Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Agreement”) is made and effective August 19,
2011,

 

BETWEEN:

 

Fred Perner (the “Executive”), an individual with his main address at: 205 Old
Stone Drive, Highlands Ranch, Colorado 80126.

 

 

 

AND:

 

Encision Inc. (the “Company”), an entity organized and existing under the laws
of Colorado, with its head office located at: 6797 Winchester Circle, Boulder,
CO 80301.

 

RECITALS

 

In consideration of the covenants and agreements herein contained and the moneys
to be paid hereunder, the Company hereby employs the Executive and the Executive
hereby agrees to perform services as an Executive of the Company, upon the
following terms and conditions:

 

1.              TERM

 

Commencing September 19, 2011, (the “Start Date”) the Company employs Executive
to serve as President and Chief Executive Officer and to serve in such
additional position or positions as the Company may determine in its sole
discretion. The term of employment shall be for a period of three (3) years
(“Employment Period”) to commence on the Start Date, unless earlier terminated
as set forth herein.

 

This Agreement shall continue in effect until the earliest of:

 

A.           The effective date of any subsequent employment agreement between
the Company and the Executive;

 

B.             The effective date of any termination of employment as provided
elsewhere herein; or

 

C.             Three years from the Start Date, provided, that this Employment
Agreement shall automatically renew for successive periods of one year each
unless either party gives written notice to the other that it does not wish to
automatically renew this Agreement, which written notice must be received by the
other party no less than ninety days prior to the expiration of the applicable
term.

 

2.              DUTIES AND RESPONSIBILITIES

 

Within the limitations established by the By-laws of the Company, the Executive
shall preside at all meetings of the shareholders and Board of Directors, shall
have general supervision of the affairs of the Company, and such other or
different duties on behalf of the Company, as may be assigned from time to time
by the Board of Directors.

 

3.              LOCATION

 

The initial principal location at which Executive shall perform services for the
Company shall initially be 6797 Winchester Circle, Boulder, CO 80301.  The
Company may move its offices to another location in the Denver-Boulder metro
area without being in violation of this Agreement.

 

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4.              ACCEPTANCE OF EMPLOYMENT

 

Executive accepts employment with the Company upon the terms set forth above and
agrees to devote all Executive’s time, energy and ability to the interests of
the Company, and to perform Executive’s duties in an efficient, trustworthy and
business-like manner.

 

5.              DEVOTION OF TIME TO EMPLOYMENT

 

The Executive shall devote the Executive’s best efforts and substantially all of
the Executive’s working time to performing the duties on behalf of the Company.
The Executive shall provide services during the normal business hours of the
Company as determined by the Company. Reasonable amounts of time may be allotted
to personal or outside business, charitable and professional activities and
shall not constitute a violation of this Agreement provided such activities do
not materially interfere with the services required to be rendered hereunder or
violate another provision of this Agreement.

 

6.              COMPENSATION

 

6.1.         Base Salary

 

Executive shall be paid a base salary (“Base Salary”) at the annual rate of
$205,000, payable in bi-weekly installments consistent with Company’s payroll
practices. In consideration of the services under this Agreement, Executive
shall be paid the aggregate of basic compensation, bonus and benefits as
hereinafter set forth.

 

6.2.         Payment

 

Payment of all compensation to Executive hereunder shall be made in accordance
with the relevant Company policies in effect from time to time, including normal
payroll practices.  However, severance payments are payable as provided below.

 

6.3.         Bonus

 

From time to time, the Company may pay to Executive a bonus.

 

Payment of any bonus compensation shall be at the sole discretion of the Board
of Directors or the compensation committee of the Board of Directors and the
Executive shall have no entitlement to such amount absent a decision by the
Company as aforesaid to make such bonus compensation.

 

Executive shall also be entitled to a bonus determined as follows:

 

a.                   An annual bonus pool for each year starting with the fiscal
year ending 3/31/12 and continuing through the Employment Period, will be
established in an amount that is equal to 10% of the increase in pre-tax GAAP
income in each fiscal year compared to the preceding fiscal year,

 

b.                  1/3 of the bonus pool (including the current year) will be
allocated to non-executive officers at the discretion of the CEO,

 

c.                   2/3 of the bonus pool (including the current year) will be
allocated to executive officers (presently defined to include 7 executive
officers, including the CEO) in ratio to their base pay.

 

Eligibility for participation in the bonus pool for a year includes a
requirement that the person must be employed during the 2 ½ months following the
end of such fiscal year.  A payment will not be made under the bonus pool if the
Executive has been terminated for Cause before the payment is

 

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received.  The bonus pool rules and interpretation will favor the Company, as
opposed to participants, and will be subject to interpretation and oversight by
the Board of Directors.  A bonus will not be paid under this bonus pool in
respect to any income resulting from a Corporate Transaction as defined in the
Company’s 2007 Stock Option Plan. The term “pre-tax GAAP income” means GAAP net
income before taxes and excluding extraordinary items as defined by GAAP. This
bonus will be paid by June 15 of the following fiscal year.  There are no third
party beneficiaries of this provision, and no non-executive officer or executive
officer has a claim to a bonus payment due to this provision nor is the consent
of any such person required to modify this bonus provision.

 

Acquisition bonus.  In the event that during the term of the Executive’s
employment the Company is acquired within 5 years of the Start Date, at a net
cash price of $10 per common share or more (net cash price means the net amount
received by the selling shareholders either in cash or in stock which is of a
class regularly traded on a U.S. exchange or U.S. trading system (including the
OTCBB), or a combination thereof), then Executive will receive an acquisition
bonus which is computed as the difference between the per share stock price of
the Company on the Start Date and the price paid in the acquisition,  multiplied
by 37,500. Per share stock price will be appropriately adjusted for stock
splits, stock dividends, and the like, and cash dividends paid between the date
of this Agreement and the date of closing of the acquisition will be counted
towards that $10 per share price.   The Company is considered “acquired” if a
Corporate Transaction, as defined in the Company’s 2007 Stock Option Plan,
occurs. If any of the acquisition price is payable by an earn out or other
contingent payment, then the Board shall in good faith determine the present
fair market value of that earn out or contingent payment at the time of closing
of the acquisition for purposes of determining whether a payment is owing
hereunder and the amount of the payment.  If any of the acquisition price is
payable in the form of stock which is of a class regularly traded on a U.S.
exchange or U.S. trading system, but either it is not readily tradable under the
securities laws or by contractual restriction, or if it is stock which is not as
a practical matter immediately saleable into a liquid market, then the Board
shall in good faith determine the present fair market value of that stock taking
into account that limitation on the ability to immediately trade that stock,  at
the time of closing of the acquisition for purposes of determining whether a
payment is owing hereunder and the amount of the payment The acquisition bonus
will be paid within thirty (30) days after closing of the acquisition.

 

6.4.         Benefits

 

The Company shall provide Executive with such benefits as are provided to other
senior management of the Company, except where the benefit provided to other
senior management would be of the same nature as a benefit already received by
Executive. Benefits shall include at a minimum (i) paid vacation of twenty days
per year of full employment, exclusive of legal holidays, as long as the
scheduling of Executive’s vacation does not interfere with the Company’s normal
business operations, (ii) medical and dental coverage, and life and disability
insurance plans under the same terms as offered to other executives of the
Company, (iii) retirement and profit sharing programs as offered to other
executives of the Company, (iv) paid holidays as per the Company’s policies, and
(v) such other benefits and perquisites as are approved by the Board of
Directors. The Company has the right to modify conditions of participation,
terminate any benefit, or change insurance plans and other providers of such
benefits in its sole discretion.

 

6.5.         Withholding

 

All sums payable to Executive under this Agreement will be reduced by all
federal, state, local, and other withholdings and similar taxes and payments
required by applicable law.

 

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7.              OTHER EMPLOYMENT BENEFITS

 

7.1.         Business Expenses

 

Upon submission of itemized expense statements in the manner specified by the
Company, Executive shall be entitled to reimbursement for reasonable travel and
other reasonable business expenses duly incurred by Executive in the performance
of his duties under this Agreement.

 

7.2.         Commuting and Cost of Living Expenses

 

Company will pay an allowance of $1,250 a month for a total of nine months after
the Start Date for commuting and cost of living expenses. This amount will be
included as compensation on Executive’s W-2 and be paid monthly.

 

7.3.         Stock Options

 

Executive shall be entitled to options to acquire shares of the Common Stock of
the Company’s follows:

 

a.                   140,000 incentive stock options under the 2007 Stock Option
Plan with normal vesting in accordance with Company’s standard option agreements
(5 years, with 20% vesting after one year and the balance monthly thereafter);
and,

 

b.                  60,000 stock options outside of the Company’s existing plan,
with normal vesting in accordance with the Company’s standard option agreements
(5 years with 20% vesting after one year and the balance monthly thereafter).
Such options are to mirror the terms of the 2007 Stock Option Plan, except that
the options will be non-qualified stock options (Executive recognizes that the
options and shares issued upon exercise are issued pursuant to a private
placement exemption from the registration requirements of the Securities Act of
1933 and will constitute restricted securities unless subsequently registered
pursuant to the Securities Act of 1933).

 

The initial exercise price for the options shall be at the fair market value of
the Company’s stock at the Start Date.

 

The Company will use reasonable diligence to register the shares underlying the
options granted outside of the Company’s existing plan on Form S-8 on or before
the date of exercise of those options, so long as such registration would not
require the pre-mature disclosure of any Company information.

 

The vesting of all options will accelerate immediately prior to a Corporate
Transaction (but not a Change in Control unless the Board of Directors elects to
allow acceleration on a Change in Control), as defined in the Company’s 2007
Stock Option Plan.

 

The vested options shall be exercisable for thirty days after termination of
Executive’s employment with the Company, or three months in the case of death or
disability (as provided in the Company’s 2007 Stock Option Plan), unless
termination is for Cause in which case the options will terminate at the time of
termination of employment. No additional vesting of options shall occur after
Executive’s death, disability, or cessation of employment with the Company for
any reason or no reason.

 

Issuance of the options shall be in accordance with all applicable securities
laws and the other terms and conditions of the Company’s 2007 Stock Option Plan
and form of the Stock Option Agreement.

 

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8.              POLICIES AND PROCEDURES

 

The Company shall have the authority to establish from time to time the policies
and procedures not inconsistent with this Agreement to be followed by the
Executive in performing services for the Company. Executive shall abide by the
provisions of any contract entered into by the Company under which the Executive
provides services.

 

9.              TERMINATION OF EMPLOYMENT

 

9.1.         For Cause

 

Notwithstanding anything herein to the contrary, the Company may terminate
Executive’s employment hereunder for cause for any one of the following reasons:
1) conviction of a felony, any crime involving moral turpitude, or a misdemeanor
where imprisonment is imposed, 2) commission of any act of theft, fraud,
dishonesty, or falsification of any employment or Company records, 3) improper
disclosure of the Company’s confidential or proprietary information, 4) any
action by the Executive which has a material detrimental effect on the Company’s
reputation or business, 5) Executive’s failure or inability to perform any
reasonable assigned duties after written notice from the Company of, and a
reasonable opportunity to cure, such failure or inability, 6) any breach of this
Agreement, which breach is not cured within thirty days following written notice
of such breach,  or repeated breaches of a similar nature even if cured after
notice, 7) a course of conduct amounting to gross incompetence, 8) chronic and
unexcused absenteeism, 9) unlawful appropriation of a corporate opportunity, or
10) material misconduct in connection with the performance of any of Executive’s
duties, including, without limitation, misappropriation of funds or property of
the Company, securing or attempting to secure personally any profit in
connection with any transaction entered into on behalf of the Company,
misrepresentation to the Company, or any violation of law or regulations on
Company premises or to which the Company is subject. Upon termination of
Executive’s employment with the Company for cause or lack of financial
performance (as defined below), the Company shall be under no further obligation
to Executive, except to pay all accrued but unpaid base salary, accrued bonuses,
and accrued vacation, to the date of termination thereof, and provide such
benefits as Executive is entitled to as a matter of law.

 

9.2.         Without Cause

 

The Company may terminate Executive’s employment hereunder at any time without
cause, provided, however, that Executive shall be entitled to severance pay, as
discussed below, in addition to accrued but unpaid Base Salary, accrued bonuses,
and accrued vacation, but if, and only if, Executive executes a valid and
comprehensive release of any and all claims that the Executive may have against
the Company, its officers, directors and employees,  in a form provided by the
Company and Executive executes such form within ten days of tender or such
longer period as the Company may specify.  Such release need not release
(i) rights under directors and officers and insurance policies; (ii) rights to
indemnification to Executive under the Company’s certificate of incorporation or
bylaws;(iii) vested rights to purchase stock from the Company that are not
contingent on the reason for termination of employment; and (iv) rights under
this Agreement. No severance payments will be paid until such release is
received from Executive and all rescission periods under the release have
expired.  The severance payments are the sole rights to payment upon
termination.

 

Severance for termination without cause will be in an amount equal to:

 

X × (60-Y) ÷ 60.

 

X is Base Salary

 

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Y is the number of whole months elapsed between the Start Date and the date of
termination of employment.

 

So, for example, if the termination without cause occurred one month after the
Start Date the payment would be 59/60th of $205,000 and if it was 25 months
after the Start Date the payment would be 35/60th of $205,000.

 

The severance payments will be paid in equal installments over the twelve month
period after termination, with each payment being on the first banking day of
the month.  Notwithstanding the prior sentence, if termination is without cause
and occurs upon the closing of a Corporate Transaction, as defined in the
Company’s 2007 Stock Option Plan, then severance equal to one year’s Base Salary
will be paid in one payment within twenty days after the later of the closing of
the Corporate Transaction and such release is received from Executive and all
rescission periods under the release have expired.

 

A failure to renew or extend the term of this Agreement is not a termination
without cause.

 

Notwithstanding the other provisions of this Section 9.2, the Company may
terminate Executive without any obligation hereunder that it would otherwise
have for a termination without cause if the Company has a net loss for GAAP
purposes (excluding extraordinary items as defined by GAAP) in any two
(2) consecutive quarters after the quarter that begins after the first
anniversary of the Start Date ( i.e. assuming the Start Date is in
September 2011, the first quarter that is subject to this test is the quarter
starting October 1, 2012). Termination under the situation described in the
prior sentence is a termination for lack of financial performance.  This
provision may be waived by a majority of the Board of Directors.  For the
avoidance of doubt, a termination described in this paragraph is not a
termination for “Cause” under the Company’s 2007 Stock Option Plan or for other
purposes.

 

9.3.         Resignation

 

Upon termination of employment, Executive shall have automatically resigned from
the Board of Directors of the Company and any subsidiary or parent, from all
employment positions with the Company, a subsidiary or parent, and from each
position as a trustee or administrator of any benefit plan of the Company or any
subsidiary or parent.  Employee is not entitled to any severance if he resigns
from the Company other than upon a resignation for Good Reason (as defined
below).

 

9.4.         Resignation for Good Reason

 

If the Company has breached a material terms of this Agreement and has not cured
such breach within thirty (30) days after written notice of the breach from
Executive to the Chairman of the Board of Directors and the Chief Financial
Officer, then Executive may resign his employment and such resignation will be
deemed a resignation for “Good Reason”.  Upon a resignation for Good Reason
Executive will be entitled to the payments and benefits he would receive upon a
termination by the Company without cause, so long as Executive has complied with
the provisions hereof regarding payments and benefits, including delivering the
release provided for in Section 9.2, and subject to the right of the Company to
terminate payments under Section 9.6..  If Executive does not comply with this
Section 9.4 he is only entitled to the payments and benefits he is entitled to
if he resigned without Good Reason and Executive has no further claim or right
to damages against any person or entity for breach of this Agreement by the
Company.

 

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9.5.         Cooperation

 

After notice of termination, Executive shall cooperate with the Company, as
reasonably requested by the Company, to effect a transition of Executive’s
responsibilities and to ensure that the Company is aware of all matters being
handled by Executive.

 

9.6.         Compensation After Notice of Termination

 

After notice of termination has been given by either Company or Executive, as
provided in this Article, Executive shall be entitled to receive the
compensation provided for in this Agreement until the notice period has expired.
It is understood that after the written notice is given by either Company or
Executive, Executive shall continue to devote substantially all of the
Executive’s time to the Executive’s normal services for the Company during the
notice period.

 

9.7.         Effect of Breach

 

Without limiting any other rights of the Company, it has no obligation to make
any further severance payments if Executive violates Articles 11, 12 or 13.

 

10.       DISABILITY OF EXECUTIVE

 

The Company may terminate this Agreement without liability if Executive shall be
permanently prevented from properly performing his essential duties hereunder
with reasonable accommodation by reason of illness or other physical or mental
incapacity for a period of more than sixty consecutive days. Upon such
termination, Executive shall be entitled to all accrued but unpaid Base Salary
and vacation, such benefits as Executive is entitled to as a matter of law, and
the other payments described in this Article 10.

 

10.1.                                             Definitions

 

For purposes of this Agreement, whenever used in this Article 10:

 

“Total disability” shall mean that the Executive is unable, mentally or
physically, whether it be due to sickness, accident, age or other infirmity, to
engage in more than fifty percent (50%) of any aspect of the Executive’s normal
duties as set forth in this Agreement.

 

“Partial disability” shall mean that the Executive is not subject to total
disability and is able to engage in more than fifty percent (50%) of every
aspect of the Executive’s normal duties as set forth in this Agreement, but that
the Executive is unable, mentally or physically, to devote the same amount of
time and ability to such services as was devoted prior to the occurrence of such
sickness or accident.

 

10.2.                                             Total Disability

 

During a single period of total disability of the Executive, the Executive shall
be entitled to receive from the Company, the Executive’s Base Salary for the
shorter of first three (3) months of disability or until any disability
insurance policy available through the Executive’s employment begins to pay
benefits. If the single period of disability should continue beyond three
(3) months, the Executive shall receive only such amount as the Executive shall
be entitled to receive under disability insurance coverage on the Executive, if
any.

 

10.3.                                             Partial Disability

 

During a period of partial disability of the Executive, the Executive shall
receive an amount of compensation computed as follows:

 

That portion of the Executive’s Base Salary which bears the same ratio to the
Executive’s Base Salary as the amount of time which the Executive is able to
devote to the usual performance of

 

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services on behalf of the Company during such period bears to the total time the
Executive devoted to performing such services prior to the commencement date of
the single period of partial disability, and

 

Such amount shall be calculated by multiplying the Executive’s Base Salary by a
fraction, the numerator of which shall be the percentage of normal services that
the Executive is able to perform and the denominator which shall be the total
services that the Executive is able to perform absent the partial disability.

 

10.4.                                             Combination of Total and
Partial Disability

 

If a single period of disability of the Executive consists of a combination of
total disability and partial disability, the maximum total disability
compensation to which the Executive shall be entitled from the Company under
this disability provision shall not exceed an amount equal to one (1) times the
Executive’s Base Salary.

 

10.5.                                             Broken Periods of Disability

 

A period of disability may be continuous or broken. If broken into partial
periods of disability which are separated by intervening periods of work, there
shall be aggregated together all of such successive partial periods of
disability except any period prior to the time when any single period of work
extends for six months or longer; and such aggregated periods of disability
shall be treated as a single period in determining the amount of disability
compensation to which Executive shall be entitled under any provision of this
Section.

 

10.6.                                             Termination Due to Disability

 

If and when the period of total or partial disability of the Executive totals
six months,  Executive’s employment with the Company shall automatically
terminate. Upon such termination, Executive is entitled to all accrued but
unpaid Base Salary, accrued bonuses, and accrued vacation, to the date of
termination, and such benefits as the spouse or estate is entitled to as a
matter of law.  Notwithstanding the foregoing, if the disabled Executive and the
Company agree, the disabled Executive may thereafter be employed by the Company
upon such terms as may be mutually agreeable.

 

10.7.                                             Commencement Date of
Disability

 

The commencement date of a period of disability, whether it be a continuous
period or the aggregate of successive partial periods, shall be the first day on
which the Executive is disabled.

 

10.8.                                             Dispute Regarding Existence of
Disability

 

Any dispute regarding the existence, extent or continuance of the disability
shall be resolved by the determination of a majority of three (3) competent
physicians, one (1) of whom shall be selected by the Company, one (1) of whom
shall be selected by the Executive and the third (3rd) of whom shall be selected
by the other two (2) physicians so selected.

 

10.9.                                             Death of Executive

 

In the event the Executive shall die during the term hereof, the Company shall
pay to the Executive’s surviving spouse, or if the Executive shall leave no
surviving spouse, then to the Executive’s estate, all accrued but unpaid Base
Salary, accrued bonuses, and accrued vacation, to the date of termination
thereof, and such benefits as the spouse or estate is entitled to as a matter of
law .

 

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11.       CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENTS

 

Executive recognizes and acknowledges that all records and information with
respect to clients, business associates, vendors, customer or referral lists,
contracting parties and referral sources of the Company, and all personal,
financial and business and proprietary information of the Company, its
employees, officers, directors and shareholders obtained by the Executive during
the term of this Agreement and not generally known in the public (the
“Confidential Information”) are valuable, special, unique and proprietary assets
of the Company. The Executive hereby agrees that during the term of this
Agreement and following the termination of this Agreement, whether the
termination shall be voluntary or involuntary, or with or without cause, or
whether the termination is solely due to the expiration of the term of this
Agreement, the Executive will not at any time, directly or indirectly, disclose
any Confidential Information, in full or in part, in written or other form, to
any person, firm, Company, association or other entity, or utilize the same for
any reason or purpose whatsoever other than for the benefit of and pursuant to
authorization granted by the Company. “Confidential Information” shall also
include any information (including, but not limited to, technical or
non-technical data, a formula, a pattern, a compilation, a program, a device, an
idea, a method, a technique, a drawing, a process, financial data, financial
plans, product plans, or a list of actual or potential customers) that:
(i) derives economic value, actual or potential, from not being generally known
to, and not being readily ascertainable by proper means by, other persons who
can obtain economic value from its disclosure or use; and (ii) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy. In
the case of Company’s business, Company’s Trade Secrets include (without
limitation) information regarding names and addresses of any customers, sales
personnel, account invoices, training and educational manuals, administrative
manuals, prospective customer leads, in whatever form, whether or not computer
or electronically accessible “on-line.”  For the avoidance of doubt,
Confidential Information does not include the names and addresses of customers
or any other information, if the fact the person is a customer or such other
information is publically known in the public domain or already known to
Executive prior to the signing of this Agreement unless the information was
conveyed to Executive by the Company.

 

Executive agrees that all Intellectual Property (as hereinafter defined)
conceived or made by him while he is employed by the Company belongs to the
Company. Executive will promptly disclose all Intellectual Property to the other
officers of the Company. Executive hereby assigns, and will further assign,
Executive’s full right, title and interest to all Intellectual Property and will
execute any and all applications for domestic and foreign patents, copyrights or
other proprietary rights (including without limitation the execution and
delivery of instruments of further assurance or confirmation) reasonably
requested by the Company to assign such Intellectual Property to the Company and
to permit the Company to enforce any patents, copyrights and other proprietary
rights to such Intellectual Property. All copyrightable works that Executive
creates that constitute Intellectual Property shall be considered “work made for
hire.” For purposes of this Agreement, “Intellectual Property” means inventions,
innovations, improvements, discoveries, developments, methods, processes,
compositions, works, concepts and ideas (whether or not patentable or
copyrightable or constituting trade secrets) conceived, made, created, developed
or reduced to practice by Executive (whether alone or with others, whether or
not during normal business hours or on or off Company premises) during
Executive’s employment with the Company that relate to any business, venture or
activity being conducted or, to Executive’s knowledge, proposed to be conducted
by the Company at any time during Executive’s employment with the Company.

 

Upon request, Executive will return any Company property to the Company.

 

The term “Company” in this Article includes any subsidiary of the Company.  This
Article will survive termination of this Agreement.

 

12.       EXCLUSIVE EMPLOYMENT; NON-COMPETE

 

During employment with the Company, Executive will not do anything to compete
with the Company’s present or contemplated business, nor will he or she plan or
organize any competitive business activity. Executive will not enter into any
agreement which conflicts with his duties or obligations to the Company.
Executive will not during his employment or within one year after it ends,
without the Company’s express written consent, directly or indirectly, solicit
or encourage any employee, agent, independent contractor,

 

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supplier, customer, consultant or any other person or company to terminate or
alter a relationship with the Company.

 

Should Executive wish to serve on other boards of directors or have other minor
non-company activities, the Executive will supply a list of all such activities,
and to update the list quarterly, including the amount of time spent on each.
The Company requests that such activities be held to a reasonable minimum.

 

The term “Company” in this Article includes any subsidiary of the Company.  This
Article will survive termination of this Agreement.

 

If, at the time of enforcement of Articles 12 or 13 of this Agreement, a court
or arbitrator holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum duration,
scope or geographical area reasonable under such circumstances shall be
substituted for the stated period, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum
duration, scope and area permitted by law. By action of its Board the Company
may also unilaterally reduce the duration, type of activity, geographic area, or
other scope, of Articles 12 or 13.

 

13.       HIRING

 

The Executive agrees that during the Executive’s employment with the Company and
for a period of one year following the termination of this Agreement, whether
the termination shall be voluntary or involuntary, or with or without cause, or
whether the termination is solely due to the expiration of the term of this
Agreement, the Executive will not attempt to hire any employee or independent
contractor of the Company or otherwise encourage or attempt to encourage any
other Executive or independent contractor of the Company to leave the Company’s
employ.

 

The term “Company” in this Article includes any subsidiary of the Company.  This
Article will survive termination of this Agreement.

 

14.       ASSIGNMENT AND TRANSFER

 

Executive’s rights and obligations under this Agreement shall not be
transferable by assignment or otherwise, and any purported assignment, transfer
or delegation thereof shall be void. This Agreement may be assumed (but need not
be) by any purchaser of substantially all of Company’s assets, any corporate
successor to Company or any assignee thereof. The Company may assign its rights
under Articles 12 and 13 of this Agreement in whole or in part to, a person or
entity who buys the assets of the Company, a person or entity who buys the
business of the Company related to Executive’s line of work with the Company, or
a person or entity who buys or is licensed inventions or other proprietary work
product with which Executive was involved.  Among other things, this means that
Executive could be subject to Article 12 and 13 of this Agreement as to more
than one person or entity.

 

15.       NO INCONSISTENT OBLIGATIONS

 

Executive is aware of no obligations, legal or otherwise, inconsistent with the
terms of this Agreement or with his undertaking employment with the Company.
Executive will not disclose to the Company, or use, or induce the Company to
use, any proprietary information or trade secrets of others. Executive
represents and warrants that he has returned all property and confidential
information belonging to all prior employers.

 

16.       INJUNCTIVE RELIEF; ATTORNEYS’ FEES

 

The parties hereto agree that, in the event of breach or threatened breach of
any covenants of Executive, the damage or imminent damage to the value and the
goodwill of the Company’s business shall be inestimable, and that therefore any
remedy at law or in damages shall be inadequate. Accordingly, the

 

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parties hereto agree that the Company shall be entitled to injunctive relief
against Executive in the event of any breach or threatened breach of any of such
provisions by Executive, in addition to any other relief (including damages)
available to the Company under this Agreement or under law. The prevailing party
in any action instituted pursuant to this Agreement shall be entitled to recover
from the other party its reasonable attorneys’ fees and other expenses incurred
in such action.

 

In the event that either party is required to engage the services of legal
counsel to enforce the terms and conditions of this Agreement against the other
party, regardless of whether such action results in litigation or arbitration,
the prevailing party shall be entitled to reasonable attorneys’ fees, costs of
legal assistants, and other costs from the other party, which shall include any
fees or costs incurred at trial or in any appellate proceeding, and expenses and
other costs, including any accounting expenses incurred.

 

17.       GOVERNING LAW

 

This Agreement shall be governed by and construed in accordance with the laws of
the State of Colorado without regard to conflict of law principles that would
result in the application of another law.

 

18.       AMENDMENT

 

This Agreement may be amended only by a writing signed by Executive and by a
duly authorized representative of the Company.

 

19.       SEVERABILITY

 

If any term, provision, covenant or condition of this Agreement, or the
application thereof to any person, place or circumstance, shall be held to be
invalid, unenforceable or void, the remainder of this Agreement and such term,
provision, covenant or condition as applied to other persons, places and
circumstances shall remain in full force and effect.

 

20.       CONSTRUCTION

 

The headings and captions of this Agreement are provided for convenience only
and are intended to have no effect in construing or interpreting this Agreement.
The language in all parts of this Agreement shall be in all cases construed
according to its fair meaning and not strictly for or against the Company or
Executive.

 

21.       RIGHTS CUMULATIVE ; EXCLUSIVE RIGHTS TO PAYMENTS AND BENEFITS

 

The rights and remedies provided by this Agreement are cumulative, and the
exercise of any right or remedy by either party hereto (or by its successor),
whether pursuant to this Agreement, to any other agreement, or to law, shall not
preclude or waive its right to exercise any or all other rights and remedies.
The rights to payments and benefits herein are Executive’s exclusive rights to
payment and benefits from the Company in the event of termination of this
Agreement or employment except for amounts which the Company is required to pay
under applicable law, and payments under insurance policies (if any) which are
not duplicative of payments provided for herein.

 

22.       NONWAIVER

 

No failure or neglect of either party hereto in any instance to exercise any
right, power or privilege hereunder or under law shall constitute a waiver of
any other right, power or privilege or of the same right, power or privilege in
any other instance. All waivers by either party hereto must be contained in a
written instrument signed by the party to be charged and, in the case of the
Company, by an officer of the Company (other than Executive) or other person
duly authorized by the Company.

 

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23.       NOTICES

 

Any and all notices or other communication provided for herein, shall be given
by registered or certified mail, return receipt requested, in case of the
Company to its principal office, and in the case of the Executive to the
Executive’s residence address set forth on the first page of this Agreement or
to such other address as may be designated by the Executive.

 

24.       ASSISTANCE IN LITIGATION

 

Executive shall, during and after termination of employment, upon reasonable
notice, furnish such information and proper assistance to the Company as may
reasonably be required by the Company in connection with any litigation in which
it or any of its parent, subsidiaries or affiliates is, or may become a party;
provided, however, that such assistance following termination shall be furnished
at mutually agreeable times and for mutually agreeable compensation. This
Article will survive termination of this Agreement.

 

25.       ARBITRATION

 

Any controversy, claim or dispute arising out of or relating to this Agreement
or the employment relationship, either during the existence of the employment
relationship or afterwards, between the parties hereto, their assignees, their
affiliates, their attorneys, or agents, shall be resolved by arbitration in
Boulder or Denver, Colorado, such site to be determined by the Company. Such
arbitration shall be conducted by the Judicial Arbiters Group (JAG) in
accordance with the rules of the American Arbitration Association for commercial
arbitration.  The following provisions will govern the arbitration. (a) one
arbitrator shall be chosen; (b) each party to the arbitration will pay its pro
rata share of the expenses and fees of the arbitrator(s), together with other
expenses of the arbitration incurred or approved by the arbitrator(s); and
(c) arbitration may proceed in the absence of any party if written notice of the
proceedings has been given to such party. The parties agree to abide by all
decisions and awards rendered in such proceedings. Such decisions and awards
rendered by the arbitrator shall be binding, final and conclusive and may be
entered in any court having jurisdiction thereof as a basis of judgment and of
the issuance of execution for its collection. All such controversies, claims or
disputes shall be settled in this manner in lieu of any action at law or equity;
provided however, that nothing in this subsection shall be construed as
precluding the Company from bringing an action for injunctive relief or other
equitable relief or relief under the confidentiality, return of property, no
hire ,non-solicitation, and invention assignment provisions.. The arbitrator
shall not have the right to award punitive damages, consequential damages, or
speculative damages to either party, but may award lost profits even if they are
consequential damages. The parties shall keep confidential the existence of the
claim, controversy or disputes from third parties (other than the arbitrator),
and the determination thereof, unless otherwise required by law or necessary for
the business of the Company. The arbitrator(s) shall be required to follow
applicable law.

 

IF FOR ANY REASON THIS ARBITRATION CLAUSE BECOMES NOT APPLICABLE, AND AS TO ANY
MATTER FOR WHICH LITIGATION IS PERMITTED HEREUNDER, THEN EACH PARTY, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER MATTER
INVOLVING THE PARTIES HERETO, AND SUBMITS TO THE VENUE AND JURISDICTION OF THE
FEDERAL AND STATE COURTS LOCATED IN DENVER AND BOULDER COUNTY COLORADO.

 

26.       COVENANTS INDEPENDENT

 

Each restrictive covenant on the part of the Executive set forth in this
Agreement shall be construed as a covenant independent of any other covenant or
provisions of this Agreement or any other agreement which the Company and the
Executive may have, fully performed and not executory, and the existence of any
claim or cause of action by the Executive against the Company whether predicated
upon another covenant or provision of this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of any other covenant.

 

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27.       INJUNCTIVE AND EQUITABLE RELIEF

 

Executive and Company recognize and expressly agree that the extent of damages
to Company in the event of a breach by Executive of any restrictive covenant set
forth herein would be difficult to ascertain, that the irreparable harm arising
out of any breach shall be irrefutably presumed, and that the remedy at law for
any breach may be inadequate to compensate the Company. Consequently, the
Executive agrees that in the event of a breach of any such covenant, in addition
to any other relief to which Company may be entitled, Company shall be entitled
to enforce the covenant by injunctive or other equitable relief ordered by a
court of competent jurisdiction.

 

28.       INDEMNIFICATION

 

The Executive hereby agrees to indemnify and hold the Company and its officers,
directors, shareholders and Executives harmless from and against any loss,
claim, damage or expense, and/or all costs of prosecution or defense of their
rights hereunder, whether in judicial proceedings, including appellate
proceedings, or whether out of court, including without limiting the generality
of the foregoing, attorneys’ fees, and all costs and expenses of litigation,
arising from or growing out of the Executive’s breach or threatened breach of
any representation, warranty or covenant contained herein.

 

The Company hereby agrees to indemnify and hold Executive harmless from and
against any loss, claim, damage or expense, and/or all costs of prosecution or
defense of his rights hereunder, whether in judicial proceedings, including
appellate proceedings, or whether out of court, including without limiting the
generality of the foregoing, attorneys’ fees, and all costs and expenses of
litigation, arising from or growing out of the Company’s breach or threatened
breach of any representation, warranty or covenant contained herein.

 

29.       ACKNOWLEDGMENT

 

The Executive acknowledges that when this Agreement is concluded, the Executive
will be able to earn a living without violating the foregoing restrictions and
that the Executive’s recognition and representation of this fact is a material
inducement to the execution of this Agreement and to Executive’s continued
relationship with the Company.

 

30.       SURVIVAL OF COVENANTS

 

All restrictive covenants contained in this Agreement shall survive the
termination of this Agreement.

 

31.       REPRESENTATION AND WARRANTY OF EXECUTIVE

 

The Executive acknowledges and understands that the Company has extended
employment opportunities to Executive based upon Executive’s representation and
warranty that Executive is able to perform the work contemplated by this
Agreement for the term hereof.

 

32.       INVALID PROVISION; SEVERABILITY

 

The invalidity or unenforceability of a particular provision of this Agreement
shall not affect the other provisions hereof, and the Agreement shall be
construed in all respects as if such invalid or unenforceable provisions were
omitted.

 

33.       MODIFICATION

 

No change or modification of this Agreement shall be valid unless the same be in
writing and signed by the parties hereto.

 

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34.       409A

 

This Agreement is intended to comply with Section 409A of the Internal Revenue
Code of 1986, as amended (“Section 409A”) and shall be construed accordingly. It
is the intention of the parties that payments or benefits payable under this
Agreement not be subject to the additional tax or interest imposed pursuant to
Section 409A. To the extent such potential payments or benefits are or could
become subject to Section 409A, the parties shall amend this Agreement with the
goal of giving Executive the economic benefits described herein in a manner that
does not result in such tax or interest being imposed, so long as such amendment
does not adversely affect the Company. Executive shall, at the request of the
Company, take any reasonable action (or refrain from taking any action),
required to comply with any correction procedure promulgated pursuant to
Section 409A.

 

If a payment that could be made under this Agreement would be subject to
additional taxes and interest under Section 409A, the Company in its sole
discretion may accelerate some or all of a payment otherwise payable under the
Agreement to the time at which such amount is includible in the income of
Executive, provided that such acceleration shall only be permitted to the extent
permitted under Treasury Regulation § 1.409A-3(j)(4)(vii) and the amount of such
acceleration does not exceed the amount permitted under Treasury Regulation §
1.409A-3(j)(vii).

 

No payment to be made under this Agreement shall be made at a time earlier than
that provided for in this Agreement unless such payment is (i) an acceleration
of payment permitted to be made under Treasury Regulation § 1.409A-3(j)(4) or
(ii) a payment that would otherwise not be subject to additional taxes and
interest under Section 409A.

 

The right to each payment described in this Agreement shall be treated as a
right to a series of separate payments and a separately identifiable payment for
purposes of Section 409A.

 

The definition of Good Reason is intended to constitute “good reason” as such
term is used in Treas. Reg. §1.409A-1(n)(2) and shall be interpreted and
construed accordingly, and to the maximum extent permitted by Section 409A and
guidance thereunder, a termination for Good Reason shall be an “involuntary
separation from service” as such term is used in Treas. Reg. §1.409A-1(n).

 

For purposes of Article 9 of this Agreement, “termination” (or any similar term)
when used in reference to Executive’s employment shall mean “separation from
service” with the Company within the meaning of Section 409A(a)(2)(A)(i) of the
Code and applicable administrative guidance issued thereunder, and Executive
shall be considered to have terminated employment with the Company when, and
only when, Executive incurs a “separation from service” with the Company within
the meaning of Section 409A(a)(2)(A)(i) of the Code and applicable
administrative guidance issued thereunder.

 

35.       ENTIRE AGREEMENT

 

This Agreement and the related option agreements contain the entire agreement
and supersede all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment, modification, or discharge is sought.

 

IN WITNESS HEREOF, each party to this Agreement has caused it to be executed on
August 19, 2011.

 

EXECUTIVE

 

COMPANY

 

 

 

 

 

 

/s/ Fred Perner

 

By:

/s/ Roger C. Odell

 

 

 

 

Fred Perner

 

 

Roger C. Odell, Chairman

Print Name

 

 

Print Name and Title

 

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