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EXHIBIT 4.8
CHEMCONNECT, INC.
STOCK RESTRICTION AGREEMENT
THIS AGREEMENT is made as of this 15th day of December, 1998, by
and among ChemConnect, Inc., a Delaware corporation (the "Company"), and Xxxx X.
Xxxxxxx ("Founder").
RECITALS
WHEREAS, Founder currently owns 2,749,794 shares of Company
Series A Preferred Stock (the "Founder's Shares") acquired pursuant to that
certain Investment Statement dated as of May 28, 1996 pursuant to which Founder
purchased the Founder's Shares;
WHEREAS, pursuant to the Investment Statement, none of the
Founder's Shares initially were subject to a right of repurchase by the Company
but were fully vested; and
WHEREAS, in order to induce the Company to enter into a sale of
Series B Preferred Stock with certain investors, Founder hereby agrees to the
imposition of contractual restrictions with respect to the Founder's Shares and
Founder and the Company hereby agree that this Agreement shall govern the rights
of the Company with respect to the Founder's Shares;
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereby agree as follows:
A. RESTRICTIONS ON SHARES AND STOCK CERTIFICATE
1. Stock Restrictions and Delivery of Certificate. Founder has
previously purchased from the Company the Founder's Shares and Founder now
hereby agrees to the imposition of certain contractual restrictions on the
Founder's Shares, including a Repurchase Right, Right of First Refusal and
Market Stand-off. Founder shall deliver to the Company, subject to the terms
hereof, at the time of the execution of this Agreement, the previously issued
stock certificate representing the Founder's Shares and shall deliver to the
Company concurrently therewith a duly-executed blank Assignment Separate from
Certificate (in the form attached hereto as Exhibit I) with respect to the
Founder's Shares.
2. Legending of Certificate and Deposit into Escrow. Upon
receipt by the Company of the items in Section A.1 above, the Company shall
issue a new certificate representing the Founder's Shares, shall legend the
stock certificate pursuant to the terms of Section A.3 below and shall hold such
stock certificate in escrow in accordance with the provisions of this Agreement.
3. Restrictive Legends. The stock certificates for the Founder's
Shares shall be endorsed with the following restrictive legend (in addition to
any previously existing legends):
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"The shares represented by this certificate are unvested and
subject to certain repurchase rights granted to the Company and accordingly may
not be sold, assigned, transferred, encumbered, or in any manner disposed of
except in conformity with the terms of a written agreement between the Company
and the registered holder of the shares (or the predecessor in interest to the
shares). A copy of such agreement is maintained at the Company's principal
corporate offices."
4. Stockholder Rights. Until such time as the Company exercises
the Repurchase Right, Founder (or any successor in interest) shall have all the
rights of a stockholder (including voting, dividend and liquidation rights) with
respect to the Founder's Shares, including any shares held in escrow hereunder
from time to time, subject, however, to the transfer restrictions of this
Agreement.
B. REPURCHASE RIGHT
1. Grant. The Founder's Shares initially shall be Restricted
Shares and shall be subject to a right (but not an obligation) of repurchase by
the Company. Founder shall not transfer, assign, encumber or otherwise dispose
of any Restricted Shares, except as provided in the following sentence. Founder
may transfer Restricted Shares (i) by beneficiary designation, will or intestate
succession or (ii) to Founder's spouse, children or grandchildren or to a trust
established by Founder for the benefit of Founder or Founder's spouse, children
or grandchildren, provided in either case that the Transferee agrees in writing
on a form prescribed by the Company to be bound by all provisions of this
Agreement. If Founder transfers any Restricted Shares, then this Section B shall
apply to the Transferee to the same extent as to Founder.
2. Condition Precedent to Exercise of the Repurchase Right. The
Right of Repurchase shall be exercisable only during the 60-day period next
following the date when Founder's Service terminates for any reason, with or
without cause, including (without limitation) death or disability.
3. Lapse of the Repurchase Right. The Right of Repurchase shall
lapse with respect to the first 50% of the Founder's Shares on the date of this
Agreement. The Right of Repurchase shall lapse with respect to an additional
2.083% of the Founder's Shares when Founder completes each full month of
continuous Service from December 1, 1998. In addition, the Right of Repurchase
shall lapse and the remaining Restricted Shares shall become vested as if
Founder had been in Service for twelve additional months if the Company is
subject to a Corporate Transaction before the Founder's Service terminates. The
Right of Repurchase shall lapse in full and all of the remaining Restricted
Shares shall become vested if (i) the Company is subject to a Corporate
Transaction before the Founder's Service terminates and (ii) the Right of
Repurchase is not assigned to the entity that employs Founder immediately after
the Corporate Transaction or to its parent or subsidiary. In addition, the Right
of Repurchase shall lapse and the remaining Restricted Shares shall become
vested as if Founder had been in Service for twelve additional months if the
Founder's Service is involuntarily terminated without cause. For purposes of
this paragraph, the term "cause" shall mean termination as a result of (a)
Founder's
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material breach of the employment agreement between Founder and the Company,
provided Founder has been provided notice of such breach and fails to cure such
breach within 20 days of such notice, (b) Founder's conviction of a felony or
other criminal act involving moral turpitude, (c) willful and repeated failure
to comply with the lawful directions of the Company's President or Board of
Directors, (d) gross negligence or willful misconduct in the performance of
duties to the Company, (e) commission of any act of fraud with respect to the
Company, or (f) incurable material breach of a proprietary information and
inventions agreement with the Company, in each case as determined in good faith
by the Company's Board of Directors.
4. Repurchase Cost. If the Company exercises the Right of
Repurchase with respect to the Founder's Shares, it shall pay Founder an amount
in cash or cash equivalents equal to $0.10 per share for each of the Founder's
Shares being repurchased.
5. Exercise of Repurchase Right. The Right of Repurchase shall
be exercisable only by written notice delivered to Founder prior to the
expiration of the 60-day period specified in Subsection 2 above. The notice
shall set forth the date on which the repurchase is to be effected. Such date
shall not be more than 30 days after the date of the notice. The certificate(s)
representing the Restricted Shares to be repurchased shall, prior to the close
of business on the date specified for the repurchase, be delivered to the
Company properly endorsed for transfer. The Company shall, concurrently with the
receipt of such certificate(s), pay to Founder the purchase price determined
according to Subsection 4 above. Payment shall be made in cash or cash
equivalents or by canceling indebtedness to the Company incurred by Founder in
the purchase of the Restricted Shares. The Right of Repurchase shall terminate
with respect to any Restricted Shares for which it has not been timely exercised
pursuant to this Subsection 5.
6. Additional Shares or Substituted Securities. In the event of
the declaration of a stock dividend, the declaration of an extraordinary
dividend payable in a form other than stock, a spin-off, a stock split, an
adjustment in conversion ratio, a recapitalization or a similar transaction
affecting the Company's outstanding securities without receipt of consideration,
any new, substituted or additional securities or other property (including money
paid other than as an ordinary cash dividend) that by reason of such transaction
are distributed with respect to any Restricted Shares or into which such
Restricted Shares thereby become convertible shall immediately be subject to the
Right of Repurchase. Appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class of the
Restricted Shares. After each such transaction, appropriate adjustments shall
also be made to the price per share to be paid upon the exercise of the Right of
Repurchase in order to reflect any change in the Company's outstanding
securities effected without receipt of consideration therefor; provided,
however, that the aggregate purchase price payable for the Restricted Shares
shall remain the same.
7. Termination of Rights as Stockholder. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Restricted Shares to be repurchased in
accordance with this Section B, then after such time the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such
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consideration in accordance with this Agreement). Such Restricted Shares shall
be deemed to have been repurchased in accordance with the applicable provisions
hereof, whether or not the certificate(s) therefor have been delivered as
required by this Agreement.
8. Escrow. Upon issuance, the certificates for Restricted Shares
shall be deposited in escrow with the Company to be held in accordance with the
provisions of this Agreement. Any new, substituted or additional securities or
other property described in Subsection 2.6 above shall immediately be delivered
to the Company to be held in escrow, but only to the extent the Founder's Shares
are at the time Restricted Shares. All regular cash dividends on Restricted
Shares (or other securities at the time held in escrow) shall be paid directly
to Founder and shall not be held in escrow. Restricted Shares, together with any
other assets or securities held in escrow hereunder, shall be (i) surrendered to
the Company for repurchase and cancellation upon the Company's exercise of its
Right of Repurchase or Right of First Refusal or (ii) released to Founder upon
Founder's request to the extent the Founder's Shares are no longer Restricted
Shares (but not more frequently than once every six months). In any event, all
Founder's Shares that have vested (and any other vested assets and securities
attributable thereto) shall be released within 60 days after the earlier of (i)
Founder's cessation of Service or (ii) the lapse of the Right of First Refusal.
C. SPECIAL TAX ELECTION
The exchange of the Founder's Shares for the Founder's Shares
and the imposition of vesting restrictions on the Founder's Shares under this
Agreement may result in adverse tax consequences that may be avoided or
mitigated by filing an election under Code Section 83(b). Such election may be
filed only within 30 days after the date of purchase. The form for making the
Code Section 83(b) election is attached to this Agreement as an Exhibit. FOUNDER
SHOULD CONSULT WITH HIS OR HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF
ACQUIRING THE FOUNDER'S SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING
THE CODE SECTION 83(b) ELECTION. FOUNDER ACKNOWLEDGES THAT IT IS HIS OR HER SOLE
RESPONSIBILITY, AND NOT THE COMPANY'S, TO FILE A TIMELY ELECTION UNDER CODE
SECTION 83(b), EVEN IF FOUNDER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO
MAKE THIS FILING ON HIS OR HER BEHALF.
D. RIGHT OF FIRST REFUSAL
1. Right of First Refusal. In the event that Founder proposes to
sell, pledge or otherwise transfer to a third party any Founder's Shares, or any
interest in such Founder's Shares, the Company shall have the Right of First
Refusal with respect to all, or less than all, of such Founder's Shares. If
Founder desires to transfer Founder's Shares, Founder shall give a written
Transfer Notice to the Company describing fully the proposed transfer, including
the number of Founder's Shares proposed to be transferred, the proposed transfer
price, the name and address of the proposed Transferee and proof satisfactory to
the Company that the proposed sale or transfer will not violate any applicable
federal or state securities laws. The Transfer Notice shall be signed both by
Founder and by the proposed Transferee and must constitute a binding commitment
of both parties to the transfer of the Founder's Shares. The Company shall have
the right to purchase all, or less than all, of the Founder's Shares on the
terms of the
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proposal described in the Transfer Notice (subject, however, to any change in
such terms permitted under Subsection 2 below) by delivery of a notice of
exercise of the Right of First Refusal within 30 days after the date when the
Transfer Notice was received by the Company. The Company's rights under this
Subsection 1 shall be assignable, in whole or in part.
2. Transfer of Shares. If the Company fails to exercise its
Right of First Refusal within 30 days after the date when it received the
Transfer Notice, Founder may, not later than 90 days following receipt of the
Transfer Notice by the Company, conclude a transfer of the Founder's Shares
subject to the Transfer Notice on the terms and conditions described in the
Transfer Notice, provided that any such sale is made in compliance with
applicable federal and state securities laws and not in violation of any other
contractual restrictions to which Founder is bound. Any proposed transfer on
terms and conditions different from those described in the Transfer Notice, as
well as any subsequent proposed transfer by Founder, shall again be subject to
the Right of First Refusal and shall require compliance with the procedure
described in Subsection 1 above. If the Company exercises its Right of First
Refusal, the parties shall consummate the sale of the Founder's Shares on the
terms set forth in the Transfer Notice within 60 days after the date when the
Company received the Transfer Notice (or within such longer period as may have
been specified in the Transfer Notice); provided, however, that in the event the
Transfer Notice provided that payment for the Founder's Shares was to be made in
a form other than cash or cash equivalents paid at the time of transfer, the
Company shall have the option of paying for the Founder's Shares with cash or
cash equivalents equal to the present value of the consideration described in
the Transfer Notice.
3. Additional Shares or Substituted Securities. In the event of
the declaration of a stock dividend, the declaration of an extraordinary
dividend payable in a form other than stock, a spin-off, a stock split, an
adjustment in conversion ratio, a recapitalization or a similar transaction
affecting the Company's outstanding securities without receipt of consideration,
any new, substituted or additional securities or other property (including money
paid other than as an ordinary cash dividend) which are by reason of such
transaction distributed with respect to any Founder's Shares subject to this
Section 3 or into which such Founder's Shares thereby become convertible shall
immediately be subject to this Section 3. Appropriate adjustments to reflect the
distribution of such securities or property shall be made to the number and/or
class of Founder's Shares subject to this Section D.
4. Termination of Right of First Refusal. The Right of First
Refusal shall lapse upon the earliest to occur of (i) the first date on which
the Common Stock is held of record by more than five hundred (500) persons, (ii)
a determination is made by the Board of Directors that a public market exists
for the outstanding Stock or (iii) a firm commitment underwritten public
offering, pursuant to an effective registration statement on Form S-1 or Form
SB-2 under the 1933 Act, covering the offer and sale of the Common Stock.
However, the Market Stand-Off shall continue to remain in full force and effect
following the lapse of the First Refusal Right.
5. Permitted Transfers. This Section 3 shall not apply to (i) a
transfer by beneficiary designation, will or intestate succession or (ii) a
transfer to Founder's spouse, children or grandchildren or to a trust
established by Founder for the benefit of Founder or
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Founder's spouse, children or grandchildren, provided in either case that the
Transferee agrees in writing on a form prescribed by the Company to be bound by
all provisions of this Agreement. If Founder transfers any Founder's Shares,
either under this Subsection 5 or after the Company has failed to exercise the
Right of First Refusal, then this Section D shall apply to the Transferee to the
same extent as to Founder.
6. Termination of Rights as Stockholder. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Founder's Shares to be purchased in
accordance with this Section D, then after such time the person from whom such
Founder's Shares are to be purchased shall no longer have any rights as a holder
of such Founder's Shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such Founder's Shares shall be
deemed to have been purchased in accordance with the applicable provisions
hereof, whether or not the certificate(s) therefor have been delivered as
required by this Agreement.
E. OTHER RESTRICTIONS ON TRANSFER
1. Purchaser Representations. In connection with the issuance
and acquisition of Founder's Shares under this Agreement, Founder hereby
represents and warrants to the Company as follows:
(a) Founder is acquiring and will hold the Founder's
Shares for investment for his or her account only and not with a view to, or for
resale in connection with, any "distribution" thereof within the meaning of the
Securities Act.
(b) Founder understands that the Founder's Shares have
not been registered under the Securities Act by reason of a specific exemption
therefrom and that the Founder's Shares must be held indefinitely, unless they
are subsequently registered under the Securities Act or Founder obtains an
opinion of counsel, in form and substance satisfactory to the Company and its
counsel, that such registration is not required. Founder further acknowledges
and understands that the Company is under no obligation to register the
Founder's Shares.
(c) Founder is aware of the adoption of Rule 144 by the
Securities and Exchange Commission under the Securities Act, which permits
limited public resales of securities acquired in a non-public offering, subject
only to the satisfaction of certain conditions. Founder acknowledges and
understands that the conditions for resale set forth in Rule 144 have not been
satisfied and that the Company has no plans to satisfy these conditions in the
foreseeable future.
(d) Founder will not sell, transfer or otherwise dispose
of the Founder's Shares in violation of the Securities Act, the Securities
Exchange Act of 1934, or the rules promulgated thereunder, including Rule 144
under the Securities Act. Founder agrees that he or she will not dispose of the
Founder's Shares unless and until he or she has complied with all requirements
of this Agreement applicable to the disposition of Founder's Shares and he or
she has provided the Company with written assurances, in substance and form
satisfactory to the Company, that (A) the proposed disposition does not require
registration of the Founder's Shares
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under the Securities Act or all appropriate action necessary for compliance with
the registration requirements of the Securities Act or with any exemption from
registration available under the Securities Act (including Rule 144) has been
taken and (B) the proposed disposition will not result in the contravention of
any transfer restrictions applicable to the Founder's Shares under the state
securities laws.
(e) Founder has been furnished with, and has had access
to, such information as he or she considers necessary or appropriate for
deciding whether to invest in the Founder's Shares, and Founder has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the issuance of the Founder's Shares.
(f) Founder is aware that his or her investment in the
Company is a speculative investment that has limited liquidity and is subject to
the risk of complete loss. Founder is able, without impairing his or her
financial condition, to hold the Founder's Shares for an indefinite period and
to suffer a complete loss of his or her investment in the Founder's Shares.
2. Securities Law Restrictions. Regardless of whether the
offering and sale of Shares under this Agreement have been registered under the
Securities Act or have been registered or qualified under the securities laws of
any state, the Company at its discretion may impose restrictions upon the sale,
pledge or other transfer of the Founder's Shares (including the placement of
appropriate legends on stock certificates or the imposition of stop-transfer
instructions) if, in the judgment of the Company, such restrictions are
necessary or desirable in order to achieve compliance with the Securities Act,
the securities laws of any state or any other law.
3. Market Stand-Off. In connection with any underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act, including the Company's
initial public offering, Founder shall not, without the prior written consent of
the Company's managing underwriter, (i) lend, offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any of the Founder's Shares, any
securities convertible into or exercisable or exchangeable for the Founder's
Shares (whether such shares or any such securities are then owned by Founder or
are thereafter acquired), or (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Founder's Shares, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of the Founder's Shares or
such other securities, in cash or otherwise. Such restriction (the "Market
Stand-Off") shall be in effect for such period of time following the date of the
final prospectus for the offering as may be requested by the Company or such
underwriters. In no event, however, shall such period exceed 180 days. The
Market Stand-Off shall in any event terminate two years after the date of the
Company's initial public offering. In the event of the declaration of a stock
dividend, a spin-off, a stock split, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company's outstanding
securities without receipt of consideration, any new, substituted or additional
securities that are
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by reason of such transaction distributed with respect to any the Founder's
Shares subject to the Market Stand-Off, or into which such Founder's Shares
thereby become convertible, shall immediately be subject to the Market
Stand-Off. In order to enforce the Market Stand-Off, the Company may impose
stop-transfer instructions with respect to the Founder's Shares until the end of
the applicable stand-off period. The Company's underwriters shall be
beneficiaries of the agreement set forth in this Section E.3. This Subsection 3
shall not apply to Founder's Shares registered in the public offering under the
Securities Act, and Founder shall be subject to this Subsection 3 only if the
directors and officers of the Company are subject to similar arrangements.
4. Rights of the Company. The Company shall not be required to
(i) transfer on its books any Founder's Shares that have been sold or
transferred in contravention of this Agreement or (ii) treat as the owner of
Founder's Shares, or otherwise to accord voting, dividend or liquidation rights
to, any transferee to whom Founder's Shares have been transferred in
contravention of this Agreement.
F. GENERAL PROVISIONS
1. No Employment or Service Contract. Nothing in this Agreement
shall confer upon Founder any right to continue in Service for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Company (or any Parent or Subsidiary employing or retaining Founder) or
of Founder, which rights are hereby expressly reserved by each, to terminate
Founder's Service at any time for any reason, with or without cause.
2. Notices. Any notice required or permitted to be given under
this Agreement shall be given in writing and shall be deemed effective upon
personal delivery, upon delivery by confirmed facsimile or electronic
transmission (with duplicate original sent by U.S. mail) or upon deposit in the
U.S. mail, registered or certified, postage prepaid and properly addressed to
the party to be notified at the address indicated below such party's signature
line on this Agreement or at such other address as such party may designate by
ten (10) days advance written notice (under the terms of this paragraph) to all
other parties to this Agreement.
3. No Waiver. The failure of the Company in any instance to
exercise the Repurchase Right shall not constitute a waiver of any other
repurchase rights and/or rights of first refusal that may subsequently arise
under the provisions of this Agreement or any other agreement between the
Company and Founder or Founder's spouse. No waiver of any breach or condition of
this Agreement shall be deemed to be a waiver of any other or subsequent breach
or condition, whether of like or different nature.
4. Cancellation of Shares. If the Company shall make available,
at the time and place and in the amount and form provided in this Agreement, the
consideration for the Founder's Shares to be repurchased in accordance with the
provisions of this Agreement, then from and after such time, the person from
whom such shares are to be repurchased shall no longer have any rights as a
holder of such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares shall be deemed
purchased in
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accordance with the applicable provisions hereof, and the Company shall be
deemed the owner and holder of such shares, whether or not the certificates
therefor have been delivered as required by this Agreement.
G. MISCELLANEOUS PROVISIONS
1. Further Actions. The parties hereby agree to take whatever
additional actions and execute whatever additional documents they may deem
necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either of them or on the Founder's Shares
pursuant to the provisions of this Agreement.
2. Amendments and Waivers. This Agreement represents the entire
understanding of the parties with respect to the subject matter hereof and
supersedes all previous understandings, whether written or oral. This Agreement
may only be amended with the written consent of Founder and the President or
Chief Executive Officer of the Company, or the successors or assigns of the
foregoing, and no oral waiver or amendment shall be effective under any
circumstances whatsoever.
3. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California without resort
to that State's conflict-of-laws rules.
4. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
5. Successors and Assigns. The terms and provisions of this
Agreement shall inure to the benefit of, and be binding upon, the Company and
its successors and assigns and upon Founder, Founder's permitted assigns and
legal representatives, heirs and legatees of Founder's estate, whether or not
any such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
6. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
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IN WITNESS WHEREOF, the parties have executed this Agreement on
the date first indicated above.
CHEMCONNECT, INC.:
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Signature
Title:
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Address:
FOUNDER: (1)
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Xxxx X. Xxxxxxx
Address:
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(1) I have executed the Section 83(b) election that was attached hereto. I
understand that I, and not the Company, will be responsible for completing
the form and filing the election with the appropriate office of the federal
and state tax authorities and that I have thirty (30) days to file the form.
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INSTRUCTION TO EXHIBIT I:
Please do not fill in any blanks other than the signature line. Please sign
exactly as you would like your name to appear on the issued stock certificate.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Right without requiring additional signatures on the part of Founder.
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EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, _____________________ hereby sells, assigns and
transfers unto ChemConnect, Inc. (the "Company") _____________________
____________ (______________) shares of the Series A Preferred Stock of the
Company standing in his name on the books of the Company represented by
Certificate Number(s) _____________ herewith and does hereby irrevocably
constitute and appoint _____________________ his attorney-in-fact to transfer
such stock on the books of the Company with full power of substitution in the
premises.
Dated: _______________
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Signature
This Assignment Separate from Certificate was executed in
conjunction with the terms of the Stock Restriction Agreement by and between the
above assignor and ChemConnect, Inc. dated December __, 1998.
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EXHIBIT II
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(b) TAX ELECTION
I. Federal Income Tax Consequences and Section 83(b) Election.
Under Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"),
the excess of the Fair Market Value of the Founder's Shares, on the date any
forfeiture restrictions applicable to such shares lapse, over the Purchase Price
paid for such shares will be reportable as ordinary income on the lapse date.
For this purpose, the term "forfeiture restrictions" includes the right of the
Company to repurchase the Founder's Shares pursuant to the Repurchase Right.
However, Founder may elect under Code Section 83(b) to be taxed at the time the
Founder's Shares become subject to forfeiture restrictions, rather than when and
as such Founder's Shares cease to be subject to such forfeiture restrictions.
Such election must be filed with the Internal Revenue Service within thirty (30)
days after the date of this Agreement. Even if the Fair Market Value of the
Founder's Shares on the date of this Agreement equals the Purchase Price paid
(and thus no tax is payable), the election must be made to avoid adverse tax
consequences in the future. The form for making this election is attached as
Exhibit III. FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30) DAY
PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY INCOME BY FOUNDER AS THE
FORFEITURE RESTRICTIONS LAPSE.
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EXHIBIT III
SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the Internal
Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
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Address:
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Taxpayer Ident. No.:
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(2) The property with respect to which the election is being made is
______ shares of the Series A preferred stock of ChemConnect, Inc.
(3) The property was issued on December ____, 1998.
(4) The taxable year in which the election is being made is the calendar
year 1998.
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's employment with the issuer is
terminated. The issuer's repurchase right lapses in a series of monthly
installments over a four (4)-year period ending on November 30, 2002.
(6) The fair market value at the time of transfer (determined without regard
to any restriction other than a restriction which by its terms will
never lapse) is $0.30 per share.
(7) The amount paid for such property is $0.30 per share.
(8) A copy of this statement was furnished to ChemConnect, Inc. for whom
taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on ________________, 1998.
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Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Restriction Agreement.
This filing should be made by registered or certified mail, return receipt
requested. Purchaser must retain two (2) copies of the completed form for filing
with his or her Federal and state tax returns for the current tax year and an
additional copy for his or her records.
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APPENDIX
The following definitions shall be in effect under the
Agreement:
1. AGREEMENT shall mean this Stock Restriction Agreement.
2. BOARD shall mean the Company's Board of Directors.
3. CODE shall mean the Internal Revenue Code of 1986, as amended.
4. COMMON STOCK shall mean the Company's common stock.
5. COMPANY shall mean ChemConnect, Inc., a Delaware corporation.
6. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities are transferred to a person
or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Company's assets in complete liquidation or
dissolution of the Company.
7. FAIR MARKET VALUE of a share of Series A Preferred Stock or Common Stock on
any relevant date, prior to the initial public offering of the Common Stock,
shall be determined by the Board after taking into account such factors as
it shall deem appropriate.
8. PARENT shall mean any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company, provided each corporation in
the unbroken chain (other than the Company) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
9. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the Founder's
Shares, provided and only if Founder obtains the Company's prior written
consent to such transfer, (ii) a transfer of title to the Founder's Shares
effected pursuant to Founder's will or the laws of intestate succession
following Founder's death or (iii) a transfer to the Company in pledge as
security for any purchase-money indebtedness incurred by Founder in
connection with the acquisition of the Founder's Shares.
10. FOUNDER'S SHARES shall have the meaning assigned to such term in the
Recitals.
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11. PURCHASE PRICE shall mean the purchase price per share as calculated by
dividing the Aggregate Purchase Price by the total number of Founder's
Shares.
12. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the Company's outstanding Common Stock as a class without the
Company's receipt of consideration.
13. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or substantially all
of the Company's assets,
(iii) a reverse merger in which the Company is the surviving entity but
in which the Company's outstanding voting securities are
transferred in whole or in part to a person or persons different
from the persons holding those securities immediately prior to
the merger, or
(iv) any transaction effected primarily to change the state in which
the Company is incorporated or to create a holding company
structure.
14. REPURCHASE RIGHT shall mean the right granted to the Company in accordance
with Section C.
15. RESTRICTED SHARE shall mean a Founder's Share that is subject to the Right
of Repurchase.
16. SERIES A PREFERRED STOCK shall mean the Series A Preferred Stock of the
Company.
17. SERVICE shall mean the provision of services to the Company (or any Parent
or Subsidiary) by a person in his or her capacity as an employee, subject to
the control and direction of the employer entity as to both the work to be
performed and the manner and method of performance or as a consultant.
18. INVESTMENT STATEMENT shall mean that certain Agreement by and between the
Company and Founder identified in the recitals.
19. SUBSIDIARY shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, provided each
corporation (other than the last corporation) in the unbroken chain owns, at
the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
