Document:

Exhibit
10.2

    

    WARRANT
PURCHASE AGREEMENT

     

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

     

    RECITALS

     

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

     

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

     

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

     

    AGREEMENT

     

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

     

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

     

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

     

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

     

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

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

     

    (a)           Subsidiaries.  The
Company has one subsidiary, SurgiCount Medical, Inc., a California corporation
(the “Subsidiary”).  The
Company owns, directly or indirectly, all of the capital stock or other equity
of the Subsidiary free and clear of any liens, claims, charges or encumbrances
and all of the issued and outstanding shares of capital stock of the Subsidiary
are validly issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities.  

     

    (b)           Organization and
Qualification.  Each of the Company and the Subsidiary is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted.  Neither the Company nor the Subsidiary is in violation or
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents.  Each of the Company and the Subsidiary is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any of the Transaction Agreements, (ii)
a material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiary, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any of the Transaction Agreements (any of (i), (ii) or (iii),
a “Material Adverse
Effect”) and no action, claim, suit, investigation or proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing or seeking
to revoke, limit or curtail such power and authority or
qualification.

     

    (c)           Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Agreements and otherwise to carry out its obligations
thereunder.  The execution and delivery of the Transaction Agreements
and the consummation by the Company of the transactions contemplated thereby
have been duly authorized by all necessary action on the part of the Company,
and no further action is required by the Company, its Board of Directors or the
Company’s stockholders in connection therewith.  The Transaction
Agreements have been (or upon delivery will have been) duly executed by the
Company and, when delivered in accordance with the terms thereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law. 

     

    
      
         

      

      
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    (d)           No Conflicts.  The
execution, delivery and performance of the Transaction Agreements by the Company
and the consummation by the Company of the other transactions contemplated
thereby do not and will not: (i) conflict with or violate any provision of the
Company’s or the Subsidiary’s certificate or articles of incorporation, bylaws
or other organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, result in the creation of any lien, claim, charge
or encumbrance upon any of the properties or assets of the Company or the
Subsidiary, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the Company or the
Subsidiary is a party or by which any property or asset of the Company or the
Subsidiary is bound or affected, or (iii) subject to the Required Approvals (as
defined below), conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company or the Subsidiary is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or the Subsidiary is bound or
affected; except in the case of each of clauses (ii) and (iii), such as could
not have or reasonably be expected to result in a Material Adverse
Effect.

     

    (e)           Filings, Consents and
Approvals.  The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other person in connection with the execution,
delivery and performance by the Company of the Transaction Agreements, other
than (i) the filing with the Securities & Exchange Commission (the “SEC”) of any registration
statement required under the Registration Rights Agreement, and (ii) the filing
of a Form 8-K and Form D with the SEC and such filings as are required to be
made under applicable state securities laws (collectively, the “Required
Approvals”).

     

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

     

    
      
         

      

      
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    (g)           Capitalization.  The
capitalization of the Company is as set forth in Section 2.1(g) of the
Disclosure Letter.  No person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the transactions contemplated by this Agreement.  Except as a result
of the acquisition of the Securities and as otherwise disclosed in the
Disclosure Letter and SEC Reports, there are no outstanding options, warrants,
scrip rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any person any right to subscribe for
or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or the Subsidiary is or may
become bound to issue additional shares of Common Stock. The issuance and sale
of the Securities will not obligate the Company to issue shares of Common Stock
or other securities to any person (other than Investor) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the outstanding
shares of capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal, state and
foreign securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities.  No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for the
issuance and sale of the Securities.  There are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Company’s capital stock to which the Company is a party or, to the knowledge of
the Company, between or among any of the Company’s
stockholders. 

     

    (h)           SEC Reports; Financial
Statements.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Securities Act of 1933, as amended (the “Securities Act”) and the
Securities and Exchange Act of 1934, as amended (the “Exchange Act”), including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date
hereof (or such shorter period as the Company was required by law or regulation
to file such material) (the foregoing materials, including the exhibits thereto
and documents incorporated by reference therein, being collectively referred to
herein as the “SEC
Reports”).  As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  The financial statements of the Company included in the
SEC Reports have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
consolidated financial position of the Company and the Subsidiary as of and for
the dates thereof and the consolidated results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.

     

    (i)           Material
Changes.  Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
a subsequent SEC Report filed prior to the date hereof, (i) there has been no
event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities incurred in the ordinary course of business
that are not required to be reflected in the Company’s financial statements
pursuant to GAAP or disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting, (iv) the Company has not
declared or made any dividend or distribution of cash, other than dividends
related to the Company’s Series A Preferred Stock, or other property to its
stockholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock and (v) the Company has not issued any equity
securities to any officer, director or affiliate, except pursuant to existing
Company stock option plans or written compensation arrangements or pursuant to a
private placement of securities.

     

    
      
         

      

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

     

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

     

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

     

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

     

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

     

    
      
         

      

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

     

    (a)           Binding Obligation. Investor
has full legal capacity, power and authority to execute and deliver the
Transaction Agreements and to perform its obligations
thereunder.  Each of the Transaction Agreements executed by Investor
is a valid and binding obligation of Investor, enforceable in accordance with
its terms, except as limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors’ rights
generally and general principles of equity.  The execution, delivery,
and performance of the Transaction Agreements have been duly authorized by
Investor.

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
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    (h)           Advice of Counsel and Tax
Advisors.  Investor has obtained, or has had the opportunity to
obtain, the advice of independent legal and tax counsel with respect to this
Agreement and all legal and tax matters relating hereto or arising in connection
herewith.

     

    (i)           Restricted
Securities.  Investor understands and acknowledges
that:

     

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

     

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

     

    4.           Covenants.

     

    (a)           Removal of
Legend.  Certificates evidencing the Conversion Stock shall not
contain any legend (i) while a registration statement covering the resale of the
Conversion Stock is effective under the Securities Act, or (ii) following any
sale of the Conversion Stock pursuant to Rule 144, or (iii) if the Conversion
Stock is eligible for sale without restriction under Rule 144, or (iv) if
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the SEC). The Company shall promptly cause its counsel to issue a legal opinion
to its transfer agent if required by the transfer agent to effect the removal of
the legend hereunder. If all or any portion of a Warrant is exercised at a time
when there is an effective registration statement to cover the resale of the
Conversion Stock or such Conversion Stock is being acquired pursuant to a
cashless exercise and is eligible for sale under Rule 144 without restriction,
such Conversion Stock shall be issued free of all legends. The Company agrees
that at such time as a legend is no longer required hereunder, it will, no later
than five business days following the delivery by Investor to  the
transfer agent of a certificate representing the Conversion Stock issued with a
restrictive legend and simultaneous written notice to the Company (including the
CEO, CFO and the Company’s outside counsel as set forth in the Notice Section to
this Agreement) (such fifth business day, the “Legend Removal Date”), deliver
or cause to be delivered to Investor a certificate representing such stock that
is free from all restrictive and other legends. The Company may not make any
notation on its records or give instructions to its transfer agent that enlarge
the restrictions on transfer set forth in the Transaction
Agreements.   As liquidated damages and Investor’s sole recourse
for damages against the Company, the Company shall pay to Investor, in cash, as
liquidated damages in full and not as a penalty, for each $1,000 of Conversion
Stock (based on the Fair Market Value (as defined in the Warrants) of Common
Stock on the date such Conversion Stock is submitted to the Company or its
transfer agent) delivered for removal of the restrictive legend, $1 per business
day for each business day after the Legend Removal Date (increasing to $2 per
business day after the tenth business day following the date such damages have
begun to accrue) until such certificate is delivered without a legend, unless
the Company is disputing such legend removal in good faith. Notwithstanding the
foregoing, unless the Company is disputing such legend removal in good faith, if
the failure to deliver such certificate is the result of the Company’s willful
action or omission, then Investor’s remedies shall not limited as set forth in
the immediately preceding sentence.

     

    
      
         

      

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

     

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

     

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

     

    5.           Dispute
Resolution.

     

    (a)           General
Provisions.

     

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

     

    
      
         

      

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

     

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

     

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

     

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

     

    (c)           Mediation.  If a
Dispute is not resolved by negotiation as provided in Section 5(b) within 45
days from the delivery of the Initial Notice, then either party may submit the
Dispute for resolution by mediation pursuant to the CPR Institute for Dispute
Resolution (the “CPR”)
Model Mediation Procedure as then in effect.  The parties shall (i)
conduct the mediation in Chicago, Illinois, and (ii) select a mutually agreeable
mediator from the CPR Panels of Distinguished Neutrals in the selected
location.  If the parties are unable to agree upon a mediator, the
parties agree that CPR shall select a mediator from its panels consistent with
its mediation rules.  The parties shall agree to a mutually convenient
date and time to conduct the mediation; provided that the mediation must occur
within 30 days of the request unless a later date is agreed to by the parties in
writing.  Each party shall bear its own fees, costs and expenses and
an equal share of the expenses of the mediation.  Each party shall
designate an individual to have full and complete authority to resolve the
Dispute and to represent its interests in the mediation, and each party may, in
its sole discretion, include any number of other representatives in the
mediation process.  At the commencement of the mediation, either party
may request to submit a written mediation statement to the
mediator.  If a Dispute is not resolved by mediation pursuant to this
section, the parties are free to pursue any relief not inconsistent with this
Agreement.  The parties agree that mediation pursuant to this section must
precede the commencement of any formal action regarding a dispute, e.g.,
litigation, except that nothing in this provision will prohibit a party from
seeking any injunctive relief to which it may be entitled.  Nothing in this
provision will prohibit a party from arguing that a failure to timely seek
injunctive relief by the other demonstrates that there is no reasonable threat
of immediate harm.

     

    
      
         

      

      
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    6.           Miscellaneous.

     

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

     

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

     

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

     

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

     

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

     

    (f)           No Third-Party
Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
person.

     

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

     

    
      
        
           

        

        
          10

          
            

          

        

        
           

        

      

    

     

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

     

    Patient
Safety Technologies, Inc.

    43460
Ridge Park Drive, Suite 140

    Temecula,
CA 92951

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

    Facsimile:
951.587.6237

     

    with a
copy to:

     

    Reed
Smith LLP

    101
Second Street, Suite 2000

    San
Francisco, CA 94105

    Attention:
Donald C. Reinke

    Facsimile:
415.391.8269

    

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

     

    (h)           Expenses. Each party shall be
responsible for its own fees and expenses, incurred in connection with the
preparation, execution and delivery of this Agreement and the other
Transaction  Agreements.

     

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

     

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

     

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

     

    (l)           Counterparts. This Agreement
may be executed in any number of counterparts, each of which shall be an
original, but all of which together shall be deemed to constitute one
instrument.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, the parties hereto have caused this Warrant Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.

     

    

    
      
        
          
            
              
                
                  
                    	 
      	
                            COMPANY:

                          
	 	 
	 
      	
                            Patient
      Safety Technologies, Inc.

                          
	 
      	
                            a
      Delaware corporation

                          
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                            By:

                          	 
      
	 
      	 
      	
                            Signature

                          
	 	 	 

                  

                

              

            

          

        

      

    

    
      
        
          	 
      	
                  Print
      Name:

                	 
      

        

      

    

    
      
        
          	 
      	
                  Title:

                	 
      

        

      

    

     

    CARDINAL
HEALTH, INC.

     

     

    
      
        
          
            
              	
                      By:

                    	 
      	 

            

          

        

      

       

      
        
          
            
              	
                      Print
      Name of Authorized Signatory:

                    	 
      	 

            

          

        

      

       

      
        
          
            
              	
                      Title
      of Authorized Signatory:

                    	 
      	 

            

          

        

      

       

      
        
          
            
              	
                      EIN
      for Investor:

                    	 
      	 

            

          

        

      

       

      
        
          
            
              	
                      Email
      Address of Investor:

                    	 
      	 

            

          

        

      

       

      
        
          
            
              	
                      Facsimile
      Number of Investor:

                    	 
      	 

            

          

        

      

       

      
        
          
            
              
                
                  	
                          Address
      for Notice of Investor:

                        	 
      	 
	 
      	 
      	 
	 
      	 
      	 

                

              

            

          

        

      

       

      Address
for Delivery of Securities for Investor

      
        
          
            
              
                
                  	
                          (if
      not same as address for notice):

                        	 
      	 
	 
      	 
      	 
	 
      	 
      	 

                

              

            

          

        

      

      

        
          
             

          

          
            1Exhibit
10.3

      

    REGISTRATION
RIGHTS AGREEMENT

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    "SEC" shall mean the
Securities and Exchange Commission.

     

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

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

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

     

    3.           MANDATORY
REGISTRATION.

     

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

     

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

     

    4.           "PIGGYBACK" REGISTRATION
RIGHTS.

     

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

    
      
         

      

      
        B-2

        
          

        

      

      
         

      

    

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

     

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

     

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

     

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

     

    (b)           Subject
to Section 11 hereof, if filed pursuant to Section 3, prepare and file with the
SEC such amendments and post-effective amendments to the Registration Statement
as may be necessary to keep the Registration Statement continuously effective
for the period specified in Section 3(b); cause the related prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any successor rule) under the Securities Act; and
use its commercially reasonable efforts to comply with the provisions of the
Securities Act applicable to it with respect to the disposition of all
Registrable Shares covered by the Registration Statement prior to the Mandatory
Registration Termination Date in accordance with the intended methods of
distribution set forth in the Registration Statement;

    
      
         

      

      
        B-3

        
          

        

      

      
         

      

    

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

     

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

     

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

     

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

     

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

    
      
         

      

      
        B-4

        
          

        

      

      
         

      

    

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        B-5

        
          

        

      

      
         

      

    

    9.           INDEMNIFICATION.

     

    (a)           To
the fullest extent permitted by law, the Company will, notwithstanding any
termination of this Agreement, indemnify and hold harmless the Investor, any
investment banking firm acting as an underwriter for the Investor, any
broker/dealer acting on behalf of the Investor and each officer and director
of  Investor, such underwriter, such broker/dealer and each person, if
any, who controls the Investor, such underwriter or broker/dealer within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which they may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue or alleged untrue statement of any material fact contained in the
Registration Statement, in any preliminary prospectus or final prospectus
relating thereto or in any amendments or supplements to the Registration
Statement or any such preliminary prospectus or final prospectus, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act or any state securities laws, or any rule or regulation
thereunder, in connection with the performance of its obligations hereunder; and
will reimburse Investor, such underwriter, broker/dealer or such officer,
director or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 9(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, damage, liability or action to the extent, but only to the
extent, that it arises out of or is based upon (i) an untrue statement or
alleged untrue statement or omission of material fact contained in the
Registration Statement, any preliminary prospectus or final prospectus relating
thereto or any amendments or supplements to the Registration Statement or any
such preliminary prospectus or final prospectus, in reliance upon and in
conformity with written information regarding Investor furnished by Investor
expressly for use in the Registration Statement or any such preliminary
prospectus or final prospectus or (ii) an untrue statement or alleged untrue
statement or omission in the Registration Statement or any prospectus that is
corrected in any subsequent amendment or supplement to the Registration
Statement or prospectus that was delivered to the Investor before the pertinent
sale or sales by the Investor, if such losses or damages would not have arisen
had the Investor delivered such subsequent document.

     

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

    
      
         

      

      
        B-6

        
          

        

      

      
         

      

    

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

     

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

    

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

    
      
         

      

      
        B-7

        
          

        

      

      
         

      

    

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

     

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

     

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

    
      
         

      

      
        B-8

        
          

        

      

      
         

      

    

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

     

    12.         TRANSFER OF REGISTRATION
RIGHTS.  None of the rights of Investor under this Agreement
shall be transferred or assigned to any person unless (i) such person is a
Qualifying Holder (as defined below), and (ii) such person agrees to become a
party to, and bound by, all of the terms and conditions of, this
Agreement.  For purposes of this Section 12, the term "Qualifying Holder"
shall mean, with respect to Investor, (a) any corporation, partnership, limited
liability company or other entity or association controlling, controlled by, or
under common control with, Investor, (b) any corporation, partnership, limited
liability company or other entity or association into which Investor is merged
or which acquires the capital stock of Investor or substantially all of the
assets of Investor or (c) any person, corporation, partnership, limited
liability company or other entity or association that acquires from Investor
greater than 50% of the Warrant Shares or portions of the Warrants representing
the right to acquire greater than 50% of the Warrant Shares.  None of
the rights of Investor under this Agreement shall be transferred or assigned to
any person (including, without limitation, a Qualifying Holder) that acquires
Registrable Shares in the event that and to the extent that such person is
eligible to resell such Registrable Shares without restriction (including
without any requirement concerning the availability of adequate current public
information concerning the Company) pursuant to Rule 144 of the Securities
Act.  After any transfer in accordance with this Section 12 the rights
and obligations of the Investor as to any transferred Registrable Shares shall
be the rights and obligations of such Qualifying Holder transferee holding such
Registrable Shares.

    
      
         

      

      
        B-9

        
          

        

      

      
         

      

    

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

     

    14.         MISCELLANEOUS.

     

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

     

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

     

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

    
      
         

      

      
        B-10

        
          

        

      

      
         

      

    

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

     

    Patient
Safety Technologies, Inc.

    43460
Ridge Park Drive, Suite 140

    Temecula,
CA 92951

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

    Facsimile:
951.587.6237

     

    with a
copy to:

     

    Reed
Smith LLP

    101
Second Street, Suite 2000

    San
Francisco, CA 94105

    Attention:
Donald C. Reinke

    Facsimile:
415.391.8269

    

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

     

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

     

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

     

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

     

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

     

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

     

    [Signature
Page to Follow]

    
      
         

      

      
        B-11

        
          

        

      

      
         

      

    

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

     

    
      
        	
                CARDINAL
      HEALTH, INC.

              
	 
      
	
                By:

              	
                   

              
	 
      	
                Name:

              
	 
      
	
                PATIENT
      SAFETY TECHNOLOGIES, INC.

              
	 
      
	
                By:

              	
                   

              
	 
      	
                Name:

              

      

    

    
      
         

      

      
        B-12

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