SEC File No. 0-14189
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
INTERWEST HOME MEDICAL, INC.
(Name of Registrant as Specified In Its Charter)
INTERWEST HOME MEDICAL, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
N/A
2) Aggregate number of securities to which transaction applies:
N/A
3)Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
N/A
4) Proposed maximum aggregate value of transaction:
N/A
5)Total Fee Paid:
N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting free was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
N/A
<PAGE>
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4)Date Filed: March 21, 2000.
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INTERWEST HOME MEDICAL, INC.
235 East 6100 South
Salt Lake City, Utah 84107
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 26, 2000
TO THE SHAREHOLDERS OF INTERWEST HOME MEDICAL, INC.
The Annual Meeting of the Shareholders of Interwest Home Medical, Inc. (the
"Company") will be held at the Crystal Inn, 818 East Winchester Street, Murray,
Utah 84107, on April 26, 2000, at 3:00 p.m. local time, for the following
purposes:
1. To elect four (4) directors to serve until the 2000 Annual Meeting of
Shareholders or until their successors shall have been duly elected and
qualified.
2. To consider and act upon a proposal to adopt the Company's 2000 Stock
Incentive Plan.
3. To transact such other business as may come before the Meeting or any
adjournment of adjournments thereof.
The Board of Directors has fixed the close of business on March 17, 1998 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Meeting and any adjournments thereof. Consequently, only holders
of common stock of record on the transfer books of the Company at the close of
business on March 17, 1998 will be entitled to notice of and to vote at the
meeting.
By Order of the Board of Directors
of Interwest Home Medical, Inc.
/s/ James E. Robinson
------------------------------------------
Chief Executive Officer
Salt Lake City, Utah
Date: March 21, 2000
YOUR VOTE IS IMPORTANT! YOUR ATTENTION IS DIRECTED TO THE ACCOMPANYING
PROXY STATEMENT AND PROXY CARD. YOU ARE REQUESTED TO VOTE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE SO THAT YOUR SHARES MAY BE
REPRESENTED. A POSTAGE PREPAID ENVELOPE IS ENCLOSED IS PROVIDED FOR THAT
PURPOSE. EVEN IF YOU HAVE VOTED YOUR PROXY, YOU MAY CHANGE YOUR VOTE PRIOR TO,
OR AT, THE MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD
BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO ATTEND AND VOTE AT THE
MEETING, YOU MUST OBTAIN FROM SUCH BROKER, BANK OR OTHER NOMINEE, A PROXY ISSUED
IN YOUR NAME, AND YOU MUST VOTE SUCH SHARES IN ACCORDANCE WITH THE INSTRUCTIONS
YOU RECEIVE FROM SUCH BROKER, BANK OR OTHER NOMINEE.
<PAGE>
INTERWEST HOME MEDICAL, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 26, 2000
This Proxy Statement is dated March 21, 2000, and is first being mailed to
Interwest Home Medical Shareholders on or about March 23, 2000.
INFORMATION CONCERNING SOLICITATION AND VOTING
General
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Interwest Home Medical, Inc., a Utah
corporation (the "Company") to be voted at the Annual Meeting of Shareholders to
be held April 26, 2000 and at any adjournment(s) thereof. The Meeting of
Shareholders ("Meeting") will be held at the Crystal Inn, 818 East Winchester
Street, Murray, Utah 84107 at 3:00 p.m., local time. The Company anticipates
mailing this Proxy Statement and accompanying proxy card commencing on or about
March 23, 2000, to all Shareholders entitled to vote at the meeting.
Matters to Be Considered at the Meeting
The purpose of the Annual Meeting is for the shareholders of the Company to:
1. Elect four Directors of the Company, each of whom is to hold office until
the Annual Meeting of Shareholders in 2001 and until the due election and
qualification of his successor;
2. Consider and vote upon a proposal to adopt the Company's 2000 Stock
Incentive Plan. A copy of the 2000 Stock Incentive Plan is attached as Appendix
A to this Proxy Statement.
3. Consider and act upon any other matters as may properly come before the
Meeting or any adjournments or postponements of the Meeting.
The Board of Directors recommends a vote "for" each of the nominees listed
on pages 5- 6 below and for the 2000 Stock Incentive Plan.
Proxy Solicitation
The Board of Directors is soliciting your proxy pursuant to this Proxy
Statement. The entire cost of soliciting management proxies will be borne by the
Company. Officers, directors and regular employees of the Company may solicit
proxies in person or by telephone. They will receive no additional compensation
for their services. The Company has requested brokers and nominees who hold
stock in the Company in their names to furnish this Proxy Statement to their
customers and the Company will reimburse these brokers and nominees for their
related out-of-pocket expenses.
Record Date and Voting Securities
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The securities of the Company entitled to vote at the Meeting consist of
shares of the Company's no par value common stock. Only shareholders of record
at the close of business on March 17, 2000, the record date for the Meeting,
will be entitled to notice of and to vote at the Meeting. On the record date,
the Company had outstanding 4,075,685 shares of common stock which were owned by
approximately792 shareholders of record.
The presence at the Meeting, in person or by proxy, of the holders of a
majority of the issued and outstanding shares of common stock entitled to vote
at the Meeting will be necessary to constitute a quorum. If a broker that is a
record holder of common stock does not return a signed proxy, the shares of
common stock represented by such proxy will not be considered present at the
meeting and will not be counted toward establishing a quorum. If a broker that
is a record holder of common stock does return a signed proxy, but is not
authorized to vote on one or more matters, each such vote being a broker
non-vote, the shares of common stock represented by such proxy will be
considered present at the Meeting for purposes of determining the presence of a
quorum.
Assuming a quorum is present:
(i) directors of the Company will be elected by a plurality of the
votes cast by shareholders present, in person or by proxy, and entitled to
vote for the election of directors at the meeting (there will be no
cumulative voting in the election of directors); and
(ii) the affirmative vote of the holders of a majority of the issued
and outstanding common stock present, in person or by proxy, and entitled to
vote on the matter will be required for the approval of the adoption of the
2000 Stock Incentive Plan.
Abstentions will be treated as present and entitled to vote at the Meeting.
Therefore, abstentions will be counted in determining whether a quorum is
present and will have the effect of a vote against a matter. A broker non-vote
on a matter (i.e., shares held by brokers or nominees as to which instructions
have not been received from the beneficial owners or persons entitled to vote
and as to which the broker or nominee does not have discretionary power to vote
on a particular matter) is considered not entitled to vote on that matter and,
therefore, will not be counted in determining whether a quorum is present or
whether a matter requiring approval of a majority of the shares present and
entitled to vote has been approved.
All proxies received pursuant to this solicitation will be voted at the
Meeting and at any adjournments thereof as indicated in the Proxy. If no
instructions are given, all shares represented by valid proxies received
pursuant to this solicitation (and not revoked before they are exercised) will
be voted FOR the election of the nominees for director, FOR the 2000 Stock
Incentive Plan and in the discretion of the proxy holder as to any other
business that comes before the meeting. In the event a shareholder specifies a
different choice by means of the proxy card or a vote which is made by
telephone, those shares will be voted in accordance with such shareholder's
selections.
Revocability of Proxies
A form of proxy is enclosed herewith for use. Any proxy given pursuant to
this solicitation may be revoked by the person giving it at any time before its
use by delivering to the Secretary of the
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Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the Meeting and voting in person.
PRINCIPAL SHAREHOLDERS AND SECURITY
OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding shares of the Company's
common stock owned beneficially as of March 13, 2000, by (i) each director and
nominee for director of the Company, (ii) all officers and directors as a group,
and (iii) each person known by the Company to beneficially own 5% or more of the
outstanding shares of the Company's common stock:
Name Amount
and Address and Nature Percent
of Beneficial of Beneficial of Class(1)
Owner Ownership Ownership
- -------------------------------------------------------------------------------
James E. Robinson (2) 1,421,250 31.61%
235 East 6100 South
Salt Lake City, UT 84107
James U. Jensen(3) 152,590 3.39%
420 Chipeta Way
Salt Lake City, UT 84108
Dr. Jeffrey F. Poore(4) 51,134 1.14%
4536 Abinadi Road
Salt Lake City, UT 84124
Jerald L. Nelson(5) 60,231 1.34%
10242 Ashley Hills Circle
Sandy, UT 84092
Que H. Christensen(6) 157,302 3.50%
235 East 6100 South
Salt Lake City, UT 84107
Val D. Christianson(7) 331,812 7.38%
3065 S. 2850 East
Salt Lake City, UT 84107
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Charles Davis(8) 359,396 7.99%
20 Bennington Drive
Colorado Springs, CO 80906
Serena J. Falgoust(9) 26,549 0.59%
1620 N. 1250 W.
Provo, UT 84604
I-Med Shareholders(10) 309,094 6.89%
Share Purchase Trust
235 East 6100 South
Salt Lake City, UT 84107
All Officers and Directors 1,869,056 41.57%
as a Group (6 Persons)
Unless otherwise indicated in the footnotes below, the Company has been
advised that each person above has sole voting power over the shares indicated
above. All of the individuals listed above are officers and directors of the
Company.
(1) As of March 17, 2000, there were 4,075,685 shares of the Company's
common stock issued and outstanding. There are also outstanding
exercisable options and warrants to purchase 407,232 shares of the
Company's common stock which are owned by officers and directors.
Therefore, for purposes of the above set forth chart, 4,482,917 shares are
deemed to be issued and outstanding in accordance with Rule 13d-3 adopted
by the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended. This amount does not include options owned by
officers and directors which are not currently exercisable.
(2) Includes (i) 22,500 shares owned of record by the five children of Mr.
Robinson (4,500 shares each); (ii) 892,798 shares owned by J&J Medical
Investments, Ltd., (iii) 260,118 shares owned of record by Mr. Robinson
and (iv) 245,834 shares which may be acquired by Mr. Robinson pursuant to
stock options which are currently exercisable.
(3) Includes (i) 88,538 shares owned of record by Mr. Jensen of which
55,992 shares were purchased through the exercise of stock options; (ii)
25,886 shares which are beneficially owned through the I-Med Shareholder
Share Purchase Trust; and 38,166 shares which may be issued pursuant to
other stock options and warrants which are currently exercisable.
(4) Includes 9,484 shares owned of record by Dr. Poore of which 8,484
shares were purchased through the exercise of stock options and 41,650
shares which may be acquired pursuant to stock options and warrants which
are currently exercisable.
(5) Includes (i) 500 shares which are owned of record by Mr. Nelson which
were purchased through the exercise of stock options; (ii) 33,666 shares
which may be issued pursuant to stock options and warrants which are
currently exercisable; and (iii) 26,065 shares which are owned of record
by Mr. Nelson's spouse.
(6) Includes (i) 6,500 shares owned of record by Mr. Christensen; (ii)
92,886 shares which are beneficially owned through the I-Med Shareholders
Share Purchase Trust; (iii) 10,000 shares owned of record by the four
children of Mr. Christensen (2,500 shares each) and (iv) 47,916 shares
which may be acquired pursuant to stock options which are currently
exercisable.
(7) Includes (i) 54,328 shares owned of record by Mr. Christianson jointly
with his spouse; (ii) 154,099 shares which are owned of record by Mr.
Christianson jointly with his spouse and held in a brokerage account;
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(iii) 100,885 shares which are beneficially owned through the I-Med
Shareholders Share Purchase Trust; and (iv) 22,500 shares owned of record
by the four children of Mr. Christianson (2,500 shares each) .
(8) Includes 197,156 shares owned of record by Mr. Davis and 162,240
shares owned jointly with his spouse.
(9) Includes 25,000 shares owned jointly with her spouse and 1,549 shares
which are owned through the Interwest Home Medical Employee Stock Purchase
Plan.
(10) The I-Med Shareholders Share Purchase Trust was established in
October 1991 to purchase shares of Interwest Medical Equipment
Distributors, Inc. common stock from a retiring officer/employee. The
Trust's shares were exchanged for the Company's shares in connection with
a merger effected February 22, 1995. The purchase price is payable in 120
monthly payments. The purchase price for the shares is funded by Trust
participants who contribute monthly payments to purchase a pro-rata
portion of such shares. There are currently 9 persons purchasing shares
pursuant to the Trust arrangement. These persons have the right to vote
the shares attributable to their pro-rata portion of the total shares
being purchased from the Trust. It is anticipated that the Trust will
distribute shares paid for to the Trust beneficiaries from time-to-time as
requested by purchasers. Interwest Medical has guaranteed payment of the
unpaid balance of the purchase price for the shares purchased by the
Trust.
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's Board of Directors consists of such number of Directors as
may be determined by the Board of Directors from time to time. The full Board of
Directors currently consists of four Directors. All four of the directors will
be elected at the Meeting. Such directors will serve until the next annual
meeting of shareholders and until their successors are duly elected and
qualified. Shareholders do not have cumulative voting rights in the election of
directors (each common shareholder is entitled to vote one vote for each share
held for each director). Unless authority is withheld, it is the intention of
the persons named in the enclosed form of proxy to vote "FOR" the election as
directors of the persons identified as nominees for directors in the table
below. If the candidacy of any one or more of such nominees should, for any
reason, be withdrawn, the proxies will be voted "FOR" such other person or
persons, if any, as may be designated by the Board of Directors. The Board has
no reason to believe that any nominee herein named will be unable or unwilling
to serve.
Nominees for Directors and Current Directors
The current directors of the Company, all of whom are nominated for
reelection as directors, are as follows:
James E. Robinson
Mr. Robinson has been president and a director of the Company since
February 1995. Mr. Robinson has been President (CEO) and Chairman of the Board
of Interwest Medical since October 1982. He also acted as Treasurer until 1990.
Mr. Robinson graduated from Brigham Young University with a Master of
Accountancy degree in 1975. He worked until July 1977 with Haskins & Sells at
which time he joined Robinson's Medical Mart (a predecessor company to Interwest
Medical) as its Vice President and Treasurer. Mr. Robinson
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was elected to the Board of Directors of the National Association of
Medical Equipment Suppliers (NAMES) in 1984 where he served as Treasurer from
1986 until 1990, Chair from 1990 to 1991, Immediate Past-Chairman from 1991 to
1992, and continues as an "Ex-Officer" Board member. He was also elected to the
Board of Directors of Medical Equipment Distributors, Inc. (The MED Group) in
1985 and served as its Chair from 1988 until 1992. Mr. Robinson has been active
in many local, regional, and national organizations which represent individuals
with disabilities, currently serving as the Chair of the Utah Assistive
Technology Foundation (UATF).
James U. Jensen
Mr. Jensen has been a director of the Company since February 1995. Mr.
Jensen has been Vice President, Corporate Development and Legal Affairs for NPS
Pharmaceutical since July 1991. He has been Secretary and a director of
Interwest Medical since 1987. From 1988 to July 1991, Mr. Jensen was a partner
in the law firm of Woodbury, Jensen, Kesler & Swinton, P.C. concentrating on
technology transfer and licensing and corporate finance. From 1983 until July
1985, he served as outside general counsel for a software company. From July
1985 to October 1986, he served as it's Chief Financial Officer. From 1980 to
1983, Mr. Jensen served as General Counsel and Secretary of Dictaphone
Corporation, a subsidiary of Pitney Bowes, Inc. He serves as a director of NPS
Pharmaceutical, Inc., a public company and Wasatch Advisors Funds, Inc., a
publicly registered investment company. Mr. Jensen received a B.S. in
English/Linguistics from the University of Utah and a J.D. and an M.B.A. degree
from Columbia University.
Jeffrey F. Poore, D.D.S.
Dr. Poore has been a director of the Company since February 1995.
Presently, Dr. Poore is a court appointed receiver and custodian over several
companies. Dr. Poore was previously President, CEO, and Chairman of the Board of
Healthchair Group, Inc. He served as President of CompHealth from 1995 through
1996. He is also a 20- year veteran of the health care industry and an early
champion of the concept of managed care. Prior to joining CompHealth, he
coordinated mergers, acquisitions and development in the office of the CEO at
FHP International, Inc., a health maintenance organization. During his tenure at
FHP he also directed staff in the organization's operational finance, financial
services, marketing, sales, medical, PPO/IPA, and contracting divisions. He also
has experience as a health care lobbyist and provider. He was in private dental
practice for many years. He earned his DDS from Loyola Medical Center in 1976,
and a BA in Economics from Brigham Young University in 1971.
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Jerald L. Nelson, Ph.D.
Dr. Nelson was a director of the Company from April 1990 to February 1995,
and was reappointed a director in August, 1995. In 1997, he was instrumental in
starting a long distance phone company, Family Telecommunications, Inc., which
was recently sold to I-Link, Inc., a Utah based, publicly traded
telecommunications firm where he serves as Vice President - Corporate
Development. He graduated from the University of Utah with a B.A. in business
and holds a Ph.D. in Economics from North Carolina State University. Dr. Nelson
has over twenty-five years of experience as an economist, business executive and
financial analyst. His career began in 1972 in NYC with TWA. Later he advised
Fortune 500 firms as a consultant with Date Resources, Inc. and then directed
planning efforts at U.S. Industries, Inc. He has served on numerous Boards of
Directors including Arrow Dynamics, Gentner Communications and One-2- One
Communications, where he also served as Chairman and CEO.
Committees and Meetings
The Board of Directors held five meetings during the last fiscal year.
Each of the Directors attended all five meetings. The Board of Directors has
established the following committees: (i) Audit Committee; (ii) Compensation
Committee; and (iii) Nominating Committee.
The Nominating Committee met one time during the year ended September 30,
1999 and is comprised of Mr. Robinson and Mr. Jensen.
The Audit Committee recommends annually to the Board of Directors the
appointment of the independent public accountants of the Company, discusses and
reviews the scope and the fees of the prospective annual audit, reviews the
results of the annual audit with the Company's independent public accountants,
reviews compliance with existing major accounting and financial policies of the
Company, reviews the adequacy of the financial organization of the Company,
reviews management's procedures and policies relative to the adequacy of the
Company's internal accounting controls and compliance with federal and state
laws relating to accounting practices, and reviews and approves transactions, if
any, with affiliated parties. In 1999, the Audit Committee was comprised of
Messrs Nelson and Jensen and held one meeting during the 1999 fiscal year. On
February 7, 2000, Director Jeffrey Poore was also appointed to the Audit
Committee. Accordingly all three of the Company's independent directors are now
members of the Audit Committee. On February 7, 2000, the full Board of Directors
adopted an Audit Committee Charter, a copy of which is attached to this Proxy
Statement as Appendix B.
The Compensation Committee conducts an annual performance review of the
Company's senior management and establishes their salaries, bonuses and stock
ownership awards. The Compensation Committee consists of Messers Jensen and
Poore. The Compensation Committee held two meetings during the 1999 fiscal year.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE
NOMINEES LISTED ABOVE.
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by the
Company for services rendered during the last three years to the Company's Chief
Executive Officer and to the Company's most highly compensated executive
officers other than the CEO, whose annual salary and bonus exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
-----------------------------
Commissions Restrict
and Other Annual Stock Options/
Name and Principal Bonuses Compensation Awards SAR's
Position Year Salary ($) ($) ($) (#)
- --------------------- ------ --------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
James E. Robinson 1999 $175,000 $36,735 (2) -0- -0-
President/CEO 1998 $150,000 $36,735 (2) -0- -0-
1997 $150,000 $15,750 (2) -0- 50,000(1)
Que H. Christensen 1999 $115,000 $23,265 (2) -0- -0-
Vice President/COO(3) 1998 $ 95,000 $23,265 (2) -0- -0-
1997 $ 95,000 $ 9,975 (2) -0- 25,000(1)
</TABLE>
(1) These Options were granted under the Company's 1995 Employee Stock
Option Plan. No SAR's have been granted by the Company.
(2) Does not include the value of perquisites provided to certain
executive officers which in the aggregate did not exceed the lesser of
$50,000 or 10% of such officer's salary and bonus.
(3) In December 1997, Mr. Christensen was promoted to Vice President and
Chief Operating Officer (COO) from Chief Financial Officer.
Stock Options
No options were granted to the named officers during fiscal years 1999 or
1998. Options were granted to the such officers following the end of the fiscal
year ended September 30, 1999.
The following table sets forth information concerning the number and value
of options held at September 30, 1999 by each of the named executive officers.
No options held by such executive officers were exercised during 1998.
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Option Values at September 30, 1999
-------------------------------------
Number of Unexercised Value of Unexercised
Options at In-the-Money Options
September 30, 1999 (#) At September 30, 1999($)(1)
- -------------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------
James E. Robinson 62,500 (2) -0- $62,500 (2) -0-
33,333 16,667 $ 8,333 $ 4,167
Que H. Christense 31,250 (2) -0- $31,250 (2) -0-
---------------------------------------------------------
16,667 8,333 $ 4,167 $ 2,083
(1) An "In-the-Money" stock option is an option for which the market
price of the Company's common stock underlying the option on
September 30, 1999 exceed the option price. The value shown
represents stock price appreciation since the date of grant. The
market price was based upon the closing price of the Company's
common stock on the NASD SmallCap Market on September 30, 1999
($3.50 per share).
(2) This stock option was granted at an exercise price of $4.00 per
share and was repriced by the Board of Directors on October 22, 1998
to an exercise price of $2.50 per share which was the closing price
of the Company's common stock on the NASD SmallCap Market on that
date. The values shown are calculated at the adjusted exercise
price.
1995 Employee Stock Purchase Plan
On November 6, 1995, the Company's Board of Directors adopted the
Company's 1995 Stock Purchase Plan (the "Plan"). The Plan is designed to provide
employees of the Company with an opportunity to purchase shares of the Company's
common stock through accumulated payroll deductions. The purchase price may be
established at 85% of the fair market price. The number of shares which may be
purchased under the Plan is 500,000. At December 1, 1999, 28,525 shares of
common stock had been purchased under the plan.
1995 Employee Stock Option Plan
On February 24, 1995, the Company's Board of Directors adopted the
Company's 1995 Stock Option Plan (the "Plan") which provides for the issuance of
a maximum 312,500 shares of common stock pursuant to the exercise of options
granted under the Plan. The Options granted under the Plan may be Incentive
Stock Options pursuant to Section 422 of the Internal Revenue Code of 1986
("ISO's") or Non-Qualified Stock Options ("NSO's"). The Plan is administered by
the Board of Directors' Compensation Committee. The Option price and terms is to
be set for each Option by the Committee administering the Plan. NSO options
granted under the Plan may have a term not exceeding ten years. ISO options
granted under the Plan may have a term not exceeding five years. The Committee
may grant options to employees (including officers and directors, or
consultants. Options to purchase 250,000 shares of stock have been granted and
options to purchase 218,750 shares of stock were outstanding as of September 30,
1999.
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2000 Stock Incentive Plan
On February 7, 2000, the Board of Directors adopted the Interwest Home
Medical 2000 Stock Incentive Plan. (See Proposal 2 of this Proxy Statement).
Compensation of Directors
The Company's non-employee directors are paid $500 for each Board of
Directors meeting attended and $400 for each Committee Meeting attended. On
February 24, 1995, the Company adopted, and the shareholders approved at the
Annual Meeting on February 16, 1996, the 1995 Non- Employee Director's Stock
Option Plan. The Plan provided that each non-employee director who was a
director as of February 24, 1995, or who became a director thereafter, was to be
issued an option to purchase 5,000 shares of the Company's common stock at $4.00
per share. Additionally, each non-employee director was automatically granted an
option to purchase 1,500 shares at market prices on April 1st of each year
commencing April 1, 1997. As of April 1, 1997, the annual grant was terminated
and each non-employee director was granted an option to purchase 40,000 shares
at $4.00 per share with one-third of the shares vesting at March 31, 1998 and
each additional one-third vesting in the two subsequent years. On December 1,
1999, the Board of Directors granted each non-employee director an additional
option to purchase 40,000 shares of the Company's common stock at $3.00 per
share. These option vests in three equal installments on March 31, 2000, March
31, 2001 and March 31, 2002.
Employment Agreements
The Company is currently a party to the following Employment Agreements:
James E. Robinson. On May 3, 1995, the Company entered into an Employment
Agreement with its President/CEO, James E. Robinson. The Agreement replaced and
superseded a previously executed agreement. The Agreement may be terminated by
the Company without notice and without cause. The Agreement may be terminated by
Mr. Robinson upon thirty day written notice. The Agreement provides for a base
annual salary of $150,000 and incentive salary based upon pre-tax profits,
revenue growth and acquisition incentives. The Agreement contains a 12 month
non-competition restriction following termination and provisions relating to
death and disability during the term of employment. The Company is obligated to
compensate Mr. Robinson for 120 days past termination in the event the Company
terminates the agreement. The Compensation Committee of the Board of Directors
amended the annual base salary to $175,000 effective October 1, 1998.
Que H. Christensen. On May 3, 1995, the Company entered into an Employment
Agreement with its Chief Financial Officer, Que H.. Christensen. The Agreement
replaced and superseded a previously executed agreement. The Agreement may be
terminated by the Company without notice and without cause. The Agreement may be
terminated by Mr. Christensen upon thirty day written notice. The Agreement
provides for a base annual salary of $95,000 and incentive salary based upon
pre-tax profits, revenue growth and acquisition
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incentives. The Agreement contains a 12 month non-competition restriction
following termination and provisions relating to death and disability during the
term of employment. The Company is obligated to compensate Mr. Christensen for
90 days past termination in the event the Company terminates the agreement. The
Compensation Committee of the Board of Directors amended the annual base salary
to $115,000 effective October 1, 1998.
Compensation Committee Interlocks and Insider Participation
James U. Jensen and Jeffrey F. Poore served on the Company's Compensation
Committee during the fiscal year ended September 30, 1999. Neither Mr. Jensen
nor Mr. Poore has ever been an officer or employee of the Company or any of its
subsidiaries.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT AND
THE PERFORMANCE GRAPH ON PAGE 14 SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILINGS.
The Company applies a consistent philosophy toward the compensation for
its executive officers. This philosophy is based on the premise that the
achievements of the Company result from the coordinated efforts of all
individuals working toward its stated mission. The Company strives to achieve
those objectives through teamwork that is focused on meeting the expectations of
its customers, shareholders and employees. The Compensation Committee (the
"Committee") is currently comprised of three (3) non-employee directors.
Compensation Philosophy
The goals of the compensation program are to:
o align individual contributions with business objectives and performance;
o enable the Company to attract, retain and reward executive officers who
contribute to the long-term success of the Company; and
o motivate those executives to advance shareholder interest. The
Company's compensation program for executive officers is based on
the following two policies of the Company:
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The Company Pays Compensation Based on Company and Individual Performance.
Executive Officers are rewarded based upon corporate performance and individual
performance. Corporate performance is evaluated by reviewing the extent to which
strategic and business plan goals are met, including such factors as increases
in net earnings, return on equity, sales growth and others. Individual
performance is evaluated by reviewing individual efforts and accomplishments,
the implementation of new programs and services, organizational and management
development progress against personal and functional area objectives and the
degree to which teamwork and Company values are fostered.
The Company Provides a Total Compensation Package Which Is Competitive.
The Company regularly compares its pay practices for its executive officers with
those of other leading companies and sets, in part, its pay parameters based on
this review. The Company strives to set the compensation paid to an individual
based upon comparisons to other executives inside the Company and at comparable
organizations.
Compensation Vehicles
The Company has a simple total compensation program that consists of cash-
and equity-based compensation. Having a compensation program that allows the
Company to successfully attract and retain key employees permits it to enhance
shareholder values, provide efficient service to customers, foster Company
values and teamwork, and adequately reward employees. These vehicles are:
Cash-Based Compensation. Cash-based compensation represents a combination
of base salary and annual incentive based bonus. Salary levels are determined
based on a review of competitive data and internal pay levels for various
positions. Base salary levels are typically at the midpoint in the wholesale
home health industry but below the median in comparable size companies.
The Committee also considers awarding an annual incentive based bonus
measured against the achievement of financial criteria established by senior
management and the Board each year as well as qualitative improvements in
certain individual performance criteria.
Equity-Based Compensation. The purpose of the Stock Option grants is to
provide longer term incentives to employees to work to maximize shareholder
value.
CEO Compensation
The Chief Executive Officer has been the CEO of the Company since 1982.
His compensation package has historically been below that of other chief
executive officers in comparable companies in the industry. In order to
determine the appropriate salary and stock option grant for the Chief Executive
Officer, the Compensation Committee considered current conditions, the salaries
of other chief executive officers in the home health industry, the results of
the formal evaluation of the CEO, and the CEO and Company accomplishments in
1999.
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Significant progress was made in several areas and the Company met or
exceeded most of its performance goals. In the Committee's review of CEO
compensation, the following developments were considered: Mr. Robinson's overall
leadership of the Company as President, CEO, and Chairman of the Board; the
overall successful completion of acquisitions and the overall revenue increase
of the Company's existing operations. Actions recommended by the Committee (and
approved by the Board) specific to Mr. Robinson, relative to his service during
fiscal 1999 as Chief Executive Officer were as follows:
Mr. Robinson was granted an 18.68% salary increase, which brought his base
pay to $175,000 per annum for fiscal 1999. This adjustment was made in large
part because of the increase in revenues and operating earnings for the year
ended September 30, 1998 and increases in the Company's operating margin
percentage. This was the first increase of Mr. Robinson's salary in more than
three years. Mr. Robinson was evaluated by the Committee and awarded a cash
bonus of $36,735 in fiscal 1999, the same bonus he was awarded in fiscal 1998.
In fiscal 1999 no options were granted to Mr. Robinson. Options were
granted subsequent to the fiscal year ended September 30, 1999.
Committee Policy Regarding Compliance with Section 162(m) of the Code.
The 1993 Omnibus Budget Reconciliation Act ("OBRA") became law in August
1993. Under the law, income tax deductions of publicly-traded companies may be
limited to the extent total compensation (including base salary, annual bonus,
stock option exercises and non-qualified benefits) for certain executive
officers exceeds $1,000,000 in any one year. We are required to disclose our
policy regarding qualifying executive compensation for deductibility under
Section 162(m) of the Internal Revenue Code. We do not anticipate that
compensation payable to any executive officer will exceed $1 million for fiscal
year 1999. The Committee will continue to evaluate the advisability of
qualifying the deductibility of such compensation in the future.
Compensation Committee of the Board of Directors
Dr. Jeffrey W. Poore and James U. Jensen
STOCK PRICE PERFORMANCE GRAPH
The following table compares the cumulative return to shareholders on the
Company's common stock for the five years with the cumulative total return of
the NASDAQ Market Index and the NASDAQ Health Services Stock. The table assumes
that $100 was invested on October 1, 1995 (the first day of the first fiscal
year following the acquisition of Interwest Medical Equipment Distributors, Inc,
by the Company) in the Company's common stock, the NASDAQ market Index and the
NASDAQ Health Services Stock, including reinvestment of dividends. No dividends
have been declared or paid by the Company.
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COMPARISON OF CUMULATIVE TOTAL RETURN OF
INTERWEST HOME MEDICAL, INC.
NASDAQ HEALTH SERVICES STOCKS,
AND THE NASDAQ STOCK MARKET (U.S.)
(Graph Appears Here)
Measurment
Period Fiscal Interwest Home NASDAQ Health NASDAQ
Year Covered Medical Services Stock Market Index
-----------------------------------------------------------------------
October 1, 1995 100.00 100.00 100.00
October 1, 1996 75.00 130.65 117.57
October 1, 1997 70.83 131.91 161.34
October 1, 1998 45.83 88.23 162.32
October 1, 1999 58.33 82.23 263.16
PROPOSAL 2: PROPOSAL TO ADOPT THE 2000 STOCK INCENTIVE PLAN
Introduction
On February 7, 2000, the Board of Directors of the Company adopted the
2000 Stock Incentive Plan (the "Plan"), which is being submitted to the
Company's shareholders for their approval. The purpose of the Plan is to advance
the interests of the Company and its shareholders by enabling the Company and
its subsidiaries to attract and retain persons of ability to perform services
for the Company and its subsidiaries by providing an incentive to such
individuals through equity participation in the Company and by rewarding such
individuals who contribute to the achievement by the Company of its economic
objectives. The Board of Directors has reserved a maximum of 600,000 shares of
Common Stock for issuance under the Plan. The major features of the Plan are
summarized below, which summary is qualified in its entirety by reference to the
actual text of the Plan, a copy of which is attached to this Proxy Statement.
Summary of the Plan
General. The Plan provides for awards ("Incentive Awards") to all
employees (including officers and directors who are also employees) non-employee
directors, consultants and independent contractors of the Company and its
subsidiaries and any joint venture partners (including officers, directors and
partners thereof) of the Company or any subsidiary, of:
o options to purchase Common Stock that qualify as "incentive stock
options" within the meaning of Section 422 of the Code ("Incentive
Options");
o options to purchase Common Stock that do not qualify as such Incentive
Options ("Non-Statutory Options");
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<PAGE>
o awards of shares of common stock that are subject to certain
forfeiture and transferability restrictions that lapse after
specified employment periods ("Restricted Stock Awards");and
o awards of shares of common stock ("Stock Bonuses").
Incentive Options and Non-Statutory Options are collectively referred to
herein as "Options," and Options, Restricted Stock Awards and Stock Bonuses are
collectively referred to herein as "Incentive Awards."
The Plan is administered by the Compensation Committee (the "Committee")
which selects the participants to be granted Incentive Awards under the Plan,
determines the amount of the grants to the participants, and prescribes
discretionary terms and conditions of each grant not otherwise fixed under the
Plan. Eligible recipients under the Plan include all employees (including,
without limitation, officers and directors who are also employees) of the
Company or any subsidiary of the Company, any non-employees consultants and
independent contractors of the Company or any subsidiary of the Company and any
joint venture partners (including without limitation, officers, directors and
partners thereof) of the Company or any subsidiary of the Company.
The Plan will terminate on February 7, 2010, unless sooner terminated by
action of the Board of Directors. No Award will be granted after termination of
the Plan. Currently, a maximum of 600,000 shares of Common Stock are reserved
for issuance under the Plan. In the event of any reorganization, merger,
recapitalization, stock dividend, stock split or similar change in the corporate
structure or shares of the Company, appropriate adjustments will be made to the
number and kind of shares reserved under the Plan and under outstanding
Incentive Awards and to the exercise price of outstanding Options. No right or
interest in any Award may be assigned or transferred by a participant, except by
will or the laws of descent and distribution, or subjected to any lien or
otherwise encumbered.
Options. The exercise price for a Non-Statutory Option must be not less
than 85% of the fair market value of the Common Stock on the day the
Non-Statutory Option is granted. An Incentive Option must be granted with an
exercise price equal to the fair market value of the Common Stock on the date
the Incentive Option is granted, except that an Incentive Option granted to a
person owning stock representing more than 10% of the total combined voting
power of all classes of stock of the Company or any subsidiary may not be
granted at less than 110% of the fair market value on the date of grant. In
determining the fair market value of the Common Stock, the Committee will use
the closing price of the Common Stock as reported by NASDAQ as of the date of
grant.
Payment of an option exercise price may be made either in cash or, in the
sole discretion of the Committee, by (i) delivery of a broker exercise notice
(pursuant to which the broker or dealer is instructed to sell enough shares or
loan the optionee enough money to pay the exercise price and to remit such sums
to the Company), (ii) transfer from the participant to the Company of previously
acquired shares of Common Stock having an aggregate fair market value on the
date of exercise equal to the payment required, or (iii) by any other legal
consideration approved by the Committee.
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<PAGE>
Options may not be transferred other than by will or the laws of descent
and distribution, and during the lifetime of an optionee may be exercised only
by the optionee. Options may be exercised in whole or in installments, as
determined by the Committee. Incentive Options will have a maximum term fixed by
the Committee, not to exceed 10 years from the date of grant or, in the case of
Incentive Options granted to persons owning stock representing more than 10% of
the total combined voting power of all classes of stock of the Company or any
subsidiary, five years from the date of grant. To the extent that the aggregate
fair market value (determined as of the date and Incentive Option is granted) of
the shares of Common Stock with respect to which Incentive Options are
exercisable for the first time by a participant during any calendar year exceeds
$100,000, such excess Incentive Options will be treated as Non-Statutory
Options. Non-Statutory Options have a maximum term fixed by the Committee, not
to exceed 10 years from the date of grant.
Restricted Stock Awards. Restricted Stock Awards are grants to
participants of shares of Common Stock that are subject to restrictions and the
possibility of forfeiture for a period of time set by the Committee during which
the participant must remain continuously employed by the Company.
Stock Bonuses. Stock Bonuses are awards of common stock that are not
subject to any restrictions other than restrictions on transferability. A
participant may be granted one or more Stock Bonuses under the Plan, and such
Stock Bonuses will be subject to such terms and conditions, consistent with
other provisions of the Plan, as may be determined by the Committee in its sole
discretion. The participant will have all voting, dividend, liquidation and
other rights with respect to the shares of common stock issued to a participant
as a Stock Bonus under the Plan upon the participant becoming the holder of
record of such shares.
Effect of Termination of Employment. If a participant ceases to be
employed by or render services to the Company and all subsidiaries ("Termination
of Service"), all Incentive Awards held by the participant will be affected in
the manner set forth below.
Upon Termination of Service due to death, disability or retirement,
o all outstanding Options then held by the participant will remain
exercisable to the extent exercisable as of such termination
following such termination until the expiration date of the Option
or),
o all Restricted Stock Awards then held by the Participant that have not
vested will be terminated and forfeited, and
o all outstanding Stock Bonuses will vest and/or continue to vest in
the manner determined by the Committee and set forth in the
agreement evidencing such or Stock Bonuses.
Upon Termination of Service for any other reason (other than by the Company
for "cause"),
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<PAGE>
o all outstanding Options will remain exercisable to the extent
exercisable as of such termination for a period of one month after
such termination (but in no event after the expiration date of such
Option); notwithstanding anything else contained herein to the
contrary, an Option issued to an Eligible Recipients who, at the
time of issuance is a consultant to the Company, shall terminate at
the termination date as provided for in the Option and the
termination of the consultancy of such consultant shall not result
in a termination of the Option or in the reduction of time of the
Option Period.
o all outstanding Restricted Stock Awards that have not vested as of
such termination will be terminated and forfeited, and
o all outstanding Stock Bonuses will vest and/or continue to vest in
the manner determined by the Committee. In the event of termination
by the Company for "cause," all rights of the participant under the
Plan and any Incentive Awards will immediately terminate without
notice of any kind.
The Company also has the right to rescind Incentive Awards or Option
exercises made to Participants in the six months prior to such Participant's
termination of employment with the Company if such Participants takes certain
actions that could have an adverse affect on the Company. The Company may also
require Participants to pay to the Company any gains realized from such
Incentive Award or Option exercise. The Committee may in its discretion modify
the post-termination provisions of the Plan, provided that no Option may remain
exercisable after its expiration date.
Change in Control of the Company. In the event a "change in control" of the
Company occurs, then, if approved by the Committee,
o all outstanding Options will become immediately exercisable in full
and will remain exercisable for the remainder of their terms,
regardless of whether the participant remains in the employ or
service of the Company or any subsidiary,
o all outstanding Restricted Stock Awards will become immediately
fully vested, and
o all outstanding Stock Bonuses will vest and/or continue to vest in
the manner determined by the Committee.
In addition, the Committee, without the consent of any affected
participant, may determine that some or all participants holding outstanding
Options will receive cash in an amount equal to the excess of the fair market
value immediately prior to the effective date of such change in control over the
exercise price per share of the Options.
To the extent that such acceleration of the vesting of Incentive Awards
would constitute a "parachute payment" (as defined in the Code), then, pursuant
to the Plan, such acceleration will be modified to such extent that the
participant will not be subject to the excise tax imposed by Section 4999 of the
Code.
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<PAGE>
For purposes of the Plan, a "change in control" of the Company will be
deemed to have occurred, among other things, upon
o a sale, lease, exchange or other transfer of substantially all of
the assets of the Company to an entity that is not controlled by
the Company,
o a merger or consolidation to which the Company is a party if, after
such merger or consolidation, the Company's shareholders do not
beneficially own more than 80% of the combined voting power of the
surviving corporation's outstanding voting securities,
o any person becoming the beneficial owner of 40% or more of the
combined voting power of the Company's outstanding securities, or
o a change in the composition of the Board such that the individuals
who constitute the Board on the effective date of the Plan cease for
any reason to constitute at least a majority of the Board (with
exceptions for individuals who are nominated or otherwise approved
by the current Board).
Federal Income Tax Consequences
The following description of federal income tax consequences is based on
current statutes, regulations and interpretations. The description does not
include state or local income tax consequences. In addition, the description is
not intended to address specific tax consequences applicable to an individual
participant who receives an Award.
Incentive Options. There will not be any federal income tax consequences
to either the participant or the Company as a result of the grant to an employee
of an Incentive Option under the Stock Incentive Plan. The exercise by a
participant of an Incentive Option also will not result in any federal income
tax consequences to the Company or the participant, except that (i) an amount
equal to the excess of the fair market value of the shares acquired upon
exercise of the Incentive Option, determined at the time of exercise, over the
amount paid for the shares by the participant will be includable in the
participant's alternative minimum taxable income for purposes of the alternative
minimum tax, and (ii) the participant may be subject to an additional excise tax
if any amounts are treated as excess parachute payments (see explanation below).
Special rules will apply if previously acquired shares of Common Stock are
permitted to be tendered in payment of an Option exercise price.
If the participant disposes of the Incentive Option shares acquired upon
exercise of the Incentive Option, the federal income tax consequences will
depend upon how long the participant has held the shares. If the participant
does not dispose of the shares within two years after the Incentive Option was
granted nor within one year after the participant exercised the Incentive Option
and the shares were transferred to the participant, then the participant will
recognize a long-term capital gain or loss. The amount of the long-term capital
gain or loss will be equal to the difference between (i) the amount the
participant realized on disposition of the shares, and (ii) the option price
20
<PAGE>
at which the participant acquired the shares. The Company is not entitled
to any compensation expense deduction under these circumstances.
If the participant does not satisfy both of the above holding period
requirements (a "disqualifying disposition"), then the participant will be
required to report as ordinary income, in the year the participant disposes of
the shares, the amount by which the lesser of (i) the fair market value of the
shares at the time of exercise of the Incentive Option (or, for directors,
officers or greater than 10 percent shareholders of the Company, generally the
fair market value of the shares six months after the date of exercise, unless
such persons file an election under Section 83(b) of the Code within 30 days of
exercise), or (ii) the amount realized on the disposition of the shares, exceeds
the option price for the shares. The Company will be entitled to a compensation
expense deduction in an amount equal to the ordinary income includable in the
taxable income of the participant. This compensation income may be subject to
withholding. The remainder of the gain recognized on the disposition, if any, or
any loss recognized on the disposition, will be treated as long-term or
short-term capital gain or loss, depending on the holding period.
Non-statutory Options. Neither the participant nor the Company incurs any
federal income tax consequences as a result of the grant of a Non-Statutory
Option. Upon exercise of a Non-Statutory Option, a participant will recognize
ordinary income, subject to withholding on the "Includability Date" in an amount
equal to the difference between (i) the fair market value of the shares
purchased, determined on the Includability Date, and (ii) the consideration paid
for the shares. The Includability Date generally will be the date of exercise of
the Non-Statutory Option. However, the Includability Date for participants who
are officers, directors or greater-than-10 percent shareholders of the Company
will generally occur six months later, unless such persons file an election
under Section 83(b) of the Code within 30 days of the date of exercise to
include as ordinary income the amount realized upon exercise of the
Non-Statutory Option. The participant may be subject to an additional excise tax
if any amounts are treated as excess parachute payments (see explanation below).
Special rules will apply if previously acquired shares of common stock are
permitted to be tendered in payment of an Option exercise price.
At the time of a subsequent sale or disposition of any shares of common
stock obtained upon exercise of a Non-Statutory Option, any gain or loss will be
a capital gain or loss. Such capital gain or loss will be long-term capital gain
or loss if the sale or disposition occurs more than one year after the
Includability Date and short-term capital gain or loss if the sale or
disposition occurs one year or less after the Includability Date.
In general, the Company will be entitled to a compensation expense
deduction in connection with the exercise of a Non-Statutory Option for any
amounts includable in the taxable income of the participant as ordinary income,
provided the Company complies with any applicable withholding requirements.
Restricted Stock Awards and Stock Bonuses. With respect to shares issued
pursuant to a Restricted Award that is not subject to a risk of forfeiture or
with respect to Stock Bonuses, a participant will include as ordinary income in
the year of receipt an amount equal to the fair market value of the shares
received on the date of receipt. With respect to shares that are subject to a
risk
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of forfeiture, a participant may file an election under Section 83(b) of the
Code within thirty (30) days after receipt to include as ordinary income in the
year of receipt an amount equal to the fair market value of the shares received
on the date of receipt (determined as if the shares were not subject to any risk
of forfeiture). If a Section 83(b) election is made, the participant will not
recognize any additional income when the restrictions on the shares issued in
connection with the Restricted Stock Award lapse. The Company will receive a
corresponding tax deduction for any amounts includable in the taxable income of
the participant as ordinary income.
A participant who does not make a Section 83(b) election within thirty
(30) days of the receipt of a Restricted Stock Award that is subject to a risk
of forfeiture will recognize ordinary income at the time of the lapse of the
restrictions in an amount equal to the then fair market value of the shares free
of restrictions. The Company will receive a corresponding tax deduction for any
amounts includable in the taxable income of a participant as ordinary income.
Excise Tax on Parachute Payments. The Code also imposes a 20% excise tax
on the recipient of "excess parachute payments," as defined in the Code and
denies tax deductibility to the Company on excess parachute payments. Generally,
parachute payments are payments in the nature of compensation to employees of a
company who are officers, shareholders, or highly compensated individuals, which
payments are contingent upon a change in ownership or effective control of the
company, or in the ownership of a substantial portion of the assets of the
company. For example, acceleration of the exercisability of Options, or the
vesting of Restricted Stock Awards, upon a change in control of the Company may
constitute parachute payments, and in certain cases, "excess parachute
payments."
Incentive Awards under the 2000 Plan
The Board of Directors has granted the following options under the 2000
Stock Incentive Plan, subject to shareholder approval of the Plan at the
Meeting:
Name Option Shares Exercise Price
--------------------------------------------------------------------
James E. Robinson (1) 12,000 $3.00
James E. Robinson (1) 120,000 $3.30
Que H. Christensen (2) 88,000 $3.00
(1) A total of 120,000 of these options are ISO's and the remaining 12,000
options are NSO's. Twenty five percent of these options are currently
vested. The remaining 75% vest in three equal increments at March 31,
2001, March 31, 2002 and March 31, 2003.
(1) All of these options are ISO's. None of these options are currently
vested. They vest in three equal increments at March 31, 2001, March 31,
2002 and March 31, 2003.
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Board of Directors Recommendations
The Board of Directors recommends that the shareholders vote FOR approval
and ratification of the Plan. The affirmative vote of the holders of a majority
of shares of Common Stock of the Company present in person or by proxy at the
Annual Meeting, assuming a quorum is present, is necessary for approval. Unless
a contrary choice is specified, proxies solicited by the Board of Directors will
be voted FOR approval of the Plan.
RIGHTS OF DISSENTING SHAREHOLDERS
The matters to be considered and acted upon at the Annual Meeting of
Shareholders do not create any dissenting shareholders rights under the Utah
Revised Business Corporation Act.
CERTAIN TRANSACTIONS
Board of Directors Stock Option Purchase Plan
On September 30, 1997, the Company's Board of Directors adopted a
financing Plan which provides a stock purchase right and warrant purchase right
to each of its three non-employee directors (the "Holders"). The maximum number
of shares issuable under the Plan is 66,000 shares per Holder, of which up to
33,000 shares per Holder may be purchased as "Purchase Shares" and up to 33,000
shares per Holder may be purchased as "Warrant Shares". This Plan is modeled on
a similar financing arrangement earlier negotiated between the Company and third
party investors. The Plan for the non-employee directors is intended to
encourage long term investment in the Company by the non-employee directors but
is not considered by the Company as "compensation" to the non-employee
directors. The prices and terms provided are deemed fair market value because
the Plan uses substantially the same prices and terms as were previously
negotiated in good faith between the Company and third party investors.
By October 30, 1997, each of the Holders had purchased the first option
right (the "First Purchase Right") by paying the required $1,000. This purchase
of the First Purchase Right entitles each Holder to purchase up to 8,250 shares
of the Company's common stock (the "First Purchase Shares") at a price of $4.28
per share if purchased on or before April 5, 1998, when the First Purchase Right
expires. To the extent the Holder purchases shares of the First Purchase Shares
on or before December 29, 1997, however, (rather that waiting until the end of
the First Purchase Period, April 5, 1998) the Holder is then entitled to
exercise a warrant (the "First Purchase Warrant") to purchase the same number of
shares (up to 8,250 shares, the "First Warrant Shares") during the ensuing three
year period at prices of $4.28 per share during the first year, $4.75 in the
second year, and $5.25 per First Warrant Share during the third year.
The Plan repeats this arrangement for three additional Purchase Periods,
for a total of four such purchase periods. The following Table show the basic
content of the non-employee director financing Plan.
23
<PAGE>
<TABLE>
<CAPTION>
Last Date for Last Date to Last Date
Exercise Price Shares Option Fee Obtain Warrants without Warrant Prices
Warrants
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Option 4.28 8,250 10/30/97 12/29/97 4/5/98 4.28, 4.75, 5.25
Second Option 4.78 8,250 1/28/98 Date Option Fee 6/9/98 4.78, 5.25, 5.75
paid + 90 days
Third Option 5.50 8,250 4/26/98 Date Option Fee 9/7/98 5.50, 6.00, 6.50
paid + 90 days
Fourth Option 6.00 8,250 7/25/98 Date Option Fee 12/6/98 6.00, 6.50, 7.00
paid + 90 days
</TABLE>
* Warrant prices change on the annual anniversary of the date the Option
Fee is paid.
As of September 30, 1999, Dr. Poore had purchased 8,250 shares, Dr. Nelson
had purchased 500 shares, and Mr. Jensen had purchased 5,000 shares. Each
director received warrants equal to the number of shares purchased. No other
option fees were paid and all the remaining options and warrants had terminated
as a result.
FILINGS UNDER SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 of the Securities Exchange Act of 1934 requires the filing of
reports for sales of the Company's common stock made by officers, directors and
10% or greater shareholders. A Form 4 must be filed within ten days after the
end of the calendar month in which a sale or purchase occurred. Based upon the
review of the Form 4's filed with the Company, no disclosure is required
regarding late filings.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Company's financial statements have been examined by Tanner + Co.,
independent certified public accountants. The selection of these independent
accountants for the current fiscal year has been made by the Board upon the
recommendation of the Audit Committee. As in the past, a representative of
Tanner + Co., is expected to be present at the meeting and such representative
will have the opportunity to make a statement and respond to appropriate
questions.
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<PAGE>
SHAREHOLDER PROPOSALS
All proposals that shareholders desire to submit for consideration by the
shareholders and for inclusion in the Company's Proxy Statement for presentation
at the next Annual Meeting must be received by the Company before September 15,
2000. In addition shareholders desiring to submit matters for inclusion in the
Company's Proxy Statement for the next Annual Meeting must comply those
procedures set forth in the Securities Exchange Act.
ANNUAL REPORT
The Company's 1999 annual report, containing audited financial statements
and schedules for the fiscal years ended September 30, 1999 and 1998,
accompanies this Proxy Statement. Upon written request, the company will send
you, without charge, a copy of its annual report on Form 10-KSB (without
exhibits) for the fiscal year ended September 30, 1999, which the company has
filed with the securities and exchange commission. Copies of exhibits will also
be provided upon written request and payment of a fee of $.25 per page plus
postage. The written request should be directed to the Company's Secretary,
Serena Falgoust. At the address of the Company set forth on the first page of
this proxy statement.
OTHER MATTERS
At the time of the preparation of this proxy statement, the Board of
Directors knows of no other matters which will be acted upon at the Annual
Meeting. If any other matters are presented for action at the Annual Meeting or
at any adjournment thereof, it is intended that the proxies will be voted with
respect thereto in accordance with the best judgment and in the discretion of
the proxy holders.
By Order of the Board of Directors
March 21, 2000
attached: Annual Report
2000 Stock Incentive Plan
Audit Committee Charter
- ------------------------------------------------------------------------------
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS ARE
URGED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN
THE ENCLOSED ENVELOPE.
- ------------------------------------------------------------------------------
25
INTERWEST HOME MEDICAL, INC.
2000 STOCK INCENTIVE PLAN
1. Purpose of Plan. The purpose of the Interwest Home Medical, Inc. 2000
Stock Incentive Plan (the "Plan") is to advance the interests of Interwest Home
Medical, Inc (the "Company") and its stockholders by enabling the Company and
its Subsidiaries to attract and retain persons of ability to perform services
for the Company and its Subsidiaries by providing an incentive to such
individuals through equity participation in the Company and by rewarding such
individuals who contribute to the achievement by the Company of its economic
objectives.
Pursuant to the Plan, the Company may grant (i) "incentive stock options,"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and (ii) stock options that do not qualify as incentive
stock options ("non-qualified stock options"). No option granted under the Plan
shall be treated as an incentive stock option unless the stock option agreement
which evidences the grant refers to such option as an incentive stock option and
such option satisfies the requirements of Section 422 of the Code. Pursuant to
the Plan, the Company may grant Restricted Stock Awards and Stock Bonuses.
As used herein, the term "parent" or "subsidiary" shall mean any
present or future corporation which is or would be a "parent corporation" or
"subsidiary corporation" of the Company as the term is defined in Section 424 of
the Code (determined as if the Company were the employer corporation).
2. Definitions. The following terms will have the meanings set forth
below, unless the context clearly otherwise requires:
2.1. "Board" means the Board of Directors of the Company.
2.2. "Broker Exercise Notice" means a written notice pursuant to which a
Participant, upon exercise of an Option, irrevocably instructs a broker or
dealer to sell a sufficient number of shares or loan a sufficient amount of
money to pay all or a portion of the exercise price of the Option and/or any
related withholding tax obligations and remit such sums to the Company and
directs the Company to deliver stock certificates to be issued upon such
exercise directly to such broker or dealer.
2.3. "Change in Control" means an event described in Section 11.1 of the
Plan.
2.4. "Code" means the Internal Revenue Code of 1986, as amended.
2.5. "Committee" means the group of individuals administering the Plan, as
provided in Section 3 of the Plan.
2.6. "Common Stock" means the common stock of the Company; par value $.001
per share, or the number and kind of shares of stock or other securities into
which such Common Stock may be changed in accordance with Section 4.3 of the
Plan.
2.7. "Disability" means the disability of the Participant such as would
entitle the Participant to receive disability income benefits pursuant to the
long-term disability plan of the Company or
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Subsidiary then covering the participant or, if no such plan exists or is
applicable to the Participant, the permanent and total disability of the
Participant within the meaning of Section 22(e)(3) of the Code.
2.8. "Eligible Recipients" means all employees (including, without
limitation, officers and directors who are also employees) of the Company or any
Subsidiary, any non-employee director, consultants and independent contractors
of the Company or any Subsidiary and any joint venture partners (including
without limitation, officers, directors and partners thereof) of the Company or
any Subsidiary.
2.9. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.10. "Fair Market Value" means, with respect to the Common Stock, as of
any date (or, if no shares were traded or quoted on such date, as of the next
preceding date on which there was such a trade or quote), the closing market
price per share of the Common Stock as reported on NASDAQ on that date.
2.11. "Incentive Award" means an Option, Restricted Stock Award or Stock
Bonus granted to an Eligible Recipient pursuant to the Plan.
2.12. "Incentive Stock Option" means a right to purchase Common Stock
granted to an Eligible Recipient pursuant to Section 6 of the Plan that
qualifies as an "incentive stock option" within the meaning of Section 422 of
the Code.
2.13. "Non-Employee Director" means any member of the Board of Directors of
the Company who is not an employee of the Company or any Subsidiary.
2.14. "Non-Statutory Stock Option" means a right to purchase Common Stock
granted to an Eligible Recipient pursuant to Section 6 of the Plan that does not
qualify as an Incentive Stock Option.
2.15. "Option" means an Incentive Stock Option or a Non-Statutory Stock
Option.
2.16. "Participant" means an Eligible Recipient who receives one or more
Incentive Awards under the Plan.
2.17. "Previously Acquired Shares" means shares of Common Stock that are
already owned by the Participant or, with respect to any Incentive Award, that
are to be issued upon the grant, exercise or vesting of such Incentive Award.
2.18. "Restricted Stock Award" means an award of Common Stock granted to
an Eligible Recipient pursuant to Section 8 of the Plan that is subject to the
restrictions on transferability and the risk of forfeiture imposed by the
provisions of such Section 8.
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2.19. "Retirement" means termination of employment or service pursuant to
and in accordance with the regular (or, if approved by the Board for purposes of
the Plan, early) retirement/pension plan or practice of the Company or
Subsidiary then covering the Participant, provided that if the Participant is
not covered by any such plan or practice, the Participant will be deemed to be
covered by the Company plan or practice for purposes of this determination.
2.20. "Securities Act" means the Securities Act of 1933, as amended.
2.21. "Stock Bonus" means an award of Common Stock granted to an Eligible
Recipient pursuant to Section 8 of the Plan.
2.22. "Subsidiary" means any entity that is directly or indirectly
controlled by the Company or any entity in which the Company has a significant
equity interest, as determined by the Committee.
2.23. "Tax Date" means the date any withholding tax obligation arises
under the Code for a Participant with respect to an Incentive Award.
3. Plan Administration.
3.1. The Committee. The Plan shall be administered by the Committee as
appointed from time to time by the Board of Directors of the Company, which may
be the Compensation Committee of the Board of Directors. Except as otherwise
specifically provided herein, no person, other than members of the Committee,
shall have any discretion as to decisions regarding the Plan. The Company may
engage a third party to administer routine matters under the Plan, such as
establishing and maintaining accounts for Plan participants and facilitating
transactions by participants pursuant to the Plan.
In administering the Plan, the Committee may adopt rules and regulations
for carrying out the Plan. The interpretations and decisions made by the
Committee with regard to any question arising under the Plan shall be final and
conclusive on all persons participating or eligible to participate in the Plan.
3.2. Authority of the Committee.
(a) In accordance with and subject to the provisions of the Plan,
the Committee will have the authority to determine all provisions of
Incentive Awards as the Committee may deem necessary or desirable and as
consistent with the terms of the Plan, including, without limitation, the
following:
(i) the Eligible Recipients to be selected as Participants;
(ii) the nature and extent of the Incentive Awards to be made to
each Participant (including the number of shares of Common Stock to
be subject to each Incentive Award, any exercise price, the manner
in which Incentive Awards will vest or
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become exercisable and whether Incentive Awards will be granted in
tandem with other Incentive Awards) and the form of written
agreement, if any, evidencing such Incentive Award;
(iii) the time or times when Incentive Awards will be granted;
(iv) the duration of each Incentive Award; and (v) the restrictions
and other conditions to which the payment or vesting of Incentive
Awards may be subject. In addition, the Committee will have the
authority under the Plan in its sole discretion to pay the economic
value of any Incentive Award in the form of cash, Common Stock or
any combination of both.
(b) The Committee will have the authority under the Plan to amend or
modify the terms of any outstanding Incentive Award in any manner,
including, without limitation, the authority to modify the number of
shares or other terms and conditions of an Incentive Award, extend the
term of an Incentive Award, accelerate the exercisability or vesting or
otherwise terminate any restrictions relating to an Incentive Award,
accept the surrender of any outstanding Incentive Award or, to the extent
not previously exercised or vested, authorize the grant of new Incentive
Awards in substitution for surrendered Incentive Awards; provided, however
that the amended or modified terms are permitted by the Plan as then in
effect and that any Participant adversely affected by such amended or
modified terms has consented to such amendment or modification. No
amendment or modification to an Incentive Award, however, whether pursuant
to this Section 3.2 or any other provisions of the Plan, will be deemed to
be a regrant of such Incentive Award for purposes of this Plan.
(c) In the event of (i) any reorganization, merger, consolidation,
recapitalization, liquidation, reclassification, stock dividend, stock
split, combination of shares, rights offering, extraordinary dividend or
divestiture (including a spin-off) or any other change in corporate
structure or shares, (ii) any purchase, acquisition, sale or disposition
of a significant amount of assets or a significant business, (iii) any
change in accounting principles or practices, or (iv) any other similar
change, in each case with respect the Company or any other entity whose
performance is relevant to the grant or vesting of an Incentive Award, the
Committee (or, if the Company is not the surviving corporation in any such
transaction, the board of directors of the surviving corporation) may,
without the consent of any affected Participant, amend or modify the
vesting criteria of any outstanding Incentive Award that is based in whole
or in part on the financial performance of the Company (or any Subsidiary
or division thereof) or such other entity so as equitably to reflect such
event, with the desired result that the criteria for evaluating such
financial performance of the Company or such other entity will be
substantially the same (in the sole discretion of the Committee or the
board of directors of the surviving corporation) following such event as
prior to such event; provided, however, that the amended or modified terms
are permitted by the Plan as then in effect.
4. Shares Available for Issuance.
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4.1. Maximum Number of Shares Available. Subject to adjustment as provided
in Section 4.3 of the Plan, the maximum number of shares of Common Stock that
will be available for issuance under the Plan will be 600,000 shares.
4.2. Accounting for Incentive Awards. Shares of Common Stock that are
issued under the Plan or that are subject to outstanding Incentive Awards will
be applied to reduce the maximum number of shares of Common Stock remaining
available for issuance under the Plan. Any shares of Common Stock that are
subject to an Incentive Award that lapses, expires, is forfeited or for any
reason is terminated unexercised or unvested and any shares of Common Stock that
are subject to an Incentive Award that is settled or paid in cash or any form
other than shares of Common Stock will automatically again become available for
issuance under the Plan. Any shares of Common Stock that constitute the
forfeited portion of a Restricted Stock Award, however, will not become
available for further issuance under the Plan.
4.3. Adjustments to Shares and Incentive Awards. In the event of any
reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights
offering, divestiture or extraordinary dividend (including a spin-off) or any
other change in the corporate structure or shares of the Company, the Committee
(or, if the Company is not the surviving corporation in any such transaction,
the board of directors of the surviving corporation) will make appropriate
adjustment (which determination will be conclusive) as to the number and kind of
securities available for issuance under the Plan and, in order to prevent
dilution or enlargement of the rights of Participants, the number, kind and,
where applicable, exercise price of securities subject to outstanding Incentive
Awards.
5. Participation. Participants in the Plan will be those Eligible
Recipients who, in the judgment of the Committee, have contributed, are
contributing or are expected to contribute to the achievement of economic
objectives of the Company or its Subsidiaries. Eligible Recipients may be
granted from time to time one or more Incentive Awards, singly or in combination
or in tandem with other Incentive Awards, as may be determined by the Committee
in its sole discretion. Incentive Awards will be deemed to be granted as of the
date specified in the grant resolution of the Committee, which date will be the
date of any related agreement with the Participant.
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6. Options.
6.1. Grant. An Eligible Recipient may be granted one or more Options under
the Plan, and such Options will be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be determined by the
Committee in its sole discretion. The Committee may designate whether an Option
is to be considered an Incentive Stock Option or a Non-Statutory Stock Option.
6.2. Exercise Price. The per share price to be paid by a Participant upon
exercise of an Option will be determined by the Committee in its discretion at
the time of the Option grant, provided that (a) such price will not be less than
100% of the Fair Market Value of one share of Common Stock on the date of grant
with respect to an Incentive Stock Option (110% of the Fair Market Value if, at
the time the Incentive Stock Option is granted, the Participant owns, directly
or indirectly, more than 10% of the total combined voting power of all classes
of stock of the Company or any parent or subsidiary corporation of the Company),
and (b) such price will not be less than 85% of the Fair Market Value of one
share of Common Stock on the date of grant with respect to a Non-Statutory Stock
Option.
6.3. Exercisabilitv and Duration. An Option will become exercisable at
such times and in such installments as may be determined by the Committee in its
sole discretion at the time of grant; provided, however, that no Option may be
exercisable after 10 years from its date of grant.
6.4. Payment of Exercise Price. The purchase price of the shares to be
purchased upon exercise of an Option will be payable to the Company in United
States dollars in cash or by check or, such other legal consideration as may be
approved by the Committee in its discretion. The Committee, in its sole
discretion and upon terms and conditions established by the Committee, may allow
such payments to be made, in whole or in part, by tender of a Broker Exercise
Notice, Previously Acquired Shares or by a combination of such methods.
6.5. Manner of Exercise. An Option may be exercised by a Participant in
whole or in part from time to time, subject to the conditions contained in the
Plan and in the agreement evidencing such Option, by delivery in person, by
facsimile or electronic transmission or through the mail of written notice of
exercise to the Company (Attention: Chief Financial Officer) at its principal
executive office in Salt lake City, Utah and by paying in full the total
exercise price for the shares of Common Stock to be purchased in accordance with
Section 6.4 of the Plan.
6.6. Aggregate Limitation of Stock Subject to Incentive Stock Options. To
the extent that the aggregate Fair Market Value (determined as of the date an
Incentive Stock Option is granted) of the shares of Common Stock with respect to
which incentive stock options (within the meaning of Section 422 of the Code)
are exercisable for the first time by a Participant during any calendar year
(under the Plan and any other incentive stock option plans of the Company or any
subsidiary or parent corporation of the Company (within the meaning of the
Code)) exceeds $100,000 (or such other amount as may be prescribed by the Code
from time to time), such excess Options will be treated as Non-Statutory Stock
Options. The determination will be made by taking incentive stock options into
account in the order in which they were granted. If such excess only applies to
a portion
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of an incentive stock option, the Committee, in its discretion, will designate
which shares will be treated as shares to be acquired upon exercise of an
incentive stock option.
7. Restricted Stock Awards.
7.1. Grant. An Eligible Recipient may be granted one or more Restricted
Stock Awards under the Plan, and such Restricted Stock Awards will be subject to
such terms and conditions, consistent with the other provisions of the Plan, as
may be determined by the Committee in its sole discretion. The Committee may
impose such restrictions or conditions, not inconsistent with the provisions of
the Plan, to the vesting of such Restricted Stock Awards as it deems
appropriate, including, without limitation, that the Participant remain in the
continuous employ or service of the Company or a Subsidiary for a certain period
or that the Participant or the Company (or any Subsidiary or division thereof)
satisfy certain performance goals or criteria.
7.2. Rights as a Stockholder; Transferability. Except as provided in
Sections 7.1, 7.3 and 12.3 of the Plan, a Participant will have all voting,
dividend, liquidation and other rights with respect to shares of Common Stock
issued to the Participant as a Restricted Stock Award under this Section 7 upon
the Participant becoming the holder of record of such shares as if such
Participant were a holder of record of shares of unrestricted Common Stock.
7.3. Dividends and Distributions. Unless the Committee determines
otherwise in its sole discretion (either in the agreement evidencing the
Restricted Stock Award at the time of grant or at any time after the grant of
the Restricted Stock Award), any dividends or distributions (including regular
quarterly cash dividends) paid with respect to shares of Common Stock subject to
the unvested portion of a Restricted Stock Award will be subject to the same
restrictions as the shares to which such dividends or distributions relate. In
the event the Committee determines not to pay such dividends or distributions
currently, the Committee will determine in its sole discretion whether any
interest will be paid on such dividends or distributions. In addition, the
Committee in its sole discretion may require such dividends and distributions to
be reinvested (and in such case the Participants consent to such reinvestment)
in shares of Common Stock that will be subject to the same restrictions as the
shares to which such dividends or distributions relate.
7.4. Enforcement of Restrictions. To enforce the restrictions referred to
in this Section 7, the Committee may place a legend on the stock certificates
referring to such restrictions and may require the Participant, until the
restrictions have lapsed, to keep the stock certificates, together with duly
endorsed stock powers, in the custody of the Company or its transfer agent or to
maintain evidence of stock ownership, together with duly endorsed stock powers,
in a certificateless book-entry stock account with the Company's transfer agent.
8. Stock Bonuses. An Eligible Recipient may be granted one or more Stock
Bonuses under the Plan, and such Stock Bonuses will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion. The Participant will have
all voting, dividend, liquidation and other rights with respect to the shares of
Common Stock issued to a Participant as a Stock Bonus under this Section 8 upon
the Participant
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becoming the holder of record of such shares; provided, however, that the
Committee may impose such restrictions on the assignment or transfer of a Stock
Bonus as it deems appropriate.
9. Effect of Termination of Employment or Other Service.
9.1. Termination Due to Death, Disability or Retirement. In the event a
Participant's employment or other service with the Company and all Subsidiaries
is terminated by reason of death, Disability or Retirement:
(a) All outstanding Options then held by the Participant will remain
exercisable to the extent exercisable as of such termination following
such termination until the expiration date of such Option;
(b) All Restricted Stock Awards then held by the Participant that
have not vested will be terminated and forfeited; and
(c) All Stock Bonuses then held by the Participant will vest and/or
continue to vest in the manner determined by the Committee and set forth
in the agreement evidencing such Stock Bonuses.
9.2. Termination for Reasons Other than Death, Disability or Retirement.
(a) In the event a Participant's employment or other service is
terminated with the Company and all Subsidiaries for any reason other than
death, Disability or Retirement, or a Participant is in the employ or
service of a Subsidiary and the Subsidiary ceases to be a Subsidiary of
the Company (unless the Participant continues in the employ or service of
the Company or another Subsidiary), all rights of the Participant under
the Plan and any agreements evidencing an Incentive Award will immediately
terminate without notice of any kind, and no Options then held by the
Participant will thereafter be exercisable, all Restricted Stock Awards
then held by the Participant that have not vested will be terminated and
forfeited, and Stock Bonuses then held by the Participant will vest and/or
continue to vest in the manner determined by the Committee and set forth
in the agreement evidencing such Stock Bonuses; provided, however, that if
such termination is due to any reason other than termination by the
Company or any Subsidiary for "cause," all outstanding Options then held
by such Participant will remain exercisable to the extent exercisable as
of such termination for a period of one month after such termination (but
in no event after the expiration date of any such Option).
(b) For purposes of this Section 9.2, "cause" (as determined by the
Committee) will be as defined in any employment or other agreement or
policy applicable to the Participant or, if no such agreement or policy
exists, will mean (i) dishonesty, fraud, misrepresentation, embezzlement
or deliberate injury or attempted injury, in each case related to the
Company or any Subsidiary, (ii) any unlawful or criminal activity of a
serious nature, (iii) any intentional and deliberate breach of a duty or
duties that, individually or in the aggregate, are material in relation to
the Participant's overall duties, or (iv) any material breach of any
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employment, service, confidentiality or noncompete agreement entered into
with the Company or any Subsidiary.
9.3. Modification of Rights Upon Termination. Notwithstanding the other
provisions of this Section 9, upon a Participant's termination of employment or
other service with the Company and all Subsidiaries, the Committee may, in its
sole discretion (which may be exercised at any time on or after the date of
grant, including following such termination), cause Options (or any part
thereof) then held by such Participant to become or continue to become
exercisable and/or remain exercisable following such termination of employment
or service and Restricted Stock Awards and Stock Bonuses then held by such
Participant to vest and/or continue to vest or become free of transfer
restrictions, as the case may be, following such termination of employment or
service, in each case in the manner determined by the Committee; provided,
however, that no Option may remain exercisable beyond its expiration date.
9.4. Breach of Confidentiality or Noncompete Agreements. Notwithstanding
anything in this Plan to the contrary, in the event that a Participant
materially breaches the terms of any confidentiality or noncompete agreement
entered into with the Company or any Subsidiary or takes any other action that
the Committee, in its sole discretion, deems to be adverse to the interests of
the Company or any Subsidiary (an "Adverse Action"), whether such Adverse Action
occurs before or after termination of such Participant's employment or other
service with the Company or any Subsidiary, the Committee in its sole discretion
may immediately terminate all rights of the Participant under the Plan and any
agreements evidencing an Incentive Award then held by the Participant without
notice of any kind. In addition, to the extent that a Participant takes such
Adverse Action during the period beginning 6 months prior to, and ending 6
months following, the date of such employment or service termination, the
Committee in its sole discretion will have the authority (by so providing in the
agreement evidencing such Incentive Award at the time of grant) to rescind (i)
any grant of an Incentive Award made to such Participant during such period and
(ii) any exercise of an Option of the Participant that was exercised during such
period, and to require the Participant to pay to the Company, within 10 days of
receipt from the Company of notice of such rescission, the amount of any gain
realized from such rescinded grant or exercise. Such payment will be made in
cash (including check, bank draft or money order) or, with the Committee's
consent, shares of Common Stock with a Fair Market Value on the date of payment
equal to the amount of such payment. The Company will be entitled to withhold
and deduct from future wages of the Participant (or from other amounts that may
be due and owing to the Participant from the Company or Subsidiary) or make
other arrangements for the collection of all amounts necessary to satisfy such
payment obligation.
9.5. Date of Termination of Employment or Other Service. Unless the
Committee otherwise determines in its sole discretion, a Participant's
employment or other service will, for purposes of the Plan, be deemed to have
terminated on the date recorded on the personnel or other records of the Company
or the Subsidiary for which the Participant provides employment or other
service, as determined by the Committee in its sole discretion based upon such
records.
10. Payment of Withholding Taxes.
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10.1. General Rules. The Company is entitled to (a) withhold and deduct
from future wages of the Participant (or from other amounts that may be due and
owing to the Participant from the Company or a Subsidiary), or make other
arrangements for the collection of, all legally required amounts necessary to
satisfy any and all federal, state and local withholding and employment-related
tax requirements attributable to an Incentive Award, including, without
limitation, the grant, exercise or vesting of, or payment of dividends with
respect to, an Incentive Award or a disqualifying disposition of stock received
upon exercise of an Incentive Stock Option, or (b) require the Participant
promptly to remit the amount of such withholding to the Company before taking
any action, including issuing any shares of Common Stock, with respect to an
Incentive Award.
10.2. Special Rules. The Committee may, in its sole discretion and upon
terms and conditions established by the Committee, permit or require a
Participant to satisfy, in whole or in part, any withholding or
employment-related tax obligation described in Section 12.1 of the Plan by
electing to tender Previously Acquired Shares or a Broker Exercise Notice, or by
a combination of such methods.
11. Change in Control.
11.1. Change in Control. For purposes of this Section 11.1, a "Change in
Control" of the Company will mean (a) the sale, lease, exchange or other
transfer of substantially all of the assets of the Company (in one transaction
or in a series of related transaction) to a person or entity that is not
controlled, directly or indirectly, by the Company, (b) a merger or
consolidation to which the Company is a party if the stockholders of the Company
immediately prior to effective date of such merger or consolidation do not have
"beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act)
immediately following the effective date of such merger or consolidation of more
than 80% of the combined voting power of the surviving corporation's outstanding
securities ordinarily having the right to vote at elections of directors, or (c)
a change in control of the Company of a nature that would be required to be
reported pursuant to Section 13 or 15(d) of the Exchange Act, whether or not the
Company is then subject to such reporting requirements, including, without
limitation, such time as (i) any person becomes, after the effective date of the
Plan, the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 40% or more of the combined voting power of the
Company's outstanding securities ordinarily having the right to vote at
elections of directors, or (ii) individuals who constitute the Board on the
effective date of the Plan cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to the effective date of the Plan whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a majority of the
directors comprising the Board on the effective date of the Plan will, for
purposes of this clause (ii), be considered as though such persons were a member
of the Board on the effective date of the Plan.
11.2. Acceleration of Vesting. Without limiting the authority of the
Committee under Section 3.2 of the Plan, if a Change in Control of the Company
occurs, then, if approved by the Committee in its sole discretion either in an
agreement evidencing an Incentive Award at the time of grant or at any time
after the grant of an Incentive Award, (a) all Options will become immediately
exercisable in full and will remain exercisable for the remainder of their
terms, regardless of whether the Participants to whom such Options have been
granted remain in the employ or service of the
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Company or any Subsidiary; (b) all outstanding Restricted Stock Awards will
become immediately fully vested; and (c) and Stock Bonuses then held by the
Participant will vest and/or continue to vest in the manner determined by the
Committee and set forth in the agreement evidencing such or Stock Bonuses.
11.3. Cash Payment for Options. If a Change in Control of the Company
occurs, then the Committee, if approved by the Committee in its sole discretion
either in an agreement evidencing an Incentive Award at the time of grant or at
any time after the grant of an Incentive Award, and without the consent of any
Participant effected thereby, may determine that some or all Participants
holding outstanding Options will receive, with respect to and in lieu of some or
all of the shares of Common Stock subject to such Options, as of the effective
date of any such Change in Control of the Company, cash in an amount equal to
the excess of the Fair Market Value of such shares immediately prior to the
effective date of such Change in Control of the Company over the exercise price
per share of such Options.
11.4. Limitation on Change in Control Payments. Notwithstanding anything
in Section 11.2 or 11.3 of the Plan to the contrary, if, with respect to a
Participant, the acceleration of the vesting of an Incentive Award as provided
in Section 11.2 or the payment of cash in exchange for all or part of an
Incentive Award as provided in Section 11.3 (which acceleration or payment could
be deemed a "payment" within the meaning of Section 280G(b)(2) of the Code),
together with any other payments which such Participant has the right to receive
from the Company or any corporation that is a member of an "affiliated group"
(as defined in Section 1504(a) of the Code without regard to Section 1504(b) of
the Code) of which the Company is a member, would constitute a "parachute
payment" (as defined in Section 280G(b)(2) of the Code), then the payments to
such Participant pursuant to Section 11.2 or 11.3 will be reduced to the largest
amount as will result in no portion of such payments being subject to the excise
tax imposed by Section 4999 of the Code; provided, however, that if such
Participant is subject to a separate agreement with the Company or a Subsidiary
which specifically provides that payments attributable to one or more forms of
employee stock incentives or to payments made in lieu of employee stock
incentives will not reduce any other payments under such agreement, even if it
would constitute an excess parachute payment, then the limitations of this
Section 11.4 will, to that extent, not apply.
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12. Rights of Eligible Recipients and Participants: Transferability.
12.1. Employment or Service. Nothing in the Plan will interfere with or
limit in any way the right of the Company or any Subsidiary to terminate the
employment or service of any Eligible Recipient or Participant at any time, nor
confer upon any Eligible Recipient or Participant any right to continue in the
employ or service of the Company or any Subsidiary.
12.2. Rights as a Stockholder. As a holder of Incentive Awards (other than
Restricted Stock Awards), a Participant will have no rights as a stockholder
unless and until such Incentive Awards are exercised for, or paid in the form
of, shares of Common Stock and the Participant becomes the holder of record of
such shares. Except as otherwise provided in the Plan, no adjustment will be
made for dividends or distributions with respect to such Incentive Awards as to
which there is a record date preceding the date the Participant becomes the
holder of record of such shares, except as the Committee may determine in its
discretion.
12.3. Restrictions on Transfer. Except pursuant to testamentary will or
the laws of descent and distribution or as otherwise expressly permitted by the
Committee or the Plan, no right or interest of any Participant in an Incentive
Award prior to the exercise or vesting of such Incentive Award will be
assignable or transferable, or subjected to any lien; during the lifetime of the
Participant, either voluntarily or involuntarily, directly or indirectly by
operation of law or otherwise. A Participant will, however, be entitled to
designate a beneficiary to receive an Incentive Award upon such Participant's
death, and in the event of a Participant's death, payment of any amounts due
under the Plan will be made to, and exercise of any Options may be made by, the
Participant's legal representatives, heirs and legatees.
12.4. Non-Exclusivity of the Plan. Nothing contained in the Plan is
intended to modify or rescind any previously approved compensation plans of
programs of the Company or create any limitations on the power or authority of
the Board to adopt such additional or other compensation arrangements as the
Board may deem necessary or desirable.
12.5. Securities Law and Other Restrictions. Notwithstanding any other
provision of the Plan or any agreements entered into pursuant to the Plan, the
Company will not be required to issue any shares of Common Stock under this
Plan, and a Participant may not sell, assign, transfer or otherwise dispose of
shares of Common Stock issued pursuant to Incentive Awards granted under the
Plan, unless (a) there is in effect with respect to such shares a registration
statement under the Securities Act and any applicable state securities laws or
an exemption from such registration under the Securities Act and applicable
state securities laws, and (b) there has been obtained any other consent,
approval or permit from any other regulatory body which the Committee, in its
sole discretion, deems necessary or advisable. The Company may condition such
issuance, sale or transfer upon the receipt of any representations or agreements
from the parties involved, and the placement of any legends on certificates
representing shares of Common Stock, as may be deemed necessary or advisable by
the Company in order to comply with such securities law or other restrictions.
13. Plan Amendment. Modification and TerminThe Board may suspend or
terminate the Plan or any portion thereof at any time, and may amend the Plan
from time to time in
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such respects as the Board may deem advisable in order that Incentive Awards
under the Plan will conform to any change in applicable laws or regulations or
in any other respect the Board may deem to be in the best interests of the
Company; provided, however, that (a) the Board will not have the authority to
amend the eligibility requirements for Options granted pursuant to Section 6.7
of the Plan, or to modify the number of shares, exercise price, exercisability,
duration, manner of payment or other terms with respect to such Options, more
than once every six months, other than to comply with changes in the Code, the
Employee Retirement Income Security Act or the rules promulgated thereunder; and
(b) no amendments to the Plan will be effective without approval of the
stockholders of the Company if stockholder approval of the amendment is then
required pursuant to Rule 16b-3 under the Exchange Act, Section 422 of the Code
or the rules of the National Association of Securities Dealers, Inc. No
termination, suspension or amendment of the Plan may adversely affect any
outstanding Incentive Award without the consent of the affected Participant;
provided, however, that this sentence will not impair the right of the Committee
to take whatever action it deems appropriate under Sections 4.3 and 11 of the
Plan.
14. Effective Date and Duration of the Plan. The Plan is effective as of
February 7, 2000, the date it was adopted by the Board. The Plan will terminate
at midnight on November 18, 2010, and may be terminated prior to such time to by
Board action, and no Incentive Award will be granted after such termination.
Incentive Awards outstanding upon termination of the Plan may continue to be
exercised, or become free of restrictions, in accordance with their terms.
15. Miscellaneous.
15.1. Governing Law. The validity, construction, interpretation,
administration and effect of the Plan and any rules, regulations and actions
relating to the Plan will be governed by and construed exclusively in accordance
with the laws of the State of Utah.
15.2. Successors and Assigns. The Plan will be binding upon and inure to
the benefit of the successors and permitted assigns of the Company and the
Participants.
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CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
Purpose:
The purpose of the Audit Committee (the "Committee") of the Board of Directors
(the Board") of Interwest Home Medical, Inc., a Utah corporation (the
"Company"), shall be to make such examinations as are necessary to monitor the
corporate financial reporting and the internal and external audits of the
Company, to provide to the Board the results of its examinations and
recommendations derived therefrom, to outline to the Board improvements made, or
to be made, in internal accounting controls, to nominate independent auditors,
and to provide such additional information and materials as it may deem
necessary to make the Board aware of significant financial matters which require
the Board's attention.
Composition:
The Committee will be comprised of three or more independent members of the
Board. The members of the Committee and its Chairman will be appointed by and
serve at the discretion of the Board.
Functions and Authority:
The operation of the Committee shall be subject to the provisions of the Bylaws
of the Company, as in effect from time to time. The Committee shall have the
full power and authority to carry out the following responsibilities:
o To recommend annually to the full Board, the firm of certified
public accountants to be employed by the Company as its independent
auditors for the ensuing year.
o To review the engagement of the independent auditors, including the
scope, extent and procedures of the audit and the compensation to be
paid therefore, and all other matters the Committee deems
appropriate.
o To have familiarity, through the individual efforts of its members,
with the accounting and reporting principles and practices applied
by the Company in preparing its financial statements, including
without limitation, the policies for recognition of revenues in
financial statements.
o To review with management and the independent auditors upon
completion of their audit, financial results for the year as
reported in the Company's financial statements, supplemental
disclosures to the Securities and Exchange Commission, or other
disclosures.
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o To assist and interact with the independent auditors in order that
they may carry out their duties in the most efficient and cost
effect manner.
o To evaluate the cooperation received by the independent auditors
during their audit examination, including their access to all
requested records, data and information, and elicits the comments of
management regarding the responsiveness of the independent auditors
to the Company's needs.
o To review the Company's balance sheet, profit and loss statement,
statements of cash flows and stockholders' equity for each interim
period as well as any changes in accounting policy that have
occurred during the interim period.
o To review and approve all professional services provided to the
company by its independent auditors and consider the possible
effects of such services on the independence of such auditors.
o To consult with the independent auditors and discuss with Company
management the scope and quality of internal accounting and
financial reporting controls in effect.
o To investigate, review and report to the Board the propriety and
ethical implications of any transactions as reported or disclosed to
the Committee by the independent auditors, employees, officers,
members of the Board or otherwise; between (a) the Company, and (b)
any employee, officer, or member of the Board of the Company, or any
affiliates of the foregoing.
o To perform such other functions and have such power as may be
necessary or convenient in the efficient and lawful discharge of the
foregoing.
Meetings:
The Committee will hold at least two regular meetings per year and additional
meetings as the Chairman or Committee deems appropriate. The Chief Executive
Officer and/or the Vice President, Finance may attend any meeting of the
Committee, except for portions of the meetings where his, her or their presence
would be inappropriate, as determined by the Committee Chairman.
Minutes and Reports:
The Chairman of the Committee shall arrange with the Corporate Secretary's
office and Corporate Counsel for the completion of an official set of minutes of
each Committee meeting. The official minutes shall be approved by the Committee
members, signed by the Chairman, and shall be given to the Corporate Secretary
for filing with the Corporate Records. The Chairman shall report to the Board
from time to time and as requested by the Board.
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APPENDIX
PROXY
INTERWEST HOME MEDICAL, INC.
ANNUAL MEETING OF SHAREHOLDERS
April 26, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James E. Robinson, CEO and director of
Interwest Home Medical, Inc., or any member of the Board of Directors, with
power of substitution, to represent and vote on behalf of the undersigned all
shares of stock of Interwest Home Medical, Inc. which the undersigned is
entitled to vote at the Annual Meeting of Shareholders to be held on April 26,
2000, at 3:00 p.m. and at any adjournment or adjournments thereof, hereby
revoking all proxies heretofore given with respect to such stock, upon the
following proposals more fully described in the Proxy Statement for the meeting,
receipt of which is hereby acknowledged.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR (1) and (2).
1. Election of Directors
FOR all nominees listed below NO AUTHORITY to vote for
(except as marked to the contrary all nominees listed below ___
below)___
James E. Robinson, James U. Jensen, Dr. Jeffrey F. Poore and Jerald L Nelson
For except vote withheld from the following nominee(s):________________________
- -------------------------------------------------------------------------------
2. Proposal to ratify the Corporation's 2000 Stock Incentive Plan:
For ________ Against_________ Abstain_________
2. IN THEIR DISCRETION, Proxy holders are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED OR ALL PROPOSALS SET FORTH ABOVE.
DATED:______________________________ _______________________________
Signature
____________________________________ _______________________________
Number of Shares owned Please print name clearly
Please sign exactly as the name appears on your stock
certificate. When shares are held by joint tenants,
both should sign. Please return this Proxy
in the enclosed envelope.
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