UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
report (Date of earliest event reported): November 19, 2009
PATIENT
SAFETY TECHNOLOGIES, INC.
(Exact
Name of Registrant as Specified in Charter)
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DELAWARE
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001-09727
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13-3419202
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(State
or Other Jurisdiction
of
Incorporation)
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(Commission
File Number)
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(I.R.S.
Employer
Identification
No.)
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43460
Ridge Park Drive, Suite 140
Temecula,
California
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92590
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(951)
587-6201
(Registrant’s
telephone number, including area code)
N/A
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the Registrant under any of the following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act of 1933,
as amended (17 CFR 230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Securities Exchange Act of
1934, as amended (17 CFR 240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Securities
Exchange Act of 1934, as amended (17 CFR
240.13e-4(c))
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Item
1.01 Entry
into a Material Definitive Agreement
On November 19, 2009, we entered into a
Supply and Distribution Agreement with Cardinal Health 200, LLC (“Cardinal
Health”) whereby Cardinal Heath agreed to act as the exclusive distributor of
certain products used in our proprietary Safety-Sponge™ System in the United
States, Puerto Rico and Canada for a five-year term (the “Supply
Agreement”). The Supply Agreement is a successor agreement to the
Supply Agreement between Surgicount Medical, Inc., our wholly-owned subsidiary,
and Cardinal Health, dated effective November 14, 2006, which expired in
accordance with its terms on November 14, 2009. A copy of the Supply Agreement
is included as Exhibit 10.1 hereto.
In connection with the execution of the
Supply Agreement, Cardinal Health issued a $10 million purchase order for our
SurgiCount products, calling for deliveries over the next 12-month
period. Cardinal Health paid us $8 million upon execution of the
Supply Agreement as partial pre-payment for such products, and agreed to pay up
to $2 million directly to A+ International, Inc., our exclusive supplier, upon
delivery of invoices for delivery of product under the purchase
order. Cardinal Health also agreed to place an additional $5 million
purchase prior to the end of the third quarter of 2010 if we have achieved a
minimum target sales threshold for sales of our surgical sponge products, and
agreed to maintain for a period of time its current ordering pattern and volume
for products required to fill orders from customers and add the products
delivered under the $10 million and $5 million purchase orders to its customary
inventory levels.
Other commercial terms in the Supply
Agreement include our agreement to provide a discount on pricing terms if we
fail to meet delivery commitments, as well as our agreement to provide Cardinal
Health minimum gross margins on the sale of our surgical sponge
products. These guaranteed minimums vary depending on the product
sold (Single Sterile or Bulk Non-Sterile) and how it is sold (directly by
Cardinal Health, through sub-distributors or to convenience kit-packers). In
addition, for Bulk Non-Sterile products included in Cardinal Health product
kits, the guaranteed minimum gross margins are based on a formula that varies
depending on sales performance criteria for specific time periods.
The Supply Agreement terminates
November 19, 2014 unless terminated earlier in accordance with its
terms. Under the Supply Agreement, either we or Cardinal Health may
terminate the agreement upon written notice to the other (with a 30-day cure
period) in the event of bankruptcy or insolvency, or material breach, or in the
event either fails to maintain the agreed fill rates (with a 60-day cure
period). In addition, Cardinal Health may terminate its obligation to distribute
certain products if such product infringes upon third-party proprietary
rights.
Under the Supply Agreement, we also
agreed to first negotiate with Cardinal Health if we intend to use a distributor
to sell our products outside the territory for which Cardinal Health acts as our
exclusive distributor. We also granted Cardinal Health a limited
right of first negotiation in the event of certain fundamental corporate
transactions (such as sale of all our assets to a third party, of a merger or
other reorganization that would result in a change in control).
As part of the purchase order described
above, we entered into a Warrant Purchase Agreement dated effective November 19,
2009 pursuant to which we issued Cardinal Health, Inc. (an affiliate of Cardinal
Health) warrants to purchase 1,250,000 shares of our common stock at $2 per
share and 625,000 shares of our common stock at $4 per share. The
warrants have a term of five-years, but are subject to early expiration in
certain circumstances, and grant the holder a right of first refusal for the
initial year of the term with respect to certain issuances of common
stock. We also granted Cardinal Health, Inc. certain registration
rights with respect to the shares of our common stock issuable upon exercise of
the warrants pursuant to a Registration Rights Agreement dated November 19,
2009. Copies of each of the warrants are included as Exhibits 4.1 and 4.2
hereto, respectively, a copy of the Warrant Purchase Agreement is included as
Exhibit 10.2 hereto and a copy of the Registration Rights Agreement is included
as Exhibit 10.3 hereto.
The foregoing descriptions of the
Supply Agreement, warrants, Warrant Purchase Agreement and Registration Rights
Agreement are qualified in their entirety by the full text of such agreements,
which are filed as Exhibits 10.1, 4.1, 4.2, 10.2 and 10.3 hereto, respectively,
and incorporated by reference herein.
Item
3.02 Unregistered
Sale of Equity Securities
On
November 19, 2009, in connection with the entry into the Supply Agreement and
the initial purchase order described in Item 1.01 above, we issued Cardinal
Health, Inc. (an affiliate of Cardinal Health) warrants to purchase 1,250,000
shares of our common stock at $2 per share and 625,000 shares of our common
stock at $4 per share pursuant to a Warrant Purchase Agreement dated effective
November 19, 2009. The warrants have a term of five-years, but are
subject to early expiration in certain circumstances, and grant the holder a
right of first refusal for the initial year of the term with respect to certain
issuances of common stock. We also granted Cardinal Health, Inc.
certain mandatory and “piggyback” registration rights, which require us to
register the shares issuable upon exercise of the warrants under the Securities
Act of 1933, as amended (the “Securities Act”) in certain circumstances pursuant
to the Registration Rights Agreement. The warrants (and shares
issuable upon exercise of the warrants) have not been registered under the
Securities Act, or state securities laws and may not be offered or sold in the
United States absent registration with the SEC or an applicable exemption from
the registration requirements.
We relied
on the exemption from the registration requirements of the Securities Act,
provided by Section 4(2) thereof and the rules and regulations promulgated
thereunder, including Regulation D, in connection with the issuance of
the warrants. The offer, sale and issuance of the warrants was made without
general solicitation or advertising. The warrants were offered and issued only
to “accredited investors” as such term is defined in Rule 501 under the
Securities Act.
Neither
this current report on Form 8-K nor the exhibits attached hereto is an offer to
sell or the solicitation of an offer to buy shares of our common stock or our
other securities.
The foregoing descriptions of the
warrants and registration rights are qualified in entirety by the form of the
warrants, included as Exhibits 4.1 and 4.2 hereto and incorporated by reference
herein, and the Registration Rights Agreement, included as Exhibit 10.3 hereto
and incorporated by reference herein.
Item
9.01 Financial
Statements and Exhibits
(c)
Exhibits.
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Exhibit
Number
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Description
of Exhibits
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4.1
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Warrant
dated November 19, 2009 to purchase up to 1,250,000 shares of the
registrant’s common stock at $2.00 per share, expiring November 19,
2014
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4.2
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Warrant
dated November 19, 2009 to purchase up to 625,000 shares of the
registrant’s common stock at $4.00 per share, expiring November 19,
2014
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10.1*
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Supply
and Distribution Agreement dated effective November 19, 2009, by and
between the registrant and Cardinal Health
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10.2
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Warrant
Purchase Agreement dated effective as of November 19, 2009 by and
between the registrant and Cardinal Health, Inc.
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10.3
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Registration
Rights Agreement dated effective as of November 19, 2009, by and
between the registrant and Cardinal Health, Inc.
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99.1
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Press
release dated November 20,
2009
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*
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Confidential
treatment requested for certain confidential portions of this exhibit.
These confidential portions have been omitted from this exhibit and filed
separately with the Commission.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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PATIENT
SAFETY TECHNOLOGIES, INC.
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November
24, 2009
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By:
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/s/ Steven
H. Kane
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Name: Steven
H. Kane
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Title:
Chief Executive Officer
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