Document:

THIS
      NOTE AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE HAVE NOT BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR UNDER THE SECURITIES LAWS
      OF
      ANY STATE, AND HAVE BEEN OFFERED AND SOLD IN RELIANCE UPON THE EXEMPTION SET
      FORTH IN SECTION 4(2) OF SUCH ACT. THIS NOTE AND THE SECURITIES INTO WHICH
      IT IS
      CONVERTIBLE MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED,
      OR
      OTHERWISE DISPOSED OF WITHOUT PROPER REGISTRATION OR A SATISFACTORY OPINION
      OF
      COUNSEL THAT AN EXEMPTION FROM REGISTRATION APPLIES TO ANY SUCH
      TRANSACTION.

    

    

    
      	U.S. $2,530,558.40	Los Angeles,
	 	California

    

               

    SECURED
      CONVERTIBLE PROMISSORY NOTE

    

    1.    FOR
      VALUE
      RECEIVED, the undersigned, Patient Safety Technologies, Inc., a Delaware
      corporation, with an office at 27555 Ynez Road, Suite 330, Temecula, CA 92591
      ("Borrower"), promises to pay to Ault Glazer Capital Partners, LLC., with its
      principal place of business located at 1800 Century Park East, Suite 200 Los
      Angeles, CA 90067 or a permitted assignee of the Lender (“Lender" or
      "Noteholder” used interchangeably), the principal sum of Two Million Five
      Hundred Thirty Thousand Five Hundred Fifty Eight Dollars and Forty
      Cents
      ($2,530,558.40) (the
      "Principal Amount"), in lawful money of the United States of America. Interest
      shall accrue on the Principal Amount from the date hereof at a simple interest
      rate equal at all times to 7% per annum (each an “Interest Payment, and
      collectively the “Interest Payments”). Such accrued interest shall be payable
      quarterly on the last Business Day (as defined below) of each quarter beginning
      on September 30, 2007 (the “Interest Date”). For the purposes of this Note
“Business Day shall mean any weekday unless such day is a holiday on which the
      New York Stock Exchange trading floor is closed. All accrued and unpaid interest
      and the Principal Amount shall be payable at the Maturity Date (as hereinafter
      defined). At the election of the Borrower the payment of interest may be made
      in
      cash or converted into equity as provided in paragraph 7(b) herein. All
      agreements between Borrower and Lender are expressly limited so that in no
      contingency or event whatsoever shall the amount paid or agreed to be paid
      to
      Lender for the use, forbearance, or detention of the indebtedness evidenced
      by
      this Note exceed the maximum amount permissible under applicable law. If from
      any circumstance Lender should ever receive as interest an amount which would
      exceed the highest lawful rate, such amount as would be excessive interest
      shall
      be applied to the reduction of the principal amount owing under this Note and
      not to the payment of interest.

    
      
         

      

      
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    2.    This
      Note, effective as of June 1, 2007, shall mature and the Principal Amount and
      accrued but unpaid interest hereunder shall become due and payable on December
      31, 2010 (the "Maturity Date") if not prepaid or converted into equity in
      accordance with the provisions hereof.

     

    3.    Payments
      of the Principal Amount and interest shall be made to Lender at the address
      of
      the Lender set forth above, or at such other place as may be designated in
      writing by Lender.

     

    4.    Borrower,
      for itself and its legal representatives, successors, and assigns, expressly
      waives presentment, demand, protest, notice of dishonor, notice of non-payment,
      notice of maturity, notice of protest, presentment for the purposes of
      accelerating maturity, diligence in collection, and any other condition
      precedent to action against Borrower for the payment hereof.

     

    5.    This
      Note
      shall become immediately due and payable, upon the expiration of any applicable
      grace period, without notice or demand upon the happening to Borrower of any
      one
      or more of the following specified events (each an “Event of Default”): (a)
      Borrower making a general assignment for the benefit of creditors; (b) Borrower
      consenting to or suffering an attachment, garnishment, execution or other legal
      process against any of its assets; (c) application for, or appointment of a
      receiver, trustee or custodian for, Borrower or Borrower’s property; (d)
      Borrower filing a voluntary petition under any of the provisions of the federal
      bankruptcy laws or having an involuntary petition filed against it under the
      federal bankruptcy laws which is not dismissed within 60 days; (e) any other
      proceeding under bankruptcy, insolvency, reorganization, relief of debtors,
      or
      similar laws is commenced by Borrower, or is commenced against Borrower and
      not
      dismissed within sixty (60) day; (f) if any payment of Principal Amount or
      interest due hereunder is not made within twenty (20) days after the date such
      payment was due; (g) any failure on the part of Borrower to keep or perform
      any
      of the terms or provisions of this Note or the Security Agreement between the
      Borrower and the Lender dated the even date hereof (the “Security Agreement”) or
      any amendment thereof; (h) delisting of the Borrower’s Common Stock from the
      Over-The-Counter Bulletin Board; (i) if any representation or warranty made
      by
      Borrower herein or in the Security Agreement was not true and correct in all
      material respects when made; and/or (j) the happening of any event under any
      agreement executed after the date hereof involving the borrowing of money in
      excess of $200,000 not in the ordinary course of business by, or advance of
      credit to, Borrower, which gives to the holder of such obligation the right
      to
      accelerate its maturity, whether or not such right is exercised. Any one or
      more
      of such events shall constitute an Event of Default hereunder. Upon the
      occurrence of any Event of Default as specified above, the balance of the
      Principal Amount, together with all accrued but unpaid interest, shall
      immediately become due and payable. Upon an Event of Default the interest rate
      on this Note shall become Twelve Percent (12%) per annum on the outstanding
      Principal Amount until paid in full or such Event of Default has been cured.
      

    
      
         

      

      
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    6.    Except
      as
      otherwise agreed to by the Borrower and Lender in writing, this Note may not
      be
      prepaid in whole or in part except as provided in Section 7(a)(ii) of this
      Note.

     

    7.    (a)
       (i) 
      At
      the
      election of the Noteholder, this Note may be convertible in whole or in part
      prior to its original maturity or prepayment into a number of shares (the
      "Shares") of the Borrower's common stock, $0.33 par value per share (the “Common
      Stock”), equal to the Principal Amount divided by a price per share equal to
      $2.50. The amount of accrued and unpaid interest hereunder shall be paid in
      cash
      or, at the sole option of the Borrower, in shares of the Borrower's Common
      Stock
      as provided in Section 7(b) of this Note. Such conversion of the Note shall
      be
      effected by Noteholder giving Borrower written notice of conversion and
      submitting this Note to Borrower for cancellation and issuance of the proper
      number of Shares to Noteholder or his qualified nominee or assign(s), and if
      this Note is being converted in part, a replacement Note representing the
      unconverted portion of this Note. The Borrower shall issue such shares and/or
      re-issue the unconverted portion of the Note within 15 Business Days of receipt
      of such notice from the Lender. The Conversion Price will be proportionately
      adjusted by (X) any stock splits and/or stock dividends which might be
      declared
      by Borrower, (Y) any subdivision or reclassification of the Borrower’s
      outstanding shares of Common Stock into a greater number of shares, and/or
      (Z)
      any combination or reclassification its outstanding shares of Common Stock
      into
      a smaller number of shares. 

    
      
         

      

      
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    (ii)
       Notwithstanding
      any of the foregoing, in the event the Trading Price (as defined below) equals
      or exceeds $5.00, the Borrower at its sole and absolute discretion at any time
      thereafter shall have the right to redeem the full Principal Amount plus all
      accrued and unpaid interest hereunder (the “Redemption Amount”). At the Maturity
      Date, at the Noteholder’s election, the Principal Amount shall be redeemed
      either in cash or in shares of the Borrower’s Common Stock. In the event the
      Noteholder shall elect to redeem the Principal Amount in shares of the
      Borrower’s Common Stock, the Principal Amount shall be convertible into a number
      of shares of the Borrower's Common Stock equal to the Principal Amount divided
      by a price of $2.50. In the event the Borrower shall elect to satisfy the
      accrued and unpaid interest in shares of Common Stock, the accrued and unpaid
      interest shall be convertible into a number of shares of the Borrower's Common
      Stock equal to the accrued and unpaid interest divided by the Interest
      Conversion Price. Upon redemption of this Note pursuant to this Section
      7(a)(ii), the Noteholder shall promptly file a UCC-3 Termination Statement
      and
      fully and unconditionally release its security interest created by the Security
      Agreement. The “Trading Price” shall mean the average closing bid price of the
      Borrower’s Common Stock for any consecutive thirty trading days.

     

    (b) At
      the
      sole election of the Borrower, any of the Interest Payments may be convertible
      in whole or in part into a number of shares of the Borrower's Common Stock
      (the
      "Interest Shares"), equal to the amount of the Interest Payments due divided
      by
      a price per share equal to 80% of the Market Price (the “Interest Conversion
      Price”). Such conversion shall be effected by the Borrower giving the Noteholder
      written notice of conversion of the Interest Payment and issuance of the proper
      number of the Interest Shares to Noteholder or his qualified nominee or
      assignee(s). (By way of example, and without limitation of the foregoing
      provisions, if the amount of the Interest Payment at December 31, 2008, equaled
      $175,000, and the Market Price was $2.00 per share, the Borrower would then
      issue 109,375 shares of its Common Stock in satisfaction of the Interest Payment
      ($175,000/($2.00*80%)). The “Market Price” shall mean the average closing bid
      price of the Borrower’s Common Stock for the thirty trading days immediately
      preceding the Interest Date.

     

    (c) The
      Borrower shall at all times reserve and keep available out of its authorized
      and
      unissued Common Stock, such number of shares of Common Stock as shall from
      time
      to time be sufficient for the purpose of providing for the conversion of this
      Note. In case of any consolidation of the Borrower with, or merger of the
      Borrower into, another corporation (except a merger or other reorganization
      in
      which the Borrower shall be the surviving corporation and its shares of Common
      Stock shall continue to be outstanding and unchanged), the corporation formed
      by
      such consolidation or merger shall execute and deliver to the Noteholder a
      supplemental agreement providing that the Noteholder shall have the rights
      thereafter to receive, upon conversion of this Note, the kind and amount of
      shares of stock and other securities and property receivable upon such
      consolidation or merger by a holder of the number of shares of Common Stock
      for
      which this Note might have been exercised immediately prior to such
      consolidation, merger, sale or transfer. Any shares issued to the Noteholder
      under this Note shall bear a legend substantially in the form of the following:
      "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN NOT REGISTERED UNDER
      THE
      SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE OFFERED OR SOLD
      EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT, OR AN
      EXEMPTION FROM REGISTRATION UNDER SUCH ACT.”

    
      
         

      

      
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    8.    
(a)
      Lender represents and warrants that this Note has been purchased for investment,
      that he is an "accredited investor" as that term is defined in Rule 501 of
      Regulation D promulgated under the Securities Act of 1933, as amended (the
      “Securities Act”), that he understands and can bear the risk of this highly
      speculative investment, that the Shares and the Interest Shares will not be
      registered under the Securities Act, or the securities laws of any state and
      that the Shares and the Interest Shares will be restricted and non-liquid
      security that is highly speculative and dependent upon the future success of
      the
      Borrower as to which there is no assurance.

     

    (b)
      Lender further confirms that he has reviewed the Borrower’s SEC Reports. The
“SEC Reports” shall mean all reports, schedules, forms, statements and other
      documents required to be filed by the Borrower under the Securities Act and
      the
      Exchange Act of 1934, as amended, including pursuant to Section 13(a) or 15(d)
      thereof.

     

    (c)
      Borrower represents, warranties and covenants (as the case may be), that as
      of
      the date hereof, and for so long as any principal and/or interest is outstanding
      on this Note, all SEC Reports have been, and shall be, true and correct in
      all
      material respects and do not and shall not contain any untrue statement of
      a
      material fact or omit to state a material fact required to be stated therein
      or
      necessary to make the statements therein, in light of the circumstances, under
      which they were made, not misleading.

     

    9.    This
      Note
      is to be construed and enforced according to and governed by the laws of the
      State of Delaware without giving effect to principles of conflicts of laws.
      In
      any action or proceeding arising out of or relating to this Note, Borrower
      waives (to the full extent permitted by law) all right to a trial by jury or
      to
      plead as a defense any statute of limitations or any other similar law or
      equitable doctrine. Borrower irrevocably consents to the jurisdiction of the
      courts of the State of Delaware and of any federal court located in such State
      in connection with any action or proceeding arising out of or relating to this
      Note, any document or instrument delivered pursuant to, in connection with,
      or
      simultaneously with this Note, or a breach of this Note or any such document
      or
      instrument. Borrower waives, to the full extent permitted by law, any objection
      which it may now or hereafter have to the laying of venue of any action or
      proceeding arising out of or relating to this Note brought in the State of
      Delaware, and further irrevocably waives, to the full extent permitted by law,
      any claim that any such action or proceeding brought in such State has been
      brought in an inconvenient forum. In any such action or proceeding, Borrower
      waives, to the full extent permitted by law, personal service of any summons,
      complaint, or other process and agrees that service thereof may be made on
      Borrower by certified or registered U.S. mail or by personal delivery.

    

    
      
         

      

      
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    10.    This
      Note
      is non-negotiable, and may not to be assigned, transferred, pledged, or
      hypothecated to any entity that is not an Affiliate (as such term is defined
      in
      section 2(11) of the Securities Act) of the Lender without the prior written
      consent of the Borrower, which consent shall not be unreasonably withheld.
      Borrower may not assign or transfer this Note or any of its obligations under
      this Note in any manner whatsoever (unless through a consolidation or merger
      of
      Borrower, if a corporation, with or into another corporation) without the prior
      written consent of Lender.

     

    11.    Borrower
      agrees to pay all costs and expenses (including, without limitation, reasonable
      attorney fees) incurred or payable by Lender in enforcing each provision of
      this
      Note including, without limitation, respecting the collection of any and all
      amounts payable under this Note.

     

    12.    Borrower
      acknowledges that its obligations to make payments hereunder are absolute and
      unconditional and valid obligations of the Company, and agrees that such
      payments shall not be requested to be, and shall not be, subject to any defense,
      setoff, or counterclaim of any kind or nature, or any other action similar
      to
      the foregoing, provided that nothing contained herein shall preclude any
      separate proceeding by Borrower against Lender so long as such proceeding does
      not in any manner relate to or otherwise impair the payment or the collection
      of
      the amounts due hereunder in accordance with the terms of this Note. Borrower
      further represents that this Note has received all necessary approvals and
      is a
      valid and binding corporate act.

     

    
      
         

      

      
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    13.    No
      amendment, modification, rescission, waiver, consent, forbearance, or release
      of
      any provision of this Note shall be valid or binding unless made in writing
      and
      executed by a duly authorized representative of Borrower and Lender. No consent
      or waiver, express or implied, by Lender to the breach by Borrower in the
      performance by it of any of its obligations hereunder shall be deemed or
      construed to be a consent to or waiver of the further breach in the performance
      of the same or any other obligation of Borrower hereunder. Failure on the part
      of Lender to complain of the act or failure to act by Borrower or to declare
      Borrower in breach, irrespective of how long such failure continues, shall
      not
      constitute a waiver by Lender of any of its rights hereunder.

     

    14.    This
      Note is
      expressly secured by a pledge by the Borrower of all of its assets as set forth
      in the Security Agreement and a Guaranty of Surgicount Medical, Inc., a
      California corporation and wholly owned subsidiary of Borrower. The security
      granted hereby shall have priority only over security subsequently granted
      to
      any party; provided,
      however, that the Lender shall subordinate this security interest in favor
      of
      any lender who provides financing to the Company of up to $2,000,000 in the
      form
      of a new credit facility and/or a replacement credit facility. Each Noteholder
      may file a UCC-1 Financing Statement to perfect the security interest granted
      herein. The aggregate amount of loan proceeds secured by this pledge will be
      not
      more than $2,530,558.40 (plus accrued and unpaid interest thereupon). The UCC-1
      security will be issued in the name of Noteholder or such other party designated
      by Noteholder. Upon satisfaction of this Note, the Noteholder shall promptly
      file a UCC-3 Termination Statement. 

     

    15.    This
      Note and
      Security Agreement constitute a final written expression of all the terms of
      the
      agreement between the parties regarding the subject matter hereof, are a
      complete and exclusive statement of those terms, and supersede all prior and
      contemporaneous agreements, understandings, and representations between the
      parties. If any provision or any word, term, clause, or other part of any
      provision of this Note shall be invalid for any reason, the same shall be
      ineffective, but the remainder of this Note shall not be affected and shall
      remain in full force and effect.

     

    16.    All
      notices,
      consents, or other communications provided for in this Note or otherwise
      required by law shall be in writing and may be given to or made upon the
      respective parties at their respective addresses set forth in Section 1 of
      this
      Note. Such
      addresses may be changed by notice given as provided in this subsection. Notices
      shall be effective upon the date of receipt; provided, however, that a notice
      (other than a notice of a changed address) sent by certified or registered
      U.S.
      mail, with postage prepaid, shall be presumed received not later than three
      (3)
      business days following the date of sending.

    
 

    [Signature
      page follows.]

    
      
         

      

      
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    IN
      WITNESS WHEREOF, Borrower has executed and delivered this Note as of July ___,
      2007.

     

    
      
        	 	PATIENT SAFETY TECHNOLOGIES,
                INC.
	 	 
	 	 
	 	By: _________________________________
                
	 	Name: William B. Horne
	 	Title: Chief Executive Officer
	 	 

      

    

     

     

    
      
         

      

      
        8SECURITY
      AGREEMENT

    

    Security
      Agreement (the “Agreement”) dated August ____, 2007 made by Patient Safety
      Technologies, Inc., a Delaware corporation (“Debtor”), in favor of Ault Glazer
      Capital Partners, LLC, a Delaware limited liability company (the “Secured
      Party”). 

    

    Debtor
      hereby agrees in favor of Secured Party as follows:

    

    1. In
      consideration for loans made or to be made to Debtor by Secured Party evidenced
      by the Promissory Note (the “Note”) dated the date hereof of Debtor in the
      principal amount of Two Million Five Hundred Thirty Thousand Five Hundred Fifty
      Eight Dollars and Forty Cents ($2,530,558.40), payable to the order of Secured
      Party (such note, as amended, modified, supplemented, replaced or substituted
      from time to time, being herein referred to as the “Note”), Debtor hereby grants
      to Secured Party a continuing security interest in, lien upon and a right of
      setoff against, and Debtor hereby assigns to Secured Party, all of Debtor's
      right, title and interest in and to the Collateral described in Section 2,
      to
      secure the full and prompt payment, performance and observance of all present
      and future indebtedness, obligations, liabilities and agreements of any kind
      of
      Debtor to Secured Party, now existing or hereafter arising under or in
      connection with the Note or this Security Agreement (all of the foregoing being
      herein referred to as the “Obligations”).

     

    2. “Collateral”
      means
      all
      of Debtor’s and Subsidiaries’ personal property, now owned or hereafter
      acquired, including without limitation all Accounts, Letter-of-Credit Rights,
      Supporting Obligations, Electronic Chattel Paper, Tangible Chattel Paper and
      Instruments, as these terms are defined in the Uniform Commercial Code, together
      with all Inventory, Equipment, Patents,
      Trademarks and Additional Collateral and all products and proceeds of the
      foregoing including, without limitation, proceeds of any insurance policies
      insuring any of the foregoing, all as more fully described on Schedule A annexed
      hereto. “Subsidiaries” means Surgicount Medical, Inc., a California corporation,
      and Automotive Services Group, Inc., (formerly known as Ault Glazer Bodnar
      Merchant Capital, Inc.) a Delaware corporation, each a wholly-owned subsidiary
      of the Debtor.

    

    3. Debtor
      hereby warrants, represents, covenants and agrees (as of the date hereof and
      so
      long as any Obligations remains outstanding) that: (a) the chief executive
      office and other places of business of Debtor, the books and records relating
      to
      the Collateral (except for such records as are in the possession or control
      of
      Secured Party) and the Collateral are located at the address set forth below
      and
      Debtor will not change any of the same, or merge or consolidate with any person
      or change its name or conduct its business under any trade, assumed or
      fictitious name, without prior written notice to and consent of Secured Party;
      (b) the Collateral is and will be used in the business of Debtor and not for
      personal, family, household or farming use; (c) Debtor will not abandon or
      assign, or lease, other than in the ordinary course of Debtor's business, nor
      will Debtor suffer or permit any of the same to occur with respect to, any
      Collateral, without prior written notice to and consent of Secured Party; (d)
      Debtor will make payment or will provide for the payment, when due, of all
      taxes, assessments or contributions or other public or private charges which
      have been or may be levied or assessed against Debtor, whether with respect
      to
      the Collateral, to any wages or salaries paid by Debtor, or otherwise, will
      deliver to Secured Party, on

     

    
      
         

      

      
        -1-

        
          

        

      

      
         

      

    

    demand,
      certificates or other evidence satisfactory to Secured Party attesting thereto
      and shall cause Debtor's subsidiaries to take any such action as described
      under
      this section 3(d); (e) Debtor will use the Collateral for lawful purposes only,
      with all reasonable care and caution and in conformity in all material respects
      with all applicable laws, ordinances and regulations; (f) Debtor will, at
      Debtor's sole cost and expense, keep the Collateral in good order, repair,
      running condition and in substantially the same condition as on the date hereof,
      reasonable wear and tear excepted, and Debtor will not, without the prior
      written consent of Secured Party, alter or remove any identifying symbol or
      number upon any of the Collateral; (g) Secured Party shall during the business
      hours of the Debtor have free access to and right of inspection of any
      Collateral and any papers, instruments and records pertaining thereto (and
      the
      right to make extracts from and to receive from Debtor originals or true copies
      of such records, papers and instruments upon request therefor) and Debtor hereby
      grants to Secured Party a security interest in all such records, papers and
      instruments to secure the payment, performance and observance of the
      Obligations; (h) Debtor
      will, at its sole cost and expense, perform all acts and execute all documents
      requested by Secured Party from time to time to evidence, perfect, maintain
      or
      enforce Secured Party's security interest granted herein or otherwise in
      furtherance of the provisions of this Security Agreement; (i) at any time and
      from time to time, Debtor shall, at its sole cost and expense, execute and
      deliver to Secured Party such financing statements pursuant to the Uniform
      Commercial Code (“UCC”), applications for certificate of title and other papers,
      documents or instruments as may be requested by Secured Party in connection
      with
      this Security Agreement, and to the extent permitted by applicable law, Debtor
      hereby authorizes Secured Party to execute and file at any time and from time
      to
      time one or more financing statements or copies thereof or of this Security
      Agreement with respect to the Collateral signed only by Secured Party; (j)
      Debtor assumes all responsibility and liability arising from the Collateral;
      (k)
      the Secured Party may, only upon giving Debtor forty five calendar days’ notice,
      upon the occurrence and during the continuance of a Default (as hereinafter
      defined), in its name or Debtor's or otherwise, notify any account debtor or
      obligor of any Account, Contract, Document, Instrument, Chattel paper or general
      intangible included in the Collateral to make payment to Secured Party; (l)
      in
      its discretion, Secured Party may, only upon giving Debtor twenty calendar
      days’
notice, upon the occurrence and during the continuance of a Default, demand,
      sue
      for, collect or receive any money or property at any time payable or receivable
      on account of or in exchange for, or make any compromise or settlement deemed
      desirable by Secured Party with respect to, any Collateral, and/or extend the
      time of payment, arrange for payment in installments, or otherwise modify the
      terms of, or release, any of the Obligations and/or the Collateral, or any
      obligor, maker, endorser, acceptor, surety or guarantor of, or any party to,
      any
      of the Obligations or the Collateral;
      (m) upon
      giving Debtor twenty calendar days’ notice, Secured Party may, at any time and
      from time to time, for the account of Debtor, pay any amount or do any act
      required of Debtor hereunder and which Debtor fails to do or pay, and any such
      payment shall be deemed an advance by Secured Party to Debtor payable on demand
      together with interest at the highest rate then payable on any of the
      Obligations; (n) upon the occurrence and during the continuance of a Default,
      any proceeds of the Collateral received by Debtor shall not be commingled with
      other property of Debtor, but shall be segregated, held by Debtor in trust
      for
      Secured Party, and immediately delivered to Secured Party in the form received,
      duly endorsed in blank where appropriate to effectuate the provisions hereof,
      the same to be held by Secured Party as additional Collateral hereunder or,
      at
      Secured Party's option, to be applied to payment of the Obligations, whether
      or
      not due and in any order; and (o) in its sole discretion, Secured Party may,
      at
      any time and from time to time, assign, transfer or deliver to any transferee
      of
      any Obligations, any Collateral, whereupon Secured Party shall be fully
      discharged from all responsibility and the transferee shall be vested with
      all
      powers and rights of Secured Party hereunder with respect thereto, but Secured
      Party shall retain all rights and powers with respect to any Collateral not
      assigned, transferred or delivered.

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    4. The
      term
      Default as used in this Security Agreement shall mean any “Event of Default”, as
      such term is defined in the Note.

    

    5. Upon
      the
      occurrence and during the continuance of any Default, Secured Party may, upon
      giving ten days’ notice or
      demand
      to Debtor, declare any Obligations immediately due and payable and Secured
      Party
      shall have the following rights and remedies (to the extent permitted by
      applicable law) in addition to all rights and remedies of a Secured party under
      the UCC or of Secured Party under the Obligations, all such rights and remedies
      being cumulative, not exclusive and enforceable alternatively, successively
      or
      concurrently:

    

    Secured
      Party may, only upon giving Debtor forty five days’ notice, with or without
      judicial process or the aid and assistance of others, (i) enter upon any
      premises in which any Collateral may be located and, without resistance or
      interference by Debtor, take possession of the Collateral, and (ii) sell,
      resell, lease, assign and deliver, grant options for or otherwise dispose of
      any
      part or all of the Collateral in its then condition or following any
      commercially reasonable preparation or processing, at public sale or proceedings
      or otherwise, by one or more contracts, in one or more parcels, at the same
      or
      different times, with or without having the Collateral at the place of sale
      or
      other disposition, for cash and/or credit, and upon any terms, at reasonable
      place(s) and time(s), and by otherwise complying with applicable statutes
      requiring reasonable notice of sale or other disposition to Debtor. Debtor
      hereby agrees that the sending of fifteen days' notice by ordinary mail, postage
      prepaid, to any address of Debtor set forth in this Security Agreement shall
      be
      deemed reasonable notice thereof. If any Collateral is sold by Secured Party
      upon credit or for future delivery, Secured Party shall not be liable for the
      failure of the purchaser to pay for same and in such event Secured Party may
      resell or otherwise dispose of such Collateral. Secured Party may buy any part
      or all of the Collateral at any public sale. Secured Party may apply the cash
      proceeds actually received from any sale or other disposition to the Obligations
      in such order and as to principal or interest as Secured Party may desire;
      and
      Debtor shall remain liable and will pay Secured Party on demand any deficiency
      remaining, together with interest thereon at the highest rate then payable
      on
      the Obligations, with any surplus to be paid to Debtor, subject to any duty
      of
      Secured Party imposed by law to the holder of any subordinate security interest
      in the Collateral known to Secured Party.

    

    6. Secured
      Party's prior recourse to any Collateral shall not constitute a condition of
      any
      demand, suit or proceeding for payment or collection of the Obligations nor
      shall any demand, suit or proceeding for payment or collection of the
      Obligations constitute a condition of any recourse by Secured Party to the
      Collateral. Any suit or proceeding by Secured Party to recover any of the
      Obligations shall not be deemed a waiver of, or bar against, subsequent
      proceedings by Secured Party with respect to any other Obligations and/or with
      respect to the Collateral. No act, omission or delay by Secured Party shall
      constitute a waiver of its rights and remedies hereunder or otherwise. No single
      or partial waiver by Secured Party of any covenant, warranty, representation,
      Default or right or remedy which he may have shall operate as a waiver of any
      other covenant, warranty, representation, Default, right or remedy or of the
      same covenant, warranty, representation, Default, right or remedy on a future
      occasion. Debtor hereby waives presentment, notice of dishonor and protest
      of
      all instruments included in or evidencing any Obligations or Collateral, and
      all
      other notices and demands whatsoever (except as expressly provided
      herein).

    

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    7. Secured
      Party may assign its rights and obligation hereunder to any Affiliate of Secured
      Party provided that such Affiliate assumes all of the liabilities or obligations
      of Secured Party hereunder. For purposes of this section, “Affiliate” of any
      person means any other person or entity which, directly or indirectly, controls
      or is controlled by that person, or is under common control with that person
      or
      entity. “Control” (including, with correlative meaning, the terms “controlled
      by” and “under common control with”), as used with respect to any person or
      entity, means the possession, directly or indirectly, of the power to direct
      or
      cause the direction of the management and policies of such person or entity,
      whether through the ownership of voting securities, by contract or
      otherwise.

    

    8. The
      security interest granted herein shall have priority only over the security
      interests subsequently granted by the Debtor to any party; provided however
      that
      the Secured Party shall subordinate this security interest in favor of any
      lender who provides financing to the Debtor of up to $2,000,000 in the form
      of a
      new credit facility and/or a replacement credit facility.

    

    9. All
      terms
      herein shall have the meanings as defined in the UCC, unless the context
      otherwise requires. No provision hereof shall be modified, altered, waived,
      released, terminated or limited except by a written instrument expressly
      referring to this Security Agreement and to such provision, and executed by
      the
      party to be charged. The execution and delivery of this Security Agreement
      has
      been authorized by the Board of Directors of Debtor. This Security Agreement
      and
      all Obligations shall be binding upon the successors and assigns of Debtor
      and
      shall, together with the rights and remedies of Secured Party hereunder, inure
      to the benefit of Secured Party, its executors, administrators, successors,
      endorsees and assigns. This Security Agreement and the Obligations shall be
      governed in all respects by the laws of the State of Delaware applicable to
      contracts executed and to be performed in such state. If any term of this
      Security Agreement shall be held to be invalid, illegal or unenforceable, the
      validity of all other terms hereof shall in no way be affected thereby. Secured
      Party is authorized to annex hereto any schedules referred to herein. Debtor
      acknowledges receipt of a copy of this Security Agreement.

    

    [Signature
      page follows.]

    

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the undersigned has executed or caused this security agreement
      to be executed in the State of California on the date first above set
      forth.

    

    
      	 	PATIENT SAFETY TECHNOLOGIES,
              INC.
	 	 
	 	 
	 	
              By:
                      

              Name:
                William
                B. Horne

              Title:
                Chief Executive Officer

            
	 	 
	 	 
	 	AULT GLAZER CAPITAL PARTNERS,
              LLC
	 	 
	 	 
	 	
              By:
                     
 

              Name:
                

              Title:
                Managing Member

            

    

     

     

    Location
      of books and records relating to Collateral:

    

    27555
      Ynez Road, Suite 330, Temecula, CA 92591

    

    

    All
      locations of Collateral:

    

    27555
      Ynez Road, Suite 330, Temecula, CA 92591

     

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    SCHEDULE
      A

    

    

    Accounts means
      “Accounts” as defined in the Uniform Commercial Code.

    

    Additional
      Collateral
      means
      (a) all “Securities Entitlements,” “Investment Property,” “Financial Assets,”
Commercial Tort Claims and “Documents” as those terms are defined in the Uniform
      Commercial Code as of the date hereof, whether now existing or hereafter
      acquired or arising, (b) all securities, bills of lading, dock warrants, dock
      receipts, warehouse receipts or orders for the delivery of goods, and any other
      documents which in the regular course of business or financing are treated
      as
      adequately evidencing that the persons in possession of them are entitled to
      receive, hold, and dispose of the goods they cover; (c) all motor vehicles,
      whether now owned or hereafter acquired by the Debtor, and all accessions and
      additions thereto, replacements therefor, and substitutions therefor; (d) all
      “General Intangibles” as that term is defined in the Uniform Commercial Code as
      of the date hereof, whether presently owned or hereafter acquired, including,
      without limitation, Payment Intangibles and Software (as those terms are defined
      in the Uniform Commercial Code), all choses in action, causes of action, and
      all
      other intangible personal property of the Debtor, including, without limitation,
      corporate or other business records, inventions, designs, patents, patent
      applications, trademarks, servicemarks, tradenames, trade secrets, goodwill,
      copyrights, registrations, licenses, franchises, customer lists, tax refund
      claims, credit files, computer programs, printouts and other computer materials
      and records, guaranty claims, security interests or other property held by
      or
      granted to Debtor to secure payment of any obligation of any obligor of Debtor
      and any and all of the rights of Debtor of whatever nature under any and all
      contracts, agreements, or leases (whether of real or personal property) to
      which
      the Debtor is or may become a party, including without limitation all of the
      rights of Debtor to enforce all of the provisions of, and to obtain payments
      or
      other performance due under, all contracts, agreements, or leases; (e) all
      of
      Debtor’s rights (including rights as licensee and lessee) with respect to all
      patents, trademarks, copyrights and other intellectual property rights,
      know-how, technology, computer hardware and software and all rights with respect
      thereto including, any and all licenses, options, warranties, service contracts,
      program services, test rights, maintenance rights, support rights, improvement
      rights, renewal rights and indemnifications, and any substitutions,
      replacements, additions or model conversions of any of the foregoing, and
      further including (i) computer and other electronic data processing hardware,
      including all integrated computer systems, central processing units, memory
      units, display terminals, printers, computer elements, card readers, tape
      drives, hard and soft disk drives, cables, electrical supply hardware,
      generators, power equalizers, accessories, peripheral devices and other related
      computer hardware, (ii) all Software and all software programs designed for
      use
      on the computers and electronic data processing hardware described in clause
      (i)
      above, including all operating system software, utilities and application
      programs in any form (source code and object code in magnetic tape, disk or
      hard
      copy format or any other listings whatsoever (iii) any firmware associated
      with
      any of the foregoing; and (iv) any documentation for hardware, Software and
      firmware described in clauses (i), (ii) and (iii) above, including flow charts,
      logic diagrams, manuals, specifications, training materials, charts and pseudo
      codes, (f) all monies, securities and other property of the Debtor, and the
      proceeds thereof, now or hereafter held or received by or in transit to the
      Investor whether for safekeeping, custody, pledge, transmission, collection
      or
      otherwise, and also in and to any and all deposits, general or special, and
      credits of the Debtor with, and any and all claims of the Debtor against, the
      Bank now or at any time hereafter existing, and (g) intellectual property
      rights.

    

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    Electronic
      Chattel Paper
      means
“Electronic Chattel Paper” as defined in the Uniform Commercial
      Code.

    

    Equipment means
      all
      Equipment, as that term is defined in the Uniform Commercial Code as of the
      date
      hereof, of Debtor, whether presently owned or hereafter acquired, and including,
      without limitation, machinery, furniture, furnishings, and fixtures, and any
      and
      all goods used or bought for use in or being used or for use in the conduct
      of
      Debtor’s business and all goods used or bought for use in Debtor’s business
      which are not included within the definition of Inventory, and all accessions
      and additions thereto, replacements therefor, and substitutions therefor,
      supplies and motor vehicles, now owned and hereafter acquired, present and
      future, by the Debtor of whatsoever name, nature, kind or description, wherever
      located, and all additions and accessions thereto and replacements or
      substitutions therefor, and all pro-ceeds thereof and all proceeds of any
      insurance thereon.

    

    Inventory
      means
      all “Inventory” as that term is defined in the Uniform Commercial Code as of the
      date hereof, including, without limitation, any and all goods, merchandise
      or
      other personal property, wherever located and whether or not in transit, now
      owned or hereafter acquired by the Debtor, which is or may at any time be held
      for sale or lease, or furnished or to be furnished under any contract of service
      or held as raw materials, work in process, supplies or materials used or
      consumed in the Debtor’s business, and all such property the sale or other
      disposition of which has given rise to Accounts, Chattel Paper, Documents,
      or
      Instruments and which has been returned to or repossessed or stopped in transit
      by the Debtor.

    

    Letter-of-Credit
      Rights
      means
“Letter-of-Credit Rights” as defined in the Uniform Commercial
      Code.

    

    Patents
      mean all
      of the Debtor’s right, title and interest, present and future, in and to (a) all
      letters patent of the United States or any other country, all right, title
      and
      interest therein and thereto, and all registrations and recordings thereof,
      including without limitation applications, registrations and recordings in
      the
      United States Patent and Trademark Office or in any similar office or agency
      of
      the United States and State thereof or any other country or any political
      subdivision thereof, all whether now owned or hereafter acquired by the Debtor;
      and (b) all reissues, continuations, continuations-in-part or extensions thereof
      and all li-censes thereof; and all proceeds of the foregoing and all proceeds
      of
      any insurance on the foregoing.

    

    Supporting
      Obligations
      means
“Supporting Obligations” as defined in the Uniform Commercial Code.

    

    Tangible
      Chattel Paper
      means
“Tangible Chattel Paper” as defined in the Uniform Commercial Code.

    

    Trademarks
      mean all
      of the Debtor’s right, title and interest, present and future, in and to (a) all
      trademarks, trade names, trade styles, service marks, prints and labels on
      which
      said trademarks, trade names, trade styles and service marks have appeared
      or
      appear, designs and general intangibles of like nature, now existing or
      hereafter adopted or acquired, all right, title and interest therein and
      thereto, and all registrations and recordings thereof, including without
      limitation applications, registrations and recordings in the United States
      Patent and Trademark Office or in any similar office or agency of the United
      States, any State thereof, or any other country or any political subdivision
      thereof, all whether now owned or hereafter acquired by the Debtor; (b) all
      reissues, ex-tensions or renewals thereof and all licenses thereof; and (c)
      the
      goodwill of the business symbolized by each of the Trademarks, and all customer
      lists and other records of the Debtor relating to the distribution of products
      bearing the Trademarks; and all proceeds of the foregoing and all proceeds
      of
      any insurance on the foregoing.

    

    
      
         

      

      
        -7-

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