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EXHIBIT 10.7
EXCHANGE APPLICATIONS, INC.
FOUNDER RESTRICTED STOCK AGREEMENT
RESTRICTED STOCK AGREEMENT (this "Agreement"), dated as of November
8th, 1996, by and between EXCHANGE APPLICATIONS, INC., a Delaware corporation
(the "Company"), and Xxxxxx X. Xxxxxxx (the "Employee").
W I T N E S S E T H:
WHEREAS, the company and Grant & Partners Limited Partnership have
entered into an Assignment and Assumption Agreement of even date herewith (the
"Assignment Agreement");
WHEREAS, in connection with the consummation of the assignment and
assumption provided in the Assignment Agreement, the Company has agreed to issue
shares of its Common Stock to the Employee upon the terms and subject to the
conditions hereof; and
WHEREAS, the Board of Directors of the Company has authorized the
purchase of Common Stock by the Employee subject to the terms of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Employee hereby agree as
follows:
1. PURCHASE OF STOCK. The Employee hereby agrees to purchase from the
Company and the Company hereby agrees to sell to the Employee, on the date
hereof 848,800 shares of its Common Stock, $.001 par value per share (the
"Stock"), for a purchase price of $.001 per share of Stock (the "Issue Price").
2. PURCHASE OPTION. All Stock purchased by the Employee pursuant to the
terms of this Agreement shall be subject to the option of the Company with
respect to the purchase thereof (the "Purchase Option") under circumstances set
forth in this Section 2.
(a) If the employment of the Employee by the Company is terminated (i)
voluntarily by the Employee or (ii) by the Company for "cause" at any time prior
to the dates set forth below, the Company shall have the right, within 60 days
after the date of any such termination, to
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exercise the Purchase Option as to the maximum portion of the Stock determined
according to the following table:
If Termination of Employment Portion of the Stock Subject
Occurs to the Purchase Option:
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Prior to 12/31/96: 50%
From (and including) 12/31/96
to (but excluding) 12/31/97: 33.33%
From (and including) 12/31/97
to (but excluding) 12/31/98: 16.67%
On and after 12/31/98: None
(b) The Purchase Option shall be exercisable by the Company at a price
per share of Stock equal to the lesser of the Issue Price or the fair market
value of the Stock as determined by the Board of Directors in accordance with
the Plan. The Company may assign any or all of its rights to exercise a Purchase
Option under this Section 2. If the Company (or its assignee) shall fail to
exercise the Purchase Option with respect to any part or all of the Stock
subject thereto, such Stock may thereafter be held and transferred by the
Employee (or other holder thereof), subject, however, to any transfer or
purchase restrictions applicable thereto pursuant to the Company's charter or
by-laws or any other agreement relating to the Stock or applicable law. Stock
not subject to the Purchase Option is herein referred to as "Vested Stock."
(c) Notwithstanding anything to the contrary in this Agreement, in the
event of a "Change of Control", all Stock held by the Employee issued under this
Agreement, and securities issued in respect thereof, shall be deemed Vested
Stock and the Purchase Option shall immediately terminate and be of no further
force and effect. A "Change of Control" shall mean (i) the direct or indirect
acquisition by any person of 50% or more of the aggregate voting power of the
Company, (ii) the sale of all or substantially all of the assets of the Company
(other than a merger or consolidation of the Company with, or the sale of all or
substantially all of the assets of the Company to, any entity if 50% or more of
the aggregate voting power of such entity is held immediately after such
transaction by persons who were stockholders of the Company immediately prior to
such transaction).
(d) For purposes hereof, "cause" shall mean the Employee's (i) failure
to devote his full time and efforts to the business of the Company, (ii)
commission of any act of embezzlement, fraud, larceny or theft or other willful
misconduct injurious to the Company or (iii) breach of his
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obligations under the Employment Agreement of even date herewith to which he is
a party with the Company.
3. RESTRICTIONS ON TRANSFER. The Employee shall not sell, transfer,
pledge, hypothecate or otherwise dispose of or encumber (other than to the
Company pursuant to Section 2 above) any of the Stock that is not Vested Stock.
Notwithstanding the foregoing, the Employee may transfer all or any of the Stock
to any member of his immediate family (as defined below) or to any trust for the
benefit of such family member or the Employee, PROVIDED that such transferee
shall agree with the Company in writing, as a condition to such transfer, to be
bound by all of the provisions of this Agreement, and PROVIDED, FURTHER, that
the Employee's employment (rather than an employment of such transferee) shall
continue to govern for purposes of Section 2. The term "immediate family" shall
mean any parent, spouse, lineal descendant, brother or sister of the Employee.
4. MANNER OF EXERCISE. The Purchase Option shall be exercised by
written notice signed by an officer of the Company and delivered or mailed to
the Employee (or to his personal representative if the Employee is deceased) as
provided in Section 12(a) below. The price for the Stock upon exercise of the
Purchase Option shall be payable, at the option of the Company, by cancellation
of all or a portion of any outstanding indebtedness of the Employee to the
Company or in cash (by check), or both.
5. APPLICATION TO OTHER PROPERTY. If from time to time during the term
of this Agreement, there is any stock dividend or liquidating dividend of cash
and/or property, stock split or other change in the character or amount of any
of the outstanding securities of the Company, or if there is any consolidation,
merger or sale of all, or substantially all, of the assets of the Company, then,
in any such event, any and all new, substituted or additional securities or
other property to which the Employee is entitled by reason of his ownership of
any Stock which then remains subject to the Purchase Option in Section 2 above
shall be immediately subject to the Purchase Option and shall be included in the
word "Stock" for all purposes of the Purchase Option with the same force and
effect as the Stock which then remains subject to the Purchase Option in Section
2 above. While the total Issue Price for such Stock shall remain the same after
each such event, the Issue Price per unit of Stock (or substituted or additional
property) upon exercise of the Purchase Option shall be appropriately adjusted.
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6. INVESTMENT REPRESENTATIONS; TRANSFER LEGENDS.
(a) In connection with his purchase of the Stock, the Employee hereby
represents and warrants to the Company as follows:
(i) The Employee is purchasing the Stock solely for his 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 in any transaction other than a transaction
exempt from registration under the Act. The Employee also represents that the
entire legal and beneficial interest of the Stock is being purchased, and will
be held, for the Employee's account only, and neither in whole or in part for
any other person. The Employee either has a pre-existing business or personal
relationship with the Company or its officers, directors or controlling persons
or by reason of the Employee's business or financial experience or the business
or financial experience of the Employee'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, could be reasonably
assumed to have the capacity to evaluate the merits and risks of an investment
in the Company and to protect the Employee's own interests in connection with
this transaction.
(ii) The Employee has heretofore discussed the Company and its
plans, operations and financial condition with the Company's officers and has
heretofore received all such information as the Employee has deemed necessary
and appropriate to enable the Employee to evaluate the financial risk inherent
in making an investment in the Stock, and the Employee has received satisfactory
and complete information concerning the business and financial condition of the
Company in response to all inquiries in respect thereof.
(iii) The Employee realizes that the purchase of the Stock
will be a highly speculative investment and involves a high degree of risk, and
the Employee is able to hold the Stock for an indefinite period of time and
suffer a complete loss on his investment.
(iv) The Employee understands and acknowledges that:
(I) the sale of the Stock has not been registered
under the Securities Act of 1933 (the "Act"), and the Stock must be held
indefinitely unless subsequently registered under said Act or an
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exemption from such registration is available and the Company is under no
obligation to register the Stock;
(II) the share certificate(s) representing the
Stock will be stamped with the legends specified in this Section; and
(III) the Company will make a notation in its
records of the aforementioned restrictions on transfer and legends.
(IV) The Employee understands that the Stock
constitutes restricted securities within the meaning of Rule 144 promulgated
under the Act; that the exemption from registration under Rule 144 will not be
available in any event for at least two years from the date of purchase and
payment for the Stock, and even then will not be available unless (I) a public
trading market then exists for the Common Stock, (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.
(v) Without in any way limiting his representations set forth
above, the Employee further agrees that he shall in no event make any
disposition of all or any portion of the Stock unless and until:
(A)(1) there is then in effect a registration statement under
the Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or, (2)(a) the Employee 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, (b) the Employee shall have furnished the Company with an opinion
of the Employee's counsel to the effect that such disposition will not require
registration of the Stock under the Act, and (c) such opinion of the Employee's
counsel shall have been concurred in by counsel for the Company and the Company
shall have advised the Employee of such concurrence; and,
(B) The Stock proposed to be transferred is no longer subject
to the purchase options set forth herein.
(b) All certificates representing any Stock subject to the
provisions of this Agreement shall have endorsed thereon the following legends:
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(i) "This security may not be sold, assigned, or otherwise
transferred or disposed of except in compliance with the conditions
specified in the Founder Restricted Stock Agreement, dated as of
November 15, 1996, between the Corporation and the holder of this
security, as amended from time to time, a copy of which will be
furnished by the Corporation without charge upon written request."
(ii) "The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or any state
securities laws and neither the securities nor any interest therein may
be offered, sold, transferred, pledged or otherwise disposed of except
pursuant to an effective registration statement under such Act or such
laws or an exemption from registration under said Act or such laws,
which in the opinion of counsel are reasonably satisfactory to counsel
for this corporation, is available."
(iii) Any legend required to be placed thereon by appropriate
Blue Sky officials.
7. DEPOSIT OF SHARES. As security for the Employee's faithful
performance of the terms of this Agreement and to ensure that the Stock will be
available for delivery upon exercise of the Purchase Option as herein provided,
the Employee agrees to deliver to and deposit with the Secretary of the Company
("Escrow Agent"), as Escrow Agent in this transaction, one stock assignment duly
endorsed (with date and number of shares blank) together with the certificate or
certificates evidencing the Stock. Such documents are to be held by the Escrow
Agent during the term of this Agreement and shall be delivered by the Escrow
Agent to the Company on the written notice by the Company to the Escrow Agent
that the Company has exercised the Purchase Option, or in the event this
Agreement terminates without the exercise by the Company of the Purchase Option
as to all of the Stock, the Company shall instruct the Escrow Agent to deliver
to the Employee the portion of such Stock as to which the Purchase Option was
not exercised.
8. TRANSFERS NOT RECOGNIZED. The Company shall not be required (i) to
transfer on its books any shares of Stock which shall have been transferred in
violation of any of the provisions of this Agreement, or (ii) to treat as owner
of such Stock or to accord the right to vote as such owner or to pay dividends
to any transferee to whom such Stock shall have been transferred.
9. RIGHTS AS STOCKHOLDER. Subject to the provisions of Section 7 above,
the Employee shall, during the term of this Agreement, exercise all
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rights and privileges of a stockholder of the Company with respect to the Stock,
including without limitation the right to vote and the right to receive any
dividends payable with respect thereto.
10. TAXES. The Employee acknowledges that an amount equal to the fair
market value of the Stock in excess of the Issue Price shall constitute income
received by the Employee for income tax purposes, and that provision must be
made for income taxes to be withheld by the Company with respect to Stock,
whenever and to the extent that the Company's Purchase Option expires pursuant
to Section 3 of this Agreement, or upon the execution of this Agreement if the
Employee makes an election pursuant to Section 83(b) of the Internal Revenue
Code. The Employee agrees that he will make appropriate provisions for the
collection and payment of such withholding taxes, in whatever manner is
reasonably determined by the Company, including without limitation payment by
the Employee to the Company of cash in the amount of required withholding taxes
or withholding from other compensation due the Employee.
11. MISCELLANEOUS. (a) Any notice hereunder shall be in writing
personally delivered by courier or mailed by registered or certified mail,
postage prepaid, and addressed to the Employee at the address appearing in the
records of the Company or to the Company at its principal executive offices, or
at such other address as may be specified by the Employee or the Company to the
other party by notice given in the manner herein provided. A notice shall be
deemed to have been given and received upon the earlier of (i) three business
days after the date on which it is deposited in the U.S. mails or (ii) receipt
by the party to whom such notice is directed.
(b) No waiver by a party hereto of a breach of any provision
of this Agreement shall be deemed to be a waiver of any preceding or subsequent
breach of the same or any other provision thereof.
(c) The Employee acknowledges that the remedy at law for any
breach of this Agreement will be inadequate, and agrees that the Company shall,
in addition to whatever other remedies it may have, be entitled to injunctive
relief.
(d) This Agreement shall be governed by the laws of The
Commonwealth of Massachusetts (without giving effect to principles of conflicts
or choice of laws of Massachusetts or of any other jurisdiction). Subject to the
terms of the Plan, this Agreement sets forth the entire
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agreement between the parties concerning the subject matter hereof and
supersedes any prior agreements and understandings relating to the subject
matter hereof. No amendment or modification hereof will be effective unless it
is in writing and signed by the parties.
(e) This Agreement shall bind and benefit the parties hereto
and their respective successors and legal representatives and permitted assigns.
(f) If any provision of this Agreement is unenforceable or
illegal, the remainder of this Agreement shall remain in full force and effect.
If any one or more of the provisions contained in this Agreement shall for any
reason be held to be excessively broad as to duration, geographical scope,
activity or subject, such provision shall be construed by limiting and reducing
it so as to be enforceable to the extent compatible with applicable law.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
on the date first above written.
EXCHANGE APPLICATIONS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
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Title: Vice President
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/S/ Xxxxxx X. Xxxxxxx
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Name of Employee
