Document:

Exhibit
10.1

SECURITIES
PURCHASE AGREEMENT

 This Securities Purchase Agreement (together
with all amendments, supplements, changes, schedules and exhibits hereto,
collectively, this “Agreement”)
is dated as of August __, 2006 by and among Phase III Medical, Inc., a Delaware
corporation (the “Company”),
and the purchaser identified on the signature page hereto (including its
successors and assigns, a “Purchaser”).

WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506
promulgated thereunder, the Company desires to issue and sell to the Purchaser,
and the Purchaser desires to purchase from the Company, securities of the
Company as more fully described in this Agreement.

NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained
in this Agreement, and for other good and valuable consideration the receipt
and adequacy of which are hereby acknowledged, the Company and the Purchaser
agree as follows:

ARTICLE
I.

DEFINITIONS

1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement the following
terms have the meanings indicated in this Section 1.1:

“Action” shall have the meaning ascribed
to such term in Section 3.1(j).

“Affiliate” means any Person that,
directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person, as such terms are used
in and construed under Rule 144 under the Securities Act. With respect to a
Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Purchaser will be
deemed to be an Affiliate of such Purchaser.

“Board” shall mean the Company’s Board
of Directors.

“Business Day” means any day except
Saturday, Sunday, any day which shall be a federal legal holiday in the United
States or any day on which banking institutions in the State of New York are
authorized or required by law or other governmental action to close.

“Closing” means the closing of the
purchase and sale of the Securities pursuant to Section 2.1.

“Closing Date” means the Business Day
when all of the Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to (i) the Purchaser’s
obligations to pay the Purchase Price and (ii) the Company’s obligations to
deliver the Securities have been satisfied or waived.

“Commission” means the Securities and
Exchange Commission.

“Common Stock” means the common stock of
the Company, par value $.001 per share, and any

 

other class of securities
into which such securities may hereafter be reclassified or changed into.

“Disclosure Schedules” shall have the
meaning ascribed to such term in Section 3.1.

“Effective Date” means the date that the
Registration Statement filed by the Company pursuant to the Registration Rights
Agreement is first declared effective by the Commission.

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

“Exhibits” shall mean the following
exhibits attached hereto and made a part of this Agreement:

Exhibit A
—          Registration Rights Agreement

Exhibit B
—           The Warrants

“GAAP” shall have the meaning ascribed
to such term in Section 3.1(i).

“Intellectual Property Rights” shall
have the meaning ascribed to such term in Section 3.1(n).

“Liens” means a lien, charge, security
interest, encumbrance, right of first refusal, preemptive right or other
restriction.

“Material Adverse Effect” shall have the
meaning assigned to such term in Section 3.1(b).

“Material Permits” shall have the
meaning ascribed to such term in Section 3.1(l).

“Person” means an individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or
an agency or subdivision thereof) or other entity of any kind.

“Purchase Price” means $.044 per share
of Common Stock in United States dollars and in immediately available funds.

“Registration Rights Agreement” means
the Registration Rights Agreement, dated the date hereof, among the Company and
the Purchaser, in the form of Exhibit A attached hereto.

“Registration Statement” means a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale of the Shares and Warrant Shares by
the Purchaser as provided for in the Registration Rights Agreement.

“Required Approvals” shall have the
meaning ascribed to such term in Section 3.1(e).

“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.

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“SEC Reports” shall have the meaning
ascribed to such term in Section 3.1(h).

“Securities” means the Common Stock, the
Warrants and the Warrant Shares.

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

“Shares” means the shares of Common
Stock which are being issued and sold by the Company to the Purchaser at the
Closing.

“Short Sales” shall include all “short
sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but
shall not be deemed to include the location and/or reservation of borrowable
shares of Common Stock).

“Subsidiary” means NeoStem, Inc., a
Delaware corporation.

“Termination Date” shall mean the
earlier of (i) mutual written termination of this Agreement by the Company and
the Purchaser, and (iii) July 31, 2006 (subject
to a the Company’s right to extend through August 30, 2006).

“Transaction Documents” means this
Agreement, the Warrants and the Registration Rights Agreement.

“Warrants” means the aggregate amount of
Common Stock purchase warrants, in the form of Exhibit B to this
Agreement.

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

ARTICLE II.

PURCHASE AND SALE

2.1           Closing. At the Closing, upon
the terms and subject to the conditions set forth herein, Purchaser shall
purchase and the Company shall issue and sell to the Purchaser such number of
shares of Common Stock and Warrants to purchase such number of shares of Common
Stock as set forth opposite such Purchaser’s name on the signature page hereto
for the aggregate Purchase Price.  The
Company may hold a Closing at any time prior to July 31, 2006 (subject to the
right for the Company to extend through August 30, 2006) provided that the
conditions to Closing as specified herein have been satisfied, which shall
occur at the offices of Company’s counsel, Lowenstein Sandler PC, 1251 Avenue
of the Americas, New York, New York 10020 at 12:00 p.m. or such other time
and/or location as the parties shall mutually agree.

2.2 Deliveries.

(a) At the Closing, the
Company shall deliver or cause to be delivered to the Purchaser the following:

(i) this Agreement duly
executed by the Company;

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(ii) a stock certificate
for the Purchaser’s purchased Shares, registered in the name of the Purchaser;

(iii) a Warrant
registered in the name of the Purchaser to purchase up to a number of shares of
Common Stock equal to 50% of the Shares purchased by the Purchaser; and

(iv) the Registration
Rights Agreement duly executed by the Company.

(b) At the Closing, the
Purchaser shall deliver or cause to be delivered to the Company the following:

(i) this Agreement duly
executed by the Purchaser;

(ii) the aggregate
Purchase Price allocable to the Shares being purchased by the Purchaser and set
forth below the Purchaser’s signature block on the signature page hereto, in
United States dollars and in immediately available funds; and

(iii) the Registration
Rights Agreement duly executed by the Purchaser.

2.3 Closing
Conditions.

(a) The obligations
of the Company hereunder in connection with the Closing are subject to the
following conditions being met:

(i) the accuracy in all
material respects when made and on the Closing Date of the representations and
warranties of the Purchaser contained herein;

(ii) all obligations,
covenants and agreements of the Purchaser required to be performed at or prior
to the Closing Date shall have been performed; and

(iii) the delivery by the
Purchaser of the items set forth in Section 2.2(b) of this Agreement.

(b) The obligations of
the Purchaser hereunder in connection with the Closing are subject to the
following conditions being met:

(i) the accuracy in all
material respects on the Closing Date of the representations and warranties of
the Company contained herein;

(ii) all obligations,
covenants and agreements of the Company required to be performed at or prior to
the Closing Date shall have been performed;

(iii)  the delivery by the Company of the items set
forth in Section 2.2(a) of this Agreement; and

(iv) there shall have
been no Material Adverse Effect with respect to the Company since the date
hereof.

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ARTICLE
III.

REPRESENTATIONS AND WARRANTIES

3.1 Representations
and Warranties of the Company. The Company hereby makes the representations
and warranties set forth below to the Purchaser.

(a) Subsidiaries.
The Company owns, directly or indirectly, all of the capital stock or other
equity interests of the Subsidiary free and clear of any Liens, and all 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. 
The Company has no other direct or indirect subsidiaries other than the
Subsidiary.

(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. 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, would not have a material adverse effect on
the results of operations, assets, business or condition (financial or
otherwise) of the Company and the Subsidiary (a “Material Adverse Effect”).

(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 Documents and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of each of the Transaction Documents by
the Company and the consummation by it of the transactions contemplated hereby
and 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 or its
stockholders in connection therewith. Each Transaction Document has been (or
upon delivery will have been) duly executed by the Company and, when delivered
in accordance with the terms hereof and 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.

(d) No Conflicts.
The execution, delivery and performance of the Transaction Documents by the
Company 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 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

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agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary debt or
otherwise) by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) 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 would not 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 Documents, other
than (i) the filing with the Commission of the Registration Statement, and (ii)
the filing of Form D with the Commission and such filings as are required to be
made under applicable state securities laws (collectively, the “Required Approvals”).

(f) Issuance of the
Securities. The Securities are duly authorized and, when issued and paid
for in accordance with the applicable Transaction Documents, will be duly and
validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company other than restrictions on transfer provided for in the
Transaction Documents (including restrictions under federal and state
securities laws). The Warrant Shares, when issued in accordance with the terms
of the Transaction Documents, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents (including
restrictions under federal and state securities laws).

(g) Capitalization.
The capitalization (including warrants, options, exchangeable and/or
convertible securities) of the Company as of June 2, 2006
is as set forth on Schedule 3.1(g).  No
Person has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. 
All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable.

(h) SEC Reports.
The Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the one year
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
(including the financial statements, exhibits and schedules thereto) complied
in all material respects with the requirements of the Securities Act and the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, as applicable and did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of material fact or omit
to state a material fact required to be stated therein or necessary in order to
made the statements therein, in light of the circumstances they were made, not
misleading.

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Each of the financial
statements (including, in each case, any related notes thereto) contained in
the SEC Reports (the “Company Financials”),
including any SEC Reports filed after the date hereof until the Closing, as of
their respective dates, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (iii) fairly presented the financial
position of the Company at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not, or are not expected to be,
material in amount. The balance sheet of the Company as of December 31, 2005 is
hereinafter referred to as the “Company
Balance Sheet.”  Except as
disclosed in the Company Financials, the Company does not have any liabilities
(absolute, accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP which are, individually
or in the aggregate, material to the business, results of operations or financial
condition of the Company, except liabilities (i) provided for in the Company
Balance Sheet, or (ii) incurred since the date of the Company Balance Sheet in
the ordinary course of business consistent with past practices and which would
not reasonably be expected to have a Material Adverse Effect.

(i) Material Changes.
Since the date of the Company Balance Sheet, except as specifically disclosed
in or contemplated by a subsequent SEC Report, (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 not required to be reflected in the Company’s
financial statements pursuant to GAAP United States generally accepted
accounting principles applied on a consistent basis during the periods involved
(“GAAP”) or disclosed in
filings made with the Commission, (iii) the Company has not declared or made
any dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock, and (v) the Company has not made any changes to its
accounting principals, practices or methods, its disclosure controls and
procedures or its internal control over financial reporting. The Company does
not have pending before the Commission any request for confidential treatment
of information.

(j) Litigation.
Except as set forth on Schedule 3.1(j), there is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company, the
Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) would, if there were an unfavorable
decision, result in a Material Adverse Effect.

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(k) Compliance.
Neither the Company nor the Subsidiary (i) is in default under or in violation
of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any
Subsidiary under), any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is in violation of any statute, rule
or regulation of any governmental authority, except in each case as would not
result in a Material Adverse Effect.

(l) Regulatory Permits.
Except as set forth in Schedule 3.1(l), the Company and the Subsidiary
possesses all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities necessary
to conduct their respective businesses as described in the SEC Reports, except
where the failure to possess such permits would not result in a Material
Adverse Effect (“Material Permits”).

(m) Title to Assets.
The Company and the Subsidiary have good and marketable title in fee simple to
all real property (if any) owned by them that is material to the business of
the Company and the Subsidiary and good and marketable title in all personal
property owned by them that is material to the business of the Company and the
Subsidiary, in each case free and clear of all Liens, except for Liens as do
not materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
the Subsidiary and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties.

(n) Patents and
Trademarks. The Company and the Subsidiary have, or have rights to use, all
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
and which the failure to so would not result in a Material Adverse Effect
(collectively, the “Intellectual Property
Rights”). Neither the Company nor the Subsidiary has received a
notice (written or otherwise) that the Intellectual Property Rights used by the
Company or the Subsidiary violates or infringes upon the rights of any Person.
To the best knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights. The Company and its Subsidiary have used
their respective best efforts using security measures to protect the secrecy, confidentiality
and value of all of their Intellectual Property Rights and Intellectual
Property, except where failure to do so would not have a Material Adverse
Effect.

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

(p) Private Placement.
Assuming the accuracy of the Purchaser’s representations and warranties

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set forth in Section
3.2, no registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Purchaser as contemplated hereby.

(q) No General
Solicitation. Neither the Company nor any person acting on behalf of the
Company has offered or sold any of the Securities by any form of general
solicitation or general advertising. The Company has offered the Securities for
sale only to the Purchasers and certain other “accredited investors” within the
meaning of Rule 501 under the Securities Act.

3.2 Representations
and Warranties of the Purchaser. The Purchaser hereby represents and
warrants as of the date hereof and as of the Closing Date to the Company as
follows:

(a) Organization;
Authority. Such Purchaser if an entity is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization
with full right, corporate or partnership power and authority to enter into and
to consummate the transactions contemplated by the Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder. The execution,
delivery and performance by such Purchaser of the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate or similar
action on the part of such Purchaser. Each Transaction Document to which it is
a party has been duly executed by such Purchaser, and when delivered by such
Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against it 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.

(b) Own Account.
Such Purchaser understands that the Securities are “restricted securities” and
have not been registered under the Securities Act or any applicable state
securities law and is acquiring the Securities as principal for its own account
and not with a view to or for distributing or reselling such Securities or any
part thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of such Securities
in violation of the Securities Act or any applicable state securities law and
has no direct or indirect arrangement or understandings with any other persons
to distribute or regarding the distribution of such Securities (this
representation and warranty not limiting such Purchaser’s right to sell the
Securities pursuant to the Registration Statement or otherwise in compliance
with applicable federal and state securities laws) in violation of the
Securities Act or any applicable state securities law. Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its business.

(c) Purchaser Status.
At the time such Purchaser was offered the Securities, it was, and at the date
hereof it is, and on each date on which it exercises any Warrants it will be
either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under the Securities Act. Such Purchaser is not
required to be registered as a broker-dealer under Section 15 of the Exchange
Act.

(d) Experience of Such
Purchaser. Such Purchaser, either alone or together with its

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representatives, has such
knowledge, sophistication and experience in business and financial matters so
as to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an investment
in the Securities and, at the present time, is able to afford a complete loss
of such investment.

(e) General
Solicitation. Such Purchaser is not purchasing the Securities as a result
of any advertisement, article, notice or other communication regarding the
Securities published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other general
solicitation or general advertisement.

(f) Short Sales and
Confidentiality Prior To The Date Hereof. Such Purchaser has not directly
or indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Purchaser, executed any Short Sales or granted any
option for the purchase of or entered into any hedging or similar transaction
with the same economic effect as a Short Sale, in the securities of the Company
since the time period beginning two weeks prior to the time that such Purchaser
was first contacted regarding an investment in the Company through the date
hereof. During such period, neither such Purchaser nor any Person acting on
behalf of or pursuant to any understanding with such Purchaser, has taken,
directly or indirectly, any actions to trade in the Company’s Securities that
might reasonably be expected to cause or result, under the Securities Act or
Exchange Act, or otherwise, or that has constituted, stabilization or
manipulation of the price of the Common Stock. Additionally, Purchaser agrees
to comply with Regulation M under the Exchange Act.

ARTICLE IV.

OTHER AGREEMENTS AND ACKNOWLEDGEMENTS OF THE PARTIES

4.1 Transfer
Restrictions.

(a) The Securities
may only be disposed of in compliance with state and federal securities laws.
In connection with any transfer of Securities other than pursuant to an
effective registration statement or Rule 144, to the Company or to an affiliate
of the Purchaser, the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company (the cost of which will be borne by the Company), the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of transfer,
any such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of the Purchaser under this Agreement and
the Registration Rights Agreement.

(b) The Purchaser agrees
to the imprinting, so long as is required by this Section 4.1, of a
legend on any of the Securities in the following form:

THESE SECURITIES  HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION NOR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES 

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ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.

(c) Certificates
evidencing the Shares and the Warrant Shares shall not be required to bear any
legend (including the legend set forth in Section 4.1(b) hereof): (i)
while a registration statement (including the Registration Statement) covering
the resale of such security is effective under the Securities Act, or (ii)
following any sale of such Shares or Warrant Shares pursuant to Rule 144, or
(iii) if such Shares or Warrant Shares are eligible for sale under Rule 144(k).
If requested by a Person holding the Shares, the Warrants or the Warrant
Shares, the Company shall take action reasonably requested by the Purchaser
(including, but not limited to, causing Company counsel to issue a legal
opinion to the Company’s transfer agent) after the Effective Date if required
by the Company’s transfer agent to effect the removal of the legend hereunder
provided that the Person requesting the removal of such legend shall have
provided to such counsel such documents as it may reasonably request and are
normally provided in accordance with industry standards.

(d) The Purchaser agrees
that the removal of the restrictive legend from certificates representing Securities
as set forth in this Section 4.1 is predicated upon the Company’s reliance that
the Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus
delivery requirements, or an exemption therefrom, and that if Securities are
sold pursuant to a Registration Statement, they will be sold in compliance with
the plan of distribution set forth therein.

4.2 Reservation and
Listing of Securities.  The Company
shall maintain a reserve from its duly authorized shares of Common Stock for
issuance pursuant to the Transaction Documents in such amount as may be
required to fulfill its obligations in full under the Transaction Documents.

4.3 Form D; Blue Sky
Filings. The Company agrees to timely file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof,
promptly upon request of any Purchaser. The Company shall take such action as
the Company shall reasonably determine is necessary in order to obtain an
exemption for, or to qualify the Securities for, sale to the Purchasers at the
Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request
of any Purchaser.

ARTICLE
V.

MISCELLANEOUS

5.1 Termination.
On the Termination Date, this Agreement shall be automatically terminated.

 11
 

 

5.2 Fees and Expenses.    Except as expressly set forth in the
Transaction Documents, each party to the Transaction Documents shall pay the
fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the transactions
contemplated by the Transaction Documents. 
The Company shall pay all transfer agent fees, stamp taxes and other
taxes and duties levied in connection with the delivery of any Securities to
the Purchasers.  In addition, the Company
shall pay any placement agent in connection with the sale of the Securities
sold a cash not to exceed 10% of the Purchase Price.  The Company may also be required to pay a
separate financial advisory fee.  In
addition, the Company may reimburse any placement agent for its reasonable expenses
incurred as part of the financing.

5.3 Entire
Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules.

5.4 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 (accompanied by
confirmation of receipt of transmission), if such notice or communication is
delivered via facsimile at the facsimile number or via e-mail at the e-mail
address respectively set forth on the signature pages attached hereto prior to
5:30 p.m. (New York City time) on a Business Day, (b) the next Business Day
after the date of transmission (accompanied by confirmation of receipt of
transmission), if such notice or communication is delivered via facsimile at
the facsimile number or via e-mail at the e-mail address respectively set forth
on the signature pages attached hereto on a day that is not a Business Day or
later than 5:30 p.m. (New York City time) on any Business Day, (c) the 2nd Business 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 set forth on the
signature pages attached hereto.

5.5 Amendments;
Waivers. No provision of this Agreement may be waived, modified,
supplemented or amended except in a written instrument signed, in the case of
an amendment, by the Company and the Purchaser or, in the case of a waiver, by
the party against whom enforcement of any such waived provision is sought. No
waiver of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right.

5.6 Headings. The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.

5.7 Successors and
Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. The Company may not
assign this Agreement 

 12
 

 

or any rights or
obligations hereunder without the prior written consent of the Purchaser (other
than by merger). The Purchaser may assign any or all of its rights under this
Agreement to any Person to whom the Purchaser assigns or transfers any
Securities, provided such transferee agrees in writing to be bound, with
respect to the transferred Securities, by the provisions of the Transaction
Documents that apply to the “Purchaser”.

5.8 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.

5.9 Governing
Law. All questions concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by and construed
and enforced exclusively 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 legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in any way any right to serve process in any other manner permitted by law. The
parties hereby waive all rights to a trial by jury. If either party shall
commence an action or proceeding to enforce any provisions of the Transaction
Documents, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys’ fees and other
costs and expenses incurred with the investigation, preparation and prosecution
of such action or proceeding.

5.10 Survival. The
representations, warranties, covenants and other agreements contained herein
shall survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable for the applicable statue of limitations.

5.11 Execution.
This Agreement may be executed in two or more counterparts, all of which when
taken together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf 

 13
 

 

such signature is
executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.

5.12 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 commercially
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.

5.13 Construction.
The parties agree that each of them and/or their respective counsel has
reviewed and had an opportunity to revise the Transaction Documents and,
therefore, the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of the Transaction Documents or any amendments hereto.

(Signature
Pages Follow)

 14
 

 

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

	
  PHASE III MEDICAL, INC.

  	
   

  	
  Address for Notice:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  420 Lexington Avenue 

  
	
   

  	
  Name: 

  	
  Robin L. Smith 

  	
   

  	
  Suite 450

  
	
   

  	
  Title: 

  	
  CEO

  	
   

  	
  New York, New York 10107

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: CEO

  
	
   

  	
   

  	
   

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

  	
   

  	
  420 Lexington Avenue

  Suite 450

  New York, New York 10107

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: General Counsel

  

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOR PURCHASER FOLLOWS]

 15
 

 

[PURCHASER
SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned has caused this Securities Purchase
Agreement to be duly executed by the authorized signatories as of the date
first indicated above.

	
  

  
	
  Name of
  Purchaser:

  	
   

  	
   

  
	
   

  
	
  Signature of
  Authorized Signatory of Purchaser:

  	
   

  	
   

  
	
   

  
	
  Name of
  Authorized Signatory:

  	
   

  	
   

  
	
   

  
	
  Title of
  Authorized Signatory:

  	
   

  	
   

  
	
   

  
	
  Email Address of
  Purchaser:

  	
   

  	
   

  
	
   

  
	
  Facsimile Number
  of Purchaser:

  	
   

  	
   

  
	
   

  
	
  Home Address of
  Purchaser:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  
	
  Business Address of Purchaser:

  	
   

  	
   

  
	
   

  
	
   

  	
   

  	
   

  
	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for
  Delivery of Securities of Purchaser (if not same as above):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Social Security
  Number or Tax ID Number of

  
	
   

  	
  Purchaser:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Aggregate
  Purchase Price:

  	
   

  	
   

  	
   

  
	
   

  	
  Number of
  Shares:

  	
   

  	
   

  	
   

  
	
   

  	
  Number of
  Warrants:

  	
   

  	
   

  	
   

  
																		

 

 16Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

This Registration
Rights Agreement (this “Agreement”) is made and entered into as of
August ___, 2006, among Phase III Medical, Inc., a Delaware corporation (the “Company”),
and the  purchaser signatory hereto (the “Purchaser”).

This Agreement is
made pursuant to the Securities Purchase Agreement, dated as of the date hereof
between the Company and the Purchaser (the “Purchase Agreement”).

Capitalized terms
used and not otherwise defined herein that are defined in the Purchase
Agreement shall have the meaning given such terms in the Purchase Agreement.

The Company and
each Purchaser hereby agrees as follows:

ARTICLE I

REGISTRATION STATEMENT

1.1
Filing of Registration Statement.
(a)  The Company will prepare and file
(which may include the preparation and filing of one or more pre-effective
amendments to any registration statements that relates to the Company’s
securities, which may be currently on file or may be subsequently filed with
the Commission), at its own expense, a registration statement on Form S-1 or
other appropriate form under the Securities Act (the “Registration Statement”)
with the Commission no later than December 31, 2006, sufficient to permit the
non-underwritten public offering and resale of the Shares and the Warrant
Shares (subject to adjustment as set forth in the Warrants) (the “Registrable
Securities”) through the facilities of all appropriate securities
exchanges, if any, on which the Company’s Common Stock is being sold or on the
over-the-counter market if the Company’s Common Stock is quoted thereon.

(b)           Piggyback Registrations Rights.
If, at any time for so long as the Company is required to maintain the
effectiveness of a Registration Statement pursuant to Section 1.2(b) of this
Agreement, 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 provide to the holder of the Registrable
Securities the opportunity to have such Registrable Securities included in such
Registration Statement; provided, that the Company shall only be required to
provide such opportunity to holders of Registrable Securities until the earlier
of (i) two years from the date of this Agreement; (ii) the date such
Registrable Securities have been sold pursuant to a Registration Statement,
(ii) the date such Registrable Securities have 
otherwise been transferred to Persons who may trade such shares without
restriction under the Securities Act, and the Company has delivered a new certificate
or other evidence of ownership for such securities not bearing a restrictive
legend, (iii) the date such Registrable Securities may

 

 

be sold without volume or manner of sale
limitations pursuant to Rule 144(k) or any similar provision then in effect
under the Securities Act in the opinion of counsel to the Company.

1.2  Effectiveness
of Registration Statement.

(a)  The Company
will use its reasonable best efforts to cause such Registration Statement to
become effective as promptly as reasonably possible.  The number of shares designated in the
Registration Statement to be registered shall include all of the Registrable
Securities and shall include appropriate language regarding reliance upon Rule
416 to the extent permitted by the Commission. 
The Company will notify each Purchaser of the date of effectiveness of
the Registration Statement within two business days of such event.

(b)  The Company will maintain the Registration
Statement or post-effective amendment filed under the terms of this Agreement
effective under the Securities Act until the earlier of (i) the date that all
of the Registrable Securities have been sold pursuant to such Registration
Statement, (ii) all Registrable Securities have been otherwise transferred to
Persons who may trade such shares without restriction under the Securities Act,
and the Company has delivered a new certificate or other evidence of ownership
for such securities not bearing a restrictive legend, (iii) all Registrable
Securities may be sold at any time, without volume or manner of sale
limitations pursuant to Rule 144(k) or any similar provision then in effect
under the Securities Act in the opinion of counsel to the Company, or (iv) two
years from the effective date of the Registration Statement (collectively, the “Effectiveness
Period”).

1.3  Fees. 
All fees, disbursements and out-of-pocket expenses and costs incurred by
the Company in connection with the preparation and filing of the Registration
Statement, in making filings with NASD or NASDR (including, without limitation,
pursuant to NASD Rule 2710), and in complying with applicable federal
securities and Blue Sky laws (including, without limitation, all attorneys’
fees of the Company) shall be borne by the Company.  The Purchaser shall bear any reasonable cost
of underwriting and/or brokerage discounts, fees, and commissions, if any,
applicable to the Registrable Securities being registered and sold by an
underwriter for a Purchaser and the fees and expenses of their counsel.  The Company shall use its reasonable best
efforts to qualify any of the Securities for sale in such states as the
Purchaser reasonably designates and shall furnish indemnification.  However, the Company shall not be required to
qualify in any state which will require an escrow or other restriction relating
to the Company and/or the sellers, or which will require the Company to qualify
to do business in such state or require the Company to file therein any general
consent to service of process and the Company shall in no event be required to
qualify in greater than five states.  The
Company at its expense will supply the Purchaser with copies of the applicable
Registration Statement and any prospectus included therein and other related
documents in such quantities as may be reasonably requested.

ARTICLE II

[Intentionally
Omitted]

 2
 

 

 

ARTICLE III

FURTHER AGREEMENTS

3.1  In the case of each registration effected by
the Company pursuant to any section herein, the Company will:

(a)           Prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to a disposition of all securities covered by such
registration statement;

(b)           Notify the Purchaser
as promptly as reasonably possible: (i)(A) upon request by the Purchaser, when
the Commission notifies the Company whether there will be a “review” of the
Registration Statement and whenever the Commission comments in writing on the
Registration Statement (the Company shall upon request provide true and
complete copies thereof and all written responses thereto to each of the
Holders, subject, if appropriate, to the execution of confidentiality
agreements in form acceptable to the Company); and (B) with respect to the
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 during the period of effectiveness of the
Registration Statement for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the Commission or any other federal or state governmental authority of any stop
order suspending the effectiveness of the 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 the Registration Statement ineligible for inclusion therein or any
statement made in the Registration Statement or Prospectus or any document
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the 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; provided  that, for not
more than 30 consecutive business days (or a total of not more than 120
calendar days in any 12-month period), the Company may delay the disclosure of
material non-public information concerning the Company the public disclosure of
which at the time is not, in the good faith opinion of the Company in the best
interests of the Company and which may, based on the written advice of outside
counsel, be delayed under applicable law or regulation (an “Allowed Delay”); provided, further, that the Company shall promptly (a) notify the
Purchaser in writing of the existence of (but in no event, without the prior
written consent of such Purchaser, shall the Company disclose to such Purchaser
any of the facts or circumstances regarding) material non-public information
giving rise to an Allowed Delay and (b) advise the Purchaser in writing to
cease all sales under such registration statement until the termination of the
Allowed Delay;

 3
 

 

 

(d)           use its commercially
reasonable best efforts to prevent the issuance of any stop order or other
suspension of effectiveness of a registration statement, and, if such an order
is issued, to obtain the withdrawal of such order at the earliest possible
moment and to notify Purchaser (and, in the event of an underwritten offering,
the managing underwriter) of the issuance of such order and the resolution
thereof;

(e)           If NASD Rule 2710
requires any broker-dealer to make a filing prior to executing a sale of
Registrable Securities by the Purchaser, make an Issuer Filing with the NASD
Corporate Financing Department pursuant to NASD Rule 2710 and respond within a
reasonable period of time to any comments received from NASD in connection
therewith.

(f)            Otherwise
use its commercially reasonable best efforts to comply with all applicable
rules and regulations of the Commission.

(g)           The
Company shall either (a) cause all the Registrable Securities covered by a
Registration Statement to be listed on each securities exchange on which
securities of the same class or series issued by the Company are then listed,
if any, if the listing of such Registrable Securities is then permitted under
the rules of such exchange, or (b) secure designation and quotation of all the
Registrable Securities covered by the Registration Statement on the Nasdaq
National Market or the Nasdaq Capital Market, or, (c) if the Company is
unsuccessful in satisfying the preceding clauses (a) or (b), the Company shall
secure the inclusion for quotation on The American Stock Exchange, Inc. or if
it is unable to, the Over The Counter Bulletin Board for such Registrable
Securities and, without limiting the generality of the foregoing, to attempt to
arrange for at least two (2) market makers to register with the National
Association of Securities Dealers, Inc. (“NASD”) as such with respect to
such Registrable Securities. The Company shall pay all fees and expenses in
connection with satisfying its obligation under this Section 3(g).

ARTICLE
IV

INDEMNIFICATION
AND CONTRIBUTION

(a)            To the extent the Purchaser includes
any Shares or Warrant Shares in a registration statement pursuant to the terms
hereof, the Company will indemnify and hold harmless the Purchaser, its
directors and officers, and each Person, if any, who controls the Purchaser
within the meaning of the Securities Act, from and against, and will reimburse
the Purchaser, its directors and officers and each controlling Person with
respect to, any and all loss, damage, liability, cost, and expense to which the
Purchaser or such controlling Person may become subject under the Securities
Act or otherwise, insofar as such losses, damages, liabilities, costs, or
expenses are caused by any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, any prospectus
contained therein or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading; provided, however,
that the Company will not be liable in any such case to the extent that any
such loss, damage, liability, cost or expense arises out of or is based upon
any untrue

 4
 

 

 

statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by the Purchaser or any such controlling Person in
writing specifically for use in the preparation thereof.

(b)           To the extent the Purchaser includes
any Shares or Warrant Shares in a registration statement pursuant to the terms
hereof, Purchaser will indemnify and hold harmless the Company, its directors
and officers and any controlling Person from and against, and will reimburse
the Company, its directors and officers and any controlling Person with respect
to, any and all loss, damage, liability, cost, or expense to which the Company,
its directors and officers or such controlling Person may become subject under
the Securities Act or otherwise, insofar as such losses, damages, liabilities,
costs, or expenses are caused by any untrue statement or alleged untrue
statement of any material fact contained in such registration statement, any
prospectus contained therein or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was so made in
reliance upon and in conformity with written information furnished by or on
behalf of the Purchaser specifically for use in the preparation thereof.

(c)            To the extent any indemnification by
an indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which
it would otherwise be liable hereunder to the extent permitted by law, provided
that (i) no contribution shall be made under circumstances where the
indemnifying party would not have been liable for indemnification pursuant to
the provisions hereof, (ii) no seller of securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of securities who was not
guilty of such fraudulent misrepresentation, and (iii) the amount of the
contribution together with any other payments made in respect of such loss,
damage, liability, or expense, by any seller of securities shall be limited to
the net amount of proceeds received by such seller from the sale of such
securities.

(d)           The Purchaser will cooperate with the
Company in connection with this Agreement, including timely supplying all
information and executing and returning the Selling Securityholder Notice and
Questionnaire attached hereto as Exhibit A, and any other documents
requested by the Company that are required to enable the Company to perform its
obligations to register the Shares and the Warrant Shares.

ARTICLE
V

MISCELLANEOUS

5.1  Amendments and Waivers. The provisions
of this Agreement, including the provisions of this sentence, 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 the holders of a majority of the then outstanding
Registrable Securities.

 5
 

 

 

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

5.3  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.

5.4 Execution
and Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission or by e-mail delivery of a “.pdf” format
data file, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile or “.pdf” signature page were an original
thereof.

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

5.6 Cumulative
Remedies. The remedies provided herein are cumulative and not exclusive of
any other remedies provided by law.

5.7
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 commercially 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.

5.8 Headings.
The headings in this Agreement are for convenience only, do not constitute a
part of the Agreement and shall not be deemed to limit or affect any of the
provisions hereof.

********************

 6
 

 

 

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

	
  

  	
  PHASE III MEDICAL, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
    Robin L. Smith

  
	
   

  	
  Title:

  	
    CEO

  

 

[SIGNATURE PAGE OF
PURCHASER FOLLOWS]

 7
 

 

 

[PURCHASER
SIGNATURE PAGES TO REGISTRATION RIGHTS AGREEMENT]

 

	
  Name of Purchaser:

  	
   

  

 

	
  Signature of Authorized
  Signatory of Purchaser:

  	
   

  

 

	
  Name of Authorized
  Signatory:

  	
   

  

 

	
  Title of Authorized
  Signatory:

  	
   

  

 

	
  Email Address of Purchaser:

  	
   

  

 

	
  Facsimile Number of
  Purchaser:

  	
   

  

 

	
  Address for Notice of
  Purchaser:

  	
   

  

 

 8

 

 

Annex
A

PHASE
III MEDICAL, INC.

Selling
Securityholder Notice and Questionnaire

The undersigned
beneficial owner of common stock, par value $0.001 per share (the “Common
Stock”), of Phase III Medical, Inc., a Delaware corporation (the “Company”),
(the “Registrable Securities”) understands that the Company has filed or
intends to file with the Securities and Exchange Commission (the “Commission”)
a registration statement on an appropriate form for the registration and resale
under Rule 415 of the Securities Act of 1933, as amended (the “Securities
Act”), of the Registrable Securities, in accordance with the terms of the
Registration Rights Agreement, dated as of _________   ,
2006 (the “Registration Rights Agreement”), among the Company and the
Purchaser. A copy of the Registration Rights Agreement is available from the
Company upon request at the address set forth below. All capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto in the
Registration Rights Agreement.

Certain legal
consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus. Accordingly, the Purchaser
and beneficial owners of Registrable Securities are advised to consult their
own securities law counsel regarding the consequences of being named or not
being named as a selling securityholder in the Registration Statement and the
related prospectus.

NOTICE

The undersigned
beneficial owner (the “Selling Securityholder”) of Registrable
Securities hereby elects to include the Registrable Securities owned by it and
listed below in Item 3 (unless otherwise specified under such Item 3)
in the Registration Statement.  The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:

 9
 

 

 

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: 

 

3.
Beneficial Ownership of Registrable Securities:

	
  

  	
  (a)

  	
  Type and Principal Amount of Registrable Securities
  beneficially owned:

  

 

	
  

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  

 

 10
 

 

 

4.
Broker-Dealer Status:

	
  

  	
  (a)

  	
  Are you a broker-dealer?

  

 

Yes             No

 

	
  

  	
  (b)

  	
  If “yes” to Section 4(a), did you receive your
  Registrable Securities as compensation for investment banking services to the
  Company.

  

 

Yes            No

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

	
  

  	
  (c)

  	
  Are you an affiliate of a broker-dealer?

  

 

Yes             No

	
  

  	
  (d)

  	
  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             No

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.

 

	
  

  	
  (a)

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

  

 

 11
 

 

 

 

 

 

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 at any time while
the Registration Statement remains effective.

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 and any amendments or
supplements thereto. 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 Name:

  	
   

  

 

	
  

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  

 

 12

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