SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
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E-Z-EM, INC.
1111 MARCUS AVENUE
LAKE SUCCESS, NEW YORK 11042
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
I am pleased to give you notice that the 2004 Annual Meeting of
Stockholders of E-Z-EM, Inc. will be held at the Long Island Marriott, 101
James Doolittle Boulevard, Uniondale, New York, on Tuesday, October 26, 2004 at
10:00 a.m., local time. At the annual meeting you will be asked to:
o elect each of Robert J. Beckman, Paul S. Echenberg and John T. Preston
as Class II directors of the Company, each for a term of three years,
o consider and vote to approve and adopt the E-Z EM, Inc. 2004 Stock and
Incentive Award Plan;
o ratify the appointment of Grant Thornton LLP as our independent
auditors for the fiscal year ending May 28, 2005, and
o transact such other business as may properly come before the meeting.
Our board of directors has fixed the close of business on September
16, 2004 as the record date for the annual meeting. Only record holders of
E-Z-EM common stock listed in our stock transfer books on the close of business
on the record date are entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
PETER J. GRAHAM, Secretary
Lake Success, New York
Dated: September 27, 2004
Whether or not you expect to be present at the meeting, we urge you to
fill in, date, sign and return the enclosed proxy card in the envelope that is
provided, which requires no postage if mailed in the United States.
We may adjourn the annual meeting from time to time without further
notice other than announcement at the meeting or any adjournment thereof. We
may conduct any business for which notice is hereby given at any such adjourned
meeting.
E-Z-EM, INC.
1111 MARCUS AVENUE
LAKE SUCCESS, NEW YORK 11042
_______________________
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 26, 2004
_______________________
INTRODUCTION
This proxy statement is being furnished to you and the other
stockholders of E-Z-EM, Inc., a Delaware corporation, by the board of directors
of your company in connection with the solicitation of proxies by the board for
use at E-Z-EM's 2004 Annual Meeting of Stockholders to be held at the Long
Island Marriott, 101 James Doolittle Boulevard, Uniondale, New York, on
Tuesday, October 26, 2004 at 10:00 a.m., local time, or at any adjournment or
postponement thereof.
Our principal executive offices are located at 1111 Marcus Avenue,
Lake Success, New York 11042. The approximate date on which this proxy
statement and the accompanying proxy are first being sent or given to
stockholders is September 27, 2004.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission. Our Securities
and Exchange Commission filings are available to the public over the Internet
at the Securities and Exchange Commission's website at www.sec.gov. You may
also read and copy any document we file with the Securities and Exchange
Commission at the Securities and Exchange Commission's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information on the public
reference room. We maintain a website at www.ezem.com. The information
contained in our website is not incorporated in this proxy statement by
reference and you should not consider it a part of this proxy statement.
You may request a copy of our recent Securities and Exchange
Commission filings, at no cost, by writing or telephoning us at the following
address and telephone number:
Stockholder Information
E-Z-EM, Inc.
1111 Marcus Avenue
Lake Success, New York 11042
Telephone: (516) 333-8230
TABLE OF CONTENTS
INTRODUCTION.............................................................................................i
WHERE YOU CAN FIND MORE INFORMATION......................................................................i
THE STOCKHOLDER MEETING..................................................................................1
Date, Time and Place...................................................................................1
Proposals To Be Considered.............................................................................1
Record Date; Voting Securities.........................................................................1
Votes Required.........................................................................................2
Share Ownership of Directors and Executive Officers....................................................2
Voting of Proxies......................................................................................2
Revocability of Proxies................................................................................3
Solicitation of Proxies................................................................................3
ELECTION OF DIRECTORS....................................................................................4
Nominees...............................................................................................4
Recommendation of the Board of Directors...............................................................5
Other Directors........................................................................................5
Meetings...............................................................................................7
Committee Charters; Code of Conduct and Ethics, Complaint Procedures and Corporate
Governance Guidelines.................................................................................8
Communications with the Board..........................................................................9
Compensation of Directors..............................................................................9
Executive Officers....................................................................................10
EXECUTIVE COMPENSATION..................................................................................11
Summary Compensation Table............................................................................11
Option/SAR Grants Table...............................................................................12
Aggregated Option Exercises and Fiscal Year-End Option Value Table....................................12
Long-Term Incentive Plan Awards Table and Defined Benefit or Actuarial Plan Table.....................13
Employment Contracts..................................................................................13
Severance Arrangements................................................................................13
Report on Repricing of Options / SARs.................................................................14
Compensation Committee Interlocks and Insider Participation in Compensation Decisions.................15
Audit Committee Report................................................................................15
Principal Accountant Fees and Services................................................................16
Compensation Committee Report on Executive Compensation...............................................17
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters........20
Equity Compensation Plan Information..................................................................23
Common Stock Performance Graph........................................................................23
Certain Relationships and Related Transactions........................................................26
Section 16(a) Beneficial Ownership Reporting Compliance...............................................27
APPROVAL OF THE 2004 STOCK AND INCENTIVE AWARD PLAN.....................................................28
Summary of Purpose....................................................................................28
Summary of the 2004 Stock and Incentive Award Plan....................................................28
Recommendation of the Board of Directors..............................................................31
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS.....................................................31
General...............................................................................................31
Recommendation of the Board of Directors..............................................................32
ANNUAL REPORT...........................................................................................32
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS..........................................................32
OTHER MATTERS...........................................................................................32
APPENDIX A -- AUDIT COMMITTEE CHARTER
APPENDIX B -- NOMINATING AND CORPORATE GOVERNANCE COMMITTEE CHARTER
THE STOCKHOLDER MEETING
DATE, TIME AND PLACE
This proxy statement is being furnished to you in connection
with the solicitation of proxies by the board of directors of E-Z-EM, Inc. from
holders of E-Z-EM's common stock for use at the annual meeting of stockholders
to be held at the Long Island Marriott, 101 James Doolittle Boulevard,
Uniondale, New York, on October 26, 2004 at 10:00 a.m., local time, and at any
adjournments or postponements of the annual meeting.
PROPOSALS TO BE CONSIDERED
At the annual meeting, we will ask holders of our common stock to
consider and vote upon the following items:
Election of Directors
The election of three of our nine directors. If elected, the nominees
for Class II directors, Robert J. Beckman, Paul S. Echenberg and John T.
Preston, will each serve until the 2007 annual meeting of stockholders or until
their respective successors are duly elected and qualified.
Approval of the 2004 Stock and Incentive Award Plan
The approval and adoption of the E-Z-EM, Inc. 2004 Stock and Incentive
Award Plan, which we refer to as the 2004 Plan. Our board of directors has
approved the 2004 Plan and recommends that you approve and adopt the 2004 Plan
at the annual meeting. If approved, the 2004 Plan will allow us to grant a
broad spectrum of stock and incentive awards to employees, directors and other
service providers. The 2004 Plan is intended to provide us with more
flexibility in the type of awards we may grant and is designed to attract and
retain employees, directors and other service providers and to better align the
interests of employees, directors and other service providers with your
interests and those of our other stockholders.
Ratification of Appointment of Independent Auditors
Ratification of the appointment of Grant Thornton LLP as our
independent auditors for the fiscal year ending May 28, 2005.
RECORD DATE; VOTING SECURITIES
As of the close of business on September 16, 2004, the record date for
the annual meeting, there were 10,738,107 outstanding shares of our common
stock entitled to notice of and to vote at the annual meeting. Each holder of
our common stock has one vote per share on each matter to be acted upon at the
annual meeting. Only stockholders of record at the close of business on the
record date are entitled to vote at the meeting and at any adjournment or
postponement thereof. A majority of the outstanding shares of common stock must
be present in person or represented by proxy in order to establish a quorum at
the meeting. For purposes of determining the presence of a quorum for
transacting business at the annual meeting, abstentions and broker "non-votes"
(proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owner or other persons entitled to
vote shares on a particular matter with respect to which the brokers or
nominees do not have discretionary authority) will be treated as shares that
are present but which have not been voted.
VOTES REQUIRED
Election of Directors
The directors nominated for election will be elected by a plurality of
the votes cast, in person or by proxy, at the annual meeting. Abstentions will
have no effect on the outcome of the vote and, given that brokers have
discretionary authority with respect to this proposal, there will be no broker
non-votes.
Approval of the 2004 Stock and Incentive Award Plan
The proposal to approve and adopt the 2004 Plan must be approved by
the affirmative vote of a majority of the votes cast, in person or by proxy, at
the annual meeting. Under applicable Delaware law, in determining whether the
proposal has received the requisite number of affirmative votes, abstentions
will be counted and will have the same effect as a vote against the proposal
and broker non-votes will be disregarded and will have no effect on the outcome
of the vote.
Ratification of the Appointment of Independent Auditors
The proposal to ratify the board's appointment of Grant Thornton LLP
as the Company's independent auditors for the fiscal year ending May 28, 2005
must be approved by the affirmative vote of a majority of the votes cast, in
person or by proxy, at the annual meeting. Abstentions will be counted and will
have the same effect as a vote against the proposal and, given that brokers
have discretionary authority with respect to this proposal, there will be no
broker non-votes.
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
As of the record date, excluding currently exercisable options, our
directors and executive officers beneficially owned an aggregate of
approximately 3,243,762 shares of our common stock, representing 30.2% of the
common stock issued and outstanding.
Our directors and executive officers have indicated that they intend
to vote their shares FOR the election of the nominees for director, FOR the
approval and adoption of the 2004 Plan and FOR the ratification of the
appointment of Grant Thornton LLP as our independent auditors for the 2005
fiscal year.
VOTING OF PROXIES
Your shares will be voted in accordance with your instructions. If you
do specify on your proxy card how you would like your shares to be voted, the
proxies will vote the shares subject to the proxy:
o FOR the election of the board's nominees for director;
o FOR the approval and adoption of the 2004 Plan;
o FOR the ratification of the appointment of Grant Thornton LLP as our
independent auditors for the 2005 fiscal year; and
o in accordance with the judgment of the person or persons voting with
respect to any other matter that may properly be brought before the
annual meeting. We do not expect that any matter not described in this
proxy statement will be brought before the annual meeting.
REVOCABILITY OF PROXIES
Even if you have granted a proxy on the enclosed proxy card, you may
still vote in person at the annual meeting. You may revoke your proxy at any
time prior to it being voted at the annual meeting by:
o delivering to our Secretary, prior to the annual meeting, a written
notice of revocation bearing a later date or time than the proxy,
o submitting another proxy by mail that has a later date and, if
applicable, that is properly signed, or
o attending the annual meeting and voting in person.
If you attend the annual meeting, that alone will not revoke your
proxy. If we adjourn the meeting, it will not affect your ability to vote or to
revoke a previously delivered proxy. We do not expect to adjourn the annual
meeting for a period of time long enough to require the setting of a new record
date for the meeting.
SOLICITATION OF PROXIES
Your company will bear the cost of soliciting proxies on behalf of the
board of directors. In addition to the use of the mail, we may solicit proxies
by telephone, facsimile and personal interview by our officers, directors and
employees. If requested, we will reimburse brokerage houses and persons holding
common stock in the names of their nominees for their reasonable expenses in
sending soliciting material to their principals.
ELECTION OF DIRECTORS
NOMINEES
Your company's board of directors currently consists of nine
directors. The board has determined that Robert J. Beckman, Paul S. Echenberg,
James L. Katz and George P. Ward, each of whom is a current board member, and
John T. Preston, a nominee for election to the board at the annual meeting, are
each "independent", as that term is defined under the listing standards of the
American Stock Exchange and the applicable rules of the Securities Exchange Act
of 1934. Donald A. Meyer, a current independent director of your company, will
be resigning from the board effective as of the annual meeting. As required by
the rules of the American Stock Exchange, independent directors comprise a
majority of the board. The board is divided into three classes, each of which
serves a staggered three-year term. At the annual meeting, you will be asked to
elect three Class II directors. If elected, Robert J. Beckman, Paul S.
Echenberg and John T. Preston will each hold office until the 2007 annual
meeting of stockholders and until their successors are duly elected and
qualified. The Class I directors and Class III directors will continue in
office during the terms indicated below - except for Michael A. Davis, who has
indicated his intention to resign from the board, but has agreed to remain a
director until an appropriate replacement has been found.
Unless otherwise specified, all proxies received will be voted in
favor of the election of each of the Class II director nominees. Management has
no reason to believe that any of the nominees will be unable or unwilling to
serve as a director, if elected. Should any of the nominees not remain a
candidate for election at the date of the annual meeting, we will vote the
proxies in favor of the election of remaining nominees and any substitute
nominees selected by the board. The names of the nominees and certain
information concerning them are set forth below:
Nominees to Class II of the Board of Directors:
First Year
Name Principal Occupation Age Became Director
---- -------------------- --- ---------------
Robert J. Beckman Founder and Managing Partner of The Channel 56 2002
Group
Paul S. Echenberg President, CEO and Director of Schroders & 60 1987
Associates Canada, Inc.
John T. Preston President & CEO of Atomic Ordered Materials, 54 Nominee
LLC
Robert J. Beckman, age 56, has been a director of our company since
2002. He is a founder and has been a Managing Partner of The Channel Group, a
venture management and corporate advisory business focusing on global life
sciences, since 2002. Previously, he founded Intergen Co., a company focused on
providing technology and biologicals to the pharmaceutical/biotechnology and
clinical diagnostic industries, and served as its Chief Executive Officer from
1987 until 2001.
Paul S. Echenberg, age 60, has been a director of our company since
1987 and has served as Chairman of the board of directors of E-Z-EM Canada Inc.
since 1994. He has been a director of AngioDynamics, Inc. since 1996 and
Chairman of its board of directors since February 2004. He has been the
President, Chief Executive Officer and a director of Schroders & Associates
Canada Inc. (investment buy-out advisory services) and a director of Schroders
Ventures Ltd. since 1997. He is also a founder and has been a general partner
and a director of Eckvest Equity Inc. (personal investment and consulting
services) since 1989. He is also a director of Lallemand Inc., Benvest Capital
Inc., Colliers MacAuley Nicholl, ITI Medical Technologies, Inc., Flexia Corp.,
Fib-Pak Industries Inc., Med-Eng Systems Inc., MacroChem Corp., Matra Plast
Industries Inc. and A.P. Plasman Corp. Our company has an investment in ITI
Medical Technologies, Inc.
John T. Preston, age 54, is a nominee for director of our company. He
has been the President and CEO of Atomic Ordered Materials, LLC since 1999 and
has been a Senior Lecturer at the Massachusetts Institute of Technology (MIT)
and Assistant Director of the MIT Entrepreneurship Center since 1996. He is the
founder of Quantum Energy, LLC and served as its CEO from 1996 to 1999. He was
the Director of Technology Development at MIT from 1992 to 1996. From 1986 to
1992, Mr. Preston served as Director of Technology Licensing at MIT. Mr.
Preston held various technology management positions with MIT from 1977 to
1986. He is also a director of Clean Harbors, Inc. and Boston Life Science,
Inc. as well as several private companies.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES.
OTHER DIRECTORS
The following Class I and III directors will continue on the board of
directors for the terms indicated, except as noted below with respect to Dr.
Davis:
Class I Directors (Term Expiring in 2006):
Michael A. Davis, M.D., age 63, has served as our Medical Director
since 1994, a director of our company since 1995 and our Technical Director
from 1997 to 2000. Dr. Davis was a Visiting Professor of Radiology at Harvard
Medical School and Visiting Scientist in Radiology at Massachusetts General
Hospital from 2002 until 2003. He has also served as Senior Vice President and
Chief Medical Officer of MedEView, Inc. (radiology informatics) from 2000 until
2003. He was Professor of Radiology and Nuclear Medicine and Director of the
Division of Radiologic Research, University of Massachusetts Medical Center
from 1980 until 2002. During 1999, he also served as the President and Chief
Executive Officer, and from 1999 until 2003, as a director of Amerimmune
Pharmaceuticals, Inc. and its wholly owned subsidiary, Amerimmune, Inc. He is
also a director of MacroChem Corp. Dr. Davis has indicated that he intends to
resign from the board, but has agreed to remain a director until an appropriate
replacement has been found.
James L. Katz, CPA, JD, age 68, has been a director of our company
since 1983. He is a founder and a director of Lakeshore Medical Fitness, LLC
(owns and manages medical fitness facilities), and has served as its Chief
Executive Officer since 2000. He is also a founder of Medical Imaging of
Northbrook Court, LLC (screening and diagnostic imaging) and has served as an
administrative member since 2001. Previously, he had been a founder and
managing director from its organization in 1995 until 2000 of Chapman Partners
LLC (investment banking). From its acquisition in 1985 until its sale in 1994,
he was the co-owner and President of Ever Ready Thermometer Co., Inc. From 1971
until 1980 and from 1983 until 1985, he held various executive positions with
Baxter International and subsidiaries of Baxter International, principally that
of Chief Financial Officer of Baxter International. He is also a director of
Intec, Inc. and Lifestart Wellness Network, LLC, as well as a member of the
Board of Advisors of Jerusalem Global and AEG Partners.
Anthony A. Lombardo, age 57, has served as President, Chief Executive
Officer and a director of our company since 2000. Prior to joining E-Z-EM, he
served as President of ALI Imaging Systems, Inc. (radiology information
management) from 1998 to 2000. Mr. Lombardo is also a director of PointDx, Inc.
and Omnicorder, Inc. E-Z-EM has an investment in PointDx, Inc.
Class III Directors (Term Expiring in 2005):
Howard S. Stern, age 73, is a co-founder of our company and has served
as Chairman of the Board and a director of E-Z-EM since its formation in 1962.
Mr. Stern has also served as President and Chief Executive Officer of our
company from 1997 to 2000. From 1990 to 1994, Mr. Stern served as our Chief
Executive Officer, and from the formation of E-Z-EM until 1990, he served as
President and Chief Executive Officer. Mr. Stern has served as a director of
AngioDynamics, Inc. since its inception and as Chairman of its board of
directors from its inception until February 2004. Mr. Stern is also a director
of ITI Medical Technologies, Inc. E-Z-EM has an investment in ITI Medical
Technologies, Inc.
David P. Meyers, age 40, has been a director of our company and of
AngioDynamics, Inc. since 1996. He is a founder of AlphaCord, Inc., which
provides cryopreservation of umbilical cord blood, and has served as its
President since 2002. Previously, he founded MedTest Express, Inc., an Atlanta,
Georgia based provider of contracted laboratory services for home health
agencies, and served as its President, Chief Executive Officer and a director
from 1994 to 2002.
George P. Ward, age 66, has been a director of our company since 2002.
Prior to his retirement in 2002, Mr. Ward served as Executive Vice President -
Business Development of Health Center Internet Services, Inc. in San Francisco,
California from 1997 until 2001. He served as a director and consultant for ALI
Technologies, Inc. of Richmond, British Columbia, Canada from 1996 until 2002.
After service as a USAF officer, he began his career as a rocket engineer with
Thiokol Chemical Corp. in 1962, then joined the General Electric Space Division
as a program manager and marketing manager in 1966. After a GE corporate
headquarters assignment in 1973, Mr. Ward moved to the GE Medical Business,
where he managed the X-ray and other medical imaging businesses. In 1977, he
became President, CEO and a director of Systron Donner Corp., Concord,
California (then NYSE-listed). In 1982, he became President, CEO and a director
of Vitalink Communications Corp., Mountain View, California, and in 1986, he
founded MEICOR, Inc., Pleasanton, California, as Chairman, CEO and a director.
From 1987 until 1991, he was a Worldwide Business Group Managing Director for
Philips Medical, and since 1991, a director/consultant for several high
technology companies. He also was a director of Blue Cross of California,
Woodland Hills, California from 1986 to 1996.
MEETINGS
The board of directors held four regular meetings, two special
meetings and ten meetings by conference call during the 2004 fiscal year. From
time to time, the members of the board of directors act by unanimous written
consent pursuant to the laws of the State of Delaware. No director attended
fewer than 75% of all board meetings during the 2004 fiscal year. Our directors
are expected to attend our annual stockholders meeting absent extenuating
circumstances. During 2004, all directors named in this proxy statement who
were directors at the time of our last annual stockholders meeting, attended
our annual stockholders meeting.
We have a standing Executive Committee, Audit Committee, Nominating
and Corporate Governance Committee, Compensation Committee and Finance
Committee.
The Executive Committee has the full power and authority to act on
behalf of the board during intervals between regularly scheduled board
meetings. The members of the Executive Committee are Messrs. Stern, Echenberg
and Katz. The Executive Committee did not meet during the 2004 fiscal year.
The Audit Committee is responsible for:
o recommending to the board the appointment or termination of
our independent auditors;
o providing an open avenue of communication between the
independent auditors and the board;
o reviewing our significant accounting policies and internal
controls; and
o having general responsibility for assisting the board in its
oversight over all audit related matters.
On September 15, 2004, the board of directors adopted an amended Audit
Committee charter which is attached as Appendix A to this proxy statement. The
members of the Audit Committee are Messrs. Katz, Echenberg and Ward. The Audit
Committee met five times during the 2004 fiscal year.
The Nominating and Corporate Governance Committee develops and
recommends corporate governance guidelines for our company. The Committee also
evaluates current and prospective directors and their qualifications to serve
on the board and presents recommendations to the board regarding nominees for
director. The Committee will also consider nominees for director recommended by
our stockholders. Any stockholder wishing to make a nomination must submit the
name of the proposed nominee in writing to our corporate Secretary, together
with the nominee's qualifications for service on the board. During the 2004
fiscal year, we did not receive any director nominations from our stockholders.
On February 9, 2004, the board of directors adopted a charter for the
Nominating and Corporate Governance Committee, a copy of which is attached as
Appendix B to this proxy statement. The members of the Nominating and Corporate
Governance Committee are Messrs. Beckman, Katz and Ward. The Nominating and
Corporate Governance Committee met three times during the 2004 fiscal year and
had several informal discussions.
The Nominating and Corporate Governance Committee's process for
identifying and evaluating nominees is as follows: In the case of incumbent
directors whose terms of office are set to expire, the Committee reviews such
directors' overall service to our company during his or her term, including the
number of meetings attended, level of participation, quality of performance,
and transactions, if any, between any such director and our company during his
or her term, and confirms such director's independence, if applicable. In the
case of new director candidates, the Committee first determines whether the
nominee must be independent for purposes of the American Stock Exchange. In
either case, determinations are based upon our internal policies, applicable
securities laws, the rules and regulations of the SEC, the listing requirements
of the American Stock Exchange, and the advice of counsel, if necessary. The
Committee then uses its network of contacts to compile a list of potential
candidates. If necessary, we will also engage a professional search firm to
assist in the process of identifying qualified nominees. The search firm
identifies potential candidates based on an extensive profile of the
requirements developed by the Nominating and Corporate Governance Committee.
The search firm then develops a scoring matrix to rank the candidates and the
Nominating and Corporate Governance Committee interviews the candidates and
makes its recommendation to the board of directors. Any candidates for director
that are nominated by our stockholders are considered in the same manner as
other candidates.
The Compensation Committee determines the cash and other incentive
compensation, if any, to be paid to our executive and non-executive officers
and key employees. The Compensation Committee also sets the policies and
parameters of our compensation programs and awards thereunder, and makes
determinations as to grants under our equity compensation plans. Although
grants will no longer be made under the 1983 Stock Option Plan and the 1984
Directors and Consultants Stock Option Plan if the 2004 Plan is approved at the
annual meeting, the Compensation Committee will make determinations as to
grants under the 2004 Plan. The current members of the Compensation Committee
are Donald A. Meyer and Messrs. Katz and Ward. Mr. Meyer, who has been
determined to be an independent director, will be resigning from his position
as a director effective as of the 2004 annual meeting of stockholders. The
board of directors has not yet determined whether to fill the vacancy on the
Compensation Committee created by Mr. Meyer's resignation. The Compensation
Committee met six times during the 2004 fiscal year and had several informal
discussions.
The board of directors created a Finance Committee in 1995. Its
members are Messrs. Katz and Meyers. The Finance Committee did not meet during
the 2004 fiscal year.
COMMITTEE CHARTERS; CODE OF CONDUCT AND ETHICS, COMPLAINT PROCEDURES
AND CORPORATE GOVERNANCE GUIDELINES
The Charters of the Audit Committee and the Nominating and Corporate
Governance Committee, as well as our E-Z-EM, Inc. Code of Conduct and Ethics,
our Complaint Procedures and our Corporate Governance Guidelines, are posted on
our website (www.ezem.com) under Investor Relations, Corporate Governance. This
website address is not intended to function as a hyperlink, and the information
contained on our website is not intended to be a part of this proxy statement.
COMMUNICATIONS WITH THE BOARD
Our stockholders may communicate directly with the board of directors
by addressing a letter to "The Board of Directors of E-Z-EM, Inc., c/o
Secretary, at 1111 Marcus Avenue, Suite LL-26, Lake Success, NY 11042." If you
would like a letter to be forwarded directly to the Chairman of the Board or to
one of the chairmen of the standing committees, to a specific director or group
of directors, or to one or more independent directors, you should so indicate.
If no specific direction is indicated, the Secretary will review the letter and
forward it to the appropriate board member or members.
COMPENSATION OF DIRECTORS
Directors who are not our employees are entitled to the following
compensation: a monthly retainer of $2,000; a fee of $1,750 for each board
meeting attended in person; a fee of $500 for each telephonic board meeting in
which they participate; an annual grant of 1,000 shares of our common stock;
and an annual grant of an option to purchase 4,000 shares of our common stock,
which vest ? per year over three years from date of grant. Directors who serve
on committees of the board and who are not our employees are entitled to a fee
of $1,000 for each committee meeting attended in person and a fee of $500 for
each telephonic committee meeting in which they participate, except that the
committee chairmen are entitled to a fee of $1,500 for each committee meeting
attended in person and $750 for each telephonic committee meeting in which they
participate. The Chairman of the Board is entitled to twice the
above-referenced fees. In addition, directors who attend board meetings of
AngioDynamics, Inc. and who are not directors of AngioDynamics are entitled to
our meeting fee of $1,750 for each board meeting attended. AngioDynamics is a
publicly traded corporation which our company currently controls, but which our
company is in the process of distributing pro rata to its stockholders.
Directors who are our employees do not receive any compensation for their
services as directors.
Upon joining our board, new directors receive options for 24,000
shares of our common stock, which vest ? per year over three years from date of
grant. However, no options pursuant to this policy will be granted to new
directors until after the completion of the distribution of our entire equity
interest in AngioDynamics to our stockholders.
Paul S. Echenberg and David P. Meyers also receive the following board
compensation from AngioDynamics for serving on its board of directors: a
monthly retainer of $1,000; a fee of $1,000 for each board meeting attended in
person; $250 for each telephonic meeting of the board in which they
participate; and an annual grant of an option to purchase 6,000 shares of
AngioDynamics common stock for each year of service on the board.
See "Certain Relationships and Related Transactions" for a description
of the consulting agreements between us and Howard S. Stern, the Chairman of
our board, Michael A. Davis, a director, and Donald A. Meyer, a director.
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to our
executive officers.
Name Age Positions
---- --- ---------
Anthony A. Lombardo 57 President, Chief Executive Officer, Director
Dennis J. Curtin 57 Senior Vice President - Chief Financial Officer
Joseph J. Palma 62 Senior Vice President - Global Sales
Jeffrey S. Peacock 47 Senior Vice President - Global Scientific and Technical
Operations
Brad S. Schreck 47 Senior Vice President - Global Marketing
Peter J. Graham 38 Vice President - General Counsel and Secretary
As part of its periodic review, our board of directors has
re-organized your company's management team into two groups: Executive Officers
and Non-Executive Officers. Accordingly, the table above consists of the
members of the Executive Officers Group.
All executive officers are elected annually and serve at the pleasure
of the board of directors.
Mr. Curtin has served as Senior Vice President - Chief Financial
Officer since 1999, and as Vice President - Chief Financial Officer from 1985
to 1999. Mr. Curtin has been an employee of our company since 1983.
Mr. Palma has served as Senior Vice President - Global Sales since
2002, and as Senior Vice President - Sales and Marketing from 1999 to 2002,
Vice President - Sales and Marketing from 1996 to 1999, and Vice President -
Sales from 1995 to 1996. Mr. Palma has been an employee of our company since
1994.
Mr. Peacock has served as Senior Vice President - Global Scientific
and Technical Operations since 2002, and as Vice President - Scientific and
Technical Operations from 2000 until 2002. Mr. Peacock has been an employee of
our company since 1986.
Mr. Schreck has served as Senior Vice President - Global Marketing
since 2002. Before joining our company, he served as a consultant for Vyteris,
Inc. (pharmaceutical/drug delivery) and ACMI, Inc. (urology, gynecology,
laparoscopy) from 2000 until 2002. From 1999 to 2000, he served as Vice
President, Worldwide Marketing of Surgical Dynamics Inc., a wholly-owned
subsidiary of Tyco Inc. (spine/sports medicine). In 1999, he served as Vice
President, Marketing and Sales Services of Implex Inc. (orthopedics). From 1996
to 1999, he served as Vice President, Worldwide Marketing and Product
Development for Howmedica, a division of Pfizer (orthopedics).
Mr. Graham has served as Vice President - General Counsel and
Secretary since 2001, and has been an employee of our company since 1997.
The business background of Mr. Lombardo has been previously set forth
in this proxy statement.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation
for services, in all capacities for fiscal years 2004, 2003 and 2002, of:
o those persons who were, during fiscal year 2004, our Chief
Executive Officer or "CEO" (Anthony A. Lombardo),
o those persons who were, at the end of fiscal year 2004, our
four most highly compensated executive officers other than
the CEO, and
o the President and Chief Executive Officer of AngioDynamics,
Inc., who was not an executive officer of E-Z-EM at the end
of fiscal year 2004, but who is included in this table due to
the level of his annual compensation for fiscal year 2004.
We refer to these individuals as the "Named Executive Officers":
Annual Compensation Long-Term Compensation
------------------------------- -----------------------------------------
Awards Payouts
----------------------------- --------
Name and Fiscal Salary Bonus Other Restricted Securities LTIP All Other
Underlying
Options
Annual .
Compensa- Stock # Payouts Compensa-
Principal tion (1) Awards (2) tion (4)
Position Year ($) ($) ($) ($) # (3) ($) ($)
------------------------- -------- ---------- --------- ---------- ---------- ------------------ -------- ----------
Anthony A. Lombardo, . 2004 $320,000 $132,828 None None None None None $10,380
President and 2003 320,000 46,560 None None None None None 9,773
Chief Executive Officer 2002 320,000 71,088 None None None None None 33,402
Dennis J. Curtin, . . . 2004 $188,402 $81,427 None None None None None $9,872
Senior Vice President 2003 188,402 31,541 None None None None None 10,164
2002 179,430 44,814 None None None None None 25,352
Peter J. Graham, . . . 2004 $178,000 $68,619 None None None None None $10,361
Vice President 2003 167,054 23,037 None None None None None 9,502
2002 148,318 26,708 None None 21,000 None None 11,219
Jeffrey S. Peacock, . . 2004 $185,000 $53,754 None None None None None $10,063
Senior Vice President 2003 183,309 20,098 None None None None None 10,342
2002 154,717 27,996 None None None None None 15,819
Brad S. Schreck, . . . 2004 $185,000 $53,754 None None None None None $9,292
Senior Vice President 2003 185,000 20,098 None None None None None 481
(effective May 2002) 2002 11,859 8,621 None None 35,000 None None None
Eamonn P. Hobbs, . . . 2004 $254,400 $126,882 None None None None None $10,572
President and Chief 2003 240,000 96,600 None None None None None 8,470
Executive Officer of 2002 218,820 114,880 None None None None None 22,760
AngioDynamics, Inc.
__________
(1) We have concluded that the aggregate amount of perquisites and other personal benefits paid to each of the
Named Executive Officers for fiscal years 2004, 2003 and 2002 did not exceed the lesser of 10% of such
officer's total annual salary and bonus for fiscal years 2004, 2003 or 2002 or $50,000; such amounts are,
therefore, not reflected in the table.
(2) Options are exercisable into our common stock.
(3) Options would be exercisable into the common stock of our current controlled subsidiary, AngioDynamics, Inc.
(4) For each of the Named Executive Officers, the amounts reported include amounts we contributed under our
Profit-Sharing Plan and, as matching contributions, under the companion 401(k) Plan. For fiscal years 2004,
2003 and 2002, such amounts contributed were: $9,600, $8,920 and $9,375, respectively, for Mr. Lombardo;
$9,284, $9,585 and $8,315, respectively, for Mr. Curtin; $9,831, $9,029 and $7,991, respectively, for Mr.
Graham; $9,486, $9,795 and $7,855, respectively, for Mr. Peacock; $8,715, $0 and $0, respectively, for Mr.
Schreck; and $9,764, $7,787 and $9,115, respectively, for Mr. Hobbs.
For each of the Named Executive Officers, the amounts reported include term life insurance premiums we paid.
For fiscal years 2004, 2003 and 2002, such amounts paid were: $780, $853 and $673, respectively, for Mr.
Lombardo; $588, $579 and $409, respectively, for Mr. Curtin; $530, $473 and $328, respectively, for Mr. Graham;
$577, $547 and $348, respectively, for Mr. Peacock; $577, $481 and $0, respectively, for Mr. Schreck; and $808,
$683 and $395, respectively, for Mr. Hobbs.
For each of the Named Executive Officers, the amounts reported include premiums we paid under split dollar life
insurance arrangements. For fiscal years 2004 and 2003, we paid no amounts under any split dollar life
insurance arrangement. For fiscal year 2002, the amounts paid were: $23,354 for Mr. Lombardo; $16,628 for Mr.
Curtin; $2,900 for Mr. Graham; $7,616 for Mr. Peacock; $0 for Mr. Schreck; and $13,250 for Mr. Hobbs. In July
2003, these arrangements were modified. Under the amended terms of the arrangements, title and ownership of the
policies were transferred to us and we will continue to pay all insurance premiums. Upon the death of any Named
Executive Officer, such officer's beneficiaries will be entitled to a death benefit, the amount of which was
determined as of July 2003. We will be entitled to the remaining life insurance proceeds. We will also be
entitled at all times to the cash surrender value of the life insurance policies.
OPTION/SAR GRANTS TABLE
We did not grant any stock options or stock appreciation rights, which
we refer to as "SARs", to any of the Named Executive Officers during fiscal
year 2004.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth information concerning all exercises of
stock options during fiscal year 2004 by our Named Executive Officers and the
fiscal year-end value of unexercised stock options on an aggregated basis:
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT
AT MAY 29, 2004 MAY 29, 2004
(#) ($) (1)
----------------------- ------------------------
NAME SHARES ACQUIRED ON VALUE REALIZED ($) EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
EXERCISE (#) (2) (2)
-------------------------------- ----------------------- ---------------------- ----------------------- ------------------------
Anthony A. Lombardo. . . 25,000 $206,490 275,000/ $2,805,000/
None None
Dennis J. Curtin. . . . . . . 12,628 $161,382 22,928/ $338,095/
31,364 $208,636
Peter J. Graham. . . . . . . . None None 14,500/ $197,200/
10,500 $144,900
Jeffrey S. Peacock. . . . . . . 1,066 $11,459 10,609/ $90,888/
None None
Brad S. Schreck. . . . . . . . 8,750 $88,375 8,750/ $84,000/
17,500 $168,000
Eamonn P. Hobbs. . . . . . . 32,639 $410,425 None/ None/
418,182 $2,781,818
_____________
(1) An option is in "in-the-money" if on May 29, 2004, the market price of the common stock exceeded the exercise
price of the option. At May 29, 2004, the closing price of our common stock was $18.70 and the fair market
value of AngioDynamics stock was $11.00 per share. The value of these options is calculated by determining the
difference between the aggregate market price of the stock covered by the options on May 29, 2004 and the
aggregate exercise price of the options.
(2) Options are exercisable into our common stock, except for currently unexercisable options held by Mr. Curtin
for 31,364 shares of AngioDynamics common stock and currently unexercisable options held by Mr. Hobbs for
418,182 shares of AngioDynamics common stock.
LONG-TERM INCENTIVE PLAN AWARDS TABLE AND DEFINED BENEFIT OR ACTUARIAL
PLAN TABLE
We do not maintain any long-term incentive plans or defined benefit or
actuarial plans.
EMPLOYMENT CONTRACTS
Effective June 1, 2004, we amended our employment contract, entered
into in 2000, with Anthony A. Lombardo in his capacity as President and Chief
Executive Officer. This amended employment contract provides for annual base
salary at $340,000. The contract is cancelable at any time by either Mr.
Lombardo or us, but provides for severance pay of two years base salary in the
event of termination by us without cause, as defined in the contract. Unless
cancelled earlier, the amended contract will terminate on May 31, 2007.
SEVERANCE ARRANGEMENTS
We have entered into severance agreements with some of our executive
officers, non-executive officers and key employees.
Each severance agreement provides certain security to the executive in
connection with a change of control. A change of control is defined as the
acquisition of 50% or more of the outstanding voting power of E-Z-EM's capital
stock; or the transfer of all or substantially all of the assets of either or
both of the AngioDynamics or Contrast Systems (E-Z-EM) business segments. The
proposed pro rata distribution of AngioDynamics to our stockholders will not
constitute a change of control of our company for purposes of our severance
arrangements. Upon a change of control, all outstanding stock options vest and
remain exercisable until the original expiration date of the options without
regard to the need to remain employed by the Company. We will provide the
executive (or his estate) with an interest-free loan in the amount necessary to
pay the exercise price and the income and employment taxes due as a result of
the option exercise. Modifications to these arrangements are being made in
light of the Sarbanes-Oxley Act of 2002.
If an executive's employment with E-Z-EM is terminated by us for "good
cause," death or disability, or by the executive other than for "good reason,"
during the term of the severance agreement and within two years following a
change of control, the executive will be entitled to accrued but unpaid base
salary. A termination of employment is for "good cause" under the severance
agreements if the basis of termination is:
o repeated acts or serious omissions constituting dishonesty,
intentional breach of fiduciary obligation or intentional wrongdoing
or malfeasance;
o conviction of a crime involving fraud, dishonesty or moral turpitude;
or
o a material breach of the severance agreement or the conditions and
requirements of employment.
"Good reason" exists under the severance agreements if there is:
o a significant reduction in the nature or the scope of the executive's
authority and/or responsibility;
o a material reduction in the executive's rate of base salary;
o a significant reduction in employee benefits; or
o a change in the principal location in which the executive is required
to perform services, which significantly increases commuting distance.
If an executive's employment with E-Z-EM is terminated by us without
good cause or by the executive for good reason, during the term of the
severance agreement and within two years following a change of control, the
executive will be entitled to:
o accrued but unpaid base salary;
o a lump sum payment equal to between one and two times annual base
salary, based upon years of service;
o any benefits accrued under any incentive and retirement plans;
o paid medical plan coverage until the earlier of 18 months from
termination or the time when the executive obtains comparable coverage
through a new employer;
o a lump sum payment equal to the unvested portion, if any, of the
executive's 401(k) plan; and
o outplacement and career counseling services.
Each severance agreement provides that if any amounts due to an
executive thereunder become subject to the "golden parachute" rules set forth
in Section 4999 of the Internal Revenue Code, then these amounts will be
reduced to the extent necessary to avoid the application of the "golden
parachute" rules.
REPORT ON REPRICING OF OPTIONS / SARS
In fiscal year 2004, we did not adjust or amend the exercise price of
any stock options or SARs previously awarded to any of the Named Executive
Officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS
The following directors currently serve on our Compensation Committee:
James L. Katz, Donald A. Meyer and George P. Ward. None of the directors
serving on our Compensation Committee is a current or former officer or
employee of E-Z-EM or any of its subsidiaries. None of these directors had any
relationship required to be disclosed by us under Item 404 of Regulation S-K
under the Securities Exchange Act of 1934. Nevertheless, we have disclosed our
consulting arrangement with Mr. Meyer under "Certain Relationships and Related
Transactions". Mr. Meyer, who has been determined to be an independent
director, will be resigning from his position as a director effective as of the
2004 annual meeting of stockholders. The board of directors has not yet
determined whether to fill the vacancy on the Compensation Committee created by
Mr. Meyer's resignation.
AUDIT COMMITTEE REPORT
The Audit Committee of the board of directors is composed of three (3)
directors, Messrs. James L. Katz, Paul S. Echenberg and George P. Ward, and
operates under a written charter. On September 15, 2004, the board of directors
adopted an amended Audit Committee charter which is attached as Appendix A to
this proxy statement. Each member of our Audit Committee is an independent
director and able to read and understand financial statements as required by
the listing standards of the American Stock Exchange and the applicable rules
of the Securities Exchange Act of 1934. In addition, Mr. Katz is "financially
sophisticated" and a "financial expert," as defined in the listing standards of
the American Stock Exchange and the rules of the Securities Exchange Act of
1934.
As set forth in more detail in the Audit Committee's charter,
management is responsible for E-Z-EM's internal controls and financial
operating system. The independent auditors are responsible for performing an
independent audit of our company's consolidated financial statements in
accordance with generally accepted auditing standards and issuing a report
relating to this audit. The Audit Committee's responsibility is to monitor and
oversee these processes. The Audit Committee's primary duties and
responsibilities fall into three broad categories:
First, the Audit Committee will serve as an independent and objective
party to monitor E-Z-EM's financial reporting process and internal control
system;
Second, the Audit Committee is responsible for reviewing and
appraising the audit efforts of our independent auditors; this includes matters
concerning the relationship between E-Z-EM and its independent auditors,
including recommending their appointment or removal, reviewing the scope of
their audit services and related fees, as well as any other services being
provided to us and determining whether the auditors are independent (based in
part on the annual letter provided to us pursuant to Independence Standards
Board Standard No. 1); and
Third, the Audit Committee provides an open avenue of communication
among the independent auditors, financial and senior management and the board
of directors.
The Audit Committee has implemented procedures to ensure that during
the course of each fiscal year it devotes the attention that it deems necessary
or appropriate to each of the matters assigned to it under its charter. To
carry out its responsibilities, our Audit Committee met five times during
fiscal year 2004.
In overseeing the preparation of our company's financial statements,
the Audit Committee has reviewed the financial statements and met with and held
discussions with management and the independent auditors. Management advised
the Audit Committee that all financial statements were prepared in accordance
with generally accepted accounting principles. The Audit Committee discussed
with the independent auditors the matters required to be discussed by the
Statement on Auditing Standards ("SAS") No. 61, "Communications with Audit
Committees" and SAS No. 90, "Audit Committee Communications."
Our independent auditors also provided the Audit Committee with the
written disclosures and the letter required by the Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees" and the Audit
Committee has discussed with the independent auditors that firm's independence.
Based upon the reviews and discussions referred to above, the Audit
Committee recommended to the board of directors that our company's audited
financial statements be included in our Annual Report on Form 10-K for the
fiscal year ended May 29, 2004 and be filed with the U.S. Securities and
Exchange Commission.
This Audit Committee Report will not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that we specifically incorporate
this report therein.
THE AUDIT COMMITTEE,
James L. Katz, Chairman
Paul S. Echenberg
George P. Ward
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table presents fees for professional audit services
rendered by the independent auditors, Grant Thornton LLP, for the audit of our
company's financial statements for the fiscal years ended May 29, 2004 and May
31, 2003, and fees billed for other services rendered by Grant Thornton LLP
during those periods:
2004 2003
---- ----
(in thousands)
Audit Fees1 $816 $343
Audit Related Fees2 50 71
Tax Fees3 60 53
All Other Fees4 3 98
---- ----
$929 $565
==== ====
__________
1 Fees paid for professional services rendered in connection with the
audit of our annual financial statements, review of our quarterly
financial statements, statutory audits of certain of our non-U.S.
subsidiaries for each fiscal year and procedures related to the S-1
registration statement filed by AngioDynamics in 2004.
2 Audit related fees consist primarily of profit sharing and 401(k) plan
audits, interpretation of accounting standards and a review of
internal controls for a U.S. subsidiary.
3 Tax fees include all tax services relating to tax compliance, tax
advice and tax planning.
4 All other fees consist primarily of services in assisting with
business modeling for a non-U.S. subsidiary product line and the
recruiting of non-managerial personnel for a non-U.S. subsidiary for
2003.
The Audit Committee understands the need for Grant Thornton LLP to
maintain objectivity and independence in its audit of our financial statements
and has implemented procedures, including pre-approval of all non-audit
services, to minimize any relationship with Grant Thornton LLP which could
impair their independence. The Audit Committee has determined that we will
engage Grant Thornton LLP to provide non-audit services only when the services
offered by Grant Thornton LLP are more effective and economical than the
services from other providers, and, to the extent possible, only after
competitive bidding. Our company's policy on auditor independence requires
that, prior to engaging the independent auditor in any non-audit related
activity, our management report to the Audit Committee the nature of the
proposed activity, including the reasons why (1) it is necessary or beneficial
to us to use the independent auditor to engage in such activity, and (2) the
steps being taken to ensure that the engagement of the independent auditor in
such activity will not, among other things, violate applicable laws or
regulations of the United States and applicable states, or the listing
standards of the American Stock Exchange, on which our company's securities are
listed. In order for our company to engage the independent auditor in the
proposed activity, we must obtain prior Audit Committee approval. The Audit
Committee has considered the compatibility of the Audit Related Fees, Tax Fees
and All Other Fees paid to Grant Thornton LLP in connection with Grant Thornton
LLP's independence.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General
The Compensation Committee of our board of directors determines the
cash and other incentive compensation, if any, to be paid to our company's
executive and non-executive officers and key employees, and administers our
stock option incentive award plans. Our Compensation Committee is currently
composed of three independent, non-employee directors: Donald A. Meyer, James
L. Katz and George P. Ward. Mr. Meyer, who has been determined to be an
independent director, will be resigning from his position as a director
effective as of the 2004 annual meeting of stockholders. The board of directors
has not yet determined whether to fill the vacancy on our Compensation
Committee created by Mr. Meyer's resignation.
Compensation Philosophy
Our company's primary philosophy regarding compensation to executive
and non-executive officers is to offer a program that rewards each member of
senior management commensurately with E-Z-EM's overall growth and financial
performance, including each person's individual performance during the previous
fiscal year. The three primary components of our compensation program are base
salary, annual performance bonus and stock option awards or other equity
compensation awards. The Committee believes that this three-part approach
enables our company to remain competitive with its industry peers while
ensuring that senior management are appropriately incentivised to deliver
positive short-term results while creating sustainable long-term stockholder
value.
The key elements of the Compensation Committee's executive philosophy
include:
o setting levels of compensation designed to attract and hold
superior executives in a highly competitive business
environment,
o providing incentive compensation that varies directly with
E-Z-EM's financial performance and individual initiative and
achievement contributions to such performance,
o linking compensation to elements which affect E-Z-EM's annual
and long-term performance,
o evaluating the competitiveness of our compensation programs
based upon information drawn from a variety of sources, and
o establishing salary levels and bonuses intended to be
consistent with competitive practice and level of
responsibility, with salary increases and bonuses reflecting
competitive trends, the overall financial performance of our
company, the performance of the individual officer and the
contractual arrangements that may be in effect with the
individual officer.
In determining each officer's overall compensation, our Compensation
Committee has relied, in part, on executive compensation surveys, publicly
available information, informal survey information obtained by management, and
information known to various members of the board of directors. The Committee
has also periodically sought the assistance of independent executive
compensation consultants who have provided information and data on the
compensation levels and philosophies adopted by other companies in the same
market for executive talent. In particular, the independent consultants have
compared our company's total compensation program, which includes base salary,
annual bonus pay and stock option awards or other equity compensation awards,
with programs offered by other companies of comparable size in the medical and
healthcare industries.
Internal Revenue Code Section 162(m) Considerations
Section 162(m) of the Internal Revenue Code prohibits a publicly held
corporation, such as E-Z-EM, from claiming a deduction on its federal income
tax return for compensation in excess of $1 million paid for a given fiscal
year to the chief executive officer (or person acting in that capacity) and to
the four most highly compensated officers of the corporation other than the
chief executive officer as of the end of the corporation's fiscal year. The $1
million compensation deduction limitation does not apply to "performance based
compensation within the meaning of Section 162(m)." We believe that any
compensation received by E-Z-EM's Named Executive Officers in connection with
the exercise of options granted under the 1983 Stock Option Plan and, if
approved, the 2004 Plan will qualify as "performance based compensation",
except for a certain de minimis option grant awarded in 1996. Stock options
issued pursuant to E-Z-EM's AngioDynamics subsidiary 1997 Stock Option Plan
will not qualify as "performance based compensation." Our company has not
established a policy with respect to Section 162(m) of the Internal Revenue
Code because E-Z-EM has not paid, and does not currently anticipate paying,
annual compensation in excess of $1 million to any employee.
Base Salaries
Base salaries for our executive and non-executive officers are
determined initially by evaluating the responsibilities of the position held
and the experience of the individual, and by reference to the competitive
marketplace for management talent, including a comparison of base salaries for
comparable positions at comparable companies. Annual salary adjustments are
determined consistent with our company's compensation policy by evaluating the
competitive marketplace, the performance of E-Z-EM, the performance of the
officer - particularly with respect to the officer's ability to manage growth
of our company - and any increased responsibilities assumed by the executive.
Annual Incentive Compensation
E-Z-EM administers an Annual Incentive Bonus Plan ("AIP"), under which
cash bonuses may be made to the CEO and President, other corporate officers,
and certain other employees. At the beginning of each fiscal year, the goals
for our company and each individual are established. During each fiscal year,
the level of bonus earned, if any, is dependent upon our company's financial
results as compared to our budget and the individual's achievement of his or
her personal goals. A bonus may be awarded if specified performance objectives,
including corporate, business unit and departmental goals, have been met, as
determined by the Compensation Committee. We awarded bonuses ranging up to
43.2% of base salary to corporate officers under the bonus plan for the 2004
fiscal year.
Stock Option Agreements
The Compensation Committee views stock options as an important
long-term incentive vehicle for our officers. The use of stock options ensures
that the interests of our officers are tied to the interests of our
stockholders by making a portion of the officer's long-term compensation
dependent upon the value created for our stockholders. This promotes a
continuing focus on our company's profitability and stockholder value. The
Compensation Committee may grant options under E-Z-EM's stockholder-approved
stock option plans. E-Z-EM's grants options at an exercise price equal to the
fair market value of our company's common stock on the date of grant. Optionees
can receive value from stock option grants only if the underlying common stock
appreciates in the long-term. Generally, stock options use vesting periods
ranging from two to four years to encourage key executives to continue in our
employ. In determining long-term incentive awards, the Compensation Committee
considers the amount of stock options previously granted to each officer, the
officer's responsibilities, as well as the officer's current performance and
contribution to our company. If the 2004 Plan is approved by our stockholders
at the annual meeting, the Compensation Committee will be able to grant stock
options, restricted stock and other forms of equity-based compensation
arrangements under the 2004 Plan.
Compensation of the Chief Executive Officer
The Compensation Committee has targeted Mr. Lombardo's total
compensation, including compensation derived from awards of stock options, at a
level it believes is competitive with the average amount paid by E-Z-EM's
competitors and companies with which the Company competes for executive talent.
On June 1, 2004, Mr. Lombardo's base salary was increased to $340,000. During
the 2004 fiscal year, no options were granted to Mr. Lombardo and 25,000
options previously granted to Mr. Lombardo were exercised at an average
exercise price of $8.50 per share. Under our employment contract with Mr.
Lombardo, Mr. Lombardo participates in our AIP program and received a bonus of
$132,828 for the 2004 fiscal year.
This compensation committee report will not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act or the Exchange Act, except
to the extent that we specifically incorporate this report therein.
THE COMPENSATION COMMITTEE,
Donald A. Meyer, Chairman
James L. Katz
George P. Ward
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth information, as of September 16, 2004,
as to the beneficial ownership of our common stock, by:
o each person known by us to own beneficially more than 5% of
our common stock,
o each of our directors,
o each of our Named Executive Officers, and
o all of our directors and executive officers as a group:
Unless otherwise noted, the address of each person listed below is
c/o E-Z-EM, Inc., 1111 Marcus Avenue, Lake Success, New York 11042.
NAME AND ADDRESS OF SHARES BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED (1) CLASS
---------------- --------- -----
Howard S. Stern........................... 2,024,099 (2) 18.8
Chairman of the Board, Director
23 Willets Road
Old Westbury, NY 11568
David P. Meyers........................... 689,167 (3) 6.4
Director
813 Springdale Road
Atlanta, GA 30306
Stuart J. Meyers.......................... 691,973 (4) 6.4
1841 Vermack Court
Dunwoody, CA 30338
Jonas I. Meyers........................... 598,319 (5) 5.6
904 Oakland Avenue
Ann Arbor, MI 48104
Ira Albert................................ 800,042 (6) 7.5
1304 SW 160th Avenue, Suite 209
Ft. Lauderdale, FL 33326
Wellington Management Company............. 707,402 (7) 6.6
75 State Street
Boston, MA 02109
Peter J. Graham........................... 442,927 4.1
Vice President
Anthony A. Lombardo....................... 275,000 2.5
President, Chief Executive
Officer, Director
Paul S. Echenberg......................... 83,305 *
Chairman of the Board of E-Z-EM
Canada and AngioDynamics, Director
Donald A. Meyer........................... 55,106 *
Director
James L. Katz............................. 33,092 *
Director
Dennis J. Curtin.......................... 24,326 *
Senior Vice President
Robert J. Beckman......................... 13,500 *
Director
George P. Ward............................ 13,000 *
Director
Michael A. Davis, M.D..................... 12,786 *
Medical Director, Director
Jeffrey S. Peacock........................ 10,609 *
Senior Vice President
Brad S. Schreck........................... 8,750 *
Senior Vice President
John T. Preston........................... 0 (8) *
Director Nominee
Eamonn P. Hobbs........................... 10,059 *
President, Chief Executive Officer,
Director of AngioDynamics
All directors and executive
officers as a group (14 persons).......... 3,685,667 (2)(3) 33.0
_______________
* Does not exceed 1%.
(1) Includes shares of our common stock issuable upon exercise of options currently exercisable or exercisable
within 60 days from September 16, 2004 as follows: Howard S. Stern (4,000), David P. Meyers (2,000), Peter J.
Graham (19,750), Anthony A. Lombardo (275,000), Paul S. Echenberg (41,966), Donald A. Meyer (19,793), James L.
Katz (19,018), Dennis J. Curtin (10,928), Michael A. Davis, M.D. (8,091), Jeffrey S. Peacock (10,609), Brad S.
Schreck (8,750), Robert J. Beckman (11,000), George P. Ward (11,000) and all directors and executive officers
as a group (441,905).
(2) Excludes 304,431 shares owned by Mr. Stern's son and an aggregate of 442,927 shares owned or issuable under
currently exercisable options held by Mr. Stern's daughter, her husband, Peter J. Graham, and their minor
children, as to which shares Mr. Stern disclaims beneficial ownership. The information relating to Mr. Stern's
share ownership and that of the persons named in this footnote was obtained from a Schedule 13D dated September
26, 2003, filed jointly by Mr. Stern, Seth F. Stern and Rachel Stern Graham, a Form 4 filed by Mr. Stern on
September 16, 2004, a Form 4 filed by Seth Stern on May 14, 2004 and a Form 4 filed by Peter Graham on May 19,
2004.
(3) Excludes (1) 121,849 shares held by David P. Meyers' wife, (2) 25,773.6 shares held by a trust established for
the benefit of his children, and (3) 52,134 shares in which Mr. Meyers has a remainder interest and his mother
has a life estate, as to which Mr. Meyers disclaims beneficial ownership. The information relating to Mr.
Meyers' share ownership was obtained from a Schedule 13D dated February 23, 2004, filed jointly by Mr. Meyers
and others and a Form 4 filed by Mr. Meyers on August 9, 2004.
(4) Excludes (1) 119,940 shares held by Stuart J. Meyers' wife, (2) 290,002 shares held by a trust established for
the benefit of his children, and (3) 49,632 shares in which Mr. Meyers has a remainder interest and his mother
has a life estate, as to which Mr. Meyers disclaims beneficial ownership. The information relating to Mr.
Meyers' share ownership was obtained from a Schedule 13D described in footnote (3), above.
(5) Excludes 49,632 shares in which Jonas I. Meyers has a remainder interest and his mother has a life estate, as
to which Mr. Meyers disclaims beneficial ownership. The information relating to Mr. Meyers' share ownership was
obtained from a Schedule 13D described in footnote (3), above.
(6) Mr. Albert's share ownership was obtained from a Schedule 13D dated July 18, 2003.
(7) Wellington Management Company's share information was obtained from a Schedule 13G dated February 13, 2004. Of
the shares beneficially owned by Wellington Management, 523,602 shares are owned of record by Vanguard
Specialized Funds - Vanguard HealthCare Fund, or Vanguard, as reflected in a Schedule 13G dated February 5,
2004 filed by Vanguard and the Schedule 13G filed by Wellington Management.
(8) If elected at the annual meeting, John T. Preston, a nominee for director of our company, will be granted
options to acquire 24,000 shares of our common stock, none of which will be exercisable within 60 days of
grant.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information, as of May 29, 2004, with
respect to compensation plans under which equity securities of E-Z-EM are
authorized for issuance.
(a) (b) (c)
Number of securities
remaining available for
Number of securities to Weighted-average future issuance under equity
be issued upon exercise exercise price of compensation plans (excluding
of outstanding options, outstanding options, securities reflected in
Plan category warrants and rights warrants and rights column (a)
--------------------------- ---------------------------- ------------------------ --------------------------
Equity compensation
plans approved by
security holders 593,399 $7.31 757,840 (1)
Equity compensation
plans not approved
by security holders None None None
Total 593,399 $7.31 757,840
(1) Consists of 652,428 shares reserved for issuance under E-Z-EM's 1983 Stock Option Plan and 1984 Directors and
Consultants Stock Option Plan and 105,412 shares reserved for issuance under E-Z-EM's 1985 Employee Stock
Purchase Plan.
COMMON STOCK PERFORMANCE GRAPH
On October 22, 2002, which we refer to as the "Recapitalization Date",
we completed a recapitalization merger in which our two previously outstanding
classes of publicly traded equity securities - Class A common stock and Class B
common stock - were combined into a single class of common stock. As a result
of the recapitalization merger, on the Recapitalization Date, each outstanding
share of Class A common stock and each outstanding share of Class B common
stock was converted into one share of the currently outstanding single class of
common stock.
The following graph compares the cumulative total stockholder return
on our common stock with returns on the AMEX Market Value (U.S. & Foreign)
Index ("AMEX Composite") and the Standard and Poor's Healthcare Equipment
(Supercap) Index ("S&P Healthcare Equipment (Supercap)") during the five-year
period ended May 29, 2004. Since our company's current single class of common
stock did not commence trading until October 22, 2002, the graph below shows
the total five-year return for our common stock assuming (1) an initial $100
investment in our previously outstanding Class A common stock on May 30, 1999
and (2) an initial $100 investment in our previously outstanding Class B common
stock on May 30, 1999, in each case, assuming each share of Class A common
stock or Class B common stock held was converted into one share of the
current single class of common stock on the Recapitalization Date. Returns
reflected in the graph below are therefore based on the performance of the
Class A common stock or Class B common stock, as applicable, for periods prior
to the Recapitalization Date and on the performance of the current single class
of common stock for periods from and after the Recapitalization Date.
TOTAL RETURN - DATA SUMMARY
CUMULATIVE TOTAL RETURN
------------------------------------------------------------
RECAP
5/99 5/00 5/01 5/02 DATE 5/03 5/04
---- ---- ---- ---- ----- ---- ----
E-Z-EM, INC. - COMMON STOCK (EZM)
CLASS A SHARES 100.00 135.80 104.69 217.28 156.05 165.93 380.44
E-Z-EM, INC. - COMMON STOCK (EZM)
CLASS B SHARES 100.00 130.00 106.00 180.00 158.00 168.00 385.20
AMEX COMPOSITE 100.00 109.95 105.47 110.20 90.28 110.36 145.31
S & P HEALTHCARE
EQUIPMENT (SUPERCAP) 100.00 113.29 122.63 130.80 117.28 135.19 178.34
In order to provide stockholders with additional information regarding
the performance of our current single class of common stock since the
completion of the recapitalization merger, the following graph compares the
cumulative total stockholder return on our common stock with returns on the
AMEX Composite and the S&P Healthcare Equipment (Supercap) on a monthly basis
during the period from the Recapitalization Date through May 29, 2004. The
graph below shows the total return during this period for our common stock
assuming an initial $100 investment on the Recapitalization Date. Returns
reflected in the graph below are therefore based solely on the performance of
our current single class of common stock.
TOTAL RETURN - DATA SUMMARY
Cumulative Total Return
------------------------------------------------------------------------------------
Recap
Date 10/02 11/02 12/02 1/03 2/03 3/03 4/03 5/03 6/03 7/03 8/03
---- ----- ----- ----- ---- ---- ---- ---- ---- ---- ---- ----
E-Z-EM, INC. 100.00 98.10 113.92 110.13 102.53 91.39 118.35 101.14 106.33 106.33 109.12 134.28
AMEX MARKET VALUE
(U.S. & FOREIGN) 100.00 100.82 101.62 102.63 102.99 105.45 105.35 110.69 123.24 127.98 124.55 130.80
S & P HEALTHCARE
EQUIPMENT (SUPERCAP) 100.00 98.92 102.81 103.30 102.49 105.41 103.71 109.49 115.37 118.30 124.66 123.65
------------------------------------------------------------------------------------
Table continued
9/03 10/03 11/03 12/03 1/04 2/04 3/04 4/04 5/04
---- ----- ----- ----- ---- ---- ---- ---- ----
E-Z-EM, INC. 158.40 156.45 150.58 168.83 195.69 237.02 240.54 203.38 243.80
AMEX MARKET VALUE
(U.S. & FOREIGN) 132.69 141.02 146.80 158.93 161.08 168.28 168.23 163.63 162.27
S & P HEALTHCARE
EQUIPMENT (SUPERCAP) 123.29 127.07 131.13 137.60 145.76 145.59 147.60 152.60 152.21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A facility of our wholly owned subsidiary located in Tokyo, Japan is
owned by Tohru Nagami, the subsidiary's President, and his mother. Aggregate
rentals were $28,000 during 2004. The lease was terminated in May 2004.
We have split dollar life insurance arrangements with Howard S. Stern
(including his spouse), the Chairman of the Board, and Betty K. Meyers, which
were entered into on May 27, 1998 and May 25, 1998, respectively. Betty K.
Meyers is a stockholder of our company and the widow of Phillip H. Meyers, a
co-founder of our company. She is the mother of David P. Meyers, a director and
principal stockholder of our company, and Stuart J. Meyers and Jonas I. Meyers,
each of whom is a principal stockholder of our company. The Betty Meyers policy
is owned by the Betty Meyers Life Insurance Trust, the beneficiaries of which
include David P. Meyers. Annually, through fiscal 2002, we paid approximately
$100,000 toward the cost of each life insurance policy. Because of the
uncertainty of the treatment of split dollar life insurance policies under the
Sarbanes-Oxley Act of 2002, for fiscal years 2003 and 2004, we did not make any
payments toward the cost of such policies. Through August 2000, payments made
by us were subject to repayment with interest payable to us annually by the
insureds. In August 2000, the arrangements with Mr. Stern and Betty Meyers were
modified to conform to our other split dollar life insurance arrangements,
making subsequent payments non-interest bearing. In May 2002, we forgave any
unpaid interest.
As a result of our not advancing the cost of the policies, Mr. Stern
personally paid the premiums on his policy during fiscal years 2003 and 2004.
The Betty Meyers Life Insurance Trust did not make similar premium payments
and, as a result, the insurance company charged the amount of the premium
against the cash surrender value of the Meyers' policy. The aggregate amount of
premiums paid by us for each policy is $500,000, the proceeds of which, under
collateral assignment agreements, will be first used to repay all payments made
by us for that policy. Additionally, beneficiaries of each policy may not
borrow against the amount paid by us. As a result of the insurance company
charging the Meyers' policy for the amount of the unpaid premiums, the cash
surrender value of the Meyers' policy was reduced to $487,000. Both Howard
Stern (including his spouse) and Betty Meyers have agreed to repay us for any
shortfall between the cash surrender value of his or her policy and the
aggregate amount of premiums paid by us. At May 29, 2004, the cash surrender
value of such policies aggregated $1,331,000 and the aggregate amount of
advances made by us totaled $1,000,000.
We have engaged Michael A. Davis, M.D., a director, for consulting
services in his capacity as our Medical Director. Fees for such services were
approximately $217,000 during 2004.
We and AngioDynamics have each entered into an agreement, effective as
of January 1, 2004, with Donald A. Meyer, a director of ours and a former
director of AngioDynamics, under which Mr. Meyer agreed to serve as the trustee
of AngioDynamics' and our 401(k) plans and to provide AngioDynamics and us with
such other services as we may reasonably request from time-to-time. Each
agreement is for a term of 36 months unless terminated earlier pursuant to its
terms. Mr. Meyer will receive 36 equal monthly payments of $3,500 and
reimbursement for reasonable business expenses incurred in providing services
under each agreement. In 2004, fees for such services, together with fees paid
to Mr. Meyer under expired consulting agreements, totaled approximately
$50,000.
Effective January 1, 2002, we entered into an agreement with Howard S.
Stern, the Chairman of our board, under which Mr. Stern agreed to provide us
with certain services until December 31, 2004. We agreed to include Mr. Stern
in our slate of directors for the 2002 annual meeting and to appoint Mr. Stern
as Chairman of the Board for a one-year term beginning at the annual meeting.
So long as Mr. Stern remains Chairman of the Board, he is entitled to receive
twice the regular fees and other compensation (including cash, stock and
options) paid to directors for service on the board. Under the terms of the
agreement, Mr. Stern is also entitled to receive 36 equal monthly payments of
$20,833.34, as well as certain bonus opportunities. Mr. Stern also receives
other benefits and perquisites and, so long as he remains Chairman, an annual
sum of up to $80,000 for reimbursement of reasonable business expenses. Prior
to AngioDynamics' initial public offering, AngioDynamics reimbursed E-Z-EM for
35% of Mr. Stern's compensation and expenses paid under the agreement. Under
AngioDynamics' master separation and distribution agreement with E-Z-EM,
AngioDynamics has assumed 35% of E-Z-EM's payment obligations to Mr. Stern
under the agreement, which total $7,300 in fees and $2,300 for expenses on a
monthly basis.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our executive officers and
directors, and persons who own more than 10% of a registered class of our
equity securities, to file reports of initial ownership and changes in
ownership with the Securities and Exchange Commission. Based solely on our
review of copies of such forms received by us, or on written representations
from certain reporting persons that no reports were required for such persons,
we believe that, during the fiscal year ended May 29, 2004, all of the filing
requirements applicable to our executive officers, directors and 10%
stockholders were complied with, except as follows:
(1) David P. Meyers filed a Form 4 on July 17, 2003 that was one business
day late, reporting the exercise of stock options.
(2) Stuart J. Meyers filed a Form 4 on August 18, 2003 that was one
business day late, reporting the sale of stock.
(3) Seth F. Stern filed a Form 4 on September 29, 2003 that was required
to be filed on or before June 2, 2003, reporting the sale of stock.
(4) Michael A. Davis filed a Form 4 on November 19, 2003 that was two
business days late, reporting the exercise of stock options and the
sale of stock.
(5) David P. Meyers filed a Form 4 on December 4, 2003 that was required
to be filed on or before November 13, 2003, reporting the sale of
stock.
(6) Archie B. Williams filed a Form 4 on February 4, 2004 that was four
business days late, reporting the exercise of stock options and the
sale of stock.
(7) David P. Meyers filed a Form 4 on April 20, 2004 that was one business
day late, reporting the sale of stock.
(8) David P. Meyers filed a Form 4 on April 27, 2004 that was one business
day late, reporting the sale of stock.
(9) Stuart J. Meyers filed a Form 5 on March 18, 2004 that was required to
be filed on or before July 15, 2003, reporting two stock sale
transactions. Mr. Meyers failed to report each of these two sale
transactions on Form 4 within two business days of the applicable
transaction date, as required by applicable regulations.
(10) Jonas I. Meyers filed a Form 5 on April 6, 2004 that was required to
be filed on or before July 15, 2003, reporting several stock sale
transactions. Mr. Meyers failed to report each of these sale
transactions on Form 4 within two business days of the applicable
transaction date, as required by applicable regulations.
APPROVAL OF THE 2004 STOCK AND INCENTIVE AWARD PLAN
SUMMARY OF PURPOSE
The 2004 Plan is intended to be our primary stock-based award program
for employees, directors and other service providers. If approved, the 2004
Plan will allow us to grant a broad spectrum of stock and incentive awards to
employees, directors and other services providers. As with our existing equity
compensation plans, the 2004 Plan is designed to attract and retain employees,
directors and other service providers and to better align the interests of our
employees, directors and other service providers with the interests of our
stockholders. As compared with our existing plans, however, the 2004 Plan is
intended to provide us with more flexibility in the type of awards we may
grant.
The primary purposes of the 2004 Plan are to:
o provide competitive equity incentives that will enable us to
attract, retain, motivate and reward persons who render
services that benefit our company or other enterprises in
which we have a significant interest, and
o align the interests of these persons with the interests of
our stockholders generally.
The 2004 Plan seeks to achieve these purposes by providing us with a wide range
of equity incentives for persons providing services that benefit our company.
The 2004 Plan provides for awards in the form of restricted stock, performance
units and performance rights, incentive awards, stock options or stock
appreciations rights. We believe that the 2004 Plan will enable us to provide
equity incentives that address the current needs of our employees, directors
and other services providers and help us to maintain our competitive position
in attracting and retaining qualified employees, directors and other service
providers.
SUMMARY OF THE 2004 STOCK AND INCENTIVE AWARD PLAN
The board of directors has approved the E-Z-EM, Inc. 2004 Stock and
Incentive Award Plan, or 2004 Plan. Our 2004 Plan provides for the grant of
incentive stock options, within the meaning of Section 422 of the Internal
Revenue Code, to our employees, and for the grant of nonstatutory stock
options, restricted stock, stock appreciation rights, performance units
performance shares and incentive awards to our employees, directors and other
service providers.
A total of 350,000 shares of our common stock have been reserved for
issuance under our 2004 Plan. In addition, if the 2004 Plan is approved at the
annual meeting, future grants under E-Z-EM's 1983 Stock Option Plan and 1984
Directors and Consultants Stock Option Plan will be suspended and all shares
reserved or to be reserved for issuance upon exercise of stock options to be
granted under these plans will be reallocated to the 2004 Plan and reserved for
issuance thereunder. We expect that an aggregate of approximately 658,414
shares of our common stock will be reallocated as described above. This
reallocation will result in an estimated aggregate of 1,008,414 shares of
common stock being available for grant under the 2004 Plan following such
reallocation. As noted above, following the adoption of the 2004 Plan, we do
not intend to make further grants under the 1983 Plan or the 1984 Plan. Under
the 2004 Plan, up to 800,000 shares may be issued upon exercise of incentive
stock options.
The Compensation Committee of our board will administer our 2004 Plan.
As required by the 2004 Plan, the Compensation Committee will consist of two or
more members of the board, each of whom must:
o be an independent director under the rules of the American
Stock Exchange,
o qualify as a "non-employee" director under SEC Rule 16b-3,
and
o qualify as an "outside director" within the meaning of
Section 162(m) of the Code.
The Compensation Committee will have the power to select the participants in
the 2004 Plan and determine the types of awards to be made and the terms of
those awards, including the exercise price, the number of shares subject to
each such award, the exercisability of the awards and the form of
consideration, if any, payable upon exercise.
The Compensation Committee will determine the exercise price of
options granted under our 2004 Plan, but for all incentive stock options the
exercise price must at least be equal to the fair market value of our common
stock on the date of grant. The term of an incentive stock option may not
exceed ten years, except that for any participant who owns 10% of the voting
power of all classes of our outstanding stock, the term must not exceed five
years and the exercise price must equal at least 110% of the fair market value
on the grant date. The Compensation Committee will determine the term of all
options. After termination of service of an employee, director or other service
provider, he or she may exercise his or her option for the period of time
stated, and subject to any other terms and conditions included in the option
agreement.
No participant in our 2004 Plan may receive options to purchase, or
stock appreciation rights with respect to, more than 200,000 shares in any
year. The maximum number of shares for which awards other than
appreciation-only awards and awards the value of which is not based on the
value of our common stock, or dollar-denominated awards, may be granted to a
plan participant in any year is 100,000 shares. This limit applies to
restricted stock, performance shares and any other stock value-based award not
based solely on the appreciation of our common stock after the award is
granted. Dollar-denominated awards under the 2004 Plan may not exceed $400,000
for a participant in any year.
Stock appreciation rights, or SARs, may be granted under our 2004
Plan. SARs allow the recipient to receive the appreciation in the fair market
value of our common stock between the exercise date and the date of grant of
the SARs or, if the SARs are linked and alternative to an option, the date of
grant of the option. The Compensation Committee will determine the terms of
SARs, including when such rights become exercisable and whether to pay the
increased appreciation in cash or with shares of our common stock, or a
combination thereof.
Restricted stock may be granted under our 2004 Plan. Restricted stock
awards are grants of shares of our common stock that vest in accordance with
terms and conditions established by the Compensation Committee. The
Compensation Committee will determine the number of shares of restricted stock
granted to any employee, director or other service provider. The Compensation
Committee may impose whatever conditions to vesting it determines to be
appropriate. For example, the Compensation Committee may set restrictions based
on the achievement of specific performance goals. Shares of restricted stock
that do not vest are subject to our right of repurchase or forfeiture. The
Compensation Committee may also make restricted stock unit awards, which are
shares of our common stock that are issued only after the recipient satisfies
any service or performance objectives or contingencies determined by the
Compensation Committee.
Our 2004 Plan does not allow for the transfer of awards, except for
transfers by will or the laws of descent and distribution or to such other
persons designated by a participant to receive the award upon the participant's
death, or except as may otherwise be authorized by the committee for any award
other than an incentive stock option.
Performance units and performance shares may be granted under our 2004
Plan. Performance share awards are rights to receive a specified number of
shares of our common stock and/or an amount of money equal to the fair market
value of a specified number of shares of our common stock, at a future time or
times if a specified performance goal is attained and any other terms and
conditions specified by the committee are satisfied. Performance unit awards
are rights to receive a specified amount of money (other than an amount of
money equal to the fair market value of a specified number of shares of common
stock) at a future time or times if a specified performance goal is attained
and any other terms and conditions specified by the committee are satisfied.
The Compensation Committee will establish organizational or individual
performance goals in its discretion, which, depending on the extent to which
they are met, will determine the number and/or the value of performance units
and performance shares to be paid out to participants.
Our 2004 Plan authorizes the Compensation Committee to grant incentive
awards, which are rights to receive money or shares on such terms and subject
to such conditions as the committee may prescribe. Restricted stock,
performance shares and performance units are particular forms of incentive
awards but are not the only forms in which they may be made. Incentive awards
may also take, for example, the form of cash or stock bonuses.
Our 2004 Plan authorizes the Compensation Committee to grant options
and SARs that become exercisable, and any award under the 2004 Plan that
becomes nonforfeitable, fully earned and payable, if we have a "change in
control," and to provide for money to be paid in settlement of any award under
the 2004 Plan in such event. Additionally, if we have a change of control, the
Compensation Committee may authorize the exercise of outstanding nonvested
appreciation rights, make any award outstanding under the 2004 Plan
non-forfeitable, fully earned and payable, or require the automatic exercise
for cash of all outstanding SARs.
In general, under the 2004 Plan, a "change in control" will be deemed
to occur if any person or group of persons acting in concert becomes the
beneficial owner of more than 50% of the outstanding voting power of all our
capital stock; a majority of our board, before a tender or exchange offer for
our common stock ceases to constitute a majority as a result of such
transaction or transactions; or our stockholders approve a merger,
reorganization, sale of assets or plan of complete liquidation following which
our stockholders before the transaction or Related Parties (as defined in the
2004 Plan) will not own at least 50% of our voting power or assets.
Subject to any applicable stockholder approval requirements of
Delaware or federal law, any rules or listing standards that apply to our
company, or the Internal Revenue Code, the 2004 Plan may be amended by the
board of directors at any time and in any respect, including without limitation
to permit or facilitate qualification of options previously granted or to be
granted in the future (1) as incentive stock options under the Internal Revenue
Code, or (2) for such other special tax treatment as may be enacted on or after
the date on which the 2004 Plan is approved by the board. Without stockholder
approval however, no such amendment may increase the aggregate number of shares
which may be issued under the 2004 Plan, or may permit the exercise price of
outstanding options or SARs to be reduced, subject to limited exceptions. No
amendment of the 2004 Plan may adversely affect any award granted prior to the
date of such amendment or termination without the written consent of the holder
of such award.
Because award grants under the 2004 Plan are subject to the discretion
of the Compensation Committee, awards under the 2004 Plan for the current year
are indeterminable. Future option exercise prices under the 2004 Plan are also
indeterminable because they will be based upon the fair market value of our
common stock on the date of grant. During the 2004 fiscal year, no options were
granted under the 1983 Stock Option Plan and options to acquire 8,000 shares
were granted under the 1984 Directors and Consultants Stock Option Plan and,
accordingly, had the 2004 Plan been in place, these 8,000 options would have
been granted under the 2004 Plan during the 2004 fiscal year.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL AND ADOPTION
OF THE 2004 STOCK AND INCENTIVE AWARD PLAN.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
GENERAL
The board of directors appointed Grant Thornton LLP, independent
certified public accountants, who were our company's independent auditors for
the 2004 fiscal year, as our independent auditors for the fiscal year ending
May 28, 2005. Although the selection of auditors does not require ratification,
the board of directors has directed that the appointment of Grant Thornton LLP
be submitted to the stockholders for ratification due to the significance of
their appointment to our company.
The proposal to ratify the board's appointment of Grant Thornton LLP
as our independent auditors for the fiscal year ending May 28, 2005 must be
approved by the affirmative vote of a majority of the votes cast at the annual
meeting.
A representative of Grant Thornton LLP is expected to be present at
the annual meeting with the opportunity to make a statement and to respond to
appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF GRANT THORNTON LLP AS OUR COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING MAY 28, 2005.
ANNUAL REPORT
All stockholders of record as of the record date have been sent, or
are concurrently herewith being sent, a copy of our Annual Report on Form 10-K
for the 2004 fiscal year.
ANY STOCKHOLDER OF E-Z-EM MAY OBTAIN WITHOUT CHARGE ADDITIONAL COPIES
OF E-Z-EM'S ANNUAL REPORT ON FORM 10-K FOR THE 2004 FISCAL YEAR (WITHOUT
EXHIBITS), AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BY WRITING TO:
STOCKHOLDER INFORMATION
E-Z-EM, INC.
1111 MARCUS AVENUE
LAKE SUCCESS, NEW YORK 11042
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
In order to be considered for inclusion in the proxy materials to be
distributed in connection with the next annual meeting of stockholders of
E-Z-EM, stockholder proposals for such meeting must be submitted to our company
no later than May 30, 2005.
In addition, our policy on stockholder nominations for director
candidates, a copy of which is posted on our website at www.ezem.com, requires
that to be considered for next year's slate of directors any stockholder
nominations for director must be received by our corporate secretary no later
than May 30, 2005.
OTHER MATTERS
As of the date of this proxy statement, management does not know of
any matters other than those set forth in this proxy statement which will be
presented for consideration at the meeting. If any other matter or matters are
properly brought before the meeting or any adjournment of the meeting, the
persons named in the accompanying proxy will have discretionary authority to
vote, or otherwise act, with respect to such matters in accordance with their
judgment.
APPENDIX A
E-Z-EM, INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
------------------------------------------------------------------------------
SEPTEMBER 15, 2004
I. PURPOSE
The function of the Audit Committee (the "Committee") of the Board of
Directors (the "Board") of E-Z-EM, Inc. (the "Corporation") is to:
A. assist the Board in its oversight of (i) the integrity of the
Corporation's financial statements, financial reporting
process, system of internal controls over financial
reporting, and audit process, (ii) the Corporation's
compliance with, and process for monitoring compliance with,
legal and regulatory requirements, (iii) the independent
auditors' qualifications and independence, and (iv) the
performance of the Corporation's internal audit function and
its independent auditors, including, without limitation,
ensuring that interim quarterly financial statements are
reviewed by the Corporation's independent auditors;
B. prepare the report required to be prepared by the Committee
under the rules of the Securities and Exchange Commission
(the "SEC") for inclusion in the Corporation's annual proxy
statement; and
C. provide an open avenue of communication between the
independent auditors and the Board.
II. COMPOSITION
A. The Committee shall consist of no fewer than three members of
the Board, all of whom shall be appointed by the Board. The
members of the Committee shall each have been determined by
the Board to be "independent" under the American Stock
Exchange Rules (the "AMEX Rules") and under the applicable
rules promulgated by the SEC under the Securities Exchange
Act of 1934 ("Exchange Act") .
B. In selecting the members of the Committee, the Board shall
also determine (i) that each member is able to read and
understand fundamental financial statements, (ii) that at
least one member is "financially sophisticated" in that he or
she has "past employment in finance or accounting" or
"requisite certification in accounting" or "other comparable
experience which results in financial sophistication", in
each case in accordance with the AMEX Rules, and (iii) to the
extent required by the applicable SEC rules, that at least
one member of the Committee is an "audit committee financial
expert" as defined by the SEC rules (or if there is no such
member, the reason for not having an audit committee
financial expert on the Committee).
C. Each member of the Committee shall be free of any
relationship that, in the opinion of the Board, would
interfere with his or her individual exercise of independent
judgment.
D. No director may serve as a member of the Committee if such
director serves on the audit committees of more than two
other public companies unless the Board determines that such
simultaneous service would not impair the ability of such
director to serve effectively on the Committee, and discloses
this determination in the Corporation`s annual proxy
statement.
III. MEETINGS
A. The Committee shall meet at least four (4) times annually and
will be available to meet more frequently as circumstances
require.
B. Incidental to any regularly scheduled meetings, the Committee
may meet, if it deems it necessary, with management and the
independent auditors in separate executive sessions to
discuss any matters that the Committee and each of these
groups believe should be discussed privately.
C. The Committee shall appoint its chairperson, after
consultation with the Board.
D. The Committee may invite such members of management, auditors
and other persons to its meetings as it may deem desirable or
appropriate. The Committee's chairperson shall report
regularly to the Board summarizing the Committee's actions
and any significant issues considered by the Committee.
IV. RESPONSIBILITIES AND DUTIES
The following are the duties, responsibilities and authority of the
Committee:
A. To meet with the Corporation's independent auditors (the
"Independent Auditors"), the Corporation's management, and
such other personnel as it deems appropriate and discuss such
matters as it considers appropriate, including the matters
referred to below. The Committee must meet separately with
each the Independent Auditors and the Corporation`s
management at least once each fiscal quarter.
B. To decide whether to appoint, retain or terminate (and
recommend to the Corporation's shareholders the selection or
ratification of selection of Independent Auditors) the
Corporation`s Independent Auditors, including having the sole
authority to approve all audit engagement fees and terms and
to pre-approve all audit and permissible non-audit services
and fees to be provided by the Independent Auditors. The
Committee shall monitor and evaluate the Independent
Auditors' qualifications, performance and independence on an
ongoing basis, and shall be directly responsible for
overseeing the work of the Independent Auditors (including
resolving disagreements between management and the
Independent Auditors regarding financial reporting). In
conducting such evaluations, the Committee shall:
1. At least annually, obtain and review a report by the
Independent Auditors describing:
a. the Independent Auditors' internal
quality-control procedures;
b. any material issues raised by the most recent
internal quality-control review or peer review
of the Independent Auditors, or by any inquiry
or investigation by governmental or
professional authorities, within the preceding
five years, concerning one or more independent
audits carried out by the auditors, and any
steps taken to deal with any such issues; and
c. (to assess the auditors' independence) all
relationships between the Independent Auditors
and the Corporation (including information the
Corporation determines is required to be
disclosed in the Corporation`s proxy statement
as to audit and non-audit services provided to
the Corporation and those disclosures required
by Independence Standards Board Standard No. 1,
as it may be modified or supplemented).
2. Discuss with the Independent Auditors any
relationships or services that may affect the
objectivity or independence of the Independent
Auditors and consider whether the provision of
non-audit services is compatible with maintaining
the Independent Auditor's independence.
3. Review and evaluate the qualifications, performance
and independence of the primary partners of the
Independent Auditors.
4. Take into account the opinions of management.
5. Discuss with management the timing and process for
implementing the rotation of the lead audit partner,
the concurring partner and any other active audit
engagement team partner and consider whether there
should be a regular rotation of the audit firm
itself.
The Committee shall present its conclusions concerning the
Independent Auditors to the Board for its information at
least annually.
C. To obtain from the management and Independent Auditors for
any audit a timely report on the Corporation`s annual audited
financial statements describing all critical accounting
policies and practices to be used including alternative
treatments of financial information within generally accepted
accounting principles discussed with management, the
ramifications of such treatments and the treatment
recommended by auditors, and to obtain from the Independent
Auditors any material written communications between the
Independent Auditors and management, such as any "management"
letter, response thereto by the Corporation's management or
schedule of unadjusted differences.
D. Prior to their being filed, to discuss with management and
the Independent Auditors the Corporation's annual audited
financial statements and quarterly financial statements,
including the Corporation`s disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations", and to discuss with the Corporation`s Chief
Executive Officer and Chief Financial Officer their
certifications to be provided under Sections 302 and 906 of
the 2002 Act, including whether the financial statements
fairly present, in all material respects, the financial
condition, results of operations and cash flows of the
Corporation as of and for the periods presented and whether
any significant deficiencies exist in the design or operation
of internal controls that could adversely affect the
Corporation`s ability to record, process, summarize and
report financial data, assess any material weaknesses that
may exist in internal controls, or consider whether any fraud
has occurred, whether or not material, that involves
management or other employees who have a significant role in
the Corporation's internal controls. The Committee shall
discuss, as applicable: (a) major issues encountered and
judgments made regarding accounting principles, financial
statement presentation and the Corporation's financial
statements generally, including any significant changes in
the Corporation`s selection or application of accounting
principles, major issues as to the adequacy of the
Corporation`s internal controls, any special audit steps
adopted in light of material control deficiencies and any
other major accounting policy changes; (b) analyses prepared
by management and/or the Independent Auditors setting forth
significant financial reporting issues and judgments made in
connection with the preparation of the financial statements;
(c) the effect of regulatory and accounting initiatives, as
well as off-balance sheet structures, transactions,
obligations (including contingent obligations), other
relationships of the Corporation with unconsolidated entities
or other persons on the financial statements of the
Corporation and any unusual methods of acquiring or holding
interests in other entities; (d) the results of the review of
the Corporation's quarterly financial statements by the
Corporation's Independent Auditors.
Whenever the Audit Committee meets with the external
auditors, the following questions should be kept in mind and
discussed with the external auditors:
1. If the external auditor were solely responsible for
preparation of the Company's financial statements,
would they have in anyway been prepared differently
from the manner selected by management, both for
material and non-material differences? If there is a
difference, discuss management's argument and the
auditor's response for possible disclosure.
2. If the auditor were an investor, would they feel
they have received, in plain English, information
essential to the understanding of the Company's
financial performance during the reporting period?
3. Is the external auditor aware of any actions, either
accounting or operational, that have had the purpose
and effect of moving revenues or expenses from one
reporting period to another?
4. If E-Z-EM establishes an internal audit capability,
would the procedures embraced by the internal audit
department be followed if the external auditor were
actually the CEO. If there are differences, what are
they and why?
E. To review filings (including interim reports) with the SEC
and other published documents containing the Corporation's
financial statements and consider whether the information
therein is consistent with the information in the financial
statements before it is filed with the SEC, AMEX or other
regulators, exchanges or associations.
F. To discuss with the Independent Auditors on at least an
annual basis, if applicable, the matters required to be
discussed by Statement on Auditing Standards No. 61, as it
may be modified or supplemented, as well as, any problems or
difficulties the auditors encountered in the course of the
audit work, including any restrictions on the scope of the
Independent Auditors' activities or access to requested
information, significant changes required in the Independent
Auditor's accounting plan, any significant disagreements with
management, and any other matters relating to the audit that
are to be communicated to the Committee under GAAP. Among the
items the Committee will consider discussing with the
Independent Auditors are:
1. any accounting adjustments that were noted or
proposed by the Independent Auditors but were
"passed" (as immaterial or otherwise);
2. any communications between the audit team and the
Independent Auditor's national office concerning
auditing or accounting issues presented by the
engagement; and
3. any "management" or "internal control" letter
issued, or proposed to be issued, by the Independent
Auditors to the Corporation. The discussion shall
also include the responsibilities, budget and
staffing of the Corporation's internal audit
function.
G. To discuss with management the Corporation's earnings press
releases, as well as financial information and any earnings
guidance provided to analysts and rating agencies. Discussion
of earnings releases, as well as financial information and
any earnings guidance may be done generally (i.e., discussion
of the types of information to be disclosed and the type of
presentation to be made).
H. To discuss with management on at least an annual basis:
1. the Independent Auditors' annual audit scope, risk
assessment and plan to ensure completeness of
coverage, reduction of redundant efforts, the
effective use of internal and external audit
resources and the use of independent public
accountants other than the appointed Independent
Auditors;
2. the form of Independent Auditors' report on the
annual financial statements and matters related to
the conduct of the audit under generally accepted
auditing standards; and
3. comments by the Independent Auditors on internal
controls and significant findings and
recommendations resulting from the audit.
I. To discuss with management on at least an annual basis:
o the written procedures regarding the internal audit,
o the adequacy of the Corporation`s internal controls,
any codes of conduct and any monitoring of the
Corporation's compliance therewith;
o the annual internal audit plan, risk assessment, and
significant findings and recommendations and
management's responses thereto;
o internal audit staffing; and
o the internal audit function and responsibilities and
any scope restrictions encountered during the
execution of internal audit responsibilities.
J. To establish procedures for the receipt, retention and
treatment of complaints received by the Corporation regarding
accounting, internal accounting controls or auditing matters,
and for the confidential, anonymous submission by the
Corporation's employees of concerns regarding questionable
accounting or auditing matters.
K. To establish policies governing the Corporation's hiring of
or engaging as a contractor any current or former employee of
the Independent Auditors and review and concur with the
hiring or engagement of such an individual. These policies
shall provide that no former employee of the Independent
Auditors who was a member of the Corporation`s audit
engagement team within one year of the date of the
commencement of procedures for a review or audit may
undertake a financial reporting oversight role at the
Corporation.
L. To discuss with management on at least an annual basis
management's assessment of the Corporation's market, credit,
liquidity and other financial and operational risks, and the
guidelines, policies and processes for managing such risks.
M. To discuss with the Corporation`s general counsel any
significant legal, compliance or regulatory matters that may
have a material impact on the Corporation`s business,
financial statements or compliance policies, including
related party transactions and reports or inquiries from
governmental or other agencies.
N. To obtain assurance from the Independent Auditors that the
audit of the Corporation`s financial statements was conducted
in a manner consistent with Section 10A of the Securities
Exchange Act of 1934, as amended, which sets forth certain
procedures to be followed in any audit of financial
statements required under that Act.
O. To review and approve all related party transactions (as
defined by the applicable AMEX Rule).
P. To conduct or authorize investigations into any matters
within the Committee's charter. The Committee is empowered
to: (i) retain outside counsel or other advisors to advise or
assist the Committee in the conduct of an investigation; (ii)
seek any information it requires from external parties or
employees, all of whom are directed to cooperate with the
Committee's requests; (iii) meet with management, the
Independent Auditors or outside counsel, as necessary; (iv)
meet with the Corporation's financial advisors; and (v)
authorize the payment of any fees in respect of the
foregoing.
Q. To produce the reports described under "Committee Reports"
below.
R. To discharge any other duties or responsibilities delegated
to the Committee by the Board, by the Corporation's bylaws or
by law from time to time.
S. To review the Committee's duties and responsibilities at
least annually.
V. COMMITTEE REPORTS
The Committee shall produce the following reports and provide them to
the Board:
A. Any report or filing, including any recommendation, or other
disclosures required to be prepared by the Committee pursuant
to the rules of the SEC or any other regulatory authority for
inclusion in the Corporation's annual proxy statement,
including:
1. a report for the annual proxy statement as to the
Committee's review and discussion of matters with
the Corporation's management and the Independent
Auditors;
2. filing a copy of the Committee's charter as an
appendix to the annual proxy statement at least once
every three (3) years; and
B. An annual performance evaluation of the Committee, which
shall compare the performance of the Committee with the
requirements of this charter. The performance evaluation
shall also include a review of the adequacy of this charter
and shall recommend to the Board any revisions the Committee
deems necessary or desirable, although the Board shall have
the sole authority to amend this charter. The performance
evaluation shall be conducted in such manner as the Committee
deems appropriate.
VI. COMPENSATION OF COMMITTEE MEMBERS
No member of the Committee may receive any compensation from the
Corporation other than (i) director's fees, which may be received in
cash, common stock, equity-based awards or other in-kind consideration
ordinarily available to directors; (ii) a pension or other deferred
compensation for prior service that is not contingent on future
service; and (iii) any other regular benefits that other directors
receive.
VII. DELEGATION TO SUBCOMMITTEE
The Committee may, in its discretion, delegate all or a portion of its
duties and responsibilities to a subcommittee of the Committee. The
Committee may, in its discretion, delegate to one or more of its
members the authority to pre-approve any audit or non-audit services
to be performed by the Independent Auditors, provided that any such
approvals are presented to the Committee at its next scheduled
meeting.
VIII. RESOURCES AND AUTHORITY OF THE COMMITTEE
The Committee shall have the resources and authority appropriate to
discharge its duties and responsibilities, including the authority to
select, retain, terminate, and approve the fees and other retention
terms of special or independent counsel, accountants or other experts,
as it deems appropriate, without seeking approval of the Board or
management.
IX. GENERAL
The Committee may perform any other activities consistent with this
Charter, the Corporation's By-laws and applicable law, as the
Committee deems necessary or appropriate, or as directed by the Board.
X. AMENDMENTS:
This Charter may be amended by the Board.
APPENDIX B
CHARTER OF THE
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
OF THE BOARD OF DIRECTORS OF E-Z-EM, INC.
ADOPTED AS OF FEBRUARY 9, 2004
________________________________________________________________________
I. PURPOSE OF THE COMMITTEE
The purposes of the Nominating and Corporate Governance Committee (the
"Committee") of the Board of Directors (the "Board") of E-Z-EM, Inc., a
Delaware corporation (the "Corporation"), shall be to identify and to recommend
to the Board individuals qualified to serve as directors of the Corporation and
on committees of the Board; to advise the Board with respect to the Board
composition, procedures and committees; to develop and recommend to the Board a
set of corporate governance principles applicable to the Corporation; and to
oversee the evaluation of the Board and the Corporation's management.
II. COMPOSITION OF THE COMMITTEE
The Committee shall consist of two or more directors, as determined
from time to time by the Board. Each member of the Committee shall be qualified
to serve on the Committee pursuant to the requirements of the American Stock
Exchange (the "AMEX"), and any additional requirements that the Board deems
appropriate.
The chairperson of the Committee shall be designated by the Board,
provided that if the Board does not so designate a chairperson, the members of
the Committee, by a majority vote, may designate a chairperson.
Any vacancy on the Committee shall be filled by majority vote of the
Board. No member of the Committee shall be removed except by majority vote of
the Board.
III. MEETINGS AND PROCEDURES OF THE COMMITTEE
The Committee shall meet as often as it determines necessary to carry
out its duties and responsibilities, but no less frequently than four times
annually. The Committee, in its discretion, may ask members of management or
others to attend its meetings (or portions thereof) and to provide pertinent
information as necessary.
The Committee may form subcommittees for any purpose that the
Committee deems appropriate and may delegate to such subcommittees such power
and authority as the Committee deems appropriate; provided, however, that no
subcommittee shall consist of fewer than two members; and provided further that
the Committee shall not delegate to a subcommittee any power or authority
required by any law, regulation or listing standard to be exercised by the
Committee as a whole.
A majority of the members of the Committee present in person or by
means of a conference telephone or other communications equipment by means of
which all persons participating in the meeting can hear each other shall
constitute a quorum.
The Committee shall maintain minutes of its meetings and records
relating to those meetings and shall report regularly to the Board on its
activities, as appropriate.
IV. DUTIES AND RESPONSIBILITIES OF THE COMMITTEE
A. BOARD CANDIDATES AND NOMINEES
The Committee shall have the following duties and responsibilities
with respect to Board candidates and nominees:
(a) To assist in identifying, recruiting and, if appropriate, interviewing
candidates to fill positions on the Board, including persons suggested by
stockholders or others. The Committee shall, if it deems appropriate and as
required by applicable law, rules and regulations, establish procedures to be
followed by stockholders in submitting recommendations for Board candidates.
(b) To review the background and qualifications of individuals being considered
as director candidates. Among the qualifications considered in the selection of
candidates, the Committee shall look at the following attributes and criteria
of candidates: experience, skills, expertise, diversity, personal and
professional integrity, character, business judgment, time availability in
light of other commitments, dedication, conflicts of interest and such other
relevant factors that the Committee considers appropriate in the context of the
needs of the Board.
(c) To recommend to the Board the director nominees for election by the
stockholders or appointment by the Board, as the case may be, pursuant to the
By-laws of the Corporation, which recommendations shall be consistent with the
criteria for selecting directors established by the Board from time to time.
(d) To review the suitability for continued service as a director of each Board
member when his or her term expires and when he or she has a change in status,
including but not limited to an employment change, and to recommend whether or
not the director should be re-nominated.
B. BOARD COMPOSITION AND PROCEDURES
The Committee shall have the following duties and responsibilities
with respect to the composition and procedures of the Board as a whole:
(a) To review annually with the Board the composition of the Board as
a whole and to recommend, if necessary, measures to be taken so that the Board
reflects the appropriate balance of knowledge, experience, skills, expertise
and diversity required for the Board as a whole and contains at least the
minimum number of independent directors required by the AMEX.
(b) To review periodically the size of the Board and to recommend to
the Board any appropriate changes.
(c) To make recommendations on the frequency and structure of Board
meetings.
(d) To make recommendations concerning any other aspect of the
procedures of the Board that the Committee considers warranted, including but
not limited to procedures with respect to the waiver by the Board of any
Corporation rule, guideline, procedure or corporate governance principle.
C. BOARD COMMITTEES
The Committee shall have the following duties and responsibilities
with respect to the committee structure of the Board:
(a) After consultation with the Chairman and Chief Executive Officer
and after taking into account the experiences and expertise of individual
directors, to make recommendations to the Board regarding the size and
composition of each standing committee of the Board, including the
identification of individuals qualified to serve as members of a committee,
including the Committee, and to recommend individual directors to fill any
vacancy that might occur on a committee, including the Committee.
(b) To monitor the functioning of the committees of the Board and to
make recommendations for any changes, including the creation and elimination of
committees.
(c) To review annually committee assignments and the policy with
respect to the rotation of committee memberships and/or chairpersonships, and
to report any recommendations to the Board.
(d) To recommend that the Board establish such special committees as
may be desirable or necessary from time to time in order to address ethical,
legal or other matters that may arise. The Committee's power to make such a
recommendation under this Charter shall be without prejudice to the right of
any other committee of the Board, or any individual director, to make such a
recommendation at any time.
D. CORPORATE GOVERNANCE
The Committee shall have the following duties and responsibilities
with respect to corporate governance:
(a) To develop and recommend to the Board a set of corporate
governance principles for the Corporation, which shall be consistent with any
applicable laws, regulations and listing standards. At a minimum, the corporate
governance principles developed and recommended by the Committee shall address
the following:
(i) Director qualification standards.
(ii) Director responsibilities.
(iii) Director access to management and, as necessary and
appropriate, independent advisors.
(iv) Director compensation, including principles for
determining the form and amount of director compensation,
and for reviewing those principles, as appropriate.
(v) Director orientation and continuing education.
(vi) Management succession, including policies and principles
for the selection and performance review of the chief
executive officer, as well as policies regarding
succession in the event of an emergency or the retirement
of the chief executive officer.
(vii) Annual performance evaluation of the Board.
(b) To review periodically, and at least annually, the corporate
governance principles adopted by the Board to assure that they (i) are
appropriate for the Corporation, (ii) comply with any applicable requirements
of the AMEX and (iii) in the Committee's judgment, constitute the best
corporate governance practices reasonably available to the Corporation, and to
recommend any desirable changes to the Board.
(c) To consider any other corporate governance issues that arise from
time to time, and to develop appropriate recommendations for the Board.
E. EVALUATION OF THE BOARD AND SENIOR MANAGEMENT
The Committee shall have the following duties and responsibilities
with respect to evaluation of the Board:
(a) The Committee shall be responsible for overseeing the evaluation
of the Board as a whole, and the President and Chief Executive Officer ("CEO")
of the Corporation and shall evaluate and report to the Board on the
performance and effectiveness of the Board and the CEO. The Committee shall
establish procedures to allow it to exercise this oversight function.
(b) The Committee shall consider questions of possible conflicts of
interests of members of the Board and the CEO.
V. EVALUATION OF THE COMMITTEE
The Committee shall, on an annual basis, evaluate its performance. In
conducting this review, the Committee shall evaluate whether this Charter
appropriately addresses the matters that are or should be within its scope and
shall recommend such changes as it deems necessary or appropriate. The
Committee shall address all matters that the Committee considers relevant to
its performance, including at least the following: the adequacy,
appropriateness and quality of the information and recommendations presented by
the Committee to the Board, the manner in which they were discussed or debated,
and whether the number and length of meetings of the Committee were adequate
for the Committee to complete its work in a thorough and thoughtful manner.
The Committee shall deliver to the Board a report, which may be oral,
setting forth the results of its evaluation, including any recommended
amendments to this Charter and any recommended changes to the Corporation's or
the Board's policies or procedures.
VI. INVESTIGATIONS AND STUDIES; OUTSIDE ADVISERS
The Committee may conduct or authorize investigations into or studies
of matters within the Committee's scope of responsibilities, and may retain, at
the Corporation's expense, such independent counsel or other consultants or
advisers as it deems necessary. The Committee shall have the solo authority to
retain or terminate any search firm to be used to identify director candidates,
including sole authority to approve the search firm's fees and other retention
terms, such fees to be borne by the Corporation.
* * *
While the members of the Committee have the duties and
responsibilities set forth in this Charter, nothing contained in this Charter
is intended to create, or should be construed as creating, any responsibility
or liability of members of the Committee, except to the extent otherwise
provided under applicable federal or state law.