Consulting Agreement - Cheung Laboratories Inc. and NACE Resources Inc.
CONSULTING AGREEMENT
This CONSULTING AGREEMENT, dated as of August 1, 1996, with an
effective date of June 1, 1996 (the "Effective Date"), is between Cheung
Laboratories, Inc., a Maryland corporation (the "Company"), and NACE Resources,
Inc., a Delaware corporation (the "Consulting Firm").
WITNESSETH
WHEREAS, since the Effective Date, the Consulting Firm has provided
consulting services to the Company with respect to the development and
application of the Company's products and proprietary technology (the "Prior
Consulting Services");
WHEREAS, the Company desires to compensate the Consulting Firm for the
Prior Consulting Services and to engage the Consulting Firm to provide
consulting services in the future in accordance with the terms of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the Company and the Consulting Firm hereby agree as
follows:
1. Term.
The Company hereby engages the Consulting Firm, and the
Consulting Firm hereby agrees to perform services for the Company, in accordance
with this Agreement, for an initial term of one (1) year commencing on the
Effective Date (the "Initial Term"), unless terminated earlier in accordance
with Section 5 hereof. The term of this Agreement shall be automatically
extended for an unlimited number of one year renewal terms (each, a "Renewal
Term"), unless terminated in accordance with Section 5 hereof or by either party
upon written notice given thirty (30) days prior to the end of the Initial Term
or any Renewal Term.
2. Duties of the Consulting Firm.
(a) The Consulting Firm hereby agrees to cause Stuart Fuchs
(the "Designated Consultant") to provide such advisory and consulting services
to the Company and its Affiliates as may be requested from time to time by the
Board of Directors or the President of the Company with respect to the
development and application of the Company's products and proprietary
technology. In addition, to the extent requested from time to time by the Board
of Directors or President of the Company, the Consulting Firm will coordinate
the activities of an advisory committee of scientific and medical professionals
to assist in the development of and application of the Company's products and
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proprietary technology. The Consulting Firm shall not change, substitute or
replace the Designated Consultant without the express written consent of the
Company. As used in this Agreement, the term "Affiliate" means any corporation
or other business organization that directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with the
Company.
(b) The Consulting Firm shall cause the Designated Consultant
to devote such time as shall be necessary to the performance of the Consulting
Firm's duties and responsibilities hereunder, but in no event less than 32 hours
in each of 48 weeks per year during the term of this Agreement. Commencing
January 1, 1997, Designated Consultant shall provide to the Company a monthly
report detailing the time spent working on behalf of the Company during the
previous month.
(c) Nothing contained herein shall constitute the Designated
Consultant an employee or agent of the Company or any of its Affiliates but the
relationship of the Consulting Firm to the Company shall be one of an
independent contractor. Any other provision of this Agreement to the contrary
notwithstanding, neither the Consulting Firm nor the Designated Consultant shall
not have the authority to enter into any agreement on behalf of, or otherwise
bind, the Company or any of its Affiliates, without the prior written consent of
the Company.
3. Compensation.
(a) For the Prior Consulting Services, the Company shall pay
to the Consulting Firm an aggregate of $75,000, all of which has been paid by
the Company to the Consulting Firm on or prior to the date of this Agreement.
(b) For its services under Section , the Company shall pay the
Consulting Firm compensation in an amount equal to $20,000 per month (the
"Current Compensation"), commencing August 1, 1996, of which $5,000 per month
(the "Deferred Compensation") shall be deferred until the completion after the
date of this Agreement of any debt or equity financings providing in the
aggregate gross proceeds to the Company of at least $5,000,000, whereupon the
aggregate Deferred Compensation shall be immediately payable to the Consulting
Firm in full. The Current Compensation shall be payable in arrears on the first
business day of each calendar month during the term of this Agreement.
(c) The Company shall pay the Consulting Firm eight percent
(8%) of any direct or indirect cash contributions or cash payments to the
company, resulting from the Consulting Firm or the Designated Consultant
introducing the Company and the contributor, and that are deductible by the
contributor or payor under 501(c)(3) of the Internal Revenue Code of 1986, as
amended (the "Contingent Compensation"), payable
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promptly upon the direct or indirect receipt by the Company of such cash
contributions or cash payments.
4. Reimbursement of Expenses.
The Company shall pay the Consulting Firm for its reasonable
out-of-pocket expenses incurred in the performance of the Consulting Firm's
duties hereunder, upon submission of an adequate accounting for such expenses in
accordance with the Company's policies form time to time in effect.
5. Termination.
This Agreement shall terminate upon the first to occur of the
following:
(a) Commencing June 1, 1997, either party may terminate
this Agreement, without cause or penalty, by delivering to other party written
notice of the termination thirty (30) days prior to the termination.
(b) The Designated Consultant's death or, at the Company's
election, the Designated Consultant's disability. For purposes of this
Agreement, the Designated Consultant shall be deemed to be "disabled" if (1) for
medical (including psychological) reasons he has been unable to perform his
duties hereunder for 30 consecutive days or 60 days in any 12 month period and
(2) it shall have been certified to the Company, by a medical doctor or other
expert approved by the Company in writing, that the disability will
substantially impair the Designated Consultant's abilities to perform his duties
as contemplated hereby for the remainder of the term of this Agreement. The
Company, in its sole discretion, shall be entitled to require the Designated
Consultant to submit to an examination by a medical doctor or expert to
determine disability. Failure of the Designated Consultant to submit to such an
examination shall constitute a default hereunder.
(c) Termination of this Agreement "for cause" by the Board of
Directors of the Company. Termination "for cause" shall be limited solely to
termination by action of the Board of Directors of the Company because of: (i)
the negligence, willful misconduct or malfeasance of the Consulting Firm in the
performance of its obligations under this Agreement; (ii) breach of the
Agreement; (iii) the perpetration by the Consulting Firm or the Designated
Consultant of a fraud against the Company or any of its Affiliates; (iv) the
filing of a bankruptcy petition or assignment for the benefit of creditors by
the Consulting Firm or the Designated Consultant; or (iv) the conviction of the
Consulting Firm or the Designated Consultant for any felony. Termination for
cause shall occur upon delivery to the consulting firm of a notice of such
action by the Board of Directors of the company, which notice shall specify the
grounds for such termination.
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(d) Upon any termination under Section 5(a), the Company's
obligation to make payments under Section 3 shall terminate 30 days after such
notice is given and the Company thereupon shall have no further obligations to
Consulting Firm whatsoever, other than reimbursement of expenses under Section 4
for expenses incurred prior to such termination and payment of any accrued and
payable Current Compensation, Deferred Compensation and Contingent Compensation.
Upon any termination under Section 5(b), the Company's obligation to make
payments under Section 3 shall terminate upon the death or disability of the
Designated Consultant and the Company thereupon shall have no further
obligations to Consulting Firm whatsoever, other than reimbursement of expenses
under Section 4 for expenses incurred prior to such termination and payment of
any accrued and payable Current Compensation, Deferred Compensation and
Contingent Compensation. Upon any termination under Section 5(c), the Company's
obligation to make payments under Section 3 shall terminate immediately upon
giving notice to Consulting Firm and the Company thereupon shall have no further
obligations to Consulting Firm whatsoever, other than reimbursement of expenses
under Section 4 for expenses incurred prior to such termination and payment of
any accrued and payable Current Compensation, Deferred Compensation and
Contingent Compensation.
6. Withholding of Taxes.
Payment of all taxes on compensation paid under this Agreement
shall be the sole liability and responsibility of the Consulting Firm, provided,
however, if any tax or other laws or regulations require the Company to withhold
any amounts from compensation paid under this Agreement to the Consulting firm,
or its assignee, such amounts may be so withheld.
7. Records and Reports.
The Consulting Firm hereby agrees to render to the Company
such reports of the activities undertaken by it or conducted under its direction
during the term of this Agreement as the Company may reasonably request.
8. Covenant Not to Compete.
(a) The Consulting Firm covenants and agrees that during the
term of this Agreement it will not, directly or indirectly, whether as
principal, agent, officer, director, partner, employee, independent contractor,
consultant, stockholder, licensor or otherwise, alone or in association with any
other person, firm, corporation or other business organization, carry on, or be
engaged, concerned or take part in, or render services or advice to, or own,
share in the earnings of or invest in the stock, bonds or other securities of
any person, firm, corporation or other business organization engaged in the
United States of America in the business of designing, assembling and marketing
hyperthermia treatment systems for cancer, other tumors, and prostate disorders,
except
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for any joint venture partner of the Company; provided, however, that each of
the Consulting Firm and the Designated Consultant may invest in stocks, bonds or
other securities of any business organization which is in competition with the
Company or any of its Affiliate (but without otherwise participating in such
business) if (i) such investment would not in any way limit the transaction of
business by the Company or any of its Affiliates by virtue of any law,
regulation, or administrative practice and (ii) such stock, bonds or other
securities are listed on a national or regional securities exchange or have been
registered under Section 12(g) of the Securities Exchange Act of 1934 and such
investment in any class of such securities does not exceed 1% of the outstanding
shares of such class or 1% of the aggregate principal amount of such class
outstanding, as the case may be.
(b) The Consulting Firm hereby agrees that the covenants
contained in Section are reasonable and valid. If for any reason any court of
competent jurisdiction shall have deemed the provisions of Section unreasonable
in duration or in geographic scope or otherwise unenforceable, the prohibitions
herein contained shall be restricted to such time and geographic areas or shall
otherwise be reformed in such manner as the curt determines to be reasonable.
9. Confidential Information.
The Consulting Firm and the Designated Consultant agree to
execute and be bound by a confidentiality agreement substantially similar to
that executed by employees of the Company.
10. Ownership of Trade Secrets.
If, during the term of this Agreement, the Consulting Firm or
any of its employees conceives, devises or develops any trade secret, invention,
improvement, formula, design, process, patent, patent application or writing, or
any program, system, or novel technique based upon technology or information
derived from the Company (whether or not capable of being trademarked,
copyrights or patented) ("Proprietary Information"), such Proprietary
Information shall be and remain the property of the Company. Provided, however,
Proprietary Information shall not include U.S. Patent Application Serial No.
08/703648 and any other proprietary information developed by Consulting Firm or
Designated Consultant with Vladislav Oleynik and/or Vladimir Popov, so long as
on or before December 31, 1997, the parties achieve a satisfactory resolution of
the Company's $40,000 investment in the patent and related technology.
11. Compliance with other Agreements.
The Consulting Firm hereby represents and warrants to the
Company that the execution and delivery of this Agreement by the Consulting Firm
and the performance of its obligations hereunder will not, with or without the
giving of notice
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or the passage of time, (a) violate any judgment, writ, injunction or order of
any court, arbitrator or governmental agency applicable to the Consulting Firm
or (b) conflict with, result in the breach of any provision of, or the
termination of, or constitute a default under, any agreement to which the
Consulting Firm is a party or by which the Consulting Firm is or may be bound.
12. Remedies.
In the event that any action shall be brought by the Company
or the Consulting Firm to restrain any breach or threatened breach of any
provision of this Agreement, the Company and the Consulting Firm hereby agree
that the prevailing party shall be reimbursed by the non-prevailing party for
all costs and expenses, including reasonable lawyers' fees, incurred by the
prevailing party by reason of such breach or threatened breach.
13. Binding Effect; Assignment.
This Agreement shall inure to the benefit of, and shall be
binding upon, the Company and the Consulting Firm and their respective
successors, assigns, heirs and legal representatives, including any firm,
corporation or other business organization with which the Company or the
Consulting Firm may merge or consolidate or to which it may transfer
substantially all of its assets.
14. Severability.
The provisions of this Agreement are severable and if any
provision of this Agreement shall be invalid or unenforceable to any extent or
in any application, then the remainder of such provision and this Agreement,
except to such extent or in such application, shall not be affected thereby, and
each and every provision of this Agreement shall be valid and enforceable to the
fullest extent and in the broadest application permitted by law.
15. Amendments and Waivers.
This Agreement may not be modified or amended except by an
instrument or instruments in writing signed by the party against whom
enforcement of any such modification or amendment is sought. Either the Company
or the Consulting Firm may, by an instrument in writing, waive compliance by the
other party with any term or provision of this Agreement on the part of such
other party hereto to be performed or complied with. The waiver by any party
hereto of a breach of any term or provision of this Agreement shall not be
construed as a waiver of any subsequent breach.
16. Notice.
Any notice, demand, approval or other communication which may
be or is required to be given under this Agreement shall be in writing and shall
be deemed to have been given on the earlier of the day actually received or on
the close of business
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on the fifth business day next following the day when deposited in the United
States mail, postage prepaid, registered or certified, addressed to the Company
or the Consulting Firm at their respective address set forth below or such other
address as such party may specify by notice given pursuant to this Section :
If to the Consulting Firm:
NACE Resources, Inc.
2323 Sheridan Road
Highland Park, IL 60035
Attn: Stuart Fuchs
with a copy (which shall not constitute notice)
to:
Altheimer & Gray
10 South Wacker Drive
Chicago, IL 60606
Attn: Norman M. Gold
If to the Company:
Cheung Laboratories, Inc.
10220-1 Old Columbia Road
Columbia, MD 21046-1705
Attn: Dr. Augustine Cheung
with a copy (which shall not constitute notice)
to:
Ballard Spahr Andrews & Ingersoll
201 S. Main Suite 1200
Salt Lake City, UT 84111
Attn: Richard Beard
17. Section and Other Headings.
The section and other headings contained in this Agreement are
for reference purposes only and shall not be deemed to be a part of this
Agreement or to affect the meaning or interpretation of this Agreement.
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18. Entire Agreement.
This Agreement contains the entire agreement between the
Company and the Consulting Firm pertaining to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, between the
Company and the Consulting Firm with respect to the subject matter hereof.
19. Governing Law.
This Agreement shall be construed and governed in accordance
with the law of the State of Illinois, without giving effect to the conflict of
laws principles thereof.
20. Counterparts.
This Agreement may be executed in counterparts.
IN WITNESS WHEREOF, the Company and the Consulting Firm have executed
this Agreement as of the date first above written.
CHEUNG LABORATORIES, INC.
By:____________________________
Name:______________________
Title:_____________________
DESIGNATED CONSULTANT NACE RESOURCES, INC.
By:____________________ By:____________________
Stuart Fuchs Stuart Fuchs, President
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