Document:

PATIENT
      SAFETY TECHNOLOGIES, INC.

    

    SECURED
      CONVERTIBLE NOTE AND WARRANT

    PURCHASE
      AGREEMENT

    

    This
      Secured Convertible Note and Warrant Purchase Agreement (this “Agreement”)
      is
      made as of the 6th
      day of
      June, 2006 by and between Patient Safety Technologies, Inc., a Delaware
      corporation (the “Company”),
      and
      Alan E. Morelli, an individual (the “Purchaser”).

    

    RECITALS

    

    A. The
      Company desires to issue and sell, and the Purchaser desires to purchase from
      the Company (i) a secured convertible promissory note in the form attached
      to this Agreement as Exhibit
      A
      (the
“Note”),
      which
      Note shall be convertible on the terms stated therein into common stock of
      the
      Company, and (ii) a warrant to purchase common stock of the Company in the
      form
      attached to this Agreement as Exhibit
      B
      (the
“Warrant”).
      The
      Note, Warrant and shares of common stock issuable upon conversion or exercise
      thereof are collectively referred to herein as the “Securities”.
      

    

    B. The
      Company desires to provide certain rights to register for resale the shares
      of
      common stock issuable to the Purchaser upon the conversion of the Note and
      exercise of the Warrant, in a Registration Rights Agreement in the form attached
      to this Agreement as Exhibit
      C
      (the
“Registration
      Rights Agreement”).
      

    

    AGREEMENT

    

    In
      consideration of the mutual promises contained herein and other good and
      valuable consideration, the receipt of which is hereby acknowledged, the parties
      to this Agreement agree as follows:

    

    1. Purchase
      and Sale of Note and Warrant.

    

    (a) Sale
      and Issuance of Note and Warrant.
      Subject
      to the terms and conditions of this Agreement, the Purchaser agrees to purchase
      and the Company agrees to sell and issue to the Purchaser a Note in the
      principal amount of $1,100,000 and a Warrant to purchase 401,460 shares of
      common stock of the Company, par value $0.33 per share (the “Common
      Stock”).
      The
      purchase price of the Note shall be equal to 100% of the principal amount of
      the
      Note, and the purchase price of the Warrant shall be $1.00. 

    

    (b) Closing;
      Delivery.
      The
      purchase and sale of the Note and the Warrant shall take place at the offices
      of
      Morrison & Foerster LLP at 10:00 a.m. Los Angeles time on June 6, 2006, or
      at such other time and place as the Company and the Purchaser mutually agree,
      orally or in writing (which time and place are designated as the “Closing”).
      At
      the Closing, the Company shall delivery to the Purchaser the Note and the
      Warrant against payment of the purchase price therefor by the following: (a)
      a
      wire transfer to the bank account of Bodnar Capital Management, LLC
      (“BCM”)
      identified in that certain letter agreement dated as of May 31, 2006 (the
“Payoff
      Letter”)
      between the Company and BCM in an amount sufficient to fund the “Payoff Amount”
(as defined therein), including the per diem interest amount for each day after
      May 31, 2006 until the Payoff Amount is paid, (b) to pay a transaction fee
      to
      the Purchaser in the amount of $30,000.00, which shall be netted against the
      purchase price of the Note, and (c) the balance to be applied to fees and
      expenses of Morrison & Foerster LLP incurred by the Purchaser in connection
      herewith.

    

    
      
         

      

      
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    2. Security
      Interest.
      The
      indebtedness represented by the Note (the “Obligations”)
      are
      secured by personal property owned by the Company consisting of equity
      securities identified in the pledge agreement between the Company and the
      Purchaser in the form attached to this Agreement as Exhibit
      D
      (the
“Pledge
      Agreement”).
      The
      security interest in securities pledged pursuant to the Pledge Agreement that
      are maintained with Ault Glazer Bodnar Securities, LLC (“AGB
      Securities”)
      is
      being perfected pursuant to that certain Account Control Agreement dated as
      of
      even date herewith (the “Account
      Control Agreement”)
      by and
      among AGB Securities, the Company and the Purchaser. In addition, the Company
      has pledged (i) 8.5 acres of undeveloped land it owns in Heber Springs,
      Arkansas pursuant to a Deed of Trust (the “Arkansas
      Deed of Trust”)
      and
      (ii) 0.61 acres of undeveloped land it owns in Springfield, Tennessee pursuant
      to a Mortgage (the “Tennessee
      Mortgage”).

    

    3. Representations
      and Warranties of the Company.
      The
      Company hereby represents and warrants to the Purchaser that as of the date
      this
      Agreement is executed and delivered and as of the Closing, except as set forth
      on a Schedule of Exceptions attached hereto as Exhibit
      E,
      specifically identifying the relevant subsection hereof, which exceptions shall
      be deemed to be representations and warranties as if made
      hereunder:

    

    3.1 Organization,
      Good Standing and Qualification.
      

    

    (a) The
      Company and each Subsidiary (defined below) is duly organized, validly existing
      and in good standing under the laws of their respective state of incorporation,
      and each of them has all requisite corporate power and authority to own their
      respective assets and properties and to carry on their respective businesses
      as
      now conducted and as proposed to be conducted. The Company does not own,
      directly or indirectly, any equity interest in any corporation, partnership,
      joint venture or other entity, except for (a) those entities identified as
      subsidiaries of the Company in Exhibit 21.1 to the Form 10-K (collectively,
      the
“Subsidiaries”)
      filed
      by the Company with the Securities and Exchange Commission (the “SEC”)
      for
      the year ended December 31, 2005 (the “Form
      10-K”),
      and
      (b) those interests in entities identified in Section 3.1 of the Schedule of
      Exceptions. The Company and each Subsidiary is duly qualified or licensed and
      in
      good standing to do business in each jurisdiction in which the property owned,
      leased, or operated by it or the nature of the business conducted by it makes
      such qualification or licensing necessary, except where the failure to be so
      duly qualified or licensed and in good standing is not reasonably expected
      to
      have, individually or in the aggregate, a Material Adverse Effect on the Company
      and the Subsidiaries taken as a whole.

    

    (b) For
      purposes of this Agreement, the term “Material
      Adverse Effect”
shall
      mean, with respect to any entity, any event, change or effect that, when taken
      individually or together with all other adverse events, changes and effects,
      is
      or is reasonably likely (a) to be materially adverse to the condition
      (financial or otherwise), properties, assets, liabilities, business, operations
      of that entity and its subsidiaries, taken as a whole, or (b) to prevent,
      have an adverse effect on or materially delay consummation of any of the
      transactions contemplated by any of the Transaction Documents or any entity’s
      performance of its obligations under any of the Transaction
      Documents.

    

    
      
         

      

      
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    3.2 Authorization.
      

    

    (a) All
      corporate action necessary on the part of the Company for the authorization,
      execution and delivery of this Agreement, the Note, the Warrant, the Pledge
      Agreement, the Account Control Agreement, the Arkansas Deed of Trust, the
      Tennessee Mortgage, the Registration Rights Agreement and any other documents
      or
      instruments required pursuant to any such agreement (collectively, the
“Transaction
      Documents”),
      the
      performance of all obligations of the Company hereunder and thereunder and
      the
      authorization, issuance and delivery of the Securities has been taken. Each
      of
      the Transaction Documents, when executed and delivered, shall constitute the
      valid and legally binding obligations of the Company, in each case enforceable
      against the Company in accordance with its respective terms, except (i) as
      limited by applicable bankruptcy, insolvency, reorganization, moratorium,
      fraudulent conveyance, and other laws of general application affecting
      enforcement of creditors’ rights generally and (ii) as limited by laws relating
      to the availability of specific performance, injunctive relief, or other
      equitable remedies.

    

    (b) Except
      for such filings, permits, consents and approvals which, if not obtained or
      made, are not reasonably expected to have a Material Adverse Effect on the
      Company and the Subsidiaries taken as a whole, no filing with or notice to,
      and
      no permit, authorization, consent or approval of, any governmental agency or
      authority is necessary for the execution and delivery by the Company of this
      Agreement or the consummation by the Company of the transactions contemplated
      hereby.

    

    (c) The
      Board
      of Directors of the Company, by the requisite vote of those present (who
      constituted a quorum of the directors then in office), with no dissenting votes,
      has duly and validly authorized the execution and delivery of the Transaction
      Documents and approved the consummation of the transactions contemplated hereby.
      

    

    (d) The
      approval of any of the Transaction Documents and the transactions contemplated
      thereby is not required by any of the stockholders of the Company. 

    

    3.3 Capitalization;
      Valuation.
      

    

    (a) The
      authorized capital stock of the Company consists of:

    

    (i) 1,000,000
      shares of Convertible Preferred Stock, par value $1.00 per share, of which
      10,950 shares are issued and outstanding immediately prior to the Closing.
      All
      of the outstanding shares of Convertible Preferred Stock have been duly
      authorized, and are fully paid and nonassessable and issued in compliance with
      all applicable foreign, federal and state securities laws. The rights,
      privileges and preferences of the Convertible Preferred Stock are as stated
      in
      the Amended and Restated Certificate of Incorporation of the Company filed
      as an
      exhibit to the Form 10-K (the “Restated
      Certificate”).

    

    (ii) 25,000,000
      shares of Common Stock, of which 6,260,048 shares issued and outstanding
      immediately prior to the Closing. All of the outstanding shares of Common Stock
      have been duly authorized, and are fully paid and nonassessable and issued
      in
      compliance with all applicable foreign, federal and state securities laws.
      The
      Company has reserved sufficient shares of Common Stock for issuance
      (x) upon exercise of the Warrant and (y) upon conversion of the
      Note.

    

    
      
         

      

      
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    (iii) The
      Company has reserved 2,500,000 shares of Common Stock for issuance to officers,
      directors, employees and consultants of the Company pursuant to the Company’s
      stock option plan (the “Stock
      Plan”).
      Of
      such reserved shares of Common Stock, 95,707 shares have been issued pursuant
      to
      restricted stock purchase agreements and options to purchase 1,669,000 shares
      have been granted.

    

    (iv) Except
      for (A) the Warrant, (B) the Note, (C) the conversion privileges of the
      Preferred Stock, (D) the stock reserved for issuance pursuant to the Stock
      Plan,
      and except as described on the Schedule of Exceptions, there are no outstanding
      options, warrants, rights (including conversion or preemptive rights or rights
      of first refusal or similar rights) or agreements, orally or in writing, related
      to the purchase or acquisition of any shares of Company’s capital stock. There
      are no rights of first refusal or similar rights, except those in favor of
      the
      Purchaser. The Schedule of Exceptions contains a complete and accurate list
      of
      all securityholders of the Company.

    

    3.4 Valid
      Issuance of Securities.
      The
      shares of Common Stock that are issuable upon conversion of the Note or exercise
      of the Warrant have been duly and validly reserved for issuance, and when
      issued, sold and delivered in accordance with the terms thereof for the
      consideration expressed therein, will be duly and validly issued, fully paid
      and
      nonassessable and free of restrictions on transfer, other than as set forth
      in
      applicable state and federal securities laws. Based in part upon the
      representations of the Purchaser in this Agreement, such shares of Common Stock
      will be issued in compliance with all applicable state and federal securities
      laws. 

    

    3.5 Consents
      and Defaults.
      

    

    (a) The
      execution, delivery and performance of each of the Transaction Documents and
      the
      consummation of the transactions contemplated by each of them will not result
      in
      any violation of or conflict with, constitute a default under (with or without
      due notice or lapse of time or both), require any consent, waiver or notice
      under any term, or result in the reduction or loss of any benefit or the
      creation or acceleration of any right or obligation (including any termination
      rights) under (i) the charter, certificate or articles of incorporation,
      bylaws or operating agreement (or other similar organizational or governing
      instruments) of the Company or any of the Subsidiaries, (ii) any agreement,
      note, bond, mortgage, indenture, contract, lease, permit or other obligation
      or
      right to which the Company or any of the Subsidiaries is a party or by which
      any
      of the assets or properties of the Company or any of the Subsidiaries is bound,
      other than the Promissory Note dated May 1, 2006 in favor of the Herbert Langsam
      Revocable Trust, which consent has been obtained, or (iii) any applicable
      domestic or foreign law or legal requirement, except
      in the
      case of clauses (ii) and (iii) where any of the foregoing is not reasonably
      expected to have, individually or in the aggregate, a Material Adverse Effect
      on
      the Company and the Subsidiaries taken as a whole. 

    

    
      
         

      

      
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    (b) Neither
      the Company nor any of the Subsidiaries is in violation of any term of its
      charter, certificate or articles of incorporation, bylaws or operating agreement
      (or other similar organizational or governing instruments). 

    

    3.6 Litigation.
      There
      is no action, suit, proceeding or investigation pending or, to the Company’s
      knowledge, currently threatened against the Company or any of the Subsidiaries
      that questions the validity of any Transaction Document or the right of the
      Company to enter into any such agreement to which such person is a party, to
      consummate the transactions contemplated hereby or thereby, or that might
      result, either individually or in the aggregate, in a Material Adverse Effect
      on
      the Company and the Subsidiaries taken as a whole, or any change in the current
      equity ownership of any of them (except as contemplated herein), nor is the
      Company aware that there is any basis for the foregoing. The Company is not
      a
      party or subject to the provisions of any order, writ, injunction, judgment
      or
      decree of any court or government agency or instrumentality. There is no action,
      suit, proceeding or investigation by the Company currently pending or which
      the
      Company intends to initiate. 

    

    3.7 SEC
      Reports; Financial Statements.
      

    

    (a) Since
      January 1, 2003, the Company (including its predecessors, if applicable) has
      filed all forms, reports and documents with the SEC required to be filed by
      it
      under the Securities Act of 1933, as amended (“Securities
      Act”),
      and
      the Securities Exchange Act of 1934, as amended (“Exchange
      Act”)
      (collectively, the “Company
      SEC Reports”),
      each
      of which complied in all material respects with all applicable requirements
      of
      the Securities Act and the Exchange Act, each as in effect on the dates such
      Company SEC Reports were filed. 

    

    (b) None
      of
      the Company SEC Reports contained, when filed, any untrue statement of a
      material fact or omitted to state a material fact required to be stated or
      incorporated by reference therein or necessary in order to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading, except to the extent amended prior to the date hereof by a
      subsequently filed Company SEC Report. The consolidated financial statements
      of
      the Company and any separate financial information relating to the Company
      included in the Company SEC Reports (the “Company
      Filed Financial Statements”)
      complied as to form in all material respects with applicable accounting
      requirements and the published rules and regulations of the SEC in respect
      thereof. 

    

    (c) The
      Company Filed Financial Statements contained in each of the Company SEC Reports
      (i) are true, accurate and complete in all respects; (ii) are
      consistent with the books and records of Company; (iii) present fairly and
      accurately the financial condition of the Company and the Subsidiaries, as
      appropriate, as of the respective dates thereof and the results of operations,
      changes in stockholder’s equity and cash flows of each of them for the periods
      covered thereby; and (iv) have been prepared in accordance with generally
      accepted accounting principles (“GAAP”),
      applied on a consistent basis throughout the periods covered, except as
      disclosed therein; provided,
      however,
      that the
      Company Balance Sheet may not contain all of the footnotes required by GAAP,
      and
      may be subject to normal adjustments consistent with past practice which are
      not
      material individually or in the aggregate. All reserves established by the
      Company and set forth in the Company Filed Financial Statements are adequate
      for
      the purposes for which they were established.

    

    
      
         

      

      
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    (d) Since
      the
      date of the financial statements contained in the Company’s Form 10-Q filed with
      the SEC for the quarter ended March 31, 2006 (the “Form
      10-Q”)
      (such
      date, the “Company
      Balance Sheet Date”),
      there
      has not been any change, or any application or request for any change, by the
      Company or any of the Subsidiaries in accounting principles, methods or policies
      for financial accounting purposes, other than as a result of any changes under
      GAAP or other relevant accounting principles.

    

    (e)
       The
      Company is in compliance with the provisions of the Sarbanes-Oxley Act of 2002
      applicable to it as of the date hereof.

    

    3.8 Books
      and Records.
      

    

    (a) The
      books, records and accounts of the Company and its Subsidiaries, in all material
      respects, (i) have been maintained in accordance with good business
      practices on a basis consistent with prior years; (ii) are stated in reasonable
      detail and accurately and fairly reflect the transactions and dispositions
      of
      the assets of the Company and its Subsidiaries; and (iii) accurately and fairly
      reflect the basis for the financial statements pertaining to the Company and
      the
      Subsidiaries contained in the Company SEC Reports and the Company Filed
      Financial Statements. 

    

    (b) The
      Company has devised and maintains a system of internal accounting controls
      sufficient to provide reasonable assurances that (i) transactions are executed
      in accordance with management’s general or specific authorization; and (ii)
      transactions are recorded as necessary (A) to permit preparation of financial
      statements in conformity with GAAP; and (B) to maintain accountability for
      assets. 

    

    (c) The
      Company maintains a system of disclosure controls and procedures that comply
      with Rules 13a-14 and 13a-15 of the Exchange Act (as in effect on the date
      of
      this Agreement) and that are designed to ensure that information required to
      be
      disclosed by the Company in its reports or other documents filed with or
      furnished to the SEC is recorded, processed, summarized and reported within
      the
      time periods required by the SEC’s rules and forms, including, without
      limitation, controls and procedures designed to ensure that such information
      is
      accumulated and communicated to the Company’s senior management, including its
      principal executive and principal financial officers, or persons performing
      similar functions, as appropriate to allow timely decisions by Company regarding
      required disclosure. 

    

    3.9 No
      Undisclosed Liabilities.
      There
      are
      no material liabilities of the Company or any of the Subsidiaries of any kind
      whatsoever, whether accrued, contingent, absolute, determined, determinable
      or
      otherwise, which are required to be reflected in its financial statements (or
      in
      the notes thereto) in accordance with GAAP, other than (a) liabilities
      disclosed, provided for or reserved against in the financial statements
      contained in the Form 10-Q or in the notes thereto; (b) liabilities arising
      in the ordinary course of business after the Company Balance Sheet Date or
      which
      arose in the ordinary course of business prior to the Company Balance Sheet
      Date
      but were not required to be disclosed, provided for or reserved against in
      the
      financial statements contained in the Form 10-Q; and (c) liabilities
      arising under this Agreement.

     

    
      
         

      

      
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    3.10 Absence
      of Changes.
      Except
      as
      contemplated by this Agreement or as disclosed in the Company SEC Reports filed
      prior to the date hereof, since the Company Balance Sheet Date, the Company
      and
      the Subsidiaries have conducted their business in the ordinary and usual course
      consistent with past practice and there has not been: 

    

    (a)
      any
      event, occurrence or development which had or is reasonably expected to have,
      individually or in the aggregate, a Material Adverse Effect on the Company
      and
      the Subsidiaries taken as a whole;

    

    (b)
      any
      declaration, setting aside or payment of any dividend or other distribution
      in
      respect of any shares of capital stock of the Company or (except to the Company
      or other Subsidiaries) any Subsidiary, any split, combination or
      reclassification of any shares of capital stock of the Company or any
      Subsidiary, or any repurchase, redemption or other acquisition by the Company
      or
      any of the Subsidiaries of any securities of the Company or any of the
      Subsidiaries; 

    

    (c)
      any
      amendment or change to the charter, certificate or articles of incorporation,
      operating agreement or bylaws (or other similar organizational or governing
      instrument) of the Company or any of the Subsidiaries, or any amendment of
      any
      term of any outstanding security of the Company or any of the Subsidiaries
      that
      would materially increase the obligations of the Company or any such subsidiary
      under such security;

    

    (d)
      (i)  any incurrence or assumption by the Company or any of the
      Subsidiaries of any indebtedness for borrowed money other than under existing
      credit facilities (or any renewals, replacements or extensions that do not
      increase the aggregate commitments thereunder) except in the ordinary and usual
      course of business consistent with past practice, or (ii) any guarantee,
      endorsement, or other incurrence or assumption of liability (whether directly,
      contingently or otherwise) by the Company or any of the Subsidiaries for the
      obligations of any other person (other than any wholly owned subsidiary of
      the
      Company), other than in the ordinary and usual course of business consistent
      with past practice;

    

    (e)
      any
      creation or assumption by the Company or any of the Subsidiaries of any lien
      or
      encumbrance on any material asset of the Company or any of the Subsidiaries
      other than in the ordinary and usual course of business consistent with past
      practice;

    

    (f)
      any
      making of any loan, advance or capital contribution to or investment in any
      person by the Company or any of the Subsidiaries other than (i) loans, advances
      or capital contributions to or investments in wholly owned subsidiaries of
      the
      Company; (ii) loans or advances to employees of the Company or any of the
      Subsidiaries in the ordinary and usual course of business consistent with past
      practice; or (iii) extensions of credit to customers in the ordinary and usual
      course of business consistent with past practice;

    

    (g)
      any
      contract or agreement entered into by the Company or any of the Subsidiaries
      on
      or prior to the date hereof relating to any material acquisition or disposition
      of any assets or business, other than contracts or agreements in the ordinary
      and usual course of business consistent with past practice and those
      contemplated by this Agreement;

    

    
      
         

      

      
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    (h)
      any
      modification, amendment, assignment, termination or relinquishment by the
      Company or any of the Subsidiaries of any contract, license or other right
      (including any insurance policy naming it as a beneficiary or a loss payable
      payee) that is reasonably expected to have a Material Adverse Effect, after
      taking into account the benefit of the consideration, if any, received in
      exchange for agreeing to such modification, amendment, assignment, termination
      or relinquishment, on the Company and the Subsidiaries taken as a
      whole;

    

    (i)
      any
      material change in any method of accounting or accounting principles or practice
      by the Company or any of the Subsidiaries, except for any such change required
      by reason of a change in GAAP, which change has been consistently
      applied;

    

    (j)
      any
      (i) grant of any severance or termination pay to any director, officer or
      employee of the Company or any of the Subsidiaries; (ii) entering into of any
      employment, deferred compensation, severance, consulting, termination or other
      similar agreement (or any change or amendment to any such existing agreement)
      with any director, officer, employee, agent or other similar representative
      of
      the Company or any of the Subsidiaries (collectively, “Company
      Employment Agreements”)
      whose
      annual cash compensation exceeds $100,000, other than changes or amendments
      that
      (A) do not and will not result in increases, in the aggregate, of more than
      five
      percent in the salary, wages or other compensation of any such person and (B)
      are otherwise consistent with clause (iv) below; (iii) increase in benefits
      payable under any existing severance or termination pay policies or Company
      Employment Agreements; or (iv) increase in compensation, bonus or other
      benefits payable to directors, officers or employees of the Company or any
      of
      the Subsidiaries other than, in the case of clauses (ii) and (iv) only,
      increases prior to the date hereof in compensation, bonus or other benefits
      payable to directors, officers or employees of the Company or any of the
      Subsidiaries in the ordinary and usual course of business consistent with past
      practice or merit increases in salaries of employees at regularly scheduled
      times in customary amounts consistent with past practices; or 

    

    (k)
      any
      (i) making or revoking of any material election relating to taxes; (ii)
      settlement or compromise of any material claim, action, suit, litigation,
      proceeding, arbitration, investigation, audit or controversy relating to taxes;
      or (iii) change to any material methods of reporting income or deductions for
      federal income tax purposes.

    

    3.11 Compliance
      with Applicable Law; Permits.
      The
      Company and each of the Subsidiaries hold all permits, licenses, variances,
      exemptions, orders, and approvals of all governmental entities necessary for
      the
      lawful conduct of their respective businesses (“Company
      Permits”),
      except for failures to hold such permits, licenses, variances, exemptions,
      orders and approvals which are not reasonably expected to have, individually
      or
      in the aggregate, a Material Adverse Effect on the Company and the Subsidiaries
      taken as a whole. The Company and each of the Subsidiaries are in compliance
      with the terms of the Company Permits, except where the failure to comply is
      not
      reasonably expected to have, individually or in the aggregate, a Material
      Adverse Effect on the Company and the Subsidiaries taken as a whole. The
      businesses and operations of the Company and the Subsidiaries comply in all
      respects with the requirements of all laws, rules and regulations applicable
      to
      the Company or the Subsidiaries, except where the failure to so comply is not
      reasonably expected to have, individually or in the aggregate, a Material
      Adverse Effect on the Company and the Subsidiaries taken as a
      whole.

    

    
      
         

      

      
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    3.12 Proprietary
      Assets.
      

    

    (a) The
      Company and each Subsidiary has full title and ownership of, or has a license
      to, or can obtain upon reasonable terms and conditions sufficient rights to,
      all
      patents, patent applications, trademarks, service marks, trade names,
      copyrights, moral rights, maskworks, trade secrets, confidential and proprietary
      information, compositions of matter, formulas, designs, proprietary rights
      and
      know-how and processes (collectively, the “Proprietary
      Assets”)
      necessary to enable each of them to carry on their businesses as now conducted
      and as presently proposed to be conducted without any conflict with, or
      infringement of, the rights of others. 

    

    (b) Neither
      the Company nor any Subsidiary has violated or infringed and is not currently
      violating or infringing, and neither the Company nor any Subsidiary has received
      any communications alleging that either of them (or any of their employees
      or
      consultants) has violated or infringed, or, by conducting its business as
      proposed would violate or infringe, any Proprietary Assets of any other person
      or entity. No third party has any ownership right, title, interest, claim in
      or
      lien on any of the Proprietary Assets of the Company or any Subsidiary, and
      the
      Company and each Subsidiary has taken, and in the future will use best efforts
      to take, all steps reasonably necessary to preserve their legal rights in,
      and
      the secrecy of, all of their Proprietary Assets, except those for which
      disclosure is required for legitimate business or legal reasons.

    

    (c) Neither
      the Company nor any Subsidiary has received any communications alleging that
      it
      or any of its employees or consultants has violated or, by conducting its
      business as proposed, would violate any Proprietary Assets of any other person
      or entity. Neither the Company nor any Subsidiary is aware that any of its
      employees is obligated under any contract (including licenses, covenants or
      commitments of any nature) or other agreement, or subject to any judgment,
      decree or order of any court or administrative agency, that would interfere
      with
      the use of such employee’s best efforts to promote the interest of the Company
      or the Subsidiary or that would conflict with the business of the Company or
      Subsidiary as proposed to be conducted. 

     

    3.13 Tax
      Matters.
      

    

    (a) The
      Company and each Subsidiary, and any individual, trust, corporation, partnership
      or any other entity as to which the Company is liable for Taxes incurred by
      such
      individual or entity either as a transferee, or pursuant to Treasury Regulations
      Section 1.1502-6, or pursuant to any other provision of federal,
      territorial, state, local or foreign law or regulations (the “Company
      Group”)
      has
      timely filed (or has had timely filed) all Tax Returns required to be filed
      by
      each of them (or on their behalf). All such Tax Returns are true, complete
      and
      correct in all respects. The Company Group has paid all Taxes due for the
      periods covered by such Tax Returns (whether or not shown on or reportable
      on
      such Tax Returns) or with respect to any period prior to the date of this
      Agreement. There are no liens on any of the assets of any member of the Company
      Group with respect to Taxes, other than liens for Taxes not yet due and payable
      or for Taxes that a member of the Company Group is contesting in good faith
      through appropriate proceedings and for which appropriate reserves have been
      established.

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (b) The
      Company Filed Financial Statements contained in the Form 10-K and Form 10-Q
      reflect adequate reserves for all Taxes payable by the Company Group for all
      Taxable periods and portions thereof through the dates thereof.

    

    (c) No
      deficiencies for any Taxes have been proposed, asserted, or assessed (either
      in
      writing or verbally, formally or informally) or are expected to be proposed,
      asserted, or assessed against the Company Group that have not been fully paid
      or
      adequately provided for in the appropriate financial statements of the Company,
      no requests for waivers of the time to assess any Taxes are pending, and no
      power of attorney still in effect in respect of any Taxes has been executed
      or
      filed with any taxing authority. No member of the Company Group has received
      notice (either in writing or verbally, formally or informally) or expects to
      receive notice that it has not filed a Tax Return or paid Taxes required to
      be
      filed or paid by it. The Tax Returns of the Company Group have never been
      audited by a government or taxing authority, nor is any such audit in process,
      pending or threatened (either in writing or verbally, formally or informally).
      No waiver or extension of any statute of limitations is in effect with respect
      to Taxes or Tax Returns of the Company Group. Each member of the Company Group
      has disclosed on its federal income tax returns all positions taken therein
      that
      could give rise to a substantial understatement penalty within the meaning
      of
      Section 6662 of the Internal Revenue Code of 1986, as amended.

    

    (d) Each
      member of Company Group has complied in all respects with all requirements
      applicable to the payment and withholding of Taxes and have duly and timely
      withheld from employee salaries, wages and other compensation and have paid
      over
      to the appropriate taxing authority all material amounts required to be so
      withheld and paid over for all periods under all applicable Legal
      Requirements.

    

    (e) No
      federal, state, local, or foreign audits or other administrative proceedings
      or
      court proceedings are presently pending in respect of any Taxes or Tax Returns
      of any member of Company Group and no such member has received notice (either
      in
      writing or verbally, formally or informally) of any pending audit or proceeding
      in respect of any Taxes or Tax Returns.

    

    (f) For
      purposes of this Section 3.13, (i) the term “Tax”
or
      “Taxes”
means
      all taxes, however denominated, including any interest, penalties or other
      additions to tax that may become payable in respect thereof, imposed by any
      federal, territorial, state, local or foreign government or any agency or
      political subdivision of any such government, which taxes shall include, without
      limiting the generality of the foregoing, all income or profits taxes
      (including, but not limited to, federal income taxes and state income taxes),
      payroll and employee withholding taxes, unemployment insurance, social security
      taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise taxes,
      gross receipts taxes, business license taxes, occupation taxes, real and
      personal property taxes, stamp taxes, environmental taxes, transfer taxes,
      workers’ compensation, Pension Benefit Guaranty Corporation premiums and other
      governmental charges, and other obligations of the same or of a similar nature
      to any of the foregoing, which the Company Group is required to pay, withhold
      or
      collect; and (ii) the term “Tax
      Return”
means
      any report, return, document, declaration, or any other information or filing
      required to be supplied to any taxing authority or jurisdiction (domestic or
      foreign) in respect of Taxes, including, information returns, any document
      in
      respect of or accompanying payments or estimated Taxes, or in respect of or
      accompanying requests for the extension of time in which to file any such
      report, return document, declaration, or other information, including amendments
      thereof and attachments thereto.

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    3.14 Listing
      and Maintenance Requirements.
      The
      Common Stock is registered pursuant to Section 12(b) of the Exchange Act, and
      the Company has taken no action designed to, or which is likely to have the
      effect of, terminating the registration of the Common Stock under the Exchange
      Act nor has the Company received any notification that the SEC is contemplating
      terminating such registration. Except as set forth in Section 3.14 of the
      Schedule of Exceptions, the Company has not, in the 12 months preceding the
      date
      hereof, received notice from the Over the Counter Bulletin Board, Nasdaq or
      any
      trading market on which the Common Stock is or has been listed or quoted to
      the
      effect that the Company is not in compliance with the listing or maintenance
      requirements of such trading market. The Company is, and has no reason to
      believe that it will not in the foreseeable future continue to be, in compliance
      with all such listing and maintenance requirements.

    

    3.15 Registration
      Rights and Voting Rights.
      Except
      as provided in the Registration Rights Agreement or as set forth in Section
      3.15
      of the Schedule of Exceptions, the Company has not granted or agreed to grant
      any registration rights, including piggyback rights, to any person or entity.
      No
      stockholders of the Company or of the Subsidiary have entered into any
      agreements with respect to the voting of shares of capital stock of the Company
      or of the Subsidiary.

    

    3.16 Private
      Placement.
      Subject
      in part to the truth and accuracy of the Purchaser’s representations set forth
      in this Agreement, the offer, sale and issuance of the Securities as
      contemplated by this Agreement, and the issuance of shares of Common Stock
      upon
      conversion of the Note and exercise of the Warrant, is or will be exempt from
      the registration requirements of the Securities Act, and neither the Company
      nor
      any authorized agent acting on its behalf will take any action hereafter that
      would cause the loss of such exemption.

    

    3.17 Full
      Disclosure.
      

    

    (a) The
      Company has provided Purchaser with all the information available to it that
      (i)
      Purchaser has requested of the Company for deciding whether to enter into this
      Agreement and effect the transactions contemplated hereby and (ii) which
      the
      Company believes is reasonably necessary to enable the Purchaser to decide
      whether to acquire the Securities. None
      of
      the Company’s representations or warranties in any of the Transaction Documents
      or any other agreements, nor any written information or statements or
      certificates made or delivered by the Company in connection herewith, when
      taken
      as a whole, contains any untrue statement of a material fact or omits to state
      a
      material fact necessary to make the statements herein or therein not misleading
      in light of the circumstances under which they were made.

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (b) There
      is
      no fact or series of related facts known to the Company that has specific
      application to the Company and that could reasonably be expected to,
      individually or in the aggregate, have a Material Adverse Effect on the Company
      and the Subsidiaries, taken as a whole, or (as far as the Company can reasonably
      foresee) that could materially adversely affect the assets, liabilities,
      business, prospects, financial condition, operations, or results of operations
      of the Company, that has not been set forth in this Agreement.

     

    3.18 Brokers.
      Except
      for AGB Securities, no broker, finder, investment banker or other person is
      entitled to receive from the Company or any Subsidiary any brokerage, finder’s
      or other fee or commission or expense reimbursement in connection with any
      of
      the Transaction Documents or any of the transactions contemplated thereby.
      

    

    4. Representations
      and Warranties of the Purchaser. The
      Purchaser hereby represents and warrants to the Company and the Subsidiary
      that:

    

    (a) Accredited
      Investor.
      The
      Purchaser is an accredited investor, as defined in Rule 501(a) of Regulation
      D
      promulgated under the Securities Act.

    

    (b) Authorization.
      The
      Transaction Documents, when executed and delivered by the Purchaser, will
      constitute valid and legally binding obligations of the Purchaser, enforceable
      in accordance with their terms, except as limited by applicable bankruptcy,
      insolvency, reorganization, moratorium, fraudulent conveyance, and any other
      laws of general application affecting enforcement of creditors’ rights
      generally, and as limited by laws relating to the availability of a specific
      performance, injunctive relief, or other equitable remedies.

    

    (c) Purchase
      Entirely for Own Account.
      This
      Agreement is made with the Purchaser in reliance upon the Purchaser’s
      representation to the Company, which by the Purchaser’s execution of this
      Agreement, the Purchaser hereby confirms, that the Securities to be acquired
      by
      the Purchaser will be acquired for investment for the Purchaser’s own account,
      not as a nominee or agent, and not with a view to the resale or distribution
      of
      any part thereof, and that the Purchaser has no present intention of selling,
      granting any participation in, or otherwise distributing the same. By executing
      this Agreement, the Purchaser further represents that the Purchaser does not
      presently have any contract, undertaking, agreement or arrangement with any
      person to sell, transfer or grant participation to such person or to any third
      person, with respect to any of the Securities. The Purchaser represents that
      it
      has full power and authority to enter into this Agreement. The Purchaser has
      not
      been formed for the specific purpose of acquiring the Securities.

    

    (d) Restricted
      Securities.
      The
      Purchaser understands that the Securities have not been, and will not be,
      registered under the Securities Act, by reason of a specific exemption from
      the
      registration provisions of the Securities Act which depends upon, among other
      things, the bona fide nature of the investment intent and the accuracy of the
      Purchaser’s representations as expressed herein. The Purchaser understands that
      the Securities are “restricted securities” under applicable U.S. federal and
      state securities laws and that, pursuant to these laws, the Purchaser must
      hold
      the Securities indefinitely unless they are registered with the SEC and
      qualified by state authorities, or an exemption from such registration and
      qualification requirements is available. The Purchaser acknowledges that the
      Company has no obligation to register or qualify the Securities for resale
      except as set forth in the Registration Rights Agreement. The Purchaser has
      such
      knowledge and experience in financial and business matters that it is capable
      of
      evaluating the merits and risks of the proposed investment and therefore has
      the
      capacity to protect its own interests in connection with the purchase of the
      Securities.

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    (e) Restrictions
      and Legends.
      None of
      the shares of the Securities shall be sold, transferred, assigned, pledged,
      hypothecated or otherwise disposed of unless one of the following events shall
      have occurred: (i) such securities are disposed of pursuant to and in
      conformity with an effective registration statement filed with the SEC pursuant
      to the Securities Act or pursuant to Rule 144 of the SEC thereunder; or (ii)
      the
      seller shall have delivered to the Company a written opinion by counsel which
      is
      reasonably acceptable to the Company to the effect that the proposed transfer
      is
      exempt from the registration and prospectus delivery requirements of the
      Securities Act. The Purchaser understands that the Securities, and any
      securities issued in respect thereof or exchange therefor, may bear the
      following legend:

    

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND
      NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
      NO
      SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
      STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO
      THE
      COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
      1933,
      AS AMENDED, EXCEPT AS SET FORTH HEREIN.”

    

    5. Conditions
      of the Purchaser’s Obligations at Closing.
      The
      obligations of the Purchaser to the Company under this Agreement are subject
      to
      the fulfillment, on or before the Closing, of each of the following conditions,
      unless otherwise waived:

    

    (a) Representations
      and Warranties. The
      representations and warranties of the Company contained in Section 3 shall
      be
      true on and as of the Closing with the same effect as though such
      representations and warranties had been made on and as of the date of the
      Closing.

    

    (b) Performance.
      The
      Company shall have performed and complied with all covenants, agreements,
      obligations and conditions contained in this Agreement and in the other
      Transaction Documents that are required to be performed or complied with by
      such
      entity on or before the Closing.

    

    (c) Qualifications.
      All
      authorizations, approvals or permits, if any, of any governmental authority
      or
      regulatory body of the United States or of any state that are required in
      connection with and prior to the lawful issuance and sale of the Securities
      pursuant to this Agreement shall be obtained and effective as of the
      Closing.

    

    (d) Transaction
      Documents.
      The
      Company shall have executed and delivered to the Purchaser the Transaction
      Documents.

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    (e) Payoff
      Letter.
      The
      Payoff Letter shall be fully executed and delivered by the parties
      thereto.

    

    (f) Account
      Control Agreement.
      AGB
      Securities shall have executed and delivered the Account Control
      Agreement.

    

    (g) Transfers
      of Real Property Collateral.
      The
      Company shall have delivered to the Purchaser evidence satisfactory to the
      Purchaser that the real property pledged pursuant to the Arkansas Mortgage
      and
      the Tennessee Deed of Trust is vested in the name of the Company and that the
      transfers of the interests in such property were duly authorized by Ault Glazer
      Bodnar Properties, LLC.

    

    (h) Title
      Insurance.
      The
      Company shall have made arrangements acceptable to the Purchaser for lender’s
      title insurance on the Arkansas Mortgage and the Tennessee Deed of
      Trust.

    

    (i) Legal
      Opinion.
      The
      Company shall have obtained a legal opinion in regarding the transaction in
      form
      and substance acceptable to the Purchaser.

    

    (j) Secretary’s
      Certificate.
      The
      Company shall have delivered a Secretary’s Certificate which shall include the
      Restated Certificate and Bylaws of the Company, resolutions of the Board of
      Directors authorizing the transactions contemplated hereby, an incumbency
      certificate as to any officer of the Company executing any Transaction Document
      and a good standing certificate with respect to the Company issued by the
      Delaware Secretary of State as of a recent date.

    

    (k) Transaction
      Fee.
      The
      Company shall pay to the Purchase concurrently with the Closing a transaction
      fee in the amount of $30,000, which shall be paid from the proceeds of the
      Note
      issuance pursuant to Section 1.1(b).

    

    (l) Proceedings
      and Documents.
      All
      corporate and other proceedings in connection with the transactions hereunder
      shall have been taken, and all documents and instruments incident to such
      transactions shall be satisfactory in substance and form to the Purchaser,
      and
      the Purchaser shall have received all such counterpart originals or certified
      or
      other copies of such documents as it may reasonably request.

    

    6. Conditions
      of the Company’s Obligations at Closing.
      The
      obligations of the Company to the Purchaser under this Agreement are subject
      to
      the fulfillment, on or before the Closing, of each of the following conditions,
      unless otherwise waived:

    

    (a) Representations
      and Warranties. The
      representations and warranties of the Purchaser contained in Section 4 shall
      be
      true on and as of the Closing with the same effect as though such
      representations and warranties had been made on and as of the
      Closing.

    

    (b) Performance. All
      covenants, agreements and conditions contained in this Agreement to be performed
      by the Purchaser on or prior to the Closing shall have been performed or
      complied with in all material respects.

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    (c) Qualifications.
      All
      authorizations, approvals or permits, if any, of any governmental authority
      or
      regulatory body of the United States or of any state that are required in
      connection with the lawful issuance and sale of the Securities pursuant to
      this
      Agreement shall be obtained and effective as of the Closing.

    

    (d) Transaction
      Documents.
      The
      Purchaser shall have executed and delivered to the Transactions Documents to
      which it is a party.

    

    7. Indemnification.
      The
      Company hereby agree to indemnify and hold harmless the Purchaser from and
      against any costs, damages, fees or expenses incurred by Purchaser as a result
      of any breach of any representation, warranty or covenant by either the Company
      contained in the Transaction Documents.

     

    8. Right
      of First Offer. Subject
      to the terms and conditions specified in this Section 8, until the
      twelve-month anniversary of the Closing, the Company hereby grants to Purchaser
      a right of first offer with respect to future sales by the Company of its Shares
      (as hereinafter defined). For purposes of this Section 8, the term
“Purchaser” includes any entity wholly-owned by Purchaser, and Purchaser shall
      be entitled to transfer all or a portion of the right of first offer hereby
      granted to such entity, so long as such transfer does not cause the loss of
      the
      exemption under Section 4(2) of the Act or any similar exemption under
      applicable state securities laws in connection with such sale of Shares by
      the
      Company. 

    

    Each
      time
      the Company proposes to offer any shares of, or securities convertible into
      or
      exchangeable or exercisable for any shares of, any class of its capital stock
      (the “Shares”),
      the
      Company shall first make an offering of such Shares to the Purchaser in
      accordance with the following provisions:

    

    (a) The
      Company shall deliver a notice in accordance with Section 9.8 (the
“Notice”)
      to the
      Purchaser stating (i) its bona fide intention to offer such Shares,
      (ii) the number of such Shares to be offered, and (iii) the price and
      terms upon which it proposes to offer such Shares.

    

    (b) By
      written notification received by the Company, within ten (10) business days
      after receipt of the Notice, (i) the Purchaser may elect to purchase or obtain,
      at the price and on the terms specified in the Notice, up to that portion of
      such Shares that equals the proportion that the number of shares of Common
      Stock
      issued and held, or issuable upon conversion or exercise of the Note and Warrant
      then held, by the Purchaser bears to the total number of shares of Common Stock
      of the Company then outstanding (assuming full conversion and exercise of all
      outstanding convertible and exercisable securities), and (ii) the Purchaser
      may
      elect to pay all or a portion of the purchase price for such Shares by
      cancellation of all or a portion of the principal or accrued interest due to
      Purchaser under the Note. 

    

    (c) If
      all
      Shares that Purchaser is entitled to obtain pursuant to Section 8(b) are
      not elected to be obtained as provided in Section 8(b) hereof, the Company
      may, during the 30-day period following the expiration of the period provided
      in
      Section 8(b) hereof, offer the remaining unsubscribed portion of such
      Shares 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 Notice. If the Company
      does
      not enter into an agreement for the sale of the Shares within such period,
      or if
      such agreement is not consummated within sixty (60) days of the execution
      thereof, the right provided hereunder shall be deemed to be revived and such
      Shares shall not be offered unless first reoffered to the Purchaser in
      accordance herewith. 

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    (d) The
      right
      of first offer in this Section 8 shall not be applicable to:

    

    (i) the
      issuance of shares of securities pursuant to a split or subdivision of the
      outstanding shares of Common Stock or the determination of holders of Common
      Stock entitled to receive a dividend or other distribution payable in additional
      shares of Common Stock or other securities or rights convertible into, or
      entitling the holder thereof to receive directly or indirectly, additional
      shares of Common Stock (hereinafter referred to as “Common
      Stock Equivalents”)
      without payment of any consideration by such holder for the additional shares
      of
      Common Stock or the Common Stock Equivalents (including the additional shares
      of
      Common Stock issuable upon conversion or exercise thereof);

    

    (ii) the
      issuance of shares of Common Stock or options therefor to employees,
      consultants, officers or directors (if in transactions with primarily
      non-financing purposes) of the Company pursuant to a stock option plan or
      restricted stock purchase plan approved by the stockholders of the Company
      and
      Board of Directors of the Company;

    

    (iii) the
      issuance of shares of Common Stock (A) in a bona fide, firmly underwritten
      public offering under the Act, or (B) upon exercise of warrants or rights
      granted to underwriters in connection with such a public offering;

    

    (iv) the
      issuance of shares of Common Stock pursuant to the conversion or exercise of
      convertible or exercisable securities outstanding as of the date hereof or
      subsequently issued pursuant to this Section 8;

    

    (v) the
      issuance of shares of Common Stock in connection with a bona fide business
      acquisition of or by the Company, whether by merger, consolidation, sale of
      assets, sale or exchange of stock or otherwise, each as approved by the Board
      of
      Directors of the Company and, if required, the stockholders of the Company;
      

    

    9. Miscellaneous.
      

    

    9.1 Survival
      of Warranties.
      Unless
      otherwise set forth in this Agreement, the warranties, representations and
      covenants of the Company and the Purchaser contained in or made pursuant to
      this
      Agreement shall survive the execution and delivery of this agreement and the
      Closing.

    

    9.2 Successors
      and Assigns.
      The
      terms and conditions of this Agreement shall inure to the benefit of and be
      binding upon the respective successors and assigns of the parties. Nothing
      in
      this Agreement, express or implied, is intended to confer upon any party other
      than the parties hereto or their respective successors and assigns any rights,
      remedies, obligations, or liabilities under or by reason of this Agreement,
      except as expressly provided in this Agreement. The Purchaser may assign this
      Agreement to, without limitation, any entity that it controls or by which it
      is
      controlled (with “control” meaning ownership of more than fifty percent (50%) of
      the voting stock of the entity or, in the case of a noncorporate entity, an
      equivalent interest). 

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    9.3 Governing
      Law; Jurisdiction.
      This
      Agreement and all acts and transactions pursuant hereto and the rights,
      remedies, powers and duties of the parties hereto shall be governed, construed
      and interpreted in accordance with the laws of the State of New York, without
      regard to principles of conflicts of laws. Each party consents to the
      non-exclusive jurisdiction of the courts of the State of California. Each party
      further consents to service of process in any litigation relating to any
      Transaction Document by written notice given in accordance with Section 9.8.
      For
      purposes of any dispute or controversy arising under this Agreement or the
      transactions contemplated herein, the parties also mutually consent to the
      jurisdiction of the courts of the State of California, and the federal district
      court, Central District of California, and agree that any and all process
      directed to any of them in any such litigation may be served outside the State
      of California with the same force and effect as if service had been made within
      the State of California. 

    

    9.4 Waiver
      of Jury Trial.
      EACH OF
      THE COMPANY AND THE PURCHASER HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE
      IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE
      ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THIS AGREEMENT
      OR
      ANY OTHER TRANSACTION DOCUMENT. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL
      BE
      RESOLVED IN A BENCH TRIAL WITHOUT A JURY. 

    

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

    

    9.6 Titles
      and Subtitles. The
      titles and subtitles used in this Agreement are used for convenience only and
      are not to be considered in construing or interpreting this
      Agreement.

    

    9.7 Notices.
      Any
      notice required or permitted by this Agreement or any other Transaction Document
      shall be in writing and shall be deemed sufficient upon receipt, when delivered
      personally or by a nationally-recognized delivery service (such as Federal
      Express or UPS) as follows:

    

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    
      	
            	
              (i)

            	
              if
                to the Company, at:

            

    

    

    Patient
      Safety Technologies, Inc.

    1800
      Century Park East, Suite 200

    Los
      Angeles, CA 90067

    Attention:
      Lynne
      Silverstein

    

    with
      a
      copy to:

    

    Sichenzia
      Ross Friedman Ference LLP

    1065
      Avenue of the Americas, 21st
      Floor

    New
      York,
      NY 10018

    Attn:
      Marc J. Ross, Esq. 

    

    
      	
            	(ii)	
              if
                to the Purchaser, at:

            

    

    

    Alan
      E.
      Morelli

    225
      Mantua Road

    Pacific
      Palisades, CA 90272

    

    with
      a
      copy to:

    

    Morrison
      & Foerster LLP

    555
      West
      5th
      Street

    Suite
      3500

    Los
      Angeles, CA 90013

    Attention:
      Allen
      Z. Sussman, Esq.

    

    Any
      party
      hereto (and such party’s permitted assigns) may by notice so given change its
      address for future notices hereunder.

    

    9.8 Attorney’s
      Fees.
      If any
      action at law or in equity (including arbitration) is necessary to enforce
      or
      interpret the terms of any of the Transaction Documents, the prevailing party
      shall be entitled to reasonable attorneys’ fees, costs and necessary
      disbursements in addition to any other relief to which such party may be
      entitled.

    

    9.9 Amendments
      and Waivers. Any
      term
      of this Agreement may be amended or waived only with the written consent of
      the
      Company and the Purchaser. Any amendment or waiver effected in accordance with
      this Section 9.10 shall be binding upon the Purchaser and each transferee of
      the
      Securities, each future holder of all such Securities and the
      Company.

    

    9.10 Severability.
      Whenever possible, each provision of this Agreement will be interpreted in
      such
      manner as to be effective and valid under applicable law, but if any provision,
      subpart, sentence, phrase or term of this Agreement is held to be invalid,
      illegal or unenforceable in any respect under any applicable law or rule in
      any
      jurisdiction, such invalidity, illegality or unenforceable provision shall
      be
      modified or replaced with a valid and enforceable term or provision that most
      accurately represents the intent of the parties with respect to the invalid,
      illegal or unenforceable term.

    

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    9.11 Delays
      or Omissions.
      No
      delay or omission to exercise any right, power or remedy accruing to any holder
      of any of the Securities, upon any breach or default of the Company under any
      Transaction Document, shall impair any such right, power or remedy of such
      holder nor shall it be construed to be a waiver of any such breach or default,
      or an acquiescence therein, or of or in any similar breach or default thereafter
      occurring; nor shall any waiver of any single breach or default be deemed a
      waiver of any other breach or default theretofore or thereafter occurring.
      Any
      waiver, permit, consent or approval of any kind or character on the part of
      any
      holder of any breach or default under this Agreement, must be in writing and
      shall be effective only to the extent specifically set forth in such writing.
      All remedies, either under a Transaction Document or by law or otherwise
      afforded to any holder, shall be cumulative and not alternative.

    

    9.12 Entire
      Agreement.
      This
      Agreement, and the documents referred to herein constitute the entire agreement
      between the parties hereto pertaining to the subject matter hereof, and any
      and
      all other written or oral agreements existing between the parties hereto are
      expressly canceled.

    

    [Remainder
      of Page Intentionally Left Blank - 

    Signature
      Pages to Follow]

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    

    The
      parties have executed this Secured Convertible Note and Warrant Purchase
      Agreement as of the date first written above.

    

    COMPANY:

    

    PATIENT
      SAFETY TECHNOLOGIES, INC.

    

    

    By:
      /s/
      Lynne
      Silverstein                              

    Name:
      Lynne
      Silverstein                               

    Title:
      President                                               
      

    

    Address:   1800
      Century Park East, Suite 200

    Los
      Angeles, CA 90067

    Attention:
      Lynne Silverstein 

     

     

    PURCHASER:

    

    ALAN
      E.
      MORELLI

    

    ___________________________
Address:   
      225 Mantua Road

    Pacific
      Palisades, CA 90272 

    

    

    SIGNATURE
      PAGE TO PATIENT SAFETY TECHNOLOGIES, INC.

    SECURED
      CONVERTIBLE NOTE

    AND
      WARRANT PURCHASE AGREEMENT

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBITS

     

    
      	Exhibit A 	-	Form of Secured Convertible Promissory
              Note

      	 	 	 

      	
              Exhibit
                B 

            	
              -

            	
              Form
                of Warrant

            

      	 	 	 

      	Exhibit C	-	Form of Registration Rights
              Agreement

      	 	 	 

      	Exhibit D	-	Form of Pledge Agreement

      	 	 	 

      	Exhibit E	-	Schedule of Exceptions

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Exhibit
      “E”

    

    Exceptions
      to Representations

    

    
      	3.2(d)	
              If
                there is an event of default, if Morelli wants to foreclose on the
                pledged
                shares, PST will obtain shareholder
                approval.

            

    

    

    
      	3.6	
              The
                following litigation as described in the Company’s 10K does not have any
                effect on the subject transaction but could have a material adverse
                effect
                should PST not prevail: 

            

    

    

    
      	
            	a)	
              Leve
                v. PST

            

    

    

    
      	
            	b)	
              Winstar
                v. PST

            

    

    

    
      	3.7(a)	
              With
                respect to representations and warranties relating to periods prior
                to
                10/24/04 (the date current management and Todd Ault took office),
                the
                representations and warranties are limited to the best of the Company’s
                knowledge.

            

    

    

    
      	
              3.9

            	
              Same
                as 3.2(d).

            

    

    

    
      	
              3.10(b)

            	
              PST
                pays a 7% dividend on its Series A Preferred, based on $1,095,000
                (7% x
                $1,095,000).

            

    

    

    
      	
              3.10(e)

            	
              Mortgages
                recorded by Alan Morelli on Arkansas and Tennessee properties on
                6/2/06.
                

            

    

     

    
      	3.10(j)	1)	Severance agreement between PST and Todd Ault dated
              5/24/06; and

      	 	 	 

      	 	
              2)

            	
              Grant
                of termination pay and benefits to Melanie Glazer for AGB Capital
                Properties, LLC approved on April 21,
                2006.

            

    

    

    
      	
              3.12(a)

            	
              Certain
                issued patents of SurgiCount Medical, Inc. are being re-examined
                by the
                USPO.

            

    

    

    
      	
              3.13(a)

            	
              State
                and federal tax returns of PST are on extension for year 2005; no
                state or
                federal taxes due, on account of substantial
                NOL.

            

    

    

    
      	
              3.14

            	
              PST
                was on AMEX deficiency list until early May 2006 but has since been
                cleared and we see no reason at this time that the Company would
                not
                remain in compliance in the foreseeable future.REGISTRATION
      RIGHTS AGREEMENT

    

    This
      Registration Rights Agreement (this “Agreement”)
      is made
      and entered into as of June 6, 2006, by and among Patient
      Safety Technologies, Inc.,
      a
      Delaware corporation (the “Company”),
      and
      Alan E. Morelli, an individual (the “Investor”).

    

    This
      Agreement is made pursuant to the Secured Note and Warrant Purchase Agreement,
      dated as of the date hereof between the Company and the Investor (the
“Purchase
      Agreement”).

    

    The
      Company and the Investor hereby agree as follows: 

    

    1. Definitions.
      Capitalized terms used and not otherwise defined herein that are defined in
      the
      Purchase Agreement will have the meanings given such terms in the Purchase
      Agreement. As used in this Agreement, the following terms have the respective
      meanings set forth in this Section 1:

    

    “Advice”
      has
      the
      meaning set forth in Section 6(d).

    

    “Effective
      Date”
      means,
      as to a Registration Statement, the date on which such Registration Statement
      is
      first declared effective by the Commission.

    

    “Effectiveness
      Date”
      means:

    

    (a)
      with
      respect to the initial Registration Statement required to be filed under Section
      2(a), the earlier of (i) 90 days from the date hereof and (ii) the fifth Trading
      Day following the date on which the Company is notified by the Commission that
      the initial Registration Statement will not be reviewed or is no longer subject
      to further review and comments; 

    

    (b)
      with
      respect to any additional Registration Statements that may be required pursuant
      to Section 2(b), the earlier of:

    

    (i)
      the
      60th
      day
      following (x) if such Registration Statement is required because the Commission
      shall have notified the Company in writing that certain Registrable Securities
      were not eligible for inclusion on a previously filed Registration Statement,
      the date or time on which the Commission shall indicate as being the first
      date
      or time that such Registrable Securities may then be included in a Registration
      Statement, or (y) if such Registration Statement is required for a reason other
      than as described in (x) above, the date on which the Company first knows,
      or
      reasonably should have known, that such additional Registration Statement(s)
      is
      required; provided,
      that,
      if the Commission reviews and has provided written comments to a Registration
      Statement filed under Section 2(b) that would require the filing of a
      pre-effective amendment thereto with the Commission, then the Effectiveness
      Date
      under this clause (b)(i) for such Registration Statement shall be the
      90th
      day
      following the date that the Company first knows, or reasonably should have
      known, that such additional Registration Statement is required under such
      Section, and 

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (ii)
      the
      fifth Trading Day following the date on which the Company is notified by the
      Commission that such additional Registration Statement will not be reviewed
      or
      is no longer subject to further review and comments; and 

    

    (c)
      with
      respect to a Registration Statement required to be filed under Section 2(c),
      the
      earlier of: 

    

    (i)
      the
      60th
      day
      following the date on which the Company becomes eligible to utilize Form S-3
      to
      register the resale of Common Stock; provided,
      that,
      if the Commission reviews and has written comments to such filed Registration
      Statement that would require the filing of a pre-effective amendment thereto
      with the Commission, then the Effectiveness Date under this clause (c)(i) shall
      be the 90th
      day
      following the date on which the Company becomes eligible to utilize Form S-3
      to
      register the resale of Common Stock, and 

    

    (ii)
      the
      fifth Trading Day following the date on which the Company is notified by the
      Commission that the initial Registration Statement will not be reviewed or
      is no
      longer subject to further review and comments.

    

    “Effectiveness
      Period”
      has the
      meaning set forth in Section 2(a).

    

    “Exchange
      Act”
      means
      the Securities Exchange Act of 1934, as amended.

    

    “Filing
      Date”
      means
      (a) with respect to the initial Registration Statement required to be filed
      under Section 2(a), the 30th
      day
      following the effective date of the registration statement on Form S-3, as
      amended (SEC File No. 333-124564), originally filed by the Company on May 3,
      2005, but no later than September 6, 2006; (b) with respect to any additional
      Registration Statements that may be required pursuant to Section 2(b), the
      30th
      day
      following (x) if such Registration Statement is required because the Commission
      shall have notified the Company in writing that certain Registrable Securities
      were not eligible for inclusion on a previously filed Registration Statement,
      the date or time on which the Commission shall indicate as being the first
      date
      or time that such Registrable Securities may then be included in a Registration
      Statement, or (y) if such Registration Statement is required for a reason other
      than as described in (x) above, the date on which the Company first knows,
      or
      reasonably should have known, that such additional Registration Statement(s)
      is
      required, but in any event no earlier than the Initial Filing Date; and (c)
      with
      respect to a Registration Statement required to be filed under Section 2(c),
      the
      30th
      day
      following the date on which the Company becomes eligible to utilize Form S-3
      to
      register the resale of Common Stock, but in any event no earlier than the
      Initial Filing Date.

    

    “Holder”
      or
“Holders”
      means
      the holder or holders, as the case may be, from time to time of Registrable
      Securities.

    

    “Indemnified
      Party”
      has the
      meaning set forth in Section 5(c).

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    “Indemnifying
      Party”
      has the
      meaning set forth in Section 5(c).

    

    “Los
      Angeles Courts”
      means
      the state and federal courts sitting in the County of Los Angeles,
      California.

    

    “Losses”
      has the
      meaning set forth in Section 5(a).

    

    “Proceeding”
      means an
      action, claim, suit, investigation or proceeding (including, without limitation,
      an investigation or partial proceeding, such as a deposition), whether commenced
      or threatened.

    

    “Prospectus”
      means
      the prospectus included in a Registration Statement (including, without
      limitation, a prospectus that includes any information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Rule 430A promulgated under the Securities Act), as amended or supplemented
      by
      any prospectus supplement, with respect to the terms of the offering of any
      portion of the Registrable Securities covered by a Registration Statement,
      and
      all other amendments and supplements to the Prospectus, including post-effective
      amendments, and all material incorporated by reference or deemed to be
      incorporated by reference in such Prospectus.

    

    “Registrable
      Securities”
      means:
      (i) the Shares, (ii) the Warrant Shares, (iii) up to 175,000 shares of Common
      Stock issuable upon exercise of a Warrant issued to Analog Ventures, LLC on
      or
      about February 16, 2006, and (iv) any securities issued or issuable upon any
      stock split, dividend or other distribution, recapitalization or similar event,
      or any conversion price adjustment with respect to any of the
      foregoing.

    

    “Registration
      Statement”
      means
      the initial registration statement required to be filed in accordance with
      Section 2(a) and any additional registration statement(s) required to be filed
      under Section 2(b) and 2(c), including (in each case) the Prospectus, amendments
      and supplements to such registration statements or Prospectus, including pre-
      and post-effective amendments, all exhibits thereto, and all material
      incorporated by reference or deemed to be incorporated by reference
      therein.

    

    “Rule
      144”
      means
      Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

    

    “Rule
      415”
      means
      Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

    

    “Rule
      424”
      means
      Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same effect as
      such
      Rule.

    

    “Securities
      Act”
      means
      the Securities Act of 1933, as amended.

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    “Shares”
      means
      the shares of Common Stock issued or issuable upon conversion of the Note issued
      to the Investor under the Purchase Agreement.

    

    “Trading
      Day”
      means
      (i) a day on which the Common Stock is traded on a Trading Market (other than
      the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading
      Market (other than the OTC Bulletin Board), a day on which the Common Stock
      is
      traded in the over-the-counter market, as reported by the OTC Bulletin Board,
      or
      (iii) if the Common Stock is not quoted on any Trading Market, a day on which
      the Common Stock is quoted in the over-the-counter market as reported by the
      Pink Sheets, LLC (or any similar organization or agency succeeding to its
      functions of reporting prices); provided, that in the event that the Common
      Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
      Trading Day shall mean a Business Day.

    

    “Trading
      Market”
      means
      the following markets or exchanges on which the Common Stock is listed or quoted
      for trading on the date in question: the OTC Bulletin Board, the American Stock
      Exchange, the New York Stock Exchange, the Nasdaq National Market or the Nasdaq
      Capital Market.

    

    “Warrant”
      means
      the
      Common Stock purchase warrant issued or issuable to the Investor pursuant to
      the
      Purchase Agreement.

    

    “Warrant
      Shares” means
      the
      shares of Common Stock issued or issuable upon exercise of the
      Warrant.

    

    2. Registration.

    

    (a) On
      or
      prior to each Filing Date, the Company shall prepare and file with the
      Commission a Registration Statement covering the resale of all Registrable
      Securities not already covered by an existing and effective Registration
      Statement for an offering to be made on a continuous basis pursuant to Rule
      415,
      on Form SB-2, Form S-1 or, if eligible, Form S-3 (or on such other form
      appropriate for such purpose). Such Registration Statement shall contain (except
      if otherwise required pursuant to written comments received from the Commission
      upon a review of such Registration Statement) the “Plan of Distribution”
attached hereto as Annex A. The Company shall use its best efforts to cause
      such
      Registration Statement to be declared effective under the Securities Act as
      soon
      as possible but, in any event, no later than its Effectiveness Date, and shall
      use its reasonable best efforts to keep the Registration Statement continuously
      effective under the Securities Act until the date which is the earlier of
      (i) seven (7) years after its Effective Date, (ii) such time as all of the
      Registrable Securities covered by such Registration Statement have been publicly
      sold by the Holders, or (iii) such time as all of the Registrable Securities
      covered by such Registration Statement may be sold by the Holders pursuant
      to
      Rule 144(k) as determined by the counsel to the Company pursuant to a written
      opinion letter to such effect, addressed and acceptable to the Company’s
      transfer agent and the affected Holders (the “Effectiveness
      Period”).

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    (b) If
      for
      any reason the Commission does not permit all of the Registrable Securities
      to
      be included in the Registration Statement filed pursuant to Section 2(a), or
      for
      any other reason any outstanding Registrable Securities are not then covered
      by
      an effective Registration Statement, then the Company shall prepare and file
      by
      the Filing Date for such Registration Statement, an additional Registration
      Statement covering the resale of all Registrable Securities not already covered
      by an existing and effective Registration Statement for an offering to be made
      on a continuous basis pursuant to Rule 415, on Form SB-1, Form S-1 or, if
      eligible, Form S-3 (or on such other form appropriate for such purpose). Each
      such Registration Statement shall contain (except if otherwise required pursuant
      to written comments received from the Commission upon a review of such
      Registration Statement) the “Plan of Distribution” attached hereto as
Annex
      A.
      The
      Company shall cause each such Registration Statement to be declared effective
      under the Securities Act as soon as possible but, in any event, by its
      Effectiveness Date, and shall use its reasonable best efforts to keep such
      Registration Statement continuously effective under the Securities Act during
      the entire Effectiveness Period. 

    

    (c) Promptly
      following any date on which the Company becomes eligible to use a registration
      statement on Form S-3 to register the Registrable Securities for resale, the
      Company shall file a registration statement on Form S-3 covering the Registrable
      Securities (or a post-effective amendment on Form S-3 to the then effective
      Registration Statement) and shall use its best efforts to cause
      such Registration Statement to be declared effective as soon as possible
      thereafter, but in any event prior to the Effectiveness Date therefor. Such
      Registration Statement shall contain (except if otherwise required pursuant
      to
      written comments received from the Commission upon a review of such Registration
      Statement) the “Plan of Distribution” attached hereto as Annex
      A.
      The
      Company shall cause such Registration Statement to be declared effective under
      the Securities Act as soon as possible but, in any event, by its Effectiveness
      Date, and shall use its reasonable best efforts to keep such Registration
      Statement continuously effective under the Securities Act during the entire
      Effectiveness Period. 

    

    (d)  If:
      (i) a Registration Statement is not filed on or prior to its Filing Date (if
      the
      Company files a Registration Statement, except in the case of an amendment
      that
      does not concern a Holder, without affording the Holders the opportunity to
      review and comment on the same as required by Section 3(a) hereof, the Company
      shall not be deemed to have satisfied this clause (i)), or (ii) a Registration
      Statement is not declared effective by the Commission on or prior to its
      required Effectiveness Date, or (iii) after its Effective Date, without regard
      for the reason thereunder or efforts therefore, such Registration Statement
      ceases for any reason to be effective and available to the Holders as to all
      Registrable Securities to which it is required to cover at any time prior to
      the
      expiration of its Effectiveness Period for more than an aggregate of 15 calendar
      days (which need not be consecutive) in any 12-month period (any such failure
      or
      breach being referred to as an “Event,”
      and for
      purposes of clauses (i) or (ii) the date on which such Event occurs, or for
      purposes of clause (iii) the date which such 15 calendar day-period is exceeded,
      being referred to as “Event
      Date”),
      then
      in addition to any other rights the Holders may have hereunder or under
      applicable law: (x) on each such Event Date the Company shall pay to the Holders
      an amount in cash, as partial liquidated damages and not as a penalty, equal
      to
      1.5% of the initial principal amount of the Note issued under the Purchase
      Agreement (with such amount to be divided pro rata among the Holders if there
      is
      more than one Holder at such time); and (y) on each monthly anniversary of
      each
      such Event Date (if the applicable Event shall not have been cured by such
      date)
      until the applicable Event is cured, the Company shall pay to the Holders an
      amount in cash, as partial liquidated damages and not as a penalty, equal to
      1.5% of the initial principal amount of the Note issued under the Purchase
      Agreement (with such amount to be divided pro rata among the Holders if there
      is
      more than one Holder at such time). The parties agree that the Company will
      not
      be liable for liquidated damages under this Section in respect of the Warrant.
      If the Company fails to pay any partial liquidated damages pursuant to this
      Section in full within seven days after the date payable, the Company will
      pay
      interest thereon at a rate of 10% per annum (or such lesser maximum amount
      that
      is permitted to be paid by applicable law) to the Holder, accruing daily from
      the date such partial liquidated damages are due until such amounts, plus all
      such interest thereon, are paid in full. The partial liquidated damages pursuant
      to the terms hereof shall apply on a daily pro-rata basis for any portion of
      a
      month prior to the cure of an Event, except in the case of the first Event
      Date.

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    (e) The
      Investor agrees to furnish to the Company a completed Questionnaire in the
      form
      attached to this Agreement as Annex
      B
      (a
“Selling
      Holder Questionnaire”).
      

    

    3. Registration
      Procedures.

    

    In
      connection with the Company’s registration obligations hereunder, the Company
      shall:

    

    (a) Not
      less
      than four Trading Days prior to the filing of a Registration Statement or any
      related Prospectus or any amendment or supplement thereto, the Company shall
      furnish to each Holder copies of the “Selling Stockholders” section of such
      document, the “Plan of Distribution” and any risk factor contained in such
      document that addresses specifically this transaction or the Selling
      Stockholders, as proposed to be filed which documents will be subject to the
      review of such Holder. The Company shall not file a Registration Statement,
      any
      Prospectus or any amendments or supplements thereto in which the “Selling
      Stockholder” section thereof differs from the disclosure received from a Holder
      in its Selling Holder Questionnaire (as amended or supplemented).

    

    (b) (i)
      Prepare and file with the Commission such amendments, including post-effective
      amendments, to each Registration Statement and the Prospectus used in connection
      therewith as may be necessary to keep such Registration Statement continuously
      effective as to the applicable Registrable Securities for its Effectiveness
      Period and prepare and file with the Commission such additional Registration
      Statements in order to register for resale under the Securities Act all of
      the
      Registrable Securities; (ii) cause the related Prospectus to be amended or
      supplemented by any required Prospectus supplement, and as so supplemented
      or
      amended to be filed pursuant to Rule 424; (iii) respond as promptly as
      reasonably possible to any comments received from the Commission with respect
      to
      each Registration Statement or any amendment thereto and, as promptly as
      reasonably possible provide the Holders true and complete copies of all
      correspondence from and to the Commission relating to such Registration
      Statement that would not result in the disclosure to the Holders of material
      and
      non-public information concerning the Company; and (iv) comply in all material
      respects with the provisions of the Securities Act and the Exchange Act with
      respect to the Registration Statements and the disposition of all Registrable
      Securities covered by each Registration Statement.

    

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    (c) Notify
      the Holders as promptly as reasonably possible (and, in the case of (i)(A)
      below, not less than three Trading Days prior to such filing and, in the case
      of
      (v) below, not less than three Trading Days prior to the financial statements
      in
      any Registration Statement becoming ineligible for inclusion therein) and (if
      requested by any such Person) confirm such notice in writing no later than
      one
      Trading Day following the day (i)(A) when a Prospectus or any Prospectus
      supplement or post-effective amendment to a Registration Statement is proposed
      to be filed; (B) when the Commission notifies the Company whether there will
      be
      a “review” of such Registration Statement and whenever the Commission comments
      in writing on such Registration Statement (the Company shall provide true and
      complete copies thereof and all written responses thereto to each of the Holders
      that pertain to the Holders as a Selling Stockholder or to the Plan of
      Distribution, but not information which the Company believes would constitute
      material and non-public information); and (C) with respect to each Registration
      Statement or any post-effective amendment, when the same has become effective;
      (ii) of any request by the Commission or any other Federal or state governmental
      authority for amendments or supplements to a Registration Statement or
      Prospectus or for additional information; (iii) of the issuance by the
      Commission of any stop order suspending the effectiveness of a Registration
      Statement covering any or all of the Registrable Securities or the initiation
      of
      any Proceedings for that purpose; (iv) of the receipt by the Company of any
      notification with respect to the suspension of the qualification or exemption
      from qualification of any of the Registrable Securities for sale in any
      jurisdiction, or the initiation or threatening of any Proceeding for such
      purpose; and (v) of the occurrence of any event or passage of time that makes
      the financial statements included in a Registration Statement ineligible for
      inclusion therein or any statement made in such Registration Statement or
      Prospectus or any document incorporated or deemed to be incorporated therein
      by
      reference untrue in any material respect or that requires any revisions to
      such
      Registration Statement, Prospectus or other documents so that, in the case
      of
      such Registration Statement or the Prospectus, as the case may be, it will
      not
      contain any untrue statement of a material fact or omit to state any material
      fact required to be stated therein or necessary to make the statements therein,
      in light of the circumstances under which they were made, not
      misleading.

    

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

    

    (e) Furnish
      to each Holder, without charge, at least one conformed copy of each Registration
      Statement and each amendment thereto and all exhibits to the extent requested
      by
      such Person (including those previously furnished) promptly after the filing
      of
      such documents with the Commission.

    

    (f) Promptly
      deliver to each Holder, without charge, as many copies of each Prospectus or
      Prospectuses (including each form of prospectus) and each amendment or
      supplement thereto as such Persons may reasonably request. The Company hereby
      consents to the use of such Prospectus and each amendment or supplement thereto
      by each of the selling Holders in connection with the offering and sale of
      the
      Registrable Securities covered by such Prospectus and any amendment or
      supplement thereto.

    

    (g) Prior
      to
      any public offering of Registrable Securities, register or qualify such
      Registrable Securities for offer and sale under the securities or Blue Sky
      laws
      of all jurisdictions within the United States, to keep each such registration
      or
      qualification (or exemption therefrom) effective during the Effectiveness Period
      and to do any and all other acts or things necessary or advisable to enable
      the
      disposition in such jurisdictions of the Registrable Securities covered by
      the
      Registration Statements.

    

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    (h) Cooperate
      with the Holders to facilitate the timely preparation and delivery of
      certificates representing Registrable Securities to be delivered to a transferee
      pursuant to the Registration Statements, which certificates shall be free,
      to
      the extent permitted by the Purchase Agreement, of all restrictive legends,
      and
      to enable such Registrable Securities to be in such denominations and registered
      in such names as any such Holders may request.

    

    (i) Upon
      the
      occurrence of any event contemplated by Section 3(c)(v), as promptly as
      reasonably possible, prepare a supplement or amendment, including a
      post-effective amendment, to the affected Registration Statements or a
      supplement to the related Prospectus or any document incorporated or deemed
      to
      be incorporated therein by reference, and file any other required document
      so
      that, as thereafter delivered, no Registration Statement nor any Prospectus
      will
      contain an untrue statement of a material fact or omit to state a material
      fact
      required to be stated therein or necessary to make the statements therein,
      in
      light of the circumstances under which they were made, not
      misleading.

    

    4. Registration
      Expenses.
      All
      fees and expenses incident to the performance of or compliance with this
      Agreement by the Company shall be borne by the Company whether or not any
      Registrable Securities are sold pursuant to a Registration Statement. The fees
      and expenses referred to in the foregoing sentence shall include, without
      limitation, (i) all registration and filing fees (including, without limitation,
      fees and expenses (A) with respect to filings required to be made with any
      Trading Market on which the Common Stock is then listed for trading, and (B)
      in
      compliance with applicable state securities or Blue Sky laws), (ii) printing
      expenses (including, without limitation, expenses of printing certificates
      for
      Registrable Securities and of printing prospectuses if the printing of
      prospectuses is reasonably requested by the holders of a majority of the
      Registrable Securities included in the Registration Statement), (iii) messenger,
      telephone and delivery expenses, (iv) fees and disbursements of counsel for
      the
      Company, (v) Securities Act liability insurance, if the Company so desires
      such
      insurance, and (vi) fees and expenses of all other Persons retained by the
      Company in connection with the consummation of the transactions contemplated
      by
      this Agreement. In addition, the Company shall be responsible for all of its
      internal expenses incurred in connection with the consummation of the
      transactions contemplated by this Agreement (including, without limitation,
      all
      salaries and expenses of its officers and employees performing legal or
      accounting duties), the expense of any annual audit and the fees and expenses
      incurred in connection with the listing of the Registrable Securities on any
      securities exchange as required hereunder.

    

    5. Indemnification.

    

    (a) Indemnification
      by the Company.
      The
      Company shall, notwithstanding any termination of this Agreement, indemnify
      and
      hold harmless each Holder, the officers, directors, agents, investment advisors,
      partners, members and employees of each of them, each Person who controls any
      such Holder (within the meaning of Section 15 of the Securities Act or Section
      20 of the Exchange Act) and the officers, directors, agents and employees of
      each such controlling Person, to the fullest extent permitted by applicable
      law,
      from and against any and all losses, claims, damages, liabilities, costs
      (including, without limitation, reasonable costs of preparation and reasonable
      attorneys’ fees) and expenses (collectively, “Losses”),
      as
      incurred, arising out of or relating to any untrue or alleged untrue statement
      of a material fact contained in any Registration Statement, any Prospectus
      or
      any form of prospectus or in any amendment or supplement thereto or in any
      preliminary prospectus, or arising out of or relating to any omission or alleged
      omission of a material fact required to be stated therein or necessary to make
      the statements therein (in the case of any Prospectus or form of prospectus
      or
      supplement thereto, in light of the circumstances under which they were made)
      not misleading, except to the extent, but only to the extent, that (1) such
      untrue statements or omissions are based solely upon information regarding
      such
      Holder furnished in writing to the Company by such Holder expressly for use
      therein, or to the extent that such information relates to such Holder or such
      Holder’s proposed method of distribution of Registrable Securities and was
      reviewed and expressly approved in writing by such Holder expressly for use
      in
      the Registration Statement, such Prospectus or such form of Prospectus or in
      any
      amendment or supplement thereto (it being understood that the Holder has
      approved Annex A hereto for this purpose) or (2) in the case of an occurrence
      of
      an event of the type specified in Section 3(c)(ii)-(v), the use by such Holder
      of an outdated or defective Prospectus after the Company has notified such
      Holder in writing that the Prospectus is outdated or defective and prior to
      the
      receipt by such Holder of an Advice or an amended or supplemented Prospectus,
      but only if and to the extent that following the receipt of the Advice or the
      amended or supplemented Prospectus the misstatement or omission giving rise
      to
      such Loss would have been corrected. The Company shall notify the Holders
      promptly of the institution, threat or assertion of any Proceeding of which
      the
      Company is aware in connection with the transactions contemplated by this
      Agreement.

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    (b) Indemnification
      by Holders.
      Each
      Holder shall, severally and not jointly, indemnify and hold harmless the
      Company, its directors, officers, agents and employees, each Person who controls
      the Company (within the meaning of Section 15 of the Securities Act and Section
      20 of the Exchange Act), and the directors, officers, agents or employees of
      such controlling Persons, to the fullest extent permitted by applicable law,
      from and against all Losses, as incurred, arising solely out of or based solely
      upon: (x) such Holder’s failure to comply with the prospectus delivery
      requirements of the Securities Act or (y) any untrue statement of a material
      fact contained in any Registration Statement, any Prospectus, or any form of
      prospectus, or in any amendment or supplement thereto, or arising solely out
      of
      or based solely upon any omission of a material fact required to be stated
      therein or necessary to make the statements therein not misleading to the
      extent, but only to the extent that, (1) such untrue statements or omissions
      are
      based solely upon information regarding such Holder furnished in writing to
      the
      Company by such Holder expressly for use therein, or to the extent that such
      information relates to such Holder or such Holder’s proposed method of
      distribution of Registrable Securities and was reviewed and expressly approved
      in writing by such Holder expressly for use in the Registration Statement (it
      being understood that the Holder has approved Annex A hereto for this purpose),
      such Prospectus or such form of Prospectus or in any amendment or supplement
      thereto or (2) in the case of an occurrence of an event of the type specified
      in
      Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective
      Prospectus after the Company has notified such Holder in writing that the
      Prospectus is outdated or defective and prior to the receipt by such Holder
      of
      an Advice or an amended or supplemented Prospectus, but only if and to the
      extent that following the receipt of the Advice or the amended or supplemented
      Prospectus the misstatement or omission giving rise to such Loss would have
      been
      corrected. In no event shall the liability of any selling Holder hereunder
      be
      greater in amount than the dollar amount of the net proceeds received by such
      Holder upon the sale of the Registrable Securities giving rise to such
      indemnification obligation.

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (c) Conduct
      of Indemnification Proceedings.
      If any
      Proceeding shall be brought or asserted against any Person entitled to indemnity
      hereunder (an “Indemnified
      Party”),
      such
      Indemnified Party shall promptly notify the Person from whom indemnity is sought
      (the “Indemnifying
      Party”)
      in
      writing, and the Indemnifying Party shall assume the defense thereof, including
      the employment of counsel reasonably satisfactory to the Indemnified Party
      and
      the payment of all fees and expenses incurred in connection with defense
      thereof; provided, that the failure of any Indemnified Party to give such notice
      shall not relieve the Indemnifying Party of its obligations or liabilities
      pursuant to this Agreement, except (and only) to the extent that it shall be
      finally determined by a court of competent jurisdiction (which determination
      is
      not subject to appeal or further review) that such failure shall have
      proximately and materially adversely prejudiced the Indemnifying
      Party.

    

    An
      Indemnified Party shall have the right to employ separate counsel in any such
      Proceeding and to participate in the defense thereof, but the fees and expenses
      of such counsel shall be at the expense of such Indemnified Party or Parties
      unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
      expenses; (2) the Indemnifying Party shall have failed promptly to assume the
      defense of such Proceeding and to employ counsel reasonably satisfactory to
      such
      Indemnified Party in any such Proceeding; or (3) the named parties to any such
      Proceeding (including any impleaded parties) include both such Indemnified
      Party
      and the Indemnifying Party, and such Indemnified Party shall have been advised
      by counsel that a conflict of interest is likely to exist if the same counsel
      were to represent such Indemnified Party and the Indemnifying Party (in which
      case, if such Indemnified Party notifies the Indemnifying Party in writing
      that
      it elects to employ separate counsel at the expense of the Indemnifying Party,
      the Indemnifying Party shall not have the right to assume the defense thereof
      and such counsel shall be at the expense of the Indemnifying Party). The
      Indemnifying Party shall not be liable for any settlement of any such Proceeding
      effected without its written consent, which consent shall not be unreasonably
      withheld. No Indemnifying Party shall, without the prior written consent of
      the
      Indemnified Party, effect any settlement of any pending Proceeding in respect
      of
      which any Indemnified Party is a party, unless such settlement includes an
      unconditional release of such Indemnified Party from all liability on claims
      that are the subject matter of such Proceeding.

    

    All
      fees
      and expenses of the Indemnified Party (including reasonable fees and expenses
      to
      the extent incurred in connection with investigating or preparing to defend
      such
      Proceeding in a manner not inconsistent with this Section) shall be paid to
      the
      Indemnified Party, as incurred, within ten Trading Days of written notice
      thereof to the Indemnifying Party (regardless of whether it is ultimately
      determined that an Indemnified Party is not entitled to indemnification
      hereunder; provided, that the Indemnifying Party may require such Indemnified
      Party to undertake to reimburse all such fees and expenses to the extent it
      is
      finally judicially determined that such Indemnified Party is not entitled to
      indemnification hereunder).

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    (d) Contribution.
      If a
      claim for indemnification under Section 5(a) or 5(b) is unavailable to an
      Indemnified Party (by reason of public policy or otherwise), 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
      fault of the Indemnifying Party and Indemnified Party in connection with the
      actions, statements or omissions that resulted in such Losses as well as any
      other relevant equitable considerations. The relative fault of such Indemnifying
      Party and Indemnified Party shall be determined by reference to, among other
      things, whether any action in question, including any untrue or alleged untrue
      statement of a material fact or omission or alleged omission of a material
      fact,
      has been taken or made by, or relates to information supplied by, such
      Indemnifying Party or Indemnified Party, and the parties’ relative intent,
      knowledge, access to information and opportunity to correct or prevent such
      action, statement or omission. The amount paid or payable by a party as a result
      of any Losses shall be deemed to include, subject to the limitations set forth
      in Section 5(c), any reasonable attorneys’ or other reasonable fees or expenses
      incurred by such party in connection with any Proceeding to the extent such
      party would have been indemnified for such fees or expenses if the
      indemnification provided for in this Section was available to such party in
      accordance with its terms.

    

    The
      parties hereto agree that it would not be just and equitable if contribution
      pursuant to this Section 5(d) were determined by pro rata allocation or by
      any
      other method of allocation that does not take into account the equitable
      considerations referred to in the immediately preceding paragraph.
      Notwithstanding the provisions of this Section 5(d), no Holder shall be required
      to contribute, in the aggregate, any amount in excess of the amount by which
      the
      proceeds actually received by such Holder from the sale of the Registrable
      Securities subject to the Proceeding exceeds the amount of any damages that
      such
      Holder has otherwise been required to pay by reason of such untrue or alleged
      untrue statement or omission or alleged omission.

    

    The
      indemnity and contribution agreements contained in this Section are in addition
      to any liability that the Indemnifying Parties may have to the Indemnified
      Parties.

    

    6. Miscellaneous.

    

    (a) Remedies.
      In the
      event of a breach by the Company or by a Holder, of any of their obligations
      under this Agreement, each Holder or the Company, as the case may be, in
      addition to being entitled to exercise all rights granted by law and under
      this
      Agreement, including recovery of damages, will be entitled to specific
      performance of its rights under this Agreement. The Company and each Holder
      agree that monetary damages would not provide adequate compensation for any
      losses incurred by reason of a breach by it of any of the provisions of this
      Agreement and hereby further agrees that, in the event of any action for
      specific performance in respect of such breach, it shall waive the defense
      that
      a remedy at law would be adequate.

    

    (b) No
      Piggyback on Registrations.
      Neither
      the Company nor any of its security holders (other than the Holders in such
      capacity pursuant hereto) may include securities of the Company in a
      Registration Statement other than the Registrable Securities, and the Company
      shall not during the Effectiveness Period enter into any agreement providing
      any
      such right to any of its security holders.

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (c) Compliance.
      Each
      Holder covenants and agrees that it will comply with the prospectus delivery
      requirements of the Securities Act as applicable to it in connection with sales
      of Registrable Securities pursuant to the Registration Statement.

    

    (d) Discontinued
      Disposition.
      Each
      Holder agrees by its acquisition of such Registrable Securities that, upon
      receipt of a notice from the Company of the occurrence of any event of the
      kind
      described in Section 3(c), such Holder will forthwith discontinue disposition
      of
      such Registrable Securities under the Registration Statement until such Holder’s
      receipt of the copies of the supplemented Prospectus and/or amended Registration
      Statement or until it is advised in writing (the “Advice”)
      by the
      Company that the use of the applicable Prospectus may be resumed, and, in either
      case, has received copies of any additional or supplemental filings that are
      incorporated or deemed to be incorporated by reference in such Prospectus or
      Registration Statement. The Company may provide appropriate stop orders to
      enforce the provisions of this paragraph.

    

    (e) Piggy-Back
      Registrations.
      If at
      any time during the Effectiveness Period there is not an effective Registration
      Statement covering all of the Registrable Securities and the Company shall
      determine to prepare and file with the Commission a registration statement
      relating to an offering for its own account or the account of others under
      the
      Securities Act of any of its equity securities, other than on Form S-4 or Form
      S-8 (each as promulgated under the Securities Act) or their then equivalents
      relating to equity securities to be issued solely in connection with any
      acquisition of any entity or business or equity securities issuable in
      connection with stock option or other employee benefit plans, then the Company
      shall send to each Holder written notice of such determination and, if within
      fifteen days after receipt of such notice, any such Holder shall so request
      in
      writing, the Company shall include in such registration statement all or any
      part of such Registrable Securities such holder requests to be registered,
      subject to customary underwriter cutbacks applicable to all holders of
      registration rights.

    

    (f) Amendments
      and Waivers.
      The
      provisions of this Agreement, including the provisions of this Section 6(f),
      may
      not be amended, modified or supplemented, and waivers or consents to departures
      from the provisions hereof may not be given, unless the same shall be in writing
      and signed by the Company and each Holder. Notwithstanding the foregoing, a
      waiver or consent to depart from the provisions hereof with respect to a matter
      that relates exclusively to the rights of certain Holders and that does not
      directly or indirectly affect the rights of other Holders may be given by
      Holders of at least a majority of the Registrable Securities to which such
      waiver or consent relates.

    

    (g) 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 (a) the date of transmission, if such notice or communication
      is delivered via facsimile (provided the sender receives a machine-generated
      confirmation of successful transmission) at the facsimile number specified
      in
      this Section prior to 5:00 p.m. (Los Angeles time) on a Trading Day, (b) the
      next Trading Day after the date of transmission, if such notice or communication
      is delivered via facsimile at the facsimile number specified in this Section
      on
      a day that is not a Trading Day or later than 5:00 p.m. (Los Angeles time)
      on
      any Trading Day, (c) the Trading Day following the date of mailing, if sent
      by
      U.S. nationally recognized overnight courier service, or (d) 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 follows:

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    
      	
            	
              If
                to the Company:

            	
              Patient
                Safety Technologies, Inc.

            

    

    1800
      Century Park East, Suite 200

    Los
      Angeles, CA 90067

    Attention:
      Chief
      Executive Officer

    

    with
      a
      copy to (which shall not constitute notice):

    

    Sichenzia
      Ross Friedman Ference LLP

    1065
      Avenue of the Americas, 21st Floor

    New
      York,
      NY 10018

    Attention:
      Marc J.
      Ross, Esq.

     

    
      	
            	
              If
                to the Investor: :

            	Alan E.
              Morelli

    

    225
      Mantua Road

    Pacific
      Pallisades, CA 90272

    

    with
      a
      copy to (which shall not constitute notice):

    

    Morrison
      & Foerster LLP

    555
      West
      5th
      Street

    Suite
      3500

    Los
      Angeles, CA 90013

    Attention:
      Allen
      Z. Sussman, Esq.

    

    If
      to any
      other Person who is then the registered Holder:

    

    To
      the
      address of such Holder as it appears in the stock transfer books of the
      Company

    

    or
      such
      other address as may be designated in writing hereafter, in the same manner,
      by
      such Person.

    

    (h) 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 its rights or obligations hereunder without
      the prior written consent of each Holder. Each Holder may assign their
      respective rights hereunder in the manner and to the Persons as permitted under
      the Purchase Agreement.

    

    (i) Execution
      and Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and, all of which taken together
      shall constitute one and the same Agreement. In the event that any signature
      is
      delivered by facsimile transmission, such signature shall create a valid binding
      obligation of the party executing (or on whose behalf such signature is
      executed) the same with the same force and effect as if such facsimile signature
      were the original thereof.

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    (j) Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof. Each party agrees that all Proceedings
      concerning the interpretations, enforcement and defense of the transactions
      contemplated by this Agreement (whether brought against a party hereto or its
      respective Affiliates, employees or agents) will be commenced in 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, and hereby irrevocably waives, and agrees not to assert
      in
      any Proceeding, any claim that it is not personally subject to the jurisdiction
      of any Los Angeles Court, or that such Proceeding has been commenced in an
      improper or inconvenient forum. Each party hereto hereby irrevocably waives
      personal service of process and consents to process being served in any such
      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 manner permitted by 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 Proceeding arising out of or relating to this Agreement or the
      transactions contemplated hereby. If either party shall commence a Proceeding
      to
      enforce any provisions of this Agreement, then the prevailing party in such
      Proceeding shall be reimbursed by the other party for its attorney’s fees and
      other costs and expenses incurred with the investigation, preparation and
      prosecution of such Proceeding.

    

    (k) Cumulative
      Remedies.
      The
      remedies provided herein are cumulative and not exclusive of any remedies
      provided by law.

    

    (l) Severability.
      If any
      term, provision, covenant or restriction of this Agreement is held by a court
      of
      competent jurisdiction to be invalid, illegal, void or unenforceable, the
      remainder of the terms, provisions, covenants and restrictions set forth herein
      shall remain in full force and effect and shall in no way be affected, impaired
      or invalidated, and the parties hereto shall use their reasonable efforts to
      find and employ an alternative means to achieve the same or substantially the
      same result as that contemplated by such term, provision, covenant or
      restriction. It is hereby stipulated and declared to be the intention of the
      parties that they would have executed the remaining terms, provisions, covenants
      and restrictions without including any of such that may be hereafter declared
      invalid, illegal, void or unenforceable.

    

    (m) Headings.
      The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

    

    [Remainder
      of Page Intentionally Left Blank

    Signature
      Pages to Follow]

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    

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

     

    
      	 	
              PATIENT
                SAFETY TECHNOLOGIES, INC.

              

              

              By: 
                /s/ Lynne
                Silverstein                                             
                

              Name:
                Lynne Silverstein

              Title:
                President

              

               

              ALAN
                E. MORELLI

              

              

              ______________________________________ 

            

    

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    Annex
      A

    

    PLAN
      OF
      DISTRIBUTION

    

    The
      Selling Stockholder and any of its pledgees, donees, transferees, assignees
      and
      successors-in-interest may, from time to time, sell any or all of its shares
      of
      Common Stock on any stock exchange, market or trading facility on which the
      shares are traded or in private transactions. These sales may be at fixed or
      negotiated prices. The Selling Stockholder may use any one or more of the
      following methods when selling shares:

    

    
      	
              ·

            	
              ordinary
                brokerage transactions and transactions in which the broker-dealer
                solicits investors;

            

    

    

    
      	
              ·

            	
              block
                trades in which the broker-dealer will attempt to sell the shares
                as agent
                but may position and resell a portion of the block as principal to
                facilitate the transaction;

            

    

    

    
      	
              ·

            	
              purchases
                by a broker-dealer as principal and resale by the broker-dealer for
                its
                account;

            

    

    

    
      	
              ·

            	
              an
                exchange distribution in accordance with the rules of the applicable
                exchange;

            

    

    

    
      	
              ·

            	
              privately
                negotiated transactions;

            

    

    

    
      	
              ·

            	
              to
                cover short sales made after the date that this Registration Statement
                is
                declared effective by the Commission;

            

    

    

    
      	
              ·

            	
              broker-dealers
                may agree with the Selling Stockholder to sell a specified number
                of such
                shares at a stipulated price per
                share;

            

    

    

    
      	
              ·

            	
              a
                combination of any such methods of sale;
                and

            

    

    

    
      	
              ·

            	
              any
                other method permitted pursuant to applicable
                law.

            

    

    

    The
      Selling Stockholder may also sell shares under Rule 144 under the Securities
      Act, if available, rather than under this prospectus.

    

    Broker-dealers
      engaged by the Selling Stockholder may arrange for other brokers-dealers to
      participate in sales. Broker-dealers may receive commissions or discounts from
      the Selling Stockholder (or, if any broker-dealer acts as agent for the
      purchaser of shares, from the purchaser) in amounts to be negotiated. The
      Selling Stockholder does not expect these commissions and discounts to exceed
      what is customary in the types of transactions involved.

    

    The
      Selling Stockholder may from time to time pledge or grant a security interest
      in
      some or all of the Shares owned by it and, if it defaults in the performance
      of
      its secured obligations, the pledgees or secured parties may offer and sell
      shares of Common Stock from time to time under this prospectus, or under an
      amendment to this prospectus under Rule 424(b)(3) or other applicable provision
      of the Securities Act of 1933 amending the list of selling stockholders to
      include the pledgee, transferee or other successors in interest as selling
      stockholders under this prospectus.

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    Upon
      the
      Company being notified in writing by a Selling Stockholder that any material
      arrangement has been entered into with a broker-dealer for the sale of Common
      Stock through a block trade, special offering, exchange distribution or
      secondary distribution or a purchase by a broker or dealer, a supplement to
      this
      prospectus will be filed, if required, pursuant to Rule 424(b) under the
      Securities Act, disclosing (i) the name of each such Selling Stockholder and
      of
      the participating broker-dealer(s), (ii) the number of shares involved, (iii)
      the price at which such the shares of Common Stock were sold, (iv)the
      commissions paid or discounts or concessions allowed to such broker-dealer(s),
      where applicable, (v) that such broker-dealer(s) did not conduct any
      investigation to verify the information set out or incorporated by reference
      in
      this prospectus, and (vi) other facts material to the transaction. In addition,
      upon the Company being notified in writing by a Selling Stockholder that a
      donee
      or pledgee intends to sell more than 500 shares of Common Stock, a supplement
      to
      this prospectus will be filed if then required in accordance with applicable
      securities law.

    

    The
      Selling Stockholder also may transfer the shares of Common Stock in other
      circumstances, in which case the transferees, pledgees or other successors
      in
      interest will be the selling beneficial owners for purposes of this
      prospectus.

    

    The
      Selling Stockholder and any broker-dealers or agents that are involved in
      selling the shares may be deemed to be “underwriters” within the meaning of the
      Securities Act in connection with such sales. In such event, any commissions
      received by such broker-dealers or agents and any profit on the resale of the
      shares purchased by them may be deemed to be underwriting commissions or
      discounts under the Securities Act. Discounts, concessions, commissions and
      similar selling expenses, if any, that can be attributed to the sale of
      Securities will be paid by the Selling Stockholder and/or the purchasers. Each
      Selling Stockholder has represented and warranted to the Company that it
      acquired the securities subject to this registration statement in the ordinary
      course of such Selling Stockholder’s business and, at the time of its purchase
      of such securities such Selling Stockholder had no agreements or understandings,
      directly or indirectly, with any person to distribute any such securities.
      

    

    The
      Company has advised the Selling Stockholder that it may not use shares
      registered on this Registration Statement to cover short sales of Common Stock
      made prior to the date on which this Registration Statement shall have been
      declared effective by the Commission. If a Selling Stockholder uses this
      prospectus for any sale of the Common Stock, it will be subject to the
      prospectus delivery requirements of the Securities Act. The Selling Stockholder
      will be responsible to comply with the applicable provisions of the Securities
      Act and Exchange Act, and the rules and regulations thereunder promulgated,
      including, without limitation, Regulation M, as applicable to such Selling
      Stockholder in connection with resales of their respective shares under this
      Registration Statement.

    

    The
      Company is required to pay all fees and expenses incident to the registration
      of
      the shares, but the Company will not receive any proceeds from the sale of
      the
      Common Stock. The Company has agreed to indemnify the Selling Stockholder
      against certain losses, claims, damages and liabilities, including liabilities
      under the Securities Act. 

    

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    Annex
      B

    

    PATIENT
      SAFETY TECHNOLOGIES, INC.

    

    Selling
      Securityholder Notice and Questionnaire

    

    The
      undersigned beneficial owner of common stock (the “Common
      Stock”),
      of
PATIENT
      SAFETY TECHNOLOGIES, INC.
      (the
“Company”)
      understands that the Company has filed or intends to file with the Securities
      and Exchange Commission (the “Commission”)
      a
      Registration Statement for the registration and resale of the Registrable
      Securities, in accordance with the terms of the Registration Rights Agreement,
      dated as of June ___, 2006 (the “Registration
      Rights Agreement”),
      among
      the Company and the Investor named therein. A copy of the Registration Rights
      Agreement is available from the Company upon request at the address set forth
      below. All capitalized terms used and not otherwise defined herein shall have
      the meanings ascribed thereto in the Registration Rights Agreement.

    

    The
      undersigned hereby provides the following information to the Company and
      represents and warrants that such information is accurate:

    

    QUESTIONNAIRE

    

    
      	1.	
              Name.

            

    

    

    
      	 	
              (a)

            	
              Full
                Legal Name of Selling Securityholder

               

                

              

               

               

            

    

    
      	
            	
              (b)

            	
              Full
                Legal Name of Registered Holder (if not the same as (a) above) through
                which Registrable Securities Listed in Item 3 below are held:

               

              
                
 

               

            

    

    
      	 	
              (c)

            	
              Full
                Legal Name of Natural Control Person (which means a natural person
                who
                directly or indirectly alone or with others has power to vote or
                dispose
                of the securities covered by the questionnaire):

               

              
                
 

            

    

    

    
      	2.	
              Address
                for Notices to Selling
                Securityholder:

            

    

     

    
      	
              

              

              
    
	
              Telephone:

            
	
              Fax:

            
	
              Contact
                Person:

            

    

    

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    
      	3.	
              Beneficial
                Ownership of Registrable
                Securities:

            

    

    

    
      	 	 	
              Type
                and Principal Amount of Registrable Securities beneficially
                owned:

               

              
                

                

              

              

            

    

     

    
      	4.	
              Broker-Dealer
                Status:

            

    

    

    
      	 	
              (a)

            	
              Are
                you a broker-dealer?

            

    

    

    Yes
o      No
o

    

    
      	 	
              Note:

            	
              If
                yes, the Commission’s staff has indicated that you should be identified as
                an underwriter in the Registration
                Statement.

            

    

    

    
      	 	
              (b)

            	
              Are
                you an affiliate of a
                broker-dealer?

            

    

    

    
      Yes
o      No
o

    
      	 	
              (c)

            	
              If
                you are an affiliate of a broker-dealer, do you certify that you
                bought
                the Registrable Securities in the ordinary course of business, and
                at the
                time of the purchase of the Registrable Securities to be resold,
                you had
                no agreements or understandings, directly or indirectly, with any
                person
                to distribute the Registrable
                Securities?

            

    

    

    
      Yes
o      No
o

    
      	 	
              Note:

            	
              If
                no, the Commission’s staff has indicated that you should be identified as
                an underwriter in the Registration
                Statement.

            

    

    

    
      	5.	
              Beneficial
                Ownership of Other Securities of the Company Owned by the Selling
                Securityholder.

            

    

    

    Except
      as set forth below in this Item 5, the undersigned is not the beneficial or
      registered owner of any securities of the Company other than the Registrable
      Securities listed above in Item 3.

    

    
      	 	 	
              Type
                and Amount of Other Securities beneficially owned by the Selling
                Securityholder:

               

              
                

                

                
   

            

    

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    

    
      	6.	
              Relationships
                with the Company:

            

    

    

    Except
      as set forth below, neither the undersigned nor any of its affiliates, officers,
      directors or principal equity holders (owners of 5% of more of the equity
      securities of the undersigned) has held any position or office or has had any
      other material relationship with the Company (or its predecessors or affiliates)
      during the past three years.

    

    State
      any
      exceptions here:

    
      

      

    

     

    The
      undersigned agrees to promptly notify the Company of any inaccuracies or changes
      in the information provided herein that may occur subsequent to the date hereof
      and prior to the Effective Date for the Registration Statement.

    

    By
      signing below, the undersigned consents to the disclosure of the information
      contained herein in its answers to Items 1 through 6 and the inclusion of such
      information in the Registration Statement and the related prospectus. The
      undersigned understands that such information will be relied upon by the Company
      in connection with the preparation or amendment of the Registration Statement
      and the related prospectus.

    

    IN
      WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice
      and Questionnaire to be executed and delivered either in person or by its duly
      authorized agent.

     

     

    
      	Dated: _________________________	Beneficial Owner:
              ___________________________
	 	 
	 	
              By: 
                ______________________________________

              Name:

              Title:

            

    

    

    PLEASE
      FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
      THE ORIGINAL BY OVERNIGHT MAIL, TO:

    

    Patient
      Safety Technologies, Inc.

    1800
      Century Park East, Suite 200

    Los
      Angeles, CA 90067

    Attention:
      Chief
      Executive Officer

    

    
      
         

      

      
        20

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