EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of this
4th day of November, 1999, between eSoft, Inc., a Delaware corporation (the
"Company"), and XXXXX XXXXXXX, an individual person (the "Executive").
RECITAL
A. The Company desires to employ the Executive as VICE PRESIDENT OF SALES,
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 SALES. Subject to Section 4, the term of Executive's employment
under this Agreement (the "Term") shall be for 24 months, beginning NOVEMBER 4,
1999 and ending OCTOBER 31, 2001.
2. DUTIES, RESPONSIBILITIES AND AUTHORITY. In the capacity as VICE
PRESIDENT OF SALES for the Company, the Executive shall have primary
responsibility for the sales and distribution of the Company's products,
software and services throughout the world. These responsibilities include
establishing and maintaining relationships with distributors, resellers, and
strategic business partners in each region. The Executive shall be responsible
for recruiting, hiring, directing, performing administrative functions, setting
and managing compensation and incentive plans for Regional Directors in each
region and other personnel as appropriate. The Executive shall have primary
responsibilities for meeting and exceeding the sales and revenue objectives
established 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 SALES 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.
3. COMPENSATION
a) SALARY. For services rendered under this Agreement, the Company
shall pay the Executive a salary at the rate of $9,167.00 per month.
(b) REVENUE INCENTIVE PAY. The Executive shall be eligible to receive
a quarterly Revenue Incentive Pay targeted at $30,000 per quarter at 100% of the
Company's Target Revenue ("Target"). The Revenue Incentive Pay is calculated as
Revenue Incentive Pay Factor (see below) times the Target. The Target for each
Quarter shall be outlined in a Incentive Compensation Plan for the Executive.
The payment of the Executive's Revenue Incentive Pay shall be made as soon as
practicable but no later than thirty (30) days following the end of the fiscal
quarter. The Revenue Incentive Pay shall be paid on a pro-rata basis for the
first quarter of employment (e.g. the period from November 4, 1999 through
December 31, 1999). The Revenue Incentive Pay Factor is calculated as follows:
Revenue Attainment Revenue Incentive Pay
Factor
------------------ ---------------------
Below 85% 0.0%
85%-99% .8%
100%-110% 1.0%
Over 110% 1.2%
(c) GROSS MARGIN INCENTIVE PAY. The Executive shall be eligible to
receive a quarterly Gross Margin Incentive Pay of $10,000 if the Company exceeds
its Gross Margin objective for the quarter. The Gross Margin incentive shall be
established in an Incentive Compensation Plan for the Executive. The payment of
the Executive's Gross Margin Incentive Pay shall be made as soon as practicable
but no later than thirty (30) days following the end of the fiscal quarter. .
The Gross Margin Incentive Pay shall be paid on a pro-rata basis for the first
quarter of employment (e.g. the period from November 4, 1999 through December
31, 1999).
(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, 2001 and may be increased as the Board deems appropriate,
but shall not be decreased during the term without mutual agreement.
(e) STOCK OPTIONS. The Executive has been granted incentive stock
options pursuant to the Company's Stock Option Plan to purchase up to 20,000
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. Additionally, the Executive shall receive another grant of
incentive stock options pursuant to the Company's Stock Option
Plan to purchase up to 40,000 shares of the Company's common stock on the
Executive's forty-fifth (45th) day of employment, subject to the Executive
being employed by the Company on that date, at an exercise price equal to the
fair market value of the Company's common stock on the 45th day of
employment, subject to board approval. Each grant of stock options 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.
(f) 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.
(g) 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.
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 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 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), 3(b) and 3(c), 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 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 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 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.
9. TRADE SECRETS AND CONFIDENTIAL INFORMATION. During Executive's
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
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 000 Xxxxxxxxxxx Xxxx, Xxxxxxxxxx, XX 00000, and if to the Executive, at 0000
Xxxxxx Xxxxx Xxxxx 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.
SIGNATURES
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
first date mentioned above.
THE COMPANY:
By: /s/ Xxxxxxx Xxxx
-----------------------------
Xxxxxxx Xxxx
Chief Executive Officer
THE EXECUTIVE:
By: /s/ Xxxxx Xxxxxxx
-----------------------------
Xxxxx Xxxxxxx
