PROPOSED EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of
this 12th day of April, 1998, between eSoft, Inc., a Delaware corporation (the
"Company"), and XXXXXX XXXXXXXXX, an individual person (the "Executive").
RECITAL
A. The Company desires to employ the CHIEF FINANCIAL OFFICER, and the
Executive desires to be employed by the Company in such position upon the terms
and conditions set forth in this Agreement.
B. The Executive acknowledges that during the course of the Executive's
employment the Executive will receive or be exposed to certain confidential
information and trade secrets (collectively referred to as "Confidential
Information") of the Company. The Executive also acknowledges that this
Confidential Information is among the Company's most important assets and that
the value of this Confidential Information would be diminished or extinguished
by disclosure.
AGREEMENT
In consideration of the mutual promises contained herein, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Employment; Position; Term. The Company hereby employs the
Executive and the Executive hereby accepts employment with the Company in the
capacity of Chief Financial Officer. Subject to Section 4, the term of
Executive's employment under this Agreement (the "Term") shall be for 36 months,
beginning April 16, 1998 and ending April 15, 2001.
2. Duties, Responsibilities and Authority. In his capacity as Chief
Financial Officer of the Company, the Executive shall have primary
responsibility for the establishment and maintenance of the Company's financial
policies and plans, accounting, budgeting, treasury, tax, insurance, and
investor relations. Responsibilities also include the Company's relationship
with financial institutions, investors and government agencies. The Executive
shall report to and be subject to the direction and control of the President of
the Company. The Executive shall devote substantially all of his full
professional and managerial time and effort to the performance of his duties as
Chief Financial Officer and he shall not engage in any other business activity
or activities which, in the judgement of the President of the Company, conflict
with the performance of his duties under this Agreement.
1.
3. Compensation
(a) SALARY. For services rendered under this Agreement, the
Company shall pay the Executive a salary at the rate of $7,500 per month.
(b) BONUSES. The Executive shall be eligible to receive a
performance bonus based upon mutually agreed performance criteria for each
fiscal quarter of the Company completed during the term of this Agreement
beginning with the fiscal quarter commencing April 1, 1998. The maximum
aggregate amount of the bonuses shall be $5,000 per quarter. The payment of the
Executive's performance bonus shall be made as soon as practicable but no later
than sixty (60) days following the end of the fiscal quarter. The Executive
shall not be entitled to a minimum performance bonus.
(c) ANNUAL REVIEW. The Executive's salary and terms of the
severance in Section 7 of this Agreement shall be reviewed annually beginning
January 1, 1999 and may be increased as the Board deems appropriate.
(d) STOCK OPTIONS. The Executive has been granted incentive
stock options pursuant to the Company's Stock Option Plan to purchase up to
40,000 shares of the Company's common stock at an exercise price equal to the
offering price of the Company's common stock in the Initial Public Offering
completed in March, 1998. Shares shall vest over a 36 month period with no
vesting until the beginning of the eighth month at which time
seven-thirty-sixths (7/36) of the options will vest, and then one-thirty-sixth
(1/36) will vest after the beginning of each month thereafter. vesting shall
occur as long as the Executive remains an employee of the Company. The options,
once vested shall have an expiration date of 4 years from the date of grant of
the option. In addition, the Executive may participate in stock option programs
of the Company upon such terms as the administrators of such programs in their
discretion determine.
(e) BENEFITS AND VACATION. The Executive shall be eligible to
participate in such insurance programs (health, disability or life) or such
other health, dental, retirement or similar employee benefits programs as the
Board may approve, on a basis comparable to that available to other officers and
executive employees of the Company. The Executive shall be entitled to a minimum
of four (4) weeks paid vacation per year. Vacation time may be accumulated for
up to one year beyond the year for which it is accrued and may be used any time
during such year. Any vacation time not used during such additional year shall
be forfeited. The value of any accrued but unused and unforfeited vacation time
shall be paid in cash to the Executive upon termination of his employment for
any reason.
(f) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Executive in a timely manner for all reasonable out-of-pocket expenses incurred
by the Executive in connection with the performance of his duties under this
Agreement; provided that the Executive presents to the Company an itemized
accounting of such expenses including reasonable supporting data.
2.
4. Termination.
(a) TERMINATION BY THE COMPANY WITHOUT CAUSE. Notwithstanding
anything to the contrary contained herein but subject to Section 7 hereof, the
Company may, by delivering thirty (30) days' prior written notice to the
Executive, terminate the Executive's employment at any time without Cause (as
hereinafter defined).
(b) TERMINATION BY THE EXECUTIVE WITHOUT CAUSE.
Notwithstanding anything to the contrary contained herein but subject to Section
7 hereof, the Executive may, by delivering thirty (30) days' prior written
notice to the Company, terminate the Executive's employment hereunder.
(c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may
terminate the Executive's employment for Cause immediately upon written notice
stating the basis for such termination. "Cause" for termination of the
Executive's employment shall only be deemed to exist if the Executive has (i)
breached this Agreement and if such breach continues or recurs more than thirty
(30) days after notice from the Company specifying the action which constitutes
the breach and demanding its discontinuance, (ii) exhibited willful disobedience
of directions of the President or of the Board, or (iii) committed gross
malfeasance in performance of his duties hereunder or acts resulting in an
indictment charging the Executive with the commission of a felony; provided that
the commission of acts resulting in such an indictment shall constitute Cause
only if a majority of the directors who are not also subject to any such
indictment determine that the Executive's conduct has substantially adversely
affected the Executive or its reputation. A material failure to perform his
duties hereunder that results from the disability of the Executive shall not be
considered Cause for this termination.
(d) TERMINATION BY THE EXECUTIVE FOR CAUSE. The Executive may
terminate employment for Cause immediately upon written notice stating the basis
for such termination. "Cause" for termination of employment by the Executive
shall only be deemed to exist if the Company has breached this Agreement and if
such breach continues or recurs more than thirty (30) days after notice from the
Executive specifying the action which constitutes the breach and demanding its
discontinuance.
5. Disability. In the event of disability of the Executive during
the term hereof, the Company shall, during the continuance of his disability but
only for a maximum of 90 days, pay the Executive his then current salary, as
provided for in Section 3(a), and adjusted pursuant to Section 3(b), and
continue to provide the Executive all other benefits provided hereunder. As used
herein, the term "disability" shall mean the complete and total inability of the
Executive, due to illness, physical or comprehensive mental impairment, to
substantially perform all of his duties as described herein for a consecutive
period of thirty (30) days or more.
6. Death. In the event of the death of the Executive, except with
respect to any benefits which have accrued and have not been paid to the
Executive hereunder, the provisions of this Agreement shall terminate
immediately. The Executive's estate shall have the right to receive compensation
due to the Executive as of and to the date of his death and shall have the right
to receive an additional amount equal to one-twelfth (12th) of the Executive's
annual compensation then in effect.
3.
7. Severance. In the event that the Executive's employment is
terminated by the Company other than for Cause or death of the Executive, or in
the event there is either a material change in the responsibilities of the
Executive or a loss of position within six (6) months after a Change of Control
(as defined in Section of this Agreement), or if Executive terminates this
Agreement for Cause, the Executive shall be entitled to receive his then current
salary and benefits, as provided for in Sections 3(a) and 3(e), and adjusted
pursuant to Section 3(b), payable in semi-monthly installments, for the greater
of three (3) months or that number of months which equals the number of years
that have elapsed from the initial date of this Agreement until the date of the
Executive's termination by the Company; PROVIDED, HOWEVER, that if any of such
payments would (i) constitute a "parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986 (the "Code") and (ii) but for
this provision, be subject to the excise tax imposed by Section 4999 of the Code
(the "Excise Tax"); the amount payable hereunder shall be reduced to the largest
amount which the Executive determines would not result in any portion of the
payments hereunder being subject to the Excise Tax. If the Executive voluntarily
resigns his employment hereunder or if his employment is terminated for Cause,
the Executive shall not be entitled to any severance pay or other compensation
beyond the date of termination of his employment.
8. Covenant Not to Compete.
(a) During the continuance of the Executive's employment
hereunder and for a period of twelve (12) months after termination of the
Executive's employment hereunder, the Executive shall not engage in any business
which competes with the Company or its affiliates anywhere in the United States
or Canada during the Executive's employment hereunder or at the time of
termination.
(b) The Executive shall not, for a period of twelve (12)
months after termination of the Executive's employment hereunder, employ, engage
or seek to employ or engage for himself or any other person or entities, any
individual who is or was employed or engaged by the Company or any of its
affiliates until the expiration of six (6) months following the termination of
such person's or entity's employment or engagement with the Company or any of
its affiliates.
9. Trade Secrets and Confidential Information. During his employment
by the Company and for a period of five (5) years thereafter, the Executive
shall not, directly or indirectly, use, disseminate, or disclose for any purpose
other than for the purposes of the Company's business, any Confidential
Information of the Company or its affiliates, unless such disclosure is
compelled in a judicial proceeding. Upon termination of his employment, all
documents, records, notebooks, and similar repositories of records containing
information relating to any Confidential Information then in the Executive's
possession or control, whether prepared by him or by others, shall be left with
the Company or, if requested, returned to the Company.
10. Severability. It is the desire and intent of the undersigned
parties that the provisions of Sections 8 and 9 shall be enforced to the fullest
extent permissible under the laws in each jurisdiction in which enforcement is
sought. Accordingly, if any particular sentence or
4.
portion of either Section 8 or 9 shall be adjudicated to be invalid or
unenforceable, the remaining portions o such section nevertheless shall continue
to be valid and enforceable as though the invalid portions were not a part
thereof. In the event that any of the provisions of Section 8 relating to the
geographic areas of restriction or the provisions of Sections 8 or 9 relating to
the duration of such sections shall be deemed to exceed the maximum area or
period of time which a court of competent jurisdiction would deem enforceable,
the geographic areas and times shall, for the purposes of this Agreement, be
deemed to be the maximum areas or time periods which a court of competent
jurisdiction would deem valid and enforceable in any state in which such court
of competent jurisdiction shall be convened.
11. Injunctive Relief. The Executive agrees that any violation by him
of the provisions contained in Sections 8 and 9 are likely to cause irreparable
damage to the Company, and therefore he agrees that if there is a breach or
threatened breach by the Executive of the provisions of said sections, the
Company shall be entitled to an injunction restraining the Executive from such
breach. Nothing herein shall be construed as prohibiting the Company from
pursuing any other available remedies for such breach or threatened breach.
12. Miscellaneous.
(a) NOTICES. Any notice required or permitted to be given
under this Agreement shall be directed to the appropriate party in writing and
mailed or delivered, if to the Company, to eSoft, Inc., to the attention of the
President, at 0000-X Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, and if to the
Executive, at 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxx, 00000.
Notification addresses may be changed with written notice.
(b) BINDING EFFECT. This Agreement is a personal service
agreement and may not be assigned by the Company or the Executive, except that
the Company may assign this Agreement to a successor of the Company by merger,
consolidation, sale of substantially all of the Company's assets or other
reorganization (a "Change of Control"). Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors, assigns, and legal representatives.
(c) AMENDMENT. This Agreement may not be amended except by an
instrument in writing executed by each of the undersigned parties.
(d) APPLICABLE LAW. This Agreement is entered into in the
State of Colorado and for all purposes shall be governed by the laws of the
State of Colorado.
(e) ATTORNEY'S FEES. In the event either party takes legal
action to enforce any of the terms of this Agreement, the unsuccessful party to
such action will pay the successful party's reasonable expenses, including
attorney's fees, incurred in such action.
(f) ENTIRE AGREEMENT. This Agreement supersedes and replaces
all prior agreements between the parties related to the employment of the
Executive by the Company.
5.
SIGNATURES
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date mentioned above.
THE COMPANY:
By:
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Xxxxx X. Xxxxx
President & COO
THE EXECUTIVE:
By:
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Xxxxxx Xxxxxxxxx
6.
