<PAGE> 1
As filed with the Securities and Exchange Commission on November 17, 1999.
Registration No. 333 -
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------------------------
ESOFT, INC.
(Exact name of registrant as specified in its charter)
------------------------------------------------------
DELAWARE 84-0938960
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
295 INTERLOCKEN BLVD. # 500
BROOMFIELD, COLORADO 80021
(303) 444-1600
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
ESOFT, INC.
EQUITY COMPENSATION PLAN (AS AMENDED THROUGH MAY 20, 1999)
(Full title of plan)
---------------------------
JEFFREY FINN WITH A COPY TO:
CHIEF EXECUTIVE OFFICER LESTER R. WOODWARD, ESQ.
295 INTERLOCKEN BLVD. #500 DAVIS, GRAHAM & STUBBS LLP
BROOMFIELD, COLORADO 80021 370 17TH STREET, SUITE 4700
(303) 444-1600 DENVER, COLORADO 80202
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================
Proposed maximum Proposed maximum
Title of each class of offering price per aggregate offering Amount of
securities to be registered Amount to be registered share(1) price(1) registration fee
- ------------------------------ ----------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Common Stock ($.01 par value) 2,900,000 $7.28125 $21,115,625 $5,870
===================================================================================================================
</TABLE>
(1) Estimated solely for the purposes of calculating the amount of the
registration fee pursuant to Rule 457(h)(1). The price per share and aggregate
offering price are based upon the average of the high and low prices of the
shares as of November 15, 1999, as reported on the Nasdaq Small Cap Market.
<PAGE> 2
EXPLANATORY NOTE
On May 20, 1999, eSoft, Inc. (the "Company"), amended the eSOFT, INC.
EQUITY COMPENSATION PLAN (the "Plan"). As part of the amended Plan, the maximum
number of shares of Common Stock issued or transferred and covered by
outstanding awards granted under the Plan was increased to 2,900,000 shares of
Common Stock. This registration statement covers shares of the Company's Common
Stock issuable under the Plan.
PART II. INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents, which are filed with the Securities and
Exchange Commission, are incorporated in this Registration Statement by
reference:
(a) The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1998, filed with the Commission on March 24, 1999.
(b) The Company's Amendment No. 1 to its Annual Report on Form 10-KSB
for the year ended December 31, 1998, filed with the Commission on April 21,
1999.
(c) The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1999, filed with the Commission on May 17, 1999.
(d) The Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1999, filed with the Commission on August 16, 1999.
(e) The Company's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1999, filed with the Commission on November 15, 1999.
(f) The Company's Current Report on Form 8-K, filed with the Commission
on June 9, 1999.
(g) The Company's Current Report on Form 8-K, filed with the Commission
on June 28, 1999.
(h) The Company's Current Report on Form 8-K, filed with the Commission
on August 9, 1999.
(i) The Company's Amendment No. 1 to its Current Report on Form 8-K,
filed with the Commission on August 9, 1999.
(j) The Company's Current Report on Form 8-K, filed with the Commission
on September 27, 1999.
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<PAGE> 3
(k) All other documents filed by the Company with the Commission
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent
to the date of this Registration Statement and prior to the filing of a
Post-Effective Amendment to this Registration Statement indicating that all
securities offered under the Registration Statement have been sold, or
deregistering all securities then remaining unsold.
Any statement contained in a document incorporated, or deemed to be
incorporated, by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Registration
Statement.
4. DESCRIPTION OF SECURITIES.
The Company is authorized to issue 50,000,000 shares of common stock
and 5,000,000 shares of preferred stock. The holders of the Company's common
stock are entitled to vote at all meetings of stockholders, to receive dividends
if, as, and when declared by the board of directors, and to participate in any
distribution of property or assets on the liquidation, winding up, or other
dissolution of the Company. The Company's common stock has no preemptive or
conversion rights.
Certain provisions of our Amended and Restated Certificate of
Incorporation and Bylaws may make it difficult to change control of the Company.
Article 4 of the Amended and Restated Certificate of Incorporation allows the
Company's board of directors to determine or alter the rights, preferences,
privileges, and restrictions to be granted to or imposed upon any wholly
unissued series of preferred stock to fix the number of shares that constitute
any series of preferred stock, and to determine the designation and series of
preferred stock. Article III of the Bylaws establishes what is known as a
"classified board of directors," with three classes of directors designated as
Class I, Class II, and Class III. Each class is elected to serve for a
three-year term, with each class up for election in different years so that in
any one year, only one-third of all directors are up for election. At each
annual meeting of stockholders, the successors to the class of directors whose
terms expire at that meeting are elected to serve as directors for a three-year
term.
5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Bylaws and Certificate of Incorporation provide that the
Company shall, to the full extent permitted by the General Corporation Law of
the State of Delaware, as amended from time to time, indemnify all directors and
officers of the Company. Section 145 of the Delaware General Corporation Law
provides in part that a corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (other than an action by or in
the right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Similar indemnity is authorized for such persons against expenses (including
attorneys' fees) actually and reasonably incurred in defense or settlement of
any threatened, pending or completed action or suit by or in the right of the
corporation, if such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and
provided further that (unless a court of competent jurisdiction otherwise
provides) such person shall not have been adjudged liable to the corporation.
Any such indemnification may be made only as authorized in each specific case
upon a determination by the stockholders or disinterested directors that
indemnification is proper because the indemnitee has met the applicable standard
of conduct.
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<PAGE> 4
Additionally, the Certificate of Incorporation eliminates in certain
circumstances the monetary liability of directors of the Company for a breach of
their fiduciary duty as directors. This provision does not eliminate the
liability of a director (i) for a breach of the director's duty of loyalty to
the Company or its stockholders; (ii) for acts or omissions by the director not
in good faith or which involve intentional misconduct or a knowing violation of
law; (iii) for liability arising under Section 174 of the Delaware General
Corporation Law (relating to the declaration of dividends and purchase or
redemption of shares in violation of the Delaware General Corporation Law); or
(iv) for any transaction from which the director derived an improper personal
benefit.
7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
8. EXHIBITS
3.1 Certificate of Incorporation of the Company.1/
3.2 Amendment to Certificate of Incorporation.2/
3.3 Amended and Restated Bylaws of the Company.3/
3.4 Form of Common Stock Certificate of the Company.4/
4.1 eSoft, Inc. Equity Compensation Plan (as amended through
May 20, 1999)
5.1 Opinion and Consent of Davis, Graham & Stubbs LLP.
23.1 Consent of Davis, Graham & Stubbs LLP (included in Exhibit
5.1).
- ----------
1/ Filed previously with Amendment No. 1 to the Registration Statement on
Form 10-SB on February 18, 1998 and incorporated herein by reference.
2/ Filed previously with the Registration Statement on Form S-4 on March
19, 1999 and incorporated herein by reference.
3/ Filed previously as an Exhibit to the Registration Statement on Form
S-8, as filed with the Commission on November 17, 1999, as
incorporated herein by reference
4/ Filed previously as an Exhibit to the Company's Registration Statement
on Form 10-SB, as filed with the Commission on December 22, 1997, and
incorporated herein by reference.
-4-
<PAGE> 5
23.2 Consent of BDO Seidman LLP
23.3 Consent of Balukoff, Lindstrom & Co., P.A.
25.1 Power of Attorney (included in signature page).
9. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement, or any material change to such
information in the Registration Statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
-5-
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boulder, State of Colorado, on the 17th day of
November, 1999.
eSOFT, INC.
By: /S/ Jeffrey Finn
------------------------------------
Jeffrey Finn
Director and Chief Executive Officer
-6-
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Philip L. Becker, Sara Kraeski, and
Jeffrey Finn, and each or any of them, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended) to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agents, or any of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jeffrey Finn
- ------------------------------------
Jeffrey Finn President, Chief Executive November 17, 1999
Officer and Director
(Principal Executive
Officer)
/s/ Philip L. Becker
- ------------------------------------
Philip L. Becker Director, Chief November 17, 1999
Technology Officer and
Chairman of the Board
- ------------------------------------
Richard Eyestone Director November __, 1999
/s/ Brian E. Cohen
- ------------------------------------
Brian E. Cohen Director November 17, 1999
/s/ Richard B. Rice
- ------------------------------------
Richard B. Rice Director November 17, 1999
/s/ Amy Beth Hansman
- ------------------------------------
Amy Beth Hansman Principal Accounting and November 17, 1999
Financial Officer
</TABLE>
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
No. Description Page No.
<S> <C> <C>
3.1 Certificate of Incorporation of the Company.5/
3.2 Amendment to Certificate of Incorporation.6/
3.3 Amended and Restated Bylaws of the Company.7/
3.4 Form of Common Stock Certificate of the Company.8/
4.1 eSoft, Inc. Equity Compensation Plan (as amended through May 20, 1999)
5.1 Opinion and Consent of Davis, Graham & Stubbs LLP.
23.1 Consent of Davis, Graham & Stubbs LLP (included in Exhibit 5.1).
23.2 Consent of BDO Seidman LLP
23.3 Consent of Balukoff, Lindstrom & Co., P.A.
25.1 Power of Attorney (included in signature page).
</TABLE>
- --------------
5/ Filed previously with Amendment No. 1 to the Registration Statement on
Form 10-SB on February 18, 1998 and incorporated herein by reference.
6/ Filed previously with the Registration Statement on Form S-4 on March
19, 1999 and incorporated herein by reference.
7/ Filed previously as an Exhibit to the Registration Statement on Form
S-8, as filed with the Commission on November 17, 1999, as
incorporated herein by reference.
8/ Filed previously as an Exhibit to the Company's Registration Statement
on Form 10-SB, as filed with the Commission on December 22, 1997, and
incorporated herein by reference.
<PAGE> 1
EXHIBIT 4.1
ESOFT, INC.
EQUITY COMPENSATION PLAN
(AS AMENDED THROUGH MAY 20, 1999)
ARTICLE I
PURPOSE
The purpose of the eSoft, Inc. Equity Compensation Plan (the "Plan") is
to attract and retain directors, officers, other employees and consultants of
eSoft, Inc. and its Subsidiaries and to provide such persons with incentives to
continue in the long-term service of the Company and to create in such persons a
more direct interest in the future success of the operations of the Company by
relating incentive compensation to increases in stockholder value.
ARTICLE II
STRUCTURE OF THE PLAN
The Plan is divided into three separate programs:
A. The Discretionary Stock Option Grant Program under which eligible
persons may, at the discretion of the Committee or the Board, be granted Stock
Options;
B. The Restricted Stock Program under which eligible persons may, at
the discretion of the Committee or the Board, be granted rights to receive
shares of Common Stock, subject to certain restrictions; and
C. The Supplemental Bonus Program under which eligible persons may, at
the discretion of the Committee or the Board, be granted a right to receive
payment, in cash, shares of Common Stock, or a combination thereof, of a
specified amount.
ARTICLE III
DEFINITIONS
As used in this Plan:
"10% Stockholder" shall mean the owner of stock (as determined under
Section 424(d) of the Code) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Subsidiary.
<PAGE> 2
"Award" shall mean a grant made under this Plan in the form of Stock
Options, Restricted Stock or Supplemental Bonuses.
"Board" shall mean the Company's Board of Directors.
"Change in Control" shall mean a change in ownership or control of the
Company effected through any of the following transactions:
(i) the acquisition, directly or indirectly by any person or
group (within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act) other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, of beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than thirty percent (30%) of the total
combined voting power of the Company's outstanding securities;
(ii) a change in the composition of the Board over a period of
eighteen (18) consecutive months or less such that fifty percent (50%)
or more of the Board members have neither (A) been directors
continuously since the beginning of such period nor (B) been
unanimously elected or nominated by the Board for election as directors
during such period;
(iii) a stockholder-approved merger or consolidation to which
the Company is a party and in which (A) the Company is not the
surviving entity or (B) securities possessing more than thirty percent
(30%) of the total combined voting power of the Company's outstanding
securities are transferred to a person or persons different from the
persons holding those securities immediately prior to such transaction;
or
(iv) the sale, transfer or other disposition of all or
substantially all of the Company's assets in complete liquidation or
dissolution of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Committee" shall mean the Plan Committee and shall also include the
Employee Committee, if established, when reference is made to functions that may
be performed by the Employee Committee.
"Common Stock" shall mean the Company's common stock, $.01 par value.
"Company" shall mean eSoft, Inc., a Delaware corporation.
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<PAGE> 3
"Date of Grant" shall mean the date specified by the Committee on which
a grant of an Award shall become effective, which shall not be earlier than the
date on which the Committee takes action with respect thereto.
"Employee" shall mean an individual who is in the employ of the Company
or any Subsidiary.
"Employee Committee" shall mean a committee composed of at least one
member of the Board of Directors who may, but need not, be a Non-Employee
Director, which, if established, shall be empowered hereunder to grant Awards to
Eligible Employees who are not directors or "officers" of the Company as that
term is defined in Rule 16a-1(f) of the Exchange Act nor "covered employees"
under Section 162(m) of the Code, and to establish the terms of such Awards at
the time of grant, but shall have no other authority with respect to the Plan or
outstanding Awards except as expressly granted by the Plan.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" of a share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time listed on any stock
exchange or traded on the Nasdaq National Market, the Nasdaq Small Cap
Market, or any other securities trading market that reports daily the
closing selling price per share of Common Stock, the Fair Market Value
shall be deemed equal to the closing selling price per share of Common
Stock on the date in question on the stock exchange or other securities
trading market determined by the Committee to be the primary market for
the Common Stock, as such price is officially quoted on such exchange
or trading market.
(ii) If there is no closing selling price for the Common Stock
on the date in question, or if the Common Stock is neither listed on a
stock exchange or traded on a securities trading market that reports
daily the closing selling price per share of the Common Stock, then the
Fair Market Value shall be deemed to be the average of the
representative closing bid and asked prices on the date in question as
reported by the Nasdaq Stock Market or other reporting entity selected
by the Committee.
(iii) In the event the Common Stock is not traded publicly,
the Fair Market Value of a share of Common Stock shall be determined,
in good faith, by the Committee after such consultation with outside
legal, accounting and other experts as the Committee may deem
advisable, and the Committee shall maintain a written record of its
method of determining such value.
-3-
<PAGE> 4
"Non-Employee Director" shall mean a director of the Company who meets
the definition of (i) a "non-employee director" set forth in Rule 16b-3 under
the Exchange Act, as amended, or any successor rule and (ii) an "outside
director" set forth in Treasury Regulation 1.162-27, as amended, or any
successor rule.
"Non-Statutory Option" shall mean a Stock Option that (i) does not
qualify as an "incentive stock option" under Section 422 of the Code or any
successor provision or (ii) is not intended to be an incentive stock option.
"Optionee" shall mean the person so designated in an agreement
evidencing an outstanding Stock Option.
"Option Price" shall mean the purchase price payable by a Participant
upon the exercise of a Stock Option.
"Participant" shall mean a person who is selected by the Committee to
receive benefits under this Plan and (i) is at that time a director, officer or
other Employee of the Company or any Subsidiary, (ii) is at that time a
consultant or other independent advisor who provides services to the Company or
a Subsidiary, or (iii) has agreed to commence serving in any capacity set forth
in (i) or (ii) of this definition.
"Plan" shall mean the Company's Equity Incentive Plan as set forth
herein.
"Plan Committee" shall mean a committee consisting entirely of two or
more Non-Employee Directors, who are empowered hereunder to take all action
required in the administration of the Plan and the grant and administration of
Awards hereunder.
"Plan Effective Date" shall mean August 27, 1997, the date on which
this Plan was approved by the Company's Board of Directors.
"Redemption Value" shall mean the amount, if any, by which the Fair
Market Value of one share of Common Stock on the date on which the Stock Option
is exercised exceeds the Option Price for such share.
"Restricted Stock" shall mean shares of Common Stock granted under
Article VII that are subject to restrictions imposed pursuant to said Article.
"SEC" shall mean the U.S. Securities and Exchange Commission and any
successor thereto.
"Statutory Stock Option" shall mean a Stock Option that (i) qualifies
as an "incentive stock option" under Section 422 of the Code or any successor
provision and (ii) is intended to be treated for purposes of federal income tax
treatment as an option that is so qualified.
-4-
<PAGE> 5
"Stock Option" shall mean a right granted under the Plan to a
Participant to purchase Common Stock at a stated price for a specified period of
time.
"Subsidiary" shall mean a corporation, partnership, joint venture,
unincorporated association or other entity in which the Company has a direct or
indirect ownership or other equity interest; provided, however, for purposes of
determining whether any person may be a Participant for purposes of any grant of
Statutory Stock Options, "Subsidiary" means any subsidiary corporation of the
Company as defined in Section 424(f) of the Code.
"Supplemental Bonus" shall mean the right to receive payment in cash of
an amount determined pursuant to Article IX of this Plan.
"Term" shall mean the length of time during which a Stock Option may be
exercised.
ARTICLE IV
ADMINISTRATION OF THE PLAN
A. Delegation to the Committee. This Plan shall be administered by the
Plan Committee. Members of the Plan Committee and the Employee Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The action of a majority of the members of the Plan
Committee and the Employee Committee present at any meeting, or acts unanimously
approved in writing, shall be the acts of the Plan Committee and the Employee
Committee, respectively.
B. Powers of the Committee. The Plan Committee shall have full power
and authority, subject to the provisions of this Plan, to establish such rules
and regulations as it may deem appropriate for proper administration of this
Plan and to make such determinations under, and issue interpretations of, the
provisions of this Plan and any outstanding Awards as it may deem necessary or
advisable. In addition, the Plan Committee shall have full power and authority
to administer and interpret the Plan and make modifications as it may deem
appropriate to conform the Plan and all actions pursuant to the Plan to any
regulation or to any change in any law or regulation applicable to this Plan.
C. Actions of the Committee. All actions taken and all interpretations
and determinations made by the Committee in good faith (including determinations
of Fair Market Value) shall be final and binding upon all Participants, the
Company and all other interested persons. No director or member of the Committee
shall be personally liable for any action, determination or interpretation made
in good faith with respect to the Plan, and all directors and members of the
Committee shall, in addition to their rights as directors, be fully protected by
the Company with respect to any such action, determination or interpretation.
-5-
<PAGE> 6
D. Awards to Officers and Directors.
1. Awards to officers shall be granted by the Plan Committee.
If the Plan Committee is not composed as prescribed in the definition of Plan
Committee in Article III, the Board may take such action with respect to any
Award to an officer as it deems necessary or advisable to comply with Rule 16b-3
of the Exchange Act and any related rules, including but not limited to seeking
stockholder ratification of such Award or restricting the sale of any shares of
Common Stock underlying the Award for a period of six months.
2. Discretionary Awards to Non-Employee Directors, if any,
shall be granted by the Board.
ARTICLE V
ELIGIBILITY AND SELECTION
A. Eligibility. The persons eligible to participate in the
Discretionary Stock Option Grant Program, the Restricted Stock Program and the
Supplemental Bonus Program are as follows:
1. Employees of the Company or a Subsidiary;
2. Members of the Board; and
3. Consultants and other independent advisors who provide
services to the Company or a Subsidiary.
C. Selection of Participants. The Committee shall from time to time
determine the Participants to whom Awards shall be granted pursuant to the
Discretionary Stock Option Grant Program, the Restricted Stock Program and the
Supplemental Bonus Program.
-6-
<PAGE> 7
ARTICLE VI
SHARES AVAILABLE UNDER THE PLAN
A. Maximum Number. The number of shares of Common Stock issued or
transferred and covered by outstanding awards granted under this Plan shall not
in the aggregate exceed 2,900,000 shares of Common Stock, which may be Common
Stock of original issuance or Common Stock held in treasury, or a combination
thereof. This authorization shall be increased automatically on each succeeding
annual anniversary of the Plan Effective Date by an amount equal to that number
of shares equal to one-half of one percent of the Company's then issued and
outstanding shares of Common Stock. The shares may be divided among the various
Plan components as the Plan Committee shall determine, except that no more than
o shares shall be issued in connection with the exercise of Statutory Stock
Options under the Plan. Any portion of the shares added on each succeeding
anniversary of the Plan Effective Date which are unused during the Plan year
beginning on such anniversary date shall be carried forward and be available for
grant and issuance in subsequent Plan years, while up to 100% of the shares to
be added in the next succeeding Plan year (calculated on the basis of the
current Plan year's allocation) may be borrowed for use in the current Plan
year. Shares of Common Stock that may be issued upon the exercise of Stock
Options shall be applied to reduce the maximum number of shares remaining
available for use under the Plan. The Company shall at all times during the term
of the Plan and while any Stock Options are outstanding retain as authorized and
unissued Common Stock, or as treasury Common Stock, at least the number of
shares of Common Stock required under the provisions of this Plan, or otherwise
assure itself of its ability to perform its obligations hereunder.
B. Unused and Forfeited Stock. The following shares of Common Stock
shall automatically become available for use under the Plan: (i) any shares of
Common Stock that are subject to an Award under this Plan that are not used
because the terms and conditions of the Award are not met, including any shares
of Common Stock that are subject to a Stock Option that expires or is terminated
for any reason, (ii) any shares of Common Stock with respect to which a
Non-Statutory Option is exercised that are used for full or partial payment of
the Option Price, and (iii) any shares of Common Stock withheld by the Company
in satisfaction of the withholding taxes incurred in connection with the
exercise of a Non-Statutory Option.
C. Capital Changes. If any change is made to the Common Stock by reason
of any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without the Company's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the number and/or class of securities for which any one
person may be granted Awards under this Plan per calendar year, (iii) the number
and/or class of securities for which grants are subsequently to be made pursuant
to Article VI of this Plan, and (iv) the number and/or class of securities and
the Option Price per share in effect under each outstanding option under this
Plan. Such adjustments to the outstanding options are to be effected in a manner
that shall preclude the enlargement or dilution of rights and benefits under
such options. The adjustments determined by the Committee shall be final,
binding and conclusive.
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ARTICLE VII
DISCRETIONARY STOCK OPTION GRANT PROGRAM
A. Discretionary Grant of Stock Options to Participants. The Committee
may from time to time authorize grants to Participants of options to purchase
shares of Common Stock upon such terms and conditions as the Committee may
determine in accordance with the following provisions (in connection with any
grants under this paragraph II.A to Non-Employee Directors, "Committee" shall
mean the entire Board of Directors):
1. Each grant shall specify the number of shares of Common Stock
to which it pertains;
2. Each grant shall specify the Option Price per share;
3. Each grant shall specify the form of consideration to be paid
in satisfaction of the Option Price and the manner of payment
of such consideration, which may include (i) cash in the form
of currency or check or other cash equivalent acceptable to
the Company, (ii) shares of Common Stock that are already
owned by the Optionee and have a Fair Market Value at the time
of exercise that is equal to the Option Price, (iii) shares of
Common Stock with respect to which a Stock Option is
exercised, (iv) a recourse promissory note in favor of the
Company, (v) any other legal consideration that the Committee
may deem appropriate and (vi) any combination of the
foregoing;
4. Any grant may provide for deferred payment of the Option Price
from the proceeds of sale through a broker of some or all of
the shares of Common Stock to which the exercise relates;
5. Any grant may provide that shares of Common Stock issuable
upon the exercise of a Stock Option shall be subject to
restrictions whereby the Company has the right or obligation
to repurchase all or a portion of such shares if the
Participant's service to the Company is terminated before a
specified time, or if certain other events occur or conditions
are not met;
6. Successive grants may be made to the same Participant
regardless of whether any Stock Options previously granted to
the Participant remain unexercised;
7. Each grant shall specify the period or periods of continuous
service by the Optionee to the Company or any Subsidiary that
are necessary before the Stock Option or installments thereof
shall become exercisable;
8. All Stock Options that meet the requirements of the Code for
"incentive stock options" shall be Statutory Stock Options
unless (i) the option agreement clearly designates the Stock
Options granted thereunder, or a specified portion thereof, as
a Non-Statutory Option, or (ii) a grant of Statutory Stock
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<PAGE> 9
Options to the Participant would be prohibited under the Code
or other applicable law;
9. Each grant shall specify the Term of the Stock Option, which
Term shall not be greater than 10 years from the Date of
Grant; and
10. Each grant shall be evidenced by an agreement, which shall be
executed on behalf of the Company by any officer thereof and
delivered to and accepted by the Optionee and shall contain
such terms and provisions as the Committee may determine
consistent with this Plan.
B. Special Terms Applicable to Statutory Stock Options. The following
additional terms shall be applicable to all Statutory Stock Options granted
pursuant to this Plan. Stock Options that are specifically designated as
Non-Statutory Options shall not be subject to the terms of this paragraph VII.B.
1. Statutory Stock Options shall be granted only to Employees of
the Company or a Subsidiary;
2. The Option Price per share shall not be less than the Fair
Market Value per share of Common Stock on the Date of Grant;
3. The aggregate Fair Market Value of the shares of Common Stock
(determined as of the respective Date(s) of Grant) with
respect to which Statutory Stock Options granted to any
Employee under the Plan (or any other plan of the Company or a
Subsidiary) are exercisable for the first time during any one
calendar year shall not exceed the sum of One Hundred Thousand
Dollars ($100,000). To the extent the Employee holds two (2)
or more such Stock Options that become exercisable for the
first time in the same calendar year, the foregoing limitation
on the treatment of such Stock Options as Statutory Stock
Options shall be applied on the basis of the order in which
such Stock Options are granted; and
4. If any Employee to whom a Statutory Stock Option is granted is
a 10% Stockholder, then the Option Price per share shall not
be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the Date of Grant, and the
option Term shall not exceed five (5) years measured from the
Date of Grant.
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ARTICLE VIII
RESTRICTED STOCK PROGRAM
A. Awards Granted. Coincident with or following designation for
participation in the Plan, a Participant may be granted one or more Restricted
Stock Awards consisting of shares of Common Stock. The number of shares granted
as a Restricted Stock Award shall be determined by the Committee.
B. Restrictions. A Participant's right to retain a Restricted Stock
Award granted to such Participant under Article VII.A shall be subject to such
restrictions, including but not limited to his or her continuous employment by
the Company for a restriction period specified by the Committee or the
attainment of specified performance goals and objectives, as may be established
by the Committee with respect to such award. The Committee may in its sole
discretion require different periods of employment or different performance
goals and objectives with respect to different Participants, to different
Restricted Stock Awards or to separate, designated portions of the shares
constituting a Restricted Stock Award.
C. Privileges of a Stockholder, Transferability. A Participant shall
have all voting, dividend, liquidation and other rights with respect to shares
of Common Stock in accordance with its terms received by him or her as a
Restricted Stock Award under this Article VIII upon his or her becoming the
holder of record of such shares; provided, however, that the Participant's right
to sell, encumber or otherwise transfer such shares shall be subject to the
limitations of Article XI hereof.
D. Enforcement of Restrictions. The Committee may in its sole
discretion require of the placing a legend on the stock certificates referring
to the restrictions to enforce the restrictions referred to in paragraphs VIII.A
and VIII.B.
ARTICLE IX
SUPPLEMENTAL BONUS PROGRAM
A. Non-Statutory Stock Options. The Committee, at the time of grant or
at any time prior to exercise of any Non-Statutory Option, may provide for a
Supplemental Bonus from the Company or a Subsidiary in connection with a
specified number of shares of Common Stock then purchasable, or which may become
purchasable, under such Non-Statutory Option. Such Supplemental Bonus shall be
payable in cash upon the exercise of the Non-Statutory Option with regard to
which such Supplemental Bonus was granted. A Supplemental Bonus shall not exceed
the amount necessary to reimburse the Participant for the income tax liability
incurred by him or her upon the exercise of the Non-Statutory Option, calculated
using the maximum combined federal and applicable state income tax rates then in
effect and taking into account the tax liability arising from the Participant's
receipt of the Supplemental Bonus.
B. Restricted Stock Awards. The Committee, either at such time as the
restrictions with respect to a Restricted Stock Award lapse or a Section 83(b)
election is made under the Code by the Participant with respect to shares issued
in connection with a Restricted Stock
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<PAGE> 11
Award, may provide for a Supplemental Bonus from the Company or a Subsidiary.
Such Supplemental Bonus shall be payable in cash and shall not exceed the amount
necessary to reimburse the Participant for the income tax liability incurred by
him or her with respect to shares issued in connection with a Restricted Stock
Award, calculated using the maximum combined federal and applicable state income
tax rates then in effect and taking into account the tax liability arising from
the Participant's receipt of the Supplemental Bonus.
ARTICLE X
TERMINATION OF SERVICE
A. Statutory Stock Options. The following provisions shall govern the
exercise of any Statutory Stock Options held by any Employee whose employment is
terminated:
1. If the Optionee's employment with the Company is terminated
for any reason other than such Optionee's death or disability,
all Statutory Stock Options held by the Optionee shall be
exercisable, to the extent that such Stock Options were
exercisable on the date the Optionee's employment terminated,
for a period of three (3) months following such termination of
employment.
2. If the Optionee's employment with the Company is terminated
because of such Optionee's death or disability within the
meaning of Section 22(e)(3) of the Code, all Statutory Stock
Options held by the Optionee shall become immediately
exercisable and shall be exercisable for a period of twelve
(12) months following such termination of employment.
3. In no event may any Statutory Stock Option remain exercisable
after the expiration of the Term of the Stock Option. Upon the
expiration of any three (3) or twelve (12) month exercise
period, as applicable, or, if earlier, upon the expiration of
the Term of the Stock Option, the Stock Option shall terminate
and shall cease to be outstanding for any shares for which the
Stock Option has not been exercised.
B. Non-Statutory Options. The following provisions shall govern the
exercise of any Non-Statutory Options:
1. If the Optionee's employment, service on the Board or
consultancy is terminated for any reason other than such
Optionee's death or disability, all Non-Statutory Options held
by the Optionee shall be exercisable, to the extent such Stock
Options were exercisable on the date of such termination, for
a period of three (3) months following such termination.
2. If the Optionee's employment, service on the Board or
consultancy is terminated because of such Optionee's death or
disability, all Non-Statutory
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<PAGE> 12
Options held by the Optionee shall become immediately
exercisable and shall be exercisable for a period of twelve
(12) months following such termination.
3. In no event may any Non-Statutory Option remain exercisable
after the expiration of the Term of the Stock Option. Upon the
expiration of any three (3) or twelve (12) month exercise
period, as applicable, or, if earlier, upon the expiration of
the Term of the Stock Option, the Stock Option shall terminate
and shall cease to be outstanding for any shares for which the
Stock Option has not been exercised.
C. Restricted Stock Awards. In the event of the death or disability
(within the meaning of Section 22(e) of the Internal Revenue Code) or retirement
of a Participant, all employment period and other restrictions applicable to
Restricted Stock Awards then held by him or her shall lapse, and such awards
shall become fully nonforfeitable. Subject to Articles X and XIV, in the event
of a Participant's termination of employment for any other reason, any
Restricted Stock Awards as to which the employment period or other restrictions
have not been satisfied shall be forfeited.
ARTICLE XI
TRANSFERABILITY OF STOCK OPTIONS
During the lifetime of the Optionee, Statutory Stock Options shall be
exercisable only by the Optionee and shall not be assignable or transferable. In
the event of the Optionee's death prior to the end of the Term, any Stock Option
may be exercised by the personal representative of the Optionee's estate, or by
the person(s) to whom the option is transferred pursuant to the Optionee's will
or in accordance with the laws of descent and distribution. Upon the prior
written consent of the Board and subject to any conditions associated with such
consent, a Non-Statutory Option may be assigned in whole or in part during the
Optionee's lifetime to one or more members of the Optionee's immediate family
(as that term is defined in Rule 16a-1(e) of the Exchange Act) or to a trust
established exclusively for one or more such family members. In addition, the
Board, in its sole discretion, may allow a Non-Statutory Option to be assigned
in other circumstances deemed appropriate. The terms applicable to the assigned
portion shall be the same as those in effect for the Stock Option immediately
prior to such assignment and shall be set forth in such documents issued to the
assignee as the Committee may deem appropriate. Notwithstanding any assignment
or transfer of a Stock Option, in no event may any Stock Option remain
exercisable after the expiration of the Term of the Stock Option.
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ARTICLE XII
STOCKHOLDER RIGHTS
The holder of a Stock Option shall have no stockholder rights with
respect to the shares subject to the Stock Option until such person shall have
exercised the Stock Option, paid the Option Price and become a holder of record
of the purchased shares of Common Stock.
ARTICLE XIII
ACCELERATION OF VESTING
The Committee may, at any time in its sole discretion, accelerate the
vesting of any Award made pursuant to this Plan by giving written notice to the
Participant. Upon receipt of such notice, the Participant and the Company shall
amend the agreement relating to the Award to reflect the new vesting schedule.
The acceleration of the exercise period of an Award shall not affect the
expiration date of such Award.
ARTICLE XIV
CHANGE IN CONTROL
In the event of a Change in Control of the Company, all Awards
outstanding under the Plan as of the day before the consummation of such Change
in Control shall automatically accelerate for all purposes under this Plan so
that each Stock Option shall become fully exercisable with respect to the total
number of shares subject to such Stock Option and may be exercised for any or
all of those shares as fully-vested shares of Common Stock as of such date,
without regard to the conditions expressed in the agreements relating to such
Stock Option, and the restrictions on each Restricted Stock Award shall lapse
and such shares of Restricted Stock shall no longer be subject to forfeiture.
ARTICLE XV
CANCELLATION AND REGRANT OF OPTIONS
The Committee shall have the authority, at any and from time to time,
with the consent of the affected Optionees, to effect the cancellation of any or
all outstanding Stock Options and/or any Restricted Stock Awards and grant in
substitution new Stock Options and/or Restricted Stock Awards covering the same
or different number of shares of Common Stock. In the case of such a regrant,
the Option Price shall be set, in accordance with Article VII, on the new Date
of Grant.
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ARTICLE XVI
FINANCING
The Committee may, in its sole discretion, authorize the Company to
make a loan to a Participant in connection with the exercise of a Stock Option,
and may authorize the Company to arrange or guaranty loans to a Participant by a
third party in connection with the exercise of a Stock Option.
ARTICLE XVII
TAX WITHHOLDING
A. Tax Withholding. The Company's obligation to deliver shares of
Common Stock upon the exercise of Stock Options under the Plan shall be subject
to the satisfaction of all applicable federal, state and local income and
employment tax withholding requirements.
B. Surrender of Shares. The Committee may, in its discretion, provide
any or all holders of Non-Statutory Options under the Discretionary Stock Option
Grant Program with the right to use shares of Common Stock in satisfaction of
all or part of the taxes incurred by such holders in connection with the
exercise of such Stock Options. Such right may be provided to any such holder in
either or both of the following formats:
1. The election to have the Company withhold, from the shares of
Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option, a portion of those shares with an
aggregate Fair Market Value less than or equal to the amount
of taxes due as designated by such holder; or
2. The election to deliver to the Company, at the time the
Non-Statutory Option is exercised, one or more shares of
Common Stock previously acquired by such holder with an
aggregate Fair Market Value less than or equal to the amount
of taxes due as designated by such holder.
ARTICLE XVIII
EFFECTIVE DATE AND TERM OF THE PLAN
A predecessor to this Plan was adopted by the Board and the Company's
stockholders and became effective on the Plan Effective Date. On o, 1998, the
Company's stockholders approved an amendment to the Plan expanding the types of
awards available under the plan and increasing the maximum aggregate number of
shares of Common Stock that may be made subject to Stock Options from 900,000
shares to o shares. This Plan shall terminate upon the earliest of (i) ten (10)
years after the Plan Effective Date or (ii) the termination of all outstanding
Awards in connection with a Change in Control. Upon such plan termination, all
outstanding Awards shall thereafter continue to have force and effect in
accordance with the provisions of the documents evidencing such Awards.
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<PAGE> 15
ARTICLE XIX
AMENDMENT OF THE PLAN
A. The Plan Committee shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects, unless stockholder
approval of such amendments or modifications is required under applicable law.
No such amendment or modification shall adversely affect the rights and
obligations with respect to Awards outstanding under the Plan at the time of
such amendment or modification, unless the Participant consents to such
amendment or modification.
B. Stock Options in excess of the number of shares of Common Stock then
available for issuance may be granted under this Plan, provided any excess
shares actually issued under this Plan shall be held in escrow until such
further action, necessary to approve a sufficient increase in the number of
shares available for issuance under the Plan, is taken. If such further action
is not obtained within 12 months after the date the first such excess issuances
are made, then (i) any unexercised options granted on the basis of such excess
shares shall terminate and cease to be outstanding, and (ii) the Company shall
promptly refund to the Optionees the exercise price paid for any excess shares
issued under the Plan and held in escrow, together with interest for the period
the shares were held in escrow, and such shares shall thereupon be automatically
cancelled and cease to be outstanding. If stockholder approval of a sufficient
increase in the number of shares subject to the Plan does not occur within 12
months of the grant of any Stock Option intended to be an Statutory Stock Option
which is granted pursuant to this Article XIX.B, such Stock Option shall be
deemed to be a Non-Statutory Option.
ARTICLE XX
REGULATORY APPROVALS
The implementation of the Plan, the granting of any Award under the
Plan and the issuance of any shares of Common Stock under any Award shall be
subject to the Company's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the Awards granted
pursuant to the Plan and the shares of Common Stock issued pursuant to any Award
under the Plan. No Stock Option shall be exercisable, no shares of Common Stock
or other assets shall be issued or delivered under the Plan, and no transfer of
any Non-Statutory Option shall be approved by the Committee, unless and until
there shall have been compliance with (i) all applicable requirements of Federal
and state securities laws, including the filing and effectiveness of a
registration statement on Form S-8 under the Securities Act of 1933, as amended,
covering the shares of Common Stock issuable under the Plan, and (ii) all
applicable listing requirements of the Nasdaq SmallCap Market or the Nasdaq
National Market, as applicable.
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ARTICLE XXI
NO EMPLOYMENT/SERVICE RIGHTS
Nothing in this Plan shall confer upon any Participant any right to
continue in service for any period or specific duration or interfere with or
otherwise restrict in any way the rights of the Company (or any Subsidiary
employing or retaining such person) or of the Participant, which rights are
hereby expressly reserved by each, to terminate such person's service at any
time for any reason, with or without Cause.
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EXHIBIT 5.1
November 16, 1999
Board of Directors
eSoft, Inc.
5335 Sterling Drive, Suite C
Boulder, Colorado 80301
Re: Sale of Common Stock Pursuant to Registration
Statement on Form S-8 Covering eSoft, Inc. Equity
Compensation Plan (as amended through May 20, 1999).
Ladies and Gentlemen:
We have acted as special counsel to eSoft, Inc., a Delaware
corporation, (the "Company") in connection with the registration pursuant to a
Registration Statement on Form S-8 (the "Registration Statement") of 2,900,000
shares of the Company's common stock, par value $.01 per share (the "Common
Stock''), issuable upon exercise of options or awards that have been or may be
granted under the eSoft, Inc. Equity Compensation Plan (as amended through May
20, 1999) (the "Plan). The 2,900,000 shares of Common Stock being registered
under the Registration Statement are referred to herein as the "Shares." This
opinion is delivered to you pursuant to Item 601 (b)(5) of Regulation S-K under
the Securities Act of 1933, as amended. With your permission, all assumptions
and statement of reliance herein have been made without independent
investigation or verification on our part except to the extent otherwise
expressly stated, and we express no opinion with respect to the subject matter
or accuracy of such assumptions or items relied upon.
In connection with this opinion, we have (i) investigated such
questions of law, (ii) examined originals or certified, conformed or
reproduction copies of such agreements, instruments, documents and records of
the Company, (iii) examined such certificates of public officials, officers or
other representatives of the Company, and other persons, and such other
documents, and (iv) reviewed such information from officers and representatives
of the Company and others as we have deemed necessary or appropriate for the
purposes of this opinion.
In all such actions, we have assumed the legal capacity of all natural
persons executing documents (other than the capacity of officers of the Company
executing documents in such capacity), the genuineness of all signatures on
original or certified copies, and the conformity to original or certified
documents of all copies submitted to us s conformed or reproduction copies. As
to various questions of fact relevant to the opinion expressed herein, we have
relied upon and assumed the accuracy of, certificates and oral or
<PAGE> 2
written statements and other information of or from public officials, officers
or other representatives of the Company, and other persons
Based upon the foregoing, and subject to the limitations set forth
herein, we are of the opinion that the Shares, when issued and paid for (with
the consideration received by the Company being not less than the par value
thereof) in accordance with the Plan and any agreement applicable to the Shares,
will be validly issued, fully paid, and non-assessable.
The opinion expressed herein is limited to the General Corporation Law
of the State of Delaware. We assume no obligation to supplement this letter if
any applicable laws change after the date hereof or if we become aware of any
facts that may change the opinion expressed herein after the date hereof. While
we are not licensed to practice law in the State of Delaware, we have reviewed
applicable provisions of the General Corporation Law of Delaware as we have
deemed appropriate in connection with the opinions expressed herein that are
governed or affected by the General Corporation Law of Delaware.
The opinion expressed herein is solely for your benefit and may not be
relied upon in any manner or for any purpose by any other person and may not be
quoted in whole or in part without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form S-8 relating to the registration of the Shares,
as amended from time to time, as the attorneys who will pass upon legal matters
in connection with the issuance of the Shares, and to the filing of this opinion
as an exhibit to the aforesaid Registration Statement. In giving this consent,
we do not admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended or the rules of the
Securities and Exchange Commission.
Very truly yours,
/s/ DAVIS, GRAHAM & STUBBS LLP
DAVIS, GRAHAM & STUBBS LLP
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
eSoft, Inc.
Broomfield, Colorado
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated January
29, 1999, relating to the financial statements of eSoft, Inc. appearing in the
Company's Annual Report on Form 10-KSB/A-1 for the year ended December 31, 1998
and our report dated July 16, 1999, relating to the supplemental consolidated
financial statements of eSoft, Inc. appearing in the Company's Form 8-K dated
August 9, 1999.
/s/ BDO SEIDMAN, LLP
Denver, Colorado
November 17, 1999
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-8 of eSoft, Inc. ('eSoft") of our report dated
February 4, 1999, relating to the balance sheet of Apexx Technology, Inc.
("Apexx") as of December 31, 1998, and the statements of operations,
stockholders' deficit and cash flows for each of the two years in the period
ended December 31, 1998 appearing in eSoft's 8-K dated August 9, 1999. Our
report contains an explanatory paragraph regarding Apexx's ability to continue
as a going concern.
/s/ Balukoff, Lindstrom & Co., P.A.
Boise, Idaho
November 1, 1999
