CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into as of
April 5, 2005, by and between HEALTH WEST MARKETING INCORPORATED, a California
corporation ("Health West"), and PATIENT SAFETY TECHNOLOGIES, INC., a Delaware
corporation ("PST").
RECITALS
WHEREAS, PST desires to engage Health West, and Health West desires to
accept the engagement by PST, to act as a consultant to PST under the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
AGREEMENT
1. CONSULTING SERVICES. Subject to the terms and conditions of this Agreement,
effective as of the date hereof, PST hereby engages Health West, and Health West
hereby accepts the engagement by PST, to act as a consultant to PST for the
duration of the Term (as defined below). In his capacity as a consultant to PST,
Health West agrees to perform the services identified in Appendix A and such
other services relating to PST's business and operations as are reasonably
requested from time to time by PST (collectively, the "Services"). The manner
and means by which Health West chooses to perform the Services shall be in the
discretion and control of Health West; provided, however, that Health West shall
perform all Services in a timely and professional manner, using a degree of
skill and care at least consistent with industry standards.
2. COMPENSATION. As consideration for Health West's performance of the Services,
PST shall issue to Health West, or Health West's nominee, shares of common stock
of PST in an amount equal to $250,000 divided by the last sale price of PST's
common stock on the date of this Agreement (the "Consulting Fees"). Consulting
Fees shall be issued over three vesting periods in amounts of 25%, 37.5% and
37.5% of the total Consulting Fees. The initial 25% of the Consulting Fees shall
be issued to Health West immediately on the date of this Agreement. 37.5% of the
Consulting Fees shall be issued to Health West three (3) months after the date
of this Agreement if the milestone described in Part 1(a) of Appendix A has been
completed at such time. The remaining 37.5% of the Consulting Fees shall be
issued to Health West ten (10) months after the date of this Agreement if the
milestones described in Part 1(b) of Appendix A have been completed at such
time. If the milestones described in Part 1 of Appendix A are not completed
within the timeframes contemplated by this Section 2, then, unless otherwise
agreed to by PST in writing, Health West shall not be entitled to any unissued
portion of the Consulting Fees. Health West shall not be responsible for the
performance of hardware or software or the impact of such hardware or software
performance on the milestones described in Appendix A. In addition, PST shall
implement a validated cost justification system in order to facilitate
completion of the milestones by Health West.
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3. WARRANTS. As incentive for entering into this Agreement, on the date of this
Agreement, PST shall issue to Health West a callable warrant ("Warrant") to
purchase 50,000 pre 3:1 forward stock split (150,000 post 3:1 forward stock
split) shares of common stock of PST at an exercise price equal to the last sale
price of PST's common stock on the date of this Agreement. As a performance
incentive under this Agreement, on the date of this Agreement, PST shall issue
to Health West a callable warrant to purchase 8,333 pre 3:1 forward stock split
(25,000 post 3:1 forward stock split) shares of common stock of PST at an
exercise price equal to the last sale price of PST's common stock on the date of
this Agreement ("Additional Warrants"). The Additional Warrants shall become
exercisable upon meeting the milestones described in Part 2 of Appendix A. If
the milestones described in Part 2 of Appendix A are not completed prior to
expiration of the Initial Term, then the Additional Warrants shall expire.
4. EXPENSES. PST shall reimburse Health West for any reasonable out-of-pocket
expenses, including, without limitation, reasonable travel expenses, incurred in
connection with Health West's performance of the Services; provided, however,
that Health West must: (i) obtain the prior written approval of PST for any such
expenses that, individually or in the aggregate, exceed $150; and (ii) submit
such written documentation of all such expenses as PST may reasonably require.
PST will reimburse Health West for expenses covered by this Section 4 within
thirty (30) days of the date that Health West submits proper documentation of
such expenses to PST.
5. INDEPENDENT CONTRACTOR RELATIONSHIP. Health West's relationship with PST
shall be solely that of an independent contractor, and nothing in this Agreement
shall be construed to create a partnership, joint venture, or employer-employee
relationship. Health West is not the agent of PST and is not authorized to make
any representation, contract or commitment on behalf of PST. Health West shall
not be entitled to any of the benefits that PST may make available to its
employees, such as group insurance, profit sharing or retirement benefits.
Health West shall be solely responsible for all tax returns and payments
required to be filed with or made to any federal, state or local tax authority
with respect to Health West's performance of the Services and receipt of the
Consulting Fees and Warrant pursuant to this Agreement. PST will regularly
report amounts paid to Health West by filing Form 1099-MISC with the Internal
Revenue Service as required by law, but given that Health West is an independent
contractor, PST will not withhold or make payments for social security, make
unemployment insurance or disability insurance contributions, or obtain worker's
compensation insurance on Health West's behalf. Health West agrees to accept
exclusive liability for complying with all applicable federal, state and local
laws governing self-employed individuals, including, without limitation,
obligations such as payment of taxes, social security, disability and other
contributions based on the Consulting Fees paid to Health West. Health West
hereby agrees to indemnify, hold harmless and defend PST from and against any
and all such taxes and contributions, as well as any penalties and interest
arising therefrom.
6. INFORMATION AND INTELLECTUAL PROPERTY RIGHTS.
6.1 Proprietary Information. Health West agrees that, during the Term and
thereafter, Health West shall take all steps necessary to hold the Proprietary
Information (as defined below) in trust and confidence, shall not use such
Proprietary Information in any manner or for any purpose except as expressly set
forth in this Agreement and shall not disclose any such Proprietary Information
to any third party without first obtaining PST's express written consent on a
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case-by-case basis; provided, however, that Health West may disclose certain
Proprietary Information, without violating its obligations under this Agreement,
to the extent such disclosure is required by a valid order of a court or other
governmental body having jurisdiction, provided that Health West provides PST
with reasonable prior written notice of such disclosure and uses commercially
reasonable efforts to obtain, or to assist PST in obtaining, a protective order
preventing or limiting the disclosure and/or requiring that the Proprietary
Information so disclosed be used only for the purposes for which the law or
regulation required, or for which the order was issued. For purposes of this
Agreement, "Proprietary Information" means any and all confidential and/or
proprietary information regarding PST or any of its affiliates and their current
and proposed business and operations, including, without limitation, information
pertaining to their current or forecasted capital structure, equity or debt
financing or investment activities, strategic plans, current or proposed
products or services, investors, employees, directors, consultants, and other
business and contractual relationships; provided, however, that information
received by Health West shall not be considered to be Proprietary Information if
Health West can demonstrate with competent evidence that such information has
been published or is otherwise readily available to the public other than by a
breach of this Agreement.
6.2 Third-Party Information. Health West understands that PST has received
and will in the future receive from third parties certain confidential or
proprietary information relating to such third parties (collectively,
"Third-Party Information"), subject to duties on PST's part to maintain the
confidentiality of such Third-Party Information and to use such Third-Party
Information only for certain limited purposes. Health West agrees to hold all
Third-Party Information in confidence and not to disclose to anyone (other than
personnel of PST) or to use, except in connection with Health West's performance
of the Services, any Third-Party Information unless expressly authorized in
writing by an executive officer of PST.
6.3 Intellectual Property Rights. Health West agrees that any and all
intellectual property and intellectual property rights that Health West
conceived, reduced to practice or developed during the course of its performance
of services as a director, officer, employee or consultant for PST, together
with any and all intellectual property and intellectual property rights that
Health West conceives, reduces to practice or develops during the course of its
performance of the Services pursuant to this Agreement, in each case whether
alone or in conjunction with others (all of the foregoing being collectively
referred to herein as the "Inventions"), shall be the sole and exclusive
property of PST. Accordingly, Health West hereby: (i) assigns and agrees to
assign to PST its entire right, title and interest in and to all Inventions; and
(ii) designates PST as its agent for, and grants to the officers of PST a power
of attorney (which power of attorney shall be deemed coupled with an interest)
with full power of substitution solely for the purpose of, effecting the
foregoing assignments from Health West to PST. Health West further agrees to
cooperate with and provide reasonable assistance to PST to obtain and from time
to time enforce any and all current or future intellectual property rights
covering or relating to the Inventions in any and all jurisdictions.
7. NO CONFLICTING OBLIGATION. Health West represents that its entering into this
Agreement, its performance of all of the terms of this Agreement and its
performance of the Services pursuant to this Agreement do not and will not
breach or conflict with any agreement or other arrangement between Health West
and any third party. During the Term, Health West agrees not to enter into any
agreement that conflicts with this Agreement.
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8. TERM AND TERMINATION.
8.1 TERM. This Agreement shall commence on the date hereof and shall
continue for a period of two (2) year thereafter (the "Initial Term"). At the
end of such Initial Term, this Agreement shall terminate unless extended for one
or more additional periods of one (1) year (each, a "Renewal Term") by mutual
written agreement of the parties. The Initial Term and all Renewal Terms, if
any, are collectively referred to herein as the "Term".
8.2 Automatic Termination. This Agreement shall automatically terminate at
any time during the Term upon the event of the death of Xxxx Xxxxx, Health
West's chief executive officer.
8.3 Termination by Health West. After expiration of the Initial Term,
Health West may voluntarily terminate this Agreement by delivering thirty (30)
days prior written notice to PST. Health West may only terminate this Agreement
pursuant to the express terms hereof.
8.4 Termination by PST. PST may terminate this Agreement at any time
during the Term upon delivery to Health West of notice of the good-faith
determination by the majority of the members of the board of directors of PST
(and the accompanying justification therefore) that such Agreement should be
terminated for Cause (as defined below) or as a result of Disability (as defined
below) of Xxxx Xxxxx. For purposes of this Agreement:
(a) The term "Cause" shall mean: (i) the willful misconduct of
Health West or any of Health West's employees, officers or agents; (ii) Health
West's willful failure to perform the Services; (iii) the causing of intentional
damage to the tangible or intangible property of PST by Health West or any of
Health West's employees, officers or agents; (iv) the conviction of Xxxx Xxxxx
of any felony or any other crime involving moral turpitude; (v) the performance
of any dishonest or fraudulent act by Health West or any of Health West's
employees, officers or agents which is, or would be, in each case as determined
in good faith by the board of directors of PST materially detrimental to the
best interests of PST or its stockholders or affiliates; or (vi) a breach of the
Agreement by Health West.
(b) The term "Disability" shall mean Xxxx Xxxxx' inability to
perform the Services for any period of forty-five (45) consecutive business days
(or any ninety (90) business days during any period of twelve (12) consecutive
months) by reason of any physical or mental incapacity or illness, as determined
by the board of directors of PST based upon medical advice provided by a
licensed physician acceptable to the board of directors of PST.
8.5 EFFECT OF TERMINATION. The obligations set forth in Sections 5, 6, 7,
8.5 and 9, as well as any outstanding payment or reimbursement obligations of
PST, shall survive any termination or expiration of this Agreement. Upon any
termination or expiration of this Agreement, Health West shall promptly deliver
to PST all documents and other materials of any nature pertaining to the
Services, together with all documents and other items containing or pertaining
to any Proprietary Information, Third-Party Information or Inventions.
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9. MISCELLANEOUS.
9.1 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements in addition to any other
relief to which the prevailing party may be entitled.
9.2 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified; (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient; if not, then on the next business day; (iii) five (5) business days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) business day after deposit with a
nationally recognized overnight courier, specifying next-day delivery, with
written verification of receipt. All communications shall be sent to the
respective parties at the following addresses (or at such other addresses as
shall be specified by notice given in accordance with this Section 9.2):
If to Health West:
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Attn:
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Telephone:
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Facsimile:
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E-mail:
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If to PST: Patient Safety Technologies, Inc.
000 Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Attn: Xxxxxx "Xxxx" Xxxx III
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail: xxxx@xxxxxx.xxx
With a copy (which shall not constitute notice) to:
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
9.3 Headings. The bold-face headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
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9.4 Governing Law; Jurisdiction and Venue. This Agreement shall be
construed in accordance with, and governed in all respects by, the internal laws
of the State of California without giving effect to its principles of conflicts
of laws. Any legal action or other legal proceeding relating to this Agreement
or the enforcement of any provision of this Agreement shall be brought or
otherwise commenced exclusively in any state or federal court located in the
County of Los Angeles, State of California. Each of the parties hereto: (i)
expressly and irrevocably consents and submits to the jurisdiction of each state
and federal court located in the County of Los Angeles, State of California, in
connection with any legal proceeding; (ii) agrees that service of any process,
summons, notice or document by U.S. mail addressed to such party at the address
set forth in Section 9.2 shall constitute effective service of such process,
summons, notice or document for purposes of any such legal proceeding; (iii)
agrees that each state and federal court located in the County of Los Angeles,
State of California, shall be deemed to be a convenient forum; and (iv) agrees
not to assert, by way of motion, as a defense or otherwise, in any such legal
proceeding commenced in any state or federal court located in the County of Los
Angeles, State of California, any claim that it is not subject personally to the
jurisdiction of such court, that such legal proceeding has been brought in an
inconvenient forum, that the venue of such proceeding is improper or that this
Agreement or the subject matter of this Agreement may not be enforced in or by
such court.
9.5 Successors and Assigns. The rights and liabilities of the parties
hereto shall bind and inure to the benefit of their respective successors,
heirs, executors and administrators, as the case may be; provided, however,
that, as PST has specifically contracted for Health West's Services, which
Services are unique and personal, Health West may not assign or delegate its
obligations under this Agreement either in whole or in part to any other
contractor, subcontractor, business or entity without the prior written consent
of PST. PST may assign its rights and obligations hereunder to any person or
entity who succeeds to all or substantially all of PST's business.
9.6 Remedies Cumulative; Specific Performance. The rights and remedies of
the parties hereto shall be cumulative and not alternative. The parties agree
that, in the event of any breach or threatened breach by any party to this
Agreement of any covenant, obligation or other provision set forth in this
Agreement for the benefit of any other party to this Agreement, such other party
shall be entitled, in addition to any other remedy that may be available to it,
to: (i) a decree or order of specific performance or mandamus to enforce the
observance and performance of such covenant, obligation or other provision; and
(ii) an injunction restraining such breach or threatened breach. The parties
further agree that no person or entity shall be required to obtain, furnish or
post any bond or similar instrument in connection with or as a condition to
obtaining any remedy referred to in this Section 9.6, and the parties
irrevocably waive any right they may have to require the obtaining, furnishing
or posting of any such bond or similar instrument.
9.7 Waiver. No failure on the part of any person or entity to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any person or entity in exercising any power, right, privilege or remedy
under this Agreement, shall operate as a waiver of such power, right, privilege
or remedy and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy. No person or entity shall be deemed to have
waived any claim arising out of this Agreement, or any power, right, privilege
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or remedy under this Agreement, unless the waiver of such claim, power, right,
privilege or remedy is expressly set forth in a written instrument duly executed
and delivered on behalf of such person or entity, and any such waiver shall not
be applicable or have any effect except in the specific instance in which it is
given.
9.8 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
9.9 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement in writing for such provision, then: (i)
such provision shall be excluded from this Agreement; (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded; and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
9.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
9.11 Entire Agreement. This Agreement sets forth the entire understanding
of the parties hereto relating to the subject matter hereof and thereof and
supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter hereof and thereof.
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IN WITNESS WHEREOF, the parties hereto have executed this CONSULTING
AGREEMENT as of the date first written above.
Health West Marketing Patient Safety Technologies, Inc.
/s/ Xxxx Xxxxx /s/ Xxxxxx Xxxx
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Xxxx Xxxxx Xxxxxx "Xxxx" Xxxx, III
Chief Executive Officer Chief Executive Officer
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APPENDIX A
SERVICES AND MILESTONES
(1) The following three milestones are critical to this Agreement and must be
accomplished in accordance with the time frames set forth in Section of the
Agreement:
(a) Structure a comprehensive manufacturing agreement with A Plus
Manufacturing for PST that will ensure a superior quality dressing product at a
very competitive price point. All quality and regulatory matters will be
incorporated into the manufacturing roles/responsibilities. This includes ISO
certifications, 510K requirements, FDA regulations, product lot control and
recall capabilities. It will also cover sterility issues, machine and packaging
validations and product inventory consistent to support growth and an overseas
supply chain. Additionally, Health West will capitalize on the warehousing and
distribution capabilities of PST's manufacturing partners. This will include
storage, handling and logistics (integrated into existing containerized
shipments). These functions are normally handled on a fee basis and are not part
of the basic product "invoice" or into-stock cost.
(b) Develop regional distribution to integrate the Patient Safety
Technologies Safety Sponge into the existing acute care supply chain. Health
West will utilize a regional supplier(s) to help with the initial clinical
testing and move forward through product solicitation at the acute care, IDN
(integrated delivery network), IHN (integrated healthcare network) and GPO
(group purchasing organization) levels. Health West will also assist PST in
development of a national distribution network to accomplish the same goals and
objectives on a greater scale than is possible with a regional provider. The
National Distributor will most likely enjoy an exclusionary relationship (versus
exclusive) with Patient Safety Technologies (the presence of a regional supplier
negates the potential for a totally exclusive distribution arrangement). Patient
Safety Technologies will also need multiple pathways into the acute care
facilities so a national partner will advance that goal.
(2) Upon meeting the following additional incentive milestones, the Additional
Warrants shall become immediately exercisable.
(a) Develop global distribution. This is part of a Phase II plan from a
marketing standpoint. Because the structure of dressings (i.e., the weave, mesh,
size and packaging) are different in Europe and Asia, Health West will employ a
strategy similar to that of the U.S. market to successfully penetrate global
markets. Health West will facilitate global distribution through its business
relationships, accounting for dichotomized characteristics of foreign markets
that do not enjoy the contractual uniformity that IDN, IHN & GPO organizations
provide.
(b) Develop acquisition candidates and new product opportunities to bring
in under the banner of Patient Safety Technologies.
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