<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. 4)
CARDIODYNAMICS INTERNATIONAL CORPORATION
- -------------------------------------------------------------------------------
(Name of Issuer)
Common Stock
- --------------------------------------------------------------------------------
(Title of Class of Securities)
141597104
- --------------------------------------------------------------------------------
(CUSIP Number)
CardioDynamics Holdings, LLC
c/o Steve Dechant
Del Mar Country Club
P.O. Box 9660
Rancho Santa Fe, CA 92067
(619) 759-5990
- -------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
February 26, 1997
- -------------------------------------------------------------------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ]. (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
(Continued on following pages)
Page 1 of 13 Pages
<PAGE> 2
CUSIP No. 141597104 SCHEDULE 13D Page 2 of 13 Pages
--------------------- -------- --------
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
CARDIODYNAMICS HOLDINGS, LLC
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(2) Check the Appropriate Box if a Member of a Group* (a) [ X ]
(b) [ ]
---------------------------------------------------------------------
(3) SEC Use Only
---------------------------------------------------------------------
(4) SOURCE OF FUNDS*
AF
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
California
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 20,340,490
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 0
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 15,782,243
--------------------------------------------------------
(10) Shared Dispositive Power
0
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
20,304,490
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
63.5%
---------------------------------------------------------------------
(14) Type of Reporting Person*
OO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 2 of 13 Pages
<PAGE> 3
CUSIP No. 141597104 SCHEDULE 13D Page 3 of 13 Pages
--------------------- -------- --------
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
ALLEN PAULSON
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(2) Check the Appropriate Box if a Member of a Group* (a) [ X ]
(b) [ ]
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(3) SEC Use Only
---------------------------------------------------------------------
(4) SOURCE OF FUNDS*
PF
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
USA
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 4,646,000
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 20,304,490
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 20,428,243
--------------------------------------------------------
(10) Shared Dispositive Power
0
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
24,950,490
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
78.0%
---------------------------------------------------------------------
(14) Type of Reporting Person*
IN
---------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 3 of 13 Pages
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CUSIP No. 141597104 SCHEDULE 13D Page 4 of 13 Pages
--------------------- -------- --------
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
JAMES GILSTRAP
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(2) Check the Appropriate Box if a Member of a Group* (a) [ ]
(b) [ ]
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(3) SEC Use Only
---------------------------------------------------------------------
(4) SOURCE OF FUNDS*
PF
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
USA
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 1,046,000
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 20,304,490
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 1,046,000
--------------------------------------------------------
(10) Shared Dispositive Power
0
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
21,350,490
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
66.7%
---------------------------------------------------------------------
(14) Type of Reporting Person*
IN
---------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 4 of 13 Pages
<PAGE> 5
CUSIP No. 141597104 SCHEDULE 13D Page 5 of 13 Pages
--------------------- -------- --------
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
NICHOLAS DIACO
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(2) Check the Appropriate Box if a Member of a Group* (a) [ ]
(b) [ ]
---------------------------------------------------------------------
(3) SEC Use Only
---------------------------------------------------------------------
(4) SOURCE OF FUNDS*
PF
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
USA
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 276,000
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 20,304,490
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 276,000
--------------------------------------------------------
(10) Shared Dispositive Power
0
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
20,580,490
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
64.1%
---------------------------------------------------------------------
(14) Type of Reporting Person*
IN
---------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 5 of 13 Pages
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CUSIP No. 141597104 SCHEDULE 13D Page 6 of 13 Pages
--------------------- -------- --------
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
JOSEPH DIACO
---------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group* (a) [ ]
(b) [ ]
---------------------------------------------------------------------
(3) SEC Use Only
---------------------------------------------------------------------
(4) SOURCE OF FUNDS*
PF
---------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
---------------------------------------------------------------------
(6) Citizenship or Place of Organization
USA
---------------------------------------------------------------------
(7) Sole Voting Power
Number of 0
Shares --------------------------------------------------------
Beneficially (8) Shared Voting Power
Owned by 20,304,490
Each --------------------------------------------------------
Reporting (9) Sole Dispositive Power
Person With 0
--------------------------------------------------------
(10) Shared Dispositive Power
0
--------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
20,304,490
---------------------------------------------------------------------
(12) Check Box if Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
---------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
63.5%
---------------------------------------------------------------------
(14) Type of Reporting Person*
IN
---------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 6 of 13 Pages
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ITEM 1. SECURITY AND ISSUER
The class of securities to which this Statement relates is the common stock
(the "Common Stock") of CardioDynamics International Corporation, a California
corporation ("Issuer"), whose address is 6155 Cornerstone Court East, Suite 125,
San Diego, California 92121.
ITEM 2. IDENTITY AND BACKGROUND
Pursuant to Rule 13d-1(f) promulgated under the Securities Exchange Act of
1934, as amended (the "Act"), the undersigned hereby jointly file this amended
statement on Schedule 13D ("Statement") on behalf of CardioDynamics Holdings,
LLC ("LLC"), a California limited liability company, Allen Paulson, a Member of
LLC, James Gilstrap, a Member of LLC, Nicholas Diaco, a Member of LLC, and
Joseph Diaco, a Member of LLC. The foregoing persons are sometimes hereinafter
referred to collectively as the "Reporting Persons." The Reporting Persons are
making this single, joint filing to comply with the reporting requirements with
respect to Common Stock of the Issuer that each beneficially owns. With respect
to Mr. Paulson's 4,646,000 privately beneficially-owned shares of Common Stock,
this is also a group filing (Paulson and LLC).
A. CardioDynamics Holdings, LLC
(a) CardioDynamics Holdings, LLC.
(b) LLC's business address is c/o Del Mar Country Club, P.O. Box 9660,
Rancho Santa Fe, California 92067.
(c) LLC's business is to acquire and own the Common Stock and other
securities of Issuer as reported in this Statement.
(d)-(e) LLC has not, during the last five years, been convicted in any
criminal proceeding, excluding traffic violations or similar misdemeanors,
nor been a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction as a result of which it was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
(f) LLC is a limited liability company formed under the laws of
California.
B. Allen Paulson -- Member of LLC
(a) Allen Paulson.
(b) Residence address: 6001 Clubhouse Drive, Rancho Santa Fe, CA
92067.
(c) Present principal occupation: private investor.
(d)-(e) Allen Paulson has not, during the last five years, been
convicted in any criminal proceeding, excluding traffic violations or
similar misdemeanors, nor been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction as a result of which he
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such
laws.
Page 7 of 13 Pages
<PAGE> 8
(f) Citizenship: USA.
C. James Gilstrap -- Member of LLC
(a) James Gilstrap.
(b) Residence address: 5067 Shore Drive, Carlsbad, CA 92008.
(c) Present principal occupation: private investor.
(d)-(e) James Gilstrap has not, during the last five years, been
convicted in any criminal proceeding, excluding traffic violations or
similar misdemeanors, nor been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction as a result of which he
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such
laws.
(f) Citizenship: USA.
D. Nicholas Diaco -- Member of LLC
(a) Nicholas Diaco.
(b) Business address: 1301 20th St., Suite 400, Santa Monica, CA
90404.
(c) Present principal occupation: Physician; Cardiology Consultants of
Santa Monica, 1301 20th St., Suite 400, Santa Monica, CA 90404.
(d)-(e) Nicholas Diaco has not, during the last five years, been
convicted in any criminal proceeding, excluding traffic violations or
similar misdemeanors, nor been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction as a result of which he
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such
laws.
(f) Citizenship: USA.
E. Joseph Diaco -- Member of LLC
(a) Joseph Diaco.
(b) Business address: 4700 N. Habana, Suite 403, Tampa, FL 33614.
(c) Present principal occupation: Physician.
(d)-(e) Joseph Diaco has not, during the last five years, been
convicted in any criminal proceeding, excluding traffic violations or
similar misdemeanors, nor been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction as a result of which he
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such
laws.
(f) Citizenship: USA.
Page 8 of 13 Pages
<PAGE> 9
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
LLC used $2,875,000 contributed by its four Members (from their
personal funds) to purchase the securities set forth in Item 5(a) of this
Statement.
Allen Paulson used $1,156,500 of his personal funds to purchase
4,626,000 of the shares of outstanding Common Stock within the 4,646,000 shares
of Common Stock set forth in Item 5(a) of this Statement. Any exercises of
outstanding stock options would also be from his personal funds.
James Gilstrap used $219,000 of his personal funds to purchase 876,000
of the shares of outstanding Common Stock within the 1,046,000 shares of Common
Stock set forth in Item 5(a) of this Statement. Any exercises of outstanding
stock options would also be from his personal funds. Also, he earlier received
150,000 shares of Common Stock from Issuer as a fee for services in connection
with LLC's February 1995 investment in Issuer.
Nicholas Diaco used $1,500 of his personal funds to purchase 6,000 of
the shares of outstanding Common Stock within the 276,000 shares of Common Stock
set forth in Item 5(a) of this Statement. Any exercises of outstanding stock
options would also be from his personal funds. Also, he earlier received 150,000
shares of Common Stock from Issuer as a fee for services in connection with
LLC's February 1995 investment in Issuer.
ITEM 4. PURPOSE OF TRANSACTION
LLC acquired control of Issuer through election of a majority of
Issuer's Board of Directors on May 15, 1995, and retains that control. The
individual Reporting Persons' acquisitions of securities have been for
investment purposes.
(a) See Items 6.d, 6.e, 6.i and 6.j, which are incorporated
herein by reference. With respect to acquisitions by other Reporting Persons,
see Item 5(c)(4), discussed below.
(b) None.
(c) None.
(d) None (see previous Statement).
(e) None.
(f) None.
(g) None.
(h) None.
(i) None.
(j) None.
The Members of LLC have no such plans or proposals, or purposes, apart
from LLC's.
Page 9 of 13 Pages
<PAGE> 10
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) LLC beneficially owns 15,682,243 shares of Common Stock outright, and
beneficially owns (by virtue of its sole voting power) an additional 4,522,247
shares of Common Stock owned by others which LLC holds irrevocable proxies to
vote. LLC also beneficially owns, by virtue of its right to acquire them from
Issuer, 100,000 shares of Common Stock issuable upon conversion of the Fifth
Amended and Restated Secured Convertible Promissory Note. Together, all this
represents 63.5% of the Common Stock under the Rule 13d-3(d)(1) calculation
(with 31,872,628 shares outstanding today).
Other than through the LLC, the Members have no such beneficial ownership
except for 4,646,000 shares beneficially owned by Mr. Paulson, 1,046,000 shares
beneficially owned by Mr. Gilstrap and 276,000 shares beneficially owned by Mr.
N. Diaco. Together, the LLC and its Members beneficially own 81.7% of the
Issuer's Common Stock.
Together, LLC and Mr. Paulson beneficially own 78.0% of the Issuer's Common
Stock.
(b) The Reporting Persons' voting and dispositive power is set forth in the
cover pages under items 7-10 on pages 2-6 of this Statement. Each of Mr.
Paulson, Mr. Gilstrap and Mr. N. Diaco has sole voting power and sole
dispositive power for his respective Issuer shares. In addition, each Member of
LLC has given Mr. Paulson a proxy to vote his respective LLC interests. Mr.
Paulson has a sufficient interest in the LLC, even without the proxies, to
control the disposition of LLC's Issuer shares.
(c) No other transactions in the Common Stock were effected by LLC, Mr.
Paulson or any of the other Members since the filing of LLC's Amendment No. 3 to
Schedule 13D, except for the following:
(1) From April 1 through June 11, 1996, LLC exercised (in
eight separate installments) its right to make $1,800,000 of further advances
under the Third Amended and Restated Convertible Promissory Note.
(2) On June 12, 1996, LLC converted $1,800,000 principal
amount of the Third Amended and Restated Secured Convertible Promissory Note
into 7,200,000 unregistered shares of Common Stock. This resulted in Issuer
issuing to LLC as of June 30, 1996 the Fourth Amended and Restated Secured
Convertible Promissory Note in place of the Third Amended and Restated Secured
Convertible Promissory Note.
(3) As of February 1, 1997, the Company and LLC amended
various terms of the Fourth Amended and Restated Secured Convertible Promissory
Note. This resulted in Issuer issuing to LLC the Fifth Amended and Restated
Secured Convertible Promissory Note in place of the Fourth Amended and Restated
Secured Convertible Promissory Note.
(4) Pursuant to Issuer's 1995 Stock Option/Stock Issuance
Plan, each of Messrs. Paulson, Gilstrap and N. Diaco has, on the last day of
each month beginning August 1995, been automatically granted options to purchase
1,000 shares of Issuer Common Stock, with an exercise price equal to the fair
market value of such stock as of each such date, in respect of his service as a
non-employee director. Such automatic option grants were not considered to
constitute beneficial ownership of the underlying shares until June 12, 1996,
when Issuer's shareholders voted to approve such Plan. Through March 31, 1997,
each of Messrs. Paulson, Gilstrap and N. Diaco has received automatic option
grants for a per-person total of 20,000 shares.
Page 10 of 13 Pages
<PAGE> 11
(d) No other person is known to have the right to receive or the power
to direct the receipt of dividends from, or the proceeds from the sale of, the
securities.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER
(a) The relationship among the Members of LLC is governed by the
Operating Agreement of LLC, as amended from time to time.
(b) Purchase Agreement. See Item 7.c.
(c) Amendment of Purchase Agreement. See Item 7.m.
(d) Fourth Amended and Restated Secured Convertible Promissory Note
(convertible into Common Stock, currently at $0.25 per share; also provides a
matching purchase right in favor of LLC in the event of Common Stock issuances
by Issuer). Secured by all assets of Issuer. See Items 7.d, 7.j, 7.k, 7.n and
7.o.
(e) Fifth Amended and Restated Secured Convertible Promissory Note
(convertible into Common Stock, currently at $0.25 per share; also provides a
matching purchase right in favor of LLC in the event of Common Stock issuances
by Issuer). Secured by all assets of Issuer. See Items 7.d, 7.j, 7.k, 7.n, 7.o
and 7.p.
(f) Agreement and Irrevocable Proxy (five-year proxy to LLC from
DaVinci Scientific Corporation -- 3,902,956 shares of Common Stock; includes an
agreement to vote such shares so as to cause the election of one nominee of
DaVinci Scientific Corporation as a director of Issuer). See Item 7.e. Now
applicable to those shares in the hands of various transferees.
(g) Agreement and Irrevocable Proxy (five-year proxy to LLC from Dr.
L.S. Smith -- 96,291 shares of Common Stock currently outstanding and 120,365
shares of Common Stock issuable upon exercise of warrants). See Item 7.f.
(h) Agreement and Irrevocable Proxy (five-year proxy to LLC from Dallas
Gold & Silver Exchange, Inc. -- 523,000 shares of Common Stock). See Item 7.g.
(i) Agreement of Right of First Refusal (Dr. L.S. Smith in favor of LLC
for three years). See Item 7.h.
(j) Agreement of Right of First Refusal (Dallas Gold & Silver Exchange,
Inc. in favor of LLC for three years). See Item 7.i.
(k) Investment Agreement. See Item 7.l.
(l) 1995 Stock Option/Stock Issuance Plan of Issuer, as amended through
August 15, 1995 (entitling each non-employee director of Issuer to automatic
grants of 1,000 stock options on the last day of each month of service beginning
August 1995). Messrs. Paulson, Gilstrap and N. Diaco are non-employee directors
of Issuer. See Item 7.q.
The Members have no such contracts, arrangements, understandings or
relationships.
Page 11 of 13 Pages
<PAGE> 12
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
a. Letter dated January 6, 1995 from Messrs. Paulson, Gilstrap and
Walters to Messrs. Tate and Schmeltzer (previously filed).
b. Letter dated February 6, 1995 from Arter & Hadden to Messrs.
Paulson, Gilstrap and Walters (previously filed).
c. Purchase Agreement dated February 7, 1995 between LLC and Issuer
(previously filed).
d. Secured Convertible Promissory Note dated February 7, 1995 from
Issuer to LLC (previously filed).
e. Agreement and Irrevocable Proxy dated February 2, 1995 between LLC
and DaVinci Scientific Corporation (previously filed).
f. Agreement and Irrevocable Proxy dated February 7, 1995 between LLC
and Dr. L.S. Smith (previously filed).
g. Agreement and Irrevocable Proxy dated February 7, 1995 between LLC
and Dallas Gold & Silver Exchange, Inc. (previously filed).
h. Agreement of Right of First Refusal dated February 7, 1995 between
LLC and Dr. L.S. Smith (previously filed).
i. Agreement of Right of First Refusal dated February 7, 1995 between
LLC and Dallas Gold & Silver Exchange, Inc. (previously filed).
j. First Amended and Restated Secured Convertible Promissory Note from
Issuer to LLC, as amended March 30, 1995 (previously filed).
k. Second Amended and Restated Secured Convertible Promissory Note from
Issuer to LLC, as amended May 19, 1995 (previously filed).
l. Investment Agreement, as amended, dated as of April 12, 1995 between
Issuer and LLC (previously filed).
m. Amendment of Purchase Agreement, dated March 31, 1996 between LLC
and Issuer (previously filed).
n. Third Amended and Restated Secured Convertible Promissory Note from
Issuer to LLC, as amended March 31, 1996 (previously filed).
o. Fourth Amended and Restated Secured Convertible Promissory Note from
Issuer to LLC, as amended as of June 30, 1996.
p. Fifth Amended and Restated Secured Convertible Promissory Note from
Issuer to LLC, as amended as of February 1, 1997.
q. 1995 Stock Option/Stock Issuance Plan of Issuer, as amended through
August 15, 1995.
r. Agreement of Joint Filing, dated April 7, 1997 among LLC and Messrs.
A. Paulson, J. Gilstrap, N. Diaco and J. Diaco.
Page 12 of 13 Pages
<PAGE> 13
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
April 7, 1997 CARDIODYNAMICS HOLDINGS, LLC
By:/s/ Allen Paulson
--------------------------
Allen Paulson, Member
By:/s/ James Gilstrap
--------------------------
James Gilstrap, Member
/s/ Allen Paulson
-----------------------------
ALLEN PAULSON
/s/ James Gilstrap
-----------------------------
JAMES GILSTRAP
/s/ Nicholas Diaco
-----------------------------
NICHOLAS DIACO
/s/ Joseph Diaco
-----------------------------
JOSEPH DIACO
Attention: Intentional misstatements or omissions of fact constitute Federal
criminal violations (see 18 U.S.C. 1001).
<PAGE> 14
EXHIBIT INDEX
7.o. Fourth Amended and Restated Secured Convertible Promissory
Note from Issuer to LLC, as amended as of June 30, 1996.
7.p. Fifth Amended and Restated Secured Convertible Promissory Note
from Issuer to LLC, as amended as of February 1, 1997.
7.q. 1995 Stock Option/Stock Issuance Plan of Issuer, as amended
through August 15, 1995.
7.r. Agreement of Joint Filing.
<PAGE> 1
EXHIBIT 7.o.
FOURTH AMENDED AND RESTATED
SECURED CONVERTIBLE
PROMISSORY NOTE
$25,000.00 February 7, 1995, as
amended March 30, 1995,
May 19, 1995,
March 31, 1996
and June 30, 1996
FOR VALUE RECEIVED, CardioDynamics International Corporation, a
California corporation ("Maker"), 6155 Cornerstone Court East, Suite 125, San
Diego, California 92121, hereby promises to pay to the order of CardioDynamics
Holdings, LLC, a California limited liability company ("Lender"), 5067 Shore
Drive, Carlsbad, California 92008, TWENTY-FIVE THOUSAND DOLLARS ($25,000.00), at
such address of Lender, in lawful money of the United States together with
interest on the principal balance outstanding at the lesser of (a) eight percent
per annum, or (b) if less, the maximum rate permissible by applicable law.
Interest shall be calculated on the basis of a 360-day year for the actual
number of days elapsed, and shall be payable in arrears on each March 31, June
30, September 30 and December 31. The principal amount of and all unpaid accrued
interest under the Note shall become due and payable in full on March 31, 1998.
This Note is an amendment and restatement of a certain Secured Convertible
Promissory Note dated February 7, 1995 in the original principal amount of
$100,000.
1. Additional Provisions Relating to Debt Characteristics.
This Note may not be prepaid in full or in part.
This Note is secured by the collateral identified and described as
security therefor in that certain Security Agreement, dated as of February 7,
1995, by and between Maker and Lender and the collateral identified and
described as security therefor in that certain Patent Security Agreement, dated
as of February 7, 1995, by and between Maker and Lender (collectively, the
"Security Agreement").
Upon the happening of any of the following events, Lender may, at its
option, declare immediately due and payable the entire unpaid principal amount
of this Note, together with all interest thereon, plus any other amounts payable
at the time of such declaration pursuant to this Note. Such events are the
following: (1) failure to make any interest payment as it falls due, (2) Maker
shall admit in writing its inability to pay its debts as they become due, shall
make a general assignment for the benefit of creditors or shall file any
petition or action for relief under any bankruptcy, reorganization, insolvency
or moratorium law,
<PAGE> 2
or any other law or laws for the relief of, or relating to,
debtors; or (3) an involuntary petition shall be filed against Maker under any
bankruptcy, reorganization, insolvency or moratorium law, or any other law or
laws for the relief of, or relating to, debtors unless such petition shall be
dismissed or vacated within sixty (60) days of the date thereof. Lender shall
further be entitled to the remedies provided in the event of default provided in
the Security Agreement.
Maker hereby waives diligence, presentment, demand, protest or other
notice of any kind.
2. Conversion.
2.1 Conversion Privilege. Lender has the right, at Lender's option, at
any time after February 6, 1996 and prior to payment in full of the principal
balance of this Note, to convert this Note, in accordance with the provisions
hereof, in whole or in part, into fully paid and nonassessable shares of Common
Stock of Maker. The number of shares of Common Stock into which this Note may be
converted shall be determined by dividing the aggregate principal amount
together with all accrued interest to the date of conversion by the Conversion
Price (as defined below) in effect at the time of such conversion. The initial
Conversion Price shall be equal to $0.50. On March 31, 1996, the Conversion
Price shall decrease to $0.25, subject to further possible adjustment under
subsection 2.2 hereof.
Before Lender shall be entitled to convert this Note into shares of
Common Stock, it shall surrender this Note at the office of Maker and shall give
written notice by mail, postage prepaid, to Maker at its principal corporate
office, of the election to convert the same, and shall state therein the name or
names in which the certificate or certificates for shares of Common Stock are to
be issued. Maker shall, as soon as practicable thereafter, issue and deliver at
such office to the holder of this Note a certificate or certificates for the
number of shares of Common Stock to which the holder of this Note shall be
entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of this
Note, and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock as of such date.
Upon the conversion of this Note, Lender shall surrender this Note,
duly endorsed, at the principal office of Maker. At its expense, Maker shall, as
soon as practicable thereafter, issue and deliver to such Lender at such
principal office a certificate or certificates for the number of shares of such
Common Stock to which the Lender shall be entitled upon such conversion (bearing
such legends as may be required by applicable state and federal securities laws
in the opinion of counsel to Maker), together with any other securities and
property to which Lender is entitled upon such conversion under the terms of
this Note. If less than the entire Note is converted, Maker shall issue to
Lender a new Note, of like tenor, for the remaining principal amount.
-2-
<PAGE> 3
2.2 Conversion Price Adjustments. In the event Maker should at
any time or from time to time after the date of issuance hereof fix a record
date for the effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled to receive
a dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Price of this Note shall be appropriately decreased so that the
number of shares of Common Stock issuable upon conversion of this Note shall be
increased in proportion to such increase of outstanding shares.
If the number of shares of Common Stock outstanding at any time after
the date hereof is decreased by a combination of the outstanding shares of
Common Stock, then, following the record date of such combination, the
Conversion Price for this Note shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion hereof shall be
decreased in proportion to such decrease in outstanding shares.
In the event Maker shall declare a distribution payable in securities
of other persons, evidences of indebtedness issued by Maker or other persons,
assets (excluding cash dividends) or options or rights, then, in each such case
for the purpose of this subsection 2.2, the holder hereof shall be entitled to a
proportionate share of any such distribution as though such holder was the
holder of the number of shares of Common Stock of Maker into which this Note is
convertible as of the record date fixed for the determination of the holders of
Common Stock of Maker entitled to receive such distribution.
-3-
<PAGE> 4
2.3 Notices of Record Date, etc. In the event of:
o any taking by Maker of a record of the holders of any
class of securities of Maker for the purpose of
determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend
payable out of earned surplus at the same rate as
that of the last such cash dividend theretofore paid)
or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of
any class or any other securities or property, or to
receive any other right; or
o any capital reorganization of Maker, any
reclassification or recapitalization of the capital
stock of Maker or any transfer of all or
substantially all of the assets of Maker to any other
person or any consolidation or merger involving
Maker; or
o any voluntary or involuntary dissolution, liquidation
or winding-up of Maker,
Maker will mail to the holder of this Note at least ten (10) days prior to the
earliest date specified therein, a notice specifying:
(a) The date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right; and,
(b) The date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding-up is expected to become effective and the
record date for determining shareholders entitled to vote thereon.
2.4 Reservation of Stock Issuable Upon Conversion. Maker shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
Note such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of the Note; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the entire outstanding principal amount of this Note,
in addition to such other remedies as shall be available to the holder of this
Note, Maker will use its reasonable best efforts to take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purposes.
-4-
<PAGE> 5
3. Matching Right.
If during the term of this Note, Maker shall issue any Common Stock to
any person in any circumstances, Lender shall have the right (exercisable by
written notice of exercise delivered to Maker no later than 60 days after
Maker's written notice to Lender of such issuance to such other person,
accompanied by a cashier's check for payment in full), but not the obligation,
to purchase from Maker (at the Conversion Price in effect on the date of the
issuance to the other person) the same number of shares of Common Stock issued
to the other person. This right may be exercised any number of times, and no
non-exercise shall affect such right in future instances.
4. Miscellaneous.
The rights and obligations of Maker and Lender shall be binding upon
and benefit the successors, assigns, heirs, administrators, and transferees of
Maker and Lender.
Lender shall not be deemed by any act or omission or commission to have
waived any of its rights or remedies hereunder unless such waiver is in writing
and expressly stated as such and signed by Lender and then only to the extent
specifically set forth in the writing. A waiver of one event shall not be
construed as continuing or a bar to or waiver of any right or remedy as to a
subsequent event. Maker expressly agrees that this Note, or any payment
hereunder, may be extended from time to time and consents to the acceptance of
security, if any, or the release of security, if any, from this Note, all
without in any way affecting the liability of Maker.
Any notice that Maker or Lender desires to give to the other related to
this Note shall be in writing and shall be deemed delivered when personally
delivered by any courier service which obtains a receipt upon delivery to an
officer or registered agent of the respective corporation, or two business days
after deposit in the United States mail, certified mail, return receipt
requested, postage prepaid, addressed to the party being notified at its
respective address specified in this Note.
If Lender should institute collection efforts, of any nature
whatsoever, to attempt to collect any and all amounts due hereunder upon the
default of Maker on this Note or under the Security Agreement, or any other
efforts to enforce any of its rights under this Note, Maker shall be liable to
pay to Lender immediately and without demand all reasonable costs and expenses
of collection incurred by Lender, including without limitation reasonable
attorneys fees, whether or not suit or other action or proceeding be instituted
and specifically including but not limited to collection efforts that may be
made on appeal or through a bankruptcy court, and all such sums shall be fully
secured by all instruments securing this Note.
-5-
<PAGE> 6
The provisions of this Note are intended by Maker to be severable and
divisible and the invalidity or unenforceability of a provision or term herein
shall not invalidate or render unenforceable the remainder of this Note or any
part thereof.
This Note shall be construed in accordance with the laws of the State
of California without giving effect to principles of conflict of laws.
IN WITNESS WHEREOF, Maker has executed this instrument in San Diego,
California.
MAKER:
CARDIODYNAMICS INTERNATIONAL
CORPORATION
By:/s/ Richard E. Otto
---------------------------------
Richard E. Otto, President
By:/s/ Stephenson M. Dechant
---------------------------------
Stephenson M. Dechant, Secretary
-6-
<PAGE> 1
EXHIBIT 7.p.
FIFTH AMENDED AND RESTATED
SECURED CONVERTIBLE
PROMISSORY NOTE
$25,000.00 February 7, 1995, as
amended March 30, 1995,
May 19, 1995,
March 31, 1996
June 30, 1996,
and February 1, 1997
FOR VALUE RECEIVED, CardioDynamics International Corporation, a
California corporation ("Maker"), 6155 Cornerstone Court East, Suite 125, San
Diego, California 92121, hereby promises to pay to the order of CardioDynamics
Holdings, LLC, a California limited liability company ("Lender"), 5067 Shore
Drive, Carlsbad, California 92008, TWENTY-FIVE THOUSAND DOLLARS ($25,000.00), at
such address of Lender, in lawful money of the United States together with
interest on the principal balance outstanding at the lesser of (a) seven and
one-half percent per annum, or (b) if less, the maximum rate permissible by
applicable law. Interest shall be calculated on the basis of a 360-day year for
the actual number of days elapsed, and shall be payable in arrears on each March
31, June 30, September 30 and December 31. The principal amount of and all
unpaid accrued interest under the Note shall become due and payable in full on
March 31, 2000. This Note is an amendment and restatement of a certain Secured
Convertible Promissory Note dated February 7, 1995 in the original principal
amount of $100,000.
1. Additional Provisions Relating to Debt Characteristics.
This Note may not be prepaid in full or in part.
This Note is secured by the collateral identified and described as
security therefor in that certain Security Agreement, dated as of February 7,
1995, by and between Maker and Lender and the collateral identified and
described as security therefor in that certain Patent Security Agreement, dated
as of February 7, 1995, by and between Maker and Lender (collectively, the
"Security Agreement").
Upon the happening of any of the following events, Lender may, at its
option, declare immediately due and payable the entire unpaid principal amount
of this Note, together with all interest thereon, plus any other amounts payable
at the time of such declaration pursuant to this Note. Such events are the
following: (1) failure to make any interest payment as it falls due, (2) Maker
shall admit in writing its inability to pay its debts as they become due, shall
make a general assignment for the benefit of creditors or shall file any
petition or action for relief under any bankruptcy, reorganization, insolvency
or moratorium law, or any other law or laws for the relief of, or relating to,
debtors; or (3) an involuntary petition shall
<PAGE> 2
be filed against Maker under any bankruptcy, reorganization, insolvency or
moratorium law, or any other law or laws for the relief of, or relating to,
debtors unless such petition shall be dismissed or vacated within sixty (60)
days of the date thereof. Lender shall further be entitled to the remedies
provided in the event of default provided in the Security Agreement.
Maker hereby waives diligence, presentment, demand, protest or other
notice of any kind.
2. Conversion.
2.1 Conversion Privilege. Lender has the right, at Lender's
option, at any time after February 6, 1996 and prior to payment in full of the
principal balance of this Note, to convert this Note, in accordance with the
provisions hereof, in whole or in part, into fully paid and nonassessable shares
of Common Stock of Maker. The number of shares of Common Stock into which this
Note may be converted shall be determined by dividing the aggregate principal
amount together with all accrued interest to the date of conversion by the
Conversion Price (as defined below) in effect at the time of such conversion.
The initial Conversion Price shall be equal to $0.50. On March 31, 1996, the
Conversion Price shall decrease to $0.25, subject to further possible adjustment
under subsection 2.2 hereof. On each of March 31, 1998 and March 31, 1999, the
Conversion Price shall increase by 20% from its immediately preceding level.
Before Lender shall be entitled to convert this Note into shares of
Common Stock, it shall surrender this Note at the office of Maker and shall give
written notice by mail, postage prepaid, to Maker at its principal corporate
office, of the election to convert the same, and shall state therein the name or
names in which the certificate or certificates for shares of Common Stock are to
be issued. Maker shall, as soon as practicable thereafter, issue and deliver at
such office to the holder of this Note a certificate or certificates for the
number of shares of Common Stock to which the holder of this Note shall be
entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of this
Note, and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock as of such date.
Upon the conversion of this Note, Lender shall surrender this Note,
duly endorsed, at the principal office of Maker. At its expense, Maker shall, as
soon as practicable thereafter, issue and deliver to such Lender at such
principal office a certificate or certificates for the number of shares of such
Common Stock to which the Lender shall be entitled upon such conversion (bearing
such legends as may be required by applicable state and federal securities laws
in the opinion of counsel to Maker), together with any other securities and
property to which Lender is entitled upon such conversion under the terms
-2-
<PAGE> 3
of this Note. If less than the entire Note is converted, Maker shall issue to
Lender a new Note, of like tenor, for the remaining principal amount.
2.2 Conversion Price Adjustments. In the event Maker should at
any time or from time to time after the date of issuance hereof fix a record
date for the effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled to receive
a dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Price of this Note shall be appropriately decreased so that the
number of shares of Common Stock issuable upon conversion of this Note shall be
increased in proportion to such increase of outstanding shares.
If the number of shares of Common Stock outstanding at any time after
the date hereof is decreased by a combination of the outstanding shares of
Common Stock, then, following the record date of such combination, the
Conversion Price for this Note shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion hereof shall be
decreased in proportion to such decrease in outstanding shares.
In the event Maker shall declare a distribution payable in securities
of other persons, evidences of indebtedness issued by Maker or other persons,
assets (excluding cash dividends) or options or rights, then, in each such case
for the purpose of this subsection 2.2, the holder hereof shall be entitled to a
proportionate share of any such distribution as though such holder was the
holder of the number of shares of Common Stock of Maker into which this Note is
convertible as of the record date fixed for the determination of the holders of
Common Stock of Maker entitled to receive such distribution.
-3-
<PAGE> 4
2.3 Notices of Record Date, etc. In the event of:
o any taking by Maker of a record of the holders of any
class of securities of Maker for the purpose of
determining the holders thereof who are entitled to
receive any dividend (other than a cash dividend
payable out of earned surplus at the same rate as
that of the last such cash dividend theretofore paid)
or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of
any class or any other securities or property, or to
receive any other right; or
o any capital reorganization of Maker, any
reclassification or recapitalization of the capital
stock of Maker or any transfer of all or
substantially all of the assets of Maker to any other
person or any consolidation or merger involving
Maker; or
o any voluntary or involuntary dissolution,
liquidation or winding-up of Maker,
Maker will mail to the holder of this Note at least ten (10) days prior to the
earliest date specified therein, a notice specifying:
(a) The date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right; and,
(b) The date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding-up is expected to become effective and the
record date for determining shareholders entitled to vote thereon.
2.4 Reservation of Stock Issuable Upon Conversion. Maker shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
Note such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of the Note; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the entire outstanding principal amount of this Note,
in addition to such other remedies as shall be available to the holder of this
Note, Maker will use its reasonable best efforts to take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purposes.
-4-
<PAGE> 5
3. Matching Right.
If during the term of this Note, Maker shall issue any Common Stock to
any person in any circumstances, Lender shall have the right (exercisable by
written notice of exercise delivered to Maker no later than 60 days after
Maker's written notice to Lender of such issuance to such other person,
accompanied by a cashier's check for payment in full), but not the obligation,
to purchase from Maker (at the Conversion Price in effect on the date of the
issuance to the other person) the same number of shares of Common Stock issued
to the other person. This right may be exercised any number of times, and no
non-exercise shall affect such right in future instances.
4. Miscellaneous.
The rights and obligations of Maker and Lender shall be binding upon
and benefit the successors, assigns, heirs, administrators, and transferees of
Maker and Lender.
Lender shall not be deemed by any act or omission or commission to have
waived any of its rights or remedies hereunder unless such waiver is in writing
and expressly stated as such and signed by Lender and then only to the extent
specifically set forth in the writing. A waiver of one event shall not be
construed as continuing or a bar to or waiver of any right or remedy as to a
subsequent event. Maker expressly agrees that this Note, or any payment
hereunder, may be extended from time to time and consents to the acceptance of
security, if any, or the release of security, if any, from this Note, all
without in any way affecting the liability of Maker.
Any notice that Maker or Lender desires to give to the other related to
this Note shall be in writing and shall be deemed delivered when personally
delivered by any courier service which obtains a receipt upon delivery to an
officer or registered agent of the respective corporation, or two business days
after deposit in the United States mail, certified mail, return receipt
requested, postage prepaid, addressed to the party being notified at its
respective address specified in this Note.
If Lender should institute collection efforts, of any nature
whatsoever, to attempt to collect any and all amounts due hereunder upon the
default of Maker on this Note or under the Security Agreement, or any other
efforts to enforce any of its rights under this Note, Maker shall be liable to
pay to Lender immediately and without demand all reasonable costs and expenses
of collection incurred by Lender, including without limitation reasonable
attorneys fees, whether or not suit or other action or proceeding be instituted
and specifically including but not limited to collection efforts that may be
made on appeal or through a bankruptcy court, and all such sums shall be fully
secured by all instruments securing this Note.
-5-
<PAGE> 6
The provisions of this Note are intended by Maker to be severable and
divisible and the invalidity or unenforceability of a provision or term herein
shall not invalidate or render unenforceable the remainder of this Note or any
part thereof.
This Note shall be construed in accordance with the laws of the State
of California without giving effect to principles of conflict of laws.
IN WITNESS WHEREOF, Maker has executed this instrument in San Diego,
California.
MAKER:
CARDIODYNAMICS INTERNATIONAL
CORPORATION
By:/s/ Richard E. Otto
--------------------------------
Richard E. Otto, President
By:/s/ Stephenson M. Dechant
--------------------------------
Stephenson M. Dechant, Secretary
-6-
<PAGE> 1
EXHIBIT 7.q.
CARDIODYNAMICS INTERNATIONAL CORPORATION
1995 STOCK OPTION/STOCK ISSUANCE PLAN
(AS AMENDED AND RESTATED THROUGH AUGUST 15, 1995)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option/Stock Issuance Plan (the "Plan") is
intended to promote the interests of CardioDynamics International Corporation, a
California corporation, by providing eligible persons with the opportunity to
acquire a proprietary interest, or otherwise increase their proprietary
interest, in the Corporation as an incentive for them to remain in the service
of the Corporation.
Capitalized terms not otherwise defined shall have the
meanings assigned to such terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity
programs:
(i) the Discretionary Option Grant Program under
which eligible persons may, at the discretion of the Plan Administrator,
be granted options to purchase shares of common stock of the Corporation,
(ii) the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator, be issued
shares of common stock of the Corporation directly, either through the
immediate purchase of such shares or as a bonus for services rendered the
Corporation (or any Parent or Subsidiary), and
(iii) the Automatic Option Grant Program under which
non-employee directors shall automatically receive option grants at
periodic intervals to purchase shares of common stock of the Corporation.
B. The provisions of Articles One and Five shall
apply to all equity programs under the Plan and shall accordingly govern the
interests of all persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered by a compensation
committee ("Committee") consisting of two (2) or more Board members who assume
full responsibility for the administration of the Plan (the "Plan
Administrator"). Members of such compensation committee shall serve for such
period of time as the Board may determine and shall be subject to removal by the
Board at any time.
B. The Plan Administrator shall have full power and
authority (subject to the express provisions of the Plan) to establish such
rules and regulations as it may deem appropriate for the proper administration
of the Plan and to make such determinations under, and issue such
interpretations of, the Plan and any outstanding option grants or stock
issuances as it may deem necessary or advisable. Decisions of the
<PAGE> 2
Plan Administrator shall be final and binding on all parties who have an
interest in the Plan or any outstanding option or stock issuance.
C. Notwithstanding the above, the administration of
the Automatic Option Grant Program under Article Three shall be self executing
in accordance with the terms and conditions thereof and the Plan Administrator
shall not exercise any discretionary functions in respect to matters governed by
Article Three.
D. The Plan Administrator shall, within the scope of
its administrative jurisdiction under the Plan, have full authority to
determine, (i) with respect to the option grants under the Discretionary Option
Grant Program, which eligible persons are to receive option grants, the time or
times when such option grants are to be made, the number of shares to be covered
by each such grant, the status of the granted option as either an Incentive
Option or a Non-Statutory Option, the time or times at which each option is to
become exercisable, the vesting schedule (if any) applicable to the option
shares and the maximum term for which the option is to remain outstanding and
(ii) with respect to stock issuances under the Stock Issuance Program, which
eligible persons are to receive stock issuances, the time or times when such
issuances are to be made, the number of shares to be issued to each Participant,
the vesting schedule (if any) applicable to the issued shares and the
consideration to be paid by the Participant for such shares.
E. The Plan Administrator shall have the absolute
discretion either to grant options in accordance with the Discretionary Option
Grant Program or to effect stock issuances in accordance with the Stock Issuance
Program.
IV. OPTION GRANTS AND STOCK ISSUANCES
A. Subject to Section V.B below, the persons eligible
to receive stock issuances under the Stock Issuance Program ("Participant")
and/or option grants pursuant to the Discretionary Option Grant Program
("Optionee") are as follows:
(i) officers and other employees of the Corporation
(or its parent or subsidiary corporations) who render services which
contribute to the management, growth and financial success of the
Corporation (or its parent or subsidiary corporations);
(ii) those consultants or other independent
contractors who provide valuable services to the Corporation (or its
parent or subsidiary corporations);
provided that, notwithstanding any other provision of this Plan, no option
grants under the Discretionary Option Grant Program or stock issuances under the
Stock Issuance Program shall be made to any director hereunder unless, at the
time of such option or issuance, the Plan Administrator is a committee composed
entirely of non-employee Board members none of whom have received an option
grant or stock issuance under this Plan or any other stock plan of the
Corporation (or any parent or subsidiary corporation) other than under the
Automatic Option Grant Program during the one year prior to service on the
committee or during such service.
B. The individuals eligible to receive option grants
under the Automatic Option Grant Program shall be those individuals who serve as
non-employee Board members during the term of the Plan.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares
of authorized but unissued or reacquired common stock of the Corporation
("Common Stock"), including shares repurchased by the Corporation on the open
market. The maximum number of shares of Common Stock which may be issued over
the term of the Plan shall not exceed 1,529,000 shares.
2.
<PAGE> 3
B. No one person participating in the Plan may
receive options, separately exercisable stock appreciation rights and direct
stock issuances for more than 800,000 shares of Common Stock in the aggregate
over the term of the Plan.
C. Shares of Common Stock subject to outstanding
options shall be available for subsequent issuance under the Plan to the extent
(i) the options expire or terminate for any reason prior to exercise in full or
(ii) the options are cancelled in accordance with the cancellation-regrant
provisions of Article Two. All shares issued under the Plan, whether or not
those shares are subsequently repurchased by the Corporation pursuant to its
repurchase rights under the Plan, shall reduce on a share-for-share basis the
number of shares of Common Stock available for subsequent issuance under the
Plan. In addition, should the exercise price of an option under the Plan be paid
with shares of Common Stock or should shares of Common Stock otherwise issuable
under the Plan be withheld by the Corporation in satisfaction of the withholding
taxes incurred in connection with the exercise of an option or the vesting of a
stock issuance under the Plan, then the number of shares of Common Stock
available for issuance under the Plan shall be reduced by the gross number of
shares for which the option is exercised or which vest under the stock issuance,
and not by the net number of shares of Common Stock issued to the holder of such
option or stock issuance.
D. Should any change be made to the Common Stock by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, appropriate
adjustments shall be made to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the maximum number and/or class of securities for
which the share reserve is to increase automatically each year, (iii) the number
and/or class of securities for which any one person may be granted options,
separately exercisable stock appreciation rights and direct stock issuances over
the term of the Plan, (iv) the number and/or class of securities for which
automatic option grants are to be subsequently made under the Automatic Option
Grant Program and (v) the number and/or class of securities and the exercise
price per share in effect under each outstanding option in order to prevent the
dilution or enlargement of benefits thereunder. The adjustments determined by
the Plan Administrator shall be final, binding and conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the
Plan Administrator but shall not be less than eighty-five percent (85%) of the
Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due
upon exercise of the option and shall, subject to the provisions of Section I of
Article Five and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation,
3.
<PAGE> 4
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
exercise date, or
(iii) to the extent the option is exercised for
vested shares, through a special sale and remittance procedure pursuant
to which the Optionee shall concurrently provide irrevocable written
instructions to (a) a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out
of the sale proceeds available on the settlement date, sufficient funds
to cover the aggregate exercise price payable for the purchased shares
plus all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise and
(b) the Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale
transaction.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made
on the exercise date.
B. Exercise and Term of Options. Each option shall be
exercisable at such time or times, during such period and for such number of
shares as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term in excess
of ten (10) years measured from the option grant date.
C. Effect of Termination of Service.
1. The following provisions shall govern the
exercise of any options held by the Optionee at the time of cessation of Service
or death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain exercisable
for such period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option, but
no such option shall be exercisable after the expiration of the option
term.
(ii) Any option exercisable in whole or in part by
the Optionee at the time of death may be subsequently exercised by the
personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's will
or in accordance with the laws of descent and distribution.
(iii) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However,
the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to be outstanding to the extent it is not exercisable
for vested shares on the date of such cessation of Service.
(iv) In the event of a Corporate Transaction,the
provisions of Section III of this Article Two shall govern the period for
which the outstanding options are to remain exercisable following the
Optionee's cessation of Service and shall supersede any provisions to the
contrary in this section.
4.
<PAGE> 5
2. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option
is to remain exercisable following the Optionee's cessation of Service
from the period otherwise in effect for that option to such greater
period of time as the Plan Administrator shall deem appropriate, but in
no event beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but also
with respect to one or more additional installments in which the Optionee
would have vested under the option had the Optionee continued in Service.
D. Shareholder Rights. The holder of an option shall
have no shareholder rights with respect to the shares subject to the option
until such person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall
have the discretion to grant options which are exercisable for unvested shares
of Common Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the exercise
price paid per share, any or all of those unvested shares. The terms upon which
such repurchase right shall be exercisable (including the period and procedure
for exercise and the appropriate vesting schedule for the purchased shares)
shall be established by the Plan Administrator and set forth in the document
evidencing such repurchase right.
F. Limited Transferability of Options. During the
lifetime of the Optionee, the option shall be exercisable only by the Optionee
and shall not be assignable or transferable other than by will or by the laws of
descent and distribution following the Optionee's death. However, a
Non-Statutory Option may be assigned in accordance with the terms of a Qualified
Domestic Relations Order within the meaning of Internal Revenue Code Section
414(p). The assigned option may only be exercised by the person or persons who
acquire a proprietary interest in the option pursuant to such Qualified Domestic
Relations Order. The terms applicable to the assigned option (or portion
thereof) shall be the same as those in effect for the option immediately prior
to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Five shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when issued under the
Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be
granted to Employees.
B. Exercise Price. The exercise price per share
shall not be less than one hundred percent (100%) of the Fair Market Value per
share of Common Stock on the option grant date.
C. Dollar Limitation. The aggregate Fair Market
Value of the shares of Common Stock (determined as of the respective date or
dates of grant) for which one or more options granted to any Employee under the
Plan (or any other option plan of the Corporation or any Parent or Subsidiary)
may for the first time
5.
<PAGE> 6
become exercisable as Incentive Options during any one (1) calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% Shareholder. If any Employee to whom an
Incentive Option is granted is a 10% shareholder (within the meaning of Internal
Revenue Code Section 424(d)), then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each
outstanding option shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. However, an outstanding option shall NOT so
accelerate if and to the extent: (i) such option is, in connection with the
Corporate Transaction, either to be assumed by the successor corporation (or
parent thereof) or to be replaced with a comparable option to purchase shares of
the capital stock of the successor corporation (or parent thereof), (ii) such
option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing on the unvested option shares at
the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such option or (iii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant. The determination of option
comparability under clause (i) above shall be made by the Plan Administrator,
and its determination shall be final, binding and conclusive.
B. All outstanding repurchase rights shall also
terminate automatically, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are to be
assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the repurchase
right is issued.
C. Immediately following the consummation of the
Corporate Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the number and
class of securities available for issuance under the Plan on both an aggregate
and per Optionee basis following the consummation of such Corporate Transaction
and (ii) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
the same.
E. Any options which are assumed or replaced in the
Corporate Transaction and do not otherwise accelerate at that time, shall
automatically accelerate (and any of the Corporation's outstanding repurchase
rights which do not otherwise terminate at the time of the Corporate Transaction
shall automatically terminate and the shares of Common Stock subject to those
terminated rights shall immediately vest in full) in the event the Optionee's
Service should subsequently terminate by reason of an Involuntary Termination
within
6.
<PAGE> 7
eighteen (18) months following the effective date of such Corporate Transaction.
Any options so accelerated shall remain exercisable for fully-vested shares
until the earlier of (i) the expiration of the option term or (ii) the
expiration of the one (1) year period measured from the effective date of the
Involuntary Termination.
F. The portion of any Incentive Option accelerated
in connection with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the applicable One Hundred
Thousand Dollar limitation is not exceeded. To the extent such dollar limitation
is exceeded, the accelerated portion of such option shall be exercisable as a
Non-Statutory Option under the Federal tax laws.
G. The grant of options under the Discretionary
Option Grant Program shall in no way affect the right of the Corporation to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program and to grant in substitution new options covering the same or
different number of shares of Common Stock but with an exercise price per share
based on the Fair Market Value per share of Common Stock on the new option grant
date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and
authority to grant to selected Optionees tandem stock appreciation rights and/or
limited stock appreciation rights.
B. The following terms shall govern the grant and
exercise of tandem stock appreciation rights:
(i) One or more Optionees may be granted the
right, exercisable upon such terms as the Plan Administrator may
establish, to elect between the exercise of the underlying option for
shares of Common Stock and the surrender of that option in exchange for a
distribution from the Corporation in an amount equal to the excess of (A)
the Fair Market Value (on the option surrender date) of the number of
shares in which the Optionee is at the time vested under the surrendered
option (or surrendered portion thereof) over (B) the aggregate exercise
price payable for such shares.
(ii) No such option surrender shall be effective
unless it is approved by the Plan Administrator. If the surrender is so
approved, then the distribution to which the Optionee shall be entitled
may be made in shares of Common Stock valued at Fair Market Value on the
option surrender date, in cash, or partly in shares and partly in cash,
as the Plan Administrator shall in its sole discretion deem appropriate.
(iii) If the surrender of an option is rejected
by the Plan Administrator, then the Optionee shall retain whatever rights
the Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at any
time prior to the later of (A) five (5) business days after the receipt
of the rejection notice or (B) the last day on which the option is
otherwise exercisable in accordance with the terms of the documents
evidencing such option, but in no event may such rights be exercised more
than ten (10) years after the option grant date.
7.
<PAGE> 8
C. The following terms shall govern the grant and
exercise of limited stock appreciation rights:
(i) One or more persons subject to Section 16 of the
Act may be granted limited stock appreciation rights with respect to
their outstanding options.
(ii) Upon the occurrence of a Hostile Take-Over,
each such individual holding one or more options with such a limited
stock appreciation right in effect for at least six (6) months shall have
the unconditional right (exercisable for a thirty (30)-day period
following such Hostile Take-Over) to surrender each such option to the
Corporation, to the extent the option is at the time exercisable for
vested shares of Common Stock. In return for the surrendered option, the
Optionee shall receive a cash distribution from the Corporation in an
amount equal to the excess of (A) the Take-Over Price of the shares of
Common Stock which are at the time vested under each surrendered option
(or surrendered portion thereof) over (B) the aggregate exercise price
payable for such shares. Such cash distribution shall be paid within five
(5) days following the option surrender date.
(iii) Neither the approval of the Plan Administrator
nor the consent of the Board shall be required in connection with such
option surrender and cash distribution.
(iv) The balance of the option (if any) shall
continue in full force and effect in accordance with the documents
evidencing such option.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.
A. Purchase Price
1. The purchase price per share shall be fixed by the
Plan Administrator, but shall not be less than eighty-five percent (85%) of the
Fair Market Value per share of Common Stock on the stock issuance date.
2. Subject to the provisions of Section I of Article
Five, shares of Common Stock may be issued under the Stock Issuance Program for
one or both of the following items of consideration which the Plan Administrator
may deem appropriate in each individual instance:
(i) cash or check made payable to the
Corporation, or
(ii) past services rendered to the Corporation
(or any Parent or Subsidiary).
8.
<PAGE> 9
B. Vesting Provisions
1. Shares of Common Stock issued under the Stock
Issuance Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the
Participant or the performance objectives to be attained,
(ii) the number of installments in which the
shares are to vest,
(iii) the interval or intervals (if any) which
are to lapse between installments, and
(iv) the effect which death, Permanent Disability
or other event designated by the Plan Administrator is to have upon the
vesting schedule,
shall be determined by the Plan Administrator and incorporated into the stock
issuance agreement.
2. Any new, substituted or additional securities or
other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to the
Participant's unvested shares of Common Stock by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to the Participant's unvested shares of Common
Stock and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
3. The Participant shall have full shareholder
rights with respect to any shares of Common Stock issued to the Participant
under the Stock Issuance Program, whether or not the Participant's interest in
those shares is vested. Accordingly, the Participant shall have the right to
vote such shares and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service
while holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further shareholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to such surrendered shares.
5. The Plan Administrator may in its discretion
waive the surrender and cancellation of one or more unvested shares of Common
Stock (or other assets attributable thereto) which would otherwise occur upon
the non-completion of the vesting schedule applicable to such shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.
9.
<PAGE> 10
II. CORPORATE TRANSACTION
A. All of the outstanding repurchase rights under
the Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately
vest in full, in the event of any Corporate Transaction, except to the extent
(i) those repurchase rights are assigned to the successor corporation (or parent
thereof) in connection with such Corporate Transaction or (ii) such accelerated
vesting is precluded by other limitations imposed in the stock issuance
agreement.
B. Any repurchase rights that are assigned in the
Corporate Transaction shall automatically terminate, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event the Optionee's Service should subsequently terminate by reason of
an Involuntary Termination within eighteen (18) months following the effective
date of such Corporate Transaction.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion,
be held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant of Options. Option grants will be made
automatically to each non-employee Board member who has not otherwise been in
the prior employ of the Corporation during the preceding two years. Each such
person shall automatically be granted a nonstatutory option to purchase 1,000
shares with respect to each calendar month (beginning August 1995) during all of
which he or she serves as a director, on the last day of each such respective
calendar month. The number of shares granted pursuant to this Automatic Grant
Program shall be subject to periodic adjustment pursuant to the applicable
provisions of Section V.D. of Article One.
B. Exercise Price. The exercise price per share of
each automatic option grant made under this Article Three shall be equal to one
hundred percent (100%) of the fair market value per share of Common Stock on the
grant date.
C. Payment.
The exercise price shall be payable in one of the
alternative forms specified below:
(i) full payment in cash or check drawn to the
Corporation's order;
(ii) full payment in shares of Common Stock held
for at least six (6) months and valued at fair market value on the
Exercise Date (as such term is defined below);
(iii) full payment in a combination of shares of
Common Stock held for at least six (6) months and valued at fair market
value on the Exercise Date and cash or check; or
10.
<PAGE> 11
(iv) full payment through a broker-dealer sale
and remittance procedure pursuant to which the non-employee Board member
(A) shall provide irrevocable written instructions to a designated
brokerage firm to effect the immediate sale of the purchased shares and
remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate option price
payable for the purchased shares plus all applicable Federal and state
income taxes required to be withheld by the Corporation in connection
with such purchase and (B) shall provide written directives to the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale transaction.
For purposes of this Section I.C. of Article Three, the
Exercise Date shall be the date on which written notice of the option exercise
is delivered to the Corporation, and the fair market value per share of Common
Stock on any relevant date shall be determined in accordance with the provisions
of Section II.A of Article Five. Except to the extent the sale and remittance
procedure is utilized in connection with the exercise of the option, payment of
the option price for the purchased shares must accompany such notice.
D. Option Term. Each automatic grant under this
Article Four shall have a maximum term of ten (10) years measured from the
automatic grant date.
E. Exercisability. Each automatic grant under this
Article Four shall be exercisable in full immediately.
F. Non-Transferability. During the lifetime of the
optionee, each automatic option grant, together with the limited stock
appreciation right pertaining to such option, if any, shall be exercisable only
by the optionee and shall not be assignable or transferable by the optionee
other than a transfer of the option effected by will or by the laws of descent
and distribution following optionee's death.
G. Effect of Termination of Board Membership.
Should the optionee cease to serve as a Board member
for any reason (other than death) while holding one or more automatic option
grants under this Article Four, then such optionee shall have a twenty-four (24)
month period following the date of such cessation of Board membership in which
to exercise each such option.
In no event shall any automatic grant under this
Article Four remain exercisable after the specified expiration date of the ten
(10)-year option term. Upon the expiration of the applicable exercise period in
accordance with the preceding subparagraph or (if earlier) upon the expiration
of the ten (10) year option term, the automatic grant shall terminate and cease
to be outstanding for any unexercised shares.
II. LIMITED STOCK APPRECIATION RIGHT.
A. Upon the occurrence of a Hostile Take-Over, each
non-employee Board member holding an automatic option grant which has been
outstanding under this Article Four for a period of at least six (6) months
shall have the unconditional right (exercisable for a thirty (30)-day period
following such Hostile Take-Over) to surrender such option in return for a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Take-Over Price of the shares of Common Stock at the time subject to the
surrendered option (whether or not the option is otherwise at the time
exercisable for such shares) over (ii) the aggregate exercise price payable for
such shares. Such cash distribution shall be paid within five (5) days following
the option surrender date. Neither the approval of the Plan Administrator nor
the consent of the Board shall be required in connection with such option
surrender and cash distribution.
11.
<PAGE> 12
B. The shares of Common Stock subject to each option
surrendered in connection with the Hostile Take-Over shall NOT be available for
subsequent issuance under this Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Immediately following the consummation of any
Corporate Transaction, each automatic option grant shall (subject to paragraph B
below) terminate and cease to be outstanding, except to the extent assumed by
the successor corporation (or parent thereof).
B. Upon the occurrence of a Hostile Take-Over, the
Optionee shall have a thirty (30)-day period in which to surrender to the
Corporation each automatic option held by him or her for a period of at least
six (6) months. The Optionee shall in return be entitled to a cash distribution
from the Corporation in an amount equal to the excess of (i) the Take-Over Price
of the shares of Common Stock at the time subject to the surrendered option over
(ii) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation. No approval or consent of the Board shall be required
in connection with such option surrender and cash distribution.
C. The grant of options under the Automatic Option
Grant Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
IV. AMENDMENT OF THE AUTOMATIC OPTION GRANT PROGRAM
The provisions of this Automatic Option Grant Program,
together with the option grants outstanding thereunder, may not be amended at
intervals more frequently than once every six (6) months, other than to the
extent necessary to comply with applicable Federal income tax laws and
regulations.
V. REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
ARTICLE FIVE
MISCELLANEOUS
I. ACCELERATION
The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted under the Discretionary Stock Option
Program, at the time that stock is issued under the Stock Issuance Program or at
any time while the option or stock remains outstanding, to provide for the
acceleration of one or more outstanding options and the termination of
repurchase rights on one or more outstanding shares upon the occurrence of such
events as the Plan Administrator may determine, including upon a Corporate
Transaction regardless or whether or not such options are to be assumed or
replaced or the repurchase rights are to be assigned in the Corporate
Transaction.
II. FINANCING
A. The Plan Administrator may permit any Optionee or
Participant to pay the option exercise price under the Discretionary Option
Grant Program or the purchase price for shares issued under the Stock Issuance
Program by delivering a promissory note payable in one or more installments. The
terms of any
12.
<PAGE> 13
such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion. Promissory notes may be authorized with or without security or
collateral. In all events, the maximum credit available to the Optionee or
Participant may not exceed the sum of (i) the aggregate option exercise price or
purchase price payable for the purchased shares plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.
B. The Plan Administrator may, in its discretion,
determine that one or more such promissory notes shall be subject to forgiveness
by the Corporation in whole or in part upon such terms as the Plan Administrator
may deem appropriate.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of
Common Stock upon the exercise of options or stock appreciation rights or upon
the issuance or vesting of such shares under the Plan shall be subject to the
satisfaction of all applicable Federal, state and local income and employment
tax withholding requirements.
B. The Plan Administrator may, in its discretion,
provide any or all holders of Non-Statutory Options or unvested shares of Common
Stock under the Plan (other than the options granted or the shares issued under
the Automatic Option Grant Program) with the right to use shares of Common Stock
in satisfaction of all or part of the federal, state and local income or
employment taxes incurred by such holders in connection with the exercise of
their options or the vesting of their shares. Such right may be provided to any
such holder in either or both of the following formats:
(i) Stock Withholding: The election to have the
Corporation withhold, from the shares of Common Stock otherwise issuable
upon the exercise of such Non-Statutory Option or the vesting of such
shares, a portion of those shares with an aggregate Fair Market Value
equal to the percentage of such taxes (not to exceed one hundred percent
(100%)) designated by the holder.
(ii) Stock Delivery: The election to deliver to
the Corporation, at the time the Non-Statutory Option is exercised or the
shares vest, one or more shares of Common Stock previously acquired by
such holder (other than in connection with the option exercise or share
vesting triggering the taxes) with an aggregate Fair Market Value equal
to the percentage of such taxes (not to exceed one hundred percent
(100%)) designated by the holder.
IV. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective on the date the
Plan is adopted by the Board, and options may be granted under the Discretionary
Option Grant Program from and after the effective date. However, no options
granted under the Plan may be exercised, and no shares shall be issued under the
Plan, until the Plan is approved by the Corporation's shareholders. If such
shareholder approval is not obtained within twelve (12) months after such
effective date, then all options previously granted under this Plan shall
terminate and cease to be outstanding, and no further options shall be granted
and no shares shall be issued under the Plan.
B. The Plan shall terminate upon the earliest of (i)
June 14, 2005, (ii) the date on which all shares available for issuance under
the Plan shall have been issued pursuant to the exercise of the options or the
issuance of shares (whether vested or unvested) under the Plan or (iii) the
termination of all outstanding options in connection with a Corporate
Transaction. Upon such Plan termination, all options and unvested stock
13.
<PAGE> 14
issuances outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the documents evidencing such
options or issuances.
V. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power
and authority to amend or modify the Plan in any or all respects. However, (i)
no such amendment or modification shall adversely affect the rights and
obligations with respect to options, stock appreciation rights or unvested stock
issuances at the time outstanding under the Plan unless the Optionee or the
Participant consents to such amendment or modification, and (ii) any amendment
made to the Automatic Option Grant Program (or any options outstanding
thereunder) shall be in compliance with the limitations of that program. In
addition, the Board shall not, without the approval of the Corporation's
shareholders, (i) materially increase the maximum number of shares issuable
under the Plan, the number of shares for which options may be granted under the
Automatic Option Grant Program or the maximum number of shares for which any one
person may be granted options, separately exercisable stock appreciation rights
and direct stock issuances in the aggregate over the term of the Plan, except
for permissible adjustments in the event of certain changes in the Corporation's
capitalization, (ii) materially modify the eligibility requirements for Plan
participation or (iii) materially increase the benefits accruing to Plan
participants.
B. Options to purchase shares of Common Stock may be
granted under the Discretionary Option Grant Program and shares of Common Stock
may be issued under the Stock Issuance Program that are in each instance in
excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under those programs are held in
escrow until there is obtained shareholder approval of an amendment sufficiently
increasing the number of shares of Common Stock available for issuance under the
Plan. If such shareholder approval is not obtained within twelve (12) months
after the date the first such excess issuances are made, then (i) any
unexercised options granted on the basis of such excess shares shall terminate
and cease to be outstanding and (ii) the Corporation shall promptly refund to
the Optionees and the Participants the exercise or purchase price paid for any
excess shares issued under the Plan and held in escrow, together with interest
(at the applicable Short Term Federal Rate) for the period the shares were held
in escrow, and such shares shall thereupon be automatically cancelled and cease
to be outstanding.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of
any option or stock appreciation right under the Plan and the issuance of any
shares of Common Stock (i) upon the exercise of any option or stock appreciation
right or (ii) under the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options and stock
appreciation rights granted under it and the shares of Common Stock issued
pursuant to it.
B. No shares of Common Stock or other assets shall
be issued or delivered under the Plan unless and until there shall have been
compliance with all applicable requirements of Federal and state securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any stock exchange (or the NASD, if
applicable) on which Common Stock is then listed for trading.
14.
<PAGE> 15
VIII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
15.
<PAGE> 16
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by
any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation), of beneficial ownership
(within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934)
of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
shareholders which the Board does not recommend such shareholders to
accept, or
(ii) a change in the composition of the Board
over a period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who either
(A) have been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as Board
members during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time the Board
approved such election or nomination.
C. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which the
Company is not the surviving entity, except for a transaction the
principal purpose of which is to change the State of the Company's
incorporation,
(ii) the sale, transfer or other disposition of
all or substantially all of the assets of the Company in liquidation or
dissolution of the Company, or
(iii) any reverse merger in which the Company is
the surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's
outstanding securities are transferred to holders different from those
who held such securities immediately prior to such merger.
D. CORPORATION shall mean CardioDynamics International Corporation, a
California corporation.
E. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
F. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
A-1.
<PAGE> 17
(i) If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question,
as such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If there
is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the
Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding
date for which such quotation exists.
(iii) If the Common Stock is at the time not
traded on the Nasdaq National Market or listed on any Stock Exchange, the
Fair Market Value shall be determined by the Plan Administrator after
taking into account such factors as the Plan Administrator shall deem
appropriate.
G. HOSTILE TAKE-OVER shall mean a change in ownership of the Corporation
effected through acquisition, directly or indirectly, by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's shareholders which the Board does not recommend such
shareholders to accept.
H. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Internal Revenue Code Section 422.
I. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
(i) such individual's involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation
following (A) a change in his or her position with the Corporation which
materially reduces his or her level of responsibility, (B) a reduction in
his or her level of compensation (including base salary, fringe benefits
and any non-discretionary and objective-standard incentive payment or
bonus award) by more than fifteen percent (15%) or (C) a relocation of
such individual's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is effected by
the Corporation without the individual's consent.
J. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation
A-2.
<PAGE> 18
(or any Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of any Optionee, Participant or other person in the Service of the
Corporation (or any Parent or Subsidiary).
K. NON-STATUTORY OPTION shall mean an option which is not an Incentive
Option.
L. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
M. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
of the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
N. SERVICE shall mean the provision of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant.
O. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
P. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
A-3.
<PAGE> 1
EXHIBIT 7.r.
Agreement of Joint Filing
The undersigned hereby agree that they are filing jointly pursuant to
Rule 13d- 1(f)(1) of the Securities Exchange Act of 1934, as amended, the
Statement dated April 7, 1997 containing the information required by Schedule
13D, for the shares of Common Stock of CardioDynamics International Corporation,
held by CardioDynamics Holdings, LLC, a California limited liability company,
and by the undersigned individuals.
April 7, 1997 CARDIODYNAMICS HOLDINGS, LLC
By:/s/ Allen Paulson
---------------------------------
Allen Paulson, Member
By:/s/ James Gilstrap
---------------------------------
James Gilstrap, Member
/s/ Allen Paulson
------------------------------------
ALLEN PAULSON
/s/ James Gilstrap
------------------------------------
JAMES GILSTRAP
/s/ Nicholas Diaco
------------------------------------
NICHOLAS DIACO
/s/ Joseph Diaco
------------------------------------
JOSEPH DIACO
