Restricted Stock Agreement - Network Engines Inc. and Lawrence A. Genovesi
NETWORK ENGINES, INC.
Restricted Stock Agreement
Granted Under 1999 Stock Incentive Plan
AGREEMENT made this 18th day of November, 1999 (the "Effective Date"),
between Network Engines, Inc., a Delaware corporation (the "Company"), and
Lawrence A. Genovesi (the "Participant").
For valuable consideration, receipt of which is acknowledged, the parties
hereto agree as follows:
1. Purchase of Shares.
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The Company shall issue and sell to the Participant, and the Participant
shall purchase from the Company, subject to the terms and conditions set forth
in this Agreement and in the Company's 1999 Stock Incentive Plan (the "Plan"),
150,000 shares (the "Shares") of common stock, $.01 par value, of the Company
("Common Stock"), at a purchase price of $.60 per share. For the sake of
clarity, such Shares represent shares of Common Stock following the stock split
which the Board of Directors of the Company approved on October 21, 1999. The
aggregate purchase price for the Shares shall be paid by the Participant by
check payable to the order of the Company or by full recourse promissory note
naming the Company as payee (the "Note") provided that the Note shall be payable
on demand and shall bear interest at the minimum applicable federal rate in
effect. Upon receipt by the Company of payment for the Shares, the Company shall
issue to the Participant one or more certificates in the name of the Participant
for the Shares. The Participant agrees that the Shares shall be subject to the
Purchase Options set forth in Section 2, the right of first refusal set forth in
Section 5 and the restrictions on transfer set forth in Section 4 of this
Agreement.
2. Purchase Options.
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(a) As of the Effective Date, 150,000 Shares shall be considered "Future
Goal Shares," zero (0) shares shall be considered "Vested Shares"
and zero (0) shares shall be considered "Missed Goal Shares."
"Unvested Shares" shall mean the total of Future Goal Shares and
Missed Goal Shares.
(b) A "Business Objective", shall mean the goal for each of the
Company's (i) net revenue and (ii) net profit for each fiscal
quarter beginning with the
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fiscal quarter ending December 31, 1999 and ending with the fiscal
quarter ending September 30, 2002 (each, a "Fiscal Quarter"). Such
Business Objectives shall be established by the Board of Directors
of the Company no less frequently than once each fiscal year of the
Company and shall be based on the goals for the Company's Net
Revenue and Net Profit, respectively, as defined in a business plan
approved by the Board of Directors. The Board of Directors may, in
its sole discretion, reduce any Business Objective (i.e., make the
Business Objective easier for the Company to achieve).
The Business Objectives by Fiscal Quarter for the Company's fiscal
year ending September 30,2000 shall be as follows:
Fiscal Quarter Ending Net Revenue Net Income
--------------------- ----------- ----------
December 31, 1999 $3,813,800 $(2,642,000)
March 31, 2000 $4,200,000 $(3,451,000)
June 30, 2000 $7,559,534 $ ( 974,000)
September 30, 2000 $9,426,667 $ ( 287,000)
Business Objectives for subsequent fiscal years shall be set by the
Board of Directors no later than the end of October of such fiscal
year.
An "Achieved Business Objective" shall mean the achievement by the
Company of a Business Objective. A "Missed Business Objective" shall
mean a Business Objective which the Company did not achieve.
Achievement of the Business Objectives for a Fiscal Quarter will be
determined based on the unaudited quarterly financial statements of
the Company, as approved by the Board of Directors within thirty
(30) days after the end of such Fiscal Quarter; any subsequent
adjustments to such financial statements shall have no effect on the
determination of whether or not a Business Objective for such Fiscal
Quarter was achieved. Notwithstanding anything to the contrary in
this Agreement or in the Plan, upon the occurrence of an Acquisition
Event, as defined in the Plan, both Business Objectives for the
Fiscal Quarter in which such Acquisition Event occurs shall be
deemed to be Achieved Business Objectives.
Failure of the Board of Directors to timely establish Business
Objectives or approve a business plan shall not affect any
determination as to the establishment of a Business Objective or the
achievement of Achieved
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Business Objectives.
For each Achieved Business Objective, the number of Vested Shares
shall be increased by 6,250 and the number of Future Goal Shares
shall be decreased by 6,250. For each Missed Business Objective, the
number of Missed Goal Shares shall be increased by 6,250 and the
number of Future Goal Shares shall be decreased by 6,250.
For the sake of clarity and by way of illustration, zero, one or two
Business Objectives may be achieved each Fiscal Quarter, thus
resulting in zero, one or two Achieved Business Objectives each
Fiscal Quarter. Accordingly, (i) for any Fiscal Quarter in which
both Business Objectives are achieved, the number of Vested Shares
shall be increased by 12,500 and the number of Future Goal Shares
shall be decreased by 12,500; (ii) for any Fiscal Quarter in which
one Business Objective is achieved and the other Business Objective
is not achieved, the number of Vested Shares shall be increased by
6,250, the number of Missed Goal Shares shall be increased by 6,250
and the number of Future Goal Shares shall be decreased by 12,500;
and (iii) for any Fiscal Quarter in which neither Business Objective
is achieved, the number of Missed Goal Shares shall be increased by
12,500 and the number of Future Goal Shares shall be decreased by
12,500.
(c) At any time, and from time to time, prior to November 18, 2004 (the
"Lapse Date"), the Company shall have the right and options (the
"Missed Goal Purchase Options") to purchase from the Participant,
for a sum of $.60 per share (the "Option Price"), any or all of the
Missed Goal Shares existing at the time such Missed Goal Purchase
Option is exercised by the Company. Immediately following such
exercise, the number of Missed Goal Shares shall be decreased by the
number of shares purchased by the Company by exercising such Missed
Goal Purchase Option.
In the event that the Participant ceases to be employed by the
Company for any reason or no reason, with or without cause, prior to
the Lapse Date, the Company shall have the right and option (the
"Termination Purchase Option", and, together with the Missed Goal
Purchase Options, the "`Purchase Options", or each, a "Purchase
Option") to purchase from the Participant, for the aggregate Option
Price, any or all of the Unvested Shares existing at the time the
Termination Purchase Option becomes exercisable by the Company.
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(d) For purposes of this Agreement, employment with the Company shall
include employment with a parent or subsidiary of the Company.
3. Exercise of Purchase Options and Closing.
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(a) The Company may exercise a Missed Goal Purchase Option by delivering
or mailing to the Participant (or his estate), at any time, a
written notice of exercise of a Missed Goal Purchase Option. Such
notice shall specify the number of Missed Goal Shares to be
purchased. If and to the extent Missed Goal Purchase Options are not
so exercised, the Missed Goal Purchase Options shall automatically
expire and terminate effective upon the Lapse Date.
The Company may exercise the Termination Purchase Option by
delivering or mailing to the Participant (or his estate), within 60
days after the termination of the employment of the Participant with
the Company, a written notice of exercise of the Termination
Purchase Option. Such notice shall specify the number of Unvested
Shares to be purchased. If and to the extent the Termination
Purchase Option is not so exercised by the giving of such a notice
within such 60-day period, the Termination Purchase Option shall
automatically expire and terminate effective upon the expiration of
such 60-day period.
(b) Within 10 days after delivery to the Participant of the Company's
notice of the exercise of a Purchase Option pursuant to subsection
(a) above, the Participant (or his estate) shall, pursuant to the
provisions of the Joint Escrow Instructions referred to in Section
7, tender to the Company at its principal offices the certificate or
certificates representing the Shares which the Company has elected
to purchase in accordance with the terms of this Agreement, duly
endorsed in blank or with duly endorsed stock powers attached
thereto, all in form suitable for the transfer of such Shares to the
Company. Promptly following its receipt of such certificate or
certificates, the Company shall pay to the Participant the aggregate
Option Price for such Shares (provided that any delay in making such
payment shall not invalidate the Company's exercise of the Purchase
Option with respect to such Shares).
(c) After the time at which any Shares are required to be delivered to
the Company for transfer to the Company pursuant to subsection (b)
above, the Company shall not pay any dividend to the Participant on
account of such Shares or permit the Participant to exercise any of
the privileges or
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rights of a stockholder with respect to such Shares, but shall, in
so far as permitted by law, treat the Company as the owner of such
Shares.
(d) The Option Price may be payable, at the option of the Company, in
cancellation of all or a portion of any outstanding indebtedness of
the Participant to the Company or in cash (by check) or both.
(e) The Company shall not purchase any fraction of a Share upon exercise
of a Purchase Option.
(f) The Company may assign its Purchase Options to one or more persons
or entities.
4. Restrictions on Transfer.
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The Participant shall not sell, assign, transfer, pledge, hypothecate or
otherwise dispose of, by operation of law or otherwise (collectively
"transfer"):
(a) any Shares, or any interest therein, that are subject to one or more
Purchase Options, except that the Participant may transfer such
Shares (i) to or for the benefit of any spouse, child or grandchild
of the Participant, or to a trust for their benefit, provided that
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such Shares shall remain subject to this Agreement (including,
without limitation, the restrictions on transfer set forth in this
Section 4, the Purchase Options and the right of first refusal set
forth in Section 5) and such permitted transferee shall, as a
condition to such transfer, deliver to the Company a written
instrument confirming that such transferee shall be bound by all of
the terms and conditions of this Agreement or (ii) as part of the
sale of all or substantially all of the Shares of capital stock of
the Company (including pursuant to a merger or consolidation),
provided that, in accordance with the Plan, the securities or other
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property received by the Participant in connection with such
transaction shall remain subject to this Agreement; or
(b) any Shares, or any interest therein, that are no longer subject to
the Purchase Options, except in accordance with Section 5 below.
5. Right of First Refusal.
----------------------
Any Shares which are no longer subject to the Purchase Options (because
they are no longer Unvested Shares and/or because the Purchase Options expired)
shall be subject to Sections 2 and 3 of that certain Stockholders' Agreement
dated as of January
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13, 1999, as amended and as may be amended from time to time, including, but
not limited to, the amendment and restatement to be executed in December, 1999,
by and among the Company and the Stockholders (as defined therein).
6. Agreement in Connection with Public Offering.
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The Participant agrees, in connection with the initial underwritten public
offering of the Company's securities pursuant to a registration statement under
the Securities Act, (i) not to sell, make short sale of, loan, grant any options
for the purchase of, or otherwise dispose of any shares of Common Stock held by
the Participant (other than those shares included in the offering) without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) to execute
any agreement reflecting clause (i) above as may be requested by the Company or
the managing underwriters at the time of such initial offering.
7. Escrow.
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The Participant shall, upon the execution of this Agreement, execute joint
Escrow Instructions in the form attached to this Agreement as Exhibit A. The
Joint Escrow Instructions shall be delivered to the Treasurer of the Company, as
escrow agent thereunder. The Participant shall deliver to such escrow agent a
stock assignment duly endorsed in blank and hereby instructs the Company to
deliver to such escrow agent, on behalf of the Participant, the certificate(s)
evidencing the Shares issued hereunder. Such materials shall be held by such
escrow agent pursuant to the terms of such joint Escrow Instructions.
8. Restrictive Legends.
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All certificates representing Shares shall have affixed thereto legends in
substantially the following form, in addition to any other legends that may be
required under federal or state securities laws:
"The shares of stock represented by this certificate are subject to
restrictions on transfer and an option to purchase set forth in a
certain Restricted Stock Agreement between the corporation and the
registered owner of these shares (or his predecessor in interest),
and such Agreement is available for inspection without charge at the
office of the Secretary of the corporation."
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"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold,
transferred or otherwise disposed of in the absence of an effective
registration statement under such Act or an opinion of counsel
satisfactory to the corporation to the effect that such registration
is not required."
9. Provisions of the Plan.
----------------------
(a) This Agreement is subject to the provisions of the Plan, a copy of
which is furnished to the Participant with this Agreement.
(b) As provided in the Plan, upon the occurrence of an Acquisition Event
(as defined in the Plan), the repurchase and other rights of the
Company hereunder shall inure to the benefit of the Company's
successor and shall apply to the cash, securities or other property
which the Common Stock was converted into or exchanged for pursuant
to such Acquisition Event in the same manner and to the same extent
as they applied to the Common Stock hereunder. If, in connection
with an Acquisition Event, a portion of the cash, securities or
other property received upon the conversion or exchange of the
Common Stock subject hereto is to be placed into escrow to secure
indemnification or similar obligations, the mix between the vested
and unvested portion of such cash, securities or other property that
is placed into escrow shall be the same as the mix between the
vested and unvested portion of such securities or other property
that is not subject to escrow.
10. Investment Representations.
--------------------------
The Participant represents, warrants and covenants as follows:
(a) The Participant is purchasing the Shares for his own account for
investment only, and not with a view to, or for sale in connection
with, any distribution of the Shares in violation of the Securities
Act, or any rule or regulation under the Securities Act.
(b) The Participant has had such opportunity as he has deemed adequate
to obtain from representatives of the Company such information as is
necessary to permit him to evaluate the merits and risks of his
investment in the Company.
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(c) The Participant has sufficient experience in business, financial and
investment matters to be able to evaluate the risks involved in the
purchase of the Shares and to make an informed investment decision
with respect to such purchase.
(d) The Participant can afford a complete loss of the value of the
Shares and is able to bear the economic risk of holding such Shares
for an indefinite period.
(e) The Participant understands that (i) the Shares have not been
registered under the Securities Act and are "restricted securities"
within the meaning of Rule 144 under the Securities Act; (ii) the
Shares cannot be sold, transferred or otherwise disposed of unless
they are subsequently registered under the Securities Act or an
exemption from registration is then available; (iii) in any event,
the exemption from registration under Rule 144 will not be available
for at least one year and even then will not be available unless a
public market then exists for the Common Stock, adequate information
concerning the Company is then available to the public, and other
terms and conditions of Rule 144 are complied with; and (iv) there
is now no registration statement on file with the Securities and
Exchange Commission with respect to any stock of the Company and the
Company has no obligation or current intention to register the
Shares under the Securities Act.
11. Withholding Taxes; Section 83(b) Election.
-----------------------------------------
(a) The Participant acknowledges and agrees that the Company has the
right to deduct from payments of any kind otherwise due to the
Participant any federal, state or local taxes of any kind required
by law to be withheld with respect to the purchase of the Shares by
the Participant or the lapse of the Purchase Option.
(b) The Participant has reviewed with the Participant's own tax advisors
the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. The
Participant is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents.
The Participant understands that the Participant (and not the
Company) shall be responsible for the Participant's own tax
liability that may arise as a result of this investment or the
transactions contemplated by this Agreement. The Participant
understands that it may be beneficial in many circumstances to elect
to be taxed at the time of the Shares are purchased
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rather than when and as the Company's Purchase Option expires by
filing an election under Section 83(b) of the Code with the IRS
within 30 days from the date of purchase.
THE PARTICIPANT ACKNOWLEDGES THAT IT IS THE PARTICIPANT'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO
MAKE THIS FILING ON THE PARTICIPANT'S BEHALF.
12. No Rights to Employment.
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The Participant acknowledges and agrees that the vesting of the shares
pursuant to Section 2 hereof is earned only by the achievement by the Company of
the Business Objectives during the period of the Participant's continuing
service as an employee at the will of the Company (not through the act of being
hired or purchasing shares hereunder). The Participant further acknowledges and
agrees that the transactions contemplated hereunder and the vesting schedule set
forth herein do not constitute an express or implied promise of continued
engagement as an employee for the vesting period, for any period, or at all.
13. Severability.
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The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, and each other provision of this Agreement shall be severable and
enforceable to the extent permitted by law.
14. Waiver.
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Any provision for the benefit of the Company contained in this Agreement
may be waived, either generally or in any particular instance, by the Board of
Directors of the Company.
15. Binding Effect.
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This Agreement shall be binding upon and inure to the benefit of the
Company and the Participant and their respective heirs, executors,
administrators, legal representatives, successors and assigns, subject to the
restrictions on transfer set forth in Sections 4 and 5 of this Agreement.
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16. Notice.
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All notices required or permitted hereunder shall be in writing and deemed
effectively given upon personal delivery or five days after deposit in the
United States Post Office, by registered or certified mail, postage prepaid,
addressed to the other party hereto at the address shown beneath his or its
respective signature to this Agreement, or at such other address or addresses as
either party shall designate to the other in accordance with this Section 16.
17. Pronouns.
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Whenever the context may require, any pronouns used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural, and vice versa.
18. Entire Agreement.
----------------
This Agreement and the Plan constitutes the entire agreement between the
parties, and supersedes all prior agreements and understandings, relating to the
subject matter of this Agreement.
19. Amendment.
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This Agreement may be amended or modified only by a written instrument
executed by both the Company and the Participant.
20. Governing Law.
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This Agreement shall be construed, interpreted and enforced in accordance
with the internal laws of the State of Delaware without regard to any applicable
conflicts of laws.
21. Participant's Acknowledgments.
-----------------------------
The Participant acknowledges that he: (a) has read this Agreement; (b) has
been represented in the preparation, negotiation and execution of this Agreement
by legal counsel of the Participant's own choice or has voluntarily declined to
seek such counsel; (c) understands the terms and consequences of this Agreement;
and (d) is fully aware of the legal and binding effect of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NETWORK ENGINES, INC.
By:/s/ Douglas G. Bryant
--------------------------------------
Title: CFO
-----------------------------------
Address: 61 Pleasant Street
Randolph, MA 02368-4137
The Participant has reviewed the provisions of this Agreement, has had an
opportunity to obtain the advice of the Participant's own tax and legal advisors
prior to executing this Agreement and fully understands and agrees to the
provisions hereof. The Participant understands that the law firm of Hale and
Dorr LLP is acting as counsel to the Company in connection with the transactions
contemplated by the Agreement, and is not acting as counsel for the Participant.
/s/ Lawrence A. Genovesi
-----------------------------------------
Lawrence A. Genovesi
Address: 36 Egypt Beach Road
Scituate, MA 02066
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Exhibit A
NETWORK ENGINES, INC.
Joint Escrow Instructions
-------------------------
November 18,1999
Mr. Douglas Bryant
Treasurer
Network Engines, Inc.
61 Pleasant Street
Randolph, MA 02368-4137
Dear Sir:
As Escrow Agent for Network Engines, Inc., a Delaware corporation (the
"Company"), and the undersigned person ("Holder"), you are hereby authorized and
directed to hold the documents delivered to you pursuant to the terms of that
certain Restricted Stock Agreement (the "Agreement") of even date herewith, to
which a copy of these Joint Escrow Instructions is attached, in accordance with
the following instructions:
1. Appointment. Holder irrevocably authorizes the Company to deposit with
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you any certificates evidencing Shares (as defined in the Agreement) to be held
by you hereunder and any additions and substitutions to said Shares. Holder does
hereby irrevocably constitute and appoint you as his attorney-in-fact and agent
for the term of this escrow to execute with respect to such Shares all documents
necessary or appropriate to make such Shares negotiable and to complete any
transaction herein contemplated. Subject to the provisions of this paragraph 1
and the terms of the Agreement, Holder shall exercise all rights and privileges
of a stockholder of the Company while the Shares are held by you.
2. Closing of Purchase.
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(a) Upon any purchase by the Company of any or all of the Shares
pursuant to the Agreement, the Company shall give to Holder and you
a written
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notice specifying the purchase price for such Shares, as determined
pursuant to the Agreement, and the time for a closing hereunder (the
"Closing") at the principal office of the Company. Holder and the
Company hereby irrevocably authorize and direct you to close the
transaction contemplated by such notice in accordance with the terms
of said notice.
(b) At the Closing, you are directed (a) to date the stock assignment
form or forms necessary for the transfer of such Shares, (b) to fill
in on such form or forms the number of Shares being transferred, and
(c) to deliver same, together with the certificate or certificates
evidencing the Shares to be transferred, to the Company against the
simultaneous delivery to you of the purchase price for the Shares
being purchased pursuant to the Agreement.
3. Withdrawal. The Holder shall have the right to withdraw from this
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escrow any Shares as to which all Purchase Options (as defined in the Agreement)
have terminated or expired.
4. Duties of Escrow Agent.
----------------------
(a) Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
(b) You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be
protected in relying or refraining from acting on any instrument
reasonably believed by you to be genuine and to have been signed or
presented by the proper party or parties. You shall not be
personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact of Holder while acting in good
faith and in the exercise of your own good judgment, and any act
done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
(c) You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person
or Company, excepting only orders or process of courts of law, and
are hereby expressly authorized to comply with and obey orders,
judgments or decrees of any court. In case you obey or comply with
any such order, judgment or decree of any court, you shall not be
liable to any of the parties hereto or to any other person, firm or
Company by reason of such compliance, notwithstanding any such
order, judgment or decree being
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subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
(d) You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or
papers deposited or called for hereunder.
(e) You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with
your obligations hereunder and may rely upon the advice of such
counsel.
(f) Your rights and responsibilities as Escrow Agent hereunder shall
terminate if (i) you cease to be Treasurer of the Company or (ii)
you resign by written notice to each party. In the event of a
termination under clause (i), your successor as Treasurer shall
become Escrow Agent hereunder; in the event of a termination under
clause (ii), the Company shall appoint a successor Escrow Agent
hereunder.
(g) If you reasonably require other or further instruments in connection
with these joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such
instruments.
(h) It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of
the securities held by you hereunder, you are authorized and
directed to retain in your possession without liability to anyone
all or any part of said securities until such dispute shall have
been settled either by mutual written agreement of the parties
concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no
appeal has been perfected, but you shall be under no duty whatsoever
to institute or defend any such proceedings.
(i) These Joint Escrow Instructions set forth your sole duties with
respect to any and all matters pertinent hereto and no implied
duties or obligations shall be read into these Joint Escrow
Instructions against you.
(j) The Company shall indemnify you and hold you harmless against any
and all damages, losses, liabilities, costs, and expenses, including
attorneys' fees and disbursements, for anything done or omitted to
be done by you as Escrow Agent in connection with this Agreement or
the
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performance of your duties hereunder, except such as shall result
from your gross negligence or willful misconduct.
5. Notice. Any notice required or permitted hereunder shall be given in
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writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to each of the other parties thereunto
entitled at the following addresses, or at such other addresses as a party may
designate by ten days' advance written notice to each of the other parties
hereto.
COMPANY: Network Engines, Inc.
61 Pleasant Street
Randolph, MA 02368-4137
HOLDER: Notices to Holder shall be sent to the
address set forth below Holder's signature
below.
ESCROW AGENT: Mr. Douglas Bryant
Network Engines, Inc.
61 Pleasant Street
Randolph, MA 02368-4137
6. Miscellaneous.
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(a) By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions, and
you do not become a party to the Agreement.
(b) This instrument shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted
assigns.
Very truly yours,
NETWORK ENGINES, INC.
By:/s/ Douglas G. Bryant
----------------------------------
Title: CFO
-------------------------------
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HOLDER:
/s/ Lawrence A. Genovesi
-------------------------------------
Lawrence A. Genovesi
Address:
36 Egypt Beach Road
Scituate, MA 02066
Date Signed: November 18,1999
ESCROW AGENT:
/s/ Douglas G. Bryant
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(STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE)
FOR VALUE RECEIVED, I hereby sell, assign and transfer unto Network
Engines, Inc. shares of Common Stock, $.01 par value per share, of Network
Engines, Inc. (the "Corporation") standing in my name on the books of said
Corporation represented by Certificate(s) Number _____ herewith, and do hereby
irrevocably constitute and appoint Lawrence A. Genovesi attorney to transfer the
said stock on the books of the within named Corporation with full power of
substitution in the premises.
Dated: 11/18/99
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IN PRESENCE OF
/s/ Lawrence A. Genovesi
--------------------------------------------
Lawrence A. Genovesi
/s/ Douglas G. Bryant
---------------------------
NOTICE: The signature(s) to this assignment must correspond with the name
as written upon the face of the certificate, in every particular, without
alteration, enlargement, or any change whatever and must be guaranteed by a
commercial bank, trust company or member firm of the Boston, New York or Midwest
Stock Exchange.
<PAGE>
DEMAND PROMISSORY NOTE
------ ---------- ----
$90,000 November 18, 1999
FOR VALUE RECEIVED, the undersigned, Lawrence A. Genovesi (the
"Borrower"), residing at 36 Egypt Beach Road, Scituate, Massachusetts 02066, by
this demand promissory note (hereinafter the "Note"), absolutely and
unconditionally promises to pay to the order of Network Engines, Inc., a
Delaware corporation (the "Lender") with a principal place of business at 61
Pleasant Street, Randolph, Massachusetts 02368-4137, ON DEMAND AT ANY TIME, or,
if no demand is made prior thereto, on November 18, 2004, the principal sum of
NINETY THOUSAND DOLLARS ($90,000), and to pay interest on the principal sum
outstanding hereunder from time to time from the date hereof as provided herein.
The entire unpaid principal (not at the time overdue) of this Note
outstanding shall bear interest at an annual rate which shall be equal to 6.08%,
compounded annually (the "Rate"). Each overdue amount (whether of principal,
interest or otherwise) payable on or in respect of this Note or the indebtedness
evidenced hereby shall (to the extent permitted by applicable law) bear
interest, from the date on which such amount shall have first become due and
payable in accordance with the terms hereof to the date on which such amount
shall be paid to the holder of this Note (whether before or after judgment) at
all times be three percent (3%) above the Rate (the "Default Rate"). The unpaid
interest accrued on each overdue amount in accordance with the foregoing terms
of this paragraph shall become absolutely due and payable by the Borrower to the
holder hereof on demand by the holder of this Note at any time. Interest on each
overdue amount will continue to accrue, as provided by the foregoing terms of
this paragraph, and will (to the extent permitted by applicable law) be
compounded monthly until the obligations of the Borrower in respect of the
payment of such overdue amount shall be discharged (whether before or after
judgment).
On the earlier to occur of DEMAND, or, if no demand has been made prior
thereto, on November 18, 2004, there shall become absolutely due and payable by
the Borrower hereunder, and the Borrower hereby promises to pay to the holder
hereof without presentment, further demand, protest, notice of protest or any
other formalities of any kind, all of which are hereby expressly and irrevocably
waived by the Borrower, the balance (if any) of the principal hereof then
remaining unpaid, all of the unpaid interest accrued hereon and all (if any)
other amounts payable on or in respect of this Note or the indebtedness
evidenced hereby.
The Borrower absolutely and unconditionally agrees to reimburse the
Lender, on demand, for all its reasonable out-of-pocket expenses, including but
not limited to (a) the reasonable attorney's fees and disbursements and
disbursements incurred or expended in connection with any amendment hereof, and
(b) all attorneys' fees relating to the enforcement of any obligations under
this Note or the satisfaction of any indebtedness of the Borrower hereunder, or
in connection with any litigation proceeding or dispute hereunder in any way
related to the credit hereunder.
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2
All payments on or in respect of this Note or the indebtedness evidenced
hereby shall be made to the holder of this Note without set-off or counterclaim
and free and clear of and without any deduction of any kind for any taxes,
levies, fees, deductions, withholdings, restrictions or conditions of any
nature.
The Borrower will have the right to prepay at any time the unpaid
principal of this Note in full or in part without premium or penalty. There
shall become and be absolutely due and payable by the Borrower on the date of
each prepayment of principal of this Note, and the Borrower hereby promises to
pay on the date of each such prepayment of this Note, all of the unpaid interest
accrued to such date on the amount of principal of this Note being prepaid on
such date. Any principal amount prepaid may not be reborrowed.
Any partial payment of the indebtedness evidenced by this Note shall be
applied by the holder hereof (a) first, to the payment of all of the interest
due and payable on the unpaid principal of this Note at the time of such partial
payment, (b) then, to the payment of all (if any) other amounts (except
principal) due and payable at the time of such partial payment on or in respect
of this Note or the indebtedness evidenced by this Note, and (c) finally, to the
repayment or (as the case may be) the prepayment of the unpaid principal of this
Note due and payable at the time of such partial payment.
All computations of interest payable as provided in this Note shall be
made by the holder hereof on the basis of the actual number of days elapsed
divided by 360.
If any sum would, but for the provisions of this paragraph, become due and
payable on or in respect of this Note or the indebtedness evidenced hereby on a
day which is not a business day, then such sum shall become due and payable on
the business day next succeeding the day on which such sum would otherwise have
become due and payable hereunder, and interest payable hereunder to the holder
hereof shall be adjusted by the holder hereof accordingly.
The failure of the holder of this Note to exercise all or any of its
rights, remedies, powers or privileges hereunder in any instance shall not
constitute a waiver thereof in that or in any other instance.
The Borrower shall remain fully bound until this Note shall be fully paid;
i.e., for the sake of clarity, the holder hereof is entitled to full recourse
against the Borrower for the principal hereof, all of the interest accrued
hereon and all (if any) other amounts payable on or in respect of this Note or
the indebtedness evidenced hereby.
The Borrower hereby irrevocably waives notice of acceptance, presentment,
notice of nonpayment, protest, notice of protest, suit and all other conditions
precedent in connection with the delivery, acceptance, collection and/or
enforcement of this Note or any collateral or security therefor. The Borrower
hereby absolutely and irrevocably consents and submits to the jurisdiction of
the Courts of the Commonwealth of Massachusetts and of any Federal Court located
in the said Commonwealth in connection with any actions or proceedings brought
against the Borrower by the holder hereof arising out of or relating to this
Note.
The Borrower hereby agrees, at the Borrower's own expense, to execute and
deliver, from time to time, any and all further, or other, instruments, and to
perform such acts, as the
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3
Lender may reasonably request to effect the transactions contemplated by this
Note and to provide to the Lender the benefits of all rights, authorities and
remedies conferred upon the Lender by the terms of this Note.
The Borrower has executed this Note in consideration of the issuance and
sale by the Lender to the Borrower of 150,000 shares of common stock, $.01 par
value, of the Borrower, at a purchase price of $.60 per share, pursuant to a
Restricted Stock Agreement, dated on or about even date herewith.
This Note may be assigned by the Lender without the prior written consent
of the Borrower.
This Note is intended to take effect as a sealed instrument. This Note and
the Obligations of the Borrower hereunder shall be governed by and interpreted
and determined in accordance with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, , this DEMAND PROMISSORY NOTE has been duly executed
by the undersigned, as of the day and in the year first above written.
BORROWER:
/s/ Lawrence A. Genovesi
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Lawrence A. Genovesi
Witness:/s/ Douglas G. Bryant
--------------------------
Name: Douglas G. Bryant
-----------------------------