COMMON STOCK PURCHASE AGREEMENT
 
COMMON STOCK PURCHASE AGREEMENT (the “Agreement”), dated as of March 28, 2011,
by and among Patient Safety Technologies, Inc., a Delaware corporation (the
“Company”), and each buyer identified on the signature pages hereto (each,
including its successors and assigns, a “Buyer” and collectively, the “Buyers”).
 
WHEREAS:
 
A.           The Company and each Buyer is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Shares Act of 1933, as amended (the “1933 Act”).
 
B.           The Buyers wish to subscribe for, and the Company wishes to issue
to the Buyers, certain shares of the Company’s authorized but unissued common
stock, par value $0.33 per share (the “Common Stock”).
 
C.           Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering an Amended and
Restated Registration Rights Agreement, in the form attached hereto as Exhibit A
(the “Registration Rights Agreement”), pursuant to which the Company will agree
to provide certain registration rights with respect to the Registrable Shares
(as defined in the Registration Rights Agreement) under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state securities
laws.
 
NOW, THEREFORE, in consideration for the foregoing premises and for other good
and valuable consideration, the receipt and sufficiency of which are
acknowledged, the Company and each Buyer hereby agree as follows:
 
ARTICLE I

 
PURCHASE AND SALE OF COMMON SHARES
 
1.1           Purchase of Shares.     Subject to the terms and conditions of
this Agreement, each Buyer agrees to purchase at the Closing and the Company
agrees to sell and issue to each Buyer, severally and not jointly, at the
Closing that number of shares of Common Stock, set forth opposite each Buyer’s
name on Schedule A hereto, at a purchase price of $0.75 per share (the aggregate
purchase price for a particular Buyer being the “Purchase Price”).  The shares
of Common Stock issued to the Buyers pursuant to this Agreement shall be
referred to in this Agreement as the “Shares.”  There is no minimum number of
Shares that the Company must sell in order to sell Shares to any one or more
Buyer, nor any maximum number that the Company may issue to any one or more
Buyer.
 
1.2           Closing; Delivery.
 
(a)           The purchase and sale of the Shares shall take place remotely via
the exchange of documents and signatures, at 10:00 a.m., Los Angeles time, on or
about March 29 2011, or at such other time and place as the Company and each
Buyer mutually agree upon, orally or in writing (which time and place are
designated as the “Closing”).
 
 
 

--------------------------------------------------------------------------------

 
 
(b)           At the Closing, (i) the Buyer shall pay its Purchase Price to the
Company for the Shares to be issued and sold to such Buyer at the Closing, by
wire transfer of immediately available funds in accordance with the Company’s
written wire instructions, and (ii) upon confirmation of receipt of such wire,
unless otherwise requested by the Buyer and agreed to by the Company, the Shares
purchased by the Buyer will be (A) delivered by electronic book-entry at The
Depository Trust Company (“DTC”), registered in the Buyer’s name and address,
and pursuant to the Company’s irrevocable delivery instructions to the transfer
agent, as set forth on the Buyer’s signature page hereto and (B) released by the
Company’s transfer agent (the “Transfer Agent”), to the Buyer. After the
execution of this Agreement by the Buyer, the Buyer shall direct the
broker-dealer at which the account or accounts to be credited with the Shares
are maintained to set up a deposit/withdrawal at custodian instructing the
Transfer Agent to credit such account or accounts with the Shares. The Shares
shall bear a restrictive securities legend as provided herein.
 
(c)           The Company may reject any subscription for any reason (regardless
of whether any check or wire transfer relating to such subscription is deposited
in a bank or trust account), and will promptly return the funds delivered
herewith, without interest, and without deduction of any expenses, in the event
this subscription is rejected.  The Company will send to the Buyer a copy of
this Agreement, countersigned, if the Buyer’s subscription is accepted.  The
Company has no obligation to issue any of the Shares to any person who is a
resident of a jurisdiction in which the issuance of the Shares would constitute
a violation of the securities laws.  This Agreement is and shall be irrevocable,
except that the Buyer shall have no obligations hereunder to the extent that
this Agreement is rejected by the Company.
 
(d)           At the Closing, the Company shall deliver or cause to be delivered
to each Buyer the following:
 
(i)           a legal opinion of Company Counsel, in substantially the form of
Exhibit B, executed by such counsel and delivered to the Buyers;
 
(ii)           a certificate of the Secretary of the Company, dated as of the
Closing Date, (a) certifying the resolutions adopted by the Board of Directors
of the Company approving the transactions contemplated by this Agreement and the
other Transaction Documents and the issuance of the Securities, (b) certifying
the current versions of the certificate of incorporation, as amended and by-laws
of the Company and (c) certifying as to the signatures and authority of persons
signing the Transaction Documents and related documents on behalf of the
Company;

(iii)           the Shares purchased by such Buyer, as provided in Section
1.2(b); and
 
(iv)           an executed copy of the Registration Rights Agreement.
 
(e)           At the Closing, each Buyer shall deliver or cause to be delivered
to the Company (i) the purchase price set forth on such Buyer’s signature page
to this Agreement in United States dollars and in immediately available funds,
by wire transfer to an account designated in writing to such Buyer by the
Company for such purpose and (ii) an executed copy of the Registration Rights
Agreement.
 
 
2

--------------------------------------------------------------------------------

 
 
ARTICLE II

 
BUYER’S REPRESENTATIONS AND WARRANTIES
 
Each Buyer, severally and not jointly, represents and warrants to the Company
with respect to itself only that:
 
2.1           Distribution.  Such Buyer is acquiring the Shares for investment
purposes for its own account and not with any current view towards a
distribution of the Shares, provided, however, that by making the
representations herein, such Buyer does not agree to hold any of the Shares for
any minimum or other specific term and reserves the right to dispose of the
Shares at any time in accordance with or pursuant to a registration statement or
an exemption under the Securities Act.
 
2.2           Accredited Investor Status.  At the time such Buyer was offered
the Shares, it was, and as of the date hereof, it is, an “accredited investor”
as that term is defined in Rule 501(a) of Regulation D.
 
2.3           Reliance on Exemptions; No General Solicitation.  Such Buyer
understands that the Shares are being offered and sold to it in reliance on
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying in part upon the truth
and accuracy of, and such Buyer’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Buyer to acquire the Shares.  The Buyer has not received any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Shares.
 
2.4           Information.  Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Shares that
have been requested by such Buyer and that such Buyer deems necessary and
appropriate to enable Buyer to evaluate the financial risk inherent in making
the investment in the Shares.  Such Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and its
management.  Such Buyer has reviewed the SEC Documents (as defined in
Section 3.8 below), including without limitation, the risk factor disclosure
contained therein, and understands that its investment in the Shares involves a
high degree of risk and is, at the present time, able to afford a complete loss
of such investment.  Subject to the truth and accuracy of the representations
and warranties made by the Company hereunder, such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Shares.  The
Buyer understands that no federal or state agency has made any finding or
determination as to the fairness of this offering for investment, or any
recommendation or endorsement of the Shares.  Neither such inquiries nor any
other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer’s right to
rely on the Company’s representations and warranties contained herein.
 
 
3

--------------------------------------------------------------------------------

 
 
2.5           Transfer or Resale.  Such Buyer understands that except as
provided in the Registration Rights Agreement:
 
(a)           the Shares have not been and are not being registered under the
1933 Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (i) subsequently registered thereunder or (ii)
such Shares are sold, assigned or transferred pursuant to an exemption from such
registration under the 1933 Act, including without limitation pursuant to Rule
144 promulgated under the 1933 Act, as amended, (or a successor rule thereto)
(“Rule 144”);
 
(b)           any sale of the Shares made in reliance on Rule 144 may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Shares under circumstances in which the seller (or
the Person through whom the sale is made) may be deemed to be an underwriter (as
that term is defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act and the rules and regulations of the SEC
thereunder.  “Person” means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof; and
 
(c)           neither the Company nor any other Person is under any obligation
to register the Shares under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
 
2.6           Legends.  Such Buyer agrees that all certificates or other
instruments representing the Shares shall bear any legend as required by the
“blue sky” laws of any state and a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such
stock certificates):
 
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN APPLICABLE EXEMPTION FROM REGISTRATION UNDER SAID ACT, INCLUDING PURSUANT
TO RULE 144 UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN LOAN OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
 
 
4

--------------------------------------------------------------------------------

 
 
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Shares upon which it is
stamped, if, unless otherwise required by state securities laws, (i) the resale
of such Shares is covered by an effective registration statement under the 1933
Act (whether pursuant to the Registration Rights Agreement or otherwise), (ii)
the Shares are eligible for resale without restriction under Rule 144, or (iii)
in connection with a sale, assignment or other transfer, such holder provides
the Company with an opinion of a law firm reasonably acceptable to the Company
and its transfer agent, in a generally acceptable form, to the effect that such
sale, assignment or transfer of the Shares may be made without registration
under the applicable requirements of the 1933 Act.
 
If within three trading days after receipt by the Company or its transfer agent
of a legended certificate and the other documents as specified in and complying
with the immediately preceding paragraph, the Company shall fail to cause to be
issued and delivered to such Buyer a certificate representing such Shares that
is free from the legends set forth above, and if on or after such trading day
the Buyer purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Buyer of shares of
Common Stock that the Buyer anticipated receiving from the Company without any
restrictive legend (the “Covering Shares”), then the Company shall, within three
trading days after the Buyer’s request, pay cash to the Buyer in an amount equal
to the excess (if any) of the Buyer’s total purchase price (including brokerage
commissions, if any) for the Covering Shares, over the product of (A) the number
of Covering Shares, times (B) the closing bid price on the date of delivery of
such certificate and the other documents as specified in and complying with the
paragraph immediately above.

2.7           Validity; Enforcement.  This Agreement and the Registration Rights
Agreement, and the consummation by such Buyer of the transactions contemplated
hereby and thereby, have been duly and validly authorized, executed and
delivered on behalf of such Buyer and shall constitute the legal, valid and
binding obligations of such Buyer enforceable against such Buyer in accordance
with their respective terms, except as such enforceability may be limited by
general principles of equity or to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.
 
2.8           No Conflicts.  The execution, delivery and performance by such
Buyer of this Agreement and the Registration Rights Agreement and the
consummation by such Buyer of the transactions contemplated hereby and thereby
will not (i) result in a violation of the organizational documents of such Buyer
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) in any respect under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which such Buyer is a party or by
which any property or asset of such Buyer is bound or affected, or (iii) result
in a violation of any law, rule, regulation, order, judgment or decree
(including foreign, federal and state securities laws and regulations) of any
court or governmental authority applicable to such Buyer, except in the case of
clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations
that would not, individually or in the aggregate, reasonably be expected to have
a material adverse effect on the ability of such Buyer to perform its
obligations hereunder or thereunder.
 
 
5

--------------------------------------------------------------------------------

 
 
2.9           Short Sales and Confidentiality Prior To The Date Hereof.  Other
than consummating the transactions contemplated hereunder, such Buyer has not,
nor has any Person acting on behalf of or pursuant to any understanding with
such Buyer, directly or indirectly executed any purchases or sales, including
short sales, of the securities of the Company during the period commencing from
the time that such Buyer first received a term sheet (written or oral) from the
Company or any other Person representing the Company setting forth the material
terms of the transactions contemplated hereunder until the date
hereof.  Notwithstanding the foregoing, in the case of a Buyer that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Buyer’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Buyer’s assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Shares
covered by this Agreement.  Except as otherwise explicitly set forth in this
Agreement, the Company acknowledges and agrees that the representations
contained in this Article II shall not modify, amend or affect such Buyer’s
right to rely on the Company’s representations and warranties contained in this
Agreement or any representations and warranties contained in any other
Transaction Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of the
transactions contemplated hereby or thereby.
 
ARTICLE III

 
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
 
Except as set forth in the Disclosure Schedule (which Disclosure Schedule sets
forth items the disclosure of which is necessary or appropriate as an exception
to one or more representations or warranties contained in this Article III;
provided, however, that the disclosure in any Section of the Disclosure Schedule
shall apply only to the indicated Section of this Agreement except to the extent
that it is reasonably apparent that such disclosure is relevant to another
Section of this Agreement), the Company represents and warrants (which
representations and warranties shall be deemed to apply, where appropriate, to
each Subsidiary of the Company) to each of the Buyers that:
 
3.1           Organization and Qualification.  The Company and its “Subsidiary”
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns any of the capital stock or holds an equity or
similar interest) are entities duly organized and validly existing and, to the
extent legally applicable, in good standing under the laws of the jurisdiction
in which they are formed, and have the requisite power and authorization to own
their properties and to carry on their business as now being conducted.  Each of
the Company and its Subsidiary is duly qualified as a foreign entity to do
business and, to the extent legally applicable, is in good standing in every
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have a Material
Adverse Effect.  As used in this Agreement, “Material Adverse Effect” means any
material adverse effect on the business, properties, assets, operations, results
of operations, condition (financial or otherwise) or prospects of the Company
and its Subsidiary, taken as a whole, or on the transactions contemplated hereby
and the other Transaction Documents or by the agreements and instruments to be
entered into in connection herewith or therewith, or on the authority or ability
of the Company to perform its obligations under the Transaction Documents.  The
Company has no Subsidiaries except as set forth on Schedule 3.1.  The Company
has furnished to the Buyers true, correct and complete copies of the Company’s
Certificate of Incorporation, as amended and as in effect on the date hereof
(the “Certificate of Incorporation”), and the Company’s Bylaws, as amended and
as in effect on the date hereof (the “Bylaws”).  The Company owns 100% of the
capital stock of its Subsidiary.
 
 
6

--------------------------------------------------------------------------------

 
 
3.2           Authorization; Enforcement; Validity.  The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement and each of
the other agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the “Transaction
Documents”) and to issue the Shares in accordance with the terms hereof.  The
execution and delivery of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Shares, have been duly
authorized by the Company’s Board of Directors and no approval by the Company’s
stockholders is required, and other than as set forth in Section 3.5, no further
filing, consent or authorization is required by the Company, its Board of
Directors or its stockholders in connection herewith or therewith.  This
Agreement and the other Transaction Documents have been duly executed and
delivered by the Company, and constitute the legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.
 
3.3           Issuance of Shares.  The issuance of the Shares is duly authorized
and, when issued and paid for in accordance with this Agreement, the Shares will
be validly issued, fully paid and nonassessable and free from all preemptive
rights or similar rights (other than as set forth on Section 3.3 of the
Disclosure Schedule), taxes, liens and charges with respect to the issue
thereof.  Assuming the accuracy of each of the representations and warranties of
each Buyer set forth in Article II of this Agreement, the offer and issuance by
the Company of the Shares is exempt from registration under the 1933 Act.
 
3.4           No Piggyback on Registrations.  Except as set forth on Section 3.4
of the Disclosure Schedule or in the Registration Rights Agreement, neither the
Company nor any of its security holders (other than the Buyers in such capacity
pursuant hereto) may include securities of the Company in the Registration
Statement other than the Registrable Securities.
 
3.5           No Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Shares) will not (i) result in a violation of any certificate of
incorporation, articles of incorporation, or any certificate of designations of
the Company or its Subsidiary, or bylaws of the Company or its Subsidiary or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) in any respect under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or its Subsidiary is
a party or by which any property or asset of the Company or its Subsidiary is
bound or affected, or (iii) other than as set forth in Section 3.4 of the
Disclosure Schedule, result in a violation of any law, rule, regulation, order,
judgment or decree (including foreign, federal and state securities laws and
regulations) of any court or governmental authority applicable to the Company or
its Subsidiary; except in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
 
 
7

--------------------------------------------------------------------------------

 
 
3.6           Compliance.  Except as would not, individually or in the
aggregate, reasonably be expected to have or result in a Material Adverse
Effect, (i)  neither the Company nor any Subsidiary is in default under or in
violation of (and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received written notice
of a claim that it is in default under or that it is in violation of, any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (unless
such default or violation has been duly waived), (ii) neither the Company nor
any Subsidiary is in violation of any order of any court, arbitrator or
governmental body, or (iii)  neither the Company nor any Subsidiary is or has
been in violation of any statute, rule or regulation of any governmental
authority.
 
3.7           Consents.  Neither the Company nor its Subsidiary is required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents, in each case in accordance with the terms hereof or thereof, except
for the following consents, authorizations, orders, filings and registrations
(none of which is required to be filed or obtained before the Closing):  (i) the
filing with the Securities and Exchange Commission (the “SEC”) of a current
report on Form 8-K disclosing the material terms of the transactions
contemplated hereby and thereby and attaching the Transaction Documents as
exhibits thereto, (ii) the filing of a Form D with the SEC and such filings as
are required to be made under applicable state securities laws, and (iii) the
filing with the SEC of one or more Registration Statements in accordance with
the requirements of the Registration Rights Agreement.
 
3.8           No General Solicitation; Placement Agent.  Neither the Company,
nor any of its affiliates, nor any Person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with the offer or sale of the
Shares.  The Company reserves the right to retain and compensate Roth Capital as
a placement agent and/or advisor (or such other placement agent or advisor in
lieu of Roth in its sole discretion) on such terms and conditions as the Company
deems appropriate.  Subject to the preceding sentence, neither the Company nor
its Subsidiary has engaged any placement agent, financial advisor, broker or
other agent in connection with the transactions contemplated by the Transaction
Documents, including, without limitation, the sale of the Shares.  The Company
shall be responsible for the payment of any placement agent’s fees, financial
advisory fees, or brokers’ commission relating to or arising out of the issuance
of the Shares pursuant to this Agreement.  The Company shall pay, and hold each
Buyer harmless against, any liability, loss or expense (including, without
limitation, reasonable attorney's fees and out-of-pocket expenses) arising in
connection with any claim for such fees arising out of the issuance of the
Shares pursuant to this Agreement.
 
 
8

--------------------------------------------------------------------------------

 
 
3.9           No Integrated Offering.  None of the Company, its Subsidiary, any
of their affiliates, and any Person acting on 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
Shares to be integrated with prior offerings by the Company for purposes of the
1933 Act or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed,
quoted or designated.  None of the Company, its Subsidiary, any of their
affiliates, and any Person acting on their behalf will take any action or steps
referred to in the preceding sentence that would require registration of the
issuance of any of the Shares under the 1933 Act or cause the offering of the
Shares to be integrated with other offerings for purposes of any such applicable
stockholder approval provisions.
 
3.10           SEC Documents; Financial Statements.  During the one (1) year
prior to the date hereof, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Shares Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder (the “1934 Act”)
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements, schedules thereto and documents incorporated
by reference therein being hereinafter referred to as the “SEC Documents”).  As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the 1934 Act, and none of the SEC Documents, at the
time they were filed with the SEC, 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.  As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto in effect at the time of filing.  Such financial statements have
been prepared in accordance with U.S. generally accepted accounting principles
(“GAAP”), consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
notes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
 
 
9

--------------------------------------------------------------------------------

 
 
3.11           Capitalization.  As of March 14, 2011, the authorized capital
stock of the Company consists of 100,000,000 shares of Common Stock, par value
$0.33 per share, and 1,000,000 shares of Preferred Stock, par value $1.00 per
share.  As of March 14, 2011, (i) 24,031,063 shares of Common Stock are issued
and outstanding, (ii) 10,950 shares of Series A Preferred Stock and 62,634
shares of Series B Convertible Preferred Stock are issued and outstanding, (iii)
7,294,919 shares of Common Stock are subject to issuance upon exercise of
outstanding warrants, (iv) 8,351,200 shares of Common Stock are subject to
issuance upon conversion of the Series B Preferred Stock and (v) 7,966,116
shares of Common Stock are subject to issuance upon exercise of options granted
under the Company’s 2005 and 2009 Stock Option Plans and pursuant to non-plan
grants to executives and directors.  All of such outstanding shares have been,
or upon issuance will be, validly issued and are fully paid and
nonassessable.  Except as disclosed in Schedule 3.11:  (i) none of the Company’s
capital stock is subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company; and (ii) there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any capital stock or other
securities of the Company or its Subsidiary, or contracts, commitments,
understandings or arrangements by which the Company or its Subsidiary is or may
become bound to issue additional capital stock of the Company or its Subsidiary
or options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any capital stock or other securities of the
Company or its Subsidiary.
 
3.12           Absence of Litigation.  Except as disclosed in the SEC Documents,
there is no action, suit, claim, or Proceeding (defined as an action, claim,
suit, investigation or proceeding (including, without limitation, a partial
proceeding, such as a deposition), whether commenced or threatened in writing),
or, to the Company's knowledge, inquiry or investigation, before or by any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any Subsidiary that could, individually or in the aggregate, to have
a Material Adverse Effect.
 
3.13           Material Changes; Undisclosed Events, Liabilities or
Developments.   Since the date of the latest audited financial statements
included within the SEC Documents, except as disclosed in the SEC Documents or
in Schedule 3.13 hereto, (i) there has been no event, occurrence or development
that, individually or in the aggregate, has had or that would result in a
Material Adverse Effect, (ii) the Company has not incurred any material
liabilities other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company's financial statements pursuant to
GAAP or required to be disclosed in filings made with the SEC,  (iii) the
Company has not altered its method of accounting or changed its auditors, except
as disclosed in its SEC Documents, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders, in their
capacities as such, or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock (other than pursuant to the terms of the
Company’s outstanding Series A Preferred Stock and Series B Preferred Stock),
and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock-based plans or
non-plan grants approved by the Board.
 
3.14           Investment Company.  The Company is not, and is not an affiliate
of, and immediately after receipt of payment for the Shares, will not be or be
an affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.
 
 
10

--------------------------------------------------------------------------------

 
 
3.15           Manipulation of Price.  The Company has not, and to the Knowledge
of the Company, no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of any of the Shares, (ii) sold, bid for, purchased, or paid any
compensation for soliciting purchases of, any of the Shares, or (iii) paid or
agreed to pay to any person any compensation for soliciting another to purchase
any other securities of the Company.
 
3.16           Insolvency.  The Company is not as of the date hereof, and
immediately following the Closing and after giving effect to the transactions
contemplated by this Agreement and the other Transaction Documents, the Company
will not (i) be insolvent (either because its financial condition is such that
the sum of its debts, including contingent and unliquidated debts, is greater
than its assets, at a fair valuation, or because the present fair saleable value
of its assets is less than the amount required to pay its probable liability on
its existing debts, including contingent and unliquidated debts, as they become
absolute and matured), (ii) have unreasonably small capital with which to
conduct the business in which it is engaged as such business is now conducted,
or (iii) have incurred debts beyond its ability to pay them as they become due.
 
3.17           Patents and Trademarks.  The Company and/or each Subsidiary owns,
or possesses adequate rights or licenses to use, all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights
(“Intellectual Property Rights”) necessary to conduct their respective
businesses as now conducted.  Except as set forth on Section 3.17 of the
Disclosure Schedule, none of the Company’s or any Subsidiary’s Intellectual
Property Rights consisting of registered intellectual property have expired or
terminated, or are expected to expire or terminate within three years from the
date of this Agreement.  Except as set forth on Section 3.17 of the Disclosure
Schedule, the Company does not have any knowledge of any infringement by the
Company or any Subsidiary of Intellectual Property Rights of others.  Except as
disclosed in the SEC Documents, there is no claim, action or proceeding being
made or brought, or to the knowledge of the Company, being threatened, against
the Company or any Subsidiary regarding its Intellectual Property Rights.
 
3.18           Insurance.  To the Company’s Knowledge: the Company and each
Subsidiary is insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and customary in the
businesses and locations in which the Company and each Subsidiary is engaged.
 
3.19           Regulatory Permits.  The Company and each Subsidiary possesses
all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as presently conducted and described in the SEC Documents
(“Material Permits”), except where the failure to possess such permits does not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, and neither the Company nor any Subsidiary has received
any written notice of proceedings relating to the revocation or modification of
any Material Permit.
 
 
11

--------------------------------------------------------------------------------

 
 
3.20           Internal Accounting Controls.  Except as disclosed in the SEC
Documents, the Company and each Subsidiary maintains a system of internal
accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
 
3.21           Labor Matters.  The Company and each Subsidiary is in compliance
in all material respects with all federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to
be in compliance would not, either individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.
 
3.22           Environmental Laws.  The Company and each Subsidiary (i) is in
compliance in all material respects with any and all Environmental Laws (as
hereinafter defined), (ii) has received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their respective
businesses and (iii) is in compliance in all material respects with all terms
and conditions of any such permit, license or approval where, in each of the
foregoing clauses (i), (ii) and (iii), the failure to so comply would be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect.  The term “Environmental Laws” means all federal, state, local
or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
 
3.23           Tax Status.  The Company and each Subsidiary (i) has made or
filed all foreign, federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject, (ii) has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) to the extent
required by GAAP, has set aside on its books provision reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply.  There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction.
 
 
12

--------------------------------------------------------------------------------

 
 
ARTICLE IV

 
COVENANTS
 
4.1           Form D and Blue Sky.  The Company agrees to file a Form D with
respect to the Shares as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing.  The Company shall make all
filings and reports relating to the offer and sale of the Shares required under
applicable securities or “Blue Sky” laws of the states of the United States
following the Closing Date and shall provide evidence of any such action so
taken to the Buyers.
 
4.2           Use of Proceeds.  The Company will use the proceeds from the sale
of the Shares for general corporate purposes, including the payment of the
accounts receivable owed to A Plus International (an affiliate of board member
Wayne Lin).  If applicable, the Company may also use the proceeds from the sale
of the Shares to pay fees to any placement agent and/or advisor used in
connection with this Agreement.
 
4.3           Fees.  The Company and each Buyer shall bear all of its own
respective fees and expenses incurred in connection with the transaction
contemplated by the Transaction Documents and the negotiations related thereto
(including all reasonable legal fees and disbursements in connection therewith,
documentation and implementation of the transactions contemplated by the
Transaction Documents and due diligence in connection therewith).
 
4.4           Disclosure of Transactions and Other Material Information.  The
Company shall, by 9:00 a.m. (New York City time) on or before the second
Business Day immediately following the date hereof, issue a press release,
disclosing the material terms of the transactions contemplated hereby.  The
Buyer shall not issue any press release or make any other public announcement
relating to this Agreement unless the content thereof is mutually agreed to by
the Company and the Buyer. The Buyer will timely make all required filings and
disclosures relating to the Buyer purchase of the Shares as may be required
under the 1934 Act, if any.  The Buyer agrees that Company will file a Current
Report on Form 8-K describing the terms of the transactions contemplated by the
Transaction Documents in the form required by the 1934 Act and attaching the
Transaction Documents (including, without limitation, this Agreement and the
form of the Registration Rights Agreement) as exhibits to such filing.  For
purposes of this Agreement, “Business Day” means any day other than Saturday,
Sunday or other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.  Except as herein provided,
neither the Company nor any Subsidiary shall publicly disclose the name of any
Buyer, or include the name of any Buyer in any press release without the prior
written consent of such Buyer (which consent shall not be unreasonably withheld
or delayed), unless otherwise required by law, regulatory authority or trading
market (it being understood that the Form 8-K may include such information to
the extent required by such Form).
 
4.5           Integration.  The Company shall not, and shall use its
commercially reasonable efforts to ensure that no affiliate of the Company
thereof shall, 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 Shares in a manner
that would require the registration under the Securities Act of the sale of the
Shares to the Buyers or that would be integrated with the offer or sale of the
Shares for purposes of the rules and regulations of any trading market.
 
 
13

--------------------------------------------------------------------------------

 
 
ARTICLE V

 
MISCELLANEOUS
 
5.1           Governing Law; Jurisdiction.  All questions concerning the
construction, validity, enforcement and interpretation of the Transaction
Documents shall be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the principles of
conflict of laws thereof.  Each party agrees that all legal proceedings
concerning the interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced in the state and federal courts sitting
in the City of Los Angeles (the “Los Angeles Courts”).  Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the Los Angeles Courts for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such Los Angeles
Courts, or such Los Angeles Courts are improper or inconvenient venue for such
proceeding.  Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by applicable law.  Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby.  If any party shall commence
an action or proceeding to enforce any provisions of this Agreement, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys’ fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or proceeding.
 
5.2           Counterparts.  This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
 
5.3           Headings.  The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
 
5.4           Severability.  If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
 
 
14

--------------------------------------------------------------------------------

 
 
5.5           Entire Agreement; Amendments.  This Agreement and the other
Transaction Documents supersede all other prior oral or written agreements
between the Buyers, the Company, their affiliates and Persons acting on their
behalf with respect to the matters discussed herein, and this Agreement, the
other Transaction Documents and the instruments referenced herein and therein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters.  No provision of this
Agreement may be waived, modified, supplemented or amended except in a written
instrument signed, in the case of an amendment, by the Company and the party
against whom enforcement of any such waived or amended provision is sought.  No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right.
 
5.6           Notices.  Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of:  (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto at or prior to
5:30 p.m. (New York City time) on a Business Day, (ii) the next Business Day
after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached
hereto on a day that is not a Business Day or later than 5:30 p.m. (New York
City time) on any Business Day, (iii) the second (2nd) Business Day following
the date of mailing, if sent by U.S. nationally recognized overnight courier
service or (iv) upon actual receipt by the party to whom such notice is required
to be given.  The address for such notices and communications shall be as set
forth on the signature pages attached hereto.
 
5.7           Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted
assigns.  The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each Buyer (other than by merger,
sale of substantially all assets or other transaction, as reasonably determined
by the Company, having substantially similar effect).  Any Buyer may assign any
or all of its rights under this Agreement to any Person to whom such Buyer
assigns or transfers any Shares in accordance with the terms of this Agreement,
provided that such transferee agrees in writing to be bound, with respect to the
transferred Shares, by the provisions of the Transaction Documents that apply to
the “Buyers.”
 
5.8           No Third Party Beneficiaries.  This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
 
 
15

--------------------------------------------------------------------------------

 
 
5.9           Survival.  All representations, warranties, covenants and
agreements made by the Company and the Buyers in this Agreement or in any
certificate or other instrument delivered pursuant hereto shall survive the
Closing and the delivery of the Shares and any investigation and discovery by
the Company or by the Buyers, as the case may be, made at any time with respect
thereto.  Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
 
5.10           Further Assurances.  Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
 
5.11           No Strict Construction.  The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
 
5.12           Remedies.  In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Buyers and the Company will be entitled to specific performance under the
Transaction Documents.  The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agrees to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
 
5.13           Independent Nature of Buyers’ Obligations and Rights.  The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any other Buyer under any
Transaction Document.  Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as, and the Company acknowledges that the Buyers
do not so constitute, a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group, and the Company will not assert any such claim
with respect to such obligations or the transactions contemplated by the
Transaction Documents and the Company acknowledges that the Buyers are not
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents.  The Company
acknowledges and each Buyer confirms that it has independently participated in
the negotiation of the transaction contemplated hereby with the advice of its
own counsel and advisors.  Each Buyer shall be entitled to independently protect
and enforce its rights, including, without limitation, the rights arising out of
this Agreement or out of any other Transaction Documents, and it shall not be
necessary for any other Buyer to be joined as an additional party in any
proceeding for such purpose.
 
5.14           Knowledge of the Company.  The phrase “Knowledge of the Company”
shall mean the actual knowledge of all executive officers and directors of the
Company.
 
5.15           Certain Waivers.                                Each Buyer, on
behalf of itself and all of its Affiliates, hereby waives any and all of the
following rights that it held prior to the date hereof, whether under contract,
the terms of securities or otherwise: (i) notice rights, (ii) preemptive or
participation rights, (iii) veto or consent rights, (iv) anti-dilution rights,
(v) rights of first refusal, (vi) piggy back rights and (vii) any other rights
that is inconsistent with the Transaction Documents.
 
 
16

--------------------------------------------------------------------------------

 
 
5.16           Waiver of Conflicts.  Each party to this Agreement acknowledges
that Manatt, Phelps & Phillips, LLP, counsel for the Company, may in the past
performed and may continue to perform legal services for certain of the Buyers
in matters unrelated to the transactions described in this Agreement, including
the representation of such Buyers in venture capital financings and other
matters, including in connection with the June 24, 2010
transactions.  Accordingly, each party to this Agreement hereby (a) acknowledges
that they have had an opportunity to ask for information relevant to this
disclosure; (b) gives its informed consent to Manatt, Phelps & Phillips’s
representation of certain of the Buyers in such unrelated matters and to such
counsel’s representation of the Company in connection with this Agreement and
the transactions contemplated hereby; and (c) if requested will provide a
separate written confirmation requested by Manatt in the form of its standard
waiver letter.
 
5.17           Rescission and Withdrawal Right.  Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Buyer exercises a right, election, demand or
option owed to such Buyer by the Company under a Transaction Document and the
Company does not timely perform, in all material respects, its related
obligations within the periods (and any permitted cure periods) therein
provided, then, prior to the performance by the Company of the Company's related
obligation, such Buyer may rescind or withdraw, in its sole discretion from time
to time upon written notice to the Company, any relevant notice, demand or
election in whole or in part without prejudice to its future actions and rights.
 
5.18           Adjustments in Share Numbers and Prices.  In the event of any
stock split, subdivision, dividend or distribution payable in shares of Common
Stock (or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly shares of Common Stock), combination
or other similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.
 
5.19.           Survival and Indemnification.

(a)            Survival.  The representations, warranties, covenants and
agreements contained in this Agreement shall survive the Closing of the
transactions contemplated by this Agreement.

(b)            Indemnification.  The Company agrees to indemnify and hold
harmless each Buyer and its affiliates and their respective directors, officers,
trustees, members, managers, employees and agents, and their respective
successors and assigns, from and against any and all losses, claims, damages,
liabilities and expenses (including without limitation reasonable attorney fees
and disbursements and other expenses incurred in connection with investigating,
preparing or defending any action, claim or proceeding, pending or threatened
and the costs of enforcement thereof) (collectively, “Losses”) to which such
Person may become subject as a result of any breach of representation, warranty,
covenant or agreement made by or to be performed on the part of the Company
under this Agreement or the Registration Rights Agreement, and will reimburse
any such Person for all such amounts as they are incurred by such Person.  

 
17

--------------------------------------------------------------------------------

 
 
(c)           Make-Whole.  Without limiting the foregoing, the Company agrees
that, in the event that any of the representations and warranties in Section
3.2, 3.3, 3.5, 3.7 or 3.11 are not true and correct in all respects,
notwithstanding anything set forth in the Disclosure Schedule relating to such
representations and warranties, and as a result the Company pays any monetary
damages or issues any additional securities to any party to a prior agreement
with the Company or whose consent is otherwise required for the Company to enter
into and perform this Agreement and the Registration Rights Agreement, then the
Losses to which a Buyer is subject shall be grossed-up so as to preserve the
economic substance of this Agreement (as of the Closing) as if such monetary
damages or issuances of additional securities had not occurred, including by the
Company shall taking appropriate action to ensure that a Buyer has not been
diluted, directly or indirectly, by any issuance of additional securities
contemplated by this Subsection (c), and ensuring that a Buyer does not bear the
portion of such monetary damages that corresponds to its ownership percentage as
of the Closing.

(d)           Conduct of Indemnification Proceedings.  Any person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided that any person entitled to
indemnification hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of such person unless (a) the indemnifying party
has agreed to pay such fees or expenses, or (b) the indemnifying party shall
have failed to assume the defense of such claim and employ counsel reasonably
satisfactory to such person or (c) in the reasonable judgment of any such
person, based upon written advice of its counsel, a conflict of interest exists
between such person and the indemnifying party with respect to such claims (in
which case, if the person notifies the indemnifying party in writing that such
person elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such person); and provided, further, that the failure of
any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations hereunder, except to the extent that such
failure to give notice shall materially adversely affect the indemnifying party
in the defense of any such claim or litigation.  It is understood that the
indemnifying party shall not, in connection with any proceeding in the same
jurisdiction, be liable for fees or expenses of more than one separate firm of
attorneys at any time for all such indemnified parties.  No indemnifying party
will, except with the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such claim or litigation. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of judgment with respect
to any pending or threatened action or any claim whatsoever, in respect of which
indemnification or contribution could be sought under this Section 5.19 (whether
or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party in form and substance reasonably satisfactory to such
indemnified party from all liability arising out of such action or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.  No indemnifying
party shall be liable for settlement of any pending or threatened action or any
claim whatsoever that is effected without its written consent (which consent
shall not be unreasonably withheld or delayed), but if settled with its written
consent, if its consent has been unreasonably withheld or delayed or if there be
a judgment for the plaintiff in any such matter, the indemnifying party agrees
to indemnify and hold harmless any indemnified party from and against any loss
or liability by reason of such settlement or judgment.
 
 
 [Signature Pages Follows]
 
 
18

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, each Buyer, severally and not jointly, and the Company, have
caused their respective signature page to this Common Stock Purchase Agreement
to be duly executed as of the date first written above.
 

  COMPANY:           PATIENT SAFETY TECHNOLOGIES, INC.          
 
By:
        Name:        Title:           

 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR BUYERS TO FOLLOW]
 
 
19

--------------------------------------------------------------------------------

 
 
[BUYER SIGNATURE PAGE TO COMMON STOCK
PURCHASE AGREEMENT]
 
Name of
Buyer:                                                                           
 
Signature of Authorized Signatory of
Buyer:                                                                                                                     
 
Name of Authorized
Signatory:                                                                                                           
 
Title of Authorized
Signatory:                                                                                                           
 
Number of Shares of Common Stock Subscribed For: See Schedule A opposite name of
Buyer
 
Delivery and Notice Information:  See below.
 
1.
 
The exact name that your Shares are to be registered in. You may use a nominee
if appropriate:
     
2.
 
The relationship between the Buyer and the registered holder listed in response
to item 1 above (if not the same person):
     
3.
 
The mailing address of the registered holder listed in response to item 1 above:
   
 Mailing:
   
 Fax:
   
 Email:
     
4.
 
The Social Security Number or Tax Identification Number of the registered holder
listed in response to item 1 above:
           
5.
 
Name of DTC Participant (broker-dealer at which the account or accounts to be
credited with the Shares are maintained); please include the name and telephone
number of the contact person at the broker-dealer:
           
6.
 
DTC Participant Number:
           
7.
 
Name of Account at DTC Participant being credited with the Shares:
     

 
20

--------------------------------------------------------------------------------

 
 
SCHEDULE A
SCHEDULE OF BUYERS
[Omitted.]
 
 
21

--------------------------------------------------------------------------------

 
 
EXHIBIT A

FORM OF AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
 
 
22

--------------------------------------------------------------------------------

 
 
EXHIBIT B

FORM OF ISSUER’S COUNSEL OPINION

[Omitted]

 
23

--------------------------------------------------------------------------------