-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RlAXC3CIt/PVCQ9yh5Wsqmjhp+GiYmzdjhObV1p5XbxCThcnAO06sJIpVN7Fwbc5 mH8YeD8DjXaSha6MMqw3vw== 0000950142-05-002480.txt : 20050912 0000950142-05-002480.hdr.sgml : 20050912 20050912163208 ACCESSION NUMBER: 0000950142-05-002480 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20050912 DATE AS OF CHANGE: 20050912 GROUP MEMBERS: CARDIAC SCIENCE CO-INVESTMENT, LP GROUP MEMBERS: FRANK H. PEARL GROUP MEMBERS: PERSEUS ACQUISITION/RECAPITALIZATION FUND, LLC GROUP MEMBERS: PERSEUS ACQUISITION/RECAPITALIZATION MANAGEMENT, LLC GROUP MEMBERS: PERSEUS MARKET OPPORTUNITY FUND, LP GROUP MEMBERS: PERSEUS MARKET OPPORTUNITY PARTNERS GP, LLC GROUP MEMBERS: PERSEUS MARKET OPPORTUNITY PARTNERS, LP GROUP MEMBERS: PERSEUS, LLC GROUP MEMBERS: PERSEUSPUR, L.L.C. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: Cardiac Science CORP CENTRAL INDEX KEY: 0001323115 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 943300396 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-80975 FILM NUMBER: 051080266 BUSINESS ADDRESS: STREET 1: 3303 MONTE VILLA PARKWAY CITY: BOTHELL STATE: WA ZIP: 98021 BUSINESS PHONE: 425-402-2206 MAIL ADDRESS: STREET 1: 3303 MONTE VILLA PARKWAY CITY: BOTHELL STATE: WA ZIP: 98021 FORMER COMPANY: FORMER CONFORMED NAME: CSQ Holding CO DATE OF NAME CHANGE: 20050407 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PEARL FRANK H CENTRAL INDEX KEY: 0000927752 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 2099 PENNSYLVANIA AVENUE NW STREET 2: SUITE 900 CITY: WASHINGTON STATE: DC ZIP: 20006 BUSINESS PHONE: 2024520101 MAIL ADDRESS: STREET 1: 2099 PENNSYLVANIA AVENUE NW STREET 2: SUITE 900 CITY: WASHINGTON STATE: DC ZIP: 20003 SC 13D 1 sc13d-cardiaccorp.txt CARDIAC SCIENCE CORPORATION UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. ___) CARDIAC SCIENCE CORPORATION (Name of Issuer) Common Stock, par value $.001 per share (Title of Class of Securities) 14141A108 (CUSIP Number) Rodd Macklin Perseus Acquisition/Recapitalization Fund, L.L.C. Perseus Market Opportunity Fund, L.P. Cardiac Science Co-Investment, L.P. 888 Seventh Avenue, 29th Floor New York, New York 10106 Tel. No.: (212) 651-6400 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) with a copy to Bruce A. Gutenplan, Esq. Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, New York 10019-6064 September 1, 2005 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject to this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box . *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes.) - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 2 of 34 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Perseus Acquisition/Recapitalization Fund, L.L.C. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,244,728 (1) NUMBER OF ---------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY ---------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 1,244,728 (1) PERSON ---------------------------------------- WITH 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,244,728 (1) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.6% (1) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS BEFORE FILLING OUT - ------------------ (1) Assuming complete exercise of the Perseus A/R Fund Warrants to purchase an aggregate of 5,447 shares of Common Stock. See Item 5 herein. - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 3 of 34 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Perseus Market Opportunity Fund, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,453,876 (1) NUMBER OF ---------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY ---------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 1,453,876 (1) PERSON ---------------------------------------- WITH 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,453,876 (1) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.5% (1) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS BEFORE FILLING OUT - ---------------- (1) Assuming complete exercise of the Perseus Market Opportunity Warrants to purchase an aggregate of 89,458 shares of Common Stock. See Item 5 herein. - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 4 of 34 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Cardiac Science Co-Investment, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 453,169 (1) NUMBER OF ---------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY ---------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 453,169 (1) PERSON ---------------------------------------- WITH 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 453,169 (1) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 2.0% (1) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS BEFORE FILLING OUT - ------------------- (1) Assuming complete exercise of the CS Co-Investment Warrants to purchase an aggregate of 1,983 shares of Common Stock. See Item 5 herein. - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 5 of 34 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Perseus Acquisition/Recapitalization Management, L.L.C. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,697,897 (1) NUMBER OF ---------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY ---------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 1,697,897 (1) PERSON ---------------------------------------- WITH 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,697,897 (1) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 7.6% (1) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS BEFORE FILLING OUT - ----------------- (1) Assuming complete exercise of each of (i) the Perseus A/R Fund Warrants and (ii) the CS Co-Investment Warrants, to purchase an aggregate of 7,430 shares of Common Stock. See Item 5 herein. - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 6 of 34 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Perseus Market Opportunity Partners, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,453,876 (1) NUMBER OF ---------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY ---------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 1,453,876 (1) PERSON ---------------------------------------- WITH 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,453,876 (1) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.5% (1) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS BEFORE FILLING OUT - ------------------ (1) Assuming complete exercise of the Perseus Market Opportunity Warrants to purchase an aggregate of 89,458 shares of Common Stock. See Item 5 herein. - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 7 of 34 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Perseus Market Opportunity Partners GP, L.L.C. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,453,876 (1) NUMBER OF ---------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY ---------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 1,453,876 (1) PERSON ---------------------------------------- WITH 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,453,876 (1) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.5% (1) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS BEFORE FILLING OUT - ------------------ (1) Assuming complete exercise of the Perseus Market Opportunity Warrants to purchase an aggregate of 89,458 shares of Common Stock. See Item 5 herein. - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 8 of 34 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Perseus, L.L.C. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 1,453,876 (1) ---------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES -0- BENEFICIALLY ---------------------------------------- OWNED BY 9 SOLE DISPOSITIVE POWER EACH 1,453,876 (1) REPORTING ---------------------------------------- PERSON 10 SHARED DISPOSITIVE POWER WITH -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,453,876 (1) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.5% (1) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS BEFORE FILLING OUT - ------------------ (1) Assuming complete exercise of the Perseus Market Opportunity Warrants to purchase an aggregate of 89,458 shares of Common Stock. See Item 5 herein. - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 9 of 34 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Perseuspur, L.L.C. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 3,151,773 (1) NUMBER OF ---------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY 0 OWNED BY ---------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 3,151,773 (1) PERSON ---------------------------------------- WITH 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,151,773 (1) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 14.1% (1) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* OO - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS BEFORE FILLING OUT - ---------------- (1) Assuming complete exercise of each of (i) the Perseus A/R Fund Warrants, (ii) the Perseus Market Opportunity Warrants and (iii) the CS Co-Investment Warrants, to purchase an aggregate of 96,888 shares of Common Stock. See Item 5 herein. - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 10 of 34 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON Frank H. Pearl (in the capacity described herein) - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 3,151,773 (1) NUMBER OF ---------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY 0 OWNED BY ---------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 3,151,773 (1) PERSON ---------------------------------------- WITH 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,151,773 (1) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 14.1% (1) - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- * SEE INSTRUCTIONS BEFORE FILLING OUT - ---------------- (1) Assuming complete exercise of each of (i) the Perseus A/R Fund Warrants, (ii) the Perseus Market Opportunity Warrants and (iii) the CS Co-Investment Warrants, to purchase an aggregate of 96,888 shares of Common Stock. See Item 5 herein. - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 11 of 34 - -------------------------------------------------------------------------------- ITEM 1. SECURITY AND ISSUER. This Statement on Schedule 13D relates to the common stock, par value $.001 per share (the "Common Stock"), of Cardiac Science Corporation, a Delaware corporation (the "Company"), whose principal executive office is located at 16931 Millikan Avenue, Irvine, California 92606. ITEM 2. IDENTITY AND BACKGROUND. (a), (b), (c) and (f). This Statement on Schedule 13D is being filed on behalf of each of the following persons (each a "Reporting Person" and collectively, the "Reporting Persons"): (i) Perseus Acquisition/Recapitalization Fund, L.L.C., a Delaware limited liability company ("Perseus A/R Fund"); (ii) Perseus Market Opportunity Fund, L.P., a Delaware limited partnership ("Perseus Market Opportunity"); (iii) Cardiac Science Co-Investment, L.P., a Delaware limited partnership ("CS Co-Investment" and together with Perseus A/R Fund and Perseus Market Opportunity, the "Purchasers"); (iv) Perseus Acquisition/Recapitalization Management, L.L.C., a Delaware limited liability company ("Perseus Management"); (v) Perseus Market Opportunity Partners, L.P., a Delaware limited partnership ("Perseus Partners"); (vi) Perseus Market Opportunity Partners GP, L.L.C., a Delaware limited liability company ("Perseus Partners GP"); (vii) Perseus, L.L.C., a Delaware limited liability company ("Perseus"); (viii) Perseuspur, L.L.C., a Delaware limited liability company ("Perseuspur"); and (ix) Frank H. Pearl ("Mr. Pearl"). The Purchasers were formed in order to engage in the acquiring, holding and disposing of investments in various companies. Set forth on Annexes A, B and C hereto and incorporated by reference in response to this Item 2 and elsewhere in this Schedule 13D as applicable is a list of executive officers of Perseus A/R Fund, Perseus Market Opportunity and CS Co-Investment, respectively. Perseus Partners is the general partner of Perseus Market Opportunity and was formed to act as the general partner of Perseus Market Opportunity. Set forth on Annex D hereto and incorporated by reference in response to this Item 2 and elsewhere in this Schedule 13D as applicable is a list of executive officers of Perseus Partners. Perseus Partners GP is the general partner of Perseus Partners and was formed to act as the general partner of Perseus Partners. Set forth on Annex E hereto and incorporated by reference in response to this Item 2 and elsewhere in this Schedule 13D as applicable is a list of executive officers of Perseus Partners GP. Perseus is the managing member of Perseus Partners GP and was formed to act as the managing member of Perseus - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 12 of 34 - -------------------------------------------------------------------------------- Partners GP. Set forth on Annex F hereto and incorporated by reference in response to this Item 2 and elsewhere in this Schedule 13D as applicable is a list of executive officers of Perseus. Perseuspur is the managing member of Perseus and was formed to act as the managing member of Perseus. Set forth on Annex G hereto and incorporated by reference in response to this Item 2 and elsewhere in this Schedule 13D as applicable is a list of executive officers of Perseuspur. Perseus Management is the managing member of the Perseus A/R Fund and the general partner of CS Co-Investment and was formed to act as the managing member and general partner of Perseus A/R Fund and CS Co-Investment, respectively. Set forth on Annex H hereto and incorporated by reference in response to this Item 2 and elsewhere in this Schedule 13D as applicable is a list of executive officers of Perseus Management. Perseuspur is the managing member of Perseus Management and was formed to act as the managing member of Perseus Management. Mr. Pearl is the Chairman, President, Chief Executive Officer and managing member of Perseuspur, and in such capacities, may be deemed a beneficial owner of the Common Stock held for the account of the Purchasers. Accordingly, pursuant to the regulations promulgated under Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Perseus Management, Perseus Partners, Perseus Partners GP, Perseus, Perseuspur and Mr. Pearl each may be deemed to be a beneficial owner of the Common Stock held for the account of the Purchasers. The address of the principal business and principal office of (i) Perseus Market Opportunity, (ii) CS Co-Investment, (iii) Perseus Partners, (iv) Perseus Partners GP, (v) Perseus A/R Fund, (vi) Perseus Management, (vii) Perseus, (vii) Perseuspur and (ix) Mr. Pearl is 2099 Pennsylvania Avenue, Suite 900, Washington, D.C. 20006-1813. The present principal occupation or employment of Mr. Pearl is as executive officer of Perseus and its related entities. Mr. Pearl is a United States citizen. (d) and (e). During the past five years, neither any Reporting Person nor, to the best knowledge of each Reporting Person, any individual otherwise identified in response to Item 2, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of which any such person was or is subject to a judgment, decree or final order enjoining future violations of, or - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 13 of 34 - -------------------------------------------------------------------------------- prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The Purchasers acquired, in the aggregate, 3,054,885 shares of Common Stock (the "Shares") and warrants to acquire 96,888 shares of Common Stock (the "Warrants" and, together with the Shares, the "Securities"), as a result of the cancellation, exchange and/or conversion of the aggregate principal amount of $50,000,00 of senior notes (the "Senior Notes"), 2,109,705 shares of common stock and warrants to purchase 14,407,481 shares of common stock of the predecessor of the Company, Cardiac Science, Inc., a Delaware corporation (the "Predecessor"), owned by the Purchasers, as discussed in Item 4 below. The Purchasers received the Securities in connection with the merger of the Predecessor into the Company (the "Merger") and certain related transactions. The source of the purchase price of the Purchasers interest in the Predecessor was capital contributions from the partners and members of the Purchasers. ITEM 4. PURPOSE OF TRANSACTION. Except as disclosed herein, the Reporting Persons have acquired the Securities for investment purposes. TERMS OF THE SENIOR NOTE AND WARRANT CONVERSION AGREEMENT Pursuant to the Senior Note and Warrant Conversion Agreement, dated February 28, 2005 (the "Conversion Agreement"), by and among the Predecessor, the Company and the Purchasers, the Purchasers agreed that, concurrently with the effective time of the Merger, September 1, 2005 (the "Effective Time"), the Senior Notes in the aggregate principal amount of $50,000,00 and warrants to purchase an aggregate of 13,438,599 shares of Predecessor common stock (the "Conversion Warrants") beneficially owned by the Purchasers were cancelled and terminated. In consideration thereof, concurrently with the Effective Time, the Purchasers received the following consideration (the "Consideration"): (i) an aggregate of $20,000,000, payable by the Company in cash, and (ii) 2,843,915 shares of Common Stock. The Conversion Agreement also provides that so long as the Purchasers continue to beneficially own at least 10% of the Company's outstanding capital stock, the Purchasers shall have the right, but not the obligation, to designate one director (the "Purchaser Designee") for election to the Company's board of directors and the Company shall cause such Purchaser Designee to be nominated for election at any - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 14 of 34 - -------------------------------------------------------------------------------- meeting of stockholders at which directors in the class of which such Purchaser Designee is a member are being voted upon. The initial Purchaser Designee is Ray E. Newton, III, an affiliate of Perseus. Pursuant to the Conversion Agreement, certain agreements among the Purchasers and the Predecessor were terminated as of the Effective Time. The foregoing summary of the Conversion Agreement is qualified in its entirety by Exhibit 2. Terms of the Warrants In connection with the Merger, Warrants to purchase 84,388 shares of Common Stock previously issued to Perseus Market Opportunity were assumed by the Company. Such Warrants have a $25.00 per share exercise price and expire on May 30, 2009. In connection with the Merger, Warrants to purchase 1,089 shares of Common Stock previously issued to Perseus A/R Fund, Warrants to purchase 1,014 shares of Common Stock previously issued to Perseus Market Opportunity and Warrants to purchase 397 shares of Common Stock previously issued to CS Co-Investment were, in each case, assumed by the Company. Such Warrants have a $17.50 per share exercise price and expire on October 24, 2012. In connection with the Merger, Warrants to purchase 4,358 shares of Common Stock previously issued to Perseus A/R Fund, Warrants to purchase 4,056 shares of Common Stock previously issued to Perseus Market Opportunity and Warrants to purchase 1,586 shares of Common Stock previously issued to CS Co-Investment were, in each case, assumed by the Company. Such Warrants have a $46.10 per share exercise price and expire on September 17, 2013. In each case, the Warrants previously issued were issued by the Predecessor and the exercise prices and the number of shares issuable upon exercise of the Warrants were adjusted in accordance with the terms of the Merger. The exercise prices and the number of shares issuable upon exercise of the Warrants will be subject to adjustment upon the occurrence of certain events as set forth in the Warrants. The foregoing summary of the Warrants is qualified in its entirety by Exhibit 3. TERMS OF THE SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT Concurrently with the execution of the Conversion Agreement, the Predecessor and the Purchasers also entered into an Second Amended and Restated Registration Rights Agreement, dated as of February 28, 2005 (the "Second Amended and Restated Registration Rights Agreement"), pursuant to which - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 15 of 34 - -------------------------------------------------------------------------------- the parties agreed to amend and restate the their existing registration rights agreement, effective at the Effective Time, at which time the Company assumed the rights and obligations of the Predecessor under the Second Amended and Restated Registration Rights Agreement. Pursuant to the Second Amended and Restated Registration Rights Agreement, among other things, the Company will use its best efforts to file with the Securities and Exchange Commission (the "Commission"), within 90 days of the Effective Time, a shelf registration statement pursuant to Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), with respect to the resale, from time to time, of all of the shares of Common Stock held by the Purchasers (as well as certain other persons). The foregoing summary of the Second Amended and Restated Registration Rights Agreement is qualified in its entirety by Exhibit 4. ADDITIONAL DISCLOSURE The Reporting Persons may from time to time acquire additional shares of Common Stock in the open market or in privately negotiated transactions, subject to availability of Common Stock at prices deemed favorable, the Company's business or financial condition and other factors and conditions the Reporting Persons deem appropriate. Alternatively, the Reporting Persons may sell all or a portion of their Common Stock, the Warrants or Common Stock issued upon exercise of the Warrants in privately negotiated transactions, in the open market pursuant to the exercise of certain registration rights granted pursuant to the Second Amended and Restated Registration Rights Agreement as described above or through an exemption from registration in compliance with applicable law, in each case, subject to the factors and conditions referred to above and to the terms of the Conversion Agreement, the Warrants and the Second Amended and Restated Registration Rights Agreement, as the case may be. In addition, the Reporting Persons may formulate other purposes, plans or proposals regarding the Company or any of its securities to the extent deemed advisable in light of general investment and trading policies, market conditions or other factors. Except as described in the Conversion Agreement, the Warrants or the Second Amended and Restated Registration Rights Agreement, and as otherwise set forth in this Schedule 13D, no Reporting Person or any individual otherwise identified in Item 2 has any present plans or proposals which relate to or would result in: (a) the acquisition by any person of additional securities of the Company, or the disposition of securities of the Company; (b) an extraordinary corporate transaction, such as a merger, reorganization - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 16 of 34 - -------------------------------------------------------------------------------- or liquidation, involving the Company or any of its subsidiaries; (c) a sale or transfer or a material amount of assets of the Company or of any of its subsidiaries; (d) any change in the present board of directors or management of the Company, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (e) any material change in the present capitalization or dividend policy of the Company; (f) any other material change in the Company's business or corporate structure; (g) changes in the Company's charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any person; (h) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter dealer quotation system of a registered national securities association; (i) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) any action similar to any of those enumerated above. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) On September 1, 2005, the Company issued to Perseus A/R Fund, and Perseus A/R Fund acquired, 1,239,281 shares of Common Stock and Warrants to acquire 5,447 shares of Common Stock (the "Perseus A/R Fund Warrants"). Accordingly, as of the date hereof and giving effect to the exercise of the Perseus A/R Fund Warrants, Perseus A/R Fund may be deemed to beneficially own 1,244,728 shares of Common Stock which, based on calculations made in accordance with Rule 13d-3(d) and there being 22,307,645 shares of Common Stock outstanding as of September 1, 2005, represents approximately 5.6% of the outstanding shares of Common Stock on a diluted basis in accordance with Rule 13d-3(d). On September 1, 2005, the Company issued to Perseus Market Opportunity, and Perseus Market Opportunity acquired, 1,364,418 shares of Common Stock and Warrants to acquire 89,458 shares of Common Stock (the "Perseus Market Opportunity Warrants"). Accordingly, as of the date hereof and giving effect to the exercise of the Perseus Market Opportunity Warrants, Perseus Market Opportunity may be deemed to beneficially own 1,453,876 shares of Common Stock which, based on calculations made in accordance with Rule 13d-3(d) and there being 22,307,645 shares of Common Stock outstanding as of September 1, 2005, represents approximately 6.5% of the outstanding shares of Common Stock on a diluted basis in accordance with Rule 13d-3(d). On September 1, 2005, the Company issued to CS Co-Investment, and CS Co-Investment acquired, 451,186 shares of Common Stock and Warrants to acquire - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 17 of 34 - -------------------------------------------------------------------------------- 1,983 shares of Common Stock (the "CS Co-Investment Warrants"). Accordingly, as of the date hereof and giving effect to the exercise of the CS Co-Investment Warrants, CS Co-Investment may be deemed to beneficially own 453,169 shares of Common Stock which, based on calculations made in accordance with Rule 13d-3(d) and there being 22,307,645 shares of Common Stock outstanding as of September 1, 2005, represents approximately 2.0% of the outstanding shares of Common Stock on a diluted basis in accordance with Rule 13d-3(d). By virtue of the relationships between and among the Reporting Persons described in Item 2 of this Statement on Schedule 13D, as of the date hereof and giving effect to the exercise of the Perseus Market Opportunity Warrants, each of (i) Perseus Partners, (ii) Perseus Partners GP and (iii) Perseus may be deemed to beneficially own 1,453,876 shares of Common Stock which, based on calculations made in accordance with Rule 13d-3(d) and there being 22,307,645 shares of Common Stock outstanding as of September 1, 2005, represents approximately 6.5% of the outstanding shares of Common Stock on a diluted basis in accordance with Rule 13d-3(d). By virtue of the relationships between and among the Reporting Persons described in Item 2 of this Statement on Schedule 13D, as of the date hereof and giving effect to the exercise of the (y) Perseus A/R Fund Warrants and (z) CS Co-Investment Warrants, Perseus Management may be deemed to beneficially own 1,697,897 shares of Common Stock which, based on calculations made in accordance with Rule 13d-3(d) and there being 22,307,645 shares of Common Stock outstanding as of September 1, 2005, represents approximately 7.6% of the outstanding shares of Common Stock on a diluted basis in accordance with Rule 13d-3(d). By virtue of the relationships between and among the Reporting Persons described in Item 2 of this Statement on Schedule 13D, as of the date hereof and giving effect to the exercise of the (x) Perseus A/R Fund Warrants, (y) Perseus Market Opportunity Warrants and (z) CS Co-Investment Warrants, each of (i) Mr. Pearl and (ii) Perseuspur may be deemed to beneficially own 3,151,773 shares of Common Stock which, based on calculations made in accordance with Rule 13d-3(d) and there being 22,307,645 shares of Common Stock outstanding as of September 1, 2005, represents approximately 14.1% of the outstanding shares of Common Stock on a diluted basis in accordance with Rule 13d-3(d). - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 18 of 34 - -------------------------------------------------------------------------------- (b) By virtue of the relationships between and among the Reporting Persons described in Item 2 of this Statement on Schedule 13D, Perseus A/R Fund may be deemed to have the sole power to direct the voting and disposition of the 1,244,728 shares of Common Stock beneficially owned by Perseus A/R Fund. By virtue of the relationships between and among the Reporting Persons described in Item 2 of this Statement on Schedule 13D, CS Co-Investment may be deemed to have the sole power to direct the voting and disposition of the 453,169 shares of Common Stock beneficially owned by CS Co-Investment. By virtue of the relationships between and among the Reporting Persons described in Item 2 of this Statement on Schedule 13D, Perseus Management may be deemed to have the sole power to direct the voting and disposition of the 1,697,897 shares of Common Stock beneficially owned by each of (i) Perseus A/R Fund and (ii) CS Co-Investment. By virtue of the relationships between and among the Reporting Persons described in Item 2 of this Statement on Schedule 13D, each of (i) Perseus Market Opportunity, (ii) Perseus Partners and (iii) Perseus Partners GP may be deemed to have the sole power to direct the voting and disposition of the 1,453,876 shares of Common Stock beneficially owned by Perseus Market Opportunity. By virtue of the relationships between and among the Reporting Persons described in Item 2 of this Statement on Schedule 13D, each of (i) Mr. Pearl and (ii) Perseuspur may be deemed to have the sole power to direct the voting and disposition of the 3,151,773 shares of Common Stock beneficially owned by each of (i) Perseus A/R Fund, (ii) Perseus Market Opportunity, and (iii) CS Co-Investment. (c) Except as set forth above, no Reporting Person nor, to the best knowledge of each Reporting Person, any person identified in Item 2 hereof, beneficially owns any shares of Common Stock or has effected any transaction in shares of Common Stock during the preceding 60 days. (d) Each of the Reporting Persons affirms that no person other than the Reporting Persons has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock owned by the Reporting Persons. The partners and members of the Purchasers have the right to participate in the receipt of dividends from, or proceeds from the sale of, - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 19 of 34 - -------------------------------------------------------------------------------- the Common Stock, the Warrants or the Common Stock underlying the Warrants held for the account of the Purchasers in accordance with their ownership interests in the Purchasers. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. As described in Item 4 above, on February 28, 2005, the Predecessor and the Purchasers entered into the Conversion Agreement and Second Amended and Restated Registration Rights Agreement. Pursuant to the Conversion Agreement, the Purchasers agreed, among other things, to the cancellation of their Senior Notes and Conversion Warrants at the Effective Time in exchange for payment of the Consideration. Pursuant to the Second Amended and Restated Registration Rights Agreement, among other things, (i) the Purchasers will relinquish their "piggy-back" and Form S-3 registration rights, (ii) the Company will terminate the registration statements then effective under the Registration Rights Agreement and (iii) the Company will use its best efforts to file with the Commission, within 90 days of the Effective Time, a shelf registration statement pursuant to Rule 415 of the Securities Act with respect to the resale, from time to time, of all of the shares of Common Stock held by the Purchasers (as well as certain other persons). The obligations of the Predecessor under these agreements have been assumed by the Company. As described in Items 3 and 4 above, the Company has issued to the Purchasers Warrants exercisable for an aggregate of 96,888 shares of Common Stock subject to adjustment upon the occurrence of certain events as set forth in the Warrants. The foregoing summaries of the Conversion Agreement, the Warrants and the Second Amended and Restated Registration Rights Agreement are qualified in their entirety to Exhibits 2, 3 and 4, respectively. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 1: Joint Filing Agreement, dated September 12, 2005, among (i) Perseus Acquisition/Recapitalization Fund, L.L.C., (ii) Perseus Market Opportunity Fund, L.P., (iii) Cardiac Science Co-Investment, L.P., (iv) Perseus Acquisition/Recapitalization Management, L.L.C., (v) Perseus Market Opportunity Partners, L.P., (vi) Perseus Market - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 20 of 34 - -------------------------------------------------------------------------------- Opportunity Partners GP, L.L.C., (vii) Perseus, L.L.C., (viii) Perseuspur, L.L.C., and (ix) Frank H. Pearl. Exhibit 2: Senior Note and Warrant Conversion Agreement, dated February 28, 2005, by and among Cardiac Science, Inc., CSQ Holdings Company, Perseus Acquisition/Recapitalization Fund, L.P., Perseus Market Opportunity Fund, L.P. and Cardiac Science Co-Investment, L.P. Exhibit 3: Forms of Warrants. Exhibit 4: Second Amended and Restated Registration Rights Agreement, dated as of February 28, 2005, by and among Cardiac Science, Inc., Perseus Acquisition/Recapitalization Fund, L.P., Perseus Market Opportunity Fund, L.P., Cardiac Science Co-Investment, L.P., Winterset Master Fund, L.P., Mill River Master Fund, L.P., Massachusetts Mutual Life Insurance Company and Walter Villiger. Exhibit 5: Power of Attorney, dated April 9, 2003, by Frank Pearl in favor of Rodd Macklin (filed as Exhibit 8 to Amendment No. 1 to the Reporting Persons' report on Schedule 13D filed on July 22, 2004 with respect to the Predecessor and incorporated herein by reference). - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 21 of 34 - -------------------------------------------------------------------------------- SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: September 12, 2005 PERSEUS ACQUISITION/RECAPITALIZATION FUND, L.L.C. By: Perseus Acquisition/Recapitalization Management, L.L.C., its Managing Member By: Perseuspur, L.L.C., its Managing Member By: /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Secretary and Treasurer PERSEUS MARKET OPPORTUNITY FUND, L.P. By: Perseus Market Opportunity Partners, L.P., its General Partner By: Perseus Market Opportunity Partners GP, L.L.C., its General Partner By: Perseus, L.L.C., its Managing Member By: Perseuspur, L.L.C, its Managing Member By: /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Secretary and Treasurer - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 22 of 34 - -------------------------------------------------------------------------------- CARDIAC SCIENCE CO-INVESTMENT, L.P. By: Perseus Acquisition/Recapitalization Management, L.L.C., its General Partner By: Perseuspur, L.L.C., its Managing Member By: /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Secretary and Treasurer PERSEUS ACQUISITION/RECAPITALIZATION MANAGEMENT, L.L.C. By: Perseuspur, L.L.C., its Managing Member By: /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Secretary and Treasurer PERSEUS MARKET OPPORTUNITY PARTNERS, L.P. By: Perseus Market Opportunity Partners GP, L.L.C., its General Partner By: Perseus, L.L.C., its Managing Member By: Perseuspur, L.L.C, its Managing Member By: /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Secretary and Treasurer PERSEUS MARKET OPPORTUNITY PARTNERS GP, L.L.C. By: Perseus, L.L.C., its Managing Member By: Perseuspur, L.L.C, its Managing Member By: /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Secretary and Treasurer - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 23 of 34 - -------------------------------------------------------------------------------- PERSEUS, L.L.C. By: Perseuspur, L.L.C, its Managing Member By: /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Secretary and Treasurer PERSEUSPUR, L.L.C. By: /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Secretary and Treasurer FRANK H. PEARL /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Attorney-in-Fact EX-99 2 ex1sc13d_cardiaccorp.txt EXHIBIT 1 - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 24 of 34 - -------------------------------------------------------------------------------- EXHIBIT 1 to Schedule 13D JOINT FILING AGREEMENT Each of the undersigned hereby acknowledges and agrees, in compliance with the provisions of Rule 13d-1(k)(1) promulgated under the Securities Exchange Act of 1934, as amended, that the Schedule 13D to which this Agreement is attached as an Exhibit (the "Schedule 13D"), and any amendments thereto, will be filed with the Securities and Exchange Commission jointly on behalf of the undersigned. This Agreement may be executed in one or more counterparts. Dated: September 12, 2005 PERSEUS ACQUISITION/RECAPITALIZATION FUND, L.L.C. By: Perseus Acquisition/Recapitalization Management, L.L.C., its Managing Member By: Perseuspur, L.L.C., its Managing Member By: /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Secretary and Treasurer PERSEUS MARKET OPPORTUNITY FUND, L.P. By: Perseus Market Opportunity Partners, L.P., its General Partner By: Perseus Market Opportunity Partners GP, L.L.C., its General Partner By: Perseus, L.L.C., its Managing Member By: Perseuspur, L.L.C, its Managing Member By: /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Secretary and Treasurer - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 25 of 34 - -------------------------------------------------------------------------------- CARDIAC SCIENCE CO-INVESTMENT, L.P. By: Perseus Acquisition/Recapitalization Management, L.L.C., its General Partner By: Perseuspur, L.L.C., its Managing Member By: /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Secretary and Treasurer PERSEUS ACQUISITION/RECAPITALIZATION MANAGEMENT, L.L.C. By: Perseuspur, L.L.C., its Managing Member By: /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Secretary and Treasurer PERSEUS MARKET OPPORTUNITY PARTNERS, L.P. By: Perseus Market Opportunity Partners GP, L.L.C., its General Partner By: Perseus, L.L.C., its Managing Member By: Perseuspur, L.L.C, its Managing Member By: /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Secretary and Treasurer PERSEUS MARKET OPPORTUNITY PARTNERS GP, L.L.C. By: Perseus, L.L.C., its Managing Member By: Perseuspur, L.L.C, its Managing Member By: /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Secretary and Treasurer - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 26 of 34 - -------------------------------------------------------------------------------- PERSEUS, L.L.C. By: Perseuspur, L.L.C, its Managing Member By: /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Secretary and Treasurer PERSEUSPUR, L.L.C. By: /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Secretary and Treasurer FRANK H. PEARL /s/ Rodd Macklin -------------------------------------- Name: Rodd Macklin Title: Attorney-in-Fact - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 27 of 34 - -------------------------------------------------------------------------------- ANNEX A Executive Officers of Perseus Acquisition/Recapitalization Fund, L.L.C.
Name/Title/Citizenship Principal Occupation Business Address - ---------------------- -------------------- ---------------- Frank H. Pearl Executive officer of Perseus, 2099 Pennsylvania Avenue Chairman, President and Chief LLC and its related entities Suite 900 Executive Officer Washington, D.C. 20006-1813 United States Kenneth M. Socha Executive officer of Perseus, 2099 Pennsylvania Avenue Senior Managing Director LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813 Rodd Macklin Executive officer of Perseus, 2099 Pennsylvania Avenue Secretary and Treasurer LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813 Ray E. Newton, III Executive officer of Perseus, 2099 Pennsylvania Avenue Managing Director LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813
Except as otherwise disclosed elsewhere in this Schedule 13D, to the best of the Reporting Persons' knowledge: (a) None of the above persons hold any Common Stock or securities derivative thereof. (b) None of the above persons has any contracts, arrangements, understandings or relationships with respect to the Common Stock or securities derivative thereof. - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 28 of 34 - -------------------------------------------------------------------------------- ANNEX B Executive Officers of Perseus Market Opportunity Fund, L.P.
Name/Title/Citizenship Principal Occupation Business Address - ---------------------- --------------------- ---------------- Frank H. Pearl Executive officer of Perseus, 2099 Pennsylvania Avenue Chairman, President and Chief LLC and its related entities Suite 900 Executive Officer Washington, D.C. 20006-1813 United States Kenneth M. Socha Executive officer of Perseus, 2099 Pennsylvania Avenue Senior Managing Director LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813 Rodd Macklin Executive officer of Perseus, 2099 Pennsylvania Avenue Secretary and Treasurer LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813
Except as otherwise disclosed elsewhere in this Schedule 13D, to the best of the Reporting Persons' knowledge: (a) None of the above persons hold any Common Stock or securities derivative thereof. (b) None of the above persons has any contracts, arrangements, understandings or relationships with respect to the Common Stock or securities derivative thereof. - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 29 of 34 - -------------------------------------------------------------------------------- ANNEX C Executive Officers of Cardiac Science Co-Investment, L.P.
Name/Title/Citizenship Principal Occupation Business Address - ---------------------- --------------------- ---------------- Frank H. Pearl Executive officer of Perseus, 2099 Pennsylvania Avenue Chairman, President and Chief LLC and its related entities Suite 900 Executive Officer Washington, D.C. 20006-1813 United States Kenneth M. Socha Executive officer of Perseus, 2099 Pennsylvania Avenue Senior Managing Director LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813 Rodd Macklin Executive officer of Perseus, 2099 Pennsylvania Avenue Secretary and Treasurer LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813
Except as otherwise disclosed elsewhere in this Schedule 13D, to the best of the Reporting Persons' knowledge: (a) None of the above persons hold any Common Stock or securities derivative thereof. (b) None of the above persons has any contracts, arrangements, understandings or relationships with respect to the Common Stock or securities derivative thereof. - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 30 of 34 - -------------------------------------------------------------------------------- ANNEX D Executive Officers of Perseus Market Opportunity Partners, L.P.
Name/Title/Citizenship Principal Occupation Business Address - ---------------------- --------------------- ---------------- Frank H. Pearl Executive officer of Perseus, 2099 Pennsylvania Avenue Chairman, President and Chief LLC and its related entities Suite 900 Executive Officer Washington, D.C. 20006-1813 United States Kenneth M. Socha Executive officer of Perseus, 2099 Pennsylvania Avenue Senior Managing Director LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813 Rodd Macklin Executive officer of Perseus, 2099 Pennsylvania Avenue Secretary and Treasurer LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813
Except as otherwise disclosed elsewhere in this Schedule 13D, to the best of the Reporting Persons' knowledge: (a) None of the above persons hold any Common Stock or securities derivative thereof. (b) None of the above persons has any contracts, arrangements, understandings or relationships with respect to the Common Stock or securities derivative thereof. - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 31 of 34 - -------------------------------------------------------------------------------- ANNEX E Executive Officers of Perseus Market Opportunity Partners GP, L.L.C.
Name/Title/Citizenship Principal Occupation Business Address - ---------------------- --------------------- ---------------- Frank H. Pearl Executive officer of Perseus, 2099 Pennsylvania Avenue Chairman, President and Chief LLC and its related entities Suite 900 Executive Officer Washington, D.C. 20006-1813 United States Kenneth M. Socha Executive officer of Perseus, 2099 Pennsylvania Avenue Senior Managing Director LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813 Rodd Macklin Executive officer of Perseus, 2099 Pennsylvania Avenue Secretary and Treasurer LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813
Except as otherwise disclosed elsewhere in this Schedule 13D, to the best of the Reporting Persons' knowledge: (a) None of the above persons hold any Common Stock or securities derivative thereof. (b) None of the above persons has any contracts, arrangements, understandings or relationships with respect to the Common Stock or securities derivative thereof. - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 32 of 34 - -------------------------------------------------------------------------------- ANNEX F Executive Officers of Perseus, L.L.C.
Name/Title/Citizenship Principal Occupation Business Address - ---------------------- --------------------- ---------------- Frank H. Pearl Executive officer of Perseus, 2099 Pennsylvania Avenue Chairman, President and Chief LLC and its related entities Suite 900 Executive Officer Washington, D.C. 20006-1813 United States Kenneth M. Socha Executive officer of Perseus, 2099 Pennsylvania Avenue Senior Managing Director LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813 Rodd Macklin Executive officer of Perseus, 2099 Pennsylvania Avenue Secretary and Treasurer LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813
Except as otherwise disclosed elsewhere in this Schedule 13D, to the best of the Reporting Persons' knowledge: (a) None of the above persons hold any Common Stock or securities derivative thereof. (b) None of the above persons has any contracts, arrangements, understandings or relationships with respect to the Common Stock or securities derivative thereof. - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 33 of 34 - -------------------------------------------------------------------------------- ANNEX G Executive Officers of Perseuspur, L.L.C.
Name/Title/Citizenship Principal Occupation Business Address - ---------------------- --------------------- ---------------- Frank H. Pearl Executive officer of Perseus, 2099 Pennsylvania Avenue Chairman, President and Chief LLC and its related entities Suite 900 Executive Officer Washington, D.C. 20006-1813 United States Rodd Macklin Executive officer of Perseus, 2099 Pennsylvania Avenue Secretary and Treasurer LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813
Except as otherwise disclosed elsewhere in this Schedule 13D, to the best of the Reporting Persons' knowledge: (a) None of the above persons hold any Common Stock or securities derivative thereof. (b) None of the above persons has any contracts, arrangements, understandings or relationships with respect to the Common Stock or securities derivative thereof. - -------------------------------------------------------------------------------- CUSIP No. 14141A108 SCHEDULE 13D Page 34 of 34 - -------------------------------------------------------------------------------- ANNEX H Executive Officers of Perseus Acquisition/Recapitalization Management, L.L.C.
Name/Title/Citizenship Principal Occupation Business Address - ---------------------- --------------------- ---------------- Frank H. Pearl Executive officer of Perseus, 2099 Pennsylvania Avenue Chairman, President and Chief LLC and its related entities Suite 900 Executive Officer Washington, D.C. 20006-1813 United States Kenneth M. Socha Executive officer of Perseus, 2099 Pennsylvania Avenue Senior Managing Director LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813 Rodd Macklin Executive officer of Perseus, 2099 Pennsylvania Avenue Secretary and Treasurer LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813 Ray E. Newton, III Executive officer of Perseus, 2099 Pennsylvania Avenue Managing Director LLC and its related entities Suite 900 United States Washington, D.C. 20006-1813
Except as otherwise disclosed elsewhere in this Schedule 13D, to the best of the Reporting Persons' knowledge: (a) None of the above persons hold any Common Stock or securities derivative thereof. (b) None of the above persons has any contracts, arrangements, understandings or relationships with respect to the Common Stock or securities derivative thereof. EX-4 3 ex2sc13d_cardiaccorp.txt EXHIBIT 2 EXHIBIT 2 to Schedule 13D SENIOR NOTE AND WARRANT CONVERSION AGREEMENT This SENIOR NOTE AND WARRANT CONVERSION AGREEMENT (this "AGREEMENT"), dated as of February 28, 2005, is entered into by and among CSQ Holding Company, a Delaware corporation ("NEWCO"), Cardiac Science, Inc., a Delaware corporation ("CSI"), and those purchasers whose names are listed on the signature pages hereto (each, a "PURCHASER" and collectively, the "PURCHASERS"). RECITALS WHEREAS, pursuant to that certain Senior Note and Warrant Purchase Agreement, dated as of May 29, 2002, as amended July 1, 2003, as further amended March 15, 2004, as amended again January 28, 2005 (the "PURCHASE AGREEMENT"), by and among CSI and the Purchasers, the Purchasers purchased from CSI senior notes in the aggregate principal amount of fifty million dollars ($50,000,000) (the "SENIOR NOTES") and warrants to purchase an aggregate of 13,438,599 shares of CSI common stock (the "WARRANTS"); WHEREAS, in connection with the issuance of the Senior Notes, (i) CSI, its subsidiaries and the Purchasers entered into that certain Security Agreement, dated as of May 30, 2002 (the "SECURITY AGREEMENT"), (ii) CSI, the Purchasers, and other signatories thereto entered into that certain Registration Rights Agreement, dated as of May 30, 2002, as amended and restated on July 20, 2004, as further amended and restated in accordance with Section 8 below (the "REGISTRATION RIGHTS AGREEMENT"), and (iii) CSI's subsidiaries each entered into those certain Guaranties, dated as of May 30, 2002, in favor of the Purchasers (each a "GUARANTY," collectively, the "GUARANTIES," and referred to collectively with the Security Agreement as the "ANCILLARY AGREEMENTS"); WHEREAS, each Purchaser currently owns all right, title and interest to the Senior Note in the principal amount set forth by such Purchaser's name on EXHIBIT A and currently owns all right, title and interest to the Warrants set forth by such Purchaser's name on EXHIBIT B; WHEREAS, CSI, Newco, Quinton Cardiology Systems, Inc., a Delaware corporation ("QUINTON"), Rhythm Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of Newco ("QUINTON MERGER SUB"), and Heart Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of Newco ("CSI MERGER SUB"), have entered into that certain Agreement and Plan of Merger, dated of even date herewith (the "MERGER Agreement"), pursuant to which, among other things, Quinton Merger Sub will merge with and into Quinton, and Quinton will thereafter merge with and into Newco, with Newco being the surviving corporation, and CSI Merger Sub will merge with and into CSI, with CSI surviving as a wholly-owned subsidiary of Newco (collectively, the "Mergers"); and WHEREAS, the Purchasers, CSI and Newco desire to cancel the Senior Notes and Warrants in connection with the Merger in exchange for certain consideration as set forth in this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for good and valuable consideration, receipt of which is hereby acknowledged, the parties hereby agree as follows: 1. DEFINITIONS. Capitalized terms used herein but not defined herein shall have the meanings ascribed to such terms in the Merger Agreement, a true and complete copy of which has been delivered to the Purchasers on the date hereof. "ACCRETED VALUE" shall mean the adjusted issue price (within the meaning of Section 1272 of the Internal Revenue Code, as amended in 1986) plus any accrued unpaid interest not included therein. 2. CANCELLATION OF SENIOR NOTES AND WARRANTS. The Purchasers hereby agree and acknowledge that concurrently with the Effective Time (the "CONVERSION TIME"), each Senior Note and Warrant held by the Purchasers shall be automatically cancelled and terminated and shall be converted into the right to receive the Senior Note and Warrant Consideration (as defined in Section 3 below) payable with respect to such Senior Notes and Warrants (the "NOTE AND WARRANT CONVERSION"). 3. SENIOR NOTE AND WARRANT CONSIDERATION. The consideration to which the Purchasers shall be entitled as a result of the cancellation and termination of the Senior Notes and Warrants, and the releases and waivers set forth in this Agreement, shall consist of the following: (i) an aggregate of twenty million dollars ($20,000,000), payable by Newco in cash immediately following the Conversion Time, in the amounts set forth by each Purchaser's name on EXHIBIT C hereto (the "CASH PAYMENT"), in exchange for each Purchaser's pro rata portion of Senior Notes in an aggregate amount equal to twenty million dollars ($20,000,000) of the Accreted Value of the Senior Notes and (ii) such number of shares of Newco common stock (rounded down to the nearest whole share) as is determined by multiplying (A) the quotient obtained by dividing Fifty-Three Million Seven Hundred Fifty Thousand Dollars ($53,750,000) by the closing sales price per share for CSI common stock as reported on the Nasdaq National Market on the trading date immediately preceding the date of this Agreement, which is $1.89, by (B) the Cardiac Exchange Ratio, as set forth by each Purchaser's name on EXHIBIT D hereto (the "SHARES" and, collectively with the "CASH PAYMENT," the "SENIOR NOTE AND WARRANT CONSIDERATION"). A portion of the Shares received by the Purchasers under (ii) above in an amount equal to the Accreted Value of the Senior Notes minus cash paid under (i) above shall be received in exchange for the Senior Notes and the balance of such Shares shall be received in exchange for the Warrants. The parties hereto hereby agree that for all purposes the Senior Note and Warrant Consideration (including the entire Cash Payment) will be allocated to the Senior Notes up to the Accreted Value of the Senior Notes, with any remaining consideration allocated to the Warrants. The Shares shall be issued to the Purchasers concurrently with shares of Newco common stock to be issued at the Conversion Time to the former stockholders of CSI. 4. CLOSING; CLOSING CONDITIONS. The closing of the Note and Warrant Conversion (the "CLOSING") shall occur concurrently with, and subject to the occurrence of, the Effective Time; PROVIDED, that unless otherwise agreed to in writing by the Purchasers holding a majority of the outstanding principal amount of Senior Notes, the Closing shall not occur prior to July 31, 2005. The Closing shall be further conditioned upon the following: 2 (a) the applicable waiting period(s) under the HSR Act with respect to the Note and Warrant Conversion, if applicable, shall have expired or been terminated; and (b) the Merger Agreement shall not have been amended, modified or waived in any manner that adversely affects the rights and obligations of the Purchasers without the consent of the Purchasers holding a majority of the outstanding principal amount of the Senior Notes. 5. RELEASES; WAIVERS; ACKNOWLEDGMENTS. (a) The Purchasers, on behalf of themselves, and on behalf of all predecessors, successors, assigns, representatives or agents of the Purchasers, to the fullest extent permitted by law, hereby acknowledge that the Senior Note and Warrant Consideration is in full satisfaction of any and all rights the Purchasers may have with respect to the Senior Notes and Warrants, including the right to demand or receive payment for all unpaid principal and any accrued and unpaid interest under the Senior Notes (other than the Senior Note and Warrant Consideration) and the right to purchase shares of CSI common stock under the Warrants and, solely in their respective capacities as holders of the Senior Notes or holders of the Warrants, effective solely upon full receipt by the Purchasers of the Senior Note and Warrant Consideration, hereby release CSI, Newco and their respective successors and assigns (collectively, the "PURCHASER RELEASEES"), from any and all obligations they would otherwise have with respect to the Senior Notes and Warrants (other than with respect to any obligations arising under this Agreement or the Registration Rights Agreement) (the "PURCHASER RELEASED Claims"). The Purchasers acknowledge that they have been advised by legal counsel and have read and understand and waive the protections of Section 1542 of the California Civil Code, which provides as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. (b) Effective solely upon delivery of the original Senior Notes and Warrants to CSI for cancellation and termination against payment of the Senior Note and Warrant Consideration, Newco and CSI, on behalf of themselves, and on behalf of all predecessors, successors, assigns, representatives or agents, to the fullest extent permitted by law, hereby release each of the Purchasers and their respective successors and assigns (collectively, the "COMPANY RELEASEES"), from any and all obligations they would otherwise have relating to their investment in CSI (other than with respect to any obligations arising under this Agreement or the Registration Rights Agreement) (the "COMPANY RELEASED CLAIMS"). (c) Each of the parties hereto acknowledges that it may hereafter discover facts in addition to, or different from, those which it now knows or believes to be true with respect to the subject matter of this Agreement, the Purchaser Released Claims and the Company Released Claims, as applicable, but that notwithstanding the foregoing, it is its intention that this release, upon becoming effective, operate to fully, finally, completely and forever settle and release each Purchaser Releasee and Company Releasee, as applicable, from each, every and all of the Purchaser Released Claims and the Company Released Claims, as applicable, and that in furtherance of such intention, the releases herein given shall be and remain in effect as full and complete releases, notwithstanding the discovery or existence of any such additional or different facts. 3 (d) The Purchasers warrant and represent to each other that as to any Purchaser Released Claim, the Purchaser releasing same is the sole and absolute owner thereof, free and clear of all other rights and interests therein and has the right, ability and sole power to release such Purchaser Released Claims. (e) The Purchasers agree to hold harmless and indemnify the Purchaser Releasees from any liability or claim asserted by a Purchaser or any of their Affiliates against a Purchaser Releasee which is based on a claim which the Purchasers purported to release hereunder. Each of CSI and Newco agrees to hold harmless and indemnify the Company Releasees from any liability or claim asserted by CSI or Newco or any of their Affiliates against a Company Releasee which is based on a claim which the CSI and Newco purported to release hereunder. (f) Each Purchaser hereby acknowledges, agrees and gives its consent that there shall be no price-based anti-dilution adjustments as a result of the transactions contemplated by this Agreement or the Merger Agreement to any warrants held by it. 6. RIGHT TO DESIGNATE DIRECTOR. After the Conversion Time, so long as the Purchasers continue to beneficially own at least 10% of Newco's outstanding capital stock, calculated in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended, the Purchasers shall have the right, but not the obligation, to designate one director (the "PURCHASER DESIGNEE") for election to Newco's Board of Directors and Newco shall cause such Purchaser Designee to be nominated for election at any meeting of stockholders at which directors in the class of which such Designee is a member are being voted upon. 7. TERMINATION OF TRANSACTION DOCUMENTS. The Purchasers hereby agree and acknowledge that by virtue of and conditioned upon the consummation of the Mergers (and payment of the Senior Note and Warrant Consideration), as of the Effective Time, the Purchase Agreement and the Ancillary Agreements shall be automatically terminated and shall be of no further force or effect, and the Purchasers authorize CSI, Newco or any of its respective representatives to file (at the expense of CSI or Newco) any documents necessary to effect such termination. 8. AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT. Concurrently with the execution of this Agreement, the Purchasers and CSI shall enter into a Second Amended and Restated Registration Rights Agreement among CSI and the investors party thereto, in the form attached hereto as EXHIBIT E. The Second Amended and Restated Registration Rights Agreement shall be effective immediately prior to the Effective Time. In accordance with Section 7.2 of the Second Amended and Restated Rights Agreement, upon the Effective Time, Newco hereby agrees to assume the rights and obligations of CSI thereunder. 9. DELIVERY OF SENIOR NOTES AND WARRANTS. As of the Conversion Time, the Purchasers shall deliver the original Senior Notes and Warrants to Newco for cancellation and termination, together with such instruments as may be reasonably requested by CSI or Newco to terminate the Purchasers' security interest under the Security Agreement, against payment of the Senior Note and Warrant Consideration. 10. REPRESENTATIONS AND WARRANTIES; COVENANTS. (a) Each Purchaser, severally and not jointly, hereby represents and warrants to CSI and Newco that (i) it is the true and lawful owner of each Senior Note set forth on EXHIBIT A and each Warrant set forth on EXHIBIT B, and (ii) each Senior Note set forth on EXHIBIT A and each 4 Warrant set forth on EXHIBIT B is free and clear of all liens, restrictions, charges, adverse claims and encumbrances whatsoever (other than under state and federal securities laws). Additionally, subject to expiration of the applicable waiting period(s) under the HSR Act, if any, each Purchaser, severally and not jointly, hereby makes the representations and warranties with respect to the Shares and this Agreement as previously made with respect to the Senior Notes and Warrants and the Purchase Agreement, respectively, in Section 3 of the Purchase Agreement. (b) CSI and Newco, severally and not jointly, hereby represents and warrants to the Purchasers that (i) such Person is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) such Person has the right, power and authority to enter into, execute, deliver and perform its obligations under this Agreement and its directors, members, managers, officers or agents executing and delivering this Agreement are duly authorized to do so, (iii) this Agreement has been duly and validly executed and delivered and constitutes the legal, valid and binding obligation of such Person, enforceable in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors' rights generally and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law), (iv) the execution, delivery and performance by such Person of this Agreement will not violate the organizational documents of such Person, (v) the execution, delivery and performance by such Person of this Agreement has been duly authorized by all requisite organizational action on the part of such Person and do not and will not violate, contravene or constitute a default under any law or any order of any court, governmental authority or arbitrator, in each case where such violation, contravention or default, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, and (vi) no authorization, approval or consent of, and no filing or registration with, any court, governmental authority or third Person is or will be necessary for the execution, delivery or performance by such Person of this Agreement or the validity or enforceability thereof, except for such approvals which will have been obtained prior to the Closing or will not have been required to be obtained prior to the Closing. (c) To the extent applicable, each party hereto agrees to make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the Note and Warrant Conversion as promptly as practicable following the determination that such a filing is applicable and to supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act and to take all other actions necessary to cause the expiration or termination of the applicable waiting periods under the HSR Act as soon as practicable. 11. FURTHER ASSURANCES. Each party hereto will, upon request of another party hereto, execute and deliver any additional documents reasonably requested by such requesting party as may be necessary or desirable to consummate the transactions contemplated hereby. 12. MISCELLANEOUS. No provision of this Agreement may be amended, modified, waived or discharged unless such amendment, waiver, modification or discharge is agreed to in writing signed by Newco, CSI and the Purchasers holding a majority of the outstanding principal amount of the Senior Notes. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. This Agreement, the Merger Agreement and the Registration Rights Agreement constitute the entire agreements with respect to the subject matter hereof and supercede all prior agreements and undertakings, both written and oral, among the parties, or of any of them, with respect to the subject matter hereof, and, except as otherwise expressly provided herein, it is not intended to confer upon any other person any rights 5 or remedies hereunder. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts executed and to be performed in the state. This Agreement may be executed in one or more counterparts (including by facsimile), and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. 13. TERMINATION. Each party's obligations under this Agreement are subject to, and contingent upon, consummation of the Mergers. In the event that the Merger Agreement is terminated, the parties hereto shall have no further obligations with respect to this Agreement. Either party may terminate this Agreement if the Effective Time shall not have taken place by December 31, 2005, in which case the parties hereto shall have no further obligations with respect to this Agreement. 14. FEES AND EXPENSES. Each party hereto shall bear the cost of its own fees and expenses incurred in connection with the transactions contemplated by this Agreement and the Merger Agreement, including, but not limited to, its legal fees and disbursements; PROVIDED, HOWEVER, that CSI (i) shall reimburse the Purchasers for any filing fees under the HSR Act and (ii) shall reimburse the Purchasers for any filing fees incurred in connection with Sections 7 and 9 of this Agreement and up to an aggregate of $5,000 in legal fees related thereto. 6 IN WITNESS WHEREOF, the undersigned have executed this Senior Note and Warrant Conversion Agreement as of the date first written above. NEWCO CSQ HOLDING COMPANY By: /s/ John R. Hinson --------------------------- Its: Chief Executive Officer --------------------------- CSI CARDIAC SCIENCE, INC. By: /s/ Raymond W. Cohen --------------------------- Its: CEO --------------------------- PURCHASERS PERSEUS ACQUISITION/RECAPITALIZATION FUND, L.L.C. By: /s/ Ray E. Newton III --------------------------- Its: Managing Director --------------------------- PERSEUS MARKET OPPORTUNITY FUND, L.P. By: /s/ Ray E. Newton III --------------------------- Its: Managing Director --------------------------- CARDIAC SCIENCE CO-INVESTMENT, L.P. By: /s/ Ray E. Newton III --------------------------- Its: Managing Director --------------------------- 7 EXHIBIT A SENIOR NOTES
- ----------------------------------------------------------------------------------------------------------- NAME NOTE NO. PRINCIPAL AMOUNT - ----------------------------------------------------------------------------------------------------------- Perseus Acquisition/Recapitalization Fund, L.L.C. N-1 $21,788,285 - ----------------------------------------------------------------------------------------------------------- Perseus Market Opportunity Fund, L.P. N-2 20,279,237 - ----------------------------------------------------------------------------------------------------------- Cardiac Science Co-Investment, L.P. N-3 7,932,478 - ----------------------------------------------------------------------------------------------------------- TOTAL: $50,000,000 - -----------------------------------------------------------------------------------------------------------
EXHIBIT B WARRANTS
- ------------------------------------------------------------------------------------------------------- NAME WARRANT NO. SHARES - ------------------------------------------------------------------------------------------------------- Perseus Acquisition/Recapitalization Fund, L.L.C. W-1 4,357,657 - ------------------------------------------------------------------------------------------------------- Perseus Market Opportunity Fund, L.P. W-2 4,055,847 - ------------------------------------------------------------------------------------------------------- Cardiac Science Co-Investment, L.P. W-3 1,586,496 - ------------------------------------------------------------------------------------------------------- Perseus Acquisition/Recapitalization Fund, L.L.C. W-4 1,318,911 - ------------------------------------------------------------------------------------------------------- Perseus Market Opportunity Fund, L.P. W-5 1,227,564 - ------------------------------------------------------------------------------------------------------- Cardiac Science Co-Investment, L.P. W-6 480,177 - ------------------------------------------------------------------------------------------------------- Perseus Acquisition/Recapitalization Fund, L.L.C. W-7 179,526 - ------------------------------------------------------------------------------------------------------- Perseus Market Opportunity Fund, L.P. W-8 167,086 - ------------------------------------------------------------------------------------------------------- Cardiac Science Co-Investment, L.P. W-9 65,335 - ------------------------------------------------------------------------------------------------------- TOTAL: 13,438,599 - -------------------------------------------------------------------------------------------------------
EXHIBIT C CASH PAYMENT AMOUNT
- ---------------------------------------------------------------------------------------------- NAME CASH PAYMENT AMOUNT - ---------------------------------------------------------------------------------------------- Perseus Acquisition/Recapitalization Fund, L.L.C. $ 8,715,314 - ---------------------------------------------------------------------------------------------- Perseus Market Opportunity Fund, L.P. 8,111,695 - ---------------------------------------------------------------------------------------------- Cardiac Science Co-Investment, L.P. 3,172,991 - ---------------------------------------------------------------------------------------------- TOTAL: $20,000,000 - ----------------------------------------------------------------------------------------------
EXHIBIT D NUMBER OF SHARES
- ---------------------------------------------------------------------------------------------- NAME NUMBER OF SHARES - ---------------------------------------------------------------------------------------------- Perseus Acquisition/Recapitalization Fund, L.L.C. 1,239,281 - ---------------------------------------------------------------------------------------------- Perseus Market Opportunity Fund, L.P. 1,153,448 - ---------------------------------------------------------------------------------------------- Cardiac Science Co-Investment, L.P. 451,186 - ---------------------------------------------------------------------------------------------- TOTAL: 2,843,915 - ----------------------------------------------------------------------------------------------
EXHIBIT E SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT EX-4 4 ex3sc13d_cardiaccorp.txt EXHIBIT 3 EXHIBIT 3 to Schedule 13D THE OFFER AND SALE OF THE WARRANT REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") NOR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. THIS WARRANT HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES OR BLUE SKY LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH REGISTRATION AND COMPLIANCE ARE NOT REQUIRED. W-[ ] Warrant to Purchase [ ] Shares of Common Stock As Herein Described WARRANT TO PURCHASE COMMON STOCK OF CARDIAC SCIENCE CORPORATION This is to certify that, for value received, [PERSEUS ENTITY] (the "HOLDER"), is entitled to purchase from CARDIAC SCIENCE CORPORATION, a Delaware corporation (the "COMPANY"), having its principal place of business at 3303 Monte Villa Parkway, Bothell, Washington 98021, at any time during the period from the date hereof (the "COMMENCEMENT DATE") to 5:00 p.m., California time, on [ ] (the "EXPIRATION DATE"), at which time this Warrant shall expire and become void, and subject to vesting and other provisions of this Warrant, [ ( ) ]shares ("WARRANT SHARES") of the Company's Common Stock (the "COMMON STOCK"). This Warrant shall be exercisable at $[ ] per share (the "EXERCISE PRICE"). The number of shares of Common Stock to be received upon exercise of this Warrant and the Exercise Price shall be adjusted from time to time as set forth below. This Warrant also is subject to the following terms and conditions: 1. VESTING: EXERCISE AND PAYMENT; EXCHANGE (a) [Intentionally omitted.] (b) This Warrant may be exercised in whole or in part at any time from and after the date hereof and before the Expiration Date, but if such date is a day on which federal or state chartered banking institutions located in the State of California are authorized to close, then on the next succeeding day which shall not be such a day. Exercise shall be by presentation and surrender to the Company at its principal office, or at the office of any transfer agent designated by the Company, of (i) this Warrant, (ii) the attached exercise form properly executed, and (iii) either (A) a certified or official bank check for the Exercise Price for the number of Warrant Shares specified in the exercise form; or (B) other securities of the Company owned by the Holder and having a fair market value determined as set forth in SECTION 3 hereof equal to the Exercise Price for the number of Warrant Shares specified in the exercise form or (C) any combination of the consideration specified in the foregoing clauses (A) and (B). If this Warrant is exercised in part only, the Company or its transfer agent shall, upon surrender of the Warrant, execute and deliver a new Warrant evidencing the rights of the Holder to purchase the remaining number of Warrant Shares purchasable hereunder. Upon receipt by the Company of this Warrant in proper form for exercise, accompanied by payment as aforesaid, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such Warrant Shares shall not then be actually delivered by the Holder. (c) EXCHANGE OF WARRANT FOR COMMON STOCK. In addition to and without limiting the rights of the Holder under the terms of this Warrant, the Holder shall have the right, Upon its written request delivered or transmitted to the Company together with this Warrant, to exchange this Warrant, in whole or in part at any time or from time to time on or prior to the Expiration date, for the number of shares of Common Stock having an aggregate fair market value (determined as set forth in SECTION 3 hereof) on the date of such exchange equal to the difference between (i) the aggregate fair market value on the date of such exchange (determined as set forth in SECTION 3 hereof) of a number of Warrant Shares designated by the Holder and (ii) the aggregate Exercise Price the Holder would have paid to the company to purchase such designated number of Warrant Shares, and, if a balance of purchasable Warrant Shares remains after such exchange, the Company shall execute and deliver to the Holder a new Warrant evidencing the right of the Holder to purchase such balance of Warrant Shares. No payment of any cash or other consideration shall be required. Such exchange shall be effective upon the date of receipt by the Company of the original Warrant surrendered for cancellation and a written request from the Holder that the exchange pursuant to this Subsection be made, or at such later date as may be specified in such request. (d) CONDITIONS TO EXERCISE OR EXCHANGE. The restrictions in SECTION 7 shall apply, to the extent applicable by their terms, to any exercise or exchange of this Warrant permitted by this SECTION 1. 2. RESERVATION OF SHARES The Company shall, at all times until the expiration of this Warrant, reserve for issuance and delivery upon exercise of this Warrant the number of Warrant Shares which shall be required for issuance and delivery upon exercise of this Warrant. -2- 3. FRACTIONAL INTERESTS The Company shall not issue any fractional shares or script representing fractional shares upon the exercise or exchange of this Warrant. With respect to any fraction of a share resulting from the exercise or exchange hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the number of shares of Common Stock into which each share of Common Stock is then convertible, multiplied by the current fair market value per share of Common Stock. The current fair market value shall be the last reported sale price of the Common Stock on The Nasdaq National Market on the last business day prior to the date of exercise of this Warrant or if no such sale is made on such day, the mean of the closing bid and asked prices for such day on The Nasdaq National Market; 4. NO RIGHTS AS STOCKHOLDERS This Warrant shall not entitle the Holder to any rights as a stockholder of the Company, either at law or in equity. The rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein. 5. ADJUSTMENTS IN NUMBER AND EXERCISE PRICES OF WARRANT SHARES 5.1 The number of shares of Common Stock for which this Warrant may be exercised and the Exercise Prices therefor shall be subject to adjustment as follows: (a) If the Company is recapitalized through the subdivision or combination of its outstanding shares of Common Stock into a larger or smaller number of shares, the number of shares of Common Stock for which this Warrant may be exercised shall be increased or reduced, as of the record date for such recapitalization in the same proportion as the increase or decrease in the outstanding shares of Common Stock, and the exercise price shall be adjusted so that the aggregate amount payable for the purchase of all of the Warrant Shares issuable hereunder immediately after the record date for such recapitalization shall equal the aggregate amount so payable immediately before such record date. -3- (b) If the Company declares a dividend or distribution on Common Stock payable in Common Stock or securities convertible into Common Stock, the number of shares of Common Stock for which this Warrant may be exercised shall be increased as of the record date for determining which holders of Common Stock shall be entitled to receive such dividend, in proportion to the increase in the number of outstanding shares (and shares of Common Stock issuable upon conversion of all such securities convertible into Common Stock) of Common Stock as a result of such dividend, and the Exercise Price shall be adjusted so that the aggregate amount payable for the purchase of all the Warrant Shares issuable hereunder immediately after the record date for such dividend shall equal the aggregate amount so payable immediately before such record date. (c) If the Company distributes to holders of its Common Stock, other than as part of its dissolution or liquidation or the winding up of its affairs, any evidence of indebtedness or any of its assets (other than cash, Common Stock or securities convertible into Common Stock), the Company shall give written notice to the Holder of any such distribution at least fifteen days prior to the proposed record date in order to permit the Holder to exercise this Warrant on or before the record date. There shall be no adjustment in the number of shares of Common Stock for which this Warrant may be exercised, or in the Exercise Price, by virtue of any such distribution. (d) If the Company offers rights or warrants to the holders of Common Stock which entitle them to subscribe to or purchase additional Common Stock or securities convertible into Common Stock, the Company shall give written notice of any such proposed offering to the Holder at least fifteen days prior to the proposed record date in order to permit the Holder to exercise this Warrant on or before such record date. There shall be no adjustment in the number of shares of Common Stock for which this Warrant may be exercised, or in the Exercise Price, by virtue of any such distribution. (e) If the event, as a result of which an adjustment is made under paragraph (a) or (b) above, does not occur, then any adjustments in the Exercise Price or number of shares issuable that were made in accordance with such paragraph (a) or (b) shall be adjusted to the Exercise Price and number of shares as were in effect immediately prior to the record date for such event. 5.2 In the event of any reorganization or reclassification of the outstanding shares of Common Stock (other than a change in par value or from no par value to par value, or from par value to no par value, or as a result of a subdivision or combination) or in the event of any consolidation or merger of the Company with another entity after which the Company is not the surviving entity, at any time prior to the expiration of this Warrant, upon subsequent exercise of this Warrant the Holder shall have the right to receive the same kind and number of shares of Common Stock and other securities, cash or other property as would have been distributed to the Holder upon such reorganization, reclassification, consolidation or merger had the Holder exercised this Warrant immediately prior to such reorganization, reclassification, consolidation or merger, appropriately adjusted for any subsequent event described in this SECTION 5. The Holder shall pay upon such exercise the Exercise Price that -4- otherwise would have been payable pursuant to the terms of this Warrant. If any such reorganization, reclassification, consolidation or merger results in a cash distribution in excess of the then applicable Exercise Price, the holder may, at the Holder's option exercise this Warrant without making payment of the Exercise Price, and in such case the Company shall, upon distribution to the Holder, consider the Exercise Price to have been paid in full, and in making settlement to the Holder, shall deduct an amount equal to the Exercise Price from the amount payable to the Holder. In the event of any such reorganization, merger or consolidation, the corporation formed by such consolidation or merger or the corporation which shall have acquired the assets of the Company shall execute and deliver a supplement hereto to the foregoing effect, which supplement shall also provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in this Warrant. 5.3 If the Company shall, at any time before the expiration of this Warrant, dissolve, liquidate or wind up its affairs, the Holder shall have the right to receive upon exercise of this Warrant, in lieu of the shares of Common Stock of the Company that the Holder otherwise would have been entitled to receive, the same kind and amount of assets as would have been issued, distributed or paid to the Holder upon any such dissolution, liquidation or winding up with respect to such Common Stock receivable upon exercise of this Warrant on the date for determining those entitled to receive any such distribution. If any such dissolution, liquidation or winding up results in any cash distribution in excess of the Exercise Price provided by this Warrant, the Holder may, at the Holder's option, exercise this Warrant without making payment of the Exercise Price and, in such case, the Company shall, upon distribution to the Holder, consider the Exercise Price to have been paid in full and, in making settlement to the Holder, shall deduct an amount equal to the Exercise Price from the amount payable to the Holder. 5.4 The Company may retain a firm of independent public accountants of recognized standing (who may be any such firm employed by the Company) to make any computation required under this SECTION 5, and a certificate signed by such firm shall be conclusive evidence of the correctness of any computation made under this SECTION 5. 5.5 Whenever the number of Warrant Shares or Exercise Price shall be adjusted as required by the provisions of this SECTION 5, the Company forthwith shall file in the custody of its secretary or an assistant secretary, at its principal office, an officer's certificate showing the adjusted number of Warrant Shares and Exercise Price and setting forth in reasonable detail the circumstances requiring the adjustment. Each such officer's certificate shall be made available at all reasonable times during reasonable hours for inspection by the Holder. 6. NOTICES TO HOLDER So long as this Warrant shall be outstanding (a) if the Company shall pay any dividends or make any distribution upon the Common Stock otherwise than in cash or (b) if the Company shall offer generally to the holders of Common Stock the right to subscribe to or purchase any shares of any class of Common Stock or securities convertible into Common -5- Stock or any similar rights or (c) if there shall be any capital reorganization of the Company in which the Company is not the surviving entity, recapitalization of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or other transfer of all or substantially all of the property and assets of the Company, or voluntary or involuntary dissolution, liquidation or winding up of the Company, then in such event, the Company shall cause to be mailed to the Holder, at least thirty days prior to the relevant date described below (or such shorter period as is reasonably possible if thirty days is not reasonably possible), a notice containing a description of the proposed action and stating the date or expected date on which a record of the Company's stockholders is to be taken for the purpose of any such dividend, distribution of rights, or such reclassification, reorganization, consolidation, merger, conveyance, lease or transfer, dissolution, liquidation or winding up is to take place and the date or expected date, if any is to be fixed, as of which the holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such event. 7. TRANSFER, EXERCISE, EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT, WARRANT SHARES OR OTHER SECURITIES 7.1 This Warrant may be transferred, exercised, exchanged or assigned ("TRANSFERRED"), in whole or in part, subject to the following restrictions. This Warrant and the Warrant Shares or any other securities ("OTHER SECURITIES") received upon exercise of this Warrant or the conversion of the Warrant Shares shall be subject to restrictions on transferability unless registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"), or unless an exemption from registration is available. Until this Warrant and the Warrant Shares or Other Securities are so registered, this Warrant and any certificate for Warrant Shares or Other Securities issued or issuable upon exercise of this Warrant shall contain a legend on the face thereof, in form and substance satisfactory to counsel for the Company, stating that this Warrant, the Warrant Shares or Other Securities may not be sold, transferred or otherwise disposed of unless, in the opinion of counsel satisfactory to the Company, which may be counsel to the Company, that the Warrant, the Warrant Shares or Other Securities may be transferred without such registration. This Warrant and the Warrant Shares or Other Securities may also be subject to restrictions on transferability under applicable state securities or blue sky laws. Until the Warrant and the Warrant Shares or Other Securities are registered under the Securities Act, the Holder shall reimburse the Company for its expenses, including attorneys' fees, incurred in connection with any transfer or assignment, in whole or in part, of this Warrant or any Warrant Shares or Other Securities. 7.2 Until this Warrant, the Warrant Shares or other Securities are registered under the Securities Act, the Company may require, as a condition of transfer of this Warrant, the Warrant Shares, or other Securities that the transferee (who may be the Holder in the case of an exercise or exchange) represent that the securities being transferred are being acquired for investment purposes and for the transferee's own account and not with a view to or for sale in connection with any distribution of the security. The Company may also require that transferee provide written information adequate to establish that the transferee is an "accredited investor" within the meaning of Regulation D issued under the Securities Act, or -6- otherwise meets all qualifications necessary to comply with exemptions to the Securities Act and any applicable securities or blue sky laws, all as determined by counsel to the Company. 7.3 Any transfer permitted hereunder shall be made by surrender of this Warrant to the Company at its principal office or to its transfer agent at its offices with a duly executed request to transfer the Warrant, which shall provide adequate information to effect such transfer and shall be accompanied by funds sufficient to pay any transfer taxes applicable. Upon satisfaction of all transfer conditions, the Company or its transfer agent shall, without charge, execute and deliver a new Warrant in the name of the transferee named in such transfer request, and this Warrant promptly shall be cancelled. 7.4 Upon receipt by the Company of evidence satisfactory to it of loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, of reasonable satisfactory indemnification, or, in the case of mutilation, upon surrender of this Warrant, the Company will execute and deliver, or instruct its transfer agent to execute and deliver, a new Warrant of like tenor and date, any such lost, stolen or destroyed Warrant thereupon shall become void. 7.5 Each Holder of this Warrant, the Warrant Shares and any Other Securities shall indemnify and hold harmless the Company, its directors and officers, and each other person, if any, who controls the Company, against any losses, claims, damages or liabilities, joint or several, to which the Company or any such director, officer or any such person may become subject under the Securities Act, any applicable state securities or blue sky laws or any statute or common law, insofar as such losses, claims, damages or liabilities or actions in respect thereof, arise out of or are based upon the disposition by such Holder of the Warrant, the Warrant Shares or Other Securities in violation of this Warrant. 8. NO IMPAIRMENT The Company will not, by amendment of its Certificate of Incorporation or otherwise, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times, in good faith, take all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment. 9. NOTICES Notices and other communications to be given to the Holder shall be deemed sufficiently given if delivered by hand, or two business days after mailing if mailed by registered or certified mail, postage prepaid, addressed in the name and at the address of such Holder appearing on the records of the Company. Notices or other communications to the Company shall be deemed to have been sufficiently given if delivered by hand or two business days after mailing if mailed by registered or certified mail, postage prepaid, to the Company at: -7- 3303 Monte Vista Parkway Bothell, Washington 98021 Attention: Chief Financial Officer Either party may change the address to which notices shall be given by notice pursuant to this SECTION 9. 10. GOVERNING LAW This Warrant shall be governed by and construed in accordance with the laws of the State of California. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed on its behalf by one of its officers thereunto duly authorized. CARDIAC SCIENCE CORPORATION By:______________________________ Name:____________________________ Its:_____________________________ Original Issuance Date: [ ] Replacement Warrant Date: September , 2005 -8- ANNEX A ------- FORM OF EXERCISE (To be executed upon exercise of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to purchase _______________ shares of Common Stock and herewith tenders payment for such shares of Common Stock to the order of Cardiac Science Corporation the amount of $__________ in accordance with the terms hereof. The undersigned requests that a certificate for such shares of Common Stock be registered in the names of _______________, whose address is _________________________. Dated:______________________ Signature:________________________________ (Signature must conform in all respects to name of holders as specified on the face of the Warrant Certificate.) ___________________________________ (Insert Social Security or Taxpayer Identification Number of Holder.) THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR WITH ANY SECURITIES COMMISSION UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THIS WARRANT OR THE ISSUER RECEIVES AN OPINION OF COUNSEL STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT. No. W-1 Warrant to Purchase 84,388 Shares of Common Stock (subject to adjustment) CARDIAC SCIENCE CORPORATION WARRANT TO PURCHASE 84,388 SHARES OF COMMON STOCK Cardiac Science Corporation, a Delaware corporation (the "Company"), hereby certifies that, for good and valuable consideration, PERSEUS MARKET OPPORTUNITY FUND, L.P. or its registered transferees, successors or assigns (each, a "holder"), is the registered holder of warrants (the "Warrants") to subscribe for and purchase from the Company, Eighty-Four Thousand Three Hundred Eighty-Eight (84,388) shares of validly issued, fully paid and nonassessable Common Stock (as adjusted pursuant to Section 4 hereof, the "Warrant Shares") of the Company, at a purchase price per share equal to twenty-five dollars ($25.00) (such price, as adjusted pursuant to Section 4 hereof, the "Warrant Price"), subject to the provisions and upon the terms and conditions hereinafter set forth. As used herein, (a) the term "Common Stock" shall mean the Company's presently authorized Common Stock, par value $.001 per share, and any stock into or for which such Common Stock may hereafter be converted or exchanged, and (b) the term "Date of Grant" shall mean May 30, 2002. The term "Warrant" shall include any warrant issued upon transfer or partial exercise of this Warrant, unless the context clearly requires otherwise. This Warrant is being issued pursuant to that certain Senior Note and Warrant Purchase Agreement (the "Purchase Agreement") dated May 29, 2002 by and among the Company and the Purchasers named therein. Capitalized terms used in this letter and not defined herein shall have the meanings ascribed to them in the Purchase Agreement. 1. TERM. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time from the Date of Grant through and including the close of business on the seventh anniversary of the Date of Grant (the "Expiration Date"); provided, 2 however, that if the holder has timely surrendered this Warrant for exercise in compliance with Section 2(a), but the statutory waiting period required under HSR (as defined in Section 10(c)(ii)), and any extension thereof, shall not have expired or been terminated before certain shares of Common Stock may be issued upon the exercise of this Warrant prior to the Expiration Date, then the Expiration Date with respect to the purchase right represented by this Warrant with respect to such shares shall be automatically extended until the third Business Day following the date of such expiration or termination. 2. EXERCISE. (a) METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. Subject to Section 1 hereof, the expiration or termination of the statutory waiting period required under HSR (and any extension thereof) in respect of the issuance of certain Warrant Shares as provided in Section 10(c)(ii) hereof, and the expiration of the exercise delay periods, if applicable, set forth in Section 2(d) hereof, the purchase right represented by this Warrant may be exercised by the holder hereof, in whole or in part, at any time or from time to time, from and after the Date of Grant by the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A duly executed) at the principal office of the Company, and, except as otherwise provided for herein, by the payment to the Company an amount in cash or by check equal to the then applicable Warrant Price multiplied by the number of Warrant Shares then being purchased. In addition and not in limitation of the foregoing, if such holder owns Senior Notes of the Company, in lieu of paying such Warrant Price in cash or by check, such holder shall have the right (but not the obligation) to pay such Warrant Price by agreeing to cancel and forgive the debt owed by the Company to such holder pursuant to the Senior Notes in the amount equal to such Warrant Price. (Such debt cancellation and forgiveness shall be applied first, toward accrued and unpaid interest on the Senior Notes (if any), second, to any premium due and owing on the Senior Notes (if any), and third, to the outstanding principal amount of the Senior Notes.) The person or persons in whose name(s) any certificate(s) representing shares of Common Stock shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the shares represented thereby (and such shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised if exercised prior to the close of business on such date; otherwise, the date of record shall be the next Business Day. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of Common Stock so purchased shall be delivered to the holder hereof as soon as possible and in any event within five (5) Business Days after such exercise and, unless this Warrant has been fully exercised (including without limitation, exercise pursuant to Section 2(b) below), a new Warrant representing the portion of the Warrant Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof as soon as possible and in any event within such five (5) Business Day period. (b) EXERCISE AT THE COMPANY'S OPTION. If, at any time following the second anniversary of the Grant Date, (i) the daily Closing Price (as defined below) per share of Common Stock for forty-five (45) consecutive Trading Days (as defined below) (the close of business on such day being referred to herein as the "Requisite Trading Date") occurring at least forty-five (45) consecutive trading following the second anniversary of the Grant Date, is at least $6.00 (with appropriate adjustment made for any stock dividend, split-up or subdivision or any 3 combination or reclassification made or effected subsequent to the date hereof), and (ii) the Shelf Registration (as defined in the Registration Rights Agreement of even date herewith between the Company and the Purchaser) with respect to the Warrant Shares is effective, then the Company, at its option, may require the holder of this Warrant to exercise this Warrant by providing written notification (the "Notice") to the holder. Such Notice shall (i) state that the Requisite Trading Date has occurred, and that the Company's desire to require the holder to exercise the Warrant. and (ii) be given to the holder not later than 30 days following the Requisite Trading Date. If the holder fails to exercise this Warrant by the first Business Day that occurs 30 days after such holder received the Notice (which shall have been given properly in accordance with this paragraph), this Warrant shall be deemed to have been exercised automatically immediately prior to the close of business on such day (the "Automatic Exercise Date"), and the person entitled to receive the shares of Common Stock issuable upon such exercise shall be treated for all purposes as the holder of record of such Warrant Shares as of the close of business on such Automatic Exercise Date. As soon as practicable after the Automatic Exercise Date, not to exceed five Business Days, the Company shall provide written notification to the holder of the Automatic Exercise Date. This Warrant shall be deemed to be surrendered to the Company on the Automatic Exercise Date by virtue of this Section 2(b) and without any action by the holder of this Warrant or any other person, and payment to the Company of the then applicable Warrant Price multiplied by the number of Warrant Shares then being purchased shall be deemed to have been elected to be made by the holder pursuant to the terms of Section 2(c) below (without payment by the holder of any exercise price or any cash, cancellation of indebtedness under the Senior Notes or other consideration) (such election, a "Deemed Election"), unless the holder notifies the Company in writing as soon as practicable after receipt of the Notice, not to exceed five (5) Business Days, that, in its sole and absolute discretion, it chooses to pay the exercise price in cash, by check or by cancelling indebtedness under the Senior Notes pursuant to Section 2(a) above). As promptly as practicable on or after the Automatic Exercise Date (but subject to the expiration of the exercise delay periods, if applicable, set forth in Section 2(d) hereof) and in any event, within five (5) Business Days after the Automatic Exercise Date (or, if applicable, the expiration of the exercise delay periods set forth in Section 2(d) hereof), the Company at its expense shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of Warrant Shares issuable upon such exercise. For purposes of the foregoing, "Closing Price" means, with respect to a share of Common Stock, as of the date of determination, (a) the closing price per share of Common Stock on such date published in The Wall Street Journal or, if no such closing price on such date is published in The Wall Street Journal, the average of the closing bid and asked prices on such date, as officially reported on the principal national securities exchange (including, without limitation, The Nasdaq Stock Market, Inc. (or its successor) ("NASDAQ")) on which the Common Stock is then listed or admitted to trading; or (b) if the Common Stock are not then listed or admitted to trading on any national securities exchange but are designated as national market system securities by the NASD, the last trading price per share of Common Stock on such date; or (c) if there shall have been no trading on such date or if the Common Stock is not so designated, the average of the reported closing bid and asked prices of the Common Stock on such date as shown by NASDAQ and reported by any member firm of The New York Stock Exchange, Inc. selected by the Company. If trading is conducted on a continuous basis on any exchange, then the closing price shall be at 4:00 p.m. New York City time. For purposes of the foregoing, "Trading Day" means, so long as the Common Stock is listed or admitted to trading on a national securities exchange, a 4 day on which the principal national securities exchange on which the Common Stock is listed is open for the transaction of business, or, if the Common Stock is not so listed or admitted for trading on any national securities exchange, a day on which NASDAQ is open for the transaction of business. (c) NET ISSUE EXERCISE. In lieu of the payment of the aggregate Warrant Price, the holder shall have the right (but not the obligation), to require the Company to convert this Warrant, in whole or in part, into shares of Common Stock as provided for in this Section 2(c). In connection with the foregoing and without limiting the rights of the holder under the terms of this Warrant, the holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company (with the notice of exercise form and notice of such election attached hereto as Exhibit A duly executed) in which event the Company shall issue to the holder a number of Warrant Shares computed using the following formula: X = Y (A - B) --------- A Where: X = the number of shares of Common Stock to be issued to the holder Y = the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the number of shares of Common Stock to be issued upon such partial exercise(at the date of such calculation) A = the Fair Market Value (as defined in Section 4(j) below) of one (1) share of Common Stock B = the Warrant Price (d) CERTAIN LIMITATIONS ON NET ISSUE EXERCISE. Notwithstanding anything to the contrary set forth herein (but giving full effect to the provisions relating to a Deemed Election as set forth in this Section 2(d)), and provided that a Shelf Registration (as defined in the Registration Agreement) with respect to the offer and sale of all of the Warrant Shares is and remains effective, the right of the holder of this Warrant to elect to pay the Warrant Price pursuant to the terms of Section 2(c) hereof shall be restricted as follows: (i) the right of the holder of this Warrant to elect to pay the Warrant Price pursuant to the terms of Section 2(c) hereof shall not be available during the period commencing on the Date of Grant and ending on (and excluding) the date of the first anniversary of the Date of Grant; (ii) if during the period commencing on (and including) the first anniversary of the Date of Grant and ending on (and excluding) the date of the third anniversary of the Date of Grant, the holder elects (or, in the case of a Deemed Election, is deemed to have elected pursuant to Section 2(b)) to pay the Warrant Price for all or any portion of the Warrant 5 Shares pursuant to the terms of Section 2(c) hereof, the Company shall have the right to delay the exercise of such portion of the Warrant (the potion of the Warrant that is exercisable into such Warrant Shares, including the portion of the Warrant that would have been cancelled to pay the Warrant Price pursuant to the terms of Section 2(c) hereof, the "Warrant Portion") for a period of up to 10 Business Days from the receipt of notice of exercise with respect to the Warrant Portion (or, in the case of a Deemed Election, from the Automatic Exercise Date ), but not longer (which period shall be deemed to include the expired portion of the exercise delay period referenced in Section 2(d)(iii) hereof); provided that, during such 10-Business Day period, the Company uses its reasonable best efforts (at its own cost and expense) to locate a prospective third-party purchaser for the Warrant Portion. If, prior to the expiration of such 10-Business Day period, (1) the Company is able to locate such third-party purchaser for the Warrant Portion, (2) such third-party purchaser makes a legally binding offer to purchase the Warrant Portion on terms (including price) satisfactory to the holder, and (3) such third-party purchaser agrees to exercise the Warrant Portion immediately after purchasing it and to pay the exercise price thereon to the Company in cash, then the holder, at the request of the Company, shall sell the Warrant Portion to such third-party purchaser on such terms; (iii) if during the period commencing on (and including) the first anniversary of the Date of Grant and ending on (and excluding) the date of the third anniversary of the Date of Grant, the holder owns any Senior Notes and elects (or, in the case of a Deemed Election, is deemed to have elected pursuant to Section 2(b)) to pay the Warrant Price for all or any portion of the Warrant Shares pursuant to the terms of Section 2(c) hereof , the Company shall have the right to delay the exercise of the portion of this Warrant covering such Warrant Shares for which the holder is able to pay the Warrant Price by canceling and forgiving the debt owed by the Company to such holder pursuant to the Senior Notes in the amount equal to such Warrant Price as set forth in Section 2(a) (such portion of this Warrant, the "Tax Opinion Portion") for a period of up to 10 Business Days from the receipt of notice of exercise with respect to such Tax Opinion Portion from the holder (or, in the case of a Deemed Election, from the Automatic Exercise Date), but not longer (which period shall be deemed to include the expired portion of the exercise delay period referenced in Section 2(d)(ii) hereof); provided that, during such 10-Business Day period, the Company shall use its reasonable best efforts to obtain, in good faith, an unqualified opinion (reasonably satisfactory to the holder) addressed to the holder from a nationally recognized tax counsel acceptable to the holder that the holding period (calculated with reference to the original investment date) of the Warrant Shares received upon the payment of the Warrant Price by canceling and forgiving the debt owed by the Company to such holder pursuant to the Senior Notes in the amount equal to such Warrant Price as set forth in Section 2(a) will include the period for which such holder held the Senior Notes to be cancelled and the Warrants to be exercised (such opinion, the "Tax Opinion"). If, prior to the expiration of such 10-day period, the Company is able to obtain a Tax Opinion, the holder shall not have the right to pay the Warrant Price pursuant to the terms of Section 2(c) hereof in respect of such Tax Opinion Portion until the date of the third anniversary of the Date of Grant; and (iv) during the period commencing on (and including) the first anniversary of the Date of Grant and ending on (and excluding) the date of the third anniversary of the Date of Grant, if the Company is unable obtain the Tax Opinion pursuant to Section 2(d)(iii) above with respect to a Tax Opinion Portion elected (or, in the case of a Deemed Election, deemed to have 6 been elected pursuant to Section 2(b)) to be exercised by the holder (or the Company reasonably believes that it would be unable to obtain such Tax Opinion), then by written notice to the holder given not more than 3 Business Days following the later of: (x) receipt of notice of exercise from such holder by the Company in respect of such Tax Opinion Portion (or, in the case of a Deemed Election, from the Automatic Exercise Date ) or (y) if applicable, the expiration of the exercise delay period in respect of such Tax Opinion Portion pursuant to Section 2(d)(iii) above, the Company shall have the right to require the holder to exercise all or any portion of such Tax Opinion Portion by electing to pay the Warrant Price pursuant to the methods of exercise set forth in Section 2(a) hereof (and not pursuant to the terms of Section 2(c) hereof ) if, upon the exercise of such portion of the Warrants, the Company will pay such holder an additional amount (the "Grossed Up Taxes") in cash which, after reduction for all Taxes payable by such holder thereon, is equal to the difference between the Taxes that would be due from such holders on the exercise of the Warrants and the immediate sale of the resulting Warrant Shares at their fair market value if taxed as ordinary income and the Taxes that would be due on such exercise and sale if taxed at the applicable capital gains rate. (For purposes of computing the Grossed Up Taxes, it shall be assumed that the holder is an individual resident of New York City, taxed at the maximum marginal rate of Federal, state, and local income taxation). 3. STOCK FULLY PAID; RESERVATION OF SHARES. All Warrant Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and conditions herein, be validly issued, fully paid and nonassessable, and free from all taxes, liens, charges, pre-emptive rights and other encumbrances with respect to the issue thereof. The Company shall pay all transfer taxes, if any, attributable to the issuance of the Warrant Shares upon the exercise of this Warrant. During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved, and free from preemptive rights, for the purpose of the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: (a) ADJUSTMENTS FOR DIVIDENDS IN STOCK. If the Company at any time or from time to time while this Warrant, or any portion thereof, remains outstanding and unexpired declares any dividend, or authorizes any other distribution, upon any stock of the Company of any class, payable in Additional Shares of Common Stock (as defined in this Section 4(a)) (except for any distribution specifically provided for in Section 4(b), Section 4(c), or as set forth in Section 4(f)), then, and in each such case, (A) the aggregate number of Warrant Shares for which this Warrant is exercisable (the "Warrant Share Number") immediately prior to such event shall be adjusted (and any other appropriate actions shall be taken by the Company) so that the holder shall be entitled to receive upon exercise of this Warrant the number of shares of Common Stock of the Company that it would have owned or would have been entitled to receive upon or by reason of any of the events described above, had this Warrant been exercised immediately prior to the occurrence of such event and (B) the Warrant Price payable upon the exercise of this Warrant shall be adjusted pursuant to the following formula: 7 X = Y(A) ---- B Where: X = the Warrant Price, as adjusted pursuant to this formula Y = the Warrant Price in effect immediately prior to such adjustment A = the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to such adjustment B = the number of Warrant Shares issuable upon the exercise of this Warrant immediately after such adjustment An adjustment made pursuant to this Section 4(a) shall become effective retroactively to a date immediately following the close of business on the record date for the determination of holders of shares of Common Stock entitled to receive such dividend or distribution. The term "Additional Shares of Common Stock" as used in this Warrant shall mean all shares of Capital Stock issued or issuable by the Company after the date of this Warrant, except for the Warrant Shares. For purposes of the foregoing, "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights in, or other equivalents (however designated and whether voting or non-voting) of such Person's capital stock and any and all rights, warrants or options exchangeable for or convertible into such capital stock. (b) SUBDIVISION OR COMBINATION OF SHARES. If the Company at any time or from time to time while this Warrant, or any portion thereof, remains outstanding and unexpired shall (x) subdivide the outstanding shares of Common Stock into a larger number of shares, (y) combine the outstanding shares of Common Stock into a smaller number of shares or (z) issue any shares of its Capital Stock in a reclassification of the Common Stock (other than any such event for which an adjustment is made pursuant to another clause of this Section 4), then, and in each such case, (A) the Warrant Share Number immediately prior to such event shall be adjusted (and any other appropriate actions shall be taken by the Company) so that the holder shall be entitled to receive upon exercise of this Warrant the number of shares of Common Stock of the Company that it would have owned or would have been entitled to receive upon or by reason of any of the events described above, had this Warrant been exercised immediately prior to the occurrence of such event and (B) the Warrant Price payable upon the exercise of this Warrant shall be adjusted by multiplying such Warrant Price immediately prior to such adjustment by a fraction, the numerator of which shall be the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to such adjustment, and the denominator of which shall be the number of Warrant Shares issuable immediately thereafter. An adjustment made pursuant to this Section 4(b) shall become effective retroactively to the close of business on the day upon which such corporate action becomes effective. (c) CERTAIN DISTRIBUTIONS. If the Company at any time while this Warrant, or any portion thereof, remains outstanding and unexpired shall declare a dividend or otherwise make a distribution to the holders of its Common Stock (other than dividends, distributions or issuances referred to in Section 4(a), Section 4(b), Section 4(d), Section 4(e), or Section 4(k)) in 8 the form of: (1) cash or other property; (2) any evidence of indebtedness, any shares of its capital stock or any other securities or property of any nature whatsoever (including securities of a subsidiary), or (3) any warrants or other rights to subscribe for or purchase any evidences of indebtedness, any shares of its capital stock, or any other securities or property of any nature whatsoever (including securities of a subsidiary), then the Warrant Price shall be reduced by multiplying the Warrant Price in effect immediately prior to the record date for such event by a fraction (a) the numerator of which shall be the Fair Market Value per share of Common Stock on such record date less the amount allocated to one share of Common Stock of any such cash so distributed and the Fair Market Value of any evidences of indebtedness, shares of capital stock, other securities or property, or warrants or other subscriptions or purchase rights so distributed, and (b) the denominator of which shall be such Fair Market Value per share of Common Stock. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Warrant Price shall again be adjusted to be the Warrant Price which would then be in effect if such record date had not been fixed, but such subsequent adjustment shall not affect the number of Warrant Shares issued upon any exercise of this Warrant prior to the date such subsequent adjustment was made. (d) MERGER; SALE OF ASSETS; RECLASSIFICATION. If at any time while this Warrant, or any portion thereof, remains outstanding and unexpired there shall be (1) a reorganization or reclassification (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), (2) a merger or consolidation of the Company with or into another corporation in which the Company is not the surviving entity, or a reverse triangular merger in which the Company is the surviving entity but the shares of the Company's capital stock outstanding immediately prior to the merger are converted by virtue of the merger into other property, whether in the form of securities, cash, or otherwise, or (3) a sale or transfer of the Company's properties and assets as, or substantially as, an entirety to any other person, then, as a part of such reorganization, reclassification, merger, consolidation, sale or transfer, lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Warrant Price then in effect, the number of shares of stock or other securities or property of the successor corporation (or the Company, as applicable) resulting from such reorganization, reclassification, merger, consolidation, sale or transfer that a holder of the shares deliverable upon exercise of this Warrant would have been entitled to receive in such reorganization, reclassification, merger, consolidation, sale or transfer if this Warrant had been exercised immediately before such reorganization, merger, consolidation, sale or transfer, all subject to further adjustment as provided in this Section 4. The foregoing provisions of this Section 4(d) shall similarly apply to successive reorganizations, reclassification, mergers, consolidations, sales and transfers and to the stock or securities of any other corporation that are at the time receivable upon the exercise of this Warrant. If the per-share consideration payable to the holder hereof for shares in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in the manner set forth under Section 4(j). At the time of such event, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by the Board of Directors of the Company, with the consent of the holder in such instances where the rights of the holder are adversely affected in the reasonable opinion of the holder) in order to provide for adjustments of shares of Common Stock for which this Warrant is exercisable. These adjustments shall be as nearly equivalent as practicable to the adjustments provided in this Section 4. In all events, appropriate adjustment (as determined in good faith by the Company's Board of Directors, with the consent of the holder in such instances where the rights of 9 the holder are adversely affected in the reasonable opinion of the holder) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the holder after the transaction, to the end that the provisions of this Warrant shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant. In case any Additional Shares of Common Stock or evidence of indebtedness, shares of stock or other securities which are at any time, directly or indirectly, convertible into or exchangeable for Additional Shares of Common Stock or any rights or options to purchase any Additional Shares of Common Stock or convertible securities shall be issued in connection with any merger of another corporation into the Company (with the Company surviving such merger), the amount of consideration therefor shall be deemed to be the fair market value of such portion of the assets of such merged corporation as the Board of Directors of the Company shall in good faith determine to be attributable to such Additional Shares of Common Stock, convertible securities or rights or options, as the case may be, and the Warrant Price shall be adjusted in accordance with this Section 4. (e) DISSOLUTION, LIQUIDATION AND WIND-UP. In case the Company shall, at any time prior to the expiration of this Warrant, dissolve, liquidate or wind up its affairs, the holder of this Warrant shall be entitled, upon the exercise of this Warrant, to receive in lieu of the shares of Common Stock of the Company which such holder would have been entitled to receive, the same kind and amount of assets as would have been issued, distributed or paid to such holder upon any such dissolution, liquidation or winding up with respect to such shares of Common Stock of the Company, had such holder been the holder of record of the Warrant Shares receivable upon the exercise of this Warrant on the record date for the determination of those persons entitled to receive any such liquidating distribution. After such dissolution, liquidation or winding up which shall result in any cash distribution in excess of the Warrant Price provided for by this Warrant, the holder of this Warrant may, at such holder's option, exercise the same without making payment of the Warrant Price, and in such case the Company shall, upon the distribution to the holder, consider that said Warrant Price has been paid in full to it and in making settlement to the holder, shall deduct from the amount payable to the holder of this Warrant an amount equal to such Warrant Price. (f) ISSUANCES OF ADDITIONAL SECURITIES. (i) ISSUANCES OF COMMON STOCK. If and whenever after the Date of Grant, the Company issues or sells, or in accordance with Sections 4(f)(ii) and (iii) below, is deemed to have issued or sold, any share of Common Stock for a consideration per share less than (x) the Adjusted Fair Market Value (as defined in Section 4(j) below) of the Common Stock at such time or (y) the Warrant Price in effect immediately prior to such time (the greater of such amounts being referred to herein as the "Adjustment Multiplier"), then immediately upon such 10 issue or sale or deemed issue or sale, the Warrant Price shall be reduced to the amount computed using the following formula: X = Y * [(A*B)+C] ------- A*D Where: X = the Warrant Price, as adjusted pursuant to this formula Y = the Warrant Price in effect immediately prior to such issue or sale A = the Adjustment Multiplier B = the number of shares of Common Stock outstanding on a fully diluted basis immediately prior to such issue or sale C = the consideration, if any, received by the Company upon such issue or sale D = the number of shares of Common Stock outstanding on a fully diluted basis immediately after such issue or sale Subject to Section 4(l) hereof, upon each such adjustment of the Warrant Price hereunder, the number of shares of Common Stock acquirable upon the exercise of this Warrant shall be adjusted to the number of shares determined computed using the following formula: X = Y(A) --- B Where: X = adjusted number of shares of Common Stock acquirable upon the exercise of this Warrant Y = the Warrant Price in effect immediately prior to being adjusted in accordance with the formula set forth in the immediately preceding paragraph A = the number of shares of Common Stock acquirable upon exercise of this Warrant immediately prior to adjustment in accordance with this formula B = the Warrant Price as adjusted in accordance with the formula set forth in the immediately preceding paragraph Notwithstanding the foregoing, there shall be no adjustment to the Warrant Price or the number of shares of Common Stock obtainable upon the exercise of this Warrant with respect to the issuance or granting of options to directors, officers or employees of the Company or the exercise thereof pursuant to the Company's stock option plan approved by the Board of Directors of the Company, but only to the extent that the aggregate shares of Common Stock covered by 11 such option plan (excluding shares of Common Stock issuable upon the exercise of options outstanding on the date hereof and listed on Schedule 4.2(b) to the Purchase Agreement) do not exceed 1,200,000 shares (subject to adjustment to reflect any stock split, stock dividend, reclassification, recapitalization or other transaction having a similar effect). (ii) ISSUANCE OF RIGHTS OR OPTIONS. For purposes of determining the adjusted Warrant Price under Section 4(f)(i) hereof, if the Company in any manner grants or sells any rights, warrants or options to subscribe for or purchase Convertible Securities (as defined below) or Common Stock (the "Options"), and the price per share for which Common Stock is issuable upon the exercise of such Options (or upon conversion or exchange of any stock or securities (directly or indirectly) convertible or exercisable into or exchangeable for Common Stock (the "Convertible Securities") issuable upon exercise of such Options) is less than the greater of (x) the Adjusted Fair Market Value of the Common Stock determined as of the time of the granting or sale of such Options or (y) the Warrant Price in effect immediately prior to such time, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options (or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options) shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Options for such price per share. For purposes of this paragraph, the "price per share for which Common Stock is issuable" shall be determined by dividing (A) the total minimum amount, if any, received or receivable by the Company as consideration for the granting or sale of such Options, plus the aggregate minimum amount of additional consideration payable to the Company upon exercise of all such Options, plus in the case of such Options which relate to Convertible Securities, the aggregate minimum amount of additional consideration, if any, payable to the Company upon the issuance or sale of such Convertible Securities and the conversion or exchange thereof, by (B) the total maximum number of shares of Common Stock issuable at any time upon the exercise of such Options or upon the conversion or exchange of all such Convertible Securities issuable at any time upon the exercise of such Options. No further adjustment of the Warrant Price or the number of shares of Common Stock issuable hereunder shall be made when Convertible Securities are actually issued upon the exercise of such Options or when Common Stock is actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities. (iii) ISSUANCE OF CONVERTIBLE SECURITIES. For purposes of determining the adjusted Warrant Price under Section 4(f)(i), if the Company in any manner issues or sells any Convertible Securities and the price per share for which Common Stock is issuable upon conversion or exchange thereof is less than the greater of (x) the Adjusted Fair Market Value of the Common Stock determined as of the time of such issue or sale or (y) the Warrant Price in effect immediately prior to such time, then the maximum number of shares of Common Stock issuable upon conversion or exchange of such Convertible Securities shall be deemed to be outstanding and to have been issued and sold by the Company the time of the issuance or sale of such Convertible Securities for such price per share. For the purposes of this paragraph, the "price per share for which Common Stock is issuable" shall be determined by dividing (A) the total amount received or receivable by the Company as consideration for the issue or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof, by (B) 12 the total maximum number of shares of Common Stock issuable at any time upon the conversion or exchange of all such Convertible Securities. No further adjustment of the Warrant Price or the number of shares of Common Stock issuable hereunder shall be made when Common Stock is actually issued upon the conversion or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustments of the Warrant Price or the number of shares of Common Stock issuable hereunder had been or are to be made pursuant to other provisions of this Section 4(f), no further adjustment of the Warrant Price or the number of shares of Common Stock issuable hereunder shall be made by reason of such issue or sale. (iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE SECURITIES. Upon the expiration of any Option or the termination of any right to convert or exchange any Convertible Security without the exercise of any such Option or right, any decrease in the Warrant Price or any increase in the number of shares of Common Stock for which this Warrant may be exercised, to the extent in any way affected by or computed using such expired or terminated Options or Convertible Securities, shall be recomputed to reflect the issuance of only the number of shares of Common Stock actually issued (or deemed issued in accordance with Sections 4(f)(ii) and (iii) above, which have not expired or terminated) upon the exercise, conversion or exchange of such Options or Convertible Securities. Notwithstanding anything to the contrary set forth in the preceding sentence, no such adjustment to the Warrant Price or the number of shares of Common Stock for which this Warrant may be exercised shall be made to the extent that such adjustment would put the holder in a worse economic position than he or it would have been in, had such Option or Convertible Security never been issued. (v) OTHER MATTERS. If any Common Stock, Option or Convertible Security is issued or sold, or deemed to have been issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Company therefor (net of discounts, commissions and related expenses). In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Option by the parties thereto, the consideration for the Option shall be the Fair Market Value thereof. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any shares so owned or held shall be considered an issue or sale of Common Stock. (g) CONSIDERATION OTHER THAN CASH. In case the Company at any time prior to the expiration of this Warrant shall issue or sell any shares of Common Stock or convertible securities or other common stock equivalents for a consideration other than cash, the amount of the consideration other than cash payable to the Company shall be deemed to be the fair value (as determined in accordance with Section 4(j) below) of such consideration. Whether or not the consideration so received is cash, the amount thereof shall be determined after deducting therefrom any expenses incurred or any underwriting commissions or concessions or discounts paid or allowed by the Company in connection therewith. (h) RECORD DATE. In case at any time the Company shall fix a record date of the holders of its Common Stock for the purpose of entitling them (1) to receive a dividend or other distribution payable in Common Stock or convertible securities or other common stock 13 equivalents or rights or options to purchase either thereof, or (2) to subscribe for or purchase Common Stock or convertible securities or other common stock equivalents or rights or options to purchase either thereof, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. (i) [Intentionally Deleted.] (j) MAXIMUM WARRANT PRICE; FAIR MARKET VALUE. The Warrant Price in effect at any time shall not be increased as a result of any event described in this Section 4, unless specifically indicated. Fair Market Value as of a particular date shall mean the average of the daily closing prices for the preceding thirty (30) trading days before the day in question. The closing price for each day shall be the last reported sale price or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices, in either case on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices as reported by the National Association of Securities Dealers Automated Quotation System. If such quotations are unavailable, or with respect to other appropriate security, property, assets, business or entity, Fair Market Value shall be determined mutually by the Board of Directors and the holder or, if the Board of Directors and the holder shall fail to agree, at the Company's expense, by a firm of independent certified public accountants of recognized national standing (who have not been employed by the Company within the last five years) acceptable to the holder (an "Appraiser"). Any determination of the Fair Market Value by an Appraiser shall be based on a valuation of the Company as an entirety without regard to any discount for minority interests or disparate voting rights among classes of capital stock. The Adjusted Fair Market Value per share of a security shall be equal to the Fair Market Value of such security, less 10% of such Fair Market Value, and less the amount of reasonable and documented out-of-pocket fees and expenses, if any, incurred by the Company as a result of the issuance of the securities being evaluated, divided by the total number of securities so issued on a fully diluted basis, which amount of reasonable and documented fees and expenses so subtracted shall, for all purposes under this Warrant, be capped at 5% of such security's Fair Market Value. (k) COMPANY TO PREVENT DILUTION. The Company shall not, by amendment of its organizational documents, by entering into any contract, agreement or understanding with any third party or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the carrying out of all the provisions of this Section 4 with the tenor and purpose of such section. (l) SHARE ADJUSTMENT LIMIT. Notwithstanding anything to the contrary set forth in Section 4(f) hereof, the maximum number of additional shares of Common Stock acquirable upon the exercise of all warrants issued pursuant to the Purchase Agreement pursuant to the anti-dilution provisions set forth in Section 4(f) therein shall not exceed the Pre-Stockholder Approval Number (as defined in Section 4 (m)). Accordingly, the adjustment to the number of shares of Common Stock acquirable upon the exercise of all warrants issued pursuant 14 to the Purchase Agreement pursuant to the anti-dilution provisions set forth in Section 4(f) therein shall be made on a pro rata basis (based on the number of additional shares of Common Stock that would have been acquirable upon the exercise of each such warrant pursuant to the anti-dilution provisions set forth in Section 4(f) therein had the Adjustment Limit (as defined below) not been reached) among all such warrants entitled to such adjustment (at the time of such entitlement) until the Adjustment Limit is reached. Once a number of shares of Common Stock equal to the Pre-Stockholder Approval Number is issued pursuant to the anti-dilution provisions set forth in Section 4(f) of the warrants issued pursuant to the Purchase Agreement upon the exercise thereof, no additional shares of Common Stock may be issued upon the exercise of any such warrant issued pursuant to the Purchase Agreement pursuant to the anti-dilution provisions set forth in Section 4(f) therein (such limitation, the "Adjustment Limit"). Any share of Common Stock issued pursuant to any warrant issued pursuant to the Purchase Agreement in excess of the Adjustment Limit shall automatically be deemed cancelled. The Adjustment Limit shall act merely to limit the number of additional shares of Common Stock issuable upon the exercise of the Warrants after giving effect to the provisions set forth in Section 4(f) therein, and not to restrict any adjustments to the Warrant Price pursuant to this Warrant, and shall not affect any matter other than the exercise of the Warrants into shares of Common Stock. In addition, once the Adjustment Limit has been reached, upon (and in addition) to each adjustment of the Warrant Price pursuant to Section 4(f) hereof (the Warrant Price as so adjusted, the "Initially Adjusted Price"), the Warrant Price per share of Common Stock shall be further adjusted to the amount computed using the following formula (the Warrant Price as so further adjusted, the "Further Adjusted Price"): X = Y-(A) --- B Where: X = the Further Adjusted Price Y = the Initially Adjusted Price A = the Adjusted Fair Market Value (as of the date of issue or sale, or deemed issue or sale, of securities by the Company that triggered the anti-dilution adjustments pursuant to Section 4(f) hereof) of the additional number of shares of Common Stock that would have been issuable upon the exercise of this Warrant pursuant to Section 4(f), but became non-issuable pursuant to this Section 4(l) because the Adjustment Limit has been reached B = the total number of Shares of Common Stock acquirable upon the exercise of this Warrant on an "as fully exercised basis" at the time of such adjustment (giving effect to the Adjustment Limit) (m) PRE-STOCKHOLDER APPROVAL NUMBER. For purposes of this Warrant, "Pre-Stockholder Approval Number" shall equal to 438,599 shares of Common Stock (subject to adjustment to reflect stock splits, stock dividends, stock combinations, recapitalizations and like occurrences). 15 5. NOTICE OF ADJUSTMENTS. Whenever the Warrant Price or the number of Warrant Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Warrant Price and the number of Warrant Shares purchasable hereunder after giving effect to such adjustment, which shall be mailed, by first class mail, postage prepaid to the holder of this Warrant. 6. FRACTIONAL SHARES. No fractional shares of Common Stock will be issued in connection with any exercise hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor based on the Fair Market Value of a share of Common Stock on the date of exercise. 7. TRANSFER OF WARRANT. (a) WARRANT REGISTER. The Company will maintain a register (the "Warrant Register") containing the names and addresses of the holder or holders of the Warrants. Any holder of this Warrant, or any portion thereof may change his or her address as shown on the Warrant Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the holder may be delivered or given by mail to such holder as shown on the Warrant Register and at the address shown on the Warrant Register. Until this Warrant is transferred on the Warrant Register of the Company, the Company may treat the holder as shown on the Warrant Register as the absolute owner of this Warrant for all purposes, notwithstanding any notice to the contrary. (b) WARRANT AGENT. The Company may, by written notice to the holder, appoint an agent for the purpose of maintaining the Warrant Register referred to in Section 7(a) above, issuing the Common Stock or other securities then issuable upon the exercise of this Warrant, exchanging this Warrant, replacing this Warrant, or any or all of the foregoing. Thereafter, any such registration, issuance, exchange, or replacement, as the case may be, shall be made at the office of such agent. (c) TRANSFERABILITY AND NONNEGOTIABILITY OF WARRANT. This Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and the transferee. Subject to the provisions of this Warrant with respect to compliance with the Securities Act of 1933, as amended (the "Securities Act"), title to this Warrant may be transferred by endorsement (by the holder executing the Assignment Form attached hereto as Exhibit B) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery. (d) EXCHANGE OF WARRANT UPON A TRANSFER. On surrender of this Warrant for exchange, properly endorsed on the Assignment Form and subject to the provisions of this Warrant with respect to compliance with the Securities Act and with the limitations on assignments and transfers contained in this Section 7, the Company at its expense shall issue to or on the order of the holder a new warrant or warrants of like tenor, in the name of the holder or as the holder may direct, for the number of shares issuable upon exercise hereof. 16 (e) COMPLIANCE WITH SECURITIES LAWS. (1) The holder of this Warrant, by acceptance hereof, acknowledges that this Warrant and the shares of Common Stock to be issued upon exercise hereof or conversion thereof are being acquired solely for the holder's own account and not as a nominee for any other party, and for investment, and that the holder will not offer, sell or otherwise dispose of this Warrant or any shares of Common Stock to be issued upon exercise hereof or conversion thereof except under circumstances that will not result in a violation of the Securities Act or any state securities laws. (2) The Warrant Shares and any other securities issued upon exercise hereof or conversion thereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws): "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR WITH ANY SECURITIES COMMISSION UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH SECURITIES OR THE ISSUER RECEIVES AN OPINION OF COUNSEL STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT." 8. REPLACEMENT OF WARRANTS OR STOCK CERTIFICATES. The Company covenants to the holder hereof that, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant or any stock certificate and, in the case of any loss, theft or destruction, upon receipt of an executed lost securities bond or indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant or stock certificate, the Company will make and deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate. 17 9. RIGHTS AS STOCKHOLDERS; INFORMATION. No holder of this Warrant, as such, shall be entitled to vote or receive dividends or be deemed the holder of Common Stock or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company or any right to vote for the election of the directors or upon any matter submitted to stockholders at any meeting thereof, or to receive notice of meetings, or to receive dividends or subscription rights or otherwise, until this Warrant shall have been exercised and the Warrant Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein. The foregoing notwithstanding, the Company will transmit to the holder of this Warrant such information, documents and reports as are generally distributed to the holders of any class or series of the securities of the Company concurrently with the distribution thereof to the stockholders. (a) REGISTRATION. Holders of the Warrant Shares shall have the registration rights set forth in the Registration Agreement, including, without limitation, the right to require the Company into maintain the effectiveness of the Shelf Registration Statement covering the Warrant Shares until such time as all the Warrant Shares have been sold. 10. SPECIAL AGREEMENTS OF THE COMPANY. (a) RESERVATION OF SHARES. The Company covenants and agrees that all Warrant Shares will, upon issuance, be validly issued, fully paid and non-assessable and free from all preemptive rights of any shareholder, and from all taxes, liens and charges with respect to the issue thereof. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant. The Company hereby covenants and agrees to take all such action as may be necessary to assure that the par value per share of the Common Stock is at all times equal to or less than the Warrant Price. (b) AVOIDANCE OF CERTAIN ACTIONS. The Company will not, by amendment of its articles of incorporation, certificate of incorporation or any other charter document through any reorganization, transfer of assets, consolidation, merger, issue or sale of securities or otherwise, avoid or take any action which would have the effect of avoiding the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in carrying out all of the provisions of this Warrant and in taking all of such action as may be necessary or appropriate in order to protect the rights of the holders against dilution or other impairment of their rights hereunder. (c) SECURING GOVERNMENTAL APPROVALS. (i) If any shares of Common Stock required to be reserved for the purposes of exercise of this Warrant require registration with or approval of any governmental authority under any federal law (other than the Securities Act) or under any state law before such shares may be issued upon exercise of this Warrant, the Company will, at its expense, as expeditiously as possible, cause such shares to be duly registered or approved, as the case may be. 18 (ii) If approvals of, or filings or registrations with, the Federal Trade Commission and Department of Justice pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR") are required under applicable law before certain shares of Common Stock may be issued upon exercise of this Warrant, and the holder desires to exercise this Warrant for such shares, then, the Company shall: (x) within 10 Business Days of receipt of notice of exercise for such shares from such holder, prepare and make all filings required to be made by the Company pursuant to the notification and reporting obligations of HSR and (y) use its best efforts to as promptly as possible take, or cause to be taken, and cooperate with such holder to take, all other actions and do, or cause to be done, all things necessary, proper or appropriate under applicable laws and regulations to consummate and make effective the exercise of this Warrant for such shares. The Company shall pay the filing fees associated with the filings under HSR. (d) LISTING ON SECURITIES EXCHANGES; REGISTRATION. If, and so long as, any class of the Company's Common Stock shall be listed on any national securities exchange (as defined in the Exchange Act) or NASDAQ, the Company will, at its expense, obtain and maintain the approval for listing upon official notice of issuance of all Warrant Shares and maintain the listing of Warrant Shares after their issuance; and the Company will so list on such national securities exchange or NASDAQ, will register under the Exchange Act (or any similar statute then in effect), and will maintain such listing of, any other securities that at any time are issuable upon exercise of this Warrant if and at the time any securities of the same class shall be listed on such national securities exchange or NASDAQ by the Company. (e) COMPLIANCE WITH LAW. The Company shall comply with all applicable laws, rules and regulations of the United States and of all states, municipalities and agencies and of any other jurisdiction applicable to the Company and shall do all things necessary to preserve, renew and keep in full force and effect and in good standing its corporate existence and authority necessary to continue its business. (f) NOTICES OF STOCK DIVIDENDS, SUBSCRIPTIONS, RECLASSIFICATIONS, CONSOLIDATIONS, MERGERS, ETC. If at any time: (1) the Company shall declare a cash dividend (or an increase in the then existing dividend rate), or declare a dividend on Common Stock payable otherwise than in cash out of its net earnings after taxes for the prior fiscal year; or (2) the Company shall authorize the granting to the holders of Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (3) there shall be any capital reorganization, or reclassification, or redemption of the capital stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation or firm; or (4) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company, then the Company shall give to the holders at the addresses of such holders as shown on the books of the Company, at least twenty (20) days prior to the applicable record date hereinafter specified, a written notice summarizing such action or event and stating the record date for any such dividend or rights (or, if a record date is not to be selected, the date as of which the holders of Common Stock of record entitled to such dividend or rights are to be determined), the date on which any such reorganization, reclassification, consolidation, merger, sale of assets, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected the holders of Common Stock of record shall be entitled to effect any exchange of their shares of Common Stock for cash (or cash 19 equivalent), securities or other property deliverable upon any such reorganization, reclassification, consolidation, merger, sale of assets, dissolution, liquidation or winding up. 11. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. 12. NOTICES. Unless otherwise specifically provided herein, all communications under this Warrant shall be in writing and shall be deemed to have been duly given if given in accordance with Section 12.3 of the Purchase Agreement. 13. GOVERNING LAW. It is the intention of the parties that the internal substantive laws, and not the laws of conflicts, of Delaware should govern the enforceability and validity of this Warrant, the construction of its terms and the interpretation of the rights and duties of the parties. 14. ACCEPTANCE. Receipt of this Warrant by the holder hereof shall constitute acceptance of and agreement to the foregoing terms and conditions. [Signature page follows.] 20 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed on its behalf by one of its officers thereunto duly authorized. CARDIAC SCIENCE CORPORATION By:___________________________________ Name: Title: Address: 3303 Monte Villa Parkway Bothell, WA 98021 Original Issuance Date: May 30, 2002 Replacement Warrant Date: September , 2005 EX-4 5 ex4sc13d_cardiaccorp.txt EXHIBIT 4 EXHIBIT 4 to Schedule 13D SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT This SECOND AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), is entered into as of February 28, 2005, by and among Cardiac Science, Inc., a Delaware corporation (the "COMPANY") and the investors listed on the signature page hereto (the "INVESTORS"), and shall be effective immediately prior to the Effective Time (as defined in Section 1.1 below). A. WHEREAS, the Company entered into that certain Registration Rights Agreement dated as of May 30, 2002, as amended and restated on July 20, 2004 (the "REGISTRATION RIGHTS AGREEMENT"), by and among the Company and the Investors; B. WHEREAS, the Company, Quinton Cardiology Systems, Inc., CSQ Holding Company ("NEWCO"), Heart Acquisition Corporation and Rhythm Acquisition Corporation have entered into an Agreement and Plan of Merger of even date herewith (the "MERGER AGREEMENT"); C. WHEREAS, in connection with the entry into the Merger Agreement, the Company, Newco and the other parties named on the signature pages thereto have entered into that certain Senior Note and Warrant Conversion Agreement of even date herewith (the "CONVERSION AGREEMENT"). D. WHEREAS, as contemplated by Section 8 of the Conversion Agreement, the Investors executing this Agreement and the Company desire to further amend and restate the Registration Rights Agreement in its entirety as set forth herein; E. WHEREAS, Section 10.6 of the Registration Rights Agreement permits the amendment of such Registration Rights Agreement upon the consent in writing by the Company and the Designated Holders (as defined in Section 1.1 below) of at least 70% of the Registrable Securities (as defined in Section 1.1 below); F. WHEREAS, the Investors executing this Agreement are Designated Holders who collectively hold at least 70% of the Registrable Securities; and G. WHEREAS, as contemplated by Section 8 of the Conversion Agreement, Newco has agreed to assume the rights and obligations of the Company under this Agreement concurrently with the Effective Time. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1 DEFINITIONS. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "2004 PURCHASE AGREEMENT" means that certain Purchase Agreement dated as of July 20, 2004 among the Company and certain of the Investors. "2004 SHELF REGISTRATION" shall mean the shelf registration filed on Form S-3 (Registration No. 333-122397) in connection with the shares of common stock and warrants to purchase common stock issued under the 2004 Purchase Agreement. "AFFILIATE" shall mean any Person who is an "affiliate" as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. In addition, any partner or member, as the case may be, of an Investor shall be deemed to be an Affiliate of such Investor. "AGREEMENT" means this Agreement as the same may be amended, supplemented or modified in accordance with the terms hereof. "BOARD OF DIRECTORS" means the Board of Directors of the Company. "BUSINESS DAY" means any day other than a Saturday, Sunday or other day on which commercial banks in the states of New York or California are authorized or required by law or executive order to close. "COMMISSION" means the Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Securities Act. "COMMON STOCK" means (i) the Common Stock, par value $.001 per share, of the Company or, from and after the Effective Time, Newco or (ii) any other capital stock of the Company or, from and after the Effective Time, Newco into which any such stock is reclassified or reconstituted. "COMPANY" has the meaning set forth in the preamble to this Agreement and, after the Effective Time and the assumption by Newco of this Agreement, shall mean Newco. "CONVERSION AGREEMENT" has the meaning set forth in the recitals hereto. "DEMAND REGISTRATION" has the meaning set forth in Section 3.2. "DESIGNATED HOLDER" means each of the Investors and any transferee of any of them to whom the Warrants or Registrable Securities have been transferred in accordance with Section 7.6 of this Agreement, other than a transferee to whom Registrable Securities have been transferred pursuant to a Registration Statement under the Securities Act or Rule 144 or Regulation S promulgated under the Securities Act (or any successor rule thereto). "EFFECTIVE TIME" shall mean the effective time of the mergers contemplated by the Merger Agreement. "EXCHANGE ACT" means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder. "EXISTING SHELF REGISTRATION" shall mean the shelf registration filed on Form S-3 (Registration No. 333-110898) in connection with the senior notes and warrants issued under the Note Purchase Agreement. 2 "FILING PERIOD" has the meaning set forth in Section 3.1. "HOLDERS' COUNSEL" has the meaning set forth in Section 4.1(a). "INDEMNIFIED PARTY" has the meaning set forth in Section 5.3. "INDEMNIFYING PARTY" has the meaning set forth in Section 5.3. "INITIATING HOLDERS" has the meaning set forth in Section 3.2. "INSPECTOR" has the meaning set forth in Section 4.1(g). "INVESTORS" has the meaning set forth in the preamble. "LIABILITY" has the meaning set forth in Section 5.1. "MERGER AGREEMENT" has the meaning set forth in the recitals hereto. "NASD" means the National Association of Securities Dealers, Inc. "NEWCO" shall mean CSQ Holdings Company, a Delaware corporation. "NOTE PURCHASE AGREEMENT" means the Note Purchase agreement dated May 29, 2002 by and among the Company and certain Investors. "PERSON" means any individual, firm, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company, government (or an agency or political subdivision thereof) or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. "RECORDS" has the meaning set forth in Section 4.1(g). "REGISTRABLE SECURITIES" means each of the following: (a) any and all shares of Common Stock issued or issuable upon the exercise of the Warrants, (b) the Common Stock received by the Investors pursuant to the Merger Agreement, including in exchange for the Common Stock issued to the Investors under the 2004 Purchase Agreement, (c) the Common Stock to be issued pursuant to the terms of the Conversion Agreement, and (d) any shares of Common Stock issued or issuable to any of the Designated Holders with respect to the Registrable Securities by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise and any shares of Common Stock issuable upon conversion, exercise or exchange thereof. "REGISTRATION EXPENSES" has the meaning set forth in Section 4.4. "REGISTRATION STATEMENT" means a Registration Statement filed pursuant to the Securities Act. "REPLACEMENT SHELF REGISTRATION" has the meaning set forth in Section 3.1. 3 "SECURITIES ACT" means the United States Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "VALID BUSINESS REASON" has the meaning set forth in Section 3.2. "WARRANTS" mean the warrants exercisable for shares of Common Stock issued in connection with the 2004 Purchase Agreement, which warrants are to be assumed by Newco pursuant to the terms of the Merger Agreement. ARTICLE II GENERAL; SECURITIES SUBJECT TO THIS AGREEMENT 2.1 GRANT OF RIGHTS. The Company hereby grants registration rights to the Designated Holders upon the terms and conditions set forth in this Agreement. 2.2 REGISTRABLE SECURITIES. For the purposes of this Agreement, Registrable Securities will cease to be Registrable Securities, when (i) a Registration Statement covering such Registrable Securities has been declared effective under the Securities Act by the Commission and such Registrable Securities have been disposed of pursuant to such effective Registration Statement, (ii) such Registrable Securities are reacquired by the Company, or (iii) such Registrable Securities are sold to the public pursuant to Rule 144 under the Securities Act or may otherwise be sold without restriction by reason of Rule 144(k) under the Securities Act or any other rule of similar effect. 2.3 HOLDERS OF REGISTRABLE SECURITIES. A Person is deemed to be a holder of Registrable Securities whenever such Person owns of record Registrable Securities, or a security convertible into or exercisable or exchangeable for, Registrable Securities whether or not such acquisition or conversion has actually been effected. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company may act upon the basis of the instructions, notice or election received from the registered owner of such Registrable Securities. Registrable Securities issuable upon conversion or exercise of another security shall be deemed outstanding for the purposes of this Agreement. ARTICLE III REGISTRATION 3.1 REPLACEMENT SHELF REGISTRATION. Immediately prior to the Effective Time, the Company shall terminate the Existing Shelf Registration and the 2004 Shelf Registration. Not later than ninety (90) days after the Effective Time (the "FILING PERIOD"), the Company shall, at its own cost and expense, use its best efforts to file with the Commission a shelf registration statement pursuant to Rule 415 of the Securities Act (the "REPLACEMENT SHELF REGISTRATION"), on Form S-3 (or any successor form thereto), with respect to the resale, from time to time, of all of the Registrable Securities. The Filing Period may be extended for up to 30 days if after using its best efforts the Company is unable to file with the Commission the Replacement Shelf Registration. The Company shall use its reasonable best efforts to cause the Replacement Shelf Registration to become effective as soon as practicable after the filing thereof, and shall keep the Replacement Shelf Registration continuously effective under the Securities Act, subject to provisions of Section 4.3, until all Registrable Securities registered thereunder are sold or are eligible for resale without registration by 4 reason of Rule 144(k) under the Securities Act or any other rule of similar effect. Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated to cause the Registrable Securities to be registered during the Filing Period. 3.2 REQUEST FOR DEMAND REGISTRATION. If the Replacement Shelf Registration is not effective within 90 days after the expiration of the Filing Period or, if any time after the Replacement Shelf Registration is declared effective the Replacement Shelf Registration ceases to remain effective (in either case, a "NON-EFFECTIVE REGISTRATION STATEMENT"), Designated Holders who propose to sell their Registrable Securities entitled to be covered by a Non-Effective Registration Statement to the public at an aggregate price of at least $1,000,000 (the "INITIATING HOLDERS"), shall have the right to make a written request that the Company register, under the Securities Act (other than pursuant to a Registration Statement on Form S-4 or S-8 or any successor thereto) (a "DEMAND REGISTRATION"), the offer and sale of the Registrable Securities stated in such request; provided, however, that the Company shall not be obligated to effect more than two (2) such Demand Registrations for the Investors. For purposes of the preceding sentence, two or more Registration Statements filed in response to one demand shall be counted as one Demand Registration. If the Board of Directors, in its good faith judgment, determines that any registration of Registrable Securities should not be made or continued because it would (A) materially interfere with any material financing, acquisition, corporate reorganization or merger or other material transaction involving the Company or (B) involve effort or expense in excess of that which would customarily be involved in effecting a resale registration (a "VALID BUSINESS REASON"), the Company may (i) postpone filing a Demand Registration statement until such Valid Business Reason no longer exists, but in no event for more than ninety (90) days, and (ii) in the event that a Demand Registration statement has been filed, if the Valid Business Reason has not resulted from actions taken by the Company, the Company, upon the approval of a majority of the Board of Directors, may cause such registration statement to be withdrawn and its effectiveness terminated or may postpone amending or supplementing such registration statement. The Company shall give written notice of its determination to postpone or withdraw a registration statement and of the fact that the Valid Business Reason for such postponement or withdrawal no longer exists, in each case, promptly after the occurrence thereof. Notwithstanding anything to the contrary contained herein, the Company may not postpone or withdraw a filing under this Section 3.2 more than once in any twelve (12) month period. Each request for a Demand Registration shall state the amount of the Registrable Securities proposed to be sold. 3.3 INCIDENTAL OR "PIGGY-BACK" RIGHTS WITH RESPECT TO A DEMAND REGISTRATION. Each of the Designated Holders (other than Initiating Holders who have requested a registration under Section 3.2) may offer and sell its or his Registrable Securities under any Demand Registration pursuant to this Section 3.3. Within seven (7) business days after the receipt of a request for a Demand Registration from an Initiating Holder, the Company shall (i) give written notice thereof to all of the Designated Holders (other than Initiating Holders which have requested a registration under Section 3.2), and (ii) include in such registration all of the Registrable Securities held by such Designated Holders from whom the Company has received a written request for inclusion therein within ten (10) days of the receipt by such Designated Holders of such written notice referred to in clause (i) above. Each such request by such Designated Holders shall specify the number of Registrable Securities to be included in the Registration Statement. The failure of any Designated Holder to respond within such 10 day period referred to in clause (ii) above shall be deemed to be a waiver of such Designated Holder's rights under this Article III with respect to such Demand Registration. Any Designated Holder may waive its rights under this Article III prior to the expiration of such 10-day period by giving written notice to the Company, with a copy to the 5 Initiating Holders. If a Designated Holder sends the Company a written request for inclusion of part or all of such Designated Holder's Registrable Securities in a registration, such Designated Holder shall not be entitled to withdraw or revoke such request without the prior written consent of the Company in its sole discretion unless, as a result of facts or circumstances relating to the Company or to market conditions arising after the date on which such request was made, such Designated Holder reasonably determines that participation in such registration would have a material adverse effect on such Designated Holder. 3.4 EFFECTIVE DEMAND REGISTRATION. Subject to the last four sentences of Section 3.2, the Company shall use its commercially reasonable efforts to cause any such Demand Registration to be filed and to become effective as soon as reasonably practicable after it receives valid written notice requesting the Demand Registration from the Initiating Holders. A registration shall not constitute a Demand Registration until it has become effective and remains continuously effective for the lesser of (i) the period during which all Registrable Securities registered in the Demand Registration are sold and (ii) 120 days; provided, however, that a registration shall not constitute a Demand Registration if (x) after such Demand Registration has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Initiating Holders and such interference is not thereafter eliminated or (y) the conditions specified in the underwriting agreement, if any, entered into in connection with such Demand Registration are not satisfied or waived, other than by reason of a failure by the Initiating Holder. 3.5 EXPENSES. Subject to Section 4.4 hereof, the Company shall pay all Registration Expenses in connection with a Replacement Shelf Registration or a Demand Registration, whether or not such Replacement Shelf Registration or Demand Registration becomes effective. ARTICLE IV REGISTRATION PROCEDURES 4.1 OBLIGATIONS OF THE COMPANY. Whenever registration of Registrable Securities has been requested pursuant to Article III of this Agreement, subject to the last four sentences of Section 3.2, the Company shall use its commercially reasonable efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method of distribution thereof as quickly as reasonably practicable, and in connection with any such request, the Company shall, as expeditiously as reasonably practicable: (a) prepare and file with the Commission a Registration Statement on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of such Registrable Securities in accordance with the intended method of distribution thereof, and cause such Registration Statement to become effective; provided, however, that (x) before filing a Registration Statement or prospectus or any amendments or supplements thereto, the Company shall provide counsel selected by the Designated Holders holding a majority of the Registrable Securities being registered in such registration ("HOLDERS' COUNSEL") and any other Inspector with an adequate and appropriate opportunity to review and comment on such Registration Statement and each prospectus included therein (and each amendment or supplement thereto) to be filed with the Commission, subject to such documents being under the Company's control, and (y) the Company shall notify the Holders' 6 Counsel and each seller of Registrable Securities of any stop order issued or threatened by the Commission and take all action required to prevent the entry of such stop order or to remove it if entered; (b) prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for the lesser of (x) 180 days and (y) such shorter period which will terminate when all Registrable Securities covered by such Registration Statement have been sold; and shall comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement; (c) furnish to each seller of Registrable Securities, prior to filing a Registration Statement, at least one copy of such Registration Statement as is proposed to be filed, and thereafter such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto), and the prospectus included in such Registration Statement (including each preliminary prospectus) and any prospectus filed under Rule 424 under the Securities Act as each such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller; (d) register or qualify the offer and sale of such Registrable Securities under such other securities or "blue sky" laws of such jurisdictions as any seller of Registrable Securities may request, and to continue such qualification in effect in such jurisdiction for as long as permissible pursuant to the laws of such jurisdiction, or for as long as any such seller requests or until all of such Registrable Securities are sold, whichever is shortest, and do any and all other acts and things which may be reasonably necessary or advisable to enable any such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller; provided, however, that the Company shall not be required to (x) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 4.1(d), (y) subject itself to taxation in any such jurisdiction or (z) consent to general service of process in any such jurisdiction; (e) notify each seller of Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such Registration Statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and the Company shall promptly prepare a supplement or amendment to such prospectus and furnish to each seller of Registrable Securities a reasonable number of copies of such supplement to or an amendment of such prospectus as may be necessary so that, after delivery to the purchasers of such Registrable Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (f) take such actions as are customary, prudent and reasonably required in order to expedite or facilitate the disposition of such Registrable Securities; 7 (g) make available at reasonable times for inspection by any seller of Registrable Securities, Holders' Counsel and any attorney, accountant or other agent retained by any such seller (each, an "INSPECTOR" and collectively, the "INSPECTORS") (provided that the Designated Holders shall cooperate with each other to minimize, to the extent practicable, the number of such attorneys, accountants and other agents who are Inspectors so as not to unduly interfere with the day-to-day operations of the Company and its subsidiaries) all financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries (collectively, the "RECORDS") as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's and its subsidiaries' officers, directors and employees, and the independent public accountants of the Company, to supply all information reasonably requested by any such Inspector in connection with such Registration Statement. Records that the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors (and the Inspectors shall confirm their agreement in writing in advance to the Company if the Company shall so request) unless (x) the disclosure of such Records is necessary, in the Company's judgment, to avoid or correct a misstatement or omission in the Registration Statement, (y) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction after exhaustion of all appeals therefrom or (z) the information in such Records was known to the Inspectors on a non-confidential basis prior to its disclosure by the Company or has been made generally available to the public. Each seller of Registrable Securities agrees that it shall, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at the Company's expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential; (h) furnish, at the request of any seller of Registrable Securities on the date the Registration Statement with respect to such securities becomes effective, an opinion, dated such date, of counsel representing the Company for the purposes of such registration, addressed to the seller making such request, covering such legal matters with respect to the registration in respect of which such opinion is being given as such seller may reasonably request and are customarily included in such opinions; (i) comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable but no later than fifteen (15) months after the effective date of the Registration Statement, an earnings statement covering a period of twelve (12) months beginning after the effective date of the Registration Statement, in a manner which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (j) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed, provided that the applicable listing requirements are satisfied; (k) keep Holders' Counsel advised in writing as to the initiation and progress of any registration under Article III hereunder; (l) cooperate with each seller of Registrable Securities in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the NASD; and 8 (m) take all other steps reasonably necessary to effect the registration of the Registrable Securities contemplated hereby. 4.2 SELLER INFORMATION. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish, and such seller shall furnish, to the Company such information regarding the distribution of such securities as the Company may from time to time reasonably request in writing. 4.3 NOTICE TO DISCONTINUE. Each Designated Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4.1(e), such Designated Holder shall forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Designated Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 4.1(e) and, if so directed by the Company, such Designated Holder shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Designated Holder's possession, of the prospectus covering such Registrable Securities which is current at the time of receipt of such notice. If the Company shall give any such notice, the Company shall extend the period during which such Registration Statement shall be maintained effective pursuant to this Agreement (including, without limitation, the period referred to in Section 4.1(b)) by the number of days during the period from and including the date of the giving of such notice pursuant to Section 4.1(e) to and including the date when sellers of such Registrable Securities under such Registration Statement shall have received the copies of the supplemented or amended prospectus contemplated by and meeting the requirements of Section 4.1(e). 4.4 REGISTRATION EXPENSES. The Company shall pay all expenses arising from or incident to its performance of, or compliance with, this Agreement, including, without limitation, (i) Commission, stock exchange and NASD registration and filing fees, (ii) all fees and expenses incurred in complying with securities or "blue sky" laws, (iii) all printing, messenger and delivery expenses, (iv) the fees, charges and disbursements of counsel to the Company and of its independent public accountants and any other accounting fees, charges and expenses incurred by the Company (including, without limitation, any expenses arising from any "cold comfort" letters or any special audits incident to or required by any registration or qualification), (v) the fees, charges and expenses of one counsel to the Designated Holders, up to an aggregate maximum of $5,000 per Registration Statement (inclusive of any amendments or supplements thereto), and (vi) any liability insurance or other premiums for insurance obtained in connection with any Demand Registration pursuant to the terms of this Agreement, regardless of whether such Registration Statement is declared effective. The expenses described in the preceding sentence of this Section 4.4 are referred to herein as "REGISTRATION EXPENSES." Notwithstanding the foregoing, if the Designated Holders shall cease to own at least 10% of the Registrable Securities acquired by the Investors on the effective date of the Registration Rights Agreement, the fees, charges and expenses of legal counsel (and other professionals) retained by the Designated Holders shall not be deemed Registration Expenses for all purposes under this Agreement (and the Company shall be under no obligation to make any payments in connection therewith). In addition, the Designated Holders of Registrable Securities sold pursuant to a Registration Statement shall bear the expense of any broker's commission or underwriter's discount or commission relating to registration and sale of such Designated Holders' Registrable Securities and, subject to clause (v) above, shall bear the fees and expenses of their own counsel.. 9 ARTICLE V INDEMNIFICATION; CONTRIBUTION 5.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless each Designated Holder, its partners, directors, officers, affiliates and each Person who controls (within the meaning of Section 15 of the Securities Act) such Designated Holder from and against any and all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation) (each, a "LIABILITY" and collectively, "LIABILITIES"), arising out of or based upon any untrue, or allegedly untrue, statement of a material fact contained in any Registration Statement, prospectus or preliminary prospectus or notification or offering circular (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading under the circumstances such statements were made, except insofar as such Liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission contained in such Registration Statement, preliminary prospectus or final prospectus in reliance and in conformity with information concerning such Designated Holder furnished in writing to the Company by such Designated Holder expressly for use therein, including, without limitation, the information furnished to the Company pursuant to Section 5.2. 5.2 INDEMNIFICATION BY DESIGNATED HOLDERS. In connection with any Registration Statement in which a Designated Holder is participating pursuant to Article III hereof, each such Designated Holder shall promptly furnish to the Company in writing such information with respect to such Designated Holder as the Company may reasonably request or as may be required by law for use in connection with any such Registration Statement or prospectus and all information required to be disclosed in order to make the information previously furnished to the Company by such Designated Holder not materially misleading or necessary to cause such Registration Statement not to omit a material fact with respect to such Designated Holder necessary in order to make the statements therein not misleading. Each Designated Holder agrees to indemnify and hold harmless the Company and each Person who controls the Company (within the meaning of Section 15 of the Securities Act) to the same extent as the foregoing indemnity from the Company to the Designated Holders, but only if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with information with respect to such Designated Holder furnished in writing to the Company by such Designated Holder expressly for use in such registration statement or prospectus, including, without limitation, the information furnished to the Company pursuant to this Section 5.2; provided, however, that the total amount to be indemnified by such Designated Holder pursuant to this Section 5.2 shall be limited to the net proceeds received by such Designated Holder in the offering to which the Registration Statement or prospectus relates. 5.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to indemnification hereunder (the "INDEMNIFIED PARTY") agrees to give prompt written notice to the indemnifying party (the "INDEMNIFYING PARTY") after the receipt by the Indemnified Party of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which the Indemnified Party intends to claim indemnification or contribution pursuant to this Agreement; provided, however, that the failure so to notify the Indemnifying Party shall not relieve the Indemnifying Party of any Liability that it may have to the Indemnified Party hereunder (except to the extent that the Indemnifying Party is materially prejudiced or otherwise forfeits substantive rights or defenses by reason of such failure). If notice of commencement of any such action is given 10 to the Indemnifying Party as above provided, the Indemnifying Party shall be entitled to participate in and, to the extent it may wish, jointly with any other Indemnifying Party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by it and reasonably satisfactory to such Indemnified Party. The Indemnified Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be paid by the Indemnified Party unless (i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party fails to assume the defense of such action with counsel reasonably satisfactory to the Indemnified Party or (iii) the named parties to any such action (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and such parties have been advised by such counsel that either (x) representation of such Indemnified Party and the Indemnifying Party by the same counsel would be inappropriate under applicable standards of professional conduct or (y) there may be one or more legal defenses available to the Indemnified Party which are different from or additional to those available to the Indemnifying Party. In any of such cases, the Indemnifying Party shall not have the right to assume the defense of such action on behalf of such Indemnified Party, it being understood, however, that the Indemnifying Party shall not be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all Indemnified Parties. No Indemnifying Party shall be liable for any settlement entered into without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the consent of such Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which such Indemnified Party is a party and indemnity has been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability for claims that are the subject matter of such proceeding. 5.4 CONTRIBUTION. If the indemnification provided for in this Article V from the Indemnifying Party is unavailable to an Indemnified Party hereunder in respect of any Liabilities referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions which resulted in such Liabilities, as well as any other relevant equitable considerations. The relative faults of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the Liabilities referred to above shall be deemed to include, subject to the limitations set forth in Sections 5.1, 5.2 and 5.3, any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigation or proceeding; provided that the total amount to be contributed by such Designated Holder shall be limited to the net proceeds received by such Designated Holder in the offering. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. 11 ARTICLE VI COVENANTS 6.1 RULE 144. The Company covenants that from and after the date hereof, it shall (a) file any reports required to be filed by it under the Exchange Act and (b) take such further action as each Designated Holder of Registrable Securities may reasonably request (including providing any information necessary to comply with Rule 144 under the Securities Act), all to the extent required from time to time to enable such Designated Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such rule may be amended from time to time, or Regulation S under the Securities Act or (ii) any similar rules or regulations hereafter adopted by the Commission. The Company shall, upon the request of any Designated Holder of Registrable Securities, deliver to such Designated Holder a written statement as to whether it has complied with such requirements. 6.2 RESTRICTIONS ON PUBLIC SALE BY THE COMPANY. The Company agrees not to effect any public sale or distribution of any of its securities, or any securities convertible into or exchangeable or exercisable for such securities (except pursuant to registrations on Form S-4 or S-8 or any successor thereto), during the period beginning on the effective date of the first Registration Statement under Section 3.2 in which at least two thirds of the Registrable Securities requested to be included in such Registration Statement were included in such Registration Statement and ending on the earlier of (i) the date that all Registrable Securities registered on such Registration Statement are sold and (ii) thirty (30) days after the effective date of such Registration Statement (except as part of such registration). ARTICLE VII MISCELLANEOUS 7.1 TERMINATION. This Agreement shall not be effective if the Merger Agreement is terminated for any reason. Either party may terminate this Agreement if the Effective Time shall not have taken place by December 31, 2005, in which case the parties hereto shall have no further obligations with respect to this Agreement and the Registration Rights Agreement shall continue in its entirety pursuant to its terms. 7.2 RECAPITALIZATIONS, EXCHANGES, ETC. The provisions of this Agreement shall apply to the full extent set forth herein with respect to (i) the shares of Common Stock, (ii) any and all shares of common stock of the Company into which the shares of Common Stock are converted, exchanged or substituted in any recapitalization or other capital reorganization by the Company and (iii) any and all equity securities of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in conversion of, in exchange for or in substitution of, the shares of Common Stock and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof. The Company shall cause any successor or assign (whether by merger, consolidation, sale of assets or otherwise) to enter into a new registration rights agreement with the Designated Holders on terms substantially the same as this Agreement as a condition of any such transaction. 12 7.3 NO INCONSISTENT AGREEMENTS. The Company represents and warrants that, except as set forth on Schedule 7.3 hereto, it has not granted to any Person the right to request or require the Company to register any securities issued by the Company, which right is effective as of the date of this Agreement, other than the rights granted to the Designated Holders herein. The Company shall not enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Designated Holders in this Agreement or grant any additional registration rights to any Person or with respect to any securities which are not Registrable Securities which are prior in right to or inconsistent with the rights granted in this Agreement. 7.4 REMEDIES. The Designated Holders, in addition to being entitled to exercise all rights granted by law, including recovery of damages, shall be entitled to specific performance of their rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive in any action for specific performance the defense that a remedy at law would be adequate. 7.5 NOTICES. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be made by registered or certified first-class mail, return receipt requested, telecopier, courier service or personal delivery: (a) if to the Company: Cardiac Science, Inc. 16931 Millikan Avenue Irvine, California 92606 Telecopier No.: 949-951-7315 Attention: Roderick de Greef with a copy to: Stradling Yocca Carlson & Rauth 660 Newport Center Drive, Suite 1600 Newport Beach, California 92660 Telecopier No.: (949) 725-4100 Attention: Shivbir S. Grewal, Esq. if to any Investor, to such Investor at the address set forth on the signature pages hereto, with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, NY 10019-6064 Telecopy: (212) 757-3990 Attention: : Bruce A. Gutenplan, Esq (b) if to any other Designated Holder, at its address as it appears on the record books of the Company. 13 All such notices, demands and other communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial courier service; five (5) Business Days after being deposited in the mail, postage prepaid, if mailed; and when receipt is mechanically acknowledged, if telecopied. Any party may by notice given in accordance with this Section 7.5 designate another address or Person for receipt of notices hereunder. 7.6 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto as hereinafter provided. The rights of the Designated Holder contained in Article III hereof shall be, with respect to any Registrable Security that is transferred, automatically transferred to such transferee. All of the obligations of the Company hereunder shall survive any such transfer. Except as provided in Article V, no Person other than the parties hereto and their successors and permitted assigns are intended to be a beneficiary of this Agreement. 7.7 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless consented to in writing by the Company and Designated Holders that hold at least 70% of the Registrable Securities; provided that any such amendment, modification, supplement, waiver or consent to departure that adversely affects a Designated Holder in a manner differently than it affects the other Designated Holders shall be effective only with the prior written consent of such Designated Holder. 7.8 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 7.9 HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. 7.11 SEVERABILITY. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof. 7.12 RULES OF CONSTRUCTION. Unless the context otherwise requires, references to sections or subsections refer to sections or subsections of this Agreement. 7.13 ENTIRE AGREEMENT. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto with respect to the subject matter contained herein. There are no restrictions, promises, representations, warranties or undertakings with respect to the subject matter contained herein, other than those set forth or referred to herein. This Agreement, once effective, 14 supersedes all prior agreements and understandings among the parties with respect to such subject matter, including the Registration Rights Agreement. 7.14 FURTHER ASSURANCES. Each of the parties shall, and shall cause their respective Affiliates to, execute such documents and perform such further acts as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement. 7.15 OTHER AGREEMENTS. Nothing contained in this Agreement shall be deemed to be a waiver of, or release from, any obligations any party hereto may have under, or any restrictions on the transfer of Registrable Securities or other securities of the Company imposed by, any other agreement including, but not limited to, the Warrants. [Remainder of page intentionally left blank] 15 IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this Second Amended and Restated Registration Rights Agreement on the date first written above. CARDIAC SCIENCE, INC. By: /s/ Raymond W. Cohen ------------------------------ Name: Raymond W. Cohen Title: CEO INVESTORS: PERSEUS MARKET OPPORTUNITY FUND, L.P. By: /s/ Ray E. Newton III ------------------------------ Name: Ray E. Newton III Title: Managing Director c/o Perseus, L.L.C. 1325 Avenue of the Americas, 25th Floor New York, New York 10019 Telecopier No.: 212-651-6399 Attention: Ray E. Newton, III PERSEUS ACQUISITION/RECAPITALIZATION FUND, L.L.C. By: /s/ Ray E. Newton III ------------------------------ Name: Ray E. Newton III Title: Managing Director c/o Perseus, L.L.C. 1325 Avenue of the Americas, 25th Floor New York, New York 10019 Telecopier No.: 212-651-6399 Attention: Ray E. Newton, III 16 CARDIAC SCIENCE CO-INVESTMENT, L.P. By: /s/ Ray E. Newton III ------------------------------ Name: Ray E. Newton III Title: Managing Director c/o Perseus, L.L.C. 1325 Avenue of the Americas, 25th Floor New York, New York 10019 Telecopier No.: 212-651-6399 Attention: Ray E. Newton, III WINTERSET MASTER FUND, L.P. By: Babson Capital Management LLC, as Investment Manager By: /s/ ------------------------------- c/o Babson Capital Management LLC 1500 Main Street, Suite 2800 Springfield, MA 01115 Telecopier No.: Attention: MILL RIVER MASTER FUND, L.P. By: Babson Capital Management LLC, as Investment Manager By: /s/ ------------------------------- c/o Babson Capital Management LLC 1500 Main Street, Suite 2800 Springfield, MA 01115 Telecopier No.: Attention: 17 MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: Babson Capital Management LLC, as Investment Manager By: /s/ -------------------------------- c/o Babson Capital Management LLC 1500 Main Street, Suite 2800 Springfield, MA 01115 Telecopier No.: Attention: Walter Villiger ------------------------------------ ------------------------------------ ------------------------------------ Telecopier No.: -------------------- 18 SCHEDULE 7.3 REGISTRATION RIGHTS The Company has outstanding registration rights as follows: 1. In July 2004, the Company amended and restated those certain registration rights granted to investors in May 2002. 2. In October 2003, the Company granted certain registration rights to Complient Corporation and its shareholders in connection with the acquisition of such corporation's assets. 3. In September 2003, the Company granted certain registration rights to investors in an equity financing. 4. In July 2003, the Company granted certain registration rights to GE Medical Systems Information Technologies, Inc. pursuant to the warrant issued in connection with an OEM Supply and Purchase Agreement. 5. In August/September 2001, the Company granted certain registration rights to investors in an equity financing. -----END PRIVACY-ENHANCED MESSAGE-----