SECURITY AGREEMENT
BY AND BETWEEN ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ACQUISITION FUND LLC
AND PATIENT SAFETY TECHNOLOGIES, INC.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Acquisition Fund, LLC ("Secured Party") and Patient
Safety Technologies, Inc., a Delaware corporation ("Debtor") agree as follows
on January 26, 2006:
1. GRANT OF SECURITY INTEREST.
1.1 The Debtor, jointly and severally, hereby grants to the Secured Party
a security interest in personal property and fixtures, inventory, products and
proceeds (including proceeds of proceeds, the "Collateral") of Debtor, as
security for:
1.1.1 The satisfaction and the prompt and full performance of all of
Debtor's obligations under that certain Secured Promissory Note (the "Note")
dated January 26, 2006 in the principal amount of twenty five thousand dollars
($25,000.00) plus interest at the rate of seven percent (7% ) per annum, as the
Note may be amended, modified, or extended from time to time (including, without
limitation, the obligation to make payments of principal and interest thereon);
and
1.1.2 The full, faithful, true and exact performance and observance
of all of the obligations, covenants and duties of Debtor under this Security
Agreement, as the same may be amended, modified, or extended from time to time.
2. DEFAULT. Any of the following events shall constitute an event of
default hereunder:
2.1 The failure by Debtor to make full and timely payment when due of any
sum as required to be paid to Secured Party under the Note after any applicable
notice of non-payment provided for in the Note has been given, and any period
within which to cure the non-payment has elapsed, if applicable. A true and
correct copy of the Note is attached hereto as Exhibit "A" and incorporated
herein by this reference.
2.2 The failure by Debtor to fully and timely perform any covenant,
agreement, obligation or duty imposed on Debtor by this Security Agreement or
any other agreement by and between Debtor and Secured Party now existing or
hereinafter made.
2.3 The filing by Debtor of any petition, or commencement by Debtor of any
proceeding, under the Bankruptcy Act or any state insolvency law.
2.4 The making by Debtor of any general assignment for the benefit of
creditors.
2.5 The filing of any petition, or commencement of any proceeding, under
the Bankruptcy Act or any state insolvency law, against Debtor, or the
appointment of any receiver or trustee, which petition, proceeding or
appointment is not fully and completely discharged, dismissed or vacated within
sixty (60) days.
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2.6 Any warranties made by Debtor are untrue in any material respect, or
any schedule, statement, report, notice, or writing furnished by Debtor to the
Secured Party are untrue in any material respect on the date as of which the
facts set forth are stated or certified.
3. INSPECTION OF RECORDS. Secured Party shall have the right without
notice to inspect all financial books, records and reports of Debtor at Debtor's
premises or wherever the same may be maintained during normal business hours.
4. REMEDIES UPON DEFAULT.
4.1 Upon the occurrence of an event of default, in addition to any and all
other remedies at law or in equity available to Secured Party, Debtors hereby
authorize and empower Secured Party, at Secured Party's option and without
notice to Debtor, except as specifically provided herein (and, to the extent
necessary, hereby irrevocably appoint Secured Party as Debtor's attorney-in-fact
for such purposes):
4.1.1 To require Debtor to assemble any and all of the Collateral
and make the same available to Secured Party at the premises wherein the same is
located, or any other place designated by Secured Party; Secured Party may enter
upon any premises where any of the Collateral is located and may take possession
of the same without judicial process and without the need to post any bond or
security as an incident thereto; and
4.1.2 To sell, assign, transfer and deliver the whole or any part of
the Collateral at public or private sale, for cash, upon credit, or for future
delivery, in bulk or item by item, at such prices and upon such terms as are
commercially reasonable, given the nature of the Collateral and the market
therefor, with or without warranties, without the necessity of the Collateral
being present at any such sale or in view of the prospective purchasers thereof,
and without any presentment, demand for performance, protest, notice of protest,
or notice of dishonor except as set forth herein, any other such advertisement,
presentment, demand or notice being expressly waived by Debtors to the extent
permitted by law. At any public sale or sales of the Collateral, Secured Party
or Secured Party's assigns may bid for and purchase all or any part of the
Collateral offered for sale and upon compliance with the terms of such sale, may
hold, exploit and dispose of such Collateral discharged from all claims of
Debtor, except to the extent that Debtor has rights in the proceeds of such sale
or sales, and free from any right or redemption, all of which are hereby
expressly waived and released, and may in paying the purchase price thereof, in
lieu of cash assignment at the face amount thereof, together with any interest
accrued thereon, all or any part of unpaid principal or interest or both,
payable under the Note. Secured Party may also purchase all or any part of the
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Collateral at any private sale thereof to the extent that such Collateral is
customarily sold in a recognized market or is the subject of a widely or
regularly distributed standard price quotation. Upon conclusion of any such
public or private sale, Secured Party may execute and deliver a ▇▇▇▇ of sale to
the assets so sold, in the name of Debtor. Secured Party may use Debtor's
premises for the purpose of conducting of any such sale. Secured Party shall
give Debtor seven (7) days' notice, in writing, of the time and place thereof,
and in the case of a public sale, the date thereof and the name of the
purchaser. Notice shall be deemed given when deposited in the United States
mail, postage prepaid, certified or registered, and addressed to Debtor at ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Secured Party shall only be
required to publish an advertisement of a public sale, which advertisement may
be published in a newspaper of general circulation no later than seven (7) days
prior to the date of sale, and an advertisement so published shall be deemed
commercially reasonable if it merely gives the place, time, and date of sale,
merely identifies the Collateral by classification without describing quantity
or quality; provided, however that such advertisement may, at Secured Party's
option, contain additional information. Debtor acknowledges that Secured Party
may accept any offer received, provided it is commercially reasonable, that
Secured Party, at Secured Party's option, need not approach more than one
possible purchaser, and that Secured Party shall, to the fullest extent
permitted by law, be relieved from all liability or claim for inadequacy of
price if the manner and terms of sale comply with the terms of this Security
Agreement.
4.2 In the event of any such sale by Secured Party of all or any of said
Collateral on credit, or for future delivery, such property so sold may be
retained by Secured Party until the selling price is paid by the purchaser.
Secured Party shall incur no liability in case of the failure of the purchaser
to take up and pay for the property so sold. In case of any such failure, said
Collateral may be again, and from time to time, sold.
4.3 In the event of any such sale or disposition, the proceeds thereof
shall be applied first to the payment of the expenses of the sale, commissions,
actual attorneys' fees, and all other charges paid or incurred by Secured Party
in taking, holding, selling , advertising, or otherwise preparing such
Collateral for sale or otherwise in connection with maintaining the security of
such Collateral, including any taxes or other charges imposed by law upon the
Collateral and/or the ownership, holding or transfer thereof; secondly, to pay,
satisfy and discharge all indebtedness of Debtor to Secured Party secured hereby
then due and payable pursuant to the Note; thirdly, to the extent that Debtor
may still have monetary obligations to Secured Party not yet due and payable,
Secured Party may retain any surplus as collateral for the payment of such sums
when due; and fourthly, if all of the secured obligations are then discharged
and satisfied, to pay the surplus, if any, to Debtor. Secured Party shall look
only to the assets of the business then operated and/or owned by Debtor to
satisfy any and all claims, defaults or breaches regarding the Note and shall
not in any event, look to any other assets of Debtor to satisfy same.
4.4 Secured Party shall not be liable or responsible for safeguarding the
Collateral, or any portion thereof, or maintaining the condition thereof, or for
any loss or damage thereto and diminution in value of the Collateral either
through loss or non-collection. Secured Party shall not be liable or responsible
for any act or default of any carrier or warehouseman or of any other person,
other than that occasioned by the gross negligence and willful misconduct of
Secured Party.
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5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants that
this Security Agreement has been duly and validly authorized, executed and
delivered by Debtor and constitutes a valid and binding agreement, enforceable
in accordance with its terms, and the execution and delivery of this Security
Agreement do not violate, or constitute a default (with or without the giving of
notice, the passage of time, or both) under any order, judgment, agreement,
contract, or instrument to which Debtor is a party or by which Debtor is
affected or may be bound. Debtor represents that Debtor will at all times
maintain the Collateral in good state of repair and condition consistent with
good business practice, including replacement of damaged, destroyed, or obsolete
parts thereof, will pay any and all taxes thereon or applicable thereto prior to
delinquency, and shall maintain at all times insurance thereon against risk of
fire and other such risks as are covered by "extended coverage", theft, burglary
and vandalism. Such policy or policies shall provide that any loss thereunder
and proceeds payable thereunder shall be payable to Secured Party as Secured
Party's interest may appear.
6. INDEMNITY. In the case of any adverse claim with respect to the
Collateral or any portion thereof arising out of any act done, or permitted or
acquiesced in by Debtor, Debtor indemnifies and agrees to hold Secured Party
harmless from and against any and all claims, losses, liabilities, damages,
expenses, costs and actual attorneys' fees incurred by Secured Party in or by
virtue of exercising any right, power or remedy of Secured Party hereunder or
defending, protecting, enforcing or prosecuting the security interest hereby
created. Any such loss, cost, liability, damage or expense so incurred shall be
repaid upon demand by Secured Party and until so paid shall be deemed a secured
obligation hereunder.
7. NO WAIVER BY SECURED PARTY. Any forbearance, failure, or delay by
Secured Party in exercising any right, power or remedy hereunder shall not be
deemed to be a waiver of such right, power, or remedy, and any single or partial
exercise of any right, power, or remedy of Secured Party shall not preclude the
later exercise of any other right, power, or remedy, each of which shall
continue in full force and effect until such right, power, or remedy is
specifically waived by an instrument in writing, executed by Secured Party.
8. EFFECTIVENESS OF AGREEMENT. This Security Agreement and Debtors' 1.
duties and obligations and Secured Party's powers to dispose of the Collateral,
and all other rights, powers and remedies granted to Secured Party hereunder
shall remain in full force and effect until Debtor has satisfied and discharged
all of Debtor's obligations to Secured Party secured thereby.
9. WAIVER BY DEBTOR. All provisions of law, in equity and by statute
providing for, relating to, or pertaining to pledges or security interests and
the sale of pledged property or property in which a security interest is
granted, or which prescribe, prohibit, limit or restrict the right to, or
conditions, notice or manner of sale, together with all limitations of law, in
equity, or by statute, on the right of attachment in the case of secured
obligations, are hereby expressly waived by Debtor to the fullest extent Debtor
may lawfully waive same.
10. RELEASE OF COLLATERAL. Upon payment in full by Debtor, in lawful money
of the United States of America, to Secured Party at the address set forth in
the Note of all amounts secured hereby, and performance of all other obligations
of Debtor under this Security Agreement, together with any interest thereon and
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any costs and expenses incurred by Secured Party in the enforcement of this
Security Agreement or of any of Secured Party's rights hereunder, or in the
enforcement of any other agreements (whether heretofore or hereafter entered
into) between Debtor and Secured Party, or any of the rights of Secured Party
thereunder, and upon the request of Debtor therefore, Secured Party will deliver
to Debtor, at Debtor's sole cost and expense, such termination statements and
such other documents of release, reconveyance and reassignments as shall be
sufficient to discharge Debtor of the liabilities secured hereby and to
terminate and release the security interest in the Collateral created hereby.
11. MISCELLANEOUS.
11.1 This Security Agreement and all of the rights and duties in
connection herewith shall be governed by and construed in accordance with the
laws of the State of California thereof without giving effect to principles
governing conflicts of law.
11.2 This Security Agreement and all of its terms and provisions shall be
binding upon the heirs, successors, transferees and assigns of each of the
parties hereto.
11.3 In the event any portion of this Security Agreement is held invalid,
the remaining portions shall remain in full force and effect as if that invalid
portion had never been a part hereof.
11.4 In the event litigation is commenced to enforce or interpret this
Security Agreement, or any provision hereof, the prevailing party shall be
entitled to recover its actual costs and attorneys' fees.
11.5 This Security Agreement may be amended only by written consent of
each of the parties hereto.
11.6 Any and all notices, demands, requests, or other communications
required or permitted by this Security Agreement or by law to be served on,
given to, or delivered to any party hereto by any other party to this Security
Agreement shall be in writing and shall be deemed duly served, given, or
delivered when personally delivered to the party, or in lieu of such personal
delivery, when deposited in the United States mail, first-class postage prepaid
addressed to the party at the address herein appearing.
11.7 This Security Agreement constitutes the entire agreement between the
parties pertaining to the subject matter contained herein and supercedes all
prior and contemporaneous agreements, representations and understandings of the
parties. No waiver of any of the provisions of this Security Agreement shall be
deemed, or shall constitute a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party making the waiver.
11.8 This Security Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The exhibits attached
hereto are made a part hereof and incorporated herein.
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11.9 Nothing in this Security Agreement, whether express or implied, is
intended to confer any rights or remedies under or by reason of this Security
Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Security Agreement intended to
relieve or discharge the obligations or liability of any third persons to any
party to this Security Agreement, nor shall any provision give any third person
any right of subrogation or action against any party to this Security Agreement.
11.10 Each party's obligations under this Security Agreement is unique. If
any party should default in its obligations under this Security Agreement, the
parties each acknowledge that it would be extremely impracticable to measure the
resulting damages; accordingly, the non-defaulting party, in addition any other
available rights or remedies, may ▇▇▇ in equity for specific performance without
the necessity of posting a bond or other security, and the parties each
expressly waive the defense that a remedy in damages will be adequate.
11.11 All representations, warranties and agreements of the parties
contained in this Security Agreement, or in any instrument, certificate, opinion
or other writing provided for in it, shall survive the completion of all acts
contemplated herein.
11.12 Whenever the context of this Security Agreement requires, the
masculine gender includes the feminine or neuter gender, and the singular number
includes the plural.
11.13 As used herein, the word "days" shall refer to calendar day,
including holidays, weekends, non-business days, etc.
11.14 The captions contained herein do not constitute part of this
Security Agreement and are used solely for convenience and shall in no way be
used to construe, modify, limit or otherwise affect this Security Agreement.
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IN WITNESS WHEREOF, this Security Agreement is executed on the date first
set forth above at Los Angeles County, California.
DEBTOR SECURED PARTY
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PATIENT SAFETY TECHNOLOGIES, INC. ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
ACQUISITION FUND, LLC
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ M.D. By: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Company
----------------------------------- Investment Management, LLC,
BY: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇ managing member
TITLE: Chairman and Chief Executive
Officer
/s/ ▇▇▇▇▇▇ ▇▇▇▇
----------------------------------------
BY: ▇▇▇▇▇▇ "▇▇▇▇" ▇▇▇▇ III
TITLE: Managing Member
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