Document:

CONVERTIBLE
PREFERRED STOCK

     

    PURCHASE
AGREEMENT

     

    CONVERTIBLE PREFERRED STOCK PURCHASE
AGREEMENT (the “Agreement”), dated as of June
24, 2010, 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”).  Francis
Capital Management, LLC is executing this Agreement solely for the purpose of
waiving certain rights pursuant to Section 8.18
hereof).

     

    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
Securities Act of 1933, as amended (the “1933 Act”).

     

    B.            The
Company has authorized a new series of Series B Convertible Preferred Stock of
the Company, pursuant to the certificate of designations (the “Certificate”) in the form
attached hereto as Exhibit A (the “Preferred Shares”), which
Preferred Shares shall be convertible into the Company’s common stock, par value
$0.33 per share (the “Common
Stock”) (such shares of Common Stock or other securities issued or
issuable upon conversion of the Preferred Shares, the “Conversion Shares”), in
accordance with the terms of the Preferred Shares.  

     

    C.            Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, in the form attached
hereto as Exhibit
B (the “Registration
Rights Agreement”), pursuant to which the Company will agree to provide
certain registration rights with respect to the Registrable Securities (as
defined in the Registration Rights Agreement) under the 1933 Act and the rules
and regulations promulgated thereunder, and applicable state securities
laws.

     

    D.      
     Contemporaneously with the execution and delivery
of this Agreement, the parties hereto are executing and delivering an Escrow
Agreement, in the form attached hereto as Exhibit C (the “Escrow
Agreement”).

     

    E.             The
Preferred Shares and the Conversion Shares collectively are referred to herein
as the “Securities.” 

     

    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:

     

    
      
         

      

      
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    ARTICLE
I

     

    PURCHASE AND SALE OF PREFERRED
SHARES

     

    1.1         Purchase of Preferred
Shares.

     

    (a)           Upon
the terms and subject to the conditions set forth herein, the Company agrees to
sell, and the Buyers, severally and not jointly, agree to purchase, up to an
aggregate amount of $6,000,000 of Preferred Shares with an aggregate Stated
Value for each Buyer equal to such Buyer’s Subscription Amount as set forth on
the signature page executed by such Buyer.  The aggregate number of
Preferred Shares sold hereunder shall be up to 60,000.  “Stated Value” means One
Hundred Dollars $100.00 per Preferred Share.  “Subscription Amount” means, as
to each Buyer, the aggregate amount to be paid for the Preferred Shares
purchased hereunder as specified below such Buyer’s name on the signature page
of this Agreement and next to the heading “Subscription Amount,” in United
States dollars and in immediately available funds.

     

    (b)           Closing.  The
date (the “Closing
Date”) and time of the closing of the purchase and sale of the Preferred
Stock (the “Closing”)  shall be
10:00 a.m., Los Angeles time, on the date hereof (or such later date as is
mutually agreed to by the Company and each Buyer) after notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Articles VI and VII below at the
offices of Manatt, Phelps & Phillips, LLP, 11355 West Olympic Blvd., Los
Angeles, California 90064, unless another date, time or place is agreed to by
Buyers and the Company.

     

    1.2         Form of
Payment.  On the Closing Date, (i) each Buyer shall pay its
Subscription Amount to the Company for the Preferred Shares to be issued and
sold to such Buyer at the Closing, (A) by wire transfer of immediately available
funds in accordance with the wire instructions set forth on Exhibit D, (B) by
cancellation or conversion of indebtedness of the Company to such Buyer
(evidenced by delivery of a written debt-cancellation agreement cancelling a
principal amount of outstanding indebtedness equal to the Subscription Amount in
form and substance satisfactory to the Company), or (C) by any combination of
such methods agreed prior to the Closing Date between such Buyer and the Company
and (ii) the Company shall deliver to each Buyer the stock certificates
representing the Preferred Shares (allocated in the principal amounts as such
Buyer shall request in writing no later than two (2) days prior to the Closing
Date), which such Buyer is then purchasing hereunder duly executed on behalf of
the Company and registered in the name of such Buyer or its designee as such
Buyer shall request in writing no later than two (2) days prior to the Closing
Date.

     

    1.3         Use of Proceeds;
Escrow.  The Company shall use all proceeds of the offerings
contemplated hereby to pay the Transaction Fees (as defined in Section 4.6 below),
for general corporate purposes and as set forth on Exhibit J, provided, however that the
parties agree that $651,223.52 (the “Escrow Amount”) shall be
deposited on the Closing Date in an account (the “Tax Escrow Account”)
with  U.S. Bank (the “Escrow Agent”), to be held,
invested, administered and distributed or released in accordance with the terms
and conditions of the Escrow Agreement.

    
      
         

      

      
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    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 Securities for investment purposes for its own account
and not with any current view towards a distribution of the
Securities.

     

    2.2         Accredited Investor
Status.  At the time such Buyer was offered the Securities, 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.  Such Buyer understands that the Securities 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 Securities.

     

    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 Securities 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
Securities.  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 3.11
below), including without limitation, the risk factor disclosure contained
therein,  and understands that its investment in the Securities
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
Securities. 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.

     

    2.5         Transfer or
Resale.  Such Buyer understands that except as provided in the
Registration Rights Agreement:

     

    (a)           the
Securities 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
Securities 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”);

    
      
         

      

      
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    (b)           any
sale of the Securities 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 Securities 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
Securities 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 Preferred
Shares and the Conversion 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 NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE 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.

     

    
      
         

      

      
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    The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) the resale
of such Securities is covered by an effective registration statement under the
1933 Act (whether pursuant to the Registration Rights Agreement or otherwise),
(ii) the Conversion 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 Securities may be made
without registration under the applicable requirements of the 1933
Act.

      

    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.

     

    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 (“Discussion Time”).
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 Securities covered by this
Agreement.

    
      
         

      

      
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    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 apparent on
the face of such disclosure that such disclosure is relevant to another Section
of this Agreement), the Company represents and warrants 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.

     

    
      
         

      

      
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    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, the Escrow 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 Securities 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 Preferred Shares, the
reservation for issuance and the issuance of the Conversion Shares issuable upon
conversion of the Preferred 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
Securities.  The issuance of the Preferred Shares are duly
authorized and, when issued and paid for in accordance with this Agreement, will
be validly issued, fully paid and nonassessable and free from all preemptive
rights or similar rights, taxes, liens and charges with respect to the issue
thereof.  As of the Closing, a number of shares of Common Stock that
equals or exceeds 100% of the aggregate of the maximum number of shares of
Common Stock issuable upon conversion of the Preferred Shares shall have been
duly authorized and reserved for issuance.  Upon conversion or
exercise in accordance with the terms of the Preferred Shares, the Conversion
Shares will be validly issued, fully paid and nonassessable and free from all
preemptive or similar rights, taxes, liens and charges with respect to the issue
thereof, with the holders being entitled to all rights accorded to a holder of
Common Stock.  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 Securities is exempt
from registration under the 1933 Act.

     

    3.4         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 Preferred Shares and reservation for issuance and issuance of
the Conversion 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 3.5, 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.

    
      
         

      

      
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    3.5         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.

     

    3.6         Acknowledgment Regarding
Buyers’ Purchase of Securities.  The Company acknowledges and
agrees that, notwithstanding any affiliation any Buyer or its respective
affiliate may have with the Company, the Company believes that it has taken
appropriate corporate governance measures to ensure that the transactions
contemplated by this Agreement and the other Transaction Documents have been
approved in a manner that complies with applicable law by a majority of
independent and disinterested board members, and the Company believes that each
Buyer is acting solely in the capacity of an arm’s length purchaser with respect
to this Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby.  The Company further acknowledges
that no Buyer is acting as a financial advisor or fiduciary of the Company with
respect to the Transaction Documents and the transactions contemplated hereby
and thereby; and that any discussions or communications between members,
managers, officers or control party(ies) of a Buyer and the officers, directors
and control parties of the Company in connection with the Transaction Documents
and the transactions contemplated hereby are (y) incidental to the fundamental
arm’s-length nature of the Transaction Documents and the transactions
contemplated thereby, and (z) do not vitiate the arm’s length negotiations
between the financial and legal representatives of the Company and the financial
and legal representatives of Buyer with respect to the Transaction Documents and
the transactions contemplated thereby.   The Company further
represents to each Buyer that the Company’s decision to enter into this
Agreement and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.

     

    3.7         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
Securities.   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 Securities. 

    
      
         

      

      
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    3.8         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 Securities
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 Securities under the 1933 Act or cause the offering
of the Securities to be integrated with other offerings for purposes of any such
applicable stockholder approval provisions.

     

    3.9        
Dilutive
Effect.  The Company understands and acknowledges that the
number of Conversion Shares issuable upon conversion of the Preferred Shares
will increase in certain circumstances.  The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Preferred Shares in accordance with this Agreement and the Preferred Shares
is absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the
Company.

     

    3.10       Application of Takeover
Protections; Rights Agreement.  The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation or the laws of
the state of its incorporation that is or could become applicable to any Buyer
as a result of the transactions contemplated by this Agreement, including,
without limitation, the Company’s issuance of the Securities and any Buyer’s
ownership of the Securities.  The Company and its Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
stockholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change in control of the
Company.  The Company has less than 2000 shareholders of
record.

     

    
      
         

      

      
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    3.11       SEC Documents; Financial
Statements.  During the two (2) years 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 Securities 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).  The most
recent weekly cash statement provided by the Company to the Buyers fairly
presents in all material respects the results of operations and cash flows for
the seven days then ended.

    

    3.12       Absence of Certain
Changes.  Since the date of the latest audited financial
statements included within the SEC Documents, except as specifically disclosed
in a subsequent SEC Document 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 trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice, (iii) the Company has not altered its method of accounting, (iv)
except in connection with the Company’s Series A Convertible Preferred Stock in
accordance with the terms thereof, the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock, (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company equity
incentive plans, (vi) sold any assets, individually or in the aggregate, outside
of the ordinary course of business or (vii) had capital expenditures,
individually or in the aggregate, outside the ordinary course of
business.  Neither the Company nor its Subsidiary has taken any steps
to seek protection pursuant to any bankruptcy law nor, to the Knowledge of the
Company, does the Company have any reason to believe that its creditors have
initiated or intend to initiate involuntary bankruptcy proceedings, nor to the
Knowledge of the Company, is there any fact that would reasonably lead a
creditor to do so. The Company does not have pending before the SEC any request
for confidential treatment of information. Except for the transactions and other
actions contemplated by this Agreement (including, without limitation, the
issuance of the Securities and the resignations contemplated by Section 7.9) and the
other Transaction Documents, no event, liability, fact, circumstance, occurrence
or development has occurred or exists or, to the Knowledge of the Company, is
reasonably expected to occur or exist with respect to the Company or its
Subsidiary or their respective businesses, properties, operations, assets or
financial condition, that would be required to be disclosed by the Company under
applicable law (including, without limitation, securities laws), rule or
regulation at the time this representation is made or deemed made that has not
been publicly disclosed at least one trading day prior to the date that this
representation is made. 

    
      
         

      

      
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    3.13       Conduct of Business;
Regulatory Permits.  Neither the Company nor its Subsidiary is
in violation of (i) any term of or in default under its certificate of
incorporation or articles of incorporation, or any certificate of designations
of any outstanding series of preferred stock of the Company, or its bylaws,
respectively, (ii) any judgment, decree or order or (iii) any statute,
ordinance, rule or regulation applicable to the Company or its Subsidiary, and
neither the Company nor its Subsidiary will conduct its business in violation of
any of the foregoing, except for possible violations that could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  The Company and its Subsidiary possess all
certificates, authorizations and permits issued by the appropriate regulatory
authorities necessary to conduct their respective businesses, except where the
failure to possess such certificates, authorizations or permits would not have
nor reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, and neither the Company nor its Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.

     

    3.14       Sarbanes-Oxley
Act.  The Company is in material compliance with any and all
applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective as
of the date hereof, and any and all applicable rules and regulations promulgated
by the SEC thereunder that are effective as of the date hereof.

     

    3.15       Transactions With
Affiliates.  Except for this Agreement and the other
Transaction Documents and those contracts described in the SEC Documents filed
prior to the date hereof or as set forth on Schedule 3.15, none
of the officers, directors or employees of the Company or its Subsidiary is
presently a party to any transaction with the Company or its Subsidiary (other
than for ordinary course services as employees, officers or directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
officer, director or employee or, to the Knowledge of the Company, any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.

     

    3.16       Capitalization.  As
of the date hereof, the authorized capital stock of the Company consists of (i)
100,000,000 shares of Common Stock, of which as of the date hereof, (v)
23,456,063 are issued and outstanding, (w) 500,000 shares are reserved for
issuance pursuant to the Amendment and Early Conversion of the Secured
Convertible Note Agreement, (x) 75,000 shares are reserved for issuance pursuant
to a consulting agreement, (y) 5,624,750 shares are reserved for issuance
pursuant to the Company’s equity incentive plans and (z) 7,602,978 shares are
reserved for issuance pursuant to securities exercisable or exchangeable for, or
convertible into, shares of Common Stock and (ii) 1,000,000 shares of preferred
stock, par value $1.00 per share, of which, as of the date hereof, 10,950 are
issued and outstanding.  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 3.16: (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.

    
      
         

      

      
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    3.17       Absence of
Litigation.  Except as set forth in Schedule 3.17, there
is no action, suit, proceeding, 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 its Subsidiary, which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the Securities
or (ii) could, if there were an unfavorable decision, reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor its Subsidiary,
nor, to the Knowledge of the Company, any director or officer thereof, is or has
been the subject of any such action, suit, proceeding, inquiry or investigation
involving a claim of violation of or liability under federal or state securities
laws or a claim of breach of fiduciary duty. 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 any current director or
officer of the Company. During the two years prior to the date hereof, the
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or its
Subsidiary under the 1934 Act or the 1933 Act.

     

    3.18       Insurance.  The
Company and its Subsidiary are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the businesses in which
the Company and its Subsidiary are engaged.  Neither the Company nor
its Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a material increase in cost.

     

    3.19       Employee
Relations.  (a) Neither the Company nor its Subsidiary is a
party to any collective bargaining agreement or employs any member of a union
that relates to such employee’s relationship with the Company or its
Subsidiary.  The Company and its Subsidiary believe that their
relations with their employees are good.  No executive officer (as
defined in Rule 501(f) of the 1933 Act) of the Company or its Subsidiary is in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or its
Subsidiary to any liability with respect to any of the foregoing
matters.

     

    
      
         

      

      
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    (b)           The
Company and its Subsidiary, to the Knowledge of the Company, are in compliance
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.

     

    3.20       Title. The Company
and its Subsidiary have good and marketable title in fee simple to all real
property owned by them and good and marketable title to all personal property
owned by them that is material to the business of the Company and its
Subsidiary, in each case free and clear of all liens, encumbrances and defects,
except such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its Subsidiary.  Any real property and facilities held
under lease by the Company and its Subsidiary are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiary.

     

    3.21       Intellectual Property
Rights. The Company and its Subsidiary own or possess adequate rights or
licenses to use all trademarks, service marks and all applications and
registrations therefor, trade names, patents, patent rights, copyrights,
original works of authorship, inventions, trade secrets and other intellectual
property rights necessary to conduct their respective businesses as now
conducted and as described in the SEC Documents and for which the failure to so
have could have a Material Adverse Effect (“Intellectual Property
Rights”).  None of the Company’s registered, or applied for,
Intellectual Property Rights have expired or terminated or have been
abandoned.  Except as set forth in Schedule 3.21, the
Company has not received notice (written or otherwise) of, nor to the Knowledge
of the Company, is there, any infringement by the Company or its Subsidiary of
intellectual property rights of others.  There is no claim, action or
proceeding being made or brought, or to the Knowledge of the Company, being
threatened, against the Company or its Subsidiaries regarding its Intellectual
Property Rights.  To the Knowledge of the Company, there are no facts
or circumstances that might give rise to any of the foregoing infringements or
claims, actions or proceedings.  The Company and its Subsidiary have
taken reasonable security measures to protect the secrecy, confidentiality and
value of all of their Intellectual Property Rights, except where failure to do
so could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect..

     

    3.22       Environmental
Laws.  To the Knowledge of the Company, the Company and its
Subsidiary (i) are in compliance with any and all environmental laws, (ii) have
received all permits, licenses or other approvals required of them under
applicable environmental laws to conduct their respective businesses and (iii)
are in compliance 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 could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect.

     

    
      
         

      

      
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    3.23       Tax
Status.  Other than as disclosed in the SEC Documents and Schedule 3.23, the
Company and its Subsidiary (i) have 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) have 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 as to which adequate reserves have been
provided and (iii) have 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.

     

    3.24       Internal Accounting and
Disclosure Controls.  The Company and its Subsidiary maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) records that accurately and fairly reflect transactions in,
and dispositions of, assets, are maintained in reasonable detail, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
receipts and expenditures are being made only in accordance with authorizations
of management or directors and (iv) the unauthorized acquisition, use or
disposition of assets that could have a material effect on the financial
statements is prevented or timely detected.  The Company maintains
disclosure controls and procedures (as such term is defined in Rule 13a-14 under
the 1934 Act) that are effective in ensuring that information required to be
disclosed by the Company in the reports that it files or submits under the 1934
Act is recorded, processed, summarized and reported, within the time periods
specified in the rules and forms of the SEC, including, without limitation,
controls and procedures designed in to ensure that information required to be
disclosed by the Company in the reports that it files or submits under the 1934
Act is accumulated and communicated to the Company’s management, including its
principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required
disclosure.  Except as set forth in the SEC Documents filed prior to
the date hereof, during the twelve months prior to the date hereof neither the
Company nor its Subsidiary has received any notice or correspondence from any
accountant relating to any potential material weakness in any part of the system
of internal accounting controls of the Company or its Subsidiary.

     

    3.25       Investment Company.
The Company is not, and is not an affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
The Company currently intends to conduct its business in a manner so that it
will not become an “investment company” subject to registration under the
Investment Company Act of 1940, as amended. 

     

    3.26       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 Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any person any compensation for soliciting another to purchase any other
securities of the Company.

     

    
      
         

      

      
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    3.27       Disclosure.  The
Company understands and confirms that each of the Buyers will rely on the
foregoing representations in effecting transactions in securities of the
Company.  All disclosure provided to the Buyers regarding the Company,
its Subsidiary, their business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by the Company is true and
correct and does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not
misleading.

     

    3.28       Acknowledgement Regarding
Buyers’ Trading Activity.  Anything in this Agreement or
elsewhere herein to the contrary notwithstanding (except for Section 2.9), it is
understood and acknowledged by the Company (i) that none of the Buyers have been
asked to agree, nor has any Buyer agreed, to desist from purchasing or selling,
long and/or short, securities of the Company, or “derivative” securities based
on securities issued by the Company or to hold the Securities for any specified
term; (ii) that past or future open market or other transactions by any Buyer,
including, without limitation, short sales or “derivative” transactions, before
or after the closing of this or future private placement transactions, may
negatively impact the market price of the Company’s publicly-traded securities;
(iii) that any Buyer, and counter parties in “derivative” transactions to which
any such Buyer is a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iv) that each Buyer shall not be deemed to
have any affiliation with or control over any arm’s length counter-party in any
“derivative” transaction.  The Company further understands and
acknowledges that (a) one or more Buyers may engage in hedging activities at
various times during the period that the Securities are outstanding, including,
without limitation, during the periods that the value of the Conversion Shares
deliverable with respect to Securities are being determined and (b) such hedging
activities (if any) could reduce the value of the existing stockholders’ equity
interests in the Company at and after the time that the hedging activities are
being conducted. The Company acknowledges
that such aforementioned hedging activities do not constitute a breach of any of
the Transaction Documents.

     

    3.29       Commitments and
Contracts. The Company has publicly disclosed in the SEC Documents filed
prior to the date hereof true, correct and complete copies of any material
contract or agreement (within the meaning of Item 601 of Regulation S-K) to
which the Company or its Subsidiary is currently a party or by which the Company
or its Subsidiary or any of their respective properties or assets are currently
bound.

     

    3.30       Compliance with
ERISA. The Company does not maintain or contribute to any “employee
benefit plan” as such term is defined in the Employee Retirement Income Security
Act of 1974 (“ERISA”).
The Company does not contribute to any “multi-employer plan” as such term is
defined in ERISA. Neither
the Company nor any Subsidiary has received services from any individual whom
the Company or such Subsidiary, as the case may be, did not treat as a
common-law employee, including any individual treated as a leased employee or as
an independent contractor, but who should have been treated as a common-law
employee.   Each individual, if any, who has constituted a leased
employee of the Company or any Subsidiary, as defined under Section 414(n) of
the Internal Revenue Code of 1986, as amended, has been properly treated as such
for all applicable purposes.

    
      
         

      

      
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    3.31       No Anti-Dilution Rights; No
Redemptions.  The transactions contemplated by this Agreement
and the other Transaction Documents will not trigger any anti-dilution or
similar provisions contained in any existing agreements and (ii) there are no
outstanding securities or instruments of the Company or its Subsidiary that
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or its
Subsidiary is bound to redeem a security of the Company or its
Subsidiary

     

    3.32       Registration Rights
Agreements. Except as set forth on Schedule 3.32, there
are no agreements or arrangements under which the Company or its Subsidiary is
obligated to register the sale of any of their securities under the 1933 Act
(except pursuant to the Registration Rights Agreement).

     

    3.33       Insolvency.  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.

     

    ARTICLE
IV

     

    COVENANTS

     

    4.1         Best
Efforts.  Each party shall use its commercially reasonable best
efforts timely to satisfy each of the conditions to be satisfied by it as
provided in Articles VI and
VII of this
Agreement.

     

    4.2         Form D and Blue
Sky.  The Company agrees to file a Form D with respect to the
Securities 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 Securities 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.

     

    4.3         Use of
Proceeds.  Other than the Transaction Fees, the Escrow Tax
Amount and as set forth on Exhibit J, the
Company will use the proceeds from the sale of the Securities for general
corporate purposes.

     

    
      
         

      

      
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    4.4         Financial
Information.  The Company agrees to send the following to each
Buyer during the Reporting Period (i) unless the following are filed with the
SEC through EDGAR and are available to the public through the EDGAR system,
within one (1) Business Day after the filing thereof with the SEC, a copy of its
Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, any interim
reports or any consolidated balance sheets, income statements, stockholders’
equity statements and/or cash flow statements for any period other than annual
or quarterly that is filed with the SEC, any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) or amendments filed pursuant to
the 1933 Act, and (ii) copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.  As used herein, “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.

      

    4.5         Pledge of
Securities.  Notwithstanding anything to the contrary in this
Agreement, the Company acknowledges and agrees that the Securities may be
pledged by a Buyer in connection with a bona fide margin agreement or other loan
or financing arrangement that is secured by the Securities, and no Buyer
effecting a pledge of Securities shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document.  The Company hereby
agrees to execute and deliver such documentation as a pledgee of the Securities
may reasonably request in connection with a pledge of the Securities to such
pledgee by a Buyer.

     

    4.6         Fees.  At
the Closing the Company shall pay an expense allowance to each of the Buyers or
its designee(s) for all reasonable costs and expenses incurred in connection
with the transactions 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), in an amount not to exceed $175,000, which amount shall
be paid by the Company at the Closing (the “Transaction
Fees”).

     

    4.7        
Disclosure of
Transactions and Other Material Information.  On or before 8:30
a.m., New York City time, on the second Business Day following the date of this
Agreement, the Company shall issue a press release describing the terms of the
transactions contemplated by the Transaction Documents in the form attached
hereto as Exhibit
E.  In addition, on or before the end of the third Business Day
following the date of this Agreement, the Company shall 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, the form
of the Preferred Shares and the form of the Registration Rights Agreement) as
exhibits to such filing (including all attachments, the “8-K
Filing”).  Subject to the foregoing, neither the Company, its
Subsidiary nor any Buyer shall issue any press releases or any other public
statements with respect to the transactions contemplated hereby; provided, however, that the
Company and each Buyer shall be entitled, without the prior approval of the
other, to make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release).  

    
      
         

      

      
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    4.8         Reservation of
Shares.  The Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance, no less than
100% of the number of Conversion Shares issuable upon conversion of the
Preferred Shares issued at the Closing (without taking into account any
limitations on the conversion of the Preferred Shares set forth in the Preferred
Shares).

     

    4.9         Conduct of
Business.  The business of the Company and its Subsidiaries
shall not be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.

     

    4.10       Preemptive
Rights.

     

    (a)           Subject
to the terms and conditions of this Section 4.10 and
applicable securities laws, if the Company proposes to offer or sell any New
Securities at any time prior to the date that is the fifth (5th) anniversary of
the Closing Date, the Company shall first offer such New Securities to the
Buyers.  A Buyer shall be entitled to apportion the preemptive rights
hereby granted to it among itself and its affiliates in such proportions as such
Buyer deems appropriate.

     

    (b)           The
Company shall give notice (the “Offer Notice”) to each Buyer,
stating (i) its bona fide intention to offer such New Securities, (ii) the
number of such New Securities to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such New Securities.

     

    (c)           By
notification to the Company within twenty (20) days after the Offer Notice is
given, each Buyer may elect to purchase or otherwise acquire, at the price and
on the terms specified in the Offer Notice, up to that portion of such New
Securities equal to the proportion that the Common Stock issued and held, or
issuable (directly or indirectly upon conversion of the Preferred Shares then
held by such Buyer bears to the total Common Stock of the Company then
outstanding (assuming full conversion of all Preferred Shares)).  At
the expiration of such twenty (20) day period, the Company shall promptly notify
each Buyer that elects to purchase or acquire all the shares available to it
(each, a “Fully Exercising
Investor”) of any other Buyer’s failure to do likewise.  During
the ten (10) day period commencing after the Company has given such notice, each
Fully Exercising Investor may, by giving notice to the Company, elect to
purchase or acquire, in addition to the number of shares specified above, up to
that portion of the New Securities for which Buyers were entitled to subscribe
but that were not subscribed for by the Buyers that is equal to the proportion
that the Common Stock issued and held, or issuable (directly or indirectly) upon
conversion Preferred Shares then held, by such Fully Exercising Investor bears
to the Common Stock issued and held, or issuable (directly or indirectly upon
conversion of the Preferred Shares then held by all Fully Exercising Investors
who wish to purchase such unsubscribed shares.  The closing of any
sale pursuant to this Section 4.10 shall
occur within the later of ninety (90) days of the date that the Offer Notice is
given and the date of initial sale of New Securities pursuant to Section
4.10(c).

    
      
         

      

      
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    (d)           If
all New Securities referred to in the Offer Notice are not elected to be
purchased or acquired as provided in Section 4.10(c), the
Company may, during the ninety (90) day period following the expiration of the
periods provided in Section 4.10(c),
offer and sell the remaining unsubscribed portion of such New Securities to any
Person or Persons at a price not less than, and upon terms no more favorable to
the offeree than, those specified in the Offer Notice.  If the Company
does not enter into an agreement for the sale of the New Securities within such
period, or if such agreement is not consummated within thirty (30) days of the
execution thereof, the right provided hereunder shall be deemed to be revived
and such New Securities shall not be offered unless first reoffered to the
Buyers in accordance with this Section
4.10.

     

    (e)           As
used in this Section
4.10 “New
Securities” shall mean any shares of capital stock of the Company,
whether now authorized or not, and any and all rights, convertible securities,
options or warrants to purchase such capital stock, and securities of any type
whatsoever that are, or may become, exercisable or convertible into capital
stock issued by the Company after the date of this Agreement.  “New Securities” shall not
include: (i) shares of capital stock reserved for issuance to employees,
officers, directors, consultants or advisers pursuant to an equity incentive
plan approved by the Board of Directors; (ii) shares of capital stock subject to
options, warrants and convertible securities outstanding as of the date hereof;
and (iii) shares of capital stock issued in connection with mergers,
acquisitions, and other similar transactions.

     

    ARTICLE
V

     

    REGISTER; TRANSFER AGENT
INSTRUCTIONS

     

    5.1         Register.  The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Preferred Shares in which the Company shall
record the name and address of the Person in whose name the Preferred Shares
have been issued (including the name and address of each transferee as notified
to the Company in writing), the principal amount of Preferred Shares held by
such Person and the number of Conversion Shares issuable upon conversion of the
Preferred Shares.  The Company shall keep the register open and
available at all times during business hours for inspection of any Buyer or its
legal representatives.

     

    5.2         Transfer Agent
Instructions.  The Company shall issue irrevocable instructions
to its transfer agent, and any subsequent transfer agent, to issue certificates
or credit shares to the applicable balance accounts at The Depository Trust
Company (“DTC”), registered in the name
of each Buyer or its respective nominee(s) upon conversion of the Preferred
Shares in such amounts as specified from time to time by each Buyer to the
Company upon conversion of the Preferred Shares.

     

    
      
         

      

      
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    ARTICLE
VI

     

    CONDITIONS TO THE COMPANY’S
OBLIGATION TO SELL   

     

    The
obligation of the Company hereunder to issue and sell the Preferred Shares to
each Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided, that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:

     

    6.1         Such Buyer
shall have executed each of the Transaction Documents to which it is a party and
delivered the same to the Company.

     

    6.2        
Such Buyer and each other Buyer shall have delivered to the Company the
purchase price for the Preferred Shares being purchased by such Buyer at the
Closing in accordance with Section 1.2 less the
Transaction Fees withheld pursuant to Section 4.6 and less
the Tax Escrow Amount.

     

    6.3        
Such Buyer and each other Buyer shall have delivered the Tax Escrow
Amount to the Escrow Agent pursuant to the terms of the Escrow
Agreement.

     

    6.4         The
representations and warranties of such Buyer shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date, which shall be true and correct as of such specified
date), and such Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by such Buyer at or prior
to the Closing Date.

     

    ARTICLE
VII

     

    CONDITIONS TO EACH BUYER’S OBLIGATION
TO PURCHASE  

     

    The
obligation of each Buyer hereunder to purchase the Preferred Shares at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for each Buyer’s
sole benefit and may be waived by such Buyer at any time in its sole discretion
by providing the Company with prior written notice thereof:

     

    7.1         The Company
shall have duly executed and delivered to such Buyer (i) each of the Transaction
Documents and (ii) stock certificates representing the Preferred Shares
(allocated in such principal amounts as such Buyer shall have requested in
writing), being purchased by such Buyer at the Closing pursuant to this
Agreement.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    7.2         Such Buyer
shall have received the opinion of Reed Smith LLP, the Company’s outside
counsel, dated as of the Closing Date, in the form of Exhibit F attached
hereto.

     

    7.3         The Company
shall have delivered to such Buyer a certificate evidencing the formation and
good standing of the Company and its Subsidiary in such entity’s jurisdiction of
formation issued by the Secretary of State (or comparable office) of such
jurisdiction, as of a date within 10 days of the Closing Date.

     

    7.4         The Company
shall have delivered to such Buyer a certified copy of the Certificate of
Incorporation as certified by the Secretary of State of the State of Delaware
within 10 days of the Closing Date.

     

    7.5         The Company
shall have delivered to such Buyer a certificate, executed by the Secretary of
the Company and dated as of the Closing Date, as to (i) the resolutions
consistent with Section 3.2 as
adopted by the Company’s Board of Directors in a form reasonably acceptable to
such Buyer, (ii) the Certificate of Incorporation and (iii) the Bylaws, each as
in effect at the Closing in the form attached hereto as Exhibit
G.

     

    7.6         The
representations and warranties of the Company shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date, which shall be true and correct as of such specified
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Closing Date.  Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in the form attached hereto as Exhibit
H.

     

    7.7         The Company
shall have obtained all governmental, regulatory or third party consents and
approvals, if any, necessary for the sale of the Securities.

     

    7.8         The
Certificate shall have been properly filed with the Delaware Secretary of State
on or before the Closing Date.

     

    7.9         The Company
shall have obtained from each of Howard Chase, Steven Kane, Loren McFarland,
Eugene Bauer and William Hitchcock a letter stating that such director has
resigned from the board of directors of Company effective as of the Closing in
the form attached hereto as Exhibit
I.

     

    7.10       The
Company shall have fully satisfied (including with respect to rights of timely
notification) or obtained enforceable waivers in respect of any preemptive
rights, rights of first refusal or any other similar rights or directly or
indirectly affecting any of its securities in connection with the sale of
Securities and provide evidence of such in a form reasonably satisfactory to
Buyers.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    7.11       The
Company shall have delivered to such Buyer such other documents relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may
reasonably request.

     

    ARTICLE
VIII

     

    MISCELLANEOUS 

     

    8.1         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 Delaware, 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.

     

    8.2         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.

     

    8.3         Headings.  The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    8.4        
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.

     

    8.5        
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 Buyers
holding at least 67% in interest of the Securities then outstanding or, in the
case of a waiver, by the party against whom enforcement of any such waived
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.

     

    8.6        
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 (2 nd )
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.

     

    8.7        
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). Any Buyer may assign
any or all of its rights under this Agreement to any Person to whom such Buyer
assigns or transfers any Securities in accordance with the terms of this
Agreement, provided that such transferee agrees in writing to be bound, with
respect to the transferred Securities, by the provisions of the Transaction
Documents that apply to the “Buyers.”

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    8.8         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.

     

    8.9         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 Securities 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. 

     

    8.10       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.

     

    8.11       Indemnification.  (a)
In consideration of each Buyer’s execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall
indemnify and hold harmless each Buyer and its affiliates and each of their
respective officers, directors, partners, members, employees, agents and
representatives, and each Person who controls each Buyer within the meaning of
the 1934 Act (collectively, the “Buyer Indemnified Parties”), to the
fullest extent lawful, from and against any and all judgments, fines, amounts
paid in settlement, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Buyer
Indemnified Party  is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys’ fees and disbursements
(the “Indemnified
Liabilities”), incurred by any Buyer Indemnified Party as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Buyer Indemnified Party by a third party (including
for these purposes a derivative action brought on behalf of the Company) and
arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby.

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    (b)           In
consideration of the Company’s execution and delivery of the Transaction
Documents and in addition to all of such Buyer’s other obligations under the
Transaction Documents, each Buyer, severally and not jointly and severally,
shall indemnify and hold harmless the Company and its affiliates and each of
their respective officers, directors, partners, members, employees, agents and
representatives, and each Person who controls the Company within the meaning of
the 1934 Act (collectively, the “Seller Indemnified Parties”),
to the fullest extent lawful, from and against any and all Indemnified
Liabilities, incurred by any Seller Indemnified Party as a result of, or arising
out of, or relating to (a) any misrepresentation or breach of any representation
or warranty made by such Buyer in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of such Buyer contained in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Seller Indemnified Party by a third party and
arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby.

    

    (c)           Any
party seeking indemnification under this Section 8.11 (an
“Indemnified
Party”) will give each party from whom indemnification is being sought
(each, an “Indemnifying Party”)
prompt written notice of any claim, action, suit or proceeding commenced against
it in respect of which indemnity may be sought hereunder, but failure to so
notify the Indemnifying Party shall not relieve the Indemnifying Party from any
liability that it may have under the indemnity agreement provided in this Section 8.11, unless
and to the extent the Indemnifying Party shall have been actually and materially
prejudiced by the failure of such Indemnified Party to so notify the
Indemnifying Party.  Such notice shall describe in reasonable detail
such claim. In case any claim, action, suit or proceeding is brought against an
Indemnified Party, the Indemnified Party shall be entitled to hire, at its own
expense, separate counsel and participate in the defense thereof.  If
the Indemnifying Party so elects within a reasonable time after receipt of
notice, the Indemnifying Party may assume the defense of the action or
proceeding at the Indemnifying Party’s own expense with counsel chosen by the
Indemnifying Party and approved by such Indemnified Party, which approval shall
not be unreasonably withheld; provided, however, that the
Indemnifying Party will not settle or compromise any claim, action, suit or
proceeding, or consent to the entry of any judgment with respect to any such
pending or threatened claim, action, suit or proceeding without the written
consent of such Indemnified Party unless such settlement, compromise or consent
secures the unconditional release of such Indemnified Party from all liabilities
arising out of such claim, action, suit or proceeding; provided, further, that if the
defendants in any such claim, action, suit or proceeding include both such
Indemnified Party  and the Indemnifying Party and such Indemnified
Party reasonably determines, based upon advice of legal counsel experienced in
such matters, that such claim, action, suit or proceeding involves a conflict of
interest (other than one of a monetary nature) that would reasonably be expected
to make it inappropriate for the same counsel to represent both such Indemnified
Party and the Indemnifying Party, then the Indemnifying Party shall not be
entitled to assume the defense of such Indemnified Party and such Indemnified
Party shall be entitled to separate counsel at the Indemnifying Party’s expense,
which counsel shall be chosen by such Indemnified Party and approved by the
Indemnifying Party, which approval shall not be unreasonably withheld; and provided, further, that it is
understood that the Indemnifying Party shall not be liable for the fees, charges
and disbursements of more than one separate firm for such Indemnified
Party.  If the Indemnifying Party assumes the defense of any claim,
action, suit or proceeding, all Indemnified Parties shall thereafter promptly
deliver to the Indemnifying Party copies of all notices and documents (including
court papers) received by such Indemnified Party relating to the claim, action,
suit or proceeding, and each Indemnified Party shall cooperate in the defense or
prosecution of such claim.  Such cooperation shall include the
retention and (upon the Indemnifying Party’s request) the prompt provision to
the Indemnifying Party of records and information that are reasonably relevant
to such claim, action, suit or proceeding, and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder.  If the Indemnifying Party is not
entitled to assume the defense of such claim, action, suit or proceeding as a
result of the second proviso to the fourth sentence of this Section 8.11, the
Indemnifying Party’s counsel shall be entitled to conduct the Indemnifying
Party’s defense and counsel for the Indemnified Party shall be entitled to
conduct the defense of the Indemnified Party, it being understood that both such
counsel will cooperate with each other, to the extent feasible in light of the
conflict of interest or different available legal defenses, to conduct the
defense of such action or proceeding as efficiently as possible.  If
the Indemnifying Party is not so entitled to assume the defense of such action
or does not assume the defense, after having received the notice referred to in
the first sentence of this Section 8.11, the
Indemnifying Party will pay the reasonable fees and expenses of counsel for the
Indemnified Party; in that event, however, the Indemnifying Party will not be
liable for any settlement of any claim, action, suit or proceeding effected
without the written consent of the Indemnifying Party.  If the
Indemnifying Party is entitled to assume, and assumes, the defense of an action
or proceeding in accordance with this Section 8.11, the
Indemnifying Party shall not be liable for any fees and expenses of counsel for
the Indemnified Party incurred thereafter in connection with that action or
proceeding except as set forth in the proviso in the fourth sentence of this
Section
8.11.  Unless and until a final judgment is rendered that an
Indemnified Party is not entitled to the costs of defense under the provisions
of this Section
8.11, the Indemnifying Party shall reimburse, promptly as they are
incurred, the Indemnified Party’s reasonable costs of defense.

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    8.12       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.

     

    8.13       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.

     

    8.14       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 under a
Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then 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.

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    8.15       Payment Set
Aside.  To the extent that the Company makes a payment or
payments to the Buyers hereunder or pursuant to any of the other Transaction
Documents or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, foreign, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.

     

    8.16       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.

     

    8.17       Knowledge of the
Company.  The phrase “Knowledge of the Company”
shall mean the actual knowledge of Steven Kane, Marc L. Rose, Howard E. Chase,
Herbert Langsam and Loren McFarland and shall specifically exclude any actual
knowledge of John Francis and Wenchen (Wayne) Lin. 

     

    8.18       Certain
Waivers.  

     

    (a)           By
executing this Agreement, each of A Plus International, Inc. and Francis Capital
Management, LLC hereby acknowledge and agree to the waiver of any notice rights
held by it in connection with the transactions contemplated by this Agreement,
and termination of any and all prior rights of participation, rights of first
refusal, registration rights and piggyback rights previously granted to them
pursuant to prior agreements with the Company, including but not limited to
(i)  rights of participation granted to A Plus International, Inc. in
Section 1.3 of the Subscription Agreement between such Buyer and the Company
dated January 29, 2007, and (ii) piggyback rights in Section 6(e) of the
Registration Rights Agreement dated October 17, 2007 granted to Francis Capital
Management and its controlled, affiliated funds signatory
thereto.

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

    (b)           By
executing this Agreement, each of A Plus International, Inc., Francis Capital
Management, LLC and Catalysis Partners, LLC hereby agree that upon consummation
of the transactions contemplated by this Agreement each officially withdraws the
Demand.  “Demand” means that certain
demand of special meeting of stockholders of the Company, pursuant to which
stockholders representing at least twenty-five percent (25%) of the number of
shares of stock outstanding and entitled to vote at a special meeting of
stockholders demanded that the Company call a special meeting for the purpose of
considering and acting upon the matters contained therein. 

     

    8.19     
 Debt Cancellation. In
consideration for the issuance to A Plus International, Inc. of 10,000 Preferred
Shares pursuant to this Agreement, A Plus International, Inc., hereby
irrevocably cancels and extinguishes, and deems paid in full, exactly One
Million Dollars ($1,000,000) in principal amount of outstanding accounts payable
owed by the Company to A Plus International, Inc., as of the date hereof
pursuant to a supply agreement for surgical sponges.  A Plus
International, Inc., agrees that no fees or penalties or other consideration
(including any that may be owed due to any default on the debt being cancelled
hereby) are owed to it by Company in order to induce it to agree to the
cancellation effected hereby.  A Plus International, Inc., warrants
that it has not assigned or otherwise transferred its rights to the debt being
cancelled hereby.  

     

    [Signature Pages
Follows]

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, each Buyer
and the Company, and solely for the purpose of waiving certain rights pursuant
to Section 8.18
hereof, Francis Capital Management, LLC, have caused their respective signature
page to this Convertible Preferred Stock Purchase Agreement to be duly executed
as of the date first written above.

    

    
      	 
      	
              COMPANY:

            
	 
      	 
      
	 
      	
              PATIENT
      SAFETY TECHNOLOGIES,

            
	 
      	
              INC.

            
	 
      	 
      
	 
      	
              By:

            	
                

            
	 
      	 
      	
              Name:

            
	 
      	 
      	
              Title:

            
	 
      	 
      
	
              Address
      for Notice:

            	 
      
	 
      	 
      
	
              copy
      to (which shall not constitute notice):

            	 
      
	 
      	 
      
	 
      	
              FRANCIS
      CAPITAL MANAGEMENT,

            
	 
      	
              LLC

            
	 
      	
              (solely
      for the purpose of waiving certain

            
	 
      	
              rights
      pursuant to Section 8.18 hereof)

            
	 
      	 
      
	 
      	
              By:

            	
                

            
	 
      	 
      	
              Name:John
      P. Francis

            
	 
      	 
      	
              Title:
      Managing Member

            
	 
      	 
      
	
              Address
      for Notice:

            	 
      
	 
      	 
      
	
              copy
      to (which shall not constitute
notice):

            

    

    

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
PAGES FOR BUYERS TO FOLLOW]

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

    [BUYER
SIGNATURE PAGE TO CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT]

     

    Name of
Buyer: ____________________________

     

    Signature of Authorized Signatory of
Buyer: ____________________________

     

    Name of
Authorized Signatory: ____________________________

     

    Title of
Authorized Signatory: ____________________________

     

    Email
Address of Authorized Signatory: ____________________________

     

    Facsimile
Number of Authorized Signatory: ____________________________

     

    Address
for Notice of Buyer: ____________________________

     

    Address
for Delivery of Preferred Stock certificate for Buyer (if not same as address
for notice): ___________________

     

    Subscription
Amount: $ ____________________________

     

    Shares of
Preferred Stock: ____________________________

     

    
      
         

      

      
        30REGISTRATION
RIGHTS AGREEMENT

     

    This
REGISTRATION RIGHTS AGREEMENT, dated as of June 24, 2010, is entered into by and
among Patient Safety Technologies, Inc., a Delaware corporation (the “Company”), and the persons
identified as Holders on the signature pages hereto (individually, a “Holder” and collectively, the
“Holders”).

     

    RECITALS:

     

    A.         The  Company,
on the one hand, and Catalysis Partners, A Plus International, Inc. and JMR
Capital Limited, on the other hand, are  parties to a Convertible
Preferred Stock Purchase Agreement dated as of June 24, 2010 (the “Purchase Agreement”), pursuant
to which the Company will sell, and the Holders will buy, Preferred Shares (as
defined in the Purchase Agreement).

     

    B.          The
Company and Kenneth Traub are parties to a Consulting Agreement dated as of May
19, 2010 (the “Consulting
Agreement”), pursuant to which Kenneth Traub is providing certain
consulting services to the Company.

     

    C.           It
is a condition precedent to the consummation of the transactions contemplated by
the Purchase Agreement that the Company provide for the rights set forth in this
Agreement.

     

    AGREEMENT

     

    NOW,
THEREFORE, in consideration of the foregoing premises and the mutual covenants
and agreements hereinafter contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
intending to be legally bound, the parties hereto hereby agree as
follows:

     

    ARTICLE I

     

    DEFINITIONS

     

    1.1       
 “Affiliate” means any Person
that directly or indirectly controls, or is under control with, or is controlled
by such Person. As used in this definition, “control” (including with its
correlative meanings, “controlled by” and “under common control with”) shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person (whether through ownership
of securities or partnership or other ownership interests, by contract or
otherwise).

     

    1.2         “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.

     

    1.3         “Closing Date” means the date
hereof.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.4         “Common Stock” means the common
stock, par value $0.33 per share, of the Company.

     

    1.5         “Company” has the meaning set
forth in the preamble.

     

    1.6         “Consulting Agreement” has the
meaning set forth in the preamble.

     

    1.7         “Consulting Shares” means the
shares of Common Stock issued to Kenneth Traub in connection with the Consulting
Agreement.

     

    1.8         “Conversion Shares” has the
meaning set forth in the Purchase Agreement.

     

    1.9         “Designated Holder” means a
holder of Registrable Securities.

     

    1.10       “Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the SEC promulgated thereunder.

     

    1.11       “Holder(s)” has the meaning set
forth in the preamble. 

     

    1.12     
 “Indemnified Party” has the
meaning set forth in Section
2.9.  

     

    1.13       “Losses” has the meaning set
forth in Section
2.9.

     

    1.14       “Majority Holders” means
holders of a majority (by number of shares) of the Registrable
Securities.

     

    1.15       “Person” means any individual,
company, partnership, firm, joint venture, association, joint-stock company,
trust, unincorporated organization, governmental body or other
entity.

     

    1.16       “Piggyback Registration” has
the meaning set forth in Section
2.4.

     

    1.17       “Purchase Agreement” has the
meaning set forth in the recitals.

     

    1.18       “Registration Period” means the
three (3) years, plus any additional periods required by the second paragraph of
Section 2.1,
during which the Registration Statement contemplated by Section 2.1 is
required to remain effective.

     

    1.19       “Registrable Securities”
means:

     

    (a)           the
Conversion Shares, the Consulting Shares and any other shares of Common Stock
held by a Holder as of the date of this Agreement;

     

    (b)           any
shares of Common Stock or other securities issued or issuable, directly or
indirectly in respect of the Conversion Shares or Common Stock referenced in
clause (a) above by way of a spin-off, split-off, dividend, distribution or
stock split or in connection with a combination of shares, reclassification,
merger, consolidation or reorganization; and

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (c)           any
securities issued in replacement of or exchange for any securities described in
clause (a) or (b) above.

     

    As to any
particular Registrable Securities, such securities shall cease to be Registrable
Securities (w) when sold pursuant to an effective registration statement under
the Securities Act, (x) when such securities may be sold pursuant to Rule 144
(or any similar provision then in force) under the Securities Act without
limitation thereunder on volume or manner of sale, (y) sold in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act under Section 4(1) thereof so that all transfer restrictions and
restrictive legends with respect to such securities are removed upon the
consummation of such sale and the seller and purchaser of such securities
receive an opinion of counsel for the Company, which shall be in form and
content reasonably satisfactory to the seller and purchaser and their respective
counsel, to the effect that such securities in the hands of the purchaser are
freely transferable without restriction or registration under the Securities Act
in any public or private transaction, or (z) when such securities cease to be
outstanding.

     

    1.20       “Registration Statement” means
a registration statement on Form S-1 (or such other form as the Company is then
eligible to use) filed by the Company under the Securities Act that covers any
of the Registrable Securities pursuant to the provisions of this Agreement,
including the prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits and all material
incorporated by reference in such registration statement, which shall permit the
Designated Holders to offer and sell, on a delayed or continuous basis pursuant
to Rule 415 under the Securities Act, the Registrable Securities.

     

    1.21       “Representatives” has the
meaning set forth in Section
2.9.

     

    1.22       “Required Filing Date” has the
meaning set forth in Section
2.1.

     

    1.23       “Required Registration
Statement” has the meaning set forth in Section
2.1.

     

    1.24       “SEC” means the United States
Securities and Exchange Commission or any other federal agency at the time
administering the Securities Act.

     

    1.25       “Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations of the SEC
promulgated thereunder.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    ARTICLE II

     

    REGISTRATION
RIGHTS

     

    2.1       
 Required
Registration.    (a) The Company shall use its
reasonable best efforts to prepare and as promptly as possible after the date
hereof, but in any event, not later than ninety (90) days from the Closing Date
(or, if such 90th day is
not a Business Day, by the first Business Day thereafter) (the “Required Filing Date”) file a
Registration Statement with the SEC (the “Required Registration
Statement”) and cause the Required Registration Statement to be declared
effective under the Securities Act within 150 days after the Closing Date (or,
if such 150th day is
not a Business Day, by the first Business Day thereafter).  If the
Required Registration Statement is not declared effective under the Securities
Act within 150 days after the Closing Date (or, if such 150th day is not a
Business Day, by the first Business Day thereafter), other than due to failure
by a Designated Holder to furnish information or consents required (as provided
in Section 2.7
hereof or as reasonably determined necessary by the Company after consultation
with counsel) to be included in such Required Registration Statement, the
Company shall pay each Designated Holder in cash an amount per month equal to
one and one-half percent (1.5%) of the amount paid by such Designated Holder for
the Registrable Securities pursuant to the Purchase Agreement, which amount
shall be payable by the tenth (10th) day after the end of each such month and
shall be the Designated Holders’ sole remedy for such failure (other than any
equitable remedies available to such Holder, such as specific performance). The
amounts payable to each Designated Holder pursuant to this Section shall bear
interest at a rate of the lesser of twelve percent (12%) per annum, compounded
annually, or the maximum rate then permitted by applicable law.

     

    (b)           The
Company shall use its reasonable best efforts to keep the Required Registration
Statement continuously effective for a period of three years after the
Registration Statement first becomes effective, plus the number of days during
which such Registration Statement was not effective or usable pursuant to Sections 2.5(b),
2.6(e) or 2.6(i) hereof, or
such shorter period as will terminate when all of the Registrable Securities
covered by the Required Registration Statement have been disposed of in
accordance with the Required Registration Statement or have otherwise ceased to
be Registrable Securities. In the event the Company shall give any notice
pursuant to Sections
2.6(e) or 2.6(i) hereof, the
additional time period mentioned in this Section 2.1 during
which the Required Registration Statement is to remain effective shall be
extended by the number of days during the period from and including the date of
the giving of such notice pursuant to Sections 2.6(e) or
2.6 (i) to and
including the date when each seller of a Registrable Security covered by the
Registration Statement shall have received the copies of the supplemented or
amended prospectus contemplated by Sections
2.6(e).

     

    (c)           The
Company may include in any registration filed pursuant to this Section 2.1, such
additional securities as it may be obligated to include pursuant to any
contractual obligations entered into by the Company, and, subject to any
restrictions contained elsewhere in this Agreement, such securities as the
Company may elect to register for its own account.

     

    2.2        
Current Public
Information.    The Company covenants that it will
use its reasonable best efforts to (a) make and keep public information
available, as those terms are understood and defined in Rule 144(c)(1) under the
Securities Act or any similar or analogous rule promulgated under the Securities
Act, (b) file with the SEC, in a timely manner, all reports and other documents
required to be filed by it under the Exchange Act and the rules and regulations
adopted by the SEC thereunder, and (c) take such further action as the
Designated Holders may reasonably request, in each case to the extent required
to enable the holders of Registrable Securities to sell Registrable Securities
pursuant to Rule 144 or Rule 144A adopted by the SEC under the Securities Act or
any similar rule or regulation hereafter adopted by the SEC.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    2.3       
 Demand
Registration.

     

    (a)           
Subject to Section
2.3(g), upon the written request of the Majority Holders requesting that
the Company effect the registration under the Securities Act of all or part of
such Designated Holders’ Registrable Securities and specifying the intended
method of disposition thereof, the Company will promptly give written notice of
such requested registration to all Designated Holders, and thereafter the
Company will use its reasonable best efforts to effect as expeditiously as
possible the registration under the Securities Act of the
following:

     

    (i)           the
Registrable Securities that the Company has been so requested to be registered
by such Designated Holders for disposition in accordance with the intended
method of disposition stated in such request;

     

    (ii)          all
other Registrable Securities the holders of which shall have made a written
request to the Company for registration thereof within 30 days after the giving
of such written notice by the Company (which request shall specify the intended
method of disposition of such Registrable Securities); and

     

    (iii)       
 all
shares of Common Stock that the Company or Persons entitled to exercise
“piggy-back” registration rights pursuant to contractual commitments of the
Company may elect to register in connection with the offering of Registrable
Securities pursuant to this Section 2.3 or
otherwise;

     

    all to
the extent requisite to permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Registrable Securities and the additional
shares of Common Stock, if any, so to be registered; provided, that, the
provisions of this Section 2.3 shall not
require the Company to effect more than two registrations of Registrable
Securities in addition to the Required Registration Statement contemplated by
Section
2.1.

     

    (b)           The
registrations under this Section 2.3 shall be
on an appropriate form for a Registration Statement that permits the disposition
of such Registrable Securities in accordance with the intended methods of
distribution specified by the Majority Holders in their request for
registration. The Company agrees to include in any such Registration Statement
all information that Designated Holders of Registrable Securities being
registered therein shall reasonably request so as to allow them to sell their
Registrable Securities by the method of distribution selected by
them.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (c)           A
registration requested pursuant to this Section 2.3 shall not
be deemed to have been effected (i) unless a Registration Statement with respect
thereto has become effective; provided, that a
Registration Statement that does not become effective after the Company has
filed a Registration Statement with respect thereto solely by reason of the
refusal to proceed of the Majority Holders (other than a refusal to proceed
based upon the advice of counsel relating to a matter with respect to the
Company) shall be deemed to have been effected by the Company at the request of
the Majority Holders unless the Designated Holders electing to have Registrable
Securities registered pursuant to such Registration Statement shall have elected
to pay all fees and expenses otherwise payable by the Company in connection with
such registration pursuant to Section 2.8, (ii) if,
after it has become effective, such registration is withdrawn by the Company
(other than at the request of the Majority Holders) or interfered with by any
stop order, injunction or other order or requirement of the SEC or other
governmental agency or court for any reason prior to the expiration of a 180 day
period following such Registration Statement’s effectiveness, or (iii) if the
conditions to closing specified in any purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied,
other than due solely to some act or omission by the Designated Holders electing
to have Registrable Securities registered pursuant to such Registration
Statement.

     

    (d)           If
a requested registration pursuant to this Section 2.3 involves
an underwritten offering, the underwriter or underwriters thereof shall be
selected by the holders of a majority (by number of shares) of the Registrable
Securities requested to be included in such Registration Statement and shall be
reasonably acceptable to the Company.

     

    (e)           If
(i) a requested registration pursuant to this Section 2.3 involves
an underwritten offering, and the managing underwriter shall advise the Company
that, in its opinion, the number of securities requested to be included in such
registration (including securities of the Company or any other Person that are
not Registrable Securities) exceeds the number that can be sold in such offering
in an orderly manner within a price range reasonably acceptable to the Company
and to the holders of a majority (by number of shares) of the Registrable
Securities requested to be included in such Registration Statement or (ii) if
any requirement of the form on which the Registration Statement is filed or rule
promulgated by the SEC or if any written interpretation or written guidance of
the Staff of the SEC sets forth a limitation on the number of securities
permitted to be registered on a particular Registration Statement (and
notwithstanding that the Company used diligent efforts to advocate with the SEC
for the registration of all or a greater portion of the securities), the Company
will include in such registration, to the extent of the number that the Company
is so advised can be sold in such offering, (i) first, any shares of Common
Stock or other securities as to which the Company has granted registration
rights prior to the date of this Agreement that by their terms require priority
over the rights granted under this Section 2.3, (ii)
second, the Registrable Securities that have been requested to be included in
such registration by the Designated Holders pursuant to this Agreement (pro rata
based on the amount of Registrable Securities sought to be registered by such
persons), (iii) third, provided that no securities sought to be included by the
Designated Holders have been excluded from such registration, the securities of
other persons entitled to exercise “piggy-back” registration rights pursuant to
other contractual commitments of the Company (pro rata based on the amount of
securities sought to be registered by such persons) and (iv) fourth, securities
the Company proposes to register for its own account.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (f)           The
Company shall use its reasonable best efforts to keep any Registration Statement
filed pursuant to this Section 2.3
continuously effective (i) for a period of three (3) years after the
Registration Statement first becomes effective, plus the number of days during
which such Registration Statement was not effective or usable pursuant to Sections 2.5(b),
2.6(e) or 2.6(i); (ii) if such
Registration Statement related to an underwritten offering, for such period as
in the opinion of counsel for the underwriters a prospectus is required by law
to be delivered in connection with sales of Registrable Securities by an
underwriter or dealer, or (iii) for such shorter period as will terminate when
all of the Registrable Securities covered by such Registration Statement have
been disposed of in accordance with such Registration Statement or have
otherwise ceased to be Registrable Securities. In the event the Company shall
give any notice pursuant to Sections 2.6(e) or
2.6(i), the
additional time period mentioned in Section 2.3(f)(i)
during which the Required Registration Statement is to remain effective shall be
extended by the number of days during the period from and including the date of
the giving of such notice pursuant to Sections 2.6(e) or
2.6(i) to and
including the date when each seller of a Registrable Security covered by the
Registration Statement shall have received the copies of the supplemented or
amended prospectus contemplated by Sections
2.6(e).

     

    (g)           The
right of Designated Holders to have Registrable Securities registered pursuant
to this Section
2.3 is only exercisable following the expiration of the Registration
Period or, if, prior to the expiration of the Registration Period, the Company
becomes ineligible to register the Registrable Securities on the Registration
Statement contemplated by Section 2.1 or such
Registration Statement otherwise becomes unusable or ineffective and the Company
is not able to correct the misstatements, have the applicable stop order
rescinded or otherwise restore the effectiveness of the Registration Statement
as contemplated by this Agreement.

     

    2.4        
Piggyback
Registration.

     

    (a)           Whenever
the Company proposes to register any of its common stock under the Securities
Act (other than pursuant to a registration pursuant to Section 2.1, Section 2.3 or a
registration on Form S-4 or S-8 or any successor or similar forms or a
registration of shares in connection with an acquisition) and the registration
form to be used may be used for the registration of Registrable Securities,
whether or not for sale for its own account, the Company will give prompt
written notice to all Designated Holders, and such notice shall describe the
proposed registration and distribution and offer to all Designated Holders the
opportunity to register the number of Registrable Securities as each such
Designated Holder may request. The Company will include in such registration
statement all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 15 days after the
Designated Holders’ receipt of the Company’s notice (a “Piggyback
Registration”).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (b)           The
Company shall use its reasonable efforts to cause the managing underwriter or
underwriters of a proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggyback Registration to be included
on the same terms and conditions as any similar securities of the Company or any
other security holder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance with the intended
method of distribution thereof.

     

    (c)           Any
Designated Holder shall have the right to withdraw its request for inclusion of
its Registrable Securities in any Registration Statement pursuant to this Section 2.4 by giving
written notice to the Company of its request to withdraw; provided, that in the
event of such withdrawal (other than pursuant to Section 2.4(e)
hereof), the Company shall not be required to reimburse such holder for the fees
and expenses referred to in Section 2.8 hereof
incurred by such Designated Holder prior to such withdrawal, unless such
withdrawal was due to a material adverse change to the Company. The Company may
withdraw a Piggyback Registration at any time prior to the time it becomes
effective.

     

    (d)           If
(i) a Piggyback Registration involves an underwritten offering of the securities
being registered, whether or not for sale for the account of the Company, to be
distributed (on a firm commitment basis) by or through one or more underwriters
of recognized standing under underwriting terms appropriate for such a
transaction, and the managing underwriter of such underwritten offering shall
advise the Company that, in its opinion, the number of securities requested to
be included in such offering (including securities of the Company or any other
Person which are not Registrable Securities) exceeds the number which can be
sold in such offering in an orderly manner within a price range reasonably
acceptable to the Company and, if registration of such offering is pursuant to a
contractual commitment of the Company to holders of its securities, holders of a
majority (by number of shares) of such securities, or (ii) if any requirement of
the form on which the Registration Statement is filed or rule promulgated by the
SEC or if any written interpretation or written guidance of the Staff of the SEC
sets forth a limitation on the number of securities permitted to be registered
on a particular Registration Statement (and notwithstanding that the Company
used diligent efforts to advocate with the SEC for the registration of all or a
greater portion of the securities), then the Company will be required to include
in such registration only the amount of securities that it is so advised should
be included in such registration. In such event: (x) in cases initially
involving the registration for sale of securities for the Company’s own account,
securities shall be registered in such offering in the following order of
priority: (i) first, the securities that the Company proposes to register, (ii)
second, any shares of Common Stock or other securities as to which the Company
has granted registration rights prior to the date of this Agreement that by
their terms require priority over the rights granted under this Section 2.4, (iii)
third, Registrable Securities and securities that have been requested to be
included in such registration by other Persons entitled to exercise “piggy-back”
registration rights pursuant to contractual commitments of the Company (pro rata
based on the amount of securities sought to be registered by Designated Holders
and such other Persons); and (y) in cases not initially involving the
registration for sale of securities for the Company’s own account, securities
shall be registered in such offering in the following order of priority: (i)
first, the securities of any Person whose exercise of a “demand” registration
right pursuant to a contractual commitment of the Company is the basis for the
registration, (ii) second, Registrable Securities and securities that have been
requested to be included in such registration by Persons entitled to exercise
“piggy-back” registration rights pursuant to contractual commitments of the
Company (pro rata based on the amount of securities sought to be registered by
Designated Holders and such other Persons), and (iii) third, the securities that
the Company proposes to register for its own account.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (e)           If,
as a result of the proration provisions of this Section 2.4, any
Designated Holders shall not be entitled to include all Registrable Securities
in a Piggyback Registration that such Designated Holders has requested to be
included, such holder may elect to withdraw its request to include Registrable
Securities in such registration.

     

    (f)           The
right of the Designated Holders to register Registrable Securities pursuant to
this Section
2.4 is only exercisable with respect to Registrable Securities not then
covered by an effective Registration Statement contemplated by Section 2.1 or Section 2.3. The
rights of the Designated Holders under this Section 2.4 shall
survive the expiration of the Registration Period.

     

    2.5       
 Holdback
Agreements.

     

    (a)           To
the extent not inconsistent with applicable law, in connection with a public
offering of securities of the Company, upon the request of the Company or the
underwriter, in the case of an underwritten public offering of the Company’s
securities, each Designated Holder will not effect any public sale or
distribution (other than those included in the registration statement being
filed with respect to such public offering) of any securities of the Company, or
any securities, options or rights convertible into or exchangeable or
exercisable for such securities during the 14 days prior to and the 90-day
period beginning on such effective date, unless (in the case of an underwritten
public offering) the managing underwriters otherwise agree to a shorter period
of time. Notwithstanding the foregoing, no Designated Holder shall be required
to enter into any such “lock up” agreement unless and until all of the Company’s
executive officers and directors execute substantially similar “lock up”
agreements. Neither the Company nor the underwriter shall amend, terminate or
waive a “lock up” agreement unless each “lock up” agreement with a Designated
Holder is also amended or waived in a similar manner or terminated, as the case
may be.

     

    (b)           The
Company shall have the right at any time, to suspend the filing of a
Registration Statement under Section 2.3 or
require that the Designated Holders of Registrable Securities suspend further
open market offers and sales of Registrable Securities pursuant to a
Registration Statement filed hereunder for a period not to exceed an aggregate
of 45 days in any six consecutive month period or an aggregate of 90 days in any
twelve consecutive month period for valid business reasons (not including
avoidance of their obligations hereunder) (i) to avoid premature public
disclosure of a pending corporate transaction, including pending acquisitions or
divestitures of assets, mergers and combinations and similar events; and (ii)
upon the occurrence of any of the events specified in Sections 2.6(e) or
2.6
(i).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2.6       
 Registration
Procedures.    The Company will use its reasonable
best efforts to effect the registration of Registrable Securities pursuant to
this Agreement in accordance with the intended methods of disposition thereof,
and pursuant thereto the Company will as expeditiously as possible:

     

    (a)           at
least three (3) Business Days before filing the Registration Statement, the
Company will furnish to counsel of any seller of Registrable Securities included
in the Registration Statement (assuming the Company has been timely notified as
to the identity and contact information for such counsel), a copy of such
Registration Statement, and will provide such counsel with all correspondence
with the SEC regarding the Registration Statement;

     

    (b)           prepare
and file with the SEC such amendments and supplements to such Registration
Statement and the prospectus used in connection therewith as may be necessary to
keep such Registration Statement effective for the period provided for in Section 2.1 or Section 2.3, or the
periods contemplated by the Company or the Persons requesting any Registration
Statement filed pursuant to Section
2.4;

     

    (c)           furnish
to each seller of Registrable Securities included in the Registration Statement
such number of copies of such Registration Statement, each amendment and
supplement thereto, the prospectus included in the Registration Statement
(including each preliminary prospectus) and such other documents as such seller
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such seller;

     

    (d)           use
its reasonable best efforts to register or qualify such Registrable Securities
under such state securities or blue sky laws as any Designated Holder reasonably
requests, and do any and all other acts and things that may be reasonably
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Registrable Securities owned by such seller and to
keep each such registration or qualification (or exemption therefrom) effective
during the period that the Registration Statement is required to be kept
effective (provided, that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subparagraph, (ii) subject itself to taxation
in any such jurisdiction, or (iii) consent to general service of process in any
such jurisdiction;

     

    (e)           notify
each seller of such Registrable Securities, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in the
Registration Statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading in the light of
the circumstances under which they were made, and, at the request of any such
seller, the Company will as soon as possible prepare and furnish to such seller
a reasonable number of copies of a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities,
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 in the
light of the circumstances under which they were made;

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (f)           cause
all such Registrable Securities to be listed on each national securities
exchange on which similar securities issued by the Company are then listed and,
if not so listed, to be approved for trading on any automated quotation system
of a national securities association on which similar securities of the Company
are then quoted and shall use reasonable best efforts to maintain such listing
or quotation;

     

    (g)           provide
a transfer agent and registrar for all Registrable Securities included in the
Registration Statement not later than the effective date of such Registration
Statement;

     

    (h)           enter
into such customary agreements (including underwriting agreements) and take all
other customary and appropriate actions as the holders of a majority of the
Registrable Securities being registered or the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of such Registrable
Securities;

     

    (i)           notify
each seller of Registrable Securities of any stop order issued or threatened by
the SEC;

     

    (j)           in
the event of the issuance of any stop order suspending the effectiveness of a
Registration Statement, or of any order suspending or preventing the use of any
related prospectus or suspending the qualification of any securities included in
such Registration Statement for sale in any jurisdiction, the Company will use
its reasonable efforts to promptly obtain the withdrawal of such
order;

     

    (k)           if
requested by the holders of a majority of the Registrable Securities being
registered, obtain one or more comfort letters, dated the effective date of the
Registration Statement (and, if such registration includes an underwritten
offering, dated the date of the closing under the underwriting agreement),
signed by the Company’s independent public accountants in customary form and
covering such matter of the type customarily covered by such accountant comfort
letters;

     

    (l)           if
requested by the holders of a majority of the Registrable Securities being
registered, provide a legal opinion of the Company’s outside counsel, dated the
effective date of such Registration Statement (and, if such registration
includes an underwritten offering, dated the date of the closing under the
underwriting agreement), with respect to the Registration Statement, each
amendment and supplement thereto, the prospectus included therein (including the
preliminary prospectus) and such other documents relating thereto in customary
form and covering such matters of the type customarily covered by legal opinions
of such nature;

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (m) subject to
execution and delivery of mutually satisfactory confidentiality agreements, make
available at reasonable times for inspection by any seller of Registrable
Securities, any managing underwriter participating in any disposition of such
Registrable Securities pursuant to the Registration Statement, and any attorney,
accountant or other agent retained by such seller or any managing underwriter,
during normal business hours of the Company at the Company’s corporate office
and without unreasonable disruption of the Company’s business or unreasonable
expense to the Company and solely for the purpose of due diligence with respect
to the Registration Statement, legally disclosable, financial and other records
and pertinent corporate documents of the Company and its subsidiaries reasonably
requested by such persons, and cause the Company’s employees and independent
accountants to supply all similar information reasonably requested by any such
seller, managing underwriter, attorney, accountant or agent in connection with
the Registration Statement, as shall be reasonably necessary to enable them to
exercise their due diligence responsibility under applicable securities
laws;

     

    (n)           cooperate
with each seller of Registrable Securities and each underwriter participating in
the disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the National Association of
Securities Dealers; and

     

    (o)           take
all other steps reasonably necessary to effect the registration of the
Registrable Securities contemplated hereby.

     

    2.7       
 Conditions Precedent to
Company’s Obligations Pursuant to this
Agreement.    It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Agreement
that each of the Designated Holders whose Registrable Securities are to be
registered pursuant to this Agreement shall furnish such Designated Holder’s
written agreement to be bound by the terms and conditions of this Agreement
prior to performance by the Company of its obligations under this Agreement. By
executing and delivering this Agreement, each Designated Holder represents and
warrants that the information concerning, and representations and warranties by,
such Designated Holder, including information concerning the securities of the
Company held, beneficially or of record, by such Designated Holder, furnished to
the Company pursuant to the Purchase Agreement or otherwise, are true and
correct as if the same were represented and warranted on the date any
Registration Statement required pursuant to this Agreement is filed with the SEC
or the date of filing with the SEC of any amendment thereto, and each Designated
Holder covenants to immediately notify the Company in writing of any change in
any such information, representation or warranty and to refrain from offering or
disposing of any securities pursuant to any Registration Statement until the
Company has reflected such change in such Registration Statement. By executing
and delivering this Agreement, each Designated Holder further agrees to furnish
any additional information or consents as the Company may reasonably request in
connection with any action to be taken by the Company pursuant to this
Agreement, and to pay such Designated Holder’s expenses that are not required to
be paid by the Company pursuant to this Agreement.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2.8       
 Fees and
Expenses.    All expenses incident to the Company’s
performance of or compliance with this Agreement including, without limitation,
all registration and filing fees payable by the Company, fees and expenses of
compliance by the Company with securities or blue sky laws, printing expenses of
the Company, messenger and delivery expenses of the Company, and fees and
disbursements of counsel for the Company and all independent certified public
accountants of the Company, and other Persons retained by the Company will be
borne by the Company, and the Company will pay its internal expenses (including,
without limitation, all salaries and expenses of the Company’s employees
performing legal or accounting duties), the expense of any annual audit or
quarterly review, the expense of any liability insurance of the Company and the
expenses and fees for listing or approval for trading of the securities to be
registered on each securities exchange on which similar securities issued by the
Company are then listed or on any automated quotation system of a national
securities association on which similar securities of the Company are quoted. In
connection with any Registration Statement filed hereunder, the Company will pay
the reasonable fees and expenses of a single counsel retained by the Designated
Holders of a majority (by number of shares) of the Registrable Securities
requested to be included in such Registration Statement. The Company shall have
no obligation to pay any underwriting discounts or commissions attributable to
the sale of Registrable Securities and any of the expenses incurred by any
Designated Holder that are not specifically payable by the Company as described
above, such costs to be borne by such Designated Holder or Holders, including,
without limitation, the following: underwriting fees, discounts and expenses, if
any, applicable to any Designated Holder’s Registrable Securities; fees and
disbursements of counsel or other professionals that any Designated Holder may
choose to retain in connection with a Registration Statement filed pursuant to
this Agreement (except as otherwise provided herein); selling commissions or
stock transfer taxes applicable to the Registrable Securities registered on
behalf of any Designated Holder; any other expenses incurred by or on behalf of
such Designated Holder in connection with the offer and sale of such Designated
Holder’s Registrable Securities other than expenses that the Company is
expressly obligated to pay pursuant to this Agreement.

     

    2.9       
 Indemnification.

     

    (a)           The
Company agrees to indemnify and hold harmless, to the fullest extent permitted
by law, each Designated Holder and its general or limited partners, officers,
directors, members, managers, employees, advisors, representatives, agents and
Affiliates (collectively, the “Representatives”) from and
against any loss, claim, damage, liability, attorney’s fees, cost or expense and
costs and expenses of investigating and defending any such claim (collectively,
the “Losses”), joint or
several, and any action in respect thereof to which such Designated Holder or
its Representatives may become subject under the Securities Act or otherwise,
insofar as such Losses (or actions or proceedings, whether commenced or
threatened, in respect thereto) arise out of or are based upon or caused by (i)
any untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement, prospectus or preliminary or summary prospectus or
any amendment or supplement thereto or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company will reimburse such
Designated Holder and its Representatives for any legal or any other expenses
incurred by them in connection with investigating or defending or preparing to
defend against any such Loss, action or proceeding; provided, however, that the Company shall not be
liable to any such Designated Holder or other indemnitee in any such case to the
extent, and only to the extent, that any such Loss (or action or proceeding,
whether commenced or threatened, in respect thereof) arises out of or is based
upon (x) an untrue statement or alleged untrue statement or omission or alleged
omission, made in such Registration Statement, any such prospectus or
preliminary or summary prospectus or any amendment or supplement thereto, in
reliance upon, and in conformity with, written information prepared and
furnished to the Company by such Designated Holder or its Affiliates or
Representatives expressly for use therein or (y) use of a Registration Statement
or the related prospectus during a period when a stop order has been issued in
respect of such Registration Statement or any proceedings for that purpose have
been initiated or use of a prospectus when use of such prospectus has been
suspended pursuant to Sections 2.5(b),
2.6(e);
provided that in each case, that such Holder was given prior written notice in
accordance with Section 3.6 hereof of
such stop order, initiation of proceedings or suspension from the Company. In no
event, however, shall the Company be liable for indirect, incidental or
consequential or special damages of any kind, even if the Company was aware of
or specifically advised as to the possibility of such damages. In connection
with an underwritten offering, the Company will indemnify such underwriters,
their officers and directors and each Person who controls such underwriters
(within the meaning of the Securities Act) to the same extent as provided above
with respect to the indemnification of the Designated Holders if requested in
connection with any Registration Statement.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (b)           In
connection with the filing of the Registration Statement by the Company pursuant
to this Agreement, the Designated Holders will furnish to the Company in writing
such information as the Company reasonably requests for use in connection with
such Registration Statement and the related prospectus and, to the fullest
extent permitted by law, each such Designated Holder will indemnify and hold
harmless the Company and its Representatives from and against any Losses,
severally but not jointly, and any action in respect thereof to which the
Company and its Representatives may become subject under the Securities Act or
otherwise, insofar as such Losses (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon (i) the
purchase or sale of Registrable Securities during a suspension as set forth in
Sections
2.5(b), 2.6(e) or 2.6(i) hereof, in
each case after written notice of such suspension was given to the Designated
Holder pursuant to the terms of Section 3.6 hereof,
(ii) any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, prospectus or preliminary or summary prospectus or any
amendment or supplement thereto, or (iii) any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but, with respect to clauses (ii) and (iii) above, only
to the extent that such untrue statement or omission is made in such
Registration Statement, any such prospectus or preliminary or summary prospectus
or any amendment or supplement thereto, in reliance upon and in conformity with
written information prepared and furnished to the Company by such Designated
Holder expressly for use therein or by failure of such Designated Holder to
deliver a copy of the Registration Statement or prospectus or any amendments or
supplements thereto, and such Designated Holder will reimburse the Company and
each Representative for any legal or any other expenses incurred by them in
connection with investigating or defending or preparing to defend against any
such Loss, action or proceeding; provided, however, that such Designated Holder
shall not be liable in any such case to the extent that prior to the filing of
any such Registration Statement or prospectus or amendment or supplement
thereto, such Designated Holder has furnished in writing to the Company
information expressly for use in such Registration Statement or prospectus or
any amendment or supplement thereto that corrected or made not misleading
information previously furnished to the Company. In no event, however, shall any
Designated Holder be liable for indirect, incidental or consequential or special
damages of any kind, even if the Designated Holder was aware of or specifically
advised as to the possibility of such damages. In no event shall the liability
of any Designated Holder hereunder be greater than the dollar amount of the net
proceeds received by such Designated Holder upon the sale of the Registrable
Securities or other securities pursuant to the Registration
Statement.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (c)           Promptly
after receipt by any Person in respect of which indemnity may be sought pursuant
to Section
2.9(a) or 2.9(b) (an “Indemnified Party”) of notice
of any claim or the commencement of any action, the Indemnified Party shall, if
a claim in respect thereof is to be made against the Person against whom such
indemnity may be sought (an “Indemnifying Party”), promptly
notify the Indemnifying Party in writing of the claim or the commencement of
such action; provided, that the failure to so notify the Indemnifying Party
shall not relieve the Indemnifying Party from any liability that it may have to
an Indemnified Party under Section 2.9(a) or
2.9(b) except
to the extent of any actual prejudice resulting therefrom. If any such claim or
action shall be brought against an Indemnified Party, and it shall notify the
Indemnifying Party thereof, the Indemnifying Party shall be entitled to
participate therein, and, to the extent that it wishes, jointly with any other
similarly notified Indemnifying Party, to assume the defense thereof with
counsel reasonably satisfactory to the Indemnified Party. After notice from the
Indemnifying Party to the Indemnified Party of its election to assume the
defense of such claim or action, the Indemnifying Party shall not be liable to
the Indemnified Party for any legal or other expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation; provided, that the Indemnified Party shall
have the right to employ separate counsel to represent the Indemnified Party and
its Representatives who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Indemnified Party against the
Indemnifying Party, but the fees and expenses of such counsel shall be for the
account of and shall be paid by such Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the
retention of such counsel or (ii) in the written opinion of counsel to such
Indemnified Party, representation of both parties by the same counsel would be
inappropriate due to actual or potential conflicts of interest between them, it
being understood, however, that the Indemnifying Party shall not, in connection
with any one such claim or action or separate but substantially similar or
related claims or actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel) at any time for all Indemnified Parties. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any claim or pending or threatened proceeding in respect of which
the Indemnified Party is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Party, unless such settlement includes
an unconditional release of such Indemnified Party from all liability arising
out of such claim or proceeding other than the payment of monetary damages by
the Indemnifying Party on behalf of the Indemnified Party. Whether or not the
defense of any claim or action is assumed by the Indemnifying Party, such
Indemnifying Party will not be subject to any liability for any settlement made
without its consent, which consent will not be unreasonably
withheld.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (d)           If
the indemnification provided for in this Section 2.9 is
unavailable to the Indemnified Parties in respect of any Losses referred to
herein, then each Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Losses in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Designated
Holders on the other from the offering of the Registrable Securities, or if such
allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Company on the one hand and the Designated Holders on the other in
connection with the statements or omissions that resulted in such Losses, as
well as any other relevant equitable considerations. The relative fault of the
Company on the one hand and of each Designated Holder on the other shall be
determined by reference to, among other things, whether any action taken,
including any untrue or alleged untrue statement of a material fact, or the
omission or alleged omission to state a material fact relates to information
supplied by such party, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.

     

    The
Company and the Designated Holders agree that it would not be just and equitable
if contribution pursuant to this Section 2.9(d) were
determined by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as a
result of the Losses referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, 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 2.9, no
Designated Holder shall be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities of such
Designated Holder were offered to the public. 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. Each Designated
Holder’s obligations to contribute pursuant to this Section 2.9 is
several in the proportion that the proceeds of the offering received by such
Designated Holder bears to the total proceeds of the offering received by all
the Designated Holders. The indemnification provided by this Section 2.9 shall be
a continuing right to indemnification with respect to sales of Registrable
Securities and shall survive the registration and sale of any Registrable
Securities by any Designated Holder and the expiration or termination of this
Agreement. The indemnity and contribution agreements contained herein are in
addition to any liability that any Indemnifying Party might have to any
Indemnified Party.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    2.10       Participation in
Registrations.

    

    (a)           
No Person may participate in any registration hereunder that is underwritten
unless such Person (i) agrees to sell such Person’s securities on the basis
provided in any underwriting arrangements approved by the Person or Persons
entitled hereunder to approve such arrangements and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements and this Agreement.

     

    (b)           Each
Person that is participating in any registration under this Agreement agrees
that, upon receipt of any notice in accordance with the terms of Section 3.6 hereof
from the Company of the happening of any event of the kind described in Section 2.6(e) or
2.6(i) above,
such Person will forthwith discontinue any further disposition of its
Registrable Securities pursuant to the Registration Statement and all use of the
Registration Statement or any prospectus or related document until such Person
receives copies of a supplemented or amended prospectus as contemplated by such
Section 2.6(e)
and, if so directed by the Company, will deliver to the Company (at the
Company’s expense) all copies, other than permanent file copies then in such
Designated Holder’s possession, of such documents at the time of receipt of such
notice. Furthermore, each Designated Holder agrees that it will comply with the
prospectus delivery requirements of the Securities Act applicable to it in
connection with any sale of Registrable Securities pursuant to a Registration
Statement and if such Designated Holder uses a prospectus in connection with the
offering and sale of any of the Registrable Securities, the Designated Holder
will use only the latest version of such prospectus provided to the Designated
Holder by the Company prior to the time at which a sale of Registrable
Securities has been made.

     

    ARTICLE III

     

    MISCELLANEOUS

     

    3.1       
 [Reserved]

     

    3.2       
 No Inconsistent
Agreements.    Neither the Company nor any of its
subsidiaries has entered, 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 the Holders in this Agreement or otherwise
conflicts with the provisions hereof. Except as set forth on Schedule 3.2, neither the Company nor
any of its subsidiaries has previously entered into any agreement granting any
registration rights with respect to any of its securities to any Person that
have not been satisfied in full.

     

    3.3       
 Amendments and
Waivers.    The provisions of this Agreement may be
amended and the Company may take action herein prohibited, or omit to perform
any act herein required to be performed by it, if, but only if, the Company has
obtained the written consent of the Majority Holders.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3.4       
 Severability.    Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be held to be prohibited by or invalid wider applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.

     

    3.5       
 Counterparts.    This
Agreement may be executed in one or more counterparts each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

     

    3.6       
 Notices.    Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be delivered as set forth in the Purchase
Agreement.

     

    3.7       
 Governing
Law.    All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be determined
in accordance with the provisions of the Purchase Agreement.

     

    3.8       
 Captions.    The
captions, headings and arrangements used in this Agreement
are for convenience only and do not in any way limit or amplify the terms and
provisions hereof.

     

    3.9       
 No
Prejudice.    The terms of this Agreement shall not
be construed in favor of or against any party on account of its participation in
the preparation hereof.

     

    3.10       Remedy for
Breach.    The Company hereby acknowledges that in
the event of any breach or threatened breach by the Company of any of the
provisions of this Agreement, the Designated Holders would have no adequate
remedy at law and could suffer substantial and irreparable damage. Accordingly,
the Company hereby agrees that, in such event, the Designated Holders shall be
entitled, and notwithstanding any election by any Designated Holder to claim
damages, to obtain a temporary and/or permanent injunction to restrain any such
breach or threatened breach or to obtain specific performance of any such
provisions, all without prejudice to any and all other remedies that any
Designated Holders may have at law or in equity.

     

    3.11       Successors and
Assigns. This Agreement shall inure to the benefit of and be binding upon
the successors and permitted assigns of each of the parties and shall inure to
the benefit of each Holder. The Company may not assign (except by merger) its
rights or obligations hereunder without the prior written consent of all of the
Holders of the then outstanding Registrable Securities. Each Holder may assign
their respective rights hereunder in the manner and to the Persons as permitted
under the Purchase Agreement.

     

    3.12       Entire
Agreement.    This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3.13       Confidentiality.    Each
Designated Holder agrees to keep confidential and not to disclose to or use for
the benefit of any third party any information that at any time is communicated
by the Company or its Representatives as being confidential without the prior
written approval of the Company; provided, however, that this provision shall not
apply to information the Designated Holder proves is already part of the public
domain (except by breach of this Agreement) or is required to be disclosed by
law, provided that Designated Holder provides the Company with advance notice of
such disclosure and cooperates with the Company to prevent or limit the scope of
such disclosure.

     

    3.14       Independent Nature of
Holders’ Obligations and Rights. The obligations of each Holder hereunder
are several and not joint with the obligations of any other Holder hereunder,
and no Holder shall be responsible in any way for the performance of the
obligations of any other Holder hereunder. Nothing contained herein or in any
other agreement or document delivered at any closing, and no action taken by any
Holder pursuant hereto or thereto, shall be deemed to constitute the Holders as
a partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Holders are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Holder shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Holder to be joined as an additional party in any
proceeding for such purpose.

     

    [Signature
Page Follows]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

    

    
      
        
          
            
              	 
      	
                      PATIENT
      SAFETY

                    
	 
      	
                      TECHNOLOGIES,
      INC.

                    
	 
      	 
      
	 
      	
                      By:

                    	
                        

                    
	 
      	
                      Title:

                    
	 
      
	
                      Name
      of Holder: _________________________

                    
	 
      	 
      
	
                      Signature of Authorized
      Signatory of Holder: _________________________

                    
	 
      	 
      
	
                      Name
      of Authorized Signatory: _________________________

                    
	 
      	 
      
	
                      Title
      of Authorized Signatory:
  _________________________

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