INNOVATIVE MEDICAL SERVICES
1725 Gillespie Way
El Cajon, California 92020
(619) 596-8600
____________________
PROXY STATEMENT
____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held December 19, 1998
TO THE SHAREHOLDERS OF INNOVATIVE MEDICAL SERVICES
NOTICE HEREBY IS GIVEN that the Annual Meeting of Shareholders of
INNOVATIVE MEDICAL SERVICES, an California corporation (the "Company"),
will be held at the Company's offices, 1725 Gillespie Way, El Cajon,
California 92020, on December 19, 1998, at 10:00 a.m., Pacific Standard
Time, and at any and all adjournments thereof, for the purpose of
considering and acting upon the following Proposals:
Proposal No. 1. ELECTION OF DIRECTORS
Proposal No. 2. AUTHORIZATION FOR THE BOARD OF DIRECTORS TO DECLARE A
REVERSE SPLIT OF THE OUTSTANDING COMMON STOCK ONLY AND
AS WHEN DEEMED NECESSARY BY THE BOARD TO MAINTAIN THE
LISTING OF THE COMPANY'S COMMON STOCK ON THE NASDAQ
SMALLCAP MARKET AND ON OR BEFORE DECEMBER 31, 1999 ON
THE BASIS OF UP TO ONE SHARE OF COMMON STOCK FOR EVERY
FOUR SHARES OUTSTANDING ON THE EFFECTIVE DATE WITH EACH
RESULTING FRACTIONAL SHARE ROUNDED UP TO THE NEXT WHOLE
SHARE.
Proposal No. 3. APPROVAL OF THE INNOVATIVE MEDICAL SERVICES 1998 DIRECTORS
AND OFFICERS STOCK OPTION PLAN
This Annual Meeting is called as provided for by California law and the
Company's By-laws.
Only holders of the outstanding Common Stock of the Company of record at
the close of business on November 20, 1998 will be entitled to notice of
and to vote at the Meeting or at any adjournment or adjournments thereof.
All shareholders, whether or not they expect to attend the Annual Meeting
of Shareholders in person, are urged to sign and date the enclosed Proxy
and return it promptly in the enclosed postage-paid envelope which requires
no additional postage if mailed in the United States. The giving of a
proxy will not affect your right to vote in person if you attend the
Meeting.
BY ORDER OF THE BOARD OF DIRECTORS.
DENNIS ATCHLEY
SECRETARY
El Cajon, California
November 20, 1998
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INNOVATIVE MEDICAL SERVICES
1725 Gillespie Way
El Cajon, California 92020
619 596 8600
____________________
PROXY STATEMENT
____________________
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 19, 1998
GENERAL INFORMATION
The enclosed Proxy is solicited by and on behalf of the Board of Directors
of INNOVATIVE MEDICAL SERVICES, a California corporation (the "Company"),
for use at the Company's Annual Meeting of Shareholders to be held at the
Company's offices, 1725 Gillespie Way, El Cajon, California 92020, on the
19h day of December 1998 at 10:00 a.m. Pacific Standard Time, and at any
adjournment thereof. It is anticipated that this Proxy Statement and the
accompanying Proxy will be mailed to the Company's shareholders on or
before November 18, 1998.
Any person signing and returning the enclosed Proxy may revoke it at any
time before it is voted by giving written notice of such revocation to the
Company, or by voting in person at the Meeting. The expense of soliciting
proxies, including the cost of preparing, assembling and mailing this proxy
material to shareholders, will be borne by the Company. It is anticipated
that solicitations of proxies for the Meeting will be made only by use of
the mails; however, the Company may use the services of its Directors,
Officers and employees to solicit proxies personally or by telephone
without additional salary or compensation to them. Brokerage houses,
custodians, nominees and fiduciaries will be requested to forward the proxy
soliciting materials to the beneficial owners of the Company's shares held
of record by such persons, and the Company will reimburse such persons for
their reasonable out-of-pocket expenses incurred by them in that
connection.
All shares represented by valid proxies will be voted in accordance
therewith at the Meeting. Shares not voting as a result of a proxy marked
to abstain will be counted as part of total shares voting in order to
determine whether or not a quorum has been achieved at the Meeting. Shares
registered in the name of a broker-dealer or similar institution for
beneficial owners to whom the broker-dealer distributed notice of the
Annual Meeting and proxy information and which such beneficial owners have
not returned proxies or otherwise instructed the broker-dealer as to voting
of their shares, will be counted as part of the total shares voting in
order to determine whether or not a quorum has been achieved at the
Meeting. Abstaining proxies and broker-dealer non-votes will not be
counted as part of the vote on any business at the Meeting on which the
shareholder has abstained.
The Company's Annual Report to Shareholders for the fiscal year ended July
31, 1998, has been previously mailed or is being mailed simultaneously to
the Company's shareholders, but does not constitute part of these proxy
soliciting materials.
SHARES OUTSTANDING AND VOTING RIGHTS
All voting rights are vested exclusively in the holders of the Company's
Common Stock with each common share entitled to one vote. Only
shareholders of record at the close of business on November 20, 1998 are
entitled to notice of and to vote at the Meeting or any adjournment
thereof. On November 20, 1998 the Company had 3,916,351 shares of its
Common Stock outstanding, each of which is entitled to one vote on all
matters to be voted upon at the Meeting, including the election of
Directors. No fractional shares are presently outstanding. A majority of
the Company's outstanding voting stock represented in person or by proxy
shall constitute a quorum at the Meeting. The affirmative vote of a
majority of the votes cast, providing a quorum is present, is necessary to
elect the Directors. Cumulative voting in the election of Directors is
permitted.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND OF MANAGEMENT
The following table sets forth persons known to the Company as
beneficially owning more than five percent (5%) of the outstanding shares
of the Registrant.
% of Shares
-----------
Name/Address Shares Outstanding
- ------------ ------ -----------
Thomas Smith 303,007 7.7%
9408 Lightwood Cove
Austin, TX 78748
The following table sets forth the directors and officers and number of
shares of the Company's Common Stock beneficially owned as of November 20,
1998, by individual directors and executive officers and by all directors
and executive officers of the Company as a group.
% of Shares
-----------
Name/Address Title Shares Outstanding(1)
- ------------ ----- ------ --------------
Dennis Atchley Secretary 22,000 0.6%
1725 Gillespie Way
El Cajon, CA 92020
Dennis Brovarone Director 17,534 0.4%
11249 W. 103rd Dr.
Westminster, CO 80021
Gary Brownell Trsr-CFO/Director 32,334 0.8%
1725 Gillespie Way
El Cajon, CA 92020
Patrick Galuska Director 35,334 0.9%
8137 S. Downing St.
Littleton, CO 80122
Michael L. Krall Pres-CEO/Chairman 618,307 15.8%
1725 Gillespie Way
El Cajon, CA 92020
Eugene Peiser Director 9,034 0.2%
1725 Gillespie Way
El Cajon, CA 92020
Directors and Officers as a Group
(7 individuals) 734,543 18.8%
MANAGEMENT
The executive officers and directors of the Company and their ages are as
follows:
Name Age Position
Michael L. Krall 46 President, CEO, Chairman, Director
Gary Brownell, CPA 50 Chief Financial Officer, Director
Dennis Atchley, Esq. 46 Secretary
Eugene Peiser, PD 67 Director
Patrick Galuska 39 Director
Dennis Brovarone 42 Director
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The Directors serve until their successors are elected by the shareholders.
Vacancies on the Board of Directors may be filled by appointment of the
majority of the continuing directors. The executive officers serve at the
discretion of the Board of Directors except as subject to the employment
agreement with Mr. Krall.
COMMITTEES: MEETINGS OF THE BOARD
- ----------------------------------
The Company has a Compensation/Administration Committee and an Audit
Committee. The Compensation/Administration Committee and the Audit
Committee were formed in 1995. Messrs. Brovarone, Galuska and Peiser
comprise the Compensation/Administration Committee and Messrs. Brownell,
Galuska and Peiser, are the Audit Committee. The
Compensation/Administration Committee recommends to the Board the
compensation of executive officers and will serve as the Administrative
Committee for the Company's Stock Option Plans. The Audit Committee serves
as a liaison between the Board and the Company's auditor. The
Compensation/Administration Committee met 2 times during the fiscal year
ended July 31, 1998, and the Audit Committee met 2 times during the fiscal
year ended July 31, 1998.
The Company's Board of Directors held 4 meetings during the fiscal year
ended July 31, 1998, at which time all the then Directors were present or
consented in writing to the action taken at such meetings. No incumbent
Director attended fewer than 100% of said meetings.
COMPLIANCE WITH SECTION 16(a) OF SECURITIES EXCHANGE ACT OF 1934
- ----------------------------------------------------------------
To the Company's knowledge, during the fiscal year ended July 31, 1998, the
Company's Directors and Officers complied with all applicable Section 16(a)
filing requirements. This statement is based solely on a review of the
copies of such reports furnished to the Company by its Directors and
Officers and their written representations that such reports accurately
reflect all reportable transactions.
FAMILY RELATIONSHIPS
- --------------------
There is no family relationship between any Director, executive or person
nominated or chosen by the Company to become a Director or executive
officer.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows for the fiscal year ending July 31, 1998, the
compensation awarded or paid by the Company to its Chief Executive Officer
and any of the executive officers of the Company whose total salary and
bonus exceeded $100,000 during such year (The "Named Executive Officers"):
Total Annual Cash
-----------------
Compensation
------------
Name and Position (Year ended Restricted Stock or
- ----------------- ----------- -------------------
7/31) ($ Amt.) Options Granted
----- -------- ---------------
Michael L. Krall, Chairman, 1998 144,000 50,000 options (1)
Pres./CEO 100,000 options (2)
90,000 options (3)
200,000 options (4)
(1) Five-year Options exercisable January 1998 at $2.50 per share adopted
pursuant to the 1996 Directors and Officers Stock Option Plan.
SUBSEQUENTLY SURRENDERED TO THE PLAN IN JULY 1998.
(2) Five-year Options exercisable May 1998 at $1.00 per share granted for
extraordinary work regarding the EXCOA acquisition adopted pursuant to
1996 Directors and Officers Stock Option Plan.
(3) Five-year Options exercisable July 1998 at $1.00 per share as part of
option grant to members of the Board of Directors adopted pursuant to
1998 Directors and Officers Stock Option Plan and subject to
shareholder approval. See Proposal 3 below.
(4) Five-year Options exercisable July 1998 at $.563 per share as part of
options granted to Director for extraordinary work regarding the EXCOA
acquisition adopted pursuant to 1998 Directors and Officers Stock
Option Plan and subject to shareholder approval. See Proposal 3
below.
No other executive officer earned more than $100,000 during the current
fiscal year.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/VALUES
The following table sets forth the number and value of the unexercised
options held by each of the Named Executive Officers at July 31, 1998.
None of the Named Executive Officers and Directors who hold unexercised
options exercised options in the fiscal year ended July 31, 1998.
Name & Position Options Held at Exercise Option Value at
- --------------- --------------- -------- ---------------
July 31, 1998 Price ($) July 31, 1998(1)
------------- --------- ----------------
Michael L. Krall, Chairman, 100,000 1.00 N/A
Pres./CEO 90,000 1.00 N/A
200,000 0.563 $8,400
(1) Option value based on exercise price and the average closing price of
$0.605 for the 30 days ending July 31, 1998.
EMPLOYMENT AGREEMENTS AND EXECUTIVE COMPENSATION
In April 1996, the Board of Directors approved a five-year employment
agreement for Michael Krall, its President. Mr. Krall receives a salary of
$144,000 per year, an amount equal to 3% of the Company's net income before
taxes if any plus other benefits. In April 1996 Mr. Krall was awarded
five-year options to acquire 31,250 common shares at $3.20 per share which
were first exercisable in April, 1997.
COMPENSATION OF DIRECTORS
Directors are entitled to receive $300 plus reimbursement for all
out-of-pocket expenses incurred for attendance at Board of Directors
meetings.
OTHER ARRANGEMENTS
INCENTIVE STOCK OPTION PLAN: On April 17, 1996, the Shareholders approved
the Company's 1996 Incentive Stock Option Plan (the Plan). The purpose of
the Plan is to advance the business and development of the Company and its
shareholders by affording to the key employees of the Company the
opportunity to acquire a propriety interest in the Company by the grant of
Options to acquire shares of the Company's common stock. The Options
granted are "Incentive Stock Options" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended, for certain key employees.
The Plan is administered by an Administrative Committee whom shall serve a
one-year term. Subject to anti-dilution provisions, the Plan may issue
Options to acquire up to 1,000,000 shares to Key Employees. The maximum
number of shares subject to Options granted to any one Key Employee shall
not exceed 100,000 shares. The exercise price for Options shall be set by
the Administrative Committee but shall not be for less than the fair market
value of the shares on the date the Option is granted. The period in which
Options can be exercised shall be set by the Administrative Committee not
to exceed five years from the date of Grant. The Plan may be terminated,
modified or amended by the Board of directors upon the recommendation of
the Administrative Committee. The issuance and exercise of options
pursuant to this Plan are not expected to be taxable events for recipient
until such time that the recipient elects to sell shares received pursuant
to an exercise of the option whereupon the recipient is expected to
recognize income to the extent the market price of the shares exceeds the
exercise price of the option on the date of exercise. All Key Employees of
the Company and its subsidiaries are eligible to participate in the
Incentive Stock Options. A Key Employee is defined in the Plan as a
Company employee who in the judgment of the Administrative Committee has
the ability to positively affect the profitability and economic well-being
of the Company. Part time employees, independent contractors, consultants
and advisors performing bona fide services to the Company shall be
considered employees for purposes of participation in the Plan.
No Executive Officer or Director of the Company has received options
pursuant to this Plan.
DIRECTORS AND OFFICERS STOCK OPTION PLAN: On April 17, 1996, the
Company's Board of Directors approved a Directors and Officers Stock Option
Plan. The purpose of the Plan is to advance the business and development
of the Company and its shareholders by affording to the Directors and
Officers of the Company who are ineligible to participate in the above
Incentive Stock Option Plan, the opportunity to acquire a propriety
interest in the Company by the grant of Options to acquire shares of the
Company's common stock. The Plan is administered by the entire Board of
Directors. The Plan became effective on April 17, 1996 by the Board of
Directors, was not subject to Shareholder approval and shall terminate on
April 17, 2006. Subject to anti-dilution provisions, the Plan may issue
Options
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to acquire up to 1,000,000 shares to Directors and Officers. The maximum
number of shares subject to Options granted to any one Director or Officer
shall not exceed 200,000 shares in any 12 month period. The exercise price
for Options shall be set by the Board of Directors but shall not be for
less than eighty-five (85%) of the fair market value per share on the date
of grant. The period in which Options can be exercised shall be set by the
Board of Directors not to exceed five years from the date of Grant. The
Plan may be terminated, modified or amended by the Board of Directors.
Please see the above table for Options granted pursuant to this Plan.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENT
There is no compensatory plan or arrangement with respect to any individual
named above which results or will result from the resignation, retirement
or any other termination of employment with the Company, or from a change
in the control of the Company.
TRANSACTIONS WITH MANAGEMENT
The Company did not enter into any transactions with Management during
the fiscal year ended July 31, 1998.
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PROPOSAL NO. 1. ELECTION AS DIRECTORS
The Articles presently provide for a Board of Directors of not more than
nine (9) members. The number of Directors of the Company has been fixed at
six (6) by the Company's Board of Directors. The Company's Board of
Directors recommends the election of Directors of the six (6) nominees
listed below to hold office until the next Annual Meeting of Shareholders
and until their successors are elected and qualified or until their earlier
death, resignation or removal. The persons named as "proxies" in the
enclosed form of Proxy, who have been designated by Management, intend to
vote for the six (6) nominees for election as Directors unless otherwise
instructed in such proxy. If at the time of the Meeting, any of the
nominees named below should be unable to serve, which event is not expected
to occur, the discretionary authority provided in the Proxy will be
exercised to cumulatively vote for the remaining nominees, or for a
substitute nominee or nominees, if any, as shall be designated by the Board
of Directors.
NOMINEES
The following table sets forth the name and age of each nominee for
Director, indicating all positions and offices with the Company presently
held by him, the period during which he has served as such, and the class
and term for which he has been nominated:
Year
Name Age Position First Director
- ---- --- -------- -------------
Dennis Brovarone 42 Director 1996
Gary Brownell, CPA 50 Chief Financial Officer, Director 1996
Patrick Galuska 39 Director 1996
Michael L. Krall 46 President, CEO, Chairman, Director 1992
Eugene Peiser, PD 67 Director 1996
Donna Singer 28 Nominee N/A
BUSINESS EXPERIENCE OF NOMINEES
- -------------------------------
DENNIS BROVARONE Mr. Brovarone has been practicing corporate and
securities law since 1986 and as a solo practitioner since 1990. He was
elected to the Company's Board of Directors in April, 1996. Since December
1997, Mr. Brovarone has served as the President and Chairman of the Board
of Directors of Ethika Corporation, a publicly held, Mississippi
corporation investment holding company with its office in Westminster,
Colorado. From January 1995 to March 1998 Mr. Brovarone served as
President (Chairman) of the Board of Directors of The Community Involved
Charter School, a four year old K-12 public school located in Lakewood,
Colorado, operating under an independent charter and serving approximately
350 students in an individualized, experiential learning environment.
Prior to 1990, Mr. Brovarone served as in-house counsel to R.B. Marich,
Inc., a Denver, Colorado based brokerage firm. Mr. Brovarone lives and
works in Westminster, Colorado.
GARY W. BROWNELL Mr. Brownell is a Certified Public Accountant in a
private partnership practice. He is the partner in charge of taxes and
municipal audits for his firm. Mr. Brownell graduated from San Diego State
University in 1973 with a Bachelor of Science degree in accounting. He
received his Certified Public Accountant designation in 1983. Mr. Brownell
has been a partner in Brownell and Duffy since 1985.
PATRICK GALUSKA Mr. Galuska is a Petroleum Engineer and has been with
Meridian Oil Inc., since 1982. He is responsible for the financial
viability of numerous properties located in the Rocky Mountains and has
also been involved in many property acquisitions and contract negotiations.
He is a Registered Professional Engineer and is a member of the Society of
Petroleum Engineers. Mr. Galuska graduated from the University of Wyoming
in 1982 with a Bachelor of Science degree in Petroleum Engineering. He
received his Masters in Business Administration, specializing in Finance
from the University of Denver in 1992. Mr. Galuska resides in Denver,
Colorado with his wife.
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MICHAEL L. KRALL Mr. Krall is the President, CEO and Chairman of the
Board of Directors of Innovative Medical Services, a position he has held
since 1993. He is responsible for the strategic planning, product
development, and day-to-day operations of IMS. Previously, Mr. Krall was
the President and CEO of Bettis-Krall Construction, Inc. a successful
building-development company of custom homes and commercial property in San
Diego County, California. He has also held numerous positions in general
management in the hospitality industry. Mr. Krall attended Pepperdine
University (economics, statistics mechanical engineering). He previously
served 4 years in the United States Marine Corps and was elected, by
general election, to a 4 year term on the Valle de Oro Planning Board. Mr.
Krall lives in El Cajon, California with his wife, Connie and two children.
EUGENE S. PEISER, DOCTOR OF PHARMACY Dr. Peiser has been an independent
consultant to FDA regulated industries since 1974 and a Member of the Board
of Innovative Medical Services since 1994. He graduated from the University
of Tennessee College of Pharmacy with a Bachelor of Science in Pharmacy in
1951 and has received his Doctorate of Pharmacy. Dr. Peiser's consultancy
advises on a wide variety of subjects, including compliance with the
Prescription Drug Marketing Act and other government compliance matters,
employee training and drug repackaging. Dr. Peiser furnishes expert
witness services and has provides approved Pharmaceutical Continuing
Education to several thousand attendees at his seminars. Dr. Peiser is a
Founding Director of the Association of Drug Repackagers; is appointed as
a Registered Arbitrator by the American Registry of Arbitrators; serves as
a member of the Surgeon General's Speakers Bureau; and is President of the
Southwest Chapter of the Association of Military Surgeons. Dr. Peiser lives
and works in Palm Harbor, FL.
DONNA SINGER Ms. Singer has been the Vice President of Operations of
Innovative Medical Services since 1996. As Vice President, Ms. Singer is
responsible for inter-departmental operations, corporate communication and
investor relations and has recently taken charge of the sales and marketing
department. Previously, Ms. Singer served as the investor relations
executive at Western Garnet International, a mining company in Coeur
d'Alene, Idaho that trades on the Toronto Stock Exchange. Ms. Singer
graduated from Gonzaga University in 1992 with a Bachelor of Arts degree in
English and lives with her husband in Lakeside, California.
PROPOSAL NO. 2: AUTHORIZATION FOR THE BOARD OF DIRECTORS TO DECLARE A
REVERSE SPLIT OF THE OUTSTANDING COMMON STOCK ONLY AND
AS WHEN DEEMED NECESSARY BY THE BOARD TO MAINTAIN THE
LISTING OF THE COMPANY'S COMMON STOCK ON THE NASDAQ
SMALLCAP MARKET AND ON OR BEFORE DECEMBER 31, 1999 ON
THE BASIS OF UP TO ONE SHARE OF COMMON STOCK FOR EVERY
FOUR SHARES OUTSTANDING ON THE EFFECTIVE DATE WITH EACH
RESULTING FRACTIONAL SHARE ROUNDED UP TO THE NEXT WHOLE
SHARE.
On November 5, 1998, the Board of Directors approved submitting a
reverse stock split of the Company's Common Stock to the Company's
shareholders if the Board subsequently determines that a reverse split
would be necessary to keep the Common Stock eligible to be quoted on The
Nasdaq SmallCap Market ("Nasdaq"). It is recommended that the shareholders
approve giving the Board the authority to subsequently declare an up to
4-to-1 reverse stock split of the Company's Common Stock on or before
December 31, 1999. Assuming that a reverse stock split would cause the
trading price of the Company's Common Stock to increase in the same
proportion as the amount of the split, a reverse stock split may be
necessary if the quoted bid price of the Common Stock declines below $1.00
per share and remains below $1.00 per share for ninety days or longer,
thereby maintaining Nasdaq eligibility of a bid price of not less than
$1.00. The effective date for any subsequently declared reverse stock
split will be approximately ten days following notice to Nasdaq that a
reverse split has been declared. No fractional shares will be issued and
no cash will be paid for fractional shares. Instead, each fractional share
would be rounded up to a whole share.
The Board of Directors does not intend to declare a reverse split at
this time and does not believe that a reverse split will be necessary.
However, as the Board believes that maintenance of the NASDAQ listing is
critical to the Company's ability to raise capital and to maintaining
shareholder liquidity, the Board believes it is in the best interest of the
Company and its shareholders that the Board have the authority to act
promptly to maintain the NASDAQ listing.
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EFFECT OF REVERSE SPLIT ON HOLDERS OF ODD LOTS OF SHARES
If authorized by the shareholders and subsequently declared by the
Board, a reverse split may result in shareholders having an "odd lot" of
less than 100 shares if their resulting total number of shares is not a
multiple of 100. A securities transaction of 100 or more shares is a
"round lot" transaction of shares for securities trading purposes and a
transaction of less than 100 shares is an "odd lot" transaction. Round lot
transaction are the standard size requirements for securities transactions
and odd lot transactions may result in higher transaction costs to the odd
lot seller.
PROPOSAL NO. 3. APPROVAL OF THE INNOVATIVE MEDICAL SERVICES 1998
DIRECTORS AND OFFICERS STOCK OPTION PLAN
On November 5, 1998, the Company's Board of Directors approved
submitting the Innovative Medical Services 1998 Officers Directors Stock
Option Plan to the shareholders for approval. The Board of Directors
recommends approval of the Plan. The purpose of the Plan is to advance the
business and development of the Company and its shareholders by affording
to the Directors and Officers of the Company the opportunity to acquire a
propriety interest in the Company by the grant of Options to acquire shares
of the Company's common stock.
The Options granted are not "Incentive Stock Options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended.
The issuance of such non-qualified options pursuant to this Plan is not
expected to be a taxable event for recipient until such time that the
recipient elects to exercise the option whereupon the recipient is expected
to recognize income to the extent the market price of the shares exceeds
the exercise price of the option on the date of exercise.
The Plan is administered by an Administrative Committee whom shall
serve a one year term. The Administrative Committee is composed of the
Board's Compensation/Administration Committee. Subject to anti-dilution
provisions, the Plan may issue Options to acquire up to 5,000,000 shares to
Directors and Officers. The Company will not receive any consideration for
the grant of options under the Plan and approximate market value of the
shares to be reserved for the plan is $3,662,500 based upon the average
thirty day closing price for the Company's common stock for the period
ending October 31, 1998. The exercise price for Options shall be set by
the Administrative Committee but shall not be for less than the fair market
value of the shares on the date the Option is granted. Fair market value
shall mean the average of the closing price for ten consecutive trading
days at which the Stock is listed in the NASDAQ quotation system ending on
the day prior to the date an Option is granted. The period in which
Options can be exercised shall be set by the Administrative Committee not
to exceed five years from the date of Grant. Options granted to new
executive officers or directors shall vest one year from date of
appointment or election. Shares issuable under options granted to
continuing officers or directors are immediately exercisable and vest upon
exercise. The maximum number of shares subject to Options granted to any
on Director of Officer shall not exceed 200,000 shares in any 12-month
period.
The Executive Officers and Directors of the Company are eligible to
participate in the Plan. The Administrative Committee has, subject to
shareholder approval, granted the present Executive Officers and Directors
an option to purchase 100,000 shares of common stock at $1.00 per share.
The Administrative Committee shall grant to individuals newly appointed as
Executive Officers or as Directors, an option to purchase 100,000 shares of
common stock at fair market value. Upon each subsequent anniversary
thereof, each such Officer and Director will receive an option to purchase
50,000 shares of common stock at fair market value. The plan also gives
the Administrative Committee discretion to award additional options. The
aggregate number and kind of shares within the Plan and the rights under
outstanding Options granted hereunder, both as to the number of shares and
Option price, will be adjusted accordingly in the event of a reverse split
in the outstanding shares of the Common Stock of the Company.
Options granted under the Plan carry Stock Appreciation Rights (SARs).
Pursuant to the SARs, the Optionee can use the difference between the price
of the common stock over the exercise price of the common stock to exercise
the option for a reduced number of shares at the appreciated price. For
example, if the market price of the common stock is at $2.00 per share at
the time of exercise, the
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holder of an option to acquire 100,000 shares at $1.00 may use the $100,000
increase in value to acquire 50,000 shares at $2.00 per share in lieu of
the exercise of the entire option. SAR's are an advantage to the Optionee
who does not have to tender cash to exercise the option and an advantage to
the Company because fewer new shares are issued at the then market price
while resulting in less dilution to other shareholders.
The Board may at any time terminate the plan. The approval of the
majority of shareholders is required to increase the total number of shares
subject to the plan, change the manner of determining the option price or
to withdraw the administration of the plan from the Administrative
Committee.
1998 DIRECTORS AND OFFICERS PLAN BENEFITS
Dollar Options
Name Position Value(1) Granted(2)
Dennis Atchley Secretary $0.00 100,000
Dennis Brovarone Director $0.00 100,000
Gary Brownell CFO, Director $0.00 100,000
Patrick Galuska Director $0.00 100,000
Michael L. Krall Pres., CEO, Director $0.00 100,000
Eugene Peiser Director $0.00 100,000
Donna Singer Nominee Director $0.00 100,000
Executive Group (5 individuals) $0.00 500,000
Non-Exec. Dir. Grp (2 individuals) $0.00 200,000
(1) Based upon exercise price of $1.00 and the average closing price of
$0.7325 for the thirty days ending October 31, 1998.
(2) Granted subject to shareholder approval on July 15, 1998
REQUEST FOR COPY OF FORM 10KSB
Shareholders may request a copy of the Form 10KSB by writing to the
Company's offices, 1725 Gillespie Way, El Cajon, California 92020.
DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Any proposal by a shareholder to be presented at the Company's next Annual
Meeting of Shareholders, including nominations for election as directors
must be received at the offices of the Company, 1725 Gillespie Way, El
Cajon, California 92020, no later than July 31, 1999.
9
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PROXY SOLICITED BY THE BOARD OF DIRECTORS OF INNOVATIVE MEDICAL SERVICES
The undersigned appoints Michael L. Krall (and Donna Singer, if Mr. Krall
is unable to serve), as the undersigned's lawful attorney and proxy, with
full power of substitution and appointment, to act for and in the stead of
the undersigned to attend and vote all of the undersigned's shares of the
Common Stock of INNOVATIVE MEDICAL SERVICES, an California corporation, at
the Annual Meeting of Shareholders to be held at the offices of the
Company, 1725 Gillespie Way, El Cajon, California, at 10:00 am. Pacific
Standard Time, on December 19, 1998, and any and all adjournments thereof,
for the following purposes:
A SHAREHOLDER MAY USE CUMULATIVE VOTING FOR THE NOMINEES OF THAT PROPOSAL
BY VOTING THE NUMBER OF THE SHARES HELD TIMES THE NUMBER OF DIRECTORS BEING
ELECTED ON A SINGLE OR GROUP OF CANDIDATES. SHAREHOLDERS MAY ALSO WITHHOLD
AUTHORITY TO VOTE FOR A NOMINEE(S) BY DRAWING A LINE THROUGH THE NOMINEE'S
NAME(S). FOR EXAMPLE A SHAREHOLDER WITH 1,000 SHARES MAY CAST A TOTAL OF
6,000 VOTES (# OF SHARES X 6 DIRECTORS) FOR ALL, ONE OR A SELECT NUMBER OF
CANDIDATES.]
PROPOSAL NO. 1 ELECTION TO THE BOARD OF DIRECTORS
[ ] FOR Management nominees listed below equally among all the
nominees OR VOTED AS FOLLOWS:
Dennis Brovarone ________ Shares Gary Brownell ________ Shares
Patrick Galuska ________ Shares Michael L. Krall ________ Shares
Eugene Peiser ________ Shares Donna Singer ________ Shares
[ ] AGAINST Management's nominees for the Board of Directors,
MANAGEMENT INTENDS TO VOTE SHARES FOR ALL OF THE SIX (6) NOMINEES NAMED
ABOVE UNLESS OTHERWISE INSTRUCTED IN THIS PROXY. IF AT THE TIME OF THE
MEETING, ANY OF THE NOMINEES SHOULD BE UNABLE TO SERVE, THE DISCRETIONARY
AUTHORITY PROVIDED IN THE PROXY WILL BE EXERCISED TO CUMULATIVELY VOTE FOR
THE REMAINING NOMINEES, OR FOR A SUBSTITUTE NOMINEE OR NOMINEES, IF ANY, AS
SHALL BE DESIGNATED BY THE BOARD OF DIRECTORS.
PROPOSAL NO. 2. AUTHORIZATION FOR THE BOARD OF DIRECTORS TO DECLARE A
REVERSE SPLIT OF THE OUTSTANDING COMMON STOCK ONLY AND
AS WHEN DEEMED NECESSARY BY THE BOARD TO MAINTAIN THE
LISTING OF THE COMPANY'S COMMON STOCK ON THE NASDAQ
SMALLCAP MARKET AND ON OR BEFORE DECEMBER 31, 1999 ON
THE BASIS OF UP TO ONE SHARE OF COMMON STOCK FOR EVERY
FOUR SHARES OUTSTANDING ON THE EFFECTIVE DATE WITH EACH
RESULTING FRACTIONAL SHARE ROUNDED UP TO THE NEXT WHOLE
SHARE.
[ ] FOR AGAINST ABSTAIN
IF THE SHAREHOLDER DOES NOT INDICATE A PREFERENCE, MANAGEMENT INTENDS TO
VOTE FOR THE PROPOSAL.
PROPOSAL NO. 3. APPROVAL OF THE INNOVATIVE MEDICAL SERVICES 1998
DIRECTORS AND OFFICERS STOCK OPTION PLAN
[ ] FOR AGAINST ABSTAIN
IF THE SHAREHOLDER DOES NOT INDICATE A PREFERENCE, MANAGEMENT INTENDS TO
VOTE FOR THE PROPOSAL.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCE
WITH THE SHAREHOLDER'S SPECIFICATION ABOVE. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY IN RESPECT TO MATTERS FOR WHICH THE SHAREHOLDER HAS
NOT INDICATED A PREFERENCE OR IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED
AT THE TIME OF THE MAILING OF THE NOTICE OF THE ANNUAL MEETING OF
SHAREHOLDERS TO THE UNDERSIGNED.
<PAGE>
In the Shareholder's discretion the Proxy is authorized to vote on such
other business as may properly be brought before the meeting or any
adjournment or postponement thereof.
The undersigned revokes any proxies heretofore given by the undersigned and
acknowledges receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement furnished herewith and the Annual Report to Shareholders
previously provided.
Dated: _______________, 199___ _____________________________
_____________________________
Signature(s) should agree with the name(s) hereon. Executors,
administrators, trustees, guardians and attorneys should indicate when
signing. Attorneys should submit powers of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INNOVATIVE
MEDICAL SERVICES. PLEASE SIGN AND RETURN THIS PROXY TO INNOVATIVE MEDICAL
SERVICES, C/O AMERICAN SECURITIES TRANSFER, INC., 938 QUAIL STREET, SUITE
101, LAKEWOOD, CO 80215-5513. THE GIVING OF A PROXY WILL NOT AFFECT YOUR
RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
EXHIBIT 99.3
INNOVATIVE MEDICAL SERVICES
1998 DIRECTORS AND OFFICERS
STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein, terms have the meaning hereinafter set forth unless
the context should clearly indicate the contrary:
(a) "Board" shall mean the Board of Directors of the Company;
(b) "Days" shall mean for calculation purposes the days of the week
in which the NASDAQ System conducts and is open for regular
trading activity;
(c) "Company" shall mean Innovative Medical Services, a California
corporation;
(d) "Director" shall mean a member of the Board;
(e) "Fair Market Value" shall mean the average closing low bid price
for the Company's common stock for the previous five (5) trading
days ending on the date of grant;
(f) "Grant" means the issuance of an Option hereunder to an Optionee
entitling such Optionee to acquire Stock on the terms and
conditions set forth in a Stock Option Agreement to be entered
into with the Optionee;
(g) "Officer" shall mean a Executive Officer of the Company and any
Employee, Consultant or Advisor which has been confirmed by the
Board as eligible to participate under this Plan;
(h) "Option" shall mean the right granted to an Optionee to acquire
Stock of the Company pursuant to the Plan;
(i) "Optionee" shall mean an Officer of the Company or a Director of
the Company to whom a Grant hereunder has been made;
(j) "Plan" shall mean the Innovative Medical Services 1998 Directors
and Officers Stock Option Plan, the terms of which are herein set
forth;
(k) "Stock" shall mean the common stock of the Company or, in the
event the outstanding shares of stock are hereafter changed into
or exchanged for shares of different stock or securities of the
Company or some other corporation, such other stock or
securities;
(l) "Stock Option Agreement" shall mean the agreement between the
Company and an Optionee under which an Optionee may acquire Stock
pursuant to the Plan.
<PAGE>
ARTICLE II
THE PLAN
2.1 NAME. The plan shall be known as the "Innovative Medical
Services 1998 Directors and Officers Stock Option Plan."
2.2 PURPOSE. The purpose of the Plan is to advance the business and
development of the Company and its shareholders by affording to the
Directors and Officers of the Company the opportunity to acquire a
propriety interest in the Company by the grant of Options to such persons
under the terms herein set forth. By doing so, the Company seeks to
motivate, retain and attract highly competent, highly motivated Executive
Officers and Directors to lead the Company through this critical time in
its evolution and ensure the success of the Company. The Options to be
granted hereunder are non-statutory Options made available to Directors and
Officers of Innovative Medical Services.
2.3 EFFECTIVE DATE. The Plan shall become effective upon its
adoption by the Board of the Company and approval by the company's
shareholders.
2.4 TERMINATION DATE. The Plan shall terminate ten (10) years from
the date the Plan is adopted by the Board of the Company and at such time
any Options granted hereunder shall be void and of no further force or
effect.
ARTICLE III
PARTICIPANTS
Only Officers and Directors of the Company shall be eligible to be
granted an Option under the Plan. The Board may grant Options to any
Director or Officer in accordance with such determinations as the Board
may, from time to time, in its sole discretion make.
ARTICLE IV
ADMINISTRATION
4.1 The Plan shall be administered by an Administrative Committee of
the Board of Directors of the Company consisting of a majority of
independent directors. Subject to the express provisions of the Plan, the
Administrative Committee shall have the sole discretion and authority to
determine from among eligible persons those to whom and the time or times
at which Options may be granted and the number of shares of Stock to be
subject to each Option. Subject to the express provisions of the Plan, the
Administrative Committee shall also have complete authority to interpret
the Plan, to prescribe, amend and rescind rules and regulations related to
it and to determine the details and provisions of each Stock Option
Agreement and to make all other determinations necessary or advisable in
the administration of the Plan. The Administrative Committee shall also
have the authority to modify outstanding Options and the provisions therein
subject to the agreement of the Optionee.
<PAGE>
4.2 RECORDS OF PROCEEDINGS. The Administrative Committee shall
maintain written minutes of its actions which shall be maintained among the
records of the Company.
4.3 COMPANY ASSISTANCE. The Company shall supply full and timely
information to the Board in all matters relating to eligible Optionees,
their status, death, retirement, disability and such other pertinent facts
as the Board may require. The Company shall furnish the Administrative
Committee with such clerical and other assistance as is necessary in the
performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO THE PLAN
5.1 LIMITATION. The number of shares of Stock which may be issued
and sold hereunder shall not exceed 5,000,000 shares.
5.2 OPTIONS GRANTED UNDER THE PLAN. Shares of stock with respect to
which an Option is granted hereunder, but which lapses prior to exercise,
shall be considered available for grant hereunder. Therefore, if Options
granted hereunder shall terminate for any reason without being wholly
exercised, new Options may be granted hereunder covering the number of
shares to which such terminated Options related.
5.3 OPTIONS TO BE GRANTED. Upon election or appointment to the
Company's Board of Directors, or appointment as an Executive Officer, such
individual shall receive an option to acquire 100,000 shares of stock per
position exercisable at the fair market value on the date of appointment.
Upon each anniversary of such date, the individual shall receive an option
to acquire 50,000 shares of stock exercisable at the fair market value on
the date thereof. The foregoing not withstanding, the Administrative
Committee shall have the discretion to award additional options to
individuals subject to the terms and conditions of the Plan.
5.4 ANTI-DILUTION. In the event the Stock subject to this Plan is
changed into or exchanged for a different number or kind of stock or other
securities of the Company or of another organization by reason of merger,
consolidation or reorganization, recapitalization, reclassification,
combination of shares, stock split or stock dividend;
(a) The aggregate number and kind of shares of Stock subject to the
Plan shall be adjusted appropriately;
(b) The Option price of any outstanding Option issued pursuant to the
Plan shall be adjusted appropriately;
(c) Where dissolution or liquidation of the Company or any merger of
consolidation in which the Company is not a surviving corporation is
involved, the Optionee holding any Option issued pursuant to the Plan shall
have the right immediately prior to such dissolution, liquidation, merger
or combination to exercise the Option, in whole or in part, to the extent
that it shall not have been exercised without regard to any installment
exercise provision.
<PAGE>
ARTICLE VI
OPTION PROVISIONS
6.1 OPTIONS. Each Option granted hereunder shall be evidenced by
minutes of a meeting of or the written consent of the Administrative
Committee and by a written Stock Option Agreement dated as of the date of
grant and executed by the Company and the Optionee, which agreement shall
set forth such terms and conditions as may be determined by the Board
consistent with the Plan.
6.2 LIMITATIONS.
(a) The maximum number of shares for which an Option or Options may
be granted under the Plan to any one Director or Officer shall be 200,000
in any twelve month period.
(b) The Options granted hereunder are non-statutory Options which do
not satisfy the requisites of Section 422 of the Internal Revenue Code, as
amended.
6.3 OPTION PRICE. The per share Option price for the stock subject
to each Option shall not be less than the fair market value per share on
the effective date of grant or such other price as the Administrative
Committee may determine.
6.4 OPTION PERIOD. Each Option granted hereunder must be granted
within five (5) years from the effective date of the Plan. The period for
the exercise of each Option shall be determined by the Administrative
Committee, but in no instance shall such period exceed five (5) years from
the date of grant of the Option.
6.5 OPTION EXERCISE.
(a) Options granted hereunder may not be exercised until and unless
the Optionee shall meet the conditions precedent established by the
Administrative Committee for the Officers or Directors.
(b) Options may be exercised by the officer or director in whole or
in part. Optionees may exercise their Option at any time by giving written
notice to the Company with respect to the specified option, delivered to
the Company at its principal office together with payment in full to the
Company of the amount of the Option price for the number of shares with
respect to which the Option(s) are then being exercised.
6.6 STOCK APPRECIATION RIGHTS. Each Option granted hereunder shall
carry with it Stock Appreciation Rights (SARs) for each share of stock
underlying the Option. Each SAR entitles the holder thereof to receive
without payment of the cash exercise price, as many shares of stock as
equals the difference between fair market value of the stock on the date of
exercise and the exercise price of an Option times the number of SARs
exercised divided by the fair market value on the date of exercise. For
example assume an Option is granted for 100,000 shares with 100,000 SARS
with an exercise price of $1.00 per share, the fair market value on the
date of grant. Then assume the fair market value of the common stock
appreciates to $2.00 per share. If the holder of the Option/SAR chooses to
exercise the 100,000 Options/SARs, the holder
<PAGE>
receives 50,000 shares without payment of the exercise price. [($2 - $1)
X 100,000 / $2 = 50,000]. The foregoing notwithstanding, the holder of an
Option/SAR may choose to exercise the option as set forth in paragraph 6.5
above.
6.7 NON-TRANSFERABILITY OF OPTION. No Option or any right relative
thereto shall be transferred by an Optionee otherwise than by will or by
the laws of descent and distribution. During the lifetime of an Optionee,
the Option shall be exercisable only by him or her.
6.8 EFFECT OF DEATH OR OTHER TERMINATION OF EMPLOYMENT OR
DIRECTORSHIP.
(a) If the Officer or Director's relationship with the Company shall
be terminated, with or without cause, or by the act of the Officer or
Director, the Optionee's right to exercise such Options shall terminate and
all rights thereunder shall cease three (3) days after the date on which
such person's association is terminated, unless this provision is modified
by the Option Agreement for the Options. Provided however, that if the
Optionee shall die or become permanently and totally disabled while
employed by or serving as a non-employee Director of the Company, as solely
determined by the Board in accordance with its policies, then either his or
her personal representatives or a transferee under the Optionee's will or
pursuant to the laws of descent and distribution, or the disabled Optionee
may exercise the Option in full six (6) months from the date of such death
or disability unless this provision is modified by the Option Agreement for
the Options. In the case of an Optionee's retirement in accordance with
the Company's established retirement policy, such Option shall remain
exercisable by the Optionee for three (3) days from the date of such
retirement unless this provision is modified by the Option Agreement for
the Options.
(b) No transfer of an Option by the Optionee by will or the laws of
descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with a written notice thereof and an
authenticated copy of the will and/or such other evidence as the Committee
may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions of
such Option.
6.9 RIGHTS AS A SHAREHOLDER.
(a) An Optionee or a transferee of an Option shall have no rights as
a shareholder of the Company with respect to any shares subject to any
unexercised Options.
(b) Unless this provision is modified by the Option Agreement for the
Options, ownership rights shall vest with the Officer or Director according
to the following schedule with respect to the total number of shares
exercised:
Initial Appointment/Election Grant: 100% upon exercise or the
first anniversary of grant,
which ever is later;
Anniversary exercise of this option: 100% upon exercise
<PAGE>
6.10 REQUIRED FILINGS. An Optionee to whom an Option is granted
under the terms of the Plan is required to file appropriate reports with
the Internal Revenue Service. As a condition of the receipt of an Option
hereunder, Optionees shall agree to make necessary filings with the
Internal Revenue Service. The Company shall assist and cooperate with
Optionees by providing the necessary information required for compliance of
this condition.
ARTICLE VII
STOCK CERTIFICATES
7.1 ISSUANCE. The Company shall issue and deliver any certificate
for shares of Stock purchased upon the exercise of any Option granted
hereunder.
7.2 TRANSFER RESTRICTIONS. Unless a registration statement covering
the shares underlying the Options is in effect at the time of execution of
an Option Agreement, the Board shall instruct the Secretary of the
Corporation to impose restrictions of the subsequent transferability of
Stock issued pursuant to Options to be granted hereunder. The Stock of the
Company to be issued pursuant to the exercise of an Option shall have such
restrictions prominently displayed as a legend on such certificate.
ARTICLE VIII
TERMINATION, AMENDMENT, OR MODIFICATION OF THE PLAN
The Board may at any time terminate the plan, and may at any time and
from time to time and in any respect amend or modify the Plan. Provided,
however, if the Plan has been submitted to and approved by the shareholders
of the Company no such action by the Board may be taken without approval of
the majority of the shareholders of the Company which: (a) increases the
total number of shares of Stock subject to the Plan, except as contemplated
in Section 5.1 hereof; (b) changes the manner of determining the Option
price; or (c) withdraws the administration of the Plan from the
Administrative Committee.
ARTICLE IX
EMPLOYMENT
9.1 EMPLOYMENT. Nothing in the Plan or any Option granted hereunder
or in any Stock Option Agreement shall confer upon a non-employee Director
receiving such Option or Stock Option Agreement the status as an employee
of the Company. Further, nothing in the Plan or any Option granted
hereunder shall in any manner create in any Optionee the right to continue
their relationship with the Company or create any vested interest in such
relationship, including employment.
9.2 OTHER COMPENSATION PLANS. The adoption of the Plan shall not
effect any other stock option, incentive, or other compensation plan in
effect for the Company or any of its subsidiaries, nor shall the Plan
preclude the Company or any subsidiary thereof from establishing any other
forms of incentive or other compensation for employees or non-employee
Directors of the Company, or any subsidiary thereof.
<PAGE>
9.3 PLAN EFFECT. The Plan shall be binding upon the successors and
assigns of the Company.
9.4 TENSE. When used herein nouns in the singular shall include the
plural.
9.5 HEADINGS OF SECTIONS ARE NOT PART OF THE PLAN. Headings of
articles and sections hereof are inserted for convenience and reference and
constitute no part of the Plan.
INNOVATIVE MEDICAL SERVICES
By:________________________________________
Michael L. Krall, President
December 19, 1998
By:________________________________________
Dennis Atchley, Secretary
December 19, 1998
