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Exhibit 10.38    
    


CERTAIN
MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. 


 
 

Personal Services Agreement
  By and Between Stephan R. Targan, M.D. and
  Prometheus Laboratories Inc.    
    


This
Agreement (the "Agreement") is effective as of the 1st day of June, 2008 (the "Effective Date") by and between Stephan R. Targan, M.D. with offices at University 240
22nd Street, Santa Monica, CA 90402 (hereinafter referred to as the "Consultant"), and Prometheus Laboratories Inc., with offices at 9410 Carroll Park Drive, San Diego, CA
92121-5201 (hereinafter referred to as "Company" or "Prometheus"). 


        This
Agreement will set forth the general terms of our agreement whereby Consultant will provide to the Company the consulting services, including speaking engagements, as described on
Exhibit A hereto (the "Consulting Services"). 


        1.     Engagement.    Company hereby engages Consultant to provide personal consulting services
to the Company as described in Exhibit A on a part-time basis. This Agreement covers all of the services to be furnished by Consultant to Company and the parties acknowledge that
there is not now, and during the term of this Agreement shall not be, any other contract or agreement between Company and Consultant. Nothing in this Agreement shall limit Consultant's right to
provide services to any other businesses or institutions except as provided in paragraph 5 below. 


        2.     Compensation.    In consideration for the Consulting Services, the Company will pay the
Consultant the fees as specified in Exhibit A. Such fees shall be paid within thirty (30) days following the performance of services upon satisfactory evidence of the provision of such
Consulting Services. Consultant shall provide a detailed statement of Consulting Services provided in the form set out in Exhibit B attached hereto no later than the tenth (10th) day of each
month for Consulting Services provided by Consultant during the immediately preceding month. 


        3.     Expenses.    The Company will reimburse Consultant for all reasonable travel and other
expenses directly related to Consultant's performance under this Agreement provided that (a) such expenses in excess of $1,500 dollars have been approved in writing, in advance of being
incurred, by an officer of the Company and (b) such expenses are of a nature (and adequate documentary evidence has been provided) qualifying them as proper deductions on federal and state
income tax returns of the Company. 


        4.     Term and Termination.    This Agreement shall commence on the Effective Date and shall
continue for a term of one year. At the conclusion of the initial term, this Agreement may be extended for subsequent one year or greater terms by the mutual consent of both parties. Extension of this
Agreement shall be made in writing by amending this Agreement. In the event of a material breach of the Agreement by either party, the other party may terminate this Agreement upon providing the
breaching party with written notice of the breach and ten (10) days prior written notice of termination, provided that if the breaching party cures said breach within ten (10) days, this
Agreement shall continue in full force and effect. 


        5.     Absence of Conflicts.    Consultant represents and warrants that Consultant is not under
any existing obligation that is inconsistent with this Agreement or that would restrict or conflict with the performance of Consultant's obligations under this Agreement. Consultant agrees not to
enter into any 


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agreement
or arrangement during the term of this Agreement that would impose on Consultant any obligation inconsistent with this Agreement or that would restrict or conflict with the performance of
Consultant's obligations under this Agreement. If Consultant is required by any applicable guidelines or policies to make any disclosure or take any action that conflicts with any obligations of
Consultant under this Agreement or is contrary to the terms of this Agreement, Consultant shall promptly notify the Company of such obligation, specifying the nature of such disclosure or action and
identifying the applicable guideline or policy under which disclosure or action is required, prior to making such disclosure or taking such action. 


        6.     Intellectual Property.    All inventions or discoveries, whether or not patentable,
which may arise from the Consulting Services shall be owned exclusively by Company. Consultant agrees to cooperate in the preparation and execution of documents necessary to effect any patent or other
filings deemed necessary or appropriate by the Company relating to such inventions and discoveries. 



        7.     Notification of Events.    In addition to the obligations under paragraph 21
hereunder, Consultant shall notify Company in writing within twenty-four (24) hours after the occurrence of any one or more of the following events: 



        (a)   Consultant
becomes the subject of, or otherwise materially involved in, any government investigation of Consultant's business practices or the provision of professional
services, including being served with a search warrant in connection with such activities; 


        (b)   Consultant
becomes the subject of any suit, action or other legal proceeding arising out of Consultant's professional services; 


        (c)   Consultant
becomes the subject of any disciplinary proceeding or action before any state's medical board or similar agency responsible for professional standards or
behavior; or 


        (d)   any
act of nature or any other event occurs which has a material adverse effect on Consultant's ability to provide the Consulting Services. 




        8.     Independent Contractor Status.    The parties agree that Consultant is serving as an independent contractor and
is not an employee of the Company. As such, Consultant acknowledges that Consultant is not entitled to any medical benefits, paid time off, tax withholding or other benefits routinely provided to
employees. 


        9.     Taxes.    By reason of Consultant's status as an independent contractor and the
representations made herein, Consultant hereby instructs the Company not to withhold any taxes from the fees paid to Consultant. Consultant acknowledges and agrees that Consultant is solely
responsible for the payment of any and all domestic or foreign taxes and/or assessments imposed on account of the payment of fees or other compensation by the Company to Consultant. Consultant
expressly agrees to treat any fees and other compensation earned under this Agreement as self-employment income for federal and state income taxes, unemployment insurance taxes, disability
insurance taxes or any other taxes when such amounts become due and payable. 


        10.   Confidentiality.    Consultant, during the term of this Agreement, will have access to
and become acquainted with various business, technical, and financial information and compilations of information and records of the Company, all of which shall be deemed Confidential Information
(hereinafter "Confidential Information") of the Company. Consultant shall hold such Confidential Information in strict confidence and shall not disclose any of the aforementioned Confidential
Information, directly or indirectly, or use it in any way, either during the term of this Agreement or at any time thereafter for a period of ten (10) years. All files, documents, records, and
similar items, relating to the foregoing, whether prepared by the Consultant or otherwise coming into the Consultant's possession, shall remain the Confidential Information of the Company. Consultant
shall 


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either
return to the Company, or certify to the Company, the destruction of all Confidential Information of the Company at the termination of the Agreement. 


        11.   Compliance of Laws.    Consultant shall comply in all material respects with all
applicable laws, ordinances, codes and regulations of federal, state and local governments applicable to the Consulting Services provided under this Agreement. 



        12.   Indemnity.    Consultant agrees to indemnify and defend Company from all claims,
charges, damages, and judgments arising from the breach of Consultant's obligations under this Agreement or the services provided by Consultant hereunder. 


        13.   Limitation on Authority.    Consultant shall not have any authority to obligate or bind
the Company to any agreement, purchase or obligation of any kind without the express written approval of an officer of the Company. 



        14.   Assignment of Rights and Duties.    The Consultant may not assign his rights or duties
under this Agreement without prior written consent of the Company, which consent may be withheld for any reason. Any attempted assignment, transfer, conveyance, or other disposition of the
Consultant's interest in this Agreement shall be void. 


        15.   Notice.    All notices and other communications required or permitted under this
Agreement shall be in writing and shall be deemed given upon personal delivery, facsimile transmission (with confirmation of receipt), delivery by a reputable overnight courier service or five
(5) days following deposit in the United States mail (if sent by certified or registered mail, postage prepaid, return receipt requested), to the parties at the following addresses (unless the
party has by written notice subsequently provided a new contact person or address): 



	            For the CONSULTANT:	 	 	 	Stephan R. Targan, M.D.

240 22nd Street

Santa Monica, CA 90402
	    	 	 	 	 
	            For COMPANY:	 	 	 	Bruce Neri

Vice President, Diagnostics R&D Prometheus Laboratories Inc.

9410 Carroll Park Drive

San Diego, CA 92121-5201
	    	 	 	 	 
	 	 	With a copy to:
	 	 	 	 	Prometheus Laboratories Inc.

Attention: Legal Department

9410 Carroll Park Drive

San Diego, CA 92121-5201





        16.   Legal Fee; Arbitration.    The parties hereto expressly agree that in the event of any
dispute, controversy or claim by any party regarding this Agreement, the prevailing party shall be entitled to reimbursement by the other party to the proceeding of reasonable attorney's fees and
costs incurred by the prevailing party. Any dispute, controversy or claim arising hereunder or in any way related to this Agreement shall be resolved by arbitration in the County of San Diego, State
of California by JAMS-Endispute. The arbitration shall be conducted by a sole arbitrator appointed by JAMS-Endispute (the "Arbitrator"). The Arbitrator's decision shall be
final and binding on all parties. The Arbitrator shall have no authority to award damages for emotional distress, punitive damages or equitable relief. The parties intend that this arbitration
provision be irrevocable and be construed as broadly as possible. The arbitration shall be governed by the provisions of the Arbitration Act, and judgment upon the award rendered by the Arbitrator may
be entered by any court having jurisdiction thereof. 


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        17.   Governing Law.    This Agreement shall be governed by and construed under the laws of
the State of California without reference to principles of conflicts of laws. 


        18.   Entire Agreement.    This Agreement, including Exhibits A and B hereto, sets
forth the entire agreement and understanding among the parties as to the subject matter hereof and supersedes all prior agreements or understandings with respect to such subject matter, whether
written or oral. This Agreement may not be amended or modified except in writing signed by Consultant and a duly authorized officer of the Company. In the event of any inconsistency between the
provisions of this Agreement and Exhibits A and B, the provisions of this Agreement shall govern. No waiver of any term, provision or condition of this Agreement, whether by conduct or
otherwise in any one or more instances shall be deemed to be or construed as a further or continuing waiver of any such term, provision or condition, or of any other term, provision or condition. The
invalidity or unenforceability of any term or provision of the parties with respect to the subject matter of this Agreement shall not affect the validity or enforceability of any other term or
provision of this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same
instrument. 


        19.   Force Majeure.    Neither party shall be responsible for failure to perform under this
Agreement if circumstances beyond their control, including, but not limited to: acts of God, government authority, disaster or other emergencies make it illegal or impossible to hold an event. 


        20.   Practice of Medicine.    Consultant and Company acknowledge that Company is neither authorized nor qualified to
engage in any activity which may be construed or deemed to constitute the practice of medicine. To the extent that any act or service required of, or reserved to, Company in this Agreement is
construed or deemed to constitute the practice of medicine, the performance of such act or service by Company shall be deemed waived or unenforceable, unless this Agreement can be amended to comply
with the law, in which case the parties shall make such amendment 


        21.   Referrals.    Consultant shall be entitled to refer patients to any health care
provider deemed by Consultant best qualified to deliver medical services to any particular patient. No term of this Agreement shall be construed as requiring or inducing Consultant to refer patients
to Company. Consultant's rights under this Agreement shall not be dependent in any way on the referral of patients or business to Company by Consultant. 


        22.   Representation Regarding Debarment and Felony Conviction.    Consultant represents to
Company that Consultant has never been and is not currently debarred, excluded or banned from any federal healthcare program. Further, Consultant represents that Consultant has not been convicted of a
felony involving fraud or deceit. Consultant agrees to immediately notify the Company should Consultant become debarred, excluded or banned from any federal healthcare program or should Consultant be
convicted of a felony involving fraud or deceit. 


        23.   Patient Privacy and Health Information.    Consultant shall comply, and shall require
any of the persons or entities performing any services under this Agreement on the Consultant's behalf to comply, with all applicable federal and state laws and regulations governing patient privacy
and confidentiality of health information, including without limitation the federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and its implementing regulations. 


        24.   Company Code of Business Conduct and Ethics.    By signing this Agreement, Consultant
agrees to review and abide by Company's Code of Business Conduct and Ethics (the "Code") as posted on its website at www.prometheuslabs.com. Consultant may request a hard copy of the Code if access to
the internet is not available. 


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        The
foregoing is acknowledged, understood and agreed to as evidenced by execution by the parties in the spaces below. 



	CONSULTANT:	 	 
	    	 	 	 	 
	By:	 	/s/  STEPHAN R. TARGAN, M.D.      
 Stephan R. Targan, M.D.	 	 
	    	 	 	 	 
	Tax Payer ID Number:
                             	 	 
	    	 	 	 	 
	    	 	 	 	 
	PROMETHEUS LABORATORIES INC.:	 	 
	    	 	 	 	 
	By:	 	/s/  JOSEPH M. LIMBER      
 Joseph M. Limber

President and Chief Executive Officer	 	 





Approved by the Legal Dept. of

Prometheus Laboratories Inc.:                         


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Exhibit A    
    


Services:    Consultant agrees to use his best efforts to diligently provide the Consulting Services described in this Exhibit A. The
Services will be directed by the Company's Vice President, Diagnostics R&D, or his designee. 


	I.
	Speaking Engagements



Consultant
shall provide speaking for up to five (5) of Company's promotional speaking engagements which must be arranged and approved in advance by the
Company. Consultant will provide fair balanced scientific and clinical information at speaking engagements on relevant therapeutic and/or diagnostic topics. Consultant agrees to be trained on
Company's products and on FDA regulations relating to product promotion prior to speaking on Company's behalf. 


Compensation
for Speaking Services: Consultant will be paid for speaking engagements, including time incurred for presentation preparation, time for travel to and from the event, the event itself,
potential question and answer period following the event, and any meal time pre or post the event at a rate of $[***].



At
the conclusion of each month, Consultant will provide evidence to the Company of the performance of a speaking engagement and receipts for reimbursable expenses. Company will provide payment within
thirty (30) days of receipt of such evidence. 


	II.
	Consulting



	•
	Consultant
shall be available to consult with Company for up to 132 hours over the term of this Agreement by providing
his expertise regarding the development of products for, and the diagnosis and treatment of, gastrointestinal diseases to the Company. 






Compensation
for these services will be $[***] per hour for actual services provided. Consultant shall provide a detailed
invoice describing the exact consulting services performed, who requested the services, date of service, number of hours spent providing the services and the deliverables to the Company at the end of
each month. Services will be tracked by a form attached as Exhibit B, or in a similar manner. Company will submit payment within thirty (30) days of receipt of such invoice. 




Total compensation for all services provided under this Agreement shall not exceed: $48,000.




	***
	Certain
information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the
omitted portions. 


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EXHIBIT B    
    


Monthly Consulting Record for Prometheus Laboratories Inc.  


Please
use this form to record your time each time you perform a service for Prometheus. Submit all forms at the end of the month for compensation under the terms of your Personal Services Agreement
with Prometheus. 







Consultant Name and Address: 


Consulting Service Details  



	 
	 	Day of service
	 	Duration of

service

(minutes/hours)
	 	Type of service

(Consulting, Speaking,

Advisory Board)
	 	Prometheus person(s)

associated

with service
	 	Brief overview of subject

matter discussed,

reviewed, etc.

	1	 	 	 	 	 	 	 	 	 	 
	2	 	 	 	 	 	 	 	 	 	 
	3	 	 	 	 	 	 	 	 	 	 
	4	 	 	 	 	 	 	 	 	 	 
	5	 	 	 	 	 	 	 	 	 	 
	6	 	 	 	 	 	 	 	 	 	 
	7	 	 	 	 	 	 	 	 	 	 
	8	 	 	 	 	 	 	 	 	 	 
	9	 	 	 	 	 	 	 	 	 	 
	10	 	 	 	 	 	 	 	 	 	 




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QuickLinks



Exhibit 10.38


Personal Services Agreement By and Between Stephan R. Targan, M.D. and Prometheus Laboratories Inc.

Exhibit A

EXHIBIT B