<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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / 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.
16931 MILLIKAN AVENUE
IRVINE, CA 92606
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 2000
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 19, 2000, at 10:00 A.M., local time, at the Company's
office located at 16931 Millikan Avenue, Irvine, CA 92606, for the following
purposes:
1. To elect a board of four directors to serve until the next Annual
Meeting of Stockholders and until their successors are duly elected
and qualified.
2. To amend the Company's restated certificate of incorporation, as
amended, to increase our authorized shares of common stock from
20,000,000 shares to 40,000,000 shares.
3. 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 1,305,000 shares to 2,805,000
shares.
4. To ratify the selection by the Board of Directors of
PricewaterhouseCoopers LLP as independent auditors of the Company for
the year ending December 31, 2000.
5. 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, 2000 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, 2000
- --------------------------------------------------------------------------------
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>
PRELIMARY COPY
CARDIAC SCIENCE, INC.
16931 MILLIKAN AVENUE
IRVINE, CA 92606
---------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 2000
-------------------
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 Friday May 19, 2000, at 10:00 A.M., local time, or at any postponements
or adjournments thereof (the "Annual Meeting"), at the Company's office located
at 16931 Millikan Avenue, Irvine, CA 92606.
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) to amend the Company's Restated Certificate of Incorporation, as amended,
to increase the authorized shares of Company's common stock, par value $.001 per
share ("Common Stock"), from 20,000,000 shares to 40,000,000 shares, (iii) 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 1,305,000 shares to 2,805,000 shares, (iv) for ratification of
the selection by the Board of Directors of PricewaterhouseCoopers LLP as
independent accountants for the year ended December 31, 2000 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,
2000 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 at the close of business on March 29, 2000 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. On
the Record Date, 12,313,127 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 director is withheld in a proxy, it is intended
that each proxy will be voted for the 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 of the nominee's are 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 Comapny 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>
Paul D. Quadros Chairman 53
Raymond W. Cohen President, Chief Executive 40
Officer and Director
Peter Crosby Director 47
Howard L. Evers Director 51
</TABLE>
PAUL D. QUADROS has been the Company's Chairman of the Board since May 1999
and a member of the Board of Directors since the Company's formation in May
1991. He is currently the Chairman of the Board of Genstar Therapeutics
(formerly, UroGen Corp.) a developer of gene therapies for hemophilia and
prostate cancer. Prior to joining Genstar in June 1995, 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 1990 to 1994, he was chairman of Technology Funding's Medical
Investment Committee and was actively involved in managing Technology Funding's
health care portfolio. Mr. Quadros served on the board of directors of Medstone
International, Inc., from 1988 to 1995. Mr. Quadros has a B.A. in Finance from
California State University at Fullerton and an M.B.A. from U.C.L.A. Graduate
School of Management. He also serves on the board of directors of several
private companies.
RAYMOND W. COHEN has served as the Company's President, Chief Executive
Officer, and as a member of the Board of Directors since January 1997. Prior to
1997, Mr. Cohen was President of Diagnostic Monitoring, a privately held
manufacturer and international distributor of non-invasive cardiac monitoring
devices and was Vice President, Sales & Marketing of DM Software, Inc., a
developer of cardiac monitoring software. From 1988 to 1990, Mr. Cohen was
President of BioAnalogics, Inc., a publicly held development-stage medical
company located
4
<PAGE>
in Beaverton, Oregon. From 1982 to 1988, Mr. Cohen was Vice President, Sales and
Marketing for Brentwood Instruments, Inc., a publicly held cardiology products
distribution company based in Torrance, California, where he was instrumental in
the company being ranked in Inc. Magazine's list of Fastest Growing Small Public
Companies from 1986 through 1988. Mr. Cohen holds a B.S. in Business Management
from the State University of New York at Binghamton.
PETER CROSBY has been a member of the Company's Board of Directors since
November 1997. Mr. Crosby has over 20 years of experience in the medical device
industry and is currently the Chief Executive Officer of Ischemia Technology
Inc. Mr. Crosby also serves as chairman of the board of Harley Street Software,
Inc., a Canadian developer of ECG software products. Mr. Crosby was CEO and a
director of NeoVision Corporation, an ultrasound imaging system developer until
NeoVision was sold to United States Surgical Corporation in September 1997. From
1981 to 1996, Mr. Crosby held numerous senior management positions for Nucleus
Group, an Australian medical device company and a division of Pacific Dunlop,
Ltd. During his tenure at Nucleus, 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 numerous patents in the defibrillation technology field, and has a B.S. in
Electrical Engineering and a M.E.S. from the University of Melbourne, Australia.
HOWARD L. EVERS has been a member of the Company's Board of Directors 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 sold to Waste Management Inc.
in 1987.
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 held a total of eight meetings during the year ended
December 31, 1999. 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 our internal controls and meets
periodically with management and the independent auditors. This Committee, which
currently consists of Messrs. Crosby, Evers and Quadros, did not meet in 1999.
The Committee intends to hold meetings in 2000, to adopt a written charter, and
to comply with the final rules on Audit Committee Effectiveness as promulgated
by the Securities and Exchange Commission.
The Compensation Committee recommends salaries, incentives and other forms
of compensation for the Company's directors, officers and other employees,
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 eight meetings during 1999.
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
1999.
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 40 President, Chief Executive Officer and Director
Brett L. Scott 49 Chief Financial Officer and Secretary
Dongping Lin 41 Chief Technical Officer
Michael Gioffredi 48 Vice President of Sales and Marketing
Jeffery Blanton 44 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 of the
Company's executive officers who are not also a director, based on information
supplied by him.
BRETT L. SCOTT has served as the Company's 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.
DONGPING LIN, PH.D., was appointed the Company's 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 Software Development
Manager 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 Normal 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 the Company's 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 the Company's 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, certain information, as of April 5, 2000,
regarding beneficial ownership of the Common Stock by
- each stockholder known by the Company to be the beneficial owner of
more than five percent (5%) of the outstanding shares of common stock;
- each Director of the Company;
- each Named Executive Officer of the Company; and
- all of the Company's current executive officers and directors as a
group.
<TABLE>
<CAPTION>
Name of
Beneficial Owner Number of Shares
(including address of 5% holders) Beneficially Owned (1) Percent of Class (1)
- --------------------------------- ---------------------- --------------------
<S> <C> <C>
Dr. Ernst Muller Mohl 2,983,750 (2) 24.1%
Weinplatz 10
8001 Zurich Switzerland
Raymond W. Cohen 532,560 (3) 4.3%
Dongping Lin 90,688 (4) *
Paul D. Quadros 33,269 (5) *
Peter Crosby 30,500 (6) *
Howard L. Evers 28,750 (7) *
Walter Villiger 933,750 (8) 7.6%
Hurdnerstrasse 10
Postfach 1474
Ch-8640
Hurden Switzerland
Brett L. Scott 25,000 (9) *
Michael Gioffredi 12,500 (10) *
Jeffrey Blanton 12,500 (11) *
All executive officers and directors as a group (eight 765,767 (12) 6.1%
persons)
</TABLE>
- -------------------------
* Less than 1%.
(1) Shares of Common Stock subject to options and warrants currently
exercisable or exercisable within 60 days of the date hereof are deemed
outstanding for computing the number of shares beneficially owned and the
percentage of outstanding shares of the class 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 56,250 shares issuable upon exercise of outstanding warrants.
(3) Includes 25,000 shares issuable upon exercise of outstanding vested
options.
(4) Includes 70,688 shares issuable upon exercise of outstanding vested
options.
(5) Includes 17,500 shares issuable upon exercise of outstanding warrants and
8,594 shares issuable upon exercise of outstanding vested options.
7
<PAGE>
(6) Includes 7,500 shares issuable upon exercise of outstanding vested options.
(7) Includes 3,750 shares issuable upon exercise of outstanding vested options.
(8) Includes 33,750 shares issuable upon exercise of outstanding warrants.
(9) Includes 25,000 shares issuable upon exercise of outstanding vested
options.
(10) Includes 12,500 shares issuable upon exercise of outstanding vested
options.
(11) Includes 12,500 shares issuable upon exercise of outstanding vested
options.
(12) Includes 17,500 shares issuable upon exercise of outstanding warrants and
165,532 shares issuable upon exercise of outstanding vested options.
EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation paid by
the Company to the Chief Executive Officer and to each of its other executive
officers, other than the Chief Executive Officer, who received salary and bonus
payments in excess of $100,000 during the year ended December 31, 1999
(collectively the "Named Executive Officers") .
SUMMARY OF COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------- ---------------------------- --------------------
SECURITIES
NAME AND OTHER RESTRICTED UNDERLYING LTIP
PRINCIPAL SALARY BONUS ANNUAL STOCK OPTIONS/SARS PAYOUT ALL OTHER
POSITION YEAR ($) ($) COMP. AWARD (#)(1) ($) COMP.
-------- ---- --- --- ----- ----- ------ --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Raymond W. Cohen 1999 189,626 40,000 -- -- 150,000 -- 9,750(2)
President and Chief 1998 161,500 -- -- -- 50,000 -- 6,000(2)
Executive Officer 1997 101,083 -- -- -- -- -- 6,000(2)
Dongping Lin 1999 125,013 -- 164,250 -- --
Chief Technical 1998 110,496 20,000 -- -- 124,250 -- --
Officer 1997 81,806 -- -- -- -- --
Brett L. Scott 1999 119,723 15,000 -- -- 100,000 -- --
Chief Financial 1998 99,336 -- -- -- 50,000 -- --
Officer and Secretary 1997 21,000 -- -- -- -- -- --
Michael Gioffredi 1999 108,110 25,000 -- -- 100,000 -- 10,634(3)
Vice President of Sales 1998 32,331 -- -- -- 50,000 -- 2,885(4)
and Marketing 1997 -- -- -- -- --
Jeffrey Blanton 1999 130,228 -- -- -- 100,000 -- --
Vice President of 1998 73,634 -- -- -- 50,000 -- --
Operations 1997 -- -- -- -- -- -- --
</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
(3) Reimbursement for relocation expenses
(4) Consulting services
8
<PAGE>
OPTION GRANTS IN 1999
The following table provides information related to options granted to each
of the Named Executive Officers during the year ended December 31, 1999:
<TABLE>
<CAPTION>
NO. OF SECURITIES PERCENTAGE OF POTENTIAL REALIZABLE
UNDERLYING TOTAL OPTIONS VALUE AT ASSUMED
OPTIONS GRANTED TO EXERCISE ANNUAL RATE OF STOCK
GRANTED EMPLOYEES IN PRICE EXPIRATION PRICE APPRECIATION FOR
NAME (#)(1) YEAR ($/SH) DATE OPTION TERM
---- ---------------- ------------- -------- ---------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
5% 10%
-- ---
Raymond W. Cohen 150,000 16.7% $2.00 5/05/09 $188,668 $478,123
Dongping Lin 164,550 6.7% $2.00 5/05/09 $206,969 $524,501
Brett L. Scott 100,000 8.3% $2.00 5/05/09 $125,779 $318,748
Michael Gioffredi 100,000 8.3% $2.00 5/05/09 $125,779 $318,748
Jeffery Blanton 100,000 8.3% $2.00 5/05/09 $125,779 $318,748
</TABLE>
(1) Represents shares of Common Stock underlying stock options. Such
options are exercisable 25% per year commencing in June 1999.
AGGREGATED OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
The following table sets forth certain information as of December 31,
1999 regarding options held by the Named Executive Officers. These executive
officers did not exercise any options during the year ended December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON VALUE OPTIONS AT IN-THE-MONEY OPTIONS AT
EXERCISE REALIZED YEAR-END YEAR-END ($)(1)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --- --- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Raymond W. Cohen -- -- 25,000/125,000 $ 50,000/$250,000
Dongping Lin -- -- 70,688/93,862 $141,376/$187,724
Brett L. Scott -- 25,000/75000 $ 50,000/$150,000
Michael Gioffredi -- 12,500/87,500 $ 25,000/$175,000
Jeffery Blanton -- 12,500/87,500 $ 25,000/$175,000
</TABLE>
(1) The closing bid price of the Common Stock on December 31, 1999 was
$4.00. 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.
9
<PAGE>
EMPLOYMENT AGREEMENTS
The Company is a party to at-will employment agreements with Raymond
W. Cohen, Brett L. Scott, Dongping Lin, Michael Gioffredi and Jeffery
Blanton. Each agreement automatically renews annually unless either party
shall give the other written notice of termination. The agreements provide
for a base salary, plus such bonuses and stock options based on incentive
plans approved by the Board of Directors. Each agreement contains a
non-competition covenant, and Mr. Cohen's agreement provides that he shall
receive a car allowance of $6,000 per annum. The agreements also provide that
in the event of an involuntary termination or change of control,
- - each employee shall receive his base salary and health insurance
benefits for six months (twelve months for Mr. Cohen) following
the event as well as his pro rata portion of his target bonus; and
- - any unvested stock option or shares of restricted stock held on
the date of event shall continue to vest over the twelve-month
period.
Mr. Scott's agreement also provides that in the event of a change of
control, Mr. Scott shall receive 50,000 shares of our Common Stock (as
adjusted for dividends, stock dividends, stock splits and other similar
changes).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee of the Board of
Directors are Paul Quadros, Howard Evers and Raymond Cohen. Compensation
decisions regarding Mr. Cohen are made by the non-employee directors of the
Compensation Committee. No interlocking relationship exists between any
member of the Board of Directors or the Compensation Committee and any member
of the board of directors or compensation committee of any other company.
COMPENSATION OF DIRECTORS
The non-employee members of the Board of Directors receive $1,000
per board meeting attended and $250 per telephonic board meeting. The
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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report, prepared by the Compensation Committee, addresses the
Company's executive compensation policies and the basis on which 1999
executive officer compensation determinations were made. The Compensation
Committee designs and approves all components of the executive pay.
During 1999, the Compensation Committee members were Messrs. Cohen,
Quadros and Evers. Mr. Cohen recused himself from any compensation
discussions and or decisions with respect to his compensation.
COMPENSATION PHILOSOPHY
The Company's executive compensation policies are intended to
attract, retain, motivate and reward executives who can lead the Company in
achieving its long-term growth and earnings goals. The objective of the
Compensation Committee is to implement a compensation program that will
provide appropriate incentives while, at the same time, encourage executive
officers to increase their equity ownership in the Company and thereby align
their interests with those of the Company's stockholders. The compensation
program consists primarily of three components, namely (a) base salary, (b)
bonus and (c) stock options. Each of these factors are further described
below. In addition, executive officers are eligible to participate, on a
non-discriminatory basis, in various benefit programs provided to all
full-time employees, including the Company's stock purchase plan, 401(k) plan
and group
10
<PAGE>
medical, disability and life insurance programs. The Compensation Committee
believes that executive compensation packages should be viewed as a whole in
order to assess properly their appropriateness.
In establishing total compensation packages for the Company's
executive officers, the Compensation Committee takes into account the
compensation packages offered to executives of other medical device design
and manufacturing companies of similar stature. The Compensation Committee
uses this comparative data primarily as benchmarks to ensure that the
Company's executive compensation packages are competitive. The Compensation
Committee seeks to maintain total compensation within the broad middle range
of comparative pay. Individual amounts are based not only on comparative
data, but also on such factors as length of service with the Company and the
Compensation Committee's judgement as to individual contributions. These
factors are not assigned specific mathematical weights. The Compensation
Committee generally meets quarterly and at other times that it deems are
necessary and, from time to time, confers with outside advisors concerning
acceptable industry practices
SALARY
Base salaries are reviewed annually. It is the Compensation
Committee's intention to pay slightly below-market base salary but provide a
significant equity ownership opportunity to create incentives for the
Company's executive officers to maximize the Company's growth and success
while increasing stockholders' value over the long term. Changes in base
salary from year to year depend upon such factors as individual performance,
cost of living changes and the economic and business conditions affecting the
Company.
BONUS
Executive bonuses are determined in accordance with achievement of
the Compensation Company's goals for the most recent fiscal year. The amounts
are intended to reward management for achieving certain milestones set out at
the beginning of the fiscal year. The cash bonus for the Chief Executive
Officer is also influenced by his ability to execute strategic plans
determined by the Board of Directors, including merger and acquisition
programs.
STOCK OPTIONS
As noted above, stock options are an important component of total
executive compensation. Stock options are considered long-term incentives
that link the long-term interests of management with those of the Company's
stockholders. Stock options that the Compensation Committee has granted to
executive employees generally vest over a four year period from the date of
grant at the rate of 25% per fiscal year, commencing at the end of the year
in which they are granted. The Compensation Committee has absolute discretion
to determine the recipients and the number of options to be awarded. Each
award is at the Committee's discretion and is not subject to any specific
formula or criteria. The Compensation Committee generally awards options on
an annual basis. The number of shares for which options were granted to
executive officers in fiscal 1999 was determined by the Compensation
Committee based upon several factors, including the executive's position, his
or her past and future expected performance, the comparative data described
above, and the number of shares under options previously granted. These
factors were evaluated in a qualitative manner and were not assigned
predetermined weights.
COMPENSATION OF RAYMOND W. COHEN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER
During 1999, the compensation of Mr. Cohen was determined by
applying the same criteria discussed in this report used to determine
salaries, bonuses and stock option grants for all executive officers. Mr.
Cohen's compensation for 1999 is set forth in the Summary Compensation Table
appearing on page 9.
Compensation Committee
Paul Quadros
Howard Evers
Raymond Cohen
11
<PAGE>
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN
The following chart provides an annual comparison, from December 31,
1994 of the cumulative total shareholder return (assuming reinvestment of any
dividends) among the Company, the Russell 2000 Index and the Hambrecht &
Quist ("H&Q") Health Care (Excluding Biotechnology) Index, an industry index
of 43 health care and medical technology companies. The Russell 2000 Index
covers a broad cross-section of public companies, many of which have
relatively small market capitalizations. The historical information set forth
below is not necessarily indicative of future performance.
COMPARE 6-YEAR CUMULATIVE TOTAL RETURN
AMONG CARDIAC SCIENCE,
RUSSELL 2000 INDEX AND H&Q HEALTHCARE EXC. BIOTECH
<TABLE>
<CAPTION>
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C> <C> <C>
CARDIAC SCIENCE 100.00 239.51 52.10 43.71 69.93 139.86
H&Q HEALTHCARE EXC. BIOTECHNOLOGY 100.00 166.50 184.85 220.29 267.67 233.86
RUSSELL 2000 INDEX 100.00 128.44 149.77 183.23 178.09 212.98
</TABLE>
ASSUMES $100 INVESTED ON DEC. 31, 1994
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1999
12
<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.
PROPOSAL NO. 2
PROPOSAL TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION, AS AMENDED, TO INCREASE THE
AUTHORIZED SHARES OF COMMON STOCK
FROM 20,000,000 SHARES TO 40,000,000 SHARES
The Board of Directors has adopted a resolution authorizing an
amendment to the Company's Restated Certificate of Incorporation, as amended,
(the "Restated Certificate") to increase the authorized number of shares of
Common Stock from 20,000,000 shares to 40,000,000 shares. The proposed
amendment is subject to approval by the Company's stockholders. The Common
Stock, including the additional shares proposed for authorization, do not
have preemptive or similar rights, which means that current stockholders do
not have a prior right to purchase any new issue of our capital stock in
order to maintain their proportionate ownership thereof. Thus, the issuances
of additional shares of Common Stock might dilute, under certain
circumstances, the ownership and voting rights of stockholders. Each of the
additional authorized shares of Common Stock will have the same rights and
privileges as the currently authorized Common Stock.
The proposed amendment will modify the first paragraph of Article
Fourth of the Restated Certificate to read as follows:
"FOURTH: The total number of shares of stock which the
Corporation shall have the authority to issue is 40,000,000 shares of
Common Stock, each having a par value of $.001, and 1,000,000 shares of
Preferred Stock, each having a par value of $.001."
The Company is currently authorized to issue 21,000,000 shares
of capital stock, of which 20,000,000 shares are designated as Common Stock
and 1,000,000 shares are designated as Preferred Stock. The proposed
amendment would increase the total number of shares of authorized capital
stock to 41,000,000 shares and the number of shares of Common Stock
authorized to 40,000,000. As of April 5, 2000, 12,313,127 shares of Common
Stock were issued and outstanding, 1,305,000 shares of Common Stock were
reserved for issuance upon exercise of outstanding stock options and for
issuance of shares under our Amended 1997 Stock Option/Issuance Plan, and
1,742,466 shares were reserved for issuance upon exercise of outstanding
warrants. As of April 5, 2000, no shares of Preferred Stock were issued and
outstanding and the proposed amendment would not change the authorized number
of shares of Preferred Stock. If the proposed amendment is adopted, it will
become effective upon the filing of the proposed amendment with the Delaware
Secretary of State.
The Board of Directors believes that it is advisable and in the
Company's best interest to have available additional authorized but unissued
shares of Common Stock in an amount adequate to provide for the Company's
future needs. The increase in authorized Common Stock will not have any
immediate affect on the rights of existing stockholders. However, the
additional shares will be available for issuance from time to time by the
Company at the discretion of the Board of Directors without further
authorization by vote of the stockholders unless such authorization is
otherwise required by applicable law or regulation. These shares may be
issued for any proper corporate purpose including, without limitation,
acquiring other businesses in exchange for shares of Common Stock; entering
into joint venture arrangements with other companies in which Common Stock or
the right to acquire Common Stock are part of the consideration; stock splits
or stock dividends; raising capital through the sale of Common Stock; and
attracting and retaining valuable employees by the issuance of additional
stock options or use of stock-based plans. Although the Company may engage in
the foregoing actions in the future, no such
13
<PAGE>
actions involving the issuance of additional shares of Common Stock are
pending as of the date hereof. If the proposed amendment is approved, the
Board of Directors would be able to authorize the issuance of shares of
Common Stock without the necessity, and related costs and delays, of either
calling a special stockholders' meeting or waiting for the next regularly
scheduled meeting of the stockholders in order to increase the authorized
shares of Common Stock.
The issuance of the additional shares of Common Stock could
have the effect of diluting earnings per share and book value per share,
which could adversely affect existing stockholders. Issuing additional shares
of Common Stock may also have the effect of delaying or preventing a change
of control in the Company. The authorized but unissued Common Stock could be
issued in one or more transactions that would make more difficult or costly,
and less likely, a takeover of the Company. The proposed amendment to the
Restated Certificate is not being recommended in response to any specific
effort of which the Company is aware to obtain control and the Board of
Directors has no present intention to use the additional shares of Common
Stock in order to impede a takeover attempt.
The affirmative vote of a majority of the outstanding shares of
Common Stock entitled to vote at the Annual Meeting is required for the
approval of the amendment to the Restated Certificate to increase the
authorized shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
AMENDMENT OF THE RESTATED CERTIFICATE.
PROPOSAL 3
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 us 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. In December 1998
the Board of Directors approved an amendment to the Plan allowing a maximum
of 1,305,000 shares of Common Stock (an increase of 600,000 shares) to be
issued pursuant to the Plan. This amendment was approved by stockholders at
the Company's annual meeting May 1999. To date 1,305,000 options have been
granted to employees, including executive officers, and directors of the
Company.
In March 2000, the Board of Directors approved an amendment to the
Plan which will allow 2,805,000 shares of Common Stock (an increase of
1,500,000 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 the
Company's employees or employees of any of the Company's subsidiaries, and
non-statutory stock options to the Company's employees, directors and certain
of the Company's consultants and advisors. Currently there are approximately
60 persons who will be eligible to receive options under the Plan. 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.
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 also may be past services rendered to the Company. Such stock
issuances may vest immediately or in one or more installments as determined
by the
14
<PAGE>
Board of Directors. The holder of such stock, however, shall have full
stockholder rights with respect to said stock, whether or not vested.
The exercise price for options granted under the Plan is determined
by the Board of Directors or a committee designated by the Board and
consisting of two or more members. The exercise price for incentive stock
options cannot be less than 100% of the fair market value of the Common Stock
on the date it is granted, or 110% in the case of optionees who own more than
10% of the voting power of all classes of the Company's stock. 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 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 cannot exceed $100,000.
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 our
stock). Options granted under the Plan are exercisable on such basis as
determined by the Board of Directors.
If the Company liquidates or dissolves, or if there is a merger or
consolidation 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. 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 any of the Company's employees or directors, prior to the
exercise of their options, ceases to be an employee or director for any
reason other than disability or misconduct, the options granted to such
employees or directors automatically terminate 90 days from the date of
termination. If any of the Company's employees or directors ceases to be an
employee or a director by reason of disability, he may exercise any option he
holds at any time within twelve months from the date of termination, but only
to the extent the holder had the right to exercise such option at the date of
termination. If any of the Company's employees or directors 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, or a committee of the
Board, shall administer the Plan, and shall 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.
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, 1999. 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
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
15
<PAGE>
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 optionee, 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 Stock acquired upon the exercise of an incentive option is
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.
MARKET PRICE OF COMMON STOCK
On March 20, 2000, the last sale price of the common stock was $6.22.
OPTION GRANTS
For each of the Named Executive Officers and the various indicated
groups, the table below shows (i) the number of shares of Common Stock
subject to options granted under the Plan during the period from December
1997 through December 1999 and (ii) the weighted average exercise price
payable per share under such options.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF EXERCISE PRICE OF
NAME AND PRINCIPAL POSITION OPTION SHARES GRANTED OPTIONS
------------------------------------------------- --------------------- -------------------------
<S> <C> <C>
Raymond W. Cohen
President and Chief Executive Officer 150,000 $2.00
Dongping Lin
Chief Technical Officer 164,550 $2.00
Brett L. Scott
16
<PAGE>
Chief Financial Officer and Secretary 100,000 $2.00
Michael Gioffredi
Vice President of Sales and Marketing 100,000 $2.00
Jeffrey Blanton
Vice President of Operations 100,000 $2.00
All current executive officers as a group
(5 persons) 614,550 $2.00
All current directors (other than executive 127,188 $2.00
officers) as a group (3 persons)
All employees, who are not executive officers, 383,262 $2.48
as a group (24 persons)
</TABLE>
REQUIRED VOTE
The approval of the amendment to the Plan to increase the number of
shares of Common Stock reserved for issuance thereunder from 1,305,000 shares
to 2,805,000 shares requires the affirmative vote of the holders of a
majority of the 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.
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the accounting firm of
PricewaterhouseCoopers LLP to serve as the Company's independent accountants
and proposes the ratification of such decision.
PricewaterhouseCoopers LLP has audited the Company's financial
statements for the year ended December 31, 1999. 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 ACCOUNTANTS FOR THE
COMPANY FOR THE YEAR ENDED DECEMBER 31, 2000.
STOCKHOLDER PROPOSALS
Stockholder proposals for action at the Company's 2001 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, 2000 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
2001 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, 2001. 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.
17
<PAGE>
OTHER MATTERS
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our 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 we are required to disclose in this Proxy Statement
any failure to meet such deadlines during the year ended December 31, 1999.
Based solely on a review of such reports furnished to us, we believe all of
these filing requirements have been satisfied.
The Board of Directors 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
18
<PAGE>
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,
19
<PAGE>
(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 two million eight hundred five thousand (2,805,000) 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.
20
<PAGE>
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.
21
<PAGE>
(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 TRANSFERABILITY OF OPTIONS. During the lifetime of
the Optionee, the option shall be exercisable only by the Optionee and shall not
be assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death.
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
26
<PAGE>
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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<PAGE>
(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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<PAGE>
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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<PAGE>
PRELIMINARY COPY
PROXY
CARDIAC SCIENCE, INC.
16931 MILLIKAN AVENUE
IRVINE, CA 92606
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, 2000, 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, 2000, at the Annual Meeting of Stockholders of the Company, to be held at
the Company's office located at 16931 Millikan Avenue, Irvine, CA 92606, on
May 19, 2000, 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 proposal to amend
the Company's Restated Certificate of Incorporation, as amended, to increase
the authorized shares of common stock from 20,000,000 shares to 40,000,000
shares, (iii) FOR the proposed approval of the amendment to the Company's
Amended 1997 Stock Option/Issuance Plan to increase the number of shares
available for issuance thereunder from 1,305,000 shares to 2,805,000 shares,
and (iv) FOR ratification of the appointment of PricewaterhouseCoopers LLP as
independent accountants for the year ending December 31, 2000.
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 AMEND THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION, AS
AMENDED, TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK FROM 20,000,000
SHARES TO 40,000,000 SHARES
/ / FOR / / AGAINST / / ABSTAIN
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 ACCOUNTANTS
/ / 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 PROXY PROMPLTY IN THE ENCLOSED
ENVELOPE
31
