EXHIBIT 2
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AMENDMENT NO. 3 AND LIMITED WAIVER TO
SENIOR NOTE AND WARRANT PURCHASE AGREEMENT
This AMENDMENT NO. 3 AND LIMITED WAIVER TO SENIOR NOTE AND WARRANT
PURCHASE AGREEMENT (this "Amendment") is entered into as of January 28, 2005, by
and among Cardiac Science, Inc., a Delaware corporation ("CSI"), and the
Purchasers with respect 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 (the "Purchase Agreement"), among CSI and the Purchasers.
Collectively, CSI and the Purchasers may be referred to as the "Parties" herein.
Section 1. Definitions. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings assigned thereto in
the Purchase Agreement, as amended hereby.
Section 2. Amendments to the Purchase Agreement.
(1) Section 2.1(a) of the Purchase Agreement is hereby
amended and restated in its entirety to read as follows:
"(a) Unless otherwise accelerated pursuant to the
terms hereof, the entire unpaid principal amount
of the Senior Notes shall be due and payable in
cash on May 29, 2008."
(2) Section 2.1(b)(ii) of the Purchase Agreement is hereby
amended and restated in its entirety to read as follows:
"(b) (ii) Subject to subsection (iii) of this Section
2.1(b), from and after the third anniversary of
the Closing Date, accrued and unpaid interest on
the Senior Notes calculated at the rate of 6.9%
per annum shall accrue and be paid in kind
(i.e., such interest shall be capitalized when
due and added to the principal balance of the
Senior Notes) quarterly in arrears on each
Interest Payment Date and on the Termination
Date."
(3) Section 7.12 of the Purchase Agreement is hereby amended
and restated in its entirety to read as follows:
"7.12 Financial Covenants.
(a) Debt to Capitalization Ratio. The Company
shall not as of the last day of each
fiscal quarter of the Company, commencing
with the fiscal quarter ended March 31,
2005, permit the ratio of Total Funded
Debt to (y) Total Capitalization plus (z)
interest expense resulting solely from the
amortization of the Warrants in accordance
with GAAP (the "Funded Debt to
Capitalization Ratio") to be more than
50%.
(b) Minimum EBITDA. The Company shall not
permit EBITDA for the periods specified
below to be less than:
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For the Period From EBITDA shall not
and Including To and Including be less than
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January 1, 2005 December 31, 2005 ($3.0 million)
January 1, 2006 March 31, 2006 $1.0 million
April 1, 2006 June 30, 2006 $1.0 million
July 1, 2006 September 30, 2006 $1.0 million
October 1, 2006 December 31, 2006 $1.0 million
Each Quarter Thereafter $1.5 million
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Solely for the purposes of this Section
7.12(b), "Interest Expense," as such term
is used in the calculation of EBITDA,
means, with reference to any period, the
sum of all cash interest charges net of
interest income (including paid-in-kind
interest, imputed interest charges with
respect to Capitalized Lease Obligations
and all amortization of debt discount and
expense, but excluding dividends) of the
Company and its Subsidiaries for such
period determined on a consolidated basis
in accordance with GAAP. Interest Expense
shall give effect to any net payments made
or received by the Company or any of its
Subsidiaries with respect to any Hedge
Agreements in effect during the applicable
period (or any portion thereof).
Additionally, solely for the purposes of
this Section 7.12(b) with respect to the
period from and including January 1, 2005
to and including December 31, 2005, any
and all accounting charges to the Company
resulting from the Company's agreement
entered into in January 2005 with the
investors who participated in the July
2004 financing shall be added back to the
calculation of EBITDA.
(4) Section 7.13 of the Purchase Agreement is hereby amended
and restated in its entirety to read as follows:
"7.13 Capital Expenditures. The Company shall not, nor
shall it permit any of its Subsidiaries to, incur Capital Expenditures in the
aggregate in excess of:
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For Each Quarter During
the Periods Below From and Capital Expenditures shall not be
Including To and Including more than
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January 1, 2005 March 31, 2005 $1.50 million
April 1, 2005 June 30, 2005 $1.25 million
July 1, 2005 December 31, 2006 $0.75 million
Each Quarter Thereafter $1.00 million
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Section 3. Amendment to the Notes. Effective as of the date of this
Amendment, the senior notes in the aggregate original principal amount of
$50,000,000 issued pursuant to the Purchase Agreement (collectively, the
"Notes") shall be amended so that all references to the date "May 30, 2007"
contained in the Notes are replaced with the date "May 29, 2008." Promptly
following the surrender of the original Notes for cancellation, CSI shall
deliver amended and restated Notes reflecting the foregoing amendment.
Section 4. Amendment to the Warrants. Effective as of the date of
this Amendment:
(1) The Warrant Price (as defined in the warrants set forth
on Exhibit A hereto (collectively, the "Warrants")) shall be amended so that the
Warrant Price contained therein shall be equal to $2.00 per share, subject to
further adjustments after the date hereof pursuant to Section 4 of the Warrants.
(2) The number of Warrant Shares (as defined in the
Warrants) subject to the Warrants shall be amended, to the extent required, to
equal the amount specified by each Purchaser's name under the heading "As
Adjusted" on Exhibit A hereto.
(3) The last paragraph of Section 4(f)(i) of the Warrants
shall be amended and restated in its entirety to read as follows:
"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 the granting of
options to directors, officers or employees of the
Company or the exercise thereof pursuant to stock option
plans or agreements approved by the Board of Directors
of the Company, but only to the extent that the
aggregate number of shares of Common Stock covered by
such option plans and agreements do not exceed
15,000,000 shares in the aggregate (subject to
adjustment to reflect any stock split, stock dividend,
reclassification, recapitalization or other transaction
having a similar effect)."
Promptly following the surrender of the original Warrants for
cancellation, CSI shall deliver to each Purchaser one or more amended and
restated Warrants reflecting the foregoing amendments. The Parties agree that
the number of Warrant Shares subject to the Warrants under the heading "As
Adjusted" on Exhibit A hereto shall not be subject to any future additional
anti-dilution adjustments under Section 4(f) of the Warrants.
Section 5. Limited Waiver.
(1) Purchase Agreement. The Purchasers hereby waive any
Event of Default arising solely as a result of CSI's failure to comply with the
covenants contained in the following Sections of the Purchase Agreement: (i)
Sections 6.1 and 6.2 with respect to certain deliveries by CSI prior to the date
hereof, (ii) Section 7.4 with respect to the sale of the MDT trainer business
and the CPR Prompt product line ▇▇▇▇▇▇ ▇▇▇▇, (▇▇▇) Sections 7.5 and 7.6 with
respect to the cancellation of ▇▇▇ ▇▇▇▇▇'▇ promissory note in the aggregate
amount of $588.684.93 in exchange for the surrender and cancellation of 277,682
shares of CSI's common stock, (iv) Section 7.6 with respect to CSI's July 2004
PIPE financing, (v) Section 7.12 of the Agreement with respect to CSI's fiscal
quarter and year ended December 31, 2004, and (vi) Sections 6.6 and 6.13 with
respect to subparagraphs (i) through (v) above.
(2) Warrants. Except as otherwise set forth in this
Amendment, the Purchasers hereby waive any additional anti-dilution adjustments
to the Warrant Shares or the Warrant Price contained in the Warrants arising
prior to the date of this Amendment.
Section 6. Miscellaneous.
(1) Effect; Ratification. The amendments and waivers set
forth herein are effective solely for the purposes set forth herein and shall be
limited precisely as written, and shall not be deemed to (a) be a consent to any
amendment, waiver or modification of any other term or condition of the Purchase
Agreement or of any other instrument or agreement referred to therein, except as
set forth herein, or (b) prejudice any right or remedy that the Purchasers may
now have or may have in the future under or in connection with the Purchase
Agreement, as amended hereby, or any other instrument or agreement referred to
therein. This Amendment shall be construed in connection with and as part of the
Purchase Agreement and all terms, conditions, representations, warranties,
covenants and agreements set forth in the Purchase Agreement and each other
instrument or agreement referred to therein, except as herein amended, are
hereby ratified and confirmed and shall remain in full force and effect.
(2) Counterparts. This Amendment may be executed in any
number of counterparts, each such counterpart constituting an original and all
of which when taken together shall constitute one and the same instrument.
[Signatures on next page]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered as of the date first above written.
CSI:
CARDIAC SCIENCE, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Title: Chief Financial Officer
PURCHASERS:
PERSEUS ACQUISITION/RECAPITALIZATION
FUND, L.L.C.
By: Perseus Acquisition/Recapitalization
Management, L.L.C., its Manager
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇, III
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Name: ▇▇▇ ▇. ▇▇▇▇▇▇, III
Title:
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: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇, III
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Name: ▇▇▇ ▇. ▇▇▇▇▇▇, III
Title:
CARDIAC SCIENCE CO-INVESTMENT. L.P.
By: Perseus Acquisition/Recapitalization
Management, L.L.C., its General Partner
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇, III
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Name: ▇▇▇ ▇. ▇▇▇▇▇▇, III
Title:
EXHIBIT A
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WARRANTS
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NAME WARRANT NO. AS ADJUSTED
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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
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