CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is entered into as of this 20th
day of September, 1996, by and between SCIENTIFIC LEARNING PRINCIPLES
CORPORATION, a California corporation (the "Company"), and XXXXXXX X. XXXXXXXXX,
PH.D. (the "Consultant") to memorialize certain arrangements previously made
between the parties and to record their understanding of their business
arrangements.
RECITALS
WHEREAS, the Company proposes to develop products based on new technology
relating to language learning impairments;
WHEREAS, Consultant is a leading scientist in the forefront of developing
technology to assess and treat language learning impairment; and
WHEREAS, the Company and the Consultant desire to enter into a consulting
arrangement whereby the Company shall benefit from the Consultant's unique
knowledge and experience;
NOW, THEREFORE, in consideration of the mutual undertakings set forth
herein, the parties hereby agree as follows.
AGREEMENT
1. SCOPE. The purpose of this Agreement is to provide for the
performance by the Consultant of research, investigation and consultation on
behalf of the Company to advance and enable the Company to commercially exploit
research related to the inventions described in Pending U.S. Patent Application
Serial No. 08/351,803 entitled "Method and Device for Enhancing the Recognition
of Speech Among Speech Impaired Individuals," filed December 8, 1994 by Drs.
Merzenich, Jenkins, Xxxxxxxxx, Xxxxxx and Xxxxxx and assigned to the Regents of
the University of California and Rutgers-the State University of New Jersey (the
"Patent"), as well as other areas as shall from time to time be mutually agreed
upon by the parties hereto ("Field of Activity"). The Consultant's specific
consulting assignments within the Field of Activity and such other general
consulting services as the Company may reasonably request ("Consulting
Activities") shall be determined from time to time by the Chief Executive
Officer of the Company or by any other officer empowered by the Company's Board
of Directors to determine the Consultant's assignments.
2. TERM. This Agreement shall be deemed effective as of January 31, 1996
(the "Effective Date") and shall terminate on December 31, 2001, unless earlier
terminated pursuant to Section 19, below, or unless extended by mutual written
consent of the parties hereto.
3. TIME COMMITMENT.
(a) The parties acknowledge that during the period from the Effective
Date through March 25, 1996 the Consultant devoted twenty percent (20%) of the
Consultant's
professional time available under Consultant's employment arrangements with the
University of California, San Francisco ("UCSF") to Consulting Activities.
(b) The Consultant has advised the Company that the Consultant has
taken an in residence sabbatical at UCSF for a one-year period, which commenced
on March 26, 1996. For the period from March 26, 1996 through March 25, 1997,
the Consultant agrees to devote an aggregate of one hundred percent (100%) of
the Consultant's total professional time available under Consultant's sabbatical
leave, other than time engaged in Permitted Sabbatical Activities (defined
below), to Consulting Activities. "Permitted Sabbatical Activities" means
administrative activities, student and research fellow advising activities,
collaborative research activities, special educational and training activities,
grant supervision activities (for grants outside the Field of Activity) at UCSF
and lecturing activities, all of which activities shall not, on average, exceed
thirty-five (35) hours per month.
(c) The Consultant has advised the Company that the Consultant plans
to seek approval for a leave of absence from UCSF for a one-year period,
commencing on March 26, 1997. For the period from March 26, 1997 through March
25, 1998, the Consultant agrees to devote an aggregate of one hundred percent
(100%) of the Consultant's total professional time available under Consultant's
sabbatical leave, other than time engaged in Permitted Leave Activities (defined
below), to Consulting Activities. "Permitted Leave Activities" means
administrative activities, student and research fellow advising activities,
collaborative research activities, special educational and training activities,
grant supervision activities (for grants outside the Field of Activity) at UCSF
and lecturing activities, all of which activities shall not, on average, exceed
thirty-five (35) hours per month.
(d) For the period commencing March 26, 1998 through December 31,
2001, the Consultant agrees to devote an aggregate of up to twenty percent (20%)
of the Consultant's total professional time to Consulting Activities. On or
prior to July 1, 1997, the Company shall notify the Consultant as to the amount
of professional time the Company requires the Consultant to reserve for
Consulting Activities for the period from March 26, 1998 through December 31,
1998 (the "Stub Period"). On or prior to each subsequent July first, the
Company shall notify the Consultant as to the amount of professional time the
Company requires the Consultant to reserve for Consulting Activities for the
next calendar year during the term of this Agreement. In each such case, the
Company shall notify the Consultant that it requires (a) twenty percent (20%) of
the Consultant's professional time, in which case the Consultant shall reserve
an average of one day per week for Consulting Activities on behalf of the
Company, (b) ten percent (10%) of the Consultant's professional time, in which
case the Consultant shall reserve an average of one-half day per week for
Consulting Activities on behalf of the Company, or (c) less than ten percent
(10%) of the Consultant's professional time, in which case the Consultant shall
reserve time at the Consultant's own discretion. Any such notice may be
hereinafter referred to as "Anticipated Request."
(e) When Consultant is engaged in less than full-time work on behalf
of the Company, as described in paragraphs 3(a) and (d), the parties acknowledge
that requests for the Consultant to engage in Consulting Activities shall be of
sufficient flexibility as to allow for reasonable accommodation of the
Consultant's personal and professional schedules.
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4. COMPENSATION.
(a) The parties acknowledge that for the period from the Effective
Date through March 25, 1996, the Consultant shall receive no compensation from
the Company.
(b) Pursuant to the policies of UCSF, for the period of Consultant's
in residence sabbatical leave from March 26, 1996 through March 25, 1997, the
Consultant shall not receive any compensation from the Company; however, the
Company shall make the payments described in Section 5 to UCSF and shall assume
liability for the reimbursements described in Section 5.
(c) For the period commencing March 26, 1997 through March 25, 1998,
during the Consultant's leave of absence from UCSF, the Consultant shall be paid
$11,000 per month.
(d) Pursuant to paragraph 3(d) above, the Company shall notify the
Consultant of the level of services requested for the Stub Period and subsequent
calendar years of this Agreement no later than the preceding July first. The
Consultant's compensation shall be set based upon the level of the Anticipated
Requests and the Company shall pay the Consultant consulting fees as follows:
(a) if Anticipated Requests for the period is twenty percent (20%) of the
Consultant's total professional time, then the Company agrees to pay the
Consultant an amount per year equal to the product of fifty-two (52) multiplied
by the "Daily Rate" (as defined below); (b) if Anticipated Requests for the
period is ten percent (10%) of the Consultant's total professional time, then
the Company agrees to pay the Consultant the greater of (i) an amount per year
equal to the product of twenty-six (26) multiplied by the Daily Rate or (ii) an
amount equal to the product of the Daily Rate multiplied by the number of days
worked at the request of the Company; and (c) if the Anticipated Request is less
than ten percent (10%) of the Consultant's total professional time, then the
Company agrees to pay the Consultant an amount equal to the Daily Rate
multiplied by the number of days worked at the request of the Company. For
purposes of the calculations described in the preceding sentence, the "Daily
Rate" shall be as follows:
DAILY RATE COMMENCING ENDING
$500 3/26/98 12/31/98
$550 1/1/99 12/31/99
$600 1/1/00 12/31/00
$650 1/1/01 12/31/01.
(e) Within thirty days following the end of any fiscal quarter in
which the Company reports net income exceeding $1,000,000 and the Company is
paying the Consultant based on the Daily Rate, the Company shall pay to the
Consultant an additional amount equal to fifty percent of the amount paid to the
Consultant during such quarter pursuant to paragraph 4(d).
(f) The Consultant acknowledges that a portion of such consulting
fees may be withheld by the Company and paid to taxing authorities, if and to
the extent that the Company determines it is obligated to do so under applicable
tax laws. Compensation shall be paid within
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30 days of the rendering of services, and may be prorated by the Company to
coincide with the Company's regular pay days.
5. REIMBURSEMENTS. The Company agrees that it shall reimburse UCSF for
the compensation and benefit expenses incurred by UCSF during the Consultant's
in residence sabbatical in the event that the Consultant does not return to
active employment at UCSF and UCSF seeks reimbursement of such amounts under
applicable UCSF policy. It is agreed that the Company's reimbursement
obligation shall not exceed $150,000. In addition, the Company acknowledges
that it has paid to UCSF $1,989 per month during the Consultant's in residence
sabbatical to reimburse UCSF for the Consultant's non-state funded compensation
and the Company agrees to continue to pay such amount during the Consultant's in
residence sabbatical, pursuant to UCSF policy.
6. FRINGE BENEFITS. To the extent the Consultant is not eligible for
similar or superior benefits through the Consultant's relationship with UCSF,
the Company agrees to provide the Consultant with at least the same non-wage
employment benefits as the Company routinely offers to its full-time employees.
7. EXPENSES. The Consultant shall be entitled to reimbursement by the
Company for all reasonable expenses the Consultant incurs in the conduct of
activities requested by the Company related to the Field of Activity.
8. RIGHTS OF FIRST REFUSAL. The Consultant agrees that prior to making
any requests to third parties for grants or sponsored research to support work
within the Field of Activity, the Consultant will present the Consultant's
proposed project to the Company and offer the Company the opportunity to support
such work in exchange for rights in resulting patents. If the Company declines
such opportunity, the Consultant may obtain support from other parties for such
work.
9. EXTERNAL CONSULTING. Notwithstanding any other provision of this
Agreement, prior to entering into a consulting arrangement with any other entity
(other than those existing commitments set forth on Appendix I ("External
Consulting Activities"), the Consultant agrees to notify the Company as to the
identity of such entity and the amount of the Consultant's professional time
proposed to be devoted to such External Consulting Activities. The Consultant
further agrees not to engage in External Consulting Activities if the Company
promptly notifies the Consultant that such proposed activities are with an
entity the Company deems to be a competitor with the Company or are activities
which the Company reasonably believes will conflict with the Company's business
objectives. During any period in which the Consultant's time commitment to the
Company pursuant to Section 3 above is twenty percent (20%) or more of
Consultant's professional time, the Consultant agrees not to engage in any
External Consulting Activities, without the prior approval of the Company (not
to be unreasonably withheld).
10. CONSENTS. The Consultant agrees to obtain all consents and approvals
from UCSF necessary to undertake and carry out the Consultant's obligations
under this Agreement. The parties acknowledge that this Agreement is intended
to comply with the policies of such institution in effect on the date hereof.
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11. PERFORMANCE OF OBLIGATIONS. The Consultant represents and warrants
that the Consultant will perform the Consulting Activities obligations under
this Agreement (a) solely on the Consultant's own time, (b) solely with supplies
and equipment provided by the Company, as set forth in Section 14 below, and
(c) at such locations, excluding in all cases the campuses of UCSF (unless
Company sponsored research is approved for conduct at UCSF), as the Company and
the Consultant may mutually agree.
12. NO CONFLICTS. The Consultant represents and warrants that the
Consultant's performance of this Agreement does not conflict with any written or
oral agreement the Consultant has entered.
13. REPORTS. The Consultant shall keep the Company fully informed of the
Consultant's activities under this Agreement and, at the request of the Company,
shall discuss all matters relating to the conduct of Consultant's activities
hereunder with personnel designated by the Company. If requested by the
Company, the Consultant shall provide the Company with written reports
describing the Consultant's activities under this Agreement.
14. SUPPLIES. The Company shall provide the Consultant with premises,
supplies and equipment as mutually agreed from time to time, at which location
and with such equipment and supplies the Consultant shall perform the Consulting
Activities.
15. PROPERTY RIGHTS. The Consultant represents and warrants that except
as set forth on Appendix II and except for the inventions covered by the Patent,
the Consultant has not made patentable inventions within the Field of Activity
prior to the date of this Agreement. The Consultant agrees to assign to the
Company any and all right, title and interest in or to any and all inventions,
developments, designs, improvements, trade secrets, formulae, processes,
devices, instruments, techniques, know-how and data (the "Inventions," or,
individually, "Invention") whether or not patentable or registrable under
copyright or similar statutes, made or conceived or reduced to practice or
learned by the Consultant, either alone or jointly with others, during the term
of this Agreement and which result from Consulting Activities. In the event the
Consultant makes an Invention that is within the Field of Activity and is within
the scope of the Company's business plans while the Consultant is performing
work unrelated to the Consulting Activities, if the Company so requests, the
Consultant shall use reasonable best efforts to cause the Invention to be
assigned to the Company (subject to limitations on Consultant's efforts under
applicable UCSF policy), and if the Company so requests, the Consultant agrees
to assign to the Company any income due to the Consultant from such Invention.
16. CONTINUED COOPERATION. The Consultant agrees to assist the Company in
every proper way in obtaining and from time to time in enforcing United States
and foreign patents, copyrights, and other rights and protections relating to
the Company Inventions in any and all countries. To that end, the Consultant
agrees to execute, verify and deliver such documents and to perform such other
acts (including appearances as a witness) as the Company may reasonably request
for use in applying for, obtaining, sustaining and enforcing such patents,
copyrights and other rights and protections on the Company's Inventions. In
addition, the Consultant agrees to execute, verify and deliver assignments of
such patents, copyrights, and other rights and protections on the Company
Inventions to the Company or its designee. The Consultant's obligations under
this Section 16 shall continue after expiration or termination of this
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Agreement, and the Company shall compensate the Consultant at a reasonable rate
after such expiration or termination for Consultant's time and expenses related
to such requests for assistance by the Company. In the event the Company is
unable, after reasonable effort, to secure the Consultant's signature on any
document needed to apply for or prosecute any patent, copyright, or other right
or protection relating to any Invention of the Company, the Consultant hereby
irrevocably designates and appoints the Company and its duly authorized agents
as agent and attorney in fact, to act for and in the Consultant's behalf to
execute, verify and file any such applications and to do all other lawfully
permitted acts to further the prosecution and issuance of patents, copyrights,
and other rights and protections thereon with the same legal force and effect as
if executed by the Consultant.
17. CONFIDENTIAL INFORMATION. The term "Confidential Information" shall
mean all information the Company desires, for business reasons, to hold in
confidence. By way of illustration but not limitation, Confidential Information
includes (a) Inventions, as defined in Section 15 above and (b) plans for
research, development, new products, marketing and selling; information
regarding business plans, budgets and unpublished financial statements;
licenses; prices and costs; information concerning suppliers and customers; and
information regarding the skills and compensation of employees of or other
consultants to the Company. The Consultant agrees to hold all such Confidential
Information in strictest confidence and not to disclose or use any of the
Company's Confidential Information except as such use or disclosure may be
required in connection with work for the Company, unless an officer of the
Company expressly authorizes such disclosure or use. The Consultant further
agrees to assign to the Company any rights the Consultant has or may acquire in
such Confidential Information to the Company and agrees that all Confidential
Information shall be the sole property of the Company and its assigns.
18. PUBLICATION. The Company agrees not to interfere with, and in
principle supports, the Consultant's academic research and publication of
scientific findings. The Consultant agrees to submit any material related to
the Field of Activity to the Company for its review before publication and the
Consultant agrees not to make public disclosures relating to the Field of
Activity which the Company believes will have an adverse effect on the business
of the Company without the Company's prior consent.
19. DEFAULT. In the event of a material default or material breach of any
provision of this Agreement by either party, the non-defaulting party shall give
written notice of such default to the defaulting party pursuant to Section 21,
below. If the default or breach is not capable of a cure, or if capable of a
cure, is not cured within 60 days of the date of said notice, the non-defaulting
party shall have the right to terminate this Agreement, which right shall not be
such party's exclusive remedy.
20. MATERIALS. The Consultant agrees to maintain, in sufficient detail to
reflect properly all work done and results achieved in the performance of this
Agreement, such books, records, reports, research notes, charts, graphs,
comments, computations, analyses, recordings, photographs, and other graphic,
written or electronically stored data generated in connection with the
Consulting Activities to be performed hereunder. All such material shall become
the property of the Company when produced, whether or not delivered to the
Company, shall be subject to inspection by personnel designated by the Company
at reasonable times, and shall, together with any materials, equipment, supplies
or rights to the use and occupation of any
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premises furnished by the Company to the Consultant under this Agreement, be
delivered to the Company (together with any reproductions thereof) upon
expiration or termination of this Agreement. Upon such expiration or
termination, the Consultant shall not retain or dispose of any of the materials
(or reproductions thereof) covered hereunder, except by delivery to the Company.
21. NOTICE. All notices hereunder shall be in writing and shall be
delivered personally, by overnight delivery service, by fax or by first class
mail sent postage prepaid to the parties hereto at their respective addresses as
set forth on the signature page hereof. Either party may change its address by
written notice. Any notice hereunder shall be deemed delivered upon receipt,
which in the case of notice sent by overnight courier or by fax shall be deemed
to be the earlier of receipt or the next business day and which in the case of
the mail shall be deemed to be the earlier of receipt or five business days
after deposit in the US mail, postage prepaid. A business day is deemed to be
any day other than a Saturday, Sunday or federal holiday.
22. WAIVER. Failure on any occasion by either party to enforce any
provision of this Agreement shall not prevent its enforcement by such party on
any other occasion.
23. ENTIRE AGREEMENT. This Agreement constitutes the sole agreement of
the parties hereto relating to the subject matter hereof and supersedes all
prior agreements with respect to the subject matter hereof. This Agreement
shall not be amended, altered or modified other than by written agreement
between the parties hereto.
24. PREVIOUS INVENTIONS. The parties hereto acknowledge that the Company
will separately negotiate with the Regents of the University of California and
Rutgers to receive an exclusive license under all foreign and domestic rights
stemming from the Patent. The Company acknowledges that the Consultant shall
receive a portion of whatever sums are paid to the UCSF in respect of those
patent rights.
25. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of California, without giving effect to the principles of conflict of laws
thereof.
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IN WITNESS WHEREOF, the parties have executed this Consulting Agreement as
of the date first above set forth.
SCIENTIFIC LEARNING PRINCIPLES CORPORATION
By: /s/ Xxxxxxxx X. Hostrom
----------------------------------------
Xxxxxxxx X. Xxxxxxxx
Chief Financial Officer
Address: Xxx Xxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
CONSULTANT
/s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxxxxx, Ph.D
Address: 20 Hillpoint
Xxx Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
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APPENDIX I
Pre-existing consulting commitments are as follows:
COMPLETED BY XX. XXXXXXXXX
I have terminated all other commercial consulting agreements.
Non-commercial agreements will be limited to: (i) U.S. and foreign government
research and education agencies, (ii) public and private universities and (iii)
non-commercial research centers and foundations.
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APPENDIX II
Consultant has conducted research at UCSF unrelated to Consulting Activities
that has led or may lead to other inventions that may be "related to" the
Patent, which may or may not be of interest to the Company and which may or may
not be covered by the Patent.
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MODIFICATION TO CONSULTING AGREEMENT
This Agreement ("Modification") modifies the Consulting Agreement ("Original
Agreement") dated September 20, 1996, between Scientific Learning Corporation
("Company") of Berkeley, California and Xxxxxxx X. Xxxxxxxxx, Ph.D.
("Consultant"). To the extent that there are any differences between the
Modification and the Original Agreement, the term(s) of the Modification
supercedes the corresponding term(s) of the Original Agreement. Accordingly,
Company and Consultant agree that:
1) As of December 15, 1997, Consultant has returned officially to the
University of California at San Francisco ("UCSF") as a full-time resident
faculty member.
2) Between December 15, 1997 and December 31, 1998, Consultant shall devote
20% of Consultant's total professional time on consulting activities for
the Company.
3) In consideration of the consulting activities provided by Consultant,
Company shall pay Consultant consulting fees of $2,167 per month for the
twelve months beginning January 1998 and ending December 1998. In
addition, Company shall pay Consultant a fee of $1,084 for services
rendered during the period of December 15, 1997 through December 31, 1997.
4) Company shall reimburse Consultant for reasonable and customary expenses
that Consultant incurs in connection with Company's business. Such
expenses are subject to the Company's current expense/purchase approval
policies. For example, all business travel must be approved in advance by
either the Chief Executive Officer or the Chief Financial Officer or their
designees.
5) Company shall coordinate with Consultant as needed with respect to
intellectual property matters that may arise with UCSF.
6) Consultant is responsible for ensuring that consulting for Company under
both the Original Agreement and this Modification is consistent with the
current policies of UCSF such as UCSF's conflict of interest policy.
Accepted and agreed by:
SCIENTIFIC LEARNING CORPORATION CONSULTANT
/s/ Xxxxx Xxxxxxx /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------- ---------------------------------
Authorized Signature Xxxxxxx X. Xxxxxxxxx, Ph. D.
Xxxxx Xxxxxxx January 19, 1998
--------------------------------- ---------------------------------
Printed Name Date
Chief Financial Officer
---------------------------------
Title
January 15, 1998
---------------------------------
Date
