Employment Agreement

Base Compensation. As compensation for the services provided by Stroud under this Agreement, the Company shall pay Stroud an annual salary of One Hundred Fifty Thousand Dollars ($150,000). The compensation of Stroud under this Section shall be paid in accordance with the Company's usual payroll procedures.

Stock and Stock Options. Upon execution of this Agreement, the Company: shall grant Stroud options to purchase 500,000 shares of the Company’s common stock with an exercise price equal to ($1.25) one dollar and twenty five cents, which shall vest in accordance with the Company’s stock option plan. The options shall have a term of five (5) years from the date of grant.

Bonus. In addition to the base compensation in Section 5(a), Stroud shall be eligible to receive an annual bonus determined by the Board of Directors based on the performance of the Company and Stroud.

Voluntary Termination by Stroud. Stroud shall have the right to voluntarily terminate this Agreement and his employment hereunder at any time during the Employment Term.

Voluntary Termination by the Company. The Company shall have the right to voluntarily terminate this Agreement and Stroud’s employment hereunder at any time. If the Company initiates an “at will” termination of your employment as described above the Company agrees to pay Stroud a lump-sum separation fee at the time of termination equal to six (6) months salary plus benefits and be granted immediate vesting of all unvested stock and options.

Termination for Cause. The Company shall have the right to terminate this Agreement and Stroud’s employment hereunder at any time for cause. For purposes of this Agreement, the term “cause” for termination by the Company shall be (a) a conviction of or plea of guilty or nolo contendere by Stroud to a felony, or any crime involving fraud or embezzlement; (b) the refusal by Stroud to perform his material duties and obligations hereunder; (c) Stroud’s willful and intentional misconduct in the performance of his material duties and obligations; or (d) if Stroud or any member of his family makes any personal profit arising out of or in connection with a transaction to which the Company is a party or with which it is associated without making disclosure to and obtaining the prior written consent of the Board of Directors. The written notice given hereunder by the Company to Stroud shall specify in reasonable detail the cause for termination. For purposes of this Agreement, “family” shall mean Stroud’s spouse and/or children. In the case of a termination for the causes described in (a) and (d) above, such termination shall be effective upon receipt of the written notice. In the case of the causes described in (b) and (c) above, such termination notice shall not be effective until ten (10) days after Stroud’s receipt of such notice, during which time Stroud shall have the right to respond to the Company’s notice and cure the breach or other event giving rise to the termination.

Event of Sale, Merger or Change of Control. In the event of the sale, merger or change of control of the Company during your employment, or in the event of an agreement to sell, merge or change control of the Company during your employment, the Company or its successor(s) agree to immediately vest all unvested stock and options and offer you employment under the terms given above, for a period of at least (6) six months after the sale or merger closing date. If this extension is not given by the Company or its successor(s) and accepted by you, then the Company or its successor(s) agree to pay to you a lump-sum separation fee equivalent to (6) six months of salary plus benefits. Employment “at will” provisions described above cannot be applied by the Company from 120 days before the date of the agreement to sell or merge the Company to the closing date. If an “at will” action to terminate your employment is taken by the Company during this time period, or if you are asked to voluntarily end your employment by the Company during this time period, you will be entitled to immediate vesting of all unvested stock and options and a lump-sum payment of the equivalent of your salary and benefits for (6) six months, to be paid on or before the sale or merger closing date.

Termination Upon Death. If Stroud dies during the Term of this Agreement, this Agreement shall terminate, except that Stroud’s legal representatives shall be entitled to receive any earned but unpaid compensation or expense reimbursement due hereunder through the date of death.

Termination Upon Disability. If, during the Term of this Agreement, Stroud suffers and continues to suffer from a “Disability” (as defined below), then the Company may terminate this Agreement by delivering to Stroud thirty (30) calendar days’ prior written notice of termination based on such Disability, setting forth with specificity the nature of such Disability and the determination of Disability by the Company. For the purposes of this Agreement, “Disability” means Stroud’s inability, with reasonable accommodation, to substantially perform Stroud’s duties, services and obligations under this Agreement due to physical or mental illness or other disability for a continuous, uninterrupted period of one hundred and eighty (180) calendar days or two hundred and ten (210) days during any twelve month period. Upon any such termination for Disability, Stroud shall be entitled to receive any earned but unpaid compensation or expense reimbursement due hereunder through the date of termination.

Effect of Termination. 

The Company agrees that if Stroud is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is Stroud’s alleged action in an official capacity while serving as a director, officer, member, employee or agent, Stroud shall be indemnified and held harmless by the Company to the fullest extent permitted or authorized by the Company's certificate of incorporation or bylaws or, if greater, by the laws of the State of Colorado, against all cost, expense, liability and loss (including, without limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by Stroud in connection therewith, and such indemnification shall continue as to Stroud even if he has ceased to be a director, member, employee or agent of the Company or other entity and shall inure to the benefit of Stroud’s heirs, executors and administrators. The Company shall advance to Stroud to the extent permitted by law all reasonable costs and expenses incurred by his in connection with a Proceeding within 20 days after receipt by the Company of a written request, with appropriate documentation, for such advance. Such request shall include an undertaking by Stroud to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses.

Neither the failure of the Company (including its Board of Directors, independent legal counsel or stockholders) to have made a determination prior to the commencement of any proceeding concerning payment of amounts claimed by Stroud that indemnification of Stroud is proper because he has met the applicable standard of conduct, nor a determination by the Company (including its Board of Directors, independent legal counsel or stockholders) that Stroud has not met such applicable standard of conduct, shall create a presumption that Stroud has not met the applicable standard of conduct.

The Company agrees to continue and maintain a liability insurance policy covering Stroud to the extent the Company provides such coverage for its other executives and officers.

Promptly after receipt by Stroud of notice of any claim or the commencement of any action or proceeding with respect to which Stroud is entitled to indemnity hereunder, Stroud shall notify the Company in writing of such claim or the commencement of such action or proceeding, and the Company shall (i) assume the defense of such action or proceeding, (ii) employ counsel reasonably satisfactory to Stroud, and (iii) pay the reasonable fees and expenses of such counsel. Notwithstanding the preceding sentence, Stroud shall be entitled to employ counsel separate from counsel for the Company and from any other party in such action if Stroud reasonably determines that a conflict of interest exists which makes representation by counsel chosen by the Company not advisable. In such event, the reasonable fees and disbursements of such separate counsel for Stroud shall be paid by the Company to the extent permitted by law.

After the termination of this Agreement and upon the request of Stroud, the Company agrees to reimburse Stroud for all reasonable travel, legal and other out-of-pocket expenses related to assisting the Company to prepare for or defend against any action, suit, proceeding or claim brought or threatened to be brought against the Company or to prepare for or institute any action, suit, proceeding or claim to be brought or threatened to be brought against a third party arising out of or based upon the transactions contemplated herein and in providing evidence, producing documents or otherwise participating in any such action, suit, proceeding or claim. In the event Stroud is required to appear after termination of this Agreement at a judicial or regulatory hearing in connection with Stroud's employment hereunder, or Stroud's role in connection therewith, the Company agrees to pay Stroud a sum, to be mutually agreed upon by Stroud and the Company, a daily fee and reasonable expenses for each day of his appearance and each day of preparation therefor.