SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Cardiodynamics International Corporation
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(Name of Registrant as Specified In Its Charter)
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CardioDynamics International Corporation
6175 Nancy Ridge Drive, Suite 300
San Diego, CA 92121
June 4, 2001
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of CardioDynamics International Corporation which will be held at the
Del Mar Country Club, 6001 Clubhouse Drive, Rancho Santa Fe,
California, on Thursday, July 19, 2001 at 9:00 a.m. (PDT).
Additional details relating to the business to be conducted at the
Annual Meeting are given in the attached Notice of Annual Meeting of
Shareholders and Proxy Statement.
In order for us to have an efficient meeting, please promptly sign,
date and return the enclosed proxy in the accompanying reply envelope.
If you are able to attend the Annual Meeting and wish to change your
proxy vote, you may do so simply by voting in person at the Annual
Meeting.
We look forward to seeing you at the Annual Meeting.
On behalf of the Board of Directors,
/s/ Michael K. Perry
Michael K. Perry
Chief Executive Officer
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YOUR VOTE IS IMPORTANT
In order to assure your representation at the meeting, you are
requested to complete, sign and date the enclosed proxy as
promptly as possible and return it in the enclosed envelope. No
postage need be affixed if your proxy is mailed in the United
States.
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CardioDynamics International Corporation
6175 Nancy Ridge Drive, Suite 300
San Diego, CA 92121
Notice of Annual Meeting of Shareholders
To be held July 19, 2001
The Annual Meeting of Shareholders of CardioDynamics International Corporation,
a California corporation ("CardioDynamics"), will be held at the Del Mar Country
Club, 6001 Clubhouse Drive, Rancho Santa Fe, California 92067, on Thursday, July
19, 2001 at 9:00 a.m.(PDT), to consider and act upon the following matters:
1. To elect a Board of Directors for the following year. Management has
nominated the following persons for election at the meeting: Connie R.
Curran, Jacques C. Douziech, Cam L. Garner, James C. Gilstrap, Richard O.
Martin, J. Michael Paulson and Michael K. Perry.
2. To consider and act upon a proposal to amend the 1995 Stock Option/Stock
Issuance Plan to increase the number of shares reserved for issuance
thereunder from 4,000,000 shares to 6,000,000 shares and to allow transfer
of certain options by gift to immediate family members and tax-exempt
charities.
3. To ratify the selection of KPMG LLP as our independent accountants for the
fiscal year ending November 30, 2001.
4. To transact any other business which may properly come before the meeting or
any postponement(s) or adjournment(s) thereof. We have no information of any
such other matters.
Shareholders of record at the close of business on June 1, 2001 will be entitled
to vote at the Annual Meeting. A list of shareholders entitled to vote at the
Annual Meeting is available for inspection at our offices. Whether or not you
plan to attend the meeting in person, please sign, date and return the enclosed
proxy in the reply envelope provided. If you attend the Annual Meeting and vote
by ballot, your proxy will be revoked automatically and only your vote at the
meeting will be counted. The prompt return of your proxy will assist us in
preparing for the Annual Meeting.
By Order of the Board of Directors,
/s/ Michael K. Perry
Dated: June 4, 2001 Michael K. Perry
Chief Executive Officer
CardioDynamics International Corporation
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held July 19, 2001
These proxy materials are being mailed in connection with the solicitation of
proxies by the Board of Directors of CardioDynamics International Corporation, a
California corporation ("CardioDynamics"), for the Annual Meeting of
Shareholders to be held at the Del Mar Country Club, 6001 Clubhouse Drive,
Rancho Santa Fe, California, at 9:00 a.m. on July 19, 2001 and at any
adjournment or postponement of the Annual Meeting. These proxy materials were
first mailed to shareholders of record beginning approximately June 5, 2001.
The address of our principal executive office is 6175 Nancy Ridge Drive, Suite
300, San Diego, California 92121.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual Meeting are
summarized in the accompanying Notice of Annual Meeting of Shareholders. Each
proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION
Any shareholder executing a proxy has the power to revoke it at any time before
it is voted by delivering written notice of such revocation to our Corporate
Secretary before the Annual Meeting or by properly executing and delivering a
proxy bearing a later date. You may also revoke your proxy at the Annual Meeting
by voting your shares in person. We will pay for the cost of soliciting proxies
and may reimburse brokerage firms and others for their expense in forwarding
solicitation material. Solicitation will be made primarily through the use of
the mail but regular employees of the Company may, without additional
compensation, solicit proxies personally by telephone.
The record date for determining those shareholders who are entitled to notice
of, and to vote at, the Annual Meeting is June 1, 2001. At the close of business
on the record date, we had 45,548,127 outstanding shares of common stock (the
"Common Stock"). Each share of Common Stock is entitled to one vote on matters
brought before the Annual Meeting. In voting for Directors, each shareholder has
the right to cumulate his or her votes and give one nominee a number of votes
equal to the number of Directors to be elected, multiplied by the number of
shares he or she holds, or to distribute his or her votes on the same principle
among the nominees to be elected in such manner as he or she may see fit. For
example, a shareholder owning ten shares of Common Stock would have 70 votes
(seven Directors multiplied by ten shares) to allocate among as few as one, or
as many as seven candidates. A shareholder may cumulate his or her votes,
however, only if his or her candidate or candidates have been placed in
nomination prior to the voting and if any shareholder gives notice at the Annual
Meeting prior to the voting of that shareholder's intention to cumulate his or
her votes. The shares represented by the proxy will be voted at the Annual
Meeting by the proxy holder as specified by the person solicited. Discretionary
authority to cumulate votes is, however, being solicited by the Board of
Directors.
1
California statutes and case law do not give specific instructions regarding the
treatment of abstentions and broker non-votes for corporations such as ours on
matters which require the affirmative vote of a majority of the shares
represented and voting at the Annual Meeting; however, we believe that
California law provides that if shares are represented and vote on any issue at
the Annual Meeting their failure to vote yes on any other issue (through either
abstention or a broker non-vote) has the same effect as a negative vote on that
other issue and we will treat such abstentions or broker non-votes accordingly.
On matters which require the affirmative vote of a majority of the outstanding
shares, abstentions and broker non-votes have the same effect as a negative
vote.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of seven members. The seven
individuals below have been nominated for election to our Board and will serve
until the next annual meeting or until their successors are elected and
qualified. Unless you specify otherwise, your proxy will be voted for the
election of the nominees of the Board of Directors who are listed below and
distributed among the nominees as the proxy holders see fit.
If, however, any of the nominees is unable to serve, or for good cause declines
to serve at the time of the Annual Meeting, the proxy holders will exercise
discretionary authority to vote for a substitute. The Board of Directors is not
aware of any circumstances that would render any nominee unavailable for
election. Discretionary authority to cumulate votes is being solicited by the
Board of Directors, and it is intended that the proxies received by the proxy
holders pursuant to the solicitation will be voted in a manner designed to cause
the election of the maximum number of the Board of Directors' nominees. The
following schedule sets forth certain information concerning the nominees for
election as Directors:
First Year
Elected
Name Director Age
-------- ---
Connie R. Curran 2000 53
Jacques C. Douziech 2000 53
Cam L. Garner 1997 53
James C. Gilstrap 1995 65
Richard O. Martin 1997 61
J. Michael Paulson 2000 45
Michael K. Perry 1998 40
__________________________________________________________________
The Company's Board of Directors recommends a vote FOR the nominees listed
---
herein.
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Connie R. Curran, Ed.D., RN became a director in February 2000. Dr. Curran is
currently President of Cardinal Health Care Consulting Services. From 1995 to
November 2000 she was president and chief executive officer of CurranCare, until
its purchase by Cardinal Health. She has held a variety of executive positions
in academia and multi-system healthcare operations and serves as vice president
of the American Hospital Association, national director of patient care for APM,
Inc. and a director for Allegiance Corporation and Finova Group. Dr. Curran
holds a master's degree in medical-surgical nursing from De Paul University and
a doctorate in educational psychology from Northern Illinois University.
Jacques C. Douziech has served as a director since July 2000. Mr. Douziech is a
Venture Advisor for Sofinov, Biotechnology and Life Sciences Division, a
subsidiary of the Caisse de depot et placement du Quebec. From 1998 to March
2000, Mr. Douziech was Vice President and served as Director of Business
Development at Procrea Biosciences, and from 1980 to 1989 and 1991 to 1998, he
held executive positions at Boehringer Mannheim Canada (now Roche Diagnostics).
He was also Marketing Director at Kodak Canada Inc. and Vice President, Sales &
Marketing of Synermed Diagnostics from 1989 to 1991. Mr. Douziech worked from
1965 to 1979 at the Queen Elizabeth Hospital of Montreal where he was the
Assistant-Chief of the Biochemistry and Immunology laboratories. Mr. Douziech
holds a Licentiate and fellowship degree in Medical Laboratory Sciences with a
specialty in Clinical Biochemistry.
Cam L. Garner has served as a director since July 1997 and provides us with
consulting services for $25,000 per year. Mr. Garner served as president and
chief executive officer of Dura Pharmaceuticals, Inc. since 1989 and was named
Chairman in 1995. Dura Pharmaceuticals was acquired by Elan Corporation, PLC in
November 2000, for $1.8 billion. Prior to joining Dura, Mr. Garner was a member
of the management team that built Hybritech Inc., a division of Eli Lilly & Co.,
which developed monoclonal antibodies for use in diagnostic and pharmaceutical
products. Mr. Garner currently serves on several boards including Favrille,
Inc., Cancer-Vax Corporation and Xcel Pharmaceuticals, Inc.
James C. Gilstrap served as the chairman of our board of directors from May 1995
to June 1996 and co-chairman of the board with Allen Paulson from June 1996
until Mr. Paulson's death in July 2000, at which time Mr. Gilstrap resumed his
role as chairman. Mr. Gilstrap is retired from Jefferies & Company, where he
served as senior executive vice president, partner and a member of the executive
committee. Mr. Gilstrap is past president of the Dallas Securities Dealers, as
well as a past member of the board of governors of the National Association of
Securities Dealers, Inc.
Richard O. Martin, Ph.D. has served as a director since July 1997. From 1998
until April 2001, Dr. Martin served as president of Medtronic Physio-Control
Corporation, a medical device company that designs, manufactures and sells
external defibrillators and heart monitors. Prior to its acquisition by
Medtronic in 1998, Dr. Martin was chairman and chief executive officer of
Physio-Control Corporation. He was vice president of cardiovascular business
development with Sulzer Medica and has held management positions at Intermedics,
Inc. and Medtronic, Inc. Dr. Martin serves on the boards of directors of Scout
Medical Technologies, LLC, Cardias Dimentions, Inc. and Encore Medical. Dr.
Martin earned a bachelor's degree in electrical engineering from Christian
Brothers College, a master's degree in electrical engineering from Notre Dame
University and a doctorate in electrical/biomedical engineering from Duke
University.
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J. Michael Paulson has served as a director since July 2000. He is the founder
and president of Nevastar Investments Corp. and Construction Specialist of
Nevada, Inc. and has been in the real estate development and investment business
since 1986. His companies have developed and sold over 500 properties in the
Western U.S. Mr. Paulson has also worked in the aerospace industry for 17 years,
including 11 years with Gulfstream Aerospace Corporation serving in various
marketing positions, including Regional Vice President of Sales for the Western
U.S. and Canada. In addition, he currently serves as a trustee, director and
officer of various companies. Mr. Paulson holds a bachelor's degree in business
administration from California State University, Northridge.
Michael K. Perry has been our chief executive officer and a director since April
1998. From 1994 to 1997, Mr. Perry was vice president of operations at Pyxis
Corporation, a leading provider of healthcare automation, information management
services and pharmacy management services to hospitals and outpatient
facilities. Pyxis was sold to Cardinal Health, Inc. in 1996. Prior to joining
Pyxis, Mr. Perry served in management with the medical products group of Hewlett
Packard Company. Additionally, he was director of quality for a division of
Hewlett-Packard's deskjet printer group. Mr. Perry holds a bachelor's degree in
mechanical engineering from General Motors Institute and a master's degree in
business administration from Harvard University. Mr. Perry serves on the
advisory board of the University of California San Diego Cardiovascular Center.
Board Meetings and Committees
The Company's Board of Directors held three meetings during the fiscal year
ended November 30, 2000. Each incumbent Director attended at least 75% of the
aggregate of the total meetings of the Board and of all the Board committees
held during the period in which they served as a Director, except Dr. Curran,
who attended one of two meeting held while she served as a director during the
year and Mr. Garner who participated 67% of the meetings of the Board.
The Board of Directors has established a standing Compensation Committee
currently composed of Messrs. Garner, Martin and Gilstrap. The Compensation
Committee reviews and acts on matters relating to compensation levels and
benefit plans for executive officers and key employees of the Company. The
Committee held three meetings during the fiscal year ended November 30, 2000.
The Board of Directors has established a standing Audit Committee currently
composed of Messrs. Gilstrap, Paulson and Dr. Curran. The Audit Committee
reviews all matters relating to oversight of the Company's internal control
structure, selection of the independent auditors and oversight of the Company's
financial reporting. The Committee held three meetings during the fiscal year
ended November 30, 2000.
The Board of Directors has also established a standing Nominating Committee
currently composed of Messrs. Gilstrap, Garner and Perry. The Nominating
Committee reviews matters pertaining to Board composition and screens and
recommends to the Board potential candidates for election as a Director.
Directors' Fees
Each director who has not been employed by us during the preceeding two years
receives 1,000 automatic monthly stock options granted at fair market value on
the last day of the month for each full month of service as a director of our
Company. In the case of 10% shareholders, the options are granted at 110% of
fair market value. On August 1, 1997, Cam L. Garner, a Director of our Company,
entered into a consulting agreement with our Company whereby Mr. Garner is paid
a monthly fee of $2,083.33 and received a one-time grant of 5,000 stock options
to purchase CardioDynamics' common stock in exchange for consulting services.
Total fees paid to Mr. Garner in fiscal 2000 were $25,000. He received the same
compensation during fiscal 1999. Mr. Martin received a one-time grant of 10,000
stock options to purchase our Common Stock. The options vested in equal thirds
on August 20, 1998, 1999 and 2000.
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PROPOSAL 2
AMENDMENT TO 1995 STOCK OPTION/STOCK ISSUANCE PLAN
Purpose
The Company's 1995 Stock Option/Stock Issuance Plan (the "Plan") provides for
the issuance of incentive stock options (i.e., options under Section 422 of the
Internal Revenue Code) and non-qualified stock options to officers, Directors,
key employees, independent contractors and consultants of the Company.
On April 12, 2001 the Board of Directors approved, subject to approval by the
shareholders, an increase in the number of shares reserved for issuance under
the Plan from, 4,000,000 to 6,000,000. The purpose of increasing the number of
shares reserved for issuance under the Plan is to permit the Company to continue
to attract and retain officers, Directors, key employees, independent
contractors and consultants of ability and experience, by providing them with
the opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Company as an incentive for them to remain in the
service of the Company. As of May 10, 2001, options for 2,725,433 shares were
outstanding under the Plan.
The April 12, 2001 amendment approved by the Board also allows for transfer of
non-qualified options (i) pursuant to a qualified domestic relations order or
(ii) upon approval of the Plan Administrator, to immediate family members, a
trust, family limited partnership or other similar entity formed for the benefit
of the option holder and/or immediate family members, or to a tax-exempt
charitable organization. Upon an approved transfer as described, the transferee
is considered an optionee for all purposes under the Plan, but without the right
further to transfer such option. A copy of the amendment is attached to this
Proxy Statement as Exhibit A.
Approval of the amendment by the shareholders is being sought under the terms of
the Plan and with reference to certain applicable regulations.
Structure of the Plan
The Plan is divided into three separate equity programs: (1) the Discretionary
Option Grant Program under which officers, Directors, employees, consultants and
independent contractors, may at the discretion of the Plan Administrator, be
granted non-qualified or incentive stock options to purchase shares of Common
Stock of the Company; (2) the Stock Issuance Program under which officers,
employees, Directors, consultants and independent contractors may, at the
discretion of the Plan Administrator, be issued shares of Common Stock of the
Company directly, either through the immediate purchase of such shares or as a
bonus for services rendered; and (3) the Automatic Option Grant Program under
which non-employee Directors automatically receive monthly grants of options to
purchase Common Stock of the Company.
Administration of the Plan
The Plan is administered by the "Plan Administrator," which means the full Board
of Directors or a compensation committee consisting of two or more Board members
or (only as to grants and issuances to persons who are not directors, officers
or 10% shareholders, and only if the Chief Executive Officer is a director) the
Chief Executive Officer. The compensation committee, when acting as Plan
Administrator, has full responsibility for the administration of the Plan.
Members of such compensation committee serve for such period of time as the
Board may determine and are subject to removal by the Board at any time. The
Chief Executive Officer's discretion as Plan Administrator can be exercised
5
only within such limits, based on the personnel category of the optionee or
participant, as are previously established by the Board and the compensation
committee.
The Plan Administrator has the sole and exclusive authority, subject to the
provisions of the Plan, to determine the eligible individuals who are to receive
options under the Discretionary Option Grant Program or the Stock Issuance
Program, the number of shares to be covered by each granted option or issuance,
the date or dates on which the option is to become exercisable and the maximum
term for which the option is to remain outstanding. The Plan Administrator also
has the authority to determine whether the granted option is to be an incentive
stock option under the Federal tax laws and to establish rules and regulations
for proper plan administration. Option grants under the Automatic Option Grant
Program are made in strict compliance with the express provisions of that
program, and the Plan Administrator does not have any discretionary authority
with respect to those option grants.
Issuable Shares
The Plan currently provides for the issuance of 4,000,000 shares of Common Stock
over the ten-year term of the Plan. The share reserve available for issuance
under the Plan is subject to adjustment for changes in the Company's Common
Stock occasioned by stock splits, stock dividends, recapitalization, conversions
or other changes affecting the outstanding Common Stock as a class without the
Company's receipt of consideration.
Should an option expire or terminate for any reason prior to exercise in full
(including options canceled in accordance with the cancellation-regrant
provisions described below), the shares subject to the portion of the option not
so exercised will be available for subsequent option grants or share issuances
under the Plan. Shares subject to any option surrendered or canceled in
accordance with the stock appreciation right provisions of the Plan and all
shares issued under the Plan, whether or not such shares are subsequently
reacquired by the Company pursuant to its repurchase rights under the Plan, will
reduce on a share-for-share basis the number of shares of Company Common Stock
available for subsequent grants. No more than 800,000 shares may be issued to
any one optionee/grantee over the lifetime of the Plan.
Identity of Beneficiaries
It is not known how many options under the Plan will be received by named
executive officers, current executive officers, non-officer Directors,
employees, their associates, or any other group. The maximum number of options
to be granted to Directors each year under the Automatic Option Grant Program
(assuming a Board of six outside directors, all non-employees) is 72,000. The
fair market value of a share of Company Common Stock on May 10, 2001 was $4.45.
The Company currently has 110 employees, an unknown number of consultants and
independent contractors who might be selected to receive stock options or direct
issuances, and six non-employee Directors.
Terms of Discretionary Option Grant Program
OPTION PRICE AND TERM. The option price per share for incentive stock options
will not be less than 100% of the fair market value of each share of Company
Common Stock issuable under the option on the grant date of such option (nor
less than 110% in the case of 10% shareholders of the Company). The option price
per share for non-statutory stock options may not be less than 85% of the fair
market value per share of each share of Company Common Stock issuable under the
option on the grant date of such option. No option will have a term in excess of
ten (10) years measured from the grant date.
6
VESTING OF OPTIONS. The vesting schedule for each granted option will be
determined by the Plan Administrator and will be set forth in the instrument
evidencing such grant. The granted option may be (i) immediately exercisable for
vested shares, (ii) immediately exercisable for unvested shares subject to the
Company's repurchase rights or (iii) exercisable in installments for vested
shares over the optionee's period of service. The vesting schedule cannot be
slower than 20% per year over five years beginning on the grant date.
PAYMENT. Upon exercise of the option, the option price for the purchased shares
will become immediately payable in cash or in shares of Common Stock valued at
fair market value on the date of exercise. The option may also be exercised
through a cashless exercise procedure pursuant to which the optionee provides
irrevocable written instructions to a designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Company, out of the
sales proceeds, an amount equal to the aggregate option price payable for the
purchased shares plus all applicable withholding taxes.
FINANCIAL ASSISTANCE. The Plan Administrator may assist any optionee (including
an officer) in the exercise of one or more outstanding options under the Plan by
authorizing a loan from the Company. The terms and conditions of any such loan
will be established by the Plan Administrator in its sole discretion, but in no
event will the maximum credit extended to the optionee exceed the aggregate
option price for the purchased shares plus any Federal or State tax liability
incurred in connection with the option exercise.
TERMINATION OF SERVICE. Should the optionee cease to remain in the Company's
service while holding one or more options under the Plan, then those options
will not remain exercisable beyond the limited post-service period designated by
the Plan Administrator at the time of the option grant (subject to certain
minimum post-service periods). Under no circumstances, however, may any option
be exercised after the specified expiration date of the option term. Each such
option will, during the period it remains exercisable, be exercisable for the
number of shares for which the option was exercisable on the date of the
optionee's cessation of service.
Should the optionee die while holding one or more outstanding options, then the
personal representative of the optionee's estate or the person or persons to
whom each such option is transferred pursuant to the optionee's will or in
accordance with the laws of inheritance will have the right to exercise such
option for any or all of the shares for which the option is exercisable on the
date of the optionee's cessation of service, less any option shares subsequently
purchased by the optionee prior to death. Such right will lapse, and the option
will terminate, upon the earlier of (i) the end of the limited post-service
period designated by the Plan Administrator at the time of the option grant or
(ii) the specified expiration date of the option term.
The Plan Administrator will have complete discretion to extend the period
following the optionee's termination of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability of
such options in whole or in part. Such discretion may be exercised at any time
while the options remain outstanding, whether before or after the optionee's
actual cessation of service.
CORPORATE TRANSACTION. Except to the extent otherwise provided in the option
documents, each option share will become fully vested in the event of certain
Corporate Transactions unless the option is assumed or is replaced with a cash
incentive program which preserves the material benefits of the options. Upon
consummation of the Corporate Transaction, all options which are not assumed
will be canceled and cease to exist. The options or cash incentive programs
which replace any options which do not accelerate will provide for full vesting
in the event of involuntary termination of employment within 18 months following
the Corporate Transaction.
7
For purposes of the above, a Corporate Transaction includes (i) a merger or
consolidation in which the Company is not the surviving entity (except for a
transaction the principal purpose of which is to change the State of
incorporation), (ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or (iii) any reverse merger in
which the Company is the surviving entity but in which securities possessing
more than 50% of the total combined voting power of the Company are transferred
to holders different from those who held the Company's securities immediately
prior to such merger.
SHAREHOLDER RIGHTS AND OPTION ASSIGNABILITY. No optionee is to have any
shareholder rights with respect to the option shares until such optionee has
exercised the option, paid the option price for the purchased shares and been
issued a stock certificate for such shares. Options are not assignable or
transferable other than upon approval to an immediate family member or tax
exempt charity, by will or by the laws of inheritance following the optionee's
death, and the option may, during the optionee's lifetime, be exercised only by
the optionee or approved transferee.
STOCK APPRECIATION RIGHTS. At the discretion of the Plan Administrator, options
may be granted in tandem with stock appreciation rights. The stock appreciation
rights which are authorized for issuance under the Plan are tandem rights which
require the option holder to elect between the exercise of the underlying option
for shares of Common Stock and the surrender of such option for an appreciation
distribution.
These tandem stock appreciation rights provide the holders with the right to
receive an appreciation distribution from the Company equal in amount to the
excess of (i) the fair market value (on the date of exercise) of the shares of
Common Stock for which the underlying option is at the time exercisable over
(ii) the aggregate exercise price payable for such shares. Such appreciation
distribution may, at the discretion of the Plan Administrator, be made in cash
or in Common Stock.
CANCELLATION/REGRANT. The Plan Administrator has the authority to effect, on one
or more separate occasions, the cancellation of outstanding options under the
Discretionary Option Grant Program which have exercise prices in excess of the
then current market price of the Common Stock and to issue replacement options
with an exercise price based on the lower market price of the Common Stock at
the time of grant.
Terms of Stock Issuance Program
ISSUE PRICE. The purchase price per share will not be less than 85% of the fair
market value of any share of Company Common Stock being issued on the date the
Plan Administrator authorizes the issuance (nor less than 110% in the case of
10% shareholders of the Company).
VESTING OF SHARES. The vesting schedule for each share issued will be determined
by the Plan Administrator and set forth in the issuance agreement. The shares
may be fully and immediately vested upon issuance or may vest in one or more
installments, subject to the Company's repurchase right, over the participant's
period of service. The vesting schedule cannot be slower than 20% per year over
five years from the date the stock is purchased.
SHAREHOLDER RIGHTS. The recipient of the share issuance will have full
shareholder rights, including voting and dividend rights, with respect to the
issued shares, whether or not the shares are vested. However, the recipient may
not sell, transfer or assign any unvested shares issued under the Plan, except
for certain limited family transfers.
8
REPURCHASE RIGHTS. Should the recipient of unvested shares cease to remain in
the Company's service before vesting in such shares, then those unvested shares
are to be immediately surrendered to the Company for cancellation, and the
recipient will have no further shareholder rights with respect to those shares.
To the extent the surrendered shares were previously issued to the recipient for
consideration paid in cash or promissory note, the Company will refund the cash
consideration paid for the surrendered shares and cancel the principal balance
of the note to the extent attributable to the fair market value of such
surrendered shares.
PAYMENT. Upon issuance of the shares, the issue price for the purchased shares
will become immediately payable in cash, in shares of Company Common Stock
valued at fair market value on the date of issuance, or by promissory note
payable to the Company's order. The promissory note may, at the discretion of
the Plan Administrator, be subject to cancellation over the participant's period
of service. Shares may also be issued for past or future services, without any
cash or other payment required of the participant.
CORPORATE TRANSACTION. Except to the extent otherwise provided in the stock
issuance documents, all repurchase rights will terminate and each share will
become fully vested in the event of a Corporate Transaction (as defined above)
unless the repurchase rights are assigned to the successor Company. Following
consummation of the Corporation Transaction, all repurchase rights which are
assigned to the successor will terminate and cease to exist in the event of
involuntary termination of employment within 18 months following the Corporate
Transaction.
Automatic Option Grant Program
Option grants are made automatically to each non-employee Board member who has
not been employed by the Company during the preceding two years. Each such
person is automatically granted a non-statutory option to purchase 1,000 shares
with respect to each calendar month during all of which he or she serves as a
director, on the last day of each such respective calendar month.
The exercise price per share of each automatic option grant made under this
Program is equal to 100% of the fair market value per share of Common Stock on
the grant date (or, in the case of 10% shareholders, at 110% of fair market
value). The exercise price is payable in one of these alternative forms: (1)
full payment in cash or check drawn to the Company's order; (2) full payment in
shares of Common Stock held for at least six months and valued at fair market
value on the Exercise Date; (3) full payment in a combination of shares of
Common Stock held for at least six months and valued at fair market value on the
Exercise Date and cash or check; or (4) full payment through a broker-dealer
sale.
During the lifetime of the optionee, each automatic option grant, together with
the limited stock appreciation right pertaining to such option, if any, is
exercisable only by the optionee or approved transferee and is not assignable or
transferable by the optionee other than as described herein or a transfer of the
option effected by will or by the laws of descent and distribution following
optionee's death.
Should the optionee cease to serve as a Board member for any reason (other than
death) while holding one or more automatic option grants, then such optionee
shall have a 24-month period following the date of such cessation of Board
membership in which to exercise each such option. In no event shall any
automatic option grant remain exercisable after the specified expiration date of
the ten-year option term. Upon the expiration of the applicable exercise period
as mentioned above or upon the expiration of the ten-year option term, the
automatic grant shall terminate and cease to be outstanding for any unexercised
shares.
9
The provisions of the Automatic Option Grant Program, together with the option
grants outstanding thereunder, may not be amended at intervals more frequently
than once every six months, other than to the extent necessary to comply with
applicable Federal income tax laws and regulations. Each automatic grant under
this Program has a maximum term of ten years measured from the automatic grant
date and is exercisable in full immediately
Tax Withholding
The Company's obligation to deliver shares of Common Stock upon the exercise of
options or stock appreciation rights or upon the issuance or vesting of such
shares under the Plan is subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.
The Plan Administrator may provide one or more participants in the Plan with the
election to have the Company withhold, from the shares of Company Common Stock
otherwise issuable upon the exercise of non-qualified options or the vesting of
unvested shares, a portion of those shares in satisfaction of the tax liability
incurred in connection with their acquisition or vesting. Any election so made
will be subject to the approval of the Plan Administrator, and no shares will be
accepted in satisfaction of such tax liability except to the extent the Plan
Administrator approves the election. Alternatively, one or more participants may
be granted the right, subject to Plan Administrator approval, to deliver
existing shares of Company Common Stock in satisfaction of such tax liability.
The withheld or delivered shares will be valued at their then current fair
market value.
Amendment and Termination
The Board of Directors may amend or modify the Plan in any or all respects
whatsoever, subject, however, to the limitation on plan amendments to the
Automatic Option Grant Program. However, no such amendment may adversely affect
the rights of existing optionees without their consent and unless otherwise
necessary to comply with applicable tax laws and regulations. In addition, the
Board may not (i) materially increase the maximum number of shares issuable
under the Plan or the number of shares for which automatic grants may be made to
non-employee Board members, except in the event of certain changes to the
Company's capital structure as indicated above, (ii) materially modify the
eligibility requirements for option grants or (iii) otherwise materially
increase the benefits accruing to participants under the Plan without the
approval of the Company's shareholders.
The Board may terminate the Plan at any time, and the Plan will in all events
terminate on the earliest of (i) June 14, 2005, (ii) the date on which all
shares available for issuance under the Plan shall have been issued pursuant to
the exercise of the options or the issuance of shares (whether vested or
unvested) under the Plan, or (iii) the termination of all outstanding options in
connection with a Corporate Transaction. Each stock option outstanding at the
time of such termination will remain in force in accordance with the provisions
of the instruments evidencing such grant.
Regulatory Approval
The implementation of the Plan, the granting of any option or stock appreciation
right under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any option or stock appreciation right or (ii) under the Stock
Issuance Program are subject to the Company's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the options and stock appreciation rights granted under it and the shares of
Common Stock issued pursuant to it.
10
No Employment/Service Rights
Nothing in the Plan shall confer upon the optionee or the participant any right
to continue in service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Company (or any parent or
subsidiary employing or retaining such person) to terminate such person's
service at any time for any reason, with or without cause.
Federal Tax Consequences
Options granted under the Plan may be either incentive stock options which
satisfy the requirements of Section 422 of the Internal Revenue Code or non-
qualified options which are not intended to meet such requirements. The Federal
income tax treatment for the two types of options differs as described below:
INCENTIVE OPTIONS. No taxable income is recognized by the optionee at the time
of the option grant, and no taxable income is generally recognized at the time
the option is exercised. The optionee will, however, recognize income for
alternative maximum tax purposes in the year the option is exercised and regular
taxable income in the year in which the purchased shares are sold or otherwise
made the subject of disposition.
For Federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. The optionee will make a qualifying
disposition of the purchased shares if the sale or other disposition of such
shares is made after the optionee has held the shares for more than two years
after the grant date of the option and more than one year after the exercise
date. If the optionee fails to satisfy either of these two holding periods prior
to the sale or other disposition of the purchased shares, then a disqualifying
disposition will result.
Upon a qualifying disposition of the shares, the optionee will recognize mid-
term or long-term capital gain in an amount equal to the excess of (i) the
amount realized upon the sale or other disposition of the purchased shares over
(ii) the exercise price paid for such shares. If there is a disqualifying
disposition of the shares, then the excess of (i) the fair market value of those
shares on the date the option was exercised over (ii) the exercise price paid
for the shares will be taxable as ordinary income. Any additional gain
recognized upon the disposition will be a capital gain.
If the optionee makes a disqualifying disposition of the purchased shares, then
the Company will be entitled to an income tax deduction, for the taxable year in
which such disposition occurs, equal to the excess of (i) the fair market value
of such shares on the date the option was exercised over (ii) the exercise price
paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
NON-QUALIFIED OPTIONS. No taxable income is recognized by an optionee upon the
grant of a non-qualified option. The optionee will in general recognize ordinary
income, in the year in which the option is exercised, equal to the excess of the
fair market value of the purchased shares on the date of exercise over the
exercise price paid for the shares, and the optionee will be required to satisfy
the tax withholding requirements applicable to such income.
Special provisions of the Internal Revenue Code apply to the acquisition of
Company Common Stock under a non-qualified option, if the purchased shares are
subject to repurchase by the Company. These special provisions may be summarized
as follows:
11
A. If the shares acquired upon exercise of the non-qualified option are
subject to repurchase by the Company at the original exercise price in the event
of the optionee's termination of service prior to vesting in such shares, the
optionee will not recognize any taxable income at the time of exercise but will
have to report as ordinary income, as and when the Company's repurchase right
lapses, an amount equal to the excess of (i) the fair market value of the shares
on the date the Company's repurchase right lapses with respect to such shares
over (ii) the exercise price paid for the shares.
B. The optionee may, however, elect under Section 83(b) of the Internal
Revenue Code to include as ordinary income in the year of exercise of the non-
qualified option an amount equal to the excess of (i) the fair market value of
the purchased shares on the date of exercise (determined as if the shares were
not subject to the Company's repurchase right) over (ii) the exercise price paid
for such shares. If the Section 83(b) election is made, the optionee will not
recognize any additional income as and when the repurchase right lapses.
The Company will be entitled to a business expense deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised non-
qualified option. The deduction will in general be allowed for the taxable year
of the Company in which such ordinary income is recognized by the optionee.
If the holder of a non-qualified option makes an approved transfer of such
option, the transferor will be subject to gift tax on the value of the option at
the time of transfer. The transferor will also pay ordinary income tax at the
time the qualifying transferee exercises the option as if the original holder
had exercised the option. The transferee will pay capital gains tax when the
shares acquired upon exercise of the transferred option are sold by the
transferee on the difference between the sale price and the stock price when the
option was exercised.
STOCK APPRECIATION RIGHTS. An optionee who is granted a stock appreciation right
will recognize ordinary income in the year of exercise equal to the amount of
the appreciation distribution. The Company will be entitled to a business
expense deduction equal to the appreciation distribution for the taxable year of
the Company in which the ordinary income is recognized by the optionee.
DIRECT STOCK ISSUANCE. The tax consequences of individuals who receive direct
stock issuances under the Plan will be substantially the same as the treatment
applicable to the exercise of non-qualified stock options as described above.
Accounting Treatment
Option grants to employees of the Company with exercise prices less than the
fair market value of the option shares on the grant date and direct stock
issuances at purchase prices less than the fair market value of the issued
shares will result in a compensation expense to the Company's earnings equal to
the difference between such exercise or purchase prices and the fair market
value on the issue date. Such expense will be accrued by the Company and
expensed over the expected life of the option. Option grants and direct stock
issuances to the Company's employees at 100% or more of fair market value will
not result in any charge to the Company's earnings. Option grants and direct
stock issuances to non-employees of the Company will result in a compensation
expense to the Company's earnings equal to the fair market value of the option
or stock on the issue date. Such expense will be accrued by the Company and
generally expensed over the term of service being provided. Whether or not
granted at a discount, the number of outstanding options may be a factor in
determining the Company's earnings per share.
12
Should one or more optionees be granted stock appreciation rights which have no
conditions upon exercisability other than a service or employment requirement,
then such rights will result in a compensation expense to be charged against the
Company's earnings. Accordingly, at the end of each fiscal quarter, the amount
(if any) by which the fair market value of the shares of Common Stock subject to
such outstanding stock appreciation rights has increased from the prior quarter-
end will be accrued as compensation expense, to the extent such amount is in
excess of the aggregate exercise price in effect for such rights.
Approval Required
The affirmative vote of the holders of not less than a majority of the
outstanding shares of Common Stock entitled to vote is required to approve the
proposed amendment to the Plan.
The Board of Directors recommends a vote FOR the amendment to the 1995 Stock
---
Option/Stock Issuance Plan.
13
PROPOSAL 3
RATIFICATION OF
SELECTION OF INDEPENDENT ACCOUNTANTS
Audit Committee Report
The Audit Committee assists the Board of Directors in fulfilling its oversight
responsibilities relating to our company's financial reporting process, its
systems of internal accounting and financial controls, and the independent audit
of its financial statements. The Audit Committee consisted of three members
prior to the addition of Richard O. Martin in April 2001. The Audit Committee
has reviewed and discussed with management the audited financial statements of
our company for the fiscal year ended November 30, 2000. The Audit Committee has
reviewed and discussed with KPMG LLP, our company's independent accountants who
are responsible for expressing an opinion on the conformity of those audited
financial statements in accordance with auditing standards generally accepted in
the United States of America, their judgment as to the quality, not just the
acceptability, of our company's accounting practices and such other matters as
are required to be discussed by the independent accountants with the Audit
Committee under generally accepted auditing standards including the matters
required to be discussed by Statement on Auditing Standards No. 61.
The Audit Committee has also received the written disclosures from KPMG LLP
required by Independence Standards Board Standard No. 1 and the Audit Committee
has discussed the independence of KPMG LLP with that firm. Based on the Audit
Committee's review and discussions noted above, the Audit Committee recommended
to the Board of Directors that our company's audited financial statements be
included in our company's Annual Report on Form 10-KSB for the fiscal year ended
November 30, 2000, for filing with the Securities and Exchange Commission.
Respectfully Submitted:
The Audit Committee
/s/ James C. Gilstrap /s/ Connie R. Curran /s/ J. Michael Paulson
- ---------------------- -------------------- ----------------------
James C. Gilstrap, Chairman Connie R. Curran J. Michael Paulson
The Board of Directors is recommending the ratification of its selection of KPMG
LLP as independent accountants to audit our financial statements for the current
fiscal year ending November 30, 2001. KPMG LLP has audited our financial
statements for calendar the year ended November 30, 2001.
KPMG, LLP has advised our Audit Committee that it is "independent" of us within
the rules and guidelines of the SEC, the American Institute of Certified Public
Accountants and the Independence Standards Board.
Audit fees billed to our company by KPMG LLP for review of our annual financial
statements and quarterly financial statements included in quarterly reports on
Form 10-QSB, for the year 2000, totaled $43,839 We did not engage KPMG LLP to
provide advice regarding financial information systems design and implementation
during 2000. Fees billed to our company by KPMG LLP with respect to the year
2000 for all other non-audit services rendered to our company including tax
related services and regulatory advisory services totaled $38,500. The Audit
Committee has concluded that the provision of the other services including tax
related services by KPMG LLP is compatible with maintaining their independence.
A representative of KPMG LLP is expected to be present at the Annual Meeting,
will have an opportunity to make a statement if desired, and will be available
to respond to appropriate questions.
The Board of Directors recommends a vote FOR the ratification of the selection
---
of KPMG LLP as our independent accountants for fiscal 2001.
14
PRINCIPAL SHAREHOLDERS
The following are the only persons known by us to own beneficially, as of May
10, 2001, five percent (5%) or more of the outstanding shares of our common
stock. Except as indicated in the footnotes to this table, we believe that the
persons named in the table have sole voting and investment power with respect to
all the shares of common stock shown as beneficially owned by them, subject to
community property laws, where applicable. Share ownership in each case includes
shares issuable upon exercise of options exercisable within 60 days after May
10, 2001. The percentage ownership is calculated pursuant to Rule 13d-3(d)(1)
promulgated by the SEC under the Securities Act of 1933.
Name and Address of Shares Beneficially Owned.
-----------------------------------
Beneficial Owner Number (1) Percentage (2)
- -------------------------- -------- -----------
J. Michael Paulson(3) 11,004,198 24.1%
P.O. Box 9660
Rancho Santa Fe, CA 92067
James C. Gilstrap(4) 3,309,918 7.3%
5067 Shore Drive
Carlsbad, CA 92008
Domain Partners LP 4,350,000 9.6%
One Palmer Square
Princeton, NJ 08542
Societe Generale Veritas 3,000,000 6.6%
4 New York Plaza
New York, NY 10004
______________________
1) Except as indicated in the footnotes to this table, 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, subject to community property laws,
where applicable.
2) Percentage of ownership is calculated pursuant to SEC Rule 13d-3(d)(1).
3) Includes 10,000,234 shares held in the Allen E. Paulson Living Trust dated
12-23-86 of which J. Michael Paulson is the co-trustee and co-executor. Also
includes 59,000 shares of common stock beneficially owned by the Allen E.
Paulson Living Trust Dated 12-23-86, by virtue of its right to acquire such
shares from CardioDynamics under stock options now exercisable or exercisable
within 60 days. Also includes 10,000 shares of common stock beneficially owned
J. Michael Paulson, by virtue of its right to acquire such shares from
CardioDynamics under stock options now exercisable or exercisable within 60
days. Includes 103,764 shares of common stock beneficially owned by
CardioDynamics Holding, LLC (CDH), of which the estate is a member with a
majority interest and 2,243 shares of common stock over which CDH exercises sole
voting and investment power. Mr. Paulson disclaims beneficial ownership of these
shares except to the extent of the estate's pecuniary interest in CDH. Excludes
2,000,000 shares of common stock owned by Mr. Paulson's bothers; Mr. Paulson
disclaims beneficial ownership of such shares.
4) Includes 103,764 shares of common stock beneficially owned by CDH, of which
Mr. Gilstrap is a member with a minority interest and 2,243 shares of common
stock over which CDH exercises sole voting and investment power. Mr. Gilstrap
disclaims beneficial ownership of these shares except to the extent of his
individual pecuniary interest in CDH. Includes 965,000 shares held in the Jim
and Sue Gilstrap Family Limited Partnership. Mr. Gilstrap disclaims beneficial
ownership of these shares except to the extent of his and his wife's ownership
interest in the Jim and Sue Gilstrap Family Limited Partnership. Also includes
69,000 shares of common stock Mr. Gilstrap beneficially owns, by virtue of his
right to acquire such shares from CardioDynamics under stock options now
exercisable or exercisable within 60 days.
15
SECURITY OWNERSHIP MANAGEMENT
The following table sets forth the beneficial ownership of common stock of
CardioDynamics as of May 10, 2001 by each Director and each officer of
CardioDynamics named in the Summary Compensation Table, and by all Directors and
executive officers of our Company as a group. Each such person has a business
address, care of CardioDynamics. Except as indicated in the footnotes to this
table, we believe that the persons named in the table have sole voting and
investment power with respect to all the shares of common stock shown as
beneficially owned by them, subject to community property laws, where
applicable. Share ownership in each case includes shares issuable upon exercise
of options exercisable within 60 days after May 10, 2001. The percentage
ownership is calculated pursuant to Rule 13d-3(d)(1) promulgated by the SEC
under the Securities Act of 1933.
Shares Beneficially Owned
-----------------------------
Name Number (1) Percent
- ------------------------------- ---------- -------
Russell H. Bergen (2) 62,185 *
Connie R. Curran (2) 17,000 *
Jacques C. Douziech (3) 1,374,086 3.0%
Cam L. Garner (2) 118,000 *
James C. Gilstrap (4) 3,309,918 7.3%
Stephen P. Loomis (2) 75,695 *
Richard O. Martin, Ph.D. (2) 105,000 *
J. Michael Paulson (5) 11,004,198 24.1%
Michael K. Perry (2) 502,695 1.1%
Rhonda F. Rhyne (2) 355,729 *
Richard E. Trayler (2) 194,167 *
All Directors and executive
officers as a group - (12 persons) (6) 17,208,727 37.8%
_________________________
*Less than 1%
(1) Except as indicated in the footnotes to this table, 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, subject to community property
laws, where applicable. Share ownership in each case includes shares issuable on
exercise of certain outstanding options as described in the footnotes below.
(2) Includes shares of common stock that may be acquired pursuant to stock
options exercisable currently or exercisable within 60 days.
(3) Includes 1,353,836 shares of common stock owned by Sofinov, Life Sciences
and Biotechnology Division, of which Mr. Douziech is a Venture Advisor. Mr.
Douziech disclaims beneficial ownership of the shares owned by Sofinov. Also
includes 10,000 shares of common stock beneficially owned Mr. Douziech, by
virtue of its right to acquire such shares from CardioDynamics under stock
options now exercisable or exercisable within 60 days.
16
(4) Includes 103,764 shares of common stock beneficially owned by
CardioDynamics Holdings, LLC (CDH), of which Mr. Gilstrap is a member with a
minority interest and 2,243 shares of common stock over which CDH exercises sole
voting and investment power. Mr. Gilstrap disclaims beneficial ownership of
these shares except to the extent of his individual pecuniary interest in CDH.
Includes 965,000 shares held in the Jim and Sue Gilstrap Family Limited
Partnership. Mr. Gilstrap disclaims beneficial ownership of these shares except
to the extent of his and his wife's ownership interest in the Jim and Sue
Gilstrap Family Limited Partnership. Also includes 69,000 shares of common stock
Mr. Gilstrap beneficially owns, by virtue of his right to acquire such shares
from CardioDynamics under stock options now exercisable or exercisable within 60
days.
(5) Includes 10,000,234 shares held in the Allen E Paulson Living Trust dated
12-23-86 of which J. Michael Paulson is the co-trustee and co-executor. Also
includes 59,000 shares of common stock beneficially owned by the Allen E.
Paulson Living Trust Dated 12-23-86, by virtue of its right to acquire such
shares from CardioDynamics under stock options now exercisable or exercisable
within 60 days. Also includes 10,000 shares of common stock beneficially owned
J. Michael Paulson, by virtue of its right to acquire such shares from
CardioDynamics under stock options now exercisable or exercisable within 60
days. Includes 103,764 shares of common stock beneficially owned by CDH, of
which the estate is a member with a majority interest and 2,243 shares of common
stock over which CDH exercises sole voting and investment power. Mr. Paulson
disclaims beneficial ownership of these shares except to the extent of the
estate's pecuniary interest in CDH. Excludes 2,000,000 shares of common stock
owned by Mr. Paulson's bothers; Mr. Paulson disclaims beneficial ownership of
such shares.
(6) Shares beneficially owned include shares held by entities affiliated with
certain directors and named Officers as described above in the footnotes.
17
EXECUTIVE OFFICERS
The Company's executive officers and their ages as of May 10, 2001 are as
follows:
Name Age Position
- ---- --- --------
James C. Gilstrap 65 Chairman of the Board of Directors
Michael K. Perry 40 Chief Executive Officer
Rhonda F. Rhyne 40 President
Stephen P. Loomis 41 Chief Financial Officer
Richard E. Trayler 51 Chief Operating Officer
Dennis G. Hepp 52 Chief Technology Officer
Russell H. Bergen 54 Vice President of Operations
Business Experience of Executive Officers
James C. Gilstrap See description under "Election of Directors."
Michael K. Perry See description under "Election of Directors."
Rhonda F. Rhyne has been our president since June 1997, previously serving as
chief operating officer from 1996 to 1997 and as vice president of operations
from 1995 to 1996. From 1992 until 1995, Ms. Rhyne was president, chief
executive officer and vice president of sales and marketing of Culture
Technology, Inc. Ms. Rhyne has also held positions at GE Medical Systems and
Quinton Instrument Company, both medical device subsidiaries of publicly held
companies. Ms. Rhyne holds a bachelor's degree in pharmacy from Washington State
University and a master's degree in business administration, executive program,
from University of California Los Angeles, Anderson School of Business.
Stephen P. Loomis joined us in September 1996 as vice president of finance and
has held the positions of chief financial officer and corporate secretary since
April 1997. From 1993 until 1996, he served as director of financial reporting
at Kinko's Inc. From 1988 to 1993, Mr. Loomis was chief financial officer for
Terminal Data Corporation, a publicly traded company. He earned his bachelor's
degree in business administration from California State University at
Northridge. Mr. Loomis is a certified public accountant.
Richard E. Trayler has served as our chief operating officer since July 1997.
From 1982 to 1997, Mr. Trayler held the positions of regional and divisional
sales manager at Quinton Instrument Company. He has also held positions at the
Heart Institute for CARE, the University of Washington and the Boeing Company.
Mr. Trayler earned a bachelor's degree from Texas A&M University and a master's
degree from the University of Washington.
Dennis G. Hepp has been our chief technology officer since June 1997 and has
served as a consultant to us since July 1995. From 1974 to 1986, Mr. Hepp held
engineering and management positions at Medtronic, Inc. In 1989, Mr. Hepp
founded, and remains a key employee and managing director of, Rivertek Medical
Systems, Inc., an engineering consulting firm to medical device manufacturers.
Mr. Hepp holds a bachelor's degree in electrical engineering from the University
of Detroit.
Russell H. Bergen has served as our vice president of operations since September
1998. From 1971 to 1998, Mr. Bergen held management positions in the instrument
group, peripheral products group and inkjet business unit of Hewlett Packard
Company. Previously, Mr. Bergen was employed at Honeywell, Inc. as a procurement
engineer. Mr. Bergen earned a bachelor's degree in aerospace engineering and
manpower management from the University of Colorado at Boulder.
18
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table provides information regarding the annual and long-term
compensation earned for services rendered in all capacities to CardioDynamics
for the fiscal years ended November 30, 1998, 1999 and 2000 of those persons who
were, at November 30, 2000 (i) the Chief Executive Officer and (ii) the other
executive officers of CardioDynamics whose aggregate direct remuneration from
CardioDynamics during the fiscal year ended November 30, 2000 exceeded $100,000
(collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------
Awards
------
Annual Compensation /(1)/ Securities
--------------------------------------------------
Other Underlying
Name and Annual Options/
Principal Position Year Salary($) Bonus($) Compensation($) SARs (#)
- ------------------ ---- --------- -------- --------------- --------
Michael K. Perry 2000 $181,480 $ 44,153 $ -0- 50,000
Chief Executive 1999 91,450 216,170 /(3)/ -0- 45,000
Officer 1998 1 /(4)/ 750 4,000 /(2)/ 1,295,000 /(6)/
Rhonda F. Rhyne 2000 176,000 35,550 -0- 40,900
President 1999 148,020 11,045 17,000 /(5)/ 40,000
1998 127,833 751 18,000 /(5)/ 250,000
Stephen P. Loomis 2000 122,000 24,750 -0- 30,300
Chief Financial 1999 137,543 8,520 -0- 30,000
Officer 1998 116,583 1,663 -0- 120,000 /(6)/
Richard E. Trayler 2000 130,000 2,475 -0- 30,300
Chief Operating 1999 129,584 8,745 -0- 35,000
Officer 1998 123,750 1,502 -0- 80,000 /(6)/
Russell H. Bergen 2000 120,000 24,175 -0- 30,000
Vice President of 1999 120,000 5,800 -0- -0-
Operations 1998 25,923 /(7)/ -0- -0- 75,000
__________________
(1) Employee benefits provided to each of the Named Officers under various
Company programs do not exceed the disclosure thresholds established under
the SEC rules and are therefore not included.
(2) Amount represents Company paid allowance for automobile expenses.
(3) Bonus amount paid in 1999 includes $205,000 pursuant to Mr. Perry's
employment agreement dated March 23, 1998, under which Mr. Perry was paid
a salary of $1.00 for the initial 14 months of his employment. In
exchange, he was eligible to receive a performance bonus based on
achieving a 100% increase in sales during the 12-month period ending May
31, 1999, over the previous 12-month period.
(4) Represents compensation earned by Mr. Perry from his employment with our
Company commencing April of 1998.
19
(5) Amounts represent Company paid lodging of $12,000 in 1998 and $11,000 in
1999. The balance in each year is for automobile expenses.
(6) Amounts represent options granted under Company Stock Option
Cancellation/Regrant program.
(7) Represents compensation earned by Mr. Bergen from his employment with our
Company commencing September of 1998.
The following table provides information regarding option grants during the
fiscal year ended November 30, 2000 to the Named Officers in fiscal 2000.
CardioDynamics has not granted any stock appreciation rights.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants.
----------------------------------------------------
Number of
Securities % of Total
Underlying Options Granted
Options to Employees Exercise Expiration
Name Granted in Fiscal 2000 Price($/Sh)/(1)/ Date
- ---------- ------------ ---------------- ---------------- ----------
Michael K. Perry 50,000 6% $6.125 01/27/2010
Rhonda F. Rhyne 40,000 5% $6.125 01/27/2010
900 0% $6.000 06/28/2010
Stephen P. Loomis 30,000 4% $6.125 01/27/2010
300 0% $6.000 06/28/2010
Richard E. Trayler 30,000 4% $6.125 01/27/2010
300 0% $6.000 06/28/2010
Russell H. Bergen 30,000 4% $6.125 01/27/2010
______________________
(1) All options were granted at fair market value (closing sale price for our
common stock on the NASDAQ/AMEX Stock Market on the date of grant).
20
The following table provides further information regarding the Named Officers'
exercises and outstanding stock options as of November 30, 2000. No stock
appreciation rights were granted or exercised.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION/SAR VALUES
Number of
Securities
Underlying Value/(1)/ of
Unexercised Unexercised
Options/SARs In-the-Money
at FY-End (#) Options/SARs at FY-
Shares Acquired Value Exercisable/ End ($) Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable/(2)/
- ---- ------------------ ----------------- ------------------- --------------------
Michael K. Perry 207,000 1,013,271 461,124 / 721,876 1,284,021 /1,874,416
Rhonda F. Rhyne 80,000 390,959 280,898 / 195,002 624,496 / 401,567
Stephen P. Loomis 70,000 385,280 27,369 / 82,931 67,538 / 138,712
Richard E. Trayler 10,000 53,815 61,888 / 73,412 163,191 / 110,247
Russell H. Bergen 10,000 45,952 30,624 / 64,376 99,451 / 111,636
Employment Agreements
On March 23, 1998, we entered into an employment agreement with Michael Perry
our Chief Executive Officer. Under the terms of the agreement, Mr. Perry was
granted 1,500,000 non-transferable stock options (not under our Option Plan) at
an exercise price of $2.55 per share, subject to vesting requirements. The first
tranche vested on September 23, 1998, and the final tranche was not scheduled to
vest until March 23, 2002. Under the October 16, 1998 Stock Option
Cancellation/Regrant program, Mr. Perry cancelled his 1,500,000 old options in
exchange for a new grant of 1,295,000 options. The new options have an exercise
price of $1.625 per share, and all accrued vesting was forfeited. The new
options vest over the same four-year period with a commencement date of October
16, 1998. At November 30, 2000, 440,500 of the options are vested. The options
expire on October 15, 2008.
Long Term Incentive Plans
We do not have any long-term incentive plans (as defined in the Securities and
Exchange Commission regulations).
21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1998, we entered into an 18-month unsecured private line of credit
agreement with Allen E. Paulson and James C. Gilstrap. Under the terms of the
agreement we can borrow up to $3,000,000 on an as-needed basis with monthly
interest-only payments at an annual interest rate of 10.0%. In February 1999,
the term was extended one year, to September 2000. In August of 2000 the line of
credit repaid in full.
Before and after becoming an executive officer of CardioDynamics in June 1997,
Dennis G. Hepp has served as a consultant and vendor to our Company since July
1995 through the company he founded in 1989, Rivertek Medical Systems, Inc.,
located in Minneapolis, Minnesota. Rivertek, which is 100% owned by Mr. Hepp and
his wife, provides engineering consulting to medical device manufacturers, and
continues to be one of our largest vendors. In fiscal 2000 and fiscal 1999, we
paid $898,439 and $391,293, respectively, to Rivertek.
22
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that each person who, at any time during the fiscal year
ended November 30, 2000, was a Director, officer, or beneficial owner of more
than 10% of a class of registered equity securities of the Company filed on a
timely basis all reports required by Section 16(a) of the Securities Exchange
Act.
SHAREHOLDER PROPOSALS FOR 2002 PROXY STATEMENT
The deadline for shareholders to submit proposals to be considered for inclusion
in the Company's Proxy Statement for the next year's Annual Meeting of
Shareholders is February 14, 2002. Such proposals may be included in the next
year's Proxy Statement if they comply with certain rules and regulations
promulgated by the Securities and Exchange Commission.
If a shareholder wishes to have a proposal considered at the 2002 Annual Meeting
but does not seek to have the proposal included in the Company's Proxy Statement
and form of Proxy for that meeting, and if the shareholder does not notify
CardioDynamics of the proposal by April 30, 2002, then the persons appointed as
proxies by management may use their discretionary voting authority to vote on
the proposal when the proposal is considered at the 2002 Annual Meeting, even
though there is no discussion of the proposal in the Proxy Statement for that
meeting. It is recommended that shareholders submitting proposals or notices of
proposal direct them to the Secretary of the Company and utilize Certified Mail-
Return Receipt Requested. Shareholders' proposals should be submitted to
CardioDynamics International Corporation, 6175 Nancy Ridge Drive, Suite 300, San
Diego, California 92121.
FORM 10-KSB
The company will mail without charge, upon written request, to any shareholder
of the company a copy of the annual report on form 10-KSB, including the
financial statements, schedules and list of exhibits. Requests should be sent to
CardioDynamics International Corporation, 6175 Nancy Ridge Drive, Suite 300, San
Diego, California 92121, Attention: Shareholder Relations.
OTHER MATTERS
The Board of Directors is not aware of any matter to be presented for action at
the Annual Meeting other than the matters set forth in this Proxy Statement.
Should any other matter requiring a vote of the shareholders arise, the persons
named as proxy holders on the enclosed proxy card will vote the shares
represented thereby in accordance with their best judgment in the interest of
the Company. Discretionary authority with respect to such other matters is
granted by the execution of the enclosed proxy card.
By Order of the Board of Directors
/s/ Michael K. Perry
Dated: June 4, 2001 Michael K. Perry
Chief Executive Officer
23
Exhibit A
AMENDMENT
TO
CARDIODYNAMICS INTERNATIONAL CORPORATION
1995 STOCK OPTIONS/STOCK ISSUANCE PLAN
--------------------------------------
(As Amended And Restated Through May 20, 1998)
THIS AMENDMENT to the CardioDynamics International Corporation 1995 Stock
Option/Stock Issuance Plan (the "Plan") has been adopted by the Board of
Directors of CardioDynamics International Corporation, a California corporation
(the "Corporation"), and approved by the shareholders of the Corporation. This
Amendment amends the Plan in the following respects only:
1. The second sentence of Article One, Section V.A., is hereby amended to
read in full as follows:
The maximum number of shares of common Stock which may be
issued over the term of the Plan shall not exceed 6,000,000
shares.
2. Article Two, Section I.F., is hereby amended to read in full as
follows:
F. Limited Transferability of Options.
-----------------------------------
1. Except as specifically provided in Section I.F.2 or
Section I.F.3 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 Optionee's death.
2. A Non-Statutory Option may be assigned in accordance
with the terms of a "qualified domestic relations
order" within the meaning of the Internal Revenue
Code Section 414(p).
3. The Plan Administrator may, in its discretion,
permit an Optionee to transfer all or any portion of
a Non-Statutory Option, or authorize all or a
portion of any Non-Statutory Option to be granted to
an Optionee to permit transfer by such Optionee, to
(i) the spouse, children or grandchildren of the
Optionee (the "Immediate Family Members"), (ii) a
trust or trusts for the exclusive benefit of such
Immediate Family Members and/or such Optionee, (iii)
a partnership or limited liability company, the
partners or members of which are limited to the
Optionee and/or such Immediate Family Members, or
(iv) an entity exempt from federal
income tax under Section 501(c)(3) of the Internal
Revenue Code, or any successor provision
(collectively, the "Permitted Transferees");
provided, that (x) the Optionee receives no
consideration for any such transfer and (y)
subsequent transfers of the transferred Non-
Statutory Option shall be prohibited except those by
will or the laws of descent and distribution or
pursuant to a qualified domestic relations order.
The stock option agreement or other documents
evidencing any Non-Statutory Options with respect to
which such transferability is authorized at the time
of grant must be approved by the Plan Administrator
and must expressly provide for transferability in a
manner consistent with this Section I.F.3.
4. Following the transfer of any Non-Statutory Option
under either Section I.F.2 or I.F.3, (i) such Non-
Statutory Option shall continue to be subject to the
same terms and conditions as were in effect
immediately prior to the transfer, provided that the
term "Optionee" shall be deemed to refer to the
Permitted Transferee, the recipient under a
qualified domestic relations order, or the estate or
heirs of a deceased Optionee, as applicable, to the
extent necessary to enable such person to exercise
the transferred Non-Statutory Option in accordance
with the terms of this Plan and applicable law and
(ii) the provisions regarding the Optionee's
cessation of Service or death shall continue to be
applied with respect to the original Optionee and,
upon the Optionee's cessation of Service or death,
the Non-Statutory Option shall be exercisable only
to the extent and for the periods specified in the
stock option agreement evidencing the Non-Statutory
Option.
5. Any Optionee desiring to transfer a Non-Statutory
Option pursuant to Section I.F.3 shall make
application therefor in the manner and at the time
specified by the Plan Administrator and shall comply
with such other requirements as the Plan
Administrator may determine to be necessary to
insure compliance with all applicable securities
laws. The Plan Administrator shall not permit a
transfer of a Non-Statutory Option if such transfer
cannot be made in compliance with all applicable
securities laws.
6. Neither the Plan Administrator nor the Corporation
shall have any obligation to inform any transferee
of a Non-Statutory Option of any expiration,
termination, lapse or acceleration of such Non-
Statutory Option.
3. Article Four, Section I.F. is hereby amended to read in full as
follows:
F. Limited Transferability of Options.
----------------------------------
1. An automatic option grant, together with the limited
stock appreciation right pertaining to such option
(collectively, for purposes of this Section I.F., the
"Automatic Option Grant"), may be assigned in
accordance with the terms of a "qualified domestic
relations order" within the meaning of the Internal
Revenue Code Section 414(p).
2. The Plan Administrator may, in its discretion, permit
an optionee to transfer all or any portion of an
Automatic Option Grant to (i) the spouse, children or
grandchildren of the optionee (the "Immediate Family
Members"), (ii) a trust or trusts for the exclusive
benefit of such Immediate Family Members and/or such
optionee, (iii) a partnership or limited liability
company, the partners or members of which are limited
to the optionee and/or such Immediate Family Members,
or (iv) an entity exempt from federal income tax under
Section 501(c)(3) of the Internal Revenue Code, or any
successor provision (collectively, the "Permitted
Transferees"); provided, that (x) the optionee receives
no consideration for any such transfer and (y)
subsequent transfers of the transferred Automatic
Option Grant shall be prohibited except those by will
or the laws of descent and distribution or pursuant to
a qualified domestic relations order. The stock option
agreement or other documents evidencing any Automatic
Option Grant with respect to which such transferability
is authorized at the time of grant must be approved by
the Plan Administrator and must expressly provide for
transferability in a manner consistent with this
Section I.F.3.
3. Following the transfer of any Automatic Option Grant
under either Section I.F.1 or Section I.F.2, (i) such
Automatic Option Grant shall continue to be subject to
the same terms and conditions as were in effect
immediately prior to the transfer, provided that the
term "optionee" shall be deemed to refer to the
Permitted Transferee, the recipient under a qualified
domestic relations order, or the estate or heirs of a
deceased optionee, as applicable, to the extent
necessary to enable such person to exercise the
transferred Automatic Option Grant in accordance with
the terms of this Plan and applicable law and (ii) the
provisions regarding the optionee's termination of
service as a Board member shall continue to be applied
with respect to the
original optionee and, upon such termination of service
as a Board member, the Automatic Option Grant shall be
exercisable only to the extent and for the periods
specified in the stock option agreement evidencing the
Automatic Option Grant.
4. Any optionee desiring to transfer an Automatic Option
Grant as permitted under Section I.F.2 shall make
application therefor in the manner and at the time
specified by the Plan Administrator and shall comply
with such other requirements as the Plan Administrator
may determine to be necessary to insure compliance with
all applicable securities laws. The Plan Administrator
shall not permit a transfer of an Automatic Option
Grant if such transfer cannot be made in compliance
with all applicable federal, state and foreign
securities laws.
5. Neither the Plan Administrator nor the Corporation
shall have any obligation to inform any transferee of
an Automatic Option Grant of any expiration,
termination, lapse or acceleration of such Automatic
Option Grant.
4. As amended hereby, the Plan continues in full force and effect.
CARDIODYNAMICS INTERNATIONAL
CORPORATION
By: /s/ Steve P. Loomis
-----------------------------
Its: Corporate Secretary
----------------------------
CardioDynamics International Corporation
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James C. Gilstrap and Michael K. Perry, jointly
and severally, as proxies, with full power of substitution, to vote all shares
of stock which the undersigned is entitled to vote at the Annual Meeting of
Shareholders of CardioDynamics International Corporation to be held on Thursday,
July 19, 2001 or at any postponement or adjournment thereof, as specified below,
and to vote in their discretion on such other business as may properly come
before the Annual Meeting and any postponement or adjournment thereof.
The Board of Directors recommends a vote FOR Proposals 1, 2 and 3. To vote in
---
accordance with the Board of Directors recommendations just sign below, no boxes
need to be checked.
________________________________________________________________________________
1. Election of Directors:
Nominees:
Connie R. Curran Jacques C. Douziech Cam L. Garner
James C. Gilstrap Richard O. Martin J. Michael Paulson
Michael K. Perry
[_]Vote FOR all nominees above (except as withheld in the space below)
[_] Vote WITHHELD from all nominees
Instruction: To withhold authority to vote for any individual nominee, check
the box "Vote FOR" and write the nominee's name for whom you wish to
withhold your vote on the line below.
________________________________________________________________________________
2. To consider and act upon a proposal to amend the 1995 Stock Option/Stock
Issuance Plan to increase the number of shares reserved for issuance
thereunder from 4,000,000 shares to 6,000,000 shares and to allow transfer
of certain options by gift to immediate family members and tax-exempt
charities.
[_] Vote FOR [_] Vote AGAINST [_] ABSTAIN
________________________________________________________________________________
3. To ratify the selection of KPMG LLP as our independent accountants for the
fiscal year ending November 30, 2001.
[_] Vote FOR [_] Vote AGAINST [_] ABSTAIN
________________________________________________________________________________
Unless otherwise specified by the undersigned, this proxy will be voted FOR
Proposals 1, 2 and 3 and will be voted by the proxy holders at their discretion
as to any other matters properly transacted at the Annual Meeting or any
postponement or adjournment thereof. To vote in accordance with the Board of
Directors recommendations just sign below, no boxes need to be checked.
Dated: ____________________, 2001
__________________________________________
Signature of Shareholder
__________________________________________
Printed Name of Shareholder
__________________________________________
Title (if appropriate)
Please sign exactly as name appears hereon.
If signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such, and, if signing
for a corporation, give your title. When
shares are in the names of more than one
person, each should sign.
__________ CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING
CardioDynamics
INTERNATIONAL CORPORATION
To My Fellow CardioDynamics' Shareholders,
Looking back, I am proud at how far we have come since the idea of "noninvasive"
cardiac measurements was researched and developed by NASA in the 1960s. Thanks
to advancements in technology and a group of very talented and dedicated people
at CardioDynamics, the dream has become a reality, and we are now the innovators
of a medical technology breakthrough called Impedance Cardiography (ICG).
Our BioZ(R) Systems provide medical professionals with vital data to help battle
the top killer of both men and women - cardiovascular disease. The statistics
are staggering - by the time you finish reading this letter, five people will
have died from this deadly disease in the U.S. alone. What gets us up each
morning? It's knowing that our work will improve the quality of your life and
will reduce the chance that you or your family becomes one of these statistics.
I know it sounds cliche, but our team literally runs up the stairs each morning
to start their day!
Performance for Shareholders - We take our commitment to creating and increasing
shareholder value very seriously. There is a great deal of turbulence in the
stock market these days, so I performed an analysis that you may find
interesting. In May 1999, if you had $10,000 to invest in the stock market and
held your investment over the past two years, which of the following companies
would have been the best to have owned: Cisco, Intel, Microsoft, Hewlett
Packard, Lucent, General Electric, ATT, Medtronic, Cardinal Health, Phillip
Morris or CardioDynamics? I am proud to say that the best investment would have
been CardioDynamics.
Lucent $ 2,163
ATT $ 4,579
Cisco $ 6,265
Hewlett Packard $ 7,182
Microsoft $ 8,785
Intel $ 9,922
Medtronic $ 12,633
General Electric $ 14,022
Phillip Morris $ 15,462
Cardinal Health $ 17,552
CardioDynamics $ 22,000
Accomplishments - The Company is much stronger today than during any point in
its history. We have made tremendous progress in just a few short years.
. Impressive Revenue Growth: From $0.5M in 1997, to $2.1M in 1998, to $7.3M in
1999, and we concluded 2000 and our 12/th/ consecutive quarter of increased
sales with sales of $13.1 million, up 80% percent over the prior year.
. Strong Gross Margins: Increased to 65% this year, generating an additional
$3.9 million during the year.
. Solid Capital Structure: Over $24 million in new equity, nearly $12 million
in the bank and no debt.
. Blue Chip Partnerships: CardioDynamics and GE Medical Systems Information
Technologies received 510(k) clearance for the first bedside monitor
providing noninvasive cardiac function information. We also recently
announced an alliance with Spacelabs Medical. Over the next few years, we
plan to enter into alliances with other leading monitoring companies, which
will provide access to more than 300,000 bedside monitors that are in today's
worldwide installed based.
. Strong Reimbursement: Significant Medicare rulings increased the average
national reimbursement by 37% and mandated the Company's technology as an
alternative to the right heart catheter for inotropic therapy determination.
. Solid Clinical Acceptance: Over 10 major clinical studies presented worldwide
and an entire issue of a peer-reviewed journal, Congestive Heart Failure,
devoted to ICG technology.
. Rich Product Development: Received two FDA 510(k) clearances - one for our
BioZ.pc(TM), the Company's ICG technology combined with an internet-based
information management system and the other for BioZtect(TM) Sensors, our new
proprietary sensors.
. Broad National Exposure. Nasdaq National Market System Listing, inclusion in
the Russell 3000 Index, Deloitte & Touche's prestigious Technology Fast 500
Award, and the American Electronics Association's High-Tech 2000 Award for
achievement and innovation.
People - We are fortunate to have a group of highly dedicated employees. All of
us are owners in the company and are encouraged to question every process,
procedure, and cost. We have an employee "cost-savings" program that has helped
reduce over $1.5 million in costs over the past 2 years, and we believe this is
just the beginning.
Looking Ahead - Our mission is to make our proprietary ICG technology a standard
of care. This will be achieved when noninvasive cardiac output, our primary
measurement, becomes the Sixth Vital Sign(TM), just as Nelcor's pulse oximetry
became the "fifth vital sign" in the mid-1980s.
We intend to position our technology as one of the key monitoring and diagnostic
tools in the treatment of patients with congestive heart failure, high blood
pressure, pacemakers, pulmonary disease, and kidney failure. We are constantly
investigating new applications for our technology and recently announced a pilot
program to improve end stage renal disease by linking the kidney disease
specialist and the cardiologist with the BioZ dTEL, our dialysis product in
development. Another exciting product in the pipeline is the BioZ.tel, the
Company's new home healthcare solution. Both of these innovative products
utilize the Internet to transfer data and have the potential to significantly
improve outcomes, reduce hospitalization admittance, and minimize costs.
Key Elements of Our Corporate Strategy:
. To accelerate outpatient market penetration through expansion of our direct
sales force
. To broaden distribution channels through strategic alliances
. To secure a recurring revenue stream through proprietary sensors, which we
anticipate will become as much as 40% of our total revenue within five
years
. To maintain market leadership through continuous innovations and product
improvements
. To target new market opportunities through technology and application
development
. To develop ICG products for home healthcare use
I would like to sincerely thank our employees, shareholders, and customers for
their support, loyalty, and patience. We survived the "proof of concept" phase
and are now in the "rapid growth" phase. I am honored to be with you on this
journey as we make a genuine contribution to healthcare. As we head into 2001,
we believe we have the necessary resources to establish our proprietary
technology as a standard of care and create long-term, sustainable and growing
value for our shareholders.
Best of Health,
/s/ Michael K. Perry
- --------------------
Michael K. Perry
Chief Executive Officer
May 25, 2001