Document:

AGREEMENT

     

    THIS
      AGREEMENT
      is
      effective as of February 27, 2007, by and between Vero Management, L.L.C.,
      a
      Delaware limited liability company with its principal place of business located
      at 936A Beachland Boulevard, Suite 13, Vero Beach, FL 32963 (“Vero”) and Frezer,
      Inc., a corporation organized and existing under the laws of the state of
      Nevada, with its principal place of business located at 936A Beachland
      Boulevard, Suite 13, Vero Beach, FL 32963 (“Client”). Vero and Client may each
      be referred to as a “Party” or collectively as the “Parties.”

    

    RECITALS

    

    WHEREAS,
      Vero is
      engaged in the business of providing managerial and administrative support
      services to public and private companies; and

    

    WHEREAS,
      Client
      desires to engage the services of Vero as described herein and Vero desires
      to
      perform such services, all in accordance with the terms and conditions herein
      set forth;

    

    NOW,
      THEREFORE,
      in
      consideration of the mutual promises and covenants set forth herein, the Parties
      hereby agree as follows:

    

    
      	
              1.

            	
              Intent
                and Services

            

    

     

    It
      is the
      general nature and intent of this Agreement that Vero will provide to Client
      a
      broad range of managerial and administrative services including but not limited
      to assistance in the preparation and maintenance of its financial books and
      records, the filing of various reports with the appropriate regulatory agencies
      as are required by State and Federal rules and regulations, the administration
      of matters relating to Client’s shareholders including responding to various
      information requests from shareholders as well as the preparation and
      distribution to shareholders of relevant Client materials, and the providing
      of
      office space, corporate identity, telephone and fax services, mailing, postage
      and courier services (“Services”). This Agreement shall be liberally construed
      in order to insure that Vero provides to Client those Services necessary for
      Client to efficiently manage its business operations, efficiently respond to
      its
      shareholders and timely comply with its regulatory reporting requirements.
      The
      parties hereto specifically acknowledge and agree that Vero will not provide
      any
      legal, auditing, accounting, investment banking or capital formation services
      to
      Client.

    

    
      	
              2.

            	
              Term

            

    

    

    This
      Agreement shall be in effect for a term of one (1) year commencing on the date
      hereof; provide that either party may terminate this Agreement upon written
      notice to the other party at any time. At the end of the initial term, this
      Agreement shall remain in effect until terminated in writing by either party.
      All duties for payment of compensation owed to Vero and those duties that
      generally survive termination shall survive the termination of this
      agreement.

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    

    
      	
              3.

            	
              Compensation

            

    

    

    In
      consideration of the services provides hereunder, Vero shall be entitled to
      the
      following compensation: 

    

    
      	 	
              a)

            	
              Client
                shall pay Vero a fee equal to $2,000 per month for each month, or
                any part
                thereof, that the Services hereunder are provided. The Parties
                specifically agree that in no event will the monthly fees be prorated
                either due to the initiation of Services following the first day
                of a
                particular month or the termination of Services prior to month’s
                end;

            

    

    

    
      	 	
              b)

            	
              Client
                shall reimburse Vero for any out-pocket expenses incurred by Vero
                in
                connection with its Services hereunder (including, without limitation,
                expenses of consultants and advisors engaged by Vero to perform all
                or any
                part of the Services hereunder, provided such expenses are approved
                by
                Client in advance). 

            

    

    

    Vero
      shall bill Client for the Services on the first day of each month and payment
      shall be due within seven (7) business days thereafter.

    

    
      	
              4.

            	
              Independent
                Contractor

            

    

    

    Vero
      shall be, and is deemed to be, an independent contractor in the performance
      of
      its duties hereunder. Vero shall have no power to enter into any agreement
      on
      behalf of or otherwise bind Client without the express prior written consent
      of
      Client. Vero shall be free to pursue, conduct, carry on and provide for its
      own
      account (or for the account of others) similar Services to other clients.

    

    
      	
              5.

            	
              Indemnification

            

    

    

    Client
      agrees to indemnify and hold Vero and its officers, directors, shareholders,
      managers, members, agents, advisors, consultants and employees (“Indemnified
      Parties”) harmless from any and all losses, expenses, claims, damages or
      liabilities (including reasonable attorneys’ fees) incurred by any Indemnified
      Party arising out of or related to the performance of Vero's duties under this
      Agreement, and Client shall, at the option of Vero, reimburse Vero or pay
      directly for any and all legal or other expenses incurred in connection with
      the
      investigation or defense of any action or claim in connection therewith.
      Notwithstanding the aforesaid, Client shall not be liable for any loss, claim,
      damage or liability that is found (as set forth in a final judgment by a court
      of competent jurisdiction) to have resulted in a material part from any act
      by
      Vero which constitutes fraud or gross negligence by Vero.

    

    
      	6.	
              Confidentiality

            

    

    

    Vero
      agrees that any information provided to it by Client of a confidential nature
      will not be revealed or disclosed to any person or entity, except in the
      performance of this Agreement. Upon the termination of this Agreement and
      following receipt of a written request from Client, all documentation provided
      by Client to Vero will be returned to it or destroyed.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    

    
      	7.	
              Notices

            

    

    

    All
      notices hereunder shall be in writing addressed to the Party at the address
      herein set forth, or at such other address as to which notice: pursuant to
      this
      section may be given, and shall be given by personal delivery, by certified
      mail
      (return receipt requested), Express Mail or by national overnight courier.
      Notices will be deemed given upon the earlier of actual receipt or three (3)
      business days
      after being mailed or delivered to such courier service.

    

    Notices
      shall be addressed as follows:

    
      	 	 
	
              If
                to Vero:

            	
              Vero
                Management, L.L.C.

            
	 	
              936A
                Beachland Boulevard, Suite 13

            
	 	
              Vero
                Beach, FL 32963

            
	 	
              Attn:
                Kevin R. Keating, Manager 

            
	 	 
	
              If
                to Client:

            	
              Frezer,
                Inc. 

            
	 	
              936A
                Beachland Boulevard, Suite 13

            
	 	
              Vero
                Beach, FL 32963

            
	 	
              Attn:
                Kevin R. Keating, President

            

    

    

    Any
      notices to be given hereunder will be effective if executed by and sent by
      the
      attorneys for the Parties giving such notice, and in connection therewith the
      Parties and their respective counsel agree that, in giving such notice, such
      counsel may communicate directly in writing, with such Parties to the extent
      necessary to give such notice.

    

    
      	8.	
              Representations
                and Warranties of Client

            

    

    

    Client
      represents and warrants that:

    

    
      	 	
              a)

            	
              Client
                will cooperate fully and timely with Vero to enable Vero to perform
                the
                Services that may be rendered
                hereunder;

            

    

    

    
      	 	
              b)

            	
              Client
                has full power and authority to enter into this
                Agreement;

            

    

    

    
      	 	
              c)

            	
              The
                performance by Client of this Agreement will not violate any applicable
                court decree, law or regulation, nor will it violate any provision(s)
                of
                the organizational or corporate governance documents of Client or
                any
                contractual obligation by which Client may be bound;
                and

            

    

    

    
      	 	
              d)

            	
              All
                information supplied to Vero by Client, shall be true and accurate
                and
                complete in all material respects, to the best of Client's
                knowledge.

            

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    
      	9.	
              Representations
                and Warranties of Vero

            

    

    

    Vero
      represents and warrants that:

    

    
      	 	
              a)

            	
              It
                has full power and authority to enter this
                Agreement;

            

    

    

    
      	 	
              b)

            	
              It
                has the requisite skill and experience to perform the Services and
                to
                carry out and fulfill its duties and obligations hereunder;
                and

            

    

    

    
      	 	
              c)

            	
              It
                will use its best efforts to complete all Services in a timely and
                professional manner.

            

    

    

    
      	10.	
              Governing
                Law, Dispute Resolution, and
                Jurisdiction

            

    

    

    This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Florida, without giving effect to the conflicts of laws principles
      thereof. All disputes, controversies or claims (“Disputes”) arising out of or
      relating to this Agreement shall in the first instance be the subject of a
      meeting between a representative of each Party who has decision-making authority
      with respect to the matter in question. Should the meeting either not take
      place
      or not result in a resolution of the Dispute within twenty (20) business days
      following notice of the Dispute to the other Party, then the Dispute shall
      be
      resolved in a binding arbitration proceeding to be held in Orlando, Florida,
      in
      accordance with the international rules of the American Arbitration Association.
      The Parties agree that a panel of one arbitrator shall be required. Any award
      of
      the arbitrator shall be deemed confidential information for a minimum period
      of
      five years. The arbitrator may award attorneys’ fees and other arbitration
      related expense, as well as pre- and post-judgment interest on any award of
      damages, to the prevailing Party, in their sole discretion.

    

    
      	11.	
              Miscellaneous

            

    

    

    
      	 	
              a)

            	
              No
                Waiver.
                No provision of this Agreement maybe waived except by agreement in
                writing
                signed by the waiving Party. A waiver of any term or provision of
                this
                Agreement shall not be construed as a waiver of any other term or
                provision.

            

    

    

    
      	 	
              b)

            	
              Non-assignability.
                This Agreement is not assignable without the written consent of the
                other
                Party.

            

    

    

    
      	 	
              c)

            	
              Multiple
                Counterparts. This
                Agreement may be executed in multiple counterparts, each of which
                shall be
                deemed an original. It shall not be necessary that each Party executes
                each counterpart, or that any one counterpart be executed by more
                than one
                Party so long as each Party executes at least one
                counterpart.

            

    

    

    
      	 	
              d)

            	
              Severability.
                If any provision of this Agreement is declared by any court of competent
                jurisdiction to be invalid for any reason, such invalidity shall
                not
                affect the remaining provisions of this
                Agreement.

            

    

    

    
      	 	
              e)

            	
              Construction.
                No provision of this Agreement shall be construed against any Party
                by
                virtue of the fact that that this Agreement was primarily prepared
                by such
                Party.

            

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

    

    
      	 	
              f)

            	
              Headings.
                The section and paragraph heading shall not be deemed a part of this
                Agreement.

            

    

    

    IN
      WITNESS WHEREOF
      the
      undersigned have executed this Agreement as of the day and year first above
      written.

    

    

    
      	
              VERO
                MANAGEMENT, L.L.C.

            	 	
              FREZER,
                INC.

            
	 	 	 	 	 
	 	 	 	 	 
	
              By:

            	
               /s/
                Kevin R. Keating

            	 	
              By:
                

            	
              /s/
                Kevin R. Keating

            
	 	
              Kevin
                R. Keating, Manager

            	 	 	
              Kevin
                R. Keating, President

            

    

    

    

    Agreed
      to
      by the Client’s Principal Shareholder:

    

    
      	
              KI
                EQUITY PARTNERS IV, LLC

            	 
	 	 	 
	 	 	 
	
              By: 

            	
               /s/
                Timothy J. Keating

            	 
	 	
              Timothy
                J. Keating, Manager

            	 

    

    

    
      
         

      

      
        5THE
      SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES COMMISSIONER OF ANY STATE
      AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION
      WITH, THE SALE OR DISTRIBUTION THEREOF. EXCEPT AS SET FORTH IN SECTION 14 OF
      THIS NOTE, NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
      REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM
      SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED, OR STATE SECURITIES LAWS.

     

    SECURED
      CONVERTIBLE PROMISSORY NOTE

    

    
      	
              U.S.
                $1,495,280.89

            	
              September
                8, 2006

            

    

    

    For
      value
      received, Patient Safety Technologies, Inc., a Delaware corporation (the
“Company”),
      promises to pay to the order of Steven J. Caspi, an individual (including his
      heirs, successors and assigns hereunder, the “Holder”),
      the
      principal sum of One Million Four Hundred Ninety Five Thousand Two Hundred
      Eighty and 89/100 U.S. Dollars (U.S. $1,495,280.89) (the “Loan”),
      together with all accrued and unpaid interest thereon, on or before the date
      such payment is required under this Note. This Note is issued pursuant to that
      certain Secured Convertible Note and Warrant Purchase Agreement dated as of
      September 8, 2006 (as amended, modified, supplemented or restated from time
      to
      time, the “Purchase
      Agreement”)
      between the Company and the Holder. Capitalized terms used herein without
      definition shall have the meanings assigned thereto in the Purchase Agreement.
      

     

    The
      following is a statement of the rights of the holder of this Note and the
      conditions to which this Note is subject, and to which the holder hereof, by
      the
      acceptance of this Note, agrees:

     

    1.
      Interest.
      

     

    (a) Interest
      shall accrue from the date the Loan is advanced until the Loan is repaid in
      full
      on the unpaid principal amount from time to time at a rate equal to twelve
      percent (12.0%) per annum and shall be payable quarterly, commencing December
      8,
      2006 and continuing until maturity or until this Note is repaid in full,
      whichever shall first occur, except as described in Section 19 of this Note.
      At
      the option of the Company, interest may be paid either in cash or in registered
      or non-registered common stock of the Company. If paid in common stock, the
      price per share for conversion purposes shall be equal to eighty percent (80%)
      of the Value Weighted Average Price determined for the five (5) days immediately
      prior to the date the interest payment was due.

     

    (b) Notwithstanding
      anything to the contrary contained in this Note, in no event shall the Company
      be required to pay interest on the principal amount outstanding under this
      Note
      at a rate in excess of the maximum nonusurious interest rate, if any, that
      at
      any time or from time to time may be contracted for, taken, reserved, charged
      or
      received on the outstanding principal balance under this Note under the laws
      of
      the State of California (the “Maximum
      Lawful Rate”),
      and
      if the effective rate of interest which would otherwise be payable under this
      Note would exceed the Maximum Lawful Rate, or if the Holder shall receive monies
      that are deemed to constitute interest which would increase the effective rate
      of interest payable under this Note to a rate in excess of the Maximum Lawful
      Rate, then: (i) the amount of interest which would otherwise be payable under
      this Note shall be reduced to the Maximum Lawful Rate, and (ii) any interest
      paid by the Company in excess of the Maximum Lawful Rate shall, at the option
      of
      the Holder, be either refunded to the Company or credited against the principal
      of this Note. It is further agreed that, without limitation of the foregoing,
      all calculations of the rate of interest contracted for, charged or received
      by
      the Holder that are made for the purpose of determining whether such rate
      exceeds the Maximum Lawful Rate shall be made, to the extent permitted by the
      applicable law (now or hereafter enacted), by amortizing, prorating and
      spreading in equal parts during the period the Loan is outstanding all interest
      at any time contracted for, charged or received by the Holder. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (c) After
      the
      occurrence and during the continuance of any Event of Default (as defined below)
      hereunder, interest shall accrue on the unpaid principal amount and any interest
      that has not been paid when due at a rate equal to six percent (6.0%) per annum
      above the rate otherwise provided in Section 1(a), i.e., at eighteen percent
      (18%) per annum (the “Default Rate”). If any interest is not paid when due it
      shall accrue and be added to principal as of the first business day of each
      month.

    

    2. Maturity.
      Principal and any accrued but unpaid interest under this Note shall be due
      and
      payable upon the earlier of (a) March 31, 2008, and (b) the occurrence of an
      Event of Default (as defined below). 

     

    3. Change
      in Control.
      In the
      event of a change in control transaction (defined as a third party acquiring
      greater than 50% of the voting rights in the Company in one or a series of
      related transactions), the Holder may elect to have this loan redeemed by the
      Company at 100% of the outstanding principal plus all accrued interest. The
      Company shall satisfy the redemption request in cash or common shares at the
      Company’s option.

     

    4. Conversion.

     

    (a) Investment
      by the Holder.
      All or
      any portion of the principal amount of and accrued interest on this Note shall,
      at the Holder’s option, be converted into shares of the Company’s common stock,
      $.33 par value (the “Common
      Stock”).
      The
      number of shares of Common Stock to be issued upon such conversion shall be
      equal to the quotient obtained by dividing (i) the portion of the amount owing
      under this Note to be converted plus (if so elected by the Holder) accrued
      interest by (ii) $1.25 (the “Conversion
      Price”),
      rounded to the nearest whole share, as adjusted pursuant to Section 5. The
      Holder shall give the Company two business days notice of conversion of this
      Note in whole or in part except where greater notice is required under the
      terms
      of this Note. Interest on this Note shall cease to accrue with respect to any
      portion of the Note that is converted into Common Stock on the date that such
      Common Stock is issued and delivered to the Holder. If and when the Company
      elects to take a direct equity investment into SurgiCount Medical, Inc., a
      California corporation (“SurgiCount”),
      Holder shall be entitled to convert any portion of the principal amount of
      or
      accrued interest on this Note to common stock of SurgiCount on the same terms
      as
      those provided in such direct equity financing. 

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (b) Mechanics
      and Effect of Conversion.
      No
      fractional shares of Common Stock (or SurgiCount common stock, if applicable)
      will be issued upon conversion of this Note. In lieu of any fractional share
      to
      which the Holder would otherwise be entitled, the Company will pay to the Holder
      in cash the amount of the unconverted principal and interest balance of this
      Note that would otherwise be converted into such fractional share. Upon
      conversion of this Note pursuant to this Section 4, the Holder shall surrender
      this Note, duly endorsed, at the principal offices of the Company or any
      transfer agent of the Company. If only a portion of the sums due under this
      Note
      is converted at any given time, the Holder shall issue a receipt for the shares
      and cash received. At its expense, the Company will, as soon as practicable
      thereafter, issue and deliver to such Holder, at such principal office, a
      certificate or certificates for the number of shares to which such Holder is
      entitled upon such conversion, together with any other securities and property
      to which the Holder is entitled upon such conversion under the terms of this
      Note, including a check payable to the Holder for such cash amounts payable
      as
      described herein. Upon full and total conversion of all sums due under this
      Note, the Company will be released from all of its obligations and liabilities
      under this Note with regard to that portion of the principal amount and accrued
      interest being converted, and the Holder shall release his security interest
      in
      all of the Collateral.

     

    (c) Payment
      of Interest. Upon
      conversion of the principal amount of this Note into Common Stock, any interest
      accrued on this Note that is not converted by reason of Section 4(a) shall
      be
      immediately paid to the Holder in cash.

     

    (d) Limitations
      on Conversion.
      Notwithstanding
      anything to the contrary contained herein, the number of shares of Common Stock
      of the Company that may be acquired by the Holder upon any conversion of this
      Note (or otherwise in respect hereof) shall be limited to the extent necessary
      to insure that, following such exercise (or other issuance), the total number
      of
      shares of Common Stock of the Company then beneficially owned by such Holder
      and
      its Affiliates and any other Persons whose beneficial ownership of Common Stock
      would be aggregated with the Holder’s for purposes of Section 13(d) of the
      Exchange Act does not exceed 9.999% of the total number of issued and
      outstanding shares of Common Stock of the Company (including for such purpose
      the shares of Common Stock of the Company issuable upon such conversion). For
      such purposes, beneficial ownership shall be determined in accordance with
      Section 13(d) of the Exchange Act and the rules and regulations promulgated
      thereunder. The provisions of this Section 4(d) may be waived by the Holder,
      at
      the election of the Holder, upon not less than 61 days’ prior notice to the
      Company, and the provisions of this Section 4(d) shall continue to apply until
      such 61st
      day (or
      such later date, as determined by the Holder, as may be specified in such notice
      of waiver). The provisions of this Section 4(d) shall not apply if the Holder
      converts to shares of SurgiCount, unless at such time SurgiCount has become
      a
      public company. 

     

    5. Certain
      Conversion Adjustments. The
      Conversion Price is subject to adjustment from time to time as set forth in
      this
      Section 5.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    (a) Stock
      Dividends and Splits.
      If the
      Company, at any time while this Note is outstanding (i) pays a stock dividend
      on
      its Common Stock or otherwise makes a distribution on any class of capital
      stock
      that is payable in shares of Common Stock, (ii) subdivides outstanding shares
      of
      Common Stock into a larger number of shares, or (iii) combines outstanding
      shares of Common Stock into a smaller number of shares, then in each such case
      the Conversion Price shall be multiplied by a fraction of which the numerator
      shall be the number of shares of Common Stock outstanding immediately before
      such event and of which the denominator shall be the number of shares of Common
      Stock outstanding immediately after such event. Any adjustment made pursuant
      to
      clause (i) of this paragraph shall become effective immediately after the record
      date for the determination of stockholders entitled to receive such dividend
      or
      distribution, and any adjustment pursuant to clause (ii) or (iii) of this
      paragraph shall become effective immediately after the effective date of such
      subdivision or combination.

     

    (b) 
      Calculations.
      All
      calculations under this Section 5 shall be made to the nearest cent or the
      nearest 1/100th
      of a
      share, as applicable. The number of shares of Common Stock outstanding at any
      given time shall not include shares owned or held by or for the account of
      the
      Company, and the disposition of any such shares shall be considered an issue
      or
      sale of Common Stock.

     

    (c) Notice
      of Adjustments.
      Upon
      the occurrence of each adjustment pursuant to this Section 5, the Company at
      its
      expense will promptly compute such adjustment in accordance with the terms
      of
      this Note and prepare a certificate setting forth such adjustment, including
      a
      statement of the adjusted Conversion Price, describing the transactions giving
      rise to such adjustments and showing in detail the facts upon which such
      adjustment is based. The Company will promptly deliver a copy of each such
      certificate to the Holder.

     

    6. Trading
      Market Limitations.
      Unless
      permitted by the applicable rules and regulations of the principal securities
      market on which the Common Stock of the Company is then listed or traded, in
      no
      event shall the Company issue upon conversion of or otherwise pursuant to this
      Note and upon exercise of or otherwise pursuant to the Warrant issued pursuant
      to the Purchase Agreement more than the maximum number of shares of Common
      Stock
      that the Company can issue pursuant to any rule of the principal securities
      market on which the Common Stock of the Company is then traded (the
“Maximum
      Share Amount”),
      which
      the parties agree is, as of the Closing, 19.99% of the total shares of Common
      Stock of the Company outstanding. In the event that the sum of (x) the aggregate
      number of shares of Common Stock of the Company that remain issuable upon
      conversion of Note and upon exercise of the Warrant issued pursuant to the
      Purchase Agreement, plus
      (y) the
      aggregate number of shares of Common Stock that remain issuable upon conversion
      of this Note and exercise of the Warrant, represents at least one hundred
      percent (100%) of the Maximum Share Amount (the “Triggering
      Event”),
      the
      Company will use its best efforts to seek and obtain Stockholder Approval (or
      obtain such other relief as will allow conversions hereunder in excess of the
      Maximum Share Amount) as soon as practicable following the Triggering Event.
      As
      used herein, “Stockholder
      Approval”
means
      approval by the shareholders of the Company to authorize the issuance of the
      full number of shares of Common Stock of the Company that would be issuable
      upon
      full conversion of this Note to Common Stock of the Company and upon full
      exercise of the Warrant but for the Maximum Share Amount. The provisions of
      this
      Section 6 shall not apply if the Holder converts to shares of SurgiCount, unless
      at such time SurgiCount has become a public company. 

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

    7. Payment. All
      cash
      payments shall be made in lawful money of the United States of America at such
      place as the Holder hereof may from time to time designate in writing to the
      Company. Payment shall be credited first to the accrued interest then due and
      payable and the remainder shall be applied to principal. This Note may be
      prepaid in whole or in part at any time without premium or penalty, upon thirty
      (30) Business Days’ prior written notice to the Holder, during which period the
      Holder shall be entitled to exercise its conversion rights under Section 4
      of
      this Note with respect to all or any portion of the obligations under this
      Note,
      as the Holder determines in its sole discretion. Not more than five (5) business
      days after the Company is notified by the Holder hereof of the election of
      the
      Holder in connection with such prepayment of this Note, to effect conversion
      of
      this Note or to receive repayment in cash, or any combination of the foregoing,
      the Company shall issue such Common Stock and/or repay the outstanding principal
      balance of this Note, together with all accrued and unpaid interest thereon,
      and
      shall pay all other obligations of the Company hereunder.

     

    8. Affirmative
      Covenants.
      The
      Company agrees that, as long as any obligations under this Note remain unpaid,
      it shall:

     

    (a) as
      soon
      as practicable after the end of each calendar quarter (and in any event within
      forty-five (45) days), deliver to the Holder a quarterly income statement and
      balance sheet, prepared in accordance with generally accepted accounting
      principles, consistently applied (subject to year-end adjustment); provided,
      however, that timely filing of a Form 10-Q by the Company with the SEC shall
      satisfy the requirements of this Section 8(a);

     

    (b) as
      soon
      as practicable after the end of each fiscal year of the Company (and in any
      event within (90) days), deliver to the Holder financial statements for such
      fiscal year, including income statements, balance sheets, and statements of
      cash
      flow for the Company setting forth in comparative form the corresponding figures
      for the preceding fiscal year; provided, however, that timely filing of a Form
      10-K by the Company with the SEC shall satisfy the requirements of this Section
      8(b);

     

    (c) maintain
      its existence and, except where any such action or failure to act could not
      reasonably be expected to have a Material Adverse Effect, maintain all material
      rights, privileges, licenses, approvals, franchises, properties and assets
      necessary or desirable in the normal conduct of its business, and comply with
      all contractual obligations and requirements of law, including, without
      limitation, all applicable environmental laws;

     

    (d) pay
      or
      arrange for the payment of all taxes (including stamp taxes), duties, fees
      or
      other governmental charges, except any such tax, duty, fee or other charge
      being
      contested in good faith and with respect to which adequate reserves are
      maintained in accordance with generally accepted accounting
      principles;

     

    (e) maintain
      insurance with responsible and reputable insurance companies or associations
      in
      such amounts and covering such risks as is customarily carried by companies
      engaged in the same or similar businesses and owning similar properties in
      the
      same general areas in which the Company operates, and upon request of the
      Holder, name the Holder as an additional insured and loss payee on all such
      insurance policies relating to the Collateral; provided
      that if
      the Holder receives proceeds of insurance, unless (i) an Event of Default,
      or an
      event which with the passage of time or the giving of notice could become an
      Event of Default, has occurred and is continuing, or (ii) the insurance proceeds
      were paid in connection with a material loss in value of the Collateral, then
      the Holder shall remit such insurance proceeds to the Company to be used for
      the
      repair or replacement of the insured property, or as otherwise agreed by the
      Company and the Holder; 

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    (f) promptly
      give written notice to the Holder of:

     

    (i) the
      occurrence of any Event of Default or any event which, with the giving of any
      notice or the passage of time or both, could constitute an Event of Default
      (any
      such event, a “Default”);

     

    (ii) any
      litigation or proceeding brought against or affecting the Company in which
      the
      amount in controversy exceeds $100,000.00; and

     

    (iii) any
      material adverse change in the business, operations, property or financial
      or
      other condition of the Company (a “Material
      Adverse Change”);

     

    (g) in
      the
      event that the Company sells, transfers or assigns any of its Common Stock
      for a
      price below $1.25 per share, then the Conversion Price set forth in Section
      4(a)
      of this Note shall be deemed lowered to such price; and

     

    (h) the
      Company shall file all necessary documents and pay all fees to register the
      Common Stock as may be required in connection with the terms of this
      Note.

     

    9. Negative
      Covenants.
      The
      Company agrees that, as long as any obligations under this Note remain unpaid,
      it shall not, directly or indirectly, unless it has obtained the prior written
      consent of the Holder:

     

    (a) change
      the accounting policies or principles on which its financial statements are
      prepared or presented other than changes approved by the Board of Directors
      of
      the Company; 

     

    (b) amend
      or
      suffer the amendment of the Company’s Restated Certificate or Bylaws if such
      amendments will have a material adverse effect on the Holder’s rights hereunder
      or under the Purchase Agreement; or

     

    (c) call
      or
      otherwise amend or modify the rights of the Holder hereunder. 

     

    10. Events
      of Default. Upon
      the
      occurrence of any of the following events (each, an “Event
      of Default”):

     

    (a) the
      Company shall fail to pay any amount due under this Note on or before the due
      date; or 

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    

    (b) any
      representation or warranty made by the Company in the Purchase Agreement or
      any
      other Loan Document shall be inaccurate in any material respect when given
      or
      made; or

    

    (c) the
      Company shall fail to observe or perform in any material respect any of the
      other terms or provisions of this Note or of any other Loan Document and such
      failure shall continue for a period of thirty (30) days after the Company has
      been notified of such failure or, if the failure is such that it cannot be
      cured
      within such period of time, such longer period of time as may be necessary
      (but
      not to exceed thirty (30) additional days) for the Company to cure such failure,
      provided that the Company diligently pursues such cure to completion;
      or

    

    (d) an
“Event
      of Default” under and as defined in the Purchase Agreement or any other Loan
      Document; or

    

    (e) (i)
      the
      Company shall (A) commence any case, proceeding or other action under any
      existing or future law of any jurisdiction, domestic or foreign, relating to
      bankruptcy, insolvency, reorganization or relief of debtors, seeking to have
      an
      order for relief entered with respect to it, or seeking to adjudicate it a
      bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
      winding-up, liquidation, dissolution, composition or other relief with respect
      to it or its debts, or (B) commence any case, proceeding or other action seeking
      appointment of a receiver, trustee, custodian or other similar official for
      it
      or for all or any substantial part of its assets, or (C) make a general
      assignment for the benefit of its creditors; or (ii) there shall be commenced
      against the Company any case, proceeding or other action of a nature referred
      to
      in clause (i) above which (A) results in the entry of an order for relief or
      any
      such adjudication or appointment, or (B) remains undismissed, undischarged
      or
      unbonded for a period of forty-five (45) days; or (iii) there shall be commenced
      against the Company any case, proceeding or other action seeking issuance of
      a
      warrant of attachment, execution, distraint or similar process against all
      or
      any substantial part of its assets which results in the entry of an order for
      any such relief which shall not have been vacated, discharged, or stayed or
      bonded pending appeal within forty-five (45) days from the entry thereof; or
      (iv) the Company shall take any action in furtherance of, or indicating its
      consent to, approval of, or acquiescence in, any of the acts set forth in
      clauses (i), (ii) or (iii) above; or (v) the Company shall generally not, or
      shall be unable to, or shall admit in writing its inability to, pay its debts
      as
      they become due;

    

    THEN,
      automatically upon the occurrence of an Event of Default under clause (e) of
      this Section 10 and, in all other cases, at the option of the Holder, in each
      case without notice to or demand upon the Company or any other party, the entire
      principal balance hereof together with all accrued and unpaid interest thereon
      shall become due and payable pursuant to the terms of Section 10(c) above,
      except as described in Section 19 of this Note. 

    

    11. Costs
      and Expenses. The
      Company agrees to pay all reasonable costs and expenses (including fees and
      disbursements of counsel): (a) of the Holder incident to the preparation,
      negotiation, arrangement, closing, waiver to, amendment or modification of,
      and
      administration of this Note, the Purchase Agreement and the other Loan Documents
      (including, without limitation, all filing and recording fees), and the
      protection of the rights of the Holder thereunder, and (b) of the Holder
      incident to the enforcement of payment of the Obligations, whether or not any
      action or proceeding is commenced, before as well as after judgment including,
      without limitation, in connection with bankruptcy, insolvency, liquidation,
      reorganization, moratorium or other similar proceedings involving the Company
      or
      a “workout” of the obligations. The obligations of the Company under this
      Section 11 shall be effective and enforceable whether or not any Loan is made
      hereunder and shall survive payment of all other obligations. 

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    12. Acceptance
      of Past Due Payments and Indulgences Not Waivers. None
      of
      the provisions hereof and none of the Holder’s rights or remedies hereunder on
      account of any past or future defaults shall be deemed to have been waived
      by
      the Holder’s acceptance of any past due installments or by any indulgence
      granted by the Holder to the Company.

    

    13. Waivers
      by the Company; No Setoffs or Counterclaims.
       The
      Company and all guarantors and endorsers hereof, and their successors and
      assigns, hereby waive presentment, demand, protest and notice thereof or of
      dishonor, and agree that they shall remain liable for all amounts due hereunder
      notwithstanding any extension of time or change in the terms of payment of
      this
      Note granted by the Holder, any change, alteration or release of any property
      now or hereafter securing the payment hereof or any delay or failure by the
      Holder to exercise any rights under this Note. The Company hereby waives the
      right to plead any and all statutes of limitation as a defense to a demand
      hereunder to the full extent permitted by law. All payments required by this
      Note shall be made without setoff or counterclaim.

    

    14. Transfer;
      Successors and Assigns. The
      Company may not assign its rights or obligations under this Note without the
      prior written consent of the Holder and any such purported assignment by the
      Company without obtaining the prior written consent of the Holder shall be
      void
ab
      initio.
      The
      terms and conditions of this Note shall inure to the benefit of and be binding
      upon the respective successors and assigns of Holder. Notwithstanding the
      foregoing, the Holder may not assign, pledge, or otherwise transfer this Note
      without the prior written consent of the Company, except that, and
      notwithstanding the requirement for an opinion of counsel in the legend at
      the
      beginning of this Note, the Holder may transfer, assign, or pledge this Note
      to
      an affiliate without prior written consent of the Company and without delivering
      such an opinion of counsel to the Company, provided that, in the event of such
      transfer, assignment, or pledge, the Holder shall remain liable, along with
      the
      transferee, for performance of the Holder’s obligations under this Note. For
      purposes of this Note, an “affiliate” shall mean an entity that the Holder
      controls (with “control” meaning ownership of more than fifty percent (50%) of
      the voting stock of the entity or, in the case of a noncorporate entity, an
      equivalent interest). Subject to the preceding sentences of this Section 14,
      this Note may be transferred only upon surrender of the original Note for
      registration of transfer, duly endorsed, or accompanied by a duly executed
      written instrument of transfer in form satisfactory to the Holder. Thereupon,
      a
      new note for the same principal amount and interest will be issued to, and
      registered in the name of, the transferee. Interest and principal are payable
      only to the registered holder of this Note.

    

    15. Governing
      Law; Jurisdiction. This
      Note
      and all acts and transactions pursuant hereto and the rights, remedies, powers
      and duties of the parties hereto shall be governed, construed and interpreted
      in
      accordance with the laws of the State of California, without regard to
      principles of conflicts of laws. The Company and the Holder each further consent
      to service of process in any litigation relating to this Note or any other
      Loan
      Document by written notice given in accordance with Section 17. For purposes
      of
      any dispute or controversy arising under this Note or the transactions
      contemplated herein, the Company and the Holder also mutually consent to the
      jurisdiction of the courts of the State of California, and the federal district
      court, Southern District of California, and agree that any and all process
      directed to either of them in any such litigation may be served outside the
      State of California with the same force and effect as if service had been made
      within the State of California. 

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

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

    

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

    

    
      	
            	(i)	
              if
                to the Company:

            

    

     

    Patient
      Safety Technologies, Inc.

    1800
      Century Park East, Suite 200

    Los
      Angeles, CA 90067

    Attn:
      Lynne Silverstein, President

    

    
      	
            	(ii)	
              if
                to the Holder:

            

    

     

    Steven
      J.
      Caspi

    3010
      Westchester Avenue

    Purchase,
      NY 10577

    

    with
      a
      copy to:

     

    Alan
      H.
      Rothschild, Esq.

    Rothschild
      & Pearl, LLP

    245
      Main
      Street, Suite 330

    White
      Plains, NY 10601

    

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

     

    18. Amendments
      and Waivers. Any
      term
      of this Note may be amended only with the written consent of the Company and
      the
      Holder. Any amendment or waiver effected in accordance with this Section 18
      shall be binding upon the Company, the Holder and each transferee of the
      Note.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    19. Collateral.
      This
      Note is secured by certain assets (tangible and intangible) of the Company
      in
      accordance with: (a) that certain Pledge Agreement of even date herewith (the
      “Pledge
      Agreement”)
      between the Company and the Holder, (b) a Mortgage relating to certain real
      property located in Heber Springs (Cleburne County), Arkansas, (c) a Deed of
      Trust relating to certain real property located in Springfield (Robertson
      County), Tennessee, (d) a Mortgage relating to certain real property located
      in
      Trussville and Birmingham (Jefferson County), Alabama, and (e) a Mortgage
      relating to certain real property in Tuscaloosa (Tuscaloosa County), Alabama.
      In
      the event of a sale of any of the assets under the Pledge Agreement, or any
      of
      the foregoing real property or the car wash located on the Birmingham property
      (together, the “Collateral”), and provided the Holder consents to release his
      lien from under any of the Collateral being sold, then the proceeds of such
      sale
      shall be placed in an escrow account at a bank of Holder’s choice. Said escrow
      account shall be subject to the Pledge Agreement (to the extent of the assets
      pledged under the Pledge Agreement), with the maximum amount to be deposited
      in
      such account to not exceed $1,495,280.89 plus accrued and unpaid interest (the
      “Maximum Amount.”) Amounts shall accrue in said account until they reach the
      Maximum Amount, and in the case of a sale that causes the Maximum Amount to
      be
      exceeded, such excess amount shall be held in the account and applied to future
      funding of the account until the Maximum Amount is again reached, as further
      described in this Section 19. At such time as the Maximum Amount is initially
      reached, the Holder shall have up to thirty (30) days from said date to
      determine whether or not to convert the said Maximum Amount to Common Stock,
      at
      the Conversion Price. During said thirty (30) day period, interest shall cease
      to accrue on all amounts in said account. If at the end of the thirty (30)
      days
      the Holder has not given the escrow agent notification that he intends to
      convert, the Note shall remain in place and the escrow agent (who shall be
      designated by the Holder) shall pay the proceeds from the sale of the assets,
      up
      to the full principal amount of $1,495,280.89, over to the Company to use as
      it
      sees fit, and shall hold in the account any accrued interest unless or until
      the
      Holder has made a written demand for payment to him of same at such time escrow
      agent may pay Holder said interest, all without further authorization by any
      party, and the Holder shall lose his right to convert the funds in the account.
      If, on the other hand, the Holder has elected to convert, the escrow agent,
      upon
      receipt of written confirmation from the parties that the Common Stock in the
      conversion has been issued to the Holder, shall pay to the Company a sum equal
      to the value of the Common Stock at the Conversion Price, with any excess being
      paid to the Holder, each without further notification. At such time as any
      sales
      of the Collateral result in amounts being deposited into the escrow account
      after the Maximum Amount has already been reached, interest on the principal
      indebtedness shall continue to accrue until such time as the Maximum Amount
      is
      again reached. At such time as the Maximum Amount is again reached, interest
      shall cease to accrue and the Holder shall have fifteen (15) days to decide
      whether to a) release the funds to the Company, or b) convert to Common Stock.
      If at the end of the fifteen (15) days the escrow agent has not received
      notification that Holder intends to convert, the escrow agent shall release
      the
      principal amount to the Company without further authorization, the Note shall
      continue to remain in place, and the Holder shall again have lost his right
      to
      convert the funds in the account. The Company agrees that the Holder may accept
      additional or substitute security for this Note, or release any security or
      any
      party liable for this Note, all without notice to the Company and without
      affecting the liability of the Company hereunder. 

     

    20. Guaranty.
      The
      obligations under this Note are guaranteed by Milton “Todd” Ault, III and by
      Louis Glazer, M.D. (the “Guarantors”),
      each
      pursuant to a Guaranty dated as of even date herewith. The Company agrees that
      the Holder may release the Guarantors or accept security from the Guarantors
      for
      all or any portion of the Obligations with ten (10) days’ notice to the Company
      and without affecting the liability of the Company hereunder.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    21. Registration
      Rights.
      The
      Company agrees that if, at any time, and from time to time after the date
      hereof, the Board of Directors of the Company (the “Board”)
      shall
      authorize the filing of a registration statement under the Securities Act (other
      than a registration statement on Form S-8, Form S-4 or any other form that
      does
      not include substantially the same information as would be required in a form
      for the general registration of securities) in connection with the proposed
      offer of any of its securities by it or any of its stockholders, the Company
      shall: (A) promptly notify the Subscriber that such registration statement
      will
      be filed and that the Shares then held by the Subscriber will be included in
      such registration statement; (B) cause such registration statement to cover
      all
      of such Shares issued to the Subscriber; (C) use best efforts to cause such
      registration statement to become effective as soon as practicable; and (D)
      take
      all other reasonable action necessary under any federal or state law or
      regulation of any governmental authority to permit all such Shares that have
      been issued to such holder to be sold or otherwise disposed of, and will
      maintain such compliance with each such federal and state law and regulation
      of
      any governmental authority for the period necessary for such holder to promptly
      effect the proposed sale or other disposition. Notwithstanding any other
      provision of this Section 21, the Company may at any time, abandon or delay
      any
      registration commenced by the Company. In the event of such abandonment by
      the
      Company, the Company shall not be required to continue registration of the
      Shares and the Subscriber shall retain the right to request inclusion of shares
      as set forth above.

    

     

    [Signatures
      on next page]

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    The
      parties have executed this Secured Convertible Promissory Note as of the date
      first written above.

     

    
      	 	COMPANY: 
	 	 	 	 
	 	PATIENT SAFETY
              TECHNOLOGIES, INC. 
	 	 	 	 
	 	By: 	 
	 	Name: 	 
	 	Title: 	 
	 	 	 	 
	 	Address: 	Patient Safety Technologies,
              Inc. 
	 	 	1800 Century Park East, Suite
              200 
	 	 	Los Angeles, CA
              90067 

    

     

    
      	AGREED TO AND
              ACCEPTED: 	 	 
	 	 	 	 
	By: 	 	 	 
	Name: Steven J.
              Caspi 	 	 

    

    

     

    SIGNATURE
      PAGE TO PATIENT SAFETY TECHNOLOGIES, INC.

    SECURED
      CONVERTIBLE PROMISSORY NOTE

     

    
      
         

      

      
        12

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