EXCHANGE AGREEMENT
EXHIBIT
99.1
This
EXCHANGE AGREEMENT,
dated as of July 29, 2009 (this “Agreement”) is
entered into by and among Patient Safety Technologies, Inc., a Delaware
corporation (“Company”), and the
other persons whose names appear on the signature pages attached hereto (each an
“Investor”, and
collectively, the “Investors”).
RECITALS
1. Each
of the Investors is a holder of one or more warrants (the “Warrants”) to purchase shares
of Common Stock of the Company (the “Warrant
Shares”). The Warrants are exercisable at various strike
prices that exceed the current trading price of the Company’s Common Stock (the
“Common
Stock”).
2. In
order to enhance the liquidity of the Investors’ holdings and reduce the number
of Warrants outstanding, the Company and the Investors wish to cause the
Warrants to be converted into shares of Common Stock.
AGREEMENT
NOW
THEREFORE, in consideration of the foregoing, and the representations,
warranties, and conditions set forth below, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Subscription. Subject
to the terms and conditions hereof the Company and each Investor, severally and
not jointly, agree as follows:
(a) Warrant
Conversion. The Investor hereby subscribes for the aggregate
number of shares of Common Stock set forth on the applicable signature page
attached hereto (the “Conversion
Shares”). The Conversion Shares shall be issued in exchange
for Warrants held by the Investor described under the caption “Investor Warrants” on the
applicable signature page attached hereto.
(b) Delivery. The
Conversion Shares shall be issued in exchange for Warrants at one or more
closings (each, a “Closing”) to be held at such
place and time as Company and the Investors participating in such Closing may
determine (the “Closing
Date”). At each such Closing, Company shall issue to each of
the Investors participating in such Closing a stock certificate representing the
number of Conversion Shares subscribed for by such Investor, against such
Investor’s tender of all Warrants held by such Investor (or, if such Warrants
cannot be located by the Investor, such Investor shall tender a Lost Instrument
Affidavit in a form provided by the Company).
(c) Termination of Obligations under
Warrants. Each Investor understands and agrees that all
obligations of the Company pursuant such Investor’s Warrants shall terminate and
shall be without any further force of effect upon the applicable
Closing. Such obligations of the Company terminated, cancelled and
released upon the Closing include, without limitation, (i) any and all
obligations to issue shares of Common Stock upon exercise or conversion of such
Warrants, and (ii) any claims, obligations or other liabilities of the Company
which may have accrued or which may in the future have accrued, pursuant to such
Warrants.
(d) Lost Warrants. In
the event that any Investor is unable to locate or retrieve any Warrant and
tender such Warrant at the Closing, such Investor shall execute and deliver a
Lost Instrument Affidavit in a form provided by the Company certifying that such
Warrant cannot be located and indemnifying the Company a against any claim or
loss arising out of failure to tender such Warrant.
(e) Company’s Right to Reject
Subscriptions and/or Terminate Offering. Notwithstanding
anything in this agreement or in any document or instrument delivered pursuant
hereto, the Company shall have the right in it sole discretion, upon notice to
each applicable Investor, at any time prior to the applicable Closing, to: (i)
reject such Investor’s subscription in whole or in part, and (ii) to terminate
the offering of Conversion Shares effected pursuant hereto.
2. Representations
and Warranties of Company. Except as set forth in the Disclosure Letter
delivered to the Investors concurrently herewith (the “Disclosure Letter”), which
Disclosure Letter shall be deemed a part hereof and shall qualify any
representation or otherwise made herein, the Company hereby makes the following
representations and warranties to each Investor:
(a) Subsidiaries. The
Company has one Subsidiary, SurgiCount Medical, Inc., a California
corporation. The Company owns, directly or indirectly, all of the
capital stock or other equity Conversion Shares of the Subsidiary free and clear
of any liens, and all of the issued and outstanding shares of capital stock of
the Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights to subscribe for or purchase
securities.
(b) Organization and
Qualification. Each of the Company and the Subsidiary is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Neither the Company nor the Subsidiary is in violation or
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents. Each of the Company and the Subsidiary is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of this Agreement, (ii) a material adverse
effect on the results of operations, assets, business, prospects or condition
(financial or otherwise) of the Company and the Subsidiary, taken as a whole, or
(iii) a material adverse effect on the Company’s ability to perform in any
material respect on a timely basis its obligations under this Agreement (any of
(i), (ii) or (iii), a “Material
Adverse Effect”) and no action, claim, suit, investigation or proceeding
has been instituted in any such jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail such power and authority or
qualification.
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(c) Authorization;
Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the this Agreement and otherwise to carry out its obligations
hereunder The execution and delivery of this Agreement and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of the Company, and no further
action is required by the Company, the Board of Directors or the Company’s
stockholders in connection therewith. This Agreement has been (or
upon delivery will have been) duly executed by the Company and, when delivered
in accordance with the terms hereof and thereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable
law.
(d) No
Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the other
transactions contemplated hereby do not and will not: (i) conflict with or
violate any provision of the Company’s or the Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the creation of
any lien upon any of the properties or assets of the Company or the Subsidiary,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or the Subsidiary
is a party or by which any property or asset of the Company or the Subsidiary is
bound or affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or the Subsidiary is subject (including federal and state securities
laws and regulations), or by which any property or asset of the Company or the
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.
(e) Filings, Consents and
Approvals. The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of this Agreement, other than (i)
filings required pursuant to Section 4.6, (ii) the filing with the Commission of
the Registration Statement, (iii) the notice and/or application(s) to each
applicable Trading Market for the issuance and sale of the Securities and the
listing of the Underlying Shares for trading thereon in the time and manner
required thereby and (iv) the filing of Form D with the Commission and such
filings as are required to be made under applicable state securities laws
(collectively, the “Required
Approvals”).
(f) Issuance of
Securities. The Conversion Shares are duly authorized and,
when issued and paid for in accordance with this Agreement, will be duly and
validly issued, fully paid and nonassessable, free and clear of all liens
imposed by the Company other than restrictions on transfer provided for in this
Agreement.
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(g) Capitalization. The
capitalization of the Company is as set forth in Section 2.1(g) of the
Disclosure Letter. No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by this Agreement. Except as a result
of the purchase and sale of the Conversion Shares, there are no outstanding
options, warrants, scrip rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or the
Subsidiary is or may become bound to issue additional shares of Common Stock or
Common Stock Equivalents. The issuance and sale of the Conversion Shares will
not obligate the Company to issue shares of Common Stock or other securities to
any Person (other than the Purchasers) and will not result in a right of any
holder of Company securities to adjust the exercise, conversion, exchange or
reset price under any of such securities. All of the outstanding shares of
capital stock of the Company are validly issued, fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws, and
none of such outstanding shares was issued in violation of any preemptive rights
or similar rights to subscribe for or purchase securities. No further
approval or authorization of any stockholder, the Board of Directors or others
is required for the issuance and sale of the Securities. There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.
(h) SEC Reports; Financial
Statements. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Securities Act of 1933, as amended (the “Securities Act”) and the
Securities and Exchange Act of 1934, as amended (the “Exchange Act”), including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date
hereof (or such shorter period as the Company was required by law or regulation
to file such material) (the foregoing materials, including the exhibits thereto
and documents incorporated by reference therein, being collectively referred to
herein as the “SEC
Reports”). As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the
SEC Reports have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”), except as may
be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated Subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
(i) Material
Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
a subsequent SEC Report filed prior to the date hereof, (i) there has been no
event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting, (iv) the
Company has not declared or made any dividend or distribution of cash, other
than dividends related to the Company’s Series A Preferred Stock, or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the Company has not
issued any equity securities to any officer, director or affiliate, except
pursuant to existing Company stock option plans, compensation arrangements, or
pursuant to a private placement of securities.
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3. Representations
and Warranties of Investors. Each Investor, for that Investor alone,
represents and warrants to Company upon the acquisition of the Conversion
Shares, as follows:
(a) Binding Obligation. Such
Investor has full legal capacity, power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. Each of this
Agreement executed by such Investor is a valid and binding obligation of the
Investor, enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency or other laws of general application relating to or
affecting the enforcement of creditors’ rights generally and general principles
of equity. The execution, delivery, and performance of this Agreement
and all other agreements contemplated hereby have been duly authorized by the
Investor.
(b) No Transfer or Assignment of
Securities or Claims. Such Investor has not sold, assigned,
transferred or exercised any of the Warrants issued to Investor, and has not
transferred or assigned any claim, right or interest associated
therewith.
(c) Investment Intent; Capacity to
Protect Conversion Shares. The Investor is
purchasing the Conversion Shares solely for its own account for investment and
not with a view to or for sale in connection with any distribution of the
Conversion Shares or any portion thereof, and not with any present intention of
selling, offering to sell or otherwise disposing of or distributing the
Conversion Shares or any portion thereof in any transaction other than a
transaction exempt from registration under the Securities Act. The
Investor also represents that the entire legal and beneficial interest of the
Conversion Shares is being purchased, and will be held, for the Investor’s
account only, and neither in whole or in part for any other person.
(d) Accredited Investor. The Investor is an “accredited
investor” within the meaning of Rule 501 under the Act.
(e) Information Concerning
Company. The Investor has heretofore discussed the Company’s
plans, operations and financial condition with the Company’s and the Company’s
officers and has heretofore received all such information as the Investor has
deemed necessary and appropriate to enable the Investor to evaluate the
financial risk inherent in making an investment in the Conversion Shares, and
the Investor has received satisfactory and complete information concerning the
business and financial condition of the Company in response to all inquiries in
respect thereof.
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(f) Economic Risk. The Investor
realizes that the purchase of the Conversion Shares will be a highly speculative
investment and involves a high degree of risk, and the Investor is able, without
impairing the Investor’s financial condition, to hold the Conversion Shares for
an indefinite period of time and to suffer a complete loss on its
investment.
(g) Risk Factor
Disclosure. Investor has reviewed the Risk Factor Disclosure
memorandum attached hereto as Exhibit A describing some of the
risks associated with an investment in the equity Conversion Shares of the
Company and the risks associated with the Company’s
business. Investor has further reviewed the Company’s SEC Reports,
including without limitation the additional risk factor disclosure contained
therein.
(h) Advice of Counsel and Tax
Advisors. The Investor has obtained, or has had the
opportunity to obtain, the advice of independent legal and tax counsel with
respect to this Agreement and all legal and tax matters relating hereto or
arising in connection herewith.
(i) Restricted
Securities. The Investor understands and acknowledges
that:
(i) The
Conversion Shares have not been registered under the Act in reliance upon a
specific exemption therefrom, which exemption depends upon, among other things,
the bona fide nature of the Investors’ investment intent as expressed herein.
The Investor understands that, in the view of the Securities and Exchange
Commission (“SEC”), the
statutory basis for such exemption may be unavailable if the Investor’s
representations were predicated solely upon a present intention to hold the
Conversion Shares for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Conversion Shares, or for a period of one (1) year or any
other fixed period in the future; and
(ii) The
Conversion Shares must be held indefinitely unless they are subsequently
registered under the Act or unless an exemption from such registration is
otherwise available. The Investor further acknowledges and
understands that the Company is under no obligation to register the Conversion
Shares. In addition, the Investor understands that any certificate or
certificates evidencing the Conversion Shares will be imprinted with a legend
which prohibits the transfer of the Conversion Shares unless they are registered
or such registration is not required in the opinion of counsel satisfactory to
the Company.
4. Miscellaneous.
(a) Waivers and Amendments. Any
provision of this Agreement may be amended, waived or modified only upon the
written consent of both Company and Investors constituting a majority in
interest of the Conversion Shares subscribed for under this Agreement (a “Majority in
Interest”).
(b) Governing Law. This Agreement
and all actions arising out of or in connection with this Agreement shall be
governed by and construed in accordance with the laws of the State of
California, without regard to the conflicts of law provisions of the State of
California or of any other state.
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(c) Survival. The
representations, warranties, covenants and agreements made herein shall survive
the execution and delivery of this Agreement.
(d) Successors and Assigns. The
rights and obligations of Company and the Investors shall be binding upon and
benefit the successors, assigns, heirs, administrators and transferees of the
parties.
(e) Assignment by Company. The
rights, Conversion Shares or obligations hereunder may not be assigned, by
operation of law or otherwise, in whole or in part, by any party without the
prior written consent of both Company and of a Majority in
Interest.
(f) Entire Agreement. This
Agreement constitutes and contains the entire agreement among Company and
Investors and supersede any and all prior agreements, negotiations,
correspondence, understandings and communications among the parties, whether
written or oral, respecting the subject matter hereof.
(g) No Third-Party
Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person
(h) Notices. All notices,
requests, demands, consents, instructions or other communications required or
permitted hereunder shall in writing and faxed, mailed or delivered to each
party as follows: (i) if to a Investor, at such Investor’s
address or facsimile number set forth in the Schedule of Investors attached as
Schedule I, or
at such other address as such Investor shall have furnished Company in writing,
or (ii) if to Company, at 00000 Xxxxx Xxxx Xxxxx, Xxxxx 000,
Xxxxxxxx, XX 00000, Attention: President,
Facsimile: ___________, or at such other address or facsimile number as Company
shall have furnished to the Investors in writing. All such notices
and communications shall be effective (a) when sent by Federal Express or other
overnight service of recognized standing, on the business day following the
deposit with such service; (b) when mailed, by registered or certified mail,
first class postage prepaid and addressed as aforesaid through the United States
Postal Service, upon receipt; (c) when delivered by hand, upon delivery; and (d)
when faxed, upon confirmation of receipt.
(i) Expenses. Each party shall be
responsible for its own fees and expenses, incurred in connection with the
preparation, execution and delivery of this Agreement and the other
Transaction Documents.
(j) Waiver of Jury Trial. In any
action, suit or proceeding in any jurisdiction brought by any party against any
other party, the parties each knowingly and intentionally, to the greatest
extent permitted by applicable law, hereby absolutely, unconditionally,
irrevocably and expressly waives forever trial by jury.
(k) Separability of Agreements;
Severability of this Agreement. Company’s agreement with each of the
Investors is a separate agreement and the sale of Conversion Shares to each of
the Investors is a separate sale. Unless otherwise expressly provided
herein, the rights of each Investor hereunder are several rights, not rights
jointly held with any of the other Investors. Any invalidity,
illegality or limitation on the enforceability of the Agreement or any part
thereof, by any Investor whether arising by reason of the law of the respective
Investor’s domicile or otherwise, shall in no way affect or impair the validity,
legality or enforceability of this Agreement with respect to other
Investors. If any provision of this Agreement shall be judicially
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
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(l) Counterparts. This Agreement
may be executed in any number of counterparts, each of which shall be an
original, but all of which together shall be deemed to constitute one
instrument.
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IN
WITNESS WHEREOF, the parties hereto have caused this Exchange Agreement to be
duly executed by their respective authorized signatories as of the date first
indicated above.
COMPANY:
a Delaware corporation
By:
Signature
Name:
Title:
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[PURCHASER
SIGNATURE PAGES TO PST EXCHANGE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Exchange Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
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Name
of Purchaser:
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Signature of Authorized
Signatory of Purchaser:
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Name
of Authorized Signatory:
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Title
of Authorized Signatory:
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SSC
No. or EIN for Purchaser:
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Email
Address of Purchaser:
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Facsimile
Number of Purchaser:
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Address
for Notice of Purchaser:
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Address
for Delivery of Securities for Purchaser
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(if
not same as address for notice):
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Investor
Warrants Converted
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Date
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No.
of Shares
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Strike
Price
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Shares
Subscribed
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No.
of Conversion Shares
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