PLEDGE AGREEMENT
THIS
PLEDGE AGREEMENT (the “Pledge Agreement”) is made and dated this 6th
day of
June, 2006 by and among Patient Safety Technologies, Inc., a Delaware
corporation (“Debtor”), and Xxxx X. Xxxxxxx, an individual (“Secured
Party”).
RECITALS
A. Secured
Party has agreed to extend credit to Debtor on the terms and subject to the
conditions set forth in that certain Secured Convertible Promissory Note dated
as of even date herewith (as the same may be amended, extended or replaced
from
time to time, the “Note”). The Note is being issued pursuant to that certain
Note and Warrant Purchase Agreement dated as of even date herewith (as the
same
may be amended, extended or replaced from time to time, the “Purchase
Agreement”). Capitalized terms used herein without definition have the meanings
assigned thereto in the Purchase Agreement.
B. To
induce
Secured Party to extend such credit, Debtor has agreed to pledge and to grant
to
Secured Party a security interest in and lien upon certain property of Debtor
described more particularly herein.
NOW,
THEREFORE, in consideration of the above Recitals and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. Pledge.
Debtor
hereby pledges, assigns and grants to Secured Party a security interest in
the
property described in Section 2 below (collectively and severally, the
“Collateral”) to secure payment and performance of the Obligations (as defined
below).
2. Collateral.
The
Collateral consists of all right, title and interest of Debtor in and to the
following, whether now existing or hereafter acquired: (a) all equity interests
listed on Schedule 1 to this Pledge Agreement and all other equity interests
obtained by Debtor and the certificates representing all such equity interests
(the “Pledged Interests”) and all security accounts, deposit accounts, and
commodity accounts in which such equity interests are held; (b) all other
property that may be delivered to and held by Secured Party pursuant to the
terms of this Pledge Agreement; (c) all payments of dividends, cash, securities,
instruments and other property from time to time received, receivable or
otherwise distributed, in respect of, in exchange for or upon the conversion
of
the securities referred to in subparagraph
(a)
above;
(d) all rights, powers and privileges of Debtor with respect to the Collateral
referred to above; and (e) all proceeds of the foregoing Collateral.
1
Upon
delivery to Secured Party (a) any stock certificates, promissory notes or other
securities now or hereafter included in the Collateral (the “Pledged
Securities”) shall be accompanied by stock powers duly executed in blank or
other instruments of transfer satisfactory to Secured Party and by such other
endorsement, instruments and documents as Secured Party may reasonably request
and (b) all other property comprising part of the Collateral shall be
accompanied by proper instruments of assignment duly executed by Debtor and
such
other endorsements, instruments or documents as Secured Party may reasonably
request. Debtor promises promptly to deliver to Secured Party any and all
Pledged Securities and any and all certificates or other instruments or
documents representing the Collateral. Each delivery of Pledged Securities
shall
be accompanied by a schedule describing the securities theretofore and then
being pledged hereunder, which schedule shall be attached hereto as Schedule
I
and made a part hereof. Each schedule so delivered shall supersede any prior
schedules so delivered.
As
of the
date of this Pledge Agreement, all of the Pledged Securities are maintained
by
Debtor in an account (the “Securities Account”) with Xxxx Xxxxxx Xxxxxx
Securities, LLC (the “Broker”). Substantially concurrently with the execution
and delivery of this Pledge Agreement, Debtor, Secured Party and Broker are
entering into an Account Control Agreement (as the same may be amended, extended
or replaced from time to time, the “Account Control Agreement”). The provisions
of the preceding paragraph relating to delivery of Pledged Securities shall
not
apply to any Pledged Securities maintained in the Securities Account so long
as
the Account Control Agreement remains in effect. For all purposes of this Pledge
Agreement, Pledged Securities maintained in the Securities Account shall be
deemed to be “delivered” to Secured Party so long as the Account Control
Agreement remains in effect.
3. Obligations.
The
Obligations secured by this Pledge Agreement consists of any and all debts,
obligations, and liabilities of Debtor to Secured Party arising out of or
related to the Note, the Purchase Agreement and this Pledge Agreement (whether
principal, interest, fees or otherwise, whether now existing or hereafter
arising, whether voluntary or involuntary, whether or not jointly owed with
others, whether direct or indirect, absolute or contingent, contractual or
tortious, liquidated or unliquidated, arising by operation of law or otherwise,
whether or not from time to time decreased or extinguished and later increased,
created or incurred and whether or not extended, modified, rearranged,
restructured, refinanced, or replaced, including without limitation,
modifications to interest rates or other payment terms of such debts,
obligations, or liabilities).
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4. Representations
and Warranties.
In
addition to all representations and warranties of Debtor set forth in the Note
and the Purchase Agreement which are incorporated herein by this reference,
Debtor hereby represents and warrants that: (a) the Pledged Interests represent
that percentage set forth on Schedule I of the issued and outstanding equity
interests of the issuer with respect thereto, based on the most recent filings
by the respective issuer if such issuer is a publicly reporting company, and
in
all other cases based on the corporate records of such issuer, in each case
as
of the date of this Agreement; (b) except for the security interest granted
hereunder, Debtor (i) is and will at all times continue to be the direct owner,
beneficially and of record, of the Pledged Securities indicated on Schedule
I,
(ii) holds the same free and clear of all liens except the lien in favor of
Secured Party, and the lien in favor of the Xxxxxxx Xxxxxxx Revocable Trust
(the
“Trust”), which lien has been subordinated pursuant to a Subordination Agreement
among Secured Party, the Trust and Debtor dated as of even date herewith, (iii)
will not dispose of or make any assignment, pledge, hypothecation or transfer
of, or create or permit to exist any security interest in or other lien on,
the
Collateral, other than pursuant hereto, and (iv) will cause any and all
Collateral, whether for value paid by Debtor or otherwise, to be forthwith
pledged or assigned hereunder and deposited with Secured Party pursuant hereto
or, if the Account Control Account remains in effect, deposited in the
Securities Account and; (c) Debtor (i) has the power and authority to pledge
the
Collateral in the manner hereby done or contemplated and (ii) will defend its
title or interest thereto or therein against any and all liens (other than
the
liens created by this Pledge Agreement), however arising, of all persons
whomsoever; (d) no consent of any other person (including stockholders or
creditors of Debtor and stockholders or creditors of any issuer of Pledged
Securities) and no consent or approval of any governmental authority or any
securities exchange was or is necessary to the validity or enforceability of
the
pledge effected hereby, except such consents as have been obtained and are
in
full force and effect; (e) by virtue of the execution and delivery by Debtor
of
this Pledge Agreement, when the Pledged Securities, certificates or other
documents representing or evidencing the Collateral are delivered to Secured
Party in accordance with this Pledge Agreement or, if a security interest in
the
Collateral may not under applicable law be perfected by possession, then upon
the filing of appropriate financing statements, Secured Party will obtain a
valid and perfected first lien upon and security interest in such Pledged
Securities as security for the payment and performance of the Obligations;
(f)
all of the pledged equity interests have been duly authorized and validly issued
and are fully paid and nonassessable and are in certificated form; provided
that
the representation and warranty set forth in this clause (f) is to the best
knowledge of Debtor with respect to equity interests in any issuer that is
not a
subsidiary of Debtor; provided, further, however, that in the event that any
such pledged equity interests do not comply with the representation and warranty
set forth in this clause (f), Debtor shall be required to take all necessary
action to cause such pledged equity interests to satisfy the representation
and
warranty set forth in this clause (f) within 30 days after obtaining knowledge
of same; (g) the Collateral will not be represented by any certificates, notes,
securities, documents, or other instruments other than those delivered
hereunder; and (h) the terms of the governing documentation for the persons
whose equity interests are pledged under this Pledge Agreement will at all
times
expressly provide that the equity interests are securities governed by Article
8
of the Uniform Commercial Code as in effect in the State of California and
that
such equity interests will at all times be represented by a certificate or
certificates duly delivered to Secured Party under this Pledge
Agreement.
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5. Registration
in Nominee Name; Denominations.
After
the
occurrence and during the continuance of an Event of Default, Secured Party
shall have the right (in its sole and absolute discretion) to hold the Pledged
Securities in its own name as pledgee, the name of its nominee (as pledgee
or as
sub-agent) or the name of Debtor, endorsed or assigned in blank or in favor
of
Secured Party. Debtor will promptly give to Secured Party copies of any notices
or other communication received by it with respect to the Pledged Securities
registered in the name of Debtor. After the occurrence and during the
continuance of an Event of Default, Secured Party shall have the right to
exchange the certificates representing Pledged Securities for certificates
of
smaller or larger denominations for any purpose consistent with this Pledge
Agreement. Debtor hereby grants to Secured Party an exclusive, irrevocable
power
of attorney, with full power and authority in the place and stead of Debtor
to
take all such action permitted under this Section 5. Debtor agrees to reimburse
Secured Party upon demand for any costs and expenses, including, without
limitation, reasonable attorneys’ fees, Secured Party may incur while acting as
Debtor’s attorney-in-fact hereunder, all of which costs and expenses are
included in the Obligations secured hereby. It is further agreed and understood
between the parties hereto that such care as Secured Party gives to the
safekeeping of its own property of like kind shall constitute reasonable care
of
the Collateral when in Secured Party’s possession; provided, however, that
Secured Party shall not be required to make any presentment, demand or protest,
or give any notice and need not take any action to preserve any rights against
any prior party or any other person in connection with the Obligations or with
respect to the Collateral.
6. Administration
of the Pledged Securities.
(a) Until
there shall have occurred and be continuing an Event of Default, Debtor shall
be
entitled to vote or consent with respect to the Pledged Securities in any manner
not inconsistent with this Pledge Agreement or any document or instrument
delivered or to be delivered pursuant to or in connection herewith and to
receive all regular dividends paid with respect to the Pledged Securities;
provided, however, that Debtor will not be entitled to exercise any such right
if the result thereof could materially and adversely affect the rights inuring
to a holder of the Pledged Securities or the rights and remedies of Secured
Party under this Pledge Agreement, the Purchase Agreement or the Note or the
ability of Secured Party to exercise the same. If there shall have occurred
and
be continuing an Event of Default and Secured Party shall have notified Debtor
that Secured Party desires to exercise its proxy rights with respect to all
or a
portion of the Pledged Securities, Debtor hereby grants to Secured Party an
irrevocable proxy for the Pledged Securities pursuant to which proxy Secured
Party shall be entitled to vote or consent, in its discretion, and in such
event
Debtor agrees to deliver to Secured Party such further evidence of the grant
of
such proxy as Secured Party may request. Upon the occurrence and during the
continuance of an Event of Default, all rights of Debtor to exercise the voting
and consensual rights and powers it is entitled to exercise pursuant to this
Pledge Agreement shall cease, and all such rights shall thereupon become vested
in Secured Party, which shall have the sole and exclusive right and authority
to
exercise such voting and consensual rights and powers.
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(b) In
the
event that at any time or from time to time after the date hereof, Debtor,
as
record and beneficial owner of the Pledged Securities, shall receive or shall
become entitled to receive, any dividend or any other distribution whether
in
securities or property by way of stock split, spin-off, split-up or
reclassification, combination of shares or the like, or in case of any
reorganization, consolidation or merger, and Debtor, as record and beneficial
owner of the Pledged Securities, shall thereby be entitled to receive securities
or property in respect of such Pledged Securities, then and in each such case,
Debtor shall deliver to Secured Party and Secured Party shall be entitled to
receive and retain all such securities or property as part of the Pledged
Securities as security for the payment and performance of the Obligations.
(c) Upon
the
occurrence and during the continuance of an Event of Default, all rights of
Debtor to regular dividends and distributions that Debtor is authorized to
receive pursuant to this Pledge Agreement shall cease, and all such rights
shall
thereupon become vested in Secured Party, which shall have the sole and
exclusive right and authority to receive and retain such dividends and
distributions. All dividends and distributions received by Debtor contrary
to
the provisions of this Pledge Agreement shall be held in trust for the benefit
of Secured Party, shall be segregated from other property or funds of Debtor
and
shall forthwith be delivered to Secured Party upon demand in the same form
as so
received (with any necessary endorsement). Any and all money and other property
paid over to or received by Secured Party pursuant to the provisions of this
subparagraph (c) shall be retained by Secured Party in an account to be
established by Secured Party upon receipt of such money or other property and
shall constitute Collateral under this Pledge Agreement to be applied in
accordance herewith.
(d) Upon
the
occurrence and during the continuance of an Event of Default, Secured Party
is
authorized to sell the Pledged Securities and, at any such sale of any of the
Pledged Securities, if it deems it advisable to do so, to restrict the
prospective bidders or purchasers to persons or entities who (1) will represent
and agree that they are purchasing for their own account, for investment, and
not with a view to the distribution or sale of any of the Pledged Securities;
and (2) satisfy the offeree and purchaser requirements for a valid private
placement transaction under Section 4(2) of the Securities Act of 1933, as
amended (the “Act”), and under Securities and Exchange Commission Release Nos.
33-6383; 34-18524; 35-22407; 39-700; IC-12264; AS-306, or under any similar
statute, rule or regulation. Debtor agrees that disposition of the Pledged
Securities pursuant to any private sale made as provided above may be at prices
and on other terms less favorable than if the Pledged Securities were sold
at
public sale, and that Secured Party has no obligation to delay the sale of
any
Pledged Securities for public sale under the Act. Debtor agrees that a private
sale or sales made under the foregoing circumstances shall be deemed to have
been made in a commercially reasonable manner. In the event that Secured Party
elects to sell the Pledged Securities, or part of them, and there is a public
market for the Pledged Securities, in a public sale Debtor shall use its best
efforts to register and qualify the Pledged Securities, or applicable part
thereof, under the Act and all state Blue Sky or securities laws required by
the
proposed terms of sale and all expenses thereof shall be payable by Debtor,
including, but not limited to, all costs of (i) registration or qualification
of, under the Act or any state Blue Sky or securities laws or pursuant to any
applicable rule or regulation issued pursuant thereto, any Pledged Securities,
and (ii) sale of such Pledged Securities, including, but not limited to,
brokers’ or underwriters’ commissions, fees or discounts, accounting and legal
fees, costs of printing and other expenses of transfer and sale.
5
(e) If
any
consent, approval or authorization of any state, municipal or other governmental
department, agency or authority should be necessary to effectuate any sale
or
other disposition of the Pledged Securities, or any part thereof, Debtor will
execute such applications and other instruments as may be required in connection
with securing any such consent, approval or authorization, and will otherwise
use its best efforts to secure the same.
(f) Nothing
contained in this Section 6 shall be deemed to limit the other obligations
of
Debtor contained in the Purchase Agreement, the Note or this Pledge Agreement
and the rights of Secured Party hereunder or thereunder.
7. Default.
An
event
of default (an “Event of Default”) shall be deemed to exist under this Pledge
Agreement if Debtor shall fail to observe any term or condition of the Note,
the
Purchase Agreement or this Pledge Agreement (in each case after any applicable
cure period expressly provided in such instrument or agreement).
8. Remedies.
(a) Upon
the
occurrence of an Event of Default, Secured Party may, without notice to or
demand on Debtor and in addition to all rights and remedies available to Secured
Party with respect to the Obligations, at law, in equity or otherwise, do any
one or more of the following:
(1) Foreclose
or otherwise enforce Secured Party’s security interest in any manner permitted
by law or provided for in this Pledge Agreement.
(2) Sell,
lease, license or otherwise dispose of any Collateral at one or more public
or
private sales at Secured Party’s place of business or any other place or places,
including, without limitation, any broker’s board or securities exchange,
whether or not such Collateral is present at the place of sale, for cash or
credit or future delivery, on such terms and in such manner as Secured Party
may
determine.
(3) Recover
from Debtor all costs and expenses, including, without limitation, reasonable
attorneys’ fees (including the allocated cost of internal counsel), incurred or
paid by Secured Party in exercising any right, power or remedy provided by
this
Pledge Agreement.
(4) In
connection with the disposition of any Collateral, disclaim any warranty
relating to title, possession or quiet enjoyment.
(b) Unless
the Collateral threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Debtor shall be given ten (10) days’
prior notice of the time and place of any public sale or of the time after
which
any private sale or other intended disposition of Collateral is to be made
pursuant to this Pledge Agreement, which notice Debtor hereby agrees shall
be
deemed reasonable notice thereof.
6
(c) Upon
any
sale or other disposition pursuant to this Pledge Agreement, Secured Party
shall
have the right to deliver, assign and transfer to the purchaser thereof the
Collateral or portion thereof so sold or disposed of. Each purchaser at any
such
sale or other disposition (including Secured Party) shall hold the Collateral
free from any claim or right of whatever kind, including any equity or right
of
redemption of Debtor and Debtor specifically waives (to the extent permitted
by
law) all rights of redemption, stay or appraisal which it has or may have under
any rule of law or statute now existing or hereafter adopted.
(d) Any
deficiency with respect to the Obligations which exists after the disposition
or
liquidation of the Collateral shall be a continuing liability of Debtor to
Secured Party and shall be immediately paid by Debtor to Secured
Party.
(e) Notwithstanding
anything else contained in this Pledge Agreement, if any non-cash proceeds
are
received in connection with any sale or disposition of any Collateral, Secured
Party shall not apply such non-cash proceeds to the Obligations unless and
until
such proceeds are converted to cash; provided, however, that if such non-cash
proceeds are not expected on the date of receipt thereof to be converted to
cash
within one year after such date, Secured Party shall use commercially reasonable
efforts to convert such non-cash proceeds to cash within such one year
period.
9. Cumulative
Rights.
The
rights, powers, and remedies of Secured Party under this Pledge Agreement shall
be in addition to all rights, powers, and remedies given to Secured Party by
virtue of any statute or rule of law, the Purchase Agreement, the Note or any
other agreement, all of which rights, powers, and remedies shall be cumulative
and may be exercised successively or concurrently without impairing Secured
Party’s security interest in the Collateral.
10. Waiver.
Any
waiver, forbearance or failure or delay by Secured Party in exercising any
right, power, or remedy shall not preclude the further exercise thereof, and
every right, power, or remedy of Secured Party shall continue in full force
and
effect until such right, power or remedy is specifically waived in a writing
executed by Secured Party. Debtor waives any right to require Secured Party
to
proceed against any person or to exhaust any Collateral or to pursue any remedy
in Secured Party’s power.
11. Setoff.
Debtor
agrees that Secured Party may exercise its rights of setoff with respect to
the
Obligations in the same manner as if the Obligations were
unsecured.
7
12. Binding
Upon Successors.
All
rights of Secured Party under this Pledge Agreement shall inure to the benefit
of its successors and assigns, and all obligations of Debtor shall bind its
heirs, executors, administrators, successors, and assigns.
13. Severability.
If
any of
the provisions of this Pledge Agreement shall be held invalid or unenforceable,
this Pledge Agreement shall be construed as if not containing those provisions
and the rights and obligations of the parties hereto shall be construed and
enforced accordingly.
14. Choice
of Law.
This
Pledge Agreement shall be construed in accordance with and governed by the
laws
of California, without giving effect to choice of law rules, and, where
applicable and except as otherwise defined herein, terms used herein shall
have
the meanings given them in the Uniform Commercial Code of such
state.
15. Amendment.
This
Pledge Agreement may not be amended or modified except by a writing signed
by
each of the parties hereto.
16. Addresses
for Notices.
All
demands, notices, and other communications to Debtor or Secured Party provided
for hereunder shall be in writing or by telephone, promptly confirmed in
writing, mailed, delivered, or sent by telefacsimile, addressed or sent to
it to
the address or telefacsimile number, as the case may be, of Debtor or Secured
Party set forth beneath such party’s signature below, or to such other address
as shall be designated by a party in a written notice to the other party. All
such demands, notices, and other communications shall, when mailed or sent
by
telefacsimile, be effective when deposited in the mails, delivered or so sent,
as the case may be, addressed as aforesaid.
8
17. Execution
in Counterparts.
This
Pledge Agreement may be executed in counterparts each of which when so executed
shall be deemed to be an original and all of which when taken together shall
constitute one and the same agreement.
EXECUTED
as of the date first written above.
|
DEBTOR:
|
a
Delaware corporation
By:
/s/
Xxxxx
Xxxxxxxxxxx
Name:
Xxxxx
Xxxxxxxxxxx
Title:
President
Address:
0000
Xxxxxxx Xxxx Xxxx, Xxxxx 000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
|
|
SECURED
PARTY:
|
By:
_______________________________
Name:
Xxxx X. Xxxxxxx
Address: 000
Xxxxxx Xxxx
Xxxxxxx
Xxxxxxxxx, XX 00000
|
9
Schedule
I
Pledged
Securities
|
Name
of Issuer
|
Certificate
No.
|
No.
of Shares
|
%
of Ownership in Issuer
|
|||
|
Digicorp
|
Uncertificated;
Held through AGB Securities
|
2,421,292
|
7.2%
|
|||
|
IPEX
Inc.
|
Uncertificated;
Held through AGB Securities
|
950,000
|
7.8%
|
|||
|
Automotive
Services Group, Inc.
|
1
|
200
|
100%
|
|||
|
Alacra,
Inc.
|
F-6
|
321,543
|
1.6%
|
|||
|
Surgicount
Medical, Inc.
|
1
|
1,000
|
100%
|
10
