Unassociated Document


    EMPLOYMENT
AGREEMENT

     

    THIS EMPLOYMENT AGREEMENT (the
      “Agreement”) is made and entered into as of November 2, 2005 and shall be
      effective as of August 8, 2005 (the “Effective Date”) by and between
SurgiCount Medical, Inc.
      (the
“Company”),a
      California corporation and wholly owned subsidiary of Patient Safety Technologies,
      Inc. (“Parent”), a Delaware
      corporation, both with offices located at 100 Wilshire Boulevard, Suite 1750,
      Santa Monica, California, 90401, and James Schafer,an
      individual with an address
      35864 Carlton Road, Wildomar, California, 92595 (“Individual”). This Agreement
      replaces and supercedes that certain Employment Agreement entered into as of
      July 22, 2005 by and between Parent and Individual, in its entirety.


    WHEREAS, the Company is in the
      business of patient safety products and content; and

    WHEREAS, Individual has had
      experience in the operations of businesses doing purchasing, materials and
      supply chain management; and 

    WHEREAS, the Company desires to
      retain the services of Individual; and 

    WHEREAS, Individual is willing
      to be
      employed by the Company. 

    NOW, THEREFORE, in consideration
      of
      the mutual covenants contained herein, the parties agree as follows: 

    1. Employment.
      Individual is hereby employed and engaged to
      serve the Company as the Chief Operating Officer of the Company, or such
      additional titles as the Company shall specify from time to time, and Individual
      does hereby accept, and Individual hereby agrees to such engagement and
      employment.

    2. Duties.
      Individual shall be responsible for the
      overall operations of the Company. In addition, Individual’s duties shall be
      such duties and responsibilities as the Company shall specify from time to
      time,
      and shall entail those duties customarily performed by the Chief Operating
      Officer of a company with a sales volume and number of employees commensurate
      with those of the Company. Individual shall have such authority, discretion,
      power and responsibility, as are customary or appropriate to this position.
      Individual shall diligently and faithfully execute and perform such duties
      and
      responsibilities, subject to the general supervision and control of the
      Company’s Chief Executive Officer. Individual shall be responsible and report
      only to the Company’s Chief Executive Officer. The Company’s Chief Executive
      Officer, in its sole and absolute discretion, shall determine Individual’s
      duties and responsibilities and may assign or reassign Individual to such duties
      and responsibilities as it deems in the Company's best interest. Individual
      shall devote his full-time attention, energy, and skill during normal business
      hours to the business and affairs of the Company and shall not, during the
      Employment Term, as that term is defined below, be actively engaged in any
      other
      business activity, except with the prior written consent of the Company’s board
      of directors.

    Nothing in this Agreement shall
      preclude Individual from devoting reasonable periods required for: 

    
    

    	
          	(a)	
            serving as a director
              or
              member of a committee of any organization or corporation involving
              no
              conflict of interest with the interests of the Company;
              

          


    
    

    	
          	(b)	
            serving as a consultant
              in
              his area of expertise (in areas other than in connection with the business
              of the Company), to government, industrial, and academic panels where
              it

          



     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    does not conflict with the interests
      of the Company; and 

    
    

    	
          	(c)	
            managing his personal
              investments or engaging in any other non-competing business; provided
              that
              such activities do not materially interfere with the regular performance
              of his duties and responsibilities under this Agreement as determined
              by
              the Company. 

          


    3. Best Efforts of
      Individual. During his
      employment hereunder, Individual shall, subject to the direction and supervision
      of the Company’s Chief Executive Officer, devote his full business time, best
      efforts, business judgment, skill, and knowledge to the advancement of the
      Company's interests and to the discharge of his duties and responsibilities
      hereunder. Notwithstanding the foregoing, nothing herein shall be construed
      as
      preventing Individual from investing his assets in any business. 

    4. Employment
      Term. Unless terminated
      pursuant to Section 12 of this Agreement, the term of this Agreement shall
      commence as of the Effective Date of this Agreement and shall continue for
      a
      term of twenty-four (24) months (the “Initial Term”), and shall be automatically
      renewed for successive one (1) year terms (the “Renewal Term”) unless a party
      hereto delivers to the other party written notice of such party's intention
      not
      to renew at least thirty (30) days prior to the end of the Initial Term or
      the
      applicable Renewal Term, as the case may be.(the terms “Initial Term” and
“Renewal Term” will collectively hereinafter be referred to as the “Employment
      Term”).

    
      	5. 
                  	Compensation
              of
              Individual.
	 
	 	(a) 
                  	Base Compensation.
              As compensation
              for
              the services provided by Individual under this Agreement, the Company
              shall pay Individual an annual salary of One Hundred Thousand Dollars
              ($100,000) during the Employment Term. The compensation of Individual
              under this Section shall be paid in accordance with the Company's usual
              payroll procedures.
	 
	 	(b) 
                  	Bonus.
              In addition
              to the
              above base compensation, Individual shall be eligible to receive an
              annual
              bonus determined by the Chief Executive Officer and detailed herein:
              Individual will be granted Fifty Thousand Dollars ($50,000) annually
              in
              restricted stock of Parent, to be vested (i) on the Effective Date
              for
              first annual payment (August 8, 2005) and (ii) on the anniversary of
              the
              Effective
	 


    

    Date of the second year (August
      8,
      2006) Should employment terminate under Section 12(b) prior to the first
      anniversary of the Effective Date, Individual will still be entitled to receive
      bonus for the second year.

    
      	
              (c) 
                    

            	Stock and Stock
              Options.
              Individual
              shall
              also be eligible to receive shares of Parent’s authorized stock and
              options to purchase shares of Parent’s authorized stock from time to time
              as determined by the Chief Executive Officer and detailed herein:
              Individual will be granted One Hundred Twenty- Five Thousand (125,000)
              stock options, vesting quarterly over four (4) years at a strike price
              of
              Five Dollars ($5.00).
	 


    

    6. Benefits. Individual
      shall also be entitled to
      participate in any and all Company benefit plans, from time to time, in effect
      for employees of the Company. Such participation shall be subject to the terms
      of the applicable plan documents and generally applicable Company policies.
      Individual shall also receive an automobile allowance of Six Thousand Dollars
      ($6,000) per year (given that Individual adheres to Company policy on auto
      allowance) and use of a Company cellular telephone, paid for by Company.


    7. Vacation, Sick Leave and
      Holidays. Individual shall be
      entitled to three (3) weeks of paid vacation, with such vacation to be scheduled
      and taken in accordance with the Company's standard vacation policies. In
      addition, Individual shall be entitled to such sick leave and holidays at full
      pay in accordance with the
      Company's policies established and in effect from time to time.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    8. Business
      Expenses. The Company shall
      promptly reimburse Individual for all reasonable out-of-pocket business expenses
      incurred in performing Individual’s duties and responsibilities hereunder in
      accordance with the Company's policies, provided Individual promptly furnishes
      to the Company adequate records of each such business expense. Individual shall
      receive a Relocation/Moving Expense of Eight Thousand ($8,000). 

    9. Location of Individual's
      Activities. Individual’s
      principal place of business in the performance of his duties and obligations
      under this Agreement shall be at a place to be determined by the Chief Executive
      Officer. Notwithstanding the preceding sentence, Individual will engage in
      such
      travel and spend such time in other places as may be necessary or appropriate
      in
      furtherance of his duties hereunder. 

    10.
      Confidentiality. Individual
      recognizes that the Company has and will have business affairs, products, future
      plans, trade secrets, customer lists, and other vital information (collectively
      "Confidential Information") that are valuable assets of the Company. Individual
      agrees that he shall not at any time or in any manner, either directly or
      indirectly, divulge, disclose, or communicate in any manner any Confidential
      Information to any third party without the prior written consent of the
      Company’s board of directors. Individual will protect the Confidential
      Information and treat it as strictly confidential. 

    11. Non-Competition.
Individual
      acknowledges that
      he has gained, and will gain extensive knowledge in the business conducted
      by
      the Company and has had, and will have, extensive contacts with customers of
      the
      Company. Accordingly, Individual agrees that he shall not compete directly
      or
      indirectly with the Company, either during the Employment Term or during the
      one
      (1) year period immediately after the termination of Individual’s employment
      under Section 12 and shall not, during such period, make public statements
      in
      derogation of the Company. For the purposes of this Section 11, competing
      directly or indirectly with the Company shall mean engaging, directly or
      indirectly, as principle owner, officer, partner, consultant, advisor, or
      otherwise, either alone or in association with others, in the operation of
      any
      entity engaged in a business similar to that of the Company’s.

    12. Termination. Notwithstanding
      any other provisions hereof to
      the contrary, Individual’s employment hereunder shall terminate under the
      following circumstances: 

    
      	
              (a) 
                    

            	
              Voluntary
                Termination by Individual.
                Individual
                shall
                have the right to voluntarily terminate this Agreement and his employment
                hereunder at any time during the Employment Term.

            
	 
	
              (b) 
                    

            	Voluntary Termination
              by
              the Company. The
              Company shall have the right to voluntarily terminate this Agreement
              and
              Individual’s employment hereunder at any time after the Employment
              Term.
	 
	
              (c) 
                    

            	
              Termination
                for
                Cause.
                The Company
                shall have
                the right to terminate this Agreement and Individual’s employment
                hereunder at any time for cause. As used in this Agreement, "cause"
                shall
                mean refusal by Individual to implement or adhere to lawful policies
                or
                directives of the Company’s board of directors, breach of this Agreement,
                Individual’s conviction of a felony, other conduct of a criminal nature
                that may have a material adverse impact on the Company's reputation,
                breach of fiduciary duty or the criminal misappropriation by Individual
                of
                funds from or resources of the Company. Cause shall not be deemed
                to exist
                unless the Company shall have first given Individual a written notice
                thereof specifying in reasonable detail the facts and circumstances
                alleged to constitute "cause" and thirty (30) days after such notice
                such
                conduct has, or such circumstances have, as the case may be, not
                entirely
                ceased and not been entirely remedied.

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    


    
      	
              (d) 
                    

            	Termination Upon
              Death
              or for Disability. This Agreement
              and Individual’s employment hereunder, shall
              automatically terminate upon Individual’s death or upon written notice to
              Individual and certification of Individual’s disability by a qualified
              physician or a panel of qualified physicians if Individual becomes
              disabled beyond a period of twelve (12) months and is unable to perform
              the duties contain in this Agreement.
	 
	
              (e) 
                    

            	Effect of Termination.
              In the event
              that
              this Agreement and Individual’s employment is voluntarily terminated by
              Individual pursuant to Section 12(a), or in the event the Company
              voluntarily terminates this Agreement pursuant to Section 12(b) or
              for
              cause pursuant to Section 12(c), all obligations of the Company and
              all
              duties, responsibilities and obligations of Individual under this
              Agreement shall cease, except for those obligations set forth in Sections
              10, 11 and 17 hereof. Upon such termination pursuant to Section 12(a),
              all
              unvested stock options and restricted stock will be forfeited. Upon
              such
              termination pursuant to Section 12(b), the Company shall (i) pay
              Individual a cash lump sum equal to (x) all accrued base salary through
              the date of termination plus all accrued vacation pay and bonuses,
              if any,
              plus (y) as severance compensation, an amount equal to twelve (12)
              months
              of Individual’s base salary, however if Individual is within the final
              twelve (12) months of the remaining Employment Term of this Agreement,
              then Individual will receive whatever base salary is remaining on the
              Employment Term. In the event of a merger, consolidation, sale, or
              change
              of control, the Company's rights hereunder shall be assigned to the
              surviving or resulting company, which company shall then honor this
              Agreement with Individual.
	 


    

    13. Resignation as Officer.
      In the event that
      Individual’s employment with the Company is terminated for any reason
      whatsoever, Individual agrees to immediately resign as an Officer and/or
      Director of the Company, if applicable, and any related entities. For the
      purposes of this Section 13, the term the "Company" shall be deemed to include
      subsidiaries, parents, and affiliates of the Company.

    14. Governing Law, Jurisdiction
      and Venue. This Agreement
      shall be governed by and construed in accordance with the laws of the State
      of
      California without giving effect to any applicable conflicts of law provisions.
      

    15. Business Opportunities.
      During the Employment
      Term
      Individual agrees to bring to the attention of the Company’s Chief Executive
      Officer and board of directors all written business proposals that come to
      Individual’s attention and all business or investment opportunities of whatever
      nature that are created or devised by Individual and that relate to areas in
      which the Company conducts business and might reasonably be expected to be
      of
      interest to the Company or any of its subsidiaries. 

    16. Employee’s Representations and
      Warranties. Individual hereby
      represents and warrants that he is not under any contractual obligation to
      any
      other company, entity or individual that would prohibit or impede Individual
      from performing his duties and responsibilities under this Agreement and that
      he
      is free to enter into and perform the duties and responsibilities required
      by
      this Agreement. Individual hereby agrees to indemnify and hold the Company
      and
      its officers, directors, employees, shareholders and agents harmless in
      connection with the representations and warranties made by Individual in this
      Section 16. 

    
      	17. 
                  	Indemnification.
	 
	 	(a) 
                  	The Company agrees that
              if
              Individual is made a party, or is threatened to be made a party, to
              any
              action, suit or proceeding, whether civil, criminal, administrative
              or
              investigative (a
	 


    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	 	"Proceeding"), by reason
              of
              the fact that he is or was a director, officer or employee of the Company
              or is or was serving at the request of the Company as a director, officer,
              member, employee or agent of another corporation, partnership, joint
              venture, trust or other enterprise, including service with respect
              to
              employee benefit plans, whether or not the basis of such Proceeding
              is
              Individual’s alleged action in an official capacity while serving as a
              director, officer, member, employee or agent, Individual shall be
              indemnified and held harmless by the Company to the fullest extent
              permitted or authorized by the Company's certificate of incorporation
              or
              bylaws or, if greater, by the laws of the State of California, against
              all
              cost, expense, liability and loss (including, without limitation,
              attorney's fees, judgments, fines, ERISA excise taxes or penalties
              and
              amounts paid or to be paid in settlement) reasonably incurred or suffered
              by Individual in connection therewith, and such indemnification shall
              continue as to Individual even if he has ceased to be a director, member,
              employee or agent of the Company or other entity and shall inure to
              the
              benefit of Individual’s heirs, executors and administrators. The Company
              shall advance to Individual to the extent permitted by law all reasonable
              costs and expenses incurred by him in connection with a Proceeding
              within
              20 days after receipt by the Company of a written request, with
              appropriate documentation, for such advance. Such request shall include
              an
              undertaking by Individual to repay the amount of such advance if it
              shall
              ultimately be determined that he is not entitled to be indemnified
              against
              such costs and expenses.
	 
	(b) 
                  	Neither the failure of
              the
              Company (including its board of directors, independent legal counsel
              or
              stockholders) to have made a determination prior to the commencement
              of
              any proceeding concerning payment of amounts claimed by Individual
              that
              indemnification of Individual is proper because he has met the applicable
              standard of conduct, nor a determination by the Company (including
              its
              board of directors, independent legal counsel or stockholders) that
              Individual has not met such applicable standard of conduct, shall create
              a
              presumption that Individual has not met the applicable standard of
              conduct.
	 
	(c) 
                  	The Company agrees to
              continue
              and maintain directors' and officers' liability insurance policy covering
              Individual to the extent the Company provides such coverage for its
              other
              executive officers.
	 
	(d) 
                  	Promptly after receipt
              by
              Individual of notice of any claim or the commencement of any action
              or
              proceeding with respect to which Individual is entitled to indemnity
              hereunder, Individual shall notify the Company in writing of such claim
              or
              the commencement of such action or proceeding, and the Company shall
              (i)
              assume the defense of such action or proceeding, (ii) employ counsel
              reasonably satisfactory to Individual, and (iii) pay the reasonable
              fees
              and expenses of such counsel. Notwithstanding the preceding sentence,
              Individual shall be entitled to employ counsel separate from counsel
              for
              the Company and from any other party in such action if Individual
              reasonably determines that a conflict of interest exists which makes
              representation by counsel chosen by the Company not advisable. In such
              event, the reasonable fees and disbursements of such separate counsel
              for
              Individual shall be paid by the Company to the extent permitted by
              law.
	 
	(e) 
                  	After the termination
              of this
              Agreement and upon the request of Individual, the Company agrees to
              reimburse Individual for all reasonable travel, legal and other
              out-of-pocket expenses related to assisting the Company to prepare
              for or
              defend against any action, suit, proceeding or claim brought or threatened
              to be brought against the Company or to prepare for or institute any
              action, suit, proceeding or claim to be brought or threatened to be
              brought against a third party arising out of or based upon the
              transactions contemplated herein and in providing evidence, producing
              documents or otherwise participating in any such action, suit, proceeding
              or claim. In the event Individual is required to appear after termination
              of this Agreement at a judicial or regulatory hearing in connection
              with
              Individual's employment hereunder, or Individual's role in
              connection
	 




     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    therewith, the Company agrees
      to pay
      Individual a sum, to be mutually agreed upon by Individual and the Company,
      per
      diem for each day of his appearance and each day of preparation therefor.


    18. Notices. All
      demands, notices, and other communications
      to be given hereunder, if any, shall be in writing and shall be sufficient
      for
      all purposes if personally delivered, sent by facsimile or sent by United States
      mail to the address below or such other address or addresses as such party
      may
      hereafter designate in writing to the other party as herein provided.


    
      	Company
              or
              Parent:  	  	100
              Wilshire Blvd., Suite 1750  	  	Individual: 
	  	James
              Schafer  
	  	  	Santa
              Monica, CA 90401  	  	  	  	35864
              Carlton Road  
	  	  	Fax:
              (310) 752-1486  	  	  	  	Wildomar,
              CA 92595  
	  	  	Phone:
              (310) 752-1416  	  	  	  	Phone:
              (951) 609-2566  
	  	  	  	  	  	  	Cell:
              (619) 864-4220  
	  	  	  	  	  	  	Schafer001@msn.com 



    


    19. Entire
      Agreement. This Agreement
      contains the entire agreement of the parties and there are no other promises
      or
      conditions in any other agreement, whether oral or written. This Agreement
      supersedes any prior written or oral agreements between the parties. This
      Agreement may be modified or amended, if the amendment is made in writing and
      is
      signed by both parties. This Agreement is for the unique personal services
      of
      Individual and is not assignable or delegable, in whole or in part, by
      Individual. This Agreement may be assigned or delegated, in whole or in part,
      by
      the Company and, in such case, shall be assumed by and become binding upon
      the
      person, firm, company, corporation or business organization or entity to which
      this Agreement is assigned. The headings contained in this Agreement are for
      reference only and shall not in any way affect the meaning or interpretation
      of
      this Agreement. If any provision of this Agreement shall be held to be invalid
      or unenforceable for any reason, the remaining provisions shall continue to
      be
      valid and enforceable. The failure of either party to enforce any provision
      of
      this Agreement shall not be construed as a waiver or limitation of that party's
      right to subsequently enforce and compel strict compliance with every provision
      of this Agreement. This Agreement may be executed in two or more counterparts,
      each of which shall be deemed an original, but all of which together shall
      constitute one and the same instrument and, in pleading or proving any provision
      of this Agreement, it shall not be necessary to produce more than one of such
      counterparts. 

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

    
      	Company: 
	  	Individual: 

	SurgiCount
              Medical, Inc.  	  	  
	  
	  
	By: 
	  	  	  	  
	
            	
            	
              

            	
            	
              

            
	Name: 
	  	Milton
              C.
              Ault, III  	  	James
              Schafer  
	Title: 
	  	Chairman
              and CEO  	  	  
	  
	Parent: 
	  	  	  	  
	Patient
              Safety Technologies, Inc.  	  	  
	  
	  
	By: 
	  	  	  	  
	
            	
            	
              

            	
            	
            
	Name: 
	  	Milton
              C.
              Ault, III  	  	  
	Title: 
	  	Chairman
              and CEO