EXECUTIVE EMPLOYMENT AGREEMENT
This
Executive Employment Agreement ("Agreement") is made effective as of January
1,
2008 (“Effective Date”), by and between AUXILIO,
Inc., a Nevada corporation (“Company”) and Xxxxxxx Xxxxxxxxx
("Executive”).
The
parties agree as follows:
1. Employment. Company
hereby employs Executive, and Executive hereby accepts such employment, upon
the
terms and conditions set forth herein.
2. Duties.
2.1 Position. Executive
is employed as President and Chief Executive Officer and shall have the duties
and responsibilities assigned by the Company’s Board of Directors, as may be
reasonably assigned from time to time. Executive shall perform
faithfully and diligently all duties assigned to Executive. Company
reserves the right to modify Executive’s duties at any time in its sole and
absolute discretion.
2.2 Best
Efforts/Full-time. Executive will expend Executive’s best efforts
on behalf of Company and its subsidiaries, and will abide by all policies and
decisions made by Company, as well as all applicable federal, state and local
laws, regulations or ordinances. Executive will act in the best
interest of Company at all times. Executive shall devote Executive’s
full business time and efforts to the performance of Executive’s assigned duties
for Company, unless Executive notifies the Board of Directors in advance of
Executive’s intent to engage in other paid work and receives the Board of
Directors’ express written consent to do so.
3. Term.
3.1 Initial
Term. The employment relationship pursuant to this Agreement
shall be for an initial term commencing on the Effective Date set forth above
and continuing for a period of 2 (two) years following such date (“Initial
Term”), unless sooner terminated in accordance with paragraph 7
below.
3.2 Renewal. On
completion of the Initial Term specified in subparagraph 3.1 above, this
Agreement will automatically renew for subsequent 12
month terms unless either party
provides advance written notice to the other that such party does not wish
to
renew the Agreement for a subsequent 12 months. In
the event either party gives notice of nonrenewal pursuant to this
subparagraph 3.2, this Agreement will expire at the end of the current
term.
4. Compensation.
4.1 Base
Salary. As compensation for Executive’s performance of
Executive’s duties hereunder, Company shall pay to Executive an initial Base
Salary of $175,000 for the first year, payable in accordance with the normal
payroll practices of Company, less required deductions for state and federal
withholding tax, social security and all other employment taxes and payroll
deductions. In the event Executive’s employment under this Agreement
is terminated by either party, for any reason, Executive will be entitled to
receive Executive’s Base Salary prorated to the date of
termination. Such amount shall eligible for increase to $190,000
effective January 1, 2009 in accordance with the provisions set forth in Exhibit
A.
4.2 Incentive
Compensation. Executive will be eligible to earn incentive
compensation in accordance with the provisions set forth in Exhibit
A.
4.3 Equity
Compensation. From time to time, Executive will
be granted stock options to purchase shares of the Company’s Common Stock at an
exercise price equal to the fair market value of the stock on the date of
grant.
5. Customary
Fringe Benefits. Executive will be eligible for all customary and
usual fringe benefits generally available to executives of Company subject
to
the terms and conditions of Company’s benefit plan documents. Company
reserves the right to change or eliminate the fringe benefits on a prospective
basis, at any time, effective upon notice to Executive.
6. Business
Expenses. Executive will be reimbursed for all reasonable,
out-of-pocket business expenses incurred in the performance of Executive’s
duties on behalf of Company. To obtain reimbursement, expenses must
be submitted promptly with appropriate supporting documentation in accordance
with Company’s policies.
7. Termination
of Executive’s Employment.
7.1 Termination
for Cause by Company. Although Company anticipates a mutually
rewarding employment relationship with Executive, Company may terminate
Executive’s employment immediately at any time for Cause. For
purposes of this Agreement, “Cause” is defined as: (a) acts or omissions
constituting gross negligence, recklessness or willful misconduct on the part
of
Executive with respect to Executive’s obligations or otherwise relating to the
business of Company; (b) Executive’s material breach of this Agreement; and
(c) Executive’s conviction or entry of a plea of nolo contendere for fraud,
misappropriation or embezzlement, or any felony or crime of moral
turpitude. In the event Executive’s employment is terminated in
accordance with this subparagraph 7.1, Executive shall be entitled to receive
Executive’s Base Salary prorated to the date of termination. All
other Company obligations to Executive pursuant to this Agreement will become
automatically terminated and completely extinguished. Executive will
not be entitled to receive the Severance Payment described in subparagraph
7.3
below.
7.2 Termination
Without Cause by Company/Severance; Change of Control.
(a) Company
may terminate Executive’s employment under this Agreement without Cause at any
time on thirty (30) days’ advance written notice to
Executive. In the event of (i) such termination without Cause, or
(ii) Executive’s inability to perform the essential functions of Executive’s
position due to a mental or physical disability or Executive's death, or (iii)
in the event of the termination of Executive without Cause following a “Change
of Control” (as defined in Section 7.2(b) below), Executive will receive the
Base Salary then in effect, prorated to the date of termination, and a
“Severance Payment” equivalent to (a) payment of compensation for an
additional six months, payable in accordance with Company’s regular payroll
cycle or lump sum, and (b) an additional provision of accelerating all unvested
stock options and warrants provided that
Executive: (i) complies with all
surviving provisions of this Agreement as specified in subparagraph 13.8 below;
and (ii) executes a full general release, releasing all claims, known or
unknown, that Executive may have against Company arising out of or any way
related to Executive’s employment or termination of employment with
Company. Notwithstanding the foregoing, in the event the Company’s
securities are publicly traded on the date of Executive’s termination of
employment, any portion of the aggregate salary continuation payments described
in clause (ii)(a) of this Section 7.2, which, if paid, would exceed the Section
409A Safe Harbor Limit (as defined in Section 7.2(c) below), such excess portion
shall be paid to Executive in a lump sum on the first day of the seventh
calendar month immediately following the date of Executive’s
termination.
(b) As
used herein, “Change of Control” means: (i) a sale of all or
substantially all of the assets of the Company; (ii) a merger or consolidation
in which the Company is not the surviving entity and in which the holders of
the
Company’s outstanding voting stock immediately prior to such transaction own,
immediately after such transaction, securities representing less than fifty
percent (50%) of the voting power of the entity surviving such transaction
or,
where the surviving entity is a wholly-owned subsidiary of another entity,
the
surviving entity’s parent; or (iii) a reverse merger in which the Company is the
surviving entity but the shares of common stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities of the surviving entity’s parent, cash or
otherwise, and in which the holders of the Company’s outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) of the voting power of
the
Company or, where the Company is a wholly-owned subsidiary of another
entity.
(c) As
used herein, “Section 409A Safe Harbor Limit” means an amount equal to two (2)
times the lesser of (i) Executive’s annual rate of compensation for the taxable
year immediately preceding the taxable year in which Executive’s employment is
terminated by the Company or (ii) the dollar amount in effect under Section
401(a)(17) of the Internal Revenue Code of 1986, as amended, for the taxable
year in which Executive’s employment is terminated.
(d) In
the event that the benefits provided to you under this Agreement, and any other
agreements, plans or arrangements to which you may be a party with the Company,
cause you to incur an excise tax under Section 4999 of the Internal Revenue
Code
of 1986 (the “Code”) or any corresponding provisions of applicable state tax law
in connection with a Change of Control, then the Company will pay you an
additional amount sufficient to reimburse you for (i) the excise tax imposed
on
such benefits, and (ii) the federal and state income, employment and excise
taxes, determined on a fully “grossed-up” basis, imposed on the benefits
payments provided. The Company shall be entitled to withhold from the
payment required hereunder such taxes as it may be required to withhold under
applicable tax law, and any such withheld taxes shall be treated as paid to
you
hereunder.
7.3 Voluntary
Resignation by Executive for Good Reason/Severance. Executive may
voluntarily resign Executive’s position with Company for Good Reason, at any
time on thirty (30) days’ advance written
notice. In the event of Executive’s resignation for Good Reason,
Executive will be entitled to receive the Base Salary then in effect, prorated
to the date of termination, and the Severance described in subparagraph 7.2.
above, provided Executive complies with all of the conditions in subparagraph
7.2. above. All other Company obligations to Executive pursuant to
this Agreement will become automatically terminated and completely
extinguished. Executive will be deemed to have resigned for Good
Reason in the following circumstances: (a) Company’s
material breach of this Agreement; (b) Executive’s Base Salary is
reduced by more than 10% below Executive’s salary in
effect at any time during the preceding twelve months, unless the reduction
is
made as part of, and is generally consistent with, a general reduction of senior
executive salaries; (c) Executive’s position and/or duties are modified so that
Executive’s duties are no longer consistent with the position of a Chief
Executive Officer, or Executive no longer reports to the Board of Directors;
and
(d) Company relocates Executive’s principal place of work to a
location more than sixty (60) miles from the location specified in subparagraph
2.3, without Executive’s prior written approval. Notwithstanding the
foregoing, in the event the Company’s securities are publicly traded on the date
of Executive’s termination of employment, any portion of the aggregate salary
continuation payments described in clause (ii)(a) of Section 7.2 above, which,
if paid, would exceed the Section 409A Safe Harbor Limit (as defined in Section
7.2(c) above), such excess portion shall be paid to Executive in a lump sum
on
the first day of the seventh calendar month immediately following the date
of
Executive’s termination.
7.4 Voluntary
Resignation by Executive Without Good Reason. Executive may
voluntarily resign Executive’s position with Company without Good Reason, at any
time after the Initial Term, on thirty (30) days’ advance
written notice. In the event of Executive’s resignation without Good
Reason, Executive will be entitled to receive only the Base Salary for the
thirty-day notice period and no other amount for the remaining months of the
current term, if any. All other Company obligations to Executive
pursuant to this Agreement will become automatically terminated and completely
extinguished. In addition, executive will not be entitled to receive
the Severance Payment described in subparagraph 7.2 above.
7.5 Termination
of Employment Upon Nonrenewal. In the event either party decides
not to renew this Agreement for a subsequent 12 months in accordance with
subparagraph 3.2 above, the Agreement will expire, Executive’s employment with
Company will terminate and Executive will only be entitled to Executive’s Base
Salary paid through the last day of the current term. All other Company
obligations to Executive pursuant to this Agreement will become automatically
terminated and completely extinguished. Executive will not be
entitled to the Severance Payment described in subparagraph 7.3
above.
8. No
Conflict of Interest. During the term of Executive’s employment
with Company and during any period Executive is receiving payments from Company,
Executive must not engage in any work, paid or unpaid, that creates an actual
or
potential conflict of interest with Company. Such work shall include,
but is not limited to, directly or indirectly competing with Company in any
way,
or acting as an officer, director, employee, consultant, stockholder, volunteer,
lender, or agent of any business enterprise of the same nature as, or which
is
in direct competition with, the business in which Company is now engaged or
in
which Company becomes engaged during the term of Executive’s employment with
Company, as may be determined by the Board of Directors in its sole
discretion. If the Board of Directors believes such a conflict exists
during the term of this Agreement, the Board of Directors may ask Executive
to
choose to discontinue the other work or resign employment with
Company. If the Board of Directors believes such a conflict exists
during any period in which Executive is receiving payments pursuant to this
Agreement, the Board of Directors may ask Executive to choose to discontinue
the
other work or forfeit the remaining severance payments. In addition,
Executive agrees not to refer any client or potential client of Company to
competitors of Company, without obtaining Company’s prior written consent,
during the term of Executive’s employment and during any period in which
Executive is receiving payments from Company pursuant to this
Agreement.
9. Confidentiality
and Proprietary Rights. Executive agrees to read, sign and abide
by Company’s Employee Innovations and Proprietary Rights Assignment Agreement,
which is provided with this Agreement and incorporated herein by
reference.
10. Non-Solicitation.
10.1 Nonsolicitation
of Customers or Prospects. Executive acknowledges that
information about Company’s customers is confidential and constitutes trade
secrets. Accordingly, Executive agrees that during the term of this
Agreement and for a period of one (1) year after the termination of this
Agreement, Executive will not, either directly or indirectly, separately or
in
association with others, interfere with, impair, disrupt or damage Company’s
relationship with any of its customers or customer prospects by soliciting
or
encouraging others to solicit any of them for the purpose of diverting or taking
away business from Company.
10.2 Nonsolicitation
of Company’s Employees. Executive agrees that during the term of
this Agreement and for a period of one (1) year after the termination of this
Agreement, Executive will not, either directly or indirectly, separately or
in
association with others, interfere with, impair, disrupt or damage Company’s
business by soliciting, encouraging or attempting to hire any of Company’s
employees or causing others to solicit or encourage any of Company’s employees
to discontinue their employment with Company.
11. Injunctive
Relief. Executive acknowledges that Executive’s breach of the
covenants contained in paragraphs 8-10 (collectively “Covenants”) would cause
irreparable injury to Company and agrees that in the event of any such breach,
Company shall be entitled to seek temporary, preliminary and permanent
injunctive relief without the necessity of proving actual damages or posting
any
bond or other security.
12. Agreement
to Arbitrate. To the fullest extent permitted by law, Executive
and Company agree to arbitrate any controversy, claim or dispute between them
arising out of or in any way related to this Agreement, the employment
relationship between Company and Executive and any disputes upon termination
of
employment, including but not limited to breach of contract, tort,
discrimination, harassment, wrongful termination, demotion, discipline, failure
to accommodate, family and medical leave, compensation or benefits claims,
constitutional claims; and any claims for violation of any local, state or
federal law, statute, regulation or ordinance or common law. Claims
for workers’ compensation, unemployment insurance benefits and Company’s right
to obtain injunctive relief pursuant to paragraph 11 above are
excluded. For the purpose of this agreement to arbitrate, references
to “Company” include all parent, subsidiary or related entities and their
employees, supervisors, officers, directors, agents, pension or benefit plans,
pension or benefit plan sponsors, fiduciaries, administrators, affiliates and
all successors and assigns of any of them, and this agreement shall apply to
them to the extent Executive’s claims arise out of or relate to their actions on
behalf of Company.
12.1 Consideration. The
mutual promise by Company and Executive to arbitrate any and all disputes
between them rather than litigate them before the courts or other bodies,
provides the consideration for this agreement to arbitrate.
12.2 Initiation
of Arbitration. Either party may exercise the right to arbitrate
by providing the other party with written notice of any and all claims forming
the basis of such right in sufficient detail to inform the other party of the
substance of such claims. In no event shall the request for
arbitration be made after the date when institution of legal or equitable
proceedings based on such claims would be barred by the applicable statute
of
limitations.
12.3 Arbitration
Procedure. The arbitration will be conducted in Irvine,
California by a single neutral arbitrator and in accordance
with the
then current rules for resolution of employment disputes of the American
Arbitration Association (“AAA”). The parties are entitled to
representation by an attorney or other representative of their
choosing. The arbitrator shall have the power to enter any award that
could be entered by a judge of the trial court of the State of California,
and
only such power, and shall follow the law. In the event the
arbitrator does not follow the law, the arbitrator will have exceeded the scope
of his or her authority and the parties may, at their option, file a motion
to
vacate the award in court. The parties agree to abide by and perform
any award rendered by the arbitrator. Judgment on the award may be
entered in any court having jurisdiction thereof.
12.4 Costs
of Arbitration. Each party shall bear one half the cost of the
arbitration filing and hearing fees, and the cost of the
arbitrator.
13. General
Provisions.
13.1 Successors
and Assigns. The rights and obligations of Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of Company. Executive shall not be entitled to assign any
of Executive’s rights or obligations under this Agreement.
13.2 Waiver. Either
party's failure to enforce any provision of this Agreement shall not in any
way
be construed as a waiver of any such provision, or prevent that party thereafter
from enforcing each and every other provision of this Agreement.
13.3 Attorneys’
Fees. Each side will bear its own attorneys’ fees in any dispute
unless a statutory section at issue, if any, authorizes the award of attorneys’
fees to the prevailing party.
13.4 Severability. In
the event any provision of this Agreement is found to be unenforceable by an
arbitrator or court of competent jurisdiction, such provision shall be deemed
modified to the extent necessary to allow enforceability of the provision as
so
limited, it being intended that the parties shall receive the benefit
contemplated herein to the fullest extent permitted by law. If a
deemed modification is not satisfactory in the judgment of such arbitrator
or
court, the unenforceable provision shall be deemed deleted, and the validity
and
enforceability of the remaining provisions shall not be affected
thereby.
13.5 Interpretation;
Construction. The headings set forth in this Agreement are for
convenience only and shall not be used in interpreting this
Agreement. This Agreement has been drafted by legal counsel
representing Company, but Executive has participated in the negotiation of
its
terms. Furthermore, Executive acknowledges that Executive has had an
opportunity to review and revise the Agreement and have it reviewed by legal
counsel, if desired, and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement.
13.6 Governing
Law. This Agreement will be governed by and construed in
accordance with the laws of the United States and the State of
California. Each party consents to the jurisdiction and venue of the
state or federal courts in Irvine, California, if applicable,
in any action, suit, or proceeding arising out of or relating to this
Agreement.
13.7 Notices. Any
notice required or permitted by this Agreement shall be in writing and shall
be
delivered as follows with notice deemed given as indicated: (a) by
personal delivery when delivered personally; (b) by overnight courier upon
written verification of receipt; (c ) by telecopy or facsimile transmission
upon
acknowledgment of receipt of electronic transmission; or (d) by certified or
registered mail, return receipt requested, upon verification of
receipt. Notice shall be sent to the addresses set forth below, or
such other address as either party may specify in writing.
13.8 Survival. Sections
8 (“No Conflict of Interest”), 9 (“Confidentiality and Proprietary Rights”), 10
(Nonsolicitation), 11 (“Injunctive Relief”), 12 (“Agreement to Arbitrate”), 13
(“General Provisions”) and 14 (“Entire Agreement”) of this Agreement shall
survive Executive’s employment by Company.
14. Entire
Agreement. This Agreement, including the Employee Innovations and
Proprietary Rights Assignment Agreement incorporated herein by reference and
Company’s stock option plan and
related option documents described in paragraph 4.3 of this Agreement,
constitutes the entire agreement between the parties relating to this subject
matter and supersedes all prior or simultaneous representations, discussions,
negotiations, and agreements, whether written or oral. This Agreement
may be amended or modified only with the written consent of Executive and the
Board of Directors of Company. No oral waiver, amendment or
modification will be effective under any circumstances whatsoever.
THE
PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND
EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED
THIS AGREEMENT ON THE DATES SHOWN BELOW.
Dated: ____________________________________________ ______________________________________________________
Xxxxxxx
Xxxxxxxxx
President
&
Chief
Executive Officer
Dated:____________________________________________
By:
_____________________________________________________
Xxxx
X.
Xxxx
Chairman
of
the Board of Directors
AUXILIO, Inc.
00000
Xxx
Xxxxx, Xxxxx 000
Xxxxxxx
Xxxxx,
XX 00000
DOCSOC/1250924v1/010036-0000
EXHIBIT
A
INCENTIVE
COMPENSATION PLAN
Incentive
Compensation:
The
Executive will be entitled to share in the Executive Bonus and Commission
Plans.
|
1.
|
The
Executive Bonus Plan will be based on 10% of EBITDA for 2008 and
2009. The bonus due, if any, will be paid on an annual basis in
March based on the relevant 10K filed with the SEC. The EBITDA
described in this Exhibit A is calculated as if the bonus to be paid
to
the Executives has not been paid and therefore the expense has not
been
accrued and counted as an expense on the Company’s income
statement.
|
|
2.
|
The
Executive Commission Plan will be based on 15% commission from net
cash
flow generated from equipment sales to customers. The commission
due, if
any, will be paid in the pay period following the payment of the
cash
amount due from the customer.
|
Base
Salary Adjustments:
The
Executive’s Base Salary will be adjusted in January 2009 to reflect an annual
Base Salary of $190,000.
DOCSOC/1250924v1/010036-0000
