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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 15, 1999
REGISTRATION NO. 333-______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
-----------------------------
APPNET SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-2077860
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6707 DEMOCRACY BOULEVARD
BETHESDA, MARYLAND 20817
(301) 493-8900
(Address, including zip code and telephone number,
including area code, of registrant's principal executive offices)
APPNET SYSTEMS, INC. 1999 STOCK INCENTIVE PLAN
APPNET SYSTEMS, INC. 1998 STOCK OPTION AND INCENTIVE PLAN
CENTURY COMPUTING, INCORPORATED INCENTIVE STOCK OPTION PLAN
INTERNET OUTFITTERS, INC. 1996 INCENTIVE STOCK OPTION PLAN
SENIOR MANAGEMENT AGREEMENTS WITH CERTAIN SENIOR MANAGERS
EMPLOYEE STOCK PURCHASE AGREEMENTS WITH CERTAIN EMPLOYEES
(Full title of the plan)
KEN S. BAJAJ, PRESIDENT AND CHIEF EXECUTIVE OFFICER
APPNET SYSTEMS, INC.
6707 DEMOCRACY BOULEVARD
BETHESDA, MARYLAND 20817
(301) 493-8900
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PER OFFERING FEE(3)(4)
(1) SHARE(2) PRICE(2)
- ----------------------------------------- ------------------ ---------------- ------------------- ------------------
<S> <C> <C> <C> <C>
1999 Stock Incentive Plan, common 2,000,000 $20.188 $40,376,000 $11,225
stock, $0.0005 par value
1998 Stock Option and Incentive Plan, 1,578,947 $17.10 $26,999,994 $7,506
common stock, $0.0005 par value
Century Computing, Incorporated 704,127 $1.4099 $992,749 $276
Incentive Stock Plan, common stock,
$0.0005 par value
Internet Outfitters, Inc. 1996 22,300 $3.762 $83,893 $23
Incentive Stock Option Plan, common
stock, $0.0005 par value
Common stock, $0.0005 par value 49,122 $8.55 $419,993 $117
Common stock, $0.0005 par value 659,643 $0.3007 $198,355 $55
Total 5,014,139 $69,070,984 $19,202(4)
- --------------------------------------------------------------------------------------------------------------------
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(1) The number of shares of AppNet Systems, Inc. ("AppNet") common
stock, par value $0.0005 per share ("Common Stock"), stated
above consists of the aggregate number of shares that (a) may
be sold upon the exercise of options which have been granted
and/or may hereafter be granted under the AppNet 1999 Stock
Incentive Plan (the "1999 Plan"), the AppNet 1998 Stock Option
and Incentive Plan, as amended and restated (the "1998 Plan"),
the Century Computing, Incorporated Incentive Stock Option
Plan, as amended (the "Century Plan") and the Internet
Outfitters, Inc. 1996 Incentive Stock Option Plan, as amended
(the "Internet Outfitters Plan"), (b) were issued upon the
exercise of options which were granted under the the 1998 Plan
and the Century Plan, (c) were issued under certain Senior
Management Agreements by and between AppNet and each of Ronald
B. Alexander, Anne Filippone, Robert G. Harvey, Robert D.
McCalley, Jack Pearlstein and Toby Tobaccowala and (d) were
issued under certain employee stock purchase agreements by and
between AppNet and each of Barbara Barnes, Julie Colton,
Robert George, Thomas Meloche, Robert Simms and Andrew Stern,
plus such indeterminate number of shares as may be issued
under the 1998 Plan, the 1999 Plan, the Century Plan and the
Internet Outfitters Plan to prevent dilution resulting from
stock splits, stock dividends or similar transactions in
accordance with Rule 416 under the Securities Act of 1933.
(2) Estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(h) under the Securities
Act of 1933 as follows: (a) in the case of shares of our
Common Stock which may be purchased upon exercise of
outstanding options, the fee is calculated on the basis of the
price at which the options may be exercised; and (b) in the
case of shares of our Common Stock for which options have not
yet been granted and the option price of which is therefore
unknown, the fee is calculated on the basis of the average of
the high and low prices per share of Common Stock as reported
on The Nasdaq Stock Market's National Market July 12, 1999.
(3) The Registration Fee is calculated by multiplying the product
of the exercise price per share and the number of shares
subject to options at such exercise price, by .000278.
(4) This Registration Fee was previously paid in connection with
the initial filing of the Registration Statement on Form S-1
of AppNet Systems, Inc. (File No. 333-75205) filed with the
Securities and Exchange Commission on March 29, 1999. The
Registration Statement on Form S-1 that was declared
effective by the Securities and Exchange Commission on June
17, 1999 registered a smaller number of shares of Common
Stock than was initially registered on March 29, 1999.
Accordingly, AppNet has a credit in the amount of $21,140,
a portion of which should be applied to cover the Registration
Fee in connection with this registration statement.
<PAGE>
EXPLANATORY NOTE
This registration statement registers shares of common stock,
par value $0.0005 per share ("Common Stock"), of AppNet Systems, Inc. ("AppNet")
that (a) may be sold upon the exercise of options which have been granted and/or
may hereafter be granted under AppNet's 1999 Stock Incentive Plan (the "1999
Plan"), AppNet's 1998 Stock Option and Incentive Plan, as amended and restated
(the "1998 Plan"), the Century Computing, Incorporated Incentive Stock Option
Plan, as amended (the "Century Pla ) and the Internet Outfitters, Inc. 1996
Incentive Stock Option Plan, as amended (the "Internet Outfitters Plan,"
together with the 1999 Plan, the 1998 Plan and the Century Plan, the "Stock
Option Plans"), (b) were issued upon the exercise of options granted under the
1998 Plan and the Century Plan, (c) were issued under certain Senior Management
Agreements by and between AppNet and each of Ronald B. Alexander, Anne
Filippone, Robert G. Harvey, Robert D. McCalley, Jack Pearlstein and Toby
Tobaccowala (the "Senior Management Agreements") and (d) were issued under
certain employee stock purchase agreements by and between AppNet and each of
Barbara Barnes, Julie Colton, Robert George, Thomas Meloche, Robert Simms and
Andrew Stern (the "Stock Purchase Agreements," together with the Stock Option
Plans and the Senior Management Agreements, the "Employee Benefit Plans").
This registration statement contains two parts. The first part
contains a prospectus prepared in accordance with Part I of Form S-3 (in
accordance with Instruction C of the General Instructions to Form S-8), which
covers reoffers and resales of certain shares of our Common Stock issued
pursuant to certain of the Employee Benefit Plans. The second part contains
information required in the registration statement pursuant to Part II of Form
S-8. Pursuant to the Note to Part I of Form S-8 the plan information specified
by Part I of Form S-8 is not being filed with the Securities and Exchange
Commission.
AppNet will provide without charge to any person, upon written
or oral request of such person, a copy of each document incorporated by
reference in Item 3 of Part II of this registration statement (which documents
are incorporated by reference in the Section 10(a) prospectus as set forth in
Form S-8), other documents required to be delivered to eligible plan
participants pursuant to Rule 428(b) of the Securities Act of 1933 or additional
information about the Employee Benefit Plans. Requests should be directed to
AppNet Systems, Inc., 6707 Democracy Boulevard, Suite 1000, Bethesda, Maryland,
20817, attention: William S. Dawson, Esq. (telephone 301-493-8900).
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
Note: The document(s) containing the plan information required by Item
1 of Form S-8 and the statement of availability of registrant information and
any other information required by Item 2 of Form S-8 will be sent or given to
participants of the Employee Benefit Plans as specified by Rule 428 under the
Securities Act of 1933. In accordance with Rule 428 and the requirements of Part
I of Form S-8, such documents are not being filed with the Securities and
Exchange Commission either as part of this registration statement or as
prospectuses or prospectus supplements pursuant to Rule 424 under the Securities
Act of 1933. AppNet will maintain a file of such documents in accordance with
the provisions of Rule 428. Upon request, AppNet will furnish to the Securities
and Exchange Commission or its staff a copy or copies of all of the documents
included in such file.
<PAGE>
APPNET SYSTEMS, INC.
1,372,047 SHARES OF COMMON STOCK,
$0.0005 PAR VALUE
----------
REOFFER PROSPECTUS
----------
JULY 15, 1999
<PAGE>
----------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
REOFFER PROSPECTUS SUMMARY ................................. 3
RISK FACTORS ............................................... 6
CAUTIONARY NOTICE REGARDING
FORWARD-LOOKING
STATEMENTS .............................................. 20
USE OF PROCEEDS ............................................ 21
SELLING SHAREHOLDERS ....................................... 22
PLAN OF DISTRIBUTION ....................................... 24
LEGAL MATTERS .............................................. 24
EXPERTS .................................................... 25
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE .................................. 25
WHERE YOU CAN FIND ADDITIONAL
INFORMATION ............................................ 26
INDEMNIFICATION ............................................ 26
----------
</TABLE>
YOU SHOULD RELY ONLY ON THE INFORMATION IN THIS DOCUMENT OR TO WHICH WE
HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION
THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL TO SELL
THESE SECURITIES. YOU SHOULD ASSUME THAT THE INFORMATION IN THIS DOCUMENT IS
ACCURATE ONLY AS OF THE DATE OF THIS DOCUMENT.
Unless otherwise indicated, (a) all references to "AppNet," "we," "us,"
and "our" refer to AppNet Systems, Inc. and, after their respective acquisitions
or formations, its subsidiaries and (b) all references to "GTCR" refer to GTCR
Golder Rauner, L.L.C. and its affiliates, including GTCR Fund VI, L.P., GTCR VI
Executive Fund, L.P. and GTCR Associates VI.
AppNet has filed for trademark registration of "AppNet." This reoffer
prospectus also includes trademarks and tradenames of other parties.
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<PAGE>
APPNET SYSTEMS, INC.
1,372,047 SHARES OF COMMON STOCK,
$0.0005 PAR VALUE
----------
REOFFER PROSPECTUS
----------
The shares of common stock, par value $0.0005 per share ("Common
Stock"), of AppNet Systems, Inc. (the "Company" or "AppNet") covered by this
reoffer prospectus may be offered and sold to the public by certain shareholders
of AppNet (collectively, the "Selling Shareholders"). The Selling Shareholders
have acquired the Common Stock through their exercise of stock options granted
to them under AppNet's 1998 Stock Option and Incentive Plan, as amended and
restated (the "1998 Plan") and the Century Computing, Incorporated Incentive
Stock Option Plan, as amended (the "Century Plan," together with the 1998 Plan,
the "Stock Option Plans"), through the purchase of shares of Common Stock under
certain Senior Management Agreements by and between AppNet and each of Ronald B.
Alexander, Anne Filippone, Robert G. Harvey, Robert D. McCalley, Jack Pearlstein
and Toby Tobaccowala (the "Senior Management Agreements") or through the
purchase of shares of Common Stock under certain employee stock purchase
agreements by and between AppNet and each of Barbara Barnes, Julie Colton,
Robert George, Thomas Meloche, Robert Simms and Andrew Stern (the "Stock
Purchase Agreements," together with the Stock Option Plans and the Senior
Management Agreements, the "Employee Benefit Plans"). All of the shares of our
Common Stock registered under this reoffer prospectus are sometimes hereinafter
referred to as the "Securities."
Our Common Stock is quoted on The Nasdaq Stock Market's National Market
under the symbol "APNT". On July 13, 1999, the closing price of a share of our
Common Stock on The Nasdaq Stock Market's National Market was $19.6875 per
share.
Subject to the volume limitations in Rule 144(e) of the Securities
Act of 1933, as amended, and subject to certain contractual limitations,
shares of our Common Stock offered hereby may be sold from time to time
directly by or on behalf of a Selling Shareholder in one or more transactions
on The Nasdaq Stock Market's National Market or on any stock exchange on
which the Common Stock may be listed at the time of sale, in privately
negotiated transactions or through a combination of such methods, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at fixed prices (which may be changed) or at negotiated prices.
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The Selling Shareholders may sell shares through one or more agents,
brokers or dealers or directly to purchasers. Such brokers or dealers may
receive compensation in the form of commissions, discounts or concessions from
the Selling Shareholders and/or purchasers of the shares or both (which
compensation as to a particular broker or dealer may be in excess of customary
commissions). In connection with such sales, the Selling Shareholders and any
participating broker or dealer may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, and any commissions they receive and the
proceeds of any sale of shares may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933. AppNet will not receive any
proceeds from the sale of the shares by the Selling Shareholders.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
REOFFER PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this reoffer prospectus is July 15, 1999.
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<PAGE>
REOFFER PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT MAY
BE IMPORTANT TO YOU. YOU SHOULD READ THE ENTIRE REOFFER PROSPECTUS BEFORE
DECIDING WHETHER TO INVEST IN OUR COMMON STOCK. THE INFORMATION IN THIS REOFFER
PROSPECTUS HAS BEEN ADJUSTED TO GIVE EFFECT TO A 2.85-FOR-ONE REVERSE STOCK
SPLIT OF OUR COMMON STOCK WHICH BECAME EFFECTIVE JUNE 15, 1999. THE FOLLOWING
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED DESCRIPTIONS AND
FINANCIAL INFORMATION AND STATEMENTS APPEARING ELSEWHERE IN THIS REOFFER
PROSPECTUS AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE.
APPNET SYSTEMS, INC.
AppNet provides Internet and electronic commerce professional services
and solutions to medium-sized and large businesses. AppNet develops electronic
commerce solutions that facilitate and promote communication and commerce
between businesses and consumers as well as among businesses and their trading
partners. We focus on maximizing the opportunities presented by the Internet and
electronic commerce to enhance all aspects of our clients' operations, from the
front end of their business, creative Website design, to the back end,
back-office integration of existing systems and electronic commerce outsourcing,
creating an end-to-end solution. Our professional services include:
- strategic consulting;
- interactive media services such as creative Website design and
development, branding, which is the creation of a unique
corporate identity for a client and its products, media
planning and buying;
- Internet-based application development of software
applications that are capable of running on the Internet and
are written in language such as Java, C++ and Visual Basic;
- electronic commerce systems integration, which is the
integration of electronic commerce systems, which are systems
that automate the receipt, processing and delivery of
transaction data and other information, with other corporate
software and computer-based applications; and
- electronic commerce outsourcing, which is the performance of
electronic commerce services that would otherwise be handled
by the client's internal staff using the client's resources.
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AppNet was founded in late 1997 and, therefore, we have a brief
operating history upon which you can evaluate our business and prospects. We
have incurred substantial losses since AppNet was founded, and we anticipate we
will continue to incur substantial losses for the foreseeable future. See "Risk
Factors--Our brief operating history makes it difficult to predict our success"
and "Risk Factors--We have an accumulated deficit of $30.7 million and
anticipate future losses."
We compete in the highly competitive markets for Internet and
electronic commerce professional services. To compete more effectively, we plan
to: expand our client relationships; increase repeat and recurring revenues;
build and enhance complementary skill sets and maintain our technological
expertise; expand and strengthen our marketing and technology relationships with
leading technology vendors; pursue client-driven geographic expansion; expand
and develop industry-specific expertise; and attract and retain a highly
specialized workforce.
We currently have offices in 14 U.S. locations, including the
metropolitan areas of Boston, Denver, Detroit, Los Angeles, New York and
Washington, DC. Our principal executive office is located at 6707 Democracy
Boulevard, Suite 1000, Bethesda, Maryland 20817, and our telephone number is
(301) 493-8900. We maintain a site on the World Wide Web at
http://www.appnet.net; however, the information found on our Website is not part
of this reoffer prospectus.
THE OFFERING
Up to 1,372,047 shares of our Common Stock are being offered pursuant
to this reoffer prospectus which may be offered from time to time by the Selling
Shareholders for their own account.
PLAN OF DISTRIBUTION
Subject to the volume limitations in Rule 144(e) of the Securities
Act of 1933, as amended, and subject to certain contractual limitations,
shares of our Common Stock offered hereby may be sold from time to time
directly by or on behalf of a Selling Shareholder in one or more transactions
on The
4
<PAGE>
Nasdaq Stock Market's National Market or on any stock exchange on which the
Common Stock may be listed at the time of sale, in privately negotiated
transactions or through a combination of such methods, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at fixed prices (which may be changed) or at negotiated prices. See
"Plan of Distribution."
5
<PAGE>
RISK FACTORS
INVESTING IN OUR COMMON STOCK INVOLVES RISK. YOU SHOULD CAREFULLY
CONSIDER THE RISKS DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS REOFFER
PROSPECTUS BEFORE YOU PURCHASE ANY OF OUR COMMON STOCK. THE RISKS AND
UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES WE FACE. ADDITIONAL RISKS
AND UNCERTAINTIES, INCLUDING THOSE THAT WE DO NOT KNOW ABOUT NOW OR THAT WE
CURRENTLY DEEM IMMATERIAL, MAY ALSO ADVERSELY AFFECT OUR BUSINESS.
OUR BRIEF OPERATING HISTORY MAKES IT DIFFICULT TO PREDICT OUR SUCCESS.
AppNet was formed in late 1997. We have a brief operating history upon
which you can evaluate our business and prospects. Our historical results of
operations do not fully give effect to the operations of the companies we have
acquired and the pro forma financial information incorporated by reference in
this reoffer prospectus is based in part on the separate pre-acquisition
financial information of the acquired companies. As a result, our historical
results of operations and pro forma financial information may not give you an
accurate indication of our future results of operations or prospects. Companies
like us in an early stage of development frequently encounter risks, expenses
and difficulties associated with starting a new business, many of which may be
beyond their control. These risks and difficulties apply particularly to AppNet
because our markets, Internet and electronic commerce professional services, are
new and rapidly changing.
WE HAVE AN ACCUMULATED DEFICIT OF $30.7 MILLION AND ANTICIPATE FUTURE LOSSES.
We have incurred substantial losses since AppNet was founded, and we
anticipate we will continue to incur substantial losses for the foreseeable
future. We had an accumulated deficit of approximately $30.7 million as of March
31, 1999 and a net loss of $14.4 million and $16.3 million for the year ended
December 31, 1998 and the quarter ended March 31, 1999, respectively. We intend
to continue to invest in internal expansion, infrastructure, integration of our
acquired companies into our existing operations, acquisitions and our marketing
and sales efforts. We cannot predict when we will operate profitably, if at all.
AS OF MARCH 31, 1999, WE HAD APPROXIMATELY $133.1 MILLION OF INTANGIBLE ASSETS
NET OF ACCUMULATED AMORTIZATION, AND WE EXPECT TO INCUR SIGNIFICANT
ACQUISITION-RELATED COMPENSATION CHARGES.
We cannot assure you that we will have earnings or cash flow sufficient
to cover our fixed charges or to comply with the financial covenants in our
credit facilities. Our
6
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acquisitions significantly increased our intangible assets, such as goodwill,
which represents a significant portion of our assets, and the charges we expect
to incur in connection with the amortization of these intangible assets will
have a material adverse impact on our net income for the foreseeable future. At
March 31, 1999, we had goodwill and other intangible assets of approximately
$133.1 million, net of accumulated amortization. In addition, in connection with
the acquisitions we have completed, we expect to continue to incur through the
end of the year 2000, acquisition-related compensation charges which will
fluctuate based on the market price of our Common Stock and the level of
achievement of agreed-upon operating targets. If all of the operating targets
are fully met, the aggregate amounts of compensation expense and additional
goodwill that will be recognized will be approximately $22.6 million and $8.2
million, respectively, assuming the market price of our Common Stock when the
contingent payments are made is $12.00, the initial public offering price, for
all shares issued in connection with these contingent payments. The compensation
expense will be recognized during 1999 and 2000. See "--Our intangible assets
represent a significant portion of our assets; amortization of our intangible
assets will adversely impact our net income and we may never realize the full
value of our intangible assets" for a discussion of accounting treatment issues
regarding intangible assets that will affect our future results of operations.
QUARTER-TO-QUARTER FLUCTUATIONS IN OUR REVENUES AND OPERATING RESULTS COULD
AFFECT THE MARKET PRICE OF OUR COMMON STOCK.
Our revenues and operating results may vary from quarter-to-quarter as
the result of a number of factors including:
- number, size and type of client engagements commenced or
completed during a quarter;
- effectiveness of integrating acquisitions with existing
operations;
- our ability to attract, train and retain skilled management,
technical and creative personnel;
- timing of acquisitions and related costs; and
- timing and size of acquisition-related compensation charges
which fluctuate based on the market price of our Common Stock.
Because a high percentage of our expenses is fixed, such as
compensation and rent, any of the factors listed above could cause significant
variations in our operating
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<PAGE>
results in any given quarter. Any decline in revenues or earnings or a greater
than expected loss for any quarter could materially adversely affect the market
price of our Common Stock, even if not reflective of any long-term problems with
our business.
OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO EFFECTIVELY INTEGRATE ACQUIRED
COMPANIES AND MANAGE OUR GROWTH.
Our growth has placed, and will continue to place, significant demands
on our management and operational and financial resources. We have acquired 12
companies since March 1998. Our number of employees has increased from eight as
of March 15, 1998 to approximately 755 as of May 1, 1999. We are in the process
of integrating the companies we have acquired since March 1998 into our
operational, financial and managerial systems. Members of our senior management
may be required to devote considerable amounts of their time to this integration
process, which will decrease the time they will have to service current clients,
attract new clients and develop new products and services. Our business,
financial condition and results of operations could be adversely affected if any
of the companies we have acquired experienced problems in the past of which we
are not currently aware. Claims asserted against us relating to the operation of
the companies we acquired prior to acquisition could exceed the indemnification
we are entitled to or can obtain from the former owners of the acquired
companies.
As we continue to grow, we expect we will hire more employees and
expand the scope of our operating and financial systems, which will increase our
operating complexity and the level of responsibility exercised by our management
personnel. To manage our growth effectively, we must continue to develop and
improve our own operational and financial systems, including our internal
systems and controls as well as those of the companies we acquired. The failure
to manage our growth effectively could have a material adverse effect on our
business, financial condition and results of operations.
WE MUST ATTRACT AND RETAIN PROFESSIONAL STAFF IN ORDER TO COMPLETE OUR PROJECTS
AND OBTAIN NEW PROJECTS.
Our failure to attract and retain qualified employees could impair our
ability to complete existing projects and bid for or obtain new projects and, as
a result, could have a material adverse effect on our business, financial
condition and results of operations. Our ability to grow and increase our market
share largely depends on our ability to hire, train, retain and manage highly
skilled employees, including project managers and technical, creative,
consulting and marketing and sales personnel. There is a significant shortage
of, and intense competition for, personnel who are qualified to perform the
services we
8
<PAGE>
provide. This shortage will probably continue for the foreseeable future. In
addition, to maintain our position as a provider of Internet and electronic
commerce end-to-end solutions, we must make sure our employees maintain their
technical expertise and business skills. We cannot assure you that we will be
able to attract a sufficient number of qualified employees or that we will
successfully train and manage the employees we hire.
In addition, our employees, including key technical personnel, may
leave us to join our competitors or start new businesses which may compete with
us. We cannot assure you that we will be able to prevent the unauthorized
disclosure or use of our proprietary knowledge, practices and procedures if our
employees leave us.
WE ARE DEPENDENT ON ADDITIONAL CAPITAL FOR FUTURE GROWTH.
Our ability to remain competitive and expand our operations through
acquisitions and internal growth largely depends on our access to capital.
Historically, we have financed capital expenditures and acquisitions primarily
by incurring debt and issuing equity securities. We may incur additional debt
and issue equity securities in the future to finance our growth strategy or
capital expenditures. We cannot assure you that additional financing will be
available to us on satisfactory terms, or at all. Additional indebtedness would
make us more vulnerable to economic downturns and may limit our ability to
withstand competitive pressures. The terms of any additional indebtedness may
include restrictive financial and operating covenants which would limit our
ability to compete and expand. Additional issuances of our Common Stock may
significantly dilute the equity interests of our existing stockholders. Our
failure to obtain any required additional financing, on satisfactory terms, or
at all, could have a material adverse effect on our business, financial
condition or results of operations.
OUR REVENUES ARE DIFFICULT TO PREDICT BECAUSE THEY ARE PRIMARILY GENERATED ON A
PROJECT-BY-PROJECT BASIS AND OUR PROJECTS CAN BE TERMINATED.
If our existing agreements with clients are terminated before we
complete our engagements, or if we are unable to enter into new engagements, our
business, financial condition and results of operations could be materially
adversely affected. Our success will depend on our ability to establish
relationships with additional medium-sized and large businesses and other
corporate users of Internet and electronic commerce professional services. We
derive our revenues in large part from fees for services generated on a
project-by-project basis. These projects vary in size, scope and duration. A
client that accounts for a significant portion of our revenues in a particular
period may not account for a similar portion of our revenues in future periods.
A client may or may
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not engage us for further services once a project is completed. As a result, our
revenues are not recurring from period to period, which makes them more
difficult to predict.
OUR CONTRACTS CONTAIN PRICING RISKS.
Generally, we charge our clients for the time, materials and expenses
incurred. Although we have limited experience pricing and managing fixed-price
contracts, we intend to increase the percentage of our work that is billed at a
fixed price. However, if we underestimate the resources and time required to
complete our projects, we could be subject to cost overruns leading to losses on
our engagements.
LOSS OF THE SERVICES OF OUR SENIOR MANAGEMENT COULD ADVERSELY AFFECT OUR
BUSINESS.
The loss of our senior managers' services or other key members of
management could have a material adverse effect on our business, financial
condition and results of operations. Our success depends heavily on the efforts
of the members of our senior management team. We cannot assure you that we will
be able to prevent the unauthorized disclosure or use of our proprietary
knowledge, practices and procedures if our senior managers leave us.
WE FACE INTENSE COMPETITION.
The markets for Internet and electronic commerce professional services
are relatively new, intensely competitive, quickly evolving and subject to rapid
technological change. We expect competition to continue and intensify in the
foreseeable future. Our competitors can be divided into several groups:
- Internet professional services providers, such as Agency.com,
iXL, Proxicom, Razorfish, Scient, Think New Ideas, US
Interactive, US Web/CKS and Viant;
- large information technology consulting services providers,
such as Andersen Consulting, Cambridge Technology Partners,
CSC, EDS, IBM and Sapient;
- interactive advertising agencies, such Darwin Digital, Giant
Step, Grey Interactive, Modem Media . Poppe Tyson and
Thunderhouse;
- electronic commerce software and service providers, such as
BroadVision, Harbinger, Open Market and Sterling Commerce; and
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- Internet access and service providers, such as Abovenet,
Exodus and Frontier/Global.
Our competitors have begun to offer multiple Internet and electronic
commerce professional services, rather than specialize in one area, or have
announced their intention to do so. These companies may continue to expand their
operations so that they offer a full range of Internet and electronic commerce
professional services and products. Some of our competitors, IBM, USWeb and EDS,
currently provide all of the services that we provide.
Many of our competitors have longer operating histories and client
relationships, greater financial, technical, marketing and public relations
resources, larger client bases and greater brand or name recognition than we
have. Our competitors may be able to respond more quickly to technological
developments and changes in clients' needs. We must promote and enhance our
reputation and brand in order to attract new clients and differentiate ourselves
from our competitors.
THE BARRIERS TO ENTER OUR BUSINESS ARE LOW.
There are relatively low barriers to entry into our business. We do not
own any technologies that preclude or inhibit competitors from entering our
markets. Our competitors may independently develop and patent or copyright
technologies that are superior or substantially similar to our technologies. The
costs to develop and provide Internet or electronic commerce professional
services are low. Therefore, we expect to continue to face additional
competition from new entrants into our markets.
WE MUST RESPOND TO RAPID TECHNOLOGICAL ADVANCES.
Our success will depend, in part, on our ability to keep pace with:
- rapidly changing technology;
- evolving industry standards and practices;
- frequent new service and product introductions and
enhancements; and
- changing user and client requirements and preferences.
Any delay or failure on our part in responding quickly,
cost-effectively and sufficiently to these developments could render our
existing products and services obsolete and have a material adverse effect on
our business, financial condition and
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results of operations. We may have to incur substantial expenditures to modify
or adapt our services or infrastructure to respond to the widespread adoption of
new Internet, networking or telecommunications technologies or other
technological changes. We must stay abreast of cutting-edge technological
developments and evolving service offerings to remain competitive, increase the
utility of our services and attract and retain qualified employees. We must be
able to incorporate new technologies into the Internet and electronic commerce
solutions we design and develop to address the increasingly complex and varied
needs of our customer base.
OUR BUSINESS IS DEPENDENT ON CONTINUED USE AND GROWTH OF THE INTERNET AND
ELECTRONIC COMMERCE.
Our business would be adversely affected if use of the Internet and
electronic commerce does not continue to develop, or develops more slowly than
expected. Our market is relatively new and rapidly evolving. Our future success
depends on the acceptance by current and future clients of Internet and
electronic commerce professional services as an integral part of their
businesses. Demand and market acceptance for these new technological services
are subject to a high level of uncertainty.
In addition, if use of the Internet grows, the Internet infrastructure
may not be able to support the demands placed on it. The performance and
reliability of the Internet may decline as the number of users and the amount of
traffic increases. Internet sites have experienced interruptions in their
service as a result of outages and other delays occurring throughout the
Internet network infrastructure. To cope with growth in the use of the Internet,
the Internet will require a reliable network backbone with the necessary speed,
data capacity and security and the timely development of complementary products,
such as high-speed modems, for providing reliable Internet access and services.
If the necessary infrastructure, products, services or facilities are not
developed or if use of the Internet as a medium for communication and commerce
does not develop, our business, financial condition and results of operations
could be materially and adversely affected.
WE HAVE POTENTIAL LIABILITY TO CLIENTS WHO ARE DISSATISFIED WITH OUR SERVICES.
We design, develop, implement and manage Internet and electronic
commerce solutions that are crucial to the operation of our clients' businesses.
Defects in the solutions we develop could result in delayed or lost revenues,
adverse customer reaction and negative publicity about us or our services or
require expensive corrections, any of which could have a material adverse effect
on our business, financial condition or results of operations. Clients who are
not satisfied with our services could bring claims against us for substantial
damages. Any claims asserted against us could exceed the level of our insurance.
We cannot assure you that the insurance we carry will continue to be available
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on economically reasonable terms, or at all. The successful assertion of one or
more large claims against us that are uninsured, exceed our insurance coverage
or result in changes to our insurance policies, including premium increases,
could have a material adverse effect on our business, financial condition or
results of operations.
OUR FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OR MAINTAIN OUR RIGHTS
TO USE LICENSED INTELLECTUAL PROPERTY COULD ADVERSELY AFFECT OUR BUSINESS.
We believe our success depends, in part, on protecting our proprietary
intellectual property. We have not received patent or copyright protection for
most of our intellectual property. We cannot assure you that we will be able to
prevent infringement or detect misappropriation of our intellectual property. A
failure to protect our intellectual property in a meaningful manner could have a
material adverse effect on our business, financial condition and results of
operations.
We rely on technologies licensed from third parties. We cannot assure
you these licenses will continue to be available to us on commercially
reasonable terms. The loss of these technologies could require us to obtain
substitute technologies of lower quality or performance standards or at greater
cost, which could have a material adverse effect on our business, financial
condition or results of operations.
Third parties may assert or prosecute infringement claims against us in
connection with the services and products we offer, and we may or may not be
able to successfully defend any such claims. We generally indemnify our clients
against any third-party intellectual property claims. Any significant claim
against us or for which we have indemnified others could have a material adverse
effect on our business, financial condition and results of operations.
In connection with our Internet and electronic commerce professional
services, we develop intellectual property for our clients. We frequently assign
ownership of such intellectual property to the client and retain only a license
for limited uses. Issues relating to ownership of and rights to use intellectual
property can be complicated. We may become involved in disputes that affect our
ability to resell or reuse this intellectual property. In addition, many of our
projects involve the use of material that is confidential or proprietary client
information. The successful assertion of one or more large claims against us by
our clients could adversely affect us.
WE SOMETIMES AGREE NOT TO PERFORM SERVICES FOR OUR CLIENTS' COMPETITORS.
Our customer contracts may contain restrictive provisions which are in
effect during the term of the contract and may remain in effect for a limited
period, generally
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one year, thereafter. The scope of the restrictive provisions varies and can
include provisions restricting our employees who are engaged on a project for a
client from performing the same or substantially similar services for a
competitor of that client and provisions prohibiting us from developing products
or performing services for our clients' competitors. These restrictive
provisions may limit our ability to enter into engagements with new clients for
specified periods of time.
OUR INTERNATIONAL OPERATIONS AND EXPANSION INVOLVE FINANCIAL AND OPERATIONAL
RISKS.
We intend to expand our business into international markets. Revenues
from our existing international operations were insignificant in 1998. We may
incur significant costs in connection with our international expansion.
There are also risks inherent in doing business in foreign countries,
such as:
- changes in legal and regulatory requirements;
- export and import restrictions, tariffs and other trade
barriers;
- currency fluctuations and the on-going conversion to the euro
in several member states of the European Union;
- difficulties in staffing and managing foreign offices as a
result of, among other things, distance, language and cultural
differences;
- longer payment cycles and problems in collecting accounts
receivable;
- political and economic instability;
- seasonal reductions in business activity; and
- potentially adverse tax consequences.
Any of these factors could have a material adverse effect on our
international and domestic business, financial condition and results of
operations.
OUR ELECTRONIC COMMERCE OUTSOURCING CENTERS COULD BE VULNERABLE TO SECURITY AND
TECHNICAL RISKS AND MAY REQUIRE ADDITIONAL INVESTMENT.
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We provide electronic commerce outsourcing services to our customers.
We perform electronic commerce functions that would otherwise be handled by the
customer's internal staff using the customer's resources.
Our electronic commerce outsourcing services rely on encryption and
authentication technology licenses from third parties to provide the security
and authentication needed to safely transmit confidential information. Although
we have designed and implemented a variety of network security measures,
unauthorized access, computer viruses, accidental or intentional acts and other
disruptions may occur. Our electronic commerce outsourcing centers may
experience delays or service interruptions as a result of the accidental or
intentional acts of Internet users, current and former employees or others. Such
acts could potentially jeopardize the security of confidential information, such
as credit card and bank account numbers, stored in our and our clients' computer
systems. Such a breach in security could result in liability to us and in the
loss of existing clients or the deterrence of potential clients.
Although we plan to continue using industry-standard security measures,
such measures have been circumvented in the past, and ours may be circumvented
in the future. The costs required to eliminate computer viruses and alleviate
other security problems could be prohibitively expensive, and efforts to address
such problems could result in delays or interruption of service to our clients.
These could in turn have a material adverse effect on our business, financial
condition and results of operations.
In the event our hardware malfunctions and our back-up systems fail, we
may not be able to maintain our standard of service to our customers. In
addition, each of our electronic commerce outsourcing centers has been
configured to provide services that facilitate commerce and communication either
between businesses and consumers, known as business-to-consumer services, or
between businesses and their trading partners, known as business-to-business
services, but not both. If we were unable to provide outsourcing services at one
of our outsourcing centers, it would materially adversely impact our ability to
continue to provide the type of electronic commerce outsourcing services
processed through that center. We may be required to make additional investments
in our electronic commerce outsourcing centers to increase capacity and respond
to technological developments.
OUR INTANGIBLE ASSETS REPRESENT A SIGNIFICANT PORTION OF OUR ASSETS;
AMORTIZATION OF OUR INTANGIBLE ASSETS WILL ADVERSELY IMPACT OUR NET INCOME AND
WE MAY NEVER REALIZE THE FULL VALUE OF OUR INTANGIBLE ASSETS.
Our acquisitions have resulted in significant goodwill and other
intangible assets, which are being amortized over various periods, primarily two
to three years. At
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March 31, 1999, we had goodwill and other intangible assets of approximately
$133.1 million, net of accumulated amortization. Charges we would have incurred
in connection with the amortization of intangible assets during the year ended
December 31, 1998 and the three months ended March 31, 1999, after giving pro
forma effect to the acquisitions we made in 1998 and 1999, would have decreased
our net income by $49.1 million and $0.1 million, respectively. The amount of
goodwill associated with the acquisitions we made in 1998 and 1999 may increase
in the future as a result of a portion of the contingent purchase consideration
that may become payable if the agreed-upon operating targets for the following
four acquired companies are fully met: LOGEX International, L.L.C., New Media
Publishing, Inc., Internet Outfitters, Inc. and TransForm IT, Incorporated. The
actual amount of goodwill that will be recorded will depend in part on the price
per share of our Common Stock and such goodwill will be recorded through the end
of the year 2000. We will continue to incur non-cash charges in connection with
the amortization of our intangible assets over their respective useful lives,
and we expect such charges will have a significant adverse impact on our net
income for the foreseeable future.
We cannot assure you that we will ever realize the value of these
intangible assets. In the future, as events or changes in circumstances indicate
that the carrying amount of our intangible assets may not be recoverable, we
will evaluate the carrying value of our intangible assets and may take an
additional charge to our earnings. Any future determination requiring the
write-off of a significant portion of unamortized intangible assets could have a
material adverse effect on our business, financial condition or results of
operations.
THE YEAR 2000 PROBLEM MAY ADVERSELY AFFECT OUR BUSINESS.
The risks posed by the Year 2000 problem could adversely affect our
business in a number of significant ways. Many of our clients and potential
clients maintain their operations on systems that could be impacted by Year 2000
problems. If our clients fail to ensure their systems are Year 2000 compliant
and Year 2000 problems materially adversely affect them, our business could be
materially adversely affected, particularly if demand for our services declines
while companies redirect their resources to upgrade their computer systems. We
also depend heavily on the availability of the Internet infrastructure to
conduct our business and provide services to our clients. Disruptions in the
Internet infrastructure arising from Year 2000 problems could materially affect
our business, financial condition and results of operations.
In addition, our business could be materially adversely affected if we
cannot obtain products, services or systems that are Year 2000 compliant when we
need them. We rely on our suppliers for hardware, software and services. We are
in the process of obtaining
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<PAGE>
assurances from our suppliers that they are Year 2000 compliant. Our internal
information systems may experience operations difficulties because of undetected
errors or defects in the technology used. The expense to correct such defects
could have a material adverse effect on our business, results of operations and
financial condition.
Because we provide computer-related services, the risk we will be
involved in a lawsuit relating to Year 2000 issues is likely to be greater than
that of companies in other industries. Because the solutions we deliver are
sometimes dependent upon third-party products and components, it may be
difficult to determine which component of our solution may cause a Year 2000
problem. As a result, we may become involved in litigation concerning our
services or products and components of a third party. We sometimes provide an
express warranty to clients that our work is Year 2000 compliant. However, even
absent an express Year 2000 warranty, there is a risk that clients for whom we
have provided services will try to hold us liable for damages caused by the Year
2000 problem.
We cannot guarantee that we will be Year 2000 compliant in a timely
manner. Moreover, the costs related to Year 2000 compliance could be
significant.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE INTERNET COULD
ADVERSELY AFFECT OUR BUSINESS.
Increased regulation of the Internet might slow the growth in use of
the Internet, which could decrease demand for our services, increase our cost of
doing business or otherwise have a material adverse effect on our business,
financial condition and results of operations. Congress has recently passed
legislation regulating certain aspects of the Internet, including on-line
content, children's protection, copyright infringement, user privacy, taxation,
access charges, liability for third-party activities, transmission of sexually
explicit material and jurisdiction. In addition, federal, state and local
governmental organizations as well as foreign governments are considering other
legislative and regulatory proposals that would regulate the Internet. Areas of
potential regulation include libel, pricing, quality of products and services
and intellectual property ownership. We do not know how courts will interpret
laws governing the Internet or the extent to which they will apply existing laws
regulating issues such as property ownership, libel and personal privacy to the
Internet. Therefore, we are not certain how new laws governing the Internet or
other existing laws will affect our business.
APPNET IS CONTROLLED BY ITS SIGNIFICANT STOCKHOLDERS.
Ken Bajaj, AppNet's President and Chief Executive Officer, and GTCR
beneficially own 9.6% and 44.2%, respectively, of our outstanding Common Stock.
As a
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<PAGE>
result, Mr. Bajaj and GTCR will be able to exercise a controlling influence over
the outcome of matters submitted to our stockholders for approval, including the
election of directors, appointment of new management, amendments to our
certificate of incorporation and mergers or sales of all of our assets. Mr.
Bajaj and GTCR will have the power to delay, defer or prevent a change in
control of AppNet.
EXTERNAL FACTORS COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK.
We cannot assure you that an active trading market, if any, will be
sustained.
The market price of our Common Stock could fluctuate significantly as a
result of:
- variations in our operating results which may cause us to fail
to meet analysts' or investors' expectations;
- general economic and stock market conditions;
- changes in financial estimates by securities analysts;
- earnings and other announcements by, and changes in market
evaluations of, providers of Internet and electronic commerce
professional services;
- changes in business or regulatory conditions affecting us;
- announcements by us or our competitors of technological
innovations, new products or services; and
- trading of our Common Stock.
The securities of many companies have experienced extreme price and
volume fluctuations in recent years, often unrelated to the companies' operating
performance. For example, market prices for securities of Internet-related and
technology companies have frequently reached elevated levels, often following
these companies' initial public offerings. These levels may not be sustainable
and may not bear any relationship to these companies' operating performances. In
the past, following periods of volatility in the market price of a company's
securities, that company's stockholders have instituted securities class action
litigation against the company in certain cases. If we were involved in such a
class action suit, it could have a material adverse effect on our business,
financial condition and results of operations.
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<PAGE>
THE SALE OR AVAILABILITY FOR SALE OF SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK
COULD ADVERSELY AFFECT ITS MARKET PRICE.
Sales of substantial amounts of our Common Stock in the public market,
or the perception that such sales could occur, could adversely affect the market
price of our Common Stock and could materially impair our future ability to
raise capital through offerings of our Common Stock.
ANTI-TAKEOVER PROVISIONS OF DELAWARE'S GENERAL CORPORATION LAW AND OUR
CERTIFICATE OF INCORPORATION COULD DELAY OR DETER A CHANGE IN CONTROL.
Our amended and restated certificate of incorporation and our bylaws,
as well as various provisions of the Delaware General Corporation Law, may make
it more difficult to effect a change in control of our company. The existence of
these provisions may adversely affect the price of our Common Stock, discourage
third parties from making a bid for our company or reduce any premiums paid to
our stockholders for their Common Stock. For example, our certificate of
incorporation authorizes our Board of Directors to issue up to 4,883,379 shares
of "blank check" preferred stock and to attach special rights and preferences to
such preferred stock. The issuance of this preferred stock may make it more
difficult for a third party to acquire control of us.
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CAUTIONARY NOTICE
REGARDING FORWARD-LOOKING STATEMENTS
This reoffer prospectus includes "forward-looking statements" for
purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934.
All statements other than statements of historical fact in this reoffer
prospectus, including statements regarding our competitive strengths, business
strategy, expected benefits of any acquisition, future financial position,
budgets, projected costs and plans and objectives of management are
forward-looking statements. In addition, forward-looking statements generally
can be identified by the use of forward-looking terminology such as "may,"
"will," "expect," "should," "intend," "estimate," "anticipate," "believe,"
"continue" or similar terminology. Although we believe that the expectations
reflected in such forward-looking statements are reasonable, we can give no
assurance that such expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from our
expectations are disclosed under "Risk Factors" and elsewhere in this reoffer
prospectus and expressly qualify all written and oral forward-looking statements
attributable to us.
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<PAGE>
USE OF PROCEEDS
AppNet will not receive any proceeds from the sale of the shares which
may be sold pursuant to this reoffer prospectus for the respective accounts of
the Selling Shareholders hereunder. All such proceeds, net of brokerage
commissions, if any, will be received by the Selling Shareholders. See "Selling
Shareholders" and "Plan of Distribution."
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<PAGE>
SELLING SHAREHOLDERS
The table below lists persons who may be deemed to be our affiliates
and persons, who are not our affiliates, who have acquired shares under our
Employee Benefit Plans prior to the filing of the registration statement of
which this reoffer prospectus is a part. The table below also sets forth
information with respect to the beneficial ownership of those Selling
Shareholders. We will pay all expenses of preparing and reproducing this reoffer
prospectus, but we will not receive any part of the proceeds of the sale of any
such shares. The Selling Shareholders will pay any and all brokerage commissions
charged to sellers in connection with any sales.
<TABLE>
<CAPTION>
AMOUNT OF
COMMON STOCK
BENEFICIALLY AMOUNT OF
OWNED PRIOR TO COMMON STOCK TO
NAME POSITION WITH APPNET OFFERING BE OFFERED HEREBY
<S> <C> <C> <C>
Ronald B. Alexander Former Employee 175,438 175,438
Mark A. Allen Employee 72,750 70,175
Robert J. Antonucci Employee 1,246 1,246
Barbara Barnes Employee 10,526 10,526
Mehdi Bousaidi Employee 293 293
Debra Cameron Employee 4,791 4,791
Julie Colton Employee 2,105 2,105
Anne Filippone Vice President-Sales and 49,122 49,122
Marketing
David Fout Employee 3,978 3,813
Robert George Employee 17,543 17,543
John E. Gillen Employee 3,208 1,246
Robert G. Harvey Senior Vice President-Software 119,597 63,157
Development Services
Donald A. Link Employee 11,362 9,900
Barbara Mallory Employee 43,670 15,254
John McBeth Employee 403,360 403,360
Robert D. McCalley Senior Vice President-Electronic 166,515 110,175
Commerce
Thomas Meloche Employee 15,117 14,035
Dharitri Misra Employee 8,970 5,647
Marilyn Mix Employee 2,420 2,420
Andrew Musliner Employee 21,967 21,635
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<S> <C> <C> <C>
Lawrence V. Novak Employee 6,834 4,840
Robert G. Novas Employee 17,674 17,674
Jack Pearlstein Senior Vice President, Chief 63,157 63,157
Financial Officer and Treasurer
Lee B. Peters Employee 2,989 1,173
David M. Schwartz Employee 3,519 3,227
Charles E. Shaw Employee 93,361 93,361
Robert Simms Employee 33,309 17,543
Andrew Stern Employee 10,526 10,526
Toby Tobaccowala Senior Vice President 175,638 175,438
Craig E. Warsaw Employee 3,239 3,227
Totals 1,544,224 1,372,047
</TABLE>
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PLAN OF DISTRIBUTION
Subject to the volume limitations in Rule 144(e) of the Securities
Act of 1933, as amended, and subject to certain contractual limitations,
shares of our Common Stock offered hereby may be sold from time to time
directly by or on behalf of a Selling Shareholder in one or more transactions
on The Nasdaq Stock Market's National Market or on any stock exchange on
which the Common Stock may be listed at the time of sale, in privately
negotiated transactions or through a combination of such methods, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at fixed prices (which may be changed) or at negotiated
prices. The Selling Shareholders may sell shares through one or more agents,
brokers or dealers or directly to purchasers. Such brokers or dealers may
receive compensation in the form of commissions, discounts or concessions
from the Selling Shareholders and/or purchasers of the shares or both (which
compensation as to a particular broker or dealer may be in excess of
customary commissions). In connection with such sales, the Selling
Shareholders and any participating broker or dealer may be deemed to be
underwriters within the meaning of the Securities Act of 1933, and any
commissions they receive and the proceeds of any sale of shares may be deemed
to be underwriting discounts and commissions under the Securities Act of
1933. All expenses related to the registration of the shares will be paid by
AppNet, including the expenses of preparing and reproducing this reoffer
prospectus.
In order to comply with certain state securities laws, if applicable,
the shares may be sold in such jurisdictions only through registered or licensed
brokers or dealers. In certain states, the shares may not be sold unless the
shares have been registered or qualified for sale in such state or an exemption
from regulation or qualification is available and is complied with. Sales of
shares must also be made by the Selling Shareholders in compliance with all
other applicable state securities laws and regulations.
There can be no assurance that any of the Selling Shareholders will
sell any or all of the shares offered by them hereby.
We have notified the Selling Shareholders of the need to deliver a copy
of this reoffer prospectus in connection with any sale of the shares.
LEGAL MATTERS
The validity of the shares of our Common Stock offered by this reoffer
prospectus will be passed upon for AppNet by Fried, Frank, Harris, Shriver &
Jacobson (a partnership including professional corporations), Washington, DC.
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EXPERTS
The financial statements and schedules incorporated by reference in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, appearing in AppNet's Registration Statement on Form S-1
(No. 333-75205), and are included herein in reliance upon the authority of said
firm as experts in giving said report.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following information filed with the Securities and Exchange
Commission is incorporated by reference herein: AppNet's Registration Statement
on Form S-1 (No. 333-75205) originally filed with the Securities and Exchange
Commission on March 29, 1999, including any amendment or report thereto
subsequently filed by AppNet for the purpose of updating that registration
statement pursuant to the Securities Act of 1933, as amended, and the related
prospectus filed pursuant to Rule 424(b) of such Act on June 21, 1999.
All documents filed by AppNet pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Securities Exchange Act of 1934 subsequent to the date hereof and
prior to the termination of the offering shall be deemed to be incorporated by
reference into this registration statement and to be a part hereof from the date
of filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated herein by reference shall be deemed to be modified
or superseded for purposes of this reoffer prospectus 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 such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
reoffer prospectus.
AppNet will provide without charge to any person to whom this reoffer
prospectus is delivered, upon written or oral request of such person, a copy of
each document incorporated by reference in the registration statement (other
than exhibits to such documents unless such exhibits are specifically
incorporated by reference into this reoffer prospectus). Requests should be
directed to AppNet Systems, Inc., 6707 Democracy Boulevard, Suite 1000,
Bethesda, Maryland 20817, attention: William S. Dawson, Esq. (telephone
301-493-8900).
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<PAGE>
WHERE YOU CAN FIND ADDITIONAL INFORMATION
AppNet has filed with the Securities and Exchange Commission a
registration statement on Form S-8, together with exhibits and documents
incorporated by reference in the registration statement, under the Securities
Act of 1933 with respect to the shares being offered pursuant to this reoffer
prospectus. This reoffer prospectus does not contain all of the information set
forth in the registration statement, certain parts of which are omitted in
accordance with the rules and regulations of the Securities and Exchange
Commission. For further information regarding AppNet and the Common Stock
offered, reference is made to the registration statement, exhibits and the
documents incorporated in the registration statement by reference.
AppNet is subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, files reports and other
information with the Securities and Exchange Commission. The registration
statement, including exhibits, and the reports and other information filed by
AppNet can be inspected without charge at the public reference facilities
maintained by the Securities and Exchange Commission at the following locations:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. Seven World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Chicago, IL 60661-2511
You may also obtain copies of the registration statement by mail from
the Public Reference Section of the Securities and Exchange Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 or by telephone at
1-800-SEC-0330. The registration statement is available to the public from
commercial document retrieval services and at the Securities and Exchange
Commission's World Wide Web site located at http://www.sec.gov. AppNet shares
are quoted on The Nasdaq Stock Market's National Market.
INDEMNIFICATION
AppNet's certificate of incorporation provides that AppNet will
indemnify each of its directors, officers, employees and agents to the fullest
extent permitted by law. Section 145 of the Delaware General Corporation Law
permits a corporation to indemnify any director or officer of the corporation
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with any action,
suit or proceeding brought by reason of the fact that such person is or was a
director or officer of the corporation, if such person acted in good faith
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<PAGE>
and in a manner that 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, if he had no reason to believe his conduct was unlawful. In a
derivative action, (I.E., one brought by or on behalf of the corporation),
indemnification may be made only for expenses, actually and reasonably incurred
by any director or officer in connection with the defense or settlement of such
an action or suit, if such person acted in good faith and in a manner that he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged to be liable to the corporation, unless and only to the
extent that the court in which the action or suit was brought shall determine
that the defendant is fairly and reasonably entitled to indemnity for such
expenses despite such adjudication of liability.
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law,
AppNet's certificate of incorporation eliminates the liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liabilities arising (a) from any breach of the
director's duty of loyalty to the corporation or its stockholders; (b) from acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (c) under Section 174 of the Delaware General
Corporation Law; or (d) from any transaction from which the director derived an
improper personal benefit.
The certificate of incorporation also provides that AppNet may purchase
and maintain insurance on behalf of its directors or officers against
liabilities they may incur in such capacity, whether or not AppNet would have
the power to indemnify against such liabilities. AppNet intends to obtain
primary and excess insurance policies insuring its directors and officers and
those of its subsidiaries against certain liabilities they may incur in their
capacity as directors and officers. Under such policies, the insurer, on behalf
of AppNet, may also pay amounts for which AppNet has granted indemnification to
the directors or officers.
Additionally, reference is made to the Underwriting Agreement filed as
Exhibit 1.1 to the Registration Statement on Form S-1, as amended, File No.
333-75205, which provides for indemnification by the underwriters of AppNet
under certain circumstances.
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<PAGE>
APPNET SYSTEMS, INC.
1,372,047 SHARES OF COMMON STOCK,
$0.0005 PAR VALUE
----------
REOFFER PROSPECTUS
----------
JULY 15, 1999
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents, which were filed by AppNet with the Securities
and Exchange Commission, are incorporated by reference in this registration
statement:
1. The Company's final prospectus filed with the Securities and
Exchange Commission on June 21, 1999 pursuant to Rule 424(b)(1) under the
Securities Act of 1933.
2. The description of the common stock of AppNet, par value $0.0005 per
share, which is registered under Section 12 of the Securities Exchange Act of
1934, contained in AppNet's Registration Statement on Form 8-A filed with the
Securities and Exchange Commission on June 4, 1999, which incorporates by
reference the description of the common stock contained in the Registration
Statement on Form S-1 (No. 333-75205) (originally filed on March 29, 1999), as
amended, including any amendment or report filed for the purpose of updating
such description. Such description of the common stock contained in the
Registration Statement on Form S-1 is also incorporated by reference.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 prior to the
filing of a post-effective amendment which indicates that all securities offered
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this registration statement and to
be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference 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 such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this registration
statement.
II-1
<PAGE>
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable; the class of securities to be offered is registered
under Section 12 of the Securities Exchange Act of 1934.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
AppNet's bylaws provide that AppNet will indemnify each of its
directors, officers, employees and agents to the fullest extent permitted by
law. Section 145 of the Delaware General Corporation Law permits a corporation
to indemnify any director or officer of the corporation against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with any action, suit or
proceeding brought by reason of the fact that such person is or was a director
or officer of the corporation, if such person acted in good faith and in a
manner that 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, if
he had no reason to believe his conduct was unlawful. In a derivative action,
(I.E., one brought by or on behalf of the corporation), indemnification may be
made only for expenses, actually and reasonably incurred by any director or
officer in connection with the defense or settlement of such an action or suit,
if such person acted in good faith and in a manner that he reasonably believed
to be in or not opposed to the best interests of the corporation, except that no
indemnification shall be made if such person shall have been adjudged to be
liable to the corporation, unless and only to the extent that the court in which
the action or suit was brought shall determine that the defendant is fairly and
reasonably entitled to indemnity for such expenses despite such adjudication of
liability.
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law,
AppNet's certificate of incorporation eliminates the liability of a director to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liabilities arising (a) from any breach of the
director's duty of loyalty to the corporation or its stockholders; (b) from acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (c) under Section 174 of the Delaware General
Corporation Law; or (d) from any transaction from which the director derived an
improper personal benefit.
The certificate of incorporation also provides that AppNet may purchase
insurance on behalf of its directors, officers, employees and agents against
liabilities they may incur
II-2
<PAGE>
in such capacity, whether or not AppNet would have
the power to indemnify against such liabilities. AppNet intends to obtain
primary and excess insurance policies insuring its directors and officers and
those of its subsidiaries against certain liabilities they may incur
in their capacity as directors and officers. Under such policies, the insurer,
on behalf of AppNet, may also pay amounts for which AppNet has granted
indemnification to the directors or officers.
Additionally, reference is made to the Underwriting Agreement filed as
Exhibit 1.1 to the Registration Statement on Form S-1, as amended, File No.
333-75205, which provides for indemnification by the underwriters of AppNet, its
directors and officers who sign the Registration Statement on Form S-1 and
persons who control AppNet, under certain circumstances.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
The shares of Common Stock to be sold under the reoffer prospectus were
initially sold by AppNet pursuant to Rule 701 as promulgated by the Securities
and Exchange Commission under the Securities Act of 1933 or Section 4(2) of the
Securities Act of 1933.
ITEM 8. EXHIBITS.
The following documents are filed as exhibits to this registration
statement:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
<S> <C>
3.1 Restated Certificate of Incorporation of the AppNet Systems, Inc.,
filed as Exhibit 3.1 to AppNet's Registration Statement (File No.
333-75205) on Form S-1.*
3.2 Form of Amended and Restated Bylaws of AppNet Systems, Inc., filed as
Exhibit 3.2 to AppNet's Registration Statement (File No. 333-75205) on
Form S-1.*
4.1 Century Computing, Incorporated Incentive Stock Option Plan, as
amended, filed as Exhibit 10.18 to AppNet's Registration Statement
(File No. 333-75205) on Form S-1.*
II-3
<PAGE>
<S> <C>
4.2 AppNet Systems, Inc. 1998 Stock Option and Incentive Plan, filed as
Exhibit 10.19 to AppNet's Registration Statement (File No. 333-75205)
on Form S-1.*
4.3 AppNet Systems, Inc. 1999 Stock Incentive Plan.
4.4 Internet Outfitters, Inc. 1996 Incentive Stock Option Plan, as amended,
filed as Exhibit 10.21 to AppNet's Registration Statement (File No.
333-75205) on Form S-1.*
4.5 Senior Management Agreement, dated as of June 29, 1998, between AppNet
Systems, Inc. and Robert G. Harvey.
4.6 Senior Management Agreement, dated as of June 29, 1998, between AppNet
Systems, Inc. and Robert D. McCalley.
4.7 Senior Management Agreement, dated as of July 31, 1998, between AppNet
Systems, Inc. and Ronald B. Alexander.
4.8 Senior Management Agreement, dated as of July 31, 1998, between AppNet
Systems, Inc. and Jack Pearlstein.
4.9 Senior Management Agreement, dated as of July 31, 1998, between AppNet
Systems, Inc. and Toby Tobaccowala.
4.10 Senior Management Agreement, dated as of November 2, 1998, between
AppNet Systems, Inc. and Anne Filippone.
4.11 Stock Purchase Agreement, dated as of July 31, 1998, between AppNet
Systems, Inc. and Barbara Barnes.
4.12 Stock Purchase Agreement, dated as of August 12, 1998, between AppNet
Systems, Inc. and Julie Colton.
4.13 Stock Purchase Agreement, dated as of August 12, 1998, between AppNet
Systems, Inc. and Robert George.
4.14 Stock Purchase Agreement, dated as of August 12, 1998, between AppNet
Systems, Inc. and Thomas Meloche.
II-4
<PAGE>
4.15 Stock Purchase Agreement, dated as of August 12, 1998, between AppNet
Systems, Inc. and Robert Simms.
4.16 Stock Purchase Agreement, dated as of August 12, 1998, between AppNet
Systems, Inc. and Andrew Stern.
4.17 Registration Agreement, dated as of June 29, 1998, by and among AppNet
Systems, Inc., GTCR Golder Rauner, L.L.C., Fairfax Management Company
II, L.L.C., Smart Technology, L.L.C. and certain stockholders of AppNet
Systems, Inc., filed as Exhibit 4.2 to AppNet's Registration Statement
(File No. 333-75205) on Form S-1.*
5.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson as to the validity
of the shares of common stock covered by this registration statement.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in
Exhibit 5.1 above).
23.3 Consent of International Data Corporation.
23.4 Consent of Gartner Group/Dataquest.
24.1 Power of Attorney (included on signature page of this registration
statement).
</TABLE>
- ---------------
* Incorporated by reference.
- ---------------
ITEM 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:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-
II-5
<PAGE>
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Securities and Exchange Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) 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;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by AppNet pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
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.
(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
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to 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.
II-6
<PAGE>
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of AppNet pursuant to the foregoing provisions, or otherwise, AppNet has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant 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, AppNet 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 Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the AppNet
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 Bethesda, State of Maryland, on July 15, 1999.
APPNET SYSTEMS, INC.
By: /s/ Ken S. Bajaj
------------------------------------
Ken S. Bajaj
President and Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
The undersigned directors and officers of AppNet Systems, Inc. hereby
constitute and appoint Ken S. Bajaj and Jack Pearlstein and each of them, as his
true and lawful attorneys-in-fact and agents, with full power to act without the
other and 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) 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
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
II-8
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Ken S. Bajaj
- ---------------------- President, Chief Executive July 15, 1999
Ken S. Bajaj Officer and Director
(Principal Executive Officer)
/s/ John Cross
- ---------------------- Executive Vice President July 15, 1999
John Cross and Director
- ---------------------- Director July 15, 1999
Thomas M. Davidson
/s/ Bruce Rauner
- ---------------------- Director July 15, 1999
Bruce Rauner
/s/ Philip A. Canfield
- ---------------------- Director July 15, 1999
Philip A. Canfield
/s/ Richard N. Perle
- --------------------- Director July 15, 1999
Richard N. Perle
/s/ Jack Pearlstein
- --------------------- Chief Financial Officer July 15, 1999
Jack Pearlstein (Principal Financial
and Accounting Officer)
</TABLE>
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
<S> <C>
3.1 Restated Certificate of Incorporation of the AppNet Systems, Inc.,
filed as Exhibit 3.1 to AppNet's Registration Statement (File No.
333-75205) on Form S-1.*
3.2 Form of Amended and Restated Bylaws of AppNet Systems, Inc., filed as
Exhibit 3.2 to AppNet's Registration Statement (File No. 333-75205) on
Form S-1.*
4.1 Century Computing, Incorporated Incentive Stock Option Plan, as
amended, filed as Exhibit 10.18 to AppNet's Registration Statement
(File No. 333-75205) on Form S-1.*
4.2 AppNet Systems, Inc. 1998 Stock Option and Incentive Plan, filed as
Exhibit 10.19 to AppNet's Registration Statement (File No. 333-75205)
on Form S-1.*
4.3 AppNet Systems, Inc. 1999 Stock Incentive Plan.
4.4 Internet Outfitters, Inc. 1996 Incentive Stock Option Plan, as amended,
filed as Exhibit 10.21 to AppNet's Registration Statement (File No.
333-75205) on Form S-1.*
4.5 Senior Management Agreement, dated as of June 29, 1998, between AppNet
Systems, Inc. and Robert G. Harvey.
4.6 Senior Management Agreement, dated as of June 29, 1998, between AppNet
Systems, Inc. and Robert D. McCalley.
4.7 Senior Management Agreement, dated as of July 31, 1998, between AppNet
Systems, Inc. and Ronald B. Alexander.
4.8 Senior Management Agreement, dated as of July 31, 1998, between AppNet
Systems, Inc. and Jack Pearlstein.
E-1
<PAGE>
<S> <C>
4.9 Senior Management Agreement, dated as of July 31, 1998, between AppNet
Systems, Inc. and Toby Tobaccowala.
4.10 Senior Management Agreement, dated as of November 2, 1998, between
AppNet Systems, Inc. and Anne Filippone.
4.11 Stock Purchase Agreement, dated as of July 31, 1998, between AppNet
Systems, Inc. and Barbara Barnes.
4.12 Stock Purchase Agreement, dated as of August 12, 1998, between AppNet
Systems, Inc. and Julie Colton.
4.13 Stock Purchase Agreement, dated as of August 12, 1998, between AppNet
Systems, Inc. and Robert George.
4.14 Stock Purchase Agreement, dated as of August 12, 1998, between AppNet
Systems, Inc. and Thomas Meloche.
4.15 Stock Purchase Agreement, dated as of August 12, 1998, between AppNet
Systems, Inc. and Robert Simms.
4.16 Stock Purchase Agreement, dated as of August 12, 1998, between AppNet
Systems, Inc. and Andrew Stern.
4.17 Registration Agreement, dated as of June 29, 1998, by and among AppNet
Systems, Inc., GTCR Golder Rauner, L.L.C., Fairfax Management Company
II, L.L.C., Smart Technology, L.L.C. and certain stockholders of AppNet
Systems, Inc., filed as Exhibit 4.2 to AppNet's Registration Statement
(File No. 333-75205) on Form S-1.*
5.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson as to the validity
of the shares of common stock covered by this registration statement.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in
Exhibit 5.1 above).
23.3 Consent of International Data Corporation.
23.4 Consent of Gartner Group/Dataquest.
24.1 Power of Attorney (included on signature page of this registration
statement).
</TABLE>
E-2
<PAGE>
- ---------------
* Incorporated by reference.
E-3
<PAGE>
Exhibit 4.3
APPNET SYSTEMS, INC.
1999 STOCK INCENTIVE PLAN
AS OF JUNE 17, 1999
<PAGE>
APPNET SYSTEMS, INC.
1999 STOCK INCENTIVE PLAN
1. PURPOSE.
The purpose of this Plan is to strengthen AppNet Systems, Inc., a
Delaware corporation (the "Company"), by providing an incentive to its
employees, officers, directors and consultants and thereby encouraging them to
devote their abilities and industry to the success of the Company's business
enterprise. It is intended that this purpose be achieved by extending to
employees (including future employees who have received a formal written offer
of employment), officers, directors, and consultants of the Company and its
Subsidiaries an added long-term incentive for high levels of performance and
unusual efforts through the grant of Incentive Stock Options, Nonqualified Stock
Options, Formula Options, Stock Appreciation Rights, Dividend Equivalent Rights,
Performance Awards, Share Awards, Phantom Stock and Restricted Stock (as each
term is herein defined).
2. DEFINITIONS.
For purposes of the Plan:
2.1 "ADJUSTED FAIR MARKET VALUE" means, in the event of a Change
in Control, the highest price per Share paid to holders of the Shares in any
transaction (or series of related transactions) constituting or resulting in a
Change in Control other than pursuant to Section 2.10(b).
2.2 "AFFILIATE" means, with respect to any Person, any other
Person that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or under common control with, such Person. Any
Relative (for this purpose, "Relative" means a spouse, child, parent, parent of
spouse, sibling or grandchild) of an individual shall be deemed to be an
Affiliate of such individual for purposes hereof. Neither the Company nor any
Person controlled by the Company shall be deemed to be an Affiliate of any
holder of Company stock.
2.3 "AGREEMENT" means the written agreement between the Company
and an Optionee or Grantee evidencing the grant of an Option or Award and
setting forth the terms and conditions thereof.
<PAGE>
2.4 "AWARD" means a grant of Restricted Stock, Phantom Stock, a
Stock Appreciation Right, a Performance Award, a Dividend Equivalent Right, a
Share Award, or any or all of them.
2.5 "BENEFICIAL OWNERSHIP" means ownership within the meaning of
Rule 13d-3 promulgated under the Exchange Act.
2.6 "BENEFICIARY" means an individual, trust or estate who or
which, by a written designation of the Optionee or Grantee filed with the
Company by operation of law succeeds to the rights and obligations of the
Optionee or Grantee under the Plan and an Agreement upon the Optiontee's or
Grantee's death.
2.7 "BOARD" means the Board of Directors of the Company.
2.8 "CAUSE" means:
(a) for purposes of Section 6.4, the term "Cause" shall mean
(i) intentional failure to perform duties as a Director, (ii) intentional
misrepresentation or the commission of an act of fraud in the performance of
such duties, (iii) breach of fiduciary duty involving personal profit including,
without limitation, embezzlement, misappropriation or conversion of assets or
opportunities of the Company or any of its Subsidiaries or (iv) willful
violation of any law, rule or regulation (other than traffic violations or
similar offenses) in connection with the performance of duties as a Director;
PROVIDED, HOWEVER, that if the term "Cause" is defined in the Articles of
Incorporation of the Company, Cause shall have the meaning given such term in
such Articles, or
(b) in the case of an Optionee or Grantee whose employment
with the Company or a Subsidiary is, as the date of the applicable Agreement,
subject to the terms of an employment agreement between such Optionee or Grantee
and the Company or Subsidiary, which employment agreement includes a definition
of "Cause," the term "Cause" as used in this Plan or any Agreement shall have
the meaning set forth in such employment agreement during the period that such
employment agreement remains in effect; or
(c) in all other cases, the term "Cause" as used in this
Plan or any Agreement shall mean (i) intentional failure to perform reasonably
assigned duties, (ii) dishonesty or willful misconduct in the performance of
duties, (iii) involvement in a transaction in connection with the performance of
duties to the Company or any of its Subsidiaries which transaction is adverse to
the interests of the Company or any of its Subsidiaries and which is engaged in
for personal profit or (iv) willful violation of any law, rule or regulation
(other than traffic violations or similar offenses) in connection with the
performance of duties.
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<PAGE>
2.9 "CHANGE IN CAPITALIZATION" means any increase or reduction in
the number of Shares, or any change (including, without limitation, in the case
of a spin-off, dividend or other distribution in respect of Shares, a change in
value) in the Shares or exchange of Shares for a different number or kind of
shares or other securities of the Company or another corporation, by reason of a
reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights or debentures, stock
dividend, stock split or reverse stock split, cash dividend, property dividend,
combination or exchange of shares, repurchase of shares, change in corporate
structure or a substantially similar transaction.
2.10 A "CHANGE IN CONTROL" shall mean the occurrence of any of the
following:
(a) An acquisition in one transaction or a series of related
transactions (other than directly from the Company or pursuant to Options or
Awards granted under this Plan or otherwise by the Company) of any Voting
Securities of the Company by any Person, immediately after which such Person has
Beneficial Ownership of fifty percent (50%) or more of the combined voting power
of the Company's then outstanding Voting Securities; PROVIDED, HOWEVER, in
determining whether a Change in Control has occurred pursuant to this Section
2.10(a), Voting Securities which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition which would cause a
Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (i)
an employee benefit plan (or a trust forming a part thereof) maintained by (A)
the Company or (B) any corporation or other Person of which a majority of its
voting power or its voting equity securities or equity interest is owned,
directly or indirectly, by the Company (for purposes of this definition, a
"Related Entity"), (ii) the Company or any Related Entity, or (iii) any Person
in connection with a "Non-Control Transaction" (as hereinafter defined);
(b) The individuals who, as of the date hereof, are members
of the Board (the "Incumbent Board"), cease for any reason to constitute at
least a majority of the members of the Board; PROVIDED, HOWEVER, that if the
election, or nomination for election by the Company's common stockholders, of
any new director was approved by a vote of at least a majority of the Incumbent
Board, such new director shall, for purposes of this Plan, be considered as a
member of the Incumbent Board; PROVIDED FURTHER, HOWEVER, that no individual
shall be considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened "Election Contest"
(as described in Rule 14a-11 promulgated under the Exchange Act) or other actual
or threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board (a "Proxy Contest") including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy Contest; or
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<PAGE>
(c) The consummation of:
(i) A merger, consolidation or reorganization involving
the Company unless:
(A) the stockholders of the Company, immediately
before such merger, consolidation or reorganization, own
directly or indirectly immediately following such
merger, consolidation or reorganization, more than fifty
percent (50%) of the combined voting power of the
outstanding voting securities of the corporation
resulting from such merger or consolidation or
reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of
the Voting Securities immediately before such merger,
consolidation or reorganization,
(B) the individuals who were members of the
Incumbent Board immediately prior to the execution of
the agreement providing for such merger, consolidation
or reorganization constitute at least a majority of the
members of the board of directors of the Surviving
Corporation, or a corporation Beneficially Owning
directly or indirectly a majority of the voting
securities of the Surviving Corporation, and
(C) no Person other than (1) the Company, (2) any
Related Entity, (3) any employee benefit plan (or any
trust forming a part thereof) that, immediately prior to
such merger, consolidation or reorganization, was
maintained by the Company, the Surviving Corporation, or
any Related Entity or (4) any Person who, together with
its Affiliates, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership
of fifty percent (50%) or more of the then outstanding
Voting Securities, owns, together with its Affiliates,
Beneficial Ownership of fifty percent (50%) or more of
the combined voting power of the Surviving Corporation's
then outstanding voting securities.
(D) a transaction described in clauses (A) through
(C) above shall herein be referred to as a "Non-Control
Transaction;"
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<PAGE>
(ii) A complete liquidation or dissolution of the
Company; or
(iii) An agreement for the sale or other disposition of
all or substantially all of the assets of the Company to any
Person (other than a transfer to a Related Entity or the
distribution to the Company's stockholders of the stock of a
Related Entity or any other assets).
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of fifty percent (50%) or more of the combined voting power of the
Company's then outstanding Voting Securities as a result of the acquisition of
Voting Securities by the Company which, by reducing the number of Voting
Securities then outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Persons, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the Company, and (1) before such share
acquisition by the Company the Subject Person becomes the Beneficial Owner of
any new or additional Voting Securities in a related transaction or (2) after
such share acquisition by the Company the Subject Person becomes the Beneficial
Owner of any new or additional Voting Securities which in either case increases
the percentage of the then outstanding Voting Securities Beneficially Owned by
the Subject Person, then a Change in Control shall occur.
2.11 "CODE" means the Internal Revenue Code of 1986, as amended.
2.12 "COMMITTEE" means a committee, as described in Section 3.1,
appointed by the Board from time to time to administer the Plan and to perform
the functions set forth herein.
2.13 "COMPANY" means AppNet Systems, Inc.
2.14 "DIRECTOR" means a director of the Company.
2.15 "DISABILITY" means:
(a) in the case of an Optionee or Grantee whose employment
with the Company or a Subsidiary is, as of the date of the applicable Agreement,
subject to the terms of an employment agreement between such Optionee or Grantee
and the Company or Subsidiary, which employment agreement includes a definition
of "Disability," the term "Disability" as used in this Plan or any Agreement
shall have the meaning set forth in such employment agreement during the period
that such employment agreement remains in effect; or
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<PAGE>
(b) in all other cases, the term "Disability" as used in
this Plan or any Agreement shall mean a physical or mental infirmity which
impairs the Optionee's or Grantee's ability to perform substantially his or her
duties for a period of one hundred eighty (180) consecutive days.
2.16 "DISABILITY DATE" means the date which is six (6) months
after the date on which an Optionee or Grantee is first absent from active
employment with the Company by reason of a Disability.
2.17 "DIVIDEND EQUIVALENT RIGHT" means a right to receive all or
some portion of the cash dividends that are or would be payable with respect to
Shares.
2.18 "DIVISION" means any of the operating units or divisions of
the Company designated as a Division by the Committee.
2.19 "ELIGIBLE INDIVIDUAL" means any of the following individuals
who is designated by the Committee as eligible to receive Options or Awards
subject to the conditions set forth herein: (a) any director (other than a
Nonemployee Director), officer or employee of the Company or a Subsidiary, (b)
any individual to whom the Company or a Subsidiary has extended a formal,
written offer of employment, or (c) any consultant or advisor of the Company or
a Subsidiary.
2.20 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
2.21 "FAIR MARKET VALUE" on any date means the closing sales
prices of the Shares on such date on the principal national securities exchange
on which such Shares are listed or admitted to trading, or, if such Shares are
not so listed or admitted to trading, the average of the per Share closing bid
price and per Share closing asked price on such date as quoted on the National
Association of Securities Dealers Automated Quotation System or such other
market in which such prices are regularly quoted, or, if there have been no
published bid or asked quotations with respect to Shares on such date, the Fair
Market Value shall be the value established by the Board in good faith and, in
the case of an Incentive Stock Option, in accordance with Section 422 of the
Code.
2.22 "FORMULA OPTION" means an Option granted pursuant to Section
6.
2.23 "GRANTEE" means a person to whom an Award has been granted
under the Plan.
2.24 "INCENTIVE STOCK OPTION" means an Option satisfying the
requirements of Section 422 of the Code and designated by the Committee as an
Incentive Stock Option.
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2.25 "INITIAL PUBLIC OFFERING" means the consummation of the first
public offering of Shares pursuant to a registration statement (other than on
Form S-8 or successor form) filed with, and declared effective by, the
Securities and Exchange Commission.
2.26 "NONEMPLOYEE DIRECTOR" means a director of the Company who is
a "nonemployee director" within the meaning of Rule 16b-3 promulgated under the
Exchange Act.
2.27 "NONQUALIFIED STOCK OPTION" means an Option which is not an
Incentive Stock Option.
2.28 "NORMAL RETIREMENT DATE" means the date on which an Optionee
or Grantee terminates active employment with the Company or a Subsidiary on or
after attainment of age 65, but does not include termination by the Company or a
Subsidiary for Cause.
2.29 "OPTION" means a Nonqualified Stock Option, an Incentive
Stock Option, a Formula Option, or any or all of them.
2.30 "OPTIONEE" means a person to whom an Option has been granted
under the Plan.
2.31 "OUTSIDE DIRECTOR" means a director of the Company who is an
"outside director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
2.32 "PARENT" means any corporation which is a parent corporation
(within the meaning of Section 424(e) of the Code) with respect to the Company.
2.33 "PERFORMANCE AWARDS" means Performance Units, Performance
Shares or either or both of them.
2.34 "PERFORMANCE-BASED COMPENSATION" means any Option or Award
that is intended to constitute "performance based compensation" within the
meaning of Section 162(m)(4)(C) of the Code and the regulations promulgated
thereunder.
2.35 "PERFORMANCE CYCLE" means the time period specified by the
Committee at the time Performance Awards are granted during which the
performance of the Company, a Subsidiary or a Division will be measured.
2.36 "PERFORMANCE OBJECTIVES" has the meaning set forth in Section
11.
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2.37 "PERFORMANCE SHARES" means Shares issued or transferred to an
Eligible Individual under Section 11.
2.38 "PERFORMANCE UNITS" means Performance Units granted to an
Eligible Individual under Section 11.
2.39 "PERSON" means `person' as such term is used for purposes of
Section 13(d) or 14(d) of the Exchange Act, including without limitation, any
individual, corporation, limited liability company, partnership, trust,
unincorporated organization, government or any agency or political subdivision
thereof, or any other entity or any group of Persons.
2.40 "PHANTOM STOCK" means a right granted to an Eligible
Individual under Section 12 representing a number of hypothetical Shares.
2.41 "PLAN" means the AppNet Systems, Inc. 1999 Stock Incentive
Plan, as amended and restated from time to time.
2.42 "POOLING TRANSACTION" means an acquisition of the Company in
a transaction which is intended to be treated as a "pooling of interests" under
generally accepted accounting principles.
2.43 "RESTRICTED STOCK" means Shares issued or transferred to an
Eligible Individual pursuant to Section 10.
2.44 "SHARE AWARD" means a grant of Shares pursuant to Section 12.
2.45 "SHARES" means the common stock, par value $.0005 per share,
of the Company.
2.46 "STOCK APPRECIATION RIGHT" means a right to receive all or
some portion of the increase in the value of the Shares as provided in Section 8
hereof.
2.47 "SUBSIDIARY" means (i) except as provided in subsection (ii)
below, any corporation which is a subsidiary corporation (within the meaning of
Section 424(f) of the Code) with respect to the Company, and (ii) with respect
to provisions relating to the eligibility to receive Options or Awards other
than Incentive Stock Options and to continued employment for purposes of Options
and Awards (unless the Committee determines otherwise), any entity, whether or
not incorporated, in which the Company directly or indirectly owns fifty percent
(50%) or more of the outstanding equity or other ownership interests.
2.48 "SUCCESSOR CORPORATION" means a corporation, or a parent or
subsidiary thereof, which issues or assumes an Option or Award in a transaction
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described in Section 424(a) of the Code without regard to Sections 424(a)(1) and
(2) thereof.
2.49 "TAX BENEFIT" means an actual decrease in the Company's
liability for taxes in any period.
2.50 "TEN-PERCENT STOCKHOLDER" means an Eligible Individual, who,
at the time an Incentive Stock Option is to be granted to him or her, owns
(within the meaning of Section 422(b)(6) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company, or of a Parent or a Subsidiary.
2.51 "TERMINATION OF EMPLOYMENT" means the later of (i) severance
of the employer-employee relationship with the Company or any Subsidiary or (ii)
the resignation, removal or termination of an officer or Director of the Company
or any Subsidiary.
2.52 "TRANSITION PERIOD" means the period beginning with an
Initial Public Offering and ending as of the earlier of (i) the date of the
first annual meeting of stockholders of the Company at which Directors are to be
elected that occurs after the close of the third (3rd) calendar year following
the calendar year in which the Initial Public Offering occurs, (ii) the
expiration of the Plan, (iii) a material modification of the Plan within the
meaning of Treasury Regulation Section 1.162-27(h)(1)(iii), or (iv) the
issuance of all Shares that have been allocated under the Plan.
2.53 "VOTING SECURITIES" means all outstanding voting securities
of the Company entitled to vote generally in the election of the Board of
Directors.
3. ADMINISTRATION.
3.1 The Plan shall be administered by the Committee, which shall
be appointed by the Board. The Committee shall hold meetings at such times as
may be necessary for the proper administration of the Plan. The Committee shall
keep minutes of its meetings. A quorum shall consist of a majority of the
members of the Committee and a majority of a quorum may authorize any action.
Any decision or determination reduced to writing and signed by all of the
members of the Committee shall be as fully effective as if made by a majority
vote at a meeting duly called and held. The Committee shall consist of at least
two (2) Directors and may consist of the entire Board; PROVIDED, HOWEVER, that
from and after the date of an Initial Public Offering, (A) if the Committee
consists of less than the entire Board, each member shall be a Nonemployee
Director and (B) to the extent necessary for any Option or Award intended to
qualify as Performance-Based
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Compensation to so qualify, each member of the Committee, whether or not it
consists of the entire Board, shall be an Outside Director.
3.2 For purposes of the preceding sentence, if one or more
members of the Committee is not a Nonemployee Director and, if necessary for any
Option or Award intended to qualify as Performance-Based Compensation to so
qualify, an Outside Director, but recuses himself or herself or abstains from
voting with respect to a particular action taken by the Committee, then the
Committee, with respect to that action, shall be deemed to consist only of the
members of the Committee who have not recused themselves or abstained from
voting. Subject to applicable law, the Committee may delegate its authority
under the Plan to any other person or persons.
3.3 No member of the Committee shall be liable for any action,
failure to act, determination or interpretation made in good faith with respect
to this Plan or any transaction hereunder. The Company hereby agrees to
indemnify each member of the Committee for all costs and expenses and, to the
extent permitted by applicable law, any liability incurred in connection with
defending against, responding to, negotiating for the settlement of or otherwise
dealing with any claim, cause of action or dispute of any kind arising in
connection with any actions in administering this Plan or in authorizing or
denying authorization to any transaction hereunder.
3.4 Subject to the express terms and conditions set forth herein,
the Committee shall have the power from time to time to:
(a) determine those Eligible Individuals to whom Options
shall be granted under the Plan and the number of such Options to be granted and
to prescribe the terms and conditions (which need not be identical) of each such
Option, including the purchase price per Share subject to each Option, and make
any amendment or modification to any Option Agreement consistent with the terms
of the Plan;
(b) select those Eligible Individuals to whom Awards shall
be granted under the Plan and to determine the number of Shares in respect of
which each Award is granted, the terms and conditions (which need not be
identical) of each such Award, including the restrictions or Performance
Objectives relating to Awards and the maximum value of any Award, and make any
amendment or modification to any Award Agreement consistent with the terms of
the Plan;
(c) construe and interpret the Plan and the Options and
Awards granted hereunder and to establish, amend and revoke rules and
regulations for the administration of the Plan, including, without limitation,
correcting any defect or supplying any omission, or reconciling any
inconsistency in the Plan or in any Agreement, in the manner and to the extent
it shall deem necessary or advisable,
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including so that the Plan and the operation of the Plan complies with the Code
to the extent applicable and other applicable law, and otherwise to make the
Plan fully effective. All decisions and determinations by the Committee in the
exercise of this power shall be final, binding and conclusive upon the Company,
its Subsidiaries, the Optionees and Grantees, and all other persons having any
interest therein;
(d) determine the duration and purposes for leaves of
absence which may be granted to an Optionee or Grantee on an individual basis
without constituting a termination of employment or service for purposes of the
Plan;
(e) exercise its sole discretion with respect to the powers
and rights granted to it as set forth in the Plan; and
(f) generally, exercise such powers and to perform such acts
as are deemed necessary or advisable to promote the best interests of the
Company with respect to the Plan.
4. STOCK SUBJECT TO THE PLAN; GRANT LIMITATIONS.
4.1 The aggregate number of Shares that may be made the subject
of Options and Awards granted under the Plan shall not exceed 2,000,000 plus the
additional Shares described in Section 4.2; PROVIDED, HOWEVER, that the
aggregate maximum number of Shares that may be made the subject of Options and
Awards granted under the Plan shall not exceed 10,000,000; and PROVIDED,
FURTHER, HOWEVER, that in the aggregate, not more than one-third of the number
of allotted Shares may be made the subject of Restricted Stock Awards under
Section 10 of the Plan (other than shares of Restricted Stock made in settlement
of Performance Units pursuant to Section 11.2(b)). Upon a Change in
Capitalization, the maximum number of Shares referred to in the first sentence
of this Section 4.1 shall be adjusted in number and kind pursuant to Section 14.
The Company shall reserve for the purposes of the Plan, out of its authorized
but unissued Shares or out of Shares held in the Company's treasury, or partly
out of each, such number of Shares as shall be determined by the Board.
4.2 As of January 1 of each year, commencing with the year 2000,
the aggregate number of Shares that may be made the subject of Options and
Awards granted under the Plan shall automatically increase by a number equal to
an amount determined by the Committee in its sole discretion.
4.3 Upon the granting of an Option or an Award, the number of
Shares available under Section 4.1 for the granting of further Options and
Awards shall be reduced as follows:
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(a) In connection with the granting of an Option or an Award
(other than the granting of a Performance Unit denominated in dollars), the
number of Shares shall be reduced by the number of Shares in respect of which
the Option or Award is granted or denominated.
(b) In connection with the granting of a Performance Unit
denominated in dollars, the number of Shares shall be reduced by an amount equal
to the quotient of (i) the dollar amount in which the Performance Unit is
denominated, divided by (ii) the Fair Market Value of a Share on the date the
Performance Unit is granted.
4.4 Whenever any outstanding Option or Award or portion thereof
expires, is canceled, or is otherwise terminated for any reason without having
been exercised or payment having been made in respect of the entire Option or
Award, the Shares allocable to the expired, canceled, or otherwise terminated
portion of the Option or Award may again be the subject of Options or Awards
granted hereunder.
5. OPTION GRANTS FOR ELIGIBLE INDIVIDUALS.
5.1 AUTHORITY OF COMMITTEE. Subject to the provisions of the
Plan, the Committee shall have full and final authority to select those Eligible
Individuals who will receive Options, the terms and conditions of which shall be
set forth in an Agreement; PROVIDED, HOWEVER, that no Eligible Individual shall
receive any Incentive Stock Options unless he is an employee of the Company, a
Parent or a Subsidiary at the time the Incentive Stock Option is granted.
5.2 PURCHASE PRICE. The purchase price (which may be greater
than, less than or equal to the Fair Market Value on the date of grant) or the
manner in which the purchase price is to be determined for Shares under each
Option shall be determined by the Committee and set forth in the Agreement
pursuant to which each Option is granted; PROVIDED, HOWEVER, that the purchase
price per Share under each Incentive Stock Option shall not be less than 100% of
the Fair Market Value of a Share on the date the Option is granted (110% in the
case of an Incentive Stock Option granted to a Ten-Percent Stockholder).
5.3 MAXIMUM DURATION. Options granted hereunder shall be for such
term as the Committee shall determine, PROVIDED, HOWEVER, that an Option shall
not be exercisable after the expiration of ten (10) years from the date it is
granted (five (5) years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder); PROVIDED, FURTHER, HOWEVER, that the Committee may
provide that an Option (other than an Incentive Stock Option) may, upon the
death of the Optionee, be exercised for up to one (1) year following the date of
the Optionee's death even if such period extends beyond ten (10) years from the
date the Option is granted. The Committee may, subsequent to the
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granting of any Option, extend the term thereof, but in no event shall the term
as so extended exceed the maximum term provided for in the preceding sentence.
5.4 EXERCISABILITY. Subject to Sections 5.5 and 7.5, each Option
shall become exercisable in such installments (which need not be equal) and at
such times as may be designated by the Committee and set forth in the Agreement.
To the extent not exercised, installments shall accumulate and be exercisable,
in whole or in part, at any time after becoming exercisable, but not later than
the date the Option expires. The Committee may accelerate the exercisability of
any Option or portion thereof at any time.
5.5 TERMINATION. Subject to Sections 7.5 and 13 and unless
otherwise provided by the Committee, in its sole discretion, in the applicable
Agreement, the following provisions shall apply to Options upon a Termination of
Employment:
(a) Subject to Section 5.3, unless otherwise determined by
the Committee at the time of grant (and set forth in the applicable Agreement)
or at a later date, except in the case of Disability, retirement on or after the
Optionee's Normal Retirement Date and death as provided in Sections 5.5(c) and
5.5(d) below, upon an Optionee's Termination of Employment with the Company, a
Parent or a Subsidiary for any reason other than a termination for Cause, any
unexercised Option held by such Optionee shall expire three (3) months after the
Optionee has a Termination of Employment and such Option may only be exercised
by the Optionee or his or her Beneficiary to the extent that the Option or a
portion thereof was exercisable on the date of Termination of Employment;
PROVIDED, HOWEVER, that no Option may be exercised after the expiration date
specified for the particular Option in the Agreement.
(b) If the Optionee's Termination of Employment arises as a
result of a termination for Cause, then, unless the Committee determines
otherwise at the time of the Termination of Employment, any unexercised Options
(whether or not vested and exercisable) held by such Optionee shall terminate
and expire concurrently with the Optionee's Termination of Employment and no
rights thereunder may be exercised.
(c) Subject to Section 5.3, unless otherwise determined by
the Committee at the time of grant (and set forth in the applicable Agreement)
or at a later date, if an Optionee suffers a Disability or retires on or after
the Optionee's Normal Retirement Date, any unexercised Option held by such
disabled or retired Optionee shall expire one (1) year after the Disability Date
or date of Termination of Employment by reason of retirement, as the case may
be, and such Option may only be exercised by the Optionee or his or her guardian
or legal representative to the extent that the Option or a portion thereof was
exercisable on the Disability Date or the date of Termination of Employment by
reason of retirement, as the case may be; PROVIDED, HOWEVER, no Option
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may be exercised after the expiration date specified for the particular Option
in the Agreement.
(d) Subject to Section 5.3, unless otherwise determined by
the Committee at the time of grant (and set forth in the applicable Agreement)
or at a later date, if an Optionee dies while still employed by the Company, the
Options which the Optionee was entitled to exercise on the date of the
Optionee's death may be exercised at any time after the Optionee's death by the
Optionee's Beneficiary; PROVIDED, HOWEVER, that no Option may be exercised after
the earlier of: (i) one (1) year after the Optionee's death or (ii) the
expiration date specified for the particular Option in the Agreement. If an
Optionee dies after his or her Termination of Employment, then the Options which
the Optionee was entitled to exercise on the date of the Optionee's death may be
exercised by his or her Beneficiary within the period specified in Sections
5.5(a) or 5.5(c), as the case may be.
(e) Subject to Section 5.3 and notwithstanding any other
provision of this Section 5.5, upon an Optionee's Termination of Employment at
any time on, or within one (1) year after, the occurrence of a Change in
Control, each Option held by the Optionee that was exercisable as of the date of
such Termination of Employment shall remain exercisable for a period ending not
before the earlier of (A) the first anniversary of the Termination of Employment
or (B) the expiration of the stated term of the Option.
(f) Unless otherwise determined by the Committee at the time
of grant (and set forth in the applicable Agreement) or at a later date, the
Option (or portion thereof), to the extent not yet vested and exercisable as of
the date of the Optionee's Termination of Employment, shall terminate
immediately upon such date.
5.6 DEFERRED DELIVERY OF OPTION SHARES. The Committee may, in its
sole discretion, permit Optionees to elect to defer the issuance of Shares upon
the exercise of one or more Nonqualified Stock Options granted pursuant to the
Plan. The terms and conditions of such deferral shall be determined at the time
of the grant of the Option or thereafter and shall be set forth in the Agreement
evidencing the Option.
5.7 MODIFICATION. No modification of a Option shall adversely
alter or impair any rights or obligations under the Option without the
Optionee's consent.
5.8 LIMITATIONS ON INCENTIVE STOCK OPTIONS. To the extent that
the aggregate Fair Market Value (determined as of the date of the grant) of
Shares with respect to which Incentive Stock Options granted under the Plan and
"incentive stock options" (within the meaning of Section 422 of the Code)
granted under all other plans of the Company or its Subsidiaries (in either case
determined without regard to this Section
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5.8) are exercisable by an Optionee for the first time during any calendar year
exceeds $100,000, such Incentive Stock Options shall be treated as Nonqualified
Stock Options. In applying the limitation in the preceding sentence in the case
of multiple Option grants, Options which were intended to be Incentive Stock
Options shall be treated as Nonqualified Stock Options according to the order in
which they were granted such that the most recently granted Options are first
treated as Nonqualified Stock Options.
6. OPTION GRANTS FOR NONEMPLOYEE DIRECTORS.
6.1 GRANT. Formula Options shall be granted (i) to a Nonemployee
Director who becomes a member of the Board after June 17, 1999 upon election or
appointment and (ii) to all Nonemployee Directors who are members of the Board
as follows:
(a) INITIAL GRANT. Each Nonemployee Director who becomes a
Director after June 17, 1999 shall, upon becoming a Director, be granted a
Formula Option in respect of 5,000 Shares.
(b) ANNUAL GRANT. Each Nonemployee Director shall be granted
a Formula Option in respect of 5,000 Shares on the first business day of January
in each year that the Plan is in effect provided that the Nonemployee Director
is a Director on such date; PROVIDED, HOWEVER, that a Nonemployee Director shall
not be entitled to receive an annual grant pursuant to this Section 6.1(b) for
the calendar year in which such Nonemployee Director is first elected or
appointed to the Board.
(c) TERMS AND CONDITIONS. All Formula Options granted
pursuant to this Section 6 shall be evidenced by an Agreement containing such
other terms and conditions not inconsistent with the provisions of this Plan as
determined by the Board; PROVIDED, HOWEVER, that such terms shall not vary the
price, amount or timing of Formula Options provided under this Section 6,
including provisions dealing with vesting, forfeiture and termination of such
Formula Options.
6.2 PURCHASE PRICE. The purchase price for Shares under each
Formula Option shall be equal to 100% of the Fair Market Value of such Shares on
the date the Formula Option is granted.
6.3 VESTING. Each Formula Option shall be fully vested and
exercisable on the date of grant; PROVIDED, HOWEVER, that the Optionee is a
Director on such date.
6.4 DURATION. Subject to Section 7.5, each Formula Option
shall terminate on the date which is the tenth (10th) anniversary of the date of
grant; PROVIDED, HOWEVER, that if an Optionee dies while a Director and prior to
such tenth (10th) anniversary, the Formula Option may be exercised for up to one
(1) year following the
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date of the Optionee's death even if such period extends beyond ten (10) years
from the date the Formula Option is granted, unless terminated earlier as
follows:
(a) If an Optionee's service as a Director terminates for
any reason other than Disability, death or Cause, the Optionee may for a period
of three (3) months after such termination exercise his or her Formula Option,
after which time the Formula Option shall automatically terminate in full.
(b) If an Optionee's service as a Director terminates by
reason of the Optionee's resignation or removal from the Board due to
Disability, the Optionee or his or her guardian or legal representative may, for
a period of one (1) year after such termination, exercise his or her Formula
Option, after which time the Formula Option shall automatically terminate in
full.
(c) If an Optionee's service as a Director terminates for
Cause, the Formula Option granted to the Optionee hereunder shall immediately
terminate in full and no rights thereunder may be exercised.
(d) If an Optionee dies while a Director, the Formula Option
may be exercised at any time after the Optionee's death by the Optionee's
Beneficiary; PROVIDED, HOWEVER, that no Formula Option may be exercised after
the first anniversary of the Optionee's death. If an Optionee dies after his or
her service as a Director terminates, then the Formula Option may be exercised
by his or her Beneficiary within the period specified in Sections. 6.4(a) or 6.4
(b), as the case may be.
(e) Notwithstanding any other provision of this Section 6.4,
in the event an Optionee's service as a Director of the Company is terminated at
any time on, or within one (1) year after, the occurrence of a Change in
Control, each Formula Option held by the Optionee shall remain exercisable for a
period ending not before the earlier of (A) the first anniversary of the
termination of the Optionee's employment or service or (B) the expiration of the
stated term of the Formula Option.
7. TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS.
7.1 ADDITIONAL TERMS. The provisions of this Section 7 shall
apply to all Options.
7.2 NON-TRANSFERABILITY. No Option granted hereunder shall be
transferable by the Optionee to whom it is granted otherwise than by will or by
the laws of descent and distribution or, in the case of an Option other than an
Incentive Stock Option, in the Committee's sole discretion, to a spouse or
former spouse in a transfer described in Section 1041(a) of the Code (a "Code
1041 Transfer"), and, except with
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respect to an Option transferred pursuant to a Code 1041 Transfer, an Option
shall be exercisable during the lifetime of such Optionee only by the Optionee
or his or her guardian or legal representative. Notwithstanding the foregoing,
the Committee may set forth in the Agreement evidencing an Option (other than an
Incentive Stock Option) at the time of grant or thereafter, that the Option may
be transferred to members of the Optionee's immediate family, to trusts solely
for the benefit of such immediate family members and to partnerships in which
such family members and/or trusts are the only partners. Following transfer, for
purposes of this Plan, a transferee of an Option shall be deemed to be the
Optionee; provided that the Option shall be exercisable by the transferee only
to the extent and for such periods that the Option would have been exercisable
if held by the original Optionee. For this purpose, immediate family means the
Optionee's spouse, parents, children, stepchildren and grandchildren and the
spouses of such parents, children, stepchildren and grandchildren. The terms of
an Option shall be final, binding and conclusive upon the beneficiaries,
executors, administrators, heirs and successors of the Optionee.
7.3 METHOD OF EXERCISE.
(a) The exercise of an Option shall be made only by a
written notice delivered in person or by mail to the Secretary of the Company at
the Company's principal executive office, specifying the number of Shares to be
purchased and, to the extent applicable, accompanied by payment therefor and
otherwise in accordance with such procedures which may be approved by the
Committee from time to time, and in accordance with the Agreement pursuant to
which the Option was granted; PROVIDED, HOWEVER, that Options may not be
exercised by an Optionee for twelve months following a hardship distribution to
the Optionee, to the extent such exercise is prohibited under Treasury
Regulation Section 1.401(k)-1(d)(2)(iv)(B)(4). The purchase price for any
Shares purchased pursuant to the exercise of an Option shall be paid, as
determined by the Committee in its sole discretion, by any one or a combination
of the following: (a) delivery of cash or a check to the order of the Company or
(b) transferring to the Company Shares that have been held by the Optionee for
at least six (6) months (or such lesser period as may be permitted by the
Committee) prior to the exercise of the Option and that have a Fair Market Value
equal in amount to the purchase price, such transfer to be upon such terms and
conditions as determined by the Committee. In addition, both Options and Formula
Options may be exercised through a registered broker-dealer pursuant to such
cashless exercise procedures which are, from time to time, deemed acceptable by
the Committee. Any Shares transferred to the Company as payment of the purchase
price under an Option shall be valued at their Fair Market Value on the day
preceding the date of exercise of such Option. If requested by the Committee,
the Optionee shall deliver the Agreement evidencing the Option to the Secretary
of the Company who shall endorse thereon a notation of such exercise and return
such Agreement to the Optionee. No fractional Shares (or cash in lieu thereof)
shall be issued
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upon exercise of an Option and the number of Shares that may be purchased upon
exercise shall be rounded to the nearest number of whole Shares.
(b) If the Fair Market Value of the Shares with respect to
which the Option is being exercised exceeds the purchase price of such Option,
an Optionee may, instead of exercising an Option as provided in Section 7.3(a),
request that the Committee authorize payment to the Optionee of the difference
between the Fair Market Value of part or all of the Shares which are the subject
of the Option and the purchase price of the Option, such difference to be
determined as of the date the Committee receives the request from the Optionee.
The Committee, in its sole discretion, may grant or deny such a request from an
Optionee with respect to part or all of the Shares as to which the Option is
then exercisable and, to the extent granted, shall direct the Company to make
the payment to the Optionee either in cash or in Shares or in any combination
thereof; PROVIDED, HOWEVER, that the payment in Shares shall be based upon the
Fair Market Value of Shares as of the date the Committee received the request
from the Optionee. An Option shall be deemed to have been exercised and shall be
canceled to the extent that the Committee grants a request pursuant to this
Section 7.3(b).
7.4 RIGHTS OF OPTIONEES. No Optionee shall be deemed for any
purpose to be the owner of any Shares subject to any Option unless and until (a)
the Option shall have been exercised pursuant to the terms thereof, (b) the
Company shall have issued and delivered Shares to the Optionee, and (c) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company. Thereupon, the Optionee shall have full voting, dividend and
other ownership rights with respect to such Shares, subject to such terms and
conditions as may be set forth in the applicable Agreement.
7.5 EFFECT OF CHANGE IN CONTROL.
(a) Notwithstanding anything contained in Sections 5 or 6 to
the contrary, in the event of a Change in Control, the Committee, in its sole
discretion, may provide in writing in connection with, or in contemplation of,
any such Change in Control for any or all of the following alternatives
(separately or in any combination): (i) for the assumption by the Successor
Corporation of the Options theretofore granted or the substitution by such
corporation for such Options of new options covering the stock of the Successor
Corporation with appropriate adjustments as to the number and kinds of shares
and the purchase prices; (ii) for the continuation of the Plan in which event
the Plan and the Options shall continue under such terms as may be provided;
(iii) for the accelerated vesting of the Options; or (iv) for the payment in
cash upon the surrender to the Company for cancellation of any Option or portion
of an Option to the extent vested and not yet exercised in an amount equal to
the excess, if any, of (i) (A) in the case of a Nonqualified Stock Option, the
greater of (1) the Fair Market Value, on the date preceding the date of
surrender, of the Shares subject to the Option or portion thereof surrendered or
(2) the
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Adjusted Fair Market Value of the Shares subject to the Option or portion
thereof surrendered or (B) in the case of an Incentive Stock Option, the Fair
Market Value, on the date preceding the date of surrender, of the Shares subject
to the Option or portion thereof surrendered, over (ii) the aggregate purchase
price for such Shares under the Option or portion thereof surrendered. Any
vesting of an Option or portion of an Option pursuant to this Section 7.5(a) or
surrender of an Option for a cash payment shall be conditioned upon the
consummation of the Change in Control and shall be effective only immediately
before the consummation of the Change in Control. Upon consummation of the
Change in Control, the Plan and all outstanding but unexercised Options shall
terminate, except to the extent provision is made in writing in connection with
such transaction for continuation of the Plan, or the assumption or substitution
of such Options. The Committee shall send written notice of an event that will
result in such a termination to all individuals who hold Options not later than
the time at which the Company gives notice thereof to its stockholders.
(b) To the extent set forth in the applicable Agreement, if,
as a result of a Change in Control transaction, an Option intended to qualify as
an Incentive Stock Option fails to so qualify SOLELY because of the failure to
meet the holding requirements of Code Section 422(a)(1) (a "Disqualifying
Disposition"), the Company shall make a cash payment to the Optionee equal to
the amount which will, after taking into account all taxes imposed on the
Disqualifying Disposition and the receipt of such payment, leave the Optionee in
the same after-tax position the Optionee would have been in had the Code Section
422(a)(1) holding requirements been met at the time of the Disqualifying
Disposition; PROVIDED, HOWEVER, that no payment described in this Section shall
exceed the Tax Benefit to the Company resulting from deductions relating to
ordinary income recognized by the Optionee as a result of the Disqualifying
Disposition and the receipt of such payment. The payment described in this
Section shall be made by the Company within thirty (30) days of the filing by
the Company of the federal tax return which includes the tax items associated
with the income recognized by the Optionee as a result of the Disqualifying
Disposition (or, if the Tax Benefit described in the preceding sentence is not
realized until a later year, within thirty (30) days of the filing by the
Company of the federal tax return with respect to which such Tax Benefit is
realized); PROVIDED, HOWEVER, that if more than one Optionee is entitled to a
cash payment pursuant to this Section 7.5(b) in any single tax year and the Tax
Benefit realized by the Company in such year with respect to all such Optionees
is less than the aggregate amount of the payments due to such Optionees
hereunder, then (i) each such Optionee shall receive a portion of such cash
payment equal to an amount determined by multiplying the amount of the Tax
Benefit realized by the Company in such year by a fraction the numerator of
which is equal to the amount of payment due to such Optionee and the denominator
of which is equal to the aggregate amount due to all such Optionees entitled to
a payment hereunder, and (ii) subject to further application of this proviso,
shall be entitled to
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receive the remaining portion within thirty (30) days of the filing by the
Company of the federal tax return with respect to which such Tax Benefit is
realized.
(c) To the extent set forth in the applicable Agreement and
provided that an Optionee is not entitled to payment under Section 7.5(b)
hereof, if, as a result of a Change in Control transaction, an Option intended
to qualify as an Incentive Stock Option fails to so qualify SOLELY because the
vesting of the Option is accelerated pursuant to Section 7.5(a) and such
acceleration causes the aggregate fair market value (determined at the time the
Option is granted) of the Shares with respect to which Options are exercisable
for the first time by an Optionee during the calendar year in which such vesting
occurs to exceed $100,000, within the meaning of Code Section 422(d) (a
"Disqualified Option"), then, upon exercise of such Disqualified Option, the
Company shall make a cash payment to the Optionee equal to the amount which
will, after taking into account all taxes imposed on the exercise of such
Disqualified Option and the receipt of such payment, leave the Optionee in the
same after-tax position the Optionee would have been in had the Disqualified
Option continued to qualify as an Incentive Stock Option on the date of exercise
and the Optionee sold the Shares received upon exercise of the Option at their
Fair Market Value on the date of exercise; PROVIDED, HOWEVER, that no payment
described in this Section shall exceed the Tax Benefit to the Company resulting
from deductions relating to ordinary income recognized by the Optionee as a
result of exercising the Disqualified Option and the receipt of such payment.
The payment described in this Section shall be made by the Company within thirty
(30) days of the filing by the Company of the federal tax return which includes
the tax items associated with the income recognized by the Optionee as a result
of exercising the Disqualified Option (or, if the Tax Benefit described in the
preceding sentence is not realized until a later year, within thirty (30) days
of the filing by the Company of the federal tax return with respect to which
such Tax Benefit is realized); PROVIDED, HOWEVER, that if more than one Optionee
is entitled to a cash payment pursuant to this Section 7.5(c) in any single tax
year and the Tax Benefit realized by the Company in such year with respect to
all such Optionees is less than the aggregate amount of the payments due to such
Optionees hereunder, then (i) each such Optionee shall receive a portion of such
cash payment equal to an amount determined by multiplying the amount of the Tax
Benefit realized by the Company in such year by a fraction the numerator of
which is equal to the amount of payment due to such Optionee and the denominator
of which is equal to the aggregate amount due to all such Optionees entitled to
a payment hereunder, and (ii) subject to further application of this proviso,
shall be entitled to receive the remaining portion within thirty (30) days of
the filing by the Company of the federal tax return with respect to which such
Tax Benefit is realized.
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8. STOCK APPRECIATION RIGHTS.
The Committee may in its sole discretion, either alone or in
connection with the grant of an Option, grant Stock Appreciation Rights in
accordance with the Plan, the terms and conditions of which shall be set forth
in an Agreement. If granted in connection with an Option, a Stock Appreciation
Right shall cover the same Shares covered by the Option (or such lesser number
of Shares as the Committee may determine) and shall, except as provided in this
Section 8, be subject to the same terms and conditions as the related Option.
8.1 TIME OF GRANT. A Stock Appreciation Right may be granted (a)
at any time if unrelated to an Option, or (b) if related to an Option, either at
the time of grant, or (except in the case of an Incentive Stock Option) at any
time thereafter during the term of the Option.
8.2 STOCK APPRECIATION RIGHT RELATED TO AN OPTION.
(a) EXERCISE. Subject to Section 8.9, a Stock Appreciation
Right granted in connection with an Option shall be exercisable at such time or
times and only to the extent that the related Options are exercisable
(including, without limitation, exercisability upon Termination of Employment or
a Change in Control), and will not be transferable except to the extent the
related Option may be transferable. A Stock Appreciation Right granted in
connection with an Incentive Stock Option shall expire no later than the
expiration of the related Incentive Stock Option and shall be exercisable only
if the Fair Market Value of a Share on the date of exercise exceeds the purchase
price of the Option specified in the related Incentive Stock Option Agreement.
(b) TREATMENT OF RELATED OPTIONS AND STOCK APPRECIATION
RIGHTS UPON EXERCISE. Upon the exercise of a Stock Appreciation Right granted in
connection with an Option, the Option shall be canceled to the extent of the
number of Shares as to which the Stock Appreciation Right is exercised, and upon
the exercise of an Option granted in connection with a Stock Appreciation Right,
the Stock Appreciation Right shall be canceled to the extent of the number of
Shares as to which the Option is exercised or surrendered.
8.3 STOCK APPRECIATION RIGHT UNRELATED TO AN OPTION.
(a) TERMS. Stock Appreciation Rights unrelated to Options
shall contain such terms and conditions as to exercisability (subject to Section
8.9), vesting and duration as the Committee shall determine, but in no event
shall they have a term of greater than ten (10) years; PROVIDED, HOWEVER, that
the Committee may provide that Stock Appreciation right may, upon the death of
the Grantee, be exercised for up to one
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(1) year following the date of the Grantee's death even if such period extends
beyond ten (10) years from the date the Stock Appreciation Right is granted.
(b) TERMINATION. Subject to Section 13 and except as
provided in Section 8.9, and unless otherwise provided by the Committee, in its
sole discretion, in the applicable Agreement, upon a Grantee's Termination of
Employment, a Stock Appreciation Right shall be exercisable by the Grantee to
the same extent that an Option would be exercisable by an Optionee upon the
Optionee's Termination of Employment under the provisions of Section 5.5;
PROVIDED, HOWEVER, no Stock Appreciation Right may be exercised after the
expiration date specified for the particular Stock Appreciation Right in the
applicable Agreement.
8.4 AMOUNT PAYABLE. Subject to Section 8.7, upon the exercise of
a Stock Appreciation Right, the Grantee shall be entitled to receive an amount
determined by multiplying (x) the excess of the Fair Market Value of a Share on
the date preceding the date of exercise of such Stock Appreciation Right over
(A) in the case of a Stock Appreciation Right granted in connection with an
Option, the per Share purchase price under the related Option, or (B) in the
case of a Stock Appreciation Right unrelated to an Option, the Fair Market Value
of a Share on the date the Stock Appreciation Right was granted, by (y) the
number of Shares as to which such Stock Appreciation Right is being exercised.
Notwithstanding the foregoing, the Committee may limit in any manner the amount
payable with respect to any Stock Appreciation Right by including such a limit
in the Agreement evidencing the Stock Appreciation Right at the time it is
granted.
8.5 NON-TRANSFERABILITY. No Stock Appreciation Right shall be
transferable by the Grantee to whom it was granted otherwise than by will or by
the laws of descent and distribution or, in the Committee's sole discretion,
(except in the case of a Stock Appreciation Right granted in connection with an
Incentive Stock Option), to a spouse or former spouse in a transfer described in
Section 1041(a) of the Code (a "Code 1041 Transfer"), and, except with respect
to a Stock Appreciation Right transferred pursuant to a Code 1041 Transfer, such
Stock Appreciation Right shall be exercisable during the lifetime of such
Grantee only by the Grantee or his or her guardian or legal representative. The
terms of such Stock Appreciation Right shall be final, binding and conclusive
upon the beneficiaries, executors, administrators, heirs and successors of the
Grantee.
8.6 METHOD OF EXERCISE. Stock Appreciation Rights shall be
exercised by a Grantee only by a written notice delivered in person or by mail
to the Secretary of the Company at the Company's principal executive office,
specifying the number of Shares with respect to which the Stock Appreciation
Right is being exercised. If requested by the Committee, the Grantee shall
deliver the Agreement evidencing the Stock Appreciation Right being exercised
and the Agreement evidencing any related
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Option to the Secretary of the Company who shall endorse thereon a notation of
such exercise and return such Agreement to the Grantee.
8.7 FORM OF PAYMENT. Payment of the amount determined under
Section 8.4 may be made in the sole discretion of the Committee solely in whole
Shares in a number determined at their Fair Market Value on the date preceding
the date of exercise of the Stock Appreciation Right, or solely in cash, or in a
combination of cash and Shares. If the Committee decides to make full payment in
Shares and the amount payable results in a fractional Share, no fractional
Shares (or cash in lieu thereof) shall be issued upon the exercise of the Stock
Appreciation Right and the number of Shares that will be delivered shall be
rounded to the nearest number of whole Shares.
8.8 MODIFICATION. No modification of an Award shall adversely
alter or impair any rights or obligations under the Agreement without the
Grantee's consent.
8.9 EFFECT OF CHANGE IN CONTROL. Notwithstanding anything
contained in this Section 8 to the contrary, in the event of a Change in
Control, the Committee, in its sole discretion, may provide in writing in
connection with, or in contemplation of, any such Change in Control for any
or all of the following alternatives (separately or in any combination): (i)
for the assumption by the Successor Corporation of the Stock Appreciation
Rights theretofore granted or the substitution by such corporation for such
Stock Appreciation Rights of new stock appreciation rights covering the stock
of the Successor Corporation with appropriate adjustments as to the number
and kinds of shares and the purchase prices; (ii) for the continuation of the
Plan in which event the Plan and the Stock Appreciation Rights shall continue
under such terms as may be provided; (iii) for the accelerated vesting of the
Stock Appreciation Rights; or (iv) with respect to a Stock Appreciation Right
unrelated to an Option, for the payment in cash upon the surrender to the
Company for cancellation of any such Stock Appreciation Right or portion of a
Stock Appreciation Right to the extent vested and not yet exercised in an
amount equal to the excess, if any, of (A) the greater of (i) the Fair Market
Value, on the date preceding the date of surrender, of the underlying Shares
subject to the Stock Appreciation Right or portion thereof surrendered and
(ii) the Adjusted Fair Market Value, on the date preceding the date of
surrender, of the Shares over (B) the aggregate Fair Market Value, on the
date the Stock Appreciation Right was granted, of the Shares subject to the
Stock Appreciation Right or portion thereof surrendered. Any vesting of Stock
Appreciation Rights pursuant to this Section 8.9 or surrender of a Stock
Appreciation Right for a cash payment shall be conditioned upon the
consummation of the Change in Control and shall be effective only immediately
before the consummation of the Change in Control. Upon consummation of the
Change in Control, the Plan and all outstanding but unexercised Stock
Appreciation Rights shall terminate, except to the extent provision is made
in writing in connection with such transaction for the continuation of the
Plan, or the assumption or substitution of such Stock Appreciation
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Rights. The Committee shall send written notice of an event that will result
in such a termination to all individuals who hold Stock Appreciation Rights
not later than the time at which the Company gives notice thereof to its
stockholders.
9. DIVIDEND EQUIVALENT RIGHTS.
The Committee may in its sole discretion grant Dividend Equivalent
Rights to Eligible Individuals in tandem with an Option or Award or as a
separate Award. The terms and conditions (including, without limitation, terms
and conditions relating to a Change in Control) applicable to each Dividend
Equivalent Right shall be specified in the Agreement under which the Dividend
Equivalent Right is granted. In the sole discretion of the Committee, amounts
payable in respect of Dividend Equivalent Rights may be payable currently or
deferred until the lapsing of restrictions on such Dividend Equivalent Rights or
until the vesting, exercise, payment, settlement or other lapse of restrictions
on the Option or Award to which the Dividend Equivalent Rights relate. In the
event that the amount payable in respect of Dividend Equivalent Rights are to be
deferred, the Committee shall determine whether such amounts are to be held in
cash or reinvested in Shares or deemed (notionally) to be reinvested in Shares.
If amounts payable in respect of Dividend Equivalent Rights are to be held in
cash, there may be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at a rate per
annum as the Committee, in its sole discretion, may determine. In the sole
discretion of the Committee, Dividend Equivalent Rights may be settled in cash
or Shares or a combination thereof, in a single installment or multiple
installments. With respect to Dividend Equivalent Rights granted in tandem with
an Option, the Agreement may provide that the Optionee may elect to have amounts
payable in respect of such Dividend Equivalent Rights applied against the
purchase price of such Option. To the extent necessary for any Dividend
Equivalent Right intended to qualify as Performance-Based Compensation under
Section 162(m) of the Code to so qualify, the terms and conditions of the
Dividend Equivalent Right shall be such that payment of the Dividend Equivalent
Right is contingent upon attainment of specified Performance Objectives within
the Performance Cycle, as provided for in Section 11, and such Dividend
Equivalent Right shall be treated as a Performance Award for purposes of
Sections 11 and 16.
10. RESTRICTED STOCK.
10.1 GRANT. The Committee may in its sole discretion grant Awards
to Eligible Individuals of Restricted Stock, which shall be evidenced by an
Agreement between the Company and the Grantee. Each Agreement shall contain such
restrictions, terms and conditions as the Committee may, in its sole discretion,
determine and (without limiting the generality of the foregoing) such Agreements
may require that an appropriate
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legend be placed on Share certificates. Awards of Restricted Stock shall be
subject to the terms and provisions set forth below in this Section 10.
10.2 RIGHTS OF GRANTEE. Shares of Restricted Stock granted
pursuant to an Award hereunder shall be issued in the name of the Grantee as
soon as reasonably practicable after the Award is granted PROVIDED that the
Grantee has executed an Agreement evidencing the Award, the appropriate blank
stock powers and, in the sole discretion of the Committee, an escrow agreement
and any other documents which the Committee may require as a condition to the
issuance of such Shares. If a Grantee shall fail to execute the Agreement
evidencing a Restricted Stock Award, the appropriate blank stock powers, an
escrow agreement or any other documents which the Committee may require within
the time period prescribed by the Committee at the time the Award is granted,
the Award shall be null and void. At the sole discretion of the Committee,
Shares issued in connection with a Restricted Stock Award shall be deposited
together with the stock powers with an escrow agent (which may be the Company)
designated by the Committee. Unless the Committee determines otherwise and as
set forth in the Agreement, upon delivery of the Shares to the escrow agent, the
Grantee shall have all of the rights of a stockholder with respect to such
Shares, including the right to vote the Shares and to receive all dividends or
other distributions paid or made with respect to the Shares.
10.3 NON-TRANSFERABILITY. Until all restrictions upon the Shares
of Restricted Stock awarded to a Grantee shall have lapsed in the manner set
forth in Section 10.4, such Shares shall not be sold, transferred or otherwise
disposed of and shall not be pledged or otherwise hypothecated, nor shall they
be delivered to the Grantee.
10.4 LAPSE OF RESTRICTIONS.
(a) GENERALLY. Subject to Section 10.4(b), restrictions upon
Shares of Restricted Stock awarded hereunder shall lapse at such time or times
and on such terms and conditions as the Committee may determine; PROVIDED,
HOWEVER, that except in the case of Shares of Restricted Stock issued in full or
partial settlement of another Award or other earned compensation, such
restrictions shall not fully lapse prior to the third anniversary of the date on
which such Shares of Restricted Stock were granted. The Agreement evidencing the
Award shall set forth any such restrictions.
(b) EFFECT OF CHANGE IN CONTROL. Notwithstanding anything in
this Section 10 to the contrary, in the event of a Change in Control, the
Committee, in its sole discretion, may provide in writing in connection with, or
in contemplation of, any such Change in Control for any or all of the following
alternatives (separately or in any combination): (i) for the assumption by the
Successor Corporation of the shares of Restricted Stock theretofore granted or
the substitution by such corporation for such
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shares of Restricted Stock of new shares of restricted stock of the Successor
Corporation with appropriate adjustments as to the number and kinds of shares;
(ii) for the continuation of the Plan in which event the Plan and the shares of
Restricted Stock shall continue under such terms as may be provided; or (iii)
for the lapse of all restrictions upon the shares of Restricted Stock. Any
vesting of shares of Restricted Stock pursuant to this Section 10.5(b) shall be
conditioned upon the consummation of the Change in Control and shall be
effective only immediately before the consummation of the Change in Control.
10.5 TERMS OF RESTRICTED STOCK.
(a) FORFEITURE OF RESTRICTED STOCK. Subject to Sections
10.4(b), 10.5(b) and 13, all Restricted Stock shall be forfeited and returned to
the Company and all rights of the Grantee with respect to such Restricted Stock
shall terminate unless the Grantee continues in the service of the Company as an
employee or director until the expiration of the forfeiture period for such
Restricted Stock and satisfies any and all other conditions set forth in the
Agreement. The Committee, in its sole discretion, shall determine the forfeiture
period (which may, but need not, lapse in installments) and any other terms and
conditions applicable with respect to any Restricted Stock Award.
(b) WAIVER OF FORFEITURE PERIOD. Notwithstanding anything
contained in this Section 10 to the contrary, the Committee may, in its sole
discretion, waive the forfeiture period and any other conditions set forth in
any Agreement under appropriate circumstances (including, without limitation,
the death, Disability or retirement of the Grantee or a material change in
circumstances arising after the date of grant) and subject to such terms and
conditions (including, without limitation, forfeiture of a proportionate number
of the Restricted Stock) as the Committee shall deem appropriate, PROVIDED that
the Grantee shall at that time have completed at least one (1) year of
employment or service after the date of grant.
10.6 MODIFICATION OR SUBSTITUTION. Subject to the terms of the
Plan, including, without limitation, Section 16, the Committee may modify
outstanding Awards of Restricted Stock or accept the surrender of outstanding
shares of Restricted Stock (to the extent the restrictions on such Shares have
not yet lapsed) and grant new Awards in substitution for them. Notwithstanding
the foregoing, no modification of an Award shall adversely alter or impair any
rights or obligations under the Agreement without the Grantee's consent.
10.7 TREATMENT OF DIVIDENDS. At the time an Award of Shares of
Restricted Stock is granted, the Committee may, in its sole discretion,
determine that the payment to the Grantee of dividends, or a specified portion
thereof, declared or paid on such Shares by the Company shall be (a) deferred
until the lapsing of the restrictions
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imposed upon such Shares and (b) held by the Company for the account of the
Grantee until such time. In the event that dividends are to be deferred, the
Committee shall determine whether such dividends are to be reinvested in Shares
(which shall be held as additional Shares of Restricted Stock) or held in cash.
If deferred dividends are to be held in cash, there may be credited at the end
of each year (or portion thereof) interest on the amount of the account at the
beginning of the year at a rate per annum as the Committee, in its sole
discretion, may determine. Payment of deferred dividends in respect of Shares of
Restricted Stock (whether held in cash or as additional Shares of Restricted
Stock), together with interest accrued thereon, if any, shall be made upon the
lapsing of restrictions imposed on the Shares in respect of which the deferred
dividends were paid, and any dividends deferred (together with any interest
accrued thereon) in respect of any Shares of Restricted Stock shall be forfeited
upon the forfeiture of such Shares.
10.8 DELIVERY OF SHARES. Upon the lapse of the restrictions on
Shares of Restricted Stock, the Committee shall cause a stock certificate to be
delivered to the Grantee with respect to such Shares, free of all restrictions
hereunder.
11. PERFORMANCE AWARDS.
11.1 PERFORMANCE OBJECTIVES
(a) ESTABLISHMENT. Performance Objectives for Performance
Awards may be expressed in terms of (i) earnings per Share, (ii) Share price,
(iii) pre-tax profits, (iv) net earnings, (v) return on equity or assets, (vi)
revenues, (vii) EBITDA (earnings before interest, taxes, depreciation and
amortization), (viii) market share, or market penetration, (ix) any combination
of the foregoing or (x) prior to the end of the Transition Period, such other
criteria as the Committee may determine, and may be determined before or after
accounting changes, special charges, foreign currency effects, acquisitions,
divestitures, or other extraordinary events as determined by the Committee.
Performance Objectives may be in respect of the performance of the Company, any
of its Subsidiaries, any of its Divisions or any combination thereof.
Performance Objectives may be absolute or relative (to prior performance of the
Company or to the performance of one or more other entities or external indices)
and may be expressed in terms of a progression within a specified range. The
Performance Objectives with respect to a Performance Cycle shall be established
in writing by the Committee by the earlier of (x) the date on which a quarter of
the Performance Cycle has elapsed or (y) the date which is ninety (90) days
after the commencement of the Performance Cycle, and in any event while the
performance relating to the Performance Objectives remains substantially
uncertain.
(b) EFFECT OF CERTAIN EVENTS. At the time of the granting of
a Performance Award, or at any time thereafter, in either case to the extent
permitted under
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Section 162(m) of the Code and the regulations thereunder without adversely
affecting the treatment of the Performance Award as Performance-Based
Compensation, the Committee may provide for the manner in which performance will
be measured against the Performance Objectives (or may adjust the Performance
Objectives) to reflect the impact of specified corporate transactions,
accounting or tax law changes and other extraordinary or nonrecurring events.
(c) DETERMINATION OF PERFORMANCE. Prior to the vesting,
payment, settlement or lapsing of any restrictions with respect to any
Performance Award that is intended to constitute Performance-Based Compensation
made to a Grantee who is subject to Section 162(m) of the Code, the Committee
shall certify in writing that the applicable Performance Objectives have been
satisfied.
11.2 PERFORMANCE UNITS. The Committee, in its sole discretion, may
grant Awards of Performance Units to Eligible Individuals, the terms and
conditions of which shall be set forth in an Agreement between the Company and
the Grantee. Performance Units may be denominated in Shares or a specified
dollar amount and, contingent upon the attainment of specified Performance
Objectives within the Performance Cycle, represent the right to receive payment
as provided in Section 11.2(b) of (i) in the case of Share-denominated
Performance Units, the Fair Market Value of a Share on the date the Performance
Unit was granted, the date the Performance Unit became vested or any other date
specified by the Committee, (ii) in the case of dollar-denominated Performance
Units, the specified dollar amount or (iii) a percentage (which may be more than
100%) of the amount described in clause (i) or (ii) depending on the level of
Performance Objective attainment; PROVIDED, HOWEVER, that, the Committee may at
the time a Performance Unit is granted specify a maximum amount payable in
respect of a vested Performance Unit. Each Agreement shall specify the number of
Performance Units to which it relates, the Performance Objectives which must be
satisfied in order for the Performance Units to vest and the Performance Cycle
within which such Performance Objectives must be satisfied.
(a) VESTING AND FORFEITURE. Subject to Sections 11.1(c) and
11.4, Performance Units shall become vested in such installments (which need not
be equal) and at such times or times and on such terms, conditions and
satisfaction of Performance Objectives as the Committee may, in its sole
discretion, determine at the time an Award is granted.
(b) PAYMENT OF AWARDS. Subject to Section 11.1(c), payment
to Grantees in respect of vested Performance Units shall be made as soon as
practicable after the last day of the Performance Cycle to which such Award
relates unless the Agreement evidencing the Award provides for the deferral of
payment, in which event the terms and conditions of the deferral shall be set
forth in the Agreement. Subject to Section 11.4,
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such payments may be made entirely in Shares valued at their Fair Market Value
as of the day preceding the date of payment or such other date specified by the
Committee, entirely in cash, or in such combination of Shares and cash as the
Committee in its sole discretion shall determine at any time prior to such
payment; PROVIDED, however, that if the Committee in its sole discretion
determines to make such payment entirely or partially in Shares of Restricted
Stock, the Committee must determine the extent to which such payment will be in
Shares of Restricted Stock and the terms of such Restricted Stock at the time
the Award is granted.
(c) NON-TRANSFERABILITY. Until the vesting of Performance
Units, such Performance Units shall not be sold, transferred or otherwise
disposed of and shall not be pledged or otherwise hypothecated.
11.3 PERFORMANCE SHARES. The Committee, in its sole discretion,
may grant Awards of Performance Shares to Eligible Individuals, the terms and
conditions of which shall be set forth in an Agreement between the Company and
the Grantee. Each Agreement may require that an appropriate legend be placed on
Share certificates. Awards of Performance Shares shall be subject to the
following terms and provisions:
(a) RIGHTS OF GRANTEE. The Committee shall provide at the
time an Award of Performance Shares is made the time or times at which the
actual Shares represented by such Award shall be issued in the name of the
Grantee; PROVIDED, HOWEVER, that no Performance Shares shall be issued until the
Grantee has executed an Agreement evidencing the Award, the appropriate blank
stock powers and, in the sole discretion of the Committee, an escrow agreement
and any other documents which the Committee may require as a condition to the
issuance of such Performance Shares. If a Grantee shall fail to execute the
Agreement evidencing an Award of Performance Shares, the appropriate blank stock
powers, an escrow agreement and any other documents which the Committee may
require within the time period prescribed by the Committee at the time the Award
is granted, the Award shall be null and void. At the sole discretion of the
Committee, Shares issued in connection with an Award of Performance Shares shall
be deposited together with the stock powers with an escrow agent (which may be
the Company) designated by the Committee. Except as restricted by the terms of
the Agreement, upon delivery of the Shares to the escrow agent, the Grantee
shall have, in the sole discretion of the Committee, all of the rights of a
stockholder with respect to such Shares, including the right to vote the Shares
and to receive all dividends or other distributions paid or made with respect to
the Shares.
(b) NON-TRANSFERABILITY. Until any restrictions upon the
Performance Shares awarded to a Grantee shall have lapsed in the manner set
forth in Sections 11.3(c) or 11.4, such Performance Shares shall not be sold,
transferred or otherwise disposed of and shall not be pledged or otherwise
hypothecated, nor shall they
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be delivered to the Grantee. The Committee may also impose such other
restrictions and conditions on the Performance Shares, if any, as it deems
appropriate.
(c) LAPSE OF RESTRICTIONS. Subject to Sections 11.1(c) and
11.4, restrictions upon Performance Shares awarded hereunder shall lapse and
such Performance Shares shall become vested at such time or times and on such
terms, conditions and satisfaction of Performance Objectives as the Committee
may, in its sole discretion, determine at the time an Award is granted.
(d) TREATMENT OF DIVIDENDS. At the time the Award of
Performance Shares is granted, the Committee may, in its sole discretion,
determine that the payment to the Grantee of dividends, or a specified portion
thereof, declared or paid on Shares represented by such Award which have been
issued by the Company to the Grantee shall be (i) deferred until the lapsing of
the restrictions imposed upon such Performance Shares and (ii) held by the
Company for the account of the Grantee until such time. In the event that
dividends are to be deferred, the Committee shall determine whether such
dividends are to be reinvested in Shares (which shall be held as additional
Performance Shares) or held in cash. If deferred dividends are to be held in
cash, there may be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at a rate per
annum as the Committee, in its sole discretion, may determine. Payment of
deferred dividends in respect of Performance Shares (whether held in cash or in
additional Performance Shares), together with interest accrued thereon, if any,
shall be made upon the lapsing of restrictions imposed on the Performance Shares
in respect of which the deferred dividends were paid, and any dividends deferred
(together with any interest accrued thereon) in respect of any Performance
Shares shall be forfeited upon the forfeiture of such Performance Shares.
(e) DELIVERY OF SHARES. Upon the lapse of the restrictions
on Performance Shares awarded hereunder, the Committee shall cause a stock
certificate to be delivered to the Grantee with respect to such Shares, free of
all restrictions hereunder.
11.4 EFFECT OF CHANGE IN CONTROL. Notwithstanding anything in this
Section 11 to the contrary, in the event of a Change in Control, the Committee,
in its sole discretion, may provide in writing in connection with, or in
contemplation of, any such Change in Control for any or all of the following
alternatives (separately or in any combination): (i) for the assumption by the
Successor Corporation of the Performance Awards theretofore granted or the
substitution by such corporation for such Performance Awards of new performance
awards of the Successor Corporation with appropriate adjustments as to the
applicable performance objectives and, if necessary, the number and kinds of
shares; (ii) for the continuation of the Plan in which event the Plan and the
Performance Awards shall continue under such terms as may be provided; or (iii)
for the vesting of outstanding Performance Awards as if all Performance
Objectives had been
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satisfied at the maximum level and, in the case of Performance Units which
become vested as a result of a Change in Control, for a payment which may be
made entirely in Shares valued at their Fair Market Value as of the day
preceding the payment, entirely in cash, or in such combination of Shares and
cash as the Committee shall determine in its sole discretion at any time prior
to such payment; provided that such payment shall be made within ten (10)
business days after such Change in Control. Any vesting of Performance Awards
pursuant to this Section 11.4 shall be conditioned upon the consummation of the
Change in Control and shall be effective only immediately before the
consummation of the Change in Control.
11.5 TERMINATION. Except as provided in Section 13, and unless
otherwise provided by the Committee, in its sole discretion, in the applicable
Agreement, the following provisions shall apply to Performance Awards upon a
Termination of Employment:
(a) TERMINATION OF EMPLOYMENT PRIOR TO END OF PERFORMANCE
CYCLE. Except as provided in Sections 11.5(b) and (d), in the case of a
Grantee's Termination of Employment, prior to the end of a Performance Cycle,
the Grantee will not be entitled to any Performance Awards, and any Performance
Shares shall be forfeited.
(b) DISABILITY, RETIREMENT OR DEATH PRIOR TO END OF
PERFORMANCE CYCLE. Unless otherwise provided by the Committee, in its sole
discretion, in the Agreement, if a Grantee's Disability Date or Termination of
Employment by reason of retirement on or after the Grantee's Normal Retirement
Date or death occurs following at least twelve (12) months of participation in
any Performance Cycle, but prior to the end of a Performance Cycle, the Grantee
or such Grantee's Beneficiary, as the case may be, shall be entitled to receive
a pro-rata share of his or her Performance Award as determined under Subsection
(c).
(c) PRO-RATA PAYMENT.
(I) PERFORMANCE UNITS. With respect to Performance
Units, the amount of any payment made to a Grantee (or Beneficiary) under
circumstances described in Section 11.5(b) will be the amount determined by
multiplying the amount of the Performance Units payable in Shares or dollars
which would have been earned, determined at the end of the Performance Cycle,
had such employment not been terminated, by a fraction, the numerator of which
is the number of whole months such Grantee was employed during the Performance
Cycle, and the denominator of which is the total number of months of the
Performance Cycle. Any such payment shall be made as soon as practicable after
the end of the respective Performance Cycle, and shall relate to attainment of
Performance Objectives over the entire Performance Cycle.
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(ii) PERFORMANCE SHARES. With respect to Performance
Shares, the amount of Performance Shares held by a Grantee (or Beneficiary) with
respect to which restrictions shall lapse under circumstances described in
Section 11.5(b) will be the amount determined by multiplying the amount of the
Performance Shares with respect to which restrictions would have lapsed,
determined at the end of the Performance Cycle, had such employment not been
terminated, by a fraction, the numerator of which is the number of whole months
such Grantee was employed during the Performance Cycle, and the denominator of
which is the total number of months of the Performance Cycle. The Committee
shall determine the amount of Performance Shares with respect to which
restrictions shall lapse under this Section 11.5(c)(ii) as soon as practicable
after the end of the respective Performance Cycle, and such determination shall
relate to attainment of Performance Objectives over the entire Performance
Cycle. At that time, all Performance Shares relating to that Performance Cycle
with respect to which restrictions shall not lapse shall be forfeited.
(d) OTHER EVENTS. Notwithstanding anything to the contrary
in this Section 11, the Committee may, in its sole discretion, determine to pay
all or any portion of a Performance Award to a Grantee who has a Termination of
Employment prior to the end of a Performance Cycle under certain circumstances
(including, without limitation, a material change in circumstances arising after
the date of grant) and subject to such terms and conditions as the Committee
shall deem appropriate, provided that the Grantee shall have completed at his or
her date of Termination of Employment at least one (1) year of employment after
the date of grant.
(e) TERMINATION OF EMPLOYMENT AFTER END OF PERFORMANCE
CYCLE. Subject to Section 11.5(f), in the case of a Grantee's Termination of
Employment after the end of a Performance Cycle in which the applicable
Performance Objectives have been satisfied, the Grantee shall not be entitled to
any Performance Awards that have not yet vested as of the date of the Grantee's
Termination of Employment.
(f) WAIVER OF FORFEITURE. Notwithstanding anything to the
contrary in Section 11(e), in the case of a Grantee's Termination of Employment
after the end of a Performance Cycle in which the applicable Performance
Objectives have been satisfied, the Committee may, in its sole discretion, waive
the forfeiture of Performance Awards and any other conditions set forth in any
Agreement under appropriate circumstances (including, without limitation, the
death, Disability, or retirement of the Grantee or a material change in
circumstances arising after the date of grant) and subject to such terms and
conditions as the Committee shall deem appropriate.
11.6 MODIFICATION OR SUBSTITUTION. Subject to the terms of the
Plan, including, without limitation, Section 16, the Committee may modify
outstanding Performance Awards or accept the surrender of outstanding
Performance Awards and
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grant new Performance Awards in substitution for them. Notwithstanding the
foregoing, no modification of a Performance Award shall adversely alter or
impair any rights or obligations under the Agreement without the Grantee's
consent.
12. OTHER SHARE BASED AWARDS.
12.1 SHARE AWARDS. The Committee may, in its sole discretion,
grant a Share Award to any Eligible Individual on such terms and conditions as
the Committee may, in its sole discretion, determine. Share Awards may be made
as additional compensation for services rendered by the Eligible Individual or
may be in lieu of cash or other compensation to which the Eligible Individual is
entitled from the Company.
12.2 PHANTOM STOCK AWARDS.
(a) GRANT. The Committee may, in its sole discretion, grant
shares of Phantom Stock to any Eligible Individual. Such Phantom Stock shall be
subject to the terms and conditions established by the Committee and set forth
in the applicable Agreement.
(b) PAYMENT OF AWARDS. Upon the vesting of a Phantom Stock
Award, the Grantee shall be entitled to receive a cash payment in respect of
each share of Phantom Stock which shall be equal to the Fair Market Value of a
Share as of the date the Phantom Stock Award was granted, or such other date as
determined by the Committee at the time the Phantom Stock Award was granted. The
Committee may, at the time a Phantom Stock Award is granted, provide a
limitation on the amount payable in respect of each share of Phantom Stock. In
lieu of a cash payment, the Committee may settle Phantom Stock Awards with
Shares having a Fair Market Value on the date of vesting equal to the cash
payment to which the Grantee has become entitled.
13. EMPLOYMENT AGREEMENT GOVERNS TERMINATION OF EMPLOYMENT. An
employment agreement, if applicable, between an Optionee or Grantee and the
Company shall govern with respect to the terms and conditions applicable to such
Option or Award upon a termination or change in the status of the employment of
the Optionee or Grantee, to the extent that such employment agreement provides
for terms and conditions that differ from the terms and conditions provided for
in the applicable Agreement or the Plan; PROVIDED, HOWEVER, that to the extent
necessary for an Option or Award intended to qualify as performance-based
compensation under Section 162(m) of the Code to so qualify, the terms of the
applicable Agreement or the Plan shall govern the Option or Award; and, PROVIDED
FURTHER, that the Committee shall have reviewed and, in its sole discretion,
approved the employment agreement.
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14. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event of a Change in Capitalization, the
Committee shall conclusively determine the appropriate adjustments, if any, to
(i) the maximum number and class of Shares or other stock or securities with
respect to which Options or Awards may be granted under the Plan, (ii) the
maximum number and class of Shares or other stock or securities with respect to
which Options or Awards may be granted to any Eligible Individual during any
calendar year period, (iii) the number and class of Shares or other stock or
securities which are subject to outstanding Options or Awards granted under the
Plan and the purchase price therefor, if applicable, (iv) the number and class
of Shares or other securities in respect of which Formula Options are to be
granted under Section 6 and (v) the Performance Objectives.
(b) Any such adjustment in the Shares or other stock or
securities subject to outstanding Incentive Stock Options (including any
adjustments in the purchase price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h)(3) of the Code and only
to the extent otherwise permitted by Sections 422 and 424 of the Code and, to
the extent necessary for any Option or Award intended to qualify as
Performance-Based Compensation to continue to so qualify, any such adjustment in
the Shares or other stock or securities subject to such Options and Awards shall
be made in such manner as to comply with Section 162(m) of the Code and the
regulations promulgated thereunder.
(c) If, by reason of a Change in Capitalization, a Grantee
of an Award shall be entitled to, or an Optionee shall be entitled to exercise
an Option with respect to, new, additional or different shares of stock or
securities of the Company or any other corporation, such new, additional or
different shares shall thereupon be subject to all of the conditions,
restrictions and performance criteria which were applicable to the Shares
subject to the Award or Option, as the case may be, prior to such Change in
Capitalization.
15. EFFECT OF CERTAIN TRANSACTIONS. Subject to Sections 7.5, 8.9,
10.4(b) and 11.4 or as otherwise provided in an Agreement, in the event of (a)
the liquidation or dissolution of the Company or (b) a merger or consolidation
of the Company (a "Transaction"), the Plan and the Options and Awards issued
hereunder shall continue in effect in accordance with their respective terms,
except that following a Transaction each Optionee and Grantee shall be entitled
to receive in respect of each Share subject to any outstanding Options or
Awards, as the case may be, upon exercise of any Option or payment or transfer
in respect of any Award, the same number and kind of stock, securities, cash,
property or other consideration that each holder of a Share was entitled to
receive in the Transaction in respect of a Share; PROVIDED, HOWEVER, that such
stock, securities, cash, property, or other consideration shall remain subject
to all of the
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conditions, restrictions and performance criteria which were applicable to the
Options and Awards prior to such Transaction.
16. INTERPRETATION. Following the required registration of any equity
security of the Company pursuant to Section 12 of the Exchange Act, unless
otherwise expressly stated in the relevant Agreement, each Option, Stock
Appreciation Right and Performance Award granted under the Plan to a "covered
employee" within the meaning of Section 162(m)(3) of the Code is intended to be
Performance-Based Compensation (except that, in the event of a Change in
Control, payment of Performance Awards to a Grantee who remains a "covered
employee" with respect to such payment may not qualify as Performance-Based
Compensation). The Committee shall not be entitled to exercise any discretion
otherwise authorized hereunder with respect to such Options or Awards if the
ability to exercise such discretion or the exercise of such discretion itself
would cause the compensation attributable to such Options or Awards to fail to
qualify as Performance-Based Compensation. Notwithstanding anything to the
contrary in the Plan, the provisions of the Plan may at any time be bifurcated
by the Board or the Committee in any manner so that certain provisions of the
Plan or any Performance Award intended (or required in order) to satisfy the
applicable requirements of Section 162(m) of the Code are only applicable to
persons whose compensation is subject to Section 162(m).
17. POOLING TRANSACTIONS. Notwithstanding anything contained in the
Plan or any Agreement to the contrary, in the event of a Change in Control which
is also intended to constitute a Pooling Transaction, the Committee shall take
such actions, if any, as are specifically recommended by an independent
accounting firm retained by the Company to the extent reasonably necessary in
order to assure that the Pooling Transaction will qualify as such, including,
without limitation, (a) deferring the vesting, exercise, payment, settlement or
lapsing of restrictions with respect to any Option or Award, (b) providing that
the payment or settlement in respect of any Option or Award be made in the form
of cash, Shares or securities of a successor or acquirer of the Company, or a
combination of the foregoing, and (c) providing for the extension of the term of
any Option or Award to the extent necessary to accommodate the foregoing, but
not beyond the maximum term permitted for any Option or Award.
18. EFFECTIVE DATE, TERMINATION AND AMENDMENT OF THE PLAN.
18.1 EFFECTIVE DATE. The effective date of this Plan shall be the
date the Plan is adopted by the Board, subject only to the approval of the
affirmative vote of the holders of a majority of the securities of the Company
present, or represented, and entitled to vote at a meeting of the stockholders
duly held in accordance with the applicable laws of the State of Delaware within
twelve (12) months of the adoption of the Plan by the Board.
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18.2 PLAN AMENDMENT OR TERMINATION. The Plan shall terminate on
the day preceding the tenth anniversary of the date of its adoption by the Board
and no Option or Award may be granted thereafter. The Board may sooner terminate
the Plan and the Board may at any time and from time to time amend, modify or
suspend the Plan; PROVIDED, HOWEVER, that:
(a) no such amendment, modification, suspension or
termination shall impair or adversely alter any Options or Awards theretofore
granted under the Plan, except with the consent of the Optionee or Grantee, nor
shall any amendment, modification, suspension or termination deprive any
Optionee or Grantee of any Shares which he or she may have acquired through or
as a result of the Plan; and
(b) to the extent necessary under any applicable law,
regulation or exchange requirement no amendment shall be effective unless
approved by the stockholders of the Company in accordance with applicable law,
regulation or exchange requirement.
19. NON-EXCLUSIVITY OF THE PLAN. The adoption of the Plan by the Board
shall not be construed as amending, modifying or rescinding any previously
approved incentive arrangement or as creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan, and such arrangements may be either applicable generally or only
in specific cases.
20. LIMITATION OF LIABILITY. As illustrative of the limitations of
liability of the Company, but not intended to be exhaustive thereof, nothing in
the Plan shall be construed to:
(a) give any person any right to be granted an Option or
Award other than at the sole discretion of the Committee;
(b) give any person any rights whatsoever with respect to
Shares except as specifically provided in the Plan;
(c) limit in any way the right of the Company or any
Subsidiary to terminate the employment of any person at any time; or
(d) be evidence of any agreement or understanding, expressed
or implied, that the Company will employ any person at any particular rate of
compensation or for any particular period of time.
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21. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
21.1 Except as to matters of federal law, the Plan and the rights
of all persons claiming hereunder shall be construed and determined in
accordance with the laws of the State of Delaware without giving effect to
conflicts of laws principles thereof.
21.2 The obligation of the Company to sell or deliver Shares with
respect to Options and Awards granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
21.3 The Board may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any government
authority, or to obtain for Eligible Individuals granted Incentive Stock Options
the tax benefits under the applicable provisions of the Code and regulations
promulgated thereunder.
21.4 Each Option and Award is subject to the requirement that, if
at any time the Committee determines, in its sole discretion, that the listing,
registration or qualification of Shares issuable pursuant to the Plan is
required by any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Option or
Award or the issuance of Shares, no Options or Awards shall be granted or
payment made or Shares issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected or obtained
free of any conditions as acceptable to the Committee.
21.5 Notwithstanding anything contained in the Plan or any
Agreement to the contrary, in the event that the disposition of Shares acquired
pursuant to the Plan is not covered by a then current registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), and is not
otherwise exempt from such registration, such Shares shall be restricted against
transfer to the extent required by the Securities Act and Rule 144 or other
regulations thereunder. The Company may place on any certificate representing
any such Shares any legend deemed desirable by the Company's counsel to comply
with federal or state securities laws and the Committee may require any
individual receiving Shares pursuant to an Option or Award granted under the
Plan, as a condition precedent to receipt of such Shares, to represent and
warrant to the Company in writing that the Shares acquired by such individual
are acquired without a view to any distribution thereof and will not be sold or
transferred other than pursuant to an effective registration thereof under said
Act or pursuant to an exemption applicable under the Securities Act or the rules
and regulations promulgated thereunder.
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22. MISCELLANEOUS.
22.1 MULTIPLE AGREEMENTS. The terms of each Option or Award may
differ from other Options or Awards granted under the Plan at the same time, or
at some other time. The Committee may also grant more than one Option or Award
to a given Eligible Individual during the term of the Plan, either in addition
to, or in substitution for, one or more Options or Awards previously granted to
that Eligible Individual.
22.2 CAPTIONS. The use of captions in this Plan or any Agreement
is for the convenience of reference only and shall not affect the meaning of any
provision of the Plan or such Agreement.
22.3 SEVERABILITY. Whenever possible, each provision of the Plan
or an Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of the Plan or an Agreement shall be
held by a court of competent jurisdiction to be prohibited by or invalid or
unenforceable under applicable law, then (a) such provision shall be deemed to
be amended to accomplish the objectives of the provision as originally written
to the fullest extent permitted by law and (b) all other provisions of the Plan
or an Agreement shall remain in full force and effect.
22.4 WITHHOLDING OF TAXES.
(a) At such times as an Optionee or Grantee recognizes
taxable income in connection with the receipt of Shares or cash hereunder (a
"Taxable Event"), the Optionee or Grantee shall pay to the Company an amount
equal to the federal, state and local income taxes and other amounts as may be
required by law to be withheld by the Company in connection with the Taxable
Event (the "Withholding Taxes") prior to the issuance, or release from escrow,
of such Shares or the payment of such cash. The Company shall have the right to
deduct from any payment of cash to an Optionee or Grantee an amount equal to the
Withholding Taxes in satisfaction of the obligation to pay Withholding Taxes. In
satisfaction of the obligation to pay Withholding Taxes to the Company, the
Optionee or Grantee may make a written election (the "Tax Election"), which may
be accepted or rejected in the sole discretion of the Committee, to have
withheld a portion of the Shares then issuable to him or her having an aggregate
Fair Market Value, on the date preceding the date of such issuance, equal to the
Withholding Taxes.
(b) If an Optionee makes a disposition, within the meaning
of Section 424(c) of the Code and regulations promulgated thereunder, of any
Share or Shares issued to such Optionee pursuant to the exercise of an Incentive
Stock Option within the two-year period commencing on the day after the date of
the grant or within the one-year period commencing on the day after the date of
transfer of such Share or
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Shares to the Optionee pursuant to such exercise, the Optionee shall, within ten
(10) days of such disposition, notify the Company thereof, by delivery of
written notice to the Company at its principal executive office.
22.5 POST-TRANSITION PERIOD. Any Option or Award granted under the
Plan after the expiration of the Transition Period which is intended to be
Performance-Based Compensation shall be subject to the approval of the material
terms of the Plan by a majority of the stockholders of the Company in accordance
with Section 162(m) of the Code and the regulations promulgated thereunder.
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Exhibit 4.5
SENIOR MANAGEMENT AGREEMENT
THIS SENIOR MANAGEMENT AGREEMENT (this "AGREEMENT") is made as of June
29, 1998, between AppNet Systems, Inc., a Delaware corporation (the
"CORPORATION") and Robert G. Harvey ("EXECUTIVE").
As of the date of this Agreement, Executive owns 160,000 shares of the
Company's Common Stock, par value $.0005 per share (the "CARRIED STOCK").
The Company and Executive desire to enter into an agreement pursuant to
which Executive will purchase, and the Company will sell, 180,000 shares of the
Company's Common Stock, par value $.0005 per share, (the "ADDITIONAL STOCK").
The Carried Stock and the Additional Stock are collectively referred to as
"EXECUTIVE STOCK." Certain definitions are set forth in Section 9 of this
Agreement.
The execution and delivery of this Agreement by the Company and
Executive is a condition to the purchase of shares of Common Stock and shares of
the Company's Class A Preferred Stock, par value $.01 per share (the "CLASS A
PREFERRED") by Smart Technology, L.L.C. ("SMART TECHNOLOGY"), GTCR Golder
Rauner, L.L.C., a Delaware limited liability company ("GTCR" and, together with
Smart Technology, the "INVESTORS" and each an "INVESTOR") pursuant to a purchase
agreement between the Company and the Investors dated as of the date hereof (the
"PURCHASE AGREEMENT"). Certain provisions of this Agreement are intended for the
benefit of, and will be enforceable by, the Investors.
The parties hereto agree as follows:
PROVISIONS RELATING TO EXECUTIVE STOCK
1. OWNERSHIP. Executive acknowledges that as of the date of this
Agreement he owns beneficially and of record the Carried Stock free and clear of
all liens and encumbrances.
2. PURCHASE AND SALE OF ADDITIONAL STOCK.
(a) Upon execution of this Agreement, Executive will purchase,
and the Company will sell, 180,000 shares of Common Stock at a price of $0.1055
per share. The Company will deliver to Executive the certificates representing
such Executive Stock, and Executive will deliver to the Company a cashier's or
certified check or wire transfer of funds in the aggregate amount of $90.00 and
a promissory note in the form of ANNEX A attached hereto in an aggregate
principal amount of $18,900.00 (the "EXECUTIVE NOTE"). Executive's obligations
under the Executive Note shall be secured by a pledge of all of the shares of
Common Stock purchased hereunder to the Company and in connection therewith,
Executive shall enter into a pledge agreement in the form of ANNEX B attached
hereto.
(b) Within 30 days after the date hereof, Executive will make
an effective election with the Internal Revenue Service under Section 83(b) of
the Internal Revenue Code and the regulations promulgated thereunder in the form
of ANNEX C attached hereto.
<PAGE>
(c) In connection with the purchase and sale of the Additional
Stock hereunder, Executive represents and warrants to the Company that:
(i) The Additional Stock to be acquired by Executive
pursuant to this Agreement will- be acquired for Executive's own account and not
with a view to, or intention of, distribution thereof in violation of the
Securities Act, or any applicable state securities laws, and the Additional
Stock will not be disposed of in contravention of the Securities Act or any
applicable state securities laws.
(ii) Executive is an executive officer of the
Company, is sophisticated in financial matters and is able to evaluate the risks
and benefits of the investment in the Additional Stock.
(iii) Executive is able to bear the economic risk of
his investment in the Additional Stock for an indefinite period of time because
the Additional Stock has not been registered under the Securities Act and,
therefore, cannot be sold unless subsequently registered under the Securities
Act or an exemption from such registration is available.
(iv) Executive has had an opportunity to ask
questions and receive answers concerning the terms and conditions of the
offering of Additional Stock and has had full access to such other information
concerning the Company as he has requested.
(v) This Agreement constitutes the legal, valid and
binding obligation of Executive, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement, contract
or instrument to which Executive is a party or any judgment, order or decree to
which Executive is subject.
(vi) Executive is a resident of the State of
Michigan.
(d) As an inducement to the Company to issue the Additional
Stock to Executive, as a condition thereto, Executive acknowledges and agrees
that neither the issuance of the Additional Stock to Executive nor any provision
contained herein shall entitle Executive to remain in the employment of the
Company and its Subsidiaries or affect the right of the Company to terminate
Executive's employment at any time for any reason.
3. REPURCHASE OPTION.
(a) In the event Executive ceases to be employed by the
Company and its Subsidiaries for any reason (the "SEPARATION"), the Executive
Stock (whether held by Executive or one or more of Executive's transferees,
other than the Company) will be subject to repurchase, in each case at the
option of the Company, the Investors and Ken S. Bajaj ("Bajaj") pursuant to the
terms and conditions set forth in this Section 3(a) (the "REPURCHASE OPTION"). A
percentage of the Executive Stock will be subject to repurchase at the
Executive's Original Cost for such shares, calculated in accordance with the
following schedule (the "ORIGINAL COST SHARES"):
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<TABLE>
<CAPTION>
DATE PERCENTAGE OF EXECUTIVE STOCK
TO BE REPURCHASED AT ORIGINAL COST
----------------------------------
<S> <C>
Date of this Agreement until 1st Anniversary of this Agreement 75%
Date immediately following 1st Anniversary of this Agreement until 56.25%
2nd Anniversary of this Agreement
Date immediately following 2nd Anniversary of this Agreement until 37.5%
3rd Anniversary of this Agreement
Date immediately following 3rd Anniversary of this Agreement until 18.75%
4th Anniversary of this Agreement
Date immediately following 4th Anniversary of this Agreement and 0%
thereafter
</TABLE>
The purchase price for the remaining shares of Executive Stock shall be the Fair
Market Value of such shares (the "FAIR MARKET VALUE SHARES"). In the event of
any repurchase of Original Cost Shares, such repurchase shall first be satisfied
from the Carried Stock and then from the Additional Stock.
(b) The Company may elect to purchase all or any portion of
the Original Cost Shares and Fair Market Value Shares by delivering written
notice (the "REPURCHASE NOTICE") to the holder or holders of the Executive Stock
within 180 days after the Separation. The Repurchase Notice will set forth the
number of Original Cost Shares and Fair Market Value Shares to be acquired from
each holder, the aggregate consideration to be paid for such shares and the time
and place for the closing of the transaction. The number of shares to be
repurchased by the Company shall first be satisfied to the extent possible from
the shares of Executive Stock held by Executive at the time of delivery of the
Repurchase Notice. If the number of shares of Executive Stock then held by
Executive is less than the total number of shares of Executive Stock which the
Company has elected to purchase, the Company shall purchase the remaining shares
elected to be purchased from the other holder(s) of Executive Stock under this
Agreement, pro rata according to the number of shares of Executive Stock held by
such other holder(s) at the time of delivery of such Repurchase Notice
(determined as nearly as practicable to the nearest share). The number of
Original Cost Shares and Fair Market Value Shares to be repurchased hereunder
will be allocated among Executive and the other holders of Executive Stock (if
any) pro rata according to the number of shares of Executive Stock to be
purchased from such person.
(c) If for any reason the Company does not elect to purchase
all of the Executive Stock pursuant to the Repurchase Option, the Investors and
Bajaj shall be entitled to
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exercise the Repurchase Option for all or any portion of the shares of Executive
Stock the Company has not elected to purchase (the "AVAILABLE SHARES"). As soon
as practicable after the Company has determined that there will be Available
Shares, but in any event within 150 days after the Separation, the Company shall
give written notice (the "OPTION NOTICE") to the Investors and Bajaj setting
forth the number of Available Shares and the purchase price for the Available
Shares. The Investors and Bajaj may elect to purchase any' or all of the
Available Shares by giving written notice to the Company within one month after
the Option Notice has been given by the Company. If the Investors and Bajaj
elect to purchase an aggregate number of shares greater than the number of
Available Shares, the Available Shares shall be allocated among the Investors
and Bajaj based upon the number of shares of Common Stock owned by each Investor
and Bajaj on a fully diluted basis (excluding, in the case of Bajaj, shares
owned by him that are subject to repurchase at cost). As soon as practicable,
and in any event within ten days, after the expiration of the one-month period
set forth above, the Company shall notify each holder of Executive Stock as to
the number of shares being purchased from such holder by the Investors and Bajaj
(the "SUPPLEMENTAL REPURCHASE NOTICE"). At the time the Company delivers the
Supplemental Repurchase Notice to the holder(s) of Executive Stock, the Company
shall also deliver written notice to the Investors and Bajaj setting forth the
number of shares the Investors and Bajaj are entitled to purchase, the aggregate
purchase price and the time and place of the closing of the transaction. The
number of Original Cost Shares and Fair Market Value Shares to be repurchased
hereunder shall be allocated among the Company, the Investors and Bajaj pro rata
according to the number of shares of Executive Stock to be purchased by each of
them. Notwithstanding the foregoing, the Investors and Bajaj shall not exercise
their Repurchase Option as to the Original Cost Shares pursuant to this Section
3(c) if the Company has sufficient assets to fully exercise its Repurchase
Option as to the Original Cost Shares but has not exercised such right.
Furthermore, if the Investors and Bajaj repurchase any Original Cost Shares,
they shall contribute such Original Cost Shares to the Company in exchange for a
promissory note from the Company with an aggregate principal amount equal to the
purchase price paid for such shares, bearing interest (payable quarterly) at a
rate per annum equal to the prime rate as published in the WALL STREET JOURNAL
from time to time, and having a term of no longer than five years.
(d) The closing of the purchase of the Executive Stock
pursuant to the Repurchase Option shall take place on the date designated by the
Company in the Repurchase Notice or Supplemental Repurchase Notice, which date
shall not be more than one month nor less than five days after the delivery of
the later of either such notice to be delivered. The Company will pay for the
Executive Stock to be purchased by it pursuant to the Repurchase Option by first
offsetting amounts outstanding under any bona fide debts owed by Executive to
the Company and will pay the remainder of the purchase price by, at its option,
(A) a check or wire transfer of funds, (B) a check or wire transfer of funds for
at least one-third of the purchase price, and a subordinate note or notes
payable in two equal annual installments beginning on each of the first and
second anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the prime rate as published in THE WALL
STREET JOURNAL from time to time in the aggregate amount of the remainder of the
purchase price for such shares. The Investors and Bajaj will pay for the
Executive Stock purchased by it by a check or wire transfer of funds. The
Company, the Investors and Bajaj will be entitled to receive
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<PAGE>
customary representations and warranties from the sellers regarding such sale
and to require that all sellers' signatures be guaranteed.
(e) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Executive Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Executive Stock hereunder which the
Company is otherwise entitled or required to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions.
(f) Notwithstanding anything to the contrary contained in this
Agreement, if the Executive delivers the notice of objection described in the
definition of Fair Market Value, or if the Fair Market Value of a Fair Market
Value Share is otherwise determined to be an amount more than 10% greater than
the per share repurchase price for Fair Market Value Shares originally
determined by the Board, each of the Company, the Investors and Bajaj shall have
the right to revoke its or their exercise of the Repurchase Option for all or
any portion of the Executive Stock elected to be repurchased by it by delivering
notice of such revocation in writing to the holders of the Executive Stock
during (i) the thirty-day period beginning on the date the Company, the
Investors and Bajaj receive Executive's written notice of objection and (ii) the
thirty-day period beginning on the date the Company, the Investors and Bajaj are
given written notice that the Fair Market Value of a Fair Market Value Share was
finally determined to be an amount more than 10% greater than the per share
repurchase price for Fair Market Value Shares originally determined by the Board
(g) The provisions of this Section 3 shall terminate upon the
consummation of a Sale of the Company.
4. RESTRICTIONS ON TRANSFER OF EXECUTIVE STOCK.
(a) RETENTION OF EXECUTIVE STOCK. Until the fifth anniversary
of the date of this Agreement, Executive shall not sell, transfer, assign,
pledge or otherwise dispose of any interest in any shares of Executive Stock,
except pursuant to: (i) a Sale of the Company, (ii) Section 3 of this Agreement,
(iii) Section 4 of the Stockholders Agreement, (iv) a sale described in clause
(i) of the definition of "PUBLIC SALE," or (v) after a Public Offering, upon any
sale by the Investors or an Affiliate of the type described in clause (ii) of
the definition of "PUBLIC SALE" (a "RULE 144 SALE"), to the extent of the lesser
of (a) the number of shares of Executive Stock held by Executive that are not
subject to repurchase at Original Cost and (b) the number of shares of Executive
Stock held by Executive multiplied by a fraction, the numerator of which is the
number of shares of Common Stock sold by the Investors and their Affiliates in
the Rule 144 Sale and the denominator of which is the total number of shares of
Common Stock held by the Investors and their Affiliates immediately if prior to
such sale.
(b) CERTAIN PERMITTED TRANSFERS. The restrictions in this
Section 4 will not apply with respect to (i) transfers of shares of Executive
Stock pursuant to applicable laws of descent and distribution or (ii) transfer
of shares of Executive Stock among Executive's Family Group; provided that such
restrictions will continue to be applicable to the Executive Stock after
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<PAGE>
any such transfer and the transferees of such Executive Stock have agreed in
writing to be bound by the provisions of this Agreement.
(c) TERMINATION OF RESTRICTIONS. The restrictions on the
Transfer of shares of Executive Stock set forth in this Section 4 will continue
with respect to each share of Executive Stock until the date on which such
Executive Stock has been transferred in a transaction permitted by this Section
4 (except in a transaction contemplated by Section 4(b)); provided that in any
event such restrictions will terminate on a Sale of the Company.
5. ADDITIONAL RESTRICTIONS ON TRANSFER OF EXECUTIVE STOCK.
(a) LEGEND. The certificates representing the Executive Stock
will bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT
AGREEMENT BETWEEN THE COMPANY AND AN EXECUTIVE OF THE COMPANY DATED AS OF JUNE
29,1998. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Executive Stock may sell,
transfer or dispose of any Executive Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
PROVISIONS RELATING TO EMPLOYMENT
6. EMPLOYMENT. The Company agrees to employ Executive and Executive
accepts such employment for the period beginning as of the date hereof and
ending upon his separation pursuant to Section 6(c) hereof (the "EMPLOYMENT
PERIOD").
(a) POSITION AND DUTIES. During the Employment Period,
Executive shall serve as the Senior Vice President, Software Development
Services of the Company and shall have the normal duties, responsibilities and
authority of the Senior Vice President, Software Development Services, subject
to the power of the Board to expand or limit such duties, responsibilities and
authority and to override actions of the Senior Vice President, Software
Development Services. Executive shall report to the President and Executive
shall devote his
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best efforts and of his full business time and attention to the business and
affairs of the Company and its subsidiaries.
(b) SALARY, BONUS AND BENEFITS. During the Employment Period,
the Company will pay Executive a base salary (the "ANNUAL BASE SALARY") of
$160,000 per annum, subject to any increase as determined by the Board based
upon the Company's achievements of budgetary and other objectives set by the
Board. In addition, Executive shall be eligible to receive a bonus of up to
fifty (50%) percent of the Annual Base Salary based upon the Company's
achievement of budgetary and other objectives set by the Board. Executive's
Annual Base Salary for any partial year will be prorated based upon the number
of days elapsed in such year. In addition, during the Employment Period,
Executive will be entitled to such other benefits approved by the Board and made
available to the Company's senior management.
(c) SEPARATION. Executive's employment by the Company will
continue until Executive's resignation, disability (as determined by the Board
in its good faith judgment) or death or until the Board terminates Executive's
employment for any reason or without any reason. If the Employment Period is
terminated by the Board without Cause, subject to the provisions of this
Agreement, Executive shall be entitled to receive his Annual Base Salary and his
life insurance, medical insurance and disability insurance benefits (but no
bonuses or other fringe benefits) through the end of the Noncompete Period (as
defined below in Section 8, including any extensions pursuant to Section 8(a))
(such payment, the "SEVERANCE PAYMENT") payable in accordance with normal
payroll practices.
7. CONFIDENTIAL INFORMATION.
(a) Executive acknowledges that the Company and its
Subsidiaries are engaged in the business of acquiring businesses that provide
electronic commerce services and operating those businesses after their
acquisition (the "BUSINESS"). Executive further acknowledges that the Business
and its continued success depend upon the use and protection of a large body of
confidential and proprietary information, and that he holds a position of trust
and confidence by virtue of which he necessarily possesses, has access to and,
as a consequence of his signing this Agreement, will continue to possess and
have access to, highly valuable, confidential and proprietary information of the
Company and its Subsidiaries not known to the public in general, and that it
would be improper for him to make use of this information for the benefit of
himself and others. All of such confidential and proprietary information now
existing or to be developed in the future will be referred to in this Agreement
as "CONFIDENTIAL INFORMATION." This includes, without specific limitation,
information relating to the nature and operation of the Business, the persons,
firms and corporations which are customers or active prospects of the Company
during Executive's employment by the Company, the Company's development
transition and transformation plans, methodology and methods of doing business,
strategic, acquisition, marketing and expansion plans, including plans regarding
planned and potential acquisitions and sales, financial and business plans,
employee lists, numbers and location of sales representatives, new and existing
programs and services (and those under development), prices and terms, customer
service, integration processes requirements, costs of providing service, support
and equipment and equipment maintenance costs. Confidential
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<PAGE>
Information shall not include any information that has become generally known to
and available for use by the public other than as a result of Executive's acts
or omissions.
(b) Disclosure of any Confidential Information of the Company
shall not be prohibited if such disclosure is directly pursuant to a valid and
existing order of a court or other governmental body or agency within the United
States; provided, however, that (i) Executive shall first have given prompt
notice to the Company of any such possible or prospective order (or proceeding
pursuant to which any such order may result) and (ii) Executive shall afford the
Company a reasonable opportunity to prevent or limit any such disclosure.
(c) During the Employment Period and at all times thereafter,
Executive will preserve and protect as confidential all of the Confidential
Information known to Executive or at any time in Executive's possession or
control. In addition, during the Employment Period and at all times thereafter,
Executive will not disclose to any unauthorized person or use for his own
account any of such Confidential Information without the Board's written
consent. Executive agrees to deliver to the Company at a Separation, or at any
other time the Company may request in writing, all memoranda, notes, plans,
records, reports and other documents (and copies thereof) containing or
otherwise relating to any of the Confidential Information (including, without
limitation, all acquisition prospects, lists and contact information) which he
may then possess or have under his control. Executive acknowledges that all such
memoranda, notes, plans, records, reports and other documents are and at all
times will be and remain the property of the Company.
(d) Executive will fully comply with any agreement reasonably
required by any of the Company's affiliates, business partners, suppliers or
contractors with respect to the protection of the confidential and proprietary
information of such entities.
8. NONCOMPETITION AND NONSOLICITATION. Executive acknowledges that in
the course of his employment with the Company he will become familiar with the
Confidential Information concerning the Company and such Subsidiaries and that
his services will be of special, unique and extraordinary value to the Company.
Executive agrees that the Company has a protectable interest in the Confidential
Information acquired by Executive during the course of his employment with the
Company. Therefore, Executive agrees that:
(a) NONCOMPETITION. So long as Executive is employed or
affiliated with the Company or any Subsidiary and for an additional (i) two
years thereafter, in the event the Employment Period is terminated as a result
of Executive's resignation or is terminated with Cause or (11) one year
thereafter, in the event the Employment Period is terminated without Cause (the
"NONCOMPETE PERIOD"), he shall not, anywhere in the United States, directly or
indirectly own, manage, control, participate in, consult with, render services
for, or in any manner engage in the Business or any other business engaged in by
the Company at the time of Separation; provided that in the event of a
termination without Cause, the Board may extend the Noncompete Period for an
additional one-year term by giving notice to Executive ninety (90) days prior to
the end of the then existing Noncompete Period.
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<PAGE>
(b) NONSOLICITATION. During the Noncompete Period, Executive
shall not directly or indirectly through another entity (i) induce or attempt to
induce any employee of the Company or any of its Subsidiaries to leave the
employ of the Company or such Subsidiary, or in any way interfere with the
relationship between the Company or any of its Subsidiaries and any employee
thereof, (ii) hire any person who was an employee of the Company or any of its
Subsidiaries within 180 days prior to the time such employee was hired by the
Executive, (iii) induce or attempt to induce any owner of a site location,
customer, supplier, licensee or other business relation of the Company or any of
its Subsidiaries to cease doing business with the Company or such Subsidiary or
in any way interfere with the relationship between any such customer, supplier,
licensee or business relation and the Company or any of its Subsidiaries or (iv)
directly or indirectly acquire or attempt to acquire an interest in any business
relating to the business of the Company or any of its Subsidiaries and with
which the Company or any of its Subsidiaries has entertained discussions or has
requested and received information relating to the acquisition of such business
by the Company or any of its Subsidiaries in the two-year period immediately
preceding a Separation.
(c) ENFORCEMENT. If, at the time of enforcement of Section 7
or 8 of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum duration, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area and that
the court shall be allowed to revise the restrictions contained herein to cover
the maximum duration, scope and area permitted by law. Because Executive's
services are unique and because Executive has access to Confidential
Information, the parties hereto agree that money damages would be an inadequate
remedy for any breach of this Agreement. Therefore, in the event of a breach or
threatened breach of Section 7 or Section 8 of this Agreement, the Company or
any of its successors or assigns shall, in addition to other rights and remedies
existing in its favor, be entitled to specific performance and/or injunctive or
other relief in order to enforce, or prevent any violations of, the provisions
of Section 7 or Section 8 from any court of competent jurisdiction.
(d) ADDITIONAL ACKNOWLEDGMENTS. Executive acknowledges that
the provisions of this Section are in consideration of: (i) employment with the
Company and (ii) additional good and valuable consideration as set forth in this
Agreement. Executive expressly agrees and acknowledges that the restrictions
contained in Sections 7 and 8 do not preclude Executive from earning a
livelihood, nor does it unreasonably impose limitations on Executive's ability
to earn a living. In addition, Executive agrees and acknowledges that the
potential harm to the Company of its non-enforcement outweighs any harm to the
Executive of its enforcement by injunction or otherwise. Executive acknowledges
that he has carefully read this Agreement and has given careful consideration to
the restraints imposed upon the Executive by this Agreement, and is in full
accord as to their necessity for the reasonable and proper protection of the
Confidential Information. Executive expressly acknowledges and agrees that each
and every restraint imposed by this Agreement is reasonable with respect to
subject matter, time period and geographical area.
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<PAGE>
GENERAL PROVISIONS
9. DEFINITIONS.
"AFFILIATE" or "AFFILIATES" of an Investor means any direct or indirect
general or limited partner of such Investor, or any employee or owner thereof,
or any other person, entity or investment fund controlling, controlled by or
under common control with such Investor.
"CAUSE" means (i) the commission of a felony or a crime involving moral
turpitude or the commission of any other act or omission involving dishonesty or
fraud with respect to the Company or any of its Subsidiaries or any of their
customers or suppliers, (ii) conduct tending to bring the Company or any of its
Subsidiaries into substantial public disgrace or disrepute, (iii) substantial
and repeated failure to perform duties of the office held by Executive as
reasonably directed by the Board, (iv) gross negligence or willful misconduct
with respect to the Company or any of its Subsidiaries or (v) any breach of
Section 7 or 8 of this Agreement.
"EXECUTIVE'S FAMILY GROUP" means Executive's spouse and descendants
(whether natural or adopted), any trust solely for the benefit of Executive
and/or Executive's spouse and/or descendants and any retirement plan for the
Executive.
"EXECUTIVE STOCK" will continue to be Executive Stock in the hands of
any holder other than Executive (except for the Company and the Investors and
except for transferees in a Public Sale), and except as otherwise provided
herein, each such other holder of Executive Stock will succeed to all rights and
obligations attributable to Executive as a holder of Executive Stock hereunder.
Executive Stock will also include shares of the Company's capital stock issued
with respect to Executive Stock by way of a stock split, stock dividend or other
recapitalization.
"FAIR MARKET VALUE" of each share of Executive Stock means the average
of the closing prices of the sales of the Common Stock on all securities
exchanges on which such Common Stock may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such day, or, if
on any day such Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time,
or, if on any day such Common Stock is not quoted in the NASDAQ System, of the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market Value
is being determined and the 20 consecutive business days prior to such day. If
at any time such Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Fair Market Value will
be the fair value of such Common Stock determined in good faith by the Board
(the "BOARD CALCULATION"). If the Executive reasonably disagrees with the Board
Calculation, the Executive may, within 30 days after receipt of the Board
Calculation, deliver a notice (an "OBJECTION NOTICE") to the Company setting
forth the Executive's calculation of Fair Market Value. The Board and the
Executive will negotiate in good faith to agree on such Fair Market Value, but
if such agreement is not reached within 30 days after the Company has received
the Objection Notice, Fair Market Value shall be
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determined by an appraiser jointly selected by the Board and the Executive,
which appraiser shall submit to the Board and the Executive a report within 30
days of its engagement setting forth such determination. If the parties are
unable to agree on an appraiser within 45 days after the Company has received
the Objection Notice, within seven days, each party shall submit the names of
four nationally recognized investment banking firms, and each party shall be
entitled to strike two names from the other party's list of firms, and the
appraiser shall be selected by lot from the remaining four investment banking
firms. The expenses of such appraiser shall be borne by the Executive unless the
appraiser's valuation is not less than 10% greater than the amount determined by
the Board, in which case, the costs of the appraiser shall be borne by the
Company. The determination of such appraiser shall be final and binding upon all
parties. If the Repurchase Option is exercised within 90 days after a
Separation, then Fair Market Value shall be determined as of the date of such
Separation; thereafter, Fair Market Value shall be determined as of the date the
Repurchase Option is exercised.
"ORIGINAL COST" means, with respect to each share of Additional Stock
purchased hereunder, $0.1055, and with respect to each share of Carried Stock,
$0.2505 (as proportionately adjusted for all subsequent stock splits, stock
dividends and other recapitalizations).
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof
"PUBLIC OFFERING" means the sale in an under-written public offering
registered under the Securities Act of shares of the Company's Common Stock
approved by the Board.
"PUBLIC SALE" means (i) any sale pursuant to a registered public
offering under the Securities Act or (ii) any sale to the public pursuant to
Rule 144 promulgated under the Securities Act effected through a broker, dealer
or market maker (other than pursuant to Rule 144(k)).
"SALE OF THE COMPANY" means any transaction or series of transactions
pursuant to which any person(s) or entity(ies) other than the Investors and its
Affiliates in the aggregate acquire(s) (i) capital stock of the Company
possessing the voting power (other than voting rights accruing only in the event
of a default, breach or event of noncompliance) to elect a majority of the
Company's board of directors (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock, shareholder or
voting agreement, proxy, power of attorney or otherwise) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis;
provided that the term "SALE OF THE COMPANY" shall not include a Public
Offering.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement of even date
herewith among the Company and certain of its stockholders.
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"SUBSIDIARY" means any corporation of which fifty percent (50%) or more
of the securities having ordinary voting power in electing the board of
directors are, at the time as of which any determination is being made, owned by
the Company either directly or through one or more Subsidiaries. The term
Subsidiary shall also include any joint venture arrangement between the Company
and any other entity, including, without limitation, the Company's joint venture
arrangement with Commerce Direct International, Inc., a Delaware corporation.
"TRANSFER" means to sell, transfer, assign, pledge or otherwise dispose
of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law).
10. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:
If to the Company:
AppNet Systems, Inc.
6700A Rockledge Drive
Suite 525
Bethesda, MD 20817
Attention: President
with a copy to:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Kirkland & Ellis
200 East Randolph
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.,
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
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If to the Executive:
Robert G. Harvey
785 Fox River Drive
Bloomfield Hills, MI 48304
If to the Investors:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Smart Technology, L.L.C.
10201 Norton Road
Potomac, MD 20854
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.,
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
11. GENERAL PROVISIONS.
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(a) EXPENSES. Each of the Company and the Executive shall pay
its or his legal, accounting and other expenses incurred in connection with the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement.
(b) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Executive Stock in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Executive Stock as the owner of
such stock for any purpose.
(c) SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(d) INTENDED THIRD-PARTY BENEFICIARIES. The Investors are
intended to be third-party beneficiaries to this entire Agreement and the rights
and obligations of the parties hereto. It is understood and agreed by the
parties hereto that this Agreement shall be enforceable by GTCR and, provided
GTCR is seeking to enforce substantially the same rights, the other Investor(s)
in accordance with its terms as though each of the Investors were a party to
every provision hereof. Except as expressly provided herein, no other third
parties are intended by the parties hereto to be beneficiaries hereof.
(e) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way, including, without limitation, the agreement between the Company and
Executive dated as of March 1, 1998 relating to his compensation.
(f) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(g) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by Executive, the Company, the Investors and their respective successors and
assigns (including subsequent holders of Executive Stock); provided that the
rights and obligations of Executive under this Agreement shall not be assignable
except in connection with a permitted transfer of Executive Stock hereunder. The
rights and obligations of GTCR under this Agreement may be assigned at any time,
in whole or in part, to any investment fund managed by GTCR, or any successor
thereto; provided that such assignment occurs in the manner provided in the
Purchase Agreement.
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<PAGE>
(h) CHOICE OF LAW. The corporate law of the State of Delaware
will govern all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits hereto will be governed by and
construed in accordance with the internal laws of the State of Maryland, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Maryland or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Maryland.
(i) REMEDIES. Each of the parties to this Agreement (including
the Investors) will be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including attorney's fees) caused by
any breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction (without posting any bond or deposit)
for specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
(j) AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended and waived only with the nor written consent of the Company and the
Executive.
(k) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or holiday
in the state in which the Company's chief executive office is located, the time
period shall be automatically extended to the business day immediately following
such Saturday, Sunday or holiday.
(l) TERMINATION. This Agreement (except for the provisions of
Section 6) shall survive a Separation and shall remain in full force and effect
after such Separation.
(m) ADJUSTMENTS OF NUMBERS. All numbers set forth herein which
refer to share prices or amounts will be appropriately adjusted to reflect stock
splits, stock dividends, combinations of shares and other recapitalizations
affecting the subject class of stock.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Senior
Management Agreement on the date first written above.
APPNET SYSTEMS, INC.
By: /s/ Ken S. Bajaj
-------------------------------
Name: Ken S. Bajaj
Its: Chairman and President
/s/ Robert G. Harvey
-------------------------------
Robert G. Harvey
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<PAGE>
Exhibit 4.6
SENIOR MANAGEMENT AGREEMENT
THIS SENIOR MANAGEMENT AGREEMENT (this "AGREEMENT") is made as of June
29, 1998, between AppNet Systems, Inc., a Delaware corporation (the
"CORPORATION") and Robert D. McCalley ("EXECUTIVE").
As of the date of this Agreement, Executive owns 160,000 shares of the
Company's Common Stock, par value $.0005 per share (the "CARRIED STOCK").
The Company and Executive desire to enter into an agreement pursuant to
which Executive will purchase, and the Company will sell, 314,000 shares of the
Company's Common Stock, par value $.0005 per share, (the "ADDITIONAL STOCK").
The Carried Stock and the Additional Stock are collectively referred to as
"EXECUTIVE STOCK." Certain definitions are set forth in Section 9 of this
Agreement.
The execution and delivery of this Agreement by the Company and
Executive is a condition to the purchase of shares of Common Stock and shares of
the Company's Class A Preferred Stock, par value $.01 per share (the "CLASS A
PREFERRED") by Smart Technology, L.L.C. ("SMART TECHNOLOGY"), GTCR Golder
Rauner, L.L.C., a Delaware limited liability company ("GTCR" and, together with
Smart Technology, the "INVESTORS" and each an "INVESTOR") pursuant to a purchase
agreement between the Company and the Investors dated as of the date hereof (the
"PURCHASE AGREEMENT"). Certain provisions of this Agreement are intended for the
benefit of, and will be enforceable by, the Investors.
The parties hereto agree as follows:
PROVISIONS RELATING TO EXECUTIVE STOCK
1. OWNERSHIP. Executive acknowledges that as of the date of this
Agreement he owns beneficially and of record the Carried Stock free and clear of
all liens and encumbrances.
2. PURCHASE AND SALE OF ADDITIONAL STOCK.
(a) Upon execution of this Agreement, Executive will purchase,
and the Company will sell, 314,000 shares of Common Stock at a price of $0.1055
per share. The Company will deliver to Executive the certificates representing
such Executive Stock, and Executive will deliver to the Company a cashier's or
certified check or wire transfer of funds in the aggregate amount of $157.00 and
a promissory note in the form of ANNEX A attached hereto in an aggregate
principal amount of $32,970 (the "EXECUTIVE NOTE"). Executive's obligations
under the Executive Note shall be secured by a pledge of all of the shares of
Common Stock purchased hereunder to the Company and in connection therewith,
Executive shall enter into a pledge agreement in the form of ANNEX B attached
hereto.
(b) Within 30 days after the date hereof, Executive will make
an effective election with the Internal Revenue Service under Section 83(b) of
the Internal Revenue Code and the regulations promulgated thereunder in the form
of ANNEX C attached hereto.
<PAGE>
(c) In connection with the purchase and sale of the Additional
Stock hereunder, Executive represents and warrants to the Company that:
(i) The Additional Stock to be acquired by Executive
pursuant to this Agreement will- be acquired for Executive's own account and not
with a view to, or intention of, distribution thereof in violation of the
Securities Act, or any applicable state securities laws, and the Additional
Stock will not be disposed of in contravention of the Securities Act or any
applicable state securities laws.
(ii) Executive is an executive officer of the
Company, is sophisticated in financial matters and is able to evaluate the risks
and benefits of the investment in the Additional Stock.
(iii) Executive is able to bear the economic risk of
his investment in the Additional Stock for an indefinite period of time because
the Additional Stock has not been registered under the Securities Act and,
therefore, cannot be sold unless subsequently registered under the Securities
Act or an exemption from such registration is available.
(iv) Executive has had an opportunity to ask
questions and receive answers concerning the terms and conditions of the
offering of Additional Stock and has had full access to such other information
concerning the Company as he has requested.
(v) This Agreement constitutes the legal, valid and
binding obligation of Executive, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement, contract
or instrument to which Executive is a party or any judgment, order or decree to
which Executive is subject.
(vi) Executive is a resident of the State of
Maryland.
(d) As an inducement to the Company to issue the Additional
Stock to Executive, as a condition thereto, Executive acknowledges and agrees
that neither the issuance of the Additional Stock to Executive nor any provision
contained herein shall entitle Executive to remain in the employment of the
Company and its Subsidiaries or affect the right of the Company to terminate
Executive's employment at any time for any reason.
3. REPURCHASE OPTION.
(a) In the event Executive ceases to be employed by the
Company and its Subsidiaries for any reason (the "SEPARATION"), the Executive
Stock (whether held by Executive or one or more of Executive's transferees,
other than the Company) will be subject to repurchase, in each case at the
option of the Company, the Investors and Ken S. Bajaj ("Bajaj") pursuant to the
terms and conditions set forth in this Section 3(a) (the "REPURCHASE OPTION"). A
percentage of the Executive Stock will be subject to repurchase at the
Executive's Original Cost for such shares, calculated in accordance with the
following schedule (the "ORIGINAL COST SHARES"):
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<PAGE>
<TABLE>
<CAPTION>
DATE PERCENTAGE OF EXECUTIVE STOCK
TO BE REPURCHASED AT ORIGINAL COST
----------------------------------
<S> <C>
Date of this Agreement until 1st Anniversary of this Agreement 75%
Date immediately following 1st Anniversary of this Agreement until 56.25%
2nd Anniversary of this Agreement
Date immediately following 2nd Anniversary of this Agreement until 37.5%
3rd Anniversary of this Agreement
Date immediately following 3rd Anniversary of this Agreement until 18.75%
4th Anniversary of this Agreement
Date immediately following 4th Anniversary of this Agreement and 0%
thereafter
</TABLE>
The purchase price for the remaining shares of Executive Stock shall be the Fair
Market Value of such shares (the "FAIR MARKET VALUE SHARES"). In the event of
any repurchase of Original Cost Shares, such repurchase shall first be satisfied
from the Carried Stock and then from the Additional Stock.
(b) The Company may elect to purchase all or any portion of
the Original Cost Shares and Fair Market Value Shares by delivering written
notice (the "REPURCHASE NOTICE") to the holder or holders of the Executive Stock
within 180 days after the Separation. The Repurchase Notice will set forth the
number of Original Cost Shares and Fair Market Value Shares to be acquired from
each holder, the aggregate consideration to be paid for such shares and the time
and place for the closing of the transaction. The number of shares to be
repurchased by the Company shall first be satisfied to the extent possible from
the shares of Executive Stock held by Executive at the time of delivery of the
Repurchase Notice. If the number of shares of Executive Stock then held by
Executive is less than the total number of shares of Executive Stock which the
Company has elected to purchase, the Company shall purchase the remaining shares
elected to be purchased from the other holder(s) of Executive Stock under this
Agreement, pro rata according to the number of shares of Executive Stock held by
such other holder(s) at the time of delivery of such Repurchase Notice
(determined as nearly as practicable to the nearest share). The number of
Original Cost Shares and Fair Market Value Shares to be repurchased hereunder
will be allocated among Executive and the other holders of Executive Stock (if
any) pro rata according to the number of shares of Executive Stock to be
purchased from such person.
(c) If for any reason the Company does not elect to purchase
all of the Executive Stock pursuant to the Repurchase Option, the Investors and
Bajaj shall be entitled to
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<PAGE>
exercise the Repurchase Option for all or any portion of the shares of Executive
Stock the Company has not elected to purchase (the "AVAILABLE SHARES"). As soon
as practicable after the Company has determined that there will be Available
Shares, but in any event within 150 days after the Separation, the Company shall
give written notice (the "OPTION NOTICE") to the Investors and Bajaj setting
forth the number of Available Shares and the purchase price for the Available
Shares. The Investors and Bajaj may elect to purchase any' or all of the
Available Shares by giving written notice to the Company within one month after
the Option Notice has been given by the Company. If the Investors and Bajaj
elect to purchase an aggregate number of shares greater than the number of
Available Shares, the Available Shares shall be allocated among the Investors
and Bajaj based upon the number of shares of Common Stock owned by each Investor
and Bajaj on a fully diluted basis (excluding, in the case of Bajaj, shares
owned by him that are subject to repurchase at cost). As soon as practicable,
and in any event within ten days, after the expiration of the one-month period
set forth above, the Company shall notify each holder of Executive Stock as to
the number of shares being purchased from such holder by the Investors and Bajaj
(the "SUPPLEMENTAL REPURCHASE NOTICE"). At the time the Company delivers the
Supplemental Repurchase Notice to the holder(s) of Executive Stock, the Company
shall also deliver written notice to the Investors and Bajaj setting forth the
number of shares the Investors and Bajaj are entitled to purchase, the aggregate
purchase price and the time and place of the closing of the transaction. The
number of Original Cost Shares and Fair Market Value Shares to be repurchased
hereunder shall be allocated among the Company, the Investors and Bajaj pro rata
according to the number of shares of Executive Stock to be purchased by each of
them. Notwithstanding the foregoing, the Investors and Bajaj shall not exercise
their Repurchase Option as to the Original Cost Shares pursuant to this Section
3(c) if the Company has sufficient assets to fully exercise its Repurchase
Option as to the Original Cost Shares but has not exercised such right.
Furthermore, if the Investors and Bajaj repurchase any Original Cost Shares,
they shall contribute such Original Cost Shares to the Company in exchange for a
promissory note from the Company with an aggregate principal amount equal to the
purchase price paid for such shares, bearing interest (payable quarterly) at a
rate per annum equal to the prime rate as published in the WALL STREET JOURNAL
from time to time, and having a term of no longer than five years.
(d) The closing of the purchase of the Executive Stock
pursuant to the Repurchase Option shall take place on the date designated by the
Company in the Repurchase Notice or Supplemental Repurchase Notice, which date
shall not be more than one month nor less than five days after the delivery of
the later of either such notice to be delivered. The Company will pay for the
Executive Stock to be purchased by it pursuant to the Repurchase Option by first
offsetting amounts outstanding under any bona fide debts owed by Executive to
the Company and will pay the remainder of the purchase price by, at its option,
(A) a check or wire transfer of funds, (B) a check or wire transfer of funds for
at least one-third of the purchase price, and a subordinate note or notes
payable in two equal annual installments beginning on each of the first and
second anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the prime rate as published in THE WALL
STREET JOURNAL from time to time in the aggregate amount of the remainder of the
purchase price for such shares. The Investors and Bajaj will pay for the
Executive Stock purchased by it by a check or wire transfer of funds. The
Company, the Investors and Bajaj will be entitled to receive
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<PAGE>
customary representations and warranties from the sellers regarding such sale
and to require that all sellers' signatures be guaranteed.
(e) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Executive Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Executive Stock hereunder which the
Company is otherwise entitled or required to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions.
(f) Notwithstanding anything to the contrary contained in this
Agreement, if the Executive delivers the notice of objection described in the
definition of Fair Market Value, or if the Fair Market Value of a Fair Market
Value Share is otherwise determined to be an amount more than 10% greater than
the per share repurchase price for Fair Market Value Shares originally
determined by the Board, each of the Company, the Investors and Bajaj shall have
the right to revoke its or their exercise of the Repurchase Option for all or
any portion of the Executive Stock elected to be repurchased by it by delivering
notice of such revocation in writing to the holders of the Executive Stock
during (i) the thirty-day period beginning on the date the Company, the
Investors and Bajaj receive Executive's written notice of objection and (ii) the
thirty-day period beginning on the date the Company, the Investors and Bajaj are
given written notice that the Fair Market Value of a Fair Market Value Share was
finally determined to be an amount more than 10% greater than the per share
repurchase price for Fair Market Value Shares originally determined by the Board
(g) The provisions of this Section 3 shall terminate upon the
consummation of a Sale of the Company.
4. RESTRICTIONS ON TRANSFER OF EXECUTIVE STOCK.
(a) RETENTION OF EXECUTIVE STOCK. Until the fifth anniversary
of the date of this Agreement, Executive shall not sell, transfer, assign,
pledge or otherwise dispose of any interest in any shares of Executive Stock,
except pursuant to: (i) a Sale of the Company, (ii) Section 3 of this Agreement,
(iii) Section 4 of the Stockholders Agreement, (iv) a sale described in clause
(i) of the definition of "PUBLIC SALE," or (v) after a Public Offering, upon any
sale by the Investors or an Affiliate of the type described in clause (ii) of
the definition of "PUBLIC SALE" (a "RULE 144 SALE"), to the extent of the lesser
of (a) the number of shares of Executive Stock held by Executive that are not
subject to repurchase at Original Cost and (b) the number of shares of Executive
Stock held by Executive multiplied by a fraction, the numerator of which is the
number of shares of Common Stock sold by the Investors and their Affiliates in
the Rule 144 Sale and the denominator of which is the total number of shares of
Common Stock held by the Investors and their Affiliates immediately if prior to
such sale.
(b) CERTAIN PERMITTED TRANSFERS. The restrictions in this
Section 4 will not apply with respect to (i) transfers of shares of Executive
Stock pursuant to applicable laws of descent and distribution or (ii) transfer
of shares of Executive Stock among Executive's Family Group; provided that such
restrictions will continue to be applicable to the Executive Stock after
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<PAGE>
any such transfer and the transferees of such Executive Stock have agreed in
writing to be bound by the provisions of this Agreement.
(c) TERMINATION OF RESTRICTIONS. The restrictions on the
Transfer of shares of Executive Stock set forth in this Section 4 will continue
with respect to each share of Executive Stock until the date on which such
Executive Stock has been transferred in a transaction permitted by this Section
4 (except in a transaction contemplated by Section 4(b)); provided that in any
event such restrictions will terminate on a Sale of the Company.
5. ADDITIONAL RESTRICTIONS ON TRANSFER OF EXECUTIVE STOCK.
(a) LEGEND. The certificates representing the Executive Stock
will bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT
AGREEMENT BETWEEN THE COMPANY AND AN EXECUTIVE OF THE COMPANY DATED AS OF JUNE
29,1998. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Executive Stock may sell,
transfer or dispose of any Executive Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
PROVISIONS RELATING TO EMPLOYMENT
6. EMPLOYMENT. The Company agrees to employ Executive and Executive
accepts such employment for the period beginning as of the date hereof and
ending upon his separation pursuant to Section 6(c) hereof (the "EMPLOYMENT
PERIOD").
(a) POSITION AND DUTIES. During the Employment Period,
Executive shall serve as the Senior Vice President, Electronic Commerce of
the Company and shall have the normal duties, responsibilities and authority
of the Senior Vice President, Electronic Commerce, subject to the power of
the Board to expand or limit such duties, responsibilities and authority and
to override actions of the Senior Vice President, Electronic Commerce.
Executive shall report to the President and Executive shall devote his
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<PAGE>
best efforts and of his full business time and attention to the business and
affairs of the Company and its subsidiaries.
(b) SALARY, BONUS AND BENEFITS. During the Employment Period,
the Company will pay Executive a base salary (the "ANNUAL BASE SALARY") of
$160,000 per annum, subject to any increase as determined by the Board based
upon the Company's achievements of budgetary and other objectives set by the
Board. In addition, Executive shall be eligible to receive a bonus of up to
fifty (50%) percent of the Annual Base Salary based upon the Company's
achievement of budgetary and other objectives set by the Board. Executive's
Annual Base Salary for any partial year will be prorated based upon the number
of days elapsed in such year. In addition, during the Employment Period,
Executive will be entitled to such other benefits approved by the Board and made
available to the Company's senior management.
(c) SEPARATION. Executive's employment by the Company will
continue until Executive's resignation, disability (as determined by the Board
in its good faith judgment) or death or until the Board terminates Executive's
employment for any reason or without any reason. If the Employment Period is
terminated by the Board without Cause, subject to the provisions of this
Agreement, Executive shall be entitled to receive his Annual Base Salary and his
life insurance, medical insurance and disability insurance benefits (but no
bonuses or other fringe benefits) through the end of the Noncompete Period (as
defined below in Section 8, including any extensions pursuant to Section 8(a))
(such payment, the "SEVERANCE PAYMENT") payable in accordance with normal
payroll practices.
7. CONFIDENTIAL INFORMATION.
(a) Executive acknowledges that the Company and its
Subsidiaries are engaged in the business of acquiring businesses that provide
electronic commerce services and operating those businesses after their
acquisition (the "BUSINESS"). Executive further acknowledges that the Business
and its continued success depend upon the use and protection of a large body of
confidential and proprietary information, and that he holds a position of trust
and confidence by virtue of which he necessarily possesses, has access to and,
as a consequence of his signing this Agreement, will continue to possess and
have access to, highly valuable, confidential and proprietary information of the
Company and its Subsidiaries not known to the public in general, and that it
would be improper for him to make use of this information for the benefit of
himself and others. All of such confidential and proprietary information now
existing or to be developed in the future will be referred to in this Agreement
as "CONFIDENTIAL INFORMATION." This includes, without specific limitation,
information relating to the nature and operation of the Business, the persons,
firms and corporations which are customers or active prospects of the Company
during Executive's employment by the Company, the Company's development
transition and transformation plans, methodology and methods of doing business,
strategic, acquisition, marketing and expansion plans, including plans regarding
planned and potential acquisitions and sales, financial and business plans,
employee lists, numbers and location of sales representatives, new and existing
programs and services (and those under development), prices and terms, customer
service, integration processes requirements, costs of providing service, support
and equipment and equipment maintenance costs. Confidential
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<PAGE>
Information shall not include any information that has become generally known to
and available for use by the public other than as a result of Executive's acts
or omissions.
(b) Disclosure of any Confidential Information of the Company
shall not be prohibited if such disclosure is directly pursuant to a valid and
existing order of a court or other governmental body or agency within the United
States; provided, however, that (i) Executive shall first have given prompt
notice to the Company of any such possible or prospective order (or proceeding
pursuant to which any such order may result) and (ii) Executive shall afford the
Company a reasonable opportunity to prevent or limit any such disclosure.
(c) During the Employment Period and at all times thereafter,
Executive will preserve and protect as confidential all of the Confidential
Information known to Executive or at any time in Executive's possession or
control. In addition, during the Employment Period and at all times thereafter,
Executive will not disclose to any unauthorized person or use for his own
account any of such Confidential Information without the Board's written
consent. Executive agrees to deliver to the Company at a Separation, or at any
other time the Company may request in writing, all memoranda, notes, plans,
records, reports and other documents (and copies thereof) containing or
otherwise relating to any of the Confidential Information (including, without
limitation, all acquisition prospects, lists and contact information) which he
may then possess or have under his control. Executive acknowledges that all such
memoranda, notes, plans, records, reports and other documents are and at all
times will be and remain the property of the Company.
(d) Executive will fully comply with any agreement reasonably
required by any of the Company's affiliates, business partners, suppliers or
contractors with respect to the protection of the confidential and proprietary
information of such entities.
8. NONCOMPETITION AND NONSOLICITATION. Executive acknowledges that in
the course of his employment with the Company he will become familiar with the
Confidential Information concerning the Company and such Subsidiaries and that
his services will be of special, unique and extraordinary value to the Company.
Executive agrees that the Company has a protectable interest in the Confidential
Information acquired by Executive during the course of his employment with the
Company. Therefore, Executive agrees that:
(a) NONCOMPETITION. So long as Executive is employed or
affiliated with the Company or any Subsidiary and for an additional (i) two
years thereafter, in the event the Employment Period is terminated as a result
of Executive's resignation or is terminated with Cause or (11) one year
thereafter, in the event the Employment Period is terminated without Cause (the
"NONCOMPETE PERIOD"), he shall not, anywhere in the United States, directly or
indirectly own, manage, control, participate in, consult with, render services
for, or in any manner engage in the Business or any other business engaged in by
the Company at the time of Separation; provided that in the event of a
termination without Cause, the Board may extend the Noncompete Period for an
additional one-year term by giving notice to Executive ninety (90) days prior to
the end of the then existing Noncompete Period.
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<PAGE>
(b) NONSOLICITATION. During the Noncompete Period, Executive
shall not directly or indirectly through another entity (i) induce or attempt to
induce any employee of the Company or any of its Subsidiaries to leave the
employ of the Company or such Subsidiary, or in any way interfere with the
relationship between the Company or any of its Subsidiaries and any employee
thereof, (ii) hire any person who was an employee of the Company or any of its
Subsidiaries within 180 days prior to the time such employee was hired by the
Executive, (iii) induce or attempt to induce any owner of a site location,
customer, supplier, licensee or other business relation of the Company or any of
its Subsidiaries to cease doing business with the Company or such Subsidiary or
in any way interfere with the relationship between any such customer, supplier,
licensee or business relation and the Company or any of its Subsidiaries or (iv)
directly or indirectly acquire or attempt to acquire an interest in any business
relating to the business of the Company or any of its Subsidiaries and with
which the Company or any of its Subsidiaries has entertained discussions or has
requested and received information relating to the acquisition of such business
by the Company or any of its Subsidiaries in the two-year period immediately
preceding a Separation.
(c) ENFORCEMENT. If, at the time of enforcement of Section 7
or 8 of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum duration, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area and that
the court shall be allowed to revise the restrictions contained herein to cover
the maximum duration, scope and area permitted by law. Because Executive's
services are unique and because Executive has access to Confidential
Information, the parties hereto agree that money damages would be an inadequate
remedy for any breach of this Agreement. Therefore, in the event of a breach or
threatened breach of Section 7 or Section 8 of this Agreement, the Company or
any of its successors or assigns shall, in addition to other rights and remedies
existing in its favor, be entitled to specific performance and/or injunctive or
other relief in order to enforce, or prevent any violations of, the provisions
of Section 7 or Section 8 from any court of competent jurisdiction.
(d) ADDITIONAL ACKNOWLEDGMENTS. Executive acknowledges that
the provisions of this Section are in consideration of: (i) employment with the
Company and (ii) additional good and valuable consideration as set forth in this
Agreement. Executive expressly agrees and acknowledges that the restrictions
contained in Sections 7 and 8 do not preclude Executive from earning a
livelihood, nor does it unreasonably impose limitations on Executive's ability
to earn a living. In addition, Executive agrees and acknowledges that the
potential harm to the Company of its non-enforcement outweighs any harm to the
Executive of its enforcement by injunction or otherwise. Executive acknowledges
that he has carefully read this Agreement and has given careful consideration to
the restraints imposed upon the Executive by this Agreement, and is in full
accord as to their necessity for the reasonable and proper protection of the
Confidential Information. Executive expressly acknowledges and agrees that each
and every restraint imposed by this Agreement is reasonable with respect to
subject matter, time period and geographical area.
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GENERAL PROVISIONS
9. DEFINITIONS.
"AFFILIATE" or "AFFILIATES" of an Investor means any direct or indirect
general or limited partner of such Investor, or any employee or owner thereof,
or any other person, entity or investment fund controlling, controlled by or
under common control with such Investor.
"CAUSE" means (i) the commission of a felony or a crime involving moral
turpitude or the commission of any other act or omission involving dishonesty or
fraud with respect to the Company or any of its Subsidiaries or any of their
customers or suppliers, (ii) conduct tending to bring the Company or any of its
Subsidiaries into substantial public disgrace or disrepute, (iii) substantial
and repeated failure to perform duties of the office held by Executive as
reasonably directed by the Board, (iv) gross negligence or willful misconduct
with respect to the Company or any of its Subsidiaries or (v) any breach of
Section 7 or 8 of this Agreement.
"EXECUTIVE'S FAMILY GROUP" means Executive's spouse and descendants
(whether natural or adopted), any trust solely for the benefit of Executive
and/or Executive's spouse and/or descendants and any retirement plan for the
Executive.
"EXECUTIVE STOCK" will continue to be Executive Stock in the hands of
any holder other than Executive (except for the Company and the Investors and
except for transferees in a Public Sale), and except as otherwise provided
herein, each such other holder of Executive Stock will succeed to all rights and
obligations attributable to Executive as a holder of Executive Stock hereunder.
Executive Stock will also include shares of the Company's capital stock issued
with respect to Executive Stock by way of a stock split, stock dividend or other
recapitalization.
"FAIR MARKET VALUE" of each share of Executive Stock means the average
of the closing prices of the sales of the Common Stock on all securities
exchanges on which such Common Stock may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such day, or, if
on any day such Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time,
or, if on any day such Common Stock is not quoted in the NASDAQ System, of the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market Value
is being determined and the 20 consecutive business days prior to such day. If
at any time such Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Fair Market Value will
be the fair value of such Common Stock determined in good faith by the Board
(the "BOARD CALCULATION"). If the Executive reasonably disagrees with the Board
Calculation, the Executive may, within 30 days after receipt of the Board
Calculation, deliver a notice (an "OBJECTION NOTICE") to the Company setting
forth the Executive's calculation of Fair Market Value. The Board and the
Executive will negotiate in good faith to agree on such Fair Market Value, but
if such agreement is not reached within 30 days after the Company has received
the Objection Notice, Fair Market Value shall be
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<PAGE>
determined by an appraiser jointly selected by the Board and the Executive,
which appraiser shall submit to the Board and the Executive a report within 30
days of its engagement setting forth such determination. If the parties are
unable to agree on an appraiser within 45 days after the Company has received
the Objection Notice, within seven days, each party shall submit the names of
four nationally recognized investment banking firms, and each party shall be
entitled to strike two names from the other party's list of firms, and the
appraiser shall be selected by lot from the remaining four investment banking
firms. The expenses of such appraiser shall be borne by the Executive unless the
appraiser's valuation is not less than 10% greater than the amount determined by
the Board, in which case, the costs of the appraiser shall be borne by the
Company. The determination of such appraiser shall be final and binding upon all
parties. If the Repurchase Option is exercised within 90 days after a
Separation, then Fair Market Value shall be determined as of the date of such
Separation; thereafter, Fair Market Value shall be determined as of the date the
Repurchase Option is exercised.
"ORIGINAL COST" means, with respect to each share of Additional Stock
purchased hereunder, $0.1055, and with respect to each share of Carried Stock,
$0.2505 (as proportionately adjusted for all subsequent stock splits, stock
dividends and other recapitalizations).
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof
"PUBLIC OFFERING" means the sale in an under-written public offering
registered under the Securities Act of shares of the Company's Common Stock
approved by the Board.
"PUBLIC SALE" means (i) any sale pursuant to a registered public
offering under the Securities Act or (ii) any sale to the public pursuant to
Rule 144 promulgated under the Securities Act effected through a broker, dealer
or market maker (other than pursuant to Rule 144(k)).
"SALE OF THE COMPANY" means any transaction or series of transactions
pursuant to which any person(s) or entity(ies) other than the Investors and its
Affiliates in the aggregate acquire(s) (i) capital stock of the Company
possessing the voting power (other than voting rights accruing only in the event
of a default, breach or event of noncompliance) to elect a majority of the
Company's board of directors (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock, shareholder or
voting agreement, proxy, power of attorney or otherwise) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis;
provided that the term "SALE OF THE COMPANY" shall not include a Public
Offering.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement of even date
herewith among the Company and certain of its stockholders.
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"SUBSIDIARY" means any corporation of which fifty percent (50%) or more
of the securities having ordinary voting power in electing the board of
directors are, at the time as of which any determination is being made, owned by
the Company either directly or through one or more Subsidiaries. The term
Subsidiary shall also include any joint venture arrangement between the Company
and any other entity, including, without limitation, the Company's joint venture
arrangement with Commerce Direct International, Inc., a Delaware corporation.
"TRANSFER" means to sell, transfer, assign, pledge or otherwise dispose
of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law).
10. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:
If to the Company:
AppNet Systems, Inc.
6700A Rockledge Drive
Suite 525
Bethesda, MD 20817
Attention: President
with a copy to:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Kirkland & Ellis
200 East Randolph
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.,
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
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<PAGE>
If to the Executive:
Robert D. McCalley
4618 Norwood Drive
Chevy Chase, MD 20815
If to the Investors:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Smart Technology, L.L.C.
10201 Norton Road
Potomac, MD 20854
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.,
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
11. GENERAL PROVISIONS.
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(a) EXPENSES. Each of the Company and the Executive shall pay
its or his legal, accounting and other expenses incurred in connection with the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement.
(b) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Executive Stock in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Executive Stock as the owner of
such stock for any purpose.
(c) SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(d) INTENDED THIRD-PARTY BENEFICIARIES. The Investors are
intended to be third-party beneficiaries to this entire Agreement and the rights
and obligations of the parties hereto. It is understood and agreed by the
parties hereto that this Agreement shall be enforceable by GTCR and, provided
GTCR is seeking to enforce substantially the same rights, the other Investor(s)
in accordance with its terms as though each of the Investors were a party to
every provision hereof. Except as expressly provided herein, no other third
parties are intended by the parties hereto to be beneficiaries hereof.
(e) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way, including, without limitation, the agreement between the Company and
Executive dated as of March 1, 1998 relating to his compensation.
(f) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(g) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by Executive, the Company, the Investors and their respective successors and
assigns (including subsequent holders of Executive Stock); provided that the
rights and obligations of Executive under this Agreement shall not be assignable
except in connection with a permitted transfer of Executive Stock hereunder. The
rights and obligations of GTCR under this Agreement may be assigned at any time,
in whole or in part, to any investment fund managed by GTCR, or any successor
thereto; provided that such assignment occurs in the manner provided in the
Purchase Agreement.
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(h) CHOICE OF LAW. The corporate law of the State of Delaware
will govern all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits hereto will be governed by and
construed in accordance with the internal laws of the State of Maryland, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Maryland or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Maryland.
(i) REMEDIES. Each of the parties to this Agreement (including
the Investors) will be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including attorney's fees) caused by
any breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction (without posting any bond or deposit)
for specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
(j) AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended and waived only with the nor written consent of the Company and the
Executive.
(k) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or holiday
in the state in which the Company's chief executive office is located, the time
period shall be automatically extended to the business day immediately following
such Saturday, Sunday or holiday.
(l) TERMINATION. This Agreement (except for the provisions of
Section 6) shall survive a Separation and shall remain in full force and effect
after such Separation.
(m) ADJUSTMENTS OF NUMBERS. All numbers set forth herein which
refer to share prices or amounts will be appropriately adjusted to reflect stock
splits, stock dividends, combinations of shares and other recapitalizations
affecting the subject class of stock.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Senior
Management Agreement on the date first written above.
APPNET SYSTEMS, INC.
By: /s/ Ken S. Bajaj
-------------------------------------
Name: Ken S. Bajaj
Its: Chairman and President
/s/ Robert D. McCalley
------------------------------------------
Robert D. McCalley
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<PAGE>
Exhbiti 4.7
SENIOR MANAGEMENT AGREEMENT
THIS SENIOR MANAGEMENT AGREEMENT (this "AGREEMENT") is made as of July
31, 1998, between AppNet Systems, Inc., a Delaware corporation (the
"CORPORATION") and Ronald B. Alexander (the "EXECUTIVE").
The Company and Executive desire to document their agreement regarding
the terms under which Executive has agreed to accept employment with the
Company, and, in connection with such acceptance, the Company agreed to sell and
the Executive agreed to purchase 500,000 shares of the Company's Common Stock,
par value $.0005 per share, (the "EXECUTIVE STOCK."). Certain definitions are
set forth in Section 9 of this Agreement. The execution and delivery of this
Agreement by the Company and Executive reflects an agreement resulting from the
Executive's acceptance of the Company's offer of employment by letter dated July
7, 1998, and acceptance of the Company's offer to sell the Executive Stock on
the terms described in that employment offer letter. This Agreement is related
to the purchase of shares of Common Stock and shares of the Company's Class A
Preferred Stock, par value $.01 per share (the "CLASS A PREFERRED") by Smart
Technology, L.L.C. ("SMART TECHNOLOGY"), GTCR Golder Rauner, L.L.C., a Delaware
limited liability company ("GTCR" and, together with Smart Technology, the
"INVESTORS" and each an "INVESTOR") pursuant to a purchase agreement between the
Company and the Investors dated as of June 29, 1998 (the "PURCHASE AGREEMENT").
Certain provisions of this Agreement are intended for the benefit of, and will
be enforceable by, the Investors.
The parties hereto agree as follows:
PROVISIONS RELATING TO EXECUTIVE STOCK
1. RESERVED.
2. PURCHASE AND SALE OF STOCK.
(a) Executive will purchase, and the Company will sell,
500,000 shares of Common Stock at a price of $0.1055 per share. Executive will
deliver to the Company a check or wire transfer of funds in the aggregate amount
of $250.00 and a promissory note in the form of ANNEX A attached hereto in an
aggregate principal amount of $52,500 (the "EXECUTIVE NOTE"). Upon receipt of
the stated cash consideration and Executive Note, and execution by the Executive
of the Stockholders Agreement and Registration Agreement, the Company will
deliver to Executive the certificates representing such Executive Stock.
Executive's obligations under the Executive Note shall be secured by a pledge of
all of the shares of Common Stock purchased hereunder to the Company and in
connection therewith, Executive shall enter into a pledge agreement in the form
of ANNEX B attached hereto.
(b) Within 30 days after the date hereof, Executive may make
an effective election with the Internal Revenue Service under Section 83(b) of
the Internal Revenue Code and the regulations promulgated thereunder in the form
of ANNEX C attached hereto.
<PAGE>
(c) In connection with the purchase and sale of the Executive
Stock hereunder, Executive represents and warrants to the Company that:
(i) The Executive Stock to be acquired by Executive
pursuant to this Agreement will be acquired for Executive's own account and not
with a view to, or intention of, distribution thereof in violation of the
Securities Act, or any applicable state securities laws, and the Executive Stock
will not be disposed of in contravention of the Securities Act or any applicable
state securities laws.
(ii) Executive is an executive officer of the
Company, is sophisticated in financial matters and is able to evaluate the risks
and benefits of the investment in the Executive Stock.
(iii) Executive is able to bear the economic risk of
his investment in the Executive Stock for an indefinite period of time because
the Executive Stock has not been registered under the Securities Act and,
therefore, cannot be sold unless subsequently registered under the Securities
Act or an exemption from such registration is available.
(iv) Executive has had an opportunity to ask
questions and receive answers concerning the terms and conditions of the
offering of Executive Stock and has had full access to such other information
concerning the Company as he has requested.
(v) This Agreement constitutes the legal, valid and
binding obligation of Executive, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement, contract
or instrument to which Executive is a party or any judgment, order or decree to
which Executive is subject.
(vi) Executive is a resident of the State of
Virginia.
(d) As an inducement to the Company to issue the Executive
Stock to Executive, as a condition thereto, Executive acknowledges and agrees
that neither the issuance of the Executive Stock to Executive nor any provision
contained herein shall entitle Executive to remain in the employment of the
Company and its Subsidiaries or affect the right of the Company to terminate
Executive's employment at any time for any reason.
3. REPURCHASE OPTION.
(a) In the event that Executive ceases to be employed by the
Company and its Subsidiaries for any reason (the "SEPARATION"), the Executive
Stock (whether held by Executive or one or more of Executive's transferees,
other than the Company) will be subject to repurchase, in each case at the
option of the Company, the Investors and Ken S. Bajaj ("Bajaj") pursuant to the
terms and conditions set forth in this Section 3(a) (the "REPURCHASE OPTION"). A
percentage of the Executive Stock will be subject to repurchase at the
Executive's Original Cost for such shares,
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calculated in accordance with the following schedule (the "ORIGINAL COST
SHARES"):
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<PAGE>
<TABLE>
<CAPTION>
DATE PERCENTAGE OF EXECUTIVE STOCK
TO BE REPURCHASED AT ORIGINAL COST
----------------------------------
<S> <C>
Date of this Agreement until 1st Anniversary of this Agreement 100%
Date immediately following 1st Anniversary of this Agreement until 75%
2nd Anniversary of this Agreement
Date immediately following 2nd Anniversary of this Agreement until 50%
3rd Anniversary of this Agreement
Date immediately following 3rd Anniversary of this Agreement until 25%
4th Anniversary of this Agreement
Date immediately following 4th Anniversary of this Agreement and 0%
thereafter
</TABLE>
The purchase price for the remaining shares of Executive Stock shall be the Fair
Market Value of such shares (the "FAIR MARKET VALUE SHARES").
(b) The Company may elect to purchase all or any portion of
the Original Cost Shares and the Fair Market Value Shares by delivering written
notice (the "REPURCHASE NOTICE") to the holder or holders of the Executive Stock
within 180 days after the Separation. The Repurchase Notice will set forth the
number of Original Cost Shares and Fair Market Value Shares to be acquired from
each holder, the aggregate consideration to be paid for such shares and the time
and place for the closing of the transaction. The number of shares to be
repurchased by the Company shall first be satisfied to the extent possible from
the shares of Executive Stock held by Executive at the time of delivery of the
Repurchase Notice. If the number of shares of Executive Stock then held by
Executive is less than the total number of shares of Executive Stock which the
Company has elected to purchase, the Company shall purchase the remaining shares
elected to be purchased from the other holder(s) of Executive Stock under this
Agreement, pro rata according to the number of shares of Executive Stock held by
such other holder(s) at the time of delivery of such Repurchase Notice
(determined as nearly as practicable to the nearest share). The number of
Original Cost Shares and Fair Market Value Shares to be repurchased hereunder
will be allocated among Executive and the other holders of Executive Stock (if
any) pro rata according to the number of shares of Executive Stock to be
purchased from such person.
(c) If for any reason the Company does not elect to purchase
all of the Executive Stock pursuant to the Repurchase Option, the Investors and
Bajaj shall be entitled to
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exercise the Repurchase Option for all or any portion of the shares of Executive
Stock that the Company has not elected to purchase (the "AVAILABLE SHARES"). As
soon as practicable after the Company has determined that there will be
Available Shares, but in any event within 150 days after the Separation, the
Company shall give written notice (the "OPTION NOTICE") to the Investors and
Bajaj setting forth the number of Available Shares and the purchase price for
the Available Shares. The Investors and Bajaj may elect to purchase any or all
of the Available Shares by giving written notice to the Company within one month
after the Option Notice has been given by the Company. If the Investors and
Bajaj elect to purchase an aggregate number of shares greater than the number of
Available Shares, the Available Shares shall be allocated among the Investors
and Bajaj based upon the number of shares of Common Stock owned by each Investor
and Bajaj on a fully diluted basis (excluding, in the case of Bajaj, shares
owned by him that are subject to repurchase at cost). As soon as practicable,
and in any event within ten days, after the expiration of the one-month period
set forth above, the Company shall notify each holder of Executive Stock as to
the number of shares being purchased from such holder by the Investors and Bajaj
(the "SUPPLEMENTAL REPURCHASE NOTICE"). At the time the Company delivers the
Supplemental Repurchase Notice to the holder(s) of Executive Stock, the Company
shall also deliver written notice to the Investors and Bajaj setting forth the
number of shares the Investors and Bajaj are entitled to purchase, the aggregate
purchase price and the time and place of the closing of the transaction. The
number of Original Cost Shares and Fair Market Value Shares to be repurchased
hereunder shall be allocated among the Company, the Investors and Bajaj pro rata
according to the number of shares of Executive Stock to be purchased by each of
them. Notwithstanding the foregoing, the Investors and Bajaj shall not exercise
their Repurchase Option as to the Original Cost Shares pursuant to this Section
3(c) if the Company has sufficient assets to fully exercise its Repurchase
Option as to the Original Cost Shares but has not exercised such right.
Furthermore, if the Investors and Bajaj repurchase any Original Cost Shares,
they shall contribute such Original Cost Shares to the Company in exchange for a
promissory note from the Company with an aggregate principal amount equal to the
purchase price paid for such shares, bearing interest (payable quarterly) at a
rate per annum equal to the prime rate as published in the WALL STREET JOURNAL
from time to time, and having a term of no longer than five years.
(d) The closing of the purchase of the Executive Stock
pursuant to the Repurchase Option shall take place on the date designated by the
Company in the Repurchase Notice or Supplemental Repurchase Notice, which date
shall not be more than one month nor less than five days after the delivery of
the later of either such notice to be delivered. The Company will pay for the
Executive Stock to be purchased by it pursuant to the Repurchase Option by first
offsetting amounts outstanding under any bona fide debts owed by Executive to
the Company and will pay the remainder of the purchase price by, at its option,
(A) a check or wire transfer of funds, or (B) a check or wire transfer of funds
for at least one-third of the purchase price, and a subordinated note or notes
payable in two equal annual installments beginning on each of the first and
second anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the prime rate as published in THE WALL
STREET JOURNAL from time to time in the aggregate amount of the remainder of the
purchase price for such shares. The Investors and Bajaj will pay for the
Executive Stock purchased by them by a check or wire transfer of funds. The
Company, the Investors and Bajaj will be entitled to
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<PAGE>
receive customary representations and warranties from the sellers regarding such
sale and to require that all sellers' signatures be guaranteed.
(e) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Executive Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Executive Stock hereunder which the
Company is otherwise entitled or required to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions.
(f) Notwithstanding anything to the contrary contained in this
Agreement, if the Executive delivers the notice of objection described in the
definition of Fair Market Value, or if the Fair Market Value of a Fair Market
Value Share is otherwise determined to be an amount more than 10% greater than
the per share repurchase price for Fair Market Value Shares originally
determined by the Board, each of the Company, the Investors and Bajaj shall have
the right to revoke its or their exercise of the Repurchase Option for all or
any portion of the Executive Stock elected to be repurchased by it by delivering
notice of such revocation in writing to the holders of the Executive Stock
during (i) the thirty-day period beginning on the date the Company, the
Investors and Bajaj receive Executive's written notice of objection and (ii) the
thirty-day period beginning on the date the Company, the Investors and Bajaj are
given written notice that the Fair Market Value of a Fair Market Value Share was
finally determined to be an amount more than 10% greater than the per share
repurchase price for Fair Market Value Shares originally determined by the Board
(g) The provisions of this Section 3 shall terminate upon the
consummation of a Sale of the Company.
4. RESTRICTIONS ON TRANSFER OF EXECUTIVE STOCK.
(a) RETENTION OF EXECUTIVE STOCK. Until the fifth anniversary
of the date of this Agreement, Executive shall not sell, transfer, assign,
pledge or otherwise dispose of any interest in any shares of Executive Stock,
except pursuant to: (i) a Sale of the Company, (ii) Section 3 of this Agreement,
(iii) Section 4 of the Stockholders Agreement, (iv) a sale described in clause
(i) of the definition of "PUBLIC SALE," or (v) after a Public Offering, upon any
sale by the Investors or an Affiliate of the type described in clause (ii) of
the definition of "PUBLIC SALE" (a "RULE 144 SALE"), to the extent of the lesser
of (a) the number of shares of Executive Stock held by Executive that are not
subject to repurchase at Original Cost and (b) the number of shares of Executive
Stock held by Executive multiplied by a fraction, the numerator of which is the
number of shares of Common Stock sold by the Investors and their Affiliates in
the Rule 144 Sale and the denominator of which is the total number of shares of
Common Stock held by the Investors and their Affiliates immediately prior to
such sale.
(b) CERTAIN PERMITTED TRANSFERS. The restrictions in this
Section 4 will not apply with respect to (i) transfers of shares of Executive
Stock pursuant to applicable laws of descent and distribution or (ii) transfer
of shares of Executive Stock among Executive's Family Group; provided that such
restrictions will continue to be applicable to the Executive Stock after
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any such transfer and the transferees of such Executive Stock have agreed in
writing to be bound by the provisions of this Agreement.
(c) TERMINATION OF RESTRICTIONS. The restrictions on the
Transfer of shares of Executive Stock set forth in this Section 4 will continue
with respect to each share of Executive Stock until the date on which such
Executive Stock has been transferred in a transaction permitted by this Section
4 (except in a transaction contemplated by Section 4(b)); provided that in any
event such restrictions will terminate on a Sale of the Company.
5. ADDITIONAL RESTRICTIONS ON TRANSFER OF EXECUTIVE STOCK.
(a) LEGEND. The certificates representing the Executive Stock
will bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT
AGREEMENT BETWEEN THE COMPANY AND AN EXECUTIVE OF THE COMPANY DATED AS OF JULY
31, 1998. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Executive Stock may sell,
transfer or dispose of any Executive Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
PROVISIONS RELATING TO EMPLOYMENT
6. EMPLOYMENT. The Company agrees to employ Executive and Executive
accepts such employment for the period beginning as of the date hereof and
ending upon his separation pursuant to Section 6(c) hereof (the "EMPLOYMENT
PERIOD").
(a) POSITION AND DUTIES. During the Employment Period,
Executive shall serve as a Senior Vice President and Chief Financial Officer of
the Company and shall have such duties, responsibilities and authority as may be
assigned by the President and Chief Executive Officer, subject to the power of
the Board to expand or limit such duties, responsibilities and authority and to
override actions of the Senior Vice President and Chief Financial Officer.
Executive shall report to the President and Chief Executive Officer. Executive
shall devote his
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best efforts and his full business time and attention to the business and
affairs of the Company and its subsidiaries.
(b) SALARY, BONUS AND BENEFITS. During the Employment Period,
the Company will pay Executive a base salary (the "ANNUAL BASE SALARY") of
$200,000 per annum, subject to any increase as determined by the Board based
upon the Company's achievements of budgetary and other objectives set by the
Board. In addition, Executive shall be eligible to receive a bonus of up to
fifty (50%) percent of the Annual Base Salary based upon the Company's
achievement of budgetary and other objectives set by the Board. Executive's
Annual Base Salary for any partial year will be prorated based upon the number
of days elapsed in such year. In addition, during the Employment Period,
Executive will be entitled to such other benefits approved by the Board and made
available to the Company's senior management.
(c) SEPARATION. Executive's employment by the Company will
continue until Executive's resignation, disability (as determined by the Board
in its good faith judgment) or death or until the Board terminates Executive's
employment for any reason or without any reason. If the Employment Period is
terminated by the Board without Cause, subject to the provisions of this
Agreement, Executive shall be entitled to receive his Annual Base Salary and his
life insurance, medical insurance and disability insurance benefits (but no
bonuses or other fringe benefits) through the end of the Noncompete Period (as
defined below in Section 8, including any extensions pursuant to Section 8(a))
(such payment, the "SEVERANCE PAYMENT") payable in accordance with normal
payroll practices.
7. CONFIDENTIAL INFORMATION.
(a) Executive acknowledges that the Company and its
Subsidiaries are engaged in the business of acquiring businesses that provide
electronic commerce services and operating those businesses after their
acquisition (the "BUSINESS"). Executive further acknowledges that the Business
and its continued success depend upon the use and protection of a large body of
confidential and proprietary information, and that he holds a position of trust
and confidence by virtue of which he necessarily possesses, has access to and,
as a consequence of his signing this Agreement, will continue to possess and
have access to, highly valuable, confidential and proprietary information of the
Company and its Subsidiaries not known to the public in general, and that it
would be improper for him to make use of this information for the benefit of
himself and others. All of such confidential and proprietary information now
existing or to be developed in the future will be referred to in this Agreement
as "CONFIDENTIAL INFORMATION." This includes, without limitation, information
relating to the nature and operation of the Business, the persons, firms and
corporations which are customers or active prospects of the Company during
Executive's employment by the Company, the Company's development, transition and
transformation plans, methodology and methods of doing business, strategic,
acquisition, marketing and expansion plans, including plans regarding planned
and potential acquisitions and sales, financial and business plans, employee
lists, numbers and location of sales representatives, new and existing programs
and services (and those under development), prices and terms, customer service,
integration processes requirements, costs of providing service, support and
equipment and equipment maintenance costs. Confidential Information shall not
-8-
<PAGE>
include any information that has become generally known to and available for use
by the public other than as a result of Executive's acts or omissions.
(b) Disclosure of any Confidential Information of the Company
shall not be prohibited if such disclosure is directly pursuant to a valid and
existing order of a court or other governmental body or agency within the United
States; provided, however, that (i) Executive shall first have given prompt
notice to the Company of any such possible or prospective order (or proceeding
pursuant to which any such order may result) and (ii) Executive shall afford the
Company a reasonable opportunity to prevent or limit any such disclosure.
(c) During the Employment Period and at all times thereafter,
Executive will preserve and protect as confidential all of the Confidential
Information known to Executive or at any time in Executive's possession or
control. In addition, during the Employment Period and at all times thereafter,
Executive will not disclose to any unauthorized person or use for his own
account any of such Confidential Information without the Board's written
consent. Executive agrees to deliver to the Company at a Separation, or at any
other time the Company may request in writing, all memoranda, notes, plans,
records, reports and other documents (and copies thereof) containing or
otherwise relating to any of the Confidential Information (including, without
limitation, all acquisition prospects, lists and contact information) which he
may then possess or have under his control. Executive acknowledges that all such
memoranda, notes, plans, records, reports and other documents are and at all
times will be and remain the property of the Company.
(d) Executive will fully comply with any agreement reasonably
required by any of the Company's affiliates, business partners, suppliers or
contractors with respect to the protection of the confidential and proprietary
information of such entities.
8. NONCOMPETITION AND NONSOLICITATION. Executive acknowledges that in
the course of his employment with the Company he will become familiar with the
Confidential Information concerning the Company and such Subsidiaries and that
his services will be of special, unique and extraordinary value to the Company.
Executive agrees that the Company has a protectable interest in the Confidential
Information acquired by Executive during the course of his employment with the
Company. Therefore, Executive agrees that:
(a) NONCOMPETITION. So long as Executive is employed or
affiliated with the Company or any Subsidiary and for an additional (i) two
years thereafter, in the event the Employment Period is terminated as a result
of Executive's resignation or is terminated with Cause or (ii) one year
thereafter, in the event the Employment Period is terminated without Cause (the
"NONCOMPETE PERIOD"), he shall not, anywhere in the United States, directly or
indirectly own, manage, control, participate in, consult with, render services
for, or in any manner engage in the Business or any other business engaged in by
the Company at the time of Separation; provided that in the event of a
termination without Cause, the Board may extend the Noncompete Period for an
additional one-year term by giving notice to Executive ninety (90) days prior to
the end of the then-existing Noncompete Period.
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<PAGE>
(b) NONSOLICITATION. During the Noncompete Period, Executive
shall not directly or indirectly through another entity (i) induce or attempt to
induce any employee of the Company or any of its Subsidiaries to leave the
employ of the Company or such Subsidiary, or in any way interfere with the
relationship between the Company or any of its Subsidiaries and any employee
thereof, (ii) hire any person who was an employee of the Company or any of its
Subsidiaries within 180 days prior to the time such employee was hired by the
Executive, (iii) induce or attempt to induce any owner of a site location,
customer, supplier, licensee or other business relation of the Company or any of
its Subsidiaries to cease doing business with the Company or such Subsidiary or
in any way interfere with the relationship between any such customer, supplier,
licensee or business relation and the Company or any of its Subsidiaries or (iv)
directly or indirectly acquire or attempt to acquire an interest in any business
relating to the business of the Company or any of its Subsidiaries and with
which the Company or any of its Subsidiaries has entertained discussions or has
requested and received information relating to the acquisition of such business
by the Company or any of its Subsidiaries in the two-year period immediately
preceding a Separation.
(c) ENFORCEMENT. If, at the time of enforcement of Section 7
or 8 of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum duration, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area and that
the court shall be allowed to revise the restrictions contained herein to cover
the maximum duration, scope and area permitted by law. Because Executive's
services are unique and because Executive has access to Confidential
Information, the parties hereto agree that money damages would be an inadequate
remedy for any breach of this Agreement. Therefore, in the event of a breach or
threatened breach of Section 7 or Section 8 of this Agreement, the Company or
any of its successors or assigns shall, in addition to other rights and remedies
existing in its favor, be entitled to specific performance and/or injunctive or
other relief in order to enforce, or prevent any violations of, the provisions
of Section 7 or Section 8 from any court of competent jurisdiction.
(d) ADDITIONAL ACKNOWLEDGMENTS. Executive acknowledges that
the provisions of this Section are in consideration of: (i) employment with the
Company and (ii) additional good and valuable consideration as set forth in this
Agreement. Executive expressly agrees and acknowledges that the restrictions
contained in Sections 7 and 8 do not preclude Executive from earning a
livelihood, nor does it unreasonably impose limitations on Executive's ability
to earn a living. In addition, Executive agrees and acknowledges that the
potential harm to the Company of its non-enforcement outweighs any harm to the
Executive of its enforcement by injunction or otherwise. Executive acknowledges
that he has carefully read this Agreement and has given careful consideration to
the restraints imposed upon the Executive by this Agreement, and is in full
accord as to their necessity for the reasonable and proper protection of the
Confidential Information. Executive expressly acknowledges and agrees that each
and every restraint imposed by this Agreement is reasonable with respect to
subject matter, time period and geographical area.
-10-
<PAGE>
GENERAL PROVISIONS
9. DEFINITIONS.
"AFFILIATE" or "AFFILIATES" of an Investor means any direct or indirect
general or limited partner of such Investor, or any employee or owner thereof,
or any other person, entity or investment fund controlling, controlled by or
under common control with such Investor.
"CAUSE" means (i) the commission of a felony or a crime involving moral
turpitude or the commission of any other act or omission involving dishonesty or
fraud with respect to the Company or any of its Subsidiaries or any of their
customers or suppliers, (ii) conduct tending to bring the Company or any of its
Subsidiaries into substantial public disgrace or disrepute, (iii) substantial
and repeated failure to perform duties of the office held by Executive as
reasonably directed by the Board, (iv) gross negligence or willful misconduct
with respect to the Company or any of its Subsidiaries or (v) any breach of
Section 7 or 8 of this Agreement.
"EXECUTIVE'S FAMILY GROUP" means Executive's spouse and descendants
(whether natural or adopted), any trust solely for the benefit of Executive
and/or Executive's spouse and/or descendants and any retirement plan for the
Executive.
"EXECUTIVE STOCK" will continue to be Executive Stock in the hands of
any holder other than Executive (except for the Company and the Investors and
except for transferees in a Public Sale), and except as otherwise provided
herein, each such other holder of Executive Stock will succeed to all rights and
obligations attributable to Executive as a holder of Executive Stock hereunder.
Executive Stock will also include shares of the Company's capital stock issued
with respect to Executive Stock by way of a stock split, stock dividend or other
recapitalization.
"FAIR MARKET VALUE" of each share of Executive Stock means the average
of the closing prices of the sales of the Common Stock on all securities
exchanges on which such Common Stock may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such day, or, if
on any day such Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time,
or, if on any day such Common Stock is not quoted in the NASDAQ System, of the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market Value
is being determined and the 20 consecutive business days prior to such day. If
at any time such Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Fair Market Value will
be the fair value of such Common Stock determined in good faith by the Board
(the "BOARD CALCULATION"). If the Executive reasonably disagrees with the Board
Calculation, the Executive may, within 30 days after receipt of the Board
Calculation, deliver a notice (an "OBJECTION NOTICE") to the Company setting
forth the Executive's calculation of Fair Market Value. The Board and the
Executive will negotiate in good faith to agree on such Fair Market Value, but
if such agreement is not reached within 30 days after the Company has received
the Objection Notice, Fair Market Value shall be
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<PAGE>
determined by an appraiser jointly selected by the Board and the Executive,
which appraiser shall submit to the Board and the Executive a report within 30
days of its engagement setting forth such determination. If the parties are
unable to agree on an appraiser within 45 days after the Company has received
the Objection Notice, within seven days, each party shall submit the names of
four nationally recognized investment banking firms, and each party shall be
entitled to strike two names from the other party's list of firms, and the
appraiser shall be selected by lot from the remaining four investment banking
firms. The expenses of such appraiser shall be borne by the Executive unless the
appraiser's valuation is not less than 10% greater than the amount determined by
the Board, in which case, the costs of the appraiser shall be borne by the
Company. The determination of such appraiser shall be final and binding upon all
parties. If the Repurchase Option is exercised within 90 days after a
Separation, then Fair Market Value shall be determined as of the date of such
Separation; thereafter, Fair Market Value shall be determined as of the date the
Repurchase Option is exercised.
"ORIGINAL COST" means, with respect to each share of Executive Stock
purchased hereunder, $0.1055 (as proportionately adjusted for all subsequent
stock splits, stock dividends and other recapitalizations).
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof
"PUBLIC OFFERING" means the sale in an underwritten public offering
registered under the Securities Act of shares of the Company's Common Stock
approved by the Board.
"PUBLIC SALE" means (i) any sale pursuant to a registered public
offering under the Securities Act or (ii) any sale to the public pursuant to
Rule 144 promulgated under the Securities Act effected through a broker, dealer
or market maker (other than pursuant to Rule 144(k)).
"SALE OF THE COMPANY" means any transaction or series of transactions
pursuant to which any person(s) or entity(ies) other than the Investors and its
Affiliates in the aggregate acquire(s) (i) capital stock of the Company
possessing the voting power (other than voting rights accruing only in the event
of a default, breach or event of noncompliance) to elect a majority of the
Company's board of directors (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock, shareholder or
voting agreement, proxy, power of attorney or otherwise) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis;
provided that the term "SALE OF THE COMPANY" shall not include a Public
Offering.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated June
29, 1998, among the Company and certain of its stockholders.
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<PAGE>
"SUBSIDIARY" means any corporation of which fifty percent (50%) or more
of the securities having ordinary voting power in electing the board of
directors are, at the time as of which any determination is being made, owned by
the Company either directly or through one or more Subsidiaries. The term
Subsidiary shall also include any joint venture arrangement between the Company
and any other entity, including, without limitation, the Company's joint venture
arrangement with Commerce Direct International, Inc., a Delaware corporation.
"TRANSFER" means to sell, transfer, assign, pledge or otherwise dispose
of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law).
10. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by
first class mail (postage prepaid and return receipt
requested) or sent by reputable overnight courier service
(charges prepaid) to the recipient at the address below
indicated:
If to the Company:
AppNet Systems, Inc.
6700-A Rockledge Drive
Suite 525
Bethesda, MD 20817
Attention: Terrence M. McManus
with a copy to:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Kirkland & Ellis
200 East Randolph
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.,
Suite 400
Washington, D.C. 20036-5612
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<PAGE>
Attention: Arthur E. Cirulnick
If to the Executive:
Ronald B. Alexander
3280 History Drive
Oakton, VA 22124
If to the Investors:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Smart Technology, L.L.C.
10201 Norton Road
Potomac, MD 20854
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.,
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
11. GENERAL PROVISIONS.
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<PAGE>
(a) EXPENSES. Each of the Company and the Executive shall pay
its or his legal, accounting and other expenses incurred in connection with the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement.
(b) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Executive Stock in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Executive Stock as the owner of
such stock for any purpose.
(c) SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(d) INTENDED THIRD-PARTY BENEFICIARIES. The Investors are
intended to be third-party beneficiaries to this entire Agreement and the rights
and obligations of the parties hereto. It is understood and agreed by the
parties hereto that this Agreement shall be enforceable by GTCR and, provided
GTCR is seeking to enforce substantially the same rights, the other Investor(s)
in accordance with its terms as though each of the Investors were a party to
every provision hereof. Except as expressly provided herein, no other third
parties are intended by the parties hereto to be beneficiaries hereof.
(e) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(f) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(g) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by Executive, the Company, the Investors and their respective successors and
assigns (including subsequent holders of Executive Stock); provided that the
rights and obligations of Executive under this Agreement shall not be assignable
except in connection with a permitted transfer of Executive Stock hereunder. The
rights and obligations of GTCR under this Agreement may be assigned at any time,
in whole or in part, to any investment fund managed by GTCR, or any successor
thereto; provided that such assignment occurs in the manner provided in the
Purchase Agreement.
(h) CHOICE OF LAW. The corporate law of the State of Delaware
will govern all questions concerning the relative rights of the Company and its
stockholders. All other questions
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<PAGE>
concerning the construction, validity and interpretation of this Agreement and
the exhibits hereto will be governed by and construed in accordance with the
internal laws of the State of Maryland, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Maryland or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Maryland.
(i) REMEDIES. Each of the parties to this Agreement (including
the Investors) will be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including attorney's fees) caused by
any breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction (without posting any bond or deposit)
for specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
(j) AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended and waived only with the written consent of the Company and the
Executive.
(k) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or holiday
in the state in which the Company's chief executive office is located, the time
period shall be automatically extended to the business day immediately following
such Saturday, Sunday or holiday.
(l) TERMINATION. This Agreement (except for the provisions of
Section 6) shall survive a Separation and shall remain in full force and effect
after such Separation.
(m) ADJUSTMENTS OF NUMBERS. All numbers set forth herein which
refer to share prices or amounts will be appropriately adjusted to reflect stock
splits, stock dividends, combinations of shares and other recapitalizations
affecting the subject class of stock.
IN WITNESS WHEREOF, the parties hereto have executed this Senior
Management Agreement on the date first written above.
APPNET SYSTEMS, INC.
By: /s/ Ken S. Bajaj
-------------------------------------
Ken S. Bajaj
President and Chief Executive Officer
/s/ Ronald B. Alexander
-------------------------------------------
Ronald B. Alexander
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<PAGE>
Exhibit 4.8
SENIOR MANAGEMENT AGREEMENT
THIS SENIOR MANAGEMENT AGREEMENT (this "AGREEMENT") is made as of July
31, 1998, between AppNet Systems, Inc., a Delaware corporation (the
"CORPORATION") and Jack Pearlstein (the "EXECUTIVE").
The Company and Executive desire to enter into an agreement pursuant to
which Executive will purchase, and the Company will sell, 180,000 shares of the
Company's Common Stock, par value $.0005 per share (the "EXECUTIVE STOCK").
Certain definitions are set forth in Section 9 of this Agreement.
The execution and delivery of this Agreement by the Company and
Executive is related to the purchase of shares of Common Stock and shares of the
Company's Class A Preferred Stock, par value $.01 per share (the "CLASS A
PREFERRED") by Smart Technology, L.L.C. ("SMART TECHNOLOGY"), GTCR Golder
Rauner, L.L.C., a Delaware limited liability company ("GTCR" and, together with
Smart Technology, the "INVESTORS" and each an "INVESTOR") pursuant to a purchase
agreement between the Company and the Investors dated as of June 29, 1998 (the
"PURCHASE AGREEMENT"). Certain provisions of this Agreement are intended for the
benefit of, and will be enforceable by, the Investors.
The parties hereto agree as follows:
PROVISIONS RELATING TO EXECUTIVE STOCK
1. RESERVED.
2. PURCHASE AND SALE OF EXECUTIVE STOCK.
(a) Upon execution of this Agreement, Executive will purchase,
and the Company will sell, 180,000 shares of Common Stock at a price of $0.1055
per share. The Company will deliver to Executive the certificates representing
such Executive Stock, and Executive will deliver to the Company a check or wire
transfer of funds in the aggregate amount of $90.00 and a promissory note in the
form of ANNEX A attached hereto in an aggregate principal amount of $18,900 (the
"EXECUTIVE NOTE"). Executive's obligations under the Executive Note shall be
secured by a pledge of all of the shares of Common Stock purchased hereunder to
the Company and in connection therewith, Executive shall enter into a pledge
agreement in the form of ANNEX B attached hereto.
(b) Within 30 days after the date hereof, Executive will make
an effective election with the Internal Revenue Service under Section 83(b) of
the Internal Revenue Code and the regulations promulgated thereunder in the form
of ANNEX C attached hereto.
(c) In connection with the purchase and sale of the Executive
Stock hereunder, Executive represents and warrants to the Company that:
<PAGE>
(i) The Executive Stock to be acquired by Executive
pursuant to this Agreement will be acquired for Executive's own account and not
with a view to, or intention of, distribution thereof in violation of the
Securities Act, or any applicable state securities laws, and the Executive Stock
will not be disposed of in contravention of the Securities Act or any applicable
state securities laws.
(ii) Executive is an executive officer of the Company, is
sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in the Executive Stock.
(iii) Executive is able to bear the economic risk of his
investment in the Executive Stock for an indefinite period of time because the
Executive Stock has not been registered under the Securities Act and, therefore,
cannot be sold unless subsequently registered under the Securities Act or an
exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of Executive
Stock and has had full access to such other information concerning the Company
as he has requested.
(v) This Agreement constitutes the legal, valid and
binding obligation of Executive, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement, contract
or instrument to which Executive is a party or any judgment, order or decree to
which Executive is subject.
(vi) Executive is a resident of the District of Columbia.
(d) As an inducement to the Company to issue the Executive
Stock to Executive, as a condition thereto, Executive acknowledges and agrees
that neither the issuance of the Executive Stock to Executive nor any provision
contained herein shall entitle Executive to remain in the employment of the
Company and its Subsidiaries or affect the right of the Company to terminate
Executive's employment at any time for any reason.
3. REPURCHASE OPTION.
(a) In the event that Executive ceases to be employed by the
Company and its Subsidiaries for any reason (the "SEPARATION"), the Executive
Stock (whether held by Executive or one or more of Executive's transferees,
other than the Company) will be subject to repurchase, in each case at the
option of the Company, the Investors and Ken S. Bajaj ("Bajaj") pursuant to the
terms and conditions set forth in this Section 3(a) (the "REPURCHASE OPTION"). A
percentage of the Executive Stock will be subject to repurchase at the
Executive's Original Cost for such shares, calculated in accordance with the
following schedule (the "ORIGINAL COST SHARES"):
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<PAGE>
<TABLE>
<CAPTION>
DATE PERCENTAGE OF EXECUTIVE STOCK
TO BE REPURCHASED AT ORIGINAL COST
----------------------------------
<S> <C>
Date of this Agreement until 1st Anniversary of this Agreement 100%
Date immediately following 1st Anniversary of this Agreement until 75%
2nd Anniversary of this Agreement
Date immediately following 2nd Anniversary of this Agreement until 50%
3rd Anniversary of this Agreement
Date immediately following 3rd Anniversary of this Agreement until 25%
4th Anniversary of this Agreement
Date immediately following 4th Anniversary of this Agreement and 0%
thereafter
</TABLE>
The purchase price for the remaining shares of Executive Stock shall be the Fair
Market Value of such shares (the "FAIR MARKET VALUE SHARES").
(b) The Company may elect to purchase all or any portion of
the Original Cost Shares and the Fair Market Value Shares by delivering written
notice (the "REPURCHASE NOTICE") to the holder or holders of the Executive Stock
within 180 days after the Separation. The Repurchase Notice will set forth the
number of Original Cost Shares and Fair Market Value Shares to be acquired from
each holder, the aggregate consideration to be paid for such shares and the time
and place for the closing of the transaction. The number of shares to be
repurchased by the Company shall first be satisfied to the extent possible from
the shares of Executive Stock held by Executive at the time of delivery of the
Repurchase Notice. If the number of shares of Executive Stock then held by
Executive is less than the total number of shares of Executive Stock which the
Company has elected to purchase, the Company shall purchase the remaining shares
elected to be purchased from the other holder(s) of Executive Stock under this
Agreement, pro rata according to the number of shares of Executive Stock held by
such other holder(s) at the time of delivery of such Repurchase Notice
(determined as nearly as practicable to the nearest share). The number of
Original Cost Shares and Fair Market Value Shares to be repurchased hereunder
will be allocated among Executive and the other holders of Executive Stock (if
any) pro rata according to the number of shares of Executive Stock to be
purchased from such person.
(c) If for any reason the Company does not elect to purchase
all of the Executive Stock pursuant to the Repurchase Option, the Investors and
Bajaj shall be entitled to
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<PAGE>
exercise the Repurchase Option for all or any portion of the shares of Executive
Stock that the Company has not elected to purchase (the "AVAILABLE SHARES"). As
soon as practicable after the Company has determined that there will be
Available Shares, but in any event within 150 days after the Separation, the
Company shall give written notice (the "OPTION NOTICE") to the Investors and
Bajaj setting forth the number of Available Shares and the purchase price for
the Available Shares. The Investors and Bajaj may elect to purchase any or all
of the Available Shares by giving written notice to the Company within one month
after the Option Notice has been given by the Company. If the Investors and
Bajaj elect to purchase an aggregate number of shares greater than the number of
Available Shares, the Available Shares shall be allocated among the Investors
and Bajaj based upon the number of shares of Common Stock owned by each Investor
and Bajaj on a fully diluted basis (excluding, in the case of Bajaj, shares
owned by him that are subject to repurchase at cost). As soon as practicable,
and in any event within ten days, after the expiration of the one-month period
set forth above, the Company shall notify each holder of Executive Stock as to
the number of shares being purchased from such holder by the Investors and Bajaj
(the "SUPPLEMENTAL REPURCHASE NOTICE"). At the time the Company delivers the
Supplemental Repurchase Notice to the holder(s) of Executive Stock, the Company
shall also deliver written notice to the Investors and Bajaj setting forth the
number of shares the Investors and Bajaj are entitled to purchase, the aggregate
purchase price and the time and place of the closing of the transaction. The
number of Original Cost Shares and Fair Market Value Shares to be repurchased
hereunder shall be allocated among the Company, the Investors and Bajaj pro rata
according to the number of shares of Executive Stock to be purchased by each of
them. Notwithstanding the foregoing, the Investors and Bajaj shall not exercise
their Repurchase Option as to the Original Cost Shares pursuant to this Section
3(c) if the Company has sufficient assets to fully exercise its Repurchase
Option as to the Original Cost Shares but has not exercised such right.
Furthermore, if the Investors and Bajaj repurchase any Original Cost Shares,
they shall contribute such Original Cost Shares to the Company in exchange for a
promissory note from the Company with an aggregate principal amount equal to the
purchase price paid for such shares, bearing interest (payable quarterly) at a
rate per annum equal to the prime rate as published in the WALL STREET JOURNAL
from time to time, and having a term of no longer than five years.
(d) The closing of the purchase of the Executive Stock
pursuant to the Repurchase Option shall take place on the date designated by the
Company in the Repurchase Notice or Supplemental Repurchase Notice, which date
shall not be more than one month nor less than five days after the delivery of
the later of either such notice to be delivered. The Company will pay for the
Executive Stock to be purchased by it pursuant to the Repurchase Option by first
offsetting amounts outstanding under any bona fide debts owed by Executive to
the Company and will pay the remainder of the purchase price by, at its option,
(A) a check or wire transfer of funds, or (B) a check or wire transfer of funds
for at least one-third of the purchase price, and a subordinated note or notes
payable in two equal annual installments beginning on each of the first and
second anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the prime rate as published in THE WALL
STREET JOURNAL from time to time in the aggregate amount of the remainder of the
purchase price for such shares. The Investors and Bajaj will pay for the
Executive Stock purchased by it by a check or wire transfer of funds. The
Company, the Investors and Bajaj will be entitled to receive
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customary representations and warranties from the sellers regarding such sale
and to require that all sellers' signatures be guaranteed.
(e) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Executive Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Executive Stock hereunder which the
Company is otherwise entitled or required to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions.
(f) Notwithstanding anything to the contrary contained in this
Agreement, if the Executive delivers the notice of objection described in the
definition of Fair Market Value, or if the Fair Market Value of a Fair Market
Value Share is otherwise determined to be an amount more than 10% greater than
the per share repurchase price for Fair Market Value Shares originally
determined by the Board, each of the Company, the Investors and Bajaj shall have
the right to revoke its or their exercise of the Repurchase Option for all or
any portion of the Executive Stock elected to be repurchased by it by delivering
notice of such revocation in writing to the holders of the Executive Stock
during (i) the thirty-day period beginning on the date the Company, the
Investors and Bajaj receive Executive's written notice of objection and (ii) the
thirty-day period beginning on the date the Company, the Investors and Bajaj are
given written notice that the Fair Market Value of a Fair Market Value Share was
finally determined to be an amount more than 10% greater than the per share
repurchase price for Fair Market Value Shares originally determined by the Board
(g) The provisions of this Section 3 shall terminate upon the
consummation of a Sale of the Company.
4. RESTRICTIONS ON TRANSFER OF EXECUTIVE STOCK.
(a) RETENTION OF EXECUTIVE STOCK. Until the fifth anniversary
of the date of this Agreement, Executive shall not sell, transfer, assign,
pledge or otherwise dispose of any interest in any shares of Executive Stock,
except pursuant to: (i) a Sale of the Company, (ii) Section 3 of this Agreement,
(iii) Section 4 of the Stockholders Agreement, (iv) a sale described in clause
(i) of the definition of "PUBLIC SALE," or (v) after a Public Offering, upon any
sale by the Investors or an Affiliate of the type described in clause (ii) of
the definition of "PUBLIC SALE" (a "RULE 144 SALE"), to the extent of the lesser
of (a) the number of shares of Executive Stock held by Executive that are not
subject to repurchase at Original Cost and (b) the number of shares of Executive
Stock held by Executive multiplied by a fraction, the numerator of which is the
number of shares of Common Stock sold by the Investors and their Affiliates in
the Rule 144 Sale and the denominator of which is the total number of shares of
Common Stock held by the Investors and their Affiliates immediately prior to
such sale.
(b) CERTAIN PERMITTED TRANSFERS. The restrictions in this
Section 4 will not apply with respect to (i) transfers of shares of Executive
Stock pursuant to applicable laws of descent and distribution or (ii) transfer
of shares of Executive Stock among Executive's Family Group; provided that such
restrictions will continue to be applicable to the Executive Stock after
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<PAGE>
any such transfer and the transferees of such Executive Stock have agreed in
writing to be bound by the provisions of this Agreement.
(c) TERMINATION OF RESTRICTIONS. The restrictions on the
Transfer of shares of Executive Stock set forth in this Section 4 will continue
with respect to each share of Executive Stock until the date on which such
Executive Stock has been transferred in a transaction permitted by this Section
4 (except in a transaction contemplated by Section 4(b)); provided that in any
event such restrictions will terminate on a Sale of the Company.
5. ADDITIONAL RESTRICTIONS ON TRANSFER OF EXECUTIVE STOCK.
(a) LEGEND. The certificates representing the Executive Stock
will bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT
AGREEMENT BETWEEN THE COMPANY AND AN EXECUTIVE OF THE COMPANY DATED AS OF JULY
31, 1998. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Executive Stock may sell,
transfer or dispose of any Executive Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
PROVISIONS RELATING TO EMPLOYMENT
6. EMPLOYMENT. The Company agrees to employ Executive and
Executive accepts such employment for the period beginning as of the date hereof
and ending upon his separation pursuant to Section 6(c) hereof (the "EMPLOYMENT
PERIOD").
(a) POSITION AND DUTIES. During the Employment Period,
Executive shall serve as a Senior Vice President of the Company and shall have
such duties, responsibilities and authority as may be assigned by the President
and Chief Executive Officer, subject to the power of the Board to expand or
limit such duties, responsibilities and authority and to override actions of the
Senior Vice President. Executive shall report to the President and Chief
Executive Officer. Executive shall devote his best efforts and his full business
time and attention to the business and affairs of the Company and its
subsidiaries.
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<PAGE>
(b) SALARY, BONUS AND BENEFITS. During the Employment Period,
the Company will pay Executive a base salary (the "ANNUAL BASE SALARY") of
$150,000 per annum, subject to any increase as determined by the Board based
upon the Company's achievements of budgetary and other objectives set by the
Board. In addition, Executive shall be eligible to receive a bonus of up to
fifty (50%) percent of the Annual Base Salary based upon the Company's
achievement of budgetary and other objectives set by the Board. Executive's
Annual Base Salary for any partial year will be prorated based upon the number
of days elapsed in such year. In addition, during the Employment Period,
Executive will be entitled to such other benefits approved by the Board and made
available to the Company's senior management.
(c) SEPARATION. Executive's employment by the Company will
continue until Executive's resignation, disability (as determined by the Board
in its good faith judgment) or death or until the Board terminates Executive's
employment for any reason or without any reason. If the Employment Period is
terminated by the Board without Cause, subject to the provisions of this
Agreement, Executive shall be entitled to receive his Annual Base Salary and his
life insurance, medical insurance and disability insurance benefits (but no
bonuses or other fringe benefits) through the end of the Noncompete Period (as
defined below in Section 8, including any extensions pursuant to Section 8(a))
(such payment, the "SEVERANCE PAYMENT") payable in accordance with normal
payroll practices.
7. CONFIDENTIAL INFORMATION.
(a) Executive acknowledges that the Company and its
Subsidiaries are engaged in the business of acquiring businesses that provide
electronic commerce services and operating those businesses after their
acquisition (the "BUSINESS"). Executive further acknowledges that the Business
and its continued success depend upon the use and protection of a large body of
confidential and proprietary information, and that he holds a position of trust
and confidence by virtue of which he necessarily possesses, has access to and,
as a consequence of his signing this Agreement, will continue to possess and
have access to, highly valuable, confidential and proprietary information of the
Company and its Subsidiaries not known to the public in general, and that it
would be improper for him to make use of this information for the benefit of
himself and others. All of such confidential and proprietary information now
existing or to be developed in the future will be referred to in this Agreement
as "CONFIDENTIAL INFORMATION." This includes, without limitation, information
relating to the nature and operation of the Business, the persons, firms and
corporations which are customers or active prospects of the Company during
Executive's employment by the Company, the Company's development, transition and
transformation plans, methodology and methods of doing business, strategic,
acquisition, marketing and expansion plans, including plans regarding planned
and potential acquisitions and sales, financial and business plans, employee
lists, numbers and location of sales representatives, new and existing programs
and services (and those under development), prices and terms, customer service,
integration processes requirements, costs of providing service, support and
equipment and equipment maintenance costs. Confidential Information shall not
include any information that has become generally known to and available for use
by the public other than as a result of Executive's acts or omissions.
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<PAGE>
(b) Disclosure of any Confidential Information of the Company
shall not be prohibited if such disclosure is directly pursuant to a valid and
existing order of a court or other governmental body or agency within the United
States; provided, however, that (i) Executive shall first have given prompt
notice to the Company of any such possible or prospective order (or proceeding
pursuant to which any such order may result) and (ii) Executive shall afford the
Company a reasonable opportunity to prevent or limit any such disclosure.
(c) During the Employment Period and at all times thereafter,
Executive will preserve and protect as confidential all of the Confidential
Information known to Executive or at any time in Executive's possession or
control. In addition, during the Employment Period and at all times thereafter,
Executive will not disclose to any unauthorized person or use for his own
account any of such Confidential Information without the Board's written
consent. Executive agrees to deliver to the Company at a Separation, or at any
other time the Company may request in writing, all memoranda, notes, plans,
records, reports and other documents (and copies thereof) containing or
otherwise relating to any of the Confidential Information (including, without
limitation, all acquisition prospects, lists and contact information) which he
may then possess or have under his control. Executive acknowledges that all such
memoranda, notes, plans, records, reports and other documents are and at all
times will be and remain the property of the Company.
(d) Executive will fully comply with any agreement reasonably
required by any of the Company's affiliates, business partners, suppliers or
contractors with respect to the protection of the confidential and proprietary
information of such entities.
8. NONCOMPETITION AND NONSOLICITATION. Executive acknowledges
that in the course of his employment with the Company he will become familiar
with the Confidential Information concerning the Company and such Subsidiaries
and that his services will be of special, unique and extraordinary value to the
Company. Executive agrees that the Company has a protectable interest in the
Confidential Information acquired by Executive during the course of his
employment with the Company. Therefore, Executive agrees that:
(a) NONCOMPETITION. So long as Executive is employed or
affiliated with the Company or any Subsidiary and for an additional (i) two
years thereafter, in the event the Employment Period is terminated as a result
of Executive's resignation or is terminated with Cause or (ii) one year
thereafter, in the event the Employment Period is terminated without Cause (the
"NONCOMPETE PERIOD"), he shall not, anywhere in the United States, directly or
indirectly own, manage, control, participate in, consult with, render services
for, or in any manner engage in the Business or any other business engaged in by
the Company at the time of Separation; provided that in the event of a
termination without Cause, the Board may extend the Noncompete Period for an
additional one-year term by giving notice to Executive ninety (90) days prior to
the end of the then-existing Noncompete Period.
(b) NONSOLICITATION. During the Noncompete Period, Executive
shall not directly or indirectly through another entity (i) induce or attempt to
induce any employee of the Company or any of its Subsidiaries to leave the
employ of the Company or such Subsidiary, or in
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<PAGE>
any way interfere with the relationship between the Company or any of its
Subsidiaries and any employee thereof, (ii) hire any person who was an employee
of the Company or any of its Subsidiaries within 180 days prior to the time such
employee was hired by the Executive, (iii) induce or attempt to induce any owner
of a site location, customer, supplier, licensee or other business relation of
the Company or any of its Subsidiaries to cease doing business with the Company
or such Subsidiary or in any way interfere with the relationship between any
such customer, supplier, licensee or business relation and the Company or any of
its Subsidiaries or (iv) directly or indirectly acquire or attempt to acquire an
interest in any business relating to the business of the Company or any of its
Subsidiaries and with which the Company or any of its Subsidiaries has
entertained discussions or has requested and received information relating to
the acquisition of such business by the Company or any of its Subsidiaries in
the two-year period immediately preceding a Separation.
(c) ENFORCEMENT. If, at the time of enforcement of Section 7
or 8 of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum duration, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area and that
the court shall be allowed to revise the restrictions contained herein to cover
the maximum duration, scope and area permitted by law. Because Executive's
services are unique and because Executive has access to Confidential
Information, the parties hereto agree that money damages would be an inadequate
remedy for any breach of this Agreement. Therefore, in the event of a breach or
threatened breach of Section 7 or Section 8 of this Agreement, the Company or
any of its successors or assigns shall, in addition to other rights and remedies
existing in its favor, be entitled to specific performance and/or injunctive or
other relief in order to enforce, or prevent any violations of, the provisions
of Section 7 or Section 8 from any court of competent jurisdiction.
(d) ADDITIONAL ACKNOWLEDGMENTS. Executive acknowledges that
the provisions of this Section are in consideration of: (i) employment with the
Company and (ii) additional good and valuable consideration as set forth in this
Agreement. Executive expressly agrees and acknowledges that the restrictions
contained in Sections 7 and 8 do not preclude Executive from earning a
livelihood, nor does it unreasonably impose limitations on Executive's ability
to earn a living. In addition, Executive agrees and acknowledges that the
potential harm to the Company of its non-enforcement outweighs any harm to the
Executive of its enforcement by injunction or otherwise. Executive acknowledges
that he has carefully read this Agreement and has given careful consideration to
the restraints imposed upon the Executive by this Agreement, and is in full
accord as to their necessity for the reasonable and proper protection of the
Confidential Information. Executive expressly acknowledges and agrees that each
and every restraint imposed by this Agreement is reasonable with respect to
subject matter, time period and geographical area.
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<PAGE>
GENERAL PROVISIONS
9. DEFINITIONS.
"AFFILIATE" or "AFFILIATES" of an Investor means any direct or indirect
general or limited partner of such Investor, or any employee or owner thereof,
or any other person, entity or investment fund controlling, controlled by or
under common control with such Investor.
"CAUSE" means (i) the commission of a felony or a crime involving moral
turpitude or the commission of any other act or omission involving dishonesty or
fraud with respect to the Company or any of its Subsidiaries or any of their
customers or suppliers, (ii) conduct tending to bring the Company or any of its
Subsidiaries into substantial public disgrace or disrepute, (iii) substantial
and repeated failure to perform duties of the office held by Executive as
reasonably directed by the Board, (iv) gross negligence or willful misconduct
with respect to the Company or any of its Subsidiaries or (v) any breach of
Section 7 or 8 of this Agreement.
"EXECUTIVE'S FAMILY GROUP" means Executive's spouse and descendants
(whether natural or adopted), any trust solely for the benefit of Executive
and/or Executive's spouse and/or descendants and any retirement plan for the
Executive.
"EXECUTIVE STOCK" will continue to be Executive Stock in the hands of
any holder other than Executive (except for the Company and the Investors and
except for transferees in a Public Sale), and except as otherwise provided
herein, each such other holder of Executive Stock will succeed to all rights and
obligations attributable to Executive as a holder of Executive Stock hereunder.
Executive Stock will also include shares of the Company's capital stock issued
with respect to Executive Stock by way of a stock split, stock dividend or other
recapitalization.
"FAIR MARKET VALUE" of each share of Executive Stock means the average
of the closing prices of the sales of the Common Stock on all securities
exchanges on which such Common Stock may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such day, or, if
on any day such Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time,
or, if on any day such Common Stock is not quoted in the NASDAQ System, of the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market Value
is being determined and the 20 consecutive business days prior to such day. If
at any time such Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Fair Market Value will
be the fair value of such Common Stock determined in good faith by the Board
(the "BOARD CALCULATION"). If the Executive reasonably disagrees with the Board
Calculation, the Executive may, within 30 days after receipt of the Board
Calculation, deliver a notice (an "OBJECTION NOTICE") to the Company setting
forth the Executive's calculation of Fair Market Value. The Board and the
Executive will negotiate in good faith to agree on such Fair Market Value, but
if such agreement is not reached within 30 days after the Company has received
the Objection Notice, Fair Market Value shall be
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determined by an appraiser jointly selected by the Board and the Executive,
which appraiser shall submit to the Board and the Executive a report within 30
days of its engagement setting forth such determination. If the parties are
unable to agree on an appraiser within 45 days after the Company has received
the Objection Notice, within seven days, each party shall submit the names of
four nationally recognized investment banking firms, and each party shall be
entitled to strike two names from the other party's list of firms, and the
appraiser shall be selected by lot from the remaining four investment banking
firms. The expenses of such appraiser shall be borne by the Executive unless the
appraiser's valuation is not less than 10% greater than the amount determined by
the Board, in which case, the costs of the appraiser shall be borne by the
Company. The determination of such appraiser shall be final and binding upon all
parties. If the Repurchase Option is exercised within 90 days after a
Separation, then Fair Market Value shall be determined as of the date of such
Separation; thereafter, Fair Market Value shall be determined as of the date the
Repurchase Option is exercised.
"ORIGINAL COST" means, with respect to each share of Executive Stock
purchased hereunder, $0.1055 (as proportionately adjusted for all subsequent
stock splits, stock dividends and other recapitalizations).
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof
"PUBLIC OFFERING" means the sale in an underwritten public offering
registered under the Securities Act of shares of the Company's Common Stock
approved by the Board.
"PUBLIC SALE" means (i) any sale pursuant to a registered public
offering under the Securities Act or (ii) any sale to the public pursuant to
Rule 144 promulgated under the Securities Act effected through a broker, dealer
or market maker (other than pursuant to Rule 144(k)).
"SALE OF THE COMPANY" means any transaction or series of transactions
pursuant to which any person(s) or entity(ies) other than the Investors and its
Affiliates in the aggregate acquire(s) (i) capital stock of the Company
possessing the voting power (other than voting rights accruing only in the event
of a default, breach or event of noncompliance) to elect a majority of the
Company's board of directors (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock, shareholder or
voting agreement, proxy, power of attorney or otherwise) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis;
provided that the term "SALE OF THE COMPANY" shall not include a Public
Offering.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated June
29, 1998, among the Company and certain of its stockholders.
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<PAGE>
"SUBSIDIARY" means any corporation of which fifty percent (50%) or more
of the securities having ordinary voting power in electing the board of
directors are, at the time as of which any determination is being made, owned by
the Company either directly or through one or more Subsidiaries. The term
Subsidiary shall also include any joint venture arrangement between the Company
and any other entity, including, without limitation, the Company's joint venture
arrangement with Commerce Direct International, Inc., a Delaware corporation.
"TRANSFER" means to sell, transfer, assign, pledge or otherwise dispose
of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law).
10. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:
If to the Company:
AppNet Systems, Inc.
6700-A Rockledge Drive
Suite 525
Bethesda, MD 20817
Attention: Terrence M. McManus
with a copy to:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Kirkland & Ellis
200 East Randolph
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
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and
Tucker, Flyer & Lewis
1615 L Street, N.W.
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
If to the Executive:
Jack Pearlstein
1660 Foxhall Road, N.W.
Washington, D.C. 20007
If to the Investors:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Smart Technology, L.L.C.
10201 Norton Road
Potomac, MD 20854
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.,
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
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<PAGE>
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
11. GENERAL PROVISIONS.
(a) EXPENSES. Each of the Company and the Executive shall pay
its or his legal, accounting and other expenses incurred in connection with the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement.
(b) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Executive Stock in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Executive Stock as the owner of
such stock for any purpose.
(c) SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(d) INTENDED THIRD-PARTY BENEFICIARIES. The Investors are
intended to be third-party beneficiaries to this entire Agreement and the rights
and obligations of the parties hereto. It is understood and agreed by the
parties hereto that this Agreement shall be enforceable by GTCR and, provided
GTCR is seeking to enforce substantially the same rights, the other Investor(s)
in accordance with its terms as though each of the Investors were a party to
every provision hereof. Except as expressly provided herein, no other third
parties are intended by the parties hereto to be beneficiaries hereof.
(e) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(f) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(g) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by Executive, the Company, the Investors and their respective successors and
assigns (including subsequent holders of Executive Stock); provided that the
rights and obligations of Executive under this Agreement
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shall not be assignable except in connection with a permitted transfer of
Executive Stock hereunder. The rights and obligations of GTCR under this
Agreement may be assigned at any time, in whole or in part, to any investment
fund managed by GTCR, or any successor thereto; provided that such assignment
occurs in the manner provided in the Purchase Agreement.
(h) CHOICE OF LAW. The corporate law of the State of Delaware
will govern all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits hereto will be governed by and
construed in accordance with the internal laws of the State of Maryland, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Maryland or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Maryland.
(i) REMEDIES. Each of the parties to this Agreement (including
the Investors) will be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including attorney's fees) caused by
any breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction (without posting any bond or deposit)
for specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
(j) AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended and waived only with the written consent of the Company and the
Executive.
(k) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or holiday
in the state in which the Company's chief executive office is located, the time
period shall be automatically extended to the business day immediately following
such Saturday, Sunday or holiday.
(l) TERMINATION. This Agreement (except for the provisions of
Section 6) shall survive a Separation and shall remain in full force and effect
after such Separation.
(m) ADJUSTMENTS OF NUMBERS. All numbers set forth herein which
refer to share prices or amounts will be appropriately adjusted to reflect stock
splits, stock dividends, combinations of shares and other recapitalizations
affecting the subject class of stock.
- 15 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Senior
Management Agreement on the date first written above.
APPNET SYSTEMS, INC.
By: /s/ Ken S. Bajaj
------------------------------------------
Ken S. Bajaj
President and Chief Executive Officer
/s/ Jack Pearlstein
------------------------------------------
Jack Pearlstein
- 16 -
<PAGE>
Exhibit 4.9
SENIOR MANAGEMENT AGREEMENT
THIS SENIOR MANAGEMENT AGREEMENT (this "AGREEMENT") is made as of July
31, 1998, between AppNet Systems, Inc., a Delaware corporation (the
"CORPORATION") and Toby Tobaccowala (the "EXECUTIVE").
The Company and Executive desire to enter into an agreement pursuant to
which Executive will purchase, and the Company will sell, 500,000 shares of the
Company's Common Stock, par value $.0005 per share (the "EXECUTIVE STOCK").
Certain definitions are set forth in Section 9 of this Agreement.
The execution and delivery of this Agreement by the Company and
Executive is related to the purchase of shares of Common Stock and shares of the
Company's Class A Preferred Stock, par value $.01 per share (the "CLASS A
PREFERRED") by Smart Technology, L.L.C. ("SMART TECHNOLOGY"), GTCR Golder
Rauner, L.L.C., a Delaware limited liability company ("GTCR" and, together with
Smart Technology, the "INVESTORS" and each an "INVESTOR") pursuant to a purchase
agreement between the Company and the Investors dated as of June 29, 1998 (the
"PURCHASE AGREEMENT"). Certain provisions of this Agreement are intended for the
benefit of, and will be enforceable by, the Investors.
The parties hereto agree as follows:
PROVISIONS RELATING TO EXECUTIVE STOCK
1. RESERVED.
2. PURCHASE AND SALE OF EXECUTIVE STOCK.
(a) Upon execution of this Agreement, Executive will purchase,
and the Company will sell, 500,000 shares of Common Stock at a price of $0.1055
per share. The Company will deliver to Executive the certificates representing
such Executive Stock, and Executive will deliver to the Company a check or wire
transfer of funds in the aggregate amount of $250.00 and a promissory note in
the form of ANNEX A attached hereto in an aggregate principal amount of $52,500
(the "EXECUTIVE NOTE"). Executive's obligations under the Executive Note shall
be secured by a pledge of all of the shares of Common Stock purchased hereunder
to the Company and in connection therewith, Executive shall enter into a pledge
agreement in the form of ANNEX B attached hereto.
(b) Within 30 days after the date hereof, Executive will make
an effective election with the Internal Revenue Service under Section 83(b) of
the Internal Revenue Code and the regulations promulgated thereunder in the form
of ANNEX C attached hereto.
(c) In connection with the purchase and sale of the Executive
Stock hereunder, Executive represents and warrants to the Company that:
<PAGE>
(i) The Executive Stock to be acquired by Executive
pursuant to this Agreement will be acquired for Executive's own account and not
with a view to, or intention of, distribution thereof in violation of the
Securities Act, or any applicable state securities laws, and the Executive Stock
will not be disposed of in contravention of the Securities Act or any applicable
state securities laws.
(ii) Executive is an executive officer of the Company, is
sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in the Executive Stock.
(iii) Executive is able to bear the economic risk of his
investment in the Executive Stock for an indefinite period of time because the
Executive Stock has not been registered under the Securities Act and, therefore,
cannot be sold unless subsequently registered under the Securities Act or an
exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of Executive
Stock and has had full access to such other information concerning the Company
as he has requested.
(v) This Agreement constitutes the legal, valid and
binding obligation of Executive, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement, contract
or instrument to which Executive is a party or any judgment, order or decree to
which Executive is subject.
(vi) Executive is a resident of the State of New Jersey.
(d) As an inducement to the Company to issue the Executive
Stock to Executive, as a condition thereto, Executive acknowledges and agrees
that neither the issuance of the Executive Stock to Executive nor any provision
contained herein shall entitle Executive to remain in the employment of the
Company and its Subsidiaries or affect the right of the Company to terminate
Executive's employment at any time for any reason.
3. REPURCHASE OPTION.
(a) In the event that Executive ceases to be employed by
the Company and its Subsidiaries for any reason (the "SEPARATION"), the
Executive Stock (whether held by Executive or one or more of Executive's
transferees, other than the Company) will be subject to repurchase, in each case
at the option of the Company, the Investors and Ken S. Bajaj ("Bajaj") pursuant
to the terms and conditions set forth in this Section 3(a) (the "REPURCHASE
OPTION"). A percentage of the Executive Stock will be subject to repurchase at
the Executive's Original Cost for such shares, calculated in accordance with the
following schedule (the "ORIGINAL COST SHARES"):
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<PAGE>
<TABLE>
<CAPTION>
DATE PERCENTAGE OF EXECUTIVE STOCK
TO BE REPURCHASED AT ORIGINAL COST
----------------------------------
<S> <C>
Date of this Agreement until 1st Anniversary of this Agreement 100%
Date immediately following 1st Anniversary of this Agreement until 75%
2nd Anniversary of this Agreement
Date immediately following 2nd Anniversary of this Agreement until 50%
3rd Anniversary of this Agreement
Date immediately following 3rd Anniversary of this Agreement until 25%
4th Anniversary of this Agreement
Date immediately following 4th Anniversary of this Agreement and 0%
thereafter
</TABLE>
The purchase price for the remaining shares of Executive Stock shall be the Fair
Market Value of such shares (the "FAIR MARKET VALUE SHARES").
(b) The Company may elect to purchase all or any portion
of the Original Cost Shares and the Fair Market Value Shares by delivering
written notice (the "REPURCHASE NOTICE") to the holder or holders of the
Executive Stock within 180 days after the Separation. The Repurchase Notice will
set forth the number of Original Cost Shares and Fair Market Value Shares to be
acquired from each holder, the aggregate consideration to be paid for such
shares and the time and place for the closing of the transaction. The number of
shares to be repurchased by the Company shall first be satisfied to the extent
possible from the shares of Executive Stock held by Executive at the time of
delivery of the Repurchase Notice. If the number of shares of Executive Stock
then held by Executive is less than the total number of shares of Executive
Stock which the Company has elected to purchase, the Company shall purchase the
remaining shares elected to be purchased from the other holder(s) of Executive
Stock under this Agreement, pro rata according to the number of shares of
Executive Stock held by such other holder(s) at the time of delivery of such
Repurchase Notice (determined as nearly as practicable to the nearest share).
The number of Original Cost Shares and Fair Market Value Shares to be
repurchased hereunder will be allocated among Executive and the other holders of
Executive Stock (if any) pro rata according to the number of shares of Executive
Stock to be purchased from such person.
(c) If for any reason the Company does not elect to
purchase all of the Executive Stock pursuant to the Repurchase Option, the
Investors and Bajaj shall be entitled to
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<PAGE>
exercise the Repurchase Option for all or any portion of the shares of Executive
Stock that the Company has not elected to purchase (the "AVAILABLE SHARES"). As
soon as practicable after the Company has determined that there will be
Available Shares, but in any event within 150 days after the Separation, the
Company shall give written notice (the "OPTION NOTICE") to the Investors and
Bajaj setting forth the number of Available Shares and the purchase price for
the Available Shares. The Investors and Bajaj may elect to purchase any or all
of the Available Shares by giving written notice to the Company within one month
after the Option Notice has been given by the Company. If the Investors and
Bajaj elect to purchase an aggregate number of shares greater than the number of
Available Shares, the Available Shares shall be allocated among the Investors
and Bajaj based upon the number of shares of Common Stock owned by each Investor
and Bajaj on a fully diluted basis (excluding, in the case of Bajaj, shares
owned by him that are subject to repurchase at cost). As soon as practicable,
and in any event within ten days, after the expiration of the one-month period
set forth above, the Company shall notify each holder of Executive Stock as to
the number of shares being purchased from such holder by the Investors and Bajaj
(the "SUPPLEMENTAL REPURCHASE NOTICE"). At the time the Company delivers the
Supplemental Repurchase Notice to the holder(s) of Executive Stock, the Company
shall also deliver written notice to the Investors and Bajaj setting forth the
number of shares the Investors and Bajaj are entitled to purchase, the aggregate
purchase price and the time and place of the closing of the transaction. The
number of Original Cost Shares and Fair Market Value Shares to be repurchased
hereunder shall be allocated among the Company, the Investors and Bajaj pro rata
according to the number of shares of Executive Stock to be purchased by each of
them. Notwithstanding the foregoing, the Investors and Bajaj shall not exercise
their Repurchase Option as to the Original Cost Shares pursuant to this Section
3(c) if the Company has sufficient assets to fully exercise its Repurchase
Option as to the Original Cost Shares but has not exercised such right.
Furthermore, if the Investors and Bajaj repurchase any Original Cost Shares,
they shall contribute such Original Cost Shares to the Company in exchange for a
promissory note from the Company with an aggregate principal amount equal to the
purchase price paid for such shares, bearing interest (payable quarterly) at a
rate per annum equal to the prime rate as published in the WALL STREET JOURNAL
from time to time, and having a term of no longer than five years.
(d) The closing of the purchase of the Executive Stock
pursuant to the Repurchase Option shall take place on the date designated by the
Company in the Repurchase Notice or Supplemental Repurchase Notice, which date
shall not be more than one month nor less than five days after the delivery of
the later of either such notice to be delivered. The Company will pay for the
Executive Stock to be purchased by it pursuant to the Repurchase Option by first
offsetting amounts outstanding under any bona fide debts owed by Executive to
the Company and will pay the remainder of the purchase price by, at its option,
(A) a check or wire transfer of funds, or (B) a check or wire transfer of funds
for at least one-third of the purchase price, and a subordinated note or notes
payable in two equal annual installments beginning on each of the first and
second anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the prime rate as published in THE WALL
STREET JOURNAL from time to time in the aggregate amount of the remainder of the
purchase price for such shares. The Investors and Bajaj will pay for the
Executive Stock purchased by it by a check or wire transfer of funds. The
Company, the Investors and Bajaj will be entitled to receive
- 4 -
<PAGE>
customary representations and warranties from the sellers regarding such sale
and to require that all sellers' signatures be guaranteed.
(e) Notwithstanding anything to the contrary contained in
this Agreement, all repurchases of Executive Stock by the Company shall be
subject to applicable restrictions contained in the Delaware General Corporation
Law and in the Company's and its Subsidiaries' debt and equity financing
agreements. If any such restrictions prohibit the repurchase of Executive Stock
hereunder which the Company is otherwise entitled or required to make, the
Company may make such repurchases as soon as it is permitted to do so under such
restrictions.
(f) Notwithstanding anything to the contrary contained in
this Agreement, if the Executive delivers the notice of objection described in
the definition of Fair Market Value, or if the Fair Market Value of a Fair
Market Value Share is otherwise determined to be an amount more than 10% greater
than the per share repurchase price for Fair Market Value Shares originally
determined by the Board, each of the Company, the Investors and Bajaj shall have
the right to revoke its or their exercise of the Repurchase Option for all or
any portion of the Executive Stock elected to be repurchased by it by delivering
notice of such revocation in writing to the holders of the Executive Stock
during (i) the thirty-day period beginning on the date the Company, the
Investors and Bajaj receive Executive's written notice of objection and (ii) the
thirty-day period beginning on the date the Company, the Investors and Bajaj are
given written notice that the Fair Market Value of a Fair Market Value Share was
finally determined to be an amount more than 10% greater than the per share
repurchase price for Fair Market Value Shares originally determined by the Board
(g) The provisions of this Section 3 shall terminate upon
the consummation of a Sale of the Company.
4. RESTRICTIONS ON TRANSFER OF EXECUTIVE STOCK.
(a) RETENTION OF EXECUTIVE STOCK. Until the fifth
anniversary of the date of this Agreement, Executive shall not sell, transfer,
assign, pledge or otherwise dispose of any interest in any shares of Executive
Stock, except pursuant to: (i) a Sale of the Company, (ii) Section 3 of this
Agreement, (iii) Section 4 of the Stockholders Agreement, (iv) a sale described
in clause (i) of the definition of "PUBLIC SALE," or (v) after a Public
Offering, upon any sale by the Investors or an Affiliate of the type described
in clause (ii) of the definition of "PUBLIC SALE" (a "RULE 144 SALE"), to the
extent of the lesser of (a) the number of shares of Executive Stock held by
Executive that are not subject to repurchase at Original Cost and (b) the number
of shares of Executive Stock held by Executive multiplied by a fraction, the
numerator of which is the number of shares of Common Stock sold by the Investors
and their Affiliates in the Rule 144 Sale and the denominator of which is the
total number of shares of Common Stock held by the Investors and their
Affiliates immediately prior to such sale.
(b) CERTAIN PERMITTED TRANSFERS. The restrictions in this
Section 4 will not apply with respect to (i) transfers of shares of Executive
Stock pursuant to applicable laws of descent and distribution or (ii) transfer
of shares of Executive Stock among Executive's Family Group; provided that such
restrictions will continue to be applicable to the Executive Stock after
- 5 -
<PAGE>
any such transfer and the transferees of such Executive Stock have agreed in
writing to be bound by the provisions of this Agreement.
(c) TERMINATION OF RESTRICTIONS. The restrictions on the
Transfer of shares of Executive Stock set forth in this Section 4 will continue
with respect to each share of Executive Stock until the date on which such
Executive Stock has been transferred in a transaction permitted by this Section
4 (except in a transaction contemplated by Section 4(b)); provided that in any
event such restrictions will terminate on a Sale of the Company.
5. ADDITIONAL RESTRICTIONS ON TRANSFER OF EXECUTIVE STOCK.
(a) LEGEND. The certificates representing the Executive
Stock will bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT
AGREEMENT BETWEEN THE COMPANY AND AN EXECUTIVE OF THE COMPANY DATED AS OF JULY
31, 1998. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Executive Stock may
sell, transfer or dispose of any Executive Stock (except pursuant to an
effective registration statement under the Securities Act) without first
delivering to the Company an opinion of counsel (reasonably acceptable in form
and substance to the Company) that neither registration nor qualification under
the Securities Act and applicable state securities laws is required in
connection with such transfer.
PROVISIONS RELATING TO EMPLOYMENT
6. EMPLOYMENT. The Company agrees to employ Executive and
Executive accepts such employment for the period beginning as of the date hereof
and ending upon his separation pursuant to Section 6(c) hereof (the "EMPLOYMENT
PERIOD").
(a) POSITION AND DUTIES. During the Employment Period,
Executive shall serve as a Senior Vice President of the Company and shall have
such duties, responsibilities and authority as may be assigned by the President
and Chief Executive Officer, subject to the power of the Board to expand or
limit such duties, responsibilities and authority and to override actions of the
Senior Vice President. Executive shall report to the President and Chief
Executive Officer. Executive shall devote his best efforts and his full business
time and attention to the business and affairs of the Company and its
subsidiaries.
- 6 -
<PAGE>
(b) SALARY, BONUS AND BENEFITS. During the Employment
Period, the Company will pay Executive a base salary (the "ANNUAL BASE SALARY")
of $200,000 per annum, subject to any increase as determined by the Board based
upon the Company's achievements of budgetary and other objectives set by the
Board. In addition, Executive shall be eligible to receive a bonus of up to
fifty (50%) percent of the Annual Base Salary based upon the Company's
achievement of budgetary and other objectives set by the Board. Executive's
Annual Base Salary for any partial year will be prorated based upon the number
of days elapsed in such year. In addition, during the Employment Period,
Executive will be entitled to such other benefits approved by the Board and made
available to the Company's senior management.
(c) SEPARATION. Executive's employment by the Company will
continue until Executive's resignation, disability (as determined by the Board
in its good faith judgment) or death or until the Board terminates Executive's
employment for any reason or without any reason. If the Employment Period is
terminated by the Board without Cause, subject to the provisions of this
Agreement, Executive shall be entitled to receive his Annual Base Salary and his
life insurance, medical insurance and disability insurance benefits (but no
bonuses or other fringe benefits) through the end of the Noncompete Period (as
defined below in Section 8, including any extensions pursuant to Section 8(a))
(such payment, the "SEVERANCE PAYMENT") payable in accordance with normal
payroll practices.
7. CONFIDENTIAL INFORMATION.
(a) Executive acknowledges that the Company and its
Subsidiaries are engaged in the business of acquiring businesses that provide
electronic commerce services and operating those businesses after their
acquisition (the "BUSINESS"). Executive further acknowledges that the Business
and its continued success depend upon the use and protection of a large body of
confidential and proprietary information, and that he holds a position of trust
and confidence by virtue of which he necessarily possesses, has access to and,
as a consequence of his signing this Agreement, will continue to possess and
have access to, highly valuable, confidential and proprietary information of the
Company and its Subsidiaries not known to the public in general, and that it
would be improper for him to make use of this information for the benefit of
himself and others. All of such confidential and proprietary information now
existing or to be developed in the future will be referred to in this Agreement
as "CONFIDENTIAL INFORMATION." This includes, without limitation, information
relating to the nature and operation of the Business, the persons, firms and
corporations which are customers or active prospects of the Company during
Executive's employment by the Company, the Company's development, transition and
transformation plans, methodology and methods of doing business, strategic,
acquisition, marketing and expansion plans, including plans regarding planned
and potential acquisitions and sales, financial and business plans, employee
lists, numbers and location of sales representatives, new and existing programs
and services (and those under development), prices and terms, customer service,
integration processes requirements, costs of providing service, support and
equipment and equipment maintenance costs. Confidential Information shall not
include any information that has become generally known to and available for use
by the public other than as a result of Executive's acts or omissions.
- 7 -
<PAGE>
(b) Disclosure of any Confidential Information of the
Company shall not be prohibited if such disclosure is directly pursuant to a
valid and existing order of a court or other governmental body or agency within
the United States; provided, however, that (i) Executive shall first have given
prompt notice to the Company of any such possible or prospective order (or
proceeding pursuant to which any such order may result) and (ii) Executive shall
afford the Company a reasonable opportunity to prevent or limit any such
disclosure.
(c) During the Employment Period and at all times
thereafter, Executive will preserve and protect as confidential all of the
Confidential Information known to Executive or at any time in Executive's
possession or control. In addition, during the Employment Period and at all
times thereafter, Executive will not disclose to any unauthorized person or use
for his own account any of such Confidential Information without the Board's
written consent. Executive agrees to deliver to the Company at a Separation, or
at any other time the Company may request in writing, all memoranda, notes,
plans, records, reports and other documents (and copies thereof) containing or
otherwise relating to any of the Confidential Information (including, without
limitation, all acquisition prospects, lists and contact information) which he
may then possess or have under his control. Executive acknowledges that all such
memoranda, notes, plans, records, reports and other documents are and at all
times will be and remain the property of the Company.
(d) Executive will fully comply with any agreement
reasonably required by any of the Company's affiliates, business partners,
suppliers or contractors with respect to the protection of the confidential and
proprietary information of such entities.
8. NONCOMPETITION AND NONSOLICITATION. Executive acknowledges
that in the course of his employment with the Company he will become familiar
with the Confidential Information concerning the Company and such Subsidiaries
and that his services will be of special, unique and extraordinary value to the
Company. Executive agrees that the Company has a protectable interest in the
Confidential Information acquired by Executive during the course of his
employment with the Company. Therefore, Executive agrees that:
(a) NONCOMPETITION. So long as Executive is employed or
affiliated with the Company or any Subsidiary and for an additional (i) two
years thereafter, in the event the Employment Period is terminated as a result
of Executive's resignation or is terminated with Cause or (ii) one year
thereafter, in the event the Employment Period is terminated without Cause (the
"NONCOMPETE PERIOD"), he shall not, anywhere in the United States, directly or
indirectly own, manage, control, participate in, consult with, render services
for, or in any manner engage in the Business or any other business engaged in by
the Company at the time of Separation; provided that in the event of a
termination without Cause, the Board may extend the Noncompete Period for an
additional one-year term by giving notice to Executive ninety (90) days prior to
the end of the then-existing Noncompete Period.
(b) NONSOLICITATION. During the Noncompete Period,
Executive shall not directly or indirectly through another entity (i) induce or
attempt to induce any employee of the Company or any of its Subsidiaries to
leave the employ of the Company or such Subsidiary, or in
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<PAGE>
any way interfere with the relationship between the Company or any of its
Subsidiaries and any employee thereof, (ii) hire any person who was an employee
of the Company or any of its Subsidiaries within 180 days prior to the time such
employee was hired by the Executive, (iii) induce or attempt to induce any owner
of a site location, customer, supplier, licensee or other business relation of
the Company or any of its Subsidiaries to cease doing business with the Company
or such Subsidiary or in any way interfere with the relationship between any
such customer, supplier, licensee or business relation and the Company or any of
its Subsidiaries or (iv) directly or indirectly acquire or attempt to acquire an
interest in any business relating to the business of the Company or any of its
Subsidiaries and with which the Company or any of its Subsidiaries has
entertained discussions or has requested and received information relating to
the acquisition of such business by the Company or any of its Subsidiaries in
the two-year period immediately preceding a Separation.
(c) ENFORCEMENT. If, at the time of enforcement of Section
7 or 8 of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum duration, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area and that
the court shall be allowed to revise the restrictions contained herein to cover
the maximum duration, scope and area permitted by law. Because Executive's
services are unique and because Executive has access to Confidential
Information, the parties hereto agree that money damages would be an inadequate
remedy for any breach of this Agreement. Therefore, in the event of a breach or
threatened breach of Section 7 or Section 8 of this Agreement, the Company or
any of its successors or assigns shall, in addition to other rights and remedies
existing in its favor, be entitled to specific performance and/or injunctive or
other relief in order to enforce, or prevent any violations of, the provisions
of Section 7 or Section 8 from any court of competent jurisdiction.
(d) ADDITIONAL ACKNOWLEDGMENTS. Executive acknowledges
that the provisions of this Section are in consideration of: (i) employment with
the Company and (ii) additional good and valuable consideration as set forth in
this Agreement. Executive expressly agrees and acknowledges that the
restrictions contained in Sections 7 and 8 do not preclude Executive from
earning a livelihood, nor does it unreasonably impose limitations on Executive's
ability to earn a living. In addition, Executive agrees and acknowledges that
the potential harm to the Company of its non-enforcement outweighs any harm to
the Executive of its enforcement by injunction or otherwise. Executive
acknowledges that he has carefully read this Agreement and has given careful
consideration to the restraints imposed upon the Executive by this Agreement,
and is in full accord as to their necessity for the reasonable and proper
protection of the Confidential Information. Executive expressly acknowledges and
agrees that each and every restraint imposed by this Agreement is reasonable
with respect to subject matter, time period and geographical area.
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<PAGE>
GENERAL PROVISIONS
9. DEFINITIONS.
"AFFILIATE" or "AFFILIATES" of an Investor means any direct or indirect
general or limited partner of such Investor, or any employee or owner thereof,
or any other person, entity or investment fund controlling, controlled by or
under common control with such Investor.
"CAUSE" means (i) the commission of a felony or a crime involving moral
turpitude or the commission of any other act or omission involving dishonesty or
fraud with respect to the Company or any of its Subsidiaries or any of their
customers or suppliers, (ii) conduct tending to bring the Company or any of its
Subsidiaries into substantial public disgrace or disrepute, (iii) substantial
and repeated failure to perform duties of the office held by Executive as
reasonably directed by the Board, (iv) gross negligence or willful misconduct
with respect to the Company or any of its Subsidiaries or (v) any breach of
Section 7 or 8 of this Agreement.
"EXECUTIVE'S FAMILY GROUP" means Executive's spouse and descendants
(whether natural or adopted), any trust solely for the benefit of Executive
and/or Executive's spouse and/or descendants and any retirement plan for the
Executive.
"EXECUTIVE STOCK" will continue to be Executive Stock in the hands of
any holder other than Executive (except for the Company and the Investors and
except for transferees in a Public Sale), and except as otherwise provided
herein, each such other holder of Executive Stock will succeed to all rights and
obligations attributable to Executive as a holder of Executive Stock hereunder.
Executive Stock will also include shares of the Company's capital stock issued
with respect to Executive Stock by way of a stock split, stock dividend or other
recapitalization.
"FAIR MARKET VALUE" of each share of Executive Stock means the average
of the closing prices of the sales of the Common Stock on all securities
exchanges on which such Common Stock may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such day, or, if
on any day such Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time,
or, if on any day such Common Stock is not quoted in the NASDAQ System, of the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market Value
is being determined and the 20 consecutive business days prior to such day. If
at any time such Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Fair Market Value will
be the fair value of such Common Stock determined in good faith by the Board
(the "BOARD CALCULATION"). If the Executive reasonably disagrees with the Board
Calculation, the Executive may, within 30 days after receipt of the Board
Calculation, deliver a notice (an "OBJECTION NOTICE") to the Company setting
forth the Executive's calculation of Fair Market Value. The Board and the
Executive will negotiate in good faith to agree on such Fair Market Value, but
if such agreement is not reached within 30 days after the Company has received
the Objection Notice, Fair Market Value shall be
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<PAGE>
determined by an appraiser jointly selected by the Board and the Executive,
which appraiser shall submit to the Board and the Executive a report within 30
days of its engagement setting forth such determination. If the parties are
unable to agree on an appraiser within 45 days after the Company has received
the Objection Notice, within seven days, each party shall submit the names of
four nationally recognized investment banking firms, and each party shall be
entitled to strike two names from the other party's list of firms, and the
appraiser shall be selected by lot from the remaining four investment banking
firms. The expenses of such appraiser shall be borne by the Executive unless the
appraiser's valuation is not less than 10% greater than the amount determined by
the Board, in which case, the costs of the appraiser shall be borne by the
Company. The determination of such appraiser shall be final and binding upon all
parties. If the Repurchase Option is exercised within 90 days after a
Separation, then Fair Market Value shall be determined as of the date of such
Separation; thereafter, Fair Market Value shall be determined as of the date the
Repurchase Option is exercised.
"ORIGINAL COST" means, with respect to each share of Executive Stock
purchased hereunder, $0.1055 (as proportionately adjusted for all subsequent
stock splits, stock dividends and other recapitalizations).
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof
"PUBLIC OFFERING" means the sale in an underwritten public offering
registered under the Securities Act of shares of the Company's Common Stock
approved by the Board.
"PUBLIC SALE" means (i) any sale pursuant to a registered public
offering under the Securities Act or (ii) any sale to the public pursuant to
Rule 144 promulgated under the Securities Act effected through a broker, dealer
or market maker (other than pursuant to Rule 144(k)).
"SALE OF THE COMPANY" means any transaction or series of transactions
pursuant to which any person(s) or entity(ies) other than the Investors and its
Affiliates in the aggregate acquire(s) (i) capital stock of the Company
possessing the voting power (other than voting rights accruing only in the event
of a default, breach or event of noncompliance) to elect a majority of the
Company's board of directors (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock, shareholder or
voting agreement, proxy, power of attorney or otherwise) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis;
provided that the term "SALE OF THE COMPANY" shall not include a Public
Offering.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated June
29, 1998, among the Company and certain of its stockholders.
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<PAGE>
"SUBSIDIARY" means any corporation of which fifty percent (50%) or more
of the securities having ordinary voting power in electing the board of
directors are, at the time as of which any determination is being made, owned by
the Company either directly or through one or more Subsidiaries. The term
Subsidiary shall also include any joint venture arrangement between the Company
and any other entity, including, without limitation, the Company's joint venture
arrangement with Commerce Direct International, Inc., a Delaware corporation.
"TRANSFER" means to sell, transfer, assign, pledge or otherwise dispose
of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law).
10. NOTICES. Any notice provided for in this Agreement must be
in writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:
If to the Company:
AppNet Systems, Inc.
6700-A Rockledge Drive
Suite 525
Bethesda, MD 20817
Attention: Terrence M. McManus
with a copy to:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Kirkland & Ellis
200 East Randolph
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
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<PAGE>
and
Tucker, Flyer & Lewis
1615 L Street, N.W.
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
If to the Executive:
Toby Tobaccowala
129 East Allendale Road
Saddle River, NJ 07458
If to the Investors:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Smart Technology, L.L.C.
10201 Norton Road
Potomac, MD 20854
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.,
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
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<PAGE>
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
11. GENERAL PROVISIONS.
(a) EXPENSES. Each of the Company and the Executive shall
pay its or his legal, accounting and other expenses incurred in connection with
the negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement.
(b) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Executive Stock in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Executive Stock as the owner of
such stock for any purpose.
(c) SEVERABILITY. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability will
not affect any other provision or any other jurisdiction, but this Agreement
will be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
(d) INTENDED THIRD-PARTY BENEFICIARIES. The Investors are
intended to be third-party beneficiaries to this entire Agreement and the rights
and obligations of the parties hereto. It is understood and agreed by the
parties hereto that this Agreement shall be enforceable by GTCR and, provided
GTCR is seeking to enforce substantially the same rights, the other Investor(s)
in accordance with its terms as though each of the Investors were a party to
every provision hereof. Except as expressly provided herein, no other third
parties are intended by the parties hereto to be beneficiaries hereof.
(e) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(f) COUNTERPARTS. This Agreement may be executed in
separate counterparts, each of which is deemed to be an original and all of
which taken together constitute one and the same agreement.
(g) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by Executive, the Company, the Investors and their respective successors and
assigns (including subsequent holders of Executive Stock); provided that the
rights and obligations of Executive under this Agreement
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<PAGE>
shall not be assignable except in connection with a permitted transfer of
Executive Stock hereunder. The rights and obligations of GTCR under this
Agreement may be assigned at any time, in whole or in part, to any investment
fund managed by GTCR, or any successor thereto; provided that such assignment
occurs in the manner provided in the Purchase Agreement.
(h) CHOICE OF LAW. The corporate law of the State of
Delaware will govern all questions concerning the relative rights of the Company
and its stockholders. All other questions concerning the construction, validity
and interpretation of this Agreement and the exhibits hereto will be governed by
and construed in accordance with the internal laws of the State of Maryland,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Maryland or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Maryland.
(i) REMEDIES. Each of the parties to this Agreement
(including the Investors) will be entitled to enforce its rights under this
Agreement specifically, to recover damages and costs (including attorney's fees)
caused by any breach of any provision of this Agreement and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole discretion apply
to any court of law or equity of competent jurisdiction (without posting any
bond or deposit) for specific performance and/or other injunctive relief in
order to enforce or prevent any violations of the provisions of this Agreement.
(j) AMENDMENT AND WAIVER. The provisions of this Agreement
may be amended and waived only with the written consent of the Company and the
Executive.
(k) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or holiday
in the state in which the Company's chief executive office is located, the time
period shall be automatically extended to the business day immediately following
such Saturday, Sunday or holiday.
(l) TERMINATION. This Agreement (except for the provisions
of Section 6) shall survive a Separation and shall remain in full force and
effect after such Separation.
(m) ADJUSTMENTS OF NUMBERS. All numbers set forth herein
which refer to share prices or amounts will be appropriately adjusted to reflect
stock splits, stock dividends, combinations of shares and other
recapitalizations affecting the subject class of stock.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Senior
Management Agreement on the date first written above.
APPNET SYSTEMS, INC.
By: /s/ KEN S. BAJAJ
------------------------------------------
Ken S. Bajaj
President and Chief Executive Officer
/s/ TOBY TOBACCOWALA
------------------------------------------
Toby Tobaccowala
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<PAGE>
Exhibit 4.10
SENIOR MANAGEMENT AGREEMENT
THIS SENIOR MANAGEMENT AGREEMENT (this "AGREEMENT") is made as of
November 2, 1998, between AppNet Systems, Inc., a Delaware corporation (the
"COMPANY") and Anne Filippone (the "EXECUTIVE").
The Company and Executive desire to enter into an agreement pursuant to
which Executive will purchase, and the Company will sell, 140,000 shares of the
Company's Common Stock, par value $.0005 per share, (the "EXECUTIVE STOCK").
Certain definitions are set forth in Section 9 of this Agreement.
The execution and delivery of this Agreement by the Company and
Executive is related to the purchase of shares of Common Stock and shares of the
Company's Class A Preferred Stock, par value $.01 per share (the "CLASS A
PREFERRED") by Smart Technology, L.L.C. ("SMART TECHNOLOGY"), GTCR Golder
Rauner, L.L.C., a Delaware limited liability company ("GTCR" and, together with
Smart Technology, the "INVESTORS" and each an "INVESTOR") pursuant to a purchase
agreement between the Company and the Investors dated as of June 29, 1998 (the
"PURCHASE Agreement"). Certain provisions of this Agreement are intended for the
benefit of, and will be enforceable by, the Investors.
The parties hereto agree as follows:
PROVISIONS RELATING TO EXECUTIVE STOCK
1. RESERVED.
2. PURCHASE AND SALE OF EXECUTIVE STOCK.
(a) Upon execution of this Agreement, Executive will purchase,
and the Company will sell, 140,000 shares of Common Stock at a price of $3.00
per share. The Company will deliver to Executive the certificates representing
such Executive Stock, and Executive will deliver to the Company a check or wire
transfer of funds in the aggregate amount of $70.00 and promissory notes in the
form of ANNEX A attached hereto in an aggregate principal amount of $419,930
(the "EXECUTIVE NOTES"). Executive's obligations under the Executive Notes shall
be secured by a pledge of all of the shares of Common Stock purchased hereunder
to the Company and in connection therewith, Executive shall enter into a pledge
agreement in the form of ANNEX B attached hereto.
(b) Within 30 days after the date hereof, Executive will make
an effective election with the Internal Revenue Service under Section 83(b) of
the Internal Revenue Code and the regulations promulgated thereunder in the form
of ANNEX C attached hereto.
(c) In connection with the purchase and sale of the Executive
Stock hereunder, Executive represents and warrants to the Company that:
<PAGE>
(i) The Executive Stock to be acquired by Executive
pursuant to this Agreement will be acquired for Executive's own account and not
with a view to, or intention of, distribution thereof in violation of the
Securities Act, or any applicable state securities laws, and the Executive Stock
will not be disposed of in contravention of the Securities Act or any applicable
state securities laws.
(ii) Executive is an executive officer of the Company, is
sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in the Executive Stock.
(iii) Executive is able to bear the economic risk of his
investment in the Executive Stock for an indefinite period of time because the
Executive Stock has not been registered under the Securities Act and, therefore,
cannot be sold unless subsequently registered under the Securities Act or an
exemption from such registration is available.
(iv) Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of Executive
Stock and has had full access to such other information concerning the Company
as he has requested.
(v) This Agreement constitutes the legal, valid and
binding obligation of Executive, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Executive does not
and will not conflict with, violate or cause a breach of any agreement, contract
or instrument to which Executive is a party or any judgment, order or decree to
which Executive is subject.
(vi) Executive is a resident of the District of Columbia.
(d) As an inducement to the Company to issue the Executive
Stock to Executive, as a condition thereto, Executive acknowledges and agrees
that neither the issuance of the Executive Stock to Executive nor any provision
contained herein shall entitle Executive to remain in the employment of the
Company and its Subsidiaries or affect the right of the Company to terminate
Executive's employment at any time for any reason.
3. REPURCHASE OPTION.
(a) In the event that Executive ceases to be employed by the
Company and its Subsidiaries for any reason (the "SEPARATION"), the Executive
Stock (whether held by Executive or one or more of Executive's transferees,
other than the Company) will be subject to repurchase, in each case at the
option of the Company, the Investors and Ken S. Bajaj ("BAJAJ") pursuant to the
terms and conditions set forth in this Section 3(a) (the "REPURCHASE OPTION"). A
percentage of the Executive Stock will be subject to repurchase at the
Executive's Original Cost for such shares, calculated in accordance with the
following schedule (the "ORIGINAL COST SHARES"):
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<PAGE>
<TABLE>
<CAPTION>
DATE PERCENTAGE OF EXECUTIVE STOCK
TO BE REPURCHASED AT ORIGINAL COST
----------------------------------
<S> <C>
Date of this Agreement until
1st Anniversary of this Agreement 100%
Date immediately following 1st Anniversary
of this Agreement until 2nd Anniversary of this Agreement 75%
Date immediately following 2nd Anniversary
of this Agreement until 3rd Anniversary of this Agreement 50%
Date immediately following 3rd Anniversary
of this Agreement until 4th Anniversary of this Agreement 25%
Date immediately following 4th Anniversary
of this Agreement and thereafter 0%
</TABLE>
The purchase price for the remaining shares of Executive Stock shall be the Fair
Market Value of such shares (the "FAIR MARKET VALUE SHARES").
(b) The Company may elect to purchase all or any portion of
the Original Cost Shares and the Fair Market Value Shares by delivering written
notice (the "REPURCHASE NOTICE") to the holder or holders of the Executive Stock
within 180 days after the Separation. The Repurchase Notice will set forth the
number of Original Cost Shares and Fair Market Value Shares to be acquired from
each holder, the aggregate consideration to be paid for such shares and the time
and place for the closing of the transaction. The number of shares to be
repurchased by the Company shall first be satisfied to the extent possible from
the shares of Executive Stock held by Executive at the time of delivery of the
Repurchase Notice. If the number of shares of Executive Stock then held by
Executive is less than the total number of shares of Executive Stock which the
Company has elected to purchase, the Company shall purchase the remaining shares
elected to be purchased from the other holder(s) of Executive Stock under this
Agreement, pro rata according to the number of shares of Executive Stock held by
such other holder(s) at the time of delivery of such Repurchase Notice
(determined as nearly as practicable to the nearest share). The number of
Original Cost Shares and Fair Market Value Shares to be repurchased hereunder
will be allocated among Executive and the other holders of Executive Stock (if
any) pro rata according to the number of shares of Executive Stock to be
purchased from such person.
(c) If for any reason the Company does not elect to purchase
all of the Executive Stock pursuant to the Repurchase Option, the Investors and
Bajaj shall be entitled to exercise the Repurchase Option for all or any portion
of the shares of Executive Stock that the Company has not elected to purchase
(the "AVAILABLE SHARES"). As soon as practicable after the
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<PAGE>
Company has determined that there will be Available Shares, but in any event
within 150 days after the Separation, the Company shall give written notice (the
"OPTION Notice") to the Investors and Bajaj setting forth the number of
Available Shares and the purchase price for the Available Shares. The Investors
and Bajaj may elect to purchase any or all of the Available Shares by giving
written notice to the Company within one month after the Option Notice has been
given by the Company. If the Investors and Bajaj elect to purchase an aggregate
number of shares greater than the number of Available Shares, the Available
Shares shall be allocated among the Investors and Bajaj based upon the number of
shares of Common Stock owned by each Investor and Bajaj on a fully diluted basis
(excluding, in the case of Bajaj, shares owned by him that are subject to
repurchase at cost). As soon as practicable, and in any event within ten days,
after the expiration of the one-month period set forth above, the Company shall
notify each holder of Executive Stock as to the number of shares being purchased
from such holder by the Investors and Bajaj (the "SUPPLEMENTAL REPURCHASE
NOTICE"). At the time the Company delivers the Supplemental Repurchase Notice to
the holder(s) of Executive Stock, the Company shall also deliver written notice
to the Investors and Bajaj setting forth the number of shares the Investors and
Bajaj are entitled to purchase, the aggregate purchase price and the time and
place of the closing of the transaction. The number of Original Cost Shares and
Fair Market Value Shares to be repurchased hereunder shall be allocated among
the Company, the Investors and Bajaj pro rata according to the number of shares
of Executive Stock to be purchased by each of them. Notwithstanding the
foregoing, the Investors and Bajaj shall not exercise their Repurchase Option as
to the Original Cost Shares pursuant to this Section 3(c) if the Company has
sufficient assets to fully exercise its Repurchase Option as to the Original
Cost Shares but has not exercised such right. Furthermore, if the Investors and
Bajaj repurchase any Original Cost Shares, they shall contribute such Original
Cost Shares to the Company in exchange for a promissory note from the Company
with an aggregate principal amount equal to the purchase price paid for such
shares, bearing interest (payable quarterly) at a rate per annum equal to the
prime rate as published in the WALL STREET JOURNAL from time to time, and having
a term of no longer than five years.
(d) The closing of the purchase of the Executive Stock
pursuant to the Repurchase Option shall take place on the date designated by the
Company in the Repurchase Notice or Supplemental Repurchase Notice, which date
shall not be more than one month nor less than five days after the delivery of
the later of either such notice to be delivered. The Company will pay for the
Executive Stock to be purchased by it pursuant to the Repurchase Option by first
offsetting amounts outstanding under any bona fide debts owed by Executive to
the Company and will pay the remainder of the purchase price by, at its option,
(A) a check or wire transfer of funds, or (B) a check or wire transfer of funds
for at least one-third of the purchase price, and a subordinated note or notes
payable in two equal annual installments beginning on each of the first and
second anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the prime rate as published in THE WALL
STREET JOURNAL from time to time in the aggregate amount of the remainder of the
purchase price for such shares. The Investors and Bajaj will pay for the
Executive Stock purchased by it by a check or wire transfer of funds. The
Company, the Investors and Bajaj will be entitled to receive customary
representations and warranties from the sellers regarding such sale and to
require that all sellers' signatures be guaranteed.
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<PAGE>
(e) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Executive Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Executive Stock hereunder which the
Company is otherwise entitled or required to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions.
(f) Notwithstanding anything to the contrary contained in this
Agreement, if the Executive delivers the notice of objection described in the
definition of Fair Market Value, or if the Fair Market Value of a Fair Market
Value Share is otherwise determined to be an amount more than 10% greater than
the per share repurchase price for Fair Market Value Shares originally
determined by the Board, each of the Company, the Investors and Bajaj shall have
the right to revoke its or their exercise of the Repurchase Option for all or
any portion of the Executive Stock elected to be repurchased by it by delivering
notice of such revocation in writing to the holders of the Executive Stock
during (i) the thirty-day period beginning on the date the Company, the
Investors and Bajaj receive Executive's written notice of objection and (ii) the
thirty-day period beginning on the date the Company, the Investors and Bajaj are
given written notice that the Fair Market Value of a Fair Market Value Share was
finally determined to be an amount more than 10% greater than the per share
repurchase price for Fair Market Value Shares originally determined by the Board
(g) The provisions of this Section 3 shall terminate upon the
consummation of a Sale of the Company.
4. RESTRICTIONS ON TRANSFER OF EXECUTIVE STOCK.
(a) RETENTION OF EXECUTIVE STOCK. Until the fifth anniversary
of the date of this Agreement, Executive shall not sell, transfer, assign,
pledge or otherwise dispose of any interest in any shares of Executive Stock,
except pursuant to: (i) a Sale of the Company, (ii) Section 3 of this Agreement,
(iii) Section 4 of the Stockholders Agreement, (iv) a sale described in clause
(i) of the definition of "PUBLIC SALE," or (v) after a Public Offering, upon any
sale by the Investors or an Affiliate of the type described in clause (ii) of
the definition of "PUBLIC SALE" (a "RULE 144 SALE"), to the extent of the lesser
of (a) the number of shares of Executive Stock held by Executive that are not
subject to repurchase at Original Cost and (b) the number of shares of Executive
Stock held by Executive multiplied by a fraction, the numerator of which is the
number of shares of Common Stock sold by the Investors and their Affiliates in
the Rule 144 Sale and the denominator of which is the total number of shares of
Common Stock held by the Investors and their Affiliates immediately prior to
such sale.
(b) CERTAIN PERMITTED TRANSFERS. The restrictions in this
Section 4 will not apply with respect to (i) transfers of shares of Executive
Stock pursuant to applicable laws of descent and distribution or (ii) transfer
of shares of Executive Stock among Executive's Family Group; provided that such
restrictions will continue to be applicable to the Executive Stock after any
such transfer and the transferees of such Executive Stock have agreed in writing
to be bound by the provisions of this Agreement.
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<PAGE>
(c) TERMINATION OF RESTRICTIONS. The restrictions on the
Transfer of shares of Executive Stock set forth in this Section 4 will continue
with respect to each share of Executive Stock until the date on which such
Executive Stock has been transferred in a transaction permitted by this Section
4 (except in a transaction contemplated by Section 4(b)); provided that in any
event such restrictions will terminate on a Sale of the Company.
5. ADDITIONAL RESTRICTIONS ON TRANSFER OF EXECUTIVE STOCK.
(a) LEGEND. The certificates representing the Executive Stock
will bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT
AGREEMENT BETWEEN THE COMPANY AND AN EXECUTIVE OF THE COMPANY DATED AS OF
NOVEMBER 2, 1998. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF
AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Executive Stock may sell,
transfer or dispose of any Executive Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
PROVISIONS RELATING TO EMPLOYMENT
6. EMPLOYMENT. The Company agrees to employ Executive and Executive
accepts such employment for the period beginning as of the date hereof and
ending upon his separation pursuant to Section 6(c) hereof (the "EMPLOYMENT
PERIOD").
(a) POSITION AND DUTIES. During the Employment Period,
Executive shall serve as Vice President/Sales and Marketing of the Company and
shall have such duties, responsibilities and authority as may be assigned by the
President and Chief Executive Officer, subject to the power of the Board to
expand or limit such duties, responsibilities and authority and to override
actions of a Vice President/Sales and Marketing. Executive shall report to the
President and Chief Executive Officer. Executive shall devote his best efforts
and his full business time and attention to the business and affairs of the
Company and its subsidiaries.
(b) SALARY, BONUS AND BENEFITS. During the Employment Period,
the Company will pay Executive a base salary (the "ANNUAL BASE SALARY") of
$150,000 per annum,
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<PAGE>
subject to any increase as determined by the Board based upon the Company's
achievements of budgetary and other objectives set by the Board; plus, a
one-time bonus of $12,500 to be paid in January 1999 so long as Executive is
then employed by the Company. In addition, Executive shall be eligible to
receive a bonus of up to fifty (50%) percent of the Annual Base Salary based
upon the Company's achievement of budgetary and other objectives set by the
Board. Executive's Annual Base Salary for any partial year will be prorated
based upon the number of days elapsed in such year. In addition, during the
Employment Period, Executive will be entitled to such other benefits approved by
the Board and made available to the Company's senior management.
(c) SEPARATION. Executive's employment by the Company will
continue until Executive's resignation, disability (as determined by the Board
in its good faith judgment) or death or until the Board terminates Executive's
employment for any reason or without any reason. If the Employment Period is
terminated by the Board without Cause, subject to the provisions of this
Agreement, Executive shall be entitled to receive his Annual Base Salary and his
life insurance, medical insurance and disability insurance benefits (but no
bonuses or other fringe benefits) through the end of the Noncompete Period (as
defined below in Section 8, including any extensions pursuant to Section 8(a))
(such payment, the "SEVERANCE PAYMENT") payable in accordance with normal
payroll practices.
7. CONFIDENTIAL INFORMATION.
(a) Executive acknowledges that the Company and its
Subsidiaries are engaged in the business of acquiring businesses that provide
electronic commerce services and operating those businesses after their
acquisition (the "BUSINESS"). Executive further acknowledges that the Business
and its continued success depend upon the use and protection of a large body of
confidential and proprietary information, and that he holds a position of trust
and confidence by virtue of which he necessarily possesses, has access to and,
as a consequence of his signing this Agreement, will continue to possess and
have access to, highly valuable, confidential and proprietary information of the
Company and its Subsidiaries not known to the public in general, and that it
would be improper for him to make use of this information for the benefit of
himself and others. All of such confidential and proprietary information now
existing or to be developed in the future will be referred to in this Agreement
as "CONFIDENTIAL INFORMATION." This includes, without limitation, information
relating to the nature and operation of the Business, the persons, firms and
corporations which are customers or active prospects of the Company during
Executive's employment by the Company, the Company's development, transition and
transformation plans, methodology and methods of doing business, strategic,
acquisition, marketing and expansion plans, including plans regarding planned
and potential acquisitions and sales, financial and business plans, employee
lists, numbers and location of sales representatives, new and existing programs
and services (and those under development), prices and terms, customer service,
integration processes requirements, costs of providing service, support and
equipment and equipment maintenance costs. Confidential Information shall not
include any information that has become generally known to and available for use
by the public other than as a result of Executive's acts or omissions.
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<PAGE>
(b) Disclosure of any Confidential Information of the Company
shall not be prohibited if such disclosure is directly pursuant to a valid and
existing order of a court or other governmental body or agency within the United
States; provided, however, that (i) Executive shall first have given prompt
notice to the Company of any such possible or prospective order (or proceeding
pursuant to which any such order may result) and (ii) Executive shall afford the
Company a reasonable opportunity to prevent or limit any such disclosure.
(c) During the Employment Period and at all times thereafter,
Executive will preserve and protect as confidential all of the Confidential
Information known to Executive or at any time in Executive's possession or
control. In addition, during the Employment Period and at all times thereafter,
Executive will not disclose to any unauthorized person or use for his own
account any of such Confidential Information without the Board's written
consent. Executive agrees to deliver to the Company at a Separation, or at any
other time the Company may request in writing, all memoranda, notes, plans,
records, reports and other documents (and copies thereof) containing or
otherwise relating to any of the Confidential Information (including, without
limitation, all acquisition prospects, lists and contact information) which he
may then possess or have under his control. Executive acknowledges that all such
memoranda, notes, plans, records, reports and other documents are and at all
times will be and remain the property of the Company.
(d) Executive will fully comply with any agreement reasonably
required by any of the Company's affiliates, business partners, suppliers or
contractors with respect to the protection of the confidential and proprietary
information of such entities.
8. NONCOMPETITION AND NONSOLICITATION. Executive acknowledges that
in the course of his employment with the Company he will become familiar with
the Confidential Information concerning the Company and such Subsidiaries and
that his services will be of special, unique and extraordinary value to the
Company. Executive agrees that the Company has a protectable interest in the
Confidential Information acquired by Executive during the course of his
employment with the Company. Therefore, Executive agrees that:
(a) NONCOMPETITION. So long as Executive is employed or
affiliated with the Company or any Subsidiary and for an additional (i) two
years thereafter, in the event the Employment Period is terminated as a
result of Executive's resignation or is terminated with Cause or (ii) one
year thereafter, in the event the Employment Period is terminated without
Cause (the "NONCOMPETE PERIOD"), he shall not, anywhere in the United States,
directly or indirectly own, manage, control, participate in, consult with,
render services for, or in any manner engage in the Business or any other
business engaged in by the Company at the time of Separation; provided that
in the event of a termination without Cause, the Board may extend the
Noncompete Period for an additional one-year term by giving notice to
Executive ninety (90) days prior to the end of the then-existing Noncompete
Period.
(b) NONSOLICITATION. During the Noncompete Period,
Executive shall not directly or indirectly through another entity (i) induce
or attempt to induce any employee of the Company or any of its Subsidiaries
to leave the employ of the Company or such Subsidiary, or in
- 8 -
<PAGE>
any way interfere with the relationship between the Company or any of its
Subsidiaries and any employee thereof, (ii) hire any person who was an employee
of the Company or any of its Subsidiaries within 180 days prior to the time such
employee was hired by the Executive, (iii) induce or attempt to induce any owner
of a site location, customer, supplier, licensee or other business relation of
the Company or any of its Subsidiaries to cease doing business with the Company
or such Subsidiary or in any way interfere with the relationship between any
such customer, supplier, licensee or business relation and the Company or any of
its Subsidiaries or (iv) directly or indirectly acquire or attempt to acquire an
interest in any business relating to the business of the Company or any of its
Subsidiaries and with which the Company or any of its Subsidiaries has
entertained discussions or has requested and received information relating to
the acquisition of such business by the Company or any of its Subsidiaries in
the two-year period immediately preceding a Separation.
(c) ENFORCEMENT. If, at the time of enforcement of Section 7
or 8 of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum duration, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area and that
the court shall be allowed to revise the restrictions contained herein to cover
the maximum duration, scope and area permitted by law. Because Executive's
services are unique and because Executive has access to Confidential
Information, the parties hereto agree that money damages would be an inadequate
remedy for any breach of this Agreement. Therefore, in the event of a breach or
threatened breach of Section 7 or Section 8 of this Agreement, the Company or
any of its successors or assigns shall, in addition to other rights and remedies
existing in its favor, be entitled to specific performance and/or injunctive or
other relief in order to enforce, or prevent any violations of, the provisions
of Section 7 or Section 8 from any court of competent jurisdiction.
(d) ADDITIONAL ACKNOWLEDGMENTS. Executive acknowledges that
the provisions of this Section are in consideration of: (i) employment with the
Company and (ii) additional good and valuable consideration as set forth in this
Agreement. Executive expressly agrees and acknowledges that the restrictions
contained in Sections 7 and 8 do not preclude Executive from earning a
livelihood, nor does it unreasonably impose limitations on Executive's ability
to earn a living. In addition, Executive agrees and acknowledges that the
potential harm to the Company of its non-enforcement outweighs any harm to the
Executive of its enforcement by injunction or otherwise. Executive acknowledges
that he has carefully read this Agreement and has given careful consideration to
the restraints imposed upon the Executive by this Agreement, and is in full
accord as to their necessity for the reasonable and proper protection of the
Confidential Information. Executive expressly acknowledges and agrees that each
and every restraint imposed by this Agreement is reasonable with respect to
subject matter, time period and geographical area.
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<PAGE>
GENERAL PROVISIONS
9. DEFINITIONS.
"AFFILIATE" or "AFFILIATES" of an Investor means any direct or indirect
general or limited partner of such Investor, or any employee or owner thereof,
or any other person, entity or investment fund controlling, controlled by or
under common control with such Investor.
"CAUSE" means (i) the commission of a felony or a crime involving moral
turpitude or the commission of any other act or omission involving dishonesty or
fraud with respect to the Company or any of its Subsidiaries or any of their
customers or suppliers, (ii) conduct tending to bring the Company or any of its
Subsidiaries into substantial public disgrace or disrepute, (iii) substantial
and repeated failure to perform duties of the office held by Executive as
reasonably directed by the Board, (iv) gross negligence or willful misconduct
with respect to the Company or any of its Subsidiaries or (v) any breach of
Section 7 or 8 of this Agreement.
"EXECUTIVE'S FAMILY GROUP" means Executive's spouse and descendants
(whether natural or adopted), any trust solely for the benefit of Executive
and/or Executive's spouse and/or descendants and any retirement plan for the
Executive.
"EXECUTIVE STOCK" will continue to be Executive Stock in the hands of
any holder other than Executive (except for the Company and the Investors and
except for transferees in a Public Sale), and except as otherwise provided
herein, each such other holder of Executive Stock will succeed to all rights and
obligations attributable to Executive as a holder of Executive Stock hereunder.
Executive Stock will also include shares of the Company's capital stock issued
with respect to Executive Stock by way of a stock split, stock dividend or other
recapitalization.
"FAIR MARKET VALUE" of each share of Executive Stock means the average
of the closing prices of the sales of the Common Stock on all securities
exchanges on which such Common Stock may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such day, or, if
on any day such Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time,
or, if on any day such Common Stock is not quoted in the NASDAQ System, of the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market Value
is being determined and the 20 consecutive business days prior to such day. If
at any time such Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Fair Market Value will
be the fair value of such Common Stock determined in good faith by the Board
(the "BOARD CALCULATION"). If the Executive reasonably disagrees with the Board
Calculation, the Executive may, within 30 days after receipt of the Board
Calculation, deliver a notice (an "OBJECTION NOTICE") to the Company setting
forth the Executive's calculation of Fair Market Value. The Board and the
Executive will negotiate in good faith to agree on such Fair Market Value, but
if such agreement is not reached within 30 days after the Company has received
the Objection Notice, Fair Market Value shall be
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<PAGE>
determined by an appraiser jointly selected by the Board and the Executive,
which appraiser shall submit to the Board and the Executive a report within 30
days of its engagement setting forth such determination. If the parties are
unable to agree on an appraiser within 45 days after the Company has received
the Objection Notice, within seven days, each party shall submit the names of
four nationally recognized investment banking firms, and each party shall be
entitled to strike two names from the other party's list of firms, and the
appraiser shall be selected by lot from the remaining four investment banking
firms. The expenses of such appraiser shall be borne by the Executive unless the
appraiser's valuation is not less than 10% greater than the amount determined by
the Board, in which case, the costs of the appraiser shall be borne by the
Company. The determination of such appraiser shall be final and binding upon all
parties. If the Repurchase Option is exercised within 90 days after a
Separation, then Fair Market Value shall be determined as of the date of such
Separation; thereafter, Fair Market Value shall be determined as of the date the
Repurchase Option is exercised.
"ORIGINAL COST" means, with respect to each share of Executive Stock
purchased hereunder, $3.00 (as proportionately adjusted for all subsequent stock
splits, stock dividends and other recapitalizations).
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PUBLIC OFFERING" means the sale in an underwritten public offering
registered under the Securities Act of shares of the Company's Common Stock
approved by the Board.
"PUBLIC SALE" means (i) any sale pursuant to a registered public
offering under the Securities Act or (ii) any sale to the public pursuant to
Rule 144 promulgated under the Securities Act effected through a broker, dealer
or market maker (other than pursuant to Rule 144(k)).
"SALE OF THE COMPANY" means any transaction or series of transactions
pursuant to which any person(s) or entity(ies) other than the Investors and its
Affiliates in the aggregate acquire(s) (i) capital stock of the Company
possessing the voting power (other than voting rights accruing only in the event
of a default, breach or event of noncompliance) to elect a majority of the
Company's board of directors (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock, shareholder or
voting agreement, proxy, power of attorney or otherwise) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis;
provided that the term "SALE OF THE COMPANY" shall not include a Public
Offering.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated
June 29, 1998, among the Company and certain of its stockholders.
- 11 -
<PAGE>
"SUBSIDIARY" means any corporation of which fifty percent (50%) or more
of the securities having ordinary voting power in electing the board of
directors are, at the time as of which any determination is being made, owned by
the Company either directly or through one or more Subsidiaries. The term
Subsidiary shall also include any joint venture arrangement between the Company
and any other entity, including, without limitation, the Company's joint venture
arrangement with Commerce Direct International, Inc., a Delaware corporation.
"TRANSFER" means to sell, transfer, assign, pledge or otherwise dispose
of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law).
10. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:
If to the Company:
AppNet Systems, Inc.
6700-A Rockledge Drive
Suite 525
Bethesda, MD 20817
Attention: Terrence M. McManus
with a copy to:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
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<PAGE>
If to the Executive:
Anne Filippone
3572 Winfield Lane
Washington, D.C. 20007
If to the Investors:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Smart Technology, L.L.C.
10201 Norton Road
Potomac, MD 20854
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
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<PAGE>
11. GENERAL PROVISIONS.
(a) EXPENSES. Each of the Company and the Executive shall
pay its or his legal, accounting and other expenses incurred in connection
with the negotiation and execution of this Agreement and the consummation of
the transactions contemplated by this Agreement.
(b) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Executive Stock in violation of any provision of
this Agreement shall be void, and the Company shall not record such Transfer
on its books or treat any purported transferee of such Executive Stock as the
owner of such stock for any purpose.
(c) SEVERABILITY. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to
be invalid, illegal or unenforceable in any respect under any applicable law
or rule in any jurisdiction, such invalidity, illegality or unenforceability
will not affect any other provision or any other jurisdiction, but this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision had never been contained
herein.
(d) INTENDED THIRD-PARTY BENEFICIARIES. The Investors are
intended to be third-party beneficiaries to this entire Agreement and the
rights and obligations of the parties hereto. It is understood and agreed by
the parties hereto that this Agreement shall be enforceable by GTCR and,
provided GTCR is seeking to enforce substantially the same rights, the other
Investor(s) in accordance with its terms as though each of the Investors were
a party to every provision hereof. Except as expressly provided herein, no
other third parties are intended by the parties hereto to be beneficiaries
hereof.
(e) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among
the parties, written or oral, which may have related to the subject matter
hereof in any way.
(f) COUNTERPARTS. This Agreement may be executed in
separate counterparts, each of which is deemed to be an original and all of
which taken together constitute one and the same agreement.
(g) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be
enforceable by Executive, the Company, the Investors and their respective
successors and assigns (including subsequent holders of Executive Stock);
provided that the rights and obligations of Executive under this Agreement
shall not be assignable except in connection with a permitted transfer of
Executive Stock hereunder. The rights and obligations of GTCR under this
Agreement may be assigned at any time, in whole or in part, to any investment
fund managed by GTCR, or any successor thereto; provided that such assignment
occurs in the manner provided in the Purchase Agreement.
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<PAGE>
(h) CHOICE OF LAW. The corporate law of the State of
Delaware will govern all questions concerning the relative rights of the
Company and its stockholders. All other questions concerning the
construction, validity and interpretation of this Agreement and the exhibits
hereto will be governed by and construed in accordance with the internal laws
of the State of Maryland, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Maryland or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Maryland.
(i) REMEDIES. Each of the parties to this Agreement
(including the Investors) will be entitled to enforce its rights under this
Agreement specifically, to recover damages and costs (including attorney's
fees) caused by any breach of any provision of this Agreement and to exercise
all other rights existing in its favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach
of the provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity of competent jurisdiction
(without posting any bond or deposit) for specific performance and/or other
injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
(j) AMENDMENT AND WAIVER. The provisions of this Agreement
may be amended and waived only with the written consent of the Company and
the Executive.
(k) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or
holiday in the state in which the Company's chief executive office is
located, the time period shall be automatically extended to the business day
immediately following such Saturday, Sunday or holiday.
(l) TERMINATION. This Agreement (except for the provisions
of Section 6) shall survive a Separation and shall remain in full force and
effect after such Separation.
(m) ADJUSTMENTS OF NUMBERS. All numbers set forth herein
which refer to share prices or amounts will be appropriately adjusted to
reflect stock splits, stock dividends, combinations of shares and other
recapitalizations affecting the subject class of stock.
(n) GENDER. Unless the context clearly indicates
otherwise, where appropriate the singular shall include the plural and the
masculine shall include the feminine or neuter, and VICE VERSA, to the extent
necessary to give the terms defined herein and/or the terms otherwise used in
this Agreement the proper meanings.
[Execution Page Follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Senior
Management Agreement on the date first written above.
APPNET SYSTEMS, INC.
By: /s/ KEN S. BAJAJ
------------------------------------------
Ken S. Bajaj
President and Chief Employee Officer
/s/ ANNE FILIPPONE
------------------------------------------
Anne Filippone
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<PAGE>
Exhibit 4.11
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made as of July 31,
1998, between AppNet Systems, Inc., a Delaware corporation (the "CORPORATION")
and Barbara Barnes (the "EMPLOYEE").
The Company and Employee desire to enter into an agreement pursuant to
which Employee will purchase, and the Company will sell, 30,000 shares of the
Company's Common Stock, par value $.0005 per share (the "EMPLOYEE STOCK").
Certain definitions are set forth in Section 8 of this Agreement.
The execution and delivery of this Agreement by the Company and
Employee is related to the purchase of shares of Common Stock and shares of the
Company's Class A Preferred Stock, par value $.01 per share (the "CLASS A
PREFERRED") by Smart Technology, L.L.C. ("SMART TECHNOLOGY"), GTCR Golder
Rauner, L.L.C., a Delaware limited liability company ("GTCR" and, together with
Smart Technology, the "INVESTORS" and each an "INVESTOR") pursuant to a purchase
agreement between the Company and the Investors dated as of June 29, 1998 (the
"PURCHASE AGREEMENT"). Certain provisions of this Agreement are intended for the
benefit of, and will be enforceable by, the Investors.
The parties hereto agree as follows:
PROVISIONS RELATING TO EMPLOYEE STOCK
1. RESERVED.
2. PURCHASE AND SALE OF EMPLOYEE STOCK.
(a) Upon execution of this Agreement, Employee will purchase,
and the Company will sell, 30,000 shares of Common Stock at a price of $0.1055
per share. The Company will deliver to Employee the certificates representing
such Employee Stock, and Employee will deliver to the Company a check or wire
transfer of funds in the aggregate amount of $15.00 and a promissory note in the
form of ANNEX A attached hereto in an aggregate principal amount of $3,150 (the
"EMPLOYEE NOTE"). Employee's obligations under the Employee Note shall be
secured by a pledge of all of the shares of Common Stock purchased hereunder to
the Company and in connection therewith, Employee shall enter into a pledge
agreement in the form of ANNEX B attached hereto.
(b) Within 30 days after the date hereof, Employee will make
an effective election with the Internal Revenue Service under Section 83(b) of
the Internal Revenue Code and the regulations promulgated thereunder in the form
of ANNEX C attached hereto.
(c) In connection with the purchase and sale of the Employee
Stock hereunder, Employee represents and warrants to the Company that:
<PAGE>
(i) The Employee Stock to be acquired by Employee pursuant
to this Agreement will be acquired for Employee's own account and not with a
view to, or intention of, distribution thereof in violation of the Securities
Act, or any applicable state securities laws, and the Employee Stock will not be
disposed of in contravention of the Securities Act or any applicable state
securities laws.
(ii) Employee is an Employee of the Company, is
sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in the Employee Stock.
(iii) Employee is able to bear the economic risk of her
investment in the Employee Stock for an indefinite period of time because the
Employee Stock has not been registered under the Securities Act and, therefore,
cannot be sold unless subsequently registered under the Securities Act or an
exemption from such registration is available.
(iv) Employee has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of Employee
Stock and has had full access to such other information concerning the Company
as she has requested.
(v) This Agreement constitutes the legal, valid and
binding obligation of Employee, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Employee does not
and will not conflict with, violate or cause a breach of any agreement, contract
or instrument to which Employee is a party or any judgment, order or decree to
which Employee is subject.
(vi) Employee is a resident of the State of Maryland.
(d) As an inducement to the Company to issue the Employee
Stock to Employee, as a condition thereto, Employee acknowledges and agrees that
neither the issuance of the Employee Stock to Employee nor any provision
contained herein shall entitle Employee to remain in the employment of the
Company and its Subsidiaries or affect the right of the Company to terminate
Employee's employment at any time for any reason.
3. REPURCHASE OPTION.
(a) In the event that Employee ceases to be employed by the
Company and its Subsidiaries for any reason (the "SEPARATION"), the Employee
Stock (whether held by Employee or one or more of Employee's transferees, other
than the Company) will be subject to repurchase, in each case at the option of
the Company, the Investors and Ken S. Bajaj ("Bajaj") pursuant to the terms and
conditions set forth in this Section 3(a) (the "REPURCHASE OPTION"). A
percentage of the Employee Stock will be subject to repurchase at the Employee's
Original Cost for such shares, calculated in accordance with the following
schedule (the "ORIGINAL COST SHARES"):
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<PAGE>
<TABLE>
<CAPTION>
DATE PERCENTAGE OF EMPLOYEE STOCK
TO BE REPURCHASED AT ORIGINAL COST
----------------------------------
<S> <C>
Date of this Agreement until 1st Anniversary of this Agreement 100%
Date immediately following 1st Anniversary of this Agreement until 75%
2nd Anniversary of this Agreement
Date immediately following 2nd Anniversary of this Agreement until 50%
3rd Anniversary of this Agreement
Date immediately following 3rd Anniversary of this Agreement until 25%
4th Anniversary of this Agreement
Date immediately following 4th Anniversary of this Agreement and 0%
thereafter
</TABLE>
The purchase price for the remaining shares of Employee Stock shall be the Fair
Market Value of such shares (the "FAIR MARKET VALUE SHARES").
(b) The Company may elect to purchase all or any portion of
the Original Cost Shares and the Fair Market Value Shares by delivering written
notice (the "REPURCHASE NOTICE") to the holder or holders of the Employee Stock
within 180 days after the Separation. The Repurchase Notice will set forth the
number of Original Cost Shares and Fair Market Value Shares to be acquired from
each holder, the aggregate consideration to be paid for such shares and the time
and place for the closing of the transaction. The number of shares to be
repurchased by the Company shall first be satisfied to the extent possible from
the shares of Employee Stock held by Employee at the time of delivery of the
Repurchase Notice. If the number of shares of Employee Stock then held by
Employee is less than the total number of shares of Employee Stock which the
Company has elected to purchase, the Company shall purchase the remaining shares
elected to be purchased from the other holder(s) of Employee Stock under this
Agreement, pro rata according to the number of shares of Employee Stock held by
such other holder(s) at the time of delivery of such Repurchase Notice
(determined as nearly as practicable to the nearest share). The number of
Original Cost Shares and Fair Market Value Shares to be repurchased hereunder
will be allocated among Employee and the other holders of Employee Stock (if
any) pro rata according to the number of shares of Employee Stock to be
purchased from such person.
(c) If for any reason the Company does not elect to purchase
all of the Employee Stock pursuant to the Repurchase Option, the Investors and
Bajaj shall be entitled to
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<PAGE>
exercise the Repurchase Option for all or any portion of the shares of Employee
Stock that the Company has not elected to purchase (the "AVAILABLE SHARES"). As
soon as practicable after the Company has determined that there will be
Available Shares, but in any event within 150 days after the Separation, the
Company shall give written notice (the "OPTION NOTICE") to the Investors and
Bajaj setting forth the number of Available Shares and the purchase price for
the Available Shares. The Investors and Bajaj may elect to purchase any or all
of the Available Shares by giving written notice to the Company within one month
after the Option Notice has been given by the Company. If the Investors and
Bajaj elect to purchase an aggregate number of shares greater than the number of
Available Shares, the Available Shares shall be allocated among the Investors
and Bajaj based upon the number of shares of Common Stock owned by each Investor
and Bajaj on a fully diluted basis (excluding, in the case of Bajaj, shares
owned by him that are subject to repurchase at cost). As soon as practicable,
and in any event within ten days, after the expiration of the one-month period
set forth above, the Company shall notify each holder of Employee Stock as to
the number of shares being purchased from such holder by the Investors and Bajaj
(the "SUPPLEMENTAL REPURCHASE NOTICE"). At the time the Company delivers the
Supplemental Repurchase Notice to the holder(s) of Employee Stock, the Company
shall also deliver written notice to the Investors and Bajaj setting forth the
number of shares the Investors and Bajaj are entitled to purchase, the aggregate
purchase price and the time and place of the closing of the transaction. The
number of Original Cost Shares and Fair Market Value Shares to be repurchased
hereunder shall be allocated among the Company, the Investors and Bajaj pro rata
according to the number of shares of Employee Stock to be purchased by each of
them. Notwithstanding the foregoing, the Investors and Bajaj shall not exercise
their Repurchase Option as to the Original Cost Shares pursuant to this Section
3(c) if the Company has sufficient assets to fully exercise its Repurchase
Option as to the Original Cost Shares but has not exercised such right.
Furthermore, if the Investors and Bajaj repurchase any Original Cost Shares,
they shall contribute such Original Cost Shares to the Company in exchange for a
promissory note from the Company with an aggregate principal amount equal to the
purchase price paid for such shares, bearing interest (payable quarterly) at a
rate per annum equal to the prime rate as published in the WALL STREET JOURNAL
from time to time, and having a term of no longer than five years.
(d) The closing of the purchase of the Employee Stock pursuant
to the Repurchase Option shall take place on the date designated by the Company
in the Repurchase Notice or Supplemental Repurchase Notice, which date shall not
be more than one month nor less than five days after the delivery of the later
of either such notice to be delivered. The Company will pay for the Employee
Stock to be purchased by it pursuant to the Repurchase Option by first
offsetting amounts outstanding under any bona fide debts owed by Employee to the
Company and will pay the remainder of the purchase price by, at its option, (A)
a check or wire transfer of funds, or (B) a check or wire transfer of funds for
at least one-third of the purchase price, and a subordinated note or notes
payable in two equal annual installments beginning on each of the first and
second anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the prime rate as published in THE WALL
STREET JOURNAL from time to time in the aggregate amount of the remainder of the
purchase price for such shares. The Investors and Bajaj will pay for the
Employee Stock purchased by it by a check or wire transfer of funds. The
Company, the Investors and Bajaj will be entitled to receive
- 4 -
<PAGE>
customary representations and warranties from the sellers regarding such sale
and to require that all sellers' signatures be guaranteed.
(e) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Employee Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Employee Stock hereunder which the
Company is otherwise entitled or required to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions.
(f) Notwithstanding anything to the contrary contained in this
Agreement, if the Employee delivers the notice of objection described in the
definition of Fair Market Value, or if the Fair Market Value of a Fair Market
Value Share is otherwise determined to be an amount more than 10% greater than
the per share repurchase price for Fair Market Value Shares originally
determined by the Board, each of the Company, the Investors and Bajaj shall have
the right to revoke its or their exercise of the Repurchase Option for all or
any portion of the Employee Stock elected to be repurchased by it by delivering
notice of such revocation in writing to the holders of the Employee Stock during
(i) the thirty-day period beginning on the date the Company, the Investors and
Bajaj receive Employee's written notice of objection and (ii) the thirty-day
period beginning on the date the Company, the Investors and Bajaj are given
written notice that the Fair Market Value of a Fair Market Value Share was
finally determined to be an amount more than 10% greater than the per share
repurchase price for Fair Market Value Shares originally determined by the Board
(g) The provisions of this Section 3 shall terminate upon the
consummation of a Sale of the Company.
4. RESTRICTIONS ON TRANSFER OF EMPLOYEE STOCK.
(a) RETENTION OF EMPLOYEE STOCK. Until the fifth anniversary
of the date of this Agreement, Employee shall not sell, transfer, assign, pledge
or otherwise dispose of any interest in any shares of Employee Stock, except
pursuant to: (i) a Sale of the Company, (ii) Section 3 of this Agreement, (iii)
Section 4 of the Stockholders Agreement, (iv) a sale described in clause (i) of
the definition of "PUBLIC SALE," or (v) after a Public Offering, upon any sale
by the Investors or an Affiliate of the type described in clause (ii) of the
definition of "PUBLIC SALE" (a "RULE 144 SALE"), to the extent of the lesser of
(a) the number of shares of Employee Stock held by Employee that are not subject
to repurchase at Original Cost and (b) the number of shares of Employee Stock
held by Employee multiplied by a fraction, the numerator of which is the number
of shares of Common Stock sold by the Investors and their Affiliates in the Rule
144 Sale and the denominator of which is the total number of shares of Common
Stock held by the Investors and their Affiliates immediately prior to such sale.
(b) CERTAIN PERMITTED TRANSFERS. The restrictions in this
Section 4 will not apply with respect to (i) transfers of shares of Employee
Stock pursuant to applicable laws of descent and distribution or (ii) transfer
of shares of Employee Stock among Employee's Family Group; provided that such
restrictions will continue to be applicable to the Employee Stock after
- 5 -
<PAGE>
any such transfer and the transferees of such Employee Stock have agreed in
writing to be bound by the provisions of this Agreement.
(c) TERMINATION OF RESTRICTIONS. The restrictions on the
Transfer of shares of Employee Stock set forth in this Section 4 will continue
with respect to each share of Employee Stock until the date on which such
Employee Stock has been transferred in a transaction permitted by this Section 4
(except in a transaction contemplated by Section 4(b)); provided that in any
event such restrictions will terminate on a Sale of the Company.
5. ADDITIONAL RESTRICTIONS ON TRANSFER OF EMPLOYEE STOCK.
(a) LEGEND. The certificates representing the Employee Stock
will bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A STOCK PURCHASE
AGREEMENT BETWEEN THE COMPANY AND AN EMPLOYEE OF THE COMPANY DATED AS OF JULY
31, 1998. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Employee Stock may sell,
transfer or dispose of any Employee Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
PROVISIONS RELATING TO EMPLOYMENT
6. CONFIDENTIAL INFORMATION.
(a) Employee acknowledges that the Company and its
Subsidiaries are engaged in the business of acquiring businesses that provide
electronic commerce services and operating those businesses after their
acquisition (the "BUSINESS"). Employee further acknowledges that the Business
and its continued success depend upon the use and protection of a large body of
confidential and proprietary information, and that she holds a position of trust
and confidence by virtue of which she necessarily possesses, has access to and,
as a consequence of hers signing this Agreement, will continue to possess and
have access to, highly valuable, confidential and proprietary information of the
Company and its Subsidiaries not known to the public in general, and that it
would be improper for him to make use of this information for the
- 6 -
<PAGE>
benefit of himself and others. All of such confidential and proprietary
information now existing or to be developed in the future will be referred to in
this Agreement as "CONFIDENTIAL INFORMATION." This includes, without limitation,
information relating to the nature and operation of the Business, the persons,
firms and corporations which are customers or active prospects of the Company
during Employee's employment by the Company, the Company's development,
transition and transformation plans, methodology and methods of doing business,
strategic, acquisition, marketing and expansion plans, including plans regarding
planned and potential acquisitions and sales, financial and business plans,
employee lists, numbers and location of sales representatives, new and existing
programs and services (and those under development), prices and terms, customer
service, integration processes requirements, costs of providing service, support
and equipment and equipment maintenance costs. Confidential Information shall
not include any information that has become generally known to and available for
use by the public other than as a result of Employee's acts or omissions.
(b) Disclosure of any Confidential Information of the Company
shall not be prohibited if such disclosure is directly pursuant to a valid and
existing order of a court or other governmental body or agency within the United
States; provided, however, that (i) Employee shall first have given prompt
notice to the Company of any such possible or prospective order (or proceeding
pursuant to which any such order may result) and (ii) Employee shall afford the
Company a reasonable opportunity to prevent or limit any such disclosure.
(c) During the Employment Period and at all times thereafter,
Employee will preserve and protect as confidential all of the Confidential
Information known to Employee or at any time in Employee's possession or
control. In addition, during the Employment Period and at all times thereafter,
Employee will not disclose to any unauthorized person or use for hers own
account any of such Confidential Information without the Board's written
consent. Employee agrees to deliver to the Company at a Separation, or at any
other time the Company may request in writing, all memoranda, notes, plans,
records, reports and other documents (and copies thereof) containing or
otherwise relating to any of the Confidential Information (including, without
limitation, all acquisition prospects, lists and contact information) which she
may then possess or have under hers control. Employee acknowledges that all such
memoranda, notes, plans, records, reports and other documents are and at all
times will be and remain the property of the Company.
(d) Employee will fully comply with any agreement reasonably
required by any of the Company's affiliates, business partners, suppliers or
contractors with respect to the protection of the confidential and proprietary
information of such entities.
7. ADDITIONAL ACKNOWLEDGMENTS. Employee acknowledges that the
provisions of this Section are in consideration of: (i) employment with the
Company and (ii) additional good and valuable consideration as set forth in this
Agreement. Employee expressly agrees and acknowledges that the restrictions
contained in Section 6 do not preclude Employee from earning a livelihood, nor
does it unreasonably impose limitations on Employee's ability to earn a living.
In addition, Employee agrees and acknowledges that the potential harm to the
Company of its non-enforcement outweighs any harm to the Employee of its
enforcement by injunction or
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<PAGE>
otherwise. Employee acknowledges that she has carefully read this Agreement and
has given careful consideration to the restraints imposed upon the Employee by
this Agreement, and is in full accord as to their necessity for the reasonable
and proper protection of the Confidential Information. Employee expressly
acknowledges and agrees that each and every restraint imposed by this Agreement
is reasonable with respect to subject matter, time period and geographical area.
GENERAL PROVISIONS
8. DEFINITIONS.
"AFFILIATE" or "AFFILIATES" of an Investor means any direct or indirect
general or limited partner of such Investor, or any employee or owner thereof,
or any other person, entity or investment fund controlling, controlled by or
under common control with such Investor.
"EMPLOYEE'S FAMILY GROUP" means Employee's spouse and descendants
(whether natural or adopted), any trust solely for the benefit of Employee
and/or Employee's spouse and/or descendants and any retirement plan for the
Employee.
"EMPLOYEE STOCK" will continue to be Employee Stock in the hands of any
holder other than Employee (except for the Company and the Investors and except
for transferees in a Public Sale), and except as otherwise provided herein, each
such other holder of Employee Stock will succeed to all rights and obligations
attributable to Employee as a holder of Employee Stock hereunder. Employee Stock
will also include shares of the Company's capital stock issued with respect to
Employee Stock by way of a stock split, stock dividend or other
recapitalization.
"FAIR MARKET VALUE" of each share of Employee Stock means the average
of the closing prices of the sales of the Common Stock on all securities
exchanges on which such Common Stock may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such day, or, if
on any day such Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time,
or, if on any day such Common Stock is not quoted in the NASDAQ System, of the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market Value
is being determined and the 20 consecutive business days prior to such day. If
at any time such Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Fair Market Value will
be the fair value of such Common Stock determined in good faith by the Board
(the "BOARD CALCULATION"). If the Employee reasonably disagrees with the Board
Calculation, the Employee may, within 30 days after receipt of the Board
Calculation, deliver a notice (an "OBJECTION NOTICE") to the Company setting
forth the Employee's calculation of Fair Market Value. The Board and the
Employee will negotiate in good faith to agree on such Fair Market Value, but if
such agreement is not reached within 30 days after the Company has received the
Objection Notice, Fair Market Value shall be determined by an appraiser jointly
selected by the Board and the Employee, which appraiser
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<PAGE>
shall submit to the Board and the Employee a report within 30 days of its
engagement setting forth such determination. If the parties are unable to agree
on an appraiser within 45 days after the Company has received the Objection
Notice, within seven days, each party shall submit the names of four nationally
recognized investment banking firms, and each party shall be entitled to strike
two names from the other party's list of firms, and the appraiser shall be
selected by lot from the remaining four investment banking firms. The expenses
of such appraiser shall be borne by the Employee unless the appraiser's
valuation is not less than 10% greater than the amount determined by the Board,
in which case, the costs of the appraiser shall be borne by the Company. The
determination of such appraiser shall be final and binding upon all parties. If
the Repurchase Option is exercised within 90 days after a Separation, then Fair
Market Value shall be determined as of the date of such Separation; thereafter,
Fair Market Value shall be determined as of the date the Repurchase Option is
exercised.
"ORIGINAL COST" means, with respect to each share of Employee Stock
purchased hereunder, $0.1055 (as proportionately adjusted for all subsequent
stock splits, stock dividends and other recapitalizations).
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof
"PUBLIC OFFERING" means the sale in an underwritten public offering
registered under the Securities Act of shares of the Company's Common Stock
approved by the Board.
"PUBLIC SALE" means (i) any sale pursuant to a registered public
offering under the Securities Act or (ii) any sale to the public pursuant to
Rule 144 promulgated under the Securities Act effected through a broker, dealer
or market maker (other than pursuant to Rule 144(k)).
"SALE OF THE COMPANY" means any transaction or series of transactions
pursuant to which any person(s) or entity(ies) other than the Investors and its
Affiliates in the aggregate acquire(s) (i) capital stock of the Company
possessing the voting power (other than voting rights accruing only in the event
of a default, breach or event of noncompliance) to elect a majority of the
Company's board of directors (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock, shareholder or
voting agreement, proxy, power of attorney or otherwise) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis;
provided that the term "SALE OF THE COMPANY" shall not include a Public
Offering.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated June
29, 1998, among the Company and certain of its stockholders.
"SUBSIDIARY" means any corporation of which fifty percent (50%) or more
of the securities having ordinary voting power in electing the board of
directors are, at the time as of
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<PAGE>
which any determination is being made, owned by the Company either directly or
through one or more Subsidiaries. The term Subsidiary shall also include any
joint venture arrangement between the Company and any other entity, including,
without limitation, the Company's joint venture arrangement with Commerce Direct
International, Inc., a Delaware corporation.
"TRANSFER" means to sell, transfer, assign, pledge or otherwise dispose
of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law).
9. NOTICES. Any notice provided for in this Agreement must be
in writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:
If to the Company:
AppNet Systems, Inc.
6700-A Rockledge Drive
Suite 525
Bethesda, MD 20817
Attention: Terrence M. McManus
with a copy to:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Kirkland & Ellis
200 East Randolph
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis 1615 L Street, N.W.
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
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<PAGE>
If to the Employee:
Barbara E. Barnes
9913-I Gable Ridge Terrace
Rockville, MD 20850
If to the Investors:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Smart Technology, L.L.C.
10201 Norton Road
Potomac, MD 20854
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.,
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
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<PAGE>
10. GENERAL PROVISIONS.
(a) EXPENSES. Each of the Company and the Employee shall pay
its or hers legal, accounting and other expenses incurred in connection with the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement.
(b) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Employee Stock in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Employee Stock as the owner of
such stock for any purpose.
(c) SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(d) INTENDED THIRD-PARTY BENEFICIARIES. The Investors are
intended to be third-party beneficiaries to this entire Agreement and the rights
and obligations of the parties hereto. It is understood and agreed by the
parties hereto that this Agreement shall be enforceable by GTCR and, provided
GTCR is seeking to enforce substantially the same rights, the other Investor(s)
in accordance with its terms as though each of the Investors were a party to
every provision hereof. Except as expressly provided herein, no other third
parties are intended by the parties hereto to be beneficiaries hereof.
(e) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(f) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(g) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by Employee, the Company, the Investors and their respective successors and
assigns (including subsequent holders of Employee Stock); provided that the
rights and obligations of Employee under this Agreement shall not be assignable
except in connection with a permitted transfer of Employee Stock hereunder. The
rights and obligations of GTCR under this Agreement may be assigned at any time,
in whole or in part, to any investment fund managed by GTCR, or any successor
thereto; provided that such assignment occurs in the manner provided in the
Purchase Agreement.
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<PAGE>
(h) CHOICE OF LAW. The corporate law of the State of Delaware
will govern all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits hereto will be governed by and
construed in accordance with the internal laws of the State of Maryland, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Maryland or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Maryland.
(i) REMEDIES. Each of the parties to this Agreement (including
the Investors) will be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including attorney's fees) caused by
any breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction (without posting any bond or deposit)
for specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
(j) AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended and waived only with the written consent of the Company and the
Employee.
(k) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or holiday
in the state in which the Company's chief Employee office is located, the time
period shall be automatically extended to the business day immediately following
such Saturday, Sunday or holiday.
(l) TERMINATION. This Agreement (except for the provisions of
Section 6) shall survive a Separation and shall remain in full force and effect
after such Separation.
(m) ADJUSTMENTS OF NUMBERS. All numbers set forth herein which
refer to share prices or amounts will be appropriately adjusted to reflect stock
splits, stock dividends, combinations of shares and other recapitalizations
affecting the subject class of stock.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the date first written above.
APPNET SYSTEMS, INC.
By: /s/ KEN S. BAJAJ
------------------------------------------
Ken S. Bajaj
President and Chief Employee Officer
/s/ BARBARA E. BARNES
------------------------------------------
Barbara E. Barnes
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<PAGE>
Exhibit 4.12
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made as of August
12, 1998, between AppNet Systems, Inc., a Delaware corporation (the
"CORPORATION") and Julie Colton (the "EMPLOYEE").
The Company and Employee desire to enter into an agreement pursuant to
which Employee will purchase, and the Company will sell, 6,000 shares of the
Company's Common Stock, par value $.0005 per share (the "EMPLOYEE STOCK").
Certain definitions are set forth in Section 8 of this Agreement.
The execution and delivery of this Agreement by the Company and
Employee is related to the purchase of shares of Common Stock and shares of the
Company's Class A Preferred Stock, par value $.01 per share (the "CLASS A
PREFERRED") by Smart Technology, L.L.C. ("SMART TECHNOLOGY"), GTCR Golder
Rauner, L.L.C., a Delaware limited liability company ("GTCR" and, together with
Smart Technology, the "INVESTORS" and each an "INVESTOR") pursuant to a purchase
agreement between the Company and the Investors dated as of June 29, 1998 (the
"PURCHASE AGREEMENT"). Certain provisions of this Agreement are intended for the
benefit of, and will be enforceable by, the Investors.
The parties hereto agree as follows:
PROVISIONS RELATING TO EMPLOYEE STOCK
1. RESERVED.
2. PURCHASE AND SALE OF EMPLOYEE STOCK.
(a) Upon execution of this Agreement, Employee will purchase,
and the Company will sell, 6,000 shares of Common Stock at a price of $0.1055
per share. The Company will deliver to Employee the certificates representing
such Employee Stock, and Employee will deliver to the Company a check or wire
transfer of funds in the aggregate amount of $3.00 and a promissory note in the
form of ANNEX A attached hereto in an aggregate principal amount of $630.00 (the
"EMPLOYEE NOTE"). Employee's obligations under the Employee Note shall be
secured by a pledge of all of the shares of Common Stock purchased hereunder to
the Company and in connection therewith, Employee shall enter into a pledge
agreement in the form of ANNEX B attached hereto.
(b) Within 30 days after the date hereof, Employee will make
an effective election with the Internal Revenue Service under Section 83(b) of
the Internal Revenue Code and the regulations promulgated thereunder in the form
of ANNEX C attached hereto.
(c) In connection with the purchase and sale of the Employee
Stock hereunder, Employee represents and warrants to the Company that:
(i) The Employee Stock to be acquired by Employee pursuant
to this Agreement will be acquired for Employee's own account and not with a
view to, or intention of,
<PAGE>
distribution thereof in violation of the Securities Act, or any applicable state
securities laws, and the Employee Stock will not be disposed of in contravention
of the Securities Act or any applicable state securities laws.
(ii) Employee is an Employee of the Company, is
sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in the Employee Stock.
(iii) Employee is able to bear the economic risk of her
investment in the Employee Stock for an indefinite period of time because the
Employee Stock has not been registered under the Securities Act and, therefore,
cannot be sold unless subsequently registered under the Securities Act or an
exemption from such registration is available.
(iv) Employee has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of Employee
Stock and has had full access to such other information concerning the Company
as she has requested.
(v) This Agreement constitutes the legal, valid and
binding obligation of Employee, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Employee does not
and will not conflict with, violate or cause a breach of any agreement, contract
or instrument to which Employee is a party or any judgment, order or decree to
which Employee is subject.
(vi) Employee is a resident of the State of Maryland.
(d) As an inducement to the Company to issue the Employee
Stock to Employee, as a condition thereto, Employee acknowledges and agrees that
neither the issuance of the Employee Stock to Employee nor any provision
contained herein shall entitle Employee to remain in the employment of the
Company and its Subsidiaries or affect the right of the Company to terminate
Employee's employment at any time for any reason.
3. REPURCHASE OPTION.
(a) In the event that Employee ceases to be employed by the
Company and its Subsidiaries for any reason (the "SEPARATION"), the Employee
Stock (whether held by Employee or one or more of Employee's transferees, other
than the Company) will be subject to repurchase, in each case at the option of
the Company, the Investors and Ken S. Bajaj ("Bajaj") pursuant to the terms and
conditions set forth in this Section 3(a) (the "REPURCHASE OPTION"). A
percentage of the Employee Stock will be subject to repurchase at the Employee's
Original Cost for such shares, calculated in accordance with the following
schedule (the "ORIGINAL COST SHARES"):
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<PAGE>
<TABLE>
<CAPTION>
DATE PERCENTAGE OF EMPLOYEE STOCK
TO BE REPURCHASED AT ORIGINAL COST
----------------------------------
<S> <C>
Date of this Agreement until 1st Anniversary of this Agreement 100%
Date immediately following 1st Anniversary of this Agreement until 75%
2nd Anniversary of this Agreement
Date immediately following 2nd Anniversary of this Agreement until 50%
3rd Anniversary of this Agreement
Date immediately following 3rd Anniversary of this Agreement until 25%
4th Anniversary of this Agreement
Date immediately following 4th Anniversary of this Agreement and 0%
thereafter
</TABLE>
The purchase price for the remaining shares of Employee Stock shall be the Fair
Market Value of such shares (the "FAIR MARKET VALUE SHARES").
(b) The Company may elect to purchase all or any portion of
the Original Cost Shares and the Fair Market Value Shares by delivering written
notice (the "REPURCHASE NOTICE") to the holder or holders of the Employee Stock
within 180 days after the Separation. The Repurchase Notice will set forth the
number of Original Cost Shares and Fair Market Value Shares to be acquired from
each holder, the aggregate consideration to be paid for such shares and the time
and place for the closing of the transaction. The number of shares to be
repurchased by the Company shall first be satisfied to the extent possible from
the shares of Employee Stock held by Employee at the time of delivery of the
Repurchase Notice. If the number of shares of Employee Stock then held by
Employee is less than the total number of shares of Employee Stock which the
Company has elected to purchase, the Company shall purchase the remaining shares
elected to be purchased from the other holder(s) of Employee Stock under this
Agreement, pro rata according to the number of shares of Employee Stock held by
such other holder(s) at the time of delivery of such Repurchase Notice
(determined as nearly as practicable to the nearest share). The number of
Original Cost Shares and Fair Market Value Shares to be repurchased hereunder
will be allocated among Employee and the other holders of Employee Stock (if
any) pro rata according to the number of shares of Employee Stock to be
purchased from such person.
(c) If for any reason the Company does not elect to purchase
all of the Employee Stock pursuant to the Repurchase Option, the Investors and
Bajaj shall be entitled to exercise the Repurchase Option for all or any portion
of the shares of Employee Stock that the Company has not elected to purchase
(the "AVAILABLE SHARES"). As soon as practicable after the
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<PAGE>
Company has determined that there will be Available Shares, but in any event
within 150 days after the Separation, the Company shall give written notice (the
"OPTION NOTICE") to the Investors and Bajaj setting forth the number of
Available Shares and the purchase price for the Available Shares. The Investors
and Bajaj may elect to purchase any or all of the Available Shares by giving
written notice to the Company within one month after the Option Notice has been
given by the Company. If the Investors and Bajaj elect to purchase an aggregate
number of shares greater than the number of Available Shares, the Available
Shares shall be allocated among the Investors and Bajaj based upon the number of
shares of Common Stock owned by each Investor and Bajaj on a fully diluted basis
(excluding, in the case of Bajaj, shares owned by him that are subject to
repurchase at cost). As soon as practicable, and in any event within ten days,
after the expiration of the one-month period set forth above, the Company shall
notify each holder of Employee Stock as to the number of shares being purchased
from such holder by the Investors and Bajaj (the "SUPPLEMENTAL REPURCHASE
NOTICE"). At the time the Company delivers the Supplemental Repurchase Notice to
the holder(s) of Employee Stock, the Company shall also deliver written notice
to the Investors and Bajaj setting forth the number of shares the Investors and
Bajaj are entitled to purchase, the aggregate purchase price and the time and
place of the closing of the transaction. The number of Original Cost Shares and
Fair Market Value Shares to be repurchased hereunder shall be allocated among
the Company, the Investors and Bajaj pro rata according to the number of shares
of Employee Stock to be purchased by each of them. Notwithstanding the
foregoing, the Investors and Bajaj shall not exercise their Repurchase Option as
to the Original Cost Shares pursuant to this Section 3(c) if the Company has
sufficient assets to fully exercise its Repurchase Option as to the Original
Cost Shares but has not exercised such right. Furthermore, if the Investors and
Bajaj repurchase any Original Cost Shares, they shall contribute such Original
Cost Shares to the Company in exchange for a promissory note from the Company
with an aggregate principal amount equal to the purchase price paid for such
shares, bearing interest (payable quarterly) at a rate per annum equal to the
prime rate as published in the WALL STREET JOURNAL from time to time, and having
a term of no longer than five years.
(d) The closing of the purchase of the Employee Stock pursuant
to the Repurchase Option shall take place on the date designated by the Company
in the Repurchase Notice or Supplemental Repurchase Notice, which date shall not
be more than one month nor less than five days after the delivery of the later
of either such notice to be delivered. The Company will pay for the Employee
Stock to be purchased by it pursuant to the Repurchase Option by first
offsetting amounts outstanding under any bona fide debts owed by Employee to the
Company and will pay the remainder of the purchase price by, at its option, (A)
a check or wire transfer of funds, or (B) a check or wire transfer of funds for
at least one-third of the purchase price, and a subordinated note or notes
payable in two equal annual installments beginning on each of the first and
second anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the prime rate as published in THE WALL
STREET JOURNAL from time to time in the aggregate amount of the remainder of the
purchase price for such shares. The Investors and Bajaj will pay for the
Employee Stock purchased by it by a check or wire transfer of funds. The
Company, the Investors and Bajaj will be entitled to receive customary
representations and warranties from the sellers regarding such sale and to
require that all sellers' signatures be guaranteed.
- 4 -
<PAGE>
(e) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Employee Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Employee Stock hereunder which the
Company is otherwise entitled or required to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions.
(f) Notwithstanding anything to the contrary contained in this
Agreement, if the Employee delivers the notice of objection described in the
definition of Fair Market Value, or if the Fair Market Value of a Fair Market
Value Share is otherwise determined to be an amount more than 10% greater than
the per share repurchase price for Fair Market Value Shares originally
determined by the Board, each of the Company, the Investors and Bajaj shall have
the right to revoke its or their exercise of the Repurchase Option for all or
any portion of the Employee Stock elected to be repurchased by it by delivering
notice of such revocation in writing to the holders of the Employee Stock during
(i) the thirty-day period beginning on the date the Company, the Investors and
Bajaj receive Employee's written notice of objection and (ii) the thirty-day
period beginning on the date the Company, the Investors and Bajaj are given
written notice that the Fair Market Value of a Fair Market Value Share was
finally determined to be an amount more than 10% greater than the per share
repurchase price for Fair Market Value Shares originally determined by the Board
(g) The provisions of this Section 3 shall terminate upon the
consummation of a Sale of the Company.
4. RESTRICTIONS ON TRANSFER OF EMPLOYEE STOCK.
(a) RETENTION OF EMPLOYEE STOCK. Until the fifth anniversary
of the date of this Agreement, Employee shall not sell, transfer, assign, pledge
or otherwise dispose of any interest in any shares of Employee Stock, except
pursuant to: (i) a Sale of the Company, (ii) Section 3 of this Agreement, (iii)
Section 4 of the Stockholders Agreement, (iv) a sale described in clause (i) of
the definition of "PUBLIC SALE," or (v) after a Public Offering, upon any sale
by the Investors or an Affiliate of the type described in clause (ii) of the
definition of "PUBLIC SALE" (a "RULE 144 SALE"), to the extent of the lesser of
(a) the number of shares of Employee Stock held by Employee that are not subject
to repurchase at Original Cost and (b) the number of shares of Employee Stock
held by Employee multiplied by a fraction, the numerator of which is the number
of shares of Common Stock sold by the Investors and their Affiliates in the Rule
144 Sale and the denominator of which is the total number of shares of Common
Stock held by the Investors and their Affiliates immediately prior to such sale.
(b) CERTAIN PERMITTED TRANSFERS. The restrictions in this
Section 4 will not apply with respect to (i) transfers of shares of Employee
Stock pursuant to applicable laws of descent and distribution or (ii) transfer
of shares of Employee Stock among Employee's Family Group; provided that such
restrictions will continue to be applicable to the Employee Stock after any such
transfer and the transferees of such Employee Stock have agreed in writing to be
bound by the provisions of this Agreement.
- 5 -
<PAGE>
(c) TERMINATION OF RESTRICTIONS. The restrictions on the
Transfer of shares of Employee Stock set forth in this Section 4 will continue
with respect to each share of Employee Stock until the date on which such
Employee Stock has been transferred in a transaction permitted by this Section 4
(except in a transaction contemplated by Section 4(b)); provided that in any
event such restrictions will terminate on a Sale of the Company.
5. ADDITIONAL RESTRICTIONS ON TRANSFER OF EMPLOYEE STOCK.
(a) LEGEND. The certificates representing the Employee Stock
will bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A STOCK PURCHASE
AGREEMENT BETWEEN THE COMPANY AND AN EMPLOYEE OF THE COMPANY DATED AS OF AUGUST
12, 1998. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Employee Stock may sell,
transfer or dispose of any Employee Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
PROVISIONS RELATING TO EMPLOYMENT
6. CONFIDENTIAL INFORMATION.
(a) Employee acknowledges that the Company and its
Subsidiaries are engaged in the business of acquiring businesses that provide
electronic commerce services and operating those businesses after their
acquisition (the "BUSINESS"). Employee further acknowledges that the Business
and its continued success depend upon the use and protection of a large body of
confidential and proprietary information, and that she holds a position of trust
and confidence by virtue of which she necessarily possesses, has access to and,
as a consequence of hers signing this Agreement, will continue to possess and
have access to, highly valuable, confidential and proprietary information of the
Company and its Subsidiaries not known to the public in general, and that it
would be improper for him to make use of this information for the benefit of
himself and others. All of such confidential and proprietary information now
existing or to be developed in the future will be referred to in this Agreement
as "CONFIDENTIAL INFORMATION." This includes, without limitation, information
relating to the nature and operation of the Business, the persons, firms and
corporations which are customers or active prospects of
- 6 -
<PAGE>
the Company during Employee's employment by the Company, the Company's
development, transition and transformation plans, methodology and methods of
doing business, strategic, acquisition, marketing and expansion plans, including
plans regarding planned and potential acquisitions and sales, financial and
business plans, employee lists, numbers and location of sales representatives,
new and existing programs and services (and those under development), prices and
terms, customer service, integration processes requirements, costs of providing
service, support and equipment and equipment maintenance costs. Confidential
Information shall not include any information that has become generally known to
and available for use by the public other than as a result of Employee's acts or
omissions.
(b) Disclosure of any Confidential Information of the Company
shall not be prohibited if such disclosure is directly pursuant to a valid and
existing order of a court or other governmental body or agency within the United
States; provided, however, that (i) Employee shall first have given prompt
notice to the Company of any such possible or prospective order (or proceeding
pursuant to which any such order may result) and (ii) Employee shall afford the
Company a reasonable opportunity to prevent or limit any such disclosure.
(c) During the Employment Period and at all times thereafter,
Employee will preserve and protect as confidential all of the Confidential
Information known to Employee or at any time in Employee's possession or
control. In addition, during the Employment Period and at all times thereafter,
Employee will not disclose to any unauthorized person or use for hers own
account any of such Confidential Information without the Board's written
consent. Employee agrees to deliver to the Company at a Separation, or at any
other time the Company may request in writing, all memoranda, notes, plans,
records, reports and other documents (and copies thereof) containing or
otherwise relating to any of the Confidential Information (including, without
limitation, all acquisition prospects, lists and contact information) which she
may then possess or have under hers control. Employee acknowledges that all such
memoranda, notes, plans, records, reports and other documents are and at all
times will be and remain the property of the Company.
(d) Employee will fully comply with any agreement reasonably
required by any of the Company's affiliates, business partners, suppliers or
contractors with respect to the protection of the confidential and proprietary
information of such entities.
7. ADDITIONAL ACKNOWLEDGMENTS. Employee acknowledges that the
provisions of this Section are in consideration of: (i) employment with the
Company and (ii) additional good and valuable consideration as set forth in this
Agreement. Employee expressly agrees and acknowledges that the restrictions
contained in Section 6 do not preclude Employee from earning a livelihood, nor
does it unreasonably impose limitations on Employee's ability to earn a living.
In addition, Employee agrees and acknowledges that the potential harm to the
Company of its non-enforcement outweighs any harm to the Employee of its
enforcement by injunction or otherwise. Employee acknowledges that she has
carefully read this Agreement and has given careful consideration to the
restraints imposed upon the Employee by this Agreement, and is in full accord as
to their necessity for the reasonable and proper protection of the Confidential
Information. Employee expressly acknowledges and agrees that each and every
restraint
- 7 -
<PAGE>
imposed by this Agreement is reasonable with respect to subject matter, time
period and geographical area.
GENERAL PROVISIONS
8. DEFINITIONS.
"AFFILIATE" or "AFFILIATES" of an Investor means any direct or indirect
general or limited partner of such Investor, or any employee or owner thereof,
or any other person, entity or investment fund controlling, controlled by or
under common control with such Investor.
"EMPLOYEE'S FAMILY GROUP" means Employee's spouse and descendants
(whether natural or adopted), any trust solely for the benefit of Employee
and/or Employee's spouse and/or descendants and any retirement plan for the
Employee.
"EMPLOYEE STOCK" will continue to be Employee Stock in the hands of any
holder other than Employee (except for the Company and the Investors and except
for transferees in a Public Sale), and except as otherwise provided herein, each
such other holder of Employee Stock will succeed to all rights and obligations
attributable to Employee as a holder of Employee Stock hereunder. Employee Stock
will also include shares of the Company's capital stock issued with respect to
Employee Stock by way of a stock split, stock dividend or other
recapitalization.
"FAIR MARKET VALUE" of each share of Employee Stock means the average
of the closing prices of the sales of the Common Stock on all securities
exchanges on which such Common Stock may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such day, or, if
on any day such Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time,
or, if on any day such Common Stock is not quoted in the NASDAQ System, of the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market Value
is being determined and the 20 consecutive business days prior to such day. If
at any time such Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Fair Market Value will
be the fair value of such Common Stock determined in good faith by the Board
(the "BOARD CALCULATION"). If the Employee reasonably disagrees with the Board
Calculation, the Employee may, within 30 days after receipt of the Board
Calculation, deliver a notice (an "OBJECTION NOTICE") to the Company setting
forth the Employee's calculation of Fair Market Value. The Board and the
Employee will negotiate in good faith to agree on such Fair Market Value, but if
such agreement is not reached within 30 days after the Company has received the
Objection Notice, Fair Market Value shall be determined by an appraiser jointly
selected by the Board and the Employee, which appraiser shall submit to the
Board and the Employee a report within 30 days of its engagement setting forth
such determination. If the parties are unable to agree on an appraiser within 45
days after the Company has received the Objection Notice, within seven days,
each party shall submit the names of four nationally recognized investment
banking firms, and each party shall be entitled to strike two names from the
other party's list of firms, and the appraiser shall be selected by lot
- 8 -
<PAGE>
from the remaining four investment banking firms. The expenses of such appraiser
shall be borne by the Employee unless the appraiser's valuation is not less than
10% greater than the amount determined by the Board, in which case, the costs of
the appraiser shall be borne by the Company. The determination of such appraiser
shall be final and binding upon all parties. If the Repurchase Option is
exercised within 90 days after a Separation, then Fair Market Value shall be
determined as of the date of such Separation; thereafter, Fair Market Value
shall be determined as of the date the Repurchase Option is exercised.
"ORIGINAL COST" means, with respect to each share of Employee Stock
purchased hereunder, $0.1055 (as proportionately adjusted for all subsequent
stock splits, stock dividends and other recapitalizations).
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof
"PUBLIC OFFERING" means the sale in an underwritten public offering
registered under the Securities Act of shares of the Company's Common Stock
approved by the Board.
"PUBLIC SALE" means (i) any sale pursuant to a registered public
offering under the Securities Act or (ii) any sale to the public pursuant to
Rule 144 promulgated under the Securities Act effected through a broker, dealer
or market maker (other than pursuant to Rule 144(k)).
"SALE OF THE COMPANY" means any transaction or series of transactions
pursuant to which any person(s) or entity(ies) other than the Investors and its
Affiliates in the aggregate acquire(s) (i) capital stock of the Company
possessing the voting power (other than voting rights accruing only in the event
of a default, breach or event of noncompliance) to elect a majority of the
Company's board of directors (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock, shareholder or
voting agreement, proxy, power of attorney or otherwise) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis;
provided that the term "SALE OF THE COMPANY" shall not include a Public
Offering.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated June
29, 1998, among the Company and certain of its stockholders.
"SUBSIDIARY" means any corporation of which fifty percent (50%) or more
of the securities having ordinary voting power in electing the board of
directors are, at the time as of which any determination is being made, owned by
the Company either directly or through one or more Subsidiaries. The term
Subsidiary shall also include any joint venture arrangement between the Company
and any other entity, including, without limitation, the Company's joint venture
arrangement with Commerce Direct International, Inc., a Delaware corporation.
- 9 -
<PAGE>
"TRANSFER" means to sell, transfer, assign, pledge or otherwise dispose
of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law).
9. NOTICES. Any notice provided for in this Agreement must be
in writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:
If to the Company:
AppNet Systems, Inc.
6700-A Rockledge Drive
Suite 525
Bethesda, MD 20817
Attention: Terrence M. McManus
with a copy to:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Kirkland & Ellis
200 East Randolph
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis 1615 L Street, N.W.
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
If to the Employee:
40 Stoney Point Court
Germantown, MD 20876
- 10 -
<PAGE>
If to the Investors:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Smart Technology, L.L.C.
10201 Norton Road
Potomac, MD 20854
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.,
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
10. GENERAL PROVISIONS.
(a) EXPENSES. Each of the Company and the Employee shall pay
its or hers legal, accounting and other expenses incurred in connection with the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement.
(b) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Employee Stock in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Employee Stock as the owner of
such stock for any purpose.
- 11 -
<PAGE>
(c) SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(d) INTENDED THIRD-PARTY BENEFICIARIES. The Investors are
intended to be third-party beneficiaries to this entire Agreement and the rights
and obligations of the parties hereto. It is understood and agreed by the
parties hereto that this Agreement shall be enforceable by GTCR and, provided
GTCR is seeking to enforce substantially the same rights, the other Investor(s)
in accordance with its terms as though each of the Investors were a party to
every provision hereof. Except as expressly provided herein, no other third
parties are intended by the parties hereto to be beneficiaries hereof.
(e) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(f) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(g) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by Employee, the Company, the Investors and their respective successors and
assigns (including subsequent holders of Employee Stock); provided that the
rights and obligations of Employee under this Agreement shall not be assignable
except in connection with a permitted transfer of Employee Stock hereunder. The
rights and obligations of GTCR under this Agreement may be assigned at any time,
in whole or in part, to any investment fund managed by GTCR, or any successor
thereto; provided that such assignment occurs in the manner provided in the
Purchase Agreement.
(h) CHOICE OF LAW. The corporate law of the State of Delaware
will govern all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits hereto will be governed by and
construed in accordance with the internal laws of the State of Maryland, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Maryland or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Maryland.
(i) REMEDIES. Each of the parties to this Agreement (including
the Investors) will be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including attorney's fees) caused by
any breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that
- 12 -
<PAGE>
money damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that any party may in its sole discretion apply to any court
of law or equity of competent jurisdiction (without posting any bond or deposit)
for specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
(j) AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended and waived only with the written consent of the Company and the
Employee.
(k) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or holiday
in the state in which the Company's chief Employee office is located, the time
period shall be automatically extended to the business day immediately following
such Saturday, Sunday or holiday.
(l) TERMINATION. This Agreement (except for the provisions of
Section 6) shall survive a Separation and shall remain in full force and effect
after such Separation.
(m) ADJUSTMENTS OF NUMBERS. All numbers set forth herein which
refer to share prices or amounts will be appropriately adjusted to reflect stock
splits, stock dividends, combinations of shares and other recapitalizations
affecting the subject class of stock.
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the date first written above.
APPNET SYSTEMS, INC.
By: /s/ Ken S. Bajaj
------------------------------------------
Ken S. Bajaj
President and Chief Employee Officer
/s/ Julie Colton
------------------------------------------
Julie Colton
- 13 -
<PAGE>
Exhibit 4.13
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made as of August 12,
1998, between AppNet Systems, Inc., a Delaware corporation (the "CORPORATION")
and Robert George (the "EMPLOYEE").
The Company and Employee desire to enter into an agreement pursuant to
which Employee will purchase, and the Company will sell, 50,000 shares of the
Company's Common Stock, par value $.0005 per share (the "EMPLOYEE STOCK").
Certain definitions are set forth in Section 8 of this Agreement.
The execution and delivery of this Agreement by the Company and Employee is
related to the purchase of shares of Common Stock and shares of the Company's
Class A Preferred Stock, par value $.01 per share (the "CLASS A PREFERRED") by
Smart Technology, L.L.C. ("SMART TECHNOLOGY"), GTCR Golder Rauner, L.L.C., a
Delaware limited liability company ("GTCR" and, together with Smart Technology,
the "INVESTORS" and each an "INVESTOR") pursuant to a purchase agreement between
the Company and the Investors dated as of June 29, 1998 (the "PURCHASE
AGREEMENT"). Certain provisions of this Agreement are intended for the benefit
of, and will be enforceable by, the Investors.
The parties hereto agree as follows:
PROVISIONS RELATING TO EMPLOYEE STOCK
1. RESERVED.
2. PURCHASE AND SALE OF EMPLOYEE STOCK.
(a) Upon execution of this Agreement, Employee will purchase, and the
Company will sell, 50,000 shares of Common Stock at a price of $0.1055 per
share. The Company will deliver to Employee the certificates representing such
Employee Stock, and Employee will deliver to the Company a check or wire
transfer of funds in the aggregate amount of $25.00 and a promissory note in the
form of ANNEX A attached hereto in an aggregate principal amount of $5,250.00
(the "EMPLOYEE NOTE"). Employee's obligations under the Employee Note shall be
secured by a pledge of all of the shares of Common Stock purchased hereunder to
the Company and in connection therewith, Employee shall enter into a pledge
agreement in the form of ANNEX B attached hereto.
(b) Within 30 days after the date hereof, Employee will make an
effective election with the Internal Revenue Service under Section 83(b) of the
Internal Revenue Code and the regulations promulgated thereunder in the form of
ANNEX C attached hereto.
(c) In connection with the purchase and sale of the Employee Stock
hereunder, Employee represents and warrants to the Company that:
(i) The Employee Stock to be acquired by Employee pursuant to
this Agreement will be acquired for Employee's own account and not with a view
to, or intention of,
<PAGE>
distribution thereof in violation of the Securities Act, or any applicable state
securities laws, and the Employee Stock will not be disposed of in contravention
of the Securities Act or any applicable state securities laws.
(ii) Employee is an Employee of the Company, is sophisticated in
financial matters and is able to evaluate the risks and benefits of the
investment in the Employee Stock.
(iii) Employee is able to bear the economic risk of her
investment in the Employee Stock for an indefinite period of time because the
Employee Stock has not been registered under the Securities Act and, therefore,
cannot be sold unless subsequently registered under the Securities Act or an
exemption from such registration is available.
(iv) Employee has had an opportunity to ask questions and receive
answers concerning the terms and conditions of the offering of Employee Stock
and has had full access to such other information concerning the Company as she
has requested.
(v) This Agreement constitutes the legal, valid and binding
obligation of Employee, enforceable in accordance with its terms, and the
execution, delivery and performance of this Agreement by Employee does not and
will not conflict with, violate or cause a breach of any agreement, contract or
instrument to which Employee is a party or any judgment, order or decree to
which Employee is subject.
(vi) Employee is a resident of the State of Maryland.
(d) As an inducement to the Company to issue the Employee Stock to
Employee, as a condition thereto, Employee acknowledges and agrees that neither
the issuance of the Employee Stock to Employee nor any provision contained
herein shall entitle Employee to remain in the employment of the Company and its
Subsidiaries or affect the right of the Company to terminate Employee's
employment at any time for any reason.
3. REPURCHASE OPTION.
(a) In the event that Employee ceases to be employed by the Company
and its Subsidiaries for any reason (the "SEPARATION"), the
Employee Stock (whether held by Employee or one or more of
Employee's transferees, other than the Company) will be subject
to repurchase, in each case at the option of the Company, the
Investors and Ken S. Bajaj ("Bajaj") pursuant to the terms and
conditions set forth in this Section 3(a) (the "REPURCHASE
OPTION"). A percentage of the Employee Stock will be subject to
repurchase at the Employee's Original Cost for such shares,
calculated in accordance with the following schedule (the
"ORIGINAL COST SHARES"):
-2-
<PAGE>
<TABLE>
<CAPTION>
DATE PERCENTAGE OF EMPLOYEE STOCK
TO BE REPURCHASED AT ORIGINAL COST
----------------------------------
<S> <C>
Date of this Agreement until 1st Anniversary of
this Agreement 100%
Date immediately following 1st Anniversary of this
Agreement until 2nd Anniversary of this Agreement 75%
Date immediately following 2nd Anniversary of this
Agreement until 3rd Anniversary of this Agreement 50%
Date immediately following 3rd Anniversary of this
Agreement until 4th Anniversary of this Agreement 25%
Date immediately following 4th Anniversary of this
Agreement and thereafter 0%
</TABLE>
The purchase price for the remaining shares of Employee Stock shall be the Fair
Market Value of such shares (the "FAIR MARKET VALUE SHARES").
(b) The Company may elect to purchase all or any portion of the
Original Cost Shares and the Fair Market Value Shares by delivering written
notice (the "REPURCHASE NOTICE") to the holder or holders of the Employee Stock
within 180 days after the Separation. The Repurchase Notice will set forth the
number of Original Cost Shares and Fair Market Value Shares to be acquired from
each holder, the aggregate consideration to be paid for such shares and the time
and place for the closing of the transaction. The number of shares to be
repurchased by the Company shall first be satisfied to the extent possible from
the shares of Employee Stock held by Employee at the time of delivery of the
Repurchase Notice. If the number of shares of Employee Stock then held by
Employee is less than the total number of shares of Employee Stock which the
Company has elected to purchase, the Company shall purchase the remaining shares
elected to be purchased from the other holder(s) of Employee Stock under this
Agreement, pro rata according to the number of shares of Employee Stock held by
such other holder(s) at the time of delivery of such Repurchase Notice
(determined as nearly as practicable to the nearest share). The number of
Original Cost Shares and Fair Market Value Shares to be repurchased hereunder
will be allocated among Employee and the other holders of Employee Stock (if
any) pro rata according to the number of shares of Employee Stock to be
purchased from such person.
(c) If for any reason the Company does not elect to purchase all of
the Employee Stock pursuant to the Repurchase Option, the Investors and Bajaj
shall be entitled to exercise the Repurchase Option for all or any portion of
the shares of Employee Stock that the Company has not elected to purchase (the
"AVAILABLE SHARES"). As soon as practicable after the Company has determined
that there will be Available Shares, but in any event within 150 days after the
Separation, the Company shall give written notice (the "OPTION NOTICE") to the
Investors
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and Bajaj setting forth the number of Available Shares and the purchase price
for the Available Shares. The Investors and Bajaj may elect to purchase any or
all of the Available Shares by giving written notice to the Company within one
month after the Option Notice has been given by the Company. If the Investors
and Bajaj elect to purchase an aggregate number of shares greater than the
number of Available Shares, the Available Shares shall be allocated among the
Investors and Bajaj based upon the number of shares of Common Stock owned by
each Investor and Bajaj on a fully diluted basis (excluding, in the case of
Bajaj, shares owned by him that are subject to repurchase at cost). As soon as
practicable, and in any event within ten days, after the expiration of the
one-month period set forth above, the Company shall notify each holder of
Employee Stock as to the number of shares being purchased from such holder by
the Investors and Bajaj (the "SUPPLEMENTAL REPURCHASE NOTICE"). At the time the
Company delivers the Supplemental Repurchase Notice to the holder(s) of Employee
Stock, the Company shall also deliver written notice to the Investors and Bajaj
setting forth the number of shares the Investors and Bajaj are entitled to
purchase, the aggregate purchase price and the time and place of the closing of
the transaction. The number of Original Cost Shares and Fair Market Value Shares
to be repurchased hereunder shall be allocated among the Company, the Investors
and Bajaj pro rata according to the number of shares of Employee Stock to be
purchased by each of them. Notwithstanding the foregoing, the Investors and
Bajaj shall not exercise their Repurchase Option as to the Original Cost Shares
pursuant to this Section 3(c) if the Company has sufficient assets to fully
exercise its Repurchase Option as to the Original Cost Shares but has not
exercised such right. Furthermore, if the Investors and Bajaj repurchase any
Original Cost Shares, they shall contribute such Original Cost Shares to the
Company in exchange for a promissory note from the Company with an aggregate
principal amount equal to the purchase price paid for such shares, bearing
interest (payable quarterly) at a rate per annum equal to the prime rate as
published in the WALL STREET JOURNAL from time to time, and having a term of no
longer than five years.
(d) The closing of the purchase of the Employee Stock pursuant to the
Repurchase Option shall take place on the date designated by the Company in the
Repurchase Notice or Supplemental Repurchase Notice, which date shall not be
more than one month nor less than five days after the delivery of the later of
either such notice to be delivered. The Company will pay for the Employee Stock
to be purchased by it pursuant to the Repurchase Option by first offsetting
amounts outstanding under any bona fide debts owed by Employee to the Company
and will pay the remainder of the purchase price by, at its option, (A) a check
or wire transfer of funds, or (B) a check or wire transfer of funds for at least
one-third of the purchase price, and a subordinated note or notes payable in two
equal annual installments beginning on each of the first and second anniversary
of the closing of such purchase and bearing interest (payable quarterly) at a
rate per annum equal to the prime rate as published in THE WALL STREET JOURNAL
from time to time in the aggregate amount of the remainder of the purchase price
for such shares. The Investors and Bajaj will pay for the Employee Stock
purchased by it by a check or wire transfer of funds. The Company, the Investors
and Bajaj will be entitled to receive customary representations and warranties
from the sellers regarding such sale and to require that all sellers' signatures
be guaranteed.
(e) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Employee Stock by the Company shall be subject to
applicable restrictions
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contained in the Delaware General Corporation Law and in the Company's and its
Subsidiaries' debt and equity financing agreements. If any such restrictions
prohibit the repurchase of Employee Stock hereunder which the Company is
otherwise entitled or required to make, the Company may make such repurchases as
soon as it is permitted to do so under such restrictions.
(f) Notwithstanding anything to the contrary contained in this
Agreement, if the Employee delivers the notice of objection described in the
definition of Fair Market Value, or if the Fair Market Value of a Fair Market
Value Share is otherwise determined to be an amount more than 10% greater than
the per share repurchase price for Fair Market Value Shares originally
determined by the Board, each of the Company, the Investors and Bajaj shall have
the right to revoke its or their exercise of the Repurchase Option for all or
any portion of the Employee Stock elected to be repurchased by it by delivering
notice of such revocation in writing to the holders of the Employee Stock during
(i) the thirty-day period beginning on the date the Company, the Investors and
Bajaj receive Employee's written notice of objection and (ii) the thirty-day
period beginning on the date the Company, the Investors and Bajaj are given
written notice that the Fair Market Value of a Fair Market Value Share was
finally determined to be an amount more than 10% greater than the per share
repurchase price for Fair Market Value Shares originally determined by the Board
(g) The provisions of this Section 3 shall terminate upon the
consummation of a Sale of the Company.
4. RESTRICTIONS ON TRANSFER OF EMPLOYEE STOCK.
(a) RETENTION OF EMPLOYEE STOCK. Until the fifth anniversary of the
date of this Agreement, Employee shall not sell, transfer, assign, pledge or
otherwise dispose of any interest in any shares of Employee Stock, except
pursuant to: (i) a Sale of the Company, (ii) Section 3 of this Agreement, (iii)
Section 4 of the Stockholders Agreement, (iv) a sale described in clause (i) of
the definition of "PUBLIC SALE," or (v) after a Public Offering, upon any sale
by the Investors or an Affiliate of the type described in clause (ii) of the
definition of "PUBLIC SALE" (a "RULE 144 SALE"), to the extent of the lesser of
(a) the number of shares of Employee Stock held by Employee that are not subject
to repurchase at Original Cost and (b) the number of shares of Employee Stock
held by Employee multiplied by a fraction, the numerator of which is the number
of shares of Common Stock sold by the Investors and their Affiliates in the Rule
144 Sale and the denominator of which is the total number of shares of Common
Stock held by the Investors and their Affiliates immediately prior to such sale.
(b) CERTAIN PERMITTED TRANSFERS. The restrictions in this Section 4
will not apply with respect to (i) transfers of shares of Employee Stock
pursuant to applicable laws of descent and distribution or (ii) transfer of
shares of Employee Stock among Employee's Family Group; provided that such
restrictions will continue to be applicable to the Employee Stock after any such
transfer and the transferees of such Employee Stock have agreed in writing to be
bound by the provisions of this Agreement.
(c) TERMINATION OF RESTRICTIONS. The restrictions on the Transfer of
shares of Employee Stock set forth in this Section 4 will continue with respect
to each share of Employee Stock until the date on which such Employee Stock has
been transferred in a transaction
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<PAGE>
permitted by this Section 4 (except in a transaction contemplated by Section
4(b)); provided that in any event such restrictions will terminate on a Sale of
the Company.
5. ADDITIONAL RESTRICTIONS ON TRANSFER OF EMPLOYEE STOCK.
(a) LEGEND. The certificates representing the Employee Stock will bear
a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A STOCK PURCHASE
AGREEMENT BETWEEN THE COMPANY AND AN EMPLOYEE OF THE COMPANY DATED AS OF AUGUST
12, 1998. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Employee Stock may sell, transfer
or dispose of any Employee Stock (except pursuant to an effective registration
statement under the Securities Act) without first delivering to the Company an
opinion of counsel (reasonably acceptable in form and substance to the Company)
that neither registration nor qualification under the Securities Act and
applicable state securities laws is required in connection with such transfer.
PROVISIONS RELATING TO EMPLOYMENT
6. CONFIDENTIAL INFORMATION.
(a) Employee acknowledges that the Company and its Subsidiaries are
engaged in the business of acquiring businesses that provide electronic commerce
services and operating those businesses after their acquisition (the
"BUSINESS"). Employee further acknowledges that the Business and its continued
success depend upon the use and protection of a large body of confidential and
proprietary information, and that she holds a position of trust and confidence
by virtue of which she necessarily possesses, has access to and, as a
consequence of hers signing this Agreement, will continue to possess and have
access to, highly valuable, confidential and proprietary information of the
Company and its Subsidiaries not known to the public in general, and that it
would be improper for him to make use of this information for the benefit of
himself and others. All of such confidential and proprietary information now
existing or to be developed in the future will be referred to in this Agreement
as "CONFIDENTIAL INFORMATION." This includes, without limitation, information
relating to the nature and operation of the Business, the persons, firms and
corporations which are customers or active prospects of the Company during
Employee's employment by the Company, the Company's development, transition and
transformation plans, methodology and methods of doing business, strategic,
acquisition, marketing and expansion plans, including plans regarding planned
and potential
-6-
<PAGE>
acquisitions and sales, financial and business plans, employee lists, numbers
and location of sales representatives, new and existing programs and services
(and those under development), prices and terms, customer service, integration
processes requirements, costs of providing service, support and equipment and
equipment maintenance costs. Confidential Information shall not include any
information that has become generally known to and available for use by the
public other than as a result of Employee's acts or omissions.
(b) Disclosure of any Confidential Information of the Company shall
not be prohibited if such disclosure is directly pursuant to a valid and
existing order of a court or other governmental body or agency within the United
States; provided, however, that (i) Employee shall first have given prompt
notice to the Company of any such possible or prospective order (or proceeding
pursuant to which any such order may result) and (ii) Employee shall afford the
Company a reasonable opportunity to prevent or limit any such disclosure.
(c) During the Employment Period and at all times thereafter, Employee
will preserve and protect as confidential all of the Confidential Information
known to Employee or at any time in Employee's possession or control. In
addition, during the Employment Period and at all times thereafter, Employee
will not disclose to any unauthorized person or use for hers own account any of
such Confidential Information without the Board's written consent. Employee
agrees to deliver to the Company at a Separation, or at any other time the
Company may request in writing, all memoranda, notes, plans, records, reports
and other documents (and copies thereof) containing or otherwise relating to any
of the Confidential Information (including, without limitation, all acquisition
prospects, lists and contact information) which she may then possess or have
under hers control. Employee acknowledges that all such memoranda, notes, plans,
records, reports and other documents are and at all times will be and remain the
property of the Company.
(d) Employee will fully comply with any agreement reasonably required
by any of the Company's affiliates, business partners, suppliers or contractors
with respect to the protection of the confidential and proprietary information
of such entities.
7. ADDITIONAL ACKNOWLEDGMENTS. Employee acknowledges that the provisions
of this Section are in consideration of: (i) employment with the Company and
(ii) additional good and valuable consideration as set forth in this Agreement.
Employee expressly agrees and acknowledges that the restrictions contained in
Section 6 do not preclude Employee from earning a livelihood, nor does it
unreasonably impose limitations on Employee's ability to earn a living. In
addition, Employee agrees and acknowledges that the potential harm to the
Company of its non-enforcement outweighs any harm to the Employee of its
enforcement by injunction or otherwise. Employee acknowledges that she has
carefully read this Agreement and has given careful consideration to the
restraints imposed upon the Employee by this Agreement, and is in full accord as
to their necessity for the reasonable and proper protection of the Confidential
Information. Employee expressly acknowledges and agrees that each and every
restraint imposed by this Agreement is reasonable with respect to subject
matter, time period and geographical area.
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<PAGE>
GENERAL PROVISIONS
8. DEFINITIONS.
"AFFILIATE" or "AFFILIATES" of an Investor means any direct or indirect
general or limited partner of such Investor, or any employee or owner thereof,
or any other person, entity or investment fund controlling, controlled by or
under common control with such Investor.
"EMPLOYEE'S FAMILY GROUP" means Employee's spouse and descendants (whether
natural or adopted), any trust solely for the benefit of Employee and/or
Employee's spouse and/or descendants and any retirement plan for the Employee.
"EMPLOYEE STOCK" will continue to be Employee Stock in the hands of any
holder other than Employee (except for the Company and the Investors and except
for transferees in a Public Sale), and except as otherwise provided herein, each
such other holder of Employee Stock will succeed to all rights and obligations
attributable to Employee as a holder of Employee Stock hereunder. Employee Stock
will also include shares of the Company's capital stock issued with respect to
Employee Stock by way of a stock split, stock dividend or other
recapitalization.
"FAIR MARKET VALUE" of each share of Employee Stock means the average of
the closing prices of the sales of the Common Stock on all securities exchanges
on which such Common Stock may at the time be listed, or, if there have been no
sales on any such exchange on any day, the average of the highest bid and lowest
asked prices on all such exchanges at the end of such day, or, if on any day
such Common Stock is not so listed, the average of the representative bid and
asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if
on any day such Common Stock is not quoted in the NASDAQ System, of the average
of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market Value
is being determined and the 20 consecutive business days prior to such day. If
at any time such Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Fair Market Value will
be the fair value of such Common Stock determined in good faith by the Board
(the "BOARD CALCULATION"). If the Employee reasonably disagrees with the Board
Calculation, the Employee may, within 30 days after receipt of the Board
Calculation, deliver a notice (an "OBJECTION NOTICE") to the Company setting
forth the Employee's calculation of Fair Market Value. The Board and the
Employee will negotiate in good faith to agree on such Fair Market Value, but if
such agreement is not reached within 30 days after the Company has received the
Objection Notice, Fair Market Value shall be determined by an appraiser jointly
selected by the Board and the Employee, which appraiser shall submit to the
Board and the Employee a report within 30 days of its engagement setting forth
such determination. If the parties are unable to agree on an appraiser within 45
days after the Company has received the Objection Notice, within seven days,
each party shall submit the names of four nationally recognized investment
banking firms, and each party shall be entitled to strike two names from the
other party's list of firms, and the appraiser shall be selected by lot from the
remaining four investment banking firms. The expenses of such appraiser shall be
borne by the Employee unless the appraiser's valuation is not less than 10%
greater than the
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<PAGE>
amount determined by the Board, in which case, the costs of the appraiser shall
be borne by the Company. The determination of such appraiser shall be final and
binding upon all parties. If the Repurchase Option is exercised within 90 days
after a Separation, then Fair Market Value shall be determined as of the date of
such Separation; thereafter, Fair Market Value shall be determined as of the
date the Repurchase Option is exercised.
"ORIGINAL COST" means, with respect to each share of Employee Stock
purchased hereunder, $0.1055 (as proportionately adjusted for all subsequent
stock splits, stock dividends and other recapitalizations).
"PERSON" means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof
"PUBLIC OFFERING" means the sale in an underwritten public offering
registered under the Securities Act of shares of the Company's Common Stock
approved by the Board.
"PUBLIC SALE" means (i) any sale pursuant to a registered public offering
under the Securities Act or (ii) any sale to the public pursuant to Rule 144
promulgated under the Securities Act effected through a broker, dealer or market
maker (other than pursuant to Rule 144(k)).
"SALE OF THE COMPANY" means any transaction or series of transactions
pursuant to which any person(s) or entity(ies) other than the Investors and its
Affiliates in the aggregate acquire(s) (i) capital stock of the Company
possessing the voting power (other than voting rights accruing only in the event
of a default, breach or event of noncompliance) to elect a majority of the
Company's board of directors (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock, shareholder or
voting agreement, proxy, power of attorney or otherwise) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis;
provided that the term "SALE OF THE COMPANY" shall not include a Public
Offering.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated June 29,
1998, among the Company and certain of its stockholders.
"SUBSIDIARY" means any corporation of which fifty percent (50%) or more of
the securities having ordinary voting power in electing the board of directors
are, at the time as of which any determination is being made, owned by the
Company either directly or through one or more Subsidiaries. The term Subsidiary
shall also include any joint venture arrangement between the Company and any
other entity, including, without limitation, the Company's joint venture
arrangement with Commerce Direct International, Inc., a Delaware corporation.
"TRANSFER" means to sell, transfer, assign, pledge or otherwise dispose of
(whether with or without consideration and whether voluntarily or involuntarily
or by operation of law).
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<PAGE>
9. NOTICES. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, mailed by first class mail (postage
prepaid and return receipt requested) or sent by reputable overnight courier
service (charges prepaid) to the recipient at the address below indicated:
If to the Company:
AppNet Systems, Inc.
6700-A Rockledge Drive
Suite 525
Bethesda, MD 20817
Attention: Terrence M. McManus
with a copy to:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Kirkland & Ellis
200 East Randolph
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
If to the Employee:
10020 Mayfield Drive
Bethesda, MD 20817
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<PAGE>
If to the Investors:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Smart Technology, L.L.C.
10201 Norton Road
Potomac, MD 20854
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
10. GENERAL PROVISIONS.
(a) EXPENSES. Each of the Company and the Employee shall pay its or
hers legal, accounting and other expenses incurred in connection with the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement.
(b) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted
Transfer of any Employee Stock in violation of any provision of this Agreement
shall be void, and the Company shall not record such Transfer on its books or
treat any purported transferee of such Employee Stock as the owner of such stock
for any purpose.
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<PAGE>
(c) SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(d) INTENDED THIRD-PARTY BENEFICIARIES. The Investors are intended to
be third-party beneficiaries to this entire Agreement and the rights and
obligations of the parties hereto. It is understood and agreed by the parties
hereto that this Agreement shall be enforceable by GTCR and, provided GTCR is
seeking to enforce substantially the same rights, the other Investor(s) in
accordance with its terms as though each of the Investors were a party to every
provision hereof. Except as expressly provided herein, no other third parties
are intended by the parties hereto to be beneficiaries hereof.
(e) COMPLETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(f) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(g) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by Employee,
the Company, the Investors and their respective successors and assigns
(including subsequent holders of Employee Stock); provided that the rights and
obligations of Employee under this Agreement shall not be assignable except in
connection with a permitted transfer of Employee Stock hereunder. The rights and
obligations of GTCR under this Agreement may be assigned at any time, in whole
or in part, to any investment fund managed by GTCR, or any successor thereto;
provided that such assignment occurs in the manner provided in the Purchase
Agreement.
(h) CHOICE OF LAW. The corporate law of the State of Delaware will
govern all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits hereto will be governed by and
construed in accordance with the internal laws of the State of Maryland, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Maryland or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Maryland.
(i) REMEDIES. Each of the parties to this Agreement (including the
Investors) will be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including attorney's fees) caused by
any breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that
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<PAGE>
money damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that any party may in its sole discretion apply to any court
of law or equity of competent jurisdiction (without posting any bond or deposit)
for specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
(j) AMENDMENT AND WAIVER. The provisions of this Agreement may be
amended and waived only with the written consent of the Company and the
Employee.
(k) BUSINESS DAYS. If any time period for giving notice or taking
action hereunder expires on a day which is a Saturday, Sunday or holiday in the
state in which the Company's chief Employee office is located, the time period
shall be automatically extended to the business day immediately following such
Saturday, Sunday or holiday.
(l) TERMINATION. This Agreement (except for the provisions of Section
6) shall survive a Separation and shall remain in full force and effect after
such Separation.
(m) ADJUSTMENTS OF NUMBERS. All numbers set forth herein which refer
to share prices or amounts will be appropriately adjusted to reflect stock
splits, stock dividends, combinations of shares and other recapitalizations
affecting the subject class of stock.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement on the date first written above.
APPNET SYSTEMS, INC.
By: /S/ KEN S. BAJAJ
-------------------------------------
Ken S. Bajaj
President and Chief Employee Officer
/S/ ROBERT GEORGE
----------------------------------------
Robert George
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Exhibit 4.14
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made as of August
12, 1998, between AppNet Systems, Inc., a Delaware corporation (the
"CORPORATION") and Thomas Meloche (the "EMPLOYEE").
The Company and Employee desire to enter into an agreement pursuant to
which Employee will purchase, and the Company will sell, 40,000 shares of the
Company's Common Stock, par value $.0005 per share (the "EMPLOYEE STOCK").
Certain definitions are set forth in Section 8 of this Agreement.
The execution and delivery of this Agreement by the Company and
Employee is related to the purchase of shares of Common Stock and shares of the
Company's Class A Preferred Stock, par value $.01 per share (the "CLASS A
PREFERRED") by Smart Technology, L.L.C. ("SMART TECHNOLOGY"), GTCR Golder
Rauner, L.L.C., a Delaware limited liability company ("GTCR" and, together with
Smart Technology, the "INVESTORS" and each an "INVESTOR") pursuant to a purchase
agreement between the Company and the Investors dated as of June 29, 1998 (the
"PURCHASE AGREEMENT"). Certain provisions of this Agreement are intended for the
benefit of, and will be enforceable by, the Investors.
The parties hereto agree as follows:
PROVISIONS RELATING TO EMPLOYEE STOCK
1. RESERVED.
2. PURCHASE AND SALE OF EMPLOYEE STOCK.
(a) Upon execution of this Agreement, Employee will purchase,
and the Company will sell, 40,000 shares of Common Stock at a price of $0.1055
per share. The Company will deliver to Employee the certificates representing
such Employee Stock, and Employee will deliver to the Company a check or wire
transfer of funds in the aggregate amount of $20.00 and a promissory note in the
form of ANNEX A attached hereto in an aggregate principal amount of $4,200.00
(the "EMPLOYEE NOTE"). Employee's obligations under the Employee Note shall be
secured by a pledge of all of the shares of Common Stock purchased hereunder to
the Company and in connection therewith, Employee shall enter into a pledge
agreement in the form of ANNEX B attached hereto.
(b) Within 30 days after the date hereof, Employee will make
an effective election with the Internal Revenue Service under Section 83(b) of
the Internal Revenue Code and the regulations promulgated thereunder in the form
of ANNEX C attached hereto.
(c) In connection with the purchase and sale of the Employee
Stock hereunder, Employee represents and warrants to the Company that:
(i) The Employee Stock to be acquired by Employee
pursuant to this Agreement will be acquired for Employee's own account and
not with a view to, or intention of,
<PAGE>
distribution thereof in violation of the Securities Act, or any applicable
state securities laws, and the Employee Stock will not be disposed of in
contravention of the Securities Act or any applicable state securities laws.
(ii) Employee is an Employee of the Company, is
sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in the Employee Stock.
(iii) Employee is able to bear the economic risk of her
investment in the Employee Stock for an indefinite period of time because the
Employee Stock has not been registered under the Securities Act and, therefore,
cannot be sold unless subsequently registered under the Securities Act or an
exemption from such registration is available.
(iv) Employee has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of Employee
Stock and has had full access to such other information concerning the Company
as she has requested.
(v) This Agreement constitutes the legal, valid and
binding obligation of Employee, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Employee does not
and will not conflict with, violate or cause a breach of any agreement, contract
or instrument to which Employee is a party or any judgment, order or decree to
which Employee is subject.
(vi) Employee is a resident of the State of Michigan.
(d) As an inducement to the Company to issue the Employee
Stock to Employee, as a condition thereto, Employee acknowledges and agrees that
neither the issuance of the Employee Stock to Employee nor any provision
contained herein shall entitle Employee to remain in the employment of the
Company and its Subsidiaries or affect the right of the Company to terminate
Employee's employment at any time for any reason.
3. REPURCHASE OPTION.
(a) In the event that Employee ceases to be employed by the
Company and its Subsidiaries for any reason (the "SEPARATION"), the Employee
Stock (whether held by Employee or one or more of Employee's transferees, other
than the Company) will be subject to repurchase, in each case at the option of
the Company, the Investors and Ken S. Bajaj ("Bajaj") pursuant to the terms and
conditions set forth in this Section 3(a) (the "REPURCHASE OPTION"). A
percentage of the Employee Stock will be subject to repurchase at the Employee's
Original Cost for such shares, calculated in accordance with the following
schedule (the "ORIGINAL COST SHARES"):
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<TABLE>
<CAPTION>
DATE PERCENTAGE OF EMPLOYEE STOCK
TO BE REPURCHASED AT ORIGINAL COST
----------------------------------
<S> <C>
Date of this Agreement until 1st Anniversary of this Agreement 100%
Date immediately following 1st Anniversary of this Agreement until 75%
2nd Anniversary of this Agreement
Date immediately following 2nd Anniversary of this Agreement until 50%
3rd Anniversary of this Agreement
Date immediately following 3rd Anniversary of this Agreement until 25%
4th Anniversary of this Agreement
Date immediately following 4th Anniversary of this Agreement and 0%
thereafter
</TABLE>
The purchase price for the remaining shares of Employee Stock shall be the Fair
Market Value of such shares (the "FAIR MARKET VALUE SHARES").
(b) The Company may elect to purchase all or any portion of
the Original Cost Shares and the Fair Market Value Shares by delivering written
notice (the "REPURCHASE NOTICE") to the holder or holders of the Employee Stock
within 180 days after the Separation. The Repurchase Notice will set forth the
number of Original Cost Shares and Fair Market Value Shares to be acquired from
each holder, the aggregate consideration to be paid for such shares and the time
and place for the closing of the transaction. The number of shares to be
repurchased by the Company shall first be satisfied to the extent possible from
the shares of Employee Stock held by Employee at the time of delivery of the
Repurchase Notice. If the number of shares of Employee Stock then held by
Employee is less than the total number of shares of Employee Stock which the
Company has elected to purchase, the Company shall purchase the remaining shares
elected to be purchased from the other holder(s) of Employee Stock under this
Agreement, pro rata according to the number of shares of Employee Stock held by
such other holder(s) at the time of delivery of such Repurchase Notice
(determined as nearly as practicable to the nearest share). The number of
Original Cost Shares and Fair Market Value Shares to be repurchased hereunder
will be allocated among Employee and the other holders of Employee Stock (if
any) pro rata according to the number of shares of Employee Stock to be
purchased from such person.
(c) If for any reason the Company does not elect to purchase
all of the Employee Stock pursuant to the Repurchase Option, the Investors and
Bajaj shall be entitled to exercise the Repurchase Option for all or any portion
of the shares of Employee Stock that the Company has not elected to purchase
(the "AVAILABLE SHARES"). As soon as practicable after the
- 3 -
<PAGE>
Company has determined that there will be Available Shares, but in any event
within 150 days after the Separation, the Company shall give written notice (the
"OPTION NOTICE") to the Investors and Bajaj setting forth the number of
Available Shares and the purchase price for the Available Shares. The Investors
and Bajaj may elect to purchase any or all of the Available Shares by giving
written notice to the Company within one month after the Option Notice has been
given by the Company. If the Investors and Bajaj elect to purchase an aggregate
number of shares greater than the number of Available Shares, the Available
Shares shall be allocated among the Investors and Bajaj based upon the number of
shares of Common Stock owned by each Investor and Bajaj on a fully diluted basis
(excluding, in the case of Bajaj, shares owned by him that are subject to
repurchase at cost). As soon as practicable, and in any event within ten days,
after the expiration of the one-month period set forth above, the Company shall
notify each holder of Employee Stock as to the number of shares being purchased
from such holder by the Investors and Bajaj (the "SUPPLEMENTAL REPURCHASE
NOTICE"). At the time the Company delivers the Supplemental Repurchase Notice to
the holder(s) of Employee Stock, the Company shall also deliver written notice
to the Investors and Bajaj setting forth the number of shares the Investors and
Bajaj are entitled to purchase, the aggregate purchase price and the time and
place of the closing of the transaction. The number of Original Cost Shares and
Fair Market Value Shares to be repurchased hereunder shall be allocated among
the Company, the Investors and Bajaj pro rata according to the number of shares
of Employee Stock to be purchased by each of them. Notwithstanding the
foregoing, the Investors and Bajaj shall not exercise their Repurchase Option as
to the Original Cost Shares pursuant to this Section 3(c) if the Company has
sufficient assets to fully exercise its Repurchase Option as to the Original
Cost Shares but has not exercised such right. Furthermore, if the Investors and
Bajaj repurchase any Original Cost Shares, they shall contribute such Original
Cost Shares to the Company in exchange for a promissory note from the Company
with an aggregate principal amount equal to the purchase price paid for such
shares, bearing interest (payable quarterly) at a rate per annum equal to the
prime rate as published in the WALL STREET JOURNAL from time to time, and having
a term of no longer than five years.
(d) The closing of the purchase of the Employee Stock pursuant
to the Repurchase Option shall take place on the date designated by the Company
in the Repurchase Notice or Supplemental Repurchase Notice, which date shall not
be more than one month nor less than five days after the delivery of the later
of either such notice to be delivered. The Company will pay for the Employee
Stock to be purchased by it pursuant to the Repurchase Option by first
offsetting amounts outstanding under any bona fide debts owed by Employee to the
Company and will pay the remainder of the purchase price by, at its option, (A)
a check or wire transfer of funds, or (B) a check or wire transfer of funds for
at least one-third of the purchase price, and a subordinated note or notes
payable in two equal annual installments beginning on each of the first and
second anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the prime rate as published in THE WALL
STREET JOURNAL from time to time in the aggregate amount of the remainder of the
purchase price for such shares. The Investors and Bajaj will pay for the
Employee Stock purchased by it by a check or wire transfer of funds. The
Company, the Investors and Bajaj will be entitled to receive customary
representations and warranties from the sellers regarding such sale and to
require that all sellers' signatures be guaranteed.
- 4 -
<PAGE>
(e) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Employee Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Employee Stock hereunder which the
Company is otherwise entitled or required to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions.
(f) Notwithstanding anything to the contrary contained in this
Agreement, if the Employee delivers the notice of objection described in the
definition of Fair Market Value, or if the Fair Market Value of a Fair Market
Value Share is otherwise determined to be an amount more than 10% greater than
the per share repurchase price for Fair Market Value Shares originally
determined by the Board, each of the Company, the Investors and Bajaj shall have
the right to revoke its or their exercise of the Repurchase Option for all or
any portion of the Employee Stock elected to be repurchased by it by delivering
notice of such revocation in writing to the holders of the Employee Stock during
(i) the thirty-day period beginning on the date the Company, the Investors and
Bajaj receive Employee's written notice of objection and (ii) the thirty-day
period beginning on the date the Company, the Investors and Bajaj are given
written notice that the Fair Market Value of a Fair Market Value Share was
finally determined to be an amount more than 10% greater than the per share
repurchase price for Fair Market Value Shares originally determined by the Board
(g) The provisions of this Section 3 shall terminate upon the
consummation of a Sale of the Company.
4. RESTRICTIONS ON TRANSFER OF EMPLOYEE STOCK.
(a) RETENTION OF EMPLOYEE STOCK. Until the fifth anniversary
of the date of this Agreement, Employee shall not sell, transfer, assign, pledge
or otherwise dispose of any interest in any shares of Employee Stock, except
pursuant to: (i) a Sale of the Company, (ii) Section 3 of this Agreement, (iii)
Section 4 of the Stockholders Agreement, (iv) a sale described in clause (i) of
the definition of "PUBLIC SALE," or (v) after a Public Offering, upon any sale
by the Investors or an Affiliate of the type described in clause (ii) of the
definition of "PUBLIC SALE" (a "RULE 144 SALE"), to the extent of the lesser of
(a) the number of shares of Employee Stock held by Employee that are not subject
to repurchase at Original Cost and (b) the number of shares of Employee Stock
held by Employee multiplied by a fraction, the numerator of which is the number
of shares of Common Stock sold by the Investors and their Affiliates in the Rule
144 Sale and the denominator of which is the total number of shares of Common
Stock held by the Investors and their Affiliates immediately prior to such sale.
(b) CERTAIN PERMITTED TRANSFERS. The restrictions in this
Section 4 will not apply with respect to (i) transfers of shares of Employee
Stock pursuant to applicable laws of descent and distribution or (ii) transfer
of shares of Employee Stock among Employee's Family Group; provided that such
restrictions will continue to be applicable to the Employee Stock after any such
transfer and the transferees of such Employee Stock have agreed in writing to be
bound by the provisions of this Agreement.
- 5 -
<PAGE>
(c) TERMINATION OF RESTRICTIONS. The restrictions on the
Transfer of shares of Employee Stock set forth in this Section 4 will continue
with respect to each share of Employee Stock until the date on which such
Employee Stock has been transferred in a transaction permitted by this Section 4
(except in a transaction contemplated by Section 4(b)); provided that in any
event such restrictions will terminate on a Sale of the Company.
5. ADDITIONAL RESTRICTIONS ON TRANSFER OF EMPLOYEE STOCK.
(a) LEGEND. The certificates representing the Employee Stock
will bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A STOCK PURCHASE
AGREEMENT BETWEEN THE COMPANY AND AN EMPLOYEE OF THE COMPANY DATED AS OF AUGUST
12, 1998. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Employee Stock may sell,
transfer or dispose of any Employee Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
PROVISIONS RELATING TO EMPLOYMENT
6. CONFIDENTIAL INFORMATION.
(a) Employee acknowledges that the Company and its
Subsidiaries are engaged in the business of acquiring businesses that provide
electronic commerce services and operating those businesses after their
acquisition (the "BUSINESS"). Employee further acknowledges that the Business
and its continued success depend upon the use and protection of a large body of
confidential and proprietary information, and that she holds a position of trust
and confidence by virtue of which she necessarily possesses, has access to and,
as a consequence of hers signing this Agreement, will continue to possess and
have access to, highly valuable, confidential and proprietary information of the
Company and its Subsidiaries not known to the public in general, and that it
would be improper for him to make use of this information for the benefit of
himself and others. All of such confidential and proprietary information now
existing or to be developed in the future will be referred to in this Agreement
as "CONFIDENTIAL INFORMATION." This includes, without limitation, information
relating to the nature and operation of the Business, the persons, firms and
corporations which are customers or active prospects of
- 6 -
<PAGE>
the Company during Employee's employment by the Company, the Company's
development, transition and transformation plans, methodology and methods of
doing business, strategic, acquisition, marketing and expansion plans, including
plans regarding planned and potential acquisitions and sales, financial and
business plans, employee lists, numbers and location of sales representatives,
new and existing programs and services (and those under development), prices and
terms, customer service, integration processes requirements, costs of providing
service, support and equipment and equipment maintenance costs. Confidential
Information shall not include any information that has become generally known to
and available for use by the public other than as a result of Employee's acts or
omissions.
(b) Disclosure of any Confidential Information of the Company
shall not be prohibited if such disclosure is directly pursuant to a valid and
existing order of a court or other governmental body or agency within the United
States; provided, however, that (i) Employee shall first have given prompt
notice to the Company of any such possible or prospective order (or proceeding
pursuant to which any such order may result) and (ii) Employee shall afford the
Company a reasonable opportunity to prevent or limit any such disclosure.
(c) During the Employment Period and at all times thereafter,
Employee will preserve and protect as confidential all of the Confidential
Information known to Employee or at any time in Employee's possession or
control. In addition, during the Employment Period and at all times thereafter,
Employee will not disclose to any unauthorized person or use for hers own
account any of such Confidential Information without the Board's written
consent. Employee agrees to deliver to the Company at a Separation, or at any
other time the Company may request in writing, all memoranda, notes, plans,
records, reports and other documents (and copies thereof) containing or
otherwise relating to any of the Confidential Information (including, without
limitation, all acquisition prospects, lists and contact information) which she
may then possess or have under hers control. Employee acknowledges that all such
memoranda, notes, plans, records, reports and other documents are and at all
times will be and remain the property of the Company.
(d) Employee will fully comply with any agreement reasonably
required by any of the Company's affiliates, business partners, suppliers or
contractors with respect to the protection of the confidential and proprietary
information of such entities.
7. ADDITIONAL ACKNOWLEDGMENTS. Employee acknowledges that the
provisions of this Section are in consideration of: (i) employment with the
Company and (ii) additional good and valuable consideration as set forth in
this Agreement. Employee expressly agrees and acknowledges that the
restrictions contained in Section 6 do not preclude Employee from earning a
livelihood, nor does it unreasonably impose limitations on Employee's ability
to earn a living. In addition, Employee agrees and acknowledges that the
potential harm to the Company of its non-enforcement outweighs any harm to
the Employee of its enforcement by injunction or otherwise. Employee
acknowledges that she has carefully read this Agreement and has given careful
consideration to the restraints imposed upon the Employee by this Agreement,
and is in full accord as to their necessity for the reasonable and proper
protection of the Confidential Information. Employee expressly acknowledges
and agrees that each and every restraint
- 7 -
<PAGE>
imposed by this Agreement is reasonable with respect to subject matter, time
period and geographical area.
GENERAL PROVISIONS
8. DEFINITIONS.
"AFFILIATE" or "AFFILIATES" of an Investor means any direct or indirect
general or limited partner of such Investor, or any employee or owner thereof,
or any other person, entity or investment fund controlling, controlled by or
under common control with such Investor.
"EMPLOYEE'S FAMILY GROUP" means Employee's spouse and descendants
(whether natural or adopted), any trust solely for the benefit of Employee
and/or Employee's spouse and/or descendants and any retirement plan for the
Employee.
"EMPLOYEE STOCK" will continue to be Employee Stock in the hands of any
holder other than Employee (except for the Company and the Investors and except
for transferees in a Public Sale), and except as otherwise provided herein, each
such other holder of Employee Stock will succeed to all rights and obligations
attributable to Employee as a holder of Employee Stock hereunder. Employee Stock
will also include shares of the Company's capital stock issued with respect to
Employee Stock by way of a stock split, stock dividend or other
recapitalization.
"FAIR MARKET VALUE" of each share of Employee Stock means the average
of the closing prices of the sales of the Common Stock on all securities
exchanges on which such Common Stock may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such day, or, if
on any day such Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time,
or, if on any day such Common Stock is not quoted in the NASDAQ System, of the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market Value
is being determined and the 20 consecutive business days prior to such day. If
at any time such Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Fair Market Value will
be the fair value of such Common Stock determined in good faith by the Board
(the "BOARD CALCULATION"). If the Employee reasonably disagrees with the Board
Calculation, the Employee may, within 30 days after receipt of the Board
Calculation, deliver a notice (an "OBJECTION NOTICE") to the Company setting
forth the Employee's calculation of Fair Market Value. The Board and the
Employee will negotiate in good faith to agree on such Fair Market Value, but if
such agreement is not reached within 30 days after the Company has received the
Objection Notice, Fair Market Value shall be determined by an appraiser jointly
selected by the Board and the Employee, which appraiser shall submit to the
Board and the Employee a report within 30 days of its engagement setting forth
such determination. If the parties are unable to agree on an appraiser within 45
days after the Company has received the Objection Notice, within seven days,
each party shall submit the names of four nationally recognized investment
banking firms, and each party shall be entitled to strike two names from the
other party's list of firms, and the appraiser shall be selected by lot
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<PAGE>
from the remaining four investment banking firms. The expenses of such appraiser
shall be borne by the Employee unless the appraiser's valuation is not less than
10% greater than the amount determined by the Board, in which case, the costs of
the appraiser shall be borne by the Company. The determination of such appraiser
shall be final and binding upon all parties. If the Repurchase Option is
exercised within 90 days after a Separation, then Fair Market Value shall be
determined as of the date of such Separation; thereafter, Fair Market Value
shall be determined as of the date the Repurchase Option is exercised.
"ORIGINAL COST" means, with respect to each share of Employee Stock
purchased hereunder, $0.1055 (as proportionately adjusted for all subsequent
stock splits, stock dividends and other recapitalizations).
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof
"PUBLIC OFFERING" means the sale in an underwritten public offering
registered under the Securities Act of shares of the Company's Common Stock
approved by the Board.
"PUBLIC SALE" means (i) any sale pursuant to a registered public
offering under the Securities Act or (ii) any sale to the public pursuant to
Rule 144 promulgated under the Securities Act effected through a broker, dealer
or market maker (other than pursuant to Rule 144(k)).
"SALE OF THE COMPANY" means any transaction or series of transactions
pursuant to which any person(s) or entity(ies) other than the Investors and its
Affiliates in the aggregate acquire(s) (i) capital stock of the Company
possessing the voting power (other than voting rights accruing only in the event
of a default, breach or event of noncompliance) to elect a majority of the
Company's board of directors (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock, shareholder or
voting agreement, proxy, power of attorney or otherwise) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis;
provided that the term "SALE OF THE COMPANY" shall not include a Public
Offering.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated June
29, 1998, among the Company and certain of its stockholders.
"SUBSIDIARY" means any corporation of which fifty percent (50%) or more
of the securities having ordinary voting power in electing the board of
directors are, at the time as of which any determination is being made, owned by
the Company either directly or through one or more Subsidiaries. The term
Subsidiary shall also include any joint venture arrangement between the Company
and any other entity, including, without limitation, the Company's joint venture
arrangement with Commerce Direct International, Inc., a Delaware corporation.
- 9 -
<PAGE>
"TRANSFER" means to sell, transfer, assign, pledge or otherwise dispose
of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law).
9. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:
If to the Company:
AppNet Systems, Inc.
6700-A Rockledge Drive
Suite 525
Bethesda, MD 20817
Attention: Terrence M. McManus
with a copy to:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Kirkland & Ellis
200 East Randolph
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
If to the Employee:
2570 Packard Road
Ann Arbor, MI 48104
- 10 -
<PAGE>
If to the Investors:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Smart Technology, L.L.C.
10201 Norton Road
Potomac, MD 20854
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
10. GENERAL PROVISIONS.
(a) EXPENSES. Each of the Company and the Employee shall pay
its or hers legal, accounting and other expenses incurred in connection with the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement.
(b) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Employee Stock in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Employee Stock as the owner of
such stock for any purpose.
- 11 -
<PAGE>
(c) SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(d) INTENDED THIRD-PARTY BENEFICIARIES. The Investors are
intended to be third-party beneficiaries to this entire Agreement and the rights
and obligations of the parties hereto. It is understood and agreed by the
parties hereto that this Agreement shall be enforceable by GTCR and, provided
GTCR is seeking to enforce substantially the same rights, the other Investor(s)
in accordance with its terms as though each of the Investors were a party to
every provision hereof. Except as expressly provided herein, no other third
parties are intended by the parties hereto to be beneficiaries hereof.
(e) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(f) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(g) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by Employee, the Company, the Investors and their respective successors and
assigns (including subsequent holders of Employee Stock); provided that the
rights and obligations of Employee under this Agreement shall not be assignable
except in connection with a permitted transfer of Employee Stock hereunder. The
rights and obligations of GTCR under this Agreement may be assigned at any time,
in whole or in part, to any investment fund managed by GTCR, or any successor
thereto; provided that such assignment occurs in the manner provided in the
Purchase Agreement.
(h) CHOICE OF LAW. The corporate law of the State of Delaware
will govern all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits hereto will be governed by and
construed in accordance with the internal laws of the State of Maryland, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Maryland or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Maryland.
(i) REMEDIES. Each of the parties to this Agreement (including
the Investors) will be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including attorney's fees) caused by
any breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that
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<PAGE>
money damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that any party may in its sole discretion apply to any court
of law or equity of competent jurisdiction (without posting any bond or deposit)
for specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
(j) AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended and waived only with the written consent of the Company and the
Employee.
(k) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or holiday
in the state in which the Company's chief Employee office is located, the time
period shall be automatically extended to the business day immediately following
such Saturday, Sunday or holiday.
(l) TERMINATION. This Agreement (except for the provisions of
Section 6) shall survive a Separation and shall remain in full force and effect
after such Separation.
(m) ADJUSTMENTS OF NUMBERS. All numbers set forth herein which
refer to share prices or amounts will be appropriately adjusted to reflect stock
splits, stock dividends, combinations of shares and other recapitalizations
affecting the subject class of stock.
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the date first written above.
APPNET SYSTEMS, INC.
By: /s/ Ken S. Bajaj
------------------------------------------
Ken S. Bajaj
President and Chief Employee Officer
/s/ Thomas Meloche
------------------------------------------
Thomas Meloche
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<PAGE>
Exhibit 4.15
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made as of August
12, 1998, between AppNet Systems, Inc., a Delaware corporation (the
"CORPORATION") and Robert Simms (the "EMPLOYEE").
The Company and Employee desire to enter into an agreement pursuant to
which Employee will purchase, and the Company will sell, 50,000 shares of the
Company's Common Stock, par value $.0005 per share (the "EMPLOYEE STOCK").
Certain definitions are set forth in Section 8 of this Agreement.
The execution and delivery of this Agreement by the Company and
Employee is related to the purchase of shares of Common Stock and shares of the
Company's Class A Preferred Stock, par value $.01 per share (the "CLASS A
PREFERRED") by Smart Technology, L.L.C. ("SMART TECHNOLOGY"), GTCR Golder
Rauner, L.L.C., a Delaware limited liability company ("GTCR" and, together with
Smart Technology, the "INVESTORS" and each an "INVESTOR") pursuant to a purchase
agreement between the Company and the Investors dated as of June 29, 1998 (the
"PURCHASE Agreement"). Certain provisions of this Agreement are intended for the
benefit of, and will be enforceable by, the Investors.
The parties hereto agree as follows:
PROVISIONS RELATING TO EMPLOYEE STOCK
1. RESERVED.
2. PURCHASE AND SALE OF EMPLOYEE STOCK.
(a) Upon execution of this Agreement, Employee will purchase,
and the Company will sell, 50,000 shares of Common Stock at a price of $0.1055
per share. The Company will deliver to Employee the certificates representing
such Employee Stock, and Employee will deliver to the Company a check or wire
transfer of funds in the aggregate amount of $25.00 and a promissory note in the
form of ANNEX A attached hereto in an aggregate principal amount of $5,250.00
(the "EMPLOYEE NOTE"). Employee's obligations under the Employee Note shall be
secured by a pledge of all of the shares of Common Stock purchased hereunder to
the Company and in connection therewith, Employee shall enter into a pledge
agreement in the form of ANNEX B attached hereto.
(b) Within 30 days after the date hereof, Employee will make
an effective election with the Internal Revenue Service under Section 83(b) of
the Internal Revenue Code and the regulations promulgated thereunder in the form
of ANNEX C attached hereto.
(c) In connection with the purchase and sale of the Employee
Stock hereunder, Employee represents and warrants to the Company that:
(i) The Employee Stock to be acquired by Employee
pursuant to this Agreement will be acquired for Employee's own account and not
with a view to, or intention of,
<PAGE>
distribution thereof in violation of the Securities Act, or any applicable state
securities laws, and the Employee Stock will not be disposed of in contravention
of the Securities Act or any applicable state securities laws.
(ii) Employee is an Employee of the Company, is
sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in the Employee Stock.
(iii) Employee is able to bear the economic risk of
her investment in the Employee Stock for an indefinite period of time because
the Employee Stock has not been registered under the Securities Act and,
therefore, cannot be sold unless subsequently registered under the Securities
Act or an exemption from such registration is available.
(iv) Employee has had an opportunity to ask questions
and receive answers concerning the terms and conditions of the offering of
Employee Stock and has had full access to such other information concerning the
Company as she has requested.
(v) This Agreement constitutes the legal, valid and
binding obligation of Employee, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Employee does not
and will not conflict with, violate or cause a breach of any agreement, contract
or instrument to which Employee is a party or any judgment, order or decree to
which Employee is subject.
(vi) Employee is a resident of the State of Michigan.
(d) As an inducement to the Company to issue the Employee
Stock to Employee, as a condition thereto, Employee acknowledges and agrees that
neither the issuance of the Employee Stock to Employee nor any provision
contained herein shall entitle Employee to remain in the employment of the
Company and its Subsidiaries or affect the right of the Company to terminate
Employee's employment at any time for any reason.
3. REPURCHASE OPTION.
(a) In the event that Employee ceases to be employed by the
Company and its Subsidiaries for any reason (the "SEPARATION"), the Employee
Stock (whether held by Employee or one or more of Employee's transferees, other
than the Company) will be subject to repurchase, in each case at the option of
the Company, the Investors and Ken S. Bajaj ("Bajaj") pursuant to the terms and
conditions set forth in this Section 3(a) (the "REPURCHASE OPTION"). A
percentage of the Employee Stock will be subject to repurchase at the Employee's
Original Cost for such shares, calculated in accordance with the following
schedule (the "ORIGINAL COST SHARES"):
-2-
<PAGE>
<TABLE>
<CAPTION>
DATE PERCENTAGE OF EMPLOYEE STOCK
TO BE REPURCHASED AT ORIGINAL COST
----------------------------------
<S> <C>
Date of this Agreement until 1st Anniversary of this Agreement 100%
Date immediately following 1st Anniversary of this Agreement until 75%
2nd Anniversary of this Agreement
Date immediately following 2nd Anniversary of this Agreement until 50%
3rd Anniversary of this Agreement
Date immediately following 3rd Anniversary of this Agreement until 25%
4th Anniversary of this Agreement
Date immediately following 4th Anniversary of this Agreement and 0%
thereafter
</TABLE>
The purchase price for the remaining shares of Employee Stock shall be the Fair
Market Value of such shares (the "FAIR MARKET VALUE SHARES").
(b) The Company may elect to purchase all or any portion of
the Original Cost Shares and the Fair Market Value Shares by delivering written
notice (the "REPURCHASE NOTICE") to the holder or holders of the Employee Stock
within 180 days after the Separation. The Repurchase Notice will set forth the
number of Original Cost Shares and Fair Market Value Shares to be acquired from
each holder, the aggregate consideration to be paid for such shares and the time
and place for the closing of the transaction. The number of shares to be
repurchased by the Company shall first be satisfied to the extent possible from
the shares of Employee Stock held by Employee at the time of delivery of the
Repurchase Notice. If the number of shares of Employee Stock then held by
Employee is less than the total number of shares of Employee Stock which the
Company has elected to purchase, the Company shall purchase the remaining shares
elected to be purchased from the other holder(s) of Employee Stock under this
Agreement, pro rata according to the number of shares of Employee Stock held by
such other holder(s) at the time of delivery of such Repurchase Notice
(determined as nearly as practicable to the nearest share). The number of
Original Cost Shares and Fair Market Value Shares to be repurchased hereunder
will be allocated among Employee and the other holders of Employee Stock (if
any) pro rata according to the number of shares of Employee Stock to be
purchased from such person.
(c) If for any reason the Company does not elect to purchase
all of the Employee Stock pursuant to the Repurchase Option, the Investors and
Bajaj shall be entitled to exercise the Repurchase Option for all or any portion
of the shares of Employee Stock that the Company has not elected to purchase
(the "AVAILABLE SHARES"). As soon as practicable after the
-3-
<PAGE>
Company has determined that there will be Available Shares, but in any event
within 150 days after the Separation, the Company shall give written notice (the
"OPTION NOTICE") to the Investors and Bajaj setting forth the number of
Available Shares and the purchase price for the Available Shares. The Investors
and Bajaj may elect to purchase any or all of the Available Shares by giving
written notice to the Company within one month after the Option Notice has been
given by the Company. If the Investors and Bajaj elect to purchase an aggregate
number of shares greater than the number of Available Shares, the Available
Shares shall be allocated among the Investors and Bajaj based upon the number of
shares of Common Stock owned by each Investor and Bajaj on a fully diluted basis
(excluding, in the case of Bajaj, shares owned by him that are subject to
repurchase at cost). As soon as practicable, and in any event within ten days,
after the expiration of the one-month period set forth above, the Company shall
notify each holder of Employee Stock as to the number of shares being purchased
from such holder by the Investors and Bajaj (the "SUPPLEMENTAL REPURCHASE
NOTICE"). At the time the Company delivers the Supplemental Repurchase Notice to
the holder(s) of Employee Stock, the Company shall also deliver written notice
to the Investors and Bajaj setting forth the number of shares the Investors and
Bajaj are entitled to purchase, the aggregate purchase price and the time and
place of the closing of the transaction. The number of Original Cost Shares and
Fair Market Value Shares to be repurchased hereunder shall be allocated among
the Company, the Investors and Bajaj pro rata according to the number of shares
of Employee Stock to be purchased by each of them. Notwithstanding the
foregoing, the Investors and Bajaj shall not exercise their Repurchase Option as
to the Original Cost Shares pursuant to this Section 3(c) if the Company has
sufficient assets to fully exercise its Repurchase Option as to the Original
Cost Shares but has not exercised such right. Furthermore, if the Investors and
Bajaj repurchase any Original Cost Shares, they shall contribute such Original
Cost Shares to the Company in exchange for a promissory note from the Company
with an aggregate principal amount equal to the purchase price paid for such
shares, bearing interest (payable quarterly) at a rate per annum equal to the
prime rate as published in the WALL STREET JOURNAL from time to time, and having
a term of no longer than five years.
(d) The closing of the purchase of the Employee Stock pursuant
to the Repurchase Option shall take place on the date designated by the Company
in the Repurchase Notice or Supplemental Repurchase Notice, which date shall not
be more than one month nor less than five days after the delivery of the later
of either such notice to be delivered. The Company will pay for the Employee
Stock to be purchased by it pursuant to the Repurchase Option by first
offsetting amounts outstanding under any bona fide debts owed by Employee to the
Company and will pay the remainder of the purchase price by, at its option, (A)
a check or wire transfer of funds, or (B) a check or wire transfer of funds for
at least one-third of the purchase price, and a subordinated note or notes
payable in two equal annual installments beginning on each of the first and
second anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the prime rate as published in THE WALL
STREET JOURNAL from time to time in the aggregate amount of the remainder of the
purchase price for such shares. The Investors and Bajaj will pay for the
Employee Stock purchased by it by a check or wire transfer of funds. The
Company, the Investors and Bajaj will be entitled to receive customary
representations and warranties from the sellers regarding such sale and to
require that all sellers' signatures be guaranteed.
-4-
<PAGE>
(e) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Employee Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Employee Stock hereunder which the
Company is otherwise entitled or required to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions.
(f) Notwithstanding anything to the contrary contained in this
Agreement, if the Employee delivers the notice of objection described in the
definition of Fair Market Value, or if the Fair Market Value of a Fair Market
Value Share is otherwise determined to be an amount more than 10% greater than
the per share repurchase price for Fair Market Value Shares originally
determined by the Board, each of the Company, the Investors and Bajaj shall have
the right to revoke its or their exercise of the Repurchase Option for all or
any portion of the Employee Stock elected to be repurchased by it by delivering
notice of such revocation in writing to the holders of the Employee Stock during
(i) the thirty-day period beginning on the date the Company, the Investors and
Bajaj receive Employee's written notice of objection and (ii) the thirty-day
period beginning on the date the Company, the Investors and Bajaj are given
written notice that the Fair Market Value of a Fair Market Value Share was
finally determined to be an amount more than 10% greater than the per share
repurchase price for Fair Market Value Shares originally determined by the Board
(g) The provisions of this Section 3 shall terminate upon the
consummation of a Sale of the Company.
4. RESTRICTIONS ON TRANSFER OF EMPLOYEE STOCK.
(a) RETENTION OF EMPLOYEE STOCK. Until the fifth anniversary
of the date of this Agreement, Employee shall not sell, transfer, assign, pledge
or otherwise dispose of any interest in any shares of Employee Stock, except
pursuant to: (i) a Sale of the Company, (ii) Section 3 of this Agreement, (iii)
Section 4 of the Stockholders Agreement, (iv) a sale described in clause (i) of
the definition of "PUBLIC SALE," or (v) after a Public Offering, upon any sale
by the Investors or an Affiliate of the type described in clause (ii) of the
definition of "PUBLIC SALE" (a "RULE 144 SALE"), to the extent of the lesser of
(a) the number of shares of Employee Stock held by Employee that are not subject
to repurchase at Original Cost and (b) the number of shares of Employee Stock
held by Employee multiplied by a fraction, the numerator of which is the number
of shares of Common Stock sold by the Investors and their Affiliates in the Rule
144 Sale and the denominator of which is the total number of shares of Common
Stock held by the Investors and their Affiliates immediately prior to such sale.
(b) CERTAIN PERMITTED TRANSFERS. The restrictions in this
Section 4 will not apply with respect to (i) transfers of shares of Employee
Stock pursuant to applicable laws of descent and distribution or (ii) transfer
of shares of Employee Stock among Employee's Family Group; provided that such
restrictions will continue to be applicable to the Employee Stock after any such
transfer and the transferees of such Employee Stock have agreed in writing to be
bound by the provisions of this Agreement.
-5-
<PAGE>
(c) TERMINATION OF RESTRICTIONS. The restrictions on the
Transfer of shares of Employee Stock set forth in this Section 4 will continue
with respect to each share of Employee Stock until the date on which such
Employee Stock has been transferred in a transaction permitted by this Section 4
(except in a transaction contemplated by Section 4(b)); provided that in any
event such restrictions will terminate on a Sale of the Company.
5. ADDITIONAL RESTRICTIONS ON TRANSFER OF EMPLOYEE STOCK.
(a) LEGEND. The certificates representing the Employee Stock
will bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A STOCK PURCHASE
AGREEMENT BETWEEN THE COMPANY AND AN EMPLOYEE OF THE COMPANY DATED AS OF AUGUST
12, 1998. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Employee Stock may sell,
transfer or dispose of any Employee Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
PROVISIONS RELATING TO EMPLOYMENT
6. CONFIDENTIAL INFORMATION.
(a) Employee acknowledges that the Company and its
Subsidiaries are engaged in the business of acquiring businesses that provide
electronic commerce services and operating those businesses after their
acquisition (the "BUSINESS"). Employee further acknowledges that the Business
and its continued success depend upon the use and protection of a large body of
confidential and proprietary information, and that she holds a position of trust
and confidence by virtue of which she necessarily possesses, has access to and,
as a consequence of hers signing this Agreement, will continue to possess and
have access to, highly valuable, confidential and proprietary information of the
Company and its Subsidiaries not known to the public in general, and that it
would be improper for him to make use of this information for the benefit of
himself and others. All of such confidential and proprietary information now
existing or to be developed in the future will be referred to in this Agreement
as "CONFIDENTIAL INFORMATION." This includes, without limitation, information
relating to the nature and operation of the Business, the persons, firms and
corporations which are customers or active prospects of
-6-
<PAGE>
the Company during Employee's employment by the Company, the Company's
development, transition and transformation plans, methodology and methods of
doing business, strategic, acquisition, marketing and expansion plans, including
plans regarding planned and potential acquisitions and sales, financial and
business plans, employee lists, numbers and location of sales representatives,
new and existing programs and services (and those under development), prices and
terms, customer service, integration processes requirements, costs of providing
service, support and equipment and equipment maintenance costs. Confidential
Information shall not include any information that has become generally known to
and available for use by the public other than as a result of Employee's acts or
omissions.
(b) Disclosure of any Confidential Information of the Company
shall not be prohibited if such disclosure is directly pursuant to a valid and
existing order of a court or other governmental body or agency within the United
States; provided, however, that (i) Employee shall first have given prompt
notice to the Company of any such possible or prospective order (or proceeding
pursuant to which any such order may result) and (ii) Employee shall afford the
Company a reasonable opportunity to prevent or limit any such disclosure.
(c) During the Employment Period and at all times thereafter,
Employee will preserve and protect as confidential all of the Confidential
Information known to Employee or at any time in Employee's possession or
control. In addition, during the Employment Period and at all times thereafter,
Employee will not disclose to any unauthorized person or use for hers own
account any of such Confidential Information without the Board's written
consent. Employee agrees to deliver to the Company at a Separation, or at any
other time the Company may request in writing, all memoranda, notes, plans,
records, reports and other documents (and copies thereof) containing or
otherwise relating to any of the Confidential Information (including, without
limitation, all acquisition prospects, lists and contact information) which she
may then possess or have under hers control. Employee acknowledges that all such
memoranda, notes, plans, records, reports and other documents are and at all
times will be and remain the property of the Company.
(d) Employee will fully comply with any agreement reasonably
required by any of the Company's affiliates, business partners, suppliers or
contractors with respect to the protection of the confidential and proprietary
information of such entities.
7. ADDITIONAL ACKNOWLEDGMENTS. Employee acknowledges that the
provisions of this Section are in consideration of: (i) employment with the
Company and (ii) additional good and valuable consideration as set forth in this
Agreement. Employee expressly agrees and acknowledges that the restrictions
contained in Section 6 do not preclude Employee from earning a livelihood, nor
does it unreasonably impose limitations on Employee's ability to earn a living.
In addition, Employee agrees and acknowledges that the potential harm to the
Company of its non-enforcement outweighs any harm to the Employee of its
enforcement by injunction or otherwise. Employee acknowledges that she has
carefully read this Agreement and has given careful consideration to the
restraints imposed upon the Employee by this Agreement, and is in full accord as
to their necessity for the reasonable and proper protection of the Confidential
Information. Employee expressly acknowledges and agrees that each and every
restraint
-7-
<PAGE>
imposed by this Agreement is reasonable with respect to subject matter, time
period and geographical area.
GENERAL PROVISIONS
8. DEFINITIONS.
"AFFILIATE" or "AFFILIATES" of an Investor means any direct or indirect
general or limited partner of such Investor, or any employee or owner thereof,
or any other person, entity or investment fund controlling, controlled by or
under common control with such Investor.
"EMPLOYEE'S FAMILY GROUP" means Employee's spouse and descendants
(whether natural or adopted), any trust solely for the benefit of Employee
and/or Employee's spouse and/or descendants and any retirement plan for the
Employee.
"EMPLOYEE STOCK" will continue to be Employee Stock in the hands of any
holder other than Employee (except for the Company and the Investors and except
for transferees in a Public Sale), and except as otherwise provided herein, each
such other holder of Employee Stock will succeed to all rights and obligations
attributable to Employee as a holder of Employee Stock hereunder. Employee Stock
will also include shares of the Company's capital stock issued with respect to
Employee Stock by way of a stock split, stock dividend or other
recapitalization.
"FAIR MARKET VALUE" of each share of Employee Stock means the average
of the closing prices of the sales of the Common Stock on all securities
exchanges on which such Common Stock may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such day, or, if
on any day such Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time,
or, if on any day such Common Stock is not quoted in the NASDAQ System, of the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market Value
is being determined and the 20 consecutive business days prior to such day. If
at any time such Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Fair Market Value will
be the fair value of such Common Stock determined in good faith by the Board
(the "BOARD CALCULATION"). If the Employee reasonably disagrees with the Board
Calculation, the Employee may, within 30 days after receipt of the Board
Calculation, deliver a notice (an "OBJECTION NOTICE") to the Company setting
forth the Employee's calculation of Fair Market Value. The Board and the
Employee will negotiate in good faith to agree on such Fair Market Value, but if
such agreement is not reached within 30 days after the Company has received the
Objection Notice, Fair Market Value shall be determined by an appraiser jointly
selected by the Board and the Employee, which appraiser shall submit to the
Board and the Employee a report within 30 days of its engagement setting forth
such determination. If the parties are unable to agree on an appraiser within 45
days after the Company has received the Objection Notice, within seven days,
each party shall submit the names of four nationally recognized investment
banking firms, and each party shall be entitled to strike two names from the
other party's list of firms, and the appraiser shall be selected by lot
-8-
<PAGE>
from the remaining four investment banking firms. The expenses of such appraiser
shall be borne by the Employee unless the appraiser's valuation is not less than
10% greater than the amount determined by the Board, in which case, the costs of
the appraiser shall be borne by the Company. The determination of such appraiser
shall be final and binding upon all parties. If the Repurchase Option is
exercised within 90 days after a Separation, then Fair Market Value shall be
determined as of the date of such Separation; thereafter, Fair Market Value
shall be determined as of the date the Repurchase Option is exercised.
"ORIGINAL COST" means, with respect to each share of Employee Stock
purchased hereunder, $0.1055 (as proportionately adjusted for all subsequent
stock splits, stock dividends and other recapitalizations).
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof
"PUBLIC OFFERING" means the sale in an underwritten public offering
registered under the Securities Act of shares of the Company's Common Stock
approved by the Board.
"PUBLIC SALE" means (i) any sale pursuant to a registered public
offering under the Securities Act or (ii) any sale to the public pursuant to
Rule 144 promulgated under the Securities Act effected through a broker, dealer
or market maker (other than pursuant to Rule 144(k)).
"SALE OF THE COMPANY" means any transaction or series of transactions
pursuant to which any person(s) or entity(ies) other than the Investors and its
Affiliates in the aggregate acquire(s) (i) capital stock of the Company
possessing the voting power (other than voting rights accruing only in the event
of a default, breach or event of noncompliance) to elect a majority of the
Company's board of directors (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock, shareholder or
voting agreement, proxy, power of attorney or otherwise) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis;
provided that the term "SALE OF THE COMPANY" shall not include a Public
Offering.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated June
29, 1998, among the Company and certain of its stockholders.
"SUBSIDIARY" means any corporation of which fifty percent (50%) or more
of the securities having ordinary voting power in electing the board of
directors are, at the time as of which any determination is being made, owned by
the Company either directly or through one or more Subsidiaries. The term
Subsidiary shall also include any joint venture arrangement between the Company
and any other entity, including, without limitation, the Company's joint venture
arrangement with Commerce Direct International, Inc., a Delaware corporation.
-9-
<PAGE>
"TRANSFER" means to sell, transfer, assign, pledge or otherwise dispose
of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law).
9. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:
If to the Company:
AppNet Systems, Inc.
6700-A Rockledge Drive
Suite 525
Bethesda, MD 20817
Attention: Terrence M. McManus
with a copy to:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Kirkland & Ellis
200 East Randolph
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
If to the Employee:
3590 Edgewood Park Drive
Commerce, MI 48382
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<PAGE>
If to the Investors:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Smart Technology, L.L.C.
10201 Norton Road
Potomac, MD 20854
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
10. GENERAL PROVISIONS.
(a) EXPENSES. Each of the Company and the Employee shall pay
its or hers legal, accounting and other expenses incurred in connection with the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement.
(b) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Employee Stock in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Employee Stock as the owner of
such stock for any purpose.
-11-
<PAGE>
(c) SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(d) INTENDED THIRD-PARTY BENEFICIARIES. The Investors are
intended to be third-party beneficiaries to this entire Agreement and the rights
and obligations of the parties hereto. It is understood and agreed by the
parties hereto that this Agreement shall be enforceable by GTCR and, provided
GTCR is seeking to enforce substantially the same rights, the other Investor(s)
in accordance with its terms as though each of the Investors were a party to
every provision hereof. Except as expressly provided herein, no other third
parties are intended by the parties hereto to be beneficiaries hereof.
(e) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(f) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(g) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by Employee, the Company, the Investors and their respective successors and
assigns (including subsequent holders of Employee Stock); provided that the
rights and obligations of Employee under this Agreement shall not be assignable
except in connection with a permitted transfer of Employee Stock hereunder. The
rights and obligations of GTCR under this Agreement may be assigned at any time,
in whole or in part, to any investment fund managed by GTCR, or any successor
thereto; provided that such assignment occurs in the manner provided in the
Purchase Agreement.
(h) CHOICE OF LAW. The corporate law of the State of Delaware
will govern all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits hereto will be governed by and
construed in accordance with the internal laws of the State of Maryland, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Maryland or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Maryland.
(i) REMEDIES. Each of the parties to this Agreement (including
the Investors) will be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including attorney's fees) caused by
any breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that
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<PAGE>
money damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that any party may in its sole discretion apply to any court
of law or equity of competent jurisdiction (without posting any bond or deposit)
for specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
(j) AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended and waived only with the written consent of the Company and the
Employee.
(k) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or holiday
in the state in which the Company's chief Employee office is located, the time
period shall be automatically extended to the business day immediately following
such Saturday, Sunday or holiday.
(l) TERMINATION. This Agreement (except for the provisions of
Section 6) shall survive a Separation and shall remain in full force and effect
after such Separation.
(m) ADJUSTMENTS OF NUMBERS. All numbers set forth herein which
refer to share prices or amounts will be appropriately adjusted to reflect stock
splits, stock dividends, combinations of shares and other recapitalizations
affecting the subject class of stock.
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the date first written above.
APPNET SYSTEMS, INC.
By: /s/ Ken S. Bajaj
-------------------------------------
Name: Ken S. Bajaj
Its: Chairman and President
/s/ Robert Simms
------------------------------------------
Robert Simms
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<PAGE>
Exhibit 4.16
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made as of August
12, 1998, between AppNet Systems, Inc., a Delaware corporation (the
"CORPORATION") and Andrew Stern (the "EMPLOYEE").
The Company and Employee desire to enter into an agreement pursuant to
which Employee will purchase, and the Company will sell, 30,000 shares of the
Company's Common Stock, par value $.0005 per share (the "EMPLOYEE STOCK").
Certain definitions are set forth in Section 8 of this Agreement.
The execution and delivery of this Agreement by the Company and
Employee is related to the purchase of shares of Common Stock and shares of the
Company's Class A Preferred Stock, par value $.01 per share (the "CLASS A
PREFERRED") by Smart Technology, L.L.C. ("SMART TECHNOLOGY"), GTCR Golder
Rauner, L.L.C., a Delaware limited liability company ("GTCR" and, together with
Smart Technology, the "INVESTORS" and each an "INVESTOR") pursuant to a purchase
agreement between the Company and the Investors dated as of June 29, 1998 (the
"PURCHASE AGREEMENT"). Certain provisions of this Agreement are intended for the
benefit of, and will be enforceable by, the Investors.
The parties hereto agree as follows:
PROVISIONS RELATING TO EMPLOYEE STOCK
1. RESERVED.
2. PURCHASE AND SALE OF EMPLOYEE STOCK.
(a) Upon execution of this Agreement, Employee will purchase,
and the Company will sell, 30,000 shares of Common Stock at a price of $0.1055
per share. The Company will deliver to Employee the certificates representing
such Employee Stock, and Employee will deliver to the Company a check or wire
transfer of funds in the aggregate amount of $15.00 and a promissory note in the
form of ANNEX A attached hereto in an aggregate principal amount of $3,150.00
(the "EMPLOYEE NOTE"). Employee's obligations under the Employee Note shall be
secured by a pledge of all of the shares of Common Stock purchased hereunder to
the Company and in connection therewith, Employee shall enter into a pledge
agreement in the form of ANNEX B attached hereto.
(b) Within 30 days after the date hereof, Employee will make
an effective election with the Internal Revenue Service under Section 83(b) of
the Internal Revenue Code and the regulations promulgated thereunder in the form
of ANNEX C attached hereto.
(c) In connection with the purchase and sale of the Employee
Stock hereunder, Employee represents and warrants to the Company that:
(i) The Employee Stock to be acquired by Employee pursuant
to this Agreement will be acquired for Employee's own account and not with a
view to, or intention of,
<PAGE>
distribution thereof in violation of the Securities Act, or any applicable
state securities laws, and the Employee Stock will not be disposed of in
contravention of the Securities Act or any applicable state securities laws.
(ii) Employee is an Employee of the Company, is
sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in the Employee Stock.
(iii) Employee is able to bear the economic risk of her
investment in the Employee Stock for an indefinite period of time because the
Employee Stock has not been registered under the Securities Act and, therefore,
cannot be sold unless subsequently registered under the Securities Act or an
exemption from such registration is available.
(iv) Employee has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of Employee
Stock and has had full access to such other information concerning the Company
as she has requested.
(v) This Agreement constitutes the legal, valid and
binding obligation of Employee, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by Employee does not
and will not conflict with, violate or cause a breach of any agreement, contract
or instrument to which Employee is a party or any judgment, order or decree to
which Employee is subject.
(vi) Employee is a resident of the District of Columbia.
(d) As an inducement to the Company to issue the Employee
Stock to Employee, as a condition thereto, Employee acknowledges and agrees that
neither the issuance of the Employee Stock to Employee nor any provision
contained herein shall entitle Employee to remain in the employment of the
Company and its Subsidiaries or affect the right of the Company to terminate
Employee's employment at any time for any reason.
3. REPURCHASE OPTION.
(a) In the event that Employee ceases to be employed by the
Company and its Subsidiaries for any reason (the "SEPARATION"), the Employee
Stock (whether held by Employee or one or more of Employee's transferees, other
than the Company) will be subject to repurchase, in each case at the option of
the Company, the Investors and Ken S. Bajaj ("Bajaj") pursuant to the terms and
conditions set forth in this Section 3(a) (the "REPURCHASE OPTION"). A
percentage of the Employee Stock will be subject to repurchase at the Employee's
Original Cost for such shares, calculated in accordance with the following
schedule (the "ORIGINAL COST SHARES"):
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<PAGE>
<TABLE>
<CAPTION>
DATE PERCENTAGE OF EMPLOYEE STOCK
TO BE REPURCHASED AT ORIGINAL COST
----------------------------------
<S> <C>
Date of this Agreement until 1st Anniversary of this Agreement 100%
Date immediately following 1st Anniversary of this Agreement until 75%
2nd Anniversary of this Agreement
Date immediately following 2nd Anniversary of this Agreement until 50%
3rd Anniversary of this Agreement
Date immediately following 3rd Anniversary of this Agreement until 25%
4th Anniversary of this Agreement
Date immediately following 4th Anniversary of this Agreement and 0%
thereafter
</TABLE>
The purchase price for the remaining shares of Employee Stock shall be the Fair
Market Value of such shares (the "FAIR MARKET VALUE SHARES").
(b) The Company may elect to purchase all or any portion of
the Original Cost Shares and the Fair Market Value Shares by delivering written
notice (the "REPURCHASE NOTICE") to the holder or holders of the Employee Stock
within 180 days after the Separation. The Repurchase Notice will set forth the
number of Original Cost Shares and Fair Market Value Shares to be acquired from
each holder, the aggregate consideration to be paid for such shares and the time
and place for the closing of the transaction. The number of shares to be
repurchased by the Company shall first be satisfied to the extent possible from
the shares of Employee Stock held by Employee at the time of delivery of the
Repurchase Notice. If the number of shares of Employee Stock then held by
Employee is less than the total number of shares of Employee Stock which the
Company has elected to purchase, the Company shall purchase the remaining shares
elected to be purchased from the other holder(s) of Employee Stock under this
Agreement, pro rata according to the number of shares of Employee Stock held by
such other holder(s) at the time of delivery of such Repurchase Notice
(determined as nearly as practicable to the nearest share). The number of
Original Cost Shares and Fair Market Value Shares to be repurchased hereunder
will be allocated among Employee and the other holders of Employee Stock (if
any) pro rata according to the number of shares of Employee Stock to be
purchased from such person.
(c) If for any reason the Company does not elect to purchase
all of the Employee Stock pursuant to the Repurchase Option, the Investors and
Bajaj shall be entitled to exercise the Repurchase Option for all or any portion
of the shares of Employee Stock that the Company has not elected to purchase
(the "AVAILABLE SHARES"). As soon as practicable after the
- 3 -
<PAGE>
Company has determined that there will be Available Shares, but in any event
within 150 days after the Separation, the Company shall give written notice (the
"OPTION NOTICE") to the Investors and Bajaj setting forth the number of
Available Shares and the purchase price for the Available Shares. The Investors
and Bajaj may elect to purchase any or all of the Available Shares by giving
written notice to the Company within one month after the Option Notice has been
given by the Company. If the Investors and Bajaj elect to purchase an aggregate
number of shares greater than the number of Available Shares, the Available
Shares shall be allocated among the Investors and Bajaj based upon the number of
shares of Common Stock owned by each Investor and Bajaj on a fully diluted basis
(excluding, in the case of Bajaj, shares owned by him that are subject to
repurchase at cost). As soon as practicable, and in any event within ten days,
after the expiration of the one-month period set forth above, the Company shall
notify each holder of Employee Stock as to the number of shares being purchased
from such holder by the Investors and Bajaj (the "SUPPLEMENTAL REPURCHASE
NOTICE"). At the time the Company delivers the Supplemental Repurchase Notice to
the holder(s) of Employee Stock, the Company shall also deliver written notice
to the Investors and Bajaj setting forth the number of shares the Investors and
Bajaj are entitled to purchase, the aggregate purchase price and the time and
place of the closing of the transaction. The number of Original Cost Shares and
Fair Market Value Shares to be repurchased hereunder shall be allocated among
the Company, the Investors and Bajaj pro rata according to the number of shares
of Employee Stock to be purchased by each of them. Notwithstanding the
foregoing, the Investors and Bajaj shall not exercise their Repurchase Option as
to the Original Cost Shares pursuant to this Section 3(c) if the Company has
sufficient assets to fully exercise its Repurchase Option as to the Original
Cost Shares but has not exercised such right. Furthermore, if the Investors and
Bajaj repurchase any Original Cost Shares, they shall contribute such Original
Cost Shares to the Company in exchange for a promissory note from the Company
with an aggregate principal amount equal to the purchase price paid for such
shares, bearing interest (payable quarterly) at a rate per annum equal to the
prime rate as published in the WALL STREET JOURNAL from time to time, and having
a term of no longer than five years.
(d) The closing of the purchase of the Employee Stock pursuant
to the Repurchase Option shall take place on the date designated by the Company
in the Repurchase Notice or Supplemental Repurchase Notice, which date shall not
be more than one month nor less than five days after the delivery of the later
of either such notice to be delivered. The Company will pay for the Employee
Stock to be purchased by it pursuant to the Repurchase Option by first
offsetting amounts outstanding under any bona fide debts owed by Employee to the
Company and will pay the remainder of the purchase price by, at its option, (A)
a check or wire transfer of funds, or (B) a check or wire transfer of funds for
at least one-third of the purchase price, and a subordinated note or notes
payable in two equal annual installments beginning on each of the first and
second anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the prime rate as published in THE WALL
STREET JOURNAL from time to time in the aggregate amount of the remainder of the
purchase price for such shares. The Investors and Bajaj will pay for the
Employee Stock purchased by it by a check or wire transfer of funds. The
Company, the Investors and Bajaj will be entitled to receive customary
representations and warranties from the sellers regarding such sale and to
require that all sellers' signatures be guaranteed.
- 4 -
<PAGE>
(e) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Employee Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Employee Stock hereunder which the
Company is otherwise entitled or required to make, the Company may make such
repurchases as soon as it is permitted to do so under such restrictions.
(f) Notwithstanding anything to the contrary contained in this
Agreement, if the Employee delivers the notice of objection described in the
definition of Fair Market Value, or if the Fair Market Value of a Fair Market
Value Share is otherwise determined to be an amount more than 10% greater than
the per share repurchase price for Fair Market Value Shares originally
determined by the Board, each of the Company, the Investors and Bajaj shall have
the right to revoke its or their exercise of the Repurchase Option for all or
any portion of the Employee Stock elected to be repurchased by it by delivering
notice of such revocation in writing to the holders of the Employee Stock during
(i) the thirty-day period beginning on the date the Company, the Investors and
Bajaj receive Employee's written notice of objection and (ii) the thirty-day
period beginning on the date the Company, the Investors and Bajaj are given
written notice that the Fair Market Value of a Fair Market Value Share was
finally determined to be an amount more than 10% greater than the per share
repurchase price for Fair Market Value Shares originally determined by the Board
(g) The provisions of this Section 3 shall terminate upon the
consummation of a Sale of the Company.
4. RESTRICTIONS ON TRANSFER OF EMPLOYEE STOCK.
(a) RETENTION OF EMPLOYEE STOCK. Until the fifth anniversary
of the date of this Agreement, Employee shall not sell, transfer, assign, pledge
or otherwise dispose of any interest in any shares of Employee Stock, except
pursuant to: (i) a Sale of the Company, (ii) Section 3 of this Agreement, (iii)
Section 4 of the Stockholders Agreement, (iv) a sale described in clause (i) of
the definition of "PUBLIC SALE," or (v) after a Public Offering, upon any sale
by the Investors or an Affiliate of the type described in clause (ii) of the
definition of "PUBLIC SALE" (a "RULE 144 SALE"), to the extent of the lesser of
(a) the number of shares of Employee Stock held by Employee that are not subject
to repurchase at Original Cost and (b) the number of shares of Employee Stock
held by Employee multiplied by a fraction, the numerator of which is the number
of shares of Common Stock sold by the Investors and their Affiliates in the Rule
144 Sale and the denominator of which is the total number of shares of Common
Stock held by the Investors and their Affiliates immediately prior to such sale.
(b) CERTAIN PERMITTED TRANSFERS. The restrictions in this
Section 4 will not apply with respect to (i) transfers of shares of Employee
Stock pursuant to applicable laws of descent and distribution or (ii) transfer
of shares of Employee Stock among Employee's Family Group; provided that such
restrictions will continue to be applicable to the Employee Stock after any such
transfer and the transferees of such Employee Stock have agreed in writing to be
bound by the provisions of this Agreement.
- 5 -
<PAGE>
(c) TERMINATION OF RESTRICTIONS. The restrictions on the
Transfer of shares of Employee Stock set forth in this Section 4 will continue
with respect to each share of Employee Stock until the date on which such
Employee Stock has been transferred in a transaction permitted by this Section 4
(except in a transaction contemplated by Section 4(b)); provided that in any
event such restrictions will terminate on a Sale of the Company.
5. ADDITIONAL RESTRICTIONS ON TRANSFER OF EMPLOYEE STOCK.
(a) LEGEND. The certificates representing the Employee Stock
will bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A STOCK PURCHASE
AGREEMENT BETWEEN THE COMPANY AND AN EMPLOYEE OF THE COMPANY DATED AS OF AUGUST
12, 1998. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Employee Stock may sell,
transfer or dispose of any Employee Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
PROVISIONS RELATING TO EMPLOYMENT
6. CONFIDENTIAL INFORMATION.
(a) Employee acknowledges that the Company and its
Subsidiaries are engaged in the business of acquiring businesses that provide
electronic commerce services and operating those businesses after their
acquisition (the "BUSINESS"). Employee further acknowledges that the Business
and its continued success depend upon the use and protection of a large body of
confidential and proprietary information, and that she holds a position of trust
and confidence by virtue of which she necessarily possesses, has access to and,
as a consequence of hers signing this Agreement, will continue to possess and
have access to, highly valuable, confidential and proprietary information of the
Company and its Subsidiaries not known to the public in general, and that it
would be improper for him to make use of this information for the benefit of
himself and others. All of such confidential and proprietary information now
existing or to be developed in the future will be referred to in this Agreement
as "CONFIDENTIAL INFORMATION." This includes, without limitation, information
relating to the nature and operation of the Business, the persons, firms and
corporations which are customers or active prospects of
- 6 -
<PAGE>
the Company during Employee's employment by the Company, the Company's
development, transition and transformation plans, methodology and methods of
doing business, strategic, acquisition, marketing and expansion plans, including
plans regarding planned and potential acquisitions and sales, financial and
business plans, employee lists, numbers and location of sales representatives,
new and existing programs and services (and those under development), prices and
terms, customer service, integration processes requirements, costs of providing
service, support and equipment and equipment maintenance costs. Confidential
Information shall not include any information that has become generally known to
and available for use by the public other than as a result of Employee's acts or
omissions.
(b) Disclosure of any Confidential Information of the Company
shall not be prohibited if such disclosure is directly pursuant to a valid and
existing order of a court or other governmental body or agency within the United
States; provided, however, that (i) Employee shall first have given prompt
notice to the Company of any such possible or prospective order (or proceeding
pursuant to which any such order may result) and (ii) Employee shall afford the
Company a reasonable opportunity to prevent or limit any such disclosure.
(c) During the Employment Period and at all times thereafter,
Employee will preserve and protect as confidential all of the Confidential
Information known to Employee or at any time in Employee's possession or
control. In addition, during the Employment Period and at all times thereafter,
Employee will not disclose to any unauthorized person or use for hers own
account any of such Confidential Information without the Board's written
consent. Employee agrees to deliver to the Company at a Separation, or at any
other time the Company may request in writing, all memoranda, notes, plans,
records, reports and other documents (and copies thereof) containing or
otherwise relating to any of the Confidential Information (including, without
limitation, all acquisition prospects, lists and contact information) which she
may then possess or have under hers control. Employee acknowledges that all such
memoranda, notes, plans, records, reports and other documents are and at all
times will be and remain the property of the Company.
(d) Employee will fully comply with any agreement reasonably
required by any of the Company's affiliates, business partners, suppliers or
contractors with respect to the protection of the confidential and proprietary
information of such entities.
7. ADDITIONAL ACKNOWLEDGMENTS. Employee acknowledges that the
provisions of this Section are in consideration of: (i) employment with the
Company and (ii) additional good and valuable consideration as set forth in this
Agreement. Employee expressly agrees and acknowledges that the restrictions
contained in Section 6 do not preclude Employee from earning a livelihood, nor
does it unreasonably impose limitations on Employee's ability to earn a living.
In addition, Employee agrees and acknowledges that the potential harm to the
Company of its non-enforcement outweighs any harm to the Employee of its
enforcement by injunction or otherwise. Employee acknowledges that she has
carefully read this Agreement and has given careful consideration to the
restraints imposed upon the Employee by this Agreement, and is in full accord as
to their necessity for the reasonable and proper protection of the Confidential
Information. Employee expressly acknowledges and agrees that each and every
restraint
- 7 -
<PAGE>
imposed by this Agreement is reasonable with respect to subject matter, time
period and geographical area.
GENERAL PROVISIONS
8. DEFINITIONS.
"AFFILIATE" or "AFFILIATES" of an Investor means any direct or indirect
general or limited partner of such Investor, or any employee or owner thereof,
or any other person, entity or investment fund controlling, controlled by or
under common control with such Investor.
"EMPLOYEE'S FAMILY GROUP" means Employee's spouse and descendants
(whether natural or adopted), any trust solely for the benefit of Employee
and/or Employee's spouse and/or descendants and any retirement plan for the
Employee.
"EMPLOYEE STOCK" will continue to be Employee Stock in the hands of any
holder other than Employee (except for the Company and the Investors and except
for transferees in a Public Sale), and except as otherwise provided herein, each
such other holder of Employee Stock will succeed to all rights and obligations
attributable to Employee as a holder of Employee Stock hereunder. Employee Stock
will also include shares of the Company's capital stock issued with respect to
Employee Stock by way of a stock split, stock dividend or other
recapitalization.
"FAIR MARKET VALUE" of each share of Employee Stock means the average
of the closing prices of the sales of the Common Stock on all securities
exchanges on which such Common Stock may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such day, or, if
on any day such Common Stock is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time,
or, if on any day such Common Stock is not quoted in the NASDAQ System, of the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market Value
is being determined and the 20 consecutive business days prior to such day. If
at any time such Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Fair Market Value will
be the fair value of such Common Stock determined in good faith by the Board
(the "BOARD CALCULATION"). If the Employee reasonably disagrees with the Board
Calculation, the Employee may, within 30 days after receipt of the Board
Calculation, deliver a notice (an "OBJECTION NOTICE") to the Company setting
forth the Employee's calculation of Fair Market Value. The Board and the
Employee will negotiate in good faith to agree on such Fair Market Value, but if
such agreement is not reached within 30 days after the Company has received the
Objection Notice, Fair Market Value shall be determined by an appraiser jointly
selected by the Board and the Employee, which appraiser shall submit to the
Board and the Employee a report within 30 days of its engagement setting forth
such determination. If the parties are unable to agree on an appraiser within 45
days after the Company has received the Objection Notice, within seven days,
each party shall submit the names of four nationally recognized investment
banking firms, and each party shall be entitled to strike two names from the
other party's list of firms, and the appraiser shall be selected by lot
- 8 -
<PAGE>
from the remaining four investment banking firms. The expenses of such appraiser
shall be borne by the Employee unless the appraiser's valuation is not less than
10% greater than the amount determined by the Board, in which case, the costs of
the appraiser shall be borne by the Company. The determination of such appraiser
shall be final and binding upon all parties. If the Repurchase Option is
exercised within 90 days after a Separation, then Fair Market Value shall be
determined as of the date of such Separation; thereafter, Fair Market Value
shall be determined as of the date the Repurchase Option is exercised.
"ORIGINAL COST" means, with respect to each share of Employee Stock
purchased hereunder, $0.1055 (as proportionately adjusted for all subsequent
stock splits, stock dividends and other recapitalizations).
"PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof
"PUBLIC OFFERING" means the sale in an underwritten public offering
registered under the Securities Act of shares of the Company's Common Stock
approved by the Board.
"PUBLIC SALE" means (i) any sale pursuant to a registered public
offering under the Securities Act or (ii) any sale to the public pursuant to
Rule 144 promulgated under the Securities Act effected through a broker, dealer
or market maker (other than pursuant to Rule 144(k)).
"SALE OF THE COMPANY" means any transaction or series of transactions
pursuant to which any person(s) or entity(ies) other than the Investors and its
Affiliates in the aggregate acquire(s) (i) capital stock of the Company
possessing the voting power (other than voting rights accruing only in the event
of a default, breach or event of noncompliance) to elect a majority of the
Company's board of directors (whether by merger, consolidation, reorganization,
combination, sale or transfer of the Company's capital stock, shareholder or
voting agreement, proxy, power of attorney or otherwise) or (ii) all or
substantially all of the Company's assets determined on a consolidated basis;
provided that the term "SALE OF THE COMPANY" shall not include a Public
Offering.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated June
29, 1998, among the Company and certain of its stockholders.
"SUBSIDIARY" means any corporation of which fifty percent (50%) or more
of the securities having ordinary voting power in electing the board of
directors are, at the time as of which any determination is being made, owned by
the Company either directly or through one or more Subsidiaries. The term
Subsidiary shall also include any joint venture arrangement between the Company
and any other entity, including, without limitation, the Company's joint venture
arrangement with Commerce Direct International, Inc., a Delaware corporation.
- 9 -
<PAGE>
"TRANSFER" means to sell, transfer, assign, pledge or otherwise dispose
of (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law).
9. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:
If to the Company:
AppNet Systems, Inc.
6700-A Rockledge Drive
Suite 525
Bethesda, MD 20817
Attention: Terrence M. McManus
with a copy to:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Kirkland & Ellis
200 East Randolph
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
If to the Employee:
3513 S Street, NW
Washington, DC 20007
- 10 -
<PAGE>
If to the Investors:
GTCR Golder Rauner, L.L.C.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Philip A. Canfield
and
Smart Technology, L.L.C.
10201 Norton Road
Potomac, MD 20854
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
and
Tucker, Flyer & Lewis
1615 L Street, N.W.
Suite 400
Washington, D.C. 20036-5612
Attention: Arthur E. Cirulnick
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
10. GENERAL PROVISIONS.
(a) EXPENSES. Each of the Company and the Employee shall pay
its or hers legal, accounting and other expenses incurred in connection with the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated by this Agreement.
(b) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Employee Stock in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Employee Stock as the owner of
such stock for any purpose.
- 11 -
<PAGE>
(c) SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(d) INTENDED THIRD-PARTY BENEFICIARIES. The Investors are
intended to be third-party beneficiaries to this entire Agreement and the rights
and obligations of the parties hereto. It is understood and agreed by the
parties hereto that this Agreement shall be enforceable by GTCR and, provided
GTCR is seeking to enforce substantially the same rights, the other Investor(s)
in accordance with its terms as though each of the Investors were a party to
every provision hereof. Except as expressly provided herein, no other third
parties are intended by the parties hereto to be beneficiaries hereof.
(e) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(f) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(g) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by Employee, the Company, the Investors and their respective successors and
assigns (including subsequent holders of Employee Stock); provided that the
rights and obligations of Employee under this Agreement shall not be assignable
except in connection with a permitted transfer of Employee Stock hereunder. The
rights and obligations of GTCR under this Agreement may be assigned at any time,
in whole or in part, to any investment fund managed by GTCR, or any successor
thereto; provided that such assignment occurs in the manner provided in the
Purchase Agreement.
(h) CHOICE OF LAW. The corporate law of the State of Delaware
will govern all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity and
interpretation of this Agreement and the exhibits hereto will be governed by and
construed in accordance with the internal laws of the State of Maryland, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Maryland or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Maryland.
(i) REMEDIES. Each of the parties to this Agreement (including
the Investors) will be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including attorney's fees) caused by
any breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree and acknowledge that
- 12 -
<PAGE>
money damages may not be an adequate remedy for any breach of the provisions of
this Agreement and that any party may in its sole discretion apply to any court
of law or equity of competent jurisdiction (without posting any bond or deposit)
for specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
(j) AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended and waived only with the written consent of the Company and the
Employee.
(k) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or holiday
in the state in which the Company's chief Employee office is located, the time
period shall be automatically extended to the business day immediately following
such Saturday, Sunday or holiday.
(l) TERMINATION. This Agreement (except for the provisions of
Section 6) shall survive a Separation and shall remain in full force and effect
after such Separation.
(m) ADJUSTMENTS OF NUMBERS. All numbers set forth herein which
refer to share prices or amounts will be appropriately adjusted to reflect stock
splits, stock dividends, combinations of shares and other recapitalizations
affecting the subject class of stock.
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the date first written above.
APPNET SYSTEMS, INC.
By: /s/ KEN S. BAJAJ
------------------------------------------
Ken S. Bajaj
President and Chief Employee Officer
/s/ ANDREW STERN
------------------------------------------
Andrew Stern
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<PAGE>
Exhibit 5.1
July 15, 1999
AppNet Systems, Inc.
6707 Democracy Boulevard
Suite 1000
Bethesda, Maryland 20817
Ladies and Gentlemen:
We have acted as special counsel for AppNet Systems, Inc., a Delaware
corporation (the "Company"), in connection with the registration, pursuant to a
Registration Statement on Form S-8 (the "Registration Statement") of 5,014,139
shares of the Company's common stock, par value $0.0005 per share ("Common
Stock"), (a) issuable upon exercise of options which have been or may be granted
under the Company's 1999 Stock Incentive Plan (the "1999 Plan"), the Company's
1998 Stock Option and Incentive Plan, as amended and restated (the "1998 Plan"),
the Century Computing Incorporated Incentive Stock Option Plan, as amended (the
"Century Plan") and the Internet Outfitters, Inc. 1996 Incentive Stock Option
Plan, as amended (the "Internet Outfitters Plan," together with the 1999 Plan,
the 1998 Plan and the Century Plan, the "Stock Option Plans"), (b) which were
issued upon the exercise of options granted under the 1998 Plan and the Century
Plan, (c) which were issued under certain Senior Management Agreements by and
between the Company and each of Ronald B. Alexander, Anne Filippone, Robert G.
Harvey, Robert D. McCalley, Jack Pearlstein and Toby Tobaccowala (collectively,
the "Senior Management Agreements") and (d) which were issued under certain
Stock Purchase Agreements by and between the Company and each of Barbara Barnes,
Julie Colton, Robert George, Thomas Meloche, Robert Simms and Andrew Stern
(collectively, the "Stock Purchase Agreements"). The Stock Option Plans, the
Senior Management Agreements and the Stock Purchase Agreements are collectively
referred to herein as the "Employee Benefit Plans". All assumptions and
statements of reliance herein have been made without any 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 or such assumptions or items relied upon.
<PAGE>
AppNet Systems, Inc.
July 15, 1999
Page 2
This opinion is delivered to you pursuant to Item 601(b)(5) of
Regulation S-K under the Securities Act of 1933, as amended. All assumptions and
statements of reliance herein have been made without any 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 assumption 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 and its subsidiaries, such certificates of public officials,
officers or other representatives of the Company and its subsidiaries and other
persons and such other documents and (iii) 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 examinations, 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, the authenticity of original and certified documents and the
conformity to original or certified documents of all copies submitted to us
as conformed or reproduction copies. As to various questions of fact relevant
to the opinions expressed herein, we have relied upon, and assumed the
accuracy of, certificates and oral or written statements and other
information of or from public officials, officers or other representatives of
the Company and others and assume compliance on the part of all parties to
the Employee Benefit Plans with their covenants and agreements contained
therein. Insofar as statements herein are based upon our knowledge, such
phrase means and is limited to the conscious awareness of facts or other
information by lawyers in this firm who gave substantive attention to
representation of the Company in connection with the Employee Benefit Plans.
Based upon the foregoing, and subject to the limitations,
qualifications and assumptions set forth herein, we are of the opinion that:
1. The shares of Common Stock issued under the Senior Management
Agreements and the Stock Purchase Agreements and upon the exercise of options
granted under the 1998 Plan and the Century Plan have been validly issued,
fully paid and nonassessable.
2. The shares of Common Stock, when issued, delivered and paid for
(with the consideration received by the Company being not less than the par
value thereof) in
<PAGE>
AppNet Systems, Inc.
July 15, 1999
Page 3
accordance with the Stock Option Plans and any agreement applicable to such
shares, will be validly issued, fully paid and non-assessable.
The opinions expressed herein are limited to the General Corporation
Law of the State of Delaware, as currently in effect. The opinions expressed
herein are given as of the date hereof, and we undertake no obligation to
supplement this letter if any applicable laws change after the date hereof or if
we become aware of any facts that might change the opinions expressed herein
after the date hereof or for any other reason.
The opinions expressed herein are solely for your benefit and may not
be relied on in any manner or for any purpose by any other person or entity 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 relating to the registration of the shares. 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 Act.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ Vasiliki B. Tsaganos
------------------------------------------
Vasiliki B. Tsaganos
<PAGE>
EXHIBIT 23.1
CONSENT OF ARTHUR ANDERSEN LLP
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports included in AppNet's
Registration Statement on Form S-1 File No. 333-75205.
/s/ Arthur Andersen LLP
July 12, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF
INTERNATIONAL DATA CORPORATION
We consent to the incorporation by reference in this registration statement of
WORLDWIDE INTERNET AND E-COMMERCE SERVICES MARKET AND TRENDS FORECAST, 1998-2002
and HOW REAL IS INTERNET COMMERCE?, two International Data Corporation reports,
and to all references to us and to such reports appearing in the registration
statement on Form S-1 (File No. 333-75205) of AppNet Systems, Inc. filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933.
INTERNATIONAL DATA CORPORATION
By: /s/ Michael Melenovsky
------------------------------------
Name: Michael Melenovsky
Title: Group Vice President
July 13, 1999
<PAGE>
EXHIBIT 23.4
CONSENT OF
GARTNERGROUP/DATAQUEST
We consent to the incorporation by reference in this registration statement
of Buying Intentions in the IT Services Industry: User Wants and Needs, a
Dataquest report, and to all references to us and to such report appearing in
the registration statement on Form S-1 (File No. 333-75205) of AppNet Systems,
Inc. filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933.
GARTNERGROUP/DATAQUEST
By: /s/Marc C. Litvinoff
---------------------------
Name: Marc C. Litvinoff
Title: Senior Vice President
July 14, 1999
