**Exhibit10.1**

 

**EMPLOYMENTAGREEMENT**

 

 

ThisEMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of October 1,2003, by and between Medicor Ltd., a Delaware corporation (the “Company”), andJim J. McGhan (“Executive”).

 

A.                                   TheCompany is engaged in the business of creation, production and distribution ofmedical devices and desires to retain an individual for the position of ChiefOperating Officer.

 

B.                                     Executiverepresents that he is well qualified to perform the duties of Chief OperatingOfficer, and will devote the necessary time, effort and energy to perform thoseduties.

 

C.                                     Basedon these representations, the Company desires to hire Executive as its ChiefOperating Officer.

 

NOW,THEREFORE, in consideration of the above recitals and the respective agreementsof Company and Executive set forth below, the Company and Executive, intendingto be legally bound, agree as follows:

 

**1.****                                      Employment.**  The Company shall employ Executive as itsChief Operating Officer, and Executive shall accept such employment and performthe services herein described for Company, upon the terms and conditions setforth in this Agreement.  The Executiveshall continue as a Member of the Board of Directors of the Company, a positionhe was appointed to on February 12, 2003 for an initial term of two (2) years.

 

**2.****                                      Termof Employment.**  Unlessterminated at an earlier date in accordance with Section 5 below, the termof Executive’s employment with Company (“Term of Employment”) shall commence onthe date first set forth above and shall continue for a period initially endingon October 31, 2005 (“Initial Term”). The Term of Employment shall automatically be renewed at the end of the12th month prior to the end of the Initial Term for an additional12-month period and shall be extended at the end of each succeeding month by anadditional month such that the Term of Employment shall extend each month untilthe end of succeeding 12th month (each such rolling 12-month period,a “Subsequent Term”) unless either party provides written notice of theirintention not to renew this Agreement to the other in advance of thenapplicable termination date of the Term of Employment.

 

**3.****                                      Positionsand Duties.**

 

a.                                       Employmentwith Company.  Executive shallperform for the Company the duties and responsibilities of a chief operatingofficer of a corporation and such other duties and responsibilities as theCompany shall reasonably assign to Executive from time to time generallyconsistent with Executive’s position as Chief Operating Officer, as determinedin the sole discretion of the Company. Executive shall report to the Chairman. In addition, Executive shall be appointed and serve as a member of theCompany’s Executive Committee which shall contain four or fewer members ofsenior management.

 

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b.                                      Placeof Employment.  Executive’sprincipal place of employment shall be at the Company’s Principal ExecutiveOffices; provided however, that (i) for an initial period, not to exceed 12months (the “Transition Period”), the Company will establish an office on amonth-to-month basis in or reasonably near Santa Barbara, CA from whichExecutive may work a material portion of time, it being understood thatExecutive will be required to be present at all necessary and appropriate timesat the Company’s Principal Executive Offices and (ii) Executive will beexpected to engage in travel within and outside the State of Nevada as Companymay reasonably request of Executive.

 

**4.****                                      Compensation**.

 

a.                                       Salary.  The Company shall pay Executive ascompensation for his services a base salary at the annualized rate of$360,000.  Such salary shall be subjectto applicable tax withholding and shall be paid periodically in accordance withthe Company’s normal payroll practices. Such annual compensation shall be reviewed annually for increase (butnot decrease) in the discretion of the Board. In conducting any such annual review, the Board shall take into accountany increase in Executive’s responsibilities, increases in the compensation ofother executives of the Company or any Affiliate (or any competitor(s) ofeither or both), the performance of Executive and/or other pertinentfactors.  The annual compensationspecified in this Section 4.a, together with any increases in such annual compensationthat the Company may grant from time to time, is referred to in this Agreementas “Base Compensation.”

 

b.                                      Bonuses.  The Company may pay to Executive periodic orannual discretionary bonuses for any period ending prior to the end of the Termof Employment in an amount that will be determined by the CompensationCommittee based on such factors as Executive’s performance and the performanceof the Company.

 

c.                                       ExecutiveBenefits.  While Executive isemployed by the Company hereunder, Executive shall be entitled to participatein all employee benefit, pension and welfare plans and programs of Company forexecutive employees, including any group medical, dental, life insurance anddisability insurance plans, or similar benefit plans of the Company, to theextent that Executive meets the eligibility requirements for each individualplan or program.  Participation in anysuch benefits and plans shall be consistent with Executive’s rate ofcompensation to the extent that compensation is a determinative factor withrespect to participation and/or coverage under any such benefit or plan.  The Company provides no assurance as to theadoption or continuance of any particular employee benefit plan or program, andExecutive’s participation in any such plan or program shall be subject to theprovisions, rules and regulations applicable thereto.

 

d.                                      Stock Options.  The Company will, within thirty (30) days ofExecutive’s signature on this Agreement, grant to Executive an option topurchase 120,000 shares of the Company’s common stock (the “Option”) at the exerciseprice equal to the fair market value of the Company’s common stock on the dateof grant, in accordance with and subject to the Company’s 2003 Amended andRestated Stock Compensation Program. Subject to the terms of the Option (including partial acceleration inthe event of a termination of this Agreement by the Company without Cause or bythe Executive for Good Reason), the Option granted pursuant to this Agreementwill vest with respect to 25% of the shares of common stock purchasable

 

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thereunder oneach of the first through fourth anniversaries of the date of grant, providedExecutive remains employed by the Company on each such date.  Unless specifically provided in thisAgreement, vesting and exercise provisions and all other terms and conditionsgoverning the Options shall be as set forth in the plan documents and suchoption agreements as may be entered into with Executive.

 

e.                                       SalaryContinuation.  Executive shall beentitled to receive his Base Compensation for all periods during which he isunable to perform his duties hereunder by reason of a mental or physicalincapacity, whether resulting from illness, accident or otherwise, prior tobeing determined to be suffering from a Disability.

 

f.                                         Expenses.  While Executive is employed by the Companyhereunder, Company shall reimburse Executive for all reasonable out-of-pocketbusiness, travel and entertainment expenses incurred by Executive in theperformance of Executive’s duties and responsibilities hereunder, subject tothe Company’s normal policies and procedures for expense verification anddocumentation as in effect from time to time. The Company shall pay the actual and reasonable moving expenses ofExecutive’s move to the location of the principal executive offices of theCompany.

 

g.                                      PaidLeave.  Executive shall be entitledto paid leave in accordance with Company’s practices and policies for executiveemployees.

 

h.                                      TransitionHousing Assistance.  During theTransition Period, the Company shall provide Executive reasonable housingaccommodation in Las Vegas, Nevada for use during Executive’s performance ofhis Company duties in Las Vegas.

 

**5.****                                      Terminationof Employment.**

 

a.                                       VoluntaryTermination; Termination for Cause. The Company may terminate Executive’s employment at any time for Causeand Executive may terminate his employment for any reason.  If Executive’s employment terminates byreason of Executive’s voluntary resignation without Good Reason, or ifExecutive is terminated for Cause (each as defined herein), Executive shall beentitled to:

 

(1)                                  BaseCompensation at the rate in effect at the time of his termination through theeffective date of termination of employment;

 

(2)                                  anybonus awarded but not yet paid;

 

(3)                                  anydeferred bonus, including interest or other credits on the deferred amounts;

 

(4)                                  reimbursementfor expenses incurred, but not paid prior to such termination of employment;

 

(5)                                  suchrights to other compensation and benefits as may be provided in applicableplans and programs of the Company, including, without limitation, applicable

 

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employee benefit plans andprograms, according to the terms and conditions of such plans and programs; and

 

(6)                                  anyequity compensation that is vested as of the effective date of termination ofemployment.

 

No terminationfor Cause shall be effective unless Executive is given at least thirty (30)days prior written notice authorized by a vote of at least a majority of themembers of the Executive Committee of the Board that the Company intends toterminate his employment for Cause except under the provisions of Section11(c)(i) or (iv).  Such written noticeshall specify the particular act or acts, or failure to act, which is or arethe basis for the decision to so terminate Executive’s employment forCause.  Executive shall be given theopportunity within fifteen (15) days of the receipt of such notice to meet withthe Board to defend such act or acts, or failure to act, and if, thereafter,the Board, by majority vote, continues to maintain that Cause for terminationexists, Executive shall be given fifteen (15) days after such determination tocorrect such act or failure to act (if such act or failure to act is reasonablysusceptible of correction or cure within such time).  Upon failure of Executive, within fifteen (15) days, to correctsuch act or failure to act, Executive’s employment by the Company shall beterminated under this subsection for Cause.

 

Anythingherein to the contrary notwithstanding, if, following a termination ofExecutive’s employment for Cause due to any conviction of Executive for anycrime, such conviction is overturned on appeal, Executive shall be entitled tothe payments and the economic equivalent of the benefits he would have receivedif his employment had been terminated without Cause.

 

b.                                      TerminationWithout Cause or for Good Reason. The Company may terminate Executive’s employment at any time withoutCause upon sixty (60) days advance written notice to Executive, and Executivemay terminate his employment for Good Reason. If the Company terminates Executive’s employment without Cause, otherthan due to Disability, or Executive terminates his employment for Good Reason,then, subject to Executive’s continuing obligations under Section 7, Executiveshall thereupon be entitled to:

 

(1)                                  alump sum payment equal to the Base Compensation for the remainder of the Termof Employment (subject to applicable tax withholdings), unless such terminationis within 24 months of a Change in Control, in which event such lump sum shallbe equal to Base Compensation for 24 months;

 

(2)                                  anybonus awarded but not yet paid;

 

(3)                                  anydeferred bonus, including interest or other credits on the deferred amounts;

 

(4)                                  aPro Rata Bonus for the fiscal year in which termination of employment occurs;

 

(5)                                  reimbursementfor expenses incurred, but not paid prior to such termination of employment;

 

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(6)                                  continuationof the health and welfare benefits of Executive, including, without limitation,any group health insurance and long-term disability insurance generallyprovided to senior executives of the Company other than life insurance oraccidental death and dismemberment insurance, at the level in effect at thetime of his termination of employment through the end of the twelfth (12th)month following such termination of employment or the economic equivalentthereof; and

 

(7)                                  anyequity compensation that is vested as of the effective date of termination ofemployment or would otherwise vest within 24 months of the effective date oftermination of employment, which shall be deemed to have vested immediatelyprior to the effective date of termination of employment.

 

Any paymentsto which Executive shall be entitled under this Subsection 5.b, including anyeconomic equivalent of any benefit, shall be made as promptly as possiblefollowing the termination of Executive’s employment hereunder and in no eventlater than thirty (30) days following such termination of employment.

 

c.                                       Deathor Disability.  In the event ofExecutive’s death or a termination of Executive’s employment due to Executive’sDisability, Executive or his legal representative, as the case may be, shall beentitled to:

 

(1)                                  BaseCompensation at the rate in effect at the time of his termination, through (x)in the case of death, for a period of three (3) months following termination,and (y) in the case of Disability, for the period, if any, between the date ofhis termination and the date by which the Company’s long-term disability planhave commenced paying its benefits;

 

(2)                                  anybonus awarded but not yet paid;

 

(3)                                  aPro Rata Bonus for the fiscal year in which death or disability occurs;

 

(4)                                  anydeferred bonuses including interest or other credits on the deferred amounts;

 

(5)                                  reimbursementfor expenses incurred but not paid prior to such termination of employment;

 

(6)                                  inthe case of death, Executive’s rights to other compensation and benefits as maybe provided in applicable plans and programs of the Company shall be determinedaccording to the terms and provisions of such plans and programs;

 

(7)                                  inthe case of Disability, the Company shall continue Executive’s health andwelfare benefits at the level in effect on the date of termination at leastthrough the end of the sixth month following the termination of Executive’semployment or provide the economic equivalent thereof, and Executive’s rightsto other compensation and benefits as may be provided in applicable plans andprograms of the Company shall be determined according to the terms andprovisions of such plans and programs; and

 

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(8)                                  anyequity compensation that is vested as of the effective date of termination ofemployment.

 

d.                                      NoMitigation; No Offset.  In the eventof any termination of employment under this Section 5, Executive shall be underno obligation to seek other employment and there shall be no offset againstamounts due Executive under this Agreement on account of any remunerationattributable to any subsequent employment that Executive may obtain.  Any amounts due under this Section 5 are inthe nature of severance payments, or liquidated damages, or both, and are notin the nature of a penalty.

 

**6.****                                      Dutyof Loyalty**. As an employee of Company, Executive will devote his bestefforts to the interests of the Company. Executive agrees to devote all of his working time and attention to hisduties hereunder, except for such reasonable amounts of time for personal,charitable, investment and professional activities that do not interfere withthe service to be rendered by Executive hereunder.  During Executive’s employment with the Company, Executive willnot, except with the written consent of the Board, engage in any activity,investment, interest or association (1) which is hostile or adverse to orcompetitive with the Company, or (2) which so occupies Executive’s attention asto interfere with the proper and efficient performance of his duties at theCompany, or (3) which interferes with the independent exercise of Executive’sjudgment in the Company’s best interests.

 

**7.****                                      ConfidentialInformation.**  Executive shallmaintain the confidentiality of all confidential and proprietary information ofthe Company, and shall execute and deliver to the Company its standardProprietary Information and Invention Agreement in the form attached hereto asSchedule I (the “Confidentiality Agreement”). Such obligations shall survive any termination of Executive’s employmentrelationship or of this Agreement.

 

**8.****                                      Third-PartyTrade Secrets.**  Executive willnot, during his employment with Company, improperly use or disclose anyproprietary information or trade secrets of any third party, including theCompany’s customers and suppliers, or of any of Executive’s former orconcurrent employers or companies, if any. Executive shall not bring to the premises of the Company any unpublisheddocuments or any property belonging to such third parties, unless consented toin writing by such third party.  Executive’semployment with the Company does not and will not breach any agreement or dutywhich Executive has concerning confidential information belonging toothers.  If Executive is asked to workon any project for the Company which raises a concern regarding third-partyconfidential information, Executive will, as soon as this is apparent toExecutive, discuss the situation with the Chief Executive Officer of Companywithout disclosing any confidences.

 

**9.****                                      Returnof Property.**  Upon terminationof Executive’s employment with the Company, Executive shall deliver promptly to the Company all of thefollowing things which are in Executive’s custody or control:  (1) all records, files, manuals, books,forms, documents, letters, memoranda, data, customer lists, tables,photographs, video tapes, audio tapes, computer disks and other computerstorage media and copies thereof, whether or not containing confidential orproprietary information, that are the property of the Company or that relate inany way to the business, products, services, personnel, customers, prospectivecustomers, suppliers, practices, or techniques of the Company; and (2) allother property of the Company, including

 

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but notlimited to computers, personal digital assistants, cellular telephones, pagers,credit cards, and keys.

 

**10.****                               ProhibitedPost-Termination Activities.**

 

a.                                       NoSolicitation.  For a period of oneyear following the termination of Executive’s employment, Executive will notinduce any employee of, or consultant to, the Company to engage in any businessin which the Company is engaged or contemplates engaging, or solicit anyemployee to leave the employment of the Company.

 

b.                                      Noncompetition.  For a period of one year following the terminationof Executive’s employment with the Company, Executive will not acceptemployment with, engage in or render advice or assistance to any businesswithin any market in which the Company conducts business or effects sales whichcompetes with or contemplates competition with the Company in any capacity inwhich the employment or rendering of advice, assistance or other services tosuch business by Executive would be substantially similar to the servicesprovided by Executive to the Company during the term of Executive’s employmentwith Company or would result in a competitive advantage to such subsequentemployer.

 

**11.****                               Definitions.**  As used herein, the following terms shallhave the respective meanings set forth below.

 

a.                                       “Affiliate”shall mean any person or entity controlling, controlled by or under commoncontrol with the Company.

 

b.                                      “Board”shall mean the board of directors of the Company.

 

c.                                       “Cause”shall mean (i) Executive is convicted of a felony involving moral turpitude,(ii) Executive, in carrying out his duties under this Agreement, is guilty of awillful act by Executive which constitutes gross misconduct and which ismaterially and demonstrably injurious to the Company, (iii) Executive, incarrying out his duties under this Agreement, is guilty of a willful violationof a written Company policy generally applicable to all employees, theviolation of which is stated in such policy to be grounds for termination, (iv)an act of fraud against, or the misappropriation of property belonging to, theCompany or its Affiliates resulting in material economic harm to the Company,(v) except as otherwise specified in this clause c, the breach in any materialrespect of this Agreement or any confidentiality or proprietary informationagreement between Executive and the Company or its Affiliates, or (vi) thecommission of a willful act which induces any customer of the Company to breaka contract with the Company resulting in material economic harm to the Company.

 

d.                                      A“Change in Control” shall be deemed to have occurred if:

 

(1)  an event occurs of a naturethat would be required to be reported in response to Item 14 of Schedule 14A ofRegulation 14A promulgated under Section 14 of the Securities Exchange Act of1934 (the “1934 Act”);

 

(2)  any “person,” as such termis used in Sections 13(d) and 14(d)(2) of the 1934 Act, other than Donald K.McGhan or entities related to, controlled by,

 

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or owned byDonald K. McGhan or his immediate family (collectively, the “McGhan Entities”)(or with respect to Affiliates, the Company), becomes a “beneficial owner,” assuch term is used in Rule 13d-3 promulgated under the 1934 Act, at any timethat the Company or any Affiliate is a Private Company, of more than 51% of theVoting Stock of the Company or such Affiliate;

 

(3)  any “person,” as such termis used in Sections 13(d) and 14(d)(2) of the 1934 Act, other than the McGhanEntities (or with respect to Affiliates, the Company), becomes a “beneficialowner,” as such term is used in Rule 13d-3 promulgated under the 1934 Act,while the Company or any Affiliate is a Public Company, of 20% or more of theVoting Stock of the Company or such Affiliate;

 

(4)  any “person” as such termis used in Sections 13(d) and 14(d)(2) of the 1934 Act, is the “beneficialowner,” as such term is used in Rule 13d-3 promulgated under the 1934 Act, of agreater percentage of the Voting Stock of the Company than the percentage ofsuch Voting Stock held, directly or indirectly, by the McGhan Entities;

 

(5)  a majority of the Boardconsists of individuals who are not members of the Incumbent Board;

 

(6)  all or substantially all ofthe business of the Company and its consolidated subsidiaries is disposed ofpursuant to a merger, consolidation, asset sale or other transaction in whichthe Company is not the surviving corporation or the Company (on a consolidatedbasis) is materially or completely liquidated or in which all or substantiallyall of the Company’s consolidated assets are sold; or

 

(7)  the Company or a subsidiarycombines with another company and, immediately after the combination, thestockholders of the Company immediately prior to the combination hold, directlyor indirectly, less than 51% of the Voting Stock of the resulting company (viewedon a consolidated basis).

 

Notwithstanding the foregoing,a transaction or event shall not constitute a Change in Control if suchtransaction or event results from a transaction that is approved in advanceunanimously by the Executive Committee.

 

e.                                       “Disability”shall mean Executive’s inability to render, for a period of three consecutivemonths, full and effective services hereunder by reason of permanent mental orphysical disability, whether resulting from illness, accident or otherwise;provided, however, that in no event will Executive be considered disabled forthe purposes of this Agreement unless he is deemed disabled pursuant to theCompany’s long-term disability plan.

 

f.                                         “GoodReason” shall mean and exist if, without Executive’s prior written consent, oneor more of the following events occurs:

 

(1)                                  Executiveis not appointed to or is otherwise removed from any office or positionprovided for in Section 1 or Section 3.a above, for any reason other than thetermination of his employment or transfer to a substantially equivalent orsuperior office or

 

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position within the Company(such determination to be made on the overall responsibilities of Executivewithin the Company);

 

(2)                                  Executiveis assigned duties or responsibilities that are, when taken as a whole,inconsistent, in any significant respect, with the scope of duties andresponsibilities associated with Executive’s office or position as described inSection 1 or Section 3.a above;

 

(3)                                  Executivesuffers a material reduction, when taken as a whole, in the authorities, dutiesor responsibilities associated with his office or position as described inSection 1 or Section 3.a above, on the basis of which he makes a determinationin good faith that he can no longer carry out such office or position in themanner contemplated at the time this Agreement was entered into;

 

(4)                                  Executive’sBase Compensation is decreased by the Company, or his benefits or opportunitiesunder any employee benefit or incentive plan or program of the Company is orare materially reduced, with the result that Executive’s overall benefitspackage is materially reduced;

 

(5)                                  Thereoccurs a Change in Control;

 

(6)                                  Exceptas provided in Section 3.b above, Executive’s work location is relocated to alocation other than the Principal Executive Offices;

 

(7)                                  theCompany fails to pay Executive any deferred payments under any bonus orincentive plans which are due to him at that time;

 

(8)                                  theCompany fails to reimburse Executive within a reasonable time for businessexpenses in accordance with this Agreement or the Company’s policies,procedures or practices;

 

(9)                                  ifand to the extent applicable, the Company fails to agree to or actuallyindemnify Executive for his actions and/or inactions, as either a director orexecutive officer of the Company, to the fullest extent permitted by Delawarelaw, and/or the Company fails to maintain satisfactory levels of directors andofficers liability insurance coverage for Executive when such insurance isavailable;

 

(10)                            theCompany fails to obtain a written agreement reasonably satisfactory toExecutive from any successor or assign of the Company to assume and performthis Agreement; or

 

(11)                            theCompany purports to terminate Executive’s employment for Cause and suchpurported termination of employment is not effected in accordance with theprocedures required by this Agreement, and for purposes of this Agreement, suchpurported termination of employment shall be invalid and of no force and effect.

 

g.                                      “IncumbentBoard” shall mean the members of the Board on the date of this Agreement for aslong as each serves on the Board, provided that any person becoming a directorsubsequent to the date of this Agreement whose election or nomination for electionwas

 

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approvedunanimously by the directors then comprising the full membership of theIncumbent Board shall, for purposes of this Agreement, be considered to be amember of the Incumbent Board for as long as such director serves the Board.

 

h.                                      “PrincipalExecutive Offices” of the Company shall mean for purposes of this Agreementonly the offices of the Company where the principal executive functions areperformed, (i) currently located in Clark County, Nevada, (ii) in the future atsuch location as is determined by the Company’s Executive Committee, and (iii)in the future if not so determined, as elected by Executive.

 

i.                                          “PrivateCompany” shall mean an entity that has no class of its Voting Stock registeredpursuant to Section 12(b), 12(g) or 15(d) of the 1934 Act.

 

j.                                          “ProRata Bonus” shall mean an amount equal to the annual bonus otherwise payablewith respect to the year in question, calculated as if Executive had beenemployed by the Company for the full year, multiplied by a fraction, thenumerator of which is the number of days in such year during which Executive isactually employed by the Company and the denominator of which is 365.

 

k.                                       “PublicCompany” shall mean an entity that has one or more classes of its Voting Stockregistered pursuant to Section 12(b), 12(g) or 15(d) of the 1934 Act.

 

l.                                          “VotingStock” shall mean capital stock (or similar security) of any class or classeshaving general voting power under ordinary circumstances, in the absence ofcontingencies, to elect the directors of a corporation or similar managers ofanother entity.

 

**12.****                               Miscellaneous.**

 

a.                                       Amendments.  No amendment or modification of thisAgreement shall be deemed effective unless made in writing and signed by the partieshereto.

 

b.                                      NoWaiver.  No term or condition ofthis Agreement shall be deemed to have been waived, except by a statement inwriting signed by the party against whom enforcement of the waiver issought.  Any written waiver shall not bedeemed a continuing waiver unless specifically stated, shall operate only as tothe specific term or condition waived and shall not constitute a waiver of suchterm or condition for the future or as to any act other than that specificallywaived.

 

c.                                       Counterparts.  This Agreement may be executed in any numberof counterparts, and such counterparts executed and delivered, each as anoriginal, shall constitute but one and the same instrument.

 

d.                                      Severability.  To the extent that any portion of anyprovision of this Agreement shall be invalid or unenforceable, it shall beconsidered deleted herefrom and the remainder of such provision and of thisAgreement shall be unaffected and shall continue in full force and effect.

 

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e.                                       Captionsand Headings.  The captions andparagraph headings used in this Agreement are for convenience of reference onlyand shall not affect the construction or interpretation of this Agreement orany of the provisions hereof.

 

f.                                         Notices.  All notices, requests, demands and othercommunications required or permitted to be given hereunder shall be in writingand shall be deemed to have been duly given (i) upon receipt, if deliveredpersonally or via courier, (ii) upon confirmation of receipt, if given byelectronic facsimile provided that another copy is sent by another meanspermitted by this subsection within two (2) business days thereafter, and (iii)on the third business day following mailing, if mailed first-class, postageprepaid, registered or certified mail from the continental United States asfollows:

 
|   | If to  Company to:   |
|--------|----------------------|
|   |                 |
|   |                 |
|   |                 | MediCor Ltd. |
|   |                 | 4560 S.  Decatur Blvd., Ste. 300 |
|   |                 | Las Vegas,  Nevada 89103 |
|   |                 | (702)  932-4563 |
|   |                 | Attn:  Chairman |
|   |                 |
|   |                 |
|   | If to  Executive to: |
|   |                 | Jim J.  McGhan |
|   |                 | 4560 S.  Decatur Blvd., Ste. 300 |
|   |                 | Las Vegas,  NV 89103 |
|   |                 | (702)  932-4574 |

 

Any party may by notice givenin accordance with this subsection to the other party to designate anotheraddress or person for receipt of notices hereunder.

 

g.                                      Attorneys’Fees.  If any legal action or otherproceeding is brought for the enforcement of this Agreement, or because of analleged dispute, breach, default or misrepresentation in connection with any ofthe provisions of this Agreement, the successful or prevailing party shall be entitledto recover such reasonable attorneys’ fees and other costs incurred in thataction or proceeding, in addition to any other relief to which it may beentitled, as may be awarded by the court or arbitrator.

 

h.                                      GoverningLaw.  The parties agree that thisAgreement will be governed by the laws of the State of Delaware.

 

i.                                          Arbitration.  Any controversy or claim arising out of orrelating to this Agreement or the breach thereof (including the arbitrabilityof any controversy or claim), shall be settled by arbitration in accordancewith the laws of the State of Delaware by one arbitrator.  If the parties cannot agree on theappointment of an arbitrator, then the arbitrator shall be appointed by theAmerican Arbitration Association.  Thearbitration shall be conducted in Clark County, Nevada in accordance with therules of the American Arbitration Association, except with respect to theselection of an arbitrator which shall be as provided in this Section12.i.  The

 

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cost of anyarbitration proceeding hereunder shall be borne by the Company.  The award of the arbitrator shall be bindingupon the parties.  Judgment upon theaward rendered by the arbitrator may be entered in any court havingjurisdiction thereof.

 

If it shall benecessary or desirable for Executive to retain legal counsel and incur othercosts and expenses in connection with the enforcement of any or all of hisrights under this Agreement, and provided that Executive substantially prevailsin the enforcement of such rights, the Company shall pay (or Executive shall beentitled to recover from the Company, as the case may be) Executive’sreasonable attorneys’ fees and costs and expenses in connection with theenforcement of his rights including the enforcement of any arbitration award.

 

j.                                          Guaranty.  The Company shall cause each of its materialAffiliates to execute and deliver to Executive a Guaranty in the form ofSchedule II hereto.

 

k.                                       EntireAgreement.  This Agreement containsthe entire agreement of the parties relating to Executive’s employment with theCompany and supersedes all prior agreements and understandings with respect tosuch subject matter.

 

IN WITNESS WHEREOF, Executiveand the Company have executed this Agreement as of the date first set forthabove.

 
|   | “COMPANY”   |
|--------|-----------------------|
|   |                  |
|   | MEDICOR LTD.          |
|   |                  |
|   |                  |
|   | By:                   |   /s/ Donald K. McGhan |   |
|   |                  | Its:  Chairman |
|   |                  |   |
|   |                  |   |
|   | “EXECUTIVE” |
|   |                  |
|   |                  | /s/ Jim J.  McGhan |   |
|   | Jim J. McGhan         |
|        |                       |  |  |  |  |  |

 

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