EXECUTIVE EMPLOYMENT
AGREEMENT
This Executive Employment Agreement
("Agreement") is made effective as of August 31, 2009
(“Effective Date”), by and between AUXILIO, Inc., a
Nevada corporation (“Company”) and Joseph Flynn
("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.
2.1 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.
3.1 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 until December 31, 2011
(“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.
4.1 Base Salary
. As compensation for Executive’s performance of
Executive’s duties hereunder, Company shall pay to Executive
an initial Base Salary of $250,000 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.
DOCSOC/1250924v1/010036-0000
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.
DOCSOC/1250924v1/010036-0000
(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
