EXHIBIT 10.3
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("AGREEMENT") IS ENTERED BETWEEN NATIONAL
SCIENTIFIC CORPORATION AND XXX X. XXXX, OR THE LIMITED LIABILITY CORPORATION
ESTABLISHED BY XX. XXXX FOR THIS PURPOSE, EFFECTIVE THIS 1ST DAY OF AUGUST,
2002. "NSC," OR "COMPANY" AS USED IN THIS AGREEMENT MEANS NATIONAL SCIENTIFIC
CORPORATION. "CONTRACTOR" OR "XXXX" AS USED IN THIS AGREEMENT MEANS XXX X. XXXX
OR THE LIMITED LIABILITY CORPORATION ESTABLISHED BY XX. XXXX FOR THIS PURPOSE.
For good and valuable consideration, as set forth herein, the parties agree
as follows:
1. DISPLACEMENT OF EXISTING CONTRACTS: This Agreement supersedes and
entirely revokes, abrogates, and displaces any and all existing agreements
between the parties hereto regarding compensation for services rendered to the
Company, other than the Settlement and Release Agreement of July 31, 2002.
2. POSITION AND DUTIES OF CONTRACTOR: As of the effective date of this
Agreement, Xxxx is retained by NSC in the position of Financial Services
Contract Executive. Xxxx will perform such duties as are assigned by the Company
Board consistent with that position, which may vary from time to time, or any
other position he may subsequently assume with NSC, and will devote his full
knowledge, skills, attention, and efforts to the business of the Company. These
duties are detailed in Attachment A, "Specific Duties and Compensation," and are
subject to change as at a later time if both parties agree to such changes in
writing.
3. TERM OF AGREEMENT: The term of this Agreement will be through December
31, 2002, from the effective date of this Agreement, unless sooner terminated in
accordance with the provisions set forth herein. The contract will automatically
renew for another 12 month period at that time, unless the Company provides Xxxx
with 90 calendar days written notice of intent to terminate this Agreement prior
to December 31, 2002.
4. COMPENSATION & SPECIFIC DUTIES: For his services under this Agreement,
Xxxx will receive the Compensation listed in Attachment A, "Specific Duties and
Compensation"
5. EXPENSES: NSC will reimburse Xxxx for all reasonable business expenses
incurred and documented in compliance with Company policy and procedure.
6. EXTERNAL COVENANTS AND RESTRICTIONS: Xxxx certifies that he is under no
restrictive covenant or similar obligation by reason of a prior employment or
other relationship. Xxxx agrees not to undertake, during his service with NSC,
any external obligation that would materially restrict his ability to perform
his duties under this Agreement.
7. OWNERSHIP OF WORK PRODUCT: Xxxx acknowledges and agrees that the nature
of his services to NSC and its clients/customers may have involved and continue
to involve development and/or improvement of technology, systems, formulas,
processes, procedures, computer-software programs, other programs, and related
documentation.
x. Xxxx agrees that all new or improved technology, systems, formulas,
processes, procedures, computer-software programs, other programs, and
related documentation that Xxxx has or has had any part in developing
or improving are, will be and remain the sole and exclusive property
of NSC, and that Xxxx has acquired and will acquire no right, title,
or interest therein. Xxxx further agrees to execute any and all
documents necessary for NSC to secure and protect its interest in any
such technology, systems, formulas, processes, procedures,
computer-software programs, other programs, and related documentation,
including but not limited to documents related to non-disclosure,
patents, licenses, or copyrights, whether of any state, federal, or
foreign government.
x. Xxxx further acknowledges and expressly agrees that all files,
records, lists, books, literature, correspondence, documents,
services, products and data of any type whatsoever, and in whatever
form, including electronically or digitally stored data, related to or
used in the conduct of the business of NSC, its customers/clients, or
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prospective customers/clients are and will remain the property of NSC.
Xxxx agrees that, upon termination of this agreement for any reason
whatsoever, he will surrender and deliver to NSC all such information
and materials, and, to the extent any such material is electronically
or digitally stored on a computer or another medium, any remaining
copies of information surrendered or delivered to NSC will be
permanently deleted from any computer or other means of storage in
NSC's possession.
8. CONFIDENTIAL INFORMATION: Xxxx acknowledges that, in the course of his
service with NSC, he has acquired, used and added to, and will be acquiring,
using, and adding to Confidential Information of a special and unique nature and
value. Xxxx acknowledges and understands that NSC is in a highly competitive
business and that its success depends in significant part on maintaining a
competitive advantage. Xxxx acknowledges and understands that NSC maintains and
uses Confidential Information to gain and maintain such a competitive advantage.
a. For the purposes of this Agreement, "Confidential Information" is that
which is not routinely disclosed by the management or Board of
Directors of NSC in response to inquiries and is not readily
obtainable elsewhere. "Confidential information" includes but is not
limited to information related to the business, operations, assets,
systems, plans, products, contracts, procedures, processes,
documentation, computer programs, or software products of NSC and/or
its customers or clients and any information about the development or
improvement of any technology by NSC and/or its customers or clients.
Information obtained by Xxxx in the course of his previous work with
NSC or service under this Agreement is Confidential Information unless
it is in the public domain. Information which is in the public domain
through sources other than Contractor is not Confidential Information.
x. Xxxx agrees he will not, during or after his service under this
agreement, disclose any Confidential Information to any person(s)
without the express written permission of NSC except as such
disclosures may be reasonably necessary in carrying out his duties for
NSC.
x. Xxxx acknowledges and agrees that any disclosure of Confidential
Information by him will constitute a material breach of this Agreement
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and be cause for immediate termination of this Agreement and may give
rise to other legal liabilities for Contractor and remedies for NSC.
9. AGREEMENT NOT TO COMPETE: Xxxx acknowledges that, in addition to
Confidential Information to which he has had access and will have access during
the course of his service under this agreement, he will be given the opportunity
to develop and maintain relationships on behalf of NSC with employees of NSC and
with existing and future customers and prospective customers and clients of NSC.
Xxxx agrees that during the term of this Agreement and any extension thereof and
for a period of one (1) year after termination of this Agreement, he will not,
directly or indirectly, as owner, partner, principal, shareholder, director,
investor, lender, officer, agent, or in any other capacity:
a. solicit, divert, or accept business from any person or entity that was
a current or prospective customer or client of NSC at any time during
the one-year period before termination of this Agreement, or
b. employ or solicit for employment any person who was an employee of NSC
at any time during the one-year period before termination of this
Agreement.
c. For purposes of this Agreement, a "prospective" customer or client is
one that, at any time during the one-year period before termination of
this Agreement, received a proposal from NSC or whose business was
demonstrably solicited by NSC.
10. TERMINATION OF AGREEMENT: This Agreement will terminate as provided in
Section 3 unless sooner terminated by any of the following events.
a. This Agreement will terminate at any time upon mutual written
agreement of NSC and Xxxx, in accordance with the terms of that mutual
agreement.
b. This Agreement will terminate upon a filing for the liquidation,
dissolution or bankruptcy of NSC. In the event of such a termination,
Xxxx will be entitled only to compensation earned on or before the
final date of the contract termination.
c. This Agreement will terminate on the date of Xxxx' death.
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x. Xxxx may terminate this Agreement without cause upon thirty (30) days
written notice to NSC. In the event of such termination, Xxxx will be
entitled only to compensation earned on or before the final date of
this service.
e. NSC may terminate this Agreement at any time without cause upon
written notice to Xxxx, but will pay a penalty of approximately six
months of compensation to do so. In the event of such termination, NSC
will pay Xxxx $90,000 as liquidated damages for this termination,
payable $15,000 on the first of each month for six months following
such termination.
f. Notwithstanding any other provision hereof, NSC may terminate this
Agreement and for cause at any time upon written notice to Xxxx,
specifying the cause for termination. "Cause for termination" is
defined as any of the following: repeated neglect of duties; failure
to comply with lawful instructions; fraud; theft; habitual drunkenness
or substance abuse; unethical business conduct; conviction of a
felony; any act or failure to act that would constitute a felony if
prosecuted pursuant to applicable criminal statutes; any material
breach of this Agreement; any willful or repeated material violation
of company policy; or failure to comply with applicable federal or
state statute or regulations regarding trading Company stock. In the
event of termination for cause, Xxxx will be entitled only to
compensation earned on or before the final date of Agreement
termination, including liquidated damages of $6,000, payable within
fifteen (15) days of such termination.
11. SCOPE AND MODIFICATION OF AGREEMENT: Neither party has relied on any
statement or representation by the other party or any representative of the
other party that is not expressly stated in this Agreement. Changes or
amendments to this Agreement are of no effect unless in writing signed by both
parties.
12. PROHIBITION OF ASSIGNMENT: This Agreement is personal to Xxxx. Neither
party can assign the performance of obligations hereunder to any third party.
Notwithstanding that, the parties' rights under this Agreement inure to the
benefit of their respective successors, heirs, and assigns.
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13. SEVERABILITY: The provisions herein entitled Position and Duties of
Contractor, Compensation, Expenses, Termination, and Prohibition of Assignment
are not severable. All other provisions herein are severable. The ruling of any
court or arbitrator of competent jurisdiction that any severable provision is
void, voidable, or otherwise unenforceable shall have no effect on the validity
and enforceability of any other provision.
14. CHOICE OF LAW: This Agreement is to be construed and interpreted in
accordance with the laws of Arizona, except as those laws may be preempted by
federal law, and without regard to choice of laws rules. No action involving
this Agreement may be brought except as provided in Sections 18 below, and no
court action challenging the enforceability of Section 18 may be brought except
in a state or federal court located in Phoenix, Maricopa County, Arizona.
15. WAIVER: Waiver by either party of any breach under this Agreement shall
not operate as a waiver of any subsequent breach of the same or any other
provision of this Agreement.
16. NOTICES: Any notice required under this Agreement shall be sufficient
if given in writing and sent by registered mail to the below address of the
party to be noticed.
National Scientific Corporation Xxx X. Xxxx
00000 X Xxxxxx Xxxx 0000 X. Xxxxxx Xx.
Xxxxx 000 Xxxxxxxxxx, Xxxxxxx 00000
Xxxxxxxxxx, Xxxxxxx 00000
17. ARBITRATION OF CLAIMS AND DISPUTES: Except as otherwise expressly
provided in this Agreement, any civil claim which arises out of or relates in
any way to this Agreement, to the parties' previous contract(s), or to the
relationship between the parties shall be settled by exclusive, binding, and
final arbitration in Phoenix, Arizona, in accordance with Rules, and under the
auspices, of the American Arbitration Association. This includes but is not
limited to claims arising under the common law of contract or tort,
discrimination claims, and all claims arising under any federal, state, county,
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or municipal constitution, charter, statute, rule, or regulation. THE PARTIES
EXPRESSLY AGREE TO FOREGO ANY RIGHT TO TRIAL BY A JUDGE AND/OR JURY IN FAVOR OF
FINAL, BINDING, AND EXCLUSIVE ARBITRATION.
18. RIGHT TO INJUNCTIVE RELIEF: Notwithstanding the parties' agreement to
arbitrate any and all civil claims that may arise from this Agreement, their
prior contract(s), or the relationship between them, Xxxx acknowledges and
agrees that any breach or threatened breach of Sections 8 or 9 will cause NSC
irreparable harm and entitle NSC to such injunctive relief as may be necessary
to prevent such a breach by Xxxx and/or any person acting for or with him. This
right to injunctive relief is in addition to and without limitation of any other
rights, remedies, or damages available to NSC under this Agreement or at law or
in equity. Xxxx shall reimburse NSC its costs and reasonable attorney's fees
incurred in obtaining such injunctive relief.
19. DAMAGES FOR BREACH: NSC's liability for damages to Xxxx (in addition to
the $90,000 payment required in paragraph 10(e) above) for NSC'S wrongful
termination of this Agreement or any other breach thereof shall not exceed the
amount of actual damages proven and, in any case, shall not exceed the amount of
compensation and expenses Xxxx did not receive and would have received had he
completed the then-current Period of this Agreement.
20. INDEPENDENT CONTRACTORS. The parties are independent contractors. Each
will bear its own costs and expenses incurred in connection with this Agreement.
Neither party has the authority to bind the other to any third party agreement,
except as may be mutually agreed upon in a separate writing. In no event shall
either party be liable for any debts of the other party to its customers or
other creditors unless provided for in this Agreement or in a separate writing.
21. LEGAL COUNSEL: The parties agree that they have read and understand the
terms of this Agreement and that they have had ample opportunity to seek the
counsel of their own attorneys before executing this Agreement.
22. EXECUTION IN COUNTERPARTS: This Agreement may be executed in
counterparts with the same effect as if the parties had signed the same
document. The counterparts shall be construed together and shall constitute one
Agreement.
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Executed this date, August 1, 2002, in Scottsdale, Arizona,
National Scientific Corporation Xxx X.Xxxx
By: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxx X. Xxxx
------------------------------- ----------------------------------
Its: Chief Executive Officer
-------------------------------
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ATTACHMENT A
SPECIFIC DUTIES AND COMPENSATION AS FINANCIAL SERVICES CONTRACT EXECUTIVE
SPECIFIC DUTIES:
1. Xxxx will oversee the financial operations of NSC, including the
preparation of financial statements and routine periodic filings required
to comply with SEC requirements. With regard to these periodic filings,
Xxxx will coordinate reviews and revisions as necessary with independent
professionals such as securities attorneys and auditors.
2. Consult with the Board and management about financing options and
facilitate their implementation or execution.
3. Report as requested to the Board regarding the financial condition of the
Company.
4. Oversee the accounting functions and employee(s) to ensure proper and
accurate financial reporting in compliance with Generally Accepted
Accounting Principles.
5. Coordinate with NSC's independent auditor to ensure a smooth and
non-disruptive annual audit.
6. Facilitate the financial modeling and business planning of NSC as needed
for projects or business planning as requested by the Board.
7. Perform as a financial representative for NSC with external business
associates in proposal meetings, sales meetings or other business
gatherings requiring financial representation.
COMPENSATION:
Compensation:
1. Monthly Direct Cash Payment for approximately 160 hours/month of service at
$15,000 per month, payable bi-monthly in appears. The initial payment will
be August 15, 2002. Xxxx will be allowed the equivalent of 160 business
hours (i.e. four weeks) per annum as compensated time away from NSC. Xxxx
agrees to defer $3,000 of the Monthly Direct Cash Payment to curb the
demand on the Company's cash flow. It is understood that when the cash
position of the Company improves, the deferred amounts will be paid.
However, regardless of the Company's cash position, the amount of deferred
Monthly Direct Cash Payments must be paid to Xxxx upon his written demand.
2. Monthly Cash Payment for Administrative Costs incurred by Xxxx of $2,083,
payable bi-monthly in arrears. The initial cash payment for Monthly Cash
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Payment for Administrative Costs will be August 15, 2002. Any future
reduction in COBRA insurance payments, which make up a component of the
Administrative Costs will reduce the Monthly Cash Payment for
Administrative Costs directly.
3. For the duration of this Agreement, Xxxx will be granted, according to the
following schedule, additional fully vested options to purchase common
stock in the Company each time the Rolling Average Closing Price for the
most recent ten business days reaches or surpasses a previously-unattained
Whole Dollar Value above the Initial Average Closing Price.
(1) For each Whole Dollar Value reached or surpassed between $4.00 per
share and $15.00 per share, inclusive, Xxxx will be granted an option
to purchase Seventy-Five Thousand (75,000) shares at the Whole Dollar
Value reached or surpassed.
(2) For each Whole Dollar Value reached or surpassed between $16.00 per
share and $30.00 per share, inclusive, Xxxx will be granted an option
to purchase Thirty Thousand (30,000) shares at the Whole Dollar Value
reached or surpassed.
(3) For each Whole Dollar Value reached or surpassed between $31.00 per
share and $50.00 per share, inclusive, Xxxx will be granted an option
to purchase Ten Thousand (10,000) shares at the Whole Dollar Value
reached or surpassed.
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