1
EXHIBIT 2.5
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered
into as of this 10th day of September 1999, to become effective at the time set
forth in Section 1 hereof, between eSoft, Inc., a Delaware corporation (the
"Company"), and Xxxxx X. Xxxxx, an individual resident of the state of Georgia
(the "Executive").
RECITAL
A. The Company desires to employ the Executive as Vice
President of Technology, 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 its 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 Technology. Subject to Section 4, the term of
Executive's employment under this Agreement (the "Term") shall be for 24 months,
beginning on the date on which the Company completes its merger with
Technologic, Inc. ("Technologic").
2. Duties, Responsibilities and Authority. In the capacity as
Vice President of Technology for the Company, the Executive shall have primary
responsibility for guiding the Company's strategic technical direction and
ensuring the architectural soundness and integrity of the Company's products.
The Executive shall report to and be subject to the direction and control of the
Vice President of Engineering 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 Technology, at such
location or locations within the Metro Atlanta area as the Company may require
from time to time, 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 $8,333.33
per month, payable to Executive on the Company's regular reoccurring pay period,
but in no event less than monthly installments.
(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 $10,000
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 Company agrees to immediately
grant to the Executive on the first day of the Term of this Agreement incentive
stock options pursuant to the Company's Stock Option Plan to purchase up to
60,000 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. Shares shall vest over a 36 month period with no vesting
until April 1, 2000, on which date seven thirty-sixths (7/36) of the options
will vest, and then one thirty-sixth (1/36) will vest on the first day of each
month thereafter. In the event that prior to April 1, 2000 either (i) the
Executive terminates his employment for Executive Cause or the Company
terminates the Executive's employment without Company Cause, or (ii) there is a
Change in Control (as defined in Section 12 of this Agreement), no fewer than
nine thirty-sixths (9/36) of the options granted to the Executive by the Company
shall be deemed to have vested. Subject to the immediately preceding proviso,
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) Incentive Pay. The Executive shall receive an
incentive payment of two percent (1%) of the sales net of any returns, discounts
or allowances on the Sabre Account (as defined below) (the "Incentive Pay").
Incentive Pay shall be paid to Executive monthly and will be paid so long as
Executive is employed by the Company and, in the event of the termination of
Executive's employment with the Company, for the period specified in Section 7
below; provided, however, if the Executive has resigned without Executive Cause
(as defined below) or been terminated for Company Cause (as defined below), the
Company shall have no further obligation or liability thereafter with respect to
Executive's Incentive Pay. As used herein, the term "Sabre Account" shall mean
invoices billed with respect to systems purchased directly by the Sabre Group or
by travel agencies based upon a recommendation from employees of or consultants
to the Sabre Group.
(e) 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 written
mutual agreement.
2
3
(f) Benefits and Vacation. The Executive shall be
eligible to participate in such insurance programs (health, disability and life)
and 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 the same amount and terms of paid time off as other officers and executive
employees of the Company and the Executive shall receive full credit for time
employed by Technologic in calculating years of service. 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 the
Executive's duties under this Agreement; provided that the Executive presents to
the Company an itemized accounting of such expenses including reasonable
supporting data and follows the Company's written travel policies, which the
Company has provided to the Executive. Notwithstanding the above, the Executive
shall be entitled to utilize Business Class travel for international air travel
at any time, and from time to time, after the Company has reported profitable
net income for any quarterly period.
4. Termination.
(a) Termination by the Company without Company 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
Company Cause (as hereinafter defined).
(b) Termination by the Executive without Executive
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 Company Cause. The
Company may terminate the Executive's employment for Company Cause immediately
upon written notice to Executive stating the basis for such termination.
"Company Cause" for termination of the Executive's employment shall only be
deemed to exist if the Executive has (i) breached any material provision of this
Agreement and if such breach continues or recurs more than thirty (30) days
after notice from the Company specifying the action which constitutes such
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
Company 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 Company Cause for Executive's termination.
3
4
(d) Termination by the Executive for Executive Cause.
The Executive may terminate employment for Executive Cause immediately upon
written notice to the Company stating the basis for such termination. "Executive
Cause" for termination of employment by the Executive shall only be deemed to
exist if the Company has breached any material provision of this Agreement and
if such breach continues or recurs more than thirty (30) days after notice from
the Executive specifying the action which constitutes such 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, (i) pay the Executive the Executive's then current salary, as
provided for in Sections 3(a) and 3(e) above, (ii) make all payments to
Executive pursuant to Sections 3(b), 3(c) and 3(d) above, and (iii) 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 ninety (90) 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 Company 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 his position within six (6)
months after a Change of Control, or if Executive terminates this Agreement for
Executive Cause, the Executive shall be entitled to receive Executive's then
current salary, Incentive Pay and benefits, as provided for in Sections 3(a),
3(b), 3(c), 3(d) and 3(f) above, payable in semi-monthly installments, for the
greater of three (3) months or the 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 Executive's employment hereunder without Executive Cause, or if
Executive's employment is terminated for Company Cause, the Executive shall not
be entitled to any severance pay or other compensation beyond the date of
termination of Executive's employment.
4
5
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 obtain or accept a position with 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, whereby Executive will likely use Confidential Information or
whereby Executive has duties for such competitor that are the same or
substantially similar to those actually performed hereunder.
(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.
Nothing contained in this Section 8 is intended to prevent Executive
from investing in stock or other securities listed on a national securities
exchange or actively traded on the over the counter market of any corporation
which competes with the Company; provided, however, that Executive shall not
hold more than a total of five percent (5%) of all the issued and outstanding
stock or other securities of any such corporation (other than the Company or 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. Confidential Information shall not include information that has
become generally available to the public by the act of any person who has the
right to disclose such information.
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.
5
6
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, #000, Xxxxxxxxxx, Xxxxxxxx 00000, and if
to the Executive, at 000 Xxxxxxxx Xxxxx, Xxxxxxx, XX 00000. Notification
addresses may be changed with written notice provided to the other party in
accordance with this Section 12(a).
(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
through a Change of Control (as defined in the Company's Equity Incentive
Plan)." 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) Career Advancement. It is understood by the
parties that, upon the position of Chief Technology Officer becoming open, the
Company will utilize reasonable efforts to promote Executive into this position
within sixty (60) days of this position becoming open. The parties also agree
that this is not a binding commitment and such decision will be based upon a
number of factors, including, but not limited to, Executive's performance and
contributions to the Company prior to such position becoming open and a
determination as to whether the duties and responsibilities of the position can
effectively be performed from a location remote from the Company's corporate
headquarters. In the event that the conditions above have been satisfied and
such promotion to Chief Technology Officer is not made on or before April 1,
2000, then a material breach shall be deemed to have occurred and the Executive
can elect to terminate this Agreement for Executive Cause. The Executive must
provide written notification to the Company of such election to terminate for
Executive Cause no later than April 15, 2000.
(d) Amendment. This Agreement may not be amended
except by an instrument in writing executed by each of the undersigned parties.
(e) 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.
(f) 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.
6
7
(g) 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/ Xxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President of Engineering
THE EXECUTIVE:
By: /s/ Xxxxx X. Xxxxx
-----------------------------------
Name: Xxxxx X. Xxxxx
7
