SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
____________________________________
Date of report (Date of earliest event reported): April 9,
1997
CARDIAC SCIENCE, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-19567
33-0465681
(State or Other Juris- (Commission File
No.) (IRS Employer
diction of Incorporation)
Identification No.)
8 Hammond Drive, Suite 111, Irvine, CA
92618
(Address of Principal Executive Offices)
(Zip Code)
Registrant's telephone number, including area code:
(714) 587-0357
N/A
(Former Name or Former Address, if Changed Since
Last Report.)
ITEM 2. Acquisition or Disposition of Assets.
On April 11, 1997, Cardiac Science, Inc. (the
"Company") acquired from Raymond Cohen, the
President and Chief Executive Officer of the Company
("Cohen"), Innovative Physicians Services, Inc. d/b/a
Diagnostic Monitoring ("IPS"), a Nevada corporation
engaged in the sale of medical diagnostic equipment,
particularly Holter technology, through a network of
domestic and international distributors.
The acquisition was effected pursuant to an
Agreement and Plan of Merger (a copy of which is
attached hereto as Exhibit A, the "Merger Agreement"),
dated April 9, 1997, by and among the Company, Cohen,
IPS, and CSI Merging Corporation, a newly-formed,
wholly-owned subsidiary of the Company ("Merging
Corp.), pursuant to which (a) Merging Corp. was merged
with and into IPS (the "Merger"), with IPS being the
surviving corporation (the "Surviving Corporation"), and
(b) IPS became a wholly-owned subsidiary of the
Company by virtue of (i) the Merger, (ii) the conversion
of the issued and outstanding shares of common stock of
Merging Corp. into shares of common stock of the
Surviving Corporation, and (iii) the conversion of the
issued and outstanding shares of common stock of IPS
into 5,714.285 shares of the Company's Series A
Convertible Preferred Stock (the "Series A Preferred
Stock") plus a non-interest bearing promissory note (a
copy of which is attached hereto as Exhibit B, the
"Promissory Note") in the principal amount of $100,000,
payable in eighteen (18) equal consecutive monthly
installments commencing upon the earlier of April 9,
1999 or the completion of an equity financing by the
Company of not less than $2,000,000 of gross proceeds.
Each share of Series A Preferred Stock (i) is
entitled to 1,000 votes per share; (ii) is convertible into
1,000 shares of the Company's common stock, par value
$0.001 per share (the "Common Stock"), at any time, and
from time to time, at the holder's option, without the
payment of any additional consideration; (iii) has a
preference on liquidation or dissolution of $175.00 per
share; (iv) entitles the holder thereof to demand
redemption of the Series A Preferred Stock by the
Company after two years from the date of issuance, at a
price of $175.00 per share of Series A Preferred Stock,
if there are an insufficient number of authorized but
unissued shares of Common Stock to allow the Series A
Preferred Stock to be converted into shares of Common
Stock; and (v) automatically shall convert into 1,000
shares of Common Stock (subject to adjustment for any
reverse stock split, etc.) upon there being a sufficient
number of authorized but unissued shares of Common
Stock to allow such conversion. A complete description
and terms of the Series A Preferred Stock are set forth in
the Certificate of Designation filed with the State of
Delaware on April 1, 1997, a copy of which is attached
hereto as Exhibit C.
<PAGE>
ITEM 7. Financial Statements, Pro Forma Financial
Information and Exhibits
(a) Financial Statements of Businesses Acquired
Audited financial statements of IPS will be
filed with the Securities and Exchange
Commission (the "SEC") by amendment on Form
8-K/A on or before June 23, 1997.
(b) Pro Forma Financial Information
Pro forma financial statements will be filed
with the SEC by amendment on Form 8-K/A on or
before June 23, 1997.
(c) Exhibits
A. Agreement and Plan of Merger,
dated April 9, 1997, by and among the Company, Cohen,
IPS and the Merging Corp.
B. Form of Promissory Note, dated
April 9, 1997.
C Certificate of Designation for Series
A Preferred Stock
<PAGE>
Signatures:
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned
thereunto duly authorized.
CARDIAC SCIENCE, INC.
By: /s/ Raymond W. Cohen
Raymond W. Cohen, President and Chief Executive
Officer
Date: April 14, 1997
<PAGE>
Exhibit A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated
April 9, 1997 (the "Agreement") by and among CARDIAC
SCIENCE, INC., a Delaware corporation, having its
principal place of business located at 8 Hammond Drive,
Irvine, California 92718 ("CSI"), CSI MERGING
CORPORATION, a Nevada corporation having its
principal place of business located at 8 Hammond Drive,
Irvine, California 92718 (the "Merger Subsidiary"),
INNOVATIVE PHYSICIANS SERVICES, INC. d/b/a
DIAGNOSTIC MONITORING, a Nevada corporation,
having its principal place of business located at 2101 E.
Fourth Street, Building B, Suite 270, Santa Ana, California
92705 ("IPS"), and RAYMOND W. COHEN, residing at
1026 Timberline Lane, Cowan Heights, California 92708
("Cohen").
W I T N E S S E T H :
WHEREAS, the Board of Directors of each of CSI
and IPS has determined that it is desirable and in the best
interests of their respective corporations and stockholders
for CSI to acquire IPS; and
WHEREAS, to effectuate the acquisition CSI has
caused to be formed the Merger Subsidiary as a wholly-
owned subsidiary of CSI; and
WHEREAS, upon the terms and subject to the
conditions hereinafter set forth, the Merger Subsidiary shall
be merged with and into IPS (the "Merger") which (a) shall
be the surviving corporation, and (b) shall become a
wholly-owned subsidiary of CSI by virtue of (i) the
Merger, (ii) the conversion of the issued and outstanding
shares of common stock of the Merger Subsidiary into
shares of common stock of the Surviving Corporation (as
hereinafter defined), and (iii) the conversion of the issued
and outstanding shares of common stock of IPS into shares
of Series A Convertible Preferred Stock of CSI (the "Series
A Preferred Stock") and a promissory note; and
WHEREAS, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986 (the "Code")
and that this Agreement shall constitute a "plan of
reorganization;"
NOW, THEREFORE, in consideration of the
premises and of the mutual covenants and agreements
herein contained, it is agreed as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF CSI AND THE
MERGER SUBSIDIARY
CSI and the Merger Subsidiary hereby jointly and
severally represent and warrant to IPS as follows:
1.1 Corporate Organization; Good Standing;
Requisite Authority to Conduct Business; Qualification in
Foreign Jurisdictions; Certificates of Incorporation and By-
Laws. Each of CSI and the Merger Subsidiary is a
corporation duly organized and validly existing under the
laws of the state of its incorporation and has all requisite
corporate power and authority to own, operate and lease its
properties and to carry on its business as the same is now
being conducted. CSI is not in good standing in the State
of Delaware, and is attempting to attain good status by
remedying outstanding deficiencies. The Merger Subsidary
is in good standing in its state of incorporation. Each of
CSI and the Merger Subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in
each jurisdiction in which the character of its properties or
the nature of its activities make such qualification
necessary, except where the failure to be so qualified and
in good standing would not have a material adverse effect
on its business, operations, financial condition, assets,
liabilities, prospects, or regulatory status ("Material
Adverse Effect"). A copy of the Certificate of
Incorporation and By-Laws, each as amended to date, of
each of CSI and the Merger Subsidiary which have
heretofore been delivered to IPS are complete, true and
correct and are in full force and effect.
1.2 Capitalization. The authorized capital stock
of CSI consists of (a) 40,000,000 shares of common stock,
par value $.001 per share, ("CSI Common Stock"), of
which 37,471,177 shares are issued and outstanding, and
1,666,667 shares are subscribed for and to be issued to
Technology Funding, Inc., and (b) 1,000,000 shares of
preferred stock, par value $.001 per share, none of which
are issued and outstanding, and of which 5,714.285 shares
are designated as Series A Convertible Preferred Stock and
have the rights and preferences set forth on Exhibit A
attached hereto. The authorized capital stock of the
Merger Subsidiary consists of 200 shares of common stock,
without par value, of which one share is issued and
outstanding. Except as set forth on Schedule 1.2 attached
hereto, there are no outstanding subscriptions, options,
warrants, calls, commitments, agreements or rights of any
kind or nature in respect of the authorized but unissued
shares of capital stock of CSI and none of such shares are
reserved for issuance for any purpose.
1.3 Authority Relative to and Validity of this
Agreement. Each of CSI and the Merger Subsidiary has
the necessary corporate power and authority to execute and
deliver this Agreement and to assume and perform all of its
obligations hereunder. The execution and delivery of this
Agreement and the performance by each of CSI and the
Merger Subsidiary of its obligations hereunder have been
duly authorized by its Board of Directors. Additionally,
CSI, as the sole stockholder of the Merger Subsidiary, has
authorized the execution and delivery of this Agreement
and the performance by the Merger Subsidiary of its
obligations hereunder. There are no corporate, contractual,
statutory or other restrictions of any kind upon the power
and authority of CSI or the Merger Subsidiary to execute
and deliver this Agreement and to consummate the
transactions contemplated hereunder, and no action, waiver
or consent by any foreign, federal, state, municipal or
other governmental department, commission or agency
("Governmental Authority") is necessary to make this
Agreement a valid instrument binding upon CSI and the
Merger Subsidiary in accordance with its terms. This
Agreement has been duly executed and delivered by each
of CSI and the Merger Subsidiary and constitutes a legal,
valid and binding obligation which is enforceable against
CSI and the Merger Subsidiary in accordance with its terms
(except as the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally or by the principles governing the availability of
equitable remedies).
1.4 Required Filings and Consents; No Conflict.
Except for applicable requirements of the Securities and
Exchange Act of 1934, as amended, (the "Exchange Act"),
the Securities Act of 1933, as amended, (the "Securities
Act"), and applicable state securities laws, and the filing
and recordation of appropriate merger or other documents
as required by the Nevada Revised Statutes ("Nevada
Law"), neither CSI nor the Merger Subsidiary is required
to submit any notice, report or other filing with any
Governmental Authority in connection with the execution,
delivery or performance of this Agreement. The execution
and delivery of this Agreement and consummation of the
transactions contemplated herein do not and will not (i)
conflict with or violate any law, regulation, judgment,
order or decree binding upon CSI or the Merger Subsidiary
or the provisions of their respective Certificates (or
Articles) of Incorporation or By-laws, or (ii) conflict with
or result in a breach of any condition or provision of, or
constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or result in
the creation or imposition of any lien or charge upon any
of the properties or assets of CSI or the Merger Subsidiary
pursuant to, any contract, agreement, permit, license,
franchise or other instrument to which CSI or the Merger
Subsidiary is a party or which is or purports to be binding
upon CSI or the Merger Subsidiary or any of their
property; nor will the same result in the loss of any license,
legal privilege or legal right enjoyed or possessed by CSI
or the Merger Subsidiary.
1.5 Securities and Exchange Commission
Filings; Financial Statements.
(a) CSI has filed all forms, reports and
documents required to be filed with the Securities and
Exchange Commission ("SEC") (although an extension on
Form 12b-25 has been filed with respect to CSI's Annual
Report on Form 10-K for the year ended December 31,
1996) and has heretofore delivered to IPS true and
complete copies (without exhibits) of (i) its Annual Report
on Form 10-K for the year ended December 31, 1995, and
(ii) its Quarterly Report on Form 10-Q for each of the
quarters ended March 31, 1996, June 30, 1996 and
September 30, 1996 (collectively, "CSI's SEC Reports").
CSI's SEC Reports (x) were prepared in accordance with
the requirements of the Exchange Act, and (y) did not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not
misleading. In addition, CSI has delivered to IPS a draft
copy of CSI's financial statements for the fiscal year ended
December 31, 1996 (the "Current Financial Statements").
(b) The financial statements contained in
CSI's SEC Reports and the Current Financial Statements
have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis
throughout the periods involved (except as may be
indicated in the notes thereto) and fairly present the
financial position of CSI as at the respective dates thereof
and the results of operations of CSI for the periods
indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected
to be material in amount. Since the date of the Current
Financial Statements there has not been any material
adverse change in the financial condition of CSI.
1.6 Litigation; Claims; Investigations. There are
no suits, actions, or claims, or any investigations or
inquiries, by any administrative agency or governmental
body, or legal, administrative or arbitration proceedings
pending or, to the best knowledge of CSI, threatened
against CSI or the Merger Subsidiary or to which CSI or
the Merger Subsidiary is or, in the case of threatened
proceedings, might become a party and which if decided
adversely to CSI or the Merger Subsidiary would have a
Material Adverse Effect, and CSI does not know or have
any grounds to know of any basis or grounds for any such
suit, action, claim, investigation, inquiry or proceeding.
There is no outstanding order, writ, judgment, injunction
or decree of any court, administrative agency or
governmental body or arbitration tribunal against or
affecting CSI or the Merger Subsidiary or any of the
properties, rights, assets or business of CSI or the Merger
Subsidiary.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF IPS AND
COHEN
IPS and Cohen hereby jointly and severally
represents and warrants to CSI and the Merger Subsidiary,
as follows:
2.1 Subsidiaries. IPS has one subsidiary,
Spirosoft Northamerica, Inc. (the "Subsidiary"), a Nevada
corporation, of which it owns all of the issued and
outstanding shares of capital stock.
2.2 Corporate Organization; Good Standing;
Requisite Authority to Conduct Business; Qualification in
Foreign Jurisdictions; Certificates of Incorporation and By-
Laws. Each of IPS and the Subsidiary is a corporation
duly organized, validly existing and in good standing under
the laws of the state of its incorporation and has all
requisite corporate power and authority to own, operate and
lease its properties and to carry on its business as the same
is now being conducted. Each of IPS and the Subsidiary
is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the
character of its properties or the nature of its activities
make such qualification necessary, except where the failure
to be so qualified and in good standing would not have a
Material Adverse Effect. Each jurisdiction in which IPS or
the Subsidiary is qualified to do business as a foreign
corporation is listed on Schedule 2.2 attached hereto. A
copy of the Articles of Incorporation and By-Laws, each as
amended to date, of each of IPS and the Subsidiary which
have heretofore been delivered to CSI are complete, true
and correct and in full force and effect. Neither IPS nor
the Subsidiary is in violation of any of the provisions of its
Articles of Incorporation or By-Laws.
2.3 Capitalization. The authorized capital stock
of IPS consists of (a) 2,500 shares of common stock,
without par value ("IPS Common Stock"), of which 100
shares are issued and outstanding. No shares of IPS capital
stock are held in the treasury of IPS. All of the
outstanding shares of capital stock of the Subsidiary are
owned directly by IPS free and clear of any liens, security
interests, pledges, agreements, claims, charges or
encumbrances of any nature whatsoever (collectively,
"Encumbrances"). The IPS Common Stock and the capital
stock of the Subsidiary are duly authorized and have been
duly and validly issued and are fully paid and non-
assessable and free of pre-emptive rights. Except as set
forth in Schedule 2.3 attached hereto, there are no
outstanding subscriptions, options, warrants, calls,
commitments, agreements or rights of any kind or nature
in respect of the authorized but unissued shares of capital
stock of IPS or the Subsidiary and none of such shares are
reserved for issuance for any purpose.
2.4 Authority Relative to and Validity of this
Agreement. IPS has the requisite corporate power and
authority to execute and deliver this Agreement and to
assume and perform all of its obligations hereunder. The
execution and delivery of this Agreement and the
performance by IPS of its obligations hereunder have been
duly authorized by its Board of Directors and stockholders.
There are no corporate, contractual, statutory or other
restrictions of any kind upon the power and authority of
IPS to execute and deliver this Agreement and to
consummate the transactions contemplated hereunder, and
no action, waiver or consent by any Governmental
Authority is necessary to make this Agreement a valid
instrument binding upon IPS in accordance with its terms.
This Agreement has been duly executed and delivered by
IPS and constitutes a legal, valid and binding obligation of
IPS enforceable against it in accordance with its terms
(except to the extent that enforceability thereof may be
limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
creditors' rights generally or by the principles governing
the availability of equitable remedies).
2.5 Required Filings and Consents; No Conflict.
Except for filing and recordation of appropriate merger or
other documents as required by Nevada Law, IPS is not
required to submit any notice, report or other filing with
any Governmental Authority in connection with the
execution, delivery or performance of this Agreement.
Except as set forth in Schedule 2.5 hereto, the execution
and delivery of this Agreement and the consummation of
the transactions contemplated herein do not and will not (i)
conflict with or violate any law, regulation, judgment,
order or decree binding upon IPS or the Subsidiary or the
provisions of their respective Articles of Incorporation or
By-laws, or (ii) conflict with or result in a breach of any
condition or provision of, or constitute a default (or an
event which with notice or lapse or time or both would
become a default) under, or result in the creation or
imposition of any lien or charge upon any properties or
assets of IPS or the Subsidiary pursuant to, any contract,
agreement, permit, license, franchise or other instrument to
which IPS or the Subsidiary is a party or which is or
purports to be binding upon IPS or the Subsidiary or any
of their property; nor will the same result in the loss of any
license, legal privilege or legal right enjoyed or possessed
by IPS or the Subsidiary.
2.6 Financial Statements. Exhibit B attached
hereto contains the unaudited consolidated balance sheet
(the "Balance Sheet") as at December 31, 1996 (the
"Balance Sheet Date") of IPS and the Subsidiary, and the
related statement of income for the year then ended. Such
financial statements have been prepared in accordance with
generally accepted accounting principles consistently
applied and fairly present the consolidated financial position
of IPS and the Subsidiary as at December 31, 1996 and the
consolidated results of operations of IPS and the Subsidiary
for the year then ended, subject only to normal and
recurring year-end adjustments which were not or are not
expected to be material in amount. The consolidated
financial statements of IPS and the Subsidiary are capable
of being audited so as to allow CSI to satisfy its reporting
requirements pursuant to the Exchange Act.
2.7 No Undisclosed Liabilities. Except as set
forth in Schedule 2.7 attached hereto, as at the Balance
Sheet Date neither IPS nor the Subsidiary had any material
debts, liabilities or obligations of any kind, whether
accrued, absolute, contingent or other, and whether due or
to become due, and there is no basis for the assertion
against IPS or the Subsidiary of any such debt, liability or
obligation. The liabilities reflected on the Balance Sheet
are bona fide liabilities which arose in the ordinary course
of business.
2.8 Absence of Certain Changes and Events.
Except as set forth in Schedule 2.8 attached hereto, since
the Balance Sheet Date there has not been, with respect to
either IPS or the Subsidiary, (i) any material adverse
change in its business, operations, financial condition,
assets, liabilities, prospects or regulatory status; (ii) any
strike, picketing, work slowdown or labor disturbance; (iii)
any damage, destruction or loss (whether or not covered by
insurance) with respect to any assets or properties; (iv) any
redemption or other acquisition of IPS Common Stock or
the capital stock of the Subsidiary or any declaration or
payment of any dividend or other distribution in cash, stock
or property with respect thereto; (v) any entry into any
material commitment or transaction (including, without
limitation, any borrowing or capital expenditure) other than
in the ordinary course of business or as contemplated by
this Agreement; (vi) any transfer of, or rights granted
under, any material leases, licenses, agreements, patents,
trademarks, trade names, or copyrights other than those
transferred or granted in the ordinary course of business
and consistent with past practice; (vii) any mortgage,
pledge, security interest or imposition of any Encumbrance
on any assets or properties; any payment of debts,
liabilities or obligations ("Liabilities") of any kind other
than Liabilities currently due; any cancellation of any debts
or claims or forgiveness of amounts owed to either IPS or
any of the Subsidiaries; any incurrence of any Liabilities of
any nature, whether accrued, contingent or otherwise,
which would have, individually or in the aggregate, a
Material Adverse Effect; (viii) any new employment or
consulting agreements entered into, any wages increased or
bonuses paid, or any additional benefit agreement entered
into or benefit plan adopted; or (ix) any change in
accounting principles or methods except insofar as may
have been required by a change in generally accepted
accounting principles. Since the Balance Sheet Date, each
of IPS and the Subsidiary has conducted its business only
in the ordinary course and in a manner consistent with past
practice and has not made any material change in the
conduct of its business or operations.
2.9 Trademarks, Patents and Copyrights.
Schedule 2.9 attached hereto sets forth all patents, patent
rights, trade names, trademarks, trademark rights, service
marks, copyrights, proprietary rights, licenses and permits
(collectively "Rights") owned or possessed by IPS and/or
the Subsidiary. The use of the Rights by IPS and/or the
Subsidiary does not and will not conflict with or violate the
rights possessed by any other person, firm, company,
partnership or corporation; and to the knowledge of IPS,
no one is infringing the rights of IPS or the Subsidiary with
respect to any such Rights. Except as set forth in Schedule
2.9, IPS and/or the Subsidiary have the sole and exclusive
rights to use the Rights referred to in Schedule 2.9.
2.10 Title to Property. Except as set forth in
Schedule 2.10 attached hereto, each of IPS and the
Subsidiary has good and marketable title, or valid leasehold
rights (in the case of leased property), to all real property
and all personal property purported to be owned or leased
by it or used in the operation of its business, free and clear
of all Encumbrances, excluding (i) liens for taxes, fees,
levies, imposts, duties or governmental charges of any kind
which are not yet delinquent or are being contested in good
faith by appropriate proceedings which suspend the
collection thereof; (ii) liens for mechanics, materialmen,
laborers, employees, suppliers or other liens arising by
operation of law for sums which are not yet delinquent or
are being contested in good faith by appropriate
proceedings; (iii) liens created in the ordinary course of
business in connection with the leasing or financing of
office, computer and related equipment and supplies; (iv)
easements and similar encumbrances ordinarily created for
fuller utilization and enjoyment of property; and (v) liens
or defects in title or leasehold rights that do not and will
not have a Material Adverse Effect.
2.11 Contracts and Commitments.
(a) Except as set forth on Schedule
2.11(a) attached hereto, neither IPS nor the Subsidiary is
a party to any contract or has any commitment, whether
written or oral, which is not cancellable upon notice of 30
days or less. Each of the contracts and commitments set
forth on Schedule 2.11(a) is valid and existing, in full force
and effect and enforceable in accordance with its terms,
and there is no default or claim of default against IPS or
the Subsidiary or any notice of termination with respect
thereof. To the best knowledge of IPS, each of IPS and
the Subsidiary has in all material respects complied with all
requirements of, and performed all of its obligations under,
such contracts and commitments. In addition, no other
party to any such contract or commitment is, to the best
knowledge of IPS, in default under or breach of any term
or provision thereof, and there exists no condition or event
which, after notice or lapse of time or both, would
constitute a default by any party to any such contract or
commitment. To the best knowledge of IPS, there are no
events or circumstances which would indicate that any
contract or commitment set forth on Schedule 2.11(a) is
likely to be terminated, or unlikely to be renewed, within
the next twelve (12) months. Copies of all the written
documents and a synopsis of all oral contracts and
commitments described on Schedule 2.11(a) have
heretofore been delivered to CSI and are true and complete
and include all amendments and supplements thereto and
modifications thereof.
(b) Except as set forth on Schedule
2.11(b) attached hereto, neither IPS nor the Subsidiary is
a party to any oral or written (i) agreement with any
consultant, executive officer or other key employee the
benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of the Merger, or
(ii) agreement or plan, including any stock option plan and
the like, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by
the occurrence of the Merger.
2.12 Insurance. Schedule 2.12 attached hereto
sets forth a list and brief description of all insurance
policies maintained by IPS and the Subsidiary on their
properties, assets, business and personnel and the premiums
payable thereon. IPS and the Subsidiary are not in default
with respect to any provision contained in any insurance
policy, and have not failed to give any notice or present
any claim under any insurance policy in due and timely
fashion. Such policies are in full force and effect and the
premiums with respect thereto have been paid.
2.13 Employee Benefit Plans. Except as set
forth on Schedule 2.13 attached hereto, neither IPS or the
Subsidiary has any employee welfare benefit plans,
employee pension benefit plans, bonus, stock option, stock
purchase, benefit, profit sharing, savings, retirement,
disability, insurance, incentive, deferred compensation or
other similar fringe or employee benefit plans, programs or
arrangements for the benefit of, or relating to, any
employee of, or independent contractor or consultant to,
IPS or the Subsidiary (collectively, the "Employee Plans").
2.14 Labor Matters; Personnel. There are no
controversies or claims pending or
threatened between IPS or the Subsidiary and any of their
current or former employees. Schedule 2.14, attached
hereto sets forth a list of all officers, directors and
employees of IPS and the Subsidiary and their respective
rates of compensation (including the portions thereof
attributable to bonuses), including any other salary, bonus
or other payment arrangement made with any of them.
2.15 Litigation; Claims; Investigations. Except as
set forth in Schedule 2.15 attached hereto, there are no
suits, actions or claims, or any investigations or inquiries,
by any administrative agency or governmental body, or
legal, administrative or arbitration proceedings pending or,
to the best knowledge of IPS, threatened against IPS or the
Subsidiary or to which IPS or the Subsidiary is or, in the
case of threatened proceedings, might become a party and
which if decided adversely to IPS or the Subsidiary would
have a Material Adverse Effect upon it, and IPS does not
know nor has any grounds to know of any basis or grounds
for any such suit, action, claim, investigation, inquiry or
proceeding. There is no outstanding order, writ, judgment,
injunction or decree of any court, administrative agency or
governmental body or arbitration tribunal against or
affecting IPS or the Subsidiary or any of the properties,
rights, assets or business of IPS or the Subsidiary.
2.16 Governmental Licenses and Permits. Each
of IPS and the Subsidiary has all governmental licenses and
permits necessary for the lawful conduct of its business and
to operate its properties and assets, and such licenses and
permits are in full force and effect. Schedule 2.16 attached
hereto sets forth all such licenses and permits. Neither IPS
nor the Subsidiary has reasonable cause to believe that any
violations exist, nor have any been recorded, with respect
to any such licenses or permits; and no proceeding is
pending or threatened which contemplates the revocation or
limitation of any such license or permit and IPS does not
know nor have any grounds to know of any basis or
grounds for any such revocation or limitation. Each of IPS
and the Subsidiary has complied in all material respects
with all laws, rules, regulations, ordinances, codes and
orders relating to its properties and/or business and to all
covenants, terms and conditions upon or under which any
of its licenses and permits are held.
2.17 Compliance With Legislation Regulating
Environmental Quality. There are no toxic wastes or other
toxic or hazardous substances or materials being stored or
otherwise held in or on any of the facilities of IPS or the
Subsidiary, or which have migrated from the facilities,
whether contained in ambient air, surface water,
groundwater, land surface or subsurface strata. To the best
knowledge of IPS, the facilities have been maintained in
material compliance with all federal, state and local
environmental protection, occupational, health and safety
or similar laws, ordinances, restrictions, licenses, and
regulations, including but not limited to, the Federal Water
Pollution Control Act (33 U.S.C. Section 1251 et seq.), Resource
Conservation & Recovery Act (42 U.S.C. Section 6901 et seq.),
Safe Drinking Water Act (21 U.S.C. Section 349, 42 U.S.C. Sections
201, 300f), Toxic Substances Control Act (15 U.S.C.
Section 2601 et seq.), Clean Air Act (42 U.S.C. Section 7401 et seq.),
Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. Section 9601 et seq.) ("CERCLA"),
and similar state laws. Neither IPS nor the Subsidiary has
disposed or arranged (by contract, agreement or otherwise),
within the meaning of Section 107(a)(3) of CERCLA, for
the disposal of any material or substance that was generated
or used by IPS or the Subsidiary at any off-site location
that has been or is listed or proposed for inclusion on the
National Priority List promulgated pursuant to CERCLA or
any list promulgated by any Governmental Authority for
the purpose of identifying sites which pose an imminent
danger to health and safety. IPS has delivered to CSI true
and complete copies of all environmental studies, reports
and analyses made or prepared, to the knowledge of IPS,
in the last five years relating to IPS or the Subsidiary.
2.18 Illegal Payments. Neither IPS nor the
Subsidiary, directly or indirectly, has paid or delivered any
fee, commission or other sum of money or item or
property, however characterized, to any finder, agent,
government official or other party, in the United States or
any other country, which is in any manner related to the
business or operations of IPS or the Subsidiary, which IPS
knows or has reason to believe to have been illegal under
any federal, state or local laws of the United States or any
other country having jurisdiction; and neither IPS nor the
Subsidiary has participated, directly or indirectly, in any
boycotts or other similar practices affecting any of its
actual or potential customers.
2.19 Tax Matters.
(a) Each of IPS and the Subsidiary,
including any predecessor thereof, has duly and timely filed
all tax reports and returns required to be filed by it,
including all federal, state, local and foreign tax returns
and reports ("Tax Returns"). All such Tax Returns were
correct and complete in all material respects when filed.
Each of IPS and the Subsidiary has paid in full all taxes
(whether or not shown on a Tax Return) required to be
paid by it before such payment became delinquent. Each
of IPS and the Subsidiary has made adequate provision in
conformity with generally accepted accounting principles
consistently applied, for the payment of all accrued taxes
not yet payable. All taxes which each of IPS and the
Subsidiary has been required to collect or withhold have
been duly collected or withheld and, to the extent required
when due, have been or will be duly and timely paid to the
proper taxing authority.
(b) The federal, state, local and foreign
income tax returns of each of IPS and the Subsidiary has
not been examined by the Internal Revenue Service for any
period during the past five years. No issue has been raised
by the Internal Revenue Service in respect of any such
returns. There are no audits, inquiries, investigations or
examinations relating to the Tax Returns of IPS or the
Subsidiary that are pending or, to the knowledge of IPS,
threatened by any Governmental Authority, and there are
no claims which have been or may be asserted relating to
any of the Tax Returns of IPS or the Subsidiary filed for
any year which if determined adversely, would result in the
assertion by any Governmental Authority of any material
tax deficiency against IPS or the Subsidiary. There have
been no waivers or extensions of statutes of limitations by
IPS or the Subsidiary.
2.20 Transactions with Certain Persons. Neither
IPS, the Subsidiary or any officer, director or, to the
knowledge of IPS, any employee of IPS or the Subsidiary,
or any member of any such person's immediate family is
presently a party to any material transaction with IPS or the
Subsidiary relating to the business of IPS, including,
without limitation, any contract, agreement or other
arrangement (i) providing for the furnishing of material
services by, (ii) providing for the rental of material real or
personal property from, or (iii) otherwise requiring
material payments to (other than for services as officers,
directors or employees of IPS or the Subsidiary), any such
person or any corporation, partnership, trust or other entity
in which any such person has a substantial interest as a
stockholder, officer, director, trustee or partner.
2.21 Brokers. No broker, finder or investment
banker has acted for IPS in connection with this Agreement
or the transactions contemplated hereby, and no broker,
finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements
made by or on behalf of IPS.
2.22 Adverse Business Conditions. Except as set
forth on Schedule 2.22 attached hereto, IPS has no
reasonable cause to believe that any condition exists with
respect to IPS or the Subsidiary which has, or may have,
a Material Adverse Effect.
2.23 Material Misstatements or Omissions. No
representation, warranty or statement made by IPS in this
Agreement, or in any certificate or document delivered or
to be delivered to CSI pursuant to this Agreement, contains
or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary to be
stated in order to make such representation, warranty or
statement not misleading. The representations and
warranties contained in this Article II shall not be affected
or deemed waived by reason of the fact that CSI or any of
its representatives should have known that any such
representation or warranty is or might be inaccurate in any
respect or by any investigation by CSI or its
representatives.
ARTICLE III
THE MERGER
3.1 The Merger.
The Merger shall become effective at the
time of filing (the "Effective Time") of a certificate of
merger (the "Certificate of Merger") pursuant to Nevada
Law. Such filing shall be effected as promptly as
practicable on or after the Closing Date (as defined in
Article V hereof).
3.2 Effects of the Merger.
(a) At the Effective Time the separate
existence of the Merger Subsidiary shall cease and IPS
shall continue as the surviving corporation. (IPS and the
Merger Subsidiary are hereinafter sometimes referred to as
the "Constituent Corporations" and IPS is hereinafter
sometimes referred to as the "Surviving Corporation.")
(b) On and after the Effective Time, the
effect of the Merger shall be as provided in the applicable
provisions of Nevada Law. Without limiting the generality
of the foregoing, and subject thereto, on and after the
Effective Time all property, real, personal and mixed,
rights, privileges and powers of each of the Constituent
Corporations shall be taken by and deemed to be
transferred to and vested in the Surviving Corporation, and
all debts, liabilities, obligations and duties of each of the
Constituent Corporations shall become the debts, liabilities,
obligations and duties of the Surviving Corporation without
further act or deed; and all property and every other
interest shall be thereafter as effectively the property of the
Surviving Corporation as it was of the Constituent
Corporations, and the title to any real estate or interest
therein whether vested by deed or otherwise, in either of
the Constituent Corporations, shall not revert or be in any
way impaired by reason of the Merger; provided, however,
that all rights of creditors and all liens upon the property of
either of the Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities, obligations and duties
of the Constituent Corporations shall thenceforth be
attached to the Surviving Corporation and may be enforced
against it to the same extent as if said debts, liabilities,
obligations and duties had been incurred or contracted by
it. Any action or proceeding pending against either of the
Constituent Corporations may be prosecuted to judgment as
if the Merger had not taken place, or the Surviving
Corporation may be substituted in place of either of the
Constituent Corporations.
3.3 Subsequent Actions. If, at any time after the
Effective Time, the Surviving Corporation deems it
necessary or advisable to obtain any deeds, bills of sale,
assignments, and other instruments, or that other action be
taken (a) to vest, perfect or confirm of record or otherwise
in the Surviving Corporation its right, title or interest in,
to or under any of the rights, properties or assets of the
Constituent Corporations acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with,
the Merger, or (b) to otherwise to carry out this
Agreement, then the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in
the name and on behalf of each of the Constituent
Corporations, all such deeds, bills of sale, assignments and
other instruments and to take and do, in the name and on
behalf of each of the Constituent Corporations or
otherwise, all such actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right,
title and interest in, to or under such rights, properties or
assets in the Surviving Corporation or otherwise to carry
out this Agreement.
3.4 Articles of Incorporation; By-Laws;
Directors and Officers.
(a) At the Effective Time, the Articles of
Incorporation of IPS, as in effect immediately before the
Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation until thereafter amended as provided
by Nevada Law.
(b) The By-Laws of IPS, as in effect
immediately before the Effective Time, shall be the By-
Laws of the Surviving Corporation until thereafter amended
as provided by Nevada Law, the Articles of Incorporation
of the Surviving Corporation and such By-Laws.
(c) The directors and officers of the
Surviving Corporation at the Effective Time shall be the
directors and officers listed on Schedule 3.4 attached
hereto, in each case until their successors are duly elected
and qualified.
ARTICLE IV
CONVERSION OF SECURITIES ON MERGER;
DELIVERY OF MERGER CONSIDERATION;
4.1 Conversion of Securities on Merger. At the
Effective Time and by virtue of the Merger:
(a) Each issued and outstanding share of
common stock, without par value, of the Merger
Subsidiary, and all rights in respect thereof, shall be
converted into one validly issued, fully paid and
nonassessable share of common stock, without par value,
of the Surviving Corporation (the "New IPS Shares").
(b) Each issued and outstanding share of
IPS Common Stock (the "Old IPS Shares"), and all rights
in respect thereof, shall be converted into the right to
receive 57.14285 shares of Series A Preferred Stock, and
a promissory note (the "Note") for $1,000 (collectively, the
"Merger Consideration"), which Note shall be due and
payable in eighteen equal consecutive monthly installments
commencing upon the earlier to occur of (i) the second
anniversary date of the Closing Date (as hereinafter
defined), or (ii) the completion of an equity financing of
CSI of not less than $2,000,000 of gross proceeds.
4.2 Delivery of Merger Consideration.
(a) The Merger Consideration shall be
paid to the sole stockholder of IPS upon (i) surrender to
CSI of all outstanding certificates evidencing the Old IPS
Shares, properly endorsed for transfer, and (ii) delivery to
CSI of the New IPS Shares.
(b) At the Effective Time, the stock
transfer books of IPS shall be closed and there shall be no
further registration of transfers of shares of IPS Common
Stock on the books of IPS.
(c) The certificates representing the
shares of Series A Preferred Stock and any of the shares of
CSI Common Stock issuable upon conversion of the Series
A Preferred Stock shall bear a legend in substantially the
following form:
"The securities represented
by this certificate have been
acquired for investment and
have not been registered
pursuant to the Securities act
of 1933, as amended, or any
applicable state statutes.
Such securities may not be
sold, transferred, pledged,
hypothecated or otherwise
disposed of without either an
effective registration
statement relating to such
disposition or an opinion of
counsel satisfactory to the
Company that the securities
may be so disposed of
without being registered.
(d) Until so surrendered, each
outstanding certificate for the Old IPS Shares shall be
deemed for all purposes to represent only the right to
receive the Merger Consideration into which the Old IPS
Shares represented by such certificate has been converted
pursuant to the Merger.
ARTICLE V
CLOSING
The closing with respect to the Merger (the
"Closing") shall take place at the offices of Breslow &
Walker, LLP, 767 Third Avenue, New York, New York
10017, or at such other place as CSI and IPS shall agree,
concurrently with the execution and delivery of the
Agreement (the "Closing Date").
ARTICLE VI
CLOSING DOCUMENTS
6.1 Documents to be Delivered by IPS and the
Merger Subsidiary. At the Closing, IPS and/or the Merger
Subsidiary, as appropriate, shall execute and deliver the
Certificate of Merger.
6.2 Documents to be Delivered by IPS. At the
Closing, IPS shall deliver to CSI and the Merger
Subsidiary the following, all in form and substance
reasonably satisfactory to counsel for CSI and the Merger
Subsidiary:
(a) A certified copy of resolutions duly
adopted by the Board of Directors of IPS authorizing and
approving the execution and delivery of this Agreement by
IPS and the performance of its obligations hereunder.
(b) A certified copy of resolutions duly
adopted by the sole stockholder of IPS authorizing and
approving the execution and delivery of this Agreement by
IPS and the performance of its obligations hereunder.
(c) A certificate of the Secretary of State
of the state of incorporation of each of IPS and the
Subsidiary, dated within five days of the Closing Date, (i)
listing the documents on file, and (ii) certifying as to the
good standing in such state of the corporation.
(d) The New IPS Shares.
(e) The Old IPS Shares.
6.3 Documents to be Delivered by CSI and the
Merger Subsidiary. At the Closing each of CSI and the
Merger Subsidiary shall deliver to IPS, all in form and
substance reasonably satisfactory to counsel for IPS:
(a) A certified copy of resolutions duly
adopted by the Board of Directors of each of CSI and the
Merger Subsidiary authorizing and approving the execution
and delivery of this Agreement by such corporation and the
performance of its obligations hereunder.
(b) A certified copy of resolutions duly
adopted by CSI, as the sole stockholder of the Merger
Subsidiary, authorizing and approving the execution and
delivery of this Agreement by the Merger Subsidiary and
the performance of its obligations hereunder.
(c) The Merger Consideration.
ARTICLE VII
ADDITIONAL COVENANTS
7.1 Each of IPS, CSI and the Merger Subsidiary
covenant and agree to proceed diligently and use its best
efforts to take or cause to be taken all actions and to do or
cause to be done all things necessary, proper and advisable
to consummate the Merger and any other transactions
contemplated by this Agreement.
7.2 CSI covenants and agrees to use its best
efforts to cause its Certificate of Incorporation to be
amended to (i) increase the authorized number of shares of
CSI Common Stock, or (ii) effectuate a reverse split of the
outstanding shares of CSI Common Stock, in either case to
make available sufficient shares of authorized and unissued
shares of CSI Common Stock to allow the Series A
Preferred Stock to be converted into shares of CSI
Common Stock.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnity of IPS and Cohen. IPS and
Cohen jointly and severally agree to indemnify and hold
harmless CSI and Merger Subsidiary and their respective
officers and directors from and against, for and in respect
of, and shall promptly reimburse them for, any and all
claims, losses, costs and expenses (including the cost of
any investigation and reasonable attorneys' fees), damages,
lawsuits, obligations, deficiencies and liabilities
(collectively "Losses") which arise or result from or are
related to (a) the inaccuracy or breach of any representation
or warranty made by IPS or Cohen herein, or (b) any
breach or failure of IPS to perform any of its covenants or
agreements set forth herein.
8.2 Indemnity of CSI and Merger Subsidiary.
CSI and Merger Subsidiary jointly and severally agree to
indemnify and hold harmless IPS and its officers and
directors from and against, for and in respect of, and shall
promptly reimburse them for, any and all Losses which
arise or result from or are related to (a) the inaccuracy or
breach of any representation or warranty made by CSI or
the Merger Subsidiary herein, or (b) any breach or failure
of CSI or the Merger Subsidiary to perform any of their
respective covenants or agreements set forth herein.
8.3 Third Party Claims Against CSI or Merger
Subsidiary. The obligations and liabilities of IPS and
Cohen with respect to Losses resulting from the assertion
of liability by third parties against CSI or Merger
Subsidiary or any of their officers or directors on account
of the matters set forth in Section 8.1(a) and (b) hereof
("Third Party Claim") shall be subject to the following
terms and conditions:
(a) CSI or Merger Subsidiary, as the case
may be, shall give IPS and Cohen prompt notice of any
such Third Party Claim, and IPS and Cohen will undertake
the defense thereof by representatives of its or his own
choosing and will consult with CSI during the course
thereof (but CSI's or the Merger Subsidiary's omission to
so notify IPS and Cohen shall not relieve them from any
liability they may have to CSI or the Merger Subsidiary
hereunder unless such omission materially prejudices the
ability of IPS and Cohen to defend against such Third Party
Claim);
(b) In the event IPS or Cohen, within
fifteen (15) days after receiving written notice from CSI
and/or the Merger Subsidiary of any Third Party Claim,
shall fail to take reasonable actions to defend, CSI and/or
the Merger Subsidiary shall (upon further notice to IPS and
Cohen) have the right to undertake the defense,
compromise or settlement of such Third Party Claim on
behalf of and for the account and risk of IPS and Cohen;
and
(c) Anything herein to the contrary
notwithstanding, (i) if there is a reasonable probability that
a Third Party Claim may adversely affect CSI and/or the
Merger Subsidiary other than as a result of money damages
or other money payments (i.e., seeks injunctive or similar
relief against CSI and/or the Merger Subsidiary), CSI
and/or the Merger Subsidiary shall make reasonable efforts
to give notice thereof to IPS and Cohen and shall have the
right, at the reasonable cost and expense of IPS and Cohen,
to defend, compromise or settle such Third Party Claim (on
such prior notice to IPS and Cohen as may be reasonably
possible under the circumstances); and (ii) IPS and Cohen
shall not, without CSI's and/or the Merger Subsidiary's
prior written consent, which consent shall not be
unreasonably withheld, settle or compromise any Third
Party Claim or consent to entry of any judgment in respect
thereof, unless (A) IPS or Cohen delivers to CSI and/or the
Merger Subsidiary in advance its or his, as the case may
be, written agreement in form and substance satisfactory to
CSI and/or the Merger Subsidiary which provides that
amounts paid and incurred or to be incurred by CSI and/or
the Merger Subsidiary in connection with such Third Party
Claim shall be paid simultaneously by IPS or Cohen, as the
case may be, to CSI and/or the Merger Subsidiary and (B)
such settlement, compromise or consent includes, as an
unconditional term thereof, the giving by the claimant or
the plaintiff to CSI and/or the Merger Subsidiary of a
general release from all liability in respect of all Third
Party Claims, satisfactory in form and substance to CSI
and/or the Merger Subsidiary.
8.4 Third Party Claims Against IPS. The
obligations and liabilities of CSI and/or the Merger
Subsidiary with respect to Losses resulting from the
assertion of liability by third parties against IPS or any of
their officers or directors on account of matters set forth in
Section 8.2(a) and (b) hereof shall be as set forth in Section
8.3 above, except that for purposes of this Section 8.4 all
references (a) to CSI and the Merger Subsidiary in Section
8.3 above shall be deemed to be references to IPS and
Cohen and (b) to IPS and Cohen in Section 8.3 above shall
be deemed to be references to CSI and the Merger
Subsidiary.
8.5 Cumulative Remedies. Except to the extent
that the limitations provided herein apply, the remedies
provided herein shall be cumulative and shall not preclude
the assertion by any party hereto of any other rights or the
seeking of any other remedies against the other parties
hereto.
8.6 Survival of Representations and Warranties.
The representations, warranties, covenants and agreements
made by the parties in this Agreement, or in any certificate
or document furnished pursuant hereto, and the obligation
to indemnify hereunder shall survive the Effective Time
and the consummation of the transactions contemplated
hereby notwithstanding any investigation made by or on
behalf of any party.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be
terminated at any time before the Effective Time:
(a) By mutual consent of the Board of
Directors of each of CSI and IPS;
(b) By either CSI or IPS if the Merger
shall not have been consummated by April 30, 1997.
9.2 Effect of Termination. In the event of a
termination of this Agreement as provided in Section 11.1
hereof, this Agreement shall forthwith become void and
there shall be no liability on the part of CSI, Merger
Subsidiary or IPS or their respective officers or directors,
except that nothing herein shall relieve any party from
liability for any willful breach hereof.
9.3 Amendment. This Agreement may be
amended by the parties hereto by action taken by the Board
of Directors of CSI and Merger Subsidiary and the Board
of Directors of IPS at any time before the Effective Time.
This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
9.4 Waiver. At any time before the Effective
Time, CSI and Merger Subsidiary, on the one hand, and
IPS, on the other hand, may (a) extend the time for the
performance of any of the obligations or other acts of the
other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party hereto
contained herein or in any document delivered pursuant
hereto and (c) waive compliance with any of the
agreements or conditions of the other party hereto
contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only
as against such party and only if set forth in an instrument
in writing signed by such party.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Notices. All notices and other
communications given or made pursuant hereto shall be in
writing and shall be deemed to have been duly given or
made as of the date delivered, if delivered personally, or
mailed, if mailed by registered or certified mail (postage
prepaid, return receipt requested) to the parties at the
following addresses (or at such other address for a party as
shall be specified by like notice, except that notices of
changes of address shall be effective upon receipt):
(a) if to CSI or Merger Subsidiary:
Cardiac Science, Inc.
8 Hammond Drive, Suite 111
Irvine, California 92718
Attention: Chief Executive Officer
with copies to:
Breslow & Walker, LLP
767 Third Avenue
New York, New York 10017
Attention: Howard S. Breslow, Esq.
(b) if to IPS:
c/o Raymond W. Cohen
1026 Timberline Lane
Cowan Heights, California 92705
Attention: Chief Executive Officer
with a copy to:
Jones Day Reavis & Pogue
555 West Fifth Street
Suite 4600
Los Angeles, CA 90013
Attention: Shivbar S. Grewal, Esq.
10.2 Expenses. All costs and expenses incurred
in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring
such costs and expenses regardless of a termination of this
Agreement or the failure to consummate the Merger, to wit
- -CSI and the Merger Subsidiary shall bear all of their
expenses in connection with the Merger; IPS shall bear any
legal expenses involved with corporate house cleaning of
IPS; and Cohen shall bear all legal expenses in connection
with the Merger of the Merging Subsidiary into IPS.
10.3 Headings. The headings or captions
contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or
interpretation of this Agreement.
10.4 Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being
enforced by virtue of any rule of law, or public policy, all
other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse
to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner
to the end that the transactions contemplated hereby are
fulfilled to the maximum extent possible.
10.5 Entire Agreement; No Third-Party
Beneficiaries. This Agreement constitutes the entire
agreement and supersedes any and all other prior
agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject
matter hereof. Except as otherwise expressly provided
herein, this Agreement is not intended to confer upon any
other person any rights or remedies hereunder.
10.6 Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of
the State of Nevada.
10.7 Counterparts. This Agreement may be
executed in one or more counterparts, each of which when
executed shall be deemed to be an original but all of which
together shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused
this Agreement to be executed by their respective officers
thereunto duly authorized as of the day and year first above
written.
CARDIAC SCIENCE, INC.
By:
J. Donald Hill, Director
CSI MERGING CORPORATION
By:
J. Donald Hill, President
INNOVATIVE PHYSICIANS SERVICES, INC.
By:
Raymond W. Cohen
RAYMOND W. COHEN
<PAGE>
Exhibit B
PROMISSORY NOTE
ONE HUNDRED THOUSAND DOLLARS
$100,000 April 9, 1997
FOR VALUE RECEIVED, the undersigned,
Cardiac Science, Inc., a Delaware corporation with an
address at 8 Hammond Drive, Suite 111, Irvine, California
92718 ("Maker"), promises to pay to the order of Raymond
Cohen ("Holder"), at 1026 Timberline Lane, Cowen
Heights, California 92705 (or at such other place as may be
designated by Holder), the principal sum of One Hundred
Thousand Dollars ($100,000), in lawful money of the
United States of America. The principal of this Note shall
be due and payable in eighteen (18) equal consecutive
monthly installments commencing upon the earlier of (i)
April 9, 1999, or (ii) the completion of an equity financing
of the Maker of not less than $2,000,000 of gross
proceeds. This Note shall not bear interest.
Maker agrees to pay all expenses of Holder in
collecting this Note, including, without limitation,
attorneys' fees and expenses. The interpretation of this
instrument and the rights and remedies of the parties hereto
shall be governed by the internal laws of the State of
California.
Maker hereby agrees and consents to the jurisdiction
of the State and Federal courts sitting in the State of
California in any action or proceeding arising out of or
connected in any way with this Note, and consents and
agrees that service of process in any such action or
proceeding will be sufficient if mailed to the address
provided above (or to such other address as Maker
hereafter may designate to Holder by a writing delivered to
Holder) by certified mail, return receipt requested. Maker
further agrees to the invocation of said jurisdiction by
service of process in any other manner authorized by law.
Maker may prepay the principal sum in whole or in
part, without penalty at any time, including all interest
accrued thereon to the date of payment.
Maker hereby waives presentment, trial by jury,
notice of non-payment, protest, notice of protest and notice
of dishonor.
CARDIAC SCIENCE, INC.
By:
J. Donald Hill, Director
<PAGE>
Exhibit C
CERTIFICATE OF DESIGNATION
of
SERIES A CONVERTIBLE PREFERRED STOCK
of
CARDIAC SCIENCE, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
____________________________________
Cardiac Science, Inc., a corporation organized and
existing under the General Corporation Law of the State of
Delaware (the "Corporation"), hereby certifies that the
following resolution was adopted by the Board of Directors
of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held
on March 27, 1997:
RESOLVED, that pursuant to the authority granted
to and vested in the Board of Directors of this Corporation
(the "Board") in accordance with the provisions of the
Certificate of Incorporation, the Board hereby creates a
series of preferred stock of the Corporation, par value
$.001 per share (the "Preferred Stock"), and hereby states
the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
Section 1. Designation and Amount. The shares
of such series shall be designated as "Series A Convertible
Preferred Stock" (the "Series A Preferred Stock") and the
number of shares constituting the Series A Preferred Stock
shall be Five Thousand Seven Hundred Fourteen and Two
Hundred and Eighty-Five One Thousandths (5,714.285).
Such number of shares may be increased or decreased by
resolution of the Board; provided, however, no decrease
shall reduce the number of shares of Series A Preferred
Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance
upon the exercise of outstanding options, rights, or
warrants for, or upon the conversion of any outstanding
securities issued by the Corporation convertible into, Series
A Preferred Stock.
Section 2. Dividends. The Series A Preferred
Stock shall not pay dividends.
Section 3. Conversion.
(a) Subject to the provisions of Section
3(c) below, the holder of any share or shares of Series A
Preferred Stock shall have the right at any time, and from
time to time, at such holder's option, without the payment
of any additional consideration, to convert each and any
share of Series A Preferred Stock held by such holder into
1,000 fully paid and non-assessable shares of common
stock of the Corporation, $0.001 par value per share (the
"Common Stock"). Each conversion shall be effected by
surrendering to the Corporation the stock certificate or
certificates for the Series A Preferred Stock to be
converted, accompanied by a written notice of such
holder's election to convert his share(s) of Series A
Preferred Stock into Common Stock and the number of
shares of Series A Preferred Stock to be so converted (the
"Conversion Notice"). Upon receipt of such stock
certificate or certificates and the Conversion Notice, the
Corporation shall issue and deliver to such holder a stock
certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled.
(b) Each share of Series A Preferred
Stock automatically shall convert into Common Stock, on
the basis set forth herein, upon their being sufficient
authorized but unissued shares of Common Stock to allow
the conversion of all outstanding shares of Series A
Preferred Stock.
(c) (1) If, at any time or from time to
time, the Corporation shall declare and pay to the holders
of Common Stock a dividend in shares of Common Stock,
or the Corporation shall subdivide the outstanding shares of
Common Stock into a greater number of shares of Common
Stock, or combine the outstanding shares of Common Stock
into a smaller number of shares of Common Stock, then
the number of shares of Common Stock into which each
share of Series A Preferred Stock shall be convertible
pursuant to the provisions hereof shall be adjusted so that
the holder of shares of Series A Preferred Stock shall be
entitled to receive the number of shares of Common Stock
which he would have owned or been entitled to receive
after the happening of any of the events described above
had the Series A Preferred Stock been converted in full
immediately prior to the happening of such event, such
adjustment to become effective immediately (i) in the event
of a stock dividend, after the opening of business of the
day following the record date, and (ii) in the event of a
subdivision or combination, the day on which the
subdivision or combination becomes effective.
(2) If, at any time or from time to
time after the date on which the Series A Preferred Stock
was first issued by the Corporation (the "Issuance Date"),
the Corporation shall make or issue, or fix a record date
for the determination of holders of shares of Common
Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation, including a
distribution of evidence of indebtedness of the Corporation,
other than shares of Common Stock, then, and in each such
event, provision shall be made by the Corporation so that
the holders of shares of Series A Preferred Stock shall
receive, upon conversion thereof, in addition to the number
of shares of Common Stock receivable thereupon, the
amount of those securities of the Corporation that such
holders would have received had their shares of Series A
Preferred Stock been converted on the date of such event
and had they thereafter, during the period from the date of
such event to and including the date of conversion, retained
such securities receivable by them as aforesaid during such
period.
(3) If the shares of Common
Stock issuable upon the conversion of shares of Series A
Preferred Stock shall be changed into the same or any
different number of shares of any class or any series of any
class of capital stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or
combination of shares or a stock dividend provided for
above, or a merger, consolidation, combination, or other
transaction provided for in Section 8 hereof), then, and in
each such event, the holder of shares of Series A Preferred
Stock shall have the right thereafter to convert such shares
of Series A Preferred Stock into the kind and amount of
shares of stock and other securities and property receivable
upon such reorganization, reclassification or other change
by holders of the number of shares of Common Stock into
which such shares of Series A Preferred Stock might have
been converted immediately prior to such reorganization,
reclassification or change.
(4) After any adjustment pursuant
to this Section 3(c), the Corporation promptly shall prepare
a certificate, signed by its President or Chief Financial
Officer, setting forth the effect of such adjustment on the
holders of Series A Preferred Stock and explaining such
adjustment and promptly shall cause such certificate to be
delivered to each holder of Series A Preferred Stock.
(d) No fractional shares of Common
Stock shall be issued. Instead, fractional shares of
Common Stock otherwise issuable upon conversion shall be
rounded to a full share of Common Stock.
Section 4. Redemption.
(a) If any share(s) of Series A Preferred
Stock shall be outstanding on the second anniversary of the
Issuance Date, then at any time after such date the
holder(s) of such shares of Preferred Stock shall have the
right to demand redemption of all of such shares at a price
of $175 per share (a "Redemption Demand"). A
Redemption Demand shall be made by giving the
Corporation notice (the "Redemption Notice") of such
holder's desire to have his shares of Series A Preferred
Stock redeemed, which notice shall indicate the number of
shares of Series A Preferred Stock to be redeemed.
(b) Each holder who makes a Redemption
Demand pursuant to this Section 4 shall send to the
Corporation the certificates evidencing such holder's shares
of Series A Preferred Stock to be redeemed, and the
Corporation promptly shall pay the applicable redemption
price to such holder. The Corporation shall not be
obligated to deliver the redemption price unless the
certificate(s) evidencing the Series A Preferred Stock so
redeemed are delivered to the Corporation.
Section \E Voting Rights. The holders of
shares of Series A Preferred Stock shall have the following
voting rights:
(a) Subject to the provision for
adjustment hereinafter set forth, each share of Series A
Preferred Stock shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the stockholders
of the Corporation. If, at any time, the Corporation shall
declare or pay to holders of the Common Stock a dividend
in shares of Common Stock, or shall effect a subdivision,
combination, or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then,
in each such case, the number of votes per share to which
holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by
multiplying such number by a fraction, the numerator of
which is the number of shares of Common Stock
outstanding immediately after such event and the
denominator of which is the number of shares of Common
Stock outstanding immediately prior to such event.
(b) Except as otherwise provided herein,
by law, or in any other Certificate of Designation creating
a series of Preferred Stock or any similar stock, the holders
of shares of Series A Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together
as one class on all matters submitted to a vote of
stockholders of the Corporation.
(c) Except as set forth herein or as
otherwise provided by law, the holders of the Series A
Preferred Stock shall not have the right or power to vote
on, and their consent shall not be required for, any
corporate action.
Section WP Reacquired Shares. Any shares of
Series A Preferred Stock purchased or otherwise acquired
by the Corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof.
Upon their cancellation, all such shares shall become
authorized but unissued shares of Preferred Stock and may
be reissued as part of a new series of Preferred Stock,
subject to the conditions and restrictions on issuance set
forth herein, in the Certificate of Incorporation, in any
other Certificate of Designation creating a series of
Preferred Stock or any similar stock, or as otherwise
required by law.
Section 7. Liquidation, Dissolution, or Winding
Up. In the event of any liquidation, dissolution, or winding
up of the Corporation, the holders of shares of the Series
A Preferred Stock are entitled to receive out of assets of
the Corporation available for distribution to stockholders,
after satisfaction of indebtedness, but before any
distribution of assets is made to holders of Common Stock
or to holders of any other class of stock of the Corporation
ranking junior to the Series A Preferred Stock upon
liquidation, liquidating distributions in the amount of $175
per share. If, upon any liquidation, dissolution, or winding
up of the Corporation, the amounts payable with respect to
the Series A Preferred Stock or any other shares of stock
of the Corporation ranking as to any such distribution on a
parity with the Series A Preferred Stock are not paid in
full, the holders of the Series A Preferred Stock and of
such other shares will share ratably in any such distribution
of assets of the Corporation in proportion to the full
distributable amounts to which they are entitled. After
payment of the full amount of the liquidating distribution to
which they are entitled, the holders of shares of the Series
A Preferred Stock will not be entitled to any further
participation in any distribution of assets by the
Corporation.
Section 8. Consolidation, Merger, etc. If the
Corporation shall enter into any consolidation, merger,
combination, or other transaction in which the shares of
Common Stock are exchanged for or changed into other
stock or securities, cash, and/or any other property, then,
in any such case, the Corporation, as a condition precedent
to such transaction, shall cause effective provisions to be
made so that each holder of Series A Preferred Stock then
outstanding shall have the right, by converting such
share(s) of Series A Preferred Stock, to acquire the kind
and amount of shares of stock, securities, cash, and/or
other property receivable upon such consolidation, merger,
combination, or other transaction by a holder of the
number of shares of Common Stock which might have been
acquired upon conversion of such Series A Preferred Stock
immediately prior to such consolidation, merger,
combination, or other transaction.
Section 9. Amendment. This Certificate of
Designation shall not be amended in any manner which
would materially alter or change the powers, preferences,
or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the
holders of at least two-thirds of the outstanding shares of
Series A Preferred Stock, voting together as a single class.
RESOLVED, FURTHER, that the appropriate
officers of the Corporation hereby are authorized to execute
and acknowledge a certificate setting forth these resolutions
and to cause such certificate to be filed and recorded, all in
accordance with the requirements of Section 151 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Certificate of
Designation is executed on behalf of the Corporation by its
President this 27th day of March, 1997.
/s/ Raymond Cohen
Raymond Cohen, President
