SMARTSERV ONLINE, INC.
RESTRICTED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of October 13, 1999 between SmartServ Online,
Inc., a Delaware corporation (the "Company"), and Xxxxxx X. Xxxxx ("Purchaser").
WHEREAS Purchaser is an employee of the Company whose continued
affiliation with the Company is considered to be important for the Company's
continued growth; and
WHEREAS in order to provide Purchaser an opportunity to acquire an
equity interest in the Company as an incentive for Purchaser to continue to
participate in the affairs of the Company, the Company is willing to sell to
Purchaser and Purchaser desires to purchase shares of Common Stock according to
the terms and conditions hereof.
THEREFORE, the parties agree as follows:
1. PURCHASE AND SALE OF STOCK. Subject to the terms and conditions of
this Agreement, the Company hereby agrees to sell to Purchaser and
Purchaser agrees to purchase from the Company 76,818 shares of the
Company's Common Stock (the "Stock") at a price of $0.75 per share (the
"Per Share Purchase Price"), for an aggregate purchase price of
$57,613.5. (The Per Share Purchase Price being equal to the fair market
value of the Stock as determined by the closing sales price for the
Stock on October 12, 1999.) The purchase price for the Stock shall be
paid as follows: $768.18 in cash and the balance by a non-recourse
promissory note (the "Note") in the form attached hereto as Exhibit A,
in the amount of $56,845.32. The Note is non-recourse with respect to
the principal and recourse with respect to the interest obligation. The
Note shall be secured by pledge of the Stock and Purchaser shall be
required to execute and deliver a Security Agreement in the form
attached hereto as Exhibit B (the "Security Agreement"). If during the
time that the Note remains outstanding, the Company sells shares of the
Company's Common Stock or other securities convertible into the
Company's Common Stock, pursuant to a Change of Control Transaction (as
defined below) at a price per share less than the Per Share Purchase
Price the aggregate principal amount of the Note shall be automatically
reduced to an amount equal the number of shares of Stock multiplied by
the per share price at which such securities are to be sold in the
Change of Control Transaction (the "Adjusted Principal Amount").
2. REPURCHASE OPTION, PUT OPTION AND RELEASE OF SHARES.
(a) REPURCHASE OPTION AND PUT OPTION.
(i) In the event of any voluntary or involuntary
termination of Purchaser's employment with the
Company (including as a result of death but excluding
Purchaser's termination of employment without Cause
(as defined below) or for Good Reason (as defined
below)) before all shares of the Stock are released
from the Company's repurchase option under Section
2(b) below, the Company shall, upon the date of such
termination (as reasonably fixed and determined by
the Company) have an irrevocable, exclusive option
for a period of twelve (12) months from such date to
repurchase all or any portion of the Stock which has
not been released from the repurchase option
described in this Section 2 (the "Repurchase Option")
at the time of such termination at the original
purchase price per share. The Repurchase Option shall
be exercised by the Company by written notice to
Purchaser or his executor and, at the Company's
option, (A) by delivery to Purchaser or his executor
with such notice and a check in the amount of the
aggregate repurchase price for the Stock being
repurchased, (B) by cancellation by the Company of an
amount of Purchaser's indebtedness to the Company
equal to the aggregate repurchase price for the Stock
being repurchased, or (C) by a combination of (A) and
(B) so that the combined payment and cancellation of
indebtedness equals such aggregate repurchase price.
Upon delivery of such notice and the payment of the
aggregate repurchase price in any of the ways
described above, the Company shall become the legal
and beneficial owner of the Stock being repurchased
and all rights and interests therein or relating
thereto, and the Company shall have the right to
retain and transfer to its own name the number of
shares of the Stock being repurchased by the Company.
(ii) If Purchaser's employment with the Company is
terminated (A) by the Company other than for Cause,
(B) as a result of Purchaser's death or Disability
(as defined below) or (C) by Purchaser for Good
Reason, Purchaser or his executor shall have the
right to cause the Company to repurchase all Stock at
the original purchase price per share (the "Put
Option"). The Put Option shall be exercised by
Purchaser by written notice to the Company delivered
within sixty (60) days of such termination. The
repurchase price shall be paid at the Company's
option, (A) by delivery to Purchaser or his executor
within ninety (90) days of a check in the amount of
the aggregate repurchase price for the Stock being
repurchased, (B) by cancellation by the Company of an
amount of Purchaser's indebtedness to the Company
equal to the aggregate repurchase price for the Stock
being repurchased, or (C) by a combination of (A) and
(B) so that the combined payment and cancellation of
indebtedness equals such aggregate repurchase price.
Upon payment of the aggregate repurchase price in any
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of the ways described above, the Company shall become
the legal and beneficial owner of the Stock being
repurchased and all rights and interests therein or
relating thereto, and the Company shall have the
right to retain and transfer to its own name the
number of shares of the Stock being repurchased by
the Company.
(b) RELEASE OF SHARES FROM REPURCHASE OPTION.
(i) Subject to Section 2(b)(ii), 1/36th of the Stock
shall be released from the Company's Repurchase
Option on the one-month anniversary of this
Agreement, and an additional 1/36th of the Stock
shall be released on each monthly anniversary of such
date thereafter until all shares of the Stock have
been released; provided in each case that there has
not been any voluntary or involuntary termination
prior to each such date of release.
(ii) Notwithstanding Section 2(b)(i), all of the
stock shall be released from the Company's Repurchase
Option in the event that (A) Purchaser terminates his
employment for Good Reason (as defined below), (B)
the Company terminates the Purchaser's employment
with the Company without cause or (C) there is a
Change of Control (as defined below).
(c) CERTAIN DEFINITIONS
(i) For purposes of this Agreement, "Cause" shall
mean termination of the Purchaser by the Company
upon:
(A) the willful and continued failure by the
Purchaser to substantially perform his
duties with the Company (other than any such
failure resulting from his incapacity due to
physical or mental illness), after a written
demand for substantial performance is
delivered to the Purchaser by the Board of
Directors which specifically identifies the
manner in which the Board of Directors
believes that the Purchaser has not
substantially performed his duties, and
which failure has not been cured within
thirty days after such written demand; or
(B) the willful and continued engaging by
the Purchaser in conduct which is
demonstrably and materially injurious to the
Company, monetarily or otherwise.
For purposes of this Subsection (c)(i), no act, or
failure to act, on the Purchaser's part shall be
considered "willful" unless done, or omitted to be
done, by the Purchaser in bad faith and without
reasonable belief that such action or omission was in
the best interest of the Company.
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(ii) For purposes of this Agreement "Change of
Control" shall mean Change of Control shall occur if:
(i) at any time less than 60% of the members of the
Board of Directors shall be individuals who were
either (x) Directors on the effective date of this
Agreement or (y) individuals whose election, or
nomination for election, was approved by a vote
(including a vote approving a merger or other
agreement providing for the membership of such
individuals on the Board of Directors) of at least
two-thirds of the Directors then still in office who
were Directors on the effective date of this
Agreement or who were so approved (the "Continuing
Directors"); or (ii) the shareholders of the
Corporation shall approve an agreement or plan
providing for the Corporation to be merged,
consolidated or otherwise combined with, or for all
or substantially all its assets or stock to be
acquired by, another corporation, as a consequence of
which the former shareholders of the Corporation will
own, immediately after such merger, consolidation,
combination or acquisition, less than a majority of
the Voting Power of such surviving or acquiring
corporation or the parent thereof (a "Change of
Control Transaction").
(iii) For purposes of this Agreement, "Disability"
shall mean that Purchaser, at the time notice of
termination is given, has been unable to
substantially perform his duties under this Agreement
for a period of not less than six (4) consecutive
months as the result of his incapacity due to
physical or mental illness.
(iv) For purposes of this Agreement, "Good Reason"
shall mean the termination of employment by the
Purchaser upon the occurrence of any one of the
following events: (i) the Company's assignment to
Purchaser of duties inconsistent in any material
respect with his position (including status and
reporting) or any other diminution of authority,
duties or responsibilities, excluding an isolated
action by the Company not taken in bad faith and
which is remedied by the Company within 15 days after
receipt of notice from the Purchaser, (ii) a Change
of Control, other than a Change of Control
Transaction that was approved by a majority of the
Continuing Directors, or (iii) the relocation of the
Purchaser's principal place of employment to a
location more than 50 miles from his principal place
of employment on the date of this Agreement (unless
such relocation is closer to the Purchaser's
principal residence).
(iv) This Agreement shall not confer upon Purchaser
any right with respect to employment by the Company,
nor shall it interfere with or affect in any manner
the right or power of the Company, or a parent or
subsidiary of the Company, to terminate Purchaser's
employment with the Company, which right is hereby
reserved.
3. STOCK SPLITS, ETC. If, from time to time during the term of this
Agreement: (i) there is any stock dividend or liquidating dividend of
cash and/or property, stock split,
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recapitalization, readjustment or other change in the character or
amount of any of the outstanding securities of the Company; or (ii)
there is any consolidation, merger or sale of all, or substantially
all, of the assets of the Company; then, in such event, any and all
new, substituted or additional securities or other property to which
Purchaser is entitled by reason of Purchaser's ownership of the Stock
shall be immediately subject to this Agreement and be included in the
word "Stock" for all purposes with the same force and effect as the
shares of Stock currently subject to the Repurchase Option and other
terms of this Agreement. While the aggregate repurchase price payable
upon execution of the Repurchase Option shall remain the same after
each such event, the repurchase price per share of Stock shall be
appropriately adjusted.
4. RESTRICTION ON TRANSFER. Purchaser shall not, except as contemplated
by the Security Agreement, sell, transfer, pledge, hypothecate or
otherwise dispose of any shares of the Stock which remain subject to
the Repurchase Option. The Company shall not be required (i) to
transfer on its books any shares of Stock which shall have purportedly
been sold or transferred in violation of any of the provisions set
forth in this Agreement, or (ii) to treat as owner of such shares or to
accord the right to vote as such owner or to pay dividends to any
purported transferee to whom such shares shall have been purportedly
transferred.
5. REGISTRATION RIGHTS
(a) Piggy Back Registration Rights. If at any time the Company
shall determine to register for its own account or the account
of others under the Securities Act of 1933, as amended (the
"Securities Act") any of its equity securities, other than on
Form S-8 or Form S-4 or their then equivalents relating to
shares of Common Stock to be issued solely in connection with
any acquisition of any entity or business or shares of Common
Stock issuable in connection with stock option or other
employee benefit plans, it shall send to the Purchaser written
notice of such determination and, if within 15 days after
receipt of such notice, the Purchaser shall so request in
writing, the Company shall use its best efforts to include in
such registration statement all or any part of the Stock not
then subject to the Repurchase Option the Purchaser requests
to be registered, except that if, in connection with any
offering involving an underwriting of the Company's Common
Stock to be issued by the Company, the managing underwriter
shall impose a limitation on the number of shares of such
Common Stock which may be included in the registration
statement because, in its judgment, such limitation is
necessary to effect an orderly public distribution, then the
Company shall be obligated to include in such registration
statement only such limited portion of the Stock with respect
to which the Purchaser has requested inclusion hereunder. Any
exclusion of the Stock shall be made pro rata among the all
holders of the Company's Common Stock with similar
registration rights seeking to include such shares, in
proportion to the number of such shares sought to be included
by such holders. No incidental right under
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this Section 5(a) shall be construed to limit any registration
required under Section 5(b). The obligations of the Company
under this Section 5(a) may be waived at any time upon the
written consent of the Purchaser and shall expire on the 3rd
anniversary of this Agreement.
(b) S-3 Registration Rights. In addition to the rights
provided the Purchaser and other holders of the Company's
Common Stock with registration rights in Section 5(a) above,
if the registration of the Company's Common Stock under the
Securities Act can be effected on Form S-3 (or any similar
form promulgated by the Commission that permits secondary
offerings of securities), then upon the written request of the
Purchaser, the Company will, as expeditiously as possible, use
its best efforts to effect qualification and registration
under the Securities Act on Form S-3 of all or such portion of
the Stock as the Purchaser shall specify (but not less than
25,000 shares); provided, however, that the Company shall not
be required to effect more than one registration during any
12-month period pursuant to this Section 5(b).
(c) The Company will use its best efforts to maintain the
effectiveness for up to 90 days (or such shorter period of
time as the underwriters need to complete the distribution of
the registered offering, or one year in the case of a "shelf"
registration statement on Form S-3) of any registration
statement pursuant to which any of the Stock is being offered,
and from time to time will amend or supplement such
registration statement and the prospectus contained therein to
the extent necessary to comply with the Securities Act and any
applicable state securities statute or regulation. The Company
will also provide the Purchaser with as many copies of the
prospectus contained in any such registration statement as he
may reasonably request.
(d) The Company shall not be required to register any shares
under this paragraph 5 if the Purchaser could sell such shares
under Rule 144 promulgated under the Securities Act.
6. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. The share certificate evidencing the Stock issued
hereunder shall be endorsed with the following legends (in
addition to any legends required under applicable state
securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION
MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
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THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE
COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH
THE SECRETARY OF THE COMPANY.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to
ensure compliance with the restrictions referred to herein,
the Company may issue appropriate "stop transfer" instructions
to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate
notations to the same effect in its own records.
7. PURCHASER'S REPRESENTATIONS AND COVENANTS. In connection with the
purchase of the Stock, Purchaser hereby represents and warrants to the
Company as follows:
(a) INVESTMENT INTENT; CAPACITY TO PROTECT INTERESTS.
Purchaser is purchasing the Stock solely for Purchaser's own
account for investment and not with a view to or for sale in
connection with any distribution of the Stock or any portion
thereof and not with any present intention of selling,
offering to sell or otherwise disposing of or distributing the
Stock or any portion thereof. Purchaser also represents that
the entire legal and beneficial interest of the Stock is being
purchased, and will be held, for Purchaser's account only, and
neither in whole or in part for any other person. Purchaser
either (i) has a pre-existing business or personal
relationship with the Company or at least one of its officers,
directors or controlling persons, or (ii) by reason of
Purchaser's business or financial experience (or the business
or financial experience of Purchaser's professional advisors
who are unaffiliated with and who are not compensated by the
Company or any affiliate or selling agent of the Company,
directly or indirectly), can be reasonably assumed to have the
capacity to evaluate the merits and risks of an investment in
the Company and to protect Purchaser's own interests in
connection with this transaction.
(b) RESIDENCE. Purchaser's principal residence is within the
State of New York and is located at the address indicated
beneath Purchaser's signature below.
(c) INFORMATION CONCERNING COMPANY. Purchaser has discussed
the Company and its plans, operations and financial condition
with the Company's officers and has received all such
information as Purchaser has deemed necessary and appropriate
to enable Purchaser to evaluate the financial risk inherent in
making an investment in the Stock. Purchaser has received
satisfactory and complete information concerning the business
and financial condition of the Company in response to all
inquiries in respect thereof.
(d) ECONOMIC RISK. Purchaser realizes that the purchase of the
Stock will be a highly speculative investment and involves a
high degree of risk. Purchaser is
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able, without impairing Purchaser's financial condition, to
hold the Stock for an indefinite period of time and to suffer
a complete loss on Purchaser's investment.
(e) RESTRICTED SECURITIES. Purchaser understands and
acknowledges that:
(i) The Stock has not been registered under the
Securities Act of 1933, as amended, in reliance upon
a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed
herein.
(ii) The Stock must be held indefinitely unless it is
subsequently registered under the Securities Act or
unless an exemption from such registration is
otherwise available. In addition, Purchaser
understands that the certificate evidencing the Stock
will be imprinted with a legend which prohibits the
transfer of the Stock unless it is registered or such
registration is not required in the opinion of
counsel satisfactory to the Company.
(f) DISPOSITION UNDER RULE 144. Purchaser understands that:
(i) The shares of Stock are restricted securities
within the meaning of Rule 144 promulgated under the
Securities Act; that the exemption from registration
under Rule 144 will not be available in any event for
at least one (1) year from the date of payment of the
Note (or the applicable portion thereof relating to
such shares of Stock), and even then will not be
available unless (i) a public trading market then
exists for the Common Stock of the Company, (ii)
adequate information concerning the Company is then
available to the public, and (iii) other terms and
conditions of Rule 144 are complied with; and that
any sale of the Stock may be made only in limited
amounts in accordance with such terms and conditions
of Rule 144;
(ii) That at the time Purchaser wishes to sell the
Stock there may be no public market upon which to
make such a sale; that, even if such a public market
then exists, the Company may not be satisfying the
current public information requirements of Rule 144;
and that, in such event, Purchaser would be precluded
from selling the Stock under Rule 144 even if the one
(1) year minimum holding period had been satisfied;
and
(iii) In the event all of the requirements of Rule
144 are not satisfied, registration under the
Securities Act or compliance with Regulation A or
another registration exemption will be required;
that, notwithstanding the fact that Rule 144 is not
exclusive, the Staff of the SEC has expressed its
opinion that persons proposing to sell private
placement securities other than in a registered
offering or pursuant to Rule 144 will have a
substantial burden of proof in establishing that an
exemption from registration is available for such
offers or sales; and that such persons and their
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respective brokers who participate in such
transactions do so at their own risk.
(g) FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting Purchaser's representations set forth above,
Purchaser further agrees that Purchaser shall in no event make
any disposition of all or any portion of the Stock unless and
until:
(i) Either:
(A) There is then in effect a Registration
Statement under the Securities Act covering
such proposed disposition, and such
disposition is made in accordance with said
Registration Statement; or
(B) (1) Purchaser shall have notified the
Company of the proposed disposition and
shall have furnished the Company with a
detailed statement of the circumstances
surrounding the proposed disposition; (2)
Purchaser shall have furnished the Company
with an opinion of Purchaser's counsel to
the effect that such disposition will not
require registration of such shares under
the Securities Act; and (3) such opinion of
Purchaser's counsel shall have been
concurred in by counsel for the Company, and
the Company shall have advised Purchaser of
such concurrence; and,
(ii) The shares of Stock proposed to be transferred
are no longer subject to the Repurchase Option set
forth in Section 2 hereof.
8. ARBITRATION.
(a) ELECTION OF ARBITRATION. At the option of either party,
any and all disputes or controversies whether of law or fact
and of any nature whatsoever arising from or respecting this
Agreement shall be decided by arbitration by the American
Arbitration Association in accordance with the rules and
regulations of that Association.
(b) SELECTION OF ARBITRATORS. The arbitrators shall be
selected as follows: In the event the Company and Purchaser
agree on one arbitrator, the arbitration shall be conducted by
such arbitrator. In the event the Company and Purchaser do not
so agree, the Company and Purchaser shall each select one
independent, qualified arbitrator, and the two arbitrators so
selected shall select the third arbitrator. The Company
reserves the right to object to any individual arbitrator who
shall be employed by or affiliated with a competing
organization.
(c) CONDUCT OF ARBITRATION. Arbitration shall take place in
Stamford, Connecticut or any other location mutually agreeable
to the parties. Reasonable
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notice of the time and place of arbitration shall be given to
all persons other than the parties as shall be required by
law, and such persons or their authorized representatives
shall have the right to attend and/or participate in all the
arbitration hearings in such manner as the law shall require.
(d) SECRECY OF PROCEEDINGS. At the request of either party,
arbitration proceedings will be conducted in the utmost
secrecy; in such case all documents, testimony and records
shall be received, heard and maintained by the arbitrators in
secrecy under seal, available for the inspection only of the
Company or Purchaser and their respective attorneys and their
respective experts, who shall agree in advance and in writing
to receive all such information confidentially and to maintain
such information in secrecy until such information shall
become generally known.
(e) RELIEF. The arbitrators, who shall act by majority vote,
shall be able to decree any and all relief of an equitable
nature (including without limitation such relief as temporary
restraining orders or temporary and/or permanent injunctions),
and shall also be able to award damages, with or without an
accounting and costs. The decree or judgment of an award
rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
9. GOVERNING LAW. This Agreement shall be governed and construed by the
laws of the State of Connecticut without regard to its choice of laws
provisions.
10. MISCELLANEOUS.
(a) RIGHTS AS SHAREHOLDER. Subject to the provisions and
limitations hereof, Purchaser may, during the term of this
Agreement, exercise all rights and privileges of a shareholder
of the Company with respect to the Stock purchased hereby.
(b) FURTHER ASSURANCES. The parties agree to execute such
further instruments and to take such further action as may
reasonably be necessary to carry out the intent of this
Agreement.
(c) NOTICES. Any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given upon
personal delivery (including by express courier) or upon
deposit in the United States Post Office, by First Class mail
with postage and fees prepaid, addressed to Purchaser at his
address shown on the Company's employment records and to the
Company at the address of its principal corporate offices
(attention: Chief Executive Officer) or at such other address
as such party may designate by ten (10) days' advance written
notice to the other party.
(d) ASSIGNMENT. This Agreement shall inure to the benefit of
the successors and assigns of the Company and, subject to the
restrictions on transfer herein set
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forth, be binding upon Purchaser, his heirs, executors,
administrators, successors and assigns. No party to this
Agreement may assign its rights and obligations under this
Agreement without the prior written consent of the other
party.
(e) AUTHORIZATION OF TRANSFER. Purchaser hereby authorizes and
directs the Secretary or transfer agent of the Company to
transfer the Stock as to which the Repurchase Option has been
exercised from Purchaser to the Company or the Company's
assignees.
(f) WAIVER. Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed
as a waiver of any such provision or provisions, nor prevent
that party thereafter from enforcing each and every other
provision of this Agreement. The rights granted both parties
herein are cumulative and shall not constitute a waiver of
either party's right to assert all other legal remedies
available to it under the circumstances.
(g) ADVICE OF COUNSEL. Purchaser has reviewed this Agreement
in its entirety, has had an opportunity to obtain the advice
of counsel prior to executing this Agreement and fully
understands all provisions hereof.
(h) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original and all of
which together shall constitute one instrument.
(i) ENTIRE AGREEMENT. This Agreement, the Note and the
Security Agreement represent the entire agreement between the
parties with respect to the purchase of Common Stock by
Purchaser and the vesting thereof, supersede all prior
understandings and agreements, written and oral, with regard
thereto, and satisfy all of the Company's obligations to
Purchaser with regard to the issuance or sale of securities.
This Agreement may be modified or amended only in writing
signed by both parties.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
SMARTSERV ONLINE, INC.,
a Delaware corporation
/s/ Xxxxxxxxx X. Xxxxxxxx
-------------------------
Xxxxxxxxx X. Xxxxxxxx
Chief Executive Officer
/s/ Xxxxxx X. Xxxxx
--------------------------
Xxxxxx X. Xxxxx
00 Xxxxx Xxxxx
Xxxxxx, Xxx Xxxx 00000
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