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EXHIBIT 10.19
CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
AGREEMENT
(Table of Contents is attached)
This AGREEMENT (the "Agreement") is entered into and
effective as of the "Effective Date" (as defined in Section 17.1) by and
between IBM Canada Limited ("IBM Canada"), a corporation having an address at
3600 Steeles Avenue East, Markham, Ontario LJR 927 Canada, and ISM Information
Systems Management Corporation ("ISM"), a Saskatchewan corporation having an
address at 245 Consumers Road, North York, Ontario M2J IR3 Canada (IBM Canada
and ISM, collectively "IBM") on the one hand, and OptiMark Technologies Inc., a
Delaware corporation having an address at 10 Exchange Place, 12th Floor, Jersey
City, New Jersey 07302 USA ("OptiMark") on the other hand.
WITNESSETH
WHEREAS, OptiMark and IBM have discussed OptiMark's licensing
of certain ISM software known as the "ITS Application Product," and the further
development of modifications to the ITS Application Product and additional
software for use in an implementation of OptiMark's proprietary trading system;
the discussions concerning such licensing and development have been
memorialized in various Documents of Understanding, the most recent of which is
Document of Understanding #3 dated August 25, 1998.
WHEREAS, for the purpose of development of such software for
the implementation of OptiMark's proprietary trading system and pursuant to
understandings and agreements of confidentiality (which have been recently set
forth in the "Amendment and Restatement of Agreement for the Exchange of
Confidential Information" entered into as of May 29, 1998), OptiMark and IBM
have exchanged confidential information concerning their proprietary technology
and plans which the parties have agreed to maintain in confidence and use only
for purposes of developing the implementation of OptiMark's proprietary trading
system;
WHEREAS, the ISM and OptiMark have also entered into an
agreement for the use of other software known as "TMAX-s" and "SIB" with terms
set forth in the "TMAX Agreement" (as defined below);
WHEREAS, the parties now wish to set forth the terms for the
licensing and use of the ITS Application Product and other software developed
to implement an embodiment of the OptiMark Proprietary System (the "ITS
Software" and "OPS Modified Work" as defined below);
* This confidential portion has been omitted and filed separately with the
Commission.
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(OPTIMARK/IBM OPS AGREEMENT)
NOW THEREFORE, in consideration of the premises stated in
this Agreement and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows to
the terms and conditions of this Agreement:
1.0 DEFINITIONS
1.1 AGREEMENTS: The following agreements are referenced in this Agreement
as follows:
a) "AGREEMENT" means this Agreement and its Schedules A through
E which are incorporated as if fully stated in this
Agreement;
b) "CONFIDENTIALITY AGREEMENT" means the "Amendment and
Restatement of Agreement for the Exchange of Confidential
Information" entered between IBM and OptiMark as of May 29,
1998;
c) "MAINTENANCE AGREEMENT" means an agreement which may be
entered into between the parties concerning IBM's providing
of services for the maintenance of the ITS Software and OPS
Modified Work at the First Exchange;
d) "MANAGED OPS AGREEMENT" means an "Agreement for Technology
Services" which may be entered into between IBM-Canada and
OptiMark for the providing of services related to the
management and operation of a computer site for the First
Exchange (as defined below); and
e) "TMAX AGREEMENT" means the "Software License Agreement"
signed by ISM and OptiMark June 24 and 25, 1998 respectively,
which is referred to in the recitals above.
1.2 "CUSTOMER(S)" means stock exchanges, financial institutions and other
customers and/or end-users of the OptiMark Proprietary Systems,
including but not limited to broker-dealers, individual investors,
boards of trade, and commodities exchanges which are sublicensed under
and within the ownership and grant of rights set forth herein.
1.3 "IBM-INVOLVED APPLICATIONS" means one or more of the following: the
ITS Software, the OPS Modified Work, the TMAX Work, and/or the TMAX
Modified Work.
1.4 "IBM RELATED COMPANY(IES)" means International Business Machines
Corporation (New York, U.S.A.) and any entity:
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(1) a majority of whose voting shares or securities are;
or
(2) which does not have voting shares or securities, but
a majority of the right to make decisions for such
entity is;
now or hereafter, owned or controlled, directly or indirectly, by
International Business Machines Corporation, but such entity shall be
deemed to be an IBM Related Company only so long as such ownership or
control exists.
1.5 IMPLEMENTATIONS: The following implementations are referenced in this
Agreement as follows:
a) "FIRST EXCHANGE" or "PACIFIC EXCHANGE" means the
implementation of an OptiMark Proprietary System for the
trading of securities via the Pacific Exchange, scheduled to
go on-line on the Launch Date (defined below).
b) "ADDITIONAL EXCHANGE(S)" means the implementation of an
OptiMark Proprietary System for trading or auction via any
exchange other than the Pacific Exchange, such as via NASDAQ,
other financial exchanges, Internet merchandise or service
exchanges (e.g. "Travelocity"), etc.
1.6. "ITS APPLICATION PRODUCT" means the software product marketed by IBM
before the Work Commencement Date to perform functions related to
integrated trading, which software has been programmed for the Tandem
computer platform.
1.7 "ITS SOFTWARE" means: (i) the version of the ITS Application Product
(including without limitation software known as "TMAX-H", but
excluding the TMAX and other software licensed or owned under the TMAX
Agreement) in both source and object code forms which existed as of
the Work Commencement Date (defined below) to be identified in
Schedule A, including without limitation the software components
thereof; (ii) documentation related to the ITS Application Product
described in "(i)" above as of the Work Commencement Date which is
also to be identified in Schedule A; and (iii) the ITS
Software-UNIX-Version (as defined in the paragraph below).
"ITS SOFTWARE-UNIX-VERSION" means the Ported Version of the ITS
Software described in "(i)" above that is translated into or rewritten
in the C++ computer programming language code by IBM, that ports the
functions of such ITS Software written for the Tandem computer
operating system to the UNIX (AIX version) computer operating systems
and which IBM will provide to OptiMark as described in Section 3.4.
The ITS
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Software-UNIX-Version does not include any OPS Modifications or any
Ported Versions of OPS Modifications.
1.8 "LAUNCH DATE" means that date when the OptiMark Proprietary System
that is currently being developed for the trading of securities via
the Pacific Exchange first goes on-line for trading of the securities
of Customers, a date currently contemplated to be on or about January
15, 1999.
1.9 "OPS MODIFICATION(S)" means any:
a) "IBM-MADE MODIFICATION(S)" which means corrections,
modifications, enhancements, or other developments to the ITS
Software or OPS Modified Work (either the code or
documentation) made by IBM on behalf of OptiMark, or
otherwise in connection with any development service provided
by IBM for OptiMark made after the Work Commencement Date,
whether made before the Effective Date (as defined in Section
17.1) or after, including but not limited to: (i)
modifications used to create software for any OPS User Server
Copies (defined below); (ii) modifications used to create
software pursuant to the Maintenance Agreement; and (iii)
Ported Versions, excluding the ITS Software-UNIX-Version, of
the corrections, modifications, enhancements or other
developments to the ITS Software or OPS Modified Work; or
b) "OPTIMARK-MADE MODIFICATION(S)" which means corrections,
modifications, enhancements or other developments to the ITS
Software or OPS Modified Work (either to the code or
documentation) made by OptiMark or any third party on behalf
of OptiMark other than IBM, including but not limited to any
creation of a Ported Version of the ITS Software or OPS
Modified Work, and any corrections, modifications,
enhancements or developments made to the ITS Software to
create any OPS User Server Copies.
1.10 "OPS MODIFIED WORK" means the ITS Software (including without
limitation the ITS Software-UNIX-Version) (code and/or documentation)
as modified, corrected, enhanced, ported or further developed by any
of the OPS Modifications and any version of the OPS Modified Work
which is further modified, corrected, enhanced, ported or further
developed by any of the OPS Modifications.
1.11 "OPS USER SERVER COPY(IES)" means copies of those software components
of the ITS Software or OPS Modified Work used for Customers to access
and otherwise use the OptiMark Proprietary Systems and copies of those
portions of the documentation for the
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ITS Software or OPS Modified Work provided to Customers to support
their use of the OPS User Server Copy software.
1.12 "OPTIMARK AUCTION PROCESS FIELD" means the field of services relating
to auction-type trading by the matching of orders or requests using
satisfaction density profiles and the like and specifically includes,
for example and without limitation, the field of financial services
and the trading of securities.
1.13 "OPTIMARK LICENSABLE MODIFICATION ELEMENTS" means those software code
module elements of the OPS Modifications existing on the Launch Date,
and which are selected thereafter by mutual agreement of the parties
(and pursuant the procedure outlined in Schedule B) to be licensed to
IBM for IBM's use pursuant to Section 2.3 of this Agreement, it being
provided however, that the OptiMark Licensable Modification Elements
shall specifically exclude the OptiMark Proprietary Elements (whether
in source or object code form), if any, which might otherwise have
been included as part of the OptiMark Licensable Modification
Elements, and all documentation related thereto, if any. Those
selected software code module elements shall be identified promptly
after the entire selection is complete in writing as determined
pursuant to Schedule B of this Agreement.
1.14 "OPTIMARK NEW WORK" means software that OptiMark may create, develop
or acquire which does not incorporate any ITS Software code, except
for code which executes standard routines (whether or not it is used
in ITS Software). OptiMark may freely use OptiMark New Work (for
example as an alternative in whole or in part to the ITS Software,
defined below); and, in particular, it is agreed between the parties
that OptiMark shall be free to create, develop, market, acquire, use,
and otherwise exploit such OptiMark New Work, and to permit others to
do so, without any restriction or the requirement of any further
agreement or license even though, for example, there may be
functional, design or other similarity between the OptiMark New Work
and the ITS Software and/or the OPS Modified Work, or the OptiMark New
Work may have been created by persons who had knowledge of such work,
or the OptiMark New Work may function with the ITS Software or OPS
Modified Work in whole or in part.
1.15 "OPTIMARK PROPRIETARY ELEMENT(S)" means those computer software
elements in code and design that relate to any OptiMark proprietary
aspect of the OptiMark Proprietary Systems, (as defined below),
including, for example, any element related to satisfaction density or
other trading profiles, message elements related to such satisfaction
density or other trading profiles, elements related to OptiMark's
graphical user interface or
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proprietary messaging protocols or elements related to any aspect of
OptiMark's technology for matching trading profiles and executing
trades based thereon.
1.16 "OPTIMARK PROPRIETARY SYSTEM(S)" means systems that OptiMark develops,
creates or acquires to implement its proprietary technology for
trading or auctioning in the OptiMark Auction Process Field.
1.17 "OPTIMARK RELATED COMPANY(IES)" means OptiMark Technologies, Inc.
(Delaware, U.S.A.) and any entity:
(1) a majority of whose voting shares or securities are;
or
(2) which does not have voting shares or securities, but
a majority of the right to make decisions for such
entity is;
now or hereafter, owned or controlled, directly or indirectly, by
OptiMark Technologies, Inc., but such entity shall be deemed to be an
OptiMark Related Company only so long as such ownership or control
exists.
1.18 "PERSON(S)" includes an individual, corporation, partnership, joint
venture, trust, unincorporated organization, a government or any
agency or instrumentality thereof or any other entity recognized by
law.
l.19 "PORTED VERSION" means a translation of a computer program in another
program language or any other modification of a computer program work
so that it will operate with substantially similar functionality on
computers or with operating systems that are different than those it
was initially intended to operate. Specifically, and by way of
example, the ITS Software-UNIX-Version is a Ported Version for the
UNIX (AIX version) computer operating system, as described in Section
1.7 above, and which IBM will provide to OptiMark as described in
Section 3.4.
1.20 "WORK COMMENCEMENT DATE" means the date when IBM commenced any
development work on behalf of OptiMark which is agreed to be on
November 1, 1996.
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2.0 GRANT OF LICENSE/ASSIGNMENT AND GRANT BACK/PERMITTED USE
2.1 a) Subject to the terms and conditions of this Agreement, IBM
grants to OptiMark a non-exclusive, worldwide, perpetual,
irrevocable (except to the extent monies are not paid
pursuant to Section 4.1) assignable license under all
copyright and any other intellectual property rights in, to
and under the ITS Software to create derivative works of the
ITS Software (alone or in conjunction with IBM or other third
parties) and to make, use, import, export, reproduce,
display, perform, internally distribute copies in source code
form, distribute source code copies (as provided in Sections
5.1 and 15.6), and otherwise distribute copies in object code
form of both the ITS Software and the derivative works of the
ITS Software, but only for use in conjunction with OptiMark
Proprietary Systems, with the right to sublicense third
parties to do any of the foregoing.
b) The OptiMark Related Companies are hereby sublicensed under
all of the rights granted above to OptiMark, provided that
OptiMark shall also be responsible for OptiMark Related
Companies' compliance with Article 15.0 in this Agreement.
c) The grant of rights and licenses to the ITS Software in
Section 2.1.a) above includes a nonexclusive, worldwide,
perpetual, irrevocable, paid-up license under any patents and
patent applications that are owned or licensable by IBM now
or in the future and are: (i) required to make, have made,
use and have used, import or sell the ITS Software and its
derivative works, including e.g. the OPS Modified Work; or
(ii) required to license or transfer the ITS Software or its
derivative works. The license scope is to make, have made,
use, have used, sell, import, license or transfer software
and other items, and to practice and have practiced methods,
and sublicense, to the extent of the licenses hereof.
2.2 a) IBM hereby irrevocably assigns, sells, transfers, grants and
conveys to OptiMark: all of the entire right, title and
interest in, to and under all copyright and other
intellectual property rights: (i) in and to all IBM-Made
Modifications created since the Work Commencement Date or
created in the future either pursuant to the Maintenance
Agreement or otherwise made by IBM on behalf of OptiMark; and
(ii) any resulting OPS Modified Work except for patents
(which are licensed to OptiMark under Section 2.1.c)); and,
in addition, it is understood that OptiMark is the owner of
the entire right, title and interest in, to and under all
copyright and other intellectual property rights in the
OptiMark-Made Modifications. It being understood by the
parties that the assignment in this Section 2.2.a) does not
apply
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to the ITS Software and the ITS Application Product, which
are licensed rather than assigned.
b) If an invention or a patent would be created or granted as a
result of the work performed by IBM employees or its agents,
subcontractors or consultants, in the course of making
IBM-Made Modifications, IBM will consult with and pursue good
faith discussions with, OptiMark with a view towards granting
rights to OptiMark, in addition to the above patent licenses,
if IBM files patent applications under such inventions.
2.3 a) Subject to the terms and conditions of this Agreement,
OptiMark grants to IBM a non-exclusive, worldwide, paid-up,
royalty-free, perpetual, irrevocable, assignable license
under all copyright and any other intellectual property
rights in the OptiMark Licensable Modification Elements for
all use and fields except the OptiMark Auction Process Field,
to create derivative works of the OptiMark Licensable
Modification Elements (alone or in conjunction with third
parties), and to make, use, import, export, reproduce,
display, perform, internally distribute copies in source code
form, distribute source code copies (as provided in Sections
5.2. and 15.6), and otherwise distribute copies in object
code form, of both the OptiMark Licensable Modification
Elements and derivative works of the OptiMark Licensable
Modification Elements, with the right to sublicense third
parties to do any of the foregoing.
b) The IBM Related Companies are hereby licensed under all of
the rights granted above to IBM, provided that IBM shall also
be responsible for IBM Related Companies' compliance with
Article 15.0 in this Agreement.
2.4 It is agreed between the parties that OptiMark needs no further
agreement or license from IBM for the creation, development,
marketing, acquisition, use, or other exploitation of any OptiMark New
Work as set forth in Section 1.14, or permitting others to engage in
the same activities.
2.5 OptiMark's right to use the ITS Software is limited to those rights
expressly set out in this Agreement. IBM's right to use the OptiMark
Licensable Modification Elements is limited to those rights expressly
set out in this Agreement.
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3.0 DELIVERY/ PORTING BY IBM
3.1 Upon execution of this Agreement, IBM shall deliver to OptiMark one
copy of the source code and object code forms of the ITS Software (and
the related documentation), and all IBM-Made Modifications together
with all versions of the OPS Modified Work held by IBM created up to
the date of delivery (and related documentation), (collectively, the
"Materials"). OptiMark shall take delivery of the Materials in
Toronto, Ontario, Canada, and OptiMark shall be responsible for all
necessary customs documentation and importing costs for importing the
Materials into the United States of America. It is acknowledged by the
parties that as of the Effective Date, IBM has not delivered IBM-Made
Modifications that meet the performance goals specified in Schedule D.
3.2 Upon agreement of the parties (cf. Section 1.13), OptiMark shall
deliver to IBM one copy of the OptiMark Licensable Modification
Elements in source code and object code and one copy of the
documentation relating to such OptiMark Licensable Modification
Elements. IBM shall take delivery of such OptiMark Licensable
Modification Elements (both software and documentation) in Jersey
City, New Jersey or New York, New York, U.S.A. and IBM shall be
responsible for all necessary customs documentation and importing
costs for importing the OptiMark Licensable Modification Elements into
Canada.
3.3 Should IBM make additional IBM-Made Modifications, pursuant to the
Maintenance Agreement (or other agreement), the parties shall agree in
writing as to which portions of such IBM-Made Modifications can be
delivered to IBM and licensed for IBM's use (e.g. such as pursuant to
Section 2.3), provided however that in no event shall any software or
other material which contains or embodies any OptiMark Proprietary
Elements be delivered or licensed to IBM, or be used by IBM.
3.4 IBM agrees that at no cost to OptiMark, IBM shall deliver to OptiMark
in source and object code forms, the ITS Software-UNIX-Version (as
described in Section 1.7) either: (i) promptly after such a Ported
Version is developed and used by IBM for its intended purposes or made
available by IBM to any third party for the same; or (ii) otherwise as
IBM and OptiMark may both agree. The parties acknowledge that the ITS
Software-UNIX-Version is licensed to OptiMark under Article 2.0 of
this Agreement as part of ITS Software, and the Ported Versions of the
OPS Modifications and the resulting OPS Modified Work are owned by
and/or licensed to OptiMark under Article 2.0 of this Agreement. Any
license fee owing for all uses of such Ported Versions, including the
ITS Software-UNIX-Version, are determined by Schedule C as part of OPS
Modifications and OPS Modified Work.
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4.0 PROVISIONS FOR OPTIMARK'S USE
4.1 FEES: For those uses of the ITS Software and the OPS Modified Work
which are set forth in Schedule C, OptiMark shall pay to ISM the fees
set forth in Schedule C, it being understood by the parties that
OptiMark shall owe no new or additional fees for any uses of the ITS
Software and the OPS Modified Work outside of the fees set forth in
Schedule C (including without limitation uses of Ported Versions
thereof).
4.2 DEVELOPMENT: Without limiting any rights and licenses granted to
OptiMark under Article 2.0, but subject to the terms of this
Agreement, OptiMark shall be free to further modify and develop the
ITS Software and the OPS Modified Work and create, develop and acquire
OptiMark New Work (e.g., to replace all or part of the OPS Modified
Work) for on-line implementations at the First Exchange or for
Additional Exchanges. OptiMark may perform the future development work
either: (i) by itself; (ii) with IBM (e.g. pursuant to further
development agreements); and/or (iii) with third parties other than
IBM. If IBM and OptiMark agree that IBM shall perform any further
development of the ITS Software and OPS Modified Work for the First
Exchange or any Additional Exchanges, the terms of that development
and fees paid for such development work shall be specified in a
subsequent agreement, however, the fees paid to IBM for the on-line
use of the ITS Software and OPS Modified Work at the First Exchange or
at each Additional Exchange shall be governed by the fee schedule in
Schedule C.
4.3 MAINTENANCE: The parties may agree that IBM shall maintain the ITS
Software and/or the OPS Modified Work installed at the First Exchange
or pursuant to the Maintenance Agreement or maintain the ITS Software
and/or the OPS Modified Work installed at one or more Additional
Exchanges pursuant to other like agreements.
4a.0 TECHNICAL REPRESENTATIVE
4a.1 Upon execution of this Agreement, each Party shall designate a person
(the "Technical Representative") who shall be contacted at the place
of notice, as set forth in Section 19.1 for notice of technical
matters, and who shall review with his or her counterpart, at least
once per month during the term of this Agreement, the technical status
of the ITS Software and any problem, error, bug or other issue or
concern that may arise with respect to the ITS Software. If an issue
is raised by one Technical Representative, it shall be addressed
without delay, taking into account the severity of the issue and the
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consequences to the affected party, and, where applicable, be brought
to the attention of senior management of the appropriate Party for
correction, in accordance with this Agreement.
4a.2 All communications of a technical nature shall be directed or copied
to the Technical Representative of one Party by the Technical
Representative of the other Party to ensure efficient handling of any
issue that may arise.
5.0 OBLIGATIONS
5.1 a) OptiMark agrees that it shall not provide the source code of
the ITS Software or the OPS Modified Work (or any
non-published documentation thereof) to any third party other
than: (i) the OptiMark Related Companies (sublicensed under
Section 2.1.b); or (ii) third party consultants, agents and
sublicensees, who have a need for the source code within the
scope of the license grant in Section 2.1 and which have
executed an agreement to protect and maintain such work in
confidence as provided for under Section 15.3.a). OptiMark
may distribute the source code of such work to those of its
employees who need to use such source code for purposes
contemplated by the grant of license and rights to OptiMark
in this Agreement. OptiMark agrees that it shall ensure that
any such software included in any OPS User Server Copies
shall be distributed in confidence and as a general policy in
object code form, and the source code for such OPS User
Server Copies shall be distributed only to Customers who have
a need within the grant to OptiMark in Sections 2.1 and 2.2
to review, test or modify the source code and who agree in a
written agreement as provided in Section 15.3.a) to protect
and maintain the source code in confidence.
b) OptiMark agrees that it shall not use, license or otherwise
exploit the ITS Software for any purpose not in conjunction
with the OptiMark Proprietary Systems.
5.2 a) IBM agrees that it shall not provide the source code of the
OptiMark Licensable Modification Elements to any third party
other than: (i) the IBM Related Companies (sublicensed under
Section 2.3.b)); or (ii) third party consultants, agents and
sublicensees, who have a need for the source code within the
scope of any grant to IBM under Section 2.3 and who have
executed an agreement to protect and maintain OptiMark
Licensable Modification Elements in confidence as provided in
Section 15.4.a). IBM may distribute the source code of the
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OptiMark Licensable Modification Elements to those of its
employees who need to use the source code for purposes
contemplated by grant of license and rights to IBM in this
Agreement.
b) IBM agrees that should any part of the OptiMark Licensable
Modification Elements be distributed to customers or other
sublicensees of IBM (and for just one example, if any part of
the OptiMark Licensable Modification Elements be included in
any user server copies of IBM software), it shall be
distributed in confidence and as a general policy in object
code form and the source code for such OptiMark Licensable
Modification Elements shall be distributed only to those
customers who have a need within any grant to IBM under
Section 2.3 to review, test or modify the source code and who
agree in a written agreement as provided in Section 15.4.a)
to protect and maintain the source code in confidence.
5.3 IBM and OptiMark agree that:
a) OptiMark may distribute as provided in this Agreement the OPS
Modified Work with OPS User Server Copies under OptiMark's
company name, trademarks and copyright notices, provided
however that IBM's company name, trademarks and copyright
notice must also appear in conjunction with OptiMark's
notices;
b) IBM may distribute, as provided in this Agreement, the
OptiMark Licensable Modification Elements which contains any
ITS Software and any work that is derived by IBM therefrom,
under IBM's company name, trademarks and copyright notices,
provided however that: (i) for OptiMark Licensable
Modification Elements, the OptiMark company name, trademark
and copyright notices must appear in conjunction with IBM's
notices; and (ii) for IBM's derivative works, the OptiMark
company name and copyright notices must appear in conjunction
with the IBM company name and copyright notices, but only if
and to the extent requested by OptiMark, OptiMark's trademark
notice must also appear in conjunction with IBM's trademark
notice; and
c) For the purposes of verifying compliance with this Agreement:
(i) Upon written inquiry, OptiMark will provide
reasonable information and reasonable responses to
IBM's inquiries concerning OptiMark's licensing,
sublicensing and contracting with third parties,
which involves third party access, use and/or
further development of IBM code licensed under this
Agreement.
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(ii) Upon written inquiry, IBM will provide reasonable
information and reasonable responses to OptiMark's
inquiries concerning IBM's licensing, sublicensing
and contracting with third parties, which involves
third party access, use and further development of
the OptiMark Licensable Modification Elements
licensed under this Agreement.
5.4 a) OptiMark is an independent contractor and is not a legal
representative or an agent of IBM for any purpose. OptiMark
shall not make any warranties, representations or create any
obligations on IBM's behalf to third parties and
documentation and software distributed by OptiMark to third
parties shall not include any statements, representations or
warranties purporting to be made by IBM.
b) IBM is an independent contractor and is not a legal
representative or an agent of OptiMark for any purpose. IBM
shall not make any warranties, representations or create any
obligations on OptiMark's behalf and documentation and
software distributed by IBM to third parties shall not
include any statements, representations or warranties
purporting to be made by OptiMark to third parties.
6.0 ACCESS BY CUSTOMERS
6.1 OptiMark may provide OPS User Server Copies to Customers.
7.0 INTELLECTUAL PROPERTY OWNERSHIP
7.1 a) IBM and the IBM Related Companies are the owners of all
intellectual property in or to the ITS Software or practiced
by it in its operation (software and documentation) and
related written materials, logos, names and other support
materials which IBM has the right to provide to OptiMark
pursuant to the terms of this Agreement. OptiMark
acknowledges that the ITS Software is proprietary to IBM and
the IBM Related Companies. No title to the intellectual
property owned by IBM and the IBM Related Companies in the
ITS Software or in any magnetic media or other physical media
provided therewith is transferred to OptiMark by IBM under
this Agreement.
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b) OptiMark is the owner or licensee of all intellectual
property in or to the OPS Modifications, the OPS Modified
Work, the OptiMark Licensable Modification Elements (provided
under Section 3.2 of this Agreement) or practiced by them in
their operations. IBM acknowledges that the OPS
Modifications, the OPS Modified Work, and the OptiMark
Licensable Modification Elements are proprietary to OptiMark,
in addition to and as part of the OptiMark Proprietary
Systems. No title to the intellectual property in the OPS
Modifications, the OPS Modified Work, the OptiMark Licensable
Modification Elements, or the OptiMark Proprietary Systems or
in any magnetic media or other physical media provided
therewith is transferred to IBM by OptiMark under this
Agreement.
7.2 a) IBM agrees not to remove or destroy or to allow the removal
or destruction of any proprietary markings or confidential
legends placed upon or contained within the OptiMark
Licensable Modification Elements provided under Section 3.2
and shall ensure that such proprietary markings or
confidential legends are marked on or included in all copies
of the OptiMark Licensable Modification Elements software and
documentation, and (absent further agreement) of any
derivative works.
b) OptiMark agrees not to remove or destroy or to allow the
removal or destruction of any proprietary markings or
confidential legends placed upon or contained within the ITS
Software provided under Section 3.1, and shall ensure that
such proprietary markings or confidential legends are marked
on and included in all copies of the ITS Software, and
(absent further agreement) of any derivative works.
7.3 Notwithstanding any other provision of this Agreement, IBM represents
that if software is hereafter included by IBM in the OPS Modified Work
or IBM-Made Modifications which is not owned by but only licensed to
IBM, it will promptly notify OptiMark of such software and certify
that it is a licensee of such software with the right to include such
software in the ITS Software and/or IBM-Made Modifications and to
grant the license and rights as set forth in this Agreement except for
assignment of title.
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8.0 IBM REPRESENTATIONS AND WARRANTIES/LIMITATION OF LIABILITY
8.1 IBM represents and warrants to OptiMark that all rights, title and
interest, including without limitation all copyright rights and other
intellectual property and proprietary rights in or to the ITS Software
and IBM-Made Modifications or practiced by them in their operations,
are (or in the case of IBM-Made Modifications, will be) owned by IBM
and the IBM Related Companies, with IBM being fully able to provide
the grants to OptiMark made herein.
8.2 IBM represents and warrants to OptiMark that to the best of IBM's and
the IBM Related Companies' knowledge no third party has asserted any
claim of ownership or of copyright or patent infringement or of
infringement of any other intellectual property right pertaining to
any aspect of the ITS Software or IBM-Made Modifications completed as
of the date of signature of this Agreement and that IBM is aware of no
such claim which could be made.
8.3 a) IBM represents and warrants that, for a period of ninety (90)
days from the Launch Date or, in the case of Additional
Exchanges, from the day determined by the parties for each
Additional Exchange as the launch date for such Additional
Exchange (the "Warranty Period"), the ITS Software and the
IBM-Made Modifications, but not the OptiMark-Made
Modifications, in the OPS Modified Work will, if installed
properly (or according to IBM written specifications),
perform in all material respects according to the detailed
design documentation set forth in Schedule E.
b) IBM represents and warrants that for a period of ninety (90)
days from the launch date on a version of the Tandem
Operating System declared to be "Year 2000 ready" by Tandem
(the "Y2K-Ready Tandem Operating System"), the ITS Software
and the IBM-Made Modifications, but not the OptiMark-Made
Modifications, in the OPS Modified Work will, if installed
properly (or according to IBM written specifications),
perform in all material respects according to the detailed
design documentation set forth in Schedule E.
OptiMark and IBM, however, agree that: (i) the ITS Software
must be tested on the Y2K-Ready Tandem Operating System
without delay; (ii) OptiMark will give IBM permission to
begin testing as soon as practicable and no later than May
30, 1999; and (iii) IBM will use commercially reasonable
efforts to test the ITS Software on the Y2K-Ready Tandem
Operating System, promptly reporting the
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results or findings of their testing to OptiMark as soon as
practicable and no later than August 30, 1999.
c) The representations and warranties in a) and b) above do not
extend to further modifications made by a Person other than,
by or on behalf of IBM or an IBM representative, or to the
performance of such ITS Software and the IBM-Made
Modifications as they have been so further modified by a
Person other than, by or on behalf of IBM or an IBM
representative, acknowledging, however, that if an error or
defect discovered in ITS Software or IBM-Made Modifications,
after it has been modified by a Person other than, by or on
behalf of IBM or an IBM representative, can be replicated in
the original version of the ITS Software or IBM-Made
Modifications that were delivered by IBM, then the
representations and warranties of this Section 8.3 in a) and
b) above shall apply to that error or defect.
d) If the parties enter into a Maintenance Agreement, any
different terms of such Maintenance Agreement will determine
the extent of the warranty.
8.4 EXCEPT AS PROVIDED IN SECTIONS 8.1, 8.2, 8.3, 7.1.a), AND 7.3, IBM
MAKES NO OTHER EXPRESS WARRANTIES IN THIS AGREEMENT, AND THERE ARE NO
IMPLIED WARRANTIES OR CONDITIONS, INCLUDING BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABLE QUALITY AND FITNESS
FOR A PARTICULAR PURPOSE.
8.5 The indemnity and other relief set forth below in Article 9.0 is the
sole and exclusive remedy for breach by IBM of any representations or
warranties set forth in Section 8.1. OptiMark shall have all rights
and remedies available at law and equity for breach of the
representations and warranties of Section 8.2. The relief set forth
below in Article 10.0 is the sole and exclusive remedy for breach by
IBM of the representations and warranties set forth in Section 8.3.
9.0 IBM'S PATENT, TRADE SECRET AND TRADEMARK INDEMNITY/NOTICE OF CLAIMS
9.1 Subject to Section 11.2, IBM will indemnify, defend and hold OptiMark,
the OptiMark Related Companies, the Customers of each and the
officers, directors, employees and agents of each (individually and
collectively, the "OptiMark Indemnitees") harmless from and against
any and all claims, causes of action, liabilities, damages, costs or
expenses finally awarded or settled against them or any of them
(including, without limitation, reasonable legal fees awarded or
settled against them or any of them) arising out of or
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resulting from any claim of infringement of a patent, of a copyright,
of a misappropriation of a trade secret or of any other right alleged
against the OptiMark Indemnitees and arising out of or from the use or
exploitation of the ITS Software or the IBM-Made Modifications in the
OPS Modified Work as permitted under this Agreement by the OptiMark
Indemnitees, provided that, subject to the provisions set forth in
Section 9.2, the OptiMark Indemnitees promptly notify IBM of any such
claim and co-operate with IBM in, and allow IBM to control, the
defense of any such claim and any related settlement negotiations.
9.2 Using counsel selected by IBM, IBM will assume, at its own cost, a
prompt, rigorous and full defense and/or a good faith settlement
(which seeks to maintain OptiMark's rights hereunder) of any claim of
which IBM is responsible to indemnify under Section 9.1 and OptiMark
will cooperate reasonably with IBM in connection therewith; except
that with respect to settlements entered into by IBM: (a) the consent
of OptiMark will be required if the settlement provides for equitable
relief against any of the OptiMark Indemnitees; and (b) IBM will
obtain a full and complete release of the OptiMark Indemnitees from
the third party claimant(s) concerning any claim which IBM is
responsible to indemnify under Section 9.1. IBM will keep OptiMark
reasonably and timely apprised of the events of the defense and/or
settlement (including without limitation the providing of copies of
the relevant pleadings, other filings and settlement proposals) and
IBM shall give full consideration to, and be open to discussion of,
the views and suggestions of OptiMark (and/or its counsel as provided
for below in Section 9.3) in proceeding with such defense and/or
settlement.
9.3 In the defense or settlement of any claim under Section 9.1, and
subject to Section 11.2, IBM shall promptly reimburse the OptiMark
Indemnitees for all costs, damages, expenses, legal fees and/or other
amounts that a court of competent jurisdiction (including without
limitation any arbitration panel or other tribunal) finally awards
against any OptiMark Indemnitee and to timely pay all costs, damages,
expenses, legal fees and/or other amounts agreed to be paid in
settlement, resulting from a claim indemnified under Section 9.1,
provided further that IBM will permit OptiMark to participate in the
settlement or defense of the claims through counsel chosen and paid
for by OptiMark, and keep such counsel informed as they may request.
9.4 In addition, if any claim or cause of action referred to in Section
9.1 is made against an OptiMark Indemnitee's use or exploitation of
the ITS Software or the IBM-Made Modifications in the OPS Modified
Work as permitted under this Agreement which occasions any material
risk of an injunction against such use or exploitation, IBM will upon
notice of the claim of infringement and at no cost to OptiMark either:
(i) obtain a
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license from the third party for the OptiMark Indemnitees to continue
using the accused ITS Software and/or IBM-Made Modifications which
shall come into effect no later than the earliest effective date of
any such injunction; and/or (ii) modify the accused ITS Software
and/or IBM-Made Modifications to avoid such infringement, and use all
diligent efforts which are not unreasonable to complete such
modifications before any injunction precluding the use thereof can be
secured or come into effect, including securing the assistance of the
IBM Related Companies in so doing.
9.5 In addition to the indemnity provided in Sections 9.1 through 9.4
above, IBM shall promptly notify OptiMark in writing, should IBM
receive notice of or become aware of any third party claim or
assertion against IBM (or the IBM Related Companies) of ownership or
of copyright or patent infringement or of infringement of any other
intellectual property right pertaining to any aspect of the ITS
Software or the IBM-Made Modifications or the use thereof and provide
a copy of any such claim or assertion (if the claim or assertion is
provided in writing) or a description thereof (if made orally) and
upon OptiMark's request, IBM shall provide reasonable responses to
reasonable OptiMark inquiries concerning such claims or assertions and
any risk of injunction as perceived by IBM.
9.6 The provisions in Sections 9.1 through 9.5 represent IBM's entire
obligation to OptiMark regarding any claim for infringement, except as
set forth in Section 8.5.
9.7 IBM has no obligation under this Agreement regarding any infringement
claim based on the following:
a) any OPS Modifications other than IBM-Made Modifications, or
any use of the ITS Software or the IBM-Made Modifications in
the OPS Modified Work which is outside the license or grants
of this Agreement;
b) the combination, operation or use of the ITS Software or
IBM-Made Modifications with any product, data, computer
equipment or software that IBM did not recommend, intend or
provide and which infringement claim would not have been made
out by the use of the ITS Software or IBM-Made Modifications
with any product, data, computer equipment or communication
software that IBM did or does recommend, intend or provide;
or
c) the combination, operation or use of the ITS Software or the
IBM-Made Modifications in the OPS Modified Work with any
other software used by OptiMark for trade processing, trade
matching and strategizing functions which
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IBM does not recommend, intend or provide and which
infringement claim would not have been made out by the use of
the ITS Software or the ITS Software as modified by IBM-Made
Modifications with software which IBM did or does recommend,
intend or provide.
10.0 SOFTWARE DEFECTS AND ERRORS
10.1 In the event OptiMark or IBM discovers an error or other defect in the
ITS Software as modified by the IBM-Made Modifications in the OPS
Modified Work, IBM's or OptiMark's Technical Representative, shall
promptly notify the other party's Technical Representative in writing
and provide as much detail in writing as is available to allow IBM to
reproduce the error or defect or to demonstrate the problem and its
foreseeable consequences to OptiMark and to allow OptiMark to make not
unreasonable efforts to avoid expense, loss, liability or other
damages which might otherwise result therefrom. If the ITS Software as
modified by the IBM-Made Modifications in the OPS Modified Work is
found to not meet the requirements of the detailed design
documentation as set out in Schedule E within the applicable Warranty
Period, IBM will use all reasonable efforts taking into account the
seriousness of the error or other defect, and whether it threatens to
interrupt use of the OPS Modified Work to promptly correct, at no cost
to OptiMark (other than reasonable economy travel expenses to
OptiMark's site, if necessary), programming errors in the ITS Software
as modified by the IBM-Made Modifications in the OPS Modified Work to
make them so perform.
IBM will use all reasonable efforts to initially provide a work around
or program detour and endeavor to correct the error or defect under
Section 8.3 above and thereafter, for a program error which cannot be
corrected by IBM, to implement a problem-avoiding restriction of the
ITS Software or IBM-Made Modification(s) in the OPS Modified Work. All
such work arounds, program detours, and problem-avoiding restrictions
shall be made to preserve the functionality and performance of the
software in question to the fullest extent possible and shall be made
to the fullest extent possible to perform or enable the program to
perform the same or substantially similar functions in the same or
substantially similar manner as the IBM-Made Modifications and/or the
ITS Software as modified by the IBM-Made Modifications. The
expenditures made by IBM under this Section 10.1 shall not be limited
in any way by the provisions of Section 11.1.
10.2 If IBM is unable within a time reasonable under the circumstances to
provide the corrections to such ITS Software as modified by the
IBM-Made Modifications as set forth in Section 10.1, OptiMark shall
have the option of notifying IBM of OptiMark's
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intent to correct the problem, providing a correction plan proceeding
to itself make all efforts which are not unreasonable or inconsistent
with industry practice to correct such error or defect, and to bill
IBM net thirty (30) days upon completion for the cost to OptiMark and
the OptiMark Related Companies of completing the correction, including
the out-of-pocket costs for replacing the defective part of the OPS
Modified Work; provided, however, that the amount billed to IBM for a
correction at any implementation (either at the First Exchange or any
Additional Exchanges) shall not exceed either: (i) for the First
Exchange through the Fifth Additional Exchange, the license fee paid
for the use at that exchange; or (ii) for the use at a particular
exchange beyond the Fifth Additional Exchange, the license fee paid
for the use at the Fifth Additional Exchange.
10.3 IBM shall not be liable for any claim to the extent that it is based
upon and would not have occurred but for OptiMark's modifications of
the ITS Software or OPS Modified Work or OptiMark's the use of the ITS
Software or OPS Modified Work outside of the rights and licenses
granted in this Agreement.
10.4 The remedies set forth in this Article 10 constitute IBM's entire
liability for any breach of the representations and warranties set
forth in Section 8.3 except for OptiMark's losses or damages due to
any gross negligence or intentional misconduct on the part of IBM.
11.0 IBM'S LIMITATION OF LIABILITY
11.1 IBM's aggregate liability for direct actual damages arising out of or
in connection with IBM's performance or non-performance under this
Agreement, regardless of the form of action and whether in contract,
tort (including, without limitation, negligence), warranty or other
legal or equitable grounds, will be limited to the total amount of
license fees contemplated under Schedule C actually paid by OptiMark
to IBM provided that this limitation will not apply to:
a) damages for physical harm to persons or tangible personal
property and real property caused by IBM's negligence; and
b) all damages for which IBM is responsible under Articles 8.0,
9.0, 10.0 and 15.0.
11.2 In no event is IBM liable for:
a) any special, indirect or consequential damages (other than
for physical harm to persons caused by the party's
negligence) even if IBM has been advised of the possibility
thereof, including but not limited to lost profits, lost
business revenue,
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failure to realize expected savings or loss of, or damage to,
OptiMark's records or data, except for OptiMark's losses or
damages due to gross negligence or intentional misconduct on
the part of IBM; or
b) any claims by a third party against OptiMark or any
contractor to OptiMark (including, without limitation, claims
by a Customer) other than those claims provided for under
Article 9.0 or those claims involving a breach of Section 8.2
or Article 15.0.
11.3 This Article 11.0 applies to all claims by OptiMark, any Customers and
any stock exchange and any contractor of OptiMark irrespective of the
cause of action underlying the claim, including but not limited to:
(a) breach of contract, even if in the nature of a breach of a
condition of a fundamental term, or a fundamental breach; or (b) tort,
including, but not limited to, negligence or negligent
misrepresentation.
12.0 OPTIMARK WARRANTY/LIMITATION OF LIABILITY
12.1 OptiMark represents and warrants to IBM that it owns sufficient title
and interest, including, without limitation, copyright rights and
other intellectual property and proprietary rights, to those
OptiMark-Made Modifications to the OPS Modified Work which are
included in the OptiMark Licensable Modification Elements to grant the
license set forth in Section 2.3.
12.2 OptiMark represents and warrants to IBM that to the best of OptiMark's
and the OptiMark Related Companies' knowledge no third party has
asserted any claim of ownership or of copyright or patent infringement
or of infringement of any other intellectual property right pertaining
to any aspect of the OptiMark-Made Modifications completed as of the
date of signature of this Agreement and included in the OptiMark
Licensable Modification Elements and that OptiMark is aware of no such
claim which could be made.
12.3 EXCEPT AS PROVIDED IN SECTIONS 7.1.b), 12.1, AND 12.2, OPTIMARK MAKES
NO OTHER EXPRESS WARRANTIES, AND THERE ARE NO IMPLIED WARRANTIES OR
CONDITIONS, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OR
CONDITIONS OF MERCHANTABLE QUALITY AND FITNESS FOR A PARTICULAR
PURPOSE.
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12.4 The indemnity and other relief set forth below in Article 13.0 is the
sole and exclusive remedy for breach of any representation or
warranties by OptiMark, except that IBM shall have all rights and
remedies available at law and equity for breach of the representations
and warranties of Section 12.2.
13.0 OPTIMARK'S PATENT, TRADE SECRET OR TRADEMARK INDEMNITY/NOTICE OF CLAIM
13.1 Subject to Section 14.2, OptiMark will indemnify, defend and hold IBM,
the IBM Related Companies, the customers of each and the officers,
directors, employees and agents of each (individually and
collectively, the "IBM Indemnitees") harmless from and against any and
all claims, causes of action, liabilities, damages, costs or expenses
finally awarded or settled against them or any of them (including,
without limitation, reasonable legal fees awarded or settled against
them or any of them) arising out of or resulting from any claim of
infringement of a patent, of a copyright, of a misappropriation of a
trade secret, or of any other right alleged against the IBM
Indemnitees and arising out of or from the use or exploitation of the
OptiMark-Made Modifications of the OptiMark Licensable Modification
Elements as permitted under this Agreement by the IBM Indemnitees,
provided that, subject to the provisions set forth in Section 13.2,
the IBM Indemnitees promptly notify OptiMark of any such claim and
co-operate with OptiMark in, and allow OptiMark to control, the
defense of any such claim and any related settlement negotiations.
13.2 Using counsel selected by OptiMark, OptiMark will assume, at its own
cost, a prompt, rigorous and full defense and/or a good faith
settlement (which seeks to maintain IBM's rights hereunder) of any
claim of which OptiMark is responsible to indemnify under Section 13.1
and IBM will cooperate reasonably with OptiMark in connection
therewith; except that with respect to settlements entered into by
OptiMark: (a) the consent of IBM will be required if the settlement
provides for equitable relief against any of the IBM Indemnitees; and
(b) OptiMark will obtain a full and complete release of the IBM
Indemnitees from the third party claimant(s) concerning any claim
which OptiMark is responsible to indemnify under Section 13.1.
OptiMark will keep IBM reasonably and timely apprised of the events of
the defense and/or settlement (including without limitation the
providing of copies of the relevant pleadings, other filings and
settlement proposals) and OptiMark shall give full consideration to,
and be open to discussion of, the views and suggestions of IBM (and/or
its counsel as provided for below in Section 13.3 in proceeding with
such defense and/or settlement.
13.3 In the defense or settlement of any claim under Section 13.1, and
subject to Section 14.2, OptiMark shall promptly reimburse the IBM
Indemnitees for all costs, damages,
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expenses, legal fees and/or other amounts that a court of competent
jurisdiction (including without limitation any arbitration panel or
other tribunal) finally awards against any IBM Indemnitee and to
timely pay all costs, damages, expenses, legal fees and/or other
amounts agreed to be paid in settlement resulting from a claim
indemnified under Section 13.1, provided further that OptiMark will
permit IBM to participate in the settlement or defense of the claims
through counsel chosen and paid for by IBM, and keep such counsel
informed as they may request.
13.4 In addition, if any claim or cause of action referred to in Section
13.1 is made against an IBM Indemnitee's use or exploitation of the
OptiMark-Made Modifications of the OptiMark Licensable Modification
Elements as permitted under this Agreement which occasions any
material risk of an injunction against such use or exploitation,
OptiMark will upon notice of the claim of infringement and at no cost
to IBM either: (i) obtain a license from the third party for the IBM
Indemnitees to continue using the accused OptiMark-Made Modifications
of the OptiMark Licensable Modification Elements which shall come into
effect no later than the earliest effective date of any such
injunction; and/or (ii) modify the accused OptiMark-Made Modifications
of the OptiMark Licensable Modification Elements to avoid such
infringement, and use all diligent efforts which are not unreasonable
to complete such modifications before any injunction precluding the
use thereof can be secured or come into effect, including securing the
assistance of the OptiMark Related Companies in so doing.
13.5 In addition to the indemnity provided in Sections 13.1 through 13.4
above, OptiMark shall promptly IBM in writing, should OptiMark receive
notice of or become aware of any third party claim or assertion
against OptiMark (or the OptiMark Related Companies) of ownership or
of copyright or patent infringement or of infringement of any other
intellectual property right pertaining to any aspect of the OptiMark
Licensable Modification Elements or the use thereof and provide a copy
of any such claim or assertion (if the claim or assertion is provided
in writing or there is a description there of if made orally) and upon
IBM's request, OptiMark shall provide reasonable responses to
reasonable IBM inquiries concerning such claims or assertions and any
risk of injunction as perceived by OptiMark.
13.6 The provisions in Sections 13.1 through 13.5 represent OptiMark's
entire obligation to IBM regarding any claim for infringement, except
a set forth in Section 12.4.
13.7 OptiMark has no obligation under this Agreement regarding any
infringement claim based on the following:
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a) any OPS Modifications other than the OptiMark-Made
Modifications of the OptiMark Licensable Modification
Elements or any use of the OptiMark-Made Modifications of the
OptiMark Licensable Modification Elements outside the license
hereof;
b) the combination, operation or use of the OptiMark-Made
Modifications of the OptiMark Licensable Modification
Elements with any product, data, computer equipment or
software that OptiMark did not recommend or provide and which
the infringement claim would not have been made out by the
use of the OptiMark-Made Modifications of the OptiMark
Licensable Modification Elements with any product, data,
computer equipment or software that OptiMark did or does
recommend, intend or provide; or
c) the combination, operation or use of the OptiMark-Made
Modifications of the OptiMark Licensable Modification
Elements with any other software used by IBM for trade
processing, trade matching and strategizing functions which
OptiMark does not recommend or provide and which the
infringement claim would not have been made out by the use of
the OptiMark-Made Modifications of the OptiMark Licensable
Modification Elements with software which OptiMark did or
does recommend, intend or provide.
14.0 OPTIMARK'S LIMITATION OF LIABILITY
14.1 OptiMark's aggregate liability for direct actual damages arising out
of or in connection with OptiMark's performance or non-performance
under this Agreement, regardless of the form of action and whether in
contract, tort (including, without limitation, negligence), warranty
or other legal or equitable grounds, shall not exceed and will be
limited to one hundred thousand U.S. Dollars ($US 100,000), provided
that this limitation will not apply to:
a) damages for physical harm to persons or tangible
personal property and real property caused by
OptiMark's negligence; and
b) all damages for which OptiMark is responsible under
Articles 12.0, 13.0 and 15.0.
14.2 In no event is OptiMark liable for:
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a) any special, indirect or consequential damages (other than
for physical harm to persons caused by OptiMark's negligence)
even if the party has been advised of the possibility
thereof, including, but not limited to, lost profits, lost
business revenue or failure to realize expected savings,
except for IBM's losses or damages due to any gross
negligence or intentional misconduct on the part of OptiMark;
or
b) any claims by a third party against IBM or any contractor to
IBM (including, without limitation, claims by a customer of
IBM or the IBM Related Companies), other than those claims
provided for under Article 13.0, or those claims involving a
breach of Section 12.2 or Article 15.0.
14.3 This Article 14.0 applies to all claims by IBM, any customers, any
stock exchange and any contractor of IBM irrespective of the cause of
action underlying the claim, including, but not limited to: (a) breach
of contract, even if in the nature of a breach of a condition of a
fundamental term, or a fundamental breach; or (b) tort, including, but
not limited to, negligence or negligent misrepresentation.
15.0 CONFIDENTIAL INFORMATION
15.1 Proprietary and confidential information which is disclosed by one
party to the other pursuant to this Agreement or created by the
parties as part of the development concerning the OPS Modified Work
shall be protected by, subject to and governed by the provisions of
the Confidentiality Agreement, as supplemented by the terms and
conditions of this Agreement, e.g. those of Articles 5.0 and 15.0.
"Confidential Information" shall have the same meaning here as in the
Confidentiality Agreement, provided that: (i) it is acknowledged and
agreed that IBM-Made Modifications, OPS Modified Work and
documentation related thereto shall be considered Confidential
Information of OptiMark as if disclosed by OptiMark and such
information shall be marked as OptiMark Confidential; and (ii) at
least in the following circumstances inadvertent disclosure without
confidentiality identification or markings by one party to the other
party shall not destroy confidentiality, namely that for source code,
developments for the OPS Modified Work or OptiMark Proprietary
Elements, business development and marketing plans for the OPS
Modified Work before their public announcement, variations of material
already marked confidential, and such information shall not be
publicly disclosed but rather treated as confidential information,
without having initially been marked as such.
15.2 The parties agree that, as defined in Section 2 of the Confidentiality
Agreement, the "Limited Use(s)" for Confidential Information subject
to this Agreement shall include all
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uses which are permitted pursuant to the licenses, grants, and
understandings set forth in this Agreement.
15.3 IBM agrees by the execution of this Agreement that:
a) IBM consents, as a prior written consent under Section 3.0 of
the Confidentiality Agreement, that OptiMark may disclose
Confidential Information concerning the ITS Software, OPS
Modified Work or other IBM-Involved Applications (which is not
otherwise owned by OptiMark) (including without limitation
source code as permitted under Sections 5.1 and 15.6) to third
party consultants, agents and sublicensees who agree in
writing to provisions that are no less protective than the
provisions for the protection of Confidential Information that
are set forth in the Confidentiality Agreement and in the
other terms and conditions of this Agreement and in particular
those in Articles 5.0 and 15.0; and
b) IBM waives any prior written notice requirement, as required
under Section 3.0 of the Confidentiality Agreement, any
disclosure to the third parties consented to in Section
15.3.a).
15.4 OptiMark agrees by the execution of this Agreement, that:
a) OptiMark consents, as a prior written consent under Section
3.0 of the Confidentiality Agreement, that IBM may disclose
Confidential Information of OptiMark concerning the OptiMark
Licensable Modification Elements (including without
limitation the source code as provided under Section 5.2 and
Section 15.6); to third party consultants, agents and
sublicensees who agree in writing to provisions that are no
less protective than the provisions for the protection of
Confidential Information that are set forth in the
Confidentiality Agreement and in the other terms and
conditions of this Agreement and in particular those in
Articles 5.0 and 15.0; and
b) OptiMark waives any prior written notice requirement, as
required in Section 3.0 of the Confidentiality Agreement, for
any disclosure to the third parties consented to in Section
15.4.a).
15.5 Each party shall ensure that all copies of the source code owned by
the other are kept in a secure environment.
15.6 The receiving party under this Article 15.0 may provide source code to
a sublicensee for their use within the scope of any license grant to
the receiving party hereunder pursuant to an agreement which provides
for confidentiality in terms no less protective than those
- 26 -
<PAGE> 27
CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
referred to or set forth in this Article 15.0. In addition and
notwithstanding any provision of the Confidentiality Agreement or this
Agreement, upon demand by a sublicensee, and under this Article 15.0,
OptiMark as the receiving party, may place the source code for the ITS
Software or OPS Modified Work (including any further modified versions
of either and software licensed as OPS User Server Copies), and IBM as
the receiving party, may place the source code for the OptiMark
Licensable Modification Elements (and any modified version of it) in
escrow pursuant to an escrow agreement (with terms to protect the
confidentiality of the source code of the work in question that are as
or more restrictive than those set forth or referred to herein) in
order to permit the sublicensee to consult the source code if: (a) the
sublicensee has executed an agreement as provided for under Section
15.3.a) or 15.4.a); and (b) the sublicensee needs it for maintenance
in order to continue to use the ITS Software, OPS Modified Work or
OptiMark Licensable Modification Elements, respectively, upon the
failure of the receiving party to provide the sublicensee with agreed
upon support and maintenance for such code.
16.0 SOURCE CODE/MODIFICATIONS
16.1 Release of source code by one party to the other party by itself shall
not be deemed a transfer of ownership or title to any copyright or
other intellectual property in the source code.
17.0 TERM AND TERMINATION
17.1 This Agreement is effective from date upon which it is executed by
both OptiMark and IBM ("the Effective Date"); and the licenses granted
shall continue in perpetuity or for the full term permitted by law
under the intellectual property rights.
17.2 Any termination of any provision in this Agreement shall be in
addition to and without prejudice to such other rights and remedies as
may be available to the terminating party including injunction and
other equitable remedies, provided that any breach shall not cause any
enjoinment of the licenses granted hereunder, which licenses are
irrevocable and not terminable.
18.0 EFFECT OF TERMINATION
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CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
18.1 The licenses granted hereunder are irrevocable and shall not be
affected by any breach or termination except that the license for each
copy of the ITS Software within any OPS Modified Work at the First
Exchange or at any of each Additional Exchange may be revoked upon
failure to pay the appropriate fee set forth in Schedule C pursuant to
Section 4.1, provided that specific written notice of said failure is
given by IBM to OptiMark, and OptiMark fails to cure the same by
making the payment within thirty (30) days of receipt of said notice.
Upon any termination of this Agreement, Articles 7.0 through 14.0
shall remain in effect for an indefinite period equal to the longest
time permitted by law under the applicable jurisdiction. The
provisions in Article 15.0 for Confidential Information shall remain
in full force and effect for the term provided for in the
Confidentiality Agreement.
19.0 NOTICES
19.1 Any notice or other communication required or permitted to be given
under this Agreement shall be in writing and will be sufficiently
given if:
a) delivered personally;
b) sent by prepaid registered mail; or
c) transmitted by facsimile;
IN THE CASE OF NOTICE TO IBM,
a) CONCERNING NON-TECHNICAL MATTERS:
251 Consumers Rd.
North York, Ontario
M2J 4R3 CANADA
Attention: IBM General Manager
Security Industry Services
Fax No: (416) 490-5629
Copy to: General Counsel
Fax No: (416) 490-5722
b) CONCERNING TECHNICAL MATTERS (E.G. UNDER SECTIONS 4a.1 AND 10.1):
251 Consumers Rd.
North York, Ontario
M2J 4R3 CANADA
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<PAGE> 29
CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
Attention: IBM TECHNICAL REPRESENTATIVE
initially designated to be: Brenda Hoffman
Fax No: (416) 490-5629
Copy to: General Counsel
Fax No: (416) 490-5722
IN THE CASE OF OPTIMARK,
a) CONCERNING NON-TECHNICAL MATTERS:
10 Exchange Place, 12th Floor
Jersey City, New Jersey 07302 USA
Attention: William F. Adiletta,
Executive Vice President
Fax No: (201) 946-9435
Copy to: OptiMark General Counsel
Fax No: (201) 946-9413
b) CONCERNING TECHNICAL MATTERS (E.G. UNDER SECTIONS 4a.1 AND 10.1):
10 Exchange Place, 12th Floor
Jersey City, New Jersey 07302 USA
Attention: OPTIMARK TECHNICAL REPRESENTATIVE
initially designated to be: William F. Adiletta,
Executive Vice
President
Fax No: (201) 946-9435
Copy to: OptiMark General Counsel
Fax No: (201) 946-9413
Notices sent by personal delivery shall be deemed to have been given
and received on the date of delivery. Notices transmitted by facsimile
shall be deemed to have been given and received on transmission if a
confirmation of successfully completed transmission is received by the
sender. Any notice sent by prepaid registered mail shall be deemed to
have been given and received on the seventh (7th) business day
following mailing. The parties may change the names and addresses for
notices under this Agreement (of technical or non-technical matters)
by giving the other party ten (10) days advance written notice of the
change.
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<PAGE> 30
CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
20.0 ASSIGNMENT
20.1 Subject to Section 20.1.a), OptiMark may assign the licenses granted
under Section 2.1 of this Agreement without the prior written consent
of IBM, provided however, IBM must be notified in advance of both the
identification of the intended assignee and the intended assignment,
and must approve of the procedures used by OptiMark, which procedures
must be agreed to by the intended assignee in advance, to protect the
Confidential Information of IBM, which approval by IBM shall not be
unreasonably withheld.
a) If OptiMark intends to assign the license under Section 2.1
to a party that is a competitor of IBM in the field of the
license hereof, and IBM has so notified OptiMark in writing
and in advance, then IBM's consent shall be required and
OptiMark shall give IBM no less than thirty (30) days advance
notice of any such assignment and IBM's consent may be
refused in IBM's absolute discretion.
20.2 Subject to Section 20.2.a), IBM may assign the licenses granted under
Section 2.3 of this Agreement without the prior written consent of
OptiMark, provided however, OptiMark must be notified in advance of
both the identification of the intended assignee and the intended
assignment, and must approve of the procedures used by IBM, which
procedures must be agreed to by the intended assignee in advance, to
protect the Confidential Information of OptiMark, which approval by
OptiMark shall not be unreasonably withheld.
a) If IBM intends to assign the license under Section 2.3 to a
party that OptiMark has notified IBM in writing in advance to
be a competitor of OptiMark, then OptiMark's consent shall be
required and IBM shall give OptiMark no less than thirty (30)
days advance notice of any such assignment and OptiMark's
consent may be refused in OptiMark's absolute discretion.
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<PAGE> 31
CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
21.0 GENERAL
21.1 Neither party shall be responsible for failure to fulfill its
respective obligations under this Agreement caused, directly or
indirectly, by fire, flood, earthquake, elements of nature or acts of
God, acts of war, terrorism, riots, civil disorders, rebellions or
revolutions, strikes, lockouts or labor difficulties or any other
cause beyond its reasonable control, provided that the failure could
not have been prevented by reasonable precautions and cannot be
reasonably circumvented by the non-performing party through
commercially reasonable means.
21.2 Section headings have been included in this Agreement merely for
convenience of reference and shall not be considered part of or used
in interpreting this Agreement.
21.3 If any provision, portion or extent of this Agreement is held or
becomes invalid, illegal or unenforceable in general or with respect
to any particular transaction, Person or jurisdiction, then, but only
to the minimal extent necessary, that provision or portion shall be
severed from, or that extent limited in, this Agreement in general or
with respect to such transaction, Person, or jurisdiction only, and
the remainder of the Agreement shall continue in full force and effect
with respect to all other transactions, Persons or jurisdictions.
21.4 Any waiver by either party of any obligation under this Agreement must
be in writing and shall not be considered to be a waiver of any other
breach of the same obligation.
21.5 No action, regardless of form, may be brought by either party more
than the lesser of: (i) two (2) years after the cause of action has
arisen and the party having the cause of action knew or would have
known with reasonable diligence the existence of the cause of action;
or (ii) the maximum time period allowed under applicable laws.
21.6 This Agreement shall be binding upon and inure to the benefit of IBM's
successors and permitted assigns and shall be binding upon and inure
to the benefit of OptiMark's successors and permitted assigns.
21.7 This Agreement and its Schedules A through E is the complete and
exclusive statement of agreement between the parties relating to the
subject matter of this Agreement and supersedes all proposals, written
or oral and all other communications between the parties relating to
the subject matter of this Agreement and its Schedules A through E.
There are no representations, warranties, conditions or terms made by
either party other than as expressly stated in this Agreement.
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<PAGE> 32
CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
21.8 This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York, United States of America that are
applicable to contracts made and wholly performed entirely within that
State and excluding its choice of law rules, provided however that
questions affecting the construction of any copyright or patent shall
be determined by the law of the country in which the copyright in
question subsists or patent in question has been granted.
21.9 The United Nations Convention on Contracts for the International Sale
of Goods shall not apply to this Agreement.
21.10 Each party shall, upon reasonable notice and with reasonable expenses
reimbursed by the other party, promptly and duly execute and deliver
to the other party such further documents and assurances, and take
such further action as the other party may from time to time request
in order to more effectively carry out the intent and purpose of this
Agreement and to establish and protect the rights, interests and
remedies intended to be created in favor of the other party. For
example, each party agrees to do what is reasonably necessary to
perfect the grants to the other party under Article 2.0 and to
cooperate and give all reasonable assistance (and facilitate its
employees to do the same) to permit the other party to secure, record,
and enforce the same, including the preparation and prosecution of any
applications for patents, registrations of copyrights or trademarks.
21.11 Neither party shall make any public statement concerning this
Agreement or disclose the existence of this Agreement without the
prior written consent of the other party. The marking of software
under Section 5.3 shall not constitute a public statement or
announcement.
21.12 All uses under this Agreement of any IBM trademarks by OptiMark shall
inure to the benefit of IBM. All uses of any OptiMark trademarks by
IBM shall inure to the benefit of OptiMark. Except as expressly
permitted in this Agreement under Section 5.3, no other uses of the
IBM trademarks by OptiMark or the OptiMark trademarks by IBM are
permitted.
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<PAGE> 33
CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
22.0 ACCEPTANCE
22.1 The parties, by their authorized signatures below, agree that this
Agreement is the complete agreement between the parties and replaces
all prior communications related to the subject matter of this
Agreement.
AGREED BY: AGREED BY:
IBM Canada Limited OptiMark Technologies, Inc.
By: /s/ Ronald Ziola By: /s/ William F. Adiletta
---------------- -----------------------
Name Ronald Ziola Name: William F. Adiletta
------------ -------------------
Title: Title: Executive Vice President
----------------------- ------------------------
Date: February 2, 1999 Date: February 2, 1999
---------------- ------------------------
AGREED BY:
ISM Information Systems
Management Corporation
By: /s/ Brenda Hoffman
------------------
Name: Brenda Hoffman
--------------
Title: Director
--------
Date: February 2, 1999
----------------
Attached: Schedules A-E
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<PAGE> 34
CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
SCHEDULE A
IDENTIFIED SOFTWARE COMPONENTS OF ITS SOFTWARE
Communications
IBADSIII - Admin
IBADSIS - Admin
IBADSIP - Admin Day End
IBDRSIS - Data Download
Custom Groups
IBCGSIS - Custom Group
IBCGSIP - Custom Group Day-end
General Modules
ITERSIR - Error Logging
ITNDSIR - Next Market Day
ITBCSIR - Broadcast
ITPDSIR - Previous Day
ITSBSIR - Subscription
ITQFSIR - Queue open
IBAASIP - Start End of Day
Market Control
IBACEXC - Application Control Exception
IBACSIII - Application Control
IBCASIII - Holiday Maintenance
IBCASIS - Holiday Maintenance
IBPDSIII - Product Distribution
IBPDSIP - Product Distribution Day End
IBPDSIS - Product Distribution
IBMHSIII - Market Hours and Software version
IBTRSIII - Transaction Table
ITPUSIS - Parameter Update
ITSMON - Monitor Menu
ITUBSIII - Event Type Table
Order Profile & Fill processing
IBOPSIS - Order Profile
A-1
<PAGE> 35
CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
IBOQSIP - Order Queue
IBOPSIP - Order Profile Day-end
IBOPSIP2 - Order Profile Day-end 2
IBMOSIP - Move Orders
IBFESIP - Fill Entry
IBFUSIS - Fill Update
IBFMSIP - Fill Monitor
IBCLSIP - Clearing
IBFDSIP - Fill Day-end
IBSNSIP - Sequence Number
Matching Cycle Scheduling
IBMSSIP - Market Status Process
IBPCSIP - Phase Control Process
IBCYSIP - Cycle Day End
Security and Suspend Processing
IBSESIS - Security Server
ITPESIR - Password Encryption Routine
IBSPSIII - Suspend Requester
IBSPSIS - Suspend Server
IBSPSIP - Suspend Process
Static Data - Firm Related
IBFISIII - Firm Setup Requester
IBFISIS - Firm Setup
IBFISIP - Firm Setup Dayend
IBFCSIII - Firm Credit Authorization Requester
IBFCSIS - Firm Credit Authorization
IBFCSIP - Firm Credit Authorization Dayend
Static Data - Market Maker
IBMMSIII - Market Maker Requester
IBMMSIS - Market Maker
IBMMSIP - Market Maker Dayend
Static Data - Product Related
IBPMSIII - Product Master Requester
IBPMSIS - Product Master
A-2
<PAGE> 36
CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
IBPMSIP - Product Master Dayend
Static Data - User Related
IBURSIII - User Setup Requester
IBURSIS - User Setup
IBURSIP - User Setup Dayend
TMAX-H
BI Broadcast Image
BM Broadcast Manager
BRA Broadcast Delivery Agent
DBA Database Delivery Agent
DM Delivery Manager
ED Event Distributor
QD Message Queue Distributor
SFDM SAF Delivery Manager
SFTM SAF Transaction Manager
TAOPT Transaction Agent
TCOM TMAX Process Command Interface
TINQ TMAX Inquiry Utility
TM Transaction Manager
XLOPT External Presentation Library
XPGEN External Presentation Compiler
A-3
<PAGE> 37
CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
SCHEDULE B
PROCEDURE TO DETERMINE OPTIMARK LICENSABLE MODIFICATION ELEMENTS
The parties acknowledge that, as of the Effective Date of this Agreement, IBM
has expressed to OptiMark an interest that the following modules of the
IBM-Made Modifications be first considered as OptiMark Licensable Modification
Elements pursuant to Section 2.3 and this Schedule B (without excluding other
modules):
IBPPSIR OptiMark Product Price Process
IBFBSIS OptiMark Fill Batch
IBOCSIII OptiMark On-demand cycle requester
SFDM OptiMark SAF delivery manager
SFTM OptiMark SAF transaction manager
SFDM OptiMark Stratus SAF delivery manager
SFTM OptiMark Stratus SAF transaction Manager
The procedure pursuant to Section 1.13 is outlined as follows:
IBM may request, by providing notice as set forth in Section 19.1,
that one or more of the eligible software code module elements
referred to in Section 1.13 be selected to be OptiMark Licensable
Modification Elements. OptiMark will evaluate IBM's request in good
faith and agrees not to withhold its consent for any request
unreasonably. If and when OptiMark and IBM mutually agree, the
selected elements shall be identified as specified in Section 1.13.
B-1
<PAGE> 38
CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
SCHEDULE C
FEES FOR OPTIMARK'S USE OF THE ITS SOFTWARE AND OPS MODIFIED WORK
[Attached hereto and incorporated by reference herein]
C-1
<PAGE> 39
CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
--------------------------------------------------------------------------------
FOR THE FIRST EXCHANGE
--------------------------------------------------------------------------------
If and when the OPS Modified Work is installed and on-line for the First
Exchange, OptiMark shall pay a one-time fee for all First Exchange uses in the
amount of $500,000 U.S. Dollars as follows:
40% in U.S. Dollars ($US 200,000) on signing; and
60% in U.S. Dollars ($US 300,000) on the Launch Date.
--------------------------------------------------------------------------------
II. FOR ADDITIONAL EXCHANGES
--------------------------------------------------------------------------------
(1) OptiMark and IBM agree that the license fees paid under
Section I above, this Section II and otherwise under the
Agreement shall in total amount to no more than $6,400,000 U.S.
dollars (as described in this Schedule C) for all uses at the
First Exchange and all Additional Exchanges ("AEs") , subject
only to the percentage reduction that may apply for "Services
Agreements" as described below.
--------------------------------------------------------------------------------
(2) The parties acknowledge they may enter into one or more
"Services Agreement(s)" covering the First Exchange and/or one or
more of the Aes. "Services Agreements" means any agreement made
between OptiMark and IBM under which IBM provides additional
software maintenance or development services, and would include,
for purposes of this Schedule C, any Documents of Understanding
(DOU's) for such services (whether or not the DOU leads to an
actual agreement). For example and without limitation, the
Services Agreements includes the Maintenance Agreement
(contemplated under Section 1.1.c) of the Agreement) but would
not include the Managed OPS Agreement (contemplated under Section
1.1.d)).
--------------------------------------------------------------------------------
(3) If and when the OPS Modified Work is installed and on-line fo
an AE, OptiMark shall pay a one-time license fee for on-line use
at the AE, as set forth in the table below, only if it is the
1st, 2nd, 3rd, 4th, or 5th AE using the OPS Modified Work. The
license fees in the table below are also subject to a percentage
reduction ("% red") based on the calendar year dollar amount of
services provided and paid for (unless the parties otherwise
agree) if any, under the Services Agreements. In addition to the
above, OptiMark shall also have the option of prepaying the
license fees for any or all of the remaining first five AEs, as
set forth in (5) below. Each license fee in this Section II (3)
shall be payable as follows: 50% on the first use date at the AE
and 50% 3 months thereafter.
(Note: "red" in table below = reduction, "CY"= calendar year, all amounts
are in millions of US Dollars (e.g. 1 MM and $US 2.10), TOTAL includes
First Exchange of $500,000, plus amounts payable under Section II)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
0 to < 1MM
(or if there are no Services
US Dollar value of Agreements) E1<3MM E3<5MM E55MM
Services Per CY 0% red 10% red 20% red 50% red
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st AE $US 2.10 1.89 1.68 1.05
---------------------------------------------------------------------------------------------------------------------------------
2nd AE $US 1.1 0.99 0.88 0.55
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
C-1
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CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
<TABLE>
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3rd AE $US 1.0 0.90 0.80 0.50
---------------------------------------------------------------------------------------------------------------------------------
4th AE $US 0.9 0.81 0.72 0.45
---------------------------------------------------------------------------------------------------------------------------------
5th AE $US 0.8 0.72 0.64 0.40
---------------------------------------------------------------------------------------------------------------------------------
6th AE + $US NO ADDITIONAL LICENSE FEE
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
Sub Tot
(for Section II) $US 5.9 5.31 4.72 2.95
---------------------------------------------------------------------------------------------------------------------------------
TOTAL
(Sections I + II) $US 6.4 5.81 5.22 3.45
---------------------------------------------------------------------------------------------------------------------------------
(4)
Agreements in force during the applicable the calendar
year (CY). The value of services per calendar year accumulates and
the agreement or DOU applies for the value calculation on the
earliest date that either a Document of Understanding (DOU) or
applicable agreement for such new services is signed.
---------------------------------------------------------------------------------------------------------------------------------
(5) In any calendar year (CY), OptiMark has the option to prepay
the one-time license fees for any or all of the remaining AEs at
the percentage reduction (% red) corresponding to the level of
services provided during that calendar year. Should OptiMark
choose to prepay all of the remaining AEs in a calendar year when
IBM is to provide a level of services having a value that entitles
OptiMark to a percentage reductions for fees due, OptiMark will
fulfill all fee obligations under this Agreement, although total
fees paid will be less then $6,400,000 U.S. dollars.
---------------------------------------------------------------------------------------------------------------------------------
EXCEPT AS SET FORTH IN THIS SCHEDULE C, NO OTHER FEE OR ROYALTY SHALL BE PAID BY
OPTIMARK FOR THE LICENSES AND RIGHTS GRANTED TO OPTIMARK AS SET FORTH UNDER THE
AGREEMENT
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
C-2
<PAGE> 41
CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
SCHEDULE D
LIST OF REQUIREMENTS THAT DO NOT MEET THE PERFORMANCE GOALS AS OUTLINED IN
THE OPEN ISSUES/NEW REQUIREMENTS DOCUMENT DATED OCTOBER 21, 1997,
OR THE OTI ALPHA PERFORMANCE OBJECTIVES MATRIX
At the Effective Date, the parties agree that the OPS Modified Work in
conjunction with the other components of the OptiMark Proprietary System does
not meet the following performance goals as outlined in the Open Issues/New
Requirements Document dated October 21, 1997, or the OTI Alpha Performance
Objectives Matrix:
1. All securities scheduled for a trade cycle within 90 seconds
- Reference Open Issues/New Requirements Document dated
October 21, 1997 page 20-29;
2. Each order profile entry has the ability of apportioning 20
broker dealers (increased from 10) - OPS Change Request # 12
Reference #ITOT4163 dated May 29, 1998;
3. Improve download for large amounts of data, currently
downloading 40 records/sec improving to 80 records/second -
Not formally documented; and
4. OPS receives and processes 215 transactions equally
distributed from 100 end-users - OTI Alpha Performance
Objectives - 8th Target dated August 24, 1998.
For further clarity, to make improvements for the above mentioned performance
goals to the OPS Modified Work will require component interface changes which,
consequently, will require changes to the components themselves to take
advantage of the OPS Modified Work improvements. The parties agree that there
is limited value in IBM performing or completing these performance improvements
without the involvement of OptiMark, because the implementation of these
performance improvements will impact other components of the OptiMark
Proprietary System. Therefore, the parties understand and agree that
cooperative effort from both parties are required to ensure maximum gain from
the performance improvements.
The parties shall make good faith efforts to agree on a cooperative
implementation plan where the OPS Modified Work performance improvements will
be completed by IBM with OptiMark input either under the Maintenance Agreement
or under a separate agreement provided that under such further agreement all
improvements contributed from IBM shall be considered IBM-Made Modifications as
defined herein and shall be subject to the rights granted as set forth herein.
D-1
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CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
SCHEDULE E
DETAILED DESIGN DOCUMENTATION FOR OPS MODIFIED WORK
[Attached hereto and incorporated by reference herein]
ii
<PAGE> 43
-------------------------------------------------------------------------------
Functional Requirements
Specifications
-------------------------------------------------------------------------------
December 30, 1998
Revision 1.1
<PAGE> 44
To order additional copies of this document, contact:
OptiMark Technologies, Inc.
10 Exchange Place, 12th Floor
Jersey City, NJ 07302
Copyright (C) 1998 OptiMark Technologies, Inc. All rights reserved. No part of
this publication may be reproduced, transmitted, transcribed, stored in a
retrieval system, or translated into any language in any form by any means
without the written permission of OptiMark Technologies, Inc.
Other third party product names used herein are used to identify such products
and for descriptive purposes only. Such names may be marks and/or registered
marks of their respective owners.
<PAGE> 45
<TABLE>
<CAPTION>
OPTIMARK TECHNOLOGIES, INC.: FUNCTIONAL REQUIREMENTS CONTENTS
SPECIFICATIONS
=========================================================================================================================
CONTENTS
<S> <C> <C> <C>
1. EXECUTIVE SUMMARY................................................................................1
1.1. Introduction.....................................................................................1
1.2. System Overview..................................................................................1
1.3. Features for Participants........................................................................1
1.3.1. Features for Institutions.............................................................1
1.3.2. Features for Exchanges................................................................2
1.3.3. Features for Broker/Dealers...........................................................3
1.4. System Components................................................................................3
1.4.1. Transaction Network...................................................................3
1.4.2. User Interface........................................................................4
1.4.3. Servers...............................................................................4
1.4.4. OptiMark Profile System...............................................................4
1.4.5. Matching Engine.......................................................................4
1.4.6. Market Data...........................................................................5
1.4.7. Pacific Exchange......................................................................6
1.4.8. Clearance and Settlement..............................................................6
1.5. OptiMark Information Flow........................................................................7
1.6. Instruments Supported............................................................................7
1.7. Relationship to Existing Systems.................................................................8
1.7.1. Integration With Exchanges, Broker/Dealers and Specialists/Market Makers..............8
1.7.2. Integration With the National Market System...........................................8
*
</TABLE>
-------------------------------
* This confidential portion has been omitted and filed separately with the
Commission.
<PAGE> 46
CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
2. EXECUTIVE SUMMARY
2.1. INTRODUCTION
The OptiMark System represents a new market mechanism
designed to optimize the process of matching buyers and
sellers of securities. The purpose of this document is to
describe the functional requirements for the OptiMark Equity
Trading System (OptiMark). The intent is to provide a
functional overview of OptiMark; what the system will, and
will not, do at the time of "First Trade", and establish the
associated functional deliverables for the OptiMark System.
2.2. SYSTEM OVERVIEW
OptiMark provides a unique opportunity for institutions,
exchanges, and broker/dealers to participate in a new method
of electronic trading, which is designed to optimize the
efficiency of matching buyers and sellers.
The optimization is based on the relative willingness of both
buyers and sellers to trade over a range of prices and
volumes. Desirability of particular trades is expressed in
terms of "satisfaction" values. Based on these satisfaction
values, trades can occur at various prices and volumes across
the continuum, in a manner to produce the optimum mutual
satisfaction for both buyers and sellers at each stage. Once
trades have been matched, the results are forwarded to the
Institution and the executing exchange for printing to the
tape. Executing broker and clearing broker information
dissemination is controlled by the institution in order to
ensure the trading strategies of the participants are not
divulged.
OptiMark shall run scheduled call markets in equity
instruments throughout the trading day acting as a facility
of the Pacific Exchange (PCX). OptiMark shall comply with the
rules and regulations of the PCX, and shall fall under the
aegis of the PCX's Self-Regulatory Organization. Synergism
with existing systems at exchanges, institutions and
broker/dealers shall be maximized, allowing the benefits of
OptiMark to accrue with minimum changes to existing order
flows and systems.
2.3. FEATURES FOR PARTICIPANTS
2.3.1. FEATURES FOR INSTITUTIONS
E - 1
<PAGE> 47
CONFIDENTIAL
(OPTIMARK/IBM OPS AGREEMENT)
OptiMark shall provide large buy-side and sell side
institutions with the ability to construct "profiles" and
submit them directly to OptiMark under the auspices of the
PCX. The institution shall indicate on the Profile the
Designated Broker/Dealer(s) it wishes to use for the trades
that are executed. The broker/dealer is not notified of the
institution's trading strategy.
In contrast to discrete orders at a single price and size, a
Profile shall consist of a User-defined three-dimensional
surface, disposed over a grid of price/size coordinates, with
the size coordinates ranging up to the maximum quantity
desired. For each price/size coordinate, the institution
shall indicate a satisfaction level of between 0 and 1, with
0 representing no interest in trading at that price/size
coordinate, and 1 indicating complete satisfaction with that
price/quantity combination. Factors between 0 and 1 reflect
relative degrees of satisfaction with trades at that level.
The Profiles shall be easily entered by the institution's
trader or portfolio manager, via either a user-friendly
Graphical User Interface (GUI) or a Computer-to-Computer
Interface (CTCI) utilizing the FIX protocol. Within the GUI,
Profiles may be represented using color graphics, allowing
the strategy to be fully visualized. Conditions such as "fill
or kill", "immediate or cancel", and "all or none" shall be
supported.
Use of OptiMark is intended to provide institutions with
access to large pools of liquidity, and to allow them to
avoid the market impact, timing and opportunity costs that
are part of the current market structure. The Profiles shall
be submitted anonymously by the institution. Profiles shall
allow the total quantity to be quickly entered and made
available for electronic matching in a deep liquidity pool,
with non-disclosure of the trading strategy assured.
Executions shall occur at scheduled call times. Any part of
the Profile not immediately executed shall be retained in the
system, subject to time-in-force and other conditions, for
matching against newly entered Profiles. The Profiles shall
be confidential, and shall be easily and quickly modified or
canceled by the owner intraday.
OptiMark shall be capable of running throughout the trading
day, providing price discovery across a continuum of prices
and quantities, matching buyers and sellers at each
combination of price and quantity, to result in optimal
mutual satisfaction.
Executions shall be immediately reported to the institutions,
and to the exchange for printing on the Consolidated Tape
System (CTS) and for end-of-day submission to NSCC.
Executions shall be reported to the specified broker/dealer
for clearing and settlement, but may, at the discretion of
the institution, be held until after the close of trading so
that the outcomes of the trading strategy are not divulged.
2.3.2. FEATURES FOR EXCHANGES
With the advent of "upstairs" block trading, large pools of
liquidity typically are not available on exchange floors.
This severely hampers the ability of exchanges to perform
their role of efficiently matching buyers and sellers. With
OptiMark, the exchanges have
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an opportunity to bring these liquidity pools back into their
domain, allowing the exchange to better service the full
range of investors, from retail to institutional size.
OptiMark shall run as a matching facility for PCX. PCX's
rules and regulations shall apply fully to OptiMark. The
exchange shall print trades from OptiMark, and forward them
as locked-in trades to NSCC. The rules regarding the National
Market System shall be respected.
Retail orders may be forwarded to OptiMark by the exchange
Specialists, at their discretion. In addition, specialists
will be able to submit Profiles for their own account.
2.3.3. FEATURES FOR BROKER/DEALERS
Broker/Dealers shall remain responsible for the trades that
are executed in their name by institutions, and therefore
shall continue to earn commissions. Clearing Brokers shall be
able to exercise control over their exposure by setting and
maintaining trading limits for the institutions they
authorize for direct trading through OptiMark. These limits
shall be monitored, and the remaining trading limit
automatically updated, for every Profile entered directly by
the institution.
The Designated Broker/Dealers shall receive execution reports
from the OptiMark system (albeit without divulging the
institution's trading strategy) and shall handle allocations,
clearing, and settlement for the institution in the usual
manner.
The broker/dealer may take advantage of the increased
liquidity pools available through OptiMark by submitting
their proprietary trading interest as Profiles, and/or by
formulating Profiles for their retail or institutional
clients.
2.4. SYSTEM COMPONENTS
The system is comprised of eight major components: (1) the
Transaction Network, (2) the User Interface, (3) the Servers,
(4) the OptiMark Profile System, (5) the Matching Process,
(6) Market Data, (7) the Pacific Exchange Interface, and (8)
Clearance and Settlement. There are additional components of
the system such as Audit and Attestation, Security, Help
Desk, and Performance, which are also addressed within this
document. The following section provides an overview of the
components that will make up the OptiMark system:
2.4.1. TRANSACTION NETWORK
The Transaction Network is the communications infrastructure
upon which the OptiMark system is built. This component
encompasses the system infrastructure and dictates the
hardware platforms that will be utilized and supported,
communication protocols to and
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from the system, access security and encryption, error
recovery, system reliability and backup.
2.4.2. USER INTERFACE
The User Interface (UI) component defines how participants
interact with the system. This component defines the methods
that will be used to create Profiles, act upon those Profiles
(save, modify, send, and cancel), and receive information
about those Profiles. Broadcast of administrative messages
from OptiMark's central site is also supported.
Additionally, the specification will define in detail the
three methods that will be utilized to send and receive
Profiles; the Graphical User Interface (GUI), the
Computer-to-Computer Interface (CTCI), and the submission of
Specialists' Order Books from the PCX. Finally, the
validation being performed at the UI level is described in
detail.
2.4.3. SERVERS
An institutional server will be provided to the major
OptiMark trading participants. The server will be behind the
customer's firewall, providing local storage for the
institution's data to enhance processing speed and
efficiency.
2.4.4. OPTIMARK PROFILE SYSTEM
The OptiMark Profile System (OPS) is the component that
maintains all information critical to the OptiMark trading
system. OPS maintains the list of eligible securities in
OptiMark, the schedule of call cycles for each security, the
OptiMark Book of Record, logs of the actions taken on
Profiles, determines available trading limit for participants
and updates trading limit usage throughout the trading day,
routes trade result information, generates clearing records,
and monitors the other system connections.
In addition, OPS is responsible for receiving Profiles from
participants, validating the information received, forwarding
this data to the Matching Engine, and sending the resulting
information to participants and the PCX.
2.4.5. MATCHING ENGINE
The Matching Engine (ME) is the heart of the OptiMark trading
system. Using OptiMark Technologies, Inc. patent-pending
matching algorithm, this component receives Profiles from
participants and participating exchange specialists wishing
to buy or sell securities, as well as the current bids and
offers of all exchanges. The quotations from
non-participating exchanges are converted into Profiles,
which are included in the cycle. The ME then determines trade
matches based upon the mutual satisfaction, price, time of
entry, and size of the buyer-seller coordinate pairs. Trade
results are then generated that
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will ensure no other exchange markets are traded through and
meet the optimal trading criteria specified on the
participants' Profiles.
The ME will run throughout the trading day, initiating call
cycles according to the schedule maintained by OPS.
2.4.6. MARKET DATA
This component is used to determine the market for a security
at the time a cycle is initiated. This includes not only the
primary market, but the regional markets as well. These
markets will be forwarded to the ME in order to develop 'CQS
Profiles'. These Profiles are critical to ensure the OptiMark
system does not trade through other markets and abides by
existing market rules and regulations.
Additionally, the Market Data component will help to
determine when a security is open for trading, when a
security has been halted, and when trading has been resumed
for a halted security. This information, combined with
information from the Pacific Exchange, will be used to
determine when OptiMark shall open or halt trading for a
security.
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2.4.7. PACIFIC EXCHANGE
The Pacific Exchange (PCX) will be the first exchange to
utilize the OptiMark system. The PCX is key to the
functionality of the system since they will print the trades
on the tape, notify Broker/Dealers of executions, and forward
clearing information to start the clearance and settlement
process.
The PCX specialists shall have the option to forward their
Limit Order Books to OptiMark. The PCX shall receive trade
results from OPS for the specialists' Limit Order Books and
update the P/Coast system with this information as required.
The PCX shall be responsible for printing the resulting
trades on the Consolidated Tape System (CTS), forwarding
Intermarket Trading System (ITS) commitments to the
appropriate exchange and processing their responses,
providing Broker/Dealers with Execution Reports as required,
and forwarding OptiMark Clearing Records to the appropriate
Broker/Dealers and National Securities Clearing Corporation
(NSCC) for clearing purposes.
2.4.8. CLEARANCE AND SETTLEMENT
While OptiMark is not a registered broker dealer, the
OptiMark system shall operate under the existing clearing and
settlement procedures; simply put, OptiMark trades shall be
cleared and settled within three days of the trade.
Since OptiMark intends to comply with the existing rules and
regulations, this component is dedicated to ensuring the
proper information required for clearance and settlement is
provided to the PCX, the NSCC, the Institutions, and the
Broker/Dealers in the appropriate time frames.
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2.5. OPTIMARK INFORMATION FLOW
Profiles shall be entered by institutions, broker/dealers, or
exchange Specialists, and shall be created using the OptiMark
Graphical User Interface (GUI), a Computer-to-Computer
Interface (CTCI) that complies with the FIX protocol, or the
PCX Interface. Using the OptiMark GUI, the trader shall be
able to draw satisfaction contour lines on a two dimensional
(price/size) grid, or use Profile templates whereby the
computer creates the corresponding Profile based on
pre-defined parameters. The Profiles shall include the order
type (buy, sell), the order sub-type (time-in-force and other
special instructions), and total quantity desired.
OptiMark shall leverage connections to the order routing
systems of the PCX. This connection shall allow retail orders
managed by Specialists the opportunity to trade with larger
buyers and sellers, at the Specialist's discretion. Standard
orders are easily converted into Profiles, allowing entry
into the OptiMark System.
The OptiMark system will read Consolidated Quotation System
(CQS) to determine quotes at all exchanges, and will send
commitments to trade over the Intermarket Trading System
(ITS), via PCX, as required. OptiMark records all trades,
updates the Profile records, and notifies the buyers,
sellers, and participating exchanges of all trades executed.
Trade reports are sent to the PCX for reporting to the
Consolidated Tape System (CTS).
The records required for clearance and settlement of OptiMark
trades will be generated by the OptiMark system and sent to
the PCX. The PCX will forward these records to the Designated
Broker/Dealers and to the NSCC. The actual clearance and
settlement process will continue to operate as today,
external to the OptiMark system.
2.6. INSTRUMENTS SUPPORTED
Phase 1 of OptiMark shall support trading in US listed
equities at the Pacific Exchange (PCX).
The OptiMark System ultimately shall support several types of
instruments and trading strategies, including options, debt
instruments, futures, and currencies. The support for
additional instrument types and strategies is not included in
this Functional Requirements Specification.
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2.7. RELATIONSHIP TO EXISTING SYSTEMS
2.7.1. INTEGRATION WITH EXCHANGES, BROKER/DEALERS AND
SPECIALISTS/MARKET MAKERS
The OptiMark system is not an exchange. Rather, it is a
matching system, acting as a facility to an exchange that
will facilitate the interaction of buyers and sellers of all
types and sizes, from retail to institutional. OptiMark shall
support the inclusion of specialist/market maker orders for
their own positions (principal), as well as the electronic
book orders (agency) that the specialist/market maker routes
to the OptiMark system for trading. All Profiles flowing into
the OptiMark system shall be associated with an exchange and
shall have one or more Broker/Dealers that are members of the
exchange associated with them, for purposes of Trading Limit
approval, clearance and settlement. The association of an
assigned Broker/Dealer and exchange shall be enforced at the
client end, where the end User MUST specify the Broker/Dealer
and exchange routing as part of the Profile order entry.
2.7.2. INTEGRATION WITH THE NATIONAL MARKET SYSTEM
The Intermarket Trading System (ITS) was implemented as a
means to address the requirement established in the
Securities Exchange Act of 1975 for a National Market System.
Listed equity securities traded on more than one exchange
must have a published best quotation (bid/ask price and
quantity) distributed via CQS. If a print on one exchange
will trade through a quotation on another exchange, the
specialist must send an ITS commitment to trade at the print
price for the size shown in that quotation.
The OptiMark system shall comply with ITS trading rules.
Therefore, OptiMark shall monitor market data for the trades
and quotations of all exchanges listing securities traded on
the PCX. This market data shall be used to determine if a
quote could be obtained from exchange(s) outside OptiMark. If
a quote is available from an outside exchange, the OptiMark
system shall direct the Pacific Exchange to submit a
commitment via ITS through its Regional Computing Interface
to the exchange(s). In this case, OptiMark will generate a
pending fill(s), based on the commitment submitted to the
exchange(s), which will become Fill(s) when a confirmation is
received.
The OptiMark system shall not receive ITS commitments
directly from other exchanges. However, at their discretion,
specialists may represent some or all of the size of arriving
ITS commitments in OptiMark by entering Profiles from their
OptiMark GUI application.
* [Remainder of Schedule E pages 8-129]
---------------------------------
* This confidential portion has been omitted and filed separately with the
Commission.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
1.0 Definitions.....................................................................................................2
1.1 Agreements.............................................................................................2
a) "Agreement"...................................................................................2
b) "Confidentiality Agreement"...................................................................2
c) "Maintenance Agreement".......................................................................2
d) "Managed OPS Agreement".......................................................................2
e) "TMAX Agreement"..............................................................................2
1.2 "Customers"............................................................................................2
1.3 "IBM-Involved Applications"............................................................................2
1.4 "IBM Related Company(ies)".............................................................................2
1.5 Implementations........................................................................................3
a) "First Exchange" or "Pacific Exchange"........................................................3
b) "Additional Exchange(s)"......................................................................3
1.6 "ITS Application Product"..............................................................................3
1.7 "ITS Software".........................................................................................3
"ITS Software-Unix-Version"...................................................................3
1.8 "Launch Date"..........................................................................................4
1.9 "OPS Modification(s)" .................................................................................4
a) "IBM-Made Modifications"......................................................................4
b) "OptiMark-Made Modifications".................................................................4
1.10 "OPS Modified Work"....................................................................................4
1.11 "OPS User Server Copy(ies)"............................................................................4
1.12 "OptiMark Auction Process Field".......................................................................4
1.13 "OptiMark Licensable Modification Elements" ...........................................................5
1.14 "OptiMark New Work"....................................................................................5
1.15 "OptiMark Proprietary Element(s)"......................................................................5
1.16 "OptiMark Proprietary System(s)".......................................................................5
1.17 "OptiMark Related Company(ies)"........................................................................6
1.18 "Person(s)"............................................................................................6
1.19 "Ported Version".......................................................................................6
1.20 "Work Commencement Date"...............................................................................6
2.0 Grant of License/Assignment and Grant Back/Permitted Use........................................................6
3.0 Delivery........................................................................................................8
4.0 Provisions for OptiMark's Use...................................................................................9
4.1 Fees...................................................................................................9
4.2 Development............................................................................................9
4.3 Maintenance...........................................................................................10
4a.0 Technical Representative.......................................................................................10
5.0 Obligations....................................................................................................10
</TABLE>
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<S> <C> <C>
6.0 Access by Customers............................................................................................12
7.0 Intellectual Property Ownership ...............................................................................13
8.0 IBM Representations and Warranties/Limitation of Liability.....................................................14
9.0 IBM's Patent, Trade Secret and Trademark Indemnity/Notice of Claims............................................15
10.0 Software Defects and Errors....................................................................................18
11.0 IBM's Limitation of Liability..................................................................................19
12.0 OptiMark Warranty/Limitation of Liability......................................................................20
13.0 OptiMark's Patent, Trade Secret or Trademark Indemnity/Notice of Claim.........................................21
14.0 OptiMark's Limitation of Liability.............................................................................23
15.0 Confidential Information.......................................................................................24
16.0 Source code/Modifications......................................................................................26
17.0 Term and Termination...........................................................................................26
18.0 Effect of Termination..........................................................................................26
19.0 Notices........................................................................................................27
20.0 Assignment.....................................................................................................28
21.0 General........................................................................................................29
22.0 Acceptance.....................................................................................................32
SCHEDULE A - Identified Software Components of ITS Software............................................................A-1
SCHEDULE B - Procedure to Determine OptiMark Licensable Modification Elements..........................................B-1
SCHEDULE C - Fees for OptiMark's Use of the ITS Software and OPS Modified Work.........................................C-1
SCHEDULE D - List of Requirements That Do Not Meet the Performance Goals as Outlined
in the Open Issues/New Requirements Document Dated October 21, 1997, or the OTI Alpha
Performance Objectives Matrix..........................................................................................D-1
SCHEDULE E - Detailed Design Documentation for OPS Modified Work......................................................E-1
</TABLE>
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