SCHEDULE 14A INFORMATION
PROXY STATEMENT
PURSUANT TO SECTION 14(A) OF THE
SECURITIES 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 materials pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
Imaging Diagnostic Systems, Inc.
--------------------------------
(Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
Payment of Filing Fee (Check the Appropriate Box):
<S> <C>
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3). RECORD DATE MARCH 10, 2000
[ ] Fee computed on table below per Exchange Act Rules MAILING DATE APRIL 14, 2000
14a-6(i)(4) and 0-11. MEETING DATE MAY 10, 2000
(1) Title of each class of securities to which
transaction applies:______________________ LIST OF EXHIBITS
(2) Aggregate number of securities to which A Proposed Amendment Certificate
transaction applies:______________________
(3) Per unit price or other underlying value of B 2000 Non-Statutory Stock
transaction computed pursuant to Exchange Option Plan
Act Rule 0-11 __/
(4) Proposed maximum aggregate value of
transaction:_______________________
(5) Total fee paid:____________________
</TABLE>
[ ] 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 fee 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:___________________
(2) Form, Schedule or Registration Statement No.:_____________
(3) Filing Party:________________
(4) Date Filed:__________________
1
<PAGE>
IMAGING DIAGNOSTIC SYSTEMS, INC.
6531 NW 18th Court
Plantation, Florida 33313
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 10, 2000
TO THE STOCKHOLDERS OF IMAGING DIAGNOSTIC SYSTEMS, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Imaging Diagnostic Systems, Inc., a Florida Corporation (the "Company"), will be
held on Wednesday, May 10, 2000, at 9:00 a.m. at our corporate offices, located
at 6531 NW 18th Court, Plantation, Florida, for the following purposes:
1. To elect six (6) directors to serve a one-year term expiring upon the
2001 Annual Meeting of Stockholders or until his/her successor is duly
elected and qualified;
2. To consider and act upon a proposal to amend the Company's Certificate
of Incorporation to increase the number of authorized shares of the
Company's common stock, no par value, from 100,000,000 to 150,000,000;
3. To consider and act upon a proposal to adopt the Company's 2000
Non-Statutory Stock Option Plan;
4. To ratify the Board of Directors' action of its appointment of
Margolies, Fink and Wichrowski, CPA's as independent auditors for the
Company for the fiscal year ending June 30, 2000; and
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on Friday, March
10, 2000, as the record date for the determination of stockholders entitled to
notice of and to vote at this Annual Meeting and at any adjournment or
postponement thereof.
By Order of the Board of Directors
/s/ Allan L. Schwartz
----------------------------
Allan L. Schwartz, Secretary
Plantation, Florida
April 10, 2000
2
<PAGE>
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. HOWEVER,
TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK, SIGN, DATE
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE POSTAGE PREPAID
ENVELOPE ENCLOSED FOR THAT PURPOSE. ANY STOCKHOLDER ATTENDING THE MEETING MAY
VOTE IN PERSON EVEN IF HE OR SHE RETURNED A PROXY. PLEASE NOTE, HOWEVER, THAT IF
A BROKER HOLDS YOUR SHARES OF RECORD, OR BANK OR OTHER NOMINEE AND YOU WISH TO
VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN
YOUR NAME.
3
<PAGE>
IMAGING DIAGNOSTIC SYSTEMS, INC.
6531 NW 18th Court
Plantation, Florida 33313
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Imaging Diagnostic Systems,
Inc. (the "Company") to be held on Wednesday, May 10, 2000, at 9:00 a.m. at our
corporate offices, located at 6531 NW 18th Court, Plantation, Florida, or any
adjournment or adjournments thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting. The Company intends to mail this
Proxy Statement and the accompanying proxy card on or about April 14, 2000 to
all shareholders entitled to vote at the Annual Meeting.
RECORD DATE; OUTSTANDING SHARES
Only stockholders of record at the close of business on Friday, March
10, 2000 (the "Record Date"), are entitled to receive notice of and to vote at
the meeting. On the Record Date, there were outstanding 97,219,959 shares of
Common Stock, no par value (the "Common Stock").
REVOCABILITY OF PROXIES
If a person who has executed and returned a proxy is present at the
meeting and wishes to vote in person, he or she may elect to do so and thereby
suspend the power of the proxy holders to vote his or her proxy. A proxy also
may be revoked before it is exercised by filing with the Secretary of the
Company a duly signed revocation of proxy bearing a later date.
VOTING AND SOLICITATION
Each share of Common Stock issued and outstanding on the record date
shall have one vote on the matters presented herein, except that with respect to
the election of directors, each share of Common Stock is entitled to one vote
for a nominee for each director position. Stockholders do not have the right to
cumulate votes in the election of directors.
SOLICITATION
We will bear the entire cost of the solicitation of proxies including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned
4
<PAGE>
by others to forward to such beneficial owners. Original solicitation of proxies
by mail may be supplemented by telephone, facsimile, telegram or personal
solicitation by directors, officers, or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services, but Jersey Transfer & Trust Co. will be paid a fee,
estimated to be about $2,000 if it renders solicitation services and ADP will be
paid a fee for its services.
SHARE OWNERSHIP BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock
of the Company as of March 10, 2000, as to (a) each person known to the Company
who beneficially owns more than 5% of the outstanding shares of its Common
Stock; (b) each current director, nominee for director and named executive
officer; and (c) all executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Name and Address Number of Shares Owned % of Outstanding
of Beneficial Owner Beneficially (1)(2) Shares of Common
- ------------------- ------------------- Stock
-----
<S> <C> <C>
Richard J. Grable 12,452,873(3) 12.8%
c/o 6351 NW 18th Court
Plantation, FL 33313
Linda B. Grable 4,530,633(4) 4.7%
c/o 6351 NW 18th Court
Plantation, FL 33313
Allan L. Schwartz 4,320,893(5) 4.4%
c/o 6351 NW 18th Court
Plantation, FL 33313
All officers and directors 21,304,399(6) 21.9%
as a group (3 persons)
</TABLE>
The actual number of shares of common stock held by Richard Grable and Linda
Grable, without giving effect to options, are 11,494,540 and 3,572,300 shares,
respectively. Both Richard Grable and Linda Grable specifically disclaim any
beneficial interest in each other's shares or options other than that which may
be attributed to him/her by operation of law.
(1) Except as indicated in the footnotes to this table, based on information
provided by such persons, the persons named in the table above have sole
voting power and investment power with respect to all shares of common
stock shown beneficially owned by them.
(2) Percentage of ownership is based on 97,219,959 shares of common stock
outstanding as of March 10, 2000 plus each person's options that are
exercisable within 60 days. Shares of common stock subject to stock
options that are exercisable within 60 days as of March 10, 2000 are
deemed outstanding for computing the percentage of that person and the
group.
5
<PAGE>
(3) Includes 958,333 shares subject to options and 11,494,540 shares owned by
Richard J. Grable. Does not include 3,572,300 shares owned by Linda B.
Grable, the wife of Richard J. Grable, since Richard J. Grable disclaims
any beneficial ownership over such shares other than that which may be
attributed to him by operation of law.
(4) Includes 958,333 shares subject to options and 3,572,300 shares owned by
Linda B. Grable. Does not include 11,494,540 shares owned by Richard J.
Grable, the husband of Linda B. Grable, since Linda B. Grable disclaims
any beneficial ownership over such shares other than that which may be
attributed to her by operation of law.
(5) Includes 958,333 shares subject to options held by Allan L. Schwartz and
9,000 shares owned by the wife of Allan L. Schwartz, Carolyn Schwartz.
(6) Includes 1,916,666 shares subject to options held by Linda and Richard
Grable and 958,333 shares subject to options held by Allan Schwartz. Also
includes 9,000 shares owned by the wife of Allan L. Schwartz, Carolyn
Schwartz, notwithstanding the fact that Allan L. Schwartz disclaims
beneficial ownership over shares other than that which may be attributed
to him by operation of law.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires that the Company's directors and executive officers,
and persons who own more than 10% of a registered class of the Company's equity
securities, to file with the SEC initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than 10% beneficial owners are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended June 30, 1999, its officers,
directors and greater than 10% beneficial owners complied with all applicable
Section 16(a) filing requirements.
PROPOSAL 1
ELECTION OF DIRECTORS
Six directors are to be elected at the meeting. All six directors are
to be elected for the term expiring in 2001. Information on the nominees
follows:
Richard J. Grable: Mr. Grable is Chief Executive Officer and Director
of Research and Development and is the inventor of the CTLM(TM) device. He is
considered a pioneer in the Optical Imaging field with over 25 years experience.
Mr. Grable is a graduate of the University of Miami School of Business with a
Masters Degree in Business Administration. He has over 30 years of electronic
design experience and has been directly involved in the development and
6
<PAGE>
sales of CT, Nuclear Medicine and Ultrasound instrumentation since 1972. He has
over sixteen years of experience of preparing and filing 510(k)'s, Investigation
Device Exemptions, and Premarket Notification documents for the Food and Drug
Administration. He holds two United States Patents and is co-inventor for one
other medical device. He is a member of the Institute of Electrical &
Electronics Engineers, Optical Society of America, the American Association for
the Advancement of Science, the New York Academy of Science, and a member and
guest speaker of the International Society for Optical Engineering. Mr. Grable
has been a Director and Officer of the Company since its inception.
Linda B. Grable: Mrs. Grable is President, Chairman of the Board and
Director of Imaging Diagnostic Systems, Inc. since its inception. She has played
a major role in raising over 35 Million dollars in debt and equity funding for
the research and development of the CTLM(TM)device. She has over 35 years
experience in negotiating funding with banking institutions for both medical and
real estate development businesses. Mrs. Grable has over 20 years of executive
experience in the medical device industry, for both sales and marketing in the
U.S. and foreign countries. She is a graduate of Ohio State University and holds
a BA in Journalism and Marketing. She is also fluent in Spanish. Mrs. Grable has
been a Director and Officer of the Company since its inception.
Allan L. Schwartz: Mr. Schwartz is Executive Vice-President and CFO of
the Company and is responsible for its financial affairs. He is an operationally
oriented executive with a wide range of management, marketing, field
engineering, construction, and business development experience. Prior to joining
IDSI, he developed the Chronometric Trading System for analyzing stock market
trends using neural networks and developed pre-engineered homes for export to
Belize, C.A. for S.E. Enterprises of Miami. FL. In 1991 he formed Tron
Industries, Inc. for the development of low-voltage neon novelty items and
self-contained battery powered portable neon. He is a graduate of C.W. Post
College of Long Island University with a B.S. in Business Administration.
Previous innovations by Mr. Schwartz before relocating to Florida have included
the use of motion detection sensors in commercial burglar alarm systems for
Tron-Guard Security Systems. Inc. and the use of water reclamation systems with
automatic carwash equipment. Mr. Schwartz has been a Director and Officer of the
Company since its inception.
John R. Liegey: Mr. Liegey is the founder, Chairman and Chief Executive
Officer of The Weston Group LLC of New York, NY, an International Investment
Banking Firm. Prior to founding The Weston Group LLC, Mr. Liegey was Managing
Director for Global Fixed Income Sales and Trading at Dean Witter Reynolds Inc.,
New York, NY and then President and Chief Operating Officer for Dean Witter
International Capital Markets Ltd., London, U.K. managing a staff of 600
professionals in nine offices and six countries. He was responsible for all
international investment banking, capital markets trading and sales and
research. He is a graduate of Georgetown College of Arts and Sciences and holds
a degree in International Economics. Mr. Liegey has been involved in investment
banking for over 20 years.
Robert L. Kagan, M.D.: Dr. Kagan is the founder and medical director of
the MRI Scan Centers in Fort Lauderdale, FL. He is a graduate of the Georgetown
University School of Medicine and is board certified in pathology and nuclear
medicine. He is a diplomate of the National Board of Medical Examiners, the
American
7
<PAGE>
Board of Nuclear Medicine, the American Board of Pathology in Clinical Pathology
and the American Board of Hyperbaric Medicine. Dr. Kagan has served as Director
of the Company's medical advisory board.
Irving H. Schwab: Mr. Schwab of Great Neck, NY has been involved in
healthcare advertising and marketing for over 25 years. During the most recent
seven years, he has been an industry consultant and President of Pathways in
Business Planning. In the 15 years prior to that, he was a senior officer for
William Douglas McAdams, the healthcare marketing and advertising firm. In both
firms, he has organized strategic planning processes for phase III and IV
products, directed launch planning and implementation, assisted in the
regulatory processes and oversaw the development of advertising, promotion and
public relations programs for the ethical and consumer pharmaceuticals and
medical devices. In his career, he has been involved with many of the top 25
healthcare companies and selected start-ups. Among them are Pfizer, American
Home Products, Johnson and Johnson, Novartis, Schering Plough and Searle. He
holds a B.S. and M.A. with areas of concentration in Economics, Chemistry and
Psychology.
Compensation of Directors
- -------------------------
Each director who is not an employee of the Company receives an annual
retainer of $500 plus a fee of $100 for each Board meeting attended. Under a
deferred compensation plan, directors may elect to defer with interest all or
part of such compensation for varying periods of time.
Family Relationships
- --------------------
Mr. Richard J. Grable and Mrs. Linda B. Grable are husband and wife.
Further, Richard J. Grable and Linda B. Grable are each "Control Persons" as a
result of their control of a majority voting power of the Company's outstanding
stock. Both parties disclaim, however, any beneficial interest or ownership in
the shares owned by the other party other than that which may be attributed to
him/her by operation of law.
Board Meetings and Committees
- -----------------------------
The Board of Directors met 14 times during the fiscal year ended June
30, 1999. The Company has no standing Committees. All three directors were
present for all board meetings.
Required Vote
- -------------
Each nominee receiving a majority of the number of affirmative votes of
the shares of the Company's Common Stock present and entitled to vote at the
Annual Meeting on this matter shall be elected as the Directors.
The Board of Directors of the Company recommends a vote FOR the
election of the nominees named above. Proxies solicited by the Board of
Directors will be voted FOR the named nominee unless instructions are
given to the contrary.
8
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Annual Compensation Long-Term Compensation
------------------------------------------
Name & Principal Other Annual Restricted Securities/Underlying
Position Year Salary(2) Compensation Stock Awards Option/SARs(1)
---------------- ---- --------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Richard J. Grable, CEO and 1997 $289,779 $115,000 $268,000 22,883
Director 1998 $286,225 -0- -0- 534,602
1999 $286,225 -0- -0- 458,333
Linda B Grable, President 1997 $ 97,451 $115,000 $268,000 22,883
and Director 1998 $119,070 -0- -0- 534,602
1999 $119,070 -0- -0- 458,333
Allan L. Schwartz, Exec. 1997 $111,534 $115,000 $268,000 130,410
V.P., CFO and 1998 $119,070 -0- -0- 534,602
Director 1999 $119,070 -0- -0- 458,333
</TABLE>
(1) The aggregate dollar value of the 1998 and 1999 options, based on the
averaged high and low price on June 30, 1999 are as follows: Richard J.
Grable, $341,321; Linda B. Grable, $341,321; and Allan L. Schwartz,
$341,321.
(2) The salaries include compensation, which has been accrued and not paid as
of June 30, 1999 in the amounts as follows: Richard J. Grable, $47,704;
Linda B. Grable, $19,890 and Allan L. Schwartz, $19,806.
EMPLOYMENT AGREEMENTS
We entered into five-year employment agreements commencing August 30, 1999 with
Mr. Richard J. Grable, Mr. Allan L. Schwartz and Ms. Linda B. Grable that expire
on August 29, 2004. According to the terms of their respective employment
agreements, base annual salaries, after giving effect to cost of living
adjustments, are as follows: Richard J. Grable, $286,224.96; Linda B. Grable,
$119,069.52; and Allan L. Schwartz, $119,069.52. In addition, Messrs. Grable and
Schwartz and Ms. Grable each receive a car allowance of $500 per month. Each
employment agreement provides for bonuses, health insurance, car allowance, and
related benefits, and a cost of living adjustment of 7% per annum. No bonuses
have been paid to date.
The following table explains information regarding the Options/SARs we granted
to management for the fiscal year ended June 30, 1999.
9
<PAGE>
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No. of Securities % of Total Options
Underlying Granted to Employees Exercise or Market Price
Options In Fiscal Base Price On Date of Expiration
Name Granted Year ($/Share) Grant Date
---- ----------- ------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
Richard J. Grable 250,000 16% $.17 $.44 7/5/03
208,333 14% $.48 $.44 7/5/03
Linda B. Grable 250,000 16% $.17 $.44 7/5/03
208,333 14% $.48 $.44 7/5/03
Allan L. Schwartz 250,000 16% $.17 $.44 7/5/03
208,333 14% $.48 $.44 7/5/03
</TABLE>
STOCK OPTION PLANS
For the fiscal year ended June 30, 1999, all of our executive officers were
participants in our 1995 stock option plan. The plan was approved by our Board
of Directors and adopted by the shareholders at the March 29, 1995 annual
meeting. The plan provides for the granting, exercising and issuing of incentive
options pursuant to Internal Revenue Code, Section 422. We may grant incentive
stock options to purchase up to 5% of our issued and outstanding common stock at
any time. Our Board of Directors has direct responsibility for the
administration of the plan.
Under this plan, the exercise price of the incentive options to employees must
be equal to at least 100% of the fair market value of the common stock, as of
the date of grant. The exercise price of incentive options to officers, or
affiliated persons, must be at least 110% of the fair market value as of the
date of grant.
According to stock option agreements, Mr. Richard J. Grable, Mr. Allan L.
Schwartz and Mrs. Linda B. Grable each have an option to purchase 2,500,000
shares of common stock or preferred stock. These options vest in equal
installments over a five-year period at an exercise price of $.21 per share
(110% of the fair market value of the shares on the date of grant). These stock
option agreements terminate on August 30, 2004.
(1) Potential realizable values are based on the fair market value per
share as determined by the Company for financial statement purposes and
represents hypothetical gains that could be achieved for the respective
options if exercised at the date of the grant. The dollar amounts set forth
in these columns are the result of calculations at the zero percent, five
percent and ten percent rates set by the Securities and Exchange Commission
and are not intended to forecast possible future appreciation, if any, of
the Common Stock price. There can be no assurance that such potential
realizable values will not be more or less than indicated in the table
above.
(2) On July 4, 1996, Mr. Grable was granted an option to purchase 22,883
shares of common stock pursuant to the Company's incentive stock option
plan.
10
<PAGE>
(3) On July 4, 1996, Mrs. Grable was granted an option to purchase 22,883
shares of common stock pursuant to the Company's incentive stock option
plan.
(4) On July 4, 1996, Mr. Schwartz was granted an option to purchase 22,883
shares of common stock pursuant to the Company's incentive stock option
plan.
Fiscal Year-End Option Values. The following table sets forth certain
information concerning the number and value of securities underlying exercisable
and un-exercisable stock options as of the fiscal year ended June 30, 1997 by
the Name Executive Officers.
Fiscal Year End Option Values
-----------------------------
<TABLE>
<CAPTION>
Number of Number of Securities Value of Unexercised
Securities Underlying Unexercised "In-The-Money" Options
Underlying Options at Fiscal Year End at Fiscal Year End
Options/SARs Value -------------------------- ------------------
Exercised Realized Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (#) (#) ($) ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. Grable 0 $ 0 1,015,818 0 $ 0 $ 0
Linda B. Grable 0 $ 0 1,015,818 0 $ 0 $ 0
Allan L. Schwartz 0 $ 0 1,123,345 0 $ 0 $ 0
</TABLE>
PROPOSAL 2
APPROVE A PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF THE
COMPANY'S COMMON STOCK, NO PAR VALUE, FROM 100,000,000 TO 150,000,000
The Board of Directors of the Company has adopted a resolution unanimously
approving and recommending to the Company's stockholders for their approval an
amendment to the Company's Certificate of Incorporation to provide for an
increase of the number of shares of common stock, which the Company shall be
authorized to issue from 100,000,000 to 150,000,000. As of the close of business
on March 10, 2000 there were 97,219,959 shares of common stock outstanding. In
addition the Company currently has reserved (i) up to 1,058,125 shares of common
stock for issuance upon the exercise of certain warrants that are outstanding;
(ii) up to 914,999 common shares for issuance upon the conversion of certain
convertible debentures held by Charlton Avenue LLC and Spinneret Financial;
(iii) and up to 759,757 shares of common stock for issuance upon the exercise of
employee options. We are further obligated to have available for issuance (i)
2,607,658 common shares for the conversion of Series B and Series I convertible
preferred shares held by Charlton Avenue LLC, (ii) 3,153,175 common shares upon
the exercise of employee stock options held by the executive officers; (iii) and
if we should choose to use the $15,000,000 equity credit line an additional
4,545,455 common shares would be required. As of March 10, 2000 we had issued,
have reserved and have obligations for
11
<PAGE>
the issuance of approximately 110,259,128 shares of common stock. Accordingly,
as of such date (i) the number of shares of common stock issued plus the number
of shares of common stock reserved for issuance and obligated for issuance
exceeded the number of common shares available, (ii) the Company was not in
compliance with all of its obligations to reserve a sufficient number of shares
of common stock for issuance upon conversion of convertible preferred stock,
convertible preferred debentures or exercise of outstanding options and warrants
and (iii) there were no additional shares of common stock available for issuance
in connection with financings, any refinancing of outstanding debentures or any
stock option plan for employees, future non-employee directors and consultants.
Without increasing the number of shares of common stock which the Company is
authorized to issue, we may not be able to meet our contractual obligations to
issue common stock to our convertible preferred stock and convertible debenture
holders, and to issue common stock upon exercise from our option and warrant
holders. Furthermore, without increasing the number of shares of common stock
which the Company is authorized to issue, it may be difficult for us to raise
the expected $4.2 million in order to bring our main product, the CTLM(TM) (see
our annual report for information on the CTLM(TM)), into the United States
market and the expected $9.0 million over the next two years (if and after we
receive pre-market approval from the FDA) we anticipate that we will need to
complete all necessary stages in order to market the CTLM(TM) in the United
States and foreign countries.
As of the close of business on March 10, 2000, we had issued 55,979,558 shares
of Common Stock which were converted from preferred stock and debentures that
were privately placed.
The Board of Directors recommends the proposed increase in the authorized number
of share of common stock to insure that a sufficient number of authorized and
unissued shares is available (i) to meet the Company's obligations under the
convertible preferred stock, convertible preferred debentures, and warrants and
options previously issued or contracted for by the Company or to permit a
refinancing of any or all of the Company's outstanding convertible debentures or
debts, (ii) to raise additional capital for the operations of the Company, (iii)
for the financing of the acquisition of other businesses and (iv) to make
options and shares available to employees, future non-employee directors and
consultants of the Company as an incentive for services provided to the Company.
Such shares would be available for issuance by the Board of Directors of the
Company without further action by the stockholders, unless required by the
Company's Certificate of Incorporation or by NASDAQ rules. Neither the presently
authorized shares of common stock nor the additional shares of common stock that
may be authorized pursuant to the Authorized Stock Amendment carry preemptive
rights.
Except as described above, and although we have recently reviewed several term
sheets provided to us by investment bankers or potential investors in regard to
additional equity financings, there are currently no set plans or arrangements
relating to the issuance of any additional shares of common stock proposed to be
authorized. However, if this proposal is approved by the stockholders, no
assurance can be given that the Company will not consider effecting an equity
offering of common stock or otherwise issuing such stock in the future for the
purpose of raising additional working capital, acquiring related business or
assets or otherwise.
The additional shares of common stock, if issued, would have a dilutive effect
upon the percentage of equity of the Company owned by present stockholders. The
issuance of such additional shares of common stock might be disadvantageous to
current stockholders in that any additional issuances would potentially reduce
per share dividends, if any. Stockholders should consider, however, that the
possible impact upon dividends is likely to be minimal in view of the fact that
the Company has never paid dividends, has never adopted any policy with respect
to the payment of dividends and does not intend to pay any cash dividends in the
foreseeable future. In
12
<PAGE>
addition, the issuance of such additional shares of common stock, by reducing
the percentage of equity of the Company owned by present shareholders, would
reduce such present shareholders' ability to influence the election of directors
or any other action taken by the holders of common stock.
The authorization to issue the additional shares of common stock would provide
management with the capacity to negate the efforts of unfriendly tender offerors
through the issuance of securities to others who are friendly or desirable to
management. This proposal is not the result of management's knowledge of any
specific effort to accumulate shares of the Company's common stock or to obtain
control of the Company in opposition to management or otherwise. The Company is
not submitting this proposal to enable it to frustrate any efforts by another
party to acquire a controlling interest or to seek representation on the Board
of Directors. The submission of this proposal is not part of any plan by the
Company's management to adopt a series of amendments to the Certificate of
Incorporation or By-laws so as to render the takeover of the Company more
difficult.
If proposal no. 2 is approved by the Company's stockholders, the Board of
Directors expects to file a Certificate of Amendment to the Company's
Certificate of Incorporation increasing the number of authorized shares of
common stock as soon as practicable after the date of the annual meeting. The
Certificate of Amendment would amend and restate Article III of the Company's
Certificate of Incorporation to read substantially as follows:
The maximum number of shares of capital stock that this corporation is
authorized to have outstanding at any one time is 152,000,000 (ONE HUNDRED
FIFTY-TWO MILLION) shares, no par value. The 152,000,000 shares of no par value
capital stock of the Corporation shall be designated as follows:
o150,000,000 common shares
o2,000,000 preferred shares, the rights, and preferences of
which are to be designated by the Company's Board of
Directors.
Annexed to this proxy statement and marked Exhibit A is proposed
amendment to certificate of incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL
TO THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION
PROPOSAL 3
CONSIDER AND ACT UPON A PROPOSAL TO ADOPT THE COMPANY'S 2000 NON-STATUTORY STOCK
OPTION PLAN
The Board of Directors on January 3, 2000 adopted the Company's 2000
Non-Statutory Stock Option Plan so as to provide a critical long-term incentive
for employees, non-employee directors, consultants, attorneys and advisors of
the Company and its subsidiaries. The Board of
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Directors believes that the Company's policy of granting stock options to such
persons will continue to provide it with a critical advantage in attracting and
retaining qualified candidates. In addition, the Stock Option Plan is intended
to provide the Company with maximum flexibility to compensate plan participants.
It is expected that such flexibility will be an integral part of the Company's
policy to encourage employees, non-employee directors, consultants, attorneys
and advisors to focus on the long-term growth of stockholder value. The Board of
Directors believes that important advantages to the Company are gained by an
option program such as the 2000 Non-Statutory Stock Option Plan which includes
incentives for motivating employees of the Company, while at the same time
promoting a closer identity of interest between employees, non-employee
directors, consultants, attorneys and advisors on the one hand, and the
stockholders on the other.
The principal terms of the Stock Option Plan are summarized below and a
copy of the Stock Option Plan is annexed to this Proxy Statement as Exhibit B.
The summary of the Stock Option Plan set forth below is not intended to be a
complete description thereof and such summary is qualified in its entirety by
the actual text of the Stock Option Plan to which reference is made.
SUMMARY DESCRIPTION OF THE IMAGING DIAGNOSTIC SYSTEMS, INC. 2000 NON-STATUTORY
STOCK OPTION PLAN
The purpose of the Non-Statutory Stock Option Plan ("Plan"), attached
hereto as Exhibit B, is to provide directors, officers and employees of,
consultants, attorneys and advisors to the Company and its subsidiaries with
additional incentives by increasing their ownership interest in the Company.
Directors, officers and other employees of the Company and its subsidiaries are
eligible to participate in the Plan. Options in the form of Non-Statutory Stock
Options ("NSO") may also be granted to directors who are not employed by the
Company and consultants, attorneys and advisors to the Company providing
valuable services to the Company and its subsidiaries. In addition, individuals
who have agreed to become an employee of, director of or an attorney, consultant
or advisor to the Company and/or its subsidiaries are eligible for option
grants, conditional in each case on actual employment, directorship or attorney,
advisor and/or consultant status. The Plan provides for the issuance of NSO's
only, which are not intended to qualify as "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code, as amended.
The maximum number of options that may be granted under this Plan shall
be options to purchase 4,850,000 shares of Common Stock.
The Board of Directors of the Company or a Compensation Committee (once
established) will administer the Stock Option Plan with the discretion generally
to determine the terms of any option grant, including the number of option
shares, exercise price, term, vesting schedule and the post-termination exercise
period. Notwithstanding this discretion (i) the term of any option may not
exceed 10 years and (ii) an option will terminate as follows: (a) if such
termination is on account of termination of employment for any reason other than
death, without cause, such options shall terminate one year thereafter; (b) if
such termination is on account of death, such options shall terminate 15 months
thereafter; and (c) if such termination is for cause (as
14
<PAGE>
determined by the Board of Directors and/or Compensation Committee), such
options shall terminate immediately. Unless otherwise determined by the Board of
Directors or Compensation Committee, the exercise price per share of Common
Stock subject to an option shall be equal to no less than 50% of the fair market
value of the Common Stock on the date such option is granted. No NSO shall be
assignable or otherwise transferable except by will or the laws of descent and
distribution or except as permitted in accordance with SEC Release No.33-7646 as
effective April 7, 1999 and in particular that portion thereof which expands
upon transferability as is contained in Article III entitled "Transferable
Options and Proxy Reporting" as indicated in Section A 1 through 4 inclusive and
Section B thereof.
The Stock Option Plan may be amended, altered, suspended, discontinued
or terminated by the Board of Directors without further stockholder approval,
unless such approval is required by law or regulation or under the rules of the
stock exchange or automated quotation system on which the Common Stock is then
listed or quoted. Thus, stockholder approval will not necessarily be required
for amendments which might increase the cost of the Stock Option Plan or broaden
eligibility except that no amendment or alteration to the Plan shall be made
without the approval of stockholders which would (a) increase the total number
of shares reserved for the purposes of the Plan or decrease the NSO price
(except as provided in paragraph 9 of the Plan) or change the classes of persons
eligible to participate in the Plan or (b) extend the NSO period or (c)
materially increase the benefits accruing to Plan participants or (d) materially
modify Plan participation eligibility requirements or (e) extend the expiration
date of the Plan. Unless otherwise indicated the Stock Option Plan will remain
in effect until terminated by the Board of Directors.
FEDERAL TAX CONSEQUENCES
The following is a brief description of the federal income tax
consequences generally arising with respect to options that may be granted under
the Stock Option Plan. This discussion is only intended for the information of
stockholders considering how to vote at the Annual Meeting, and not as tax
guidance to individuals who participate in the Stock Option Plan.
The grant of an option will create no tax consequences for the grantee
or the Company. Upon exercising a NSO, the participant must generally recognize
ordinary income equal to the difference between the exercise price and fair
market value of the freely transferable and nonforfeitable stock received. In
such case, the Company will be entitled to a deduction equal to the amount
recognized as ordinary income by the participant.
The participant's disposition of shares acquired upon the exercise of
an option generally will result in capital long-term or short-term gain or loss
(depending upon the holding period) measured by the difference between the sale
price and the participant's tax basis in such shares.
Additionally, the following tax effects on Stock Option Plan
participation may be considered:
15
<PAGE>
Tax Treatment to the Participants. The Stock Option Plan provides for
the grant of nonqualified stock options. A description of these options and
certain federal income tax aspects associated therewith is set forth below.
Because tax results may vary due to individual circumstances, each participant
in the Stock Option Plan is urged to consult his personal tax adviser with
respect to the tax consequences of the exercise of an option or the sale of
stock received upon the exercise thereof, especially with respect to the effect
of state tax laws.
Federal Income Tax Treatment of Nonqualified Stock Options. No income
is recognized by an optionee when a non-qualified stock option is granted.
Except as described below, upon exercise of a nonqualified stock option, an
optionee is treated as having received ordinary income at the time of exercise
in an amount equal to the difference between the option price paid and the then
fair market value of the Common Stock acquired. The Company is entitled to a
deduction at the same time and in a corresponding amount. The optionee's basis
in the Common Stock acquired upon exercise of a nonqualified stock option is
equal to the option price plus the amount of ordinary income recognized, and any
gain or loss thereafter recognized upon disposition of the Common Stock is
treated as capital long-term or short-term gain or loss (depending upon the
holding period).
Stock acquired by "insiders' (i.e., officers, directors or persons
holding 10% or more of the stock of the Company who are subject to the
restrictions on short-swing trading imposed by Section 16(b) of the Securities
Exchange Act of 1934) upon exercise of nonqualified stock options constitutes
"restricted property" and, unless the optionee elects otherwise, the recognition
of income upon exercise is deferred to the date upon which the stock acquired
upon exercise may first be sold without incurring Section 16(b) liability
(generally six months after exercise). If such an optionee does not elect to
recognize income upon exercise, the insider will realize ordinary income in an
amount equal to the difference between the option price and the fair market
value on the date the stock may first be sold without incurring Section 16(b)
liability.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the outstanding shares of the
Common Stock present in persons or represented by Proxy at the Annual Meeting
and entitled to vote is required to approve the adoption of the Stock Option
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL
OF THE 2000 NON-STATUTORY STOCK OPTION PLAN
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Margolies, Fink and Wichrowski CPA
as independent public accountants of the Company with respect to its operations
for the fiscal year 2000, subject to ratification by the holders of Common Stock
of the Company. The firm has audited the Company's financial statements since
1994. Representatives of the firm are expected
16
<PAGE>
to be present at the Annual Meeting, will have an opportunity to make a
statement if they so desire and will be available to respond to appropriate
questions.
There will be presented at the Annual Meeting a proposal for the
ratification of this appointment, which the Board of Directors believes is
advisable and in the best interests of the stockholders. If the appointment of
Margolies, Fink and Wichrowski, CPA is not ratified, the matter of appointment
of independent public accountants will be considered by the Board of Directors.
The Board of Directors of the Company recommends a vote FOR the
appointment of Margolies, Fink and Wichrowski, CPA as the Company's
independent accountants for the fiscal year ending June 30, 2000.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
The Company anticipates that the 2000 Annual Meeting will be held on or
about October 25, 2000 and that the proxy materials for the 2000 Annual Meeting
will be mailed on or before September 15, 2000. If any stockholder wishes a
proposal to be considered for inclusion in the 2000 Proxy Statement, this
material must be received by the Chief Executive Officer no later than August
15, 2000 or a reasonable time prior to the 2000 Annual Meeting.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented
for consideration at the Annual Meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
/s/ Allan L. Schwartz
-----------------------
Allan L. Schwartz, Secretary
17
<PAGE>
APPENDIX A
IMAGING DIAGNOSTIC SYSTEMS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 2000
The undersigned hereby appoints Richard J. Grable and Allan L. Schwartz
and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, to vote all of the shares of stock of Imaging Diagnostic
Systems, Inc. which the undersigned may be entitled to vote at the Annual
Meeting of Stockholders of Imaging Diagnostic Systems, Inc. to be held at the
Company's offices, located at 6531 NW 18th Court, Plantation, Florida, on May
10, 2000, at 9:00 a.m., local time, and at any and all continuations and
adjournments thereof, with all powers that the undersigned would possess if
personally sent, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as to
any and all other matters that may properly come before the meeting.
(Continued, and to be signed on the other side)
Please mark your votes as this [X]
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4 AS MORE SPECIFICALLY
DESCRIBED IN THE PROXY STATEMENT, AND IN THE PROXIES' DISCRETION ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
FOR WITHOLD FOR
PROPOSAL 1: To elect six (6) directors [ ] [ ]
to hold office until the 2001 Annual
Meeting of Stockholders.
Nominees: Richard J. Grable, Linda B. Grable, Allan L. Schwartz, John R. Liegey,
Robert L. Kagan, M.D., and Irving H. Schwab
Instruction: To withhold authority to vote for any nominee, write
the nominee's name in the space provided below.
- ------------------------------------------
<PAGE>
FOR
PROPOSAL 2: To approve the amendment FOR AGAINST ABSTAIN
To the Company's Certificate of
Incorporation to increase the number of [ ] [ ] [ ]
Authorized shares of the Company's
Common stock, no par value, from
100,000,000 to 150,000,000
FOR
PROPOSAL 3: To adopt the Company's FOR AGAINST ABSTAIN
2000 Non-Statutory Stock Option Plan
[ ] [ ] [ ]
FOR
PROPOSAL 4: To ratify selection of FOR AGAINST ABSTAIN
Margolies, Fink and Wichrowski CPA,
as independent public accountants [ ] [ ] [ ]
of the Company for its fiscal
year ending June 30, 2000.
I PLAN TO ATTEND THE MEETING [ ]
ADMISSION TO ANNUAL MEETING WILL BE BY TICKET ONLY TO SHAREHOLDERS OF RECORD ON
RECORD DATE. ADMISSION TICKETS WILL BE MAILED TO THE ADDRESS ENTERED BELOW:
Name:______________________________________________________
Street Address:_______________________________________________
City:_______________________________State:____Zip:_____________
Please sign exactly as your name appears hereon. If the stock is registered in
the names of two or more persons, each should sign. Executors, administrators,
trustees, guardians and attorney-in-fact should add their titles. If signer is a
corporation, please give full corporate name and have a duly authorized officer,
stating title. If signer is a partnership, please sign in partnership name by
authorized person.
Signature____________________________________ Date________________
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
<PAGE>
EXHIBIT A
In accordance with shareholders approval of a proposal to amend the
Company's Certificate of Incorporation to increase the number of authorized
shares of the Company's common stock, no par value, from 100,000,000 to
150,000,000 duly executed by a majority of the shareholders of Imaging
Diagnostic Systems, Inc. entitled to vote thereon, and ratification of such
action by the Company's Board of Directors, the Corporation's Articles of
Incorporation to provide for and increase in the authorized Common Stock,
pursuant to the relevant provisions of Chapter 607 of the Florida Statutes are
hereby Amended as follows:
ARTICLE I
---------
The name of the corporation is IMAGING DIAGNOSTIC SYSTEMS, INC.
ARTICLE III CAPITAL STOCK
-------------------------
The maximum number of shares of capital stock that this corporation is
authorized to have outstanding at any one time is 152,000,000 (ONE HUNDRED
FIFTY-TWO MILLION) shares, no par value. The 152,000,000 shares of no par value
capital stock of the Corporation shall be designated as follows:
o150,000,000 common shares
o2,000,000 Preferred Shares, the rights, and preferences of
which are to be designated by the Company's Board of
Directors.
Except as amended above the remainder of the Company's Article of
Incorporation shall remain unchanged, and are hereby ratified and confirmed
The foregoing Amendments to the Articles of Incorporation were duly adopted on
May 10, 2000 by a vote of a majority of the holders of the Corporation's common
stock, no par value and the holders of the Preferred Shares, and approved by a
sufficient number of votes pursuant to the Florida Statutes.
ATTESTED TO: IMAGING DIAGNOSTIC SYSTEMS, INC
By: _________________________________ Name:_____________________________
Title:____________________________
20
<PAGE>
By:_________________________________ Name______________________________
Title_____________________________
<PAGE>
EXHIBIT B
IMAGING DIAGNOSTIC SYSTEMS, INC.
2000 NON-STATUTORY STOCK OPTION PLAN
1. PURPOSE OF THIS PLAN.
This Non-Statutory Stock Option Plan (the "Plan") is intended as an
employment incentive, to aid in attracting and retaining in the employ or
service of Imaging Diagnostic Systems, Inc. (the "Company"), a Florida
corporation, and any Affiliated Corporation, persons of experience and ability
and whose services are considered valuable, to encourage the sense of
proprietorship in such persons, and to stimulate the active interest of such
persons in the development and success of the Company. This Plan provides for
the issuance of non-statutory stock options ("NSOs" or "Options") which are not
intended to qualify as "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
2. ADMINISTRATION OF THIS PLAN.
The Company's Board of Directors ("Board") may appoint and maintain as
administrator of this Plan the Compensation Committee (the "Committee") of the
Board which shall consist of at least three members of the Board each of whom
shall be a "non-employee director," within the meaning of Rule 16b-3 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and an
"outside director," within the meaning of the Treasury Regulation Section
1.162-27(e)(3). Until such time as the Committee is duly constituted, the Board
itself shall have and fulfill the duties herein allocated to the Committee. The
Committee shall have full power and authority to designate Plan participants, to
determine the provisions and terms of respective NSOs (which need not be
identical as to number of shares covered by any NSO, the method of exercise as
related to exercise in whole or in installments, or otherwise), including the
NSO price, and to interpret the provisions and supervise the administration of
this Plan. The Committee may, in its discretion, provide that certain NSOs not
vest (that is, become exercisable) until expiration of a certain period after
issuance or until other conditions are satisfied, so long as not contrary to
this Plan.
A majority of the members of the Committee shall constitute a quorum.
All decisions and selections made by the Committee pursuant to this Plan's
provisions shall be made by a majority of its members. Any decision reduced to
writing and signed by all of the members shall be fully effective as if it had
been made by a majority at a meeting duly held. The Committee shall select one
of its members as its chairman and shall hold its meetings at such times and
places as it deems advisable. If at any time the Board shall consist of seven or
more members, then the Board may amend this Plan to provide that the Committee
shall consist only of Board members who shall not have been eligible to
participate in this Plan (or similar stock or stock option plan) of the Company
or its affiliates at any time within one year prior to appointment to the
Committee.
<PAGE>
All NSOs granted under this Plan are subject to, and may not be
exercised before, the approval of this Plan by the holders of a majority of the
Company's outstanding shares, and if such approval is not obtained, all NSOs
previously granted shall be void. Each NSO shall be evidenced by a written
agreement containing terms and conditions established by the Committee
consistent with the provisions of this Plan. If on the date of grant of an
option, any class of common stock of the Company is required to be registered
under Section 12 of the Exchange Act, the maximum number of shares subject to
options that may be granted to any employee during any calendar year under the
Plan shall be 500,000 shares.
3. DESIGNATION OF PARTICIPANTS.
The persons eligible for participation in this Plan as recipients of
NSOs shall include full-time and part-time employees (as determined by the
Committee) and officers of the Company or of an Affiliated Corporation. In
addition, directors of the Company or any Affiliated Corporation who are not
employees of the Company or an Affiliated Corporation and any attorney,
consultant or other adviser to the Company or any Affiliated Corporation shall
be eligible to participate in this Plan. For all purposes of this Plan, any
director who is not also a common law employee and is granted an option under
this Plan shall be considered an "employee" until the effective date of the
director's resignation or removal from the Board of Directors, including removal
due to death or disability. The Committee shall have full power to designate,
from among eligible individuals, the persons to whom NSOs may be granted. A
person who has been granted an NSO hereunder may be granted an additional NSO or
NSOs, if the Committee shall so determine. The granting of an NSO shall not be
construed as a contract of employment or as entitling the recipient thereof to
any rights of continued employment.
4. STOCK RESERVED FOR THIS PLAN.
Subject to adjustment as provided in Paragraph 9 below, a total of
4,850,000 shares of Common Stock ("Stock"), of the Company shall be subject to
this Plan. The Stock subject to this Plan shall consist of unissued shares or
previously issued shares reacquired and held by the Company or any Affiliated
Corporation, and such amount of shares shall be and is hereby reserved for sale
for such purpose. Any of such shares which may remain unsold and which are not
subject to outstanding NSOs at the termination of this Plan shall cease to be
reserved for the purpose of this Plan, but until termination of this Plan, the
Company shall at all times reserve a sufficient number of shares to meet the
requirements of this Plan. Should any NSO expire or be canceled prior to its
exercise in full, the unexercised shares theretofore subject to such NSO may
again be subjected to an NSO under this Plan.
5. OPTION PRICE.
The purchase price of each share of Stock placed under NSO shall not be
less than 50% of the fair market value of such share on the date the NSO is
granted. The fair market value of a share on a particular date shall be deemed
to be the average of either (i) the highest and lowest prices at which shares
were sold on the date of grant, if traded on a national securities exchange,
(ii) the high and low prices reported in the consolidated reporting system, if
traded on a "last sale
<PAGE>
reported" system, such as NASDAQ, or (iii) the high bid and low asked price for
over-the-counter securities. If no transactions in the Stock occur on the date
of grant, the fair market value shall be determined as of the next earliest day
for which reports or quotations are available. If the common shares are not then
quoted on any exchange or in any quotation medium at the time the option is
granted, then the Board of Directors or Committee will use its discretion in
selecting a good faith value believed to represent fair market value based on
factors then known to them. The cash proceeds from the sale of Stock are to be
added to the general funds of the Company.
6. EXERCISE PERIOD.
(a) The NSO exercise period shall be a term of not more than ten
(10) years from the date of granting of each NSO and shall automatically
terminate:
(i) Upon termination of the optionee's employment with the
Company for cause;
(ii) At the expiration of twelve (12) months from the date of
termination of the optionee's employment with the Company for any reason other
than death, without cause; provided, that if the optionee dies within such
twelve-month period, subclause (iii) below shall apply; or
(iii) At the expiration of fifteen (15) months after the date of
death of the optionee.
(b) "Employment with the Company" as used in this Plan shall include
employment with any Affiliated Corporation, and NSOs granted under this Plan
shall not be affected by an employee's transfer of employment among the Company
and any Parent or Subsidiary thereof. An optionee's employment with the Company
shall not be deemed interrupted or terminated by a bona fide leave of absence
(such as sabbatical leave or employment by the Government) duly approved,
military leave, maternity leave or sick leave.
7. EXERCISE OF OPTIONS.
(a) The Committee, in granting NSOs, shall have discretion to
determine the terms upon which NSOs shall be exercisable, subject to applicable
provisions of this Plan. Once available for purchase, unpurchased shares of
Stock shall remain subject to purchase until the NSO expires or terminates in
accordance with Paragraph 6 above. Unless otherwise provided in the NSO, an NSO
may be exercised in whole or in part, one or more times, but no NSO may be
exercised for a fractional share of Stock.
(b) NSOs may be exercised solely by the optionee during his
lifetime, or after his death (with respect to the number of shares which the
optionee could have purchased at the time of death) by the person or persons
entitled thereto under the decedent's will or the laws of descent and
distribution.
<PAGE>
(c) The purchase price of the shares of Stock as to which an NSO is
exercised shall be paid in full at the time of exercise and no shares of Stock
shall be issued until full payment is made therefore. Payment shall be made
either (i) in cash, represented by bank or cashier's check, certified check or
money order (ii) in lieu of payment for bona fide services rendered, and such
services were not in connection with the offer or sale of securities in a
capital raising transaction, (iii) by delivering shares of the Company's Common
Stock which have been beneficially owned by the optionee, the optionee's spouse,
or both of them for a period of at least six (6) months prior to the time of
exercise (the "Delivered Stock") in a number equal to the number of shares of
Stock being purchased upon exercise of the NSO or (iv) by delivery of shares of
corporate stock which are freely tradable without restriction and which are part
of a class of securities which has been listed for trading on the NASDAQ system
or a national securities exchange, with an aggregate fair market value equal to
or greater than the exercise price of the shares of Stock being purchased under
the NSO, or (v) a combination of cash, services, Delivered Stock or other
corporate shares. An NSO shall be deemed exercised when written notice thereof,
accompanied by the appropriate payment in full, is received by the Company. No
holder of an NSO shall be, or have any of the rights and privileges of, a
shareholder of the Company in respect of any shares of Stock purchasable upon
exercise of any part of an NSO unless and until certificates representing such
shares shall have been issued by the Company to him or her.
8. ASSIGNABILITY.
No NSO shall be assignable or otherwise transferable (by the optionee
or otherwise) except by will or the laws of descent and distribution or except
as permitted in accordance with SEC Release No.33-7646 as effective April 7,
1999 and in particular that portion thereof which expands upon transferability
as is contained in Article III entitled "Transferable Options and Proxy
Reporting" as indicated in Section A 1 through 4 inclusive and Section B
thereof. No NSO shall be pledged or hypothecated in any manner, whether by
operation of law or otherwise, nor be subject to execution, attachment or
similar process.
9. REORGANIZATIONS AND RECAPITALIZATIONS OF THE COMPANY.
(a) The existence of this Plan and NSOs granted hereunder shall not
affect in any way the right or power of the Company or its shareholders to make
or authorize any and all adjustments, recapitalizations, reorganizations or
other changes in the Company's capital structure or its business, or any merger
or consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference stocks ahead of or affecting the Company's Common Stock or the
rights thereof, or the dissolution or liquidation of the Company, or any sale,
exchange or transfer of all or any part of its assets or business, or the other
corporation act or proceeding, whether of a similar character or otherwise.
(b) The shares of Stock with respect to which NSOs may be granted
hereunder are shares of the Common Stock of the Company as currently
constituted. If, and whenever, prior to delivery by the Company of all of the
shares of Stock which are subject to NSOs granted hereunder, the Company shall
effect a subdivision or consolidation of shares or other capital readjustment,
the payment of a Stock dividend, a stock split, combination of shares (reverse
stock split) or recapitalization or other increase or reduction of the number of
shares of the
<PAGE>
Common Stock outstanding without receiving compensation therefore in money,
services or property, then the number of shares of Stock available under this
Plan and the number of shares of Stock with respect to which NSOs granted
hereunder may thereafter be exercised shall (i) in the event of an increase in
the number of outstanding shares, be proportionately increased, and the cash
consideration payable per share shall be proportionately reduced; and (ii) in
the event of a reduction in the number of outstanding shares, be proportionately
reduced, and the cash consideration payable per share shall be proportionately
increased.
(c) If the Company is reorganized, merged, consolidated or party to
a plan of exchange with another corporation pursuant to which shareholders of
the Company receive any shares of stock or other securities, there shall be
substituted for the shares of Stock subject to the unexercised portions of
outstanding NSOs an appropriate number of shares of each class of stock or other
securities which were distributed to the shareholders of the Company in respect
of such shares of Stock in the case of a reorganization, merger, consolidation
or plan of exchange; provided, however, that all such NSOs may be canceled by
the Company as of the effective date of a reorganization, merger, consolidation,
plan of exchange, or any dissolution or liquidation of the Company, by giving
notice to each optionee or his personal representative of its intention to do so
and by permitting the purchase of all the shares subject to such outstanding
NSOs for a period of not less than thirty (30) days during the sixty (60) days
next preceding such effective date.
(d) Except as expressly provided above, the Company's issuance of
shares of Stock of any class, or securities convertible into shares of Stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefore, or upon
conversion of shares or obligations of the Company convertible into shares of
Stock or other securities, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number of shares of Stock subject to NSOs
granted hereunder or the purchase price of such shares.
10. PURCHASE FOR INVESTMENT.
Unless the shares of Stock covered by this Plan have been registered
under the Securities Act of 1933, as amended, each person exercising an NSO
under this Plan may be required by the Company to give a representation in
writing that he is acquiring such shares for his own account for investment and
not with a view to, or for sale in connection with, the distribution of any part
thereof.
11. EFFECTIVE DATE AND EXPIRATION OF THIS PLAN.
This Plan shall be effective as of January 3, 2000 the date of its
adoption by the Board, subject to the approval of the Company's shareholders,
and no NSO shall be granted pursuant to this Plan after its expiration. This
Plan shall expire on January 2, 2010 except as to NSOs then outstanding, which
shall remain in effect until they have expired or been exercised.
12. AMENDMENTS OR TERMINATION.
<PAGE>
The Board may amend, alter or discontinue this Plan at any time in such
respects as it shall deem advisable in order to conform to any change in any
other applicable law, or in order to comply with the provisions of any rule or
regulation of the Securities and Exchange Commission required to exempt this
Plan or any NSOs granted thereunder from the operation of Section 16(b) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), or in any other
respect not inconsistent with Section 16(b) of the Exchange Act; provided, that
no amendment or alteration shall be made which would impair the rights of any
participant under any NSO theretofore granted, without his consent (unless made
solely to conform such NSO to, and necessary because of, changes in the
foregoing laws, rules or regulations), and except that no amendment or
alteration shall be made without the approval of shareholders which would:
(a) Increase the total number of shares reserved for the purposes of
this Plan or decrease the NSO price provided for in Paragraph 5 (except as
provided in Paragraph 9), or change the classes of persons eligible to
participate in this Plan as provided in Paragraph 3; or
(b) Extend the NSO period provided for in Paragraph 6; or
(c) Materially increase the benefits accruing to participants under
this Plan; or
(d) Materially modify the requirements as to eligibility for
participation in this Plan; or
(e) Extend the expiration date of this Plan as set forth in
Paragraph 11.
13. GOVERNMENT REGULATIONS.
This Plan, and the granting and exercise of NSOs hereunder, and the
obligation of the Company to sell and deliver shares of Stock under such NSOs,
shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies or national securities exchanges as may
be required.
14. LIABILITY.
No member of the Board of Directors, the Committee or officers or
employees of the Company or any Affiliated Corporation shall be personally
liable for any action, omission or determination made in good faith in
connection with this Plan.
15. MISCELLANEOUS.
(a) The term "Affiliated Corporation" used herein shall mean any
Parent or Subsidiary.
(b) The term "Parent" used herein shall mean any corporation owning
50 percent or more of the total combined voting stock of all classes of the
Company or of another corporation qualifying as a Parent within this definition.
<PAGE>
(c) The term "Subsidiary" used herein shall mean any corporation
more than 50 percent of whose total combined voting stock of all classes is held
by the Company or by another corporation qualifying as a Subsidiary within this
definition.
16. OPTIONS IN SUBSTITUTION FOR OTHER OPTIONS.
The Committee may, in its sole discretion, at any time during the term
of this Plan, grant new options to an employee under this Plan or any other
stock option plan of the Company on the condition that such employee shall
surrender for cancellation one or more outstanding options which represent the
right to purchase (after giving effect to any previous partial exercise thereof)
a number of shares, in relation to the number of shares to be covered by the new
conditional grant hereunder, determined by the Committee. If the Committee shall
have so determined to grant such new options on such a conditional basis ("New
Conditional Options"), no such New Conditional Option shall become exercisable
in the absence of such employee's consent to the condition and surrender and
cancellation as appropriate. New Conditional Options shall be treated in all
respects under this Plan as newly granted options. Option may be granted under
this Plan from time to time in substitution for similar rights held by employees
of other corporations who are about to become employees of the Company or an
Affiliated Corporation, or the merger or consolidation of the employing
corporation with the Company or an Affiliated Corporation, or the acquisition by
the Company or an Affiliated Corporation of the assets of the employing
corporation, or the acquisition by the Company or an Affiliated Corporation of
stock of the employing corporation as the result of which it becomes an
Affiliated Corporation.
17. WITHHOLDING TAXES.
Pursuant to applicable federal and state laws, the Company may be
required to collect withholding taxes upon the exercise of a NSO. The Company
may require, as a condition to the exercise of a NSO, that the optionee
concurrently pay to the Company the entire amount or a portion of any taxes
which the Company is required to withhold by reason of such exercise, in such
amount as the Committee or the Company in its discretion may determine. In lieu
of part or all of any such payment, the optionee may elect to have the Company
withhold from the shares to be issued upon exercise of the option that number of
shares having a Fair Market Value equal to the amount which the Company is
required to withhold.
18. TRANSFERABILITY IN ACCORDANCE WITH FORM S-8 AS AMENDED AND EFFECTIVE
APRIL 7, 1999.
Notwithstanding anything to the contrary as may be contained in this
Plan regarding rights as to transferability or lack thereof, all options granted
hereunder may and shall be transferable to the extent permitted in accordance
with SEC Release No. 33-7646 entitled "Registration of Securities on Form S-8"
as effective April 7, 1999 and in particular in accordance with that portion of
such Release which expands Form S-8 to include stock
<PAGE>
option exercise by family members so that the rules governing the use of Form
S-8 (a) do not impede legitimate intra family transfer of options and (b) may
facilitate transfer for estate planning purposes - all as more specifically
defined in Article III, Sections A and B thereto, the contents of which are
herewith incorporated by reference.
IMAGING DIAGNOSTIC SYSTEMS, INC.
ATTEST:
By: /s/ Linda B. Grable
-----------------------
Name: Linda B. Grable
Title: President
By:/s/ Allan L. Schwartz
------------------------
Name: Allan L. Schwartz
Title: Secretary
(SEAL)
<PAGE>
CERTIFICATION OF PLAN ADOPTION
I, the undersigned Secretary of this Corporation, hereby certify that
the foregoing 2000 Non-Statutory Stock Option Plan was duly approved by the
requisite number of holders of the issued and outstanding common stock of this
corporation as of May 10, 2000.
, Secretary
------------------------------
(SEAL)
<PAGE>
OPTION AGREEMENT
The undersigned hereby grants_________________________(pursuant to the Imaging
Diagnostic Systems, Inc. 2000 Non-Statutory Stock Option Plan dated January
3, 2000 attached hereto) an option to purchase__________shares of Imaging
Diagnostic Systems, Inc. (the "Corporation").
Option Period. This option shall be for a period of_______years from the date of
this Option Agreement ("Option Period").
Option Price. The option price shall be $_______per share for an aggregate of
$_________ if the entire ________ shares are purchased. The option price of the
shares of Common Stock shall be paid in full at the time of exercise and no
shares of Common Stock shall be issued until full payment is made therefore.
Payment shall be made either (i) in cash, represented by bank or cashier's
check, certified check or money order (ii) in lieu of payment for bona fide
services rendered, and such services were not in connection with the offer or
sale of securities in a capital-raising transaction, (iii) by delivering shares
of the undersigned's Common Stock which have been beneficially owned by the
optionee, the optionee's spouse, or both of them for a period of at least six
(6) months prior to the time of exercise (the "Delivered Stock") in a number
equal to the number of shares of Stock being purchased upon exercise of the
Option or (iv) by delivery of shares of corporate stock which are freely
tradable without restriction and which are part of a class of securities which
has been listed for trading on the NASDAQ system or a national securities
exchange, with an aggregate fair market value equal to or greater than the
exercise price of the shares of Stock being purchased under the Option, or (v) a
combination of cash, services, Delivered Stock or other corporate shares.
Shareholder Rights. No holder of an Option shall be, or have any of the rights
and privileges of, a shareholder of the Corporation in respect of any shares of
Common Stock purchasable upon exercise of any part of an Option unless and until
certificates representing such shares shall have been issued by the Corporation
to him or her.
Determination of Exercise Date. This Option or a portion of this Option shall be
deemed exercised when written notice thereof, accompanied by the appropriate
payment in full, is received by the Corporation.
Date: ___________, 2000
Imaging Diagnostic Systems, Inc.
By: , President
-----------------------------
By: , Secretary
-----------------------------
