Sample Business Contracts

Distribution and License Agreement - Physio-Control Corp. and Cardiac Science Inc.

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     AGREEMENT made as of this __________ day of ___________, 199___, by and
between Physio-Control Corporation ("Physio") and Cardiac Science, Inc.
("Cardiac Science").


     a.   CARDIAC SCIENCE.  Cardiac Science is a corporation incorporated under
          the laws of Delaware, with its principal place of business at 1176
          Main Street, Bldg. C, Irvine, CA 92614.  Cardiac Science is a
          manufacturer of medical devices, including the Powerheart-Registered
          Trademark- AECD-Registered Trademark- defibrillator-monitor
          ("Powerheart") and related supplies and accessories.  Incorporated
          within the Powerheart is certain Software Technology (as defined in
     b.   PHYSIO.  Physio-Control Corporation is a Washington corporation with
          its principal place of business at 11811 Willows Road NE, P.O. Box
          97006 Redmond, WA 98073-9706.  Physio represents that it has the
          capability and resources to promote, market, and sell the Products (as
          defined in 1.2).  Physio is also a manufacturer of cardiac
          defibrillator-monitors and related supplies and accessories, including
          disposable defibrillator electrode pads.
     c.   PURPOSE.  The parties intend that during the term of this Agreement
          Physio will be appointed as an authorized dealer of Cardiac Science
          Products with the exclusive right to distribute the Powerheart to the
          US and Canadian Hospital Market; will be the exclusive authorized
          supplier of electrodes for use with the Powerheart; and will have the
          right to incorporate the Software Technology into existing or future
          defibrillator-monitor products to be manufactured by Physio.

                    NOW, THEREFORE, the parties agree as follows:

                                          1  DEFINITIONS

Whenever the following terms appear capitalized in this Agreement they shall
have the indicated meanings.

     1.1  HOSPITAL MARKET.  The Hospital Market shall be defined as any and all
          hospitals without limitation to type or size. The Powerheart is
          intended to be used to provide treatment for "in-hospital" patients
          who are at risk of cardiac arrest. Therefore, sale of the Powerheart
          is restricted for use inside of hospitals.
     1.2  PRODUCTS.  The Powerheart and/or replacements.


     1.3  SOFTWARE TECHNOLOGY.  The AECD-Registered Trademark- Tachyarrhythmia
          Detection and Discrimination software package, which when integrated
          into an external defibrillator-monitor, is capable of, among other
          things, continuous monitoring and instant detection of ventricular
          tachyarrthymias. Moreover, it allows for fully automatic delivery of
          defibrillation therapy without human intervention in accordance with
          its programmed parameters. The Software Technology is further
          described in EXHIBIT 1.3 labeled AECD-Registered Trademark-
          Tachyarrhythmia Detection Software-TM- Description attached hereto.
     1.4  DEFIBRILLATOR-MONITOR. A defibrillator device with a display that
          incorporates certain hardware and software components that is
          portable, stands alone and is not part of, nor a sub-component of,
          another product (e.g., patient monitoring system). A defibrillator
          device that is capable of communicating with, or functioning as a
          sub-component of, another product such as a patient monitoring system
          shall be considered a Defibrillator-Monitor provided that the
          defibrillator device is capable of operating as a portable, stand
          alone device.
     1.5  PROPRIETARY CHIP.  A proprietary device  comprised of electronic chips
          within a proprietary integrated circuit designed and owned exclusively
          by Cardiac Science and incorporated into the cable connector of a
          disposable defibrillator pad, which allows the defibrillator to detect
          the presence of the disposable defibrillator pad.
     1.6  CHIP CONTROLLED CONNECTOR. The cable connector component of disposable
          defibrillator pads that has incorporated Cardiac Science's Proprietary
          Chip, and may or may not be compatible with the Products.
     1.7  ELECTRODES. Disposable defibrillator pads that incorporate a
          Proprietary Chip in the cable connector and is compatible with the
     1.8  MANUFACTURED COST. The parties anticipate that the Products and the
          Electrodes will each be manufactured for Cardiac Science and Physio,
          respectively, by independent 3rd party suppliers.  In such case, the
          Manufactured Cost shall be the actual cost paid to the supplier plus
          any applicable transfer taxes, and shall also include freight, if any,
          incurred by Cardiac Science or Physio from the place of manufacture.
          If the Products or the Electrodes are manufactured directly by Physio
          or Cardiac Science, then the definition of Manufactured Cost shall be
          agreed to in good faith by the parties.
     1.9  NET SALES PRICE. The Net Sales Price shall be the actual sales price
          of the product net of taxes, freight for shipment from Physio, actual
          discounts, and returns.


                            2  DISTRIBUTION OF PRODUCTS
     2.1  APPOINTMENT.  Subject to the terms and conditions of this Agreement
          and during the term hereof, Physio shall be the exclusive authorized
          dealer and distributor of the Products for all sales to the Hospital
          Market anywhere in the United States and Canada ("Exclusive
          Territory")..  During the period of exclusivity, Cardiac Science shall
          not sell, authorize or knowingly permit any other party to sell, any
          Products to an end customer for use in the Hospital Market within the
          Exclusive Territory.  Exclusivity is conditioned upon Physio
          purchasing at least the following minimum number of Products or
          Software Technology (or a combination of both which totals the
          following), following successful completion (and availability in
          commercially reasonable quantities) of the commercial version of the
               First 12 months     1,000
               Second 12 months    1,600
               Third 12 months     2,400
               Fourth 12 months    3,600
               Fifth 12 months     5,400
          If Physio fails to purchase the minimum number in any period it will
          have a six (6) month period within which to cure any shortfall.  At
          its election, Physio may purchase Products or Software Technology in
          advance of their sale to end customers for the purpose of satisfying
          the foregoing minimum requirements.
          If Physio does not cure any shortfall within the six (6) month cure
          period, Cardiac Science may terminate Physio's representation of
          Products, upon not less than thirty (30) days prior written notice to
          Physio.  In the event Physio's distribution rights to Products
          terminate under the terms of this Section 2.1, Cardiac Science shall
          be entitled to develop, manufacture and sell disposable defibrillator
          pads with a Proprietary Chip embedded in the connector component
          thereof compatible with Products; provided that such disposable
          defibrillator pads will not be compatible with Defibrillator-Monitors
          manufactured by or for Physio and provided that Cardiac Science shall
          be responsible for all forecasts which it has provided to Physio for
          the purchase of disposable defibrillator pads.
     2.2  TERM.  Subject to the Termination provisions in Section 2.8, the term
          of this Agreement shall commence as of the  date hereof  and shall


          continue  for an initial term of five (5) years.  At the conclusion of
          any term of this Agreement, the term shall automatically renew for an
          additional term of one (1) year, unless either party has given the
          other party notice at least 12 months in advance of its intent not to
          renew the term.
     2.3  PAYMENT. Physio shall pay Cardiac Science, in accordance with the
          Product pricing outlined in section 2.5.3 and section 2.11 herein, for
          all Products shipped to Physio or its customers, within the close of
          twenty (20) business days from the presentation of invoices.
     2.4  PHYSIO'S RESPONSIBILITIES.  During the term of this Agreement, Physio
          2.4.1     PURCHASE, PROMOTE AND SELL.  Until such time as Physio is
                    able to integrate the Software Technology into its own
                    Defibrillator-Monitor products, purchase Products from
                    Cardiac Science and use its best efforts to promote and sell
                    the Products at such prices as Physio may, in its sole
                    discretion, determine.  Thereafter, Physio shall use its
                    best efforts to promote and sell its Defibrillator-Monitor
                    products, which shall incorporate the Software Technology
                    and an Electrode or a Chip Controlled Connector.
          2.4.2     FACILITY AND STAFF.  Maintain a business sufficient to carry
                    out its duties hereunder.  Physio shall also maintain a
                    sales staff capable of demonstrating the Products in a
                    manner consistent with any policies or guidelines which the
                    parties may from time to time mutually establish.
          2.4.3     INSERVICE.  Perform post-sale delivery, instruction and
                    education to the user in a manner that is consistent with
                    standards or guidelines which the parties may from time to
                    time establish.
          2.4.4     ORDERS.  Place all orders for Products and/or Software
                    Technology on terms set out in this Agreement or upon such
                    other terms as may from time to time be mutually agreed upon
                    by the parties.
          2.4.5     DEVICE TRACKING.  Maintain a system in place to track each
                    serialized Product sold by Physio in accordance with
                    applicable law, and with such requirements as the parties
                    may from time to time establish.
          2.4.6     RECALL OF PRODUCTS. Promptly notify Cardiac Science in the
                    event that Physio has reason to believe that one or more of
                    the Products should be recalled or withdrawn from
                    distribution.  Any decision as to whether or not to initiate
                    a recall or withdrawal shall be solely that of Cardiac
                    Science.  Physio shall provide Cardiac Science with all
                    reasonably requested assistance in any


                    recall or withdrawal, including, without limitation,
                    Physio contacting its subdealers and distributors.
          2.4.7     COMPLY WITH LAW. Comply with all applicable laws, rules and
                    regulations in all of its activities relating to the
                    marketing, promotion, service, and sale of Products,
                    including obtaining any and all required registrations and
                    licenses for the operation of Physio's business and the sale
                    of the Products.  All licenses and registrations for the
                    Products shall be the property of Cardiac Science and, at
                    the option of Cardiac Science, shall be obtained in the name
                    of Cardiac Science.
          2.4.8     SUB DEALERS.  In its sole and absolute discretion, sell the
                    Products through such subdealers or distributors as it may
                    from time to time establish. Physio is jointly and severally
                    liable for the actions of its subdealers and distributors.
          2.4.9     SUPPLY OF ELECTRODES. Be responsible for the processing of
                    orders received from Cardiac Science and/or its authorized
                    dealers. Moreover, Physio will be responsible for
                    maintaining adequate levels of inventory of the Electrodes
                    in order to facilitate its own sales and that of Cardiac
                    Science and its authorized dealers.  Physio will supply,
                    package and ship directly to Cardiac Science and/or its
                    authorized dealers as well as invoice (payment terms to be
                    consistent with standard industry terms) and collect
                    accounts receivable for Electrodes sold to Cardiac Science's
                    authorized dealers. Physio shall use its reasonable
                    commercial efforts to deliver accepted orders for Electrodes
                    on time. Cardiac Science shall provide Physio with a rolling
                    one hundred twenty (120) day forecast of anticipated
                    Electrode orders.  However, in no event shall Physio be
                    responsible for shipping Electrodes to any party who is in
                    default of credit terms or any loss or damages which are
                    claimed to have been caused by a delay in shipping an order,
                    whether or not Physio may have been advised of the
                    possibility of such loss or damages.  Cardiac Science may
                    elect to cancel any order for which delivery of an Electrode
                    is delayed more than thirty (30) days.
                    Be responsible for providing, at its expense, engineering
                    resources needed to determine the feasibility of
                    incorporating the Software Technology into any of its
                    Defibrillator-Monitor products and the development and
                    manufacturing of such products.  Cardiac Science shall
                    supply the reasonable assistance of Cardiac Science's chief
                    technical officer and


                    director of software programming, and/or other Cardiac
                    Science engineering personnel that Cardiac Science may
                    from time to time assign to the project.
          2.4.11    DEFECTIVE PRODUCTS; CUSTOMER SERVICE. During the first year
                    after commercial introduction of the Products,   arrange
                    that all Products which are claimed to be defective be
                    returned to Cardiac Science for inspection, engineering
                    analysis of claimed defect, and repair.  Physio is
                    authorized, but not required, to accept return of the
                    Products on behalf of Cardiac Science from Physio customers,
                    in which case Physio will promptly forward the Products to
                    Cardiac Science. At all times with respect to the Products,
                    Physio shall be the initial point of contact for its
                    customers and shall provide customer support services in a
                    manner consistent with such standards, procedures and
                    guidelines Physio applies to its own products.
     2.5  CARDIAC SCIENCE RESPONSIBILITIES.  During the term of  this Agreement,
          Cardiac Science shall:
          2.5.1     PROVIDE PRODUCTS.  Provide the Products to Physio upon the
                    terms and conditions specified in EXHIBIT 2.5.1 or such
                    other terms as the parties may from time to time agree.
          2.5.2     PROVIDE SOFTWARE TECHNOLOGY.  Provide the Software
                    Technology to Physio in a form (along with the necessary
                    software tools) that the parties may reasonably agree. 
          2.5.3     PRICING. ***
          2.5.4     2.5.4     REFERRALS.  Refer all inquiries for purchases of
                    Products in the Exclusive Territory for the Hospital Market
                    to Physio.
          2.5.5     PROMOTIONAL MATERIALS.  Be responsible for developing and
                    providing  such sales literature and advertising materials
                    the parties deem appropriate to assist Physio in selling the
          2.5.6     TRAINING AND SUPPORT.  Offer such general and specialized
                    sales and technical training, materials and support as the
                    parties may from time to time agree.  The costs and expenses
                    incurred by Cardiac Science employees in the training of
                    Physio's representatives shall be paid by Cardiac Science.
                    Any costs and expenses incurred by Physio in said training
                    shall be paid by Physio.
          2.5.7     DELIVERY.  Use reasonable commercial efforts to deliver
                    accepted orders for Products on time.  However, in no event
                    shall Cardiac Science be responsible for any loss or damages
                    which are claimed to have been caused by a delay in shipping
                    an order, whether or not Cardiac Science may have been
                    advised of the possibility of such loss or damages.  Physio


                    elect to cancel any order for which delivery of a Product
                    is delayed more than ninety (90) days.
          2.5.9     2.5.9     WARRANTY. The Products will be warranted to the
                    end customer according to the terms of a Warranty to be
                    established by Cardiac Science and reasonably acceptable to
          2.5.10    AVAILABILITY.***.
          2.5.11    DEVICE REPORTING.  Physio shall promptly notify Cardiac
                    Science of any event which is reportable under applicable
                    Medical Device Reporting requirements, Cardiac Science has
                    the responsibility to submit all such reports and maintain
                    all applicable records.

          the Products only in the form, condition and packaging as provided or
          approved by Cardiac Science.  Physio will not alter, modify or change
          any Product or its package without Cardiac Science's prior written
          consent.  In addition, with Cardiac Science's prior approval, not to
          be unreasonable withheld, Physio may (a) attach labels which identify
          Physio as the dealer or distributor of the Products or (b) have
          Cardiac Science attach such labels to any Products which are sold to
          or by Physio or any of its subdistributors.  Physio will reimburse
          Cardiac Science for its reasonable costs in attaching such labels.
          Cardiac Science reserves the right to change the design of any
          Products or any part thereof at any time without notice to Physio. In
          such event, Cardiac Science shall have no obligation to make such
          changes upon any Products shipped upon existing orders to Physio's
          customers, nor shall Cardiac Science be obligated to make a similar
          change on any Products previously shipped to Physio's customers, or to
          install or furnish any other or different parts than were on such
          Products when shipment was made. Cardiac Science, in its sole and
          absolute discretion may discontinue manufacture of the Products at any
          time and shall not incur any obligation or liability by reason
     2.7  SALES DEMO UNITS.  Physio agrees to purchase an adequate number of
          sales demonstration inventory necessary to facilitate sales of the
          Products in the Exclusive Territory. Sales demo units shall be
          purchased at a price to be agreed upon, but not less than the
          Manufactured Cost.
     2.8  TERMINATION.  This Agreement may be terminated as follows:
          2.8.1     IMMEDIATE FOR CAUSE. In the event of any of the following,
                    the non-breaching party may terminate this Agreement if:


                    (a)  Any employee or representative of the other party
                         commits any illegal or unethical act in the course of
                         carrying out any of its duties under this Agreement;
                    (b)  Either party or its parent or any of its principal
                         owners becomes insolvent or is the subject of a
                         bankruptcy or other insolvency proceeding;
                    (c)  Physio or any of its representatives makes a material
                         misrepresentation in seeking this appointment, in
                         filing warranty claims or performing any other
                         responsibilities under this Agreement;
          2.8.2     FOR CAUSE.
                    (a)  Either party may terminate this Agreement if the other
                         party is in default of any representation, warranty,
                         covenant or other obligation in this Agreement and
                         fails to cure such default within twenty (20) days of
                         written notice from the other party specifying the
                         nature of such default.  Thereafter, the party giving
                         such notice may terminate this Agreement by a separate
                         five (5) days notice.
                    (b)  This Agreement shall terminate upon written notice from
                         Cardiac Science to Physio if Physio determines within
                         the thirty (30) day period provided for in section
                         2.5.10 hereof, that the Products do not pass its test
                         for quality, reliability, efficacy and marketability
                         and gives written notice thereof to Cardiac Science
                         within such time period.  The failure by Physio to give
                         such notice shall activate the provision of Section
                         2.4.1 hereof.

     2.9  EFFECT OF TERMINATION.  Upon the effective date of termination or
          expiration of this Agreement for any reason, the obligations and
          responsibilities of the parties one to the other contained herein
          shall cease; provided, however, that the same shall not release Physio
          from payments which may be due to Cardiac Science  as a result of
          prior sales or prior obligations incurred, and these shall be paid as
          they become due; and, provided, further, however, that all obligations
          with respect to confidentiality, return of intellectual property and
          other obligations which by their nature are continuing or which are
          specifically stated to survive the termination or expiration of the
          Agreement shall survive the termination or expiration of this
          Agreement.  Physio may, at its option, cancel any outstanding order
          for purchase which has not been shipped by the effective date of


          2.9.1     MANUFACTURE AND AVAILABILITY OF ELECTRODES.  In the event of
                    termination or expiration of this Agreement Cardiac Science
                    may manufacture or authorize others to manufacture
                    disposable defibrillator pads for use with the Products. In
                    addition hereto,  as long as Physio or its designated
                    supplier manufactures Electrodes, Physio shall make such
                    Electrodes available to Cardiac Science and its customers
                    and authorized distributors at such prices as the parties
                    may reasonably agree.  However, Physio may terminate
                    production of Electrodes upon one-hundred eighty (180) days
                    written notice to Cardiac Science.  Thereafter, Cardiac
                    Science may manufacture or authorize others to manufacture
                    disposable defibrillator pads for use with the Powerheart
                    and in such event make such Electrodes available to Physio
                    and its customers upon such terms and conditions as the
                    parties may reasonably agree.  Nothing in this Agreement
                    shall constitute a license for Cardiac Science or any of its
                    suppliers to use any of the patented or proprietary
                    technology Physio or any of its suppliers in the manufacture
                    of such disposable defibrillator pads, nor to use the trade
                    names or trademarks of Physio or any of its suppliers.  The
                    provision of this section 2.9.1 will survive the expiration
                    and termination of this Agreement.

     2.10 RETURN OF MATERIALS.  Upon termination of this Agreement, Physio shall
          return to Cardiac Science all promotional and other Product related
          materials previously provided by Cardiac Science to Physio.  If Physio
          has paid Cardiac Science for any of the materials returned then
          Cardiac Science shall reimburse Physio for the value of the returned
          materials to the extent that such materials are currently useable by
          Cardiac Science.
     2.12 RIGHT TO INSPECT. Upon reasonable notice either party shall make
          available to the other party's independent auditors, all records
          pertaining to the Manufactured Cost or sale of the Products,
          Electrodes, Chip Controlled Connectors and any Defibrillator-Monitor
          products incorporating the Software Technology.


                          3    DISPOSABLE DEFIBRILLATOR PADS
     3.1  PROPRIETARY CHIP.  Cardiac Science has developed a Proprietary Chip
          designed to be incorporated into the cable connector component of
          disposable defibrillator pads to be used with the Products. Cardiac
          Science has designed and will manufacture the Products with a patient
          and therapy cable, which is physically compatible with Physio's Quick
          Combo-Registered Trademark- connectors containing a Proprietary Chip.
          Cardiac Science hereby grants, during the term of this Agreement, a
          non-exclusive license to Physio and/or its designated suppliers solely
          to incorporate and manufacture the Proprietary Chip into Physio's
          Quick Combo-Registered Trademark- connectors for the purpose of
          carrying out all of the terms of this Agreement.  Cardiac Science will
          provide Physio and/or its designated subcontractor or supplier with
          sufficient information to manufacture pads compatible with the
          Proprietary Chip to be embedded into Physio's Quick Combo connector.
     3.2  MANUFACTURE OF ELECTRODES.  Through itself or its designated supplier,
          Physio will manufacture Electrodes.  Physio may terminate production
          thereof upon one-hundred and eighty (180) days written notice to
          Cardiac Science.  Thereafter, Cardiac Science may manufacture or
          authorize others to manufacture Electrodes in accordance with Section
          2.9.1 hereof.
     3.3  EXCLUSIVITY. Except as permitted under Section 2.1, 2.9.1 and 3.2
          hereof, Cardiac Science will not manufacture or sell any Electrodes
          nor will it authorize, assist or permit anyone else to manufacture or
          sell Electrodes.  Electrodes will be supplied by Physio in accordance
          with Section 2.4.9 hereof.
          in this Agreement shall prohibit or in any way restrict the right of
          Cardiac Science to develop, manufacture or sell disposable
          defibrillator pads with a Proprietary Chip embedded in the connector
          component thereof for use with products other than
          Defibrillator-Monitors; provided that such pads are not compatible
          with the Products or with Defibrillator-Monitors which incorporate the
          Software Technology.
     3.5  ELECTRODE WARRANTY.  The Electrodes will be warranted by Physio or its
          designated supplier upon terms that are consistent with the terms of
          warranties for electrodes for use with Physio products, as those
          warranties may be established from time to time.  Cardiac Science
          shall bear no responsibility for any such warranties, except to the
          extent that


          the Proprietary Chip infringes upon the U.S. patent rights of
          any third party.
     3.7  PAYMENT OF ROYALTY.  Physio shall pay Cardiac Science its royalties on
          the sale of Electrodes on a calendar quarterly basis, with payments
          due within ten (10) business days of the close of the quarter
     3.8  ENGINEERING SUPPORT.  Physio will allocate such reasonable engineering
          resources as it determines are appropriate for the purpose of timely
          completing the Electrode so as not to unreasonably delay the
          commercial introduction of the Products.
     3.9  REGULATORY APPROVAL.  Cardiac Science shall be responsible to obtain,
          if necessary, any regulatory approvals for use of Electrodes with the


                            4     SOFTWARE TECHNOLOGY

     4.1  GRANT OF LICENSE.  Cardiac Science hereby grants to Physio, for the
          term of this Agreement, a license to use the Software Technology
          solely to incorporate such Software Technology into any existing or
          future Defibrillator-Monitor product manufactured or to be
          manufactured by Physio or its designated supplier. As soon as
          practicable after the signing of this Agreement, the parties shall
          enter into a license agreement, to be attached to this Agreement,
          setting forth the terms and conditions of such license. The license
          agreement will contain, at a minimum, the rights set forth in Sections
          4.1 - 4.9 hereto.

          4.1.1     SCOPE. This license shall be exclusive with respect to the
                    use of the Software Technology in Defibrillator-Monitors for
                    the Hospital Market in the Exclusive Territory during the
                    term of this Agreement; provided however that such license
                    shall become non-exclusive in the event Physio fails to
                    maintain its exclusivity with respect to the Products
                    pursuant to Section 2.1.

          the license agreement, or this Agreement, shall prohibit or in any way
          restrict the right of Cardiac Science to develop, manufacture, embed,
          incorporate or sell the Software Technology to any other third party
          for any application other than that for which Physio has been granted
          exclusivity herein.

     4.3  ENGINEERING SUPPORT. Cardiac Science will, at its expense, make its
          chief technical officer, director of software programming and/or other
          engineering personnel reasonably available at Physio's Redmond, WA
          facility to provide engineering support to assist Physio in
          investigating the feasibility of incorporating the Software Technology
          into any Physio Defibrillator-Monitor product.



     4.5  USE OF CHIP CONTROLLED CONNECTOR. Any Defibrillator-Monitor
          manufactured or sold by Physio which incorporates the Software
          Technology will be manufactured for use with disposable defibrillator
          electrodes that incorporate a Chip Controlled Connector designed by
          Cardiac Science and approved by Physio.


     4.7  SOFTWARE TECHNOLOGY WARRANTY.  The Software Technology will be
          warranted by Cardiac Science to work in accordance with its
          specifications as described in EXHIBIT 1.3 of this Agreement.

     4.8  CHIP CONTROLLED CONNECTOR WARRANTY.  The electrode incorporating the
          Chip Controlled Connectors will be warranted by Physio or its
          designated supplier upon terms that are consistent with Section 3.5
          hereto.  Cardiac Science shall bear no responsibility for any such
          warranties, except to the extent that the Proprietary Chip infringes
          upon the U.S. patent rights of any third party.

     4.9  LABELING AND ADVERTISING.  Any Physio products which incorporate the
          Software Technology and the product advertising and brochures for them
          will include a label, logo or other method to identify Cardiac Science
          in a manner which is reasonably acceptable to both Cardiac Science and


                           5     INTELLECTUAL PROPERTY


          5.1.1     Neither party shall have rights under this Agreement in the
                    trademarks, trade names, logos, distinctive packaging and
                    designs of the other party or any of its affiliates or
                    suppliers except as set forth in Sections 2.6 and 5.1.2

          5.1.2     Cardiac Science hereby grants to Physio a limited,
                    non-exclusive license to use Cardiac Science trademarks and
                    trade names associated with the Products and Software
                    Technology during the term of this Agreement solely in the
                    advertisement and promotion of the Products and Software
                    Technology; provided (i) all uses have been approved in
                    writing by Cardiac Science, (ii) such use shall be
                    consistent with any reasonable rules or guidelines that
                    Cardiac Science may now or hereafter establish with respect
                    to such use and (iii) Cardiac Science has the right to
                    periodically review all advertising and promotional
                    materials bearing the trademarks and/or trade names. In
                    addition, Physio shall not use any of Cardiac Science's
                    trademarks or trade names in connection with any product
                    that does not meet certain quality standards as established
                    by Cardiac Science from time to time.  Upon any termination
                    of this Agreement, Physio shall immediately discontinue all
                    uses of Cardiac Science Trademarks, trade names, logos,
                    distinctive packaging, and designs similar thereto.

     5.2  PATENT RIGHTS.  Neither party is granted rights in any of the other
          party's patents, except as expressly granted in this Agreement.

     5.3  CONFIDENTIAL INFORMATION. In the course of performing its duties
          hereunder either party may become aware of confidential information of
          the other, including, but not limited to, trade secrets under the
          Uniform Trade Secrets Act, technical product data, software programs,
          software code, designs, prototypes, methods, techniques, business
          plans, product pricing, sales goals, marketing information and other
          information not generally available to the public (collectively,
          "Confidential Information"). Each party shall maintain in confidence
          and, except as provided in this Agreement, not use for its own
          benefit, directly or indirectly any Confidential Information received
          from the other or any of its suppliers or purchasers during the term
          of this Agreement and shall not publish, disseminate, or disclose such
          information except to the extent necessary to carry out its duties
          hereunder without the express written permission of the other.  The


          parties shall use at least the same degree of care to protect the
          Confidential Information of the other, its suppliers, or purchasers
          as it does to protect its own Confidential Information and in all
          cases commercially reasonable efforts.  This obligation shall not
          apply to Confidential Information which (a) was known to the recipient
          prior to disclosure by the other party or it supplier as evidenced by
          the party's prior written record, (b) is disclosed to the recipient by
          a third party without violation of any obligation of confidentiality
          to the other, (c ) becomes public knowledge without the breach of any
          obligation of confidentiality.  All Confidential Information shall be
          returned to the originating party at the request of the recipient
          party upon the termination or expiration of this Agreement, with the
          exception of a single copy which may be retained in a confidential
          file solely for the purpose of determining compliance with this
          paragraph.   The covenants contained in this section 5.3 shall expire
          five (5) years after the termination or expiration of this Agreement.
          Each party acknowledges that the other party will be irreparably
          damaged if the covenants contained in this section 5.3 are not
          specifically enforced. The provisions of this section 5.3 may be
          enforced by injunctive relief restraining any violation (without any
          bond or other security required) or any other appropriate decree of
          specific performance, such remedies shall not be exclusive and shall
          be in addition to any other remedy which an injured party may have.

     5.4  PROTECTION OF RIGHTS.  Each party shall use its best efforts to
          cooperate with the other in protecting all of each other's rights in
          intellectual property.  Neither party shall dispute nor contest the
          validity of the other party's intellectual property rights which are
          subject to this Agreement.  Each party shall promptly inform the other
          about any facts of which it becomes aware, which may constitute unfair
          competition or in which any other person or entity may be infringing
          on the intellectual property rights of the other. Physio acknowledges
          and agrees that Cardiac Science is the sole and exclusive owner of all
          right, title and interest in and to (a) the Software Technology, the
          Proprietary Chip and any and all updates and modifications to the
          foregoing technology, (b) the current model of the Powerheart and all
          future models of the Powerheart, (c) trademarks and trade names
          associated with the advertisement and promotion of Cardiac Science's
          Products and (d) all proprietary rights in (a) - (c).

          this Agreement shall prohibit or in any way restrict the right of
          Physio to develop, manufacture or sell its own Defibrillator-Monitor
          products. The parties acknowledge that Cardiac Science is under no
          obligation to


          extend the license for the Software Technology beyond the termination
          or expiration of this Agreement.

                                 6      WARRANTS

     6.1  INITIAL GRANT.  Upon the mutual execution of this Agreement Cardiac
          Science will issue a warrant to Physio to purchase two hundred
          thousand (200,000) shares of common stock in Cardiac Science at a
          price of three dollars ($3.00) per share.  The warrant on this initial
          grant must be exercised by Physio, if at all, by November 30, 1999.
          Any share issued pursuant to this initial grant will include
          "piggyback" registration rights.

     6.2  PERFORMANCE GRANT.  At such time as Physio has purchased one thousand
          (1,000) Products or has sold one thousand (1,000)
          Defibrillator-Monitors which include the Software Technology (or a
          combination of both totaling 1,000), Cardiac Science will issue a
          warrant to Physio to purchase an additional two hundred thousand
          (200,000) shares of common stock in Cardiac Science at a price of
          three dollars ($3.00) per share.  The warrant on this performance
          grant must be exercised by Physio, if at all, within two (2) years of
          the date of the grant.  Any share issued pursuant to this performance
          grant will also include "piggyback" registration rights.

                         7       INDEMNITIES AND INSURANCE

     7.1  MUTUAL.  The parties shall defend and indemnify each other from any
          loss, damages and costs incurred as a result of the breach of any of
          their duties under this Agreement or for the negligent acts of that
          party's employees or other representatives operating within the scope
          of their authority; provided that in no event shall a party be
          responsible to the other for any compensation, reimbursement or
          damages on account of the loss of prospective profits or anticipated
          sales nor for expenditures, investments, lease commitments, property
          improvements or other commitments made in connection with the business
          or goodwill of the other party.

     7.2  INTELLECTUAL PROPERTY.  Cardiac Science warrants that the Proprietary
          Chip to be incorporated into the Chip Controlled Connector, does not
          infringe upon the patent or other intellectual property rights of any
          third party currently known to the extent that it is manufactured in
          accordance with information or design provided by Cardiac Science.
          Cardiac Science shall indemnify Physio from any cost, expense or


          damage to the extent that it is based upon a claim that the
          Proprietary Chip, Software Technology or any Product purchased by
          Physio infringes an applicable U.S. patent; provided that Physio shall
          promptly notify Cardiac Science of such claim, permit Cardiac Science
          to assume control of the defense of such claim, and fully cooperate in
          the defense of such claim.  If the use or sale of the Proprietary
          Chip, Software Technology or a Product is enjoined by order or
          settlement, then Cardiac Science shall have the option to (1) procure
          for Physio the right to continue using or selling the Product, (2)
          replace the Product with a non-infringing Product or to modify the
          Product, (3) modify the Product so it becomes non-infringing, or (4)
          accept return of the infringing Product and grant Physio a credit for
          its purchase price.  The foregoing shall be the entire liability of
          Cardiac Science for infringement by Products furnished hereunder.

                            8    GENERAL PROVISIONS

     8.1  RELATIONSHIP. This Agreement creates no relationship of employer and
          employee, agent and principal, partnership or joint venture, Cardiac
          Science and Physio are independent contractors and neither party is
          the legal representative or agent of the other party in any respect
          and is not authorized to assume or create any obligation or liability
          of any kind on behalf of the other party.  Neither party may make any
          promises or representations in the name of the other.

     8.2  NOTICES.  All notices required or permitted by this Agreement shall be
          in writing, in English and may be delivered personally, or may be sent
          by registered prepaid airmail, return receipt requested, or by
          facsimile transmission, or other electronic means of written
          communication with a copy to be dispatched by registered prepaid
          airmail return receipt requested by the close of the next following
          business day.

          Notices Sent to Physio shall be addressed to:

               General Counsel
               11811 Willows Road N.E.
               P.O. Box 97006
               Redmond, WA 98073-9706


          Notices Sent to Cardiac Science shall be addressed to:

               Raymond W. Cohen
               President & CEO
               CARDIAC SCIENCE, INC.
               1176 Main Street, Bldg. C
               Irvine, CA 92614

     8.3  WAIVERS.  Failure of either party at any time to require strict
          performance of the other party of the provisions of this Agreement
          shall not act as a waiver of such provisions, nor shall the waiver of
          a breach of the Agreement by either party constitute a waiver of such
          provision for any subsequent breach.

     8.4  ENTIRE AGREEMENT AND MODIFICATIONS.  This Agreement, together with its
          Exhibits and addendum's, if any, contains the entire and only
          agreement between the parties with respect to the matters addressed
          herein.  Any representations or terms and conditions not incorporated
          in this Agreement shall not be binding upon either party.  No
          attempted modification of this Agreement shall be binding upon either
          party unless in writing and signed in the same manner as the original
          Agreement.  If any provision of this Agreement is held to be invalid,
          it shall not affect the enforceability of the remaining provisions.

     8.5  DISPUTES.  Any dispute arising from this Agreement or the relationship
          between the parties shall be governed by the laws of the State of
          California .  At the request of either party, any dispute shall be
          submitted to binding arbitration JAMS in Los Angeles, California.  The
          prevailing party in any arbitration, litigation or other alternate
          dispute resolution forum shall be entitled to its reasonable costs and
          fees, including attorney's fees.


     8.6  FORCE MAJEURE.  If the performance of any obligation of this Agreement
          except for the payment of money is prevented, restricted, or
          interfered with by reason of strike, labor dispute, natural disaster,
          war, the acts of government or any other cause outside the reasonable
          control of the parties, then the party so affected shall give prompt
          notice to the other party and shall be excused from such performance
          to the extent made necessary by such event.


By:                                     By:                          
   ---------------------------             ---------------------------

Title:                                  Title:    President & CEO



            POWERHEART-Registered Trademark- AECD-Registered Trademark-


The Powerheart-Registered Trademark- AECD-Registered
Trademark- defibrillator-monitor represents a significant advancement in
defibrillator technology and the ability to effectively manage
life-threatening arrhythmias in a hospital environment.  Drawing on the
technologies that have made "hands-off" defibrillation and implantable
defibrillation possible and fusing this with advanced monitoring
capabilities, the Powerheart introduces the unique ability to provide
continuous monitoring of patients at risk for Sudden Cardiac Arrest. If a
patient suffers cardiac arrest, the Powerheart automatically detects and
restores a normal heart rhythm within seconds.

The Powerheart is a fully functional defibrillator that can be programmed to
identify and treat life-threatening arrhythmias.  The Powerheart is capable
of providing as many as eight defibrillation shocks of up to 360 joules for
each life-threatening ventricular tachyarrhythmia event that occurs.  This
unique protection is available to the patient throughout the period of high
risk whether that time is hours, days, or weeks.  Similar to other diagnostic
monitoring devices that may be attached to the patient in this environment,
the Powerheart provides a patient cable to allow limited mobility customarily
available to less critical patients, as well as providing flexibility to the
nursing staff.

In addition to the standard AC power, the Powerheart also has a backup
battery that provides up to one hour of freestanding use.  This battery is
automatically recharged whenever the Powerheart is plugged in, so that it is
always ready for use.  The battery provides reliable backup in case of a
power outage as well as allowing the Powerheart to go with the patient should
the patient need to be moved.

The Powerheart attaches to the patient using disposable defibrillation
electrodes.  Four additional monitoring electrodes may also be attached
providing up to three separate electrocardiogram (ECG) signals (channels) for
analysis.  These additional channels provide the physician with the ability
to select and change the channel of ECG to be analyzed.  Once the patient is
attached, the operator can program the Powerheart according to the
physician's prescription.  The Powerheart will verify hookup quality.
Assuming the patient is in a normal rhythm, the operator will proceed to
program the device and allow for automatic analysis.

During the analysis period, the Powerheart can communicate with the medical
staff in a variety of ways.  The ECG is always available for review on the
LCD display.  This display provides important patient ECG information
regarding the analysis such as heart rate and rhythm.  The printer will
provide hard copy documentation in standard ECG "strip chart" format.  These
strips are printed automatically during a cardiac event. They may also be
printed whenever the operator


desires.  The Powerheart also stores one hour of information in a continuous
loop.  This data can be transmitted to a personal computer for detailed
review and/or printing.  In the case of a cardiac event, or any situation
requiring operator attention, the Powerheart can alert the operator through
an appropriate combination of visual alarm, audible alarm, or voice prompt.

The Powerheart includes the following basic components:

-    RHYTHM ANALYSIS SYSTEM - This system assesses the patient's
     electrocardiogram ("ECG") signal to determine when therapy is appropriate
     based upon parameters set by the patient's physician. ECG signals are
     sensed by electrodes placed on the patient's chest. This signal is
     amplified and filtered by an electrical analog circuit, digitized, and then
     analyzed by proprietary software algorithms in the device, which makes the
     determination of when therapy (a defibrillation shock) is appropriate for
     the patient.

-    DEFIBRILLATOR - The AECD system uses electrical circuitry that provides an
     AAMI standard waveform for defibrillation. Such waveforms are used by a
     majority of defibrillators on the market, and have the longest proven track
     record of success. The AECD can be programmed to transmit the low amounts
     of electrical energy to the heart needed to terminate the life-threatening
     arrhythmia. The AECD is designed to provide progressively greater amounts
     energy, if needed, to restore the patient's heart to its normal cardiac
     rhythm. The maximum energy that can be delivered by the device is 360
     joules, which is the maximum limit recommended by the American Heart
     Association (AHA).

-    DEFIBRILLATION ELECTRODES - The AECD uses self-adhesive, disposable
     defibrillation electrodes manufactured by a third party vendor to the
     Company's specifications. Electrodes require daily replacement.

-    DATA STORAGE - The device stores real-time ECG data on a real-time basis in
     digital form. In addition, a strip chart recorder automatically prints
     real-time ECG and relevant device data during significant detected events.

-    USER INTERFACE - Operating modes and setting parameters for rhythm analysis
     are programmed via the user interface. The bedside AECD has a liquid
     crystal display that indicates real time patient ECG as well as device

-    DATA RETRIEVAL SOFTWARE - This software is used to access the data stored
     from the AECD device. This software runs on a personal computer. The data
     can be viewed on a monitor and printed on a standard high-resolution
     printer. This provides valuable post-facto analysis of the patient's rhythm
     and device operation.


The Powerheart's analysis of a patient's rhythm begins with the detection of
electrical activity in the heart.  Under normal conditions this event is an
R-wave and represents a normal contraction of the heart.  In abnormal
conditions this event may be the electrical signal generated with ventricular
tachycardia or fibrillation.  The incoming signal is sampled every 2
milliseconds (2/1000th of a second).  This incoming signal is filtered (for
signal and motion noise as well as baseline wandering), differentiated and
squared (calculations that normalize the event) and clipped (to take out
excess signal).  The detection software for these electrical events also
automatically adjusts to take into account the size characteristics of the
preceding beats. If this moving average exceeds a given


threshold, an electrical event (e.g. an R-wave) is considered to have
occurred.  This further eliminates signal artifacts.

Analysis continues by determining the rate at which these electrical events
occur.  The Powerheart will measure the interval between consecutive events
to compute rate.  This rate calculation is the primary parameter in
determining if a rhythm is shockable.  This rate is called the Shockable
Tachyarrhythmia Detection (STD) rate or simply the detection rate.  This rate
analysis occurs continuously as a moving average.

In addition to rate analysis, the Powerheart is capable of distinguishing
between unusually fast "normal" rhythms (tachycardia, supraventricular
tachycardia or atrial fibrillation) and rhythms requiring a shock
(ventricular tachyarrhythmias).  This feature is called Modulation Domain
Function, or MDF-Registered Trademark-. MDF uses sophisticated morphology
differentiation techniques designed to reduce the probability of delivering
therapy for rapid normal rhythms that satisfy the rate criteria without
compromising sensitivity in shocking ventricular tachycardia or fibrillation..

When the Powerheart is ready to deliver a shock, it will first verify that
the defibrillation pads are properly attached to the patient, can safely
deliver the shock and that the rhythm is still shockable.  If the
life-threatening rhythm has changed on its own and no longer requires a
shock, the Powerheart will safely dispose of the charge internally.  After
the shock is delivered, the Powerheart will quickly re-acquire the ECG signal
and resume analysis to check the resulting rhythm.  If the life-threatening
rhythm continues, the Powerheart will charge and deliver another shock, if
programmed.  If the shock restores normal rhythm, the Powerheart will wait
for one minute then reset to the beginning of its therapy sequence.  Should
the shock.

There are two special rhythms that must be taken abnormal rhythm recur during
this minute, the Powerheart will continue therapy with the next programmed
into account by any automatic defibrillator.  These rhythms occur when there
is no ECG signal or when the patient is in Fine VF. When this situation
occurs in a normal rhythm, this is called Asystole.  Shocking Asystole cannot
help, and may in fact be harmful.

The Powerheart will not shock Asystole in accordance with the American Heart
Association recommendations. Fine VF however, is detectable by the
Powerheart, and the Powerheart will shock this rhythm.

The Powerheart incorporates important safety features and performs periodic
internal diagnostics to verify it is correctly operating.  As already
mentioned, the Powerheart will verify that the rhythm is shockable, just
before delivering the shock.  In addition, the Powerheart is able to
determine if the ECG and/or defibrillation electrodes become disconnected. 
The Powerheart is also able to determine if the ECG signal it is receiving is
too small or too large for safe analysis.  In any of these situations occur,
the Powerheart will alert the medical personnel to correct the situation.



The Powerheart can be programmed for several modes of operation.  The first
mode of operation is MANUAL.  In this mode, the Powerheart functions as a
manual defibrillator.  The operator selects the shock energy, charges the
device, and manually delivers the shock. MANUAL mode can always be selected
by the operator. This allows the users to operate the Powerheart as a
standard defibrillator, pre-empt automatic therapy or abort automatic therapy.

In order to set up the Powerheart for automatic use, a PROGRAMMING mode is
available.  In this mode, the operator can program up to eight shocks.  The
strength of the shock and a timed delay for the shock must be programmed for
each therapy.  The shock strength can be programmed to "industry standard"
energy selections from 5 to 360 Joules.  The delay indicates the time
interval from the detection of the shockable rhythm until the delivery of the
shock.  The delay may be programmed from 10 seconds to 10 minutes.  The
ability to program a long delay allows the doctor to take into account those
patients that can tolerate certain types of ventricular tachycardia.

The detection criteria are also set in PROGRAMMING mode.  The operator
selects the ECG channel to be used for analysis.  The operator must also
program the Shockable Tachyarrhythmia Detection (STD) rate described earlier.
The STD rate may be programmed from 120 up to 240 beats per minute in steps
of 5.  If MDF is enabled, then a rate must be set for it.  The rate for MDF
is programmed to a value greater than the STD rate up to 240 beats per
minute, again in steps of 5. Finally, the operator is able to enter a patient
ID, date and time.

During the programming process, the Powerheart checks for unsafe conditions
such as a delay without a corresponding shock or selection of an ECG channel
that has not been attached to the patient.  The operator cannot continue
until these conditions have been corrected.  Once programming is complete,
the Powerheart will verify that the ECG signal is satisfactory for safe
analysis and that the patient is in a normal rhythm.

The operator may now select one of two automatic analysis modes.  In the
first mode, AUTO mode, the Powerheart will perform rhythm analysis and
automatically deliver therapy when needed.  This is the primary intended mode
of operation for the Powerheart.  A secondary mode called ADVISORY mode is
also available.  In ADVISORY mode, the Powerheart will provide the automatic
analysis and will automatically prepare to shock a shockable rhythm. 
However, the operator must confirm the shock before it will be delivered to
the patient.


To test the safety and efficacy of the Powerheart, a multi-center clinical
trial study was conducted. 155 patients enrolled in four institutions. Of
these patients, 130 were attached to the Powerheart and 25 were utilized as
controls. The control patients allowed comparison of the Powerheart to
standard medical care.  The Powerheart was utilized for over 1200 hours
during this study.


Patients in the clinical trial experienced a total of 92 shockable episodes.
The study found that the Powerheart had a sensitivity of 100% (correctly
identifying shockable episodes), a specificity of 99.4 percent, (not allowing
a non-shockable rhythm to be shocked). The average response time for the
Powerheart was approximately 21 seconds.  In addition, normal rhythm was
restored by the FIRST shock of the Powerheart in 96 percent of the actual
shocks delivered with energy levels as low as 50 joules.

These results demonstrate that the Powerheart responded to every shockable
event within seconds, successfully restored a normal rhythm and delivered
shocks only when appropriate, confirming its safe to use.


             CAPABILITY                         POWERHEART AECD
             <S>                                <C>
             Indication for use                 Patients at risk for cardiac
             Initial rhythm for attaching       Typically a normal rhythm
             Artifact/motion                    Designed to reject artifact.
                                                Allows patient motion. Allows
                                                transport of patient.
             Length of use                      Continuos monitoring
             Modes of use                       Fully automatic, Manual,
                                                Semi-automatic (advisory)
             Power source                       AC, battery
             Inputs from patient                Defibrillation pads plus two
                                                optional channels of ECG
             Unattended use?                    Yes
             Automatic analysis                 Yes
             Automatic shock?                   Yes
             Monitoring capability              Yes
             Accuracy                           Specificity > 99%
                                                Sensitivity > 99%
             Programmable parameters            Shock energy for 8 shocks
                                                Delay for 8 shocks
                                                ECG channel
                                                Detection rate (STD)
                                                MDF rate
                                                Patient demographics
             Rhythm analysis                    Continuous sliding window


                                  EXHIBIT 1.3

*** Seven pages omitted.


                                 EXHIBIT 2.5.1

                         STANDARD TERMS AND CONDITIONS

PURCHASE ORDERS.    Physio will order Products from Cardiac Science by
issuing written Purchase Orders. Purchase Orders shall be issued one hundred
and twenty (120) days in advance of required shipment date.  Each Purchase
Order will specify items such as: Products, quantity, delivery or completion
schedule, destination, Physio's Specifications/Acceptance Criteria (as
applicable), total price of the Purchase Order.

All Purchase Orders are subject to acceptance by Cardiac Science in
accordance with the terms of this Agreement; provided, however, that orders
for which Physio has not received a written acceptance or rejection from
Cardiac Science within 10 business days following its receipt by Cardiac
Science shall be deemed to have been accepted by Cardiac Science.

DELIVERY.  Physio may elect to have Cardiac Science "drop ship" Product to
Physio determined destination.  Time and method of shipment are of the
essence for all purchases made under this Agreement.  Cardiac Science's
on-time delivery is defined as within 4 days early to 2 days late from
scheduled delivery date. Cardiac Science shall prepare and pack the Products
to prevent damage and deterioration, and comply with carrier tariffs. 
Charges for preparation, packing, and crating are included in the price
unless separately specified on the Purchase Order.  Products sold F.O.B.
place of shipment shall be forwarded collect. Shipments or deliveries, as
specified in this Agreement, shall be strictly in accordance with this
Agreement.  Cardiac Science shall promptly notify Physio in writing of any
anticipated or actual delay, the reasons thereof, and the actions being taken
by Cardiac Science to overcome or minimize the delay.  If requested by
Physio, Cardiac Science shall, at Cardiac Science's expense, ship quantities
of Product needed to support a shortage caused by Cardiac Science's delay in
shipment due to causes under Cardiac Science's control, via air or other fast
transportation to avoid or minimize the delay to the maximum extent possible.

REJECTION.  In the regular course of its business, Physio may reject, refuse
acceptance or revoke acceptance ("rejection" herein) of any or all of the
Products or any tender thereof which Physio reasonably determines are not
strictly in conformance with all of the requirements of this Agreement. 
Physio must promptly notify Cardiac Science of such rejection in writing.  
At Cardiac Science's risk and expense, all such Products will be returned to
Cardiac Science for immediate repair, replacement or other correction.

SUBCONTRACT MANAGEMENT.  Cardiac Science is responsible for the management of
his subcontractors, suppliers, and vendors.  The Cardiac Science shall ensure
that each lower tier subcontract contains all applicable specifications,
special requirements, and clauses needed to comply with the requirements of
this Agreement.  Any technical, schedule, and/or cost problems encountered by
the Cardiac Science or its subcontractors shall be promptly reported to the

INQUIRIES.  If any governmental agency contacts Cardiac Science or Physio to
inquire about or investigate any Product manufactured by Cardiac Science or
Physio,  Cardiac Science or Physio shall use its best efforts to give notice
thereof to Cardiac Science or Physio within 24 hours of receipt of such

RESCHEDULING OF PURCHASE ORDERS.  Unless otherwise agreed between the
parties, Physio may reschedule in writing, delivery of any Products on
Purchase Order with Cardiac Science within the following guidelines:

<S>                                                    <C>
     30 days from scheduled shipment date              No changes
     31-60 days from scheduled shipment date           25% (+ or -)


     61-120 days from scheduled shipment date          50% (+ or -)
     121 days or more from scheduled shipment date     100% (+ or -)

QUALITY ASSURANCE PROGRAM.  Cardiac Science shall maintain a Quality
Assurance Program that effectively ensures the quality of design, materials,
workmanship, assembly, testing, inspection, distribution, and product support
of all Products.

AUDIT RIGHTS.  Cardiac Science agrees to grant Physio complete and free
access to verbal, visual, and written records, as well as access to
personnel, suppliers, and facilities that are necessary and expeditious to
Physio's confirmation of the Quality Assurance Program.  Physio shall perform
audits of Cardiac Science's facility at approximately twelve (12) month
intervals, and will give at least twenty (20) days notice of intent to visit
Cardiac Science's facility for the purpose of carrying out an audit.  More
frequent audits could occur as a result of investigations or corrective
action follow-up.  These are likely to be less comprehensive, and, as a
function of the nature and severity of the issue, notice for the audit could
be much shorter -- as little as one day.

If Cardiac Science has asked any third party (for example, certifying bodies
for ISO9001 registration) to audit their facility, Cardiac Science will
inform Physio of such scheduled audits.  Physio may request Cardiac Science
to direct the third party to audit certain areas of Cardiac Science's
facility, and if such request results in additional third party audit expense
to Cardiac Science, Physio shall reimburse Cardiac Science for such expense. 
Cardiac Science shall provide Physio with copies of third party audit
reports.  Cardiac Science may edit such reports before sending them to Physio
to remove any information which if transferred to Physio might be in conflict
with Cardiac Science's existing confidentiality agreements with other parties.

CORRECTIVE ACTION SYSTEM.  To address Product quality issues, Cardiac Science
shall implement and maintain a corrective action system to be approved by
Physio.  This system shall specifically cover how Cardiac Science will deal
with "trigger" events, such events being defined as the discovery of a
problem by either Physio or Cardiac Science that has the potential of
existing in Product that has already been shipped to Physio or has potential
to disrupt deliveries. The Cardiac Science's corrective action system shall
include the following:

     -Method of assessing risk in Cardiac Science's finished goods inventory
(FGI), Physio's FGI, and distributed Product

     -Procedure for carrying out, validating, and documenting problem root
cause analysis

     -Procedure for implementing remedial (short-term) corrective actions

     -Procedure for implementing permanent corrective action that address the
root cause

     -Response time requirements that are compatible with Physio's corrective
action system requirements

COMPLAINT FILES.  Cardiac Science shall be responsible for Medical Device
Reporting (MDR) under the MDR requirements of Title 21 Code of Federal
Regulations Part 803.  Product(s) supplied hereunder are designated as
medical devices. Therefore, Physio shall notify Cardiac Science if it
receives any complaint relating to any part of a Product or a Product that
was manufactured or sold by Cardiac Science or if it becomes aware of any
event involving such Product that might require filing of an MDR. Physio
shall orally notify the Cardiac Science within 24 hours if it becomes aware
of any event involving the Cardiac Sciences Product, requiring the filing of
an MDR.

REGULATORY REGISTRATIONS.  Cardiac Science is required to maintain GMP
Registration as a Medical Device Manufacturer throughout the term of this
Agreement.  Cardiac Science shall also obtain certification to ISO9001
including EN46001 and the European Medical Device Directives.


CONFIGURATION CONTROL  Cardiac Science shall maintain control of
configuration, traceability, and identification of raw materials,
components,  sub-assemblies, and units in accordance with Cardiac Science's
Quality System.



All sections marked as "***" have been omitted pursuant to a request for
confidential treatment.  The omitted sections have been filed separately.