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CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
OF
ESPEED, INC.
ESPEED, INC., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY
CERTIFY THAT:
Pursuant to authority conferred upon the Board of Directors of the
Corporation (the "Board") by the Amended and Restated Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation") and
pursuant to the provisions of ss.151 of the General Corporation Law of the State
of Delaware, the Board, pursuant to a meeting held on September 20, 2000,
adopted the following resolution providing for the designations, preferences and
relative, participating, optional and other rights, and the qualifications,
limitations and restrictions of the Series A Redeemable Convertible Preferred
Stock.
WHEREAS, the Certificate of Incorporation provides for two
classes of stock known as common stock, $.01 par value per share (the "Common
Stock"), and preferred stock, $.01 par value per share ("Preferred Stock"); and
WHEREAS, the shares of Common Stock have been designated as
Class A Common Stock, $.01 par value per share (the "Class A Common Stock"), and
Class B Common Stock, $.01 par value per share; and
WHEREAS, the Board is authorized by the Certificate of
Incorporation to provide for the issuance of the shares of Preferred Stock in
series, and by filing a certificate pursuant to the applicable law of the State
of Delaware, to establish from time to time the number of shares to be included
in such series and to fix the designations, preferences and rights of the shares
of each such series and the qualifications, limitations and restrictions
thereof.
NOW, THEREFORE, BE IT RESOLVED, that the Board deems it
advisable to, and hereby does, designate a Series A Redeemable Convertible
Preferred Stock and fixes and determines the rights, preferences,
qualifications, limitations and restrictions relating to the Series A Redeemable
Convertible Preferred Stock as follows:
1. Designation. The shares of such series of Preferred Stock shall be
designated "Series A Redeemable Convertible Preferred Stock" (referred to herein
as the "Series A Preferred Stock").
2. Authorized Number. The number of shares constituting the Series A
Preferred Stock shall be 5,500,000.
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3. Ranking. The Series A Preferred Stock shall rank, upon a Liquidation
Event (as defined in Section 5(a) hereof), senior and prior to the Common Stock
(all equity securities of the Corporation to which the Series A Preferred Stock
ranks prior, whether with respect to liquidation, dissolution, winding up or
otherwise, including the Common Stock are collectively referred to herein as
"Junior Securities") and on parity with all other classes or series of preferred
stock of the Corporation now or hereafter created and/or issued (including the
Corporation's Series B Redeemable Convertible Preferred Stock). The Corporation
shall not create any other class or series of stock ranking senior to the Series
A Preferred Stock without the affirmative vote of the holders of a majority of
the then outstanding shares of Series A Preferred Stock, voting separately as a
class.
4. Dividends. The Series A Preferred Stock shall not accrue or be paid
any dividends.
5. Liquidation.
(a) Liquidation Procedure. Upon any liquidation, dissolution
or winding-up of the Corporation, whether voluntary or involuntary or a sale,
conveyance or disposition of all or substantially all the assets of the
Corporation (each such event, a "Liquidation Event"), the holders of Series A
Preferred Stock shall be entitled, before any distribution or payment is made
upon any Junior Securities (but after any distribution or payment is made upon
any stock ranking senior to the Series A Preferred Stock), to be paid an amount
equal to $1.00 per share of Series A Preferred Stock (the "Series A Issue
Price") (as adjusted for any combinations, divisions or similar
recapitalizations affecting the shares of Series A Preferred Stock but not the
Common Stock or any other securities of the Corporation into which the Series A
Preferred Stock may be converted from time to time) (such Series A Issue Price
being herein referred to when appropriate as the "Liquidation Payments" and the
date on which the Liquidation Payments are made being herein referred to as the
"Liquidation Date"). If upon any Liquidation Event, the assets to be distributed
among the holders of Series A Preferred Stock and the holders of any class or
series of stock of the Corporation ranking on a parity with the Series A
Preferred Stock with respect to liquidation preference shall be insufficient to
permit payment in full to the holders of Series A Preferred Stock of the
Liquidation Payments and the preferential amounts to which such other holders
are entitled, then the assets available for distribution to the holders of
Series A Preferred Stock and such other holders shall be distributed ratably
among the holders of Series A Preferred Stock and such holders in proportion to
the full respective distributive amounts to which they are entitled.
(b) Remaining Assets. Upon any Liquidation Event, after the
holders of Series A Preferred Stock and the holders of any class or series of
stock of the Corporation ranking on a parity with the Series A Preferred Stock
with respect to liquidation preference shall have been paid in full the
respective distributive amounts to which they are entitled, the remaining assets
of the Corporation may be distributed ratably per share, including shares of
Class A Common Stock actually issued upon exercise of the Warrant (as defined
herein), in order of preference to the holders of Junior Securities in
accordance with their terms.
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(c) Liquidation Notice. At least 30 days prior to a
Liquidation Date, written notice (a "Liquidation Notice") shall be mailed by
means of first-class mail, postage pre-paid, to each holder of record of the
Series A Preferred Stock at its address last shown on the records of the
Corporation. Any Liquidation Notice mailed in this manner shall conclusively be
deemed to have been duly given whether or not the Liquidation Notice is in fact
received. The Liquidation Notice shall state:
(i) the Liquidation Date;
(ii) the amount of the Liquidation Payments; and
(iii) the place where the Liquidation Payments shall
be payable.
(d) Fractional Shares. The Liquidation Payments with respect
to each outstanding fractional share of Series A Preferred Stock shall be equal
to a ratably proportionate amount of the Liquidation Payments with respect to
each outstanding share of Series A Preferred Stock.
6. Optional Conversion.
(a) Optional Conversion. From and after the date of issuance
and until the Redemption Date (as defined in Section 7 below), (i) any share of
Series A Preferred Stock may be converted without any payment of consideration
at the option of the holder at any time into fully paid and non-assessable
shares of Class A Common Stock at the rate of 1/100th of a share of Class A
Common Stock (subject to adjustment as set forth in subsection 6(f) below) for
each share of Series A Preferred Stock (the "Partial Conversion Rate") or (ii)
such number of shares as is equal to the Annual Amount (as defined below) or, if
greater, the Cumulative Annual Amount (as defined below) may be converted
without any payment of consideration at the option of the holder into fully paid
and non-assessable warrants (individually a "Warrant" and collectively, the
"Warrants"), in the form of Exhibit A hereto, at the rate of one Warrant for
each share of Series A Preferred Stock (the "Full Conversion Rate"). Each
Warrant will be exercisable to purchase one share of Class A Common Stock,
subject to adjustment as set forth in the Warrant.
(b) The Annual Amount. The number of shares of Series A
Preferred Stock which may be converted at the Full Conversion Rate each year
(the "Annual Amount") shall be determined annually based on the Gross
Transaction Revenues (as defined below) received by the Corporation and
TradeSpark, LP ("TradeSpark") in the aggregate (without double counting) from
the electronic marketplace (the "Marketplace"), described in that certain
Services Agreement, dated September 22, 2000, between the Corporation and
TradeSpark (the "Services Agreement"), for each year during the six year period
(the "Six Year Period") which begins on the first day of the month that
immediately follows the initial closing of EIP Holdings, LLC's ("EIP")
investment in TradeSpark pursuant to that certain Subscription Agreement, dated
September 22, 2000, between TradeSpark and EIP. Upon the determination of the
Gross Transaction Revenues for the first year during the Six Year
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Period, such Gross Transaction Revenues shall be divided by $250,000,000 and
then multiplied by 5,500,000 for the determination of the Annual Amount for the
first year of the Six Year Period. Upon determination of the Gross Transaction
Revenues for the remaining five years of the Six Year Period, the excess (if
any) of the Gross Transaction Revenues of each such year over the Gross
Transaction Revenues of the immediately preceding year shall be divided by
$250,000,000 and then multiplied by 5,500,000 to determine the Annual Amount for
such year; provided, however, that for purposes of calculating the Annual Amount
for any year during such remaining five years, an excess shall be deemed to
exist for any such year only if and to the extent that the Gross Transaction
Revenues for such year exceed the highest Gross Transaction Revenues theretofore
achieved for any year of the Six Year Period. Notwithstanding the foregoing,
until the Gross Transaction Revenues for any year of the Six Year Period exceeds
$10,000,000, the Annual Amount shall be zero. Upon determination of the Annual
Amount for each year during the Six Year Period, the Chief Financial Officer of
the Corporation shall prepare a written certificate setting forth such
determination and such certificate shall promptly be delivered to the
recordholders of the Series A Preferred Stock. The sum of all Annual Amounts,
less any shares of Series A Preferred Stock previously converted at the Partial
Conversion Rate or the Full Conversion Rate, shall be referred to herein as the
"Cumulative Annual Amount."
(c) Definition of Gross Transaction Revenues. "Gross
Transaction Revenues" shall have the meaning ascribed to Transaction Revenues in
the Services Agreement except that (x) there shall be added thereto, Advertising
Sales Revenues (as defined in the Services Agreement) and Additional Services
Revenues (as defined in the Services Agreement); and (y) any rebates of
commissions or similar arrangements shall be ignored and the amount of any such
rebate or similar arrangement shall be deemed collected and part of Gross
Transaction Revenues; and (z) to the extent that, for any year during the Six
Year Period, Additional E-Commerce Services Revenues (as defined in the Services
Agreement) and Information Services Revenues (as defined in the Services
Agreement) (collectively the "Non-Electronic Services Revenues") comprise more
than the specified percentage set forth below of the Gross Transaction Revenues
for such year, the portion of Non-Electronic Services Revenues for such year
that is in excess of such percentage shall be excluded from the calculation of
Gross Transaction Revenues for such year:
Year 1..........................50%
Year 2..........................40%
Year 3..........................30%
Year 4(and thereafter)..........20%
(d) Determination of Gross Transaction Revenues. Gross
Transaction Revenues for each year during the Six Year Period shall be
determined in accordance with the definition contained in this Section 6 and the
procedures contained in the Limited Liability Company Agreement of EIP, as the
same may be amended from time to time, and any disputes in connection with any
such determination shall be resolved in accordance with the dispute resolution
terms thereof.
(e) Procedure. In the event that a holder of Series A
Preferred Stock desires to convert its Series A Preferred Stock into shares of
Class A Common Stock, such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or any
transfer agent for the Series A Preferred Stock, and shall give written notice
to the Corporation at such office that such holder elects to convert the same.
Such notice shall state the
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number of shares of Series A Preferred Stock being converted. Thereupon, the
Corporation shall promptly issue and deliver at such office to such holder a
certificate or certificates for the number of shares of Class A Common Stock to
which such holder is entitled. Such conversion shall be deemed to have been made
at the close of business on the date of such surrender of the certificates
representing the shares of Series A Preferred Stock to be converted, and the
person entitled to receive the shares of Class A Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of Class A Common Stock on such date. If shares of Class A Common Stock are
being sold pursuant to an underwritten public offering, such conversion may at
the option of the holder be conditioned upon closing of the offering.
(f) Adjustment of Partial Conversion Rate. The number and kind
of securities issuable upon the optional conversion of the Series A Preferred
Stock at the Partial Conversion Rate shall be subject to adjustment from time to
time in accordance with the following provisions:
(i) Reorganization, Reclassification. In the event of
a reorganization, share exchange or reclassification,
other than a change in par value, or from par value
to no par value, or from no par value to par value,
or a transaction described in clauses (ii) or (iii)
below, then each share of Series A Preferred Stock
shall, after such reorganization, share exchange or
reclassification, be convertible into the kind and
number of shares of stock or other securities or
other property of the Corporation which the holder of
Series A Preferred Stock would have been entitled to
receive if the holder had held the Class A Common
Stock issuable upon conversion of its Series A
Preferred Stock immediately prior to such
reorganization, share exchange or reclassification.
The provision of this Section 6(f)(i) shall similarly
apply to successive reorganizations and
reclassifications.
(ii) Consolidation, Merger. In the event of a merger
or consolidation to which the Corporation is a party,
then each share of Series A Preferred Stock shall,
after such merger or consolidation, be convertible
into the kind and number of shares of stock and/or
other securities, cash or other property which the
holder of Series A Preferred Stock would have been
entitled to receive if the holder had held the Class
A Common Stock issuable upon conversion of its Series
A Preferred Stock immediately prior to such
consolidation or merger. The provision of this
Section 6(f)(ii) shall similarly apply to successive
reorganizations and reclassifications.
(iii) Subdivision or Combination of Shares. In case
outstanding shares of Class A Common Stock shall be
subdivided, the Partial Conversion Rate shall be
proportionately reduced as of the effective date of
such subdivision, or as of the date a record is taken
of the holders of Class A Common Stock for the
purpose of so subdividing, whichever is earlier. In
case outstanding shares of Class A Common Stock shall
be combined, the Partial Conversion Rate shall be
proportionately increased as of the
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effective date of such combination, or as of the date
a record is taken of the holders of Class A Common
Stock for the purpose of so combining, whichever is
earlier.
(iv) Stock Dividends. In case shares of Class A
Common Stock are issued as a dividend or other
distribution on the Class A Common Stock (or such
dividend is declared), then upon conversion of any
share of Series A Preferred Stock, the holder of such
converted Series A Preferred Stock shall be entitled
to receive, in addition to the number of shares of
Class A Common Stock such holder is entitled to
receive based on the Partial Conversion Rate then in
effect, that kind and number of shares of stock which
such holder would have been entitled to receive if
the holder had held the Class A Common Stock issuable
upon conversion of its Series A Preferred Stock as of
the date a record is taken of the holders of Class A
Common Stock for the purpose of receiving such
dividend or other distribution (or if no such record
is taken, as at the earliest of the date of such
declaration, payment or other distribution).
(v) Minimum Adjustment. No adjustment of the Partial
Conversion Rate shall be made if the amount of any
such adjustment would be an amount less than 1% of
the Partial Conversion Rate then in effect, but any
such amount shall be carried forward and an
adjustment in respect thereof shall be made at the
time of and together with any subsequent adjustment
which, together with such amount and any other amount
or amounts so carried forward, shall aggregate an
increase or decrease of 1% or more.
(g) Adjustment of Full Conversion Rate. The number of Warrants
issuable upon optional conversion of the Series A Preferred Stock at the Full
Conversion Rate shall not be subject to adjustment upon the occurrence of any of
the events set forth in Sections (f)(i) - (iv). Section 3 of the Warrants
contains comparable adjustment provisions which require adjustment to the
Warrant Shares (as defined therein), the other securities for which the Warrants
are exercisable and the Per Share Warrant Price (as defined therein) upon the
occurrence of certain corporate events. If any such corporate events occur after
the date of issuance of the Series A Preferred Stock, but on or prior to the
conversion of the Series A Preferred Stock into a Warrant, the terms of such
Warrant shall be adjusted at the time of issuance of the Warrant to reflect
adjustments in the Warrant Shares, the securities for which the Warrant is
exercisable and the Per Share Warrant Price, and such other terms as necessary
to reflect such corporate event.
7. Redemption.
(a) Optional Redemption by the Corporation. Any Series A
Preferred Stock which are not convertible at the Full Conversion Rate, following
the determination of the Annual
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Amount for the sixth year of the Six Year Period shall be redeemable, at the
option of the Corporation, at the Partial Conversion Rate, as the same may be
subject to adjustment as set forth above (the "Redemption Price"), payable in
fully paid and non-assessable shares of Class A Common Stock on the date of
redemption (such date being referred to herein as the "Redemption Date"),
pursuant to the Redemption Notice and the Redemption Procedure provisions set
forth, respectively, in subsections 7(b) and 7(c) below.
(b) Redemption Notice. At least five days prior to a
Redemption Date, written notice (a "Redemption Notice") shall be mailed by means
of first-class mail, postage pre-paid, to each holder of record of the Series A
Preferred Stock to be redeemed at its address last shown on the records of the
Corporation. Any Redemption Notice mailed in this manner shall conclusively be
deemed to have been duly given whether or not the Redemption Notice is in fact
received. The Redemption Notice shall state:
(i) the total number of shares of Series A
Preferred Stock to be redeemed by the
Corporation on the Redemption Date;
(ii) the number of shares of Series A Preferred
Stock that the Corporation intends to redeem
from the holder of Series A Preferred Stock
to whom the Redemption Notice is addressed;
(iii) the Redemption Date and the Redemption
Price; and
(iv) the manner and place designated for the
holder of Series A Preferred Stock to
surrender to the Corporation his certificate
or certificates representing the shares of
Series A Preferred Stock to be redeemed in
exchange for the Redemption Price.
(c) Redemption Procedure. From and after the Redemption Date,
unless there shall have been a default in payment of the Redemption Price, all
rights of the holders of shares of Series A Preferred Stock as holders of Series
A Preferred Stock (except the right to receive the Redemption Price upon
surrender of their certificate or certificates) shall cease as to those shares
of Series A Preferred Stock redeemed, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever. The shares of Series A Preferred Stock not redeemed
shall remain outstanding and entitled to all the rights and preferences provided
herein.
8. Voting Rights.
(a) General. Other than the rights expressly provided for
herein or provided by law, holders of the Series A Preferred Stock shall not
have any voting rights. In any vote or action of the holders of the Series A
Preferred Stock voting together as a separate class required by law, each share
of issued and outstanding Series A Preferred Stock shall entitle the holder
thereof to one vote per share.
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(b) Protective Provisions. So long as any Series A Preferred
Stock is outstanding, the Corporation shall not, without the approval by vote or
written consent of the holders of not less than a majority of the then
outstanding shares of Series A Preferred Stock, amend, waive or repeal any
provisions of, or add any provision to this Certificate of Designations or any
provisions contained herein that affect the Warrant; provided, however, that
written consent of all holders of Series A Preferred Stock shall be required
with respect to any changes that would be detrimental to the rights of a holder
as a holder of Series A Preferred Stock under this Certificate of Designation
disproportionately to such rights of the other holders of Series A Preferred
Stock.
9. Shares to be Retired. All shares of Series A Preferred Stock
redeemed, converted, exchanged or purchased by the Corporation shall be retired
and canceled and shall be restored to the status of authorized but unissued
shares of Preferred Stock, without designation as to series and may thereafter
be reissued.
10. Miscellaneous.
(a) Sinking Fund. The Series A Preferred Stock is not subject
to or entitled to the benefit of a sinking fund.
(b) No other Rights. The Series A Preferred Stock shall not
have any preferences, voting powers or relative, participating, optional,
preemptive or other special rights except as expressly set forth in this
Certificate of Designations.
(c) Notices. If at any time, (i) the Corporation shall declare
a stock dividend (or any other distribution except for cash dividends) on the
Class A Common Stock or a subdivision or combination of the Class A Common
Stock; (ii) there shall be any capital reorganization, share exchange or
reclassification of the Class A Common Stock, or any consolidation or merger to
which the Corporation is a party, or any sale or transfer of all of
substantially all of the assets of the Corporation; or (iii) there shall be a
voluntary or involuntary dissolution, liquidation or winding-up of the
Corporation; then, in any one or more of such cases, the Corporation shall give
written notice to the recordholders of the Series A Preferred Stock, not less
than 10 days before any record date or other date set for definitive action, or
of the date on which such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up shall take place, as the
case may be. Such notice shall also set forth such facts as shall indicate the
effect of such action (to the extent such effect may be known at the date of
such notice) on the current Partial Conversion Rate, and the kind and amount of
Class A Common Stock and other securities and property deliverable upon optional
conversion of the Series A Preferred Stock. Such notice shall also specify the
date (to the extent known) as of which the holders of the Class A Common Stock
of record shall be entitled to exchange their Class A Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, sale, consolidation, merger, dissolution, liquidation or
winding-up, as the case may be. In addition, whenever the Partial Conversion
Rate is adjusted as herein provided, or an event occurs, prior to the conversion
of all of the then outstanding shares of the Series A Preferred Stock into
Warrants, that would require adjustment of the Warrant Shares, the securities
for which the Warrant is exercisable or the Per Warrant Share Price under
Section 6(g)
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above, the Chief Financial Officer of the Corporation shall compute the adjusted
Partial Conversion Rate in accordance with Section 6(f) above and the
adjustments to the Warrant in accordance with Section 6(g) and shall prepare a
written certificate setting forth such adjusted Partial Conversion Rate and
Warrant adjustments, and such written instrument shall promptly be delivered to
the recordholders of the Series A Preferred Stock.
(d) Reservation. The Board shall at all times so long as any
shares of Series A Preferred Stock remain outstanding reserve a sufficient
number of authorized but unissued shares of Class A Common Stock to be issued in
satisfaction of the conversion rights, exercise rights and privileges aforesaid,
including, the maximum number of such shares which would be issued upon exercise
of all Warrants at the Full Conversion Rate.
(e) Issue Taxes. The Corporation shall pay all issue taxes, if
any, incurred in respect of the issue of securities on conversion. If a holder
of shares of Series A Preferred Stock surrendered for conversion specifies that
the securities to be issued on conversion are to be issued in a name or names
other than the name or names in which such surrendered shares are registered on
the books of the Corporation, then, the Corporation shall not be required to pay
any transfer or other taxes incurred by reason of the issuance of such
securities on conversion to the name of another, and if the appropriate transfer
taxes shall not have been paid to the Corporation or the transfer agent for the
Series A Preferred Stock at the time of surrender of the shares of Series A
Preferred Stock involved, then the securities issued upon conversion thereof may
be registered in the name or names in which the surrendered shares were
registered, despite the instructions to the contrary.
(f) Valid Issuance. All securities which may be issued in
connection with the conversion provisions set forth herein, upon issuance by the
Corporation, will be validly issued, fully paid and non-assessable, free from
preemptive rights and free from all taxes, liens or charges with respect thereto
created or imposed by the Corporation.
(g) Swap or Hedging Transactions. Without the prior written
consent of the Corporation, no holder of shares of Series A Preferred Stock may
enter into any swap or other hedging transaction relating to the Series A
Preferred Stock, or any interest therein, except as provided in the Warrant.
o * * * *
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IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designations this 22nd day of September, 2000.
ESPEED, INC.
By: /s/ Frederick T. Varacchi
----------------------------------------
Name: Frederick T. Varacchi
Title: President
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EXHIBIT A
NEITHER THIS WARRANT NOR THE SHARES OF CLASS A COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION
SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Standard Time, on September 22, 2010
WARRANT TO PURCHASE CLASS A COMMON STOCK
OF
eSpeed, Inc.
FOR VALUE RECEIVED, eSpeed, Inc. (the "Company"), a Delaware
corporation, hereby certifies that ___________ (the "Initial Holder"), or its
permitted assigns (together with the Initial Holder, the "Holder"), is entitled
to purchase from the Company, at any time or from time to time commencing on the
Exercise Date set forth in Section 4 hereof and prior to 5:00 P.M., Eastern
Standard Time, on September 22, 2010 a total of _________ fully paid and
non-assessable shares of Class A Common Stock, par value $.01 per share, of the
Company for a purchase price of $27.94 per share (Hereinafter, (i) said Class A
Common Stock, together with any other equity securities which may be issued by
the Company with respect thereto or in substitution therefor, is referred to as
the "Class A Stock," (ii) the shares of the Class A Stock purchasable hereunder
are referred to as the "Warrant Shares," (iii) the aggregate purchase price
payable hereunder for the Warrant Shares is referred to as the "Aggregate
Warrant Price," (iv) the price payable hereunder for each of the Warrant Shares
is referred to as the "Per Share Warrant Price," (v) this Warrant, and all
warrants hereafter issued in exchange or substitution for this Warrant are
referred to as the "Warrant" and (vi) the holder of this Warrant is referred to
as the "Holder.") This Warrant is one of a series of warrants issued pursuant to
a conversion of either Series A Redeemable Convertible Preferred Stock, $.01 par
value per share or Series B Redeemable Convertible Preferred Stock, $.01 par
value per share which were issued by the Company (collectively, the "Convertible
Preferred Stock") to various persons (the "Preferred Stock Holders"). The number
of Warrant Shares and the securities (if applicable) for which this Warrant is
exercisable and the Per Share Warrant Price are subject to adjustment for
certain corporate events occurring after September 22, 2000 as hereinafter
provided under Section 3. [The terms of this Warrant will be revised prior to
issuance to reflect any corporate event which would have required an adjustment
under Section 3 hereof had this Warrant been outstanding on the date of such
event.]
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1. Exercise of Warrant. This Warrant may be exercised, in whole at any
time or in part from time to time, commencing on the Exercise Date set forth in
Section 4 hereof and prior to 5:00 P.M., Eastern Standard Time, on September 22,
2010 by the Holder of this Warrant by the surrender of this Warrant (with the
subscription form at the end hereof duly executed) at the address set forth in
Section 9(a) hereof, together with proper payment of the Aggregate Warrant
Price, or the proportionate part thereof if this Warrant is exercised in part.
The Aggregate Warrant Price or Per Share Warrant Price shall be paid in cash,
via wire transfer to an account designated by the Company, or by certified or
official bank check payable to the order of the Company.
If this Warrant is exercised in part, the Holder shall be
entitled to receive a new Warrant covering the number of Warrant Shares in
respect of which this Warrant has not been exercised and setting forth the
proportionate part of the Aggregate Warrant Price applicable to such Warrant
Shares. Upon such surrender of this Warrant, the Company will (a) issue a
certificate or certificates in the name of the Holder for the shares of the
Class A Stock to which the Holder shall be entitled, and (b) deliver the
proportionate part thereof if this Warrant is exercised in part, pursuant to the
provisions of the Warrant.
No fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in cash equal to such
fraction multiplied by the fair market value of a share as reasonably determined
by the Company's Board of Directors.
2. Reservation of Warrant Shares. The Company agrees that, prior to the
expiration of this Warrant, the Company from and as of the date hereof, will
have authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Class A Stock as
from time to time shall be receivable upon the exercise of this Warrant.
3. Adjustments for Corporate Events. The number and kind of securities
issuable upon the exercise of this Warrant, the Per Share Warrant Price and the
number of Warrant Shares for which this Warrant may be exercised shall be
subject to adjustment from time to time in accordance with the following
provisions:
(a) Reorganization, Reclassification. In the event of a
reorganization, share exchange, or reclassification,
other than a change in par value, or from par value
to no par value, or from no par value to par value or
a transaction described in subsection (b) or (c)
below, this Warrant shall, after such reorganization,
share exchange or reclassification, be exercisable
into the kind and number of shares of stock or other
securities or other property of the Company which the
holder of this Warrant would have been entitled to
receive if the holder had held the Warrant Shares
issuable upon exercise of this Warrant immediately
prior to such reorganization, share exchange, or
reclassification. The provision of this Section 3(a)
shall similarly apply to successive reorganizations
and reclassifications.
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(b) Merger, Consolidation or Sale of All or Substantially
All Assets. In the event of a merger or consolidation
to which the Company is a party or the sale of all or
substantially all of the assets of the Company, this
Warrant shall, after such merger, consolidation or
sale, be exercisable for the kind and number of
shares of stock and/or other securities, cash or
other property which the holder of this Warrant would
have been entitled to receive if the holder had held
the Warrant Shares issuable upon exercise of this
Warrant immediately prior to such merger,
consolidation or sale. Any such merger, consolidation
or sale shall require, as a condition thereto, that
such other party to such merger, consolidation or
sale agree in writing to assume this Warrant. The
provision of this Section 3(b) shall similarly apply
to successive mergers and transfers.
(c) Subdivision or Combination of Shares. In case
outstanding shares of Class A Stock shall be
subdivided, the Per Share Warrant Price shall be
proportionately reduced as of the effective date of
such subdivision, or as of the date a record is taken
of the holders of Class A Stock for the purpose of so
subdividing, whichever is earlier. In case
outstanding shares of Class A Stock shall be
combined, the Per Share Warrant Price shall be
proportionately increased as of the effective date of
such combination, or as of the date a record is taken
of the holders of Class A Stock for the purpose of so
combining, whichever is earlier.
(d) Stock Dividends. In case shares of Class A Stock are
issued as a dividend or other distribution on the
Class A Stock (or such dividend is declared), then
the Per Share Warrant Price shall be adjusted, as of
the date a record is taken of the holders of Class A
Stock for the purpose of receiving such dividend or
other distribution (or if no such record is taken, as
at the earliest of the date of such declaration,
payment or other distribution), to that price
determined by multiplying the Per Share Warrant Price
in effect immediately prior to such declaration,
payment or other distribution by a fraction (i) the
numerator of which shall be the number of shares of
Class A Stock outstanding immediately prior to the
declaration or payment of such dividend or other
distribution, and (ii) the denominator of which shall
be the total number of shares of Class A Stock
outstanding immediately after the declaration or
payment of such dividend or other distribution. In
the event that the Company shall declare or pay any
dividend on the Class A Stock payable in any right to
acquire Class A Stock for no consideration, then, for
purposes of calculating such adjustment, the Company
shall be deemed to have made a dividend payable in
Class A Stock in an amount of shares equal to the
maximum number of shares issuable upon exercise of
such rights to acquire Class A Stock.
(e) Adjustment of Aggregate Number of Warrant Shares
Issuable. Upon each adjustment of the Per Share
Warrant Price under the provisions of this Section 3,
the aggregate number of Warrant Shares issuable upon
exercise of this Warrant shall be adjusted to the
nearest whole number to an
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amount determined by multiplying the Warrant Shares
issuable prior to such adjustment by a fraction (x)
the numerator of which is the Per Share Warrant Price
in effect immediately prior to the event causing such
adjustment and (y) the denominator of which is the
adjusted Per Share Warrant Price.
(f) Minimum Adjustment. No adjustment of the Per Share
Warrant Price shall be made if the amount of any such
adjustment would be an amount less than 1% of the Per
Share Warrant Price then in effect, but any such
amount shall be carried forward and an adjustment in
respect thereof shall be made at the time of and
together with any subsequent adjustment which,
together with such amount and any other amount or
amounts so carried forward, shall aggregate an
increase or decrease of 1% or more.
(g) Treasury Shares. The number of shares of Class A
Stock at any time outstanding shall not include any
shares thereof then directly or indirectly owned or
held by or for the account of the Company.
(h) Notices. If at any time, (x) the Company shall
declare a stock dividend (or any other distribution
except for cash dividends) on its Class A Stock; (y)
there shall be any capital reorganization or
reclassification of the Class A Stock, or any
consolidation or merger to which the Company is a
party, or any sale or transfer of all of
substantially all of the assets of the Company; or
(z) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the
Company; then, in any one or more of such cases, the
Company shall give written notice to the Holder, not
less than 10 days before any record date or other
date set for definitive action, or of the date on
which such reorganization, reclassification, sale,
consolidation, merger, dissolution, liquidation or
winding up shall take place, as the case may be. Such
notice shall also set forth such facts as shall
indicate the effect of such action (to the extent
such effect may be known at the date of such notice)
on the current Per Share Warrant Price and the kind
and amount of Class A Stock and other securities and
property deliverable upon exercise of this Warrant.
Such notice shall also specify the date (to the
extent known) as of which the holders of the Class A
Stock of record shall be entitled to exchange their
Class A Stock for securities or other property
deliverable upon such reorganization,
reclassification, sale, consolidation, merger,
dissolution, liquidation or winding up, as the case
may be. In addition, whenever the aggregate number of
Warrant Shares issuable upon exercise of this Warrant
and Per Share Warrant Price is adjusted as herein
provided, the Chief Financial Officer of the Company
shall compute the adjusted number of Warrant Shares
and Per Share Warrant Price in accordance with the
foregoing provisions and shall prepare a written
certificate setting forth such adjusted number of
Warrant Shares and Per Share Warrant Price, and such
written instrument shall promptly be delivered to the
recordholder of this Warrant.
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4. Exercise of Warrant. This Warrant shall be vested and exercisable in
its entirety immediately upon issuance (the "Exercise Date").
5. Fully Paid Stock; Taxes. The Company agrees that the shares of the
Class A Stock represented by each and every certificate for Warrant Shares
delivered on the proper exercise of this Warrant shall, at the time of such
delivery, be validly issued and outstanding, fully paid and non-assessable, and
not subject to preemptive rights, and the Company will take all such actions as
may be necessary to assure that the par value or stated value, if any, per share
of the Class A Stock is at all times equal to or less than the then Per Share
Warrant Price. The Company further covenants and agrees that it will pay, when
due and payable, any and all federal and state stamp, original issue or similar
taxes that may be payable in respect of the issuance of any Warrant Shares or
certificates therefor. The Holder covenants and agrees that it shall pay, when
due and payable, all of its federal, state and local income or similar taxes
that may be payable in respect of the issuance of any Warrant Shares or
certificates therefor, if any.
6. Transfer
(a) Securities Laws. Neither this Warrant nor the Warrant Shares
issuable upon the exercise hereof have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), or under any state securities laws
and unless so registered may not be transferred, sold, pledged, hypothecated or
otherwise disposed of unless an exemption from such registration is available.
In the event the Holder desires to transfer this Warrant or any of the Warrant
Shares issued in accordance with the terms hereof, the Holder must give the
Company prior written notice of such proposed transfer including the name and
address of the proposed transferee, unless such transfer is a transfer of the
Warrant Shares pursuant to an effective Registration Statement. Such transfer
may be made only either (i) upon publication by the Securities and Exchange
Commission (the "Commission") of a ruling, interpretation, opinion or "no action
letter" based upon facts presented to said Commission, or (ii) upon receipt by
the Company of an opinion of counsel acceptable to the Company to the effect
that the proposed transfer will not violate the provisions of the Securities
Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
the rules and regulations promulgated under either such act, or to the effect
that the Warrant or Warrant Shares to be sold or transferred have been
registered under the Securities Act, and that there is in effect a current
prospectus meeting the requirements of Subsection 10(a) of the Securities Act,
which is being or will be delivered to the purchaser or transferee at or prior
to the time of delivery of the certificates evidencing the Warrant or Warrant
Shares to be sold or transferred. The Warrants Shares are Registrable Securities
within the meaning of that certain Registration Rights Agreement by the Company
and the Investors named therein, dated September 22, 2000 (the "Registration
Rights Agreement").
(b) Swap or Hedging Transactions. Without the prior written consent
of the Company, the Holder may not enter into any swap or other hedging
transaction relating to the Warrants, the Warrant Shares (prior to the issuance
thereof), or any interest therein until September 22, 2002. For the period
commencing September 22, 2002 through the period (the "Interim Hedging Period")
ending on the later of (x) the effective date of a Perpetual Shelf Registration
(as defined in the Registration Rights Agreement) and (y) September 22, 2005, a
Holder may enter into swap or hedging transactions with respect to the Warrant
Shares; provided that, not later than one year from the end of the Interim
Hedging Period, such Holder
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shall have exercised such number of Warrants as shall purchase Warrant Shares
equal to the Maximum Hedged Position (as defined below) during the Interim
Hedging Period. The "Maximum Hedged Position" shall mean the largest number of
Warrant Shares that were the subject of, or included in, such a swap or hedging
transaction, at any one time outstanding, by the Holder. Subsequent to the
effective date of a Perpetual Shelf Registration, the Holder may enter into swap
or hedging transactions with respect to the Warrant Shares; provided that (x)
not later than two years from the effective date of the Perpetual Shelf
Registration, the Holder shall have exercised such number of Warrants as shall
purchase Warrant Shares equal to the Maximum Hedged Position during the one-year
period ending on the first anniversary of the effective date of the Perpetual
Shelf Registration and (y) not later than each subsequent anniversary of the
effective date of the Perpetual Shelf Registration (commencing with the third
anniversary of such effective date), the Holder shall have exercised such number
of Warrants as shall purchase Warrant Shares equal to the Maximum Hedged
Position during the one-year period ending on the immediately preceding
anniversary of the effective date of the Perpetual Shelf Registration.
Notwithstanding the foregoing, the obligation to exercise any Warrants set forth
in this paragraph shall be suspended for so long as the per share exercise price
of such Warrants exceeds the market price of the Warrant Shares (based on the
closing market price as reported on the NASDAQ National Market) and, in
addition, if as of the date of any such obligation to exercise Warrants a
Black-Out Period (as defined in the Registration Rights Agreement) is then in
effect, for so long as such Black-Out Period remains in effect. In no event
shall the restrictions contained in this paragraph apply to any Warrant Shares
that have been issued.
(c) Transfer. Without the prior written consent of Company, which
consent shall not be unreasonably withheld in connection with a merger,
combination, restructuring or other similar transaction, the Initial Holder may
not directly sell, transfer, assign, pledge, encumber or otherwise dispose of
(whether voluntarily or involuntarily or by operation of law) (each of the
above-described actions being referred to herein as a "Transfer") this Warrant
or any interest herein, except to (i) a corporation that is a direct or indirect
wholly-owned subsidiary of the Initial Holder, (ii) a partnership or limited
liability company of which the Initial Holder, or a direct or indirect at least
90%-owned subsidiary of the Initial Holder, or of which the Parent Entity (as
defined below) of the Initial Holder, or a direct or indirect at least 90%-owned
subsidiary of such Parent Entity, is the sole general partner or sole managing
partner and each class of partnership or membership interests is at least 90%
owned by the Initial Holder, the Initial Holder's Parent Entity or one or more
of their respective direct or indirect at least 90%-owned subsidiaries (each, a
"Controlled Subsidiary"), (iii) to any Person (the "Parent Entity") that,
together with its Controlled Subsidiaries, ultimately directly or indirectly
owns all of each class and series of equity interests in the Initial Holder or
(iv) to any Person (the "Trading Affiliate") provided such Person is, or
immediately after such transaction becomes: (x) at least 20% owned by the
Initial Holder, the Initial Holder's Parent Entity or one or more of their
respective Controlled Subsidiaries, and (y) the principal gas and electricity
trading entity of such Initial Holder and other persons or entities directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Initial Holder (each of clauses (i), (ii), (iii) and (iv)
referred to herein collectively as a "Permissible Transfer"). The transferee in
a Permissible Transfer is referred to herein as a "Permissible Transferee". If
the Initial Holder makes a Permissible Transfer (other than to a Trading
Affiliate), neither the Initial Holder, nor
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such Initial Holder's Parent Entity (as applicable), will directly Transfer all
or any portion of any equity interest in such transferee except to another
Permissible Transferee (whereupon such Permissible Transferee shall not Transfer
such equity interest in such transferee except to another Permissible Transferee
of the Initial Holder as long as such transferee owns this Warrant); provided,
that any Permissible Transferee shall, prior to and as a condition precedent to
such Transfer, execute a counterpart copy of this Warrant. Any sale, assignment,
transfer, pledge, encumbrance or other disposition of this Warrant or any
interest herein, attempted contrary to the provisions of this Warrant, shall be
null and void and without effect; provided that nothing contained in this clause
(c) shall prevent the Initial Holder from entering into any swap or other
hedging transaction permited under Section 6(b). The provisions of this Section
6(c) shall not be applicable to the Warrant Shares.
(d) Legend and Stop Transfer Orders. Unless the Warrant Shares have
been registered under the Securities Act or eligible for resale pursuant to Rule
144(k) under the Securities Act, upon exercise of any part of the Warrant and
the issuance of any of the Warrant Shares, the Company shall instruct its
transfer agent to enter stop transfer orders with respect to such shares, and
all certificates representing Warrant Shares shall bear on the face thereof
substantially the following legend, insofar as is consistent with Delaware law:
"The shares of Class A Common Stock
represented by this certificate have not
been registered under the Securities Act of
1933, as amended, and may not be sold,
offered for sale, assigned, transferred or
otherwise disposed of unless registered
pursuant to the provisions of that Act or an
opinion of counsel to the Company is
obtained stating that such disposition is in
compliance with an available exemption from
such registration."
7. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant if mutilated, the Company
shall execute and deliver to the Holder a new Warrant of like date, tenor and
denomination.
8. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof. Notwithstanding the foregoing, if the Company shall no
longer be required to file reports pursuant to Sections 12 or 15(d) of the
Exchange Act, the Company will deliver to Holder such information, documents,
and reports as are generally distributed to the holders of any class or series
of the Company's securities concurrently with the distribution thereof to the
shareholders.
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9. Communication. No notice or other communication under this Warrant
shall be effective unless the same is in writing and sent by overnight courier,
delivered in person or mailed by first-class mail, postage prepaid, addressed
to:
(a) the Company at One World Trade Center, 103rd Floor,
New York, New York 10048, Attention: General Counsel,
Facsimile No.: (212) 938-3620 or such other address
as the Company has designated in writing to the
Holder, or
(b) the Holder at ______________________, or such other
address as the Holder has designated in writing to
the Company.
10. Headings. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
11. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the State of New York without giving effect to the
principles of conflict of laws thereof.
12. Compliance with Other Instruments. Company represents and warrants
to Holder that the execution and delivery of this Warrant are not, and the
issuance of the Warrant Shares upon exercise of this Warrant in accordance with
the terms hereof will not be, inconsistent with the Company's charter or bylaws,
do not and will not contravene any law, governmental rule or regulation,
judgment or order applicable to the Company, and do not and will not conflict
with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration or filing with or the taking of any action in
respect of or by, any Federal, state or local government authority or agency or
other person, except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required thereby.
13. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the Company and the holder of this Warrant, except that changes or
waivers that adversely affect the rights of any Preferred Stock Holder under its
Warrant (other than the holder of this Warrant) disproportionately to the rights
of the other Preferred Stock Holders under their respective Warrants shall be in
writing and signed by all of the Preferred Stock Holders and the Company.
14. Binding Effect on Successors. This Warrant shall be binding upon
any entity succeeding the Company by merger, consolidation or acquisition of all
or substantially all of the Company's assets, and all of the obligations of the
Company relating to the Warrant Shares issuable upon the exercise of this
Warrant shall survive the exercise and termination of this Warrant and all of
the covenants and agreements of the Company shall inure to the benefit of the
successors and permitted assigns of the holder hereof. The Company will, at the
time of the exercise or conversion of this Warrant, in whole or in part, upon
request of the holder hereof, but at the Company's expense, acknowledge in
writing its continuing obligation to Holder in respect of any rights (including,
without limitation, any right to registration of the Warrant Shares) to
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which the holder hereof shall continue to be entitled after such exercise or
conversion in accordance with this warrant; provided, that the failure of Holder
to make any such request shall not affect the continuing obligation of the
Company to the holder hereof in respect of such rights.
15. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, Holder (in the case of a
breach by the Company), or the Company (in the case of a breach by Holder), may
proceed to protect and enforce their or its rights either by suit in equity
and/or by action at law, including, but not limited to, an action for damages as
a result of any such breach and/or an action for specific performance of any
such covenant or agreement contained in this Warrant.
16. No Impairment of Rights. The Company will not, by amendment of its
Charter (except as permitted in the Certificate of Designation relating to the
applicable series of Convertible Preferred Stock pursuant to which this Warrant
was issued) or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary in order to protect the rights of the holder of this
Warrant against impairment.
17. Severability. The invalidity or unenforceability of any provision
of this Warrant in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction, or affect any other
provision of this Warrant, which shall remain in full force and effect.
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IN WITNESS WHEREOF, eSpeed, Inc. has caused this Warrant to be signed
by a duly authorized officer as of this _____ day of ________, _____
eSpeed, Inc.
By:
----------------------------
Name:
Title:
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SUBSCRIPTION
The undersigned, __________________________________________, pursuant
to the provisions of the foregoing Warrant, hereby agrees to subscribe for the
purchase of _________________________ shares of the Class A Common Stock of
eSpeed, Inc. covered by said Warrant, and makes payment therefor in full at the
price per share provided by said Warrant.
Dated Signature
-------------------- ---------------------------
Address
------------------------
-------------------------
ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto _________________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_________________________, attorney, to transfer said Warrant on the books of
eSpeed, Inc.
Dated Signature
-------------------- ---------------------------
Address
------------------------
-------------------------
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _________________________ hereby assigns and
transfers unto _________________________ the right to purchase
_________________________ shares of the Class A Common Stock of eSpeed, Inc. by
the foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced hereby, and does irrevocably constitute and appoint
_________________________, attorney, to transfer that part of said Warrant on
the books of eSpeed, Inc.
Dated Signature
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Address
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-------------------------
