Document:

exv10w5

Exhibit 10.5

CARDIAC SCIENCE CORPORATION

2002 EMPLOYEE STOCK PURCHASE PLAN

SECTION 1. PURPOSE

     The purposes of the Cardiac Science Corporation 2002 Employee Stock Purchase Plan (the “Plan”)
are (a) to assist employees of Cardiac Science Corporation, a Delaware corporation (the “Company”),
and its designated subsidiaries in acquiring a stock ownership interest in the Company pursuant to
a plan that is intended to qualify as an “employee stock purchase plan” under Section 423 of the
Internal Revenue Code of 1986, as amended, and (b) to encourage employees to remain in the employ
of the Company and its subsidiaries.

SECTION 2. DEFINITIONS

     In the Plan:

     “Additional Shares” has the meaning set forth in Section 6.

     “Board” means the Board of Directors of the Company.

     “Code” means the Internal Revenue Code of 1986, as amended from time to time.

     “Committee” means the Company’s Compensation Committee or any other Board committee appointed
by the Board to administer the Plan.

     “Common Stock” means the common stock, par value $0.001 per share, of the Company.

     “Company” means Cardiac Science Corporation, a Delaware corporation.

     “Company Transaction” means consummation of either:

     (a) a merger or consolidation of the Company with or into any another company, entity or
person or

     (b) a sale, lease, exchange or other transfer in one transaction or a series of related
transactions of all or substantially all the Company’s outstanding securities or all or
substantially all the Company’s assets;

provided, however, that a Company Transaction shall not include a Related Party Transaction.

     “Designated Subsidiary” means any domestic Subsidiary Corporation or any other Subsidiary
Corporation designated as such by the Board or the Committee.

 

 

     “Eligible Compensation” means all W-2 earnings (e.g. wages, tips, overtime pay, bonuses and
commissions, as included on IRS Form W-2) and such amounts of gross earnings as are deferred by an
Eligible Employee (a) under a qualified cash or deferred arrangement described in Section 401(k) of
the Code or (b) to a plan qualified under Section 125 of the Code. Eligible Compensation does not
include taxable fringe benefits, reimbursement or other expense allowances, moving expenses,
welfare benefits, deferred compensation (other than deferred amounts noted above), gain from stock
option exercises or any other special payments.

     “Eligible Employee” means any employee of the Company or a Designated Subsidiary who is in the
employ of the Company or any Designated Subsidiary on one or more Offering Dates and who meets the
following criteria:

     (a) the employee does not, immediately after the Option is granted, own stock (as defined by
the Code) possessing 5% or more of the total combined voting power or value of all classes of stock
of the Company or of a Parent or Subsidiary Corporation;

     (b) the employee’s customary employment is for 20 hours or more per week or any lesser number
of hours established by the Plan Administrator for a future Offering Period;

     (c) if specified by the Plan Administrator for a future Offering Period, the employee
customarily works a minimum of five months per year or any lesser number of months established by
the Plan Administrator; and

     (d) if specified by the Plan Administrator for a future Offering Period, the employee has been
employed for a minimum of one year as of an Offering Period or any lesser or greater minimum
employment period not to exceed two years that is established by the Plan Administrator for a
future Offering Period.

If the Company permits any employee of a Designated Subsidiary to participate in the Plan, then all
employees of that Designated Subsidiary who meet the requirements of this paragraph shall also be
considered Eligible Employees.

	 	 	“Enrollment Period” has the meaning set forth in Section 7.1.

     “ESPP Broker” has the meaning set forth in Section 10.1.

     “Fair Market Value” shall be as established in good faith by the Plan Administrator or (a) if
the Common Stock is listed on the Nasdaq National Market, the closing sales price for the Common
Stock as reported by that market for regular session trading on the Offering Date or the Purchase
Date, as applicable, unless the Plan Administrator determines otherwise for a future Offering
Period or (b) if the Common Stock is listed on the New York Stock Exchange or the American Stock
Exchange, the closing sales price for the Common Stock as such price is officially quoted in the
composite tape of transactions on such exchange for regular session trading on the Offering Date or
the Purchase Date, as applicable, unless the
Plan Administrator determines otherwise for a future Offering Period. If there is no such

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reported price for the Common Stock for the date in question, then such price on the last preceding
date for which such price exists shall be determinative of Fair Market Value.

     “Offering Period” has the meaning set forth in Section 5.1.

     “Offering Date” means the first day of an Offering Period.

     “Option” means an option granted under the Plan to an Eligible Employee to purchase shares of
Common Stock.

     “Parent Corporation” means any corporation, other than the Company, in an unbroken chain of
corporations ending with the Company, if, at the time of the granting of the Option, each of the
corporations, other than the Company, owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such chain.

     “Participant” means any Eligible Employee who has elected to participate in an Offering Period
in accordance with the procedures set forth in Section 7 and who has not withdrawn from the Plan or
whose participation in the Plan is not otherwise terminated.

     “Plan” means the Cardiac Science Corporation 2002 Employee Stock Purchase Plan, as it may be
amended from time to time.

     “Plan Administrator” has the meaning set forth in Section 3.1.

     “Purchase Date” means the last day of each Purchase Period.

     “Purchase Period” has the meaning set forth in Section 5.2.

     “Purchase Price” has the meaning set forth in Section 6.

     “Related Party Transaction” means (a) a merger or consolidation of the Company in which the
holders of the outstanding voting securities of the Company immediately prior to the merger or
consolidation hold at least a majority of the outstanding voting securities of a successor company
(as defined in Section 20.3) immediately after the merger or consolidation; (b) a sale, lease,
exchange or other transfer of the Company’s assets to a majority-owned subsidiary company; (c) a
transaction undertaken for the principal purpose of restructuring the capital of the Company,
including but not limited to, reincorporating the Company in a different jurisdiction or creating a
holding company; or (d) a corporate dissolution or liquidation.

     “Securities Act” means the Securities Act of 1933, as amended.

     “Subscription” has the meaning set forth in Section 7.1.

     “Subsidiary Corporation” means any corporation, other than the Company, in an unbroken chain
of corporations beginning with the Company, if, at the time of the granting of

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the Option, each of
the corporations, other than the last corporation in the unbroken chain, owns stock possessing 50%
or more of the total combined voting power of all classes of stock in one of the other corporations
in such chain.

SECTION 3. ADMINISTRATION

3.1 Plan Administrator

     The Plan shall be administered by the Board or the Committee or, if and to the extent the
Board or the Committee designates an executive officer of the Company to administer the Plan, by
such executive officer (each, the “Plan Administrator”). Any decisions made by the Plan
Administrator shall be applicable equally to all Eligible Employees.

3.2 Administration and Interpretation by the Plan Administrator

     Subject to the provisions of the Plan, the Plan Administrator shall have the authority, in its
sole discretion, to determine all matters relating to Options granted under the Plan, including all
terms, conditions, restrictions and limitations of Options; provided, however, that all
Participants granted Options pursuant to the Plan shall have the same rights and privileges within
the meaning of Code Section 423. The Plan Administrator shall also have exclusive authority to
interpret the Plan and may from time to time adopt, and change, rules and regulations of general
application for the Plan’s administration. The Plan Administrator’s interpretation of the Plan and
its rules and regulations, and all actions taken and determinations made by the Plan Administrator
pursuant to the Plan, unless reserved to the Board or the Committee, shall be conclusive and
binding on all parties involved or affected. The Plan Administrator may delegate administrative
duties to such of the Company’s other officers or employees as the Plan Administrator so
determines.

SECTION 4. STOCK SUBJECT TO PLAN

     Subject to adjustment from time to time as provided in Section 20.1, the maximum number of
shares of Common Stock that shall be available for issuance under the Plan shall be:

     (a) 175,419 shares, plus

     (b) an annual increase to be added as of the first day of the Company’s fiscal year equal to
the least of (i) 175,419 shares and (ii) 2% of the outstanding shares of Common Stock of the
Company as of the end of the Company’s immediately preceding fiscal year on a fully diluted basis
(assuming exercise of all outstanding options and warrants and conversion of all outstanding
convertible securities) and (iii) a lesser amount determined by the Board; provided, however, that
any shares from any increases in previous years that are not actually issued shall continue to be
added to the aggregate number of shares available for issuance under the Plan.

     Shares issued under the Plan shall be drawn from authorized and unissued shares or shares
subsequently acquired by the Company as treasury shares.

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SECTION 5. OFFERING AND PURCHASE PERIODS

5.1 Offering Periods

     (a) Except as otherwise set forth below, the Plan shall be implemented pursuant to twelve
month offering periods (an “Offering Period”). Each Offering Period shall commence on December 1
of each year and shall end on the following November 30.

     (b) Notwithstanding the foregoing, the Plan Administrator may establish (i) a different term
for one or more future Offering Periods and (ii) different commencing and ending dates for such
future Offering Periods; provided, however, that an Offering Period may not exceed five years; and
provided, further, that if the Purchase Price may be less than 85% of the Fair Market Value of the
Common Stock on the Purchase Date, the Offering Period may not exceed 27 months.

     (c) In the event the first or the last day of an Offering Period is not a regular business
day, then the first day of the Offering Period shall be deemed to be the next regular business day
and the last day of the Offering Period shall be deemed to be the last preceding regular business
day.

5.2 Purchase Periods

     (a) Each Offering Period shall consist of four consecutive purchase periods of three months’
duration (each, a “Purchase Period”). The last day of each Purchase Period shall be the Purchase
Date for such Purchase Period. Except as otherwise set forth below, a Purchase Period shall
commence on December 1, March 1, June 1 and September 1 of each year and shall end three months
later on the next February 28, May 31, August 31, and November 30 respectively, occurring
thereafter.

     (b) Notwithstanding the foregoing, the Plan Administrator may establish for a future Offering
Period (i) a different term for the initial Purchase Period or for one or more future Purchase
Periods and (ii) different commencing and ending dates for any such Purchase Period.

     (c) In the event the first or last day of a Purchase Period is not a regular business day,
then the first day of the Purchase Period shall be deemed to be the next regular business day and
the last day of the Purchase Period shall be deemed to be the last preceding regular business day.

5.3 Governmental Approval; Shareholder Approval

     Notwithstanding any other provision of the Plan to the contrary, an Option granted pursuant to
the Plan shall be subject to (a) obtaining all necessary governmental approvals and qualifications
for the Plan and (b) obtaining shareholder approval of the Plan.

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SECTION 6. PURCHASE PRICE

     (a) The purchase price (the “Purchase Price”) at which Common Stock may be acquired in an
Offering Period pursuant to the exercise of all or any portion of an Option shall be 85% of the
lesser of (i) the Fair Market Value of the Common Stock on the Offering Date of such Offering
Period and (ii) the Fair Market Value of the Common Stock on the Purchase Date.

     (b) Notwithstanding the foregoing, if an increase in the number of shares authorized for
issuance under the Plan (other than an annual increase pursuant to Section 4) is approved and all
or a portion of such additional shares are to be issued during one or more Offering Periods that
are underway at the time of shareholder approval of such increase (the “Additional Shares”), then,
if as of the date of such shareholder approval, the Fair Market Value of a share of Common Stock is
higher than the Fair Market Value on the Offering Date for any such Offering Period, the Purchase
Price for the Additional Shares shall be 85% of the lesser of (i) the Common Stock’s Fair Market
Value on the date of such shareholder approval and (ii) the Fair Market Value of the Common Stock
on the Purchase Date.

SECTION 7. PARTICIPATION IN THE PLAN

7.1 Initial Participation

     An Eligible Employee shall become a Participant on the first Offering Date after satisfying
the eligibility requirements and delivering to the Plan Administrator during the enrollment period
established by the Plan Administrator (the “Enrollment Period”) a subscription (the
“Subscription”):

     (a) indicating the Eligible Employee’s election to participate in the Plan;

     (b) authorizing payroll deductions and stating the amount to be deducted regularly from the
Participant’s Eligible Compensation; and

     (c) authorizing the purchase of Common Stock for the Participant in each Purchase Period.

     An Eligible Employee who does not deliver a Subscription as provided above during the
Enrollment Period shall not participate in the Plan for that Offering Period or for any subsequent
Offering Period unless such Eligible Employee subsequently enrolls in the Plan by filing a
Subscription with the Company during the Enrollment Period for such subsequent Offering Period.
The Company may, from time to time, change the Enrollment Period for a
future Offering Period as deemed advisable by the Plan Administrator, in its sole discretion,
for the proper administration of the Plan.

     An employee who becomes eligible to participate in the Plan after an Offering Period has
commenced shall not be eligible to participate in such Offering Period but may participate in any
subsequent Offering Period, provided that such employee is still an

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Eligible Employee as of the
commencement of any such subsequent Offering Period. Eligible Employees may not participate in
more than one Offering Period at a time.

7.2 Continued Participation

     A Participant shall automatically participate in the next Offering Period until such time as
such Participant withdraws from the Plan pursuant to Section 11.3 or terminates employment as
provided in Section 13.

SECTION 8. LIMITATIONS ON RIGHT TO PURCHASE SHARES

8.1 Number of Shares Purchased

     (a) No Participant shall be entitled to purchase Common Stock under the Plan (or any other
employee stock purchase plan that is intended to meet the requirements of Code Section 423
sponsored by the Company, a Parent Corporation or a Subsidiary Corporation) with a Fair Market
Value exceeding $25,000 (such value determined as of the Offering Date for each Offering Period or
such other limit as may be imposed by the Code) in any calendar year in which a Participant
participates in the Plan (or any other employee stock purchase plan described in this Section 8.1).

     (b) No Participant shall be entitled to purchase more than 525 shares of stock (or such other
number as the Plan Administrator shall specify for a future Offering Period) under the Plan in any
Purchase Period.

     (c) For a future Offering Period, the Board or the Committee may specify a different maximum
number of shares that may be purchased by any Participant, as well as a maximum aggregate number of
shares that may be purchased by all Participants, pursuant to such Offering Period.

8.2 Pro Rata Allocation

     In the event the number of shares of Common Stock that might be purchased by all Participants
exceeds the number of shares of Common Stock available in the Plan, in a Purchase Period or in an
Offering Period, the Plan Administrator shall make a pro rata allocation of the remaining shares of
Common Stock in as uniform a manner as shall be practicable and as the Plan Administrator shall
determine to be equitable. Fractional shares may not be issued under the Plan unless the Plan
Administrator determines otherwise for a future Offering Period.

SECTION 9. PAYMENT OF PURCHASE PRICE

9.1 General Rules

     Subject to Section 7.2 and Section 9.11, Common Stock that is acquired pursuant to the
exercise of all or any portion of an Option may be paid for only by means of payroll deductions
from the Participant’s Eligible Compensation. Except as set forth in this

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Section 9, the amount of
compensation to be withheld from a Participant’s Eligible Compensation during each pay period shall
be determined by the Participant’s Subscription.

9.2 Percent Withheld

     The amount of payroll withholding for each Participant for purchases pursuant to the Plan
during any pay period shall be at least 1% but shall not exceed 15% of the Participant’s Eligible
Compensation for such pay period (or such other higher percentage as the Plan Administrator may
establish from time to time for a future Offering Period). Amounts shall be withheld in whole
percentages only.

9.3 Payroll Deductions

     Payroll deductions shall commence on the first payday following the Offering Date and shall
continue through the last payday of the Offering Period unless sooner altered or terminated as
provided in the Plan.

9.4 Memorandum Accounts

     Individual accounts shall be maintained for each Participant for memorandum purposes only.
All payroll deductions from a Participant’s compensation shall be credited to such account but
shall be deposited with the general funds of the Company. All payroll deductions received or held
by the Company may be used by the Company for any corporate purpose.

9.5 No Interest

     No interest shall be paid on payroll deductions received or held by the Company.

9.6 Acquisition of Common Stock

     On each Purchase Date of an Offering Period, each Participant shall automatically acquire,
pursuant to the exercise of the Participant’s Option, the number of shares of Common Stock arrived
at by dividing the total amount of the Participant’s accumulated payroll deductions for the
Purchase Period by the Purchase Price; provided, however, that the number of shares of Common Stock
purchased by the Participant shall not exceed the number of whole shares of Common Stock so
determined, unless the Plan Administrator has determined for a future Offering Period that
fractional shares may be issued under the Plan; and provided, further, that the number of shares of
Common Stock purchased by the
Participant shall not exceed the number of shares for which Options have been granted to the
Participant pursuant to Section 8.1.

9.7 Refund of Excess Amounts

     Any cash balance remaining in the Participant’s account at the termination of a Purchase
Period that is not sufficient to purchase a whole share of Common Stock shall be applied to the
purchase of Common Stock in the next Purchase Period, provided the

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Participant participates in the
next Purchase Period and the purchase complies with Section 8.1. All other amounts remaining in a
Participant’s account after a Purchase Date shall be refunded to the Participant as soon as
practical after the Purchase Date without the payment of any interest.

9.8 Withholding Obligations

     At the time the Option is exercised, in whole or in part, or at the time some or all the
Common Stock is disposed of, the Participant shall make adequate provision for local, state,
federal and foreign withholding obligations of the Company, if any, that arise upon exercise of the
Option or upon disposition of the Common Stock. The Company may withhold from the Participant’s
compensation the amount necessary to meet such withholding obligations.

9.9 Termination of Participation

     No Common Stock shall be purchased on behalf of a Participant on a Purchase Date if his or her
participation in a current Offering Period or the Plan has terminated on or before such Purchase
Date or if the Participant has otherwise terminated employment prior to a Purchase Date.

9.10 Procedural Matters

     The Company may, from time to time, establish (a) limitations on the frequency and/or number
of any permitted changes in the amount withheld during an Offering Period, as set forth in Section
11.1, (b) an exchange ratio applicable to amounts withheld in a currency other than U.S. dollars,
(c) payroll withholding in excess of the amount designated by a Participant in order to adjust for
delays or mistakes in the Company’s processing of properly completed withholding elections, and (d)
such other limitations or procedures as deemed advisable by the Company in the Company’s sole
discretion that are consistent with the Plan and in accordance with the requirements of Code
Section 423.

9.11 Leaves of Absence

     During unpaid leaves of absence approved by the Company and meeting the requirements of the
applicable treasury regulations promulgated under the Code, a Participant may elect to continue
participation in the Plan by delivering cash payments to the Company on the Participant’s normal
paydays equal to the amount of his or her payroll deduction under the Plan had the Participant not
taken a leave of absence. Such cash payments will be based
upon the Participant’s base salary immediately before the leave of absence. Currently, the
treasury regulations provide that a Participant may continue participation in the Plan only during
the first 90 days of a leave of absence unless the Participant’s reemployment rights are guaranteed
by statute or contract.

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SECTION 10. COMMON STOCK PURCHASED UNDER THE PLAN

10.1 ESPP Broker

     If the Plan Administrator designates or approves a stock brokerage or other financial services
firm (the “ESPP Broker”) to hold shares purchased under the Plan for the accounts of Participants,
the following procedures shall apply. Promptly following each Purchase Date, the number of shares
of Common Stock purchased by each Participant shall be deposited into an account established in the
Participant’s name with the ESPP Broker. Each Participant shall be the beneficial owner of the
Common Stock purchased under the Plan and shall have all rights of beneficial ownership in such
Common Stock. A Participant shall be free to undertake a disposition of the shares of Common Stock
in his or her account at any time, but, in the absence of such a disposition, the shares of Common
Stock must remain in the Participant’s account at the ESPP Broker until the holding period set
forth in Code Section 423 has been satisfied. With respect to shares of Common Stock for which the
holding period set forth above has been satisfied, the Participant may move those shares of Common
Stock to another brokerage account of the Participant’s choosing or request that a stock
certificate be issued and delivered to him or her. Dividends paid in the form of shares of Common
Stock with respect to Common Stock in a Participant’s account shall be credited to such account. A
Participant who is not subject to payment of U.S. income taxes may move his or her shares of Common
Stock to another brokerage account of his or her choosing or request that a stock certificate be
delivered to him or her at any time, without regard to the Code Section 423 holding period.

10.2 Notice of Disposition

     By entering the Plan, each Participant agrees to promptly give the Company notice of any
Common Stock disposed of within the later of one year from the Purchase Date and two years from the
Offering Date for such Common Stock, showing the number of such shares disposed of and the Purchase
Date and Offering Date for such Common Stock. This notice shall not be required if and so long as
the Company has a designated ESPP Broker.

SECTION 11. CHANGES IN WITHHOLDING AMOUNTS AND

VOLUNTARY WITHDRAWAL

11.1 Changes in Withholding Amounts

     (a) Unless the Plan Administrator establishes otherwise for a future Offering Period, during a
Purchase Period, a Participant may elect to reduce payroll contributions to 0% by completing and
filing with the Company an amended Subscription authorizing cessation of payroll deductions. The
change in rate shall be effective as of the beginning of
the next payroll period following the date of filing the amended Subscription, provided the
amended Subscription is filed prior to any date required by the Company, and, if not, as of the
beginning of the next succeeding payroll period. All payroll deductions accrued by a Participant
as of a Change Notice Date shall continue to be applied toward the purchase of Common Stock on the
Purchase Date, unless a Participant withdraws from an Offering

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Period or the Plan, pursuant to
Section 11.2 or Section 11.3 below. An amended Subscription shall remain in effect until the
Participant changes such Subscription in accordance with the terms of the Plan.

     (b) Unless the Plan Administrator determines otherwise for a future Offering Period, a
Participant may elect to increase or decrease the amount to be withheld from his or her
compensation for future Purchase Periods by filing with the Plan Administrator an amended
Subscription; provided, however, that notice of such election must be delivered to the Plan
Administrator at least ten days prior to such Purchase Period in such form and in accordance with
such terms as the Plan Administrator may establish for an Offering Period. An amended Subscription
shall remain in effect until the Participant changes such Subscription in accordance with the terms
of the Plan.

     (c) Notwithstanding the foregoing, to the extent necessary to comply with Code Section 423 and
Section 8.1, a Participant’s payroll deductions may be decreased to 0% during any Purchase Period
if the aggregate of all payroll deductions accumulated with respect to one or more Purchase Periods
ending within the same calendar year exceeds $25,000 of Fair Market Value of the Common Stock
determined as of the first day of an Offering Period ($21,250 to the extent the Purchase Price may
be 85% of the Fair Market Value of the Common Stock on the Offering Date of the Offering Period).
Payroll deductions shall re-commence at the rate provided in such Participant’s Subscription at the
beginning of the first Purchase Period that is scheduled to end in the following calendar year,
unless the Participant terminates participation in an Offering Period or the Plan as provided in
Section 11.2 or Section 11.3 or indicates otherwise in an amended Subscription.

     (d) Also notwithstanding the foregoing, a Participant’s payroll deductions may be decreased to
0% at such time that the aggregate of all payroll deductions accumulated with respect to a Purchase
Period exceeds the amount necessary to purchase (i) 525 shares of Common Stock in such Purchase
Period (or such other number as the Plan Administrator shall specify for a future Offering Period)
or (ii) the aggregate number of shares of Common Stock available for purchase by all Participants
in any single Purchase Period or Offering Period as set forth in Section 8.1. Payroll deductions
shall re-commence at the rate provided in such Participant’s Subscription at the beginning of the
next Purchase Period, provided the Participant continues to participate in the Plan and such
participation complies with Section 8.1.

11.2 Withdrawal From an Offering Period

     A Participant may withdraw from an Offering Period by completing and delivering to the Plan
Administrator a written notice of withdrawal on a form provided by the Company for such purpose.
Such notice must be delivered prior to the end of the Purchase Period for
which such withdrawal is to be effective. Unless otherwise indicated by a Participant,
withdrawal from an Offering Period shall not result in a withdrawal from the Plan or any succeeding
Offering Period therein, provided that such Participant is still an Eligible Employee upon
commencement of such succeeding Offering Period. A Participant may not

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resume participation in the
same Offering Period at any time following withdrawal from such Offering Period.

11.3 Withdrawal From the Plan

     A Participant may withdraw from the Plan by completing and delivering to the Plan
Administrator a written notice of withdrawal on a form provided by the Plan Administrator for such
purpose. Such notice must be delivered prior to the end of the Purchase Period for which such
withdrawal is to be effective, or by any other date specified by the Plan Administrator for a
future Offering Period.

11.4 Notice of Withdrawal; Effect of Withdrawal on Prior Purchase Periods; Re-enrollment
in the Plan

     (a) The Company may, from time to time, impose a requirement that any notice of withdrawal be
on file with the Company for a reasonable period prior to the effectiveness of the Participant’s
withdrawal.

     (b) In the event a Participant voluntarily elects to withdraw from the Plan, the Participant
may participate in any subsequent Offering Periods under the Plan by again satisfying the
definition of Eligible Employee and re-enrolling in the Plan in accordance with Section 7.

11.5 Return of Payroll Deductions

     Upon withdrawal from an Offering Period pursuant to Section 11.2 or from the Plan pursuant to
Section 11.3, the withdrawing Participant’s accumulated payroll deductions that have not been
applied to the purchase of Common Stock shall be returned as soon as practical after the
withdrawal, without the payment of any interest, to the Participant and the Participant’s interest
in the Offering Period shall terminate. Such accumulated payroll deductions may not be applied to
any other Offering Period under the Plan.

SECTION 12. AUTOMATIC WITHDRAWAL

     For any future Offering Periods with multiple Purchase Periods, if the Fair Market Value of
the Common Stock on any Purchase Date of an Offering Period is less than the Fair Market Value of
the Common Stock on the Offering Date for such Offering Period, then every Participant shall
automatically (a) be withdrawn from such Offering Period at the close of such Purchase Date and
after the acquisition of the shares of Common Stock for such Purchase Period and (b) be enrolled in
the Offering Period commencing on the first business date subsequent to such Purchase Period,
provided the Participant is eligible to participate in the Plan and has not elected to terminate
participation in the Plan.

SECTION 13. TERMINATION OF EMPLOYMENT

     Termination of a Participant’s employment with the Company for any reason, including
retirement, death or the failure of a Participant to remain an Eligible Employee,

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shall immediately
terminate the Participant’s participation in the Plan. The payroll deductions credited to the
Participant’s account since the last Purchase Date shall, as soon as practical, be returned to the
Participant or, in the case of a Participant’s death, to the Participant’s legal representative or
designated beneficiary as provided in Section 14.2, and all the Participant’s rights under the Plan
shall terminate. Interest shall not be paid on sums returned to a Participant pursuant to this
Section 13.

SECTION 14. RESTRICTIONS ON ASSIGNMENT

14.1 Transferability

     An Option granted under the Plan shall not be transferable and such Option shall be
exercisable during the Participant’s lifetime only by the Participant. The Company will not
recognize, and shall be under no duty to recognize, any assignment or purported assignment by a
Participant of the Participant’s interest in the Plan, of his or her Option or of any rights under
his or her Option.

14.2 Beneficiary Designation

     A Participant may designate on a Company-approved form a beneficiary who is to receive any
shares and cash, if any, from the Participant’s account under the Plan in the event the Participant
dies after the Purchase Date for an Offering Period but prior to delivery to such Participant of
such shares and cash. In addition, a Participant may designate on a Company-approved form a
beneficiary who is to receive any cash from the Participant’s account under the Plan in the event
that the Participant dies before the Purchase Date for an Offering Period. Such designation may be
changed by the Participant at any time by written notice to the Plan Administrator or other
individual performing similar functions.

SECTION 15. NO RIGHTS AS SHAREHOLDER UNTIL SHARES

ISSUED

     With respect to shares of Common Stock subject to an Option, a Participant shall not be deemed
to be a shareholder of the Company, and he or she shall not have any of the rights or privileges of
a shareholder. A Participant shall have the rights and privileges of a shareholder of the Company
when, but not until, a certificate or its equivalent has been issued to the Participant for the
shares following exercise of the Participant’s Option.

SECTION 16. LIMITATIONS ON SALE OF COMMON STOCK

PURCHASED UNDER THE PLAN

     The Plan is intended to provide Common Stock for investment and not for immediate resale. The
Company does not, however, intend to restrict or influence any Participant in the
conduct of his or her own affairs. A Participant, therefore, may sell Common Stock purchased
under the Plan at any time he or she chooses subject to compliance with Company policies and any
applicable federal and state securities laws. A Participant assumes the risk of any market
fluctuations in the price of the Common Stock.

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SECTION 17. AMENDMENT, SUSPENSION OR TERMINATION OF

THE PLAN

     (a) The Board may amend the Plan in such respects as it shall deem advisable; provided,
however, that, to the extent required for compliance with Code Section 423 or any applicable law or
regulation, shareholder approval will be required for any amendment that (i) increases the total
number of shares as to which Options may be granted under the Plan, (ii) modifies the class of
employees eligible to receive Options, or (iii) otherwise requires shareholder approval under any
applicable law or regulation; and provided further, that except as provided in this Section 17, no
amendment to the Plan shall make any change in any Option previously granted which adversely
affects the rights of any Participant.

     (b) The Plan shall continue in effect for ten years after the date of its adoption by the
Board. Notwithstanding the foregoing, the Board may at any time and for any reason suspend or
terminate the Plan. During any period of suspension or upon termination of the Plan, no Options
shall be granted.

     (c) Except as provided in Section 20, no such termination of the Plan may affect Options
previously granted, provided that the Plan or an Offering Period may be terminated by the Board on
a Purchase Date or by the Board’s setting a new Purchase Date with respect to an Offering Period
and a Purchase Period then in progress if the Board determines that termination of the Plan and/or
the Offering Period is in the best interests of the Company and the shareholders or if continuation
of the Plan and/or the Offering Period would cause the Company to incur adverse accounting charges
as a result of a change after the effective date of the Plan in the generally accepted accounting
rules applicable to the Plan.

SECTION 18. NO RIGHTS AS AN EMPLOYEE

     Nothing in the Plan shall be construed to give any person (including any Eligible Employee or
Participant) the right to remain in the employ of the Company or a Parent or Subsidiary Corporation
or to affect the right of the Company or a Parent or Subsidiary Corporation to terminate the
employment of any person (including any Eligible Employee or Participant) at any time with or
without cause.

SECTION 19. EFFECT UPON OTHER PLANS

     The adoption of the Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Parent or Subsidiary Corporation. Nothing in the Plan shall be construed to
limit the right of the Company, any Parent Corporation or Subsidiary Corporation to (a) establish
any other forms of incentives or compensation for employees of the Company, a Parent Corporation or
Subsidiary Corporation or (b) grant or assume options
otherwise than under the Plan in connection with any proper corporate purpose, including, but
not by way of limitation, the grant or assumption of options in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any
corporation, firm or association.

-14-

 

SECTION 20. ADJUSTMENTS

20.1 Adjustment of Shares

     In the event that, at any time or from time to time after board approval of the Plan, a stock
dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger,
consolidation, distribution to shareholders other than a normal cash dividend, or other change in
the Company’s corporate or capital structure results in (a) the outstanding shares, or any
securities exchanged therefor or received in their place, being exchanged for a different number or
kind of securities of the Company or of any other corporation or (b) new, different or additional
securities of the Company or of any other corporation being received by the holders of shares of
Common Stock, then (subject to any required action by the Company’s shareholders), the Board or the
Committee, in its sole discretion, shall make such equitable adjustments as it shall deem
appropriate in the circumstances in (i) the maximum number and kind of shares of Common Stock
subject to the Plan as set forth in Section 4, (ii) the number and kind of securities that are
subject to any outstanding Option and the per share price of such securities and (iii) the maximum
number of shares of Common Stock that may be purchased by a Participant in a Purchase Period, or by
all Participants in a single Purchase Period. The determination by the Board or the Committee as
to the terms of any of the foregoing adjustments shall be conclusive and binding. Notwithstanding
the foregoing, a dissolution or liquidation of the Company or a Company Transaction shall not be
governed by this Section 20.1 but shall be governed by Sections 20.2 and 20.3, respectively.

20.2 Dissolution or Liquidation of the Company

     In the event of the dissolution or liquidation of the Company, the Offering Period then in
progress shall be shortened by setting a new Purchase Date and shall terminate immediately prior to
the consummation of such dissolution or liquidation, unless provided otherwise by the Board. The
new Purchase Date shall be a specified date before the date of the Company’s proposed dissolution
or liquidation. The Board shall notify each Participant in writing prior to the new Purchase Date
that the Purchase Date for the Participant’s Option has been changed to the new Purchase Date and
that the Participant’s Option shall be exercised automatically on the new Purchase Date, unless
prior to such date the Participant has withdrawn from an Offering Period then in progress or the
Plan as provided in Section 11.

20.3 Company Transaction

     In the event of a Company Transaction, each outstanding Option shall be assumed or an
equivalent option substituted by the successor company or parent thereof (the “Successor Company”).
In the event that the Successor Company refuses to assume or substitute for the
Option, any Offering Period then in progress shall be shortened by setting a new Purchase
Date. The new Purchase Date shall be a specified date before the date of the Company Transaction.
The Board shall notify each Participant in writing, prior to the new Purchase Date, that the
Purchase Date for the Participant’s Option has been changed to the new Purchase Date and that the
Participant’s Option shall be exercised automatically on the new

-15-

 

Purchase Date, unless prior to
such date the Participant has withdrawn from an Offering Period then in progress or the Plan as
provided in Section 11.

20.4 Limitations

     The grant of Options shall in no way affect the Company’s right to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or assets.

SECTION 21. REGISTRATION; CERTIFICATES FOR SHARES

     Notwithstanding any other provision of the Plan, the Company shall have no obligation to issue
or deliver any shares of Common Stock under the Plan or make any other distribution of benefits
under the Plan unless such issuance, delivery or distribution would comply with all applicable laws
(including, without limitation, the requirements of the Securities Act), and the applicable
requirements of any securities exchange or similar entity.

     The Company shall be under no obligation to any Participant to register for offering or resale
or to qualify for exemption under the Securities Act, or to register or qualify under state
securities laws, any shares of Common Stock, security or interest in a security paid or issued
under, or created by, the Plan, or to continue in effect any such registrations or qualifications
if made. The Company may issue certificates for shares with such legends and subject to such
restrictions on transfer and stop-transfer instructions as counsel for the Company deems necessary
or desirable for compliance by the Company with federal and state securities laws.

     To the extent that the Plan or any instrument evidencing shares of Common Stock provides for
issuance of stock certificates to reflect the issuance of such shares, the issuance may be effected
on a noncertificated basis, to the extent not prohibited by applicable law or the applicable rules
of any stock exchange.

SECTION 22. EFFECTIVE DATE

     The plan was adopted by the Board on February 21, 2002 and approved by the shareholders on
February 21, 2002. The Plan became effective on May 6, 2002.

-16-

 

PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS

SUMMARY PAGE

	 	 	 	 	 	 	 
	 	 	 	 	Section/Effect of	 	Date of Shareholder
	Date of Board Action	 	Action	 	Amendment	 	Approval
	 
	 	 	 	 	 	 
	February 21, 2002

	 	Approval of Plan
	 	 	 	February 21, 2002
	 
	 	 	 	 	 	 
	November 9, 2005

	 	Amendment of Plan
	 	Plan amended to
reflect assumption
by Cardiac Science
Corporation and
eliminate
inoperative
provisions
	 	Not required

R-1exv10w13

Exhibit 10.13

Form of Executive Employment Agreement

CARDIAC SCIENCE CORPORATION

 

 

     Executive Employment Agreement

     This executive employment agreement (“Agreement”), effective                                         ,
is between Cardiac Science Corporation, a Delaware corporation (the “Company”), and
[                    ] (“Executive”).

     W I T N E S S E T
H:

     WHEREAS, the Company desires to continue to retain the services of Executive upon the terms
and conditions set forth herein; and

     WHEREAS, Executive is willing to continue to provide services to the Company upon the terms
and conditions set forth herein; and

     WHEREAS, Executive and the Company are parties to an Employment Agreement, dated by Executive
as of [                    ], that the parties wish to void and replace with this Agreement as of the
effective date of this Agreement;

     A G R E E M E N T
S:

     NOW, THEREFORE, for and in consideration of the foregoing premises and for other good and
valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the Company
and Executive hereby agree to enter into an employment relationship in accordance with the terms
and conditions set forth below.

1. EMPLOYMENT

     The Company will continue to employ Executive, and Executive will continue to accept
employment by the Company as its [                    ] and report to the [                    ]. Subject to
Sections 3.3 and 3.4, changes may be made from time to time by the Company in its sole discretion
to the duties, reporting relationships and title of Executive. Executive will perform the duties
of [                    ] and will devote [his/her] full time and attention to achieving the purposes and
discharging of responsibilities afforded the position, and such other duties as may be assigned
from time to time by the Company, which relate to the business of the Company and are reasonably
consistent with Executive’s position. During Executive’s employment, Executive will not engage in
any business activity that, in the reasonable judgment of the Chief Executive Officer or Board of
Directors, conflicts with the duties of Executive under this Agreement, whether or not such
activity is pursued for gain, profit or other advantage. Executive will comply with Company
policies and procedures, and with all applicable laws and regulations, and will take reasonable
steps to ensure that the operations Executive manages are in compliance with all applicable
policies, procedures, laws and regulations.

2. COMPENSATION AND BENEFITS

     The Company agrees to pay or cause to be paid to Executive and Executive agrees to accept in
exchange for the services rendered hereunder the following compensation and benefits:

2

 

     2.1 Annual Salary

     Executive’s compensation shall consist of an annual base salary (the “Salary”) of
$[INSERT BASE SALARY], payable in accordance with the payroll practices of the Company. The Salary
shall be reviewed, and shall be subject to change, by the Chief Executive Officer and/or the Board
of Directors of the Company (or the Compensation Committee thereof) at least annually while
Executive is employed hereunder.

     2.2 Bonus

     Executive shall be eligible to participate in the Company’s incentive bonus plan and in such
other executive bonus plans as may be adopted from time to time by the Board of Directors of the
Company (or the Compensation Committee thereof), subject to and in accordance with any applicable
eligibility requirements.

     2.3 Benefits

     Executive shall be eligible to participate, subject to and in accordance with applicable
eligibility requirements, in such benefit programs as are generally provided to the Company’s
executives, which shall include, at a minimum, basic health, dental and vision insurance.

     2.4 Vacation and Other Paid Time-Off Benefits

     Each calendar year, Executive shall be entitled to up to five (5) weeks’ paid vacation or the
amount of paid vacation provided under the Company vacation policy, whichever is longer. Vacation
will be scheduled by mutual agreement and otherwise governed by the terms of such policy except as
stated herein. Executive will also be provided such holidays and sick leave as the Company makes
available to all of its other employees. Notwithstanding any other policy or practice, Executive’s
unused vacation days shall expire at the end of each calendar year and upon the termination of
Executive’s employment with the Company.

     2.5 Business Expenses

     Executive shall be reimbursed for all reasonable out-of-pocket expenses actually incurred by
Executive in the conduct of the business of the Company, provided that Executive submits
substantiation of all such expenses to the Company on a timely basis in accordance with standard
policies of the Company.

3. TERMINATION

     3.1 Employment At Will

     Executive acknowledges and understands that employment with the Company is at will and can be
terminated by either party for no reason or for any reason not otherwise specifically prohibited by
law or provided for in this Agreement. Nothing in this Agreement is intended to alter Executive’s
at-will employment status or obligate the Company to continue to employ Executive for any specific
period of time, or in any specific role or geographic location. Either the Company or Executive
may terminate this agreement at any time for any reason, with or without notice. Except as
expressly provided for in this Agreement, upon any termination of employment, Executive shall not
be entitled
to receive any payments or benefits under this Agreement other than any unpaid Salary earned

3

 

through the date of termination. Such amounts shall be paid in a lump sum on the next regularly
scheduled payroll date following the date on which Executive’s employment terminated.

     3.2 Automatic Termination on Death or Total Disability

     This Agreement and Executive’s employment hereunder shall terminate automatically upon the
death or Total Disability of Executive. “Total Disability” shall mean Executive’s
inability, with reasonable accommodation, to perform the duties of his position for a period or
periods aggregating ninety (90) calendar days in any period of one hundred eighty days (180)
consecutive days as a result of physical or mental illness, loss of legal capacity or any other
cause beyond Executive’s control. Executive and the Company hereby acknowledge that Executive’s
ability to perform the duties specified in Section 1 is the essence of this Agreement. Termination
hereunder shall be deemed to be effective (a) at the end of the calendar month in which Executive’s
death occurs or (b) immediately upon a determination by the Board of Directors of the Company (or
the Compensation Committee thereof) of Executive’s Total Disability. In the case of termination of
employment under this Section 3.2, Executive shall not be entitled to receive any payments or
benefits under this Agreement other than any unpaid Salary, which shall be paid in a lump sum on
the next regularly scheduled payroll date following the date on which Executive’s employment
terminated.

     3.3 Termination Without Cause or for Good Reason, Other Than in Connection with a Change of Control

     If (a) the Company terminates Executive’s employment without Cause (as defined below), or
(b) Executive resigns for Good Reason (as defined below), then Executive shall be entitled to
receive the following termination payments, except that this Section 3.3 shall not apply to, and
shall have no effect in connection with, any termination to which Section 3.2 or Section 3.4 of
this Agreement applies:

     (1) An amount totaling [INSERT SEVERANCE PAYMENT PERIOD – 18, 12, 9] months’ Salary,
at the rate in effect immediately prior to termination, to be paid to Executive in
accordance with the terms below (“Severance Payments”).

     (2) Company-paid premiums for Executive and Executive’s spouse’s and dependents’
continuing health insurance coverage under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, (“COBRA”), for the shorter of (i) [INSERT BENEFITS PERIOD
– 18, 12, 9] months; (ii) until such date as Executive is no longer entitled to COBRA
continuation coverage under the Company’s group health plan(s); or (iii) until such date as
Executive obtains health coverage through another employer, provided that such benefits
will be provided only if, as a result of Executive’s termination without Cause or
resignation for Good Reason, Executive is eligible for and timely (and properly) elects
COBRA continuation coverage for Executive under the Company’s group health plan(s).

     (3) Unpaid Salary, paid in a lump sum on the next regularly scheduled payroll date
following the date on which Executive’s employment terminated.

     (4) Executive’s earned and unpaid bonuses for the year in which Executive’s employment
terminates, calculated according to the bonus plan criteria in place for that year, but
pro-rated through the date of termination. Such bonus, if any, shall
be paid in a lump-sum payment on the date such bonuses are paid to eligible employees; provided that
such

4

 

payment shall be paid no later than the 15th day of the third calendar month following
the end of the calendar year in which Executive’s employment terminated.

     The Severance Payments, bonus equivalent and benefits described above are expressly contingent
upon Executive’s signing upon termination a full release in a form acceptable to the Company, and
are further contingent upon Executive’s full and continued compliance with the terms of Section 4
of this Agreement. Severance Payments shall be paid to Executive through the Company’s or
Successor Employer’s normally scheduled payroll during the [INSERT SEVERANCE PAYMENT PERIOD – 18,
12, 9] month period immediately following the date on which Executive’s employment was terminated
without Cause or Executive resigned for Good Reason. Each such installment payment shall be
treated as a separate payment for purposes of Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”).

     3.4 Termination in Connection with a Change of Control

	 	3.4.1	 	Severance Benefits for Qualified Terminations in Connection with a Change of Control

     If (a) during the period commencing on the date the Company enters into a definitive agreement
with respect to a transaction that would constitute a Change of Control (as defined below) and
ending on the date the definitive agreement therefor is terminated or the Change of Control is
consummated, the Company terminates Executive’s employment without Cause (as defined below), (b)
during the period commencing upon the consummation of the Change of Control and ending twenty-four
(24) months thereafter, the Company or, if applicable, the surviving or successor employer
(“Successor Employer”) terminates Executive’s employment without Cause (as defined below),
or (c) during the period commencing upon the consummation of the Change of Control and ending
twenty-four (24) months thereafter, Executive resigns for Good Reason (as defined below), then
Executive shall be entitled to receive the following payments and benefits:

     (1) An amount equal to [INSERT SEVERANCE PAYMENT PERIOD – 24, 18, 12] months’ Salary
(measured as the higher of the Salary in effect immediately prior to the Change of Control
or the Salary in effect immediately prior to termination) plus [INSERT BONUS PAYMENT
PERCENTAGE – 200, 150, 100]% of Executive’s Target Bonus for the year in which termination
occurs, paid to Executive in accordance with the terms below (“CIC Severance
Payments”).

     (2) Company-paid premiums for Executive and Executive’s spouse’s and dependents’
continuing health insurance coverage under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, (“COBRA”), for the shorter of (i) [INSERT BENEFITS PERIOD
– 24, 18, 12] months; (ii) until such date as Executive is no longer entitled to COBRA
continuation coverage under the Company’s group health plan(s); or (iii) until such date as
Executive obtains health coverage through another employer, provided that such benefits
will be provided only if, as a result of Executive’s termination without Cause or
resignation for Good Reason, Executive is eligible for and timely (and properly) elects
COBRA continuation coverage for Executive under the Company’s group health plan(s).

     (3) Unpaid Salary as of the date Executive’s employment terminates, paid in a lump sum
on the next regularly scheduled payroll date following the date on which Executive’s
employment terminated.

5

 

     (4) Executive’s earned and unpaid bonuses for the year in which Executive’s employment
terminates, calculated according to the bonus plan criteria in place for that year, but
pro-rated through the date of termination. Such bonus, if any, shall be paid in a lump-sum
payment on the date such bonuses are paid to eligible employees; provided that such payment
shall be paid no later than the 15th day of the third calendar month following the end of
the calendar year in which Executive’s employment terminated.

     (5) Accelerated vesting of one hundred percent (100%) of (A) Executive’s then unvested
options to purchase shares of the Company’s common stock or the options to purchase common
stock of the Successor Employer issued in substitution therefor in connection with the
Change of Control, (B) any restricted stock units, or (C) other similar stock-based awards.

     The CIC Severance Payments, bonus equivalent and benefits described above are expressly
contingent upon Executive’s signing upon termination a full release in a form acceptable to the
Company and/or a Successor Employer, as applicable, and are further contingent upon Executive’s
full and continued compliance with the terms of Section 4 of this Agreement. CIC Severance
Payments shall be paid to Executive through the Company’s or Successor Employer’s normally
scheduled payroll during the [INSERT SEVERANCE PAYMENT PERIOD – 24, 18, 12] month period
immediately following the date on which Executive’s employment was terminated without Cause or
Executive resigned for Good Reason. Each such installment payment shall be treated as a separate
payment for purposes of Code Section 409A.

	 	3.4.2	 	Change of Control

     For purposes of this Agreement, “Change of Control” means:

     (a) a merger or consolidation of the Company with or into any other company, entity or
person;

     (b) a sale, lease, exchange or other transfer, in one transaction or a series of
transactions undertaken with a common purpose, of all or substantially all of the Company’s
then outstanding securities or all or substantially all of the Company’s assets;

     (c) the purchase of a significant portion of the Company’s common stock without
approval of a majority of the Company’s incumbent directors; or

     (d) a successful proxy contest, which is stated in terms of the Board of Directors
becoming composed of a majority of persons that are not incumbent directors (or appointed
or nominated by incumbent directors)..

     Notwithstanding the foregoing, a Change of Control shall not include a Related Party
Transaction. A “Related Party Transaction” means:

     (a) a merger or consolidation of the Company in which the holders of the outstanding
voting securities of the Company outstanding immediately prior to the merger or
consolidation hold at least a majority of the outstanding voting securities of the
surviving or successor entity immediately after the merger or consolidation;

6

 

     (b) a sale, lease, exchange or other transfer of the Company’s assets to a
majority-owned subsidiary company;

     (c) a transaction undertaken for the principal purpose of restructuring the capital of
the Company, including but not limited to reincorporating the Company in a different
jurisdiction; or

     (d) a corporate dissolution or liquidation.

	           3.4.3	 	Code Section 280G

     (a) Notwithstanding anything in this Agreement to the contrary, in the event that
Executive becomes entitled to receive or receives any payment or benefit under this
Agreement or under any other plan, agreement or arrangement with the Company, any person
whose actions result in a Change of Control or any person affiliated with the Company or
such person (all such payments and benefits being referred to herein as the “Total
Payments”) and it is determined that any of the Total Payments will be subject to any
excise tax pursuant to Code Section 4999, or any similar or successor provision
(the “Excise Tax”), the Company shall pay to Executive either (i) the full amount of the
Total Payments or (ii) an amount equal to the Total Payments, reduced by the minimum amount
necessary to prevent any portion of the Total Payments from being an “excess parachute
payment” (within the meaning of Code Section 280G) (the
“Capped Payments”), whichever of the foregoing amounts results in the receipt by Executive,
on an after-tax basis, of the greatest amount of Total Payments notwithstanding
that all or some portion of the Total Payments may be subject to the Excise Tax. For
purposes of determining whether Executive would receive a greater after-tax benefit from
the Capped Payments than from receipt of the full amount of the Total Payments,
(i) there shall be taken into account any Excise Tax and all applicable federal,
state and local taxes required to be paid by Executive in respect of the receipt of such
payments and (ii) such payments shall be deemed to be subject to federal income taxes at
the highest rate of federal income taxation applicable to individuals that is in effect for
the calendar year in which the effective date of the Change in Control occurs, and state
and local income taxes at the highest rate of taxation applicable to individuals in the
state and locality of Executive’s residence on the effective date of the Change in Control,
net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes (as determined by assuming that such deduction
is subject to the maximum limitation applicable to itemized deductions under Code Section
68 and any other limitations applicable to the deduction of state and local income taxes
under the Code).

     (b) All computations and determinations called for by this Section 3.4.3 shall be made
by a reputable independent public accounting firm or independent tax counsel appointed by
the Company (the “Firm”). All determinations made by the Firm under this Section 3.4.3
shall be conclusive and binding on both the Company and Executive, and the Firm shall
provide its determinations and any supporting calculations to the
Company and Executive within ten (10) business days after Executive’s employment terminates under
any of the circumstances described in Section 3.4.1, or such earlier time as is requested
by the Company. For purposes of making its determinations under this Section 3.4.3, the
Firm may rely on reasonable, good faith interpretations concerning the application of Code
Sections 280G and 4999. The Company and Executive shall furnish to the Firm such
information and

7

 

documents as the Firm may reasonably request in making its determinations.
The Company shall bear all fees and expenses charged by the Firm in connection with its
services.

     (c) In the event that Section 3.4.3(a) applies and a reduction is required to be
applied to the Total Payments thereunder, the Total Payments shall be reduced by the
Company in its reasonable discretion in the following order: (i) reduction of any Total
Payments that are subject to Code Section 409A on a pro-rata basis or such other manner
that complies with Code Section 409A, as determined by the Company, and (ii) reduction of
any Total Payments that are exempt from Code Section 409A.

     3.5 Definitions of “Cause” and “Good Reason”

	          3.5.1	 	Cause

     Wherever reference is made in this Agreement to termination being with or without Cause,
"Cause” shall mean the occurrence of one or more of the following events:

     (a) willful misconduct, insubordination or dishonesty in the performance of
Executive’s duties or a knowing and material violation of the Company’s or the Successor
Employer’s policies and procedures in effect from time to time which results in a material
adverse effect on the Company or the Successor Employer;

     (b) the continued failure of Executive to satisfactorily perform his duties after
receipt of written notice that identifies the areas in which Executive’s performance is
deficient;

     (c) willful actions in bad faith or intentional failures to act in good faith by
Executive with respect to the Company or the Successor Employer that materially impair the
Company’s or the Successor Employer’s business, goodwill or reputation;

     (d) conviction of Executive of a felony or misdemeanor, conduct by Executive that the
Company reasonably believes violates any statute, rule or regulation governing the Company,
or conduct by Executive that the Company reasonably believes constitutes unethical
practices, dishonesty or disloyalty and that results in a material adverse effect on the
Company or the Successor Employer;

     (e) current use by Executive of illegal substances;

     (f) any material violation by Executive of the Confidentiality Agreement; or

     (g) solely for purposes of a termination without Cause to which Section 3.3 applies,
the Company fails as a business enterprise, as evidenced by the Company’s (i) voluntary or
involuntary entry into bankruptcy proceedings or (ii) winding up its affairs
because in the judgment of the Board of Directors of the Company the Company is no
longer economically viable.

	 	3.5.2	 	Good Reason

     For the purposes of this Agreement, “Good Reason” shall mean that Executive, without his or
her consent, has:

8

 

     (a) incurred a material reduction in title, status, authority or responsibility at the
Company or the Successor Employer (relative to title, status, authority or responsibility
immediately prior to the Change of Control);

     (b) incurred a material reduction in Executive’s annual Salary or bonus opportunity;
or material adverse modifications to the stock option awarded to Executive, or the Stock
Plan (or any similar stock option plan);

     (c) suffered a material breach of this Agreement by the Company or the Successor
Employer; or

     (d) been required to relocate or travel more than fifty (50) miles from his then
current place of employment in order to continue to perform the duties and responsibilities
of his/her position (not including customary travel as may be required by the nature of
his/her position).

     Notwithstanding the foregoing, termination of employment by Executive will not be for Good
Reason unless (x) Executive notifies the Company in writing of the existence of the condition which
Executive believes constitutes Good Reason within thirty (30) days of the initial existence of such
condition (which notice specifically identifies such condition), (y) the Company fails to remedy
such condition within thirty (30) days after the date on which it receives such notice (the
“Remedial Period”), and (z) Executive actually terminates employment within thirty (30)
days after the expiration of the Remedial Period and before the Company remedies such condition.
If Executive terminates employment before the expiration of the Remedial Period or after the
Company remedies the condition (even if after the end of the Remedial Period), then Executive’s
termination will not be considered to be for Good Reason.

4. CONFIDENTIALITY; NON-SOLICITATION; NON-COMPETITION

     4.1 Confidentiality Agreement

     Executive recognizes that the Company’s business and continued success depend upon the use and
protection of confidential information and proprietary information, and therefore Executive is
subject to, and this Agreement is conditioned on agreement to, the terms of the non-disclosure
agreement (the “Confidentiality Agreement”) entered into by Executive and the terms of the
Confidentiality Agreement shall survive the termination of Executive’s employment with the Company
or Successor Employer.

     4.2 Non-Solicitation Agreement

     (a) During Executive’s employment with the Company and/or a Successor Employer and for one
year after the termination of such employment, Executive will not induce, or attempt to induce, any
employee or independent contractor of the Company and/or a Successor Employer to cease such
employment or relationship to engage in, be employed by, perform services for, participate in the
ownership, management, control or operation of, or otherwise be connected with, either directly or
indirectly, any Competing Business (defined below).

     (b) During Executive’s employment with the Company and/or a Successor Employer and for one
year after the termination of such employment, Executive will not, directly or indirectly
(i) solicit, divert, appropriate to or accept on behalf of any Competing Business, or (ii) attempt
to

9

 

solicit, divert, appropriate to or accept on behalf of any Competing Business, any business from
any customer or actively sought prospective customer of the Company with whom Executive has dealt,
whose dealings with the Company have been supervised by Executive or about whom Executive has
acquired confidential information in the course of his employment.

     4.3 Non-Competition Agreement

     During Executive’s employment with the Company and/or a Successor Employer and for one year
after the termination of such employment, Executive will not engage in, be employed by, perform
services for, participate in the ownership, management, control or operation of, or otherwise be
connected with, either directly or indirectly, any Competing Business. For purposes of this
Section 4.3, Executive will not be considered to be connected with any Competing Business solely on
account of ownership of less than five percent of the outstanding capital stock or other equity
interests in any Competing Business. Executive agrees that this restriction is reasonable, but
further agrees that should a court exercising jurisdiction with respect to this Agreement find any
such restriction invalid or unenforceable due to unreasonableness, either in period of time,
geographical area, or otherwise, then in that event, such restriction is to be interpreted and
enforced to the maximum extent which such court deems reasonable.

     4.4 Competing Business

     “Competing Business” means any business whose efforts are in competition with the efforts of
the Company. A Competing Business includes any business whose efforts involve any research and
development, products or services in competition with products or services which are, during and at
the end of Executive’s employment with the Company and/or a Successor Employer, (a) produced,
marketed or otherwise commercially exploited by the Company and/or a Successor Employer, or (b) in
actual research or development by the Company and/or a Successor Employer, or (c) planned for
future research and development by the Company and/or a Successor Employer, as demonstrated by
objective evidence, such as budget allocations, work assignments, hiring decisions, planning
documents, or other similar documentation.

5. ASSIGNMENT

     This Agreement is personal to Executive and shall not be assignable by Executive. The Company
may assign its rights hereunder to (a) any Successor Employer; (b) any other corporation resulting
from any merger, consolidation or other reorganization to which the Company is a party; (c) any
other corporation, partnership, association or other person to which the Company may transfer
all or substantially all of the assets and business of the Company existing at such time; or
(d) any subsidiary, parent or other affiliate of the Company. All of the terms and provisions of
this Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted assigns.

6. AMENDMENTS IN WRITING

     No amendment, modification, waiver, termination or discharge of any provision of this
Agreement, or consent to any departure therefrom by either party hereto, shall in any event be
effective unless the same shall be in writing, specifically identifying this Agreement and the
provision intended to be amended, modified, waived, terminated or discharged and signed by the
Company and Executive, and each such amendment, modification, waiver, termination or discharge
shall be effective only in the specific instance and for the specific purpose for which given. No
provision of

10

 

this Agreement shall be varied, contradicted or explained by any oral agreement,
course of dealing or performance or any other matter not set forth in an agreement in writing and
signed by the Company and Executive.

7. APPLICABLE LAW

     This Agreement shall in all respects, including all matters of construction, validity and
performance, be governed by, and construed and enforced in accordance with, the laws of the State
of Washington, without regard to any rules governing conflicts of laws.

8. ENTIRE AGREEMENT

     This Agreement, on and as of the date hereof, constitutes the entire agreement between the
Company and Executive with respect to the subject matter hereof, and all prior or contemporaneous
oral or written communications, understandings or agreements between the Company and Executive with
respect to such subject matter are hereby superseded.

9. SEVERABILITY

     If any provision of this Agreement is held to be invalid, illegal or unenforceable in any
respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement or any action in any other
jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as
if such invalid, illegal or unenforceable provision had never been contained herein.

10. CODE SECTION 409A

     With respect to any payments or benefits hereunder that are subject to Code Section 409A and
any official guidance and regulations issued thereunder (together “Code Section 409A”) and
that are payable on account of Executive’s termination of employment, such payments shall only be
made if such termination of employment constitutes a “separation from service” within the meaning
of Code Section 409A. Notwithstanding anything to the contrary contained in this Agreement, all
reimbursements for costs and expenses under this Agreement will be paid in no event later than the
end of the calendar year following the calendar year in which Executive incurs such expense. With
regard to any provision herein that provides for reimbursement of costs and expenses or in-kind
benefits, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind
benefits shall not be subject to liquidation or exchange for another benefit, and (ii) the
amount of expenses eligible for reimbursements or in-kind benefits provided during any taxable year
shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any
other taxable year.

     The Company makes no representations or warranties to Executive with respect to any tax,
economic or legal consequences of this Agreement or any payments or other benefits provided
hereunder, including without limitation under Code Section 409A, and no provision of the Agreement
shall be interpreted or construed to transfer any liability for failure to comply with Code
Section 409A from Executive or any other individual to the Company or any of its affiliates.
Executive, by executing this Agreement, shall be deemed to have waived any claim against the
Company and its affiliates with respect to any such tax, economic or legal consequences. However,
the parties intend that this Agreement and the payments and other benefits provided hereunder be
exempt from the requirements of Code Section 409A to the maximum extent possible, whether pursuant
to the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4),

11

 

the
involuntary separation pay plan exception described in Treasury Regulation Section
1.409A-1(b)(9)(iii), or otherwise. To the extent Code Section 409A is applicable to this Agreement
(and such payments and benefits), the parties intend that this Agreement (and such payments and
benefits) comply with the deferral, payout and other limitations and restrictions imposed under
Code Section 409A. Notwithstanding any other provision of this Agreement to the contrary, this
Agreement shall be interpreted, operated and administered in a manner consistent with such
intentions. In addition, if Executive is a “specified employee,” within the meaning of Code
Section 409A, then to the extent necessary to avoid subjecting Executive to the imposition of any
additional tax under Code Section 409A, amounts that would otherwise be payable under this
Agreement during the six (6) month period immediately following Executive’s “separation from
service” for reasons other than Executive’s death shall not be paid to Executive during such
period, but shall instead be accumulated and paid to Executive in a lump sum on the first business
day after the earlier of the date that is six (6) months following Executive’s separation from
service.

     IN WITNESS WHEREOF, the parties have executed and entered into this Agreement effective on the
date first set forth above.

	 	 	 	 	 
	 

	 	EXECUTIVE	 	 
	 
	 
	 	 	 	 
	 

	 	 

	 	 
	 

	 	Date	 	 

	 	 	 	 	 	 	 
	 	 	CARDIAC SCIENCE CORPORATION
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Its	 	 	 	 
	 

	 	 	 	 

	 	 

Date 

12

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