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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OPTIMARK TECHNOLOGIES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 84-1350993
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10 Exchange Place Centre, 24th Floor, Jersey City, NJ 07302
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (201) 536-7000
Securities to be registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH EACH CLASS IS TO BE
TO BE SO REGISTERED REGISTERED
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None None
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Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
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(Title of Class)
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TABLE OF CONTENTS
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ITEM 1. BUSINESS.............................................................................................1
ITEM 2. FINANCIAL INFORMATION...............................................................................27
ITEM 3. PROPERTIES..........................................................................................38
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................................38
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS....................................................................43
ITEM 6. EXECUTIVE COMPENSATION..............................................................................46
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................................................51
ITEM 8. LEGAL PROCEEDINGS...................................................................................55
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.....55
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.............................................................55
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.............................................58
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS...........................................................62
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.........................................................63
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE................63
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS...................................................................63
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FORWARD-LOOKING STATEMENTS
This registration statement on Form 10 includes forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. These statements are based on our beliefs and assumptions, and
on information currently available to us. Forward-looking statements include the
information concerning our possible or assumed future results of operations set
forth in Item 2 - "FINANCIAL INFORMATION - Management's Discussion and Analysis
of Financial Condition and Results of Operations". Forward-looking statements
also include statements in which words such as "expect", "anticipate",
"contemplate", "intend", "plan", "believe", "estimate", "consider" or similar
expressions are used.
Forward-looking statements are not guarantees of future performance.
They involve risks, uncertainties and assumptions, including the risks discussed
under the heading "BUSINESS - Risk Factors and Investment Considerations" and
elsewhere in this registration statement. Our future results and stockholder
values may differ materially from those expressed in these forward-looking
statements. Many of the factors that will determine these results and values are
beyond our ability to control or predict. Investors are cautioned not to put
undue reliance on any forward-looking statements. In addition, we do not have
any intention or obligation to update forward-looking statements after the
effectiveness of this registration statement, even if new information, future
events or other circumstances have made them incorrect or misleading. For these
statements, we claim the protection of the safe harbor for forward-looking
statements contained in Section 21E of the Exchange Act.
ITEM 1. BUSINESS
OptiMark conceives, develops and implements matching engines and
platforms for electronic marketplaces. While our initial focus has been on the
global equities markets, we believe the OptiMark matching engine technology has
special capabilities that will compliment transactions where multiple buyers and
sellers exchange goods and services at electronic speed, the value of these
goods and services is determined by more than price and quantity, periodic call
markets are required and buyers and sellers put a premium on confidentiality. We
operate in two business segments, our electronic markets business and our US
equities business.
In the electronic markets business, we license matching engines and
platforms to exchanges, markets and managers of communities where buyers and
sellers exchange information about a particular topic or product, the so-called
"vertical markets". We generate revenue from consulting fees related to
customizing the matching engine and platform to the market and from royalties
from the licensing of our matching engine technology. In our effort to obtain
upside value, we also seek an equity position in the markets and communities
with whom we consult and license our technology. We believe our matching engine
technology has applications in many securities or business-to-business markets
where goods are traded. An example of one of our initiatives in this area is
Japan OptiMark Systems' license of a matching engine for buying and selling
equity securities traded on the Osaka Securities Exchange in Japan. We have also
entered into agreements to develop the OptiMark matching engine technology for
an established financial exchange located offshore and a technology provider
located in South Africa.
In the US equities business, we have created, developed and implemented
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engines for the buying and selling of equities for the Pacific Exchange, Inc.
and the Nasdaq Stock Market, Inc. Unlike the electronic markets business, where
we license our matching engine technology to third parties, in the US equities
business, we have so far chosen to maintain full management and ownership of
the business.
We were founded in 1996 as the successor to a company that had begun
developing the OptiMark matching engine technology in 1994. During the period
through 1999, we patented key technology, entered into agreements with the
Pacific Exchange, the Nasdaq and, through a joint venture, the Osaka Securities
Exchange, and raised $236 million in four rounds of preferred equity financing.
With respect to the US equities business, following receipt of
necessary Securities and Exchange Commission approvals, the OptiMark equities
trading system was implemented on the Pacific Exchange in January 1999 and on
the Nasdaq in October 1999. The system is operated through two subsidiaries,
OptiMark Services, Inc., which operates the Pacific Exchange facility, and
OptiMark OTC Services, Inc., which operates the Nasdaq facility.
STRATEGY
Our goal is to become the leading provider of matching engine
technology to facilitate trading on exchanges and in markets. The key elements
of our strategy are:
Aggressively work to improve liquidity and ease of use in our US
equities business. We believe that the OptiMark matching engine technology will
succeed only if users are confident their trades will be executed at acceptable
prices over time. This requires that consistent, deep, diverse and appropriately
priced liquidity be available in the OptiMark equities trading system. To date
the OptiMark equities trading system has not provided this liquidity. We are
taking steps to address these issues and increase system volume, including:
- correcting systems issues related to the Nasdaq market, including
access to electronic communications networks liquidity, improved
risk management tools for the broker/dealer community, and
improved ability for the market maker community to manage their
positions in the OptiMark equities trading system,
- creating transparency in the OptiMark equities trading system so
that users can better assess the liquidity available in the
OptiMark equities trading system, including real-time posting
of transaction information, selective electronic messaging of
trading interest between users and automatic trade negotiation
that should make users more willing to enter profiles,
- working intensively with a core group of institutional users to
help integrate the system better into their internal order flow,
- educating users to create better profiles, stressing ease of use,
- adjusting pricing if necessary for some categories of users, and
- focusing on a specific list of stocks to increase liquidity.
Continue to expand our electronic markets business. We believe the
OptiMark matching engine technology can be implemented effectively in many
different markets beyond equities. We
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intend to enter other business-to-business electronic markets through direct
participation, licensing our technology to e-commerce providers for inclusion
in their infrastructure and operating system products and establishing
relationships with key consulting organizations. Examples of markets we are
targeting include European energy, bandwidth, funds trading and options, and
Canadian equities.
Employ a business model that focuses on those areas of a business
opportunity where we can add the most value. We believe our special competencies
center on design and development of platforms, creating technology and
delivering turn-key systems, as well as providing ongoing improvements and
enhancements to the system and market. We believe we add less value in operating
these systems and managing the enterprises they serve. We intend to adopt a
business model in which we provide the platform and intellectual property,
recovering our development costs and receiving development fees, royalties and
minority equity stakes, with strategic partners that will supply domain
expertise, management, liquidity and capital.
Invest in and develop the best human capital. We believe that investing
in human capital is key to delivering fully functional trading systems and high
quality customer service. We intend to continue our practice of aggressively
recruiting high caliber personnel and retaining these personnel by providing
appropriate compensation incentives.
US EQUITIES BUSINESS
Background. During recent years, the United States market for equity
securities has experienced dramatic growth in trading volumes. In addition to
the increasing volume of shares traded, holdings by institutional investors
have steadily increased over the last several decades.
Traditionally, orders for publicly traded equity securities to be
executed on an exchange are brought to the floor and executed by open outcry
or, if there is not enough liquidity "in the crowd", are filled by or left with
the specialist for that stock. Orders to be executed in the over-the-counter
market are filled by market makers, dealers that hold themselves out as willing
to trade the security in question on a regular, continuous basis.
Advances in telecommunications and information technology have produced
several alternatives to traditional exchange trading and the over-the-counter
market. Alternative trading systems such as electronic communications networks,
or ECNs, and crossing networks allow institutions to electronically execute
trades in a variety of ways. ECNs allow participants to display firm, priced
orders to other participants and to execute automatically against other orders
in the system. Crossing networks allow participants to enter unpriced orders,
which are then executed with matching interest at a single price, typically
derived from the primary public market price for each crossed security.
A problem for traders using both traditional and alternative means of
trading of equity securities is that disclosing the size, price or source of an
order, especially a large one, may cause the price of the stock to rise or fall
before the order is filled. To avoid this market impact, traders often avoid
disclosing their positions to the market or to other traders. However,
withholding this information from the market results in a loss of liquidity and
price transparency resulting in
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missed trades and higher transaction costs.
The OptiMark equities trading system. We have designed, built and
implemented the OptiMark equities trading system as a computer-based matching
facility that uses a proprietary matching algorithm to allow traders to trade
anonymously while committing their full positions to the market. The OptiMark
equities trading system is designed to help traders overcome the problem of
market impact, thus increasing market liquidity, permitting more efficient
transaction execution and lowering the cost of trading. In addition, the
OptiMark equities trading system is designed to allow retail traders direct
access to institutional volume, which should result in better executions.
Users access the OptiMark equities trading system by submitting
customized expressions of trading interest called profiles. Profiles reflect an
investor's trading interest and can be as simple as a limit order or represent
a complex trading strategy. A complex profile may reflect an investor's
willingness to trade at a variety of prices and sizes, including the level of
satisfaction, on a sliding scale, of trading at a given price and size. For
example, an investor may be 100% satisfied to buy 100,000 shares of XYZ Company
at a price up to $1.00 above the current market price, but only 50% satisfied
to buy that number of shares at a price $1.50 above it, and not at all
satisfied to pay more than $2.00 above it. The satisfaction levels are expressed
as a number from zero to one for each coordinate on a price/size grid.
These profiles, which are entered through computer terminals and
expressed graphically for ease of use, are not disclosed to other users or
market participants. Accordingly, the user's presence, identity and strategy
remain confidential. The profiles are transmitted over a secure network and are
received and logged in by the OptiMark equities trading system.
At regular intervals throughout the trading day, all profiles are
centrally processed by the OptiMark equities trading system to obtain the
optimal matches among users. The OptiMark equities trading system employs a
computer algorithm that matches buy and sell profiles in a manner that takes
into account, and is intended to maximize, mutual satisfaction with the trade.
Orders generated are typically executed immediately.
Transactions that result from matches through the OptiMark equities
trading system clear and settle regular way, as would any other transaction.
All users receive a report of any execution resulting from processing the
profiles submitted by them as soon as possible after the execution takes place.
Pacific Exchange and Nasdaq Applications
Pacific Exchange. In January 1999, we launched the OptiMark equities
trading system on the Pacific Exchange. Our wholly-owned subsidiary, OptiMark
Services, Inc., provides the system as a facility of the Pacific Exchange. The
Pacific Exchange system provides for the matching and execution of equity
securities listed or traded on the Pacific Exchange under an agreement dated
August 27, 1996. We developed and maintain the central computer-based matching
facility and the related communications network and the Pacific Exchange
developed and makes available the necessary computer hardware and software for
the system to communicate with the exchange's
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computerized order system. As of March 31, 2000, the Pacific Exchange system was
capable of handling trades in all of the over 2,600 securities listed or traded
on the Pacific Exchange.
The Pacific Exchange system is available to all members of the Pacific
Exchange and, through those members, to non-members like institutional investors
and other non-member broker/dealers. Each user of the system must enter into a
user agreement with OptiMark Services that establishes the basis on which a user
communicates with the system. As of March 31, 2000, more than 144 buy-side
institutions and 65 sell-side institutions had entered into user agreements with
OptiMark Services and were authorized to trade using the OptiMark equities
trading system.
The Pacific Exchange assesses its members acting as users, or
sponsoring non-member users, a transaction charge per share matched using the
system. The exchange generally remits $.01 per share matched to OptiMark
Services for its services as an exchange facility operator responsible for
operating portions of the Pacific Exchange facility. Although daily volumes
through the Pacific Exchange facility peaked at about 3.0 million shares shortly
after it was implemented in early 1999, and reached this level again in
September 1999, volumes have since substantially subsided.
In August 1996, we also entered into a revenue sharing agreement with
the Pacific Exchange. The agreement provides that each month after the date of
the agreement through December 31, 2005, we will credit a revenue accrual
account with 1 1/2% of our consolidated gross revenues for such month, up to an
aggregate amount of $3,855,580. Distributions are made from the account to the
Pacific Exchange quarterly after the commencement of use of the system by the
Pacific Exchange and other exchanges to trade listed equities, equity securities
traded after normal trading hours, options and equities securities with unlisted
trading privileges, as applicable. We began making distributions from the
accrual account to the Pacific Exchange at the end of the first quarter of 1999
in connection with the Pacific Exchange's use of the system to trade listed
equities. As of March 31, 2000, we have distributed to the Pacific Exchange
$21,523 and accrued an amount of $72,674 for future distribution. We have a
similar revenue sharing arrangement with the Chicago Board Options Exchange,
Inc. to credit an account with up to $2,250,000 of our gross revenues. No
distributions have been made under that arrangement to date.
The Nasdaq Stock Market. In October 1999, we launched the OptiMark
equities trading system on a pilot basis on the Nasdaq. Our wholly-owned
subsidiary, OptiMark OTC Services, Inc., provides the system as a facility of
the Nasdaq. The Nasdaq system provides for the matching and execution of equity
securities traded over-the-counter in Nasdaq pursuant to an agreement dated
September 1, 1998. We adapted the OptiMark equities trading system from the
Pacific Exchange for use within the existing Nasdaq market structure. We make
available to Nasdaq a version of the OptiMark equities trading system and Nasdaq
developed and makes available the networks through which profiles may be
transmitted from the Nasdaq workstation environment. Nasdaq also manages the
facility in Trumbull, Connecticut, which houses the Nasdaq system.
The Nasdaq system was approved by the Securities and Exchange
Commission to handle trades in 250 companies traded over-the-counter in Nasdaq.
The SEC recently approved an extension of the pilot program through September
30, 2000. We believe the SEC will continue to extend the pilot program and may
remove the restrictions in the pilot program when we resolve
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the technical issues described below.
The Nasdaq system is available to any NASD member that is a clearing
broker, and through such members, to NASD members that are non-clearing brokers
and non-members. Each user of the system must enter into a user agreement with
OptiMark OTC Services that establishes the basis on which a user communicates
with the system. As of March 31, 2000, more than 144 buy-side institutions and
90 sell-side institutions had entered into user agreements with OptiMark OTC
Services and were authorized to trade using the OptiMark equities trading
system.
The Nasdaq assesses its members acting as a user, or sponsoring a
non-member user, the following transaction charges:
- no charge for trades matched against an ECN or market-maker quote,
- $0.005/share for trades matched against a NASD member acting as
principal, and
- $0.01/share for all other trades matched.
The Nasdaq remits from 90% to 100% of these amounts to OptiMark OTC
Services for its services as an exchange facility operator responsible for
operating portions of the Nasdaq system, based on our agreement with Nasdaq.
When we launched the Nasdaq system, it was available for the trading
of 10 over-the-counter stocks. We intend to expand the Nasdaq facility to trade
additional stocks. However, we have delayed expanding beyond 10 stocks due to:
- the unwillingness of certain key ECN's to modify their computer
systems to process trades transmitted from the system in spite of
the fact that, in not doing so, they are in our view breaching SEC
regulations; at this time both the SEC and the NASDR, the
regulatory body of Nasdaq, have in our view chosen not to enforce
their regulations,
- Nasdaq's not delivering the necessary software modifications to
allow market makers to update their positions immediately after
trades are executed through the system, without these
modifications, market makers are unwilling to use the system and
expose themselves to higher than acceptable perceived risk, and
- Nasdaq's not yet delivering the necessary software modifications
to allow designated brokers to obtain information concerning the
account balances, and to decrease trading limits, of sponsored
users during the course of the trading day.
Because of this, the Nasdaq system is virtually dormant, and has not been
effectively launched. We continue to work with the Nasdaq, the ECNs and the SEC
to correct these issues as rapidly as possible so that we can effectively launch
the Nasdaq system.
Operations. We have entered into agreements with IBM Canada Ltd. and
its affiliate ISM Information Systems Management Corp. relating to the
operations of the OptiMark equities trading system, including a license
agreement and related services agreements. Under the license agreement we
license certain software used in the profile system module of the OptiMark
equities trading system to maintain the order book of record, schedule matching
cycles, receive/log/broadcast executions from the OptiMark matching engine
software
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and manage user credit. The license is perpetual, subject to termination only in
the event we fail to pay. We are also party to an agreement with IBM relating to
maintenance services for IBM software and an agreement in which IBM performs and
manages certain information systems activities and responsibilities in
connection with the computer system for the Pacific Exchange system. We
currently pay approximately $1,100,000 per month for these services.
IXnet, a subsidiary of IPC Information Systems, Inc., provides network
services and support to our customers for the operation of our US equities
business. We currently pay IXnet approximately $770,000 per month for the
network services and support. IXnet's service commitment continues until March
31, 2002.
Competition. We derive substantially all of our revenues in the US
equities business from the volume of shares traded using our OptiMark equities
trading system. We expect competition for order flow to continue and intensify
in the future. We compete for order flow primarily with wholesale, national, and
regional broker/dealers, as well as ECNs, which are third-party trading systems
typically operated by broker/dealers, the New York and American Stock Exchanges,
regional exchanges, and third market competitors, as follows:
- Island, Instinet and Tradebook and other ECNs allow participants
to display firm, priced orders without disclosing their
identities to other participants and to execute automatically
against other orders in the system,
- POSIT and other "crossing systems" allow participants to enter
unpriced orders, which are then executed with matching interest
at a single price, typically derived from the primary public
market price for each crossed security,
- the Arizona Stock Exchange and other "single-price auction"
systems allow participants to enter priced orders, which the
system compares to determine the single price at which the
largest volume of orders can be executed, matching and executing
all orders at that price, and
- "Upstairs" brokers, the bulge bracket, full-service brokerage
firms, employ their own capital enabling them to take large
positions from a trader.
We also face competition from existing markets and exchanges in their
traditional forms, as well as from the potential of such markets and exchanges
to deploy technological advances such as Nasdaq's primex facility. In addition,
the NYSE has announced that it will establish its own alternative trading
system.
We believe the main competitive factors are liquidity concentration,
quality of execution, especially price and speed, scope of coverage and ease of
learning and use.
Regulation. We provide the OptiMark equities trading system through
facilities of the Pacific Exchange and the Nasdaq, and in our facility capacity
we are subject to regulation by the SEC. The facilities are provided pursuant
to the rules of the Pacific Exchange and Nasdaq in their capacities as self
regulatory organizations, and these rules must be approved by the SEC. This
approval process includes possible public notice and comment periods which both
invite industry and competitor opposition to our initiatives and cause those
initiatives to be known publicly before they are actually implemented, which
could result in competitive harm to us. Before
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obtaining SEC approval, any rule changes affecting the OptiMark equities trading
system must first be approved by the exchanges themselves. This approval process
can be cumbersome and uncertain because the self regulatory organizations
operate in a not-for-profit mutual or member-controlled form of ownership, and
governance initiatives must often be approved by internal member committees and
other responsible officials before being reviewed at executive levels.
Although we are not directly registered with the SEC in a formal
registration category (such as a broker-dealer or an ECN), as a facility of a
registered exchange we have agreed to SEC oversight and audit of our activities.
This oversight includes screening of our employees for past disciplinary
violations or other violations which would cause those individuals to
potentially be disqualified if they did work for a registered entity. The SEC
also has authority to audit our policies and procedures and books and records to
insure our adequacy and integrity as a facilities manager of a registered
exchange. We are also subject to audit and review by the internal regulatory
departments of the exchanges of which we are a facility for compliance with
applicable exchange rules. We are required to maintain extensive books and
records including detailed transaction logs in order to respond to regulatory
inquiries about the market conduct of our users in addition to our own conduct.
Our failure to comply with these laws, rules and regulations or perform our
role or maintain our policies and procedures in accordance with the applicable
standards could result in exchange or SEC imposed restrictions on or termination
of the operation of our facilities.
The OptiMark equities trading system in use on the Pacific Exchange
obtains access to prices and liquidity at other U.S. securities exchanges
through a system called the Intermarket Trading System, which is governed by a
plan approved by the SEC and may be amended only with the unanimous consent of
all plan participants. The plan amendments impose ceilings on our use of the
Intermarket Trading System and limitations and restrictions on our access if the
facilities exceed those ceilings. Because of the SEC approval process and the
unanimous consent provision, it is extremely difficult for us to obtain changes
to or relief from these ceilings and limitations. We have exceeded certain
Intermarket Trading System plan ceilings in the past and, as a result, have
experienced restricted access to the other securities exchanges and may
experience restricted access in the future.
The regulatory environment in which we operate our US equities business
is subject to change. We cannot predict what effect these changes might have.
Both regulations directly applicable to us and regulations of general
application could have a material adverse effect on our business, financial
condition, and operating results. In particular, the SEC is weighing and seeking
public comment on the disadvantages of market fragmentation resulting from the
existence of separate market centers, such as multiple exchanges and ECNs,
against the benefits of technological innovation provided by those centers. We
provide the OptiMark equities trading system to two exchanges, and our business
may be materially affected by new rules mandating changes in market linkages,
order display and handling, duties of best execution and the regulation of
exchanges generally.
ELECTRONIC MARKETS BUSINESS
Industry Background. The fast growth of the Internet as a means of
communicating with
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consumers and businesses globally has encouraged companies to take advantage of
the Internet to enter new markets, lower costs and improve efficiency. We
believe the OptiMark matching engine technology has special capabilities that
will complement transactions where multiple buyers and sellers exchange goods
and services at electronic speed, the value of these goods and services is
determined by more than price and quantity, periodic call markets are required
and buyers and sellers put a premium on confidentiality.
Today the use of the Internet for business-to business transactions can
be broken down into three basic categories as follows:
- online communities where buyers and sellers meet to exchange
information about particular topics and products, the so-called
"vertical markets",
- electronic distributors that provide a one-stop shopping source for
goods and services produced by a specific vertical market, and
- business-to-business exchanges that enable buyers and sellers to
find one another efficiently and agree to a fair price.
We believe that the OptiMark matching engine technology can enhance the
use of the Internet by companies in transactions with other companies that
distribute or exchange products or services to improve the efficiency and
customization of these business-to-business interactions. We believe our
expertise in the areas of design and development of platforms, creating
technology and delivering turn-key systems can aid businesses in many different
sectors to create more efficient systems and interactions between businesses.
We have adopted a business model that focuses on the delivery of
turn-key trading platforms to a market, while partnering with organizations that
have specific geographic or domain expertise who will direct and manage the
market, thereby providing the capital and liquidity to the market. We intend to
provide the platform and intellectual property, recovering our development costs
and receiving development fees, royalties and minority equity stakes, with
strategic partners that will supply domain expertise, management, liquidity and
capital.
The following are specific initiatives in this area:
Osaka Securities Exchange. In September 1998 Nihon Keizai Shimbun and
QUICK Corp. established a joint venture with us in Japan called Japan OptiMark
Systems, Inc. Japan OptiMark Systems was formed to implement the OptiMark
equities trading system for Japanese equity securities. Japan OptiMark Systems
has entered into an agreement with the Osaka Securities Exchange to create a new
independent market using the OptiMark equities trading system to trade Japanese
listed equities. The Osaka Securities Exchange is one of Japan's oldest stock
markets and trades over 1,200 Japanese equity securities.
We have licensed to Japan OptiMark Systems technology and other
intellectual property that permits Japan OptiMark Systems to develop and operate
a version of the OptiMark equities trading system for trading Japanese equity
securities on exchanges and/or markets in Japan. Japan OptiMark Systems pays us
a royalty for the license based on gross revenues generated from its operation
of the OptiMark equities trading system. For at least an initial period of time,
the
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license of the technology is exclusive to Japan OptiMark Systems for trading
Japanese equity securities on exchanges and/or markets in Japan. Under certain
circumstances, the license may become non-exclusive.
We have begun to develop portions of the OptiMark equities trading
system for trading Japanese equity securities on the Osaka Securities Exchange
in Japan. Japan OptiMark Systems pays us fees, and reimburses us for expenses
incurred in providing development and maintenance services. Japan OptiMark
Systems will operate the OptiMark equities trading system on a daily basis, deal
with the Osaka Securities Exchange and Japan's Ministry of Finance for market
control and regulatory supervision, and perform sales, marketing, and customer
relations functions in connection with this application of the OptiMark equities
trading system.
Japan OptiMark Systems has begun marketing the system to Japanese users
and testing of the final system is scheduled to begin in the second quarter of
2000. Subject to Japan OptiMark Systems and the Osaka Securities Exchange
obtaining all required regulatory approvals, the system is scheduled to be
launched on the Osaka Securities Exchange in September 2000.
We own 15% and Nihon Keizai Shimbun and QUICK together own 53% of the
common stock of Japan OptiMark Systems. The remaining 32% of the common stock of
Japan OptiMark Systems is owned by unaffiliated third party investors. We have a
representative on the board of directors of Japan OptiMark Systems and have a
veto right over significant transactions and actions that may materially affect
Japan OptiMark Systems.
Offshore Financial Exchange. In April 2000, we entered into an
agreement with an established offshore financial exchange to license certain
portions of the OptiMark matching engine technology in consideration for 20% of
the equity of the exchange on a fully diluted basis. This offshore financial
exchange intends to utilize the OptiMark matching engine technology for trading
a variety of financial products in a variety of vertical markets. We also have
an option to purchase up to an additional 10% of the equity of the exchange on
a fully diluted basis for $1,650,000, for a period of time after the achievement
of specified targets.
The software license requires the exchange to pay us a royalty equal to
45% of the net revenue generated from the use of the OptiMark matching engine
technology in the respective vertical markets. In addition, we have agreed to
provide to the exchange certain information technology and support services. We
will have a representative on the board of directors of the exchange and have a
veto right over certain transactions that may materially affect the exchange and
our equity ownership. We anticipate that this transaction will be consummated in
the third quarter of 2000, subject to the satisfaction of customary closing
conditions.
South African Technology Provider. In April 2000, we entered into an
agreement with a South African technology provider to establish a joint venture
for the purpose of providing the OptiMark matching engine technology for the
trading of private equity securities of South African companies. We will own 50%
and our joint venture partner will own 50% of the joint venture company.
We will license to the joint venture company certain portions of the
OptiMark matching
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engine technology in exchange for our 50% equity ownership in the joint venture
company and a royalty equal to 20% of the transaction revenues of the joint
venture company for the first twelve months after it begins using the technology
and 10% thereafter. Our joint venture partner will contribute the equivalent of
approximately $750,000 in South African Rand in exchange for its 50% equity
ownership in the joint venture company.
We will have three representatives and our joint venture partner will
have three representatives on the board of directors of the joint venture
company. We also have a veto right over significant transactions and actions
that may materially affect the joint venture company. We anticipate this
transaction will be consummated in the second quarter of 2000, subject to the
satisfaction of customary closing conditions.
Other Foreign and Domestic Exchanges and Markets. We have signed a
letter of intent to license our matching engine technology to a company engaged
in the shipping industry in exchange for approximately 14.5% of its equity. We
have also had exploratory discussions with other securities exchanges, option
exchanges, and other providers of non-financial products, but have no agreements
or commitments.
Competition. In the growing Internet area many companies provide
services and products to the market for business-to-business commerce.
Competition in this market is rapidly increasing, and we expect that competition
will further increase in the future. Our competition, both direct and indirect,
potentially comes from a wide range of companies involved in electronic
commerce, including:
- companies that provide software that allows for the establishment
of digital marketplaces,
- companies that develop and operate trading systems,
- companies that operate websites that provide auction features to
buyers and sellers,
- providers of stand-alone software products that make available to
buyers technology for conducting online auctions of goods and
services, and
- professional service and consulting firms offering similar services.
Many of our competitors have had more experience in this field and have
developed a greater customer base than we have to date. Because many of these
potential competitors are more established and larger than we are, they may be
able to commit more resources to promotions and marketing of their products. The
services we provide may look similar to those of our competitors, despite actual
differences, which may hurt our customer base and recognition of our product. We
also face the potential risk that customers will be dissatisfied with our
products or services which will make it difficult to maintain our client base
and attract new clients.
RESEARCH AND DEVELOPMENT
We originally began developing the OptiMark matching engine technology
in 1994 and we continue to enhance the technology on an ongoing basis. As of
March 31, 2000, our research and development team included approximately 132
employees and consultants. The research and development team includes a number
of key members that have extensive experience with trading
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systems, advanced mathematics and computer programming.
We believe our technical personnel and core technologies represent a
significant competitive advantage. We believe a technically skilled and highly
productive research and development team is a key component for the success of
new and better product offerings.
We expect that most of our technology and enhancements to existing and
future systems will be developed internally. However, we currently license
certain externally-developed technologies and will continue to evaluate
externally-developed technologies to integrate with our systems.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
As of March 31, 2000, we held five issued United States patents, as
well as two allowed and seven pending United States patent applications. As of
that date, we also held 11 issued international patents, as well as 100 pending
international patent applications. We plan to file additional patent
applications, both domestically and internationally, as we discover new
inventions.
We seek to protect our trade secrets, service marks, trademarks, and
copyrights through a combination of contractual restrictions and laws, such as
confidentiality and license agreements. We attempt to register our trademarks
and service marks in the United States and internationally. We have registered
our corporate logo and the mark "OPTIMARK," among others, in the United States
and internationally in several countries. However, effective trademark, service
mark, trade secret, and copyright protection may not be available in every
country in which OptiMark's matching engine technology may be made available.
We currently own the Internet domain name "optimark.com". Domain names
generally are regulated by Internet regulatory bodies. The relationship between
regulations governing domain names and laws protecting trademarks and similar
proprietary rights is unclear. We, therefore, could be unable to prevent third
parties from acquiring domain names that infringe or otherwise decrease the
value of our trademarks and other proprietary rights.
SALES AND MARKETING
In our US equities business, we offer the OptiMark equities trading
system through our direct sales organization. As of March 31, 2000, our direct
sales force consisted of 19 sales professionals. We typically target our sales
and marketing efforts at portfolio managers and traders within user
organizations. When a prospective user is interested in becoming a user of the
OptiMark equities trading system, we will provide the appropriate user
agreements and account opening forms, provide connectivity to the system through
a proprietary network or other order routing system and offer training and
guidance in the use of the system to appropriate persons in the user
organization.
In our electronic markets business, we have two individuals primarily
responsible for identifying and establishing strategic relationships with
partners who will supply domain
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expertise, management and capital to ventures that we establish and to whom we
license the OptiMark matching engine technology. We contemplate that the
marketing of the matching engine technology product that is utilized in these
ventures will be undertaken by our strategic partners who primarily operate and
manage these enterprises.
We market our US equities and electronic markets businesses through
advertising on our website and a public relations program. In addition, for the
OptiMark equities trading system operating on the Nasdaq, we offer a web-based,
self-paced training course accessible from our website. This training course
allows participants to understand the features and benefits of the Nasdaq system
and to enter profiles and see the results of the matches.
EMPLOYEES
As of March 31, 2000, we had 268 full-time employees, 128 of whom were
engaged in research and development, 34 in sales and marketing, 20 in customer
support, and 86 in executive, finance, administration and operations. We have
never had a work stoppage and our employees are not represented by any
collective bargaining unit.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Financial information about our industry segments is included in the
financial statements attached hereto and is incorporated herein by reference.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
Financial information about our foreign and domestic operations and
export sales, as applicable, is included in the financial statements attached
hereto and is incorporated herein by reference.
RISK FACTORS AND INVESTMENT CONSIDERATIONS
The risks and uncertainties described below are not the only ones we
face. Additional risks and uncertainties not presently known to us may also
adversely impact our business operations. If any of the following risks actually
occur, our business, financial condition or operating results could be
negatively affected.
UNLESS WE CAN OBTAIN ADDITIONAL FINANCING WE WILL RUN OUT OF CASH BY SEPTEMBER
2000
Since our inception, our operating and investing activities have used
substantially more cash than they have generated. Because we will continue to
need substantial amounts of working capital to fund the growth of our business,
we expect to continue to experience significant negative operating and investing
cash flows for the foreseeable future. We currently anticipate that our
available cash resources will be sufficient to meet our anticipated working
capital and capital expenditure requirements through September 2000. This
estimate is a forward-looking statement that involves risks and uncertainties.
The actual time period may differ materially from that indicated as a result of
a number of factors so that we cannot assure you that our cash resources
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will be sufficient for anticipated or unanticipated working capital and capital
expenditure requirements for this period. We will need to raise additional
capital in the future to meet our operating and investing cash requirements. We
may not be able to find additional financing on favorable terms or at all. If we
raise additional funds through the issuance of securities, these securities may
have rights, preferences or privileges senior to those of our common stock and
existing series of preferred stock, and our stockholders may experience
additional dilution to their equity ownership.
WE HAVE A HISTORY OF LOSSES AND HAVE NEVER BEEN PROFITABLE
We have not achieved profitability, we expect to continue to incur
losses for the foreseeable future and we may never be profitable. If we do
achieve profitability in any period, we cannot be certain that we will sustain
or increase such profitability on a quarterly or annual basis.
We had no revenues from our current operations until January 1999.
Through December 31, 1999, we only generated revenue of approximately $3.0
million, and we incurred total expenses of approximately $141.0 million during
that same period. We have incurred net losses each year since our inception. We
incurred a net loss of $135.1 million in 1999, $57.2 million in 1998, $20.4
million in 1997, and $7.2 million in 1996. As of December 31, 1999, we had an
accumulated deficit of $229.3 million.
We have received a report from our independent auditors for our fiscal
year ended December 31, 1999 containing an explanatory paragraph that describes
the uncertainty as to our ability to continue as a going concern due to our
historical negative cash flow and because we did not have access to sufficient
committed capital to meet our projected operating needs for fiscal year 2000.
See "Item 2--FINANCIAL INFORMATION--Management's Discussion and Analysis of
Financial Condition and Results of Operations".
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE
We expect to experience fluctuations in future quarterly operating
results that may be caused by many factors, including the following:
- fluctuations in the volume of trades using the OptiMark matching
engine technology in both our US equities business and electronic
markets business,
- issuance or exercise of warrants,
- trends in securities and other markets,
- competition,
- domestic and international regulation,
- changes in strategy,
- the success of or costs associated with acquisitions, joint ventures
or other strategic relationships,
- changes in key personnel,
- international expansion,
- changes in the level of operating expenses to support projected
growth, and
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- general economic conditions.
Due to these factors, quarterly revenues and operating results are
difficult to forecast. We believe that period-to-period comparisons of our
operating results will not necessarily be meaningful and you should not rely on
them as any indication of future performance. Our future quarterly operating
results may not consistently meet the expectations of securities analysts or
investors, which in turn may have an adverse effect on the market price of our
common stock.
WE HAVE RELATIONSHIPS WITH SERVICE PROVIDERS AND EQUIPMENT LESSORS THAT LIMIT
OUR ABILITY TO REDUCE OUR FIXED COSTS AT A TIME WHEN WE ARE GENERATING LIMITED
REVENUE
In addition to other operating expenses, which include research and
development, general and administrative and US equities business development,
which are relatively fixed in the short term, we have relationships with several
service providers and equipment lessors under which we pay approximately $2.5
million per month. These expenses are relatively fixed and were based on the
anticipation of future revenues. To date our revenues have not been significant.
If we fail to generate sufficient revenues in relation to these expenses then we
may be unable to adjust our costs in a timely manner, or at all, and our
operating results will be negatively affected.
OUR FINANCIAL RESULTS MAY BE ADVERSELY AFFECTED BY THE ACCOUNTING TREATMENT OF
CERTAIN WARRANTS
We have agreed to issue warrants to purchase up to 11,250,000 shares of
our common stock to the Nasdaq Stock Market on the achievement of specified
levels of trading volume using the OptiMark equities trading system and up to a
maximum of approximately 31,000,000 shares of common stock to the Knight/Trimark
Group, Inc. contingent on the execution of transactions originated by
Knight/Trimark in listed or over-the-counter equity securities using the
OptiMark equities trading system. At the time it becomes reasonably probable
that these warrants will be earned by the Nasdaq and Knight/Trimark, we will
begin to record a non-cash warrant compensation expense equal to the fair value
of the warrants to be earned. This expense will be calculated using the
Black-Scholes model and will reduce our net income, or increase our net loss, as
the case may be, until the warrant is exercised. In 1999, we recorded an expense
of approximately $34 million in connection with the issuance to the Nasdaq of
warrants to acquire 4,500,000 shares of common stock.
OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS AND PROSPECTS
DIFFICULT
We have a limited operating history on which you can base an evaluation
of our business and future prospects. You should carefully consider our
prospects in light of the risks and difficulties frequently encountered by early
stage companies in new and rapidly evolving markets. Our success will depend in
part upon our ability to implement and execute our business and marketing
strategy in our US equities business and electronic markets business. There is a
risk that we will not be able to accomplish our objectives. Failure to achieve
any of our objectives could negatively affect our business, financial condition
and results of operations.
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WE DEPEND ON THE PACIFIC EXCHANGE, THE NASDAQ AND JAPAN OPTIMARK SYSTEMS FOR
SUBSTANTIALLY ALL OF OUR REVENUES
We currently do not have any revenues other than revenues derived from
trading US equity securities on the Pacific Exchange and Nasdaq and revenues
derived from consulting services we provide to Japan OptiMark Systems. The
Pacific Exchange, the Nasdaq and Japan OptiMark Systems represented all of our
revenues in 1999 and for the three months ended March 31, 2000. We do not expect
any other significant sources of revenues until the OptiMark matching engine
technology has been implemented on other markets and exchanges. Therefore, our
business would be harmed if the Pacific Exchange or Nasdaq stopped using the
OptiMark equities trading system or if Japan OptiMark Systems stopped making
payment for the consulting services we provide to them. We currently anticipate
that the services we provide to Japan OptiMark Systems and the fees from such
services will decrease substantially upon the launch of the OptiMark equities
trading system on the Osaka Securities Exchange.
WE DEPEND SIGNIFICANTLY ON A SMALL GROUP OF USERS FOR A SUBSTANTIAL PORTION OF
OUR REVENUES FROM OUR US EQUITIES BUSINESS
Approximately 75% of our revenues from our US equities business in 1999
were derived from four users of the OptiMark equities trading system, one of
whom accounted for 54% of our revenues and the other three of whom each
accounted for less than 10% of our revenues. We anticipate these users will
continue to account for a significant percentage of our revenues in our US
equities business. Neither these users, nor any other user, is obligated
contractually to use the OptiMark equities trading system. There is a risk that
we will not be able to retain these users in the future. A decision by one or
more of these users to discontinue using or decrease its usage of the OptiMark
equities trading system would have a material adverse effect on our business,
financial condition and results of operations.
OUR BUSINESS-TO-BUSINESS STRATEGY IS UNPROVEN AND MAY NOT BE SUCCESSFUL
After an evaluation of our business prospects, we have adopted a new
strategy to make the OptiMark matching engine technology available for use in
business-to-business marketplaces where buyers and sellers can conduct
electronic commerce. We contemplate entering these business-to-business
electronic markets through direct participation, licensing the OptiMark matching
engine technology to e-commerce providers for inclusion in their infrastructure
and operating system products and establishing relationships with key consulting
organizations. If this business strategy is flawed, or if we are unable to
execute it effectively, our business, operating results and financial condition
will be substantially harmed. Our strategy is unproven, our management team has
limited experience in business-to-business marketplaces and we have never
implemented our OptiMark equities trading system or the OptiMark matching engine
technology outside of our US equities business.
In addition, we may incur losses in the future as we enter new markets
and exchanges. Implementation of the OptiMark matching engine technology in new
markets will require us to incur substantial expenses. We may incur significant
research and development expenses to adapt the OptiMark matching engine
technology for use in these markets and exchanges. We may
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experience long delays between these implementation expenses and any resulting
revenues. For example, we incurred significant expenses prior to implementing
the OptiMark equities trading system on the Pacific Exchange and Nasdaq before
we received any revenues. We may incur even greater expenses if we enter
non-financial markets. Therefore, entering new markets may affect our short-term
profits and cash position. Furthermore, these efforts may divert management
attention or inefficiently use our resources.
OUR BUSINESS MODEL DEPENDS ON ESTABLISHING RELATIONSHIPS WITH STRATEGIC PARTNERS
WITH DOMAIN EXPERTISE TO DEVELOP AND SUCCESSFULLY OPERATE ELECTRONIC
MARKETPLACES
A key element of our business model is to provide the platform and
intellectual property to strategic partners both domestically and
internationally that will supply domain expertise, management, liquidity and
capital. We cannot assure you that we will be able to identify, attract and
reach agreement with these strategic partners or that if we reach agreement,
these agreements will be on terms favorable to us. In addition, given the
potential complexity of these relationships, there may be significant delay
between the identification of strategic partners and reaching the necessary
agreements. Even if we reach the necessary agreements with one or more strategic
partners, we cannot assure you that these partners will be able to implement our
platform and technology effectively, that they will develop and launch
electronic marketplaces or that buyers and sellers in the respective markets in
which the OptiMark matching engine technology is deployed will participate in
the marketplace. Operating through these strategic alliances can be complex, we
may be a minority equity holder in these alliances with limited control over the
venture, and we may not be able to reach agreement with our strategic partners
on important matters regarding the direction of the venture.
BECAUSE THE BUSINESS-TO-BUSINESS MARKET PLACE IS HIGHLY COMPETITIVE AND HAS LOW
BARRIERS TO ENTRY, WE CANNOT ASSURE YOU THAT WE WILL BE ABLE TO COMPETE
EFFECTIVELY
The market for business-to-business electronic commerce solutions is
extremely competitive. We expect competition to intensify as current competitors
expand their product offerings and new competitors like us enter the market. We
cannot assure you that we will be able to compete successfully against current
or future competitors, or that competitive pressures we face will not harm our
business, operating results or financial condition.
Because there are relatively low barriers to entry in the electronic
commerce market, competition from other established and emerging companies may
develop in the future. In addition, our customers and partners may become
competitors in the future. Certain of our competitors may be able to negotiate
alliances with strategic partners on more favorable terms than we are able to
negotiate. Many of our competitors may also have well-established relationships
with our existing and prospective customers. Increased competition is likely to
result in price reductions, lower average sales prices, reduced margins, longer
sales cycles and decrease or loss of market share, any of which could harm our
business, operating results or financial condition.
Many of our competitors will have, and potential competitors may have,
more experience developing software and matching solutions, larger technical
staffs, larger customer bases, greater
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brand recognition and greater financial and other resources than we have. In
addition, competitors may be able to develop products and services that are
superior to our products and services, that achieve greater customer acceptance
or that have significantly improved functionality as compared to our existing
and future products and services. There is a risk that the business-to-business
electronic commerce solutions offered by our competitors now or in the future
will be perceived as superior to ours.
USERS MAY NOT USE THE OPTIMARK EQUITIES TRADING SYSTEM AT LEVELS SUFFICIENT TO
SUSTAIN OUR BUSINESS
We believe our success depends in part upon our ability to attract
users. A significant portion of our revenues is directly related to the volume
of shares traded through the OptiMark equities trading system. In order to
encourage use of the OptiMark equities trading system, we need to ensure that
users' trades are adequately matched. This will require a large volume of shares
to be processed through our system. If we do not achieve sufficient trading
volume, we may not be able to attract additional users to generate the trading
volume necessary for widespread acceptance.
User acceptance of the OptiMark equities trading system has been slow
to date and is subject to a high level of uncertainty going forward. The
OptiMark equities trading system is a new approach to securities trading that
requires intensive marketing and sales efforts to educate prospective customers
as to its uses and benefits. Users of our system must adopt a new, computerized
approach to trading equity securities that is different from traditional
methods, particularly execution of orders by "open outcry" in the U.S. listed
equities market. Institutions may be reluctant or slow to change.
Factors that may affect our ability to attract users include:
- failure to achieve sufficient liquidity in our system to ensure
that trades will get done,
- perception that using the system is difficult and time-consuming,
- perception that using the system does not create a trading
advantage,
- inability to price our services at a competitive level,
- failure to provide adequate customer service and support,
- security or privacy breaches, and
- actual or perceived system "bugs" or failures.
There is a risk that we will not be able to adequately address these
issues such that enough users will use the system at sufficient levels to
sustain our business.
WE DEPEND HEAVILY ON THIRD PARTIES OVER WHOM WE HAVE LIMITED CONTROL IN ORDER
TO OBTAIN REGULATORY APPROVALS AND MAKE SYSTEMS MODIFICATIONS
Our US equities business is heavily dependent on third parties,
primarily the Pacific Exchange and Nasdaq, to submit for regulatory approval and
implement certain modifications and enhancements to our equities trading system.
In many cases the business priorities of these third parties will not
necessarily be the same as ours. If we are unable to obtain the timely
cooperation
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of these third parties in connection with these approvals, modifications and
enhancements, it could have a material adverse effect on our business, financial
condition and operating results. We have experienced delays of this nature in
the past.
MARKETS AND EXCHANGES MAY NOT ADOPT THE OPTIMARK MATCHING ENGINE TECHNOLOGY
Currently, the only application of our matching engine technology is
for trading equity securities. Acceptance of the OptiMark matching engine
technology by other stock markets and exchanges is highly uncertain. Our growth
may be limited if we are unable to establish additional relationships with other
markets and exchanges.
THE OPTIMARK MATCHING ENGINE TECHNOLOGY MAY SUFFER FROM SYSTEM FAILURES
The operation of our technology requires the successful technical
operation of an entire chain of software, hardware and telecommunications
equipment. A significant disruption in our service could seriously undermine our
users' confidence in our system. Heavy stress placed on our systems during peak
trading times could cause our systems to operate at unacceptably low speed or
fail. If our systems or any other systems in the trading process slow down
significantly or fail even for a short time, users may suffer delays in trading,
causing substantial losses and possibly subjecting us to claims for such losses.
The perception of a failure or bad publicity may lead users to stop using the
OptiMark trading technology. We have experienced such systems failures in the
past, and this may occur in the future.
Some of these elements are not within our control, such as network
connectivity and software, hardware and telecommunications equipment and service
we purchase from others. In addition, hardware and software are potentially
vulnerable to interruption from power failures, telecommunications outages,
network service outages and disruptions, natural disasters, and vandalism and
other misconduct.
We cannot assure you that our network structure will operate
appropriately in any of the following events:
- subsystem, component or software failure or power or
telecommunications failure,
- an earthquake, fire or other natural disaster, or
- an act of God or war.
There is a risk that in any such event, we will not be able to prevent
an extended systems failure. Any systems failure that interrupts our operations
could harm our business.
WE MAY NOT BE ABLE TO GUARANTEE CONFIDENTIALITY AND SECURITY
A significant component of the OptiMark matching engine technology is
the secure transmission of confidential information over private networks. A
compromise of security on our network would decrease confidence of users to
enter profiles anonymously. We rely on encryption and authentication technology
to provide secure transmission of confidential information. There is a risk that
advances in computer and cryptography capabilities or other developments will
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compromise the algorithms we use to protect customer transaction data.
WE RELY ON THIRD PARTIES TO PROVIDE SERVICES IMPORTANT TO OUR US EQUITIES
BUSINESS
We rely on certain third-party service providers, including:
- IXnet, a subsidiary of IPC Information Systems, Inc., to provide
private network services, and
- ISM, a subsidiary of IBM, to operate our data center for the
Pacific Exchange system and provide consulting and integration
services.
If we are no longer able to obtain these services, we will need to
provide these services internally or find other third-party providers of these
services. We cannot assure you that we will be able to provide these services
internally or secure these services on acceptable terms.
OUR REVENUES MAY BE AFFECTED BY DIMINISHED MARKET ACTIVITY DUE TO ADVERSE
ECONOMIC, POLITICAL AND MARKET CONDITIONS
Our revenues in our business segments are directly related,
particularly in our US equities business, to the volume of trades matched using
our technology. Numerous national and international factors that are beyond our
control may affect our businesses, including:
- economic, political and market conditions,
- the availability of short-term and long-term funding and capital,
- the level and volatility of interest rates,
- legislative and regulatory changes, and
- currency values and inflation.
Any decline in market volume, liquidity or price or any other of these
factors could have a material adverse effect on our business, financial
condition and operating results. Any of these factors may contribute to reduced
levels of activity in the markets in which we operate, which could result in
lower revenues from our activities.
WE FACE SUBSTANTIAL COMPETITION IN OUR US EQUITIES BUSINESS
The market for alternative trading systems is new, rapidly evolving and
intensely competitive. We expect competition to continue and intensify in the
future. We face direct and indirect competition from alternative trading systems
including the following:
- Island, Instinet and Tradebook and other ECNs allow participants
to display firm, priced orders to other participants and to
execute automatically against other orders in the system,
- POSIT and other "crossing systems" allow participants to enter
unpriced orders, which are then executed with matching interest
at a single price, typically derived from the primary public
market price for each crossed security,
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- the Arizona Stock Exchange and other "single-price auction"
systems allow participants to enter priced orders, which the
system then compares to determine the single price at which the
largest volume of orders can be executed. All orders are then
matched and executed at that price, and
- more than 18 broker/dealers have notified the SEC that they
operate some type of alternative trading system, either
internally for their own traders or for their customers and other
market participants.
Existing alternative trading systems currently handle approximately 30%
of the volume of Nasdaq over-the-counter securities traded and 17% of the volume
of NYSE-listed securities traded. These alternative trading systems already have
relationships with potential users of the OptiMark equities trading system.
In addition, we may face competition from existing markets and
exchanges. The NYSE has announced that it will establish its own alternative
trading system. Accordingly, it is possible that new competitors or alliances
among existing competitors may significantly reduce the volume of securities
traded using the OptiMark equities trading system.
Many of our competitors have longer operating histories and
significantly greater financial, technical, marketing and other resources than
we do. Many of our competitors offer a wider range of services and financial
products than we do, and thus may be able to respond more quickly to new or
changing opportunities, technologies and customer requirements. Many of our
competitors also have greater name recognition and larger customer bases that
could be leveraged, thereby inhibiting our ability to gain market share.
Moreover, certain competitors have established cooperative relationships among
themselves or with third parties to enhance their services and products.
WE FACE SIGNIFICANT REGULATION
General. We provide the OptiMark equities trading system through
facilities of the Pacific Exchange and the Nasdaq, and in our facility capacity
we are subject to regulation by the SEC. The facilities are provided pursuant to
the rules of the Pacific Exchange and Nasdaq in their capacities as self
regulatory organizations, and these rules must be approved by the SEC. As a
facility of a registered exchange, we have also agreed to SEC oversight and
audit of our activities. The SEC also has authority to audit our policies and
procedures and books and records to insure our adequacy and integrity as a
facilities manager of a registered exchange. We are also subject to audit and
review by the internal regulatory departments of the exchanges of which we are
a facility for compliance with applicable exchange rules. Our failure to comply
with theses laws, rules and regulations or perform our role or maintain our
policies and procedures in accordance with the applicable standards could result
in exchange or SEC imposed restrictions on or termination of the operation of
our facilities.
The OptiMark equities trading system in use on the Pacific Exchange
obtains access to prices and liquidity at other U.S. securities exchanges
through a system called the Intermarket Trading System. The Intermarket Trading
System plan imposes ceilings on our use of the Intermarket Trading System and
imposes limitations and restrictions on our access in the event
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that the facilities exceed those ceilings. We have exceeded Intermarket Trading
System plan ceilings in the past and, as a result, have experienced restricted
access to the other securities exchanges. There is a risk that we will exceed
these plan ceilings again in the future and that could have a material adverse
effect on our business, financial condition and operating results.
In connection with our approval of the OptiMark equities trading
system on the Nasdaq, the SEC approved the system on a pilot basis. The SEC
recently approved an extension of the pilot program through September 30, 2000.
We believe that the SEC will continue to extend the pilot program and will
eventually remove the restrictions in the pilot program. However, there is a
risk that the SEC will not grant any further extension of the pilot program or
remove the pilot program restrictions. This would have a material adverse effect
on our business, financial condition and operating results.
The regulatory environment in which we operate our US equities business
is subject to change. We cannot predict what effect any such changes might have.
Both regulations directly applicable to us and regulations of general
application could have a material adverse effect on our business, financial
condition, and operating results.
We may face other regulation. There is a risk that other federal, state
or foreign agencies will attempt to regulate our activities, especially as we
enter new markets. We anticipate that we may be required to comply with record
keeping, data processing and other regulatory requirements as a result of
proposed federal legislation or otherwise. Federal or state authorities could
enact laws, rules or regulations affecting our business or operations. If such
laws are enacted or deemed applicable to us, our business or operations would be
rendered more costly or burdensome, less efficient or even impossible.
We face significant regulation in foreign countries. We intend to
expand the use of the OptiMark matching engine technology to other countries.
Through the joint venture we created in Japan, we have entered into agreements
with the Osaka Securities Exchange. We intend to enter into other foreign
markets. In order to expand our services globally, we must comply with the
regulations of each country in which we operate. Our international expansion
will be limited by the compliance requirements of various national regulatory
organizations. We intend to rely primarily on local third parties for regulatory
compliance in international jurisdictions. The varying compliance requirements
of these different regulatory jurisdictions and other factors may limit our
ability to expand internationally. There is a risk that we will not be
successful in obtaining the necessary regulatory approvals for any such
expansion, or if such approvals are obtained, that we will be able to continue
to comply with such regulations. The failure to obtain or comply with such
approvals could have a material adverse effect on our business, financial
condition and operating results.
Regulation of the Internet. Our business segments, both directly and
indirectly, rely on the Internet and other electronic communications gateways.
We intend to expand our use of these gateways. To date, the use of the Internet
has been relatively free from regulatory restraints. However, the SEC, certain
self regulatory organizations and certain states are beginning to address the
regulatory issues that may arise in connection with the use of the Internet.
Accordingly, new regulations or interpretations may be adopted that constrain
our own and our
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<PAGE> 25
customers' abilities to transact business through the Internet
or other electronic communications gateways. There is a risk that any additional
regulation of the use of such gateways could have a material adverse effect on
our business, financial condition and operating results.
WE DEPEND ON KEY PERSONNEL AND MAY NEED TO RECRUIT NEW PERSONNEL
In connection with our recent change in business strategy, we laid off
80 employees, primarily in the technology and operations areas. As we attempt to
implement our new business model and expand into other financial and
non-financial markets we may need to add additional key personnel. If we cannot
attract and retain enough qualified and skilled staff, the growth of our
business may be limited. Our ability to provide services to clients and expand
our business depends, in part, on our ability to attract and retain staff with
college and graduate degrees, as well as professional experiences that are
relevant to technology development and other functions we perform. Competition
for personnel with these skills is intense. Some technical job categories are
under conditions of severe shortage in the United States. In addition,
restrictive immigration quotas could prevent us from recruiting skilled staff
from outside the United States. We may not be able to recruit or retain the
caliber of staff required to carry out essential functions at the pace necessary
to sustain or expand our business.
We believe our future success will depend in part on the following:
- the continued employment and performance of our senior management,
- our ability to retain and motivate our other officers and key
employees, and
- our ability to identify, attract, hire, train, retain and
motivate other highly skilled technical, managerial, marketing
and customer service personnel.
WE FACE RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
One component of our strategy is to implement the OptiMark matching
engine technology in countries other than the United States. We have established
a joint venture in Japan and have entered into agreements with an established
financial exchange located offshore and a technology provider located in South
Africa to use our matching engine technology. Our experience in implementing our
matching engine technology in foreign markets is very limited. We cannot assure
you that our international partners and licensees will be able to implement our
trading technology successfully in international markets. In addition, there are
certain risks inherent in doing business in international markets, particularly
in the heavily regulated securities and financial services industries, such as:
- unexpected changes in regulatory requirements, tariffs and other
trade barriers,
- difficulties in staffing and managing foreign operations,
- political instability,
- fluctuations in currency exchange rates,
- reduced protection for intellectual property rights in some
countries,
- seasonal reductions in business activity in various parts of the
world, and
- potentially adverse tax consequences.
Any of the foregoing could adversely affect the success of our
international operations.
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<PAGE> 26
WE DEPEND ON INTELLECTUAL PROPERTY RIGHTS AND PROTECTION IS UNCERTAIN
Our success and ability to compete depend to a significant degree on
our proprietary technology. If we are not successful in protecting and enforcing
our intellectual property, there could be a material adverse effect on our
business.
Effective trademark protection may not be available for our trademarks.
Although we have registered the trademark "OptiMark" in the United States and
various other countries and have other registered trademarks, there is a risk
that we will not be able to secure significant protection for and successfully
enforce these trademarks. Our competitors or others may adopt product or service
names similar to "OptiMark" impeding our ability to build brand identity and
possibly leading to customer confusion. Our inability to adequately protect the
name "OptiMark" would harm our business.
Effective patent protection may not be available for our technology.
While we believe that our patents, together with our pending patent
applications, help protect our business, there is a risk that
- our patents cannot be successfully defended against challenges by
third parties,
- the pending patent applications will not result in the issuance of
patents,
- our competitors or potential competitors will devise new methods of
competing with us that are not covered by our patents or patent
applications,
- because of variations in the fungible goods and services traded
or to be traded using our matching engine technology, our patents
may not be effective in preventing one or more third parties from
utilizing a copycat system to offer the same matching services
for one or more goods or services, or
- a third party will have or obtain one or more patents that
prevent us from practicing features of our business or will
require us to pay for a license to use those features.
Despite any precautions we take, a third party may be able to copy or
otherwise obtain and use our software or other proprietary information without
authorization or develop similar software independently. The laws of other
countries may afford us little or no effective protection for our intellectual
property. We cannot assure you that the steps we have taken or will take will
prevent misappropriation of our technology or that agreements entered into for
that purpose will be enforceable.
Litigation may be necessary in the future to:
- enforce our intellectual property rights,
- protect our trade secrets,
- determine the validity and scope of the proprietary rights of
others, or
- defend against claims of infringement or invalidity.
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<PAGE> 27
This litigation, whether successful or unsuccessful, could result in
substantial costs and diversions of resources, either of which could harm our
business.
WE MAY INFRINGE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES
Litigation regarding intellectual property rights is common in the
software and technology industries. We have in the past received letters
suggesting that we are infringing the intellectual property rights of others. We
were also the subject of a claim for infringement of a third party's
intellectual property rights, which was settled and had no material adverse
effect on our business or operations. We may in the future be the subject of
claims for infringement or invalidity (or any indemnification claims based on
such claims) of other parties' proprietary rights. These claims, with or without
merit, could be time consuming and costly to defend or litigate, divert our
attention and resources or require us to enter into royalty or licensing
agreements. There is a risk that such licenses would not be available on
reasonable terms, or at all. Although we believe we have the ability to use our
intellectual property to use, market and license our existing products without
incurring liability to third parties, there is a risk that our products and
services infringe the intellectual property rights of third parties.
OUR PRODUCTS AND TECHNOLOGY DEPEND UPON THE CONTINUED AVAILABILITY OF LICENSED
TECHNOLOGY FROM THIRD PARTIES
We license and will continue to license certain technology and software
from third parties, including certain software from IBM Canada that comprises a
portion of our OptiMark equities trading system in use at the Pacific Exchange
and the Nasdaq. These licenses are integral to our business. If any of these
relationships were terminated or if any of these third parties were to cease
doing business, we would be forced to spend significant time and money to
replace the licensed software. We cannot assure you that we would be able to
replace these licenses. This could have a material adverse effect on our
business, financial condition and operating results.
OFFICERS AND DIRECTORS MAY BE ABLE TO INFLUENCE STOCKHOLDER ACTIONS
Executive officers, directors and entities affiliated with them, in the
aggregate, beneficially own over 50% of our outstanding voting stock. These
stockholders acting together would be able to significantly influence matters
requiring approval by our stockholders, including the election of directors and
the approval of mergers or other business combination transactions in a manner
that could conflict with our other stockholders.
SHARES ELIGIBLE FOR FUTURE SALE MAY REDUCE OUR STOCK PRICE
As of April 24, 2000, we had outstanding 68,992,929 shares of common
stock (on an as converted basis). These shares will become eligible for sale
in the public market as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES DATE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
18,421,158 On the effective date of this registration statement
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 28
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------
50,571,771 After 90 days from the effective date of this registration
statement subject to certain restrictions under the federal
securities laws
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
A number of our stockholders, representing approximately 40,113,000
shares of our common stock (on an as converted basis), have registration
rights. By exercising their registration rights and causing a large number of
shares to be registered and sold in the public market, these holders may cause
the price of our common stock to fall. In addition, any demand to include these
shares in a registration statement could have an adverse effect on our ability
to raise needed capital.
YOU WILL INCUR DILUTION UPON THE EXERCISE OF OUTSTANDING WARRANTS WE HAVE
GRANTED
We have issued warrants or agreed to issue warrants upon the
achievement of certain levels of trading volume through the OptiMark equities
trading system to purchase up to approximately 46,000,000 shares of our common
stock. If the holders of these warrants exercise these warrants you will incur
dilution.
ANTITAKEOVER PROVISIONS MAY PREVENT AN ACQUISITION
Provisions of our certificate of incorporation, bylaws and Delaware law
could make it more difficult for a third party to acquire us, even if doing so
would be beneficial to our stockholders. Our certificate of incorporation
authorizes the board to determine the terms of our unissued series of preferred
stock and to fix the number of shares of any series of preferred stock without
any vote or action by our stockholders. As a result, the board can authorize and
issue shares of preferred stock with rights that could adversely affect the
rights of holders of our common stock or junior classes of preferred stock. In
addition, the issuance of preferred stock may have the effect of delaying or
preventing a change of control, because the rights given to the holders of a
series of preferred stock may prohibit a merger, reorganization, sale,
liquidation or other extraordinary corporate transaction.
WE HAVE NO INTENTION OF PAYING DIVIDENDS
We have never declared or paid any cash dividends on our capital stock.
We currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any dividends for the foreseeable future.
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<PAGE> 29
ITEM 2. FINANCIAL INFORMATION
SELECTED FINANCIAL DATA
Our selected financial data for and as of each of the years ended
December 31, 1999, 1998, 1997, 1996 and 1995 have been derived from our audited
consolidated financial statements, including notes thereto. The information set
forth below is qualified in its entirety by reference to, and should be read in
conjunction with, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and notes thereto
included elsewhere in this registration statement.
OptiMark Technologies, Inc. was formed in July 1996 in order to effect
the reorganization of MJT Holdings, Inc. On August 1, 1996, MJT Holdings was
merged with and into OptiMark Technologies, Inc. The merger was a transaction
among companies under common control and, accordingly, has been accounted for in
a manner similar to a pooling of interests. Accordingly, our financial
statements include the results of operations of MJT Holdings and its wholly
owned subsidiaries for 1995 and 1996. From January 1, 1995 to May 31, 1996, MJT
Holdings operated as a broker/dealer and therefore had commissions and fees
included in revenue.
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<PAGE> 30
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated Statements of Operations
and Comprehensive Loss Data:
Revenue............................... $ 3,012,244 $ - $ - $ 781,231 $ 2,352,971
Operating expenses.................... 140,957,751 59,119,384 21,005,912 8,173,598 8,036,215
Other (income) net.................... (2,866,998) (1,912,289) (562,366) (176,053) (52,650)
---------------- ------------- ------------- ------------ -------------
Net loss.............................. $ (135,078,509) $(57,207,095) $(20,443,546) $ (7,216,314) $ (5,630,594)
================ ============= ============= ============= =============
Net loss per common share............. $ (2.12) $ (1.13) $ (0.54) $ (0.27) $ (0.24)
================ ============= ============= ============= =============
Weighted average common shares
outstanding.......................... 63,790,247 50,417,641 37,848,932 27,180,271 23,201,191
================ ============= ============= ============= =============
As of December 31,
-------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------------------------------------------------------------------------------
Consolidated Balance Sheets Data:
Cash and cash equivalents............. $ 62,637,410 $ 63,839,270 $ 7,416,760 $ 4,100,165 $ 1,558,064
Working capital....................... 50,234,094 53,088,565 3,961,824 3,261,025 1,869,420
Property and equipment, net........... 19,967,364 8,623,431 1,509,827 212,129 492,534
Capitalized software costs, net....... 10,816,389 - - - 96,762
Intangible assets, net................ 27,849,752 - - - -
Total assets.......................... 129,680,107 75,458,361 10,467,386 4,780,298 2,778,010
Stockholders' equity.................. $ 106,524,760 $ 59,318,827 $ 6,016,090 $ 3,914,270 $ 2,672,968
</TABLE>
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<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the
financial statements and the notes thereto included elsewhere in this
registration statement. This registration statement contains, in addition to
historical information, forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from the results
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include those discussed below, as well as those
discussed elsewhere in this registration statement. See "Item 1- "BUSINESS -
Risk Factors and Investment Considerations".
GENERAL
OptiMark was founded in 1996 as the successor to a company that had
begun developing the OptiMark equities trading system in 1994. We operate in two
business segments, our electronic markets business and our US equities business.
The electronic markets business comprises the development and
implementation of matching engines and trading platforms for existing and
emerging electronic marketplaces through a combination of consulting, licensing,
servicing and equity agreements, focused on both the securities and
non-securities marketplaces. We believe the OptiMark matching engine technology
has special capabilities that will compliment transactions where multiple buyers
and sellers exchange goods and services at electronic speed, the value of these
goods and services is determined by more than price and quantity, periodic call
markets are required and buyers and sellers put a premium on confidentiality.
The US equities business, operated through two wholly owned
subsidiaries, OptiMark Services, Inc. and OptiMark OTC Services, Inc., makes the
OptiMark equities trading system available to end users as facilities of the
Pacific Exchange and the Nasdaq, respectively. The OptiMark equities trading
system uses a computer implemented matching algorithm designed to allow traders
to preserve their anonymity and maintain the confidentiality of their positions
and trading strategies, permitting them to avoid the market impact that might
otherwise result from the disclosure of that information. We believe that these
system features can help traders achieve greater liquidity, facilitate the best
execution of trades and lower the cost of trading.
CONTINUATION AS A GOING CONCERN
Our financial statements disclose that while the financial statements
have been prepared assuming we will continue to operate as a going concern,
there is substantial doubt as to our ability to do so. To date, we have
generated insufficient revenue to meet our operating expenses and have met our
cash needs through equity financing and equipment leasing. See "Liquidity and
Capital Resources".
We implemented significant cost reductions during 1999 where possible
in order to reduce losses from our continuing operations. We are still in the
process of reevaluating our cost structure
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<PAGE> 32
and implementing cost savings where possible. However, many of our costs
associated with equipment lease financing, network services, and operations
management are relatively fixed, and we may not be able to adjust these costs in
a timely manner or at all. Management also has been attempting to increase usage
of the OptiMark equities trading system in use at the Pacific Exchange and
Nasdaq, but has been unsuccessful to date. Additional equity financing will be
required during 2000 to meet our operating requirements. There is a risk that we
will not be successful in raising this money on acceptable terms, or at all.
RECENT EVENT
In conjunction with continual reevaluation of our cost structure, in
addition to the restructuring charge taken in 1999, we recorded a restructuring
charge in the first four months of 2000 of approximately $2,105,000 associated
with a workforce reduction of eight employees. Included in this amount is
approximately $1,890,000 representing the charge associated with the revaluation
of employee options, the remaining balance of approximately $215,000 includes
notice period salaries of approximately $138,000, severance of approximately
$45,000 and vacation pay and other employee-related costs of approximately
$32,000. This restructuring resulted in a reduction of personnel-related costs
of approximately $900,000 annually.
HISTORY OF LOSSES
We have experienced losses since our inception, and losses are expected
to continue for the foreseeable future. As of December 31, 1999, our accumulated
deficit was approximately $229,284,000.
LIMITED OPERATING HISTORY AND CHANGING BUSINESS MODEL
We have a limited operating history that makes it difficult to forecast
future operating results. Prior to late 1998, our main business focus was the US
equities business. We have spent most of our capital to develop and implement
the OptiMark equities trading system for use on the Pacific Exchange and Nasdaq.
During late 1998, we began to expand our focus to include financial markets
other than US equities through our electronic markets business. As of December
31, 1999, we had entered into one venture through this business segment, Japan
OptiMark Systems.
In our US equities business we incur all traditional operating expenses
including research and development, business development including sales and
marketing and operations expense including data center, customer network and
customer support. In this business model, we have so far chosen to maintain full
management and ownership of the business.
In our electronic markets business we intend to enter additional new
markets through joint venture relationships with partners who have domain
expertise in the market being entered. We anticipate that the capital for these
ventures will be contributed mainly by our joint venture partner or by outside
investors, not by us. We will license our matching engine technology and intend
to
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<PAGE> 33
charge royalties. We will support the joint ventures through development and
service agreements and intend to charge for these services. This may allow us to
enter many markets simultaneously. We have limited experience with this new
business model and there is a risk that it will not be successful. See "Item
1-BUSINESS - Risk Factors and Investment Considerations".
INCOME TAXES
We have net operating loss carry-forwards of approximately $173,911,000
and research and development credit carry-forwards of approximately $2,121,000
at December 31, 1999. These carry-forwards expire during the period from 2004
through 2018. Based on the issuance of additional shares of stock resulting from
our financing activities, a change in ownership occurred during 1998 for tax
purposes, which may limit future use of these carry-forwards.
RESULTS OF OPERATIONS
Year ended December 31, 1999 compared to year ended December 31, 1998
Revenue. We did not begin to recognize revenue until January 1999 when
the OptiMark equities trading system was launched on the Pacific Exchange. In
June 1999, we began to recognize revenue for consulting services to Japan
OptiMark Systems for development of the OptiMark equities trading system for the
Osaka Securities Exchange. In October 1999, the OptiMark equities trading system
was launched on the Nasdaq. Of the $3,012,244 of revenue for 1999, $1,620,454
was earned from consulting services to Japan OptiMark Systems and $1,391,790 was
earned from transaction fees for use of the system on both the Pacific Exchange
and Nasdaq.
Transaction revenue is recorded on a trade date basis and recognized
when securities are traded through the system based on a fee per share
contractual agreement with both the Pacific Exchange and Nasdaq. Consulting
revenue is recorded as services are performed. We record transaction and
consulting revenue net of our revenue sharing agreements with both the Pacific
Exchange and the Chicago Board Options Exchange.
Operating Expense. Total operating expenses for the year ended
December 31, 1999 totaled $140,957,751 as compared to $59,119,384 for 1998. The
following is an explanation of the increases in the components of each operating
expense:
Research and Development Expense. We incurred research and development
expense for 1999 of $31,635,548 as compared to $23,124,775 for 1998. This
increase of $8,510,773 is primarily attributable to an increase in employees and
consultants, equipment and related expense, telephone expense, travel
expenditures and rent and related expense. These costs were incurred primarily
to support and enhance the Pacific Exchange system and develop the Nasdaq
system. During 1999, in accordance with recent accounting pronouncements,
approximately $12,298,000 of related software development costs were capitalized
and are being amortized over a three-year period.
Communications and Data Center Expense. We incurred communications and
data center
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<PAGE> 34
expense for 1999 of $28,227,012 as compared to $13,585,922 for 1998. This
increase of $14,641,090 is attributable primarily to the expansion of our
OptiMark Information Center to provide customer support for the Pacific Exchange
system and the Nasdaq system, as well as an increase in the number of users who
were given network access to the system. This increase resulted in increases in
employees, equipment and related costs, communications expense and rent and
related costs.
US Equity Business Development. We incurred US equity business
development expense for 1999 of $12,230,190 as compared to $11,081,296 for 1998.
This increase of $1,148,894 is attributable primarily to increases in employee
and consultant costs to train and support users of the OptiMark equities trading
system, offset by reduced marketing and promotional expenses such as trade
shows.
General and Administrative Expense. We incurred general and
administrative expense for 1999 of $11,220,729 as compared to $9,196,446 for
1998. This increase of $2,024,283 is attributable primarily to an increase in
executive and staff employees, and obtaining errors and omissions liability
insurance as well as directors and officers liability insurance. These insurance
policies were deemed necessary once the OptiMark equities trading system was
launched in January 1999.
Depreciation and Amortization Expense. We incurred depreciation and
amortization expense in 1999 of $9,334,424 as compared to $1,584,339 in 1998.
The increase of $7,750,085 is attributable primarily to depreciation of computer
equipment, software and the amortization of certain intangible assets. The
computer equipment and software leased as capital leases or purchased for cash
are utilized primarily in the development and production areas to support the
OptiMark equities trading system for both the Pacific Exchange and the Nasdaq.
The intangible assets include purchased software licenses used for development
and production, capitalized internal software development costs for the Pacific
Exchange and Nasdaq systems, production software licenses from a third party
software developer and an intangible asset created by the issuance of 2,000,000
shares of our common stock in consideration for the termination of a license
previously granted to High Performance Markets, Ltd. to use our matching engine
technology in non-financial markets.
Restructuring Expense. We recorded a restructuring expense of
$7,693,026 in the fourth quarter of 1999 associated with a workforce reduction
of 72 employees (mainly in our technology areas). Included in this amount is
approximately $5,811,000, representing the charge associated with the
revaluation of employee options. The remaining balance of approximately
$1,882,000 includes notice period salaries of approximately $876,000, severance
of approximately $706,000 and vacation pay and other employee-related costs of
approximately $300,000. As of December 31, 1999, approximately $522,000 of such
costs had been paid and we anticipate that the remaining accrued restructuring
costs will be paid in 2000. This restructuring resulted in a reduction of
personnel-related costs of approximately $6,100,000 annually.
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<PAGE> 35
Warrant Compensation Expense. We incurred a non-cash warrant
compensation expense in 1999 of $40,616,822 as compared to $546,606 in 1998.
This increase of $40,070,216 is due to certain warrants being charged to expense
in accordance with the Emerging Issues Task Force 96-18, Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services.
In September 1998, in connection with our agreement with Nasdaq to
implement the Nasdaq system, we entered into a warrant agreement with Nasdaq
whereby Nasdaq has the ability to earn warrants to purchase up to 11,250,000
shares of our common stock. The Nasdaq warrants are exercisable in tranches
based upon the achievement of specified milestones. In connection with the
launch of the Nasdaq system in October 1999, warrants to acquire an aggregate of
4,500,000 shares of common stock were earned. One warrant to acquire 2,250,000
shares of common stock is exercisable at $5 per share and the other warrant to
acquire the remaining 2,250,000 shares of common stock is exercisable at $7 per
share. We recorded a non-cash expense of $33,800,000 (the value using the
Black-Scholes model) in 1999. The exercise price of the remaining warrants to
acquire 6,750,000 shares of common stock, if earned, will be $7 per share. The
Nasdaq warrants expire on the earlier of October 11, 2004 or the last day the
Nasdaq system is available to Nasdaq users.
During 1999, we issued to five holders of series B convertible
participating preferred stock warrants to acquire 1,666,667 shares of our common
stock at $10 per share. In connection with this issuance, we recorded a non-cash
expense of approximately $6,786,000 (the value using the Black-Scholes model) in
1999. All of these warrants expired unexercised in June 1999.
During 1999, warrants to acquire 25,000 shares of common stock were
granted to two consultants. Of these warrants, a warrant to acquire 5,000 shares
was issued with an exercise price of $10 per share and expires in January 2002.
The non-cash expense from the issuance of this warrant in 1999 was approximately
$6,300 (the value using the Black-Scholes model). The second warrant to acquire
20,000 shares of common stock was issued to a former board member with an
exercise price of $14 per share and expires in February 2009. The non-cash
expense from the issuance of this warrant was approximately $38,800 (the value
using the Black-Scholes model), to be amortized over the term of the consulting
agreement. The amount expensed in 1999 was approximately $24,200.
Other Income and Expense. Other income and expense includes interest
income, interest expense, equity in income of investee and gain on recovery of
bad debt. Other income, net, was $2,866,998 for 1999 compared to $1,912,289 for
1998. This increase of $954,709 was attributable primarily to additional
interest income as a result of additional cash on hand from the issuance of
series B convertible participating preferred stock, series C convertible
preferred stock and series D convertible preferred stock and the recovery of
$700,000 in bad debt, partially offset by the increase in interest expense
attributable to capital lease payments.
Year ended December 31, 1998 compared to year ended December 31, 1997
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<PAGE> 36
Operating Expense. Total operating expenses for the year ended December
31, 1998 were $59,119,384 as compared to $21,005,912 for 1997. The following is
an explanation of the increases in the components of each operating expense:
Research and Development Expense. We incurred research and development
expense for 1998 of $23,124,775 as compared to $11,701,821 for 1997. This
increase of $11,422,954 is attributable primarily to increases in employees and
consultants and equipment and related expenses. These costs were incurred in the
development of the Pacific Exchange system.
Communications and Data Center Expense. We incurred communications and
data center expense for 1998 of $13,585,922. These costs include primarily
employees, equipment and related expenses, communications expense and rent and
related expenses. We began to incur costs for the data center in Toronto, Canada
and the OptiMark Information Center in 1998 and therefore had no costs in 1997.
US Equity Business Development. We incurred US equity business
development expense for 1998 of $11,081,296 as compared to $4,171,720 for 1997.
This increase of $6,909,576 is attributable primarily to increases in employee
costs to train and support customers as well as marketing and promotional
expenses such as trade shows.
General and Administrative Expense. We incurred general and
administrative expense for 1998 of $9,196,446 as compared to $4,890,097 for
1997. This increase of $4,306,349 is attributable primarily to increases in
executive management, professional fees and rent and related expenses.
Depreciation and Amortization Expense. We incurred depreciation and
amortization expense in 1998 of $1,584,339 as compared to $242,274 in 1997. The
increase of $1,342,065 is attributable primarily to depreciation of computer
equipment, primarily for development and production machines that were leased as
capital leases or purchased for cash.
Warrant Compensation Expense. The Company incurred warrant compensation
expense in 1998 of $546,606. This increase is due to certain warrants we issued
being charged to expense in accordance with the Emerging Issues Task Force
96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees
for Acquiring, or in Conjunction with Selling, Goods or Services.
In 1998, a warrant to acquire 42,500 shares of common stock was issued
in connection with a master equipment lease agreement with a third party and
expires in June 2003. Warrants to acquire 45,000 shares of common stock were
granted to two consultants and have an exercise price
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<PAGE> 37
of $10 per share. Of these warrants, 40,000 expire in August 2003 and the
remaining 5,000 were exercised in August 1999. The non-cash expense from the
issuance of the above warrants in 1998 was approximately $109,000 (the value
using the Black-Scholes model).
During 1996, we granted a warrant to purchase 1,000,000 shares of
common stock in connection with an anticipated agreement with the Chicago Board
Options Exchange to implement the OptiMark matching engine technology. The
warrant is exercisable in tranches based upon the achievement of certain
milestones. The exercise price of the warrant was $2.25 per share, subject to
certain adjustments. Subsequent to the issuance of this warrant, as a result of
certain adjustments, the number of shares under this warrant increased by
227,828 and the exercise price was reduced to approximately $1.83 per share. In
connection with these adjustments, we recorded a non-cash expense of
approximately $438,000 in 1998.
There was no warrant compensation expense in 1997.
Other Income and Expense. Other income and expense includes interest
income and interest expense. Other income, net, was $1,912,289 for 1998 compared
to $562,366 for 1997. This increase of $1,349,923 was attributable primarily to
additional interest income as a result of additional cash on hand from the
issuance of series B convertible participating preferred stock.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, we had cash and cash equivalents of
$62,637,410 and working capital of $50,234,094 as compared to cash and cash
equivalents of $63,839,270 and working capital of $53,088,565 as of December 31,
1998.
Since June 1996, we have been financed through a series of preferred
stock private placements of approximately $235,019,000, net after expenses,
common stock issuances of approximately $5,300,000, the exercise of warrants for
approximately $14,141,000 and the exercise of employee and director stock
options for approximately $1,560,000, for an aggregate of approximately
$256,020,000.
We received the following proceeds from our preferred equity private
placements: $99,989,000 in 1999, $109,032,000 in 1998, $21,198,000 in 1997 and
$4,800,000 in 1996. In 1998, $10,000,000 of these proceeds were used to purchase
series A convertible participating preferred stock from one investor. As of
December 31, 1999, these shares were held as treasury stock.
We received the following proceeds from our sale of common stock:
$50,000 from a consultant in 1999, $3,500,000 from one of our officers and
$250,000 from two consultants in 1998 and $1,500,000 from one of our directors
in 1997.
We received the following proceeds from our issuance of warrants:
$13,562,000 from warrants exercised by investors in connection with our series A
convertible participating preferred stock private placement, $529,000 from
former employees and $50,000 from a warrant issued to a consultant. Of this
amount, $5,984,000 was raised in 1999, $7,477,000 in 1998, $380,000 in 1997 and
$300,000 in 1996.
35
<PAGE> 38
Of the $1,560,000 in employee and director stock options exercised, we
received $852,000 in 1999 and $708,000 in 1998.
During 1998 and 1999, we also entered into a number of three-year
capital and operating leases to finance the purchase of production and
development computer equipment. As of December 31, 1999, we had leased
approximately $30,400,000 of equipment under operating leases and approximately
$12,700,000 under capital leases. Included in capital leases is a three-year
term loan for computer equipment residing in Canada, as well as a sale-leaseback
transaction of approximately $2,576,000. As of December 31, 1999, including
interest payments, there was approximately $23,100,000 remaining to be paid for
operating leases and approximately $10,300,000 remaining to be paid for capital
leases.
We had book accounting losses for 1999 of approximately $135,079,000,
of which $107,625,000 in cash was used for operating and investing activities.
The difference of $27,454,000 is net non-cash items. Included in these net
non-cash items are the value assigned to warrants and options of $46,428,000 and
depreciation and amortization of $9,334,000, offset by cash purchases of
equipment and software license of $12,767,000, capitalized internal software
development costs of $12,298,000, changes in working capital of $2,582,000 and
other miscellaneous (net) of $661,000.
We are still generating losses and expect to do so for the foreseeable
future. Presently we have cash to fund operations through the end of September
2000. Additional equity financing will be required during 2000 to meet our
operating and investing cash requirements. There is no assurance that we will be
successful in the future in raising this money on acceptable terms or at all.
MARKET RISK
Our exposure to market risk is related to changes in interest rates,
foreign currency exchange rates and equity prices. This discussion contains
forward-looking statements that are subject to risks and uncertainties. Actual
results could vary materially as a result of a number of factors including those
mentioned in the risk factors in this registration statement.
Interest Rate Risk. As of December 31, 1999, we had cash and cash
equivalents of $62,637,410 that consisted of cash and highly liquid short-term
investments with original maturities of 90 days or less at the date of purchase.
These investments may be subject to interest rate risk and would decrease in
value if the market interest rate increased. A hypothetical increase or decrease
in market interest rates at December 31, 1999 of 10 percent would have caused
the fair value of these short-term investments to change by an immaterial
amount. Declines in interest rates over time will, however, reduce our interest
income.
Foreign Currency Exchange Rate Risk. Substantially all of our
revenues recognized to date have been denominated in U.S. dollars from our U.S.
customers as well as our international customers. Although revenues from
international customers to date have been U.S. dollar denominated, we cannot be
certain that future international customers or future business ventures will
result in U.S. dollar denominated revenue, royalties or dividends. As a result,
our operating
36
<PAGE> 39
results could become subject to significant fluctuations based upon changes in
the exchange rates of certain currencies in relation to the U.S. dollar.
Equity Price Risk. We do not own any material equity investments.
Therefore, we are not currently exposed to any direct equity price risk.
RECENT ACCOUNTING PRONOUNCEMENTS
During 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. We are
currently evaluating the impact, if any, of this standard, which will be
applicable to our December 31, 2001 consolidated financial statements. We do not
believe the impact will be material.
During 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued SOP No. 98-1,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use. This statement is applicable to and has been adopted in our 1999
consolidated financial statements and requires us to capitalize certain payroll
and payroll related costs and other costs that are directly related to the
development of certain of our systems.
37
<PAGE> 40
ITEM 3. PROPERTIES
Our headquarters are located in Jersey City, New Jersey. We sublease
approximately 32,000 square feet under a sublease that expires in February 2014.
We also lease approximately 31,000 square feet for our operations center in
Jersey City, New Jersey and offices in Boston, Massachusetts; Chicago, Illinois;
Durango, Colorado; Los Angeles, California; New York, New York; Toronto, Canada
and Tokyo, Japan. We believe that our present facilities are adequate for our
current needs.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables give information as of April 24, 2000 regarding
the ownership of our common stock, series A convertible participating preferred
stock, series B convertible participating preferred stock, series C convertible
preferred stock and series D convertible preferred stock by:
- each person who is known by us to own more than 5% of the shares
of the class or series of stock,
- each named executive officer,
- each of our directors, and
- all of our directors and executive officers as a group.
The percentage of shares beneficially owned is based on 35,864,657
shares of common stock, 3,222,068 shares of series A convertible participating
preferred stock, 11,000,000 shares of series B convertible participating
preferred stock, 8,250,000 shares of series C convertible preferred stock and
250,000 shares of series D convertible preferred stock outstanding as of April
24, 2000. Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Shares subject to options that are
exercisable currently or within 60 days following April 24, 2000 are deemed
outstanding and beneficially owned by the optionee in computing share and
percentage ownership of that optionee, but are not deemed outstanding in
computing the percentage ownership of any other person. Shares entitled to vote
include shares of common stock held and shares of series A convertible
participating preferred stock, series B convertible participating preferred
stock, series C convertible preferred stock and series D convertible preferred
stock held, on an as converted basis. The percentage of shares entitled to vote
is based on a total of 68,252,929 voting shares outstanding (on an as converted
basis, which excludes 740,000 shares of non-voting common stock) as of April 24,
2000. Except as indicated in the footnotes to these tables, and as affected by
applicable community property laws, all persons listed have sole voting and
investment power for all shares shown as beneficially owned. Unless otherwise
indicated, the address of each person named in the following tables is c/o
OptiMark Technologies, Inc., 10 Exchange Place, 24th Floor, Jersey City, New
Jersey 07302.
38
<PAGE> 41
COMMON STOCK
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
PERCENTAGE OF
NUMBER OF SHARES PERCENT OF SHARES NUMBER OF SHARES SHARES ENTITLED TO
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED ENTITLED TO VOTE VOTE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Peter L. Bloom 12,453,184(1) 27.6% - -
- ------------------------------------------------------------------------------------------------------------------------
General Atlantic Partners, L.L.C. 12,428,184(1) 27.6 12,428,184 18.2%
- ------------------------------------------------------------------------------------------------------------------------
SOFTBANK Affiliates 8,250,000(2) 18.7 8,250,000 12.1
- ------------------------------------------------------------------------------------------------------------------------
Ronald D. Fisher 8,250,000(2) 18.7 - -
- ------------------------------------------------------------------------------------------------------------------------
William A. Lupien 5,624,867(3) 15.7 5,572,448 8.2
- ------------------------------------------------------------------------------------------------------------------------
Dow Jones & Company, Inc. 5,318,792(4) 13.6 5,318,792 7.8
- ------------------------------------------------------------------------------------------------------------------------
Richard W. Jones 4,767,427(5) 13.3 4,767,427 7.0
- ------------------------------------------------------------------------------------------------------------------------
The Nasdaq Stock Market, Inc. 4,500,000(6) 11.1 - -
- ------------------------------------------------------------------------------------------------------------------------
American Century Companies, Inc. 2,800,000(7) 7.6 2,060,000 3.0
- ------------------------------------------------------------------------------------------------------------------------
Virginia Surety Company, Inc. 2,500,000(8) 6.5 2,000,000 2.9
- ------------------------------------------------------------------------------------------------------------------------
DH Management, Inc. 2,000,000(9) 5.6 2,000,000 2.9
- ------------------------------------------------------------------------------------------------------------------------
Morton H. Meyerson 1,521,417(10) 4.2 1,521,417 2.2
- ------------------------------------------------------------------------------------------------------------------------
Phillip J. Riese 750,000(11) 2.1 350,000 *
- ------------------------------------------------------------------------------------------------------------------------
John T. Rickard 464,104(12) 1.3 13,818 *
- ------------------------------------------------------------------------------------------------------------------------
Paul I. Kasnetz 65,000(13) * 25,000 *
- ------------------------------------------------------------------------------------------------------------------------
Michael D. O'Halleran 15,000 * 15,000 *
- ------------------------------------------------------------------------------------------------------------------------
Jerome H. Bailey - - - -
- ------------------------------------------------------------------------------------------------------------------------
Kenneth D. Pasternak - - - -
- ------------------------------------------------------------------------------------------------------------------------
Robert J. Warshaw - - - -
- ------------------------------------------------------------------------------------------------------------------------
All directors and executive officers
as a group (14 persons) 33,910,999 62.6% 12,265,110 18.0%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Less than one percent
(1) Represents:
- 2,763,699 shares of common stock held by General Atlantic Partners
35, L.P. ("GAP 35"),
- 6,976,520 shares of common stock issuable currently on conversion
of 1,744,130 shares of series A convertible participating
preferred stock held by GAP 35,
- 478,945 shares of common stock held by GAP Coinvestment Partners,
L.P. ("GAPCo"),
- 1,209,020 shares of common stock issuable currently on conversion
of 302,255 shares of series A convertible participating preferred
stock held by GAPCo,
39
<PAGE> 42
- 813,220 shares of common stock issuable currently on conversion of
203,305 shares of series A convertible participating preferred stock
held by General Atlantic Partners 52, L.P. ("GAP 52"), and
- 186,780 shares of common stock issuable currently on conversion
of 46,695 shares of series A convertible participating preferred
stock held by GAP Coinvestment Partners II, L.P. ("GAPCo II").
In addition, includes options to purchase 25,000 shares of common
stock exercisable within 60 days of April 24, 2000, held by Peter
L. Bloom. Mr. Bloom, a director, is a managing member of General
Atlantic Partners, LLC ("GAP LLC"). GAP LLC is the general partner
of GAP 35 and GAP 52. The managing members of GAP LLC are also the
general partners of GAPCo and GAPCo II. Mr. Bloom disclaims
beneficial ownership of the shares referred to above, except to
the extent of his pecuniary interest in such shares. GAP LLC is
not a beneficial owner of the options held by Mr. Bloom. The
address of GAP LLC is 3 Pickwick Plaza, Greenwich, Connecticut
06830.
(2) Represents 8,136,150 and 113,850 shares of common stock issuable
currently on conversion of 8,136,150 and 113,850 shares of series C
convertible preferred stock held by SOFTBANK Capital Partners L.P. and
SOFTBANK Capital Advisors Fund L.P., respectively. Ronald D. Fisher, a
director, is a managing director of the general partner of each of
these SOFTBANK entities. Mr. Fisher disclaims beneficial ownership of
these shares, except to the extent of his pecuniary interest. The
address of the SOFTBANK entities is 10 Langley Road, Suite 403, Newton
Center, Massachusetts 02159.
(3) Includes 4,725,676 shares held jointly by Mr. Lupien and his spouse,
792,400 shares held by a family partnership controlled by Mr.
Lupien, 52,372 shares held by Mr. Lupien's spouse and 47 shares
held by a retained annuity trust of which Mr. Lupien is the
beneficiary. Mr. Lupien disclaims beneficial ownership of the
shares held by his spouse and the retained annuity trust.
(4) Includes 3,157,028 shares of common stock issuable currently on
conversion of 789,257 shares of series A convertible participating
preferred stock. The address of Dow Jones & Company, Inc. is 200
Liberty Street, New York, New York 10281.
(5) Includes 3,772,047 shares held by a trust for which Mr. Jones is the
trustee and 90,004 shares held by a trust of which Mr. Jones is the
beneficiary.
(6) Represents shares of common stock issuable on exercise of warrants
exercisable within 60 days of April 24, 2000. The address of The
Nasdaq Stock Market, Inc. is 1735 K Street, N.W., Washington, D.C.
20006.
(7) Includes 740,000 shares of common stock issuable currently on
conversion of 740,000 shares of non-voting common stock. The address
of American Century Companies, Inc. is 4500 Main Street, Kansas City,
Missouri 64141-9210.
(8) Represents 2,000,000 shares of common stock issuable currently on
conversion of 2,000,000 shares of series B convertible
participating preferred stock and 500,000 shares of common stock
issuable on exercise of a warrant exercisable within 60 days of
April 24, 2000. The address of Virginia Surety Company, Inc. is
123 North Wacker Dr., 29th Floor, Chicago, Illinois 60606.
(9) Represents 2,000,000 shares of common stock held by High Performance
Markets, Ltd., of which DH Management, Inc. is the general partner.
The address of DH Management, Inc. is 3005A Booth Falls Road, Vail,
Colorado 81657.
(10) Includes 1,482,717 shares of common stock held by a partnership
controlled by Mr. Meyerson.
(11) Includes 400,000 shares of common stock issuable on exercise of options
exercisable within 60 days of April 24, 2000.
(12) Represents 13,818 shares of common stock held by a trust of which Mr.
Rickard is the trustee and beneficiary, 4,000 shares of common stock
held by minor children of Mr. Rickard and 446,286 shares of common
stock issuable on exercise of options exercisable within 60 days of
April 24, 2000. Mr. Rickard disclaims beneficial ownership of the
shares held by his minor children.
(13) Includes 40,000 shares of common stock issuable on exercise of options
that are exercisable within 60 days of April 24, 2000.
40
<PAGE> 43
SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES BENEFICIALLY OWNED PERCENT OF SHARES BENEFICIALLY OWNED
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Peter L. Bloom (1) 2,296,385 71.3%
- ---------------------------------------------------------------------------------------------------------------------
General Atlantic Partners, L.L.C. (1) 2,296,385 71.3
- ---------------------------------------------------------------------------------------------------------------------
Dow Jones & Company, Inc. 789,257 24.5
- ---------------------------------------------------------------------------------------------------------------------
All directors and executive officers as
a group (14 persons) 2,296,385 71.3%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents 1,744,130 shares held by GAP 35, 302,255 shares held by
GAPCo, 203,305 shares held by GAP 52, and 46,695 shares held by GAPCo
II. Mr. Bloom, a director, is a managing member of GAP LLC. GAP LLC is
the general partner of GAP 35 and GAP 52. The managing members of GAP
LLC are also the general partners of GAPCo and GAPCo II. Mr. Bloom
disclaims beneficial ownership of the shares referred to above, except
to the extent of his pecuniary interest.
SERIES B CONVERTIBLE PARTICIPATING PREFERRED STOCK
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES BENEFICIALLY OWNED PERCENT OF SHARES BENEFICIALLY OWNED
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Virginia Surety Company, Inc. 2,000,000 18.2%
- ---------------------------------------------------------------------------------------------------------------------
Merrill Lynch Affiliates (1) 1,500,000 13.6
- ---------------------------------------------------------------------------------------------------------------------
Paine Webber Affiliate (2) 1,060,000 9.6
- ---------------------------------------------------------------------------------------------------------------------
Credit Suisse Affiliate (3) 1,000,000 9.1
- ---------------------------------------------------------------------------------------------------------------------
Goldman Sachs Affiliate (4) 1,000,000 9.1
- ---------------------------------------------------------------------------------------------------------------------
CIBC Affiliate (5) 850,000 7.7
- ---------------------------------------------------------------------------------------------------------------------
Nihon Keizai Shimbun 800,000 7.3
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents 750,000 shares held by ML IBK Positions, Inc., 562,500
shares held by Merrill Lynch KECALP L.P. 1997 and 187,500 shares held
by Merrill Lynch KEKALP International L.P. 1997. The address of the
Merrill Lynch entities is 250 Vesey St., 5th Floor, New York, New York
10281.
(2) Represents shares held by PaineWebber Capital, Inc, whose address is
1285 Avenue of the Americas, 14th Floor, New York, New York 10019.
(3) Represents shares held by Credit Suisse First Boston OptiMark
Investors, Inc., whose address is 11 Madison Avenue, 3rd Floor, New
York, New York 10010.
(4) Represents shares held by The Goldman Sachs Group, Inc., whose address
is 85 Broad Street, 12th Floor, New York, New York 10004.
(5) Represents shares held by CIBC Wood Gundy Capital Corp., whose address
is 425 Lexington Avenue, 9th Floor, New York, New York 10017.
41
<PAGE> 44
<TABLE>
<CAPTION>
SERIES C CONVERTIBLE PREFERRED STOCK
- ---------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES BENEFICIALLY OWNED PERCENT OF SHARES BENEFICIALLY OWNED
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SOFTBANK Affiliates (1) 8,250,000 100%
- ---------------------------------------------------------------------------------------------------------------------
Ronald D. Fisher (1) 8,250,000 100
- ---------------------------------------------------------------------------------------------------------------------
All directors and executive officers as
a group (14 persons) 8,250,000 100%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents 8,136,150 held by SOFTBANK Capital Partners L.P. and 113,850
shares held by SOFTBANK Capital Advisors Fund L.P. Ronald D. Fisher,
a director, is a managing director of the general partner of each of
these SOFTBANK entities. Mr. Fisher disclaims beneficial ownership of
these shares, except to the extent of his pecuniary interest.
<TABLE>
<CAPTION>
SERIES D CONVERTIBLE PREFERRED STOCK
- ---------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES BENEFICIALLY OWNED PERCENT OF SHARES BENEFICIALLY OWNED
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bank Boston Affiliate (1) 250,000 100%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents shares held by BancBoston Capital Inc., whose address is 175
Federal Street, Boston, Massachusetts 02110.
42
<PAGE> 45
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers, and their ages as of April 24,
2000, are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
NAME AGE POSITION(S)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
William A. Lupien 58 Chairman of the Board of Directors
- ----------------------------------------------------------------------------------------------------------------------
Phillip J. Riese 50 Chief Executive Officer and Director
- ----------------------------------------------------------------------------------------------------------------------
John T. Rickard 52 Chief Scientific Officer and Director
- ----------------------------------------------------------------------------------------------------------------------
Robert J. Warshaw 46 Executive Vice President and Chief Technology Officer
- ----------------------------------------------------------------------------------------------------------------------
Robert T. Colgan 39 President U.S. Equities
- ----------------------------------------------------------------------------------------------------------------------
James G. Rickards 48 Senior Vice President, General Counsel and Secretary
- ----------------------------------------------------------------------------------------------------------------------
Paul I. Kasnetz 38 Vice President Finance and Administration
- ----------------------------------------------------------------------------------------------------------------------
Jerome H. Bailey 47 Director
- ----------------------------------------------------------------------------------------------------------------------
Peter L. Bloom (1) 42 Director
- ----------------------------------------------------------------------------------------------------------------------
Ronald D. Fisher 52 Director
- ----------------------------------------------------------------------------------------------------------------------
Richard W. Jones 74 Director
- ----------------------------------------------------------------------------------------------------------------------
Morton H. Meyerson (1) 61 Director
- ----------------------------------------------------------------------------------------------------------------------
Michael D. O'Halleran 49 Director
- ----------------------------------------------------------------------------------------------------------------------
Kenneth D. Pasternak 46 Director
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Member of compensation committee.
William A. Lupien is our founder and a co-inventor of the OptiMark
matching engine technology and has been Chairman of the Board of Directors of
ptiMark and its predecessor, MJT Holdings, since its founding in 1988. From
inception through November 1998, Mr. Lupien served as our Chief Executive
Officer. From 1983 to 1988, Mr. Lupien was President, then Chairman and Chief
Executive Officer, of Instinet Corporation, a computer-based market access
network company. From 1965 to 1983, Mr. Lupien served as a specialist on the
floor of the Pacific Exchange. For six years during that period, he was also a
member of the board of the Pacific Exchange. From 1974 to 1980, Mr. Lupien was
President of Mitchum, Jones & Templeton, Inc., a brokerage firm. Mr. Lupien
also serves as a Trustee of the Securities Industry Institute. Mr. Lupien
received his Bachelor of Science degree from San Diego State University.
Phillip J. Riese has been our Chief Executive Officer and a director
since November 1998. From 1994 to November 1998, Mr. Riese was President of
the Consumer Card Group of American Express, a credit card company, and
Chairman of American Express Centurion Bank. From 1980 to 1994, Mr. Riese
served in a variety of executive positions at American Express. Mr. Riese
received a B. Comm. from Leeds University in the United Kingdom. He received
an M.B.A. from the University of Cape Town in South Africa and an SM degree in
Management from MIT.
Dr. John T. (Terry) Rickard is a co-inventor of the OptiMark matching
engine technology and currently serves as our Chief Scientific Officer. Dr.
Rickard has served as a director of
43
<PAGE> 46
OptiMark and its predecessor since July 1994. He obtained Series 7 (General
Securities) and Series 24 (General Securities Principal) licenses during his
service with our predecessor. Dr. Rickard served as our President from July
1994 to February 1999. From 1975 to 1994, Dr. Rickard was Senior Vice
President and Technical Director of Orincon Industries, a signal and
information processing systems development company. Dr. Rickard received his
bachelor's and master's degrees in electrical engineering from the Florida
Institute of Technology, and his Ph.D. in engineering physics from the
University of California at San Diego.
Robert J. Warshaw has been our Executive Vice President and Chief
Technology Officer since November 1999. From October 1993 to October 1999, Mr.
Warshaw was the Chief Information Officer at Lazard Freres & Co. LLC, an
international investment banking firm. From January 1990 to October 1993 Mr.
Warshaw was a partner at McKinsey & Company, a global management consulting
firm. Mr. Warshaw received his bachelors degree in English from the University
of Pennsylvania and a Masters in Management from Northwestern University's
Kellogg School of Management.
Robert T. Colgan has been our President of U.S. Equities since January
2000. From 1983 to 1999, Mr. Colgan was at Jefferies & Co., a third market
trading firm where he served in a variety of senior management positions,
including most recently as Executive Vice President and Director of Equity
Capital Markets. Mr. Colgan received his Bachelor of Science Degree in
Business Administration from the University of Colorado.
James G. Rickards has been our Senior Vice President, General Counsel
and Secretary since September 1999. From 1994 to August 1999, Mr. Rickards was
General Counsel of Long-Term Capital Management, L.P., an investment management
firm. From 1985 to 1994, Mr. Rickards was Senior Vice President, Secretary and
General Counsel of Greenwich Capital Markets, Inc., an investment banking firm.
Mr. Rickards received his Juris Doctoris Degree from the University of
Pennsylvania School of Law and his LL.M. in taxation from the New York
University School of Law. Mr. Rickards received his Bachelor of Arts Degree in
Political Science from The Johns Hopkins University and his Master of Arts
Degree in International Relations from the Paul H. Nitze School of Advanced
International Studies of The Johns Hopkins University.
Paul I. Kasnetz has been our Vice President of Finance and
Administration since August 1997. From December 1995 to August 1997, Mr.
Kasnetz was the Chief Financial Officer of Telesphere Corporation, a software
development, communications and financial information company. From December
1990 to December 1995, Mr. Kasnetz was the Chief Financial Officer of
MarketVision Corporation, a software developer and systems integrator for the
financial services industry. Mr. Kasnetz began his career at KPMG Peat Marwick.
Mr. Kasnetz received his Bachelor of Science degree in accounting from the
State University of New York at Binghamton and his M.B.A. in Finance from
Rutgers University.
Jerome H. Bailey has served as a director of OptiMark since January
1999. In April 1998, Mr. Bailey joined Dow Jones & Company, Inc. as Senior
Vice President and Chief Financial Officer. In October 1998, Mr. Bailey was
named Executive Vice President of Dow Jones &
44
<PAGE> 47
Company, Inc. From 1993 to 1997, Mr. Bailey was Chief Financial Officer for
Salomon Inc. and Salomon Brothers. From 1986 until 1993, Mr. Bailey was with
Morgan Stanley where he served in a variety of executive positions. Prior to
joining Morgan Stanley, Mr. Bailey was a partner at Price Waterhouse, a firm he
joined in 1974. Mr. Bailey is a member of the board of directors of Ottaway
Newspapers, Inc., the community newspaper subsidiary of Dow Jones & Company,
Inc. Mr. Bailey received his Bachelor of Science degree from the University of
Nebraska.
Peter L. Bloom has served as a director of OptiMark since August 1996.
Mr. Bloom is a Managing Member of General Atlantic Partners, L.L.C., a private
equity investment firm focused exclusively on strategic investments in software
and related services worldwide, and has served in that capacity since 1996.
From 1983 to 1996, Mr. Bloom was at Salomon Brothers, an investment banking
firm, where he last was the Managing Director of Salomon's U.S. Technology
Division. He is a member of the board of directors of BindView Development
Corporation and Predictive Systems, Inc., and is a special advisor to the board
of directors of E*TRADE Group, Inc., as well as a board member of selected
private companies. Mr. Bloom received his Bachelor of Arts degree in computer
studies and economics from Northwestern University.
Ronald D. Fisher has served as a director of OptiMark since November
1999. Mr. Fisher is the Vice Chairman of SOFTBANK Holdings Inc. and a director
of SOFTBANK Corp., Japan. Mr. Fisher also currently serves as the Managing
General Partner of SOFTBANK Capital Partners LP and represents SOFTBANK
Corporation in the activities of SOFTBANK Technology Ventures. Before joining
SOFTBANK in 1995, Mr. Fisher was, for six years, the Chief Executive Officer of
Phoenix Technologies, Ltd., a developer and marketer of system software
products for personal computers. Earlier, he was with INTERACTIVE Systems
Corporation, a UNIX software company, where he served for five years in various
capacities including Chief Operating Officer and Chief Executive Officer. Mr.
Fisher's experience prior to Interactive Systems includes senior executive
positions at Visicorp, TRW, and ICL (U.S.A). Mr. Fisher also serves as a
member of the boards of directors of InsWeb Corporation and Ziff Davis Inc. Mr.
Fisher received his M.B.A. from Columbia University, and Bachelor of Commerce
degree from the University of Witwatersand in South Africa.
Richard W. Jones has served as a director of OptiMark since December
1997. Mr. Jones has served as a business consultant to Paine Webber since
1988. From 1977 to 1988, Mr. Jones was Senior Vice President and a Director of
E.F. Hutton & Co. From 1962 to 1977, Mr. Jones served in a variety of
executive positions with Mitchum, Jones & Templeton, Inc., a brokerage firm,
including Chairman and Chief Executive Officer. Mr. Jones was a member of the
board of directors of GTE Corporation from 1966 until his retirement in 1998.
Mr. Jones received his Bachelor of Science degree from the University of
California, Los Angeles and earned graduate degrees from the University of
California, Los Angeles and the University of California at Berkeley.
Morton H. Meyerson has served as a director of OptiMark since August
1997. From 1992 to 1998, Mr. Meyerson was Chairman of Perot Systems
Corporation, a provider of information technology services and business
solutions. From 1979 to 1986, Mr. Meyerson served as President
45
<PAGE> 48
of Electronic Data Systems Corporation, an information services company. Mr.
Meyerson is a member of the board of directors of each of Crescent Real Estate
Equities, Inc., TeleTech Holdings, Inc., Energy Services Company International,
Inc. and Lante Corporation. Mr. Meyerson received his Bachelor of Arts degree
in economics and philosophy from the University of Texas at Austin.
Michael D. O'Halleran has served as a director of OptiMark since April
1998. Mr. O'Halleran has served as President and Chief Operating Officer of
Aon Group, Inc., the commercial brokerage and consulting operation of Aon
Corporation, an insurance brokerage company, since 1995. From 1987 to 1995,
Mr. O'Halleran served in a variety of executive positions at Aon Corporation.
Mr. O'Halleran received his Bachelor of Arts degree from the University of
Wisconsin-Whitewater.
Kenneth D. Pasternak has served as a director of OptiMark since
November 1999. Mr. Pasternak is the President, Chief Executive Officer and a
director of Knight/Trimark Group, Inc., which is the largest wholesale market
maker in U.S. equity securities and the leading execution destination for
trades placed via the Internet. Mr. Pasternak founded the predecessor of
Knight/Trimark, Roundtable Partners, LLC, in 1994. From 1979 to 1994, Mr.
Pasternak served as Senior Vice President, limited partner and trading room
manager for Spear Leeds & Kellogg/Troster Singer, a trading firm. He also
serves on the boards of directors of BRASS Utility, the European Association of
Securities Dealers Automated Quotation and the International Securities
Exchange. Mr. Pasternak received his Bachelor of Arts degree from the State
University of New York at New Paltz.
ITEM 6. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below summarizes the compensation earned for services rendered to us
in all capacities for the fiscal year ended December 31, 1999 by
- our chief executive officer,
- our next four most highly compensated executive officers who
earned more than $100,000 during the fiscal year ended December
31, 1999, and
- William F. Adiletta, for whom disclosure would have been required
but for the fact that Mr. Adiletta resigned in November 1999.
We do not have a restricted stock award program or a long-term incentive plan in
which our executive officers or directors may participate.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) OPTIONS (#) ALL OTHER COMPENSATION
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Phillip J. Riese . . . . . . . . $425,000 $1,000,000 - -
Chief Executive Officer
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 49
<TABLE>
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William A. Lupien . . . . . . . . 180,000 - - -
Chairman of the Board
- --------------------------------------------------------------------------------------------------------------------
John T. Rickard . . . . . . . . . 180,000 - -
Chief Scientific Officer
- --------------------------------------------------------------------------------------------------------------------
Robert J. Warshaw (1). . . . . . 28,990 175,000 500,000 -
Executive Vice President and
Chief Technology Officer
- --------------------------------------------------------------------------------------------------------------------
Paul I. Kasnetz. . . . . . . . . 140,000 - - -
Vice President Finance
and Administration
- --------------------------------------------------------------------------------------------------------------------
William F. Adiletta. . . . . . . 211,505 250,000 - 150,000(2)
Former President OptiMark
Nasdaq Market
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Warshaw became our executive vice president and chief technology
officer in November 1999.
(2) Represents payments made during 1999 under a letter agreement with
Mr. Adiletta in connection with his resignation in November 1999.
See "-Employment and Other Agreements".
OPTION GRANTS IN LAST FISCAL YEAR
The following table describes stock options granted to each of the
named executive officers in the fiscal year ended December 31, 1999, including
the potential realizable value over the ten-year term of the options based on
assumed rates of stock appreciation of 5% and 10% compounded annually. These
assumed rates of appreciation comply with the rules of the Securities and
Exchange Commission and do not represent our estimate of future stock
performance. Actual gains, if any, on stock option exercises will depend on the
future performance of our common stock. The deemed value for the date of grant
was determined after the date of grant solely for financial accounting purposes.
In the fiscal year ended December 31, 1999, we granted options to
purchase up to an aggregate of 2,074,450 shares of common stock to employees.
All options were granted under our stock option plan with exercise prices at the
fair market value of our common stock on the date of grant, as determined by the
board of directors. All options have a term of ten years. Optionees may pay the
exercise price by cash or check. Options generally vest 20% each year over a
five-year period from the date of hire of the optionee.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS POTENTIAL REALIZABLE VALUE AT
SECURITIES GRANTED TO EXERCISE ASSUMED ANNUAL RATES OF STOCK
DATE OF UNDERLYING EMPLOYEES IN OR BASE EXPIRATION PRICE APPRECIATION FOR OPTION
NAME GRANT OPTIONS GRANTED FISCAL YEAR PRICE DATE TERM
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5% 10%
- ----------------------------------------------------------------------------------------------------------------
Robert J.
Warshaw 11/15/99 500,000 24.10% $10.00 11/15/09 $3,144,473 $7,968,712
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 50
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table describes the named executive officers' option
exercises for the fiscal year ended December 31, 1999, and exercisable and
unexercisable options they held as of December 31, 1999. The "Value Realized" is
based on the fair market value of our common stock as of the date of exercise
and the "Value of Unexercised In-the-Money Options at Fiscal Year End" is the
value as of December 31, 1999, in each case as determined by the board of
directors, less the exercise price. All options were granted under our stock
option plan.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
VALUE OF UNEXERCISED
NAME NUMBER OF SECURITIES IN-THE-MONEY OPTIONS AT
SHARES UNDERLYING UNEXERCISED FISCAL YEAR-END
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END (#) ($)
EXERCISE REALIZED
(#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Phillip J. Riese - - 400,000/800,000 0/0
- ---------------------------------------------------------------------------------------------------------------------
William A. Lupien - - - -
- ---------------------------------------------------------------------------------------------------------------------
John T. Rickard 8,000 68,000 426,286/165,715 3,573,431/1,208,569
- ---------------------------------------------------------------------------------------------------------------------
Robert J. Warshaw - - 0/500,000 0/0
- ---------------------------------------------------------------------------------------------------------------------
Paul I. Kasnetz 18,500 151,099 20,000/60,000 163,350/490,050
- ---------------------------------------------------------------------------------------------------------------------
William F. Adiletta 163,704 1,337,052 231,209/0 1,888,400/0
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
COMPENSATION OF DIRECTORS
Our directors do not currently receive any cash compensation for their
services as members of the board of directors, although we do reimburse them for
travel and lodging expenses in connection with attendance at board and committee
meetings. Our directors are eligible to receive options under our 1999 stock
plan at the discretion of the board of directors or other administrator of the
plan.
During 1998, the board granted options to purchase an aggregate of
50,000 shares to each of Messrs. Bloom and Meyerson at an exercise price per
share of $4.00. These option shares vest ratably over a four-year period subject
to continuing service on the board and have a term of ten years. During 2000,
the board granted options pursuant to our 1999 stock plan to purchase an
aggregate of 10,000 shares to each of Messrs. Bloom and Meyerson, 50,000 shares
to each of Messrs. Fisher and Pasternak and 60,000 shares to each of Messrs.
Jones and O'Halleran, at an exercise price per share of $10.00. These option
shares vest ratably over a five-year period, subject to continuing service on
the board, and have a term of ten years.
EMPLOYMENT AND OTHER AGREEMENTS
Phillip J. Riese. In November 1998 we entered into an employment
agreement with Mr. Riese pursuant to which Mr. Riese was employed as chief
executive officer and appointed to the board of directors. The agreement
provides that Mr. Riese's employment will continue until terminated by either
party with or without cause. Mr. Riese is entitled to a base salary of
$425,000,
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<PAGE> 51
subject to annual evaluation and increase as determined by the board
of directors. Mr. Riese received a $1,000,000 bonus upon joining the company
and received a $1,000,000 bonus in November 1999 on the first anniversary of
his employment. Mr. Riese is also entitled to a one-time performance bonus of
$1,000,000 if the company achieves pre-tax net income of at least $10,000,000
in a fiscal year.
Under the agreement, Mr. Riese purchased 350,000 shares of common stock
at a price of $10.00 per share. Of these shares, he purchased 100,000 with a
full recourse promissory note payable to us, which were subject to restrictions
on transfer during the first year of Mr. Riese's employment. Mr. Riese repaid
the note and the restrictions lapsed in November 1999.
Under the agreement, if we terminate Mr. Riese's employment other than
for "cause" or if Mr. Riese terminates his employment for "good reason",
- we must pay his base salary for two years after termination,
- we must pay a lump sum payment equal to the greater of the bonus
paid to Mr. Riese in the fiscal year before termination or a pro
rata portion of his target bonus for the fiscal year in which
termination occurs, excluding the one-time performance bonus,
- we must continue his benefits for two years, and
- 60% of Mr. Riese's options will vest if the termination occurs
within three years after the date of his employment, 80% will
vest if the termination occurs thereafter but within four years
from the date of his employment and 100% will vest if the
termination occurs thereafter.
If the termination occurs on or after the first day of the tenth month of our
fiscal year, Mr. Riese is entitled to a lump sum payment equal to the pro rata
portion of his target bonus for the fiscal year, excluding the one-time
performance bonus.
If the one-time performance bonus is earned in the year we terminate
Mr. Riese's employment other than for "cause" or Mr. Riese terminates his
employment for "good reason" or Mr. Riese's employment is terminated by reason
of death or disability, we must pay a prorated portion of that bonus.
In the event of a "change of control," 75% of Mr. Riese's options will
vest if the change of control occurs within two years of the date of his
employment, 60% will vest if the change of control occurs thereafter but within
three years of the date of his employment, 80% will vest if the change of
control occurs thereafter but within four years of the date of his employment
and all will vest if the change of control occurs thereafter. If we terminate
Mr. Riese's employment other than for "cause" or if Mr. Riese terminates his
employment for "good reason" within one year after a change of control, all of
Mr. Riese's options will vest.
William A. Lupien. In August 1996 we entered into an employment
agreement with Mr. Lupien. The agreement provides that Mr. Lupien's employment
will continue until terminated by
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<PAGE> 52
either party with or without cause. The agreement further provides that if we
terminate Mr. Lupien's employment without "cause" or Mr. Lupien terminates his
employment because of a substantial diminution in responsibility or pay or
because of a forced relocation,
- we will continue to pay Mr. Lupien his base salary for eighteen
months,
- all of Mr. Lupien's stock options will vest, and
- we must loan Mr. Lupien an amount sufficient to pay the exercise price
of his stock options.
John T. Rickard. In August 1996 we entered into an employment
agreement with Mr. Rickard which is substantially identical to our agreement
with Mr. Lupien.
Robert J. Warshaw. In August 1999 we entered into a letter agreement
with Mr. Warshaw. The letter agreement provides that Mr. Warshaw's employment
will continue at the discretion of both parties. Mr. Warshaw is entitled to a
base salary of $225,000 and a guaranteed bonus of $350,000 for the first year
of his employment. One-half of the guaranteed bonus was paid to Mr. Warshaw on
commencement of his employment and the balance is payable on the first
anniversary of Mr. Warshaw's employment. In the event of a "change of control",
or if we terminate Mr. Warshaw's employment other than for "cause" or if Mr.
Warshaw terminates his employment for "good reason" within one year after a
change of control, Mr. Warshaw's options will vest in the same manner as Mr.
Riese's options, as described above.
If we terminate Mr. Warshaw's employment without "cause" or Mr. Warshaw
terminates his employment for "good reason," we must pay him an amount equal to
12 times his last gross monthly salary plus the amount of any cash bonus paid to
him during the period 12 months before termination.
William F. Adiletta. In November 1999, we entered into a letter
agreement with William F. Adiletta in connection with his resignation as
President of OptiMark Nasdaq Market and a director. Under this agreement, Mr.
Adiletta received $150,000 on signing and $150,000 on January 3, 2000, and is
receiving $150,000 payable in 12 equal semi-monthly installments beginning in
January 2000. In addition, fifty percent of any options granted to Mr. Adiletta
which would have vested after November 1999 were treated as vested on the date
of Mr. Adiletta's termination and all vested options remain exercisable until
November 1, 2002.
ADDITIONAL INFORMATION WITH RESPECT TO COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
Peter L. Bloom and Morton H. Meyerson served as members of our
compensation committee during the fiscal year ended December 31, 1999. Neither
of the members of our compensation committee has ever been an officer or
employee of OptiMark. None of our executive officers serves as a member of the
board of directors or compensation committee of any entity that has one or more
executive officers serving on our board of directors or compensation committee.
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<PAGE> 53
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Described below are past and proposed transactions involving amounts
exceeding $60,000 in which any of our directors, executive officers, holders of
more than 5% of any class of our voting securities, or any member of their
immediate families had or will have a direct or indirect material interest.
SALES OF SECURITIES
In August 1996 and March and May 1997, we issued an aggregate of
2,046,385 shares of series A convertible participating preferred stock to
General Atlantic Partners 35, L.P. and GAP Coinvestment Partners, L.P., and
1,364,257 shares of series A convertible participating preferred stock to Dow
Jones & Company, Inc. at a purchase price of $7.33 per share. These investors
entered into a stockholders agreement that provides for rights of first offer
to purchase our capital stock on issuance and a registration rights agreement.
The General Atlantic entities and Dow Jones are the beneficial owners of at
least five percent of our common stock.
In May 1997, we issued warrants to purchase up to an aggregate of
3,242,644 shares of common stock to General Atlantic Partners 35 and GAP
Coinvestment Partners and a warrant to purchase up to an aggregate of 2,161,764
shares of common stock to Dow Jones for an initial price of $2.25 per share. In
January 1998, the General Atlantic entities exercised their warrants to acquire
3,242,644 shares of common stock for an aggregate purchase price of $7,295,949.
In April 1999, Dow Jones exercised its warrant to acquire 2,161,764 shares of
common stock for an aggregate purchase price of $5,886,483.
In August 1997, we issued an aggregate of 818,552 shares of common
stock to Big Bend Investments II, L.P., a partnership controlled by Morton H.
Meyerson, one of our directors, for an aggregate purchase price of $1,500,000.
In April 1998, we issued 2,000,000 shares of series B convertible
participating preferred stock to Virginia Surety Company, Inc. at a purchase
price of $10.00 per share. In June 1998, we issued 1,000,000 shares of series B
convertible participating preferred stock to The Goldman Sachs Group, L.P. at a
purchase price of $10.00 per share. In July 1998, we issued 800,000 shares of
series B convertible participating preferred stock to Nihon Keizai Shimbun,
Inc., and an aggregate of 1,500,000 shares of series B convertible participating
preferred stock to ML IBK Positions, Inc., Merrill Lynch KECALP L.P. 1997 and
Merrill Lynch KECALP International L.P. 1997, at a purchase price of $10.00 per
share. In August 1998, we issued 1,000,000 shares of series B convertible
participating preferred stock to Credit Suisse First Boston OptiMark Investors,
Inc. and 1,060,000 shares of series B convertible participating preferred stock
to Paine Webber Capital, Inc., at a purchase price of $10.00 per share. Each
investor entered into a registration rights agreement. Each of the foregoing
series B investors is the beneficial owner of at least five percent of our
series B convertible participating preferred stock.
In April 1998, we issued to Virginia Surety Company a warrant to
purchase up to
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<PAGE> 54
500,000 shares of common stock for $10.00 per share in connection
with its investment in shares of series B convertible participating preferred
stock.
In September 1998, we entered into an agreement to issue warrants to
Nasdaq to purchase up to an aggregate of 11,250,000 shares of common stock for
prices ranging from $5.00 to $7.00 per share in consideration for our agreement
to develop and provide the Nasdaq application of the OptiMark trading
technology. In October 1999, we issued to Nasdaq a warrant to purchase
2,250,000 shares of common stock for a price of $5.00 per share and a warrant
to purchase 2,250,000 shares of common stock for a price of $7.00 per share.
Nasdaq is the beneficial owner of at least five percent of our common stock.
In May 1999, we issued warrants to purchase up to an aggregate of
1,500,000 shares of common stock for $10.00 per share to The Goldman Sachs
Group, Inc., ML IBK Positions, Inc., Merrill Lynch KECALP L.P. 1997 and Merrill
Lynch KECALP International L.P. 1997. These warrants expired unexercised
pursuant to their terms in June 1999.
In July 1999, we issued 8,250,000 shares of series C convertible
preferred stock to SOFTBANK Capital Partners L.P. and SOFTBANK Capital Advisors
Fund L.P. at a purchase price of approximately $11.76 per share. In connection
with the SOFTBANK affiliates' investment, they entered into a registration
rights agreement. The SOFTBANK affiliates are the beneficial owners of at least
five percent of our common stock.
In July 1999, we issued 250,000 shares of series D convertible
preferred stock to BancBoston Capital Inc. at a purchase price of $12.00 per
share. In connection with BancBoston's investment, it entered into a
registration rights agreement. BancBoston is the beneficial owner of all of our
series D convertible preferred stock.
In October 1999, we entered into an agreement to issue warrants to
Knight/Trimark Group, Inc. to purchase a number of shares of common stock at an
exercise price to be determined depending on the number of executions matched
through the OptiMark equities trading system resulting from profiles entered
into by Knight/Trimark. Kenneth Pasternak, a member of our board of directors,
is an executive officer and director of Knight/Trimark.
HIGH PERFORMANCE MARKETS, LTD.
High Performance Markets, Ltd., is a limited partnership in which
Messrs. Lupien, Rickard, and Jones indirectly owned a majority of the limited
partnership interests and control the general partner. In May 1996, we sold
to High Performance Markets a royalty-free, exclusive, fully paid, perpetual,
worldwide license to make, use and distribute products, systems and services
under certain of our patent applications within the non-securities industry
field for $650,000. High Performance Markets delivered a non-recourse promissory
note in the original principal amount of $650,000 in payment of the purchase
price. Interest on the principal amount of the loan accrued at a rate of 5.45%
per annum, compounded annually.
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In April 1998, we purchased from High Performance Markets for $500,000
a fully paid, perpetual, worldwide license to make, use and distribute products,
systems and services under certain of our patent applications within the
insurance industry.
In March 1999, we entered into a license termination agreement with
High Performance Markets pursuant to which High Performance Markets agreed to
the termination of the license granted by us to High Performance Markets in May
1996. In consideration for the termination of the license, we granted to High
Performance Markets 2,000,000 shares of common stock valued at $28,000,000. In
connection with the transaction, the terms of the $650,000 promissory note from
High Performance Markets were amended and restated to provide that the note
would be a recourse obligation. The terms of the transaction, including the form
and value of the consideration paid to High Performance Markets, were negotiated
and approved by a special independent committee of the board of directors.
In August 1999, High Performance Markets paid in full all principal
and accrued interest outstanding on the $650,000 loan. The largest principal
amount outstanding under the loan during 1999 was $650,000.
AON INSURANCE CORPORATION/VIRGINIA SURETY COMPANY, INC.
In April 1998, we granted to Aon Corporation, the parent company of
Virginia Surety Company, Inc., in connection with Virginia Surety's investment
in our series B convertible participating preferred stock, a fully paid,
perpetual, worldwide license to use and distribute products, systems and
services under several of our patent applications within the insurance industry.
We use Aon Risk Services, Inc. of New York, a wholly-owned subsidiary
of Aon Corporation, as broker for our corporate insurance needs including
worker's compensation, general liability, auto, umbrella liability, property,
directors and officers liability, errors and omissions liability, fiduciary and
crime insurance policies. The premiums under these policies were approximately
$817,000 in 1999. We also use Cananwill Inc., another wholly-owned subsidiary of
Aon Corporation, to finance the insurance premiums on the above mentioned
policies. We paid approximately $1,143,000 to Cananwill in 1999.
NIHON KEIZAI SHIMBUN/QUICK CORP.
In September 1998, we established a joint venture in Japan called Japan
OptiMark Systems, Inc. with Nihon Keizai Shimbun and QUICK Corp. Nihon Keizai
Shimbun is the beneficial owner of at least five percent of our series B
convertible participating preferred stock.
DOW JONES & COMPANY, INC.
In December 1998, we purchased from Dow Jones & Company, Inc. 250,000
shares of our series A convertible participating preferred stock for an
aggregate purchase price of $10,000,000.
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<PAGE> 56
At the time of the transaction, each share of series A convertible
participating preferred stock was convertible into four shares of common stock
and the fair market value of our common stock was $10.00 per share, as
determined by the board of directors. Dow Jones is the beneficial owner of over
five percent of our common stock.
LOANS TO EXECUTIVE OFFICERS
In November 1998, we made a loan to Phillip J. Riese in the principal
amount of $1,000,000, the proceeds of which he used to purchase 100,000 shares
of our common stock. Interest on the principal amount of the loan accrued at a
rate of 4.33% per annum, compounded annually. The principal balance and all
accrued interest were paid by Mr. Riese in November 1999. The largest principal
amount outstanding under the loan during 1999 was $1,000,000.
In March 1998, we made a loan to John T. Rickard in the principal
amount of $200,000, the proceeds of which he used to repay other indebtedness.
Interest on the principal amount of the loan accrues at 6% per annum. The
principal balance of the loan and all accrued but unpaid interest thereon are
due and payable on March 31, 2003 or within 30 days of Mr. Rickard's
termination of employment, if earlier. In January 1999 and January 2000, Mr.
Rickard paid all accrued interest on the loan. The largest principal amount
outstanding under the loan during 1999 was $200,000. In April 2000, we forgave
the outstanding principal amount under this loan in consideration for Mr.
Rickard's past services and Mr. Rickard paid all accrued and unpaid interest.
OTHER TRANSACTIONS
In May 1996, in consideration for the sale of certain technology by a
subsidiary of our predecessor, MJT Holdings, Inc. we received a promissory note
from TOMCAT, LLC in the principal amount of $700,000. TOMCAT is a limited
liability company in which Messrs. Lupien, Rickard, and Jones indirectly owned a
majority of the membership interests. Interest on the principal amount of the
note accrues at 5.45% per annum, compounded annually. The principal balance and
all accrued but unpaid interest on the note are due and payable on May 31, 2005.
The largest principal amount outstanding under the note during each of 1997,
1998 and 1999 was $700,000. During 1997, we determined that the note was
uncollectible and wrote it off against the reserve we set up in 1996.
In May 1996, in consideration for the sale of certain technology from
MJT Holdings we received a promissory note from Durango Holdings, Ltd. in the
principal amount of $1,900,000. Durango Holdings is a limited partnership in
which Messrs. Lupien, Rickard, and Jones owned a majority of the limited
partnership interests and controlled the general partner. Interest on the
principal amount of the note accrues at 5.45% per annum, compounded annually.
The principal balance and all accrued but unpaid interest on the note are due
and payable on May 31, 2005. The largest principal amount outstanding under the
note during each of 1997, 1998 and 1999 was $1,900,000. During 1997, we recorded
a valuation allowance for the full amount of the note. In May 1999, Durango
Holdings assigned its rights and obligations under the note to Pegasus
Technologies, Ltd., a limited partnership in which Messrs. Lupien, Rickard, and
Jones owned a
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<PAGE> 57
majority of the limited partnership interests and control the general partner.
In August 1999, Pegasus Technologies paid us approximately $59,000 on the note.
ITEM 8. LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings, an adverse
outcome of which, individually or in the aggregate, could have a material
adverse effect on our business, financial condition or operating results. We
have been subject to legal proceedings in the past and may be subject to legal
proceedings in the future.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the shares of common
stock and we do not currently intend to seek inclusion of the shares of common
stock in any established public trading market. As of April 24, 2000 we had
36,604,657 outstanding shares of common stock, including 740,000 shares on
non-voting common stock owned by approximately 616 holders.
There are 68,992,929 outstanding shares of common stock on an as
converted basis that can be sold pursuant to Rule 144 within 90 days after the
effective date of this registration statement. As of April 24, 2000 we have
- issued options to purchase an aggregate of 8,837,759 shares of common
stock to certain of our directors, officers and employees,
- issued warrants to purchase an aggregate of 8,458,328 shares of
common stock to investors and strategic partners, and
- granted registration rights to holders of an aggregate of
approximately 40,113,000 shares of common stock, on an as converted
basis.
We have not declared any dividends or other distributions on our
shares of common stock. We do not anticipate paying any other cash dividends in
the foreseeable future and anticipate that future earnings will be retained to
finance operations.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of our transactions since April 1997
involving sales of our securities that were not registered under the Securities
Act of 1933.
In May 1997, we issued an aggregate of 1,364,256 shares of series A
convertible participating preferred stock and warrants to purchase up to an
aggregate of 5,404,408 shares of common stock for an initial price of $2.25 per
share to three accredited investors for an aggregate
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purchase price of $10,000,000. Each share of series A convertible participating
preferred stock is currently convertible into four shares of common stock.
In August 1997, we issued an aggregate of 818,552 shares of common
stock to Big Bend Investments II, L.P., a partnership controlled by Morton H.
Meyerson, a director, for an aggregate purchase price of $1,500,000.
In January 1998, in connection with the exercise of warrants we issued
in May 1997, we issued an aggregate of 3,242,644 shares of common stock to
General Atlantic Partners 35 and GAP Coinvestment Partners for an aggregate
purchase price of $7,295,949.
From April to December 1998, we issued an aggregate of 11,000,000
shares of series B convertible participating preferred stock to 54 accredited
investors for an aggregate purchase price of $110,000,000.
In April 1998, we issued a warrant to Virginia Surety Company, Inc. to
purchase up to 500,000 shares of common stock for $10.00 per share in
consideration for Virginia Surety Company's investment in series B convertible
participating preferred stock.
In April 1998, we granted options to purchase an aggregate of 200,000
shares of common stock at an exercise price of $4.00 per share to four
non-employee directors.
In June 1998, in connection with the exercise of options we granted in
April 1998, we issued an aggregate of 100,000 shares of common stock to two
non-employee directors for an aggregate purchase price of $400,000.
In June 1998, we issued a warrant to Transamerica Business Credit
Corporation to purchase up to an aggregate of 42,500 shares of common stock for
$10.00 per share in consideration for Transamerica Business Credit Corporation
providing equipment lease financing to us.
In August 1998, we issued a warrant to Francis X. Egan, a consultant,
to purchase up to 40,000 shares of common stock for $10.00 per share.
In October 1998, we issued an aggregate of 20,000 shares of common
stock to Yehoshua Benjamin, a consultant, for an aggregate purchase price of
$200,000.
In October 1998, we issued an aggregate of 5,000 shares of common stock
to Ramsey Beirne Partners, L.L.C., a consulting firm, for an aggregate purchase
price of $50,000 and also issued a warrant to Ramsey Beirne to purchase up to an
aggregate of 5,000 shares of common stock for $10.00 per share.
In December 1998, we issued an aggregate of 100,000 shares of common
stock to Phillip J. Riese, our chief executive officer, for an aggregate
purchase price of $1,000,000.
In December 1998, we issued an aggregate of 250,000 shares of common
stock to Phillip J.
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<PAGE> 59
Riese for an aggregate purchase price of $2,500,000.
In January 1999, we issued a warrant to BIOS Group LP, a consulting
firm, to purchase up to an aggregate of 5,000 shares of common stock for $10.00
per share.
In February 1999, we granted an option to purchase an aggregate of
20,000 shares of common stock at an exercise price of $14.00 per share to Carl
M. Valenti, a former director, for certain consulting services.
In March 1999, we issued an aggregate of 300,000 shares of common stock
to Dow Jones pursuant to Dow Jones conversion of 75,000 shares of series A
convertible participating preferred stock.
In March 1999, we issued an aggregate of 2,000,000 shares of common
stock to High Performance Markets in consideration for the cancellation of
certain license rights previously granted by us to High Performance Markets.
In April 1999, in connection with the exercise of warrants we granted
in May 1997, we issued an aggregate of 2,161,764 shares of common stock to Dow
Jones for an aggregate purchase price of $5,886,483.
In May 1999, we issued warrants to B.T. Investment Partners, Inc., The
Goldman Sachs Group, Inc., ML IBK Positions, Inc., Merrill Lynch KECALP L.P.
1997, and Merrill Lynch KECALP International L.P. 1997 to purchase up to an
aggregate of 1,666,667 shares of common stock for $10.00 per share. These
warrants expired unexercised in June 1999.
In July 1999, we issued an aggregate of 8,250,000 shares of series C
convertible preferred stock to SOFTBANK Capital Partners L.P. and SOFTBANK
Capital Advisors Fund L.P. for an aggregate purchase price of $97,000,000.
In July 1999, we issued an aggregate of 250,000 shares of series D
convertible preferred stock to BancBoston Capital Inc. for an aggregate
purchase price of $3,000,000.
In August 1999, in connection with the exercise of warrants we granted
in October 1998, we issued an aggregate of 5,000 shares of common stock to
Ramsey Beirne for an aggregate purchase price of $50,000.
In August 1999, we issued an aggregate of 4,167 shares of common stock
to Ramsey Beirne for an aggregate purchase price of $50,000.
Between April 1997 and April 1998, we granted options to purchase
1,219,000 shares of common stock at an exercise price of $1.8325 per share and
granted options to purchase 777,000 shares of common stock at an exercise price
of $2.56 per share to employees. Between April 1998 and June 1998, we granted
options to purchase 845,000 shares of common stock at an exercise price of $4.00
per share to employees. Between July 1998 and August 1998, we granted options to
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<PAGE> 60
purchase 267,500 shares of common stock at an exercise price of $7.50 per share
to employees. Between September 1998 and February 1999, we granted options to
purchase 1,560,350 shares of common stock at an exercise price of $10.00 per
share to employees. Between February 1999 and July 1999, we granted options to
purchase 781,950 shares of common stock at an exercise price of $14.00 per
share to employees. From July 1999 to November 1999, we granted options to
purchase 1,136,900 shares of common stock at an exercise price of $12.00 per
share to employees. From January 2000 to April 24, 2000, we granted options to
purchase 2,658,850 shares of common stock at an exercise price of $10.00 per
share to employees and directors.
Between December 1997 and April 2000, we issued an aggregate of
844,514 shares of common stock upon the exercise of stock options for aggregate
consideration of approximately $1,566,000.
These issuances of securities were exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act or Rule 701
promulgated under the Securities Act, as transactions by an issuer not
involving a public offering or transactions under compensatory benefit plans
and contracts as provided under Rule 701. The recipients of securities in each
of these transactions represented their intention to acquire the securities for
investment only and not with view to or for sale in connection with any
distribution, and appropriate legends were affixed to the share certificates
and instruments issued. All recipients were accredited investors as defined in
the Securities Act and/or were sophisticated and had adequate access, through
their relationship with us, to information about us.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
Our authorized capital stock consists of 150,000,000 shares of common
stock, par value $.01 per share, and 40,000,000 shares of preferred stock, par
value $.01 per share. As of April 24, 2000 there were issued and outstanding
- 36,604,657 shares of common stock, including 740,000 shares of
non-voting common stock,
- 3,222,068 shares of series A convertible participating preferred stock,
- 11,000,000 shares of series B convertible participating preferred stock,
- 8,250,000 shares of series C convertible preferred stock, and
- 250,000 shares of series D convertible preferred stock.
COMMON STOCK
There are 1,500,000 shares of the authorized common stock that are
designated as non-voting common stock. As of April 24, 2000 there were issued
and outstanding 740,000 shares of non-voting common stock. These shares shall
have no voting rights, except as provided by law. The remainder of the
authorized common stock is voting common stock, the holders of which are
entitled to one vote per share. Votes are not cumulated in the election of
directors. Under our
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<PAGE> 61
amended and restated certificate of incorporation, the holders of common stock
have no preemptive or similar rights or redemption or conversion privileges.
The holders of common stock are entitled to receive dividends as and when
declared by the board of directors from legally available funds and are
entitled on liquidation to share ratably in all assets remaining after payment
of liabilities and liquidation preferences to holders of preferred stock.
Under an amended and restated stockholders agreement, dated April 23,
1998, stockholders holding an aggregate of 29,358,885 shares of common stock (on
an as converted basis) have preemptive rights with respect to the issuance of
new shares of common stock or securities convertible into or exchangeable for
common stock before an initial public offering of the common stock.
The agreement also entitles General Atlantic Partners 35, GAP
Coinvestment Partners, General Atlantic Partners 52 and GAP Coinvestment
Partners II, together as a group, and Dow Jones to designate two individuals to
the board of directors for as long as each stockholder owns at least five
percent of the total common stock outstanding on an as converted basis. They are
entitled to designate one individual for as long as each stockholder owns less
than five percent and at least two percent of the total common stock outstanding
on an as converted basis. Virginia Surety Company is entitled to designate one
individual to the board of directors for so long as it owns at least two-thirds
of the series B convertible participating preferred stock it purchased from us.
These stockholders will no longer be entitled to designate any directors once
they own less than two percent of the total common stock outstanding on an as
converted basis.
PREFERRED STOCK
Shares of preferred stock we acquire must be retired and canceled
promptly after acquisition. These shares on cancellation become authorized but
unissued shares of preferred stock. Shares of series A convertible
participating preferred stock may be reissued only as part of another series of
preferred stock, and shares of other series of preferred stock may be reissued
as part of the same or another series of preferred stock.
Voting Rights. The holders of preferred stock are entitled to vote on
all matters to be voted on by the holders of common stock as a single class with
other shares entitled to vote. Each share of preferred stock is entitled to a
number of votes equal to the number of shares into which it is convertible. As
of April 24, 2000, each share of series A convertible participating preferred
stock is entitled to four votes per share and each other share of preferred
stock is entitled to one vote per share.
Dividends. The holders of preferred stock are entitled to dividends
and other distributions in an amount equal to the amount of dividends or
distributions paid on the number of shares of common stock into which the
preferred shares are convertible on the record date for the dividend or
distribution.
Liquidation. On liquidation, dissolution or winding up:
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<PAGE> 62
- the holders of series A convertible participating preferred stock are
entitled to a liquidation preference of $7.33 per share,
- the holder of series B convertible participating preferred stock are
entitled to a liquidation preference of $10.00 per share,
- the holders of series C convertible preferred stock are entitled to
a liquidation preference of approximately $11.76 per share, and
- the holders of series D convertible preferred stock are entitled to
a liquidation preference of $12.00 per share,
each plus all declared and unpaid dividends. If our assets available for
distribution to the stockholders are not sufficient to pay the liquidation
preferences of each series of preferred stock, the holders of each series share
ratably in the distribution of available assets. The liquidation preference for
each series of preferred stock must be paid in full before any payments are
made or assets distributed to the holders of common stock.
Redemption. No shares of any series of preferred stock are
redeemable, whether at our option or at the option of any holder of such
shares.
Conversion Right. Each share of series A convertible participating
preferred stock may currently be converted, at the option of the holder, into
four shares of common stock. Each other share of preferred stock may be
converted, at the option of the holder, into shares of common stock on a
one-for-one basis. The conversion ratio for each share of preferred stock will
be adjusted in the event of:
- stock dividends or distributions,
- combinations, subdivisions or reclassifications,
- our sale of common stock at a price per share that is less than the
conversion price then in effect, and
- the board of directors determining that it would be equitable to
adjust the conversion price as a result of other actions we may take
affecting the common stock.
None of these adjustments to the conversion ratio of the series A
convertible participating preferred stock will be made unless the adjustment
would require an increase or decrease of at least one percent of the conversion
price.
Each share of preferred stock will be automatically converted to
common stock, at the then applicable conversion price as determined above, upon
the occurrence of the following events:
- we achieve average volumes of at least 5,000,000 shares per day
transacted through the OptiMark equities trading system for the latest
twelve month period and operating profit over the same twelve-month
period of at least $10,000,000, or
- following an initial public offering of the common stock at a
price per share that is at least 2.00 times the then applicable
conversion price of the series B convertible participating
preferred stock and 1.67 times the then applicable conversion
price of the
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<PAGE> 63
series C convertible preferred stock and series D convertible
preferred stock and with aggregate proceeds to us of at least
$10,000,000.
WARRANTS
We have issued warrants or entered into agreements to issue warrants
to purchase up to an aggregate of approximately 46 million shares of common
stock.
We issued a warrant to purchase up to 2,104,000 shares of common stock
to the Pacific Exchange on August 27, 1996, for an exercise price of $1.8325 per
share. The number of shares depends on the dates on which certain amounts of
securities are traded on any exchange and on the Pacific Exchange using our
technology, including equity options, after-hours trading and securities with
unlisted trading privileges. The warrant is currently exercisable for 841,600
shares of common stock. The warrant will expire on December 31, 2010 or two
years following an initial public offering of the common stock if earlier, but
in no case before December 31, 2005.
We issued a warrant to purchase up to 1,227,828 shares of common stock
to the Chicago Board Options Exchange on December 31, 1996, for an exercise
price of $1.8325 per share. The number of shares depends on the dates on which
different types of options, including equity options, index options and other
options, representing at least 80% of the average daily options of the same type
are traded using our technology on the Chicago Board Options Exchange. The
warrant is not currently exercisable. The warrant will expire on December 31,
2010 or two years following an initial public offering of the common stock if
earlier, but in no case before December 31, 2005.
We issued a warrant to purchase up to 500,000 shares of common stock
to Virginia Surety Company, Inc. on April 23, 1998, for an exercise price of
$10.00 per share. The warrant will expire on December 31, 2001.
We entered into an agreement with Nasdaq to issue warrants to purchase
up to 11,250,000 shares of common stock. In October 1999 in connection with the
launch of the Nasdaq system we issued to Nasdaq one warrant to purchase
2,250,000 shares of common stock for an exercise price of $5.00 per share and a
second warrant to purchase 2,250,000 shares of common stock for an exercise
price of $7.00 per share. Nasdaq has the opportunity to earn additional warrants
to purchase up to 6,750,000 additional shares at an exercise price of $7.00 per
share depending on the average daily volume and transaction revenues of
securities traded in Nasdaq using our equities trading system. The warrants and
the right to earn warrants will expire on the earlier of October 11, 2004, or
the last date on which the trading technology is made available on Nasdaq
workstations.
We entered into an agreement to issue warrants to Knight/Trimark Group,
Inc. to purchase shares of common stock. The amount and exercise price, ranging
from $2 per share to $9 per share, of the warrants will be determined depending
on the number of executions entered into,
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<PAGE> 64
matched through and reported out of the OptiMark equities trading system
resulting from profiles entered by Knight/Trimark. At progressively earlier
satisfaction of the performance criteria by Knight/Trimark, the exercise prices
are progressively lower. At progressively smaller percentages of total
executions in the system represented by Knight/Trimark executions, the exercise
prices are also progressively lower. The warrants for the appropriate number of
shares of common stock will be issued to Knight/Trimark no later than June 30,
2002, and will expire six months after issuance.
The exercise price of these warrants and the number of shares issuable
upon exercise will be subject to adjustment to protect against dilution in the
event of:
- stock dividends, stock splits, combinations, subdivisions and
reclassifications,
- mergers, consolidations and sales of assets,
- our taking any action affecting the common stock and the board of
directors determining in good faith that it would be equitable to
adjust the exercise price of the warrants, and
- our issuing shares of common stock at a price per share that is
less than the exercise price for the warrant, except in the case
of the Knight/Trimark agreement and, in the case of the
Knight/Trimark agreement, if we issue shares to all of our
stockholders at a price less than the fair market value of the
common stock.
The Pacific Exchange, Virginia Surety Company, Nasdaq and Knight/
Trimark each is entitled to registration rights with respect to the common stock
underlying its warrants.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
grants corporations the power to indemnify their directors, officers, employees
and agents.
Our bylaws and amended and restated certificate of incorporation
provide that we will indemnify any person who was or is a party or is threatened
to be made a party to any proceeding, because he was a director or officer, or
was serving at our request as a director, officer, partner, trustee, employee or
agent of another enterprise. The indemnity covers expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement reasonably incurred in
connection with the proceeding, to the fullest extent permitted by the Delaware
General Corporation Law. The indemnity is payable only if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to our best
interests, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Any of our other employees
or agents may be indemnified to the maximum extent permitted by law as
authorized by the board of directors. Our bylaws provide that this
indemnification is not exclusive of other rights to which these persons may be
entitled.
Our amended and restated certificate of incorporation also contains
provisions exculpating a director from liability for breaches of fiduciary duty
as a director, except for liability:
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- for any breach of the director's duty of loyalty to us or our
stockholders,
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
- in respect of certain unlawful dividend payments or stock redemptions
or repurchases, or
- for any transaction from which the director derived an improper
personal benefit.
Our amended and restated certificate of incorporation also provides
that we will have the power to maintain insurance covering our directors,
officers and employees against any liability or loss whether or not we could
indemnify them against the liability or loss under Delaware law. We currently
maintain directors' and officers' liability insurance.
Our amended and restated certificate of incorporation and bylaws are
attached hereto as Exhibits 3.1 and 3.2, respectively, and are incorporated
herein by reference.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this Item
are filed as part of this Form 10. See "Index to Financial Statement
Information" at page F-1 of this Form 10.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Our consolidated financial statements are filed as part of
this registration statement on Form 10. See "Index to Financial Statement
Information" at page F-1.
The report of Deloitte & Touche LLP, dated March 17, 2000, is
filed as part of this registration statement of Form 10. See "Index to
Financial Statement Information" at page F-1.
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
3.1 Amended and Restated Certificate of Incorporation, as amended, of OptiMark
3.2 Amended and Restated By-Laws of OptiMark
</TABLE>
63
<PAGE> 66
<TABLE>
<S> <C>
4.1 Specimen Common Stock Certificate
4.2 Specimen Preferred Stock Certificate
4.3 Series A Stock Purchase Agreement dated August 27,
1996 by and among OptiMark and the Stockholders
named therein
4.4 Registration Rights Agreement dated August 27,
1996 by and among OptiMark and the parties named
therein
4.5 Amendment to Stock Purchase Agreement and
Registration Rights Agreement dated March 19, 1997
by and among OptiMark and the parties named therein
4.6 Amendment to Stock Purchase Agreement, Stockholders
Agreement and Registration Rights Agreement dated May 29,
1997 by and among OptiMark and the parties named therein
4.7 Amendment to Series A Registration Rights
Agreement dated January 1999 by and among OptiMark
and the parties named therein
4.8 Series B Stock Purchase Agreement dated December
22, 1998 by and among OptiMark and the parties
named therein
4.9 Registration Rights Agreement dated April 23, 1998
by and among OptiMark and the parties named therein
4.10 Series C Stock Purchase Agreement dated June 11,
1999 by and among OptiMark and the stockholders
named therein
4.11 Registration Rights Agreement dated July 26, 1999
by and among OptiMark and the Stockholders named
therein
4.12 Series D Stock Purchase Agreement dated July 30,
1999 by and between OptiMark and BancBoston
Capital Inc.
4.13 Registration Rights Agreement dated July 30, 1999 by and
between OptiMark and BancBoston Capital Inc.
4.14 Registration Rights Agreement dated September 19,
1998 by and between OptiMark and The NASDAQ Stock
Market, Inc.
4.15 Amended and Restated Stockholders Agreement dated
April 23, 1998 by and among OptiMark and the
parties named therein
10.1 Revenue Sharing Agreement dated August 27, 1996 by and
between OptiMark and The Pacific Exchange, Inc.
10.2 Revenue Sharing Agreement dated December 31, 1996
by and between OptiMark and the Chicago Board
Options Exchange, Inc.
10.3 PSE-OptiMark Agreement dated August 27, 1996 between
OptiMark and The Pacific Exchange, Inc.
10.4 NASDAQ/OptiMark Agreement dated September 1, 1998
by and between OptiMark and The NASDAQ Stock
Market, Inc.
10.5 OptiMark Technologies, Inc. 1999 Stock Plan
(adopted November 29, 1999)
</TABLE>
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<TABLE>
<S> <C>
10.6 OptiMark Technologies, Inc. Stock Option Plan
(Amended & Restated January 27, 1999)
10.7 Form of Stock Option Agreement (1999 Stock Plan)
10.8 Form of Stock Option Agreement (Amended and
Restated Stock Option Plan)
10.9 Form of Non-Employee Director Option Agreement
10.10 Employment Agreement dated November 1, 1998 by and
between OptiMark and Phillip J. Riese
10.11 Employment, Trade Secret and Non-Competition
Agreement dated August 27, 1996 by and between
OptiMark and William A. Lupien
10.12 Employment, Trade Secret and Non-Competition
Agreement dated August 27, 1996 by and between
OptiMark and John T. Rickard
10.13 Letter Agreement dated November 15, 1999 by and
between OptiMark and William F. Adiletta
10.14 Restricted Stock Purchase Agreement dated December
1, 1998 by and between OptiMark and Phillip J.
Riese
10.15 Stock Purchase Agreement dated December 18, 1998
by and between OptiMark and Phillip J. Riese
10.16 Stock Option Agreement dated November 1, 1998 by
and between OptiMark and Phillip J. Riese
10.17 Stock Option Agreement dated November 1, 1998 by
and between OptiMark and Phillip J. Riese
10.18* Services Agreement dated January 1, 1999 by and
between OptiMark and ISM Information Systems
Management Corporation
10.19* OptiMark/IBM Ops Agreement dated February 2, 1999
by and between OptiMark and the parties named
therein
10.20* Agreement for Information Technology Services
dated May 6, 1999 by and between OptiMark and IBM
Canada Limited
10.21 License Termination Agreement dated March 19, 1999
by and between OptiMark and High Performance
Markets, Ltd.
10.22 Common Stock Purchase Warrant dated August 27,
1996 in favor of The Pacific Exchange, Inc.
10.23 Common Stock Purchase Warrant dated December 31,
1996 in favor of The Chicago Board Options
Exchange, Inc.
10.24 Common Stock Purchase Warrant dated April 23, 1998
in favor of Virginia Surety Company, Inc.
10.25 Common Stock Purchase Warrant dated June 19, 1998
in favor of Transamerica Business Credit
Corporation
10.26 Common Stock Purchase Warrant dated August 24,
1998 by and between OptiMark and Francis X. Egan
10.27 NASDAQ Warrant Agreement dated September 1, 1998
by and between OptiMark and The NASDAQ Stock
Market, Inc.
10.28 Common Stock Purchase Warrant dated January 27,
1999 by and between OptiMark and BIOS Group LP
</TABLE>
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<TABLE>
<S> <C>
10.29 Warrant Agreement dated October 27, 1999 by and between OptiMark and Knight/Trimark
21.1 Subsidiaries of OptiMark
27.1 Financial Data Schedule
</TABLE>
* To be filed by amendment.
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<PAGE> 69
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
OPTIMARK TECHNOLOGIES, INC.
Dated: May 1, 2000 By: /s/ Phillip J. Riese
--------------------- -------------------------
Name: Phillip J. Riese
Title: Chief Executive Officer
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<PAGE> 70
OPTIMARK TECHNOLOGIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
- ---------------------------------------------------------------------------
PAGE
INDEPENDENT AUDITORS' REPORT F-2
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997:
Balance Sheets F-3
Statements of Operations and Comprehensive Loss F-4
Statements of Changes in Stockholders' Equity F-5
Statements of Cash Flows F-7
Notes to Financial Statements F-8
F-1
<PAGE> 71
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
OptiMark Technologies, Inc.
We have audited the accompanying consolidated balance sheets of OptiMark
Technologies, Inc. and subsidiaries (the "Company") as of December 31, 1999 and
1998, and the related consolidated statements of operations and comprehensive
loss, changes in stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
1999 and 1998, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1999 in conformity
with generally accepted accounting principles.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for costs of computer software developed or
obtained for internal use in 1999.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company's recurring losses from operations raise substantial
doubt about its ability to continue as a going concern. Management's plans
concerning these matters are also described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ DELOITTE & TOUCHE LLP
New York, New York
March 17, 2000
(April 19, 2000 as to Note 18)
F-2
<PAGE> 72
OPTIMARK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 62,637,410 $ 63,839,270
Receivables (Note 3) 672,882 -
Other current assets (Note 4) 5,140,562 2,014,549
--------------- ---------------
Total current assets 68,450,854 65,853,819
PROPERTY AND EQUIPMENT - Net (Note 5) 19,967,364 8,623,431
CAPITALIZED SOFTWARE COSTS - Net (Note 2) 10,816,389 -
INTANGIBLE ASSETS - Net (Note 6) 27,849,752 -
OTHER ASSETS (Note 4) 2,595,748 911,999
INVESTMENT IN JOINT VENTURE (Note 1) - 69,112
--------------- ---------------
TOTAL ASSETS $ 129,680,107 $ 75,458,361
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities:
Accounts payable and accrued liabilities $ 10,453,825 $ 9,379,941
Accrued compensation (Note 7) 1,613,613 1,609,212
Current portion of capital leases payable (Note 9) 4,186,624 1,625,598
Accrued restructuring (Note 8) 1,360,761 -
Other current liabilities 601,937 150,503
--------------- ---------------
Total current liabilities 18,216,760 12,765,254
CAPITAL LEASES PAYABLE, NET OF CURRENT PORTION (Note 9) 4,814,696 3,208,463
OTHER LIABILITIES 123,891 165,817
--------------- ---------------
Total liabilities 23,155,347 16,139,534
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
(Notes 9 and 13)
STOCKHOLDERS' EQUITY:
Preferred stock, authorized and unissued, 16,952,932
and 25,452,932 as of December 31, 1999 and 1998, respectively
Series A preferred stock, convertible and participating
$0.01 par value; 3,547,068 shares authorized; 3,472,068
and 3,547,068 shares issued and outstanding as of
December 31, 1999 and 1998, respectively (Note 14) 34,721 35,471
Series B preferred stock, convertible, $0.01 par value;
11,000,000 shares authorized, issued and outstanding as of
December 31, 1999 and 1998 (Note 14) 110,000 110,000
Series C preferred stock, convertible, $0.01 par value;
8,250,000 shares authorized; 8,250,000 and 0 shares
issued and outstanding at December 31, 1999 and 1998, 82,500 -
respectively (Note 14)
Series D preferred stock, convertible, $0.01 par value;
250,000 shares authorized; 250,000 and 0 shares
issued and outstanding at December 31, 1999 and 1998,
respectively (Note 14) 2,500 -
Common stock, $0.01 par value; 150,000,000
shares authorized; 36,496,057 and
31,558,922 shares issued and outstanding at
December 31, 1999 and 1998, respectively (Note 14) 364,961 315,589
Warrants, common stock (Note 14) 35,686,523 1,845,467
Additional paid-in capital 309,564,789 162,221,792
Accumulated deficit (229,284,323) (94,205,814)
Notes receivable - officer (Note 14) - (1,003,678)
Accumulated other comprehensive loss (36,911) -
Treasury stock, Series A preferred; 250,000 shares, at
cost (Note 14) (10,000,000) (10,000,000)
--------------- ---------------
Total stockholders' equity 106,524,760 59,318,827
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 129,680,107 $ 75,458,361
=============== ===============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 73
OPTIMARK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
REVENUE $ 3,012,244 - -
--------------- --------------- --------------
EXPENSES:
Research and development 31,635,548 $ 23,124,775 $ 11,701,821
Communications and data center 28,227,012 13,585,922 -
U.S. Equities business development 12,230,190 11,081,296 4,171,720
General and administrative 11,220,729 9,196,446 4,890,097
Depreciation and amortization 9,334,424 1,584,339 242,274
Restructuring expense (Note 8) 7,693,026 - -
Warrant compensation expense (Note 14) 40,616,822 546,606 -
--------------- --------------- --------------
Total expenses 140,957,751 59,119,384 21,005,912
--------------- --------------- --------------
OTHER (INCOME) EXPENSES:
Interest income (3,315,664) (2,234,087) (562,366)
Interest expense 1,079,554 321,798 -
Equity in income of investee (Note 1) 69,112 - -
Gain on recovery of bad debt (Note 3) (700,000) - -
--------------- --------------- --------------
(2,866,998) (1,912,289) (562,366)
--------------- --------------- --------------
NET LOSS (135,078,509) (57,207,095) (20,443,546)
OTHER COMPREHENSIVE LOSS:
Foreign currency translation adjustments (36,911) - -
--------------- --------------- --------------
COMPREHENSIVE LOSS $ (135,115,420) $ (57,207,095) $ (20,443,546)
=============== =============== ==============
EARNINGS PER SHARE:
Basic and diluted $ (2.12) $ (1.13) $ (0.54)
=============== =============== ==============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 74
OPTIMARK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Series A Series B
Convertible Convertible
Preferred Stock Preferred Stock
Shares Amounts Shares Amounts
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 654,844 $6,548 - -
Issuance of common stock (Note 14) - - - -
Purchase of treasury stock (Note 14) - - - -
Issuance of Series A preferred stock, net of expenses
(Note 14) 2,892,224 28,923 - -
Issuance of warrants (Note 14) - - - -
Warrants exercised, net of expenses (Note 14) - - - -
Net loss - - - -
--------- ------ --------- --------
BALANCE, DECEMBER 31, 1997 3,547,068 35,471 - -
Issuance of common stock (Note 14) - - - -
Repurchase of Series A preferred treasury stock (Note 14) - - - -
Sale of common treasury stock (Note 14) - - - -
Issuance of Series B preferred stock, and warrants,
net of expenses (Note 14) - - 11,000,000 $110,000
Issuance of warrants (Note 14) - - - -
Warrants exercised (Note 14) - - - -
Warrants forfeited (Note 14) - - - -
Options exercised (Note 15) - - - -
Conversion of common stock to nonvoting common
stock (Note 14) - - - -
Value assigned to warrants issued as compensation
(Note 14) - - - -
Note receivable from officer, plus interest (Notes 14 and 15) - - - -
Net loss - - - -
--------- ------ --------- --------
BALANCE, DECEMBER 31, 1998 3,547,068 35,471 11,000,000 110,000
Conversion of Series A Preferred Stock into common
stock (Note 14) (75,000) (750) - -
Issuance of Series C Preferred Stock, net of expenses
(Note 14) - - - -
Issuance of Series D Preferred Stock (Note 14) - - - -
Issuance of common stock (Note 14) - - - -
Issuance of warrants (Note 14) - - - -
Warrants exercised (Note 14) - - - -
Warrants forfeited (Note 14) - - - -
Warrants expired (Note 14) - - - -
Options exercised (Note 14) - - - -
Restructuring option charge (Note 8) - - - -
Interest on note receivable from officer (Note 14) - - - -
Note receivable repayment from officer (Note 14) - - - -
Net loss - - - -
Other comprehensive loss - - - -
--------- ------ --------- --------
BALANCE, DECEMBER 31, 1999 3,472,068 $34,721 11,000,000 $110,000
========= ======= ========== ========
</TABLE>
F-5
<TABLE>
<CAPTION>
Series C Series D
Convertible Convertible
Preferred Stock Preferred Stock
Shares Amounts Shares Amounts
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 - - - -
Issuance of common stock (Note 14) - - - -
Purchase of treasury stock (Note 14) - - - -
Issuance of Series A preferred stock, net of expenses
(Note 14) - - - -
Issuance of warrants (Note 14) - - - -
Warrants exercised, net of expenses (Note 14) - - - -
Net loss - - - -
--------- -------- ------- -------
BALANCE, DECEMBER 31, 1997 - - - -
Issuance of common stock (Note 14) - -
Repurchase of Series A preferred treasury stock (Note 14) - - - -
Sale of common treasury stock (Note 14) - - - -
Issuance of Series B preferred stock, and warrants,
net of expenses (Note 14) - - - -
Issuance of warrants (Note 14) - - - -
Warrants exercised (Note 14) - - - -
Warrants forfeited (Note 14) - - - -
Options exercised (Note 15) - - - -
Conversion of common stock to nonvoting common
stock (Note 14) - - - -
--------- -------- ------- -------
Value assigned to warrants issued as compensation
(Note 14) - - - -
-
Note receivable from officer, plus interest (Notes 14 and 15) - - - -
Net loss - - - -
--------- -------- ------- -------
BALANCE, DECEMBER 31, 1998 - - - -
Conversion of Series A Preferred Stock into common
stock (Note 14) - - - -
Issuance of Series C Preferred Stock, net of expenses
(Note 14) 8,250,000 $82,500 - -
Issuance of Series D Preferred Stock (Note 14) - - 250,000 $2,500
Issuance of common stock (Note 14) - - - -
Issuance of warrants (Note 14) - - - -
Warrants exercised (Note 14) - - - -
Warrants forfeited (Note 14) - - - -
Warrants expired (Note 14) - - - -
Options exercised (Note 14) - - - -
Restructuring option charge (Note 8) - - - -
Interest on note receivable from officer (Note 14) - - - -
Note receivable repayment from officer (Note 14) - - - -
Net loss - - - -
Other comprehensive loss - - - -
--------- -------- ------- -------
BALANCE, DECEMBER 31, 1999 8,250,000 $82,500 250,000 $2,500
========= ======== ======= =======
</TABLE>
F-5
<TABLE>
<CAPTION>
Common Stock
-------------------------------------------------------
Voting Nonvoting
Shares Amounts Shares Amounts
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 26,753,732 $267,536 - -
Issuance of common stock (Note 14) 818,552 8,186 - -
Purchase of treasury stock (Note 14) - - - -
Issuance of Series A preferred stock, net of expenses
(Note 14) - - - -
Issuance of warrants (Note 14) - - - -
Warrants exercised, net of expenses (Note 14) 207,284 2,073 - -
Net loss - - - -
---------- -------- ------- -------
BALANCE, DECEMBER 31, 1997 27,779,568 277,795 - -
Issuance of common stock (Note 14) 167,000 1,670 - -
Repurchase of Series A preferred treasury stock (Note 14) - - - -
Sale of common treasury stock (Note 14) - - - -
Issuance of Series B preferred stock, and warrants,
net of expenses (Note 14) - - - -
Issuance of warrants (Note 14) - - - -
Warrants exercised (Note 14) 3,358,844 33,589 - -
Warrants forfeited (Note 14) - - - -
Options exercised (Note 15) 253,510 2,535 - -
Conversion of common stock to nonvoting common
stock (Note 14) (740,000) (7,400) 740,000 $7,400
Value assigned to warrants issued as compensation
(Note 14) - - - -
Note receivable from officer, plus interest (Notes 14 and 15) - - - -
Net loss - - - -
---------- -------- ------- -------
BALANCE, DECEMBER 31, 1998 30,818,922 308,189 740,000 7,400
Conversion of Series A Preferred Stock into common
stock (Note 14) 300,000 3,000 - -
Issuance of Series C Preferred Stock, net of expenses
(Note 14) - - - -
Issuance of Series D Preferred Stock (Note 14) - - - -
Issuance of common stock (Note 14) 2,004,167 20,042 - -
Issuance of warrants (Note 14) - - - -
Warrants exercised (Note 14) 2,198,764 21,988 - -
Warrants forfeited (Note 14) - - - -
Warrants expired (Note 14) - - - -
Options exercised (Note 14) 434,204 4,342 - -
Restructuring option charge (Note 8) - - - -
Interest on note receivable from officer (Note 14) - - - -
Note receivable repayment from officer (Note 14) - - - -
Net loss - - - -
Other comprehensive loss - - - -
---------- -------- ------- -------
BALANCE, DECEMBER 31, 1999 35,756,057 $357,561 740,000 $7,400
========== ======== ======= =======
</TABLE>
F-5
<TABLE>
<CAPTION>
---------------------------
Total
Shares Amounts
<S> <C> <C>
BALANCE, JANUARY 1, 1997 26,753,732 $267,536
Issuance of common stock (Note 14) 818,552 8,186
Purchase of treasury stock (Note 14) - -
Issuance of Series A preferred stock, net of expenses
(Note 14) - -
Issuance of warrants (Note 14) - -
Warrants exercised, net of expenses (Note 14) 207,284 2,073
Net loss - -
---------- --------
BALANCE, DECEMBER 31, 1997 27,779,568 277,795
Issuance of common stock (Note 14) 167,000 1,670
Repurchase of Series A preferred treasury stock (Note 14) - -
Sale of common treasury stock (Note 14) - -
Issuance of Series B preferred stock, and warrants,
net of expenses (Note 14) - -
Issuance of warrants (Note 14) - -
Warrants exercised (Note 14) 3,358,844 33,589
Warrants forfeited (Note 14) - -
Options exercised (Note 15) 253,510 2,535
Conversion of common stock to nonvoting common
stock (Note 14) - -
Value assigned to warrants issued as compensation
(Note 14) - -
Note receivable from officer, plus interest (Notes 14 and 15) - -
Net loss - -
---------- --------
BALANCE, DECEMBER 31, 1998 31,558,922 315,589
Conversion of Series A Preferred Stock into common
stock (Note 14) 300,000 3,000
Issuance of Series C Preferred Stock, net of expenses
(Note 14) - -
Issuance of Series D Preferred Stock (Note 14) - -
Issuance of common stock (Note 14) 2,004,167 20,042
Issuance of warrants (Note 14) - -
Warrants exercised (Note 14) 2,198,764 21,988
Warrants forfeited (Note 14) - -
Warrants expired (Note 14) - -
Options exercised (Note 14) 434,204 4,342
Restructuring option charge (Note 8) - -
Interest on note receivable from officer (Note 14) - -
Note receivable repayment from officer (Note 14) - -
Net loss - -
Other comprehensive loss - -
---------- --------
BALANCE, DECEMBER 31, 1999 36,496,057 $364,961
========== ========
</TABLE>
F-5
<PAGE> 75
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK ADDITIONAL
WARRANTS PAID-IN ACCUMULATED
SHARES AMOUNTS CAPITAL DEFICIT
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 3,464,000 $ 384,000 $ 19,811,359 $ (16,555,173)
Issuance of common stock (Note 14) - - 1,491,814 -
Purchase of treasury stock (Note 14) - - - -
Issuance of Series A preferred stock, net of expenses
(Note 14) - - 21,169,075 -
Issuance of warrants (Note 14) 5,611,692 - - -
Warrants exercised, net of expenses (Note 14) (207,284) - 377,775 -
Net loss - - - (20,443,546)
------------ ----------- ------------ -------------
BALANCE, DECEMBER 31, 1997 8,868,408 384,000 42,850,023 (36,998,719)
Issuance of common stock (Note 14) - - 1,668,330 -
Repurchase of Series A preferred treasury stock (Note 14) - - - -
Sale of common treasury stock (Note 14) - - 1,547,520 -
Issuance of Series B preferred stock, and warrants,
net of expenses (Note 14) 500,000 914,861 108,006,651 -
Issuance of warrants (Note 14) 11,250,000 - - -
Warrants exercised (Note 14) (3,358,844) - 7,443,310 -
Warrants forfeited (Note 14) (40,800) - - -
Options exercised (Note 15) - - 705,958 -
Conversion of common stock to nonvoting common
stock (Note 14) - - - -
Value assigned to warrants issued as compensation
(Note 14) 315,328 546,606 - -
Note receivable from officer, plus interest (Notes 14 and 15) - - - -
Net loss - - - (57,207,095)
------------ ----------- ------------ --------------
BALANCE, DECEMBER 31, 1998 17,534,092 1,845,467 162,221,792 (94,205,814)
Conversion of Series A Preferred Stock into common
stock (Note 14) - - (2,250) -
Issuance of Series C Preferred Stock, net of expenses
(Note 14) - - 96,906,621 -
Issuance of Series D Preferred Stock (Note 14) - - 2,997,500 -
Issuance of common stock (Note 14) - - 28,029,963 -
Issuance of warrants (Note 14) 32,729,158 40,631,364 - -
Warrants exercised (Note 14) (2,198,764) (4,002) 5,966,498 -
Warrants forfeited (Note 14) (8,000) - - -
Warrants expired (Note 14) (1,666,667) (6,786,306) 6,786,306 -
Options exercised (Note 14) - - 847,519 -
Restructuring option charge (Note 8) - - 5,810,840 -
Interest on note receivable from officer (Note 14) - - - -
Note receivable repayment from officer (Note 14) - - - -
Net loss - - - (135,078,509)
Other comprehensive loss - - - -
------------ ----------- ------------ --------------
BALANCE, DECEMBER 31, 1999 46,389,819 $35,686,523 $309,564,789 $(229,284,323)
============ =========== ============ ==============
</TABLE>
F-6
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
TREASURY STOCK
-----------------------------------------
NOTES SERIES A SERIES A
RECEIVABLE - PREFERRED PREFERRED COMMON
OFFICER SHARES AMOUNT SHARES
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 - - - -
Issuance of common stock (Note 14) - - - -
Purchase of treasury stock (Note 14) - - - (208,000)
Issuance of Series A preferred stock, net of expenses
(Note 14) - - - -
Issuance of warrants (Note 14) - - - -
Warrants exercised, net of expenses (Note 14) - - - -
Net loss - - - -
----------- ---------- --------------- ----------
BALANCE, DECEMBER 31, 1997 - - - (208,000)
Issuance of common stock (Note 14) - - - -
Repurchase of Series A preferred treasury stock (Note 14) - (250,000) $ (10,000,000) -
Sale of common treasury stock (Note 14) - - - 208,000
Issuance of Series B preferred stock, and warrants,
net of expenses (Note 14) - - - -
Issuance of warrants (Note 14) - - - -
Warrants exercised (Note 14) - - - -
Warrants forfeited (Note 14) - - - -
Options exercised (Note 15) - - - -
Conversion of common stock to nonvoting common
stock (Note 14) - - - -
Value assigned to warrants issued as compensation
(Note 14) - - - -
Note receivable from officer, plus interest (Notes 14 and 15) - - - -
Net loss - - - -
----------- ---------- --------------- ----------
BALANCE, DECEMBER 31, 1998 (1,003,678) (250,000) (10,000,000) -
Conversion of Series A Preferred Stock into common
stock (Note 14) - - - -
Issuance of Series C Preferred Stock, net of expenses
(Note 14) - - - -
Issuance of Series D Preferred Stock (Note 14) - - - -
Issuance of common stock (Note 14) - - - -
Issuance of warrants (Note 14) - - - -
Warrants exercised (Note 14) - - - -
Warrants forfeited (Note 14) - - - -
Warrants expired (Note 14) - - - -
Options exercised (Note 14) - - - -
Restructuring option charge (Note 8) - - - -
Interest on note receivable from officer (Note 14) (36,064) - - -
Note receivable repayment from officer (Note 14) 1,039,742 - - -
Net loss - - - -
Other comprehensive loss - - - -
----------- ---------- --------------- ----------
BALANCE, DECEMBER 31, 1999 - (250,000) (10,000,000) -
=========== ========== =============== ==========
</TABLE>
F-6
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
------------ ACCUMULATED
OTHER TOTAL
COMMON COMPREHENSIVE STOCKHOLDERS'
AMOUNT LOSS EQUITY
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1997 - - 3,914,270
Issuance of common stock (Note 14) - - 1,500,000
Purchase of treasury stock (Note 14) $ (532,480) - (532,480)
Issuance of Series A preferred stock, net of expenses
(Note 14) - - 21,197,998
Issuance of warrants (Note 14) - - -
Warrants exercised, net of expenses (Note 14) - - 379,848
Net loss - - (20,443,546)
---------- --------- --------------
BALANCE, DECEMBER 31, 1997 (532,480) - 6,016,090
Issuance of common stock (Note 14) - - 1,670,000
Repurchase of Series A preferred treasury stock (Note 14) - - (10,000,000)
Sale of common treasury stock (Note 14) 532,480 - 2,080,000
Issuance of Series B preferred stock, and warrants,
net of expenses (Note 14) - - 109,031,512
Issuance of warrants (Note 14) - - -
Warrants exercised (Note 14) - - 7,476,899
Warrants forfeited (Note 14) - - -
Options exercised (Note 15) - - 708,493
Conversion of common stock to nonvoting common
stock (Note 14) - - -
Value assigned to warrants issued as compensation
(Note 14) - - 546,606
Note receivable from officer, plus interest (Notes 14 and 15) - - (1,003,678)
Net loss - - (57,207,095)
---------- --------- --------------
BALANCE, DECEMBER 31, 1998 - - 59,318,827
Conversion of Series A Preferred Stock into common
stock (Note 14) - - -
Issuance of Series C Preferred Stock, net of expenses
(Note 14) - - 96,989,121
Issuance of Series D Preferred Stock (Note 14) - - 3,000,000
Issuance of common stock (Note 14) - - 28,050,005
Issuance of warrants (Note 14) - - 40,631,364
Warrants exercised (Note 14) - - 5,984,484
Warrants forfeited (Note 14) - - -
Warrants expired (Note 14) - - -
Options exercised (Note 14) - - 851,861
Restructuring option charge (Note 8) - - 5,810,840
Interest on note receivable from officer (Note 14) - - (36,064)
Note receivable repayment from officer (Note 14) - - 1,039,742
Net loss - - (135,078,509)
Other comprehensive loss - $(36,911) (36,911)
---------- --------- --------------
BALANCE, DECEMBER 31, 1999 $ - $(36,911) $ 106,524,760
========== ========= ==============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 76
<TABLE>
<CAPTION>
OPTIMARK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (135,078,509) $ (57,207,095) $ (20,443,546)
Adjustments to reconcile net loss to net cash used in
operating activities:
Interest on note receivable (36,064) (3,678) -
Write-off of intangibles - - 96,436
Value assigned to warrants issued as compensation 40,616,822 546,606 -
Value assigned to options in connection with
restructuring 5,810,840 - -
Depreciation and amortization 9,334,424 1,584,339 242,274
Gain on recovery of receivable (700,000) - -
Loss from investment in joint venture 69,112 - -
Loss on disposal of assets 980 - -
Changes in operating assets and liabilities:
Receivables (672,882) - -
Other assets (4,799,180) (1,385,749) (1,169,231)
Accounts payable and accrued liabilities 2,402,135 6,597,004 3,526,121
Other liabilities 487,856 57,433 59,147
---------------- ------------------ ------------------
Net cash used in operating activities (82,564,466) (49,811,140) (17,688,799)
---------------- ------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (11,148,195) (5,697,274) (1,539,972)
Purchases of software licenses (1,619,039) - -
Payments on capitalized software costs (12,298,155) - -
Investment in joint venture - (69,112) -
Proceeds from disposal of assets 4,826 - -
---------------- ------------------ ------------------
Net cash used in investing activities (25,060,563) (5,766,386) (1,539,972)
---------------- ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 50,005 670,000 1,500,000
Net proceeds from issuance of preferred stock 99,989,121 108,116,651 21,197,998
Net proceeds from issuance of warrants - 914,861 -
Net proceeds from recovery of receivable 700,000 - -
Proceeds from exercise of warrants for common stock 5,984,484 7,476,899 379,848
Proceeds from exercise of options for common stock 851,861 708,493 -
Proceeds from sale and leaseback - 2,575,560 -
Proceeds from term loan 999,653 - -
Proceeds from officer loan 1,039,742 - -
Payments on capital leases (3,191,697) (542,428) -
Purchase of treasury stock, common - - (532,480)
Purchase of treasury stock, Series A - (10,000,000) -
Proceeds from sale of treasury stock, common - 2,080,000 -
---------------- ------------------ ------------------
Net cash provided by financing activities 106,423,169 112,000,036 22,545,366
---------------- ------------------ ------------------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (1,201,860) 56,422,510 3,316,595
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 63,839,270 7,416,760 4,100,165
---------------- ------------------ ------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 62,637,410 $ 63,839,270 $ 7,416,760
================ ================== ==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash payments for interest $ 1,079,554 $ 201,555 $ -
================ ================== ==================
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Common stock issued for note $ - $ 1,000,000 $ -
================ ================== ==================
Increase in capital leases $ 6,359,303 $ 2,800,921 $ -
================ ================== ==================
Acquisition of license $ 28,000,000 $ - $ -
================ ================== ==================
See notes to consolidated financial statements.
</TABLE>
F-7
<PAGE> 77
OPTIMARK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
- ------------------------------------------------------------------------------
1. BASIS OF PRESENTATION AND REORGANIZATION
OptiMark Technologies, Inc. (formerly MJT Holdings, Inc.) (the "Company"
or "OptiMark") was formed in July 1996 in order to effect the
reorganization of MJT Holdings, Inc. ("Holdings"). On August 1, 1996,
Holdings was merged with and into the Company (the "Merger"). The Merger
was a transaction among companies under common control and, accordingly,
has been accounted for in a manner similar to a pooling of interests.
2. GENERAL INFORMATION AND SUMMARY OF ACCOUNTING POLICIES
GENERAL - The Company has been engaged in two business segments, the U.S.
Equities Business and the Electronic Markets Business. The U.S. Equities
Business is comprised of the development, operation and marketing of the
OptiMark(TM) Equity Trading System (the "System"), an innovative
securities trading service based on the Company's patented market
restructuring technology (the "OptiMark Technology"). The OptiMark
Technology, as adapted for the System, allows the anonymous and
nondisclosed representation of an investor's willingness to buy or sell
securities over a continuous range of prices and sizes, and provides a
means of optimizing the sequential allocation of trades between buyers and
sellers at different prices and sizes based on a measure of mutual
satisfaction. The Company presents the System to potential users as a
facility of securities exchanges, and the exchange remits to OptiMark a
fee per share for trades completed through the System. As of December 31,
1998, the System entered the final testing stage, and the Company had not
realized any revenues from its use. In January and October 1999, the
Company began to realize revenue for the trades executed through both the
Pacific Exchange, Inc. (the "PCX") and the Nasdaq Stock Market, Inc. (the
"Nasdaq") Systems, respectively.
The Electronic Markets Business is comprised of the development and
operation of trading platforms and environments for existing and emerging
electronic market places through a combination of consulting, servicing,
licensing and equity agreements, focused on both the securities and
non-securities market places. The Company commenced these activities after
termination of the license agreement with High Performance Markets, Ltd.
("HPM") (Note 6). The OptiMark Technology, as adapted for these
marketplaces, allows a broad array of auction and exchange activities,
including the trading of goods and services whose value is determined by
more than size and price; trading among many buyers and many sellers; and
broker facilitated trading. In July 1999, the Company began to realize
revenues from the consulting and development services to a joint venture
in Japan for the trading of equity securities ("Japan Joint Venture").
The Company has suffered recurring net losses from operations each year
since inception. The Company's current cash and cash equivalents, plus the
expected cash flows for 2000, are not expected to be sufficient to meet
its 2000 operating and financial commitments. The Company anticipates that
it will be able to meet its cash requirements through September 2000.
The Company re-evaluated its organization and cost structure in the light
of its business trajectory, resulting in significant cost reductions
during 1999. The Company is continuing to re-evaluate its cost structure
and implement cost savings where possible. Management also has been
executing its strategy
F-8
<PAGE> 78
to increase usage of the System in use at the PCX and Nasdaq, but has not
been successful to date. The Company will seek additional financing but
there is no guarantee such financing will be obtained.
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. Companies in which OptiMark has equity investments of 50%
or less and has the ability to exercise significant influence are
accounted for using the equity method. Intercompany accounts and
transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS - The Company considers highly liquid
investments with an original maturity of three months or less, to be cash
equivalents.
FOREIGN CURRENCY TRANSLATION - Assets and liabilities of the Company's
foreign operations are translated into U.S. dollars at fiscal year-end
exchange rates, and revenues and expenses are translated at weighted
average exchange rates for the year. Gains and losses arising from
translation are recorded as a cumulative translation adjustment within
accumulated other comprehensive loss, a component of stockholders'
equity.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost. For
financial reporting purposes, depreciation is provided for using the
straight-line method over the estimated useful lives of the related
assets, which range from three to seven years. Leasehold improvements are
amortized over the lesser of the life of the asset or the life of the
lease.
INTANGIBLE ASSETS - Intangible assets are primarily comprised of
non-securities industry rights and product and software licenses.
Amortization is provided for using the straight-line method over a period
of 3 to 15 years (Note 6).
INCOME TAXES - The Company files a consolidated Federal income tax
return, which includes all eligible United States subsidiary companies.
Foreign subsidiaries are taxed according to regulations existing in the
countries in which they do business. Deferred income taxes are provided
for temporary differences between income tax bases and financial
reporting bases of the Company's assets and liabilities utilizing
currently enacted tax laws and rates.
REVENUE RECOGNITION - Transaction revenue is recorded on a trade date
basis and recognized when securities are traded through the System based
on a fee per share contractual agreement with both the PCX and the
Nasdaq. Consulting revenue is recorded as services are performed. The
Company records transaction and consulting revenue net of its revenue
sharing agreements with both the PCX and Chicago Board Options Exchange,
Inc. ("CBOE") (Note 13).
LONG-LIVED ASSETS - The Company accounts for the impairment of long-lived
assets and for long-lived assets to be disposed of by evaluating the
carrying value of its long-lived assets in relation to the operating
performance and future undiscounted cash flows of the underlying
businesses when indications of impairment are present. Long-lived assets
to be disposed of, if any, are evaluated in relation to the net
realizable value. The Company determined that, as of December 31, 1999
and 1998, there had been no impairment in the carrying value of the
long-lived assets.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
F-9
<PAGE> 79
RECENT ACCOUNTING PRONOUNCEMENTS - During 1998, the Financial Accounting
Standards Board issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. The Company is currently evaluating
the impact, if any, of this standard, which will be applicable to the
Company's December 31, 2001 consolidated financial statements.
During 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued SOP No. 98-1, Accounting
for the Costs of Computer Software Developed or Obtained for Internal
Use. This statement is applicable to and has been adopted in the
Company's 1999 consolidated financial statements and requires the Company
to capitalize certain payroll and payroll related costs and other costs
that are directly related to the development of certain systems of the
Company. At December 31, 1999, net capitalized software costs were
approximately $10,816,000. The Company is amortizing these costs over
three years. The current year amortization expense totaled approximately
$1,482,000.
SEGMENT REPORTING - The Company operates in two industry segments, the
U.S. Equity Business and the Electronic Markets Business. At December 31,
1998, the Company's U.S. Equity Business had not generated any revenues
as the Company was engaged in the development and testing of the System.
At December 31, 1998, the Electronic Markets Business had not generated
any revenues as no consulting services had been performed for licensees,
nor were any royalties earned from licensees. In 1999, the System was
launched, consulting services were performed and revenue began to be
realized.
3. RELATED PARTY TRANSACTIONS
At December 31, 1998, the Company had two notes receivable from
affiliates aggregating $2,550,000 which were fully reserved and bear
interest at 5.45% per annum. As these notes were deemed to be
uncollectible, no interest income had been accrued on these notes. In
1999, the Company received in aggregate, payments of approximately
$827,000 on these notes. This amount represented full repayment of one
note, partial repayment on the other note and interest income of
approximately $127,000. Due to the uncertainty of the remaining balance
being collected, the Company has continued to record a valuation
allowance against the note and has not recorded any additional interest.
The Company recorded the return of principal on both notes as a gain on
the recovery of bad debt.
Included in stockholders' equity at December 31, 1998 is a loan to an
officer of the Company of approximately $1,004,000, including interest.
This note was repaid during 1999 (Note 14).
In September 1998, the Company entered into the Japan Joint Venture to
develop and implement the System for the trading of equity securities in
Japan. As of December 31, 1998, OptiMark had made its capital
contribution of approximately $69,000 for a 15% interest (which is
reflected as "Investment in Joint Venture" in the consolidated balance
sheets). It is management's belief that the Company has the ability to
exercise significant influence over the Japan Joint Venture through veto
power and membership on the board and therefore accounts for its
investment in the Japan Joint Venture using the equity method. At
December 31, 1999, the Company, in accordance with the equity method of
accounting, realized losses up to its capital contribution. In connection
with the Japan Joint Venture, the Company entered into a development
agreement in principle, whereby the Company provides services on a
time and material basis and is reimbursed at fully allocated cost
(Note 10).
Included in Receivables at December 31, 1999 is approximately $522,000
due from the Japan Joint Venture in connection with consulting services
performed by the Company.
Included in other assets at December 31, 1999 is a loan to an officer of
approximately $212,000 (Note 4).
F-10
<PAGE> 80
4. OTHER CURRENT ASSETS AND OTHER ASSETS
Other current assets and other assets consist of the following as of
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
OTHER
CURRENT ASSETS OTHER ASSETS
------------------------------------ ----------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Prepaid expenses $3,127,165 $1,004,554 $ - $ -
Security deposits 32,723 497,013 2,283,748 702,564
Restricted cash 1,470,095 496,966 - -
Interest receivable 262,552 - - -
Other 248,027 16,016 100,000 -
Loan to officer - - 212,000 209,435
----------- ---------- ---------- --------
$5,140,562 $2,014,549 $2,595,748 $911,999
=========== ========== ========== ========
</TABLE>
Prepaid expenses as of December 31, 1999 and 1998, consists primarily of
warranty, support and service agreements for purchased hardware and
software. Security deposits consist primarily of deposits with respect to
rental property and operating leases. Included in restricted cash at
December 31, 1999 and 1998 are letters of credit of approximately
$338,000 and $377,000, respectively, a guarantee of two employee loans of
approximately $120,000 in both years and approximately $1,012,000 held in
an escrow account at December 31, 1999. Interest receivable relates to
interest earned, but not yet received, on the Company's commercial paper.
The loan to the officer incurs interest at 6% and expires on March 31,
2003 or within 30 days of termination of employment.
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of December 31, 1999
and 1998:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Computer equipment $18,562,737 $6,957,193
Furniture and fixtures 1,483,588 1,034,003
Software 4,573,767 1,407,025
Leasehold improvements 3,251,821 1,058,910
----------- ----------
Total 27,871,913 10,457,131
Less accumulated depreciation and
amortization 7,904,549 1,833,700
----------- -----------
Net property and equipment $19,967,364 $8,623,431
=========== ===========
</TABLE>
Depreciation expense was approximately $6,083,000, $1,584,000 and $242,000
for the years ended December 31, 1999, 1998 and 1997, respectively.
6. INTANGIBLE ASSETS
Intangible assets consist of the following as of December 31, 1999:
F-11
<PAGE> 81
<TABLE>
<S> <C>
Nonsecurities industry rights $ 28,000,000
Software licenses 1,619,039
------------
Total 29,619,039
Less accumulated amortization 1,769,287
------------
Intangible assets, net $27,849,752
============
</TABLE>
In May 1996, the Company sold to HPM, a newly formed limited partnership
controlled by the then stockholders of the Company, a royalty-free,
perpetual, worldwide license to make, have made, use, sell and distribute
products, systems and services, outside of the securities industry field,
under the issued OptiMark patent and one other patent application (the
"HPM License"), in exchange for a nonrecourse subordinated promissory
note in the amount of $650,000 (which was fully reserved for in 1996). In
March 1999, the Company entered into a license termination agreement with
HPM to terminate the HPM License. In consideration for the termination
of the license, the Company issued to HPM 2,000,000 shares of common
stock of the Company at $14 per share (fair market value at issuance of
grant) (Note 14). In connection with the issuance of common stock, the
Company recorded an intangible asset in the amount of $28,000,000. During
1999 HPM paid the Company an aggregate of $767,700 representing full
repayment on the note (which represents a portion of amounts previously
written off (Note 3)) and interest income of $117,700.
During 1999, the Company also purchased certain software licenses from a
subcontractor for outsourced software development services for the PCX
and Nasdaq applications aggregating $1,300,000. Such licenses are being
amortized over three years and are included in the $1,619,039 above.
7. ACCRUED COMPENSATION
Accrued compensation includes $250,000 and $750,000 of employee bonuses
for 1999 and 1998, respectively, and accrued vacation of approximately
$1,363,000 and $859,000 for 1999 and 1998, respectively. These bonuses
are granted at the discretion of the Board of Directors.
8. ACCRUED RESTRUCTURING
The Company recorded approximately $7,693,000 of restructuring charges
in the fourth quarter of 1999 associated with a workforce reduction of 72
employees (mainly in the technology areas of the Company). Included in
this amount is approximately $5,811,000, representing the charge
associated with the revaluation of employee options and the remaining
balance of approximately $1,882,000 includes notice period salaries of
approximately $876,000, severance of approximately $706,000 and vacation
pay and other related employee costs of approximately $300,000. As of
December 31, 1999, approximately $522,000 of such amount has been paid
and the Company anticipates that the remaining accrued restructuring
costs will be paid in 2000.
In November 1999, the Company entered into an agreement with an officer
of the Company in connection with that officer's termination as an
officer and director of the Company. The agreement calls for cash
payments of $450,000 between November 1999 and June 2000, the vesting of
50% of any nonvested options as of November 1999 and the extension of the
date on which all vested options can be exercised until November 2002.
These costs, approximating $2,355,000, are included in the amounts above.
F-12
<PAGE> 82
9. LEASE COMMITMENTS
OPERATING LEASES - The Company has operating lease obligations for office
space, office equipment and computer equipment which expire at various
dates through 2014. Included in such operating leases are certain
informal mirror leases with a third party who is providing services to
the Company. The future minimum rental payments under operating leases
at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
<S> <C>
2000 $ 13,621,873
2001 10,570,332
2002 4,695,372
2003 1,526,294
2004 1,412,890
Thereafter 11,495,641
------------
Total $43,322,402
============
</TABLE>
Total rent expense for real estate amounted to approximately $1,844,000;
$735,000 and $206,000 (net of sublease income of approximately $7,600;
$46,800 and $13,200) for the years ended December 31, 1999, 1998 and
1997, respectively.
Total rent expense for equipment amounted to approximately $9,267,000;
$2,881,000 and $442,000 for the years ended December 31, 1999, 1998 and
1997, respectively.
In December 1998, the Company entered into a master lease agreement with
a third party, which provided for equipment leases up to $15,000,000. In
January 1999, the Company entered into two master lease agreements with
two other third parties, which provided for equipment leases up to
$7,000,000 and $20,000,000 of aggregate equipment value, respectively.
During 1999 and 1998, the Company leased an aggregate of approximately
$22,615,000 and $0, respectively, of equipment under these master lease
agreements. The unused available credit under these master lease
agreements expired during 1999.
CAPITAL LEASES - In June 1998, the Company entered into a master lease
agreement with a third party which provided for equipment purchases up to
$5,000,000. In January 1999, the agreement was amended to increase the
line of credit by $7,000,000 to a total of $12,000,000.
In connection with obtaining the lease line of credit, the Company
granted a warrant to purchase up to 42,500 shares of its common stock at
an exercise price of $10 per share (fair market value at date of grant)
(Note 14). During 1999 and 1998, the Company leased an aggregate of
approximately $7,187,000 and $4,683,000, respectively, under the lease
line of credit. Included in the 1999 amount is a three-year term loan for
approximately $999,700. Included in the 1998 amount was a sale-leaseback
transaction for approximately $2,576,000, whereby the Company sold and
leased back new and existing computer hardware located within the United
States. The sale resulted in a gain of approximately $235,000 for the
Company, which was deferred and is being amortized over the three-year
lease term.
F-13
<PAGE> 83
The Company entered into additional lease agreements for telephone and
office equipment during 1999 and 1998 with terms of 36 months. Property
and equipment purchased under these leases for the years ended December
31, 1999 and 1998 were approximately $173,000 and $694,000, respectively.
The net book value of equipment held under capital leases was
approximately $7,910,000 and $4,605,000 at December 31, 1999 and 1998
respectively.
Future lease payments under capital leases as of December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
<S> <C>
2000 $ 5,083,967
2001 4,376,078
2002 817,288
------------
Total 10,277,333
Less amounts representing interest 1,276,013
------------
Present value of future lease payments 9,001,320
Less current portion 4,186,624
------------
Noncurrent portion $ 4,814,696
============
</TABLE>
10. SEGMENTS
As of December 31, 1998, the Company operated in one industry segment,
the Equity Business. As of December 31, 1999, the Company operated in
two industry segments, the U.S. Equity Business and the Electronic
Markets Business (Note 2). As of December 31, 1999, the Japan Joint
Venture was the only joint venture the Electronic Markets Business was
engaged in. Revenue from the Japan Joint Venture for 1999 was $1,620,454
(see table below). The accounting policies of each segment are the same
as those described in the summary of significant accounting policies
(Note 2). The operations by industry segment for the year ended December
31, 1999 are as follows:
<TABLE>
<CAPTION>
ELECTRONIC
US EQUITY MARKETS
BUSINESS BUSINESS CONSOLIDATED
<S> <C> <C> <C>
Revenue $ 1,391,790 $ 1,620,454 $ 3,012,244
Operating expenses (81,163,017) (2,150,462) (83,313,479)
Depreciation and amortization (8,220,620) (1,113,804) (9,334,424)
expense
Net non-operating expenses (45,349,501) (93,349) (45,442,850)
Net loss (133,365,586) (1,712,923) (135,078,509)
Total assets 102,527,244 27,152,863 129,680,107
</TABLE>
F-14
<PAGE> 84
11. INCOME TAXES
The tax effected components of deferred income tax assets and liabilities
at December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 69,946,000 $ 30,657,000
Capitalized research and development costs 386,000 4,151,000
Reserve for note receivable to related parties 721,500 1,267,000
Vacation accruals and other reserves 1,535,421 346,000
Warrants expense 15,391,990 -
Other 532,000 -
------------ ------------
Total deferred tax asset 88,512,911 36,421,000
------------ ------------
Deferred tax liabilities:
Tax depreciation in excess of book depreciation 265,000 208,000
Deferred gain on sale of assets 750,000 762,000
------------ ------------
Total deferred tax liability 1,015,000 970,000
------------ ------------
Net deferred tax assets 87,497,911 35,451,000
Less valuation allowance (87,497,911) (35,451,000)
------------ ------------
$ - $ -
============ ============
</TABLE>
Realization of the future tax benefits related to the deferred tax assets
is dependent on many factors, including the Company's ability to generate
taxable income within the net operating loss carryforward period.
Management has considered these factors in reaching its conclusion as to
the valuation allowance for financial reporting purposes.
The Company has net operating loss carryforwards of approximately
$173,911,000 and research and development credit carryforwards of
$2,121,000 at December 31, 1999. Both the net operating loss
carryforwards and research and development credit carryforwards will
begin to expire in 2004 through 2018.
Based on the issuance of additional shares of stock, the Company incurred
a change in ownership for tax purposes, which may limit future use of the
net operating loss and research and development credit carryforwards.
12. 401(k) EMPLOYEE BENEFIT PLAN
OptiMark has a 401(k) defined contribution plan (the "Plan"), which
covers all full-time employees over the age of 21 as of their initial
date of employment. The Plan has no matching requirement. Any future
matching will be at the discretion of the Board of Directors. The
amounts charged to expense related to the administration of the Plan was
approximately $9,200; $9,100 and $9,800 for the years ended December 31,
1999, 1998 and 1997, respectively.
F-15
<PAGE> 85
13. COMMITMENTS AND CONTINGENCIES
In August 1996, OptiMark entered into a revenue sharing agreement (the
"PCX Revenue Agreement") with PCX. The PCX Revenue Agreement requires
the Company to pay 1.5% of its consolidated gross revenues, as defined,
to PCX, up to a maximum of $3,855,580. The timing and the amount of the
payments is based on PCX's attainment of certain milestones with respect
to the deployment of the System at PCX as specified in the PCX Revenue
Agreement, which expires on December 31, 2005. Based on gross revenues,
as defined, for the year ended December 31, 1999, the PCX was entitled to
approximately $46,600 under this agreement, of which approximately
$16,000 had been paid. The PCX was not entitled to any amounts or
payments in 1998 or earlier.
In December 1996, OptiMark entered into a revenue sharing agreement (the
"CBOE Revenue Agreement") with the CBOE. The CBOE Revenue Agreement
requires the Company to pay 1.5% of its consolidated gross revenues, as
defined, to CBOE, up to a maximum amount of $2,250,000. The timing and
the amount of the payments are based on CBOE's attainment of certain
milestones with respect to the deployment of the System at the national
securities exchange operated by CBOE, as specified in the CBOE Revenue
Agreement, which expires on December 31, 2005. At December 31, 1999, no
System exists for the CBOE and thus no payments are required to be made
prior to commencement of this system. Based on gross revenues, as
defined, for the year ended December 31, 1999, the Company has accrued
approximately $46,600 under this agreement. The CBOE was not entitled to
any amounts or payments in 1998 or earlier.
OptiMark also entered into separate warrant agreements with PCX and CBOE
(Note 14).
In November 1998, the Company entered into an employment agreement (the
"Agreement") with an officer of the Company which provides for annual
compensation of $425,000, a $1,000,000 sign on bonus and a $1,000,000
bonus paid in November 1999, the first anniversary of his employment. The
Agreement also provides that the officer will be paid a one-time
$1,000,000 bonus if the Company achieves pre-tax income in a fiscal year
of at least $10,000,000. See Note 15 regarding options granted in
accordance with the Agreement.
In August 1999, the Company entered into an employment agreement with an
officer of the Company which provides for annual compensation of $225,000
and a guaranteed bonus of $350,000, half of which was paid at the time of
hire and half of which is payable on the first anniversary of employment.
The Company receives network services from a supplier of international
and domestic long-distance enhanced network telecommunications services
(the "Network Provider"). The contractual agreement with the Network
Provider has a minimum annual fee of approximately $4,800,000 for such
services. Additionally, under certain circumstances, the Company will be
required to make cancellation payments in the event that the Company
terminates any or all of these services. The agreement contains
provisions allowing the Company to purchase infrastructure equipment used
by the Network Provider in providing service to the Company.
In September 1998, OptiMark entered into an agreement with the Nasdaq to
offer, as a facility of the Nasdaq, a securities trading application
based on the OptiMark Technology to be known as the "Nasdaq Application."
The agreement with Nasdaq may be terminated by either of the parties in
certain circumstances, which include denial of regulatory approval,
persistent low trading volumes or if a change of control, as defined, has
occurred with respect to either party. The agreement provides for each
party to provide, at its own expense, certain requisite hardware,
software and other equipment,
F-16
<PAGE> 86
necessary to develop and implement the Nasdaq Application. As of
December 31, 1999, the Company received regulatory approval and has
commenced operations of the Nasdaq system.
OptiMark also entered into a separate warrant agreement with the Nasdaq
(Note 14).
14. EQUITY
STOCK SPLIT - On May 22, 1997, the Company declared a 4-for-1 stock split
of its common stock. All share data has been shown retroactively in the
financial statements and in the accompanying footnotes for all years
presented, to reflect the stock split.
AUTHORIZED STOCK - During 1998, the Board of Directors and the
stockholders of the Company increased the authorized shares of common
stock and preferred stock of the Company by 70,000,000 and 30,000,000
shares, respectively. The Board of Directors have designated 3,547,068
shares of preferred stock as Series A Convertible Participating Preferred
Stock, 11,000,000 shares of preferred stock as Series B Convertible
Participating Preferred Stock, 8,250,000 shares of preferred stock as
Series C Convertible Preferred Stock and 250,000 shares of preferred
stock as Series D Convertible Preferred Stock. As of December 31, 1999
and 1998, the Company had 16,952,932 and 25,452,932 undesignated shares
of preferred stock respectively, authorized for issuance.
COMMON STOCK - During 1997, the Company issued 818,552 shares of common
stock to an investor at approximately $1.83 per share (fair market value
at date of issuance) raising $1,500,000. The investor was elected to the
Board of Directors. During 1998, the Company issued 350,000 shares of
common stock to an officer at $10 per share (fair market value at date of
issuance) of which 183,000 shares were issued out of treasury stock. The
Company received cash of $2,500,000 and received a 4.33% interest-bearing
note receivable for $1,000,000 which is presented as a contra amount in
the stockholders' equity section at December 31, 1998. On November 1,
1999, the principal amount plus interest of $39,742 on the note was repaid
to the Company.
During 1999, the Company issued 2,000,000 shares of common stock to HPM
(Note 6) at $14 per share (fair market value at date of issuance) in
exchange for the termination of the non-securities industry licenses
previously granted to HPM and 4,167 shares of common stock to a
consultant at $12 (fair market value at date of issuance) in exchange for
approximately $50,000 in cash.
COMMON STOCK (NON-VOTING) - During 1998, the Company created a new class
of non-voting common stock. 1,500,000 shares were authorized and 740,000
shares were issued during 1998, to an investor who exchanged 740,000
shares of voting common stock for them. Such amounts are included in
common stock.
SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK - During 1996,
OptiMark entered into a stock purchase agreement (the "Purchase
Agreement") with three investors whereby the investors committed to
purchase an aggregate of 2,182,812 shares of OptiMark's Series A
Convertible Participating Preferred Stock (the "Series A Preferred
Stock") at a price of $7.33 per share (fair market value at date of the
agreement). The transaction closed in two stages. In 1996, OptiMark
sold 654,844 shares of Series A Preferred Stock for approximately
$4,800,000. At the second closing which took place in March 1997,
OptiMark sold 1,527,968 shares of Series A Preferred Stock for
approximately $11,200,000.
In May 1997, the Company and the holders of the Series A Preferred Stock
amended the Purchase Agreement to provide for the purchase by two of the
three abovementioned investors an aggregate of an
F-17
<PAGE> 87
additional 1,364,256 shares of Series A Preferred Stock at a price of
$7.33 per share (fair market value at date of the amendment) for
$10,000,000.
Each share of Series A Preferred Stock is currently convertible into four
shares of common stock, subject to certain adjustments.
In March 1999, a Series A Preferred Stockholder converted 75,000 shares
of Series A Preferred Stock into 300,000 shares of the Company's common
stock.
SERIES B CONVERTIBLE PREFERRED STOCK - Between April and December 1998,
in a series of closings, the Company issued 11,000,000 shares of Series B
Convertible Preferred Stock (the "Series B Preferred Stock") at a price
of $10 per share (fair market value at date of issuance) to investors. In
connection therewith, the Company issued 25,000 shares of Series B
Preferred Stock (included in the 11,000,000 shares above) and paid a
$150,000 fee to an investor who served as a placement agent on behalf of
the Company. The Company also granted to the initial investor in the
Series B Preferred Stock a warrant to purchase 500,000 shares of common
stock at $10 per share (fair market value at date of grant) and granted
that investor a license to use, sell and distribute products, systems and
services using the OptiMark Technology within the insurance industry
field (see "Warrants" below). In advance of granting this license, the
Company purchased the rights to the OptiMark Technology in the insurance
industry field from HPM for $500,000 in cash. HPM had a license to the
rights to the OptiMark Technology in all non-securities industry markets
(Note 6). Legal and other costs of approximately $68,000 were incurred
in connection with these transactions.
Each share of Series B Preferred Stock is currently convertible into one
share of common stock, subject to certain adjustments.
SERIES C CONVERTIBLE PREFERRED STOCK - In July 1999, the Company issued
8,250,000 shares of Series C Convertible Preferred Stock (the "Series C
Preferred Stock") at a price of approximately $11.76 per share (fair
market value at date of issuance) to two investors. Legal and other
costs of approximately $11,000 were incurred in connection with this
transaction.
Each share of Series C Preferred Stock is currently convertible into one
share of common stock, subject to certain adjustments.
SERIES D CONVERTIBLE PREFERRED STOCK - In July 1999, the Company issued
250,000 shares of Series D Convertible Preferred Stock (the "Series D
Preferred Stock") at a price of $12 per share (fair market value at date
of issuance) to an investor.
Each share of Series D Preferred Stock is currently convertible into one
share of common stock, subject to certain adjustments.
The Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock are entitled to a
liquidation preference equal to $7.33 per share, $10 per share,
approximately $11.76 per share and $12 per share, respectively,
(aggregating approximately $226 million) plus all declared and unpaid
dividends thereon to the date fixed for liquidation, dissolution or
winding up. Holders of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock are entitled
to receive dividends equal to any dividends received by the holders of
the Company's common stock, as if the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
had been converted into common stock.
F-18
<PAGE> 88
Pursuant to agreements between the holders of the Series A Preferred
Stock, one of the holders of Series B Preferred Stock, certain officers
and directors of the Company, and the Company, these stockholders have
certain preemptive rights, rights of first refusal and tag-along rights.
Pursuant to four separate registration rights agreements, the holders of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock have certain rights, subject to
certain restrictions and limitations, to have the Company register their
shares with the Securities Exchange Commission for resale.
WARRANTS - During 1996, the Company granted a warrant to purchase
2,104,000 shares of its common stock in connection with the Company's
agreement with PCX to implement the System (Note 13). The warrant is
exercisable in tranches based upon the achievement of certain milestones
set forth in the warrant agreement. As of December 31, 1999 the warrant
was exercisable for 841,600 shares. The exercise price of the warrant is
approximately $1.83 per share (fair market value at date of grant),
subject to certain adjustments. The effect of the warrant was an expense
of approximately $384,000 (the value using the Black-Scholes Model) in
1996.
During 1996, the Company also granted a warrant to purchase 1,000,000
shares of common stock in connection with an anticipated agreement with
CBOE to implement the System (Note 13). The warrant is exercisable in
tranches based upon the achievement of certain milestones set forth in
the warrant agreement. As of December 31, 1999, no shares were
exercisable under this warrant. The exercise price of the warrant was
$2.25 per share, subject to certain adjustments. Subsequent to the
issuance of this warrant, as a result of certain adjustments, the number
of shares under this warrant increased by 227,828 and the exercise price
was reduced to approximately $1.83 per share. In connection with these
adjustments, the Company recorded an expense of approximately $438,000 in
1998.
During 1997, the Company granted warrants to purchase 5,611,692 shares of
common stock in conjunction with the Series A Preferred Stock financing
mentioned above. The exercise prices, (subject to certain adjustments),
ranged from approximately $1.83 (fair market value at date of grant) to
$2.75 per share based on the Company meeting certain objectives. Based
on the Black-Scholes Model, there was no value associated with these
warrants. During 1997, 207,284 of these warrants were exercised at
approximately $1.83 per share and during 1998 an additional 3,242,644
were exercised at $2.25 per share. As a result of certain adjustments,
the exercise prices of certain of these warrants were reduced from $2.25
to approximately $2.22 and from $2.75 to approximately $2.72. During
1999, the remaining warrant to purchase 2,161,764 shares of common stock
at approximately $2.72 per share was exercised.
At December 31, 1997, the Company had outstanding warrants to purchase
360,000 shares of common stock, of which 340,000 were granted at $1.50
per share (fair market value at date of grant) to employees of Holdings
who did not become employees of the Company in connection with the
restructuring (Note 1) and 20,000 granted at approximately $1.83 per
share (fair market value at the date of grant) to a consultant of the
Company. The services provided or goods received under the granting of
such warrants by the Company were not significant. During 1996, warrants
to purchase 200,000 shares of common stock had been exercised at $1.50
per share. During 1999 and 1998, warrants to purchase an additional
32,000 and 96,200 shares, respectively, had been exercised at $1.50 per
share and 20,000 at approximately $1.83 per share, were exercised in
1998.
During 1998, the Company issued warrants to purchase up to 11,837,500
shares of its common stock. In September 1998, in connection with the
Company's agreement with the Nasdaq to implement the Nasdaq Application
(Note 13), the Company entered into a warrant agreement with the Nasdaq
whereby the Nasdaq has the ability to earn warrants to purchase up to
11,250,000 shares of the Company's common stock (the "Nasdaq Warrants").
The Nasdaq Warrants are exercisable in tranches based upon
F-19
<PAGE> 89
the achievement of certain milestones, as defined by the Nasdaq Warrant
agreement. In connection with the launch of the Nasdaq Application in
October 1999, an aggregate of 4,500,000 warrants were earned. Of the
4,500,000 warrants, 2,250,000 are exercisable at $5 per share and the
remaining 2,250,000 are exercisable at $7 per share. The exercise price
of the remaining 6,750,000 Nasdaq Warrants is $7 per share. The Nasdaq
Warrants expire the earlier of: (i) October 2004, or (ii) the last day
the Nasdaq Application is available to Nasdaq users. In connection with
the above 4,500,000 warrants, the Company recorded an expense of
$33,800,000 in 1999 (the value using the Black Scholes Model). In
accordance with the Emerging Issues Task Force 96-18, Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring,
or in Conjunction with Selling, Goods or Services ("EITF 96-18"), as the
measurement date is at some time in the future, no value can be
determined on the remaining 6,750,000 Nasdaq warrants until the Nasdaq
has achieved certain conditions.
As discussed above, a warrant to acquire 500,000 shares of common stock
was issued in connection with the Series B Preferred Stock financing and
expires in June 2003. The effect of the above warrant in 1998 was a
debit to additional paid in capital of approximately $915,000 (the value
using the Black-Scholes Model).
In 1998, a warrant to acquire 42,500 shares of common stock was issued in
connection with a master equipment lease agreement with a third party
(Note 9) and expires in June 2003. The remaining warrants to acquire
45,000 shares of common stock were granted to two consultants of the
Company and have an exercise price of $10 (fair market value at date of
grant). Of these warrants, 40,000 expire in August 2003 and the
remaining 5,000 were exercised in August 1999. The effect of the above
warrants in 1998 was an expense of approximately $109,000 (the value
using the Black-Scholes Model).
During 1999, the Company issued to five holders of Series B Preferred
Stock, warrants to acquire 1,666,667 shares of its common stock at $10
per share. In connection with such issuance, the Company recorded an
expense of approximately $6,786,300 (the value using the Black-Scholes
Model) in 1999. All of these warrants expired unexercised in June 1999.
Additionally, warrants to acquire 25,000 shares of common stock were
granted to two consultants of the Company. Of these warrants, 5,000 were
issued at $10 and expire in January 2002 or by termination by the
Company. The effect of this warrant in 1999 was an expense of
approximately $6,300 (the value using the Black-Scholes Model). The
remaining 20,000, granted to a former board member, were issued at $14
and expire in February 2009. The charge associated with this warrant
(utilizing the Black-Scholes Model) was approximately $38,800, to be
amortized over the life of the contract. The amount expensed in 1999 was
approximately $24,200.
Additionally, in October 1999, the Company entered into a strategic
alliance with Knight/Trimark Group, Inc. ("Knight") under which Knight
can earn warrants to acquire common stock of up to a maximum of 25% of
the Company, but not in excess of 31,037,491 common shares. The warrants
are earned in tranches based on the number of shares traded by Knight in
the OptiMark System, with progressively larger amounts of trades required
to earn each tranche. The warrants, if earned, have exercise prices
ranging from $2 to $9 per share, contingent upon the time frame in which
the warrants are earned as well as the percentage of Knight trades of
total trades in the OptiMark System. At progressively earlier
satisfaction of the trades required, the exercise prices are
progressively lower. Also, at progressively smaller percentages of
Knight trades of total trades in the OptiMark system, the exercise prices
are progressively lower. In accordance with the Emerging Issues Task
Force 96-18, Accounting for Equity Instruments That are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services ("EITF 96-18"), as the measurement date is at some time
F-20
<PAGE> 90
in the future, no value can be determined on the 31,037,491 warrants
until Knight has achieved certain conditions.
TREASURY STOCK - During 1997, the Company purchased 208,000 shares of
common stock at $2.56 per share from an individual investor and held
these shares as treasury shares. In 1998, these shares were sold to two
consultants and an officer of the Company at $10 per share (fair market
value at date of sale).
Additionally, during 1998, the Company purchased 250,000 shares of Series
A Preferred Stock at $40 per share from an investor and held these shares
as treasury shares at December 31, 1998 and 1999. In January 2000, the
Company's Board of Directors retired these Series A Preferred shares and
the shares were returned to the unauthorized preferred shares.
15. STOCK OPTION PLAN
Prior to November 1999, the Company maintained a stock option plan (the
"1996 Plan"), which provided for the issuance of stock options to
employees. Under the 1996 Plan, options that were intended to be
incentive stock options were granted at prices not less than fair market
value per share on the date of grant, as determined by the Board of
Directors. The options granted were exercisable in accordance with the
vesting schedule not to exceed ten years. No further stock options may
be granted under the 1996 Plan.
In November 1999, the Company adopted the 1999 Stock Plan (the "1999
Plan"), which made 14,669,224 shares available for issuance. This amount
included 8,669,224 shares under the 1996 Plan and an additional 6,000,000
shares under the 1999 Plan. All options outstanding under the 1996 Plan,
as of the date of adoption of the 1999 Plan, continue in effect under
their original terms. The 1999 Plan provides for the issuance of
non-statutory and incentive stock options (as defined in the Internal
Revenue Code of 1986, as amended), restricted stock and stock equivalent
rights to employees, directors and consultants. Options granted under
the 1999 Plan that are intended to be incentive stock options are granted
at prices not less than fair market value per share on the date of grant.
Non-Statutory stock options granted under the 1999 Plan are granted at
prices not less than 85% of fair market value per share on the date of
grant. No portion of the option may be exercised beyond 10 years from
the grant date.
On voluntary termination an employee has thirty days in which to exercise
his or her vested options.
During 1998, the Company provided for the granting of 1,200,000 options
to an officer of the Company with an exercise price of $10 (fair market
value at the date of grant), and an exercise period of 10 years from the
date of grant under the Plan. Of the 1,200,000 options, 200,000 vested
immediately and the remaining 1,000,000 options vest ratably over a
five-year period on the anniversary of the date of hire.
F-21
<PAGE> 91
At December 31, 1999, 1998 and 1997, the components of the Plan consisted
of the following:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
EXERCISE
SHARES PRICE
<S> <C> <C>
Options outstanding at January 1, 1997 2,060,000 $ 1.68
Options granted during 1997 1,901,500 1.97
-------------
Options outstanding at December 31, 1997 3,961,500 $ 1.82
Options granted during 1998 3,131,750 6.80
Options exercised during 1998 (253,510) 2.79
Options canceled during 1998 (122,100) 2.95
-------------
Options outstanding at December 31, 1998 6,717,640 $ 4.08
Options granted during 1999 2,074,450 12.60
Options exercised during 1999 (434,204) 1.96
Options canceled during 1999 (1,411,826) 6.27
-------------
Options outstanding at December 31, 1999 6,946,060 $ 6.32
-------------
Weighted-average fair value of options granted during the year 1999 $ 1.97
Weighted-average fair value of options granted during the year 1998 $ 0.99
Weighted-average fair value of options granted during the year 1997 $ 0.43
Number of options exercisable at December 31, 1997 748,797 $1.69
Number of options exercisable at December 31, 1998 1,548,655 $2.81
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------- -----------------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF NUMBER OF REMAINING AVERAGE NUMBER OF AVERAGE
EXERCISE SHARES CONTRACTUAL EXERCISE SHARES EXERCISE
PRICES OUTSTANDING LIFE PRICE OUTSTANDING PRICE
<S> <C> <C> <C> <C> <C>
$ 1.50 - $ 1.83 2,490,700 5.29 $1.73 1,673,286 $1.71
$ 2.56 - $ 4.00 1,274,500 6.84 3.32 427,700 3.32
$ 7.50 - $10.00 1,627,400 8.63 9.70 499,350 9.70
$ 12.00 - $14.00 1,553,460 9.60 12.58 10,860 13.63
--------- ---------
$ 1.50 - $14.00 6,946,060 7.32 $6.32 2,611,196 $3.55
========= =========
</TABLE>
F-22
<PAGE> 92
SFAS No. 123, Accounting for Stock-Based Compensation, encourages, but
does not require companies to record compensation cost for stock-based
employee compensation plans at fair value. The Company has chosen to
continue to account for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and Related Interpretations.
Accordingly, compensation cost for stock options is measured as the
excess, if any, of the fair value of the Company's stock at the date of
grant over the amount an employee must pay to acquire the stock. Had
compensation cost for the Plan been determined at the fair value on the
grant dates under the method of SFAS No. 123, the Company's net loss for
the years ended December 31, 1999, 1998 and 1997, would have increased to
approximately $135,747,000, $57,830,000 and $20,661,000, respectively.
Options held by an optionee will generally become exercisable as to 20%
of the shares covered by such options on the first anniversary of the
date of hire for initial grants and 20% of the shares on the first
anniversary date of the grant date for subsequent issues and with an
additional 20% of the shares covered by such options on each of the four
succeeding anniversaries of the date of the hire or grant date if the
optionee continues to be employed by the Company, on each such date.
The fair value of each option grant in 1999, 1998 and 1997 was estimated
on the date of grant using the Black-Scholes option-pricing model, with
the following assumptions: weighted-average risk-free interest rates of
5.51%, 5.08% and 6.32% in 1999, 1998 and 1997, respectively; no dividend
yield, expected life of between two and five years in 1999 and 1998 and
between three and five years in 1997, and volatility of 0%. All options
were granted at fair market value.
16. FAIR VALUE OF FINANCIAL INSTRUMENTS
In the opinion of management, the carrying value of cash and cash
equivalents, receivables, notes, other assets, current liabilities and
capital leases payable are a reasonable estimate of their fair value.
17. EARNINGS PER SHARE ("EPS")
Basic EPS for 1999, 1998 and 1997 was calculated using 63,790,247,
50,417,641 and 37,848,932 weighted-average shares outstanding for the
years ended December 31, 1999, 1998 and 1997, respectively.
18. SUBSEQUENT EVENTS
On April 19, 2000, the Company entered into an agreement to form a 50/50
joint venture with a third party to provide the OptiMark matching engine
technology for the trading of non-exchange (private) equity securities of
certain overseas companies in defined international markets. OptiMark
will license certain technology to the joint venture for a royalty. The
third party will contribute cash to the joint venture covering front- and
back-end development, operations and maintenance.
On April 19, 2000, the Company also entered into an agreement with a
third party to provide the OptiMark matching engine technology in a wide
variety of vertical markets in financial and derivative products.
OptiMark will license certain technology to the third party for a royalty
and will also receive 20% of the equity of the third party on a
fully-diluted basis, as well as an option on 10% of the common equity of
the third party.
F-23
<PAGE> 93
On April 19, 2000, the Company also entered into an agreement with a
third-party to provide the OptiMark matching engine technology for
trading of certain capacity-related services in a web-market trading
environment and vertical site. OptiMark will receive 20% carried
interest in the third party company and be remunerated for any trading
engine customization.
******
F-24
<PAGE> 94
INDEX TO EXHIBITS
These Exhibits are numbered in accordance with the Exhibit Table of
Item 601 of Regulation S-K.
The following documents are filed as part of this report:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
3.1 Amended and Restated Certificate of Incorporation,
as amended, of OptiMark
3.2 Amended and Restated By-Laws of OptiMark
4.1 Specimen Common Stock Certificate
4.2 Specimen Preferred Stock Certificate
4.3 Series A Stock Purchase Agreement dated August 27,
1996 by and among OptiMark and the Stockholders
named therein
4.4 Registration Rights Agreement dated August 27, 1996
by and among OptiMark and the parties named therein
4.5 Amendment to Stock Purchase Agreement and
Registration Rights Agreement dated March 19, 1997
by and among OptiMark and the parties named therein
4.6 Amendment to Stock Purchase Agreement, Stockholders
Agreement and Registration Rights Agreement dated
May 29, 1997 by and among OptiMark and the parties
named therein
4.7 Amendment to Series A Registration Rights Agreement
dated January 1999 by and among OptiMark and the
parties named therein
4.8 Series B Stock Purchase Agreement dated December
22, 1998 by and among OptiMark and the parties
named therein
4.9 Registration Rights Agreement dated April 23, 1998
by and among OptiMark and the parties named therein
4.10 Series C Stock Purchase Agreement dated June 11,
1999 by and among OptiMark and the stockholders
named therein
4.11 Registration Rights Agreement dated July 26, 1999
by and among OptiMark and the Stockholders named
therein
4.12 Series D Stock Purchase Agreement dated July 30,
1999 by and between OptiMark and BancBoston Capital
Inc.
4.13 Registration Rights Agreement dated July 30, 1999 by
and between OptiMark and BancBoston Capital Inc.
4.14 Registration Rights Agreement dated September 19,
1998 by and between OptiMark and The NASDAQ Stock
Market, Inc.
4.15 Amended and Restated Stockholders Agreement dated
April 23, 1998 by and among OptiMark and the
parties named therein
</TABLE>
<PAGE> 95
<TABLE>
<S> <C>
10.1 Revenue Sharing Agreement dated August 27, 1996 by
and between OptiMark and The Pacific Exchange, Inc.
10.2 Revenue Sharing Agreement dated December 31, 1996
by and between OptiMark and the Chicago Board
Options Exchange, Inc.
10.3 PSE-OptiMark Agreement dated August 27, 1996 between
OptiMark and The Pacific Exchange, Inc.
10.4 NASDAQ/OptiMark Agreement dated September 1, 1998
by and between OptiMark and The NASDAQ Stock
Market, Inc.
10.5 OptiMark Technologies, Inc. 1999 Stock Plan
(adopted November 29, 1999)
10.6 OptiMark Technologies, Inc. Stock Option Plan
(Amended & Restated January 27, 1999)
10.7 Form of Stock Option Agreement (1999 Stock Plan)
10.8 Form of Stock Option Agreement (Amended and
Restated Stock Option Plan)
10.9 Form of Non-Employee Director Option Agreement
10.10 Employment Agreement dated November 1, 1998 by and
between OptiMark and Phillip J. Riese
10.11 Employment, Trade Secret and Non-Competition
Agreement dated August 27, 1996 by and between
OptiMark and William A. Lupien
10.12 Employment, Trade Secret and Non-Competition
Agreement dated August 27, 1996 by and between
OptiMark and John T. Rickard
10.13 Letter Agreement dated November 15, 1999 by and
between OptiMark and William F. Adiletta
10.14 Restricted Stock Purchase Agreement dated December
1, 1998 by and between OptiMark and Phillip J. Riese
10.15 Stock Purchase Agreement dated December 18, 1998 by
and between OptiMark and Phillip J. Riese
10.16 Stock Option Agreement dated November 1, 1998 by
and between OptiMark and Phillip J. Riese
10.17 Stock Option Agreement dated November 1, 1998 by
and between OptiMark and Phillip J. Riese
10.18* Services Agreement dated January 1, 1999 by and
between OptiMark and ISM Information Systems
Management Corporation
10.19* OptiMark/IBM Ops Agreement dated February 2, 1999
by and between OptiMark and the parties named
therein
10.20* Agreement for Information Technology Services dated
May 6, 1999 by and between OptiMark and IBM Canada
Limited
10.21 License Termination Agreement dated March 19, 1999
by and between OptiMark and High Performance
Markets, Ltd.
10.22 Common Stock Purchase Warrant dated August 27, 1996
in favor of The Pacific Exchange, Inc.
</TABLE>
<PAGE> 96
<TABLE>
<S> <C>
10.23 Common Stock Purchase Warrant dated December 31,
1996 in favor of The Chicago Board Options
Exchange, Inc.
10.24 Common Stock Purchase Warrant dated April 23, 1998
in favor of Virginia Surety Company, Inc.
10.25 Common Stock Purchase Warrant dated June 19, 1998
in favor of Transamerica Business Credit Corporation
10.26 Common Stock Purchase Warrant dated August 24, 1998
by and between OptiMark and Francis X. Egan
10.27 NASDAQ Warrant Agreement dated September 1, 1998 by
and between OptiMark and The NASDAQ Stock Market,
Inc.
10.28 Common Stock Purchase Warrant dated January 27,
1999 by and between OptiMark and BIOS Group LP
10.29 Warrant Agreement dated October 27, 1999 by and
between OptiMark and Knight/Trimark Group, Inc.
21.1 Subsidiaries of OptiMark
27.1 Financial Data Schedule
</TABLE>
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
Amended and Restated Certificate of Incorporation
of
OptiMark Technologies, Inc.
This Amended and Restated Certificate of Incorporation restates,
integrates and also further amends the Restated Certificate of Incorporation of
OptiMark Technologies, Inc. (the "Corporation"), as previously corrected and
amended. The original Certificate of Incorporation of the Corporation was filed
on July 17, 1996 (#960207837). This Amended and Restated Certificate of
Incorporation was duly adopted by the board of directors and the stockholders of
the Corporation in accordance with Sections 242 and 245 of the Delaware General
Corporation Law.
1. Name. The name of the Corporation is: OptiMark Technologies,
Inc.
2. Registered Office; Registered Agent. The registered office of the
Corporation is located at 1209 Orange Street, Corporation Trust Center,
Wilmington, New Castle County, Delaware 19801. The name of its registered agent
at such address is The Corporation Trust Company.
3. Term. The Corporation shall have perpetual existence.
4. Purposes. The nature, objects and purposes of the business to be
transacted by the Corporation shall be to engage in any lawful activity for
which corporations may be organized under the Delaware General Corporation Law.
5. Powers. In furtherance of the foregoing purposes, the Corporation
shall have and may exercise all of the rights, powers and privileges now or
hereafter conferred upon corporations organized under the Delaware General
Corporation Law. In addition, it may do everything necessary, suitable or proper
for the accomplishment of any of its corporate purposes.
6. Shares of Stock. The total number of shares of capital stock
which the Corporation is authorized to issue is one hundred ninety million
(190,000,000), consisting of one hundred fifty million (150,000,000) shares of
common stock, one cent ($0.01) par value per share ("Common Stock"), and forty
million (40,000,000) shares of preferred stock, one cent ($0.01) par value per
share ("Preferred Stock").
(a) Preferred Stock. The Board of Directors of the
Corporation is expressly granted the authority to issue the Preferred Stock in
one or more classes or series, and to fix, by one or more resolutions from time
to time, the designations, powers, preferences and rights, and the
qualifications, limitations and restrictions, of such classes and series of the
Preferred Stock. In particular, the Board of Directors to date has established
two series of Preferred Stock of the Corporation -- the Series A Convertible
Participating Preferred Stock ("Series A Preferred Stock") and the Series B
Convertible Participating Preferred Stock ("Series B Preferred Stock") -- the
designations, powers,
<PAGE> 2
preferences and rights, and the qualifications, limitations and restrictions, of
which are set forth on Exhibit A and Exhibit B attached hereto, respectively.
(b) Common Stock. One million five hundred thousand
(1,500,000) shares of authorized Common Stock shall be designated as Nonvoting
Common Stock. To the maximum extent permitted by law, the shares of Nonvoting
Common Stock shall have no voting rights whatsoever on any matters submitted to
a vote or consent of the stockholders of the Corporation. The balance of the
authorized Common Stock shall be voting Common Stock, the holders of which shall
have the right to vote for the election of directors and on all other matters
submitted to a vote of the stockholders generally, with each share entitled to
one vote. Except as described in the preceding two sentences with respect to
voting rights, each share of Common Stock shall be equal to every other share of
Common Stock for all purposes. Subject to the prior rights and privileges of the
holders of Preferred Stock (if any), upon the voluntary liquidation, dissolution
or winding up of the Corporation, the net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock.
7. Election of Directors; No Cumulative Voting. The Board of
Directors shall consist of one or more members, with the number specified or
fixed in accordance with the bylaws of the Corporation. Members of the Board of
Directors may be elected either by written ballot or by voice vote. The
stockholders of the Corporation shall not have cumulative voting rights in the
election of directors or with respect to any other matter.
8. Adoption, Amendment or Repeal of Bylaws. In furtherance of and
not in limitation of the powers conferred by laws of the State of Delaware, the
Board of Directors is expressly authorized to adopt, amend and repeal the bylaws
of the Corporation; provided that any bylaws adopted or amended by the Board of
Directors may be amended or repealed, and any bylaws may be adopted, by the
stockholders of the Corporation.
9. Restrictions on Transfer of Stock. The Corporation is granted the
right to impose such restrictions on the transfer of the Corporation's stock as
the Board of Directors deems necessary, advisable or proper.
10. Elimination of Certain Liability of Directors. A director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (a) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) in
respect of certain unlawful dividend payments or stock redemptions or
repurchases, or (d) for any transaction from which the director derived an
improper personal benefit. Any repeal or modification of the foregoing sentence
shall not adversely affect any right or protection of a director of the
Corporation existing hereunder with respect to any act or omission occurring
prior to such repeal or modification.
<PAGE> 3
11. Indemnification and Insurance. The Corporation shall indemnify,
to the maximum extent permitted by law, any person who is or was a director or
officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, against any claim, liability or expense arising against or incurred
by such person as a result of actions reasonably taken by him at the direction
of the Corporation or in connection with his service to the Corporation. Any
person who is not covered by the foregoing sentence and who is or was an
employee or agent of the Corporation may be indemnified by the Corporation to
the maximum extent permitted by law as authorized by the Board of Directors from
time to time. The Corporation further shall have the authority to purchase and
maintain insurance, at the Corporation's expense, providing for indemnification
up to the maximum extent permitted by law.
12. Interested Transactions. The fact that a director or officer of
the Corporation is directly or indirectly interested in or connected with any
person or entity (a) employed by the Corporation to render or perform a service
or (b) from or to whom the Corporation may buy or sell merchandise or other
property, shall not (except as provided under the Delaware General Corporation
Law) prohibit the Corporation from employing such person or from dealing with
such person on customary terms with competitive rates of compensation, and
neither the Corporation nor any stockholder shall have any claims or rights in
any obligation, compensation or income payable to such person.
13. Compromises/Arrangements. Whenever a compromise or arrangement
is proposed between the Corporation and its creditors or any class of them
and/or between the Corporation and its stockholders or any class of them, any
court of equitable jurisdiction within the State of Delaware may, on the
application in a summary way of the Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers appointed
for the Corporation under the provisions of Section 291 of the Delaware General
Corporation Law, or on the application of trustees in dissolution or any
receiver or receivers appointed for the Corporation under the provisions of
Section 279 of the Delaware General Corporation Law, order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as such court directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of the Corporation as a
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of the
Corporation as the case may be, and also on the Corporation.
14. Reservation of Rights. The Corporation reserves the right at any
time, and from time to time, to amend, alter, change or repeal any provision
contained in this
<PAGE> 4
Certificate of Incorporation, and other provisions authorized
by the laws of the State of Delaware at the time in force may be added or
inserted, in the manner now or hereafter prescribed by law; and all rights,
preferences and privileges of whatsoever nature conferred upon stockholders,
directors or any other persons whomsoever by and pursuant to this Certificate of
Incorporation in its present form or as hereafter amended are granted subject to
the rights reserved in this Article 14.
WHEREFORE, the Corporation has executed and acknowledged this
Amended and Restated Certificate of Incorporation as of the 29th day of May,
1998.
OptiMark Technologies, Inc.
By:/s/ William A. Lupien
----------------------
William A. Lupien, Chief Executive Officer
By:/s/ Christopher J. Walsh
------------------------
Christopher J. Walsh, Assistant Secretary
<PAGE> 5
Exhibit A
(to Amended and Restated Certificate of Incorporation of OptiMark
Technologies, Inc.)
CERTIFICATE OF POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES A CONVERTIBLE PARTICIPATING PREFERRED STOCK,
PAR VALUE $.01 PER SHARE
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The following resolution was duly adopted by the Board
of Directors of OptiMark Technologies, Inc., a Delaware corporation (the
"Corporation"), pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, on August 21, 1996, by unanimous
written consent of the Board of Directors, and amended effective March 27, 1997
and April 30, 1998 at meetings of the Board of Directors duly noticed and held:
WHEREAS, the Board of Directors is authorized, within
the limitations and restrictions stated in the Certificate of Incorporation of
the Corporation, to provide by resolution or resolutions for the issuance of
shares of Preferred Stock, par value $.01 per share, of the Corporation, in one
or more series with such voting powers, full or limited, or without voting
powers, and such designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or restrictions as
shall be stated and expressed in the resolution or resolutions providing for the
issuance thereof adopted by the Board of Directors, and as are not stated and
expressed in the Certificate of Incorporation, or any amendment thereto,
including (but without limiting the generality of the foregoing) such provisions
as may be desired concerning voting, redemption, dividends, dissolution or the
distribution of assets and such other subjects or matters as may be fixed by
resolution or resolutions of the Board of Directors under the General
Corporation Law of the State of Delaware; and
WHEREAS, it is the desire of the Board of Directors,
pursuant to its authority as aforesaid, to authorize and fix the terms of a
series of preferred stock and the number of shares constituting such series.
NOW, THEREFORE, BE IT RESOLVED:
1. Designation and Number of Shares. There shall be hereby
established a series of Preferred Stock designated as "Series A
Convertible Participating Preferred Stock" (the "Series A Preferred Stock"). The
authorized number of shares of Series A Preferred Stock shall be 3,547,068.
<PAGE> 6
2. Rank. The Series A Preferred Stock shall, with respect to
distributions of assets and rights upon the liquidation, winding up and
dissolution of the Corporation, rank senior to (a) all classes of common stock
of the Corporation (including, without limitation, the common stock, par value
$.01 per share, of the Corporation) (the "Common Stock") and (b) each other
class or series of Capital Stock of the Corporation hereafter created which does
not expressly rank pari passu with or senior to the Series A Preferred Stock
(the "Junior Stock").
3. Dividends. Beginning on the date of issuance of the Series A
Preferred Stock, if the Board of Directors of the Corporation shall
declare a dividend or make any other distribution (including, without
limitation, in cash, evidences of indebtedness of the Corporation or another
issuer, securities of the Corporation or another issuer or other property or
assets), to holders of shares of Common Stock, then the holder of each share of
Series A Preferred Stock shall be entitled to receive, out of funds legally
available therefor, a dividend or distribution in an amount equal to the amount
of such dividend or distribution received by a holder of the number of shares of
Common Stock for which such share of Series A Preferred Stock is convertible on
the record date for such dividend or distribution. Any such amount shall be paid
to the holders of shares of Series A Preferred Stock at the same time such
dividend or distribution is made to holders of Common Stock.
4. Liquidation Preference.
(a) Subject to paragraph 4(b) below, in the event of
any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation, the holders of shares of Series A Preferred Stock then
outstanding shall be entitled to be paid for each share of Series A Preferred
Stock held thereby, out of the assets of the Corporation available for
distribution to its stockholders, before any payment shall be made or any assets
distributed to the holders of any shares of Junior Stock, an amount (the
following (i) and (ii) together, the "Liquidation Amount") equal to (i) $7.33
per share (the "Liquidation Preference") plus (ii) all declared and unpaid
dividends thereon to the date fixed for liquidation, dissolution or winding up.
If the assets of the Corporation are not sufficient to pay in full the foregoing
Liquidation Amount to the holders of outstanding shares of the Series A
Preferred Stock, then the holders of all shares of Series A Preferred Stock
shall share ratably in such distribution of assets in accordance with the amount
that would be payable on such distribution if the amounts to which the holders
of outstanding shares of Series A Preferred Stock are entitled were paid in
full.
(b) After the holders of all shares of Series A
Preferred Stock shall have been allocated in full the amounts to which
they are entitled under paragraph 4(a), each holder of Series A Preferred Stock
and Common Stock shall be entitled to receive such holder's pro rata share,
based on the number of shares of Common Stock held by such holder and assuming
conversion of all shares of Series A Preferred Stock into Common Stock ("Pro
Rata Share"), of the remaining assets of the Corporation available for
distribution; provided, however, that if the fair value per share of Common
Stock (assuming conversion of all shares of Series A Preferred Stock into Common
<PAGE> 7
Stock) of the entire assets of the Corporation legally available for
distribution (without deduction for any preferential amount which may be payable
to holders of the Series A Preferred Stock pursuant to paragraph 4(a)) (the
"Common Stock Fair Value", as determined pursuant to subparagraph (e) below)
equals or exceeds the Conversion Price then in effect multiplied by five (5),
then each holder of Series A Preferred Stock and Common Stock shall be entitled
to receive such holder's Pro Rata Share of such entire assets, and the holders
of Series A Preferred Stock shall not receive any prior payment of any
preferential amount pursuant to paragraph 4(a). Notwithstanding anything
contained in this paragraph 4 to the contrary, if the Common Stock Fair Value is
less than the Conversion Price then in effect multiplied by five (5), then the
holders of Series A Preferred Stock shall not be entitled to receive an amount
greater than the Common Stock Fair Value multiplied by five (5).
(c) Written notice of such liquidation, dissolution
or winding up, stating a payment date, the amount of the payment as
determined pursuant to this paragraph 4 and the place where such amount shall be
payable, shall be delivered in person, mailed by certified or registered mail,
return receipt requested, mailed by overnight mail or sent by telecopier, not
less than ten (10) days prior to the payment date stated therein, to the holders
of record of the Series A Preferred Stock, such notice to be addressed to each
such holder at its address as shown by the records of the Corporation.
(d) For purposes of paragraph 2 and this paragraph 4,
a voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation shall include (i) the voluntary sale, conveyance,
exchange or transfer to another Person of all or substantially all of the assets
of the Corporation and (ii) (x) the merger or consolidation of the Corporation
with or into one or more Persons or (y) the merger or consolidation of one or
more Persons with or into the Corporation, if, in the case of (x) or (y), the
stockholders of the Corporation prior to such merger or consolidation do not
retain at least a majority of the voting power of the surviving Person and (iii)
a transaction or a series of related transactions (other than a public offering
of the Corporation's securities) in which the Corporation issues shares of
Capital Stock with the result that the stockholders of the Corporation prior to
such issuance do not retain at least a majority of the voting power of the
Corporation after giving effect to such transaction (each of the foregoing (i),
(ii) and (iii) being referred to hereinafter as a "Liquidation Event"). For the
purposes of the foregoing, the exchange of securities or other consideration of
the surviving Person or an affiliate thereof for securities of the Corporation
shall be deemed to constitute the distribution of assets of the Corporation upon
a Liquidation Event.
(e) The fair value of the assets to be distributed or
exchanged (to the extent that distributions are not made in cash) in the
event of a Liquidation Event shall be determined by the Board of Directors in
good faith; provided, however, that any securities to be delivered to the
holders of any class or series of the Corporation's capital stock under this
paragraph 4 shall be valued as follows:
<PAGE> 8
(i) Securities that do not constitute "restricted
securities," as such item is defined in Rule 144(a)(3) promulgated under the
Securities Act:
(A) If traded on a securities exchange, the
value shall be deemed to be the average of the closing prices of the securities
on such exchange over the 30-day period ending three (3) days prior to the date
of distribution;
(B) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid prices over the
30-day period ending three (3) days prior to the date of distribution;
(C) If there is no active public market, the
value shall be the fair market value thereof, as mutually determined by the
Corporation and the holders of not less than a majority of the then outstanding
shares of Series A Preferred Stock.
(D) If fair market value cannot be determined
pursuant to clause (C) above, the Corporation and the holders of not less than
a majority of the then outstanding shares of Series A Preferred Stock shall
each appoint one (1) independent third party and such two persons shall in turn
select a third person, which group of three persons shall then determine the
fair market value thereof.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability that are of the
same class or series as securities that are publicly traded shall be to
make an appropriate discount from the market value determined as set forth above
in clauses (i)(A) or (i)(B) to reflect the appropriate fair market value
thereof, as mutually determined by the Corporation and the holders of a majority
of the then outstanding shares of Series A Preferred Stock, or if applicable,
shall be in accordance with clauses (i)(C) or (i)(D), giving appropriate weight,
if any, to such restriction.
5. Redemption. The shares of Series A Preferred Stock shall not be
redeemed or subject to redemption, whether at the option of the Corporation or
any holder thereof, or otherwise.
6. Voting Rights; Election of Directors. So long as the Series A
Preferred Stock is outstanding, each share of Series A Preferred Stock
shall entitle the holder thereof to vote, in person or by proxy, at a special or
annual meeting of stockholders, on all matters entitled to be voted on by
holders of Common Stock voting together as a single class with other shares
entitled to vote thereon. With respect to any such vote, each share of Series A
Preferred Stock shall entitle the holder thereof to cast that number of votes
per share as is equal to the number of votes that such holder would be entitled
to cast had such holder converted its shares of Series A Preferred Stock into
shares of Common Stock on the record date for determining the stockholders of
the Corporation eligible to vote on any such matters.
<PAGE> 9
7. Conversion.
(a) Any holder of Series A Preferred Stock shall have the right,
at its option, at any time and from time to time, to convert, subject to the
terms and provisions of this paragraph 7, any or all of such holder's shares of
Series A Preferred Stock into such number of fully paid and non-assessable
shares of Common Stock as is equal to the product of the number of shares of
Series A Preferred Stock being so converted multiplied by the quotient of (i)
the Liquidation Preference divided by (ii) the conversion price of $1.8325 per
share, subject to adjustment as provided in paragraph 7(d) (the "Conversion
Price"), then in effect. Such conversion right shall be exercised by the
surrender of the shares of Series A Preferred Stock to be converted to the
Corporation at any time during usual business hours at its principal place of
business to be maintained by it, accompanied by written notice that the holder
elects to convert such shares of Series A Preferred Stock and specifying the
name or names (with address) in which a certificate or certificates for shares
of Common Stock are to be issued and (if so required by the Corporation) by a
written instrument or instruments of transfer in form reasonably satisfactory to
the Corporation duly executed by the holder or its duly authorized legal
representative and transfer tax stamps or funds therefor, if required pursuant
to paragraph 7(i). All shares of Series A Preferred Stock surrendered for
conversion shall be delivered to the Corporation for cancellation and canceled
by it and no shares of Series A Preferred Stock shall be issued in lieu thereof.
(b) As promptly as practicable after the surrender, as herein
provided, of any shares of Series A Preferred Stock for conversion pursuant
to paragraph 7(a), the Corporation shall deliver to or upon the written
order of the holder of such shares of Series A Preferred Stock so surrendered a
certificate or certificates representing the number of fully paid and
non-assessable shares of Common Stock into which such shares of Series A
Preferred Stock may be or have been converted in accordance with the provisions
of this paragraph 7. Subject to the following provisions of this paragraph and
of paragraph 7(d), such conversion shall be deemed to have been made immediately
prior to the close of business on the date that such shares of Series A
Preferred Stock shall have been surrendered in satisfactory form for conversion,
and the Person or Persons entitled to receive the shares of Common Stock
deliverable upon conversion of such shares of Series A Preferred Stock shall be
treated for all purposes as having become the record holder or holders of such
shares of Common Stock at such appropriate time, and such conversion shall be at
the Conversion Price in effect at such time; provided, however, that no
surrender shall be effective to constitute the Person or Persons entitled to
receive the shares of Common Stock deliverable upon such conversion as the
record holder or holders of such shares of Common Stock while the share transfer
books of the Corporation shall be closed (but not for any period in excess of
five days), but such surrender shall be effective to constitute the Person or
Persons entitled to receive such shares of Common Stock as the record holder or
holders thereof for all purposes immediately prior to the close of business on
the next succeeding day on which such share transfer books are open, and such
conversion shall be deemed to have been made at, and shall be made at the
Conversion Price in effect at, such time on such next succeeding day.
<PAGE> 10
(c) To the extent permitted by law, when shares of Series A
Preferred Stock are converted, all dividends declared and unpaid on the shares
of Series A Preferred Stock so converted to the date of conversion shall
be immediately due and payable and must accompany the shares of Common Stock
issued upon such conversion.
(d) The Conversion Price shall be subject to adjustment as
follows:
(i) In the event that the Corporation shall at any time or from
time to time (w) pay a dividend or make a distribution (other than a
dividend or distribution paid or made to holders of shares of Series
A Preferred Stock in the manner provided in paragraph 3) on the
outstanding shares of Common Stock in Capital Stock, (x) subdivide
the outstanding shares of Common Stock into a larger number of
shares, (y) combine the outstanding shares of Common Stock into a
smaller number of shares or (z) issue any shares of its Capital Stock
in a reclassification of the Common Stock, then, and in each such
case, the Conversion Price in effect immediately prior to such event
shall be adjusted (and any other appropriate actions shall be taken
by the Corporation) so that the holder of any share of Series A
Preferred Stock thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock or other
securities of the Corporation that such holder would have owned or
would have been entitled to receive upon or by reason of any of the
events described above, had such share of Series A Preferred Stock
been converted immediately prior to the occurrence of such event. An
adjustment made pursuant to this paragraph 7(d)(i) shall become
effective retroactively (x) in the case of any such dividend or
distribution, to a date immediately following the close of business
on the record date for the determination of holders of Common Stock
entitled to receive such dividend or distribution or (y) in the case
of any such subdivision, combination or reclassification, to the
close of business on the day upon which such corporate action becomes
effective.
(ii) If the Corporation shall at any time or from time to time
issue or sell any shares of Common Stock or Common Stock Equivalents
at a price per share (the "Offering Price") that is less than the
Conversion Price then in effect as of the record date or Issue Date
referred to in the following sentence, as the case may be (the
"Relevant Date") (treating the Offering Price per share of Common
Stock, in the case of the issuance of any Common Stock Equivalent, as
equal to (x) the sum of the price for such Common Stock Equivalent
plus any additional consideration payable (without regard to any
anti-dilution adjustments) upon the conversion, exchange or exercise
of such Common Stock Equivalent divided by (y) the number of shares
of Common Stock initially underlying such Common Stock Equivalent),
other than (1) issuances or
<PAGE> 11
sales for which an adjustment is made pursuant to another paragraph
of this Section 7(d) and (2) issuances of Common Stock in connection
with an Excluded Transaction, then, and in each such case, the
Conversion Price then in effect shall be adjusted to a price equal to
such Offering Price. Such adjustment shall be made whenever such
shares of Common Stock or Common Stock Equivalents are issued, and
shall become effective retroactively to a date immediately following
the close of business (x) in the case of an issuance to the
stockholders of the Corporation, as such, on the record date for the
determination of stockholders entitled to receive such shares of
Common Stock or Common Stock Equivalents and (y) in all other cases,
on the date (the "Issue Date") of such issuance; provided, however,
that the determination as to whether an adjustment is required to be
made pursuant to this Section 7(d)(ii) shall only be made upon the
issuance of such shares of Common Stock or Common Stock Equivalents,
and not upon the issuance of the security into which such Common
Stock Equivalents convert, exchange or may be exercised; and provided
further, that if the convertibility or exercisability feature of all
such Common Stock Equivalents expires prior to conversion or exercise
thereof, then the Conversion Price shall be readjusted (but to no
greater extent than originally adjusted) to a Conversion Price equal
to that price which would have existed had the expired Common Stock
Equivalents never been issued or sold.
(iii) In the case the Corporation, at any time or from time to
time, shall take any action affecting its Common Stock similar to or
having an effect similar to any of the actions described in
paragraphs 7(d)(i) or (ii) (but not including any action described in
any such paragraph) and the Board of Directors in good faith
determines that it would be equitable in the circumstances to adjust
the Conversion Price as a result of such action, then, and in each
such case, the Conversion Price shall be adjusted in such manner and
at such time as the Board of Directors of the Corporation in good
faith determines would be equitable in the circumstances (such
determination to be evidenced in a resolution, a certified copy of
which shall be mailed to the holders of the shares of Series A
Preferred Stock).
(iv) Notwithstanding anything herein to the contrary, no
adjustment under this paragraph 7(d) need be made to the Conversion
Price unless such adjustment would require an increase or decrease of
at least 1% of the Conversion Price then in effect. Any lesser
adjustment shall be carried forward and shall be made at the time of
and together with the next subsequent adjustment, which, together
with any adjustment or adjustments so carried forward, shall amount
to an increase or decrease of at least 1% of such Conversion Price.
Any adjustment to the Conversion Price carried forward and not
theretofore made shall be made immediately
<PAGE> 12
prior to the conversion of any shares of Series A Preferred Stock
pursuant hereto.
(e) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Price then in
effect shall be required by reason of the taking of such record.
(f) Upon any increase or decrease in the Conversion Price, then,
and in each such case, the Corporation promptly shall deliver to each
registered holder of Series A Preferred Stock at least ten (10) Business
Days prior to effecting any of the foregoing transactions a certificate, signed
by the President or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Corporation, setting
forth in reasonable detail the event requiring the adjustment and the method by
which such adjustment was calculated and specifying the increased or decreased
Conversion Price then in effect following such adjustment.
(g) In case at any time or from time to time:
(i) the Corporation shall declare a dividend (or any other
distribution) on its shares of Common Stock;
(ii) the Corporation shall authorize the granting to the
holders of its Common Stock of rights or warrants to subscribe for or
purchase any shares of stock of any class or of any other rights or
warrants;
(iii) there shall be any reorganization or reclassification of
the Common Stock, or any merger or consolidation to which the
Corporation is a party and for which approval of any of the
stockholders of the Corporation is required, or any sale or other
disposition of all or substantially all of the assets of the
Corporation; or
(iv) there shall occur a Liquidation Event;
then the Corporation shall mail to each holder of shares of Series A
Preferred Stock at such holder's address as it appears on the transfer books of
the Corporation, as promptly as possible but in any event at least thirty (30)
days prior to the applicable date hereinafter specified, a notice stating (A)
the date on which a record is to be taken for the purpose of such dividend,
distribution or rights or warrants or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution or rights are to be determined, or (B) the date on which
such reclassification, reorganization, merger, consolidation, sale, disposition
or Liquidation Event is expected to become effective. Such notice also shall
specify the date as of
<PAGE> 13
which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for shares of stock or other securities
or property or cash deliverable upon such reclassification, reorganization,
merger, consolidation, sale, exchange, transfer, liquidation, dissolution or
winding up.
(h) The Corporation shall at all times reserve and keep
available for issuance upon the conversion of the Series A Preferred
Stock, such number of its authorized but unissued shares of Common Stock as will
from time to time be sufficient to permit the conversion of all outstanding
shares of Series A Preferred Stock, and shall take all action required to
increase the authorized number of shares of Common Stock if at any time there
shall be insufficient authorized but unissued shares of Common Stock to permit
such reservation or to permit the conversion of all outstanding shares of Series
A Preferred Stock.
(i) The issuance or delivery of certificates for Common Stock
upon the conversion of shares of Series A Preferred Stock shall be made without
charge to the converting holder of shares of Series A Preferred Stock for
such certificates or for any tax in respect of the issuance or delivery of such
certificates or the securities represented thereby, and such certificates shall
be issued or delivered in the respective names of, or (subject to compliance
with the applicable provisions of federal and state securities laws) in such
names as may be directed by, the holders of the shares of Series A Preferred
Stock converted; provided, however, that the Corporation shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate in a name other than that of the
holder of the shares of Series A Preferred Stock converted, and the Corporation
shall not be required to issue or deliver such certificate unless or until the
Person or Persons requesting the issuance or delivery thereof shall have paid to
the Corporation the amount of such tax or shall have established to the
reasonable satisfaction of the Corporation that such tax has been paid.
8. Automatic Conversion. Each share of Series A Preferred Stock
shall automatically be converted into such number of fully paid and
nonassessable shares of Common Stock at the then applicable Conversion Price in
accordance with Section 7 hereof upon the earlier of (i) the Corporation
achieving average volume of at least five million shares per day transacted
through its proprietary OptiMark(TM) securities trading system for the latest
twelve month period and operating profit, as normally recorded on the
Corporation's books and records, over the same twelve month period of at least
$10,000,000 and (ii) automatic conversion of all outstanding shares of the
Corporation's Series B Convertible Participating Preferred Stock, $.01 par value
("Series B Stock"), pursuant to Section 7(ii) of the Certificate of Powers,
Designations, Preferences and Rights of the Series B Stock on file with the
Delaware Secretary of State. In the latter event, the Person(s) entitled to
receive the shares of Common Stock issuable upon such conversion of the Series A
Preferred Stock shall not be deemed to have converted the Series A Preferred
Stock until immediately after the closing of the Corporation's initial public
offering, except that any such Person may convert its shares of Series A
Preferred Stock at an earlier time in accordance with Section 7.
<PAGE> 14
9. Certain Remedies. Any registered holder of Series A Preferred
Stock shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Certificate of Designations and to enforce
specifically the terms and provisions of this Certificate of Designations in any
court of the United States or any state thereof having jurisdiction, this being
in addition to any other remedy to which such holder may be entitled at law or
in equity.
10. Reissuance of Series A Preferred Stock. Shares of Series A
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or converted, shall (upon compliance with any applicable
provisions of the laws of Delaware) have the status of authorized and unissued
shares of Preferred Stock undesignated as to series and may be redesignated and
reissued as part of any series of preferred stock (other than Series A
Preferred Stock).
11. Business Day. If any payment shall be required by the terms
hereof to be made on a day that is not a Business Day, such payment shall be
made on the immediately succeeding Business Day.
12. Definitions. As used in this Certificate of Designations, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Board of Directors" means the Board of Directors of the
Corporation.
"Business Day" means any day except a Saturday, a Sunday, or
other day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting or non-voting) of, such Person's capital stock
and any and all rights, warrants or options exchangeable for or convertible
into such capital stock (but, solely for the purposes of paragraph 2, excluding
any debt security that is exchangeable for or convertible into such capital
stock).
"Commission" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" shall have the meaning ascribed to it in
paragraph 2 hereof.
"Common Stock Equivalents" means any security or obligation
which is by its terms convertible into or exchangeable for shares of Common
Stock, including,
<PAGE> 15
without limitation, the Series A Preferred Stock, and any option, warrant or
other subscription or purchase right with respect to shares of Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, and
the rules and regulations of the Commission promulgated thereunder.
"Excluded Transaction" shall mean (i) the issuance of up to
6,534,268 shares of Common Stock pursuant to options, warrants and compensatory
stock grants, issued and reserved for issuance as incentives for the
Corporation's officers, directors, employees, former employees and consultants,
(ii) the issuance pursuant to a warrant in favor of The Pacific Exchange,
Incorporated dated August 27, 1996, of up to 2,104,000 shares of Common Stock
(subject to adjustment as provided therein), (iii) the issuance pursuant to a
warrant in favor of The Chicago Board Options Exchange, Incorporated dated
December 31, 1996, of up to 1,000,000 shares of Common Stock (subject to
adjustment as provided therein), (iv) the issuance pursuant to a warrant in
favor of Dow Jones & Company, Inc. dated May 29, 1997, of up to 2,161,764 shares
of Common Stock (subject to adjustment as provided therein), (v) the issuance of
Common Stock pursuant to a warrant expected to be negotiated with the National
Association of Securities Dealers, Inc. or one of its affiliates, as an
incentive to make the Corporation's proprietary OptiMark(TM) trading system
available on NASDAQ, (vi) the issuance of Common Stock upon conversion of the
Series A Stock, and (vii) the issuance pursuant to a warrant in favor of
Virginia Surety Company, Inc. dated April 23, 1998, of up to 500,000 shares of
Common Stock (subject to adjustment as provided therein).
"Fair Market Value" shall mean the amount which a willing buyer
would pay a willing seller in an arm's length transaction.
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, governmental body or other entity of any
kind.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
* * * * *
<PAGE> 16
Exhibit B
(to Amended and Restated Certificate of Incorporation of OptiMark Technologies,
Inc.)
CERTIFICATE OF POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES B CONVERTIBLE PARTICIPATING PREFERRED STOCK,
PAR VALUE $.01 PER SHARE
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The following resolution was duly adopted by the Board of Directors of OptiMark
Technologies, Inc., a Delaware corporation (the "Corporation"), pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, effective as of April 15, 1998, by unanimous written consent of the
Board of Directors.
WHEREAS, the Board of Directors is authorized, within the limitations and
restrictions stated in the Restated Certificate of Incorporation of the
Corporation, to provide by resolution or resolutions for the issuance of shares
of Preferred Stock, par value $.01 per share, of the Corporation, in one or more
series with such voting powers, full or limited, or without voting powers, and
such designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions as shall be
stated and expressed in the resolution or resolutions providing for the issuance
thereof adopted by the Board of Directors, and as are not stated and expressed
in the Certificate of Incorporation, or any amendment thereto, including (but
without limiting the generality of the foregoing) such provisions as may be
desired concerning voting, redemption, dividends, dissolution or the
distribution of assets and such other subjects or matters as may be fixed by
resolution or resolutions of the Board of Directors under the General
Corporation Law of the State of Delaware; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its authority
as aforesaid, to authorize and fix the terms of a series of preferred stock and
the number of shares constituting such series.
NOW THEREFORE, BE IT RESOLVED:
1. Designation and Number of Shares. There is hereby established a
series of Preferred Stock of the Corporation designated as "Series B
Convertible Participating Preferred Stock" (the "Series B Stock"). The
authorized number of shares of Series B Stock shall be six million (6,000,000).
<PAGE> 17
2. Dividends.
(a) If the Board of Directors of the Corporation shall declare a
dividend or make any other distribution (including, without limitation,
in cash, evidences of indebtedness of the Corporation or another issuer,
securities of the Corporation or another issuer, or other property or assets),
to holders of shares of Common Stock, then the holder of each share of Series B
Stock theretofore issued shall be entitled to receive, out of funds legally
available therefor, a dividend or distribution in an amount equal to the amount
of such dividend or distribution received by a holder of the number of shares of
Common Stock for which such share of Series B Stock is convertible on the record
date for such dividend or distribution. Any such amount shall be paid to the
holders of shares of Series B Stock at the same time such dividend or
distribution is made to holders of Common Stock.
(b) Except as otherwise provided in paragraph (a) above, the
Series B Stock shall not be entitled to any dividends.
3. Liquidation Preference.
(a) In connection with any Liquidation of the Corporation, (i) if
the assets of the Corporation available for distribution to the
stockholders are sufficient both to pay the Series A Liquidation Amount with
respect to each outstanding share of Series A Stock and to pay the Series B
Liquidation Amount with respect to each outstanding share of Series B Stock,
then the holders of Series B Stock then outstanding shall be entitled to be paid
the Series B Liquidation Amount for each share of Series B Stock held thereby,
(ii) if the assets of the Corporation available for distribution to the
stockholders are not sufficient so to pay both the Series A Liquidation Amount
and the Series B Liquidation Amount, then the holders of the outstanding shares
of Series A Stock and Series B Stock shall share pari passu in the distribution
of available assets, pro rata to the amounts that would have been payable to
such holders if the assets of the Corporation available for distribution to the
stockholders in Liquidation had been sufficient to pay both the Series A
Liquidation Amount and the Series B Liquidation Amount in full, and (iii) the
Series B Liquidation Amount must be paid in full with respect to each
outstanding share of Series B Stock before any payment shall be made or any
assets distributed to the holders of any shares of Common Stock or any other
securities which, by their terms, have expressly been made junior to the Series
B Stock in Liquidation.
(b) Written notice of any Liquidation, stating a payment date,
the amount of the payment determined pursuant to this paragraph 3 and the
place where such amount shall be payable, shall be delivered in person, mailed
by certified or registered mail, return receipt requested, mailed by overnight
mail or sent by telecopier, not less than ten (10) days prior to the payment
date stated therein, to the holders of record of the Series B Stock, such notice
to be addressed to each such holder at its address as shown by the records of
the Corporation.
<PAGE> 18
(c) The fair value of the assets to be distributed or exchanged
(to the extent that distributions are not made in cash) in the event of
Liquidation shall be determined as provided in the Certificate of Designations
on file with the Delaware Secretary of State with respect to the Series A Stock
(the "Series A Certificate").
(d) For purposes of this Certificate of Designations, (i)
"Liquidation" means any voluntary or involuntary liquidation, dissolution
or winding-up of the Corporation, under the U.S. Bankruptcy Code or otherwise,
(ii) "Series A Stock" means the Corporation's Series A Convertible Participating
Preferred Stock, $.01 par value, (iii) the "Series A Liquidation Amount" means
the amount payable upon Liquidation to the holders of the Series A Stock, as
provided in the Series A Certificate, and (iv) the "Series B Liquidation Amount"
means Ten Dollars ($10.00) per share of Series B Stock plus all declared and
unpaid dividends thereon (if any) through the effective date of Liquidation.
4. Redemption. The shares of Series B Stock shall not be redeemable
at the option of the Corporation or at the option of any holder thereof.
5. Voting Rights; Election of Directors. Each issued and outstanding
share of Series B Stock shall entitle the holder thereof to vote, in
person or by proxy, at each special and annual meeting of stockholders of the
Corporation, on all matters entitled to be voted on by holders of voting Common
Stock. To the maximum extent permitted by law, on all matters submitted to a
vote of the stockholders, the holders of the Series B Stock shall vote as a
single class together with the holders of voting Common Stock and with all other
shares (including the outstanding shares of Series A Stock) entitled to vote
with the voting Common Stock thereon. With respect to any such vote, each share
of Series B Stock shall entitle the holder thereof to cast that number of votes
per share as is equal to the number of votes that such holder would be entitled
to cast had such holder converted its shares of Series B Stock into shares of
Common Stock on the record date for determining the stockholders of the
Corporation eligible to vote on such matters.
6. Conversion.
(a) Any holder of Series B Stock shall have the right, at its
option, at any time and from time to time, to convert, subject to the
terms and provisions of this paragraph 6, any or all of such holder's shares of
Series B Stock into such number of fully paid and nonassessable shares of voting
Common Stock as is equal to the product of the number of shares of Series B
Stock being so converted multiplied by the quotient of (i) the Liquidation
Amount, divided by (ii) the conversion price of $10.00 per share, subject to
adjustment as provided in paragraph 6(c) (the "Conversion Price"), then in
effect. Such conversion right shall be exercised by the surrender of the shares
of Series B Stock to be converted to the Corporation at any time during usual
business hours at its principal place of business to be maintained by it,
accompanied by written notice that the holder elects to convert such shares of
Series B Stock and specifying the name or names (with address) in which a
certificate or certificates for shares of voting Common Stock are to be issued
and (if so required by the Corporation) by a written instrument or
<PAGE> 19
instruments of transfer in form reasonably satisfactory to the
Corporation duly executed by the holder or its duly authorized legal
representative and transfer tax stamps or funds therefor, if required pursuant
to paragraph 6(h).
(b) As promptly as practicable after the surrender, as herein
provided, of any shares of Series B Stock for conversion pursuant to
paragraph 6(a), the Corporation shall deliver to or per the written order of the
holder of such shares of Series B Stock so surrendered a certificate or
certificates representing the number of fully paid and nonassessable shares of
voting Common Stock into which such shares of Series B Stock may be or have been
converted in accordance with the provisions of this paragraph 6. Subject to the
following provisions of this paragraph and of paragraph 6(c), such conversion
shall be deemed to have been made immediately prior to the close of business on
the date that such shares of Series B Stock shall have been surrendered in
satisfactory form for conversion, and the Person or Persons entitled to receive
the shares of Common Stock deliverable upon conversion of such shares of Series
B Stock shall be treated for all purposes as having become the record holder or
holders of such shares of Common Stock at such appropriate time, and such
conversion shall be at the Conversion Price in effect at such time; provided,
however, that no surrender shall be effective to constitute the Person or
Persons entitled to receive the shares of Common Stock deliverable upon such
conversion as the record holder or holders of such shares of Common Stock while
the share transfer books of the Corporation shall be closed (but not for any
period in excess of five days), but such surrender shall be effective to
constitute the Person or Persons entitled to receive such shares of Common Stock
as the record holder or holders thereof for all purposes immediately prior to
the close of business on the next succeeding day on which such share transfer
books are open, and such conversion shall be deemed to have been made at, and
shall be made at the Conversion Price in effect at, such time on such next
succeeding day.
(c) The Conversion Price shall also be subject to adjustment as
follows:
(i) In the event that the Corporation shall at any time
or from time to time (w) pay a dividend or make a distribution (other
than a dividend or distribution paid or made to holders of shares of Series B
Stock in the manner provided in paragraph 2) on the outstanding shares of Common
Stock in Capital Stock, (x) subdivide the outstanding shares of Common Stock
into a larger number of shares, (y) combine the outstanding shares of Common
Stock into a smaller number of shares or (z) issue any shares of its Capital
Stock in a reclassification of the Common Stock, then, and in each such case,
the Conversion Price in effect immediately prior to such event shall be adjusted
(and any other appropriate actions shall be taken by the Corporation) so that
the holder of any share of Series B Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of voting Common Stock or
other securities of the Corporation that such holder would have owned or to
which such holder would have been entitled to receive upon or by reason of any
of the events described above, had such share of Series B Stock been converted
into Common Stock immediately prior to the occurrence of such event. An
adjustment made pursuant to this paragraph 6(c)(i) shall become effective
retroactively (x) in the case of any such dividend or distribution, to a
<PAGE> 20
date immediately following the close of business on the record date for
the determination of holders of Common Stock entitled to receive such dividend
or distribution, or (y) in the case of any such subdivision, combination or
reclassification, to the close of business on the day upon which such corporate
action becomes effective.
(ii) If the Corporation shall at any time or from time to
time issue or sell any shares of Common Stock or Common Stock Equivalents
at a price per share (the "Offering Price") that is less than the Conversion
Price then in effect as of the record date or Issue Date referred to in the
following sentence, as the case may be (the "Relevant Date") (treating the
Offering Price per share of Common Stock, in the case of the issuance of any
Common Stock Equivalent, as equal to (x) the sum of the price for such Common
Stock Equivalent plus any additional consideration payable (without regard to
any anti-dilution adjustments) upon the conversion, exchange or exercise of such
Common Stock Equivalent, divided by (y) the number of shares of Common Stock
initially underlying such Common Stock Equivalent), other than (1) issuances or
sales for which an adjustment is made pursuant to another paragraph of this
Section 6(c) and (2) issuances of Common Stock in connection with an Excluded
Transaction, then, and in each such case, the Conversion Price then in effect
shall be reduced, concurrently with such issuance, to a price determined by
multiplying such Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock that the aggregate
consideration received by the Corporation for the total number of additional
shares of Common Stock or Common Stock Equivalents so issued would purchase at
such Conversion Price; and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of such additional shares of Common Stock or Common Stock Equivalents so
issued. Such adjustment shall be made whenever such shares of Common Stock or
Common Stock Equivalents are issued, and shall become effective retroactively to
a date immediately following the close of business (x) in the case of an
issuance to the stockholders of the Corporation, as such, on the record date for
the determination of stockholders entitled to receive such shares of Common
Stock or Common stock Equivalents and (y) in all other cases, on the date (the
"Issue Date") of such issuance; provided, however, that the determination as to
whether an adjustment is required to be made pursuant to this Section 6(c)(ii)
shall only be made upon the issuance of such shares of Common Stock or Common
Stock Equivalents, and not upon the issuance of the security into which such
Common Stock Equivalents convert, exchange or may be exercised; and provided
further, that if and to the extent that the convertibility or exercisability
feature of such Common Stock Equivalents expires prior to conversion or exercise
thereof, then the Conversion Price shall be readjusted (but to no greater extent
than originally adjusted) to a Conversion Price equal to that price which would
have existed had the expired Common Stock Equivalents never been issued or sold.
(iii) In the case the Corporation, at any time or from time
to time, shall take any action affecting its Common Stock similar to or
having an effect similar to any of the actions described in paragraphs 6(c)(i)
or (ii) (but not including any action described in any such paragraphs) and the
Board of Directors in good faith
<PAGE> 21
determines that it would be equitable in the circumstances to adjust the
Conversion Price as a result of such action, then, and in each such case, the
Conversion Price shall be adjusted in such manner and at such time as the Board
of Directors of the Corporation in good faith determines would be equitable in
the circumstances (such determination to be evidenced in a resolution, a
certified copy of which shall be mailed to the holders of the shares of Series B
Stock).
(d) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Price then in
effect shall be required by reason of the taking of such record.
(e) Upon any increase or decrease in the Conversion Price, then,
and in each such case, the Corporation promptly shall deliver to each
registered holder of Series B Stock at least ten (10) Business Days prior to
effecting any of the foregoing transactions a certificate, signed by the
President or a Vice President and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Corporation, setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the increased or decreased
Conversion Price then in effect following such adjustment.
(f) In case at any time or from time to time:
(i) The Corporation shall declare a dividend (or any
other distribution) on its shares of Capital Stock;
(ii) the Corporation shall authorize the granting to the
holders of its Capital Stock of rights or warrants to subscribe for or purchase
any shares of stock of any class or of any other rights or warrants;
(iii) there shall be any reorganization or
reclassification of the Capital Stock of the Corporation, or any merger or
consolidation to which the Corporation is a party and for which approval
of any of the stockholders of the Corporation is required, or any sale or other
disposition of all or substantially all of the assets of the Corporation; or
(iv) there shall occur a Liquidation;
then the Corporation shall mail to each holder of shares of Series B Stock at
such holder's address as it appears on the transfer books of the Corporation, as
promptly as possible but in any event at least thirty (30) days prior to the
applicable date hereinafter specified, a notice stating (A) the date on which a
record is to be taken for the purpose of such dividend, distribution, rights or
warrants or, if a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distribution or rights
are to be determined, or (B) the date on which such reclassification,
<PAGE> 22
reorganization, merger, consolidation, sale, disposition or Liquidation
is expected to become effective. Such notice also shall specify the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their Common Stock for shares of stock or other securities or property
or cash deliverable upon such reclassification, reorganization, merger,
consolidation, sale, exchange, transfer or Liquidation.
(g) The Corporation shall at all times reserve and keep available
for issuance upon the conversion of the Series B Stock, such number of
its authorized but unissued shares of voting Common Stock as will from time to
time be sufficient to permit the conversion of all outstanding shares of Series
B Stock, and shall take all action required to increase the authorized number of
shares of voting Common Stock if at any time there shall be insufficient
authorized but unissued shares of Common Stock to permit such reservation or to
permit the conversion of all outstanding shares of Series B Stock.
(h) The issuance or delivery of certificates for Common Stock
upon the conversion of shares of Series B Stock shall be made without
charge to the converting holder of shares of Series B Stock for such
certificates or for any tax in respect of the issuance or delivery of such
certificates or the securities represented thereby, and such certificates shall
be issued or delivered in the respective names of, or (subject to compliance
with the applicable provisions of federal and state securities laws) in such
names as may be directed by, the holders of the shares of Series B Stock
converted; provided, however, that the Corporation shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificate in a name other than that of the holder of
the shares of Series B Stock converted, and the Corporation shall not be
required to issue or deliver such certificate unless or until the Person
requesting the issuance or delivery thereof shall have paid to the Corporation
the amount of such tax or shall have established to the reasonable satisfaction
of the Corporation that such tax has been paid.
7. Automatic Conversion. Each share of Series B Stock shall
automatically be converted into such number of fully paid and
nonassessable shares of voting Common Stock at the then applicable Conversion
Price in accordance with Section 6 hereof upon the earlier of (i) the
Corporation achieving average volume of at least five million (5,000,000) shares
per day transacted through its proprietary OptiMark(TM) trading system for the
latest twelve month period and operating profit, as normally recorded on the
Corporation's books and records, over the same twelve month period of at least
$10,000,000, or (ii) immediately after the closing of an underwritten initial
public offering ("IPO") pursuant to an effective registration statement filed
under the Securities Act covering the offer and sale of shares of Common Stock
for the account of the Corporation at a price per share of Common Stock that is
not less that twice (200% of) the then applicable Conversion Price and resulting
in aggregate gross proceeds to the Corporation of at least $10,000,000. In the
event of an IPO, the Person(s) entitled to receive the shares of Common Stock
issuable upon such conversion of the Series B Stock shall not be deemed to have
converted the Series B Stock until immediately after the
<PAGE> 23
closing of such offering, except that any such Person may convert its
shares of Series B Stock at any earlier time in accordance with paragraph 6.
8. Certain Remedies. Any registered holder of Series B Stock shall be
entitled to an injunction or injunctions to prevent breaches of the
provisions of this Certificate of Designations and to enforce specifically the
terms and provisions of this Certificate of Designations in any court of the
United States or any state thereof having jurisdiction, this being in addition
to any other remedy to which such holder may be entitled at law or in equity.
9. Reissuance of Series B Stock. Shares of Series B Stock that have
been issued and reacquired in any manner, including shares redeemed or
converted, shall (upon compliance with any applicable provisions of the laws of
Delaware) have the status of authorized and unissued shares of Preferred Stock
of the Corporation, undesignated as to series, and may be redesignated and
reissued as part of any series of preferred stock (including Series B Stock).
10. Amendment. This Certificate of Designations may be amended with
(and only with) the written consent of (i) the Corporation, and (ii) the
holders of not less than 75% of the outstanding shares of Series B Stock.
11. Definitions. As used in this Certificate of Designation, in addition
to other capitalized terms defined elsewhere in this Certificate, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Board of Directors" means the Board of Directors of the Corporation.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting or nonvoting) of such Person's capital stock and
any and all rights, warrants or options exchangeable for or convertible into
such capital stock.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" means the Corporation's common stock (including both
voting and nonvoting common stock), $.01 par value per share.
"Common Stock Equivalents" means any security or obligation which
is by its terms convertible into or exchangeable for shares of Common
Stock, including, without limitation, the Series A Stock, the Series B Stock,
and any option, warrant or other subscription or purchase right with respect to
shares of Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, and the
rules and regulations of the Commission promulgated thereunder.
<PAGE> 24
"Excluded Transaction" shall mean (i) the issuance of up to
6,534,268 shares of Common Stock pursuant to options, warrants and compensatory
stock grants, issued and reserved for issuance as incentives for the
Corporation's officers, directors, employees, former employees and consultants,
(ii) the issuance pursuant to a warrant in favor of The Pacific Exchange,
Incorporated dated August 27, 1996, of up to 2,104,000 shares of Common Stock
(subject to adjustment as provided therein), (iii) the issuance pursuant to a
warrant in favor of The Chicago Board Options Exchange, Incorporated dated
December 31, 1996 of up to 1,000,000 shares of Common Stock (subject to
adjustment as provided therein), (iv) the issuance pursuant to a warrant in
favor of Dow Jones & Company, Inc. dated May 29, 1997, of up to 2,161,764 shares
of Common Stock (subject to adjustment as provided therein), (v) the issuance of
Common Stock pursuant to a warrant expected to be negotiated with the National
Association of Securities Dealers, Inc. or one of its affiliates, as an
incentive to make the Corporation's proprietary OptiMark(TM) trading system
available on NASDAQ, (vi) the issuance of Common Stock upon conversion of the
Series A Stock, and (vii) the issuance pursuant to a warrant in favor of
Virginia Surety Company, Inc. dated April 23, 1998, of up to 500,000 shares of
Common Stock (subject to adjustment as provided therein).
"Fair Market Value" shall mean the amount which a willing buyer
would pay a willing seller in an arm's length transaction.
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, governmental body or other entity of any
kind.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Shares outstanding" or "Shares then outstanding" means all
shares of Common Stock outstanding and all shares of Common Stock
issuable upon conversion, exercise or exchange of any option, warrant or other
security or obligation which is, by its terms, convertible, exercisable or
exchangeable into shares of Common Stock, whether or not such conversion,
exercise or exchange has actually been effected.
* * * * *
<PAGE> 25
OPTIMARK TECHNOLOGIES, INC.
CERTIFICATE OF INCREASE
TO THE
CERTIFICATE OF THE POWERS, DESIGNATIONS, PREFERENCES AND RIGHTS OF THE
SERIES B CONVERTIBLE PARTICIPATING STOCK,
PAR VALUE $.01 PER SHARE
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
1. On April 28, 1998, by authority reserved to the board of directors
in its Certificate of Incorporation, the undersigned OptiMark
Technologies, Inc., a Delaware corporation (the "Corporation"),
filed with the Delaware Secretary of State a Certificate of Powers,
Designations, Preferences and Rights (the "Certificate of
Designations") with respect to 6,000,000 shares of Series B
Convertible Participating Preferred Stock (the "Series B Stock").
The Certificate of Designations subsequently was incorporated
verbatim as Exhibit B to the Company's Amended and Restated
Certificate of Incorporation filed with the Delaware Secretary of
State on May 29, 1998.
2. Effective June 9, 1998, the board of directors of the Corporation
duly adopted a resolution authorizing and directing an increase in
the number of authorized shares of Series B Stock to 10,000,000
shares. Accordingly, pursuant to Section 151(g) of the Delaware
General Corporation Law, the second sentence of Section 1 of the
Certificate of Designations is hereby amended to read in its
entirety as follows:
"The authorized number of shares of Series B Preferred
Stock shall be 10,000,000."
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Increase to be duly executed by its Chief Executive Officer as of this 9th day
of June, 1998.
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
Chief Executive Officer
<PAGE> 26
OPTIMARK TECHNOLOGIES, INC.
CERTIFICATE OF INCREASE
TO THE
CERTIFICATE OF THE POWERS, DESIGNATIONS, PREFERENCES AND RIGHTS OF THE
SERIES B CONVERTIBLE PARTICIPATING STOCK,
PAR VALUE $.01 PER SHARE
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
1. On April 28, 1998, by authority reserved to the board of directors
in its Certificate of Incorporation, the undersigned OptiMark
Technologies, Inc., a Delaware corporation (the "Corporation"),
filed with the Delaware Secretary of State a Certificate of Powers,
Designations, Preferences and Rights (the "Certificate of
Designations") with respect to 6,000,000 shares of Series B
Convertible Participating Preferred Stock (the "Series B Stock").
The Certificate of Designations subsequently was incorporated
verbatim as Exhibit B to the Company's Amended and Restated
Certificate of Incorporation filed with the Delaware Secretary of
State on May 29, 1998. The Certificate of Designations was
subsequently amended to increase the number of authorized shares of
Series B Stock to 10,000,000 shares pursuant to that Certificate of
Increase filed with the Delaware Secretary of State on June 15,
1998.
2. Effective September 21, 1998, the board of directors of the
Corporation duly adopted a resolution authorizing and directing an
increase in the number of authorized shares of Series B Stock to
11,000,000 shares. Accordingly, pursuant to Section 151(g) of the
Delaware General Corporation Law, the second sentence of Section 1
of the Certificate of Designations is hereby amended to read in its
entirety as follows:
"The authorized number of shares of Series B Preferred Stock
shall be 11,000,000."
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Increase to be duly executed by its Chief Executive Officer as of this 21st day
of September, 1998.
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
Chief Executive Officer
<PAGE> 27
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF FIRST AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
OPTIMARK TECHNOLOGIES, INC.
OptiMark Technologies, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware,
does hereby certify as follows:
First: That the document (the "Document") evidencing the Certificate
of First Amendment to Restated Certificate of Incorporation of OptiMark
Technologies, Inc., filed with the Secretary of State of the State of Delaware
on January 14, 1998 is an inaccurate record of the corporate action referred to
therein.
Second: That the Document is inaccurate in that (i) it was titled and
filed as a First Amendment to the Corporation's Restated Certificate of
Incorporation, and made reference to the Corporation's Restated Certificate of
Incorporation, when, in fact, the Company had not properly filed a Restated
<PAGE> 28
2.
Certificate of Incorporation, and (ii) it purported to amend all of
Article 6, rather than only the first paragraph thereof.
Third: That each reference in the title and body of the Document to
the "First Amendment to Restated Certificate of Incorporation" be corrected to
read "Amendment to Certificate of Incorporation" and that each reference
to the "Restated Certificate of Incorporation" in the Document be corrected to
read "Certificate of Incorporation."
Fourth: That the second paragraph of the Document is corrected to read
as follows:
The first paragraph of Article 6 of the Certificate of
Incorporation is hereby amended by deleting the provisions
thereof in their entirety and replacing such provisions with
the following:
<PAGE> 29
3.
IN WITNESS WHEREOF, OptiMark Technologies, Inc., has
caused this Certificate of Correction to be signed by its duly authorized
officer this 29th day of March, 1998.
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
--------------------
<PAGE> 30
CORRECTED CERTIFICATE
OF
CERTIFICATE OF CORRECTION
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
OPTIMARK TECHNOLOGIES, INC.
OptiMark Technologies, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, does
hereby certify as follows:
The Certificate of Correction to the Restated Certificate of
Incorporation of OptiMark Technologies, Inc. filed with the Secretary of
State on April 28, 1998 was an inaccurate record of the corporate action
referred to therein in that it did not set forth in correct form the portion of
the instrument to be corrected. The corrected instrument is set forth in its
entirety on Exhibit A hereto.
IN WITNESS WHEREOF, OptiMark Technologies, Inc. has caused this
Certificate of Correction to be signed by its duly authorized officer this
29th day of March, 1999.
<PAGE> 31
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
--------------------
-2-
<PAGE> 32
EXHIBIT A
CERTIFICATE OF CORRECTION
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
OPTIMARK TECHNOLOGIES, INC.
OptiMark Technologies, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, does
hereby certify as follows:
First: That the document (the "Document") evidencing the Restated
Certificate of Incorporation of OptiMark Technologies, Inc. filed with the
Secretary of the State of Delaware on May 29, 1997 is an inaccurate record of
the corporate action referred to therein.
Second: That the Document is inaccurate in that it was titled and filed
as a Restated Certificate of Incorporation when, in fact, an amendment to the
Company's Certificate of Incorporation was duly adopted by the directors
and stockholders of the Corporation, and, therefore, a Certificate of Amendment
of Certificate of Incorporation should instead have been filed with the
Secretary of State of Delaware and, furthermore, the text of Article 6 set forth
in the Document omitted language effecting a stock split that had been duly
adopted by the directors and stockholders of the Corporation.
<PAGE> 33
Third: That the title and text of the Document in correct form is
attached hereto as Exhibit 1.
-2-
<PAGE> 34
EXHIBIT 1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
OPTIMARK TECHNOLOGIES, INC.
OptiMark Technologies, Inc., a corporation duly organized and existing
under the General Corporation Law of the State of Delaware (the "DGCL"), does
hereby certify as follows:
First: The first paragraph of Article 6 of the Certificate of
Incorporation of the Corporation is hereby amended to read in its entirety as
follows:
6. Shares of Stock. The total number of shares of
capital stock which the Corporation is authorized to
issue is ninety million (90,000,000), consisting of
eighty million (80,000,000) shares of Common Stock, One
Cent ($0.01) par value per share and ten million
(10,000,000) shares of Preferred Stock, One Cent ($0.01)
par value per share. The board of directors of the
Corporation is expressly granted the authority to fix by
one or more resolutions from time to time, the
designations, powers, preferences and rights, and the
qualifications, limitations and restrictions, of the
Preferred Stock. Each share of Common Stock shall be
equal to every other share of Common Stock for voting
and all other purposes. Upon the effectiveness of the
Certificate of Amendment containing this sentence, each
outstanding share of Common Stock shall be changed and
subdivided into four shares of Common Stock.
<PAGE> 35
Second: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the DGCL.
-2-
<PAGE> 36
CERTIFICATE OF POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES C CONVERTIBLE PREFERRED STOCK,
PAR VALUE $.01 PER SHARE
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The following resolution was duly adopted by the Board of Directors of
OptiMark Technologies, Inc., a Delaware corporation (the "Corporation"),
pursuant to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, effective as of June 11, 1999, by unanimous written consent
of the Board of Directors.
WHEREAS, the Board of Directors is authorized, within the limitations and
restrictions stated in the Amended and Restated Certificate of Incorporation of
the Corporation, (the "Certificate of Incorporation") to provide by resolution
or resolutions for the issuance of shares of Preferred Stock, par value $.01 per
share, of the Corporation, in one or more classes or series with such voting
powers, full or limited, or without voting powers, and such designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions as shall be stated and expressed in
the resolution or resolutions providing for the issuance thereof adopted by the
Board of Directors, and as are not stated and expressed in the Certificate of
Incorporation, or any amendment thereto, including (but without limiting the
generality of the foregoing) such provisions as may be desired concerning
voting, redemption, dividends, dissolution or the distribution of assets and
such other subjects or matters as may be fixed by resolution or resolutions of
the Board of Directors under the General Corporation Law of the State of
Delaware; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to authorize and fix the terms of a series of preferred
stock and the number of shares constituting such series.
NOW THEREFORE, BE IT RESOLVED:
1. Designation and Number of Shares. There is hereby established a series
of Preferred Stock of the Corporation designated as "Series C Convertible
Preferred Stock" (the "Series C Stock"). The authorized number of shares of
Series C Stock shall be eight million two hundred fifty thousand (8,250,000).
<PAGE> 37
2. Dividends.
(a) If the Board of Directors of the Corporation shall declare a dividend
or make any other distribution (including, without limitation, in cash,
evidences of indebtedness of the Corporation or another issuer, securities of
the Corporation other than Common Stock or another issuer, or other property or
assets), to holders of shares of Common Stock, then the holder of each share of
Series C Stock theretofore issued shall be entitled to receive, out of funds
legally available therefor, a dividend or distribution in an amount equal to the
amount of such dividend or distribution received by a holder of the number of
shares of Common Stock for which such share of Series C Stock is convertible on
the record date for such dividend or distribution. Any such amount shall be
paid to the holders of shares of Series C Stock at the same time such dividend
or distribution is made to holders of Common Stock.
(b) Except as otherwise provided in paragraph (a) above, the Series C Stock
shall not be entitled to any dividends.
3. Liquidation Preference.
(a) In connection with any Liquidation of the Corporation, (i) if the
assets of the Corporation available for distribution to the stockholders are
sufficient to pay the Series A Liquidation Amount with respect to each
outstanding share of Series A Stock, to pay the Series B Liquidation Amount with
respect to each outstanding share of Series B Stock and to pay the Series C
Liquidation Amount with respect to each outstanding share of Series C Stock,
then the holders of Series C Stock then outstanding shall be entitled to be paid
the Series C Liquidation Amount for each share of Series C Stock held thereby
before any payment shall be made or any assets distributed to the holders of any
shares of Junior Stock (as hereinafter defined), (ii) if the assets of the
Corporation available for distribution to the stockholders are not sufficient
to pay the Series A Liquidation Amount, the Series B Liquidation Amount and the
Series C Liquidation Amount, then the holders of the outstanding shares of
Series A Stock, Series B Stock and Series C Stock shall share pari passu in the
distribution of available assets, pro rata to the amounts that would have been
payable to such holders if the assets of the Corporation available for
distribution to the stockholders in Liquidation had been sufficient to pay the
Series A Liquidation Amount, the Series B Liquidation Amount and the Series C
Liquidation Amount in full, and (iii) the Series C Liquidation Amount must be
paid in full with respect to each outstanding share of Series C Stock before any
payment shall be made or any assets distributed to the holders of any shares of
Common Stock or any other securities which, by their terms, have expressly been
made junior to the Series C Stock in Liquidation (the "Junior Stock").
(b) Written notice of any Liquidation, stating a payment date, the amount
of the payment determined pursuant to this paragraph 3 and the place where such
amount shall be payable, shall be delivered in person, mailed by certified or
registered mail, return receipt requested, mailed by overnight mail or sent by
telecopier, not less than ten (10) days prior to the payment date stated
therein, to the holders of record of the Series C Stock, such notice to be
addressed to each such holder at its address as shown by the records of the
Corporation.
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(c) The fair value of the assets to be distributed or exchanged (to the
extent that distributions are not made in cash) in the event of Liquidation
shall be determined as provided in the Certificate of Designations on file with
the Delaware Secretary of State with respect to the Series A Stock (the "Series
A Certificate").
(d) For purposes of this Certificate of Designations, (i) "Liquidation"
means any voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation, under the U.S. Bankruptcy Code or otherwise, (ii) "Series A Stock"
means the Corporation's Series A Convertible Participating Preferred Stock, $.01
par value, (iii) the "Series A Liquidation Amount" means the amount payable upon
Liquidation to the holders of the Series A Stock, as provided in the Series A
Certificate, (iv) "Series B Stock" means the Corporation's Series B Convertible
Participating Preferred Stock, $.01 par value,(v) the "Series B Liquidation
Amount" means the amount payable upon Liquidation to the holders of the Series B
Stock, as provided in the Certificate of Designations on file with the Delaware
Secretary of State with respect to the Series B Stock and (vi) the "Series C
Liquidation Amount" means $11.75758 per share of Series C Stock plus all
declared and unpaid dividends thereon (if any) through the effective date of
Liquidation.
4. Redemption. The shares of Series C Stock shall not be redeemable at the
option of the Corporation or at the option of any holder thereof.
5. Voting Rights; Election of Directors. Each issued and outstanding share
of Series C Stock shall entitle the holder thereof to vote, in person or by
proxy, at each special and annual meeting of stockholders of the Corporation, on
all matters entitled to be voted on by holders of voting Common Stock. To the
maximum extent permitted by law, on all matters submitted to a vote of the
stockholders, the holders of the Series C Stock shall vote as a single class
together with the holders of voting Common Stock and with all other shares
(including the outstanding shares of Series A Stock and Series B Stock) entitled
to vote with the voting Common Stock thereon. With respect to any such vote,
each share of Series C Stock shall entitle the holder thereof to cast that
number of votes per share as is equal to the number of votes that such holder
would be entitled to cast had such holder converted its shares of Series C Stock
into shares of Common Stock on the record date for determining the stockholders
of the Corporation eligible to vote on such matters.
6. Conversion.
(a) Any holder of Series C Stock shall have the right, at its option, at
any time and from time to time, to convert, subject to the terms and provisions
of this paragraph 6, any or all of such holder's shares of Series C Stock into
such number of fully paid and nonassessable shares of voting Common Stock as is
equal to the product of the number of shares of Series C Stock being so
converted multiplied by the quotient of (i) the Liquidation Amount, divided by
(ii) the conversion price of $11.75758 per share, subject to adjustment as
provided in paragraph 6(c) (the "Conversion Price"), then in effect. Such
conversion right shall be exercised by the surrender of the shares of Series C
Stock to be converted to the Corporation at any time during usual business hours
at its principal place of business to be maintained by it, accompanied by
written notice that the holder elects to convert such shares of Series C Stock
and specifying the name or names (with address) in which a certificate or
certificates for shares of voting Common Stock are to be issued and (if so
required by the Corporation) by a written instrument or instruments of transfer
in form reasonably
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<PAGE> 39
satisfactory to the Corporation duly executed by the holder or its duly
authorized legal representative and transfer tax stamps or funds therefor, if
required pursuant to paragraph 6(h).
(b) As promptly as practicable after the surrender, as herein provided, of
any shares of Series C Stock for conversion pursuant to paragraph 6(a), the
Corporation shall deliver to or per the written order of the holder of such
shares of Series C Stock so surrendered a certificate or certificates
representing the number of fully paid and nonassessable shares of voting Common
Stock into which such shares of Series C Stock may be or have been converted in
accordance with the provisions of this paragraph 6. Subject to the following
provisions of this paragraph and of paragraph 6(c), such conversion shall be
deemed to have been made immediately prior to the close of business on the date
that such shares of Series C Stock shall have been surrendered in satisfactory
form for conversion, and the Person or Persons entitled to receive the shares of
voting Common Stock deliverable upon conversion of such shares of Series C Stock
shall be treated for all purposes as having become the record holder or holders
of such shares of voting Common Stock at such appropriate time, and such
conversion shall be at the Conversion Price in effect at such time; provided,
however, that no surrender shall be effective to constitute the Person or
Persons entitled to receive the shares of voting Common Stock deliverable upon
such conversion as the record holder or holders of such shares of voting Common
Stock while the share transfer books of the Corporation shall be closed (but not
for any period in excess of five days), but such surrender shall be effective to
constitute the Person or Persons entitled to receive such shares of voting
Common Stock as the record holder or holders thereof for all purposes
immediately prior to the close of business on the next succeeding day on which
such share transfer books are open, and such conversion shall be deemed to have
been made at, and shall be made at the Conversion Price in effect at, such time
on such next succeeding day.
(c) The Conversion Price shall be subject to adjustment as follows:
(i) In the event that the Corporation shall at any time or from time to
time (w) pay a dividend or make a distribution (other than a dividend or
distribution paid or made to holders of shares of Series C Stock in the manner
provided in paragraph 2) on the outstanding shares of Common Stock in Capital
Stock, (x) subdivide the outstanding shares of Common Stock into a larger number
of shares, (y) combine the outstanding shares of Common Stock into a smaller
number of shares or (z) issue any shares of its Capital Stock in a
reclassification of the Common Stock, then, and in each such case, the
Conversion Price in effect immediately prior to such event shall be adjusted
(and any other appropriate actions shall be taken by the Corporation) so that
the holder of any share of Series C Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of voting Common Stock or
other securities of the Corporation that such holder would have owned or to
which such holder would have been entitled to receive upon or by reason of any
of the events described above, had such share of Series C Stock been converted
into voting Common Stock immediately prior to the occurrence of such event. An
adjustment made pursuant to this paragraph 6(c)(i) shall become effective
retroactively (x) in the case of any such dividend or distribution, to a date
immediately following the close of business on the record date for the
determination of holders of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of any such subdivision, combination or
reclassification, to the close of business on the day upon which such corporate
action becomes effective.
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<PAGE> 40
(ii) If the Corporation shall at any time or from time to time issue or
sell any shares of Common Stock or Common Stock Equivalents at a price per share
(the "Offering Price") that is less than the Conversion Price then in effect as
of the record date or Issue Date referred to in the following sentence, as the
case may be (the "Relevant Date") (treating the Offering Price per share of
Common Stock, in the case of the issuance of any Common Stock Equivalent, as
equal to (x) the sum of the price for such Common Stock Equivalent plus any
additional consideration payable (without regard to any anti-dilution
adjustments) upon the conversion, exchange or exercise of such Common Stock
Equivalent, divided by (y) the number of shares of Common Stock initially
underlying such Common Stock Equivalent), other than (1) issuances or sales for
which an adjustment is made pursuant to another paragraph of this Section 6(c)
and (2) issuances of Common Stock in connection with an Excluded Transaction,
then, and in each such case, the Conversion Price then in effect shall be
reduced, concurrently with such issuance, to a price determined by multiplying
such Conversion Price by a fraction, the numerator of which shall be the number
of Shares then outstanding immediately prior to such issuance plus the number of
shares of Common Stock that the aggregate consideration received by the
Corporation for the total number of additional shares of Common Stock or Common
Stock Equivalents so issued would purchase at such Conversion Price; and the
denominator of which shall be the number of Shares then outstanding immediately
prior to such issuance plus the number of such additional shares of Common Stock
or Common Stock Equivalents so issued. Such adjustment shall be made whenever
such shares of Common Stock or Common Stock Equivalents are issued, and shall
become effective retroactively to a date immediately following the close of
business (x) in the case of an issuance to the stockholders of the Corporation,
as such, on the record date for the determination of stockholders entitled to
receive such shares of Common Stock or Common Stock Equivalents and (y) in all
other cases, on the date (the "Issue Date") of such issuance; provided, however,
that the determination as to whether an adjustment is required to be made
pursuant to this Section 6(c)(ii) shall only be made upon the issuance of such
shares of Common Stock or Common Stock Equivalents, and not upon the issuance of
the security into which such Common Stock Equivalents convert, exchange or may
be exercised; and provided further, that if and to the extent that the
convertibility or exercisability feature of such Common Stock Equivalents
expires prior to conversion or exercise thereof, then the Conversion Price shall
be readjusted (but to no greater extent than originally adjusted) to a
Conversion Price equal to that price which would have existed had the expired
Common Stock Equivalents never been issued or sold.
(iii) In the case the Corporation, at any time or from time to time, shall
take any action affecting its Common Stock similar to or having an effect
similar to any of the actions described in paragraphs 6(c)(i) or (ii) (but not
including any action described in any such paragraphs) and the Board of
Directors in good faith determines that it would be equitable in the
circumstances to adjust the Conversion Price as a result of such action, then,
and in each such case, the Conversion Price shall be adjusted in such manner and
at such time as the Board of Directors of the Corporation in good faith
determines would be equitable in the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be mailed to the
holders of the shares of Series C Stock).
(d) If the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such
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<PAGE> 41
dividend or distribution, then thereafter no adjustment in the Conversion Price
then in effect shall be required by reason of the taking of such record.
(e) Upon any increase or decrease in the Conversion Price, then, and in
each such case, the Corporation promptly shall deliver to each registered holder
of Series C Stock at least ten (10) Business Days prior to effecting any of the
foregoing transactions a certificate, signed by the Chief Executive Officer,
Chief Financial Officer, President or a Vice President and by the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Corporation,
setting forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated and specifying the increased or
decreased Conversion Price then in effect following such adjustment.
(f) In case at any time or from time to time:
(i) The Corporation shall declare a dividend (or any other distribution) on
its shares of Capital Stock;
(ii) the Corporation shall authorize the granting to the holders of its
Capital Stock of rights or warrants to subscribe for or purchase any shares of
stock of any class or of any other rights or warrants;
(iii) there shall be any reorganization or reclassification of the Capital
Stock of the Corporation, or any merger or consolidation to which the
Corporation is a party and for which approval of any of the stockholders of the
Corporation is required, or any sale or other disposition of all or
substantially all of the assets of the Corporation; or
(iv) there shall occur a Liquidation;
then the Corporation shall mail to each holder of shares of Series C Stock at
such holder's address as it appears on the transfer books of the Corporation, as
promptly as possible but in any event at least thirty (30) days prior to the
applicable date hereinafter specified, a notice stating (A) the date on which a
record is to be taken for the purpose of such dividend, distribution, rights or
warrants or, if a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distribution or rights
are to be determined, or (B) the date on which such reclassification,
reorganization, merger, consolidation, sale, disposition or Liquidation is
expected to become effective. Such notice also shall specify the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their Common Stock for shares of stock or other securities or property
or cash deliverable upon such reclassification, reorganization, merger,
consolidation, sale, exchange, transfer or Liquidation.
(g) The Corporation shall at all times reserve and keep available for
issuance upon the conversion of the Series C Stock, such number of its
authorized but unissued shares of voting Common Stock as will from time to time
be sufficient to permit the conversion of all outstanding shares of Series C
Stock, and shall take all action required to increase the authorized number of
shares of voting Common Stock if at any time there shall be insufficient
authorized but
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<PAGE> 42
unissued shares of voting Common Stock to permit such reservation or to permit
the conversion of all outstanding shares of Series C Stock.
(h) The issuance or delivery of certificates for voting Common Stock upon
the conversion of shares of Series C Stock shall be made without charge to the
converting holder of shares of Series C Stock for such certificates or for any
tax in respect of the issuance or delivery of such certificates or the
securities represented thereby, and such certificates shall be issued or
delivered in the respective names of, or (subject to compliance with the
applicable provisions of federal and state securities laws) in such names as may
be directed by, the holders of the shares of Series C Stock converted; provided,
however, that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificate in a name other than that of the holder of the shares of Series
C Stock converted, and the Corporation shall not be required to issue or deliver
such certificate unless or until the Person requesting the issuance or delivery
thereof shall have paid to the Corporation the amount of such tax or shall have
established to the reasonable satisfaction of the Corporation that such tax has
been paid.
7. Automatic Conversion. Each share of Series C Stock shall automatically
be converted into such number of fully paid and nonassessable shares of voting
Common Stock at the then applicable Conversion Price in accordance with Section
6 hereof upon the earlier of (i) the Corporation achieving average volume of at
least five million (5,000,000) shares per day transacted through its proprietary
OptiMark(tm) trading system for the latest twelve month period and operating
profit, as normally recorded on the Corporation's books and records, over the
same twelve month period of at least $10,000,000, or (ii) immediately after the
closing of an underwritten initial public offering ("IPO") pursuant to an
effective registration statement filed under the Securities Act covering the
offer and sale of shares of Common Stock for the account of the Corporation at a
price per share of Common Stock that is at least 1.67 times (167% of) the then
applicable Conversion Price and resulting in aggregate gross proceeds to the
Corporation of at least $10,000,000. In the event of an IPO, the Person(s)
entitled to receive the shares of Common Stock issuable upon such conversion of
the Series C Stock shall not be deemed to have converted the Series C Stock
until immediately after the closing of such offering, except that any such
Person may convert its shares of Series C Stock at any earlier time in
accordance with paragraph 6.
8. Certain Remedies. Any registered holder of Series C Stock shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Certificate of Designations and to enforce specifically the terms and
provisions of this Certificate of Designations in any court of the United States
or any state thereof having jurisdiction, this being in addition to any other
remedy to which such holder may be entitled at law or in equity.
9. Reissuance of Series C Stock. Shares of Series C Stock that have been
issued and reacquired in any manner, including shares redeemed or converted,
shall (upon compliance with any applicable provisions of the laws of Delaware)
have the status of authorized and unissued shares of Preferred Stock of the
Corporation, undesignated as to series, and may be redesignated and reissued as
part of any series of preferred stock (including Series C Stock).
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10. Amendment. This Certificate of Designations may be amended with (and
only with) the written consent of (i) the Corporation, and (ii) the holders of
not less than 75% of the outstanding shares of Series C Stock.
11. Definitions. As used in this Certificate of Designation, in addition
to other capitalized terms defined elsewhere in this Certificate, the following
terms shall have the following meanings (with terms defined in the singular
having comparable meanings when used in the plural and vice versa), unless the
context otherwise requires:
"Board of Directors" means the Board of Directors of the Corporation.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or nonvoting) of such Person's capital stock and any and all
rights, warrants or options exchangeable for or convertible into such capital
stock.
"Commission" means the Securities and Exchange Commission or any similar
agency then having jurisdiction to enforce the Securities Act.
"Common Stock" means the Corporation's common stock (including both voting
and nonvoting common stock), $.01 par value per share.
"Common Stock Equivalents" means any security or obligation which is by its
terms convertible into or exchangeable for shares of Common Stock, including,
without limitation, the Series A Stock, the Series B Stock, the Series C Stock
and any option, warrant or other subscription or purchase right with respect to
shares of Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, and the rules and
regulations of the Commission promulgated thereunder.
"Excluded Transaction" shall mean (i) the issuance of shares directly to,
the issuance of Common Stock Equivalents to, and the issuance of shares upon
the exercise, exchange or conversion of Common Stock Equivalents granted to the
Corporation's officers, directors, employees, former employees and consultants,
as incentives, (ii) the issuance of Common Stock pursuant to a warrant in favor
of The Pacific Exchange, Incorporated dated August 27, 1996, (subject to
adjustment as provided therein), (iii) the issuance of Common Stock pursuant to
a warrant in favor of The Chicago Board Options Exchange, Incorporated dated
December 31, 1996 (subject to adjustment as provided therein), (iv) the
issuance of Common Stock pursuant to a warrant in favor of Virginia Surety
Company, Inc. dated April 23, 1998 (subject to adjustment as provided therein)
(v) the issuance of Common Stock pursuant to a warrant in favor of Transamerica
Business Credit Corporation dated June 19, 1998 (subject to adjustment as
provided therein), (vi) the issuance of Common Stock pursuant to a warrant in
favor of Francis X. Egan dated August 24, 1998 (subject to adjustment as
provided therein) (vii) the issuance of Common Stock pursuant to a warrant in
favor of The Nasdaq Stock Market, Inc. dated September 1, 1998 (subject to
adjustment as provided therein), (viii) the issuance of Common Stock pursuant to
a warrant in favor of Ramsey Beirne, L.L.C. dated November 2, 1998 (subject to
adjustment as provided therein), (ix) the issuance of Common Stock
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pursuant to a warrant in favor of BIOS Group, L.P. dated January 27, 1999
(subject to adjustment as provided therein), (x) the issuance of Common Stock
pursuant to a warrant in favor of Goldman Sachs Group, Inc. dated May 7, 1999
(subject to adjustment as provided therein), (xi) the issuance of Common Stock
pursuant to a warrant in favor of BT Investment Partners, Inc. dated May 7, 1999
(subject to adjustment as provided therein), (xii) the issuance of Common Stock
pursuant to those warrants in favor of ML IBK Positions, Inc., Merrill Lynch
KECALP International L.P. 1997 and Merrill Lynch KECALP L.P. 1997, each dated
May 7, 1999 (and each subject to adjustment as provided therein) (xiii) the
issuance of Common Stock upon conversion of the Series A Stock, (xiv) the
issuance of Common Stock upon conversion of the Series B Stock, and (xv) the
issuance of voting Common Stock upon conversion of the Corporation's non-voting
Common Stock. .
"Fair Market Value" shall mean the amount which a willing buyer would pay a
willing seller in an arm's length transaction as determined in good faith by the
Board of Directors.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental body or other entity of any kind.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Shares outstanding" or "Shares then outstanding" means all shares of
Common Stock outstanding and all shares of Common Stock issuable upon
conversion, exercise or exchange of any option, warrant or other security or
obligation which is, by its terms, convertible, exercisable or exchangeable into
shares of Common Stock, whether or not such conversion, exercise or exchange has
actually been effected.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be duly
executed by its Chief Executive Officer this 26th day of July, 1999
OPTIMARK TECHNOLOGIES, INC.
By: /s/ Phillip J. Riese
Chief Executive Officer
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<PAGE> 45
CERTIFICATE OF POWERS, DESIGNATIONS,
PREFERENCES AND RIGHTS OF THE
SERIES D CONVERTIBLE PREFERRED STOCK,
PAR VALUE $.01 PER SHARE
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The following resolution was duly adopted by the Board of Directors
of OptiMark Technologies, Inc., a Delaware corporation (the "Corporation"),
pursuant to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, effective as of July 2, 1999, by unanimous written consent of
the Board of Directors.
WHEREAS, the Board of Directors is authorized, within the
limitations and restrictions stated in the Amended and Restated Certificate of
Incorporation of the Corporation, (the "Certificate of Incorporation") to
provide by resolution or resolutions for the issuance of shares of Preferred
Stock, par value $.01 per share, of the Corporation, in one or more classes or
series with such voting powers, full or limited, or without voting powers, and
such designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions as shall be
stated and expressed in the resolution or resolutions providing for the issuance
thereof adopted by the Board of Directors, and as are not stated and expressed
in the Certificate of Incorporation, or any amendment thereto, including (but
without limiting the generality of the foregoing) such provisions as may be
desired concerning voting, redemption, dividends, dissolution or the
distribution of assets and such other subjects or matters as may be fixed by
resolution or resolutions of the Board of Directors under the General
Corporation Law of the State of Delaware; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to authorize and fix the terms of a series of preferred
stock and the number of shares constituting such series.
NOW THEREFORE, BE IT RESOLVED:
1. Designation and Number of Shares. There is hereby established a
series of Preferred Stock of the Corporation designated as "Series D
Convertible Preferred Stock" (the "Series D Stock"). The authorized number of
shares of Series D Stock shall be two hundred fifty thousand (250,000).
<PAGE> 46
2. Dividends.
(a) If the Board of Directors of the Corporation shall declare a
dividend or make any other distribution (including, without limitation,
in cash, evidences of indebtedness of the Corporation or another issuer,
securities of the Corporation other than Common Stock or another issuer, or
other property or assets), to holders of shares of Common Stock, then the holder
of each share of Series D Stock theretofore issued shall be entitled to receive,
out of funds legally available therefor, a dividend or distribution in an amount
equal to the amount of such dividend or distribution received by a holder of the
number of shares of Common Stock for which such share of Series D Stock is
convertible on the record date for such dividend or distribution. Any such
amount shall be paid to the holders of shares of Series D Stock at the same time
such dividend or distribution is made to holders of Common Stock.
(b) Except as otherwise provided in paragraph (a) above, the Series D
Stock shall not be entitled to any dividends.
3. Liquidation Preference.
(a) In connection with any Liquidation of the Corporation, (i)
if the assets of the Corporation available for distribution to the
stockholders are sufficient to pay the Series A Liquidation Amount with respect
to each outstanding share of Series A Stock, to pay the Series B Liquidation
Amount with respect to each outstanding share of Series B Stock, to pay the
Series C Liquidation Amount with respect to each outstanding share of Series C
Stock and to pay the Series D Liquidation Amount with respect to each
outstanding share of Series D Stock, then the holders of Series D Stock then
outstanding shall be entitled to be paid the Series D Liquidation Amount for
each share of Series D Stock held thereby before any payment shall be made or
any assets distributed to the holders of any shares of Junior Stock (as
hereinafter defined), (ii) if the assets of the Corporation available for
distribution to the stockholders are not sufficient to pay the Series A
Liquidation Amount, the Series B Liquidation Amount, the Series C Liquidation
Amount and the Series D Liquidation Amount, then the holders of the outstanding
shares of Series A Stock, Series B Stock, Series C Stock and Series D Stock
shall share pari passu in the distribution of available assets, pro rata to the
amounts that would have been payable to such holders if the assets of the
Corporation available for distribution to the stockholders in Liquidation had
been sufficient to pay the Series A Liquidation Amount, the Series B Liquidation
Amount, the Series C Liquidation Amount and the Series D Liquidation Amount in
full, and (iii) the Series D Liquidation Amount must be paid in full with
respect to each outstanding share of Series D Stock before any payment shall be
made or any assets distributed to the holders of any shares of Common Stock or
any other securities which, by their terms, have expressly been made junior to
the Series D Stock in Liquidation (the "Junior Stock").
(b) Written notice of any Liquidation, stating a payment date, the
amount of the payment determined pursuant to this paragraph 3 and the place
where such amount shall be payable, shall be delivered in person, mailed by
certified or registered mail, return receipt requested, mailed by overnight mail
or sent by telecopier, not less than ten (10) days prior to the payment date
stated therein, to the holders of record of the Series D Stock, such notice to
be addressed to each such holder at its address as shown by the records of the
Corporation.
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(c) The fair value of the assets to be distributed or exchanged (to
the extent that distributions are not made in cash) in the event of Liquidation
shall be determined as provided in the Certificate of Designations on file with
the Delaware Secretary of State with respect to the Series A Stock (the "Series
A Certificate").
(d) For purposes of this Certificate of Designations, (i)
"Liquidation" means any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, under the U.S. Bankruptcy Code or otherwise, (ii)
"Series A Stock" means the Corporation's Series A Convertible Participating
Preferred Stock, $.01 par value, (iii) the "Series A Liquidation Amount" means
the amount payable upon Liquidation to the holders of the Series A Stock, as
provided in the Series A Certificate, (iv) "Series B Stock" means the
Corporation's Series B Convertible Participating Preferred Stock, $.01 par
value, (v) the "Series B Liquidation Amount" means the amount payable upon
Liquidation to the holders of the Series B Stock, as provided in the Certificate
of Designations on file with the Delaware Secretary of State with respect to the
Series B Stock, (vi) "Series C Stock" means the Corporation's Series C
Convertible Preferred Stock, $.01 par value, (vii) the "Series C Liquidation
Amount" means the amount payable upon Liquidation to the holders of the Series C
Stock, as provided in the Certificate of Designations on file with the Delaware
Secretary of State with respect to the Series C Stock, and (viii) the "Series D
Liquidation Amount" means $12.00 per share of Series D Stock plus all declared
and unpaid dividends thereon (if any) through the effective date of Liquidation.
4. Redemption. The shares of Series D Stock shall not be redeemable
at the option of the Corporation or at the option of any holder thereof.
5. Voting Rights; Election of Directors. Each issued and outstanding
share of Series D Stock shall entitle the holder thereof to vote, in
person or by proxy, at each special and annual meeting of stockholders of the
Corporation, on all matters entitled to be voted on by holders of voting Common
Stock. To the maximum extent permitted by law, on all matters submitted to a
vote of the stockholders, the holders of the Series D Stock shall vote as a
single class together with the holders of voting Common Stock and with all other
shares (including the outstanding shares of Series A Stock, Series B Stock and
Series C Stock) entitled to vote with the voting Common Stock thereon. With
respect to any such vote, each share of Series D Stock shall entitle the holder
thereof to cast that number of votes per share as is equal to the number of
votes that such holder would be entitled to cast had such holder converted its
shares of Series D Stock into shares of Common Stock on the record date for
determining the stockholders of the Corporation eligible to vote on such
matters.
6. Conversion.
(a) Any holder of Series D Stock shall have the right, at its
option, at any time and from time to time, to convert, subject to the terms and
provisions of this paragraph 6, any or all of such holder's shares of Series D
Stock into such number of fully paid and nonassessable shares of voting Common
Stock as is equal to the product of the number of shares of Series D Stock being
so converted multiplied by the quotient of (i) the Liquidation Amount, divided
by (ii) the conversion price of $12.00 per share, subject to adjustment as
provided in paragraph 6(c) (the "Conversion Price"), then in effect. Such
conversion right shall be exercised by the surrender of the shares of
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Series D Stock to be converted to the Corporation at any time during usual
business hours at its principal place of business to be maintained by it,
accompanied by written notice that the holder elects to convert such shares of
Series D Stock and specifying the name or names (with address) in which a
certificate or certificates for shares of voting Common Stock are to be issued
and (if so required by the Corporation) by a written instrument or instruments
of transfer in form reasonably satisfactory to the Corporation duly executed by
the holder or its duly authorized legal representative and transfer tax stamps
or funds therefor, if required pursuant to paragraph 6(h).
(b) As promptly as practicable after the surrender, as herein
provided, of any shares of Series D Stock for conversion pursuant to paragraph
6(a), the Corporation shall deliver to or per the written order of the holder of
such shares of Series D Stock so surrendered a certificate or certificates
representing the number of fully paid and nonassessable shares of voting Common
Stock into which such shares of Series D Stock may be or have been converted in
accordance with the provisions of this paragraph 6. Subject to the following
provisions of this paragraph and of paragraph 6(c), such conversion shall be
deemed to have been made immediately prior to the close of business on the date
that such shares of Series D Stock shall have been surrendered in satisfactory
form for conversion, and the Person or Persons entitled to receive the shares of
voting Common Stock deliverable upon conversion of such shares of Series D Stock
shall be treated for all purposes as having become the record holder or holders
of such shares of voting Common Stock at such appropriate time, and such
conversion shall be at the Conversion Price in effect at such time; provided,
however, that no surrender shall be effective to constitute the Person or
Persons entitled to receive the shares of voting Common Stock deliverable upon
such conversion as the record holder or holders of such shares of voting Common
Stock while the share transfer books of the Corporation shall be closed (but not
for any period in excess of five days), but such surrender shall be effective to
constitute the Person or Persons entitled to receive such shares of voting
Common Stock as the record holder or holders thereof for all purposes
immediately prior to the close of business on the next succeeding day on which
such share transfer books are open, and such conversion shall be deemed to have
been made at, and shall be made at the Conversion Price in effect at, such time
on such next succeeding day.
(c) The Conversion Price shall be subject to adjustment as follows:
(i) In the event that the Corporation shall at any time or
from time to time (w) pay a dividend or make a distribution (other than a
dividend or distribution paid or made to holders of shares of Series D Stock in
the manner provided in paragraph 2) on the outstanding shares of Common Stock in
Capital Stock, (x) subdivide the outstanding shares of Common Stock into a
larger number of shares, (y) combine the outstanding shares of Common Stock into
a smaller number of shares or (z) issue any shares of its Capital Stock in a
reclassification of the Common Stock, then, and in each such case, the
Conversion Price in effect immediately prior to such event shall be adjusted
(and any other appropriate actions shall be taken by the Corporation) so that
the holder of any share of Series D Stock thereafter surrendered for conversion
shall be entitled to receive the number of shares of voting Common Stock or
other securities of the Corporation that such holder would have owned or to
which such holder would have been entitled to receive upon or by reason of any
of the events described above, had such share of Series D Stock been converted
into voting Common Stock immediately prior to the occurrence of such event. An
adjustment made pursuant to this paragraph 6(c)(i) shall become effective
retroactively (x) in the case of any such
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dividend or distribution, to a date immediately following the close of
business on the record date for the determination of holders of Common Stock
entitled to receive such dividend or distribution, or (y) in the case of any
such subdivision, combination or reclassification, to the close of business on
the day upon which such corporate action becomes effective.
(ii) If the Corporation shall at any time or from time to time issue
or sell any shares of Common Stock or Common Stock Equivalents at a price
per share (the "Offering Price") that is less than the Conversion Price then in
effect as of the record date or Issue Date referred to in the following
sentence, as the case may be (the "Relevant Date") (treating the Offering Price
per share of Common Stock, in the case of the issuance of any Common Stock
Equivalent, as equal to (x) the sum of the price for such Common Stock
Equivalent plus any additional consideration payable (without regard to any
anti-dilution adjustments) upon the conversion, exchange or exercise of such
Common Stock Equivalent, divided by (y) the number of shares of Common Stock
initially underlying such Common Stock Equivalent), other than (1) issuances or
sales for which an adjustment is made pursuant to another paragraph of this
Section 6(c) and (2) issuances of Common Stock in connection with an Excluded
Transaction, then, and in each such case, the Conversion Price then in effect
shall be reduced, concurrently with such issuance, to a price determined by
multiplying such Conversion Price by a fraction, the numerator of which shall be
the number of Shares then outstanding immediately prior to such issuance plus
the number of shares of Common Stock that the aggregate consideration received
by the Corporation for the total number of additional shares of Common Stock or
Common Stock Equivalents so issued would purchase at such Conversion Price; and
the denominator of which shall be the number of Shares then outstanding
immediately prior to such issuance plus the number of such additional shares of
Common Stock or Common Stock Equivalents so issued. Such adjustment shall be
made whenever such shares of Common Stock or Common Stock Equivalents are
issued, and shall become effective retroactively to a date immediately following
the close of business (x) in the case of an issuance to the stockholders of the
Corporation, as such, on the record date for the determination of stockholders
entitled to receive such shares of Common Stock or Common Stock Equivalents and
(y) in all other cases, on the date (the "Issue Date") of such issuance;
provided, however, that the determination as to whether an adjustment is
required to be made pursuant to this Section 6(c)(ii) shall only be made upon
the issuance of such shares of Common Stock or Common Stock Equivalents, and not
upon the issuance of the security into which such Common Stock Equivalents
convert, exchange or may be exercised; and provided further, that if and to the
extent that the convertibility or exercisability feature of such Common Stock
Equivalents expires prior to conversion or exercise thereof, then the Conversion
Price shall be readjusted (but to no greater extent than originally adjusted) to
a Conversion Price equal to that price which would have existed had the expired
Common Stock Equivalents never been issued or sold.
(iii) In the case the Corporation, at any time or from time to time,
shall take any action affecting its Common Stock similar to or having an
effect similar to any of the actions described in paragraphs 6(c)(i) or (ii)
(but not including any action described in any such paragraphs) and the Board of
Directors in good faith determines that it would be equitable in the
circumstances to adjust the Conversion Price as a result of such action, then,
and in each such case, the Conversion Price shall be adjusted in such manner and
at such time as the Board of Directors of the Corporation in good faith
determines would be equitable in the circumstances (such
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determination to be evidenced in a resolution, a certified copy of which
shall be mailed to the holders of the shares of Series D Stock).
(d) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Price then in
effect shall be required by reason of the taking of such record.
(e) Upon any increase or decrease in the Conversion Price, then, and
in each such case, the Corporation promptly shall deliver to each
registered holder of Series D Stock at least ten (10) Business Days prior to
effecting any of the foregoing transactions a certificate, signed by the Chief
Executive Officer, Chief Financial Officer, President or a Vice President and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary
of the Corporation, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated and specifying
the increased or decreased Conversion Price then in effect following such
adjustment.
(f) In case at any time or from time to time:
(i) The Corporation shall declare a dividend (or any other
distribution) on its shares of Capital Stock;
(ii) the Corporation shall authorize the granting to the holders
of its Capital Stock of rights or warrants to subscribe for or purchase any
shares of stock of any class or of any other rights or warrants;
(iii) there shall be any reorganization or reclassification of
the Capital Stock of the Corporation, or any merger or consolidation to which
the Corporation is a party and for which approval of any of the stockholders of
the Corporation is required, or any sale or other disposition of all or
substantially all of the assets of the Corporation; or
(iv) there shall occur a Liquidation;
then the Corporation shall mail to each holder of shares of Series D Stock at
such holder's address as it appears on the transfer books of the Corporation, as
promptly as possible but in any event at least thirty (30) days prior to the
applicable date hereinafter specified, a notice stating (A) the date on which a
record is to be taken for the purpose of such dividend, distribution, rights or
warrants or, if a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distribution or rights
are to be determined, or (B) the date on which such reclassification,
reorganization, merger, consolidation, sale, disposition or Liquidation is
expected to become effective. Such notice also shall specify the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their Common Stock for shares of stock or other securities or property
or cash deliverable upon such reclassification, reorganization, merger,
consolidation, sale, exchange, transfer or Liquidation.
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(g) The Corporation shall at all times reserve and keep available for
issuance upon the conversion of the Series D Stock, such number of its
authorized but unissued shares of voting Common Stock as will from time to time
be sufficient to permit the conversion of all outstanding shares of Series D
Stock, and shall take all action required to increase the authorized number of
shares of voting Common Stock if at any time there shall be insufficient
authorized but unissued shares of voting Common Stock to permit such reservation
or to permit the conversion of all outstanding shares of Series D Stock.
(h) The issuance or delivery of certificates for voting Common Stock
upon the conversion of shares of Series D Stock shall be made without
charge to the converting holder of shares of Series D Stock for such
certificates or for any tax in respect of the issuance or delivery of such
certificates or the securities represented thereby, and such certificates shall
be issued or delivered in the respective names of, or (subject to compliance
with the applicable provisions of federal and state securities laws) in such
names as may be directed by, the holders of the shares of Series D Stock
converted; provided, however, that the Corporation shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of any such certificate in a name other than that of the holder of
the shares of Series D Stock converted, and the Corporation shall not be
required to issue or deliver such certificate unless or until the Person
requesting the issuance or delivery thereof shall have paid to the Corporation
the amount of such tax or shall have established to the reasonable satisfaction
of the Corporation that such tax has been paid.
7. Automatic Conversion. Each share of Series D Stock shall
automatically be converted into such number of fully paid and
nonassessable shares of voting Common Stock at the then applicable Conversion
Price in accordance with Section 6 hereof upon the earlier of (i) the
Corporation achieving average volume of at least five million (5,000,000) shares
per day transacted through its proprietary OptiMark(TM) trading system for the
latest twelve month period and operating profit, as normally recorded on the
Corporation's books and records, over the same twelve month period of at least
$10,000,000, or (ii) immediately after the closing of an underwritten initial
public offering ("IPO") pursuant to an effective registration statement filed
under the Securities Act covering the offer and sale of shares of Common Stock
for the account of the Corporation at a price per share of Common Stock that is
at least 1.67 times (167% of) the then applicable Conversion Price and resulting
in aggregate gross proceeds to the Corporation of at least $10,000,000. In the
event of an IPO, the Person(s) entitled to receive the shares of Common Stock
issuable upon such conversion of the Series D Stock shall not be deemed to have
converted the Series D Stock until immediately after the closing of such
offering, except that any such Person may convert its shares of Series D Stock
at any earlier time in accordance with paragraph 6.
8. Certain Remedies. Any registered holder of Series D Stock shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Certificate of Designations and to enforce specifically the terms and
provisions of this Certificate of Designations in any court of the United States
or any state thereof having jurisdiction, this being in addition to any other
remedy to which such holder may be entitled at law or in equity.
9. Reissuance of Series D Stock. Shares of Series D Stock that have
been issued and reacquired in any manner, including shares redeemed or
converted, shall (upon compliance with any
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applicable provisions of the laws of Delaware) have the status of
authorized and unissued shares of Preferred Stock of the Corporation,
undesignated as to series, and may be redesignated and reissued as part of any
series of preferred stock (including Series D Stock).
10. Amendment. This Certificate of Designations may be amended with
(and only with) the written consent of (i) the Corporation, and (ii) the
holders of not less than 75% of the outstanding shares of Series D Stock.
11. Definitions. As used in this Certificate of Designation, in
addition to other capitalized terms defined elsewhere in this Certificate, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Board of Directors" means the Board of Directors of the
Corporation.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in, or other equivalents
(however designated and whether voting or nonvoting) of such Person's capital
stock and any and all rights, warrants or options exchangeable for or
convertible into such capital stock.
"Commission" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" means the Corporation's common stock (including
both voting and nonvoting common stock), $.01 par value per share.
"Common Stock Equivalents" means any security or obligation
which is by its terms convertible into or exchangeable for shares of Common
Stock, including, without limitation, the Series A Stock, the Series B Stock,
the Series C Stock, the Series D Stock and any option, warrant or other
subscription or purchase right with respect to shares of Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, and
the rules and regulations of the Commission promulgated thereunder.
"Excluded Transaction" shall mean (i) the issuance of shares
directly to, the issuance of Common Stock Equivalents to, and the issuance
of shares upon the exercise, exchange or conversion of Common Stock Equivalents
granted to the Corporation's officers, directors, employees, former employees
and consultants, as incentives, (ii) the issuance of Common Stock pursuant to a
warrant in favor of The Pacific Exchange, Incorporated dated August 27, 1996,
(subject to adjustment as provided therein), (iii) the issuance of Common Stock
pursuant to a warrant in favor of The Chicago Board Options Exchange,
Incorporated dated December 31, 1996 (subject to adjustment as provided
therein), (iv) the issuance of Common Stock pursuant to a warrant in favor of
Virginia Surety Company, Inc. dated April 23, 1998 (subject to adjustment as
provided therein) (v) the issuance of Common Stock pursuant to a warrant in
favor of Transamerica Business Credit Corporation dated June 19, 1998 (subject
to adjustment as provided therein), (vi) the issuance of Common Stock pursuant
to a warrant in favor of Francis X. Egan dated August 24, 1998 (subject to
adjustment as provided therein) (vii) the issuance of Common Stock pursuant to a
warrant in favor of
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The Nasdaq Stock Market, Inc. dated September 1, 1998 (subject to adjustment as
provided therein), (viii) the issuance of Common Stock pursuant to a warrant in
favor of Ramsey Beirne, L.L.C. dated November 2, 1998 (subject to adjustment as
provided therein), (ix) the issuance of Common Stock pursuant to a warrant in
favor of BIOS Group, L.P. dated January 27, 1999 (subject to adjustment as
provided therein), (x) the issuance of Common Stock upon conversion of the
Series A Stock, (xi) the issuance of Common Stock upon conversion of the Series
B Stock, (xii) the issuance of Common Stock upon conversion of the Series C
Stock, and (xiii) the issuance of voting Common Stock upon conversion of the
Corporation's non-voting Common Stock. .
"Fair Market Value" shall mean the amount which a willing buyer would
pay a willing seller in an arm's length transaction as determined in good
faith by the Board of Directors.
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated
association, joint venture, joint stock company, governmental body or other
entity of any kind.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Shares outstanding" or "Shares then outstanding" means all shares of
Common Stock outstanding and all shares of Common Stock issuable upon
conversion, exercise or exchange of any option, warrant or other security or
obligation which is, by its terms, convertible, exercisable or exchangeable
into shares of Common Stock, whether or not such conversion, exercise or
exchange has actually been effected.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
duly executed by its Chief Executive Officer this 29th day of July, 1999.
OPTIMARK TECHNOLOGIES, INC.
By: /s/ Phillip J. Riese
Chief Executive Officer
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CERTIFICATE OF RETIREMENT OF STOCK
of
OPTIMARK TECHNOLOGIES, INC.
OptiMark Technologies, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Company, at a meeting of its
members, duly adopted a resolution retiring shares of the capital stock of the
Company, which were issued but not outstanding, to the extent hereinafter set
forth, and which retired shares had no capital applied to their acquisition.
SECOND: The shares of capital stock of the Company, which are retired, are
identified as being 325,000 shares of the Series A Convertible Participating
Preferred Stock (the "Series A Preferred Stock"), par value $.01 per share.
THIRD: That the Amended and Restated Certificate of Incorporation of the
Company prohibits the reissuance of any retired shares of Series A Preferred
Stock as part of the same series; and pursuant to the provisions of
Section 243 of the General Corporation Law of the State of Delaware, upon the
effective date of this Certificate, the Amended and Restated Certificate of
Incorporation of the Company shall be amended so as to effect a reduction in the
authorized number of shares of the Series A Preferred Stock to 3,222,068 shares
with par value of $.01 per share. Pursuant to the Amended and Restated
Certificate of Incorporation of the Company, such retired shares may be
redesignated and reissued as part of any other series of preferred stock of the
Company.
FOURTH: This Certificate of Retirement of Stock shall be effective on
January 27, 2000.
IN WITNESS WHEREOF, said OptiMark Technologies, Inc. has caused this
Certificate to be signed by Christopher J. Walsh, its Vice President and
Assistant Secretary, this 27th day of January, 2000.
OPTIMARK TECHNOLOGIES, INC.
By: /s/ Christopher J. Walsh
Vice President & Assistant Secretary
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
OPTIMARK TECHNOLOGIES, INC.
(A DELAWARE CORPORATION)
AS OF JANUARY 27, 2000
ARTICLE I.
OFFICES AND AGENT
1. Principal Office. The principal office of OptiMark Technologies,
Inc. (the "Corporation") may be located within or without the State of Delaware,
as designated by the board of directors. The Corporation may have other offices
and places of business at such places within or without the State of Delaware
as shall be determined by the directors.
2. Registered Office and Agent. The Corporation shall have and
maintain at all times (a) a registered office in the State of Delaware, which
office shall be located at 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801, and (b) a registered agent located at such address whose name
is The Corporation Trust Company, until changed from time to time as provided
by the General Corporation Law of the State of Delaware ("Delaware Corporation
Law").
ARTICLE II.
STOCKHOLDERS MEETINGS AND VOTING
1. Annual Meetings. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held on such date and at such
time as determined by resolution of the board of directors. If this date shall
fall upon a legal holiday, then such meeting shall be held on the next
succeeding business day at the same hour. If no annual meeting is held in
accordance with the foregoing provisions, the board of directors shall cause
the meeting to be held as soon thereafter as convenient. If no annual meeting
is held in accordance with the foregoing provisions, a special meeting may be
held in lieu of the annual meeting, and any action taken at that special
meeting shall have the same effect as if it had been taken at the annual
meeting, and in such case all references in these Bylaws to the annual meeting
of stockholders shall be deemed to refer to such special meeting.
2. Special Meetings. Special meetings of the stockholders of the
Corporation may be called for any purpose (including, without limitation, the
filling of board vacancies and newly created directorships) and may be held at
such time and place, within or without the State of Delaware, as shall be
stated in a notice of meeting or in a duly executed waiver of notice thereof.
Such meetings
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may be called at any time by the board of directors or the chairman of the
board or the chief executive officer and shall be called by the chairman of the
board or the chief executive officer upon the written request of holders of
shares entitled to cast not less than ten percent (10%) of the votes at such
special meeting or by the written request of the holders of not less than ten
percent (10%) of the outstanding shares of any series or class of the
Corporation's stock; provided that if the chairman of the board or the chief
executive officer does not so call the meeting, it may be called by the holders
of shares entitled to cast not less than ten percent (10%) of the votes at such
special meeting or by the holders of not less than ten percent (10%) of the
outstanding shares of any series or class of the Corporation's stock. Such
written request shall specify the purpose or purposes of, and a proposed date
for, the meeting and shall be delivered to the chairman of the board or the
chief executive officer. Upon receipt of such written request, the chairman of
the board or the chief executive officer, as applicable, shall fix a date and
time for such meeting, which such date shall be within five (5) business days
of the proposed date specified in the written request.
3. Place of Meetings. All meetings of stockholders of the
Corporation shall be held within or without the State of Delaware as may be
designated by the board of directors, the chairman of the board or the chief
executive officer or the stockholders entitled to call a meeting pursuant to
Section 2 of this Article II, or, if not designated, at the principal office of
the Corporation.
4. Notice of Meeting. Except as otherwise provided in these Bylaws
or the Delaware Corporation Law, written notice of any meeting of stockholders
stating the place, date and hour of the meeting and, in the case of a special
meeting, the purpose for which the meeting is called, shall be delivered either
personally or by mail to each stockholder of record entitled to vote at such
meeting not less than ten (10) nor more than sixty (60) days before the date of
the meeting, by or at the direction of the board of directors, the chairman of
the board, the chief executive officer or the secretary. If mailed, such notice
shall be deemed to be delivered as to any stockholder of record when deposited
in the United States mail addressed to the stockholder at his address as it
appears on the stock transfer books of the Corporation, with postage prepaid.
When a meeting is adjourned to another time or place, notice need not be given
of the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting the
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
5. Waiver of Notice. Any stockholder, either before or after any
stockholders' meeting, may waive in writing notice of the meeting, and his
waiver shall be deemed the equivalent of giving notice. Attendance at a meeting
by a stockholder shall constitute a waiver of notice, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
6. Fixing of Record Date. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent
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to corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful action, the board of
directors of the Corporation may fix, in advance, a record date which shall be
not more than sixty (60) days nor less than ten (10) days prior to the date of
such meeting, nor more than sixty (60) days prior to any other action. If no
record date is fixed, the record date for determining the stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. The record date for determining the stockholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the board of directors is necessary, shall be the day
on which the first written consent is expressed. The record date for
determining stockholders for any other purpose shall be at the close of
business on the day on which the board of directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
7. Stockholders List. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof and may be inspected by any
stockholder who is present.
8. Proxies. A stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. No proxy shall be voted or acted upon after three (3) years from its
date, unless the proxy provides for a longer period.
9. Voting Rights. Each stockholder shall have one vote for each
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation.
Persons holding stock in a fiduciary capacity shall be entitled to vote
the shares so held. Persons whose stock is pledged shall be entitled to vote,
unless in the transfer by the pledgor on the books of the Corporation he has
expressly empowered the pledgee to vote thereon, in which case only the
pledgee, or his proxy, may represent such stock and vote thereon.
If shares having voting power stand of record in the names of two or
more persons, whether
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fiduciaries, members of a partnership, joint tenants, tenants in common,
tenants by the entirety, or otherwise, or if two or more persons have the same
fiduciary relationship respecting the same shares, unless the secretary of the
Corporation is given written notice to the contrary and is furnished with a
copy of the instrument or order appointing them or creating the relationship
wherein it is so provided, their acts with respect to voting shall have the
following effect: (i) if only one votes, his act binds all; (ii) if more than
one vote, the act of the majority so voting binds all; and (iii) if more than
one vote, but the vote is evenly split on any particular matter, each fraction
may vote the securities in question proportionately, or any person voting the
shares or a beneficiary, if any, may apply to the Court of Chancery or any
court of competent jurisdiction in the State of Delaware to appoint an
additional person to act with the persons so voting the shares. The shares
shall then be voted as determined by a majority of such persons and the person
appointed by the Court. If a tenancy is held in unequal interests, a majority
or even-split for the purpose of this subsection shall be a majority or
even-split in interest.
10. Quorum and Required Vote. Except as otherwise provided by law,
the Certificate of Incorporation or these Bylaws, the holders of shares
representing a majority of the votes entitled to be cast at the meeting,
present in person or by proxy, shall constitute a quorum for the transaction of
business. If a quorum is present, the affirmative vote of the holders of shares
representing a majority of the votes present or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, and, if there are one or more classes or series of stock entitled
to vote as separate classes or series, then, in the case of each such class or
series, the affirmative vote of the holders of shares representing a majority
of the votes of that class or series present or represented by proxy at the
meeting shall be the vote of such class or series unless a different vote is
required by an express provision of law, the Certificate of Incorporation or
these Bylaws.
11. Conduct of Meetings. Meetings of stockholders shall be presided
over by the chairman of the board, if any, or in his absence by the chief
executive officer, if any, or in his absence by a president, or in his absence
by a vice president, or in the absence of the foregoing persons by a chairman
designated by the board of directors, or in the absence of such designation by
a chairman chosen at the meeting. The secretary shall act as secretary of the
meeting, but in his absence the person presiding over the meeting may appoint
any person to act as secretary of the meeting. The person presiding over the
meeting shall conduct the meeting in a businesslike and fair manner, but shall
not be obligated to follow any technical, formal or parliamentary rules or
principles of procedure. His rulings on procedural matters shall be conclusive
and binding on all stockholders. Without limiting the generality of the
foregoing, the person presiding over the meeting shall have all of the powers
usually vested in the chairman of a meeting of stockholders.
12. Informal Action By Stockholders. Except as otherwise provided in
the Certificate of Incorporation, any action required by the provisions of
Delaware Corporation Law to be taken or any action which may be taken at a
stockholders' meeting may be taken without a meeting without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon
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were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous consent shall be given to those
stockholders who have not consented in writing. Any action taken pursuant to
such written consent of the stockholders shall have the same force and effect
as if taken by the stockholders at a meeting thereof.
ARTICLE III.
BOARD OF DIRECTORS - GENERAL
1. Number, Qualifications and Term of Office. Except as otherwise
provided in the Certificate of Incorporation or the Delaware Corporation Law,
the business and affairs of the Corporation shall be managed by or under the
direction of a board of directors consisting of one or more members. Directors
need not be stockholders of the Corporation. The board of directors, by
resolution, may increase or decrease the number of directors from time to time.
Except as otherwise provided in these Bylaws, each director shall be elected at
each annual meeting of stockholders and shall hold such office until the next
annual meeting of stockholders and until his successor shall be elected and
shall qualify. No decrease in the number of directors shall have the effect of
shortening the term of any incumbent director.
2. Vacancies. Except as otherwise provided by the Certificate of
Incorporation of the Corporation or any amendments thereto, board vacancies and
newly created directorships resulting from any increase in the authorized
number of directors may be filled by the affirmative vote of the holders of
shares representing a majority of the votes then entitled to vote thereon at an
election of directors or by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director. A director
elected to fill a vacancy shall hold office until his successor is elected and
qualified or until his earlier death, resignation or removal.
3. Resignation. Any director may resign by delivering his written
resignation to the Corporation at its principal office addressed to the
chairman of the board, the chief executive officer or secretary. Such
resignation shall be effective upon receipt unless it is specified to be
effective at some later time or upon the happening of some other event.
4. Removal. Except as otherwise provided in the Certificate of
Incorporation or the Delaware Corporation Law, any director or the entire board
of directors may be removed with or without cause by the affirmative vote of
the holders of shares representing a majority of the votes then entitled to
vote thereon at an election of directors.
5. Compensation. Directors may be paid such compensation for their
services and such reimbursements for expenses of attendance at meetings as the
Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
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ARTICLE IV.
MEETINGS OF THE BOARD
1. Place of Meetings. The regular or special meetings of the board
of directors or any committee designated by the board shall be held at the
principal office of the Corporation or at any other place within or without the
State of Delaware.
2. Regular Meetings. The board of directors shall meet each year
immediately after and at the same place as the annual meeting of the
stockholders for the purpose of electing officers and transacting such other
business as may come before the meeting. The board of directors or any
committee designated by the board may provide, by resolution, for the holding
of additional regular meetings within or without the State of Delaware without
notice of the time and place of such meeting other than such resolution;
provided that any director who is absent when such resolution is made shall be
given notice of said resolution.
3. Special Meetings. Special meetings of the board of directors or
any committee designated by the board may be held at any time and place, within
or without the State of Delaware, designated in a call by the chairman of the
board, if any, by the chief executive officer or by a majority of the members
of the board of directors or any such committee, as the case may be.
4. Notice of Special Meetings. Except as otherwise provided by
these Bylaws or the laws of the State of Delaware, written notice of each
special meeting of the board of directors or any committee thereof setting
forth the time and place of the meeting shall be given to each director by the
secretary or by the officer or director calling the meeting not less than two
(2) days prior to the time fixed for the meeting. Notice of special meetings
may be either given personally, personally by telephone, or by sending a copy
of the notice through the United States mail or by telegram, telex or telecopy,
charges prepaid, to the address of each director appearing on the books of the
Corporation. If mailed, such notice shall be deemed to be delivered two days
after it has been deposited in the United States mail so addressed, with
postage prepaid thereon. If notice be given by telegram, such notice shall be
deemed to be delivered when the telegram, telex or telecopy, is delivered to
the telegraph, telex or telecopy operator. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
5. Waiver of Notice. A director may waive, in writing, notice of
any special meeting of the board of directors or any committee thereof, either
before, at, or after the meeting; and his waiver shall be deemed the equivalent
of giving notice. By attending or participating in a regular or special
meeting, a director waives any required notice of such meeting unless the
director, at the beginning of the meeting, objects to the holding of the
meeting or the transacting of business at the meeting.
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6. Quorum and Action at Meeting. At meetings of the board of
directors or any committee designated by the board, a majority of the total
number of directors, or a majority of the members of any such committee, as the
case may be, shall constitute a quorum for the transaction of business. In the
event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such
director so disqualified; provided, however, that in no case shall less than
one-third (1/3) of the number so fixed constitute a quorum. If a quorum is
present, the act of the majority of directors in attendance shall be the act of
the board of directors or any committee thereof, as the case may be, unless the
act of a greater number is required by these Bylaws, the Certificate of
Incorporation or Delaware Corporation Law. If a quorum shall not be present at
any meeting of the board of directors, the directors present thereat may
adjourn that meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present.
7. Presumption of Assent. A director who is present at a meeting of
the board or a committee thereof when action is taken is deemed to have
assented to the action taken unless: (i) he objects at the beginning of such
meeting to the holding of the meeting or the transacting of business at the
meeting; (ii) he contemporaneously requests that his dissent from the action
taken be entered in the minutes of such meeting; or (iii) he gives written
notice of his dissent to the presiding officer of such meeting before its
adjournment or to the secretary of the Corporation immediately after
adjournment of such meeting. The right of dissent as to a specific action taken
at a meeting of a board or a committee thereof is not available to a director
who votes in favor of such action.
8. Committees. The board of directors may, by a resolution passed
by a majority of the whole board of directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members of the committee present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the board of directors to act at the
meeting in the place of the absent or disqualified member. Any such committee,
to the extent provided in the resolution of the board of directors and subject
to the provisions of Delaware Corporation Law, shall have and may exercise all
the powers and authority of the board of directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all such papers which may require it. Each such
committee shall keep minutes and make such reports as the board of directors
may from time to time request. Except as the board of directors may otherwise
determine, any committee may make rules for the conduct of its business, but,
unless otherwise provided by the board of directors or in such rules, its
business shall be conducted as nearly as possible in the same manner as is
provided in these Bylaws for the board of directors.
9. Informal Action by Directors. Except as otherwise provided in
the Certificate of Incorporation, any action required or permitted by the
Delaware Corporation Law to be taken at any meeting of the board of directors
or any committee thereof may be taken without a meeting if all
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members of the board or committee, as the case may be, consent to the action in
writing, and the written consents are filed with the minutes of proceedings of
the board or committee.
10. Telephonic Meetings. Directors or any members of any committee
designated by the board may participate in a meeting of the board or committee
by means of a conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other at the same time.
Such participation shall constitute presence in person at the meeting.
ARTICLE V.
OFFICERS AND AGENTS
1. Enumeration, Election and Term. The officers of the Corporation
shall consist of a chief executive officer, one or more presidents, a
secretary, a treasurer and such other officers with such other titles as may be
deemed necessary or desirable by the board of directors, including one or more
vice presidents, assistant treasurers and assistant secretaries and a chairman
of the board. Any number of offices may be held by the same person and no
officer need be a stockholder or a resident of the State of Delaware. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws,
each officer shall hold office until his successor is elected and qualified or
until his earlier death, resignation or removal. The officers of the
Corporation shall be elected annually by the board of directors at the first
meeting of the board held after each annual meeting of the stockholders.
2. General Duties. All officers and agents of the Corporation, as
between themselves and the Corporation, shall have such authority and shall
perform such duties in the management of the Corporation as may be provided in
these Bylaws or as may be determined by resolution of the board of directors
not inconsistent with these Bylaws. In all cases where the duties of any
officer, agent or employee are not prescribed by the Bylaws or by the board of
directors, such officer, agent or employee shall follow the orders and
instructions of the chief executive officer.
3. Vacancies. The board of directors may fill any vacancy occurring
in any office for any reason and may, in its discretion, leave any vacancy
unfilled for such period as it may determine. The officer so selected shall
hold office until his successor is elected and qualified or until his earlier
death, resignation or removal.
4. Resignation and Removal. Any officer may resign by delivering
his written resignation to the Corporation at its principal office addressed to
the chairman of the board, the chief executive officer or secretary. Such
resignation shall be effective upon receipt unless it is specified to be
effective at some later time or upon the happening of some other event. Any
officer or agent of the Corporation may be removed, with or without cause, by a
vote of the majority of the members of the board of directors whenever in its
judgment the best interests of the Corporation may be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the
person so
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removed. Election or appointment of an officer or an agent shall not of itself
create contract rights.
5. Chairman of the Board. The chairman of the board, if any, shall
preside as chairman at meetings of the stockholders and the board of directors.
He shall, in addition, have such other duties as the board may prescribe that
he perform. At the request of the chief executive officer, the chairman of the
board may, in the case of the chief executive officer's absence or inability to
act, temporarily act in his place. In the case of death of the chief executive
officer or in the case of his absence or inability to act without having
designated the chairman of the board to act temporarily in his place, the
chairman of the board shall perform the duties of the chief executive officer,
unless the board of directors, by resolution, provides otherwise.
6. Chief Executive Officer. The chief executive officer shall
supervise and control all of the business or affairs of the Corporation. In the
event the position of chairman of the board shall not be occupied or the
chairman shall be absent or otherwise unable to act, the chief executive
officer shall preside at meetings of the stockholders and directors and shall
discharge the duties of the presiding officer.
7. President. Each president shall supervise and control the
technical aspects of the Corporation's business, products and services, or a
unit thereof, and shall perform such other duties as may be prescribed by the
board of directors from time to time. At the request of the chief executive
officer, in the case of the chief executive officer's absence or inability to
act, a president may temporarily act in his place. In the case of the death of
the chief executive officer, or in the case of his absence or inability to act
without having designated a president to act temporarily in his place, the
board of directors, by resolution, may designate a president to perform the
duties of the chief executive officer. If no such designation shall be made,
the chairman of the board of directors, if any, shall exercise such powers and
perform such duties, as provided in Section 5 above.
8. Vice Presidents. Each vice president shall have such powers and
perform such duties as the board of directors may from to time prescribe or as
the chief executive officer or a president may from time to time delegate to
him. At the request of a president, in the case of the president's absence or
inability to act, any vice president may temporarily act in his place. In the
case of the death of a president, or in the case of his absence or inability to
act without having designated a vice president or vice presidents to act
temporarily in his place, the board of directors, by resolution, may designate
a vice president or vice presidents to perform the duties of the president. If
no such designation shall be made, the chairman of the board of directors, if
any, shall exercise such powers and perform such duties, but if the Corporation
has no chairman of the board of directors, or if the chairman is unable to act
in place of the president, the chief executive officer may exercise such powers
and perform such duties.
9. Secretary. The secretary shall keep or cause to be kept in books
provided for that purpose, the minutes of the meetings of the stockholders,
executive committee, if any, and any other committees, and of the board of
directors; shall see that all notices are duly given in accordance with the
provisions of these Bylaws and as required by law; shall be custodian of the
records and of the
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seal of the Corporation and see that the seal is affixed to all documents, the
execution of which on behalf of the Corporation under its seal is duly
authorized and in accordance with the provisions of these Bylaws; and, in
general shall perform all duties incident to the office of secretary and such
other duties as may, from time to time, be assigned to him by the board of
directors or by the chief executive officer. In the absence of the secretary or
his inability to act, the assistant secretaries, if any, shall act with the
same powers and shall be subject to the same restrictions as are applicable to
the secretary.
10. Treasurer. The treasurer shall be responsible for custody of
corporate funds and securities. He shall keep full and accurate accounts of
receipts and disbursements and shall deposit all corporate monies and other
valuable effects in the name and to the credit of the Corporation in the
depository or depositories of the Corporation, and shall render an account of
his transactions as treasurer and of the financial condition of the Corporation
to the chief executive officer and/or the board of directors upon request. Such
power given to the treasurer to deposit and disburse funds shall not, however,
preclude any other officer or employee of the Corporation from also depositing
and disbursing funds when authorized to do so by the board of directors. The
treasurer shall, if required by the board of directors, give the Corporation a
bond in such amount and with such surety or sureties as may be ordered by the
board of directors for the faithful performance of the duties of his office.
The treasurer shall have such other powers and perform such other duties as may
be from time to time prescribed by the board of directors or the chief
executive officer. In the absence of the treasurer or his inability to act, the
assistant treasurers, if any, shall act with the same authority and shall be
subject to the same restrictions as are applicable to the treasurer.
11. Delegation of Duties. Whenever an officer is absent, or
whenever, for any reason, the board of directors may deem it desirable, the
board may delegate the powers and duties of an officer to any other officer or
officers or to any director or directors.
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ARTICLE VI.
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
1. Indemnification: Third Party Actions. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he is or was a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, or of a partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interest
of the Corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. Any person who is not
covered by the foregoing sentence and who is or was an employee or agent of the
Corporation may be indemnified by the Corporation to the maximum extent
permitted by law as authorized by the board of directors from time to time. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interest of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
2. Indemnification: Derivative Actions. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the Corporation to procure a judgment in its favor by reason of the fact that
he is or was a director or officer of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee or agent of another corporation, or of a partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper. Any person who is not covered by the
foregoing sentence and who is or was an employee or agent of the Corporation
may be indemnified by the Corporation to the maximum extent permitted by law as
authorized by the board of directors from time to time.
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3. Mandatory Indemnification. To the extent that a director or
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Sections 1 and 2 of this Article VI or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
4. Authorization for Indemnification. Any indemnification under
Section 1 or 2 of this Article VI (unless ordered by a court) shall be made by
the Corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in Section 1 or 2 of this Article VI. Such determination shall be made
(a) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (b) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (c) by the stockholders.
5. Advance Payment of Expenses. Expenses (including attorneys'
fees) incurred in defending a civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized in this Article VI. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the board of directors deems appropriate.
6. Non-Exclusive. The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue, unless otherwise provided when authorized or
ratified, as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
7. Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article VI.
8. Definitions. For purposes of this Article VI, the following
terms shall have the
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following meetings:
(a) references to "the Corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees or agents so that any person who
is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article VI with respect to the resulting
or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued;
(b) references to "other enterprises" shall include employee
benefit plans;
(c) references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan;
(d) references to "serving at the request of the
Corporation" shall include any service as a director, officer, employee or
agent of the Corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and
(e) a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the interests of the Corporation" as referred to in this Article VI.
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ARTICLE VII.
CAPITAL STOCK
1. Certificates of Stock. The shares of the Corporation shall be
represented by certificates; provided that the board of directors of the
Corporation may, by resolution, provide that some or all of any or all classes
or series of its stock shall be uncertificated shares. Any such resolution
shall not apply to shares represented by a certificate until such certificate
is surrendered to the Corporation. Notwithstanding the adoption of such a
resolution by the board of directors, every holder of stock represented by
certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the Corporation by
the chairman or vice chairman of the board of directors, or the chief executive
officer or president or vice president, and by the treasurer or an assistant
treasurer, or the secretary or an assistant secretary of the Corporation,
representing the number of shares owned by the stockholder. Any or all the
signatures on the certificate may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
2. Issuance of Stock. Subject to the provisions of the Certificate
of Incorporation, the whole or any part of any unissued balance of the
authorized capital stock of the Corporation or the whole or any part of any
unissued balance of the authorized capital stock of the Corporation held in its
treasury may be issued, sold, transferred or otherwise disposed of by
resolution of the board of directors in such manner, for such consideration and
on such terms as the board of directors may determine. Consideration for such
shares of capital stock shall be expressed in dollars, and shall not be less
than the par value or stated value therefor, as the case may be. The par value
for shares, if any, shall be stated in the Certificate of Incorporation, and
the stated value for shares, if any, shall be fixed from time to time by the
board of directors.
3. Lost Certificates. The Corporation may issue a new certificate
to be issued in place of any previously issued certificate alleged to have been
destroyed or lost if the owner makes an affidavit or affirmation of that fact
and produces such evidence of loss or destruction as the Corporation or its
transfer agent may require. The Corporation, in its discretion, may as a
condition precedent to the issuance of a new certificate require the owner to
give the Corporation a bond as indemnity against any claim that may be made
against the Corporation relating to the allegedly destroyed or lost
certificate.
4. Transfer of Shares. Subject to applicable law and the provisions
of the Certificate of Incorporation, shares of stock of the Corporation may be
transferred on its books upon the surrender to the Corporation or its transfer
agent of the certificates representing such shares, if any, duly endorsed or
accompanied by a written assignment or power of attorney duly executed and with
-14-
<PAGE> 15
such proof of authority or authenticity of signature as the Corporation or its
transfer agent may reasonably require.
5. Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, to vote as such owner, to hold liable for calls
and assessments, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of the other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Delaware.
6. Stock Ledger. An appropriate stock journal and ledger shall be
kept by the secretary or such registrars or transfer agents as the directors by
resolution may appoint in which all transactions in the shares of stock of the
Corporation shall be recorded.
7. Restriction on Transfer of Shares. Notice of any restriction on
the transfer of the stock of the Corporation shall be placed on each
certificate of stock issued or in the case of uncertificated shares contained
in the notice sent to the registered owner of such shares in accordance with
the provisions of the Delaware Corporation Law.
ARTICLE VIII.
DIVIDENDS
Subject to the provisions of the Certificate of Incorporation, if any,
dividends upon the capital stock of the Corporation may be declared by the
board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation. Before payment
of any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the directors from time to time, in
their absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the directors shall
think in the best interest of the Corporation, and the directors may modify or
abolish any such reserve in the manner in which it was created.
-15-
<PAGE> 16
ARTICLE IX.
AMENDMENTS
Subject to repeal or change by action of the stockholders, the board of
directors may amend, supplement or repeal these Bylaws or adopt new Bylaws, and
all such changes shall affect and be binding upon the holders of all shares
heretofore as well as hereafter authorized, subscribed for or offered.
ARTICLE X.
MISCELLANEOUS
1. Gender. Whenever required by the context, the singular shall
include the plural, the plural the singular, and one gender shall include all
genders.
2. Invalid Provision. The invalidity or unenforceability of any
particular provision of these Bylaws shall not affect the other provisions
herein, and these Bylaws shall be construed in all respects as if such invalid
or unenforceable provision was omitted.
3. Governing Law. These Bylaws shall be governed by and construed
in accordance with the laws of the State of Delaware.
I, James G. Rickards, as Secretary of OptiMark Technologies, Inc.,
hereby certify that the foregoing Amended and Restated Bylaws were adopted by
the Board of Directors of the Corporation effective as of January 27, 2000.
/s/ James G. Rickards
-16-
<PAGE> 1
Exhibit 4.1
<TABLE>
<CAPTION>
<S> <C> <C>
NUMBER [OPTIMARK LOGO] SHARES
OT
OPTIMARK (TM)
COMMON STOCK TECHNOLOGIES, INC.
PAR VALUE .01 PER SHARE INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE SEE REVERSE FOR CERTAIN DEFINITIONS
</TABLE>
This certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
OPTIMARK TECHNOLOGIES, INC. The shares evidenced by this Certificate are
transferable on the books of the Corporation by the holder hereof in person
or duly authorized attorney or legal representative, upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are subject to all the provisions of the Articles of Incorporation
and Bylaws of the Corporation and all amendments thereto (copies of which
are on file with the Transfer Agent). This Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by its facsimile seal and the facsimile signatures of its duly
authorized officers.
Dated:
OPTIMARK TECHNOLOGIES, INC.
CORPORATE SEAL DELAWARE
/s/ Christopher J. Walsh /s/ William A. Lupen
SECRETARY CHAIRMAN
COUNTERSIGNED AND REGISTERED:
ChaseMellon Shareholder Services, L.L.C.
TRANSFER AGENT
AND REGISTRAR
BY:
AUTHORIZED SIGNATURE
<PAGE> 2
OPTIMARK TECHNOLOGIES, INC.
The corporation will furnish without charge to each stockholder who so requests
the powers, designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof of the
Corporation, and the qualifications, limitations, or restrictions of such
preferences and/or rights. Such request may be made to the corporation or the
transfer agent.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
------- -------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right ACT
of survivorship and not as ------------------------
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
-----------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address including Zip Code of Assignee)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------Shares
of the Stock represented by the within certificate and do hereby irrevocably
constitute and appoint
------------------------------
- ------------------------------------------------------------------------Attorney
to transfer the said Stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated:
-----------------
---------------------------------
Signature
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 or
enlargement, or any change whatever.
SIGNATURE GUARANTEED:
----------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
<PAGE> 1
\ Exhibit 4.2
<TABLE>
<CAPTION>
<S> <C> <C>
NUMBER OPTIMARK LOGO] SHARES
OTB
SERIES B OPTIMARK (TM)
CONVERTIBLE PARTICIPATING PREFERRED TECHNOLOGIES, INC.
STOCK PAR VALUE .01 PER SHARE INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE SEE REVERSE FOR CERTAIN DEFINITIONS
</TABLE>
This certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE SERIES B CONVERTIBLE PARTICIPATING
PREFERRED STOCK OF
OPTIMARK TECHNOLOGIES, INC. The shares evidenced by this Certificate are
transferable on the books of the Corporation by the holder hereof in person
or duly authorized attorney or legal representative, upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are subject to all the provisions of the Articles of Incorporation
and Bylaws of the Corporation and all amendments thereto (copies of which
are on file with the Transfer Agent). This Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by its facsimile seal and the facsimile signatures of its duly
authorized officers.
Dated:
OPTIMARK TECHNOLOGIES, INC.
CORPORATE SEAL DELAWARE
/s/ Christoper J. Walsh /s/ William A. Lupen
SECRETARY CHAIRMAN
COUNTERSIGNED AND REGISTERED:
ChaseMellon Shareholder Services, L.L.C.
TRANSFER AGENT
AND REGISTRAR
BY:
AUTHORIZED SIGNATURE
<PAGE> 2
OPTIMARK TECHNOLOGIES, INC.
The corporation will furnish without charge to each stockholder who so requests
the powers, designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof of the
Corporation, and the qualifications, limitations, or restrictions of such
preferences and/or rights. Such request may be made to the corporation or the
transfer agent.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
------- -------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right ACT
of survivorship and not as ------------------------
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
-----------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address including Zip Code of Assignee)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------Shares
of the Stock represented by the within certificate and do hereby irrevocably
constitute and appoint
------------------------------
- ------------------------------------------------------------------------Attorney
to transfer the said Stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated:
-----------------
---------------------------------
Signature
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 or
enlargement, or any change whatever.
SIGNATURE GUARANTEED:
----------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
<PAGE> 3
Exhibit 4.2
<TABLE>
<CAPTION>
<S> <C> <C>
NUMBER [OPTIMARK LOGO] SHARES
OTA
SERIES A OPTIMARK (TM)
CONVERTIBLE PARTICIPATING PREFERRED TECHNOLOGIES, INC.
STOCK PAR VALUE .01 PER SHARE INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE SEE REVERSE FOR CERTAIN DEFINITIONS
</TABLE>
This certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE SERIES A CONVERTIBLE PARTICIPATING
PREFERRED STOCK OF
OPTIMARK TECHNOLOGIES, INC. The shares evidenced by this Certificate are
transferable on the books of the Corporation by the holder hereof in person
or duly authorized attorney or legal representative, upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are subject to all the provisions of the Articles of Incorporation
and Bylaws of the Corporation and all amendments thereto (copies of which
are on file with the Transfer Agent). This Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed by its facsimile seal and the facsimile signatures of its duly
authorized officers.
Dated:
OPTIMARK TECHNOLOGIES, INC.
CORPORATE SEAL DELAWARE
/s/ Christopher J. Walsh /s/ William A. Lupen
SECRETARY CHAIRMAN
COUNTERSIGNED AND REGISTERED:
ChaseMellon Shareholder Services, L.L.C.
TRANSFER AGENT
AND REGISTRAR
BY:
AUTHORIZED SIGNATURE
<PAGE> 4
OPTIMARK TECHNOLOGIES, INC.
The corporation will furnish without charge to each stockholder who so requests
the powers, designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof of the
Corporation, and the qualifications, limitations, or restrictions of such
preferences and/or rights. Such request may be made to the corporation or the
transfer agent.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
------- -------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right ACT
of survivorship and not as ------------------------
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
-----------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address including Zip Code of Assignee)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------Shares
of the Stock represented by the within certificate and do hereby irrevocably
constitute and appoint
------------------------------
- ------------------------------------------------------------------------Attorney
to transfer the said Stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated:
-----------------
---------------------------------
Signature
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 or
enlargement, or any change whatever.
SIGNATURE GUARANTEED:
----------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
<PAGE> 1
Exhibit 4.3
STOCK PURCHASE AGREEMENT
AGREEMENT made as of this 27th day of August, 1996 by and among (i)
OptiMark Technologies, Inc., a Delaware corporation (the "Company'), and (ii)
General Atlantic Partners 35, L.P., a Delaware limited partnership, GAP
Coinvestment Partners, L.P., a New York limited partnership, Dow Jones &
Company, Inc., a Delaware corporation, and Alice L. Walton, individually
(collectively, the "Investors").
SECTION 1 DEFINITIONS
In addition to other capitalized terms defined elsewhere herein, the
following terms shall have the indicated meanings:
1.1 "1933 Act" means the Securities Act of 1933, as amended.
1.2 "Affiliate" of the Company means any corporation or other entity that
is or ever would have been considered a single employer with the Company under
ERISA ss. 4001(b) or part of the same "controlled group" as the Company for
purposes of ERISA ss. 302(d)(8)(C).
1.3 "Audited Financial Statements" means the audited consolidated balance
sheets of the Company and its Subsidiaries as of December 31, 1994 and December
31, 1995, and the related statements of income, retained earnings and cash flows
of the Company and its Subsidiaries for the 12-month periods then ended
(together with the notes thereto), copies of which have been delivered to the
Investors.
1.4 "Board" means the board of directors of the Company as constituted
from time to time.
1.5 "Certificate of Incorporation" means the Certificate of Incorporation
of the Company, including the Certificate of Designation with respect to the
Preferred Stock approved by the Board pursuant to ss. 151 of the Delaware
General Corporation Law.
1.6 "Code" means the Internal Revenue Code of 1986, as amended. For
purposes of this Agreement, all references to Sections of the Code shall include
any predecessor provisions to such Sections.
1.7 "Common Stock" means the common stock of the Company, $.0l par value
per share.
<PAGE> 2
1.8 "Consent of the Investors" means the vote at a meeting or executed
written consents in lieu of a meeting of one or more Investors owning at least
two-thirds of the Preferred Shares (including for such purposes, on a
proportional basis, any Conversion Shares into which any of the Preferred Shares
have been converted and not sold to the public).
1.9 "Conversion Shares" means the shares of Common Stock or any successor
class of capital stock of the Company hereafter issued or issuable upon
conversion of the Preferred Shares.
1.10 "Copyrights" means any foreign or United States copyright
registrations and applications for registration thereof, and any non-registered
copyrights.
1.11 "Critical Design Review" means a detailed design review of the
Company's OptiMark(TM) software that focuses upon the determination of the
acceptability of the design, performance, and test characteristics of the design
solution, and on the adequacy of the operation and support documents. The
purpose of this review will be to (a) determine that the detail design of the
system under review satisfies the performance and engineering specialty
requirements of the development specification, (b) establish the detail design
compatibility between the system and other items of equipment, facilities,
computer software and personnel that the system will interface to or interact
with, (c) assess risk areas (on a technical, cost, and schedule basis), and (d)
review the hardware specifications.
1.12 "Employee Program" means (a) all employee benefit plans within the
meaning of ERISA ss. 3(3), including but not limited to multiple employer
welfare arrangements (within the meaning of ERISA ss. 3(40)), plans to which
more than one unaffiliated employer contributes, and employee benefit plans
(such as foreign or excess benefit plans) which are not subject to ERISA; and
(b) all stock or cash option plans, restricted stock plans, bonus or incentive
award plans, severance pay policies or agreements, deferred compensation
agreements, supplemental income arrangements, vacation plans, and all other
employee benefit plans, agreements, and arrangements not described in (a) above.
In the case of an Employee Program funded through an organization described in
Code ss. 501(c)(9), each reference to such Employee Program shall include a
reference to such organization. An entity "maintains" an Employee Program if
such entity sponsors, contributes to, or provides (or has promised to provide)
benefits under such Employee Program, or has any obligation (by agreement or
under applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise covers
employees of such entity (or their spouses, dependents, or beneficiaries).
1.13 "Environmental Laws" means and includes any environmental or health
and safety-related law, regulation, rule, ordinance, or by-law at the federal,
state or local level, whether existing as of the date hereof or subsequently
enacted.
1.14 "ERISA" means the Employee Retirement Income Security Acto of 1974,
as amended.
- 2 -
<PAGE> 3
1.15 "Financial Statements" means and includes both the Audited Financial
Statements and the Unaudited Financial Statements, copies of both of which have
been delivered to the Investors.
1.16 "Hazardous Material" means and includes any hazardous waste,
hazardous material, hazardous substance, petroleum product, oil, toxic
substance, pollutant, contaminant, or other substance which may pose a threat to
the environment or to human health or safety, as defined or regulated under any
Environmental Law.
1.17 "Intellectual Property" means and includes Copyrights, Internet
Assets, Patents, Trade Secrets, Trademarks, Software and other proprietary
rights.
1.18 "Internet Assets" means any internet domain names and other computer
user identifiers and any rights in and to sites on the worldwide web, including
rights in and to any text, graphics, audio and video files and html or other
code incorporated in such sites.
1.19 "Investors" includes the Investors and their successors and assigns
with respect to the Securities.
1.20 "IRS" means the Internal Revenue Service.
1.21 "Judgment" means any judgment, injunction, writ, award, decree or
order of any nature from any arbitrator, court or governmental agency.
1.22 "Liabilities" means and includes any indebtedness, liabilities,
guaranties or other obligations of any nature, whether accrued, absolute,
contingent or otherwise, known or unknown, asserted or unasserted, including
without limitation liabilities arising from the Restructuring.
1.23 "Lien" means and includes any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other) or preference,
priority, right or other security interest or preferential arrangement of any
kind or nature whatsoever (excluding preferred stock and equity related
preferences), including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease obligation, or any financing lease
having substantially the same economic effect as any of the foregoing.
1.24 "Losses" means and includes losses, claims, damages, causes of
action, liabilities, penalties, fines and related interest and expenses,
including reasonable attorneys' fees and disbursements, and costs of
investigation, litigation, arbitration, enforcement and indemnification.
1.25 "Material Contracts" means and includes any employment contract;
stock redemption or purchase agreement; loan, capital lease or other financing
agreement; license, distributor, sales representation or OEM agreement;
agreements with any officers, directors, employees or
- 3 -
<PAGE> 4
stockholders of the Company or any persons related to or affiliated with any
such persons; leases; agreements relating to the licensing, distribution,
development or maintenance of Software and related hardware; agreements with
customers of the Company; powers of attorney; pension, profit-sharing,
retirement or stock option plans; any other contract, obligation or commitment
(whether written or oral) involving actual or potential consideration of more
than $100,000; or any contract, obligation or commitment not entered into in the
ordinary course of business.
1.26 "Multiemployer Plan" means an Employer Program to which more than one
employer contributes and which is maintained pursuant to one or more collective
bargaining agreements.
1.27 "Outstanding Rights" means and includes (a) the rights of PSE to
purchase up to 526,000 shares of Common Stock at an exercise price of $7.33 per
share, under the PSE Warrant, (b) the rights of certain existing and former
employees of the Company to purchase up to 320,000 shares of Common Stock at an
exercise price of $6.00 per share, under outstanding warrants and outstanding
options issued under the Stock Option Plan, (c) the right of Alan S. Danson to
purchase up to 50,000 shares of Common Stock at an exercise price of $6.00 per
share under an outstanding warrant, and (d) the rights of future grantees to
purchase up to 491,567 shares of Common Stock reserved for issuance upon
exercise of ungranted options under the Stock Option Plan (as such Plan may be
amended from time to time), at an exercise price of not less than $6.00 per
share; in each case subject to appropriate adjustment for all subdivisions and
combinations.
1.28 "Patents" means any foreign or United States patents and patent
applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or
resubmitted.
1.29 "Person" means any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company, governmental agency or other entity of any kind, and
shall include any successor (by merger or otherwise) of such entity.
1.30 "Preferred Shares" means the 2,182,812 shares of Preferred Stock
being sold by the Company to the Investors pursuant to this Agreement.
1.31 "Preferred Stock" means the Company's Series A Convertible
Participating Preferred Stock, $.01 par value per share, the rights, privileges,
preferences, limitations and qualifications of which are set forth in the
Certificate of Designation filed by the Company with the Delaware Secretary of
State.
1.32 "PSE" means The Pacific Stock Exchange Incorporated.
1.33 "PSE-OptiMark Agreement" means the PSE-OptiMark Agreement of even
date between PSE and the Company.
- 4 -
<PAGE> 5
1.34 "PSE Revenue Sharing Agreement" means the Revenue Sharing Agreement
of even date between the Company and PSE.
1.35 "PSE Warrant" means the Common Stock Purchase Warrant of even date
issued by the Company in favor of PSE.
1.36 "Registration Rights Agreement" means the Registration Rights
Agreement of even date among the Company, the Investors, and PSE.
1.37 "Requirement of Law" means, as to any Person, any law, statute,
treaty, rule, regulation, right, privilege, qualification, license, franchise or
Judgment, in each case applicable or binding upon such Person or any of its
property or to which such Person or any of its property is subject or pertaining
to any or all of the transactions contemplated or referred to herein.
1.38 "Restructuring" means the divestiture of certain assets and
restructuring of the Company and its Subsidiaries described in the Company's
Information Statement to its shareholders dated April 11, 1996 and in the
undated memorandum entitled "Restructuring" (a copy of each of which has been
provided to the Investors), which closed effective May 31, 1996.
1.39 "SEC" means the United States Securities and Exchange Commission.
1.40 "Securities Laws" means and includes the 1933 Act and all other
applicable federal, state and foreign securities laws.
1.41 "Securities" means and includes both the Preferred Shares and the
Conversion Shares.
1.42 "Software" means any computer software programs, source code, object
code, data and related documentation.
1.43 "Stock Option Plan" means the Company's Incentive Stock Option Plan,
a copy of which has been delivered to the Investors.
1.44 "Stockholders Agreement" means the Stockholders Agreement of even
date among the Company, the Investors, the Voting Committee Members and certain
stockholders of the Company.
1.45 "Subsidiary" means any corporation or other entity (a) a majority of
which is owned or previously was owned by the Company, or (b) which the Company
otherwise directly or indirectly controls or previously controlled.
1.46 "Taxes" means and includes all federal, state, local, foreign and
other taxes and governmental assessments and levies, including without
limitation income taxes, alternative
- 5 -
<PAGE> 6
minimum taxes, sales taxes, franchise taxes, excise taxes, employment and
payroll taxes, estimated taxes, withholding taxes, transfer taxes, and all
associated fines, penalties and interest.
1.47 "Trade Secrets" means and includes any trade secrets, research
records, processes, procedures, manufacturing formulae, technical know-how,
technology, blueprints, designs, plans, inventions (whether patentable and
whether reduced to practice), invention disclosures and improvements thereto.
1.48 "Trademarks" means and includes any foreign or United States
trademarks, service marks, trade dress, trade names, brand names, designs and
logos, corporate names, product or service identifiers, whether registered or
unregistered, and all registrations and applications for registration thereof.
1.49 "Transaction Documents" means collectively this Agreement, the
Certificate of Designation, the Stockholders Agreement, the Registration Rights
Agreement, the Employment, Trade Secret and NonCompetition Agreements between
the Company and Messrs. Lupien and Rickard, the PSE-OptiMark Agreement, the PSE
Revenue Sharing Agreement and the PSE Warrant.
1.50 "Unaudited Financial Statements" means the unaudited consolidated
balance sheet as of June 30, 1996 of the Company and its Subsidiaries as of that
date, and the related statement of income of the Company and its Subsidiaries
for the six-month period then ended. The income statement included in the
Unaudited Financial Statements includes the results of Subsidiaries of the
Company that were divested in connection with the Restructuring.
1.51 "Voting Agreement' means the Voting Agreement dated July 17, 1996
among some of the stockholders of the Company.
SECTION 2 TERMS OF PURCHASE
2.1 Description of Securities. The Company has authorized the issuance and
sale of the Preferred Shares to the Investors for a purchase price of $7.33 per
Preferred Share. The Preferred Shares shall be sold in two sequential closings
of 654,844 shares (30%) (the "First Closing") and 1,527,968 shares (70%) (the
"Second Closing"), respectively, divided among the Investors as set forth
opposite such Investor's name in Schedule 2.1 hereto. The Company has authorized
and has reserved, and covenants to continue to reserve, a sufficient number of
shares of Common Stock to satisfy the rights of conversion of the holders of the
Preferred Shares.
2.2 First Closing. The First Closing is occurring simultaneously with the
parties' execution and delivery of this Agreement. At the First Closing, the
Company is issuing and selling to each of the Investors, and each Investor
severally and not jointly is purchasing from the Company, the number of
Preferred Shares set forth opposite such Investor's name in Schedule 2.1. At the
First Closing, the following is occurring:
- 6 -
<PAGE> 7
(a) The Company is executing and delivering to the Investors
certificates evidencing the Preferred Shares being purchased.
(b) The Company is delivering to the Investors evidence of the
filing of the Certificate of Designation with the Delaware Secretary of State.
(c) The Company, the Investors, the Voting Committee Members and
certain stockholders of the Company are mutually executing and delivering the
Stockholders Agreement.
(d) The Company, the Investors, and PSE are mutually executing and
delivering the Registration Rights Agreement.
(e) The Company and PSE are mutually executing and delivering the
PSE-OptiMark Agreement, the PSE Warrant, and the PSE Revenue Sharing Agreement.
(f) The Company is entering into Employment, Trade Secret and
NonCompetition Agreements with each of William A. Lupien and John T. ("Terry")
Rickard.
(g) The Company is delivering to the Investors an Officer's
Certificate of even date as to (i) the due adoption and continuing effectiveness
of the resolutions of the Board, attached thereto, approving the Transaction
Documents and all transactions contemplated thereby, (ii) the accuracy and
continuing effectiveness of the Certificate of Incorporation and Bylaws of the
Company attached thereto, and (iii) the incumbency and specimen signature of
each officer executing the Transaction Documents and the other closing documents
on behalf of the Company.
(h) The Company is delivering to the Investors a written opinion of
counsel to the Company of even date as to certain legal matters of importance to
the Investors (the "First Legal Opinion").
(i) The Company is executing and delivering to the Investors a side
letter as to the Financial Statements and certain Restructuring documents.
(j) The Investors severally and not jointly are making the payment
for the Preferred Shares being purchased, by wire transfer to the Company.
2.3 Second Closing.
(a) The Second Closing shall occur one week following both (i)
retention of a Chief Technical Officer by the Company, and (ii) completion of a
Critical Design Review and approval of the Critical Design Review by a special
vote of the Board in accordance with ss. 6.6 of the Stockholders Agreement. If
the Second Closing has not occurred by January 31, 1997, the obligations of the
parties under this ss. 2.3 shall be null and void.
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(b) The obligation of the Investors to purchase the Preferred Shares
set forth opposite each Investor's name in Schedule 2.1 at the Second Closing
and to pay the purchase price therefor at the Second Closing shall be subject to
the satisfaction, or waiver by a Consent of the Investors, of the following
conditions on the date of the Second Closing:
(i) The representations and warranties of the Company
contained in Section 3 hereof shall be true and correct in all material respects
on and as of the date of the Second Closing as if made at and on such date.
(ii) The Company shall have performed and complied in all
material respects with all of its covenants and conditions set forth herein that
are required to be performed or complied with by the Company on or before the
date of the Second Closing.
(iii) The Company shall have delivered to the Investors an
Officer's Certificate dated as of the Second Closing as to (i) the due adoption
and continuing effectiveness of the resolutions of the Board, attached thereto,
approving the Transaction Documents and all transactions contemplated thereby,
(ii) the accuracy and continuing effectiveness of the Certificate of
Incorporation and Bylaws of the Company attached thereto, and (iii) the
incumbency and specimen signature of each officer executing the Transaction
Documents and the other closing documents on behalf of the Company.
(iv) The Investors shall have received a certificate from the
Company, in form and substance reasonably satisfactory to the Investors (as
determined by a Consent of the Investors), dated the date of the Second Closing
and signed by the Chief Executive Officer of the Company, certifying that (A)
the representations and warranties of the Company contained in Section 3 hereof
are true and correct in all material respects on and as of the date of the
Second Closing as if made at and on such date and (B) the Company has performed
and complied in all material respects with all of the covenants and conditions
set forth herein that are required to be performed or complied with by the
Company on or before the date of the Second Closing.
(v) The Investors shall have received an opinion of counsel to
the Company, dated as of the date of the Second Closing, substantially in the
form of the First Legal Opinion.
(vi) OptiMark Licensing, Ltd. shall have irrevocably offered
to Investors an opportunity to invest in OptiMark Licensing, Ltd., in accordance
with and to the extent described by the Subscription Documents dated July 31,
1996 previously delivered to the Investors such offer to expire not earlier than
September 13, 1996.
(c) At the Second Closing, the Company shall issue and sell to each
of the Investors, and each Investor severally and not jointly shall purchase
from the Company, the number of Preferred Shares set forth opposite such
Investor's name in Schedule 2.1. At the Second Closing, the following shall
occur:
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<PAGE> 9
(i) The Company shall execute and deliver to the Investors or
their designated nominees certificates evidencing the Preferred Shares so
purchased.
(ii) The Investors shall deliver the purchase price for such
Preferred Shares to the Company by wire transfer.
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
To induce the Investors to enter into and consummate this Agreement, the
Company hereby represents and warrants to the Investors as follows:
3.1 Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is qualified to do business as a foreign corporation in each
jurisdiction in which the failure to qualify would have a material adverse
effect on the Company. The Company has all required corporate power and
authority to own and operate its property, to lease the property it operates as
lessee, to carry on its business as presently conducted or contemplated, to
enter into and perform the Transaction Documents and the agreements contemplated
thereby, and generally to carry out the transactions contemplated hereby and
thereby. Except as set forth on Schedule 3.1, the Company does not own or lease
property in any jurisdiction other than its jurisdiction of incorporation and
the jurisdictions in which it is qualified to do business as a foreign
corporation. The copies of the Certificate of Incorporation and Bylaws of the
Company, each as amended to date, which have been furnished to counsel for the
Investors, are correct and complete at the date hereof. The Company is not in
violation of any term of its Certificate of Incorporation or Bylaws.
3.2 Authorization. The Transaction Documents and all documents and
instruments executed pursuant thereto have been duly executed and delivered by
the Company and constitute legal, valid and binding obligations of the Company
enforceable in accordance with their terms against the Company. The execution,
delivery and performance of the Transaction Documents and all documents and
instruments contemplated thereby and the delivery and issuance of the Preferred
Shares and, upon conversion of the Preferred Shares, the Conversion Shares have
been duly authorized by all necessary corporate or other action of the Company.
Other than routine filing of a Form D with the SEC and any required filings
under state securities laws, no consent, approval or authorization of, or
designation, declaration or filing with, any Person, and no lapse of a waiting
period, is required of the Company in connection with the execution, delivery
and performance of the Transaction Documents, or the issuance and delivery by
the Company of the Preferred Shares in accordance with the terms of this
Agreement and, upon conversion of the Preferred Shares, the Conversion Shares,
or the performance or consummation of any other transaction contemplated
thereby.
3.3 Non-Contravention. The execution, delivery and performance by the
Company of the Transaction Documents and each of the other agreements and
instruments to which it is a party and which are contemplated thereby will not
(a) conflict with or result in any default under (i) any
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contract, obligation or commitment of the Company, or (ii) any provision of the
Certificate of Incorporation or Bylaws of the Company or any amendment thereof;
(b) result in the creation of any Lien of any nature upon any of the properties
or assets of the Company; or (c) violate any Judgment or Requirement of Law
applicable to the Company. The Company has not previously entered into any
contract, obligation or commitment which is currently in effect or by which the
Company is currently bound, granting any rights to any Person which are
inconsistent with the rights to be granted by the Company in the Transaction
Documents or any of the agreements contemplated by the Transaction Documents.
3.4 Capitalization of the Company.
(a) The authorized capital stock of the Company consists of (i)
20,000,000 shares of Common Stock, of which 6,638,433 shares are actually
outstanding as of the First Closing, and (ii) 10,000,000 shares of Preferred
Stock, none of which are outstanding except for the Preferred Shares. No
Certificate of Designation has been filed with the Delaware Secretary of State
with respect to the Preferred Stock except the Certificate of Designation for
the Preferred Shares. All outstanding shares of Common Stock are duly and
validly issued, fully paid and nonassessable. The Company has reserved an
aggregate of 2,182,812 shares of Common Stock for issuance upon conversion of
the Preferred Shares. Except for the Outstanding Rights, the Company has not
issued any other shares of its capital stock and there are no outstanding
warrants, options or other rights to purchase or acquire any of such shares or
other securities of the Company, nor are there any outstanding warrants, options
or other rights to acquire any such convertible securities. All of the
outstanding shares of capital stock of the Company (including the Preferred
Shares) have been offered, issued, sold and delivered in compliance with all
applicable federal and state securities laws. The Preferred Shares have been
duly and validly authorized and, when delivered and paid for pursuant to this
Agreement, will be validly issued, fully paid and nonassessable. The Preferred
Shares are convertible into 2,182,812 shares of Common Stock which will
represent, as of the Second Closing, approximately 21.38% of the Common Stock on
a fully-diluted basis after giving effect to the issuance of all shares reserved
for issuance under the Outstanding Rights. The Conversion Shares are duly
authorized and, when issued in compliance with the Company's Certificate of
Incorporation, will be validly issued, fully paid and nonassessable and will be
issued in compliance with the registration and qualification requirements of all
applicable federal and state securities laws.
(b) There are no preemptive rights or rights of first refusal with
respect to the issuance or sale of the Company's capital stock, other than
rights to which holders of the Preferred Shares and the Conversion Shares are
entitled as set forth in the Stockholders Agreement. No Person claims to have
or, to the best of the Company's knowledge, has any right to claim any interest
in the Company's capital stock. There are no restrictions on the transfer of the
Company's capital stock other than those arising from the Securities Laws and
the Stockholders Agreement. There are no rights, obligations, or restrictions on
the voting of any of the Company's capital stock, except under the Voting
Agreement, or the registration of such capital stock for offering to the public
pursuant to the 1933 Act. The outstanding shares of the Company's capital stock,
before giving effect to the
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<PAGE> 11
transactions contemplated by this Agreement, are held of record and beneficially
by the persons identified in Schedule 3.4 in the amounts indicated therein.
(c) Except as otherwise set forth on Schedule 3.4, the Company owns
no Subsidiaries or investments in any other corporation or business
organization.
3.5 Financial Statements. The Financial Statements were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, except that the Unaudited Financial Statements have been prepared without
footnote disclosures and year-end audit adjustments, which will not, in any
event, be material. All of such Financial Statements fairly represent the
financial condition of the Company and its Subsidiaries as of the date thereof,
and are true, correct and complete as of the date thereof in all material
respects. Nothing has come to the attention of the management of the Company
since such dates which would indicate that the Financial Statements were not
true and correct as of the date thereof.
3.6 Absence of Undisclosed Liabilities. Between the date of the Unaudited
Financial Statements and the First Closing, except as and to the extent
disclosed in Schedule 3.6, the Company did not incur any Liabilities that are
(a) individually in excess of $100,000 or (b) in the aggregate in excess of
$250,000, other than (i) Liabilities fully and adequately reflected or reserved
against on the Financial Statements and (ii) Liabilities incurred in the
ordinary course of business. As of the date of the First Closing, the Company
has no knowledge of any circumstance, condition, event or arrangement that may
hereafter give rise to any Liabilities of the Company except in the ordinary
course of business or as otherwise set forth on Schedule 3.6.
3.7 Absence of Certain Developments. Except as disclosed in Schedule 3.7,
between the date of the Unaudited Financial Statements and the First Closing,
there was (i) no material adverse change in the condition, financial or
otherwise, of the Company or in the assets, liabilities, business or prospects
of the Company, (ii) no declaration, setting aside or payment of any dividend or
other distribution with respect to, or any direct or indirect redemption or
acquisition of, any of the capital stock of the Company, (iii) no waiver of any
right of the Company or cancellation of any debt or claim held by the Company,
(iv) no loan by the Company to any officer, director, employee or stockholder of
the Company, any affiliates of any of the foregoing, or any agreement or
commitment therefor, (v) no material loss, destruction or damage to any property
of the Company, whether or not insured, (vi) no labor trouble involving the
Company and no material change in the personnel of the Company or the terms and
conditions of their employment, and (vii) no acquisition or disposition of any
assets (or any contract or arrangement therefor) nor any other transaction by
the Company otherwise than for fair value in the ordinary course of business.
3.8 Accounts Receivable. Except as disclosed on Schedule 3.8, the Company
has no accounts receivable from any Person which is affiliated with the Company
or any of its directors, officers, employees or shareholders or any affiliates
of any of the foregoing.
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<PAGE> 12
3.9 Debt. Schedule 3.9 sets forth as of the First Closing (a) a list of
all agreements for incurring of indebtedness for borrowed money to which the
Company is a party, (b) the amount of all indebtedness under each such
agreement, (c) the Liens that relate to such indebtedness and that encumber the
assets of the Company, and (d) the name of the lender thereof. None of the
obligations pursuant to such agreements are subject to acceleration by reason of
the consummation of the transactions contemplated hereby, nor would the
execution of the Transaction Documents or the consummation of the transactions
contemplated thereby result in any default under such agreements.
3.10 Title to Properties. The Company has good and marketable title to all
of its properties and assets (other than Intellectual Property, which is
addressed by ss. 3.13 below), free and clear of all Liens, and such properties
and assets constitute all of the assets necessary for the conduct of the
Company's business as presently conducted and as presently contemplated to be
conducted. All machinery and equipment included in such properties which is
necessary to the business of the Company is in good condition and repair and all
leases of real or personal property to which the Company is a party are in full
force and effect and afford the Company peaceful and undisturbed possession of
the subject matter of the lease. The Company is not in violation of any
Requirement of Law applicable to the operation of its owned or leased
properties, nor has the Company received any written notice of violation with
which it has not complied.
3.11 Tax Matters.
(a) The Company has paid or caused to be paid all Taxes required to
be paid by it through the date hereof whether disputed or not. All Taxes which
the Company is required to withhold or collect have been withheld and collected
and have been paid over to the proper governmental authorities. The Company has,
in accordance with applicable law, timely and properly filed all Tax returns
required to be filed by it through the date hereof, all such returns correctly
and accurately set forth the amount of any Taxes relating to the applicable
period, and any deductions from, or credits against, any Taxes or taxable income
relating to such returns are in all material respects valid and proper items of
deduction or credit.
(b) Neither the IRS nor any other governmental authority is now
asserting or, to the knowledge of the Company, threatening to assert against the
Company any deficiency or claim for additional Taxes. No claim has ever been
made by an authority in a jurisdiction where the Company does not file reports
and returns that the Company is or may be subject to taxation by that
jurisdiction. There are no Liens on any of the assets of the Company that arose
in connection with any failure (or alleged failure) to pay any Taxes. The
Company has never entered into a closing agreement pursuant to ss. 7121 of the
Code. The Company is not and never has been a "personal holding company" as
defined under Section 541 of the Code. There has not been any audit of any tax
return filed by the Company, no such audit is in progress, and the Company has
not been notified by any tax authority that any such audit is contemplated or
pending. No extension of time with respect to any date on which a tax return was
or is to be filed by the Company is in force, and no waiver or agreement by the
Company is in force for the extension of time for the assessment or
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<PAGE> 13
payment of any Taxes. To the best of the Company's knowledge, the Company does
not have any liability for the Taxes of any person or entity other than the
Company.
3.12 Contracts and Commitments. Except as provided on Schedule 3.12, and
except for contracts, obligations and commitments (if any) that may be duly
approved by the Board between the First Closing and the Second Closing, the
Company is not a party to any Material Contract. The Company does not know of
any basis for the termination, expiration or modification of any such Material
Contracts. Neither the Company nor any other party thereto is in default under
any Material Contract and, to the best knowledge of the Company, there is no
state of facts which upon notice or lapse of time or both would constitute such
a default. The Company is not a party to any contract or arrangement which under
circumstances now foreseeable is likely to have a materially adverse effect on
the assets, liabilities, business, condition, financial or otherwise, or
prospects of the Company. The Company does not have any liability for
renegotiation of any government contracts or subcontracts.
3.13 Intellectual Property.
(a) Schedule 3.13 sets forth all Patents, Trademarks and registered
Copyrights owned by, and applications for any of the above filed by, the Company
specifying as to each item, as applicable: (i) the category of Intellectual
Property; (ii) the jurisdiction in which the item is issued or registered or in
which any application for issuance or registration has been filed, including the
respective issuance, registration or application number; (iii) the date of
application, issuance or registration; and (iv) with respect to any Trademarks,
the class or classes of goods or services on which each such Trademark is or is
intended to be used. None of the Intellectual Property of the Company is subject
to any outstanding Judgment, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to the
knowledge of the Company, threatened, which challenges the validity,
enforceability, use or ownership of the Intellectual Property of the Company,
nor does the Company know of any valid basis for any such claim.
(b) Schedule 3.13 sets forth all licenses, sublicenses and other
agreements under which the Company is either a licensor or licensee of any
Intellectual Property, except such licenses, sublicenses and other agreements
relating to prepackaged software used solely on the computers of the Company.
The Company has substantially performed all obligations imposed upon it
thereunder, and neither the Company nor, to the knowledge of the Company, any
other party thereto, is in breach of or default thereunder in any respect, nor
is there any event which with notice or lapse of time or both would constitute a
default thereunder. All of the licenses listed on Schedule 3.13 are valid,
enforceable and in full force and effect, and will continue to be so on
identical terms as of both the First Closing and the Second Closing, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity relating to enforceability (regardless of whether
considered in a proceeding at law or in equity).
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<PAGE> 14
(c) To the knowledge of the Company, none of the Intellectual
Property currently sold or licensed by the Company to any Person or used by or
licensed to the Company infringes upon or otherwise violates any Intellectual
Property rights of others. No claim is pending or, to the knowledge of the
Company, threatened which challenges the freedom of the Company to conduct its
business as presently conducted.
(d) No litigation, action, suit, proceeding, arbitration, claim,
complaint, dispute or investigation is pending or, to the knowledge of the
Company, threatened against the Company, contesting the right of the Company to
sell or license to any Person or use the Intellectual Property presently sold or
licensed to such Person or used by the Company, nor does the Company know of any
valid basis for any such claim.
(e) To the knowledge of the Company, no Person is infringing upon or
otherwise violating the Intellectual Property rights of the Company.
(f) Except as set forth on Schedule 3.13, the Company has not agreed
to indemnify any person against any charge of infringement or other violation
with respect to any Intellectual Property owned or used by the Company.
(g) No former employer of any employee of the Company, and no
current or former client of any consultant of the Company, has made a claim
against the Company or, to the knowledge of the Company, against any other
Person, that such employee or such consultant is utilizing proprietary
information of such former employer or client.
(h) Except as set forth on Schedule 3.13, the Company is not a party
to or bound by and, upon the consummation of the transactions contemplated by
this Agreement, will not be a party to or bound by, any license or other
agreement requiring the payment of any material royalty payment, excluding such
agreements relating to prepackaged software licensed for use solely on the
computers of the Company.
(i) To the knowledge of the Company, no employee of the Company is
in violation of any Requirement of Law applicable to such employee's employment,
or any term of any employment agreement, patent or invention disclosure
agreement or other contract or agreement relating to the relationship of such
employee with the Company.
(j) Since January 1995, each employee and officer of the Company who
has had access to Company technology relating to OptiMark(TM) (fka MJTX) has
executed an agreement regarding confidentiality, proprietary information and
assignment of inventions to the Company and, to the knowledge of the Company,
none of such employees and officers are in violation of such agreements.
(k) To the knowledge of the Company, none of the Trade Secrets of
the Company, the value of which is contingent upon the continued maintenance of
the confidentiality thereof, has
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<PAGE> 15
been disclosed to any Person other than employees, representatives and agents of
the Company, except (A) where the Company determined that such disclosure was
necessary to conduct the business of the Company, such disclosure not having a
material adverse effect on the Company, (B) as required pursuant to the filing
of a patent application by the Company, or (C) under a confidentiality
agreement.
(l) The Company has the exclusive right to file, procure and
maintain all applications and registrations for the Intellectual Property owned
by the Company.
(m) To the present knowledge of the Company, all Patents, Trademarks
and Copyrights owned by the Company are valid and subsisting. The Company has
taken commercially reasonable efforts to maintain and protect its Intellectual
Property.
(n) The Intellectual Property owned by the Company is free and clear
of all Liens.
3.14 Litigation. There is no litigation, arbitration or governmental
proceeding or investigation pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries, which could, if
adversely determined, (i) call into question the validity or hinder the
enforceability or performance of the Transaction Documents or the agreements and
transactions contemplated thereby or (ii) have a materially adverse effect on
the assets, liabilities, business, condition (financial or otherwise), or
prospects of the Company; nor, to the best knowledge of the Company, has there
occurred any event nor does there exist any condition on the basis of which any
litigation, proceeding or investigation might properly be instituted.
3.15 Offerees. Neither the Company nor anyone acting on its behalf has
sold, offered or solicited offers to buy any securities of the Company so as to
bring the offer, issuance or sale of the Preferred Shares or the Conversion
Shares, as contemplated by this Agreement, within the provisions of Section 5 of
the 1933 Act, unless such offer, issuance or sale was within the exemptions of
the 1933 Act. Assuming the accuracy of the representations of the Investors in
Section 4, below, the Company has complied with all Securities Laws in
connection with the issuance and sale of the Preferred Shares.
3.16 Business: Compliance with Laws. The Company has all material
franchises, permits, licenses, orders, approvals and all other rights and
privileges necessary to permit it to own its property and to conduct its
business as it is presently conducted and as it is presently contemplated to be
conducted (collectively, "Permits"). Such Permits are in full force and effect.
The Company is not in violation in any respect of any Requirement of Law,
Judgment or Permit. The Company is in compliance, in all respects, with all
material federal, state and local laws and regulations (including all applicable
environmental laws and regulations, whether material or immaterial) relating to
its business as presently conducted. Neither the Company nor any officer or
director of the Company has been (a) subject to voluntary or involuntary
petition under the federal bankruptcy laws or any state insolvency law or the
appointment of a receiver, fiscal agent or similar officer by a court for its or
his business or property; (b) convicted in a criminal proceeding or named as a
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<PAGE> 16
subject of a pending criminal proceeding (excluding traffic violations and other
minor offenses); (c) subject to any Judgment (not subsequently reversed,
suspended or vacated) permanently or temporarily enjoining it or him from, or
otherwise imposing limits or conditions on its or his, engaging in any
securities, investment advisory, banking, insurance or other type of business or
acting as an officer or director of a public company; or (d) found by a court of
competent jurisdiction in a civil action or by the SEC or the Commodity Futures
Trading Commission to have violated any federal or state commodities, securities
or unfair trade practices law, which such judgment or finding has not been
subsequently reversed, suspended, or vacated.
3.17 Information Supplied to Investors. Neither the Transaction Documents,
nor the Schedules and Exhibits attached thereto or any document referenced
therein, nor any certificate, projection or statement (whether oral or written)
furnished to the Investors by or on behalf of the Company (including, without
limitation, (i) the undated memorandum entitled "Restructuring", (ii) the
Information Statement dated April 11, 1996, and (iii) the Results of Annual
Meeting of Shareholders dated May 17, 1996), contains any untrue statement of a
material fact, and none of the Transaction Documents, the Schedules and Exhibits
attached thereto or such other documents, certificates, projections or
statements referenced therein omits to state a material fact necessary in order
to make the statements contained therein not misleading. There is no material
fact directly relating to the assets, liabilities, business, condition
(financial or otherwise) or prospects of the Company (other than facts which
relate to general economic trends or conditions) known to the Company that
materially adversely affects or in the future may reasonably be expected to be
materially adversely affect the same that has not been set forth in this
Agreement or in the Schedules and Exhibits attached hereto.
3.18 Investment Banking: Brokerage. No broker, finder, agent or similar
intermediary has acted on behalf of the Company in connection with this
Agreement or the transactions contemplated hereby and there are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
therewith. The Company agrees to indemnify and hold the Investors harmless from
any Losses they may suffer or incur as a result of a breach of this
representation (including any dilution or diminution in value of their
investment in the Company).
3.19 Environmental Matters.
(a) The Company has never generated, transported, used, stored,
treated, disposed of, or managed any Hazardous Material. No Hazardous Material
has ever been or, to the best knowledge of the Company, is threatened to be
spilled, released, or disposed of by the Company, at any site presently or
formerly owned, operated, leased, or used by the Company, or has ever come to be
located in the soil or groundwater at any such site. No Hazardous Material has
ever been transported from any site presently or formerly owned, operated,
leased, or used by the Company for treatment, storage, or disposal at any other
place. To the best knowledge of the Company, the Company presently does not own,
operate, lease, or use, nor has the Company previously owned, operated, leased,
or used, any site on which underground storage tanks are or were located. No
Lien has ever been imposed by any governmental agency on any property, facility,
machinery, or
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equipment owned, operated, leased, or used by the Company with the presence of
any Hazardous Material and based upon any action or inaction of the Company.
(b) The Company has no liability under, nor has it ever violated in
any respect, any Environmental Law. The Company, any property owned, operated,
leased, or used by the Company, and any facilities and operations thereon are
presently in compliance in all respects with all applicable Environmental Laws.
The Company has never entered into or been subject to any Judgment with respect
to any environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law. None of the foregoing
items enumerated in this paragraph will be forthcoming.
(c) For purposes of this ss. 3.19, the term "Company" shall include
the Company, its Subsidiaries and their Affiliates, and any predecessors of the
Company, its Subsidiaries and their Affiliates.
3.20 Employee Benefit Programs.
(a) Schedule 3.20 sets forth a list of every Employee Program that
has been maintained by the Company at any time during the three-year period
ending on the First Closing.
(b) Each Employee Program which has ever been maintained by the
Company and which has at any time been intended to qualify under ss. 401(a) or
501(c)(9) of the Code has received a favorable determination or approval letter
from the IRS regarding its qualification under such section and to the best
knowledge of the Company has, in fact, been continuously qualified under the
applicable section of the Code since the effective date of such Employee
Program. No event or omission has occurred which would cause any such Employee
Program to lose its qualification under the applicable Code section.
(c) Each Employee Program that has ever been maintained by the
Company has been maintained in compliance with all applicable laws. With respect
to any Employee Program ever maintained by the Company, there has occurred no
"prohibited transaction," as defined in Section 406 of ERISA or Section 4975 of
the Code (for which there exists neither a statutory nor regulatory exception),
or material breach of any duty under ERISA or other applicable law (including,
without limitation, any health care continuation requirements or any other tax
law requirements, or conditions to favorable tax treatment, applicable to such
plan or to any person in regard to such plan), which could result, directly or
indirectly (including, without limitation, through any obligation of
indemnification or contribution), in any taxes, penalties or other liability to
the Company or any of its affiliates. No litigation, arbitration, or
governmental administrative proceeding (or investigation) or other proceeding
(other than those relating to routine claims for benefits) is pending or, to the
best knowledge of the Company, threatened with respect to any such Employee
Program.
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<PAGE> 18
(d) Neither the Company nor any Affiliate (i) has ever maintained
any Employee Program which has been subject to Title IV of ERISA or Section 412
of the Code (including, but not limited to, any Multiemployer Plan) or (ii) has
ever provided health care or any other non-pension benefits to any employees
after their employment is terminated (other than as required by part 6 of
subtitle B of Title I of ERISA) or has ever promised to provide such
post-termination benefits.
(e) With respect to each Employee Program maintained by or on behalf
of the Company or any Affiliate within the three (3) years preceding the
Closing, complete and correct copies of the following documents (if applicable
to such Employee Program) have been made available to the Investors: (i) all
documents embodying or governing such Employee Program, and any funding medium
for the Employee Program (including, without limitation, trust agreements), as
they may have been amended to the date hereof; (ii) the most recent IRS
determination or approval letter with respect to such Employee Program under
Code ss. 401 or 501(c)(9), and any applications for determination or approval
subsequently filed with the IRS; (iii) the three most recently filed IRS Forms
5500, with all applicable schedules and accountants' opinions attached thereto;
(iv) the summary plan description for such Employee Program (or other
descriptions of such Employee Program provided to employees) and all
modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy and any excess loss policy) related to such Employee
Program; (vi) any documents evidencing any loan to an Employee Program that is a
leveraged employee stock ownership plan; and (vii) all other materials
reasonably necessary for the Company to perform any of its responsibilities with
respect to any Employee Program subsequent to the Closing (including, without
limitation, health care continuation requirements).
(f) With respect to each Employee Program maintained by the Company
or its Affiliates, no event has occurred, and there exists no condition or set
of circumstances in connection with which the Company could, directly or
indirectly (through a Commonly Controlled Entity or otherwise), be subject to
any liability under ERISA, the Code or any other applicable law, except
liability for benefits claims and funding obligations payable in the ordinary
course.
(g) Each Employee Program maintained by the Company or Affiliate
that is a "group health plan" (as defined in ERISA ss. 607(1) or Code ss. 500
1(b)(1)) has been operated at all times in compliance with the provisions of
COBRA and any applicable, similar state law.
(h) The consummation of the transactions contemplated by this
Agreement will not: (i) entitle any current or former employee to severance pay,
unemployment compensation or any similar payment; (ii) accelerate the time of
payment or vesting, or increase the amount of any compensation due to, or in
respect of, any current or former employee; (iii) result in or satisfy a
condition to the payment of compensation that would, in combination with any
other payment, result in an "excess parachute payment" within the meaning of
Code ss. 280G(b); or (iv) constitute or involve a prohibited transaction (as
defined in ERISA ss. 502(1)) or otherwise violate Part 4 of Subtitle B of Title
I of ERISA.
- 18 -
<PAGE> 19
3.21 Product and Services Claims. There are no pending or, to the best of
the Company's knowledge, threatened product or service claims with respect to
any products manufactured or services provided by the Company nor are there any
facts upon which a claim of such nature could reasonably be anticipated to be
based. The Company does not have any contractual liability for breach of
warranty or service claims. No claims have been made against the Company for
renegotiation or price redetermination of any business transaction resulting
from or relating to defective products or services, and, to the best of the
Company's knowledge, there are no facts upon which any such claim should
reasonably be anticipated to be based.
3.22 Employees: Labor Matters. As of the First Closing, the Company
employs a total of approximately 13 full-time employees and one temporary
part-time employee. The Company believes it enjoys good employer-employee
relationships. The Company is not delinquent in payments to any of its employees
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed to the date hereof or amounts required to be reimbursed
to such employees. The Company does not have any policy, practice, plan or
program of paying severance pay or any form of severance compensation in
connection with the termination of employment, except as set forth in Schedule
3.22. All of the Company's programs and arrangements in connection with the
payment of commissions are described in Schedule 3.22. To the best of the
Company's knowledge, the Company is in material compliance with all Requirements
of Law respecting labor, employment, fair employment practices, work place
safety and health, terms and conditions of employment, and wages and hours.
There are no charges of employment discrimination or unfair labor practices, nor
are there any strikes, slowdowns, stoppages of work, or any other concerted
interference with normal operations which are existing, pending or, to the best
of the Company's knowledge, threatened against or involving the Company. The
Company has not received any information indicating that any of its employment
policies or practices is currently being audited or investigated by any federal,
state or local government agency. To the best of the Company's knowledge, the
Company is, and at all times since November 6, 1986 has been, in material
compliance with the requirements of the Immigration Reform Control Act of 1986.
3.23 Trade Relations. To the best knowledge of the Company, there exists
no actual or threatened termination, cancellation or limitation of, or any
adverse modification or change in, the business relationship of the Company with
any customer or any group of customers whose purchases are individually or in
the aggregate material to the business of the Company, or with any material
supplier.
3.24 Corporate Records; Copies of Documents. The corporate record books of
the Company accurately record all corporate action taken by its stockholders,
Board and committees. The copies of the corporate records of the Company, as
made available to the Investors for review, are true and complete copies of the
originals of such documents. The Company has made available for inspection by
the Investors true and correct copies of all documents referred to in this
Section 3.24 or in the Schedules delivered pursuant to this Agreement.
- 19 -
<PAGE> 20
3.25 Affiliate Transactions. Except as set forth in Schedule 3.25 hereto,
neither the Company nor, to the best of the Company's knowledge, any officer,
employee or director of the Company owns or controls, directly or indirectly, on
an individual or joint basis, any interest in (excepting less than 1%
stockholding for investment purposes in securities of publicly-held companies)
or serves as an officer, director, employee, consultant, partner or in another
similar capacity of, any competitor, supplier, lessor, lessee, distributor,
sales agent or customer of or lender to or borrower from, the Company.
3.26 Insurance. Schedule 3.26 lists all of the insurance policies held by
or on behalf of the Company as of the First Closing, with the effective date and
coverage amounts indicated thereon. Except as set forth on Schedule 3.26, such
policies and binders are valid and enforceable in accordance with their terms
and are in full force and effect. None of such policies will be affected by, or
terminate or lapse by reason of, any transaction contemplated by this Agreement
or any transaction contemplated hereunder.
3.27 FIRPTA. The Company is not a "foreign person" within the meaning of
Section 1445 of the Code.
3.28 Investment Company. The Company is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
3.29 Restructuring. Except for the actions described in Schedule 3.4, (a)
the Restructuring was completed prior to June 30, 1996, and (b) all of the
Company's Subsidiaries have been dissolved and each Subsidiary's affairs has
been wound-up in accordance with each Subsidiary's applicable law.
3.30 PSE-OptiMark Agreement. The PSE-OptiMark Agreement is in full force
and effect and binding upon the Company and PSE in accordance with its terms.
The Company is not in breach and, to the best of the Company's knowledge, PSE is
not in breach of the PSE-OptiMark Agreement. Regulatory Approval (as defined in
the PSE-OptiMark Agreement) has not been denied by the SEC. Neither the Company
nor PSE has "Terminated" the PSE-OptiMark Agreement (as defined therein), nor do
any grounds exist for the Termination of the PSE-OptiMark Agreement by either
party thereto.
SECTION 4 INVESTOR REPRESENTATIONS
To induce the Company to enter into this Agreement, each Investor hereby
severally and not jointly represents to the Company as follows:
4.1 Authorization. The execution of this Agreement and all other documents
executed pursuant to hereto have been duly authorized by all necessary action on
the part of the Investor, has been duly executed and delivered, and constitutes
a valid, binding and enforceable agreement of the Investor.
- 20 -
<PAGE> 21
4.2 Investment Intent. The Investor is acquiring the Preferred Shares for
its own account, for investment, and not with a present view to any
"distribution" thereof within the meaning of the 1933 Act. The Investor was not
formed or organized for the purpose of acquiring the Preferred Shares.
4.3 Restrictions on Transfer. The Investor understands that, because the
Preferred Shares have not been registered under the Securities Laws, the
Investor cannot dispose of any or all of the Preferred Shares or the Conversion
Shares unless such Securities are subsequently registered under the Securities
Laws or exemptions from such registration are available. The Investor
understands that each certificate representing the Preferred Shares and the
Conversion Shares will bear a legend substantially as follows:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of
any state. These securities may not be sold, pledged or otherwise
transferred except pursuant to an effective registration statement under
the securities laws or a written opinion of counsel reasonably
satisfactory to the Company that such registration is not required.
4.4 Sophistication. The Investor is sufficiently knowledgeable and
experienced in the making of venture capital investments so as to be able to
evaluate the risks and merits of its investment in the Company, and is able to
bear the economic risk of loss of its investment in the Company.
4.5 Reliance by Company. The Investor has been advised that the Preferred
Shares have not been and are not being registered under the Securities Laws and
that in issuing the Preferred Shares the Company is relying upon, among other
things, the representations and warranties of the Investors contained in this
Section 4.
4.6 Brokers. No broker, finder, agent or similar intermediary has acted on
behalf of the Investor in connection with this Agreement or the transactions
contemplated hereby, and there are no brokerage commissions, finder's fees or
similar fees or commissions payable in connection therewith.
4.7 Accreditation. The Investor is an "accredited investor" as that term
is defined under Regulation D adopted under the 1933 Act.
- 21 -
<PAGE> 22
SECTION 5 INDEMNIFICATION
5.1 General.
(a) The Company shall, to the full extent permitted by law, and in
addition to any such rights which any Indemnified Party (as defined herein) may
have pursuant to statute, common law, separate agreement, the Company's
Certificate of Incorporation or By-laws, or otherwise, indemnify, defend and
hold harmless each Investor (including its respective subsidiaries, affiliates,
directors, officers, members, partners, employees and agents, an "Indemnified
Investor") and each person (a "Controlling Person" and, collectively with
Indenmified Investors, the "Indemnified Parties") who controls any of them
within the meaning of Section 15 of the 1933 Act, from and against any and all
Losses (including Losses incurred by the Indemnified Party in any action between
the Company and the Indemnified Party or between the Indemnified Party and any
third party or otherwise) resulting from, arising out of or relating to (i) any
breach of any representation or warranty, covenant or agreement by the Company
in the Transaction Documents and/or any Certificate or Schedule delivered by the
Company pursuant thereto, including, without limitation, any legal,
administrative or other actions (including actions brought by the Investors or
the Company or any equity holders of the Company or derivative actions brought
by any Person claiming through or in the Company's name), proceedings or
investigations (whether formal or informal), or written threats thereof, based
upon, relating to or arising out of the Transaction Documents and/or any
Certificate or Schedule delivered by the Company pursuant thereto, the
transactions contemplated thereby, or any Indemnified Party's role therein or in
transactions contemplated thereby; (ii) by reason of their status as a security
holder, creditor, director, agent, representative or controlling person of the
Company (including, without limitation, any and all Losses under the Securities
Laws, at common law or otherwise, which relate directly or indirectly to the
registration, purchase, sale or ownership of the Securities or to any fiduciary
obligation owed with respect thereto); provided, however, that the Company will
not be liable to the extent that Losses arise from and are based on an untrue
statement or omission or alleged untrue statement or omission in a registration
statement or prospectus which is made in reliance on and in conformity with
information furnished to the Company by or on behalf of such Indemnified Party.
The indemnification and contribution provided for in this Section 5.1 will
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Parties or any officer, director, employee, agent or
Controlling Person of the Indemnified Parties.
(b) If the indemnification provided for in this Section 5.1 is for
any reason held by a court of competent jurisdiction to be unavailable to an
Indemnified Party in respect of any Losses referred to above, then the Company,
in lieu of indemnifying such Indemnified Party thereunder, shall contribute to
the amount paid or payable by such Indemnified Party as a result of such Losses
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Investors, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Investors in connection
with the action or inaction which resulted in such Losses, as well as any other
relevant equitable
- 22 -
<PAGE> 23
considerations. In connection with any registration of the Company's securities,
the relative benefits received by the Company and the Investors shall be deemed
to be in the same respective proportions that the net proceeds from the offering
(before deducting expenses) received by the Company and the Investors, in each
case as set forth in the table on the cover page of the applicable prospectus,
bear to the aggregate public offering price of the securities so offered. The
relative fault of the Company and the Investors shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Investors and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(c) The Company and the Investors agree that it would not be just
and equitable if contribution pursuant to the foregoing paragraph (b) were
determined by pro rata or per capita allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the foregoing paragraph (b). In connection with any registration of the
Company's securities, in no event shall an Investor be required to contribute
any amount under this Section 5.1 in excess of the lesser of (i) that proportion
of the total of such Losses indemnified against equal to the proportion of the
total securities sold under such registration statement which is being sold by
such Investors or (ii) the proceeds received by such Investor from its sale of
securities under such registration statement. No person found guilty of
fraudulent misrepresentation (within the meaning of the Securities Laws) shall
be entitled to contribution from any person who was not found guilty of such
fraudulent misrepresentation.
5.2 Notice; Defense of Claims.
(a) Promptly after receipt by an Indemnified Party of notice of any
third party or other claim, liability or expense to which the indemnification
obligations hereunder would apply, including in connection with any governmental
proceeding, the Indemnified Party shall give notice thereof in writing to the
indemnifying party or parties, but the omission to so notify the indemnifying
party or parties promptly will not relieve the indemnifying party or parties
from any liability except to the extent that the indemnifying party or parties
shall have been materially prejudiced as a result of the failure or delay in
giving such notice. Such notice shall state the information then available
regarding the amount and nature of such claim, liability or expense and shall
specify the provision or provisions of this Agreement under which the liability
or obligation is asserted.
(b) In the case of any third party claim, if within twenty (20) days
after receiving the notice described in the preceding paragraph the indemnifying
party or parties (i) give written notice to the Indemnified Parties stating that
they intend to defend in good faith against such claim, liability or expense at
their own cost and expense and (ii) provide assurance and security reasonably
acceptable to such Indemnified Parties that such indemnification will be paid
fully and promptly if required and such Indemnified Parties will not incur cost
or expense during the proceeding, then counsel for the defense shall be selected
by the indemnifying party or parties (subject to the consent of such Indemnified
Parties which consent shall not be unreasonably withheld) and such Indemnified
- 23 -
<PAGE> 24
Parties shall not be eligible for any payment with respect to such claim,
liability or expense as long as the indemnifying party or parties are conducting
a good faith and diligent defense at their own expense; provided, however, that
the assumption of defense of any such matters by the indemnifying party or
parties shall relate solely to the claim, liability or expense that is subject
or potentially subject to indemnification. If the indemnifying party or parties
assume such defense in accordance with the preceding sentence, they shall have
the right, with the consent of such Indemnified Parties, which consent shall not
be unreasonably withheld, to settle all indemnifiable matters related to claims
by third parties which are susceptible to being settled provided the
indemnifying party or parties' obligation to indemnify such Indemnified Parties
therefor will be fully satisfied and the settlement includes a complete release
of such Indemnified Parties. The indemnifying party or parties shall keep the
such Indemnified Parties apprised of the status of the claim, liability or
expense and any resulting suit, proceeding or enforcement action, shall furnish
such Indemnified Parties with all documents and information that such
Indemnified Parties shall reasonably request and shall consult with such
Indemnified Parties prior to acting on major matters, including settlement
discussions. Notwithstanding anything herein stated, such Indemnified Parties
shall at all times have the right to fully participate in such defense at its
own expense directly or through counsel; provided, however, if the named parties
to the action or proceeding include both the indemnifying party or parties and
the Indemnified Parties and representation of both parties by the same counsel
would be inappropriate under applicable standards of professional conduct, the
expense of separate counsel for such Indemnified Parties shall be paid by the
indemnifying party or parties. If no such notice of intent to dispute and defend
is given by the indemnifying party or parties, or if such diligent good faith
defense is not being or ceases to be conducted, such Indemnified Parties shall,
at the expense of the indemnifying party or parties, undertake the defense of
(with counsel selected by such Indemnified Parties), and shall have the right to
compromise or settle, such claim, liability or expense. If such claim, liability
or expense is one that by its nature cannot be defended solely by the
indemnifying party or parties, then such Indemnified Parties shall make
available all information and assistance that the indemnifying party or parties
may reasonably request and shall cooperate with the indemnifying party or
parties in such defense.
5.3 Satisfaction of Indemnification Obligations. Any indemnity payable
pursuant to this Section 5 shall be paid within the later of (a) thirty (30)
days after the Indemnified Party's request therefor or (b) after a final
non-appealable determination of Loss, and ten (10) days prior to the date on
which the Loss upon which the indemnity is based is required to be satisfied by
the Indemnified Party, if applicable.
SECTION 6 GENERAL
6.1 Amendments: Waivers and Consents. For the purposes of this Agreement
and all agreements, documents and instruments executed pursuant hereto, except
as otherwise specifically set forth herein or therein, no course of dealing
between the Company on the one hand and any Investor on the other and no delay
on the part of any party hereto in exercising any rights hereunder or thereunder
shall operate as a waiver of the rights hereof and thereof. Except as otherwise
provided herein or therein, amendments in or additions to, and any consents
required by, this
- 24 -
<PAGE> 25
Agreement may be made, and compliance with any term, covenant, condition or
provision set forth herein may be omitted or waived (either generally or in a
particular instance and either retroactively or prospectively) by a Consent of
the Investors and (in the case of any such amendment or addition) the Company.
Any amendment or waiver effected in accordance with this Section 6.1 shall be
binding upon each holder of Preferred Shares and the Conversion Shares, each
future holder of all such Securities, and the Company.
6.2 Survival of Representations, Warranties and Covenants; Assignability
of Rights. All covenants, agreements, representations and warranties of the
Company made herein and in the Schedules and Exhibits delivered or furnished by
or on behalf of the Company to any Investor in connection herewith shall be
deemed material and to have been relied upon by such Investor, and, except as
otherwise provided in this Agreement, shall survive the delivery of the
Securities indefinitely, regardless of any instruction or any investigation by
or on behalf of the Investors, and shall not merge in the performance of any
obligation and shall bind the Company's successors, assigns and heirs, whether
so expressed or not. Except as otherwise provided in this Agreement, all such
covenants, agreements, representations and warranties shall inure to the benefit
of the Investors successors and assigns and to transferees of the Securities,
whether so expressed or not. The representations and warranties made by the
Investors in Section 4 of this Agreement shall survive the delivery of the
Securities and shall bind the Investors' successors and assigns and shall inure
to the benefit of the Company's successors and assigns.
6.3 Governing Law. This Agreement shall be deemed to be a contract made
under, and shall be construed in accordance with, the laws of the State of New
York without giving effect to principles of conflicts of law.
6.4 Section Headings; Counterparts. The descriptive headings in this
Agreement have been inserted for convenience only and shall not be deemed to
limit or otherwise affect the construction of any provision thereof or hereof.
This Agreement may be executed simultaneously in any number of counterparts,
each of which when so executed and delivered shall be taken to be an original;
but such counterparts shall together constitute but one and the same document.
6.5 Notices and Demands. Any notice or demand which, by any provision of
this Agreement or any agreement, document or instrument executed pursuant hereto
or thereto, except as otherwise provided therein, is required or provided to be
given shall be deemed to have been sufficiently given or served and received for
all purposes upon the earlier to occur of actual delivery or five days after
being sent by certified or registered mail, postage and charges prepaid, return
receipt requested, or by express delivery providing receipt of delivery, to the
following addresses: if to the Company, at its address as shown on the signature
page hereof, or at any other address designated by the Company to each of the
Investors in writing; if to an Investor, at its mailing address as shown on
Schedule 2.1 hereto, or at any other address designated by such Investor to the
Company and the other Investors in writing; and if to an assignee of an
Investor, at its address as designated to the Company and the other Investors in
writing.
- 25 -
<PAGE> 26
6.6 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.
6.7 Expenses. The Company shall pay its costs and expenses, and each of
the Investors shall pay its respective costs and expenses, incurred with respect
to the negotiation, execution, delivery and performance of this Agreement and
the agreements, documents and instruments contemplated hereby or executed
pursuant hereto.
6.8 Publicity. Except as may be required by applicable Requirement of Law,
none of the parties hereto shall issue a publicity release or public
announcement or otherwise make any disclosure concerning the Transaction
Documents (other than the PSE-OptiMark Agreement) or the transactions
contemplated thereby, without prior approval by the Company and Consent of the
Investors; provided, however, that nothing in this Agreement shall restrict any
Investor from disclosing information (a) that is already publicly available; (b)
to a prospective transferee in connection with any contemplated transfer of any
of the Preferred Shares or Conversion Shares; and (c) to its attorneys,
accountants, consultants and other advisors to the extent necessary to obtain
their services in connection with such Investor's investment in the Company. If
any announcement is required by law to be made by any party hereto, prior to
making such announcement such party will deliver a draft of such announcement to
the other parties and shall give the other parties an opportunity to comment
thereon.
6.9 Further Assurances. Each of the parties shall execute such documents
and perform such further acts (including, without limitation, obtaining any
consents, exemptions, authorizations or other actions by, or giving any notices
to, or making any filings with, any governmental agency or any other Person) as
may be reasonably required or desirable to carry out or to perform the
provisions of this Agreement.
6.10 Integration. This Agreement together with the other Transaction
Documents, including the Schedules, Exhibits, documents and instruments referred
to herein or therein, constitutes the entire agreement, and supersedes all other
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as a
sealed instrument as of the day and year first above written.
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<PAGE> 27
Company:
OptiMark Technologies, Inc.
By: /s/ William A. Lupien
-------------------------------------------
William A. Lupien, Chief Executive Officer
Investors:
General Atlantic Partners 35, L.P.
By: General Atlantic Partners, LLC, its General
Partner
By: /s/ J. Michael Cline
-------------------------------------------
A Managing Member
GAP Coinvestment Partners, L.P.
By: /s/ J. Michael Cline
-------------------------------------------
General Partner
Dow Jones & Company, Inc.
By: /s/ Carl M. Valenti
-------------------------------------------
Title: Senior Vice President
------------------------------------
/s/ Alice L. Walton
-----------------------------------------------
Alice L. Walton
- 27 -
<PAGE> 28
Schedule 2.1
<TABLE>
<CAPTION>
First Closing Second Closing
------------- --------------
Investor Shares Price Shares Price
- -------- ------ ----- ------ -----
<S> <C> <C> <C> <C>
General Atlantic Partners 35, L.P. 348,826 $2,556,895 813,927 $5,966,085
3 Pickwick Plaza
Greenwich, CT 06830
GAP Coinvestment Partners, L.P. 60,451 443,105 141,053 1,033,915
3 Pickwick Plaza
Greenwich, CT 06830
Dow Jones & Company, Inc. 204,639 1,500,000 477,490 3,500,000
200 Liberty Street
New York, NY 10281
Alice L. Walton 40,928 300,000 95,498 700,000
The Llama Company
One McIlroy Plaza, Suite 302
Fayetteville, AR 72701
------- ---------- --------- -----------
TOTALS 654,844 $4,800,000 1,527,968 $11,200,000
</TABLE>
- 28 -
<PAGE> 1
Exhibit 4.4
================================================================================
REGISTRATION RIGHTS AGREEMENT
among
OPTIMARK TECHNOLOGIES, INC.,
GENERAL ATLANTIC PARTNERS 35, L.P.,
GAP COINVESTMENT PARTNERS, L.P.,
DOW JONES & COMPANY, INC.,
ALICE L. WALTON
and
THE PACIFIC STOCK EXCHANGE INCORPORATED
---------------------------------
Dated: August 27, 1996
---------------------------------
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
1. Definitions ............................................................ 1
2. General; Securities Subject to this Agreement .......................... 5
(a) Grant of Rights .................................................... 5
(b) Registrable Securities ............................................. 5
(c) Holders of Registrable Securities .................................. 5
3. Demand Registration .................................................... 5
(a) Request for Demand Registration .................................... 5
(b) Effective Demand Registration ...................................... 6
(c) Expenses ........................................................... 6
(d) Underwriting Procedures ............................................ 7
(e) Selection of Underwriters .......................................... 7
4. Piggy-Back Registration ................................................ 7
(a) Piggy-Back Rights .................................................. 7
(b) Expenses ........................................................... 8
5. Holdback Agreements .................................................... 8
(a) Restrictions on Public Sale by Designated Holders .................. 8
(b) Restrictions on Public Sale by the Company ......................... 8
6. Registration Procedures ................................................ 9
(a) Obligations of the Company ........................................ 9
(b) Seller Information ................................................. 12
(c) Notice to Discontinue .............................................. 12
(d) Registration Expenses .............................................. 12
7. Indemnification; Contribution .......................................... 13
(a) Indemnification by the Company ..................................... 13
(b) Indemnification by Designated Holders .............................. 13
(c) Conduct of Indemnification Proceedings ............................. 14
(d) Contribution ....................................................... 14
8. Rule 144 ............................................................... 15
9. Miscellaneous .......................................................... 15
(a) Recapitalizations, Exchanges, etc .................................. 15
(b) No Inconsistent Agreements ......................................... 16
i
<PAGE> 3
Page
(c) Remedies .............................................................. 16
(d) Amendments and Waivers ................................................ 16
(e) Notices ............................................................... 16
(f) Successors and Assigns; Third Party Beneficiaries ..................... 18
(g) Counterparts .......................................................... 19
(h) Headings .............................................................. 19
(i) GOVERNING LAW ......................................................... 19
(j) Severability .......................................................... 19
(k) Entire Agreement ...................................................... 19
(1) Further Assurances .................................................... 19
ii
<PAGE> 4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated August 27, 1996 (this
"Agreement"), among OptiMark Technologies, Inc., a Delaware corporation (the
"Company"), General Atlantic Partners 35, L.P., a Delaware limited Partnership
("GAP LP"), GAP Coinvestment Partners, L.P., a New York limited partnership
("GAP Coinvestment"), Dow Jones & Company, Inc., a Delaware corporation
("Dow Jones"), Alice L. Walton ("Walton") and The Pacific Stock Exchange
Incorporated, a Delaware corporation ("PSE").
This Agreement is made in connection with the Stock Purchase
Agreement, dated the date hereof (the "Stock Purchase Agreement"), among the
Company, GAP LP, GAP Coinvestment, Dow Jones and Walton, pursuant to which the
Company has agreed to issue and sell to (a) GAP LP, and GAP LP has agreed to
purchase from the Company, 1,162,753 shares, par value $.Ol per share, of Series
A Convertible Participating Preferred Stock of the Company (the "Preferred
Stock"), (b) GAP Coinvestment, and GAP Coinvestment has agreed to purchase from
the Company, 201,504 shares of Preferred Stock, (c) Dow Jones, and Dow Jones has
agreed to purchase from the Company, 682,129 shares of Preferred Stock and (d)
Walton, and Walton has agreed to purchase from the Company, 136,426 shares of
Preferred Stock. Each share of Preferred Stock is convertible into one (1)
share, par value $.O1 per share, of Common Stock of the Company (the "Common
Stock"), subject to adjustments. On the date hereof, PSE has the right to
purchase up to 526,000 shares of Common Stock pursuant to a Common Stock
Purchase Warrant, dated the date hereof, issued by the Company to PSE (the "PSE
Warrant"). In order to induce (i) GAP LP, GAP Coinvestment, Dow Jones and Walton
to enter into the Stockholders Agreement, dated the date hereof (the
"Stockholders Agreement") and (ii) PSE to enter into the PSE-OptiMark Agreement,
dated the date hereof, between the Company and PSE, and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Company has agreed to grant registration rights with respect
to the Registrable Securities (as hereinafter defined) as set forth in this
Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement the following terms have
the meanings indicated:
"Act" means the Securities Act of 1933, as amended.
"Affiliate" shall mean any Person who is an "affiliate" as
defined in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act. In addition, the following shall be deemed to be Affiliates of GAP LP: (a)
GAP LLC, the members of GAP LLC, and the limited partners of GAP LP; (b) any
<PAGE> 5
2
Affiliate of GAP LLC, the members of GAP LLC and the limited partners of GAP LP;
and (c) any limited liability company or partnership a majority of whose members
or partners, as the case may be, are members, former members, consultants or key
employees of GAP LLC. In addition, GAP LP and GAP Coinvestment shall be deemed
to be Affiliates of one another.
"Approved Underwriter" has the meaning assigned such term in
Section 3(e).
"Common Stock" means the Common Stock, par value $.Ol per share,
of the Company or any other equity securities of the Company into which such
securities are converted, reclassified, reconstituted or exchanged.
"Company" has the meaning assigned to such term in the recital to
this Agreement.
"Company Underwriter" has the meaning assigned such term in
Section 4(a).
"Demand Registration" has the meaning assigned such term in
Section 3(a).
"Designated Holder" means each of the General Atlantic
Stockholders, the Dow Jones Stockholders, the Walton Stockholders and the PSE
Stockholders and any transferee of any of them to whom Registrable Securities
have been transferred in accordance with the provisions of this Agreement, other
than a transferee to whom such securities have been transferred pursuant to a
registration statement under the Securities Act or Rule 144 or Regulation S
under the Securities Act.
"Dow Jones" has the meaning assigned such term in the recital to
this Agreement.
"Dow Jones Stockholders" means Dow Jones and any Affiliate
thereof to which Registrable Securities are transferred.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"GAP LLC" means General Atlantic Partners, LLC, a Delaware
limited liability company and the general partner of GAP LP, and any successor
to such entity.
"GAP Coinvestment" has the meaning assigned such term in the
recital to this Agreement.
<PAGE> 6
3
"GAP LP" has the meaning assigned such term in the recital to
this Agreement.
"General Atlantic Stockholders" means GAP LP, GAP Coinvestment
and any Affiliate thereof to which Registrable Securities are transferred.
"Holders' Counsel" has the meaning assigned such term in Section
6(a)(i).
"Indemnified Party" has the meaning assigned such term in Section
7(c).
"Indemnifying Party" has the meaning assigned such term in
Section 7(c).
"Initiating Holders" has the meaning assigned such term in
Section 3(a).
"Inspector" has the meaning assigned such term in Section 6(a)
(viii).
"IPO Effectiveness Date" means the date upon which the Company
commences its initial offer for sale of shares of Common Stock pursuant to an
effective Registration Statement filed under the Securities Act.
"NASD" has the meaning assigned such term in Section 6(a)(xiii).
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, limited liability company, government (or an
agency or political subdivision thereof) or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity.
"Preferred Stock" has the meaning assigned to such term in the
recital to this Agreement.
"PSE" means The Pacific Stock Exchange Incorporated.
"PSE Stockholders" means PSE and any Affiliate thereof to which
Registrable Securities are transferred.
"PSE Warrant" means the Common Stock Purchase Warrant, dated the
date hereof, issued by the Company in favor of PSE.
<PAGE> 7
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"Records" has the meaning assigned such term in Section 6(a)(v
iii).
"Registrable Securities" means each of the following: (a) any and
all shares of Common Stock owned by the Designated Holders and issued or
issuable upon conversion of shares of Preferred Stock, (b) any other shares of
Common Stock acquired or owned by any of the Designated Holders prior to the IPO
Effectiveness Date, or acquired or owned by any of the Designated Holders after
the IPO Effectiveness Date, if such Designated Holder is an Affiliate of the
Company, (c) any shares of Common Stock issued or issuable to any of the
Designated Holders with respect to shares of Common Stock or shares of Preferred
Stock by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise and shares of Common Stock issuable upon conversion,
exercise or exchange thereof and (d) to the extent exercisable at the time such
amount of Registrable Securities is to be determined, any and all shares of
Common Stock issuable to PSE upon exercise of the PSE Warrant.
"Registration Expenses" has the meaning set forth in Section
6(d).
"Registration Statement" means a registration statement filed
pursuant to the Securities Act.
"SEC" means the Securities and Exchange Commission or any similar
agency then having jurisdiction to enforce the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Stock Purchase Agreement" has the meaning assigned such term in
the recital to this Agreement.
"Stockholders Agreement" has the meaning assigned such term in
the recital to this Agreement.
"Walton" has the meaning assigned such term in the recital to
this Agreement.
"Walton Stockholders" means Walton and any Permitted Transferee
(as defined in the Stockholders Agreement) thereof to which Registrable
Securities are transferred.
<PAGE> 8
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2. General; Securities Subject to this Agreement.
(a) Grant of Rights. The Company hereby grants registration
rights to the General Atlantic Stockholders, the Dow Jones Stockholders, the
Walton Stockholders and the PSE Stockholders upon the terms and conditions set
forth in this Agreement.
(b) Registrable Securities. For the purposes of this Agreement,
Registrable Securities will cease to be Registrable Securities when (i) a
registration statement covering such Registrable Securities has been declared
effective under the Securities Act by the SEC and such Registrable Securities
have been disposed of pursuant to such effective registration statement, (ii)
the entire amount of such Registrable Securities proposed to be sold in a single
sale are or, in the opinion of counsel satisfactory to the Company and the
Designated Holder, each in their reasonable judgment, may be distributed to the
public without any limitation as to volume pursuant to Rule 144 (or any
successor provision then in effect) under the Securities Act or (iii) such
Registrable Securities are proposed to be sold or distributed by a Person not
entitled to the registration rights granted by this Agreement.
(c) Holders of Registrable Securities. A Person is deemed to be a
holder of Registrable Securities whenever such Person owns of record Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company may act upon the basis of the instructions, notice or
election received from the registered owner of such Registrable Securities.
Registrable Securities issuable upon exercise of an option or upon conversion of
another security shall be deemed outstanding for the purposes of this Agreement.
3. Demand Registration.
(a) Request for Demand Registration. At any time after twelve
months following the IPO Effectiveness Date, the General Atlantic Stockholders
may make a written request to the Company to register (such General Atlantic
Stockholders making such request being referred to hereinafter as the
"Initiating Holders"), under the Securities Act and under the securities or
"blue sky" laws of any jurisdiction reasonably designated by such holder or
holders, the number of Registrable Securities, the offer and sale of which shall
result in net proceeds (after expenses and underwriting commissions and
discounts) to such Initiating Holders of at least $5,000,000 (a "Demand
Registration"). The Company shall use its reasonable efforts to cause such
Demand Registration to become and remain effective not later than three (3)
months after it receives a request for a Demand Registration. The Company shall
not be required to effect more than one (1) Demand Registration at the request
of the General Atlantic Stockholders pursuant to this Section 3. Notwithstanding
the foregoing, if the amount of Registrable Securities requested by
<PAGE> 9
6
the Initiating Holders to be included in a Demand Registration is reduced
pursuant to Section 3(d) or 4(a), then a Demand Registration shall not be deemed
to have been effected at the request of such Initiating Holders. If at the time
of any request to register Registrable Securities pursuant to this Section 3(a),
the Company is engaged in, or has fixed plans to engage in within three (3)
months of the time of such request, a registered public offering or is engaged
in any other activity which, in the good faith determination of the Board of
Directors of the Company, would be adversely affected by the requested
registration to the material detriment of the Company, then the Company may at
its option direct that such request be delayed for a reasonable period not in
excess of three (3) months from the effective date of such offering or the date
of completion of such other material activity, as the case may be, such right to
delay a request to be exercised by the Company not more than once in any
one-year period. In addition, the Company shall not be required to effect any
Demand Registration within three (3) months after the effective date of any
other Registration Statement of the Company. Each request for a Demand
Registration by the Initiating Holders shall state the amount of the Registrable
Securities proposed to be sold and the intended method of disposition thereof.
Upon a request for a Demand Registration, the Company shall promptly take such
steps as are necessary or appropriate to prepare for the registration of the
Registrable Securities to be registered. Each of the Designated Holders (other
than the Initiating Holders) may, pursuant to and as limited by Section 4
hereof, offer its Registrable Securities under any such Demand Registration
pursuant to this Section 3.
(b) Effective Demand Registration. A registration shall not
constitute a Demand Registration until it has become effective and remains
continuously effective for the lesser of (i) the period during which all
Registrable Securities registered in the Demand Registration are sold and (ii)
120 days; provided, however, that a registration shall not constitute a Demand
Registration if (x) after such Demand Registration has become effective, such
registration or the related offer, sale or distribution of Registrable
Securities thereunder is interfered with by any stop order, injunction or other
order or requirement of the SEC or other governmental agency or court for any
reason not attributable to the Initiating Holders and such interference is not
thereafter eliminated or (y) the conditions to closing specified in the
underwriting agreement, if any, entered into in connection with such Demand
Registration are not satisfied or waived, other than by reason of a failure by
the Initiating Holders.
(c) Expenses. In any registration initiated as a Demand
Registration, the Company shall pay all Registration Expenses (other than
underwriting discounts and commissions) in connection therewith, whether or not
such Demand Registration becomes effective; provided, however, that each
Designated Holder participating in such Demand Registration shall bear the costs
of its own legal counsel.
<PAGE> 10
7
(d) Underwriting Procedures. If the Initiating Holders holding a
majority of the Registrable Securities held by all of the Initiating Holders to
which the requested Demand Registration relates so elect, the Company shall use
its reasonable efforts to cause the offering of such Registrable Securities
pursuant to such Demand Registration to be in the form of a firm commitment
underwritten offering and the managing underwriter or underwriters selected for
such offering shall be the Approved Underwriter (as hereinafter defined)
selected in accordance with Section 3(e). In such event, if the Approved
Underwriter advises the Company in writing that in its opinion the aggregate
amount of such Registrable Securities requested to be included in such offering
is sufficiently large to have a material adverse effect on the success of such
offering, then the Company shall include in such registration only the aggregate
amount of Registrable Securities that in the opinion of the Approved Underwriter
may be sold without any such material adverse effect and shall reduce, first as
to the Company and then as to the Designated Holders as a group pro rata based
on the number of Registrable Securities requested to be included in such
registration.
(e) Selection of Underwriters. If any Demand Registration of
Registrable Securities is in the form of an underwritten offering, the
Initiating Holders holding a majority of the Registrable Securities held by all
such Initiating Holders shall select and obtain an investment banking firm of
national reputation to act as the managing underwriter of the offering (the
"Approved Underwriter"); provided, however, that the Approved Underwriter shall,
in any case, be acceptable to the Company in its reasonable judgment.
4. Piggy-Back Registration.
(a) Piggy-Back Rights. At any time after the IPO Effectiveness
Date, if the Company proposes to file a registration statement under the
Securities Act with respect to an offering by the Company for its own account or
for the account of the Initiating Holders pursuant to Section 3 of any class of
security (other than a registration statement on Form S-4 or S-8 or any
successor thereto), then the Company shall give written notice of such proposed
filing to each of the Designated Holders of Registrable Securities (other than
any Initiating Holders) at least thirty (30) days before the anticipated filing
date, and such notice shall describe the proposed registration and distribution
and offer such Designated Holders (other than any Initiating Holders) the
opportunity to register the number of Registrable Securities as each such holder
may request. The Company and/or Initiating Holders shall, and shall use
reasonable efforts to cause the managing underwriter or underwriters of a
proposed underwritten offering (the "Company Underwriter") to, permit the
Designated Holders of Registrable Securities who have requested in writing to
participate in the registration for such offering to include such Registrable
Securities in such offering on the same terms and conditions as the securities
of the Company included therein. In connection with any offering under this
Section 4(a) involving an underwriting, the Company and/or Initiating Holders
shall not be
<PAGE> 11
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required to include any Registrable Securities in such underwriting unless the
holders thereof accept the terms of the underwriting as agreed upon between the
Company and the Company Underwriter, and then only in such quantity as will not,
in the opinion of the Company Underwriter, jeopardize the success of the
offering by the Company and/or Initiating Holders. If in the written opinion of
the Company Underwriter the registration of all or part of the Registrable
Securities which the Designated Holders have requested to be included would
materially adversely affect such public offering, then the Company shall be
required to include in the underwriting, to the extent of the amount that the
Company Underwriter believes may be sold without causing such adverse effect,
first, all of the securities to be offered for the account of the Company, if
the Company initiated such registration; second, the Registrable Securities to
be offered for the account of the Designated Holders as a group, pro rata based
on the number of Registrable Securities proposed to be offered for the account
of such Designated Holders; and third, any other securities requested to be
included in such underwriting.
(b) Expenses. The Company shall bear all Registration Expenses
(other than underwriting discounts and commissions) in connection with any
registration pursuant to this Section 4; provided, however, that each Designated
Holder participating in such registration shall bear the costs of its own legal
counsel.
5. Holdback Agreements.
(a) Restrictions on Public Sale by Designated Holders. Each
Designated Holder of Registrable Securities agrees not to effect any public sale
or distribution of any Registrable Securities being registered or of any
securities convertible into or exchangeable or exercisable for such Registrable
Securities, including a sale pursuant to Rule 144 under the Securities Act,
during the 180-day period beginning on the effective date of such registration
statement (except as part of such registration), if and to the extent requested
by the Company or Initiating Holders in the case of a non-underwritten public
offering or if and to the extent requested by the Company Underwriter in the
case of an underwritten public offering.
(b) Restrictions on Public Sale by the Company. The Company
agrees not to effect any public sale or distribution of any of its securities,
or any securities convertible into or exchangeable or exercisable for such
securities (except pursuant to registrations on Form S-4 or S-8 or any successor
thereto), during the period beginning on the effective date of any registration
statement in which the Designated Holders of Registrable Securities are
participating and ending on the earlier of (i) the date on which all Registrable
Securities registered on such registration statement are sold and (ii) three (3)
months after the effective date of such registration statement.
<PAGE> 12
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6. Registration Procedures.
(a) Obligations of the Company. Whenever registration of
Registrable Securities has been requested pursuant to Section 3 or 4 of this
Agreement, the Company shall use its reasonable efforts to effect the
registration and sale of such Registrable Securities in accordance with the
intended method of distribution thereof as quickly as practicable, and in
connection with any such request, the Company shall, as expeditiously as
possible:
(i) use its reasonable efforts to prepare and file with the
SEC a registration statement on any form for which the Company then qualifies or
which counsel for the Company shall deem appropriate and which form shall be
available for the sale of such Registrable Securities in accordance with the
intended method of distribution thereof, and use its reasonable efforts to cause
such registration statement to become effective; provided, however, that (x)
before filing a registration statement or prospectus or any amendments or
supplements thereto, the Company shall provide counsel selected by the
Designated Holders holding a majority of the Registrable Securities being
registered in such registration ("Holders' Counsel") and any other Inspector (as
hereinafter defined) with an adequate and appropriate opportunity to participate
in the preparation of such registration statement and each prospectus included
therein (and each amendment or supplement thereto) to be filed with the SEC,
which documents shall be subject to the review of Holders' Counsel, and (y) the
Company shall notify the Holders' Counsel and each seller of Registrable
Securities of any stop order issued or threatened by the SEC and take all
reasonable action required to prevent the entry of such stop order or to remove
it if entered;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the lesser of (x) three (3) months and (y) such shorter period which will
terminate when all Registrable Securities covered by such registration statement
have been sold, and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;
(iii) as soon as reasonably possible, furnish to each seller
of Registrable Securities, prior to filing a registration statement, copies of
such registration statement as is proposed to be filed, and thereafter such
number of copies of such registration statement, each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus included
in such registration statement (including each preliminary prospectus) and such
other documents as each such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such seller;
<PAGE> 13
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(iv) use its reasonable efforts to register or qualify such
Registrable Securities under such other securities or "blue sky" laws of such
jurisdictions as any seller of Registrable Securities may reasonably request,
and to continue such qualification in effect in such jurisdiction for the lesser
of (x) three (3) months and (y) such shorter period which will terminate when
all Registrable Securities covered by such registration statement have been
sold, and do any and all other acts and things which may be reasonably necessary
or advisable to enable any such seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such seller; provided,
however, that the Company shall not be required to (x) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 6(a)(iv), (y) subject itself to taxation in any such
jurisdiction or (z) consent to general service of process in any such
jurisdiction;
(v) use its reasonable efforts to cause the Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
by virtue of the business and operations of the Company to enable the seller or
sellers of Registrable Securities to consummate the disposition of such
Registrable Securities;
(vi) upon discovery that, or upon the happening of any event
as a result of which, the prospectus included in a registration statement
covering Registrable Securities contains an untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances
under which they were made, (x) promptly prepare a supplement or amendment to
such prospectus and furnish to each seller of Registrable Securities a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, after delivery to the purchasers of such
Registrable Securities, such prospectus shall not contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances under which they were made and (y) immediately prior to the
preparation of such amendment or supplement to such prospectus, notify each
seller of Registrable Securities of the anticipated preparation thereof;
(vii) enter into and perform customary agreements (including
an underwriting agreement in customary form with the Approved Underwriter or
Company Underwriter, if any, selected as provided in Section 3 or 4) and take
such other actions as are prudent and reasonably required in order to expedite
or facilitate the disposition of such Registrable Securities;
(viii) make available for inspection by any seller of
Registrable Securities, any managing underwriter participating in any
disposition pursuant to such registration statement, Holders' Counsel and any
attorney, accountant or other agent retained by any such seller or any managing
underwriter
<PAGE> 14
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(each, an "Inspector" and collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of the Company and
its subsidiaries (collectively, the "Records") as shall be reasonably necessary
to enable them to exercise their due diligence responsibility, and cause the
Company's and its subsidiaries' officers, directors and employees, and the
independent public accountants of the Company, to supply all information
reasonably requested by any such Inspector in connection with such registration
statement. Records that the Company determines, in good faith, to be
confidential and which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors unless (x) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in the registration
statement, (y) the release of such Records is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction or (z) the information in
such Records was known to the Inspectors on a non-confidential basis prior to
its disclosure by the Company or has been made generally available to the
public. Each seller of Registrable Securities agrees that it shall, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at the Company's
expense, to undertake appropriate action to prevent disclosure of the Records
deemed confidential;
(ix) if such sale is pursuant to an underwritten offering,
use its reasonable efforts to obtain a "cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by "cold comfort" letters as Holders' Counsel or
the managing underwriter reasonably request;
(x) use its reasonable efforts to furnish, at the request of
any seller of Registrable Securities on the date such securities are delivered
to the underwriters for sale pursuant to such registration or, if such
securities are not being sold through underwriters, on the date the registration
statement with respect to such securities becomes effective, an opinion, dated
such date, of counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to the seller making
such request, covering such legal matters with respect to the registration in
respect of which such opinion is being given as such seller may reasonably
request and are customarily included in such opinions;
(xi) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable but no later than fifteen (15) months
after the effective date of the registration statement, an earnings statement
covering a period of twelve (12) months beginning after the effective date of
the registration statement, in a manner which satisfies the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
<PAGE> 15
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(xii) cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Company are
then listed, provided, that the applicable listing requirements are satisfied;
(xiii) cooperate with each seller of Registrable Securities
and each underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings required
to be made with the National Association of Securities Dealers, Inc. (the
"NASD"); and
(xiv) use reasonable efforts to take all other steps
necessary to effect the registration of the Registrable Securities contemplated
hereby.
(b) Seller Information. The Company may require each seller of
Registrable Securities as to which any registration is being effected to furnish
to the Company such information regarding the distribution of such securities as
the Company may from time to time reasonably request in writing.
(c) Notice to Discontinue. Each Designated Holder of Registrable
Securities agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 6(a)(vi), such
Designated Holder shall forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such Designated Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 6(a)(vi) and, if so
directed by the Company, such Designated Holder shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
Designated Holder's possession, of the prospectus covering such Registrable
Securities which is current at the time of receipt of such notice. If the
Company shall give any such notice, the Company shall extend the period during
which such registration statement shall be maintained effective pursuant to this
Agreement (including, without limitation, the period referred to in Section
6(a)(ii)) by the number of days during the period from and including the date of
the giving of such notice pursuant to Section 6(a)(vi) to and including the date
when the Designated Holder shall have received the copies of the supplemented or
amended prospectus contemplated by and meeting the requirements of Section
6(a)(vi).
(d) Registration Expenses. The Company shall pay all expenses
(other than as set forth in Sections 3(c) and 4(b)) arising from or incident to
the performance of, or compliance with, this Agreement, including, without
limitation, (i) SEC, stock exchange and NASD registration and filing fees, (ii)
all fees and expenses incurred in complying with securities or "blue sky" laws
(including reasonable fees, charges and disbursements of counsel in connection
with "blue sky" qualifications of the Registrable Securities), (iii) all
printing, messenger and delivery expenses, (iv) the fees, charges and
disbursements of counsel to the Company and of its independent public
accountants and any other accounting and legal fees, charges and expenses
incurred by the Company (including, without limitation, any expenses
<PAGE> 16
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arising from any special audits incident to or required by any registration or
qualification) and (v) any liability insurance or other premiums for insurance
obtained in connection with any Demand Registration or piggy-back registration
pursuant to the terms of this Agreement, regardless of whether such registration
statement is declared effective. All of the expenses described in this Section
6(d) are referred to herein as "Registration Expenses".
7. Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the fullest extent permitted by law, each
Designated Holder, its officers, directors, trustees, partners, members,
employees, advisors and agents and each Person who controls (within the meaning
of the Securities Act or the Exchange Act) such Designated Holder from and
against any and all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation) arising out of or based upon any untrue, or
allegedly untrue, statement of a material fact contained in any registration
statement, prospectus or preliminary prospectus or notification or offering
circular (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or arising out of or based upon any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as the same are caused by or contained in any information concerning
such Designated Holder furnished in writing to the Company by such Designated
Holder expressly for use therein. The Company shall also provide customary
indemnities to any underwriters of the Registrable Securities, their officers,
directors and employees and each Person who controls such underwriters (within
the meaning of the Securities Act and the Exchange Act) to the same extent as
provided above with respect to the indemnification of the Designated Holders of
Registrable Securities.
(b) Indemnification by Designated Holders. In connection with any
registration statement in which a Designated Holder is participating pursuant to
Section 3 or 4 hereof, each such Designated Holder shall furnish to the Company
in writing such information with respect to such Designated Holder as the
Company may reasonably request or as may be required by law for use in
connection with any such registration statement or prospectus and each
Designated Holder agrees to indemnify and hold harmless, to the fullest extent
permitted by law, the Company, any underwriter retained by the Company and their
respective directors, officers, employees and each Person who controls the
Company or such underwriter (within the meaning of the Securities Act and the
Exchange Act) to the same extent as the foregoing indemnity from the Company to
the Designated Holders, but only with respect to any such information with
respect to such Designated Holder furnished in writing to the Company by such
Designated Holder expressly for use therein; provided, however, that the total
amount to be indemnified by such Designated Holder pursuant to this Section 7(b)
shall be limited to the net proceeds received by
<PAGE> 17
14
such Designated Holder in the offering to which the registration statement or
prospectus relates.
(c) Conduct of Indemnification Proceedings. Any Person entitled
to indemnification hereunder (the "Indemnified Party") agrees to give prompt
written notice to the indemnifying party (the "Indemnifying Party") after the
receipt by the Indemnified Party of any written notice of the commencement of
any action, suit, proceeding or investigation or threat thereof made in writing
for which the Indemnified Party intends to claim indemnification or contribution
pursuant to this Agreement; provided, however, that the failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to the Indemnified Party hereunder. If notice of commencement
of any such action is given to the Indemnifying Party as above provided, the
Indemnifying Party shall be entitled to participate in and, to the extent it may
wish, jointly with any other Indemnifying Party similarly notified, to assume
the defense of such action at its own expense, with counsel chosen by it and
satisfactory to such Indemnified Party. The Indemnified Party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the Indemnified Party unless
(i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party
fails to assume the defense of such action with counsel satisfactory to the
Indemnified Party in its reasonable judgment or (iii) the named parties to any
such action (including any impleaded parties) have been advised by such counsel
that either (x) representation of such Indemnified Party and the Indemnifying
Party by the same counsel would be inappropriate under applicable standards of
professional conduct or (y) there may be one or more legal defenses available to
it which are different from or additional to and in conflict with those
available to the Indemnifying Party and in such event, the Indemnifying Party
shall pay the fees and expenses of counsel to the Indemnified Party only to the
extent that such separate counsel is necessary under such applicable standards
of professional conduct in the case of the foregoing clause (x) or to the extent
necessary to avoid any conflict in the case of the foregoing clause (y). In
either of such cases, the Indemnifying Party shall not have the right to assume
the defense of such action on behalf of such Indemnified Party. No Indemnifying
Party shall be liable for any settlement entered into without its written
consent, which consent shall not be unreasonably withheld.
(d) Contribution. If the indemnification provided for in this
Section 8 from the Indemnifying Party is unavailable to an Indemnified Party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party and Indemnified Party in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The
<PAGE> 18
15
relative faults of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
Sections 7(a), 7(b) and 7(c), any legal or other fees, charges or expenses
reasonably incurred by such party in connection with any investigation or
proceeding; provided that the total amount to be indemnified by such Designated
Holder shall be limited to the net proceeds received by such Designated Holder
in the offering.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person.
8. Rule 144. From and after the IPO Effectiveness Date, the Company
covenants that it shall file any reports required to be filed by it under the
Exchange Act and that it shall take such further action as each Designated
Holder of Registrable Securities may reasonably request (including providing any
information necessary to comply with Rules 144 and 144A under the Securities
Act), all to the extent required from time to time to enable such Designated
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such rules may be amended from time to time, or (b) any
similar rules or regulations hereafter adopted by the SEC. The Company shall,
upon the request of any Designated Holder of Registrable Securities, deliver to
such Designated Holder a written statement as to whether it has complied with
such requirements.
9. Miscellaneous.
(a) Recapitalizations, Exchanges, etc. The provisions of this
Agreement shall apply, to the full extent set forth herein with respect to (i)
the shares of Common Stock and (ii) to any and all equity securities of the
Company or any successor or assign of the Company (whether by merger,
consolidation, sale of assets or otherwise) which may be issued in respect of,
in conversion of, in exchange for or in substitution of, the shares of Common
Stock and shall be appropriately adjusted for any stock dividends, splits,
reverse splits, combinations, recapitalizations and the like occurring after the
date hereof. The Company shall cause any successor or assign (whether by sale,
merger or otherwise) to enter into a new registration rights
<PAGE> 19
16
agreement with the Designated Holders on terms substantially the same as this
agreement as a condition of any such transaction.
(b) No Inconsistent Agreements. The Company shall not enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the Designated Holders in this Agreement or grant any
additional registration rights to any Person or with respect to any securities
which are not Registrable Securities which are prior in right to or inconsistent
with the rights granted in this Agreement.
(c) Remedies. The Designated Holders, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
shall be entitled to specific performance of their rights under this Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive in any action for specific performance the
defense that a remedy at law would be adequate.
(d) Amendments and Waivers. Except as otherwise provided herein,
the provisions of this Agreement may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless consented to in writing by (i) the Company, (ii) the General
Atlantic Stockholders holding Registrable Securities representing (after giving
effect to any adjustments) at least 80% of the aggregate number of Registrable
Securities owned by all of the General Atlantic Stockholders, (iii) the holders
of Registrable Securities representing (after giving effect to any adjustments)
at least 60% of (x) the aggregate number of Registrable Securities owned by all
of the Dow Jones Stockholders plus (y) the aggregate number of Registrable
Securities owned by all of Walton Stockholders and (iv) the PSE Stockholders
holding Registrable Securities representing (after giving effect to any
adjustments) at least 80% of the aggregate number of Registrable Securities
owned by all of the PSE Stockholders. Any such written consent shall be binding
upon the Company and all of the Designated Holders.
(e) Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be made
by registered or certified first-class mail, return receipt requested,
telecopier, courier service, overnight mail or personal delivery:
(i) if to the Company:
OptiMark Technologies, Inc.
530 Main Avenue
Durango, CO 81301
Telecopy: (970) 247-8844
Attention: William A. Lupien
<PAGE> 20
17
with a copy to:
Ducker, Seawell & Montgomery, P.C.
One Civic Center Plaza
1560 Broadway, Suite 1500
Denver, CO 80202
Telecopy: (303) 861-4017
Attention: Bruce Ducker, Esq.
(ii) if to GAP LP or GAP Coinvestment:
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Telecopy: (203) 622-4099
Attention: Stephen P. Reynolds
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Matthew Nimetz, Esq.
(iii) if to Dow Jones:
Dow Jones & Company, Inc.
200 Liberty Street
New York, New York 10281
Telecopy: (212) 416-2524
Attention: John Goggins, Esq.
(iv) if to Walton:
The Llama Company
One McIlroy Plaza, Suite 302
Fayetteville, AR 72701
Telecopy: (501) 444-4042
Attention: Alice L. Walton
<PAGE> 21
18
(v) if to PSE:
The Pacific Stock Exchange Incorporated
301 Pine Street
San Francisco, CA 94104
Telecopy: (415) 393-4150
Attention: John C. Katovich, Esq.
with a copy to:
Howard, Rice, Nemerovski,
Canady, Falk & Rabkin
A Professional Corporation
Three Embarcadero Center
Suite 700
San Francisco, CA 94111
Telecopy: (415) 399-3041
Attention: Timothy S. McCann, Esq.
(vi) if to any other Designated Holder, at its address as it
appears on the record books of the Company.
All such notices and communications shall be deemed to have been
duly given when delivered by hand, if personally delivered; when delivered by
courier or overnight mail, if delivered by commercial courier service or
overnight mail; five (5) Business Days after being deposited in the mail,
postage prepaid, if mailed; and when receipt is mechanically acknowledged, if
telecopied.
(f) Successors and Assigns; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto. The Demand Registration rights and other
rights of the General Atlantic Stockholders contained in Section 3 of this
Agreement shall be, with respect to any Registrable Security, (i) automatically
transferred among the General Atlantic Stockholders and (ii) in all other cases,
transferred only with the consent of the Company. The "incidental" registration
rights and other rights of each of the Designated Holders contained in this
Agreement may be, with respect to any Registrable Security, (i) automatically
transferred among the General Atlantic Stockholders, (ii) automatically
transferred among the Dow Jones Stockholders, (iii) automatically transferred
among the Walton Stockholders and (v) automatically transferred among the PSE
Stockholders. All of the obligations of the Company hereunder shall survive any
such transfer. No Person other than the parties hereto and their successors and
permitted assigns is intended to be a beneficiary of any of the rights granted
hereunder.
<PAGE> 22
19
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
(j) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired, it being intended
that all of the rights and privileges of the Designated Holders shall be
enforceable to the fullest extent permitted by law.
(k) Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and in the Stock Purchase Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
(l) Further Assurances. Each of the parties shall execute such
documents and perform such further acts as may be reasonably required or
desirable to carry out or to perform the provisions of this Agreement.
<PAGE> 23
20
IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Agreement on the date first written above.
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
-------------------------------------
Name: William A. Lupien
Title: Chairman & C.E.O.
GENERAL ATLANTIC PARTNERS 35, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC,
Its General Partner
By: /s/ J. Michael Cline
-------------------------------------
Name: J. Michael Cline
Title: A Managing Member
GAP COINVESTMENT PARTNERS, L.P.
By: /s/ J. Michael Cline
-------------------------------------
Name: J. Michael Cline
Title: A General Partner
DOW JONES & COMPANY, INC.
By: /s/ Carl M. Valenti
-------------------------------------
Name: Carl M. Valenti
Title: Senior Vice President
/s/ Alice L. Walton
-----------------------------------------
Alice L. Walton
THE PACIFIC STOCK EXCHANGE INCORPORATED
By: /s/ John C. Katovich
-------------------------------------
Name: John C. Katovich
Title: Sr. Vice President, General Counsel
and Director of Legal Affairs
<PAGE> 1
Exhibit 4.5
AMENDMENT
TO
STOCK PURCHASE AGREEMENT
AND
REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT (this "Amendment"), dated as of March 19, 1997 among
OptiMark Technologies, Inc. (the "Company"), General Atlantic Partners 35, L.P.
("GAP 35"), GAP Coinvestment Partners, L.P. ("GAP Coinvestment"), Dow Jones &
Company, Inc. ("Dow") and Alice L. Walton ("Walton"; and, together with GAP 35,
GAP Coinvestment and Dow, the "Investors") amends (i) that certain Stock
Purchase Agreement, dated August 27, 1996, as amended on October 25, 1996 (the
"Stock Purchase Agreement") among the Company and the Investors and (ii) that
certain Registration Rights Agreement, dated as of August 27, 1996 (the
"Registration Rights Agreement"), among the Company, the Investors and The
Pacific Stock Exchange Incorporated.
WHEREAS, pursuant to the Stock Purchase Agreement, the Investors
agreed to purchase, and the Company agreed to sell, shares of Series A
Convertible Participating Preferred Stock, par value $.O1 per share, of the
Company in two sequential closings;
WHEREAS, on August 27, 1996, the Company and the Investors
consummated the First Closing (as defined in the Stock Purchase Agreement);
WHEREAS, concurrent with the execution of this Amendment, the
Investors have agreed to waive a certain condition to the Second Closing (as
defined in the Stock Purchase Agreement) and consummate the Second Closing; and
WHEREAS, in order to induce the Investors to waive that certain
condition to the Second Closing and consummate the Second Closing, the Company
has agreed to issue to each of the Investors a warrant to purchase Common Stock,
par value $.01 per share, of the Company.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. Amendment to the Stock Purchase Agreement.
(a) Section 2.3(a) of the Stock Purchase Agreement is hereby
deleted in its entirety and replaced with the following:
"(a) Subject to Section 2.3(b), the Second Closing shall occur on
March 19, 1997."
<PAGE> 2
2
(b) Section 2.3(b) of the Stock Purchase Agreement is hereby
amended to add the following as subsection (vii):
"(vii) Each of the Investors shall have received a warrant,
substantially in the form attached hereto as Exhibit A (each, a
"Warrant" and collectively, the "Warrants"), exercisable into that
percentage of outstanding shares of Common Stock as set forth
opposite such Investor's name below:
Investor Percentage of Common Stock
-------- --------------------------
GAP 35 4.13 %
GAP Coinvestment 0.87 %
Dow 2.5 %
Walton 0.5 %"
(c) The definition of "Transaction Documents" in the Stock
Purchase Agreement is hereby amended by deleting it entirely and replacing it
with the following:
"Transaction Documents" means collectively this Agreement, the
Certificate of Designation, the Stockholders Agreement, the
Registration Rights Agreement, the Employment, Trade Secret and
NonCompetition Agreements between the Company and Messrs. Lupien and
Rickard, the PSE-OptiMark Agreement, the PSE Revenue Sharing
Agreement, the PSE Warrant and each Warrant."
2. Amendment to the Registration Rights Agreement.
(a) The definition of "Registrable Securities" in the
Registration Rights Agreement is hereby amended by deleting part (d) of such
definition in its entirety and replacing it with the following:
"(d) to the extent exercisable at the time such amount of
Registrable Securities is to be determined, any and all shares of
Common Stock issuable to (i) PSE upon exercise of the PSE Warrant
and (ii) each Investor (as defined in the Stock Purchase Agreement)
upon exercise of their respective Warrants (as defined in the Stock
Purchase Agreement)."
<PAGE> 3
3
(b) It is understood by the parties hereto that the above
amendment to the Registration Rights Agreement shall become effective upon the
written consent of The Pacific Stock Exchange Incorporated.
3. Miscellaneous.
(a) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
(b) Assignment. This Amendment shall be binding upon the
successors and permitted assigns of the parties.
(c) Counterparts. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original but all such counterparts together shall
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first above written.
OptiMark Technologies, Inc.
By: /s/ Alan S. Danson
--------------------------------------
Name: Alan S. Danson
Title: Senior Vice President
General Atlantic Partners 35, L.P.
By: General Atlantic Partners, LLC
its General Partner
By: /s/ Stephen P. Reynolds
---------------------------------
A Managing Member
GAP Coinvestment Partners, L.P.
By: /s/ Stephen P. Reynolds
--------------------------------------
General Partner
<PAGE> 4
Dow Jones & Company, Inc.
By: /s/ Julian B. Childs
--------------------------------------
Name: Julian B. Childs
Title: Executive Vice President
/s/ Alice L. Walton
------------------------------------------
Alice L. Walton
<PAGE> 1
Exhibit 4.6
AMENDMENT
TO
STOCK PURCHASE AGREEMENT,
STOCKHOLDERS AGREEMENT
AND
REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT (this "Amendment"), dated as of May 29, 1997 among
OptiMark Technologies, Inc. (the "Company"), General Atlantic Partners 35, L.P.
("GAP 35"), GAP Coinvestment Partners, L.P. ("GAP Coinvestment"), Dow Jones &
Company, Inc. ("Dow Jones"), Alice L. Walton ("Walton"; and, together with GAP
35, GAP Coinvestment and Dow, the "Investors"), William A. Lupien, Richard W.
Jones, John T. Rickard, Alan S. Danson and The Pacific Stock Exchange
Incorporated amends (i) that certain Stock Purchase Agreement, dated August 27,
1996, as amended on October 25, 1996 and March 19, 1997 (the "Stock Purchase
Agreement"), among the Company and the Investors: (ii) that certain Stockholders
Agreement, dated as of August 27, 1996 (the "Stockholders Agreement"), among the
Company, the Investors, William A. Lupien, Richard W. Jones, John T. Rickard and
Alan S. Danson; and (iii) that certain Registration Rights Agreement, dated as
of August 27, 1996, as amended on March 19, 1997 (the "Registration Rights
Agreement"), among the Company, the Investors and The Pacific Stock Exchange
Incorporated.
WHEREAS, pursuant to the Stock Purchase Agreement, originally dated
as of August 27, 1996, the Investors agreed to purchase, and the Company agreed
to sell, shares of Series A Convertible Participating Preferred Stock, par value
$.01 per share ("Preferred Stock"), of the Company in two sequential closings;
WHEREAS, on August 27, 1996, the Company and the Investors
consummated the First Closing (as defined in the Stock Purchase Agreement);
WHEREAS, on March 19, 1997, the Company and the Investors
consummated the Second Closing (as defined in the Stock Purchase Agreement) and
in connection therewith the Company issued to each Investor a warrant, dated as
of March 19, 1997, to purchase Common Stock, par value $.01 per share, of the
Company (each, an "Old Warrant;" and collectively, the "Old Warrants");
WHEREAS, the Company would like to sell, and each of GAP 35, GAP
Coinvestment and Dow Jones would like to purchase, additional shares of
Preferred Stock pursuant to a Third Closing (as defined below); and
WHEREAS, in order to induce GAP 35, GAP Coinvestment and Dow Jones
to consummate the Third Closing, the Company has agreed to issue to each of GAP
35, GAP Coinvestment and Dow Jones a warrant to purchase Common Stock,
<PAGE> 2
par value $.01 per share, of the Company (each, a "New Warrant;" and
collectively, the "New Warrants") in exchange for each such holder's Old
Warrant;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. Amendment to the Stock Purchase Agreement
(a) The definition of "Transaction Documents" in the Stock Purchase
Agreement is hereby amended by deleting it entirely and replacing it with the
following:
"'Transaction Documents' means collectively this Agreement,
the Certificate of Designation, the Stockholders Agreement, the
Registration Rights Agreement, the Employment, Trade Secret and
Noncompetition Agreements between the Company and Messrs. Lupien and
Rickard, the PSE-OptiMark Agreement, the PSE Revenue Sharing
Agreement, the PSE Warrant, the Warrants issued in connection with
the Second Closing and the New Warrants issued in connection with
the Third Closing."
(b) Section 2.1 of the Stock Purchase Agreement is hereby deleted in its
entirety and replaced with the following:
"2.1 Description of Securities. The Company has authorized the
issuance and sale of the Preferred Shares to the Investors for a
purchase price of $7.33 per Preferred Share. The Preferred Shares
shall be sold in three sequential closings of 654,844 shares (the
"First Closing"), 1,527,968 shares (the "Second Closing") and
1,364,256 shares (the "Third Closing"), respectively, divided among
the Investors as set forth opposite such Investor's name in Schedule
2.1 hereto. The Company has authorized and has reserved, and
covenants to continue to reserve, a sufficient number of shares of
Common Stock to satisfy the rights of conversion of the holders of
the Preferred Shares."
<PAGE> 3
(c) The Stock Purchase Agreement is hereby amended by inserting after
Section 2.3 the following new Section:
"2.4 Third Closing.
(a) Subject to Section 2.4(b), the Third Closing shall occur
on May 29, 1997.
(b) The obligation of the Investors to purchase the Preferred
Shares set forth opposite each Investor's name in Schedule 2.1 at
the Third Closing and to pay the purchase price therefor at the
Third Closing shall be subject to the satisfaction, or waiver by a
Consent of the Investors, of the following conditions on the date of
the Third Closing:
(i) The representations and warranties of the Company
contained in Section 3 hereof shall be true and correct in all
material respects on and as of the date of the Third Closing
as if made at and on such date.
(ii) The Company shall have performed and complied in
all material respects with all of its covenants and conditions
set forth herein that are required to be performed or complied
with by the Company on or before the date of the Third
Closing.
(iii) The Company shall have delivered to the Investors
an Officer's Certificate dated as of the Third Closing as to
(i) the due adoption and continuing effectiveness of the
resolutions of the Board, attached thereto, approving the
Transaction Documents and all transactions contemplated
thereby, (ii) the accuracy and continuing effectiveness of the
Certificate of Incorporation and By-laws of the Company
attached thereto, and (iii) the incumbency and specimen
signature of each officer executing the Transaction Documents
and the other closing documents on behalf of the Company.
(iv) The Investors shall have received a certificate
from the Company, in form and substance reasonably
satisfactory to the Investors, dated the date of the Third
Closing and signed by the Chief
<PAGE> 4
Executive Officer of the Company, certifying that (A) the
representations and warranties of the Company contained in
Section 3 hereof are true and correct in all material respects
on and as of the date of the Third Closing as if made at and
on such date and (B) the Company has performed and complied in
all material respects with all of the covenants and conditions
set forth herein that are required to be performed or complied
with by the Company on or before the date of the Third
Closing.
(v) The Investors shall have received an opinion of
counsel to the Company, dated as of the date of the Third
Closing, substantially in the form of the First Legal Opinion.
(vi) The Company shall issue to each Investor set forth
below a warrant, substantially in the form attached hereto as
Exhibit A (each, a "New Warrant" and collectively, the "New
Warrants"), exercisable into that number of outstanding shares
of Common Stock as set forth opposite such Investor's name
below:
Investor Shares of Common Stock
-------- ----------------------
GAP 35 2,763,699
GAP Coinvestment 478,945
Dow 2,161,764
(c) At the Third Closing, the Company shall issue and sell to
each Investor, and each Investor severally and not jointly shall
purchase from the Company, the number of Preferred Shares set forth
opposite such Investor's name in Schedule 2.1. At the Third Closing,
the following shall occur:
(i) The Company shall execute and deliver to the
Investors or their designated nominees certificates evidencing
the Preferred Shares so purchased.
<PAGE> 5
(ii) The Investors shall deliver the purchase price for
such Preferred Shares to the Company by wire transfer.
(iii) Each of GAP 35, GAP Coinvestment and Dow Jones
shall surrender the Warrant previously issued to it in
connection with the Second Closing to the Company for
cancellation."
(d) Schedule 2.1 to the Stock Purchase Agreement is hereby deleted in its
entirety and replaced with Exhibit B, attached hereto.
2. Amendment to the Stockholders Agreement
(a) The Stockholders Agreement is hereby amended by inserting the
following definition:
"'Dow Jones Director' has the meaning set forth in Section 6.3(c) of
this Agreement."
(b) Section 2.2 of the Stockholders Agreement is hereby amended by
inserting, after the last sentence thereof, the following:
"If any Permitted Transferee of Dow Jones to whom or which Shares
have been transferred in accordance with this Section 2.2 ceases to
be a Permitted Transferee of Dow Jones, then, prior to such event,
the Dow Jones Stockholders (other than such Permitted Transferee)
may repurchase such Shares or, if such Dow Jones Stockholders do not
wish to repurchase such Shares, then such Permitted Transferee shall
offer the Shares held by such Permitted Transferee to the Company,
the General Atlantic Stockholders and the Walton Stockholders in
accordance with Section 3.1.
Notwithstanding anything contained in this Agreement to the
contrary, if there is a Change of Control in Dow Jones and the
Person who effects such a Change of Control (as defined below) is or
thereafter becomes an OptiMark Competitor (as defined below), then
(i) as soon as practicable after a Change of Control (or, if later,
the date on which such Person becomes an OptiMark
<PAGE> 6
Competitor), all of the Dow Jones Stockholders shall offer their
Shares and Common Stock Equivalents to the Company, the OptiMark
Stockholders, the General Atlantic Stockholders and the Walton
Stockholders in accordance with Section 3.1 at an Offer Price that
is mutually agreed upon by Dow Jones and the Company and (ii) the
Dow Jones Stockholders shall cause the Dow Jones Directors to
promptly resign from the Board of Directors and the Dow Jones
Stockholders shall no longer be entitled to designate a director
pursuant to Section 6.3. If Dow Jones and the Company fail to agree
on an Offer Price within 5 Business Days after the occurrence of a
Change of Control, then (i) the Offer Price with respect to the
Shares shall be the greater of (x) the Fair Value per Share as
determined in accordance with Section 3.2.2 or (y) the Exercise
Price (as defined in the New Warrants) in effect at the time of the
Change of Control or, if the New Warrants have expired or been fully
exercised, the last exercise price in effect under the New Warrants
and (ii) the Offer Price with respect to the New Warrants shall
equal the difference, if any, between the Offer Price with respect
to the Shares and the exercise price in effect under the New
Warrants. If there is a Change of Control in Dow Jones and the
Person who effects such a Change of Control is not an OptiMark
Competitor, then the Dow Jones Stockholders shall have no obligation
then to offer or transfer any portion of their Shares or Common
Stock Equivalents to the Company, any Stockholder or any other
Person, but the Dow Jones Stockholders shall cause the Dow Jones
Directors to promptly resign from the Board of Directors and the Dow
Jones Stockholders shall no longer be entitled to designate a
director pursuant to Section 6.3.
A "Change of Control" in Dow Jones shall have occurred if any one
Person or group within the meaning of Section 13(d)(3) of the
Exchange Act (other than the "parent" of Dow Jones described in
footnote (6) on page 6 of its 1997 proxy statement or any Person who
is an Affiliate of or of familial relationship to any Person
included within such "parent") has the power to elect, directly or
indirectly, as of any date, a majority of the directors serving on
the board of directors of Dow Jones.
<PAGE> 7
"OptiMark Competitor" shall mean: (i) Microsoft Corp., Reuters
Limited, Cantor Fitzgerald LP, Investment Technology Group, Inc.,
AZX Inc., State Street Boston Corp., Bloomberg LP and Bridge
Information Systems Inc. or (ii) any Person who operates an
electronic matching service for the trading of securities."
(c) Section 4.1 of the Stockholders Agreement is hereby amended by
inserting, after clause (e), the following:
"(f) capital stock of the Company issued pursuant to exercise of the
Warrants and the New Warrants..."
(d) Section 6.3 of the Stockholders Agreement is hereby deleted in its
entirety and replaced with the following:
"6.3 Election of Directors: Number and Composition. Each
Stockholder shall vote its Snares and each Voting Committee Member
shall cause the Voting Committee to vote its Shares at any
Stockholders Meeting, or act by Written Consent with respect to such
Shares, and take all other actions necessary to ensure that the
number of directors constituting the entire Board of Directors shall
be nine. Each Stockholder shall vote its Shares and each Voting
Committee Member shall cause the Voting Committee to vote its Shares
at any Stockholders Meeting called for the purpose of filling the
positions on the Board of Directors, or in any Written Consent
executed for such purpose, and to take all other actions necessary
to ensure the ejection to the Board of Directors of the following
individuals under the following circumstances:
(a) two individuals designated by the General Atlantic
Stockholders (each a "General Atlantic Director"), for so long as
the General Atlantic Stockholders own shares of Common Stock or
Common Stock Equivalents convertible into or exchangeable for shares
of voting capital stock of the Company representing (after giving
effect to any adjustments) greater than or equal to 5% of the total
number of shares of Common Stock outstanding on an as converted
basis;
<PAGE> 8
(b) one General Atlantic Director; for so long as the General
Atlantic Stockholders own shares of Common Stock or Common Stock
Equivalents convertible into or exchangeable for shares of voting
capital stock of the Company representing (after giving effect to
any adjustments) less than 5% but greater than or equal to 2% of the
total number of shares of Common Stock outstanding on an as
converted basis;
(c) two individuals designated by the Dow Jones Stockholders
(each a "Dow Jones Director"); for so long as the Dow Jones
Stockholders own shares of Common Stock or Common Stock Equivalents
convertible into or exchangeable for shares of voting capital stock
of the Company representing (after giving effect to any adjustments)
greater than or equal to 5% of the total number of shares of Common
Stock outstanding on an as convened basis.
(d) one Dow Jones Director; for so long as the Dow Jones
Stockholders own shares of Common Stock or Common Stock Equivalents
convertible into or exchangeable for shares of voting capital stock
of the Company representing (after giving effect to any adjustments)
less than 5% but greater than or equal to 2% of the total number of
shares of Common Stock outstanding on an as converted basis.
Notwithstanding anything to the contrary contained in this
Agreement. if at any time the General Atlantic Stockholders or the
Dow Jones Stockholders own shares of Common Stock or Common Stock
Equivalents convertible into or exchangeable for shares of voting
capital stock of the Company representing (after giving effect to
any adjustments) less than 2% of the total number of shares of
Common Stock outstanding on an as converted basis, then the General
Atlantic Stockholders or the Dow Jones Stockholders, as the case may
be, shall no longer be entitled to designate a director pursuant to
this Section 6.3.
All other directors of the Company shall be elected to the
Board of Directors in accordance with the By-laws of the Company."
<PAGE> 9
(e) Section 6.4 of the Stockholders Agreement is hereby amended by
inserting after Section 6.4.2 the following:
"6.4.3 Removal of Dow Jones Directors. If at any time the Dow
Jones Stockholders notify the other Stockholders of their wish to
remove at any time and for any reason (or no reason) any Dow Jones
Director, then each Stockholder shall vote all of its Shares and
each Voting Committee Member shall cause the Voting Committee to
vote all of its Shares so as to remove such Dow Jones Director.
6.4.4 Replacement of Directors.
(a) If at any time, a vacancy is created on the Board of
Directors by reason of the death, removal or resignation of a Dow
Jones Director, then the Dow Jones Stockholders shall designate an
individual who shall be elected to fill such vacancy until the next
Stockholders Meeting.
(b) Upon receipt of notice of the designation of a nominee,
each Stockholder and each Voting Committee Member shall, as soon as
practicable after the date of such notice, take action, including
(i) the voting of its Shares (in the case of each Stockholder) and
(ii) causing the Voting Committee to vote its shares (in the case of
each Voting Committee Member), to elect the director designated by
the Dow Jones Stockholders to fill such vacancy."
(f) Section 6.5 of the Stockholders Agreement is hereby deleted in its
entirety and replaced with the following:
"6.5 Reimbursement of Expenses. Notwithstanding anything to
the contrary contained in this Agreement, the Company shall
reimburse (i) GAP LP and GAP Coinvestment, or their designee, for
all reasonable travel and other out-of-pocket expenses incurred by
the General Atlantic Director(s) in connection with their duties as
directors of the Company and (ii) Dow Jones for all reasonable
travel and other out-of-pocket expenses incurred by the Dow Jones
Director(s) in connection with their duties as directors of the
Company."
<PAGE> 10
(g) Section 6.6 of the Stockholders Agreement is hereby amended by
deleting the first sentence thereof in its entirety and replacing it with the
following:
"Notwithstanding anything to the contrary contained in this
Agreement, for so long as there is at least one General Atlantic
Director elected pursuant to Section 6.3 on the Board of Directors,
the Board of Directors shall not take, approve or otherwise ratify
any of the following actions except with the consent of at least a
majority of the directors constituting the entire Board of
Directors; provided, however, such majority includes at least one
General Atlantic Director or one Dow Jones Director:"
3. Amendment to the Registration Rights Agreement.
(a) The definition of "Registrable Securities" in the Registration Rights
Agreement is hereby amended by deleting part (d) of such definition in its
entirety and replacing it with the following:
"(d) to the extent exercisable at the time such amount of
Registrable Securities is to be determined, any and all shares of
Common Stock issuable to (i) PSE upon exercise of the PSE Warrant
and (ii) each Investor as defined in the Stock Purchase Agreement
upon exercise of their respective Warrants and New Warrants (as
defined in the Stock Purchase Agreement)."
(b) Section 3 of the Registration Rights Agreement is hereby amended by
deleting the first sentence thereof in its entirety and replacing it with the
following:
"At any time after twelve months following the IPO Effectiveness
Date, the General Atlantic Stockholders or the Dow Jones
Stockholders may make a written request to the Company to register
(such General Atlantic Stockholders or Dow Jones Stockholders making
such request being referred to hereinafter as the "Initiating
Holders"), under the Securities Act and under the securities or
"blue sky" laws of any jurisdiction reasonably designated by such
holder or holders, the number of Registrable Securities, the offer
and sale of which shall result in net proceeds (after expenses and
<PAGE> 11
underwriting commissions and discounts) to such Initiating Holders
of at least $5,000,000 (a "Demand Registration")."
(c) Section 3 of the Registration Rights Agreement is hereby amended by
deleting the third sentence thereof in its entirety and replacing it with the
following:
"The Company shall not be required to effect more than two (2)
Demand Registration at the request of the General Atlantic
Stockholders and one (1) Demand Registration at the request of the
Dow Jones Stockholders pursuant to this Section 3."
4. Miscellaneous
(a) Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed entirely within such State.
(b) Assignment. This Amendment shall be binding upon the successors and
permitted assigns of the parties.
(c) Counterparts. This Amendment may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original but all such counterparts together shall constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
<PAGE> 12
12
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first above written.
OptiMark Technologies Inc.
By: /s/ Alan S. Danson
-----------------------------------
Name: Alan S. Danson
Title: Senior VP
General Atlantic Partners 35, L.P.
By: General Atlantic Partners, LLC its
General Partner
By: /s/ Steven A. Denning
-------------------------------
A Managing Member
GAP Coinvestment Partners, L.P.
By: /s/ Steven A. Denning
-----------------------------------
General Partner
Dow Jones & Company, Inc.
By: /s/ Kenneth L. Burenga
-----------------------------------
Name: Kenneth L. Burenga
Title: President and Chief
Operating Officer
/s/ Alice L. Walton
---------------------------------------
Alice L. Walton
/s/ William A. Lupien
---------------------------------------
William A. Lupien, in his capacity as a
Voting Committee Member for purposes of
Sections 6 and 21 of the Stockholders
Agreement and in his individual
capacity as a Major Stockholder (as
defined therein)
<PAGE> 13
13
/s/ Richard W. Jones
---------------------------------------
Richard W. Jones
/s/ John T. Rickard
---------------------------------------
John T. Rickard, in his capacity as a
Voting Committee Member for purposes of
Sections 6 and 21 of the Stockholders
Agreement and in his individual
capacity as a Major Stockholder (as
defined therein)
/s/ Alan S. Danson
---------------------------------------
Alan S. Danson, in his capacity as a
Voting Committee Member for purposes of
Sections 6 and 21 of the Stockholders
Agreement
The Pacific Stock Exchange Incorporated
By: /s/ John C. Katovich
-----------------------------------
Name: John C. Katovich
Title: Sr. Vice President, General
Counsel and Director of
Legal Affairs
<PAGE> 1
EXHIBIT 4.7
AMENDMENT NO. 2
TO THE
SERIES A REGISTRATION RIGHTS AGREEMENT
AMONG
OPTIMARK TECHNOLOGIES, INC.
AND
CERTAIN STOCKHOLDERS THEREOF
This Amendment No. 2 ("this Amendment") in entered into effective as
of the ____ day of January, 1999 by and among (i) OptiMark Technologies, Inc., a
Delaware corporation (the "Company"), (ii) General Atlantic Partners 52, L.P., a
Delaware limited partnership ("GAP 52"), and GAP Coinvestment Partners II, L.P.,
a Delaware limited partnership ("Coinvestment II" and, together with GAP 52, the
"New GA Stockholders"), and (iii) the stockholders of the Company whose
signatures are shown below, who are current parties to the Company's
Registration Rights Agreement dated August 27, 1996, as previously amended
effective May 29, 1997 (the "Rights Agreement"). Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to them in the Rights
Agreement.
1. On or about the date of this Amendment, the New GA
Stockholders are purchasing an aggregate of 250,000 shares of Preferred Stock
from Dow Jones & Company, Inc..
2. The new GA Stockholders are hereby made party to the
Rights Agreement, as "General Atlantic Stockholders".
3. As hereby amended, the Rights Agreement continues in
full force and effect. This Amendment may be executed in multiple counterparts,
all of which together shall comprise one instrument.
OptiMark Technologies, Inc.
By: /s/ Phillip J. Riese
Chief Executive Officer
Dow Jones & Company, Inc.
By: /s/ Jerome H. Bailey
Executive Vice President,
Chief Financial Officer
General Atlantic Partners 35, L.P.
By: General Atlantic Partners, LLC,
its General Partner
<PAGE> 2
By: /s/ David C. Hodgson
a Managing Member
GAP Coinvestment Partners, L.P.
By: /s/ David C. Hodgson
a General Partner
/s/ Alice L. Walton
The Pacific Stock Exchange Incorporated
By: /s/ R. Warren Langley
President and Chief Operating Officer
General Atlantic Partners 52, L.P.
By: General Atlantic Partners, LLC,
its General Partner
By: /s/ David C. Hodgson
a Managing Member
GAP Coinvestment Partners II, L.P.
By: /s/ David C. Hodgson
a General Partner
<PAGE> 1
EXHIBIT 4.8
SERIES B STOCK PURCHASE AGREEMENT
AGREEMENT made as of this 22nd day of December, 1998, by and among (i)
OptiMark Technologies, Inc., a Delaware corporation (the "Company"), and (ii)
the purchasers ("Purchasers") of the Company's Series B Convertible
Participating Preferred Stock, $.01 par value per share ("Series B Stock")
identified on Schedule I hereto.
SECTION 1. DEFINITIONS
In addition to other capitalized terms defined elsewhere herein, the
following terms shall have the indicated meanings:
1.1 "1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
1.2 "Affiliate" of a Person means any corporation or other entity
that is or ever would have been considered a single employer with that Person
under ERISA Section 4001(b) or part of the same "controlled group" as that
Person for purposes of ERISA Section 302(d)(8)(C).
1.3 "Audited Financial Statements" means the audited consolidated
balance sheets of the Company and its Subsidiaries as of December 31, 1996 and
December 31, 1997, and the related statements of income, retained earnings and
cash flows of the Company and its Subsidiaries for the 12-month periods then
ended (together with the notes thereto), copies of which have been delivered to
the Purchasers.
1.4 "Board" means the board of directors of the Company as
constituted from time to time.
1.5 "BT Options" means the Common Stock Purchase Options dated July
10, 1998 in favor of BT Investment Partners, Inc. ("BT") under which General
Atlantic Partners has granted to BT the right to purchase up to 166,667 shares
of Common Stock owned by General Atlantic Partners, at an exercise price of
$10.00 per share.
1.6 "CBOE Warrant" means a Common Stock Purchase Warrant dated
December 31, 1996, pursuant to which The Chicago Board Options Exchange,
Incorporated has the right to purchase from the Company up to 1,000,000 shares
of Common Stock at an exercise price of $2.25 per share, subject to potential
adjustment as provided therein.
1.7 "Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of the Company, including the Certificate of
Designations with respect to the Series A Stock and the Certificate of
Designations with respect to the Series B Stock (as amended) attached thereto,
filed with the Delaware Secretary of State on or about May 29, 1998.
<PAGE> 2
1.8 "Code" means the Internal Revenue Code of 1986, as amended. For
purposes of this Agreement, all references to Sections of the Code shall include
any predecessor provisions to such Sections.
1.9 "Common Stock" means the voting and nonvoting common stock of
the Company, $.01 par value per share.
1.10 "Consent of the Purchasers" means the vote at a meeting or
executed written consents in lieu of a meeting of one or more Purchasers owning
at least 75% of the Series B Shares (including for such purposes, on a
proportional basis, any Conversion Shares into which any of the Series B Shares
have been converted and not sold to the public).
1.11 "Conversion Shares" means the shares of Common Stock or any
successor class of capital stock of the Company hereafter issued or issuable
upon conversion of the Series B Shares.
1.12 "Copyrights" means any foreign or United States copyright
registrations and applications for registration thereof, and any non-registered
copyrights.
1.13 "Dow Jones Warrant" means a Common Stock Purchase Warrant dated
May 29, 1997, pursuant to which Dow Jones & Company, Inc. has the right to
purchase from the Company up to 2,161,764 shares of Common Stock at an exercise
price of $2.75 per share, subject to potential adjustment as provided therein.
1.14 "Employee Program" means (a) all employee benefit plans within
the meaning of ERISA Section 3(3), including but not limited to multiple
employer welfare arrangements (within the meaning of ERISA Section 3(40)), plans
to which more than one unaffiliated employer contributes, and employee benefit
plans (such as foreign or excess benefit plans) which are not subject to ERISA;
and (b) all stock or cash option plans, restricted stock plans, bonus or
incentive award plans, severance pay policies or agreements, deferred
compensation agreements, supplemental income arrangements, vacation plans, and
all other employee benefit plans, agreements, and arrangements not described in
(a) above. In the case of an Employee Program funded through an organization
described in Code Section 501(c)(9), each reference to such Employee Program
shall include a reference to such organization. An entity "maintains" an
Employee Program if such entity sponsors, contributes to, or provides (or has
promised to provide) benefits under such Employee Program, or has any obligation
(by agreement or under applicable law) to contribute to or provide benefits
under such Employee Program, or if such Employee Program provides benefits to or
otherwise covers employees of such entity (or their spouses, dependents, or
beneficiaries).
1.15 "Environmental Laws" means and includes any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
federal, state or local level, whether existing as of the date hereof or
subsequently enacted.
<PAGE> 3
1.16 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.17 "Financial Statements" means and includes both the Audited
Financial Statements and the Unaudited Financial Statements, copies of both of
which have been delivered to the Purchasers.
1.18 "Goldman Warrants" means (i) the Common Stock Purchase Warrant
in favor of The Goldman Sachs Group, L.P. dated June 1, 1998 under which William
A. Lupien has granted to Goldman Sachs the right to purchase up to 500,000
shares of Common Stock owned by Mr. Lupien, at an exercise price of $10.00 per
share, and (ii) the Common Stock Purchase Warrant in favor of The Goldman Sachs
Group, L.P. dated June 1, 1998 under which Richard W. Jones has granted to
Goldman Sachs the right to purchase up to 500,000 shares of Common Stock owned
by Mr. Jones, at an exercise price of $10.00 per share
1.19 "Hazardous Material" means and includes any hazardous waste,
hazardous material, hazardous substance, petroleum product, oil, toxic
substance, pollutant, contaminant, or other substance which may pose a threat to
the environment or to human health or safety, as defined or regulated under any
Environmental Law.
1.20 "Intellectual Property" means and includes Copyrights, Internet
Assets, Patents, Trade Secrets, Trademarks, Software and other proprietary
rights.
1.21 "Internet Assets" means any Internet domain names and other
computer user identifiers and any rights in and to sites on the worldwide web,
including rights in and to any text, graphics, audio and video files and html or
other code incorporated in such sites.
1.22 "IPO Effectiveness Date" means the date (if any) upon which the
Company commences its initial public offering pursuant to an effective
registration statement filed with the SEC under the 1933 Act.
1.23 "IRS" means the Internal Revenue Service.
1.24 "Judgment" means any judgment, injunction, writ, award, decree
or order of any nature from any arbitrator, court or governmental agency.
1.25 "Liabilities" means and includes any indebtedness, liabilities,
guaranties or other obligations of any nature, whether accrued, absolute,
contingent or otherwise, known or unknown, asserted or unasserted.
1.26 "Lien" means and includes any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other) or preference,
priority, right or other security interest or preferential arrangement of any
kind or nature whatsoever (excluding preferred stock and equity related
preferences), including, without
<PAGE> 4
limitation, those created by, arising under or evidenced by any conditional sale
or other title retention agreement, the interest of a lessor under a capital
lease obligation, or any financing lease having substantially the same economic
effect as any of the foregoing.
1.27 "Losses" means and includes losses, claims, damages, causes of
action, liabilities, penalties, fines and related interest and expenses,
including reasonable attorneys' fees and disbursements, and costs of
investigation, litigation, arbitration, enforcement and indemnification.
1.28 "Material Contracts" means and includes any employment contract;
stock redemption or purchase agreement; loan, capital lease or other financing
agreement; license, distributor, sales representation or OEM agreement;
agreements with any officers, directors, employees or stockholders of the
Company or any persons related to or affiliated with any such persons; leases;
agreements relating to the licensing, distribution, development or maintenance
of Software and related hardware; agreements with customers of the Company;
powers of attorney; pension, profit-sharing, retirement or stock option plans;
any other contract, obligation or commitment (whether written or oral) involving
actual or potential consideration of more than $100,000; or any contract,
obligation or commitment not entered into in the ordinary course of business.
1.29 "ML Options" means the Common Stock Purchase Options dated July
10, 1998 in favor of ML IBK Positions, Inc., Merrill Lynch KECALP L.P. 1997, and
Merrill Lynch KECALP International L.P. 1997 (altogether, "ML") under which Dow
Jones & Company, Inc. and General Atlantic Partners have granted to ML the right
to purchase a total of up to 500,000 shares of Common Stock owned by Dow Jones
and General Atlantic Partners, at an exercise price of $10.00 per share.
1.30 "Multiemployer Plan" means an Employer Program to which more
than one employer contributes and which is maintained pursuant to one or more
collective bargaining agreements.
1.31 "NASDAQ Warrant" means the Warrant Agreement dated September 1,
1998 pursuant to which The Nasdaq Stock Exchange Incorporated has the right to
purchase from the Company up to 11,250,000 shares of Common Stock at exercise
prices ranging from $3.00 to $7.00 per share.
1.32 "NeoVision Letter" means the letter dated April 16, 1998 from
counsel for NeoVision Hypersystems, Inc. to the Company, a copy of which is
included in Schedule 3.13 hereto.
1.33 "OptiMark(TM)" means the Company's proprietary "OptiMark(TM)"
securities trading system, which is under development.
1.34 "Outstanding Rights" means and includes (a) the rights of the
holder under the PCX Warrant, (b) the rights of the holder under the Dow Jones
Warrant, (c) the rights of the holder under the NASDAQ Warrant, (d) the rights
of the holder under the CBOE
<PAGE> 5
Warrant, (e) the rights of the holder under the VSC Warrant, (f) the rights of
the holder under the TransAmerica Warrant, (g) the right of Frank Egan to
purchase from the Company up to 40,000 shares of Common Stock at an exercise
price of $10.00 per share, (h) the right of Ramsey Beirne Partners, L.L.C. to
purchase from the Company up to 5,000 shares of Common Stock at an exercise
price of $10.00 per share, and (i) the rights of the holders of options and
other rights to acquire Common Stock, issued and reserved for issuance as
incentives for the Company's officers, directors, employees, former employees
and consultants.
1.35 "Patents" means any foreign or United States patents and patent
applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or
resubmitted.
1.36 "Person" means any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, limited liability company, governmental agency or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.
1.37 "PCX Warrant" means the Common Stock Purchase Warrant dated
August 27, 1996 pursuant to which The Pacific Exchange, Incorporated has the
right to purchase from the Company up to 2,104,000 shares of Common Stock at an
exercise price of $1.83 per share, subject to potential adjustment as provided
therein.
1.38 "Purchasers" includes the Purchasers and their successors and
assigns with respect to the Series B Stock and the Conversion Shares.
1.39 "Registration Rights Agreement" means the Registration Rights
Agreement dated April 23, 1998 between the Company and the Purchasers.
1.40 "Requirement of Law" means, as to any Person, any law, statute,
treaty, rule, regulation, right, privilege, qualification, license, franchise or
Judgment, in each case applicable or binding upon such Person or any of its
property or to which such Person or any of its property is subject or pertaining
to any or all of the transactions contemplated or referred to herein.
1.41 "SEC" means the United States Securities and Exchange
Commission.
1.42 "Securities Laws" means and includes the 1933 Act and all other
applicable federal, state and foreign securities laws.
1.43 "Series A Stock" means the Company's Series A Convertible
Participating Preferred Stock, $.01 par value per share, the rights, privileges,
preferences, limitations and qualifications of which are set forth in the
Certificate of Designations attached to the Company's Certificate of
Incorporation.
<PAGE> 6
1.44 "Series B Shares" means the shares of Series B Stock being sold
by the Company to the Purchasers pursuant to this Agreement.
1.45 "Series B Stock" means the Company's Series B Convertible
Participating Preferred Stock, $.01 par value per share, the rights, privileges,
preferences, limitations and qualifications of which are set forth in the
Certificate of Designations attached to the Company's Certificate of
Incorporation.
1.46 "Software" means any computer software programs, source code,
object code, data and related documentation.
1.47 "Stockholders Agreement" means the Amended and Restated
Stockholders Agreement dated April 23, 1998, among the Company, the holders of
the Series A Stock, and certain other stockholders of the Company.
1.48 "Subsidiary" means any corporation or other entity (a) a
majority of which is owned or previously was owned by the Company, or (b) which
the Company otherwise directly or indirectly controls or previously controlled.
1.49 "Taxes" means and includes all federal, state, local, foreign
and other taxes and governmental assessments and levies, including without
limitation income taxes, alternative minimum taxes, sales taxes, franchise
taxes, excise taxes, employment and payroll taxes, estimated taxes, withholding
taxes, transfer taxes, and all associated fines, penalties and interest.
1.50 "Trade Secrets" means and includes any trade secrets, research
records, processes, procedures, manufacturing formulae, technical know-how,
technology, blueprints, designs, plans, inventions (whether patentable and
whether reduced to practice), invention disclosures and improvements thereto.
1.51 "Trademarks" means and includes any foreign or United States
trademarks, service marks, trade dress, trade names, brand names, designs and
logos, corporate names, product or service identifiers, whether registered or
unregistered, and all registrations and applications for registration thereof.
1.52 "Transaction Documents" means collectively this Agreement, the
Certificate of Designations for the Series B Stock included within the
Certificate of Incorporation, and the Registration Rights Agreement.
1.53 "TransAmerica Warrant" means the Common Stock Purchase Warrant
dated June 19, 1998, issued in connection with the Company's receipt of a
$5,000,000 line of credit for equipment leasing purposes, under which
TransAmerica Business Credit Corporation has the right to purchase from the
Company up to 42,500 shares of Common Stock at a price of $10.00 per share.
<PAGE> 7
1.54 "Unaudited Financial Statements" as of any date means the most
recently available unaudited consolidated balance sheet of the Company and its
Subsidiaries as of that date, and the related statement of income of the Company
and its Subsidiaries for the year or partial year then ended.
1.55 "Voting Agreement" means the Voting Agreement dated July 17,
1996 among some of the stockholders of the Company.
1.56 "VSC Warrant" means the Common Stock Purchase Warrant dated
April 23, 1998 pursuant to which Virginia Surety Company, Inc. has the right to
purchase from the Company up to 500,000 shares of Common Stock at an exercise
price of $10.00 per share, subject to potential adjustment as provided therein.
SECTION 2. TERMS OF PURCHASE
2.1 General. The Company has authorized the issuance and sale of up
to an aggregate of eleven million (11,000,000) Series B Shares to the Purchasers
for a purchase price of Ten Dollars ($10.00) per share. The Series B Shares will
be sold in one or more closings (each, a "Closing"), beginning on or about April
23, 1998 and continuing from time to time thereafter until the earlier to occur
of (i) the sale by the Company of all eleven million (11,000,000) available
Series B Shares, or (ii) a decision by the Board to terminate the offering of
Series B Stock. The Series B Shares will be sold to such Purchasers, in such
amounts, and at such intervals, as the Company may determine. The Company has
authorized and has reserved, and covenants to continue to reserve, a sufficient
number of shares of voting Common Stock to satisfy the rights of conversion of
the holders of the Series B Shares.
2.2 Closings. At each Closing the following shall occur:
(a) The Company will execute and deliver to the relevant
Purchaser(s) certificates evidencing the Series B Shares being purchased.
(b) The Company and the relevant Purchaser(s) will mutually
execute and deliver the Registration Rights Agreement.
(c) The Company will deliver to the Purchasers an Officer's
Certificate as to (i) the due adoption and continuing effectiveness of the
resolutions of the Board, attached thereto, approving the Transaction Documents
and all transactions contemplated thereby, (ii) the accuracy and continuing
effectiveness of the Certificate of Incorporation and Bylaws of the Company
attached thereto, and (iii) the incumbency and specimen signature of each
officer executing the Transaction Documents and the other closing documents on
behalf of the Company.
(d) The Company will deliver to the Purchasers a written
opinion of counsel to the Company, in form and substance reasonably satisfactory
to the Purchasers, as to certain legal matters of potential importance to the
Purchasers.
<PAGE> 8
(e) The relevant Purchaser(s) will pay for the Series B
Shares being purchased, by wire transfer to the Company.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
To induce the Purchasers to enter into and consummate this Agreement,
effective as of each Closing, the Company represents and warrants to the
relevant Purchasers as follows:
3.1 Organization and Corporate Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and is qualified to do business as a foreign corporation in
each jurisdiction in which the failure to qualify would have a material adverse
effect on the Company. The Company has all required corporate power and
authority to own and operate its property, to lease the property it operates as
lessee, to carry on its business as presently conducted or contemplated, to
enter into and perform the Transaction Documents and the agreements contemplated
thereby, and generally to carry out the transactions contemplated hereby and
thereby. Except as set forth on Schedule 3.1, the Company does not own or lease
property in any jurisdiction other than its jurisdiction of incorporation and
the jurisdictions in which it is qualified to do business as a foreign
corporation. The copies of the Certificate of Incorporation and Bylaws of the
Company, each as amended to date, which have been furnished to the Purchasers,
are correct and complete at the date hereof. The Company is not in violation of
any term of its Certificate of Incorporation or Bylaws.
3.2 Authorization. The Transaction Documents and all documents and
instruments executed pursuant thereto have been duly executed and delivered by
the Company and constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms. The execution,
delivery and performance of the Transaction Documents and all documents and
instruments contemplated thereby and the delivery and issuance of the Series B
Shares and, upon conversion of the Series B Shares, the Conversion Shares have
been duly authorized by all necessary corporate or other action of the Company.
Other than routine filing of a Form D with the SEC and any required filings
under state securities laws, no consent, approval or authorization of, or
designation, declaration or filing with, any Person, and no lapse of a waiting
period, is required of the Company in connection with the execution, delivery
and performance of the Transaction Documents, or the issuance and delivery by
the Company of the Series B Shares in accordance with the terms of this
Agreement and, upon conversion of the Series B Shares, the Conversion Shares, or
the performance or consummation of any other transaction contemplated thereby.
3.3 Non-Contravention. The execution, delivery and performance by
the Company of the Transaction Documents and each of the other agreements and
instruments to which it is a party and which are contemplated thereby will not
(a) conflict with or result in any default under (i) any contract, obligation or
commitment of the Company, or (ii) any provision of the Certificate of
Incorporation or Bylaws of the
<PAGE> 9
Company or any amendment thereof; (b) result in the creation of any Lien of any
nature upon any of the properties or assets of the Company; or (c) violate any
Judgment or Requirement of Law applicable to the Company. The Company has not
previously entered into any contract, obligation or commitment which is
currently in effect or by which the Company is currently bound, granting any
rights to any Person which are inconsistent with the rights to be granted by the
Company in the Transaction Documents or any of the agreements contemplated by
the Transaction Documents.
3.4 Capitalization of the Company.
(a) The authorized capital stock of the Company consists of
(i) 150,000,000 shares of Common Stock, of which 148,500,000 shares are voting
Common Stock and 1,500,000 shares are Nonvoting Common Stock, and (ii)
40,000,000 shares of Preferred Stock. No Certificate of Designation has been
filed with the Delaware Secretary of State with respect to the Company's
Preferred Stock except the Certificate of Designations for the Series A Stock
and the Certificate of Designations for the Series B Stock. Immediately prior to
the date of this Agreement, there were outstanding (x) 31,139,822 shares of
Common Stock, including 30,399,822 shares of voting Common Stock and 740,000
shares of Nonvoting Common Stock, but not including 188,000 shares of Common
Stock held by the Company in treasury, (y) 3,509,568 shares of Series A Stock,
and (z) 10,150,000 shares of Series B Stock. All outstanding shares of Preferred
Stock and Common Stock are duly and validly issued, fully paid and
nonassessable. The 3,509,568 outstanding shares of Series A Stock are
convertible into a total of 14,038,272 shares of voting Common Stock. The
10,150,000 outstanding shares of Series B Stock are convertible into a total of
10,150,000 shares of voting Common Stock. The Company has reserved an aggregate
of 11,000,000 shares of voting Common Stock for issuance upon conversion of the
Series B Shares. Except for the Series A Stock, the Series B Stock and the
Outstanding Rights, there are no outstanding warrants, options or other rights
or obligations to purchase or acquire any Common Stock or other securities of
the Company from the Company. To the Company's knowledge, except for the Goldman
Warrants, the BT Options and the ML Options, no stockholder of the Company has
granted to any Person any warrant, option or right to acquire any securities of
the Company from any such stockholder. All of the outstanding shares of capital
stock of the Company (including the Series B Shares) have been offered, issued,
sold and delivered in compliance with all applicable federal and state
securities laws. The Series B Shares have been duly and validly authorized and,
when delivered and paid for pursuant to this Agreement, will be validly issued,
fully paid and nonassessable. Assuming sale of all 11,000,000 available Series B
Shares, the Series B Shares will be convertible into 11,000,000 shares of Common
Stock which will represent approximately 14% of the Common Stock on a
fully-diluted basis after giving effect to the issuance of all shares reserved
for issuance under the Outstanding Rights. The Conversion Shares are duly
authorized and, when issued in compliance with the Company's Certificate of
Incorporation, will be validly issued, fully paid and nonassessable and will be
issued in compliance with the registration and qualification requirements of all
applicable federal and state securities laws. The Company effected a
four-for-one Common Stock split in mid-1997, and all of the numbers in this
paragraph reflect that split.
<PAGE> 10
(b) There are no preemptive rights or rights of first
refusal with respect to the issuance or sale of the Company's capital stock,
other than rights to which certain holders of the Series A Stock are entitled as
set forth in the Stockholders Agreement. There are no restrictions on the
transfer of the Company's Preferred Stock (including Series B Shares) or the
Conversion Shares other than those arising from the Securities Laws and the
Stockholders Agreement. Except for (i) the Registration Rights Agreement, (ii) a
registration rights agreement dated August 26, 1996, as amended, in favor of the
holders of the Series A Stock, (iii) a registration rights agreement in favor of
the holder of the NASDAQ Warrant, and (iv) the Voting Agreement, the Company is
not party to and is not bound by (and, to the Company's knowledge, no
stockholder of the Company is a party to or otherwise bound by) any agreement
with respect to (x) the voting of any of the Company's capital stock, or (y) the
registration of such capital stock for offering to the public pursuant to the
1933 Act.
(c) Except as otherwise set forth on Schedule 3.4, the
Company owns no Subsidiaries or investments in any other corporation or business
organization.
3.5 Financial Statements. The Financial Statements were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, except that the Unaudited Financial Statements have been prepared without
footnote disclosures and year-end audit adjustments, which will not, in any
event, be material. All of such Financial Statements fairly represent the
financial condition of the Company and its Subsidiaries as of the date thereof,
and are true, correct and complete as of the date thereof in all material
respects. Nothing has come to the attention of the management of the Company
since such dates which would indicate that the Financial Statements were not
true and correct as of the date thereof.
3.6 Absence of Undisclosed Liabilities. Between the date of the most
recent Financial Statements and the Closing, except as and to the extent
disclosed in Schedule 3.6, the Company did not incur any Liabilities that are
(a) individually in excess of $100,000 or (b) in the aggregate in excess of
$250,000, other than (i) Liabilities fully and adequately reflected or reserved
against on the Financial Statements and (ii) Liabilities incurred in the
ordinary course of business. As of the date of the Closing, the Company has no
knowledge of any circumstance, condition, event or arrangement that may
hereafter give rise to any Liabilities of the Company except in the ordinary
course of business or as otherwise set forth on Schedule 3.6.
3.7 Absence of Certain Developments. Except as disclosed in Schedule
3.7, between the date of the most recent Financial Statements and the Closing,
there was (i) no material adverse change in the condition, financial or
otherwise, of the Company or in the assets, liabilities, business or prospects
of the Company, (ii) no declaration, setting aside or payment of any dividend or
other distribution with respect to, or any direct or indirect redemption or
acquisition of, any of the capital stock of the Company, (iii) no waiver of any
right of the Company or cancellation of any debt or claim held by the Company,
(iv) no loan by the Company to any officer, director, employee or stockholder
<PAGE> 11
of the Company, any affiliates of any of the foregoing, or any agreement or
commitment therefor, (v) no material loss, destruction or damage to any property
of the Company, whether or not insured, (vi) no labor trouble involving the
Company and no material change in the personnel of the Company or the terms and
conditions of their employment, and (vii) no acquisition or disposition of any
assets (or any contract or arrangement therefor) nor any other transaction by
the Company otherwise than for fair value in the ordinary course of business.
3.8 Accounts Receivable. Except as disclosed on Schedule 3.8, the
Company has no accounts receivable from any Person which is affiliated with the
Company or any of its directors, officers, employees or shareholders or any
affiliates of any of the foregoing.
3.9 Debt. Schedule 3.9 sets forth (a) a list of all agreements for
incurring of indebtedness for borrowed money to which the Company is a party,
(b) the amount of all indebtedness under each such agreement, (c) the Liens that
relate to such indebtedness and that encumber the assets of the Company, and (d)
the name of the lender thereof. None of the obligations pursuant to such
agreements are subject to acceleration by reason of the consummation of the
transactions contemplated hereby, nor would the execution of the Transaction
Documents or the consummation of the transactions contemplated thereby result in
any default under such agreements.
3.10 Title to Properties. The Company has good and marketable title
to all of its properties and assets (other than Intellectual Property, which is
addressed by Section 3.13 below), free and clear of all Liens, and such
properties and assets constitute all of the assets necessary for the conduct of
the Company's business as presently conducted and as presently contemplated to
be conducted. All machinery and equipment included in such properties which is
necessary to the business of the Company is in good condition and repair and all
leases of real or personal property to which the Company is a party are in full
force and effect and afford the Company peaceful and undisturbed possession of
the subject matter of the lease. The Company is not in violation of any
Requirement of Law applicable to the operation of its owned or leased
properties, nor has the Company received any written notice of violation with
which it has not complied.
3.11 Tax Matters.
(a) The Company has paid or caused to be paid all Taxes
required to be paid by it through the date hereof, whether disputed or not. All
Taxes which the Company is required to withhold or collect have been withheld
and collected and have been paid over to the proper governmental authorities.
The Company has, in accordance with applicable law, timely and properly filed
all Tax returns required to be filed by it through the date hereof, all such
returns correctly and accurately set forth the amount of any Taxes relating to
the applicable period, and any deductions from, or credits against, any Taxes or
taxable income relating to such returns are in all material respects valid and
proper items of deduction or credit.
<PAGE> 12
(b) Neither the IRS nor any other governmental authority is
now asserting or, to the knowledge of the Company, threatening to assert against
the Company any deficiency or claim for additional Taxes. No claim has ever been
made by an authority in a jurisdiction where the Company does not file reports
and returns that the Company is or may be subject to taxation by that
jurisdiction. There are no Liens on any of the assets of the Company that arose
in connection with any failure (or alleged failure) to pay any Taxes. The
Company has never entered into a closing agreement pursuant to Section 7121 of
the Code. The Company is not and never has been a "personal holding company" as
defined under Section 541 of the Code. There has not been any audit of any tax
return filed by the Company, no such audit is in progress, and the Company has
not been notified by any tax authority that any such audit is contemplated or
pending. No extension of time with respect to any date on which a tax return was
or is to be filed by the Company is in force, and no waiver or agreement by the
Company is in force for the extension of time for the assessment or payment of
any Taxes. To the best of the Company's knowledge, the Company does not have any
liability for the Taxes of any person or entity other than the Company.
3.12 Contracts and Commitments. Except as provided on Schedule 3.12,
the Company is not a party to any Material Contract. The Company does not know
of any basis for the termination, expiration or modification of any such
Material Contracts. Neither the Company nor any other party thereto is in
default under any Material Contract and, to the best knowledge of the Company,
there is no state of facts which upon notice or lapse of time or both would
constitute such a default. The Company is not a party to any contract or
arrangement which under circumstances now foreseeable is likely to have a
materially adverse effect on the assets, liabilities, business, condition,
financial or otherwise, or prospects of the Company. The Company does not have
any liability for renegotiation of any government contracts or subcontracts.
3.13 Intellectual Property.
(a) Schedule 3.13 sets forth all Patents, Trademarks and
registered Copyrights owned by, and applications for any of the above filed by,
the Company specifying as to each item, as applicable: (i) the category of
Intellectual Property; (ii) the jurisdiction in which the item is issued or
registered or in which any application for issuance or registration has been
filed, including the respective issuance, registration or application number;
(iii) the date of application, issuance or registration; and (iv) with respect
to any Trademarks, the class or classes of goods or services on which each such
Trademark is or is intended to be used. None of the Intellectual Property of the
Company is subject to any outstanding Judgment, and, except for the NeoVision
Letter and as otherwise set forth in Schedule 3.13, no action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand is pending or, to the
knowledge of the Company, threatened, which challenges the validity,
enforceability, use or ownership of the Intellectual Property of the Company,
nor does the Company know of any valid basis for any such claim, or any prior
art, or any act or omission or failure to act which may render the Intellectual
Property invalid or unenforceable.
<PAGE> 13
(b) Schedule 3.13 sets forth all licenses, sublicenses and
other agreements under which the Company is either a licensor or licensee of any
Intellectual Property, except such licenses, sublicenses and other agreements
relating to prepackaged software used solely on the computers of the Company.
The Company has substantially performed all obligations imposed upon it
thereunder, and neither the Company nor, to the knowledge of the Company, any
other party thereto, is in breach of or default thereunder in any respect, nor
is there any event which with notice or lapse of time or both would constitute a
default thereunder. All of the licenses listed on Schedule 3.13 are valid,
enforceable and in full force and effect, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity relating to
enforceability (regardless of whether considered in a proceeding at law or in
equity).
(c) To the knowledge of the Company, none of the
Intellectual Property currently sold or licensed by the Company to any Person or
used by or licensed to the Company infringes upon or otherwise violates any
Intellectual Property rights of others. No claim is pending or, to the knowledge
of the Company, threatened which challenges the freedom of the Company to
conduct its business as presently conducted.
(d) Except for the NeoVision Letter and as otherwise set
forth on Schedule 3.13, no litigation, action, suit, proceeding, arbitration,
claim, complaint, dispute or investigation is pending or, to the knowledge of
the Company, threatened against the Company, contesting the right of the Company
to sell or license to any Person or use the Intellectual Property presently sold
or licensed to such Person or used by the Company, nor does the Company know of
any valid basis for any such claim.
(e) To the knowledge of the Company, no Person is infringing
upon or otherwise violating the Intellectual Property rights of the Company.
(f) Except as set forth on Schedule 3.13, the Company has
not agreed to indemnify any person against any charge of infringement or other
violation with respect to any Intellectual Property owned or used by the
Company.
(g) No former employer of any employee of the Company, and
no current or former client of any consultant of the Company, has made a claim
against the Company or, to the knowledge of the Company, against any other
Person, that such employee or such consultant is utilizing proprietary
information of such former employer or client.
(h) Except as set forth on Schedule 3.13, the Company is not
a party to or bound by and, upon the consummation of the transactions
contemplated by this Agreement, will not be a party to or bound by, any license
or other agreement requiring the payment of any material royalty payment,
excluding such agreements relating to prepackaged software licensed for use
solely on the computers of the Company.
<PAGE> 14
(i) To the knowledge of the Company, no employee of the
Company is in violation of any Requirement of Law applicable to such employee's
employment, or any term of any employment agreement, patent or invention
disclosure agreement or other contract or agreement relating to the relationship
of such employee with the Company.
(j) Since January 1995, each employee and officer of the
Company who has had access to OptiMark(TM) has executed an agreement regarding
confidentiality, proprietary information and assignment of inventions to the
Company and, to the knowledge of the Company, none of such employees and
officers are in violation of such agreements.
(k) To the knowledge of the Company, none of the Trade
Secrets of the Company, the value of which is contingent upon the continued
maintenance of the confidentiality thereof, has been disclosed to any Person
other than employees, representatives and agents of the Company, except (A)
where the Company determined that such disclosure was necessary to conduct the
business of the Company, such disclosure not having a material adverse effect on
the Company, (B) as required pursuant to the filing of a Patent application by
the Company, or (C) under a confidentiality agreement.
(l) The Company has the exclusive right to file, procure and
maintain all applications and registrations for the Intellectual Property owned
by the Company.
(m) To the present knowledge of the Company, all Patents,
Trademarks and Copyrights owned by the Company are valid and subsisting. The
Company has taken commercially reasonable efforts to maintain and protect its
Intellectual Property.
(n) The Intellectual Property owned by the Company is free
and clear of all Liens.
3.14 Litigation. Except as otherwise set forth on Schedule 3.14
hereto, there is no litigation, arbitration or governmental proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries, which could, if adversely determined,
(i) call into question the validity or hinder the enforceability or performance
of the Transaction Documents or the agreements and transactions contemplated
thereby or (ii) have a materially adverse effect on the assets, liabilities,
business, condition (financial or otherwise), or prospects of the Company; nor,
to the best knowledge of the Company, has there occurred any event nor does
there exist any condition on the basis of which any litigation, proceeding or
investigation might properly be instituted.
3.15 Offerees. Neither the Company nor anyone acting on its behalf
has sold, offered or solicited offers to buy any securities of the Company so as
to bring the offer, issuance or sale of the Series B Shares or the Conversion
Shares, as contemplated by this Agreement, within the provisions of Section 5 of
the 1933 Act, unless such offer,
<PAGE> 15
issuance or sale was within the exemptions of the 1933 Act. Assuming the
accuracy of the representations of the Purchasers in Section 4 below, the
Company has complied with all Securities Laws in connection with the issuance
and sale of the Series B Shares.
3.16 Business; Compliance with Laws. The Company has all material
franchises, permits, licenses, orders, approvals and all other rights and
privileges necessary to permit it to own its property and to conduct its
business as it is presently conducted and as it is presently contemplated to be
conducted (collectively, "Permits"). Such Permits are in full force and effect.
The Company is not in violation in any respect of any Requirement of Law,
Judgment or Permit. The Company is in compliance, in all respects, with all
material federal, state and local laws and regulations (including all applicable
environmental laws and regulations, whether material or immaterial) relating to
its business as presently conducted. Neither the Company nor any officer or
director of the Company has been (a) subject to voluntary or involuntary
petition under the federal bankruptcy laws or any state insolvency law or the
appointment of a receiver, fiscal agent or similar officer by a court for its or
his business or property; (b) convicted in a criminal proceeding or named as a
subject of a pending criminal proceeding (excluding traffic violations and other
minor offenses); (c) subject to any Judgment (not subsequently reversed,
suspended or vacated) permanently or temporarily enjoining it or him from, or
otherwise imposing limits or conditions on its or his, engaging in any
securities, investment advisory, banking, insurance or other type of business or
acting as an officer or director of a public company; or (d) found by a court of
competent jurisdiction in a civil action or by the SEC or the Commodity Futures
Trading Commission to have violated any federal or state commodities, securities
or unfair trade practices law, which such judgment or finding has not been
subsequently reversed, suspended, or vacated.
3.17 Information Supplied to Purchasers. Neither the Transaction
Documents, nor the Schedules and Exhibits attached thereto or any document
referenced therein, nor any certificate, projection or statement (whether oral
or written) furnished to the Purchasers by or on behalf of the Company, contains
any untrue statement of a material fact, and none of the Transaction Documents,
the Schedules and Exhibits attached thereto or such other documents,
certificates, projections or statements referenced therein omits to state a
material fact necessary in order to make the statements contained therein not
misleading. There is no material fact directly relating to the assets,
liabilities, business, condition (financial or otherwise) or prospects of the
Company (other than facts which relate to general economic trends or conditions)
known to the Company that materially adversely affects or in the future may
reasonably be expected to be materially adversely affect the same that has not
been set forth in this Agreement or in the Schedules and Exhibits attached
hereto.
3.18 Investment Banking; Brokerage. Except for J.C. Bradford & Co.,
L.L.C. and Frank Egan, (a) no broker, finder, agent or similar intermediary has
acted on behalf of the Company in connection with this Agreement or the
transactions contemplated hereby, and (b) there are no brokerage commissions,
finder's fees or similar fees or commissions payable to any Person as a result
of any actions taken by the Company.
<PAGE> 16
3.19 Environmental Matters.
(a) The Company has never generated, transported, used,
stored, treated, disposed of, or managed any Hazardous Material. No Hazardous
Material has ever been or, to the best knowledge of the Company, is threatened
to be spilled, released, or disposed of by the Company, at any site presently or
formerly owned, operated, leased, or used by the Company, or has ever come to be
located in the soil or groundwater at any such site. No Hazardous Material has
ever been transported from any site presently or formerly owned, operated,
leased, or used by the Company for treatment, storage, or disposal at any other
place. To the best knowledge of the Company, the Company presently does not own,
operate, lease, or use, nor has the Company previously owned, operated, leased,
or used, any site on which underground storage tanks are or were located. No
Lien has ever been imposed by any governmental agency on any property, facility,
machinery, or equipment owned, operated, leased, or used by the Company with the
presence of any Hazardous Material and based upon any action or inaction of the
Company.
(b) The Company has no liability under, nor has it ever
violated in any respect, any Environmental Law. The Company, any property owned,
operated, leased, or used by the Company, and any facilities and operations
thereon are presently in compliance in all respects with all applicable
Environmental Laws. The Company has never entered into or been subject to any
Judgment with respect to any environmental or health and safety matter or
received any request for information, notice, demand letter, administrative
inquiry, or formal or informal complaint or claim with respect to any
environmental or health and safety matter or the enforcement of any
Environmental Law. None of the foregoing items enumerated in this paragraph will
be forthcoming.
(c) For purposes of this Section 3.19, the term "Company"
shall include the Company, its Subsidiaries and their Affiliates, and any
predecessors of the Company, its Subsidiaries and their Affiliates.
3.20 Employee Benefit Programs.
(a) Schedule 3.20 sets forth a list of every Employee
Program that has been maintained by the Company at any time since January 1,
1995.
(b) Each Employee Program which has ever been maintained by
the Company and which has at any time been intended to qualify under Section
401(a) or Section 501(c)(9) of the Code has received a favorable determination
or approval letter from the IRS regarding its qualification under such section
and, to the best knowledge of the Company has, in fact, been continuously
qualified under the applicable section of the Code since the effective date of
such Employee Program. No event or omission has occurred which would cause any
such Employee Program to lose its qualification under the applicable Code
section.
<PAGE> 17
(c) Each Employee Program that has ever been maintained by
the Company has been maintained in compliance with all applicable laws. With
respect to any Employee Program ever maintained by the Company, there has
occurred no "prohibited transaction," as defined in Section 406 of ERISA or
Section 4975 of the Code (for which there exists neither a statutory nor
regulatory exception), or material breach of any duty under ERISA or other
applicable law (including, without limitation, any health care continuation
requirements or any other tax law requirements, or conditions to favorable tax
treatment, applicable to such plan or to any person in regard to such plan),
which could result, directly or indirectly (including, without limitation,
through any obligation of indemnification or contribution), in any taxes,
penalties or other liability to the Company or any of its affiliates. No
litigation, arbitration, or governmental administrative proceeding (or
investigation) or other proceeding (other than those relating to routine claims
for benefits) is pending or, to the best knowledge of the Company, threatened
with respect to any such Employee Program.
(d) Neither the Company nor any Affiliate (i) has ever
maintained any Employee Program which has been subject to Title IV of ERISA or
Section 412 of the Code (including, but not limited to, any Multiemployer Plan)
or (ii) has ever provided health care or any other non-pension benefits to any
employees after their employment is terminated (other than as required by part 6
of subtitle B of Title I of ERISA) or has ever promised to provide such
post-termination benefits.
(e) With respect to each Employee Program maintained by or
on behalf of the Company or any Affiliate within the three (3) years preceding
the Closing, complete and correct copies of the following documents (if
applicable to such Employee Program) have been made available to the Purchasers:
(i) all documents embodying or governing such Employee Program, and any funding
medium for the Employee Program (including, without limitation, trust
agreements), as they may have been amended to the date hereof; (ii) the most
recent IRS determination or approval letter with respect to such Employee
Program under Code Section 401 or Section 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three most
recently filed IRS Forms 5500, with all applicable schedules and accountants'
opinions attached thereto; (iv) the summary plan description for such Employee
Program (or other descriptions of such Employee Program provided to employees)
and all modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy and any excess loss policy) related to such Employee
Program; (vi) any documents evidencing any loan to an Employee Program that is a
leveraged employee stock ownership plan; and (vii) all other materials
reasonably necessary for the Company to perform any of its responsibilities with
respect to any Employee Program subsequent to the Closing (including, without
limitation, health care continuation requirements).
(f) With respect to each Employee Program maintained by the
Company or its Affiliates, no event has occurred, and there exists no condition
or set of circumstances in connection with which the Company could, directly or
indirectly (through a Commonly Controlled Entity or otherwise), be subject to
any liability under
<PAGE> 18
ERISA, the Code or any other applicable law, except liability for benefits
claims and funding obligations payable in the ordinary course.
(g) Each Employee Program maintained by the Company or
Affiliate that is a "group health plan" (as defined in ERISA Section 607(1) or
Code Section 5001(b)(1)) has been operated at all times in compliance with the
provisions of COBRA and any applicable, similar state law.
(h) The consummation of the transactions contemplated by
this Agreement will not: (i) entitle any current or former employee to severance
pay, unemployment compensation or any similar payment; (ii) accelerate the time
of payment or vesting, or increase the amount of any compensation due to, or in
respect of, any current or former employee; (iii) result in or satisfy a
condition to the payment of compensation that would, in combination with any
other payment, result in an "excess parachute payment" within the meaning of
Code Section 280G(b); or (iv) constitute or involve a prohibited transaction (as
defined in ERISA Section 502(1)) or otherwise violate Part 4 of Subtitle B of
Title I of ERISA.
3.21 Product and Services Claims. There are no pending or, to the
best of the Company's knowledge, threatened product or service claims with
respect to any products manufactured or services provided by the Company nor are
there any facts upon which a claim of such nature could reasonably be
anticipated to be based. The Company does not have any contractual liability for
breach of warranty or service claims. No claims have been made against the
Company for renegotiation or price redetermination of any business transaction
resulting from or relating to defective products or services, and, to the best
of the Company's knowledge, there are no facts upon which any such claim should
reasonably be anticipated to be based.
3.22 Employees; Labor Matters. As of the date of this Agreement, the
Company employed a total of approximately 190 full-time employees. The Company
believes it enjoys good employer-employee relationships. The Company is not
delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed to
the date hereof or amounts required to be reimbursed to such employees. The
Company does not have any policy, practice, plan or program of paying severance
pay or any form of severance compensation in connection with the termination of
employment, except as set forth in Schedule 3.22. All of the Company's programs
and arrangements in connection with the payment of commissions are described in
Schedule 3.22. To the best of the Company's knowledge, the Company is in
material compliance with all Requirements of Law respecting labor, employment,
fair employment practices, work place safety and health, terms and conditions of
employment, and wages and hours. There are no charges of employment
discrimination or unfair labor practices, nor are there any strikes, slowdowns,
stoppages of work, or any other concerted interference with normal operations
which are existing, pending or, to the best of the Company's knowledge,
threatened against or involving the Company. The Company has not received any
information indicating that any of its employment policies or practices is
currently being
<PAGE> 19
audited or investigated by any federal, state or local government agency. To the
best of the Company's knowledge, the Company is, and at all times since its
incorporation has been, in material compliance with the requirements of the
Immigration Reform Control Act of 1986.
3.23 Trade Relations. To the best knowledge of the Company, there
exists no actual or threatened termination, cancellation or limitation of, or
any adverse modification or change in, the business relationship of the Company
with any customer or any group of customers whose purchases are individually or
in the aggregate material to the business of the Company, or with any material
supplier.
3.24 Corporate Records; Copies of Documents. The corporate record
books of the Company accurately record all corporate action taken by its
stockholders, Board and committees thereof. The copies of the corporate records
of the Company, as made available to the Purchasers for review, are true and
complete copies of the originals of such documents. The Company has made
available for inspection by the Purchasers true and correct copies of all
documents referred to in this Section 3.24 or in the Schedules delivered
pursuant to this Agreement.
3.25 Affiliate Transactions. Except as set forth in Schedule 3.25
hereto, neither the Company nor, to the best of the Company's knowledge, any
officer, employee or director of the Company owns or controls, directly or
indirectly, on an individual or joint basis, any interest in (excepting less
than 1% stockholding for investment purposes in securities of publicly-held
companies) or serves as an officer, director, employee, consultant, partner or
in another similar capacity of, any competitor, supplier, lessor, lessee,
distributor, sales agent or customer of or lender to or borrower from, the
Company.
3.26 Insurance. Schedule 3.26 lists all of the insurance policies
held by or on behalf of the Company as of the date of this Agreement, with the
effective date and coverage amounts indicated thereon. Except as set forth on
Schedule 3.26, such policies and binders are valid and enforceable in accordance
with their terms and are in full force and effect. None of such policies will be
affected by, or terminate or lapse by reason of, any transaction contemplated by
this Agreement or any transaction contemplated hereunder.
3.27 FIRPTA. The Company is not a "foreign person" within the meaning
of Section 1445 of the Code.
3.28 Investment Company. The Company is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
SECTION 4. INVESTOR REPRESENTATIONS
To induce the Company to enter into this Agreement, each Purchaser
hereby severally and not jointly represents to the Company as follows:
<PAGE> 20
4.1 Authorization. The execution of this Agreement and all other
documents executed pursuant to hereto have been duly authorized by all necessary
action on the part of the Purchaser, has been duly executed and delivered, and
constitutes a valid, binding and enforceable agreement of the Purchaser.
4.2 Investment Intent. The Purchaser is acquiring the Series B
Shares for its own account, for investment, and not with a present view to any
"distribution" thereof within the meaning of the 1933 Act.
4.3 Restrictions on Transfer. The Purchaser understands that,
because the Series B Shares have not been registered under the Securities Laws,
the Purchaser cannot dispose of any or all of the Series B Shares or the
Conversion Shares unless such securities are subsequently registered under the
Securities Laws or exemptions from such registration are available. The
Purchaser understands that each certificate representing the Series B Shares and
the Conversion Shares will bear a legend substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO A WRITTEN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
4.4 Sophistication. The Purchaser is sufficiently knowledgeable and
experienced in the making of venture capital investments so as to be able to
evaluate the risks and merits of its investment in the Company, and is able to
bear the economic risk of loss of its investment in the Company.
4.5 No General Solicitation. The Purchaser did not learn of this
investment through any general solicitation or general advertising by the
Company, as those terms are used in Rule 502(c) under the 1933 Act.
4.6 Brokers. No broker, finder, agent or similar intermediary has
acted on behalf of the Purchaser in connection with this Agreement or the
transactions contemplated hereby, and there are no brokerage commissions,
finder's fees or similar fees or commissions payable in connection therewith.
4.7 Accreditation. The Purchaser is an "accredited investor" as that
term is defined under Regulation D adopted under the 1933 Act.
4.8 Reliance by Company. The Purchaser has been advised that the
Series B Shares have not been and are not being registered under the Securities
Laws and that in
<PAGE> 21
issuing the Series B Shares the Company is relying upon, among other things, the
representations and warranties of the Purchasers contained in this Section 4.
SECTION 5. INDEMNIFICATION
5.1 General.
(a) The Company shall, to the full extent permitted by law,
and in addition to any such rights which any Indemnified Party (as defined
herein) may have pursuant to statute, common law, separate agreement, the
Company's Certificate of Incorporation or By-laws, or otherwise, indemnify,
defend and hold harmless each Purchaser (including its respective subsidiaries,
affiliates, directors, officers, members, partners, employees and agents, an
"Indemnified Purchaser") and each person (a "Controlling Person" and,
collectively with Indemnified Purchasers, the "Indemnified Parties") who
controls any of them within the meaning of Section 15 of the 1933 Act, from and
against any and all Losses (including Losses incurred by the Indemnified Party
in any action between the Company and the Indemnified Party or between the
Indemnified Party and any third party or otherwise) resulting from, arising out
of or relating to (i) any breach of any representation or warranty, covenant or
agreement by the Company in the Transaction Documents and/or any Certificate or
Schedule delivered by the Company pursuant thereto, including, without
limitation, any legal, administrative or other actions (including actions
brought by the Purchasers or the Company or any equity holders of the Company or
derivative actions brought by any Person claiming through or in the Company's
name), proceedings or investigations (whether formal or informal), or written
threats thereof, based upon, relating to or arising out of the Transaction
Documents and/or any Certificate or Schedule delivered by the Company pursuant
thereto, the transactions contemplated thereby, or any Indemnified Party's role
therein or in transactions contemplated thereby, (ii) by reason of their status
as a security holder, creditor, director, agent, representative or controlling
person of the Company (including, without limitation, any and all Losses under
the Securities Laws, at common law or otherwise, which relate directly or
indirectly to the registration, purchase, sale or ownership of the Securities or
to any fiduciary obligation owed with respect thereto), and (iii) the claims of
NeoVision Hypersystems, Inc. set forth in the NeoVision Letter; provided,
however, that the Company will not be liable to the extent that Losses arise
from and are based on an untrue statement or omission or alleged untrue
statement or omission in a registration statement or prospectus which is made in
reliance on and in conformity with information furnished to the Company by or on
behalf of such Indemnified Party. The indemnification and contribution provided
for in this Section 5.1 will remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Parties or any officer,
director, employee, agent or Controlling Person of the Indemnified Parties.
(b) If the indemnification provided for in this Section 5.1
is for any reason held by a court of competent jurisdiction to be unavailable to
an Indemnified Party in respect of any Losses referred to above, then the
Company, in lieu of indemnifying such Indemnified Party thereunder, shall
contribute to the amount paid or payable by
<PAGE> 22
such Indemnified Party as a result of such Losses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Purchasers, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company and the Purchasers in connection with the action or
inaction which resulted in such Losses, as well as any other relevant equitable
considerations. In connection with any registration of the Company's securities,
the relative benefits received by the Company and the Purchasers shall be deemed
to be in the same respective proportions that the net proceeds from the offering
(before deducting expenses) received by the Company and the Purchasers, in each
case as set forth in the table on the cover page of the applicable prospectus,
bear to the aggregate public offering price of the securities so offered. The
relative fault of the Company and the Purchasers shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Purchasers and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(c) The Company and the Purchasers agree that it would not
be just and equitable if contribution pursuant to the foregoing paragraph (b)
were determined by pro rata or per capita allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the foregoing paragraph (b). In connection with any registration of the
Company's securities, in no event shall a Purchaser be required to contribute
any amount under this Section 5.1 in excess of the lesser of (i) that proportion
of the total of such Losses indemnified against equal to the proportion of the
total securities sold under such registration statement which is being sold by
such Purchasers or (ii) the proceeds received by such Purchaser from its sale of
securities under such registration statement. No person found guilty of
fraudulent misrepresentation (within the meaning of the Securities Laws) shall
be entitled to contribution from any person who was not found guilty of such
fraudulent misrepresentation.
5.2 Notice; Defense of Claims.
(a) Promptly after receipt by an Indemnified Party of notice
of any third party or other claim, liability or expense to which the
indemnification obligations hereunder would apply, including in connection with
any governmental proceeding, the Indemnified Party shall give notice thereof in
writing to the indemnifying party or parties, but the omission to so notify the
indemnifying party or parties promptly will not relieve the indemnifying party
or parties from any liability except to the extent that the indemnifying party
or parties shall have been materially prejudiced as a result of the failure or
delay in giving such notice. Such notice shall state the information then
available regarding the amount and nature of such claim, liability or expense
and shall specify the provision or provisions of this Agreement under which the
liability or obligation is asserted.
<PAGE> 23
(b) In the case of any third party claim, if within twenty
(20) days after receiving the notice described in the preceding paragraph the
indemnifying party or parties (i) give written notice to the Indemnified Parties
stating that they intend to defend in good faith against such claim, liability
or expense at their own cost and expense and (ii) provide assurance and security
reasonably acceptable to such Indemnified Parties that such indemnification will
be paid fully and promptly if required and such Indemnified Parties will not
incur cost or expense during the proceeding, then counsel for the defense shall
be selected by the indemnifying party or parties (subject to the consent of such
Indemnified Parties which consent shall not be unreasonably withheld) and such
Indemnified Parties shall not be eligible for any payment with respect to such
claim, liability or expense as long as the indemnifying party or parties are
conducting a good faith and diligent defense at their own expense; provided,
however, that the assumption of defense of any such matters by the indemnifying
party or parties shall relate solely to the claim, liability or expense that is
subject or potentially subject to indemnification. If the indemnifying party or
parties assume such defense in accordance with the preceding sentence, they
shall have the right, with the consent of such Indemnified Parties, which
consent shall not be unreasonably withheld, to settle all indemnifiable matters
related to claims by third parties which are susceptible to being settled
provided the indemnifying party or parties' obligation to indemnify such
Indemnified Parties therefor will be fully satisfied and the settlement includes
a complete release of such Indemnified Parties. The indemnifying party or
parties shall keep the such Indemnified Parties apprised of the status of the
claim, liability or expense and any resulting suit, proceeding or enforcement
action, shall furnish such Indemnified Parties with all documents and
information that such Indemnified Parties shall reasonably request and shall
consult with such Indemnified Parties prior to acting on major matters,
including settlement discussions. Notwithstanding anything herein stated, such
Indemnified Parties shall at all times have the right to fully participate in
such defense at its own expense directly or through counsel; provided, however,
if the named parties to the action or proceeding include both the indemnifying
party or parties and the Indemnified Parties and representation of both parties
by the same counsel would be inappropriate under applicable standards of
professional conduct, the expense of separate counsel for such Indemnified
Parties shall be paid by the indemnifying party or parties. If no such notice of
intent to dispute and defend is given by the indemnifying party or parties, or
if such diligent good faith defense is not being or ceases to be conducted, such
Indemnified Parties shall, at the expense of the indemnifying party or parties,
undertake the defense of (with counsel selected by such Indemnified Parties),
and shall have the right to compromise or settle, such claim, liability or
expense. If such claim, liability or expense is one that by its nature cannot be
defended solely by the indemnifying party or parties, then such Indemnified
Parties shall make available all information and assistance that the
indemnifying party or parties may reasonably request and shall cooperate with
the indemnifying party or parties in such defense.
5.3 Satisfaction of Indemnification Obligations. Any indemnity
payable pursuant to this Section 5 shall be paid not later than thirty (30) days
following the later of (a) the Indemnified Party's request therefor or (b) a
final non-appealable determination of Loss, but in any event such payment shall
be made not later than ten (10) days prior to
<PAGE> 24
the date on which the Loss upon which the indemnity is based is required to be
satisfied by the Indemnified Party, if applicable.
SECTION 6. COVENANTS OF THE COMPANY.
Until the earlier to occur of (i) August 27, 2016, or (ii) the IPO
Effectiveness Date:
6.1 Inspection. The Company will permit representatives of each
Purchaser to visit and inspect any of its properties, to examine its corporate,
financial and operating records and make copies thereof or abstracts therefrom,
and to discuss its affairs, finances and accounts with their respective
directors, officers and independent public accountants, all at such reasonable
times during normal business hours and as often as may be reasonably requested,
upon reasonable advance notice to the Company.
6.2 Financial Statements and Other Information. The Company shall
deliver to each Purchaser the following:
(a) as soon as available, but not later than sixty (60) days
after the end of each fiscal year of the Company, a copy of the audited balance
sheet of the Company as of the end of such year and the related statements of
operations and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous year, all in reasonable detail and
accompanied by a management summary and analysis of the operations of the
Company for such fiscal year and by the opinion of a nationally recognized
independent certified public accounting firm which report shall state without
qualification that such financial statements present fairly the financial
condition as of such date and results of operations and cash flows for the
periods indicated in conformity with GAAP applied on a consistent basis;
(b) as soon as available, but in any event not later than
thirty (30) days after the end of each of the first three fiscal quarters of
each fiscal year, the unaudited balance sheet of the Company, and the related
statements of operations and cash flows for such quarter and for the period
commencing on the first day of the fiscal year and ending on the last day of
such quarter, all certified by an appropriate officer of the Company as
presenting fairly the financial condition as of such date and results of
operations and cash flows for the periods indicated in conformity with GAAP
applied on a consistent basis, subject to normal year-end adjustments and the
absence of footnotes required by GAAP; and
(c) annual operating budgets and, from time to time, such
other financial data and information about the Company as is reasonably
available to the Company and as any of the Purchasers may reasonably request.
6.3 Management Compensation. Compensation paid by the Company to its
management will be reasonably comparable to compensation paid to management in
<PAGE> 25
companies in the same or similar businesses of similar size and maturity and
with comparable financial performance.
6.4 Conduct of Business. The Company will (a) keep in full force and
effect (i) its corporate existence and good standing under the laws of its
jurisdiction of incorporation and (ii) all intellectual property rights useful
in its business (except such rights as the Board of Directors has reasonably
determined are not material to the Company's continuing operations), (b)
preserve and maintain in full force and effect all material rights, privileges,
qualifications, applications, licenses and franchises necessary in the normal
conduct of its business, (c) conduct its business in accordance with sound
business practices, and (d) file or cause to be filed in a timely manner all
reports, applications and licenses that shall be required by a governmental
agency or body and that, if not timely filed, could have a material adverse
effect on the Company.
6.5 Payment of Taxes, Compliance with Laws, etc. The Company will
pay and discharge all lawful taxes, assessments and governmental charges or
levies imposed upon it or upon its income or property before the same shall
become in default, as well as all lawful claims for labor, materials and
supplies which, if not paid when due, might become a lien or charge upon its
property or any part thereof; provided, however, that the Company shall not be
required to pay and discharge any such tax, assessment, charge, levy or claim so
long as the validity thereof is being contested by the Company in good faith by
appropriate proceedings and an adequate reserve therefor has been established on
its books. The Company will use its best efforts to comply with all applicable
laws and regulations in the conduct of its business, including, without
limitation, all applicable federal and state securities laws in connection with
the issuance of any shares of its capital stock.
6.6 Insurance. The Company will keep its insurable properties
insured, upon reasonable business terms, by financially sound and reputable
insurers against liability, and the perils of casualty, fire and extended
coverage in amounts of coverage at least equal to those customarily maintained
by companies in the same or similar business as the Company. The Company will
also maintain with such insurers insurance against other hazards and risks and
liability to persons and property to the extent and in the manner customary for
companies engaged in the same or similar business.
6.7 Maintenance of Properties. The Company will maintain all
properties used or useful in the conduct of its business in good repair, working
order and condition, ordinary wear and tear excepted, as necessary to permit
such business to be properly and advantageously conducted.
6.8 Affiliated Transactions. All transactions between the Company
and any director, officer or key employee of the Company shall be conducted on
an arm's-length basis, shall be on terms and conditions no less favorable to the
Company than could be obtained from nonrelated persons and shall be approved in
advance by a majority of disinterested members of the Board of Directors after
full disclosure of the terms thereof.
<PAGE> 26
6.9 Use of Proceeds. The Company will use the first $60,000,000 of
proceeds from the sale of the Series B Shares (i) to complete development of the
Pacific Exchange application for OptiMark(TM), and (ii) to fund the role-out of
OptiMark(TM) to the expected point of positive cash flow, with (iii) any balance
being dedicated as needed to the NASDAQ, Japan and Toronto business initiatives.
The balance of the proceeds from the sale of the Series B Shares will be used as
determined by the Board of Directors.
6.10 Books and Records. The Company shall keep books of record and
account, in which accurate entries shall be made of all financial transactions
and the assets and business of the Company in accordance with GAAP consistently
applied.
6.11 Back-ups of Computer Software. The Company shall make back-ups
of all material computer software programs and databases and shall maintain such
software programs databases at a secure off-site location.
6.12 Defense of Intellectual Property. In the event the Company
discovers, either through its own investigation or through notice from any
Purchaser or other entity, that a third party may be infringing the Intellectual
Property, the Company shall commence reasonable efforts to cease such
infringement. If the third party declines to cease infringement, the Company
shall consider in good faith whether to commence and pursue legal action against
such third party. The determination of whether or not legal action shall be
commenced shall lie exclusively with the Company; provided, however, the Company
shall not unreasonably decline to commence legal action if the Company obtains
or receives reasonable evidence of infringement by a third party and said
infringement is having or may have a material impact on the Company's revenue or
other business interests. All costs of such legal action shall be born by the
Company, and the Company shall retain control over the conduct of such action,
including settlement. In the event threatened or actual legal action by the
Company results in a settlement or resolution that provides damages or other
monies to the Company, such proceeds will be the property of the Company,
provided Purchasers have incurred no legal fees or costs in connection with that
action not otherwise subject to indemnification hereunder, in which event
Purchasers' fees and costs shall first be reimbursed from such proceeds.
SECTION 7. GENERAL
7.1 Amendments; Waivers and Consents. For the purposes of this
Agreement and all agreements, documents and instruments executed pursuant
hereto, except as otherwise specifically set forth herein or therein, no course
of dealing between the Company on the one hand and any Purchaser on the other
and no delay on the part of any party hereto in exercising any rights hereunder
or thereunder shall operate as a waiver of the rights hereof and thereof. Except
as otherwise provided herein or therein, amendments in or additions to, and any
consents required by, this Agreement may be made, and compliance with any term,
covenant, condition or provision set forth herein may be omitted or waived
(either generally or in a particular instance and either retroactively or
prospectively) by a Consent of the Purchasers and (in the case of any such
amendment or addition) the Company. Any amendment or waiver effected in
<PAGE> 27
accordance with this Section 7.1 shall be binding upon each holder of Series B
Shares and the Conversion Shares, each future holder of all such Securities, and
the Company.
7.2 Survival of Representations, Warranties and Covenants:
Assignability of Rights. All covenants, agreements, representations and
warranties of the Company made herein and in the Schedules and Exhibits
delivered or furnished by or on behalf of the Company to any Purchaser in
connection herewith shall be deemed material and to have been relied upon by
such Purchaser, and, except as otherwise provided in this Agreement, shall
survive the delivery of the Series B Shares indefinitely, regardless of any
instruction or any investigation by or on behalf of the Purchasers, and shall
not merge in the performance of any obligation and shall bind the Company's
successors, assigns and heirs, whether so expressed or not. Except as otherwise
provided in this Agreement, all such covenants, agreements, representations and
warranties shall inure to the benefit of the Purchasers' successors and assigns
and to transferees of the Series B Shares, whether so expressed or not. The
representations and warranties made by the Purchasers in Section 4 of this
Agreement shall survive the delivery of the Series B Shares and shall bind the
Purchasers' successors and assigns and shall inure to the benefit of the
Company's successors and assigns.
7.3 Governing Law. This Agreement shall be deemed to be a contract
made under, and shall be construed in accordance with, the laws of the State of
Delaware without giving effect to principles of conflicts of law.
7.4 Section Headings; Counterparts. The descriptive headings in this
Agreement have been inserted for convenience only and shall not be deemed to
limit or otherwise affect the construction of any provision thereof or hereof.
This Agreement may be executed simultaneously in any number of counterparts,
each of which when so executed and delivered shall be taken to be an original;
but such counterparts shall together constitute but one and the same document.
7.5 Notices and Demands. Any notice or demand which, by any
provision of this Agreement or any agreement, document or instrument executed
pursuant hereto or thereto, except as otherwise provided therein, is required or
provided to be given shall be deemed to have been sufficiently given or served
and received for all purposes upon the earlier to occur of actual delivery or
five days after being sent by certified or registered mail, postage and charges
prepaid, return receipt requested, or by express delivery providing receipt of
delivery, to the following addresses:
(a) if to the Company, at its chief executive office, or at
any other address designated by the Company to each of the Purchasers in
writing;
(b) if to a Purchaser, at its mailing address as shown on
Schedule I hereto, or at any other address designated by such Purchaser to the
Company in writing.
7.6 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if
<PAGE> 28
any provision of this Agreement shall be deemed prohibited or invalid under such
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, and such prohibition or invalidity shall not
invalidate the remainder of such provision or the other provisions of this
Agreement.
7.7 Expenses. The Company shall pay its costs and expenses, and each
of the Purchasers shall pay its respective costs and expenses, incurred with
respect to the negotiation, execution, delivery and performance of this
Agreement and the agreements, documents and instruments contemplated hereby or
executed pursuant hereto.
7.8 Publicity. Except as may be required by applicable Requirement
of Law, (i) none of the Purchasers shall issue a publicity release or public
announcement or otherwise make any disclosure concerning the Transaction
Documents or the transactions contemplated thereby, without prior written
approval by the Company, and (ii) the Company shall not issue any publicity
release, public announcement or make any other disclosure regarding the
Transaction Documents, which disclosure directly or indirectly references the
name of any Purchaser, without prior written approval of that Purchaser;
provided, however, that nothing in this Agreement shall restrict any party to
this Agreement from disclosing information (a) that is already publicly
available; (b) to a prospective Purchaser or transferee in connection with any
contemplated sale or transfer of any of the Series B Shares or Conversion
Shares; and/or (c) to its attorneys, accountants, consultants and other advisors
to the extent necessary to obtain their services in connection with this
Agreement. If any announcement is required by law to be made by any Purchaser,
prior to making such announcement such Purchaser will deliver a draft of such
announcement to the Company and shall give the Company an opportunity to comment
thereon.
7.9 Further Assurances. Each of the parties shall execute such
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any governmental agency or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement.
7.10 Integration. This Agreement together with the other Transaction
Documents, including the Schedules, Exhibits, documents and instruments referred
to herein or therein, constitutes the entire agreement, and supersedes all other
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
<PAGE> 29
IN WITNESS WHEREOF, the undersigned have executed this Agreement as a
sealed instrument as of the day and year first above written.
Company:
OptiMark Technologies, Inc.
By: /s/ Phillip J. Riese
Chief Executive Officer
Purchasers:
see signature page(s) attached hereto
Purchaser:
Virginia Surety Company, Inc.
By: /s/ Michael C. Conway
Senior Vice President
The Goldman Sachs Group, L.P.
By: The Goldman Sachs Corporation,
its General Partner
By: /s/ J. David Rogers
Executive Vice President
Castellini Family Partnership, L.P.
By: JAC Management LLC,
its General Partner
By: /s/ Jerome A. Castellini
Manager
OMK Partners, L.P.
By: JAC Management LLC,
its General Partner
By: /s/ Jerome A. Castellini
Manager
/s/ Jerome A. Castellini
Greenwich Ventures, L.P.
By: Greenwich Ventures, L.L.C.,
its General Partner
By: /s/ Jon Victor
Managing Partner
Vantage Ventures, C.V.
By: Greenwich Ventures, L.L.C.,
its General Partner
By: /s/ Jon Victor
Managing Partner
Big Island, LLC
By: /s/ David R. Duncan
Manager
<PAGE> 30
Everen Capital Corporation
By: /s/ James R. Boris
Chief Executive Officer
/s/ Charles F. Knight
/s/ Lester B. Knight
Nihon Keizai Shimbun, Inc.
By: /s/ Ryoki Sugita
Executive Managing Director
QUICK Corp.
By: /s/
Senior Managing Director
JCB Venture Partnership IV
By: /s/ J.C. Bradford Jr.
Commerce Partners I
By: /s/ J.C. Bradford Jr.
/s/ Jeffrey E. Powell
Prairie Acorn Ventures, LLC
By: /s/
/s/ Harvey P. Eisen
Jones & Associates, Inc.
By: /s/ Anthony J. Tesoro
Chairman, Chief Executive Officer
Jones Investment Group, LLC
By: /s/ Anthony J. Tesoro
President
BT Investment Partners, Inc.
By: /s/ Peter Scutt
Managing Director
ML IBK Positions, Inc.
By: /s/ James V. Caruso
Vice President
Merrill Lynch KECALP L.P. 1997
By: KECALP, Inc., its General Partner
By: /s/ Robert F. Tully
Vice President and Treasurer
Merrill Lynch KECALP International L.P. 1997
By: KECALP International, Inc.,
its General Partner
By: /s/ Robert F. Tully
Treasurer
OptiMark Investors General Partnership
By: /s/ David Baylor
General Partner
Winslade Management Limited
By: /s/ Michael Buckley
/s/ Jamie Blond
Credit Suisse First Boston OptiMark
Investors, Inc.
By: /s/
Managing Director
/s/ John H. Blair
Paine Webber Capital Inc.
By: /s/ Dhananjay Pai
President
Dain Rauscher Wessels,
a Division of Dain Rauscher Incorporated
By: /s/
Chairman, President & Chief Executive Officer
/s/ Harold S. Bradley
/s/ Kathryn Andrasik-Bradley
<PAGE> 31
Fremont Concentrated Equity Fund, LLC
By: /s/
Executive Vice President & Principal
Kern Capital Management LLC
Perth Capital, LLC
By: /s/
Orincon Technologies, Inc.
By: /s/ Thomas P. O'Hara
Chief Financial Officer
Community Investment Partners III L.P., LLLP
By: /s/ Daniel A. Burkhardt
Chairman, CIP Management, Inc.
First Union Investors, Inc.
By: /s/
Senior Vice President
J Partners
By: /s/ Richard Jacinto II
Partner
J.C. Bradford & Co., L.L.C.
By: /s/
Tom and Nancy Juda Living Trust
UA DTD 5/3/95
By: /s/ Tom Juda
Trustee
Ryan Family Trust April 1, 1997
By: /s/ David & Deborah Ryan
Trustee
D.A. Davidson & Co.
By: /s/ Ian B. Davidson
Chairman
/s/ John P. Dunphy
Sanders Morris Mundy Inc.
By: /s/ B. T. Morris
President
Fahnestock & Co. Inc.
By: /s/
Chairman and CEO
Boyd Family Trust
By: /s/ Chris Boyd
Trustee
O'Neil Data Systems, Inc.
By: /s/
Chairman
Haven Capital Management Inc.
Profit Sharing Plan C
By: /s/ Denis M. Turko
Trustee
By:/s/ Stephen Ely
Trustee
/s/ Stephen Ely
/s/ Denis M. Turko
Hambrecht & Quist
By: /s/
Chief Financial Officer
AGE Investments, Inc.
By: /s/ Robert L. Proost
Sole Director
Banc Boston Capital Inc.
By: /s/ Mary Joseph Rielly
Vice President
CIBC Wood Gundy Capital Corp.
By: /s/ Rick White
Managing Director
<PAGE> 32
Schedule I
(to Series B Stock Purchase Agreement)
<TABLE>
<CAPTION>
Cert.Name and Address Effective Number of
No.of Purchaser Date of Purchase Shares of
--------------- ---------------- Series B
Stock
Purchased
---------
(First Closing:)
<S> <C> <C> <C>
B-1 Virginia Surety Company, Inc. 4/23/98 2,000,000
123 North Wacker Dr., 29th Floor
Chicago, IL 60606
---------------
TOTAL FIRST CLOSING: 2,000,000 $20,000,000
- -----------------------------------------------------------------------------------------------
(Second Closing:)
B-2 The Goldman Sachs Group, L.P. 6/1/98 1,000,000
85 Broad Street, 12th Floor
New York, NY 10004
B-3 Greenwich Ventures, L.P. 6/1/98 74,550
3463 State Street, #503
Santa Barbara, CA 93105
B-4 Vantage Ventures, C.V. 6/1/98 25,450
3463 State Street, #503
Santa Barbara, CA 93105
B-5 Castellini Family Partnership, L.P. 6/1/98 31,000
3 First National Plaza, #5450
Chicago, IL 60602
B-6 OMK Partners, L.P. 6/1/98 247,800
3 First National Plaza, #5450
Chicago, IL 60602
B-7 Jerome Castellini 6/1/98 52,000
3 First National Plaza, #5450
Chicago, IL 60602
B-8 Big Island, LLC 6/1/98 180,000
1777 S. Harrison Street, Suite #1
Denver, CO 80210
</TABLE>
<PAGE> 33
<TABLE>
<S> <C> <C> <C>
B-9 Everen Capital Corporation 6/1/98 250,000
77 West Wacker Drive
Chicago, IL 60601
B-10 Charles F. Knight 6/1/98 40,000
24 Foreway
St. Louis, MO 63124
B-11 Lester B. Knight 6/1/98 10,000
155 Thorntree
Winnetka, IL 60093
---------------
TOTAL SECOND CLOSING: 1,910,800 $19,108,000
- -----------------------------------------------------------------------------------------------
(Third Closing:)
B-12 Nihon Keizai Shimbun, Inc. 7/1/98 800,000
1-9-5 Otemachi
Chiyoda-ku
Tokyo, KU 100-8066
Japan
B-13 QUICK Corp. 7/1/98 200,000
828 Otemachi Bldg.
1-6-1 Otemachi
Chiyoda-ku
Tokyo, KU 100
Japan
---------------
TOTAL THIRD CLOSING: 1,000,000 $10,000,000
- -----------------------------------------------------------------------------------------------
(Fourth Closing:)
B-14 JCB Venture Partnership IV 7/10/98 10,000
330 Commerce Street
Nashville, TN 37201
B-15 Commerce Partners I 7/10/98 70,500
330 Commerce Street
Nashville, TN 37201
B-16 Jeffrey E. Powell 7/10/98 10,000
330 Commerce Street
Nashville, TN 37201
</TABLE>
<PAGE> 34
<TABLE>
<S> <C> <C> <C>
B-17 Prarie Acorn Ventures, LLC 7/10/98 12,000
311 Walnut Drive
Nashville, TN 37205
B-18 Harvey P. Eisen 7/10/98 25,000
100 South Bedford Road
Mt. Kisco, NY 10549
B-19 Jones & Associates, Inc. 7/10/98 150,000
32133 W. Lindero Rd., Suite 208
Westlake Village, CA 91361
B-20 Jones Investment Group, LLC 7/10/98 100,000
32133 W. Lindero Rd., Suite 208
Westlake Village, CA 91361
B-21 BT Investment Partners, Inc. 7/10/98 500,000
130 Liberty Street, 24th Floor
New York, NY 10006
B-22 ML IBK Positions, Inc. 7/10/98 750,000
250 Vesey St., 5th Floor
New York, NY 10281
B-23 Merrill Lynch KECALP L.P. 1997 7/10/98 562,500
250 Vesey St., 5th Floor
New York, NY 10281
B-24 Merrill Lynch KECALP 7/10/98 187,500
International L.P. 1997
250 Vesey St., 5th Floor
New York, NY 10281
B-25 OptiMark Investors 7/10/98 66,000
General Partnership
600 Montgomery Street
San Francisco, CA 94111
---------------
TOTAL FOURTH CLOSING: 2,443,500 $24,435,000
- -----------------------------------------------------------------------------------------------
(Fifth Closing:)
B-26 Winslade Management Limited 8/5/98 10,000
P.O. Box 204
Celtic House
</TABLE>
<PAGE> 35
<TABLE>
<S> <C> <C> <C>
Victoria Street
Douglas, Isle of Man
IM99 1QZ
B-27 Jamie Blond 8/5/98 50,000
260 Franklin Street, 14th Floor
Boston, MA 02110
B-28 Credit Suisse First Boston 8/5/98 1,000,000
OptiMark Investors, Inc.
11 Madison Avenue, 3rd Floor
New York, NY 10010
B-29 John H. Blair 8/5/98 30,000
11 Madison Avenue, 3rd Floor
New York, NY 10010
B-30 Paine Webber Capital, Inc. 8/5/98 1,060,000
1285 Avenue of the Americas
14th Floor
New York, NY 10019
B-31 Dain Rauscher Wessels, a 8/5/98 100,000
Division of Dain Rauscher
Incorporated
60 South 6th Street
Minneapolis, MN 55402
B-32 Harold S. Bradley and/or Kathryn 8/5/98 10,000
Andrasik-Bradley
c/o American Century Investments
4500 Main Street
Kansas City, MO 64111
B-33 Fremont Concentrated 8/5/98 50,000
Equity Fund
114 West 47th Street, Suite 1926
New York, NY 10036
B-34 Perth Capital, LLC 8/5/98 25,000
520 Lake Cook Road
Deerfield, IL 60015
B-35 Orincon Technologies, Inc. 8/5/98 10,000
9363 Towne Centre Drive
San Diego, CA 92121
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
---------------
TOTAL FIFTH CLOSING: 2,345,000 $23,450,000
- -----------------------------------------------------------------------------------------------
(Sixth Closing:)
<S> <C> <C> <C>
B-36 Community Investment Partners 9/22/98 10,000
III L.P., LLLP 12555 Manchester Rd.
St. Louis, MO 63131
B-37 First Union Investors, Inc. 9/22/98 125,000
1 First Union Center
Charlotte, NC 28288-0732
B-38 J Partners 9/22/98 15,000
c/o Richard Jacinto II
235 E. 22nd Street, Suite 10E
New York, NY 10010
B-39 J.C. Bradford & Co., L.L.C. 9/22/98 25,000
330 Commerce Street
Nashville, TN 37201
B-40 Tom and Nancy Juda Living Trust 9/22/98 10,000
UA DTD 5/3/95
555 Flower Street
Los Angeles, CA 90071
B-41 Ryan Family Trust Apr. 1 1997 9/22/98 5,000
100 Wilshire Blvd., 15th Floor
Santa Monica, CA 90401
B-42 D.A. Davidson & Co.. 9/22/98 10,000
P.O. Box 5015
Davidson Building
Great Falls, MT 59401
B-43 John P. Dunphy 9/22/98 5,000
Financial Square
New York, NY 10005
B-44 Sanders Morris Mundy Inc. 9/22/98 25,000
3100 Chase Tower
600 Travis Street
Houston, TX 77002
</TABLE>
<PAGE> 37
<TABLE>
<S> <C> <C> <C>
B-45 Fahnestock & Co. Inc. 9/22/98 15,000
125 Broad Street, 16th Floor
New York, NY 10004
ATTN: Albert G. Lowenthal
B-46 Boyd Family Trust 9/22/98 15,700
4500 Main Street
Kansas City, MO 64111
B-47 O'Neil Data Systems, Inc. 9/22/98 20,000
12655 Beatrice Street
Los Angeles, CA 90066
B-48 Haven Capital Management Inc. 9/22/98 15,000
Profit Sharing Plan C
655 Third Avenue
New York, NY 10017
B-49 Steve Ely 9/22/98 2,500
655 Third Avenue
New York, NY 10017
B-50 Denis M. Turko 9/22/98 2,500
655 Third Avenue
New York, NY 10017
---------------
TOTAL SIXTH CLOSING: 300,700 $3,007,000
- -----------------------------------------------------------------------------------------------
(Seventh Closing:)
B-51 Hambrecht & Quist California 10/13/98 25,000
One Bush Street
San Francisco, CA 94104
---------------
TOTAL SEVENTH CLOSING: 25,000 $250,000
- -----------------------------------------------------------------------------------------------
(Eighth Closing:)
B-52 AGE Investments, Inc. 11/4/98 50,000
One North Jefferson Street
St Louis, MO 63103
---------------
TOTAL EIGHTH CLOSING: 50,000 $500,000
- -----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 38
<TABLE>
<CAPTION>
(Ninth Closing:)
<S> <C> <C> <C>
B-53 BancBoston Capital Inc. 12/3/98 75,000
175 Federal Street, 10th Floor
Boston, MA 02110
TOTAL NINTH CLOSING: 75,000 $750,000
- -----------------------------------------------------------------------------------------------
(Tenth Closing)
B-54 CIBC Wood Gundy Capital Corp. 12/22/98 850,000 $8,500,000
425 Lexington Avenue
New York, NY 10017
TOTAL TENTH CLOSING: 850,000 $8,500,000
- -----------------------------------------------------------------------------------------------
</TABLE>
Summary
<TABLE>
<CAPTION>
Closing Shares $
------- ------ -
<S> <C> <C>
1 2,000,000 $20,000,000
2 1,910,800 $19,108,000
3 1,000,000 $10,000,000
4 2,443,500 $24,435,000
5 2,345,000 $23,450,000
6 300,700 $3,007,000
7 25,000 $250,000
8 50,000 $500,000
9 75,000 $750,000
---------------------------------------------------------------
10 850,000 $8,500,000
---------------------------------------------------------------
Totals: 11,000,000 $110,000,000
</TABLE>
<PAGE> 1
EXHIBIT 4.9
REGISTRATION RIGHTS AGREEMENT
among
OPTIMARK TECHNOLOGIES, INC.
and
THE HOLDERS OF ITS SERIES B
CONVERTIBLE PARTICIPATING
PREFERRED STOCK
- April 23, 1998 -
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Definitions..............................................................................1
2. General; Securities Subject to this Agreement............................................3
(a) Grant of Rights...................................................................3
(b) Registrable Securities............................................................3
(c) Holders of Registrable Securities.................................................3
3. Piggy-Back Registration..................................................................3
(a) Piggy-Back Rights.................................................................3
(b) Expenses..........................................................................4
4. Holdback Agreements......................................................................4
(a) Restrictions on Public Sale by Designated Holders.................................4
(b) Restrictions on Public Sale by the Company........................................4
5. Registration Procedures..................................................................5
(a) Obligations of the Company........................................................5
(b) Seller Information................................................................7
(c) Notice to Discontinue.............................................................8
(d) Registration Expenses.............................................................8
6. Indemnification; Contribution............................................................8
(a) Indemnification by the Company....................................................8
(b) Indemnification by Designated Holders.............................................9
(c) Procedures........................................................................9
(d) Contribution.....................................................................10
(e) Limitations......................................................................10
7. Rule 144................................................................................10
8. Miscellaneous...........................................................................10
(a) Recapitalizations, Exchanges, etc................................................10
(b) No Inconsistent Agreements.......................................................11
(c) Remedies.........................................................................11
(d) Amendments and Waivers...........................................................11
(e) Notices..........................................................................11
(f) Successors and Assigns; Third Party Beneficiaries................................12
(g) Counterparts.....................................................................12
(h) Headings.........................................................................12
(i) Governing Law....................................................................12
(j) Severability.....................................................................12
(k) Entire Agreement.................................................................12
(l) Further Assurances...............................................................13
</TABLE>
-i-
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT, dated April 23, 1998 (this "Agreement"),
among OptiMark Technologies, Inc., a Delaware corporation (the "Company"), and
the purchaser(s) ("Purchasers") of the Company's Series B Convertible
Participating Preferred Stock ("Series B Stock") listed on Schedule I hereto.
This Agreement is made in connection with the Series B Stock Purchase
Agreement (the "Stock Purchase Agreement"), between the Company and the
Purchasers pursuant to which the Company has agreed to issue and sell Series B
Stock to the Purchasers. Each share of Series B Stock is convertible into one
(1) share of Common Stock, subject to potential adjustments. In order to induce
the Purchasers to purchase Series B Stock, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Company has agreed to grant registration rights with respect to the Registrable
Securities (as hereinafter defined) as set forth in this Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement in addition to other
capitalized terms defined elsewhere herein, the following terms shall have the
meanings indicated:
"Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Affiliate" shall mean any Person who is an "affiliate" of
another designated Person, as defined in Rule l2b-2 of the General Rules and
Regulations under the Exchange Act.
"Common Stock" means the common stock, par value $.01 per share,
of the Company or any other equity securities of the Company into which such
securities are converted, reclassified, reconstituted or exchanged.
"Company" has the meaning assigned to such term in the recital
to this Agreement.
"Company Underwriter" has the meaning assigned such term in
Section 3(a) below.
"Damages" has the meaning assigned to such term in Section 6(a)
below.
"Designated Holder" means each Purchaser and any transferee of
any Purchaser to whom Registrable Securities have been transferred in accordance
with the provisions of this Agreement and the Stockholders Agreement, other than
a transferee to whom such securities have been transferred pursuant to a
Registration Statement or Rule 144 or Regulation S under the Act.
"Exchange Act" means the Securities Exchange Act of 1934 as
amended, and the rules and regulations promulgated thereunder.
"Holders' Counsel" has the meaning assigned such term in Section
5(a)(i) below.
"Indemnified Party" has the meaning assigned such term in
Section 6(c) below.
<PAGE> 4
"Indemnifying Party" has the meaning assigned such term in
Section 6(c) below.
"Inspector" has the meaning assigned such term in Section
5(a)(viii) below.
"IPO Effectiveness Date" means the date upon which the Company
commences an initial offer for sale of shares of Common Stock pursuant to an
effective Registration Statement.
"NASD" means the National Association of Securities Dealers,
Inc.
"Other Rights Holders" means (i) the holders of the Company's
Series A Convertible Participating Preferred Stock, and (ii) any other Persons
(including, without limitation, the other holders of Series B Stock and The
Nasdaq Stock Market, Inc.) holding registration rights with respect to Common
Stock whose registration rights have not expressly been made junior to the
registration rights of the Designated Holders hereunder.
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, limited liability company, government (or an
agency or political subdivision thereof) or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity.
"Purchaser(s)" has the meaning assigned to such term in the
recital to this Agreement.
"Records" has the meaning assigned such term in Section
5(a)(viii) below.
"Registrable Securities" means each of the following: (a) any
and all shares of Common Stock owned by the Designated Holders and issued or
issuable upon conversion of shares of Series B Stock, (b) any other shares of
Common Stock acquired or owned by any of the Designated Holders prior to the IPO
Effectiveness Date, (c) any shares of Common Stock issued or issuable to any of
the Designated Holders with respect to shares of Common Stock or shares of
Series B Stock by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise, and shares of Common Stock issuable upon
conversion, exercise or exchange thereof, and (d) to the extent exercisable at
the time such amount of Registrable Securities is to be determined, any and all
shares of Common Stock issuable upon exercise of the VSC Warrant.
"Registration Expenses" has the meaning set forth in Section
5(d) below.
"Registration Statement" means a Registration Statement filed
by the Company pursuant to the Act.
"SEC" means the Securities and Exchange Commission or any
successor agency then having jurisdiction to enforce the Act.
"Series B Stock" has the meaning assigned to such term in the
recital to this Agreement.
-2-
<PAGE> 5
"Stock Purchase Agreement" has the meaning assigned such term
in the recital to this Agreement.
"Stockholders Agreement" means the Amended and Restated
Stockholders Agreement dated April 23, 1998, as amended from time to time,
among the Company and certain stockholders thereof.
"VSC Warrant" means the Common Stock Purchase Warrant dated
April 23, 1998 pursuant to which Virginia Surety Company, Inc. has the right to
purchase up to 500,000 shares of Common Stock at an exercise price of $10.00
per share, subject to potential adjustment.
2. General; Securities Subject to this Agreement
(a) Grant of Rights. The Company hereby grants registration
rights to the Purchasers upon the terms and conditions set forth in this
Agreement.
(b) Registrable Securities. For purposes of this Agreement,
Registrable Securities will cease to be Registrable Securities when (i) a
Registration Statement covering such Registrable Securities has been declared
effective by the SEC, and such Registrable Securities have been disposed of
pursuant to such effective Registration Statement, (ii) the entire amount of
such Registrable Securities proposed to be sold in a single sale are or, in the
opinion of counsel satisfactory to the Company and the Designated Holder, each
in their reasonable judgment, may be distributed to the public without any
limitation as to volume pursuant to Rule 144 (or any successor provision then in
effect) under the Act, or (iii) such Registrable Securities are sold,
distributed or proposed to be sold or distributed by a Person not entitled to
the registration rights granted by this Agreement.
(c) Holders of Registrable Securities. A Person is deemed to
be a holder of Registrable Securities whenever such Person owns of record
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company may act upon the basis of the instructions,
notice or election received from the record owner of such Registrable
Securities.
3. Piggy-Back Registration
(a) Piggy-Back Rights. At any time after the IPO
Effectiveness Date, if either (I) the Company proposes to file a Registration
Statement with respect to an offering by the Company of Common Stock for its own
account (other than a Registration Statement on Form S-4 or S-8 or any
successors thereto) (a "Company Registration"), or (II) the Company is required
to file a Registration Statement upon demand by and for the account of any
"Initiating Holders", as defined and provided in Section 3 of the Registration
Rights Agreement dated August 27, 1996, as amended, among the Company and the
holders of its Series A Stock (a "Demand Registration"), then the Company shall
give written notice of such proposed filing to each of the Designated Holders of
-3-
<PAGE> 6
Registrable Securities at least thirty (30) days before the anticipated filing
date, and such notice shall describe the proposed registration and distribution
and offer such Designated Holders the opportunity to register such number of
Registrable Securities as each such holder may request. The Company shall, and
shall use reasonable efforts to cause the managing underwriter(s) of a proposed
underwritten offering (the "Company Underwriter") to, permit the Designated
Holders of Registrable Securities who have requested in writing to participate
in the registration for such offering to include such Registrable Securities in
such offering on the same terms and conditions as the securities of the Company
or the Initiating Holders included therein. In connection with any offering
under this Section 3(a) involving an underwriting, the Company shall not be
required to include any Registrable Securities in such underwriting unless the
holders thereof accept the terms of the underwriting as agreed upon between the
Company and the Company Underwriter, and then only in such quantity as will not,
in the opinion of the Company Underwriter, jeopardize the success of the
offering by the Company. If in the written opinion of the Company Underwriter
the registration of all or part of the Registrable Securities which the
Designated Holders have requested to be included would materially adversely
affect such public offering, then the Company shall include in the underwriting,
to the extent of the amount that the Company Underwriter believes may be sold
without causing such adverse effect, (A) in connection with a Company
Registration, first, all of the securities to be offered for the account of the
Company; and second, as a group, (i) the Registrable Securities requested by
Designated Holders to be sold in the offering, and (ii) the Common Stock
requested by Other Rights Holders to be sold in the offering, pro rata based
upon the number of shares of Registrable Securities/Common Stock owned by such
Persons; or (B) in connection with a Demand Registration, first, as a group, (i)
the Registrable Securities requested by Designated Holders to be sold in the
offering, and (ii) the Common Stock requested by Other Rights Holders to be sold
in the offering, pro rata based upon the number of shares of Registrable
Securities/Common Stock owned by such Persons, and second, all of the securities
to be offered for the account of the Company.
(b) Expenses. The Company shall bear all Registration
Expenses (other than underwriting discounts and commissions) in connection with
any registration pursuant to this Section 3; provided, however, that each
Designated Holder participating in such registration shall bear the costs of its
own legal counsel, if any.
4. Holdback Agreements
(a) Restrictions on Public Sale by Designated Holders. Each
Designated Holder of Registrable Securities agrees not to effect any public sale
or distribution of any Registrable Securities or of any securities convertible
into or exchangeable or exercisable for such Registrable Securities, including a
sale pursuant to Rule 144 under the Act, during the 180-day period beginning on
the effective date of any Registration Statement (except as part of such
registration), if and to the extent requested by the Company in the case of a
nonunderwritten public offering or if and to the extent requested by the Company
Underwriter in the case of an underwritten public offering.
-4-
<PAGE> 7
(b) Restrictions on Public Sale by the Company. The Company
agrees not to effect any public sale or distribution of any of its Common Stock,
or any securities convertible into or exchangeable or exercisable for such
securities (except pursuant to registrations on Form S-4 or S-8 or any successor
thereto), during the period beginning on the effective date of any Registration
Statement in which the Designated Holders of Registrable Securities are
participating and ending on the earlier of (i) the date on which all Registrable
Securities registered on such Registration Statement are sold and (ii) three (3)
months after the effective date of such Registration Statement.
5. Registration Procedures
(a) Obligations of the Company. Whenever registration of
Registrable Securities has been requested pursuant to Section 3 of this
Agreement, the Company shall use its reasonable efforts to effect the
registration and sale of such Registrable Securities in accordance with the
intended method of distribution thereof as quickly as practicable, and in
connection with any such request, the Company shall, as expeditiously as
possible:
(i) use its reasonable efforts to prepare and file
with the SEC a Registration Statement on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate and which form
shall be available for the sale of the Common Stock and such Registrable
Securities in accordance with the intended method of distribution thereof, and
use its reasonable efforts to cause such Registration Statement to become
effective; provided, however, that (x) before filing a Registration Statement or
prospectus or any amendments or supplements thereto, the Company shall provide
counsel selected by the Designated Holders holding a majority of the Registrable
Securities being registered in such registration ("Holders' Counsel") and any
other Inspector (as hereinafter defined) with an adequate and appropriate
opportunity to participate in the preparation of such Registration Statement and
each prospectus included therein (and each amendment or supplement thereto) to
be filed with the SEC, which documents shall be subject to the review of
Holders' Counsel. and (y) the Company shall notify the Holders' Counsel and each
seller of Registrable Securities of any stop order issued or threatened by the
SEC and take all reasonable action required to prevent the entry of such stop
order or to remove it if entered;
(ii) prepare and file with the SEC such amendments
and supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for the lesser of (x) three (3) months and (y) such shorter period
which will terminate when all Registrable Securities covered by such
Registration Statement have been sold, and comply with the provisions of the Act
with respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement;
(iii) as soon as reasonably possible, furnish to each
seller of Registrable Securities, prior to filing a Registration Statement,
copies of such Registration Statement as is proposed to be filed, and thereafter
such number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto), the prospectus
included in such Registration Statement (including each preliminary prospectus)
and such other
-5-
<PAGE> 8
documents as each such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(iv) use its reasonable efforts to register or
qualify such Registrable Securities under such other securities or "blue sky"
laws of such jurisdictions as any seller of Registrable Securities may
reasonably request, and to continue such qualification in effect in such
jurisdiction for the lesser of (x) three (3) months and (y) such shorter period
which will terminate when all Registrable Securities covered by such
Registration Statement have been sold, and do any and all other acts and things
which may be reasonably necessary or advisable to enable any such seller to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such seller; provided, however, that the Company shall not be required
to (x) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 5(a)(iv), (y) subject
itself to taxation in any such jurisdiction or (z) consent to general service of
process in any such jurisdiction;
(v) use its reasonable efforts to cause the
Registrable Securities covered by such Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to enable the
seller or sellers of Registrable Securities to consummate the disposition of
such Registrable Securities;
(vi) upon discovery that, or upon the happening of
any event as a result of which, the prospectus included in a Registration
Statement covering Registrable Securities contains an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances under which they were made, (x) promptly prepare a supplement or
amendment to such prospectus and furnish to each seller of Registrable
Securities a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, after delivery to the purchasers of
such Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made and (y) immediately prior
to the preparation of such amendment or supplement to such prospectus, notify
each seller of Registrable Securities of the anticipated preparation thereof;
(vii) enter into and perform customary agreements
(including an underwriting agreement in customary form with the Company
Underwriter, if any) and take such other actions as are prudent and reasonably
required in order to expedite or facilitate the disposition of such Registrable
Securities;
(viii) make available for inspection by any seller of
Registrable Securities, any managing underwriter participating in any
disposition pursuant to such Registration Statement, Holders' Counsel and any
attorney, accountant or other agent retained by any such seller or any managing
underwriter (each, an "Inspector" and collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and properties of the
Company and its subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due
-6-
<PAGE> 9
diligence responsibility, and cause the Company's and its subsidiaries'
officers, directors and employees, and the independent public accountants of the
Company, to supply all information reasonably requested by any such Inspector in
connection with such Registration Statement. Records that the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (x)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in the Registration Statement, (y) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction or (z) the information in such Records was known to the Inspectors
on a non-confidential basis prior to its disclosure by the Company or has been
made generally available to the public. Each seller of Registrable Securities
agrees that it shall, upon learning that disclosure of such Records is sought in
a court of competent jurisdiction, give notice to the Company and allow the
Company, at the Company's expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential;
(ix) if such sale is pursuant to an underwritten
offering, use its reasonable efforts to obtain a "cold comfort" letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by "cold comfort" letters as Holders'
Counsel or the managing underwriter reasonably request;
(x) use its reasonable efforts to furnish, at the
request of any seller of Registrable Securities on the date such securities are
delivered to the underwriters for sale pursuant to such registration or, if such
securities are not being sold through underwriters, on the date the Registration
Statement with respect to such securities becomes effective, an opinion, dated
such date, of counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to the seller making
such request, covering such legal matters with respect to the registration in
respect of which such opinion is being given as such seller may reasonably
request and are customarily included in such opinions;
(xi) otherwise use its reasonable efforts to comply
with all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable but no later than fifteen
(15) months after the effective date of the Registration Statement, an earnings
statement covering a period of twelve (12) months beginning after the effective
date of the Registration Statement, in a manner which satisfies the provisions
of Section 11(a) of the Act and Rule 158 thereunder;
(xii) cause all such Registrable Securities to be
listed on each securities exchange on which similar securities issued by the
Company are then listed, provided that the applicable listing requirements are
satisfied;
(xiii) cooperate with each seller of Registrable
Securities and each underwriter participating in the disposition of such
Registrable Securities and their respective counsel in connection with any
filings required to be made with the NASD; and
(xiv) use reasonable efforts to take all other steps
necessary to effect the registration of the Registrable Securities contemplated
hereby.
-7-
<PAGE> 10
(b) Seller Information. The Company may require each seller
of Registrable Securities as to which any registration is being effected to
furnish to the Company such information regarding the distribution of such
securities as the Company may from time to time reasonably request in writing.
(c) Notice to Discontinue. Each Designated Holder of
Registrable Securities agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 5(a)(vi), such
Designated Holder shall forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Designated Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 5(a)(vi) and, if so
directed by the Company, such Designated Holder shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
Designated Holder's possession, of the prospectus covering such Registrable
Securities which is current at the time of receipt of such notice. If the
Company shall give any such notice, the Company shall extend the period during
which such Registration Statement shall be maintained effective pursuant to this
Agreement (including, without limitation, the period referred to in Section
5(a)(ii)) by the number of days during the period from and including the date of
the giving of such notice pursuant to Section 5(a)(vi) to and including the date
when the Designated Holder shall have received the copies of the supplemented or
amended prospectus contemplated by and meeting the requirements of Section
5(a)(vi).
(d) Registration Expenses. The Company shall pay all
expenses (other than as set forth in Section 3(b)) arising from or incident to
the performance of, or compliance with, this Agreement, including, without
limitation, (i) SEC, stock exchange and NASD registration and filing fees, (ii)
all fees and expenses incurred in complying with securities or "blue sky" laws
(including reasonable fees, charges and disbursements of counsel in connection
with "blue sky" qualifications of the Registrable Securities), (iii) all
printing, messenger and delivery expenses, (iv) the fees, charges and
disbursements of counsel to the Company and of its independent public
accountants and any other accounting and legal fees, charges and expenses
incurred by the Company (including, without limitation, any expenses arising
from any special audits incident to or required by any registration or
qualification) and (v) any liability insurance or other premiums for insurance
obtained in connection with any registration pursuant to the terms of this
Agreement, regardless of whether such Registration Statement is declared
effective. All of the expenses described in this Section 5(d) are referred to
herein as "Registration Expenses."
6. Indemnification; Contribution
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the fullest extent permitted by law, each
Designated Holder, its officers, directors, trustees, partners, members,
employees, advisors and agents and each Person who controls (within the meaning
of the Act or the Exchange Act) such Designated Holder from and against any and
all losses, claims, damages, liabilities and expenses, including reasonable
costs of investigation (generally, "Damages"), arising out of or based upon any
untrue, or allegedly untrue, statement of a material fact contained in any
Registration Statement, prospectus or preliminary prospectus or notification or
offering circular (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or arising out of or based
-8-
<PAGE> 11
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any information
concerning such Designated Holder furnished in writing to the Company by such
Designated Holder expressly for use therein. The Company shall also provide
customary indemnities to any underwriters of the Registrable Securities, their
officers, directors and employees and each Person who controls such underwriters
(within the meaning of the Act and the Exchange Act) to the same extent as
provided above with respect to the indemnification of the Designated Holders of
Registrable Securities.
(b) Indemnification by Designated Holders. In connection
with any Registration Statement in which a Designated Holder is participating
pursuant to Section 3 hereof, each such Designated Holder shall furnish to the
Company in writing such information with respect to such Designated Holder as
the Company may reasonably request or as may be required by law for use in
connection with any such Registration Statement or prospectus, and each
Designated Holder agrees to indemnify and hold harmless, to the fullest extent
permitted by law, the Company, any underwriter retained by the Company and their
respective directors, officers, employees and each Person who controls the
Company or such underwriter (within the meaning of the Act and the Exchange Act)
to the same extent as the foregoing indemnity from the Company to the Designated
Holders, but only with respect to any such information with respect to such
Designated Holder furnished in writing to the Company by such Designated Holder
expressly for use therein.
(c) Procedures. Any Person entitled to indemnification
hereunder (the "Indemnified Party") agrees to give prompt written notice to the
indemnifying party (the "Indemnifying Party") after the receipt by the
Indemnified Party of any written notice of the commencement of any action, suit,
proceeding or investigation or threat thereof made in writing for which the
Indemnified Party intends to claim indemnification or contribution pursuant to
this Agreement; provided, however, that the failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to the Indemnified Party hereunder. If notice of commencement
of any such action is given to the Indemnifying Party as above provided, the
Indemnifying Party shall be entitled to participate in and, to the extent it may
wish, jointly with any other Indemnifying Party similarly notified, to assume
the defense of such action at its own expense, with counsel chosen by it and
satisfactory to such Indemnified Party. The Indemnified Party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the Indemnified Party unless
(i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party
fails to assume the defense of such action with counsel satisfactory to the
Indemnified Party in its reasonable judgment or (iii) the named parties to any
such action (including any impleaded parties) have been advised by such counsel
that either (x) representation of such Indemnified Party and the Indemnifying
Party by the same counsel would be inappropriate under applicable standards of
professional conduct or (y) there may be one or more legal defenses available to
it which are different from or additional to and in conflict with those
available to the Indemnifying Party and in such event, the Indemnifying Party
shall pay the fees and expenses of counsel to the Indemnified Party only to the
extent that such separate counsel is necessary under such applicable standards
of professional conduct in the case of the foregoing clause (x) or to the
-9-
<PAGE> 12
extent necessary to avoid any conflict in the case of the foregoing clause (y).
In either of such cases, the Indemnifying Party shall not have the right to
assume the defense of such action on behalf of such Indemnified Party. No
Indemnifying Party shall be liable for any settlement entered into without its
written consent, which consent shall not be unreasonably withheld.
(d) Contribution. If the indemnification provided for in
this Section 6 from the Indemnifying Party is unavailable to an Indemnified
Party hereunder in respect of any Damages referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount of Damages paid or payable by such Indemnified Party in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions which
resulted in such Damages, as well as any other relevant equitable
considerations. The relative faults of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The parties
hereto agree that it would not be just and equitable if contribution pursuant to
this Section 6(d) were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations
referred to in this paragraph.
(e) Limitations. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to indemnification or contribution from any Person. Notwithstanding
anything to the contrary provided above, the total amount of Damages subject to
indemnification or contribution by any Designated Holder under this Section 6
shall not exceed the net proceeds received by such Designated Holder in the
offering to which the registration statement or prospectus relates.
7. Rule 144. From and after the IPO Effectiveness Date, the Company
covenants that it shall file any reports required to be filed by it under the
Exchange Act and that it shall take such further action as each Designated
Holder of Registrable Securities may reasonably request (including providing any
information necessary to comply with Rules 144 and 144A under the Act), all to
the extent required from time to time to enable such Designated Holder to sell
Registrable Securities without registration under the Act within the limitation
of the exemptions provided by (a) Rule 144 under the Act, as such rules may be
amended from time to time, or (b) any similar rules or regulations hereafter
adopted by the SEC. The Company shall, upon the request of any Designated Holder
of Registrable Securities, deliver to such Designated Holder a written statement
as to whether it has complied with such requirements.
8. Miscellaneous Recapitalizations, Exchanges, etc. The provisions
of this Agreement shall apply, to the full extent set forth herein with respect
to (i) the shares of Common Stock and (ii) to any and all equity securities of
the Company or any successor or assign of the Company (whether by merger,
consolidation, sale of assets or otherwise) which may be issued in respect of,
in conversion of, in exchange for or in substitution of, the Common Stock, and
shall be appropriately
-10-
<PAGE> 13
adjusted for any stock dividends, splits, reverse splits, combinations,
recapitalizations and the like occurring after the date hereof. The Company
shall cause any successor or assign (whether by sale, merger or otherwise) to
enter into a new registration rights agreement with the Designated Holders on
terms substantially the same as this Agreement as a condition of any such
transaction.
(b) No Inconsistent Agreements. The Company shall not enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the Designated Holders in this Agreement or grant any
additional registration rights to any Person or with respect to any securities
which are not Registrable Securities which are prior in right to or inconsistent
with the rights granted in this Agreement.
(c) Remedies. The Designated Holders, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
shall be entitled to specific performance of their rights under this Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive in any action for specific performance the
defense that a remedy at law would be adequate.
(d) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless consented to in writing by (i) the Company and (ii)
Designated Holders owning at least 75% of the Registrable Securities. Any such
written consent shall be binding upon the Company and all of the Designated
Holders.
(e) Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be made
by registered or certified first-class mail, return receipt requested, courier
service, overnight mail or personal delivery as follows:
(i) if to the Company:
OptiMark Technologies, Inc.
530 Main Avenue
Durango, CO 81301
Telecopy: (970) 247-8844
Attention: William A. Lupien
with a copy to:
Ducker, Montgomery & Lewis, P.C.
One Civic Center Plaza
1560 Broadway, Suite 1500
Denver, CO 80202
Telecopy: (303) 861-4017
Attention: Robert C. Montgomery, Esq.
-11-
<PAGE> 14
(ii) if to any Purchaser:
To the address of such Purchaser shown on
Schedule I hereto, or to any other address of
which a Purchaser may give notice to the Company
pursuant to this paragraph (e)
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; when delivered by courier
or overnight mail, if delivered by commercial courier service or overnight mail;
and five (5) Business Days after being deposited in the mail, postage prepaid,
if mailed.
(f) Successors and Assigns; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto. No Person other than the parties hereto
and their successors and permitted assigns is intended to be a beneficiary of
any of the rights granted hereunder.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
(j) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, it being
intended that all of the rights and privileges of the Designated Holders shall
be enforceable to the fullest extent permitted by law.
(k) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, in the Stockholders Agreement and in the Stock Purchase Agreement. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
-12-
<PAGE> 15
(l) Further Assurances. Each of the parties shall execute
such documents and perform such further acts as may be reasonably required or
desirable to carry out or to perform the provisions of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed, or have caused to be
executed, this Agreement on the date first written above.
COMPANY:
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
Chief Executive Officer
PURCHASERS:
See attached signature pages
-13-
<PAGE> 16
Signature Page
(to Registration Rights Agreement dated April 23, 1998)
Purchaser:
Virginia Surety Company, Inc.
By: /s/ Michael A. Conway
Senior Vice President
The Goldman Sachs Group, L.P.
By: The Goldman Sachs Corporation,
its General Partner
By: /s/ J. David Rogers
Executive Vice President
Castellini Family Partnership, L.P.
By: JAC Management LLC,
its General Partner
By: /s/ Jerome A. Castellini
Manager
OMK Partners, L.P.
By: JAC Management LLC,
its General Partner
By: /s/ Jerome A. Castellini
Manager
/s/ Jerome A. Castellini
Greenwich Ventures, L.P.
By: Greenwich Ventures, L.L.C.,
its General Partner
By: /s/ Jon Victor
Managing Partner
Vantage Ventures, C.V.
By: Greenwich Ventures, L.L.C.,
its General Partner
By: /s/ Jon Victor
Managing Partner
Big Island, LLC
By: /s/ David R. Duncan
Manager
<PAGE> 17
Everen Capital Corporation
By: /s/ James R. Boris
Chief Executive Officer
/s/ Charles F. Knight
/s/ Lester B. Knight
Nihon Keizai Shimbun, Inc.
By: /s/ Ryoki Sugita
Executive Managing Director
QUICK Corp.
By: /s/
Senior Managing Director
JCB Venture Partnership IV
By: /s/ J.C. Bradford Jr.
Commerce Partners I
By: /s/ J.C. Bradford Jr.
/s/ Jeffrey E. Powell
Prairie Acorn Ventures, LLC
By: /s/
/s/ Harvey P. Eisen
Jones & Associates, Inc.
By: /s/ Anthony J. Tesoro
Chairman, Chief Executive Officer
Jones Investment Group, LLC
By: /s/ Anthony J. Tesoro
President
BT Investment Partners, Inc.
By: /s/ Peter Scutt
Managing Director
-2-
<PAGE> 18
ML IBK Positions, Inc.
By: /s/ James V. Caruso
Vice President
Merrill Lynch KECALP L.P. 1997
By: KECALP, Inc., its General Partner
By: /s/ Robert F. Tully
Vice President and Treasurer
Merrill Lynch KECALP International L.P. 1997
By: KECALP International, Inc.,
its General Partner
By: /s/ Robert F. Tully
Treasurer
OptiMark Investors General Partnership
By: /s/ David Baylor
General Partner
Winslade Management Limited
By: /s/ Michael Buckley
/s/ Jamie Blond
Credit Suisse First Boston OptiMark
Investors, Inc.
By: /s/
Managing Director
/s/ John H. Blair
Paine Webber Capital Inc.
By: /s/ Dhananjay Pai
President
Dain Rauscher Wessels,
a Division of Dain Rauscher Incorporated
By: /s/
Chairman, President & Chief Executive Officer
/s/ Harold S. Bradley
/s/ Kathryn Andrasik-Bradley
-3-
<PAGE> 19
Fremont Concentrated Equity Fund, LLC
By: /s/
Executive Vice President & Principal
Kern Capital Management LLC
Perth Capital, LLC
By: /s/
Orincon Technologies, Inc.
By: /s/ Thomas P. O'Hara
Chief Financial Officer
Community Investment Partners III L.P., LLLP
By: /s/ Daniel A. Burkhardt
Chairman, CIP Management, Inc.
First Union Investors, Inc.
By: /s/
Senior Vice President
J Partners
By: /s/ Richard Jacinto II
Partner
J.C. Bradford & Co., L.L.C.
By: /s/
Tom and Nancy Juda Living Trust
UA DTD 5/3/95
By: /s/ Tom Juda
Trustee
Ryan Family Trust April 1, 1997
By: /s/ David & Deborah Ryan
Trustee
D.A. Davidson & Co.
By: /s/ ___ B. Davidson
Chairman
/s/ John P. Dunphy
-4-
<PAGE> 20
Sanders Morris Mundy Inc.
By: /s/ B. T. Morris
President
Fahnestock & Co. Inc.
By: /s/
Chairman and CEO
Boyd Family Trust
By: /s/ Chris Boyd
Trustee
O'Neil Data Systems, Inc.
By: /s/
Chairman
Haven Capital Management Inc.
Profit Sharing Plan C
By: /s/ Denis M. Turko
Trustee
By:/s/ Stephen Ely
Trustee
/s/ Stephen Ely
/s/ Denis M. Turko
Hambrecht & Quist
By: /s/
Chief Financial Officer
AGE Investments, Inc.
By: /s/ Robert L. Proost
Sole Director
Banc Boston Capital Inc.
By: /s/ Mary Joseph Rielly
Vice President
CIBC Wood Gundy Capital Corp.
By: /s/ Rick White
Managing Director
-5-
<PAGE> 21
Schedule I
(to Registration Rights Agreement dated April 23, 1998)
<TABLE>
<CAPTION>
NUMBER OF
EFFECTIVE SHARES OF
CERT. DATE OF SERIES B STOCK
NO. NAME AND ADDRESS OF PURCHASER PURCHASE PURCHASED
- ----- ------------------------------------------ ----------- --------------
(First Closing:)
<S> <C> <C> <C>
B-1 Virginia Surety Company, Inc. 4/23/98 2,000,000
123 North Wacker Dr., 29th Floor ---------
Chicago, IL 60606
TOTAL FIRST CLOSING: 2,000,000 $20,000,000
- -----------------------------------------------------------------------------------------------
(Second Closing:)
B-2 The Goldman Sachs Group, L.P. 6/1/98 1,000,000
85 Broad Street, 12th Floor
New York, NY 10004
B-3 Greenwich Ventures, L.P. 6/1/98 74,550
3463 State Street, #503
Santa Barbara, CA 93105
B-4 Vantage Ventures, C.V. 6/1/98 25,450
3463 State Street, #503
Santa Barbara, CA 93105
B-5 Castellini Family Partnership, L.P. 6/1/98 31,000
3 First National Plaza, #5450
Chicago, IL 60602
B-6 OMK Partners, L.P. 6/1/98 247,800
3 First National Plaza, #5450
Chicago, IL 60602
B-7 Jerome Castellini 6/1/98 52,000
3 First National Plaza, #5450
Chicago, IL 60602
B-8 Big Island, LLC 6/1/98 180,000
1777 S. Harrison Street, Suite #1
Denver, CO 80210
B-9 Everen Capital Corporation 6/1/98 250,000
77 West Wacker Drive
Chicago, IL 60601
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
NUMBER OF
EFFECTIVE SHARES OF
CERT. DATE OF SERIES B STOCK
NO. NAME AND ADDRESS OF PURCHASER PURCHASE PURCHASED
- ----- ------------------------------------------ ----------- --------------
<S> <C> <C> <C>
B-10 Charles F. Knight 6/1/98 40,000
24 Foreway
St. Louis, MO 63124
B-11 Lester B. Knight 6/1/98 10,000
155 Thorntree ---------
Winnetka, IL 60093
TOTAL SECOND CLOSING: 1,910,800 $19,108,000
- -----------------------------------------------------------------------------------------------
(Third Closing:)
B-12 Nihon Keizai Shimbun, Inc. 7/1/98 800,000
1-9-5 Otemachi
Chiyoda-ku
Tokyo, KU 100-8066
Japan
B-13 QUICK Corp. 7/1/98 200,000
828 Otemachi Bldg. ---------
1-6-1 Otemachi
Chiyoda-ku
Tokyo, KU 100
Japan
TOTAL THIRD CLOSING: 1,000,000 $10,000,000
- -----------------------------------------------------------------------------------------------
(Fourth Closing:)
B-14 JCB Venture Partnership IV 7/10/98 10,000
330 Commerce Street
Nashville, TN 37201
B-15 Commerce Partners I 7/10/98 70,500
330 Commerce Street
Nashville, TN 37201
B-16 Jeffrey E. Powell 7/10/98 10,000
330 Commerce Street
Nashville, TN 37201
B-17 Prarie Acorn Ventures, LLC 7/10/98 12,000
311 Walnut Drive
Nashville, TN 37205
</TABLE>
-2-
<PAGE> 23
<TABLE>
<CAPTION>
NUMBER OF
EFFECTIVE SHARES OF
CERT. DATE OF SERIES B STOCK
NO. NAME AND ADDRESS OF PURCHASER PURCHASE PURCHASED
- ----- ------------------------------------------ ----------- --------------
<S> <C> <C> <C>
B-18 Harvey P. Eisen 7/10/98 25,000
100 South Bedford Road
Mt. Kisco, NY 10549
B-19 Jones & Associates, Inc. 7/10/98 150,000
32133 W. Lindero Rd., Suite 208
Westlake Village, CA 91361
B-20 Jones Investment Group, LLC 7/10/98 100,000
32133 W. Lindero Rd., Suite 208
Westlake Village, CA 91361
B-21 BT Investment Partners, Inc. 7/10/98 500,000
130 Liberty Street, 24th Floor
New York, NY 10006
B-22 ML IBK Positions, Inc. 7/10/98 750,000
250 Vesey St., 5th Floor
New York, NY 10281
B-23 Merrill Lynch KECALP L.P. 1997 7/10/98 562,500
250 Vesey St., 5th Floor
New York, NY 10281
B-24 Merrill Lynch KECALP 7/10/98 187,500
International L.P. 1997
250 Vesey St., 5th Floor
New York, NY 10281
B-25 OptiMark Investors 7/10/98 66,000
General Partnership ---------
600 Montgomery Street
San Francisco, CA 94111
TOTAL FOURTH CLOSING: 2,443,500 $24,435,000
- -----------------------------------------------------------------------------------------------
(Fifth Closing:)
B-26 Winslade Management Limited 8/5/98 10,000
P.O. Box 204
Celtic House
Victoria Street
Douglas, Isle of Man
IM99 1QZ
</TABLE>
-3-
<PAGE> 24
<TABLE>
<CAPTION>
NUMBER OF
EFFECTIVE SHARES OF
CERT. DATE OF SERIES B STOCK
NO. NAME AND ADDRESS OF PURCHASER PURCHASE PURCHASED
- ----- ------------------------------------------ ----------- --------------
<S> <C> <C> <C>
B-27 Jamie Blond 8/5/98 50,000
260 Franklin Street, 14th Floor
Boston, MA 02110
B-28 Credit Suisse First Boston 8/5/98 1,000,000
OptiMark Investors, Inc.
11 Madison Avenue, 3rd Floor
New York, NY 10010
B-29 John H. Blair 8/5/98 30,000
11 Madison Avenue, 3rd Floor
New York, NY 10010
B-30 Paine Webber Capital, Inc. 8/5/98 1,060,000
1285 Avenue of the Americas
14th Floor
New York, NY 10019
B-31 Dain Rauscher Wessels, a 8/5/98 100,000
Division of Dain Rauscher
Incorporated
60 South 6th Street
Minneapolis, MN 55402
B-32 Harold S. Bradley and/or Kathryn 8/5/98 10,000
Andrasik-Bradley
c/o American Century Investments
4500 Main Street
Kansas City, MO 64111
B-33 Fremont Concentrated 8/5/98 50,000
Equity Fund
114 West 47th Street, Suite 1926
New York, NY 10036
B-34 Perth Capital, LLC 8/5/98 25,000
520 Lake Cook Road
Deerfield, IL 60015
B-35 Orincon Technologies, Inc. 8/5/98 10,000
9363 Towne Centre Drive ---------
San Diego, CA 92121
TOTAL FIFTH CLOSING: 2,345,000 $23,450,000
- -----------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE> 25
<TABLE>
<CAPTION>
NUMBER OF
EFFECTIVE SHARES OF
CERT. DATE OF SERIES B STOCK
NO. NAME AND ADDRESS OF PURCHASER PURCHASE PURCHASED
- ----- ------------------------------------------ ----------- --------------
<S> <C> <C> <C>
(Sixth Closing:)
B-36 Community Investment Partners 9/22/98 10,000
III L.P., LLLP 12555 Manchester Rd.
St. Louis, MO 63131
B-37 First Union Investors, Inc. 9/22/98 125,000
1 First Union Center
Charlotte, NC 28288-0732
B-38 J Partners 9/22/98 15,000
c/o Richard Jacinto II
235 E. 22nd Street, Suite 10E
New York, NY 10010
B-39 J.C. Bradford & Co., L.L.C. 9/22/98 25,000
330 Commerce Street
Nashville, TN 37201
B-40 Tom and Nancy Juda Living Trust 9/22/98 10,000
UA DTD 5/3/95
555 Flower Street
Los Angeles, CA 90071
B-41 Ryan Family Trust Apr. 1 1997 9/22/98 5,000
100 Wilshire Blvd., 15th Floor
Santa Monica, CA 90401
B-42 D.A. Davidson & Co. 9/22/98 10,000
P.O. Box 5015
Davidson Building
Great Falls, MT 59401
B-43 John P. Dunphy 9/22/98 5,000
Financial Square
New York, NY 10005
B-44 Sanders Morris Mundy Inc. 9/22/98 25,000
3100 Chase Tower
600 Travis Street
Houston, TX 77002
</TABLE>
-5-
<PAGE> 26
<TABLE>
<CAPTION>
NUMBER OF
EFFECTIVE SHARES OF
CERT. DATE OF SERIES B STOCK
NO. NAME AND ADDRESS OF PURCHASER PURCHASE PURCHASED
- ----- ------------------------------------------ ----------- --------------
<S> <C> <C> <C>
B-45 Fahnestock & Co. Inc. 9/22/98 15,000
125 Broad Street, 16th Floor
New York, NY 10004
ATTN: Albert G. Lowenthal
B-46 Boyd Family Trust 9/22/98 15,700
4500 Main Street
Kansas City, MO 64111
B-47 O'Neil Data Systems, Inc. 9/22/98 20,000
12655 Beatrice Street
Los Angeles, CA 90066
B-48 Haven Capital Management Inc. 9/22/98 15,000
Profit Sharing Plan C
655 Third Avenue
New York, NY 10017
B-49 Steve Ely 9/22/98 2,500
655 Third Avenue
New York, NY 10017
B-50 Denis M. Turko 9/22/98 2,500
655 Third Avenue ---------
New York, NY 10017
TOTAL SIXTH CLOSING: 300,700 $3,007,000
- -----------------------------------------------------------------------------------------------
(Seventh Closing:)
B-51 Hambrecht & Quist California 10/13/98 25,000
One Bush Street ---------
San Francisco, CA 94104
TOTAL SEVENTH CLOSING: 25,000 $250,000
- -----------------------------------------------------------------------------------------------
(Eighth Closing:)
B-52 AGE Investments, Inc. 11/4/98 50,000
One North Jefferson Street ---------
St Louis, MO 63103
TOTAL EIGHTH CLOSING: 50,000 $500,000
- -----------------------------------------------------------------------------------------------
</TABLE>
-6-
<PAGE> 27
<TABLE>
<CAPTION>
NUMBER OF
EFFECTIVE SHARES OF
CERT. DATE OF SERIES B STOCK
NO. NAME AND ADDRESS OF PURCHASER PURCHASE PURCHASED
- ----- ------------------------------------------ ----------- --------------
<S> <C> <C> <C>
(Ninth Closing:)
B-53 BancBoston Capital Inc. 12/3/98 75,000
175 Federal Street, 10th Floor ---------
Boston, MA 02110
TOTAL NINTH CLOSING: 75,000 $750,000
- -----------------------------------------------------------------------------------------------
(Tenth Closing)
B-54 CIBC Wood Gundy Capital Corp. 12/22/98 850,000 $8,500,000
425 Lexington Avenue ---------
New York, NY 10017
TOTAL TENTH CLOSING: 850,000 $8,500,000
- -----------------------------------------------------------------------------------------------
</TABLE>
Summary
-------
<TABLE>
<CAPTION>
Closing Shares $
--------------- ---------------- ---------------
<S> <C> <C>
1 2,000,000 $ 20,000,000
2 1,910,800 $ 19,108,000
3 1,000,000 $ 10,000,000
4 2,443,500 $ 24,435,000
5 2,345,000 $ 23,450,000
6 300,700 $ 3,007,000
7 25,000 $ 250,000
8 50,000 $ 500,000
9 75,000 $ 750,000
---------- ------------
10 850,000 $ 8,500,000
---------- ------------
Totals: 11,000,000 $110,000,000
</TABLE>
-7-
<PAGE> 1
EXHIBIT 4.10
SERIES C STOCK PURCHASE AGREEMENT
This Series C Stock Purchase Agreement (the "Agreement") made as of this
11th day of June, 1999, by and among (i) OptiMark Technologies, Inc., a Delaware
corporation (the "Company"), and (ii) the purchaser ("Purchaser") of the
Company's Series C Convertible Preferred Stock, $.01 par value per share
("Series C Stock") identified on Schedule I hereto.
SECTION 1. DEFINITIONS
In addition to other capitalized terms defined elsewhere herein, the
following terms shall have the indicated meanings:
1.1 "1933 Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
1.2 "Affiliate" of a Person means any corporation or other entity that
is or ever would have been considered a single employer with that Person under
ERISA Section 4001(b) or part of the same "controlled group" as that Person for
purposes of ERISA Section 302(d)(8)(C).
1.3 "Audited Financial Statements" means the audited consolidated
balance sheets of the Company and its Subsidiaries as of December 31, 1997 and
December 31, 1998, and the related statements of income, retained earnings and
cash flows of the Company and its Subsidiaries for the 12-month periods then
ended (together with the notes thereto), copies of which have been delivered to
the Purchaser.
1.4 "Board" means the board of directors of the Company as constituted
from time to time.
1.5 "BT Warrant" means the Common Stock Purchase Warrant dated May 7,
1999 in favor of BT Investment Partners, Inc. ("BT") under which the Company has
granted to BT the right to purchase up to 166,667 shares of voting Common Stock,
at an exercise price of $10.00 per share, subject to potential adjustment as
provided therein.
1.6 "CBOE Warrant" means a Common Stock Purchase Warrant dated December
3l, 1996, pursuant to which The Chicago Board Options Exchange, Incorporated has
the right to purchase from the Company up to 1,227,828 shares of Common Stock at
an exercise price of $1.8325 per share, subject to potential adjustment as
provided therein.
1.7 "Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of the Company, including the Certificate of
Designations with respect to the Series A Stock and the Certificate of
Designations with respect to the Series B Stock (as amended) attached thereto,
filed with the Delaware Secretary of State on or about May 29, 1998, and
Certificates of Increase with respect to the Series B Stock filed subsequent to
May 29, 1998.
<PAGE> 2
1.8 "Code" means the Internal Revenue Code of 1986, as amended. For
purposes of this Agreement, all references to Sections of the Code shall include
any predecessor provisions to such Sections.
1.9 "Common Stock" means the voting and nonvoting common stock of the
Company, $.01 par value per share.
1.10 "Conversion Shares" means the shares of voting Common Stock or any
successor class of capital stock of the Company hereafter issued or issuable
upon conversion of the Series C Shares.
1.11 "Copyrights" means any foreign or United States copyright
registrations and applications for registration thereof, and any non-registered
copyrights.
1.12 "Employee Program" means (a) all employee benefit plans within the
meaning of ERISA Section 3(3), including but not limited to multiple employer
welfare arrangements (within the meaning of ERISA Section 3(40)), plans to which
more than one unaffiliated employer contributes, and employee benefit plans
(such as foreign or excess benefit plans) which are not subject to ERISA; and
(b) all stock or cash option plans, restricted stock plans, bonus or incentive
award plans, severance pay policies or agreements, deferred compensation
agreements, supplemental income arrangements, vacation plans, and all other
employee benefit plans, agreements, and arrangements not described in (a) above.
In the case of an Employee Program funded through an organization described in
Code Section 501(c)(9), each reference to such Employee Program shall include a
reference to such organization. An entity "maintains" an Employee Program if
such entity sponsors, contributes to, or provides (or has promised to provide)
benefits under such Employee Program, or has any obligation (by agreement or
under applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise covers
employees of such entity (or their spouses, dependents, or beneficiaries).
1.13 "Environmental Laws" means and includes any environmental or health
and safety-related law, regulation, rule, ordinance, or by-law at the federal,
state or local level, whether existing as of the date hereof or subsequently
enacted.
1.14 "ERISA" means the Employee Retirement Income Security Act of l974,
as amended.
1.15 "Financial Statements" means and includes both the Audited
Financial Statements and the Unaudited Financial Statements, copies of both of
which have been delivered to the Purchaser.
1.16 "Goldman Warrant" means the Common Stock Purchase Warrant in favor
of The Goldman Sachs Group, Inc. ("Goldman Sachs") dated May 7, 1999 under which
the Company has granted to Goldman Sachs the right to purchase up to 1,000,000
shares of voting Common Stock, at an exercise price of $10.00 per share, subject
to potential adjustment as provided therein.
1.17 "Hazardous Material" means and includes any hazardous waste,
hazardous material, hazardous substance, petroleum product, oil, toxic
substance, pollutant, contaminant, or other
-2-
<PAGE> 3
substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law.
1.18 "Intellectual Property" means and includes Copyrights, Internet
Assets, Patents, Trade Secrets, Trademarks, Software and other proprietary
rights.
1.19 "Internet Assets" means any internet domain names and other
computer user identifiers and any rights in and to sites on the worldwide web,
including rights in and to any text, graphics, audio and video files and html or
other code incorporated in such sites.
1.20 "IPO Effectiveness Date" means the date (if any) upon which the
Company commences its initial public offering pursuant to an effective
registration statement filed with the SEC under the 1933 Act.
1.21 "IRS" means the Internal Revenue Service.
1.22 "Judgment" means any judgment, injunction, writ, award, decree or
order of any nature from any arbitrator, court or governmental agency.
1.23 "Liabilities" means and includes any indebtedness, liabilities,
guaranties or other obligations of any nature, whether accrued, absolute,
contingent or otherwise, known or unknown, asserted or unasserted.
1.24 "Lien" means and includes any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other) or preference,
priority, right or other security interest or preferential arrangement of any
kind or nature whatsoever (excluding preferred stock and equity related
preferences), including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease obligation, or any financing lease
having substantially the same economic effect as any of the foregoing.
1.25 "Losses" means and includes losses, claims, damages, causes of
action, liabilities, penalties, fines and related interest and expenses,
including reasonable attorneys' fees and disbursements, and costs of
investigation, litigation, arbitration, enforcement and indemnification.
1.26 "Material Contracts" means and includes any employment contract;
stock redemption or purchase agreement; loan, capital lease or other financing
agreement; license, distributor, sales representation or OEM agreement;
agreements with any officers, directors, employees or stockholders of the
Company or any persons related to or affiliated with any such persons; leases;
agreements relating to the licensing, distribution, development or maintenance
of Software and related hardware; agreements with customers of the Company;
powers of attorney; pension, profit-sharing, retirement or stock option plans;
any other contract, obligation or commitment (whether written or oral) involving
actual or potential consideration of more than $100,000; or any contract,
obligation or commitment not entered into in the ordinary course of business.
-3-
<PAGE> 4
1.27 "ML Warrants" means the Common Stock Purchase Warrants dated May 7,
1999 in favor of ML IBK Positions, Inc., Merrill Lynch KECALP L.P. 1997, and
Merrill Lynch KECALP International L.P. 1997 (altogether, "ML") under which the
Company has granted to ML the right to purchase a total of up to 500,000 shares
of voting Common Stock, at an exercise price of $10.00 per share, subject to
potential adjustment as provided therein.
1.28 "Multiemployer Plan" means an Employer Program to which more than
one employer contributes and which is maintained pursuant to one or more
collective bargaining agreements.
1.29 "NASDAQ Warrant" means the Warrant Agreement dated September 1,
1998 pursuant to which The Nasdaq Stock Market, Inc. has the right to purchase
from the Company up to 11,250,000 shares of voting Common Stock at exercise
prices ranging from $3.00 to $7.00 per share, subject to potential adjustment as
provided therein.
1.30 "NeoVision Lawsuit" means that complaint filed by NeoVision
Hypersystems, Inc. against the Company on January 25, 1999 in the United States
Southern District of New York, a summary of which is included in Schedule 3.13
hereto.
1.31 "OptiMark(TM)" means the Company's proprietary "OptiMark(TM)"
securities trading system.
1.32 "Outstanding Rights" means and includes (a) the rights of the
holder under the PCX Warrant, (b) the rights of the holder under the NASDAQ
Warrant, (c) the rights of the holder under the CBOE Warrant, (d) the rights of
the holder under the VSC Warrant, (e) the rights of the holder under the
TransAmerica Warrant, (f) the right of Frank Egan to purchase from the Company
up to 40,000 shares of voting Common Stock at an exercise price of $10.00 per
share, (g) the right of Ramsey Beirne Partners, L.L.C. to purchase from the
Company up to 5,000 shares of voting Common Stock at an exercise price of $10.00
per share, (h) the rights of the holder under the BT Warrant, (i) the rights of
the holder under the Goldman Warrant, (j) the rights of the holders under the ML
Warrants, (k) the right of BIOS Group, L.P. to purchase from the Company up to
5,000 shares of voting Common Stock at an exercise price of $10.00 per shares,
and (l) the rights of the holders of options and other rights to acquire Common
Stock, issued and reserved for issuance as incentives for the Company's
officers, directors, employees, former employees and consultants.
1.33 "Patents" means any foreign or United States patents and patent
applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or
resubmitted.
1.34 "Person" means any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, limited liability company, governmental agency or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.
-4-
<PAGE> 5
1.35 "PCX Warrant" means the Common Stock Purchase Warrant dated August
27, 1996 pursuant to which The Pacific Exchange, Incorporated has the right to
purchase from the Company up to 2,104,000 shares of voting Common Stock at an
exercise price of $1.8325 per share, subject to potential adjustment as provided
therein.
1.36 "Purchaser" includes the Purchaser and its successors and assigns
with respect to the Series C Stock and the Conversion Shares.
1.37 "Registration Rights Agreement" means the Registration Rights
Agreement attached hereto as Exhibit A to be entered into between the Company
and the Purchaser.
1.38 "Requirement of Law" means, as to any Person, any law, statute,
treaty, rule, regulation, right, privilege, qualification, license, franchise or
Judgment, in each case applicable or binding upon such Person or any of its
property or to which such Person or any of its property is subject or pertaining
to any or all of the transactions contemplated or referred to herein.
1.39 "SEC" means the United States Securities and Exchange Commission.
1.40 "Securities Laws" means and includes the 1933 Act and all other
applicable federal, state and foreign securities laws.
1.41 "Series A Stock" means the Company's Series A Convertible
Participating Preferred Stock, $.01 par value per share, the rights, privileges,
preferences, limitations and qualifications of which are set forth in the
Certificate of Designations attached to the Company's Certificate of
Incorporation.
1.42 "Series B Stock" means the Company's Series B Convertible
Participating Preferred Stock, $.01 par value per share, the rights, privileges,
preferences, limitations and qualifications of which are set forth in the
Certificate of Designations attached to the Company's Certificate of
Incorporation.
1.43 "Series C Certificate of Designations" means that Certificate of
Powers, Designations, Preferences and Rights substantially in the form attached
hereto as Exhibit B setting forth the rights, privileges, preferences,
limitations and qualifications of the Series C Stock.
1.44 "Series C Shares" means the shares of Series C Stock being sold by
the Company to the Purchaser pursuant to this Agreement.
1.45 "Series C Stock" means the Company's Series C Convertible Preferred
Stock, $.01 par value per share, the rights, privileges, preferences,
limitations and qualifications of which are set forth in the Series C
Certificate of Designations.
1.46 "Software" means any computer software programs, source code,
object code, data and related documentation.
-5-
<PAGE> 6
1.47 "Stockholders Agreement" means the Amended and Restated
Stockholders Agreement dated April 23, 1998, among the Company, the holders of
the Series A Stock, and certain other stockholders of the Company, as amended
from time to time.
1.48 "Subsidiary" means any corporation or other entity (a) a majority
of which is owned or previously was owned by the Company, or (b) which the
Company otherwise directly or indirectly controls or previously controlled.
1.49 "Taxes" means and includes all federal, state, local, foreign and
other taxes and governmental assessments and levies, including without
limitation income taxes, alternative minimum taxes, sales taxes, franchise
taxes, excise taxes, employment and payroll taxes, estimated taxes, withholding
taxes, transfer taxes, and all associated fines, penalties and interest.
1.50 "Trade Secrets" means and includes any trade secrets, research
records, processes, procedures, manufacturing formulae, technical know-how,
technology, blueprints, designs, plans, inventions (whether patentable and
whether reduced to practice), invention disclosures and improvements thereto.
1.51 "Trademarks" means and includes any foreign or United States
trademarks, service marks, trade dress, trade names, brand names, designs and
logos, corporate names, product or service identifiers, whether registered or
unregistered, and all registrations and applications for registration thereof.
1.52 "Transaction Documents" means collectively this Agreement, the
Series C Certificate of Designations and the Registration Rights Agreement.
1.53 "TransAmerica Warrant" means the Common Stock Purchase Warrant
dated June 19, 1998, issued in connection with the Company's receipt of a
$5,000,000 line of credit for equipment leasing purposes, under which
TransAmerica Business Credit Corporation has the right to purchase from the
Company up to 42,500 shares of voting Common Stock at a price of $10.00 per
share, subject to potential adjustment as provided therein.
1.54 "Unaudited Financial Statements" as of any date means the most
recently available unaudited consolidated balance sheet of the Company and its
Subsidiaries as of that date, and the related statements of income and cash flow
of the Company and its Subsidiaries for the year or partial year then ended.
1.55 "Voting Agreement" means the Voting Agreement dated July 17, 1996
among some of the stockholders of the Company.
1.56 "VSC Warrant" means the Common Stock Purchase Warrant dated April
23, 1998 pursuant to which Virginia Surety Company, Inc. has the right to
purchase from the Company up to 500,000 shares of voting Common Stock at an
exercise price of $10.00 per share, subject to potential adjustment as provided
therein.
-6-
<PAGE> 7
SECTION 2. TERMS OF PURCHASE
2.1 General.
(a) The Company has authorized the issuance and sale of up to an
aggregate of eight million, five hundred twenty two thousand, seven hundred
twenty seven (8,522,727) shares of Series C Stock to the Purchaser. At the
Closing (as hereinafter defined), the Company shall sell to the Purchaser and,
subject to the terms and conditions set forth herein, the Purchaser shall
purchase from the Company (x) 6,250,000 shares of Series C Stock worth an
initial amount of $75,000,000 at $12.00 per share (the "Initial Amount") and (y)
an additional number of shares of Series C Stock worth an additional amount
equal to the positive difference between $25,000,000 and the amount of
commitments that the Company has received on or before June 30, 1999 from
certain strategic investors (the "Strategic Investor Commitments") to purchase
capital stock of the Company at or above $12 per share (the "Additional
Amount"). The Purchaser hereby acknowledges and agrees that in connection with
the Strategic Investor Commitments, (i) the strategic investors shall be
determined in good faith by Board and (ii) the Company may offer and issue
Series C Stock to the strategic investors or create and issue one or more
additional classes or series of preferred stock of the Company, with powers,
designations, preferences and rights substantially on par with the Series C
Stock (other than the purchase price, liquidation amount and conversion price
thereof) and file with the Delaware Secretary of State one or more certificates
of powers, designations, preferences and rights with respect thereto (the
"Additional Certificates of Designation").
(b) The aggregate number of shares of Series C Stock to be sold
by the Company and purchased by the Purchaser pursuant to Section 2.1(a) herein,
shall be equal to the sum of (x) 6,250,000 plus (y) the Additional Amount, if
any, divided by 11, rounded to the nearest whole share.
(c) The per share purchase price of Series C Stock to be sold by
the Company and purchased by the Purchaser pursuant to Section 2.1(a) herein
shall be equal to the quotient of (x) the sum of the Initial Amount plus the
Additional Amount, if any, divided by (y) the aggregate number of shares of
Series C Stock determined pursuant to Section 2.1(b) herein, rounded to the
nearest five decimal places.
2.2 Closing. The closing of the purchase and sale of the Series C Stock
(the "Closing") shall take place by facsimile on the later of (i) June 30, 1999,
or (ii) within two business days after the satisfaction of the condition set
forth in Section 2.3(g) below, or at such other time and date as may be mutually
agreeable to by the Company and the Purchaser, but in no event later than August
15, 1999. At the Closing, the Company shall deliver to the Purchaser stock
certificates evidencing the Series C Shares to be purchased by the Purchaser,
registered in the Purchaser's name, upon payment of the purchase price thereof
by wire transfer of immediately available funds to the Company.
2.3 Conditions to Closing. The obligation of the Purchaser to purchase
and pay for the Series C Stock at the Closing and the Company's obligation to
sell the Series C Stock at the Closing is subject to the satisfaction as of the
date of the Closing of the following conditions:
-7-
<PAGE> 8
(a) The Company and the Purchaser will mutually execute and
deliver the Registration Rights Agreement.
(b) The Company will deliver to the Purchaser an Officer's
Certificate as to (i) the due adoption and continuing effectiveness of the
resolutions of the Board, attached thereto, approving the Transaction Documents
and all transactions contemplated thereby, (ii) the accuracy and continuing
effectiveness of the Certificate of Incorporation, as amended by the Series C
Certificate of Designation and any Additional Certificates of Designation, and
Bylaws of the Company attached thereto, and (iii) the incumbency and specimen
signature of each officer executing the Transaction Documents and the other
closing documents on behalf of the Company.
(c) The representations and warranties made by the Company
contained in Section 3 hereof shall be true and correct in all material respects
at and as of the Closing as though then made and certified as such in writing at
and as of the Closing, except to the extent of changes caused by the
transactions expressly contemplated herein, but excluding any disclosures made
by the Company as provided in Section 3 hereof.
(d) The representations and warranties made by the Purchaser
contained in Section 4 hereof shall be true and correct in all material respects
at and as of the Closing as though then made and certified as such in writing at
and as of the Closing.
(e) The Company will deliver to the Purchaser a written opinion
of counsel to the Company, in form and substance reasonably satisfactory to the
Purchaser, as to certain legal matters of potential importance to the Purchaser.
(f) The Company shall have duly adopted, executed and filed with
the Secretary of State of Delaware the Series C Certificate of Designations. The
Series C Certificate of Designations shall be in full force and effect as of the
Closing under the laws of the State of Delaware and shall not have been amended
or modified. The Liquidation Amount and the Conversion Price (both as defined in
the Series C Certificate of Designations) shall be that per share purchase price
determined pursuant to the formula set forth in Section 2.1(c) herein, and shall
be inserted by the Company into the Series C Certificate of Designations prior
to its filing with the Delaware Secretary of State contemplated herein.
(g) The applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended and the regulations thereunder
(the "HSR Act") shall have expired or been terminated.
2.4 Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each party hereto agrees to use reasonable efforts to take, or cause
to be taken, all action, and to do, or cause to be done, all things reasonably
necessary or appropriate to consummate as soon as reasonably practicable the
transactions set forth herein.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
-8-
<PAGE> 9
To induce the Purchaser to enter into and consummate this Agreement,
effective as of the date hereof and at and as of the Closing unless otherwise
expressly indicated, the Company represents and warrants to the Purchaser as
follows:
3.1 Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is qualified to do business as a foreign corporation in each
jurisdiction in which the failure to qualify would have a material adverse
effect on the Company. The Company has all required corporate power and
authority to own and operate its property, to lease the property it operates as
lessee, to carry on its business as presently conducted or contemplated, to
enter into and perform the Transaction Documents and the agreements contemplated
thereby, and generally to carry out the transactions contemplated hereby and
thereby. Except as set forth on Schedule 3.1, the Company does not own or lease
real property in any jurisdiction other than its jurisdiction of incorporation
and the jurisdictions in which it is qualified to do business as a foreign
corporation. The copies of the Certificate of Incorporation and Bylaws of the
Company, each as amended to date, which have been furnished to the Purchaser,
are correct and complete at the date hereof. The Company is not in violation of
any term of its Certificate of Incorporation or Bylaws.
3.2 Authorization. The Transaction Documents and all documents and
instruments to be executed pursuant thereto have been or, as of the Closing,
will be duly executed and delivered by the Company and constitute legal, valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms. The execution, delivery and performance of the
Transaction Documents and all documents and instruments contemplated thereby and
the delivery and issuance of the Series C Shares and, upon conversion of the
Series C Shares, the Conversion Shares have been duly authorized by all
necessary corporate or other action of the Company. Other than the filing of the
Series C Certificate of Designations, the routine filing of a Form D with the
SEC and any required filings under state securities laws, and the filing of a
Notification and Report Form for Certain Mergers and Acquisitions pursuant to
the HSR Act no consent, approval or authorization of, or designation,
declaration or filing with, any Person, is required of the Company in connection
with the execution, delivery and performance of the Transaction Documents, or
the issuance and delivery by the Company of the Series C Shares in accordance
with the terms of this Agreement and, upon conversion of the Series C Shares,
the Conversion Shares, or the performance or consummation of any other
transaction contemplated thereby.
3.3 Non-Contravention. The execution, delivery and performance by the
Company of the Transaction Documents and each of the other agreements and
instruments to which it is a party and which are contemplated thereby will not
(a) conflict with or result in any default under (i) any contract, obligation or
commitment of the Company, or (ii) any provision of the Certificate of
Incorporation or Bylaws of the Company or any amendment thereof; (b) result in
the creation of any Lien of any nature upon any of the properties or assets of
the Company; or (c) violate any Judgment or Requirement of Law applicable to the
Company. The Company has not previously entered into any contract, obligation or
commitment which is currently in effect or by which the Company is currently
bound, granting any rights to any Person which are inconsistent with the rights
to be granted by the Company in the Transaction Documents or any of the
agreements contemplated by the Transaction Documents.
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3.4 Capitalization of the Company.
(a) The authorized capital stock of the Company consists of (i)
150,000,000 shares of Common Stock, of which 148,500,000 shares are voting
Common Stock and 1,500,000 shares are nonvoting Common Stock, and (ii)
40,000,000 shares of preferred stock, $.01 par value per share ("Preferred
Stock"). No Certificate of Designation has been or will be filed with the
Delaware Secretary of State with respect to the Company's Preferred Stock except
the Certificate of Designations for the Series A Stock, the Certificate of
Designations for the Series B Stock and the Series C Certificate of Designations
to be filed on or before the Closing and the Additional Certificates of
Designation that may be filed in connection with the Strategic Investor
Commitments described in Section 2.1(a) above. As of the date hereof, there were
outstanding (x) 36,401,090 shares of Common Stock, including 35,661,090 shares
of voting Common Stock and 740,000 shares of nonvoting Common Stock, (y)
3,222,068 shares of Series A Stock, and (z) 11,000,000 shares of Series B Stock.
All outstanding shares of Preferred Stock and Common Stock are duly and validly
issued, fully paid and nonassessable. The 3,222,068 outstanding shares of Series
A Stock are convertible into a total of 12,888,272 shares of voting Common
Stock. The 11,000,000 outstanding shares of Series B Stock are convertible into
a total of 11,000,000 shares of voting Common Stock. As of the date hereof, the
Company has reserved an aggregate of 8,522,727 shares of voting Common Stock for
issuance upon conversion of the Series C Stock. Except for the Series A Stock,
the Series B Stock, the Series C Stock and the Outstanding Rights, as of the
date hereof there are no outstanding warrants, options or other rights or
obligations to purchase or acquire any Common Stock or other securities of the
Company from the Company. All of the outstanding shares of capital stock of the
Company (including the Series C Shares) have been offered, issued, sold and
delivered in compliance with all applicable federal and state securities laws.
The Series C Shares have been duly and validly authorized and, when delivered
and paid for pursuant to this Agreement, will be validly issued, fully paid and
nonassessable. Assuming sale of all 8,522,727 available shares of Series C
Stock, the Series C Stock will be initially convertible into 8,522,727 shares of
voting Common Stock which will represent approximately 9% of the Common Stock on
a fully-diluted basis after giving effect to the issuance of all shares reserved
for issuance upon conversion of the Series A Stock, the Series B Stock, the
Series C Stock, the nonvoting Common Stock and under the Outstanding Rights. The
Conversion Shares are duly authorized and, when issued in compliance with the
Company's Certificate of Incorporation, will be validly issued, fully paid and
nonassessable and will be issued in compliance with the registration and
qualification requirements of all applicable federal and state securities laws.
The Company effected a four-for-one Common Stock split in mid-1997, and all of
the numbers in this paragraph reflect that split.
(b) There are no preemptive rights or rights of first refusal
with respect to the issuance or sale of the Company's capital stock, other than
rights to which certain holders of the Company's capital stock are entitled as
set forth in the Stockholders Agreement. There are no restrictions on the
transfer of the Company's Preferred Stock (including Series C Shares) or the
Conversion Shares other than those arising from the Securities Laws and the
Stockholders Agreement, if applicable. Except for (i) the Registration Rights
Agreement, (ii) a registration rights agreement dated August 26, 1996, as
amended, in favor of the holders of the Series A Stock, (iii) a registration
rights agreement dated April 23 1998, as amended, in favor of the holders of the
Series B Stock, (iv) a registration rights agreement dated September 17, 1998 in
favor of the holder of the
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<PAGE> 11
NASDAQ Warrant, and (v) the Voting Agreement, the Company is not party to and is
not bound by (and, to the Company's knowledge, no stockholder of the Company is
a party to or otherwise bound by) any agreement with respect to (x) the voting
of any of the Company's capital stock, or (y) the registration of such capital
stock for offering to the public pursuant to the 1933 Act.
(c) Except as otherwise set forth on Schedule 3.4, the Company
owns no Subsidiaries or investments in any other corporation or business
organization.
3.5 Financial Statements. The Financial Statements were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, except that the Unaudited Financial Statements have been prepared without
footnote disclosures and year-end audit adjustments, which the Company believes
will not, in any event, be material. All of such Financial Statements fairly
represent the financial condition of the Company and its Subsidiaries as of the
date thereof, and are true, correct and complete as of the date thereof in all
material respects. Nothing has come to the attention of the management of the
Company since such dates which would indicate that the Financial Statements were
not true and correct as of the date thereof.
3.6 Absence of Undisclosed Liabilities. Between the date of the most
recent Financial Statements and the Closing, except as and to the extent
disclosed in Schedule 3.6, the Company did not incur any Liabilities that are
(a) individually in excess of $100,000 or (b) in the aggregate in excess of
$250,000, other than (i) Liabilities fully and adequately reflected or reserved
against on the Financial Statements and (ii) Liabilities incurred in the
ordinary course of business. As of the date of the Closing, the Company has no
knowledge of any circumstance, condition, event or arrangement that may
hereafter give rise to any Liabilities of the Company except in the ordinary
course of business or as otherwise set forth on Schedule 3.6.
3.7 Absence of Certain Developments. Except as disclosed in Schedule
3.7, between the date of the most recent Financial Statements and the Closing,
there was (i) no material adverse change in the condition, financial or
otherwise, of the Company or in the assets, liabilities, business or prospects
of the Company, (ii) no declaration, setting aside or payment of any dividend or
other distribution with respect to, or any direct or indirect redemption or
acquisition of, any of the capital stock of the Company, (iii) no waiver of any
right of the Company or cancellation of any debt or claim held by the Company,
(iv) no loan by the Company to any officer, director, employee or stockholder of
the Company, any affiliates of any of the foregoing, or any agreement or
commitment therefor, (v) no material loss, destruction or damage to any property
of the Company, whether or not insured, (vi) no labor trouble involving the
Company and no material change in the personnel of the Company or the terms and
conditions of their employment, and (vii) no acquisition or disposition of any
assets (or any contract or arrangement therefor) nor any other transaction by
the Company otherwise than for fair value in the ordinary course of business.
3.8 Accounts Receivable. Except as disclosed on Schedule 3.8, the
Company has no accounts receivable from any Person which is affiliated with the
Company or any of its directors, officers, employees or shareholders or any
affiliates of any of the foregoing.
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<PAGE> 12
3.9 Debt. Schedule 3.9 sets forth (a) a list of all agreements for
incurring of indebtedness for borrowed money to which the Company is a party,
(b) the amount of all indebtedness under each such agreement, (c) the Liens that
relate to such indebtedness and that encumber the assets of the Company, and (d)
the name of the lender thereof. None of the obligations pursuant to such
agreements are subject to acceleration by reason of the consummation of the
transactions contemplated hereby, nor would the execution of the Transaction
Documents or the consummation of the transactions contemplated thereby result in
any default under such agreements.
3.10 Title to Properties. Except as set forth on Schedule 3.10, the
Company has good and marketable title to all of its properties and assets (other
than Intellectual Property, which is addressed by Section 3.13 below), free and
clear of all Liens, and such properties and assets constitute all of the assets
necessary for the conduct of the Company's business as presently conducted and
as presently contemplated to be conducted. All machinery and equipment included
in such properties which is necessary to the business of the Company is in good
condition and repair and all leases of real or personal property to which the
Company is a party are in full force and effect and afford the Company peaceful
and undisturbed possession of the subject matter of the lease. The Company is
not in violation of any Requirement of Law applicable to the operation of its
owned or leased properties, nor has the Company received any written notice of
violation with which it has not complied.
3.11 Tax Matters.
(a) The Company has paid or caused to be paid all Taxes required
to be paid by it through the date hereof, whether disputed or not. All Taxes
which the Company is required to withhold or collect have been withheld and
collected and have been paid over to the proper governmental authorities. The
Company has, in accordance with applicable law, timely and properly filed all
Tax returns or extensions required to be filed by it through the date hereof,
all such returns correctly and accurately set forth the amount of any Taxes
relating to the applicable period, and any deductions from, or credits against,
any Taxes or taxable income relating to such returns are in all material
respects valid and proper items of deduction or credit.
(b) Neither the IRS nor any other governmental authority is now
asserting or, to the knowledge of the Company, threatening to assert against the
Company any deficiency or claim for additional Taxes. No claim has ever been
made by an authority in a jurisdiction where the Company does not file reports
and returns that the Company is or may be subject to taxation by that
jurisdiction. There are no Liens on any of the assets of the Company that arose
in connection with any failure (or alleged failure) to pay any Taxes. The
Company has never entered into a closing agreement pursuant to Section 7121 of
the Code. The Company is not and never has been a "personal holding company" as
defined under Section 541 of the Code. There has not been any audit of any tax
return filed by the Company, no such audit is in progress, and the Company has
not been notified by any tax authority that any such audit is contemplated or
pending. To the best of the Company's knowledge, the Company does not have any
liability for the Taxes of any person or entity other than the Company and its
Subsidiaries.
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<PAGE> 13
3.12 Contracts and Commitments. Except as provided on Schedule 3.12, the
Company is not a party to any Material Contract. The Company does not know of
any basis for the termination, expiration or modification of any such Material
Contracts. Neither the Company nor, to the knowledge of the Company, any other
party thereto is in default under any Material Contract and, to the best
knowledge of the Company, there is no current state of facts which upon notice
or lapse of time or both would constitute such a default. The Company does not
have any liability for renegotiation of any government contracts or
subcontracts.
3.13 Intellectual Property.
(a) Schedule 3.13 sets forth all Patents, Trademarks and
registered Copyrights owned by, and applications for any of the above filed by,
the Company specifying as to each item, as applicable: (i) the category of
Intellectual Property; (ii) the jurisdiction in which the item is issued or
registered or in which any application for issuance or registration has been
filed, including the respective issuance, registration or application number;
(iii) the date of application, issuance or registration; and (iv) with respect
to any Trademarks, the class or classes of goods or services on which each such
Trademark is or is intended to be used. None of the Intellectual Property of the
Company is subject to any outstanding Judgment, and, except as set forth in
Schedule 3.13, no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or, to the knowledge of the Company,
threatened, which challenges the validity, enforceability, use or ownership of
the Intellectual Property of the Company, nor does the Company know of any valid
basis for any such claim, or any prior art, or any act or omission or failure to
act which may render the Intellectual Property invalid or unenforceable.
(b) Schedule 3.13 sets forth all material licenses, sublicenses
and other agreements under which the Company is either a licensor or licensee of
any Intellectual Property, except such licenses, sublicenses and other
agreements relating to prepackaged software used solely on the computers of the
Company. The Company has substantially performed all obligations imposed upon it
thereunder, and neither the Company nor, to the knowledge of the Company, any
other party thereto, is in breach of or default thereunder in any respect, nor
is there any current event which with notice or lapse of time or both would
constitute a default thereunder. All of the licenses listed on Schedule 3.13 are
valid, enforceable and in full force and effect, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity relating to
enforceability (regardless of whether considered in a proceeding at law or in
equity).
(c) To the knowledge of the Company, none of the Intellectual
Property currently sold or licensed by the Company to any Person or used by or
licensed to the Company infringes upon or otherwise violates any Intellectual
Property rights of others. Except as set forth on Schedule 3.13, no claim is
pending or, to the knowledge of the Company, threatened which challenges the
freedom of the Company to conduct its business as presently conducted.
(d) Except as set forth on Schedule 3.13, no litigation, action,
suit, proceeding, arbitration, claim, complaint, dispute or investigation is
pending or, to the knowledge of the
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<PAGE> 14
Company, threatened against the Company, contesting the right of the Company to
sell or license to any Person or use the Intellectual Property presently sold or
licensed to such Person or used by the Company, nor does the Company know of any
valid basis for any such claim.
(e) To the knowledge of the Company, no Person is infringing
upon or otherwise violating the Intellectual Property rights of the Company.
(f) Except as set forth on Schedule 3.13, the Company has not
agreed to indemnify any person against any charge of infringement or other
violation with respect to any Intellectual Property owned or used by the
Company.
(g) No former employer of any employee of the Company, and no
current or former client of any consultant of the Company, has made a claim
against the Company or, to the knowledge of the Company, against any other
Person, that such employee or such consultant is utilizing proprietary
information of such former employer or client.
(h) Except as set forth on Schedule 3.13, the Company is not a
party to or bound by and, upon the consummation of the transactions contemplated
by this Agreement, will not be a party to or bound by any license or other
agreement requiring the payment of any material royalty payment, excluding such
agreements relating to prepackaged software licensed for use solely on the
computers of the Company.
(i) To the knowledge of the Company, no employee of the Company
is in violation of any Requirement of Law applicable to such employee's
employment, or any term of any employment agreement, patent or invention
disclosure agreement or other contract or agreement relating to the relationship
of such employee with the Company.
(j) Since January 1995, each employee and officer of the Company
who has had access to OptiMark(TM) has executed an agreement regarding
confidentiality, proprietary information and assignment of inventions to the
Company and, to the knowledge of the Company, none of such employees and
officers are in violation of such agreements.
(k) To the knowledge of the Company, none of the Trade Secrets
of the Company, the value of which is contingent upon the continued maintenance
of the confidentiality thereof, has been disclosed to any Person other than
employees, representatives and agents of the Company, except (A) where the
Company determined that such disclosure was necessary to conduct the business of
the Company, such disclosure not having a material adverse effect on the
Company, (B) as required pursuant to the filing of a Patent application by the
Company, or (C) under a confidentiality agreement.
(l) The Company has the exclusive right to file, procure and
maintain all applications and registrations for the Intellectual Property owned
by the Company.
(m) To the present knowledge of the Company, all Patents,
Trademarks and Copyrights owned by the Company are valid. The Company has taken
commercially reasonable efforts to maintain and protect its Intellectual
Property.
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<PAGE> 15
(n) The Intellectual Property owned by the Company is free and
clear of all Liens.
3.14 Litigation. Except as otherwise set forth on Schedule 3.14 hereto,
there is no litigation, arbitration or governmental proceeding pending or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries, which could, if adversely determined, (i) call into question the
validity or hinder the enforceability or performance of the Transaction
Documents or the agreements and transactions contemplated thereby or (ii) have a
materially adverse effect on the assets, liabilities, business, condition
(financial or otherwise), or prospects of the Company; nor, to the best
knowledge of the Company, has there occurred any event nor does there exist any
condition on the basis of which any litigation, proceeding or investigation
might properly be instituted.
3.15 Offerees. Neither the Company nor anyone acting on its behalf has
sold, offered or solicited offers to buy any securities of the Company so as to
bring the offer, issuance or sale of the Series C Shares or the Conversion
Shares, as contemplated by this Agreement, within the provisions of Section 5 of
the 1933 Act, unless such offer, issuance or sale was within the exemptions of
the 1933 Act. Assuming the accuracy of the representations of the Purchaser in
Section 4 below, the Company has complied with all Securities Laws in connection
with the issuance and sale of the Series C Shares.
3.16 Business; Compliance with Laws. The Company has all material
franchises, permits, licenses, orders, approvals and all other rights and
privileges necessary to permit it to own its property and to conduct its
business as it is presently conducted and as it is presently contemplated to be
conducted (collectively, "Permits"). Such Permits are in full force and effect.
The Company is not in violation in any respect of any Requirement of Law,
Judgment or Permit. The Company is in compliance, in all respects, with all
material federal, state and local laws and regulations (including all applicable
environmental laws and regulations, whether material or immaterial) relating to
its business as presently conducted. Neither the Company nor any officer or
director of the Company has been (a) subject to voluntary or involuntary
petition under the federal bankruptcy laws or any state insolvency law or the
appointment of a receiver, fiscal agent or similar officer by a court for its or
his business or property; (b) convicted in a criminal proceeding or named as a
subject of a pending criminal proceeding (excluding traffic violations and other
minor offenses); (c) subject to any Judgment (not subsequently reversed,
suspended or vacated) permanently or temporarily enjoining it or him from, or
otherwise imposing limits or conditions on its or his, engaging in any
securities, investment advisory, banking, insurance or other type of business or
acting as an officer or director of a public company; or (d) found by a court of
competent jurisdiction in a civil action or by the SEC or the Commodity Futures
Trading Commission to have violated any federal or state commodities, securities
or unfair trade practices law, which such judgment or finding has not been
subsequently reversed, suspended, or vacated.
3.17 Information Supplied to Purchaser. Neither the Transaction
Documents, nor the Schedules and Exhibits attached thereto or any document
referenced therein, nor any certificate, projection or statement (whether oral
or written) furnished to the Purchaser by or on behalf of the Company, contains
any untrue statement of a material fact, and none of the Transaction Documents,
the Schedules and Exhibits attached thereto or such other documents,
certificates, projections or
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<PAGE> 16
statements referenced therein, when taken together, omits to state a material
fact necessary in order to make the statements contained therein not misleading.
There is no material fact directly relating to the assets, liabilities,
business, condition (financial or otherwise) or prospects of the Company (other
than facts which relate to general economic trends or conditions) known to the
Company that materially adversely affects or in the future may reasonably be
expected to materially adversely affect the same that has not been set forth in
this Agreement or in the Schedules and Exhibits attached hereto.
3.18 Investment Banking; Brokerage. No broker, finder, agent or similar
intermediary has acted on behalf of the Company in connection with this
Agreement or the transactions contemplated hereby, and there are no brokerage
commissions, finder's fees or similar fees or commissions payable to any Person
as a result of any actions taken by the Company in connection with the
transactions contemplated hereby.
3.19 Environmental Matters.
(a) The Company has never generated, transported, used, stored,
treated, disposed of, or managed any Hazardous Material. No Hazardous Material
has ever been or, to the best knowledge of the Company, is threatened to be
spilled, released, or disposed of by the Company, at any site presently or
formerly owned, operated, leased, or used by the Company, or, to the knowledge
of the Company, no Hazardous Material of the Company has ever come to be located
in the soil or groundwater at any such site. No Hazardous Material of the
Company has ever been transported from any site presently or formerly owned,
operated, leased, or used by the Company for treatment, storage, or disposal at
any other place. To the knowledge of the Company, the Company presently does not
own, operate, lease, or use, nor has the Company previously owned, operated,
leased, or used, any site on which underground storage tanks are or were
located. No Lien has ever been imposed by any governmental agency on any
property, facility, machinery, or equipment owned, operated, leased, or used by
the Company with the presence of any Hazardous Material and based upon any
action or inaction of the Company.
(b) The Company has no material liability under, nor has it ever
violated in any material respect, any Environmental Law. The Company and, to the
Company's knowledge, any property owned, operated, leased, or used by the
Company, and any facilities and operations thereon are presently in compliance
in all material respects with all applicable Environmental Laws. The Company has
never entered into or been subject to any Judgment with respect to any
environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law.
(c) For purposes of this Section 3.19, the term "Company" shall
include the Company, its Subsidiaries and their Affiliates, and any predecessors
of the Company, its Subsidiaries and their Affiliates.
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<PAGE> 17
3.20 Employee Benefit Programs.
(a) Schedule 3.20 sets forth a list of every Employee Program
that has been maintained by the Company at any time since January 1, 1995.
(b) Each Employee Program which has ever been maintained by the
Company and which has at any time been intended to qualify under Section 401 (a)
or Section 501 (c)(9) of the Code has received a favorable determination or
approval letter from the IRS regarding its qualification under such section and,
to the best knowledge of the Company, has in fact, been continuously qualified
under the applicable section of the Code since the effective date of such
Employee Program. No event or omission has occurred which would cause any such
Employee Program to lose its qualification under the applicable Code section.
(c) Each Employee Program that has ever been maintained by the
Company has been maintained in material compliance with all applicable laws.
With respect to any Employee Program ever maintained by the Company, there has
occurred no "prohibited transaction," as defined in Section406 of ERISA or
Section 4975 of the Code (for which there exists neither a statutory nor
regulatory exception), or material breach of any duty under ERISA or other
applicable law (including, without limitation, any health care continuation
requirements or any other tax law requirements, or conditions to favorable tax
treatment, applicable to such plan or to any person in regard to such plan),
which could result, directly or indirectly (including, without limitation,
through any obligation of indemnification or contribution), in any taxes,
penalties or other liability to the Company or any of its affiliates. No
litigation, arbitration, or governmental administrative proceeding (or
investigation) or other proceeding (other than those relating to routine claims
for benefits) is pending or, to the best knowledge of the Company, threatened
with respect to any such Employee Program.
(d) Neither the Company nor any Affiliate (i) has ever
maintained any Employee Program which has been subject to Title IV of ERISA or
Section 412 of the Code (including, but not limited to, any Multiemployer Plan)
or (ii) has ever provided health care or any other non-pension benefits to any
employees after their employment is terminated (other than as required by part 6
of subtitle B of Title I of ERISA) or has ever promised to provide such
post-termination benefits.
(e) With respect to each Employee Program maintained by or on
behalf of the Company or any Affiliate within the three (3) years preceding the
Closing, complete and correct copies of the following documents (if applicable
to such Employee Program) have been made available to the Purchaser: (i) all
documents embodying or governing such Employee Program, and any funding medium
for the Employee Program (including, without limitation, trust agreements), as
they may have been amended to the date hereof; (ii) the most recent IRS
determination or approval letter with respect to such Employee Program under
Code Section 401 or Section 501(c)(9), and any applications for determination or
approval subsequently filed with the IRS; (iii) the three most recently filed
IRS Forms 5500, with all applicable schedules and accountants' opinions attached
thereto; (iv) the summary plan description for such Employee Program (or other
descriptions of such Employee Program provided to employees) and all
modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy and any excess loss policy) related to such Employee
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<PAGE> 18
Program; (vi) any documents evidencing any loan to an Employee Program that is a
leveraged employee stock ownership plan; and (vii) all other materials
reasonably necessary for the Company to perform any of its responsibilities with
respect to any Employee Program subsequent to the Closing (including, without
limitation, health care continuation requirements).
(f) With respect to each Employee Program maintained by the
Company or its Affiliates, no event has occurred, and there exists no condition
or current set of circumstances in connection with which the Company could,
directly or indirectly (through a Commonly Controlled Entity or otherwise), be
subject to any liability under ERISA, the Code or any other applicable law,
except liability for benefits claims and funding obligations payable in the
ordinary course.
(g) Each Employee Program maintained by the Company or Affiliate
that is a "group health plan" (as defined in ERISA Section 607(1) or Code
Section 5001(b)(1)) has been operated at all times in compliance with the
provisions of COBRA and any applicable similar state law.
(h) The consummation of the transactions contemplated by this
Agreement will not: (i) entitle any current or former employee to severance pay,
unemployment compensation or any similar payment; (ii) accelerate the time of
payment or vesting, or increase the amount of any compensation due to, or in
respect of, any current or former employee; (iii) result in or satisfy a
condition to the payment of compensation that would, in combination with any
other payment, result in an "excess parachute payment" within the meaning of
Code 280G(b); or (iv) constitute or involve a prohibited transaction (as defined
in ERISA Section 502(1)) or otherwise violate Part 4 of Subtitle B of Title I of
ERISA.
3.21 Product and Services Claims. There are no pending or, to the best
of the Company's knowledge, threatened product or service claims with respect to
any products manufactured or services provided by the Company nor are there any
facts upon which a claim of such nature could reasonably be anticipated to be
based. The Company does not have any contractual liability for breach of
warranty or service claims. No claims have been made against the Company for
renegotiation or price redetermination of any business transaction resulting
from or relating to defective products or services, and, to the best of the
Company's knowledge, there are no current facts upon which any such claim could
reasonably be anticipated to be based.
3.22 Employees; Labor Matters. As of May 15, 1999, the Company employed
a total of approximately 319 full-time employees. The Company believes it enjoys
good employer--employee relationships. To the best of the Company's knowledge,
the Company is not delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed to the date hereof or amounts required to be reimbursed to such
employees. The Company does not have any policy, practice, plan or program of
paying severance pay or any form of severance compensation in connection with
the termination of employment, except as set forth in Schedule 3.22. All of the
Company's programs and arrangements in connection with the payment of
commissions are described in Schedule 3.22. To the best of the Company's
knowledge, the Company is in material compliance with all Requirements of Law
respecting labor, employment, fair employment practices, workplace safety and
health, terms and conditions of employment, and wages and hours. There are no
charges of employment discrimination or unfair
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<PAGE> 19
labor practices, nor are there any strikes, slowdowns, stoppages of work, or any
other concerted interference with normal operations which are existing, pending
or, to the best of the Company's knowledge, threatened against or involving the
Company. The Company has not received any information indicating that any of its
employment policies or practices is currently being audited or investigated by
any federal, state or local government agency. To the best of the Company's
knowledge, the Company is, and at all times since its incorporation has been, in
material compliance with the requirements of the Immigration Reform Control Act
of 1986.
3.23 Trade Relations. To the best knowledge of the Company, there exists
no actual or threatened termination, cancellation or limitation of, or any
adverse modification or change in, the business relationship of the Company with
any customer or any group of customers whose purchases are individually or in
the aggregate material to the business of the Company, or with any material
supplier.
3.24 Corporate Records; Copies of Documents. The corporate record books
of the Company accurately record all corporate action taken by its stockholders,
Board and committees thereof. The copies of the corporate records of the
Company, as made available to the Purchaser for review, are true and complete
copies of the originals of such documents. The Company has made available for
inspection by the Purchaser true and correct copies of all documents referred to
in this Section 3.24 or in the Schedules delivered pursuant to this Agreement.
3.25 Affiliate Transactions. Except as set forth in Schedule 3.25
hereto, neither the Company nor, to the best of the Company's knowledge, any
officer, employee or director of the Company owns or controls, directly or
indirectly, on an individual or joint basis, any interest in (excepting less
than 1% stockholding for investment purposes in securities of publicly-held
companies) or serves as an officer, director, employee, consultant, partner or
in another similar capacity of, any competitor, supplier, lessor, lessee,
distributor, sales agent or customer of or lender to or borrower from, the
Company.
3.26 Insurance. Schedule 3.26 lists all of the insurance policies held
by or on behalf of the Company as of the date of this Agreement, with the
effective date and coverage amounts indicated thereon. Except as set forth on
Schedule 3.26, such policies and binders are valid and enforceable in accordance
with their terms and are in full force and effect. None of such policies will be
affected by, or terminate or lapse by reason of, any transaction contemplated by
this Agreement or any transaction contemplated hereunder.
3.27 FIRPTA. The Company is not a "foreign person" within the meaning of
Section 1445 of the Code.
3.28 Investment Company. The Company is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
3.29 Closing. The representations and warranties of the Company
contained in this Section 3 shall be true and correct in all material respects
on the date of the Closing as though then made, except
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<PAGE> 20
as affected by the transactions expressly contemplated by this Agreement and
except as expressly disclosed in writing to the Purchaser by the Company prior
to the Closing.
SECTION 4. INVESTOR REPRESENTATIONS
To induce the Company to enter into this Agreement, effective as of the
date hereof and at and as of the Closing unless otherwise expressly indicated,
the Purchaser hereby represents to the Company as follows:
4.1 Authorization. This Agreement and all other documents executed
pursuant hereto have been duly authorized by all necessary action on the part of
the Purchaser, have been duly executed and delivered, and constitute valid,
binding and enforceable agreements of the Purchaser.
4.2 Investment Intent. The Purchaser is acquiring the Series C Shares
for its own account, for investment, and not with a present view to any
"distribution" thereof within the meaning of the 1933 Act.
4.3 Restrictions on Transfer. The Purchaser understands that, because
the Series C Shares have not been registered under the Securities Laws, the
Purchaser cannot dispose of any or all of the Series C Shares or the Conversion
Shares unless such securities are subsequently registered under the Securities
Laws or exemptions from such registration are available. The Purchaser
understands that each certificate representing the Series C Shares and the
Conversion Shares will bear a legend substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO A WRITTEN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
4.4 Sophistication. The Purchaser is sufficiently knowledgeable and
experienced in the making of venture capital investments so as to be able to
evaluate the risks and merits of its investment in the Company, and is able to
bear the economic risk of loss of its investment in the Company.
4.5 No General Solicitation. The Purchaser did not learn of this
investment through any general solicitation or general advertising by the
Company, as those terms are used in Rule 502(c) under the 1933 Act.
4.6 Brokers. No broker, finder, agent or similar intermediary has acted
on behalf of the Purchaser in connection with this Agreement or the transactions
contemplated hereby, and there are no brokerage commissions, finder's fees or
similar fees or commissions payable in connection therewith.
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<PAGE> 21
4.7 Accreditation. The Purchaser is an "accredited investor" as that
term is defined under Regulation D adopted under the 1933 Act.
4.8 Reliance by Company. The Purchaser has been advised that the Series
C Shares have not been and are not being registered under the Securities Laws
and that in issuing the Series C Shares the Company is relying upon, among other
things, the representations and warranties of the Purchasers contained in this
Section 4.
SECTION 5. INDEMNIFICATION
5.1 General.
(a) The Company shall, to the full extent permitted by law, and
in addition to any such rights which any Indemnified Party (as defined herein)
may have pursuant to statute, common law, separate agreement, the Company's
Certificate of Incorporation or By-laws, or otherwise, indemnify, defend and
hold harmless the Purchaser (including its subsidiaries, affiliates, directors,
officers, members, partners, employees and agents, an "Indemnified Purchaser")
and each person (a "Controlling Person" and, collectively with Indemnified
Purchasers, the "Indemnified Parties") who controls any of them within the
meaning of Section 15 of the 1933 Act, from and against any and all Losses
(including Losses incurred by the Indemnified Party in any action between the
Company and the Indemnified Party or between the Indemnified Party and any third
party or otherwise) resulting from, arising out of or relating to (i) any breach
of any representation or warranty, covenant or agreement by the Company in the
Transaction Documents and/or any Certificate or Schedule delivered by the
Company pursuant thereto, including, without limitation, any legal,
administrative or other actions (including actions brought by the Purchaser or
the Company or any equity holders of the Company or derivative actions brought
by any Person claiming through or in the Company's name), proceedings or
investigations (whether formal or informal), or written threats thereof, based
upon, relating to or arising out of the Transaction Documents and/or any
Certificate or Schedule delivered by the Company pursuant thereto, the
transactions contemplated thereby, or any Indemnified Party's role therein or in
transactions contemplated thereby, (ii) by reason of the Purchaser's status as a
security holder, creditor, director, agent, representative or controlling person
of the Company (including, without limitation, any and all Losses under the
Securities Laws, at common law or otherwise, which relate directly or indirectly
to the registration, purchase, sale or ownership of the Series C Shares or
Conversion Shares or to any fiduciary obligation owed with respect thereto), and
(iii) the claims of NeoVision Hypersystems, Inc. set forth in the NeoVision
Lawsuit; provided, however, that the Company will not be liable to the extent
that Losses arise from and are based on an untrue statement or omission or
alleged untrue statement or omission in a registration statement or prospectus
which is made in reliance on and in conformity with information furnished to the
Company by or on behalf of such Indemnified Party. The indemnification and
contribution provided for in this Section 5.1 will remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Parties or any officer, director, employee, agent or Controlling Person of the
Indemnified Parties.
(b) If the indemnification provided for in this Section 5.1 is for any
reason held by a court of competent jurisdiction to be unavailable to an
Indemnified Party in respect of any Losses
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<PAGE> 22
referred to above, then the Company, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Purchaser, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company and the Purchaser in connection with the action or inaction
which resulted in such Losses, as well as any other relevant equitable
considerations. In connection with any registration of the Company's securities,
the relative benefits received by the Company and the Purchaser shall be deemed
to be in the same respective proportions that the net proceeds from the offering
(before deducting expenses) received by the Company and the Purchaser, in each
case as set forth in the table on the cover page of the applicable prospectus,
bear to the aggregate public offering price of the securities so offered. The
relative fault of the Company and the Purchaser shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Purchaser and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(c) The Company and the Purchaser agree that it would not be just and
equitable if contribution pursuant to the foregoing paragraph (b) were
determined by pro rata or per capita allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the foregoing paragraph (b). In connection with any registration of the
Company's securities, in no event shall the Purchaser be required to contribute
any amount under this Section 5.1 in excess of the lesser of (i) the total of
such Losses indemnified against divided by the total securities sold under such
registration statement which are being sold by the Purchaser or (ii) the
proceeds received by the Purchaser from its sale of securities under such
registration statement. No person found guilty of fraudulent misrepresentation
(within the meaning of the Securities Laws) shall be entitled to contribution
from any person who was not found guilty of such fraudulent misrepresentation.
5.2 Notice; Defense of Claims.
(a) Promptly after receipt by an Indemnified Party of notice of any
third party or other claim, liability or expense to which the indemnification
obligations hereunder would apply, including in connection with any governmental
proceeding, the Indemnified Party shall give notice thereof in writing to the
indemnifying party or parties, but the omission to so notify the indemnifying
party or parties promptly will not relieve the indemnifying party or parties
from any liability except to the extent that the indemnifying party or parties
shall have been materially prejudiced as a result of the failure or delay in
giving such notice. Such notice shall state the information then available
regarding the amount and nature of such claim, liability or expense and shall
specify the provision or provisions of this Agreement under which the liability
or obligation is asserted.
(b) In the case of any third party claim, if within twenty (20) days
after receiving the notice described in the preceding paragraph the indemnifying
party or parties (i) give written notice to the Indemnified Parties stating that
they intend to defend in good faith against such claim, liability or expense at
their own cost and expense and (ii) provide assurance and security reasonably
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<PAGE> 23
acceptable to such Indemnified Parties that such indemnification will be paid
fully and promptly if required and such Indemnified Parties will not incur cost
or expense during the proceeding, then counsel for the defense shall be selected
by the indemnifying party or parties (subject to the consent of such Indemnified
Parties which consent shall not be unreasonably withheld) and such Indemnified
Parties shall not be eligible for any payment with respect to such claim,
liability or expense as long as the indemnifying party or parties are conducting
a good faith and diligent defense at their own expense; provided, however, that
the assumption of defense of any such matters by the indemnifying party or
parties shall relate solely to the claim, liability or expense that is subject
or potentially subject to indemnification. If the indemnifying party or parties
assume such defense in accordance with the preceding sentence, they shall have
the right, with the consent of such Indemnified Parties, which consent shall not
be unreasonably withheld, to settle all indemnifiable matters related to claims
by third parties which are susceptible to being settled provided the
indemnifying party or parties' obligation to indemnify such Indemnified Parties
therefor will be fully satisfied and the settlement includes a complete release
of such Indemnified Parties. The indemnifying party or parties shall keep such
Indemnified Parties apprised of the status of the claim, liability or expense
and any resulting suit, proceeding or enforcement action, shall furnish such
Indemnified Parties with all documents and information that such Indemnified
Parties shall reasonably request and shall consult with such Indemnified Parties
prior to acting on major matters, including settlement discussions.
Notwithstanding anything herein stated, such Indemnified Parties shall at all
times have the right to fully participate in such defense at its own expense
directly or through counsel; provided, however, if the named parties to the
action or proceeding include both the indemnifying party or parties and the
Indemnified Parties and representation of both parties by the same counsel would
be inappropriate under applicable standards of professional conduct, the expense
of separate counsel for such Indemnified Parties shall be paid by the
indemnifying party or parties. If no such notice of intent to dispute and defend
is given by the indemnifying party or parties, or if such diligent good faith
defense is not being or ceases to be conducted, such Indemnified Parties shall,
at the expense of the indemnifying party or parties, undertake the defense of
(with counsel selected by such Indemnified Parties), and shall have the right to
compromise or settle, such claim, liability or expense. If such claim, liability
or expense is one that by its nature cannot be defended solely by the
indemnifying party or parties, then such Indemnified Parties shall make
available all information and assistance that the indemnifying party or parties
may reasonably request and shall cooperate with the indemnifying party or
parties in such defense.
(c) Satisfaction of Indemnification Obligations. Any indemnity payable
pursuant to this Section 5 shall be paid not later than thirty (30) days
following the later of (a) the Indemnified Party's request therefor or (b) a
final non-appealable determination of Loss, but in any event such payment shall
be made not later than ten (10) days prior to the date on which the Loss upon
which the indemnity is based is required to be satisfied by the Indemnified
Party, if applicable.
SECTION 6. COVENANTS OF THE COMPANY
Until the earlier to occur of (i) August 27, 2016, or (ii) the IPO
Effectiveness Date:
6.1 Inspection. The Company will permit representatives of the Purchaser
to visit and inspect any of its properties, to examine its corporate, financial
and operating records and make copies
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<PAGE> 24
thereof or abstracts therefrom, and to discuss its affairs, finances and
accounts with their respective directors, officers and independent public
accountants, all at such reasonable times during normal business hours and as
often as may be reasonably requested, upon reasonable advance notice to the
Company.
6.2 Financial Statements and Other Information. The Company shall
deliver to the Purchaser the following:
(a) as soon as available, but not later than ninety (90) days
after the end of each fiscal year of the Company, a copy of the audited balance
sheet of the Company as of the end of such year and the related statements of
operations and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous year, all in reasonable detail and
accompanied by a management summary and analysis of the operations of the
Company for such fiscal year and by the opinion of a nationally recognized
independent certified public accounting firm which report shall state without
qualification that such financial statements present fairly the financial
condition as of such date and results of operations and cash flows for the
periods indicated in conformity with GAAP applied on a consistent basis;
(b) as soon as available, but in any event not later than thirty
(30) days after the end of each of the first three fiscal quarters of each
fiscal year, the unaudited balance sheet of the Company, and the related
statements of operations and cash flows for such quarter and for the period
commencing on the first day of the fiscal year and ending on the last day of
such quarter, all certified by an appropriate officer of the Company as
presenting fairly the financial condition as of such date and results of
operations and cash flows for the periods indicated in conformity with GAAP
applied on a consistent basis, subject to normal year-end adjustments and the
absence of footnotes required by GAAP; and
(c) unaudited monthly financial statements within thirty (30)
days after the end of each month; and
(d) annual operating budgets no later than thirty (30) days
prior to the end of the Company's fiscal year and, from time to time, such other
financial data and information about the Company as is reasonably available to
the Company and as the Purchaser may reasonably request.
6.3 Management Compensation. Compensation paid by the Company to its
management will be reasonably comparable to compensation paid to management in
companies in the same or similar businesses of similar size and maturity and
with comparable financial performance.
6.4 Conduct of Business. The Company will (a) keep in full force and
effect (i) its corporate existence and good standing under the laws of its
jurisdiction of incorporation and (ii) all intellectual property rights useful
in its business (except such rights as the Board of Directors has reasonably
determined are not material to the Company's continuing operations), (b)
preserve and maintain in full force and effect all material rights, privileges,
qualifications, applications, licenses and franchises necessary in the normal
conduct of its business, (c) conduct its business in accordance with sound
business practices, and (d) file or cause to be filed in a timely manner all
reports,
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<PAGE> 25
applications and licenses that shall be required by a governmental agency or
body and that, if not timely filed, could have a material adverse effect on the
Company.
6.5 Payment of Taxes, Compliance with Laws, etc. The Company will pay
and discharge all lawful taxes, assessments and governmental charges or levies
imposed upon it or upon its income or property before the same shall become in
default, as well as all lawful claims for labor, materials and supplies which,
if not paid when due, might become a lien or charge upon its property or any
part thereof; provided, however, that the Company shall not be required to pay
and discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof is being contested by the Company in good faith by appropriate
proceedings and an adequate reserve therefor has been established on its books.
The Company will use its best efforts to comply with all applicable laws and
regulations in the conduct of its business, including, without limitation, all
applicable federal and state securities laws in connection with the issuance of
any shares of its capital stock.
6.6 Insurance. The Company will keep its insurable properties insured,
upon reasonable business terms, by financially sound and reputable insurers
against liability, and the perils of casualty, fire and extended coverage in
amounts of coverage at least equal to those customarily maintained by companies
in the same or similar business as the Company. The Company will also maintain
with such insurers insurance against other hazards and risks and liability to
persons and property to the extent and in the manner customary for companies
engaged in the same or similar business.
6.7 Maintenance of Properties. The Company will maintain all properties
used or useful in the conduct of its business in good repair, working order and
condition, ordinary wear and tear excepted, as necessary to permit such business
to be properly and advantageously conducted.
6.8 Affiliated Transactions. All transactions between the Company and
any director, officer or key employee of the Company shall be conducted on an
arm's-length basis, shall be on terms and conditions no less favorable to the
Company than could be obtained from nonrelated persons and shall be approved in
advance by a majority of disinterested members of the Board of Directors after
full disclosure of the terms thereof.
6.9 Books and Records. The Company shall keep books of record and
account, in which accurate entries shall be made of all financial transactions
and the assets and business of the Company in accordance with GAAP consistently
applied.
6.10 Back-ups of Computer Software. The Company shall make back-ups of
all material computer software programs and databases and shall maintain such
software programs databases at a secure off-site location.
6.11 Defense of Intellectual Property. In the event the Company
discovers, either through its own investigation or through notice from the
Purchaser or other entity, that a third party may be infringing the Intellectual
Property, the Company shall commence reasonable efforts to cease such
infringement. If the third party declines to cease infringement, the Company
shall consider in good faith whether to commence and pursue legal action against
such third party. The determination of
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<PAGE> 26
whether or not legal action shall be commenced shall lie exclusively with the
Company; provided, however, the Company shall not unreasonably decline to
commence legal action if the Company obtains or receives reasonable evidence of
infringement by a third party and said infringement is having or may have a
material impact on the Company's revenue or other business interests. All costs
of such legal action shall be borne by the Company, and the Company shall retain
control over the conduct of such action, including settlement. In the event
threatened or actual legal action by the Company results in a settlement or
resolution that provides damages or other monies to the Company, such proceeds
will be the property of the Company, provided the Purchaser has incurred no
legal fees or costs in connection with that action not otherwise subject to
indemnification thereunder, in which event the Purchasers' fees and costs shall
first be reimbursed from such proceeds.
SECTION 7. GENERAL
7.1 Amendments; Waivers and Consents. No provision of this Agreement may
be waived or amended except in writing. For the purposes of this Agreement and
all agreements, documents and instruments executed pursuant hereto, except as
otherwise specifically set forth herein or therein, no course of dealing between
the Company on the one hand and the Purchaser on the other and no delay on the
part of any party hereto in exercising any rights hereunder or thereunder shall
operate as a waiver of the rights hereof and thereof. Except as otherwise
provided herein or therein, amendments in or additions to, and any consents
required by, this Agreement may be made, and compliance with any term, covenant,
condition or provision set forth herein may be omitted or waived (either
generally or in a particular instance and either retroactively or prospectively)
with a consent of the Purchaser and (in the case of any such amendment or
addition) the Company.
7.2 Survival of Representations, Warranties and Covenants; Assignability
of Rights. All covenants, agreements, representations and warranties of the
Company made herein and in the Schedules and Exhibits delivered or furnished by
or on behalf of the Company to the Purchaser in connection herewith shall
survive the delivery of the Series C Shares until the earlier of twenty four
(24) months after the date of the Closing or the IPO Effectiveness Date,
regardless of any instruction or any investigation by or on behalf of the
Purchaser. Except as otherwise provided in this Agreement, all such covenants,
agreements, representations and warranties shall inure to the benefit of the
Purchaser's successors and assigns and to transferees of the Series C Shares,
whether so expressed or not. The representations and warranties made by the
Purchaser in Section 4 of this Agreement shall survive the delivery of the
Series C Shares and shall bind the Purchaser's successors and assigns and shall
inure to the benefit of the Company's successors and assigns. It is understood
that the Purchaser's rights and obligations hereunder may be assigned to a
Person that controls, is controlled by, or is under common control with the
Purchaser, provided that such Person agrees to be bound by this Agreement as if
a party hereto.
7.3 Governing Law. This Agreement shall be deemed to be a contract made
under, and shall be construed in accordance with, the laws of the State of
Delaware without giving effect to principles of conflicts of law.
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<PAGE> 27
7.4 Section Headings; Counterparts. The descriptive headings in this
Agreement have been inserted for convenience only and shall not be deemed to
limit or otherwise affect the construction of any provision thereof or hereof.
This Agreement may be executed simultaneously in any number of counterparts,
each of which when so executed and delivered shall be taken to be an original;
but such counterparts shall together constitute but one and the same document.
7.5 Notices and Demands. Any notice or demand which, by any provision of
this Agreement or any agreement, document or instrument executed pursuant hereto
or thereto, except as otherwise provided therein, is required or provided to be
given shall be deemed to have been sufficiently given or served and received for
all purposes upon the earlier to occur of actual delivery or five days after
being sent by certified or registered mail, postage and charges prepaid, return
receipt requested, or by express delivery providing receipt of delivery, to the
following addresses:
(a) if to the Company, at its chief executive office, or at any
other address designated by the Company to the Purchaser in writing;
(b) if to the Purchaser, at its mailing address as shown on
Schedule I hereto, or at any other address designated by the Purchaser to the
Company in writing.
7.6 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.
7.7 Expenses. The Company shall pay its costs and expenses, and the
Purchaser shall pay its respective costs and expenses, incurred with respect to
the negotiation, execution, delivery and performance of this Agreement and the
agreements, documents and instruments contemplated hereby or executed pursuant
hereto.
7.8 Publicity. Except as may be required by an applicable Requirement of
Law, (i) the Purchaser shall not issue a publicity release or public
announcement or otherwise make any disclosure concerning the Transaction
Documents or the transactions contemplated thereby, without prior written
approval by the Company, and (ii) the Company shall not issue any publicity
release, public announcement or make any other disclosure regarding the
Transaction Documents, which disclosure directly or indirectly references the
name of the Purchaser, without prior written approval by the Purchaser;
provided, however, that nothing in this Agreement shall restrict any party to
this Agreement from disclosing information (a) that is already publicly
available; (b) to a prospective purchaser or transferee in connection with any
contemplated sale or transfer of any of the Series C Shares or Conversion
Shares; and/or (c) to its attorneys, accountants, consultants and other advisors
to the extent necessary to obtain their services in connection with this
Agreement. If any announcement is required by law to be made by the Purchaser,
prior to making such announcement the Purchaser will deliver a draft of such
announcement to the Company and shall give the Company an opportunity to comment
thereon.
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<PAGE> 28
7.9 Further Assurances. Each of the parties shall execute such documents
and perform such further acts (including, without limitation, obtaining any
consents, exemptions, authorizations or other actions by, or giving any notices
to, or making any filings with, any governmental agency or any other Person) as
may be reasonably required or desirable to carry out or to perform the
provisions of this Agreement.
7.10 Integration. This Agreement together with the other Transaction
Documents, including the Schedules, Exhibits, documents and instruments referred
to herein or therein, constitutes the entire agreement and supersedes all other
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
7.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
a sealed instrument as of the day and year first above written.
Company:
--------
OptiMark Technologies, Inc.
By: /s/ Phillip J. Riese
Chief Executive Officer
Purchaser:
Softbank America, Inc.
By: /s/ Steven J. Murray
Treasurer
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<PAGE> 29
Schedule I
(to Series C Stock Purchase Agreement)
NUMBER OF
EFFECTIVE SHARES OF
DATE OF SERIES C STOCK
CERT NO. NAME AND ADDRESS OF PURCHASER PURCHASE PURCHASED
-------- ----------------------------- -------- --------------
OTC-1 SOFTBANK Capital Partners LP
10 Langley Road, Suite 403
Newton Center, MA 02159-1972
Attn: Steven J. Murray 07/26/99 8,136,150
OTC-2 SOFTBANK Capital Advisors Fund LP
10 Langley Road, Suite 403
Newton Center, MA 02159-1972
Attn: Steven J. Murray 07/26/99 113,850
<PAGE> 1
EXHIBIT 4.11
REGISTRATION RIGHTS AGREEMENT
among
OPTIMARK TECHNOLOGIES, INC.
and
THE HOLDERS OF ITS SERIES C
CONVERTIBLE
PREFERRED STOCK
- July 26, 1999 -
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
1. Definitions..............................................................1
2. General; Securities Subject to this Agreement............................3
(a) Grant of Rights..............................................3
(b) Registrable Securities.......................................3
(c) Holders of Registrable Securities............................3
3. Piggy-Back Registration..................................................3
(a) Piggy-Back Rights............................................3
(b) Expenses.....................................................4
4. Holdback Agreements......................................................4
(a) Restrictions on Public Sale by Designated Holders............4
(b) Restrictions on Public Sale by the Company...................5
5. Registration Procedures..................................................5
(a) Obligations of the Company...................................5
(b) Seller Information...........................................8
(c) Notice to Discontinue........................................8
(d) Registration Expenses........................................8
6. Indemnification; Contribution............................................8
(a) Indemnification by the Company...............................8
(b) Indemnification by Designated Holders........................9
(c) Procedures...................................................9
(d) Contribution................................................10
(e) Limitations.................................................10
7. Rule 144................................................................10
8. Miscellaneous...........................................................10
(a) Recapitalizations, Exchanges, etc...........................10
(b) No Inconsistent Agreements..................................11
(c) Remedies....................................................11
(d) Amendments and Waivers......................................11
(e) Notices.....................................................11
(f) Successors and Assigns; Third Party Beneficiaries...........12
(g) Counterparts................................................12
(h) Headings....................................................12
(i) Governing Law...............................................12
(j) Severability................................................12
(k) Entire Agreement............................................12
(l) Further Assurances..........................................13
-i-
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT, dated July 26, 1999 (this "Agreement"),
among OptiMark Technologies, Inc., a Delaware corporation (the "Company"), and
the purchaser(s) ("Purchasers") of the Company's Series C Convertible Preferred
Stock ("Series C Stock") listed on Schedule I hereto.
This Agreement is made in connection with Series C Stock Purchase
Agreements (the "Stock Purchase Agreement"), between the Company and the
Purchaser(s) pursuant to which the Company has agreed to issue and sell Series C
Stock. Each share of Series C Stock is convertible into one (1) share of Common
Stock, subject to potential adjustments. In order to induce the Purchaser(s) to
purchase Series C Stock, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company has agreed to
grant registration rights with respect to the Registrable Securities (as
hereinafter defined) as set forth in this Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement in addition to other
capitalized terms defined elsewhere herein, the following terms shall have the
meanings indicated:
"Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Affiliate" shall mean any Person who is an "affiliate" of
another designated Person, as defined in Rule l2b-2 of the General Rules and
Regulations under the Exchange Act.
"Common Stock" means the common stock, par value $.01 per share,
of the Company or any other equity securities of the Company into which such
securities are converted, reclassified, reconstituted or exchanged.
"Company" has the meaning assigned to such term in the recital
to this Agreement.
"Company Underwriter" has the meaning assigned such term in
Section 3(a) below.
"Damages" has the meaning assigned to such term in Section 6(a)
below.
"Designated Holder" means each Purchaser and any transferee of
any Purchaser to whom Registrable Securities have been transferred in accordance
with the provisions of this Agreement , other than a transferee to whom such
securities have been transferred pursuant to a Registration Statement or Rule
144 or Regulation S under the Act.
"Exchange Act" means the Securities Exchange Act of 1934 as
amended, and the rules and regulations promulgated thereunder.
"Holders' Counsel" has the meaning assigned such term in Section
5(a)(i) below.
"Indemnified Party" has the meaning assigned such term in
Section 6(c) below.
<PAGE> 4
"Indemnifying Party" has the meaning assigned such term in
Section 6(c) below.
"Inspector" has the meaning assigned such term in Section
5(a)(viii) below.
"IPO Effectiveness Date" means the date upon which the Company
commences an initial offer for sale of shares of Common Stock pursuant to an
effective Registration Statement.
"NASD" means the National Association of Securities Dealers,
Inc.
"Nasdaq Warrant" means the Warrant Agreement dated September 1,
1998 pursuant to which The Nasdaq Stock Market, Inc. has the right to purchase
from the Company up to 11,250,000 shares of voting Common Stock at exercise
prices ranging from $3.00 to $7.00 per share, subject to potential adjustment as
provided therein.
"Other Rights Holders" means (i) the holders of the Series A
Stock, (ii) the holders of the Series B Stock, (iii) the holder of the Nasdaq
Warrant, and (iv) any other Persons holding registration rights with respect to
Common Stock whose registration rights have not expressly been made junior to
the registration rights of the Designated Holders hereunder.
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, limited liability company, government (or an
agency or political subdivision thereof) or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity.
"Purchaser(s)" has the meaning assigned to such term in the
recital to this Agreement.
"Records" has the meaning assigned such term in Section
5(a)(viii) below.
"Registrable Securities" means each of the following: (a) any
and all shares of Common Stock owned by the Designated Holders and issued or
issuable upon conversion of shares of Series C Stock, (b) any other shares of
Common Stock acquired or owned by any of the Designated Holders prior to the IPO
Effectiveness Date, (c) any shares of Common Stock issued or issuable to any of
the Designated Holders with respect to shares of Common Stock or shares of
Series C Stock by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise, and shares of Common Stock issuable upon
conversion, exercise or exchange thereof.
"Registration Expenses" has the meaning set forth in Section
5(d) below.
"Registration Statement" means a Registration Statement filed by
the Company pursuant to the Act.
"SEC" means the Securities and Exchange Commission or any
successor agency then having jurisdiction to enforce the Act.
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"Series A Stock" means the Company's Series A Convertible
Participating Preferred Stock, $.01 par value per share.
"Series B Stock" means the Company's Series B Convertible
Participating Preferred Stock, $.01 par value per share.
"Series C Stock" has the meaning assigned to such term in the
recital to this Agreement.
"Stock Purchase Agreement" has the meaning assigned such term in
the recital to this Agreement.
2. General; Securities Subject to this Agreement Grant of Rights.
The Company hereby grants registration rights to the Purchasers upon the terms
and conditions set forth in this Agreement.
(b) Registrable Securities. For purposes of this Agreement,
Registrable Securities will cease to be Registrable Securities when (i) a
Registration Statement covering such Registrable Securities has been declared
effective by the SEC, and such Registrable Securities have been disposed of
pursuant to such effective Registration Statement, (ii) the entire amount of
such Registrable Securities proposed to be sold in a single sale are or, in the
opinion of counsel satisfactory to the Company and the Designated Holder, each
in their reasonable judgment, may be distributed to the public without any
limitation as to volume pursuant to Rule 144 (or any successor provision then in
effect) under the Act, or (iii) such Registrable Securities are sold,
distributed or proposed to be sold or distributed by a Person not entitled to
the registration rights granted by this Agreement.
(c) Holders of Registrable Securities. A Person is deemed to
be a holder of Registrable Securities whenever such Person owns of record
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company may act upon the basis of the instructions,
notice or election received from the record owner of such Registrable
Securities.
3. Piggy-Back Registration Piggy-Back Rights. At any time after the
IPO Effectiveness Date, if either (I) the Company proposes to file a
Registration Statement with respect to an offering by the Company of Common
Stock for its own account (other than a Registration Statement on Form S-4 or
S-8 or any successors thereto) (a "Company Registration"), or (II) the Company
is required to file a Registration Statement upon demand by and for the account
of any "Initiating Holders", as
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<PAGE> 6
defined and provided in Section 3 of the Registration Rights Agreement dated
August 27, 1996, as amended, among the Company and the holders of its Series A
Stock (a "Demand Registration"), then the Company shall give written notice of
such proposed filing to each of the Designated Holders of Registrable Securities
at least thirty (30) days before the anticipated filing date, and such notice
shall describe the proposed registration and distribution and offer such
Designated Holders the opportunity to register such number of Registrable
Securities as each such holder may request. The Company shall, and shall use
reasonable efforts to cause the managing underwriter(s) of a proposed
underwritten offering (the "Company Underwriter") to, permit the Designated
Holders of Registrable Securities who have requested in writing to participate
in the registration for such offering to include such Registrable Securities in
such offering on the same terms and conditions as the securities of the Company
or the Initiating Holders included therein. In connection with any offering
under this Section 3(a) involving an underwriting, the Company shall not be
required to include any Registrable Securities in such underwriting unless the
holders thereof accept the terms of the underwriting as agreed upon between the
Company and the Company Underwriter, and then only in such quantity as will not,
in the opinion of the Company Underwriter, jeopardize the success of the
offering by the Company. If in the written opinion of the Company Underwriter
the registration of all or part of the Registrable Securities which the
Designated Holders have requested to be included would materially adversely
affect such public offering, then the Company shall include in the underwriting,
to the extent of the amount that the Company Underwriter believes may be sold
without causing such adverse effect, (A) in connection with a Company
Registration, first, all of the securities to be offered for the account of the
Company; and second, as a group, (i) the Registrable Securities requested by
Designated Holders to be sold in the offering, and (ii) the Common Stock
requested by Other Rights Holders to be sold in the offering, pro rata based
upon the number of shares of Registrable Securities/Common Stock owned by such
Persons; or (B) in connection with a Demand Registration, first, as a group, (i)
the Registrable Securities requested by Designated Holders to be sold in the
offering, and (ii) the Common Stock requested by Other Rights Holders to be sold
in the offering, pro rata based upon the number of shares of Registrable
Securities/Common Stock owned by such Persons, and second, all of the securities
to be offered for the account of the Company.
(b) Expenses. The Company shall bear all Registration
Expenses (other than underwriting discounts and commissions) in connection with
any registration pursuant to this Section 3; provided, however, that each
Designated Holder participating in such registration shall bear the costs of its
own legal counsel, if any.
4. Holdback Agreements Restrictions on Public Sale by Designated
Holders. Each Designated Holder of Registrable Securities agrees not to effect
any public sale or distribution of any Registrable Securities or of any
securities convertible into or exchangeable or exercisable for such Registrable
Securities, including a sale pursuant to Rule 144 under the Act, during the
180-day period beginning on the effective date of any Registration Statement
(except as part of such registration), if and to the extent requested by the
Company in the case of a nonunderwritten public offering or if and to the extent
requested by the Company Underwriter in the case of an underwritten public
offering.
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<PAGE> 7
(b) Restrictions on Public Sale by the Company. The Company
agrees not to effect any public sale or distribution of any of its Common Stock,
or any securities convertible into or exchangeable or exercisable for such
securities (except pursuant to registrations on Form S-4 or S-8 or any successor
thereto), during the period beginning on the effective date of any Registration
Statement (except as part of such registration) in which the Designated Holders
of Registrable Securities are participating and ending on the earlier of (i) the
date on which all Registrable Securities registered on such Registration
Statement are sold and (ii) three (3) months after the effective date of such
Registration Statement.
5. Registration Procedures Obligations of the Company. Whenever
registration of Registrable Securities has been requested pursuant to Section 3
of this Agreement, the Company shall use its reasonable efforts to effect the
registration and sale of such Registrable Securities in accordance with the
intended method of distribution thereof as quickly as practicable, and in
connection with any such request, the Company shall, as expeditiously as
possible:
(i) use its reasonable efforts to prepare and file
with the SEC a Registration Statement on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate and which form
shall be available for the sale of the Common Stock and such Registrable
Securities in accordance with the intended method of distribution thereof, and
use its reasonable efforts to cause such Registration Statement to become
effective; provided, however, that (x) before filing a Registration Statement or
prospectus or any amendments or supplements thereto, the Company shall provide
counsel selected by the Designated Holders holding a majority of the Registrable
Securities being registered in such registration ("Holders' Counsel") and any
other Inspector (as hereinafter defined) with an adequate and appropriate
opportunity to participate in the preparation of such Registration Statement and
each prospectus included therein (and each amendment or supplement thereto) to
be filed with the SEC, which documents shall be subject to the review of
Holders' Counsel, and (y) the Company shall notify the Holders' Counsel and each
seller of Registrable Securities of any stop order issued or threatened by the
SEC and take all reasonable action required to prevent the entry of such stop
order or to remove it if entered;
(ii) prepare and file with the SEC such amendments
and supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for the lesser of (x) three (3) months and (y) such shorter period
which will terminate when all Registrable Securities covered by such
Registration Statement have been sold, and comply with the provisions of the Act
with respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement;
(iii) as soon as reasonably possible, furnish to each
seller of Registrable Securities, prior to filing a Registration Statement,
copies of such Registration Statement as is proposed to be filed, and
thereafter such number of copies of such Registration Statement, each amendment
and supplement thereto (in each case including all exhibits thereto), the
prospectus included in such Registration Statement (including each preliminary
prospectus) and such other
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<PAGE> 8
documents as each such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(iv) use its reasonable efforts to register or
qualify such Registrable Securities under such other securities or "blue sky"
laws of such jurisdictions as any seller of Registrable Securities may
reasonably request, and to continue such qualification in effect in such
jurisdiction for the lesser of (x) three (3) months and (y) such shorter period
which will terminate when all Registrable Securities covered by such
Registration Statement have been sold, and do any and all other acts and things
which may be reasonably necessary or advisable to enable any such seller to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such seller; provided, however, that the Company shall not be required
to (x) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 5(a)(iv), (y) subject
itself to taxation in any such jurisdiction or (z) consent to general service of
process in any such jurisdiction;
(v) use its reasonable efforts to cause the
Registrable Securities covered by such Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to enable the
seller or sellers of Registrable Securities to consummate the disposition of
such Registrable Securities;
(vi) upon discovery that, or upon the happening of
any event as a result of which, the prospectus included in a Registration
Statement covering Registrable Securities contains an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances under which they were made, (x) promptly prepare a supplement or
amendment to such prospectus and furnish to each seller of Registrable
Securities a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, after delivery to the purchasers
of such Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made and (y) immediately prior
to the preparation of such amendment or supplement to such prospectus, notify
each seller of Registrable Securities of the anticipated preparation thereof;
(vii) enter into and perform customary agreements
(including an underwriting agreement in customary form with the Company
Underwriter, if any) and take such other actions as are prudent and reasonably
required in order to expedite or facilitate the disposition of such Registrable
Securities;
(viii) make available for inspection by any seller of
Registrable Securities, any managing underwriter participating in any
disposition pursuant to such Registration Statement, Holders' Counsel and any
attorney, accountant or other agent retained by any such seller or any managing
underwriter (each, an "Inspector" and collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and properties of the
Company and its subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due
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<PAGE> 9
diligence responsibility, and cause the Company's and its subsidiaries'
officers, directors and employees, and the independent public accountants of the
Company, to supply all information reasonably requested by any such Inspector in
connection with such Registration Statement. Records that the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (x)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in the Registration Statement, (y) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction or (z) the information in such Records was known to the Inspectors
on a non-confidential basis prior to its disclosure by the Company or has been
made generally available to the public. Each seller of Registrable Securities
agrees that it shall, upon learning that disclosure of such Records is sought in
a court of competent jurisdiction, give notice to the Company and allow the
Company, at the Company's expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential;
(ix) if such sale is pursuant to an underwritten
offering, use its reasonable efforts to obtain a "cold comfort" letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by "cold comfort" letters as Holders'
Counsel or the managing underwriter reasonably request;
(x) use its reasonable efforts to furnish, at the
request of any seller of Registrable Securities on the date such securities are
delivered to the underwriters for sale pursuant to such registration or, if such
securities are not being sold through underwriters, on the date the Registration
Statement with respect to such securities becomes effective, an opinion, dated
such date, of counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to the seller making
such request, covering such legal matters with respect to the registration in
respect of which such opinion is being given as such seller may reasonably
request and are customarily included in such opinions;
(xi) otherwise use its reasonable efforts to comply
with all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable but no later than fifteen
(15) months after the effective date of the Registration Statement, an earnings
statement covering a period of twelve (12) months beginning after the effective
date of the Registration Statement, in a manner which satisfies the provisions
of Section 11(a) of the Act and Rule 158 thereunder;
(xii) cause all such Registrable Securities to be
listed on each securities exchange on which similar securities issued by the
Company are then listed, provided that the applicable listing requirements are
satisfied;
(xiii) cooperate with each seller of Registrable
Securities and each underwriter participating in the disposition of such
Registrable Securities and their respective counsel in connection with any
filings required to be made with the NASD; and
(xiv) use reasonable efforts to take all other steps
necessary to effect the registration of the Registrable Securities contemplated
hereby.
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<PAGE> 10
(b) Seller Information. The Company may require each seller
of Registrable Securities as to which any registration is being effected to
furnish to the Company such information regarding the distribution of such
securities as the Company may from time to time reasonably request in writing.
(c) Notice to Discontinue. Each Designated Holder of
Registrable Securities agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 5(a)(vi), such
Designated Holder shall forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Designated Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 5(a)(vi) and, if so
directed by the Company, such Designated Holder shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
Designated Holder's possession, of the prospectus covering such Registrable
Securities which is current at the time of receipt of such notice. If the
Company shall give any such notice, the Company shall extend the period during
which such Registration Statement shall be maintained effective pursuant to this
Agreement (including, without limitation, the period referred to in Section
5(a)(ii)) by the number of days during the period from and including the date of
the giving of such notice pursuant to Section 5(a)(vi) to and including the date
when the Designated Holder shall have received the copies of the supplemented or
amended prospectus contemplated by and meeting the requirements of Section
5(a)(vi).
(d) Registration Expenses. The Company shall pay all
expenses (other than as set forth in Section 3(b)) arising from or incident to
the performance of, or compliance with, this Agreement, including, without
limitation, (i) SEC, stock exchange and NASD registration and filing fees, (ii)
all fees and expenses incurred in complying with securities or "blue sky" laws
(including reasonable fees, charges and disbursements of counsel in connection
with "blue sky" qualifications of the Registrable Securities), (iii) all
printing, messenger and delivery expenses, (iv) the fees, charges and
disbursements of counsel to the Company and of its independent public
accountants and any other accounting and legal fees, charges and expenses
incurred by the Company (including, without limitation, any expenses arising
from any special audits incident to or required by any registration or
qualification) and (v) any liability insurance or other premiums for insurance
obtained in connection with any registration pursuant to the terms of this
Agreement, regardless of whether such Registration Statement is declared
effective. All of the expenses described in this Section 5(d) are referred to
herein as "Registration Expenses."
6. Indemnification; Contribution Indemnification by the Company.
The Company agrees to indemnify and hold harmless, to the fullest extent
permitted by law, each Designated Holder, its officers, directors, trustees,
partners, members, employees, advisors and agents and each Person who controls
(within the meaning of the Act or the Exchange Act) such Designated Holder from
and against any and all losses, claims, damages, liabilities and expenses,
including reasonable costs of investigation (generally, "Damages"), arising out
of or based upon any untrue, or allegedly
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<PAGE> 11
untrue, statement of a material fact contained in any Registration Statement,
prospectus or preliminary prospectus or notification or offering circular (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are caused by or contained in any information concerning such Designated
Holder furnished in writing to the Company by such Designated Holder expressly
for use therein. The Company shall also provide customary indemnities to any
underwriters of the Registrable Securities, their officers, directors and
employees and each Person who controls such underwriters (within the meaning of
the Act and the Exchange Act) to the same extent as provided above with respect
to the indemnification of the Designated Holders of Registrable Securities.
(b) Indemnification by Designated Holders. In connection
with any Registration Statement in which a Designated Holder is participating
pursuant to Section 3 hereof, each such Designated Holder shall furnish to the
Company in writing such information with respect to such Designated Holder as
the Company may reasonably request or as may be required by law for use in
connection with any such Registration Statement or prospectus, and each
Designated Holder agrees to indemnify and hold harmless, to the fullest extent
permitted by law, the Company, any underwriter retained by the Company and their
respective directors, officers, employees and each Person who controls the
Company or such underwriter (within the meaning of the Act and the Exchange Act)
to the same extent as the foregoing indemnity from the Company to the Designated
Holders, but only with respect to any such information with respect to such
Designated Holder furnished in writing to the Company by such Designated Holder
expressly for use therein.
(c) Procedures. Any Person entitled to indemnification
hereunder (the "Indemnified Party") agrees to give prompt written notice to the
indemnifying party (the "Indemnifying Party") after the receipt by the
Indemnified Party of any written notice of the commencement of any action, suit,
proceeding or investigation or threat thereof made in writing for which the
Indemnified Party intends to claim indemnification or contribution pursuant to
this Agreement; provided, however, that the failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to the Indemnified Party hereunder. If notice of commencement
of any such action is given to the Indemnifying Party as above provided, the
Indemnifying Party shall be entitled to participate in and, to the extent it may
wish, jointly with any other Indemnifying Party similarly notified, to assume
the defense of such action at its own expense, with counsel chosen by it and
satisfactory to such Indemnified Party. The Indemnified Party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the Indemnified Party unless
(i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party
fails to assume the defense of such action with counsel satisfactory to the
Indemnified Party in its reasonable judgment or (iii) the named parties to any
such action (including any impleaded parties) have been advised by such counsel
that either (x) representation of such Indemnified Party and the Indemnifying
Party by the same counsel would be inappropriate under applicable standards of
professional conduct or (y) there may be one or more legal defenses available to
it which are different from or additional to and in conflict with those
available to the
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<PAGE> 12
Indemnifying Party and in such event, the Indemnifying Party shall pay the fees
and expenses of counsel to the Indemnified Party only to the extent that such
separate counsel is necessary under such applicable standards of professional
conduct in the case of the foregoing clause (x) or to the extent necessary to
avoid any conflict in the case of the foregoing clause (y). In either of such
cases, the Indemnifying Party shall not have the right to assume the defense of
such action on behalf of such Indemnified Party. No Indemnifying Party shall be
liable for any settlement entered into without its written consent, which
consent shall not be unreasonably withheld.
(d) Contribution. If the indemnification provided for in
this Section 6 from the Indemnifying Party is unavailable to an Indemnified
Party hereunder in respect of any Damages referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount of Damages paid or payable by such Indemnified Party in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions which
resulted in such Damages, as well as any other relevant equitable
considerations. The relative faults of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The parties
hereto agree that it would not be just and equitable if contribution pursuant to
this Section 6(d) were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations
referred to in this paragraph.
(e) Limitations. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to indemnification or contribution from any Person. Notwithstanding
anything to the contrary provided above, the total amount of Damages subject to
indemnification or contribution by any Designated Holder under this Section 6
shall not exceed the net proceeds received by such Designated Holder in the
offering to which the registration statement or prospectus relates.
7. Rule 144. From and after the IPO Effectiveness Date, the Company
covenants that it shall file any reports required to be filed by it under the
Exchange Act and that it shall take such further action as each Designated
Holder of Registrable Securities may reasonably request (including providing any
information necessary to comply with Rules 144 and 144A under the Act), all to
the extent required from time to time to enable such Designated Holder to sell
Registrable Securities without registration under the Act within the limitation
of the exemptions provided by (a) Rule 144 under the Act, as such rules may be
amended from time to time, or (b) any similar rules or regulations hereafter
adopted by the SEC. The Company shall, upon the request of any Designated Holder
of Registrable Securities, deliver to such Designated Holder a written statement
as to whether it has complied with such requirements.
8. Miscellaneous Recapitalizations, Exchanges, etc. The provisions
of this Agreement shall apply, to the full extent set forth herein with respect
to (i) the shares of Common Stock and
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(ii) to any and all equity securities of the Company or any successor or assign
of the Company (whether by merger, consolidation, sale of assets or otherwise)
which may be issued in respect of, in conversion of, in exchange for or in
substitution of, the Common Stock, and shall be appropriately adjusted for any
stock dividends, splits, reverse splits, combinations, recapitalizations and the
like occurring after the date hereof. The Company shall cause any successor or
assign (whether by sale, merger or otherwise) to enter into a new registration
rights agreement with the Designated Holders on terms substantially the same as
this Agreement as a condition of any such transaction.
(b) No Inconsistent Agreements. The Company shall not enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the Designated Holders in this Agreement or grant any
additional registration rights to any Person or with respect to any securities
which are not Registrable Securities which are prior in right to or inconsistent
with the rights granted in this Agreement.
(c) Remedies. The Designated Holders, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
shall be entitled to specific performance of their rights under this Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive in any action for specific performance the
defense that a remedy at law would be adequate.
(d) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless consented to in writing by (i) the Company and (ii)
Designated Holders owning at least 75% of the Registrable Securities. Any such
written consent shall be binding upon the Company and all of the Designated
Holders.
(e) Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be made
by registered or certified first-class mail, return receipt requested, courier
service, overnight mail or personal delivery as follows:
(i) if to the Company:
OptiMark Technologies, Inc.
10 Exchange Place, 12th Floor
Jersey City, New Jersey 07302
Telecopy: (201) 946-9435
Attention: Chief Executive Officer
with a copy to:
OptiMark Technologies, Inc.
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10 Exchange Place, 12th Floor
Jersey City, New Jersey 07302
Telecopy: (201) 946-9435
Attention: General Counsel
(ii) if to any Purchaser:
To the address of such Purchaser shown on
Schedule I hereto, or to any other address of
which a Purchaser may give notice to the
Company pursuant to this paragraph (e)
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; when delivered by courier
or overnight mail, if delivered by commercial courier service or overnight mail;
and five (5) Business Days after being deposited in the mail, postage prepaid,
if mailed.
(f) Successors and Assigns; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto. No Person other than the parties hereto
and their successors and permitted assigns is intended to be a beneficiary of
any of the rights granted hereunder.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
(j) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, it being
intended that all of the rights and privileges of the Designated Holders shall
be enforceable to the fullest extent permitted by law.
(k) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred
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to herein and in the Stock Purchase Agreement. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
(l) Further Assurances. Each of the parties shall execute
such documents and perform such further acts as may be reasonably required or
desirable to carry out or to perform the provisions of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed, or have caused to be
executed, this Agreement on the date first written above.
COMPANY:
--------
OPTIMARK TECHNOLOGIES, INC.
By: /s/ Phillip J. Riese
Chief Executive Officer
PURCHASERS:
-----------
See attached signature pages
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Signature Page
(to Registration Rights Agreement dated July 26, 1999)
Purchaser: SOFTBANK Capital Advisors Fund LP
By: SOFTBANK Capital Advisors Fund LLC,
General Partner
By: /s/ Ronald D. Fisher
<PAGE> 17
Signature Page
(to Registration Rights Agreement dated July 26, 1999)
Purchaser: SOFTBANK Capital Partners LP
By: SOFTBANK Capital Partners LLC,
General Partner
By: /s/ Ronald D. Fisher
<PAGE> 18
Schedule I
(to Registration Rights Agreement dated July 26, 1999)
NUMBER OF
EFFECTIVE SHARES OF
DATE OF SERIES C STOCK
CERT. NO. NAME AND ADDRESS OF PURCHASER PURCHASE PURCHASED
- --------- ----------------------------- -------- ---------
OTC-1 SOFTBANK Capital Partners LP 07/26/99 8,136,150
10 Langley Road, Suite 403
Newton Center, MA 02159-1972
Attn: Steven J. Murray
OTC-2 SOFTBANK Capital Advisors Fund LP 07/26/99 113,850
10 Langley Road, Suite 403
Newton Center, MA 02159-1972
Attn: Steven J. Murray
<PAGE> 1
Exhibit 4.12
SERIES D STOCK PURCHASE AGREEMENT
This Series D Stock Purchase Agreement (the "Agreement") made as of this
30th day of July, 1999, by and among (i) OptiMark Technologies, Inc., a Delaware
corporation (the "Company"), and (ii) the purchasers ("Purchasers") of the
Company's Series D Convertible Preferred Stock, $.01 par value per share
("Series D Stock") identified on Schedule I hereto.
SECTION 1. DEFINITIONS
In addition to other capitalized terms defined elsewhere herein, the
following terms shall have the indicated meanings:
1.1 "1933 Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder.
1.2 "Affiliate" of a Person means any corporation or other entity that is
or ever would have been considered a single employer with that Person under
ERISA ss. 400 1(b) or part of the same "controlled group" as that Person for
purposes of ERISA ss. 302(d)(8)(C).
1.3 "Audited Financial Statements" means the audited consolidated balance
sheets of the Company and its Subsidiaries as of December 31, 1997 and December
31, 1998, and the related statements of income, retained earnings and cash flows
of the Company and its Subsidiaries for the 12-month periods then ended
(together with the notes thereto), copies of which have been delivered to the
Purchasers.
1.4 "Board" means the board of directors of the Company as constituted
from time to time.
1.5 "CBOE Warrant" means a Common Stock Purchase Warrant dated December
31, 1996, pursuant to which The Chicago Board Options Exchange, Incorporated has
the right to purchase from the Company up to 1,227,828 shares of Common Stock at
an exercise price of $1.8325 per share, subject to potential adjustment as
provided therein.
1.6 "Certificate of Incorporation" means the Amended and Restated
Certificate of Incorporation of the Company, including the Certificate of
Designations with respect to the Series A Stock and the Certificate of
Designations with respect to the Series B Stock (as amended) attached thereto,
filed with the Delaware Secretary of State on or about May 29, 1998, and
Certificates of Increase with respect to the Series B Stock filed subsequent to
May 29, 1998 and the Series C Certificate of Designations..
1.7 "Code" means the Internal Revenue Code of 1986, as amended. For
purposes of this Agreement, all references to Sections of the Code shall include
any predecessor provisions to such Sections.
1.8 "Common Stock" means the voting and nonvoting common stock of the
Company, $.01 par value per share.
<PAGE> 2
1.9 "Consent of the Purchasers" means the vote at a meeting or executed
written consents in lieu of a meeting of one or more Purchasers owning at least
75% of the Series D Shares (including for such purposes, on a proportional
basis, any Conversion Shares into which any of the Series D Shares have been
converted and not sold to the public).
1.10 "Conversion Shares" means the shares of voting Common Stock or any
successor class of capital stock of the Company hereafter issued or issuable
upon conversion of the Series D Shares.
1.11 "Copyrights" means any foreign or United States copyright
registrations and applications for registration thereof and any non-registered
copyrights.
1.12 "Employee Program" means (a) all employee benefit plans within the
meaning of ERISA ss. 3(3), including but not limited to multiple employer
welfare arrangements (within the meaning of ERISA ss. 3(40)), plans to which
more than one unaffiliated employer contributes, and employee benefit plans
(such as foreign or excess benefit plans) which are not subject to ERISA and (b)
all stock or cash option plans, restricted stock plans, bonus or incentive award
plans, severance pay policies or agreements, deferred compensation agreements,
supplemental income arrangements, vacation plans, and all other employee benefit
plans, agreements, and arrangements not described in (a) above. In the case of
an Employee Program funded though an organization described in Code ss.
501(c)(9), each reference to such Employee Program shall include a reference to
such organization. An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides (or has promised to provide) benefits
under such Employee Program, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise covers
employees of such entity (or their spouses, dependents, or beneficiaries).
1.13 "Environmental Laws" means and includes any environmental or health
and safety-related law, regulation, rule, ordinance, or by-law at the federal,
state or local level, whether existing as of the date hereof or subsequently
enacted.
1.14 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.15 "Financial Statements" means and includes both the Audited Financial
Statements and the Unaudited Financial Statements, copies of both of which have
been delivered to the Purchasers.
1.16 "Hazardous Material" means and includes any hazardous waste,
hazardous material, hazardous substance, petroleum product, oil, toxic
substance, pollutant, contaminant, or other substance which may pose a threat to
the environment or to human health or safety, as defined or regulated under any
Environmental Law.
1.17 "Intellectual Property" means and includes Copyrights, Internet
Assets, Patents, Trade Secrets, Trademarks, Software and other proprietary
rights.
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1.18 "Internet Assets" means any internet domain names and other computer
user identifiers and any rights in and to sites on the worldwide web, including
rights in and to any text, graphics, audio and video files and html or other
code incorporated in such sites.
1.19 "IPO Effectiveness Date" means the date (if any) upon which the
Company commences its initial public offering pursuant to an effective
registration statement filed with the SEC under the 1933 Act.
1.20 "IRS" means the Internal Revenue Service.
1.21 "Judgment" means any judgment, injunction, writ, award, decree or
order of any nature from any arbitrator, court or governmental agency.
1.22 "Liabilities" means and includes any indebtedness, liabilities,
guaranties or other obligations of any nature, whether accrued, absolute,
contingent or otherwise, known or unknown, asserted or unasserted.
1.23 "Lien" means and includes any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other) or preference,
priority, right or other security interest or preferential arrangement of any
kind or nature whatsoever (excluding preferred stock and equity related
preferences), including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease obligation, or any financing lease
having substantially the same economic effect as any of the foregoing.
1.24 "Losses" means and includes losses, claims, damages, causes of
action, liabilities, penalties, fines and related interest and expenses,
including reasonable attorneys' fees and disbursements, and costs of
investigation, litigation, arbitration, enforcement and indemnification.
1.25 "Material Contracts" means and includes any employment contract;
stock redemption or purchase agreement; loan, capital lease or other financing
agreement; license, distributor, sales representation or OEM agreement;
agreements with any officers, directors, employees or stockholders of the
Company or any persons related to or affiliated with any such persons; leases;
agreements relating to the licensing, distribution, development or maintenance
of Software and related hardware; agreements with customers of the Company;
powers of attorney; pension, profit-sharing, retirement or stock option plans;
any other contract, obligation or commitment (whether written or oral) involving
actual or potential consideration of more than $100,000; or any contract,
obligation or commitment not entered into in the ordinary course of business.
1.26 "Multiemployer Plan" means an Employer Program to which more than one
employer contributes and which is maintained pursuant to one or more collective
bargaining agreements.
1.27 "NASDAQ Warrant" means the Warrant Agreement dated September 1, 1998
pursuant to which The Nasdaq Stock Market, Inc. has the right to purchase from
the Company up to 11,250,000 shares of voting Common Stock at exercise prices
ranging from $3.00 to $7.00 per share, subject to potential adjustment as
provided therein.
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1.28 "Neo Vision Lawsuit" means that complaint filed by Neo Vision
Hypersystems, Inc. against the Company on January 25, 1999 in the United States
Southern District of New York, a summary of which is included in Schedule 3.13
hereto.
1.29 "OptiMark(TM)" means the Company's proprietary "OptiMark(TM)"
securities trading system.
1.30 "Outstanding Rights" means and includes (a) the rights of the holder
under the PCX Warrant, (b) the rights of the holder under the NASDAQ Warrant,
(c) the rights of the holder under the CBOE Warrant, (d) the rights of the
holder under the VSC Warrant, (e) the rights of the holder under the
TransAmerica Warrant, (f) the right of Frank Egan to purchase from the Company
up to 40,000 shares of voting Common Stock at an exercise price of $10.00 per
share, (g) the right of Ramsey Beirne Partners, L.L.C. to purchase from the
Company up to 5,000 shares of voting Common Stock at an exercise price of $10.00
per share, (h) the right of BIOS Group, L.P. to purchase from the Company up to
5,000 shares of voting Common Stock at an exercise price of $10.00 per shares,
and (i) the rights of the holders of options and other rights to acquire Common
Stock, issued and reserved for issuance as incentives for the Company's
officers, directors, employees, former employees and consultants.
1.31 "Patents" means any foreign or United States patents and patent
applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or
resubmitted.
1.32 "Person" means any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company, governmental agency or other entity of any kind, and
shall include any successor (by merger or otherwise) of such entity.
1.33 "PCX Warrant" means the Common Stock Purchase Warrant dated August
27, 1996 pursuant to which The Pacific Exchange, Incorporated has the right to
purchase from the Company up to 2,104,000 shares of voting Common Stock at an
exercise price of $1.8325 per share, subject to potential adjustment as provided
therein.
1.34 "Purchasers" includes the Purchasers and their successors and assigns
with respect to the Series D Stock and the Conversion Shares.
1.35 "Registration Rights Agreement" means the Registration Rights
Agreement attached hereto as Exhibit A to be entered into between the Company
and the Purchasers.
1.36 "Requirement of Law" means, as to any Person, any law, statute,
treaty, rule, regulation, right, privilege, qualification, license, franchise or
Judgment, in each case applicable or binding upon such Person or any of its
property or to which such Person or any of its property is subject or pertaining
to any or all of the transactions contemplated or referred to herein.
1.37 "SEC" means the United States Securities and Exchange Commission
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1.38 "Securities Laws" means and includes the 1933 Act and all other
applicable federal, state and foreign securities laws.
1.39 "Series A Stock" means the Company's Series A Convertible
Participating Preferred Stock, $.01 par value per share, the rights, privileges,
preferences, limitations and qualifications of which are set forth in the
Certificate of Designations attached to the Company's Certificate of
Incorporation.
1.40 "Series B Stock" means the Company's Series B Convertible
Participating Preferred Stock, $.01 par value per share, the rights, privileges,
preferences, limitations and qualifications of which are set forth in the
Certificate of Designations attached to the Company's Certificate of
Incorporation.
1.41 "Series C Stock" means the Company's Series C Convertible Preferred
Stock, $.01 par value per share, the rights, privileges, preferences,
limitations and qualifications of which are set forth in the Series C
Certificate of Designations.
1.42 "Series C Certificate of Designations" means that Certificate of
Powers, Designations, Preferences and Rights setting forth the rights,
privileges, preferences, limitations and qualifications of the Series C Stock
filed with the Delaware Secretary of State.
1.43 "Series D Stock" means the Company's Series D Convertible Preferred
Stock, $.01 par value per share, the rights, privileges, preferences,
limitations and qualifications of which are set forth in the Series D
Certificate of Designations.
1 44 "Series D Certificate of Designations" means that Certificate of
Powers, Designations, Preferences and Rights substantially in the form attached
hereto as Exhibit B setting forth the rights, privileges, preferences,
limitations and qualifications of the Series D Stock.
1 45 "Series D Shares" means the shares of Series D Stock being sold by
the Company to the Purchasers pursuant to this Agreement.
1.46 "Software" means any computer software programs, source code, object
code, data and related documentation.
1.47 "Stockholders Agreement" means the Amended and Restated Stockholders
Agreement dated April 23, 1998, among the Company, the holders of the Series A
Stock, and certain other stockholders of the Company, as amended from time to
time.
1.48 "Subsidiary" means any corporation or other entity (a) a majority of
which is owned or previously was owned by the Company, or (b) which the Company
otherwise directly or indirectly controls or previously controlled.
1.49 "Taxes" means and includes all federal, state, local, foreign and
other taxes and governmental assessments and levies, including without
limitation income taxes, alternative minimum
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<PAGE> 6
taxes, sales taxes, franchise taxes, excise taxes, employment and payroll taxes,
estimated taxes, withholding taxes, transfer taxes, and all associated fines,
penalties and interest.
1.50 "Trade Secrets" means and includes any trade secrets, research
records, processes, procedures, manufacturing formulae, technical know-how,
technology, blueprints, designs, plans, inventions (whether patentable and
whether reduced to practice), invention disclosures and improvements thereto.
1.51 "Trademarks" means and includes any foreign or United States
trademarks, service marks, trade dress, trade names, brand names, designs and
logos, corporate names, product or service identifiers, whether registered or
unregistered, and all registrations and applications for registration thereof
1.52 "Transaction Documents" means collectively this Agreement, the Series
D Certificate of Designations and the Registration Rights Agreement.
1.53 "TransAmerica Warrant" means the Common Stock Purchase Warrant dated
June 19, 1998, issued in connection with the Company's receipt of a $5,000,000
line of credit for equipment leasing purposes, under which TransAmerica Business
Credit Corporation has the right to purchase from the Company up to 42,500
shares of voting Common Stock at a price of $10.00 per share, subject to
potential adjustment as provided therein.
1.54 "Unaudited Financial Statements" as of any date means the most
recently available unaudited consolidated balance sheet of the Company and its
Subsidiaries as of that date, and the related statements of income and cash flow
of the Company and its Subsidiaries for the year or partial year then ended.
1.55 "Voting Agreement" means the Voting Agreement dated July 17, 1996
among some of the stockholders of the Company.
1.56 "VSC Warrant" means the Common Stock Purchase Warrant dated April 23,
1998 pursuant to which Virginia Surety Company, Inc. has the right to purchase
from the Company up to 500,000 shares of voting Common Stock at an exercise
price of $10.00 per share, subject to potential adjustment as provided therein.
SECTION 2. TERMS OF PURCHASE
2.1 General. The Company shall authorize the issuance and sale to the
Purchasers of two hundred fifty thousand shares of its Series D Stock. At the
Closing, the Company shall sell to each Purchaser and, subject to the terms and
conditions set forth herein, each Purchaser shall purchase from the Company the
number of shares of Series D Stock set forth opposite such Purchaser's name on
the Schedule I hereto at a price of $12.00 per Series D Share. The sale of
Series D Stock to each Purchaser shall constitute a separate sale hereunder.
2.2 Closing. The closing of the purchase and sale of the Series D Stock
(the "Closing") shall take place by facsimile on July 30, 1999, by facsimile, or
at such other time and date as may be
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mutually agreeable to by the Company and the Purchasers, but in no event later
than August 15,, 1999. At the Closing, the Company shall deliver to the
Purchaser stock certificates evidencing the Series D Shares to be purchased by
the Purchaser, registered in the Purchaser's name, upon payment of the purchase
price thereof by wire transfer of immediately available funds to the Company.
2.3 Conditions to Closing. The obligation of the Purchaser to purchase and
pay for the Series D Stock at the Closing and the Company's obligation to sell
the Series D Stock at the Closing is subject to the satisfaction as of the date
of the Closing of the following conditions:
(a) The Company and each Purchaser will mutually execute and deliver
the Registration Rights Agreement.
(b) The Company will deliver to the Purchasers an Officer's
Certificate as to (i) the due adoption and continuing effectiveness of the
resolutions of the Board, attached thereto, approving the Transaction Documents
and all transactions contemplated thereby, (ii) the accuracy and continuing
effectiveness of the Certificate of Incorporation, as amended by the Series D
Certificate of Designation, and Bylaws of the Company attached thereto, and
(iii) the incumbency and specimen signature of each officer executing the
Transaction Documents and the other closing documents on behalf of the Company.
(c) The representations and warranties made by the Company contained
in Section 3 hereof shall be true and correct in all material respects at and as
of the Closing as though then made and certified as such in writing at and as of
the Closing, except to the extent of changes caused by the transactions
expressly contemplated herein, but excluding any disclosures made by the Company
as provided in Section 3 hereof.
(d) The representations and warranties made by the Purchasers
contained in Section 4 hereof shall be true and correct in all material respects
at and as of the Closing as though then made and certified as such in writing at
and as of the Closing.
(e) The Company will deliver to the Purchasers a written opinion of
counsel to the Company, in form and substance reasonably satisfactory to the
Purchasers, as to certain legal matters of potential importance to the
Purchasers.
(f) The Company shall have duly adopted, executed and filed with the
Secretary of State of Delaware the Series D Certificate of Designations. The
Series D Certificate of Designations shall be in full force and effect as of the
Closing under the laws of the State of Delaware and shall not have been amended
or modified.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
To induce the Purchasers to enter into and consummate this Agreement,
effective as of the date hereof and at and as of the Closing unless otherwise
expressly indicated, the Company represents and warrants to the relevant
Purchasers as follows:
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3.1 Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is qualified to do business as a foreign corporation in each
jurisdiction in which the failure to qualify would have a material adverse
effect on the Company. The Company has all required corporate power and
authority to own and operate its property, to lease the property it operates as
lessee, to carry on its business as presently conducted or contemplated, to
enter into and perform the Transaction Documents and the agreements contemplated
thereby, and generally to carry out the transactions contemplated hereby and
thereby. Except as set forth on Schedule 3.1, the Company does not own or lease
real property in any jurisdiction other than its jurisdiction of incorporation
and the jurisdictions in which it is qualified to do business as a foreign
corporation. The copies of the Certificate of Incorporation and Bylaws of the
Company, each as amended to date, which have been furnished to the Purchaser,
are correct and complete at the date hereof. The Company is not in violation of
any term of its Certificate of Incorporation or Bylaws.
3.2 Authorization. The Transaction Documents and all documents and
instruments to be executed pursuant thereto have been or, as of the Closing,
will be duly executed and delivered by the Company and constitute legal, valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms. The execution, delivery and performance of the
Transaction Documents and all documents and instruments contemplated thereby and
the delivery and issuance of the Series D Shares and, upon conversion of the
Series D Shares, the Conversion Shares have been duly authorized by all
necessary corporate or other action of the Company. Other than the filing of the
Series D Certificate of Designations, the routine filing of a Form D with the
SEC and any required filings under state securities laws, no consent, approval
or authorization of, or designation, declaration or filing with, any Person, and
no lapse of a waiting period, is required of the Company in connection with the
execution, delivery and performance of the Transaction Documents, or the
issuance and delivery by the Company of the Series D Shares in accordance with
the terms of this Agreement and, upon conversion of the Series D Shares, the
Conversion Shares, or the performance or consummation of any other transaction
contemplated thereby.
3.3 Non-Contravention. The execution, delivery and performance by the
Company of the Transaction Documents and each of the other agreements and
instruments to which it is a party and which are contemplated thereby will not
(a) conflict with or result in any default under (i) any contract, obligation or
commitment of the Company, or (ii) any provision of the Certificate of
Incorporation or Bylaws of the Company or any amendment thereof; (b) result in
the creation of any Lien of any nature upon any of the properties or assets of
the Company; or (c) violate any Judgment or Requirement of Law applicable to the
Company. The Company has not previously entered into any contract, obligation or
commitment which is currently in effect or by which the Company is currently
bound, granting any rights to any Person which are inconsistent with the rights
to be granted by the Company in the Transaction Documents or any of the
agreements contemplated by the Transaction Documents.
3.4 Capitalization of the Company.
(a) The authorized capital stock of the Company consists of (i)
150,000,000 shares of Common Stock, of which 148,500,000 shares are voting
Common Stock and 1,500,000 shares are
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<PAGE> 9
nonvoting Common Stock, and (ii) 40,000,000 shares of preferred stock, $.01 par
value per share ("Preferred Stock"). No Certificate of Designation has been or
will be filed with the Delaware Secretary of State with respect to the Company's
Preferred Stock except the Certificate of Designations for the Series A Stock,
the Certificate of Designations for the Series B Stock, the Series C Certificate
of Designations and the Series D Certificate of Designations. As of the date
hereof, there were outstanding (x) 36,410,490 shares of Common Stock, including
35,670,490 shares of voting Common Stock and 740,000 shares of nonvoting Common
Stock, (y) 3,222,068 shares of Series A Stock and (z) 11,000,000 shares of
Series B Stock. All outstanding shares of Preferred Stock and Common Stock are
duly and validly issued, fully paid and nonassessable. The 3,222,068 outstanding
shares of Series A Stock are convertible into a total of 12,888,272 shares of
voting Common Stock. The 11,000,000 outstanding shares of Series B Stock are
convertible into a total of 11,000,000 shares of voting Common Stock. The
8,250,000 shares of Series C Stock reserved for issuance will be convertible
into a total of 8,250,000 shares of voting Common Stock. As of the date hereof,
the Company has reserved an aggregate of 250,000 shares of voting Common Stock
for issuance upon conversion of the Series D Stock. Except for the Series A
Stock, the Series B Stock, the Series C Stock, the Series D Stock and the
Outstanding Rights, as of the date hereof there are no outstanding warrants,
options or other rights or obligations to purchase or acquire any Common Stock
or other securities of the Company from the Company. All of the outstanding
shares of capital stock of the Company (including the Series D Shares) have been
offered, issued, sold and delivered in compliance with all applicable federal
and state securities laws. The Series D Shares have been duly and validly
authorized and, when delivered and paid for pursuant to this Agreement, will be
validly issued, fully paid and nonassessable. Assuming sale of all 250,000
available shares of Series D Stock, the Series D Stock will be initially
convertible into 250,000 shares of voting Common Stock which will represent
approximately .2% of the Common Stock on a fully-diluted basis after giving
effect to the issuance of all shares reserved for issuance upon conversion of
the Series A Stock, the Series B Stock, the Series C Stock, the Series D Stock,
the nonvoting Common Stock and under the Outstanding Rights. The Conversion
Shares are duly authorized and, when issued in compliance with the Company's
Certificate of Incorporation, will be validly issued, fully paid and
nonassessable and will be issued in compliance with the registration and
qualification requirements of all applicable federal and state securities laws.
The Company effected a four-for-one Common Stock split in mid-1997, and all of
the numbers in this paragraph reflect that split.
(b) There are no preemptive rights or rights of first refusal with
respect to the issuance or sale of the Company's capital stock, other than
rights to which certain holders of the Company's capital stock are entitled as
set forth in the Stockholders Agreement. There are no restrictions on the
transfer of the Company's Preferred Stock (including Series D Shares) or the
Conversion Shares other than those arising from the Securities Laws and the
Stockholders Agreement, if applicable. Except for (i) the Registration Rights
Agreement, (ii) a registration rights agreement dated August 26, 1996, as
amended, in favor of the holders of the Series A Stock, (iii) a registration
rights agreement dated April 23 1998, as amended, in favor of the holders of the
Series B Stock, (iv) a registration rights agreement to be entered into in favor
of the holder of the Series C Stock, (v) a registration rights agreement in
favor of the holder of the NASDAQ Warrant, and (vi) the Voting Agreement, the
Company is not party to and is not bound by (and, to the Company's knowledge, no
stockholder of the Company is a party to or otherwise bound by) any agreement
with respect to (x) the voting of any
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of the Company's capital stock, or (y) the registration of such capital stock
for offering to the public pursuant to the 1933 Act.
(c) Except as otherwise set forth on Schedule 3.4, the Company owns
no Subsidiaries or investments in any other corporation or business
organization.
3.5 Financial Statements. The Financial Statements were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, except that the Unaudited Financial Statements have been prepared without
footnote disclosures and year-end audit adjustments, which the Company believes
will not, in any event, be material. All of such Financial Statements fairly
represent the financial condition of the Company and its Subsidiaries as of the
date thereof, and are true, correct and complete as of the date thereof in all
material respects. Nothing has come to the attention of the management of the
Company since such dates which would indicate that the Financial Statements were
not true and correct as of the date thereof
3.6 Absence of Undisclosed Liabilities. Between the date of the most
recent Financial Statements and the Closing, except as and to the extent
disclosed in Schedule 3.6, the Company did not incur any Liabilities that are
(a) individually in excess of $100,000 or (b) in the aggregate in excess of
$250,000, other than (i) Liabilities fully and adequately reflected or reserved
against on the Financial Statements and (ii) Liabilities incurred in the
ordinary course of business. As of the date of the Closing, the Company has no
knowledge of any circumstance, condition, event or arrangement that may
hereafter give rise to any Liabilities of the Company except in the ordinary
course of business or as otherwise set forth on Schedule 3.6.
3.7 Absence of Certain Developments. Except as disclosed in Schedule 3.7,
between the date of the most recent Financial Statements and the Closing, there
was (i) no material adverse change in the condition, financial or otherwise, of
the Company or in the assets, liabilities, business or prospects of the Company,
(ii) no declaration, setting aside or payment of any dividend or other
distribution with respect to, or any direct or indirect redemption or
acquisition of, any of the capital stock of the Company, (iii) no waiver of any
right of the Company or cancellation of any debt or claim held by the Company,
(iv) no loan by the Company to any officer, director, employee or stockholder of
the Company, any affiliates of any of the foregoing, or any agreement or
commitment therefor, (v) no material loss, destruction or damage to any property
of the Company, whether or not insured, (vi) no labor trouble involving the
Company and no material change in the personnel of the Company or the terms and
conditions of their employment, and (vii) no acquisition or disposition of any
assets (or any contract or arrangement therefor) nor any other transaction by
the Company otherwise than for fair value in the ordinary course of business.
3.8 Accounts Receivable. Except as disclosed on Schedule 3.8, the Company
has no accounts receivable from any Person which is affiliated with the Company
or any of its directors, officers, employees or shareholders or any affiliates
of any of the foregoing.
3.9 Debt. Schedule 3.9 sets forth (a) a list of all agreements for
incurring of indebtedness for borrowed money to which the Company is a party,
(b) the amount of all indebtedness under each such agreement, (c) the Liens that
relate to such indebtedness and that encumber the assets of the
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Company, and (d) the name of the lender thereof. None of the obligations
pursuant to such agreements are subject to acceleration by reason of the
consummation of the transactions contemplated hereby, nor would the execution of
the Transaction Documents or the consummation of the transactions contemplated
thereby result in any default under such agreements.
3.10 Title to Properties. Except as set forth on Schedule 3.10, the
Company has good and marketable title to all of its properties and assets (other
than Intellectual Property, which is addressed by ss. 3.13 below), free and
clear of all Liens, and such properties and assets constitute all of the assets
necessary for the conduct of the Company's business as presently conducted and
as presently contemplated to be conducted. All machinery and equipment included
in such properties which is necessary to the business of the Company is in good
condition and repair and all leases of real or personal property to which the
Company is a party are in full force and effect and afford the Company peaceful
and undisturbed possession of the subject matter of the lease. The Company is
not in violation of any Requirement of Law applicable to the operation of its
owned or leased properties, nor has the Company received any written notice of
violation with which it has not complied.
3.11 Tax Matters.
(a) The Company has paid or caused to be paid all Taxes required to
be paid by it through the date hereof, whether disputed or not. All Taxes which
the Company is required to withhold or collect have been withheld and collected
and have been paid over to the proper governmental authorities. The Company has,
in accordance with applicable law, timely and properly filed all Tax returns or
extensions required to be filed by it through the date hereof, all such returns
correctly and accurately set forth the amount of any Taxes relating to the
applicable period, and any deductions from, or credits against, any Taxes or
taxable income relating to such returns are in all material respects valid and
proper items of deduction or credit.
(b) Neither the IRS nor any other governmental authority is now
asserting or, to the knowledge of the Company, threatening to assert against the
Company any deficiency or claim for additional Taxes. No claim has ever been
made by an authority in a jurisdiction where the Company does not file reports
and returns that the Company is or may be subject to taxation by that
jurisdiction. There are no Liens on any of the assets of the Company that arose
in connection with any failure (or alleged failure) to pay any Taxes. The
Company has never entered into a closing agreement pursuant to ss. 7121 of the
Code. The Company is not and never has been a "personal holding company" as
defined under Section 541 of the Code. There has not been any audit of any tax
return filed by the Company, no such audit is in progress, and the Company has
not been notified by any tax authority that any such audit is contemplated or
pending. To the best of the Company's knowledge, the Company does not have any
liability for the Taxes of any person or entity other than the Company and its
Subsidiaries.
3.12 Contracts and Commitments. Except as provided on Schedule 3.12, the
Company is not a party to any Material Contract. The Company does not know of
any basis for the termination, expiration or modification of any such Material
Contracts. Neither the Company nor, to the knowledge of the Company, any other
party thereto is in default under any Material Contract and, to the best
knowledge of the Company, there is no current state of facts which upon notice
or lapse of
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<PAGE> 12
time or both would constitute such a default. The Company does not have any
liability for renegotiation of any government contracts or subcontracts.
3.13 Intellectual Property.
(a) Schedule 3.13 sets forth all Patents, Trademarks and registered
Copyrights owned by, and applications for any of the above filed by, the Company
specifying as to each item, as applicable: (i) the category of Intellectual
Property; (ii) the jurisdiction in which the item is issued or registered or in
which any application for issuance or registration has been filed, including the
respective issuance, registration or application number; (iii) the date of
application, issuance or registration; and (iv) with respect to any Trademarks,
the class or classes of goods or services on which each such Trademark is or is
intended to be used. None of the Intellectual Property of the Company is subject
to any outstanding Judgment, and, except as set forth in Schedule 3.13, no
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand is pending or, to the knowledge of the Company, threatened, which
challenges the validity, enforceability, use or ownership of the Intellectual
Property of the Company, nor does the Company know of any valid basis for any
such claim, or any prior art, or any act or omission or failure to act which may
render the Intellectual Property invalid or unenforceable.
(b) Schedule 3.13 sets forth all material licenses, sublicenses and
other agreements under which the Company is either a licensor or licensee of any
Intellectual Property, except such licenses, sublicenses and other agreements
relating to prepackaged software used solely on the computers of the Company.
The Company has substantially performed all obligations imposed upon it
thereunder, and neither the Company nor, to the knowledge of the Company, any
other party thereto, is in breach of or default thereunder in any respect, nor
is there any current event which with notice or lapse of time or both would
constitute a default thereunder. All of the licenses listed on Schedule 3.13 are
valid, enforceable and in full force and effect, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity relating to
enforceability (regardless of whether considered in a proceeding at law or in
equity).
(c) To the knowledge of the Company, none of the Intellectual
Property currently sold or licensed by the Company to any Person or used by or
licensed to the Company infringes upon or otherwise violates any Intellectual
Property rights of others. Except as set forth on Schedule 3.13, no claim is
pending or, to the knowledge of the Company, threatened which challenges the
freedom of the Company to conduct its business as presently conducted.
(d) Except as set forth on Schedule 3.13, no litigation, action,
suit, proceeding, arbitration, claim, complaint, dispute or investigation is
pending or, to the knowledge of the Company, threatened against the Company,
contesting the right of the Company to sell or license to any Person or use the
Intellectual Property presently sold or licensed to such Person or used by the
Company, nor does the Company know of any valid basis for any such claim.
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<PAGE> 13
(e) To the knowledge of the Company, no Person is infringing upon or
otherwise violating the Intellectual Property rights of the Company.
(f) Except as set forth on Schedule 3.13, the Company has not agreed
to indemnify any person against any charge of infringement or other violation
with respect to any Intellectual Property owned or used by the Company.
(g) No former employer of any employee of the Company, and no
current or former client of any consultant of the Company, has made a claim
against the Company or, to the knowledge of the Company, against any other
Person, that such employee or such consultant is utilizing proprietary
information of such former employer or client.
(h) Except as set forth on Schedule 3.13, the Company is not a party
to or bound by and, upon the consummation of the transactions contemplated by
this Agreement, will not be a party to or bound by any license or other
agreement requiring the payment of any material royalty payment, excluding such
agreements relating to prepackaged software licensed for use solely on the
computers of the Company.
(i) To the knowledge of the Company, no employee of the Company is
in violation of any Requirement of Law applicable to such employee's employment,
or any term of any employment agreement, patent or invention disclosure
agreement or other contract or agreement relating to the relationship of such
employee with the Company.
(j) Since January 1995, each employee and officer of the Company who
has had access to OptiMark(TM) has executed an agreement regarding
confidentiality, proprietary information and assignment of inventions to the
Company and, to the knowledge of the Company, none of such employees and
officers are in violation of such agreements.
(k) To the knowledge of the Company, none of the Trade Secrets of
the Company, the value of which is contingent upon the continued maintenance of
the confidentiality thereof, has been disclosed to any Person other than
employees, representatives and agents of the Company, except (A) where the
Company determined that such disclosure was necessary to conduct the business of
the Company, such disclosure not having a material adverse effect on the
Company, (B) as required pursuant to the filing of a Patent application by the
Company, or (C) under a confidentiality agreement.
(l) The Company has the exclusive right to file, procure and
maintain all applications and registrations for the Intellectual Property owned
by the Company.
(m) To the present knowledge of the Company, all Patents, Trademarks
and Copyrights owned by the Company are valid. The Company has taken
commercially reasonable efforts to maintain and protect its Intellectual
Property.
(n) The Intellectual Property owned by the Company is free and clear
of all Liens.
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<PAGE> 14
3.14 Litigation. Except as otherwise set forth on Schedule 3.14 hereto,
there is no litigation, arbitration or governmental proceeding pending or, to
the knowledge of the Company, threatened against the Company or any of its
Subsidiaries, which could, if adversely determined, (i) call into question the
validity or hinder the enforceability or performance of the Transaction
Documents or the agreements and transactions contemplated thereby or (ii) have a
materially adverse effect on the assets, liabilities, business, condition
(financial or otherwise), or prospects of the Company; nor, to the best
knowledge of the Company, has there occurred any event nor does there exist any
condition on the basis of which any litigation, proceeding or investigation
might properly be instituted.
3.15 Offerees. Neither the Company nor anyone acting on its behalf has
sold, offered or solicited offers to buy any securities of the Company so as to
bring the offer, issuance or sale of the Series D Shares or the Conversion
Shares, as contemplated by this Agreement, within the provisions of Section 5 of
the 1933 Act, unless such offer, issuance or sale was within the exemptions of
the 1933 Act. Assuming the accuracy of the representations of the Purchasers in
Section 4 below, the Company has complied with all Securities Laws in connection
with the issuance and sale of the Series D Shares.
3.16 Business; Compliance with Laws. The Company has all material
franchises, permits, licenses, orders, approvals and all other rights and
privileges necessary to permit it to own its property and to conduct its
business as it is presently conducted and as it is presently contemplated to be
conducted (collectively, "Permits"). Such Permits are in full force and effect.
The Company is not in violation in any respect of any Requirement of Law,
Judgment or Permit. The Company is in compliance, in all respects, with all
material federal, state and local laws and regulations (including all applicable
environmental laws and regulations, whether material or immaterial) relating to
its business as presently conducted. Neither the Company nor any officer or
director of the Company has been (a) subject to voluntary or involuntary
petition under the federal bankruptcy laws or any state insolvency law or the
appointment of a receiver, fiscal agent or similar officer by a court for its or
his business or property; (b) convicted in a criminal proceeding or named as a
subject of a pending criminal proceeding (excluding traffic violations and other
minor offenses); (c) subject to any Judgment (not subsequently reversed,
suspended or vacated) permanently or temporarily enjoining it or him from, or
otherwise imposing limits or conditions on its or his, engaging in any
securities, investment advisory, banking, insurance or other type of business or
acting as an officer or director of a public company; or (d) found by a court of
competent jurisdiction in a civil action or by the SEC or the Commodity Futures
Trading Commission to have violated any federal or state commodities, securities
or unfair trade practices law, which such judgment or finding has not been
subsequently reversed, suspended, or vacated.
3.17 Information Supplied to Purchasers. Neither the Transaction
Documents, nor the Schedules and Exhibits attached thereto or any document
referenced therein, nor any certificate, projection or statement (whether oral
or written) furnished to the Purchasers by or on behalf of the Company, contains
any untrue statement of a material fact, and none of the Transaction Documents,
the Schedules and Exhibits attached thereto or such other documents,
certificates, projections or statements referenced therein, when taken together,
omits to state a material fact necessary in order to make the statements
contained therein not misleading. There is no material fact directly relating to
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<PAGE> 15
the assets, liabilities, business, condition (financial or otherwise) or
prospects of the Company (other than facts which relate to general economic
trends or conditions) known to the Company that materially adversely affects or
in the future may reasonably be expected to materially adversely affect the same
that has not been set forth in this Agreement or in the Schedules and Exhibits
attached hereto.
3.18 Investment Banking; Brokerage. No broker, finder, agent or similar
intermediary has acted on behalf of the Company in connection with this
Agreement or the transactions contemplated hereby, and there are no brokerage
commissions, finder's fees or similar fees or commissions payable to any Person
as a result of any actions taken by the Company in connection with the
transactions contemplated hereby.
3.19 Environmental Matters.
(a) The Company has never generated, transported, used, stored,
treated, disposed of, or managed any Hazardous Material. No Hazardous Material
has ever been or, to the best knowledge of the Company, is threatened to be
spilled, released, or disposed of by the Company, at any site presently or
formerly owned, operated, leased, or used by the Company, or, to the knowledge
of the Company, no Hazardous Material of the Company has ever come to be located
in the soil or groundwater at any such site. No Hazardous Material of the
Company has ever been transported from any site presently or formerly owned,
operated, leased, or used by the Company for treatment, storage, or disposal at
any other place. To the knowledge of the Company, the Company presently does not
own, operate, lease, or use, nor has the Company previously owned, operated,
leased, or used, any site on which underground storage tanks are or were
located. No Lien has ever been imposed by any governmental agency on any
property, facility, machinery, or equipment owned, operated, leased, or used by
the Company with the presence of any Hazardous Material and based upon any
action or inaction of the Company.
(b) The Company has no material liability under, nor has it ever
violated in any material respect, any Environmental Law. The Company and, to the
Company's knowledge, any property owned, operated, leased, or used by the
Company, and any facilities and operations thereon are presently in compliance
in all material respects with all applicable Environmental Laws. The Company has
never entered into or been subject to any Judgment with respect to any
environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law.
(c) For purposes of this ss.3.19, the term "Company" shall include
the Company, its Subsidiaries and their Affiliates, and any predecessors of the
Company, its Subsidiaries and their Affiliates.
3.20 Employee Benefit Programs.
(a) Schedule 3.20 sets forth a list of every Employee Program that
has been maintained by the Company at any time since January 1, 1995.
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<PAGE> 16
(b) Each Employee Program which has ever been maintained by the
Company and which has at any time been intended to qualify under ss.401 (a) or
ss.501 (c)(9) of the Code has received a favorable determination or approval
letter from the IRS regarding its qualification under such section and, to the
best knowledge of the Company, has in fact, been continuously qualified under
the applicable section of the Code since the effective date of such Employee
Program. No event or omission has occurred which would cause any such Employee
Program to lose its qualification under the applicable Code section.
(c) Each Employee Program that has ever been maintained by the
Company has been maintained in material compliance with all applicable laws.
With respect to any Employee Program ever maintained by the Company, there has
occurred no "prohibited transaction," as defined in Section 406 of ERISA or
Section 4975 of the Code (for which there exists neither a statutory nor
regulatory exception), or material breach of any duty under ERISA or other
applicable law (including, without limitation, any health care continuation
requirements or any other tax law requirements, or conditions to favorable tax
treatment, applicable to such plan or to any person in regard to such plan),
which could result, directly or indirectly (including, without limitation,
through any obligation of indemnification or contribution), in any taxes,
penalties or other liability to the Company or any of its affiliates. No
litigation, arbitration, or governmental administrative proceeding (or
investigation) or other proceeding (other than those relating to routine claims
for benefits) is pending or, to the best knowledge of the Company, threatened
with respect to any such Employee Program.
(d) Neither the Company nor any Affiliate (i) has ever maintained
any Employee Program which has been subject to Title IV of ERISA or Section 412
of the Code (including, but not limited to, any Multiemployer Plan) or (ii) has
ever provided health care or any other non-pension benefits to any employees
after their employment is terminated (other than as required by part 6 of
subtitle B of Title I of ERISA) or has ever promised to provide such
post-termination benefits.
(e) With respect to each Employee Program maintained by or on behalf
of the Company or any Affiliate within the three (3) years preceding the
Closing, complete and correct copies of the following documents (if applicable
to such Employee Program) have been made available to the Purchasers: (i) all
documents embodying or governing such Employee Program, and any funding medium
for the Employee Program (including, without limitation, trust agreements), as
they may have been amended to the date hereof; (ii) the most recent IRS
determination or approval letter with respect to such Employee Program under
Code ss.401 or ss.501(c)(9), and any applications for determination or approval
subsequently filed with the IRS; (iii) the three most recently filed IRS Forms
5500, with all applicable schedules and accountants' opinions attached thereto;
(iv) the summary plan description for such Employee Program (or other
descriptions of such Employee Program provided to employees) and all
modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy and any excess loss policy) related to such Employee
Program; (vi) any documents evidencing any loan to an Employee Program that is a
leveraged employee stock ownership plan; and (vii) all other materials
reasonably necessary for the Company to perform any of its responsibilities with
respect to any Employee Program subsequent to the Closing (including, without
limitation, health care continuation requirements).
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<PAGE> 17
(f) With respect to each Employee Program maintained by the Company
or its Affiliates, no event has occurred, and there exists no condition or
current set of circumstances in connection with which the Company could,
directly or indirectly (through a Commonly Controlled Entity or otherwise), be
subject to any liability under ERISA, the Code or any other applicable law,
except liability for benefits claims and funding obligations payable in the
ordinary course.
(g) Each Employee Program maintained by the Company or Affiliate
that is a "group health plan" (as defined in ERISA ss. 607(1) or Code ss.
5001(b)(1)) has been operated at all times in compliance with the provisions of
COBRA and any applicable similar state law.
(h) The consummation of the transactions contemplated by this
Agreement will not: (i) entitle any current or former employee to severance pay,
unemployment compensation or any similar payment; (ii) accelerate the time of
payment or vesting, or increase the amount of any compensation due to, or in
respect of, any current or former employee; (iii) result in or satisfy a
condition to the payment of compensation that would, in combination with any
other payment, result in an "excess parachute payment" within the meaning of
Code 280G(b); or (iv) constitute or involve a prohibited transaction (as defined
in ERISA ss. 502(1)) or otherwise violate Part 4 of Subtitle B of Title I of
ERISA.
3.21 Product and Services Claims. There are no pending or, to the best of
the Company's knowledge, threatened product or service claims with respect to
any products manufactured or services provided by the Company nor are there any
facts upon which a claim of such nature could reasonably be anticipated to be
based. The Company does not have any contractual liability for breach of
warranty or service claims. No claims have been made against the Company for
renegotiation or price redetermination of any business transaction resulting
from or relating to defective products or services, and, to the best of the
Company's knowledge, there are no current facts upon which any such claim could
reasonably be anticipated to be based.
3.22 Employees: Labor Matters. As of May 15, 1999, the Company employed a
total of approximately 319 full-time employees. The Company believes it enjoys
good employer-employee relationships. To the best of the Company's knowledge,
the Company is not delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed to the date hereof or amounts required to be reimbursed to such
employees. The Company does not have any policy, practice, plan or program of
paying severance pay or any form of severance compensation in connection with
the termination of employment, except as set forth in Schedule 3.22. All of the
Company's programs and arrangements in connection with the payment of
commissions are described in Schedule 3.22. To the best of the Company's
knowledge, the Company is in material compliance with all Requirements of Law
respecting labor, employment, fair employment practices, work-place safety and
health, terms and conditions of employment, and wages and hours. There are no
charges of employment discrimination or unfair labor practices, nor are there
any strikes, slowdowns, stoppages of work, or any other concerted interference
with normal operations which are existing, pending or, to the best of the
Company's knowledge, threatened against or involving the Company. The Company
has not received any information indicating that any of its employment policies
or practices is currently being audited or investigated by any federal, state or
local government agency. To the best of the Company's
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knowledge, the Company is, and at all times since its incorporation has been, in
material compliance with the requirements of the Immigration Reform Control Act
of 1986.
3.23 Trade Relations. To the best knowledge of the Company, there exists
no actual or threatened termination, cancellation or limitation of, or any
adverse modification or change in, the business relationship of the Company with
any customer or any group of customers whose purchases are individually or in
the aggregate material to the business of the Company, or with any material
supplier.
3.24 Corporate Records; Copies of Documents. The corporate record books of
the Company accurately record all corporate action taken by its stockholders,
Board and committees thereof. The copies of the corporate records of the
Company, as made available to the Purchasers for review, are true and complete
copies of the originals of such documents. The Company has made available for
inspection by the Purchasers true and correct copies of all documents referred
to in this Section 3.24 or in the Schedules delivered pursuant to this
Agreement.
3.25 Affiliate Transactions. Except as set forth in Schedule 3.25 hereto,
neither the Company nor, to the best of the Company's knowledge, any officer,
employee or director of the Company owns or controls, directly or indirectly, on
an individual or joint basis, any interest in (excepting less than 1%
stockholding for investment purposes in securities of publicly-held companies)
or serves as an officer, director, employee, consultant, partner or in another
similar capacity of, any competitor, supplier, lessor, lessee, distributor,
sales agent or customer of or lender to or borrower from, the Company.
3.26 Insurance. Schedule 3.26 lists all of the insurance policies held by
or on behalf of the Company as of the date of this Agreement, with the effective
date and coverage amounts indicated thereon. Except as set forth on Schedule
3.26, such policies and binders are valid and enforceable in accordance with
their terms and are in full force and effect. None of such policies will be
affected by, or terminate or lapse by reason of, any transaction contemplated by
this Agreement or any transaction contemplated hereunder.
3.27 FIRPTA. The Company is not a "foreign person" within the meaning of
Section 1445 of the Code.
3.28 Investment Company. The Company is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
3.29 Closing. The representations and warranties of the Company contained
in this Section 3 shall be true and correct in all material respects on the date
of the Closing as though then made, except as affected by the transactions
expressly contemplated by this Agreement and except as expressly disclosed in
writing to the Purchaser by the Company prior to the Closing.
SECTION 4. INVESTOR REPRESENTATIONS
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To induce the Company to enter into this Agreement, effective as of the
date hereof and at and as of the Closing unless otherwise expressly indicated,
each Purchaser hereby severally and not jointly represents to the Company as
follows:
4.1 Authorization. This Agreement and all other documents executed
pursuant hereto have been duly authorized by all necessary action on the part of
the Purchaser, have been duly executed and delivered, and constitute valid,
binding and enforceable agreements of the Purchaser.
4.2 Investment Intent. The Purchaser is acquiring the Series D Shares for
its own account, for investment, and not with a present view to any
"distribution" thereof within the meaning of the 1933 Act.
4.3 Restrictions on Transfer. The Purchaser understands that, because the
Series D Shares have not been registered under the Securities Laws, the
Purchaser cannot dispose of any or all of the Series D Shares or the Conversion
Shares unless such securities are subsequently registered under the Securities
Laws or exemptions from such registration are available. The Purchaser
understands that each certificate representing the Series D Shares and the
Conversion Shares will bear a legend substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO A WRITTEN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
4.4 Sophistication. The Purchaser is sufficiently knowledgeable and
experienced in the making of venture capital investments so as to be able to
evaluate the risks and merits of its investment in the Company, and is able to
bear the economic risk of loss of its investment in the Company.
4.5 No General Solicitation. The Purchaser did not learn of this
investment through any general solicitation or general advertising by the
Company, as those terms are used in Rule 502(c) under the 1933 Act.
4.6 Brokers. No broker, finder, agent or similar intermediary has acted on
behalf of the Purchaser in connection with this Agreement or the transactions
contemplated hereby, and there are no brokerage commissions, finder's fees or
similar fees or commissions payable in connection therewith.
4.7 Accreditation. The Purchaser is an "accredited investor" as that term
is defined under Regulation D adopted under the 1933 Act.
4.8 Reliance by Company. The Purchaser has been advised that the Series D
Shares have not been and are not being registered under the Securities Laws and
that in issuing the Series D Shares
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the Company is relying upon, among other things, the representations and
warranties of the Purchasers contained in this Section 4.
SECTION 5. INDEMNIFICATION
5.1 General.
(a) The Company shall, to the full extent permitted by law, and in
addition to any such rights which any Indemnified Party (as defined herein) may
have pursuant to statute, common law, separate agreement, the Company's
Certificate of Incorporation or By-laws, or otherwise, indemnify, defend and
hold harmless each Purchaser (including its respective subsidiaries, affiliates,
directors, officers, members, partners, employees and agents, an "Indemnified
Purchaser") and each person (a "Controlling Person" and, collectively with
Indemnified Purchasers, the "Indemnified Parties") who controls any of them
within the meaning of Section 15 of the 1933 Act, from and against any and all
Losses (including Losses incurred by the Indemnified Party in any action between
the Company and the Indemnified Party or between the Indemnified Party and any
third party or otherwise) resulting from, arising out of or relating to (i) any
breach of any representation or warranty, covenant or agreement by the Company
in the Transaction Documents and/or any Certificate or Schedule delivered by the
Company pursuant thereto, including, without limitation, any legal,
administrative or other actions (including actions brought by the Purchasers or
the Company or any equity holders of the Company or derivative actions brought
by any Person claiming through or in the Company's name), proceedings or
investigations (whether formal or informal), or written threats thereof; based
upon, relating to or arising out of the Transaction Documents and/or any
Certificate or Schedule delivered by the Company pursuant thereto, the
transactions contemplated thereby, or any Indemnified Party's role therein or in
transactions contemplated thereby, (ii) by reason of a Purchaser's status as a
security holder, creditor, director, agent, representative or controlling person
of the Company (including, without limitation, any and all Losses under the
Securities Laws, at common law or otherwise, which relate directly or indirectly
to the registration, purchase, sale or ownership of the Series D Shares or
Conversion Shares or to any fiduciary obligation owed with respect thereto), and
(iii) the claims of Neo Vision Hypersystems, Inc. set forth in the Neo Vision
Lawsuit; provided, however, that the Company will not be liable to the extent
that Losses arise from and are based on an untrue statement or omission or
alleged untrue statement or omission in a registration statement or prospectus
which is made in reliance on and in conformity with information furnished to the
Company by or on behalf of such Indemnified Party. The indemnification and
contribution provided for in this Section 5.1 will remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Parties or any officer, director, employee, agent or Controlling Person of the
Indemnified Parties
(b) If the indemnification provided for in this Section 5.1 is for
any reason held by a court of competent jurisdiction to be unavailable to an
Indemnified Party in respect of any Losses referred to above, then the Company,
in lieu of indemnifying such Indemnified Party thereunder, shall contribute to
the amount paid or payable by such Indemnified Party as a result of such Losses
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Purchasers, or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above
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<PAGE> 21
but also the relative fault of the Company and the Purchasers in connection with
the action or inaction which resulted in such Losses, as well as any other
relevant equitable considerations. In connection with any registration of the
Company's securities, the relative benefits received by the Company and the
Purchasers shall be deemed to be in the same respective proportions that the net
proceeds from the offering (before deducting expenses) received by the Company
and the Purchasers, in each case as set forth in the table on the cover page of
the applicable prospectus, bear to the aggregate public offering price of the
securities so offered. The relative fault of the Company and the Purchasers
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Purchasers and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
(c) The Company and the Purchasers agree that it would not be just
and equitable if contribution pursuant to the foregoing paragraph (b) were
determined by pro rata or per capita allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the foregoing paragraph (b). In connection with any registration of the
Company's securities, in no event shall a Purchaser be required to contribute
any amount under this Section 5.1 in excess of the lesser of (i) the total of
such Losses indemnified against divided by the total securities sold under such
registration statement which are being sold by such Purchasers or (ii) the
proceeds received by such Purchaser from its sale of securities under such
registration statement. No person found guilty of fraudulent misrepresentation
(within the meaning of the Securities Laws) shall be entitled to contribution
from any person who was not found guilty of such fraudulent misrepresentation.
5.2 Notice; Defense of Claims.
(a) Promptly after receipt by an Indemnified Party of notice of any
third party or other claim, liability or expense to which the indemnification
obligations hereunder would apply, including in connection with any governmental
proceeding, the Indemnified Party shall give notice thereof in writing to the
indemnifying party or parties, but the omission to so notify the indemnifying
party or parties promptly will not relieve the indemnifying party or parties
from any liability except to the extent that the indemnifying party or parties
shall have been materially prejudiced as a result of the failure or delay in
giving such notice. Such notice shall state the information then available
regarding the amount and nature of such claim, liability or expense and shall
specify the provision or provisions of this Agreement under which the liability
or obligation is asserted.
(b) In the case of any third party claim, if within twenty (20) days
after receiving the notice described in the preceding paragraph the indemnifying
party or parties (i) give written notice to the Indemnified Parties stating that
they intend to defend in good faith against such claim, liability or expense at
their own cost and expense and (ii) provide assurance and security reasonably
acceptable to such Indemnified Parties that such indemnification will be paid
fully and promptly if required and such Indemnified Parties will not incur cost
or expense during the proceeding, then counsel for the defense shall be selected
by the indemnifying party or parties (subject to the consent of such Indemnified
Parties which consent shall not be unreasonably withheld) and such Indemnified
Parties shall not be eligible for any payment with respect to such claim,
liability or expense as long as the
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<PAGE> 22
indemnifying party or parties are conducting a good faith and diligent defense
at their own expense; provided, however, that the assumption of defense of any
such matters by the indemnifying party or parties shall relate solely to the
claim, liability or expense that is subject or potentially subject to
indemnification. If the indemnifying party or parties assume such defense in
accordance with the preceding sentence, they shall have the right, with the
consent of such Indemnified Parties, which consent shall not be unreasonably
withheld, to settle all indemnifiable matters related to claims by third parties
which are susceptible to being settled provided the indemnifying party or
parties' obligation to indemnify such Indemnified Parties therefor will be fully
satisfied and the settlement includes a complete release of such Indemnified
Parties. The indemnifying party or parties shall keep such Indemnified Parties
apprised of the status of the claim, liability or expense and any resulting
suit, proceeding or enforcement action, shall furnish such Indemnified Parties
with all documents and information that such Indemnified Parties shall
reasonably request and shall consult with such Indemnified Parties prior to
acting on major matters, including settlement discussions. Notwithstanding
anything herein stated, such Indemnified Parties shall at all times have the
right to fully participate in such defense at its own expense directly or
through counsel; provided, however, if the named parties to the action or
proceeding include both the indemnifying party or parties and the Indemnified
Parties and representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the expense of
separate counsel for such Indemnified Parties shall be paid by the indemnifying
party or parties. If no such notice of intent to dispute and defend is given by
the indemnifying party or parties, or if such diligent good faith defense is not
being or ceases to be conducted, such Indemnified Parties shall, at the expense
of the indemnifying party or parties, undertake the defense of (with counsel
selected by such Indemnified Parties), and shall have the right to compromise or
settle, such claim, liability or expense. If such claim, liability or expense is
one that by its nature cannot be defended solely by the indemnifying party or
parties, then such Indemnified Parties shall make available all information and
assistance that the indemnifying party or parties may reasonably request and
shall cooperate with the indemnifying party or parties in such defense.
(c) Satisfaction of Indemnification Obligations. Any indemnity
payable pursuant to this Section 5 shall be paid not later than thirty (30) days
following the later of (a) the Indemnified Party's request therefor or (b) a
final non-appealable determination of Loss, but in any event such payment shall
be made not later than ten (10) days prior to the date on which the Loss upon
which the indemnity is based is required to be satisfied by the Indemnified
Party, if applicable.
SECTION 6. COVENANTS OF THE COMPANY
Until the earlier to occur of (i) August 27, 2016, or (ii) the IP0
Effectiveness Date:
6.1 Inspection. The Company will permit representatives of the Purchaser
to visit and inspect any of its properties, to examine its corporate, financial
and operating records and make copies thereof or abstracts therefrom, and to
discuss its affairs, finances and accounts with their respective directors,
officers and independent public accountants, all at such reasonable times during
normal business hours and as often as may be reasonably requested, upon
reasonable advance notice to the Company.
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<PAGE> 23
6.2 Financial Statements and Other Information. The Company shall deliver
to each Purchaser the following:
(a) as soon as available, but not later than ninety (90) days after
the end of each fiscal year of the Company, a copy of the audited balance sheet
of the Company as of the end of such year and the related statements of
operations and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous year, all in reasonable detail and
accompanied by a management summary and analysis of the operations of the
Company for such fiscal year and by the opinion of a nationally recognized
independent certified public accounting firm which report shall state without
qualification that such financial statements present fairly the financial
condition as of such date and results of operations and cash flows for the
periods indicated in conformity with GAAP applied on a consistent basis;
(b) as soon as available, but in any event not later than thirty
(30) days after the end of each of the first three fiscal quarters of each
fiscal year, the unaudited balance sheet of the Company, and the related
statements of operations and cash flows for such quarter and for the period
commencing on the first day of the fiscal year and ending on the last day of
such quarter, all certified by an appropriate officer of the Company as
presenting fairly the financial condition as of such date and results of
operations and cash flows for the periods indicated in conformity with GAAP
applied on a consistent basis, subject to normal year-end adjustments and the
absence of footnotes required by GAAP; and
(c) annual operating budgets and, from time to time, such other
financial data and information about the Company as is reasonably available to
the Company and as any of the Purchasers may reasonably request.
6.3 Management Compensation. Compensation paid by the Company to its
management will be reasonably comparable to compensation paid to management in
companies in the same or similar businesses of similar size and maturity and
with comparable financial performance.
6.4 Conduct of Business. The Company will (a) keep in full force and
effect (i) its corporate existence and good standing under the laws of its
jurisdiction of incorporation and (ii) all intellectual property rights useful
in its business (except such rights as the Board of Directors has reasonably
determined are not material to the Company's continuing operations), (b)
preserve and maintain in full force and effect all material rights, privileges,
qualifications, applications, licenses and franchises necessary in the normal
conduct of its business, (c) conduct its business in accordance with sound
business practices, and (d) file or cause to be filed in a timely manner all
reports, applications and licenses that shall be required by a governmental
agency or body and that, if not timely filed, could have a material adverse
effect on the Company.
6.5 Payment of Taxes, Compliance with Laws, etc. The Company will pay and
discharge all lawful taxes, assessments and governmental charges or levies
imposed upon it or upon its income or property before the same shall become in
default, as well as all lawful claims for labor, materials and supplies which,
if not paid when due, might become a lien or charge upon its property or any
part thereof; provided, however, that the Company shall not be required to pay
and discharge any such
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<PAGE> 24
tax, assessment, charge, levy or claim so long as the validity thereof is being
contested by the Company in good faith by appropriate proceedings and an
adequate reserve therefor has been established on its books. The Company will
use its best efforts to comply with all applicable laws and regulations in the
conduct of its business, including, without limitation, all applicable federal
and state securities laws in connection with the issuance of any shares of its
capital stock.
6.6 Insurance. The Company will keep its insurable properties insured,
upon reasonable business terms, by financially sound and reputable insurers
against liability, and the perils of casualty, fire and extended coverage in
amounts of coverage at least equal to those customarily maintained by companies
in the same or similar business as the Company. The Company will also maintain
with such insurers insurance against other hazards and risks and liability to
persons and property to the extent and in the manner customary for companies
engaged in the same or similar business.
6.7 Maintenance of Properties. The Company will maintain all properties
used or useful in the conduct of its business in good repair, working order and
condition, ordinary wear and tear excepted, as necessary to permit such business
to be properly and advantageously conducted.
6.8 Affiliated Transactions. All transactions between the Company and any
director, officer or key employee of the Company shall be conducted on an
arm's-length basis, shall be on terms and conditions no less favorable to the
Company than could be obtained from nonrelated persons and shall be approved in
advance by a majority of disinterested members of the Board of Directors after
full disclosure of the terms thereof
6.9 Books and Records. The Company shall keep books of record and account,
in which accurate entries shall be made of all financial transactions and the
assets and business of the Company in accordance with GAAP consistently applied.
6.10 Back-ups of Computer Software. The Company shall make back-ups of all
material computer software programs and databases and shall maintain such
software programs databases at a secure off-site location.
6.11 Defense of Intellectual Property. In the event the Company discovers,
either through its own investigation or through notice from any Purchaser or
other entity, that a third party may be infringing the Intellectual Property,
the Company shall commence reasonable efforts to cease such infringement. If the
third party declines to cease infringement, the Company shall consider in good
faith whether to commence and pursue legal action against such third party. The
determination of whether or not legal action shall be commenced shall lie
exclusively with the Company; provided, however, the Company shall not
unreasonably decline to commence legal action if the Company obtains or receives
reasonable evidence of infringement by a third party and said infringement is
having or may have a material impact on the Company's revenue or other business
interests. All costs of such legal action shall be borne by the Company, and the
Company shall retain control over the conduct of such action, including
settlement. In the event threatened or actual legal action by the Company
results in a settlement or resolution that provides damages or other monies to
the Company, such proceeds will be the property of the Company, provided
Purchasers have incurred no
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<PAGE> 25
legal fees or costs in connection with that action not otherwise subject to
indemnification thereunder, in which event Purchasers' fees and costs shall
first be reimbursed from such proceeds.
SECTION 7. GENERAL
7.1 Amendments; Waivers and Consents. No provision of this Agreement may
be waived or amended except in writing. For the purposes of this Agreement and
all agreements, documents and instruments executed pursuant hereto, except as
otherwise specifically set forth herein or therein, no course of dealing between
the Company on the one hand and any Purchaser on the other and no delay on the
part of any party hereto in exercising any rights hereunder or thereunder shall
operate as a waiver of the rights hereof and thereof. Except as otherwise
provided herein or therein, amendments in or additions to, and any consents
required by, this Agreement may be made, and compliance with any term, covenant,
condition or provision set forth herein may be omitted or waived (either
generally or in a particular instance and either retroactively or prospectively)
by a Consent of the Purchasers and (in the case of any such amendment or
addition) the Company.
7.2 Survival of Representations, Warranties and Covenants; Assignability
of Rights. All covenants, agreements, representations and warranties of the
Company made herein and in the Schedules and Exhibits delivered or furnished by
or on behalf of the Company to any Purchaser in connection herewith shall
survive the delivery of the Series D Shares until the earlier of twenty four
(24) months after the date of the Closing or the IP0 Effectiveness Date,
regardless of any instruction or any investigation by or on behalf of the
Purchasers. Except as otherwise provided in this Agreement, all such covenants,
agreements, representations and warranties shall inure to the benefit of the
Purchasers' successors and assigns and to transferees of the Series D Shares,
whether so expressed or not. The representations and warranties made by the
Purchasers in Section 4 of this Agreement shall survive the delivery of the
Series D Shares and shall bind the Purchasers' successors and assigns and shall
inure to the benefit of the Company's successors and assigns.
7.3 Governing Law. This Agreement shall be deemed to be a contract made
under, and shall be construed in accordance with, the laws of the State of
Delaware without giving effect to principles of conflicts of law.
7.4 Section Headings; Counterparts. The descriptive headings in this
Agreement have been inserted for convenience only and shall not be deemed to
limit or otherwise affect the construction of any provision thereof or hereof.
This Agreement may be executed simultaneously in any number of counterparts,
each of which when so executed and delivered shall be taken to be an original;
but such counterparts shall together constitute but one and the same document.
7.5 Notices and Demands. Any notice or demand which, by any provision of
this Agreement or any agreement, document or instrument executed pursuant hereto
or thereto, except as otherwise provided therein, is required or provided to be
given shall be deemed to have been sufficiently given or served and received for
all purposes upon the earlier to occur of actual delivery or five days after
being sent by certified or registered mail, postage and charges prepaid, return
receipt requested, or by express delivery providing receipt of delivery, to the
following addresses:
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<PAGE> 26
(a) if to the Company, at its chief executive office, or at any
other address designated by the Company to each of the Purchasers in writing;
(b) if to a Purchaser, at its mailing address as shown on Schedule I
hereto, or at any other address designated by such Purchaser to the Company in
writing.
7.6 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.
7.7 Expenses. The Company shall pay its costs and expenses, and each of
the Purchasers shall pay its respective costs and expenses, incurred with
respect to the negotiation, execution, delivery and performance of this
Agreement and the agreements, documents and instruments contemplated hereby or
executed pursuant hereto.
7.8 Publicity. Except as may be required by an applicable Requirement of
Law, (i) none of the Purchasers shall issue a publicity release or public
announcement or otherwise make any disclosure concerning the Transaction
Documents or the transactions contemplated thereby, without prior written
approval by the Company, and (ii) the Company shall not issue any publicity
release, public announcement or make any other disclosure regarding the
Transaction Documents, which disclosure directly or indirectly references the
name of any Purchaser, without prior written approval by that Purchaser;
provided, however, that nothing in this Agreement shall restrict any party to
this Agreement from disclosing information (a) that is already publicly
available; (b) to a prospective Purchaser or transferee in connection with any
contemplated sale or transfer of any of the Series D Shares or Conversion
Shares; and/or (c) to its attorneys, accountants, consultants and other advisors
to the extent necessary to obtain their services in connection with this
Agreement. If any announcement is required by law to be made by any Purchaser,
prior to making such announcement such Purchaser will deliver a draft of such
announcement to the Company and shall give the Company an opportunity to comment
thereon.
7.9 Further Assurances. Each of the parties shall execute such documents
and perform such further acts (including, without limitation, obtaining any
consents, exemptions, authorizations or other actions by, or giving any notices
to, or making any filings with, any governmental agency or any other Person) as
may be reasonably required or desirable to carry out or to perform the
provisions of this Agreement.
7.10 Integration. This Agreement together with the other Transaction
Documents, including the Schedules, Exhibits, documents and instruments referred
to herein or therein, constitutes the entire agreement and supersedes all other
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof
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<PAGE> 27
7.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as a
sealed instrument as of the day and year first above written.
Company
OptiMark Technologies, Inc.
By: /s/ Phillip J. Riese
-------------------------------------
Phillip J. Riese, Chief Executive
Officer
Purchasers
see signature page(s) attached hereto:
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<PAGE> 28
Signature Page
(to Series D Stock Purchase Agreement)
BancBoston Capital Inc.
By: /s/ Mary J. Reilly
-------------------------------------
Title: Director
----------------------------------
<PAGE> 29
Schedule I
(to Series D Stock Purchase Agreement)
Number of
Effective Shares of
Cert Date of Series D Stock
No. Name and Address of Purchaser Purchase Purchased
--- ----------------------------- -------- ---------
OTD-1 BancBoston Capital Inc. 07/30/99 250,000
175 Federal Street
Boston, Massachusetts 02110
Attention: Mary Reilly
<PAGE> 1
EXHIBIT 4.13
REGISTRATION RIGHTS AGREEMENT
among
OPTIMARK TECHNOLOGIES, INC.
and
THE HOLDERS OF ITS SERIES D
CONVERTIBLE
PREFERRED STOCK
- July 30, 1999 -
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
1. Definitions.............................................................1
2. General; Securities Subject to this Agreement...........................3
(a) Grant of Rights.............................................3
(b) Registrable Securities......................................3
(c) Holders of Registrable Securities...........................3
3. Piggy-Back Registration.................................................4
(a) Piggy-Back Rights...........................................4
(b) Expenses....................................................4
4. Holdback Agreements.....................................................5
(a) Restrictions on Public Sale by Designated Holders...........5
(b) Restrictions on Public Sale by the Company..................5
5. Registration Procedures.................................................5
(a) Obligations of the Company..................................5
(b) Seller Information..........................................8
(c) Notice to Discontinue.......................................8
(d) Registration Expenses.......................................9
6. Indemnification; Contribution...........................................9
(a) Indemnification by the Company..............................9
(b) Indemnification by Designated Holders.......................9
(c) Procedures.................................................10
(d) Contribution...............................................10
(e) Limitations................................................11
7. Rule 144...............................................................11
8. Miscellaneous..........................................................11
(a) Recapitalizations, Exchanges, etc..........................11
(b) No Inconsistent Agreements.................................11
(c) Remedies...................................................12
(d) Amendments and Waivers.....................................12
(e) Notices....................................................12
(f) Successors and Assigns; Third Party Beneficiaries..........13
(g) Counterparts...............................................13
(h) Headings...................................................13
(i) Governing Law..............................................13
(j) Severability...............................................13
(k) Entire Agreement...........................................13
(l) Further Assurances.........................................14
-i-
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT, dated July 30, 1999 (this "Agreement"),
among OptiMark Technologies, Inc., a Delaware corporation (the "Company"), and
the purchaser(s) ("Purchasers") of the Company's Series D Convertible Preferred
Stock ("Series D Stock") listed on Schedule I hereto.
This Agreement is made in connection with Series D Stock Purchase
Agreements (the "Stock Purchase Agreements"), between the Company and the
Purchaser(s) pursuant to which the Company has agreed to issue and sell Series D
Stock. Each share of Series D Stock is convertible into one (1) share of Common
Stock, subject to potential adjustments. In order to induce the Purchaser(s) to
purchase Series D Stock, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company has agreed to
grant registration rights with respect to the Registrable Securities (as
hereinafter defined) as set forth in this Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement in addition to other
capitalized terms defined elsewhere herein, the following terms shall have the
meanings indicated:
"Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Affiliate" shall mean any Person who is an "affiliate" of
another designated Person, as defined in Rule l2b-2 of the General Rules and
Regulations under the Exchange Act.
"Common Stock" means the common stock, par value $.01 per share,
of the Company or any other equity securities of the Company into which such
securities are converted, reclassified, reconstituted or exchanged.
"Company" has the meaning assigned to such term in the recital
to this Agreement.
"Company Underwriter" has the meaning assigned such term in
Section 3(a) below.
"Damages" has the meaning assigned to such term in Section 6(a)
below.
"Designated Holder" means each Purchaser and any transferee of
any Purchaser to whom Registrable Securities have been transferred in accordance
with the provisions of this Agreement , other than a transferee to whom such
securities have been transferred pursuant to a Registration Statement or Rule
144 or Regulation S under the Act.
"Exchange Act" means the Securities Exchange Act of 1934 as
amended, and the rules and regulations promulgated thereunder.
"Holders' Counsel" has the meaning assigned such term in Section
5(a)(i) below.
"Indemnified Party" has the meaning assigned such term in
Section 6(c) below.
<PAGE> 4
"Indemnifying Party" has the meaning assigned such term in
Section 6(c) below.
"Inspector" has the meaning assigned such term in Section
5(a)(viii) below.
"IPO Effectiveness Date" means the date upon which the Company
commences an initial offer for sale of shares of Common Stock pursuant to an
effective Registration Statement.
"NASD" means the National Association of Securities Dealers,
Inc.
"Nasdaq Warrant" means the Warrant Agreement dated September 1,
1998 pursuant to which The Nasdaq Stock Market, Inc. has the right to purchase
from the Company up to 11,250,000 shares of voting Common Stock at exercise
prices ranging from $3.00 to $7.00 per share, subject to potential adjustment as
provided therein.
"Other Rights Holders" means (i) the holders of the Series A
Stock, (ii) the holders of the Series B Stock, (iii) the holders of the Series C
Stock, (iv) the holder of the Nasdaq Warrant, and (iv) any other Persons holding
registration rights with respect to Common Stock whose registration rights have
not expressly been made junior to the registration rights of the Designated
Holders hereunder.
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, limited liability company, government (or an
agency or political subdivision thereof) or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity.
"Purchaser(s)" has the meaning assigned to such term in the
recital to this Agreement.
"Records" has the meaning assigned such term in Section
5(a)(viii) below.
"Registrable Securities" means each of the following: (a) any
and all shares of Common Stock owned by the Designated Holders and issued or
issuable upon conversion of shares of Series D Stock, (b) any other shares of
Common Stock acquired or owned by any of the Designated Holders prior to the IPO
Effectiveness Date, and (c) any shares of Common Stock issued or issuable to any
of the Designated Holders with respect to shares of Common Stock or shares of
Series D Stock by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise, and shares of Common Stock issuable upon
conversion, exercise or exchange thereof.
"Registration Expenses" has the meaning set forth in Section
5(d) below.
"Registration Statement" means a Registration Statement filed by
the Company pursuant to the Act.
"SEC" means the Securities and Exchange Commission or any
successor agency then having jurisdiction to enforce the Act.
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<PAGE> 5
"Series A Stock" means the Company's Series A Convertible
Participating Preferred Stock, $.01 par value per share.
"Series B Stock" means the Company's Series B Convertible
Participating Preferred Stock, $.01 par value per share.
"Series C Stock" means the Company's Series C Convertible
Preferred Stock, $.01 par value per share.
"Series D Stock" has the meaning assigned to such term in the
recital to this Agreement.
"Stock Purchase Agreement" has the meaning assigned such term in
the recital to this Agreement.
2. General; Securities Subject to this Agreement Grant of Rights.
The Company hereby grants registration rights to the Purchasers upon the terms
and conditions set forth in this Agreement.
(b) Registrable Securities. For purposes of this Agreement,
Registrable Securities will cease to be Registrable Securities when (i) a
Registration Statement covering such Registrable Securities has been declared
effective by the SEC, and such Registrable Securities have been disposed of
pursuant to such effective Registration Statement, (ii) the entire amount of
such Registrable Securities proposed to be sold in a single sale are or, in the
opinion of counsel satisfactory to the Company and the Designated Holder, each
in their reasonable judgment, may be distributed to the public without any
limitation as to volume pursuant to Rule 144 (or any successor provision then in
effect) under the Act, or (iii) such Registrable Securities are sold,
distributed or proposed to be sold or distributed by a Person not entitled to
the registration rights granted by this Agreement.
(c) Holders of Registrable Securities. A Person is deemed to
be a holder of Registrable Securities whenever such Person owns of record
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company may act upon the basis of the instructions,
notice or election received from the record owner of such Registrable
Securities.
3. Piggy-Back Registration Piggy-Back Rights. At any time after the
IPO Effectiveness Date, if either (I) the Company proposes to file a
Registration Statement with respect to an offering by the Company of Common
Stock for its own account (other than a Registration Statement on Form S-4 or
S-8 or any successors thereto) (a "Company Registration"), or (II) the Company
is required to file a Registration Statement upon demand by and for the account
of any "Initiating Holders", as defined and provided in Section 3 of the
Registration Rights Agreement dated August 27, 1996, as amended, among the
Company and the holders of its Series A Stock (a "Demand Registration"), then
the Company shall give written notice of such proposed filing to each of the
Designated Holders of
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<PAGE> 6
Registrable Securities at least thirty (30) days before the anticipated filing
date, and such notice shall describe the proposed registration and distribution
and offer such Designated Holders the opportunity to register such number of
Registrable Securities as each such holder may request. The Company shall, and
shall use reasonable efforts to cause the managing underwriter(s) of a proposed
underwritten offering (the "Company Underwriter") to, permit the Designated
Holders of Registrable Securities who have requested in writing to participate
in the registration for such offering to include such Registrable Securities in
such offering on the same terms and conditions as the securities of the Company
or the Initiating Holders included therein. In connection with any offering
under this Section 3(a) involving an underwriting, the Company shall not be
required to include any Registrable Securities in such underwriting unless the
holders thereof accept the terms of the underwriting as agreed upon between the
Company and the Company Underwriter, and then only in such quantity as will
not, in the opinion of the Company Underwriter, jeopardize the success of the
offering by the Company. If in the written opinion of the Company Underwriter
the registration of all or part of the Registrable Securities which the
Designated Holders have requested to be included would materially adversely
affect such public offering, then the Company shall include in the
underwriting, to the extent of the amount that the Company Underwriter believes
may be sold without causing such adverse effect, (A) in connection with a
Company Registration, first, all of the securities to be offered for the
account of the Company; and second, as a group, (i) the Registrable Securities
requested by Designated Holders to be sold in the offering, and (ii) the Common
Stock requested by Other Rights Holders to be sold in the offering, pro rata
based upon the number of shares of Registrable Securities/Common Stock owned by
such Persons; or (B) in connection with a Demand Registration, first, as a
group, (i) the Registrable Securities requested by Designated Holders to be
sold in the offering, and (ii) the Common Stock requested by Other Rights
Holders to be sold in the offering, pro rata based upon the number of shares of
Registrable Securities/Common Stock owned by such Persons, and second, all of
the securities to be offered for the account of the Company.
(b) Expenses. The Company shall bear all Registration
Expenses (other than underwriting discounts and commissions) in connection with
any registration pursuant to this Section 3; provided, however, that each
Designated Holder participating in such registration shall bear the costs of its
own legal counsel, if any.
4. Holdback Agreements Restrictions on Public Sale by Designated
Holders. Each Designated Holder of Registrable Securities agrees not to effect
any public sale or distribution of any Registrable Securities or of any
securities convertible into or exchangeable or exercisable for such Registrable
Securities, including a sale pursuant to Rule 144 under the Act, during the
180-day period beginning on the effective date of any Registration Statement
(except as part of such registration), if and to the extent requested by the
Company in the case of a nonunderwritten public offering or if and to the extent
requested by the Company Underwriter in the case of an underwritten public
offering.
(b) Restrictions on Public Sale by the Company. The Company agrees
not to effect any public sale or distribution of any of its Common Stock, or any
securities convertible into or exchangeable or exercisable for such securities
(except pursuant to registrations on Form S-4 or
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<PAGE> 7
S-8 or any successor thereto), during the period beginning on the effective date
of any Registration Statement (except as part of such registration) in which the
Designated Holders of Registrable Securities are participating and ending on the
earlier of (i) the date on which all Registrable Securities registered on such
Registration Statement are sold and (ii) three (3) months after the effective
date of such Registration Statement.
5. Registration Procedures Obligations of the Company. Whenever
registration of Registrable Securities has been requested pursuant to Section 3
of this Agreement, the Company shall use its reasonable efforts to effect the
registration and sale of such Registrable Securities in accordance with the
intended method of distribution thereof as quickly as practicable, and in
connection with any such request, the Company shall, as expeditiously as
possible:
(i) use its reasonable efforts to prepare and file
with the SEC a Registration Statement on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate and which form
shall be available for the sale of the Common Stock and such Registrable
Securities in accordance with the intended method of distribution thereof, and
use its reasonable efforts to cause such Registration Statement to become
effective; provided, however, that (x) before filing a Registration Statement or
prospectus or any amendments or supplements thereto, the Company shall provide
counsel selected by the Designated Holders holding a majority of the Registrable
Securities being registered in such registration ("Holders' Counsel") and any
other Inspector (as hereinafter defined) with an adequate and appropriate
opportunity to participate in the preparation of such Registration Statement and
each prospectus included therein (and each amendment or supplement thereto) to
be filed with the SEC, which documents shall be subject to the review of
Holders' Counsel, and (y) the Company shall notify the Holders' Counsel and each
seller of Registrable Securities of any stop order issued or threatened by the
SEC and take all reasonable action required to prevent the entry of such stop
order or to remove it if entered;
(ii) prepare and file with the SEC such amendments
and supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for the lesser of (x) three (3) months and (y) such shorter period
which will terminate when all Registrable Securities covered by such
Registration Statement have been sold, and comply with the provisions of the Act
with respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement;
(iii) as soon as reasonably possible, furnish to each
seller of Registrable Securities, prior to filing a Registration Statement,
copies of such Registration Statement as is proposed to be filed, and thereafter
such number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto), the prospectus
included in such Registration Statement (including each preliminary prospectus)
and such other documents as each such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such seller;
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<PAGE> 8
(iv) use its reasonable efforts to register or
qualify such Registrable Securities under such other securities or "blue sky"
laws of such jurisdictions as any seller of Registrable Securities may
reasonably request, and to continue such qualification in effect in such
jurisdiction for the lesser of (x) three (3) months and (y) such shorter period
which will terminate when all Registrable Securities covered by such
Registration Statement have been sold, and do any and all other acts and things
which may be reasonably necessary or advisable to enable any such seller to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such seller; provided, however, that the Company shall not be required
to (x) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 5(a)(iv), (y) subject
itself to taxation in any such jurisdiction or (z) consent to general service of
process in any such jurisdiction;
(v) use its reasonable efforts to cause the
Registrable Securities covered by such Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to enable the
seller or sellers of Registrable Securities to consummate the disposition of
such Registrable Securities;
(vi) upon discovery that, or upon the happening of
any event as a result of which, the prospectus included in a Registration
Statement covering Registrable Securities contains an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances under which they were made, (x) promptly prepare a supplement or
amendment to such prospectus and furnish to each seller of Registrable
Securities a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, after delivery to the purchasers of
such Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made and (y) immediately prior
to the preparation of such amendment or supplement to such prospectus, notify
each seller of Registrable Securities of the anticipated preparation thereof;
(vii) enter into and perform customary agreements
(including an underwriting agreement in customary form with the Company
Underwriter, if any) and take such other actions as are prudent and reasonably
required in order to expedite or facilitate the disposition of such Registrable
Securities;
(viii) make available for inspection by any seller of
Registrable Securities, any managing underwriter participating in any
disposition pursuant to such Registration Statement, Holders' Counsel and any
attorney, accountant or other agent retained by any such seller or any managing
underwriter (each, an "Inspector" and collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and properties of the
Company and its subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's and its subsidiaries' officers,
directors and employees, and the independent public accountants of the Company,
to supply all information
-6-
<PAGE> 9
reasonably requested by any such Inspector in connection with such Registration
Statement. Records that the Company determines, in good faith, to be
confidential and which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors unless (x) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in the Registration
Statement, (y) the release of such Records is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction or (z) the information in
such Records was known to the Inspectors on a non-confidential basis prior to
its disclosure by the Company or has been made generally available to the
public. Each seller of Registrable Securities agrees that it shall, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at the Company's
expense, to undertake appropriate action to prevent disclosure of the Records
deemed confidential;
(ix) if such sale is pursuant to an underwritten
offering, use its reasonable efforts to obtain a "cold comfort" letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by "cold comfort" letters as Holders'
Counsel or the managing underwriter reasonably request;
(x) use its reasonable efforts to furnish, at the
request of any seller of Registrable Securities on the date such securities are
delivered to the underwriters for sale pursuant to such registration or, if such
securities are not being sold through underwriters, on the date the Registration
Statement with respect to such securities becomes effective, an opinion, dated
such date, of counsel representing the Company for the purposes of such
registration, addressed to the underwriters, if any, and to the seller making
such request, covering such legal matters with respect to the registration in
respect of which such opinion is being given as such seller may reasonably
request and are customarily included in such opinions;
(xi) otherwise use its reasonable efforts to comply
with all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable but no later than fifteen
(15) months after the effective date of the Registration Statement, an earnings
statement covering a period of twelve (12) months beginning after the effective
date of the Registration Statement, in a manner which satisfies the provisions
of Section 11(a) of the Act and Rule 158 thereunder;
(xii) cause all such Registrable Securities to be
listed on each securities exchange on which similar securities issued by the
Company are then listed, provided that the applicable listing requirements are
satisfied;
(xiii) cooperate with each seller of Registrable
Securities and each underwriter participating in the disposition of such
Registrable Securities and their respective counsel in connection with any
filings required to be made with the NASD; and
(xiv) use reasonable efforts to take all other steps
necessary to effect the registration of the Registrable Securities contemplated
hereby.
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<PAGE> 10
(b) Seller Information. The Company may require each seller
of Registrable Securities as to which any registration is being effected to
furnish to the Company such information regarding the distribution of such
securities as the Company may from time to time reasonably request in writing.
(c) Notice to Discontinue. Each Designated Holder of
Registrable Securities agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 5(a)(vi), such
Designated Holder shall forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Designated Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 5(a)(vi) and, if so
directed by the Company, such Designated Holder shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
Designated Holder's possession, of the prospectus covering such Registrable
Securities which is current at the time of receipt of such notice. If the
Company shall give any such notice, the Company shall extend the period during
which such Registration Statement shall be maintained effective pursuant to this
Agreement (including, without limitation, the period referred to in Section
5(a)(ii)) by the number of days during the period from and including the date of
the giving of such notice pursuant to Section 5(a)(vi) to and including the date
when the Designated Holder shall have received the copies of the supplemented or
amended prospectus contemplated by and meeting the requirements of Section
5(a)(vi).
(d) Registration Expenses. The Company shall pay all
expenses (other than as set forth in Section 3(b)) arising from or incident to
the performance of, or compliance with, this Agreement, including, without
limitation, (i) SEC, stock exchange and NASD registration and filing fees, (ii)
all fees and expenses incurred in complying with securities or "blue sky" laws
(including reasonable fees, charges and disbursements of counsel in connection
with "blue sky" qualifications of the Registrable Securities), (iii) all
printing, messenger and delivery expenses, (iv) the fees, charges and
disbursements of counsel to the Company and of its independent public
accountants and any other accounting and legal fees, charges and expenses
incurred by the Company (including, without limitation, any expenses arising
from any special audits incident to or required by any registration or
qualification) and (v) any liability insurance or other premiums for insurance
obtained in connection with any registration pursuant to the terms of this
Agreement, regardless of whether such Registration Statement is declared
effective. All of the expenses described in this Section 5(d) are referred to
herein as "Registration Expenses."
6. Indemnification; Contribution Indemnification by the Company.
The Company agrees to indemnify and hold harmless, to the fullest extent
permitted by law, each Designated Holder, its officers, directors, trustees,
partners, members, employees, advisors and agents and each Person who controls
(within the meaning of the Act or the Exchange Act) such Designated Holder from
and against any and all losses, claims, damages, liabilities and expenses,
including reasonable costs of investigation (generally, "Damages"), arising out
of or based upon any untrue, or allegedly
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<PAGE> 11
untrue, statement of a material fact contained in any Registration Statement,
prospectus or preliminary prospectus or notification or offering circular (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are caused by or contained in any information concerning such Designated
Holder furnished in writing to the Company by such Designated Holder expressly
for use therein. The Company shall also provide customary indemnities to any
underwriters of the Registrable Securities, their officers, directors and
employees and each Person who controls such underwriters (within the meaning of
the Act and the Exchange Act) to the same extent as provided above with respect
to the indemnification of the Designated Holders of Registrable Securities.
(b) Indemnification by Designated Holders. In connection
with any Registration Statement in which a Designated Holder is participating
pursuant to Section 3 hereof, each such Designated Holder shall furnish to the
Company in writing such information with respect to such Designated Holder as
the Company may reasonably request or as may be required by law for use in
connection with any such Registration Statement or prospectus, and each
Designated Holder agrees to indemnify and hold harmless, to the fullest extent
permitted by law, the Company, any underwriter retained by the Company and their
respective directors, officers, employees and each Person who controls the
Company or such underwriter (within the meaning of the Act and the Exchange Act)
to the same extent as the foregoing indemnity from the Company to the Designated
Holders, but only with respect to any such information with respect to such
Designated Holder furnished in writing to the Company by such Designated Holder
expressly for use therein.
(c) Procedures. Any Person entitled to indemnification
hereunder (the "Indemnified Party") agrees to give prompt written notice to the
indemnifying party (the "Indemnifying Party") after the receipt by the
Indemnified Party of any written notice of the commencement of any action, suit,
proceeding or investigation or threat thereof made in writing for which the
Indemnified Party intends to claim indemnification or contribution pursuant to
this Agreement; provided, however, that the failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to the Indemnified Party hereunder. If notice of commencement
of any such action is given to the Indemnifying Party as above provided, the
Indemnifying Party shall be entitled to participate in and, to the extent it may
wish, jointly with any other Indemnifying Party similarly notified, to assume
the defense of such action at its own expense, with counsel chosen by it and
satisfactory to such Indemnified Party. The Indemnified Party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the Indemnified Party unless
(i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party
fails to assume the defense of such action with counsel satisfactory to the
Indemnified Party in its reasonable judgment or (iii) the named parties to any
such action (including any impleaded parties) have been advised by such counsel
that either (x) representation of such Indemnified Party and the Indemnifying
Party by the same counsel would be inappropriate under applicable standards of
professional conduct or (y) there may be one or more legal defenses available to
it which are different from or additional to and in conflict with those
available to the
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<PAGE> 12
Indemnifying Party and in such event, the Indemnifying Party shall pay the fees
and expenses of counsel to the Indemnified Party only to the extent that such
separate counsel is necessary under such applicable standards of professional
conduct in the case of the foregoing clause (x) or to the extent necessary to
avoid any conflict in the case of the foregoing clause (y). In either of such
cases, the Indemnifying Party shall not have the right to assume the defense of
such action on behalf of such Indemnified Party. No Indemnifying Party shall be
liable for any settlement entered into without its written consent, which
consent shall not be unreasonably withheld.
(d) Contribution. If the indemnification provided for in
this Section 6 from the Indemnifying Party is unavailable to an Indemnified
Party hereunder in respect of any Damages referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount of Damages paid or payable by such Indemnified Party in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions which
resulted in such Damages, as well as any other relevant equitable
considerations. The relative faults of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The parties
hereto agree that it would not be just and equitable if contribution pursuant to
this Section 6(d) were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations
referred to in this paragraph.
(e) Limitations. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to indemnification or contribution from any Person. Notwithstanding
anything to the contrary provided above, the total amount of Damages subject to
indemnification or contribution by any Designated Holder under this Section 6
shall not exceed the net proceeds received by such Designated Holder in the
offering to which the registration statement or prospectus relates.
7. Rule 144. From and after the IPO Effectiveness Date, the Company
covenants that it shall file any reports required to be filed by it under the
Exchange Act and that it shall take such further action as each Designated
Holder of Registrable Securities may reasonably request (including providing any
information necessary to comply with Rules 144 and 144A under the Act), all to
the extent required from time to time to enable such Designated Holder to sell
Registrable Securities without registration under the Act within the limitation
of the exemptions provided by (a) Rule 144 under the Act, as such rules may be
amended from time to time, or (b) any similar rules or regulations hereafter
adopted by the SEC. The Company shall, upon the request of any Designated Holder
of Registrable Securities, deliver to such Designated Holder a written statement
as to whether it has complied with such requirements.
8. Miscellaneous Recapitalizations, Exchanges, etc. The provisions
of this Agreement shall apply, to the full extent set forth herein with respect
to (i) the shares of Common Stock and
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<PAGE> 13
(ii) to any and all equity securities of the Company or any successor or assign
of the Company (whether by merger, consolidation, sale of assets or otherwise)
which may be issued in respect of, in conversion of, in exchange for or in
substitution of, the Common Stock, and shall be appropriately adjusted for any
stock dividends, splits, reverse splits, combinations, recapitalizations and the
like occurring after the date hereof. The Company shall cause any successor or
assign (whether by sale, merger or otherwise) to enter into a new registration
rights agreement with the Designated Holders on terms substantially the same as
this Agreement as a condition of any such transaction.
(b) No Inconsistent Agreements. The Company shall not enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the Designated Holders in this Agreement or grant any
additional registration rights to any Person or with respect to any securities
which are not Registrable Securities which are prior in right to or inconsistent
with the rights granted in this Agreement.
(c) Remedies. The Designated Holders, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
shall be entitled to specific performance of their rights under this Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive in any action for specific performance the
defense that a remedy at law would be adequate.
(d) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless consented to in writing by (i) the Company and (ii)
Designated Holders owning at least 75% of the Registrable Securities. Any such
written consent shall be binding upon the Company and all of the Designated
Holders.
(e) Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be made
by registered or certified first-class mail, return receipt requested, courier
service, overnight mail or personal delivery as follows:
(i) if to the Company:
OptiMark Technologies, Inc.
10 Exchange Place, 12th Floor
Jersey City, New Jersey 07302
Telecopy: (201) 946-9435
Attention: Chief Executive Officer
with a copy to:
OptiMark Technologies, Inc.
10 Exchange Place, 12th Floor
Jersey City, New Jersey 07302
<PAGE> 14
Telecopy: (201) 946-9435
Attention: General Counsel
(ii) if to any Purchaser:
To the address of such Purchaser shown on
Schedule I hereto, or to any other address of
which a Purchaser may give notice to the Company
pursuant to this paragraph (e)
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; when delivered by courier
or overnight mail, if delivered by commercial courier service or overnight mail;
and five (5) Business Days after being deposited in the mail, postage prepaid,
if mailed.
(f) Successors and Assigns; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto. No Person other than the parties hereto
and their successors and permitted assigns is intended to be a beneficiary of
any of the rights granted hereunder.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
(j) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, it being
intended that all of the rights and privileges of the Designated Holders shall
be enforceable to the fullest extent permitted by law.
(k) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and in the Stock Purchase Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
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<PAGE> 15
(l) Further Assurances. Each of the parties shall execute
such documents and perform such further acts as may be reasonably required or
desirable to carry out or to perform the provisions of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed, or have caused to be
executed, this Agreement on the date first written above.
COMPANY:
--------
OPTIMARK TECHNOLOGIES, INC.
By: /s/ Phillip J. Riese
Chief Executive Officer
PURCHASERS:
-----------
See attached signature pages
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<PAGE> 16
Signature Page
(to Registration Rights Agreement dated July 30, 1999)
Purchaser: BancBoston Capital Inc.
By: /s/ Mary J. Reilly
Director
<PAGE> 17
Schedule I
(to Registration Rights Agreement dated July 30, 1999)
NUMBER OF
EFFECTIVE SHARES OF
DATE OF SERIES D STOCK
CERT. NO. NAME AND ADDRESS OF PURCHASER PURCHASE PURCHASED
- --------- ----------------------------- -------- ---------
OTD-1 BancBoston Capital Inc. 07/30/99 250,000
175 Federal Street
Boston, Massachusetts 02110
Attention: Mary Reilly
<PAGE> 1
EXHIBIT 4.14
REGISTRATION RIGHTS AGREEMENT, dated September 17, 1998 (this
"Agreement"), among OptiMark Technologies, Inc., a Delaware corporation (the
"Company"), and The Nasdaq Stock Market, Inc. ("Nasdaq").
This Agreement is being executed and delivered in connection with the
execution and delivery by the Company and Nasdaq of a Warrant Agreement (the
"Warrant Agreement") and a Nasdaq-OptiMark Agreement, both dated on or about
September 1, 1998. In order to induce Nasdaq to execute and deliver the
Nasdaq-OptiMark Agreement and the Warrant Agreement, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Company has agreed to grant registration rights with respect
to the Registrable Securities (as hereinafter defined) as set forth in this
Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, in addition to other
capitalized terms defined elsewhere herein, the following terms shall have the
meanings indicated:
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"Affiliate" of a named Person shall mean any Person who is an "affiliate"
of the named Person, as defined in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
"Common Stock" means the common stock, par value $.01 per share, of the
Company or any other equity securities of the Company into which such securities
are converted, reclassified, reconstituted or exchanged.
"Company" has the meaning assigned to such term in the recital to this
Agreement.
"Damages" has the meaning assigned to such term in Section 6(a) below.
"Designated Holder" means Nasdaq and any transferee of Nasdaq to whom
Registrable Securities have been transferred in accordance with the Warrant
Agreement, other than a transferee to whom such securities have been transferred
pursuant to a Registration Statement or Rule 144 or Regulation S under the Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Holders' Counsel" has the meaning assigned such term in Section 5(a)(i)
below.
<PAGE> 2
"Indemnified Party" has the meaning assigned such term in Section 6(c)
below.
"Indemnifying Party" has the meaning assigned such term in Section 6(c)
below.
"Inspector" has the meaning assigned such term in Section 5(a)(viii)
below.
"IPO Effectiveness Date" means the date upon which the Company commences
an initial offer for sale of shares of Common Stock pursuant to an effective
Registration Statement.
"NASD" means the National Association of Securities Dealers, Inc.
"Other Rights Holders" means (i) the holders of the Company's Series A
Stock and any Common Stock issued upon conversion of the Series A Stock, (ii)
the holders of the Series B Stock and any Common Stock issued upon conversion of
the Series B Stock, (iii) the holder(s) of the VSC Warrant and any Common Stock
issued upon exercise of the VSC Warrant, and (iv) any other Persons holding
registration rights with respect to Common Stock whose registration rights have
not expressly been made junior to the registration rights of the Designated
Holders hereunder.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, limited liability company, government (or an
agency or political subdivision thereof) or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity.
"Purchaser(s)" has the meaning assigned to such term in the recital to
this Agreement.
"Records" has the meaning assigned such term in Section 5(a)(viii) below.
"Registrable Securities" means each of the following: (a) any and all
shares of Common Stock owned by the Designated Holders and issued or issuable
upon exercise of Warrant Certificates (if any) issued pursuant to the Warrant
Agreement, (b) any other shares of Common Stock acquired or owned by any of the
Designated Holders prior to the IPO Effectiveness Date, and (c) any shares of
Common Stock issued or issuable to any of the Designated Holders with respect to
shares of Common Stock by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise, and shares of Common Stock issuable upon
conversion, exercise or exchange thereof.
"Registration Expenses" has the meaning set forth in Section 5(d) below.
<PAGE> 3
"Registration Statement" means a Registration Statement filed by the
Company pursuant to the Act.
"SEC" means the Securities and Exchange Commission or any successor
agency then having jurisdiction to enforce the Act.
"Series A Stock" means the Company's Series A Convertible Participating
Preferred Stock.
"Series B Stock' means the Company's Series B Convertible Participating
Preferred Stock.
"Underwriter" has the meaning assigned such term in Section 3(a) below.
"VSC Warrant" means the Common Stock Purchase Warrant dated April 23,
1998 pursuant to which Virginia Surety Company, Inc. has the right to purchase
up to 500,000 shares of Common Stock at an exercise price of $10.00 per share,
subject to potential adjustment.
2. General; Securities Subject to this Agreement.
a. Grant of Rights. The Company hereby grants registration
rights to Nasdaq and any other Designated Holders upon the terms and conditions
set forth in this Agreement.
b. Registrable Securities. For purposes of this Agreement,
Registrable Securities will cease to be Registrable Securities when (i) a
Registration Statement covering such Registrable Securities has been declared
effective by the SEC, and such Registrable Securities have been disposed of
pursuant to such effective Registration Statement, (ii) the entire amount of
such Registrable Securities proposed to be sold in a single sale are or, in the
opinion of counsel satisfactory to the Company and the Designated Holder, each
in their reasonable judgment, may be distributed to the public without any
limitation as to volume pursuant to Rule 144 (or any successor provision then in
effect) under the Act, or (iii) such Registrable Securities are sold,
distributed or proposed to be sold or distributed by a Person not entitled to
the registration rights granted by this Agreement.
c. Holders of Registrable Securities. A Person is deemed to be
a holder of Registrable Securities whenever such Person owns of record
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more Persons with respect to the same
Registrable Securities, the Company may act upon the basis of the instructions,
notice or election received from the record owner of such Registrable
Securities.
<PAGE> 4
3. Piggy-Back Registration.
a. Piggy-Back Rights. At any time after the IPO Effectiveness
Date, if either (I) the Company proposes to file a Registration Statement with
respect to an offering by the Company of Common Stock for its own account (other
than a Registration Statement on Form S-4 or S-8 or any successors thereto) (a
"Company Registration"), or (II) the Company is required to file a Registration
Statement upon demand by and for the account of any "Initiating Holders", as
defined and provided in Section 3 of the Registration Rights Agreement dated
August 27, 1996, as amended, among the Company and the holders of its Series A
Stock (a "Demand Registration"), then the Company shall give written notice of
such proposed filing to each of the Designated Holders at least thirty (30) days
before the anticipated filing date. Such notice shall describe the proposed
registration and distribution and offer such Designated Holders the opportunity
to register such number of Registrable Securities as each such holder may
request. The Company shall, and shall use reasonable efforts to cause the
managing underwriter(s) of a proposed underwritten offering (the "Underwriter")
to, permit the Designated Holders of Registrable Securities who have requested
in writing to participate in the registration for such offering to include such
Registrable Securities in such offering on the same terms and conditions as the
securities of the Company or the Initiating Holders included therein. In
connection with any offering under this Section 3(a) involving an underwriting,
the Company shall not be required to include any Registrable Securities in such
underwriting unless the holders thereof accept the terms of the underwriting as
agreed upon by the Underwriter, and then only in such quantity as will not, in
the opinion of the Underwriter, jeopardize the success of the offering by the
Company. If in the written opinion of the Underwriter the registration of all or
part of the Registrable Securities which the Designated Holders have requested
to be included would materially adversely affect such public offering, then the
Company shall include in the underwriting, to the extent of the amount that the
Company Underwriter believes may be sold without causing such adverse effect,
(A) in connection with a Company Registration, first, all of the securities to
be offered for the account of the Company; and second, as a group, (i) the
Registrable Securities requested by Designated Holders to be sold in the
offering, and (ii) the Common Stock requested by Other Rights Holders to be sold
in the offering, pro rata based upon the number of shares of Registrable
Securities/Common Stock owned by such Persons; or (B) in connection with a
Demand Registration, first, as a group, (i) the Registrable Securities requested
by Designated Holders to be sold in the offering, and (ii) the Common Stock
requested by Other Rights Holders to be sold in the offering, pro rata based
upon the number of shares of Registrable Securities/Common Stock owned by such
Persons; and second, all of the securities to be offered for the account of the
Company.
b. Expenses. The Company shall bear all Registration Expenses
(other than underwriting discounts and commissions) in connection with any
registration pursuant to this Section 3; provided, however, that each Designated
Holder participating in such registration shall bear the costs of its own legal
counsel, if any.
<PAGE> 5
4. Holdback Agreements.
a. Restrictions on Public Sale by Designated Holders. Each
Designated Holder agrees not to effect any public sale or distribution of any
Registrable Securities or of any securities convertible into or exchangeable or
exercisable for such Registrable Securities, including a sale pursuant to Rule
144 under the Act, during the 180-day period beginning on the effective date of
any Registration Statement (except as part of such registration), if and to the
extent requested by the Company in the case of a non-underwritten public
offering or if and to the extent requested by the Underwriter in the case of an
underwritten public offering.
b. Restrictions on Public Sale by the Company. The Company
agrees not to effect any public sale or distribution of any of its Common Stock,
or any securities convertible into or exchangeable or exercisable for such
securities (except pursuant to registrations on Form S-4 or S-8 or any successor
thereto), during the period beginning on the effective date of any Registration
Statement in which the Designated Holders are participating and ending on the
earlier of (i) the date on which all Registrable Securities registered on such
Registration Statement are sold and (ii) three (3) months after the effective
date of such Registration Statement.
5. Registration Procedures.
a. Obligations of the Company. Whenever registration of
Registrable Securities has been requested pursuant to Section 3 of this
Agreement, the Company shall use its reasonable efforts to effect the
registration and sale of such Registrable Securities in accordance with the
intended method of distribution thereof as quickly as practicable, and in
connection with any such request, the Company shall, as expeditiously as
possible:
i. use its reasonable efforts to prepare and file with the SEC
a Registration Statement on any form for which the Company then qualifies
or which counsel for the Company shall deem appropriate and which form
shall be available for the sale of the Common Stock and such Registrable
Securities in accordance with the intended method of distribution
thereof, and use its reasonable efforts to cause such Registration
Statement to become effective; provided, however, that (x) before filing
a Registration Statement or prospectus or any amendments or supplements
thereto, the Company shall provide counsel selected by the Designated
Holders holding a majority of the Registrable Securities being registered
in such registration ("Holders' Counsel") and any other Inspector (as
hereinafter defined) with an adequate and appropriate opportunity to
participate in the preparation of such Registration Statement and each
prospectus included therein (and each amendment or supplement thereto) to
be filed with the SEC, which documents shall be subject to the review of
Holders' Counsel, and (y) the Company shall notify the Holders' Counsel
and each seller of Registrable
<PAGE> 6
Securities of any stop order issued or threatened by the SEC and take all
reasonable action required to prevent the entry of such stop order or to
remove it if entered;
ii. prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective for the lesser of (x) three (3) months and (y) such
shorter period which will terminate when all Registrable Securities
covered by such Registration Statement have been sold, and comply with
the provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement;
iii. as soon as reasonably possible, furnish to each seller of
Registrable Securities, prior to filing a Registration Statement, copies
of such Registration Statement as is proposed to be filed, and thereafter
such number of copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto), the
prospectus included in such Registration Statement (including each
preliminary prospectus) and such other documents as each such seller may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
iv. use its reasonable efforts to register or qualify such
Registrable Securities under such other securities or "blue sky" laws of
such jurisdictions as any seller of Registrable Securities may reasonably
request, and to continue such qualification in effect in such
jurisdiction for the lesser of (x) three (3) months and (y) such shorter
period which will terminate when all Registrable Securities covered by
such Registration Statement have been sold, and do any and all other acts
and things which may be reasonably necessary or advisable to enable any
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller; provided, however, that the
Company shall not be required to (x) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but
for this Section 5(a)(iv), (y) subject itself to taxation in any such
jurisdiction or (z) consent to general service of process in any such
jurisdiction;
v. use its reasonable efforts to cause the Registrable
Securities covered by such Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to
enable the seller or sellers of Registrable Securities to consummate the
disposition of such Registrable Securities;
vi. upon discovery that, or upon the happening of any event as
a result of which, the prospectus included in a Registration Statement
covering
<PAGE> 7
Registrable Securities contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made, (x) promptly prepare a
supplement or amendment to such prospectus and furnish to each seller of
Registrable Securities a reasonable number of copies of a supplement to
or an amendment of such prospectus as may be necessary so that, after
delivery to the purchasers of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made and (y) immediately prior to the
preparation of such amendment or supplement to such prospectus, notify
each seller of Registrable Securities of the anticipated preparation
thereof;
vii. enter into and perform customary agreements (including an
underwriting agreement in customary form with the Underwriter, if any)
and take such other actions as are prudent and reasonably required in
order to expedite or facilitate the disposition of such Registrable
Securities;
viii. make available for inspection by any seller of Registrable
Securities, any managing underwriter participating in any disposition
pursuant to such Registration Statement, Holders' Counsel and any
attorney, accountant or other agent retained by any such seller or any
managing underwriter (each, an "Inspector" and collectively, the
"Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries
(collectively, the "Records") as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the
Company's and its subsidiaries' officers, directors and employees, and
the independent public accountants of the Company, to supply all
information reasonably requested by any such Inspector in connection with
such Registration Statement. Records that the Company determines, in good
faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (x) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the Registration Statement, (y) the release
of such Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction or (z) the information in such Records
was known to the Inspectors on a non-confidential basis prior to its
disclosure by the Company or has been made generally available to the
public. Each seller of Registrable Securities agrees that it shall, upon
learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company,
at the Company's expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential;
ix. if such sale is pursuant to an underwritten offering, use
its reasonable efforts to obtain a "cold comfort" letter from the
Company's independent public accountants in customary form and covering
such matters of
<PAGE> 8
the type customarily covered by "cold comfort" letters as Holders'
Counsel or the Underwriter reasonably request;
x. use its reasonable efforts to furnish, at the request of
any seller of Registrable Securities on the date such securities are
delivered to the underwriters for sale pursuant to such registration or,
if such securities are not being sold through underwriters, on the date
the Registration Statement with respect to such securities becomes
effective, an opinion, dated such date, of counsel representing the
Company for the purposes of such registration, addressed to the
underwriters, if any, and to the seller making such request, covering
such legal matters with respect to the registration in respect of which
such opinion is being given as such seller may reasonably request and are
customarily included in such opinions;
xi. otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable but no later than
fifteen (15) months after the effective date of the Registration
Statement, an earnings statement covering a period of twelve (12) months
beginning after the effective date of the Registration Statement, in a
manner which satisfies the provisions of Section 11(a) of the Act and
Rule 158 thereunder;
xii. cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are
then listed, provided that the applicable listing requirements are
satisfied;
xiii. cooperate with each seller of Registrable Securities and
each underwriter participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the NASD; and
xiv. use reasonable efforts to take all other steps necessary to
effect the registration of the Registrable Securities contemplated
hereby.
b. Seller Information. The Company may require each seller of
Registrable Securities as to which any registration is being effected to furnish
to the Company such information regarding the distribution of such securities as
the Company may from time to time reasonably request in writing.
c. Notice to Discontinue. Each Designated Holder agrees that,
upon receipt of any notice from the Company of the happening of any event of the
kind described in Section 5(a)(vi), such Designated Holder shall forthwith
discontinue disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until such Designated Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 5(a)(vi) and, if so directed by the Company, such Designated Holder
shall
<PAGE> 9
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Designated Holder's possession, of the
prospectus covering such Registrable Securities which is current at the time of
receipt of such notice. If the Company shall give any such notice, the Company
shall extend the period during which such Registration Statement shall be
maintained effective pursuant to this Agreement (including, without limitation,
the period referred to in Section 5(a)(ii)) by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 5(a)(vi) to and including the date when the Designated Holder shall have
received the copies of the supplemented or amended prospectus contemplated by
and meeting the requirements of Section 5(a)(vi).
d. Registration Expenses. The Company shall pay all expenses
(other than as set forth in Section 3(b)) arising from or incident to the
performance of, or compliance with, this Agreement, including, without
limitation, (i) SEC, stock exchange and NASD registration and filing fees, (ii)
all fees and expenses incurred in complying with securities or "blue sky" laws
(including reasonable fees, charges and disbursements of counsel in connection
with "blue sky" qualifications of the Registrable Securities), (iii) all
printing, messenger and delivery expenses, (iv) the fees, charges and
disbursements of counsel to the Company and of its independent public
accountants and any other accounting and legal fees, charges and expenses
incurred by the Company (including, without limitation, any expenses arising
from any special audits incident to or required by any registration or
qualification) and (v) any liability insurance or other premiums for insurance
obtained in connection with any registration pursuant to the terms of this
Agreement, regardless of whether such Registration Statement is declared
effective. All of the expenses described in this Section 5(d) are referred to
herein as "Registration Expenses".
6. Indemnification; Contribution.
a. Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the fullest extent permitted by law, each
Designated Holder, its officers, directors, trustees, partners, members,
employees, advisors and agents and each Person who controls (within the meaning
of the Act or the Exchange Act) such Designated Holder from and against any and
all losses, claims, damages, liabilities and expenses, including reasonable
costs of investigation (generally, "Damages"), arising out of or based upon any
untrue, or allegedly untrue, statement of a material fact contained in any
Registration Statement, prospectus or preliminary prospectus or notification or
offering circular (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or arising out of or based upon
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any information
concerning such Designated Holder furnished in writing to the Company by such
Designated Holder expressly for use therein. The Company shall also provide
customary indemnities to any Underwriters, their officers, directors and
employees and each Person who controls such Underwriters (within the meaning of
the Act and
<PAGE> 10
the Exchange Act) to the same extent as provided above with respect to the
indemnification of the Designated Holders.
b. Indemnification by Designated Holders. In connection with
any Registration Statement in which a Designated Holder is participating
pursuant to Section 3 hereof, each such Designated Holder shall furnish to the
Company in writing such information with respect to such Designated Holder as
the Company may reasonably request or as may be required by law for use in
connection with any such Registration Statement or prospectus, and each
Designated Holder agrees to indemnify and hold harmless, to the fullest extent
permitted by law, the Company, any Underwriter, and their respective directors,
officers, employees and each Person who controls the Company or such underwriter
(within the meaning of the Act and the Exchange Act) to the same extent as the
foregoing indemnity from the Company to the Designated Holders, but only with
respect to any such information with respect to such Designated Holder furnished
in writing to the Company by such Designated Holder expressly for use therein.
c. Procedures. Any Person entitled to indemnification
hereunder (the "Indemnified Party") agrees to give prompt written notice to the
indemnifying party (the "Indemnifying Party") after the receipt by the
Indemnified Party of any written notice of the commencement of any action, suit,
proceeding or investigation or threat thereof made in writing for which the
Indemnified Party intends to claim indemnification or contribution pursuant to
this Agreement; provided, however, that the failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to the Indemnified Party hereunder. If notice of commencement
of any such action is given to the Indemnifying Party as above provided, the
Indemnifying Party shall be entitled to participate in and, to the extent it may
wish, jointly with any other Indemnifying Party similarly notified, to assume
the defense of such action at its own expense, with counsel chosen by it and
satisfactory to such Indemnified Party. The Indemnified Party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the Indemnified Party unless
(i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party
fails to assume the defense of such action with counsel satisfactory to the
Indemnified Party in its reasonable judgment or (iii) the named parties to any
such action (including any impleaded parties) have been advised by such counsel
that either (x) representation of such Indemnified Party and the Indemnifying
Party by the same counsel would be inappropriate under applicable standards of
professional conduct or (y) there may be one or more legal defenses available to
it which are different from or additional to and in conflict with those
available to the Indemnifying Party and in such event, the Indemnifying Party
shall pay the fees and expenses of counsel to the Indemnified Party only to the
extent that such separate counsel is necessary under such applicable standards
of professional conduct in the case of the foregoing clause (x) or to the extent
necessary to avoid any conflict in the case of the foregoing clause (y). In
either of such cases, the Indemnifying Party shall not have the right to assume
the defense of such action
<PAGE> 11
on behalf of such Indemnified Party. No Indemnifying Party shall be liable for
any settlement entered into without its written consent, which consent shall not
be unreasonably withheld.
d. Contribution. If the indemnification provided for in this
Section 6 from the Indemnifying Party is unavailable to an Indemnified Party
hereunder in respect of any Damages referred to therein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount of Damages paid or payable by such Indemnified Party in such proportion
as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions which resulted in such Damages,
as well as any other relevant equitable considerations. The relative faults of
such Indemnifying Party and Indemnified Party shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in this paragraph.
e. Limitations. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to indemnification or contribution from any Person. Notwithstanding
anything to the contrary provided above, the total amount of Damages subject to
indemnification or contribution by any Designated Holder under this Section 6
shall not exceed the net proceeds received by such Designated Holder in the
offering to which the registration statement or prospectus relates.
7. Rule 144. From and after the IPO Effectiveness Date, the Company
covenants that it shall file all reports required to be filed by it under the
Exchange Act and that it shall take such further action as each Designated
Holder may reasonably request (including providing any information necessary to
comply with Rules 144 and 144A under the Act), all to the extent required from
time to time to enable such Designated Holder to sell Registrable Securities
without registration under the Act within the limitation of the exemptions
provided by (a) Rule 144 under the Act, as such rules may be amended from time
to time, or (b) any similar rules or regulations hereafter adopted by the SEC.
The Company shall, upon request, deliver to any Designated Holder a written
statement as to whether the Company has complied with such requirements.
8. Miscellaneous.
a. Recapitalizations, Exchanges, etc. The provisions of this
Agreement shall apply, to the full extent set forth herein with respect to (i)
the shares
<PAGE> 12
of Common Stock and (ii) to any and all equity securities of the Company or any
successor or assign of the Company (whether by merger, consolidation, sale of
assets or otherwise) which may be issued in respect of, in conversion of, in
exchange for or in substitution of, the Common Stock, and shall be appropriately
adjusted for any stock dividends, splits, reverse splits, combinations,
recapitalizations and the like occurring after the date hereof. The Company
shall cause any successor or assign (whether by sale, merger or otherwise) to
enter into a new registration rights agreement with the Designated Holders on
terms substantially the same as this Agreement as a condition of any such
transaction.
b. No Inconsistent Agreements. The Company shall not enter
into any agreement with respect to its securities that is inconsistent with the
rights granted to the Designated Holders in this Agreement or grant any
additional registration rights to any Person or with respect to any securities
which are not Registrable Securities which are prior in right to or inconsistent
with the rights granted in this Agreement.
c. Remedies. The Designated Holders, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
shall be entitled to specific performance of their rights under this Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive in any action for specific performance the
defense that a remedy at law would be adequate.
d. Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless consented to in writing by (i) the Company and (ii)
Designated Holders owning at least 75% of the Registrable Securities. Any such
written consent shall be binding upon the Company and all of the Designated
Holders.
e. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be made
by registered or certified first-class mail, return receipt requested, courier
service, overnight mail or personal delivery as follows:
i. if to the Company:
OptiMark Technologies, Inc.
530 Main Avenue
Durango, CO 81301
Telecopy: (970) 247-8844
Attention: William A. Lupien
<PAGE> 13
with a copy to:
Ducker, Montgomery & Lewis, P.C.
One Civic Center Plaza
1560 Broadway, Suite 1500
Denver, CO 80202
Telecopy: (303) 861-4017
Attention: Robert C. Montgomery, Esq.
ii. if to Nasdaq or any other Designated Holder:
As provided in the Warrant Agreement
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; when delivered by courier
or overnight mail, if delivered by commercial courier service or overnight mail;
and five (5) Business Days after being deposited in the mail, postage prepaid,
if mailed.
f. Successors and Assigns; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto. No Person other than the parties hereto
and their successors and permitted assigns is intended to be a beneficiary of
any of the rights granted hereunder.
g. Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
h. Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
i. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
j. Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, it being
<PAGE> 14
intended that all of the rights and privileges of the Designated Holders shall
be enforceable to the fullest extent permitted by law.
k. Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, and in the Warrant Agreement. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
l. Further Assurances. Each of the parties shall execute such
documents and perform such further acts as may be reasonably required or
desirable to carry out or to perform the provisions of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed, or have caused
to be executed, this Agreement on the date first written above.
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
Chief Executive Officer
THE NASDAQ STOCK MARKET, INC.
By: /s/ J. Patrick Campbell
Chief Operating Officer
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EXHIBIT 4.15
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
among
OPTIMARK TECHNOLOGIES, INC.
and
CERTAIN STOCKHOLDERS THEREOF
NAMED HEREIN
- April 23, 1998 -
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TABLE OF CONTENTS
1. Definitions1
2. Restrictions on Transfer of Shares7
2.1 Limitation on Transfer7
2.2 Permitted Transfers7
2.4 Permitted Transfer Procedures9
2.5 Transfers in Compliance with Law; Substitution of Transferee9
3. Right of First Offer and Tag-Along Rights.10
3.1 Proposed Voluntary Transfers.10
3.2 Involuntary Transfers13
4. Future Issuance of Shares; Right of First Offer15
4.1 Offering Notice; Right of First Offer15
4.2 Rightholder Option.15
4.3 Exercise of Options.16
4.4 Closing.16
4.5 Sale to Subject Purchaser16
5. After-Acquired Securities17
6. Corporate Governance17
6.1 General17
6.2 Stockholder Actions17
6.3 Election of Directors; Number and Composition17
6.4 Removal and Replacement of Directors19
6.5 Reimbursement of Expenses20
6.6 Actions of the Board of Directors; Extraordinary Events20
6.7 Board of Directors Meetings.22
7. Covenants of the Company.22
7.1 Charter Documents.22
7.2 Inspection.22
7.3 Financial Statements and Other Information.22
7.4 Management Compensation.23
7.5 Conduct of Business.23
7.6 Payment of Taxes, Compliance with Laws, etc.23
7.7 Insurance.24
7.8 Maintenance of Properties.24
7.9 Affiliated Transactions.24
7.10 Use of Proceeds.24
7.11 Allocation of Proceeds.24
7.12 Books and Records.24
7.13 Back-ups of Computer Software.24
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8. Voting Committee Composition.24
9. Stock Certificate Legend25
10. Miscellaneous25
10.1 Notices25
10.2 Amendment and Waiver27
10.3 Specific Performance28
10.4 Headings28
10.5 Severability28
10.6 Entire Agreement29
10.7 Term of Agreement29
10.8 Variations in Pronouns29
10.9 GOVERNING LAW29
10.10 Further Assurances29
10.11 Successors and Assigns29
10.12 Counterparts29
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AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, dated April 23, 1998 (this
"AGREEMENT"), among OptiMark Technologies, Inc., a Delaware corporation (the
"COMPANY"), and the stockholders of the Company listed on the signature pages
hereto. This Agreement amends, restates and supersedes in its entirety a
Stockholders Agreement dated August 27, 1996 among the Company and some of the
parties hereto.
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the adequacy of which are hereby acknowledged, the parties
hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:
"Affiliate" of a Person means any Person who is an "affiliate" of
the named Person, as defined in Rule 501(b) under the Securities Act. In
addition, the following shall be deemed to be Affiliates of GAP LP: (a) GAP LLC,
the members of GAP LLC and the limited partners of GAP LP; (b) any Affiliate of
GAP LLC, the members of GAP LLC and the limited partners of GAP LP; and (c) any
limited liability company or partnership a majority of whose members or
partners, as the case may be, are members, former members, consultants or key
employees of GAP LLC. In addition, GAP LP and GAP Coinvestment shall be deemed
to be Affiliates of one another.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
"CBOE Warrant" means the Common Stock Purchase Warrant dated
December 31, 1996 pursuant to which The Chicago Board Options Exchange,
Incorporated has the right to purchase up to 1,000,000 shares of Common Stock at
an exercise price of $2.25 per share, subject to potential adjustment as
provided therein.
"Change of Control" in Dow Jones has the meaning set forth in
Section 2.3(b) of this Agreement.
"Charter Documents" means the Restated Certificate of
Incorporation, as amended, and the Bylaws of the Company, as amended from time
to time.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" means the common stock, par value $.01 per share,
of the Company, or any other capital stock of the Company into which such stock
is reclassified or reconstituted.
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"Common Stock Equivalents" means any security or obligation which
is by its terms convertible into shares of Common Stock, including, without
limitation, the Series A Preferred Stock, the Series B Preferred Stock, the VSC
Warrant, the CBOE Warrant, the NASDAQ Warrant, the Dow Jones Warrant, the PCX
Warrant and any other option, warrant or other subscription or purchase right
with respect to Common Stock.
"Company Option" has the meaning set forth in Section 3.1.2 of
this Agreement.
"Company Option Period" has the meaning set forth in Section 3.1.2
of this Agreement.
"Contract Date" has the meaning set forth in Section 3.1.5 of this
Agreement.
"Dow Jones" means Dow Jones & Company, Inc., a Delaware
corporation.
"Dow Jones Director" has the meaning set forth in Section 6.3(c)
of this Agreement.
"Dow Jones Stockholders" means Dow Jones and any Permitted
Transferee thereof to which Shares are transferred in accordance with Section
2.2, and the term "Dow Jones Stockholder" shall mean any such Person.
"Dow Jones Warrant" means a Common Stock Purchase Warrant dated
May 29, 1997 pursuant to which Dow Jones has the right to purchase up to
2,161,764 shares of Common Stock at an exercise price of $2.75 per share,
subject to potential adjustment as provided therein.
"Employee Equity" means options and other rights to acquire up to
6,534,268 shares of Common Stock, issued and reserved for issuance as incentives
for the Company's officers, directors, employees, former employees and
consultants.
"Excess Notice" has the meaning assigned to such term in Section
4.3 of this Agreement.
"Excess Offered Securities" has the meaning set forth in Section
3.1.3(a) of this Agreement.
"Excess Percentage" has the meaning assigned to such term in
Section 4.2 of this Agreement.
"Fair Value" has the meaning assigned to such term in Section
3.2.2 of this Agreement.
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"Family Members" has the meaning assigned to such term in Section
2.2 of this Agreement.
"GAAP" means generally accepted United States accounting
principles in effect from time to time.
"GAP Coinvestment" means GAP Coinvestment Partners, L.P., a New
York limited partnership.
"GAP LLC" means General Atlantic Partners, LLC, a Delaware limited
liability company and the general partner of GAP LP, and any successor to such
entity.
"GAP LP" means General Atlantic Partners 35, L.P., a Delaware
limited partnership.
"General Atlantic Director" has the meaning set forth in Section
6.3(a) of this Agreement.
"General Atlantic Stockholders" means GAP LP, GAP Coinvestment and
any Permitted Transferee of either of them to which Shares are transferred in
accordance with Section 2.2, and the term "General Atlantic Stockholder" shall
mean any such Person.
"Governmental Authority" means the government of any nation,
state, city, locality or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Involuntary Transfer" means any transfer, proceeding or action by
or in which a Stockholder shall be deprived or divested of any right, title or
interest in or to any of the Shares, including, without limitation, any seizure
under levy of attachment or execution, any transfer in connection with
bankruptcy (whether pursuant to the filing of a voluntary or an involuntary
petition under the United States Bankruptcy Code of 1978, or any modifications
or revisions thereto) or other court proceeding to a debtor in possession,
trustee in bankruptcy or receiver or other officer or agency, any transfer to a
state or to a public officer or agency pursuant to any statute pertaining to
escheat or abandoned property and any transfer pursuant to a divorce or
separation agreement or a final decree of a court in a divorce action.
"Involuntary Transferee" has the meaning assigned such term in
Section 3.2.1 of this Agreement.
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"IPO Effectiveness Date" means the date, if any, upon which the
Company commences its initial Public Offering.
"Liens" has the meaning assigned such term in Section 3.1.4 of
this Agreement.
"Lupien Employment Agreement" means the Employment Trade Secret
and Non-Competition Agreement, dated as of August 27, 1996, between the Company
and William A. Lupien.
"Major Stockholders" means William A. Lupien, Richard W. Jones and
John T. Rickard, and "Major Stockholder" shall mean any of such Persons.
"NASDAQ Warrant" means a warrant to purchase Common Stock in favor
of The National Association of Securities Dealers, Inc. or one of its
Affiliates, the terms of which have not yet been defined, which the Company is
negotiating.
"New Issuance Notice" has the meaning set forth in Section 4.1 of
this Agreement.
"New Issuance Percentage" has the meaning assigned to such term in
Section 4.2 of this Agreement.
"New Securities" has the meaning set forth in Section 4.1 of this
Agreement.
"Offer Price" has the meaning assigned such term in Section 3.1.1
of this Agreement.
"Offered Securities" has the meaning assigned such term in Section
3.1.1 of this Agreement.
"Offering Notice" has the meaning assigned such term in Section
3.1.1 of this Agreement.
"OptiMark Competitor" means (i) Microsoft Corp., Reuters Limited,
Cantor Fitzgerald LP, Investment Technology Group, Inc., AZX Inc., State Street
Boston Corp., Bloomberg LP and Bridge Information Systems, Inc., and (ii) any
Person who operates an electronic matching service for the trading of
securities.
"OptiMark Stockholders" means the Major Stockholders and any
Permitted Transferee of any of them to whom Shares are transferred in accordance
with Section 2.2, and the term "OptiMark Stockholder" shall mean any such
Person.
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"Option Period" has the meaning set forth in Section 3.1.3(a) of
this Agreement.
"PCX Warrant" means the Common Stock Purchase Warrant, dated
August 27, 1996 pursuant to which The Pacific Exchange, Incorporated has the
right to purchase up to 2,104,000 shares of Common Stock at an exercise price of
$1.83 per share, pursuant to potential adjustment as described therein.
"Permitted Transferee" has the meaning assigned such term in
Section 2.2 of this Agreement.
"Person" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint stock company, trust,
unincorporated organization, governmental body or other entity.
"Preferred Stock" means the Series A Preferred Stock and the
Series B Preferred Stock, collectively.
"Preferred Stockholders" means the Series A Preferred Stockholders
and the Series B Preferred Stockholders, collectively, and the term "Preferred
Stockholder" shall mean any such Person.
"Proposed Price" has the meaning set forth in Section 4.1 of this
Agreement.
"Public Offering" means any offer for sale of shares of Common
Stock pursuant to an effective Registration Statement.
"Registration Statement" means a registration statement filed
pursuant to the Securities Act.
"Rickard Employment Agreement" means the Employment Trade Secret
and Non-Competition Agreement, dated as of August 27, 1996, between the Company
and John T. Rickard.
"Rightholders" means the OptiMark Stockholders, the General
Atlantic Stockholders, the Dow Jones Stockholders, and the Walton Stockholders,
and the term "Rightholder" shall mean any such Person.
"Rightholder Notice" has the meaning set forth in Section 4.3 of
this Agreement.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
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"Selling Stockholder" has the meaning set forth in Section 3.1.1
of this Agreement.
"Series A Certificate of Designations" means the Amended and
Restated Certificate of Designations with respect to the Series A Preferred
Stock filed with the Secretary of State of the State of Delaware on or about
April 23, 1998.
"Series B Certificate of Designations" means the Certificate of
Designations with respect to the Series B Preferred Stock adopted by the Board
of Directors and filed with the Secretary of State of the State of Delaware on
or about April 23, 1998.
"Series A Preferred Stock" means the Company's Series A
Convertible Participating Preferred Stock, $.01 par value per share.
"Series B Preferred Stock" means the Company's Series B
Convertible Participating Preferred Stock, $.01 par value per share.
"Series A Preferred Stockholders" means the holders of Series A
Preferred Stock, and the term "Series A Preferred Stockholder" shall mean any
such Person.
"Series B Preferred Stockholders" means the holders of Series B
Preferred Stock, and the term "Series B Preferred Stockholder" shall mean any
such Person.
"Series B Stock Purchase Agreement" means the Series B Stock
Purchase Agreement dated April 23, 1998, between the Company and the holders of
the Series B Preferred Stock.
"Shares" means, with respect to each Stockholder, all shares,
whether now owned or hereafter acquired, of Common Stock and Preferred Stock
owned thereby; provided, however, for the purposes of any computation of the
number of Shares either outstanding or held by any Stockholder or otherwise to
be determined pursuant to Sections 2, 3, 4, 5 and 10.2 of this Agreement, the
shares of Common Stock issuable upon conversion, exercise or exchange of all
Common Stock Equivalents shall be deemed outstanding whether or not such
conversion, exercise or exchange has actually been effected. "Shares" means,
with respect to the Voting Committee, all shares of Common Stock subject to the
Voting Agreement.
"Stockholders" means the holders of Series A Preferred Stock,
Series B Preferred Stock and/or Common Stock who are or who may hereafter become
parties to this Agreement from time to time, and the term "Stockholder" shall
mean any such Person.
"Stockholders Meeting" has the meaning set forth in Section 6.1.
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"Subject Purchaser" has the meaning set forth in Section 4.1 of
this Agreement.
"Subsidiaries" means, as of the relevant date of determination,
with respect to any Person, a corporation or any Person of which 50% or more of
the voting power of the outstanding voting equity securities or 50% or more of
the outstanding economic equity interest is held, directly or indirectly, by
such Person. Unless otherwise qualified, or the context otherwise requires, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Company.
"transfer" has the meaning set forth in Section 2.1 of this
Agreement.
"Transferred Shares" has the meaning set forth in Section 3.2.1 of
this Agreement.
"Third Party Purchaser" has the meaning set forth in Section 3.1.1
of this Agreement.
"Voting Agreement" means the Voting Agreement dated as of July 17,
1996, among the Voting Committee Members and the stockholders of the Company
named therein.
"Voting Committee" means the voting committee established pursuant
to the Voting Agreement.
"Voting Committee Members" means those individuals who serve from
time to time as members of the Voting Committee. As of the date of this
Agreement, the Voting Committee Members are William A. Lupien, John T. Rickard
and Alan S. Danson.
"VSC" means Virginia Surety Company, Inc., an Illinois insurance
corporation.
"VSC Director" has the meaning set forth in Section 6.3(e) of this
Agreement.
"VSC Stockholders" means VSC and any Permitted Transferee thereof
to which Shares are transferred in accordance with Section 2.2, and the term
"VSC Stockholder" shall mean any such Person.
"VSC Warrant" means the Common Stock Purchase Warrant dated April
23, 1998 pursuant to which VSC has the right to purchase up to 500,000 shares of
Common Stock at an exercise price of $10.00 per share, subject to potential
adjustment as provided therein.
"Walton" means Alice L. Walton, individually.
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"Walton Stockholders" means Walton and any Permitted Transferee
thereof to whom Shares are transferred in accordance with Section 2.2, and the
term "Walton Stockholder" shall mean any such Person.
"Written Consent" has the meaning set forth in Section 6.1 of this
Agreement.
2. Restrictions on Transfer of Shares.
2.1 Limitation on Transfer. No Stockholder shall sell, give,
assign, hypothecate, pledge, encumber, grant a security interest in or otherwise
dispose of (whether by operation of law or otherwise) (each a "TRANSFER") any
Shares or any right, title or interest therein or thereto, except for transfers
made in accordance with the provisions of this Agreement, and in such event, any
transferee obtaining any record or beneficial interest or right to vote such
Shares hereunder shall agree to be bound by this Agreement and shall comply with
Section 2.5. Any attempt to transfer any Shares or any rights thereunder in
violation of the preceding sentence shall be null and void ab initio and the
Company shall not register any such transfer.
2.2 Permitted Transfers. Notwithstanding anything to the
contrary contained in this Agreement, but subject to Sections 2.3, 2.4 and 2.5,
(a) each of the Major Stockholders may transfer
all or a portion of his Shares to or among (i) each other, (ii) a
member of such Major Stockholder's immediate family, which shall
include his spouse, siblings, children or grandchildren ("FAMILY
MEMBERS"), or (iii) a trust, corporation, partnership or limited
liability company, all of the beneficial interests in which shall
be held by such Major Stockholder and/or one or more of his Family
Members; provided, however, that during the period that any such
trust, corporation, partnership or limited liability company holds
any right, title or interest in any Shares, no Person other than
such Major Stockholder and/or one or more of his Family Members
may be or become beneficiaries, stockholders, limited or general
partners or members thereof;
(b) each of GAP LP and GAP Coinvestment may
transfer all or a portion of its Shares to any of its Affiliates;
(c) Dow Jones may transfer all or a portion of
its Shares to any of its Affiliates;
(d) Walton may transfer all or a portion of her
Shares to or among (i) Family Members of Walton, or (ii) a trust,
corporation, partnership or limited liability company, all of the
beneficial interests in which shall be held by Walton and/or one
or more of her Family
<PAGE> 12
Members; provided, however, that during the period that any such
trust, corporation, partnership or limited liability company holds
any right, title or interest in any Shares, no Person other than
Walton and/or one or more of her Family Members may be or become
beneficiaries, stockholders, limited or general partners or
members thereof; and
(e) VSC may transfer all or a portion of its
Shares to any of its Affiliates.
The Persons referred to in the preceding clauses (a), (b), (c), (d) and (e) are
herein each called a "PERMITTED TRANSFEREE".
If any Permitted Transferee of Dow Jones to which Shares have been transferred
in accordance with this Section 2.2 ceases to be a Permitted Transferee of Dow
Jones, then, prior to such event, the Dow Jones Stockholders (other than such
Permitted Transferee) may repurchase such Shares or, if such Dow Jones
Stockholders do not wish or are unable to repurchase such Shares, then such
Permitted Transferee shall offer the Shares held by such Permitted Transferee to
the Company and to the Rightholders, at the Fair Value thereof, in accordance
with Section 3.1.
2.3 Change of Control of Dow Jones.
(a) Notwithstanding anything contained in this
Agreement to the contrary, if there is a Change of Control in Dow
Jones and the Person who effects such Change of Control is or
thereafter becomes an OptiMark Competitor, then (i) as soon as
practicable after the Change of Control (or, if later, the date on
which such Person becomes an OptiMark Competitor), all of the Dow
Jones Stockholders shall offer to sell their Shares and, unless
theretofore expired or fully exercised, the Dow Jones Warrant
first to the Company, and second to the Rightholders, in
accordance with Section 3.1 at an Offer Price that is mutually
agreed upon by Dow Jones and the Company, (ii) the Dow Jones
Stockholders shall remove or cause the Dow Jones Directors to
promptly resign from the Board of Directors, and (iii) the Dow
Jones Stockholders shall no longer be entitled to appoint any
members of the Board of Directors pursuant to Section 6.3. If Dow
Jones and the Company fail to agree upon an Offer Price within ten
Business Days after the occurrence of a Change of Control, then
(i) the Offer Price with respect to the Shares shall be the
greater of (x) the Fair Value per Share as determined in
accordance with Section 3.2.2, or (y) the Exercise Price (as
defined in the Dow Jones Warrant) in effect at the time of the
Change of Control or, if the Dow Jones Warrant has expired or been
fully exercised, the last exercise price in effect under the Dow
Jones Warrant, and (ii) the Offer Price with respect to the Dow
Jones Warrant shall equal the number of shares of Common Stock
then subject to the Dow Jones Warrant multiplied by the greater of
(x) $.0001, or (y) the excess (if any) of the Offer Price with
<PAGE> 13
respect to the Shares over the Exercise Price in effect under the
Dow Jones Warrant. If there is a Change of Control in Dow Jones
and the Person who effects such a Change of Control is not and
does not thereafter become an OptiMark Competitor, then the Dow
Jones Stockholders shall have no obligation to offer or transfer
any portion of their Shares or Common Stock Equivalents to the
Company and the Rightholders under this Section 2.3, but
nevertheless (A) the Dow Jones Stockholders promptly shall remove
or cause the Dow Jones Directors to resign from the Board of
Directors, and (B) the Dow Jones Stockholders shall no longer be
entitled to appoint any members of the Board of Directors pursuant
to Section 6.3.
(b) A "CHANGE OF CONTROL" in Dow Jones shall have
occurred if any one Person or group within the meaning of Section
13(d)(3) of the Exchange Act (other than the "parent" of Dow Jones
described in footnote (6) on page 6 of its 1997 proxy statement or
any Person who is an Affiliate of or of familial relationship to
any Person included within such "parent") has the power to elect,
directly or indirectly, as of any date, a majority of the
directors serving on the board of directors of Dow Jones.
2.4 Permitted Transfer Procedures. If any Stockholder wishes to
transfer Shares to a Permitted Transferee under Section 2.2, such Stockholder
shall give notice to the Company of its intention to make any transfer permitted
under Section 2.2 not less than ten (10) days prior to effecting such transfer,
which notice shall state the name and address of each Permitted Transferee to
whom such transfer is proposed and the number of Shares proposed to be
transferred to such Permitted Transferee.
2.5 Transfers in Compliance with Law; Substitution of
Transferee. Notwithstanding any other provision of this Agreement, no transfer
may be made pursuant to this Section 2 or Section 3 unless (a) the transferee
has agreed in writing to be bound by the terms and conditions of this Agreement
pursuant to an instrument substantially in the form attached hereto as Exhibit
A, (b) the transfer complies in all respects with the applicable provisions of
this Agreement and (c) the transfer complies in all respects with applicable
federal and state securities laws, including, without limitation, the Securities
Act. If requested by the Company in its reasonable judgment, an opinion of
counsel to such transferring Stockholder (which shall be reasonably acceptable
to counsel to the Company) shall be supplied to the Company at such transferring
Stockholder's expense, to the effect that such transfer complies with the
applicable federal and state securities laws. Upon becoming a party to this
Agreement, (i) the Permitted Transferee of a Major Stockholder shall be
substituted for, and shall enjoy the same rights and be subject to the same
obligations as, the transferring Major Stockholder hereunder with respect to the
Shares transferred to such Permitted Transferee, (ii) the Permitted Transferee
of GAP LP or GAP Coinvestment, as the case may be, shall be substituted for, and
shall enjoy the same rights and be subject to the same obligations as, GAP LP or
GAP Coinvestment, as the case may be, hereunder with respect to the Shares
<PAGE> 14
transferred to such Permitted Transferee, (iii) the Permitted Transferee of Dow
Jones shall be substituted for, and shall enjoy the rights and be subject to the
same obligations as, Dow Jones hereunder with respect to the Shares transferred
to such Permitted Transferee, (iv) the Permitted Transferee of Walton shall be
substituted for, and shall enjoy the same rights and be subject to the same
obligations as, Walton hereunder with respect to the Shares transferred to such
Permitted Transferee, (v) any other transferee of any Rightholder shall be
subject to the same obligations as, but none of the rights of, the transferring
Rightholder and (vi) the transferee of any other Stockholder shall be
substituted for, and shall be subject to the same obligations as, the
transferring Stockholder hereunder with respect to the Shares transferred to
such transferee.
3. Right of First Offer and Tag-Along Rights.
3.1 Proposed Voluntary Transfers.
3.1.1 Offering Notice. Subject to Section 2, if any
Stockholder (a "SELLING STOCKHOLDER") wishes to transfer all or any
portion of its Shares to any Person (other than to a Permitted
Transferee) (a "THIRD PARTY PURCHASER"), such Selling Stockholder shall
offer such Shares first to the Company by sending written notice (the
"OFFERING NOTICE") to the Company and the Rightholders which shall state
(a) the number of Shares proposed to be transferred (the "OFFERED
SECURITIES") and (b) the proposed purchase price per Share which the
Selling Stockholder is willing to accept (the "OFFER PRICE"). Upon
delivery of the Offering Notice, such offer shall be irrevocable unless
and until the rights of first offer provided for herein shall have been
waived or shall have expired.
3.1.2 Company Option; Exercise. For a period of fifteen
(15) days after the giving of the Offering Notice pursuant to Section
3.1.1 (the "COMPANY OPTION PERIOD"), the Company shall have the right
(the "COMPANY OPTION") to purchase any or all of the Offered Securities
at a purchase price equal to the Offer Price and upon the terms and
conditions set forth in the Offering Notice. The right of the Company to
purchase any or all of the Offered Securities under this Section 3.1.2
shall be exercisable by delivering written notice of the exercise
thereof, prior to the expiration of the Company Option Period, to the
Selling Stockholder, which notice shall state the number of Offered
Securities proposed to be purchased by the Company. The failure of the
Company to respond within the Company Option Period shall be deemed to be
a waiver of the Company's rights under Section 3.1. The Company may waive
its rights under Section 3.1 prior to the expiration of the Company
Option Period by notice to the Selling Stockholder and the Rightholders.
3.1.3 Rightholder Option; Exercise.
(a) If the Company does not elect to purchase all
of the Offered Securities pursuant to Section 3.1.2, then for a
period of fifteen (15) days after the earlier to occur of (a) the
expiration of the Company
<PAGE> 15
Option Period pursuant to Section 3.1.2 and (b) the date upon
which the Company shall have sent to the Selling Stockholder and
the Rightholders written notice of exercise of the Company Option
pursuant to Section 3.1.2 or its waiver thereof (the "OPTION
PERIOD"), the Rightholders shall have the right to purchase any or
all of the remaining Offered Securities at a purchase price equal
to the Offer Price and upon the terms and conditions set forth in
the Offering Notice. Each such Rightholder shall have the right to
purchase that percentage of the remaining Offered Securities
determined by dividing (i) the total number of Shares then owned
by such Rightholder, by (ii) the total number of Shares then owned
by all Rightholders. If any Rightholder does not fully subscribe
for the number or amount of Offered Securities it is entitled to
purchase, then each other participating Rightholder shall have the
right to purchase that percentage of the Offered Securities not so
subscribed for (for the purposes of this Section 3.1.3, the
"EXCESS OFFERED SECURITIES") determined by dividing (x) the total
number of Shares then owned by such fully participating
Rightholder, by (y) the total number of Shares then owned by all
fully participating Rightholders who elected to purchase Offered
Securities. The procedure described in the preceding sentence
shall be repeated until there are no remaining Excess Offered
Securities. If the Company and/or the Rightholders do not purchase
all of the Offered Securities pursuant to Section 3.1.2 and/or
this Section 3.1.3, then the Selling Stockholder may, subject to
Section 3.1.6, sell the Offered Securities to a Third Party
Purchaser in accordance with Section 3.1.5 without further regard
to the obligations set forth in Sections 3.1.2 and this 3.1.3.
(b) The right of each Rightholder under
subsection (a) above shall be exercisable by delivering written
notice of the exercise thereof, prior to the expiration of the
Option Period, to the Selling Stockholder with a copy to the
Company and the other Rightholders. Each such notice shall state
(i) the number of Shares held by such Rightholder and (ii) the
number of Shares that such Rightholder is willing to purchase
pursuant to this Section 3.1.3. The failure of a Rightholder to
respond within the Option Period to the Selling Stockholder shall
be deemed to be a waiver of such Rightholder's rights under
Section 3.1.3. A Rightholder may waive its rights hereunder by
notice to the Company and the other Rightholders.
3.1.4 Closing. The closing of the purchases of Offered
Securities subscribed for by the Company under Section 3.1.2 and/or the
Rightholders under Section 3.1.3 shall be held at the principal office of
the Company at 11:00 a.m., local time, on the 60th day after the giving
of the Offering Notice pursuant to Section 3.1.1 or at such other time
and place as the parties to the transaction may agree. At such closing,
the Selling Stockholder shall deliver certificates representing the
Offered Securities, duly endorsed for
<PAGE> 16
transfer and accompanied by all requisite transfer taxes, if any, and
such Offered Securities shall be free and clear of any liens, claims,
options, charges, encumbrances or rights ("LIENS") (other than those
arising hereunder and those attributable to actions by the purchasers)
and the Selling Stockholder shall so represent and warrant, and further
represent and warrant that it is the sole beneficial and record owner of
such Offered Securities. The Company or each Rightholder, as the case may
be, purchasing Offered Securities shall deliver at the closing payment in
full in immediately available funds for the Offered Securities purchased
by it. At such closing, all of the parties to the transaction shall
execute such additional documents as are otherwise necessary or
appropriate.
3.1.5 Sale to a Third Party Purchaser. Unless the Company
or the Rightholders elect to purchase all of the Offered Securities under
Sections 3.1.2 or 3.1.3, the Selling Stockholder may, subject to Section
3.1.6, sell the Offered Securities to a Third Party Purchaser on the
terms and conditions set forth in the Offering Notice; provided, however,
that such sale is bona fide and made pursuant to a contract entered into
and closed within 180 days of the earlier to occur of (i) the waiver by
the Company and the Rightholders of their options to purchase the Offered
Securities and (ii) the expiration of the Option Period (the earlier of
such dates being offered herein as the "CONTRACT DATE"); and provided
further, that such sale shall not be consummated unless and until all of
the following conditions are met:
(a) The Selling Stockholder shall deliver to the
Company a certificate of the Third Party Purchaser stating that
(i) such Third Party Purchaser is aware of the rights of the
Company and the Rightholders, contained in this Section 3.1, and
(ii) prior to the purchase by such Third Party Purchaser of any of
such Offered Securities, such Third Party Purchaser shall become a
party to this Agreement and agree to be bound by the terms and
conditions hereof, as a Stockholder, in accordance with Section
2.4 above.
(b) The consummation of such sale to a Third
Party Purchaser shall not be subject to any conditions (other than
necessary filings under the HSR Act), except that it may be
conditioned upon the truth as of the closing of the proposed
purchase of customary representations and warranties and the
delivery of stock certificates and a customary legal opinion.
(c) A Third Party Purchaser shall have furnished
evidence satisfactory to the Company, in its reasonable judgment,
as to the financial ability of such Third Party Purchaser to
consummate the proposed purchase. If such sale is not consummated
within 180 days of the Contract Date for any reason, then the
restrictions provided for herein shall again become effective, and
no transfer of such Offered Securities may be made thereafter by
the Selling Stockholder without again offering
<PAGE> 17
the same to the Company and the Rightholders in accordance with
this Section 3.1.
3.1.6 Tag-Along Rights.
(a) If an OptiMark Stockholder is transferring
Offered Securities to a Third Party Purchaser pursuant to Section
3.1.5, then each Rightholder shall have the right to sell to such
Third Party Purchaser, upon the terms set forth in the Offering
Notice, that number of Shares held by such Rightholder equal to
that percentage of the Offered Securities determined by dividing
(x) the total number of Shares then owned by such Rightholder, by
(y) (i) the total number of Shares then owned by all Rightholders
plus (ii) the total number of Shares then owned by the OptiMark
Stockholder who is exercising his rights pursuant to Section
3.1.5. Such OptiMark Stockholder and the Rightholder(s) shall
effect the sale of the Offered Securities and such Rightholder(s)
shall sell the number of Offered Securities required to be sold
pursuant to this Section 3.1.6(a), and the number of Offered
Securities to be sold to the Third Party Purchaser by the OptiMark
Stockholder shall be reduced accordingly.
(b) In order to exercise its right to sell Shares
to a Third Party Purchaser pursuant to this Section 3.1.6, a
Rightholder must agree to make substantially the same
representations, warranties, covenants and indemnities and other
similar agreements as the OptiMark Stockholder agrees to make in
connection with the proposed sale by him of Offered Securities to
the Third Party Purchaser. The OptiMark Stockholder who is
exercising his rights pursuant to Section 3.1.5 shall give notice
to each Rightholder of each proposed sale by it of Offered
Securities which gives rise to the rights of the Rightholders set
forth in this Section 3.1.6, at least thirty (30) days prior to
the proposed consummation of such sale, setting forth the name of
such OptiMark Stockholder, the number of Offered Securities, the
name and address of the proposed Third Party Purchaser, the
proposed amount and form of consideration and terms and conditions
of payment offered by such Third Party Purchaser, the percent of
Shares that such Rightholder may sell to such Third Party
Purchaser (determined in accordance with this Section 3.1.6), and
a representation that such Third Party Purchaser has been informed
of the "tag-along" rights provided for in this Section 3.1.6 and
has agreed to purchase Shares in accordance with the terms hereof.
The tag-along rights provided by this Section 3.1.6 must be
exercised by each Rightholder wishing to sell Shares within
fifteen (15) days following receipt of the notice required by the
preceding sentence, by delivery of a written notice to such
OptiMark Stockholder indicating such Rightholder's wish to
exercise its rights and specifying the number of Shares (up to the
maximum number of Shares owned by such Rightholder required to be
purchased by such Third Party Purchaser) it wishes to sell. If
such Third Party Purchaser fails to purchase Shares from any
<PAGE> 18
Rightholder that has properly exercised its tag-along rights
pursuant to this Section 3.1.6, then such OptiMark Stockholder
shall not be permitted to consummate the proposed sale of the
Offered Securities, and any such attempted sale shall be null and
void and the Company shall not register any such transfer.
3.2 Involuntary Transfers.
3.2.1 Rights of First Offer upon Involuntary Transfer. If
an Involuntary Transfer of any Shares (the "TRANSFERRED SHARES") owned by
any Stockholder shall occur, then the Company and each Rightholder
(unless such Rightholder is the Involuntary Transferor) shall have the
same rights as specified in Sections 3.1.2 and 3.1.3, respectively, with
respect to such Transferred Shares as if the Involuntary Transfer had
been a proposed voluntary transfer by a Selling Stockholder, except that
(a) the time periods shall run from the date of receipt by the Company of
actual notice of the Involuntary Transfer (and the Company shall
immediately give notice to the Rightholders of the date of receipt of
such notice), (b) such rights shall be exercised by notice to the
transferee of such Transferred Shares (the "INVOLUNTARY TRANSFEREE")
rather than to the Stockholder who suffered or will suffer the
Involuntary Transfer, and (c) the purchase price per Transferred Share
shall be agreed upon by the Involuntary Transferee and the Company or the
purchasing Rightholders, as the case may be; provided, however, that if
such parties fail to agree as to such purchase price, the purchase price
shall be the Fair Value thereof as determined in accordance with Section
3.2.2.
3.2.2 Fair Value. If the parties fail to agree upon the
purchase price of the Transferred Shares in accordance with Section 3.2.1
hereof, then the Company or the Rightholders, as the case may be, shall
purchase the Transferred Shares at a purchase price equal to the Fair
Value (as hereinafter defined) thereof. The Fair Value of the Transferred
Shares shall be determined by a panel of three independent appraisers,
which shall be nationally recognized investment banking firms or
nationally recognized experts experienced in the valuation of
corporations. Within ten Business Days after the notice to the
Involuntary Transferee with respect to the exercise of the right to
purchase the Transferred Shares, the Involuntary Transferee and the Board
of Directors shall each designate one such appraiser that is willing and
able to conduct such determination. If either the Involuntary Transferee
or the Board of Directors fails to make such designation within such
period, then the party that has made the designation shall have the right
to make the designation on its behalf. The two appraisers designated
shall, within a period of ten Business Days after the designation of the
second appraiser, agree to designate a third appraiser. The three
appraisers shall conduct their determination as promptly as practicable,
and the Fair Value of the Transferred Shares shall be the average of the
determination of the two appraisers that are closer to each other than to
the determination of the third appraiser, which third determination shall
be discarded; provided, however, that if the determination of two
appraisers are equally close to the determination of the third
<PAGE> 19
appraiser, then the Fair Value of the Transferred Shares shall be the
average of the determination of all three appraisers. Such determination
shall be final and binding on the Involuntary Transferee, the Company and
the Rightholders. The Involuntary Transferee shall be responsible for the
fees and expenses of the appraiser designated by or on behalf of it, and
the Company for the fees and expenses of the appraiser designated by or
on behalf of the Board of Directors. The Involuntary Transferee and the
Company shall each share half the fees and expenses of the appraiser
designated by the appraisers. For purposes of this Section 3.2.2, the
"FAIR VALUE" of the Transferred Shares means the fair market value of
such Transferred Shares based upon all considerations that the appraisers
determine to be relevant.
3.2.3 Closing. The closing of any purchase under this
Section 3.2 shall be held at the principal office of the Company at 11:00
a.m., local time, on the earlier to occur of (a) the fifth Business Day
after the purchase price per Transferred Share shall have been agreed
upon by the Involuntary Transferee and the Company or the purchasing
Rightholders, as the case may be, in accordance with Section 3.2.1, or
(b) the fifth Business Day after the determination of the Fair Value of
the Transferred Shares in accordance with Section 3.2.2, or at such other
time and place as the parties to the transaction may agree. At such
closing, the Involuntary Transferee shall deliver certificates, if
applicable, or other instruments or documents representing the
Transferred Shares being purchased under this Section 3.2, duly endorsed
with a signature guarantee for transfer and accompanied by all requisite
transfer taxes, if any, and such Transferred Shares shall be free and
clear of any Liens (other than those arising hereunder) arising through
the action or inaction of the Involuntary Transferee and the Involuntary
Transferee shall so represent and warrant, and further represent and
warrant that it is the legal and beneficial owner of such Transferred
Shares. The Company or each Rightholder, as the case may be, purchasing
such Transferred Shares shall deliver at closing payment in full in
immediately available funds for such Transferred Shares. At such closing,
all parties to the transaction shall execute such additional documents as
are otherwise necessary or appropriate.
3.2.4 General. In the event that the provisions of this
Section 3.2 shall be held to be unenforceable with respect to any
particular Involuntary Transfer, the Company and the Rightholders shall
have the rights specified in Sections 3.1.2 and 3.1.3, respectively, with
respect to any transfer by an Involuntary Transferee of such Shares, and
each Rightholder agrees that any Involuntary Transfer shall be subject to
such rights, in which case the Involuntary Transferee shall be deemed to
be the Selling Stockholder for purposes of Section 3.1 of this Agreement
and shall be bound by the provisions of Section 3.1 and other related
provisions of this Agreement.
4. Future Issuance of Shares; Right of First Offer.
4.1 Offering Notice; Right of First Offer. Except for (a)
Employee Equity, (b) a dividend on the outstanding shares of Common Stock in
capital stock of the Company or a subdivision of the outstanding shares of
Common Stock into a larger number of shares of Common Stock, (c) capital stock
of the Company issued in consideration of the acquisition by the Company or any
of its Subsidiaries of another Person, (d) capital stock of the Company issued
pursuant to exercise of the PCX Warrant, the CBOE Warrant, the Dow Jones
Warrant, the NASDAQ Warrant and/or the VSC Warrant, and (e) capital stock of the
Company issued upon conversion of the Preferred Stock, if the Company wishes to
issue any shares of capital stock or any other security convertible into or
exchangeable for capital stock of the Company (collectively, "NEW SECURITIES")
to any Person (the "SUBJECT PURCHASER") prior to the IPO Effectiveness Date,
then the Company shall offer such New Securities first to the Rightholders by
sending written notice (the "NEW ISSUANCE NOTICE") to each Rightholder which
shall state (i) the number of New Securities proposed to be issued and (ii) the
proposed purchase price per share of the New Securities that the Company is
willing to accept (the "PROPOSED PRICE"). Upon delivery of the New Issuance
Notice, such offer shall be irrevocable unless and until the rights provided for
in Section 4.2 shall have been waived or shall have expired.
4.2 Rightholder Option.
4.2.1 For a period of fifteen (15) days after the giving
of the New Issuance Notice pursuant to Section 4.1, each Rightholder
shall have the right to purchase, at a purchase price equal to the
Proposed Price and upon the terms and conditions set forth in the New
Issuance Notice, that percentage of the New Securities determined by
dividing (a) the total number of Shares then owned by such Rightholder by
(b) the total number of Shares then owned by all Rightholders (the "NEW
ISSUANCE PERCENTAGE").
4.2.2 If any Rightholder does not fully subscribe for the
amount of New Securities that it is entitled to purchase pursuant to
Section 4.2.1, then those Rightholders who elected to fully subscribe for
the amount of New Securities that they are entitled to purchase pursuant
to Section 4.2.1 shall have the right to purchase that percentage of the
remaining New Securities not so subscribed for determined by dividing (x)
the total number of Shares then owned by such participating Rightholders
by (y) the total number of Shares then owned by all fully participating
Rightholders (the "EXCESS PERCENTAGE").
4.3 Exercise of Options.
4.3.1 The right of the Rightholders to purchase their New
Issuance Percentage under Section 4.2.1 shall be exercisable by
delivering written notice ("RIGHTHOLDER NOTICE") of exercise thereof,
prior to the expiration of fifteen (15) days after the giving of the New
Issuance Notice pursuant to Section
<PAGE> 20
4.1 to the Company and the other Rightholders, which notice shall state
the number of New Securities proposed to be purchased by each
Rightholder. The failure of any Rightholder to respond within such 15-day
period shall be deemed to be a waiver of such Rightholder's rights under
Section 4.2.1.
4.3.2 The right of the Rightholders to purchase their
Excess Percentage under Section 4.2.2 shall be exercisable by delivering
written notice (the "EXCESS NOTICE") of exercise thereof, prior to the
expiration of fifteen (15) days after the giving of the Rightholder
Notice pursuant to Section 4.3.1 to the Company and the other
Rightholders, which notice shall state the number of Excess Securities
proposed to be purchased by each Rightholder. The failure of any
Rightholder to respond within such 15 day period shall be deemed a waiver
of such Rightholder's rights under Section 4.2.2.
4.4 Closing. The closing of the purchase of New Securities
subscribed for under Section 4.2 shall be held at the principal office of the
Company at 11:00 a.m., local time, on (a) the 30th day after the giving of the
New Issuance Notice pursuant to Section 4.1, if the Rightholders elect to
purchase all of the New Securities pursuant to Section 4.2.1, (b) the 45th day
after the giving of the New Issuance Notice pursuant to Section 4.1, if the
Rightholders elect to purchase any of the New Securities under Section 4.2.2, or
(c) at such other time and place as the parties to the transaction may agree. At
such closing, the Company shall deliver certificates representing the New
Securities, and such New Securities shall be issued free and clear of all Liens
and the Company shall so represent and warrant, and further represent and
warrant that such New Securities shall be, upon issuance thereof to the
Rightholders pursuant to Section 4.2.1 or 4.2.2, as the case may be, and after
payment therefor, duly authorized, validly issued, fully paid and nonassessable.
Each Rightholder purchasing the New Securities pursuant to Section 4.2.1 or
4.2.2, as the case may be, shall deliver at the closing payment in full in
immediately available funds for the New Securities purchased by it. At such
closing, all of the parties to the transaction shall execute such additional
documents as are otherwise necessary or appropriate.
4.5 Sale to Subject Purchaser. Unless all of the New Securities
are purchased by Rightholders pursuant to Section 4.2 and Section 4.3, the
Company may sell to the Subject Purchaser all of the New Securities not
purchased by the Rightholders pursuant to Section 4.2 on terms and conditions
that are no more favorable to the Subject Purchaser than those set forth in the
New Issuance Notice; provided, however, that such sale is bona fide and made
pursuant to a contract entered into and closed within six (6) months of the
earlier to occur of (i) the waiver by the Rightholders of their option to
purchase all of the New Securities pursuant to Section 4.2.2, and (ii) the
expiration of the 15-day period referred to in Section 4.3.2. If such sale is
not consummated within such six (6) month period for any reason, then the
restrictions provided for herein shall again become effective, and no issuance
and sale of New Securities may be made thereafter by the Company without again
offering the same to the Rightholders in accordance with this Section 4.
<PAGE> 21
5. After-Acquired Securities. All of the provisions of this Agreement
shall apply to all of the Shares now owned or which may be issued or transferred
hereafter to a Stockholder in consequence of any additional issuance, purchase,
exchange or reclassification of any of such Shares, exercise or conversion of
Common Stock Equivalents, corporate reorganization, or any other form of
recapitalization, consolidation, merger, share split or share dividend, or which
are acquired by a Stockholder in any other manner.
6. Corporate Governance.
6.1 General. From and after the execution of this Agreement,
each Stockholder shall vote its Shares and each Voting Committee Member shall
cause the Voting Committee to vote its Shares at each regular or special meeting
of stockholders of the Company (a "STOCKHOLDERS MEETING") or in any written
consent executed in lieu of such a meeting of stockholders (a "WRITTEN
CONSENT"), and shall take all other actions necessary, to give effect to the
provisions of this Agreement (including, without limitation, Section 6.3 hereof)
and to ensure that the Charter Documents do not, at any time hereafter, conflict
in any respect with the provisions of this Agreement. In addition, each
Stockholder shall vote its Shares and each Voting Committee Member shall cause
the Voting Committee to vote its Shares at any Stockholders Meeting or act by
Written Consent with respect to such Shares, upon any matter submitted for
action by the Company's stockholders or with respect to which such Stockholder
or Voting Committee may vote or act by Written Consent, in conformity with the
specific terms and provisions of this Agreement and the Charter Documents.
6.2 Stockholder Actions. In order to effectuate the provisions
of this Section 6, each Stockholder and each Voting Committee Member (a) hereby
agrees that when any action or vote is required to be taken by such Stockholder
and Voting Committee pursuant to this Agreement, such Stockholder and Voting
Committee Member shall use its best efforts to call, or cause the appropriate
officer and directors of the Company to call, a Stockholders Meeting or to
execute or cause to be executed a Written Consent to effectuate such stockholder
action, (b) shall use its best efforts to cause the Board of Directors to adopt,
either at a meeting of the Board of Directors or by unanimous written consent of
the Board of Directors, all the resolutions necessary to effectuate the
provisions of this Agreement and (c) shall use its best efforts to cause the
Board of Directors to cause the Secretary of the Company, or if there be no
secretary, such other officer of the Company as the Board of Directors may
appoint to fulfill the duties of Secretary, not to record any vote or consent
contrary to the terms of this Section 6.
6.3 Election of Directors; Number and Composition. Each
Stockholder shall vote its Shares and each Voting Committee Member shall cause
the Voting Committee to vote its Shares at any Stockholders Meeting, or act by
Written Consent with respect to such Shares, and take all other actions
necessary to ensure that the number of directors constituting the entire Board
of Directors shall be (i) not less than the number sufficient to give effect to
the rights of the General Atlantic Stockholders, the
<PAGE> 22
Dow Jones Stockholders and the VSC Stockholders set forth in this Section 6.3,
and (ii) not more than 15. Each Stockholder shall vote its Shares and each
Voting Committee Member shall cause the Voting Committee to vote its Shares at
any Stockholders Meeting called for the purpose of filling the positions on the
Board of Directors, or in any Written Consent executed for such purpose, and to
take all other actions necessary to ensure the election to the Board of
Directors of the following individuals under the following circumstances:
(a) two individuals designated by the General Atlantic Stockholders
(each a "GENERAL ATLANTIC DIRECTOR"), if the General Atlantic Stockholders so
elect, for so long as the General Atlantic Stockholders own Common Stock or
Common Stock Equivalents convertible into or exchangeable for shares of voting
capital stock of the Company representing (after giving effect to any
adjustments) greater than or equal to 5% of the total number of shares of Common
Stock outstanding on an "as converted" basis;
(b) one General Atlantic Director, if the General Atlantic
Stockholders so elect, for so long as the General Atlantic Stockholders own
Common Stock or Common Stock Equivalents convertible into or exchangeable for
shares of voting capital stock of the Company representing (after giving effect
to any adjustments) less than 5% but greater than or equal to 2% of the total
number of shares of Common Stock outstanding on an "as converted" basis;
(c) two individuals designated by the Dow Jones Stockholders (each a
"DOW JONES DIRECTOR"), if the Dow Jones Stockholders so elect, for so long as
the Dow Jones Stockholders own Common Stock or Common Stock Equivalents
convertible into or exchangeable for shares of voting capital stock of the
Company representing (after giving effect to any adjustments) greater than or
equal to 5% of the total number of shares of Common Stock outstanding on an "as
converted" basis;
(d) one Dow Jones Director, if the Dow Jones Stockholders so elect,
for so long as the Dow Jones Stockholders own Common Stock or Common Stock
Equivalents convertible into or exchangeable for shares of voting capital stock
of the Company representing (after giving effect to any adjustments) less than
5% but greater than or equal to 2% of the total number of shares of Common Stock
outstanding on an "as converted" basis; and
(e) one individual designated by the VSC Stockholders (a "VSC
DIRECTOR"), if the VSC Stockholders so elect, for so long as the VSC
Stockholders own at least two-thirds of the Series B Preferred Stock (and/or the
Common Stock into which such Series B Preferred Stock may henceforth be
converted) purchased by VSC under the Series B Stock Purchase Agreement.
If at any time the General Atlantic Stockholders, the Dow Jones
Stockholders or the VSC Stockholders, as the case may be, are entitled to
appoint one or more members of the Board of Directors pursuant to this Section
6.3 but elect not to do so, such
<PAGE> 23
Stockholders shall be entitled to appoint a representative to attend any and all
meetings of the Board of Directors with "observer" status.
Notwithstanding anything to the contrary contained in this Agreement, if
at any time the General Atlantic Stockholders, the Dow Jones Stockholders, or
the VSC Stockholders own Common Stock or Common Stock Equivalents convertible
into or exchangeable for shares of voting capital stock of the Company
representing (after giving effect to any adjustments) less than 2% of the total
number of shares of Common Stock outstanding on an "as converted" basis, then
the General Atlantic Stockholders, the Dow Jones Stockholders, or the VSC
Stockholders, as the case may be, shall no longer be entitled to designate any
directors or attend any meetings of the Board of Directors pursuant to this
Section 6.3.
All other directors of the Company shall be elected to the Board of
Directors in accordance with the Bylaws of the Company.
6.4 Removal and Replacement of Directors.
6.4.1 General Atlantic Directors.
(a) If at any time the General Atlantic
Stockholders notify the other Stockholders of their wish to remove
at any time and for any reason (or no reason) any General Atlantic
Director, then each Stockholder shall vote all of its Shares and
each Voting Committee Member shall cause the Voting Committee to
vote all of its Shares so as to remove such General Atlantic
Director.
(b) If at any time, a vacancy is created on the
Board of Directors by reason of the death, removal or resignation
of a General Atlantic Director, then the General Atlantic
Stockholders shall designate an individual who shall be elected to
fill such vacancy until the next Stockholders Meeting. Upon
receipt of notice of the designation of a nominee, each
Stockholder and each Voting Committee Member shall, as soon as
practicable after the date of such notice, take action, including
(i) the voting of its Shares (in the case of each Stockholder) and
(ii) causing the Voting Committee to vote its shares (in the case
of each Voting Committee Member), to elect the director designated
by the General Atlantic Stockholders to fill such vacancy.
6.4.2 Dow Jones Directors.
(a) If at any time the Dow Jones Stockholders
notify the other Stockholders of their wish to remove at any time
and for any reason (or no reason) any Dow Jones Director, then
each Stockholder shall vote all of its Shares and each Voting
Committee Member shall cause the
<PAGE> 24
Voting Committee to vote all of its Shares so as to remove such
Dow Jones Director.
(b) If at any time, a vacancy is created on the
Board of Directors by reason of the death, removal or resignation
of a Dow Jones Director, then the Dow Jones Stockholders shall
designate an individual who shall be elected to fill such vacancy
until the next Stockholders Meeting. Upon receipt of notice of the
designation of a nominee, each Stockholder and each Voting
Committee Member shall, as soon as practicable after the date of
such notice, take action, including (i) the voting of its Shares
(in the case of each Stockholder) and (ii) causing the Voting
Committee to vote its shares (in the case of each Voting Committee
Member), to elect the director designated by the Dow Jones
Stockholders to fill such vacancy.
6.4.3 VSC Director.
(a) If at any time the VSC Stockholders notify
the other Stockholders of their wish to remove at any time and for
any reason (or no reason) the VSC Director, then each Stockholder
shall vote all of its Shares and each Voting Committee Member
shall cause the Voting Committee to vote all of its Shares so as
to remove such VSC Director.
(b) If at any time, a vacancy is created on the
Board of Directors by reason of the death, removal or resignation
of the VSC Director, then the VSC Stockholders shall designate an
individual who shall be elected to fill such vacancy until the
next Stockholders Meeting. Upon receipt of notice of the
designation of a nominee, each Stockholder and each Voting
Committee Member shall, as soon as practicable after the date of
such notice, take action, including (i) the voting of its Shares
(in the case of each Stockholder) and (ii) causing the Voting
Committee to vote its shares (in the case of each Voting Committee
Member), to elect the director designated by the VSC Stockholders
to fill such vacancy.
6.5 Reimbursement of Expenses. Notwithstanding anything to the
contrary contained in this Agreement, the Company shall reimburse (i) GAP LP and
GAP Coinvestment, or their designee, for all reasonable travel and other
out-of-pocket expenses incurred by the General Atlantic Director(s) in
connection with their duties as directors of the Company, (ii) Dow Jones for all
reasonable travel and other out-of-pocket expenses incurred by the Dow Jones
Director(s) in connection with their duties as directors of the Company, and
(ii) VSC for all reasonable travel and other out-of-pocket expenses incurred by
the VSC Director in connection with his duties as a director of the Company.
6.6 Actions of the Board of Directors; Extraordinary Events.
Notwithstanding anything to the contrary contained in this Agreement, for so
long as
<PAGE> 25
there is at least one General Atlantic Director elected pursuant to Section 6.3
on the Board of Directors, the Board of Directors shall not take, approve or
otherwise ratify any of the following actions except with the consent of at
least a majority of the directors constituting the entire Board of Directors;
provided, however, such majority includes at least one General Atlantic Director
or one Dow Jones Director:
(a) any voluntary filing of a petition in
bankruptcy (or similar law of the United States or any other
jurisdiction which relates to liquidation or reorganization of
companies or to the modification or alteration of the rights of
creditors); the making of an assignment, or so-called trust
mortgage or the like, for the benefit of creditors or the making
of a proposal to creditors under any bankruptcy act, the
appointment of a receiver or trustee (or other Person performing a
similar function) for all or a substantial part of the Company's
property; or the calling of a meeting of creditors, appointment of
a committee of creditors or liquidating agents or offering of a
composition or extension to creditors;
(b) a material change in the line or lines of
business activity in which the Company is engaged on the date
hereof;
(c) an amendment to, or waiver or release of any
rights under, the Lupien Employment Agreement;
(d) an amendment to, or waiver or release of any
rights under, the Rickard Employment Agreement;
(e) other than capital stock of the Company that
may be issued (i) to officers, employees, consultants and/or
directors of the Company as Employee Equity, (ii) upon exercise of
the PCX Warrant, the CBOE Warrant, the Dow Jones Warrant, the
NASDAQ Warrant and/or the VSC Warrant, and (iii) to the Preferred
Stockholders upon conversion of the Preferred Stock, any issuance
of or agreement to issue (x) any shares of capital stock of the
Company or rights of any kind convertible into or exchangeable
for, any shares of capital stock of the Company, or any option,
warrant or other subscription or purchase right with respect to
shares of capital stock, and (y) any long term indebtedness of the
Company in excess of an aggregate of $1,000,000;
(f) (i) any single capital expenditure by the
Company in excess of $1,000,000 and (ii) any material expenditure
by the Company in any single year in excess of $500,000 that is
not provided for in the annual operating budget of the Company for
such year;
(g) any material changes in accounting principles
or policies of the Company, including any material change in the
criteria for evaluating the Company's financial conditions and
results of operations;
<PAGE> 26
(h) any sale, conveyance, lease, transfer,
license or other disposition of (whether in one transaction or a
series of related transactions) all or substantially all of the
assets of the Company or any Subsidiary thereof; provided,
however, that (i) the transfer of assets of the Company to a
wholly-owned Subsidiary of the Company or (ii) the license by such
wholly-owned Subsidiary of less than all or substantially all of
the collective assets of such wholly-owned Subsidiary and the
Company, shall not require the approval of a General Atlantic
Director or a Dow Jones Director;
(i) any transaction of merger, consolidation or
other form of business combination with respect to the Company or
any Subsidiary thereof if the stockholders of the Company prior to
such merger, consolidation or business combination do not retain
at least a majority of the voting power of the surviving Person;
(j) voluntarily dissolve, liquidate or wind up
the Company's operations;
(k) grant or permit to exist any liens, security
interests or encumbrances on any of the Company's assets or
properties, except in the ordinary course of business;
(l) enter into any agreement with any party which
by its terms restricts the payments due the Series A Preferred
Stockholders pursuant to the Series A Certificate of Designations;
(m) any amendment, modification or restatement of
the Charter Documents, any modification of the minimum or maximum
number of directors constituting the entire Board of Directors
pursuant to Section 6.3, or any amendment or modification of this
Section 6.6 that, in each case, in the reasonable judgment of a
General Atlantic Director, adversely impairs or effects the rights
of the General Atlantic Stockholders;
(n) declare or pay any dividends or make any
distributions of cash, property or securities of the Company with
respect to the Common Stock or any other class of the Company's
capital stock; or
(o) directly or indirectly, redeem, purchase, or
otherwise acquire for consideration any Common Stock or any other
class of the Company's capital stock.
<PAGE> 27
6.7 Board of Directors Meetings. The Company will ensure that
meetings of its Board of Directors are held at least four times each year and at
intervals not more than three months.
7. Covenants of the Company.
7.1 Charter Documents. The Company will ensure that the Charter
Documents will at all times during which a General Atlantic Director, a Dow
Jones Director and/or a VSC Director serves on the Board of Directors provide
for (i) indemnification of each member of the Board of Directors and (ii)
limitations on the liability of each member of the Board of Directors to the
fullest extent permitted under applicable law.
7.2 Inspection. The Company will permit representatives of VSC
and each Series A Preferred Stockholder to visit and inspect any of its
properties, to examine its corporate, financial and operating records and make
copies thereof or abstracts therefrom, and to discuss its affairs, finances and
accounts with their respective directors, officers and independent public
accountants, all at such reasonable times during normal business hours and as
often as may be reasonably requested, upon reasonable advance notice to the
Company.
7.3 Financial Statements and Other Information. The Company
shall deliver to each of VSC and the Series A Preferred Stockholders the
following:
(a) as soon as available, but not later than
sixty (60) days after the end of each fiscal year of the Company,
a copy of the audited balance sheet of the Company as of the end
of such year and the related statements of operations and cash
flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous year, all in
reasonable detail and accompanied by a management summary and
analysis of the operations of the Company for such fiscal year and
by the opinion of a nationally recognized independent certified
public accounting firm which report shall state without
qualification that such financial statements present fairly the
financial condition as of such date and results of operations and
cash flows for the periods indicated in conformity with GAAP
applied on a consistent basis;
(b) as soon as available, but in any event not
later than thirty (30) days after the end of each of the first
three fiscal quarters of each fiscal year, the unaudited balance
sheet of the Company, and the related statements of operations and
cash flows for such quarter and for the period commencing on the
first day of the fiscal year and ending on the last day of such
quarter, all certified by an appropriate officer of the Company as
presenting fairly the financial condition as of such date and
results of operations and cash flows for the periods indicated in
<PAGE> 28
conformity with GAAP applied on a consistent basis, subject to
normal year-end adjustments and the absence of footnotes required
by GAAP; and
(c) annual operating budgets and, from time to
time, such other financial data and information about the Company
as is reasonably available to the Company and as VSC and/or any of
the Series A Preferred Stockholders may reasonably request.
7.4 Management Compensation. Compensation paid by the Company
to its management will be reasonably comparable to compensation paid to
management in companies in the same or similar businesses of similar size and
maturity and with comparable financial performance.
7.5 Conduct of Business. The Company will (a) keep in full
force and effect (i) its corporate existence and good standing under the laws of
its jurisdiction of incorporation and (ii) all intellectual property rights
useful in its business (except such rights as the Board of Directors has
reasonably determined are not material to the Company's continuing operations),
(b) preserve and maintain in full force and effect all material rights,
privileges, qualifications, applications, licenses and franchises necessary in
the normal conduct of its business, (c) conduct its business in accordance with
sound business practices, and (d) file or cause to be filed in a timely manner
all reports, applications and licenses that shall be required by a governmental
agency or body and that, if not timely filed, could have a material adverse
effect on the Company.
7.6 Payment of Taxes, Compliance with Laws, etc. The Company
will pay and discharge all lawful taxes, assessments and governmental charges or
levies imposed upon it or upon its income or property before the same shall
become in default, as well as all lawful claims for labor, materials and
supplies which, if not paid when due, might become a lien or charge upon its
property or any part thereof; provided, however, that the Company shall not be
required to pay and discharge any such tax, assessment, charge, levy or claim so
long as the validity thereof is being contested by the Company in good faith by
appropriate proceedings and an adequate reserve therefor has been established on
its books. The Company will use its best efforts to comply with all applicable
laws and regulations in the conduct of its business, including, without
limitation, all applicable federal and state securities laws in connection with
the issuance of any shares of its capital stock.
7.7 Insurance. The Company will keep its insurable properties
insured, upon reasonable business terms, by financially sound and reputable
insurers against liability, and the perils of casualty, fire and extended
coverage in amounts of coverage at least equal to those customarily maintained
by companies in the same or similar business as the Company. The Company will
also maintain with such insurers insurance against other hazards and risks and
liability to persons and property to the extent and in the manner customary for
companies engaged in the same or similar business.
<PAGE> 29
7.8 Maintenance of Properties. The Company will maintain all
properties used or useful in the conduct of its business in good repair, working
order and condition, ordinary wear and tear excepted, as necessary to permit
such business to be properly and advantageously conducted.
7.9 Affiliated Transactions. All transactions between the
Company and any director, officer or key employee of the Company shall be
conducted on an arm's-length basis, shall be on terms and conditions no less
favorable to the Company than could be obtained from nonrelated persons and
shall be approved in advance by a majority of disinterested members of the Board
of Directors after full disclosure of the terms thereof.
7.10 Use of Proceeds. The Company will use the proceeds from the
sale of the Series B Preferred Stock pursuant to the Series B Stock Purchase
Agreement (i) to complete development of the Pacific Exchange application for
OptiMark(TM), (ii) to fund the roll-out of OptiMark(TM) to the expected point of
positive cash flow, with (iii) any balance being dedicated as needed to the
NASDAQ, Japan and Toronto initiatives.
7.11 Allocation of Proceeds. Notwithstanding anything contained
herein to the contrary, in the event all or substantially all of the voting
capital stock of the Company is sold to another Person for cash or securities of
such Person (or an affiliate thereof), the Stockholders agree to allocate the
proceeds of such sale in such manner as to give effect to the purposes of
paragraph 4 of the Series A Certificate of Designations as if such sale were a
Liquidation Event (as defined in the Series A Certificate of Designations).
7.12 Books and Records. The Company shall keep books of record
and account, in which accurate entries shall be made of all financial
transactions and the assets and business of the Company in accordance with GAAP
consistently applied.
7.13 Back-ups of Computer Software. The Company shall make
back-ups of all material computer software programs and databases and shall
maintain such software programs databases at a secure off-site location.
8. Voting Committee Composition. In the event a vacancy occurs on the
Voting Committee that may be filled by the remaining Voting Committee Members,
each remaining Voting Committee Member shall cause such vacancy to be filled by
a Person who has agreed in writing to be bound by the terms and conditions of
Section 6 of this Agreement pursuant to an instrument reasonably acceptable to
the General Atlantic Stockholders (a "QUALIFIED PERSON"). If a vote of the
Shareholders (as defined in the Voting Agreement) is required to fill a position
on the Voting Committee or otherwise change the composition of the Voting
Committee, the OptiMark Stockholders shall vote their Shares (as defined in the
Voting Agreement) and take all other actions necessary to ensure the election to
the Voting Committee of Qualified Persons.
<PAGE> 30
9. Stock Certificate Legend. A copy of this Agreement shall be filed
with the Secretary of the Company and kept with the records of the Company. Each
certificate representing Shares now held or hereafter acquired by any
Stockholder shall for as long as this Agreement is effective bear legends
substantially in the following forms:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO A WRITTEN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED.
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER
DISPOSITION (EACH A "TRANSFER") AND VOTING OF ANY OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF AN AMENDED
AND RESTATED STOCKHOLDERS AGREEMENT, DATED APRIL 23, 1998, AMONG OPTIMARK
TECHNOLOGIES, INC. AND CERTAIN STOCKHOLDERS THEREOF, A COPY OF WHICH MAY
BE INSPECTED AT THE COMPANY'S PRINCIPAL OFFICE. THE COMPANY WILL NOT
REGISTER THE TRANSFER OF SUCH SECURITIES ON THE BOOKS OF THE COMPANY
UNLESS AND UNTIL THE TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE TERMS
OF THE STOCKHOLDERS AGREEMENT.
10. Miscellaneous.
10.1 Notices. All notices, demands or other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first class mail, return receipt requested, courier
service, overnight mail or personal delivery:
(a) if to the Company:
OptiMark Technologies, Inc.
530 Main Avenue
Durango, CO 81301
Attention: William A. Lupien
and with a copy to:
c/o OptiMark Technologies, Inc.
530 Main Avenue
Durango, CO 81301
Attention: Alan S. Danson
<PAGE> 31
and with a copy to:
Ducker, Montgomery & Lewis, P.C.
One Civic Center Plaza
1560 Broadway, Suite 1500
Denver, CO 80202
Attention: Robert C. Montgomery, Esq.
(b) if to any of the General Atlantic Stockholders:
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, Connecticut 06830
Attention: Stephen P. Reynolds
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Matthew Nimetz, Esq.
(c) if to any of the OptiMark Stockholders:
c/o OptiMark Technologies, Inc.
530 Main Avenue
Durango, CO 81301
Attention: William A. Lupien
(d) if to any of the Dow Jones Stockholders:
Dow Jones & Company, Inc.
200 Liberty Street
New York, NY 10281
Attention: John Goggins, Esq.
(e) if to any of the Walton Stockholders:
The Llama Company
One McIlroy Plaza, Suite 302
Fayetteville, AR 72701
Attention: Alice L. Walton
<PAGE> 32
(f) if to any of the VSC Stockholders:
Virginia Surety Company, Inc.
123 North Wacker Drive, 29th Floor
Chicago, IL 60606
Attention: Michael A. Conway
(g) if to any other Stockholder, at its address at it
appears on the record books of the Company.
Any party may by notice given in accordance with this Section 10.1 designate
another address or person for receipt of notices hereunder. All such notices and
communications shall be deemed to have been duly given when delivered by hand,
if personally delivered; when delivered by courier or overnight mail, if
delivered by commercial courier service or overnight mail; and five (5) Business
Days after being deposited in the mail, postage prepaid, if mailed.
10.2 Amendment and Waiver.
10.2.1 Unless expressly provided for herein, no failure or
delay on the part of any party hereto in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right, power or
remedy. The remedies provided for herein are cumulative and are not
exclusive of any remedies that may be available to the parties hereto at
law, in equity or otherwise.
10.2.2 Any amendment, supplement or modification of or to
any provision of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by any party from the terms
of any provision of this Agreement, shall be effective
(i) only if it is made or given in writing and
signed by (u) the Company, (v) one or more OptiMark Stockholders
holding Shares representing (after giving effect to any
adjustments) at least 80% of the Shares owned by all of the
OptiMark Stockholders, (w) one or more General Atlantic
Stockholders holding Shares representing (after giving effect to
any adjustments) at least 80% of the Shares owed by all of the
General Atlantic Stockholders, (x) one or more Dow Jones
Stockholders holding Shares representing (after giving effect to
any adjustments) at least 80% of the Shares owned by all of the
Dow Jones Stockholders, (y) one or more VSC Stockholders holding
Shares representing (after giving effect to any adjustments) at
least 80% of the Shares owned by all of the VSC Stockholders, and
(z) one or more Walton Stockholders holding Shares representing
(after giving effect to any adjustments) at least 80% of the
Shares owned by all of the Walton Stockholders; and
<PAGE> 33
(ii) only in the specific instance and for the
specific purpose for which made or given.
Any such written consent shall be binding upon the Company and all of the
Stockholders.
10.3 Specific Performance. The parties hereto intend that each
of the parties have the right to seek damages or specific performance in the
event that any other party hereto fails to perform such party's obligations
hereunder. Therefore, if any party shall institute any action or proceeding to
enforce the provisions hereof, any party against whom such action or proceeding
is brought hereby waives any claim or defense therein that the plaintiff party
has an adequate remedy at law.
10.4 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
10.5 Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.
10.6 Entire Agreement. This Agreement, together with the
exhibits and schedules hereto, is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein or
therein. This Agreement, together with the exhibits hereto, supersede all prior
agreements and understandings between the parties with respect to such subject
matter.
10.7 Term of Agreement. This Agreement shall become effective
upon the date hereof and shall terminate upon the earlier to occur of (i) the
IPO Effectiveness Date, and (ii) August 27, 2016.
10.8 Variations in Pronouns. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
context may require.
10.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF, EXCEPT FOR THE PROVISIONS OF THIS
AGREEMENT THAT ARE GOVERNED BY THE GENERAL CORPORATION LAW OF THE STATE OF
<PAGE> 34
DELAWARE (THE "DGCL"), WHICH PROVISIONS SHALL BE GOVERNED BY THE DGCL.
10.10 Further Assurances. Each of the parties shall, and shall
cause their respective Affiliates to, execute such instruments and take such
action as may be reasonably required or desirable to carry out the provisions
hereof and the transactions contemplated hereby.
10.11 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors,
heirs, legatees and legal representatives. This Agreement is not assignable
except in connection with a transfer of Shares in accordance with this
Agreement.
10.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed, or have cause to be
executed, this Agreement on the date first written above.
OPTIMARK TECHNOLOGIES, INC.
By:/s/ William A. Lupien
---------------------
William A. Lupien, Chief Executive Officer
GENERAL ATLANTIC PARTNERS 35, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC
Its General Partner
By:/s/ J. Michael Cline
--------------------
J. Michael Cline, Managing Member
GAP COINVESTMENT PARTNERS, L.P.
By:/s/ J. Michael Cline
--------------------
J. Michael Cline, an Authorized General Partner
DOW JONES & COMPANY, INC.
By:/s/ Kenneth L. Burenga
---------------------
Kenneth L. Burenga, President &
Chief Operating Officer
/s/ Alice L. Walton
-------------------
ALICE L. WALTON
<PAGE> 35
VIRGINIA SURETY COMPANY, INC.
By:/s/ Michael A. Conway
---------------------
Name: Michael A. Conway
Title: Senior Vice President
/s/ William A. Lupien
---------------------
William A. Lupien, in his capacity as a Voting Committee
Member for purposes of Sections 6 and 8 of this Agreement
and in his individual capacity as a Major Stockholder
/s/ Richard W. Jones
--------------------
Richard W. Jones, in his individual capacity as a Major
Stockholder
/s/ John T. Rickard
-------------------
John T. Rickard, in his capacity as a Voting Committee
Member for purposes of Sections 6 and 8 of this Agreement,
and in his individual capacity as a Major Stockholder
/s/ Alan S. Danson
------------------
Alan S. Danson, in his capacity as a Voting Committee
Member for purposes of Sections 6 and 8 of this Agreement
<PAGE> 36
Exhibit A
ACKNOWLEDGMENT AND AGREEMENT
The undersigned wishes to receive from __________ ("TRANSFEROR")
certain shares or certain options, warrants or other rights to purchase _____
shares, par value $.01 per share, of Common Stock (the "SHARES") of OptiMark
Technologies, Inc. a Delaware corporation (the "COMPANY");
The Shares are subject to the Amended and Restated Stockholders
Agreement, dated April 23, 1998 (the "AGREEMENT"), among the Company and certain
stockholders thereof.
The undersigned has been given a copy of the Agreement and
afforded ample opportunity to read it, and the undersigned is thoroughly
familiar with its terms;
Pursuant to terms of the Agreement, the Transferor is prohibited
from transferring the Shares and the Company is prohibited from registering the
transfer of the Shares unless and until the recipient of such Shares
acknowledges the terms and conditions of the Agreement and agrees to be bound
thereby; and
The undersigned wishes to receive the Shares and have the Company
register the transfer of such Shares.
NOW, THEREFORE, in consideration of the mutual premises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and to induce the Transferor to
transfer the Shares to the undersigned and the Company to register such
transfer, the undersigned does hereby acknowledge and agree that (i) he has been
given a copy of the Agreement and ample opportunity to read it, and the
undersigned is thoroughly familiar with its terms, (ii) the Shares are subject
to the terms and conditions set forth in the Agreement, and (iii) the
undersigned does hereby agree fully to be bound thereby as [an "OptiMark
Stockholder," a "General Atlantic Stockholder," a "Dow Jones Stockholder", a
"VSC Stockholder" or a "Walton Stockholder"](1) [a "Stockholder"].(2)
This ________ day of ________, 19__.
------------------------------
<PAGE> 37
- OptiMark Technologies, Inc. -
Consent
( in connection with Phillip J. Riese
becoming party to the Amended and Restated Stockholders Agreement)
1. The undersigned is a party to that Amended and Restated
Stockholders Agreement dated April 23, 1998, as amended, among OptiMark
Technologies, Inc. (the "Company") and the signatories thereto (the
"Stockholders Agreement"). Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Stockholders Agreement.
2. On November 1, 1998, Phillip J. Riese commenced employment with
the Company as it Chief Executive Officer pursuant to the terms of that
Employment Agreement dated as of November 1, 1998 (the "Employment Agreement").
Pursuant to the Employment Agreement, Phillip J. Riese was granted options to
acquire shares of common stock of the Company and has the right to purchase
shares of common stock of the Company and that with respect to such shares,
Phillip J. Riese will be made a party to the Stockholders Agreement and will be
deemed a "Stockholder" and "Major Stockholder" thereunder.
3. The undersigned hereby consents to Phillip J. Riese becoming a
party to the Stockholders Agreement, subject to Mr. Riese agreeing to be bound
by the terms and conditions of the Stockholder Agreement, and agrees that the
definition of "Major Stockholder" contained in the Stockholders Agreement will
be deemed to include Phillip J. Riese.
Effective: December 15, 1998
OptiMark Technologies, Inc.
By: /s/ CHRISTOPHER J. WALSH
------------------------------------
Title: Vice President
General Atlantic Partners, LLC
Its General Partner
By: /s/ J. MICHAEL CLINE
-----------------------------------
GAP Coinvestment Partners, L.P.
By: /s/ J. MICHAEL CLINE
------------------------------------
Dow Jones & Company, Inc.
By: /s/ JEROME H. BAILEY
------------------------------------
Title: Executive Vice President
Chief Financial Officer
By: /s/ ALICE L. WALTON
------------------------------------
By: /s/ WILLIAM A. LUPIEN
------------------------------------
BY: /S/ JOHN T. RICKARD
------------------------------------
By: /s/ RICHARD W. JONES
------------------------------------
Virginia Surety Company, Inc.
By: /s/ MICHAEL A. CONWAY
------------------------------------
<PAGE> 38
SUPPLEMENTAL SIGNATURE PAGE TO
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
AMONG
OPTIMARK TECHNOLOGIES, INC.
AND
CERTAIN STOCKHOLDERS NAMED HEREIN
DATED
APRIL 23, 1998
The undersigned, Phillip J. Riese, hereby agrees to become a party to
that Amended and Restated Stockholders Agreement dated April 23, 1998, as
amended, among OptiMark Technologies, Inc. and the signatories to such Agreement
(the "Stockholders Agreement"), and agrees to bound by the terms and conditions
of the Stockholders Agreement. For purposes hereof, the undersigned will be
deemed to be a "Stockholder," a "Major Stockholder" and a "Rightsholder," as
such terms are defined in the Stockholders Agreement.
/s/ PHILLIP J. RIESE
------------------------------------
Phillip J. Riese, in his individual
capacity as a Major Stockholder
<PAGE> 39
AGREEMENT RESPECTING TRANSFER OF SHARES
This Agreement is entered into as of the 22nd day of January, 1999, by and
among OptiMark Technologies, Inc., a Delaware corporation (the "COMPANY"), and
the stockholders of the Company listed on the signature pages of this Agreement.
This Agreement is in respect of certain provisions of the Amended and Restated
Stockholders Agreement, dated April 23, 1998, as such agreement may be amended
(the "STOCKHOLDERS AGREEMENT"), among the Company and certain stockholders of
the Company. All capitalized terms in this Agreement that are not defined shall
have the same meaning as in the Stockholders Agreement.
- Recitals -
A. William A. Lupien ("LUPIEN") desires to transfer one million (1,000,000)
shares of common stock, par value $.01 per share, of the Company (the "SHARES"),
to Lupien Family Partnership, LLLP, a Colorado limited liability limited
partnership (the "PARTNERSHIP"), in which Lupien initially will own a 0.5%
general partner interest and a 49.5% limited partner interest, and Lupien's
spouse, Bonnie R. Lupien, initially will own a 0.5% general partner interest and
a 49.5% limited partner interest. The Partnership will execute an Acknowledgment
and Agreement in the form attached to the Stockholders Agreement as Exhibit A by
which it will agree to be bound by the terms and conditions of the Stockholders
Agreement.
B. Immediately following the transfer of Shares to the Partnership, Lupien
and Bonnie R. Lupien will transfer limited partner interests to four trusts (the
"TRUSTS") as follows: Lupien will transfer a 24.75% limited partner interest in
the Partnership to the William A. Lupien 1999 Irrevocable Trust and a 24.75%
limited partner interest in the Partnership to the William A. Lupien Retained
Annuity Trust #1, and Bonnie R. Lupien will transfer a 24.75% limited partner
interest in the Partnership to the Bonnie R. Lupien 1999 Irrevocable Trust and a
24.75% limited partner interest in the Partnership to the Bonnie R. Lupien
Retained Annuity Trust #1. Lupien and Bonnie R. Lupien will retain their
respective 0.5% general partner interests in the Partnership.
C. The present beneficiary of the William A. Lupien 1999 Irrevocable Trust
and the Bonnie R. Lupien 1999 Irrevocable Trust is Lupien's daughter, Susan L.
Lupien. The present beneficiary of the William A. Lupien Retained Annuity Trust
#1 is Lupien. The present beneficiary of the Bonnie R. Lupien Retained Annuity
Trust #1 is Bonnie R. Lupien. Except for remote contingent remainder
beneficiaries (i.e., the nieces and nephews of Lupien and Bonnie R. Lupien), all
of the remainder beneficiaries of the foregoing trusts are Family Members of
Lupien.
D. Since all of the beneficial interests in the Trusts will be held by
Lupien and his Family Members, and, accordingly, all of the transferred Shares
will continue to be held, directly or indirectly, by or for the benefit of
Lupien and his Family Members, the parties to this Agreement are willing to
consent to the transfers described in Recitals A and B and to waive those
provisions of Section 2.2(a) of the Stockholders Agreement that otherwise would
result in (1) the initial transfer of the Shares by Lupien to the Partnership
not being a Permitted Transfer by reason of the subsequent transfer of limited
partner interests in the Partnership to the Trusts, and (2) the
<PAGE> 40
Partnership not being a Permitted Transferee by reason of a portion of its
interests being held by the Trusts.
E. The stockholders of the Company listed on the signature pages of this
Agreement hold shares of common stock and preferred stock of the Company
satisfying the respective 80% requirements set forth in Section 10.2.2 of the
Stockholders Agreement (regarding requirements for any waiver or consent).
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth in this Agreement, the adequacy of which are acknowledged, the parties
agree as follows:
1. Initial Transfer to Partnership a Permitted Transfer. The parties
acknowledge and agree that the initial transfer by Lupien of the Shares to the
Partnership described in Recital A will be a Permitted Transfer.
2. Partnership and Trusts Shall Be Permitted Transferees. The parties
consent to the transfers of limited partner interests in the Partnership by
Lupien and Bonnie R. Lupien to the Trusts. As long as (a) no interests in the
Partnership are held by any person other than Lupien, one or more of his Family
Members, or one or more of the Trusts, and (b) no person other than Lupien or
one or more of his Family Members is or becomes a present beneficiary of any of
the Trusts, the Partnership and the Trusts shall be Permitted Transferees for
all purposes of the Stockholders Agreement. The parties waive those provisions
of Section 2.2(a) of the Stockholders Agreement that otherwise would result in
(c) the initial transfer of the Shares by Lupien to the Partnership not being a
Permitted Transfer by reason of the subsequent transfer of limited partner
interests in the Partnership to the Trusts, and (d) the Partnership not being a
Permitted Transferee by reason of a portion of its interests being held by the
Trusts.
3. Section 3 of Stockholders Agreement Not Applicable. The provisions of
Section 3 of the Stockholders Agreement (relating to rights of first offer and
tag-along rights) shall not apply to the transfers described in Recital A and
Recital B.
4. Waiver of Notice Requirement. The parties waive any advance notice
requirement that otherwise would apply to the transfer by Lupien of the Shares
to the Partnership.
5. Miscellaneous. (a) Headings. The headings in this Agreement are for
convenience of reference only; (b) Entire Agreement. This Agreement is intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained in this Agreement.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter; (c) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the state of New York applicable to agreements made
and to be performed entirely within such state, without regard to the principles
of conflicts of law thereof; (d) Successors. This Agreement shall be binding
upon and inure to the
-2-
<PAGE> 41
benefit of the parties and their respective successors, heirs, legatees and
legal representatives; (e) Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, and all of
which taken together shall constitute one and the same instrument. Any facsimile
transmission of an executed counterpart also shall be deemed an original.
IN WITNESS WHEREOF, the undersigned have executed, or have caused to be
executed, this Agreement on the date first written above.
/s/ Alice L. Walton
OPTIMARK TECHNOLOGIES, INC. _________________________________
ALICE L. WALTON
By: /s/ Phillip J. Riese
___________________________________
Name: Phillip J. Riese
Title: Chief Executive Officer /s/ William A. Lupien
_________________________________
WILLIAM A. LUPIEN
GENERAL ATLANTIC PARTNERS 35, L.P.
By: GENERAL ATLANTIC PARTNERS, INC /s/ Richard W. Jones
Its General Partner _________________________________
RICHARD W. JONES
By: /s/ Thomas J. Murphy
________________________________
Name: Thomas J. Murphy /s/ John T. Rickard
Title: Attorney-in-Fact _________________________________
JOHN T. RICKARD
GAP COINVESTMENT PARTNERS, L.P.
/s/ Phillip J. Riese
_________________________________
PHILLIP J. RIESE
By: /s/ Thomas J. Murphy
________________________________
Name: Thomas J. Murphy
Title: Attorney-in-Fact
DOW JONES & COMPANY, INC.
By: /s/ Jerome H. Bailey
___________________________________
Name: Jerome H. Bailey
Title: Chief Financial Officer
VIRGINIA SURETY COMPANY, INC.
By: /s/ Ivan P. Berk
___________________________________
Name: Ivan P. Berk
Title: Senior Executive Director,
AON Advisors, Inc.
-3-
<PAGE> 42
AMENDMENT NO. 2
TO THE
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
AMONG
OPTIMARK TECHNOLOGIES, INC.
AND
CERTAIN STOCKHOLDERS THEREOF
This Amendment No. 2 ("this Amendment") in entered into effective as of
the ____ day of January, 1999 by and among (i) OptiMark Technologies, Inc., a
Delaware corporation (the "Company"), (ii) General Atlantic Partners 52, L.P., a
Delaware limited partnership ("GAP 52"), and GAP Coinvestment Partners II, L.P.,
a Delaware limited partnership ("Coinvestment II" and, together with GAP 52, the
"New GA Stockholders"), and (iii) the stockholders of the Company whose
signatures are shown below, who are current parties to the Company's Amended and
Restated Stockholders Agreement dated April 23, 1998, as previously amended
effective December 15, 1998 (the "Stockholders Agreement"). Capitalized terms
used but not otherwise defined herein shall have the meanings ascribed to them
in the Stockholders Agreement.
1. On or about the date of this Amendment, the New GA Stockholders
are purchasing an aggregate of 250,000 shares of Series A Stock from Dow Jones &
Company, Inc.
2. The new GA Stockholders are hereby made party to the Stockholders
Agreement, as "General Atlantic Stockholders", "Rightholders" and
"Stockholders".
3. As hereby amended, the Stockholders Agreement continues in full
force and effect. This Amendment may be executed in multiple counterparts, all
of which together shall comprise one instrument.
<TABLE>
<S> <C>
OptiMark Technologies, Inc.
/s/ Phillip J. Riese, individually By: /s/ Phillip J. Riese
in his capacity as a Major Stockholder Chief Executive Officer
Dow Jones & Company, Inc.
/s/ William A. Lupien By: /s/ Jerome H. Bailey
in his capacity as a Major Stockholder Executive Vice President,
Chief Financial Officer
General Atlantic Partners 35, L.P.
By: General Atlantic Partners, LLC,
its General Partner
</TABLE>
<PAGE> 43
<TABLE>
<S> <C>
/s/ John T. Rickard
in his capacity as a Major Stockholder By: /s/ David C. Hodgson
a Managing Member
/s/ Richard W. Jones, individually and as GAP Coinvestment Partners, L.P.
Trustee of the Jones Living Trust dtd 6/15/90,
in his capacity as a Major Stockholder By: /s/ David C. Hodgson
a General Partner
/s/ Alice L. Walton
Lupien Family Partnership, LLLP Virginia Surety Company, Inc.
By: /s/ William A. Lupien By: /s/ Ivan P. Beck
Managing Partner Senior Executive Director
Aon Advisors, Inc.
General Atlantic Partners 52, L.P.
By: General Atlantic Partners, LLC,
its General Partner
By: /s/ David C. Hodgson
a Managing Member
GAP Coinvestment Partners II, L.P.
By: /s/ David C. Hodgson
a General Partner
</TABLE>
<PAGE> 1
EXHIBIT 10.1
REVENUE SHARING AGREEMENT
This Revenue Sharing Agreement ("this Agreement") is entered into as of
the 27th day of August, 1996, by and between OptiMark Technologies, Inc., a
Delaware corporation (the "Company"), and The Pacific Stock Exchange
Incorporated, a Delaware corporation ("PSE").
1. DEFINITIONS. For purposes of this Agreement, in addition to terms
defined elsewhere herein, the following terms shall have the indicated meanings:
(a) "Exchange" means any domestic securities exchange
registered under Section 6 of the Securities Exchange Act of 1934, including but
not limited to the Pacific Exchange, or any foreign securities exchange
registered, licensed or otherwise authorized as such under the laws of any other
country.
(b) "Exchange After-Hours Commencement Date" means the first
day on which any Exchange is making OptiMark-Securities Available with respect
to at least 50% of the total number of issues of equity securities traded on
such Exchange after its normal trading hours.
(c) "Exchange Listed Equities Commencement Date" means the
first day on which any Exchange is making OptiMark-Securities Available with
respect to at least 50% of the total number of issues of listed equity
securities traded on such Exchange during its normal trading hours.
(d) "Exchange Options Commencement Date" means the first day on
which any Exchange is making OptiMark-Securities Available with respect to at
least 50% of the total number of issues of equity options traded on such
Exchange.
(e) "Exchange UTP Commencement Date" means the first day on
which any Exchange is making OptiMark-Securities Available with respect to at
least 50% of the total number of issues of equity securities traded on such
Exchange with unlisted trading privileges (UTP).
(f) "Gross Revenues" of the Company means the gross revenues of
the Company (including, for this purpose, the Company's allocable share of the
gross revenues of any consolidated or majority-owned subsidiaries and any other
controlled entities) from all sources, determined in accordance with generally
accepted accounting principles consistently applied.
(g) Making "Available", as applied to OptiMark-Securities and
the Pacific Exchange and/or Other Exchanges, means that the necessary
communications between OptiMark-Securities and the relevant systems of the
Pacific Exchange and/or such Other Exchanges have been established such that
users have the ability to utilize OptiMark-Securities subject to entering into a
User Agreement with the Company and/or
<PAGE> 2
its Affiliates. Notwithstanding the use of such phrases in this Agreement, PSE
is not providing or offering to provide OptiMark-Securities to users, either
directly or indirectly.
(h) "OptiMark-Securities" means the market structuring
technology and related software which is generally described as
"OptiMark-Securities" in the PSE-OptiMark Agreement, including all derivatives,
releases and subsequent versions of such technology and software, regardless of
platform or operating media.
(i) "Pacific Exchange" means the registered national securities
exchange operated by PSE.
(j) "PSE After-Hours Commencement Date" means the first day on
which the Pacific Exchange is making OptiMark-Securities Available with respect
to at least 50% of the total number of issues of equity securities traded on the
Pacific Exchange after hours; provided, however that (i) if the PSE After-Hours
Commencement Date has not earlier occurred, and (ii) OptiMark-Securities and all
necessary PSE Interfaces have been completed under the PSE-OptiMark Agreement
for after-hours trading on the Pacific Exchange, then the PSE After-Hours
Commencement Date shall occur on the date that PSE notifies the Company of PSE's
desire to make OptiMark-Securities Available for such after-hours trading,
without regard to whether the Company has allowed PSE to make
OptiMark-Securities Available for such after-hours trading.
(k) "PSE Listed Equities Commencement Date" means the first day
on which the Pacific Exchange is making OptiMark-Securities Available with
respect to at least 50% of the total number of issues of listed equity
securities traded on the Pacific Exchange during its normal trading hours.
(l) "PSE Options Commencement Date" means the first day on
which the Pacific Exchange is making OptiMark-Securities Available with respect
to at least 50% of the total number of issues of equity options traded on the
Pacific Exchange.
(m) "PSE-OptiMark Agreement" means the PSE-OptiMark Agreement
of even date between PSE and the Company.
(n) "PSE UTP Commencement Date Period" means the first day on
which the Pacific Exchange is making OptiMark-Securities Available with respect
to at least 50% of the total number of issues of equity securities traded on the
Pacific Exchange with unlisted trading privileges (UTP).
(o) "Warrant" means the Common Stock Purchase Warrant of even
date issued by the Company in favor of PSE.
(p) "Warrant Expiration Date" shall have the meaning provided
in the Warrant.
<PAGE> 3
2. ESTABLISHMENT, CREDITS AND DEBITS TO REVENUE ACCRUAL ACCOUNT. The
Company hereby establishes an internal account called the "Revenue Accrual
Account". The initial balance in the Revenue Accrual Account shall be zero. At
the end of each complete calendar month from and after the date of this
Agreement through December 31, 2005, the Revenue Accrual Account shall be
credited with (increased by) one and one-half percent (1.5%) of all Gross
Revenues of the Company for that month, up to an aggregate maximum amount of
credits equal to Three Million Eight Hundred Fifty Five Thousand Five Hundred
Eighty Dollars (US $3,855,580). All payments from the Revenue Accrual Account
under Section 3 below shall be debited (subtracted) form the Revenue Accrual
Account. The Revenue Accrual Account shall not bear interest.
3. DISTRIBUTIONS.
(a) Promptly following the end of the calendar quarter during
which occurs the PSE Listed Equities Commencement Date (if any), the Company
shall pay to PSE the lesser of (i) an amount equal to the balance in the Revenue
Accrual Account as of the end of such quarter, or (ii) $771,116. If the payment
to PSE under the foregoing sentence is less than $771,116, the Company shall
continue to make payments to PSE promptly following the end of each complete
calendar quarter thereafter, in an amount equal to the balance of the Revenue
Accrual Account as of the end of such quarter, until the earliest to occur of
(i) the Warrant Expiration Date, (ii) the date on which all payments to PSE
under this paragraph (a) have totalled $771,116, or (iii) the date (if any) on
which PSE unilaterally and permanently withdraws OptiMark(TM) from Availability
through the Pacific Exchange for listed equity securities during normal trading
hours.
(b) Promptly following the end of the calendar quarter during
which occurs the Exchange Listed Equities Commencement Date (if any), the
Company shall pay to PSE the lesser of (i) an amount equal to the balance in the
Revenue Accrual Account as of the end of such quarter, or (ii) $771,116. If the
payment to PSE under the foregoing sentence is less than $771,116, the Company
shall continue to make payments to PSE promptly following the end of each
complete calendar quarter thereafter, in an amount equal to the balance of the
Revenue Accrual Account as of the end of such quarter, until the earlier to
occur of (i) the Warrant Expiration Date, or (ii) the date on which all payments
to PSE under this paragraph (b) have totalled $771,116.
(c) Promptly following the end of the calendar quarter during
which occurs the PSE Options Commencement Date (if any), the Company shall pay
to PSE the lesser of (i) an amount equal to the balance in the Revenue Accrual
Account as of the end of such quarter, or (ii) $385,558. If the payment to PSE
under the foregoing sentence is less than $385,558, the Company shall continue
to make payments to PSE promptly following the end of each complete calendar
quarter thereafter, in an amount equal to the balance of the Revenue Accrual
Account as of the end of such quarter, until the earliest to occur of (i) the
Warrant Expiration Date, (ii) the date on which all payments to PSE under this
paragraph (c) have totalled $385,558, or (iii) the date (if any) on which PSE
<PAGE> 4
unilaterally and permanently withdraws OptiMark(TM) from Availability through
the Pacific Exchange for options.
(d) Promptly following the end of the calendar quarter during
which occurs the Exchange Listed Options Commencement Date (if any), the Company
shall pay to PSE the lesser of (i) an amount equal to the balance in the Revenue
Accrual Account as of the end of such quarter, or (ii) $385,558. If the payment
to PSE under the foregoing sentence is less than $385,558, the Company shall
continue to make payments to PSE promptly following the end of each complete
calendar quarter thereafter, in an amount equal to the balance of the Revenue
Accrual Account as of the end of such quarter, until the earlier to occur of (i)
the Warrant Expiration Date, or (ii) the date on which all payments to PSE under
this paragraph (d) have totalled $385,558.
(e) Promptly following the end of the calendar quarter during
which occurs the PSE UTP Commencement Date (if any), the Company shall pay to
PSE the lesser of (i) an amount equal to the balance in the Revenue Accrual
Account as of the end of such quarter, or (ii) $385,558. If the payment to PSE
under the foregoing sentence is less than $385,558, the Company shall continue
to make payments to PSE promptly following the end of each complete calendar
quarter thereafter, in an amount equal to the balance of the Revenue Accrual
Account as of the end of such quarter, until the earliest to occur of (i) the
Warrant Expiration Date, (ii) the date on which all payments to PSE under this
paragraph (e) have totalled $385,558, or (iii) the date (if any) on which PSE
unilaterally and permanently withdraws OptiMark(TM) from Availability through
the Pacific Exchange for equity securities with unlisted trading privileges.
(f) Promptly following the end of the calendar quarter during
which occurs the Exchange UTP Commencement Date (if any), the Company shall pay
to PSE the lesser of (i) an amount equal to the balance in the Revenue Accrual
Account as of the end of such quarter, or (ii) $385,558. If the payment to PSE
under the foregoing sentence is less than $385,558, the Company shall continue
to make payments to PSE promptly following the end of each complete calendar
quarter thereafter, in an amount equal to the balance of the Revenue Accrual
Account as of the end of such quarter, until the earlier to occur of (i) the
Warrant Expiration Date, or (ii) the date on which all payments to PSE under
this paragraph (f) have totalled $385,558.
(g) Promptly following the end of the calendar quarter during
which occurs the PSE After-Hours Commencement Date (if any), the Company shall
pay to PSE the lesser of (i) an amount equal to the balance in the Revenue
Accrual Account as of the end of such quarter, or (ii) $385,558. If the payment
to PSE under the foregoing sentence is less than $385,558, the Company shall
continue to make payments to PSE promptly following the end of each complete
calendar quarter thereafter, in an amount equal to the balance of the Revenue
Accrual Account as of the end of such quarter, until the earliest to occur of
(i) the Warrant Expiration Date, (ii) the date on which all payments to PSE
under this paragraph (g) have totalled $385,558, or (iii) the date (if any) on
which PSE unilaterally and permanently withdraws OptiMark(TM) from Availability
through the Pacific Exchange for equity securities after normal trading hours.
<PAGE> 5
(h) Promptly following the end of the calendar quarter during
which occurs the Exchange After-Hours Commencement Date (if any), the Company
shall pay to PSE the lesser of (i) an amount equal to the balance in the Revenue
Accrual Account as of the end of such quarter, or (ii) $385,558. If the payment
to PSE under the foregoing sentence is less than $385,558, the Company shall
continue to make payments to PSE promptly following the end of each complete
calendar quarter thereafter, in an amount equal to the balance of the Revenue
Accrual Account as of the end of such quarter, until the earlier to occur of (i)
the Warrant Expiration Date, or (ii) the date on which all payments to PSE under
this paragraph (h) have totalled $385,558.
An example of payments under this Section 3 is set forth on
Exhibit A to this Agreement.
4. REVENUE STATEMENT. Within twenty (20) days following request by
PSE from time to time, the Company shall deliver to PSE a written statement,
certified by the Chief Financial Officer of the Company to be accurate and
complete, attesting to: (i) the total Gross Revenues of the Company from and
after the date of this Agreement through and including the end of the most
recent calendar month, and (ii) the then-current balance in the Revenue Accrual
Account, if any (a "Revenue Statement"). The Company shall maintain, at its
executive offices, books of account concerning Gross Revenues and credits and
debits to the Revenue Accrual Account under this Agreement. Such books of
account shall be maintained in accordance with generally accepted accounting
principles consistently applied and shall be consistent with the general ledger
of the Company. PSE, or a certified public accountant on PSE's behalf may, at
PSE's sole expense, examine such books of account solely for the purpose of
verifying the accuracy thereof. Such examination may take place during normal
business hours, upon reasonable advance written notice, and not more than twice
per year; provided, however, that if any such examination of the Company's books
of account reveals a discrepancy to PSE's detriment of more than five percent
(5%) in the Revenue Accrual Account, then (x) the Company shall pay or reimburse
PSE for the auditing expenses incurred in connection with such examination, and
(y) PSE shall be entitled thereafter to examine the Company's books of account
for such purpose at any time and the Company shall pay the costs of each such
examination.
5. TERMINATION. Upon payment of all amounts required to be paid out
under Section 3 above, any remaining balance in the Revenue Accrual Account
shall be extinguished on the Warrant Expiration Date, and no further payments
shall be made to PSE under this Agreement thereafter.
6. CONTEXT. This Agreement is being executed and delivered in
connection with and in consideration of PSE's execution and delivery of the
PSE-OptiMark Agreement.
<PAGE> 6
7. MISCELLANEOUS.
(a) Except as provided above to the contrary, each of the
parties shall bear their own costs and expenses in connection with this
Agreement.
(b) All notices required or permitted under this Agreement
shall be in writing and given by prepaid Federal Express or other nationally
recognized overnight delivery service as follows (or to any other addresses
which either party subsequently may designate by notice):
i) if to PSE, to:
The Pacific Stock Exchange Incorporated
attn: John C. Katovich, Esq.
301 Pine Street
San Francisco, CA 94104
with a copy in the same manner to:
Timothy S. McCann, Esq.
Howard, Rice, Nemerovski, Canady, Falk & Rabkin
A Professional Corporation
Three Embarcadero Center, Suite 700
San Francisco, CA 94111
ii) If to the Company, to:
OptiMark Technologies, Inc.
attn: William A. Lupien
530 Main Avenue
Durango, CO 81301
with a copy in the same manner to:
Bruce Ducker, Esq.
Ducker, Seawell & Montgomery, P.C.
1560 Broadway, Suite 1500
Denver, CO 80202
(c) This Agreement shall not be assignable by either party except in
connection with a merger, consolidation, sale of all or substantially all
assets, or analogous transaction in which a third party succeeds to all or
substantially all of the business and assumes all or substantially all of the
liabilities (including the obligations under this Agreement) of one of the
parties hereto. Any non-permitted assignment shall
<PAGE> 7
be void ab initio. This Agreement shall bind and inure to the benefit of the
parties and their respective successors and permitted assigns.
(d) This Agreement may be executed in several counterparts, all of
which taken together shall constitute a single agreement between the parties.
(e) No delay or omission by either party hereto to exercise any right
or power occurring upon any noncompliance or default by the other party with
respect to any of the terms of this Agreement shall impair any such right or
power or be construed to be a waiver thereof. A waiver by either of the parties
hereto of any of the covenants, conditions, or agreements to be performed by the
other shall not be construed to be a waiver of any succeeding breach thereof or
of any other covenant, condition, or agreement herein contained.
(f) This Agreement, the PSE-OptiMark Agreement, the Warrant and their
Exhibits constitute the entire agreement between the parties with respect to
their subject matter, and all prior negotiations, agreements and letters of
intent are superseded and merged herein. No change, waiver, or discharge hereof
shall be valid unless it is in writing and is executed by the party against whom
such change, waiver, or discharge is sought to be enforced.
(g) In the event any party hereto initiates any legal action or suit
in connection with any dispute concerning the interpretation of this Agreement
or the enforcement of any provision hereof, the prevailing party in such action
or suit shall be entitled to recover all of its costs of action or suit
(including without limitation reasonable attorneys' and expert witness fees)
from the other party.
(h) This Agreement shall for all purposes be construed and enforced in
accordance with, and governed by, the internal laws of the State of California,
without giving effect to principles of conflict of laws. The exclusive venue for
any litigation related to this Agreement shall be the Superior Court in and for
San Francisco County, California or, if jurisdictionally available, the U.S.
District Court for the Northern District of California.
<PAGE> 8
IN WITNESS WHEREOF, the parties have set their hands and seals as of the
date first set forth above.
THE PACIFIC STOCK EXCHANGE INCORPORATED
By: /s/ Robert M. Greber
Chief Executive Officer
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
Chief Executive Officer
<PAGE> 9
Exhibit A
(to Revenue Sharing Agreement)
Assumptions:
8. The American Stock Exchange makes OptiMark(TM) Available for
listed equities on September 1, 1997. The Pacific Exchange makes OptiMark(TM)
Available for listed equities on February 1, 1999.
9. The Pacific Exchange makes OptiMark(TM) Available for equities
with unlisted trading privileges on July 20, 1999. The Pacific Exchange
permanently unilaterally withdraws OptiMark(TM) for equities with unlisted
trading privileges on September 30, 2000.
10. The Pacific Exchange makes OptiMark(TM) Available for options on
February 15, 2001. The Pacific Exchange temporarily unilaterally withdraws
OptiMark(TM) for options on February 1, 2002, but reinstitutes OptiMark(TM) for
options trading on July 15, 2002.
11. The Pacific Exchange never makes OptiMark(TM) Available for
after-hours trading.
12. No stock exchange other than the Pacific Exchange and the American
Stock Exchange ever makes OptiMark(TM) Available. The American Stock Exchange
never makes OptiMark(TM) Available for listed options, unlisted equities, or
after-hours trading.
13. The Company's initial public offering becomes effective on
December 31, 2004.
14. The Company's Gross Revenues are as follows:(1)
<TABLE>
<CAPTION>
=============================================================================================
Payment to PSE
Credits to Revenue following End of
Accrual Period Gross Revenues Accrual Account Accrual Period
- -------------- -------------- --------------- --------------
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
8/__/96-9/30/97 -0- -0- -0-
- ---------------------------------------------------------------------------------------------
10/1/97-12/31/97 $2,000,000 $30,000 $30,000
- ---------------------------------------------------------------------------------------------
1/1/98-3/31/98 $20,000,000 $300,000 $300,000
- ---------------------------------------------------------------------------------------------
4/1/98-6/30/98 $26,666,667 $400,000 $400,000
- ---------------------------------------------------------------------------------------------
7/1/98-9/30/98 $40,000,000 $600,000 $41,116
- ---------------------------------------------------------------------------------------------
10/1/98-12/31/98 $66,666,667 $1,000,000 -0-
- ---------------------------------------------------------------------------------------------
1/1/99-3/31/99 -0- -0- $771,116
- ---------------------------------------------------------------------------------------------
4/1/99-6/30/99 -0- -0- -0-
- ---------------------------------------------------------------------------------------------
7/1/99-9/30/99 -0- -0- $771,116
- ---------------------------------------------------------------------------------------------
10/1/99-12/31/99 $666,667 $10,000 -0-
</TABLE>
<PAGE> 10
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
1/1/00-3/31/00 $1,333,334 $20,000 -0-
- ---------------------------------------------------------------------------------------------
4/1/00-6/30/00 $1,333,334 $20,000 -0-
- ---------------------------------------------------------------------------------------------
7/1/00-9/30/00 $3,333,334 $50,000 -0-
- ---------------------------------------------------------------------------------------------
10/1/00-12/31/00 $6,666,667 $100,000 -0-
- ---------------------------------------------------------------------------------------------
1/1/01-3/31/01 $13,333,334 $200,000 $416,652
- ---------------------------------------------------------------------------------------------
4/1/01-6/30/01 $666,667 $10,000 $10,000
- ---------------------------------------------------------------------------------------------
7/1/01-9/30/01 $666,667 $10,000 $10,000
- ---------------------------------------------------------------------------------------------
10/1/01-12/31/01 $666,667 $10,000 $10,000
- ---------------------------------------------------------------------------------------------
1/1/02-3/31/02 $666,667 $10,000 $10,000
- ---------------------------------------------------------------------------------------------
4/1/02-6/30/02 -0- -0- -0-
- ---------------------------------------------------------------------------------------------
7/1/02-9/30/02 $666,667 $10,000 $10,000
- ---------------------------------------------------------------------------------------------
10/1/02-12/31/02 $666,667 $10,000 $10,000
- ---------------------------------------------------------------------------------------------
1/1/03-3/31/03 $1,333,334 $20,000 $20,000
- ---------------------------------------------------------------------------------------------
4/1/03-6/30/03 $2,000,000 $30,000 $30,000
- ---------------------------------------------------------------------------------------------
7/1/03-9/30/03 $2,666,667 $40,000 $40,000
- ---------------------------------------------------------------------------------------------
10/1/03-12/31/03 $3,333,334 $50,000 $50,000
- ---------------------------------------------------------------------------------------------
1/1/04-3/31/04 $4,000,000 $60,000 $60,000
- ---------------------------------------------------------------------------------------------
4/1/04-6/30/04 $6,666,667 $100,000 $94,464
- ---------------------------------------------------------------------------------------------
7/1/04-9/30/04 $20,000,000 $300,000 -0-
- ---------------------------------------------------------------------------------------------
10/1/04-12/31/04 $26,666,667 $400,000 -0-
- ---------------------------------------------------------------------------------------------
1/1/05-3/31/05 $29,000,000 $65,580(2) -0-
- ---------------------------------------------------------------------------------------------
4/1/05-6/30/05 $32,000,000 -0- -0-
- ---------------------------------------------------------------------------------------------
7/1/05-9/30/05 $35,000,000 -0- -0-
- ---------------------------------------------------------------------------------------------
10/1/05-12/31/05 $40,000,000 -0- -0-
- ---------------------------------------------------------------------------------------------
1/1/06-12/31/06 $100,000,000 N/A -0-
=============================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.2
REVENUE SHARING AGREEMENT
This Revenue Sharing Agreement ("this Agreement") is entered into as of
the 31st day of December, 1996, by and between OptiMark Technologies, Inc., a
Delaware corporation (the "Company"), and the Chicago Board Options Exchange,
Incorporated, a Delaware non-stock corporation ("CBOE").
1. DEFINITIONS. For purposes of this Agreement, in addition to terms
defined elsewhere herein, the following terms shall have the indicated meanings:
(a) "Equity Options Commencement Date" means the first day on which the
Exchange has made OptiMark-Securities Available with respect to equity options
classes representing at least eighty percent (80%) of the average daily contract
volume of all equity options classes, excluding FLEX equity options from the
calculation, measured over the then most recent six complete calendar months.
(b) "Exchange" means the registered national securities exchange
operated by CBOE.
(c) "Flex Options Commencement Date" means the first day on which the
Exchange has made OptiMark-Securities Available with respect to FLEX options
classes representing at least eighty percent (80%) of the average daily contract
volume of all FLEX options classes, measured over the then most recent six
complete calendar months.
(d) "Gross Revenues" of the Company means the gross revenues of the
Company (including, for this purpose, the Company's allocable share of the gross
revenues of any consolidated or majority-owned subsidiaries and any other
controlled entities) from all sources, determined in accordance with generally
accepted accounting principles consistently applied.
(e) "Index Options Commencement Date" means the first day on which the
Exchange has made OptiMark-Securities Available with respect to index options
classes representing at least eighty percent (80%) of the average daily contract
volume of all index options classes, excluding FLEX index options from the
calculation, measured over the then most recent six complete calendar months.
(f) "Made Available", "Making Available" and like terms, as applied to
OptiMark-Securities and the Exchange, means that the necessary communication
links between OptiMark-Securities and the relevant systems of the Exchange have
been established such that persons wishing to utilize OptiMark-Securities as a
facility of the Exchange may do so.
(g) "OptiMark-Securities" means the market structuring technology and
related software which is generally described in Exhibit A hereto, including all
derivatives, releases and subsequent versions of such technology and software,
regardless of platform or operating media.
<PAGE> 2
(h) "Warrant" means the Common Stock Purchase Warrant of even date
issued by the Company in favor of CBOE.
(i) "Warrant Expiration Date" shall have the meaning provided in the
Warrant.
2. ESTABLISHMENT, CREDITS AND DEBITS TO REVENUE ACCRUAL ACCOUNT. The
Company hereby establishes an internal account called the "CBOE Revenue Accrual
Account". The initial balance in the CBOE Revenue Accrual Account shall be zero.
At the end of each complete calendar month from and after the date of this
Agreement through December 31, 2005, the CBOE Revenue Accrual Account shall be
credited with (increased by) one and one-half percent (1.5%) of all Gross
Revenues of the Company for that month, up to an aggregate maximum amount of
credits equal to Two Million Two Hundred Fifty Thousand Dollars (US $2,250,000).
All payments from the CBOE Revenue Accrual Account under Section 3 below shall
be debited (subtracted) from the CBOE Revenue Accrual Account. The CBOE Revenue
Accrual Account shall not bear interest.
3. DISTRIBUTIONS.
(a) Amount.
(i) Promptly following the end of the calendar quarter during
which occurs the Equity Options Commencement Date (if any), the Company shall
pay to CBOE the lesser of (A) an amount equal to the balance in the CBOE Revenue
Accrual Account as of the end of such quarter, or (B) $900,000. If the payment
to CBOE under the foregoing sentence is less than $900,000, the Company shall
continue to make payments to CBOE promptly following the end of each complete
calendar quarter thereafter, in an amount equal to the balance of the CBOE
Revenue Accrual Account as of the end of such quarter , until the earliest to
occur of (I) the Warrant Expiration Date, (II) the date on which all payments to
CBOE under this paragraph (i) have totaled $900,000, or (III) the date (if any)
on which CBOE unilaterally and permanently withdraws OptiMark-Securities from
Availability through the Exchange with respect to twenty percent (20%) or more
of the average daily contract volume of all equity options classes, excluding
FLEX equity options from the calculation, measured over the then most recent six
complete calendar months.
(ii) Promptly following the end of the calendar quarter during
which occurs the Index Options Commencement Date (if any), the Company shall pay
to CBOE the lesser of (A) an amount equal to the balance in the CBOE Revenue
Accrual Account as of the end of such quarter, or (B) $900,000. If the payment
to CBOE under the foregoing sentence is less than $900,000, the Company shall
continue to make payments to CBOE promptly following the end of each complete
calendar quarter thereafter, in an amount equal to the balance of the CBOE
Revenue Accrual Account as of the end of such quarter, until the earliest to
occur of (I) the Warrant Expiration Date, (II) the date on which all payments to
CBOE under this paragraph (ii) have totaled $900,000, or (III) the
<PAGE> 3
date (if any) on which CBOE unilaterally and permanently withdraws
OptiMark-Securities from Availability through the Exchange with respect to
twenty percent (20%) or more of the average daily contract volume of all FLEX
options classes, measured over the then most recent six complete calendar
months.
(iii) Promptly following the end of the calendar quarter
during which occurs the Flex Options Commencement Date (if any), the Company
shall pay to CBOE the lesser of (A) an amount equal to the balance in the CBOE
Revenue Accrual Account as of the end of such quarter, or (B) $450,000. If the
payment to CBOE under the foregoing sentence is less than $450,000, the Company
shall continue to make payments to CBOE promptly following the end of each
complete calendar quarter thereafter, in an amount equal to the balance of the
CBOE Revenue Accrual Account as of the end of such quarter, until the earliest
to occur of (I) the Warrant Expiration Date, (II) the date on which all payments
to CBOE under this paragraph (iii) have totaled $450,000, or (III) the date (if
any) on which CBOE unilaterally and permanently withdraws OptiMark-Securities
from Availability through the Exchange with respect to twenty percent (20%) or
more of the average daily contract volume of all index options classes,
excluding FLEX index options from the calculation, measured over the then most
recent six complete calendar months.
(b) Allocation. In the event that, at the time the Company is required
to make a payment to CBOE under paragraph 3(a) above, CBOE is eligible to
receive payments under more than one sub-paragraph of paragraph 3(a), to the
extent possible the payment shall be allocated equally among all two or three
eligible categories in respect of which OptiMark-Securities has been made
Available, up to the respective cap amount for each such category.
4. REVENUE STATEMENT. Within twenty (20) days following request by CBOE
from time to time, the Company shall deliver to CBOE a written statement,
certified by the Chief Financial Officer of the Company to be accurate and
complete, attesting to: (i) the total Gross Revenues of the Company from and
after the date of this Agreement through and including the end of the most
recent calendar month, and (ii) the then-current balance in the CBOE Revenue
Accrual Account, if any (a "Revenue Statement"). The Company shall maintain, at
its executive offices, books of account concerning Gross Revenues and credits
and debits to the CBOE Revenue Accrual Account under this Agreement. Such books
of account shall be maintained in accordance with generally accepted accounting
principles consistently applied and shall be consistent with the general ledger
of the Company. CBOE, or a certified public accountant on CBOE's behalf may, at
CBOE's sole expense, examine such books of account solely for the purpose of
verifying the accuracy thereof. Such examination may take place during normal
business hours, upon reasonable advance written notice, and not more than twice
per year; provided, however, that if any such examination of the Company's books
of account reveals a discrepancy to CBOE's detriment of more than five percent
(5%) in the CBOE Revenue Accrual Account, then (x) the Company shall pay or
reimburse CBOE for the auditing expenses incurred in connection with such
examination, and (y) CBOE shall be entitled thereafter
<PAGE> 4
to examine the Company's books of account for such purpose at any time and the
Company shall pay the costs of each such examination.
5. DISCLAIMER. The Company acknowledges that, notwithstanding any
implication in this Agreement to the contrary, CBOE shall have the unilateral
right at any and all times to temporarily or permanently cease to make
OptiMark-Securities Available through the Exchange with respect to any class, or
all classes, of options upon notice to the Company.
6. TERMINATION. This Agreement and the Company's obligation to make
payments hereunder shall terminate upon the first to occur of (i) the date on
which the maximum amounts required to be paid under all sub-paragraphs of
paragraph 3(a) above have been paid out, (ii) the date on which CBOE permanently
ceases to make OptiMark-Securities Available through the Exchange with respect
to all options traded on the Exchange (after having first made
OptiMark-Securities Available with respect to any options traded on the
Exchange) or (iii) the Warrant Expiration Date. No further payments shall be
made to CBOE under this Agreement after the termination of this Agreement.
7. MISCELLANEOUS.
(a) Except as provided above to the contrary, each of the parties shall
bear their own costs and expenses in connection with this Agreement.
(b) All notices required or permitted under this Agreement shall be in
writing and given by prepaid Federal Express or other nationally recognized
overnight delivery service as follows (or to any other addresses which either
party subsequently may designate by notice):
i) if to CBOE, to:
Chicago Board Options Exchange, Incorporated
LaSalle at Van Buren
Chicago, IL 60605
attn: Richard Du Four
ii) If to the Company, to:
OptiMark Technologies, Inc.
attn: William A. Lupien
530 Main Avenue
Durango, CO 81301
<PAGE> 5
with a copy to
Ducker, Seawell & Montgomery, P.C.
1560 Broadway, Suite 1500
Denver, CO, 80202
attn: Robert C. Montgomery, Esq.
(c) This Agreement shall not be assignable by either party except in
connection with a merger, consolidation, sale of all or substantially all
assets, or analogous transaction in which a third party succeeds to all or
substantially all of the business and assumes all or substantially all of the
liabilities (including the obligations under this Agreement) of one of the
parties hereto. Any non-permitted assignment shall be void ab initio. This
Agreement shall bind and inure to the benefit of the parties and their
respective successors and permitted assigns.
(d) This Agreement may be executed in several counterparts, all of
which taken together shall constitute a single agreement between the parties.
(e) No delay or omission by either party hereto to exercise any right
or power occurring upon any noncompliance or default by the other party with
respect to any of the terms of this Agreement shall impair any such right or
power or be construed to be a waiver thereof. A waiver by either of the parties
hereto of any of the covenants, conditions, or agreements to be performed by the
other shall not be construed to be a waiver of any succeeding breach thereof or
of any other covenant, condition, or agreement herein contained.
(f) This Agreement, the Warrant and their Exhibits constitute the
entire agreement between the parties with respect to their subject matter, and
all prior negotiations, agreements and letters of intent are superseded and
merged herein. No change, waiver, or discharge hereof shall be valid unless it
is in writing and is executed by the party against whom such change, waiver, or
discharge is sought to be enforced.
(g) In the event any party hereto initiates any legal action or suit in
connection with any dispute concerning the interpretation of this Agreement or
the enforcement of any provision hereof, the prevailing party in such action or
suit shall be entitled to recover all of its costs of action or suit (including
without limitation reasonable attorneys' and expert witness fees) from the other
party.
(h) This Agreement shall for all purposes be construed and enforced in
accordance with, and governed by, the laws of the State of Colorado.
<PAGE> 6
IN WITNESS WHEREOF, the parties have set their hands and seals as of the
date first set forth above.
CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED
By: /s/ Alger B. Chapman
Title: Chairman
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien,
Chief Executive Officer
<PAGE> 7
EXHIBIT A
DEFINITION OF OPTIMARK-SECURITIES (fka MJTX)
OptiMark-Securities (the "Service") describes a service to be implemented
and offered by OptiMark Technologies, Inc. or its Affiliates (the "Company").
The Service will incorporate a market mechanism developed and owned by the
Company and with regard to which patents are pending. The market mechanism
features two innovations: 1) an anonymous and non-disclosed representation of
trading desire in terms of a "satisfaction profile", which may be thought of as
a normalized bivariate (extendible to multivariate) utility function in
price/size space; and 2) a means of optimizing the sequential allocation of
trades between buyers and sellers at different prices and sizes based upon a
measure of "mutual satisfaction."
The Service will be accessible via TCP/IP network protocols, and access to
the transaction facility will be via network providers of the users' choice that
might include, for example, Dow Jones Telerate, Bridge or IBM. Users will send
profiles to a computer facility operated by the Company, where they will be
processed using software incorporating the Company's proprietary algorithms. The
Company will also provide application programming interfaces to network
providers.
At the user's site, the Service will include a sophisticated graphical
user interface initially running under Microsoft Windows (3.1 through 95), OS/2
or UNIX to simplify and enhance the customers' ability to define and enter
profiles. At the central site, the Service will include a computer to computer
interface (CTCI) for receiving computer-generated profiles. The Service will
process quotation feeds from third parties, including the real-time feeds
available from the Consolidated Quotation Service ("CQS"), the Options Price
Reporting Authority ("OPRA"), and the National Association of Securities Dealers
Automated Quotation Service ("NASDAQ").
<PAGE> 1
EXHIBIT 10.3
PSE-OPTIMARK AGREEMENT
This PSE-OptiMark Agreement ("this Agreement") is entered into effective
as of the 27th day of August, 1996 by and between The Pacific Stock Exchange
Incorporated, a Delaware corporation ("PSE"), and OptiMark Technologies, Inc., a
Delaware corporation (the "Company").
- Recitals -
A. The Company owns and has applied for patents on certain market
structuring technology referred to by the Company as "OptiMark(TM)". PSE has
become generally familiar with the potential capabilities of OptiMark(TM). The
Company desires to present OptiMark(TM) for trading equities and equity options
to the investment community as a facility of a securities exchange or otherwise.
PSE desires to make OptiMark(TM) available to the financial community in
connection with trading on the Pacific Exchange, in the manner and subject to
the terms and conditions stated below.
B. Effective simultaneously with the execution and delivery of this
Agreement, pursuant to a Stock Purchase Agreement of even date among the Company
and certain investors designated therein (the "Stock Purchase Agreement"), the
Company is closing the first stage ($4.8 million) of a total $16 million
offering of the Company's Series A Convertible Participating Preferred Stock.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, in addition to other
terms defined elsewhere herein, the following terms shall have the indicated
meanings.
(a) "1934 Act" means the Securities Exchange Act of 1934, as
amended, and all applicable rules and regulations thereunder.
(b) "Affiliates" of a party means that party's officers,
directors, employees, and any corporations or other entities that control, are
controlled by, or are under common control with that party.
(c) "Exchange Warrants" means PSE's rights to acquire Exchange
Listed Equities Warrant Shares, Exchange Listed Options Warrant Shares, Exchange
UTP Warrant Shares, and Exchange After-Hours Warrant Shares, all as described in
the Purchase Warrant.
(d) "OptiMark-Securities" refers to the service described
generally in Exhibit B attached hereto, as it exists on the date hereof and as
it may be modified from time to time hereafter.
<PAGE> 2
(e) "Other Exchange Applications" means the Availability of
OptiMark-Securities through one or more Other Exchanges for (i) equity
securities listed on such Other Exchange(s) during normal trading hours, (ii)
equity securities pursuant to unlisted trading privileges on such Other
Exchange(s), if any, (iii) options during normal trading hours, if any, and (iv)
equity securities after-hours, if applicable.
(f) "Other Exchanges" means (i) securities exchanges registered
under Section 6 of the 1934 Act, other than the Pacific Exchange, including
without limitation the New York, American, Boston, Chicago, Cincinnati and
Philadelphia Stock Exchanges, and the Chicago Board Options Exchange, and (ii)
securities exchanges licensed, registered or otherwise authorized to do business
as such under the laws of any country other than the United States.
(g) "Pacific Exchange" means the securities exchange operated
by PSE, registered under Section 6 of the 1934 Act.
(h) "PSE Applications" means the Availability of
OptiMark-Securities through the Pacific Exchange for (i) equity securities
listed on the Pacific Exchange during normal trading hours (i.e., the PSE Listed
Application), (ii) equity securities pursuant to Pacific Exchange Unlisted
Trading Privileges (UTP), (iii) options during normal trading hours, and (iv)
equity securities after-hours.
(i) "PSE Listed Application" means the Availability of
OptiMark-Securities through the Pacific Exchange for equity securities listed on
the Pacific Exchange during normal trading hours.
(j) "PSE Warrants" means PSE's rights to acquire PSE Listed
Equities Warrant Shares, PSE Listed Options Warrant Shares, PSE UTP Warrant
Shares, and PSE After-Hours Warrant Shares, all as described in the Purchase
Warrant.
(k) "Purchase Warrant" means the Common Stock Purchase Warrant
of even date issued by the Company to PSE.
(l) "Regulatory Approval" means grant of all Rule Changes by
the staff of or the SEC.
(m) "Rule Changes" means all rule changes, no action letters,
exemptions and/or waivers necessary under the 1934 Act, if any, to allow PSE
Applications.
(n) "SEC" means the U.S. Securities and Exchange Commission.
(o) "Users" means the Pacific Exchange's members and other
brokers, dealers and investors who wish to utilize OptiMark-Securities.
<PAGE> 3
(p) As used herein, phrases such as "Availability", "made
Available", "make Available through" or "making Available" as applied to
OptiMark-Securities and the relevant PSE Applications mean that, on or after the
Initial Operational Capability Date (as defined in Section 5(c) below), the PSE
Interfaces (as defined in Section 4(a) below) permit the necessary
communications between OptiMark-Securities and the relevant systems of the
Pacific Exchange described in Section 4(a) such that Users have the ability to
utilize OptiMark-Securities subject to entering into a User Agreement (as
defined in Section 11 below) with the Company or its Affiliates. Notwithstanding
the use of such phrases in the Agreement, PSE is not providing, or offering to
provide, OptiMark-Securities to Users, either directly or indirectly.
2. OPTIMARK DEVELOPMENT. The Company promptly shall commence and
diligently shall pursue, using commercially reasonable efforts, the development,
refinement and implementation of OptiMark-Securities for PSE Applications. The
Company initially shall focus principally on development, refinement and
implementation of OptiMark-Securities for the PSE Listed Application. The
Company expects to develop OptiMark-Securities for the PSE Listed Application in
the following stages:
<TABLE>
<CAPTION>
==============================================================================================================================
Estimated
Stage Schedule
----- --------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Requirements analysis 1/15/96 - 8/6/96
- ------------------------------------------------------------------------------------------------------------------------------
Detailed hardware design 8/7/96 - 10/1/96
- ------------------------------------------------------------------------------------------------------------------------------
Detailed software design 8/7/96 - 10/29/96
- ------------------------------------------------------------------------------------------------------------------------------
Engineering development 8/7/96 - 10/17/97
- ------------------------------------------------------------------------------------------------------------------------------
Coding and unit testing 8/23/96 - 3/20/97
- ------------------------------------------------------------------------------------------------------------------------------
System integration and testing 1/27/97 - 8/22/97
- ------------------------------------------------------------------------------------------------------------------------------
System installation 8/25/97 - 9/19/97
- ------------------------------------------------------------------------------------------------------------------------------
Formal acceptance test report 8/22/97
- ------------------------------------------------------------------------------------------------------------------------------
Operational testing 9/22/97 - 10/17/97
- ------------------------------------------------------------------------------------------------------------------------------
System operational (PSE Listed Application) 10/17/97
==============================================================================================================================
</TABLE>
3. RULE CHANGES. The Company shall cause its counsel promptly to
commence, diligently to pursue and as soon as practicable to deliver to PSE (a)
a detailed written analysis as to whether, in the Company's view, any Rule
Changes are necessary and, if so (b) a proposed formal written request for such
Rule Changes for presentation by PSE to the SEC, with all supporting documents
that the Company believes are required (a "Rule Filing"). PSE and its counsel
shall review the Company's analysis and Rule Filing, shall determine
independently whether, in PSE's view, any Rule Changes are necessary and, if so,
shall finalize the Rule Filing in consultation with the Company. The Company
promptly shall deliver to PSE any supplemental information and supporting
documentation reasonably requested by PSE in this respect. The form and
substance of any Rule Filing shall be determined by PSE and shall be subject to
the Company's reasonable approval, not to be unreasonably withheld or delayed.
If PSE determines that a Rule Filing is required, PSE shall submit the Rule
Filing to the SEC as soon as practicable. PSE thereafter diligently shall pursue
Regulatory Approval, using
<PAGE> 4
commercially reasonable efforts, including to the extent necessary or
appropriate (i) attending public hearings and meetings with the SEC, in
Washington, D.C. and elsewhere, and (ii) responding to requests by the SEC and
comment letters to or from the SEC, in consultation with the Company.
4. INTERFACE DEVELOPMENT.
(a) As soon as practicable, the Company shall deliver to PSE
detailed specifications for the hardware and software needed to allow
OptiMark-Securities to interface with PSE's computerized order book, including
the terminals in use by Users, the Intermarket Trading System (ITS),
Consolidated Quote System (CQS), Consolidated Tape System (CTS), and PCOAST (fka
Scorex) system (generally, "PSE Interfaces"). All of such specifications for PSE
Interfaces shall be subject to PSE's approval, not to be unreasonably withheld
or delayed. The date on which PSE gives such approval (if any) is referred to
below as the "Interface Specifications Approval Date".
(b) For purposes of this Agreement, the "Interface Development
Commencement Date" means the latest to occur of the following:
(i) the Interface Specifications Approval Date;
(ii) the "Second Closing" under and pursuant to the Stock
Purchase Agreement;
(iii) the submission of the Rule Filing to the SEC by PSE,
if Rule Changes are deemed necessary in accordance with Section 3 ("Rule
Changes") above; and
(iv) execution and delivery by the Company, PSE and
International Business Machines Corporation ("IBM") of a contract,
satisfactory to PSE and the Company in their discretion (an "IBM
Contract"), under which IBM will provide technical assistance to PSE in
connection with design, development and testing of the PSE Interfaces.
(c) Promptly following the Interface Development Commencement
Date, PSE shall commence and diligently shall pursue, using commercially
reasonable efforts, the design, development and testing of the PSE Interfaces.
PSE initially shall focus principally on development of PSE Interfaces for the
PSE Listed Application.
(d) The Company shall pay to IBM under the IBM Contract such
amounts as may reasonably be necessary to assist PSE in the design, development
and testing of the PSE Interfaces, not to exceed $1,000,000.
<PAGE> 5
5. KEY DATES.
(a) The date (if any) on which OptiMark-Securities for the PSE
Listed Application is complete and operational in all material respects and
ready for system integration and testing, subject only to readiness of the
related PSE Interfaces, is referred to below as the "Software Completion Date".
(b) The date (if any) on which all PSE Interfaces needed for
the PSE Listed Application are complete and operational in all material respects
and ready for system integration and testing, subject only to readiness of
OptiMark-Securities, is referred to below as the "Interface Completion Date".
(c) The date (if any) on which both (i) OptiMark-Securities and
all related PSE Interfaces needed for the PSE Listed Application have been fully
tested and are ready for actual Availability on the Pacific Exchange, subject
only to PSE making OptiMark-Securities Available, and (ii) Regulatory Approval
has been obtained or has been deemed unnecessary by both parties, is referred to
below as the "Initial Operational Capability Date".
6. COOPERATION; PROGRESS REPORTS; MEETINGS.
(a) The Company shall provide all cooperation and assistance as
PSE reasonably may request from time to time in connection with PSE's
development and implementation of the PSE Interfaces under this Agreement. PSE
shall provide all cooperation and assistance related to PSE Interfaces as the
Company reasonably may request from time to time in connection with the
Company's development and implementation of OptiMark-Securities for PSE
Applications under this Agreement.
(b) PSE and the Company shall participate in a monthly
conference call during which each shall report to the other as to the status and
prospects of the project contemplated by this Agreement.
(c) At such times as PSE reasonably may request, the Company
shall provide to PSE a written report in reasonable detail as to the status of
the development of OptiMark-Securities under this Agreement, including any known
or anticipated potential problems (whether or not resolved or resolvable) and a
comparison of the Company's progress against the schedule set forth in Section 2
("OptiMark Development") above. At such times as the Company reasonably may
request, PSE shall provide to the Company a written report in reasonable detail
as to the status of the development of the PSE Interfaces for the PSE Listed
Application and other PSE Applications, including any known or anticipated
potential problems (whether or not resolved or resolvable).
(d) Once each calendar quarter, in San Francisco,
representatives of PSE and the Company shall meet for a formal mutual status
presentation and discussion concerning the development of OptiMark-Securities
and related PSE Interfaces.
<PAGE> 6
(e) From time to time upon reasonable prior notice from the
other party, each party shall allow the other party access to its premises for
purposes of design review, "walk-throughs", and discussions between the parties'
management and line personnel concerning the status and conduct of work being
performed under this Agreement.
7. INDUSTRY PROMOTION.
(a) As soon as practicable following the date of this
Agreement, the Company shall prepare and submit to PSE a proposed, detailed
written marketing plan for promoting OptiMark-Securities as a facility of the
Pacific Exchange. PSE and the Company shall attempt to finalize the marketing
plan as soon as practicable thereafter.
(b) Following agreement between the parties as to the final,
detailed marketing plan, if any (the agreed version is referred to below as the
"Marketing Plan"), upon the reasonable request of the Company from time to time,
PSE shall, to the extent specified in the Marketing Plan (i) promote
OptiMark-Securities to Other Exchanges, (ii) co-sponsor with the Company a
series of seminars in major U.S. financial centers promoting OptiMark-Securities
to institutional money managers, and (iii) generally assist the Company in
promoting OptiMark-Securities to the financial community in the U.S. and abroad.
The Company shall pay all of PSE's out-of-pocket expenses in connection with any
promotion abroad of OptiMark-Securities.
(c) PSE's obligations under this Section 7 shall be suspended
for such time(s), if any, as (i) the Company is more than three months behind on
the development schedule for OptiMark-Securities set forth in Section 2
("OptiMark Development") above, (ii) the SEC indicates that Regulatory Approval
is unlikely, or (iii) the parties are in disagreement as to whether a Rule
Filing is necessary.
8. BURDEN ON PSE. Notwithstanding anything to the contrary set forth
elsewhere herein, the obligations of PSE under this Agreement (a) shall not
require any disruption whatsoever to trading activities on the Pacific Exchange,
and (b) shall not unreasonably interfere with the normal duties of PSE and its
staff.
9. FORCE MAJEURE. Each party shall be excused from delays in
performing or failure to perform under this Agreement if and to the extent that
such delays or failures result from causes beyond the reasonable control of such
party, including without limitation fire, flood, epidemic, earthquake,
explosion, accident, riot, war, civil disturbance, labor dispute, strike or any
Act of God (generally, "Force Majeure"); provided that, in order to be excused
from delay or failure to perform, the affected party must (i) promptly notify
and keep the other party appropriately informed of the claim of Force Majeure,
and (ii) diligently use commercially reasonable efforts to eliminate the Force
Majeure. Each deadline set forth in this Agreement (including without limitation
the deadlines set forth in Section 10 ("Termination") below) shall be
appropriately extended, day-for-day, in the event of a Force Majeure.
<PAGE> 7
10. TERMINATION.
(a) For purposes of this Section 10, "Termination" of this
Agreement means termination of the parties' obligations under Section 2
("OptiMark Development"), Section 3 ("Rule Changes"), Section 4 ("Interface
Development"), Section 6 ("Cooperation; Progress Reports; Meetings") and Section
7 ("Industry Promotion") above and Section 13 ("Publicity") below. Except as
otherwise provided below, Termination shall be effective upon written notice to
the other party, which notice shall cite the paragraph of this Section 10 under
which Termination is being effected and specify the reasons for Termination in
reasonable detail. Except as otherwise provided below, Section 12 ("Ownership;
License"), Section 14 ("Confidentiality") and Section 17 ("Breach;
Indemnification; Remedies") shall survive any Termination of this Agreement.
(b) If the Company has not delivered to PSE a proposed Rule
Filing (if necessary) within 60 days following the date of this Agreement or
fails to deliver additional information for the Rule Filing within 30 days of a
reasonable request therefor by PSE, PSE may Terminate this Agreement at any time
thereafter; provided that PSE may not Terminate this Agreement under this
paragraph (b) following the Company's delivery of the proposed Rule Filing or
the referenced requested information to PSE. In connection with any Termination
of this Agreement under this paragraph (b), (i) the Purchase Warrant shall
remain outstanding in its entirety, and (ii) the Paragraph 13(c) License (as
defined below) shall be cancelled automatically.
(c) If the Company notifies PSE that the Company has determined
in good faith that a Rule Filing is necessary (such notice to specify in detail
the exact Rule Changes that are necessary) but PSE disagrees in writing, and the
parties fail to resolve the dispute (despite good faith efforts) on or before
January 31, 1997, the Company may Terminate this Agreement at any time
thereafter. In connection with any Termination of this Agreement under this
paragraph (c), (i) the Exchange Warrants shall remain outstanding and (ii) the
PSE Warrants and the Paragraph 13(c) License shall be cancelled automatically.
(d) If the Company notifies PSE that the Company has determined
in good faith that a Rule Filing is not necessary but PSE disagrees in writing,
PSE may Terminate this Agreement at any time thereafter. In connection with any
Termination of this Agreement under this paragraph (d), (i) the PSE Warrants
shall be cancelled, (ii) the Exchange Warrants shall remain outstanding, and
(iii) the Paragraph 13(c) License shall remain in effect if (but only if) the
Company has expended at least $500,000 under the IBM Contract pursuant to
Section 4(d) above; otherwise, the Paragraph 13(c) License shall be cancelled
automatically.
(e) For purposes of this paragraph (e), the "Next PSE Board
Meeting" means the next regularly scheduled meeting of the full board of
directors of PSE (the "PSE Board"), which meeting is at least 45 days beyond the
date that the Company delivers its proposed Rule Filing to PSE. If the Company
and PSE have agreed that Rule Changes are necessary and at the Next PSE Board
Meeting (i) the PSE Board does not
<PAGE> 8
consider or disapproves the Rule Filing, (ii) the PSE Board refuses to allow PSE
to make a Rule Filing, or (iii) the PSE Board approves or conditionally approves
the Rule Filing and the making of a Rule Filing, and in any such case PSE does
not submit a Rule Filing to the SEC within 30 days following the Next PSE Board
Meeting, then the Company may Terminate this Agreement at any time thereafter;
provided that the Company may not Terminate this Agreement under this paragraph
(e) following submission of the Rule Filing to the SEC by PSE; and provided
further, however, in the case of clause (e)(iii) above, if the Board seeks
additional information from the Company, the Company may not Terminate this
Agreement unless PSE has not submitted the Rule Filing to the SEC within 45 days
following the date on which the Company has complied with such request for
additional information in all material respects. In connection with any
Termination of this Agreement under this paragraph (e), the Purchase Warrant and
the Paragraph 13(c) License shall be cancelled automatically.
(f) If Regulatory Approval is denied, or if Regulatory Approval
has not been received within twelve months following submission of the Rule
Filing to the SEC by PSE, either party may Terminate this Agreement at any time
thereafter. In connection with any Termination of this Agreement under this
paragraph (f), (i) the Purchase Warrant shall remain outstanding in its
entirety, and (ii) the Paragraph 13(c) License shall remain in effect if (but
only if) the Company has expended at least $500,000 under the IBM Contract
pursuant to Section 4(d) above; otherwise, the Paragraph 13(c) License shall be
cancelled automatically.
(g) If the Software Completion Date has not occurred by March
31, 1998, PSE may Terminate this Agreement at any time thereafter; provided,
however, that PSE may not Terminate this Agreement under this paragraph (g)
following the Software Completion Date. In connection with any Termination of
this Agreement under this paragraph (g), (i) the PSE Warrants shall be
cancelled, (ii) the Exchange Warrants shall remain outstanding, and (iii) the
Paragraph 13(c) License shall remain in effect if (but only if) the Company has
expended at least $500,000 under the IBM Contract pursuant to Section 4(d)
above; otherwise, the Paragraph 13(c) License shall be cancelled automatically.
(h) If the Interface Completion Date has not occurred by the
later of (i) eight months following the Interface Development Commencement Date,
or (ii) thirty days following the Software Completion Date, the Company may
Terminate this Agreement at any time thereafter; provided, however, that the
Company may not Terminate this Agreement under this paragraph (h) following the
Interface Completion Date. In connection with any Termination of this Agreement
under this paragraph (h), (x) the PSE Warrants shall be cancelled, (y) the
Exchange Warrants shall remain outstanding, and (z) the Paragraph 13(c) License
shall remain in effect if (but only if) the Company has expended at least
$500,000 under the IBM Contract pursuant to Section 4(d) above; otherwise, the
Paragraph 13(c) License shall be cancelled automatically.
(i) If within 30 days following the Initial Operational
Capability Date PSE has not made OptiMark-Securities Available with respect to
at least fifty percent (50%) of the total number of issues of listed equity
securities traded on the Pacific
<PAGE> 9
Exchange during normal business hours, the Company may Terminate this Agreement
at any time thereafter; provided, however, that the Company may not Terminate
this Agreement under this paragraph (i) following the date (if any) on which PSE
actually makes OptiMark-Securities Available to Users for the PSE Listed
Application. In connection with any Termination of this Agreement under this
paragraph (i), (i) the PSE Warrants shall be cancelled, (ii) the Exchange
Warrants shall remain outstanding, and (iii) the Paragraph 13(c) License shall
remain in effect if (but only if) the Company has expended at least $500,000
under the IBM Contract pursuant to Section 4(d) above; otherwise, the Paragraph
13(c) License shall be cancelled automatically.
(j) If PSE fails to satisfy in all material respects the
specific objective obligations of PSE as stated in the Marketing Plan, if any,
after written notice from the Company and a reasonable opportunity to cure, the
Company may Terminate this Agreement at any time thereafter. In connection with
any Termination of this Agreement under this paragraph (j), (i) the PSE Warrants
shall be cancelled, (ii) the Exchange Warrants shall remain outstanding, and
(iii) the Paragraph 13(c) License shall remain in effect if (but only if) the
Company has expended at least $500,000 under the IBM Contract pursuant to
Section 4(d) above; otherwise, the Paragraph 13(c) License shall be cancelled
automatically.
(k) In the event any Force Majeure precludes or materially
impairs the Company's ability to perform under this Agreement for a period of
120 consecutive days or more, PSE shall have the right to Terminate this
Agreement at any time thereafter; provided that PSE may not Terminate this
Agreement under this paragraph (k) following elimination of the Force Majeure.
In connection with any Termination of this Agreement under this paragraph (k),
(i) the PSE Warrants shall be cancelled, (ii) the Exchange Warrants shall remain
outstanding, and (iii) the Paragraph 13(c) License shall remain in effect if
(but only if) the Company has expended at least $500,000 under the IBM Contract
pursuant to Section 4(d) above; otherwise, the Paragraph 13(c) License shall be
cancelled automatically.
(l) In the event any Force Majeure precludes or materially
impairs PSE's ability to perform under this Agreement for a period of 120
consecutive days or more, the Company shall have the right to Terminate this
Agreement at any time thereafter; provided that the Company may not Terminate
this Agreement under this paragraph (l) following elimination of the Force
Majeure. In connection with any Termination of this Agreement under this
paragraph (l), (i) the PSE Warrants shall be cancelled, (ii) the Exchange
Warrants shall remain outstanding, and (iii) the Paragraph 13(c) License shall
remain in effect if (but only if) the Company has expended at least $500,000
under the IBM Contract pursuant to Section 4(d) above; otherwise, the Paragraph
13(c) License shall be cancelled automatically.
(m) If the Company has not closed the second stage ($11.2
million) of its total $16 million offering under the Stock Purchase Agreement by
January 31, 1997, PSE may Terminate this Agreement at any time thereafter;
provided, however, that PSE may not Terminate this Agreement under this
paragraph (m) following the date (if any) on which the Company completes the
second stage of its offering under the Stock Purchase Agreement. In connection
with any Termination of this Agreement under this
<PAGE> 10
paragraph (m), (i) the Purchase Warrant shall remain outstanding in its
entirety, and (ii) the Paragraph 13(c) License shall be cancelled automatically.
11. USER AGREEMENTS. Upon the implementation of OptiMark-Securities
for PSE Applications, there will be one or more written agreements with each
User ("User Agreements"). Each User Agreement shall include (a) an appropriate
limited right for the User to access OptiMark-Securities, (b) limited liability
of the Company and its Affiliates, and limited remedies of Users against the
Company and its Affiliates, (c) an exculpation of PSE and its Affiliates in form
and substance satisfactory to PSE, and (d) other terms and conditions deemed to
be necessary by the Company or its Affiliates in connection with effectuating
the foregoing from time to time. Each User shall pay fees for use of
OptiMark-Securities, which fees the Company may change from time to time (the
"Fee Schedule"). Under the Fee Schedule, PSE specialists shall be entitled to
certain fee exceptions as set forth on Exhibit A to this Agreement. If the
Company or its Affiliates ever offers to the specialists of one or more Other
Exchanges a more favorable fee structure for OptiMark-Securities than set forth
on Exhibit A, the Company or its Affiliates simultaneously shall offer the more
favorable fee structure to PSE's specialists.
12. PUBLICITY. Any press release or other publicity by the Company
describing this Agreement or otherwise referencing PSE that occurs prior to
agreement on the Marketing Plan or that is not entirely consistent with the
Marketing Plan shall be subject to prior written approval by PSE, not to be
unreasonably withheld or delayed.
13. OWNERSHIP; LICENSE.
(a) Nothing in this Agreement grants to PSE any ownership,
license or other proprietary or property rights in OptiMark(TM) or
OptiMark-Securities or in any intellectual property rights therein. PSE shall
assign to the Company all of PSE's ownership, intellectual property and other
proprietary or property rights in any system, method, apparatus or work of
authorship hereafter developed or created in whole or in part by PSE relating
principally to or used principally in OptiMark(TM) or OptiMark-Securities or any
copy or embodiment thereof.
(b) Subject to the Paragraph 13(c) License, nothing in this
Agreement grants to the Company any ownership, license or other proprietary or
property rights in the PSE Interfaces or in any intellectual property rights
therein. The Company and its Affiliates shall assign to PSE all of the
ownership, intellectual property and other proprietary or property rights of the
Company and its Affiliates in any system, method, apparatus or work of
authorship hereafter developed or created in whole or in part by the Company
relating principally to or used principally in the PSE Interfaces or any copy or
embodiment thereof.
(c) PSE hereby grants to the Company a perpetual fully-paid,
nonexclusive, nontransferable (except in accordance with this Agreement) right
and license to use and modify the PSE Interfaces, in whatever stage of
completion they may exist from time to time, in connection with (and only in
connection with) any use of
<PAGE> 11
OptiMark(TM) and/or OptiMark-Securities (the "Paragraph 13(c) License").
Promptly upon request by the Company from time to time, if the Paragraph 13(c)
License has not theretofore terminated, PSE shall deliver to the Company any and
all object code, source code and supporting documentation related to the PSE
Interfaces. The Company may modify the PSE Interfaces from time to time in
connection with the Paragraph 13(c) License; provided that any modification that
impacts the use of OptiMark-Securities for PSE Applications shall be subject to
the prior written approval of PSE, not to be unreasonably withheld or delayed.
The Paragraph 13(c) License is subject to cancellation as described in Section
10 ("Termination") above.
(d) Each party will execute, and the IBM Contract will require
IBM to execute, such assignments and other documents as may be necessary to
implement and carry out the provisions of this Section 13, and each party will
cooperate, and the IBM Contract will require IBM to cooperate, with the other
party in obtaining patents, copyright registrations or other proprietary rights
protections for that which the other party is intended to own as provided in
this Section 13.
14. CONFIDENTIALITY.
(a) PSE and the Company may provide to each other confidential
or proprietary business and technical information in connection with this
Agreement ("Confidential Information"). For the avoidance of doubt, all
technical information relating to OptiMark(TM), OptiMark-Securities and the PSE
Interfaces (including source code) shall be regarded as Confidential
Information. The Company and PSE each shall keep in strict confidence and not
disclose to any other person the Confidential Information of the other party
except as necessary in the normal operation of OptiMark-Securities and the PSE
Interfaces. The Company and PSE agree to use the Confidential Information of the
other party only as necessary for the purposes of this Agreement.
(b) Notwithstanding anything to the contrary in Section 14(a)
above, the following will not be considered to be Confidential Information:
(i) information that is now or hereafter becomes
generally known to the applicable trade without breach of this
Agreement by the receiving party and its Affiliates;
(ii) information that is shown by the receiving party to
have been in the possession of the receiving party prior to the
date of this Agreement, and was not subject to a prior agreement
of confidence;
(iii) information which, subsequent to disclosure by the
disclosing party, is lawfully obtained or received by the
receiving party from a third party, without a breach of this
Agreement, and without a breach of another agreement of
confidentiality by the third party;
<PAGE> 12
(iv) information which is developed by an employee of the
receiving party or a third party having no access to and making no
use of the disclosing party's Confidential Information; and
(v) information contained in published patent
applications or patents.
Specific information shall not be deemed to be within the foregoing exceptions
merely because it is embraced in general disclosures. In addition, any
combination of features shall not be deemed to be within the foregoing
exceptions unless the combination itself and its principle of operation are
within the foregoing exceptions.
(c) The receiving party agrees to treat the disclosing party's
Confidential Information with at least the same degree of care (but not less
than reasonable care) that it uses in protecting its own confidential
information of a similar nature. The receiving party may disclose the disclosing
party's Confidential Information only to its own employees, officers, directors
and to counsel whose work requires such disclosure for the purpose of this
Agreement. The receiving party (other than counsel) may also disclose the
disclosing party's Confidential Information to individuals having an agent or
consultant relationship with the receiving party, but only if (i) the receiving
party wishes to obtain assistance from such individuals in furtherance of the
purposes of this Agreement; and (ii) such individuals have first executed an
agreement agreeing to hold the disclosing party's Confidential Information in
confidence and use the disclosing party's Confidential Information only in
connection with services performed on behalf of the receiving party. The
receiving party shall cause its Affiliates not to disclose or use the disclosing
party's Confidential Information in a manner which would violate this Agreement.
(d) Notwithstanding any of the foregoing, the receiving party
may disclose the disclosing party's Confidential Information if required to do
so by law or pursuant to a subpoena or order of a court or other governmental
entity or self-regulatory organization provided (i) the receiving party promptly
gives the disclosing party prior notice of the requirement to disclose the
Confidential Information and reasonable opportunity to obtain a protective order
or similar relief; and (ii) disclosure is limited to that necessary to comply
with the applicable law, subpoena or order.
(e) Neither the execution of this Agreement nor the delivery of
any Confidential Information to the other party shall (unless otherwise
expressly provided herein) be construed as granting any right in or license
under the Confidential Information or under any present or future invention,
patent, patent application, trade secret, trademark or copyright of the
disclosing party.
15. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company hereby incorporates and makes unto PSE all of
the Company's representations and warranties set forth in Section 3 of the Stock
Purchase
<PAGE> 13
Agreement and PSE is entitled to rely thereon as though PSE were an "Investor"
(as defined in the Stock Purchase Agreement).
(b) The definition of OptiMark-Securities set forth on Exhibit
B to this Agreement accurately describes in all material respects the current
capabilities of OptiMark(TM) and the Company's reasonable expectations as to the
capabilities of OptiMark-Securities. The Company shall use its best efforts to
develop OptiMark-Securities in all material respects consistent with both
Exhibit B and the presentations made to PSE and the members of the Pacific
Exchange.
16. DISCLAIMER. The Company acknowledges that, notwithstanding any
occurrence of the Initial Operational Capability Date, PSE has no obligation
ever to make OptiMark-Securities Available (or, if ever made Available, to keep
OptiMark-Securities Available) for any PSE Applications.
17. BREACH; INDEMNIFICATION; REMEDIES.
(a) In the event of any breach of any representation, warranty
or agreement of the Company in this Agreement that is susceptible to cure, (i)
PSE shall notify the Company of the breach, and (ii) the Company shall have
thirty days following such notice within which to cure the breach. Any curable
breach not so cured within the thirty-day period, and any uncurable breach of
this Agreement, is referred to below as a "Breach".
(b) The Company shall indemnify and hold PSE and PSE's
Affiliates harmless from and against any and all claims, causes of action,
liabilities, damages and related costs of investigation and enforcement
(including reasonable attorneys' fees) ("Losses") (unless and except to the
extent caused by the gross negligence, willful misconduct, violation of law
and/or violation of any Rule Changes by PSE and/or its Affiliates) incurred by
PSE and/or its Affiliates arising from or caused by (i) the negligence, gross
negligence or intentional misconduct of the Company, its Affiliates and/or IBM
in connection with this Agreement or the IBM Contract, (ii) the use of
OptiMark-Securities by Users, or (iii) any Breach of this Agreement by the
Company. Notwithstanding the foregoing, the Company shall have no liability to
PSE for any Losses arising from or caused by PSE's failure to comply with its
own constitution or rules, or to perform any obligation or satisfy any duty owed
to its members, their agents and/or their employees thereunder.
(c) Promptly following the assertion of any claim that may give
rise to indemnification under paragraph (b), PSE shall give notice of the claim
to the Company and shall demand indemnification therefor. In response, the
Company may notify PSE of the intent of the Company to fully assume defense of
the claim. If the Company assumes defense of the claim, (i) PSE shall provide to
the Company whatever information may be available to PSE and otherwise shall
provide reasonable assistance to the Company with respect to the claim, (ii) PSE
shall be entitled to participate in any related litigation or other proceeding,
using its own counsel at its own expense, (iii) the Company shall have
<PAGE> 14
full charge of the proceedings, (iv) any settlement shall be subject to the
consent of PSE, not to be unreasonably withheld or delayed, and (v) the Company
shall pay any judgment or settlement. The Company's assumption of defense or
failure to assume the defense shall not operate as a waiver of any right it may
have to contest whether the claim was within the scope of Section 17(b). If the
Company does not fully assume defense of the claim, PSE may assume defense of
the claim and the Company shall be bound by any settlement, judgment or other
resolution of the claim achieved by PSE.
(d) Section 10 ("Termination") above and paragraph (e)
immediately below set forth the sole and exclusive rights and remedies of the
Company in connection with this Agreement. Except as set forth in Section 10 and
paragraph (e), THE COMPANY HEREBY WAIVES ALL RIGHTS, REMEDIES AND DAMAGES
AGAINST PSE UNDER OR OTHERWISE RELATED TO THIS AGREEMENT, WHETHER SOUNDING IN
CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE. By way of example and not of
limitation, PSE MAKES NO REPRESENTATIONS OR WARRANTIES TO THE COMPANY WHATSOEVER
IN CONNECTION WITH THE PARAGRAPH 13(C) LICENSE, INCLUDING WITHOUT LIMITATION ANY
WARRANTIES AS TO OWNERSHIP, INFRINGEMENT ON INTELLECTUAL PROPERTY RIGHTS OF
THIRD PARTIES, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE. This
paragraph (d) shall apply notwithstanding the failure of any remedy of its
essential purpose.
(e) The parties acknowledge that any breach of Section 13
("Ownership; License") or Section 14 ("Confidential Information") above could
not be remedied adequately by damages. Accordingly, upon such a breach, in
addition to any other rights and remedies available under this Agreement, at law
or in equity, the offended party shall be entitled to temporary, preliminary and
permanent injunctive relief against the breaching party from any court of
competent jurisdiction, without bond or other security.
18. MISCELLANEOUS.
(a) Except as provided above to the contrary, each of the
parties shall bear their own costs and expenses in connection with this
Agreement.
(b) All notices required or permitted under this Agreement
shall be in writing and given by prepaid Federal Express or other nationally
recognized overnight delivery service as follows (or to any other addresses
which either party subsequently may designate by notice):
i) if to PSE, to:
The Pacific Stock Exchange Incorporated
attn: John C. Katovich, Esq.
301 Pine Street
San Francisco, CA 94104
<PAGE> 15
with a copy in the same manner to:
Timothy S. McCann, Esq.
Howard, Rice, Nemerovski, Canady, Falk & Rabkin
A Professional Corporation
Three Embarcadero Center, Suite 700
San Francisco, CA 94111
ii) If to the Company, to:
OptiMark Technologies, Inc.
attn: William A. Lupien
530 Main Avenue
Durango, CO 81301
with a copy in the same manner to:
Bruce Ducker, Esq.
Ducker, Seawell & Montgomery, P.C.
1560 Broadway, Suite 1500
Denver, CO 80202
(c) This Agreement shall not be assignable by either party except in
connection with a merger, consolidation, sale of all or substantially all
assets, or analogous transaction in which a third party succeeds to all or
substantially all of the business and assumes all or substantially all of the
liabilities (including the obligations under this Agreement) of one of the
parties hereto. Any non-permitted assignment shall be void ab initio. This
Agreement shall bind and inure to the benefit of the parties and their
respective successors and permitted assigns.
(d) Each party, in rendering performance under this Agreement, is
acting solely as an independent contractor. Neither party undertakes by this
Agreement or otherwise to perform any obligation of the other party, whether by
regulation or contract. In no way is either party to be construed as the agent
or fiduciary or to be acting as the agent or fiduciary of the other party in any
respect, or to have the power or authority to bind the other party, legally or
otherwise, any other provisions of this Agreement notwithstanding.
(e) This Agreement may be executed in several counterparts, all of
which taken together shall constitute a single agreement between the parties.
(f) No delay or omission by either party hereto to exercise any right
or power occurring upon any noncompliance or default by the other party with
respect to any of the terms of this Agreement shall impair any such right or
power or be construed to be a waiver thereof. A waiver by either of the parties
hereto of any of the covenants, conditions, or agreements to be performed by the
other shall not be construed to be a
<PAGE> 16
waiver of any succeeding breach thereof or of any other covenant, condition, or
agreement herein contained.
(g) This Agreement, the Purchase Warrant, the Revenue Sharing
Agreement and their Exhibits constitute the entire agreement between the parties
with respect to their subject matter, and all prior negotiations, agreements and
letters of intent are superseded and merged herein. No change, waiver, or
discharge hereof shall be valid unless it is in writing and is executed by the
party against whom such change, waiver, or discharge is sought to be enforced.
(h) If any provision of this Agreement shall be held void, voidable,
invalid or inoperative, no other provision of this Agreement shall be affected
as a result thereof and, accordingly, the remaining provisions of this Agreement
shall remain in full force and effect as though such void, invalid or
inoperative provision had not been contained herein. In such event, the parties
agree to negotiate in good faith substitute provisions which shall effect the
parties' original intent in entering into this Agreement as nearly as possible.
(i) In the event any party hereto initiates any legal action or suit
in connection with any dispute concerning the interpretation of this Agreement
or the enforcement of any provision hereof, the prevailing party in such action
or suit shall be entitled to recover all of its costs of action or suit
(including without limitation reasonable attorneys' and expert witness fees)
from the other party.
(j) This Agreement shall for all purposes be construed and enforced in
accordance with, and governed by, the internal laws of the State of California,
without giving effect to principles of conflict of laws. The exclusive venue for
any litigation related to this Agreement shall be the Superior Court in and for
San Francisco County, California or, if jurisdictionally available, the U.S.
District Court for the Northern District of California.
IN WITNESS WHEREOF, the parties have set their hands and seals as of the
date first set forth above.
THE PACIFIC STOCK EXCHANGE INCORPORATED
By: /s/ Robert M. Greber
Chief Executive Officer
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
Chief Executive Officer
<PAGE> 17
EXHIBIT A
(to PSE-OptiMark Agreement)
FEE SCHEDULE EXCEPTIONS FOR PSE SPECIALISTS
1. Blanket Exemption for Trades Aggregating Less Than Average Daily
Volume. Daily trading of U.S. listed equities utilizing OptiMark-Securities by
PSE specialists as a group, up to a total number of shares equal to the average
daily trading volume in U.S. listed equities for such group for the 120 trading
days prior to commencement of trading through OptiMark-Securities of U.S. listed
equities on the Pacific Exchange, shall be exempt from any fee charge regardless
of how the trade is represented in OptiMark-Securities. Specialist trades that
exceed the blanket exemption on a given trading day will be subject to the Fee
Schedule unless exempt under paragraphs 2 or 3 below.
2. Specific Exemption for Two Dimensional Orders of 1,000 Shares or
Less. Individual trades by PSE specialists of 1,000 shares or less (or
aggregations of such trades) that specify only price and size and DO NOT use the
multi-dimensional trade representation capabilities of OptiMark-Securities shall
be exempt from any fee charge, whether or not exempt under paragraph 1 above.
3. Specific Exemption for Undisplayed Three Dimensional Book Interest
Where No Price Improvement is Obtained. Individual trades of any size by PSE
specialists that result from undisplayed book orders that DO use the
multi-dimensional interest representation capabilities of OptiMark-Securities
but DO NOT receive price improvement over the best bid or offer at a full (1.0)
satisfaction level, shall be exempt from any fee charge whether or not exempt
under paragraph 1 above.
4. Other Trades. All other PSE specialist trades executed through
OptiMark-Securities, including trades resulting from orders between exchanges,
that are not otherwise exempt under paragraphs 1, 2 or 3 above, will be subject
to the Fee Schedule. Unexecuted "linked" trades may also be subject to the Fee
Schedule.
<PAGE> 18
EXHIBIT B
(to PSE-OptiMark Agreement)
DEFINITION OF OPTIMARK-SECURITIES (fka MJTX)
OptiMark-Securities (the "Service") describes a service to be implemented
and offered to Users by OptiMark Technologies, Inc. or its Affiliates (the
"Company"). The Service will incorporate a market mechanism developed and owned
by the Company and with regard to which patents are pending. The market
mechanism features two innovations: 1) an anonymous and non-disclosed
representation of trading desire in terms of a "satisfaction profile", which may
be thought of as a normalized bivariate (extendible to multivariate) utility
function in price/size space; and 2) a means of optimizing the sequential
allocation of trades between buyers and sellers at different prices and sizes
based upon a measure of "mutual satisfaction."
The Service will be accessible via TCP/IP network protocols, and access
to the transaction facility will be via network providers of the Users' choice
that might include, for example, Dow Jones Telerate, Bridge or IBM. Customers
will send profiles to a computer facility operated by the Company, where they
will be processed using software incorporating the Company's proprietary
algorithms. The Company will also provide application programming interfaces to
network providers.
At the User's site, the Service will include a sophisticated graphical
user interface initially running under Microsoft Windows (3.1 through 95), OS/2
or UNIX to simplify and enhance the customers' ability to define and enter
profiles. At the central site, the Service will include a computer to computer
interface (CTCI) for receiving computer-generated profiles. The Service will
process quotation feeds from third parties, including the real-time feeds
available from the Consolidated Quotation Service ("CQS") and the National
Association of Securities Dealers Automated Quotation Service ("NASDAQ").
<PAGE> 1
EXHIBIT 10.4
NASDAQ/OPTIMARK
AGREEMENT
THIS AGREEMENT (the "Agreement"), effective as of this 1st day of
September, 1998 (the "Effective Date"), is entered into by and between (i) The
Nasdaq Stock Market, Inc. ("Nasdaq"), a wholly-owned subsidiary of the National
Association of Securities Dealers, Inc. ("NASD"), a national securities
association registered with the United States Securities and Exchange Commission
(the "SEC") under Section 15A of the Securities Exchange Act of 1934 (the
"Exchange Act") and (ii) OptiMark Technologies, Inc. ("OptiMark"), a Delaware
corporation (Nasdaq and OptiMark are collectively referred to herein as the
"Parties"). Unless otherwise defined herein, all capitalized terms used herein
shall have the meanings set forth in Section 25 of this Agreement.
WHEREAS, OptiMark is planning to develop and implement a system based on
its proprietary technology to permit a trading service for Nasdaq;
WHEREAS, Nasdaq plans to develop and implement a trading facility that
enables Members and others sponsored by Members to obtain access to the OptiMark
Matching Module and permit the transmission and processing of certain Profiles,
executions, and trade reports of such executions in accordance with applicable
NASD rules;
WHEREAS, simultaneously with the execution of this Agreement, the Parties
are executing the Warrant Agreement (the "Warrant Agreement") attached hereto as
Exhibit A;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties intend to be legally bound and
hereby agree as follows:
Page 1
<PAGE> 2
SECTION 1. PROJECT SCOPE - OVERVIEW
1.1. NASDAQ APPLICATION. The Parties agree to offer, as a facility of
the "Nasdaq Stock Market" as that term is defined in NASD Rule 4200(a), a
securities trading application based on the OptiMark Technology to be known as
the "Nasdaq Application." The "Nasdaq Application" for the purposes of this
Agreement shall mean an electronic trading system for Nasdaq Securities that
permits: (i) the entry and transmission of certain Profiles through networks
operated by or for the Nasdaq Family and/or the OptiMark Family to the OptiMark
Matching Module; (ii) participation of such Profiles in a Call; and (iii) the
execution, trade reporting, comparison, clearance, and settlement of the
resulting transactions in the Nasdaq Stock Market. The Parties recognize that
the Complex through which the Nasdaq Application will be made available will
consist of: (a) the portion (including interfaces to (b), below) owned or
operated by the Nasdaq Family which may include a portion of the Nasdaq
Technology; and (b) the portion (including interfaces to (a), below) owned or
operated by the OptiMark Family (including the OptiMark Matching Module as
defined below in this Section 1.1) which may include a portion of the OptiMark
Technology; The "OptiMark Matching Module" shall mean the OptiMark portion of
the Nasdaq Application that receives Profiles in Nasdaq Securities and conducts
periodic Calls. OptiMark hereby agrees to co-locate the OptiMark Matching Module
in the Nasdaq Data Center. The "Nasdaq Technology" shall mean existing and
future portions of a Complex owned by or operated for the Nasdaq Family which it
uses as the base for a customized Complex for use by the Nasdaq Application or
which it uses to support the Nasdaq Application and other applications,
products, or services. The "OptiMark Technology" shall mean existing and future
portions of a Complex owned by or operated for the OptiMark Family which it uses
as the base for a customized Complex for use by the Nasdaq Application or which
it uses to support the Nasdaq Application and other applications, products, or
services.
1.2. PURPOSE OF THE AGREEMENT. The Parties shall work as set forth in
this Agreement to develop and implement the Nasdaq Application. The Parties
agree that such development and implementation requires efforts on the part of
both Parties. This Agreement contains a framework for the allocation of the
responsibilities and schedules for developing and operating the Nasdaq
Application.
1.3. OPTIMARK'S RESPONSIBILITIES. OptiMark shall make available, as
provided in the Specifications, the OptiMark Matching Module. In addition,
OptiMark shall perform the following: (a) the development and installation work
for a Terminal Program that is adapted for installation with the Nasdaq
Workstation Presentation Device software with messages transmittable through the
EWN or VPN; (b) the development and installation work for software that permits
effective interfaces between the OptiMark Matching Module and the Nasdaq portion
of the Nasdaq Application related to trade reporting, comparison, and clearance
and settlement processes; (c) make available OptiMark provided network(s); and
(d) such other tasks as assigned to it in the Specifications or as agreed to by
the Parties to develop and implement the Nasdaq
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Application, including any development and installation tasks necessary to
receive information from the Terminal Program installed in the EWN environment.
OptiMark agrees that except for its work on the current version of the Pacific
Exchange, Inc. (the "PCX Application"), OptiMark will give its top priority to
the Nasdaq Application and that no other OptiMark application or version will
become operational until after the Operational Commencement Date; provided,
however, that if commencement of the Nasdaq Application is delayed more than
four (4) calendar months past the Critical Milestone Operational Commencement
Date stipulated by the Parties as of the Effective Date, OptiMark may proceed
with its work to make such other OptiMark applications or versions operational,
while continuing to use commercially reasonable efforts to continue performance
under this Agreement.
1.4. NASDAQ'S RESPONSIBILITIES. Nasdaq shall make available, as
provided in the Specifications, one or more separate types of networks through
which Profiles may be transmitted from the Nasdaq Workstation II environment
(the "Nasdaq Workstation"): (i) the Enterprise Wide Network (the "EWN") and (ii)
potentially, Virtual Private Network(s) used or to be developed by Nasdaq (the
"VPN") for the subscribers of the Nasdaq Workstation that use the Nasdaq
Workstation Presentation Devices. Nasdaq also shall provide the facilities
management necessary to operate the Nasdaq Application as provided in the
Specifications. In addition, Nasdaq shall perform the following development and
installation work: (a) develop a means to permit installation of the OptiMark
developed Terminal Program (that is adapted for installation with the Nasdaq
Workstation Presentation Device software) on applicable Nasdaq Workstation
Presentation Devices; (b) develop an ability for messages transmitted from the
OptiMark developed Terminal Program (that is adapted for installation with the
Nasdaq Workstation Presentation Device software ) to flow through the Nasdaq
provided networks; (c) develop an interface with the OptiMark portion of the
Nasdaq Application to permit transmission of the results of a Call to Nasdaq's
trade reporting, comparison, and clearance and settlement systems; and (d) such
other tasks as assigned to it in the Specifications or as agreed to by the
Parties to develop and implement the Nasdaq Application.
1.5 ALLOCATION OF RESPONSIBILITIES. The Parties are uncertain as of
the Effective Date whether a VPN, institutional servers, or distribution servers
will be necessary to implement this Agreement. In the event that such VPN,
institutional servers, or distribution servers prove necessary, the Parties are
agreed that the development, procurement, and installation of the VPN shall be
the responsibility of Nasdaq and the development, procurement, and installation
of the institutional servers, or distribution servers shall be responsibility of
OptiMark.
1.6. SCOPE OF THE AGREEMENT. The Parties recognize that certain
national securities exchanges may trade Nasdaq Securities pursuant to the
Unlisted Trading Privileges ("UTP") Plan for Nasdaq Securities. Nothing in this
Agreement is intended to preclude OptiMark from offering its technology,
directly or indirectly, to any such exchange for the trading of Nasdaq
Securities; provided, however, that no network,
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network device, central computer processor or any other portion of the Nasdaq
Application shall be used to trade Nasdaq Securities on such exchange without
express written agreement by Nasdaq. Where an OptiMark provided network or
Terminal Program does not use any of the Nasdaq Technology to trade Nasdaq
Securities, the above consent is not required for use of the network or Terminal
Program. Further, with respect to any such UTP application, the Parties agree
that, while this Agreement is in effect, unless a Person entering a Profile
specifically designates that the Profile is to be processed through the UTP
application, the Profile shall be processed through the Nasdaq Application and
reported as a Nasdaq trade for credit to Nasdaq for tape revenue purposes.
Anything herein to the contrary notwithstanding, OptiMark may develop a Terminal
Program at its own expense to enable End-Users to use the Nasdaq Workstation to
enter Profiles in securities listed on a national securities exchange, subject
to (a) further agreement between the Parties and (b) an appropriate service
charge arrangement as agreed to by the Parties.
1.7. TWO STAGES. The Parties agree that the Nasdaq Application shall be
developed and implemented in at least two stages. During the initial stage of
their efforts (the "First Stage"), the Parties shall develop and implement,
among other things, capabilities to allow End-Users to send Profiles from the
Nasdaq Workstation through the EWN and the VPN. During the First Stage, the
Parties shall develop and implement capabilities to permit the participation of
the national best bid and offer Quotes ("BBO") in Calls. During the subsequent
stage of their efforts (the "Second Stage"), which shall be completed within a
reasonable time period after completion of the First Stage, the Parties may
create automated mechanisms for participation of other portions of the Nasdaq
Quote Montage in Calls. However, the Parties agree that if the Nasdaq Family
determines to adopt a trade-through rule for the Nasdaq Stock Market, it may
require the Parties to accelerate the Second Stage development activities to
overlap and interact with the First Stage work. The Parties agree to identify
the need for any such efforts as soon as possible, during the Specifications
Phase if possible, and modify the Specifications (including the Critical
Milestone Dates set forth in Schedule II) accordingly.
1.8. FOUR PHASES. The Parties expect to complete the First Stage over
the course of the following four Phases, which may overlap and interact: (i) the
Specifications Phase; (ii) the Development Phase, (iii) the Installation and
Acceptance Phase and (iv) the Operational Phase. The Parties agree that the
Second Stage may follow the same or similar Phases.
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SECTION 2. SPECIFICATIONS PHASE
2.1. SPECIFICATIONS. During the Specifications Phase, the Parties shall
develop detailed operational and functional specifications (the
"Specifications") for the Nasdaq Application that expands on the specifications
agreed to on the Effective Date and reflected in the Schedules. As used in this
Agreement, the term "Specifications" shall incorporate time schedules, equipment
requirements and other Schedules referenced in this Agreement. The
Specifications shall allocate the development and implementation
responsibilities of each Party as set forth in sections 1.3, 1.4, and 1.5 and
shall describe, but not be limited to, the following:
(a) functional specifications (including network specifications for
using TCP/IP to transmit messages through the EWN and VPN);
(b) the procedures by which workstations, servers and/or
communications capabilities provided directly or indirectly by the
OptiMark Family may be used by End-Users who are Members or who have made
appropriate arrangements with Members (as described below) to submit
Profiles for participation in a Call;
(c) the procedures by which the Nasdaq Workstation may be used by
End-Users who are Members or who have made appropriate arrangements with
Members (as described below) to submit Profiles for participation in a
Call;
(d) the requirements for the EWN and the VPN that will allow End-Users
to submit Profiles from the Nasdaq Workstation for participation in a
Call;
(e) the procedures for Designated Brokers to establish and update
trading authority limits;
(f) the procedures for conducting post-trade operations (including
online comparison, trade reporting, and clearance and settlement
communications interfaces);
(g) the requisite personnel and Complex to be delivered or made
available to each Party by the other Party in connection with the
development and implementation of the Nasdaq Application;
(h) the required configurations for each component;
(i) the procedures and personnel needed for the coordination of Nasdaq
and OptiMark help desks and their respective responsibilities including
those for detecting problems and resolving issues;
(j) the disaster recovery capabilities and installations;
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(k) the site locations and requirements, including the procedures
related to the co-location of the OptiMark Matching Module in the Nasdaq
Data Center;
(l) trading capacity and issues related thereto;
(m) length of up-time and systems availability and requirements
relating thereto;
(o) response times for the processing environment and the OptiMark
Matching Module, including the requirement that, with respect to Calls,
the OptiMark Matching Module shall complete the vast majority of all
Calls within 4 seconds and shall truncate any Call not completed within 4
seconds;
(p) the hours of operation of the Nasdaq Application;
(q) interim and final acceptance test criteria, specifications, and
procedures for the Nasdaq Application (including, but not limited to the
following tests: integration, quality control, Year 2000, user
acceptance, stress, and operational recovery), as well as the
requirements for on-site personnel of the other Party needed during the
testing;
(r) interaction between different components of the four Phases and
their sequencing, including the appropriate interval for each of the
Phases following completion of the initial Specifications Phase;
(s) any development efforts that the Parties agree to accelerate from
the Second Stage;
(t) security procedures;
(u) archival and backup capabilities;
(v) a timetable for the performance of each task (or completion of
each deliverable) to be performed by a party;
(w) feeds and interface specifications with regulatory systems;
(x) functional specifications for integrating the BBO to permit the
generation of Profiles based on eligible Quotes and subsequent
participation of such system-generated Profiles in a Call;
(y) the procedures for incorporating the BBO (the best bids and offers
of market participants) from Quotes collected, furnished, or supplied,
directly or
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indirectly by Nasdaq, upon the terms and conditions reasonably
established by the Parties;
(z) the procedures whereby OptiMark adjusts any potential match from a
Call involving any portions of the BBO, which Quote has been canceled or
executed during the Call; and
(aa) OptiMark will obtain appropriate software and development
equipment for developing and testing its system. Nasdaq will provide
appropriate facilities and personnel to support OptiMark's development,
QA, and production systems, 7 by 24, as needed and agreed to by both
Parties.
2.2. MILESTONE DATES. When Schedule I and II are finalized, they shall
be as if attached and incorporated into this Agreement. Schedule II shall
include a list of certain Milestone Dates labeled as "critical" for successful
and timely implementation of the Nasdaq Application (the "Critical Milestone
Dates"). Anything herein to the contrary notwithstanding, the Critical Milestone
Dates may only be altered by written agreement of officers of the Parties. The
Parties recognize that all deliverables and schedules related to such
deliverables, including the Milestone Dates but not including the Critical
Milestone Dates, are based on certain assumptions about the basic
functionalities of each other's system and that each deliverable and schedule
related to the deliverable are contingent on the terms and conditions preceding
the event, as specified in Specifications. The Parties recognize that if
regulatory approvals are not obtained by the Critical Milestone Date, the
Parties will have to agree to change all subsequent schedules related to such
deliverables, including Milestone Dates and the Critical Milestone Dates. With
respect to the First Stage, the Parties shall complete the "Final
Specifications" by the Critical Milestone Date. The Parties agree that within
five (5) Business Days of the Effective Date, each Party shall provide to the
other Party the names of its staff that shall be responsible for drafting the
Specifications and that such individuals shall conduct their first meeting to
commence the drafting process no later than ten (10) Business Days after the
Effective Date. Thereafter, the drafters shall meet (by telephone,
video-conference, in person, or otherwise) at least weekly, until the
Specifications are completed. If operational or functional Specifications must
be modified after the Final Specifications are drafted, the Parties agree to
follow the procedures in Section 2.3 below.
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2.3. MODIFICATIONS.
2.3.1. Prior to the Operational Commencement Date, a Party may
request a modification to the Final Specifications, which request shall be
presented to the other Party in writing. Any such request shall indicate whether
the modification, in the reasonable and good faith judgment of the requesting
Party, would result in an extension of, or other change to, the Installation
Schedule and/or the Milestone Dates schedule or result in an increase in the
cost of development or operation of the Nasdaq Application. If a Party believes
that the request for modification (other than the modification contemplated
under Section 1.7 of this Agreement) is not commercially practicable based on
the determination that it will not recover its allocated costs for the requested
modification, plus a reasonable return on such costs, in a reasonable time
frame, such impracticability will be raised as a Dispute under the ADR and
Arbitration Provisions of the Agreement. The modification will be deemed
effective upon the written agreement of the other Party to such written request
or the decision of the arbitrator, and the Schedules attached hereto, to the
extent applicable, shall be deemed amended from the date thereof.
2.3.2. The Parties expect that after the Nasdaq Application
becomes operational, ongoing modifications and enhancements to the Nasdaq
Application may be necessary throughout the term of this Agreement. Such
requests shall be handled under Section 10.5.2 of this Agreement.
2.4. EXTENSION OF MILESTONE DATES.
2.4.1. The Parties acknowledge that although they may agree, from
time to time, to modify schedules and other important Milestone Dates, due to
the limits on each other's resources and the need to come to market, neither
Party has wide-ranging flexibility to extend a Critical Milestone Date as may be
requested by the other Party. Anything herein to the contrary notwithstanding,
in the event of any delay in meeting a Critical Milestone Date, other than an
event of Force Majeure discussed below in Subsection 2.4.2, a Party shall be
excused from meeting the Critical Milestone Date and shall not be subject to any
Event of Default or Event of Termination on the account of any such delay, if
the Party shall (i) promptly notify and keep the other Party informed of the
work in progress to complete the task at hand and (ii) pay to the other Party a
liquidated damages amount (which the Parties agree represents their good faith
attempt to estimate an amount of the increased costs or damage to the other
Party caused by the delays but which appears to be an amount incapable of
precise calculation) of $5,000.00 (Five Thousand Dollars) for each Business Day
past the 30-Day cure period for the Critical Milestone Date. Each Critical
Milestone Date shall be appropriately extended, Day-for-Day, in the event that
the liquidated damages are paid hereunder, provided however, that anytime after
the earlier of the Critical QC Delivery Date or a total of 90 Days after the
Critical Milestone Date, the non-breaching Party may terminate this Agreement.
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2.4.2. Each Party shall be excused from delays in performing under
this Agreement, and the schedules and Milestone Dates (including the Critical
Milestone Dates) shall be appropriately extended, Day-for-Day, to the extent
that such delays result from an event of Force Majeure and while the effect of
such event is continuing, unless and until the Agreement is terminated in
accordance with Section 18 of this Agreement.
SECTION 3. DEVELOPMENT PHASE
3.1. DEVELOPMENT TASKS. During the Development Phase, the Parties shall
commence development of the Nasdaq Application in accordance with the
Specifications. In furtherance thereof, the Parties shall, during the
Development Phase, take the following actions:
(a) OptiMark shall develop and internally test, at its own expense,
the OptiMark Matching Module to match Profiles in Nasdaq Securities, as provided
in the Specifications. In addition, OptiMark shall develop and internally test,
at its own expense, such other tasks as described in this Agreement, assigned to
it in the Specifications, or as agreed to by the Parties, including the
development of the appropriate Terminal Program for the Nasdaq Workstation. The
OptiMark Matching Module and all other components and functions of the Nasdaq
Application developed by or operated for OptiMark hereunder shall satisfy the
Specifications in all material respects.
(b) Nasdaq shall develop and internally test, at its own expense, the
capability of messages from the Nasdaq Workstation to flow through the EWN and
the VPN for delivery to and from the OptiMark Matching Module, as provided in
the Specifications. In addition, Nasdaq shall develop and internally test, at
its own expense, such other tasks as described in this Agreement, assigned to it
in the Specifications, or as agreed to by the Parties. The components and
functions of the Nasdaq Application developed by or operated for Nasdaq that
affect the ability to effect and process a transaction resulting from a Call,
shall satisfy the Specifications in all material respects.
SECTION 4. INSTALLATION AND ACCEPTANCE PHASE
4.1. INSTALLATION SCHEDULE. During the Installation and Acceptance
Phase, the installation of the Nasdaq Application shall be phased in according
to the schedule (the "Installation Schedule") in the Specifications. The
Installation Schedule shall reflect the timing for the installation and
connection of various components of the Nasdaq Application (including the
OptiMark Matching Module and the installation of Terminal Programs at End-User
sites). The Parties shall use commercially reasonable efforts to minimize
deviations from the Installation Schedule by assigning the necessary resources
to the project activities.
4.2. DELIVERY. The Parties shall exert commercially reasonable efforts
to deliver each component of the Nasdaq Application (including the OptiMark
Matching
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Module) on the estimated delivery date applicable to such component as set forth
in the Specifications (the "Delivery"). The entire Nasdaq Application shall be
delivered as of the date for Delivery of the final component of the Nasdaq
Application as provided in the Specifications.
4.3. ACCEPTANCE TESTS
(a) Each Party shall cooperate with the other Party to perform its own
interim integration, stress, and other acceptance tests for the Nasdaq
Application to ensure operability and compliance with the Specifications.
Acceptance tests by Nasdaq shall include certain quality control and stress
tests conducted after the completion of the Installation Schedule that are
customary and routine to the Nasdaq Stock Market and may include End-User
testing (the "Nasdaq QC Tests"). Upon successful completion of the Nasdaq QC
Tests, Nasdaq shall execute and deliver to OptiMark a Certificate of Acceptance,
indicating its acceptance of the Nasdaq Application. Anything herein to the
contrary notwithstanding, the Parties agree that final responsibility for
declaring the Nasdaq Application ready for operation remains with Nasdaq.
(b) Interim acceptance tests may be performed by either Party, which
shall indicate the relevant stage, component or configuration which is being
accepted. Preliminary acceptance or necessary modification thereto shall be
agreed to by the Parties within the specified time period as provided in the
Specifications. Anything herein to the contrary notwithstanding, the Parties
agree that a Party's testing or acceptance of any interim stage, component or
configuration shall not be deemed to be acceptance of that stage, component or
configuration during any subsequent interim test or the Nasdaq QC Test, nor act
as a waiver or estoppel to perform other tests, or the Nasdaq QC Tests on any
stage, component or configuration of the final Nasdaq Application.
(c) If the Nasdaq Application fails to meet any applicable Nasdaq QC
Test and if such failure did not result from (i) material failure of the Nasdaq
portion of the Nasdaq Application to meet relevant parts of the Specifications
or (ii) Nasdaq controlled conditions which were foreseeable to Nasdaq but
undisclosed to OptiMark such that it was not commercially reasonable for
OptiMark to react to such, Nasdaq shall promptly notify OptiMark in writing of
such failure and OptiMark shall correct, modify or improve its work, as the case
may be, to meet the criteria set forth in the applicable Nasdaq QC Test within a
reasonable time frame necessary to meet the Critical Milestone Operational
Commencement Date. Nasdaq shall thereafter reinitiate and complete one or more
additional rounds of Nasdaq QC Tests until such time as when OptiMark either
passes the Nasdaq QC Tests or the Critical Milestone Date passes, in which case
Nasdaq may thereafter terminate this Agreement. In the event that the failure to
pass the Nasdaq QC Test by the Critical Milestone Date is a result of (i) or
(ii) of this sub-section, then OptiMark may thereafter terminate this Agreement.
4.4. NOTIFICATION OF DELAY OR FAILURE. In order to anticipate and
reduce the effect of delays or failures, the Parties agree to notify each other
as soon as there is any
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reason to believe that any Delivery will be delayed and/or that the Nasdaq
Application will fail to meet the Specifications.
SECTION 5. OPERATIONAL PHASE
5.1. COMMENCEMENT.
5.1.1. The Parties agree that the Operational Commencement Date is
subject to regulatory approval and successful completion of all development,
installation and testing requirements as agreed to in the Specifications. The
Parties recognize that the Operational Commencement Date may not be met despite
the Parties' commercially reasonable efforts to do so. However, the Parties also
recognize that Year 2000 issues may require Nasdaq, OptiMark, government
regulators and/or End Users to refuse to allow the introduction of new
computerized facilities into the Nasdaq Stock Market at a currently unspecified
date in the latter half of 1999 ("Year 2000 Lockdown"). Accordingly, because a
Year 2000 Lockdown may prevent the introduction of the Nasdaq Application until
an unspecified time in 2000, the Parties agree to make Best Efforts to avoid
delays in an Operational Commencement Date that could overlap with any Year 2000
Lockdown on new trading facilities. The Parties agree that subject to Sections
18.2(c) and 18.2(d), they must meet the Critical Milestone Operational
Commencement Date, as such date was agreed to on the Effective Date or changed
thereafter.
5.1.2. The Operational Phase shall commence on the date (the
"Operational Commencement Date") on which (i) all Regulatory Approval has been
obtained and (ii) Nasdaq shall have delivered to OptiMark an executed
Certificate of Acceptance. On the Operational Commencement Date, Nasdaq
End-Users shall have access to, and may commence trading through, the Nasdaq
Application.
5.1.3. During the Operational Phase, the Nasdaq Application shall
be available for End-Users to purchase and sell Nasdaq Securities. During the
Operational Phase, each Party shall operate and maintain its respective portion
of the Nasdaq Application so that it continues to meet the Specifications and
all other provisions of this Agreement, including the provisions relating to the
staffing, training and the Parties' respective help desks. Each Party shall (i)
ensure proper machine configuration, program installation, audit controls,
including archival material and operating methods, including any backup tapes,
(ii) work to establish adequate backup plans to ensure proper functioning of the
Nasdaq Application in the event of any failure of the primary system located in
the Nasdaq Data Center, and (iii) implement sufficient procedures to satisfy its
requirements for security and accuracy of input and output as well as restart
and recovery in the event of malfunction; (iv) correct in a timely manner errors
or malfunctions of the Nasdaq Application, (v) implement in a timely manner
modifications, revisions, enhancements or upgrades to the Nasdaq Application as
agreed to by the Parties and (vi) ensure compatibility of the Specifications
with any changes in law, subject to Section 10.5.2 below.
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5.2. OPERATIONAL PROBLEMS. Each Party shall inform the other of any
known defects in its portion of the Nasdaq Application, including, in the case
of OptiMark, any known defects in the OptiMark Matching Module which might
materially interfere with the operation or use of the Nasdaq Application.
OptiMark shall promptly make commercially reasonable efforts to correct coding
errors, bugs and/or other operational problems (and supply Nasdaq with
replacement documentation and media therefor) of, or resulting from, the
OptiMark Matching Module or any other component of its portion of the Nasdaq
Application, including those brought to the attention of OptiMark by Nasdaq, and
Nasdaq shall promptly make commercially reasonable efforts to correct coding
errors, bugs and/or other operational problems (and supply OptiMark with
replacement documentation and media therefor) of, or resulting from its portion
of the Nasdaq Application, including those brought to the attention of Nasdaq by
OptiMark.
5.3 VIRUSES, TIME BOMBS, TRAP DOORS. Each Party shall promptly notify
the other of any defects in relevant security mechanisms of which it has actual
knowledge, such as Time Bombs, Viruses, Trap Doors, or similar devices. The
Parties shall use Best Efforts to disable and/or correct any such defects, such
as Time Bombs, Viruses, Trap Doors, or similar devices.
5.4. MARKET OR SYSTEM EMERGENCIES. Nasdaq, in its sole discretion, may
intervene and take any action with respect to its portion of the Nasdaq
Application that Nasdaq deems reasonably necessary, if there shall be or shall
be threatened, in either case in Nasdaq's sole judgment, a market or operational
emergency -- including, without limitation, any event or circumstance under
which the OptiMark Matching Module, or the Nasdaq Application as a whole,
threatens or is expected to threaten, the effective and orderly operation of the
Nasdaq Stock Market or otherwise poses a threat to its systems. Subject to
Nasdaq's statutory obligations, court action, and any SEC action (or action of
other body with regulatory or oversight jurisdiction over any part of the Nasdaq
Family), such action by Nasdaq may include temporarily disconnecting the Nasdaq
Application until Nasdaq determines, in its sole discretion, that such market or
operational emergency (or threat thereof) no longer exists. Nasdaq shall make
reasonable efforts under the circumstances confronting Nasdaq at the time of the
market or system emergency to notify OptiMark prior to taking any action under
this Section or promptly thereafter. Nothing in this Agreement is intended to
preclude the OptiMark Family from continuing to operate other applications in a
market other than the Nasdaq Stock Market. Nasdaq shall provide OptiMark with
material information relating to its policies and procedures for identifying and
handling market or operational emergencies, which information may be modified by
Nasdaq from time to time to reflect its current practice. Nothing in such
information prohibits Nasdaq from taking other or additional steps not
identified therein if Nasdaq, or the Nasdaq Family, determine that such other
steps are necessary and consistent with its authority under SEC and NASD Rules.
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SECTION 6. SECOND STAGE DEVELOPMENTS
6.1. SPECIFICATIONS. The Parties agree that a Second Stage of the
Nasdaq Application shall be developed to permit an automated mechanism for the
participation of portions of the Nasdaq Quote Montage (such as a Nasdaq limit
order file) in Calls. The Specifications shall allocate the development and
implementation responsibilities of each Party and describe, but not be limited
to, the following:
(a) functional specifications for integrating the portions of the
Nasdaq Quote Montage to permit the generation of Profiles based on eligible
Quotes and subsequent participation of such system-generated Profiles in a Call;
(b) the procedures for incorporating the portions of the Nasdaq Quote
Montage from Quotes furnished by market makers and ECNs upon the terms and
conditions reasonably established by the Parties; and
(c) the procedures whereby OptiMark adjusts any potential match from a
Call involving any portions of the Nasdaq Quote Montage, which Quote has been
canceled or executed during the Call;
6.2. ACCESS TO OTHER SYSTEMS. The Parties agree that notwithstanding
obligations hereunder, as a part of a self-regulatory organization, Nasdaq has
legal and regulatory obligations mandated by statute regarding access to
services and facilities provided by other software developers and/or Members.
Accordingly, Nasdaq shall handle any such requests for access in a manner
described in the Nasdaq Letter.
SECTION 7. STEERING COMMITTEE
7.1. PROJECT COORDINATORS; STEERING COMMITTEE. No later than five
Business Days after the Effective Date, (i) each Party shall appoint a project
coordinator (the "Project Coordinator") that will be the primary contact between
the Parties hereto and who will have the authority to bind the Parties and (ii)
the Parties shall jointly establish a steering committee (the "Steering
Committee") to supervise the performance of the Parties pursuant to this
Agreement and to address legal, technical, operational, and regulatory issues
that arise out of the operation of the Nasdaq Application. The Steering
Committee shall initially be comprised of two members from the Nasdaq Family and
two members from OptiMark. Each Party may re-designate its respective appointees
for the Project Coordinator and the Steering Committee as deemed appropriate in
its sole discretion.
7.2. MEETINGS. The Steering Committee shall meet, either in person or
by or a conference call, every two weeks until the end of the Development Phase
and at least quarterly thereafter to discuss the development, implementation and
operation of, and regulatory and other issues arising in connection with the
OptiMark Matching Module or
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the Nasdaq Application, as appropriate, (including their Specifications,
development, installation and acceptance, or operations). The Steering Committee
shall appoint one or more members to prepare an advanced agenda for each meeting
and shall record the minutes and action items for each meeting (in the absence
of such designation, OptiMark shall be responsible).
7.3. PROGRESS REPORT. After each meeting or conference call, the
appointed Steering Committee member(s) shall (and any other member may) prepare
a report (a "Progress Report") specifying in detail:
(a) any critical problem encountered, discovered, or continuing during
the preceding two week period or quarter, as the case may be, including, without
limitation, the failure of either Party in performing, any delay of either Party
in performing or the inadequate performance of either Party which may prevent or
tend to prevent completion of any task by the Milestone Dates set forth on
Schedule II;
(b) the estimated length of any project delay which may result from
any critical problem; and
(c) the specific steps taken or proposed to be taken by either or both
Parties, as appropriate, to remedy such critical problem.
SECTION 8. STAFFING AND TRAINING.
8.1. MUTUAL OBLIGATION TO PROVIDE INFORMATION. Each Party shall make
available to the other Party such information and personnel knowledgeable in its
operations as specified in the Specifications or agreed to by the Parties to
facilitate timely completion of a Party's obligations. The Parties shall staff
the project in accordance with the Specifications or as otherwise agreed to
hereafter.
8.2. TRAINING. (a) OptiMark shall provide all reasonable instruction
and training to enable Nasdaq (i) to understand the operations and functioning
of the OptiMark Matching Module and other OptiMark developed aspects of the
Nasdaq Application, (ii) to effectively work with OptiMark to develop the
Specifications during the Specifications Phase, (iii) to effectively develop the
portion of the Nasdaq Application for which Nasdaq is responsible, (iv) to
perform integration, stress and other tests on the Nasdaq Application, (v) to
ensure operability and compliance with the Specifications, (vi) to effectively
operate and maintain its portion of the Nasdaq Application, and (vii) to
effectively react to emergency situations.
(b) Nasdaq shall provide all reasonable instruction and training to
enable OptiMark (i) to understand the operations and functioning of Nasdaq's
Workstations and End-User requirements and other Nasdaq developed aspects of the
Nasdaq Application that are necessary for OptiMark to perform its obligations
under this Agreement, (ii) to effectively work with Nasdaq to develop the
Specifications during the Specification
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Phase, (iii) to effectively develop the components of the Nasdaq Application for
which OptiMark is responsible, (iv) to perform integration, stress and other
tests on the Nasdaq Application, (v) to ensure operability and compliance with
the Specifications, (vi) to effectively operate and maintain its portion of the
Nasdaq Application and (vii) to effectively react to emergency situations.
8.3. POLICIES. Each Party, while on the premises of the other Party,
shall obey, and instruct their employees, agents and contractors to obey all
security, access, safety and other designated policies, including drug and
sexual harassment policies and policies of landlords for the protection of the
other Party's facilities and employees and shall reassign any Person whom the
other Party objects to having on its premises for a bona fide business reason
and shall replace such Person unless such reassignment would violate applicable
law.
SECTION 9. FACILITIES
9.1. FACILITIES MANAGEMENT - DATA CENTER. The Parties agree that Nasdaq
shall provide the facilities management necessary to operate the Nasdaq
Application, as outlined in the Specifications. Nasdaq shall provide the Nasdaq
Data Center as the site used to build and house the production environment for
the OptiMark Matching Module and other relevant components of the Nasdaq
Application. Nasdaq shall make available at the Nasdaq Data Center capabilities,
managed operations, help desk and network infrastructure required for the
integration of the OptiMark Matching Module into the rest of the Nasdaq
Application as listed in the Specifications. OptiMark shall make available at
the Nasdaq Data Center capabilities for a help desk and software support.
OptiMark shall visually inspect the sites prior to Delivery, and shall notify
Nasdaq whether or not there are any noticeable deviations from the
Specifications. OptiMark shall have the right to enter the Nasdaq Data Center
and inspect and maintain the OptiMark portion of the Nasdaq Application housed
therein at all reasonable times.
9.2. EQUIPMENT. Each Party shall provide all requisite software,
hardware and other equipment assigned to it in the Specifications or as agreed
to by the Parties and shall be responsible for their maintenance thereafter.
With respect to hardware requirements, the Parties have already agreed that: (a)
OptiMark shall provide, at its own expense, the computer hardware and software
that OptiMark believes are necessary to meet the OptiMark Matching Module
Specifications, including Tandem Computers and DEC Alphas (or other hardware
make or type); and (b) Nasdaq shall contract with a vendor and provide at its
own expense the necessary circuits for any VPN End-Users.
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SECTION 10. REGULATORY MATTERS
10.1. REGULATORY APPROVALS. Promptly after the Effective Date, with the
cooperation and assistance of OptiMark, Nasdaq shall cause to be prepared and
cause a rule filing (the "Rule Filing") to be filed with the SEC (or other body
with regulatory or oversight jurisdiction over any part of the Nasdaq Family)
and use its Best Efforts to pursue approval of the Rule Filing by the SEC (or
other body with regulatory or oversight jurisdiction over any part of the Nasdaq
Family) ("Regulatory Approval"). OptiMark shall use its Best Efforts to support
the approval of the Rule Filing. The Rule Filing shall state, among other
things, that Members will be responsible, as a regulatory matter under the
Exchange Act, for all Profiles, orders and resulting transactions for their own
accounts or their customer's accounts and shall include, among other things, an
exculpation of the OptiMark Family in form and substance satisfactory to the
Parties in connection with any action taken by Nasdaq under Section 5.4 of this
Agreement. The Nasdaq Family shall submit the Rule Filing by the relevant
Critical Milestone Date, or such other date as the Parties shall agree. After
the Operational Commencement Date, if an obligation of a Party under the
Agreement requires SEC action or approval (or action or approval of other body
with regulatory or oversight jurisdiction over any part of the Nasdaq Family),
such Party is not obligated to perform that obligation until requisite
regulatory approval has been obtained.
10.2. COOPERATION. Nasdaq shall cooperate with OptiMark in connection
with OptiMark's regulatory requirements that are reasonably related to the
Nasdaq Application. If any portion of the OptiMark Family registers as a broker,
dealer, or self-regulatory organization in the United States (or the equivalent
of any of these overseas where there is a material adverse affect on The Nasdaq
Application or the Nasdaq Family) that is not required or mandated by a
governmental agency with regulatory oversight over any portion of the OptiMark
Family and applied for prior to the Operational Commencement Date shall be
grounds for Nasdaq, after ADR, to terminate this Agreement. If any portion of
the OptiMark Family registers as a broker, dealer, or self-regulatory
organization in the United States (or the equivalent of any of these overseas
where there is a material adverse affect on The Nasdaq Application or the Nasdaq
Family) that is required or mandated by a governmental agency with regulatory
oversight over any portion of the OptiMark Family and applied for prior to the
Operational Commencement Date shall be grounds for Nasdaq, after ADR, to
terminate this Agreement, but neither Party is entitled to invoke Section 18.4.
Any materially adverse change in regulatory status of any portion of the
OptiMark Family (e.g., registration as a broker, dealer, or self-regulatory
organization, or the equivalent of such status overseas) after the Operational
Commencement Date shall be treated under Section 10.5.2.
10.3. GOVERNMENT DEALINGS. The Parties shall cooperate with each other
(including the OptiMark Family and the Nasdaq Family) regarding all governmental
applications, reports, filings, audits, and formal and informal information
inquiries
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(including Automation Review Policies) that are reasonably related to the Nasdaq
Application.
10.4. REGULATORY REQUESTS. The Parties acknowledge and agree that
implementation of the Nasdaq Application is subject to Regulatory Approval in
advance and continued oversight by the SEC (or other body with regulatory or
oversight jurisdiction over any part of the Nasdaq Family) which may include
governmental audits, information requests, and other similar matters. Subject to
Section 10.5 below, the Parties agree to take whatever action may be reasonably
necessary to comply with all SEC (or other body with regulatory or oversight
jurisdiction over any part of the Nasdaq Family) regulations and requirements,
including, but not limited to, modifying the operation of the Nasdaq
Application.
10.5. COMMERCIAL PRACTICABILITY.
10.5.1. Anything herein to the contrary notwithstanding, prior to
the Operational Commencement Date, if any modification to the Final
Specifications (other than the modification contemplated under Section 1.7 of
this Agreement) is requested by the Nasdaq due to SEC action or inaction (or
action or inaction of other body with regulatory or oversight jurisdiction over
any part of the Nasdaq Family) that was not foreseeable by OptiMark on the
Effective Date and if such request is not commercially practicable, OptiMark may
refrain from making the requested modification. OptiMark shall notify Nasdaq in
writing along with a reasonably detailed description of the problem, the
anticipated impact of the problem, estimates of development and operation costs,
and any other information that is deemed material in the reasonable and good
faith judgment of Nasdaq. In the event the refraining from the obligation
substantially affects the value of the entire Nasdaq Application or makes
performance of the Agreement as a whole not commercially practicable, Nasdaq may
terminate the Agreement, and seek recovery under Section 18.4, but limited to $2
million.
10.5.2. After the Operational Commencement Date, if a Party
believes that any of its obligations under the Agreement are no longer
commercially practicable, whether due to SEC action or inaction (or action or
inaction of other body with regulatory or oversight jurisdiction over any part
of the Nasdaq Family), a modification or requested modification of the Nasdaq
Application, or any other reason (among other reasons, based on the
determination that it will not recover its allocated costs, plus a reasonable
return on such costs, in a reasonable time frame), such impracticability will be
raised as a Dispute under the ADR Provisions of the Agreement. A written notice
shall be presented to the other Party and shall include a reasonably detailed
description of the problem, the anticipated impact of the problem, (if
applicable) estimates of development and operation costs, and any other
information that is deemed material in the reasonable and good faith judgment of
the other Party. The Party giving notice may request a reasonably detailed
reply, including the other Party's anticipated impact of the problem, (if
applicable) estimates of development and operation costs, and any other
information that is deemed material in the reasonable and good faith judgment of
the notifying Party. In the event the
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refraining by a Party from the obligation substantially affects the value of the
entire Nasdaq Application or makes performance of the Agreement as a whole not
commercially practicable, the other Party may terminate the Agreement, the
Parties may refrain from such obligation, but neither Party may seek damages
against the other Party.
10.6. SECURITY. Nasdaq's security procedures are subject to regulatory
oversight of the SEC (or other body with regulatory or oversight jurisdiction
over any part of the Nasdaq Family). OptiMark shall develop and employ
reasonable system and other security procedures and systems respecting the
OptiMark portion of the Nasdaq Application for which it is responsible
(including the OptiMark Matching Module). Nasdaq shall develop and employ system
and other security procedures and systems respecting the Nasdaq portion of the
Nasdaq Application for which it is responsible, consistent with the system and
other security procedures that Nasdaq utilizes for other electronic trading
systems made available through the same Complex or as stated in the
Specifications. In addition, the Parties shall develop and employ reasonable
system and other security procedures and systems respecting the Nasdaq Data
Center where the OptiMark Matching Module will be housed, as provided in the
Specifications.
SECTION 11. OWNERSHIP AND LICENSES
11.1. OWNERSHIP. The development and implementation of the Nasdaq
Application shall not result in a joint venture or joint works of the Parties
(or their respective Affiliates). All software, systems and capabilities
required to operate the Nasdaq Application and all Intellectual Property rights
therein, shall remain the sole and exclusive property of the Party developing
them (or of their licensors and suppliers) regardless of any asserted
contribution of knowledge or information by the other Party, and unless
permitted by Sections 16.2 or 16.3, shall not be sold, revealed, disclosed or
otherwise communicated directly or indirectly, by the other Party to any Person
other than as set forth herein. It is expressly understood that no title to or
ownership of the property owned or being developed by either Party is hereby
transferred to the other Party. As to the Specifications, OptiMark shall own the
portion of the Specifications that deals with the OptiMark portion of the Nasdaq
Application or the OptiMark Technology and Nasdaq shall own the portion of the
Specifications that deals with the Nasdaq portion of the Nasdaq Application or
the Nasdaq Technology regardless of any asserted contribution of knowledge or
information by the other Party, and unless permitted by Sections 16.2 or 16.3,
shall not be sold, revealed, disclosed or otherwise communicated directly or
indirectly, by the other Party to any Person other than as set forth herein.
11.2. INTELLECTUAL PROPERTY. Nothing in the Agreement shall be deemed to
grant a Party the right to use the other Party's names, trade marks, service
marks, or other Intellectual Property rights without written consent unless
specifically provided herein.
11.3. LICENSES. Each Party agrees that it will grant, as to its portion
of the Nasdaq Application, any Intellectual Property or other rights, on a
non-exclusive basis, necessary for the Parties or other authorized Persons to
perform their obligations under
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this Agreement. Anything herein to the contrary notwithstanding, neither Party
shall be restricted (except for any use of Confidential Information subject to
the Confidential Information Exchange Agreement) in using ideas, concepts,
know-how, trade secrets and techniques that result from the development of the
Nasdaq Application and are related to network management and electronic
securities trading; provided, however, that such use does not infringe the valid
patents or copyrights of the disclosing Party.
11.4. ON-SITE VISITS. During the Specifications Phase, OptiMark shall
authorize a reasonable number of on-site visits by the Nasdaq staff at a time
and place agreed by the Parties to observe the operation and/or testing of the
PCX Application.
11.5. NASDAQ DUE DILIGENCE. OptiMark (unless it has already recently
done so) shall provide Nasdaq all documents and schedules (including recent
financial and income statements) provided or referenced at a recent significant
closing with investors (satisfactory to Nasdaq).
11.6 REMEDIAL ACTIONS. In the event that: (a) an Intellectual Property
or other Claim is asserted by a third party against a Party's (including the
OptiMark Family, the Nasdaq Family, and any other authorized Person) permitted
use of the Nasdaq Application or (b) a Party discovers the facts that are likely
to give rise to such Claim, the Party whose Intellectual Property or other right
is affected will use its Best Efforts to either: (i) obtain a license from the
third party for the Parties or authorized Persons to continue using the Nasdaq
Application and/or (ii) modify the Nasdaq Application to avoid such
infringement, and use its Best Efforts to complete such modifications. The
Parties agree that in event that the foregoing in the clauses (i) and (ii)
cannot be accomplished, then they will follow the provisions set forth in
Section 10.5.2, but must continue their indemnification obligations.
SECTION 12. END-USERS AND DESIGNATED BROKERS
12.1. END-USERS; DESIGNATED BROKERS. The Nasdaq Application shall be
available, subject to the Standard Agreements, to (i) Member End-Users which are
Nasdaq Workstation subscribers and, (ii) through Members to non-Member End-Users
such as institutional investors and other non-Member broker-dealers. Member
End-Users shall have access to the Nasdaq Application and shall accept
regulatory responsibility for all Profiles, orders and transactions resulting
from the Nasdaq Application in their own or customer accounts. Non-Member
End-Users shall be required to designate in advance one or more Members as
designated brokers ("Designated Brokers") who shall authorize their access to
the Nasdaq Application and accept regulatory responsibility for the Profiles,
orders and transactions of such non-Member submitted and resulting from the
Nasdaq Application. Consistent with NASD Rules on this matter, Designated
Brokers shall authorize OptiMark to handle on their behalf the Profiles, orders
and transactions of their non-Member customers and to report to Nasdaq's systems
the transactions and related information for clearing and settlement, on behalf
of the Designated Brokers and in their name.
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12.2. CONTRACTS. (a) Prior to the Operational Commencement Date, there
shall be at least one or more of the following standard agreements (the
"Standard Agreements"): (i) a User Agreement (a "User Agreement") between
OptiMark and each End-User; (ii) a Designated-Broker Consent Agreement (a
"Designated Broker Consent Agreement") between OptiMark and each Designated
Broker and (iii), if appropriate, a Supplemental Account Agreement (a
"Supplemental Account Agreement" between each non-Member End-User and each of
its Designated Broker(s). Any modification of a Standard Agreement shall be
considered a Standard Agreement.
(b) Nasdaq shall be provided with a reasonable prior opportunity to
review each Standard Agreement. Each appropriate Standard Agreement shall
include terms stipulating that (i) a Party (which as used throughout the
remainder of this paragraph (b) is meant to include any of the entire NASD
Family or the OptiMark Family) shall be responsible to an End-User for direct
loss or damage resulting from an order which is executed on terms different to
those specified in the Profile which the End-User submits if, and only to the
extent that, the loss or damage is a result of such Party's gross negligence or
willful misconduct and is evidenced by contemporaneous printouts provided by the
End-User and confirmed by such Party's own computer printouts; and that (ii) a
Party shall not be responsible for any such loss or damage incurred by an
End-User that could have been avoided or mitigated if the End-User had promptly
reported the error to the relevant control center and/or had traded out of the
error.
(c) If, after its review of a Standard Agreement, Nasdaq does not
believe that the terms of such agreements adequately address reasonable
commercial or regulatory requirements that are consistent with Nasdaq's duties
as a part of an SRO, Nasdaq shall communicate such concerns promptly to
OptiMark, and shall attempt to jointly develop terms that address such concerns.
If the Parties cannot agree to new terms for the Standard Agreements, the
Parties shall handle the matter through the ADR and Arbitration Provisions, and
OptiMark shall indemnify and hold the NASD Family harmless against any claim or
losses that occur during the pendency of the procedures and that were the
subject of Nasdaq's concerns. Nasdaq shall complete its initial review of the
version of Standard Agreement that exists on the Effective date and notify
OptiMark of any concerns by the SEC Rule Filing Critical Milestone Date.
12.3. PROCEEDINGS UNDER THE STANDARD AGREEMENTS. OptiMark agrees to
cooperate (at OptiMark's expense) with Nasdaq in any SEC or other regulatory or
government proceeding involving Nasdaq arising out of or related to the Standard
Agreements and, as reasonably necessary, OptiMark shall alter any of the
Standard Agreements (subject to Section 10.5) or revise enforcement thereof
(after which, OptiMark may invoke Section 10.5) in the same manner as Nasdaq
would be required to do in order to comply with any order or ruling issued in
any such proceeding.
12.4. TRADING LIMITS. The Parties shall develop and implement the
capability for Designated Brokers to establish and update trading authority
limits for each of their
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non-Member customers and to advise such customers that a specified percentage of
that limit has been reached.
SECTION 13. JOINT TRAINING AND EDUCATION EFFORTS. The Parties shall commit to
undertake joint training and educational efforts as follows:
(a) Trader Forums. The Parties shall conduct at least ten trader
forums around the United States to familiarize sell-side traders with the Nasdaq
Application and to help make the new facility widely understood and accessible,
using mutually agreed upon materials.
(b) OptiMark Institutes. The Parties shall co-sponsor one or more
OptiMark Institute presentations at such times as agreed to by the Parties.
(c) Firm Support. The Parties shall commit a support team to provide
individual firm support regarding use of the Nasdaq Application.
(d) WEB Information. OptiMark shall provide a tutorial on the Nasdaq
Application, subject to Nasdaq approval, which Nasdaq shall place on at least
one of its relevant web site(s).
(e) Customer Interaction. Nasdaq shall hold periodic meetings with
OptiMark to discuss and to coordinate training for End-Users related to the
Nasdaq Application.
(f) Advance Notice of Third Party Contacts. Nasdaq agrees to give
notice to OptiMark prior to the Nasdaq Family entering into any agreement with a
market outside the United States that would permit that market or its members
access to the Nasdaq Application. OptiMark agrees to give notice to Nasdaq prior
to the OptiMark Family entering into any agreement with any Person to give
access to or supply an OptiMark Family Complex that would permit that Person or
its members access to the ability to trade Nasdaq Securities.
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SECTION 14. FEES.
14.1 OVERVIEW. Nasdaq shall file a fee schedule with the SEC for the
Nasdaq Application and shall share such fees with OptiMark as agreed to by the
Parties. As of the Effective Date, the Parties agree that the standard fee for
execution of shares through the Nasdaq Application shall be $.01 per share,
provided that such fee shall be discounted as set forth in subsections 14.2,
14.3(a) and 14.4, below. Revenue from the standard and discounted fees shall be
apportioned between OptiMark and Nasdaq as described in subsections 14.2, 14.3,
and 14.4. Notwithstanding the apportionment described in such subsections,
Nasdaq agrees to the following temporary revenue sharing arrangement to assist
OptiMark in recovering its costs associated with its First Stage purchase of
Tandem Computers (or a substituted make or type) for the OptiMark Matching
Module. For executed orders as a result of Profiles described in subsection
14.3(a) and (b) below, Nasdaq shall share with OptiMark: (a) none of the Nasdaq
Service Fee for the first 10 million shares per day so executed; (b) 50% of the
Nasdaq Service Fee for the next 5 million shares per day so executed; and (c)
75% of the Nasdaq Service Fee for the next 10 million shares per day so executed
until such time that the total amount of extra revenue paid to OptiMark as a
result of this special revenue sharing arrangement reaches the Rebate Cap, at
which time the normal revenue sharing arrangement shall be followed.
14.2 EXECUTIONS FROM THE BBO. There shall be no fee shared with
OptiMark for executions of the first 30 million shares per day resulting from
matches with the BBO or the Nasdaq Quote Montage.
14.3. PROFILES AND ORDERS FROM NASDAQ WORKSTATIONS AND OTHER NETWORKS
(a) Discounted Fee Profiles - OptiMark Share of Revenue. Profiles that
are transmitted by Members through the EWN or VPN from the Nasdaq Workstation
and that are for 10,000 shares or less for Nasdaq's Largest Capitalized Stock,
and for 5,000 shares or less for all other Nasdaq Securities, which Profiles
result in trades that do not receive any Price Improvement in the OptiMark
Matching Module, shall be charged by Nasdaq, on behalf of OptiMark, at a rate of
$0.0025 per share traded.
(b) Other Profiles - OptiMark share of Revenue. Except as specified in
Section 14.3(a), all executions reported through the Nasdaq Application
(including trades by End-Users that are not NASD members or that use networks
other than those provided by Nasdaq to submit Profiles for participation in a
Call) shall be charged by Nasdaq, on behalf of OptiMark, at a rate of $0.009 per
share traded.
14.4. NASDAQ SERVICE FEE. Nasdaq shall have the right to charge as a fee
$0.001 per share traded or such other amount as agreed to by the Parties (the
"Nasdaq Service Fee") for all executions reported through the Nasdaq Application
(including trades by End-Users that are not NASD members or that use networks
other than those provided by Nasdaq to submit Profiles for participation in a
Call) as a means for Nasdaq to cover its
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operating and capital costs related to or arising from the Nasdaq Application.
The Nasdaq Service Fee shall be discounted for those trades referred to in
Section 14.3(a) at the same proportion as specified therein. In addition, if the
Parties agree to allow Profiles in listed securities to flow through the Nasdaq
Application or the Nasdaq Technology, Nasdaq may assess a reasonable amount of
service charge for permitting such Profiles in listed securities to be delivered
to other OptiMark applications. Where the Profile flows through an OptiMark
provided network or terminal program but does not use any of the Nasdaq
Technology to trade the listed securities, the above fee does not apply.
14.5 COMPETITIVE FEES. The Parties shall review fees under Sections
14.3 and 14.4 prior to the Operational Commencement Date and, periodically
thereafter determine whether such fees reflect competitive market conditions.
14.6. BILLING FOR NASDAQ APPLICATION. Nasdaq shall bill End-Users a
Nasdaq Application fee for all executions reported through the Nasdaq
Application (including trades by End-Users that are not NASD members or that use
networks other than those provided by Nasdaq to submit Profiles for
participation in a Call). Nasdaq shall use the same efforts to produce and
collect the Nasdaq Application fee that it uses to produce and collect the bills
for other trading services that it makes available. Upon payment of the bill,
Nasdaq shall within 30 Days remit the OptiMark fees to OptiMark. Partial payment
of a bill by an End User shall be split pro rata between the Parties.
14.7. MONITORING. The Parties agree that use of a discounted fee related
to the Nasdaq Application for Members could provide an incentive for certain
non-Member End-Users to direct Profiles to Members to obtain the discounted fee.
Nasdaq shall monitor trading to identify Members that may be using the EWN or
VPN strictly as a conduit to the OptiMark Matching Module to provide
institutional customers a reduced fee. Nasdaq shall use its best efforts to
cause to be filed rule filings that Nasdaq reasonably believes will help prevent
this activity and diligently work to obtain requisite regulatory approval of
such rule filings.
SECTION 15. REPRESENTATIONS AND WARRANTIES.
15.1. [LEFT BLANK].
15.2. EXCLUSION OF IMPLIED WARRANTIES. These warranties are exclusive
and expressly in lieu of all other warranties, express or implied, including any
warranty of merchantability or fitness for a particular purpose.
15.3. REPRESENTATIONS AND WARRANTIES OF OPTIMARK. OptiMark hereby
represents and warrants to Nasdaq as follows:
(a) Corporate Status. It is (i) a duly organized and validly existing
corporation in good standing under the laws of the jurisdiction of its
organization and has the corporate power and authority to own its property and
assets and to transact the
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business in which it is engaged and presently proposes to engage and (ii) has
duly qualified and is authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified except where the failure
to be so qualified would not have a Material Adverse Effect.
(b) Corporate Power and Authority. It has the corporate power and
authority to execute, deliver and carry out the terms and provisions of this
Agreement and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement.
(c) Authority. It has duly executed and delivered this Agreement and
this Agreement constitutes the legal, valid and binding obligation of OptiMark,
enforceable against OptiMark in accordance with its terms except to the extent
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
generally and by general equitable principles (regardless of whether the issue
of enforceability is considered in a proceeding in equity or at law).
(d) No Violation. Except as otherwise provided in subsection (e),
neither the execution, delivery and performance by OptiMark of this Agreement
nor compliance by OptiMark with the terms and provisions hereof (i) will
contravene any applicable provision of any law, statute, rule, regulation,
order, writ, injunction or decree of any court or governmental instrumentality,
(ii) will conflict or be inconsistent with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in the creation or imposition of (or the obligation to create or impose)
any lien upon any of the property or assets of OptiMark pursuant to the terms of
any material indenture, mortgage, deed of trust, agreement or other material
instrument to which OptiMark is a party or by which it or any of its property or
assets are bound or to which it may be subject or (iii) will violate any
provision of the certificate of incorporation or by-laws of OptiMark.
(e) Intellectual Property, etc. To the best of OptiMark's knowledge,
it owns or has sufficient right to use all of its material licenses and other
Intellectual Property and any other necessary rights, free from restrictions,
that are necessary for the operation of the Nasdaq Application under this
Agreement or could have a Material Adverse Effect.
(f) Compliance with Statutes. It is in compliance with all applicable
statutes, regulations, and orders of, and all applicable restrictions imposed by
all governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (other than Intellectual Property),
except such noncompliance as is not reasonably likely to, in the aggregate, have
a Material Adverse Effect.
(g) Ownership. It owns and possesses all rights and interests
necessary to enter into, and perform its obligations under, this Agreement and
has the right to grant to
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Nasdaq the rights set forth herein in OptiMark's Intellectual Property to the
Nasdaq Application.
15.4. REPRESENTATION AND WARRANTIES OF NASDAQ. Nasdaq hereby represents
and warrants to OptiMark that:
(a) Corporate Status. It is (i) a duly organized and validly existing
corporation in good standing under the laws of the jurisdiction of its
organization or formation and has the corporate power and authority to own its
property and assets and to transact the business in which it is engaged and
presently proposes to engage and (ii) has duly qualified and is authorized to do
business and is in good standing in all jurisdictions where it is required to be
so qualified except where the failure to be so qualified would not have a
Material Adverse Effect.
(b) Corporate Power and Authority. It has the corporate power and
authority to execute, deliver and carry out the terms and provisions of this
Agreement and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement.
(c) Authority. It has duly executed and delivered this Agreement and
this Agreement constitutes the legal, valid and binding obligation of Nasdaq
enforceable against Nasdaq in accordance with its terms except to the extent
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
generally and by general equitable principles (regardless of whether the issue
of enforceability is considered in a proceeding in equity or at law).
(d) No Violation. Except as otherwise provided in subsection (e),
neither the execution, delivery and performance by Nasdaq of this Agreement nor
compliance by Nasdaq with the terms and provisions hereof (i) will contravene
any applicable provision of any law, statute, rule, regulation, order, writ,
injunction or decree of any court or governmental instrumentality, (ii) will
conflict or be inconsistent with or result in any breach of any of the terms,
covenants, conditions or provisions of, or constitute a default under, or result
in the creation or imposition of (or the obligation to create or impose) any
lien upon any of the property or assets of Nasdaq pursuant to the terms of any
material indenture, mortgage, deed of trust, agreement or other material
instrument to which Nasdaq is a party or by which it or any of its property or
assets are bound or to which it may be subject or (iii) will violate any
provision of the certificate of incorporation or by-laws of Nasdaq.
(e) Intellectual Property, etc. To the best of Nasdaq's knowledge, it
owns or has sufficient right to use all of its material Intellectual Property,
licenses and other rights, free from restrictions, that are necessary for the
operation of the Nasdaq Application under this Agreement or that affects the
ability to effect and process a transaction resulting from a Call.
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(f) Compliance with Statutes. It is in compliance with all applicable
statutes, regulations, and orders of, and all applicable restrictions imposed by
all governmental bodies, domestic or foreign (other than Intellectual Property)
that affects the ability to effect and process a transaction resulting from a
Call
(g) Ownership. It owns and possesses all rights and interests
necessary to enter into, and perform its obligations under, this Agreement and
has the right to grant to OptiMark the rights set forth herein.
SECTION 16. CONFIDENTIAL INFORMATION.
16.1. CONFIDENTIALITY OF TRADING INFORMATION. The Parties and their
employees, agents, contractors and consultants shall at all times treat in
strictest confidence all information and data of whatsoever nature received from
the OptiMark Family, the Nasdaq Family, a broker or dealer, or End-Users in
connection with any Profiles or trades (including orders, trades, positions,
trade limits and other trading information) in the course of operating the
Nasdaq Application. The Parties shall comply with the confidentiality
obligations as set forth in the Standard Agreements. Nothing in this Agreement
or a Standard Agreement is intended to prevent the Parties (including the Nasdaq
Family) from disclosing or using such confidential information in its regulatory
capacity, where required by law or regulation, or pursuant to a request of a
regulatory body (such as NASD Regulation and other members of the Nasdaq Family,
the SEC, or other body with regulatory or oversight jurisdiction over a Party or
any part of the Nasdaq Family). OptiMark shall create and maintain an
appropriate audit trail and other regulatory information related to the Nasdaq
Application and shall provide the Nasdaq Family with access to such information
on the same basis as if OptiMark were a Member.
16.2. NON-CONFIDENTIAL INFORMATION. No Party shall be obligated
hereunder to maintain in confidence information that (i) was published or
otherwise available in the industry at the time of disclosure to that Person by
the other Party; (ii) became generally available in the industry, prior to that
Person's unauthorized use of disclosure, other than by breach of an agreement
with the other Party; (iii) was acquired by that Person from a third party who
did not acquire it under a confidential relationship directly or indirectly from
the other Party hereto; or (iv) was in that Person's possession prior to the
time it was disclosed to it by the other Party.
16.3. CONFIDENTIAL EXCHANGE INFORMATION AGREEMENT. The Parties hereby
agree that any proprietary and confidential information disclosed under this
Agreement by or under authorization of the OptiMark Family, or a broker or
dealer, to the Nasdaq Family or by or under authorization of the Nasdaq Family,
or a broker or dealer, to the OptiMark Family (including information relating to
any End-User) shall continue to be governed by the terms of that certain
Confidential Information Exchange Agreement (the "Exchange Agreement") made as
of November 12, 1997. The Parties hereby agree to amend the Exchange Agreement
as appropriate to ensure that the confidentiality
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provisions therein shall apply to all disclosures of proprietary and
confidential information made under this Agreement.
SECTION 17. DEFAULT.
An occurrence of any of the following specified events shall be a default
(each an "Event of Default") hereunder:
17.1. MATERIAL BREACH. Either Party shall breach any material provision
of this Agreement. Any representation or warranty made by OptiMark or Nasdaq in
this Agreement or in any deliverables hereunder shall prove to be untrue in any
material respect on the date as of which made or deemed made or becomes untrue
thereafter. In addition, an Event of Default hereunder also shall include (i) a
Party's failure to complete the tasks identified in Schedule II within the
specified time frame, resulting in the failure to meet a Critical Milestone Date
by more than 30 Days and (ii) a Party's failure to correct any malfunction,
defect or non-conformity in that Party's respective portion of the Nasdaq
Application (including the OptiMark Matching Module), resulting in the Nasdaq
Application's failure to materially function in accordance with the applicable
Specifications on more than three (3) occasions in a one-year period.
17.2. DUE DILIGENCE BY NASDAQ. The result of the due diligence by Nasdaq
under the Warrant Agreement shall show a Material Adverse Effect or a material
risk of inability of OptiMark to perform its obligations hereunder. Nasdaq shall
notify OptiMark of a breach of this provision within 60 Days of receiving the
applicable due diligence materials.
17.3. BANKRUPTCY AND INSOLVENCY. OptiMark or Nasdaq shall commence a
voluntary case concerning itself under Title 11 of the United States Code
entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto
(the "Bankruptcy Code"); or an involuntary case is commenced against OptiMark or
Nasdaq and the petition is not controverted within 10 Business Days, or is not
dismissed within 60 Days, after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of OptiMark or Nasdaq, as the case may be; or
OptiMark or Nasdaq commences any other proceeding under any reorganization
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to OptiMark or Nasdaq as the case may be, or there is commenced
against OptiMark or Nasdaq any such proceeding which remains undismissed for a
period of 60 Days; or OptiMark or Nasdaq is adjudicated insolvent or bankrupt;
or any order of relief or other order approving any such case or proceeding is
entered; or OptiMark or Nasdaq suffers any appointment of any custodian or the
like for it or any substantial part of its property to continue undischarged or
unstayed for a period of 60 Days; or OptiMark or Nasdaq makes a general
assignment for the benefit of creditors; or any corporate action is taken by
OptiMark or Nasdaq for the purpose of effecting any of the foregoing.
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17.4. CROSS DEFAULT. There shall occur a material breach of any
provision of, or a default under, the Warrant Agreement, which breach or default
is not properly cured or remedied in the time frame and manner set forth in the
Warrant Agreement.
SECTION 18. TERM AND TERMINATION.
18.1. TERM. The term of this Agreement shall commence on the Effective
Date and shall continue until Termination shall have occurred.
18.2. EVENTS OF TERMINATION. Except as expressly provided otherwise
herein, this Agreement shall terminate as follows (any such termination, an
"Event of Termination"):
(a) Default. Upon the occurrence of an Event of Default under Section
17.1-17.2, the non-defaulting Party may terminate this Agreement by providing 30
Days' prior written notice to the defaulting Party with the right to cure within
such period. In the case of a default under Section 4.3 (related to Nasdaq QC
Tests) or the remainder of Section 17, the written notice need not give a notice
period with a right to cure. Any such notice shall specify the nature of the
event or occurrence giving rise to such termination.
(b) Mutual Agreement. This Agreement may be terminated at any time
upon mutual agreement of the Parties in writing.
(c) Force Majeure. An event of Force Majeure shall have occurred and
the effect of such event shall be continuing for more than 10 Days and such
event shall continue for a period of 10 additional Days after the giving of
written notice thereof by either Party. If termination is sought by the Party
affected by the Force Majeure, it must exercise its Best Efforts to avoid the
effect of the Force Majeure for the entire 20 day period.
(d) Failure to Obtain Regulatory Approval. Nasdaq shall have failed to
receive Regulatory Approval by the Critical Milestone Date and such failure
shall continue for a period of at least 30 Days or such longer period as agreed
to by the Parties, after which period either Party may give written notice of
termination of the Agreement to the other Party.
(e) Persistent Low Trading Volumes. At any time after the Nasdaq
Application has been operating for a period of three years, and the gross
collected revenues under this Agreement shall be less than an average of
$500,000 per month over the preceding 12-month period, after which period either
Party may give 60 Days written notice of termination of the Agreement to the
other Party.
(f) Market Integrity Reasons. This Agreement may be terminated by
Nasdaq if an event or circumstance occurs under which the OptiMark Matching
Module or the Nasdaq Application as a whole threatens or Nasdaq reasonably
believes it threatens the
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effective and orderly operation of the Nasdaq Stock Market, and such threat
remains uncured for a period of at least 30 Days or such other period as the
Parties shall agree to, after which period Nasdaq may give written notice of
termination of the Agreement.
(g) OptiMark Change of Control. This Agreement may be terminated by
Nasdaq if a Change of Control shall have occurred in respect of OptiMark and
shall continue for a minimum period of 30 Days after written notice from Nasdaq,
after which period Nasdaq may give written notice of its intent to terminate the
Agreement.
(h) Nasdaq Change of Control. This Agreement may be terminated by
OptiMark if a Change of Control shall have occurred in respect of Nasdaq and
shall continue for a minimum period of 30 Days after written notice from
OptiMark, after which period OptiMark may give written notice of termination of
the Agreement.
18.3. PROPERTY OF THE PARTIES. Upon termination: (i) each Party shall
promptly return to the other Party all papers, materials and other properties of
the other held for purposes of this Agreement; and (ii) each Party shall assist
the other Party in the orderly termination of this Agreement so as to ensure, to
the greatest extent possible, for the orderly, non-disrupted shutdown of the
Nasdaq Application, subject to Section 19.
18.4. PRE-OPERATIONAL DAMAGES. If an Event of Termination shall occur
prior to the Operational Commencement Date as a result of an Event of Default
under Section 17, the defaulting Party shall pay, as the exclusive remedy, the
out-of-pocket expenses reasonably incurred by the non-defaulting Party in the
course of discharging its obligations under this Agreement, up to $5 million.
SECTION 19. NASDAQ'S RIGHTS UPON CERTAIN EVENTS OF TERMINATION. If an Event of
Termination shall occur after the Operational Commencement Date, in addition to
any damages or injunctive relief as may be awarded, Nasdaq shall have a license
to use the OptiMark portion of the Nasdaq Application and a license under
OptiMark's Intellectual Property of sufficient scope over the OptiMark
Technology (including the OptiMark Matching Module) to permit Nasdaq to operate,
support, and maintain the Nasdaq Application as a facility of the Nasdaq Market
until such time as Nasdaq is able in a commercially reasonable time frame to
receive any requisite permission from the SEC (and all other necessary bodies
with regulatory or oversight jurisdiction over any part of the Nasdaq Family) to
cease operation of the Nasdaq Application, provided that Nasdaq pays a
reasonable royalty to OptiMark. If the Parties cannot agree on a rate, the rate
shall be set in accordance with the ADR and Arbitration Provisions of this
Agreement. If the Event of Termination is not the result of an Event of Default
by OptiMark, Nasdaq shall use its Best Efforts to file and work to obtain any
requisite permission from the SEC (and other necessary bodies with regulatory or
oversight jurisdiction over any part of the Nasdaq Family) to cease operation of
the Nasdaq Application immediately thereafter; OptiMark shall use its Best
Efforts to support the approval of the Rule Filing.
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SECTION 20. INDEMNIFICATION
20.1. MUTUAL INDEMNITY. Each Party (the "Indemnifying Party") shall
indemnify the other Party and such other Party's respective Affiliates,
directors, officers, employees, contractors, and agents (each an "Indemnified
Party" and collectively the "Indemnified Parties") and hold them harmless from
and against any and all claims, causes of action, liabilities, damages and
related costs of investigation and enforcement (including reasonable attorney's
fees) ("Losses") incurred or suffered by any Indemnified Party arising out of:
(a) any material breach of the confidentiality provisions of this Agreement; (b)
any failure of any representation or warranty made by the Indemnifying Party
pursuant to this Agreement to be true and correct in any material respect on the
date made or deemed to be made or shall become untrue in any material respect at
any time thereafter; (c) injury or damage to any Person or tangible property; or
(d) any act or omission of gross negligence or willful tortuous misconduct of
the Indemnifying Party in performance of any of its duties hereunder. The
Parties agree that with respect to any Losses arising out of the clause (b) of
this subsection, the representations and warranties made under subsections
15.3(e) and 15.4(e) of this Agreement are made, and shall be deemed to be made,
only as of the Effective Date. The Parties further agree that with respect to
any Intellectual Property or other Claim by a third party based on the
Indemnified Party's permitted use of the Nasdaq Application, the Indemnifying
Party shall indemnify the Indemnified Party as set forth in the otherwise
applicable provisions of this Section 20.
20.2. INDEMNIFICATION PROCEDURE. (a) The Indemnified Party shall
promptly notify the Indemnifying Party of the existence of any claim, demand,
action, proceeding or other matter pursuant to this Agreement (the "Claim"),
setting forth in reasonable detail the facts and circumstances pertaining
thereto and the basis for the Indemnified Party's right to indemnification. Such
notification shall be given in accordance with Section 24.5 of this Agreement.
(b) If any third party shall assert any claim against any Indemnified
Party which may give rise to a Claim for indemnification against the
Indemnifying Party under this Agreement, (a "Third Party Claim") then the
Indemnified Party shall promptly notify the Indemnifying Party thereof;
provided, however, that no delay on the part of the Indemnified Party in
notifying the Indemnifying Party of any Third Party Claim shall relieve the
Indemnifying Party from any liability or obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is materially prejudiced by
such failure to give notice. In the event that any Indemnified Party shall give
notice to any Indemnifying Party of a Third Party Claim, the Indemnifying Party
may assume the defense thereof by giving notice to the Indemnified Party within
thirty (30) Days of receipt from the Indemnified Party of such Third Party Claim
in which case:
(i) the Indemnifying Party will defend the Indemnified Party against
such Third Party Claim with counsel of its choice reasonably satisfactory to the
Indemnified Party;
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(ii) the Indemnified Party may retain separate co-counsel at its sole
cost and expense to represent it in the defense of such Third Party Claim,
except that the Indemnifying Party will be responsible for the fees and expenses
of the separate co-counsel (a) to the extent the Indemnified Party concludes
reasonably based upon advice of counsel that a conflict of interest exists
between the Indemnified Party and Indemnifying Party or (b) the named parties to
any such Third Party Claim (including any impleaded parties) include both such
Indemnified Party and the Indemnifying Party and such Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to the Indemnified Party which are not available to the Indemnifying
Party, or available to the Indemnifying Party, but the assertion of which would
be adverse to the interest of the Indemnified Party;
(iii) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to such Third Party Claim
without the written consent of the Indemnifying Party (not to be withheld
unreasonably); and
(iv) the Indemnifying Part will not consent to the entry of any
judgment or enter into any settlement with respect to such Third Party Claim
which does not include a provision whereby the plaintiff or claimant in such
matter releases the Indemnified Party from all liability with respect thereto,
without the written consent of the Indemnified Party (not to be withheld
unreasonably).
(c) If no Indemnifying Party notifies the Indemnified Party within 30
Days after the Indemnified Party has given notice of such Third Party Claim that
such Indemnifying Party is assuming the defense thereof, then the Indemnified
Party may defend against, or enter into any settlement with respect to, such
matter in any manner it reasonably may deem appropriate, without prejudice to
any of its rights hereunder.
(d) The Indemnified Party shall be entitled to reimbursement of
reasonable expenses included in Losses with respect to any Third Party Claim
noticed to the Indemnifying Party in accordance herewith (including, without
limitation, the cost of defense, preparation and investigation relating to such
Claim) as such expenses are incurred by the Indemnified Party.
(e) Notwithstanding the foregoing, the Indemnifying Party shall not be
liable for any Losses to the extent (i) caused by the Indemnified Party's gross
negligence, willful tortious misconduct, or violation of laws or rules
applicable to the Nasdaq Application or (ii) that the Indemnified Party is not
required to pay any damages under a Third Party Claim due to the Indemnified
Party's mitigation efforts or regulatory rules, or any contract between the
Indemnified Party and the third party. Neither Party shall be entitled to
recover its own consequential damages against the other Party, except for
willful tortious misconduct, gross negligence, and injury to personal or
tangible property.
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SECTION 21. YEAR 2000/DECIMALIZATION COMPLIANCE.
(a) Nasdaq shall comply with its Year 2000 compliance program, and it
shall provide OptiMark with information concerning such program promptly upon
request. After the Operational Commencement Date, the Parties shall work
together to develop the capability for input, output, and processing of prices
to an appropriate number of decimal places as required by the SEC (or other body
with regulatory or oversight jurisdiction over any part of the Nasdaq Family).
(b) OptiMark shall provide all computer hardware and software systems
as required in connection with this Agreement or utilized by OptiMark to
discharge its obligations hereunder (including the OptiMark Matching Module)
that provide fault-free performance in the processing of dates and date related
data (including, but not limited to calculating, comparing and sequencing),
individually and in combination. Fault-free performance shall include the
manipulation of such data with dates prior to and through January 1, 2001, and
shall be transparent to Nasdaq and to End-Users ("Year 2000").
(c) In the event that Year 2000 errors are encountered, such error
shall be considered a critical error and OptiMark shall (i) respond within
twenty-four (24) hours with either a fix or a work around that corrects the
error; (ii) provide replacement software that corrects the error; or (iii)
provide a statement that the error is not being caused by OptiMark's hardware
and software systems.
SECTION 22. DISPUTE RESOLUTION.
22.1. ALTERNATIVE DISPUTE RESOLUTION. Any and all disputes,
controversies, claims, or differences arising out of, relating to, or having any
connection with this Agreement as well as any other question relating to its
existence, validity, interpretation, performance, or termination, any functional
methodology disputes, one Party getting behind on a milestone or likely to get
behind on milestones, or testing, reliability or other operational concerns
(collectively, "Disputes") shall first be attempted to be resolved by the
Project Coordinators. If the Project Coordinators are unable to resolve any such
Dispute, then either Party may include such subject matter on the agenda of the
next Steering Committee meeting. If the Steering Committee fails to resolve such
Dispute at such meeting, either Party may demand a consultation on the Dispute
between senior officers of both Parties. If, within 10 Days thereafter, the
Parties have not met or are still unable to resolve the matter, either Party may
give an mediation notice to the other Party. Non-binding mediation be
administered by the American Arbitration Association ("AAA"), and shall be
conducted in accordance with the Commercial Mediation Rules of the American
Arbitration Association, as such may be amended from time to time. The mediation
shall be held in New York City or such a place as the Parties to the Parties to
the mediation proceeding shall otherwise agree in writing. The procedures in
this sub-section shall be referred to as "ADR".
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22.2. ARBITRATION. (a) Except where a section of this Agreement provides
only for ADR, any and all Disputes (after having been dealt with in accordance
with the provisions of Subsection 22.1) shall be exclusively resolved by binding
arbitration, which shall be administered by the American Arbitration Association
("AAA"), and shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (the "Rules"), as such Rules may
be amended from time to time. The arbitration shall be held in New York City or
such a place as the Parties to the arbitration proceeding shall otherwise agree
in writing.
(b) Within 10 Days of receipt of the arbitration notice, the Parties
shall attempt in good faith to agree on a single neutral arbitrator, except
where the Parties agree that three arbitrators are needed given the relatively
large amount in controversy (generally expected to exceed $1,000,000.00) and the
complexity of the Dispute, in which case each Party shall select one person to
act as arbitrator and the two selected shall select a third arbitrator within 10
Days of their appointment. If the Parties do not agree on the number of
arbitrator(s) or do not agree on a single neutral arbitrator within the
specified time frame, the AAA shall use its normal procedures pursuant to the
Rules for selection of one or more arbitrators. The Parties agree that under all
circumstances, regardless of how many arbitrators are selected and who appoints
them, the selection of arbitrator(s) must be completed within 20 Days of receipt
of the arbitration notice.
(c) The decision or award of the arbitrator(s) shall be final, binding
and incontestable and may be used as a basis for judgment thereon in any
jurisdiction. The Parties hereby expressly agree to waive the right to appeal
(other than the grounds permitted under the Federal Arbitration Act) from the
decision of the arbitrator(s). Accordingly, there shall be no appeal to any
court or other authority (government or private) from the decision of the
arbitrator(s), and the Parties shall not dispute nor question the validity of
such decision or award before any regulatory or other authority in any
jurisdiction where enforcement action is taken by the Party in whose favor the
decision or award is rendered.
(d) The Parties shall cooperate with each other in causing the
arbitration to be held in as efficient and expeditious a manner as practicable
and in this connection to furnish such documents and make available such Persons
as the arbitrator(s) may request.
(e) The Parties have selected arbitration in order to expedite the
resolution of Disputes and to reduce the costs and burdens associated with
litigation. The Parties agree that the arbitrator(s) should take these concerns
into account when determining whether to authorize discovery and, if so, the
scope of permissible discovery and other hearing and pre-hearing procedures. The
arbitrator(s) shall render a written decision or an award within 90 Days after
the arbitration notice is provided, unless the Parties otherwise agree or the
arbitrator(s) makes a finding that a Party has carried the burden of showing
good cause for a longer period.
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(f) Without limiting any other remedies that may be available under
applicable law, the arbitrator(s) shall have no authority to award punitive
damages.
(g) Notwithstanding anything herein to the contrary, a Party may seek
a temporary restraining order or a preliminary injunction (including, without
limitation, to the extent available under the applicable law, a temporary
restraining order, preliminary injunction and/or pre- judgment attachment) from
any court of competent jurisdiction, without regard to any notice periods
required by the provisions of this Agreement (whether before, during or after
arbitration) and as often as is necessary or appropriate, in order to prevent
immediate and irreparable injury, loss, or damage to it or its Intellectual
Property on a provisional basis, pending the decision of the arbitrator(s) on
the ultimate merits of any Dispute.
(h) All proceedings and decisions of the arbitrator(s) shall be
maintained in confidence, to the extent legally permissible, and shall not be
made public by any party or any arbitrator(s) without the prior written consent
of all parties to the arbitration, except as may be required by law.
(i) Each Party shall bear its own costs and attorneys' fees, and the
Parties shall equally bear the fees, costs, and expenses of the arbitrator(s)
and the arbitration proceedings; provided, however, that the arbitrator(s) may
exercise discretion to award costs, but not attorneys' fees, to the prevailing
party.
(j) The commencement and pendency of an arbitration under this Section
shall not relieve any of the Parties of their respective obligations under this
Agreement. This sub-section shall not preclude a Party from suspending
performance of its obligations under this Agreement if otherwise permissible if
the matter has not been resolved within 30 Days after the date of the notice of
mediation under Section 22.1.
(k) The provisions set forth in this Subsection 22.2, shall be
referred to as "Arbitration." The Parties agree that the ADR and Arbitration
Provisions shall survive the termination and/or expiration of this Agreement.
SECTION 23. LITIGATION. A Party shall give prompt written notice to the other
Party if it knows of any pending or threatened actions, suits or proceedings or
of facts which would lead a reasonable person to believe that it would give rise
to such threats, with respect to: (1) OptiMark, that have, or are reasonably
likely to have: (i) a material and adverse affect on the Nasdaq Application,
(ii) a Material Adverse Effect or (iii) on the rights or remedies of Nasdaq or
on the ability of OptiMark to perform its obligations hereunder; (2) Nasdaq,
that have, or are reasonably likely to have: (i) a material and adverse affect
on the ability to effect and process a transaction resulting from a Call, (ii) a
Material Adverse Effect or (iii) on the rights or remedies of OptiMark or on the
ability of Nasdaq to perform its obligations hereunder. The existence of any of
the above may be treated as a Dispute by the other Party.
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SECTION 24. MISCELLANEOUS MATTERS
24.1. INTEGRATION CLAUSE. This Agreement shall be the sole agreement
between the Parties regarding its subject matter, and shall merge and supersede
all prior oral and written communications and all contemporaneous oral
communications between the Parties regarding the same except those specifically
referenced herein.
24.2. WAIVER/ESTOPPEL CLAUSE. No delay or failure of either Party in
exercising any right hereunder and no partial or single exercise thereof, shall
be deemed of itself to constitute a waiver of such right or any other rights
hereunder.
24.3. AMENDMENT, MODIFICATION AND WAIVER. This Agreement may be amended,
modified or supplemented only by written agreement of the Parties. Except as
noted otherwise in this Agreement, the Specifications attached hereto may be
amended, modified or supplemented in writing by agreement of the Project
Coordinators. Either Party hereto may waive compliance by the other Party with
any term or provision hereof only by an instrument in writing. The waiver by
either Party hereto of a breach of any term or provision of this Agreement shall
not be construed as a waiver of any subsequent breach.
24.4. SEVERABILITY. Any provisions of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate any other provision of
this Agreement in such jurisdiction or any other jurisdiction.
24.5. NOTICES. Any notice required to be in writing or notice of any
Dispute to be made hereunder shall be deemed to have been duly given upon actual
receipt by the person, or upon constructive receipt if sent by certified mail,
return receipt requested (at the earlier of the time the party signs the return
receipt or at the time of first refusal), or any other delivery method that
actually obtains a signed delivery receipt, when addressed to the person named
below to the following addresses or to such other address as any party hereto
shall hereafter specify by written notice to the other party or parties hereto:
To Nasdaq: The Nasdaq Stock Market, Inc.
Attention: Alfred R. Berkeley, III
1735 K Street, N.W.
Washington, D.C. 20006
Tel: (202) 728-8282
Fax: (202) 728-8075
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With a required copy to: Eugene A. Lopez, Esq.
The Nasdaq Stock Market, Inc.
1735 K Street, N.W.
Washington, D.C. 20006
Tel: (202) 728-6998
Fax: (202) 728-8106
To OptiMark: OptiMark Technologies, Inc.
Attention: Bill Lupien
530 Main Avenue
Durango, CO 81301
Tel: (970) 247-8800
Fax: (970) 247-8844
With a required copy to: John Katovich, Esq.
4347 Harbord Dr.
Oakland, CA 94618
Tel: (510) 594-2408
24.6. COMPLIANCE WITH LAWS. Each Party shall comply with the provision
of, and shall not cause the Nasdaq Application or the other Party (including any
of the Nasdaq Family or the OptiMark Family) to be in violation of, all
applicable foreign, federal, state, county and local laws, ordinances,
regulations, and codes including, but not limited to, each Party's obligations
as an employer with regard to the health, safety and payment of its employees,
and identification and procurement of required permits, certificates, approvals
and inspections in each Party's performance of this Agreement.
24.7. NO THIRD PARTY BENEFICIARIES. This Agreement shall inure to the
sole benefit of and be binding upon the Parties and their respective successors
and assigns. Nothing in this Agreement is intended or shall be construed to give
any other Person any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.
24.8. MUTUAL LIMITATION OF LIABILITIES. Neither Party shall be entitled
to recover, and there shall be exclusion of, lost profits, lost opportunity,
trading losses, and consequential damages against the other Party (including the
NASD Family and the OptiMark Family) except for willful tortious misconduct,
gross negligence, and injury to Person or tangible property.
24.9. ASSIGNMENT. Absent the prior written consent of the other Party,
neither Party shall assign or otherwise transfer to any Person any of its rights
or obligations under this Agreement, except as expressly provided in this
Section. Nasdaq may assign its rights and obligation under this Agreement to any
of the Nasdaq Family without OptiMark's consent, in which case, Nasdaq shall
remain jointly and severally liable to OptiMark. Similarly, OptiMark may assign
its rights and obligation under this
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Agreement to any of the OptiMark Family without Nasdaq's consent, in which case,
OptiMark shall remain jointly and severally liable to Nasdaq. Any attempted
assignment in violation of this Section, and any other assignment which may
otherwise arise by operation of law, shall be void.
24.10. GOVERNING LAW. This Agreement and the rights and obligations of
the Parties hereunder shall be construed in accordance with and be governed by
the law of the state of New York (without reference to the choice of law
provisions thereof). Subject to Section 22, any legal action or proceeding with
respect to this Agreement or may be brought exclusively in the courts of or for
the City of New York or of the United States for the Southern District of New
York, and, by execution and delivery of this Agreement, each Party hereby
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each Party hereby
further irrevocably waives any claim that any such courts lack jurisdiction over
such Party or that venue is not proper, and agrees not to plead or claim, in any
legal action or proceeding with respect to this Agreement brought in any of the
aforesaid courts, that any such court lacks jurisdiction over such Party or that
venue is not proper. Each Party irrevocably consents to the service of process
in any such action or proceeding by the mailing of copies thereof by written
notice. Each Party hereby irrevocably waives any objection to such service of
process and further irrevocably waives and agrees not to plead or claim in any
action or proceeding commenced hereunder that service of process was in any way
invalid or ineffective. Nothing herein shall affect the right of a Party to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the other Party in any other
jurisdiction.
24.11. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by the different Parties on separate counterparts, each of
which when so executed and delivered shall be an original, but all of which
together shall constitute but one and the same instrument. A complete set of
counterparts shall be lodged with each Party.
24.12. SUCCESSORS. Except as otherwise provided herein, this Agreement,
together with all schedules or modifications now and hereafter made a part
hereof, shall be binding upon, and inure to the benefit of the Parties and their
permitted successors and assigns.
24.13. HEADINGS. The headings of the various Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
SECTION 25. DEFINITIONS [Comment: we need to check the cross references later].
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"Affiliates" of any specified Person shall mean any other Person that
directly or indirectly controls, is controlled by, or is under common control
with such specified Person.
"Agreement" shall have the meaning set forth in the first paragraph
hereof.
"Automation Review Policies" shall mean the policies currently in effect
at the SEC regarding the SEC's review of self-regulatory organization's computer
capacity, security, contingency planning, and system audit procedures.
"Bankruptcy Code" shall have the meaning provided in Section 17.3.
"Best Efforts" means a standard of performance that involves more than
indifference to the other party's interests and requires more than a duty to
attempt to act with diligence to fulfill an obligation, but does not require a
party to disregard its own interests. Meeting a standard of best efforts may
require a party to incur losses to a reasonable extent for the benefit of the
other party and to exceed prevailing business practices, but does not require
the party to imperil its own existence or to make total efforts to fulfill the
obligation irrespective of all other considerations.
"Business Day" shall mean for all purposes any day excluding Saturday,
Sunday and any day on which the Nasdaq Stock Market is closed.
"Call" shall mean the central processing effected by the OptiMark
Matching Module in which Profiles are matched on a periodic basis according to
the algorithm software, resulting in orders of specified sizes and prices that
are capable of immediate execution.
"Change of Control" in respect to OptiMark shall mean: (a) William A.
Lupien shall cease to be the chairman of OptiMark prior to the third anniversary
of the Operational Commencement Date, except where it is caused by death,
incapacity or health impairment; (b) all or substantially all of OptiMark's
assets shall be transferred to an ECN or another securities exchange or
association or a statutorily disqualified person in connection with any merger
or acquisition; or (c) a change of control that creates, or is likely to create,
a material competitive disadvantage to Nasdaq. "Change of Control" in respect to
Nasdaq shall mean: (a) Nasdaq shall cease to be an Affiliate of NASD; (b) all or
substantially all of Nasdaq's assets shall be transferred to an ECN or another
securities exchange or association or a statutorily disqualified person in
connection with any merger or acquisition; or (c) a change of control that
creates, or is likely to create, a material competitive disadvantage to
OptiMark. Whether a Party experiences or is likely to experience a material
competitive disadvantage will be raised as a Dispute under the ADR and
Arbitration Provisions of this Agreement.
"Claim" shall have the meaning provided in Section 20.2.
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"Complex" means computer hardware, software, communications networks,
systems, and communications interfaces.
"Critical Milestone Dates" shall have the meaning provided in Section
2.2.
"Day" means a calendar day.
"Delivery" shall have the meaning provided in Section 4.2.
"Designated Broker Consent Agreement shall have the meaning provided in
Section 12.2.
"Designated Brokers" shall have the meaning provided in Section 12.1.
"Development Phase" should have the meaning provided in Section 3.
"ECN" shall mean an Electronic Communications Network that is linked to
Nasdaq's facilities under SEC Rule 11Ac1-1(c)(5)(ii) (known as the "ECN Display
Alternative" provision) of the Exchange Act.
"End-User" shall mean a Person using a Nasdaq Workstation or other
terminal linked to the OptiMark Matching Module (including persons linked by
means of an OptiMark provided network) who submits Profiles.
"Event of Default" shall have the meaning provided in Section 17.
"Event of Termination" shall have the meaning provided in Section 18.2.
"Exchange Act" shall have the meaning set forth in the first paragraph
hereof.
"Force Majeure" shall mean such events including but not limited to Acts
of God, strikes, lockouts, riots, acts of war, epidemics, fire, communication
line failure, power failures, earthquakes or other disasters, if such is found
to be beyond the control of the Party; provided, however, that an event of Force
Majeure shall not include an action or inaction of the SEC (or other
governmental body having jurisdiction over any member of the Nasdaq Family).
"Indemnified Party" shall have the meaning provided in Section 20.1.
"Indemnifying Party" shall have the meaning provided in Section 20.1.
"Installation and Acceptance Phase" shall have the meaning provided in
Section 4.1.
"Installation Schedule" shall have the meaning provided in Section 4.1.
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"Intellectual Property" shall mean domestic and foreign patents, patent
applications, registered and unregistered trade marks and service marks,
registered and unregistered copyrights, trade names, computer programs, data
bases, trade secrets, proprietary information and include all rights in
information created under laws governing patents, copyrights, mask works, trade
secrets, trademarks, publicity rights, or any other law that permits a person,
independently of contract, to control or preclude another person's use of the
information on the basis of the rights holder's interest in the information.
"Largest Capitalized Stock" shall mean Nasdaq's 1000 largest capitalized
stocks within the prior calendar quarter.
"Losses" shall have the meaning provided in Section 20.1.
"Material Adverse Effect" shall mean a material adverse effect on the
business, property, assets, liabilities, operations, condition (financial or
otherwise) or prospects of a Party taken as a whole.
"Member" shall mean a "member" of NASD within the meaning of Article I of
the By-Laws of the NASD.
"Milestone Dates" shall have the meaning provided in Section 2.2.
"NASD" shall have the meaning set forth in the first paragraph hereof.
"NASD Regulation" shall mean the subsidiary of the NASD with
responsibilities for regulation of NASD members.
"Nasdaq" shall have the meaning set forth in the first paragraph hereof.
"Nasdaq Application" shall have the meaning provided in Section 1.1.
"Nasdaq Data Center" shall mean Nasdaq's facility in Trumbull,
Connecticut or its successor(s) or replacement(s).
"Nasdaq Family" shall mean Nasdaq and its Affiliates, collectively.
"Nasdaq Letter" shall mean that certain letter, dated December 17, 1997,
from Richard G. Ketchum and Alfred R. Berkeley to William A. Lupien regarding
the exclusivity obligations of Nasdaq and OptiMark to each other.
"Nasdaq Stock Market" shall have the meaning provided in Section 1.1.
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"Nasdaq Quote Montage" shall mean the quotes, including orders and other
items which, pursuant to NASD Rules, are displayed with quotes in the Nasdaq
Workstation. A "Quote" shall mean an individual item within the Nasdaq Quote
Montage.
"Nasdaq Securities" shall mean all securities listed on the Nasdaq Stock
Market.
"Nasdaq Service Fee" shall have the meaning provided in Section 14.4.
"Nasdaq Workstation" shall have the meaning provided in Section 1.4.
"Nasdaq Workstation Presentation Device" shall mean a Nasdaq Workstation
Authorized Device (as that term is defined in the Nasdaq Workstation II
Subscriber Agreement or its successor(s)) which is a personal computer intended
for use by a single human End User.
"Operational Phase" shall have the meaning provided in Section 5.1.
"Operational Commencement Date" shall have the meaning provided in
Section 5.1.
"OptiMark Family" shall mean OptiMark and its Affiliates, collectively.
"OptiMark Institutes" shall mean the training sessions operated by
OptiMark personnel for the purpose of explaining to End-Users and broker-dealers
the operation of the OptiMark Matching Module as it works in the Nasdaq
Application.
"OptiMark Matching Module" shall have the meaning provided in Section
1.1.
"Parties" shall have the meaning provided in the first paragraph hereof.
"Person" shall mean a natural person, corporation, partnership, limited
liability company, association or other governmental or non-governmental entity.
"Phase" shall mean each of the Specification Phase, Development Phase,
Installation and Acceptance Phase and Operational Phase.
"Price Improvement" shall occur whenever a Profile submitted by an
End-User results in an execution at a price that is superior by at least one
standard Nasdaq price increment compared to the most aggressive price specified
in the Profile for the size of that trade. If the Nasdaq Stock Market shall
permit decimalization of prices in the future, the Parties shall agree on a
revised definition of Price Improvement at that time.
"Profiles" shall mean the expression of trading interest in the form of a
satisfaction profile that shows an End User's degree of satisfaction (expressed
as a number between zero and one) to trade at each coordinate of a grid showing
price and
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size. In the case of the Nasdaq Application, such Profiles may be directly
entered by End Users through Terminal Programs or created by the OptiMark
Matching Module to reflect the BBO.
"Progress Report" shall have the meaning provided in Section 7.3.
"Project Coordinator" shall have the meaning provided in Section 7.1.
"Rebate Cap" shall mean the maximum amount of the Nasdaq Service Fee that
Nasdaq shall agree to share with OptiMark under Section 14.1 of this Agreement
to assist OptiMark in recovering its costs associated with its First Stage
purchase of Tandem Computers (or a substituted make or type) for the OptiMark
Matching Module. The Rebate Cap shall be equal to $1.1 million. If OptiMark
orders the Tandem Computers listed in August 27, 1998 memorandum and attached
quote no. 125994-69 within 30 days of the Effective Date, and the Tandem price
has changed, the Parties will adjust the Rebate Cap upward or downward by up to
$500,000.
"Regulatory Approval" shall have the meaning provided in Section 10.1.
"SEC" shall have the meaning provided in the first paragraph hereof.
"Specifications" shall have the meaning provided in Section 2.1.
"Specifications Phase" shall have the meaning provided in Section 2.1.
"Standard Agreements" shall have the meaning provided in Section 12.2.
"Steering Committee" shall have the meaning provided in Section 7.1.
"Supplemental Account Agreement" shall have the meaning provided in
Section 12.2.
"Tandem Computers" shall mean those computers identified in the
Specifications.
"Terminal Programs" shall mean the Internet browser-like application at a
desktop used to enter Profiles.
"Third Party Claim" shall have the meaning provided in Section 20.2(b).
"Time Bombs" shall mean code, which is not described in the documentation
or Specification, the purpose of which is to halt effective operation or use of
the system by a Person other than the Party operating the system when triggered
by certain events or to detect non-compliance with law, its license, or the
terms of this Agreement.
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"Trap Door" shall mean the computer software that includes a means by
which an unauthorized user may circumvent the security protections of the system
or gain access without authorization of the party operating the system.
"User Agreement" shall have the meaning provided in Section 12.2.
"Virus" shall mean a code imbedded in the system, the purpose of which to
halt effective operation or use of the system when triggered by certain event or
upon use by a Person other than the Party operating the system.
"Warrant Agreement" shall have the meaning provided in the third WHEREAS
clause hereof.
"Warrants" shall have meaning provided in the Warrant Agreement.
"Year 2000" shall have the meaning provided in Section 21(b).
IN WITNESS WHEREOF, the Parties agree to be bound by the
foregoing.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
<S> <C>
- ------------------------------------ FOR PUBLICLY TRADED COMPANIES. Nasdaq and its
affiliates (Corporations) have an internal policy of
By: /s/ William A. Lupien monitoring or restricting trading by certain of its
- ------------------------------------ employees in publicly traded stocks where the
Name: granting, renewal, or termination of the agreement
William A. Lupien is considered by the publicly traded company to be
a "significant" event (one that could affect the
- ------------------------------------ price of your company's stock or require a public
Title: announcement). WHILE THE CORPORATIONS OFFER
Chairman & CEO NO REPRESENTATION OR WARRANTY ABOUT THE ENFORCEMENT
- ------------------------------------ OF ITS POLICY OR THE SECURITIES ACTIVITIES OF ANYONE
AUTHORIZED OFFICER ASSOCIATED WITH THE CORPORATIONS, if your company
Date: 9-1-98 believes its contracts with the Corporations may
be "significant", please initial here _________.
- --------------------------------------------------------------------------------------------------
Executed this 1st day of September, 1998,
for and on behalf of:
The Nasdaq Stock Market, Inc. (Nasdaq)
By: /s/ J. Patrick Campbell
- ------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
Name:
J. Patrick Campbell
- ------------------------------------
Title:
Chief Operating Officer
- ------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
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SCHEDULE I
SPECIFICATIONS
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SCHEDULE II
CRITICAL MILESTONE DATES
Critical Milestone Dates (including responsible Party)
Mutual--Final Specifications--November 1, 1998
Nasdaq--Filing of SEC Rules--November 9, 1998
Neither Party--Approval by SEC (and other approval necessary from body
with regulatory or oversight jurisdiction over any part of the Nasdaq
Family) March 1, 1999
OptiMark--Delivery of final version of OptiMark Matching Module to Nasdaq
QC--March 1, 1999
Nasdaq as to its portion of the Nasdaq Application and OptiMark as to its
portion of the Nasdaq Application --Delivery by each Party of final
version of its portion of Nasdaq Application to Nasdaq QC--April 1, 1999
Nasdaq--Commencement of VPN Rollout -April 30, 1999
Nasdaq--Completion of the Nasdaq QC Test--July 19, 1999
OptiMark--Passing the Nasdaq QC Test--July 19, 1999
Nasdaq--Operational Commencement Date--August 2, 1999
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EXHIBIT 10.5
OPTIMARK TECHNOLOGIES, INC.
1999 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are (i) to
attract and retain the best available personnel, (ii) to provide additional
incentive to Employees, Directors and Consultants, and (iii) to promote the
success of the Company's business. Options granted under the Plan may be
Incentive Stock Options or Nonstatutory Stock Options, as determined by the
Administrator at the time of grant. In addition, Stock Purchase Rights and
Common Stock Equivalents may also be granted or awarded under the Plan.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Awards are, or will be, granted under
the Plan.
(c) "Award" means an award of Options, Stock Purchase Rights or
Common Stock Equivalents pursuant to the terms of the Plan.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means (i) any act of personal dishonesty taken by
the Optionee in connection with Optionee's responsibilities with the Company and
intended to result in substantial personal enrichment of the Optionee, (ii)
Optionee's conviction of or plea of nolo contendere to a felony, (iii) a willful
act by the Optionee which constitutes gross misconduct and which is injurious to
the successor corporation, and (iv) following delivery to the Optionee of a
written demand for performance from the successor corporation which describes
the basis for the successor corporation's belief that the Optionee has not
substantially performed his duties, continued violations by the Optionee of the
Optionee's obligations to the successor corporation which are demonstrably
willful and deliberate on the Optionee's part.
(f) "Change of Control" means the occurrence of any of the
following events:
(i) Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the total voting power
represented by the Company's then outstanding voting securities; or
(ii) A change in the composition of the Board occurring
within a two (2)-year period, as a result of which fewer than a majority of the
Directors are Incumbent Directors; or
<PAGE> 2
(iii) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or its parent)
more than fifty percent (50%) of the total voting power represented by the
voting securities of the Company or such surviving entity or parent outstanding
immediately after such merger or consolidation; or
(iv) The consummation of the sale or disposition by the
Company of all or substantially all of the Company's assets to an acquiror,
where immediately after such sale, the stockholders of the Company immediately
prior to such sale (other than any corporation or other person controlling,
controlled by or under common control with the acquiror) own, directly or
indirectly, in the aggregate, voting securities of the acquiror having less than
a majority of the voting power of the issued and outstanding voting securities
of the acquiror.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 of the Plan.
(i) "Common Stock" means the common stock of the Company.
(j) "Common Stock Equivalent" means an unfunded and unsecured
right to receive Shares in the future that may be granted to a Service Provider
pursuant to Section 12.
(k) "Common Stock Equivalent Agreement" means a written
agreement between the Company and a Service Provider evidencing the terms and
conditions of an individual Common Stock Equivalent grant.
(l) "Company" means OptiMark Technologies, Inc., a Delaware
corporation.
(m) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services to such
entity.
(n) "Director" means a member of the Board.
(o) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(p) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, then three (3)
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<PAGE> 3
months following the 91st day of such leave any Incentive Stock Option held by
the Optionee shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(q) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(r) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system on
the day of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the day of determination, as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(s) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(t) "Incumbent Directors" shall mean Directors who either (i)
are Directors as of September 21, 1998, or (ii) are elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of Directors to the
Company)
(u) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(v) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement and
Restricted Stock Purchase Agreement.
(w) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
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<PAGE> 4
(x) "Option" means a stock option granted pursuant to the Plan.
(y) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan and the Notice of Grant.
(z) "Optioned Stock" means the Common Stock subject to an
Option or Stock Purchase Right.
(aa) "Optionee" means the holder of an outstanding Award granted
under the Plan.
(bb) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(cc) "Plan" means this 1999 Stock Plan.
(dd) "Predecessor Plan " means the Company's Stock Option Plan,
as amended, in effect immediately prior to the effective date of this Plan.
(ee) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(ff) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(gg) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(hh) "Section 16(b)" means Section 16(b) of the Exchange Act.
(ii) "Service Provider" means an Employee, Director or
Consultant. In accordance with Section 4(b)(ii), a Service Provider shall not be
entitled to Awards under this Plan solely by reason of being an Employee,
Director or Consultant.
(jj) "Share" means a share of Common Stock, as adjusted in
accordance with Section 14 of the Plan.
(kk) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ll) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
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3. Stock Subject to the Plan.
(a) Subject to the provisions of Section 14 of the Plan, the
maximum aggregate number of Shares authorized for issuance under the Plan is
14,669,224 Shares, which consists of (i) 8,669,224 Shares available for future
issuance under the Predecessor Plan, including Shares subject to outstanding
options granted under the Predecessor Plan, as of the effective date of this
Plan, and (ii) an additional increase of 6,000,000 Shares. The Shares may be
authorized, but unissued, or reacquired Common Stock.
(b) For purposes of determining the number of Shares available
for issuance under this Plan, Shares subject to options granted under the
Predecessor Plan and included in Section 3(a)(i) above, shall be treated as
Shares subject to an Option granted under this Plan. Shares that are issued upon
the exercise of options granted under the Predecessor Plan that are included in
Section 3(a)(i) above shall reduce the number of Shares that are available for
issuance under this Plan; however, such Shares shall be governed by the terms of
the Predecessor Plan and the agreement evidencing such option and Shares. If an
Award expires or becomes unexercisable without having been exercised or
converted in full, the unpurchased or unissued Shares which were subject thereto
shall become available for future issuance under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Stock Purchase Right or
conversion of a Common Stock Equivalent, shall not be returned to the Plan and
shall not become available for future issuance under the Plan, except that if
Shares of Restricted Stock are repurchased by the Company at their original
purchase price, such Shares shall become available for future award under the
Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of Service
Providers.
(ii) Section 162(m). To qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To qualify transactions hereunder as
exempt under Rule 16b-3, the transactions shall be structured to satisfy the
requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above,
the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
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<PAGE> 6
(b) Powers of the Administrator. Subject to the provisions of
the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Awards may
be granted hereunder;
(iii) to determine the number of Shares to be covered by
each Award granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Award granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options or Stock Purchase Rights may be exercised (which may
be based on performance criteria), the time or times when Common Stock
Equivalents may be converted to Shares, any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Awards
or the Shares relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vi) to construe and interpret the terms of the Plan and
Awards granted pursuant to the Plan;
(vii) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred treatment
under foreign laws;
(viii) to modify or amend each Award (subject to Section
16(c) of the Plan), including (without limitation) the discretionary authority
to extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(ix) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right or upon the conversion
of a Common Stock Equivalent that number of Shares having a Fair Market Value
equal to (or less than) the minimum amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;
(x) to authorize any person to execute on behalf of the
Company any instrument required to effect an Award previously granted by the
Administrator; and
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<PAGE> 7
(xi) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Awards.
5. Eligibility. Nonstatutory Stock Options, Stock Purchase Rights and
Common Stock Equivalents may be granted to Service Providers. Incentive Stock
Options may be granted only to Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Award shall confer upon an
Optionee any right with respect to continuing the Optionee's relationship as a
Service Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without Cause.
7. Term of Plan. Subject to Section 20 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 16 of the Plan.
8. Term of Option. The term of each Option shall be stated in the
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the Option Agreement. Moreover, in the case of an Incentive Stock Option granted
to an Optionee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
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<PAGE> 8
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a Service Provider who, at the
time of grant of such Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any other Service Provider, the
per Share exercise price shall be no less than 85% of the Fair Market Value per
Share on the date of grant. However, the per Share exercise price of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine
the acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the Administrator
shall determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(iv) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;
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<PAGE> 9
(v) a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vi) any combination of the foregoing methods of payment;
or
(vii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.
Notwithstanding any of the forgoing, the Administrator may permit an
Option to be exercised by delivery of a full-recourse promissory note secured by
the purchased Shares. All other terms of such promissory note shall be
determined by the Administrator in its sole discretion.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Except in the case of Options granted to
Officers, Directors and Consultants, Options shall become exercisable at a rate
of no less than 20% per year over five (5) years from the date the Options are
granted. Unless the Administrator provides in writing otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of absence. An
Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 14 of the Plan.
Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's
Disability or death, the Optionee may exercise his or her Option within such
period of time as is specified in the Option Agreement of at least thirty (30)
days to the extent that the Option is vested on the date of termination (but in
no event later than
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<PAGE> 10
the expiration of the term of such Option as set forth in the Option Agreement).
In the absence of a specified time in the Option Agreement, the Option shall
remain exercisable for thirty (30) days following the Optionee's termination.
If, on the date of termination, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his or
her Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option Agreement of at least six (6) months to the extent the Option is vested
on the date of termination (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement). In the absence of a
specified time in the Option Agreement, the Option shall remain exercisable for
one (1) year following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement of at least six (6) months (but in no event later than
the expiration of the term of such Option as set forth in the Notice of Grant),
by the Optionee's designated beneficiary, provided such beneficiary has been
designated prior to Optionee's death in a form acceptable by the Administrator.
If no such beneficiary has been designated by the Optionee, then such Option may
be exercised by the personal representative of the Optionee's estate or by the
person or persons to whom the Option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution. In the absence
of a specified time in the Option Agreement, the Option shall remain exercisable
for six (6) months following the Optionee's termination. If, at the time of
death, the Optionee is not vested as to his or her entire Option, the Shares
covered by the unvested portion of the Option shall immediately revert to the
Plan. If the Option is not so exercised within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.
(e) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other Awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically, by means of a Notice of Grant,
of the terms, conditions and restrictions related to the offer, including the
number of Shares that the offeree shall be entitled to purchase, the price to be
paid, and the time within which the offeree must accept
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<PAGE> 11
such offer. The terms of the offer shall comply in all respects with Section
260.140.42 of Title 10 of the California Code of Regulations. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including Disability or
death). The purchase price for Shares repurchased pursuant to the Restricted
Stock Purchase Agreement shall be the original price paid by the purchaser and
may be paid by cancellation of any indebtedness of the purchaser to the Company.
The repurchase option shall lapse at a rate determined by the Administrator.
Except with respect to Shares purchased by Officers, Directors and Consultants,
the repurchase option shall in on case lapse at a rate of less than 20% per year
over five (5) years from the date of purchase.
(c) Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 14
of the Plan.
12. Common Stock Equivalents.
(a) Award of Common Stock Equivalents. Common Stock Equivalents
may be awarded to Service Providers either alone, in addition to, or in tandem
with other awards granted under the Plan and/or cash awards made outside of the
Plan. An Award of Common Stock Equivalents shall be made pursuant to a Common
Stock Equivalent Agreement in such form as is determined by the Administrator.
(b) Bookkeeping Accounts; Nontransferability. The number of
Common Stock Equivalents awarded pursuant to Section 12(a) to each Service
Provider shall be credited to a bookkeeping account established in the name of
the Service Provider. The Company's obligation with respect to such Common Stock
Equivalents shall not be funded or secured in any manner. A Service Provider's
right to receive Common Stock Equivalents may not be assigned or transferred,
voluntarily or involuntarily, except as expressly provided herein.
(c) Dividends. If the Company pays a cash dividend with respect
to the Shares at any time while Common Stock Equivalents are credited to a
Service Provider's account, there shall be credited to the Service Provider's
account additional Common Stock Equivalents equal to (a) the dollar amount of
the cash dividend the Service Provider would have received had he or she been
the actual owner of the Shares to which the Common Stock Equivalents then
credited to the Service Provider's account relate, divided by (b) the Fair
Market Value of one Share of the dividend
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<PAGE> 12
payment date. The Company will pay the Service Provider a cash payment in lieu
of fractional Common Stock Equivalents on the date of such dividend payment.
(d) Conversion. The Company shall deliver to the Service
Provider (or his or her designated beneficiary or estate) a number of Shares
equal to the whole number of Common Stock Equivalents then credited to the
Service Provider's account, at such time or times as specified in the Service
Provider's Common Stock Equivalent Agreement, or as otherwise provided herein.
(e) Stockholder Rights. A Service Provider (or his or her
designated beneficiary or estate) shall not be entitled to any voting or other
stockholder rights as a result of the credit of Common Stock Equivalents to the
Service Provider's account, until certificates representing Shares are delivered
to the Service Provider (or his or her designated beneficiary or estate) upon
conversion of the Service Provider's Common Stock Equivalents pursuant to
Section 12(d).
13. Non-Transferability of Awards. Unless determined otherwise by the
Administrator, an Award may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Award
transferable, such Award shall contain such additional terms and conditions as
the Administrator deems appropriate and shall comply with Section 260.140.41 of
Title 10 of the California Code of Regulations.
14. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action
by the stockholders of the Company, the number of Shares covered by each
outstanding Award, the number of Common Stock Equivalents credited to a Service
Provider's account under Section 12(b), and the number of Shares which have been
authorized for issuance under the Plan but as to which no Awards have yet been
granted or which have been returned to the Plan upon cancellation, forfeiture or
expiration of an Award, as well as the price per Share covered by each such
outstanding Award, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued Shares effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of Shares subject to an Award.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator may, in its discretion, provide: (i) for an
Optionee to have the right to exercise his or her Option until fifteen (15) days
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prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be exercisable, (ii)
that any Company repurchase option applicable to any Shares purchased upon
exercise of an Option or Stock Purchase Right shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated; and (iii) that any Common Stock Equivalents credited to
a Service Provider's account under Section 12 (b) shall convert into Shares (as
provided in Section 12(d)) immediately prior to the consummation of any such
dissolution or liquidation. To the extent it has not been previously exercised
or converted, an Award will terminate immediately prior to the consummation of
such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Award shall be assumed or an
equivalent award substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute such Awards: (i) each Optionee shall
fully vest in and have the right to exercise the Option or Stock Purchase Right
as to all of the Optioned Stock, including Shares as to which it would not
otherwise be vested or exercisable; (ii) any Company repurchase option
applicable to any Shares acquired upon exercise of an Option or Stock Purchase
Right shall lapse as to all such Shares; and (iii) Common Stock Equivalents
credited to a Service Provider's account under Section 12(b) shall convert into
Shares (as provided in Section 12(d)) immediately prior to the merger or sale of
assets. If an Option or Stock Purchase Right becomes fully vested and
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee in writing or
electronically that the Option or Stock Purchase Right shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option or Stock Purchase Right shall terminate upon the expiration of such
period. If a Common Stock Equivalent converts to Shares in such event, the
Administrator shall notify the Optionee at least fifteen (15) days prior to the
consummation of the proposed transaction. For the purposes of this paragraph, an
Award shall be considered assumed if, following the merger or sale of assets,
the award confers the right to purchase or receive, for each Share of Optioned
Stock subject to an Option or Stock Purchase Right or for each Common Stock
Equivalent immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger or
sale of assets by holders of Common Stock for each Share held on the effective
date of the transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger or
sale of assets is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of an Option or
Stock Purchase Right, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right or upon conversion of each Common Stock Equivalent, to be
solely common stock of the successor corporation or its Parent equal in fair
market value to the per share consideration received by holders of Common Stock
in the merger or sale of assets.
(d) Termination without Cause Following Change of Control. In
the event of a Change of Control, if an Optionee is terminated by the Company
(or the successor entity) without Cause within one (1) year following such
Change of Control, Optionee shall fully vest in and have
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<PAGE> 14
the right to exercise his or her Option or Stock Purchase Right as to all of the
Shares subject to each such Option or Stock Purchase Right and any of Optionee's
Common Stock Equivalents shall automatically convert into Shares (as provided in
Section 12(d)), including Shares as to which such Award would not otherwise be
vested, exercisable or convertible.
15. Date of Grant. The date of grant of an Award shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Award, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
16. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Awards
granted under the Plan prior to the date of such termination.
17. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to
the exercise or conversion of an Award unless the exercise or conversion of such
Award and the issuance and delivery of such Shares shall comply with Applicable
Laws and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
(b) Investment Representations. As a condition to the exercise
or conversion of an Award, the Company may require the person exercising or
converting such Award to represent and warrant at the time of any such exercise
or conversion that the Shares are being purchased or issued only for investment
and without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
18. Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
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<PAGE> 15
19. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
20. Stockholder Approval. The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
21. Information to Optionees and Purchasers. The Company shall provide
to each Optionee and to each individual who acquires Shares pursuant to the
Plan, not less frequently than annually during the period such Optionee or
purchaser has one or more Options or Stock Purchase Rights outstanding, and, in
the case of an individual who acquires Shares pursuant to the Plan, during the
period such individual owns such Shares, copies of annual financial statements.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.
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<PAGE> 1
EXHIBIT 10.6
STOCK OPTION PLAN
(AMENDED AND RESTATED AS OF JANUARY 27, 1999)
OptiMark Technologies, Inc., organized and existing under the laws of
the State of Delaware (hereinafter called "OptiMark"), and successor to MJT
Holdings, Inc., a California Corporation, hereby adopts the MJT Holdings, Inc.,
Incentive Stock Option Plan for certain of its officers and key employees, and
for certain officers and key employees of its subsidiaries, as follows:
1. PURPOSE OF THE PLAN.
This Stock Option Plan (hereinafter called the "Plan") for
OptiMark is intended to advance the interests of OptiMark by providing officers
and other key employees of OptiMark and its subsidiaries with additional
incentive for them to promote the success of the business, to have an
opportunity to acquire a proprietary interest in the business, and to encourage
them to remain in its employ. The above aims will be effectuated through the
granting of certain stock options. It is intended that the options issued
under the Plan and designated by the Board of Directors will qualify as
incentive stock options (hereinafter called "ISO") to the extent permitted
under section 422 of the Internal Revenue Code and the regulations thereunder,
and the terms of the Plan shall be interpreted in accordance with this
intention.
2. ADMINISTRATION OF THE PLAN.
The Board of Directors of OptiMark or a committee of one or
more directors appointed by the Board from time to time (hereinafter, the
"Board") shall have the authority, in its sole discretion:
(a) to determine the employees of OptiMark and its
subsidiaries to whom the options shall be granted;
(b) to determine the time or times at which the options
shall be granted;
(c) to determine the option price of the shares subject
to each option, which price shall not be less than the minimum specified in
Section 5 below;
(d) to determine the time when each option shall become
exercisable and the duration of the exercise period; and
(e) to interpret the Plan and to prescribe, amend and
rescind rules and regulations relating to it.
3. ELIGIBILITY AND LIMITATIONS OF OPTIONS GRANTED UNDER THE PLAN.
<PAGE> 2
Options will be granted only to persons who are key employees
of OptiMark or of a subsidiary corporation of OptiMark. The term "key
employee" shall include officers, directors, executives, supervisory personnel,
and other employees. No ISO shall be granted to any key employee who, at the
time of such grant, owns stock possessing more than 10 percent of the total
combined voting power of all classes of stock of OptiMark or any subsidiary of
OptiMark unless, at the time of such grant, the option price is fixed at not
less than 110 percent of the current fair market value of the stock subject to
the option and unless exercise of such option is prohibited by its terms after
the expiration of five (5) years from the date such option is granted. To the
extent that the aggregate fair market value of the stock with respect to which
ISOs are exercisable for the first time by the key employee during any calendar
year (under all plans of OptiMark and any parent or subsidiary of OptiMark)
exceeds $100,000, such ISOs shall be treated as non-qualified stock options.
For purposes of this Section 3, ISOs shall be taken into account in the order
in which they were granted. The fair market value of the stock shall be
determined as of the time the option with respect to such stock is granted.
4. SHARES OF STOCK SUBJECT TO PLAN.
There will be reserved for use under and upon the exercise of
options to be granted from time to time under the Plan an aggregate of
9,200,000 shares of OptiMark common stock, which shares may be, in whole or
part, as the Board shall from time to time determine, authorized but unissued
shares of the common stock or issued shares of the common stock which shall
have been reacquired by OptiMark. Any shares subject to an option under the
Plan, which option for any reason expires or is terminated unexercised as to
such shares, may again be subject to the Plan.
5. OPTION PRICE.
The purchase price under each option issued shall be
determined by the Board at the time the option is granted, but in no event
shall such purchase price of shares underlying ISOs be less than 100 percent of
the fair market value of OptiMark's common stock on the date of grant.
6. ADDITIONAL SHARES.
(a) In the event that additional shares of OptiMark's
common stock are issued pursuant to a stock split or a stock dividend, the
number of shares of common stock being covered by each outstanding option
granted hereunder shall be increased proportionately with no increase in the
total price of the shares then so covered, and the number of shares of common
stock reserved for purposes of the Plan shall be increased by the same
proportion. In the event that shares of common stock of OptiMark from time to
time issued and outstanding are reduced by a combination of shares, the number
of shares of common stock then covered by each outstanding option granted
hereunder shall be reduced proportionately with no reduction in the total price
of the shares then so covered, and the number of shares of common stock
reserved for purposes of the Plan shall be reduced by the same proportion.
(b) In the event of the proposed dissolution or
liquidation of OptiMark, the Board shall notify each key employee as soon as
practicable prior to the effective date of such proposed transaction. The
Board in its discretion may provide for each key employee to have the right to
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<PAGE> 3
exercise his or her option until fifteen (15) days prior to such transaction as
to all of the stock covered thereby, including shares as to which the option
would not otherwise be exercisable. The Board shall give each key employee
timely written or electronic notice of such exercisability. To the extent it
has not been previously exercised, an option will terminate immediately prior
to the consummation of such proposed action.
(c) In the event of a merger of OptiMark with or into
another corporation, or the sale of substantially all of the assets of
OptiMark, each outstanding option shall be assumed or an equivalent option
substituted by the successor corporation or a parent or subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the option, the key employee shall fully vest in and
have the right to exercise the option as to all of the optioned stock,
including shares as to which it would not otherwise be vested or exercisable.
If an option becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify
the key employee in writing or electronically that the option shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
the option shall terminate upon the expiration of such period. For the
purposes of this paragraph, the option shall be considered assumed if,
following the merger or sale of assets, the option confers the right to
receive, for each share of optioned stock subject to the option immediately
prior to the merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale of assets by
holders of common stock for each share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its parent,
the Board may, with the consent of the successor corporation, provide for the
consideration to be received upon the exercise of the option, for each share of
optioned stock subject to the option, to be solely common stock of the
successor corporation or its parent equal in fair market value to the per share
consideration received by holders of common stock in the merger or sale of
assets.
(d) In the event of a "Change of Control" (as defined
below), if a key employee's employment is terminated by OptiMark (or its
successor) without "Cause" (as defined below) within one year following such
Change of Control, the key employee shall fully vest in and have the right to
exercise the option as to all of the optioned stock in accordance with Section
9(d), including shares as to which it would not otherwise be vested or
exercisable.
For this purpose, a "Change in Control" means the
occurrence of any of the following events:
(A) Any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of OptiMark representing fifty percent
(50%) or more of the total voting power represented by OptiMark's then
outstanding voting securities; or
(B) A change in the composition of the OptiMark
Board of Directors occurring within a two-year period, as a result of which
fewer than a majority of the directors are
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<PAGE> 4
Incumbent Directors. "Incumbent Directors" shall mean directors who either (i)
are directors of OptiMark as of September 21, 1998, or (ii) are elected, or
nominated for election, to the Board of Directors with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to OptiMark); or
(C) The consummation of a merger or consolidation
of OptiMark with any other corporation, other than a merger or consolidation
which would result in the voting securities of OptiMark outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or its parent)
more than fifty percent (50%) of the total voting power represented by the
voting securities of OptiMark or such surviving entity or parent outstanding
immediately after such merger or consolidation; or
(D) The consummation of the sale or disposition
by OptiMark of all or substantially all of OptiMark's assets to an acquiror,
where immediately after such sale, the stockholders of OptiMark immediately
prior to such sale (other than any corporation or other person controlling,
controlled by or under common control with the acquiror) own, directly or
indirectly, in the aggregate, voting securities of the acquiror having less
than a majority of the voting power of the issued and outstanding voting
securities of the acquiror.
For this purpose, "Cause" shall mean (A) any act of
personal dishonesty taken by the key employee in connection with his
responsibilities with OptiMark and intended to result in substantial personal
enrichment of the key employee, (B) key employee's conviction of or plea of
nolo contendere to a felony, (C) a willful act by the key employee which
constitutes gross misconduct and which is injurious to the successor
corporation, and (D) following delivery to the key employee of a written demand
for performance from the successor corporation which describes the basis for
the successor corporation's belief that the key employee has not substantially
performed his duties, continued violations by the key employee of the key
employee's obligations to the successor corporation which are demonstrably
willful and deliberate on the key employee's part.
7. PERIOD OF OPTION AND CERTAIN LIMITATIONS ON RIGHT TO EXERCISE.
(a) All options issued under the Plan shall be for such
period as the Board shall determine, but for not more than ten (10) years from
the date of grant thereof.
(b) The period of the option, once it is granted, may be
reduced only as provided in Section 9 in connection with the termination of
employment, disability or death of the key employee.
(c) Each option granted under this Plan shall become
exercisable only after the key employee chooses to exercise such option and to
pay for such option in the manner set forth in Section 7(e) hereof.
Notwithstanding the foregoing, the Board may, in its sole discretion (1)
prescribe longer periods and additional requirements with respect to the
exercise of an option,
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<PAGE> 5
and (2) terminate in whole or in part such portion of any option as has not yet
become exercisable at the time of termination of employment.
(d) This paragraph has been deleted.
(e) The exercise of any option shall be contingent upon
receipt by OptiMark of cash or certified bank check to its order in an amount
equal to the full option price of the shares being purchased.
(f) No key employee or his legal representative,
legatees, or distributees, as the case may be, will be deemed to be a holder of
any shares subject to an option unless and until Certificates for such shares
are issued to him, or them, under the terms of the Plan, and then the key
employee will be deemed a holder of shares only as to the number of shares for
which he/she has paid and received a certificate. No adjustment shall be made
for cash dividends or any other rights for which the record date is prior to
the date such Stock Certificate is issued.
(g) In no event may an option be exercised after the
expiration of its term.
(h) Exercise of an option in any manner shall result in a
decrease in the number of shares of common stock which may thereafter be
available under the Plan by the number as to which the option is exercised.
8. ASSIGNABILITY.
Unless otherwise determined by the Board, the options granted
herein shall not be transferable by any key employee except by laws of descent
and distribution.
9. EFFECT OF DISABILITY, DEATH, RETIREMENT OR TERMINATION.
Upon the termination of the key employee's employment with
OptiMark, whether by disability, death, retirement or otherwise, any option, or
part thereof, which is not exercisable as of the date the key employee's
employment so terminates (hereinafter called "Termination Date"), shall also
terminate. As to any option, or part thereof, which is exercisable on the
Termination Date:
(a) in the event that a key employee shall become
disabled (within the meaning of section 22 (e)(3) of the Internal Revenue Code)
while employed by OptiMark, any option, or part thereof, granted to the key
employee under this Plan, which is exercisable at the Termination Date and not
previously exercised or otherwise expired, shall be exercisable at any time
within one (1) year from the date the key employee's employment with OptiMark
terminates as a result of the disability;
(b) in the event that a key employee shall die while
employed by OptiMark, any option, or part thereof, granted to the key employee
under this Plan, which is exercisable at the Termination Date and not
previously exercised or otherwise expired, shall be exercisable by the estate
of the key employee, or by any person entitled to exercise the option after the
death of the key employee, at any time within six (6) calendar months of the
date of the key employee's death;
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<PAGE> 6
(c) in the event that a key employee's employment with
OptiMark is terminated as a result of the retirement of the key employee, any
option, or part thereof, granted to the key employee under this Plan, which is
exercisable at the Termination Date and not previously exercised or otherwise
expired, shall be exercisable at any time within ninety (90) days from the date
the key employee's employment so terminates.
(d) in the event that a key employee's employment with
OptiMark is terminated by OptiMark, with or without Cause, any option, or part
thereof, granted to the key employee under this Plan, which is exercisable at
the Termination Date and not previously exercised or otherwise expired, shall
be exercisable at any time within thirty (30) days from the date the key
employee's employment so terminates. The transfer of a key employee from the
employ of OptiMark to a subsidiary corporation of OptiMark, or vice versa, or
from one subsidiary corporation of OptiMark to another, shall not be deemed to
constitute a termination of employment for purposes of this Plan;
(e) in the event that a key employee's employment with
OptiMark is terminated other than by disability, death, retirement or OptiMark
(as provided in subsections (a), (b), (c) or (d) above), any option, or part
thereof, granted to the key employee under this Plan, which is exercisable at
the Termination Date and not previously exercised or otherwise expired, shall
be exercisable at any time within thirty (30) days from the date employee's
employment so terminates.
Notwithstanding the above provisions, no option granted under
the Plan shall be exercisable at any time after ten (10) years has passed from
the date the option is granted.
10. ADDITIONAL TERMS.
Any option granted hereunder shall contain such other and
additional terms, which are deemed necessary or desirable by the Board. Such
other terms may include those which, together with the terms of this Plan,
shall constitute such option as an "Incentive Stock Option" within the meaning
of section 422 of the Internal Revenue Code.
11. LISTING AND REGISTRATION OF SHARES.
Each option shall be subject to the requirement that if, at
any time, the Board shall determine, in its sole discretion, that the listing,
registration or qualification of the shares covered thereby 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 granting
of such option, or the issue or purchase thereunder, such option shall not be
exercised in whole or in part unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any condition not acceptable to the Board.
12. EXPIRATION AND TERMINATION OF THE PLAN.
Options may be granted under the Plan at any time or from time
to time so long as the total number of shares optioned or purchased under this
Plan does not exceed 9,200,000 shares of common stock. No option shall be
granted pursuant to the Plan, however, after ten (10) years from
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<PAGE> 7
the effective date of the Plan. The Plan may be abandoned or terminated at any
time by the Board of Directors of OptiMark, except with respect to any options
then outstanding under the Plan.
13. AMENDMENT OF PLAN.
The Board of Directors of OptiMark may at any time and from
time to time modify and amend the Plan (including such form of Option
Agreement) in any respect. The termination or modification or amendment of the
Plan shall not, however, without the consent of a key employee, affect his/her
rights under an option theretofore granted to him/her.
14. APPLICABILITY OF PLAN TO OUTSTANDING STOCK OPTIONS.
This Plan shall not affect the terms and conditions of any
non-qualified stock options granted to any employee of OptiMark or of a
subsidiary corporation of OptiMark under any other plan relating to
non-qualified stock options, nor shall it affect any of the rights of any
employee to whom such a non-qualified stock option was granted.
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<PAGE> 1
EXHIBIT 10.7
OPTIMARK TECHNOLOGIES, INC.
1999 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the 1999 Stock Plan shall
have the same defined meanings in this Stock Option Agreement.
1. NOTICE OF STOCK OPTION GRANT
[OPTIONEE'S NAME AND ADDRESS]
The undersigned Optionee has been granted an Option to purchase Common Stock of
the Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
<TABLE>
<S> <C>
Date of Grant
-----------------------------------------------
Vesting Commencement Date
-----------------------------------------------
Exercise Price per Share $
----------------------------------------------
Total Number of Shares Granted
-----------------------------------------------
Total Exercise Price $
----------------------------------------------
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: Ten (10) years from the Date of Grant
</TABLE>
Vesting Schedule:
This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:
The Shares subject to the Option shall vest in five (5) successive equal annual
installments measured from the Vesting Commencement Date, subject to Optionee's
continuing to be a Service Provider on such dates.
Termination Period:
Upon Optionee's termination as a Service Provider for any reason, all unvested
Shares then subject to the Option shall immediately terminate and cease to be
outstanding. In the event of Optionee's termination as a Service Provider for
any reason other than Disability or death, the vested portion of
<PAGE> 2
the Option shall be exercisable for 30 days after Optionee ceases to be a
Service Provider. In the event of Optionee's termination as a Service Provider
by reason of Disability, the vested portion of the Option may be exercised for
one year after Optionee ceases to be a Service Provider. In the event of
Optionee's termination as a Service Provider by reason of death, the vested
portion of the Option may be exercised for six months after Optionee ceases to
be a Service Provider.
In no event, however, may Optionee exercise this Option after the
Term/Expiration Date as provided above.
2. AGREEMENT
(a) Grant of Option. The Plan Administrator of the
Company hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase the number of Shares set
forth in the Notice of Grant, at the exercise price per Share set forth in the
Notice of Grant (the "Exercise Price"), and subject to the terms and conditions
of the Plan, which is incorporated herein by reference. Subject to Section
16(c) of the Plan, in the event of a conflict between the terms and conditions
of the Plan and this Option Agreement, the terms and conditions of the Plan
shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it
exceeds the $100,000 rule of Code Section 422(d), that portion of this Option
shall be treated as a Nonstatutory Stock Option ("NSO").
(b) Exercise of Option.
(i) Right to Exercise. This Option shall be
exercisable during its term in accordance with the Vesting Schedule set out in
the Notice of Grant and with the applicable provisions of the Plan and this
Option Agreement.
(ii) Method of Exercise. This Option shall be
exercisable by delivery of an exercise notice in the form attached as Exhibit A
(the "Exercise Notice") which shall state the election to exercise the Option,
the number of Shares with respect to which the Option is being exercised, and
such other representations and agreements as may be required by the Company.
The Exercise Notice shall be accompanied by payment of the aggregate Exercise
Price as to all Shares for which said Option is being exercised. This Option
shall be deemed to be exercised upon receipt by the Company of such fully
executed Exercise Notice accompanied by the aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of an Option unless such
issuance and such exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.
(c) Optionee's Representations. In the event the Shares have
not been registered under the Securities Act of 1933, as amended, at the time
this Option is exercised, the Optionee shall, if required by the Company,
concurrently with the exercise of all or any portion of this Option,
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<PAGE> 3
deliver to the Company his or her Investment Representation Statement in the
form attached hereto as Exhibit B.
(d) Lock-Up Period. Optionee hereby agrees that, if so
requested by the Company or any representative of the underwriters (the
"Managing Underwriter") in connection with any registration of the offering of
any securities of the Company under the Securities Act, Optionee shall not sell
or otherwise transfer any Shares or other securities of the Company during the
180-day period (or such other period as may be requested in writing by the
Managing Underwriter and agreed to in writing by the Company) (the "Market
Standoff Period") following the effective date of a registration statement of
the Company filed under the Securities Act. Such restriction shall apply only
to the first registration statement of the Company to become effective under
the Securities Act that includes securities to be sold on behalf of the Company
to the public in an underwritten public offering under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such Market Standoff
Period.
(e) Method of Payment. Payment of the aggregate Exercise
Price shall be by any of the following, or a combination thereof, at the
election of the Optionee:
(i) cash or check;
(ii) consideration received by the Company under a
formal cashless exercise program adopted by the Company in connection with the
Plan; or
(iii) beginning on the date that the Common Stock
is first registered under Section 12 of the Exchange Act, other Shares which
(A) in the case of Shares acquired upon exercise of an option, have been owned
by the Optionee for more than six months on the date of surrender, and (B) have
a Fair Market Value on the date of surrender equal to the aggregate exercise
price of the Shares as to which said Option shall be exercised.
(f) Restrictions on Exercise. This Option may not be
exercised until such time as the Plan has been approved by the shareholders of
the Company, or if the issuance of such Shares upon such exercise or the method
of payment of consideration for such shares would constitute a violation of any
Applicable Law.
(g) Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
Optionee. The terms of the Plan and this Option Agreement shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.
(h) Term of Option. This Option may be exercised only within
the term set out in the Notice of Grant, and may be exercised during such term
only in accordance with the Plan and the terms of this Option.
(i) Tax Consequences. Set forth below is a brief summary as
of the date of this Option of some of the federal tax consequences of exercise
of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND
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<PAGE> 4
REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(i) Exercise of NSO. There may be a regular
federal income tax liability upon the exercise of an NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Shares on
the date of exercise over the Exercise Price. If Optionee is an Employee or a
former Employee, the Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount in cash equal to a percentage of this compensation income
at the time of exercise, and may refuse to honor the exercise and refuse to
deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(ii) Exercise of ISO. If this Option qualifies as
an ISO, there will be no regular federal income tax liability upon the exercise
of the Option, although the excess, if any, of the Fair Market Value of the
Shares on the date of exercise over the Exercise Price will be treated as an
adjustment to the alternative minimum tax for federal tax purposes and may
subject the Optionee to the alternative minimum tax in the year of exercise.
(iii) Disposition of Shares. In the case of an
NSO, if Shares are held for at least one year, any gain realized on disposition
of the Shares will be treated as long-term capital gain for federal income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and of at least two years after
the Date of Grant, any gain realized on disposition of the Shares will also be
treated as long-term capital gain for federal income tax purposes. If Shares
purchased under an ISO are disposed of within one year after exercise or two
years after the Date of Grant, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the extent
of the difference between the Exercise Price and the lesser of (1) the Fair
Market Value of the Shares on the date of exercise, or (2) the sale price of
the Shares. Any additional gain will be taxed as capital gain, short-term or
long-term depending on the period that the ISO Shares were held.
(iv) Notice of Disqualifying Disposition of ISO
Shares. If the Option granted to Optionee herein is an ISO, and if Optionee
sells or otherwise disposes of any of the Shares acquired pursuant to the ISO
on or before the later of (1) the date two years after the Date of Grant, or
(2) the date one year after the date of exercise, the Optionee shall
immediately notify the Company in writing of such disposition. Optionee agrees
that Optionee may be subject to income tax withholding by the Company on the
compensation income recognized by the Optionee.
(j) Entire Agreement; Governing Law. The Plan is incorporated
herein by reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee. This agreement is governed by the internal
substantive laws but not the choice of law rules of New Jersey.
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<PAGE> 5
(k) No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES
AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF
IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY
(NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING
SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS
AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S
RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME,
WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he or
she is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
<TABLE>
<S> <C>
OPTIONEE OPTIMARK TECHNOLOGIES, INC.
- --------------------------------------------------- ------------------------------------------------------
Signature By
- --------------------------------------------------- ------------------------------------------------------
Print Name Title
- ---------------------------------------------------
- ---------------------------------------------------
Residence Address
</TABLE>
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<PAGE> 6
EXHIBIT A
1999 STOCK PLAN
EXERCISE NOTICE
OptiMark Technologies, Inc.
[Address]
Attention: [Title]
1. Exercise of Option. Effective as of today, ___________, 20__,
the undersigned ("Optionee") hereby elects to exercise Optionee's option to
purchase _________ shares of the Common Stock (the "Shares") of OptiMark
Technologies, Inc. (the "Company") under and pursuant to the 1999 Stock Plan
(the "Plan") and the Stock Option Agreement dated ________, 20______(the
"Option Agreement").
2. Delivery of Payment. Purchaser herewith delivers to the
Company the full purchase price of the Shares, as set forth in the Option
Agreement.
3. Representations of Optionee. Optionee acknowledges that
Optionee has received, read and understood the Plan and the Option Agreement
and agrees to abide by and be bound by their terms and conditions. Optionee
also acknowledges that Optionee has received, read and understood that
documents entitled "Risks Associated with Purchasing OptiMark Common Stock",
"OptiMark Technologies, Inc. Employee Stock Options" and certain financial
information regarding the Company.
4. Rights as Shareholder. Until the issuance of the Shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Shares shall
be issued to the Optionee as soon as practicable after the Option is exercised.
No adjustment shall be made for a dividend or other right for which the record
date is prior to the date of issuance except as provided in Section 14 of the
Plan.
5. Tax Consultation. Optionee understands that Optionee may
suffer adverse tax consequences as a result of Optionee's purchase or
disposition of the Shares. Optionee represents that Optionee has consulted
with any tax consultants Optionee deems advisable in connection with the
purchase or disposition of the Shares and that Optionee is not relying on the
Company for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
<PAGE> 7
(a) Legend. Optionee understands and agrees that the
Company shall cause the legend set forth below or a legend substantially
equivalent thereto, to be placed upon any certificate(s) evidencing ownership
of the Shares together with any other legends that may be required by the
Company or by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF
COMPANY COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES,
SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.
(b) Stop-Transfer Notices. Optionee agrees that, in
order to ensure compliance with the restrictions referred to herein, the
Company may issue appropriate "stop transfer" instructions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be
required (i) to transfer on its books any Shares that have been sold or
otherwise transferred in violation of any of the provisions of this Exercise
Notice or (ii) to treat as owner of such Shares or to accord the right to vote
or pay dividends to any purchaser or other transferee to whom such Shares shall
have been so transferred.
7. Successors and Assigns. The Company may assign any of its
rights under this Exercise Notice to single or multiple assignees, and this
Exercise Notice shall inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer herein set forth, this
Exercise Notice shall be binding upon Optionee and his or her heirs, executors,
administrators, successors and assigns.
8. Interpretation. Any dispute regarding the interpretation of
this Exercise Notice shall be submitted by Optionee or by the Company forthwith
to the Administrator which shall review such dispute at its next regular
meeting. The resolution of such a dispute by the Administrator shall be final
and binding on all parties.
9. Governing Law; Severability. This Exercise Notice is governed
by the internal substantive laws but not the choice of law rules, of New
Jersey.
10. Entire Agreement. The Plan and Option Agreement are
incorporated herein by reference. This Exercise Notice, the Plan, the Option
Agreement and the Investment Representation Statement constitute the entire
agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee.
<TABLE>
<S> <C>
Submitted by: Accepted by:
</TABLE>
<PAGE> 8
<TABLE>
<S> <C>
OPTIONEE OPTIMARK TECHNOLOGIES, INC.
- --------------------------------------------------- ------------------------------------------------------
Signature By
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Print Name Title
Address: Address:
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Date Received
</TABLE>
<PAGE> 9
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: OPTIMARK TECHNOLOGIES, INC.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities.
Optionee is acquiring these Securities for investment for Optionee's own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this
connection, Optionee understands that, in the view of the Securities and
Exchange Commission, the statutory basis for such exemption may be unavailable
if Optionee's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available and as such Optionee
acknowledges that Optionee must bear the economic risk of the investment for an
indefinite period of time. Optionee further acknowledges and understands that
the Company is under no obligation to register the Securities. Optionee
understands that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel
satisfactory to the Company, and any other legend required under applicable
state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
<PAGE> 10
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the
Optionee, the exercise will be exempt from registration under the Securities
Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days
thereafter (or such longer period as any market stand-off agreement may
require) the Securities exempt under Rule 701 may be resold, subject to the
satisfaction of certain of the conditions specified by Rule 144, including:
(1) the resale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934); and, in the case of an
affiliate, (2) the availability of certain public information about the
Company, (3) the amount of Securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than one year after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(d) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration
under the Securities Act, compliance with Regulation A, or some other
registration exemption will be required; and that, notwithstanding the fact
that Rules 144 and 701 are not exclusive, the Staff of the Securities and
Exchange Commission has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rules 144 or 701 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers
or sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk. Optionee understands that no
assurances can be given that any such other registration exemption will be
available in such event.
Signature of Optionee:
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Date: , 20
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<PAGE> 1
EXHIBIT 10.8
STOCK OPTION AGREEMENT
THIS AGREEMENT is made this _______ day of ___________, 199__, by and
between OptiMark Technologies, Inc., a Delaware corporation (hereinafter
referred to as "Employer"), and ______________________ (hereinafter referred to
as "Employee").
WHEREAS, Employee is a valued and trusted employee of Employer, or of
a subsidiary of Employer, and Employer considers it desirable and in its best
interest that Employee be given an inducement to acquire a proprietary interest
in Employer, as an added incentive to advance the interests of Employer, by
giving Employee an option to purchase common stock of Employer in accordance
with the Incentive Stock Option Plan (hereinafter referred to as the "Plan")
adopted by the Board of Directors of Employer's predecessor on July 15, 1994,
and approved by the shareholders of Employer's predecessor as of July 15, 1994,
and adopted by Employer as its own plan on July 29, 1996;
NOW, THEREFORE, IT IS AGREED BY AND BETWEEN EMPLOYER AND EMPLOYEE AS
FOLLOWS:
1. OPTION GRANTED. Employer hereby and herein grants Employee an
option to purchase _________ shares of OptiMark Technologies, Inc. common stock
subject to the terms and conditions contained herein. 20% of the shares of
OptiMark Technologies, Inc. common stock subject to the option shall vest each
year on the anniversary of ____________, beginning on ____________, 1999, and
ending on ____________, 2003, provided that Employee is employed by Employer or
a subsidiary of Employer (hereinafter also referred to as "Employer") on the
applicable anniversary date.
2. EXERCISE PRICE OF OPTION. Employee shall be entitled to exercise
the option granted herein at a purchase price of _____________________
($_____.__) per share, said price being the fair market value of a share of
Employer's common stock on the date the option is granted.
3. CUMULATIVENESS OF OPTION. The right to exercise the option
granted herein is cumulative, so that if Employee does not exercise his/her
option at the moment the option is first exercisable, as described in Paragraph
1 hereof, his/her right to exercise the same shall not lapse, but shall
continue, subject to the other conditions contained in this Agreement, until
such time as the option shall terminate, as described in Paragraph 6 hereof.
4. EXERCISE OF OPTION. Subject to the other conditions contained in
this Agreement, exercise of the option granted herein shall be made by the
giving of written notice to Employer by Employee. Such written notice shall be
deemed sufficient for purposes of this Agreement only if such notice is
delivered by registered or certified mail to Employer at its principal office,
states the number of shares with respect to which the option is being
exercised, and further states the date, not more than ninety (90) days after
the date of such notice, on which the shares of
<PAGE> 2
stock shall be taken up and payment therefor shall be made. If payment is not
received within the ninety (90) days after the date of such notice, the written
notice shall be deemed null and void.
The payment for shares of stock taken up pursuant to an
exercise of the option granted herein shall be made in cash or certified check
at the principal office of Employer or at any office of a transfer agent
appointed for the shares of the stock of Employer. Upon an exercise of the
option granted herein in compliance with the provisions of this paragraph, and
upon the receipt by Employer or its transfer agent of payment for the stock so
taken up, Employer shall deliver or cause to be delivered to Employee so
exercising his/her option a certificate or certificates for the number of
shares of stock with respect to which the option is so exercised and payment is
so made.
5. TRANSFER OF OPTION. The option granted herein shall not be
transferred by Employee, other than by will or the laws of descent and
distribution, and shall be exercisable, during his/her lifetime, only by
Employee. Notwithstanding the above, in the event of Employee's death, the
representative of Employee's estate, or the person who received by bequest or
inheritance the right to exercise such option, may exercise the option to the
same extent as if the option were being exercised by the decedent, and subject
to the same conditions as the decedent, except as otherwise noted herein.
6. TERMINATION OF OPTION. Upon the termination of Employee's
employment with Employer, whether by disability, death, retirement or
otherwise, any option, or part thereof, which is not exercisable as of the date
the Employee's employment so terminates (hereinafter referred to as
"Termination Date"), shall also terminate. As to any option, or part thereof,
which is exercisable on the Termination Date:
(a) in the event of Employee's disability (within the meaning
of Section 22(e)(3) of the Internal Revenue Code) while employed by Employer,
any option, or part thereof, granted to Employee under the Plan, which is
exercisable on the Termination Date and not previously exercised or otherwise
expired, shall be exercisable at any time within one (1) year from the date
Employee's employment so terminates;
(b) in the event of Employee's death while employed by
Employer, any option, or part thereof, granted to Employee under the Plan,
which is exercisable on the Termination Date and not previously exercised or
otherwise expired, shall be exercisable at any time within six (6) calendar
months from the date of Employee's death;
(c) in the event Employee's employment with Employer is
terminated as a result of the retirement of Employee, any option, or part
thereof, granted to Employee under the Plan, which is exercisable on the
Termination Date and not previously exercised or otherwise expired, shall be
exercisable at any time within ninety (90) days from the date employment so
terminates;
(d) in the event Employee's employment with Employer is
terminated by Employer, whether or not for Cause, any option, or part thereof,
granted to Employee under the Plan, which is exercisable on the Termination
Date and not previously exercised or otherwise expired, shall be exercisable at
any time within thirty (30) days from the date employment so terminates;
-2-
<PAGE> 3
(e) in the event Employee's employment with Employer is
terminated other than by disability, death, retirement or Employer (as provided
in Paragraphs 6(a), 6(b), 6(c) or 6(d) above), any option, or part thereof,
granted to Employee under the Plan, which is exercisable on the Termination
Date and not previously exercised or otherwise expired, shall be exercisable at
any time within thirty (30) days from the date employment so terminates;
Notwithstanding the above provisions, no option granted herein shall
be exercisable at any time after ten (10) years have passed from the date this
option is granted.
7. CHANGE OF CONTROL. In the event Employee's employment is
terminated by OptiMark (or its successor) without Cause within one year
following a Change in Control, any option granted to Employee under the Plan
shall become fully vested and exercisable in accordance with Section 6(d).
8. OWNERSHIP OF STOCK. Employee will not be deemed to be a holder of
any shares as to which this option is granted, and shall have none of the
rights of a shareholder as to any of the shares as to which this option is
granted, until payment of the option price by him/her and delivery of a stock
certificate to him/her for such shares, and then shall be deemed a holder of
shares with the corresponding shareholder rights only as to the number of
shares for which Employee has paid and a stock certificate delivered. Except
as otherwise provided in this Agreement, no adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is delivered.
All shares taken up by Employee pursuant to any exercise of
the option granted herein shall be registered in the name of Employee or in the
name of Employee jointly with his/her spouse. Nothing contained herein,
however, shall be construed to prohibit any shares taken up by Employee
pursuant to any exercise of the option granted herein from being registered in
the name of a trust pursuant to a qualified 401(k) plan or qualified family,
living or similar trust wherein the beneficiary of such plan or trust is
Employee or Employee and his/her heirs.
9. LIMITATION ON EXERCISE. The option granted herein may not be
exercised if the issuance of shares of common stock of Employer upon such
exercise would constitute a violation of any applicable Federal or State
securities or other laws. Employee, as a condition to his/her exercise of this
option, shall represent to Employer that the shares of common stock of Employer
that Employee acquires under this option are being acquired by and for Employee
for investment and not with a present view to distribution or resale, unless
counsel for Employer is of the opinion that such a representation is not
required under the Securities Act of 1933 or any other applicable law,
regulation or rule of any governmental agency or private regulating body.
Furthermore, the option granted herein shall be subject to the requirement that
if at any time Employer shall determine, in its sole discretion, that the
listing, registration or qualification of the shares covered thereby under any
State or Federal law, or the consent of or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such option, or the issue or purchase thereunder, such
option shall not be exercised in whole or in part unless and until such
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of
-3-
<PAGE> 4
any condition not acceptable to Employer.
10. EFFECTIVE DATE OF PLAN. The Plan shall take effect upon its
approval by the shareholders of Employer, and when so approved shall be deemed
to have been in full force and effect from and after the date on which it is
adopted for Employer by action of its Board of Directors.
11. ACKNOWLEDGEMENT. Employee acknowledges receipt of a copy of the
Plan, a copy of which is annexed hereto, and represents that he/she is familiar
with the terms and provisions thereof. The Plan is incorporated herein by
reference. Employee hereby accepts this option subject to all the terms and
provisions of the Plan. Employee hereby agrees to accept, as binding,
conclusive and final, all decisions and interpretations of the Board of
Directors of Employer upon any question arising under the Plan. The Plan and
this Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Employer and Employee with respect to the
subject matter hereof, and may not be modified adversely to the Employee's
interest except by means of a writing signed by the Employer and Employee. As
a condition to the issuance of shares of common stock of Employer under this
option, Employee authorizes Employer to withhold, in accordance with applicable
law, from any regular cash compensation payable to him, any taxes required to
be withheld by Employer under Federal, State or local law as a result of his
exercise of this option. This agreement is governed by the internal
substantive laws, but not the choice of law rules, of Colorado.
12. NO GUARANTEE OF CONTINUED SERVICE. EMPLOYEE ACKNOWLEDGES AND
AGREES THAT THE OPTION TO PURCHASE SHARES PURSUANT HERETO IS EARNED ONLY BY
CONTINUING AS A SERVICE PROVIDER AT THE WILL OF EMPLOYER (AND NOT THROUGH THE
ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER).
EMPLOYEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH EMPLOYEE'S RIGHT OR EMPLOYER'S RIGHT TO TERMINATE EMPLOYEE'S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
13. LOCK-UP PERIOD. Employee hereby agrees that, if so requested by
Employer or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of
Employer under the Securities Act, Employee shall not sell or otherwise
transfer any shares of OptiMark Technologies, Inc. common stock or other
securities of Employer during the 180-day period (or such other period as may
be requested in writing by the Managing Underwriter and agreed to in writing by
Employer) (the "Market Standoff Period") following the effective date of a
registration statement of Employer filed under the Securities Act. Such
restriction shall apply only to the first registration statement of Employer
to become effective under the Securities Act that includes securities to be
sold on behalf of Employer to the public in an underwritten public offering
under the Securities Act. Employer may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of
such Market Standoff Period.
-4-
<PAGE> 5
Signed and sealed on the date first above written with intent to
be legally bound.
EMPLOYER
OPTIMARK TECHNOLOGIES, INC.
By:
EMPLOYEE
--------------------------------------
(Signature)
--------------------------------------
(Name: Typed or Printed)
-5-
<PAGE> 1
EXHIBIT 10.9
STOCK OPTION AGREEMENT
THIS AGREEMENT ("Agreement") effective as of this ___ day of _______, ________
(the "Effective Date"), by and between OptiMark Technologies, Inc., a Delaware
corporation (hereinafter referred to as the "Company") and _________
(hereinafter referred to as "Optionee").
WHEREAS Optionee is a valued and trusted member of the Board of Directors of the
Company and the Company considers it desirable and in its best interest that
Optionee be given an inducement to acquire a proprietary interest in Company as
an added incentive to advance the interests of Company, enable him to represent
the viewpoint of other stockholders of the Company more effectively and to
encourage continuing service as a director of the Company, by giving Optionee an
option to purchase common stock of Company in accordance with the terms of this
Agreement.
NOW, THEREFORE, IT IS AGREED BY AND BETWEEN COMPANY AND OPTIONEE AS FOLLOWS:
1. OPTION GRANTED. In the manner described below and subject to the
conditions contained herein, the Company hereby and herein grants Optionee an
option to purchase _________ shares of OptiMark Technologies, Inc., common
stock, on or after each of the four succeeding anniversary dates of the
Effective Date beginning on _________ and ending on ___________, provided that
Optionee is a director of the Company on the applicable anniversary date and has
attended in person at least 80% of the meetings of the Board of Directors of the
Company held during the applicable 12 month period. In the event that Optionee
does not attend in person at least 80% of the meetings of the Board of Directors
of the Company during the applicable 12 month period, the option to purchase
__________ shares of OptiMark Technologies, Inc., common stock on and after such
anniversary date shall terminate and become null and void on such date. Such
options are not intended to qualify as incentive stock options.
2. EXERCISE PRICE OF OPTION. Optionee shall be entitled to exercise the
option granted herein at a purchase price of $_____ per share, said price being
the fair market value of a share of Company's common stock on the date the
option is granted.
3. CUMULATIVENESS OF OPTION. The right to exercise the option granted herein
is cumulative, so that if Optionee does not exercise his/her option at the
moment the option is first exercisable, as described in Paragraph 1 hereof,
his/her right to exercise the same shall not lapse but shall continue, subject
to the other conditions contained in this Agreement, until such time as the
option shall terminate, as described in Paragraph 6 hereof.
<PAGE> 2
4. EXERCISE OF OPTION. Subject to the other conditions contained in this
Agreement, exercise of the option granted herein shall be made by the giving of
written notice to Company by Optionee. Such written notice shall be deemed
sufficient for purposes of this Agreement only if such notice is delivered by
registered or certified mail to Company at its principal office, states the
number of shares with respect to which the option is being exercised, and
further states the date, not more than ninety (90) days after the date of such
notice, on which the shares of stock shall be taken up and payment therefor
shall be made. If payment is not received within the ninety (90) days after the
date of such notice, the written notice shall be deemed null and void.
The payment for shares of stock taken up pursuant to an exercise of the option
granted herein shall be made in cash or certified check at the principal office
of Company or at any office of a transfer agent appointed for the shares of the
stock of Company. Upon an exercise of the option granted herein in compliance
with the provisions of this paragraph, and upon the receipt by Company or its
transfer agent of payment for the stock so taken up, Company shall deliver or
cause to be delivered to Optionee so exercising his/her option a certificate or
certificates for the number of shares of stock with respect to which the option
is so exercised and payment is so made.
5. TRANSFER OF OPTION. The option granted herein shall not be transferred by
Optionee, other than by will or the laws of descent and distribution, and shall
be exercisable, during his/her lifetime, only by Optionee. Notwithstanding the
above, in the event of Optionee's death, the representative of Optionee's
estate, or the person who received by bequest or inheritance the right to
exercise such option, may exercise the option to the same extent as if the
option were being exercised by the decedent, and subject to the same conditions
as the decedent, except as otherwise noted herein.
6. TERMINATION OF OPTION. Upon the termination of Optionee's status as a
directors of Company, whether by disability, death, resignation, removal or
otherwise, any option, or part thereof, which is not exercisable as of the date
the Optionee's directorship terminates (hereinafter referred to as "Termination
Date"), shall also terminate. As to any option, or part thereof, which is
exercisable on the Termination Date:
(a) in the event of Optionee's disability (within the meaning of
Section 22(e)(3) of the Internal Revenue Code) while a director of the Company,
any option, or part thereof, granted to Optionee hereunder, which is exercisable
on the Termination Date and not previously exercised or otherwise expired, shall
be exercisable at any time within one (1) year from the date Optionee's
directorship so terminates;
(b) in the event of Optionee's death while a director of the Company,
any option, or part thereof, granted to Optionee hereunder, which is exercisable
on the
<PAGE> 3
Termination Date and not previously exercised or otherwise expired, shall be
exercisable at any time within six (6) calendar months from the date of
Optionee's death;
(c) in the event Optionee's directorship with Company is terminated as
a result of the resignation of Optionee, any option, or part thereof, granted to
Optionee hereunder, which is exercisable on the Termination Date and not
previously exercised or otherwise expired, shall be exercisable at any time
within ninety (90) days from the date employment so terminates;
(d) in the event Optionee's directorship with the Company is
terminated as a result of removal by the stockholders of the Company, whether or
not for cause, any option, or part thereof, granted to Optionee hereunder, which
is exercisable on the Termination Date and not previously exercised or otherwise
expired, shall be exercisable at any time within thirty (30) days from the date
employment so terminates;
(e) in the event Optionee's directorship with the Company is
terminated other than by disability, death, resignation or removal (as provided
in Paragraphs 6(a), 6(b), 6(c) or 6(d) above), any option, or part thereof,
granted to Optionee hereunder, which is exercisable on the Termination Date and
not previously exercised or otherwise expired, shall be exercisable at any time
within thirty (30) days from the date employment so terminates;
Notwithstanding the above provisions, no option granted herein shall be
exercisable at any time after ten (10) years have passed from the Effective
Date.
7. ADDITIONAL SHARES.
(a) In the event that additional shares of Company's common
stock are issued pursuant to a stock split or a stock dividend, the number of
shares of common stock being covered by each outstanding option granted
hereunder shall be increased proportionately with no increase in the total price
of the shares then so covered. In the event that shares of Company's common
stock from time to time issued and outstanding are reduced by a combination of
shares, the number of shares of common stock then covered by each outstanding
option granted hereunder shall be reduced proportionately with no reduction in
the total price of the shares then so covered.
(b) In the event of the proposed dissolution or liquidation of
Company, the Board of Directors shall notify Optionee as soon as practicable
prior to the effective date of such proposed transaction. The Board of Directors
in its discretion may provide for Optionee to have the right to exercise his
option until fifteen (15) days prior to such transaction as to all of the stock
covered thereby, including shares as to which the option would not otherwise be
exercisable. To
<PAGE> 4
the extent it has not been previously exercised, an option will terminate
immediately prior to the consummation of such proposed action.
(c) In the event of a merger of Company with or into another
corporation, or the sale of substantially all of the assets of Company, each
outstanding option shall be assumed or an equivalent option substituted by the
successor corporation or a parent or subsidiary of the successor corporation. In
the event that the successor corporation refuses to assume or substitute for the
option, Optionee shall fully vest in and have the right to exercise the option
as to all of the optioned stock, including shares as to which it would not
otherwise be vested or exercisable. If an option becomes fully vested and
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Board of Directors shall notify Optionee that the option
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and the option shall terminate upon the expiration of such period.
For the purposes of this paragraph, the option shall be considered assumed if,
following the merger or sale of assets, the option confers the right to receive,
for each share of optioned stock subject to the option immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
common stock for each share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares); provided,
however, that if such consideration received in the merger or sale of assets is
not solely common stock of the successor corporation or its parent, the Board of
Directors may, with the consent of the successor corporation, provide for the
consideration to be received upon the exercise of the option, for each share of
optioned stock subject to the option, to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of common stock in the merger or sale of
assets.
(d) In the event of a "Change of Control" (as defined below),
if Optionee's status as a director of Company or a director of the successor
corporation as applicable, is terminated other than upon a voluntary resignation
by Optionee or the death or Disability of the Optionee within one year following
such Change of Control, Optionee shall fully vest in and have the right to
exercise the option as to all of the optioned stock in accordance with Paragraph
6(e) hereof, including shares as to which it would not otherwise be vested or
exercisable.
For this purpose, a "Change in Control" means the occurrence of
any of the following events:
(A) Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly,
<PAGE> 5
of securities of OptiMark representing fifty percent (50%) or more of the total
voting power represented by OptiMark's then outstanding voting securities; or
(B) A change in the composition of Company's Board of
Directors occurring within a two-year period, as a result of which fewer than a
majority of the directors are Incumbent Directors. "Incumbent Directors" shall
mean directors who either (i) are directors of Company as of April 30,1998, or
(ii) are elected, or nominated for election, to the Board of Directors with the
affirmative votes of at least a majority of the Incumbent Directors at the time
of such election or nomination (but shall not include an individual whose
election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to Company); or
(C) The consummation of a merger or consolidation of
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or its parent) more
than fifty percent (50%) of the total voting power represented by the voting
securities of Company or such surviving entity or parent outstanding immediately
after such merger or consolidation; or
(D) The consummation of the sale or disposition by
Company of all or substantially all of Company's assets to an acquiror, where
immediately after such sale, the stockholders of Company immediately prior to
such sale (other than any corporation or other person controlling, controlled by
or under common control with the acquiror) own, directly or indirectly, in the
aggregate, voting securities of the acquiror having less than a majority of the
voting power of the issued and outstanding voting securities of the acquiror.
8. OWNERSHIP OF STOCK. Optionee will not be deemed to be a holder of any
shares as to which this option is granted, and shall have none of the rights of
a stockholder as to any of the shares as to which this option is granted, until
payment of the exercise price by him/her and delivery of a stock certificate to
him/her for such shares, and then shall be deemed a holder of shares with the
corresponding stockholder rights only as to the number of shares for which
Optionee has paid and a stock certificate delivered. Except as otherwise
provided in this Agreement, no adjustment shall be made for dividends or other
rights for which the record date is prior to the date such stock certificate is
delivered.
All shares taken up by Optionee pursuant to any exercise of the option granted
herein shall be registered in the name of Optionee or in the name of Optionee
jointly with his/her spouse. Nothing contained herein, however, shall be
construed to prohibit any shares taken up by Optionee pursuant to any exercise
of the option granted herein from being registered in the name of a trust
pursuant to a qualified
<PAGE> 6
401(k) plan or qualified family, living or similar trust wherein the beneficiary
of such plan or trust is Optionee or Optionee and his/her heirs.
9. LIMITATION ON EXERCISE. The option granted herein may not be exercised if
the issuance of shares of common stock of the Company upon such exercise would
constitute a violation of any applicable Federal or State securities or other
laws. Optionee, as a condition to his/her exercise of this option, shall
represent to the Company that the shares of common stock of the Company that
Optionee acquires under this option are being acquired by and for Optionee for
investment and not with a present view to distribution or resale, unless counsel
for the Company is of the opinion that such a representation is not required
under the Securities Act of 1933 or any other applicable law, regulation or rule
of any governmental agency or private regulating body. Furthermore, the option
granted herein shall be subject to the requirement that if at any time the
Company shall determine, in its sole discretion, that the listing, registration
or qualification of the shares covered thereby under any State or Federal law,
or the consent of or approval of any governmental regulatory body, is necessary
or desirable as a condition of, or in connection with, the granting of such
option, or the issue or purchase thereunder, such option shall not be exercised
in whole or in part unless and until such listing, registration, qualification,
consent, or approval shall have been effected or obtained free of any condition
not acceptable to the Company.
10. TAX MATTERS. Optionee shall be solely responsible for learning,
understanding and accepting the tax consequences to him/her of the receipt and
exercise of the option granted herein and the disposition of the Company's
common stock upon or after the exercise thereof. As a condition to the issuance
of shares of common stock of Company under this option, Optionee authorizes
Company to withhold, in accordance with applicable law, from any regular cash
compensation payable to him, any taxes required to be withheld by Company under
Federal, State or local law as a result of his exercise of this option.
<PAGE> 7
Signed and sealed on the date first above written with intent to be legally
bound.
COMPANY
OptiMark Technologies, Inc.
By
-------------------------------------
OPTIONEE
-------------------------------------
(signature)
-------------------------------------
(name typed or printed)
<PAGE> 1
EXHIBIT 10.10
OPTIMARK TECHNOLOGIES, INC.
EMPLOYMENT AGREEMENT
This Agreement is entered into by and between OptiMark Technologies,
Inc., a Delaware corporation (the "Company") and Phillip J. Riese (the
"Employee").
WHEREAS, the Company desires to employ the Employee on a full-time
basis in the capacity of Chief Executive Officer of the Company, and the
Employee desires to accept such employment; and
WHEREAS the parties desire and agree to enter into an employment
relationship by means of this Agreement;
NOW THEREFORE in consideration of the promises and mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is mutually covenanted and
agreed by the parties as follows:
1. POSITION AND DUTIES. The Employee shall be employed as Chief
Executive Officer of the Company, reporting solely to the Company's Board of
Directors (the "Board") and assuming and discharging such duties and
responsibilities as are commensurate with the Employee's position. In
performing his basic duties, the Employee shall work at the Company's business
offices located in New York, New York, although the Employee acknowledges that
frequent travel may be necessary in carrying out his duties hereunder. The
Employee shall perform his duties faithfully and to the best of his ability and
shall devote his full business time and effort (except for permitted vacation
periods and periods of illness and other incapacity) to the performance of his
duties hereunder. The Employee shall commence employment with the Company
effective November 1, 1998 (the "Effective Date"), and for so long as the
Employee remains Chief Executive Officer of the Company, the Board will
nominate the Employee to the Board, and, if elected, the Employee shall serve
in such capacity without additional consideration.
2. TERM OF EMPLOYMENT. This Agreement shall become effective
upon the Effective Date. The Employee's employment with the Company shall
continue until terminated by either party at any time, with or without notice,
and for any or no reason. The parties agree and acknowledge that this
Agreement is an "at will" agreement and that no implied covenant or standard of
practice will cause this Agreement to have any minimum period of employment.
3. TERM OF AGREEMENT. The terms of this Agreement shall
terminate upon the earlier of (i) the date that all obligations of the parties
hereunder have been satisfied, or (ii) the fifth anniversary of the Effective
Date. Notwithstanding the foregoing, this Agreement may be extended for an
additional period or periods by mutual written agreement of the Company and the
Employee. A termination of the terms of this Agreement pursuant to this
Section 3 shall be effective for all purposes, except that such termination
shall not affect any ongoing obligations of the parties hereunder.
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4. COMPENSATION.
(a) BASE SALARY. For all services to be rendered by the
Employee to the Company while this Agreement is in effect, the Employee shall
receive a minimum annual base salary equal to $425,000 (the "Base Salary"),
payable in accordance with the Company's normal payroll practices. The Base
Salary shall be reevaluated yearly and may be increased by the Board, in light
of the Employee's performance of his duties, provided that in any event, the
Base Salary shall at least be increased each January 1, starting January 1,
2000, by a percentage equal to the percentage increase in the Consumer Price
Index - All Urban Consumers for the New York - Northern New Jersey - Long
Island, NY-NJ-CT-PA area (or any successor Consumer Price Index) for the
preceding year, based on the most recent data published by the Bureau of Labor
Statistics Data of the United States Department of Labor.
(b) JOINING BONUS. Within fifteen (15) calendar days
after the Effective Date, the Company shall pay the Employee a lump sum cash
bonus equal to $1,000,000.
(c) PERFORMANCE BONUS. Beginning with the Company's 1999
fiscal year, the Employee shall be entitled to a one-time bonus (the
"Performance Bonus") of $1,000,000 in the event the Company achieves pre-tax
net income in a fiscal year of at least $10,000,000, provided the Employee is
employed with the Company on the last day of such fiscal year. For this
purpose only, the Company's pre-tax net income shall be determined before
giving effect to any accounting expense attributable to (i) the Employee's
purchase of shares of Company stock pursuant to Section 5(b) below and (ii) the
payment to Employee of any bonus, including any Performance Bonus or Retention
Bonus. In the event the Employee becomes entitled to the Performance Bonus
hereunder, it shall be paid to the Employee within 90 days after the end of the
applicable fiscal year. Notwithstanding the foregoing, in the event that on or
before the end of the fiscal year in which such Performance Bonus is earned (i)
the Company terminates the Employee's employment other than for "Cause" or the
Employee terminates his employment for "Good Reason" (as those terms are
defined in Section 10 below), or (ii) the Employee's employment terminates by
reason of the Employee's death or "Disability" (as defined in Section 10), the
Company shall become obligated to pay a prorated Performance Bonus equal to
$1,000,000 multiplied by a fraction, the numerator of which is the actual
pre-tax net income achieved in such fiscal year prior to such termination
(calculated through the end of the calendar month in which such termination
occurs in accordance with the second sentence of this Section 4(c)) and the
denominator of which is $10,000,000, provided that such fraction shall not
exceed one, within fifteen (15) days of such termination. Thereafter, the
Employee shall become eligible to participate in the Company's executive bonus
plan as then in effect.
(d) RETENTION BONUS. Provided the Employee remains an
employee of the Company through the first anniversary of the Effective Date,
the Company shall pay to the Executive a bonus (the "Retention Bonus") of
$1,000,000 within fifteen (15) days of such anniversary. Notwithstanding the
foregoing, in the event that on or before such first anniversary (i) the
Company terminates
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<PAGE> 3
the Employee's employment other than for "Cause" or the Employee terminates his
employment for "Good Reason" (as those terms are defined in Section 10 below),
or (ii) the Employee's employment terminates by reason of Employee's death or
"Disability" (as defined in Section 10), the Company shall become obligated to
pay the Retention Bonus within fifteen (15) days of such termination.
5. OPTIONS; STOCK PURCHASES.
(a) OPTIONS. As of the Effective Date, the Company shall
grant two (2) options to the Employee covering a total of one million, two
hundred thousand (1,200,000) shares of the Company's Common Stock (the
"Options") pursuant to the Company's Incentive Stock Option Plan, as amended
and restated as of September 21, 1998 and standard form of stock option
agreement as modified to reflect the terms of this Agreement (the "Plan"). The
exercise price of the Options shall be $10.00 per share, i.e., the current fair
market value of a share. Except as otherwise provided herein, the other terms
and conditions of the Options shall be as provided under the Plan. The First
Option (the "First Option") shall cover 1,000,000 shares and the Second Option
(the "Second Option") shall cover 200,000 shares. Subject to the Employee's
continued employment with the Company, twenty percent (20%) of the First Option
shall vest and become exercisable on the first anniversary of the Effective
Date, and an additional twenty percent (20%) of the First Option shall vest and
become exercisable at the end of each subsequent annual anniversary of the
Effective Date. The Second Option shall be fully vested and exercisable as of
the Effective Date. Notwithstanding the foregoing, in certain circumstances
following a "Change of Control" of the Company (as defined in Section 10 below)
in the event (i) the Company terminates the Employee's employment with the
Company other than for "Cause" or (ii) the Employee terminates for "Good
Reason" (as those terms are defined in Section 10 below), all or a portion of
the then unvested portion of the First Option shall become vested and
exercisable as provided in Sections 8 or 9 below.
(b) RESTRICTED STOCK. For a period of thirty (30) days
after the Effective Date, the Employee may purchase from the Company up to
100,000 shares of the Company's Common Stock at a price of $10.00 per share
(the "Restricted Stock"). The Employee may purchase the Restricted Stock with
a full recourse promissory note (the "Note"). The Note shall accrue interest
semiannually at the "applicable federal rate" (within the meeting of Section
1274(d) of the Internal Revenue Code of 1986, as amended (the "Code")), and
shall be subject to repayment in accordance with Section 5(e) below. Subject
to the Employee's continued employment with the Company, the Restricted Stock
shall vest on the first anniversary of the Effective Date; provided, however,
the Restricted Stock shall vest in full prior to such date in the event (i) the
Company terminates the Employee's employment with the Company for any reason
other than "Cause" or the Employee terminates his employment for "Good Reason"
(as those terms are defined in Section 10 below), or (ii) the Employee's
employment terminates by reason of his death or "Disability" (as defined in
Section 10 below).
(c) STOCK PURCHASE. Within sixty (60) days of the
Effective Date, the Employee may purchase from the Company up to 250,000 shares
of the Company's Common Stock at a purchase price of $10.00 per share.
(d) STOCK OWNERSHIP RIGHTS AND RESTRICTIONS. With
respect to shares of the Company's Common Stock that the Employee acquires or
may acquire pursuant to Sections 5(a), (b) and
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<PAGE> 4
(c) above, the Employee shall be made a party to the Amended and Restated
Stockholders Agreement dated April 23, 1998, as amended, among the Company and
the signatories to such Agreement (the "Stockholders Agreement") and will be
deemed a Stockholder, Major Stockholder and Rightholder thereunder, provided
that the Employee agrees to be bound by the terms and conditions of such
Stockholders Agreement.
(e) REPAYMENT OF NOTE. The Employee's Note (as described
in Section 5(b)) shall be due and payable in full, together with any accrued
but unpaid interest, on the earlier of (i) the first anniversary of the
Effective Date, or (ii) fifteen (15) days after termination of the Employee's
employment with the Company for any reason.
6. OTHER BENEFITS. The Employee shall be entitled to participate
in the employee benefit plans and programs that the Company makes available to
its senior executives, subject to the rules and regulations applicable thereto.
The Company reserves the right to cancel or change the benefit plans and
programs it offers to its senior executive employees at any time. The Employee
will be eligible for vacation and sick leave in accordance with the policies in
effect for senior executives during the term of this Agreement and will receive
such other benefits and perquisites as the Company generally provides to its
senior executives.
7. EXPENSES. The Company shall pay the Employee a corporate
allowance of $35,000 per fiscal year to be paid to the Employee in a lump sum
at the beginning of such fiscal year (beginning with the 1999 fiscal year) and
used at the Employee's reasonable discretion to cover his Company-related
business expenses. In addition, the Company shall reimburse the Employee for
reasonable travel, entertainment or other expenses incurred by the Employee in
the furtherance of or in connection with the performance of the Employee's
duties hereunder, in accordance with the Company's expense reimbursement policy
as in effect from time to time.
8. TERMINATION.
(a) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If the
Company terminates the Employee's employment other than for "Cause" or if
Employee terminates his employment for "Good Reason" (as those terms are
defined in Section 10 below), then, subject to the Employee's obligations
pursuant to Section 11 below and in addition to any other amounts to which the
Employee is entitled hereunder: (i) the Company shall continue to pay the
Employee his Base Salary in effect on the date of such termination for two (2)
years after termination, (ii) the Company shall pay the Employee the "Bonus
Amount" (as defined herein) in a lump sum within fifteen (15) days after
termination, (iii) the Company shall continue to provide the Employee with the
same medical, life and disability benefits as provided to the Employee
immediately prior to such termination or the after-tax cash equivalent,
provided that such amount is sufficient for the Employee to purchase his own
policy, for so long as the Employee is entitled to continuation of Base Salary
as provided herein, provided that such coverage shall become secondary if the
Employee receives coverage from a subsequent employer; and (iv) 60% of the
First Option shall vest upon termination prior to the third anniversary of the
Effective Date, 80% shall vest upon termination on or after the third but prior
to the fourth anniversary of the Effective Date, and
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<PAGE> 5
100% shall vest upon termination on or after the fourth but prior to the fifth
anniversary of the Effective Date. For purposes of the preceding (iv), the
applicable vesting percentage shall include any portion of the First Option
vested prior to such termination. In addition, if such termination occurs on
or after the first day of the tenth month of the Company's fiscal year, the
Employee shall be entitled to a lump sum payment within fifteen (15) days of
termination in an amount equal to a prorata portion of the Employee's target
bonus for such fiscal year, based on the number of days in such fiscal year up
to and including the termination date divided by 365, and excluding for this
purpose the Performance Bonus and the Retention Bonus. For purposes of the
foregoing, the "Bonus Amount" shall mean an amount equal to the greater of (i)
the bonus paid or payable to the Employee with respect to the Company's fiscal
year immediately preceding the fiscal year in which such termination occurs, or
(ii) a prorata portion of the Employee's target bonus for the fiscal year in
which such termination occurs, based on the number of calendar days in such
fiscal year up to and including the termination date divided by 365, and
excluding for this purpose the Performance Bonus and the Retention Bonus.
(b) DEATH OR DISABILITY. In the event of Employee's
death during the term of this Agreement, the Company shall pay to the
Employee's estate all salary, bonuses and unpaid vacation accrued as of the
date of Employee's death and any other benefits payable under the Company's
then existing benefit plans and policies in accordance with such plans and
policies in effect on the date of death and in accordance with applicable law.
In the event that, during the term of this Agreement, Employee is unable to
perform his job due to Disability (as defined in Section 10 below), the Company
may, at its option, terminate Employee's employment with the Company and such
termination shall entitle the Employee to all salary, bonuses and unpaid
vacation accrued as of the date of such termination and any other benefits
payable under the Company's then existing benefit plans and policies in
accordance with such plans and policies in effect on the date of such
termination and in accordance with applicable law.
(c) VOLUNTARY TERMINATION; TERMINATION FOR CAUSE. In the
event the Employee's employment with the Company terminates either (i)
voluntarily by the Employee without "Good Reason" (as defined in Section 10
below), or (ii) involuntarily by the Company for "Cause" (as defined in Section
10 below), then the Company shall have no further obligations hereunder except
to pay to the Employee all amounts of unpaid Base Salary and any unpaid bonus
from the prior year, reimburse all reasonable business-related expenses and pay
and provide all other benefits required by law or by the terms of the
applicable plan or benefit program.
9. CHANGE OF CONTROL.
(a) OPTION VESTING. Upon a "Change of Control" (as
defined in Section 10), 100% of the First Option shall vest if such Change of
Control occurs prior to the first anniversary of the Effective Date, 75% shall
vest if such Change of Control occurs on or after the first but prior to the
second anniversary of the Effective Date, 60% shall vest if such Change of
Control occurs on or after the second but prior to the third anniversary of the
Effective Date, 80% shall vest if such Change of Control occurs on or after the
third but prior to the fourth anniversary of the Effective Date, and 100% shall
vest if such Change of Control occurs on or after the fourth anniversary of the
Effective Date. For
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<PAGE> 6
purposes of the preceding sentence, the applicable vesting percentage shall
include any portion of the First Option that is vested prior to such Change of
Control. If, during the one-year period following a "Change of Control" of the
Company (as defined in Section 10 below), (i) the Employee terminates his
employment with the Company for "Good Reason" (as defined in Section 10 below),
or (ii) the Company terminates the Employee's employment other than "Cause" (as
defined in Section 10 below), then, subject to the Employee's obligations
pursuant to Section 11 below and in addition to any other amounts to which the
Employee is entitled hereunder, including, but not limited to, payments
provided pursuant to Section 8(a), the First Option shall become 100% vested.
(b) LIMITATION ON PAYMENTS. In the event that any
payment or benefit received or to be received by the Employee in connection
with a "Change of Control" (as defined in Section 10) or the termination of the
Employee's employment (the "Total Payments") would subject the Employee to the
excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), (the "Excise Tax") and the net after-tax amount
receivable by the Employee is less than the net after-tax amount that could
otherwise be payable to the Employee without the imposition of the Excise Tax,
then, subject to Section 9(c) below, to the extent necessary to eliminate the
imposition of the Excise Tax, such Total Payments shall be reduced in the
following order by the least amount which results in the Employee not being
subject to the Excise Tax: Total Payments payable in cash shall first be
reduced (if necessary, to zero) and Total Payments in connection with stock
options shall next be reduced. For purposes of this limitation no portion of
the Total Payments shall be taken into account that, in the opinion of tax
counsel selected by the Employee and reasonably acceptable to the Company, does
not constitute a "parachute payment" within the meaning of Section 280G(b)(2)
of the Code, including by reason of Section 280G(b)(4)(A).
(c) CERTAIN BUSINESS COMBINATIONS. In the event it is
determined by the Board, upon receipt of a written opinion of the Company's
independent public accounts, that the operation of Section 9(b) hereof would
preclude accounting for any proposed business combination of the Company
involving a Change of Control as a pooling of interests, and the Board
otherwise desires to approve such proposed business transaction as a pooling
interests, said Section shall be null and void, but only to the extent
necessary to preserve the pooling treatment.
10. DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) CAUSE. "Cause" shall mean (i) gross negligence or
willful misconduct in the performance of duties to the Company after one
written warning detailing the concerns and offering the Employee opportunities
to cure; (ii) conviction of a felony or a crime involving moral turpitude, in
either event, causing material harm to the standing and reputation of the
Company; or (iii) intentional and improper disclosure of the Company's
confidential or proprietary information which causes material harm to the
Company.
(b) CHANGE OF CONTROL. A "Change of Control" shall mean
(i) the sale, lease, conveyance or other disposition of all or substantially
all of the Company's assets as an entirety or
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<PAGE> 7
substantially as an entirety to any "person" (as such term is used in Sections
13(d) and 14(d) of Securities Exchange Act of 1934, as amended), entity or
group of persons acting in concert; (ii) any "person" becoming the "beneficial
owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing 40% or more of the total voting power
represented by the Company's then outstanding voting securities; (iii) a merger
or consolidation of the Company with any other corporation, other than a merger
or consolidation that would result in the voting securities of the Company
outstanding immediately prior thereto continue to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or its controlling entity) of at least 60% of the total voting
power represented by the voting securities of the Company or such surviving
entity (or its controlling entity) outstanding immediately after such merger or
consolidation; (iv) a change in the composition of the Board of Directors of
the Company occurring within a two (2)-year period, such that a majority of the
then current Board members ceases to be comprised of individuals who either (a)
have been Board members continuously since the beginning of such period, or (b)
have been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (a) who were
still in office at the time such election or nomination was approved by the
Board.
(c) DISABILITY. A "Disability" shall mean the Employee's
inability to substantially perform his essential job functions as the result of
a physical or mental disability or incapacity for a period of 180 days,
consecutive or otherwise, in any 360-day period.
(d) GOOD REASON. Resignation for "Good Reason" shall
mean any of the following without the Employee's written consent: (i) any
material diminution or material adverse change in the Employee's position with
the Company, duties, responsibilities or the positions that report directly to
him, (ii) a reduction by the Company in Employee's Base Salary (in which event
payments provided in Sections 8 and 9 shall be made based upon Employee's Base
Salary in effect prior to any such reduction), (iii) a material reduction in
the aggregate program of employee benefits and perquisites to which Employee is
entitled, (iv) relocation by more than 50 miles from Executive's workplace, (v)
a material decline in Executive's bonus opportunity or (vi) the failure by the
Company to elect, or the removal of, the Employee as a Director, in any event
without Cause.
11. NON-COMPETITION AND NON-SOLICITATION.
(a) For a period beginning on the Effective Date and
ending 18 months after the date on which the Employee ceases to be employed by
the Company for any reason whatsoever, the Employee, directly or indirectly,
whether as owner, sole proprietor, partner, shareholder, director, member,
consultant, agent, founder, co-venturer or otherwise, will: (i) not engage,
participate or invest in any business activity anywhere in the world which
develops, manufactures or markets products or performs services which are
competitive with the products or services of the Company at the time of the
Employee's termination, or products or services which the Company has under
development or for which are the subject of active planning at the time of the
Employee's termination; provided, however, that the Employee, may own as a
passive investor, publicly-traded securities of any corporation which competes
with the business of the Company so long as such securities do not, in the
aggregate, constitute
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<PAGE> 8
more than 5% of any class of outstanding securities of such corporations; (ii)
refrain from hiring or attempting to employ, recruiting or otherwise
soliciting, inducing or influencing any person to leave employment with the
Company or its resellers or distributors and (iii) refrain from directly or
indirectly soliciting competitive business from any of the Company's customers
and users, resellers or distributors on behalf of any business which competes
the Company.
(b) The Employee understands that the restrictions set
forth in this Section 11 are intended to protect the Company's interest in its
"proprietary information" (as defined in the Confidential Information
Agreement) and establish customer relationships in good will, and agrees that
such restrictions are reasonable and appropriate for this purpose.
(c) The Employee agrees that it would be difficult to
measure any damages caused by the Company which might result from any breach
by the Employee of the promises set forth in this Section 11, and that in any
event money damages would be an inadequate remedy for any such breach.
Accordingly, the Employee agrees that if the Employee breaches, or proposes to
breach, any portion of this Section 11, the Company shall be entitled, in
addition all other remedies that it may have, to injunction or other
appropriate equitable relief to restrain any such breach without showing or
proving any actual damage to the Company.
12. RIGHT TO ADVICE OF COUNSEL. The Employee acknowledges that he
has consulted with counsel and is fully aware of his rights and obligations
under this Agreement and of the tax consequences thereof. The Company shall
pay the legal fees incurred by the Employee in connection with the negotiation
of this Agreement up to $3,000.
13. CONFIDENTIAL INFORMATION. As a condition of Employee's
employment with the Company, the Employee shall execute the Company's standard
form of Confidential Information Agreement.
14. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. Any successor (whether direct
or indirect and whether by purchase, lease, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company," shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this
subsection (a) or which becomes bound by the terms of this Agreement by
operation of law.
(b) EMPLOYEE'S SUCCESSORS. Without the written consent
of the Company, the Employee shall not assign or transfer this Agreement or any
right or obligation under this Agreement to any other person or entity.
Notwithstanding the foregoing, the terms of this Agreement and all rights
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of the Employee hereunder shall inure to the benefit of, and be enforceable by,
the Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
15. NOTICE CLAUSE.
(a) MANNER. Any notice hereby required or permitted to
be given shall be sufficiently given if in writing and upon mailing by
registered or certified mail, postage prepaid, to either party at the address
of such party or such other address as shall have been designated by written
notice by such party to the other party.
(b) EFFECTIVENESS. Any notice or other communication
required or permitted to be given under this Agreement will be deemed given on
the day when delivered in person, or the third business day after the day on
which such notice was mailed in accordance with Section 15(a).
16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal substantive laws, but not the choice
of law rules, of the state of New York.
17. SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement, or any terms hereof, shall not affect the validity
or enforceability of any other provision or term of this Agreement.
18. INTEGRATION. Except as otherwise expressly provided otherwise
herein, this Agreement represents the entire agreement and understanding
between the parties as to the subject matter herein and supersedes all prior or
contemporaneous agreements, whether written or oral. No waiver, alteration, or
modification of any of the provisions of this Agreement shall be binding unless
in writing and signed by duly authorized representatives of the parties hereto.
19. TAXES. All payments made pursuant to this Agreement shall be
subject to withholding of applicable income and employment taxes.
20. ARBITRATION. Except for proceedings seeking injunctive
relief, including, without limitation, allegations of misappropriation of trade
secrets, copyright or patent infringements, or breach of any anti-competition
provisions of this Agreement, any controversy or claim arising out of or in
relation to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the commercial arbitration rules of the American
Arbitration Association ("AAA"), and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
Arbitration of this Agreement shall include all claims, regardless of whether
the dispute arises during the term of the Agreement, at the time of termination
or thereafter. Either party may initiate the arbitration proceedings, for
which the provision is herein made, by notifying the opposing party, in
writing, of its demand to arbitrate. In any such arbitration there shall be
appointed one arbitrator who shall be selected in accordance with the AAA
Commercial Arbitration Rules. The place of arbitration shall be New York, New
York. The parties agree that the award of the arbitrator shall be the sole and
exclusive remedy between them regarding any claims, counterclaims, issues or
accounting presented or plead to the
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arbitrator; that the arbitrator shall be the final judge of both law and fact
in arbitration of disputes arising out of or relating to this Agreement,
including the interpretation of the terms of this Agreement. The parties
further agree it shall be the sole and exclusive duty of the arbitrator to
determine the arbitrability of issues in dispute and that neither party shall
have recourse to the court of such a determination.
21. COUNTERPARTS. This Agreement may be executed by either of the
parties hereto in one or more counterparts, none of which need contain the
signature of more than one party hereto, and each of which shall be deemed to
be an original, and all of which together shall constitute a single agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by a duly authorized officer, as of the day and year
first above written.
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
Chairman
PHILLIP J. RIESE
By: /s/ Phillip J. Riese
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EXHIBIT 10.11
EMPLOYMENT
TRADE SECRET AND
NON-COMPETITION AGREEMENT
This Agreement is made and entered into as of August 27, 1996 by and
between OptiMark Technologies, Inc., a Delaware corporation (the "Company"),
and William A. Lupien (the "Officer").
WHEREAS, the Company is in the business of designing, producing and
selling methods of structuring or coordinating markets for fungible items;
WHEREAS, the Company intends its business to be world-wide in scope;
WHEREAS, in the operation of its business, the Company develops and
acquires valuable confidential information, including trade secrets, which is
essential to its commercial success;
WHEREAS, Officer is an executive of the Company; and
WHEREAS, Officer is in a position of trust and confidence in which he
will learn, develop and have access to the Company's confidential information;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company and the Officer agree as follows:
1. Confidential Information, Non-Competition and
Non-Solicitation.
(a) Definitions. As used in this Agreement,
(i) "Proprietary Information" means information
related to the Company's Business (defined below) which the Company possesses
or to which the Company has rights which has commercial value. Proprietary
Information includes, by way of example and without limitation, trade secrets,
product ideas, designs, configurations, processes, techniques, formulas, source
and object code forms of software, improvements, inventions, discoveries, data,
know-how, copyrightable materials, marketing plans and strategies, sales and
financial reports and forecasts, and customer lists. Proprietary Information
includes information discovered, conceived, prepared or developed by the
Officer in the course of the Officer's employment by the Company or otherwise
relating to Inventions and Developments which belong to the Company under
Section l(d) below, as well as other information to which the Officer may have
or had access in connection with the Officer's employment.
(ii) "Inventions and Developments" means any and
all inventions, developments, creative works and useful ideas of any
description whatsoever, whether or not patentable or copyrightable, relating to
the Company's Business.
<PAGE> 2
Inventions and Developments include, by way of example and without limitation,
discoveries or improvements which consist of or relate to any form of
Proprietary Information.
(iii) "Company-Related Inventions and Developments"
means all Inventions and Developments (but excluding any Inventions and
Development that relate to the project Pegasus) which either (A) relate at the
time of conception or development to the actual or demonstrably anticipated
business of the Company or to its actual or demonstrably anticipated research
and development; (B) result from or relate to any work performed for the
Company, whether or not during normal business hours; (C) are developed on
Company time; or (D) are developed through the use of the Company's Proprietary
Information, equipment and software, or other facilities or resources.
(iv) "Business" means the development of methods
for structuring or coordinating markets for fungible items.
(v) "Termination Without Cause" means cessation
of employment of Officer either (a) initiated by Officer (after thirty days
written notice without cure) as a direct result of (1) a substantial diminution
of his job responsibility or compensation or both or (2) his forced relocation
from Durango, Colorado, or (b) initiated by the Company other than as a direct
result of commission by Officer of a felony or a repeated failure by Officer to
discharge assigned duties.
(b) Confidentiality. The Officer understands and agrees
that the Officer's employment has created a relationship of confidence and
trust between the Officer and the Company with respect to (i) all Proprietary
Information and (ii) the confidential information of others with which the
Company has a business relationship with reasonable expectations (whether as a
result of a contract or otherwise) that such information will not be disclosed.
The information referred to in clauses (i) and (ii) of the preceding sentence
is referred to in this Agreement, collectively, as "Confidential Information."
At all times, both during the Officer's employment with the Company and after
its termination, the Officer will keep in confidence and trust all such
Confidential Information, and will not use or disclose any such Confidential
Information without the written consent of the Company, except as may be
necessary in the ordinary course of performing the Officer's duties to the
Company and except to the extent required by applicable law or court order (in
each case following notice to the Company). The restrictions set forth in this
Section l(b) will not apply to information which is or becomes known to the
public or in the trade, unless such knowledge results from an unauthorized
disclosure by the Officer, but this exception will not affect the application
of any other provision of this Agreement to such information in accordance with
the terms of such provision.
(c) Documents, Records, etc. All documents, records,
apparatus, equipment and other physical property, whether or not pertaining to
Confidential Information, furnished to the Officer by the Company or produced
by the Officer in connection with the Officer's employment will be and remain
the sole property of the
<PAGE> 3
Company. The Officer will return to the Company all such materials and
property as and when requested by the Company. In any event, the Officer will
return all such materials and property immediately upon termination of the
Officer's employment for any reason. The Officer will not retain with the
Officer any such material or property or any copies thereof after such
termination, except that one copy of any such materials may be delivered to
independent counsel for the Company to the extent the Officer deems it
reasonably necessary to preserve any of its rights hereunder, provided that
such independent counsel is reasonably acceptable to the Company, and the
Officer provides prior notice to the Company describing any such materials and
such independent counsel agrees to keep such material confidential.
(d) Ownership of Inventions and Developments. The
Officer agrees that all Company-Related Inventions and Developments which the
Officer conceives, creates, reduces to practice or develops, in whole or in
part, either alone or jointly with others, prior to or during the course of the
Officer's employment with the Company will be the sole property of the Company.
The Officer agrees that the Company will be the sole owner of all patents,
copyrights and other proprietary rights in and with respect to such
Company-Related Inventions and Developments. To the fullest extent permitted
by law, such Company-Related Inventions and Developments will be deemed works
made for hire. The Officer hereby irrevocably transfers and assigns to the
Company any proprietary rights worldwide which the Officer may have or acquire
in any such Company-Related Inventions and Developments, whether now known or
hereafter to become known. In the event Officer has any right in and to the
Company-Related Inventions and Developments that cannot be assigned to the
Company, Officer hereby unconditionally and irrevocably waives the enforcement
of all such rights, and all claims and causes of action of any kind with
respect to any of the foregoing against the Company and its customers, whether
now known or hereafter to become known, and agrees at the request and expense
of the Company, and its successors and assigns, to consent to and join in any
action to enforce such rights and to procure a waiver of such rights from the
holders of such rights. In the event Officer has any rights in and to the
Company-Related Inventions and Developments that cannot be assigned to the
Company and cannot be waived, Officer hereby grants to the Company and its
successors and assigns an exclusive, worldwide, fully paid-up, royalty free
license during the term of such rights to use, reproduce, distribute, modify,
publicly perform and publicly display, with the right to sublicense and assign,
such rights in and to the Company-Related Inventions and Developments, Officer
acknowledges and agrees that he retains no rights to the Company-Related
Inventions and Developments and agrees not to challenge the validity of the
ownership by the Company of such Company-Related Inventions and Developments.
The Officer agrees to execute any documents and take any actions that may be
required to effect and confirm such transfer and assignment and waiver. The
provisions of this Section 1(d) will apply to all Company-Related Inventions
and Developments which are conceived, created or developed during the course of
the Officer's employment with the Company, whether before or after the date of
this Agreement, and whether or not further development or reduction to practice
may take place after termination of the Officer's employment, for which purpose
it will be presumed that any Company-Related Inventions and Developments
conceived by the
<PAGE> 4
Officer which are reduced to practice within six months after termination of
the Officer's employment were conceived during the course of the Officer's
employment with the Company unless the Officer is able to establish a later
conception date by clear and convincing evidence. The provisions of this
Section l(d) will not apply, however, to any Inventions and Developments which
may be disclosed in a separate schedule attached to this Agreement prior to its
acceptance by the Company.
(e) Disclosure of Inventions and Developments. The
Officer agrees to disclose fully and promptly to the Company, or any persons
designated by it, all Company-Related Inventions and Developments which are or
may be subject to the provisions of Section l(d).
(f) Obtaining and Enforcing Proprietary Rights. The
Officer agrees to assist the Company, at the Company's request from time to
time and at the Company's expense, to obtain and enforce patents, copyrights or
other proprietary rights with respect to Company-Related Inventions and
Developments in any and all countries. The Officer will execute all documents
reasonably necessary or appropriate for this purpose. This obligation will
survive the termination of the Officer's employment, provided that the Company
will compensate the Officer at a reasonable rate after such termination for
time actually spent by the Officer at the Company's request on such assistance.
In the event that the Company is unable for any reason whatsoever to secure the
Officer's signature to any document reasonably necessary or appropriate for any
of the foregoing purposes (including renewals, extensions, continuations,
divisions or continuations in part), the Officer hereby irrevocably designates
and appoints the Company and its duly authorized officers and agents as the
Officer's agents and attorneys-in-fact to act for the Officer and on the
Officer's behalf, but only for the purpose of executing and filing any such
document and doing all other lawfully permitted acts to accomplish the
foregoing purposes with the same legal force and effect as if executed by the
Officer.
(g) Third-Party Agreements and Rights. The Officer
hereby confirms that the Officer is not bound by the terms of any agreement
with any previous company or other party which restricts in any way the
Officer's use or disclosure of information or the Officer's engagement in any
business. The Officer represents to the Company that the Officer's execution
of this Agreement, the Officer's employment with the Company and the
performance of the Officer's proposed duties for the Company will not violate
any obligations the Officer may have to any such previous company or other
party. In the Officer's work for the Company, the Officer will not disclose or
make use of any information in violation of any agreements with or rights of
any such previous company or other party, and the Officer will not bring or
transmit to the premises of the Company any copies or other tangible
embodiments or electronic versions of non-public information belonging to or
obtained from any such previous employment or other party.
(h) Non-Competition and Non-Solicitation. For a period
beginning on the date hereof and ending eighteen months after the date on which
the Officer ceases to be employed by the Company for any reason whatsoever, the
Officer, directly or indirectly, whether as owner, sole proprietor, partner,
shareholder, director, member,
<PAGE> 5
consultant, agent, founder, co-venturer or otherwise, will: (i) not engage,
participate or invest in any business activity anywhere in the world which
develops, manufactures or markets products or performs services which are
competitive with the products or services of the Company at the time of the
Officer's termination, or products or services which the Company has under
development or which are the subject of active planning at the time of the
Officer's termination; provided, however, that the Officer may own, as a
passive investor, publicly-traded securities of any corporation which competes
with the business of the Company so long as such securities do not, in the
aggregate, constitute more than 5% of any class of outstanding securities of
such corporation; (ii) refrain from hiring or attempting to employ, recruiting
or otherwise soliciting, inducing or influencing any person to leave employment
with the Company or its resellers or distributors; and (iii) refrain from
directly or indirectly soliciting competitive business from any of the
Company's customers, end users, resellers or distributors on behalf of any
business which competes with the Company. The Officer understands that the
restrictions set forth in this Section 1(h) are intended to protect the
Company's interest in its Proprietary Information and established customer
relationships and goodwill, and agrees that such restrictions are reasonable
and appropriate for this purpose.
(i) Injunction. The Officer agrees that it would be
difficult to measure any damages caused to the Company which might result from
any breach by the Officer of the promises set forth in this Agreement, and that
in any event money damages would be an inadequate remedy for any such breach.
Accordingly, the Officer agrees that if the Officer breaches, or proposes to
breach, any portion of this Agreement, the Company shall be entitled, in
addition to all other remedies that it may have, to an injunction or other
appropriate equitable relief to restrain any such breach without showing or
proving any actual damage to the Company.
(j) Termination Without Cause. In the event of
termination of Officer without Cause, as defined in Subsection 1(a)(v) above,
then
(i) The Company shall pay to Officer as his sole
and exclusive severance the amount of his base annual salary at the time of
termination, for eighteen months thereafter, payable in eighteen equal monthly
installments less applicable withholding items.
(ii) All stock options granted to Officer shall
vest and immediately be exercisable in accordance with their terms.
(iii) The Company shall loan the Officer upon his
written request, submitted within thirty days of termination, sufficient funds
to exercise, and for the sole purpose of exercising, all vested stock options.
That loan shall be represented by a promissory note with interest at the then
prime rate, without recourse and secured by a first perfected security interest
in all shares so purchased, principal and all accrued interest to be due upon
the earlier of the sale of any or all of the shares or December 31, 2005.
<PAGE> 6
In the event of the cessation of Officer's employment for any reason, including
death, except Termination Without Cause, Officer shall receive no severance.
2. Extent of Service. So long as the Officer is employed by the
Company, the Officer shall devote substantially all of the Officer's business
time, attention and energies, best efforts and business judgment, skill and
knowledge to the advancement of the Company's interests and to the discharge of
the Officer's duties and responsibilities hereunder.
3. No Employment Obligation. The Officer understands and agrees
that this Agreement does not create an obligation on the part of the Company to
continue the Officer's employment by the Company. The Officer acknowledges and
agrees that, except as expressly provided in any subsequent agreement to the
contrary, he is an employee "at will."
<PAGE> 7
4. Inclusion of Company's Subsidiaries. All references to
"Company" in this Agreement shall be deemed to include the Company and each of
its subsidiaries, as in existence from time to time.
5. Integration. This Agreement constitutes the entire agreements
between the parties with respect to the subject matter hereof and supersede all
prior agreements between the parties with respect to any related subject
matter.
6. Assignment; Successors and Assigns; Binding Effect. Neither
the Company nor the Officer may make any assignment of this Agreement or any
interest herein, by operation of law or otherwise, without the prior written
consent of the other party; provided, however, that the Company may assign its
rights under this Agreement without the consent of the Officer in the event
that the Company shall hereafter effect a reorganization, consolidate with or
merge into any other corporation, partnership, organization or other entity, or
transfer all or substantially all of its properties or assets to any other
corporation, partnership, organization or other entity in which even for
purposes of Section 1(h) hereof as used in determining the scope of the
Company's business, references to the Company shall be deemed to refer to the
Company immediately prior to such reorganization, consolidation or merger.
This Agreement shall inure to the benefit of and be binding upon the Company
and the Officer, their respective successors, executors, administrators, heirs
and permitted assigns.
7. Enforceability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as
to which it is so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
8. Waiver. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of any
party to require the
<PAGE> 8
performance of any term or obligation of this Agreement, or the waiver by any
party of any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.
9. Notices. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and delivered in person or sent by registered or certified mail, postage
prepaid, return receipt requested, to the Officer at the last address the
Officer has filed in writing with the Company or, in the case of the Company,
at its main offices, attention of the Chairman of the Board of Directors.
10. Amendment. This Agreement may be amended or modified only by
a written instrument signed by the Officer and by a duly authorized
representative of the Company.
11. Governing Law. This is a Colorado contract and shall be
construed under and be governed in all respects by the internal laws of the
State of Colorado, without giving effect to its conflicts of law principles.
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.
13. Notices. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and delivered in person or sent by registered or certified mail, postage
prepaid, return receipt requested, to the Officer at the last address the
Officer has filed in writing with the Company or, in the case of the Company,
at its main offices, attention of the Chairman of the Board of Directors.
14. Amendment. This Agreement may be amended or modified only by
a written instrument signed by the Officer and by a duly authorized
representative of the Company.
15. Governing Law. This is a Colorado contract and shall be
construed under and be governed in all respects by the internal laws of the
State of Colorado, without giving effect to its conflicts of law principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.
<PAGE> 9
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company, by its duly authorized officer, and by the Officer,
as of the date first above written.
COMPANY:
-------
OPTIMARK TECHNOLOGIES, INC.
By: /s/ John T. Rickard
-------------------
John T. Rickard, President
OFFICER:
-------
/s/ William A. Lupien
---------------------
William A. Lupien
<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT
TRADE SECRET AND
NON-COMPETITION AGREEMENT
This Agreement is made and entered into as of August 27, 1996 by and
between OptiMark Technologies, Inc., a Delaware corporation (the "Company"),
and John T. Rickard (the "Officer").
WHEREAS, the Company is in the business of designing, producing and
selling methods of structuring or coordinating markets for fungible items;
WHEREAS, the Company intends its business to be world-wide in scope;
WHEREAS, in the operation of its business, the Company develops and
acquires valuable confidential information, including trade secrets, which is
essential to its commercial success;
WHEREAS, Officer is an executive of the Company; and
WHEREAS, Officer is in a position of trust and confidence in which he
will learn, develop and have access to the Company's confidential information;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Company and the Officer agree as follows:
1. Confidential Information, Non-Competition and
Non-Solicitation.
(a) Definitions. As used in this Agreement,
(i) "Proprietary Information" means information
related to the Company's Business (defined below) which the Company possesses
or to which the Company has rights which has commercial value. Proprietary
Information includes, by way of example and without limitation, trade secrets,
product ideas, designs, configurations, processes, techniques, formulas, source
and object code forms of software, improvements, inventions, discoveries, data,
know-how, copyrightable materials, marketing plans and strategies, sales and
financial reports and forecasts, and customer lists. Proprietary Information
includes information discovered, conceived, prepared or developed by the
Officer in the course of the Officer's employment by the Company or otherwise
relating to Inventions and Developments which belong to the Company under
Section l(d) below, as well as other information to which the Officer may have
or had access in connection with the Officer's employment.
(ii) "Inventions and Developments" means any and
all inventions, developments, creative works and useful ideas of any
description whatsoever, whether or not patentable or copyrightable, relating to
the Company's Business.
<PAGE> 2
Inventions and Developments include, by way of example and without limitation,
discoveries or improvements which consist of or relate to any form of
Proprietary Information.
(iii) "Company-Related Inventions and Developments"
means all Inventions and Developments (but excluding any Inventions and
Development that relate to the project Pegasus) which either (A) relate at the
time of conception or development to the actual or demonstrably anticipated
business of the Company or to its actual or demonstrably anticipated research
and development; (B) result from or relate to any work performed for the
Company, whether or not during normal business hours; (C) are developed on
Company time; or (D) are developed through the use of the Company's Proprietary
Information, equipment and software, or other facilities or resources.
(iv) "Business" means the development of methods
for structuring or coordinating markets for fungible items.
(v) "Termination Without Cause" means cessation
of employment of Officer either (a) initiated by Officer (after thirty days
written notice without cure) as a direct result of (1) a substantial diminution
of his job responsibility or compensation or both or (2) his forced relocation
from Durango, Colorado, or (b) initiated by the Company other than as a direct
result of commission by Officer of a felony or a repeated failure by Officer to
discharge assigned duties.
(b) Confidentiality. The Officer understands and agrees
that the Officer's employment has created a relationship of confidence and
trust between the Officer and the Company with respect to (i) all Proprietary
Information and (ii) the confidential information of others with which the
Company has a business relationship with reasonable expectations (whether as a
result of a contract or otherwise) that such information will not be disclosed.
The information referred to in clauses (i) and (ii) of the preceding sentence
is referred to in this Agreement, collectively, as "Confidential Information."
At all times, both during the Officer's employment with the Company and after
its termination, the Officer will keep in confidence and trust all such
Confidential Information, and will not use or disclose any such Confidential
Information without the written consent of the Company, except as may be
necessary in the ordinary course of performing the Officer's duties to the
Company and except to the extent required by applicable law or court order (in
each case following notice to the Company). The restrictions set forth in this
Section l(b) will not apply to information which is or becomes known to the
public or in the trade, unless such knowledge results from an unauthorized
disclosure by the Officer, but this exception will not affect the application
of any other provision of this Agreement to such information in accordance with
the terms of such provision.
(c) Documents, Records, etc. All documents, records,
apparatus, equipment and other physical property, whether or not pertaining to
Confidential Information, furnished to the Officer by the Company or produced
by the Officer in connection with the Officer's employment will be and remain
the sole property of the
<PAGE> 3
Company. The Officer will return to the Company all such materials and
property as and when requested by the Company. In any event, the Officer will
return all such materials and property immediately upon termination of the
Officer's employment for any reason. The Officer will not retain with the
Officer any such material or property or any copies thereof after such
termination, except that one copy of any such materials may be delivered to
independent counsel for the Company to the extent the Officer deems it
reasonably necessary to preserve any of its rights hereunder, provided that
such independent counsel is reasonably acceptable to the Company, and the
Officer provides prior notice to the Company describing any such materials and
such independent counsel agrees to keep such material confidential.
(d) Ownership of Inventions and Developments. The
Officer agrees that all Company-Related Inventions and Developments which the
Officer conceives, creates, reduces to practice or develops, in whole or in
part, either alone or jointly with others, prior to or during the course of the
Officer's employment with the Company will be the sole property of the Company.
The Officer agrees that the Company will be the sole owner of all patents,
copyrights and other proprietary rights in and with respect to such
Company-Related Inventions and Developments. To the fullest extent permitted
by law, such Company-Related Inventions and Developments will be deemed works
made for hire. The Officer hereby irrevocably transfers and assigns to the
Company any proprietary rights worldwide which the Officer may have or acquire
in any such Company-Related Inventions and Developments, whether now known or
hereafter to become known. In the event Officer has any right in and to the
Company-Related Inventions and Developments that cannot be assigned to the
Company, Officer hereby unconditionally and irrevocably waives the enforcement
of all such rights, and all claims and causes of action of any kind with
respect to any of the foregoing against the Company and its customers, whether
now known or hereafter to become known, and agrees at the request and expense
of the Company, and its successors and assigns, to consent to and join in any
action to enforce such rights and to procure a waiver of such rights from the
holders of such rights. In the event Officer has any rights in and to the
Company-Related Inventions and Developments that cannot be assigned to the
Company and cannot be waived, Officer hereby grants to the Company and its
successors and assigns an exclusive, worldwide, fully paid-up, royalty free
license during the term of such rights to use, reproduce, distribute, modify,
publicly perform and publicly display, with the right to sublicense and assign,
such rights in and to the Company-Related Inventions and Developments, Officer
acknowledges and agrees that he retains no rights to the Company-Related
Inventions and Developments and agrees not to challenge the validity of the
ownership by the Company of such Company-Related Inventions and Developments.
The Officer agrees to execute any documents and take any actions that may be
required to effect and confirm such transfer and assignment and waiver. The
provisions of this Section 1(d) will apply to all Company-Related Inventions
and Developments which are conceived, created or developed during the course of
the Officer's employment with the Company, whether before or after the date of
this Agreement, and whether or not further development or reduction to practice
may take place after termination of the Officer's employment, for which purpose
it will be presumed that any Company-Related Inventions and Developments
conceived by the
<PAGE> 4
Officer which are reduced to practice within six months after termination of
the Officer's employment were conceived during the course of the Officer's
employment with the Company unless the Officer is able to establish a later
conception date by clear and convincing evidence. The provisions of this
Section l(d) will not apply, however, to any Inventions and Developments which
may be disclosed in a separate schedule attached to this Agreement prior to its
acceptance by the Company.
(e) Disclosure of Inventions and Developments. The
Officer agrees to disclose fully and promptly to the Company, or any persons
designated by it, all Company-Related Inventions and Developments which are or
may be subject to the provisions of Section l(d).
(f) Obtaining and Enforcing Proprietary Rights. The
Officer agrees to assist the Company, at the Company's request from time to
time and at the Company's expense, to obtain and enforce patents, copyrights or
other proprietary rights with respect to Company-Related Inventions and
Developments in any and all countries. The Officer will execute all documents
reasonably necessary or appropriate for this purpose. This obligation will
survive the termination of the Officer's employment, provided that the Company
will compensate the Officer at a reasonable rate after such termination for
time actually spent by the Officer at the Company's request on such assistance.
In the event that the Company is unable for any reason whatsoever to secure the
Officer's signature to any document reasonably necessary or appropriate for any
of the foregoing purposes (including renewals, extensions, continuations,
divisions or continuations in part), the Officer hereby irrevocably designates
and appoints the Company and its duly authorized officers and agents as the
Officer's agents and attorneys-in-fact to act for the Officer and on the
Officer's behalf, but only for the purpose of executing and filing any such
document and doing all other lawfully permitted acts to accomplish the
foregoing purposes with the same legal force and effect as if executed by the
Officer.
(g) Third-Party Agreements and Rights. The Officer
hereby confirms that the Officer is not bound by the terms of any agreement
with any previous company or other party which restricts in any way the
Officer's use or disclosure of information or the Officer's engagement in any
business. The Officer represents to the Company that the Officer's execution
of this Agreement, the Officer's employment with the Company and the
performance of the Officer's proposed duties for the Company will not violate
any obligations the Officer may have to any such previous company or other
party. In the Officer's work for the Company, the Officer will not disclose or
make use of any information in violation of any agreements with or rights of
any such previous company or other party, and the Officer will not bring or
transmit to the premises of the Company any copies or other tangible
embodiments or electronic versions of non-public information belonging to or
obtained from any such previous employment or other party.
(h) Non-Competition and Non-Solicitation. For a period
beginning on the date hereof and ending eighteen months after the date on which
the Officer ceases to be employed by the Company for any reason whatsoever, the
Officer, directly or indirectly, whether as owner, sole proprietor, partner,
shareholder, director, member,
<PAGE> 5
consultant, agent, founder, co-venturer or otherwise, will: (i) not engage,
participate or invest in any business activity anywhere in the world which
develops, manufactures or markets products or performs services which are
competitive with the products or services of the Company at the time of the
Officer's termination, or products or services which the Company has under
development or which are the subject of active planning at the time of the
Officer's termination; provided, however, that the Officer may own, as a
passive investor, publicly-traded securities of any corporation which competes
with the business of the Company so long as such securities do not, in the
aggregate, constitute more than 5% of any class of outstanding securities of
such corporation; (ii) refrain from hiring or attempting to employ, recruiting
or otherwise soliciting, inducing or influencing any person to leave employment
with the Company or its resellers or distributors; and (iii) refrain from
directly or indirectly soliciting competitive business from any of the
Company's customers, end users, resellers or distributors on behalf of any
business which competes with the Company. The Officer understands that the
restrictions set forth in this Section 1(h) are intended to protect the
Company's interest in its Proprietary Information and established customer
relationships and goodwill, and agrees that such restrictions are reasonable
and appropriate for this purpose.
(i) Injunction. The Officer agrees that it would be
difficult to measure any damages caused to the Company which might result from
any breach by the Officer of the promises set forth in this Agreement, and that
in any event money damages would be an inadequate remedy for any such breach.
Accordingly, the Officer agrees that if the Officer breaches, or proposes to
breach, any portion of this Agreement, the Company shall be entitled, in
addition to all other remedies that it may have, to an injunction or other
appropriate equitable relief to restrain any such breach without showing or
proving any actual damage to the Company.
(j) Termination Without Cause. In the event of
termination of Officer without Cause, as defined in Subsection 1(a)(v) above,
then
(i) The Company shall pay to Officer as his sole
and exclusive severance the amount of his base annual salary at the time of
termination, for eighteen months thereafter, payable in eighteen equal monthly
installments less applicable withholding items.
(ii) All stock options granted to Officer shall
vest and immediately be exercisable in accordance with their terms.
(iii) The Company shall loan the Officer upon his
written request, submitted within thirty days of termination, sufficient funds
to exercise, and for the sole purpose of exercising, all vested stock options.
That loan shall be represented by a promissory note with interest at the then
prime rate, without recourse and secured by a first perfected security interest
in all shares so purchased, principal and all accrued interest to be due upon
the earlier of the sale of any or all of the shares or December 31, 2005.
<PAGE> 6
In the event of the cessation of Officer's employment for any reason, including
death, except Termination Without Cause, Officer shall receive no severance.
2. Extent of Service. So long as the Officer is employed by the
Company, the Officer shall devote substantially all of the Officer's business
time, attention and energies, best efforts and business judgment, skill and
knowledge to the advancement of the Company's interests and to the discharge of
the Officer's duties and responsibilities hereunder.
3. No Employment Obligation. The Officer understands and agrees
that this Agreement does not create an obligation on the part of the Company to
continue the Officer's employment by the Company. The Officer acknowledges and
agrees that, except as expressly provided in any subsequent agreement to the
contrary, he is an employee "at will."
4. Inclusion of Company's Subsidiaries. All references to
"Company" in this Agreement shall be deemed to include the Company and each of
its subsidiaries, as in existence from time to time.
5. Integration. This Agreement constitutes the entire agreements
between the parties with respect to the subject matter hereof and supersede all
prior agreements between the parties with respect to any related subject
matter.
6. Assignment; Successors and Assigns; Binding Effect. Neither
the Company nor the Officer may make any assignment of this Agreement or any
interest herein, by operation of law or otherwise, without the prior written
consent of the other party; provided, however, that the Company may assign its
rights under this Agreement without the consent of the Officer in the event
that the Company shall hereafter effect a reorganization, consolidate with or
merge into any other corporation, partnership, organization or other entity, or
transfer all or substantially all of its properties or assets to any other
corporation, partnership, organization or other entity in which even for
purposes of Section 1(h) hereof as used in determining the scope of the
Company's business, references to the Company shall be deemed to refer to the
Company immediately prior to such reorganization, consolidation or merger.
This Agreement shall inure to the benefit of and be binding upon the Company
and the Officer, their respective successors, executors, administrators, heirs
and permitted assigns.
7. Enforceability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as
to which it is so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
8. Waiver. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of any
party to require the
<PAGE> 7
performance of any term or obligation of this Agreement, or the waiver by any
party of any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.
9. Notices. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and delivered in person or sent by registered or certified mail, postage
prepaid, return receipt requested, to the Officer at the last address the
Officer has filed in writing with the Company or, in the case of the Company,
at its main offices, attention of the Chairman of the Board of Directors.
10. Amendment. This Agreement may be amended or modified only by
a written instrument signed by the Officer and by a duly authorized
representative of the Company.
11. Governing Law. This is a Colorado contract and shall be
construed under and be governed in all respects by the internal laws of the
State of Colorado, without giving effect to its conflicts of law principles.
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.
13. Notices. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and delivered in person or sent by registered or certified mail, postage
prepaid, return receipt requested, to the Officer at the last address the
Officer has filed in writing with the Company or, in the case of the Company,
at its main offices, attention of the Chairman of the Board of Directors.
14. Amendment. This Agreement may be amended or modified only by
a written instrument signed by the Officer and by a duly authorized
representative of the Company.
15. Governing Law. This is a Colorado contract and shall be
construed under and be governed in all respects by the internal laws of the
State of Colorado, without giving effect to its conflicts of law principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.
<PAGE> 8
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company, by its duly authorized officer, and by the Officer,
as of the date first above written.
COMPANY:
-------
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
---------------------
William A. Lupien, Chief Executive Officer
OFFICER:
-------
/s/ John T. Rickard
-------------------
John T. Rickard
<PAGE> 1
EXHIBIT 10.13
[OPTIMARK TECHNOLOGIES, INC. LOGO] 10 Exchange Place, Jersey City, NJ 07302
- ------------------------------------------------------------------------------
BY E-MAIL AND TELEFACSIMILE
PRIVATE & CONFIDENTIAL
November 15, 1999
William F. Adiletta
66 Petty Road
Cranbury, New Jersey 08512
Re: Separation Agreement and General Release
Dear Bill:
This letter (the "Letter Agreement") confirms the termination of your
employment as Executive Vice President of OptiMark Technologies, Inc.
("OptiMark") and as President of the NASDAQ Business Division of OptiMark,
effective immediately. By signing this Letter Agreement, you agree to the
following terms and conditions:
A. Subject to the provisions of this Letter Agreement, OptiMark will
provide you with the following separation payments and benefits:
1. OptiMark will pay you as severance the amount of $450,000.00,
minus the deductions required by law, which represents the sum
of (a) twelve (12) months of your current base salary, (b) all
bonuses you received during the preceding twelve (12) month
period, and (c) $25,000 (collectively, the "Severance
Payment"). The Severance Payment will be paid to you according
to the following schedule:
(a) One-third of the Severance Payment will be paid to
you within three (3) business days of the date that
this Letter Agreement becomes effective in accordance
with its terms;
(b) One-third of the Severance Payment will be paid to you on the
first business day following January 1, 2000; and
(c) The final one-third of the Severance Payment will be paid to you
in equal semi-monthly installments, by keeping you on OptiMark's
payroll for a period of six (6) months, from January 1, 2000
through June 30, 2000 (the "Severance Period").
Your coverage, and the coverage of your eligible dependents, under OptiMark's
group health plan will continue during the Severance Period with OptiMark and
you making the same percentage of contributions as each did as of November 8,
1999. Thereafter, you may continue your coverage as part of your entitlement
under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA").
(See reference to COBRA in paragraph C.2, below.)
<PAGE> 2
2. Subject to your continued compliance with the terms and
conditions of this Letter Agreement, fifty percent (50%) of
any options granted to you pursuant to OptiMark's Incentive
Stock Agreement and OptiMark's Non-Qualified Stock Option
Agreement which were scheduled to vest after November 1, 1999
shall be treated as vested on the date hereof as if you had
remained in OptiMark's employ. In addition, you will have
until November 1, 2002, to exercise all vested options,
including those otherwise unvested options considered vested
per the preceding sentence.
3. You will be provided with a Letter of Reference that is
mutually satisfactory to you and OptiMark, which shall
indicate that the termination of your employment was due to
your voluntary resignation.
4. Except as provided in paragraph C.1 below, the separation
payments and benefits described in this Section A represent
the total amount that will be paid to you and are in lieu of
any rights to other payments or benefits which you might have
been eligible to receive as an employee of OptiMark. If you
breach any of the terms of this Letter Agreement, OptiMark
will cease making any payments or providing any benefits
recited herein.
5. You will have the option of purchasing any OptiMark equipment
currently in your possession at a price which is reflective of
OptiMark's book value and which shall be determined in
OptiMark's sole discretion.
B. IN CONSIDERATION OF OPTIMARK'S PROVIDING THOSE SEPARATION PAYMENTS AND
BENEFITS DESCRIBED IN SECTION A ABOVE, TO WHICH YOU ARE NOT OTHERWISE ENTITLED,
YOU VOLUNTARILY AGREE TO THE FOLLOWING:
1. You will sign the General Release attached hereto as Exhibit 1.
2. You will tender your written resignation from all positions
you hold with OptiMark or any of its affiliates, which shall
include your resignation from all Boards of Directors of which
you are a member and your surrender of all official titles.
3. You will return to Felice Schulaner all records and materials
you have in your possession, custody or control that are the
property of OptiMark no later than November 30, 1999, except
for property that you have elected to purchase in accordance
with Section A.6 above.
4. You will comply with all of the terms and conditions of the
Employee Agreement (Version II) that you executed on or about
July 16, 1997, which is incorporated herein and made a part of
this Letter Agreement; provided, however, that you may hire or
otherwise retain the services of any former employee of
OptiMark whose employment was involuntarily terminated by
OptiMark, subject to your and such former employee's continued
compliance with all applicable restrictions contained in the
Employee Agreement (Version II) or any similar agreement which
the former employee may have signed.
5. You will not disclose the contents or substance of this Letter
Agreement or the General Release to anyone except your
immediate family and any tax, or legal counsel you have
2
<PAGE> 3
consulted regarding the meaning or effect hereof, and you will
instruct each of the foregoing not to disclose the same.
6. You will not make any disparaging remarks about OptiMark, or
any of its present and former directors, officers, agents,
representatives or employees, to any third parties in a
business context, including current and potential clients of
OptiMark. Similarly, OptiMark, in its corporate capacity, will
not make disparaging remarks about you to any third parties in
a business context, including current and potential clients of
OptiMark.
7. You agree to make yourself reasonably available to OptiMark
and its representatives in connection with the prosecution and
defense of any legal proceedings involving matters of which
you may have relevant knowledge. OptiMark will reimburse you
for such reasonable expenses as you may incur in providing
such assistance upon your submission of appropriate
documentation.
8. Any dispute arising under this Letter Agreement shall be
resolved through arbitration sponsored by, and in accordance
with the rules of, the American Arbitration Association, with
proceedings conducted by a panel of three arbitrators in
Newark, New Jersey. In any such proceeding, the arbitration
panel may award costs and expenses (including reasonable
attorneys' fees) to the prevailing party. Notwithstanding the
foregoing, OptiMark shall remain entitled to apply to a court
of competent jurisdiction to obtain injunctive or other
equitable relief in the event of your alleged violation of
Section B.4 above, which shall be in addition to any other
remedies that may be available to OptiMark.
C. This Letter Agreement does not affect your entitlement to previously
accrued or vested benefits, which are summarized as follows:
1. You acknowledge that on November 11, 1999, you were paid the
sum of $36,778.14, minus applicable withholdings, representing
all vacation accrued but unused as of November 8, 1999.
2. Your coverage under OptiMark's group health plan will cease at
the end of the Severance Period. You will be given separate
information regarding your right to continue your coverage, as
required by COBRA.
3. Your participation in OptiMark's 401k Plan will terminate on
November 30, 1999. Your rights under these plans will be
determined by law and in accordance with the terms of the
plan. A statement of your benefits under the plans will be
provided to you separately.
By entering into this Letter Agreement, OptiMark does not admit, and
specifically denies, any liability, wrongdoing or violation of any law, statute,
regulation or policy, and it is expressly understood and agreed that this Letter
Agreement is being entered into solely for the purpose of amicably resolving all
matters in controversy of any kind whatsoever concerning your employment and the
termination of your employment. Moreover, by signing this Letter Agreement you
acknowledge that you are not currently aware of any wrongdoing on the part of
OptiMark.
3
<PAGE> 4
Because by signing this Letter Agreement and the General Release you are
releasing OptiMark from all claims you might have and you are acknowledging that
no other payments or benefits are due and owing to you, you should review both
documents carefully before signing them. You can take up to twenty-one (21) days
from your receipt of this Letter Agreement to consider its meaning and effect
and to determine whether or not you wish to enter into it. During that time, you
are advised to consult with an attorney.
To receive your separation payments and other benefits, you must sign and return
this Letter Agreement and the General Release no later than twenty-one (21) days
after receiving them. In addition, you may take up to seven (7) days after
executing both documents to revoke your signature. No payments will be made
until the revocation period has expired without your revocation. Any revocation
is requested to be in writing and delivered to OptiMark by hand and marked
"Attention: Felice Schulaner."
THE PAYMENTS AND BENEFITS DESCRIBED IN SECTION A ARE BEING OFFERED FOR THE
PURPOSE OF RESOLVING ALL MATTERS IN DISPUTE BETWEEN YOU AND OPTIMARK WITHOUT
LITIGATION. IF YOU CHOOSE NOT TO SIGN THIS LETTER AGREEMENT AND THE GENERAL
RELEASE, YOU WILL BE PAID THE AMOUNT DUE TO YOU PURSUANT TO THE EMPLOYEE
AGREEMENT (VERSION II) IN EXCHANGE FOR YOUR COMPLIANCE WITH THE TERMS AND
CONDITIONS THEREOF, BUT NO OTHER PAYMENTS OR BENEFITS WILL BE MADE OR PROVIDED
TO YOU. THE REMAINING PAYMENTS AND BENEFITS OFFERED TO YOU, HAVING BEEN OFFERED
ON THE CONDITIONS STATED, MAY NOT BE ENTERED INTO EVIDENCE OR OTHERWISE USED
AGAINST OPTIMARK IN ANY LITIGATION.
This Letter Agreement and the General Release contain the entire agreement
between the parties concerning the subject matter hereof and supersede all
prior agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, express or implied, between the parties with respect
hereto. No representations, inducements, promises or agreements not embodied
herein shall be of any force or effect. This Letter Agreement and the General
Release will be construed in accordance with and governed by the State and
Federal laws applicable in New Jersey. Neither document may be changed or
altered, except in writing signed by OptiMark and you. If any clause of this
Letter Agreement or the General Release is determined to be unenforceable, it
is agreed that this will not affect the enforceability of any other clause or
the remainder of either document.
If you have any questions about your separation benefits, please contact Felice
Schulaner at 201-536-7111.
Very truly yours,
/s/ Phillip Riese
Chief Executive Officer
Agreed to and Accepted By:
/s/ William F. Adiletta
Date: November 15, 1999
4
<PAGE> 5
GENERAL RELEASE
BY
WILLIAM F. ADILETTA
I, WILLIAM F. ADILETTA, in consideration of and subject to the terms
and conditions set out in the letter ("Letter Agreement") to which this General
Release is attached, and other good and valuable consideration, do hereby
release and forever discharge OPTIMARK TECHNOLOGIES, INC. ("OptiMark") and all
of its offices, branches, parents, subsidiaries and affiliates and its present
and former directors, officers, agents, representatives, employees, successors
and assigns, from any and all actions, causes of action, covenants, contracts,
claims and demands whatsoever, which I ever had, now have or which my heirs,
executors, administrators and assigns, or any of them hereafter can, shall or
may have by reason of my employment with or severance of my employment from
OptiMark on or about the 8th day of November, 1999.
By signing this General Release, I am providing a complete waiver of
all rights and claims that may have arisen, whether known or unknown, up until
the time this General Release is signed. This includes, but is not limited to,
claims based on Title VII of the Civil Rights Act of 1964, the Civil Rights Act
of 1866, the Age Discrimination in Employment Act of 1967 (including the Older
Workers Benefit Protection Act), the Americans with Disabilities Act, the Fair
Labor Standards Act, the Equal Pay Act, the Family and Medical Leave Act, the
Employee Retirement Income Security Act of 1974, the New Jersey Law Against
Discrimination, the New Jersey Labor Laws or any common law, public policy,
contract (whether oral or written, express or implied) or tort law, and any
other local, state or federal law, regulation or ordinance having any bearing
whatsoever on the terms and conditions of my employment and the cessation
thereof. However, I am not releasing any claims I may have that OptiMark
breached the Letter Agreement to which this General Release is attached.
In addition to waiving my right to file any charge or complaint on my
own behalf, I am waiving my right to participate in any charge or complaint
which may be made by any other person or organization on my behalf before any
federal, state or local court or administrative agency against OptiMark, except
as such waiver is prohibited by law and except to the extent that such
participation is ordered by subpoena or by a court of competent jurisdiction.
Should any charge be filed, I agree that I will not accept any relief or
recovery therefrom.
I hereby represent that neither I nor anyone acting on my behalf has
filed or will file any action, complaint, charge, grievance or arbitration or
commenced any proceeding, administrative or judicial, against OptiMark or any of
its past or present offices, branches, parents, subsidiaries and affiliates or
its past or present directors, officers, agents, representatives, employees,
successors or assigns.
I have been given twenty-one (21) days to review the Letter Agreement
and this General Release and to consult with legal counsel, and I am signing
this General Release knowingly, voluntarily and with full understanding of its
terms and effects, and I voluntarily accept the amounts provided for in the
Letter Agreement for the purpose of making full and final settlement of all
claims referred to above. I also understand that this General Release will not
become effective if I revoke my signature within seven (7) days of execution.
The Letter Agreement and this General Release will be governed by and
construed in accordance with the State and Federal laws applicable in the State
of New Jersey. If any provision in the Letter Agreement or this General Release
is held invalid or unenforceable for any reason, the
5
<PAGE> 6
remaining provisions shall be construed as if the invalid or unenforceable
provision had not been included.
In witness hereof, I have executed this General Release this 15th day of
November, 1999.
/s/ William F. Adiletta
State of New York )
) ss.:
County of New York )
On this 15th day of November, 1999, before me, a Notary Public of the State of
New York, personally appeared William F. Adiletta to me known and known to me
to be the person described and who executed the foregoing Letter Agreement and
General Release and did then and there acknowledge to me that he voluntarily
executed the same.
/s/ Muriel B. Finkelstein
Notary Public, State of New York
No. 31-4735274
Qualified in New York County
Commission Expires April 30, 2001
<PAGE> 1
EXHIBIT 10.14
OPTIMARK TECHNOLOGIES, INC.
RESTRICTED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of December 1, 1998, between OptiMark
Technologies, Inc., a Delaware corporation (the "Company"), and Phillip J.
Riese (the "Purchaser").
WHEREAS in order to give the Purchaser an opportunity to acquire an
equity interest in the Company as an incentive for the Purchaser to participate
in the affairs of the Company, the Company is willing to sell to the Purchaser
and the Purchaser desires to purchase shares of Common Stock according to the
terms and conditions contained in the Employment Agreement between the
Purchaser and the Company effective as of November 1, 1998 (the "Employment
Agreement") and the Amended and Restated Stockholders Agreement dated April 23,
1998, as amended, among the Company and the signatories to such Agreement (the
"Stockholders Agreement") and herein.
THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the
Purchaser and the Purchaser hereby agrees to purchase an aggregate of 100,000
shares of the Company's Common Stock, par value $.01 per share (the "Shares"),
at the price of $10.00 per share for an aggregate purchase price of $1,000,000.
2. Payment of Purchase Price.
(a) The purchase price for the Shares may be paid by
delivery to the Company at the time of execution of this Agreement of cash,
check, duly executed full recourse promissory note in the form attached hereto
as Exhibit A (the "Note"), or any combination thereof.
(b) With respect to the Note, the parties agree to the
following:
(i) The Note shall become payable in full upon
the earlier of (i) November 1, 1999 or (ii) fifteen (15) days following
termination of Purchaser's employment with the Company for any reason.
(ii) The Purchaser shall deliver to the Company
(the "Escrow Holder") all certificates representing the Shares and two executed
blank stock assignments, in the form attached hereto as Exhibit B, for use in
transferring all or a portion of said Shares to the Company, as required under
this Section 2(b) or under any other provision of this Agreement including
Section 3.
(iii) Upon full payment by the Purchaser of all
amounts due on Purchaser's Note, the Escrow Holder shall deliver to the
Purchaser the certificate or certificates representing the Shares in the Escrow
Holder's possession belonging to the Purchaser, the blank stock assignment and
the executed original of the Note marked "canceled" by the Company, and the
Escrow Holder shall be
<PAGE> 2
discharged of all further obligations hereunder; provided, however, that the
Escrow Holder shall nevertheless retain said certificate or certificates and
stock assignment as escrow agent if so required pursuant to other restrictions
imposed pursuant to this Agreement.
3. Repurchase Requirement. If, prior to November 1, 1999 (i) the
Company terminates the Purchaser's employment for "Cause," or (ii) the
Purchaser terminates his employment voluntarily other than for "Good Reason"
(as those terms are defined in the Employment Agreement), the Company shall,
within 90 days from such termination date, repurchase all (but not less than
all) of the Shares that shall constitute the Unreleased Shares (as defined in
Section 4) at such time, at the original purchase price of $10.00 per share
(the "Repurchase Price"). Such repurchase shall be effected by the Company by
written notice to the Purchaser (with a copy to the Escrow Holder) and, at the
Company's option, (i) by delivery to the Purchaser with such notice of a check
in the amount of the purchase price for the Shares being repurchased, or (ii)
by cancellation by the Company of an amount of the Purchaser's indebtedness to
the Company equal to the purchase price for the Shares being repurchased, or
(iii) by a combination of (i) and (ii) so that the combined payment and
cancellation of indebtedness equals the aggregate Repurchase Price. Upon
delivery of such notice and the payment of the purchase price in any of the
ways described above, the Company shall become the legal and beneficial owner
of the Shares being repurchased and all rights and interests therein or
relating thereto, and the Company shall have the right to retain and transfer
to its own name the number of Shares being repurchased by the Company.
4. Release of Shares From Repurchase Requirement.
(a) Shares shall be released from the Company's
repurchase requirement on November 1, 1999, provided the Purchaser is employed
by the Company on such date, or, if earlier, upon termination of the
Purchaser's employment with the Company (i) by the Company for any reason other
than "Cause," (ii) by the Purchaser for "Good Reason," or (iii) as a result of
Purchaser's death or "Disability" (as such terms are defined in the Employment
Agreement).
(b) Any of the Shares that have not yet been released
from the Company's repurchase requirement are referred to herein as "Unreleased
Shares."
(c) The Shares that (i) have been released from the
Company's repurchase requirement and (ii) have been paid for in full, shall be
delivered to the Purchaser at the Purchaser's request.
5. Restriction on Transfer. None of the Shares or any beneficial
interest therein shall be transferred, encumbered or otherwise disposed of in
any manner, except for the deposit of the Shares with the Company pursuant to
Section 2 hereof or the release of the Shares to the Company pursuant to
Section 3 hereof, until the release of such Shares from the Company's
repurchase requirement in accordance with the provisions of this Agreement.
6. Stock Adjustments. If after the date of issuance of the
Shares to the Purchaser under this Agreement the Company shall issue any
additional shares of its Common Stock to holders of such Common Stock, by way
of dividend or stock split or other distribution, or if any shares of capital
stock
<PAGE> 3
or other securities or other consideration of the Company or of any other
corporation are issued in exchange for, or with respect to, the Shares issued
hereunder pursuant to any recapitalization, merger, sale of assets, liquidation
or other reorganization (collectively, "Reorganization"), regardless of whether
the Company shall survive such Reorganization, all of such Shares , capital
stock and other securities or other consideration shall be treated as if they
were Shares acquired by the Purchaser under this Agreement and shall be ratably
subject to all provisions of this Agreement (including, without limitation, the
Company's Repurchase Requirement) as if they were Shares issued to the
Purchaser hereunder.
7. Investment Representations. In connection with the purchase
of the Shares, the Purchaser represents to the Company the following:
(a) The Purchaser is aware of the Company's business
affairs and financial condition and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the
securities. The Purchaser is purchasing these securities for investment for
the Purchaser's own account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the
Securities Act of 1933, as amended (the "Securities Act").
(b) Purchaser acknowledges and understands that the
Securities constitute "restricted securities" under the Securities Act and have
not been registered under the Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona
fide nature of Purchaser's investment intent as expressed herein. Purchaser
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser further acknowledges and understands that
the Company is under no obligation to register the Securities.
8. Stock Certificate Legends.
(a) Purchaser understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the
Shares together with any other legends that may be required by the Company or
by applicable state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR THE SECURITIES
LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT AND APPLICABLE SECURITIES LAWS OR PURSUANT TO A
WRITTEN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND A
<PAGE> 4
REPURCHASE REQUIREMENT HELD BY THE ISSUER OR ITS ASSIGNEE(S)
AS SET FORTH IN THE RESTRICTED STOCK PURCHASE AGREEMENT
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A
COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE
ISSUER. SUCH TRANSFER RESTRICTIONS AND REPURCHASE REQUIREMENT
ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Purchaser agrees that, in
order to ensure compliance with the restrictions referred to herein, the
Company may issue appropriate "stop transfer" instructions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be
required (i) to transfer on its books any Shares that have been sold or
otherwise transferred in violation of any of the provisions of this Agreement
or (ii) to treat as owner of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall have
been so transferred.
9. Tax Consequences. The Purchaser has reviewed with the
Purchaser's own tax advisors the federal, state, local and foreign tax
consequences of this investment and the transactions contemplated by this
Agreement. The Purchaser is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents. The
Purchaser understands that the Purchaser (and not the Company) shall be
responsible for the Purchaser's own tax liability that may arise as a result of
this investment or the transactions contemplated by this Agreement. The
Purchaser understands that Section 83 of the Internal Revenue Code of 1986, as
amended (the "Code"), taxes as ordinary income the difference between the
amount paid for the Shares and the fair market value of the Shares as of the
date any restrictions on the Shares lapse. In this context, "restriction"
includes the obligation of the Company to buy back the Shares pursuant to its
repurchase requirement. The Purchaser understands that the Purchaser may elect
to be taxed at the time the Shares are purchased rather than when and as the
Company's repurchase requirement lapses by filing an election under Section
83(b) of the Code with the I.R.S. within 30 days from the date of purchase.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO
MAKE THIS FILING ON THE PURCHASER'S BEHALF.
10. General Provisions.
(a) This Agreement shall be governed by the laws of the
State of New York as they apply to contracts entered into and wholly to be
performed in such state. This Agreement, together with the Employment
Agreement and the Stockholders Agreement, represent the entire agreement
between
<PAGE> 5
the parties with respect to the purchase of Common Stock by the Purchaser and
may only be modified or amended in writing signed by both parties.
(b) Any dispute, claim or controversy of any kind
(including but not limited to tort, contract and statute) arising on or before
November 1, 1999 under, in connection with, or relating to this Agreement,
shall at the request of either party be resolved exclusively by arbitration in
accordance with Section 20 of the Employment Agreement.
(c) All notices, demands or other communications provided
for or permitted hereunder shall be made in writing and shall be registered or
certified first class mail, return receipt requested, courier service, outright
mail or personal delivery:
If to the Company:
------------------
OptiMark Technologies, Inc.
530 Main Avenue
Durango, CO 81301
Attention: William A. Lupien
If to the Purchaser:
--------------------
Phillip J. Riese
141 Prince Street, Apt. 4
New York, NY 10012
(d) The rights and benefits of the Company under this
Agreement shall be transferable in the case of a sale of substantially all of
the assets of the Company to any one or more persons or entities, and all
covenants and agreements hereunder shall inure to the benefit of, and be
enforceable by the Company's successors and assigns. The rights and
obligations of the Purchaser under this Agreement may only be assigned with the
prior written consent of the Company.
(e) Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party thereafter from
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
(f) The Purchaser agrees upon request to execute any
further documents or instruments necessary or desirable to carry out the
purposes or intent of this Agreement.
(g) Purchaser acknowledges and agrees that this Agreement
and the transactions contemplated hereunder do not constitute an express or
implied promise of continued engagement as an employee or consultant for any
period, or at all, and shall not interfere with Purchaser's right or the
<PAGE> 6
Company's right to terminate Purchaser's employment or consulting relationship
at any time, with or without cause.
(h) Purchaser has reviewed this Agreement in its
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Agreement and fully understands all provisions of this
Agreement.
(i) This Agreement may be executed by either of the
parties hereto in one or more counterparts, none of which need contain the
signature of more than one party hereto, and each of which shall be deemed an
original, and all of which together shall constitute a single agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first set forth above.
<TABLE>
<S> <C>
OPTIMARK TECHNOLOGIES, INC. PURCHASER: Phillip J. Riese
a Delaware corporation
By: /s/ William A. Lupien By: /s/ Phillip J. Riese
------------------------------------------ -----------------------------------------
(Signature)
Title: Chairman
--------------------------------------------
(Type or Print Name) 141 Prince Street
---------------------------------------------------
New York
---------------------------------------------------
(Address)
</TABLE>
<PAGE> 1
EXHIBIT 10.15
OPTIMARK TECHNOLOGIES, INC.
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of December 18, 1998, between OptiMark
Technologies, Inc., a Delaware corporation (the "Company"), and Phillip J.
Riese (the "Purchaser").
WHEREAS in order to give the Purchaser an opportunity to acquire an
equity interest in the Company as an incentive for the Purchaser to participate
in the affairs of the Company, the Company is willing to sell to the Purchaser
and the Purchaser desires to purchase shares of Common Stock according to the
terms and conditions contained in the Employment Agreement between the
Purchaser and the Company effective as of November 1, 1998 (the "Employment
Agreement") and the Amended and Restated Stockholders Agreement dated April 23,
1998, as amended, among the Company and the signatories to such Agreement (the
"Stockholders Agreement") and herein.
THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the
Purchaser and the Purchaser hereby agrees to purchase an aggregate of 250,000
shares of the Company's Common Stock, par value $.01 per share (the "Shares"),
at the price of $10.00 per share for an aggregate purchase price of $2,500,000.
2. Payment of Purchase Price. The purchase price for the Shares
may be paid by delivery to the Company at the time of execution of this
Agreement of cash, check, or any combination thereof.
3. Investment Representations. In connection with the purchase
of the Shares, the Purchaser represents to the Company the following:
(a) The Purchaser is aware of the Company's business
affairs and financial condition and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the
securities. The Purchaser is purchasing these securities for investment for
the Purchaser's own account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the
Securities Act of 1933, as amended (the "Securities Act").
(b) Purchaser acknowledges and understands that the
Securities constitute "restricted securities" under the Securities Act and have
not been registered under the Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona
fide nature of Purchaser's investment intent as expressed herein. Purchaser
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser further acknowledges and understands that
the Company is under no obligation to register the Securities.
<PAGE> 2
4. Stock Certificate Legends. Purchaser understands and agrees
that the Company shall cause the legend set forth below or a legend
substantially equivalent thereto, to be placed upon any certificate(s)
evidencing ownership of the Shares together with any other legends that may be
required by the Company or by applicable state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR THE SECURITIES
LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT AND APPLICABLE SECURITIES LAWS OR PURSUANT TO A
WRITTEN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
5. Tax Consequences. The Purchaser has reviewed with the
Purchaser's own tax advisors the federal, state, local and foreign tax
consequences of this investment and the transactions contemplated by this
Agreement. The Purchaser is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents. The
Purchaser understands that the Purchaser (and not the Company) shall be
responsible for the Purchaser's own tax liability that may arise as a result of
this investment or the transactions contemplated by this Agreement.
6. General Provisions.
(a) This Agreement shall be governed by the laws of the
State of New York as they apply to contracts entered into and wholly to be
performed in such state. This Agreement, together with the Employment
Agreement and the Stockholders Agreement, represent the entire agreement
between the parties with respect to the purchase of Common Stock by the
Purchaser and may only be modified or amended in writing signed by both
parties.
(b) All notices, demands or other communications provided
for or permitted hereunder shall be made in writing and shall be registered or
certified first class mail, return receipt requested, courier service, outright
mail or personal delivery:
If to the Company:
------------------
OptiMark Technologies, Inc.
530 Main Avenue
Durango, CO 81301
Attention: William A. Lupien
If to the Purchaser:
---------------------
Phillip J. Riese
<PAGE> 3
141 Prince Street, Apt. 4
New York, NY 10012
(c) The rights and benefits of the Company under this
Agreement shall be transferable in the case of a sale of substantially all of
the assets of the Company to any one or more persons or entities, and all
covenants and agreements hereunder shall inure to the benefit of, and be
enforceable by the Company's successors and assigns. The rights and
obligations of the Purchaser under this Agreement may only be assigned with the
prior written consent of the Company.
(d) Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party thereafter from
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
(e) The Purchaser agrees upon request to execute any
further documents or instruments necessary or desirable to carry out the
purposes or intent of this Agreement.
(f) Purchaser acknowledges and agrees that this Agreement
and the transactions contemplated hereunder do not constitute an express or
implied promise of continued engagement as an employee or consultant for any
period, or at all, and shall not interfere with Purchaser's right or the
Company's right to terminate Purchaser's employment or consulting relationship
at any time, with or without cause.
(g) Purchaser has reviewed this Agreement in its
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Agreement and fully understands all provisions of this
Agreement.
<PAGE> 4
(h) This Agreement may be executed by either of the
parties hereto in one or more counterparts, none of which need contain the
signature of more than one party hereto, and each of which shall be deemed an
original, and all of which together shall constitute a single agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first set forth above.
<TABLE>
<S> <C>
OPTIMARK TECHNOLOGIES, INC. PURCHASER: Phillip J. Riese
a Delaware corporation
By: /s/ William A. Lupien By: /s/ Phillip J. Riese
------------------------------------------------ -----------------------------------------------------
(Signature)
Title: Chairman
--------------------------------------------
(Type or Print Name) 141 Prince Street
-------------------------------------------------------
New York, NY 10012
-------------------------------------------------------
(Address)
</TABLE>
<PAGE> 1
EXHIBIT 10.16
STOCK OPTION AGREEMENT
THIS AGREEMENT is made this 1st day of November, 1998, by and between
OptiMark Technologies, Inc., a Delaware corporation (hereinafter referred to as
"Employer"), and Phillip J. Riese (hereinafter referred to as "Employee").
WHEREAS, Employee is a valued and trusted employee of Employer, or of
a subsidiary of Employer, and Employer considers it desirable and in its best
interest that Employee be given an inducement to acquire a proprietary interest
in Employer, as an added incentive to advance the interests of Employer, by
giving Employee an option to purchase common stock of Employer in accordance
with the Incentive Stock Option Plan (hereinafter referred to as the "Plan")
adopted by the Board of Directors of Employer's predecessor on July 15, 1994,
and approved by the shareholders of Employer's predecessor as of July 15, 1994,
and adopted by Employer as its own plan on July 29, 1996;
NOW, THEREFORE, IT IS AGREED BY AND BETWEEN EMPLOYER AND EMPLOYEE AS
FOLLOWS:
1. OPTION GRANTED. Employer hereby and herein grants Employee an
option to purchase 1,000,000 shares of OptiMark Technologies, Inc., common
stock, which shall become exercisable as to 200,000 of the option shares on or
after each of the five succeeding anniversary dates of the execution of this
Agreement, provided that Employee is employed by Employer or a subsidiary of
Employer (hereinafter also referred to as "Employer") on the applicable
anniversary date, beginning on November 1, 1999, and ending on November 1,
2003, in the manner described below and subject to the conditions contained
herein. Subject to Section 6 herein, the option shall have a term of ten (10)
years, and notwithstanding anything in this Agreement to the contrary, no
option granted herein shall be exercisable at any time after ten (10) years
have passed from the date this option is granted.
2. EXERCISE PRICE OF OPTION. Employee shall be entitled to exercise
the option granted herein at a purchase price of ten dollars ($10.00) per
share, said price being the fair market value of a share of Employer's common
stock on the date the option is granted.
3. CUMULATIVENESS OF OPTION. The right to exercise the option
granted herein is cumulative, so that if Employee does not exercise his/her
option at the moment the option is first exercisable, as described in Paragraph
1 hereof, his/her right to exercise the same shall not lapse, but shall
continue, subject to the other conditions contained in this Agreement, until
such time as the option shall terminate, as described herein.
4. EXERCISE OF OPTION. Subject to the other conditions contained in
this Agreement, exercise of the option granted herein shall be made by the
giving of written notice to Employer by Employee. Such written notice shall be
deemed sufficient for purposes of this Agreement only if such notice is
delivered by registered or certified mail to Employer at its principal office,
states the number of shares with respect to which the option is being
exercised, and further
<PAGE> 2
states the date, not more than ninety (90) days after the date of such notice,
on which the shares of stock shall be taken up and payment therefor shall be
made. If payment is not received within the ninety (90) days after the date of
such notice, the written notice shall be deemed null and void.
The payment for shares of stock taken up pursuant to an
exercise of the option granted herein shall be made in cash or certified check
at the principal office of Employer or at any office of a transfer agent
appointed for the shares of the stock of Employer. Upon an exercise of the
option granted herein in compliance with the provisions of this paragraph, and
upon the receipt by Employer or its transfer agent of payment for the stock so
taken up, Employer shall deliver or cause to be delivered to Employee so
exercising his/her option a certificate or certificates for the number of
shares of stock with respect to which the option is so exercised and payment is
so made.
Employee hereby agrees that, if so requested by Employer or any
representative of the underwriters (the "Managing Underwriter") in connection
with any registration of the offering of any securities of Employer under the
Securities Act of 1933, as amended (the "Securities Act"), Employee shall not
sell or otherwise transfer any option shares or any securities of Employer
during the 180-day period (or such other period as may be requested in writing
by the Managing Underwriter and agreed to in writing by Employer) (the "Market
Standoff Period") following the effective date of a registration statement of
Employer filed under the Securities Act. Such restriction shall apply only on
the first registration statement of Employer to become effective under the
Securities Act that includes securities to be sold on behalf of Employer to the
public in an underwritten public offering under the Securities Act. Employer
may impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such Market Standoff Period.
5. TRANSFER OF OPTION. The option granted herein shall not be
transferred by Employee, other than by will or the laws of descent and
distribution, and shall be exercisable, during his/her lifetime, only by
Employee. Notwithstanding the above, in the event of Employee's death, the
representative of Employee's estate, or the person who received by bequest or
inheritance the right to exercise such option, may exercise the option to the
same extent as if the option were being exercised by the decedent, and subject
to the same conditions as the decedent, except as otherwise noted herein.
6. TERMINATION OF EMPLOYMENT.
(a) Upon termination of Employee's employment by the Employer
for other than Cause (as such term is defined in the employment agreement
between the Employer and the Employee effective as of November 1, 1998 (the
"Employment Agreement")) or by the Employee for Good Reason (as defined in the
Employment Agreement), (i) 60% of the option shall vest if such termination
occurs prior to November 1, 2001, (ii) 80% shall vest if such termination
occurs on or after November 1, 2001 but prior to November 1, 2002, and (iii)
100% shall vest if such termination occurs on or after November 1, 2002 and, in
each case, shall remain exercisable for 90 days following such termination.
For purposes of the preceding sentence, the applicable vesting percentage shall
include any portion of the option vested prior to such termination.
-2-
<PAGE> 3
(b) Upon the termination of Employee's employment by the
Employer for Cause, disability or death, or by Employee without Good Reason,
any option, or part thereof, that is not exercisable as of the date the
Employee's employment so terminates (hereinafter referred to as "Termination
Date"), shall also terminate. As to any option, or part thereof, which is
exercisable on the Termination Date:
(i) in the event of Employee's disability (within
the meaning of Section 22(e)(3) of the Internal Revenue Code) while employed by
Employer, any option, or part thereof, granted to Employee under the Plan,
which is exercisable on the Termination Date and not previously exercised or
otherwise expired, shall be exercisable at any time within one (1) year from
the date Employee's employment so terminates;
(ii) in the event of Employee's death while
employed by Employer, any option, or part thereof, granted to Employee under
the Plan, which is exercisable on the Termination Date and not previously
exercised or otherwise expired, shall be exercisable at any time within six (6)
calendar months from the date of Employee's death;
(iii) in the event Employee's employment with
Employer is terminated by Employee without Good Reason, any option, or part
thereof, granted to Employee under the Plan, which is exercisable on the
Termination Date and not previously exercised or otherwise expired, shall be
exercisable at any time within ninety (90) days from the date employment so
terminates; or
(iv) in the event Employee's employment with
Employer is terminated by Employer for Cause, any option, or part thereof,
granted to Employee under the Plan, which is exercisable on the Termination
Date and not previously exercised or otherwise expired, shall be exercisable at
any time within thirty (30) days from the date employment so terminates.
7. CHANGE OF CONTROL.
(a) In the event of a Change of Control (as defined in the
Employment Agreement), (i) 100% of the option shall vest if the Change of
Control occurs prior to November 1, 1999, (ii) 75% of the option shall vest if
the Change of Control occurs on or after November 1, 1999 but prior to November
1, 2000, (iii) 60% of the option shall vest if the Change of Control occurs on
or after November 1, 2000 but prior to November 1, 2001, (iv) 80% of the option
shall vest if the Change of Control occurs on or after November 1, 2001 but
prior to November 1, 2002, and (v) 100% of the option shall vest if the Change
of Control occurs on or after November 1, 2002. For purposes of the preceding
sentence, the applicable vesting percentage shall include any portion of the
option that is vested prior to such Change of Control.
(b) In the event Employee's employment is terminated by
OptiMark (or its successor) without Cause or by Employee with Good Reason
within one year following a Change in Control, the option shall become fully
vested and exercisable, and shall remain exercisable for 90 days following such
termination.
8. OWNERSHIP OF STOCK. Employee will not be deemed to be a holder of
any shares as to which this option is granted, and shall have none of the
rights of a shareholder as to any
-3-
<PAGE> 4
of the shares as to which this option is granted, until payment of the option
price by him/her and delivery of a stock certificate to him/her for such
shares, and then shall be deemed a holder of shares with the corresponding
shareholder rights only as to the number of shares for which Employee has paid
and a stock certificate delivered. Except as otherwise provided in this
Agreement, no adjustment shall be made for dividends or other rights for which
the record date is prior to the date such stock certificate is delivered.
All shares taken up by Employee pursuant to any exercise of
the option granted herein shall be registered in the name of Employee or in the
name of Employee jointly with his/her spouse. Nothing contained herein,
however, shall be construed to prohibit any shares taken up by Employee
pursuant to any exercise of the option granted herein from being registered in
the name of a trust pursuant to a qualified 401(k) plan or qualified family,
living or similar trust wherein the beneficiary of such plan or trust is
Employee or Employee and his/her heirs.
9. LIMITATION ON EXERCISE. The option granted herein may not be
exercised if the issuance of shares of common stock of Employer upon such
exercise would constitute a violation of any applicable Federal or State
securities or other laws. Employee, as a condition to his/her exercise of this
option, shall represent to Employer that the shares of common stock of Employer
that Employee acquires under this option are being acquired by and for Employee
for investment and not with a present view to distribution or resale, unless
counsel for Employer is of the opinion that such a representation is not
required under the Securities Act of 1933 or any other applicable law,
regulation or rule of any governmental agency or private regulating body.
Furthermore, the option granted herein shall be subject to the requirement that
if at any time Employer shall determine, in its sole discretion, that the
listing, registration or qualification of the shares covered thereby under any
State or Federal law, or the consent of or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such option, or the issue or purchase thereunder, such
option shall not be exercised in whole or in part unless and until such
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any condition not acceptable to Employer.
10. EFFECTIVE DATE OF PLAN. The Plan became effective in accordance
with Section 15 therein.
11. ACKNOWLEDGEMENT. Employee acknowledges receipt of a copy of the
Plan, a copy of which is annexed hereto, and represents that he/she is familiar
with the terms and provisions thereof. The Plan is incorporated herein by
reference. Employee hereby accepts this option subject to all the terms and
provisions of the Plan. Employee hereby agrees to accept, as binding,
conclusive and final, all decisions and interpretations of the Board of
Directors of Employer upon any question arising under the Plan. The Plan, this
agreement and the Employment Agreement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Employer and Employee
with respect to the subject matter hereof, and may not be modified adversely to
the Employee's interest except by means of a writing signed by the Employer and
Employee. As a condition to the issuance of shares of common stock of Employer
under this option, Employee authorizes Employer to withhold, in accordance with
applicable law, from any regular cash compensation payable to him, any taxes
-4-
<PAGE> 5
required to be withheld by Employer under Federal, State or local law as a
result of his exercise of this option. This agreement is governed by the
internal substantive laws, but not the choice of law rules, of Colorado.
Signed and sealed on the date first above written with intent
to be legally bound.
EMPLOYER
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
Chairman
EMPLOYEE
By: /s/ Phillip J. Riese
-5-
<PAGE> 1
EXHIBIT 10.17
STOCK OPTION AGREEMENT
THIS AGREEMENT is made this 1st day of November, 1998, by and between
OptiMark Technologies, Inc., a Delaware corporation (hereinafter referred to as
"Employer"), and Phillip J. Riese (hereinafter referred to as "Employee").
WHEREAS, Employee is a valued and trusted employee of Employer, or of a
subsidiary of Employer, and Employer considers it desirable and in its best
interest that Employee be given an inducement to acquire a proprietary interest
in Employer, as an added incentive to advance the interests of Employer, by
giving Employee an option to purchase common stock of Employer in accordance
with the Incentive Stock Option Plan (hereinafter referred to as the "Plan")
adopted by the Board of Directors of Employer's predecessor on July 15, 1994,
and approved by the shareholders of Employer's predecessor as of July 15, 1994,
and adopted by Employer as its own plan on July 29, 1996;
NOW, THEREFORE, IT IS AGREED BY AND BETWEEN EMPLOYER AND
EMPLOYEE AS FOLLOWS:
1. OPTION GRANTED. Employer hereby and herein grants Employee an option
to purchase 200,000 shares of OptiMark Technologies, Inc., common stock, subject
to the conditions contained herein. Subject to Section 5 herein, the option
shall have a term of ten (10) years, and notwithstanding anything in this
Agreement to the contrary, no option granted herein shall be exercisable at any
time after ten (10) years have passed from the date this option is granted.
2. EXERCISE PRICE OF OPTION. Employee shall be entitled to exercise
the option granted herein at a purchase price of ten dollars ($10.00) per share,
said price being the fair market value of a share of Employer's common stock on
the date the option is granted.
3. EXERCISE OF OPTION. Subject to the other conditions contained in
this Agreement, exercise of the option granted herein shall be made by the
giving of written notice to Employer by Employee. Such written notice shall be
deemed sufficient for purposes of this Agreement only if such notice is
delivered by registered or certified mail to Employer at its principal office,
states the number of shares with respect to which the option is being exercised,
and further states the date, not more than ninety (90) days after the date of
such notice, on which the shares of stock shall be taken up and payment therefor
shall be made. If payment is not received within the ninety (90) days after the
date of such notice, the written notice shall be deemed null and void.
The payment for shares of stock taken up pursuant to an exercise of the
option granted herein shall be made in cash or certified check at the principal
office of Employer or at any office of a transfer agent appointed for the shares
of the stock of Employer. Upon an exercise of the option granted herein in
compliance with the provisions of this paragraph, and upon the receipt by
Employer or its transfer agent of payment for the stock so taken up, Employer
shall deliver or cause to be delivered to Employee so exercising his/her option
a certificate or certificates for the number of shares of stock with respect to
which the option is so exercised and payment is so made.
<PAGE> 2
4. TRANSFER OF OPTION. The option granted herein shall not be
transferred by Employee, other than by will or the laws of descent and
distribution, and shall be exercisable, during his/her lifetime, only by
Employee. Notwithstanding the above, in the event of Employee's death, the
representative of Employee's estate, or the person who received by bequest or
inheritance the right to exercise such option, may exercise the option to the
same extent as if the option were being exercised by the decedent, and subject
to the same conditions as the decedent, except as otherwise noted herein.
5. TERMINATION OF EMPLOYMENT. Upon termination of Employee's
employment by the Employer:
(a) by reason of Employee's disability (within the meaning of
Section 22(e)(3) of the Internal Revenue Code) while employed by Employer, the
option, to the extent not previously exercised or otherwise expired, shall be
exercisable at any time within one (1) year from the date Employee's employment
so terminates;
(b) by reason of Employee's death while employed by Employer, the
option, to the extent not previously exercised or otherwise expired, shall be
exercisable at any time within six (6) calendar months from the date of
Employee's death;
(c) by Employee without Good Reason (as such term is defined in
the employment agreement between the Employer and the Employee effective as of
November 1, 1998 (the "Employment Agreement")), the option, to the extent not
previously exercised or otherwise expired, shall be exercisable at any time
within ninety (90) days from the date employment so terminates;
(d) by reason of termination by Employer for Cause (as defined in
the Employment Agreement), the option, to the extent not previously exercised or
otherwise expired, shall be exercisable at any time within thirty (30) days from
the date employment so terminates;
(e) by reason of termination by Employer other than Cause or by
Employee for Good Reason (as such terms are defined in the Employment
Agreement), the option, to the extent not previously exercised or otherwise
expired, shall be exercised at any time within ninety (90) days following the
date employment so terminates.
6. OWNERSHIP OF STOCK. Employee will not be deemed to be a holder of
any shares as to which this option is granted, and shall have none of the rights
of a shareholder as to any of the shares as to which this option is granted,
until payment of the option price by him/her and delivery of a stock certificate
to him/her for such shares, and then shall be deemed a holder of shares with the
corresponding shareholder rights only as to the number of shares for which
Employee has paid and a stock certificate delivered. Except as otherwise
provided in this Agreement, no adjustment shall be made for dividends or other
rights for which the record date is prior to the date such stock certificate is
delivered.
All shares taken up by Employee pursuant to any exercise of the
option granted herein shall be registered in the name of Employee or in the name
of Employee jointly with his/her
- 2 -
<PAGE> 3
spouse. Nothing contained herein, however, shall be construed to prohibit any
shares taken up by Employee pursuant to any exercise of the option granted
herein from being registered in the name of a trust pursuant to a qualified
401(k) plan or qualified family, living or similar trust wherein the beneficiary
of such plan or trust is Employee or Employee and his/her heirs.
Employee hereby agrees that, if so requested by Employer or
any representative of the underwriters (the "Managing Underwriter") in
connection with any registration of the offering of any securities of Employer
under the Securities Act of 1933, as amended (the "Securities Act"), Employee
shall not sell or otherwise transfer any option shares or any securities of
Employer during the 180-day period (or such other period as may be requested in
writing by the Managing Underwriter and agreed to in writing by Employer) (the
"Market Standoff Period") following the effective date of a registration
statement of Employer filed under the Securities Act. Such restriction shall
apply only on the first registration statement of Employer to become effective
under the Securities Act that includes securities to be sold on behalf of
Employer to the public in an underwritten public offering under the Securities
Act. Employer may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such Market Standoff
Period.
7. LIMITATION ON EXERCISE. The option granted herein may not be
exercised if the issuance of shares of common stock of Employer upon such
exercise would constitute a violation of any applicable Federal or State
securities or other laws. Employee, as a condition to his/her exercise of this
option, shall represent to Employer that the shares of common stock of Employer
that Employee acquires under this option are being acquired by and for Employee
for investment and not with a present view to distribution or resale, unless
counsel for Employer is of the opinion that such a representation is not
required under the Securities Act of 1933 or any other applicable law,
regulation or rule of any governmental agency or private regulating body.
Furthermore, the option granted herein shall be subject to the requirement that
if at any time Employer shall determine, in its sole discretion, that the
listing, registration or qualification of the shares covered thereby under any
State or Federal law, or the consent of or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such option, or the issue or purchase thereunder, such
option shall not be exercised in whole or in part unless and until such listing,
registration, qualification, consent, or approval shall have been effected or
obtained free of any condition not acceptable to Employer.
8. EFFECTIVE DATE OF PLAN. The Plan became effective in accordance
with Section 15 therein.
9. ACKNOWLEDGEMENT. Employee acknowledges receipt of a copy of the
Plan, a copy of which is annexed hereto, and represents that he/she is familiar
with the terms and provisions thereof. The Plan is incorporated herein by
reference. Employee hereby accepts this option subject to all the terms and
provisions of the Plan. Employee hereby agrees to accept, as binding, conclusive
and final, all decisions and interpretations of the Board of Directors of
Employer upon any question arising under the Plan. The Plan, this agreement and
the Employment Agreement constitute the entire agreement of the parties with
respect to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Employer and Employee with respect to the
- 3 -
<PAGE> 4
subject matter hereof, and may not be modified adversely to the Employee's
interest except by means of a writing signed by the Employer and Employee. As a
condition to the issuance of shares of common stock of Employer under this
option, Employee authorizes Employer to withhold, in accordance with applicable
law, from any regular cash compensation payable to him, any taxes required to be
withheld by Employer under Federal, State or local law as a result of his
exercise of this option. This agreement is governed by the internal substantive
laws, but not the choice of law rules, of Colorado.
Signed and sealed on the date first above written with intent to be
legally bound.
EMPLOYER
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
Chairman
EMPLOYEE
By: /s/ Phillip J. Riese
- 4 -
<PAGE> 1
EXHIBIT 10.21
LICENSE TERMINATION AGREEMENT
This License Termination Agreement ("Agreement") is made effective as of
March 19, 1999 by and between OptiMark Technologies, Inc., having its principal
offices at 10 Exchange Place Center, 12th Floor, Jersey City, NJ 07302 (referred
to in this Agreement as "Licensor"), and High Performance Markets, Ltd. having
its principal offices at 530 Main Avenue, Durango, Colorado, 81301 (referred to
in this Agreement as "Licensee").
Licensor and Licensee wish to terminate a July 31, 1996, License
Agreement between Licensor and Licensee (the "License Agreement") wherein
Licensor granted to Licensee an exclusive, fully paid-up, perpetual, worldwide
license to make, have made, use, sell and distribute products, systems and
services under the Patent Applications for use within and only within the
Non-Securities Industry Field (the "License"). Terms not defined herein have the
meaning ascribed to them in the License Agreement.
1. TERMINATION OF LICENSE.
In consideration of the foregoing premises, the mutual promises
undertaken herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Licensor and Licensee agree as
follows:
A. License Termination. On or before the thirtieth day after the date set
forth above (the "Closing Date"):
(i) The License and the License Agreement, including but not limited
to all licenses and sublicenses granted and maintenance services being provided
or to be provided thereunder, are terminated in its and their entirety, and
Licensee will have no further rights or obligations whatsoever pursuant to such
License Agreement.
(ii) Licensee shall return to Licensor the original and all copies of
all software and documentation furnished by Licensor to Licensee pursuant to the
License Agreement. Licensee shall also delete and destroy, and if requested by
Licensor, provide a certificate from an officer of Licensee attesting to such
deletion and destruction, all copies of such software and documentation residing
on any computer storage devices in Licensee's possession or control.
(iii) Promptly upon receipt of the returned software and documentation
and the officer's certificate referred to in Section A (ii) above, Licensor
shall issue to Licensee 2,000,000 shares (the "Shares") of Licensor's common
stock, $.01 par value per share ("Common Stock"), subject to the restrictions
contained herein.
B. Certificate of Compliance. The representations and warranties by Licensor
and Licensee set forth in Sections 2 and 3 hereof, respectively, shall be true,
correct and certified as such in writing on and as of the Closing Date.
<PAGE> 2
C. Opinion of Licensee's Counsel. As a condition to Licensor's obligation to
deliver the shares on the Closing Date, which condition is waivable by Licensor,
Licensor shall have received an opinion, addressed to Licensor and dated the
Closing Date, of Holland & Hart LLP, special counsel to DH Management, Inc., a
Colorado corporation, Licensee's general partner, in form and substance as set
forth on Exhibit A hereto.
D. Amended and Restated Promissory Note; Surrender of Original Note. On the
Closing Date, the parties hereto shall execute and deliver an amended Business
Promissory Note in the form and substance as set forth on Exhibit B hereto,
amending and restating that certain Business Promissory Note dated May 31, 1996,
in the principal amount of $650,000 made in favor of Licensor by Licensee (the
"Original Note"). The Original Note shall be surrendered to Licensee for
cancellation, or in the absence of the Original Note, Licensor shall deliver to
Licensee an acceptable declaration of lost instrument and indemnity.
E. Cancellation of Security Agreement. Effective on and as of the Closing
Date, that certain Security Agreement dated May 31, 1996, made in favor of
Licensor by Licensee will be, by operation of this Agreement and without further
action by the parties hereto, cancelled in its entirety and be of no further
force or effect, and Licensor shall execute and deliver to Licensee a
Termination Statement with respect thereto.
2. REPRESENTATIONS OF LICENSOR. Licensor hereby represents that:
A. Corporate Authority.This Agreement and the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Licensor, its officers, directors and shareholders. This Agreement
constitutes, when executed and delivered pursuant hereto, the valid and binding
obligation of Licensor, enforceable in accordance with its terms (except to the
extent that enforcement thereof is affected by laws pertaining to bankruptcy,
reorganization, insolvency and creditors' rights and by the availability of
injunctive relief, specific performance and other equitable remedies).
B. Organization of Licensor. Licensor is a corporation duly organized and
validly existing in good standing under the laws of the State of Delaware, with
full corporate power and authority (i) to enter into this Agreement, and (ii) to
carry out the other transactions and agreements contemplated hereby.
C. Shares. Upon the issuance and delivery of the Shares to the Licensee in
accordance with this Agreement, such shares will constitute legally and validly
authorized and issued, fully paid, and nonassessable shares of Common Stock, and
are not subject to any liens, claims, encumbrances, options, restrictions on
voting or other restrictions, except those imposed by applicable securities laws
and those imposed by this Agreement.
D. No Litigation. There is no action, suit, proceeding or investigation
pending or currently threatened against Licensor which questions the validity of
this Agreement or the right of Licensor to enter into it or to consummate the
transactions contemplated hereby.
-2-
<PAGE> 3
3. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF LICENSEE. Licensee hereby
represents, warrants, and covenants, the following:
A. Authority.
(i) This Agreement and the transactions contemplated hereby have been
duly authorized by all necessary action on the part of Licensee, its general
partner, Licensee's limited partners, and the officers, directors and
shareholders of Licensee's general partner. Licensee has the power to enter into
this Agreement and perform the obligations of Licensee contemplated hereunder.
This Agreement constitutes, when executed and delivered pursuant hereto, the
valid and binding obligation of Licensee, enforceable in accordance with its
terms (except to the extent that enforcement thereof is affected by laws
pertaining to bankruptcy, reorganization, insolvency and creditors' rights and
by the availability of injunctive relief, specific performance and other
equitable remedies).
(ii) Licensee is under to no statutory requirement to seek the consent
of its limited partner (and Durango Holdings, Ltd. is under no statutory
requirement to seek the consent of its limited partners) to effect the
termination of the License Agreement as contemplated herein. In addition,
Licensee represents that Durango Holdings, Ltd. is under no requirement pursuant
to the Limited Partnership Agreement of Durango Holdings, Ltd. dated May 31,
1996, as in effect on the date hereof, to obtain the consent of the limited
partners of Durango Holdings, Ltd. to effect the termination of the License
Agreement as contemplated herein.
B. License Free and Clear. On the Closing Date, Licensee will have good and
marketable title to the License, and the License will be free and clear of any
liens, claims, encumbrances, mortgages, pledges, restrictions, security
interests and options, licenses, or sublicenses of any kind or nature granted
by, or otherwise made by, Licensee, or otherwise arising as a result of
Licensee's ownership interest in the License, except for the Sublicense
Agreement dated April 22, 1998, between Licensee and Licensor (the
"Sublicense"). Immediately upon termination of the License and the License
Agreement pursuant to this Agreement, good and marketable title to the License
(except for the Sublicense), and the intellectual property licensed under the
License Agreement free and clear of any liens, claims, encumbrances, mortgages,
pledges, restrictions, security interests and options, licenses, or sublicenses
of any kind or nature (except for the Sublicense) granted by, or otherwise made
by, Licensee, or otherwise arising as a result of Licensee's ownership interest
in the License will be transferred to Licensor. Licensee represents and warrants
that, except for the Sublicense, Licensee has not granted any licenses or
sublicenses under, nor assigned, all or any part of the rights or intellectual
property licensed under the License Agreement.
C. No Conflicts. Neither the execution and delivery by Licensee of this
Agreement, nor the consummation by Licensee of the transactions contemplated
hereby, will conflict with or result in a breach of any of the terms, conditions
or provisions of Licensee's partnership agreement or formation documents.
D. Release and Discharge. Licensee for itself and its successors and assigns
fully and unconditionally releases and forever discharges Licensor and
Licensor's directors, officers,
-3-
<PAGE> 4
employees, attorneys, agents, representatives and insurers, and its and their
respective successors and assigns ("Licensor Parties"), from and against any and
all claims, contentions, debts, liabilities, demands, promises, agreements,
costs, expenses (including but not limited to attorneys' fees), damages, actions
or causes of action, of whatever kind or nature, whether known or unknown
(collectively "Losses"), based on, arising out of or in connection with actions
taken by Licensor, or any failures of Licensor to act, relating to the License
Agreement or the intellectual property licensed thereby. Licensee covenants to
defend, indemnify and hold harmless, for a period of one year from the Closing
Date, Licensor Parties, collectively and/or individually, from and against, and
pay or reimburse such parties for any and all such Losses arising from any
failure of any of Licensee's representations herein to be true and correct on
the Closing Date, and arising from any breach of warranty made by Licensee
herein or failure of performance of any covenant or agreement of Licensee made
herein. In addition to the covenant to defend, indemnify and hold harmless
contained in the immediately preceding sentence, Licensee covenants to defend,
indemnify and hold harmless, in perpetuity, Licensor Parties collectively and/or
individually, from and against, and pay or reimburse such parties for any and
all such Losses arising from, or related to, the License, or the intellectual
property licensed thereunder, being subject to, or encumbered by, any license or
sublicense of any kind or nature granted by, or otherwise made by, Licensee,
except for the Sublicense.
E. Investment Experience. Licensee is experienced in evaluating and
investing in private placement transactions of securities in companies similar
to Licensor. Licensee has the capacity to protect its own interests in
connection with the receipt of the Shares from Licensor and is capable of
evaluating the merits and risks of an investment in Licensor by reason of
Licensee's (i) pre-existing personal or business relationship with Licensor or
any of its officers, directors or control persons, or (ii) business and
financial knowledge and experience.
F. Economic Risk. Licensee understands all of the risks related to the
investment in the Shares and that such investment will be speculative. Licensee
is able, without impairing Licensee's financial condition, to hold the Shares
for an indefinite period of time and to suffer a complete loss of Licensee's
investment.
G. Investment Intent. Licensee is acquiring the Shares for investment for
its own account, not as a nominee or agent, and not with the view to, or for
resale in connection with, any distribution thereof. Licensee understands that
the Shares have not been, and will not be, registered under the Act by reason of
a specific exemption from the registration provisions of the Act, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of Licensee's representations expressed
herein.
H. No Dissolution or Distribution. Licensee agrees that for a period of one
year and one day from the Closing Date, it will not take any action, its general
partner will not adopt any resolution or take any action, and no other of
Licensee's representatives will adopt any resolution or take any action, to
dissolve Licensee or to distribute the Shares to its partners or their
successors or assigns.
-4-
<PAGE> 5
I. No Plan to Distribute. Licensee's termination of the License and the
License Agreement hereunder is not part of any past, current, or contemplated
plan to distribute the shares acquired by Licensee hereby to any party, whether
by a distribution to its partners or otherwise.
J. Rule 144. Licensee acknowledges that the Shares must be held indefinitely
unless subsequently registered under the Act or unless an exemption from such
registration is available. Licensee is aware of the provisions of Rule 144
promulgated under the Act which permit limited resale of shares purchased in a
private placement subject to the satisfaction of certain conditions, including,
among other things, the existence of a public market for the shares, the
availability of certain current public information about Licensor, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold, the sale being effected through a "broker's transaction" or
in transactions directly with a "market maker" and the number of shares being
sold during any three-month period not exceeding specified limitations.
K. Public Market. Licensee understands that no public market now exists for
any of the securities issued by Licensor and that Licensor has made no
assurances that a public market will ever exist for Licensor's securities.
L. Access to Data. Licensee has had an opportunity to discuss Licensor's
business, management and financial affairs with Licensor's management and has
also had an opportunity to ask questions of Licensor's officers, which questions
were answered to Licensee's satisfaction.
M. Tax Treatment. Licensee acknowledges that the transactions contemplated
by this Agreement shall be treated as taxable transactions under the Internal
Revenue Code of 1986, as amended.
N. No Litigation. There is no action, suit, proceeding or investigation
pending or currently threatened against Licensee or its general partner which
questions the validity of this Agreement or the right of Licensee to enter into
it, or to consummate the transactions contemplated hereby, or which might result
in any encumbrance on the License.
4. LEGENDS.
A. Legends. It is understood that the certificates evidencing the Shares may
bear one or all of the following legends:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR, IF REASONABLY REQUESTED, AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY SUCH THAT REGISTRATION IS NOT REQUIRED. THIS
CERTIFICATE REPRESENTING THE SECURITIES MUST BE SURRENDERED TO THE COMPANY OR
ITS TRANSFER AGENT PRIOR TO ANY TRANSFER OF ANY INTEREST IN THE SECURITIES
REPRESENTED BY THIS CERTIFICATE.
-5-
<PAGE> 6
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER CONTAINED IN AN AGREEMENT BETWEEN THE HOLDER HEREOF AND
THE ISSUER OF THE SECURITIES. THE SECURITIES REPRESENTED BY THIS CERTIFICATE
CANNOT BE TRANSFERRED, EXCEPT IN COMPLIANCE WITH SUCH AGREEMENT, A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE ISSUER.
Licensor need not record a transfer of Shares, unless the conditions
specified in the foregoing legends are satisfied. Licensor may also instruct its
transfer agent not to record the transfer of any of the Shares unless the
conditions specified in the foregoing legends are satisfied.
B. Removal of Legends and Transfer Restrictions. The legend relating to the
Securities Act of 1933, as amended (the "Act") endorsed on a share certificate
pursuant to paragraph 4. A of this Agreement shall be removed, and Licensor
shall issue a certificate without such legend to the holder of such securities
if such Shares are registered under the Act or if such holder provides to
Licensor an opinion of counsel for such holder of the Shares reasonably
satisfactory to Licensor, or a no-action letter or interpretive opinion of the
staff of the SEC to the effect that a public sale, transfer or assignment of
such Shares may be made without registration and without compliance with any
restriction such as Rule 144. The legend relating to the contractual
restrictions endorsed on a share certificate pursuant to paragraph 4. A of this
Agreement shall be removed, when the conditions have been satisfied, and
Licensor shall issue a certificate without such legend to the holder of such
securities.
5. MISCELLANEOUS.
A. Successors and Assigns. This Agreement is and shall be binding upon and
inure to the benefit of the parties hereto and their predecessors and successors
in interest. This Agreement and the rights and obligations hereunder may not be
assigned by Licensee without the prior approval of Licensor, such approval not
to be unreasonably withheld.
B. Complete Agreement. This Agreement contains the entire agreement between
the parties and supersedes any written or oral agreements, understandings or
communications concerning the subject matter hereof.
C. Governing Law. This Agreement shall be interpreted and enforced according
to the laws of the State of Colorado, without reference to its conflict of laws
rules.
D. Indemnification Not Exclusive Remedy. The indemnification provided by
Section 3D hereof is not Licensor's exclusive remedy for any claims arising
under or related to any misrepresentation of Licensee or breach by Licensee of
its warranties or covenants hereunder. All other remedies at law or in equity
are not affected by Licensor's right to indemnification hereunder, provided that
Licensor shall not be entitled to recover more than once for each Loss suffered.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be signed by their duly authorized representatives, and this
Agreement shall be effective as of the date first set forth above.
<TABLE>
<CAPTION>
OptiMark Technologies, Inc. High Performance Markets, Ltd.
(Licensor) (Licensee)
<S> <C>
By: DH Management, Inc., its General Partner
By: /s/ Christopher J. Walsh By: /s/ Alan S. Danson
--------------------- --------------------
Name: Christopher J. Walsh Name: Alan S. Danson
------------------------ --------------------
Title: Vice President Title: President
------------------
</TABLE>
-7-
<PAGE> 8
EXHIBIT B TO LICENSE TERMINATION AGREEMENT
-8-
<PAGE> 9
AMENDED BUSINESS PROMISSORY NOTE
$650,000.00 Original Date: May 31, 1996
Amendment Date: March 22, 1999
Durango, Colorado
FOR VALUE RECEIVED, the undersigned High Performance Markets, Ltd., a
Colorado limited partnership formerly named OptiMark, Ltd. and OptiMark
Licensing, Ltd. ("HPM"), hereby promises to pay to the order of OptiMark
Technologies, Inc., a Delaware corporation, as successor to MJT Holdings, Inc.,
a California corporation, or any subsequent holder of this Note (the "Holder"),
the principal sum of Six Hundred Fifty Thousand Dollars and No Cents (U.S.
$650,000.00), with interest thereon as provided below.
1. Interest. Prior to any default, interest shall accrue from May 31,
1996 (the "Original Date") on the outstanding principal balance of this Note at
the fixed rate of five and forty-five hundredths percent (5.45%) per annum.
Following any default, interest shall accrue on the outstanding principal
balance hereof at the fixed rate of twelve percent (12%) per annum. Interest
shall compound annually on each anniversary of the Original Date of this Note.
2. Payments. Payment of all outstanding principal and interest shall
be due on this Note on the earlier of (i) May 31, 2005 or (ii) the sale,
exchange, delivery, assignment, pledge or other disposition by HPM, in the
aggregate, of more than 200,000 shares of OptiMark
-9-
<PAGE> 10
Technologies, Inc. common stock ("OptiMark Stock"), constituting ten percent
(10%) of the OptiMark Stock acquired in connection with the License Termination
Agreement dated on or approximately on the Amendment Date ("Due Date").
Following May 31, 2001, quarterly payments of accrued interest only shall be
payable in arrears. If not earlier paid, all principal and accrued interest
shall be due and payable on the earlier of (i) the Due Date or (ii) May 31,
2005.
3. Prepayments. HPM may freely prepay this Note at its
option, in whole or in part, at any time without penalty. On April 30, 1999, HPM
shall prepay all or a portion of the outstanding principal and interest to the
extent of all of its available cash or other liquid assets in excess of its
reasonably anticipated future legal, accounting and administrative expenses. Any
prepayments shall be applied first to accrued interest, then to principal.
4. Collection Costs. In the event of any default, Holder shall
be entitled to all of its costs of collection of this Note, including reasonable
attorneys' fees.
5. Negative Covenants. HPM shall not at any time create, incur,
assume or suffer to exist any pledge, lien, deed of trust, security interest,
charge or other encumbrance or security arrangement of any nature whatsoever on
any of its property other than 200,000 shares of OptiMark Stock, constituting
ten percent (10%) of the OptiMark Stock acquired in connection with the License
Agreement. HPM shall not at any time sell, distribute, or otherwise transfer any
of the OptiMark Stock (other than up to 200,000 shares of OptiMark Stock
acquired in connection with the License Termination Agreement) prior to the full
payment of all outstanding principal and accrued
-10-
<PAGE> 11
interest hereunder.
6. Recourse. THIS NOTE IS MADE WITH FULL RECOURSE BY THE HOLDER
AGAINST HPM, ITS SUCCESSORS OR ASSIGNS.
7. General. HPM waives demand, presentment, dishonor, notice of
dishonor and all other procedural prerequisites to enforcement of this Note to
the maximum extent permitted by law. This Note shall be governed by the laws of
the State of Colorado.
IN WITNESS WHEREOF, HPM has executed this Amended Business Promissory
Note as of the Amendment Date set forth above.
High Performance Markets, Ltd., a Colorado
limited partnership
By: DH Management, Inc., a Colorado
corporation, its General Partner
By: /s/ Alan S. Danson
President
-11-
<PAGE> 1
EXHIBIT 10.22
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE. THE
SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO A
WRITTEN OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
- OPTIMARK TECHNOLOGIES, INC. -
COMMON STOCK PURCHASE WARRANT
526,000 shares (subject to adjustment)
August 27, 1996
FOR VALUE RECEIVED, the receipt and sufficiency of which are
acknowledged, this Common Stock Purchase Warrant ("this Warrant") certifies that
The Pacific Stock Exchange Incorporated, a Delaware corporation, its successors
and permitted assigns (generally, "Holder") is entitled to subscribe for and
purchase from OptiMark Technologies, Inc., a Delaware corporation (the
"Company"), up to Five Hundred Twenty Six Thousand (526,000) fully paid and
nonassessable shares (subject to potential adjustment as noted below, the
"Warrant Shares") of the common stock of the Company ("Common Stock"). This
Warrant is subject to the following terms and conditions:
1. DEFINITIONS. For purposes of this Warrant, in addition to
terms defined elsewhere herein, the following terms shall have the indicated
meanings:
(a) "Additional Shares of Common Stock" shall mean any and all
shares of Common Stock (including, without limitation, Common Stock issuable
upon exercise, conversion or exchange of Convertible Securities) issued by the
Company after the date of this Warrant, whether or not subsequently reacquired
or retired by the Company; provided, however, that the term "Additional Shares
of Common Stock" does not include (i) Warrant Shares issued or issuable upon
exercise of this Warrant, (ii) Common Stock issued or issuable upon exercise of
Outstanding Options, or (iii) Common Stock issued or issuable upon conversion of
the Series A Preferred Stock.
(b) "Affiliate" of a Holder means any natural person,
corporation or other entity that controls, is controlled by, or is under common
control with the Holder.
(c) "Common Stock" means shares of the Company's presently or
subsequently authorized Common Stock and any stock into which such Common Stock
may hereafter be exchanged or substituted.
(d) "Convertible Securities" means any rights, warrants
or options for the purchase of, or stock or other securities (including,
without limitation, evidences of
<PAGE> 2
indebtedness) convertible into, or exchangeable for, Additional Shares of
Common Stock, other than this Warrant, the Series A Preferred Stock and the
Outstanding Options.
(e) "Effective Price" when used with reference to an issue or
sale of Additional Shares of Common Stock means the quotient determined by
dividing the total number of Additional Shares of Common Stock in such issue
which were issued or sold, or deemed to have been issued or sold, by the Company
under Section 5(e) into the aggregate consideration received or deemed to have
been received by the Company for such issue or sale, or deemed issue or sale,
under Section 5(e) hereof.
(f) "Exchange" means any domestic securities exchange
registered under Section 6 of the Securities Exchange Act of 1934, including but
not limited to the Pacific Exchange, or any foreign securities exchange
registered, licensed or otherwise authorized as such under the laws of any other
country.
(g) "Exchange After-Hours Commencement Date" means the first
day on which any Exchange is making OptiMark-Securities Available with respect
to at least 50% of the total number of issues of equity securities traded on
such Exchange after its normal trading hours.
(h) "Exchange Listed Equities Commencement Date" means the
first day on which any Exchange is making OptiMark-Securities Available with
respect to at least 50% of the total number of issues of listed equity
securities traded on such Exchange during its normal trading hours.
(i) "Exchange Options Commencement Date" means the first day
on which any Exchange is making OptiMark-Securities Available with respect to at
least 50% of the total number of issues of equity options traded on such
Exchange.
(j) "Exchange UTP Commencement Date" means the first day on
which any Exchange is making OptiMark-Securities Available with respect to at
least 50% of the total number of issues of equity securities traded on such
Exchange with unlisted trading privileges (UTP).
(k) "Exercise Price" means the purchase price per Warrant
Share, as adjusted from time to time pursuant to Section 5 hereof, required
under the terms of this Warrant to exercise this Warrant and acquire Common
Stock pursuant to such exercise.
(l) "FMV" of a share of Common Stock means (i) in connection
with any effective registration under the Securities Laws and public sale of
Common Stock by the Company, the gross offering price per share to the public,
or otherwise (ii) if there exists a public market for the Common Stock, the
average of the closing bid and asked prices of the Common Stock quoted in the
Over-The-Counter Market Summary or the last reported sale price of the Common
Stock or the closing price quoted on any Exchange on which the Common Stock is
listed, as published in the Western Edition of The Wall Street Journal, for the
five (5) trading days immediately preceding the date of
<PAGE> 3
determination of FMV, or otherwise (iii) the fair market value thereof
determined in good faith by the Board of Directors of the Company.
(m) "Fully Diluted" means computed on the assumption that all
outstanding Convertible Securities (including but not limited to Outstanding
Options) that are then convertible or exercisable are converted or exercised,
without regard to whether such Convertible Securities are "in the money".
(n) "Investors" means General Atlantic Partners 35, Ltd., GAP
Coinvestment Partners, Ltd., State Street Boston Corporation, Dow Jones &
Company, Inc., and Alice L. Walton.
(o) "Issuance Date" means the date of this Warrant set forth
above.
(p) "IPO Effectiveness Date" means the date on which the
Company commences its initial offer for sale of shares of Common Stock pursuant
to an effective registration statement filed under the Securities Act of 1933,
as amended.
(q) Making "Available", as applied to OptiMark-Securities and
the Pacific Exchange and/or Other Exchanges, means that the necessary
communications between OptiMark-Securities and the relevant systems of the
Pacific Exchange and/or such Other Exchanges have been established such that
users have the ability to utilize OptiMark-Securities subject to entering into a
User Agreement with the Company and/or its Affiliates. Notwithstanding the use
of such phrases in this Warrant, PSE is not providing or offering to provide
OptiMark-Securities to users, either directly or indirectly.
(r) "OptiMark-Securities" means the market structuring
technology and related software which is generally described as
"OptiMark-Securities" in the PSE-OptiMark Agreement, including all derivatives,
releases and subsequent versions of such technology and software, regardless of
platform or operating media.
(s) "Outstanding Options" means (i) currently outstanding
options and warrants granted by the Company to employees and former employees to
purchase up to 320,000 shares of Common Stock, and a currently outstanding
warrant granted by the Company in favor of Alan S. Danson to purchase up to
50,000 shares of Common Stock, all at an exercise price of $6.00 per share (with
the number of shares and the exercise price therefor subject to potential
anti-dilution and other adjustments as currently provided therein), (ii) any
Convertible Securities issued by the Company to the current holders of such
options and warrants, with respect to the same number or fewer shares, with the
same or any greater exercise price, in substitution or replacement of any of the
foregoing, and (iii) the right of future grantees to purchase up to 491,567
shares of Common Stock reserved for issuance upon exercise of ungranted options
under the Company's Incentive Stock Option Plan (as such Plan may be amended
from time to time), at an exercise price not less than $6.00 per share, subject
to appropriate adjustment for all subdivisions and combinations.
<PAGE> 4
(t) "Pacific Exchange" means the registered national
securities exchange operated by PSE.
(u) "PSE" means The Pacific Stock Exchange Incorporated, i.e.,
the initial Holder.
(v) "PSE After-Hours Commencement Date" means the first day on
which the Pacific Exchange is making OptiMark-Securities Available with respect
to at least 50% of the total number of issues of equity securities traded on the
Pacific Exchange after hours; provided, however, that if (i) the PSE After-Hours
Commencement Date has not earlier occurred, and (ii) OptiMark-Securities and all
necessary PSE Interfaces have been completed under the PSE-OptiMark Agreement
for after-hours trading on the Pacific Exchange, then the PSE After-Hours
Commencement Date shall occur on the date on which PSE notifies the Company of
PSE's desire to make OptiMark-Securities Available for such after-hours trading,
without regard to whether the Company has allowed PSE to make
OptiMark-Securities Available for such after-hours trading.
(w) "PSE Listed Equities Commencement Date" means the first
day on which the Pacific Exchange is making OptiMark-Securities Available with
respect to at least 50% of the total number of issues of listed equity
securities traded on the Pacific Exchange during its normal trading hours.
(x) "PSE Options Commencement Date" means the first day on
which the Pacific Exchange is making OptiMark-Securities Available with respect
to at least 50% of the total number of issues of equity options traded on the
Pacific Exchange.
(y) "PSE-OptiMark Agreement" means the PSE-OptiMark
Agreement of even date between PSE and the Company.
(z) "PSE UTP Commencement Date" means the first day on which
the Pacific Exchange is making OptiMark-Securities Available with respect to at
least 50% of the total number of issues of equity securities traded on the
Pacific Exchange with unlisted trading privileges (UTP).
(aa) "Registration Rights Agreement" means the Registration
Rights Agreement of even date among the Company, PSE and the Investors.
(bb) "Revenue Sharing Agreement" means the Revenue Sharing
Agreement of even date between the Company and PSE.
(cc) "Securities Laws" means the Securities Act of 1933, as
amended, and any applicable state securities ("blue sky") laws.
<PAGE> 5
(dd) "Series A Preferred Stock" means the Company's Series A
Convertible Participating Preferred Stock issued and issuable to the Investors
under the Stock Purchase Agreement.
(ee) "Stock Purchase Agreement" means the Stock Purchase
Agreement of even date among the Company and the Investors.
(ff) "Stockholders Agreement" means the Stockholders Agreement
of even date among the Company, the Investors, the Voting Committee Members and
certain stockholders of the Company.
(gg) "Warrant Expiration Date" means the earlier to occur of
(i) December 31, 2010, or (ii) two years following the IPO Effectiveness Date;
provided, however, that the Warrant Expiration Date shall not occur until and
unless the Company has given at least thirty (30) days' prior notice to Holder
of (A) the pendency of the Warrant Expiration Date and (B) if there exists no
public market for the Common Stock, the FMV of the Common Stock; and provided
further, however, that the Warrant Expiration Date shall not occur prior to
December 31, 2005.
(hh) "Warrant Shares" means the shares of Common Stock that
are issuable by the Company from time to time upon exercise of this Warrant.
"Warrant Shares" includes the PSE Listed Equities Warrant Shares, the Exchange
Listed Equities Warrant Shares, the PSE Options Warrant Shares, the Exchange
Options Warrant Shares, the PSE UTP Warrant Shares, the Exchange UTP Warrant
Shares, the PSE After-Hours Warrant Shares, and the Exchange After-Hours Warrant
Shares (all as defined herein).
2. INITIAL EXERCISE PRICE. The Exercise Price on the Issuance Date is
Seven Dollars and Thirty-Three Cents (US $7.33) per Warrant Share.
3. EXERCISABILITY. Subject to potential adjustment with respect to the
number of Warrant Shares and the Exercise Price pursuant to Section 5 below,
this Warrant may be exercised from time to time as follows:
(a) Up to one hundred five thousand two hundred (105,200)
Warrant Shares (the "PSE Listed Equities Warrant Shares") may be purchased by
Holder under this Warrant at any time and from time to time beginning on the PSE
Listed Equities Commencement Date and ending on the Warrant Expiration Date;
provided, however, that this Warrant shall not be exercisable as to the PSE
Listed Equities Warrant Shares during such period(s) of time, if any, during
which PSE unilaterally has withdrawn OptiMark(TM) from Availability through the
Pacific Exchange for listed equity securities during normal trading hours.
(b) Up to one hundred five thousand two hundred two (105,200)
Warrant Shares (the "Exchange Listed Equities Warrant Shares") may be purchased
by Holder under this Warrant at any time and from time to time beginning on the
Exchange Listed Equities Commencement Date and ending on the Warrant Expiration
Date.
<PAGE> 6
(c) Up to fifty two thousand six hundred eleven (52,600)
Warrant Shares (the "PSE Options Warrant Shares") may be purchased by Holder
under this Warrant at any time and from time to time beginning on the PSE
Options Commencement Date and ending on the Warrant Expiration Date; provided,
however, that this Warrant shall not be exercisable as to the PSE Listed Options
Warrant Shares during such period(s) of time, if any, during which PSE
unilaterally has withdrawn OptiMark(TM) from Availability through the Pacific
Exchange for options.
(d) Up to fifty two thousand six hundred eleven (52,600)
Warrant Shares (the "Exchange Options Warrant Shares") may be purchased by
Holder under this Warrant at any time and from time to time beginning on the
Exchange Options Commencement Date and ending on the Warrant Expiration Date.
(e) Up to fifty two thousand six hundred (52,600) Warrant
Shares (the "PSE UTP Warrant Shares") may be purchased by Holder under this
Warrant at any time and from time to time beginning on the PSE UTP Commencement
Date and ending on the Warrant Expiration Date; provided, however, that this
Warrant shall not be exercisable as to the PSE UTP Warrant Shares during such
period(s) of time, if any, during which PSE unilaterally has withdrawn
OptiMark(TM) from Availability through the Pacific Exchange for equity
securities with unlisted trading privileges.
(f) Up to fifty two thousand six hundred (52,600) Warrant
Shares (the "Exchange UTP Warrant Shares") may be purchased by Holder under this
Warrant at any time and from time to time beginning on the Exchange UTP
Commencement Date and ending on the Warrant Expiration Date.
(g) Up to fifty two thousand six hundred (52,600) Warrant
Shares (the "PSE After-Hours Warrant Shares") may be purchased by Holder under
this Warrant at any time and from time to time beginning on the PSE After-Hours
Commencement Date and ending on the Warrant Expiration Date; provided, however,
that this Warrant shall not be exercisable as to the PSE After-Hours Warrant
Shares during such period(s) of time, if any, during which PSE unilaterally has
withdrawn OptiMark(TM) from Availability through the Pacific Exchange for equity
securities after normal trading hours.
(h) Up to fifty two thousand six hundred (52,600) Warrant
Shares (the "Exchange After-Hours Warrant Shares") may be purchased by Holder
under this Warrant at any time and from time to time beginning on the Exchange
After-Hours Commencement Date and ending on the Warrant Expiration Date.
Within twenty (20) days following request by Holder from time to time,
the Company shall deliver to Holder a written statement, certified as accurate
and complete by a senior officer of the Company, attesting to (i) the number and
type of Warrant Shares as to which this Warrant then is exercisable, (ii) their
respective expiration date, under this Section 3, and (iii) the Exercise Price
therefor.
<PAGE> 7
4. EXERCISE PROCEDURE.
(a) Manner of Exercise. This Warrant is exercisable at the
Exercise Price per Warrant Share payable in cash or by check payable to the
order of the Company, or by Net Issue Exercise pursuant to Section 4(b) below.
Upon surrender of this Warrant at the Company's principal executive office
together with appropriate payment of the Exercise Price for the Warrant Shares
purchased, Holder shall be entitled to receive one or more certificates for the
Warrant Shares so purchased. Any exercise of this Warrant as to fewer than all
of the Warrant Shares as to which this Warrant is then exercisable shall be
effected in even increments of one thousand (1,000) shares. In the case of the
purchase of fewer than all the Warrant Shares actually or potentially
subsequently purchasable under this Warrant, the Company shall cancel this
Warrant upon the surrender hereof and shall execute and deliver to Holder a new
Warrant of like tenor for the balance of the Warrant Shares purchasable
hereunder.
(b) Net Issue Exercise. Notwithstanding any provisions herein
to the contrary, if at any time when this Warrant is otherwise exercisable the
FMV of one share of Common Stock is greater than the Exercise Price, in lieu of
exercising this Warrant for cash, Holder may notify the Company of Holder's
election to exercise this Warrant in whole or in part by "Net Issue Exercise".
Upon delivery of such notification together with surrender of this Warrant at
the principal executive office of the Company, Holder shall receive from the
Company a number of shares of Common Stock equal to
A x (FMV - Exercise Price)
---------------------
FMV
where A = the number of Warrant Shares as to which
this Warrant is being exercised by Net Issue Exercise. An example is
set forth on Exhibit A to this Warrant.
(c) Delivery of Stock Certificates. As soon as practicable,
but not exceeding ten (10) business days, after any exercise of this Warrant,
the Company, at its expense, shall cause to be issued in the name of Holder and
delivered to Holder (or upon payment by Holder of any applicable transfer taxes,
subject to the provisions of Section 8 below, Holder's assigns) one or more
certificates for the number of Warrant Shares or such other securities or
property or combination thereof, to which Holder shall be entitled upon such
exercise, determined in accordance with Section 5 hereof. In lieu of any
fractional share, the Company shall deliver cash in proportion to the FMV of the
Common Stock. Irrespective of the date of issuance and delivery of certificates
for any Common Stock or other securities issuable upon the exercise of this
Warrant, each person in whose name any such certificates are to be issued shall
for all purposes be deemed to have become the holder of record of the Common
Stock or other securities represented thereby immediately prior to the close of
business on the date on which this Warrant and payment for the number of Warrant
Shares as to which this Warrant shall have been exercised shall have been
delivered to the Company.
<PAGE> 8
5. ADJUSTMENTS.
(a) Subdivision, Stock Split or Combination. If the Company at
any time after the Issuance Date effects a subdivision of its Common Stock
(whether by stock split or otherwise), then and in each such event the Exercise
Price then in effect immediately before the subdivision shall be proportionately
decreased. Conversely, if the Company at any time after the Issuance Date
combines the outstanding shares of Common Stock (whether by reverse stock split
or otherwise), then and in each such event the Exercise Price then in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this Section 5(a) due to a subdivision of the outstanding
Common Stock shall become effective as of the record date of such subdivision.
Any adjustment under this Section 5(a) due to a combination of the outstanding
Common Stock shall become effective as of the effective date of such
combination.
(b) Common Stock Dividends and Distributions. If the Company
at any time after the Issuance Date makes or pays, or fixes a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in Additional Shares of Common Stock (except a
dividend or other distribution described in Sections 5(a) or 5(d)), then and in
each such event the Exercise Price then in effect shall be decreased as of the
time of such issuance or, in the event such a record date is fixed, as of the
close of business on such record date, by multiplying the Exercise Price then in
effect by a fraction of which the numerator shall be the total number of shares
of Common Stock issued and actually outstanding immediately prior to the time of
such issuance or the close of business on such record date and the denominator
of which shall be the total number of shares of Common Stock issued and actually
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of Additional Shares of Common
Stock issuable in payment of such dividend or distribution; provided, however,
that if such record date is fixed and such dividend is not fully paid, or if
such distribution is not fully made on the date fixed therefor, the Exercise
Price shall be recalculated to reflect that such dividend was not fully paid or
that such distribution was not fully made and thereafter the Exercise Price
shall be adjusted pursuant to this Section 5(b) as of the time of actual payment
of such dividends or distributions.
(c) Other Dividends or Distributions. If the Company at any
time after the Issuance Date makes, or fixes a record date for the determination
of holders of Common Stock entitled to receive, a dividend or other distribution
payable in cash or in securities of the Company other than Additional Shares of
Common Stock (except an event provided for in Section 5(d)), then and in each
such event lawful and adequate provision shall be made so that Holder shall
receive upon exercise of this Warrant, in addition to the number of Warrant
Shares receivable thereupon, the amount of cash or securities of the Company
which Holder would have received had this Warrant been exercised for Warrant
Shares immediately prior to the record date for such event and had Holder
thereafter, during the period from such record date to and including the date of
exercise, retained such securities receivable by it as aforesaid during such
period, subject to all
<PAGE> 9
other adjustments called for during such period under this Section 5 with
respect to the rights of Holder.
(d) Reclassification, Merger, Consolidation or Sale of Assets.
If at any time after the Issuance Date there is (i) any reclassification or
change of outstanding securities issuable upon exercise of this Warrant (except
for a subdivision or combination provided for in Section 5(a)), (ii) any merger
or consolidation of the Company with or into another corporation or other entity
(other than a merger or consolidation in which the Company is the surviving
corporation and which does not result in any reclassification, change or
exchange of outstanding securities issuable upon exercise of this Warrant), or a
reverse triangular merger in which the Company is the surviving corporation but
the shares of the Company's capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise, or (iii) any sale or transfer of all or
substantially all of the Company's properties and assets to any other person
(whether or not as part of the liquidation or dissolution of the Company), then,
and in each such event, and as a part of and as a condition to the consummation
of such reclassification, merger, consolidation, sale or transfer, lawful and
adequate provision shall be made so that Holder shall thereafter be entitled to
receive, upon exercise of this Warrant, the number of shares of stock or other
securities or property of the Company or other entity resulting from such
reclassification, merger, consolidation, sale or transfer, to which a holder of
Common Stock or other securities deliverable upon the exercise of this Warrant
would have been entitled on such reclassification, change, merger,
consolidation, sale or transfer if this Warrant had been exercisable and had
been exercised immediately prior to such event. In any such case, appropriate
adjustments shall be made in the application of the provisions of this Section 5
so as to ensure that the provisions of this Section 5 applicable after such
events shall be as equivalent as possible to the provisions of this Section 5
applicable before such events.
(e) Issuance or Sale at Less than Exercise Price.
(i) If at any time or from time to time after the
Issuance Date the Company issues or sells, or is deemed by the express
provisions of this Section 5(e) to have issued or sold, Additional
Shares of Common Stock (except as a dividend or other distribution on
any class of stock as provided in Sections 5(b) or 5(c) above, or a
subdivision or combination of shares of Common Stock as provided in
Section 5(a) above), for an Effective Price that is less than the
Exercise Price in effect immediately prior to such issuance or sale (or
deemed issuance or sale), then and in each such case the Exercise Price
shall be reduced as of the opening of business on the date of such
issue or sale to a price equal to the Effective Price for such issuance
or sale.
(ii) For the purpose of making any adjustment
required under this Section 5(e), the consideration received by the
Company for any issue or sale (or deemed issue or sale) of securities
shall (A) to the extent it consists of cash, be computed at the
aggregate sales price paid, (B) to the extent it consists of property
other than cash, be computed at the fair value of the property as
determined in
<PAGE> 10
good faith by the board of directors of the Company, and (C) if
Additional Shares of Common Stock, or rights or options to purchase
Additional Shares of Common Stock, are issued or sold together with
other assets of the Company for a consideration which covers both,
be computed as the portion of the consideration so received that
may be reasonably determined in good faith by the board of
directors to be allocable to such Additional Shares of Common Stock
or rights or options.
(iii) For the purpose of the adjustments required
under this Section 5(e), if the Company issues or sells any Convertible
Securities, then in each such case, the Company shall be deemed to have
issued at the time of the issuance of such Convertible Securities the
maximum number of Additional Shares of Common Stock (determined without
regard to adjustment provisions similar to those contained in this
Section 5) issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount
equal to the total amount of the consideration, if any, received by the
Company for the issuance of such Convertible Securities, plus the
minimum amount of consideration, if any, payable to the Company upon
exercise or conversion (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities), assuming
conversion immediately after the time of such issuance or sale. No
further adjustment of the Exercise Price, adjusted upon the issuance of
such Convertible Securities, shall be made as a result of the actual
issuance of shares of Common Stock upon exercise of such Convertible
Securities; provided, however, that if the convertibility or
exercisability feature of such Convertible Securities shall expire
prior to conversion or exercise thereof, then the Exercise Price shall
be readjusted (but to no greater extent than originally adjusted) to an
Exercise Price equal to that price which would have existed had the
expired Convertible Securities never been issued or sold.
(iv) For the purpose of the adjustments required
under this Section 5(e), if the Company issues or sells any rights or
options for the purchase of Convertible Securities, then in each such
case the Company shall be deemed to have issued at the time of the
issuance of such rights or options the maximum number of Additional
Shares of Common Stock (determined without regard to adjustment
provisions similar to those contained in this Section 5) issuable upon
conversion of the total amount of Convertible Securities covered by
such rights or options and to have received as consideration for the
issuance of such Additional Shares of Common Stock an amount equal to
the amount of consideration, if any, received by the Company for the
issuance of such rights or options, plus the minimum amount of
consideration, if any, payable to the Company upon the exercise of such
rights or options, and plus the minimum amount of consideration, if
any, payable to the Company (other than by cancellation of liabilities
or obligations evidenced by such Convertible Securities) upon exercise
of the conversion or purchase rights of such Convertible Securities,
assuming exercise or conversion immediately after the time of such
issuance or sale. No further adjustment of the Exercise Price, adjusted
upon the issuance of such rights or options, shall be made as a result
of the actual issuance of the Convertible Securities upon the exercise
of such rights or
<PAGE> 11
options or upon the actual issuance of Common Stock upon exercise of
the conversion or purchase rights of such Convertible Securities;
provided, however, that if such rights or options to purchase
Convertible Securities shall expire prior to conversion or exercise
thereof, or if the convertibility or exercisability feature of such
Convertible Securities shall expire prior to the exercise thereof,
the Exercise Price shall be readjusted to an Exercise Price equal to
that price which would have existed had the expired rights or options
to purchase Convertible Securities or such Convertible Securities
never been issued or sold.
(f) Equitable Adjustment. In case the Company, at any time or
from time to time, shall take any action affecting its Common Stock similar to
or having an effect similar to any of the actions described in this Section 5
(but not including any action described expressly in this Section 5) and the
Board of Directors in good faith determines that it would be equitable in the
circumstances to adjust the Exercise Price as a result of such action, then, and
in each such case, the Exercise price shall be adjusted in such manner and at
such time as the Board of Directors of the Company in good faith determines
would be equitable in the circumstances (such determination to be evidenced in a
resolution, a certified copy of which shall be mailed to Holder).
(g) Number of Warrant Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 5, the number of
shares of Common Stock issuable upon the exercise of this Warrant shall be
adjusted, to the nearest full share, by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
(h) Accountant's Certificate. In case of any adjustment or
readjustment of the Exercise Price and/or the number of shares of Common Stock
or other securities issuable upon exercise of this Warrant, the Company at its
expense shall cause independent certified public accountants of recognized
national standing selected by the Company (who may be the independent certified
public accountants then auditing the books of the Company) to compute such
adjustment or readjustment in accordance with the provisions hereof and prepare
a certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to Holder at Holder's address
as shown in the Company's books. The certificate shall set forth such adjustment
or readjustment, showing in detail the facts upon which such adjustment or
readjustment is based including a statement of (i) the consideration received or
deemed to be received by the Company for any Additional Shares of Common Stock
issued or sold or deemed to have been issued or sold, (ii) the Exercise Price at
the time in effect, (iii) the number of Additional Shares of Common Stock issued
or sold or deemed to have been issued or sold, and (iv) the type and amount, if
any, of other property which at the time would be receivable upon exercise of
this Warrant.
<PAGE> 12
6. RESERVED SHARES. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of issuance upon exercise of this Warrant, such number of shares of
Common Stock as shall be issuable upon the exercise hereof. All Warrant Shares
that are issued upon exercise of this Warrant will be, upon issuance, duly
authorized, validly issued, fully paid and nonassessable.
7. NO RIGHTS AS A STOCKHOLDER. Unless, until and except to the extent
that this Warrant is exercised, Holder shall not be entitled to any voting
rights, dividends or other rights as a stockholder of the Company.
8. SECURITIES LAWS; TRANSFER; RIGHT OF FIRST REFUSAL.
(a) This Warrant may not be transferred in whole or in part,
unless (i) this Warrant has been registered under the Securities Laws, or (ii)
Holder provides to the Company an opinion of Howard, Rice, Nemerovski, Canady,
Falk & Rabkin, a Professional Corporation (or such other counsel to Holder,
including in-house counsel, as may be acceptable to the Company in its
reasonable discretion), or the Company is otherwise satisfied, that such
transfer is exempt from registration under the Securities Laws. This Warrant
also may not be transferred if and to the extent not then exercisable, except to
an Affiliate of PSE.
(b) If Holder ever wishes to sell or otherwise transfer this
Warrant or any Warrant Shares to any person other than an Affiliate of PSE (a
"Third Party Purchaser"), Holder first shall offer this Warrant or such Warrant
Shares to the Company by sending written notice to the Company (the "Offering
Notice"). The Offering Notice shall state (i) the identity of the Third Party
Purchaser, (ii) the portion of this Warrant and/or the number of Warrant Shares
proposed to be transferred (the "Offered Securities"), and (iii) the proposed
purchase price which Holder is willing to accept therefor (the "Offer Price").
For a period of fifteen (15) days after delivery of the Offering Notice (the
"Option Period"), the Company shall have the right and option to purchase all
(but not less than all) of the Offered Securities at a purchase price equal to
the Offer Price and upon the terms and conditions set forth in the Offering
Notice. The right of the Company to purchase any or all of the Offered
Securities under this paragraph (b) shall be exercisable by delivering written
notice of exercise to Holder, prior to expiration of the Option Period. Any
failure of the Company to respond to the Offering Notice within the Option
Period shall be deemed a waiver of the Company's rights under this paragraph
(b). The closing of any purchase of the Offered Securities by the Company under
this (b) shall be held at the principal office of the Company at 11:00 a.m.,
local time, on the 60th day following the date of delivery of the Offering
Notice. At such closing, (x) Holder shall deliver one or more certificates
representing the Offered Securities being purchased, duly endorsed for transfer,
together with all requisite transfer taxes and a written representation that
Holder is the sole beneficial and record owner of such Offered Securities, free
and clear of all liens, claims, options, charges, encumbrances and rights, (y)
the Company shall deliver the necessary payment in full for such Offered
Securities in immediately Available funds, and (z) Holder and the Company
<PAGE> 13
shall execute and deliver such additional documents as are otherwise necessary
or appropriate. If and to the extent that the Company does not purchase the
Offered Securities under this paragraph (b), Holder may sell the Offered
Securities to the Third Party Purchaser at a price not less than the Offer Price
and on the other terms and conditions set forth in the Offering Notice at any
time within 180 days following expiration of the Option Period. The Offered
Securities in the hands of the Third Party Purchaser shall remain subject to the
Company's right of first refusal in this paragraph (b) and the other
restrictions on transfer set forth in this Section 8.
(c) No Warrant Shares shall be issued other than to PSE or an
Affiliate of PSE, and no Warrant Shares may be transferred except to an
Affiliate of PSE, unless (i) such issuance or transfer has been registered under
the Securities Laws, or (ii) Holder provides to the Company an opinion of
Howard, Rice, Nemerovski, Canady, Falk & Rabkin, a Professional Corporation (or
such other counsel to Holder, including in-house counsel, as may be acceptable
to the Company in its reasonable discretion), or otherwise satisfies the
Company, that the issuance or transfer is exempt from the registration
requirements of the Securities Laws. Each notice of exercise of this Warrant
automatically shall be deemed to include a representation and warranty from
Holder that Holder is acquiring the Warrant Shares for investment only, and not
with a view to the distribution thereof.
(d) Each certificate evidencing Warrant Shares shall
include a prominent legend to the following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND SUCH LAWS OR PURSUANT
TO A WRITTEN OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED. THESE SHARES ALSO ARE SUBJECT TO A RIGHT OF FIRST
REFUSAL IN FAVOR OF THE ISSUER.
(e) Notwithstanding any provision of this Section 8 to the
contrary, the restrictions imposed by Sections 8 (a), 8(b), 8(c) and 8(d) above
shall terminate as to any particular Warrant Shares when (i) any class of Common
Stock of the Company shall have been effectively registered under the Securities
Laws, or(ii) an opinion to the effect that the restrictions imposed by Sections
8(a) and 8(c) are no longer required under the Securities Laws shall have been
received from Howard, Rice, Nemerovski, Canady, Falk & Rabkin, a Professional
Corporation (or such other counsel to Holder, including in-house counsel, as may
be acceptable to the Company in its reasonable discretion). Whenever the
restrictions imposed by this Section 8 shall terminate, each Holder of any
Warrant Shares as to which such restrictions shall have terminated shall be
entitled to receive from the Company, without expense, new certificates not
bearing the restrictive legend set forth in Section 8(d) of this Agreement.
<PAGE> 14
(f) To transfer this Warrant, Holder shall surrender the
original Warrant to the Secretary of the Company, and the Company shall exchange
such instrument for one or more new Warrants of like tenor, of such nature and
in such denominations as may be specified by Holder, representing in the
aggregate the right to subscribe for and purchase the number of Warrant Shares
purchasable hereunder. Unless and until such transfer(s) is/are duly registered
on the books of the Company, the Company shall be entitled to treat the record
Holder as the sole and absolute owner of this Warrant for purposes of notices,
rights to exercise, rights to transfer, and for all other purposes.
9. INFORMATION.
(a) The Company shall cooperate with Holder in supplying such
information as may be reasonably necessary for Holder to complete and file any
information reporting forms presently or hereafter required by the SEC as a
condition to the Availability of an exemption from the Securities Laws for any
permitted sale or other transfer of this Warrant and/or the Warrant Shares.
(b) The Company shall provide to Holder such financial
information as the Company must supply to the Investors from time to time, as
stated in the current version of the Stockholders Agreement, regardless of any
subsequent amendment or termination thereof.
(c) Prior to any exercise or contemplated exercise of this
Warrant, Holder shall be entitled to review current financial statements of the
Company, to inquire of management as to the Company's business and financial
status and prospects, and to review other non-privileged information that may be
available from the Company without undue effort or expense.
10. PAYMENT OF TAXES. The Company shall pay all taxes and other
governmental charges that may be imposed upon the issuance or delivery of
Warrant Shares (but not on income related thereto). The Company shall not be
required, however, to pay any tax or other charge imposed in connection with any
transfer of this Warrant or the issue of any certificate for Warrant Shares in
any name other than that of Holder.
11. REPRESENTATIONS AND WARRANTIES. The Company hereby incorporates and
makes unto Holder all of the Company's representations and warranties set forth
in Section 3 of the Stock Purchase Agreement, and PSE is entitled to rely on
such representations and warranties as though PSE were an Investor under the
Stock Purchase Agreement.
12. NO IMPAIRMENT. The Company will not, by any voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Warrant and in
the taking of all such action as
<PAGE> 15
may be necessary or appropriate in order to protect the rights of Holder against
impairment.
13. CONTEXT; REGISTRATION RIGHTS. This Warrant is being issued in
connection with the First Closing under the Stock Purchase Agreement and the
execution and delivery of the Stockholders Agreement, the Registration Rights
Agreement, the Revenue Sharing Agreement and the PSE-OptiMark Agreement. Holder
shall be entitled to the benefit of the registration, indemnification and other
rights set forth in the Registration Rights Agreement to the extent provided
therein.
14. LOSS. Upon receipt of evidence reasonably satisfactory to the
Company of the ownership of and the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity reasonably satisfactory to the Company or (in the case of mutilation)
upon surrender and cancellation of the mutilated Warrant, the Company will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
15. CANCELLATION. This Warrant is subject to cancellation in whole or
in part under certain circumstances described in the PSE-OptiMark Agreement.
16. NOTICES. All notices and other communications related to this
Warrant shall be in writing, shall be delivered by Federal Express or other
nationally recognized overnight delivery service, and shall be directed as
follows:
i) if to the Company: To the following address, or
any other address which the Company may designate by notice to Holder
from time to time:
OptiMark Technologies, Inc.
520 Main Avenue
Durango, CO 81301
attn: William A. Lupien, Chief Executive Officer
with a copy in the same manner to:
Ducker, Seawell & Montgomery, P.C.
1560 Broadway, Suite 1500
Denver, CO 80202
attn: Bruce Ducker, Esq.
ii) if to Holder: To the following address, or to any
other address which Holder may designate by notice to the Company from
time to time:
The Pacific Stock Exchange Incorporated
301 Pine Street
San Francisco, CA 94104
attn: John C. Katovich, Senior Vice President
& General Counsel
<PAGE> 16
with a copy in the same manner to:
Howard, Rice, Nemerovski, Canady,
Falk & Rabkin, a Professional Corporation
Three Embarcadero Center, 7th Floor
San Francisco, CA 94111
attn: Timothy S. McCann, Esq.
17. MISCELLANEOUS.
(a) Office of the Company. As long as any part of this Warrant
remains outstanding, the Company shall maintain an office or agency (which may
be the principal executive office of the Company) where this Warrant may be
presented for exercise, registration of transfer, division or combination as
provided in this Warrant. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its Common Stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of this Warrant. The Company shall notify
Holder in writing prior to any change of the address of the office at which this
Warrant may be presented.
(b) Limitation of Liability. No provision hereof, and no
enumeration herein of the rights or privileges of Holder, shall give rise to any
liability of Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
(c) Nonwaiver. No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Company shall operate as a
waiver of such right or otherwise prejudice the Company's rights, powers or
remedies. No course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice Holder's rights, power or remedies.
(d) Successors. All the covenants, agreements,
representations and warranties contained in this Warrant shall bind the parties
hereto and their respective heirs, executors, administrators, distributees,
successors and assigns.
(e) Change; Waiver. Neither this Warrant nor any term hereof
may be changed, waived, discharged or terminated orally but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
(f) Headings. The section headings in this Warrant are
inserted for purposes of convenience only and shall have no substantive effect.
<PAGE> 17
(g) Law Governing. This Warrant shall for all purposes be
construed and enforced in accordance with, and governed by, the internal laws of
the State of California, without giving effect to principles of conflict of
laws. The exclusive venue for any litigation related to this Warrant shall be
the Superior Court in and for San Francisco County, California or, if
jurisdictionally available, the U.S. District Court for the Northern District of
California.
(h) Attorneys' Fees. In the event any party hereto initiates
any legal action or suit in connection with any dispute concerning the
interpretation of this Warrant or the enforcement of any provision hereof, the
prevailing party in such action or suit shall be entitled to recover all of its
costs of action or suit (including without limitation reasonable attorneys' and
expert witness fees) from the other party.
IN WITNESS WHEREOF, OptiMark Technologies, Inc., a Delaware
corporation, has caused this Warrant to be signed by its duly authorized
officers under its corporate seal, as of the date first set forth above.
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
Chief Executive Officer
Attest:
/s/ Frederick A. Bryson
Secretary
<PAGE> 18
Exhibit A
(to PSE Warrant)
Example
Assumptions:
18. The American Stock Exchange makes OptiMark(TM) Available for listed
equities on September 1, 1997. The Pacific Exchange makes OptiMark(TM) Available
for listed equities on February 1, 1999.
19. The Pacific Exchange makes OptiMark(TM) Available for equities with
unlisted trading privileges on July 20, 1999. The Pacific Exchange permanently
unilaterally withdraws OptiMark(TM) for equities with unlisted trading
privileges on September 30, 2000.
20. The Pacific Exchange makes OptiMark(TM) Available for options on
February 15, 2001. The Pacific Exchange temporarily unilaterally withdraws
OptiMark(TM) for options on February 1, 2002, but reinstitutes OptiMark(TM) for
options trading on July 15, 2002.
21. The Pacific Exchange never makes OptiMark(TM) Available for
after-hours trading.
22. No stock exchange other than the Pacific Exchange and the American
Stock Exchange ever makes OptiMark(TM) Available. The American Stock Exchange
never makes OptiMark(TM) Available for listed options, unlisted equities, or
after-hours trading.
23. The Company's initial public offering becomes effective on December
31, 2004.
Results: As consequences of the foregoing,
(a) The Warrant Expiration Date is December 31, 2006;
(b) the Warrant is exercisable with respect to the Exchange
Listed Equities Warrant Shares at any time between September 1, 1997 and
December 31, 2006, inclusive;
(c) the Warrant is exercisable with respect to the PSE Listed
Equities Warrant Shares at any time between February 1, 1999 and December 31,
2006, inclusive;
(d) the Warrant is exercisable with respect to both the PSE
UTP Warrant Shares and the Exchange UTP Warrant Shares at any time between July
20, 1999 and September 30, 2000, inclusive; and
<PAGE> 19
(e) the Warrant is exercisable with respect to both the PSE
Options Warrant Shares and the Exchange Options Warrant Shares at any time
between February 15, 2001 and December 31, 2006, inclusive, but excluding the
period between February 1, 2002 and July 15, 2002;
(f) the Warrant never becomes exercisable with respect to the
PSE After-Hours Warrant Shares or the Exchange After-Hours Warrant Shares.
Further Assumption: Holder exercises the Warrant as to 10,000 PSE UTP Warrant
Shares on September 30, 2000.
Result: Holder pays $73,300 to the Company and receives a certificate
for 10,000 shares. The Warrant expires at to all of the Exchange UTP Warrant
Shares and the remaining 42,600 PSE UTP Warrant Shares.
Further Assumptions:
1. On November 27, 2006, the Company duly notifies Holder of the
pending Warrant Expiration Date.
2. The FMV of the Common Stock on the Warrant Expiration Date is
$60/share.
3. On December 31, 2006, Holder exercises the Warrant (a) by Net Issue
Exercise with respect to all Exchange Listed Equities Warrant Shares and all PSE
Listed Equities Warrant Shares, and (b) for cash with respect to all Exchange
Options Warrant Shares and all PSE Options Warrant Shares.
Result: Holder pays $771,115 cash to the Company and receives a
certificate for 289,896 shares. The Warrant expires.
<PAGE> 1
EXHIBIT 10.23
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE. THE
SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO A
WRITTEN OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
- OPTIMARK TECHNOLOGIES, INC. -
COMMON STOCK PURCHASE WARRANT
250,000 shares (subject to adjustment)
December 31, 1996
FOR VALUE RECEIVED, the receipt and sufficiency of which are
acknowledged, this Common Stock Purchase Warrant ("this Warrant") certifies that
the Chicago Board Options Exchange, Incorporated, a Delaware non-stock
corporation, its successors and permitted assigns (generally, "Holder") is
entitled to subscribe for and purchase from OptiMark Technologies, Inc., a
Delaware corporation (the "Company"), up Two Hundred Fifty Thousand (250,000)
fully paid and nonassessable shares (subject to potential adjustment as noted
below, the "Warrant Shares") of the common stock of the Company ("Common
Stock"). This Warrant is subject to the following terms and conditions:
1. DEFINITIONS. For purposes of this Warrant, in addition to
terms defined elsewhere herein, the following terms shall have the indicated
meanings:
(a) "Additional Shares of Common Stock" shall mean any and all
shares of Common Stock (including, without limitation, Common Stock issuable
upon exercise, conversion or exchange of Convertible Securities) issued by the
Company after the date of this Warrant, whether or not subsequently reacquired
or retired by the Company; provided, however, that the term "Additional Shares
of Common Stock" does not include (i) Warrant Shares issued or issuable upon
exercise of this Warrant, (ii) Common Stock issued or issuable upon exercise of
Reserved Options, (iii) Common Stock issued or issuable upon conversion of the
Company's Series A Preferred Stock, or (iv) up to 2,046,385 shares of Series A
Preferred Stock that the Company may issue to State Street Boston Corporation,
an affiliate thereof and/or other investors in the absolute discretion of the
Company, at a price of not less than $7.33 per share.
(b) "Affiliate" of a Holder means any natural person,
corporation or other entity that controls, is controlled by, or is under common
control with the Holder.
(c) "CBOE" means the Chicago Board Options Exchange,
Incorporated, i.e., the initial Holder.
<PAGE> 2
(d) "Common Stock" means shares of the Company's presently or
subsequently authorized $.01 par value common stock and any stock into which
such common stock may hereafter be exchanged or substituted.
(e) "Convertible Securities" means any rights, warrants or
options for the purchase of, or stock or other securities (including, without
limitation, evidences of indebtedness) convertible into, or exchangeable for,
Additional Shares of Common Stock, other than this Warrant, the Series A
Preferred Stock and the Reserved Options.
(f) "Effective Price" when used with reference to an issue or
sale of Additional Shares of Common Stock means the quotient determined by
dividing the total number of Additional Shares of Common Stock in such issue
which were issued or sold, or deemed to have been issued or sold, by the Company
under Section 5(e) into the aggregate consideration received or deemed to have
been received by the Company for such issue or sale, or deemed issue or sale,
under Section 5(e) hereof.
(g) "Equity Options Commencement Date" means the first day on
which the Exchange has made OptiMark-Securities Available with respect to equity
options classes representing at least eighty percent (80%) of the average daily
contract volume of all equity options classes, excluding FLEX equity options
from the calculation, measured over the then most recent six complete calendar
months.
(h) "Exchange" means the registered national securities
exchange operated by CBOE.
(i) "Exercise Price" means the purchase price per Warrant
Share, as adjusted from time to time pursuant to Section 5 hereof, required
under the terms of this Warrant to exercise this Warrant and acquire Common
Stock pursuant to such exercise.
(j) "Flex Options Commencement Date" means the first day on
which the Exchange has made OptiMark-Securities Available with respect to FLEX
options classes representing at least eighty percent (80%) of the average daily
contract volume of all FLEX options classes, measured over the then most recent
six complete calendar months.
(k) "FMV" of a share of Common Stock means (i) in connection
with any effective registration under the Securities Laws and public sale of
Common Stock by the Company, the gross offering price per share to the public,
or otherwise (ii) if there exists a public market for the Common Stock, the
average of the closing bid and asked prices of the Common Stock quoted in the
Over-The-Counter Market Summary or the last reported sale price of the Common
Stock or the closing price quoted on any Exchange on which the Common Stock is
listed, as published in the Western Edition of The Wall Street Journal, for the
five (5) trading days immediately preceding the date of determination of FMV, or
otherwise (iii) the fair market value thereof determined in good faith by the
Board of Directors of the Company.
<PAGE> 3
(l) "Fully Diluted" means computed on the assumption that all
outstanding Convertible Securities (including but not limited to Reserved
Options) that are then convertible or exercisable are converted or exercised,
without regard to whether such Convertible Securities are "in the money".
(m) "Index Options Commencement Date" means the first day on
which the Exchange has made OptiMark-Securities Available with respect to index
options classes representing at least eighty percent (80%) of the average daily
contract volume of all index options classes, excluding FLEX index options from
the calculation, measured over the then most recent six complete calendar
months.
(n) "Issuance Date" means the date of this Warrant set forth
above.
(o) "IPO Effectiveness Date" means the date on which the
Company commences its initial offer for sale of shares of Common Stock pursuant
to an effective registration statement filed under the Securities Act of 1933,
as amended.
(p) "Made Available", "Making Available" and like terms, as
applied to OptiMark-Securities and the Exchange, means that the necessary
communications links between OptiMark-Securities and the relevant systems of the
Exchange have been established such that persons wishing to utilize
OptiMark-Securities as a facility of the Exchange may do so.
(q) "OptiMark-Securities" means the market structuring
technology and related software which is generally described as
"OptiMark-Securities" in Exhibit A hereto, including all derivatives, releases
and subsequent versions of such technology and software, regardless of platform
or operating media.
(r) "Reserved Options" means (i) currently outstanding options
and warrants granted by the Company to employees and former employees to
purchase up to 320,000 shares of Common Stock at an exercise price of $6.00 per
share, a currently outstanding warrant granted by the Company in favor of Alan
S. Danson to purchase up to 50,000 shares of Common Stock at an exercise price
of $6.00 per share, and a currently outstanding warrant granted by the Company
in favor of The Pacific Stock Exchange Incorporated to purchase up to 526,000
shares of Common Stock at an exercise price of $7.33 per share (with the number
of shares and the exercise price therefor subject to potential anti-dilution and
other adjustments as currently provided therein), (ii) any Convertible
Securities issued by the Company to the current holders of such options and
warrants, with respect to the same number or fewer shares, with the same or any
greater exercise price, in substitution or replacement of any of the foregoing,
and (iii) the right of future grantees to purchase up to 491,567 shares of
Common Stock reserved for issuance upon exercise of ungranted options under the
Company's Stock Option Plan (as such Plan may be amended from time to time) or
otherwise, at an exercise price not less than $6.00 per share, subject to
appropriate adjustment for all subdivisions and combinations.
<PAGE> 4
(s) "Securities Laws" means the Securities Act of 1933, as
amended, and any applicable state securities ("blue sky") laws.
(t) "Warrant Expiration Date" means the earlier to occur of
(i) December 31, 2010, or (ii) two years following the IPO Effectiveness Date;
provided, however, that the Warrant Expiration Date shall not occur until and
unless the Company has given at least thirty (30) days' prior notice to Holder
of (A) the pendency of the Warrant Expiration Date and (B) if there exists no
public market for the Common Stock, the FMV of the Common Stock; and provided
further, however, that the Warrant Expiration Date shall not occur prior to
December 31, 2005.
(u) "Warrant Shares" means the shares of Common Stock that are
issuable by the Company from time to time upon exercise of this Warrant. .
2. INITIAL EXERCISE PRICE. The Exercise Price on the Issuance
Date is Nine Dollars (US $9.00) per Warrant Share.
3. EXERCISABILITY. Subject to potential adjustment with respect to the
number of Warrant Shares and the Exercise Price pursuant to Section 5 below,
this Warrant may be exercised from time to time as follows:
(a) Up to fifty thousand (50,000) Warrant Shares (the "Flex
Options Warrant Shares") may be purchased by Holder under this Warrant at any
time and from time to time beginning on the Flex Options Commencement Date and
ending on the Warrant Expiration Date; provided, however, that this Warrant
shall not be exercisable as to the Flex Options Warrant Shares during such
period(s) of time, if any, during which CBOE unilaterally has withdrawn
OptiMark-Securities from Availability through the Exchange with respect to
twenty percent (20%) or more of the average daily contract volume of all FLEX
options classes, measured over the then most recent six complete calendar
months.
(b) Up to one hundred thousand (100,000) Warrant Shares (the
"Index Options Warrant Shares") may be purchased by Holder under this Warrant at
any time and from time to time beginning on the Index Options Commencement Date
and ending on the Warrant Expiration Date; provided, however, that this Warrant
shall not be exercisable as to the Index Options Warrant Shares during such
period(s) of time, if any, during which CBOE unilaterally has withdrawn
OptiMark-Securities from Availability through the Exchange with respect to
twenty percent (20%) or more of the average daily contract volume of all index
options classes, excluding FLEX index options from the calculation, measured
over the then most recent six complete calendar months.
(c) Up to one hundred thousand (100,000) Warrant Shares
(the "Equity Options Warrant Shares") may be purchased by Holder under this
Warrant at any time and from time to time beginning on the Equity Options
Commencement Date and ending on the Warrant Expiration Date; provided, however,
that this Warrant shall not be exercisable as to the Equity Options Warrant
Shares during such period(s) of time,
<PAGE> 5
if any, during which CBOE unilaterally has withdrawn OptiMark-Securities from
Availability through the Exchange with respect to twenty percent (20%) or more
of the average daily contract volume of all equity options classes, excluding
FLEX equity options from the calculation, measured over the then most recent six
complete calendar months.
Within twenty (20) days following request by Holder from time to time,
the Company shall deliver to Holder a written statement, certified as accurate
and complete by a senior officer of the Company, attesting to (i) the number and
type of Warrant Shares as to which this Warrant then is exercisable, (ii) their
respective expiration dates under this Section 3, and (iii) the Exercise Price
therefor.
4. EXERCISE PROCEDURE.
(a) Manner of Exercise. This Warrant is exercisable at the
Exercise Price per Warrant Share payable in cash or by check payable to the
order of the Company, or by Net Issue Exercise pursuant to Section 4(b) below.
Upon surrender of this Warrant at the Company's principal executive office
together with appropriate payment of the Exercise Price for the Warrant Shares
purchased, Holder shall be entitled to receive one or more certificates for the
Warrant Shares so purchased. Any exercise of this Warrant as to fewer than all
of the Warrant Shares as to which this Warrant is then exercisable shall be
effected in even increments of one thousand (1,000) shares. In the case of the
purchase of fewer than all the Warrant Shares actually or potentially
subsequently purchasable under this Warrant, the Company shall cancel this
Warrant upon the surrender hereof and shall execute and deliver to Holder a new
Warrant of like tenor for the balance of the Warrant Shares purchasable
hereunder.
(b) Net Issue Exercise. Notwithstanding any provisions herein
to the contrary, if at any time when this Warrant is otherwise exercisable the
FMV of the Common Stock is greater than the Exercise Price, in lieu of
exercising this Warrant for cash, Holder may notify the Company of Holder's
election to exercise this Warrant in whole or in part by "Net Issue Exercise".
Upon delivery of such notification together with surrender of this Warrant at
the principal executive office of the Company, Holder shall receive from the
Company a number of shares of Common Stock equal to where A = the number of
Warrant Shares as to which this Warrant is being exercised by Net Issue
Exercise.
(c) Delivery of Stock Certificates. As soon as practicable,
but not exceeding ten (10) business days, after any exercise of this Warrant,
the Company, at its expense, shall cause to be issued in the name of Holder and
delivered to Holder (or upon payment by Holder of any applicable transfer taxes,
subject to the provisions of Section 8 below, Holder's assigns) one or more
certificates for the number of Warrant Shares or such other securities or
property or combination thereof, to which Holder shall be entitled upon such
exercise, determined in accordance with Section 5 hereof. In lieu of any
fractional share, the Company shall deliver cash in proportion to the FMV of the
Common Stock. Irrespective of the date of issuance and delivery of certificates
for any Common Stock or
<PAGE> 6
other securities issuable upon the exercise of this Warrant, each person in
whose name any such certificates are to be issued shall for all purposes be
deemed to have become the holder of record of the Common Stock or other
securities represented thereby immediately prior to the close of business on the
date on which this Warrant and payment for the number of Warrant Shares as to
which this Warrant shall have been exercised shall have been delivered to the
Company.
5. ADJUSTMENTS.
(a) Subdivision, Stock Split or Combination. If the Company at
any time after the Issuance Date effects a subdivision of its Common Stock
(whether by stock split or otherwise), then and in each such event the Exercise
Price then in effect immediately before the subdivision shall be proportionately
decreased. Conversely, if the Company at any time after the Issuance Date
combines the outstanding shares of Common Stock (whether by reverse stock split
or otherwise), then and in each such event the Exercise Price then in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this Section 5(a) due to a subdivision of the outstanding
Common Stock shall become effective as of the record date of such subdivision.
Any adjustment under this Section 5(a) due to a combination of the outstanding
Common Stock shall become effective as of the effective date of such
combination.
(b) Common Stock Dividends and Distributions. If the Company
at any time after the Issuance Date makes or pays, or fixes a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in Additional Shares of Common Stock (except a
dividend or other distribution described in Sections 5(a) or 5(d)), then and in
each such event the Exercise Price then in effect shall be decreased as of the
time of such issuance or, in the event such a record date is fixed, as of the
close of business on such record date, by multiplying the Exercise Price then in
effect by a fraction of which the numerator shall be the total number of shares
of Common Stock issued and actually outstanding immediately prior to the time of
such issuance or the close of business on such record date and the denominator
of which shall be the total number of shares of Common Stock issued and actually
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of Additional Shares of Common
Stock issuable in payment of such dividend or distribution; provided, however,
that if such record date is fixed and such dividend is not fully paid, or if
such distribution is not fully made on the date fixed therefor, the Exercise
Price shall be recalculated to reflect that such dividend was not fully paid or
that such distribution was not fully made and thereafter the Exercise Price
shall be adjusted pursuant to this Section 5(b) as of the time of actual payment
of such dividends or distributions.
(c) Other Dividends or Distributions. If the Company at
any time after the Issuance Date makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in cash or in securities of the Company other than
Additional Shares of Common Stock (except an event provided for in Section
5(d)), then and in each such event lawful and adequate provision
<PAGE> 7
shall be made so that Holder shall receive upon exercise of this Warrant, in
addition to the number of Warrant Shares receivable thereupon, the amount of
cash or securities of the Company which Holder would have received had this
Warrant been exercised for Warrant Shares immediately prior to the record date
for such event and had Holder thereafter, during the period from such record
date to and including the date of exercise, retained such securities receivable
by it as aforesaid during such period, subject to all other adjustments called
for during such period under this Section 5 with respect to the rights of
Holder.
(d) Reclassification, Merger, Consolidation or Sale of Assets.
If at any time after the Issuance Date there is (i) any reclassification or
change of outstanding securities issuable upon exercise of this Warrant (except
for a subdivision or combination provided for in Section 5(a)), (ii) any merger
or consolidation of the Company with or into another corporation or other entity
(other than a merger or consolidation in which the Company is the surviving
corporation and which does not result in any reclassification, change or
exchange of outstanding securities issuable upon exercise of this Warrant), or a
reverse triangular merger in which the Company is the surviving corporation but
the shares of the Company's capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise, or (iii) any sale or transfer of all or
substantially all of the Company's properties and assets to any other person
(whether or not as part of the liquidation or dissolution of the Company), then,
and in each such event, and as a part of and as a condition to the consummation
of such reclassification, merger, consolidation, sale or transfer, lawful and
adequate provision shall be made so that Holder shall thereafter be entitled to
receive, upon exercise of this Warrant, the number of shares of stock or other
securities or property of the Company or other entity resulting from such
reclassification, merger, consolidation, sale or transfer, to which a holder of
Common Stock or other securities deliverable upon the exercise of this Warrant
would have been entitled on such reclassification, change, merger,
consolidation, sale or transfer if this Warrant had been exercisable and had
been exercised immediately prior to such event. In any such case, appropriate
adjustments shall be made in the application of the provisions of this Section 5
so as to ensure that the provisions of this Section 5 applicable after such
events shall be as equivalent as possible to the provisions of this Section 5
applicable before such events.
(e) Issuance or Sale at Less than Exercise Price.
(i) If at any time or from time to time after the
Issuance Date the Company issues or sells, or is deemed by the express
provisions of this Section 5(e) to have issued or sold, Additional Shares of
Common Stock (except as a dividend or other distribution on any class of stock
as provided in Sections 5(b) or 5(c) above, or a subdivision or combination of
shares of Common Stock as provided in Section 5(a) above), for an Effective
Price that is less than the Exercise Price in effect immediately prior to such
issuance or sale (or deemed issuance or sale), then and in each such case the
Exercise Price shall be reduced as of the opening of business on the date of
such issue or sale to a price equal to the Effective Price for such issuance or
sale.
<PAGE> 8
(ii) For the purpose of making any adjustment
required under this Section 5(e), the consideration received by the Company for
any issue or sale (or deemed issue or sale) of securities shall (A) to the
extent it consists of cash, be computed at the aggregate sales price paid, (B)
to the extent it consists of property other than cash, be computed at the fair
value of the property as determined in good faith by the Board of Directors of
the Company, and (C) if Additional Shares of Common Stock, or rights or options
to purchase Additional Shares of Common Stock, are issued or sold together with
other assets of the Company for a consideration which covers both, be computed
as the portion of the consideration so received that may be reasonably
determined in good faith by the Board of Directors to be allocable to such
Additional Shares of Common Stock or rights or options.
(iii) For the purpose of the adjustments required
under this Section 5(e), if the Company issues or sells any Convertible
Securities, then in each such case, the Company shall be deemed to have issued
at the time of the issuance of such Convertible Securities the maximum number of
Additional Shares of Common Stock (determined without regard to adjustment
provisions similar to those contained in this Section 5) issuable upon exercise
or conversion thereof and to have received as consideration for the issuance of
such shares an amount equal to the total amount of the consideration, if any,
received by the Company for the issuance of such Convertible Securities, plus
the minimum amount of consideration, if any, payable to the Company upon
exercise or conversion (other than by cancellation of liabilities or obligations
evidenced by such Convertible Securities), assuming conversion immediately after
the time of such issuance or sale. No further adjustment of the Exercise Price,
adjusted upon the issuance of such Convertible Securities, shall be made as a
result of the actual issuance of shares of Common Stock upon exercise of such
Convertible Securities; provided, however, that if the convertibility or
exercisability feature of such Convertible Securities shall expire prior to
conversion or exercise thereof, then the Exercise Price shall be readjusted (but
to no greater extent than originally adjusted) to an Exercise Price equal to
that price which would have existed had the expired Convertible Securities never
been issued or sold.
(iv) For the purpose of the adjustments
required under this Section 5(e), if the Company issues or sells
any rights or options for the purchase of Convertible Securities, then in
each such case the Company shall be deemed to have issued at the time of
the issuance of such rights or options the maximum number of Additional
Shares of Common Stock (determined without regard to adjustment
provisions similar to those contained in this Section 5) issuable upon
conversion of the total amount of Convertible Securities covered by such
rights or options and to have received as consideration for the issuance
of such Additional Shares of Common Stock an amount equal to the amount
of consideration, if any, received by the Company for the issuance of
such rights or options, plus the minimum amount of consideration, if any,
payable to the Company upon the
<PAGE> 9
exercise of such rights or options, and plus the minimum amount of
consideration, if any, payable to the Company (other than by cancellation
of liabilities or obligations evidenced by such Convertible Securities)
upon exercise of the conversion or purchase rights of such Convertible
Securities, assuming exercise or conversion immediately after the time of
such issuance or sale. No further adjustment of the Exercise Price,
adjusted upon the issuance of such rights or options, shall be made as a
result of the actual issuance of the Convertible Securities upon the
exercise of such rights or options or upon the actual issuance of Common
Stock upon exercise of the conversion or purchase rights of such
Convertible Securities; provided, however, that if such rights or options
to purchase Convertible Securities shall expire prior to conversion or
exercise thereof, or if the convertibility or exercisability feature of
such Convertible Securities shall expire prior to the exercise thereof,
the Exercise Price shall be readjusted to an Exercise Price equal to that
price which would have existed had the expired rights or options to
purchase Convertible Securities or such Convertible Securities never been
issued or sold.
(f) Equitable Adjustment. In case the Company, at any time or
from time to time, shall take any action affecting its Common Stock similar to
or having an effect similar to any of the actions described in this Section 5
(but not including any action described expressly in this Section 5) and the
Board of Directors in good faith determines that it would be equitable in the
circumstances to adjust the Exercise Price as a result of such action, then, and
in each such case, the Exercise price shall be adjusted in such manner and at
such time as the Board of Directors of the Company in good faith determines
would be equitable in the circumstances (such determination to be evidenced in a
resolution, a certified copy of which shall be mailed to Holder).
(g) Number of Warrant Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 5, the number of
shares of Common Stock issuable upon the exercise of this Warrant shall be
adjusted, to the nearest full share, by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
(h) Accountant's Certificate. In case of any adjustment or
readjustment of the Exercise Price and/or the number of shares of Common Stock
or other securities or property issuable upon exercise of this Warrant, the
Company at its expense shall cause independent certified public accountants of
recognized national standing selected by the Company (who may be the independent
certified public accountants then auditing the books of the Company) to compute
such adjustment or readjustment in accordance with the provisions hereof and
prepare a certificate showing such adjustment or readjustment, and shall mail
such certificate, by first class mail, postage prepaid, to Holder at Holder's
address as shown in the Company's books. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based including a statement of (i) the
<PAGE> 10
consideration received or deemed to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold, (ii) the Exercise Price at the time in effect, (iii) the number of
Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold, and (iv) the type and amount, if any, of other property which at the
time would be receivable upon exercise of this Warrant.
6. RESERVED SHARES. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of issuance upon exercise of this Warrant, such number of shares of
Common Stock as shall be issuable upon the exercise hereof. All Warrant Shares
that are issued upon exercise of this Warrant will be, upon issuance, duly
authorized, validly issued, fully paid and nonassessable.
7. NO RIGHTS AS A STOCKHOLDER. Unless, until and except to the extent
that this Warrant is exercised, Holder shall not be entitled to any voting
rights, dividends or other rights as a stockholder of the Company.
8. SECURITIES LAWS; TRANSFER; RIGHT OF FIRST REFUSAL.
(a) This Warrant may not be transferred in whole or in part,
unless (i) this Warrant has been registered under the Securities Laws, or (ii)
Holder provides to the Company an opinion of counsel acceptable to the Company
in its reasonable discretion, or the Company is otherwise satisfied, that such
transfer is exempt from registration under the Securities Laws. This Warrant
also may not be transferred if and to the extent not then exercisable, except to
an Affiliate of CBOE.
(b) If Holder ever wishes to sell or otherwise transfer
this Warrant or any Warrant Shares to any person other than an Affiliate of CBOE
(a "Third Party Purchaser"), Holder first shall offer this Warrant or such
Warrant Shares to the Company by sending written notice to the Company (the
"Offering Notice"). The Offering Notice shall state (i) the identity of the
Third Party Purchaser, (ii) the portion of this Warrant and/or the number of
Warrant Shares proposed to be transferred (the "Offered Securities"), and (iii)
the proposed purchase price which Holder is willing to accept therefor (the
"Offer Price"). For a period of fifteen (15) days after delivery of the Offering
Notice (the "Option Period"), the Company shall have the right and option to
purchase all (but not less than all) of the Offered Securities at a purchase
price equal to the Offer Price and upon the terms and conditions set forth in
the Offering Notice. The right of the Company to purchase any or all of the
Offered Securities under this paragraph (b) shall be exercisable by delivering
written notice of exercise to Holder, prior to expiration of the Option Period.
Any failure of the Company to respond to the Offering Notice within the Option
Period shall be deemed a waiver of the Company's rights under this paragraph
(b). The closing of any purchase of the Offered Securities by the Company under
this (b) shall be held at the principal office of the Company at 11:00 a.m.,
local time, on the 60th day following the date of delivery of the Offering
Notice. At such closing, (x) Holder shall deliver one or more certificates
representing the Offered
<PAGE> 11
Securities being purchased, duly endorsed for transfer, together with all
requisite transfer taxes and a written representation that Holder is the sole
beneficial and record owner of such Offered Securities, free and clear of all
liens, claims, options, charges, encumbrances and rights, (y) the Company shall
deliver the necessary payment in full for such Offered Securities in immediately
Available funds, and (z) Holder and the Company shall execute and deliver such
additional documents as are otherwise necessary or appropriate. If and to the
extent that the Company does not purchase the Offered Securities under this
paragraph (b), Holder may sell the Offered Securities to the Third Party
Purchaser at a price not less than the Offer Price and on the other terms and
conditions set forth in the Offering Notice at any time within 180 days
following expiration of the Option Period. The Offered Securities in the hands
of the Third Party Purchaser shall remain subject to the Company's right of
first refusal in this paragraph (b) and the other restrictions on transfer set
forth in this Section 8.
(c) No Warrant Shares shall be issued other than to CBOE or an
Affiliate of CBOE, and no Warrant Shares may be transferred except to an
Affiliate of CBOE, unless (i) such issuance or transfer has been registered
under the Securities Laws, or (ii) Holder provides to the Company an opinion of
counsel acceptable to the Company in its reasonable discretion, or otherwise
satisfies the Company, that the issuance or transfer is exempt from the
registration requirements of the Securities Laws. Each notice of exercise of
this Warrant automatically shall be deemed to include a representation and
warranty from Holder that Holder is acquiring the Warrant Shares for investment
only, and not with a view to the distribution thereof.
(d) Each certificate evidencing Warrant Shares shall
include a prominent legend to the following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
AND SUCH LAWS OR PURSUANT TO A WRITTEN OPINION OF COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED. THESE SHARES ALSO ARE SUBJECT TO A RIGHT
OF FIRST REFUSAL IN FAVOR OF THE ISSUER.
(e) Notwithstanding any provision of this Section 8 to the
contrary, the restrictions imposed by Sections 8 (a), 8(b), 8(c) and 8(d) above
shall terminate as to any particular Warrant Shares when (i) any class of Common
Stock of the Company shall have been effectively registered under the Securities
Laws, or (ii) an opinion to the effect that the restrictions imposed by Sections
8(a) and 8(c) are no longer required under the Securities Laws shall have been
received from counsel to Holder acceptable to the Company. Whenever the
restrictions imposed by this Section 8 shall terminate, each Holder of any
Warrant Shares as to which such restrictions shall have terminated shall be
entitled to receive from the Company, without expense, new certificates not
bearing the restrictive legend set forth in Section 8(d) of this Agreement.
<PAGE> 12
(f) To transfer this Warrant, Holder shall surrender the
original Warrant to the Secretary of the Company, and the Company shall exchange
such instrument for one or more new Warrants of like tenor, of such nature and
in such denominations as may be specified by Holder, representing in the
aggregate the right to subscribe for and purchase the number of Warrant Shares
purchasable hereunder. Unless and until such transfer(s) is/are duly registered
on the books of the Company, the Company shall be entitled to treat the record
Holder as the sole and absolute owner of this Warrant for purposes of notices,
rights to exercise, rights to transfer, and for all other purposes.
9. INFORMATION.
(a) By its acceptance hereof, CBOE acknowledges the
opportunity to have reviewed the financial statements of the Company and
otherwise to have obtained such information concerning the business and
financial status and prospects of the Company as CBOE desired.
(b) The Company shall cooperate with Holder in supplying such
information as may be reasonably necessary for Holder to complete and file any
information reporting forms presently or hereafter required by the SEC as a
condition to the availability of an exemption from the Securities Laws for any
permitted sale or other transfer of this Warrant and/or the Warrant Shares.
(c) Prior to any exercise or contemplated exercise of this
Warrant, Holder shall be entitled to review current financial statements of the
Company, to inquire of management as to the Company's business and financial
status and prospects, and to review other non-privileged information that may be
available from the Company without undue effort or expense.
10. PAYMENT OF TAXES. The Company shall pay all taxes and other
governmental charges that may be imposed upon the issuance or delivery of
Warrant Shares (but not on income related thereto). The Company shall not be
required, however, to pay any tax or other charge imposed in connection with any
transfer of this Warrant or the issue of any certificate evidencing Warrant
Shares in any name other than that of Holder.
11. NO IMPAIRMENT. The Company will not, by any voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Warrant and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of Holder against impairment.
12. LOSS. Upon receipt of evidence reasonably satisfactory to the
Company of the ownership of and the loss, theft, destruction or mutilation of
this Warrant and (in the
<PAGE> 13
case of loss, theft or destruction) upon delivery of an indemnity reasonably
satisfactory to the Company or (in the case of mutilation) upon surrender and
cancellation of the mutilated Warrant, the Company will execute and deliver, in
lieu thereof, a new Warrant of like tenor.
13. NOTICES. All notices and other communications related to this
Warrant shall be in writing, shall be delivered by Federal Express or other
nationally recognized overnight delivery service, and shall be directed as
follows:
i) if to the Company: To the following
address, or any other address which the Company may designate by notice to
Holder from time to time:
OptiMark Technologies, Inc.
520 Main Avenue
Durango, CO 81301
attn: William A. Lupien, Chief Executive Officer
with a copy in the same manner to:
Ducker, Seawell & Montgomery, P.C.
1560 Broadway, Suite 1500
Denver, CO 80202
attn: Robert C. Montgomery, Esq.
ii) if to Holder: To the following address, or to any
other address which Holder may designate by notice to the Company from
time to time:
Chicago Board Options Exchange, Incorporated
LaSalle at Van Buren
Chicago, IL 60605
attn: Richard Du Four
14. MISCELLANEOUS.
(a) Office of the Company. As long as any part of this Warrant remains
outstanding, the Company shall maintain an office or agency (which may be the
principal executive office of the Company) where this Warrant may be presented
for exercise, registration of transfer, division or combination as provided in
this Warrant. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its Common Stock transfer books
or Warrant transfer books so as to result in preventing or delaying the exercise
or transfer of this Warrant. The Company shall notify Holder in writing prior to
any change of the address of the office at which this Warrant may be presented.
(b) Limitation of Liability. No provision hereof, and no
enumeration herein of the rights or privileges of Holder, shall give rise to any
liability of Holder for the
<PAGE> 14
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
(c) Nonwaiver. No course of dealing or any delay or failure to exercise
any right hereunder on the part of the Company shall operate as a waiver of such
right or otherwise prejudice the Company's rights, powers or remedies. No course
of dealing or any delay or failure to exercise any right hereunder on the part
of Holder shall operate as a waiver of such right or otherwise prejudice
Holder's rights, power or remedies.
(d) Successors. All the covenants, agreements, representations and
warranties contained in this Warrant shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns.
(e) Change; Waiver. Neither this Warrant nor any term hereof may be
changed, waived, discharged or terminated orally but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
(f) Headings. The section headings in this Warrant are inserted for
purposes of convenience only and shall have no substantive effect.
(g) Law Governing. This Warrant shall for all purposes be construed and
enforced in accordance with, and governed by, the laws of the State of Colorado.
(h) Attorneys' Fees. In the event any party hereto initiates any legal
action or suit in connection with any dispute concerning the interpretation of
this Warrant or the enforcement of any provision hereof, the prevailing party in
such action or suit shall be entitled to recover all of its costs of action or
suit (including without limitation reasonable attorneys' and expert witness
fees) from the other party.
IN WITNESS WHEREOF, OptiMark Technologies, Inc., a Delaware corporation,
has caused this Warrant to be signed by its duly authorized officers under its
corporate seal, as of the date first set forth above.
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien,
Chief Executive Officer
Attest:
/s/ Frederick A. Bryson
Secretary
<PAGE> 15
EXHIBIT A
DEFINITION OF OPTIMARK-SECURITIES (fka MJTX)
OptiMark-Securities (the "Service") describes a service to be implemented
and offered by OptiMark Technologies, Inc. or its Affiliates (the "Company").
The Service will incorporate a market mechanism developed and owned by the
Company and with regard to which patents are pending. The market mechanism
features two innovations: 1) an anonymous and non-disclosed representation of
trading desire in terms of a "satisfaction profile", which may be thought of as
a normalized bivariate (extendible to multivariate) utility function in
price/size space; and 2) a means of optimizing the sequential allocation of
trades between buyers and sellers at different prices and sizes based upon a
measure of "mutual satisfaction."
The Service will be accessible via TCP/IP network protocols, and access to
the transaction facility will be via network providers of the users' choice that
might include, for example, Dow Jones Telerate, Bridge or IBM. Users will send
profiles to a computer facility operated by the Company, where they will be
processed using software incorporating the Company's proprietary algorithms. The
Company will also provide application programming interfaces to network
providers.
At the user's site, the Service will include a sophisticated graphical
user interface initially running under Microsoft Windows (3.1 through 95), OS/2
or UNIX to simplify and enhance the customers' ability to define and enter
profiles. At the central site, the Service will include a computer to computer
interface (CTCI) for receiving computer-generated profiles. The Service will
process quotation feeds from third parties, including the real-time feeds
available from the Consolidated Quotation Service ("CQS"), the Options Price
Reporting Authority ("OPRA"), and the National Association of Securities Dealers
Automated Quotation Service ("NASDAQ").
<PAGE> 1
EXHIBIT 10.24
April 23, 1998
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY
STATE AND NEITHER THIS WARRANT, SUCH SECURITIES NOR ANY
INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO A WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
NEITHER THIS WARRANT NOR THE SECURITIES ACQUIRED UPON EXERCISE
OF THIS WARRANT MAY BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED,
IN WHOLE OR IN PART, EXCEPT TO AFFILIATES OF THE HOLDER,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE ISSUER.
OPTIMARK TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Virginia Surety Company, Inc.,
or its permitted assigns (the "Holder"), is entitled to subscribe for and
purchase up to Five Hundred Thousand (500,000) validly issued, fully paid and
nonassessable shares ("Warrant Shares") of voting Common Stock of OptiMark
Technologies, Inc., a Delaware corporation (the "Company"), at the exercise
price to be determined in accordance with Section 2 below (the "Exercise
Price"), subject to the terms, conditions and adjustments herein after set
forth.
1. Definitions. As used in this Warrant, in addition to other capitalized
terms defined elsewhere herein, the following terms have the meanings indicated:
"Act" means the Securities Act of 1933, as amended, and the Rules and
Regulations promulgated thereunder.
"Additional Shares" has the meaning specified in Section 6(b)(ii) below.
"Additional Warrant" has the meaning specified in Section 6(b)(ii) below.
"Affiliate" of any named Person means any other Person who is an
"affiliate"of the named Person, as defined in Rule 501(b) under the Act.
<PAGE> 2
"Board of Directors" means the board of directors of the Company, as
constituted from time to time.
"Business Day" means any day other than a Saturday, Sunday or a day on
which national banks are authorized by law to close in the State of New York.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock.
"Common Stock" means the voting and nonvoting common stock, $.01 par
value per share, of the Company, or any other capital stock of the Company into
which such stock is reclassified or reconstituted.
"Common Stock Equivalent" means any security or obligation which is by
its terms convertible into or exchangeable for shares of Common Stock,
including, without limitation, this Warrant, the Series A Preferred Stock, the
Series B Preferred Stock, and any option, warrant or other subscription or
purchase right with respect to shares of Common Stock.
"Company" has the meaning specified on the cover of this Warrant.
"Distribution" has the meaning specified in Section 6(b)(i) below.
"Excluded Transaction" means (i) the issuance of up to 6,534,268 shares
of Common Stock pursuant to options, warrants and compensatory stock grants,
issued and reserved for issuance as incentives for the Corporation's officers,
directors, employees, former employees and consultants, (ii) the issuance
pursuant to a warrant in favor of The Pacific Exchange, Incorporated dated
August 27, 1996, of up to 2,104,000 shares of Common Stock (subject to
adjustment as provided therein), (iii) the issuance pursuant to a warrant in
favor of The Chicago Board Options Exchange, Incorporated dated December 31,
1996, of up to 1,000,000 shares of Common Stock (subject to adjustment as
provided therein), (iv) the issuance pursuant to a warrant in favor of Dow Jones
& Company, Inc. dated May 29, 1997, of up to 2,161,764 shares of Common Stock
(subject to adjustment as provided therein), (v) the issuance of Common Stock
pursuant to a warrant expected to be negotiated with the National Association of
Securities Dealers, Inc. or one of its affiliates, as an incentive to make the
Corporation's proprietary OptiMark trading system available on NASDAQ, (vi) the
issuance of Common Stock upon conversion of the Series A Preferred Stock, and
(vii) the issuance of Common Stock upon conversion of the Series B Preferred
Stock.
"Exercise Date" has the meaning specified in Section 3(c) below.
"Exercise Form" means an Exercise Form in the form annexed hereto as
Exhibit A.
<PAGE> 3
"Exercise Period" has the meaning specified in Section 2(a) below.
"Expiration Date" means December 31, 2001.
"Fair Market Value" means the amount that a willing buyer would pay a
willing seller in an arm's length transaction, as reasonably determined by the
Board of Directors in good faith.
"Issue Date" has the meaning specified in Section 6(d) below.
"Offering Price" has the meaning set forth in Section 6(d) below.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated April 23, 1998 between the Company and the holders of the Series B Stock.
"Relevant Date" has the meaning specified in Section 6(d) below.
"Series A Preferred Stock" means the Company's Series A Convertible
Participating Preferred Stock, $.01 par value per share.
"Series B Preferred Stock" means the Company's Series B Convertible
Participating Preferred Stock, $.01 par value per share.
"Shares outstanding" or "shares then outstanding" means all shares of
Common Stock outstanding and all Common Stock Equivalents outstanding.
"Transaction" has the meaning specified in Section 7 below.
"Warrant Issue Date" means April 23, 1998.
2. Exercise of Warrant.
(a) Term of Warrant. Subject to the terms and conditions set forth below,
this Warrant may be exercised, in whole or in part, by the Holder at any time,
or from time to time, during the term commencing on the Warrant Issue Date and
ending at 5:00 p.m., New York City time on the Expiration Date (the "Exercise
Period"). This Warrant shall expire on the Expiration Date if and to the extent
not exercised by the Holder during the Exercise Period.
<PAGE> 4
(b) Exercise Price. Subject to potential adjustment from time to
time pursuant to Section 6 hereof, this Warrant shall be exercisable at an
Exercise Price of Ten Dollars ($10.00) per share of Common Stock.
3. Method of Exercise; Payment; Stock Certificates.
(a) Method of Exercise; Payment of Purchase Price. The purchase rights
represented by this Warrant may be exercised by the Holder, in whole or in part,
at any time, or from time to time, during the Exercise Period by the surrender
of this Warrant (with a duly executed Exercise Form specifying the number of
Warrant Shares to be purchased) at the principal office of the Company, and by
the payment to the Company in cash, by certified, cashier's or other check
acceptable to the Company, of an amount equal to the aggregate Exercise Price
for those Warrant Shares specified in the Exercise Form.
(b) Stock Certificates. In the event of the exercise of the rights
represented by this Warrant as provided above, the Company shall promptly (i)
issue and deliver to the Holder, one or more certificates representing the
shares of voting Common Stock so purchased by the Holder, in such name or names
as may be designated by the Holder, and (ii) if applicable, cash in lieu of any
fraction of a share.
(c) When Exercise Effective. The exercise of this Warrant shall be deemed
effective immediately prior to the close of business on the Business Day on
which this Warrant is surrendered to the Company as provided in this Section 3
(the "Exercise Date"). The Person in whose name any certificate for shares of
Common Stock shall be issuable upon such exercise, as provided in Section 3(b),
shall be deemed to be the record holder of such shares of Common Stock for all
purposes on the Exercise Date. In the event that this Warrant is exercised in
part, the Company at its expense will execute and deliver a new Warrant of like
tenor exercisable for the number of Warrant Shares for which this Warrant may
still thereafter be exercised.
4. Stock Fully Paid; Reservation of Shares. All of the shares of Common
Stock issuable upon the exercise of the rights represented by this Warrant will,
upon issuance, be duly authorized, validly issued, fully paid and nonassessable,
and free of all taxes, liens and charges with respect to the issue thereof.
During the Exercise Period, the Company shall at all times have authorized and
reserved a sufficient number of shares of its voting Common Stock to provide for
the exercise of the rights represented by this Warrant.
5. Fractional Shares. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder. In lieu of such fractional shares the
Company shall make a cash payment therefor based upon the Fair Market Value of
the Common Stock.
<PAGE> 5
6. Certain Adjustments.
(a) Capital Adjustments. The number of Warrant Shares purchasable upon
the exercise of this Warrant and the Exercise Price then in effect pursuant to
Section 2(b) shall be subject to adjustment as follows:
(i) Stock Dividends, Splits, Etc. If at any time after the Warrant
Issue Date (A) the Company shall pay a stock dividend payable in shares of
Common Stock or (B) the number of shares of Common Stock shall be increased by a
subdivision or split-up of shares of Common Stock, then, on the date of the
payment of such dividend or immediately after the effective date of subdivision
or split up, as the case may be, the number of Warrant Shares to be delivered
upon exercise of this Warrant will be increased so that the Holder will be
entitled to receive the number of shares of Common Stock that such Holder would
have owned immediately following such action had this Warrant been exercised
immediately prior thereto, and the Exercise Price will be adjusted as provided
below in paragraph (iii).
(ii) Combination of Stock. If the number of shares of Common Stock
outstanding at any time after the Warrant Issue Date shall be decreased by a
combination of the outstanding shares of Common Stock, then, immediately after
the effective date of such combination, the number of Warrant Shares to be
delivered upon exercise of this Warrant will be decreased so that the Holder
thereafter will be entitled to receive the number of shares of Common Stock that
such Holder would have owned immediately following such action had this Warrant
been exercised immediately prior thereto, and the Exercise Price will be
adjusted as provided below in paragraph (iii).
(iii) Exercise Price Adjustment. Whenever the number of Warrant Shares
purchasable upon the exercise of this Warrant is adjusted as provided pursuant
to this Section 6(a), the Exercise Price payable upon the exercise of this
Warrant shall be adjusted by multiplying such Exercise Price immediately prior
to such adjustment by a fraction, of which the numerator shall be the number of
Warrant Shares purchasable upon the exercise of the Warrant immediately prior to
such adjustment, and of which the denominator shall be the number of Warrant
Shares purchasable immediately thereafter; provided, however, that the Exercise
Price for each Warrant Share shall in no event be less than the par value of
such Warrant Share.
(b) Certain Distributions.
(i) Exercise Price Adjustment. In case the Company shall at any time
or from time to time distribute to all or substantially all of the holders of
shares of its Common Stock (including, but not limited to, any distribution made
in connection with a merger or consolidation in which the Company is the
resulting or surviving Person and the Common Stock is not changed or exchanged)
cash, evidences of indebtedness of the Company or another Person, securities of
the Company or another Person, or other assets (excluding dividends payable in
shares of Common Stock for which adjustment is made under Section 6(a)(i)) or
rights or warrants to subscribe for or purchase the foregoing
<PAGE> 6
(each, a "Distribution"), then, and in each such case, the Exercise Price then
in effect shall be adjusted (and any other appropriate actions shall be taken by
the Company) by multiplying the Exercise Price in effect immediately prior to
the date of such distribution by a fraction (A) the numerator of which shall be
the Fair Market Value of the Common Stock less the Fair Market Value of the
amount of cash, evidences of indebtedness, securities or other assets so
distributed or of such subscription rights or warrants applicable to one share
of Common Stock and (B) the denominator of which shall be the Fair Market Value
of the Common Stock, all as determined on the record date referred to below.
Such adjustment shall be made whenever any distribution is made and shall become
effective retroactively to the date immediately following the close of business
on the record date for the determination of stockholders entitled to receive
such distribution.
(ii) Additional Shares. In addition to the Exercise Price adjustment
pursuant to clause (i) above, in case the Company shall at any time or from time
to time distribute to all or substantially all of the holders of shares of its
Common Stock (including, but not limited to, any distribution made in connection
with a merger or consolidation in which the Company is the resulting or
surviving Person and the Common Stock is not changed or exchanged) securities of
the Company or another Person (the "Additional Shares"), then, and in each such
case, the Company shall, at its expense, cause an additional warrant (the
"Additional Warrant"), substantially in the form of this Warrant, to be issued
by such Person or the Company, as the case may be, to evidence the Holder's
right to acquire the kind and amount of Additional Shares receivable by a holder
of the number of shares of Common Stock that such Holder would have been
entitled to receive upon exercise of this Warrant had this Warrant been
exercised immediately before such Distribution is made, subject to adjustments
that shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 6. The Additional Warrant shall be subject to adjustments
that shall be as nearly equivalent as practicable to the adjustments provided in
this Section 6. The exercise price for each Additional Share shall be reasonably
determined by the Board of Directors in good faith after considering the
relationship that exists (as of the date of the issuance of the Additional
Warrant) between the Exercise Price and the Fair Market Value of each Warrant
Share; provided, however, that such exercise price shall in no event be greater
than the amount by which the Exercise Price was decreased pursuant to clause (i)
above.
(c) No Adjustment. If the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of Warrant Shares
and/or the Exercise Price then in effect shall be required by reason of the
taking of such record.
(d) Issuances Below Exercise Price. In addition to any adjustments made
pursuant to this Section 6, the Exercise Price then in effect pursuant to
Section 2(b) shall be subject to adjustment if the Company shall at any time or
from time to time issue or sell any Common Stock or Common Stock Equivalents at
a price per share (the "Offering Price") that is less than the Exercise Price
then in effect as of the record date or Issue
<PAGE> 7
Date referred to in the following sentence, as the case may be (the "Relevant
Date") (treating the Offering Price per share of Common Stock, in the case of
the issuance of any Common Stock Equivalent, as equal to (x) the sum of the
price for such Common Stock Equivalent plus any additional consideration payable
(without regard to any anti-dilution adjustments) upon the conversion, exchange
or exercise of such Common Stock Equivalent divided by (y) the number of shares
of Common Stock initially underlying such Common Stock Equivalent), other than
(1) issuances or sales for which an adjustment is made pursuant to another
paragraph of this Section 6 and (2) issuances of Common Stock in connection with
an Excluded Transaction, then, and in each such case, the Exercise Price then in
effect shall be reduced, concurrently with such issuance, to a price determined
by multiplying such Exercise Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock that the aggregate
consideration received by the Company for the total number of additional shares
of Common Stock or Common Stock Equivalents so issued would purchase at such
Exercise Price; and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
such additional shares of Common Stock or Common Stock Equivalents so issued.
Such adjustment shall be made whenever such shares of Common Stock or Common
Stock Equivalents are issued, and shall become effective retroactively to a date
immediately following the close of business (x) in the case of an issuance to
the stockholders of the Company, as such, on the record date for the
determination of stockholders entitled to receive such shares of Common Stock or
Common Stock Equivalents and (y) in all other cases, on the date (the "Issue
Date") of such issuance; provided, however, that the determination as to whether
an adjustment is required to be made pursuant to this Section 6 shall only be
made upon the issuance of such shares of Common Stock or Common Stock
Equivalents, and not upon the issuance of the security into which such Common
Stock Equivalents convert, exchange or may be exercised; and provided further,
that if the convertibility or exercisability feature of such Common Stock
Equivalents expires prior to conversion or exercise thereof, then the Exercise
Price shall be readjusted (but to no greater extent than originally adjusted) to
an Exercise Price equal to that price which would have existed had the expired
Common Stock Equivalents never been issued or sold.
(e) Similar Actions. In the case the Company, at any time or from time to
time, shall take any action affecting its Common Stock similar to or having an
effect similar to any of the actions described in Section 6(a), (b) or (d) (but
not including any action described in any such subsections) and the Board of
Directors in good faith determines that it would be equitable in the
circumstances to adjust the number of Warrant Shares and/or the Exercise Price
as a result of such action, then, and in each such case, the number of Warrant
Shares and/or the Exercise Price shall be adjusted in such manner and at such
time as the Board of Directors of the Company in good faith determines would be
equitable in the circumstances (such determination to be evidenced in a
resolution, a certified copy of which shall be mailed to the Holder).
7. Reorganization, etc. If any capital reorganization of the Company, or
any reclassification of the Common Stock, or any consolidation of the Company
with or
<PAGE> 8
merger of the Company with or into any other Person (other than a consolidation
or merger in which the Corporation is the resulting or surviving Person which
does not result in any reclassification or change of outstanding Common Stock)
or any sale, lease or other transfer of all or substantially all of the assets
of the Company to any other Person (each, a "Transaction"), shall be effected in
such a way that the holders of Common Stock shall be entitled to receive stock,
other securities or assets (whether such stock, other securities or assets are
issued or distributed by the Company or another Person), in lieu of or in
addition to cash, with respect to or in exchange for Common Stock, then, upon
exercise of this Warrant, the Holder shall have the right to receive the same
kind and amount of stock, other securities, cash and/or assets receivable upon
such reorganization, reclassification, consolidation, merger or sale, lease or
other transfer by a holder of the number of shares of Common Stock that such
Holder would have been entitled to receive upon exercise of this Warrant had
this Warrant been exercised immediately before such reorganization,
reclassification, consolidation, merger or sale, lease or other transfer,
subject to adjustments that shall be as nearly equivalent as may be practicable
to the adjustments provided for in Section 6.
8. Notices of Adjustment. Whenever the Exercise Price and/or the
number of Warrant Shares purchasable hereunder shall be adjusted pursuant to
Section 6 hereof, the Company shall deliver to the Holder a certificate setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Exercise Price and the number of Warrant Shares purchasable hereunder after
giving effect to such adjustment.
9. Notices of Corporate Action. Prior to the Expiration Date, if this
Warrant has not theretofore been exercised in full, then in the event of:
(a) any taking by the Company of a record of the holders of its
Capital Stock for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right;
(b) any capital reorganization of the Company, any reclassification or
recapitalization of any Capital Stock of the Company, any consolidation or
merger involving the Company and any other Person, or any transfer of all or
substantially all the assets of the Company to any other Person;
(c) or any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
the Company will mail to the Holder a notice specifying (x) the date or expected
date on which any such record is to be taken for the purpose of such dividend,
distri bution or right and the amount and character of any such dividend,
distribution or right, and (y) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and
<PAGE> 9
the time, if any, as of which the holders of record of Capital Stock (or other
securities) shall be entitled to exchange their shares of Capital Stock (or
other securities) for the securities or other property deliverable upon such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up. Such notice shall be
delivered at least 10 days prior to the date therein specified, in the case of
any date referred to in the foregoing clauses (x) and (y).
10. Registration Rights Agreement. All shares of Common Stock acquired by
the Holder upon exercise of this Warrant shall be subject, in full, to all
provisions of the Registration Rights Agreement.
11. Representations of the Company. The Company represents and warrants
that all corporate actions on the part of the Company, its officers, directors
and stockholders necessary for the issuance of this Warrant, for the sale and
issuance of the shares of Common Stock pursuant hereto, and for the performance
of the Company's obligations hereunder, were taken prior to and are effective as
of the Warrant Issue Date.
12. Representations and Warranties by the Holder. The Holder represents and
warrants to the Company as follows:
(a) This Warrant is being acquired and any Warrant Shares will be acquired
for the Holder's own account, for investment and not with a view to, or for
resale in connection with, any distribution or public offering thereof within
the meaning of the Act.
(b) The Holder understands that this Warrant has not been and the Warrant
Shares will not be registered under the Act by reason of their issuance in a
transaction exempt from the registration and prospectus delivery requirements of
the Act pursuant to Section 4(2) thereof. Accordingly, this Warrant and the
Warrant Shares must be held by the Holder indefinitely, and the Holder must
therefore bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the Act or is exempted from
such registration.
(c) The Holder has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the purchase of
this Warrant and the Warrant Shares and of protecting its interests in
connection therewith.
(d) The Holder is able to bear the economic risk of the purchase of Warrant
Shares pursuant to the terms of this Warrant.
13. Replacement of Warrant. On receipt by the Company of an affidavit of an
authorized representative of the Holder stating the circumstances of the loss,
theft, destruction or mutilation of this Warrant (and in the case of any such
mutilation, on surrender and cancellation of such Warrant), the Company, at its
expense, shall promptly execute and deliver, in lieu thereof, a new Warrant of
like tenor.
<PAGE> 10
14. Restrictions on Transfer; Restrictive Legends.
(a) This Warrant and any Warrant Shares may be freely sold or otherwise
transferred, in whole or in part, to one or more Affiliates of the Holder.
Except for the foregoing, neither this Warrant nor any Warrant Shares may be
sold, pledged or otherwise transferred, in whole or in part, to any Person
without the prior written consent of the Company.
(b) Each Warrant issued in substitution for this Warrant shall be stamped
or otherwise imprinted with legends in substantially the following form:
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND
NEITHER THIS WARRANT, SUCH SECURITIES NOR ANY INTEREST THEREIN MAY
BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO A WRITTEN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
NEITHER THIS WARRANT NOR THE SECURITIES ACQUIRED UPON EXERCISE OF
THIS WARRANT MAY BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED, IN WHOLE
OR IN PART, EXCEPT TO AN AFFILIATE OF THE HOLDER, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE ISSUER.
(c) Each stock certificate for Warrant Shares issued upon the exercise of
any Warrant and each stock certificate issued upon the direct or indirect
transfer of any Warrant Shares shall be stamped or otherwise imprinted with
legends 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"),
OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO A WRITTEN OPINION OF COUNSEL SATISFACTORY TO
<PAGE> 11
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED, IN WHOLE OR IN PART, EXCEPT TO AN
AFFILIATE OF THE HOLDER, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
ISSUER.
15. Rights of Stockholders. This Warrant shall not entitle its Holder to
any of the rights of a stockholder of the Company.
16. Successors and Assigns. The provisions of this Warrant shall inure to
the benefit of and be binding upon the Company, the Holder and their respective
permitted assigns. Nothing in this Warrant, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Warrant, except as expressly provided in
this Warrant.
17. Amendment or Waiver. This Warrant and any term hereof may be amended,
waived, discharged or terminated only by and with the written consent of the
Company and the Holder.
18. Specific Performance. The parties hereto intend that each of the
parties have the right to seek damages or specific performance in the event that
any other party hereto fails to perform such party's obligations hereunder.
Therefore, if any party shall initiate any action or proceeding to enforce the
provisions hereof, any party against whom such action or proceeding is brought
hereby waives any claim or defense therein that the plaintiff party has an
adequate remedy at law.
19. Charges, Taxes and Expenses. Issuance of certificates representing
Warrant Shares shall be made without charge to the Holder for any issue or
transfer tax, or other incidental expense, in respect of the issuance or
delivery of such certificates or the securities represented thereby, all of
which taxes and expenses shall be paid by the Company; provided, however, the
Company shall not be required (a) to pay any tax or other incidental expense
which may be payable in respect of (i) any transfer or delivery of this Warrant
by the Holder to another Person or (ii) the issuance or delivery of certificates
representing Warrant Shares to a Person other than the Holder, or (b) to issue
or deliver certificates representing Warrant Shares to a Person other than the
Holder until any such tax payable by the Holder as provided in clause (ii) above
shall have been paid or until it has been established to the Company's
reasonable satisfaction that no such tax is due.
20. Notices. All notices, demands and other communications provided for or
permitted hereunder shall be given in the manner specified in Section 8(e) of
the Registration Rights Agreement.
<PAGE> 12
21. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF.
22. Headings. The headings in this Warrant are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
23. Severability. Any term or provision of this Warrant which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the terms and provisions of this Warrant or affecting the
validity or enforceability of any of the terms or provisions of this Warrant in
any other jurisdiction.
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
Chief Executive Officer
<PAGE> 13
Exhibit A
EXERCISE FORM
(To be executed upon exercise of the Warrant)
Reference is made to the attached Common Stock Purchase Warrant. The undersigned
hereby irrevocably elects to exercise the right, represented by the attached
Warrant, to purchase __________ Warrant Shares and herewith tenders payment for
such Warrant Shares to the order of OptiMark Technologies, Inc. in the amount of
$__________ in accordance with the terms of the Warrant. The undersigned
requests that a certificate for such Warrant Shares be registered in the name of
the undersigned and that such certificate be delivered to the undersigned's
address below.
If such number of Warrant Shares purchased shall not be all of the Warrant
Shares evidenced by the Warrant, the undersigned requests that a new Warrant of
like tenor for the balance remaining of such Warrant Shares be registered in the
name of the undersigned and that such Warrant be delivered to the undersigned's
address below.
Dated:
-----------------
Signature
------------------------------
(Print Name)
---------------------------------
(Street Address)
---------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- ----------------------------
<PAGE> 1
Exhibit 10.25
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO A WRITTEN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
COMMON STOCK PURCHASE WARRANT
OPTIMARK TECHNOLOGIES, INC. (the "Company")
DATE OF INITIAL ISSUANCE: JUNE 19, 1998
THIS CERTIFIES THAT for value received, TRANSAMERICA BUSINESS CREDIT
CORPORATION or its registered assigns (hereinafter called the "Holder") is
entitled to purchase from the Company, at any time during the Term of this
Warrant, Forty Two Thousand Five Hundred (42,500) shares (subject to the
limitation set forth in Section 2.3 below) of common stock, $0.01 par value, of
the Company (the "Common Stock"), at the Warrant Price, payable as provided
herein. The exercise of this Warrant shall be subject to the provisions,
limitations and restrictions herein contained, and may be exercised in whole or
in part.
SECTION 1. Definitions.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
Common Stock - shall mean and include the Company's authorized Common
Stock, $0.01 par value, as constituted at the date hereof.
Exchange Act - shall mean the Securities Exchange Act of 1934, as amended
from time to time.
Securities Act - the Securities Act of 1933, as amended.
Term of this Warrant - shall mean the period beginning on the date of
initial issuance hereof and ending on June 18, 2003.
Warrant Price - $10.00 per share, subject to adjustment in accordance with
Section 4 hereof.
Warrant - this Warrant issued in connection with a Commitment Letter dated
April 23, 1998 executed by the Company and Transamerica Business Credit
Corporation (the "Commitment Letter") to the original holder of this Warrant, or
any permitted transferees from such original holder or this Holder.
Warrant Shares - shares of Common Stock purchased or purchasable by the
Holder of this Warrant upon the exercise hereof.
<PAGE> 2
SECTION 2. Exercise of Warrant.
2.1. Procedure for Exercise of Warrant. To exercise this Warrant in whole
or in part (but not as to any fractional share of Common Stock), the Holder
shall deliver to the Company at its office referred to in Section 11 hereof at
any time and from time to time during the Term of this Warrant: (i) the Notice
of Exercise in the form attached hereto, (ii) cash, certified or official bank
check payable to the order of the Company, wire transfer of funds to the
Company's account (or any combination of any of the foregoing) in the amount of
the aggregate Warrant Price for each Warrant Share being purchased, and (iii)
this Warrant. Notwithstanding any provisions herein to the contrary, if the
Current Market Price (as defined in Section 5) is greater than the Warrant Price
(at the date of calculation, as set forth below), in lieu of exercising this
Warrant as hereinabove permitted, the Holder may elect to receive shares of
Common Stock equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the office of
the Company referred to in Section 11 hereof, together with the Notice of
Exercise, in which event the Company shall issue to the Holder that number of
shares of Common Stock computed using the following formula:
CS = WCS x (CMP-WP)
--------------
CMP
Where
CS equals the number of shares of Common Stock to be issued to the
Holder
WCS equals the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being exercised, the
portion of the Warrant being exercised (at the date of such
calculation)
CMP equals the Current Market Price (at the date of such calculation)
WP equals the Warrant Price (as adjusted to the date of such
calculation)
Subject to the limitations set forth in Section 6.2 hereof regarding the
transfer of Warrant Shares, in the event of any exercise of the rights
represented by this Warrant, a certificate or certificates for the Warrant
Shares so purchased, registered in the name of the Holder or such other name or
names as may be designated by the Holder, shall be delivered to the Holder
hereof within a reasonable time, not exceeding fifteen (15) days, after the
rights represented by this Warrant shall have been so exercised; and, unless
this Warrant has expired, a new Warrant representing the number of Warrant
Shares (except a remaining fractional share), if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the Holder
hereof within such time. The person in whose name any certificate for Warrant
Shares is issued upon exercise of this Warrant shall for all purposes be deemed
to have become the holder of record of such shares on the date on which the
Warrant was surrendered and payment of the aggregate Warrant Price and any
applicable taxes was made, irrespective of the date of delivery of such
certificate, except that, if the date of such surrender and payment is a date
when the stock transfer books of the Company are closed, such person shall be
deemed to have become the holder of such shares at the close of business on the
next succeeding date on which the stock transfer books are open.
2.2. Transfer Restriction Legend. Each certificate for Warrant Shares
shall bear the following legends (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on
2
<PAGE> 3
the face thereof unless at the time of exercise such Warrant Shares shall be
registered under the Securities Act:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
OR PURSUANT TO A WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THAT COMMON
STOCK PURCHASE WARRANT DATED JUNE 19, 1998 IN FAVOR OF TRANSAMERICA
BUSINESS CREDIT CORPORATION, A COPY OF WHICH MAY BE INSPECTED AT THE
COMPANY'S PRINCIPAL OFFICE.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the written opinion
of counsel for the holder thereof (which counsel shall be reasonably
satisfactory to counsel for the Company) the securities represented thereby are
not, at such time, required by law to bear such legend.
2.3. Limitation on Exercise; Reduction of Number of Warrant Shares. Prior
to March 31, 1999, the Holder shall not be permitted to exercise this Warrant
for a greater number of Warrant Shares than results from the following
computation: 42,500 times a fraction, the numerator of which is the aggregate
amount of Equipment Cost represented by all Lease Schedules funded under the
Master Lease Agreement dated as of June 19, 1998 under which the Company is
Lessee (the "Master Lease"), and the denominator of which is $5,000,000. In the
event that the Lessor under the Master Lease declines to fund further Lease
Schedules under the Master Lease on the grounds that the Lessee has suffered a
material adverse change, then this Warrant will thereafter be exerciseable only
for the number of Warrant Shares set forth in the preceding sentence. If, as of
March 31, 1999, the Lessor has not declined to fund Lease Schedules in this
manner, then this Warrant shall thereafter be fully exerciseable as though this
Section 2.3 were not present.
SECTION 3. Covenants as to Common Stock. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable in
respect of the issue of this Warrant or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant; provided, however, the
Company shall not be required to pay any tax or other incidental expense which
may be payable in respect of (i) any transfer or delivery of this Warrant by the
Holder to another person or entity or (ii) the issuance or delivery of
certificates representing Warrant Shares to a person or entity other than the
Holder. The Company further covenants and agrees that the Company will at all
times have authorized and reserved, free from preemptive rights, a sufficient
number of shares of Common Stock to provide for the exercise of the rights
represented by this Warrant. The Company further covenants and agrees that if
3
<PAGE> 4
any shares of capital stock to be reserved for the purpose of the issuance of
Warrant Shares upon the exercise of this Warrant require registration with or
approval of any governmental authority under any federal or state law before
such Warrant Shares may be validly issued or delivered upon exercise, then the
Company will in good faith and as expeditiously as possible endeavor to secure
such registration or approval, as the case may be.
SECTION 4. Certain Adjustments
a. Capital Adjustments. The number of Warrant Shares purchasable
upon the exercise of this Warrant and the Warrant Price then in effect shall be
subject to adjustment as follows:
i. Stock Dividends, Splits, Etc.. If at any time during the
Term of this Warrant (A) the Company shall pay a stock dividend payable in
shares of Common Stock or (B) the number of shares of Common Stock shall be
increased by a subdivision or split-up of shares of Common Stock, then, on the
date of the payment of such dividend or immediately after the effective date of
subdivision or split up, as the case may be, the number of Warrant Shares to be
delivered upon exercise of this Warrant will be increased so that the Holder
will be entitled to receive the number of shares of Common Stock that such
Holder would have owned immediately following such action had this Warrant been
exercised immediately prior thereto, and the Warrant Price will be adjusted as
provided below in paragraph (iii).
ii. Combination of Stock. If the number of shares of Common
Stock outstanding at any time during the Term of this Warrant shall be decreased
by a combination of the outstanding shares of Common Stock, then, immediately
after the effective date of such combination, the number of Warrant Shares to be
delivered upon exercise of this Warrant will be decreased so that the Holder
thereafter will be entitled to receive the number of shares of common Stock that
such Holder would have owned immediately following such action had this Warrant
been exercised immediately prior thereto, and the Warrant Price will be adjusted
as provided below in paragraph (iii).
iii. Warrant Price Adjustment. Whenever the number of Warrant
Shares purchasable upon the exercise of this Warrant is adjusted as provided
pursuant to this Section 4(a), the Warrant Price payable upon the exercise of
this Warrant shall be adjusted by multiplying such Warrant Price immediately
prior to such adjustment by a fraction, of which the numerator shall be the
number of Warrant Shares purchasable upon the exercise of the Warrant
immediately prior to such adjustment, and of which the denominator shall be the
number of Warrant Shares purchasable immediately thereafter; provided, however,
that the Warrant Price for each Warrant Share shall in no event be less than the
par value of such Warrant Share.
b. Certain Distributions.
i. Warrant Price Adjustment. In case the Company shall at any
time or from time to time distribute to all or substantially all of the holders
of shares of its Common Stock (including, but not limited to, any distribution
made in connection with a merger or consolidation in which the Company is the
resulting or surviving entity and the Common Stock is not changed or exchanged),
evidences of indebtedness of the Company or another entity, securities of the
Company or another entity, or other assets (excluding dividends payable in
shares of Common Stock for which adjustment is made under Section 4(a)(i) and
excluding cash dividends and distributions) or rights or warrants to subscribe
for or purchase the foregoing (excluding options to purchase and rights to
subscribe for Common Stock or other securities of the Company convertible into
or exchangeable for Common
4
<PAGE> 5
Stock), or if the Company shall declare a cash dividend upon its Common Stock
payable otherwise then out of earnings or earned surplus (each, a
"Distribution"), then, and in each such case, the Warrant Price then in effect
shall be adjusted (and any other appropriate actions shall be taken by the
Company) by multiplying the Warrant Price in effect immediately prior to the
date of such Distribution by a fraction (A) the numerator of which shall be the
Current Market Price of the Common Stock less the fair market value of the
evidences of indebtedness, securities or other assets so distributed or of such
subscription rights or warrants applicable to one share of Common Stock (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive), and (B) the denominator of which shall be
the Current Market Price of the Common Stock. Such adjustment shall be made
whenever any Distribution is made.
ii. Additional Shares. In addition to the Warrant Price
adjustment pursuant to paragraph (i) above, in case the Company shall at any
time or from time to time make a Distribution of securities of the Company or
another entity as described in paragraph (i) above (the "Additional Shares"),
then, and in each such case, the Company shall, at its expense, cause an
additional warrant (the "Additional Warrant"), substantially in the form of this
Warrant, to be issued by such entity or the Company, as the case may be, to
evidence the Holder's right to acquire the kind and amount of Additional Shares
receivable by a holder of the number of shares of Common Stock that such Holder
would have been entitled to receive upon exercise of this Warrant had this
Warrant been exercised immediately before such Distribution is made, subject to
adjustments that shall be as nearly equivalent as practicable to the adjustments
provided for in this Section 4. The Additional Warrant shall be subject to
adjustments that shall be as nearly equivalent as practicable to the adjustments
provided for in this Section 4. The exercise price for each Additional Share
shall be determined conclusively by the Board of Directors in good faith after
considering the relationship that exists (as of the date of the issuance of the
Additional Warrant) between the Warrant Price and the fair market value of each
Warrant Share; provided, however, that such exercise price shall in no event be
greater than the amount by which the Warrant Price was decreased pursuant to
paragraph (i) above.
c. No Adjustment. If the Company shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of Warrant Shares
and/or the Warrant Price then in effect shall be required by reason of the
taking of such record.
SECTION 5. Additional Adjustment Provisions. (a) All calculations under Section
4 shall be made to the nearest cent or to the nearest one-tenth (1/10) of a
share, as the case may be.
(b) For the purpose of any computation pursuant to Section 4, the Current
Market Price at any date of one share of Common Stock shall be deemed to be the
average of the daily closing prices for the 15 consecutive business days ending
on the last business day before the day in question (as adjusted for any stock
dividend, split, combination or reclassification that took effect during such 15
business day period). The closing price for each day shall be the last reported
sales price regular way or, in case no such reported sales took place on such
day, the average of the last reported bid and asked prices regular way, in
either case on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or as reported by Nasdaq (or if the
Common Stock is not at the time listed or admitted for trading on any such
exchange or if prices of the Common Stock are not reported by Nasdaq then such
price shall be equal to the average of the last reported bid and asked prices on
such day as reported by The National Quotation Bureau Incorporated or any
similar reputable quotation and reporting service, if such quotation is not
reported by The National Quotation Bureau Incorporated); provided, however, that
5
<PAGE> 6
if the Common Stock is not traded in such manner that the quotations referred to
in this clause (b) are available for the period required hereunder, the Current
Market Price shall be determined in good faith by the Board of Directors of the
Company.
(c) Whenever the Warrant Price shall be adjusted as provided in Section 4,
the Company shall prepare a statement showing the facts requiring such
adjustment and the Warrant Price that shall be in effect after such adjustment.
The Company shall cause a copy of such statement to be sent by mail, first class
postage prepaid, to each Holder of this Warrant at its, his or her address
appearing on the Company's records. Where appropriate, such copy may be given in
advance and may be included as part of the notice required to be mailed under
the provisions of subsection (e) of this Section 5.
(d) Adjustments made pursuant to Section 4 shall be made on the date such
dividend, subdivision, split-up, combination or Distribution, as the case may
be, is made, and shall become effective at the opening of business on the
business day next following the record date for the determination of
stockholders entitled to such dividend, subdivision, split-up, combination or
distribution.
(e) In the event the Company shall propose to take any action of the types
described in Section 4, the Company shall forward, at the same time and in the
same manner, to the Holder of this Warrant such notice, if any, which the
Company shall give to the holders of capital stock of the Company.
(f) In any case in which an adjustment shall become effective immediately
after a record date for an event, the Company may defer until the occurrence of
such event issuing to the Holder of all or any part of this Warrant which is
exercised after such record date and before the occurrence of such event the
additional shares of capital stock (if any) issuable upon such exercise by
reason of the adjustment required by such event over and above the shares of
capital stock issuable upon such exercise before giving effect to such
adjustment exercise; provided, however, that upon such exercise by the Holder,
the Company shall deliver to such Holder a due bill or other appropriate
instrument evidencing such Holder's right to receive such additional shares upon
the occurrence of the event requiring such adjustment.
SECTION 6. Ownership.
6.1. Ownership of This Warrant. The Company may deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2. Transfer and Replacement. Subject to the limitations set forth in
this Section 6.2, this Warrant and all rights hereunder are transferable in
whole or in part upon the books of the Company by the Holder hereof in person or
by duly authorized attorney, and a new Warrant or Warrants, of the same tenor as
this Warrant but registered in the name of the transferee or transferees (and in
the name of the Holder, if a partial transfer is effected) shall be made and
delivered by the Company upon surrender of this Warrant duly endorsed, at the
office of the Company referred to in Section 11 hereof. Notwithstanding any
other provision of this Warrant, no transfer of this Warrant or the Warrant
Shares may by made unless such transfer complies in all respects with applicable
federal and state securities laws, including without limitation, the Securities
Act and provided that such transfer does not result in the Company having a
class of equity security held of record by 500 or more persons as determined in
accordance with Section 12(g) of the Exchange Act and the rules and regulations
promulgated thereunder. If requested by the Company in the event of a proposed
transfer of this Warrant or the
6
<PAGE> 7
Warrant Shares by the Holder, an opinion of counsel to the Holder transferring
this Warrant or the Warrant Shares (which shall be satisfactory to the Company)
shall be supplied to the Company at such transferring Holder's expense, to the
effect that such transfer complies with the applicable state and federal
securities laws. Notwithstanding the foregoing, no opinion of counsel will be
required in the case of a transfer of the entire Warrant (and all of the Warrant
Shares) by the Holder to an entity whose beneficial ownership is not different
from that of the Holder, where the Holder receives no consideration from an
unaffiliated third party in connection with such transfer, provided that such
transfer complies with the applicable state and federal securities laws. Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft or destruction, and, in such case, of indemnity or security reasonably
satisfactory to it, and upon surrender of this Warrant if mutilated, the Company
will make and deliver a new Warrant of like tenor, in lieu of this Warrant;
provided that if the Holder hereof is an instrumentality of a state or local
government or an institutional holder or a nominee for such an instrumentality
or institutional holder an irrevocable agreement of indemnity by such Holder
shall be sufficient for all purposes of this Section 6, and no evidence of loss
or theft or destruction shall be necessary. This Warrant shall be promptly
cancelled by the Company upon the surrender hereof in connection with any
transfer or replacement. In the case of the loss, theft or destruction of this
Warrant, the Company shall pay all expenses, taxes and other charges payable in
connection with any replacement of this Warrant. Stock transfer taxes (if any)
payable in connection with a transfer of this Warrant shall be payable by the
Holder.
SECTION 7. Mergers, Consolidation, Sales. In the case of any proposed
consolidation or merger of the Company with another entity, or the proposed sale
of all or substantially all of its assets to another person or entity, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, lawful and adequate provision shall be made whereby the Holder of this
Warrant shall thereafter have the right to receive upon the basis and upon the
terms and conditions specified herein, in lieu of the shares of the Common Stock
of the Company immediately theretofore purchasable hereunder, such shares of
stock, securities or assets as may (by virtue of such consolidation, merger,
sale, reorganization or reclassification) be issued or payable with respect to
or in exchange for the number of shares of such Common Stock purchasable
hereunder immediately before such consolidation, merger, sale, reorganization or
reclassification. In any such case appropriate provision shall be made with
respect to the rights and interests of the Holder of this Warrant to the end
that the provisions hereof shall thereafter be applicable as nearly as may be,
in relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of this Warrant.
SECTION 8. Notice of Dissolution or Liquidation. In case of any distribution of
the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution to
shareholders until the expiration often (10) business days from the date of
mailing of the aforesaid notice and, in any case, the Holder hereof may exercise
this Warrant within ten (10) business days from the date of the giving of such
notice, and all rights herein granted not so exercised within such thirty-day
period shall thereafter become null and void.
SECTION 9. Notice of Extraordinary Dividends. If the Board of Directors of the
Company shall declare any dividend or other distribution on its Common Stock
except out of earned surplus or by way of a stock dividend payable in shares of
its Common Stock, the Company shall mail notice thereof to the Holder hereof not
less than ten (10) business days prior to the record date fixed for determining
shareholders entitled to participate in such dividend or other distribution, and
the Holder hereof shall not participate in such dividend or other distribution
unless this Warrant is exercised prior to such record
7
<PAGE> 8
date. The provisions of this Section 9 shall not apply to distributions made in
connection with transactions covered by Section 7.
SECTION 10. Fractional Shares. Fractional shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 10, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company) over the Warrant Price for
such fractional share.
SECTION 11. Notices. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail, courier service or overnight mail to, the Holder at
Transamerica Technology Finance Division, 76 Batterson Park Road, Farmington,
Connecticut 06032, Attention: Assistant Vice President, Lease Administration,
with a copy to the Lender at Riverway II, West Office Tower, 9399 West Higgins
Road, Rosemont, Illinois 60018, Attention: Legal Department or to such other
address as shall have been furnished to the Company in writing by the Holder.
Any notice or other document required or permitted to be given or delivered to
the Company shall be delivered at, or sent by certified or registered mail,
courier service or overnight mail to, the Company at 10 Exchange Place, 12th
Floor, Jersey City, New Jersey, 07032, Attention: Vice President Finance &
Administration with a copy to Ducker, Montgomery & Lewis, P.C., One Civic Center
Plaza, 1560 Broadway, Suite 1500, Denver, Colorado 80202, Attn: Michael J.
Kelly, Esq. or to such other address as shall have been furnished in writing to
the Holder by the Company. Any notice so addressed and mailed by registered or
certified mail shall be deemed to be given when delivered by hand, if personally
delivered; when delivered by courier or overnight mail, if delivered by
commercial courier service or overnight mail; and when mailed, if sent by
registered or certified mail.
SECTION 12. No Rights as Stockholder; Limitation of Liability. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company except upon exercise in accordance with the terms hereof. No provision
hereof, in the absence of affirmative action by the Holder to purchase shares of
Common Stock, and no mere enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of the Holder for the Warrant Price
hereunder or as a shareholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.
SECTION 13. Law Governing. THE VALIDITY, INTERPRETATION, AND ENFORCEMENT OF THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
SECTION 14. Miscellaneous. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by both
parties (or any respective predecessor in interest thereof). The headings in
this Warrant are for purposes of reference only and shall not affect the meaning
or construction of any of the provisions hereof.
SECTION 15. Successors. The provisions of this Warrant shall inure to the
benefit of and be binding upon the Company, the Holder and their respective
permitted assigns. Nothing in this Warrant, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Warrant, except as expressly provided in
this Warrant.
8
<PAGE> 9
SECTION 16. Representations and Warranties by the Holder. The Holder represents
and warrants to the Company as follows:
a. This Warrant is being acquired and any Warrant Shares will be
acquired for the Holder's own account, for investment and not with a view to, or
for resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act.
b. The Holder understands that this Warrant has not been and the
Warrant Shares will not be registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act pursuant to Section 4(2) thereof.
Accordingly, this Warrant and the Warrant Shares must be held by the Holder
indefinitely, and the Holder must therefore bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is registered
under the Securities Act or is exempted from such registration.
c. The Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
acquisition of this Warrant and the Warrant Shares and of protecting its
interests in connection therewith.
d. The Holder is able to bear the economic risk of the purchase of
Warrant Shares pursuant to the terms of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this 19th day of June, 1998.
OPTIMARK TECHNOLOGIES, INC.
[CORPORATE SEAL] By: /s/ Paul I. Kasnetz
------------------------------
Title: VP Finance & Adm.
---------------------------
9
<PAGE> 10
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase __________ shares
of Common Stock which the undersigned is entitled to purchase by the terms of
the within Warrant according to the conditions thereof, and herewith
[check one]
o makes payment of $___________ therefor; or
o directs the Company to issue _______ shares,
and to withhold ____ shares in lieu of
payment of the Warrant Price, as described in
Section 2.1 of the Warrant.
All shares to be issued pursuant hereto shall be issued in the name of and the
initial address of such person to be entered on the books of the Company shall
be:
The shares are to be issued in certificates of the following
denominations:
________________________________________
[Type Name of Holder]
By: ____________________________________
Title: _________________________________
Dated: ___________________________
10
<PAGE> 11
FORM OF ASSIGNMENT
(ENTIRE)
[To be signed only upon transfer of entire Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto _________________________________ all rights of the undersigned
under and pursuant to the within Warrant, and the undersigned does hereby
irrevocably constitute and appoint ___________________________ Attorney to
transfer the said Warrant on the books of the Company, with full power of
substitution.
________________________________________
[Type Name of Holder]
By: ____________________________________
Title: _________________________________
Dated: ___________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
11
<PAGE> 12
FORM OF ASSIGNMENT
(PARTIAL)
[To be signed only upon partial transfer of Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED __________________ hereby sells, assigns and transfers
unto _________________________________ (i) the rights of the undersigned to
purchase ___ shares of Common Stock under and pursuant to the within Warrant,
and (ii) on a non-exclusive basis, all other rights of the undersigned under and
pursuant to the within Warrant, it being understood that the undersigned shall
retain, severally (and not jointly) with the transferee(s) named herein, all
rights assigned on such non-exclusive basis. The undersigned does hereby
irrevocably constitute and appoint ____________________________ Attorney to
transfer the said Warrant on the books of the Company, with full power of
substitution.
________________________________________
[Type Name of Holder]
By: ____________________________________
Title: _________________________________
Dated: ___________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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<PAGE> 1
EXHIBIT 10.26
August 24, 1998
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND NEITHER THIS
WARRANT, SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO A WRITTEN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
NEITHER THIS WARRANT NOR THE SECURITIES ACQUIRED UPON EXERCISE OF THIS
WARRANT MAY BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED, IN WHOLE OR IN
PART, WITHOUT THE PRIOR WRITTEN CONSENT OF THE ISSUER.
OPTIMARK TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Francis X. Egan, or his
permitted assigns (the "Holder"), is entitled to subscribe for and purchase up
to Forty Thousand (40,000) validly issued, fully paid and nonassessable shares
("Warrant Shares") of voting Common Stock of OptiMark Technologies, Inc., a
Delaware corporation (the "Company"), at the exercise price to be determined in
accordance with Section 2 below (the "Exercise Price"), subject to the terms,
conditions and adjustments hereinafter set forth.
1. Definitions. As used in this Warrant, in addition to other
capitalized terms defined elsewhere herein, the following terms have the
meanings indicated:
"Act" means the Securities Act of 1933, as amended, and the Rules
and Regulations promulgated thereunder.
"Additional Shares" has the meaning specified in Section 6(b)(ii)
below.
"Additional Warrant" has the meaning specified in Section 6(b)(ii)
below.
"Board of Directors" means the board of directors of the Company,
as constituted from time to time.
<PAGE> 2
"Business Day" means any day other than a Saturday, Sunday or a
day on which national banks are authorized by law to close in the State of New
York.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in, or other equivalents (however
designated and whether voting or non-voting) of, such Person's capital stock
and any and all rights, warrants or options exchangeable for or convertible
into such capital stock.
"Common Stock" means the voting and nonvoting common stock, $.01
par value per share, of the Company, or any other capital stock of the Company
into which such stock is reclassified or reconstituted.
"Company" has the meaning specified on the cover of this Warrant.
"Distribution" has the meaning specified in Section 6(b)(i) below.
"Exercise Date" has the meaning specified in Section 3(d) below.
"Exercise Form" means an Exercise Form in the form annexed hereto
as Exhibit A.
"Exercise Period" has the meaning specified in Section 2(a) below.
"Expiration Date" means the fifth anniversary of the Warrant Issue
Date.
"Fair Market Value" means the amount that a willing buyer would
pay a willing seller in an arm's length transaction, as reasonably determined by
the Board of Directors in good faith.
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, governmental authority or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity.
"Transaction" has the meaning specified in Section 7 below.
"Warrant Issue Date" means August 24, 1998.
2. Exercise of Warrant.
(a) Term of Warrant. Subject to the terms and conditions set
forth herein, including but not limited to the vesting schedule set forth in
Section 3(a) below, this Warrant may be exercised, in whole or in part, by the
Holder at any time, or from time to time, during the term commencing on first
anniversary of the Warrant Issue Date and ending at 5:00 p.m., New York City
<PAGE> 3
time on the Expiration Date (the "Exercise Period"). This Warrant shall expire
on the Expiration Date if and to the extent not exercised by the Holder during
the Exercise Period.
(b) Exercise Price. Subject to potential adjustment from time
to time pursuant to Section 6 hereof, this Warrant shall be exercisable at an
Exercise Price of Ten Dollars ($10.00) per share of Common Stock.
3. Vesting; Method of Exercise; Payment; Stock Certificates.
(a) Vesting. The purchase rights represented by this Warrant
may be exercised by the Holder only in accordance with the vesting schedule set
forth herein. During the period beginning on the first anniversary of the
Warrant Issue Date and ending on the second anniversary of the Warrant Issue
Date, the purchase rights represented by this Warrant may be exercised by the
Holder only as to 13,334 Warrant Shares (subject to adjustment as provided for
herein). During the period beginning on the second anniversary date of the
Warrant Issue Date and ending on the third anniversary of the Warrant Issue
Date, the purchase rights represented by this Warrant may be exercised by the
Holder only as to 26,667 Warrant Shares (subject to adjustment as provided
herein), less the number of Warrant Shares previously purchased pursuant to the
exercise of this Warrant. During the period beginning on the third anniversary
of the Warrant Issue Date and ending on the Expiration Date, the purchase rights
represented by this Warrant may be exercised by the Holder as to the full 40,000
Warrant Shares (subject to adjustment as provided for herein) to which this
Warrant is subject, less the number of Warrant Shares previously purchased
pursuant to the exercise of this Warrant.
(b) Method of Exercise; Payment of Purchase Price. Subject to
the vesting schedule set forth above, the purchase rights represented by this
Warrant may be exercised by the Holder, in whole or in part, at any time, or
from time to time, during the Exercise Period by the surrender of this Warrant
(with a duly executed Exercise Form specifying the number of Warrant Shares to
be purchased) at the principal office of the Company, and by the payment to the
Company in cash, by certified, cashier's or other check acceptable to the
Company, of an amount equal to the aggregate Exercise Price for those Warrant
Shares specified in the Exercise Form.
(c) Stock Certificates. In the event of the exercise of the
rights represented by this Warrant as provided above, the Company shall promptly
(i) issue and deliver to the Holder, one or more certificates representing the
shares of voting Common Stock so purchased by the Holder, in such name or names
as may be designated by the Holder, and (ii) if applicable, cash in lieu of any
fraction of a share.
(d) When Exercise Effective. The exercise of this Warrant shall
be deemed effective immediately prior to the close of business on the Business
Day on which this Warrant is surrendered to the Company as provided in this
Section 3 (the "Exercise Date"). The Person in whose name any certificate for
shares of Common Stock shall be issuable upon such exercise, as provided in
Section 3(c), shall be deemed to be the record holder of such shares of Common
Stock for all purposes on the Exercise Date. In the event that this Warrant is
exercised in part, the
<PAGE> 4
Company at its expense will execute and deliver a new Warrant of like tenor
exercisable for the number of Warrant Shares for which this Warrant may still
thereafter be exercised.
4. Stock Fully Paid; Reservation of Shares. All of the shares of
Common Stock issuable upon the exercise of the rights represented by this
Warrant will, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable, and free of all taxes, liens and charges with respect to the
issue thereof. During the Exercise Period, the Company shall at all times have
authorized and reserved a sufficient number of shares of its voting Common Stock
to provide for the exercise of the rights represented by this Warrant.
5. Fractional Shares. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of such fractional
shares the Company shall make a cash payment therefor based upon the Fair Market
Value of the Common Stock.
6. Certain Adjustments.
(a) Capital Adjustments. The number of Warrant Shares
purchasable upon the exercise of this Warrant and the Exercise Price then in
effect pursuant to Section 2(b) shall be subject to adjustment as follows:
(i) Stock Dividends, Splits, Etc. If at any time
after the Warrant Issue Date (A) the Company shall pay a stock dividend payable
in shares of Common Stock or (B) the number of shares of Common Stock shall be
increased by a subdivision or split-up of shares of Common Stock, then, on the
date of the payment of such dividend or immediately after the effective date of
subdivision or split up, as the case may be, the number of Warrant Shares to be
delivered upon exercise of this Warrant will be increased so that the Holder
will be entitled to receive the number of shares of Common Stock that such
Holder would have owned immediately following such action had this Warrant been
exercised immediately prior thereto, and the Exercise Price will be adjusted as
provided below in paragraph (iii).
(ii) Combination of Stock. If the number of shares
of Common Stock outstanding at any time after the Warrant Issue Date shall be
decreased by a combination of the outstanding shares of Common Stock, then,
immediately after the effective date of such combination, the number of Warrant
Shares to be delivered upon exercise of this Warrant will be decreased so that
the Holder thereafter will be entitled to receive the number of shares of
Common Stock that such Holder would have owned immediately following such
action had this Warrant been exercised immediately prior thereto, and the
Exercise Price will be adjusted as provided below in paragraph (iii).
(iii) Exercise Price Adjustment. Whenever the
number of Warrant Shares purchasable upon the exercise of this Warrant is
adjusted as provided pursuant to this Section 6(a), the Exercise Price payable
upon the exercise of this Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which the
<PAGE> 5
numerator shall be the number of Warrant Shares purchasable upon the
exercise of the Warrant immediately prior to such adjustment, and of which the
denominator shall be the number of Warrant Shares purchasable immediately
thereafter; provided, however, that the Exercise Price for each Warrant Share
shall in no event be less than the par value of such Warrant Share.
(b) Certain Distributions.
(i) Exercise Price Adjustment. In case the
Company shall at any time or from time to time distribute to all or
substantially all of the holders of shares of its Common Stock (including, but
not limited to, any distribution made in connection with a merger or
consolidation in which the Company is the resulting or surviving Person and the
Common Stock is not changed or exchanged) cash, evidences of indebtedness of
the Company or another Person, securities of the Company or another Person, or
other assets (excluding dividends payable in shares of Common Stock for which
adjustment is made under Section 6(a)(i)) or rights or warrants to subscribe
for or purchase the foregoing (each, a "Distribution"), then, and in each such
case, the Exercise Price then in effect shall be adjusted (and any other
appropriate actions shall be taken by the Company) by multiplying the Exercise
Price in effect immediately prior to the date of such distribution by a
fraction (A) the numerator of which shall be the Fair Market Value of the
Common Stock less the Fair Market Value of the amount of cash, evidences of
indebtedness, securities or other assets so distributed or of such subscription
rights or warrants applicable to one share of Common Stock and (B) the
denominator of which shall be the Fair Market Value of the Common Stock, all as
determined on the record date referred to below. Such adjustment shall be made
whenever any distribution is made and shall become effective retroactively to
the date immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(ii) Additional Shares. In addition to the
Exercise Price adjustment pursuant to clause (i) above, in case the Company
shall at any time or from time to time distribute to all or substantially all
of the holders of shares of its Common Stock (including, but not limited to,
any distribution made in connection with a merger or consolidation in which the
Company is the resulting or surviving Person and the Common Stock is not
changed or exchanged) securities of the Company or another Person (the
"Additional Shares"), then, and in each such case, the Company shall, at its
expense, cause an additional warrant (the "Additional Warrant"), substantially
in the form of this Warrant, to be issued by such Person or the Company, as the
case may be, to evidence the Holder's right to acquire the kind and amount of
Additional Shares receivable by a holder of the number of shares of Common
Stock that such Holder would have been entitled to receive upon exercise of
this Warrant had this Warrant been exercised immediately before such
Distribution is made, subject to adjustments that shall be as nearly equivalent
as practicable to the adjustments provided for in this Section 6. The
Additional Warrant shall be subject to adjustments that shall be as nearly
equivalent as practicable to the adjustments provided in this Section 6. The
exercise price for each Additional Share shall be reasonably determined by the
Board of Directors in good faith after considering the relationship that exists
(as of the date of the issuance of the Additional Warrant) between the Exercise
Price and the Fair Market Value of each Warrant Share;
<PAGE> 6
provided, however, that such exercise price shall in no event be greater than
the amount by which the Exercise Price was decreased pursuant to clause (i)
above.
(c) No Adjustment. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution, and shall thereafter and before the
distribution to stockholders thereof legally abandon its plan to pay or deliver
such dividend or distribution, then thereafter no adjustment in the number of
Warrant Shares and/or the Exercise Price then in effect shall be required by
reason of the taking of such record.`
(d) Similar Actions. In the case the Company, at any
time or from time to time, shall take any action affecting its Common Stock
similar to or having an effect similar to any of the actions described in
Section 6(a) or (b) (but not including any action described in any such
subsections) and the Board of Directors in good faith determines that it would
be equitable in the circumstances to adjust the number of Warrant Shares and/or
the Exercise Price as a result of such action, then, and in each such case, the
number of Warrant Shares and/or the Exercise Price shall be adjusted in such
manner and at such time as the Board of Directors of the Company in good faith
determines would be equitable in the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be mailed to the
Holder).
7. Reorganization, etc. If any capital reorganization of the Company,
or any reclassification of the Common Stock, or any consolidation of the Company
with or merger of the Company with or into any other Person (other than a
consolidation or merger in which the Corporation is the resulting or surviving
Person which does not result in any reclassification or change of outstanding
Common Stock) or any sale, lease or other transfer of all or substantially all
of the assets of the Company to any other Person (each, a "Transaction"), shall
be effected in such a way that the holders of Common Stock shall be entitled to
receive stock, other securities or assets (whether such stock, other securities
or assets are issued or distributed by the Company or another Person), in lieu
of or in addition to cash, with respect to or in exchange for Common Stock,
then, upon exercise of this Warrant, the Holder shall have the right to receive
the same kind and amount of stock, other securities, cash and/or assets
receivable upon such reorganization, reclassification, consolidation, merger or
sale, lease or other transfer by a holder of the number of shares of Common
Stock that such Holder would have been entitled to receive upon exercise of this
Warrant had this Warrant been exercised immediately before such reorganization,
reclassification, consolidation, merger or sale, lease or other transfer,
subject to adjustments that shall be as nearly equivalent as may be practicable
to the adjustments provided for in Section 6.
8. Notices of Adjustment. Whenever the Exercise Price and/or
the number of Warrant Shares purchasable hereunder shall be adjusted pursuant to
Section 6 hereof, the Company shall deliver to the Holder a certificate setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Exercise Price and the number of Warrant Shares purchasable hereunder after
giving effect to such adjustment.
<PAGE> 7
9. Notices of Corporate Action. Prior to the Expiration Date, if this
Warrant has not theretofore been exercised in full, then in the event of:
(a) any taking by the Company of a record of the holders of its
Capital Stock for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right;
(b) any capital reorganization of the Company, any
reclassification or recapitalization of any Capital Stock of the Company, any
consolidation or merger involving the Company and any other Person, or any
transfer of all or substantially all the assets of the Company to any other
Person; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
the Company will mail to the Holder a notice specifying (x) the date or expected
date on which any such record is to be taken for the purpose of such dividend,
distribution or right and the amount and character of any such dividend,
distribution or right, and (y) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any, as of which the holders of record of Capital Stock (or other securities)
shall be entitled to exchange their shares of Capital Stock (or other
securities) for the securities or other property deliverable upon such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up. Such notice shall be delivered
at least 10 days prior to the date therein specified, in the case of any date
referred to in the foregoing clauses (x) and (y).
10. Representations of the Company. The Company represents and
warrants that all corporate actions on the part of the Company, its officers,
directors and stockholders necessary for the issuance of this Warrant, for the
sale and issuance of the shares of Common Stock pursuant hereto, and for the
performance of the Company's obligations hereunder, were taken prior to and are
effective as of the Warrant Issue Date.
11. Representations and Warranties by the Holder. The Holder
represents and warrants to the Company as follows:
(a) This Warrant is being acquired and any Warrant Shares will
be acquired for the Holder's own account, for investment and not with a view to,
or for resale in connection with, any distribution or public offering thereof
within the meaning of the Act.
(b) The Holder understands that this Warrant has not been and
the Warrant Shares will not be registered under the Act by reason of their
issuance in a transaction exempt from the registration and prospectus delivery
requirements of the Act pursuant to Section 4(2) and/or Section 506 of
Regulation D thereof. Accordingly, this Warrant and the Warrant Shares must be
<PAGE> 8
held by the Holder indefinitely, and the Holder must therefore bear the economic
risk of such investment indefinitely, unless a subsequent disposition thereof is
registered under the Act or is exempted from such registration.
(c) The Holder has such knowledge and experience in financial
and business matters that he is capable of evaluating the merits and risks of
the purchase of this Warrant and the Warrant Shares and of protecting his
interests in connection therewith.
(d) The Holder is able to bear the economic risk of the
purchase of Warrant Shares pursuant to the terms of this Warrant.
12. Replacement of Warrant. On receipt by the Company of an affidavit
of the Holder stating the circumstances of the loss, theft, destruction or
mutilation of this Warrant (and in the case of any such mutilation, on surrender
and cancellation of such Warrant), the Company, at its expense, shall promptly
execute and deliver, in lieu thereof, a new Warrant of like tenor.
13. Restrictions on Transfer; Restrictive Legends.
(a) Neither this Warrant nor any Warrant Shares may be sold,
pledged or otherwise transferred, in whole or in part, to any Person without the
prior written consent of the Company.
(b) Each Warrant issued in substitution for this Warrant shall
be stamped or otherwise imprinted with legends in substantially the following
form:
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND
NEITHER THIS WARRANT, SUCH SECURITIES NOR ANY INTEREST THEREIN MAY
BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO A WRITTEN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED.
NEITHER THIS WARRANT NOR THE SECURITIES ACQUIRED UPON EXERCISE OF
THIS WARRANT MAY BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED, IN
WHOLE OR IN PART, WITHOUT THE PRIOR WRITTEN CONSENT OF THE ISSUER.
<PAGE> 9
(c) Each stock certificate for Warrant Shares issued upon
the exercise of any Warrant and each stock certificate issued upon the direct or
indirect transfer of any Warrant Shares shall be stamped or otherwise imprinted
with legends 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"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY
NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO A WRITTEN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED, IN WHOLE OR IN PART, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE ISSUER.
14. Rights of Stockholders. This Warrant shall not entitle its Holder
to any of the rights of a stockholder of the Company.
15. Successors and Assigns. The provisions of this Warrant shall inure
to the benefit of and be binding upon the Company, the Holder and their
respective permitted assigns. Nothing in this Warrant, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Warrant, except as expressly provided in
this Warrant.
16. Amendment or Waiver. This Warrant and any term hereof may be
amended, waived, discharged or terminated only by and with the written consent
of the Company and the Holder.
17. Specific Performance. The parties hereto intend that each of the
parties have the right to seek damages or specific performance in the event that
any other party hereto fails to perform such party's obligations hereunder.
Therefore, if any party shall initiate any action or proceeding to enforce the
provisions hereof, any party against whom such action or proceeding is brought
hereby waives any claim or defense therein that the plaintiff party has an
adequate remedy at law.
18. Charges, Taxes and Expenses. Issuance of certificates representing
Warrant Shares shall be made without charge to the Holder for any issue or
transfer tax, or other incidental expense, in respect of the issuance or
delivery of such certificates or the securities represented thereby, all of
which taxes and expenses shall be paid by the Company; provided, however, the
Company shall not be required (a) to pay any tax or other incidental expense
which may be payable in respect of (i) any transfer or delivery of this Warrant
by the Holder to another Person or (ii) the issuance or delivery
<PAGE> 10
of certificates representing Warrant Shares to a Person other than the Holder,
or (b) to issue or deliver certificates representing Warrant Shares to a Person
other than the Holder until any such tax payable by the Holder as provided in
clause (ii) above shall have been paid or until it has been established to the
Company's reasonable satisfaction that no such tax is due.
19. Notices. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be made by
registered or certified first-class mail, return receipt requested, courier
service, overnight mail or personal delivery as follows:
(a) if to the Company:
OptiMark Technologies, Inc.
530 Main Avenue
Durango, CO 81301
Telecopy: (970) 247-8844
Attention: William A. Lupien
with a copy to:
OptiMark Technologies, Inc.
530 Main Avenue
Durango, CO 81301
Telecopy: (970) 247-8844
Attention: General Counsel
(b) if to the Holder:
to the address of the Holder as set forth in the records
of the Company
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; when delivered by courier
or overnight mail, if delivered by commercial courier service or overnight mail;
and five (5) Business Days after being deposited in the mail, postage prepaid,
if mailed.
20. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF.
21. Headings. The headings in this Warrant are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
<PAGE> 11
22. Severability. Any term or provision of this Warrant which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
William A. Lupien, Chief Executive Officer
ACKNOWLEDGED AND AGREED:
/s/ Francis X. Egan
<PAGE> 12
Exhibit A
EXERCISE FORM
(To be executed upon exercise of the Warrant)
Reference is made to the attached Common Stock Purchase Warrant. The
undersigned hereby irrevocably elects to exercise the right, represented by the
attached Warrant, to purchase __________ Warrant Shares and herewith tenders
payment for such Warrant Shares to the order of OptiMark Technologies, Inc. in
the amount of $__________ in accordance with the terms of the Warrant. The
undersigned requests that a certificate for such Warrant Shares be registered in
the name of the undersigned and that such certificate be delivered to the
undersigned's address below.
If such number of Warrant Shares purchased shall not be all of the
Warrant Shares evidenced by the Warrant, the undersigned requests that a new
Warrant of like tenor for the balance remaining of such Warrant Shares be
registered in the name of the undersigned and that such Warrant be delivered to
the undersigned's address below.
Dated:
----------------------
Signature
----------------------
------------------------------
(Print Name)
------------------------------
(Street Address)
------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- ----------------------------
-1-
<PAGE> 1
EXHIBIT 10.27
[Execution Copy]
================================================================================
OPTIMARK TECHNOLOGIES, INC.
and
THE NASDAQ STOCK MARKET, INC.
-----------------------
WARRANT AGREEMENT
-----------------------
Dated as of September 1, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Definitions..........................................................................................................1
Section 2. Issuance of Warrants.................................................................................................5
Section 3. Review of the Company................................................................................................7
Section 4. Warrant Certificates.................................................................................................7
Section 5. Registration and Countersignature....................................................................................8
Section 6. Restrictions on Transfer of Warrants and Warrant Shares..............................................................8
Section 7. Registration of Transfers and Exchanges..............................................................................9
Section 8. Terms of Warrants; Exercise of Warrants..............................................................................9
(a) Terms of Warrants........................................................................................10
(b) Exercise of Warrants.....................................................................................10
Section 9. Registration Rights..................................................................................................11
Section 10. Dissolution, Liquidation or Winding Up..............................................................................11
Section 11. Adjustments to Warrant Exercise Price and Warrant Exercise Number for Diluting Issues ..............................12
(a) Issue of Securities Deemed Issue of Additional Shares of Common Stock...........................................12
(b) Adjustment of Warrant Exercise Price Upon Issuance of Additional Shares of Common Stock.........................14
(c) Determination of Consideration..................................................................................14
(d) Adjustment for Stock Dividends, Distributions, Subdivisions, Combinations or Consolidation of Common Stock......15
(e) Adjustments for Consolidation, Merger, Sale of Assets, Reorganization; Etc......................................16
(f) Distributions of Cash, Debt and Other Assets....................................................................16
(g) Adjustment of Warrant Exercise Number...........................................................................17
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 12. No Dilution or Impairment...........................................................................................17
Section 13. Payment of Taxes....................................................................................................17
Section 14. Mutilated or Missing Warrant Certificates...........................................................................17
Section 15. Reservation of Warrant Shares.......................................................................................18
Section 16. Fractional Interests................................................................................................18
Section 17. Notices to Holders..................................................................................................18
Section 18. Notices to Company..................................................................................................19
Section 19. Termination.........................................................................................................20
Section 20. Supplements and Amendments..........................................................................................20
Section 21. Successors..........................................................................................................21
Section 22. Governing Law.......................................................................................................21
Section 23. Benefits of This Agreement..........................................................................................21
Section 24. Counterparts........................................................................................................21
</TABLE>
SIGNATURES 22
EXHIBIT A - FORM OF WARRANT CERTIFICATE
EXHIBIT B - FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE> 4
WARRANT AGREEMENT dated as of September 1, 1998 among OptiMark
Technologies, Inc., a Delaware corporation (the "Company"), and The Nasdaq Stock
Market, Inc. ("Nasdaq" or "Purchaser").
RECITALS
The Company proposes to issue Common Stock Purchase Warrants, as
hereinafter described (the "Warrants"), to purchase up to an aggregate of
11,250,000 shares of Common Stock, par value $0.01 per share (the "Common
Stock") of the Company as such number may be adjusted in accordance with the
terms hereof (the Common Stock issuable on exercise of the Warrants being
referred to herein as the "Warrant Shares").
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
Section 1. Definitions. As used in this Agreement, the following terms
have the meanings indicated:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock of the Company and all equivalents thereof, including all Options and all
Convertible Securities and all other securities exchangeable for, or convertible
into, such Common Stock, and all options, warrants and subscription and other
rights to purchase or otherwise acquire such Common Stock, but excluding (i)
shares issued or issuable upon exercise of the Warrants provided for in this
Agreement, (ii) shares issuable upon exercise of (x) that certain Common Stock
Purchase Warrant, dated as of August 27, 1996, to the Pacific Exchange, Inc. for
the purchase of up to an aggregate amount of 2,104,000 shares of Common Stock of
the Company, (y) that certain Common Stock Purchase Warrant, dated as of
December 31, 1997, to the Chicago Board of Options Exchange Incorporated for the
purchase of up to an aggregate amount of 1,000,000 shares of Common Stock of the
Company and (z) that certain Warrant to Purchase Common Stock, dated as of May
29, 1997, to Dow Jones & Company, Inc. for the purchase of up to an aggregate
amount of 2,161,764 shares of Common Stock of the Company, (iii) shares issued
or issuable directly to, Options issued to, and shares issued or issuable upon
the exercise of Options granted to, employees, former employees, officers,
directors and consultants of the Company and its Subsidiaries, or (iv) shares
issued or issuable upon conversion of the Series A Preferred Stock of the
Company.
"Affiliate" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise.
<PAGE> 5
"Agreement" means this Agreement, as the same may be amended from time
to time.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or other
day on which banks in the city of New York are authorized or required by law to
close.
"Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock or other
equity interests, including, without limitation, partnership interests and
mandatorily redeemable preferred stock, whether or not included in shareholders'
equity, and any warrants or options to acquire such Capital Stock.
"Cashless Exercise Notice" shall have the meaning set forth in Section
8(b).
"Common Stock" has the meaning set forth in the Recitals.
"Company" means the party named as such above in the Preamble, and its
successors and assigns.
"Convertible Securities" means any evidences of indebtedness, shares
of stock, options, warrants or other securities which are convertible into or
exchangeable, with or without payment of additional consideration of cash or
property, for shares of Common Stock or rights to acquire shares of Common
Stock, either immediately or on a specified date or the happening of a specified
event.
"Distribution" shall have the meaning set forth in Section 11(f).
"Early Measurement Period" has the meaning set forth in Section 2(b).
"End-Users" shall mean a person using a Nasdaq Workstation or other
terminal linked to the Nasdaq Application who submits profile orders through the
Nasdaq Application and is informed as to which orders have been executed through
the OptiMark System.
"Equity Interests" means Capital Stock or other equity participations,
including partnership interests, or warrants, options or rights to acquire
Capital Stock or other equity participations (but excluding any debt security
that is convertible into, or exchangeable for, Capital Stock or other such
equity participations).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Expiration Date" shall mean the earlier of (i) the last day that the
Nasdaq Application continues to be available on all Nasdaq Workstation
Presentation Devices and (ii) the fifth (5th) anniversary of the Warrant
Commencement Date.
-2-
<PAGE> 6
"Fair Market Value" shall mean, with respect to any asset or property,
including, without limitation, Common Stock, the price which could be negotiated
in an arm's length, free market transaction, for cash, between a willing seller
and a willing buyer, neither of whom is under any pressure or compulsion to
complete the transaction, in each case as determined reasonably and in good
faith by the Board of Directors; provided that if shares of Common Stock are
traded or quoted, as the case may be (x) on the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") National Market
System, (y) in the over-the-counter market or (z) on a National Securities
Exchange, the "Fair Market Value" per share of Common Stock at any date shall be
deemed to be the average daily Closing Prices of the shares of Common Stock for
the 15 consecutive trading days commencing 20 trading days before the day in
question. As used in herein, the term "Closing Price" of the shares of Common
Stock for a day or days shall mean (a) if the shares of Common Stock are not
listed or admitted for trading on a National Securities Exchange, (i) the last
transaction price of the shares of Common Stock on the NASDAQ National Market
System or, in the case no such reported transaction takes place on such day or
days, the average of the reported closing bid and asked prices thereof quoted on
the NASDAQ National Market System, or (ii) if the shares of Common Stock are not
quoted on the NASDAQ National Market System, the average of the closing bid and
asked prices of the shares of Common Stock in the over-the-counter market, as
reported by the National Quotation Bureau, Inc., or an equivalent generally
accepted reporting service or (b) if the shares of Common Stock are listed or
admitted for trading on a National Securities Exchange, the last reported sales
price regular way, or in case no such reported sale takes place on such day or
days, the average of the reported closing bid and asked prices regular way, in
either case on the principal National Securities Exchange on which the shares of
Common Stock are listed or admitted for trading.
"Holder" or "Warrantholder" means the Person in whose name a Warrant
is registered.
"Listed Securities" shall mean all securities listed on The New York
Stock Exchange and the American Stock Exchange and traded through the OptiMark
System outside of the Nasdaq Application.
"Measurement Period" has the meaning set forth in Section 2(b).
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq" shall mean the party named as such above in the Preamble and
any and all successors and permitted assigns thereof.
"Nasdaq Application" shall mean all of the facilities offered jointly
by Nasdaq and OptiMark to End Users that enable End Users to use the Nasdaq
Application for executions in Nasdaq Securities.
"Nasdaq Workstation Presentation Devices" shall have the meaning
assigned to it in the Operating Agreement.
-3-
<PAGE> 7
"Nasdaq Securities" shall mean securities traded in Nasdaq.
"National Securities Exchange" shall mean an exchange registered under
Section 6 of the Exchange Act.
"Operating Agreement" shall mean that Agreement, of even date
herewith, between the Company and Nasdaq regarding the development,
implementation and operation of a facility to be offered on the "Nasdaq Stock
Market" (as defined in NASD Rule 4200(a)) that will be an application based upon
the Company's patented or other technology.
"OptiMark System" shall mean the computer software and related systems
with which the Company implements its technology and applies it for the use of
organizations such as the NASD.
"Options" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.
"Permitted Third Party Transferee" shall have the meaning provided in
Section 6(a).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
"Purchaser Affiliate" shall have the meaning provided in Section 6(a).
"Revenue Equivalent Volume" shall mean an amount equal to the product
of (x) the fraction (1) the numerator of which is the gross transaction revenue
per share for trades in the Nasdaq Application and (2) the denominator of which
is the gross transaction revenue per share for all Listed Securities traded
through the Optimark System and (y) the number of shares traded in the Nasdaq
Application; provided that if there is no volume of Listed Securities processed
through the OptiMark System outside the Nasdaq Application, "Revenue Equivalent
Volume" shall mean the actual number of shares traded in the Nasdaq Application.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"Sixth Month Measurement Period" has the meaning set forth in Section
2.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other Equity Interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors or other managing authority thereof is at the time owned or
controlled, directly or indirectly, by such Person and its Subsidiaries.
-4-
<PAGE> 8
"Transfer Notice" has the meaning set forth in Section 6.
"Warrant Certificates" has the meaning set forth in Section 4.
"Warrant Commencement Date" shall mean the first date following the
Operational Commencement Date (as defined in the Operating Agreement) upon which
Nasdaq makes available for trading through the Nasdaq Application all of the
issues of Nasdaq Securities, subject to any and all limitations and constraints
upon Nasdaq's ability to make available for trading through the Nasdaq
Application Nasdaq Securities as a result of any and all (i) applicable (x) laws
or (y) rules, regulations or pronouncements of the United States Securities and
Exchange Commission or any National Securities Exchange, self-regulatory
organization (as such term is defined in Section 3(a)(26) of the Securities
Exchange Act of 1934, as amended) or other governmental or quasi-governmental
authority and/or (ii) systems or capacity restraints of Optimark or the Nasdaq
Application; provided that in no event shall a decision by Optimark to trade
less than all Nasdaq Securities through the Nasdaq Application (without the
proviso creating any right of, or implication that, Optimark has the right to
make such a decision) effect the Warrant Commencement Date.
"Warrant Exercise Number" shall mean the number of Warrant Shares
issuable upon the exercise of each Warrant.
"Warrant Exercise Period" shall mean for each Warrant, the period
beginning on the Warrant Commencement Date and ending on the Expiration Date,
provided that the Warrant Exercise Period shall automatically be extended ninety
(90) days beyond the Expiration Date in order to permit the Holder to exercise
any Warrant that is issuable or that shall be issued by the Company as a result
of the average daily volume in Nasdaq Securities during any six (6) month period
ending within thirty (30) days of the Expiration Date.
"Warrant Exercise Price" has the meaning set forth in Section 2.
"Warrant Register" has the meaning set forth in Section 5.
"Warrantholder" means the Person in whose name a Warrant is
registered.
"Warrant Shares" has the meaning set forth in the Recitals.
"Warrants" has the meaning set forth in the Recitals.
Section 2. Issuance of Warrants. The Purchaser may acquire Warrants,
which shall be immediately exercisable upon receipt thereof, to purchase up to
11,250,000 shares of Common Stock (as such number may be adjusted in accordance
with the terms hereof) in accordance with the following issuance schedule:
(a) Availability of Nasdaq Workstation Presentation Devices. Upon the
Warrant Commencement Date, the Purchaser shall receive two Warrants to
purchase 2,250,000 shares of Common Stock each. The exercise price (as such
price may be adjusted in accordance with the terms hereof, the "Warrant
Exercise Price") for the first
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<PAGE> 9
Warrant shall be $5.00 per share, and the Warrant Exercise Price for
the second warrant shall be $7.00 per share. If (x) the Warrant
Commencement Date occurs by September 30, 1999 and (y) the average daily
volume of Nasdaq Securities traded through the Nasdaq Application during
the first six (6) month period following the Warrant Commencement Date
equals or exceeds 10,000,000 shares, the Warrant Exercise Price for both
Warrants shall be reduced to $3.00 per share.
(b) The Purchaser shall receive a Warrant to purchase 2,250,000 shares
of Common Stock at a Warrant Exercise Price of $7.00 per share if for any
rolling six month period (a "Sixth Month Measurement Period") beginning on
the first Business Day of a calendar month on or after the second (2nd)
anniversary of the Warrant Commencement Date and ending on the last
Business Day of a calendar month on or before the Expiration Date (the
"Measurement Period"), average daily volume in Nasdaq Securities traded
through the Nasdaq Application exceeds the average daily volume of Listed
Securities traded through the OptiMark System; provided, however, that if
the Purchaser has not satisfied the conditions of this Section 2(b) but
does satisfy the applicable requirements referred to in Section 2(d), (e)
and/or (f) for any Six Month Measurement Period beginning on the first
Business Day of a calendar month on or after the Warrant Commencement Date
and ending on the last Business Day of a calendar month on or before the
third (3rd) anniversary of the Warrant Commencement Date (the "Early
Measurement Period"), each of such Warrants shall be exercisable for an
additional 750,000 shares; provided further, that the number of shares of
Common Stock purchasable under the Warrant issued pursuant to this Section
2(b) shall be permanently reduced by the aggregate number of additional
shares earned by the Purchaser by virtue of its satisfaction of the
applicable requirements of Sections 2(d), (e) and/or (f) during the Early
Measurement Period.
(c) The Purchaser shall receive a Warrant to purchase 1,125,000 shares
of Common Stock at a Warrant Exercise Price of $7.00 per share if for any
Six Month Measurement Period during the Measurement Period the average
daily Revenue Equivalent Volume of Nasdaq Securities traded through the
Nasdaq Application equals or exceeds twenty million (20,000,000).
(d) The Purchaser shall receive a Warrant to purchase 1,125,000 shares
(or 1,875,000 shares if the Purchaser satisfies the following requirements
for any Six Month Measurement Period during the Early Measurement Period)
at a Warrant Exercise Price of $7.00 per share if for any Six Month
Measurement Period during the Measurement Period the average daily Revenue
Equivalent Volume of Nasdaq Securities traded through the Nasdaq
Application equals or exceeds forty million (40,000,000).
(e) The Purchaser shall receive a Warrant to purchase 1,125,000 shares
(or 1,875,000 shares if the Purchaser satisfies the following requirements
for any Six Month Measurement Period during the Early Measurement Period)
at a Warrant Exercise Price of $7.00 per share if for any Six Month
Measurement Period during the Measurement Period the average daily Revenue
Equivalent Volume of Nasdaq Securities traded through the Nasdaq
Application equals or exceeds eighty million (80,000,000).
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(f) The Purchaser shall receive a Warrant to purchase 1,125,000 shares
(or 1,875,000 shares if the Purchaser satisfies the following requirements
for any Six Month Measurement Period during the Early Measurement Period)
at a Warrant Exercise Price of $7.00 per share if for any Six Month
Measurement Period during the Measurement Period the average daily Revenue
Equivalent Volume of Nasdaq Securities traded through the Nasdaq
Application equals or exceeds one hundred fifty million (150,000,000).
The Company and Nasdaq hereby agree to cooperate fully with each other
and to provide the other party with all information necessary to determine if
and when the Purchaser shall receive Warrants and the applicable Warrant
Exercise Price for those Warrants pursuant to this Section 2, including, without
limitation, information regarding and/or necessary to calculate or verify (i)
the average daily volume of Nasdaq Securities traded through the Nasdaq
Application, (ii) the average daily volume of Listed Securities traded through
the Optimark System and (iii) the average daily Revenue Equivalent Volume of
Nasdaq Securities traded through the Nasdaq Application.
Section 3. Review of the Company. The Company and each of its
subsidiaries shall permit the Purchaser and its representatives to have, at any
time between the Warrant Commencement Date and the Expiration Date, full access,
during normal business hours and on reasonable prior notice, to the premises and
to all the books and records of the Company and its Subsidiaries and to cause
the officers of the Company and each of its Subsidiaries to furnish the
Purchaser with such financial and operating data and other information with
respect to the business and properties of the Company and its Subsidiaries as
the Purchaser shall from time to time reasonably request. The Company shall
deliver or cause to be delivered such additional instruments necessary for the
purpose of consummating the transactions contemplated by this Agreement. Except
as required by law or legal process, the Purchaser is not authorized to disclose
any information obtained pursuant to this Section 3 to any other Person, other
than the Purchaser's legal and financial advisors in connection with its
evaluation thereof, without the prior written consent of the Company, provided
that if any court or other judicial or other governmental authority requests or
requires that Nasdaq disclose any confidential information obtained pursuant to
this Section 3 pursuant to or in accordance with any legal process (including,
without limitation, any subpoena, document request or other court order or
discovery request), Nasdaq shall oppose such request or requirement and, should
such opposition fail, shall use its reasonable best efforts to narrow to the
extent possible the confidential information disclosed pursuant to such request
or requirement and seek to have access to and use of such information limited by
a protective order.
Section 4. Warrant Certificates. The certificates evidencing the
Warrants (the "Warrant Certificates") to be acquired by the Purchaser pursuant
to the issuance schedule set forth in Section 2 of this Agreement shall be
substantially in the form set forth in Exhibit A attached hereto and shall be
issued promptly by the Company upon satisfaction of the standards set forth in
Section 2 hereof.
Warrant Certificates shall be signed on behalf of the Company by its
Chairman of the Board or its President or a Vice President and by its Secretary
or an Assistant Secretary.
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<PAGE> 11
Each such signature upon the Warrant Certificates may be in the form of a
facsimile signature of the present or any future Chairman of the Board,
President, Vice President, Secretary or Assistant Secretary and may be imprinted
or otherwise reproduced on the Warrant Certificates and for that purpose the
Company may adopt and use the facsimile signature of any person who shall have
been Chairman of the Board, President, Vice President, Secretary or Assistant
Secretary, notwithstanding the fact that at the time the Warrant Certificates
shall be delivered or disposed of he shall have ceased to hold such office.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been delivered or disposed of by the Company,
such Warrant Certificates nevertheless may be delivered or disposed of as though
such person had not ceased to be such officer of the Company; and any Warrant
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Warrant Certificate, shall be a proper
officer of the Company to sign such Warrant Certificate, although at the date of
the execution of this Warrant Agreement any such person was not such officer.
Warrant Certificates shall be dated the date signed by the Company.
Section 5. Registration and Countersignature. The Company shall number
and register the Warrant Certificates in a register (the "Warrant Register") as
they are issued.
The Company shall deliver Warrants entitling the Holders thereof to
purchase not more than the aggregate number of Warrant Shares referred to above
in the first recital hereof and shall sign and deliver Warrants as otherwise
provided in this Agreement.
The Company may deem and treat the Holders of the Warrant Certificates
as the absolute owners thereof (notwithstanding any notation of ownership or
other writing thereon made by anyone), for all purposes, and the Company shall
not be affected by any notice to the contrary.
Section 6. Restrictions on Transfer of Warrants and Warrant Shares.
(a) Subject to Section 6(b), each Warrant may be transferred only (i)
by the Purchaser to any one or more of its Affiliates (a "Purchaser Affiliate"),
(ii) by a Purchaser Affiliate to the Purchaser or one or more other Purchaser
Affiliates, (iii) by the Purchaser or any Purchaser Affiliate to any other
entity, provided that, the Holder of such Warrant or Warrants to be transferred
gives 10 days' prior written notice to the Company of such Holder's intention to
effect such transfer and the Company, at is sole discretion, consents to such
transfer (a "Permitted Third Party Transferee") and (iv) by a Permitted Third
Party Transferee to (x) the Purchaser, (y) a Purchaser Affiliate or (z) another
Permitted Third Party Transferee.
(b) Except as otherwise permitted by this Section 6, each Warrant
(including each Warrant issued upon the transfer of any Warrant) and each
Warrant Share shall be stamped or otherwise imprinted with a legend in
substantially the following form:
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<PAGE> 12
THIS [WARRANT/SHARE] HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THIS [WARRANT/SHARE] MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT.
THIS [WARRANT/SHARE] MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE
CONDITIONS SPECIFIED IN THE WARRANT AGREEMENT DATED AS OF SEPTEMBER 1, 1998
BETWEEN OPTIMARK TECHNOLOGIES, INC. ("OPTIMARK") AND THE NASDAQ STOCK
MARKET, INC., WHICH CONDITIONS INCLUDE, WITHOUT LIMITATION, THE REQUIREMENT
THAT, IF REQUESTED BY OPTIMARK, THE HOLDER/TRANSFEROR HEREOF SHALL OBTAIN
AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE REASONABLY SATISFACTORY TO
OPTIMARK), THAT THE PROPOSED TRANSFER OF THIS [WARRANT/SHARE] MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT.
Prior to any transfer or attempted transfer of any Warrants or Warrant
Shares, the Holder of such Warrants or Warrant Shares shall give 10 days' prior
written notice (a "Transfer Notice") to the Company of such Holder's intention
to effect such transfer, describing the manner and circumstances of the proposed
transfer, and, if requested by the Company, obtain from counsel to such Holder
who shall be reasonably satisfactory to the Company, an opinion that the
proposed transfer of such Warrants or Warrant Shares may be effected without
registration under the Securities Act. After receipt of the Transfer Notice and
opinion, the Company shall, within five days thereof, so notify the Holder of
such Warrants or Warrant Shares and such Holder shall thereupon be entitled to
transfer such Warrants or Warrant Shares, in accordance with the terms of the
Transfer Notice. Each Warrant or Warrant Share issued upon such transfer shall
bear the restrictive legend set forth above, unless, in the opinion of such
counsel, such legend is not required in order to ensure compliance with the
Securities Act. The Holder of the Warrants or Warrant Shares giving the Transfer
Notice shall not be entitled to transfer such Warrants or Warrant Shares until
receipt of notice from the Company under this Section 6.
Section 7. Registration of Transfers and Exchanges. The Company shall
from time to time register in the Warrant Register any transfer permitted in
accordance with Section 6 of any outstanding Warrant Certificates upon surrender
thereof accompanied (if so required by it) by a written instrument or
instruments of transfer in form reasonably satisfactory to the Company, duly
executed by the Holder or Holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney-in-fact. Upon any such
registration of transfer, a new Warrant Certificate shall be issued to the
transferee(s) and the surrendered Warrant Certificate shall be cancelled by the
Company. Cancelled Warrant Certificates shall thereafter be disposed of in a
manner satisfactory to the Company.
Warrant Certificates may be exchanged at the option of the Holder(s)
thereof, when surrendered to the Company at its office for another Warrant
Certificate or other Warrant Certificates of like tenor and representing in the
aggregate a like number of Warrants. Warrant Certificates surrendered for
exchange shall be cancelled by the Company.
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<PAGE> 13
Section 8. Terms of Warrants; Exercise of Warrants.
(a) Terms of Warrants. Subject to the terms of this Agreement, each
Holder shall have the right to receive from the Company the number of fully paid
and nonassessable Warrant Shares which the Holder may at the time be entitled to
receive on exercise of such Warrants and payment of the Warrant Exercise Price
then in effect for such Warrant Shares. Each Warrant not exercised prior to 5:00
p.m., New York City time, on the Expiration Date shall become void and all
rights thereunder and all rights in respect thereof under this Agreement shall
cease as of such time.
(b) Exercise of Warrants. The Warrants shall be immediately
exercisable at the option of the Warrantholder any time after the issuance
thereof. A Warrant shall be exercised by surrender to the Company at its office
of the certificate or certificates evidencing the Warrants to be exercised with
the form of election to purchase on the reverse thereof duly filled in and
signed, which signature shall be guaranteed by a bank or trust company having an
office or correspondent in the United States or a broker or dealer which is a
member of a registered securities exchange or the NASD, and upon payment to the
Company for the account of the Company of the Warrant Exercise Price set forth
in Section 2 hereof, for the number of Warrant Shares in respect of which such
Warrants are then exercised. Alternatively, if at any time when a Warrant is
exercisable, the Fair Market Value of one share of Common Stock is greater than
the Warrant Exercise Price of the applicable Warrant, in lieu of exercising such
Warrant for cash, a Holder may exercise such Warrant by delivering a notice (a
"Cashless Exercise Notice") to the Company of a cashless exercise. Upon delivery
to the Company of a Cashless Exercise Notice, together with surrender of the
applicable Warrant, the Holder shall receive from the Company Warrant Shares
equal to
A x (Fair Market Value - Warrant Exercise Price)/Fair Market Value
where A = the number of Warrant Shares as to which such Warrant is being
exercised pursuant to a cashless exercise.
Upon surrender of a Warrant Certificate in conformity with the
foregoing provisions or the delivery to the Company of a Cashless Exercise
Notice, the Company shall transfer to the Holder of such Warrant Certificate
appropriate evidence of ownership of any Warrant Shares or other securities or
property and any money to which the Holder is entitled, registered or otherwise
placed in, or payable to the order of, such name or names as may be directed in
writing by the Holder, and the Company shall deliver such evidence of ownership
and any money to the Person or Persons entitled to receive the same, together
with an amount in cash in lieu of any fraction of a share or Warrant as
hereinafter provided in Section 16. If more than one Warrant Certificate shall
be surrendered for exercise or sale of the Warrants represented thereby at one
time by the same Holder, the total number of full Warrant Shares or other
securities or property (including any money) to which the Holder is entitled
which shall be deliverable upon tender thereof shall be computed on the basis of
the aggregate number of Warrants tendered.
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<PAGE> 14
A Warrant shall be deemed to have been exercised or sold immediately
prior to the close of business on the date of the surrender for such exercise or
sale of the Warrant Certificate representing such Warrant or the date of
delivery to the Company of a Cashless Exercise Notice in respect of such
Warrant, and for all purposes of this Agreement, the Person entitled to receive
any Warrant Shares or other securities or property (including any money)
deliverable upon such exercise or sale shall, as between such Person and the
Company, be deemed to be the Holder of such Warrant Shares or other securities
or property of record as of the close of business on such date and shall be
entitled to receive any money, Warrant Shares or other securities or property to
which such Holder would have been entitled had such Holder been the record
Holder on such date.
Without limiting the foregoing, if, at the date referred to above, the
transfer books for the Warrant Shares or other securities to be received upon
the exercise of the Warrants shall be closed, the certificates for the Warrant
Shares or other securities in respect of which such Warrants are then exercised
shall be transferred when such transfer book shall next be opened and until such
date the Company shall be under no duty to deliver any certificates for such
Warrant Shares or other securities; provided, however, that the transfer books
of record, unless required by law, shall not be closed at any time for a period
longer than 20 days.
The Warrants shall be exercisable, subject to the terms of this
Agreement, at the election of the Holders thereof, either in full or from time
to time in part and, in the event that a certificate evidencing Warrants is
exercised in respect of fewer than all of the Warrant Shares issuable on such
exercise at any time prior to the Expiration Date, the Company will issue and
deliver a new certificate (or certificates) evidencing the remaining Warrant or
Warrants pursuant to the provisions of this Section and of Section 5 hereof.
The Company shall keep copies of this Agreement and any notices given
or received hereunder available for inspection by the Holders during normal
business hours at its office.
Section 9. Registration Rights. Upon receipt by the Company of all
necessary third party consents, and in no event later than December 31, 1998,
the Company and Nasdaq shall execute and deliver to each other a Registration
Rights Agreement substantially in the form attached hereto as Exhibit B.
Section 10. Dissolution, Liquidation or Winding Up. Notwithstanding
any other provision of this Agreement, in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company, each
Warrantholder shall be entitled to share, with respect to the Warrant Shares
issuable upon exercise of his Warrants, equally and ratably in any cash or
non-cash distributions payable to holders of Common Stock, less the aggregate
Warrant Exercise Price payable upon the exercise of such Warrants. The Company
shall give notice by first-class mail to each Holder of outstanding Warrants at
such Holder's address as it appears on the Warrant Register at the earliest
practicable time (and, in any event, not less than 20 days before the date on
which such dissolution, liquidation or winding up shall take place). Such notice
shall state that, in connection with such dissolution, liquidation or
winding-up, as the case may be, each Holder of outstanding Warrants shall be
entitled to share equally and ratably in any cash or
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<PAGE> 15
noncash distributions payable to holders of Common Stock. In case of any such
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the Company shall hold in escrow any funds or other property which a Holder is
entitled to receive in respect of such Holder's Warrant Shares at the time of
any distribution made in the case of a voluntary or involuntary dissolution,
liquidation or winding up of the Company. No such Holder will be entitled to
receive payment of any such distribution until such Holder has surrendered the
Warrant Certificates evidencing such Warrant to the Company. From and after such
voluntary or involuntary dissolution, liquidation, or winding-up with respect to
the Company, all rights of the Holders, except the right to receive such
distribution, without interest, upon the surrender of the Warrant Certificates,
shall cease and terminate and such Warrants shall not thereafter be transferred
(except with the consent of the Company) and such Warrants shall not be deemed
to be outstanding for any other purpose whatsoever. For the purposes of this
Agreement, neither the voluntary sale, lease, conveyance, exchange or transfer
(for cash, shares of stock, securities or other consideration) of all or
substantially all the property or assets of the Company, nor the consolidation
or merger of the Company with one or more other Persons, shall be deemed to be a
liquidation, dissolution or winding-up, voluntary or involuntary, with respect
to the Company.
Section 11. Adjustments to Warrant Exercise Price and Warrant Exercise
Number for Diluting Issues .
(a) Issue of Securities Deemed Issue of Additional Shares of Common
Stock.
(1) Options and Convertible Securities. In the event the Company at
any time prior to the Expiration Date shall issue, sell or grant any Additional
Shares of Common Stock in the form of Options or Convertible Securities or shall
fix a record date for the determination of holders of any class of securities
entitled to receive any such Options or Convertible Securities, then, and in
each such case, the maximum number of shares of Common Stock (as set forth in
the instrument relating thereto without regard to any antidilution provisions
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or, in the case of Convertible Securities, the
conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue, sale or
grant, or in case such a record date shall have been fixed, as of the close of
business on such record date, provided that Additional Shares of Common Stock
shall not be deemed to have been issued for purposes of adjusting the applicable
Warrant Exercise Price unless the consideration per share (determined pursuant
to Section 11(c) hereof) of such Additional Shares of Common Stock would be less
than the Warrant Exercise Price per share on the date of such issue, or such
record date, as the case may be, and provided further that in any such case in
which Additional Shares of Common Stock are deemed to be issued:
(A) no further adjustment in the Warrant Exercise Price shall be made
upon the subsequent issue of Convertible Securities or Common Stock upon the
exercise of such Options or conversion or exchange of such Convertible
Securities pursuant to the terms in effect at the date of issuance;
(B) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the consideration
payable to the
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<PAGE> 16
Company, or decrease in the number of shares of Common Stock issuable, upon the
exercise, conversion or exchange thereof, the Warrant Exercise Price computed
upon the original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall, upon any
such increase or decrease becoming effective, be recomputed to reflect such
increase or decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities which are outstanding
at such time;
(C) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall not have
been fully exercised, the Warrant Exercise Price computed upon the original
issue, sale or grant thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if:
(I) in the case of such Convertible Securities or Options for Common
Stock, the only Additional Shares of Common Stock issued or sold were the shares
of Common Stock, if any, actually issued or sold upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received for such Additional Shares of Common Stock was, in the
case of Options, the consideration actually received by the Company for the
issue, sale or grant of all such Options, whether or not exercised, plus the
consideration actually received by the Company upon such exercise, or, in the
case of Convertible Securities, the consideration actually received by the
Company for the issue, sale or grant of all such Convertible Securities which
were actually converted or exchanged, plus the additional consideration, if any,
actually received by the Company upon such conversion or exchange, and
(II) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the exercise
thereof were issued at the time of issue, sale or grant of such Options, and the
consideration received by the Company for the Additional Shares of Common Stock
deemed to have been then issued was the consideration actually received by the
Company for the issue, sale or grant of all such Options, whether or not
exercised, plus the consideration deemed to have been received by the Company
(determined pursuant to Section 11(c)) upon the issue or sale of the Convertible
Securities with respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or (C) above shall have the
effect of increasing the Warrant Exercise Price to an amount which exceeds the
lower of (i) the Warrant Exercise Price on the original adjustment date or (ii)
the Warrant Exercise Price that would have resulted from any other issuance of
Additional Shares of Common Stock which would have occurred between the original
adjustment date and such readjustment date;
(E) in the case of any Options which expire by their terms not more
than 30 days after the date of issue, sale or grant thereof, no adjustment of
the Warrant Exercise Price shall be made until the expiration or exercise of all
such Options, whereupon such adjustment shall be made in the same manner
provided in clause (C) above; and
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<PAGE> 17
(F) if any such record date shall have been fixed and such Options or
Convertible Securities are not issued on the date fixed therefor, the adjustment
previously made in the Warrant Exercise Price which became effective on such
record date shall be cancelled as of the close of business on such record date,
and thereafter the Warrant Exercise Price shall be adjusted pursuant to
subparagraph 13(a) as of the actual date of their issuance.
(2) Stock Dividends, Stock Distributions and Subdivision. In the event
the Company at any time prior to the Expiration Date shall declare or pay any
dividend or make any other distribution on the Common Stock payable in shares of
Common Stock, or shall effect a subdivision of the outstanding Common Stock,
into a greater number of shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock), then and in
each such event, Additional Shares of Common Stock shall be deemed to have been
issued:
(A) in the case of any such dividend or distribution, immediately
after the close of business on the record date for the determination of holders
of any class of securities entitled to receive such dividend or distribution, or
(B) in the case of any such subdivision, at the close of business on
the date immediately prior to the date upon which such corporate action becomes
effective.
If such record date shall have been fixed and such dividend or
distribution shall not have been paid on the date fixed therefor, the adjustment
previously made in the applicable Warrant Exercise Price which became effective
on such record date shall be cancelled as of the close of business on such
record date, and thereafter the Warrant Exercise Price shall be adjusted
pursuant to subparagraph 15(d) as of the time of actual payment of such dividend
or distribution.
(b) Adjustment of Warrant Exercise Price Upon Issuance of Additional
Shares of Common Stock. In the event the Company shall issue or be deemed to
issue Additional Shares of Common Stock (excluding Additional Shares of Common
Stock deemed to be issued pursuant to Section 11(a)(2), which event is dealt
with in Section 11(d)) for a consideration per share less than the Warrant
Exercise Price per share for an applicable Warrant, on the date of such issue,
then and in such event, the Warrant Exercise Price for such Warrants shall be
reduced, concurrently with such issue or sale in order to increase the number of
shares of Common Stock into which such Warrants are convertible, to a price
(calculated to the nearest cent) determined by multiplying the Warrant Exercise
Price for the applicable Warrants by a fraction (x) the numerator of which shall
be (1) the number of shares of Common Stock outstanding immediately prior to
such issue or sale, plus (2) the number of shares of Common Stock which the
aggregate consideration received by the Company for the total number of
Additional Shares of Common Stock so issued would purchase at the Warrant
Exercise Price per share on the date of issue, and (y) the denominator of which
shall be (1) the number of shares of Common Stock outstanding immediately prior
to such issue or sale plus (2) the number of such Additional Shares of Common
Stock so issued, provided that for the purposes of this Section 11(b) the number
of shares of Common Stock outstanding at any time shall not include treasury
shares and shall include any Additional Shares of Common Stock deemed to have
been issued
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<PAGE> 18
prior to such time pursuant to this Section 11 and any shares of Common Stock
issuable upon conversion of any outstanding Options and Convertible Securities.
(c) Determination of Consideration. For purposes of this Section 11,
the consideration received (or deemed to be received) by the Company for the
issue or sale of any Additional Shares of Common Stock (or any Additional Shares
of Common Stock deemed to be issued pursuant to Section 11(a)(1)) shall be
computed as follows:
(1) Cash and Property: The consideration per share received by the
Company for the issue or sale of Additional Shares of Common Stock shall:
(A) insofar as it consists of cash, be computed at the aggregate
amount of cash received by the Company excluding amounts paid or payable for
accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash, be computed
based on its Fair Market Value; and
(C) in the event Additional Shares of Common Stock are issued together
with other shares or securities or other assets of the Company for consideration
which covers both cash and property other than cash, be the portion of such
consideration so received, computed as provided in clauses (A) and (B) above,
allocable to such Additional Shares of Common Stock as determined in good faith
by the Board of Directors.
(2) Options and Convertible Securities. The consideration per share
deemed to be received by the Company for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 11(a)(1), relating to Options and
Convertible Securities, shall be determined by dividing
(x) the total amount, if any, actually received by the Company as
consideration for the issue, sale or grant of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating to such Options or Convertible Securities
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Company upon the exercise in full of such
Options or the conversion or exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such Convertible
Securities by
(y) the maximum number of Additional Shares of Common Stock (as set forth
in the instruments relating to such Options or Convertible Securities, without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the conversion or exchange
of such Convertible Securities.
(d) Adjustment for Stock Dividends, Distributions, Subdivisions,
Combinations or Consolidation of Common Stock.
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<PAGE> 19
(1) Stock Dividends, Distributions and Subdivisions. In the event the
Company shall issue Additional Shares of Common Stock pursuant to Section
11(a)(2), relating to stock dividends, distributions and subdivisions, the
Warrant Exercise Price in effect immediately prior to such stock dividend,
distribution or subdivision shall, concurrently with the effectiveness of such
stock dividend, distribution or subdivision, be proportionately decreased to a
price equal to the amount obtained by multiplying the Warrant Exercise Price by
a fraction (i) the numerator of which is the number of shares of Common Stock
outstanding immediately prior to such stock dividend, distribution or
subdivision and (ii) the denominator of which is the number of shares of Common
Stock outstanding immediately after such stock dividend, distribution or
subdivision.
(2) Combinations or Consolidation of Common Stock. In the event the
outstanding Common Stock shall be combined or consolidated, by reclassification
or otherwise, into a lesser number of shares of Common Stock, the Warrant
Exercise Price in effect immediately prior to such combination or consolidation
shall, concurrently with the effectiveness of such combination or consolidation,
be proportionately increased to a price equal to the amount obtained by
multiplying the Warrant Exercise Price by a fraction (i) the numerator of which
is the number of shares of Common Stock outstanding immediately prior to such
combination or consolidation and (ii) the denominator of which is the number of
shares of Common Stock outstanding immediately after such combination or
consolidation.
(e) Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization; Etc. In the event the Company (1) shall consolidate with or
merge into any other Company or entity and shall not be the continuing or
surviving Company or entity of such consolidation or merger, or (2) shall permit
any other Company or entity to consolidate with or merge into the Company and
the Company shall be the continuing or surviving Company but, in connection with
such consolidation or merger, the shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property, or (3) shall transfer all or substantially all of its properties
or assets to any other Company or entity, or (4) shall effect a capital
reorganization or reclassification of the Common Stock (other than a change from
par to no-par value stock or from no-par to par value stock, or a capital
reorganization or reclassification resulting in the issue of Additional Shares
of Common Stock for which adjustment in the Warrant Exercise Price is provided
in Section 11(b)), then, and in each such event, proper provision shall be made
so that, upon the basis and the terms and in the manner provided in this Section
11(e), the holder of the Warrants, upon the exercise thereof at any time after
the consummation of such consolidation, merger, transfer, reorganization or
reclassification, shall be entitled to receive, in lieu of the shares of Common
Stock issuable upon such conversion prior to such consummation, the stock and
other securities, cash and property to which such holder would have been
entitled upon such consummation if such holder had converted such Warrants
immediately prior thereto, subject to adjustments (subsequent to such corporate
action) as nearly equivalent as possible to the adjustments provided for in this
Section 11, all as determined in good faith by the Company's Board of Directors
in the reasonable exercise of its discretion. Notwithstanding anything contained
herein to the contrary, the Company will not effect any of the transactions
described in clauses (1) through (4) above unless, prior to the consummation
thereof, each company (other than the Company) which may be required to deliver
any stock, securities, cash or property upon the exercise of Warrants shall
-16-
<PAGE> 20
assume, by written instrument delivered to each Warrantholder, the obligation to
deliver to such holder such shares of stock, securities, cash or property as
such holder may be entitled to receive upon such conversion.
(f) Distributions of Cash, Debt and Other Assets. In the event that the
Company shall at any time or from time to time distribute to all or
substantially all of the holders of shares of Common Stock (including, without
limitation, any distribution made in connection with a merger or consolidation
in which the Company is the resulting or surviving Person and the Common Stock
is not changed or exchanged) cash, evidences of indebtedness of the Company or
another Person, securities of the Company or another Person or other property or
assets (other than issuances or distributions of securities of the Company
(including, without limitation, shares of Common Stock, Options or Convertible
Securities) pursuant to which the Warrant Exercise Price shall be adjusted
pursuant to another provision of this Section 11) (a "Distribution"), then, and
in each such case, the Warrant Exercise Price then in effect shall be adjusted
(and any other appropriate actions shall be taken by the Company) by multiplying
the Warrant Exercise Price in effect immediately prior to the date of such
distribution by a fraction (A) the numerator of which shall be the Fair Market
Value of the Common Stock less the Fair Market Value of the amount of cash,
evidences of indebtedness, securities or other property or assets so issued or
distributed applicable to one share of Common Stock and (B) the denominator of
which shall be the Fair Market Value of the Common Stock, all as determined on
the record date referred to in the next sentence. Such adjustment shall be made
whenever any distribution is made and shall become effective retroactively to
the date immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(g) Adjustment of Warrant Exercise Number. Upon each adjustment of the
Warrant Exercise Price except as provided in subsection (f) of this Section 11,
the Warrant Exercise Number shall be determined by multiplying the Warrant
Exercise Number immediately prior to such adjustment by a fraction, the
numerator of which shall be the Warrant Exercise Price in effect immediately
prior to such adjustment and the denominator of which shall be the Warrant
Exercise Price as so adjusted.
Section 12. No Dilution or Impairment. The Company (a) will not permit
the par value of any Warrant Shares issuable upon the exercise of Warrants to
exceed the amount payable therefor upon such exercise, (b) will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares on the exercise of
the Warrants from time to time outstanding and (c) will not take any action
which results in any adjustment of the Warrant Exercise Number if the total
number of shares of Common Stock (or other securities) issuable after the action
upon the exercise of all of the Warrants would exceed the total number of shares
of Common Stock (or other securities) then authorized by the Company's
Certificate of Incorporation and available for the issuance of shares of Common
Stock (or other securities) upon such exercise.
Section 13. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the initial issuance of Warrant Shares upon the exercise
of Warrants; provided, however, that the Company shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issue of any Warrant Certificates or any
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<PAGE> 21
certificates for Warrant Shares in a name other than that of the registered
Holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and
the Company shall not be required to issue or deliver such Warrant Certificates
unless or until the Person or Persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
Section 14. Mutilated or Missing Warrant Certificates. In case any of the
Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company
may in its discretion issue, in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant Certificate and
indemnity, if requested, also satisfactory to the Company. Applicants for such
substitute Warrant Certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
Section 15. Reservation of Warrant Shares. The Company will at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock or its authorized and issued Common
Stock held in its treasury, for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon exercise of Warrants, the maximum number
of shares of Common Stock which may then be deliverable upon the exercise of all
Warrants. The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon issue, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof.
Section 16. Fractional Interests. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If any fraction of
a Warrant Share would, except for the provisions of this Section 16, be issuable
on the exercise of any Warrants (or specified portion thereof), the Company
shall pay an amount in cash equal to the current market price of the Common
Stock on the day immediately preceding the date the Warrant is presented for
exercise, multiplied by such fraction.
Section 17. Notices to Holders. Upon any adjustment of the Warrant
Exercise Price or the Warrant Exercise Number pursuant to Section 11, the
Company shall promptly thereafter mail to each Holder, at his address appearing
on the Warrant Register written notice of such adjustments by first-class mail,
postage prepaid, a certificate setting forth the Warrant Exercise Price or the
Warrant Exercise Number after such adjustment and setting forth in reasonable
detail the method of calculation and the facts upon which such calculations are
based and setting forth the number of Warrant Shares (or portion thereof)
issuable after such adjustment upon exercise of a Warrant and payment of the
Warrant Exercise Price. Where appropriate, such notice may be given in advance
and included as a part of the notice required to be mailed under the other
provisions of this Section 17.
-18-
<PAGE> 22
In case:
(a) the Company shall authorize the issuance to all holders of shares of
Common Stock of rights, options or warrants to subscribe for or purchase shares
of Common Stock or of any other subscription rights or warrants; or
(b) the Company shall authorize the distribution to all holders of shares
of Common Stock of evidences of its indebtedness or assets (other than cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends payable in shares of Common Stock or distributions referred
to in subsection (a) of Section 11 hereof); or
(c) of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of the
conveyance or transfer of the properties and assets of the Company substantially
as an entirety, or of any reclassification or change of Common Stock issuable
upon exercise of the Warrants (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or a tender offer or exchange offer for shares of
Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or
(e) the Company proposes to take any action (other than actions of the
character described in Section 11(a)) which would require an adjustment of the
Warrant Exercise Price or the Warrant Exercise Number pursuant to Section 11; or
(f) the Company makes any cash dividend (or other dividend to the extent
such dividend is not adjusted for pursuant to Section 11 above) on or
distribution in respect of, its Common Stock;
then the Company shall give to each of the Holders of the Warrant Certificates
at his address appearing on the Warrant Register, at least 20 days (or 10 days
in any case specified in clauses (a) or (b) above) prior to the applicable
record date hereinafter specified, or promptly in the case of events for which
there is no record date, by first-class mail, postage prepaid, a written notice
stating (i) the date as of which the holders of record of shares of Common Stock
to be entitled to receive any such rights, options, warrants or distribution are
to be determined or (ii) the initial expiration date set forth in any tender
offer or exchange offer for shares of Common Stock, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such reclassification. The failure to give the notice required by this
Section 17 or any defect therein shall not affect the legality or validity of
any distribution, right, option or warrant, or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant Certificates
shall be construed as conferring upon the holders thereof the right to vote or
to consent or to receive notice as stockholders in respect of the meetings of
stockholders or the election of Directors of the Company or any other matter, or
any rights whatsoever as stockholders of the Company;
-19-
<PAGE> 23
provided, however, the Company shall deliver to the Holders promptly upon the
sending or filing thereof, copies of all financial statements, reports, notices,
proxy statements and other information sent or made available generally by the
Company to its security holders.
Section 18. Notices to Company. Any notice or demand authorized by this
Agreement to be given or made by the Holder of any Warrant Certificate to or on
the Company shall be sufficiently given or made when and if deposited in the
mail, first class or registered, postage prepaid, addressed as follows:
OptiMark Technologies, Inc.
530 Main Avenue
Durango, CO 81301
Attention: General Counsel
Telecopy No.: (970) 247-8844
with a copy to:
Ducker, Montgomery & Lewis
1560 Broadway, Suite 1500
Denver, CO 80202
Attention: Robert C. Montgomery, Esq.
Telecopy No.: (303) 861-4017
If the Company shall fail to maintain such office or agency, the Company
shall give notice of the new office to each Holder.
Any notice pursuant to this Agreement to be given by the Company to any
Holder(s) of any Warrant Certificate shall be sufficiently given when and if
deposited in the mail, first-class or registered, postage prepaid, addressed to
such Holder at the address given to the Company in a notice from such Holder.
Section 19. Termination. If the Operating Agreement shall be terminated
in accordance with Section 18 thereof before the Warrant Commencement Date, this
Agreement shall terminate upon the date of termination of the Operating
Agreement. If the Operating Agreement is terminated for any reason on or after
the Warrant Commencement Date, the termination thereof shall have no effect upon
this Agreement with respect to any Warrants issued prior to such termination.
Section 20. Supplements and Amendments. Any amendment or supplement to
the Warrant Agreement shall require the written consent of registered holders of
a majority of the then outstanding Warrants. Notwithstanding the foregoing, the
consent of each Holder of a warrant affected shall be required for any amendment
pursuant to which (i) the Warrant Exercise Price would be increased or the
Warrant Exercise Number would be decreased (other than pursuant to adjustments
provided here) or (ii) the Triggering Events (or rights or obligations upon the
occurrence of any such Triggering Events) are changed in a manner adverse to any
Warrantholder.
-20-
<PAGE> 24
Section 21. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company and the Warrantholders shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 22. Governing Law. This Agreement and each Warrant Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of New York and for all purposes shall be construed in accordance with the
internal laws of said State.
Section 23. Benefits of This Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company and the
Holders of the Warrant Certificates any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company and the Holders of the Warrant Certificates.
Section 24. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
[Signature Page Follows]
<PAGE> 25
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
OPTIMARK TECHNOLOGIES, INC.
By: /s/ William A. Lupien
Chairman & CEO
THE NASDAQ STOCK MARKET, INC.
By: /s/ J. Patrick Campbell
Chief Operating Officer
<PAGE> 26
Exhibit A
FORM OF WARRANT CERTIFICATE
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS WARRANT MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT. THIS WARRANT MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THE WARRANT
AGREEMENT.
OPTIMARK TECHNOLOGIES, INC.
Warrants to Purchase Common Stock $0.01 par value
of OPTIMARK TECHNOLOGIES, INC.
No.___________ ________ Warrants
This Warrant Certificate certifies that _________ or registered
assigns is the registered owner of _________ Warrants, each Warrant entitling
such owner to purchase initially one share of Common Stock, $0.01 par value
("Common Stock") of OptiMark Technologies, Inc. (the "Company") at the price of
$______ per share (the "Warrant Exercise Price"), subject to the terms and
conditions hereof and of the Warrant Agreement hereinafter referred to. The
holder ("Holder") may exercise the Warrants evidenced hereby by (i) providing
certain information set forth on the back hereof, (ii) paying in full, in lawful
money of the United States of America in cash, by certified check or official
bank check, by bank wire transfer, or any combination of the foregoing, the
Warrant Exercise Price for each Warrant exercised (the "Aggregate Exercise
Price") to the Company (as hereinafter defined) and (iii) surrendering this
Warrant Certificate to the Company, with the exercise form on the back hereof
duly executed. Alternatively, if at any time when a Warrant is exercisable, the
Fair Market Value of one share of Common Stock is greater than the Warrant
Exercise Price of the applicable Warrant, in lieu of exercising such Warrant for
cash, a Holder may exercise such Warrant by delivering a notice (a "Cashless
Exercise Notice") to the Company of a cashless exercise. Upon delivery to the
Company of a Cashless Exercise Notice, together with surrender of the applicable
Warrant, the Holder shall receive from the Company Warrant Shares equal to
A x (Fair Market Value - Warrant Exercise Price)/Fair Market Value
where A = the number of Warrant Shares as to which such Warrant is being
exercised pursuant to a cashless exercise.
The "Fair Market Value" per share of Common Stock shall mean the price
which could be negotiated in an arm's length, free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under any
pressure or compulsion to complete the transaction, in each case as determined
reasonably and in good faith by the Board of Directors; provided that if shares
of Common Stock are traded or quoted, as the case may be (x) on the
<PAGE> 27
Exhibit A
Page 2
National Association of Securities Dealers' Automated Quotation System
("NASDAQ") National Market System, (y) in the over-the-counter market or (z) on
a National Securities Exchange, the "Fair Market Value" per share of Common
Stock at any date shall be deemed to be the average daily Closing Prices of the
shares of Common Stock for the 15 consecutive trading days commencing 20 trading
days before the day in question. As used in herein, the term "Closing Price" of
the shares of Common Stock for a day or days shall mean (a) if the shares of
Common Stock are not listed or admitted for trading on a National Securities
Exchange, (i) the last transaction price of the shares of Common Stock on the
NASDAQ National Market System or, in the case no such reported transaction takes
place on such day or days, the average of the reported closing bid and asked
prices thereof quoted on the NASDAQ National Market System, or (ii) if the
shares of Common Stock are not quoted on the NASDAQ National Market System, the
average of the closing bid and asked prices of the shares of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau, Inc., or
an equivalent generally accepted reporting service or (b) if the shares of
Common Stock are listed or admitted for trading on a National Securities
Exchange, the last reported sales price regular way, or in case no such reported
sale takes place on such day or days, the average of the reported closing bid
and asked prices regular way, in either case on the principal National
Securities Exchange on which the shares of Common Stock are listed or admitted
for trading.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed.
OPTIMARK TECHNOLOGIES, INC.
By____________________________
<PAGE> 28
Exhibit A
Page 3
FORM OF REVERSE OF WARRANT CERTIFICATE
This Warrant is issued under a Warrant Agreement, dated September 1,
1998, (the "Warrant Agreement") between the Company and Holder and is subject to
the terms and provisions contained in the Warrant Agreement, which are
incorporated by reference in and made a part of this Warrant Certificate, to all
of which terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. Copies of the Warrant Agreement are available at the
above-mentioned office of the Company. All capitalized terms not otherwise
defined herein shall have the meaning assigned such term in the Warrant
Agreement.
Instructions for Exercise of Warrant
To exercise the Warrants evidenced hereby, the holder must pay the
Warrant Exercise Price in full in a manner provided for in the Warrant
Certificate for the Warrants exercised to OptiMark Technologies, Inc.,
________________________, Attention: General Counsel, which payment must specify
the name of the holder and the number of Warrants exercised by such holder. In
addition, the holder must complete the information required below and present
this Warrant Certificate in person or by mail (certified or registered mail,
return receipt requested, is recommended) to the Company at the appropriate
address set forth below. This Warrant Certificate, completed and duly executed,
must be received by the Company within five Business Days of the payment.
To be Executed Upon Exercise of Warrant
The undersigned hereby irrevocably elects to exercise _______
Warrants, evidenced by this Warrant Certificate, to purchase ________________
shares of Common Stock, $0.01 par value of OptiMark Technologies, Inc. or its
successor and represents that he has made payment of the Warrant Exercise Price
in a manner provided for in the Warrant Certificate for such Warrant Shares to
OptiMark Technologies, Inc., ________________________, Attention: General
Counsel, in accordance with the terms hereof. The undersigned requests that said
shares of Common Stock or other securities constituting consideration be in
fully registered form registered in such names and delivered all as specified in
accordance with the instructions set forth below.
If the number of Warrants exercised is less than all of the Warrants
evidenced hereby, the undersigned requests that a new Warrant Certificate
representing the remaining Warrants evidenced hereby be issued and delivered to
the undersigned unless otherwise specified in the instructions below.
Dated: Name
--------------- -------------------------
(Please Print)
<PAGE> 29
Exhibit A
Page 4
(Insert Social Security
or Other Identifying Address
Number of Holder) ---------------------
---------------------
---------------------
Signature
Signature Guaranteed (Signature must conform in all respects to name of
Holder specified on the face of this Warrant
Certificate and must bear a signature guarantee by a
bank, trust company or member firm of a national
securities exchange.)
The Warrants evidenced hereby may be exercised at the following
addresses:
By hand at
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
By mail at
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
Instructions as to form and delivery of Common Stock and, if
applicable, Warrant Certificates evidencing unexercised Warrants:
<PAGE> 30
Exhibit A
Page 5
Assignment
(Form of Assignment To Be Executed If Holder Desires To Transfer
Warrants Evidenced Hereby)
FOR VALUE RECEIVED _____________________ hereby sells, assigns and
transfers unto
Please insert social security
or other identifying number
- -------------------------------
(Please print name and address
including zip code)
- -------------------------------
the Warrants represented by the within Warrant Certificate and does hereby
irrevocably constitute and appoint ________________ Attorney, to transfer said
Warrant Certificate on the books of the Company with full power of substitution
in the premises.
Dated:
-----------------------------
Signature
Signature Guaranteed (Signature must conform in all respects to name of
Holder specified on the face of this Warrant Certificate
and must bear a signature guarantee by a bank, trust
company or member firm of a national securities
exchange.)
<PAGE> 1
EXHIBIT 10.28
January 27, 1999
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE
AND NEITHER THIS WARRANT, SUCH SECURITIES NOR ANY INTEREST
THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO A
WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
NEITHER THIS WARRANT NOR THE SECURITIES ACQUIRED UPON EXERCISE OF
THIS WARRANT MAY BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED, IN
WHOLE OR IN PART, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
ISSUER.
OPTIMARK TECHNOLOGIES, INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, BIOS Group LP, or its permitted
assigns (the "Holder"), is entitled to subscribe for and purchase up to five
thousand (5,000) validly issued, fully paid and nonassessable shares ("Warrant
Shares") of voting Common Stock of OptiMark Technologies, Inc., a Delaware
corporation (the "Company"), at the exercise price to be determined in
accordance with Section 2 below (the "Exercise Price"), subject to the terms,
conditions and adjustments hereinafter set forth.
1. Definitions. As used in this Warrant, in addition to other capitalized
terms defined elsewhere herein, the following terms have the meanings indicated:
"Act" means the Securities Act of 1933, as amended, and the Rules and
Regulations promulgated thereunder.
"Additional Shares" has the meaning specified in Section 6(b)(ii) below.
"Additional Warrant" has the meaning specified in Section 6(b)(ii)
below.
"Board of Directors" means the board of directors of the Company, as
constituted from time to time.
<PAGE> 2
"Business Day" means any day other than a Saturday, Sunday or a day on
which national banks are authorized by law to close in the State of New York.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock and any and
all rights, warrants or options exchangeable for or convertible into such
capital stock.
"Common Stock" means the voting and nonvoting common stock, $.01 par
value per share, of the Company, or any other capital stock of the Company into
which such stock is reclassified or reconstituted.
"Company" has the meaning specified on the cover of this Warrant.
"Distribution" has the meaning specified in Section 6(b)(i) below.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the Securities Exchange Commission
thereunder.
"Exercise Date" has the meaning specified in Section 3(d) below.
"Exercise Form" means an Exercise Form in the form annexed hereto as
Exhibit A.
"Exercise Period" has the meaning specified in Section 2(a) below.
"Expiration Date" means the earlier of (i) the third anniversary of the
Warrant Issue Date or (ii) the termination of this Warrant by the Company
pursuant to the terms set forth in Article IX of the OptiMark/BIOS Agreement.
"Fair Market Value" means, with respect to any asset or property,
including, without limitation, Common Stock, the price which could be negotiated
in an arm's length, free market transaction, for cash, between a willing seller
and a willing buyer, neither of whom is under any pressure or compulsion to
complete the transaction, in each case as determined reasonably and in good
faith by the Board of Directors; provided that if shares of Common Stock are
traded or quoted, as the case may be (x) on the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") National Market
System, (y) in the over-the-counter market or (z) on a National Securities
Exchange, the "Fair Market Value" per share of Common Stock at any date shall be
deemed to be the average daily Closing Prices of the shares of Common Stock for
the 15 consecutive trading days commencing 20 trading days before the day in
question. As used in herein, the term "Closing Price" of the shares of Common
Stock for a day or days shall mean (a) if the shares of Common Stock are not
listed or admitted for trading on a National Securities Exchange, (i) the last
transaction price of the shares of Common Stock on the NASDAQ National Market
System or, in the case no such reported transaction takes place on such day or
days, the average of the reported closing bid and asked prices thereof quoted on
the NASDAQ National Market System,
<PAGE> 3
or (ii) if the shares of Common Stock are not quoted on the NASDAQ National
Market System, the average of the closing bid and asked prices of the shares of
Common Stock in the over-the-counter market, as reported by the National
Quotation Bureau, Inc., or an equivalent generally accepted reporting service or
(b) if the shares of Common Stock are listed or admitted for trading on a
National Securities Exchange, the last reported sales price regular way, or in
case no such reported sale takes place on such day or days, the average of the
reported closing bid and asked prices regular way, in either case on the
principal National Securities Exchange on which the shares of Common Stock are
listed or admitted for trading.
"National Securities Exchange" means an exchange registered under
Section 6 of the Exchange Act.
"OptiMark/BIOS Agreement" means that OptiMark Technologies, Inc./BIOS
Group, L.P. Agreement dated January 27, 1999.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of such entity.
"Transaction" has the meaning specified in Section 7 below.
"Warrant Issue Date" means January 27, 1999.
2. Exercise of Warrant.
(a) Term of Warrant. Subject to the terms and conditions set forth
herein, this Warrant may be exercised, in whole or in part (except as provided
in Section 3(a) below), by the Holder at any time, or from time to time, during
the term hereof commencing on the Warrant Issue Date and ending at 5:00 p.m.,
New York City time on the Expiration Date (the "Exercise Period"). This Warrant
shall expire on the Expiration Date if and to the extent not exercised by the
Holder during the Exercise Period.
(b) Exercise Price. Subject to potential adjustment from time to time
pursuant to Section 6 hereof, this Warrant shall be exercisable at an Exercise
Price of Ten Dollars ($10.00) per share of Common Stock.
3. Method of Exercise; Payment; Stock Certificates.
(a) Method of Exercise; Payment of Purchase Price. The purchase rights
represented by this Warrant may be exercised by the Holder, in whole or in part
(except as otherwise provided in this Section 3(a)), at any time, or from time
to time, during the Exercise Period by the surrender of this Warrant at the
principal office of the Company (with a duly signed Exercise Form
<PAGE> 4
specifying the number of Warrant Shares to be purchased), which signature shall
be guaranteed by a bank or trust company having an office or correspondent in
the United States, and by the payment to the Company of an amount equal to the
aggregate Exercise Price for those Warrant Shares specified in the Exercise Form
in one of the following forms (but not a combination thereof): (i) cash, (ii)
certified, cashier's or other check acceptable to the Company, or (iii) in the
event the Holder has used its best faith efforts to obtain third party financing
to finance the aggregate Exercise Price and has been unsuccessful, cash in the
aggregate amount of the par value of the Warrant Shares being purchased and
delivery of a duly executed full recourse promissory note substantially in the
form attached hereto as Exhibit B (the "Note") for the balance of the Exercise
Price. Notwithstanding the foregoing, if the Company has provided BIOS Group,
L.P. a notice of breach of the OptiMark/BIOS Agreement pursuant to Article IX
thereof, and such breach has not been cured in accordance with the terms of the
OptiMark/BIOS Agreement, this Warrant may not be exercised until sixty (60) days
have elapsed from the date of such written notice by the Company to BIOS Group,
L.P. In the event that the Holder is entitled and elects to pay the aggregate
Exercise Price by delivery of the Note, this Warrant may only be exercised by
the Holder in whole and shall not be exercisable in part.
(b) Stock Certificates. Except as otherwise provided in Section 3(d)
below, in the event of the exercise of the rights represented by this Warrant as
provided above, the Company shall promptly (i) issue and deliver to the Holder,
one or more certificates representing the shares of voting Common Stock so
purchased by the Holder, in such name or names as may be designated by the
Holder, and (ii) if applicable, cash in lieu of any fraction of a share.
(c) When Exercise Effective. The exercise of this Warrant shall be
deemed effective immediately prior to the close of business on the Business Day
on which this Warrant is surrendered to the Company as provided in this Section
3 (the "Exercise Date"). The Person in whose name any certificate for shares of
Common Stock shall be issuable upon such exercise, as provided in Section 3(b),
shall be deemed to be the record holder of such shares of Common Stock for all
purposes on the Exercise Date. In the event that this Warrant is exercised in
part, the Company at its expense will execute and deliver a new Warrant of like
tenor exercisable for the number of Warrant Shares for which this Warrant may
still thereafter be exercised.
(d) Promissory Note. With respect to the Note, the parties hereto agree
as follows:
1. The Note shall become payable in full 13 months after the
Exercise Date or earlier as provided in the Note.
2. As security for the payment of the Note and any renewal,
extension or modification thereof, the Holder will grant to the Company,
pursuant to a Security Agreement substantially in the form attached hereto as
Exhibit C, (i) a security interest in and pledges with and delivers to the
Company the certificate or certificates representing the Warrant Shares and
(iii) a security interest in collateral, other than the Warrant Shares, having a
fair market value at least equal to the aggregate Exercise Price of the Warrant
Shares purchased.
<PAGE> 5
3. In the event of default in payment when due of any indebtedness
under the Note, the Company may elect then, or at any time thereafter, to
exercise all rights available to a secured party under applicable laws,
including the right to sell the Warrant Shares at a private or public sale. The
proceeds of any sale shall be applied in the following order:
i. To pay all reasonable expenses of the Company in enforcing
its rights under the Note and the Security Agreement,
including without limitation reasonable attorneys' fees and
legal expenses incurred by the Company.
ii. In satisfaction of the remaining indebtedness under the
Note.
iii. To the Holder, any remaining proceeds.
4. The Holder shall deliver to the Company two executed blank stock
power assignments, in the form attached hereto as Exhibit D, for use in
transferring all or a portion of the Warrant Shares in the event of default in
payment when due of any indebtedness under the Note.
4. Stock Fully Paid; Reservation of Shares. All of the shares of Common
Stock issuable upon the exercise of the rights represented by this Warrant will,
upon issuance, be duly authorized, validly issued, fully paid and nonassessable,
and free of all taxes, liens and charges with respect to the issue thereof.
During the Exercise Period, the Company shall at all times have authorized and
reserved a sufficient number of shares of its voting Common Stock to provide for
the exercise of the rights represented by this Warrant.
5. Fractional Shares. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder. In lieu of such fractional shares the
Company shall make a cash payment therefor based upon the Fair Market Value of
the Common Stock.
6. Certain Adjustments.
(a) Capital Adjustments. The number of Warrant Shares purchasable
upon the exercise of this Warrant and the Exercise Price then in effect pursuant
to Section 2(b) shall be subject to adjustment as follows:
(i) Stock Dividends, Splits, Etc. If at any time after the
Warrant Issue Date (A) the Company shall pay a stock dividend payable in shares
of Common Stock or (B) the number of shares of Common Stock shall be increased
by a subdivision or split-up of shares of Common Stock, then, on the date of the
payment of such dividend or immediately after the effective date of subdivision
or split up, as the case may be, the number of Warrant Shares to be delivered
upon exercise of this Warrant will be increased so that the Holder will be
entitled to receive the number of shares of Common Stock that such Holder would
have owned immediately
<PAGE> 6
following such action had this Warrant been exercised immediately prior thereto,
and the Exercise Price will be adjusted as provided below in paragraph (iii).
(ii) Combination of Stock. If the number of shares of Common
Stock outstanding at any time after the Warrant Issue Date shall be decreased by
a combination of the outstanding shares of Common Stock, then, immediately after
the effective date of such combination, the number of Warrant Shares to be
delivered upon exercise of this Warrant will be decreased so that the Holder
thereafter will be entitled to receive the number of shares of Common Stock that
such Holder would have owned immediately following such action had this Warrant
been exercised immediately prior thereto, and the Exercise Price will be
adjusted as provided below in paragraph (iii).
(iii) Exercise Price Adjustment. Whenever the number of
Warrant Shares purchasable upon the exercise of this Warrant is adjusted as
provided pursuant to this Section 6(a), the Exercise Price payable upon the
exercise of this Warrant shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of Warrant Shares purchasable upon the exercise of the Warrant
immediately prior to such adjustment, and of which the denominator shall be the
number of Warrant Shares purchasable immediately thereafter; provided, however,
that the Exercise Price for each Warrant Share shall in no event be less than
the par value of such Warrant Share.
(b) Certain Distributions.
(i) Exercise Price Adjustment. In case the Company shall at
any time or from time to time distribute to all or substantially all of the
holders of shares of its Common Stock (including, but not limited to, any
distribution made in connection with a merger or consolidation in which the
Company is the resulting or surviving Person and the Common Stock is not changed
or exchanged) cash, evidences of indebtedness of the Company or another Person,
securities of the Company or another Person, or other assets (excluding
dividends payable in shares of Common Stock for which adjustment is made under
Section 6(a)(i)) or rights or warrants to subscribe for or purchase the
foregoing (each, a "Distribution"), then, and in each such case, the Exercise
Price then in effect shall be adjusted (and any other appropriate actions shall
be taken by the Company) by multiplying the Exercise Price in effect immediately
prior to the date of such distribution by a fraction (A) the numerator of which
shall be the Fair Market Value of the Common Stock less the Fair Market Value of
the amount of cash, evidences of indebtedness, securities or other assets so
distributed or of such subscription rights or warrants applicable to one share
of Common Stock and (B) the denominator of which shall be the Fair Market Value
of the Common Stock, all as determined on the record date referred to below.
Such adjustment shall be made whenever any distribution is made and shall become
effective retroactively to the date immediately following the close of business
on the record date for the determination of stockholders entitled to receive
such distribution.
(ii) Additional Shares. In addition to the Exercise Price
adjustment pursuant to clause (i) above, in case the Company shall at any time
or from time to time
<PAGE> 7
distribute to all or substantially all of the holders of shares of its Common
Stock (including, but not limited to, any distribution made in connection with a
merger or consolidation in which the Company is the resulting or surviving
Person and the Common Stock is not changed or exchanged) securities of the
Company or another Person (the "Additional Shares"), then, and in each such
case, the Company shall, at its expense, cause an additional warrant (the
"Additional Warrant"), substantially in the form of this Warrant, to be issued
by such Person or the Company, as the case may be, to evidence the Holder's
right to acquire the kind and amount of Additional Shares receivable by a holder
of the number of shares of Common Stock that such Holder would have been
entitled to receive upon exercise of this Warrant had this Warrant been
exercised immediately before such Distribution is made, subject to adjustments
that shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 6. The Additional Warrant shall be subject to adjustments
that shall be as nearly equivalent as practicable to the adjustments provided in
this Section 6. The exercise price for each Additional Share shall be reasonably
determined by the Board of Directors in good faith after considering the
relationship that exists (as of the date of the issuance of the Additional
Warrant) between the Exercise Price and the Fair Market Value of each Warrant
Share; provided, however, that such exercise price shall in no event be greater
than the amount by which the Exercise Price was decreased pursuant to clause (i)
above.
(c) No Adjustment. If the Company shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of Warrant Shares
and/or the Exercise Price then in effect shall be required by reason of the
taking of such record.
(d) Similar Actions. In the case the Company, at any time or from
time to time, shall take any action affecting its Common Stock similar to or
having an effect similar to any of the actions described in Section 6(a) or (b)
(but not including any action described in any such subsections) and the Board
of Directors in good faith determines that it would be equitable in the
circumstances to adjust the number of Warrant Shares and/or the Exercise Price
as a result of such action, then, and in each such case, the number of Warrant
Shares and/or the Exercise Price shall be adjusted in such manner and at such
time as the Board of Directors of the Company in good faith determines would be
equitable in the circumstances (such determination to be evidenced in a
resolution, a certified copy of which shall be mailed to the Holder).
7. Reorganization, etc. If any capital reorganization of the Company, or
any reclassification of the Common Stock, or any consolidation of the Company
with or merger of the Company with or into any other Person (other than a
consolidation or merger in which the Corporation is the resulting or surviving
Person which does not result in any reclassification or change of outstanding
Common Stock) or any sale, lease or other transfer of all or substantially all
of the assets of the Company to any other Person (each, a "Transaction"), shall
be effected in such a way that the holders of Common Stock shall be entitled to
receive stock, other securities or assets (whether such stock, other securities
or assets are issued or distributed by the Company or another Person), in lieu
of or in addition to cash, with respect to or in exchange for Common Stock,
then, upon exercise of this Warrant, the Holder shall have the right to receive
the same kind and amount
<PAGE> 8
of stock, other securities, cash and/or assets receivable upon such
reorganization, reclassification, consolidation, merger or sale, lease or other
transfer by a holder of the number of shares of Common Stock that such Holder
would have been entitled to receive upon exercise of this Warrant had this
Warrant been exercised immediately before such reorganization, reclassification,
consolidation, merger or sale, lease or other transfer, subject to adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in Section 6.
8. Notices of Adjustment. Whenever the Exercise Price and/or the number
of Warrant Shares purchasable hereunder shall be adjusted pursuant to Section 6
hereof, the Company shall deliver to the Holder a certificate setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method by which such adjustment was calculated, and the Exercise
Price and the number of Warrant Shares purchasable hereunder after giving effect
to such adjustment.
9. Notices of Corporate Action. Prior to the Expiration Date, if this
Warrant has not theretofore been exercised in full, then in the event of:
(a) any taking by the Company of a record of the holders of its
Capital Stock for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right;
(b) any capital reorganization of the Company, any
reclassification or recapitalization of any Capital Stock of the Company, any
consolidation or merger involving the Company and any other Person, or any
transfer of all or substantially all the assets of the Company to any other
Person; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
the Company will mail to the Holder a notice specifying (x) the date or expected
date on which any such record is to be taken for the purpose of such dividend,
distribution or right and the amount and character of any such dividend,
distribution or right, and (y) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any, as of which the holders of record of Capital Stock (or other securities)
shall be entitled to exchange their shares of Capital Stock (or other
securities) for the securities or other property deliverable upon such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up. Such notice shall be delivered
at least 10 days prior to the date therein specified, in the case of any date
referred to in the foregoing clauses (x) and (y).
10. Representations of the Company. The Company represents and warrants
that all corporate actions on the part of the Company, its officers, directors
and stockholders necessary for the issuance of this Warrant, for the sale and
issuance of the shares of Common Stock pursuant
<PAGE> 9
hereto, and for the performance of the Company's obligations hereunder, were
taken prior to and are effective as of the Warrant Issue Date.
11. Representations and Warranties by the Holder. The Holder represents
and warrants to the Company as follows:
(a) This Warrant is being acquired and any Warrant Shares will be
acquired for the Holder's own account, for investment and not with a view to, or
for resale in connection with, any distribution or public offering thereof
within the meaning of the Act.
(b) The Holder understands that this Warrant has not been and the
Warrant Shares will not be registered under the Act by reason of their issuance
in a transaction exempt from the registration and prospectus delivery
requirements of the Act pursuant to Section 4(2) and/or Section 506 of
Regulation D thereof. Accordingly, this Warrant and the Warrant Shares must be
held by the Holder indefinitely, and the Holder must therefore bear the economic
risk of such investment indefinitely, unless a subsequent disposition thereof is
registered under the Act or is exempted from such registration.
(c) The Holder is an "accredited investor" as that term is
defined under Regulation D adopted under the Act. The Holder has such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of the purchase of this Warrant and the Warrant
Shares and of protecting its interests in connection therewith.
(d) The Holder is able to bear the economic risk of the purchase
of Warrant Shares pursuant to the terms of this Warrant.
12. Replacement of Warrant. On receipt by the Company of an affidavit of
the Holder stating the circumstances of the loss, theft, destruction or
mutilation of this Warrant (and in the case of any such mutilation, on surrender
and cancellation of such Warrant), the Company, at its expense, shall promptly
execute and deliver, in lieu thereof, a new Warrant of like tenor.
13. Restrictions on Transfer; Restrictive Legends.
(a) Neither this Warrant nor any Warrant Shares may be sold, pledged or
otherwise transferred, in whole or in part, to any Person without the prior
written consent of the Company.
(b) Each Warrant issued in substitution for this Warrant shall be
stamped or otherwise imprinted with legends in substantially the following form:
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF ANY
<PAGE> 10
STATE, AND NEITHER THIS WARRANT, SUCH SECURITIES NOR ANY INTEREST
THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
OR PURSUANT TO A WRITTEN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
NEITHER THIS WARRANT NOR THE SECURITIES ACQUIRED UPON
EXERCISE OF THIS WARRANT MAY BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED, IN WHOLE OR IN PART, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE ISSUER.
(c) Each stock certificate for Warrant Shares issued upon the exercise
of any Warrant and each stock certificate issued upon the direct or indirect
transfer of any Warrant Shares shall be stamped or otherwise imprinted with
legends 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"), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES
MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO A WRITTEN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, PLEDGED OR OTHERWISE TRANSFERRED, IN WHOLE OR IN PART,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE ISSUER.
14. Rights of Stockholders; Lock-Up Period. This Warrant shall not entitle
its Holder to any of the rights of a stockholder of the Company. Holder hereby
agrees that, if so requested by the Company or any representative of the
underwriters (the "Managing Underwriter") in connection with any registration of
the offering of any securities of the Company under the Act, Holder shall not
sell or otherwise transfer any Warrant Shares or other securities of the Company
during the 180-day period (or such other period as may be requested in writing
by the Managing Underwriter and agreed to in writing by the Company) (the
"Market Standoff Period") following the effective date of a registration
statement of the Company filed under the Act. Such restriction shall apply only
to the first registration statement of the Company to become effective under the
Act that includes securities
<PAGE> 11
to be sold on behalf of the Company to the public in an underwritten public
offering under the Act. The Company may impose stop-transfer instructions with
respect to securities subject to the foregoing restrictions until the end of
such Market Standoff Period.
15. Successors and Assigns. The provisions of this Warrant shall inure to
the benefit of and be binding upon the Company, the Holder and their respective
permitted assigns. Nothing in this Warrant, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Warrant, except as expressly provided in
this Warrant.
16. Amendment or Waiver. This Warrant and any term hereof may be amended,
waived, discharged or terminated only by and with the written consent of the
Company and the Holder.
17. Specific Performance. The parties hereto intend that each of the
parties have the right to seek damages or specific performance in the event that
any other party hereto fails to perform such party's obligations hereunder.
Therefore, if any party shall initiate any action or proceeding to enforce the
provisions hereof, any party against whom such action or proceeding is brought
hereby waives any claim or defense therein that the plaintiff party has an
adequate remedy at law.
18. Charges, Taxes and Expenses. Issuance of certificates representing
Warrant Shares shall be made without charge to the Holder for any issue or
transfer tax, or other incidental expense, in respect of the issuance or
delivery of such certificates or the securities represented thereby, all of
which taxes and expenses shall be paid by the Company; provided, however, the
Company shall not be required (a) to pay any tax or other incidental expense
which may be payable in respect of (i) any transfer or delivery of this Warrant
by the Holder to another Person or (ii) the issuance or delivery of certificates
representing Warrant Shares to a Person other than the Holder, or (b) to issue
or deliver certificates representing Warrant Shares to a Person other than the
Holder until any such tax payable by the Holder as provided in clause (ii) above
shall have been paid or until it has been established to the Company's
reasonable satisfaction that no such tax is due.
19. Notices. Except as otherwise provided herein, all notices, requests,
demands, consents, instructions or other communications to or upon the Company
or the Holder under this Warrant shall be by telecopy or in writing and
telecopied, mailed or delivered to each party at telecopier number or its
address set forth below (or to such other telecopy number or address as the
recipient of any notice shall have notified the other in writing). All such
notices and communications shall be effective (a) when sent by Federal Express
or other overnight service of recognized standing, on the business day following
the deposit with such service; (b) when mailed, by registered or certified mail,
first class postage prepaid and addressed as aforesaid through the United States
Postal Service, upon receipt; (c) when delivered by hand, upon delivery; and (d)
when telecopied, upon confirmation of receipt.
(a) if to the Company:
<PAGE> 12
OptiMark Technologies, Inc.
10 Exchange Place, 12th Floor
Jersey City, New Jersey 07302
Telecopy: (201) 946-9435
Attention: Chief Executive Officer
with a copy to:
OptiMark Technologies, Inc.
10 Exchange Place, 12th Floor
Jersey City, New Jersey 07302
Telecopy: (201) 946-9435
Attention: General Counsel
(b) if to the Holder:
to the address of the Holder as set forth in the records
of the Company
20. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF.
21. Headings. The headings in this Warrant are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
<PAGE> 13
22. Severability. Any term or provision of this Warrant which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the terms and provisions of this Warrant or affecting the
validity or enforceability of any of the terms or provisions of this Warrant in
any other jurisdiction.
OPTIMARK TECHNOLOGIES, INC.
By: /s/ John T. Rickard
President
ACKNOWLEDGED AND AGREED:
BIOS GROUP, LP
By: /s/ Robert R. MacDonald
President
<PAGE> 14
Exhibit A
EXERCISE FORM
(To be executed upon exercise of the Warrant)
Reference is made to the attached Common Stock Purchase Warrant. The
undersigned hereby irrevocably elects to exercise the right, represented by the
attached Warrant, to purchase __________ Warrant Shares and herewith tenders
payment for such Warrant Shares to the order of OptiMark Technologies, Inc. in
the amount of $__________ in accordance with the terms of the Warrant. The
undersigned requests that a certificate for such Warrant Shares be registered in
the name of the undersigned and that such certificate be delivered to the
undersigned's address below.
If such number of Warrant Shares purchased shall not be all of the Warrant
Shares evidenced by the Warrant, the undersigned requests that a new Warrant of
like tenor for the balance remaining of such Warrant Shares be registered in the
name of the undersigned and that such Warrant be delivered to the undersigned's
address below.
Dated:
-----------------
Signature
--------------------------
------------------------------------
(Print Name)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- ----------------------------
- 1 -
<PAGE> 15
Exhibit B
PROMISSORY NOTE
-----------------, ----
$-----------
For value received, the undersigned promises to pay to OptiMark
Technologies, Inc., a Delaware corporation (the "Company"), or order, at its
principal office the principal sum of $____________ with interest thereon at the
rate of 8% per annum, compounded annually, on the unpaid balance of the
principal sum. Said principal shall be due on _______________, ______.
This Note is subject to the terms of that Warrant to Purchase Common Stock
between the undersigned and the Company effective as of January 27, 1999. This
Note is secured by a pledge of the Company's Common Stock and certain other
collateral under the terms of a Security Agreement of even date herewith and is
subject to all the provisions thereof.
The holder of this Note shall have full recourse against the undersigned
personally for failure to pay the Note as and when due.
The principal is payable in lawful money of the United States of America.
The privilege is reserved to prepay any portion of the Note at any time.
If the undersigned shall default in the payment of amounts hereunder when
due, the holder of this Note shall be entitled to payment by the undersigned of
all costs of collection, including, without limitation, reasonable attorneys'
fees and costs incurred in connection with such collection efforts, whether or
not suit on this Note is filed. The maker waives presentment for payment,
protest, notice of protest and notice of non-payment of this Note. This Note
shall be governed by the laws of the State of New Jersey as they apply to
contracts entered into and wholly to be performed within such state.
BIOS GROUP, LP
--------------------------------
By:
Its:
-1-
<PAGE> 16
Exhibit C
SECURITY AGREEMENT
This Security Agreement, dated as of ___________, ________, executed by
BIOS Group, L.P., a Delaware limited partnership ("Debtor"), in favor of
OptiMark Technologies, Inc., a Delaware corporation ("Secured Party").
RECITALS
A. Pursuant to that Warrant to Purchase Common Stock dated January 27, 1999
(the "Warrant"), between Debtor and Secured Party, Debtor has purchased 5,000
shares of Secured Party's common stock (the "Shares") and has elected to pay for
the Shares by delivering that Promissory Note (the "Note") dated the date
hereof, the form of which was attached to the Warrant.
B. In order to induce Secured Party to extend the credit evidenced by the
Note, Debtor has agreed to enter into this Security Agreement and to grant the
security interest in the Collateral described below.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor hereby agrees with Secured Party as follows:
1. Definitions and Interpretation. When used in this Security Agreement,
the following terms shall have the following respective meanings:
"Collateral" shall have the meaning given to that term in Section 2 hereof.
"Obligations" shall mean and include all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by Debtor to Secured Party
of every kind and description (whether or not evidenced by any note or
instrument and whether or not for the payment of money), now existing or
hereafter arising under or pursuant to the terms of the Note or this Security
Agreement, including, all interest, fees, charges, expenses, attorneys' fees and
costs chargeable to and payable by Debtor hereunder and thereunder, in each
case, whether direct or indirect, absolute or contingent, due or to become due,
and whether or not arising after the commencement of a proceeding under Title 11
of the United States Code (11 U.S.C. Section 101 et seq.), as amended from time
to time (including post-petition interest) and whether or not allowed or
allowable as a claim in any such proceeding.
"UCC" shall mean the Uniform Commercial Code as in effect in the State of
New Jersey
-1-
<PAGE> 17
from time to time.
Unless otherwise defined herein, all terms defined in the UCC shall have
the respective meanings given to those terms in the UCC.
2. Grant of Security Interest. As security for the Obligations, Debtor
hereby pledges and assigns to Secured Party and grants to Secured Party security
interest in all right, title and interests of Debtor in and to the property
described in Attachment 1 hereto (collectively and severally, the "Collateral"),
which Attachment 1 is incorporated herein by this reference.
3. Representations and Warranties. Debtor represents and warrants to
Secured Party that (a) Debtor is the owner of the Collateral (or, in the case of
after-acquired Collateral, at the time Debtor acquires rights in the Collateral,
will be the owner thereof) and that no other person has (or, in the case of
after-acquired Collateral, at the time Debtor acquires rights therein, will
have) any right, title, claim or interest (by way of lien or otherwise) in,
against or to the Collateral; and (b) Secured Party has (or in the case of
after-acquired Collateral, at the time Debtor acquires rights therein, will
have) a perfected security interest in the Collateral.
4. Covenants Relating to Collateral. Debtor hereby agrees (a) not to sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Secured Party; (b) to perform
all acts that may be necessary to maintain, preserve, protect and perfect the
Collateral, the lien granted to Secured Party therein and the first priority of
such lien; (c) not to change Debtor's name or, without 30 days' prior written
notice to Secured Party, Debtor's principal place of business; (d) to procure,
execute and deliver from time to time any endorsements, assignments, financing
statements and other writings reasonably deemed necessary or appropriate by
Secured Party to perfect, maintain and protect its lien hereunder and the
priority thereof; (e) to appear in and defend any action or proceeding which may
affect its title to or Secured Party's interest in the Collateral; and (f) to
comply with all material requirements of law relating to the production,
possession, operation, maintenance and control of the Collateral.
5. Authorized Action by Agent. Debtor hereby irrevocably appoints Secured
Party as its attorney-in-fact and agrees that, upon the occurrence and during
the continuance of an Event of Default (as defined in Section 6 hereof below),
Secured Party may perform any act which Debtor is obligated by this Security
Agreement to perform, and to exercise such rights and powers as Debtor might
exercise with respect to the Collateral.
6. Default and Remedies. Debtor shall be deemed in default under this
Security Agreement upon the occurrence of the following, each of which shall be
deemed an "Event of Default":
(a) If Debtor shall fail to pay when due any portion of the Obligations;
-2-
<PAGE> 18
(b) A bankruptcy or insolvency proceeding is instituted by or against
Debtor, or if a receiver is appointed for the property of Debtor;
(c) If Debtor makes an assignment for the benefit of creditors;
(d) If Debtor fails to perform any of the covenants set forth in the
Warrant or contained in this Security Agreement for a period of five (5) days
after notice thereof from Secured Party; or
(e) If the Note or this Security Agreement shall in any respect cease to
be, or Debtor shall assert that either document is not, a legal, valid and
binding obligation of Debtor enforceable in accordance with its terms.
Upon the occurrence and during the continuance of any such Event of
Default, Secured Party shall have the rights of a secured creditor under the UCC
and applicable federal law, all rights granted by this Security Agreement and by
law.
7. Insolvency. Debtor agrees that if a bankruptcy or insolvency proceeding
is instituted by or against it, or if a receiver is appointed for the property
of Debtor, or if Debtor makes an assignment for the benefit of creditors, the
entire amount unpaid on the Note shall become immediately due and payable, and
Secured Party may proceed as provided in the case of an Event of Default.
8. Voting Rights. During the term of this Security Agreement and so long as
an Event of Default shall not have occurred, Debtor shall have the right to vote
all of the Shares which are pledged hereunder and comprise all or a portion of
the Collateral.
9. Miscellaneous.
(a) Notices. Except as otherwise provided herein, all notices, requests,
demands, consents, instructions or other communications to or upon the Company
or the Holder under this Warrant shall be by telecopy or in writing and
telecopied, mailed or delivered to each party at telecopier number or its
address set forth below (or to such other telecopy number or address as the
recipient of any notice shall have notified the other in writing). All such
notices and communications shall be effective (a) when sent by Federal Express
or other overnight service of recognized standing, on the business day following
the deposit with such service; (b) when mailed, by registered or certified mail,
first class postage prepaid and addressed as aforesaid through the United States
Postal Service, upon receipt; (c) when delivered by hand, upon delivery; and (d)
when telecopied, upon confirmation of receipt.
(i) if to Secured Party:
-3-
<PAGE> 19
OptiMark Technologies, Inc.
10 Exchange Place, 12th Floor
Jersey City, New Jersey 07302
Telecopy: (201) 946-9435
Attention: Chief Executive Officer
with a copy to:
OptiMark Technologies, Inc.
10 Exchange Place, 12th Floor
Jersey City, New Jersey 07302
Telecopy: (201) 946-9435
Attention: General Counsel
(ii) if to Debtor:
(b) Nonwaiver. No failure or delay on Secured Party's part in exercising
any right hereunder shall operate as a waiver thereof or of any other right nor
shall any single or partial exercise of any such right preclude any other
further exercise thereof or of any other right.
(c) Amendments and Waivers. This Security Agreement may not be amended or
modified, nor may any of its terms be waived, except by written instruments
signed by Debtor and Secured Party. Each waiver or consent under any provision
hereof shall be effective only in the specific instances for the purpose for
which given.
(d) Expenses. Debtor shall pay on demand all reasonable fees and expenses,
including reasonable attorneys' fees and expenses, incurred by Secured Party in
connection with custody, preservation or sale of, or other realization on, any
of the Collateral or the enforcement or attempt to enforce any of the
Obligations which is not performed as and when required by this Security
Agreement.
(e) Severability. Debtor and Secured Party agree that the enforceability or
invalidity or any provision or provisions of this Security Agreement shall not
render any other provision or provisions herein contained unenforceable or
invalid.
(f) Successors and Assigns. Debtor and Secured Party agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Debtor" and the term "Secured Party" as used
herein shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
-4-
<PAGE> 20
(g) Governing Law. This Security Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey without
reference to conflicts of law rules (except to the extent governed by the UCC).
[Remainder of page intentionally left blank]
<PAGE> 21
IN WITNESS WHEREOF, Debtor has caused this Security Agreement to be
executed as of the day and year first above written.
BIOS GROUP, L.P.,
as Debtor
By
--------------------------------
Name:
AGREED:
OPTIMARK TECHNOLOGIES, INC.,
as Secured Party
By
------------------------------
Name:
Title:
-6-
<PAGE> 22
ATTACHMENT 1
TO SECURITY AGREEMENT
All right, title and interest of Debtor now owned or hereafter acquired in and
to the following:
(a) All of the Shares represented by certificate number ___, and in the
event of any stock dividend, reclassification, readjustment or other changes
declared or made in the capital structure of Secured Party, all new, substituted
and additional shares or other securities issued by reason of any such change.
(b) [DESCRIPTION OF ADDITIONAL COLLATERAL]
(c) All proceeds of the foregoing (including, without limitation, whatever
is receivable or received when Collateral or proceeds is sold, collected,
exchanged, returned, substituted or otherwise disposed of, whether such
disposition is voluntary or involuntary, including rights to payment and return
premiums and insurance proceeds under insurance with respect to any Collateral,
and all rights to payment with respect to any cause of action affecting or
relating to the Collateral).
-7-
<PAGE> 23
Exhibit D
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, __________________________, hereby sell, assign and
transfer unto________________________________(__________) shares of the Common
Stock of OptiMark Technologies, Inc., standing in my name of the books of said
corporation represented by Certificate No. _____ herewith and do hereby
irrevocably constitute and appoint__________________ , attorney, to transfer
the said stock on the books of the within named corporation with full power of
substitution in the premises.
This Stock Assignment may be used only in accordance with the Security
Agreement between OptiMark Technologies, Inc. and the undersigned dated
______________, 1999.
Dated: _______________, _______
---------------------------------------------
(to be signed exactly as name is to appear
on stock certificate)
INSTRUCTIONS: Please do not fill in the blanks other than the signature line.
-1-
<PAGE> 1
EXHIBIT 10.29
================================================================================
WARRANT AGREEMENT
Between
OPTIMARK TECHNOLOGIES, INC.
and
KNIGHT/TRIMARK GROUP, INC.
Dated as of October 27, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. Purchase and Sale of Warrants...................................................................1
1.01 Authorization and Issuance of Warrant Stock and Warrants........................................1
1.02 Issuance of the Warrants........................................................................1
1.03 Purchase for Investor's Account.................................................................3
SECTION 2 Adjustments.....................................................................................4
2.01 Subdivisions and Combinations...................................................................4
2.02 Issuance of Common Stock, Other Securities, Rights or Obligations...............................4
2.03 Superseding Adjustment..........................................................................5
2.04 Other Provisions Applicable to Adjustments......................................................6
2.05 Merger, Consolidation or Disposition of Assets..................................................6
2.06 No Adjustment Necessary.........................................................................6
2.07 Notice of Adjustments...........................................................................7
SECTION 3. Representations and Warranties..................................................................7
3.01 Existence; Qualification........................................................................7
3.02 No Breach.......................................................................................7
3.03 Corporate Action................................................................................7
3.04 Approvals.......................................................................................7
3.05 Capitalization..................................................................................8
3.06 Private Offering................................................................................8
3.07 Litigation......................................................................................8
3.08 Brokers.........................................................................................8
SECTION 4. Covenants.......................................................................................8
4.01 Transfers Generally; Standstill.................................................................8
4.02 OTS Pricing.....................................................................................9
4.03 Right of the Investor to Designate Director.....................................................9
4.04 Change in Control of the Investor..............................................................10
4.05 Call Rights....................................................................................10
4.06 Access to Information..........................................................................10
4.07 Restrictive Legends............................................................................11
4.08 Registration Rights............................................................................11
4.09 Cooperation....................................................................................11
SECTION 5. Definitions....................................................................................12
5.01 Definitions....................................................................................12
SECTION 6. Miscellaneous..................................................................................15
6.01 Public Announcements...........................................................................15
6.02 Waiver.........................................................................................15
6.03 Notices........................................................................................15
6.04 Expenses.......................................................................................16
</TABLE>
<PAGE> 3
(ii)
<TABLE>
<S> <C> <C>
6.05 Amendments.....................................................................................16
6.06 No Assignment; Binding Effect..................................................................16
6.07 Survival.......................................................................................17
6.08 Specific Performance...........................................................................17
6.09 Captions.......................................................................................17
6.10 Counterparts...................................................................................17
6.11 Governing Law..................................................................................17
6.12 Severability...................................................................................17
6.13 Entire Agreement...............................................................................17
6.14 No Third Party Beneficiary.....................................................................18
6.15 Termination....................................................................................18
6.16 Confidentiality................................................................................18
6.17 Dispute Resolution.............................................................................18
</TABLE>
SCHEDULES
Schedule 1 Number of Stock Units
Schedule 2 Warrant Exercise Price
Schedule 3 Issuer Capitalization
ANNEX 1 - FORM OF WARRANT
ANNEX 2 - REGISTRATION RIGHTS IN FAVOR OF INVESTOR
ANNEX 3 - REGISTRATION RIGHTS IN FAVOR OF ISSUER
<PAGE> 4
WARRANT AGREEMENT dated as of October 27, 1999 between OPTIMARK
TECHNOLOGIES, INC., a company duly organized and validly existing under the laws
of the State of Delaware (the "Issuer"), and KNIGHT/TRIMARK GROUP, INC., a
company duly organized and validly existing under the laws of the State of
Delaware (the "Investor").
WHEREAS, the Investor intends to use the OTS (as defined below) to
enter profiles for the purpose of executing trades in securities;
WHEREAS, in order to encourage the Investor to use the OTS to execute
trades in securities, the Issuer proposes to issue warrants to purchase common
stock of the Issuer.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Purchase and Sale of Warrants.
1.01 Authorization and Issuance of Warrant Stock and Warrants. The
Issuer has authorized: (a) the issuance of the Warrants evidenced by warrant
certificates in the form of Annex 1; and (b) the issuance of, and shall reserve
out of its authorized but unissued Common Stock or its Common Stock held in
treasury, such number of shares of Common Stock as shall be necessary to permit
the Issuer to comply with its obligations to issue shares of Common Stock
pursuant to the Warrants.
1.02 Issuance of the Warrants.
(a) On the Closing Date, the Issuer shall issue to the Investor
(i) if the Tranche A Warrant has vested, the Tranche A Warrant; (ii) if the
Tranche B Warrant has vested, the Tranche B Warrant; (iii) if the Tranche C1
Warrant has vested, the Tranche C1 Warrant; (iv) if the Tranche C2 Warrant has
vested, the Tranche C2 Warrant; and (v) if the Tranche C3 Warrant has vested,
the Tranche C3 Warrant. The number of Stock Units covered by each Warrant shall
be determined in accordance with Schedule 1, and the Exercise Price for each
Warrant shall be determined in accordance with Schedule 2. The Issuer shall
deliver to the Investor a single certificate for each Warrant, registered in the
name of the Investor, with the number of Stock Units and the Exercise Price
appropriately completed in accordance with the preceding sentence.
(b) If between the Closing Date and the third anniversary of the
Effective Date the Issuer issues any additional shares of Common Stock on
exercise of the Existing Warrants, the Issuer shall issue to the Investor an
additional Warrant of each Tranche theretofore issued covering a number of Stock
Units such that the total number of Stock Units covered by the Warrants of that
Tranche will equal the number of Stock Units covered by the original Warrant of
that Tranche multiplied by a fraction the numerator of which is the Adjusted
Base Amount for that Tranche recomputed to reflect additional shares of Common
Stock issued on exercise of Existing Warrants and the denominator of which is
the Adjusted Base Amount used originally to calculate the number of Stock Units
covered by the original Warrant for such Tranche.
<PAGE> 5
2
(c) For purposes of this Section 1.02:
The Tranche A Warrant shall vest immediately if at the end of any day
on or prior to the first anniversary of the Effective Date the total number of
Investor Executions shall exceed 1.25 billion.
The Tranche B Warrant shall vest immediately if at the end of any day
within 18 months after the Effective Date the total number of Investor
Executions shall exceed the Tranche A Reference Amount by at least 5 billion.
The Tranche C1 Warrant shall vest immediately if at the end of any day
within 30 months after the Effective Date the total number of Investor
Executions shall exceed the Tranche B Reference Amount by at least 15 billion.
Notwithstanding the foregoing, if on the day 30 months after the Effective Date
the number of Investor Executions in excess of the Tranche B Reference amount is
less than 15 billion but is at least 13 billion, the Tranche C1 Warrant shall be
deemed to have vested, but the number of Stock Units covered thereby shall be
reduced in accordance with Schedule 1.
The Tranche C2 Warrant shall vest immediately if at the end of any day
within 30 months after the Effective Date the total number of Investor
Executions shall exceed the Tranche C Reference Amount by at least 2.5 billion.
The Tranche C2 Warrant shall not vest if the Tranche A Warrant has vested.
The Tranche C3 Warrant shall vest immediately if at the end of any day
within 30 months after the Effective Date the total number of Investor
Executions shall exceed the Tranche C Reference Amount by at least 5 billion.
The Tranche C3 Warrant shall not vest if the Tranche B Warrant has vested.
"Tranche A Reference Amount" means the lesser of 1.25 billion or the
amount of Investor Executions within the first 12 months from the Effective
Date.
"Tranche B Reference Amount" means the lesser of 6.25 billion or the
amount of Investor Executions within the first 18 months from the Effective
Date.
"Tranche C Reference Amount" means the number of Investor Executions
required for the Tranche C1 Warrant to vest.
(d) As promptly as practicable and in any event no later than 15 days
after the end of each month ending after the Effective Date hereof and before
the Closing Date, the Issuer will deliver to the Investor a certificate
specifying the total number of Investor Executions through such date and the
percent of OTI Executions during the current vesting time period represented by
Investor Executions. The Investor may, at any time, designate an accounting
firm, in the manner described below, to review the data in the Investor's
certificate, as well as interim determinations with respect to the vesting of
Warrants, the number of Stock Units covered by each Warrant and the Exercise
Price for each Warrant as of the applicable period (such data and
determinations, the "Interim Determinations").
<PAGE> 6
3
In addition, no later than two Business Days after the end of the
30-month period following the Effective Date, the Issuer will deliver to the
Investor a final computation specifying the number of Warrants, if any, to be
issued pursuant to this Agreement, the number of Stock Units covered by each
Warrant and the Exercise Price for each Warrant (the "Final Computation"). The
Final Computation shall be conclusive and binding upon the parties unless by the
fifth Business Day following delivery thereof the Investor gives written notice
of its disagreement with the Final Computation to the Issuer. In the event of
such a notice, the Issuer and the Investor shall seek in good faith to resolve
any differences with respect to the Final Computation within 30 days following
the Investor's notice of disagreement. If within this period the parties cannot
do so, the Investor shall appoint an accounting firm to review the Final
Computation.
The Investor and the Issuer shall agree upon the procedures to be used
by the accounting firm in making any Interim Determinations and the Final
Computation. If the Investor and Issuer cannot agree upon the procedures to be
used by the accounting firm for any Interim Determination or the Final
Computation, then the procedures will be settled by arbitration pursuant to
Section 6.17. Any determination of the accounting firm shall be final, binding
and conclusive. The accounting firm will be instructed to make its determination
within 30 days. The accounting firm shall be one of the "Big Five" firms which
has not performed services for the Investor or its Affiliates within the past
three years and is not currently contemplated to perform services for the
Investor or its Affiliates, and shall be independent with respect to the
Investor and its Affiliates under the rules of the American Institute of
Certified Public Accountants and the Commission. The Issuer will provide the
accounting firm with access, upon reasonable prior notice and during normal
business hours, to its books and records, but only to the extent that such
access does not unreasonably interfere with the business and operations of the
Issuer and its Subsidiaries or violate any law, order, contract or license
applicable to the Issuer or any Subsidiary or by which any of their respective
assets or properties is bound. In no event will the accounting firm be permitted
access to user profiles or the identity of Persons entering them or to
information concerning the operation of the matching engine. The accounting firm
must agree to be bound by the provisions of Section 6.16. The accounting firm's
expenses will be paid by the Investor unless the accounting firm's review
results in, (i) in the case of the Final Computation, an increase in the number
of Warrants vested or the amount of Stock Units covered thereby or a decrease in
the Exercise Price of any Warrant, or (ii) in the case of an Interim
Determination, one that as to any item thereof is at least 5% more favorable to
the Investor than as determined by the Issuer, in which cases the accounting
firm's expenses will be paid by the Issuer.
1.03 Purchase for Investor's Account. The Investor represents and
warrants to the Issuer as follows:
(a) The Investor is purchasing and shall purchase the Warrants
and the Warrant Stock for investment for its own account, without a view to the
distribution thereof.
(b) The Investor is an "accredited investor" within the meaning
of Regulation D under the Securities Act.
<PAGE> 7
4
SECTION 2 Adjustments.
2.01 Subdivisions and Combinations. If at any time after the date
of this Agreement the Issuer shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend or other distribution of Common
Stock;
(b) subdivide or reclassify its outstanding shares of Common
Stock into a larger number of shares of Common Stock; or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock;
then immediately after the occurrence of any such event (or if the event occurs
before the Closing Date, immediately upon issuance of the Warrants) the number
of shares of Warrant Stock comprising a Stock Unit shall be adjusted so as to
equal the number of shares of Warrant Stock which such holder would have been
entitled to receive if such holder had exercised the Warrants immediately prior
to the occurrence of such event.
2.02 Issuance of Common Stock, Other Securities, Rights or
Obligations.
(a) In case at any time after the date of this Agreement the Issuer
(i)(A) shall take a record of the holders of its Common Stock for the purpose of
entitling them to subscribe for or purchase shares of any class or series of
Common Stock, Options or Convertible Securities or (B) shall otherwise (except
as provided in Section 2.01) issue or sell any such shares, Options or
Convertible Securities to all its stockholders and (ii) the consideration per
share for which Common Stock is deliverable upon such purchase or upon exercise
of such Options or conversion or exchange of such Convertible Securities
(determined by dividing (x) the total amount received or receivable by the
Issuer in consideration of the issuance of or subscription for such shares,
Options or Convertible Securities, plus (in the case of Options or Convertible
Securities) the minimum aggregate amount of consideration (if any) payable to
the Issuer upon such exercise, conversion or exchange, by (y) the total maximum
number of shares of Common Stock to be issued or necessary to effect the
exercise, conversion or exchange of all such Options or Convertible Securities)
shall be less than the Fair Market Value per share of Common Stock on such
record date or sale or issuance date, as the case may be, then the number of
shares of Warrant Stock comprising a Stock Unit shall be adjusted (at the time
or if the Warrants have not yet been issued, immediately upon issuance) to be
that number determined by multiplying the number of shares of Warrant Stock
comprising a Stock Unit immediately prior to such date by a fraction (not to be
less than one) (i) the numerator of which shall be equal to the product of (A)
the total maximum number of shares of Common Stock outstanding after giving
effect to the issuance of such shares or the assumed exercise or conversion of
all such Options or Convertible Securities and all the Issuer's outstanding
Options and Convertible Securities other than the Existing Warrants and (B) the
Fair Market Value per share of Common Stock determined immediately before such
date and (ii) the denominator of which shall be equal to the sum of (A) the
product of (1) the number of shares of Common Stock outstanding immediately
before such
<PAGE> 8
5
date assuming the exercise or conversion of all the Issuer's outstanding Options
and Convertible Securities other than the Existing Warrants and (2) the Fair
Market Value per share of the Common Stock determined immediately before such
date and (B) the aggregate consideration per share (determined as set forth in
subsection (ii)(x) and (y) above) for which Common Stock is so issuable or is
deliverable upon exercise, conversion or exchange of such Options or Convertible
Securities.
(b) Aggregate consideration for purposes of the preceding clause
(B) shall be determined as follows: In case any shares, Options or Convertible
Securities shall be issued or sold, or exercisable, convertible or exchangeable
for cash, the consideration received therefor shall be deemed to be the amount
payable to the Issuer (determined as set forth in subsection (ii)(x) and (y)
above) therefor, before deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts or, in the case of a
private placement thereof, finders' fees or commissions paid or allowed by the
Issuer in connection therewith. In case any such shares, Options or Convertible
Securities shall be issued or sold, or exercisable, convertible or exchangeable
for a consideration other than cash payable to the Issuer, the consideration
received therefor (determined as set forth in subsection (ii)(x) and (y) above)
shall be deemed to be the fair value of such consideration as determined by the
Board, before deduction therefrom of any expenses incurred or any underwriting
commissions or concessions or discounts paid or allowed by the Issuer in
connection therewith.
2.03 Superseding Adjustment. If, at any time after any adjustment
in the number of shares of Warrant Stock comprising a Stock Unit shall have been
made on the basis of the issuance of any Options or Convertible Securities
pursuant to Section 2.02:
(a) the Options shall expire prior to exercise or the right to
convert or exchange any such Convertible Securities shall terminate; or
(b) the consideration per share for which shares of Common Stock
are issuable pursuant to the terms of such Options or Convertible Securities
shall be increased or decreased, other than under or by reason of provisions
designed to protect against dilution;
such previous adjustment shall be rescinded and annulled. Thereupon, a
recomputation shall be made of the effect of such Options or Convertible
Securities with respect to shares of Common Stock on the basis of
(A) treating the number of shares of Common Stock, if any,
theretofore actually issued or issuable pursuant to the previous
exercise, conversion or exchange of such Options or Convertible
Securities as having been issued on the date or dates of such
exercise, conversion or exchange and for the consideration actually
received and receivable therefore, and
(B) treating any such Options or Convertible Securities which
then remain outstanding as having been granted or issued immediately
after the time of such increase or decrease for the consideration per
share for which shares of Common Stock
<PAGE> 9
6
are issuable upon exercise, conversion or exchange of such Options or
Convertible Securities.
To the extent called for by the foregoing provisions of this Section 2.03 on the
basis aforesaid, a new adjustment in the number of shares of Warrant Stock
comprising a Stock Unit shall be made, determined using the Fair Market Value
used at the time of the original determination, which new adjustment shall
supersede the previous adjustment so rescinded and annulled.
2.04 Other Provisions Applicable to Adjustments. The following
provisions shall be applicable to the making of adjustments of the number of
shares of Warrant Stock comprising a Stock Unit:
(a) The sale or other disposition of any issued shares of Common
Stock owned or held by or for the account of the Issuer shall be deemed to be an
issuance thereof for purposes of this Section 2.
(b) In computing adjustments under this Section 2, fractional
interests in Common Stock shall be taken into account to the nearest
one-thousandth of a share.
(c) If the Issuer shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall, thereafter and before
the distribution thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then thereafter no
adjustment shall be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded and annulled.
2.05 Merger, Consolidation or Disposition of Assets. If the Issuer
shall merge or consolidate with another corporation, or shall sell, transfer or
otherwise dispose of all or substantially all of its assets to another
corporation and pursuant to the terms of such merger, consolidation or
disposition of assets, cash, shares of common stock or other securities of the
successor or acquiring corporation or property of any nature is to be received
by or distributed to the holders of Common Stock of the Issuer, then a Stock
Unit shall thereafter comprise the amount that would have been received by the
holder of such a Stock Unit in such merger, consolidation or disposition of
assets. In case of any such merger, consolidation or disposition of assets, the
successor or acquiring corporation (and any Affiliate thereof issuing
securities) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Agreement and the
Warrants to be performed and observed by the Issuer and all of the obligations
and liabilities hereunder and thereunder, subject to such modifications as may
be deemed appropriate (as determined by resolution of the Board) in order to
provide for adjustments of Stock Units which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section. The foregoing
provisions shall similarly apply to successive mergers, consolidations and
dispositions of assets.
2.06 No Adjustment Necessary. Anything to the contrary herein
notwithstanding, no adjustment to the number of shares of Warrant Stock
comprising a Stock
<PAGE> 10
7
Unit shall be made as a result of, or in connection with, the exercise,
conversion or exchange of any Option or Convertible Security.
2.07 Notice of Adjustments. Whenever the number of shares of
Warrant Stock comprising a Stock Unit shall be adjusted pursuant to this
Agreement, the Issuer shall forthwith, and in any event within 10 days, obtain a
certificate signed by the Issuer's chief financial officer or other officer at
the time performing the chief financial officer's functions, setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the number of shares of Warrant
Stock comprising a Stock Unit, after giving effect to such adjustment or change.
The Issuer shall promptly cause a signed copy of such certificate to be
delivered to each holder of Warrants. The Issuer shall keep at its office copies
of all such certificates and cause the same to be available for inspection at
said office during normal business hours by any holder of Warrants.
SECTION 3. Representations and Warranties. Each party represents and
warrants to the other as follows (it being understood by the parties hereto that
it is the explicit intent of each party that it is making no representation and
warranty whatsoever, express or implied, except those representations and
warranties contained in this Section 3):
3.01 Existence; Qualification. It is duly organized, validly
existing and in good standing under the laws of the State of Delaware. It is
duly qualified, licensed or admitted to do business and is in good standing as a
foreign corporation in every jurisdiction where the failure to be so qualified
would have a material adverse effect on its business, financial condition,
operations, assets, prospects, liabilities or capitalization taken as a whole
and has all requisite corporate power and authority to transact its business as
now conducted in all such jurisdictions.
3.02 No Breach. The execution, delivery and performance of this
Agreement and the Warrants by it and the consummation by it of the transactions
contemplated hereby and thereby will not (a) violate its certificate of
incorporation or by-laws or any other instrument or document of organization or
governance, (b) violate, or result in a breach of or default under, any other
material instrument or agreement to which it is a party or is bound, (c) violate
any judgment, order, injunction, decree or award against or binding upon it, (d)
result in the creation of any material Lien upon any of its properties or
assets, or (e) violate any law, rule or regulation relating to it.
3.03 Corporate Action. It has all necessary corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the Warrants; the execution, delivery and performance by it of this
Agreement and the Warrants have been duly authorized by all necessary action
(including all shareholder action); and this Agreement has been and (in the case
of the Issuer) the Warrants shall be duly executed and delivered by it and
constitute (or will constitute its) legal, valid and binding obligations,
enforceable against it in accordance with their respective terms.
3.04 Approvals. Except for any required filings and actions under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder, no authorizations, approvals or consents of,
and no filings or registrations with, any
<PAGE> 11
8
Governmental Authority or any other Person are necessary for the execution,
delivery or performance by it of this Agreement or the Warrants or for the
validity or enforceability thereof, except where the failure to obtain any such
approval, authorization or consent or to make any such filing or registration
could not reasonably be expected to adversely affect its ability to consummate
the transactions contemplated by this Agreement.
3.05 Capitalization. Issuer represents that Schedule 3 hereto
correctly sets forth the class and number of equity interests of the Issuer on
the date hereof. Except as specified therein, the Issuer does not have
outstanding any Convertible Securities or Options, nor does it have outstanding
any agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, Options or
Convertible Securities. The Warrant Stock initially covered by the Warrants has
been duly and validly authorized and shall, when paid for, issued and delivered
in accordance with the Warrants, be duly and validly issued, fully paid and
nonassessable and free and clear of any Liens; and none of the Warrant Stock
issued pursuant to the terms hereof will be in violation of any preemptive
rights of any Shareholder.
3.06 Private Offering. Issuer represents that assuming the truth
and accuracy of the Investor's representations and warranties contained in
Section 1.03, the issuance and sale of the Warrants to the Investor hereunder
are exempt from the registration and prospectus delivery requirements of the
Securities Act.
3.07 Litigation. There is no action, suit, proceeding or
investigation pending or, to the best of its knowledge after due inquiry,
threatened against it before any Governmental Authority seeking to enjoin the
transactions contemplated by this Agreement or the Warrants.
3.08 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by it directly without
the intervention of any Person on its behalf in such manner as to give rise to
any valid claim by any Person against the other party for a finder's fee,
brokerage commission or similar payment.
SECTION 4. Covenants.
4.01 Transfers Generally; Standstill. (a) The Investor agrees and
acknowledges that it will not, directly or indirectly, offer, sell, assign,
pledge, encumber or otherwise transfer any interest in any Warrants or Warrant
Stock, except (i) to any Person that would be a Subsidiary of Knight/Trimark
Group, Inc., substituting "80%" for "50%" in the definition of Subsidiary, or a
Person that owns all the Investor's stock and the stock of which has been
designated as a National Market Security in Nasdaq or is listed for trading on
The New York Stock Exchange or the American Stock Exchange, provided in either
case that such Person has agreed to be bound by all the provisions of this
Agreement, and (ii) in a registered public offering pursuant to the rights
granted in Section 4.08, provided, that to the Investor's knowledge after due
inquiry, no purchaser in such offering will following such purchase beneficially
own with its Affiliates, directly or indirectly, more than 1% of the Common
Stock. Any transfer in violation of this paragraph will be void.
<PAGE> 12
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(b) Other than with respect to the Warrants and Warrant Stock,
the Investor will not, and will not permit any of its Affiliates to, directly or
indirectly (i) acquire or agree, offer, seek or propose (whether publicly or
otherwise) to acquire ownership (including but not limited to beneficial
ownership as defined in Rule 13d-3 under the Exchange Act) of (x) the Issuer or
any of its Subsidiaries or any of their respective assets or businesses, (y) any
securities issued by the Issuer or any of its Subsidiaries or (z) any rights or
options to acquire such ownership, in each case including from a Person other
than the Issuer, whether by means of a negotiated purchase or securities or
assets, tender or exchange offer, merger or other business combination,
recapitalization, restructuring or other extraordinary transaction, (ii) engage
in any "solicitation" of "proxies" (as such terms are used in the proxy rules
(whether or not the Issuer is subject to such rules) promulgated under the
Exchange Act, but disregarding clause (iv) of Rule 14a-1(1)(2) but including any
exempt solicitation pursuant to Rule 14a-2(b)(1) or (2), or form, join or in any
way participate in a "group" (as defined under the Exchange Act), with respect
to any securities issued by the Issuer or any of its Subsidiaries, (iii)
otherwise seek or propose to influence or control the Board, management or
policies of the Issuer (other than as described in Section 4.03), (iv) take any
action that could reasonably be expected to require the Issuer to make a public
announcement regarding any of the types of matters referred to in clause (i),
(ii) or (iii) above, or (v) enter into any discussions, negotiations,
agreements, arrangements or understandings with, or assist or encourage, any
third party with respect to any of the foregoing.
(c) Each party agrees that, from the date hereof until one year
following the termination of this Agreement, neither it nor any of its
Affiliates will solicit to employ or employ any Person who within the preceding
six months was an officer or employee of the other or any of its Subsidiaries
unless the employment of such officer or employee was terminated by the other or
such Subsidiary or such officer or employee resigns voluntarily without
solicitation.
4.02 OTS Pricing. The Issuer shall set the OTS execution fees on
Investor Executions monthly at the lowest price then available to any OTS user
designated as an NASD Member (as such term is defined in public pricing
information of OTS).
4.03 Right of the Investor to Designate Director. (a) The Issuer
shall use its best efforts as soon as practicable after the date of this
Agreement to appoint to the Board one Person designated by the Investor (the
"Investor Director"); provided, that such Investor Director shall be designated
from among a panel of three persons that shall include Messrs. Kenneth D.
Pasternak, John G. Hewitt and Walter F. Raquet while they are directors or
employees of the Investor or any of its Affiliates, and may include other
individuals chosen by the Investor from among its directors or senior executives
with the consent of the Issuer (which it may not unreasonably withhold) (the
"Investor Representatives"). The Investor Director shall participate directly in
all Board activities, rather than by means of an alternate. The Investor
Director position may be rotated among the Investor Representatives after the
then current Investor Director has served a minimum term of one year. No Person
shall be or remain eligible to serve as the Investor Director unless such Person
is and remains a senior executive or director of the Issuer or one of its
Affiliates. Should any Person appointed to the Board as an Investor Director
cease to serve in such capacity for any reason, including by means of voluntary
resignation, other than as a result of death, ceasing to be employed by or a
director of the Investor or any of its
<PAGE> 13
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Affiliates or incapacity, the Investor shall have no right to designate a
successor to such Investor Director until the end of such Investor Director's
one-year term.
(b) The right of the Investor to designate an Investor Director
shall terminate at any time after the date 30 months from the Effective Date if
the number of shares of Common Stock beneficially owned by the Investor,
including any shares of Common Stock obtainable by the Investor upon exercise of
the Warrants, does not exceed 2.5% of the total outstanding voting stock of the
Issuer, assuming exercise of all Options and Convertible Securities (other than
Existing Warrants).
4.04 Change in Control of the Investor. In the event of a Change
in Control of the Investor (as defined below), this Agreement shall terminate,
all Warrants shall be void and the Issuer shall have the rights described in
Section 4.05 below; provided, however, that Sections 4.01, 4.07, 6.01 and 6.16
shall survive such termination. "Change in Control of the Investor" shall mean
(i) the acquisition by a single Person or "group" (as defined under the Exchange
Act) of more than 50% of the equity of the Investor or (ii) a merger,
consolidation, combination or sale of all or substantially all of the assets of
the Investor, unless immediately following such transaction a majority of the
successor entity's voting power is owned by Persons who immediately before such
transaction were stockholders of the Investor.
4.05 Call Rights. (a) In the event of a Change in Control of the
Investor, the Issuer shall have the right to purchase (the "Call Right") any or
all of the securities issued by the Issuer or its Subsidiaries and held by the
Investor or its Affiliates. The Investor shall immediately notify the Issuer of
the occurrence of such a Change in Control of the Investor. The Issuer may
assign the Call Right in whole or in part to a third party.
(b) The Issuer may exercise a Call Right by delivering an
irrevocable notice to the Investor indicating that the Issuer wishes to purchase
the Warrant Stock specified in such notice (a "Call Notice"). The Call Notice
must be given within 90 days following the giving of the notice referred to in
paragraph (a) of this Section.
(c) The purchase and sale of the Warrant Stock pursuant to a Call
Right shall be consummated on a date selected by the Issuer on at least 10 days'
prior written notice thereof, which such date shall be not more than 90 days
following the Investor's receipt of the Call Notice. The Issuer shall purchase
from the Investor or such Affiliates, and the Investor and such Affiliates shall
sell to the Issuer, the securities being purchased free and clear of all Liens,
at a price equal to the Fair Market Value of the securities being purchased.
Payment of the purchase price for the Warrant Stock so purchased by the Issuer
shall be made by wire transfer in immediately available funds or by surrender to
the Investor of shares of Investor common stock used to pay the exercise price
of the Warrants valued at their Fair Market Value on the date of surrender
against delivery of the securities appropriately endorsed and accompanied by
signature guarantees.
4.06 Access to Information. (a) By its acceptance hereof, the
Investor acknowledges the opportunity to have reviewed the financial statements
of the Issuer and
<PAGE> 14
11
otherwise to have obtained such information concerning the business and
financial status and prospects of the Issuer as the Investor desired.
(b) Prior to any exercise or contemplated exercise of the
Warrants, the Investor shall be entitled to review current financial statements
of the Issuer, to inquire of management as to the Issuer's business and
financial status and prospects, and to review other non-confidential information
that may be available to the Issuer without undue effort or expense.
4.07 Restrictive Legends. The certificates for the Warrants and
each certificate for any Warrant Stock issued upon exercise of any Warrant shall
be stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS SPECIFIED IN THAT CERTAIN WARRANT AGREEMENT DATED AS OF OCTOBER 27, 1999
(THE "WARRANT AGREEMENT"), BETWEEN OPTIMARK TECHNOLOGIES INC., A DELAWARE
CORPORATION (THE "ISSUER"), AND KNIGHT/TRIMARK GROUP, INC., A DELAWARE
CORPORATION (THE "INVESTOR"), AS THE WARRANT AGREEMENT MAY BE MODIFIED AND
SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND NO ACTIONS WITH REGARD TO THE
SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL
SUCH TERMS HAVE BEEN FULFILLED. A COPY OF THE FORM OF THE WARRANT AGREEMENT IS
ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER.
THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE
BOUND BY THE PROVISIONS OF THE WARRANT AGREEMENT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES MAY NOT BE TRANSFERRED, SOLD
OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM."
4.08 Registration Rights. The Investor and the Issuer shall have
the rights and shall be subject to the duties specified in Annex 2 and Annex 3.
4.09 Cooperation. The Investor and the Issuer shall proceed
diligently and in good faith to ensure that the Investor will have in place all
documentation, systems and user interfaces needed to enter profiles in the OTS,
as soon as reasonably practicable after the date hereof.
<PAGE> 15
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SECTION 5. Definitions.
5.01 Definitions. As used herein, the following terms shall have
the following meanings (all terms defined in this Section 5 or in other
provisions of this Agreement in the singular are to have the same meanings when
used in the plural and vice versa):
"Adjusted Base Amount" shall have the meaning assigned to such term in
Schedule 1.
"Affiliate" shall mean, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Board" shall mean the Board of Directors of the Issuer.
"Business Day" shall mean any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to remain closed.
"Call Notice" shall have the meaning assigned to such term in Section
4.05.
"Call Right" shall mean the right of the Issuer to purchase Warrant
Stock pursuant to, and in accordance with, Section 4.05.
"Closing Date" shall mean the date five Business Days after the day
that is 30 months after the Effective Date, or the date that is one Business Day
after the determination of the accounting firm relating to the Final Computation
under Section 1.02(d).
"Commission" shall mean the Securities and Exchange Commission or any
other similar or successor agency of the Federal government administering the
Securities Act and/or the Exchange Act.
"Common Stock" shall mean the Common Stock of the Issuer, par value
$0.01 per share, or any other common stock or other securities receivable
thereon, or into which the Common Stock is convertible or exchangeable, as a
result of any recapitalization, reclassification, merger or consolidation of, or
disposition of assets by, the Issuer.
"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" shall have meanings correlative
thereto.
"Convertible Securities" shall mean evidences of indebtedness,
interests or other securities or rights which are exchangeable for or
exercisable or convertible into shares of Common Stock either immediately or
upon the arrival of a specified date or the occurrence of a specified event.
"Effective Date" shall mean the later of (i) the date on which the
Nasdaq 100 is available for trading in the OTS or (ii) the day when Knight
Securities, L.P. and Trimark
<PAGE> 16
13
Securities, Inc. have in place all documentation, systems and user interfaces
needed to enter profiles in the OTS, as notified by the Investor to the Issuer,
but in any event no later than December 31, 1999.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Exercise Price" shall be determined pursuant to Schedule 2 hereto and
shall have the meaning assigned to such term in the form of Warrant attached as
Annex 1 hereto.
"Existing Warrants" shall mean (i) the warrant in favor of The Pacific
Exchange, Incorporated dated August 27, 1996; (ii) the warrant in favor of The
Chicago Board Options Exchange, Incorporated dated December 31, 1996; (iii) the
warrant in favor of Virginia Surety Company, Inc. dated April 23, 1998; (iv) the
warrant in favor of Transamerica Business Credit Corporation dated June 19,
1998; (v) the warrant in favor of Francis X. Egan dated August 24, 1998; (vi)
the warrants in favor of The Nasdaq Stock Market, Inc. issued pursuant to the
Warrant Agreement dated September 1, 1998; (vii) the warrant in favor of Ramsey
Beirne, L.L.C. dated November 2, 1998 and (viii) the warrant in favor of BIOS
Group, L.P. dated January 27, 1999.
"Expiration Date" shall have the meaning assigned to such term in form
of the Warrant attached as Annex 1 hereto.
"Fair Market Value" on any day shall mean, for the Common Stock, the
market price for the last trading day before such date. The "market price" for
each such trading day shall be the last sale price on such day as reported in
the Consolidated Last Sale Reporting System or as quoted in the National
Association of Securities Dealers Automated Quotation System, or if such last
sale price is not available, the average of the closing bid and asked prices as
reported in either such system, or in any other case the higher bid price quoted
for such day as reported by The Wall Street Journal and the National Quotation
Bureau pink sheets. The Fair Market Value of (i) the Common Stock if there is
not a market price for such day and (ii) any other security or property shall be
as determined in good faith by the Board.
"Governmental Authority" shall mean the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory, monetary or administrative powers or functions of
or pertaining to government.
"Holder" shall mean any Person who acquires Warrants or Warrant Stock
pursuant to the provisions of this Agreement.
"include" and "including" shall be construed as if followed by the
phrase "without being limited to".
"Investor" shall have the meaning assigned to such term in the
preamble of this Agreement.
<PAGE> 17
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"Investor Executions" shall mean the OTI Executions resulting from
profiles entered by the Investor.
"Investor Director" shall have the meaning assigned to it in Section
4.03.
"Investor Representatives" shall have the meaning assigned to it in
Section 4.03.
"Issuer" shall have the meaning assigned to such term in the preamble
of this Agreement.
"Lien" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset.
"Option" shall mean any warrant, option or other right to subscribe
for or purchase shares of Common Stock or Convertible Securities.
"OTI Executions" shall mean executions on or after the Effective Date,
measured by the number of shares involved, resulting from buy and sell profiles
which are entered into, matched through and reported out of the OTS using OTS
Facilities.
"OTS" shall mean Optimark Trading System.
"OTS Facility" means The Pacific Exchange Application, the Nasdaq
Stock Exchange Application and any other U.S. exchange facility using the OTS
for listed securities and OTC equity trading.
"Person" shall mean any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Shareholder" shall mean any Person who directly or indirectly owns
any shares of Common Stock (including Warrant Stock).
"Stock Unit" shall mean one share of Common Stock, as such Common
Stock is constituted on the date hereof, and thereafter shall mean such number
of shares (including any fractional shares) of Common Stock and other
securities, cash or other property as shall result from the adjustments
specified in Section 2.
"Subsidiary" of a Person means (a) any corporation more than 50% of
the outstanding securities having ordinary voting power of which shall at the
time be owned or controlled, directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its Subsidiaries,
or (b) any company, partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
<PAGE> 18
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expressly provided, all references herein to a "Subsidiary" shall mean a direct
or indirect Subsidiary of the Issuer.
"Warrant" and "Warrants" shall mean a Warrant originally issued by the
Issuer pursuant to this Agreement, and all Warrants issued upon transfer,
division or combination of, or in substitution for, any thereof.
"Warrant Stock" shall mean all shares of Common Stock issuable upon
exercise of a Warrant.
SECTION 6. Miscellaneous.
6.01 Public Announcements. Neither the Issuer nor the Investor
will issue or make any reports, statements or releases to the public with
respect to this Agreement or the transactions contemplated hereby without (i)
furnishing to the other a draft thereof as much in advance as possible and (ii)
obtaining the consent of the other, which consent shall not be unreasonably
withheld. If either party is unable to obtain the approval of its public report,
statement or release from the other party and such report, statement or release
is, in the opinion of legal counsel to such party, required by law in order to
discharge such party's disclosure obligations, then such party may make or issue
the legally required report, statement or release and promptly furnish the other
party with a copy thereof. The Issuer and the Investor will also obtain the
other's prior approval of any press release to be issued immediately following
the date hereof announcing the transactions contemplated by this Agreement.
6.02 Waiver. No failure on the part of any party hereto to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement or the Warrants shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege under this Agreement or the Warrants preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
6.03 Notices. (a) All notices, requests and other communications
provided for herein and the Warrants (including any waivers or consents under
this Agreement and the Warrants) shall be given or made in writing,
(i) if to the Issuer:
Optimark Technologies, Inc.
10 Exchange Place Center
Jersey City, NJ 07302
Attention: Paul I. Kasnetz
Vice President-Finance and Administration
Telephone No.: 201/536-7049
Fax No.: 201/946-9435
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with a copy to:
James G. Rickards
Senior Vice President and General Counsel
Telephone No.: 201/536-7112
Fax No.: 201/499-1228
(ii) if to the Investor:
Knight/Trimark Group, Inc.
525 Washington Boulevard
Newport Tower, 29th floor
Jersey City, NJ 07310
Attention: Robert I. Turner
Telephone No.: 201/557-6845
Fax No.: 201/557-6853
with a copy to:
Michael T. Dorsey
Senior Vice President and General Counsel
Telephone No.: 201/557-6910
Fax No.: 201/557-6922
All such notices, requests and other communications shall be: (i)
personally delivered, sent by courier guaranteeing overnight delivery or sent by
registered or certified mail, return receipt requested, postage prepaid, in each
case given or addressed as aforesaid; and (ii) effective upon receipt.
6.04 Expenses. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated hereby are consummated,
each party will pay its own costs and expenses incurred in connection with the
negotiation, execution, closing and performance of this Agreement and the
transactions contemplated hereby.
6.05 Amendments. Except as otherwise expressly provided in this
Agreement, any provision of this Agreement may be amended or modified only by an
instrument in writing signed by the Issuer and the Investor.
6.06 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other party hereto and any attempt to
do so will be void, except for assignments and transfers by operation of law and
except that the Investor may assign its rights hereunder to a Subsidiary or
parent to which it has transferred Warrants or Warrant Shares in accordance with
Section 4.01(a). Subject to the preceding sentence, this Agreement is binding
upon, inures to the benefit of and is enforceable by the parties hereto and
their respective successors and assigns.
<PAGE> 20
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6.07 Survival. All representations and warranties made by either
party herein shall be considered to have been relied upon by the other party and
shall survive the issuance of the Warrants or the Warrant Stock and the issuance
of any Investor common stock in relation thereto, regardless of any
investigation made by or on behalf of the other.
6.08 Specific Performance. Damages in the event of breach of this
Agreement by the Investor or the Issuer would be difficult, if not impossible,
to ascertain, and it is therefore agreed that the Investor and the Issuer, in
addition to and without limiting any other remedy or right it may have, will
have the right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any such breach, and enforcing specifically
the terms and provisions hereof, and the Investor and the Issuer hereby waive
any and all defenses they may have on the ground of lack of jurisdiction or
competence of the court to grant such an injunction or other equitable relief.
The existence of this right will not preclude the Investor or the Issuer from
pursuing any other rights and remedies at law or in equity which it may have.
6.09 Captions. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
6.10 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart signature page or counterpart.
6.11 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New Jersey without giving
effect to the conflicts of law principles thereof, except to the extent that New
Jersey conflicts of laws principles would apply the Delaware General Corporation
Law to matters relating to corporations organized thereunder.
6.12 Severability. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
6.13 Entire Agreement. This Agreement (including the Schedules and
Annexes hereto) supersedes all prior discussions and agreements between the
parties with respect to the subject matter hereof, and together with the
Warrants contains the sole and entire agreement between the parties hereto with
respect to the subject matter hereof.
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6.14 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person.
6.15 Termination. This Agreement shall terminate on the date that
is 30 months following the Effective Date unless Warrants have vested.
Thereafter, there shall be no obligations or liabilities on the part of the
parties hereunder, except that Sections 6.04 and 6.16 will continue to apply
following such termination.
6.16 Confidentiality. Each party hereto will hold, and will use
its best efforts to cause its Affiliates, to hold, in strict confidence from any
Person (other than any such Affiliate), unless (i) compelled to disclose by
judicial or administrative process (including without limitation in connection
with obtaining the necessary approvals of this Agreement and the transactions
contemplated hereby of Governmental Authorities) or by other requirements of law
or (ii) disclosed in an action or proceeding brought by a party hereto in
pursuit of its rights or in the exercise of its remedies hereunder, all
documents and information concerning the other party or any of its Affiliates
furnished to it by the other party or such Affiliate in connection with this
Agreement or the transactions contemplated hereby, and shall use such documents
and information solely for purposes relating to the transactions contemplated by
this Agreement, except to the extent that such documents or information can be
shown to have been (a) previously known by the party receiving such documents or
information, (b) in the public domain (either prior to or after the furnishing
of such documents or information hereunder) through no fault of such receiving
party or (c) later acquired by the receiving party from another source if the
receiving party is not aware that such source is under an obligation to another
party hereto to keep such documents and information confidential. In the event
this Agreement terminates, upon the request of the other party, each party
hereto will, and will cause its Affiliates to, promptly (and in no event later
than five Business Days after such request) redeliver or cause to be redelivered
all copies of confidential documents and information furnished by the other
party in connection with this Agreement or the transactions contemplated hereby
and destroy or cause to be destroyed all notes, memoranda, summaries, analyses,
compilations and other writings related thereto or based thereon prepared by the
party furnished such documents and information.
6.17 Dispute Resolution. The parties hereto agree that any dispute
arising out of, or in connection with, the execution, interpretation,
performance or non-performance of this Agreement (including the validity, scope
and enforceability of this arbitration provision) (a "Dispute") shall be settled
by arbitration, which shall be conducted in New York, New York pursuant to the
then prevailing rules of the American Arbitration Association ("AAA") by a panel
of three arbitrators of the AAA (the "Board of Arbitration") acceptable to each
party. Each of the Issuer, on the one hand, and the Investor, on the other hand,
shall select one member and the third member shall be selected by mutual
agreement of the other members. If the other members fail to reach agreement on
a third member within 30 days after their selection, the parties shall jointly
request the AAA to designate, in accordance with AAA rules, a third member. The
parties agree to facilitate the arbitration by (a) making available to one
another and to the Board of Arbitration for inspection and extraction all
documents, books, records, and
<PAGE> 22
19
personnel under their control or under the control of a person controlling or
controlled by such party if determined by the Board of Arbitration for
inspection and extraction all documents, books, records, and personnel under
their control or under the control of a person controlling or controlled by such
party if determined by the Board of Arbitration to be relevant to the dispute,
(b) conducting arbitration hearings to the greatest extent possible on
successive business days and (c) using their best efforts to observe the time
periods established by the rules of the AAA or by the Board of Arbitration for
the submission of evidence and briefs. The decision of the Board of Arbitration
shall be final, binding and not subject to further review, and judgment on the
award of the Board of Arbitration may be entered in and enforced by any court
having jurisdiction over the parties or their assets. Any costs incurred in
conducting the arbitration shall be borne by the non-prevailing (as determined
by the Board of Arbitration) party. Notwithstanding the provisions of this
Section 6.17, with respect to any Dispute that would come within the subject
matter jurisdiction of the Delaware Chancery Court, any party shall be entitled
to equitable relief in that court without regard to this Section 6.17, both
parties submitting to the exclusive jurisdiction thereof.
<PAGE> 23
20
IN WITNESS WHEREOF, the parties hereto have duly executed this Warrant
Agreement as of the date first above written.
OPTIMARK TECHNOLOGIES, INC.
By: /s/ Phillip J. Riese
Chief Executive Officer
KNIGHT/TRIMARK GROUP, INC.
By: /s/ Robert Turner
Executive Vice President, CFO
& Treasurer
<PAGE> 24
21
Schedule 1
<TABLE>
<CAPTION>
<S> <C>
Number of Stock Units covered by each Tranche shall (Adjusted Base/1-% to be owned) -Adjusted Base -
be determined as follows: Stock Units covered by previously vested Warrants
where "% to be owned" is the sum of the following Tranche A Warrant and Tranche C2 Warrant = .05
amounts for each Warrant that vests or has Tranche B Warrant, Tranche C1 Warrant and Tranche
previously vested: C3 Warrant = .10
where Adjusted Base Amount for each Warrant = 77,943,145 + the number of shares issued on
exercise of Existing Warrants between the date of
this Agreement and the date 30 months after the
Effective Date (disregarding any antidilution
adjustments).
</TABLE>
Reductions in Tranche C1 Warrant in accordance with Section 1.02(c) of the
Agreement:
<TABLE>
<CAPTION>
Tranche C1 Warrant will cover
Investor Executions in excess of this percent of Stock Units
Tranche B Reference Amount as determined above
------------------------- -------------------
<S> <C>
13 billion or more but less than 14 billion 20%
14 billion or more but less than 14.5 billion 40%
14.5 billion or more but less than 15 billion 80%
</TABLE>
<PAGE> 25
22
Schedule 2
Exercise Price
Time Period Within Which Warrant Vests
<TABLE>
<CAPTION>
Investor Executions as a
percent of OTI Executions
during the applicable vesting
time period, measured at time of
vesting 1-12 Months 13-18 Months 19-30 Months
- ---------------------------------- --------------------------- --------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
Tranche A $9
Tranche B $7 Tranche B $8
50% or more Tranche C $6 Tranche C $7 Tranche C $9
- ---------------------------------- --------------------------- --------------------------- ----------------------------
Tranche A $7
Tranche B $5 Tranche B $6
25% or more (but less than 50%) Tranche C $4 Tranche C $5 Tranche C $7
- ---------------------------------- --------------------------- --------------------------- ----------------------------
Tranche A $5
Tranche B $3 Tranche B $4
10% or more (but less than 25%) Tranche C $3 Tranche C $4 Tranche C $5
- ---------------------------------- --------------------------- --------------------------- ----------------------------
Tranche A $2
Tranche B $2 Tranche B $3
5% or more (but less than 10%) Tranche C $2 Tranche C $2 Tranche C $3
- ---------------------------------- --------------------------- --------------------------- ----------------------------
</TABLE>
References to Tranche C include Tranche C1 Warrants, Tranche C2 Warrants and
Tranche C3 Warrants.
Notwithstanding the foregoing table, the exercise price of all Warrants
that vest within an applicable time period specified above shall be the lowest
exercise price of any Warrant that vested in that period.
<PAGE> 26
23
Schedule 3
Issuer Capitalization
<TABLE>
<CAPTION>
Common Stock
- ------------
<S> <C>
Voting Common 35,713,057
Non-Voting Common 740,000
----------
Total Outstanding Common 36,453,057
Preferred Stock (as if converted)
Series A Preferred* 12,888,272
Series B Preferred 11,000,000
Series C Preferred 8,250,000
Series D Preferred 250,000
----------
Total Preferred Stock 32,388,272
Total Outstanding Shares 68,841,329
----------
Warrants (1) 15,169,328
Options/Other Warrants (2) 9,101,816
----------
Total Fully Diluted Shares 93,112,473
==========
</TABLE>
* excludes 1,000,000 shares held in treasury
(1) includes Nasdaq, Virginia Surety, CBOE, Egan, Pacific Exchange, Bios and
Transamerica.
(2) includes granted and to be granted to employees.
<PAGE> 27
Annex 1
to
Warrant Agreement
[Form of Warrant]
WARRANT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS SPECIFIED IN THAT CERTAIN WARRANT AGREEMENT DATED AS OF OCTOBER 27, 1999
(THE "WARRANT AGREEMENT"), BETWEEN OPTIMARK TECHNOLOGIES, INC., A DELAWARE
CORPORATION (THE "ISSUER") AND KNIGHT/TRIMARK GROUP, INC., A DELAWARE
CORPORATION (THE "INVESTOR"), AS THE WARRANT AGREEMENT MAY BE MODIFIED AND
SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND NO ACTIONS WITH REGARD TO THE
SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL
SUCH TERMS HAVE BEEN FULFILLED. A COPY OF THE FORM OF THE WARRANT AGREEMENT IS
ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER.
THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE
BOUND BY THE PROVISIONS OF THE WARRANT AGREEMENT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES MAY NOT BE TRANSFERRED, SOLD
OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM.
No. of Stock Units Covered Hereby: __ Warrant No. ________
<PAGE> 28
WARRANT
to Purchase Common Stock of
OPTIMARK TECHNOLOGIES, INC.
THIS IS TO CERTIFY THAT Knight/Trimark Group, Inc. (the "Holder"), is
entitled to purchase in whole or in part from Optimark Technologies, Inc., a
Delaware corporation (the "Issuer"), on ________ __, 2002 [third anniversary of
Effective Date] (the "Expiration Date"), ____ Stock Units (as hereinafter
defined and subject to adjustment as provided herein) at a purchase price of
$____ per Stock Unit (the "Exercise Price"), subject to the terms and conditions
hereinbelow provided. "Stock Unit" shall mean one share of Common Stock, as such
Common Stock is constituted on the date hereof, and thereafter shall mean such
number of shares (including any fractional shares) of Common Stock and other
securities, cash or other property as shall result from the adjustments
specified in Section 2 of the Warrant Agreement. "Common Stock" shall mean the
voting Common Stock of the Issuer, par value $.01 per share, or any other common
stock or other securities receivable thereon, or into which the Common Stock is
convertible or exchangeable, as a result of any recapitalization,
reclassification, merger or consolidation of, or deposition of assets by, the
Issuer.
This Warrant was issued under a Warrant Agreement dated as of October
27, 1999 between the Issuer and the Investor and is subject to the terms
thereof. All capitalized terms unless otherwise defined herein shall have the
meanings set forth in the Warrant Agreement.
On the Expiration Date, until 5:00 p.m., New York time, the Holder may
exercise this Warrant, in whole or in part, by delivering to the Issuer,
(a) a written notice of the Holder's election to exercise this
Warrant, which notice shall specify the number of Stock Units to be purchased
(the "Exercise Notice");
(b) payment of the aggregate Exercise Price for the number of Stock
Units as to which this Warrant is being exercised (payable as set forth below);
and
(c) this Warrant.
The Exercise Price shall be payable by any combination of the
following: (a) cash or by certified or official bank check payable to the order
of the Issuer or by wire transfer of immediately available funds to the account
of the Issuer, (b) delivery of this Warrant Certificate to the Issuer for
cancellation in accordance with the following formula: in exchange for each
Stock Unit issuable on exercise of this Warrant that is being purchased, the
holder shall receive such number of Stock Units as is equal to the product of
(i) the number of Stock Units issuable upon exercise of the Warrant being
purchased at such time multiplied by (ii) a fraction, the numerator or which is
the Fair Market Value per Stock Unit at such time minus the Exercise Price per
Stock Unit at such time, and the denominator of which is the Fair Market Value
per
<PAGE> 29
2
Stock Unit at such time and (c) subject to satisfaction of all applicable
regulatory requirements, an amount of duly authorized, validly issued, fully
paid, non-assessable shares of Investor voting common stock, free and clear of
all Liens, the issuance of which to the Issuer has been registered under the
Securities Act and (to the extent necessary) applicable state securities laws,
equal to the quotient of (i) the product of (x) the Exercise Price and (y) the
number of Stock Units to be purchased divided by (ii) the average closing price
per share of Investor common stock for the 30-trading-day period ending the day
prior to the issuance of such Investor common stock. If at any time or from time
to time during this 30-day period the Investor shall take any action affecting
its common stock, including, but not limited to, by reason of any
reorganization, recapitalization, reclassification, merger, consolidation,
spin-off, partial or complete liquidation, share dividend, split-up or
distribution to shareholders or any other change in the Investor's share
capital, the number of Investor common shares resulting from application of this
formula shall be equitably adjusted to reflect such event. Notwithstanding the
foregoing, if the Common Stock is listed on The New York Stock Exchange or the
American Stock Exchange, or is designated as a national market security in
Nasdaq at the time of such exercise, the Exercise Price may be payable in shares
of Investor voting common stock which have not been registered, and the Issuer
shall have registration rights as provided in Annex 3 to the Warrant Agreement.
The Exercise Price may not be paid in shares of the Investor's stock if the
Issuer is or would as a result thereof become either (A) an Affiliate of the
Investor or (B) together with its Affiliates, the owner of more than 5% of the
Investor's voting common stock.
The Exercise Notice shall be substantially in the form of Annex A
hereto. Upon receipt thereof and satisfaction of the other conditions to
exercise specified above, the Issuer shall, as promptly as practicable and in
any event within five Business Days thereafter, execute or cause to be executed
and deliver or cause to be delivered to the Holder a certificate or certificates
representing the aggregate number of shares of Warrant Stock and other
securities issuable upon such exercise and any other property to which such
Holder is entitled.
The certificate or certificates for Warrant Stock so delivered shall
be in such denominations as may be specified in the Exercise Notice and shall be
registered in the name of the Holder. Such certificate or certificates shall be
deemed to have been issued and the Holder shall be deemed to have become a
holder of record of Warrant Stock, including, to the extent permitted by law,
the right to vote Warrant Stock or to consent or to receive notice as a
Shareholder, as of the date on which the last of the Exercise Notice, payment of
the Exercise Price and this Warrant is received by the Issuer as aforesaid, and
all taxes required to be paid by the Holder, if any, prior to the issuance of
Stock Units have been paid.
The Issuer shall not be required to issue a fractional share of
Warrant Stock upon exercise of this Warrant. As to any fraction of a share of
Warrant Stock which the Holder would otherwise be entitled to purchase upon such
exercise, the Issuer shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Fair Market Value per
share of Common Stock on the date of exercise.
Upon a Change in Control of the Investor, this Warrant shall expire.
THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW JERSEY.
<PAGE> 30
3
IN WITNESS WHEREOF, the Issuer has duly executed this Warrant.
Dated: 2002
---------- --,
OPTIMARK TECHNOLOGIES, INC.
By ______________________________
Name:
Title:
Attest:
- -------------------------------
Secretary
<PAGE> 31
7
Annex A
to
Warrant
FORM OF EXERCISE
(To be executed by the registered holder hereof)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of [ ] Stock Units of OPTIMARK TECHNOLOGIES, INC.,
a Delaware corporation, and herewith makes payment therefor, all at the price
and on the terms and conditions specified in this Warrant, and requests that
certificates for the shares of Common Stock be issued in accordance with the
instructions given below.
Dated:
------------------
--------------------------------
(Signature of Registered Holder)
Instructions for issuance and
registration of Common Stock:
--------------------------------
Name of Registered Holder
(please print)
Social Security or Other Identifying
Number:
-------------------------
Please deliver certificate to
the following address:
------------------------------------
Street
-------------------------------------
City, State and Zip Code
<PAGE> 1
Exhibit 21.1
Subsidiaries
1. OptiMark Services, Inc., a Colorado corporation
2. OptiMark OTC Services, Inc., a Delaware corporation
3. OptiMark Trading Systems Canada Inc., a Canadian corporation
4. Japan OptiMark Systems, Inc., a Japanese corporation
5. Hudson Investment Holdings, LLC, a Delaware limited liability company
6. Hudson Investments, LLC, a Delaware limited liability company
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OPTIMARK
TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AT
DECEMBER 31, 1999 AND 1998 AND FOR THE YEARS ENDED DECEMBER 31, 1999, 1998,
1997, AND INDEPENDENT AUDITORS' REPORT
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<PERIOD-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<CASH> 62,637,410 63,839,270 0
<SECURITIES> 0 0 0
<RECEIVABLES> 151,302 0 0
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 68,450,854 65,853,819 0
<PP&E> 27,871,913 10,457,131 0
<DEPRECIATION> 7,904,549 1,833,700 0
<TOTAL-ASSETS> 129,680,107 75,458,361 0
<CURRENT-LIABILITIES> 18,216,760 12,765,254 0
<BONDS> 0 0 0
0 0 0
229,721 145,471 0
<COMMON> 364,961 315,589 0
<OTHER-SE> 105,930,078 58,857,767 0
<TOTAL-LIABILITY-AND-EQUITY> 129,680,107 75,458,361 0
<SALES> 0 0 0
<TOTAL-REVENUES> 3,012,244 0 0
<CGS> 0 0 0
<TOTAL-COSTS> 40,457,202 24,667,218 4,171,720
<OTHER-EXPENSES> 100,500,549 34,452,166 16,834,192
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,079,554 321,798 0
<INCOME-PRETAX> (135,078,509) (57,207,095) (20,443,546)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (135,078,509) (57,207,095) (20,443,546)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (135,078,509) (57,207,095) (20,443,546)
<EPS-BASIC> (2.12) (1.13) (0.54)
<EPS-DILUTED> (2.12) (1.13) (0.54)
</TABLE>
