-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EsEr9A1WqLJd6LH4UnVB0M+NmJFq8z3J+8YJC1Sb+6qb16ch2gTZ0EAUn3F3C4vY d2Dlo0xJJjCxOjeAbnNPOg== 0001079973-02-000037.txt : 20020520 0001079973-02-000037.hdr.sgml : 20020520 20020520135729 ACCESSION NUMBER: 0001079973-02-000037 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20020520 EFFECTIVENESS DATE: 20020520 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INNOVATIVE MEDICAL SERVICES CENTRAL INDEX KEY: 0001006028 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 330530289 STATE OF INCORPORATION: CA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 333-88648 FILM NUMBER: 02657375 BUSINESS ADDRESS: STREET 1: 1725 GILLESPIE WAY STREET 2: STE H CITY: EL CAJON STATE: CA ZIP: 92020 BUSINESS PHONE: 6195968600 MAIL ADDRESS: STREET 1: 1725 GILLESPIE WAY STREET 2: SUITE H CITY: EL CAJON STATE: CA ZIP: 92020 S-8 1 forms8.txt FORM S-8 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 INNOVATIVE MEDICAL SERVICES (Exact name of Registrant as specified in its charter) CALIFORNIA 33-0530289 (State of Incorporation) (I.R.S. Employer ID No.) 1725 Gillespie Way El Cajon CA 92020 ---------------------------- (Address of Principal Offices) THE INNOVATIVE MEDICAL SERVICES 2002 Employee Incentive Stock Option Plan -------------------------------- (Full Title of the Plan) Donna Singer INNOVATIVE MEDICAL SERVICES 1725 Gillespie Way, El Cajon CA 92020 -------------------------------------- (Name and address of Agent for Service) (619)596-8600 (Telephone number, including area code of Agent for Service) CALCULATION OF REGISTRATION FEE Title of Amount of Max. Off. Maximum Amount of Securities Securities Price Aggregate Reg. Registered Registered Per Share Offrg. Price Fee - --------------------------------------------------------------------------- Common Stock(1) 4,000,000 $1.56(2) $6,240,000 $574.08 (1) Issuable pursuant to Plan options. (2) Estimated Price in accordance with Rule 457(h)and based upon the last reported sale on the NASDAQ SmallCap Market on May 14, 2002 PART I INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS Item 1. Plan Information. The documents containing the information related to the Innovative Medical Services 2002 Employee Incentive Stock Option Plan which is not being filed as part of this Registration Statement (the "Registration Statement") and documents incorporated by reference in response to Item 3 of Part II of this Registration Statement, which taken together constitute a prospectus that meets the requirements of Section 10(a) of the Securities Act of 1933 (the "Securities Act") will be sent or given to the participant by the Registrant as specified by Rule 428(b)(1) of the Securities Act. Item 2. Registrant Information and Employee Plan Annual Information. As required by this Item, the Registrant shall provide to the participant a written statement advising them of the availability without charge, upon written or oral request, of documents incorporated by reference in Item 3 of Part II hereof and of documents required to be delivered pursuant to Rule 428(b) under the Securities Act. The statement shall include the address listing the title or department and telephone number to which the request is to be directed. Part II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT Item 3. Incorporation of Documents by Reference. We incorporate by reference the documents listed below and any future filings we will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934: -- Form 8-A Registration Statement as amended filed on July 22, 1996 and the Description of the Common Stock incorporated by reference therein from the Registration Statement on Form SB-2 dated August 8, 1996 SEC file no 333-434. -- Form 10-KSB Annual Report for the fiscal year ended July 31, 2001 filed on October 29, 2001 -- Amendment No. 1 to Form 10-KSB Annual Report for the fiscal year ended July 31, 2001 filed on November 15, 2001 -- Amendment No. 2 to Form 10-KSB Annual Report for the fiscal year ended July 31, 2001 filed on December 4, 2001 -- Form 15 Certification and Notice Of Termination Of Registration under Section 12(g) Of The Securities Exchange Act Of 1934 for Class A Warrants filed on November 15, 2001 -- Form 8-K regarding settlement of NVID Litigation filed on December 6, 2001 -- Amended Form 8-K regarding settlement of NVID Litigation filed on December 7, 2001 -- Form 10-QSB Quarterly Report for the fiscal quarter ended October 31, 2001 filed on December 15, 2001 -- Form 10-QSB Quarterly Report for the fiscal quarter ended January 31, 2002 filed on March 18, 2002 -- All other documents filed by us after the date of this prospectus under Section 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, are incorporated by reference herein to be a part thereof from the date of filing of such documents. You may request a copy of these filings at no cost, by writing, telephoning or e-mailing us at the following address: Innovative Medical Services 1725 Gillespie Way, El Cajon, California 92020 e-mail: dsinger@imspure.com Item 4. Not Applicable. Item 5. Interests of Named Experts and Counsel: Not applicable. Item 6. Indemnification of Officers and Directors. Article 11 of the Company's By-laws provides that every person who was or is a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or a person for whom he is the legal representative is or was a director or officer of the corporation or is or was serving at the request of the corporation or for its benefit as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless to the fullest extent legally permissible under the General Corporation Law of the State of Nevada against all expenses, liability and loss (including attorney's fees, judgments, fines and amounts paid or to be paid in settlement) reasonably incurred or suffered by him in connection therewith. Item 7. Exemption from Registration Claimed: Not Applicable Item 8. Exhibits. 5.1 Opinion of Dennis Brovarone, regarding legality of shares being issued. 23.1 Consent of Dennis Brovarone,(See Opinion). 23.2 Consent of Miller and McCollum Certified Public Accountants 99.8 The Innovative Medical Services 2002 Employee Incentive Stock Option Plan Item 9. Undertakings. (a) The undersigned Registrant hereby undertakes. (1) To file, during any period in which offers or sales are being made, a post-effective amendment to the Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information in the Registration Statement; (iii) To include any material information with respect to the Plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended that are incorporated by reference into this Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new Registration Statement to the securities offered therein, and the offering of such securities offered at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the Registration Statement shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 6, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel that matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the questions whether such indemnification is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. SIGNATURES In accordance with the requirements of the Securities Act of 1933 as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form S-3 and authorized this registration statement to be signed on its behalf by the undersigned thereunto duly authorized, in the City of El Cajon, State of California on May 15, 2002. INNOVATIVE MEDICAL SERVICES By: /s/ MICHAEL L. KRALL - -------------------------------- Michael L. Krall Executive Officer In accordance with the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates stated. SIGNATURE TITLE DATE /s/ MICHAEL L. KRALL President, Chief Executive May 15, 2002 - ----------------------- Officer and Director Michael L. Krall /s/ GARY BROWNELL Chief Financial Officer, May 15, 2002 - ----------------------- Director Gary Brownell /s/ DENNIS BROVARONE Director May 15, 2002 - ----------------------- Dennis Brovarone /s/ DONNA SINGER Director May 15, 2002 - ----------------------- Donna Singer /s/ GREGORY BARNHILL Director May 15, 2002 - ----------------------- Gregory Barnhill /s/ PATRICK GALUSKA Director May 15, 2002 - ----------------------- Patrick Galuska /s/ EUGENE PEISER Director May 15, 2002 - ----------------------- Eugene Peiser EX-5.1 3 opinionconsent.txt OPINION OF DENNIS BROVARONE Exhibit 5.1 DENNIS BROVARONE ATTORNEY AND COUNSELOR AT LAW 18 Mountain Laurel Drive Littleton, Colorado 80127 phone: 303 466 4092 / fax: 303 466 4826 May 15, 2002 Board of Directors / Innovative Medical Services Re: Registration Statement on Form S-8 Gentlemen: You have requested my opinion as to the legality of the issuance by Innovative Medical Services, (the "Corporation") of up to 4,000,000 shares of Common Stock (the "Shares") pursuant to a Registration Statement on Form S-8 (the "Registration Statement") to be filed on or before May 15, 2002. Pursuant to your request I have reviewed and examined:(1).The Articles of Incorporation of the Corporation, as amended (the "Articles"); (2). The Bylaws of the Corporation, as certified by the Secretary of the Corporation; (3). The minute book of the Corporation; (4). A copy of certain resolutions of the Board of Directors of the Corporation; (5). The Registration Statement; (6). The Corporation's Stock Option Plan covered by the Registration Statement; and (7).Such other matters as I have deemed relevant in order to form my opinion. Based upon the foregoing, and subject to the qualifications set forth below, I am of the opinion that the Shares, if issued as described in the Registration Statement will have been duly authorized, legally issued, fully paid and non-assessable. This opinion is furnished by me as counsel to the Corporation and is solely for your benefit. Neither this opinion nor copies hereof may be relied upon by, delivered to, or quoted in whole or in part to any governmental agency or other person without our prior written consent. My opinion is subject to the qualification that no opinion is expressed herein as to the application of state securities or Blue Sky laws. Not withstanding the above, I consent to the use of this opinion in the Registration Statement. In giving my consent, I do not admit that I come without the category of persons whose consent is required under Section 7 of the Securities and Exchange Commission promulgated thereunder. Very truly yours, /s/ DENNIS BROVARONE - -------------------- Dennis Brovarone EX-23.2 4 auditorconsent.txt CONSENT OF MILLER AND MCCOLLUM, CPA CONSENT OF MILLER AND McCOLLOM, CERTIFIED PUBLIC ACCOUNTANTS EXHIBIT 23.2 MILLER AND McCOLLOM CERTIFIED PUBLIC ACCOUNTANTS 4350 Wadsworth Blvd., Suite 300 TELEPHONE (303) 424-2020 Wheat Ridge, CO 80033 FACSIMILE (720) 294-9753 E-MAIL: rmccollom@attglobal.net We hereby consent to the use incorporated by reference in the Registration Statement on Form S-8 filed on May 16, 2002 of our report dated October 19, 2001, relating to the consolidated financial statements of Innovative Medical Services and consolidated subsidiaries including in the annual report Form 10-KSB for the fiscal years ended July 31, 2001 and July 31, 2000 and to the reference to Miller and McCollom in the Experts section of the Prospectus contained in the Registration Statement. /s/MILLER AND McCOLLOM - ---------------------- Miller and McCollom May 13, 2002 EX-99.8 5 employeeincentivesop2002.txt IMS 2002 EMPLOYEE INCENTIVE SOP INNOVATIVE MEDICAL SERVICES 2002 EMPLOYEE INCENTIVE STOCK OPTION PLAN ARTICLE I DEFINITIONS As used herein, terms have the meaning hereinafter set forth unless the context should clearly indicate the contrary: (a) "Board" shall mean the Board of Directors of the Company, or the Executive Committee of such Board; (b) "Business Days" shall mean for calculation purposes the days of the week in which the NASDAQ System conducts and is open for regular trading activity; (c) "Committee" shall mean the Compensation Committee of the Board which is authorized to oversee the administration of this Plan; (d) "Company" shall mean Innovative Medical Services, a California corporation; (e) "Director" shall mean a member of the Board; (f) "Fair market value" shall mean the prior 30 day average closing price at which the Stock is listed in the NASDAQ quotation system on the day an Option is granted hereunder, or in the absence of any reported quote on such day, the first preceding day on which there was such a quote available; (g) "Grant" means the issuance of an Option hereunder to an Optionee entitling such Optionee to acquire Stock on the terms and conditions set forth in a Stock Option Agreement to be entered into with the Optionee, "Grant" may also include a direct grant of stock; (h) "Incentive Stock Option" shall mean a compensatory Option provided to an employee of the Company giving him or her the right to purchase Stock at a predetermined price under a plan that meets certain Internal Revenue Code requirements and involves registered stock; (i) "Key Employee" shall mean a Company employee who in the judgment of the Committee has the ability to positively affect the profitability and economic well-being of the Company, part-time employees, independent contractors, consultants and advisors performing bonafide services to the Company shall also be deemed employees solely for the purpose of participation under the Plan; (j) "Option" shall mean the right granted to an Optionee to acquire Stock of the Company pursuant to the Plan; (k) "Optionee" shall mean an employee of the Company or a non-employee Director of the Company to whom a Grant hereunder has been made; (l) "Plan" shall mean the Innovative Medical Services 2002 Employee Incentive Stock Option Plan, the terms of which are herein set forth; (m) "Stock" shall mean the common stock of the Company or, in the event the outstanding shares of stock are hereafter changed into or exchanged for shares of different stock or securities of the Company or some other corporation, such other stock or securities; (n) "Stock Option Agreement" shall mean the agreement between the Company and an Optionee under which an Optionee may acquire Stock pursuant to the Plan. ARTICLE II THE PLAN 2.1 NAME. The plan shall be known as the "Innovative Medical Services 2002 Employee Incentive Stock Option Plan." 2.2 PURPOSE. The purpose of the Plan is to advance the business and development of the Company and its shareholders by affording to the Key Employees of the Company and non-employee Directors of the Company the opportunity to acquire a propriety interest in the Company by the grant of Options to such persons under the terms herein set forth. By doing so, the Company seeks to motivate, retain and attract highly competent, highly motivated personnel whose judgment, initiative, leadership and continued efforts will contribute to the success of the Company. The Options to be granted hereunder are either "Incentive Stock Options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, for certain Key Employees or non-statutory Options made available to non-employee Directors. However, at no time will the Plan be considered or operate as a "tandem" option plan or will any Key employee or non-employee Director be subjected to a tandem option provision. 2.3 EFFECTIVE DATE. The Plan shall become effective upon its adoption by the Board of the Company. Thereafter, the Plan shall be submitted to the shareholders of the company for approval within 12 months after the date said Plan is adopted by the Board. 2.4 TERMINATION DATE. The Plan shall terminate ten (10) years from the date the Plan is adopted by the Board of the Company and at such time any Options granted hereunder shall be void and of no further force or effect. ARTICLE III PARTICIPANTS Any Key Employee or non-employee Director of the Company, or of any of its wholly owned subsidiaries, shall be eligible to be granted an Option under the Plan. The Committee shall adopt criteria pursuant to which Options shall be granted. The Committee may grant Options to any eligible Key Employee or non-employee Director in accordance with such determinations as the Committee may, from time to time, in its sole discretion make. A Director of the Company or of a subsidiary who is not also an employee of the Company will not be eligible to receive an "Incentive Stock Option" pursuant to the Plan. Non-employee Directors are only eligible for non-statutory Options which do not qualify under Section 422 of the Internal Revenue Code, as amended. ARTICLE IV ADMINISTRATION 4.1 DUTIES AND POWERS OF THE COMMITTEE. The Plan shall be administered by the Committee. Subject to the express provisions of the Plan, the Committee shall have the sole discretion and authority to determine from among eligible persons those to whom and the time or times at which Options may be granted and the number of shares of Stock to be subject to each Option. Subject to the express provisions of the Plan, the Committee shall also have complete authority to interpret the Plan, to prescribe, amend and rescind rules and regulations related to it and to determine the details and provisions of each Stock Option Agreement and to make all other determinations necessary or advisable in the administration of the Plan. 4.2 RECORDS OF PROCEEDINGS. The Committee shall maintain written minutes of its actions which shall be maintained among the records of the Company. 4.3 COMPANY ASSISTANCE. The Company shall supply full and timely information to the Committee in all matters relating to eligible Optionees, their status, death, retirement, disability and such other pertinent facts as the Committee may require. The Company shall furnish the Committee with such clerical and other assistance as is necessary in the performance of its duties. All expenses of the Committee shall be paid by the Company. 4.4 COMPOSITION OF THE COMMITTEE. The Committee shall consist of three (3) individuals appointed by the Board from among its members. Appointment to the Committee shall be for a term of one (1) year. Any individual designated and serving as a member of the Committee shall be entitled to indemnification in relation to such service by the Company to the fullest extent called for or permitted by the Bylaws of the Company. 4.6 COMMITTEE AUTHORITY. If the Committee deems it necessary or in the best interest of the Company or its shareholders, the Committee may impose restrictions of the subsequent transferability of Stock issued pursuant to Options to be granted hereunder. In the event of the imposition of any such conditions, the Stock of the Company to be issued pursuant to the exercise of an Option shall have any such restrictions prominently displayed as a legend on such certificate. ARTICLE V SHARES OF STOCK SUBJECT TO THE PLAN 5.1 LIMITATION. Subject to adjustment pursuant to the provisions of Section 5.3 hereof, the number of shares of Stock which may be issued and sold hereunder shall not exceed 4,000,000 shares with 3,000,000 shares reserved for issuance to Key Employees pursuant to their Incentive Stock Options and 1,000,000 shares reserved for issuance to non-employee Directors pursuant to their non-statutory Options. The Company shall take such action as necessary to reserve the aforesaid number of shares for issuance pursuant to the Plan. 5.2 OPTIONS GRANTED UNDER THE PLAN. Shares of stock with respect to which an Option is granted hereunder, but which lapses prior to exercise, shall be considered available for grant hereunder. Therefore, if Options granted hereunder shall terminate for any reason without being wholly exercised, new Options may be granted hereunder covering the number of shares to which such terminated Options related. 5.3 ANTI-DILUTION. In the event the Stock subject to Options hereunder is changed into or exchanged for a different number or kind of stock or other securities of the Company or of another organization by reason of merger, consolidation or reorganization, recapitalization, reclassification, combination of shares, stock split or stock dividend; (a) The aggregate number and kind of shares of Stock subject to Options which may be granted hereunder shall be adjusted appropriately; (b) Rights under outstanding Options granted hereunder, both as to the number of subject shares and the Option price, shall be adjusted appropriately; (c) Where dissolution or liquidation of the Company or any merger of consolidation in which the Company is not a surviving corporation is involved, each outstanding Option shall terminate and the Optionee holding such Option shall have the right immediately prior to such dissolution, liquidation, merger or combination to exercise his Option, in whole or in part, to the extent that it shall not have been exercised without regard to any installment exercise provision. The manner of application of the foregoing provision shall be determined solely by the committee and any such adjustment may provide for the elimination of fractional share interests. ARTICLE VI OPTION PROVISIONS 6.1 OPTIONS. Each Option granted hereunder shall be evidenced by minutes of a meeting of or the written consent of the Committee and by a written Stock Option Agreement dated as of the date of grant and executed by the Company and the Optionee, which agreement shall set forth such terms and conditions as may be determined by the Committee consistent with the Plan. 6.2 PARTICIPATION, LIMITATIONS. (a) Options qualifying as "incentive stock options" under Section 422 of the Internal Revenue Code, as amended, may be granted from time to time to Key Employees of the Company to purchase shares of the Company's Stock. (b) The maximum number of shares for which an Option or Options may be granted under the Plan to any one Key Employee shall be two hundred thousand (200,000) shares in any twelve month period. (c) Options defined as non-statutory Options which do not satisfy the requisites of Section 422 of the Internal Revenue Code, as amended, may be granted from time to time only to non-employee Directors of the Company to purchase shares of the Company's Stock. (d) The maximum number of shares for which an Option or Options may be granted under the Plan to any one participating non-employee Director shall be one hundred fifty thousand (150,000) shares in any twelve month period.. 6.3 OPTION PRICE. The per share Option price for the stock subject to each Option shall be determined by the Committee, but the per share exercise price shall not be less than the fair market value of the Stock on the date the Option is granted. 6.4 OPTION PERIOD. Each Option granted hereunder must be granted within five (5) years from the effective date of the Plan. The period for the exercise of each Option shall be determined by the Committee, but in no instance shall such period exceed five (5) years from the date of grant of the Option. The Committee may prescribe such period after the grant of an Option which must expire before such Option may be exercised and the Committee deems appropriate. 6.5 OPTION EXERCISE. (a) Options granted hereunder may not be exercised until and unless the Optionee shall meet the conditions precedent established by the Committee for the Key Employees and the non-employee Directors. (b) Options may be exercised by Key Employees for whole shares only. Key Employee Optionees may exercise their Option in whole at any time, or in part from time to time in each year on a cumulative basis with any portion not exercised to be carried over for exercise in subsequent years. Options shall be exercised by written notice of intent to exercise the Option with respect to a specified number of shares delivered to the Company at its principal office and payment in full in cash or shares to the Company at said office of the amount of the Option price for the number of shares with respect to which the Option(s) are then being exercised. (c) Options may be exercised by participating non-employee Directors in whole at any time, or in part from time to time with respect to whole shares, and can be exercised to the full extent of his Option at any time after grant, and shall be exercised by written notice of intent to exercise the Option with respect to a specified number of shares delivered to its Company at its principal office and payment in full in cash or shares to the Company at said office of the amount of the Option price for the number of shares with respect to which the Option(s) are then being exercised. (d) No Option may be exercised by any Optionee unless a registration statement, such as form S-8, covering the Stock subject thereto has been filed with and declared effective by the Securities and Exchange Commission and an appropriate registration or exemption therefrom, is in effect or available in the state of residence of the exercising Optionee. 6.6 NON-TRANSFERABILITY OF OPTION. No Option or any right relative thereto shall be transferred by an Optionee otherwise than by will or by the laws of descent and distribution. During the lifetime of an Optionee, the Option shall be exercisable only by him or her. 6.7 EFFECT OF DEATH OR OTHER TERMINATION OF EMPLOYMENT OR DIRECTORSHIP. (a) If the Key Employee's or non-employee Director's relationship with the Company shall be terminated, with or without cause, or by the act of the Key Employee or non-employee Director, the Optionee's right to exercise such Options shall terminate and all rights thereunder shall cease three (3) months after the date on which such person's association is terminated. Provided however, that if the Optionee shall die or become permanently and totally disabled while employed by or serving as a non-employee Director of the Company, as solely determined by the Committee in accordance with its policies, then either his or her personal representatives or a transferee under the Optionee's will or pursuant to the laws of descent and distribution, or the disabled Optionee may exercise the Option in full one (1) year from the date of such death or disability. In the case of an Optionee's retirement in accordance with the Company's established retirement policy, such Option shall remain exercisable by the Optionee for three (3) months from the date of such retirement. (b) No transfer of an Option by the Optionee by will or the laws of descent and distribution shall be effective to bind the Company unless the Company shall have been furnished with a written notice thereof and an authenticated copy of the will and/or such other evidence as the Committee may deem necessary to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions of such Option. 6.8 RIGHTS AS A SHAREHOLDER. An Optionee or a transferee of an Option shall have no rights as a shareholder of the Company with respect to any shares subject to any unexercised Options. 6.9 REQUIRED FILINGS. An Optionee to whom an Option is granted under the terms of the Plan is required to file appropriate reports with the Internal Revenue Service. As a condition of the receipt of an Option hereunder, Optionees shall agree to make necessary filings with the Internal Revenue Service. The Committee shall assist and cooperate with Optionees by providing the necessary information required for compliance of this condition. ARTICLE VII STOCK CERTIFICATES The Company shall not be required to issue or deliver any certificate for shares of Stock purchased upon the exercise of any Option granted hereunder, or any portion thereof, prior to the obtaining of any approval or clearance from any federal or state governmental agency which the Committee shall, in its sole discretion, determine to be necessary or advisable. ARTICLE VIII TERMINATION, AMENDMENT, OR MODIFICATION OF THE PLAN The Board may at any time, upon recommendation of the Committee, terminate, and may at any time and from time to time and in any respect amend or modify the Plan. Provided, however, if the Plan has been submitted to and approved by the shareholders of the Company no such action by the Board may be taken without approval of the majority of the shareholders of the Company which: (a) increases the total number of shares of Stock subject to the Plan, except as contemplated in Section 5.3 hereof; (b) changes the manner of determining the Option price; or (c) withdraws the administration of the Plan from the Committee. ARTICLE IX EMPLOYMENT 9.1 EMPLOYMENT. Nothing in the Plan or any Option granted hereunder or in any Stock Option Agreement shall confer upon a non-employee Director receiving such Option or Stock Option Agreement the status as an employee of the Company. Further, nothing in the Plan or any Option granted hereunder shall in any manner create in any Optionee the right to continue their relationship with the Company or create any vested interest in such relationship, including employment. 9.2 OTHER COMPENSATION PLANS. The adoption of the Plan shall not effect any other stock option, incentive, or other compensation plan in effect for the Company or any of its subsidiaries, nor shall the Plan preclude the Company or any subsidiary thereof from establishing any other forms of incentive or other compensation for employees or non-employee Directors of the Company, or any subsidiary thereof. 9.3 PLAN EFFECT. The Plan shall be binding upon the successors and assigns of the Company. 9.4 TENSE. When used herein nouns in the singular shall include the plural. 9.5 HEADINGS OF SECTIONS ARE NOT PART OF THE PLAN. Headings of articles and sections hereof are inserted for convenience and reference and constitute no part of the Plan. INNOVATIVE MEDICAL SERVICES By: /s/ MICHAEL L. KRALL -------------------- Michael L. Krall, President March 11, 2002 By: /s/ DENNIS ATCHLEY ------------------- Dennis Atchley, Secretary March 11, 2002 -----END PRIVACY-ENHANCED MESSAGE-----