PATIENT SAFETY TECHNOLOGIES, INC. SECURED CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT
SECURED
CONVERTIBLE NOTE AND WARRANT
PURCHASE
AGREEMENT
This
Secured Convertible Note and Warrant Purchase Agreement (this “Agreement”)
is
made as of the 6th
day of
June, 2006 by and between Patient Safety Technologies, Inc., a Delaware
corporation (the “Company”),
and
Xxxx X. Xxxxxxx, an individual (the “Purchaser”).
RECITALS
A. The
Company desires to issue and sell, and the Purchaser desires to purchase from
the Company (i) a secured convertible promissory note in the form attached
to this Agreement as Exhibit
A
(the
“Note”),
which
Note shall be convertible on the terms stated therein into common stock of
the
Company, and (ii) a warrant to purchase common stock of the Company in the
form
attached to this Agreement as Exhibit
B
(the
“Warrant”).
The
Note, Warrant and shares of common stock issuable upon conversion or exercise
thereof are collectively referred to herein as the “Securities”.
B. The
Company desires to provide certain rights to register for resale the shares
of
common stock issuable to the Purchaser upon the conversion of the Note and
exercise of the Warrant, in a Registration Rights Agreement in the form attached
to this Agreement as Exhibit
C
(the
“Registration
Rights Agreement”).
AGREEMENT
In
consideration of the mutual promises contained herein and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
to this Agreement agree as follows:
1. Purchase
and Sale of Note and Warrant.
(a) Sale
and Issuance of Note and Warrant.
Subject
to the terms and conditions of this Agreement, the Purchaser agrees to purchase
and the Company agrees to sell and issue to the Purchaser a Note in the
principal amount of $1,100,000 and a Warrant to purchase 401,460 shares of
common stock of the Company, par value $0.33 per share (the “Common
Stock”).
The
purchase price of the Note shall be equal to 100% of the principal amount of
the
Note, and the purchase price of the Warrant shall be $1.00.
(b) Closing;
Delivery.
The
purchase and sale of the Note and the Warrant shall take place at the offices
of
Xxxxxxxx & Xxxxxxxx LLP at 10:00 a.m. Los Angeles time on June 6, 2006, or
at such other time and place as the Company and the Purchaser mutually agree,
orally or in writing (which time and place are designated as the “Closing”).
At
the Closing, the Company shall delivery to the Purchaser the Note and the
Warrant against payment of the purchase price therefor by the following: (a)
a
wire transfer to the bank account of Xxxxxx Capital Management, LLC
(“BCM”)
identified in that certain letter agreement dated as of May 31, 2006 (the
“Payoff
Letter”)
between the Company and BCM in an amount sufficient to fund the “Payoff Amount”
(as defined therein), including the per diem interest amount for each day after
May 31, 2006 until the Payoff Amount is paid, (b) to pay a transaction fee
to
the Purchaser in the amount of $30,000.00, which shall be netted against the
purchase price of the Note, and (c) the balance to be applied to fees and
expenses of Xxxxxxxx & Xxxxxxxx LLP incurred by the Purchaser in connection
herewith.
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2. Security
Interest.
The
indebtedness represented by the Note (the “Obligations”)
are
secured by personal property owned by the Company consisting of equity
securities identified in the pledge agreement between the Company and the
Purchaser in the form attached to this Agreement as Exhibit
D
(the
“Pledge
Agreement”).
The
security interest in securities pledged pursuant to the Pledge Agreement that
are maintained with Xxxx Xxxxxx Xxxxxx Securities, LLC (“AGB
Securities”)
is
being perfected pursuant to that certain Account Control Agreement dated as
of
even date herewith (the “Account
Control Agreement”)
by and
among AGB Securities, the Company and the Purchaser. In addition, the Company
has pledged (i) 8.5 acres of undeveloped land it owns in Heber Springs,
Arkansas pursuant to a Deed of Trust (the “Arkansas
Deed of Trust”)
and
(ii) 0.61 acres of undeveloped land it owns in Springfield, Tennessee pursuant
to a Mortgage (the “Tennessee
Mortgage”).
3. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to the Purchaser that as of the date
this
Agreement is executed and delivered and as of the Closing, except as set forth
on a Schedule of Exceptions attached hereto as Exhibit
E,
specifically identifying the relevant subsection hereof, which exceptions shall
be deemed to be representations and warranties as if made
hereunder:
3.1 Organization,
Good Standing and Qualification.
(a) The
Company and each Subsidiary (defined below) is duly organized, validly existing
and in good standing under the laws of their respective state of incorporation,
and each of them has all requisite corporate power and authority to own their
respective assets and properties and to carry on their respective businesses
as
now conducted and as proposed to be conducted. The Company does not own,
directly or indirectly, any equity interest in any corporation, partnership,
joint venture or other entity, except for (a) those entities identified as
subsidiaries of the Company in Exhibit 21.1 to the Form 10-K (collectively,
the
“Subsidiaries”)
filed
by the Company with the Securities and Exchange Commission (the “SEC”)
for
the year ended December 31, 2005 (the “Form
10-K”),
and
(b) those interests in entities identified in Section 3.1 of the Schedule of
Exceptions. The Company and each Subsidiary is duly qualified or licensed and
in
good standing to do business in each jurisdiction in which the property owned,
leased, or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing is not reasonably expected
to
have, individually or in the aggregate, a Material Adverse Effect on the Company
and the Subsidiaries taken as a whole.
(b) For
purposes of this Agreement, the term “Material
Adverse Effect”
shall
mean, with respect to any entity, any event, change or effect that, when taken
individually or together with all other adverse events, changes and effects,
is
or is reasonably likely (a) to be materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business, operations
of that entity and its subsidiaries, taken as a whole, or (b) to prevent,
have an adverse effect on or materially delay consummation of any of the
transactions contemplated by any of the Transaction Documents or any entity’s
performance of its obligations under any of the Transaction
Documents.
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3.2 Authorization.
(a) All
corporate action necessary on the part of the Company for the authorization,
execution and delivery of this Agreement, the Note, the Warrant, the Pledge
Agreement, the Account Control Agreement, the Arkansas Deed of Trust, the
Tennessee Mortgage, the Registration Rights Agreement and any other documents
or
instruments required pursuant to any such agreement (collectively, the
“Transaction
Documents”),
the
performance of all obligations of the Company hereunder and thereunder and
the
authorization, issuance and delivery of the Securities has been taken. Each
of
the Transaction Documents, when executed and delivered, shall constitute the
valid and legally binding obligations of the Company, in each case enforceable
against the Company in accordance with its respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws of general application affecting
enforcement of creditors’ rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.
(b) Except
for such filings, permits, consents and approvals which, if not obtained or
made, are not reasonably expected to have a Material Adverse Effect on the
Company and the Subsidiaries taken as a whole, no filing with or notice to,
and
no permit, authorization, consent or approval of, any governmental agency or
authority is necessary for the execution and delivery by the Company of this
Agreement or the consummation by the Company of the transactions contemplated
hereby.
(c) The
Board
of Directors of the Company, by the requisite vote of those present (who
constituted a quorum of the directors then in office), with no dissenting votes,
has duly and validly authorized the execution and delivery of the Transaction
Documents and approved the consummation of the transactions contemplated hereby.
(d) The
approval of any of the Transaction Documents and the transactions contemplated
thereby is not required by any of the stockholders of the Company.
3.3 Capitalization;
Valuation.
(a) The
authorized capital stock of the Company consists of:
(i) 1,000,000
shares of Convertible Preferred Stock, par value $1.00 per share, of which
10,950 shares are issued and outstanding immediately prior to the Closing.
All
of the outstanding shares of Convertible Preferred Stock have been duly
authorized, and are fully paid and nonassessable and issued in compliance with
all applicable foreign, federal and state securities laws. The rights,
privileges and preferences of the Convertible Preferred Stock are as stated
in
the Amended and Restated Certificate of Incorporation of the Company filed
as an
exhibit to the Form 10-K (the “Restated
Certificate”).
(ii) 25,000,000
shares of Common Stock, of which 6,260,048 shares issued and outstanding
immediately prior to the Closing. All of the outstanding shares of Common Stock
have been duly authorized, and are fully paid and nonassessable and issued
in
compliance with all applicable foreign, federal and state securities laws.
The
Company has reserved sufficient shares of Common Stock for issuance
(x) upon exercise of the Warrant and (y) upon conversion of the
Note.
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(iii) The
Company has reserved 2,500,000 shares of Common Stock for issuance to officers,
directors, employees and consultants of the Company pursuant to the Company’s
stock option plan (the “Stock
Plan”).
Of
such reserved shares of Common Stock, 95,707 shares have been issued pursuant
to
restricted stock purchase agreements and options to purchase 1,669,000 shares
have been granted.
(iv) Except
for (A) the Warrant, (B) the Note, (C) the conversion privileges of the
Preferred Stock, (D) the stock reserved for issuance pursuant to the Stock
Plan,
and except as described on the Schedule of Exceptions, there are no outstanding
options, warrants, rights (including conversion or preemptive rights or rights
of first refusal or similar rights) or agreements, orally or in writing, related
to the purchase or acquisition of any shares of Company’s capital stock. There
are no rights of first refusal or similar rights, except those in favor of
the
Purchaser. The Schedule of Exceptions contains a complete and accurate list
of
all securityholders of the Company.
3.4 Valid
Issuance of Securities.
The
shares of Common Stock that are issuable upon conversion of the Note or exercise
of the Warrant have been duly and validly reserved for issuance, and when
issued, sold and delivered in accordance with the terms thereof for the
consideration expressed therein, will be duly and validly issued, fully paid
and
nonassessable and free of restrictions on transfer, other than as set forth
in
applicable state and federal securities laws. Based in part upon the
representations of the Purchaser in this Agreement, such shares of Common Stock
will be issued in compliance with all applicable state and federal securities
laws.
3.5 Consents
and Defaults.
(a) The
execution, delivery and performance of each of the Transaction Documents and
the
consummation of the transactions contemplated by each of them will not result
in
any violation of or conflict with, constitute a default under (with or without
due notice or lapse of time or both), require any consent, waiver or notice
under any term, or result in the reduction or loss of any benefit or the
creation or acceleration of any right or obligation (including any termination
rights) under (i) the charter, certificate or articles of incorporation,
bylaws or operating agreement (or other similar organizational or governing
instruments) of the Company or any of the Subsidiaries, (ii) any agreement,
note, bond, mortgage, indenture, contract, lease, permit or other obligation
or
right to which the Company or any of the Subsidiaries is a party or by which
any
of the assets or properties of the Company or any of the Subsidiaries is bound,
other than the Promissory Note dated May 1, 2006 in favor of the Xxxxxxx Xxxxxxx
Revocable Trust, which consent has been obtained, or (iii) any applicable
domestic or foreign law or legal requirement, except
in the
case of clauses (ii) and (iii) where any of the foregoing is not reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect
on
the Company and the Subsidiaries taken as a whole.
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(b) Neither
the Company nor any of the Subsidiaries is in violation of any term of its
charter, certificate or articles of incorporation, bylaws or operating agreement
(or other similar organizational or governing instruments).
3.6 Litigation.
There
is no action, suit, proceeding or investigation pending or, to the Company’s
knowledge, currently threatened against the Company or any of the Subsidiaries
that questions the validity of any Transaction Document or the right of the
Company to enter into any such agreement to which such person is a party, to
consummate the transactions contemplated hereby or thereby, or that might
result, either individually or in the aggregate, in a Material Adverse Effect
on
the Company and the Subsidiaries taken as a whole, or any change in the current
equity ownership of any of them (except as contemplated herein), nor is the
Company aware that there is any basis for the foregoing. The Company is not
a
party or subject to the provisions of any order, writ, injunction, judgment
or
decree of any court or government agency or instrumentality. There is no action,
suit, proceeding or investigation by the Company currently pending or which
the
Company intends to initiate.
3.7 SEC
Reports; Financial Statements.
(a) Since
January 1, 2003, the Company (including its predecessors, if applicable) has
filed all forms, reports and documents with the SEC required to be filed by
it
under the Securities Act of 1933, as amended (“Securities
Act”),
and
the Securities Exchange Act of 1934, as amended (“Exchange
Act”)
(collectively, the “Company
SEC Reports”),
each
of which complied in all material respects with all applicable requirements
of
the Securities Act and the Exchange Act, each as in effect on the dates such
Company SEC Reports were filed.
(b) None
of
the Company SEC Reports contained, when filed, any untrue statement of a
material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except to the extent amended prior to the date hereof by a
subsequently filed Company SEC Report. The consolidated financial statements
of
the Company and any separate financial information relating to the Company
included in the Company SEC Reports (the “Company
Filed Financial Statements”)
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC in respect
thereof.
(c) The
Company Filed Financial Statements contained in each of the Company SEC Reports
(i) are true, accurate and complete in all respects; (ii) are
consistent with the books and records of Company; (iii) present fairly and
accurately the financial condition of the Company and the Subsidiaries, as
appropriate, as of the respective dates thereof and the results of operations,
changes in stockholder’s equity and cash flows of each of them for the periods
covered thereby; and (iv) have been prepared in accordance with generally
accepted accounting principles (“GAAP”),
applied on a consistent basis throughout the periods covered, except as
disclosed therein; provided,
however,
that the
Company Balance Sheet may not contain all of the footnotes required by GAAP,
and
may be subject to normal adjustments consistent with past practice which are
not
material individually or in the aggregate. All reserves established by the
Company and set forth in the Company Filed Financial Statements are adequate
for
the purposes for which they were established.
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(d) Since
the
date of the financial statements contained in the Company’s Form 10-Q filed with
the SEC for the quarter ended March 31, 2006 (the “Form
10-Q”)
(such
date, the “Company
Balance Sheet Date”),
there
has not been any change, or any application or request for any change, by the
Company or any of the Subsidiaries in accounting principles, methods or policies
for financial accounting purposes, other than as a result of any changes under
GAAP or other relevant accounting principles.
(e)
The
Company is in compliance with the provisions of the Xxxxxxxx-Xxxxx Act of 2002
applicable to it as of the date hereof.
3.8 Books
and Records.
(a) The
books, records and accounts of the Company and its Subsidiaries, in all material
respects, (i) have been maintained in accordance with good business
practices on a basis consistent with prior years; (ii) are stated in reasonable
detail and accurately and fairly reflect the transactions and dispositions
of
the assets of the Company and its Subsidiaries; and (iii) accurately and fairly
reflect the basis for the financial statements pertaining to the Company and
the
Subsidiaries contained in the Company SEC Reports and the Company Filed
Financial Statements.
(b) The
Company has devised and maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management’s general or specific authorization; and (ii)
transactions are recorded as necessary (A) to permit preparation of financial
statements in conformity with GAAP; and (B) to maintain accountability for
assets.
(c) The
Company maintains a system of disclosure controls and procedures that comply
with Rules 13a-14 and 13a-15 of the Exchange Act (as in effect on the date
of
this Agreement) and that are designed to ensure that information required to
be
disclosed by the Company in its reports or other documents filed with or
furnished to the SEC is recorded, processed, summarized and reported within
the
time periods required by the SEC’s rules and forms, including, without
limitation, controls and procedures designed to ensure that such information
is
accumulated and communicated to the Company’s senior management, including its
principal executive and principal financial officers, or persons performing
similar functions, as appropriate to allow timely decisions by Company regarding
required disclosure.
3.9 No
Undisclosed Liabilities.
There
are
no material liabilities of the Company or any of the Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable
or
otherwise, which are required to be reflected in its financial statements (or
in
the notes thereto) in accordance with GAAP, other than (a) liabilities
disclosed, provided for or reserved against in the financial statements
contained in the Form 10-Q or in the notes thereto; (b) liabilities arising
in the ordinary course of business after the Company Balance Sheet Date or
which
arose in the ordinary course of business prior to the Company Balance Sheet
Date
but were not required to be disclosed, provided for or reserved against in
the
financial statements contained in the Form 10-Q; and (c) liabilities
arising under this Agreement.
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3.10 Absence
of Changes.
Except
as
contemplated by this Agreement or as disclosed in the Company SEC Reports filed
prior to the date hereof, since the Company Balance Sheet Date, the Company
and
the Subsidiaries have conducted their business in the ordinary and usual course
consistent with past practice and there has not been:
(a)
any
event, occurrence or development which had or is reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company
and
the Subsidiaries taken as a whole;
(b)
any
declaration, setting aside or payment of any dividend or other distribution
in
respect of any shares of capital stock of the Company or (except to the Company
or other Subsidiaries) any Subsidiary, any split, combination or
reclassification of any shares of capital stock of the Company or any
Subsidiary, or any repurchase, redemption or other acquisition by the Company
or
any of the Subsidiaries of any securities of the Company or any of the
Subsidiaries;
(c)
any
amendment or change to the charter, certificate or articles of incorporation,
operating agreement or bylaws (or other similar organizational or governing
instrument) of the Company or any of the Subsidiaries, or any amendment of
any
term of any outstanding security of the Company or any of the Subsidiaries
that
would materially increase the obligations of the Company or any such subsidiary
under such security;
(d)
(i) any incurrence or assumption by the Company or any of the
Subsidiaries of any indebtedness for borrowed money other than under existing
credit facilities (or any renewals, replacements or extensions that do not
increase the aggregate commitments thereunder) except in the ordinary and usual
course of business consistent with past practice, or (ii) any guarantee,
endorsement, or other incurrence or assumption of liability (whether directly,
contingently or otherwise) by the Company or any of the Subsidiaries for the
obligations of any other person (other than any wholly owned subsidiary of
the
Company), other than in the ordinary and usual course of business consistent
with past practice;
(e)
any
creation or assumption by the Company or any of the Subsidiaries of any lien
or
encumbrance on any material asset of the Company or any of the Subsidiaries
other than in the ordinary and usual course of business consistent with past
practice;
(f)
any
making of any loan, advance or capital contribution to or investment in any
person by the Company or any of the Subsidiaries other than (i) loans, advances
or capital contributions to or investments in wholly owned subsidiaries of
the
Company; (ii) loans or advances to employees of the Company or any of the
Subsidiaries in the ordinary and usual course of business consistent with past
practice; or (iii) extensions of credit to customers in the ordinary and usual
course of business consistent with past practice;
(g)
any
contract or agreement entered into by the Company or any of the Subsidiaries
on
or prior to the date hereof relating to any material acquisition or disposition
of any assets or business, other than contracts or agreements in the ordinary
and usual course of business consistent with past practice and those
contemplated by this Agreement;
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(h)
any
modification, amendment, assignment, termination or relinquishment by the
Company or any of the Subsidiaries of any contract, license or other right
(including any insurance policy naming it as a beneficiary or a loss payable
payee) that is reasonably expected to have a Material Adverse Effect, after
taking into account the benefit of the consideration, if any, received in
exchange for agreeing to such modification, amendment, assignment, termination
or relinquishment, on the Company and the Subsidiaries taken as a
whole;
(i)
any
material change in any method of accounting or accounting principles or practice
by the Company or any of the Subsidiaries, except for any such change required
by reason of a change in GAAP, which change has been consistently
applied;
(j)
any
(i) grant of any severance or termination pay to any director, officer or
employee of the Company or any of the Subsidiaries; (ii) entering into of any
employment, deferred compensation, severance, consulting, termination or other
similar agreement (or any change or amendment to any such existing agreement)
with any director, officer, employee, agent or other similar representative
of
the Company or any of the Subsidiaries (collectively, “Company
Employment Agreements”)
whose
annual cash compensation exceeds $100,000, other than changes or amendments
that
(A) do not and will not result in increases, in the aggregate, of more than
five
percent in the salary, wages or other compensation of any such person and (B)
are otherwise consistent with clause (iv) below; (iii) increase in benefits
payable under any existing severance or termination pay policies or Company
Employment Agreements; or (iv) increase in compensation, bonus or other
benefits payable to directors, officers or employees of the Company or any
of
the Subsidiaries other than, in the case of clauses (ii) and (iv) only,
increases prior to the date hereof in compensation, bonus or other benefits
payable to directors, officers or employees of the Company or any of the
Subsidiaries in the ordinary and usual course of business consistent with past
practice or merit increases in salaries of employees at regularly scheduled
times in customary amounts consistent with past practices; or
(k)
any
(i) making or revoking of any material election relating to taxes; (ii)
settlement or compromise of any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to taxes;
or (iii) change to any material methods of reporting income or deductions for
federal income tax purposes.
3.11 Compliance
with Applicable Law; Permits.
The
Company and each of the Subsidiaries hold all permits, licenses, variances,
exemptions, orders, and approvals of all governmental entities necessary for
the
lawful conduct of their respective businesses (“Company
Permits”),
except for failures to hold such permits, licenses, variances, exemptions,
orders and approvals which are not reasonably expected to have, individually
or
in the aggregate, a Material Adverse Effect on the Company and the Subsidiaries
taken as a whole. The Company and each of the Subsidiaries are in compliance
with the terms of the Company Permits, except where the failure to comply is
not
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company and the Subsidiaries taken as a whole. The
businesses and operations of the Company and the Subsidiaries comply in all
respects with the requirements of all laws, rules and regulations applicable
to
the Company or the Subsidiaries, except where the failure to so comply is not
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company and the Subsidiaries taken as a
whole.
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3.12 Proprietary
Assets.
(a) The
Company and each Subsidiary has full title and ownership of, or has a license
to, or can obtain upon reasonable terms and conditions sufficient rights to,
all
patents, patent applications, trademarks, service marks, trade names,
copyrights, moral rights, maskworks, trade secrets, confidential and proprietary
information, compositions of matter, formulas, designs, proprietary rights
and
know-how and processes (collectively, the “Proprietary
Assets”)
necessary to enable each of them to carry on their businesses as now conducted
and as presently proposed to be conducted without any conflict with, or
infringement of, the rights of others.
(b) Neither
the Company nor any Subsidiary has violated or infringed and is not currently
violating or infringing, and neither the Company nor any Subsidiary has received
any communications alleging that either of them (or any of their employees
or
consultants) has violated or infringed, or, by conducting its business as
proposed would violate or infringe, any Proprietary Assets of any other person
or entity. No third party has any ownership right, title, interest, claim in
or
lien on any of the Proprietary Assets of the Company or any Subsidiary, and
the
Company and each Subsidiary has taken, and in the future will use best efforts
to take, all steps reasonably necessary to preserve their legal rights in,
and
the secrecy of, all of their Proprietary Assets, except those for which
disclosure is required for legitimate business or legal reasons.
(c) Neither
the Company nor any Subsidiary has received any communications alleging that
it
or any of its employees or consultants has violated or, by conducting its
business as proposed, would violate any Proprietary Assets of any other person
or entity. Neither the Company nor any Subsidiary is aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere
with
the use of such employee’s best efforts to promote the interest of the Company
or the Subsidiary or that would conflict with the business of the Company or
Subsidiary as proposed to be conducted.
3.13 Tax
Matters.
(a) The
Company and each Subsidiary, and any individual, trust, corporation, partnership
or any other entity as to which the Company is liable for Taxes incurred by
such
individual or entity either as a transferee, or pursuant to Treasury Regulations
Section 1.1502-6, or pursuant to any other provision of federal,
territorial, state, local or foreign law or regulations (the “Company
Group”)
has
timely filed (or has had timely filed) all Tax Returns required to be filed
by
each of them (or on their behalf). All such Tax Returns are true, complete
and
correct in all respects. The Company Group has paid all Taxes due for the
periods covered by such Tax Returns (whether or not shown on or reportable
on
such Tax Returns) or with respect to any period prior to the date of this
Agreement. There are no liens on any of the assets of any member of the Company
Group with respect to Taxes, other than liens for Taxes not yet due and payable
or for Taxes that a member of the Company Group is contesting in good faith
through appropriate proceedings and for which appropriate reserves have been
established.
9
(b) The
Company Filed Financial Statements contained in the Form 10-K and Form 10-Q
reflect adequate reserves for all Taxes payable by the Company Group for all
Taxable periods and portions thereof through the dates thereof.
(c) No
deficiencies for any Taxes have been proposed, asserted, or assessed (either
in
writing or verbally, formally or informally) or are expected to be proposed,
asserted, or assessed against the Company Group that have not been fully paid
or
adequately provided for in the appropriate financial statements of the Company,
no requests for waivers of the time to assess any Taxes are pending, and no
power of attorney still in effect in respect of any Taxes has been executed
or
filed with any taxing authority. No member of the Company Group has received
notice (either in writing or verbally, formally or informally) or expects to
receive notice that it has not filed a Tax Return or paid Taxes required to
be
filed or paid by it. The Tax Returns of the Company Group have never been
audited by a government or taxing authority, nor is any such audit in process,
pending or threatened (either in writing or verbally, formally or informally).
No waiver or extension of any statute of limitations is in effect with respect
to Taxes or Tax Returns of the Company Group. Each member of the Company Group
has disclosed on its federal income tax returns all positions taken therein
that
could give rise to a substantial understatement penalty within the meaning
of
Section 6662 of the Internal Revenue Code of 1986, as amended.
(d) Each
member of Company Group has complied in all respects with all requirements
applicable to the payment and withholding of Taxes and have duly and timely
withheld from employee salaries, wages and other compensation and have paid
over
to the appropriate taxing authority all material amounts required to be so
withheld and paid over for all periods under all applicable Legal
Requirements.
(e) No
federal, state, local, or foreign audits or other administrative proceedings
or
court proceedings are presently pending in respect of any Taxes or Tax Returns
of any member of Company Group and no such member has received notice (either
in
writing or verbally, formally or informally) of any pending audit or proceeding
in respect of any Taxes or Tax Returns.
(f) For
purposes of this Section 3.13, (i) the term “Tax”
or
“Taxes”
means
all taxes, however denominated, including any interest, penalties or other
additions to tax that may become payable in respect thereof, imposed by any
federal, territorial, state, local or foreign government or any agency or
political subdivision of any such government, which taxes shall include, without
limiting the generality of the foregoing, all income or profits taxes
(including, but not limited to, federal income taxes and state income taxes),
payroll and employee withholding taxes, unemployment insurance, social security
taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise taxes,
gross receipts taxes, business license taxes, occupation taxes, real and
personal property taxes, stamp taxes, environmental taxes, transfer taxes,
workers’ compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar nature
to any of the foregoing, which the Company Group is required to pay, withhold
or
collect; and (ii) the term “Tax
Return”
means
any report, return, document, declaration, or any other information or filing
required to be supplied to any taxing authority or jurisdiction (domestic or
foreign) in respect of Taxes, including, information returns, any document
in
respect of or accompanying payments or estimated Taxes, or in respect of or
accompanying requests for the extension of time in which to file any such
report, return document, declaration, or other information, including amendments
thereof and attachments thereto.
10
3.14 Listing
and Maintenance Requirements.
The
Common Stock is registered pursuant to Section 12(b) of the Exchange Act, and
the Company has taken no action designed to, or which is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the SEC is contemplating
terminating such registration. Except as set forth in Section 3.14 of the
Schedule of Exceptions, the Company has not, in the 12 months preceding the
date
hereof, received notice from the Over the Counter Bulletin Board, Nasdaq or
any
trading market on which the Common Stock is or has been listed or quoted to
the
effect that the Company is not in compliance with the listing or maintenance
requirements of such trading market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
3.15 Registration
Rights and Voting Rights.
Except
as provided in the Registration Rights Agreement or as set forth in Section
3.15
of the Schedule of Exceptions, the Company has not granted or agreed to grant
any registration rights, including piggyback rights, to any person or entity.
No
stockholders of the Company or of the Subsidiary have entered into any
agreements with respect to the voting of shares of capital stock of the Company
or of the Subsidiary.
3.16 Private
Placement.
Subject
in part to the truth and accuracy of the Purchaser’s representations set forth
in this Agreement, the offer, sale and issuance of the Securities as
contemplated by this Agreement, and the issuance of shares of Common Stock
upon
conversion of the Note and exercise of the Warrant, is or will be exempt from
the registration requirements of the Securities Act, and neither the Company
nor
any authorized agent acting on its behalf will take any action hereafter that
would cause the loss of such exemption.
3.17 Full
Disclosure.
(a) The
Company has provided Purchaser with all the information available to it that
(i)
Purchaser has requested of the Company for deciding whether to enter into this
Agreement and effect the transactions contemplated hereby and (ii) which
the
Company believes is reasonably necessary to enable the Purchaser to decide
whether to acquire the Securities. None
of
the Company’s representations or warranties in any of the Transaction Documents
or any other agreements, nor any written information or statements or
certificates made or delivered by the Company in connection herewith, when
taken
as a whole, contains any untrue statement of a material fact or omits to state
a
material fact necessary to make the statements herein or therein not misleading
in light of the circumstances under which they were made.
11
(b) There
is
no fact or series of related facts known to the Company that has specific
application to the Company and that could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect on the Company
and the Subsidiaries, taken as a whole, or (as far as the Company can reasonably
foresee) that could materially adversely affect the assets, liabilities,
business, prospects, financial condition, operations, or results of operations
of the Company, that has not been set forth in this Agreement.
3.18 Brokers.
Except
for AGB Securities, no broker, finder, investment banker or other person is
entitled to receive from the Company or any Subsidiary any brokerage, finder’s
or other fee or commission or expense reimbursement in connection with any
of
the Transaction Documents or any of the transactions contemplated thereby.
4. Representations
and Warranties of the Purchaser. The
Purchaser hereby represents and warrants to the Company and the Subsidiary
that:
(a) Accredited
Investor.
The
Purchaser is an accredited investor, as defined in Rule 501(a) of Regulation
D
promulgated under the Securities Act.
(b) Authorization.
The
Transaction Documents, when executed and delivered by the Purchaser, will
constitute valid and legally binding obligations of the Purchaser, enforceable
in accordance with their terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and any other
laws of general application affecting enforcement of creditors’ rights
generally, and as limited by laws relating to the availability of a specific
performance, injunctive relief, or other equitable remedies.
(c) Purchase
Entirely for Own Account.
This
Agreement is made with the Purchaser in reliance upon the Purchaser’s
representation to the Company, which by the Purchaser’s execution of this
Agreement, the Purchaser hereby confirms, that the Securities to be acquired
by
the Purchaser will be acquired for investment for the Purchaser’s own account,
not as a nominee or agent, and not with a view to the resale or distribution
of
any part thereof, and that the Purchaser has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, the Purchaser further represents that the Purchaser does not
presently have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to any of the Securities. The Purchaser represents that
it
has full power and authority to enter into this Agreement. The Purchaser has
not
been formed for the specific purpose of acquiring the Securities.
(d) Restricted
Securities.
The
Purchaser understands that the Securities have not been, and will not be,
registered under the Securities Act, by reason of a specific exemption from
the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of the
Purchaser’s representations as expressed herein. The Purchaser understands that
the Securities are “restricted securities” under applicable U.S. federal and
state securities laws and that, pursuant to these laws, the Purchaser must
hold
the Securities indefinitely unless they are registered with the SEC and
qualified by state authorities, or an exemption from such registration and
qualification requirements is available. The Purchaser acknowledges that the
Company has no obligation to register or qualify the Securities for resale
except as set forth in the Registration Rights Agreement. The Purchaser has
such
knowledge and experience in financial and business matters that it is capable
of
evaluating the merits and risks of the proposed investment and therefore has
the
capacity to protect its own interests in connection with the purchase of the
Securities.
12
(e) Restrictions
and Legends.
None of
the shares of the Securities shall be sold, transferred, assigned, pledged,
hypothecated or otherwise disposed of unless one of the following events shall
have occurred: (i) such securities are disposed of pursuant to and in
conformity with an effective registration statement filed with the SEC pursuant
to the Securities Act or pursuant to Rule 144 of the SEC thereunder; or (ii)
the
seller shall have delivered to the Company a written opinion by counsel which
is
reasonably acceptable to the Company to the effect that the proposed transfer
is
exempt from the registration and prospectus delivery requirements of the
Securities Act. The Purchaser understands that the Securities, and any
securities issued in respect thereof or exchange therefor, may bear the
following legend:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO
THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933,
AS AMENDED, EXCEPT AS SET FORTH HEREIN.”
5. Conditions
of the Purchaser’s Obligations at Closing.
The
obligations of the Purchaser to the Company under this Agreement are subject
to
the fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
(a) Representations
and Warranties. The
representations and warranties of the Company contained in Section 3 shall
be
true on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of the
Closing.
(b) Performance.
The
Company shall have performed and complied with all covenants, agreements,
obligations and conditions contained in this Agreement and in the other
Transaction Documents that are required to be performed or complied with by
such
entity on or before the Closing.
(c) Qualifications.
All
authorizations, approvals or permits, if any, of any governmental authority
or
regulatory body of the United States or of any state that are required in
connection with and prior to the lawful issuance and sale of the Securities
pursuant to this Agreement shall be obtained and effective as of the
Closing.
(d) Transaction
Documents.
The
Company shall have executed and delivered to the Purchaser the Transaction
Documents.
13
(e) Payoff
Letter.
The
Payoff Letter shall be fully executed and delivered by the parties
thereto.
(f) Account
Control Agreement.
AGB
Securities shall have executed and delivered the Account Control
Agreement.
(g) Transfers
of Real Property Collateral.
The
Company shall have delivered to the Purchaser evidence satisfactory to the
Purchaser that the real property pledged pursuant to the Arkansas Mortgage
and
the Tennessee Deed of Trust is vested in the name of the Company and that the
transfers of the interests in such property were duly authorized by Xxxx Xxxxxx
Xxxxxx Properties, LLC.
(h) Title
Insurance.
The
Company shall have made arrangements acceptable to the Purchaser for lender’s
title insurance on the Arkansas Mortgage and the Tennessee Deed of
Trust.
(i) Legal
Opinion.
The
Company shall have obtained a legal opinion in regarding the transaction in
form
and substance acceptable to the Purchaser.
(j) Secretary’s
Certificate.
The
Company shall have delivered a Secretary’s Certificate which shall include the
Restated Certificate and Bylaws of the Company, resolutions of the Board of
Directors authorizing the transactions contemplated hereby, an incumbency
certificate as to any officer of the Company executing any Transaction Document
and a good standing certificate with respect to the Company issued by the
Delaware Secretary of State as of a recent date.
(k) Transaction
Fee.
The
Company shall pay to the Purchase concurrently with the Closing a transaction
fee in the amount of $30,000, which shall be paid from the proceeds of the
Note
issuance pursuant to Section 1.1(b).
(l) Proceedings
and Documents.
All
corporate and other proceedings in connection with the transactions hereunder
shall have been taken, and all documents and instruments incident to such
transactions shall be satisfactory in substance and form to the Purchaser,
and
the Purchaser shall have received all such counterpart originals or certified
or
other copies of such documents as it may reasonably request.
6. Conditions
of the Company’s Obligations at Closing.
The
obligations of the Company to the Purchaser under this Agreement are subject
to
the fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:
(a) Representations
and Warranties. The
representations and warranties of the Purchaser contained in Section 4 shall
be
true on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the
Closing.
(b) Performance. All
covenants, agreements and conditions contained in this Agreement to be performed
by the Purchaser on or prior to the Closing shall have been performed or
complied with in all material respects.
14
(c) Qualifications.
All
authorizations, approvals or permits, if any, of any governmental authority
or
regulatory body of the United States or of any state that are required in
connection with the lawful issuance and sale of the Securities pursuant to
this
Agreement shall be obtained and effective as of the Closing.
(d) Transaction
Documents.
The
Purchaser shall have executed and delivered to the Transactions Documents to
which it is a party.
7. Indemnification.
The
Company hereby agree to indemnify and hold harmless the Purchaser from and
against any costs, damages, fees or expenses incurred by Purchaser as a result
of any breach of any representation, warranty or covenant by either the Company
contained in the Transaction Documents.
8. Right
of First Offer. Subject
to the terms and conditions specified in this Section 8, until the
twelve-month anniversary of the Closing, the Company hereby grants to Purchaser
a right of first offer with respect to future sales by the Company of its Shares
(as hereinafter defined). For purposes of this Section 8, the term
“Purchaser” includes any entity wholly-owned by Purchaser, and Purchaser shall
be entitled to transfer all or a portion of the right of first offer hereby
granted to such entity, so long as such transfer does not cause the loss of
the
exemption under Section 4(2) of the Act or any similar exemption under
applicable state securities laws in connection with such sale of Shares by
the
Company.
Each
time
the Company proposes to offer any shares of, or securities convertible into
or
exchangeable or exercisable for any shares of, any class of its capital stock
(the “Shares”),
the
Company shall first make an offering of such Shares to the Purchaser in
accordance with the following provisions:
(a) The
Company shall deliver a notice in accordance with Section 9.8 (the
“Notice”)
to the
Purchaser stating (i) its bona fide intention to offer such Shares,
(ii) the number of such Shares to be offered, and (iii) the price and
terms upon which it proposes to offer such Shares.
(b) By
written notification received by the Company, within ten (10) business days
after receipt of the Notice, (i) the Purchaser may elect to purchase or obtain,
at the price and on the terms specified in the Notice, up to that portion of
such Shares that equals the proportion that the number of shares of Common
Stock
issued and held, or issuable upon conversion or exercise of the Note and Warrant
then held, by the Purchaser bears to the total number of shares of Common Stock
of the Company then outstanding (assuming full conversion and exercise of all
outstanding convertible and exercisable securities), and (ii) the Purchaser
may
elect to pay all or a portion of the purchase price for such Shares by
cancellation of all or a portion of the principal or accrued interest due to
Purchaser under the Note.
(c) If
all
Shares that Purchaser is entitled to obtain pursuant to Section 8(b) are
not elected to be obtained as provided in Section 8(b) hereof, the Company
may, during the 30-day period following the expiration of the period provided
in
Section 8(b) hereof, offer the remaining unsubscribed portion of such
Shares to any person or persons at a price not less than, and upon terms no
more
favorable to the offeree than those specified in the Notice. If the Company
does
not enter into an agreement for the sale of the Shares within such period,
or if
such agreement is not consummated within sixty (60) days of the execution
thereof, the right provided hereunder shall be deemed to be revived and such
Shares shall not be offered unless first reoffered to the Purchaser in
accordance herewith.
15
(d) The
right
of first offer in this Section 8 shall not be applicable to:
(i) the
issuance of shares of securities pursuant to a split or subdivision of the
outstanding shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock (hereinafter referred to as “Common
Stock Equivalents”)
without payment of any consideration by such holder for the additional shares
of
Common Stock or the Common Stock Equivalents (including the additional shares
of
Common Stock issuable upon conversion or exercise thereof);
(ii) the
issuance of shares of Common Stock or options therefor to employees,
consultants, officers or directors (if in transactions with primarily
non-financing purposes) of the Company pursuant to a stock option plan or
restricted stock purchase plan approved by the stockholders of the Company
and
Board of Directors of the Company;
(iii) the
issuance of shares of Common Stock (A) in a bona fide, firmly underwritten
public offering under the Act, or (B) upon exercise of warrants or rights
granted to underwriters in connection with such a public offering;
(iv) the
issuance of shares of Common Stock pursuant to the conversion or exercise of
convertible or exercisable securities outstanding as of the date hereof or
subsequently issued pursuant to this Section 8;
(v) the
issuance of shares of Common Stock in connection with a bona fide business
acquisition of or by the Company, whether by merger, consolidation, sale of
assets, sale or exchange of stock or otherwise, each as approved by the Board
of
Directors of the Company and, if required, the stockholders of the Company;
9. Miscellaneous.
9.1 Survival
of Warranties.
Unless
otherwise set forth in this Agreement, the warranties, representations and
covenants of the Company and the Purchaser contained in or made pursuant to
this
Agreement shall survive the execution and delivery of this agreement and the
Closing.
9.2 Successors
and Assigns.
The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing
in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement. The Purchaser may assign this
Agreement to, without limitation, any entity that it controls or by which it
is
controlled (with “control” meaning ownership of more than fifty percent (50%) of
the voting stock of the entity or, in the case of a noncorporate entity, an
equivalent interest).
16
9.3 Governing
Law; Jurisdiction.
This
Agreement and all acts and transactions pursuant hereto and the rights,
remedies, powers and duties of the parties hereto shall be governed, construed
and interpreted in accordance with the laws of the State of New York, without
regard to principles of conflicts of laws. Each party consents to the
non-exclusive jurisdiction of the courts of the State of California. Each party
further consents to service of process in any litigation relating to any
Transaction Document by written notice given in accordance with Section 9.8.
For
purposes of any dispute or controversy arising under this Agreement or the
transactions contemplated herein, the parties also mutually consent to the
jurisdiction of the courts of the State of California, and the federal xxxxxxxx
xxxxx, Xxxxxxx Xxxxxxxx of California, and agree that any and all process
directed to any of them in any such litigation may be served outside the State
of California with the same force and effect as if service had been made within
the State of California.
9.4 Waiver
of Jury Trial.
EACH OF
THE COMPANY AND THE PURCHASER HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE
IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE
ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THIS AGREEMENT
OR
ANY OTHER TRANSACTION DOCUMENT. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL
BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
9.5 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original and all of which together shall constitute one
instrument.
9.6 Titles
and Subtitles. The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
9.7 Notices.
Any
notice required or permitted by this Agreement or any other Transaction Document
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS) as follows:
17
|
(i)
|
if
to the Company, at:
|
0000
Xxxxxxx Xxxx Xxxx, Xxxxx 000
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxxx
Xxxxxxxxxxx
with
a
copy to:
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
0000
Xxxxxx xx xxx Xxxxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Attn:
Xxxx X. Xxxx, Esq.
| (ii) |
if
to the Purchaser, at:
|
Xxxx
X.
Xxxxxxx
000
Xxxxxx Xxxx
Xxxxxxx
Xxxxxxxxx, XX 00000
with
a
copy to:
Xxxxxxxx
& Xxxxxxxx LLP
000
Xxxx
0xx
Xxxxxx
Xxxxx
0000
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxxx
X. Xxxxxxx, Esq.
Any
party
hereto (and such party’s permitted assigns) may by notice so given change its
address for future notices hereunder.
9.8 Attorney’s
Fees.
If any
action at law or in equity (including arbitration) is necessary to enforce
or
interpret the terms of any of the Transaction Documents, the prevailing party
shall be entitled to reasonable attorneys’ fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
9.9 Amendments
and Waivers. Any
term
of this Agreement may be amended or waived only with the written consent of
the
Company and the Purchaser. Any amendment or waiver effected in accordance with
this Section 9.10 shall be binding upon the Purchaser and each transferee of
the
Securities, each future holder of all such Securities and the
Company.
9.10 Severability.
Whenever possible, each provision of this Agreement will be interpreted in
such
manner as to be effective and valid under applicable law, but if any provision,
subpart, sentence, phrase or term of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in
any
jurisdiction, such invalidity, illegality or unenforceable provision shall
be
modified or replaced with a valid and enforceable term or provision that most
accurately represents the intent of the parties with respect to the invalid,
illegal or unenforceable term.
18
9.11 Delays
or Omissions.
No
delay or omission to exercise any right, power or remedy accruing to any holder
of any of the Securities, upon any breach or default of the Company under any
Transaction Document, shall impair any such right, power or remedy of such
holder nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring.
Any
waiver, permit, consent or approval of any kind or character on the part of
any
holder of any breach or default under this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies, either under a Transaction Document or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
9.12 Entire
Agreement.
This
Agreement, and the documents referred to herein constitute the entire agreement
between the parties hereto pertaining to the subject matter hereof, and any
and
all other written or oral agreements existing between the parties hereto are
expressly canceled.
[Remainder
of Page Intentionally Left Blank -
Signature
Pages to Follow]
19
The
parties have executed this Secured Convertible Note and Warrant Purchase
Agreement as of the date first written above.
COMPANY:
By:
/s/
Xxxxx
Xxxxxxxxxxx
Name:
Xxxxx
Xxxxxxxxxxx
Title:
President
Address: 0000
Xxxxxxx Xxxx Xxxx, Xxxxx 000
Xxx
Xxxxxxx, XX 00000
Attention:
Xxxxx Xxxxxxxxxxx
PURCHASER:
XXXX
X.
XXXXXXX
___________________________
Address: 000 Xxxxxx Xxxx
Address: 000 Xxxxxx Xxxx
Xxxxxxx
Xxxxxxxxx, XX 00000
SIGNATURE
PAGE TO PATIENT SAFETY TECHNOLOGIES, INC.
SECURED
CONVERTIBLE NOTE
AND
WARRANT PURCHASE AGREEMENT
EXHIBITS
| Exhibit A | - | Form of Secured Convertible Promissory Note |
|
Exhibit
B
|
-
|
Form
of Warrant
|
| Exhibit C | - | Form of Registration Rights Agreement |
| Exhibit D | - | Form of Pledge Agreement |
| Exhibit E | - | Schedule of Exceptions |
Exhibit
“E”
Exceptions
to Representations
| 3.2(d) |
If
there is an event of default, if Xxxxxxx wants to foreclose on the
pledged
shares, PST will obtain shareholder
approval.
|
| 3.6 |
The
following litigation as described in the Company’s 10K does not have any
effect on the subject transaction but could have a material adverse
effect
should PST not prevail:
|
| a) |
Leve
v. PST
|
| b) |
Winstar
v. PST
|
| 3.7(a) |
With
respect to representations and warranties relating to periods prior
to
10/24/04 (the date current management and Xxxx Xxxx took office),
the
representations and warranties are limited to the best of the Company’s
knowledge.
|
|
3.9
|
Same
as 3.2(d).
|
|
3.10(b)
|
PST
pays a 7% dividend on its Series A Preferred, based on $1,095,000
(7% x
$1,095,000).
|
|
3.10(e)
|
Mortgages
recorded by Xxxx Xxxxxxx on Arkansas and Tennessee properties on
6/2/06.
|
| 3.10(j) | 1) | Severance agreement between PST and Xxxx Xxxx dated 5/24/06; and |
|
2)
|
Grant
of termination pay and benefits to Xxxxxxx Xxxxxx for AGB Capital
Properties, LLC approved on April 21,
2006.
|
|
3.12(a)
|
Certain
issued patents of SurgiCount Medical, Inc. are being re-examined
by the
USPO.
|
|
3.13(a)
|
State
and federal tax returns of PST are on extension for year 2005; no
state or
federal taxes due, on account of substantial
NOL.
|
|
3.14
|
PST
was on AMEX deficiency list until early May 2006 but has since been
cleared and we see no reason at this time that the Company would
not
remain in compliance in the foreseeable future.
|
