1
EXHIBIT 2.5
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as
of this ______th day of January 1999, to become effective at the time set
forth in Section 1 hereof, between eSoft, Inc., a Delaware corporation (the
"Company"), and Xxx Xxxxxxxxxxxxx, an individual person (the "Executive").
RECITAL
A. The Company desires to employ the Executive as VICE PRESIDENT OF
PRODUCT DEVELOPMENT, 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 VICE PRESIDENT OF PRODUCT DEVELOPMENT. Subject to Section 4, the
term of Executive's employment under this Agreement (the "Term") shall be for
twenty-four (24) months, beginning on the first calendar day following the date
on which the Company acquires Apexx Technology, Inc.
2. Duties, Responsibilities and Authority. In the capacity as VICE
PRESIDENT OF PRODUCT DEVELOPMENT for the Company, the Executive shall have
primary responsibility for product management, product development, and
technical support, as well as providing general management functions for the
Boise, Idaho location for the Company. 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 Executive's full professional and
managerial time and effort to the performance of the duties as VICE PRESIDENT
OF PRODUCT DEVELOPMENT and shall not engage in other business activity or
activities which, in the reasonable good-faith judgement of the President of
the Company, conflict with the performance of duties under this Agreement.
1
2
3. Compensation
(a) Salary. For services rendered under this Agreement, the
Company shall pay the Executive a salary at the rate of $9,166.00 per month.
(b) Bonus. The Executive shall be eligible to receive a
performance bonus based upon mutually agreed company and department performance
criteria for each fiscal quarter of the Company completed during the term of
this Agreement. The target bonus pay at 100% of attainment is $12,500 per
quarter. The payment of the Executive's incentive pay shall be made as soon as
practicable but no later than sixty (60) days following the end of the quarter.
(c) Stock Options. The Executive will be granted incentive stock
options pursuant to the Company's Stock Option Plan to purchase up to 50,000
shares of the Company's common stock at an exercise price equal to the fair
market value of the Company's common stock on the day of the grant, subject to
board approval. The day of the grant will be the first calendar day following
the date on which the Company acquires Apexx Technology, Inc. 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.
(d) Annual Review. The Executive's salary, bonus, options and
terms of the severance in Section 7 of this Agreement shall be reviewed
annually beginning January 1, 2000 and may be increased as the Board deems
appropriate, but shall not be decreased during the term without mutual
agreement.
(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 three (3) weeks of 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 Executive's 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 Executive's duties under
this Agreement; provided that the Executive presents to the Company an itemized
accounting of such expenses including reasonable supporting data.
2
3
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 lawful directions of the President or of the Board, or (iii)
committed gross malfeasance in performance of Executive's 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 Company or its reputation. A material
failure to perform Executive's duties hereunder that results from the
disability of the Executive shall not be considered Cause for Executive's
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 (i) Company reduces title of
Executive, (ii) Company requires Executive to relocate to Boulder, or (iii) 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, or if the
Company is engaged in unlawful activity or requests the Executive to engage in
unlawful activity.
5. Disability. In the event of disability of the Executive during
the term hereof, the Company shall, during the continuance of Executive's
disability but only for a maximum of 90 days following the determination of
disability, pay the Executive the
3
4
Executive's 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 Executive's
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 Executive's death
and shall have the right to receive an additional amount equal to one-twelfth
(1/12th) of the Executive's annual compensation then in effect.
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 12 of this Agreement), or if Executive terminates this
Agreement for Cause, the Executive shall be entitled to receive Executive's
then current salary and benefits, as provided for in Sections 3(a) and 3(e),
payable in semi-monthly installments, for the greater of six (6) 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
Intemal 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
Executive's employment hereunder or if Executive's employment is terminated by
the Company for Cause, the Executive shall not be entitled to any severance pay
or other compensation beyond the date of termination of Executive's 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, pursuant to section 4.b or 4.c hereof, the
Executive shall not engage in any business which directly 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, pursuant to section
4.b or 4.c hereof, 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.
4
5
9. Trade Secrets and Confidential Information. During Executive's
employment by the Company and for a period of three (3) 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
Executive's 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 portion of
either Section 8 or 9 shall be adjudicated to be invalid or unenforceable, the
remaining portions of 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
Executive of the provisions contained in Sections 8 and 9 are likely to cause
irreparable damage to the Company, and therefore Executive 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 pursue an injunction restraining the
Executive from such breach, and Executive will make no objection to the form of
relief sought. 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 000 X Xxxxxxxx Xxxx, Xxxxx, XX. 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
5
6
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.
SIGNATURES
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the first date mentioned above.
THE COMPANY:
By:
------------------------------------------
Name: Xxxxxxx Xxxx
Title: Chief Executive Officer
THE EXECUTIVE:
By:
------------------------------------------
Xxx Xxxxxxxxxxxxx
6
