<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CARDIAC SCIENCE, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
CARDIAC SCIENCE, INC.
1176 MAIN STREET
BUILDING C
IRVINE, CA 92614
--------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 1999
TO THE STOCKHOLDERS OF
CARDIAC SCIENCE, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of CARDIAC SCIENCE, INC., a Delaware corporation (the
"Company"), will be held on Friday, May 14, 1999, at 10:00 A.M., local time, at
Doubletree Club Hotel, Orange County Airport, 7 Hutton Centre Drive, Santa Ana,
CA 92707, for the following purposes:
1. To elect a board of five directors to serve until the next
Annual Meeting of Stockholders and until their successors are
duly elected and qualified.
2. To approve an amendment to the Company's 1997 Stock
Option/Stock Issuance Plan to increase the number of shares of
Common Stock reserved for issuance thereunder from 705,000
shares to 1,305,000 shares.
3. To ratify the selection by the Board of Directors of
PricewaterhouseCoopers LLP as independent auditors of the
Company for the year ending December 31, 1999.
4. To transact such other business as may properly come before
the meeting or any postponements or adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Management is aware of no other business
which will come before the Annual Meeting.
The Board of Directors has fixed the close of business on March 29,
1999 as the record date for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting and any postponements or adjournments
thereof.
All stockholders are cordially invited to attend the Annual Meeting.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the Annual Meeting may vote in person even if he or she has returned a proxy.
By Order of the Board of Directors,
Brett L. Scott
Secretary
Irvine, California
April 12, 1999
- -------------------------------------------------------------------------------
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. IF YOU ATTEND THE MEETING AND SO DESIRE, YOU MAY WITHDRAW YOUR PROXY
AND VOTE IN PERSON. THANK YOU FOR ACTING PROMPTLY.
- -------------------------------------------------------------------------------
2
<PAGE>
CARDIAC SCIENCE, INC.
1176 MAIN STREET
BUILDING C
IRVINE, CA 92614
---------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 1999
-------------------
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Cardiac Science, Inc., a Delaware corporation (the
"Company"), of proxies to be voted at the Annual Meeting of Stockholders to be
held on May 14, 1999, at 10:00 A.M., local time, or at any postponements or
adjournments thereof (the "Annual Meeting"), at Doubletree Club Hotel, Orange
County Airport, 7 Hutton Centre Drive, Santa Ana, CA 92707.
A form of proxy is enclosed for use at the Annual Meeting. Any proxy
given pursuant to this solicitation may be revoked by the person giving it at
any time before it is voted by delivering to the Company (Attention: Brett L.
Scott, Inspector of Elections) a written notice of revocation or a duly executed
proxy bearing a later date or by attending the Annual Meeting and voting in
person. When a proxy is properly executed and returned, the shares it represents
will be voted at the Annual Meeting in accordance with any instructions noted
thereon. If no direction is indicated, all shares represented by valid proxies
received pursuant to this solicitation (and not revoked prior to exercise) will
be voted (i) for the election of the nominees for director named in this Proxy
Statement, (ii) for approval of the amendment to the Company's 1997 Stock
Option/Stock Issuance Plan to increase the number of shares of Common Stock
reserved for issuance thereunder from 705,000 shares to 1,305,000 shares, (iii)
for ratification of the selection by the Board of Directors of
PricewaterhouseCoopers LLP as independent auditors for the year ended December
31, 1999 and (iv) in accordance with the judgment of the persons named in the
proxy as to such other matters as may properly come before the Annual Meeting.
The proxy solicitation materials are being mailed on or about April 12,
1999 to all stockholders entitled to vote at the Annual Meeting. The cost of
soliciting proxies will be borne by the Company. Regular employees, officers,
and directors of the Company may solicit proxies in person, by telephone, or by
mail. No additional compensation will be given to employees, officers, or
directors for such solicitation. The Company will request brokers and nominees
who hold stock in their names to furnish proxy solicitation materials to
beneficial owners of the shares and will reimburse such brokers and nominees for
their reasonable expenses incurred in forwarding proxy solicitation materials to
such beneficial owners.
Stockholders of record of the Company's common stock, par value $.001
per share ("Common Stock"), at the close of business on March 29, 1999 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. On
the Record Date, approximately 7,150,000 shares of Common Stock were issued and
outstanding.
Holders of shares of Common Stock are entitled to one vote per share on
all matters to come before the Annual Meeting. The holders of a majority of the
shares of Common Stock outstanding on the Record Date and entitled to be voted
at the Annual Meeting, present in person or by proxy, will constitute a quorum
for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes each shall be included in the
determination of the number of shares present at the Annual Meeting and for the
purpose of determining whether a quorum is present, and each shall be tabulated
separately. Abstentions and broker non-votes shall not be counted in determining
whether a nominee is elected. In determining whether a proposal has been
approved, abstentions shall be counted as votes against the proposal and broker
non-votes shall not be counted either for or against the proposal.
3
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
Four persons, all of whom are members of the present Board of
Directors, are nominees for election at the Annual Meeting to hold office until
the next annual meeting and until their respective successors are elected and
qualified. Unless authority to vote for any directors is withheld in a proxy, it
is intended that each proxy will be voted for the Company's four nominees named
below.
It is expected that all nominees will be able and willing to serve as
directors. However, in the event that any nominee of the Company is unable or
declines to serve as a director at the time of the Annual Meeting, the proxies
will be voted for any nominee who shall be designated by the present Board of
Directors to fill the vacancy. The Board of Directors has no reason to believe
that any of the persons named will be unable or unwilling to serve as a nominee
or as a director if elected.
The following information is submitted concerning the nominees named
for election as directors based upon information received by the Company from
such person. Approval of the nominees for election to the Board will require the
affirmative vote of the holders of a plurality of the outstanding shares of
Common Stock present at the Annual Meeting in person or by proxy and entitled to
vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF ALL NOMINEES LISTED BELOW TO THE BOARD OF DIRECTORS.
<TABLE>
<CAPTION>
Name Position Age
---- -------- ---
<S> <C> <C>
Raymond W. Cohen President, Chief Executive 39
Officer and Director
Paul D. Quadros Director 52
Peter Crosby Director 46
Howard L. Evers Director 50
</TABLE>
RAYMOND W. COHEN has been President and Chief Executive Officer of the
Company since February 1997 and a director of the Company since April 1997.
Since August 1993, Mr. Cohen has served as the President of Diagnostic
Monitoring, a diagnostic medical device company distributing cardiovascular
products worldwide. The Company acquired Diagnostic Monitoring in April 1997 and
sold substantially all of the assets of Diagnostic Monitoring in December 1998.
From 1990 to 1993, he was Vice President, Sales and Marketing of DM Software
Inc. From 1988 to 1990, Mr. Cohen was President of BioAnalogics, Inc., a
development stage medical device manufacturer. During his tenure at Brentwood
Instruments, Inc., a distributor of cardiopulmonary devices from 1981 to 1988,
Mr. Cohen held various sales and marketing positions, including Vice President
of Sales and Marketing from 1985 to 1988. Mr. Cohen holds a B.S. in Business
Management from the State University of New York at Binghamton.
PAUL D. QUADROS has been a director of the Company since its formation
in May 1991. Since 1995, he has been Chairman of the Board of UroGen Corp., a
developer of pharmaceuticals to treat prostate cancer. From 1994 to 1995, Mr.
Quadros served as Senior Vice President and Chief Financial Officer of
Thermatrix, Inc., a manufacturer of pollution control equipment. Prior to
joining Thermatrix, Mr. Quadros was a General Partner of Technology Funding, a
venture capital management organization. During his tenure at Technology Funding
he was a member of the Commitments Committee from 1986 to 1994, serving as its
Chairman from 1987 to 1990. From 1991 to 1994, he was
4
<PAGE>
Chairman of Technology Funding's Medical Investment Committee and was actively
involved in managing Technology Funding's health care portfolio. Mr. Quadros has
a B.A. in Finance from California State University at Fullerton and an M.B.A.
from the UCLA Graduate School of Management.
PETER CROSBY has been a director of the Company since November 1997.
Mr. Crosby has been Chief Executive Officer of Ischemia Technologies, LLC since
June of 1998. From February 1998 to June 1998, Mr. Crosby was Chairman of the
Board of Cardicomm Solutions (formerly Harley Street Software). From 1996 to
1997, he was President, Chief Executive Officer and a director of NeoVision
Corporation, an ultrasound imaging system developer. NeoVision was sold to
United States Surgical Corporation in September 1997. From 1995 to 1996, Mr.
Crosby was a consultant for Biomedical Business Resources, helping development
stage medical device companies with product development, strategy and marketing.
From 1981 to 1996, Mr. Crosby held numerous senior management positions for
Nucleous Group, an Australian medical device company division of Pacific Dunlop,
a multinational corporation. During his tenure at Nucleous, he served as Vice
President, R&D, and Vice President of Business Development for Telectronics
Pacing Systems, a global developer of implantable medical devices such as
defibrillators, pacemakers and cardiomyoplasty stimulators. Mr. Crosby is the
author of many publications, holds several patents, and has a B.S. in Electrical
Engineering as well as a Masters of Engineering Science from the University of
Melbourne, Australia.
HOWARD EVERS has been a director of the Company since March 1998. From
1995 to 1996, Mr. Evers served as President, Chief Executive Officer and
Chairman of the Board of Diagnostics On Call, a mobile X-ray and EKG services
provider to the long term care and home health care markets. From 1992 to 1995,
he was the Chief Executive Officer and Chairman of the Board of PSI, a medical
supply distribution company servicing the physician office market. From 1988 to
1992, Mr. Evers was the Chief Executive Officer and Chairman of the Board of
Lake Industries, an environmental services company. From 1973 to 1988, Mr. Evers
was President and Chief Executive Officer of Tru Green Corporation, a lawn, tree
and shrub care and pest control company.
There is no family relationship between any of the directors or
executive officers of the Company.
BOARD MEETINGS AND CERTAIN COMMITTEES
The Board of Directors of the Company held a total of eight meetings
during the year ended December 31, 1998. While the Board of Directors has an
Audit Committee and a Compensation Committee, there is no nominating committee
or committee performing the functions of a nominating committee.
The Audit Committee reviews the adequacy of the Company's internal
controls and meets periodically with management and the independent auditors.
This Committee, which currently consists of Messrs. Crosby and Quadros, did not
meet in 1998.
The Compensation Committee recommends salaries, incentives and other
forms of compensation for directors, officers and other employees of the
Company, administers the Company's various incentive compensation and benefit
plans (including stock plans) and recommends policies relating to such incentive
compensation and benefit plans. The Committee, which consists of directors
Cohen, Evers and Quadros, held five meetings during 1998.
No incumbent director attended fewer than 75 percent of the aggregate
number of meetings (held while such director was a member) of the Board of
Directors and of the committees, if any, upon which such director served in
1998.
5
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position and Offices with the Company
---- --- -------------------------------------
<S> <C> <C>
Raymond W. Cohen 39 President, Chief Executive Officer and Director
Brett L. Scott 48 Chief Financial Officer and Secretary
Dongping Lin 40 Chief Technical Officer
Michael Gioffredi 47 Vice President of Sales and Marketing
Jeffery Blanton 42 Vice President of Operations
</TABLE>
Officers are appointed by and hold office at the pleasure of the Board
of Directors. Set forth below is a biographical description of each executive
officer of the Company who is not also a director of the Company, based on
information supplied by him.
BRETT L. SCOTT has served as Chief Financial Officer and Secretary of
the Company since October 1997. From 1992 to 1997, Mr. Scott was Chief Financial
Officer of Neuro Navigational Corporation, a publicly held company located in
Costa Mesa, California which developed, manufactured and marketed
minimally-invasive neurosurgery and vascular surgery fiberoptic imaging
technology, software and disposables. Mr. Scott was Chief Financial Officer of
Western Energy Management, Inc. from 1991 to 1992 and of D&D Construction Co.,
Inc. from 1989 to 1991. From 1982 to 1989, he was co-owner of Schneider & Scott,
Inc., certified public accountants. Mr. Scott is a certified public accountant
and holds a B.S. in Business Administration from the University of Southern
California.
DONPING LIN, Ph.D., was appointed as Chief Technical Officer in July,
1998. Dr. Lin held the position of Director of Software Engineering from January
1997 until July 1998. Dr. Lin joined the Company as Senior Software Engineer in
January 1993. From 1988 to 1993, Dr. Lin held senior software engineering
positions at Del Mar Avionics located in Irvine, Calif. Dr. Lin received his
B.S. in Electrical Engineering from Beijing University in Bejing, China. Dr. Lin
received an M.S.E. in Computer Engineering and Ph.D. in Electrical Engineering
and Computer Science from the University of Michigan. Dr. Lin is recognized as
an expert in the field of computer arrhythmia analysis and real-time ventricular
fibrillation detection. While at the University of Michigan Dr. Lin's real-time
arrhythmia detection software was licensed to Pacific Communications, Inc.
MICHAEL GIOFFREDI, has served as Vice President, Sales and Marketing
since September 1998. Mr. Gioffredi previously held the position of vice
president sales and marketing for Britesmile, Inc., a public dental laser
technology company located in Salt Lake City. Prior to 1997, Mr. Gioffredi was
senior VP marketing and business development for the EMPath Group, a private
emergency medicine consulting firm and VP marketing for Laserscope, Inc., a
publicly traded medical laser company. From 1982 to 1993, Mr. Gioffredi held
marketing management and sales positions with the cardiology and cardiovascular
divisions of C.R. Bard, Inc., a fortune 500 medical device company. Mr.
Gioffredi has a BA in Business Administration and Marketing from California
State University at Fullerton.
JEFFERY W. BLANTON, has served as Vice President of Operations since
May 1998. From November 1994 to May 1998, Mr. Blanton held various positions
including Director of Engineering, Director of Project Engineering and Director
of Operations for Chiron Vision, a division of Chiron Corporation. Chiron Vision
develops and manufactures products for the ophthalmic surgeon. From March of
1994 to November 1994, Mr. Blanton was a consultant to Ohmeda Medical Devices, a
division of the British Oxygen Company. From 1987 to February 1994, Mr. Blanton
held project and management engineering positions at McGaw Inc., a drug delivery
company. Prior to 1987, Mr. Blanton worked for Honeywell Inc. Mr. Blanton is a
certified project manager and has a B.S. in Mechanical Engineering from
Worcester Polytechnic Institute.
6
<PAGE>
BENEFICIAL OWNERSHIP OF THE COMPANY'S SECURITIES
The following table sets forth, as of April 5, 1999, certain
information regarding the beneficial ownership of Common Stock by (i) each
stockholder known to the Company to be the beneficial owner of more than 5% of
the outstanding shares thereof; (ii) each director of the Company; (iii) each
Named Executive Officer (as defined herein); and (iv) all executive officers and
directors of the Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT OF CLASS(1)
BENEFICIAL OWNER BENEFICIALLY OWNED
- ---------------- ------------------ -------------------
<S> <C> <C>
Dr. Ernst Muhler Mohl 1,687,500(2) 22%
Weinplatz 10
8001 Zurich
Switzerland
Medstone, Inc. 634,222(3) 9%
100 Columbia
Suite 100
Aliso Viejo, CA 92656
Lava Investments Limited 509,000 7%
Hong Kong
Raymond W. Cohen 520,060(4) 7%
1176 Main Street
Irvine California 92614
Dongping Lin 49,625(5) *
Paul D. Quadros 29,519(6) *
Peter Crosby 26,750(7) *
Howard L. Evers 25,000 *
All executive officers and directors 663,454(8) 9%
as a group (eight persons)
- -------------------------
</TABLE>
* Less than 1%.
(1) Shares of Common Stock subject to options and warrants currently
exercisable or exercisable within 60 days are deemed outstanding for
computing the number of shares and the percentage of the outstanding
shares held by a person holding such options or warrants but are not
deemed outstanding for computing the percentage of any other person.
Except as indicated by footnote, and subject to community property laws
where applicable, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Includes 437,500 shares issuable upon exercise of outstanding warrants.
(3) Includes 87,500 shares issuable upon exercise of outstanding warrants.
(4) Includes 12,500 shares issuable upon exercise of outstanding vested
options.
(5) Includes 29,625 shares issuable upon exercise of outstanding vested
options.
(6) Includes 17,500 shares issuable upon exercise of outstanding warrants and
4,844 shares issuable upon exercise of outstanding vested options.
(7) Includes 3,750 shares issuable upon exercise of outstanding vested
options.
(8) Includes 17,500 shares issuable upon exercise of outstanding warrants and
73,219 shares issuable upon exercise of outstanding vested options.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation paid
by the Company to the Company's Chief Executive Officer and to each executive
officer of the Company (other than the Chief Executive Officer) who received
salary and bonus payments in excess of $100,000 during the year ended December
31, 1998 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY OF COMPENSATION TABLE
LONG TERM COMPENSATION
----------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ ---------------------------- --------------------
SECURITIES
NAME AND OTHER RESTRICTED UNDERLYING LTIP ALL
PRINCIPAL SALARY BONUS ANNUAL STOCK OPTIONS/SARS PAYOUT OTHER
POSITION YEAR ($) ($) COMP. AWARD (#)(1) ($) COMP.
-------- ---- --- --- ----- ----- ------ --- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Raymond W. Cohen 1998 161,500 -- -- -- 50,000 -- 6,000(2)
President and Chief 1997 101,083 -- -- -- -- -- 6,000(2)
Executive Officer
Dongping Lin 1998 110,496 20,000 -- -- 124,250 -- --
Chief Technical 1997 81,806 -- -- -- -- --
Officer
</TABLE>
- ------------------------------
(1) Represents shares of Common Stock underlying stock options. The grant
of the options disclosed in this column was made pursuant to the 1997
Stock Option/Stock Issuance Plan.
(2) Annual automobile allowance
OPTION GRANTS IN 1998
The following table provides information related to options granted to
each of the Named Executive Officers during the year ended December 31, 1998:
<TABLE>
<CAPTION>
NO. OF SECURITIES PERCENTAGE OF TOTAL
UNDERLYING OPTIONS OPTIONS GRANTED TO EXERCISE PRICE EXPIRATION
NAME GRANTED (#)(1) EMPLOYEES IN YEAR ($/SH) DATE
---- -------------- ----------------- ------ ----
<S> <C> <C> <C> <C>
Dongping Lin 30,000 12.0% $2.00 12/8/07
</TABLE>
- -----------------------
(1) Represents shares of Common Stock underlying stock options. Such options
are exercisable 25% per year commencing in June 1999.
8
<PAGE>
AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
The following table sets forth certain information as of December 31,
1998 regarding options held by the Named Executive Officers. Such executive
officers did not exercise any options during the year ended December 31, 1998.
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES
ACQUIRED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
ON VALUE OPTIONS AT MONEY OPTIONS AT
NAME EXERCISE REALIZED YEAR-END YEAR-END ($)(1)
---- (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
--- --- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Raymond W. Cohen -- -- 50,000 $0
Dongping Lin -- -- 124,250 $0
</TABLE>
- -------------------------
(1) The closing bid price of the Common Stock on December 31, 1998 was
$2.00. Value is calculated on the difference between the exercise price
of in-the-money options and multiplied by the number of shares of
Common Stock underlying the option.
EMPLOYMENT AGREEMENTS
In May 1998, the Company entered into an employment agreement with
Raymond W. Cohen pursuant to which he would continue employment as President and
Chief Executive Officer. The agreement expires in May 1999 and shall continue
after the end of the original term, unless either party shall give the other
written notice of termination. Pursuant to the agreement, Mr. Cohen shall
receive a base salary of $180,000 per annum, plus such bonuses and stock options
which he may be eligible to receive based on incentive plans approved by the
Board of Directors. In addition, Mr. Cohen shall receive a car allowance of
$6,000 per annum. A non-competition covenant is contained in the employment
agreement. The agreement also provides that in the event of an Involuntary
Termination or change of Control (as such terms are defined in the agreement),
Mr. Cohen shall receive his base salary and health insurance benefits for twelve
months following such event as well as his pro rata portion of his target bonus,
and any unvested stock option or shares of restricted stock held by Mr.
Cohen on the date of such event shall continue to vest over such twelve month
period.
In July 1998, the Company entered into an employment agreement with
Dongping Lin pursuant to which he was named Chief Technical Officer. The
agreement expires in July 1999 and shall continue after the end of the original
term unless either party shall give the other written notice of termination.
Pursuant to the agreement, Mr. Lin shall receive a base salary of $125,000 per
annum, plus such bonuses and stock options which he may be eligible to receive
based on incentive plans approved by the Board of Directors. A non-competition
covenant is contained in the employment agreement. The agreement also provides
that in the event of an Involuntary Termination or change of Control (as such
terms are defined in the agreement), Mr. Lin shall receive his base salary and
health insurance benefits for six months following such event as well as his pro
rata portion of his target bonus, and any unvested stock option or shares of
restricted stock held by Mr. Lin on the date of such event shall continue to
vest over such twelve month period.
COMPENSATION OF DIRECTORS
Directors receive $1,000 per Board meeting attended and $250 per
telephonic Board meeting. Directors also are reimbursed for expenses incurred in
attending meetings of the Board of Directors and its committees. Non-employee
directors also are eligible to receive options under the Company's 1997 Stock
Option/Stock Issuance Plan.
9
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 11, 1997, the Company acquired Innovative Physicians Services,
Inc. d/b/a Diagnostic Monitoring, a Nevada corporation ("DM"), from Raymond W.
Cohen, President and Chief Executive Officer of the Company, for 5,714.285
shares of the Company's Series A Convertible Preferred Stock plus a non-interest
bearing promissory note in the principal amount of $100,000, which was paid in
full in 1998. Each share of Series A Preferred Stock has been, by its terms,
converted into 1,000 shares of Common Stock. The Company sold substantially all
of the assets of DM in December 1998.
10
<PAGE>
PROPOSAL 2
APPROVAL OF THE AMENDMENT TO THE
1997 STOCK OPTION/STOCK ISSUANCE PLAN
The Company believes that stock options and share ownership are
important factors in order for it to attract, retain and motivate key employees.
The Company's 1997 Stock Option/Stock Issuance Plan (the "Plan") was adopted by
the Board of Directors in December 1997 and approved by stockholders at the
Company's annual meeting in May 1997. A maximum of 705,000 shares of Common
Stock may be issued pursuant to the Plan, of which 704,892 have been granted to
date to employees, including executive officers, and directors of the Company
In December 1998, the Board of Directors approved an amendment to the
Plan which will allow 1,305,000 shares of Common Stock (an increase of 600,000
shares) to be issued pursuant to the Plan. A summary of the Plan as proposed to
be amended is set forth below. The summary does not purport to be complete and
is qualified in its entirety by the text of the Plan as proposed to be amended,
a copy of which is attached to this Proxy Statement as Exhibit A.
SUMMARY OF PLAN AS PROPOSED TO BE AMENDED
The Plan authorizes the granting of incentive stock options to
employees of the Company or any of its subsidiaries, including officers, and
non-statutory stock options to employees, including officers, and directors of
the Company, as well as to certain consultants and advisors. The options to be
granted under the Plan and designated as incentive stock options are intended to
receive incentive stock option tax treatment pursuant to Section 422 of the
Internal Revenue Code, as amended (the "Code").
The Plan also authorizes direct issuance of stock to eligible
participants in the Plan at a price per share of not less than 85% of the fair
market value on the date of issuance, payable in cash, by check, or, if
permitted under the terms of the grant, by promissory note. The consideration
for such shares may also be past services rendered to the Company. Such stock
issuances may vest immediately or in one or more installments as determined by
the Board of Directors. The holder of such stock, however, shall have full
stockholder rights with respect to said stock, whether or not vested.
The aggregate amount of Common Stock subject to the Plan and issuable
upon the exercise of all stock options ("Options") or granted directly to an
eligible participant consists of 705,000 shares of Common Stock, whether
authorized but unissued or reacquired by the Company. The maximum amount of
705,000 shares issuable upon the exercise of Options or direct issuance and the
number of shares and exercise price per share in effect under each outstanding
Option are subject to adjustment upon the occurrence of certain events,
including, but not limited to, stock dividends, stock splits, combinations,
mergers, consolidations, reorganizations, reclassifications, exchanges or other
capital adjustments.
The option price for the Common Stock underlying the Options is
determined by the Board of Directors or a committee designated by the Board and
consisting of two or more members ("Committee"), but in no event shall it be,
with respect to incentive stock options, less than 100% of the fair market value
of the Common Stock on the date it is granted (110% in the case of optionees who
own more than 10% of the voting power of all classes of stock of the Company).
The exercise price for non-statutory Options may be less than 100% of the fair
market value of the Common Stock on the date the Option is granted. The Code
limits to $100,000 the fair market value (determined at the time the Option is
granted) of the Common Stock with respect to which incentive Options are first
exercisable by any individual employee during any calendar year.
No Option granted under the Plan may be exercised after the expiration
of the Option, which may not, in any case, exceed ten years from the date of
grant (five years in the case of incentive Options granted to persons who own
more than 10% of the voting power of all classes of the stock of the Company).
Options granted under the Plan are exercisable on such basis as determined by
the Board of Directors of the Company.
In the event of a liquidation or dissolution of the Company or a merger
or consolidation of the Company
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resulting in a transfer of more than 50% of the voting power of the Company's
securities, any unexercised Options theretofore granted under the Plan shall,
immediately prior to such transaction, become fully exercisable. If not
exercised prior to such transaction, all Options shall be deemed cancelled
unless the surviving corporation in any such merger or consolidation elects to
assume the Options under the Plan. All shares of stock issued pursuant to the
Plan shall also be immediately vested in the event of such a transaction.
The exercise of an Option is contingent upon receipt by the Company of
a written notice of exercise from the holder thereof, and payment to the
Company, either in cash, a check to its order, or, in certain circumstances,
shares of Common Stock, of the purchase price for the shares of Common Stock.
Options granted under the Plan may not be transferred by the participant other
than by will or the laws of descent and distribution and may be exercised during
the holder's lifetime only by such holder.
If an employee or director of the Company or a subsidiary thereof by
reason of a termination of such relationship other than disability or misconduct
ceases to be an employee or director prior to his exercise of the Option, the
Option granted to such employee or other person shall automatically terminate,
lapse and expire 90 days from the date of termination. If an employee or
director of the Company or a subsidiary thereof ceases to be an employee or a
director of the Company by reason of disability, such holder may exercise any
Option he holds at any time within twelve months from the date of termination
for such cause, but only to the extent the holder had the right to exercise such
Option at the date of such termination.
If an employee or director of the Company or a subsidiary thereof dies
while holding an outstanding Option, his Option rights may be exercised by the
person or persons to whom such rights under the Option are transferred by will
or the laws of descent and distribution within twelve months from the date of
death.
The Plan provides that the Board of Directors of the Company (or
Committee), shall administer the Plan. Subject to the terms of the Plan, the
Board of Directors (or Committee) have authority to determine and designate
those employees, including officers, and directors, consultants and advisors,
who are to be granted Options or shares and the number of shares underlying such
Options. Subject to the express provisions of the Plan, the Board of Directors
(or Committee) also have the authority to interpret the Plan and to prescribe,
amend and rescind the rules and regulations relating thereto.
Unless previously terminated in certain circumstances, the Plan will
terminate in December 2007. The Board of Directors may terminate or suspend the
Plan or make such modifications or amendments thereto as it shall deem
advisable; provided, however, that no amendment, termination or modification
shall adversely affect the rights of a holder of an Option previously granted
thereunder; and provided further, however, that if required to qualify the Plan
under Rule 16b-3 of the Securities Exchange Act of 1934, as amended, (i) in no
event shall the provisions of the Plan be amended more than once every six (6)
months other than to comply with changes in the Code, ERISA or the rules
promulgated by the Securities and Exchange Commission, and (ii) no amendment
that would materially increase the number of shares that may be issued under the
Plan, materially modify the requirements of eligibility for participation in the
Plan, or otherwise materially increase the benefits necessary to participants
under the Plan, shall be made without the approval of shareholders of the
Company.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the federal income tax consequences
of certain transactions under the Plan based on Federal income tax laws in
effect on January 1, 1998. This summary is not intended to be complete and does
not describe state or local tax consequences.
Tax Consequences to Participants
NON-QUALIFIED STOCK OPTIONS. In general, (i) no income will be
recognized by an optionee at the time a non-qualified Option is granted; (ii) at
the time of exercise of a non-qualified Option, ordinary income will be
recognized by the optionee in an amount equal to the difference between the
option price paid for the shares and the fair market value of the shares, if
unrestricted, on the date of exercise; and (iii) at the time of sale of shares
acquired
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pursuant to the exercise of a non-qualified Option, appreciation (or
depreciation) in value of the shares after the date of exercise will be treated
as a capital gain (or loss).
INCENTIVE STOCK OPTIONS. No income generally will be recognized by an
optionee upon the grant or exercise of an incentive option. If shares of common
stock are issued to the optionee pursuant to the exercise of an incentive
option, and if no disqualifying disposition of such shares is made by such
optionee within two years after the date of grant or within one year after the
transfer of such shares to the option, then upon sale of such shares, any amount
realized in excess of the option price will be taxed to the optionee as a
capital gain and any loss sustained will be a capital loss.
If common shares acquired upon the exercise of an incentive option are
disposed of prior to the expiration of either holding period described above,
the optionee generally will recognize ordinary income in the year of disposition
in an amount equal to the excess (if any) of the fair market value of such
shares at the time of exercise (or, if less, the amount realized on the
disposition of such shares if a sale or exchange) over the option price paid for
such shares. Any further gain (or loss) realized by the participant generally
will be taxed as a capital gain (or loss).
SHARE ISSUANCES. The recipient of shares of common stock under the plan
generally will be subject to tax at ordinary income rates on the fair market
value of the shares (reduced by any amount paid by the participant for such
shares) at such time as the shares are no longer subject to forfeiture or
restrictions on transfer for purposes of Section 83 of the Code
("Restrictions"). However, a recipient who so elects under Section 83(b) of the
Code within 30 days of the date of transfer of the shares will have taxable
ordinary income on the date of transfer of the shares equal to the excess of the
fair market value of such shares (determined without regard to the Restrictions)
over the purchase price, if any, of such shares. If a Section 83(b) election has
not been made, any dividends received with respect to shares issued under the
Plan that are subject to the Restrictions generally will be treated as
compensation that is taxable as ordinary income to the participant.
Tax Consequences to the Company
To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company will be entitled to a corresponding
deduction provided that, among other things, the income meets the test of
reasonableness, is an ordinary and necessary business expense, is not an "excess
parachute payment" within the meaning of Section 280G of the Code and is not
disallowed by the $1 million limitation on certain executive compensation under
Section 162(m) of the Code.
REQUIRED VOTE
The approval of the amendment to the Plan to increase the number of
shares of Common Stock reserved for issuance thereunder from 705,000 shares to
1,305,000 shares requires the affirmative vote of the holders of a majority of
the outstanding shares of the Common Stock present at the Annual Meeting in
person or by proxy and entitled to vote.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
AMENDMENT TO THE PLAN.
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PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected the accounting firm of
PricewaterhouseCoopers LLP to serve as independent auditors of the Company and
proposes the ratification of such decision.
PricewaterhouseCoopers LLP has audited the Company's financial
statements for the year ended December 31, 1998. Representatives of
PricewaterhousCoopers LLP are expected to be present at the Annual Meeting, with
the opportunity to make a statement if they desire to do so, and to respond to
appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS FOR THE
COMPANY FOR THE YEAR ENDED DECEMBER 31, 1999.
STOCKHOLDER PROPOSALS
Stockholder proposals for action at the Company's 2000 Annual Meeting
of Stockholders must be submitted in writing to the Company at its address set
forth on the first page of this Proxy Statement and received by the Company no
later than December 10, 1999 in order that they may be considered for inclusion
in the proxy statement and form of proxy relating to that meeting. Stockholders
who intend to present a proposal at the Company's 2000 Annual Meeting of
Stockholders without inclusion of such proposal in the Company's proxy materials
are required to provide notice of such proposal to the Company no later than
February 25, 2000. The Company reserves the right to reject, rule out of order,
or take other appropriate action with respect to any proposal that does not
comply with these and other applicable requirements.
OTHER MATTERS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, officers, and any persons holding more than
ten percent of the Common Stock to file reports of their initial ownership of
the Common Stock and any subsequent changes in that ownership with the
Securities and Exchange Commission ("SEC"). Specific filing deadlines of these
reports have been established and the Company is required to disclose in this
Proxy Statement any failure to meet such deadlines during the year ended
December 31, 1998. Based solely on a review of such reports furnished to the
Company, the Company believes all of these filing requirements have been
satisfied.
The Board of Directors of the Company knows of no other matters to be
submitted at the Annual Meeting. If any other matters properly come before the
Annual Meeting, the persons named in the enclosed form of proxy will have the
discretionary authority to vote all proxies received with respect to such
matters in accordance with their judgment.
BY ORDER OF THE BOARD
OF DIRECTORS
Brett L. Scott, Secretary
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EXHIBIT A
1997 STOCK OPTION/STOCK ISSUANCE PLAN AS PROPOSED TO BE AMENDED
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1997 Stock Option/Stock Issuance Plan is intended to
promote the interests of Cardiac Science Inc, a Delaware 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 herein shall have the meanings assigned to
such terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two (2) separate
equity programs:
(i) the Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be
granted options to purchase shares of Common Stock, and
(ii) the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator, be
issued shares of Common Stock directly, either through the
immediate purchase of such shares or as a bonus for services
rendered the Corporation (or any Parent or Subsidiary).
B. The provisions of Articles One and Four shall apply to both
equity programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board. However, any
or all administrative functions otherwise exercisable by the Board may be
delegated to the Committee. Members of the 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. The Board may also at any time terminate the functions of the
Committee and reassume all powers and authority previously delegated to the
Committee.
B. The Plan Administrator shall have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Plan and to make
such determinations under, and issue such interpretations of, the Plan and any
outstanding options thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator shall be final and binding on all parties who have an
interest in the Plan or any option thereunder.
IV. ELIGIBILITY
A. The persons eligible to participate in the Plan are
as follows:
(i) Employees,
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(ii) non-employee members of the Board or the
non-employee members of the board of directors of any Parent
or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or
Subsidiary).
B. The Plan Administrator shall have full authority to
determine, (i) with respect to the grants under the Option Grant Program, which
eligible persons are to receive the option grants, the time or times when those
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 when 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 such 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.
C. The Plan Administrator shall have the absolute discretion
either to grant options in accordance with the Option Grant Program or to effect
stock issuances in accordance with the Stock Issuance Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock. The maximum number of shares
of Common Stock which may be issued over the term of the Plan shall not exceed
one million three hundred five thousand (1,305,000) shares.
B. 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 canceled in accordance with the cancellation-regrant provisions of
Article Two. Unvested shares issued under the Plan and subsequently repurchased
by the Corporation, at the option exercise price or direct issue price paid per
share, pursuant to the Corporation's repurchase rights under the Plan shall be
added back to the number of shares of Common Stock reserved for issuance under
the Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan.
C. 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 and (ii) 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. In
no event shall any such adjustments be made in connection with the conversion of
one or more outstanding shares of the Corporation's preferred stock into shares
of Common Stock.
ARTICLE TWO
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.
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A. EXERCISE PRICE.
1. The exercise price per share shall be fixed
by the Plan Administrator in accordance with the following provisions:
(i) The exercise price per share shall not
be less than eighty-five percent (85%) of the Fair Market
Value per share of Common Stock on the option grant date.
(ii) If the person to whom the option is
granted is a 10% Stockholder, 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.
Currently, there are approximately thirty persons who are
eligible to participate in the Plan.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Four and the documents evidencing the option, be payable in cash or
check made payable to the Corporation. Should the Common Stock be registered
under Section 12(g) of the 1934 Act at the time the option is exercised, then
the exercise price may also be paid as follows:
(i) in 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
(ii) 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 instructions (A) to 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) to the Corporation to deliver
the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
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 grant. 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) Should the Optionee cease to remain in
Service for any reason other than Disability or Misconduct,
then the Optionee shall have a period of three (3) months
following the date of such cessation of Service during which
to exercise each outstanding option held by such Optionee.
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(ii) Should Optionee's Service terminate by
reason of Disability, then the Optionee shall have a period of
twelve (12) months following the date of such cessation of
Service during which to exercise each outstanding option held
by such Optionee.
(iii) If the Optionee dies while holding an
outstanding option, then the personal representative of his or
her estate or the person or persons to whom the option is
transferred pursuant to the Optionee's will or the laws of
inheritance shall have a twelve (12)-month period following
the date of the Optionee's death to exercise such option.
(iv) Under no circumstances, however, shall
any such option be exercisable after the specified expiration
of the option term.
(v) 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 with respect to any and all option shares for
which the option is not otherwise at the time exercisable or
in which the Optionee is not otherwise at that time vested.
(vi) Should Optionee's Service be terminated
for Misconduct, then all outstanding options held by the
Optionee shall terminate immediately and cease to remain
outstanding.
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 Optionee's
cessation of Service or death from the limited 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. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder 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. UNVESTED SHARES. 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. The Plan Administrator may
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not impose a vesting schedule upon any option grant or the shares of Common
Stock subject to that option which is more restrictive than twenty percent (20%)
per year vesting, with the initial vesting to occur not later than one (1) year
after the option grant date. However, such limitation shall not be applicable to
any option grants made to individuals who are officers of the Corporation,
non-employee Board members or independent consultants.
F. LIMITED TRANSFERABLILITY 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.
G. WITHHOLDING. The Corporation's obligation to deliver shares
of Common Stock upon the exercise of any options granted under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.
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 the Plan shall be applicable to Incentive Options. Options which
are specifically designated as Non-Statutory Options 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 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% STOCKHOLDER. If any Employee to whom an Incentive
Option is granted is a 10% Stockholder, then the option term shall not exceed
five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION
A. The shares subject to each option outstanding under the
Plan at the time of a Corporate Transaction shall automatically vest in full 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 that option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock.
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.
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
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(i) the number and class of securities available for issuance under the Plan
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. The Plan Administrator shall have the discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration (in whole
or in part) of one or more outstanding options (and the immediate termination of
the Corporation's repurchase rights with respect to the shares.
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 issue date. However,
the purchase price per share of Common Stock issued to a 10% Stockholder shall
not be less than one hundred and ten percent (110%) of such Fair Market Value.
2. Subject to the provisions of Section I of Article
Four, shares of Common Stock may be issued under the Stock Issuance Program for
any 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).
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. However, the Plan Administrator may not impose
a vesting schedule upon any stock issuance effected under the Stock Issuance
Program which is more restrictive than twenty percent (20%) per year vesting,
with initial vesting to occur not later than one (1) year after the issuance
date. Such limitation shall not apply to any Common Stock issuances made to the
officers of the Corporation, non-employee Board members or independent
consultants.
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.
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3. The Participant shall have full stockholder
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 stockholder 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.
II. CORPORATE TRANSACTION
Upon the occurrence of a Corporate Transaction, all
outstanding repurchase rights under the Stock Issuance Program shall terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full.
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
MISCELLANEOUS
I. FINANCING
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 of shares issued under the Stock Issuance Program by
delivering a full-recourse, interest bearing promissory note payable in one or
more installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares (less the par value of
those 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.
II. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective when adopted by the Board,
but no option granted under the Plan may be exercised, and no shares shall be
issued under the Plan, until the Plan is approved by the
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Corporation's stockholders. If such stockholder approval is not obtained within
twelve (12) months after the date of the Board's adoption of the Plan, then all
options previously granted under the Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan. Subject to such limitation, the Plan Administrator may
grant options and issue shares under the Plan at any time after the effective
date of the Plan and before the date fixed herein for termination of the Plan.
B. The Plan shall terminate upon the EARLIEST of (i) the
expiration of the ten (10)-year period measured from the date the Plan is
adopted by the Board, (ii) the date on which all shares available for issuance
under the Plan shall have been issued as vested shares or (iii) the termination
of all outstanding options in connection with a Corporate Transaction. All
options and unvested stock issuances outstanding at that time under the Plan
shall continue to have full force and effect in accordance with the provisions
of the documents evidencing such options or issuances.
III. 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, no such
amendment or modification shall adversely affect the rights and obligations with
respect to options or unvested stock issuances at the time outstanding under the
Plan unless the 0ptionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws and regulations.
B. Options may be granted under the Option Grant Program and
shares may be issued under the Stock Issuance Program which are in each instance
in excess of the number of shares of Common Stock then available for issuance
under the Plan, provided any excess shares actually issued under those programs
shall be held in escrow until there is obtained stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess shares 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 canceled
and cease to be outstanding.
IV. 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.
V. WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock
upon the exercise of any options or upon the vesting of any shares issued under
the Plan shall be subject to the satisfaction of all applicable Federal, state
and local income and employment tax withholding requirements.
VI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any option 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 granted
under it and the shares of Common Stock issued pursuant to it.
VII. NO EMPLOYMENT OR 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
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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.
VIII. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income
statement at least annually to each individual holding an outstanding option
under the Plan, unless such individual is a key Employee whose duties in
connection with the Corporation (or any Parent or Subsidiary) assure such
individual access to equivalent information.
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CODE shall mean the Internal Revenue Code of 1986, as amended.
C. COMMITTEE shall mean a committee of two (2) or more Board members
appointed by the Board to exercise one or more administrative functions under
the Plan.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(a) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(b) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
F. CORPORATION shall mean Cardiac Science Inc, a Delaware corporation.
G. DISABILITY 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 and shall be determined by
the Plan Administrator on the basis of such medical evidence as the Plan
Administrator deems warranted under the circumstances.
H. 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.
I. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.
J. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
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(a) 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. 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.
(b) 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.
(c) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem
appropriate.
K. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
L. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
(a) such individual's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(b) 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
target bonuses under any corporate-performance based bonus or incentive
programs) 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
without the individual's consent.
M. 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 (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).
N. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
O. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
P. OPTION GRANT PROGRAM shall mean the option grant program in effect
under the Plan.
Q. OPTIONEE shall mean any person to whom an option is granted under
the Plan.
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R. 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.
S. PARTICIPANT shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.
T. PLAN shall mean the Corporation's 1997 Stock Option/Stock Issuance
Plan, as set forth in this document.
U. PLAN ADMINISTRATOR shall mean either the Board or the Committee
acting in its capacity as administrator of the Plan.
V. 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.
W. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
X. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
Y. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.
Z. 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.
AA. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
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PROXY
CARDIAC SCIENCE, INC.
1176 MAIN STREET, BLDG "C"
IRVINE, CA 92614
This Proxy is solicited on behalf of the Board of Directors
The undersigned, acknowledging receipt of the proxy statement of Cardiac
Science, Inc. (the "Company"), dated April 12, 1999, hereby constitutes and
appoints Raymond W. Cohen and Brett L. Scott, and each or any of them, attorney,
agent, and proxy of the undersigned, with full power of substitution to each of
them, for and in the name, place, and stead of the undersigned, to appear and
vote all the shares of stock of the Company, standing in the name of the
undersigned on the books of the Company on March 29,1999, at the Annual Meeting
of Stockholders of the Company, to be held at the Doubletree Club Hotel, Orange
County Airport, 7 Hutton Centre Drive, Santa Ana, CA 92707, on May 14, 1999, at
10:00 a.m., local time, and all adjournments thereof.
When properly executed, this proxy will be voted as designated by the
undersigned.
If no choice is specified, this proxy will be voted (i) FOR the
election of the nominees for directors herein, (ii) FOR the proposed approval of
the amendment to the Company's 1997 Stock Option/Issuance Plan to increase the
number of shares available for issuance thereunder from 705,000 shares to
1,305,000 shares, and (iii) FOR ratification of the appointment of
PricewaterhouseCoopers LLP as independent auditors for the year ending December
31, 1999.
ELECTION OF DIRECTORS
/ / FOR all nominees listed below (except as written in on the line below)
Raymond W. Cohen, Paul D. Quadros, Peter Crosby, Howard L. Evers
/ / WITHOLD AUTHORITY for all nominees listed above.
(Instruction: To withhold authority to vote for any individual
nominee, please write in name on line below)
------------------------------------------------------------------------
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PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S 1997 STOCK OPTION/ISSUANCE
PLAN
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
AUDITORS
/ / FOR / / AGAINST / / ABSTAIN
FOR SUCH OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING AND ANY
ADJOURNMENTS THEREOF.
--------------------------------
Date
--------------------------------
Print Name
--------------------------------
Signature
--------------------------------
Signature, if held jointly
When shares are held by joint tenants, both should sign. When signing as
attorney, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE, AND RETURN THIS
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