-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R45hsCX8dqLDl7QyiqPWHOF1AZH2zOY+2knA9oUVsISz1llWH18ZyxrJEG4nhK/w ynr+Xr3CpC7FpSZWptQ0DA== 0001193125-09-244103.txt : 20091130 0001193125-09-244103.hdr.sgml : 20091130 20091130160540 ACCESSION NUMBER: 0001193125-09-244103 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20091130 DATE AS OF CHANGE: 20091130 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: Patient Safety Technologies, Inc CENTRAL INDEX KEY: 0000812301 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 133419202 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-38889 FILM NUMBER: 091212203 BUSINESS ADDRESS: STREET 1: 1800 CENTURY PARK EAST STREET 2: STE. 200 CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: (310) 895-7750 MAIL ADDRESS: STREET 1: 1800 CENTURY PARK EAST STREET 2: STE. 200 CITY: LOS ANGELES STATE: CA ZIP: 90067 FORMER COMPANY: FORMER CONFORMED NAME: Patient Safety Technologies DATE OF NAME CHANGE: 20050406 FORMER COMPANY: FORMER CONFORMED NAME: Patient Safety Technologies, Inc DATE OF NAME CHANGE: 20050406 FORMER COMPANY: FORMER CONFORMED NAME: FRANKLIN CAPITAL CORP DATE OF NAME CHANGE: 19990505 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CARDINAL HEALTH INC CENTRAL INDEX KEY: 0000721371 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 310958666 STATE OF INCORPORATION: OH FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 7000 CARDINAL PLACE CITY: DUBLIN STATE: OH ZIP: 43017 BUSINESS PHONE: 6147573033 MAIL ADDRESS: STREET 1: 7000 CARDINAL PLACE CITY: DUBLIN STATE: OH ZIP: 43017 FORMER COMPANY: FORMER CONFORMED NAME: CARDINAL DISTRIBUTION INC DATE OF NAME CHANGE: 19920703 SC 13D 1 dsc13d.htm SCHEDULE 13D Schedule 13D

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 13D

(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT

TO § 240.13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO § 240.13d-2(a)

(Amendment No. )*

Patient Safety Technologies, Inc.

 

(Name of Issuer)

Common Stock, $0.33 par value

 

(Title of Class of Securities)

70322H10 6

 

(CUSIP Number)

Cardinal Health, Inc.

7000 Cardinal Place

Dublin, Ohio 43017

Tel. No.: (614) 757-5000

Attention: Stephen T. Falk

 

(Name, Address and Telephone Number of Person Authorized to

Receive Notices and Communications)

November 19, 2009

 

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ¨

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

 

 


CUSIP No. 70322H10 6

 

  1)     

NAME OF REPORTING PERSONS

S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

 

Cardinal Health, Inc.

31-0958666

  2)     

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)

(a)    ¨

(b)    x

      
  3)      SEC USE ONLY
      
  4)     

SOURCE OF FUNDS (See Instructions)

 

OO

      
  5)     

CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)

x

      
  6)     

CITIZENSHIP OR PLACE OF ORGANIZATION

 

OHIO

      
NUMBER OF

SHARES

BENEFICIALLY

OWNED BY

EACH

REPORTING

PERSON

WITH

     7)    

SOLE VOTING POWER

 

1,875,000 (1)

       
     8)    

SHARED VOTING POWER

 

0

       
     9)    

SOLE DISPOSITIVE POWER

 

1,875,000 (1)

       
   10)    

SHARED DISPOSITIVE POWER

 

0

                
11)     

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

 

1,875,000 (1)

 

12)     

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions)

 

¨

      
13)     

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

 

7.4%

      
14)     

TYPE OF REPORTING PERSON (See Instructions)

 

CO

 

 

(1) Represents Common Stock the Reporting Person may be deemed to beneficially own as a result of its acquisition of warrants to purchase Common Stock exercisable within 60 days as further described below.

 


SCHEDULE 13D

Item 1. Security and Issuer

This Schedule 13D relates to the common stock, $0.33 par value (“Common Stock”), of Patient Safety Technologies, Inc., a Delaware corporation (the “Issuer”). The Issuer’s principal executive offices are located at 43460 Ridge Park Drive, Suite 140, Temecula, California 92590.

Item 2. Identity and Background

This Schedule 13D is filed by Cardinal Health, Inc., an Ohio corporation (the “Reporting Person”). The Reporting Person’s principal executive offices are located at 7000 Cardinal Place, Dublin, Ohio 43017. The Reporting Person is a leading provider of products and services that improve the cost-effectiveness of healthcare.

The name, business address, and present principal occupation of each director and executive officer of the Reporting Person are set forth in Annex A to this Schedule 13D, which is incorporated herein by reference. Each director and executive officer of the Reporting Person is a citizen of the United States.

During the last five years, neither the Reporting Person nor, to the best of the Reporting Person’s knowledge, any of its directors or executive officers has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

Other than the settlement of the SEC investigation described in the paragraph below, during the last five years, neither the Reporting Person nor, to the best of the Reporting Person’s knowledge, any of its directors or executive officers has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws or finding any violation with respect to such laws.

On July 26, 2007, the Reporting Person announced a settlement with the Securities and Exchange Commission (the “SEC”) that concluded an SEC investigation relating principally to the Reporting Person’s financial reporting and disclosures. As part of the settlement, the Reporting Person, without admitting or denying any wrongdoing, consented to the entry of a judgment in the United States District Court for the Southern District of New York. The judgment, which was entered by the court on August 2, 2007, among other things, enjoined the Reporting Person from future violations of the federal securities laws and required the Reporting Person to pay a civil penalty of $35 million and retain an independent consultant to review certain company policies and procedures.

Item 3. Source and Amount of Funds or Other Consideration

On November 19, 2009, the Reporting Person acquired a warrant to purchase 1,250,000 shares of the Issuer’s Common Stock at an exercise price of $2.00 per share and a warrant to purchase 625,000 shares of the Issuer’s Common Stock at an exercise price of $4.00 per share (collectively, the “Warrants”) pursuant to a Warrant Purchase Agreement, dated November 19, 2009 (the “Warrant Purchase Agreement”), between the Issuer and the Reporting Person. No money was paid for the Warrants, which were acquired in connection with the execution of a Supply and Distribution Agreement, effective November 19, 2009, between the Issuer and the Reporting Person.

Item 4. Purpose of the Transaction

The purpose of the acquisition of the Warrants by the Reporting Person is for investment purposes. The Warrants were not acquired for the purpose of acquiring control of the Issuer. The Reporting Person may, from time to time, depending upon market conditions and other factors deemed relevant by the Reporting Person, acquire Common Stock upon exercise of the Warrants, in whole or in part, acquire Common Stock in another manner or dispose of the Warrants or any or all shares of Common Stock that it may acquire. At the date of this Schedule 13D, except as set forth in this Schedule 13D, the Reporting Person has no plans or proposals which relate to or would result in: (a) the acquisition by any

 

3


person of additional securities of the Issuer, or the disposition of securities of the Issuer; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries; (c) a sale or transfer of a material amount of assets of the Issuer or any of its subsidiaries; (d) any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number or term of the board of directors or management of the Issuer, or to fill any existing vacancies on the board; (e) any material change in the present capitalization or dividend policy of the Issuer; (f) any other material change in the Issuer’s business or corporate structure; (g) changes in the Issuer’s charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person; (h) causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) a class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Act; or (j) any action similar to any of those actions enumerated above.

Item 5. Interest in Securities of the Issuer

(a) As of November 19, 2009, as a result of its acquisition of the Warrants, the Reporting Person may be deemed to beneficially own 1,875,000 shares of Common Stock, which shares represent 7.4% of the Issuer’s outstanding shares of Common Stock. The percentage of beneficial ownership of the Reporting Person, as reported in this Schedule 13D, was calculated by dividing (i) the number of shares of Common Stock beneficially owned by the Reporting Person as of November 19, 2009 as set forth in this Schedule 13D, by (ii) 23,456,188 shares of Common Stock outstanding as of November 16, 2009, as reported in the Issuer’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 18, 2009, plus 1,875,000 shares of Common Stock issuable upon exercise of the Warrants.

As of the date hereof, to the best of the Reporting Person’s knowledge, no director or executive officer of the Reporting Person beneficially owns any shares of Common Stock.

(b) If the Warrants are exercised in full, the Reporting Person will have sole power to vote and to dispose of 1,875,000 shares of Common Stock.

(c) Neither the Reporting Person nor, to the best of the Reporting Person’s knowledge, any director or executive officer of the Reporting Person has effected any transactions in the Common Stock during the past 60 days.

(d) Not Applicable.

(e) Not Applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer

Other than the Warrants, the Warrant Purchase Agreement, and a Registration Rights Agreement, dated November 19, 2009 (the “Registration Rights Agreement”), between the Issuer and the Reporting Person, there are no contracts, arrangements, understandings or relationships (legal or otherwise) between the Reporting Person and any other person with respect to any securities of the Issuer, including but not limited to the transfer or voting of any of the Issuer’s securities, finder’s fees, joint ventures, loan or option agreements, puts or calls, guarantees of profits, divisions of profit or loss, or the giving or withholding of proxies.

The information set forth in Items 3, 4 and 5 is incorporated by reference in this Item 6.

The Registration Rights Agreement provides the Reporting Person certain registration rights with respect to shares of Common Stock issued upon exercise of the Warrants.

Item 7. Material to be Filed as Exhibits

 

Exhibit 1

   Form of Warrant to Purchase Common Stock, dated November 19, 2009, between the Issuer and the Reporting Person

Exhibit 2

   Warrant Purchase Agreement, dated November 19, 2009, between the Issuer and the Reporting Person

Exhibit 3

   Registration Rights Agreement, dated November 19, 2009, between the Issuer and the Reporting Person

 

4


Signature

After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct.

 

November 30, 2009

Date

 

CARDINAL HEALTH, INC.
By:  

/s/ Stephen T. Falk

Name:   Stephen T. Falk
Title:   Executive Vice President, General
  Counsel and Secretary

 

5


ANNEX A

DIRECTORS AND EXECUTIVE OFFICERS OF CARDINAL HEALTH, INC.

Set forth below are the name and present principal occupation of each director and executive officer of the Reporting Person as of November 30, 2009. The business address of each such director and executive officer is c/o Cardinal Health, Inc., 7000 Cardinal Place, Dublin, Ohio 43017.

Directors

Colleen F. Arnold — General Manager of GBS Strategy, Global Consulting Services and SOA Solutions, Global Industries and Global Application Services of International Business Machines Corporation, a globally integrated innovation company that provides systems and financing, software and services to enterprises and institutions worldwide

George S. Barrett — Chairman and Chief Executive Officer of the Reporting Person

Glenn A. Britt — Chairman, President and Chief Executive Officer of Time Warner Cable Inc., a cable operator

Calvin Darden — Retired Senior Vice President of U.S. Operations of United Parcel Service, Inc., a package delivery company and provider of specialized transportation and logistics services

Bruce L. Downey — Partner of NewSpring Health Capital II, L.P., a venture capital firm

John F. Finn — President and Chief Executive Officer of Gardner, Inc., a supply chain management company serving industrial and consumer markets

Gregory B. Kenny — President and Chief Executive Officer of General Cable Corporation, a manufacturer of aluminum, copper and fiber-optic wire and cable products

Richard C. Notebaert — Retired Chairman and Chief Executive Officer of Qwest Communications International Inc., a telecommunications systems company

David W. Raisbeck — Retired Vice Chairman of Cargill, Incorporated, a marketer, processor and distributor of agricultural, food, financial and industrial products and services

Jean G. Spaulding, M.D. — Private medical practice in psychiatry; Consultant, Duke University Health System, a non-profit academic health care system; and Associate Clinical Professorships at Duke University Medical Center, a non-profit academic hospital

Executive Officers

George S. Barrett — Chairman and Chief Executive Officer

Jeffrey W. Henderson — Chief Financial Officer

Michael C. Kaufmann — Chief Executive Officer, Pharmaceutical Segment

Michael A. Lynch — Chief Executive Officer, Medical Segment

Craig S. Morford — Chief Legal and Compliance Officer

Carole S. Watkins — Chief Human Resources Officer

Stephen T. Falk — Executive Vice President, General Counsel and Corporate Secretary

Mark R. Blake — Executive Vice President, Strategy and Corporate Development

 

6

EX-1 2 dex1.htm FORM OF WARRANT TO PURCHASE COMMON STOCK Form of Warrant to Purchase Common Stock

Exhibit 1

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR LAWS COVERING SUCH SECURITIES, OR (B) THE HOLDER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THE SECURITIES REASONABLY SATISFACTORY TO THE CORPORATION, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND ANY FURTHER QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE LAW.”

Date: November 19, 2009

WARRANT TO PURCHASE COMMON STOCK

OF

PATIENT SAFETY TECHNOLOGIES, INC.

This certifies that, for value received, CARDINAL HEALTH, INC. (“Holder”) is entitled, subject to the terms and conditions set forth below, to purchase from PATIENT SAFETY TECHNOLOGIES, INC., a Delaware corporation (the “Company”), up to [1,250,000/625,000] shares of the Company’s Common Stock (the “Warrant Shares”) at an exercise price of [$2.00/$4.00] per share (the “Exercise Price”). The number, character and Exercise Price of the Warrant Shares are subject to adjustment as provided below and all references to “Warrant Shares” and “Exercise Price” herein shall be deemed to include any such adjustment or series of adjustments. This Warrant is issued pursuant to Section 1(a) of that certain Warrant Purchase Agreement between the Company and the original Holder hereof dated as of November 19, 2009 (the “Purchase Agreement”). The holder of this Common Stock Warrant is subject to certain restrictions, and entitled to certain rights, as set forth in the Registration Rights Agreement, dated on even date herewith (the “Registration Rights Agreement”). The term “Common Stock Warrant” as used herein shall mean this Common Stock Warrant and any Common Stock Warrants delivered in substitution or exchange therefor as provided herein.

This Common Stock Warrant is subject to the following terms and conditions:

1. Term of Common Stock Warrant. Subject to the terms and conditions set forth herein, this Common Stock Warrant shall be exercisable, in whole or in part (but in no event for less than the lesser of (i) 25,000 Warrant Shares and (ii) the remaining Warrant Shares exercisable hereunder), on any business day during the period (the “Exercise Period”) commencing on the Closing Date (as defined in the Purchase Agreement) and ending on the earlier to occur of (x) the fifth anniversary date of the Closing Date, (y) a merger or consolidation of the Company with or into any other person or entity, or tender offer, or the sale of all or substantially all of the Company’s assets and properties to any other person or entity (collectively, each a


“Reorganization), whereby in each instance the stockholders of the Company receive for each share of the Company’s Common Stock held by them cash and/or securities with a fair market value as determined in such transaction in excess of 110% of the Exercise Price, and (z) the conditions set forth in Section 11 below.

2. Exercise of Common Stock Warrant.

(a) Cash Exercise. This Common Stock Warrant may be exercised by the Holder during the Exercise Period by (i) the surrender of this Common Stock Warrant to the Company, with the Notice of Exercise annexed hereto duly completed and executed on behalf of the Holder, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company) and (ii) the delivery of payment to the Company, for the account of the Company, by cash, wire transfer of immediately available funds to a bank account specified by the Company, or by certified or bank cashier’s check, in an amount equal to the Exercise Price multiplied by the number of Warrant Shares for which this Common Stock Warrant is being exercised as specified in the Notice of Exercise, such payment to be made in lawful money of the United States of America. The Company agrees that such Warrant Shares shall be deemed to be issued to the Holder as the record holder of such Warrant Shares as of the close of business on the date on which this Common Stock Warrant shall have been exercised and surrendered and payment made for the Warrant Shares as aforesaid. A stock certificate or certificates for the Warrant Shares specified in the Notice of Exercise shall be delivered to the Holder as promptly as practicable, and in any event within five (5) business days, thereafter. If this Common Stock Warrant shall have been exercised only in part and has not otherwise expired, the Company shall, at the time of delivery of the stock certificate or certificates, deliver to the Holder a new Common Stock Warrant evidencing the right to purchase the remaining Warrant Shares, which new Common Stock Warrant shall in all other respects be identical with this Common Stock Warrant. No adjustments shall be made on Warrant Shares issuable on the exercise of this Common Stock Warrant for any cash dividends or distributions paid or payable to holders of record of any capital stock of the Company (except for Common Stock dividends as provided in Section 10(c) below) prior to the date as of which the Holder shall be deemed to be the record holder of such Warrant Shares.

(b) Net Issue Exercise. In lieu of exercising this Common Stock Warrant pursuant to Section 2(a) above, during the Exercise Period, the Holder may elect to convert this Common Stock Warrant or any portion hereof into Warrant Shares, the aggregate value of which shares shall be equal to the value of this Common Stock Warrant or portion thereof being so converted. The conversion right may be exercised by the Holder by surrender of this Common Stock Warrant to the Company, with a duly executed Notice of Exercise marked to reflect the Holder’s intention to exercise the conversion right hereunder, in which event the Company shall issue to the Holder a number of shares computed using the following formula:

 

X =

   Y (A-B)
         A

 

Where

   X =    the number of shares to be issued to Holder under this Section 2(b) upon exercise of the conversion rights under this Section 2(b);

 

2


   Y =    the number of Warrant Shares otherwise purchasable under this Common Stock Warrant or, if only a portion of the Common Stock Warrant is exercised, the number of Warrant Shares with respect to which the Common Stock Warrant is being exercised (as adjusted to the date of such calculation);
   A =    the Fair Market Value (determined in the manner provided below) of one share of the Warrant Shares subject to this Common Stock Warrant as of the date of exercise of this Common Stock Warrant;
   B =    the Exercise Price (as adjusted to the date of such calculation).

(c) Fair Market Value. For purposes of the above calculation, “Fair Market Value” of one share of Warrant Shares shall be the sum of (i) the average of the closing bid and asked prices of the Common Stock quoted in the Over-The-Counter Market Summary or the last reported sale price of the Common Stock or the closing price quoted on the Nasdaq National Market or any exchange on which the Common Stock is listed, whichever is applicable, as published in the Western Edition of The Wall Street Journal (or such other reference reasonably relied upon by the Company if not so published), for the twenty (20) trading days prior to the date as of which the fair market value is being determined plus (ii) the fair market value of (A) any securities (other than Common Stock) receivable upon exercise of this Common Stock Warrant as a result of an adjustment pursuant to Section 11 and (B) any other property receivable upon exercise of this Common Stock Warrant as a result of an adjustment pursuant to Section 11(d) (the “Adjustment Consideration”); provided, however, that if no Common Stock is then quoted or listed or the fair market value of the Adjustment Consideration cannot be determined by applying the procedures set forth in clause (i), the fair market value of one share of Warrant Shares shall be determined by the Board of Directors of the Company in good faith within ten (10) days of the date of the Company’s receipt of Notice of Exercise based upon an arm’s length transaction between a willing buyer and a willing seller and determined without reference to any discount for minority interest, restrictions on transfer, disparate voting rights among classes of capital stock or lack of marketability with respect to capital stock and such determination (including the basis therefor) shall be promptly provided to the Holder. Such determination by the Board of Directors shall be binding on the Holder unless the Holder objects thereto in writing within ten (10) business days of receipt. In the event the Company and the Holder cannot agree on the Fair Market Value within ten (10) business days of the date of the Holder’s objection, the Fair Market Value shall be determined by a disinterested appraiser (which shall be a national or regional investment bank or national accounting firm) mutually selected by the Company and the Holder, the fees and expenses of which shall be paid by the Company unless such determination results in a Fair Market Value no more than ten percent (10%) in excess of the Fair Market Value initially determined by the Board of Directors of the Company, in which case such fees and expenses shall be borne by the Holder. Any selection of a disinterested appraiser shall be made in good faith within seven (7) business days after the end of the last ten (10) business day period referred to above and any determination of Fair Market Value by a disinterested appraiser shall be made within thirty (30) days of the date of selection.

 

3


(d) Delivery of Common Stock. This Common Stock Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above, and the person entitled to receive the shares of Warrant Shares issuable upon such exercise shall be treated for all purposes as the holder of record of such shares as of the close of business on such date. As promptly as practicable on or after such date and in any event within five (5) business days thereafter, the Company at its expense shall issue and deliver to the person or persons entitled to receive the same a certificate or certificates for the number of shares issuable upon such exercise. In the event that this Common Stock Warrant is exercised in part, the Company at its expense will execute and deliver with such certificate or certificates a new Common Stock Warrant of like tenor exercisable for the number of shares for which this Common Stock Warrant may then be exercised. Holder’s sole recourse for the Company’s failure to deliver such certificate(s) hereunder shall be governed by Section 4 under the Purchase Agreement; provided, however, that any penalties established under such Section 4 shall be suspended for any period of time during which Holder is disputing the “Fair Market Value” under Section 2(c) above such that the number of shares issuable has not yet been determined.

3. No Fractional Shares or Scrip/Minimum Exercise. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Common Stock Warrant. In lieu of any fractional share to which the Holder would otherwise be entitled, the Company shall make a cash payment equal to the difference between the Fair Market Value of one share of Warrant Shares and the Exercise Price multiplied by such fraction (after aggregating all shares issuable upon exercise thereof).

4. Replacement of Common Stock Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Common Stock Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement and security reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Common Stock Warrant, the Company at its expense shall execute and deliver, in lieu of this Common Stock Warrant, a new Common Stock Warrant of like tenor and amount.

5. Rights of a Stockholder. Subject to Section 10 of this Common Stock Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of Warrant Shares for any purpose, and nothing contained herein shall be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value, or change of stock to no par value, consolidation, merger, conveyance or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Common Stock Warrant shall have been exercised as provided herein and then only as to the shares for which this Common Stock Warrant has been so exercised.

6. Transfer of Common Stock Warrant.

(a) Common Stock Warrant Register. The Company will maintain a register (the “Common Stock Warrant Register”) containing the names and addresses of the Holder or Holders. Any Holder of this Common Stock Warrant or any portion thereof may change such Holder’s address as shown on the Common Stock Warrant Register by written notice to the Company requesting such change. Any notice or written communication required or permitted to be given to the Holder may be delivered or given by mail to such Holder as shown on the

 

4


Common Stock Warrant Register and at the address shown on the Common Stock Warrant Register. Until this Common Stock Warrant is transferred on the Common Stock Warrant Register of the Company, the Company may treat the Holder as shown on the Common Stock Warrant Register as the absolute owner of this Common Stock Warrant for all purposes, notwithstanding any notice to the contrary.

(b) Common Stock Warrant Agent. The Company may, by written notice to the Holder, appoint an agent for the purpose of maintaining the Common Stock Warrant Register referred to in Section 6(a) above, issuing the Common Stock Warrant Shares or other securities then issuable upon the exercise of this Common Stock Warrant, exchanging this Common Stock Warrant, replacing this Common Stock Warrant or any or all of the foregoing; provided that such appointment shall not relieve the Company of its obligations hereunder. Thereafter, any such registration, issuance, exchange or replacement, as the case may be, shall be made at the office of such agent.

(c) Transferability and Nonnegotiability of Common Stock Warrant. This Common Stock Warrant may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws by the transferor and the transferee and compliance with the requirements set forth in Section 6(d) and 6(e) below. Subject to the provisions of this Common Stock Warrant, title to this Common Stock Warrant may be transferred by endorsement (by the Holder executing the Assignment Form annexed hereto) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery.

(d) Exchange of Common Stock Warrant Upon a Transfer. On surrender of this Common Stock Warrant for exchange, properly endorsed on the Assignment Form and subject to the provisions of this Common Stock Warrant with respect to compliance with the Act and applicable state securities laws and with the other limitations on assignments and transfers contained in this Section 6, the Company at its expense shall issue to or on the order of the Holder a new Common Stock Warrant or Common Stock Warrants of like tenor, in the name of the Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct, for the number of shares issuable upon exercise hereof at the time of such surrender.

(e) Compliance with Securities Laws.

(i) The Holder of this Common Stock Warrant, by acceptance hereof, acknowledges that this Common Stock Warrant and the Warrant Shares to be issued upon exercise hereof are being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder will not offer, sell or otherwise dispose of this Common Stock Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Act or any applicable state securities laws. Holder hereby represents and warrants that such Holder is and any transferee hereunder shall be an “accredited investor” as such term is defined under Regulation D promulgated by the Securities and Exchange Commission. Any transferee of this Common Stock Warrant shall represent in writing that it is an “accredited investor” as a condition to such transfer.

 

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(ii) Subject to the terms of the Purchase Agreement, this Common Stock Warrant and all Warrant Shares issued upon exercise hereof shall be stamped or imprinted with a legend in substantially the following form (in addition to any legend required by state securities laws):

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR LAWS COVERING SUCH SECURITIES, OR (B) THE HOLDER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THE SECURITIES REASONABLY SATISFACTORY TO THE CORPORATION, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND ANY FURTHER QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE LAW.”

7. Reservation of Stock. The Company covenants that during the Exercise Period, the Company will reserve from its authorized and unissued shares a sufficient number of shares to provide for the issuance of Warrant Shares upon the exercise of this Common Stock Warrant. The Company further covenants that all shares issued upon the exercise of rights represented by this Common Stock Warrant and payment of the Exercise Price, in the amount and otherwise all as set forth herein, shall be free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer by Holder occurring contemporaneously). The Company further covenants that its issuance of this Common Stock Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Common Stock Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the trading market upon which the Common Stock may be listed.

8. Notices. All notices required or permitted hereunder to be given shall be in writing and shall be telecopied or mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand or by messenger or overnight courier,

 

If to the Company:

   Patient Safety Technologies, Inc.
   43460 Ridge Park Drive, Suite 140
   Temecula, CA 92951
   Attention: Steven H. Kane, President and Chief Executive Officer
   Facsimile: 951.587.6237

With a copy to:

   Reed Smith LLP
   101 Second Street, 20th Floor
   San Francisco, CA 94105
   Attn: Donald C. Reinke
   Facsimile: 415.391.8269

 

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If to any Holder:

   The address set forth on the Company’s records.

9. Amendments. Any term of this Common Stock Warrant hereunder may be amended, waived or terminated (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company, and the Holder. Any amendment, waiver or termination effected in accordance with this Section 9 shall be binding upon the Company, the Holder and each transferee of the Common Stock Warrants (and of any securities into which this Common Stock Warrant is convertible).

10. Adjustments. The Exercise Price and the number of shares purchasable hereunder are subject to adjustment from time to time as follows:

(a) Reclassification, etc. If the Company, at any time while this Common Stock Warrant or any portion thereof is exercisable and remains outstanding and unexpired, by reclassification of securities or otherwise, shall change any of the securities as to which purchase rights under this Common Stock Warrant exist into the same or a different number of securities of any other class or classes, this Common Stock Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities that were subject to the purchase rights under this Common Stock Warrant immediately prior to such reclassification or other change and the Exercise Price therefor shall be appropriately adjusted, all subject to further adjustment as provided in this Section 10.

(b) Split, Subdivision or Combination of Shares. If the Company, at any time while this Common Stock Warrant or any portion thereof is exercisable and remains outstanding and unexpired, shall split, subdivide or combine the outstanding shares of Warrant Shares into a different number of shares of Warrant Shares, then (i) in the case of a split or subdivision, the Exercise Price for such securities shall be proportionately decreased and the Warrant Shares issuable upon exercise of this Common Stock Warrant shall be proportionately increased, and (ii) in the case of a combination, the Exercise Price for such Warrant Shares shall be proportionately increased and the securities issuable upon exercise of this Common Stock Warrant shall be proportionately decreased. If the Warrant Shares are convertible into any other stock or securities of the Company, then if all of the outstanding Warrant Shares should be converted at any time during the Exercise Period of this Common Stock Warrant into shares of the Company’s Common Stock or other stock or securities of the Company then (i) this Common Stock Warrant immediately shall become exercisable for that number of shares of such stock or securities (subject to further adjustment as herein provided) which would have been received if this Common Stock Warrant had been exercised in full and the Warrant Shares received thereupon had been simultaneously converted immediately prior to such event, (ii) the Exercise Price hereunder shall be appropriately adjusted and (iii) all references herein to Warrant Shares shall be automatically deemed amended to be references to the stock or securities into which the Warrant Shares was converted.

 

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(c) Adjustments for Dividends in Stock or Other Securities. If, while this Common Stock Warrant or any portion hereof is exercisable and remains outstanding and unexpired, the holders of Common Stock (or any shares of stock or securities at the time receivable upon exercise of this Common Stock Warrant) shall have received, or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, capital stock or any other securities, or any rights or options to subscribe for, purchase or otherwise acquire any of the foregoing, by way of dividend, then and in each case, Holder shall be entitled to receive upon exercise of this Common Stock Warrant, in addition to the number of shares of the security receivable upon exercise of this Common Stock Warrant, and without payment of any additional consideration therefor, the amount of such capital stock and other securities that the Holder would hold on the date of such exercise had it been the holder of record of such capital stock as of the date on which the holders of capital stock received or became entitled to receive such capital stock or other securities.

(d) Merger, Consolidation or Sale of Assets. If at any time or from time to time there shall be a capital reorganization of the Common Stock (other than a subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Section 10) or a merger or consolidation of the Company with or into any other person or entity, or the sale of all or substantially all of the Company’s assets and properties to any other person or entity, then as a part of such reorganization, merger, consolidation or sale, unless this Common Stock Warrant has expired in accordance with the terms set forth in Section 1 above, provision shall be made so that the Holder shall thereafter be entitled to receive upon the exercise of this Common Stock Warrant, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such reorganization, merger, consolidation or sale, to which a holder of the number of shares of Common Stock issuable upon the exercise of this Common Stock Warrant would have received if this Common Stock Warrant had been exercised immediately prior to such reorganization, merger, consolidation or sale and all references herein to Warrant Shares shall be automatically deemed amended to be references to the shares of stock or other securities or property receivable upon exercise of this Common Stock Warrant; provided, that, as a condition to any merger, consolidation, or sale of substantially all of the assets of the Company, unless this Common Stock Warrant has expired in accordance with the terms set forth in Section 1 above, the Company shall require that the surviving corporation assume in writing the obligations pursuant to this Common Stock Warrant.

(e) Calculations. All calculations under this Section 10 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 10, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

(f) Notice to Holder.

(i) Whenever an adjustment is made pursuant to any provision of this Section 10, the Company shall promptly mail to the Holder a notice setting forth such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

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(ii) If (A) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (B) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Common Stock Warrant Register, at least twenty (20) calendar days prior to the applicable effective date, a notice stating the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.

(iii) In the event the Company intends to declare a dividend in cash or other property on its Common Stock, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Common Stock Warrant Register, at least fifteen (15) calendar days prior to the applicable record date, a notice describing the dividend and providing the record date for such dividend.

11. Early Exercise/Termination. If for a sixty (60) consecutive trading day period the average of the closing bid and asked prices of the Common Stock quoted in the Over-The-Counter Market Summary or the last reported sale price of the Common Stock or the closing price quoted on the Nasdaq National Market or any exchange on which the Common Stock is listed, whichever is applicable, as published in the Western Edition of The Wall Street Journal (or such other reference reasonably relied upon by the Company if not so published) is greater than or equal to Fifty Percent (50%) above the Exercise Price with at least an average of Fifty Thousand (50,000) shares traded per day (appropriately adjusted for stock splits, combinations, reclassifications and the like) during such period (the “Early Termination Event”), then on the tenth business day following written notice from the Company notifying Holder of the Early Termination Event, if Holder has not elected to exercise this Warrant for cash pursuant to Section 2(a) above on or prior to such 10th business day, then this Warrant shall be deemed automatically exercised on such 10th business day pursuant to the cashless/net exercise provisions under Section 2(b) above; provided, however, that until Holder has complied with the Warrant delivery and any other obligations under Section 2(d), the Company shall have no obligation to deliver share certificates nor shall any damages begin to accrue for failure to deliver such certificates until Holder’s compliance under Section 2(d).

12. No Impairment. The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of this Common Stock Warrant and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment.

 

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13. Right of First Refusal. For a period of the earlier to occur of a Reorganization and one year following the Closing Date (the “RofFR Period”), Holder has the right of first refusal to purchase Holder’s Pro Rata Share (as defined below), of any “New Securities” (as defined below) that the Company may issue during the RofFR Period at a price below Fair Market Value. Holder’s “Pro Rata Share” for purposes of this right of first refusal is the ratio of (a) the number of Warrant Shares exercised or exercisable under Holder’s Warrants to (b) a number of shares of Common Stock equal to the sum of (1) the total number of shares of Common Stock then outstanding plus (2) the total number of shares of Common Stock into which all then-outstanding Common Stock Equivalents (as defined below) are then convertible. “New Securities” shall mean any Common Stock or Preferred Stock of the Company, whether now authorized or not, and rights, options or warrants to purchase such Common Stock or Preferred Stock, and securities of any type whatsoever that are, or may become, convertible or exchangeable into such Common Stock or Preferred Stock; provided, however, that the term “New Securities” does not include (i) the issuance of Common Stock or Common Stock Equivalents upon the conversion or exercise of any securities or rights to acquire securities of the Company or a Subsidiary outstanding on the Closing Date (including any adjustments provided thereunder or any issuances that trigger an adjustment to the number of Warrant Shares hereunder), (ii) the issuance of any Common Stock or Common Stock Equivalents pursuant to any Company equity incentive plan approved by the Company’s stockholders and in place as of the Closing Date, (iii) the issuance of Common Stock or Common Stock Equivalents pursuant to acquisitions of other entities by the Company by merger, purchase of substantially all of the assets or other reorganization, (iv) the issuance of Common Stock or Common Stock Equivalents in connection with strategic transactions or joint ventures approved by a majority of the disinterested directors of the Company, or (v) the issuance of Common Stock or Common Stock Equivalents in connection with any product sale, technology license or acquisition, development agreement, or marketing agreement. “Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock. In the event that the Company proposes to undertake an issuance of New Securities, it shall give to Holder a written notice of its intention to issue New Securities (the “Notice”), describing the type of New Securities and the price and the general terms upon which the Company proposes to issue such New Securities. Holder shall have 15 days from the date such Notice is delivered to agree in writing to purchase Holder’s Pro Rata Share of such New Securities for the price and upon the general terms specified in the Notice by giving written notice to the Company and stating therein the quantity of New Securities to be purchased (not to exceed Holder’s Pro Rata Share). If Holder fails to so agree in writing within such fifteen-day period to purchase Holder’s full Pro Rata Share of an offering of New Securities, then Holder shall forfeit the right hereunder to purchase that part of its Pro Rata Share of such New Securities that Holder did not so agree to purchase. In the event that Holder fails to exercise in full the right of first refusal within such fifteen-day period, then the Company shall have one hundred twenty days thereafter to sell the balance of the New Securities on financial terms no less favorable to the investors in question than as set forth in the Notice without having to again offer the New Securities to Holder under the provisions of this Section 13.

14. Miscellaneous.

(a) This Common Stock Warrant and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Delaware without regard to the conflict of law provisions thereof and venue shall be established in the State of Delaware.

 

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(b) In the event of a dispute with regard to the interpretation of this Common Stock Warrant, the prevailing party may collect the cost of attorney’s fees, litigation expenses or such other expenses as may be incurred in the enforcement of the prevailing party’s rights hereunder.

(c) This Common Stock Warrant shall be exercisable as provided for herein, except that in the event that the expiration date of this Common Stock Warrant shall fall on a day other than a business day, the expiration date for this Common Stock Warrant shall be extended to 5:00 p.m. Eastern standard time on the first business day following such day. For all purposes of this Common Stock Warrant, a business day shall mean any day, other than a Saturday or a Sunday, upon which banks are open for business in Delaware.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, PATIENT SAFETY TECHNOLOGIES, INC. has caused this Common Stock Warrant to be executed as of the date first above written.

 

COMPANY:
PATIENT SAFETY TECHNOLOGIES INC.
a Delaware corporation
By:    
 

Steven H. Kane

President and Chief Executive Officer

AGREED AND ACCEPTED:

HOLDER:

CARDINAL HEALTH, INC.
By:
 
[Print Name]
 
[Title]

 

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NOTICE OF EXERCISE

 

To: PATIENT SAFETY TECHNOLOGIES, INC.

(1) The undersigned hereby:

 

________

   elects to purchase                  shares of Warrant Shares (as defined in the attached Common Stock Warrant) of PATIENT SAFETY TECHNOLOGIES, INC. pursuant to the terms of the attached Common Stock Warrant, and tenders herewith payment of the purchase price for such shares in full; or

________

   elects to exercise the conversion right features under Section 2(b) of the attached Common Stock Warrant with respect to                  shares of Warrant Shares of PATIENT SAFETY TECHNOLOGIES, INC. pursuant to the terms of such Common Stock Warrant.

(2) Please issue a certificate or certificates representing said shares of Warrant Shares in the name of the undersigned:

        
    (Name)
        
    (Name)

 

(3) Please issue a new Common Stock Warrant for the unexercised portion of the attached Common Stock Warrant in the name of the undersigned:

            
      (Name)
             
(Date)       (Signature)


ASSIGNMENT FORM

FOR VALUE RECEIVED, the undersigned registered owner of this Common Stock Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Common Stock Warrant, with respect to the number of shares of Warrant Shares (as defined in the this Common Stock Warrant) set forth below:

 

Name of Assignee

  

Address

   No. of Shares
     
     

and does hereby irrevocably constitute and appoint the Secretary of the Company to make such transfer on the books of PATIENT SAFETY TECHNOLOGIES, INC. maintained for such purpose, with full power of substitution in the premises.

The Assignee represents that it will not offer, sell or otherwise dispose of this Common Stock Warrant or any shares of stock to be issued upon exercise hereof or conversion thereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended, or any applicable state securities laws.

Dated: _______________

  
Signature of Holder

The undersigned hereby agrees to be bound by the terms of the attached Common Stock Warrant on this        day of               , 20__.

 

ASSIGNEE:
 
[Name]
By:    
Title:    
EX-2 3 dex2.htm WARRANT PURCHASE AGREEMENT Warrant Purchase Agreement

Exhibit 2

WARRANT PURCHASE AGREEMENT

This WARRANT PURCHASE AGREEMENT, dated effective as of November 19, 2009 (this “Agreement”), is entered into by and between Patient Safety Technologies, Inc., a Delaware corporation (the “Company”), and Cardinal Health, Inc. (“Investor”).

RECITALS

1. On even date herewith, the Company and a wholly-owned subsidiary of Investor are entering into a Supply and Distribution Agreement (the “Distribution Agreement”).

2. In connection therewith, the Company and the Investor desire that the Company issue to Investor certain Warrants to purchase Common Stock of the Company (“Common Stock”) and enter into an ancillary Registration Rights Agreement with Investor.

3. The Company and Investor desire to enter into this Agreement to provide for the acquisition of such Warrants by Investor from the Company and the Company’s issuance to Investor of such Warrants, all on the terms and conditions set forth below.

AGREEMENT

NOW THEREFORE, in consideration of the foregoing, and the representations, warranties, covenants and agreements set forth below, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Purchase. Subject to the terms and conditions hereof, the Company and Investor agree as follows:

(a) Warrants Acquisition. Investor hereby acquires two separate Warrants, both in form and substance attached hereto as Exhibit A, to acquire 1,250,000 shares of Common Stock and 625,000 shares of Common Stock, respectively, at exercise prices of $2.00 per share and $4.00 per share, respectively (each a “Warrant” and collectively, the “Warrants”), in consideration of the parties entering into the Distribution Agreement.

(b) Registration Rights Agreement. In connection with the issuance of the Warrants, the Company and Investor are entering into the Registration Rights Agreement in form and substance attached hereto as Exhibit B (the “Registration Rights Agreement”).

(c) Delivery. The sale and acquisition of the Warrants (the “Closing”) shall be held at such place and time on the date hereof as the Company and Investor may determine in connection with the execution of the Distribution Agreement (the “Closing Date”). At the Closing, the Company shall issue to Investor the Warrants duly executed and registered in the name of Investor (and countersigned by Investor if required by the Company). At the Closing, the Company and Investor also shall each execute and deliver to the other the Distribution Agreement and Registration Rights Agreement (collectively, together with this Agreement, the “Transaction Agreements”). The total amount of shares of Common Stock and other securities issuable upon exercise of the Warrants are hereinafter referred to as the “Conversion Stock.” The Warrants and the Conversion Stock are hereinafter collectively referred to as the “Securities.”


2. Representations and Warranties of the Company. Except as set forth in the Disclosure Letter delivered to Investor concurrently herewith (the “Disclosure Letter”) and the SEC Reports (as defined Section 2(h) below) filed since December 31, 2007 (excluding the schedules (but not exhibits attached or referenced therein) and any disclosures only set forth in the risk factor section or forward looking statements contained therein), which Disclosure Letter and SEC Reports shall be deemed a part hereof and shall qualify any representation made herein to the extent such qualification is reasonably apparent on its face, the Company hereby makes the following representations and warranties to Investor:

(a) Subsidiaries. The Company has one subsidiary, SurgiCount Medical, Inc., a California corporation (the “Subsidiary”). The Company owns, directly or indirectly, all of the capital stock or other equity of the Subsidiary free and clear of any liens, claims, charges or encumbrances 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 any of the Transaction Agreements, (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 any of the Transaction Agreements (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.

(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 Transaction Agreements and otherwise to carry out its obligations thereunder. The execution and delivery of the Transaction Agreements and the consummation by the Company of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company, and no further action is required by the Company, its Board of Directors or the Company’s stockholders in connection therewith. The Transaction Agreements have been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance

 

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with the terms 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 the Transaction Agreements by the Company and the consummation by the Company of the other transactions contemplated thereby 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, claim, charge or encumbrance 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 (as defined below), 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 the Transaction Agreements, other than (i) the filing with the Securities & Exchange Commission (the “SEC”) of any registration statement required under the Registration Rights Agreement, and (ii) the filing of a Form 8-K and Form D with the SEC and such filings as are required to be made under applicable state securities laws (collectively, the “Required Approvals”).

(f) Issuance of Securities. The Securities are duly authorized and, when issued and paid for in accordance with the Transaction Agreements, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens, claims, charges and encumbrances other than restrictions on transfer provided for in this Agreement and applicable state and federal securities laws.

(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 acquisition of the Securities and as otherwise disclosed in the Disclosure Letter and SEC Reports, there are no outstanding options, warrants, scrip rights to

 

3


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. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any person (other than Investor) 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, state and foreign 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 of the Company 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 consolidated financial position of the Company and the Subsidiary as of and for the dates thereof and the consolidated 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 incurred in the ordinary course of business that are 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

 

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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 or written compensation arrangements or pursuant to a private placement of securities.

(j) Litigation. Except as set forth on Schedule 3.1(j), there is no action, suit, or proceeding pending or, to the knowledge of the Company, threatened against the Company, the Subsidiary or any of their respective properties or assets before or by any court or governmental agency (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Agreements or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to have a material adverse effect against the Company. Neither the Company nor the Subsidiary, nor to the actual knowledge of the officer signing this Agreement, any current director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty in connection with the Company. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company or, to the actual knowledge of the officer signing this Agreement, any current director or officer of the Company.

(k) Compliance. Neither the Company nor the Subsidiary (i) is in violation of any order of any court or governmental agency, or (ii) is in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business, except in those circumstances under either (i) or (ii) above where such violation has not caused a material adverse effect against the Company.

(l) Patents and Trademarks. Neither the Company nor the Subsidiary has received any written notice that any of the patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or material for use in connection with their respective businesses as described in the SEC Reports as used by the Company or the Subsidiary violates or infringes upon the intellectual property rights of any person.

(m) Private Placement. Assuming the accuracy of Investor’s representations and warranties set forth in Section 3, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to Investor as contemplated hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the trading market on which the Common Stock is listed or quoted for trading (the “Trading Market”).

(n) No Integrated Offering. Assuming the accuracy of Investor’s representations and warranties set forth in Section 3, neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any Trading Market.

 

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3. Representations and Warranties of Investor. Investor represents and warrants to the Company as of the Closing as follows:

(a) Binding Obligation. Investor has full legal capacity, power and authority to execute and deliver the Transaction Agreements and to perform its obligations thereunder. Each of the Transaction Agreements executed by Investor is a valid and binding obligation of 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 the Transaction Agreements have been duly authorized by Investor.

(b) No Transfer or Assignment of Securities or Claims. Investor has not sold, assigned, transferred or exercised any of the Securities to be issued to Investor, and has not transferred or assigned any claim, right or interest associated therewith.

(c) Investment Intent; Capacity to Protect Securities. Investor is purchasing or will purchase, as applicable, the Securities solely for its own account for investment and not with a view to or for sale in connection with any distribution of the Securities or any portion thereof, and not with any present intention of selling, offering to sell or otherwise disposing of or distributing the Securities or any portion thereof in any transaction other than a transaction registered under the Securities Act or exempt from registration under the Securities Act. Investor also represents that the entire legal and beneficial interest of the Securities is being purchased, and as of the date hereof will be held, for Investor’s account only, and neither in whole or in part for any other person.

(d) Accredited Investor. Investor is an “accredited investor” within the meaning of Rule 501 under the Securities Act.

(e) Information Concerning the Company. Investor has heretofore discussed the Company’s plans, operations and financial condition with the Company and the Company’s officers and has heretofore received all such information as Investor has deemed necessary and appropriate to enable Investor to evaluate the financial risk inherent in making an investment in the Securities, and Investor has received information satisfactory to Investor concerning the business and financial condition of the Company in response to all inquiries in respect thereof.

(f) Economic Risk. Investor realizes that the purchase of the Securities will be a highly speculative investment and involves a high degree of risk, and Investor is able, without impairing Investor’s financial condition, to hold the Securities for an indefinite period of time and to suffer a complete loss on its investment.

(g) Risk Factor Disclosure. Investor has reviewed the Company’s SEC Reports, including without limitation, the risk factor disclosure contained therein.

 

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(h) Advice of Counsel and Tax Advisors. 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. Investor understands and acknowledges that:

(i) The Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Investors’ investment intent as expressed herein. Investor understands that, in the view of the SEC, the statutory basis for such exemption may be unavailable if Investor’s representations of present intent are predicated solely upon a present intention to hold the Securities 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 Securities, or for a fixed period in the future; and

(ii) The Securities must be held indefinitely unless they are subsequently registered under the Act or unless an exemption from such registration is otherwise available. Investor further acknowledges and understands that the Company is under no obligation to register the Securities except as provided in the Registration Rights Agreement. In addition, Investor understands that, subject to Section 4(a) of this Agreement, any certificate or certificates evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company.

4. Covenants.

(a) Removal of Legend. Certificates evidencing the Conversion Stock shall not contain any legend (i) while a registration statement covering the resale of the Conversion Stock is effective under the Securities Act, or (ii) following any sale of the Conversion Stock pursuant to Rule 144, or (iii) if the Conversion Stock is eligible for sale without restriction under Rule 144, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC). The Company shall promptly cause its counsel to issue a legal opinion to its transfer agent if required by the transfer agent to effect the removal of the legend hereunder. If all or any portion of a Warrant is exercised at a time when there is an effective registration statement to cover the resale of the Conversion Stock or such Conversion Stock is being acquired pursuant to a cashless exercise and is eligible for sale under Rule 144 without restriction, such Conversion Stock shall be issued free of all legends. The Company agrees that at such time as a legend is no longer required hereunder, it will, no later than five business days following the delivery by Investor to the transfer agent of a certificate representing the Conversion Stock issued with a restrictive legend and simultaneous written notice to the Company (including the CEO, CFO and the Company’s outside counsel as set forth in the Notice Section to this Agreement) (such fifth business day, the “Legend Removal Date”), deliver or cause to be delivered to Investor a certificate representing such stock that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to its transfer agent that enlarge the restrictions on transfer set forth in the Transaction Agreements. As liquidated damages and Investor’s sole recourse for damages against the Company, the Company shall pay

 

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to Investor, in cash, as liquidated damages in full and not as a penalty, for each $1,000 of Conversion Stock (based on the Fair Market Value (as defined in the Warrants) of Common Stock on the date such Conversion Stock is submitted to the Company or its transfer agent) delivered for removal of the restrictive legend, $1 per business day for each business day after the Legend Removal Date (increasing to $2 per business day after the tenth business day following the date such damages have begun to accrue) until such certificate is delivered without a legend, unless the Company is disputing such legend removal in good faith. Notwithstanding the foregoing, unless the Company is disputing such legend removal in good faith, if the failure to deliver such certificate is the result of the Company’s willful action or omission, then Investor’s remedies shall not limited as set forth in the immediately preceding sentence.

(b) Integration. The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to Investor or that would be integrated with the offer or sale of the Securities to Investor for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.

(c) Publicity. The Company and Investor shall consult with each other in issuing any press releases with respect to the transactions contemplated hereby, and neither the Company nor Investor shall issue any such press release or otherwise make any such public statement without the prior consent of the Company, with respect to any press release of Investor, or without the prior consent of Investor, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by any law or regulation or the regulations of the Trading Market or stock exchange on which such party’s capital stock is listed or quoted, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, Investor acknowledges and consents to the filing of and disclosure under any 8-K or other SEC periodic report (and any exhibits therein, including any Transaction Agreement) the Company files with the SEC upon the advice of its counsel in connection with the Transaction Agreements and the transactions contemplated thereunder.

(d) Listing of Common Stock. The Company agrees that if the Company applies to have the Common Stock traded on a Trading Market, and so long as the Company elects to have its Common Stock traded on a Trading Market, it will include in such application all of the Conversion Stock, and will take such other action as is necessary to cause all of the Conversion Stock to be listed on such Trading Market as promptly as possible.

5. Dispute Resolution.

(a) General Provisions.

(i) Any dispute, controversy or claim arising out of or relating to this Agreement but not arising out of or relating to the Distribution Agreement (a “Dispute”) shall be resolved in accordance with the procedures set forth in this Section 5, which shall be the sole and exclusive procedures for the resolution of any such Dispute unless otherwise specified in this Section 5 below.

 

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(ii) Commencing with a request contemplated by Section 5(b) set forth below, all communications between the parties or their representatives in connection with the attempted resolution of any Dispute shall be deemed to have been delivered in furtherance of a Dispute settlement and shall be exempt from discovery and production, and shall not be admissible into evidence for any reason (whether as an admission or otherwise), in any arbitral, court or other proceeding for the resolution of any Dispute.

(iii) The specific procedures set forth in this Section 5 below, including the time limits referenced therein, may be modified by agreement of both of the parties in writing.

(iv) All applicable statutes of limitations and defenses based upon the passage of time shall be tolled while the procedures specified in this Section 5 are pending. The parties will take any necessary or appropriate action required to effectuate such tolling.

(b) Consideration by Senior Executives. If a Dispute is not resolved in the normal course of business at the operational level, the parties shall attempt in good faith to resolve the Dispute by negotiation. Either party may initiate the executive negotiation process by providing a written notice to the other (the “Initial Notice”). Within 15 days after delivery of the Initial Notice, the receiving party shall submit to the other a written response (the “Response”). The Initial Notice and the Response shall include (i) a statement of the Dispute and of each party’s position and (ii) the name and title of the individual who will represent that party and of any other person who will accompany that individual. The parties agree that such individuals shall have full and complete authority to resolve any Disputes submitted pursuant to this Section 5(b). Such individuals will meet in person or by teleconference or video conference within 30 days of the date of the Initial Notice to seek a resolution of the Dispute. In the event that the parties are unable to agree to a format for such meeting, the meeting shall be convened by teleconference.

(c) Mediation. If a Dispute is not resolved by negotiation as provided in Section 5(b) within 45 days from the delivery of the Initial Notice, then either party may submit the Dispute for resolution by mediation pursuant to the CPR Institute for Dispute Resolution (the “CPR”) Model Mediation Procedure as then in effect. The parties shall (i) conduct the mediation in Chicago, Illinois, and (ii) select a mutually agreeable mediator from the CPR Panels of Distinguished Neutrals in the selected location. If the parties are unable to agree upon a mediator, the parties agree that CPR shall select a mediator from its panels consistent with its mediation rules. The parties shall agree to a mutually convenient date and time to conduct the mediation; provided that the mediation must occur within 30 days of the request unless a later date is agreed to by the parties in writing. Each party shall bear its own fees, costs and expenses and an equal share of the expenses of the mediation. Each party shall designate an individual to have full and complete authority to resolve the Dispute and to represent its interests in the mediation, and each party may, in its sole discretion, include any number of other representatives in the mediation process. At the commencement of the mediation, either party may request to submit a written mediation statement to the mediator. If a Dispute is not resolved by mediation

 

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pursuant to this section, the parties are free to pursue any relief not inconsistent with this Agreement. The parties agree that mediation pursuant to this section must precede the commencement of any formal action regarding a dispute, e.g., litigation, except that nothing in this provision will prohibit a party from seeking any injunctive relief to which it may be entitled. Nothing in this provision will prohibit a party from arguing that a failure to timely seek injunctive relief by the other demonstrates that there is no reasonable threat of immediate harm.

6. Miscellaneous.

(a) Waivers and Amendments. Any provision of this Agreement may be amended, waived or modified only upon the written consent of both the Company and Investor.

(b) Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware and without regard to any conflicts of laws concepts which would apply the substantive law of some other jurisdiction, and shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors or assigns. Venue for any litigation hereunder shall be in the applicable state or federal courts located in the State of Delaware.

(c) Survival. The representations and warranties made herein shall survive the execution and delivery of this Agreement for a period of two (2) years. The covenants and agreements contained herein shall survive until fully performed.

(d) Successors and Assigns. The rights and obligations of the Company and Investor shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.

(e) Entire Agreement. This Agreement together with the other Transaction Agreements constitute and contain the entire agreement among the Company and Investor and supersede any and all prior agreements, negotiations, correspondence, understandings and communications among the parties, whether written or oral, respecting the subject matter hereof.

(f) 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.

(g) Notices. Any notices, reports or other correspondence (hereinafter collectively referred to as “correspondence”) required or permitted to be given hereunder shall be in writing and shall be sent by postage prepaid first class mail, courier or telecopy or delivered by hand to the party to whom such correspondence is required or permitted to be given hereunder, and shall be deemed sufficient upon receipt when delivered personally or by courier, overnight delivery service or confirmed facsimile, or three business days after being deposited in the regular mail as certified or registered mail (airmail if sent internationally) with postage prepaid, if such notice is addressed to the party to be notified at such party’s address or facsimile number as set forth below:

(i) All correspondence to the Company shall be addressed as follows:

Patient Safety Technologies, Inc.

43460 Ridge Park Drive, Suite 140

Temecula, CA 92951

Attention: Steven H. Kane, President and Chief Executive Officer

Facsimile: 951.587.6237

 

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with a copy to:

Reed Smith LLP

101 Second Street, Suite 2000

San Francisco, CA 94105

Attention: Donald C. Reinke

Facsimile: 415.391.8269

(ii) All correspondence to Investor shall be sent to Investor at the address set forth on the signature page hereto.

(h) 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 Agreements.

(i) Severability of this Agreement. Should any part or provision of this Agreement be held unenforceable or in conflict with the applicable laws or regulations of any jurisdiction, the invalid or unenforceable part or provisions shall be replaced with a provision which accomplishes, to the extent possible, the original business purpose of such part or provision in a valid and enforceable manner, and the remainder of this Agreement shall remain binding upon the parties hereto.

(j) Singular/Plural; Gender. Where the context so requires or permits, the use of the singular form includes the plural, the use of the plural form includes the singular, and the use of any gender includes any and all genders. As used herein, the word “person” means any natural person, general or limited partnership, corporation, association, limited liability company or other entity.

(k) Inclusive Language. As used herein, the word “or” is not exclusive and the word “including” is not limiting (whether or not non-limiting language such as “without limitation” or “but not limited to” or words of similar import are used in reference thereto).

(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 Warrant Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

COMPANY:

 

Patient Safety Technologies, Inc.

a Delaware corporation

By:   /s/ Steven H. Kane
  Signature
Print Name:   Steven H. Kane
Title:   President and CEO

 

 

CARDINAL HEALTH, INC.
By:   /s/ Michael Lynch

 

Print Name of Authorized Signatory: Michael Lynch                                                                 

Title of Authorized Signatory: Chief Executive Officer, Medical Segment                                

EIN for Investor: 31-0958666                                                                                          

Email Address of Investor: —                                                                                          

Facsimile Number of Investor: (614) 757-6948                                                                     

Address for Notice of Investor: 7000 Cardinal Place, Dublin, OH 43017                                

                                                Attn: Executive Vice President, General Counsel                        

Address for Delivery of Securities for Investor

(if not same as address for notice):    ___________________________________________________

                                                             __________________________________________________

 

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EX-3 4 dex3.htm REGISTRATION RIGHTS AGREEMENT Registration Rights Agreement

Exhibit 3

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made effective as of November 19, 2009, by and between Patient Safety Technologies, Inc., a Delaware corporation (the “Company”) and Cardinal Health, Inc. (the “Investor”).

WHEREAS, the Company has agreed to issue to the Investor, and the Investor has agreed to acquire from the Company, Warrants to purchase Common Stock of the Company (the “Warrant Shares”), all upon the terms and conditions set forth in that certain Warrant Purchase Agreement, dated on even date herewith, between the Company and the Investor (the “Warrant Purchase Agreement”); and

WHEREAS, the terms of the Warrant Purchase Agreement provide that it shall be a condition precedent to the closing of the transactions thereunder, for the Company and the Investor to execute and deliver this Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto hereby agree as follows:

1. DEFINITIONS. The following terms shall have the meanings provided therefor below or elsewhere in this Agreement as described below:

Board” shall mean the board of directors of the Company.

Closing” and “Closing Date” shall have the meanings ascribed to such terms in the Warrant Purchase Agreement.

Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and all of the rules and regulations promulgated thereunder.

Qualifying Holder” shall have the meaning ascribed thereto in Section 12 hereof.

Registrable Shares” shall mean the Warrant Shares, provided, however, such term shall not, after the Mandatory Registration Termination Date, include any of the Warrant Shares that become or have become eligible for resale without restriction (including without any requirement concerning the availability of adequate current public information concerning the Company) pursuant to Rule 144.

Rule 144” shall mean Rule 144 promulgated under the Securities Act and any successor or substitute rule, law or provision.

SEC” shall mean the Securities and Exchange Commission.

Securities Act” shall mean the Securities Act of 1933, as amended, and all of the rules and regulations promulgated thereunder.


2. EFFECTIVENESS; TERMINATION. This Agreement shall become effective and legally binding only if the Closing occurs.

3. MANDATORY REGISTRATION.

(a) If the Company is late in filing any SEC periodic report (after taking into consideration any permitted extensions) for more than thirty (30) days during the first twelve months following the Closing Date, then within twenty (20) business days thereafter, the Company will prepare and file with the SEC a registration statement on Form S-3, or if the Company is ineligible to use Form S-3, then within thirty (30) business days thereafter, the Company will prepare and file with the SEC a registration statement on Form S-1 (or successor forms), for the purpose of registering under the Securities Act all of the Registrable Shares for resale by, and for the account of, the Investor as the selling stockholder thereunder (the “Registration Statement”). The Registration Statement shall permit the Investor to offer and sell, on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, any or all of the Registrable Shares. The Company agrees to use its commercially reasonable efforts to cause the Registration Statement to become effective as soon as practicable.

(b) The Company shall be required to keep the Registration Statement effective until such date that is the earlier of (such date is referred to herein as the “Mandatory Registration Termination Date”) (i) the date as of which the Investor may sell all of the Registrable Shares without restriction (including without any requirement concerning the availability of adequate current public information concerning the Company) pursuant to Rule 144 assuming a cashless exercise of the Warrant or (ii) the date when all of the Registrable Shares registered thereunder shall have been sold. Thereafter, the Company shall be entitled to withdraw the Registration Statement and the Investor shall have no further right to offer or sell any of the Registrable Shares pursuant to the Registration Statement (or any prospectus relating thereto).

4. “PIGGYBACK” REGISTRATION RIGHTS.

(a) If, at any time prior to the Mandatory Registration Termination Date, the Company proposes to register any of its Common Stock under the Securities Act, whether as a result of a primary or secondary offering of Common Stock or pursuant to registration rights granted to holders of other securities of the Company (but excluding in all cases any registrations to be effected on Forms S-4 or S-8 or other applicable successor forms), the Company shall, each such time, give to the Investor holding Registrable Shares written notice of its intent to do so. Upon the written request of Investor given within ten (10) days of such notice, the Company shall use its commercially reasonable efforts to cause to be included in such registration the Registrable Shares of Investor, to the extent requested to be registered; provided that (i) Investor agrees to sell those of its Registrable Shares to be included in such registration in the same manner and on the same terms and conditions as the other shares of Common Stock which the Company proposes to register and (ii) if the registration is to include shares of Common Stock to be sold for the account of the Company or any party exercising demand registration rights pursuant to any other agreement with the Company, the proposed managing underwriter does not advise the Company that in its opinion the inclusion of Investor’s Registrable Shares (without any reduction in the number of shares to be sold for the account of the Company or such party

 

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exercising demand registration rights) is likely to affect materially and adversely the success of the offering or the price that would be received for any shares of Common Stock offered, in which case the rights of Investor shall be as provided in Section 4(b) hereof.

(b) If a registration pursuant to Section 4(a) hereof involves an underwritten offering and the managing underwriter shall advise the Company in writing that, in its opinion, the number of shares of Common Stock requested by the Investor to be included in such registration is likely to affect materially and adversely the success of the offering or the price that would be received for any shares of Common Stock offered in such offering, then, notwithstanding anything in Section 4(a) to the contrary, the Company shall be required to include in such registration only the number of shares of Common Stock which the Company is so advised can be sold in such offering as follows: (i) first, the number of shares of Common Stock proposed to be included in such registration for the account of the Company and/or any stockholders of the Company (other than the Investor) that have exercised demand registration rights, in accordance with the priorities, if any, then existing among the Company and/or such stockholders of the Company with registration rights (other than the Investor), and (ii) second, the shares of Common Stock requested to be included in such registration by all other stockholders of the Company who have piggyback registration rights (including, without limitation, the Investor), pro rata among such other stockholders (including, without limitation, the Investor) on the basis of the number of shares of Common Stock that each requested to include in such registration.

(c) In connection with any registration triggering piggyback rights hereunder, the Company shall not be required under Section 4 hereof or otherwise to include the Registrable Shares of Investor unless Investor accepts and agrees to the terms of such registration.

5. OBLIGATIONS OF THE COMPANY. In connection with the Company’s obligation under Sections 3 and 4 hereof (unless limited to one Section or the other as indicated below) to file a Registration Statement with the SEC and to use its commercially reasonable efforts to cause the Registration Statement to become effective, the Company shall:

(a) Prepare and file with the SEC the Registration Statement for the resale of the Registrable Shares by, and for the account of, the Investor in accordance with the intended methods of distribution thereof set forth in the Registration Statement, and use its commercially reasonable efforts to cause the Registration Statement to become effective as soon as practicable and remain effective in accordance with Section 3 hereof if filed pursuant to Section 3; provided that before filing with the SEC a Registration Statement or prospectus or any amendments or supplements thereto under Section 3, the Company will furnish to one counsel selected by the Investor copies of all such documents proposed to be filed, which documents will be subject to the timely review and comments of such counsel;

(b) Subject to Section 11 hereof, if filed pursuant to Section 3, prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement continuously effective for the period specified in Section 3(b); cause the related prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any successor rule) under the Securities Act; and use its commercially reasonable efforts to comply

 

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with the provisions of the Securities Act applicable to it with respect to the disposition of all Registrable Shares covered by the Registration Statement prior to the Mandatory Registration Termination Date in accordance with the intended methods of distribution set forth in the Registration Statement;

(c) Give notice to the Investor (i) as promptly as practicable, when any prospectus, prospectus supplement, Registration Statement or post-effective amendment to the Registration Statement has been filed with the SEC (other than any amendments or supplements solely to update the selling stockholder information in the prospectus or any amendments caused by the filing of a report under the Exchange Act) and, with respect to the Registration Statement or any post-effective amendment, when the same has been declared effective, and (ii) immediately, of the occurrence of any event described in Section 11 hereof in accordance with the provisions thereof;

(d) As promptly as practicable, deliver to Investor, without charge, as many copies of the prospectus and any amendment or supplement thereto as Investor may reasonably request; and the Company hereby consents (except during any Suspension Period (as defined in Section 11 hereof)) to the use of such prospectus and any amendment or supplement thereto by Investor in connection with any offering and sale of the Registrable Shares covered by such prospectus or any amendment or supplement thereto in the manner set forth therein;

(e) Following the occurrence of an event described in Section 11(iv) hereof, if filed pursuant to Section 3, promptly prepare an amendment to the Registration Statement or amendment or supplement to the prospectus (and, when completed, give notice (as provided in Section 5(c) hereof and provide a copy thereof (as provided in Section 5(d) hereof to Investor) so that, as thereafter delivered to the purchasers of such Registrable Shares, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading; provided that upon notification by the Company of the occurrence of an event described in Section 11(iv) hereof, the Investor will not offer or sell Registrable Shares until the Company has notified the Investor that it has prepared an amendment or supplement to the Registration Statement or prospectus and delivered copies of such amendment or supplement to the Investor (it being understood and agreed by the Company that the foregoing proviso shall in no way diminish or otherwise impair the Company’s obligation to promptly prepare an amendment or supplement as above provided in this Section 5(d) and deliver copies of same as above provided in Section 5(b) hereof);

(f) If filed pursuant to Section 3, use its commercially reasonable efforts to register and qualify the Registrable Shares covered by the Registration Statement under such other securities or Blue Sky laws of such states as the Investor or the managing underwriters, if any, shall reasonably request; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;

(g) Cause all Registrable Shares to be quoted on the Nasdaq Stock Market Over-the-Counter Bulletin Board (the “OTCBB”), or such other securities exchange on which similar securities issued by the Company are then listed, and comply with all requirements of the OTCBB or such other securities exchange, as applicable, with regard to the issuance of the Registrable Shares and the listing thereof;

 

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(h) Comply with all applicable rules and regulations of the SEC; and

(i) Use its commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order stopping or suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Shares for sale in any jurisdiction, at the earliest practicable moment.

6. FURNISH INFORMATION. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Agreement that the Investor shall furnish to the Company such information regarding it and the securities held by it as the Company shall reasonably request and as shall be required in order to effect any registration by the Company pursuant to this Agreement. Investor shall promptly notify the Company of any changes in the information furnished to the Company.

7. EXPENSES OF REGISTRATION. All expenses incurred in connection with the registration of the Registrable Shares pursuant to this Agreement (excluding underwriting, brokerage and other selling commissions and discounts relating to disposition of Registrable Shares by Investor, and stock transfer fees and, if registration is pursuant to Section 4, fees and disbursements of Investor’s counsel relating to dispositions of Registrable Shares by Investor), including without limitation all registration and qualification and filing fees, printing fees, fees and disbursements of counsel for the Company and, if registration is pursuant to Section 3, fees and disbursements of Investor’s counsel not to exceed $25,000, shall be borne by the Company.

8. DELAY OF REGISTRATION. The Investor shall not take any action to restrain, enjoin or otherwise delay any registration as the result of any controversy which might arise with respect to the interpretation or implementation of this Agreement.

9. INDEMNIFICATION.

(a) To the fullest extent permitted by law, the Company will, notwithstanding any termination of this Agreement, indemnify and hold harmless the Investor, any investment banking firm acting as an underwriter for the Investor, any broker/dealer acting on behalf of the Investor and each officer and director of Investor, such underwriter, such broker/dealer and each person, if any, who controls the Investor, such underwriter or broker/dealer within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which they may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue or alleged untrue statement of any material fact contained in the Registration Statement, in any preliminary prospectus or final prospectus relating thereto or in any amendments or supplements to the Registration Statement or any such preliminary prospectus or final prospectus, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state securities laws, or

 

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any rule or regulation thereunder, in connection with the performance of its obligations hereunder; and will reimburse Investor, such underwriter, broker/dealer or such officer, director or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 9(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, damage, liability or action to the extent, but only to the extent, that it arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission of material fact contained in the Registration Statement, any preliminary prospectus or final prospectus relating thereto or any amendments or supplements to the Registration Statement or any such preliminary prospectus or final prospectus, in reliance upon and in conformity with written information regarding Investor furnished by Investor expressly for use in the Registration Statement or any such preliminary prospectus or final prospectus or (ii) an untrue statement or alleged untrue statement or omission in the Registration Statement or any prospectus that is corrected in any subsequent amendment or supplement to the Registration Statement or prospectus that was delivered to the Investor before the pertinent sale or sales by the Investor, if such losses or damages would not have arisen had the Investor delivered such subsequent document.

(b) To the fullest extent permitted by law, the Investor will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the Registration Statement, each person, if any, who controls the Company within the meaning of the Securities Act, any investment banking firm acting as underwriter for the Company, or any broker/dealer acting on behalf of the Company, against any losses, claims, damages or liabilities to which the Company or any such director, officer, controlling person, underwriter, or broker/dealer may become subject to, under the Securities Act or otherwise, to the extent, but only to the extent, such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon (i) an untrue or alleged untrue statement or omission of any material fact contained in the Registration Statement, or any preliminary prospectus or final prospectus relating thereto or in any amendments or supplements to the Registration Statement or any such preliminary prospectus in reliance upon and in conformity with written information regarding the Investor furnished by the Investor expressly for use in the Registration Statement, or any preliminary prospectus or final prospectus or (ii) an untrue statement or alleged untrue statement or omission in the Registration Statement or any prospectus that was corrected in any subsequent amendment or supplement to the Registration Statement or prospectus that was delivered to the Investor before the pertinent sale or sales by the Investor, if such losses or damages would not have arisen had the Investor delivered such subsequent document; and Investor will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, underwriter, broker/dealer in connection with investigating or defending any such loss, claim, damage, liability or action, provided, however, that the liability of Investor hereunder shall be limited to the proceeds (net of underwriting discounts and commissions, if any) actually received by Investor from the sale of Registrable Shares covered by the Registration Statement, and provided further, however, that the indemnity agreement contained in this Section 9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of Investor (which consent shall not be unreasonably withheld).

 

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(c) Promptly after receipt by an indemnified party under this Section 9 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 9, notify the indemnifying party in writing of the commencement thereof and the indemnifying party shall have the right to participate in and, to the extent the indemnifying party desires, jointly with any other indemnifying party similarly noticed, to assume at its expense the defense thereof with counsel reasonably satisfactory to the indemnified party; provided, that the failure of any indemnified party to give such notice shall not relieve the indemnifying party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have materially prejudiced the indemnifying party.

An indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such indemnified party or unless: (i) the indemnifying party has agreed in writing to pay such fees and expenses; (ii) the indemnifying party shall have failed promptly to assume the defense of such action and to employ counsel reasonably satisfactory to such indemnified party in any such action; or (iii) the named parties to any such action (including any impleaded parties) include both such indemnified party and the indemnifying party, and counsel to the indemnifying party shall reasonably believe that a material conflict of interest is likely to exist if the same counsel were to represent the indemnified party and the indemnifying party (in which case, the indemnifying party shall not have the right to assume the defense thereof and the reasonable fees and expenses of no more than one separate counsel shall be at the expense of the indemnifying party). Subject to the terms of this Agreement, all reasonable fees and expenses of the indemnified party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such action in a manner not inconsistent with this Section) shall be paid to the indemnified party, as incurred, within ten business days of written notice thereof to the indemnifying party; provided, that the indemnified party shall promptly reimburse the indemnifying party for that portion of such fees and expenses applicable to such actions for which such indemnified party is judicially determined to be not entitled to indemnification hereunder.

(d) Notwithstanding anything to the contrary herein, the indemnifying party shall not be entitled to settle any claim, suit or proceeding unless in connection with such settlement the indemnified party receives an unconditional release with respect to the subject matter of such claim, suit or proceeding and such settlement does not contain any admission of fault by the indemnified party.

(e) If the indemnification provided for in this Section 9 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Investor on the other in connection with the statements or omissions or other matters which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be

 

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determined by reference to, among other things, in the case of an untrue statement, whether the untrue statement relates to information supplied by the Company on the one hand or an Investor on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement. The Company and the Investor agree that it would not be just and equitable if contribution pursuant to this subsection (e) were determined by pro rata allocation (even if the Investor were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this subsection (e). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 9(e), the Investor shall not be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds (net of underwriting discounts and commissions, if any) actually received by the Investor from the sale of the Registrable Shares covered by the Registration Statement subject to the action exceeds the amount of any damages that the Investor has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

(f) The parties to this Agreement hereby acknowledge that they are sophisticated business persons who were represented by counsel during the negotiations regarding the provisions hereof including, without limitation, the provisions of this Section 9, and are fully informed regarding said provisions.

10. REPORTS UNDER THE EXCHANGE ACT. With a view to making available to the Investor the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit the Investor to sell the Warrant Shares to the public without registration, for a period of one year after the Closing Date (unless the Company or its stockholders have consummated a “Reorganization” (as defined in the Warrants) prior to such one year period) and thereafter only so long as the Company elects in its sole discretion to remain a reporting issuer with the SEC, the Company agrees to use its commercially reasonable efforts: (i) to make and keep public information available as those terms are understood in Rule 144, (ii) to file with the SEC in a timely manner all reports and other documents required to be filed by an issuer of securities registered under the Securities Act or the Exchange Act, (iii) as long as Investor owns any Warrant Shares, to furnish in writing upon Investor’s request a written statement by the Company that it has complied with the reporting requirements of Rule 144 and of the Securities Act and the Exchange Act, and to furnish to Investor a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as may be reasonably requested in availing Investor of any rule or regulation of the SEC permitting the selling of any such Warrant Shares without registration and (iv) undertake any additional actions reasonably necessary to maintain the availability of the Registration Statement or the use of Rule 144.

11. DEFERRAL. Notwithstanding anything in this Agreement to the contrary, in the event (i) of any request by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to a

 

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Registration Statement or prospectus or for additional information; (ii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose; (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Shares for sale in any jurisdiction or the initiation of any proceeding for such purpose; (iv) of any event or circumstance which necessitates the making of any changes in the Registration Statement or prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the prospectus, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (v) that the Board has made the good faith determination (A) that continued use by the Investor of the Registration Statement for purposes of effecting offers or sales of Registrable Shares pursuant thereto would require, under the Securities Act, premature disclosure in the Registration Statement or prospectus of material, nonpublic information concerning the Company, its business or prospects or any proposed material transaction involving the Company, (B) that such premature disclosure would be materially adverse to the Company, its business or prospects or any such proposed material transaction or would make the successful consummation by the Company of any such material transaction significantly less likely and (C) that it is therefore essential to suspend the use by the Investor of such Registration Statement and prospectus for purposes of effecting offers or sales of Registrable Shares pursuant thereto, then the Company shall promptly furnish to the Investor a certificate signed by the Chief Executive Officer or Chief Financial Officer of the Company setting forth one or more of the above described circumstances, and the right of the Investor to use the Registration Statement (and the prospectus relating thereto) shall be suspended for a period (the “Suspension Period”) of not more than ninety (90) days after delivery by the Company of the certificate referred to above in this Section 11. During the Suspension Period, the Investor shall not offer or sell any Registrable Shares pursuant to or in reliance upon the Registration Statement or prospectus and Investor shall keep the fact of the above described certificate and its contents confidential. The Company shall use commercially reasonable efforts to terminate any Suspension Period as promptly as commercially practicable.

12. TRANSFER OF REGISTRATION RIGHTS. None of the rights of Investor under this Agreement shall be transferred or assigned to any person unless (i) such person is a Qualifying Holder (as defined below), and (ii) such person agrees to become a party to, and bound by, all of the terms and conditions of, this Agreement. For purposes of this Section 12, the term “Qualifying Holder” shall mean, with respect to Investor, (a) any corporation, partnership, limited liability company or other entity or association controlling, controlled by, or under common control with, Investor, (b) any corporation, partnership, limited liability company or other entity or association into which Investor is merged or which acquires the capital stock of Investor or substantially all of the assets of Investor or (c) any person, corporation, partnership, limited liability company or other entity or association that acquires from Investor greater than 50% of the Warrant Shares or portions of the Warrants representing the right to acquire greater than 50% of the Warrant Shares. None of the rights of Investor under this Agreement shall be transferred or assigned to any person (including, without limitation, a Qualifying Holder) that

 

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acquires Registrable Shares in the event that and to the extent that such person is eligible to resell such Registrable Shares without restriction (including without any requirement concerning the availability of adequate current public information concerning the Company) pursuant to Rule 144 of the Securities Act. After any transfer in accordance with this Section 12 the rights and obligations of the Investor as to any transferred Registrable Shares shall be the rights and obligations of such Qualifying Holder transferee holding such Registrable Shares.

13. ENTIRE AGREEMENT/TERMINATION. This Agreement, the Warrants and the Warrant Purchase Agreement constitute and contain the entire agreement and understanding of the parties with respect to the subject matter hereof, and supersede any and all prior negotiations, correspondence, agreements or understandings with respect to the subject matter hereof. Notwithstanding anything herein to the contrary, this Agreement and all obligations hereunder shall terminate immediately upon a “Transaction Termination Event” (as defined in the Warrant).

14. MISCELLANEOUS.

(a) This Agreement may not be amended, modified or terminated, and no rights or provisions may be waived, except with the written consent of the Investor and the Company.

(b) This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware and without regard to any conflicts of laws concepts which would apply the substantive law of some other jurisdiction, and shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors or assigns, provided that the terms and conditions of Section 12 hereof are satisfied. This Agreement shall also be binding upon and inure to the benefit of any transferee of any of the Warrant Shares provided that the terms and conditions of Section 12 hereof are satisfied. Subject to Section 12, if at any time following exercise of the Warrants in full the Investor shall transfer all of its Warrant Shares, all of Investor’s rights under this Agreement shall immediately terminate. Any dispute arising in relation to this Agreement shall be resolved in accordance with the dispute resolution provisions set forth in the Warrant Purchase Agreement.

(c) Any notices, reports or other correspondence (hereinafter collectively referred to as “correspondence”) required or permitted to be given hereunder shall be in writing and shall be sent by postage prepaid first class mail, courier or telecopy or delivered by hand to the party to whom such correspondence is required or permitted to be given hereunder, and shall be deemed sufficient upon receipt when delivered personally or by courier, overnight delivery service or confirmed facsimile, or three (3) business days after being deposited in the regular mail as certified or registered mail (airmail if sent internationally) with postage prepaid, if such notice is addressed to the party to be notified at such party’s address or facsimile number as set forth below:

(i) All correspondence to the Company shall be addressed as follows:

Patient Safety Technologies, Inc.

43460 Ridge Park Drive, Suite 140

Temecula, CA 92951

Attention: Steven H. Kane, President and Chief Executive Officer

Facsimile: 951.587.6237

 

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with a copy to:

Reed Smith LLP

101 Second Street, Suite 2000

San Francisco, CA 94105

Attention: Donald C. Reinke

Facsimile: 415.391.8269

(ii) All correspondence to Investor shall be sent to Investor at the address set forth on the signature page hereto.

(iii) Any entity may change the address to which correspondence to it is to be addressed by written notification as provided for herein.

(d) The parties acknowledge and agree that in the event of any breach of this Agreement, remedies at law may be inadequate, and each of the parties hereto shall be entitled to seek specific performance of the obligations of the other parties hereto and such appropriate injunctive relief as may be granted by a court of competent jurisdiction.

(e) Should any part or provision of this Agreement be held unenforceable or in conflict with the applicable laws or regulations of any jurisdiction, the invalid or unenforceable part or provisions shall be replaced with a provision which accomplishes, to the extent possible, the original business purpose of such part or provision in a valid and enforceable manner, and the remainder of this Agreement shall remain binding upon the parties hereto.

(f) This Agreement may be executed in a number of counterparts, any of which together shall for all purposes constitute one Agreement, binding on all the parties hereto notwithstanding that all such parties have not signed the same counterpart.

(g) Neither the Company nor any of its subsidiaries has entered into, as of the date hereof, nor shall the Company or any of its subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to Investor in this Agreement or otherwise conflicts with or is inconsistent with the provisions hereof.

[Signature Page to Follow]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date and year first above written.

 

CARDINAL HEALTH, INC.
By:   /s/ Michael Lynch
  Name:  

Michael Lynch

Chief Executive Officer, Medical Segment

PATIENT SAFETY TECHNOLOGIES, INC.
By:   /s/ Steven H. Kane
  Name:   Steven H. Kane

 

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