WAYNE, Pa., May 16 /PRNewswire-FirstCall/ -- Escalon Medical Corp.
(Nasdaq Small Cap: ESMC) today filed a complaint against IntraLase Corp.
(Nasdaq: ILSE) in the Court of Chancery of the State of Delaware for breach of
contract and breach of fiduciary duty arising out of IntraLase's bad faith
conduct under, and multiple breaches of, a License Agreement for laser
technology.  Under the License Agreement, Escalon Medical granted IntraLase
the exclusive right to use Escalon Medical's patented and non-patented
technology in exchange for, among other things, royalty payments based on a
percentage of net sales. Escalon Medical seeks declaratory relief, specified
damages, and specific performance of its rights under the license agreement,
including its express right under the agreement to have independent certified
accountants audit the books and records of IntraLase to verify and compute
payments due Escalon Medical.
    Escalon Medical also announced that on May 6, 2005 the United States
District Court for the Central District of California, Southern District
entered judgment in prior litigation between IntraLase and Escalon Medical
wherein IntraLase asked the court to validate its interpretation of certain
terms of the License Agreement relating to the amount of royalties owed to
Escalon Medical.  The Court did not agree with IntraLase's interpretation of
certain terms and declared that, under the terms of the License Agreement,
IntraLase must pay Escalon Medical royalties on revenue from maintenance
contracts and one-year warranties.  Further, the Court rejected IntraLase's
argument that it is entitled to deduct the value of non-patented components of
its ophthalmic products, which it sells as an integrated unit, from the
royalties due Escalon Medical.  Non-patented components of the products
include computer monitors, joysticks, keyboards, universal power supplies,
microscope assemblies, installation kits and syringes.  In addition, the Court
rejected IntraLase's assertion that account receivables are not "consideration
received" under the License Agreement and expressly ruled that IntraLase must
pay Escalon Medical royalties on IntraLase's account receivables."  The Court
agreed, however, with IntraLase's position that IntraLase is not required to
pay royalties on research grants.  The Court also held that IntraLase must
give Escalon Medical an accounting of third-party royalties.
    Further, the Court agreed with Escalon Medical in finding that royalties
are "monies" and default in the payment of royalties must be remedied within
15 days of written notice of the default.  The Court rejected IntraLase's
position concerning the effective date of the License Agreement, as amended
and restated, holding that the effective date of such Agreement was dated
October 17, 2000.
    In October 1997, Escalon Medical licensed its intellectual laser
properties to IntraLase in exchange for an equity interest in IntraLase as
well as royalties on future product sales.  The shares of common stock were
restricted for sale until April 4, 2005 and, according to a Fourth Amended
Registration Right Agreement between Escalon Medical and IntraLase, are now
able to be sold.
    Escalon Medical is record holder of the common stock of IntraLase.  On
April 22, 2005 Escalon Medical made a formal written demand to inspect certain
of IntraLase's books and records pursuant to section 220 of the Delaware
General Corporation Law ("DGCL").  IntraLase rejected Escalon Medical's
demand.

    Founded in 1987, Escalon develops, markets and distributes ophthalmic
diagnostic, surgical and pharmaceutical products as well as vascular access
devices.  Drew, which operates as a separate division, provides
instrumentation and consumables for the diagnosis and monitoring of medical
disorders in the areas of diabetes, cardiovascular diseases and hematology, as
well as veterinary hematology and blood chemistry.  The Company seeks to
utilize strategic partnerships to help finance its development programs and is
also seeking acquisitions to further diversify its product line to achieve
critical mass in sales and take better advantage of the Company's distribution
capabilities.  Escalon has headquarters in Wayne, Pennsylvania and
manufacturing operations in Long Island, New York, New Berlin, Wisconsin,
Dallas, Texas, Oxford, Connecticut and Barrow-in-Furness, U.K.

    Note:  This press release contains statements that are considered forward-
looking under the Private Securities Litigation Reform Act of 1995, including
statements about the Company's future prospects.  They are based on the
Company's current expectations and are subject to a number of uncertainties
and risks, and actual results may differ materially.  The uncertainties and
risks include whether the Company is able to improve upon the operations of
the Company's business units, including Drew, generate cash and identify,
finance, integrate operations of Drew and enter into business relationships
and acquisitions, uncertainties and risks related to new product development,
commercialization, manufacturing and market acceptance of new products,
marketing acceptance of existing products in new markets, the continuity of
royalty revenue, research and development activities, including failure to
demonstrate clinical efficacy, delays by regulatory authorities, scientific
and technical advances by the Company or third parties, introduction of
competitive products, third party reimbursement and physician training as well
as general economic conditions.  Further information about these and other
relevant risks and uncertainties may be found in the Company's report on Form
10-K, and its other filings with the Securities and Exchange Commission, all
of which are available from the Commission as well as other sources.

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