Document:

Unassociated Document

    EXHIBIT
10.25

     

    Executive
Services Agreement

     

    July 11,
2008

    

    Bill
Adams

    President

    Patient
Safety Technologies, Inc.

    43460
Ridge Park Drive, Suite 140

    Temecula,
CA 92590

    

    Dear
Bill:

    

    Tatum,
LLC (“Tatum,” “we,” or “us”) is pleased that Patient Safety Technologies, Inc.
(the “Company,” “you” or “your”) desires to employ Mary Lay, a member of Tatum
(the “Employee”), to serve as the interim Chief Financial Officer of the
Company.  This letter along with the terms and conditions attached as
Exhibit A and any other exhibits or schedules attached hereto (collectively, the
“Agreement”) confirms our mutual understanding of the terms and conditions upon
which we will make available to you the Employee and Tatum’s intellectual
capital to the Employee for use in connection with the Employee’s employment
relationship with you.

    

    Effective
as of July 14, 2008, the Employee will become your employee serving in the
capacity set forth above.  The Employee will work on a full-time basis
and be subject to the supervision, direction and control of and report directly
to the Company’s management.  While the Employee will remain a member
of Tatum and have access to Tatum’s intellectual capital to be used in
connection with the Employee’s employment relationship with you, we will have no
supervision, direction or control over the Employee with respect to the services
provided by the Employee to you.

     

    You will
pay directly to the Employee a salary of $14,000 per month
(“Salary”).  In addition, you will reimburse the Employee for
out-of-pocket expenses incurred by the Employee to the same extent that you
reimburse other senior managers for such expenses.  In addition, you
will pay directly to Tatum a fee of $6,000 per month (“Fees”). The term of this
agreement is six months (180 days) after which time the above salary and fees
will be increased to $17,500 and $7,500 respectively for up to an additional
three months (90 days). In the event you terminate the agreement after 120 days
but prior to 180 days, other than to convert the Employee to a permanent
employee, the salary and fees will retroactively be adjusted to $17,500 and
$7,500, respectively.

     

    Payments
to the Employee shall be made in accordance with the Company’s standard payroll
and expense reimbursement policies.  Payments to Tatum should be made
in accordance with the instructions set forth on Exhibit A at the same time
payments are made to the Employee.

     

    Except as
specifically provided for herein, you will have no obligation to provide the
Employee with any health insurance benefits during the term of this
agreement  In lieu of the Employee participating in the
Company-sponsored employee health insurance plans, the Employee will remain on
her current health insurance plans.

     

    As an
employee, the Employee will be eligible for any bonus and equity incentives,
vacation and holidays consistent with the Company’s policy as it applies to
senior management.

     

    You will
have the opportunity to make the Employee a permanent, full-time member of
Company management at any time during the term of this Agreement by entering
into another form of Tatum agreement, the terms of which will be negotiated at
such time. (see Exhibit A, Section 5)

     

    As a
condition to providing the services hereunder, we require a security deposit in
an amount equal to $10,000 (the “Deposit”), which will only be used by us under
the limited circumstances described on Exhibit A.  The Deposit is due
upon the execution of this Agreement.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    To the
extent the Company has directors’ and officers’ liability insurance in effect,
the Company will provide such insurance coverage for the Employee at no
additional cost to the Employee, along with written evidence to Tatum or the
Employee that the Employee is covered by such insurance.  Furthermore,
the Company will maintain such insurance coverage with respect to occurrences
arising during the term of this Agreement for at least three years following the
termination or expiration of this Agreement or will purchase a directors’ and
officers’ extended reporting period or “tail” policy to cover the
Employee.

     

    We
appreciate the opportunity to serve you and believe this Agreement accurately
reflects our mutual understanding.  We would be pleased to discuss
this Agreement with you at your convenience.  If the foregoing is in
accordance with your understanding, please sign a copy of this Agreement and
return it to my attention.

     

    Sincerely,

     

    Tatum,
LLC

     

     

    /s/  Mark
C. Neilson 

      
        

      

    

    Mark C.
Neilson, Managing Partner-San Diego

     

     

    Accepted
and agreed:

     

     

    Patient
Safety Technologies, Inc.

     

     

    By:  /s/ Williams Adams 

    
      

    

    Name:  William
Adams

    Title:
Chief Executive Officer

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    Exhibit
A

     

    Terms and
Conditions

     

    1.    Relationship
of the Parties.  The parties agree that Tatum will be serving the
Company as an independent contractor for all purposes and not as an employee,
agent, partner of, or joint venturer with the Company and that the Employee will
be serving the Company as an employee of the Company for all purposes and not as
an independent contractor.

     

    2.    Payment
Terms.  Payments to Tatum should be made by electronic transfer in
accordance with the instructions set forth below or such alternative
instructions as provided by Tatum from time to time.  Any amounts not
paid when due may be subject to a periodic service charge equal to the lesser of
1.5% per month and the maximum amount allowed under applicable law, until such
amounts are paid in full, including assessed service charges.  In lieu
of terminating this Agreement, Tatum may suspend the provision of services
(including the Employee’s services) if amounts owed are not paid in accordance
with the terms of this Agreement.

     

    3.    Deposit.  If
the Company breaches this Agreement and fails to cure such breach as provided
for herein, Tatum will be entitled to apply the Deposit to its or the Employee’s
damages resulting from such breach.  In the event the Deposit falls
below the amount required, the Company will pay Tatum an additional amount equal
to the shortfall.  Upon the expiration or termination of this
Agreement, Tatum will return to the Company the balance of the Deposit remaining
after application of any amounts to damages as provided for herein, including,
without limitation, unfulfilled payment obligations of the Company to Tatum or
the Employee.

     

    4.    Termination.

     

    (a)           Either
party may terminate this Agreement by providing the other party a minimum of 15
days’ advance written notice and such termination will be effective as of the
date specified in such notice, provided that such date is no earlier than 15
days after the date of delivery of the notice.  Tatum will continue to
provide, and the Company will continue to pay for, the services until the
termination effective date.

     

    (b)           Tatum
may terminate this Agreement immediately upon written notice to the Company if:
(i) the Company is engaged in or asks Tatum or the Employee to engage in or
ignore any illegal or unethical activity; (ii) the Employee ceases to be a
member of Tatum for any reason; (iii) the Employee becomes disabled; or (iv) the
Company fails to pay any amounts due to Tatum or the Employee when
due.  For purposes of this Agreement, disability will be defined by
the applicable policy of disability insurance or, in the absence of such
insurance, by Tatum’s management acting in good
faith.  Notwithstanding the foregoing, in lieu of terminating this
Agreement under (ii) and (iii) above, upon the mutual agreement of the parties,
the Employee may be replaced by another Tatum member.

     

    (c)           In
the event that a party commits a breach of this Agreement, other than for the
reasons described in the above Section, and fails to cure the same within 10
days following delivery by the non-breaching party of written notice specifying
the nature of the breach, the non-breaching party may terminate this Agreement
effective upon written notice of such termination.

     

    (d)           The
expiration or termination of this Agreement will not destroy or diminish the
binding force and effect of any of the provisions of this Agreement that
expressly, or y reasonable implication, come into or continue in effect on or
after such expiration or termination, including, without limitation, provisions
relating to payment of fees and expenses (including witness fees and expenses),
hiring the Employee, governing law, arbitration, limitation of liability, and
indemnity.

     

    5.    Hiring the Employee Outside
of a Tatum Agreement.  The parties recognize and agree that
Tatum is responsible for introducing the Employee to the Company. Therefore, if,
at any time during the term of this Agreement or the 12-month period following
the termination or expiration of this Agreement, other than in connection with
this Agreement or another Tatum agreement, the Company employs the Employee, or
engages the Employee as an independent contractor, Tatum will be entitled to
receive as a placement fee an amount equal to thirty percent (30%) of the
Annualized Compensation (as defined below).  The amount will be due and
payable to Tatum upon written demand to the Company.  “Annualized
Compensation” means the equivalent of the Employee’s base Salary calculated on a
full-time annual basis.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    6.    Warranties and
Disclaimers.  It is understood that Tatum does not have a contractual
obligation to the Company other than to provide the Employee to the Company and
to provide the Employee access to Tatum’s intellectual capital to be used in
connection with the Employee’s employment relationship with the
Company.  The Company acknowledges that any information, including any
resources delivered through Tatum’s proprietary information and technology
system, will be provided by Tatum as a tool to be used in the discretion of the
Company.  Tatum will not be responsible for any action taken by the
Company in following or declining to follow any of Tatum’s or the Employee’s
advice or recommendations.  Tatum represents to the Company that Tatum
has conducted its standard screening and investigation procedures with respect
to the Employee becoming a member of Tatum, and the results of the same were
satisfactory to Tatum.  Tatum disclaims all other warranties, whether
express, implied or statutory.  Without limiting the foregoing, Tatum
makes no representation or warranty as to the services provided by the Employee,
or the accuracy or reliability of reports, projections, certifications,
opinions, representations, or any other information prepared or made by Tatum or
the Employee (collectively, the “Information”) even if derived from Tatum’s
intellectual capital, and Tatum will not be liable for any claims of reliance on
the Information or that the Information does not comply with federal, state or
local laws or regulations.  The services provided by Tatum hereunder
are for the sole benefit of the Company and not any unnamed third
parties.  The services will not constitute an audit, review, or
compilation, or any other type of financial statement reporting or attestation
engagement that is subject to the rules of the AICPA or other similar state or
national professional bodies and will not result in an opinion or any form of
assurance on internal controls.

     

    7.    Limitation of
Liability; Indemnity.

     

    (a)           The
liability of Tatum in any and all categories and for any and all causes arising
out of this Agreement, whether based in contract, tort, negligence, strict
liability or otherwise will, in the aggregate, not exceed the actual Fees paid
by the Company to Tatum over the previous two months’ of the
Agreement.  In no event will Tatum be liable for incidental,
consequential, punitive, indirect or special damages, including, without
limitation, any interruption or loss of business, profit or
goodwill.  As a condition for recovery of any liability, the Company
must assert any claim against Tatum within three months after discovery or 60
days after the termination or expiration of this Agreement, whichever is
earlier.

     

    (b)           The
Company agrees to indemnify Tatum and the Employee to the full extent permitted
by law for any losses, costs, damages, and expenses (including reasonable
attorneys’ fees), as they are incurred, in connection with any cause of action,
suit, or other proceeding arising in connection with the Employee’s services to
the Company.

     

    8.    Governing Law,
Arbitration, and Witness Fees.

     

    (a)           This
Agreement will be governed by and construed in accordance with the laws of the
State of Georgia, without regard to conflicts of laws provisions.

     

    (b)           If
the parties are unable to resolve any dispute arising out of or in connection
with this Agreement, the parties agree and stipulate that any such disputes will
be settled by binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (“AAA”).  The
arbitration will be conducted in the Atlanta, Georgia office of the AAA by a
single arbitrator selected by the parties according to the rules of the AAA, and
the decision of the arbitrator will be final and binding on both
parties.  In the event that the parties fail to agree on the selection
of the arbitrator within 30 days after either party’s request for arbitration
under this Section, the arbitrator will be chosen by the AAA.  The
arbitrator may in his or her discretion order documentary discovery but will not
allow depositions without a showing of compelling need.  The
arbitrator will render his or her decision within 90 days after the call for
arbitration.  Judgment on the award of the arbitrator may be entered
in and enforced by any court of competent jurisdiction.  The
arbitrator will have no authority to award damages in excess or in contravention
of this Agreement and may not amend or disregard any provision of this
Agreement, including this Section.  Notwithstanding the foregoing,
either party may seek appropriate injunctive relief from any court of competent
jurisdiction, and Tatum may pursue payment of undisputed amounts through any
court of competent jurisdiction.

     

    (c)           In
the event any member or employee of Tatum (including, without limitation, the
Employee to the extent not otherwise entitled in his or her capacity as an
employee of the Company) is requested or authorized by the Company or is
required by government regulation, subpoena, or other legal process to produce
documents or appear as witnesses in connection with any action, suit or other
proceeding initiated by a third party against the Company or by the Company
against a third party, the Company will, so long as Tatum is not a party to the
proceeding in which the information is sought, reimburse Tatum for its member’s
or employee’s professional time (based on customary rates) and expenses, as well
as the fees and expenses of its counsel (including the allocable cost of
in-house counsel), incurred in responding to such requests.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    9.    Miscellaneous.

     

    (a)           This
Agreement constitutes the entire agreement between the parties with regard to
the subject matter hereof and supersede any and all agreements, whether oral or
written, between the parties with respect to its subject matter.  No
amendment or modification to this Agreement will be valid unless in writing and
signed by both parties.

     

    (b)           If
any portion of this Agreement is found to be invalid or unenforceable, such
provision will be deemed severable from the remainder of this Agreement and will
not cause the invalidity or unenforceability of the remainder of this Agreement,
except to the extent that the severed provision deprives either party of a
substantial portion of its bargain.

     

    (c)           Neither
the Company nor Tatum will be deemed to have waived any rights or remedies
accruing under this Agreement unless such waiver is in writing and signed by the
party electing to waive the right or remedy.  The waiver by any party
of a breach or violation of any provision of this Agreement will not operate or
be construed as a waiver of any subsequent breach of such provision or any other
provision of this Agreement.

     

    (d)           Neither
party will be liable for any delay or failure to perform under this Agreement
(other than with respect to payment obligations) to the extent such delay or
failure is a result of an act of God, war, earthquake, civil disobedience, court
order, labor dispute, or other cause beyond such party’s reasonable
control.

     

    (e)           The
Company may not assign its rights or obligations under this Agreement without
the express written consent of Tatum.  Nothing in this Agreement will
confer any rights upon any person or entity other than the parties hereto and
their respective successors and permitted assigns and the Employee.

     

    (f)           The
Company agrees to reimburse Tatum for all costs and expenses incurred by Tatum
in enforcing collection of any monies due under this Agreement, including,
without limitation, reasonable attorneys’ fees.

     

    (g)           The
Company agrees to allow Tatum to use the Company’s logo and name on Tatum’s
website and other marketing materials for the sole purpose of identifying the
Company as a client of Tatum.  Tatum will not use the Company’s logo
or name in any press release or general circulation advertisement without the
Company’s prior written consent.Unassociated Document

    EXHIBIT
10.26

     

    AGREEMENT

     

    THIS
AGREEMENT, with Effective Date of January 5, 2009, is made by and amongst
Patient Safety Technologies, Inc., a Delaware Corporation, (the “Company”),
having its principal offices at 43460 Ridge Park Drive, Suite 140, Temecula, CA
92590, and David I. Bruce (“Executive”).

    

    WHEREAS,
Executive and the Company desire to set forth the terms and conditions of
Executive’s employment with the Company by entering into this Agreement
regarding each parties’ respective rights and obligations as set forth herein;
and

     

    NOW,
THEREFORE, the parties hereto, intending to be legally bound, hereby agree as
follows:

     

    1.           Definitions.  For
purposes of this Agreement, the following terms shall have the meanings set
forth below:

     

    (a)           “Annual Base Salary” shall mean
Executive’s rate of regular base annual compensation prior to any reduction
under (i) a salary reduction agreement pursuant to Section 401(k) or
Section 125 of the Code or (ii) any plan or arrangement deferring any
base salary.

     

    (b)           “Board” shall mean the Board of
Directors of the Company.  The Board may delegate its authority to
a  committee of the Board (the “Committee”), including without
limitation a remuneration committee, which shall consist of outside directors as
defined under Section 162(m) of the Code, and related Treasury regulations,
and “non-employee directors” as defined under Rule-16b-3 under the Securities
Exchange Act of 1934 (the “Exchange Act”).  Unless otherwise specified
in the Agreement, the term “Board” shall include any Committee (or
sub-committee) to which the Board’s authority has been delegated
to.

     

    (c)           “Cause” any of the following
(i) conviction of Executive by a court of competent jurisdiction of any
felony or a crime involving moral turpitude; (ii) Executive’s knowing
failure or refusal to follow reasonable instructions of the Board or reasonable
policies, standards and regulations of the Company or its affiliates;
(iii) Executive’s failure or refusal to faithfully and diligently perform
the usual, customary duties of his employment with the Company or its
affiliates; (iv) fraudulent conduct by Executive; (v) conduct by Executive
that materially discredits the Company or any affiliate or is materially
detrimental to the reputation, character and standing of the Company or any
affiliate, or (vi) a material breach of the terms of this Agreement, including
any of the provisions in Section 5 of this Agreement.

     

    (d)           “Change in Control” shall mean
a determination (which may be made effective as of a particular date specified
by the Board) by the Board, made by a majority vote that a change in control has
occurred, or is about to occur.  Such a change shall not include,
however, a restructuring, reorganization, merger or other change in
capitalization in which the persons who own an interest in the Company on the
date hereof (the “Current Owners”) (or any individual or entity which receives
from a Current Owner an interest in the Company through will or the laws of
descent and distribution) maintain more than a fifty percent (50%) interest in
the resultant entity.  Regardless of the vote of the Board or whether
or not the Board votes, a Change in Control will be deemed to have occurred as
of the first day any one (1) or more of the following subsections shall have
been satisfied:

     

    Any Person (other than the Person in
control of the Company as of the date of this Agreement, or other than a trustee
or other fiduciary holding securities under an employee benefit plan of the
Company, or a company owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of stock of the
Company), becomes the beneficial owner, directly or indirectly, of securities of
the Company representing more than thirty five percent (35%) of the combined
voting power of the Company’s then outstanding securities;

     

    The
stockholders of the Company approve:

     

    a plan of
complete liquidation of the Company;

     

    an
agreement for the sale, license or disposition of all or;

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    substantially
all of the Company’s assets; or

     

    A merger, consolidation or
reorganization of the Company with or involving any other company, other than a
merger, consolidation or reorganization that would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least fifty percent (50%) of the combined
voting power of the voting securities of the Company (or such surviving entity)
outstanding immediately after such merger, consolidation or
reorganization

     

    Notwithstanding the foregoing, a Change
in Control as defined in subsections (i) and (ii) above shall not be deemed to
have occurred unless the majority of members of the Board are replaced during
any twelve (12)-month period by directors whose appointment or election is not
endorsed by a majority of the members of the Board prior to the date of such
appointment or election.

     

    (e)           
“Code” shall mean the Internal Revenue Code of 1986, as amended, and, as
applicable, Treasury Regulations promulgated thereunder.

     

    (f)           “Company”
shall mean Patient Safety, Inc. and any successor to its business and/or assets
which assumes (either expressly, by operation of law or otherwise) and/or agrees
to perform this Agreement by operation of law or otherwise (except in
determining, under subsection (d) hereof, whether or not any Change in
Control of the Company has occurred in connection with such
succession).

     

    (g)           “Date
of Termination” shall mean with respect to any purported termination of
Executive’s employment, (i) if Executive’s employment is terminated by his
death, the date of his death, (ii) if Executive’s employment is terminated
for Cause or without Cause by the Company, the date specified in the Company’s
notice of termination, (iii) if Executive’s employment is terminated as a
result of a Disability, the date on which it is finally determined that
Executive is Disabled, and (iv) if Executive terminates his employment for
Good Reason or otherwise voluntarily terminates his employment, the date
specified in Executive’s notice of termination.

     

    (h)           “Disability”
shall mean Executive’s inability for medical reasons to perform the essential
duties of Executive’s position for either ninety (90) consecutive calendar days
or one hundred twenty (120) business days in a twelve month period by reason of
any medically determined physical or mental impairment as determined by a
medical doctor selected by written agreement of the Company and Executive upon
the request of either party by notice to the other.

     

    (i)           “Good
Reason” shall mean a termination of employment by the Executive within two years
of any of the following events:

     

    (i)           a
material change in the character or scope of Executive’s duties, Annual Base
Salary, responsibilities, or authority;

     

    (ii)           the
Company’s material breach of the Agreement.

     

    (j)           “Person”
shall have the meaning ascribed thereto in Section 3(a)(9) of the Exchange
Act, as modified, applied and used in Sections 13(d) and 14(d) thereof;
provided, however, a Person
shall not include (i) the Company or any of its respective subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its respective subsidiaries (in its
capacity as such), or (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities.

     

    (k)           “Release”
shall mean a general mutual release of the Company and Executive containing a
mutual non-disparagement clause and mutually agreed to by the parties
hereto.  The Release must be signed by Executive and returned to the
Company by no later than the fifth day after the date any applicable review
period has expired or if no review period applies, by no later than the
twenty-sixth day after the date the Release is provided to
Executive.

     

    (l)           “Stock
Option Plan” shall mean the Patient Safety, Inc. Employee Stock Option
Plan.

     

    2.           Term
of this Agreement.  The term of this Agreement shall commence upon the
date of this Agreement set forth above and shall continue until the second
anniversary of the date of this Agreement; provided however, that the term of
this Agreement shall automatically be extended for an additional term of one
year on each anniversary (the “Term”) unless either party to this Agreement
delivers a written notice of non-extension to the other party by at least ninety
(90) days prior to the expiration of the Term.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    3.           Duties;
Scope of Employment; Compensation and Benefits.

     

    (a)           Position
and Duties.  The Company shall employ Executive in the position of
Chief Executive Officer of the Company.  During the Term, beginning
six months after the Effective Date, Executive will devote substantially all of
Executive’s business efforts and time to the Company. Executive agrees not to
actively engage in any other material employment, occupation or consulting
activity for any direct or indirect remuneration without the prior approval of
the Board, which shall not be unreasonably withheld or delayed.

     

    (b)           Board
Membership.  Executive will be appointed to serve as a member of the
Board as of the Effective Date, and shall be nominated for each subsequent
period, subject to stockholder approval.  Upon Termination, Executive
will be deemed to have resigned from the Board voluntarily, without any further
required action by Executive.

     

    (c)           Annual
Base Salary.  Executive’s Annual Base Salary shall equal Three hundred
twenty five thousand Dollars ($325,000). This amount shall be reviewed annually
in January of each year by the Board and, in the sole discretion of the Board,
may be adjusted upward with such adjustments effective January 1 of the
respective year.

     

    (d)           Bonus.  Executive
shall be eligible to participate in the Company’s executive bonus plan in
accordance with the terms of the executive bonus plan; provided, however, that
the minimum target bonus opportunity provided under the executive bonus plan
shall not be less than twenty five percent 25% of Executive’s Annual Base
Salary.

     

    (e)           Pension
and Welfare Plans.  During the Term, Executive and Executive’s
dependents, if applicable, shall be entitled to participate in all incentive,
savings and retirement plans, health and welfare benefit plans, practices,
policies and programs (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death and
dismemberment and travel accident insurance plans and programs) sponsored by the
Company or its affiliates on the same terms and conditions generally applicable
to executives of the Company generally.

     

    (f)           Equity
Compensation Grants and Plans.

     

    (iii)           Initial
Stock Option Grant. The Company agrees to grant Executive a stock option (the
“Option”) for two million shares of common stock of the Company
(“Shares”).  Upon the six month anniversary of the Effective Date of
this Agreement, 250,000 Shares subject to the Option shall vest and become
exercisable and thereafter the remaining Shares shall vest over a forty-two
month period at the rate of 1/48th of the
total Shares subject to the Option per month with 100% of the Option becoming
exercisable on the forty-eighth anniversary of the Effective Date of this
Agreement.  Option price will be set at the average of the market
close price on the ten trading days prior to Effective Date, but not at a price
below $0.60 per share.

     

    (iv)           Equity
Compensation Plans.  Executive shall be entitled to continue to
participate in any stock option, restricted stock, stock appreciation rights, or
any other equity compensation plan or program sponsored by the Company or its
affiliates on the same terms and conditions generally applicable to executives
of the Company.  Any equity interests or rights to purchase equity
interests in the Company held by Executive and issued pursuant to an equity
compensation plan shall be administered and subject to the terms of the plan and
any amendments thereto.

     

    (g)           Designation
as Qualified Performance-Based Compensation.  The Company may
determine that any bonus or equity awards issued under Sections 3(c) or
3(e) of this Agreement (“Awards”) shall be considered “qualified
performance-based compensation” under Section 162(m) of the
Code.  Any Awards shall be administered by the Committee in accordance
with this Section 3(f).

     

    (h)           Fringe
Benefits and Prerequisites.  Executive shall be entitled to fringe
benefits and prerequisites available to executives of the Company in accordance
with the plans, practices, programs and policies of the Company from time to
time.

     

    (i)           Expenses.  Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by Executive in accordance with the applicable policy of the Company
and its affiliated companies.

     

    (j)           Paid
Time Off.  Executive shall be entitled to twenty one days per year of
paid time off in accordance with the general policy of the Company.

     

    (k)           Change
in Control.  Upon Change in Control, all stock options and unvested
deferred compensation will immediately vest with suitable opportunity for
Executive to exercise such options, plus Executive shall receive a cash payment
of two times Annual Base Salary in effect at that time, within 45
days.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    4.           Termination.  Notwithstanding
anything set forth herein to the contrary, if Executive’s employment with the
Company is terminated by the Company or Executive for any reason prior to the
six month anniversary of the Effective Date of this Agreement, Executive shall
not be entitled to any payments, benefits or other rights under this Section
4.  If Executive’s employment shall terminate upon the occurrence of
any of the events listed below after the six month anniversary of the Effective
Date of this Agreement, the following provisions shall apply:

     

    (a)           Termination
Without Cause; Resignation for Good Reason.

     

    (i)           The
Company may remove Executive at any time without Cause from the position in
which Executive is employed hereunder upon not less than thirty (30) days’
prior written notice of termination to Executive; provided, however, that, in
the event that such notice is given, Executive shall be under no obligation to
render any additional services to the Company and shall be allowed to seek other
employment.  In addition, Executive may initiate termination of
employment by resigning under this Section 4(a) for Good
Reason.  Executive shall give the Company not less than thirty (30)
days’ prior written notice of termination of such resignation.

     

    (ii)           Upon
any removal or resignation described in Section 4(a)(i) above, the
Executive shall be entitled to receive, upon execution of the Release, for a
period of twelve (12) months a monthly cash payment equal to the monthly portion
of the Executive’s Annual Base Salary in effect immediately before the
Executive’s separation from service (“Termination Annul Base
Salary”).  Notwithstanding the foregoing, however, if as of the
Executive’s removal or resignation described in Section 4(a)(i) above the
Executive is a “specified employee” under Section 409A of the Code the Executive
shall receive the severance payments specified in this section (4)(a)(ii) as
follows:

     

    (1)           for
the first six months following his removal or resignation described in Section
4(a)(i) above, Executive shall receive one sixth (1/6) of the lesser of (i) six
monthly payments of Executive’s Termination Annual Base Salary or (ii) the
amount equal to two (2) times the maximum amount that may be taken into account
under a qualified plan pursuant to Section 401(a)(17) of the Code, for the year
in which Executive terminates employment;

     

    (2)           upon
the six (6) month anniversary of Executive’s removal or resignation described in
Section 4(a)(i) above, Executive shall receive a lump sum payment equal to six
(6) monthly payments of Executive’s Termination Annual Base Salary reduced by
the amount Executive was paid under subsection 4(a)(ii)(1) above;

     

    (iii)           Upon
any removal or resignation described in Section 4(a)(i) above, the
Executive shall also receive:

     

    (1)           A
pro rated bonus for the year in which the Executive’s termination of employment
occurs.  The pro rated bonus shall be based on the Executive’s highest
target percentage annual bonus for the year in which the Executive’s termination
occurs, multiplied by a fraction, the numerator of which is the number of days
during which the Executive was employed by the Company in the year of his
termination and the denominator of which is three hundred sixty five
(365).  Payment of the pro rated bonus shall be made to the Executive
at the time the Company would have paid a bonus, if any, to the Executive for
services performed for the year in which the Executive’s termination of
employment occurs, but by no later than March 15 of the year following the year
of termination.

     

    (2)           The
Executive shall continue to receive the medical coverage and other health and
welfare benefits in effect at the Date of Termination (or generally comparable
coverage) for himself and, where applicable, his spouse and dependents, as the
same may be changed from time to time for employees generally, for twelve (12)
months from the Date of Termination.  As an alternative to the
foregoing, the Company may elect to pay the Executive cash in lieu of such
coverage in an amount equal to the Executive’s after-tax cost of continuing such
coverage, where such coverage may not be continued (or where such continuation
would adversely affect the tax status of the plan pursuant to which the coverage
is provided).  The COBRA health care continuation coverage period
under Section 4980B of the Code, as amended, shall run concurrently with
the foregoing benefit period.

     

    

     

    (iv)
Notwithstanding anything set forth herein to the contrary, in the event that
Executive violates the provisions of Section 5(a) of this Agreement after his
separation from service, the payments and benefits provided under this Section
4(a) shall cease and all obligations of the Company under this Section 4(a)
shall terminate.

     

    (b)           Termination
for Cause; Voluntary Resignation Without Good Reason.  In the event
that Executive voluntarily terminates his employment for any reason other than
Good Reason or in the event that Company terminates Executive for Cause no
further payments shall be due under this Agreement, except that Executive shall
be entitled to any amounts earned, accrued or owing but not yet paid under
Section 3 above and any benefits accrued or earned under the Company’s
benefit plans and programs.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c)           Disability.  In
the event that Executive’s employment is terminated due to Disability, Executive
shall be entitled to receive all of the benefits described in Section 4(a)
above upon execution of a Release except that the monthly payments described in
subparagraph (a)(ii)(1) shall be paid for a period of twelve (12) months
beginning after Executive’s separation from service.

     

    (d)           Death.  If
Executive dies while employed by the Company, the Company shall upon receiving a
Release from Executive’s executor, legal representative, administrator or
designated beneficiary (the “Heir(s)”) pay to the Heir(s), the
following:

     

    (i)           The
Heirs shall receive (1) any amounts earned, accrued or owing but not yet
paid under Section 3 above, accelerated vesting of the next six months
stock options held by Executive, and any benefits accrued or earned under the
Company’s benefit plans and programs and (2) a lump sum cash payment equal
to twelve (12) months of Executive’s monthly Annual Base Salary at the rate in
effect immediately before Executive’s termination of employment.

     

    (e)           Compliance
with Section 409A of the Code.  Notwithstanding any other
provision of this Agreement, to the extent that (i) any amount paid pursuant to
Section 4 of the Agreement is treated as nonqualified deferred compensation
pursuant to Section 409A of the Code and (ii) Executive is a “specified
employee” pursuant to Section 409A(2)(B) of the Code, then such payments shall
be made on the date which is six (6) months after the date of Executive’s
separation from service.

     

    5.           Non-Competition,
Non-Disclosure and Non-Competition.  In consideration of the promises
of the Company made herein, Executive agrees to the following:

     

    (a)           Non-Competition.  Except
for the furtherance of the interests of the Company, Executive agrees that he or
she will not, during the term of Executive’s employment and for a period
of  one (1) year following the date of termination of employment (such
period, the “Restricted Period”) do any of the following directly or indirectly
within the continental United States, without the prior written consent of the
Company:

     

    (i)           solicit
or call upon, either directly or indirectly, any employee or independent
contractor of the Company to attempt to persuade or induce the employee or
independent contractor to terminate employment with the Company and commence
employment with another entity;

     

    (ii)           solicit
or call upon, either directly or indirectly, any vendor, customer, or
prospective customer with whom the Company shall have dealt at any time in
connection with any business which is competitive with the business of the
Company;

     

    (iii)           influence
or attempt to influence any customer or prospective customer of the Company to
terminate or modify any written or oral agreement or course of dealing with the
Company; or

     

    (iv)           own,
manage or operate or be connected as an officer, director, employee, partner,
principal, agent, representative, consultant, or otherwise with, or use or
permit his name to be used in connection with any business or enterprise which
is engaged in any business that is competitive with any business or enterprise
in which the Company is engaged.

     

    (b)           Non-Disclosure.  Executive
agrees not to use or disclose at any time, except with the prior written consent
of the Company, any proprietary, trade secret, or confidential information
relating to the business of the Company, including, without limitation,
information relating to formulas, designs, processes, suppliers, machines,
compositions, improvements, inventions, operations, manufacturing, processing,
marketing, distributing, selling, cost and pricing data, master files, or
customer lists utilized by the Company and all other similar information
material to the conduct of the business of the Company, which is not presently
generally known to the public and which is or was obtained or acquired by
Executive while an employee of the Employer; provided, however, that this
Subsection (b) shall not preclude Executive from (i) the use or disclosure of
such information that presently is known to the public generally or that
subsequently comes into the public domain, other than by way of disclosure in
violation of the Agreement or in any other unauthorized fashion, or (ii)
disclosure of such information required by law or court order, provided that
prior to such disclosure required by law or court order, Executive shall give
the Company three (3) business days’ written notice (or, if disclosure is
required to be made in less than three (3) business days, such notice shall be
given as promptly as practicable after determination that disclosure may be
required) of the nature of the law or order requiring disclosure and the
disclosure to be made in accordance therewith.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    (c)           Inventions.  Executive
hereby sells, transfers, and assigns to the Company all of the entire right,
title, and interest of Executive in and to all inventions, ideas, disclosures,
and improvements, whether patented or unpatented, and copyrightable material,
made or conceived by Executive, solely or jointly, during his or her employment
by the Employer that directly relate to methods, apparatus, designs, products,
processes, or devices, sold, leased, used, or under development by the Company,
or that otherwise directly relate or pertain to the business, functions, or
operations of the Company or that arise from the efforts of Executive during the
course of his or her employment with the Employer (the
“Inventions”).  Executive shall communicate promptly and disclose to
the Company, in such form as the Company requests, all information, details, and
data pertaining to the Inventions.  Executive shall execute and
deliver to the Company such formal transfers and assignments and such other
papers and documents as may be necessary or required of Executive to permit the
Company or any person or entity designated by the Company to file and prosecute
the patent applications and, as to copyrightable material, to obtain copyright
thereof.  Any Invention relating to the business of the Company and
disclosed or utilized by Executive within one (1) year following the date of
Executive’s termination of employment shall be deemed to fall within the
provisions of this Subsection (c).

     

    (d)           Acknowledgement.  Executive
acknowledges and agrees that the restrictions contained in the foregoing
covenants are necessary to protect legitimate interests of the Company and
acknowledges that remedies for damages in the event of their violation or
potential violation would be inadequate.  Accordingly, Executive
agrees that the Company shall be entitled to injunctive relief in the event of
any violation by Executive of any provisions of this Section 5.  Such
right to an injunction shall be in addition to, and not in limitation of, any
other rights or remedies that the Company may have.  The period of
time during which the provisions of this Section 5 will be in effect shall be
extended by the length of time during which Executive is in breach of the terms
hereof as determined by any court of competent jurisdiction where the injunctive
relief is sought.

     

    (e)           Enforceability
and Understanding.  If any provision of this Section 5 shall be deemed
invalid or unenforceable, either in whole or in part, the Agreement shall be
deemed amended to delete or modify, as necessary, the offending provision and to
reform the terms thereof to render it valid and enforceable.  This
Section 5 contains all the understandings between Executive and the Company
pertaining to the matters referred to herein, and supersedes any other
undertakings and agreements, whether oral or in writing, previously entered into
by them with respect thereto.  Executive represents that, in executing
the Agreement, Executive does not rely and has not relied upon any
representation or statement made by the Company not set forth herein with regard
to the subject matter or effect of this Section 5 or otherwise.

     

    6.           Special
Reimbursement - Excise tax related to Section 4999 of the
Code.

     

    (a)           Payment
of Gross-Up.  In the event that Executive becomes entitled to payments
or benefits from the Company (the “Total Payments”) which constitute an “excess
parachute payment” as defined in Section 280G(b) of the Code subject to the
excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then
the Company shall cause a payment to be made to Executive of an additional
amount (the “Additional Payment”) equal to the sum of (i) the Excise Tax
and (ii) such additional sums, such that, after imposition of the Excise
Tax and all taxes, including, without limitation, any income, employment and
other withholding taxes and Excise Tax (and any interest and penalties imposed
with respect thereto) imposed on the amount described in clauses (i) and
(ii), Executive shall receive such payments and benefits from the Company free
and clear of any taxes, other than income, employment and other withholding
taxes that would have been imposed on such payments and benefits, determined
without regard to the imposition of the Excise Tax.

     

    (b)           Administration.  All
determinations under this Section 6 shall be made by the Company’s independent
accounting firm, in their reasonable discretion in consultation with Executive’s
accountants. Executive and the Company shall each reasonably cooperate with the
other in connection with causing or allowing any shareholder vote on the Total
Payments to occur and any administrative or judicial proceedings concerning the
existence or amount of any such subsequent liability for amounts described in
clauses (i) and (ii) in Section 6(a).  The Company shall
solely be responsible for any legal, accounting and other costs and expenses
incurred in connection with such shareholder vote and administrative and
judicial proceedings.

     

    7.           Miscellaneous.

     

    (a)           Indemnification.  Subject
to applicable law, Executive will be provided indemnification to the maximum
extent permitted by the Company’s bylaws, including any directors and officers
insurance policies, on terms no less favorable than any other executive officer
or Director of the Company.

     

    (b)           Legal
Costs.  The Company shall reimburse Executive for reasonable legal
fees and expenses incurred if Executive prevails on any issue which is the
subject of such of a lawsuit or arbitration brought by Executive or the Company
as a result of any dispute with any party (including, but not limited to, the
Company and/or any affiliate of the Company) regarding the provisions of this
Agreement.  Otherwise, Executive and the Company shall be responsible
for its own legal fees and expenses in connection
with such action.  The Company will reimburse Executive for reasonable
legal fees and expenses directly relating to the negotiation of this
Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c)           Arbitration.  In
the event of any dispute under the provisions of this Agreement, other than a
dispute in which the primary relief sought is an equitable remedy such as an
injunction, the parties shall be required to have the dispute, controversy or
claim settled by arbitration in California in accordance with the National Rules
for the Resolution of Employment Disputes then in effect of the American
Arbitration Association, before a panel of three arbitrators, two of whom shall
be selected by the Company and Executive, respectively, and the third of whom
shall be selected by the other two arbitrators.  Any award entered by
the arbitrators shall be final, binding and nonappealable and judgment may be
entered thereon by either party in accordance with applicable law in any court
of competent jurisdiction.  This arbitration provision shall be
specifically enforceable.  The arbitrators shall have no authority to
modify any provision of this Agreement or to award a remedy for a dispute
involving this Agreement other than a benefit specifically provided under or by
virtue of the Agreement.

     

    (d)           No
Mitigation.  The Company agrees that, if Executive’s employment is
terminated during the Term, Executive is not required to seek other employment
or to attempt in any way to reduce any amounts payable to Executive by the
Company pursuant to this Agreement.

     

    (e)           Successors.  In
addition to any obligations imposed by law upon any successor to the Company,
the Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.  Failure
of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle Executive to compensation from the Company in the same amount and
on the same terms as Executive would be entitled to hereunder if Executive were
to terminate Executive’s employment for Good Reason, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.

     

    (f)           Binding
Agreement.  This Agreement shall inure to the benefit of and be
enforceable by Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees.  If Executive shall die while any amount would still be
payable to Executive hereunder (other than amounts which, by their terms,
terminate upon the death of Executive) if Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the executors, personal representatives or
administrators of Executive’s estate.

     

    (g)           Notices.  For
the purpose of this Agreement, notices and all other communications provided for
in this Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses set forth
below, or to such other address as either party may have furnished to the other
in writing in accordance herewith, except that notice of change of address shall
be effective only upon actual receipt.

     

    (h)           Amendments.  No
provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing and signed by
Executive and such officer as may be specifically designated by the
Company.  No waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.

     

    (i)           Entire
Agreement.  Except as otherwise provided, this Agreement contains the
entire agreement between the parties concerning the subject matter hereof and
supersedes all prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, express or implied, between the parties
with respect thereto.

     

    (j)           Applicable
Law.  The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of Delaware without
regard to the principles of conflict of laws thereof.

     

    (k)           Captions.  The
captions of this Agreement are not part of the provisions hereof and shall have
no force or effect.

     

    (l)           Withholding.  Any
payments provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law and any additional withholding to
which Executive has agreed.

     

    (m)           Survivorship.  The
rights and obligations of the Company and Executive under this Agreement shall
survive the expiration of the Term.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    (n)           Mutual
Intent.  All parties participated in the drafting of the Agreement,
and the language used in this Agreement is the language chosen by Executive and
the Company to express their mutual intent.  The parties agree that in
the event that any language, section, clause, phrase or word used in the
Agreement is determined to be ambiguous, no presumption shall arise against or
in favor of either party and that no rule of strict construction shall be
applied against either party with respect to such ambiguity.

     

    (o)           Validity.  The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.

     

    (p)           Counterparts.  This
Agreement may be executed in several counterparts, each of which shall be deemed
to be an original but all of which together will constitute one and the same
instrument.

     

    IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on January 5,
2009.

     

     

    PATIENT
SAFETY, INC

     

     

    By: 
/s/  Steven H. Kane 

      
        

      

    

    Name:   Steven
H. Kane

    Title:  Chairman
of the Board

     

     

    
      EXECUTIVE

       

      By:  /s/  David I. Bruce 

        
          

        

      

      Name:   David
I. Bruce

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