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Exhibit 4.3
STOCK PURCHASE AGREEMENT
AGREEMENT made as of this 27th day of August, 1996 by and among (i)
OptiMark Technologies, Inc., a Delaware corporation (the "Company'), and (ii)
General Atlantic Partners 35, L.P., a Delaware limited partnership, GAP
Coinvestment Partners, L.P., a New York limited partnership, Dow Xxxxx &
Company, Inc., a Delaware corporation, and Xxxxx X. Xxxxxx, individually
(collectively, the "Investors").
SECTION 1 DEFINITIONS
In addition to other capitalized terms defined elsewhere herein, the
following terms shall have the indicated meanings:
1.1 "1933 Act" means the Securities Act of 1933, as amended.
1.2 "Affiliate" of the Company means any corporation or other entity that
is or ever would have been considered a single employer with the Company under
ERISA ss. 4001(b) or part of the same "controlled group" as the Company for
purposes of ERISA ss. 302(d)(8)(C).
1.3 "Audited Financial Statements" means the audited consolidated balance
sheets of the Company and its Subsidiaries as of December 31, 1994 and December
31, 1995, and the related statements of income, retained earnings and cash flows
of the Company and its Subsidiaries for the 12-month periods then ended
(together with the notes thereto), copies of which have been delivered to the
Investors.
1.4 "Board" means the board of directors of the Company as constituted
from time to time.
1.5 "Certificate of Incorporation" means the Certificate of Incorporation
of the Company, including the Certificate of Designation with respect to the
Preferred Stock approved by the Board pursuant to ss. 151 of the Delaware
General Corporation Law.
1.6 "Code" means the Internal Revenue Code of 1986, as amended. For
purposes of this Agreement, all references to Sections of the Code shall include
any predecessor provisions to such Sections.
1.7 "Common Stock" means the common stock of the Company, $.0l par value
per share.
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1.8 "Consent of the Investors" means the vote at a meeting or executed
written consents in lieu of a meeting of one or more Investors owning at least
two-thirds of the Preferred Shares (including for such purposes, on a
proportional basis, any Conversion Shares into which any of the Preferred Shares
have been converted and not sold to the public).
1.9 "Conversion Shares" means the shares of Common Stock or any successor
class of capital stock of the Company hereafter issued or issuable upon
conversion of the Preferred Shares.
1.10 "Copyrights" means any foreign or United States copyright
registrations and applications for registration thereof, and any non-registered
copyrights.
1.11 "Critical Design Review" means a detailed design review of the
Company's OptiMark(TM) software that focuses upon the determination of the
acceptability of the design, performance, and test characteristics of the design
solution, and on the adequacy of the operation and support documents. The
purpose of this review will be to (a) determine that the detail design of the
system under review satisfies the performance and engineering specialty
requirements of the development specification, (b) establish the detail design
compatibility between the system and other items of equipment, facilities,
computer software and personnel that the system will interface to or interact
with, (c) assess risk areas (on a technical, cost, and schedule basis), and (d)
review the hardware specifications.
1.12 "Employee Program" means (a) all employee benefit plans within the
meaning of ERISA ss. 3(3), including but not limited to multiple employer
welfare arrangements (within the meaning of ERISA ss. 3(40)), plans to which
more than one unaffiliated employer contributes, and employee benefit plans
(such as foreign or excess benefit plans) which are not subject to ERISA; and
(b) all stock or cash option plans, restricted stock plans, bonus or incentive
award plans, severance pay policies or agreements, deferred compensation
agreements, supplemental income arrangements, vacation plans, and all other
employee benefit plans, agreements, and arrangements not described in (a) above.
In the case of an Employee Program funded through an organization described in
Code ss. 501(c)(9), each reference to such Employee Program shall include a
reference to such organization. An entity "maintains" an Employee Program if
such entity sponsors, contributes to, or provides (or has promised to provide)
benefits under such Employee Program, or has any obligation (by agreement or
under applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise covers
employees of such entity (or their spouses, dependents, or beneficiaries).
1.13 "Environmental Laws" means and includes any environmental or health
and safety-related law, regulation, rule, ordinance, or by-law at the federal,
state or local level, whether existing as of the date hereof or subsequently
enacted.
1.14 "ERISA" means the Employee Retirement Income Security Acto of 1974,
as amended.
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1.15 "Financial Statements" means and includes both the Audited Financial
Statements and the Unaudited Financial Statements, copies of both of which have
been delivered to the Investors.
1.16 "Hazardous Material" means and includes any hazardous waste,
hazardous material, hazardous substance, petroleum product, oil, toxic
substance, pollutant, contaminant, or other substance which may pose a threat to
the environment or to human health or safety, as defined or regulated under any
Environmental Law.
1.17 "Intellectual Property" means and includes Copyrights, Internet
Assets, Patents, Trade Secrets, Trademarks, Software and other proprietary
rights.
1.18 "Internet Assets" means any internet domain names and other computer
user identifiers and any rights in and to sites on the worldwide web, including
rights in and to any text, graphics, audio and video files and html or other
code incorporated in such sites.
1.19 "Investors" includes the Investors and their successors and assigns
with respect to the Securities.
1.20 "IRS" means the Internal Revenue Service.
1.21 "Judgment" means any judgment, injunction, writ, award, decree or
order of any nature from any arbitrator, court or governmental agency.
1.22 "Liabilities" means and includes any indebtedness, liabilities,
guaranties or other obligations of any nature, whether accrued, absolute,
contingent or otherwise, known or unknown, asserted or unasserted, including
without limitation liabilities arising from the Restructuring.
1.23 "Lien" means and includes any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other) or preference,
priority, right or other security interest or preferential arrangement of any
kind or nature whatsoever (excluding preferred stock and equity related
preferences), including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease obligation, or any financing lease
having substantially the same economic effect as any of the foregoing.
1.24 "Losses" means and includes losses, claims, damages, causes of
action, liabilities, penalties, fines and related interest and expenses,
including reasonable attorneys' fees and disbursements, and costs of
investigation, litigation, arbitration, enforcement and indemnification.
1.25 "Material Contracts" means and includes any employment contract;
stock redemption or purchase agreement; loan, capital lease or other financing
agreement; license, distributor, sales representation or OEM agreement;
agreements with any officers, directors, employees or
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stockholders of the Company or any persons related to or affiliated with any
such persons; leases; agreements relating to the licensing, distribution,
development or maintenance of Software and related hardware; agreements with
customers of the Company; powers of attorney; pension, profit-sharing,
retirement or stock option plans; any other contract, obligation or commitment
(whether written or oral) involving actual or potential consideration of more
than $100,000; or any contract, obligation or commitment not entered into in the
ordinary course of business.
1.26 "Multiemployer Plan" means an Employer Program to which more than one
employer contributes and which is maintained pursuant to one or more collective
bargaining agreements.
1.27 "Outstanding Rights" means and includes (a) the rights of PSE to
purchase up to 526,000 shares of Common Stock at an exercise price of $7.33 per
share, under the PSE Warrant, (b) the rights of certain existing and former
employees of the Company to purchase up to 320,000 shares of Common Stock at an
exercise price of $6.00 per share, under outstanding warrants and outstanding
options issued under the Stock Option Plan, (c) the right of Xxxx X. Xxxxxx to
purchase up to 50,000 shares of Common Stock at an exercise price of $6.00 per
share under an outstanding warrant, and (d) the rights of future grantees to
purchase up to 491,567 shares of Common Stock reserved for issuance upon
exercise of ungranted options under the Stock Option Plan (as such Plan may be
amended from time to time), at an exercise price of not less than $6.00 per
share; in each case subject to appropriate adjustment for all subdivisions and
combinations.
1.28 "Patents" means any foreign or United States patents and patent
applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or
resubmitted.
1.29 "Person" means any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company, governmental agency or other entity of any kind, and
shall include any successor (by merger or otherwise) of such entity.
1.30 "Preferred Shares" means the 2,182,812 shares of Preferred Stock
being sold by the Company to the Investors pursuant to this Agreement.
1.31 "Preferred Stock" means the Company's Series A Convertible
Participating Preferred Stock, $.01 par value per share, the rights, privileges,
preferences, limitations and qualifications of which are set forth in the
Certificate of Designation filed by the Company with the Delaware Secretary of
State.
1.32 "PSE" means The Pacific Stock Exchange Incorporated.
1.33 "PSE-OptiMark Agreement" means the PSE-OptiMark Agreement of even
date between PSE and the Company.
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1.34 "PSE Revenue Sharing Agreement" means the Revenue Sharing Agreement
of even date between the Company and PSE.
1.35 "PSE Warrant" means the Common Stock Purchase Warrant of even date
issued by the Company in favor of PSE.
1.36 "Registration Rights Agreement" means the Registration Rights
Agreement of even date among the Company, the Investors, and PSE.
1.37 "Requirement of Law" means, as to any Person, any law, statute,
treaty, rule, regulation, right, privilege, qualification, license, franchise or
Judgment, in each case applicable or binding upon such Person or any of its
property or to which such Person or any of its property is subject or pertaining
to any or all of the transactions contemplated or referred to herein.
1.38 "Restructuring" means the divestiture of certain assets and
restructuring of the Company and its Subsidiaries described in the Company's
Information Statement to its shareholders dated April 11, 1996 and in the
undated memorandum entitled "Restructuring" (a copy of each of which has been
provided to the Investors), which closed effective May 31, 1996.
1.39 "SEC" means the United States Securities and Exchange Commission.
1.40 "Securities Laws" means and includes the 1933 Act and all other
applicable federal, state and foreign securities laws.
1.41 "Securities" means and includes both the Preferred Shares and the
Conversion Shares.
1.42 "Software" means any computer software programs, source code, object
code, data and related documentation.
1.43 "Stock Option Plan" means the Company's Incentive Stock Option Plan,
a copy of which has been delivered to the Investors.
1.44 "Stockholders Agreement" means the Stockholders Agreement of even
date among the Company, the Investors, the Voting Committee Members and certain
stockholders of the Company.
1.45 "Subsidiary" means any corporation or other entity (a) a majority of
which is owned or previously was owned by the Company, or (b) which the Company
otherwise directly or indirectly controls or previously controlled.
1.46 "Taxes" means and includes all federal, state, local, foreign and
other taxes and governmental assessments and levies, including without
limitation income taxes, alternative
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minimum taxes, sales taxes, franchise taxes, excise taxes, employment and
payroll taxes, estimated taxes, withholding taxes, transfer taxes, and all
associated fines, penalties and interest.
1.47 "Trade Secrets" means and includes any trade secrets, research
records, processes, procedures, manufacturing formulae, technical know-how,
technology, blueprints, designs, plans, inventions (whether patentable and
whether reduced to practice), invention disclosures and improvements thereto.
1.48 "Trademarks" means and includes any foreign or United States
trademarks, service marks, trade dress, trade names, brand names, designs and
logos, corporate names, product or service identifiers, whether registered or
unregistered, and all registrations and applications for registration thereof.
1.49 "Transaction Documents" means collectively this Agreement, the
Certificate of Designation, the Stockholders Agreement, the Registration Rights
Agreement, the Employment, Trade Secret and NonCompetition Agreements between
the Company and Messrs. Xxxxxx and Xxxxxxx, the PSE-OptiMark Agreement, the PSE
Revenue Sharing Agreement and the PSE Warrant.
1.50 "Unaudited Financial Statements" means the unaudited consolidated
balance sheet as of June 30, 1996 of the Company and its Subsidiaries as of that
date, and the related statement of income of the Company and its Subsidiaries
for the six-month period then ended. The income statement included in the
Unaudited Financial Statements includes the results of Subsidiaries of the
Company that were divested in connection with the Restructuring.
1.51 "Voting Agreement' means the Voting Agreement dated July 17, 1996
among some of the stockholders of the Company.
SECTION 2 TERMS OF PURCHASE
2.1 Description of Securities. The Company has authorized the issuance and
sale of the Preferred Shares to the Investors for a purchase price of $7.33 per
Preferred Share. The Preferred Shares shall be sold in two sequential closings
of 654,844 shares (30%) (the "First Closing") and 1,527,968 shares (70%) (the
"Second Closing"), respectively, divided among the Investors as set forth
opposite such Investor's name in Schedule 2.1 hereto. The Company has authorized
and has reserved, and covenants to continue to reserve, a sufficient number of
shares of Common Stock to satisfy the rights of conversion of the holders of the
Preferred Shares.
2.2 First Closing. The First Closing is occurring simultaneously with the
parties' execution and delivery of this Agreement. At the First Closing, the
Company is issuing and selling to each of the Investors, and each Investor
severally and not jointly is purchasing from the Company, the number of
Preferred Shares set forth opposite such Investor's name in Schedule 2.1. At the
First Closing, the following is occurring:
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(a) The Company is executing and delivering to the Investors
certificates evidencing the Preferred Shares being purchased.
(b) The Company is delivering to the Investors evidence of the
filing of the Certificate of Designation with the Delaware Secretary of State.
(c) The Company, the Investors, the Voting Committee Members and
certain stockholders of the Company are mutually executing and delivering the
Stockholders Agreement.
(d) The Company, the Investors, and PSE are mutually executing and
delivering the Registration Rights Agreement.
(e) The Company and PSE are mutually executing and delivering the
PSE-OptiMark Agreement, the PSE Warrant, and the PSE Revenue Sharing Agreement.
(f) The Company is entering into Employment, Trade Secret and
NonCompetition Agreements with each of Xxxxxxx X. Xxxxxx and Xxxx X. ("Xxxxx")
Xxxxxxx.
(g) The Company is delivering to the Investors an Officer's
Certificate of even date as to (i) the due adoption and continuing effectiveness
of the resolutions of the Board, attached thereto, approving the Transaction
Documents and all transactions contemplated thereby, (ii) the accuracy and
continuing effectiveness of the Certificate of Incorporation and Bylaws of the
Company attached thereto, and (iii) the incumbency and specimen signature of
each officer executing the Transaction Documents and the other closing documents
on behalf of the Company.
(h) The Company is delivering to the Investors a written opinion of
counsel to the Company of even date as to certain legal matters of importance to
the Investors (the "First Legal Opinion").
(i) The Company is executing and delivering to the Investors a side
letter as to the Financial Statements and certain Restructuring documents.
(j) The Investors severally and not jointly are making the payment
for the Preferred Shares being purchased, by wire transfer to the Company.
2.3 Second Closing.
(a) The Second Closing shall occur one week following both (i)
retention of a Chief Technical Officer by the Company, and (ii) completion of a
Critical Design Review and approval of the Critical Design Review by a special
vote of the Board in accordance with ss. 6.6 of the Stockholders Agreement. If
the Second Closing has not occurred by January 31, 1997, the obligations of the
parties under this ss. 2.3 shall be null and void.
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(b) The obligation of the Investors to purchase the Preferred Shares
set forth opposite each Investor's name in Schedule 2.1 at the Second Closing
and to pay the purchase price therefor at the Second Closing shall be subject to
the satisfaction, or waiver by a Consent of the Investors, of the following
conditions on the date of the Second Closing:
(i) The representations and warranties of the Company
contained in Section 3 hereof shall be true and correct in all material respects
on and as of the date of the Second Closing as if made at and on such date.
(ii) The Company shall have performed and complied in all
material respects with all of its covenants and conditions set forth herein that
are required to be performed or complied with by the Company on or before the
date of the Second Closing.
(iii) The Company shall have delivered to the Investors an
Officer's Certificate dated as of the Second Closing as to (i) the due adoption
and continuing effectiveness of the resolutions of the Board, attached thereto,
approving the Transaction Documents and all transactions contemplated thereby,
(ii) the accuracy and continuing effectiveness of the Certificate of
Incorporation and Bylaws of the Company attached thereto, and (iii) the
incumbency and specimen signature of each officer executing the Transaction
Documents and the other closing documents on behalf of the Company.
(iv) The Investors shall have received a certificate from the
Company, in form and substance reasonably satisfactory to the Investors (as
determined by a Consent of the Investors), dated the date of the Second Closing
and signed by the Chief Executive Officer of the Company, certifying that (A)
the representations and warranties of the Company contained in Section 3 hereof
are true and correct in all material respects on and as of the date of the
Second Closing as if made at and on such date and (B) the Company has performed
and complied in all material respects with all of the covenants and conditions
set forth herein that are required to be performed or complied with by the
Company on or before the date of the Second Closing.
(v) The Investors shall have received an opinion of counsel to
the Company, dated as of the date of the Second Closing, substantially in the
form of the First Legal Opinion.
(vi) OptiMark Licensing, Ltd. shall have irrevocably offered
to Investors an opportunity to invest in OptiMark Licensing, Ltd., in accordance
with and to the extent described by the Subscription Documents dated July 31,
1996 previously delivered to the Investors such offer to expire not earlier than
September 13, 1996.
(c) At the Second Closing, the Company shall issue and sell to each
of the Investors, and each Investor severally and not jointly shall purchase
from the Company, the number of Preferred Shares set forth opposite such
Investor's name in Schedule 2.1. At the Second Closing, the following shall
occur:
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(i) The Company shall execute and deliver to the Investors or
their designated nominees certificates evidencing the Preferred Shares so
purchased.
(ii) The Investors shall deliver the purchase price for such
Preferred Shares to the Company by wire transfer.
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
To induce the Investors to enter into and consummate this Agreement, the
Company hereby represents and warrants to the Investors as follows:
3.1 Organization and Corporate Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is qualified to do business as a foreign corporation in each
jurisdiction in which the failure to qualify would have a material adverse
effect on the Company. The Company has all required corporate power and
authority to own and operate its property, to lease the property it operates as
lessee, to carry on its business as presently conducted or contemplated, to
enter into and perform the Transaction Documents and the agreements contemplated
thereby, and generally to carry out the transactions contemplated hereby and
thereby. Except as set forth on Schedule 3.1, the Company does not own or lease
property in any jurisdiction other than its jurisdiction of incorporation and
the jurisdictions in which it is qualified to do business as a foreign
corporation. The copies of the Certificate of Incorporation and Bylaws of the
Company, each as amended to date, which have been furnished to counsel for the
Investors, are correct and complete at the date hereof. The Company is not in
violation of any term of its Certificate of Incorporation or Bylaws.
3.2 Authorization. The Transaction Documents and all documents and
instruments executed pursuant thereto have been duly executed and delivered by
the Company and constitute legal, valid and binding obligations of the Company
enforceable in accordance with their terms against the Company. The execution,
delivery and performance of the Transaction Documents and all documents and
instruments contemplated thereby and the delivery and issuance of the Preferred
Shares and, upon conversion of the Preferred Shares, the Conversion Shares have
been duly authorized by all necessary corporate or other action of the Company.
Other than routine filing of a Form D with the SEC and any required filings
under state securities laws, no consent, approval or authorization of, or
designation, declaration or filing with, any Person, and no lapse of a waiting
period, is required of the Company in connection with the execution, delivery
and performance of the Transaction Documents, or the issuance and delivery by
the Company of the Preferred Shares in accordance with the terms of this
Agreement and, upon conversion of the Preferred Shares, the Conversion Shares,
or the performance or consummation of any other transaction contemplated
thereby.
3.3 Non-Contravention. The execution, delivery and performance by the
Company of the Transaction Documents and each of the other agreements and
instruments to which it is a party and which are contemplated thereby will not
(a) conflict with or result in any default under (i) any
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contract, obligation or commitment of the Company, or (ii) any provision of the
Certificate of Incorporation or Bylaws of the Company or any amendment thereof;
(b) result in the creation of any Lien of any nature upon any of the properties
or assets of the Company; or (c) violate any Judgment or Requirement of Law
applicable to the Company. The Company has not previously entered into any
contract, obligation or commitment which is currently in effect or by which the
Company is currently bound, granting any rights to any Person which are
inconsistent with the rights to be granted by the Company in the Transaction
Documents or any of the agreements contemplated by the Transaction Documents.
3.4 Capitalization of the Company.
(a) The authorized capital stock of the Company consists of (i)
20,000,000 shares of Common Stock, of which 6,638,433 shares are actually
outstanding as of the First Closing, and (ii) 10,000,000 shares of Preferred
Stock, none of which are outstanding except for the Preferred Shares. No
Certificate of Designation has been filed with the Delaware Secretary of State
with respect to the Preferred Stock except the Certificate of Designation for
the Preferred Shares. All outstanding shares of Common Stock are duly and
validly issued, fully paid and nonassessable. The Company has reserved an
aggregate of 2,182,812 shares of Common Stock for issuance upon conversion of
the Preferred Shares. Except for the Outstanding Rights, the Company has not
issued any other shares of its capital stock and there are no outstanding
warrants, options or other rights to purchase or acquire any of such shares or
other securities of the Company, nor are there any outstanding warrants, options
or other rights to acquire any such convertible securities. All of the
outstanding shares of capital stock of the Company (including the Preferred
Shares) have been offered, issued, sold and delivered in compliance with all
applicable federal and state securities laws. The Preferred Shares have been
duly and validly authorized and, when delivered and paid for pursuant to this
Agreement, will be validly issued, fully paid and nonassessable. The Preferred
Shares are convertible into 2,182,812 shares of Common Stock which will
represent, as of the Second Closing, approximately 21.38% of the Common Stock on
a fully-diluted basis after giving effect to the issuance of all shares reserved
for issuance under the Outstanding Rights. The Conversion Shares are duly
authorized and, when issued in compliance with the Company's Certificate of
Incorporation, will be validly issued, fully paid and nonassessable and will be
issued in compliance with the registration and qualification requirements of all
applicable federal and state securities laws.
(b) There are no preemptive rights or rights of first refusal with
respect to the issuance or sale of the Company's capital stock, other than
rights to which holders of the Preferred Shares and the Conversion Shares are
entitled as set forth in the Stockholders Agreement. No Person claims to have
or, to the best of the Company's knowledge, has any right to claim any interest
in the Company's capital stock. There are no restrictions on the transfer of the
Company's capital stock other than those arising from the Securities Laws and
the Stockholders Agreement. There are no rights, obligations, or restrictions on
the voting of any of the Company's capital stock, except under the Voting
Agreement, or the registration of such capital stock for offering to the public
pursuant to the 1933 Act. The outstanding shares of the Company's capital stock,
before giving effect to the
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transactions contemplated by this Agreement, are held of record and beneficially
by the persons identified in Schedule 3.4 in the amounts indicated therein.
(c) Except as otherwise set forth on Schedule 3.4, the Company owns
no Subsidiaries or investments in any other corporation or business
organization.
3.5 Financial Statements. The Financial Statements were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, except that the Unaudited Financial Statements have been prepared without
footnote disclosures and year-end audit adjustments, which will not, in any
event, be material. All of such Financial Statements fairly represent the
financial condition of the Company and its Subsidiaries as of the date thereof,
and are true, correct and complete as of the date thereof in all material
respects. Nothing has come to the attention of the management of the Company
since such dates which would indicate that the Financial Statements were not
true and correct as of the date thereof.
3.6 Absence of Undisclosed Liabilities. Between the date of the Unaudited
Financial Statements and the First Closing, except as and to the extent
disclosed in Schedule 3.6, the Company did not incur any Liabilities that are
(a) individually in excess of $100,000 or (b) in the aggregate in excess of
$250,000, other than (i) Liabilities fully and adequately reflected or reserved
against on the Financial Statements and (ii) Liabilities incurred in the
ordinary course of business. As of the date of the First Closing, the Company
has no knowledge of any circumstance, condition, event or arrangement that may
hereafter give rise to any Liabilities of the Company except in the ordinary
course of business or as otherwise set forth on Schedule 3.6.
3.7 Absence of Certain Developments. Except as disclosed in Schedule 3.7,
between the date of the Unaudited Financial Statements and the First Closing,
there was (i) no material adverse change in the condition, financial or
otherwise, of the Company or in the assets, liabilities, business or prospects
of the Company, (ii) no declaration, setting aside or payment of any dividend or
other distribution with respect to, or any direct or indirect redemption or
acquisition of, any of the capital stock of the Company, (iii) no waiver of any
right of the Company or cancellation of any debt or claim held by the Company,
(iv) no loan by the Company to any officer, director, employee or stockholder of
the Company, any affiliates of any of the foregoing, or any agreement or
commitment therefor, (v) no material loss, destruction or damage to any property
of the Company, whether or not insured, (vi) no labor trouble involving the
Company and no material change in the personnel of the Company or the terms and
conditions of their employment, and (vii) no acquisition or disposition of any
assets (or any contract or arrangement therefor) nor any other transaction by
the Company otherwise than for fair value in the ordinary course of business.
3.8 Accounts Receivable. Except as disclosed on Schedule 3.8, the Company
has no accounts receivable from any Person which is affiliated with the Company
or any of its directors, officers, employees or shareholders or any affiliates
of any of the foregoing.
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3.9 Debt. Schedule 3.9 sets forth as of the First Closing (a) a list of
all agreements for incurring of indebtedness for borrowed money to which the
Company is a party, (b) the amount of all indebtedness under each such
agreement, (c) the Liens that relate to such indebtedness and that encumber the
assets of the Company, and (d) the name of the lender thereof. None of the
obligations pursuant to such agreements are subject to acceleration by reason of
the consummation of the transactions contemplated hereby, nor would the
execution of the Transaction Documents or the consummation of the transactions
contemplated thereby result in any default under such agreements.
3.10 Title to Properties. The Company has good and marketable title to all
of its properties and assets (other than Intellectual Property, which is
addressed by ss. 3.13 below), free and clear of all Liens, and such properties
and assets constitute all of the assets necessary for the conduct of the
Company's business as presently conducted and as presently contemplated to be
conducted. All machinery and equipment included in such properties which is
necessary to the business of the Company is in good condition and repair and all
leases of real or personal property to which the Company is a party are in full
force and effect and afford the Company peaceful and undisturbed possession of
the subject matter of the lease. The Company is not in violation of any
Requirement of Law applicable to the operation of its owned or leased
properties, nor has the Company received any written notice of violation with
which it has not complied.
3.11 Tax Matters.
(a) The Company has paid or caused to be paid all Taxes required to
be paid by it through the date hereof whether disputed or not. All Taxes which
the Company is required to withhold or collect have been withheld and collected
and have been paid over to the proper governmental authorities. The Company has,
in accordance with applicable law, timely and properly filed all Tax returns
required to be filed by it through the date hereof, all such returns correctly
and accurately set forth the amount of any Taxes relating to the applicable
period, and any deductions from, or credits against, any Taxes or taxable income
relating to such returns are in all material respects valid and proper items of
deduction or credit.
(b) Neither the IRS nor any other governmental authority is now
asserting or, to the knowledge of the Company, threatening to assert against the
Company any deficiency or claim for additional Taxes. No claim has ever been
made by an authority in a jurisdiction where the Company does not file reports
and returns that the Company is or may be subject to taxation by that
jurisdiction. There are no Liens on any of the assets of the Company that arose
in connection with any failure (or alleged failure) to pay any Taxes. The
Company has never entered into a closing agreement pursuant to ss. 7121 of the
Code. The Company is not and never has been a "personal holding company" as
defined under Section 541 of the Code. There has not been any audit of any tax
return filed by the Company, no such audit is in progress, and the Company has
not been notified by any tax authority that any such audit is contemplated or
pending. No extension of time with respect to any date on which a tax return was
or is to be filed by the Company is in force, and no waiver or agreement by the
Company is in force for the extension of time for the assessment or
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13
payment of any Taxes. To the best of the Company's knowledge, the Company does
not have any liability for the Taxes of any person or entity other than the
Company.
3.12 Contracts and Commitments. Except as provided on Schedule 3.12, and
except for contracts, obligations and commitments (if any) that may be duly
approved by the Board between the First Closing and the Second Closing, the
Company is not a party to any Material Contract. The Company does not know of
any basis for the termination, expiration or modification of any such Material
Contracts. Neither the Company nor any other party thereto is in default under
any Material Contract and, to the best knowledge of the Company, there is no
state of facts which upon notice or lapse of time or both would constitute such
a default. The Company is not a party to any contract or arrangement which under
circumstances now foreseeable is likely to have a materially adverse effect on
the assets, liabilities, business, condition, financial or otherwise, or
prospects of the Company. The Company does not have any liability for
renegotiation of any government contracts or subcontracts.
3.13 Intellectual Property.
(a) Schedule 3.13 sets forth all Patents, Trademarks and registered
Copyrights owned by, and applications for any of the above filed by, the Company
specifying as to each item, as applicable: (i) the category of Intellectual
Property; (ii) the jurisdiction in which the item is issued or registered or in
which any application for issuance or registration has been filed, including the
respective issuance, registration or application number; (iii) the date of
application, issuance or registration; and (iv) with respect to any Trademarks,
the class or classes of goods or services on which each such Trademark is or is
intended to be used. None of the Intellectual Property of the Company is subject
to any outstanding Judgment, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to the
knowledge of the Company, threatened, which challenges the validity,
enforceability, use or ownership of the Intellectual Property of the Company,
nor does the Company know of any valid basis for any such claim.
(b) Schedule 3.13 sets forth all licenses, sublicenses and other
agreements under which the Company is either a licensor or licensee of any
Intellectual Property, except such licenses, sublicenses and other agreements
relating to prepackaged software used solely on the computers of the Company.
The Company has substantially performed all obligations imposed upon it
thereunder, and neither the Company nor, to the knowledge of the Company, any
other party thereto, is in breach of or default thereunder in any respect, nor
is there any event which with notice or lapse of time or both would constitute a
default thereunder. All of the licenses listed on Schedule 3.13 are valid,
enforceable and in full force and effect, and will continue to be so on
identical terms as of both the First Closing and the Second Closing, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity relating to enforceability (regardless of whether
considered in a proceeding at law or in equity).
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14
(c) To the knowledge of the Company, none of the Intellectual
Property currently sold or licensed by the Company to any Person or used by or
licensed to the Company infringes upon or otherwise violates any Intellectual
Property rights of others. No claim is pending or, to the knowledge of the
Company, threatened which challenges the freedom of the Company to conduct its
business as presently conducted.
(d) No litigation, action, suit, proceeding, arbitration, claim,
complaint, dispute or investigation is pending or, to the knowledge of the
Company, threatened against the Company, contesting the right of the Company to
sell or license to any Person or use the Intellectual Property presently sold or
licensed to such Person or used by the Company, nor does the Company know of any
valid basis for any such claim.
(e) To the knowledge of the Company, no Person is infringing upon or
otherwise violating the Intellectual Property rights of the Company.
(f) Except as set forth on Schedule 3.13, the Company has not agreed
to indemnify any person against any charge of infringement or other violation
with respect to any Intellectual Property owned or used by the Company.
(g) No former employer of any employee of the Company, and no
current or former client of any consultant of the Company, has made a claim
against the Company or, to the knowledge of the Company, against any other
Person, that such employee or such consultant is utilizing proprietary
information of such former employer or client.
(h) Except as set forth on Schedule 3.13, the Company is not a party
to or bound by and, upon the consummation of the transactions contemplated by
this Agreement, will not be a party to or bound by, any license or other
agreement requiring the payment of any material royalty payment, excluding such
agreements relating to prepackaged software licensed for use solely on the
computers of the Company.
(i) To the knowledge of the Company, no employee of the Company is
in violation of any Requirement of Law applicable to such employee's employment,
or any term of any employment agreement, patent or invention disclosure
agreement or other contract or agreement relating to the relationship of such
employee with the Company.
(j) Since January 1995, each employee and officer of the Company who
has had access to Company technology relating to OptiMark(TM) (fka MJTX) has
executed an agreement regarding confidentiality, proprietary information and
assignment of inventions to the Company and, to the knowledge of the Company,
none of such employees and officers are in violation of such agreements.
(k) To the knowledge of the Company, none of the Trade Secrets of
the Company, the value of which is contingent upon the continued maintenance of
the confidentiality thereof, has
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15
been disclosed to any Person other than employees, representatives and agents of
the Company, except (A) where the Company determined that such disclosure was
necessary to conduct the business of the Company, such disclosure not having a
material adverse effect on the Company, (B) as required pursuant to the filing
of a patent application by the Company, or (C) under a confidentiality
agreement.
(l) The Company has the exclusive right to file, procure and
maintain all applications and registrations for the Intellectual Property owned
by the Company.
(m) To the present knowledge of the Company, all Patents, Trademarks
and Copyrights owned by the Company are valid and subsisting. The Company has
taken commercially reasonable efforts to maintain and protect its Intellectual
Property.
(n) The Intellectual Property owned by the Company is free and clear
of all Liens.
3.14 Litigation. There is no litigation, arbitration or governmental
proceeding or investigation pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries, which could, if
adversely determined, (i) call into question the validity or hinder the
enforceability or performance of the Transaction Documents or the agreements and
transactions contemplated thereby or (ii) have a materially adverse effect on
the assets, liabilities, business, condition (financial or otherwise), or
prospects of the Company; nor, to the best knowledge of the Company, has there
occurred any event nor does there exist any condition on the basis of which any
litigation, proceeding or investigation might properly be instituted.
3.15 Offerees. Neither the Company nor anyone acting on its behalf has
sold, offered or solicited offers to buy any securities of the Company so as to
bring the offer, issuance or sale of the Preferred Shares or the Conversion
Shares, as contemplated by this Agreement, within the provisions of Section 5 of
the 1933 Act, unless such offer, issuance or sale was within the exemptions of
the 1933 Act. Assuming the accuracy of the representations of the Investors in
Section 4, below, the Company has complied with all Securities Laws in
connection with the issuance and sale of the Preferred Shares.
3.16 Business: Compliance with Laws. The Company has all material
franchises, permits, licenses, orders, approvals and all other rights and
privileges necessary to permit it to own its property and to conduct its
business as it is presently conducted and as it is presently contemplated to be
conducted (collectively, "Permits"). Such Permits are in full force and effect.
The Company is not in violation in any respect of any Requirement of Law,
Judgment or Permit. The Company is in compliance, in all respects, with all
material federal, state and local laws and regulations (including all applicable
environmental laws and regulations, whether material or immaterial) relating to
its business as presently conducted. Neither the Company nor any officer or
director of the Company has been (a) subject to voluntary or involuntary
petition under the federal bankruptcy laws or any state insolvency law or the
appointment of a receiver, fiscal agent or similar officer by a court for its or
his business or property; (b) convicted in a criminal proceeding or named as a
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subject of a pending criminal proceeding (excluding traffic violations and other
minor offenses); (c) subject to any Judgment (not subsequently reversed,
suspended or vacated) permanently or temporarily enjoining it or him from, or
otherwise imposing limits or conditions on its or his, engaging in any
securities, investment advisory, banking, insurance or other type of business or
acting as an officer or director of a public company; or (d) found by a court of
competent jurisdiction in a civil action or by the SEC or the Commodity Futures
Trading Commission to have violated any federal or state commodities, securities
or unfair trade practices law, which such judgment or finding has not been
subsequently reversed, suspended, or vacated.
3.17 Information Supplied to Investors. Neither the Transaction Documents,
nor the Schedules and Exhibits attached thereto or any document referenced
therein, nor any certificate, projection or statement (whether oral or written)
furnished to the Investors by or on behalf of the Company (including, without
limitation, (i) the undated memorandum entitled "Restructuring", (ii) the
Information Statement dated April 11, 1996, and (iii) the Results of Annual
Meeting of Shareholders dated May 17, 1996), contains any untrue statement of a
material fact, and none of the Transaction Documents, the Schedules and Exhibits
attached thereto or such other documents, certificates, projections or
statements referenced therein omits to state a material fact necessary in order
to make the statements contained therein not misleading. There is no material
fact directly relating to the assets, liabilities, business, condition
(financial or otherwise) or prospects of the Company (other than facts which
relate to general economic trends or conditions) known to the Company that
materially adversely affects or in the future may reasonably be expected to be
materially adversely affect the same that has not been set forth in this
Agreement or in the Schedules and Exhibits attached hereto.
3.18 Investment Banking: Brokerage. No broker, finder, agent or similar
intermediary has acted on behalf of the Company in connection with this
Agreement or the transactions contemplated hereby and there are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
therewith. The Company agrees to indemnify and hold the Investors harmless from
any Losses they may suffer or incur as a result of a breach of this
representation (including any dilution or diminution in value of their
investment in the Company).
3.19 Environmental Matters.
(a) The Company has never generated, transported, used, stored,
treated, disposed of, or managed any Hazardous Material. No Hazardous Material
has ever been or, to the best knowledge of the Company, is threatened to be
spilled, released, or disposed of by the Company, at any site presently or
formerly owned, operated, leased, or used by the Company, or has ever come to be
located in the soil or groundwater at any such site. No Hazardous Material has
ever been transported from any site presently or formerly owned, operated,
leased, or used by the Company for treatment, storage, or disposal at any other
place. To the best knowledge of the Company, the Company presently does not own,
operate, lease, or use, nor has the Company previously owned, operated, leased,
or used, any site on which underground storage tanks are or were located. No
Lien has ever been imposed by any governmental agency on any property, facility,
machinery, or
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17
equipment owned, operated, leased, or used by the Company with the presence of
any Hazardous Material and based upon any action or inaction of the Company.
(b) The Company has no liability under, nor has it ever violated in
any respect, any Environmental Law. The Company, any property owned, operated,
leased, or used by the Company, and any facilities and operations thereon are
presently in compliance in all respects with all applicable Environmental Laws.
The Company has never entered into or been subject to any Judgment with respect
to any environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law. None of the foregoing
items enumerated in this paragraph will be forthcoming.
(c) For purposes of this ss. 3.19, the term "Company" shall include
the Company, its Subsidiaries and their Affiliates, and any predecessors of the
Company, its Subsidiaries and their Affiliates.
3.20 Employee Benefit Programs.
(a) Schedule 3.20 sets forth a list of every Employee Program that
has been maintained by the Company at any time during the three-year period
ending on the First Closing.
(b) Each Employee Program which has ever been maintained by the
Company and which has at any time been intended to qualify under ss. 401(a) or
501(c)(9) of the Code has received a favorable determination or approval letter
from the IRS regarding its qualification under such section and to the best
knowledge of the Company has, in fact, been continuously qualified under the
applicable section of the Code since the effective date of such Employee
Program. No event or omission has occurred which would cause any such Employee
Program to lose its qualification under the applicable Code section.
(c) Each Employee Program that has ever been maintained by the
Company has been maintained in compliance with all applicable laws. With respect
to any Employee Program ever maintained by the Company, there has occurred no
"prohibited transaction," as defined in Section 406 of ERISA or Section 4975 of
the Code (for which there exists neither a statutory nor regulatory exception),
or material breach of any duty under ERISA or other applicable law (including,
without limitation, any health care continuation requirements or any other tax
law requirements, or conditions to favorable tax treatment, applicable to such
plan or to any person in regard to such plan), which could result, directly or
indirectly (including, without limitation, through any obligation of
indemnification or contribution), in any taxes, penalties or other liability to
the Company or any of its affiliates. No litigation, arbitration, or
governmental administrative proceeding (or investigation) or other proceeding
(other than those relating to routine claims for benefits) is pending or, to the
best knowledge of the Company, threatened with respect to any such Employee
Program.
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18
(d) Neither the Company nor any Affiliate (i) has ever maintained
any Employee Program which has been subject to Title IV of ERISA or Section 412
of the Code (including, but not limited to, any Multiemployer Plan) or (ii) has
ever provided health care or any other non-pension benefits to any employees
after their employment is terminated (other than as required by part 6 of
subtitle B of Title I of ERISA) or has ever promised to provide such
post-termination benefits.
(e) With respect to each Employee Program maintained by or on behalf
of the Company or any Affiliate within the three (3) years preceding the
Closing, complete and correct copies of the following documents (if applicable
to such Employee Program) have been made available to the Investors: (i) all
documents embodying or governing such Employee Program, and any funding medium
for the Employee Program (including, without limitation, trust agreements), as
they may have been amended to the date hereof; (ii) the most recent IRS
determination or approval letter with respect to such Employee Program under
Code ss. 401 or 501(c)(9), and any applications for determination or approval
subsequently filed with the IRS; (iii) the three most recently filed IRS Forms
5500, with all applicable schedules and accountants' opinions attached thereto;
(iv) the summary plan description for such Employee Program (or other
descriptions of such Employee Program provided to employees) and all
modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy and any excess loss policy) related to such Employee
Program; (vi) any documents evidencing any loan to an Employee Program that is a
leveraged employee stock ownership plan; and (vii) all other materials
reasonably necessary for the Company to perform any of its responsibilities with
respect to any Employee Program subsequent to the Closing (including, without
limitation, health care continuation requirements).
(f) With respect to each Employee Program maintained by the Company
or its Affiliates, no event has occurred, and there exists no condition or set
of circumstances in connection with which the Company could, directly or
indirectly (through a Commonly Controlled Entity or otherwise), be subject to
any liability under ERISA, the Code or any other applicable law, except
liability for benefits claims and funding obligations payable in the ordinary
course.
(g) Each Employee Program maintained by the Company or Affiliate
that is a "group health plan" (as defined in ERISA ss. 607(1) or Code ss. 500
1(b)(1)) has been operated at all times in compliance with the provisions of
COBRA and any applicable, similar state law.
(h) The consummation of the transactions contemplated by this
Agreement will not: (i) entitle any current or former employee to severance pay,
unemployment compensation or any similar payment; (ii) accelerate the time of
payment or vesting, or increase the amount of any compensation due to, or in
respect of, any current or former employee; (iii) result in or satisfy a
condition to the payment of compensation that would, in combination with any
other payment, result in an "excess parachute payment" within the meaning of
Code ss. 280G(b); or (iv) constitute or involve a prohibited transaction (as
defined in ERISA ss. 502(1)) or otherwise violate Part 4 of Subtitle B of Title
I of ERISA.
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3.21 Product and Services Claims. There are no pending or, to the best of
the Company's knowledge, threatened product or service claims with respect to
any products manufactured or services provided by the Company nor are there any
facts upon which a claim of such nature could reasonably be anticipated to be
based. The Company does not have any contractual liability for breach of
warranty or service claims. No claims have been made against the Company for
renegotiation or price redetermination of any business transaction resulting
from or relating to defective products or services, and, to the best of the
Company's knowledge, there are no facts upon which any such claim should
reasonably be anticipated to be based.
3.22 Employees: Labor Matters. As of the First Closing, the Company
employs a total of approximately 13 full-time employees and one temporary
part-time employee. The Company believes it enjoys good employer-employee
relationships. The Company is not delinquent in payments to any of its employees
for any wages, salaries, commissions, bonuses or other direct compensation for
any services performed to the date hereof or amounts required to be reimbursed
to such employees. The Company does not have any policy, practice, plan or
program of paying severance pay or any form of severance compensation in
connection with the termination of employment, except as set forth in Schedule
3.22. All of the Company's programs and arrangements in connection with the
payment of commissions are described in Schedule 3.22. To the best of the
Company's knowledge, the Company is in material compliance with all Requirements
of Law respecting labor, employment, fair employment practices, work place
safety and health, terms and conditions of employment, and wages and hours.
There are no charges of employment discrimination or unfair labor practices, nor
are there any strikes, slowdowns, stoppages of work, or any other concerted
interference with normal operations which are existing, pending or, to the best
of the Company's knowledge, threatened against or involving the Company. The
Company has not received any information indicating that any of its employment
policies or practices is currently being audited or investigated by any federal,
state or local government agency. To the best of the Company's knowledge, the
Company is, and at all times since November 6, 1986 has been, in material
compliance with the requirements of the Immigration Reform Control Act of 1986.
3.23 Trade Relations. To the best knowledge of the Company, there exists
no actual or threatened termination, cancellation or limitation of, or any
adverse modification or change in, the business relationship of the Company with
any customer or any group of customers whose purchases are individually or in
the aggregate material to the business of the Company, or with any material
supplier.
3.24 Corporate Records; Copies of Documents. The corporate record books of
the Company accurately record all corporate action taken by its stockholders,
Board and committees. The copies of the corporate records of the Company, as
made available to the Investors for review, are true and complete copies of the
originals of such documents. The Company has made available for inspection by
the Investors true and correct copies of all documents referred to in this
Section 3.24 or in the Schedules delivered pursuant to this Agreement.
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3.25 Affiliate Transactions. Except as set forth in Schedule 3.25 hereto,
neither the Company nor, to the best of the Company's knowledge, any officer,
employee or director of the Company owns or controls, directly or indirectly, on
an individual or joint basis, any interest in (excepting less than 1%
stockholding for investment purposes in securities of publicly-held companies)
or serves as an officer, director, employee, consultant, partner or in another
similar capacity of, any competitor, supplier, lessor, lessee, distributor,
sales agent or customer of or lender to or borrower from, the Company.
3.26 Insurance. Schedule 3.26 lists all of the insurance policies held by
or on behalf of the Company as of the First Closing, with the effective date and
coverage amounts indicated thereon. Except as set forth on Schedule 3.26, such
policies and binders are valid and enforceable in accordance with their terms
and are in full force and effect. None of such policies will be affected by, or
terminate or lapse by reason of, any transaction contemplated by this Agreement
or any transaction contemplated hereunder.
3.27 FIRPTA. The Company is not a "foreign person" within the meaning of
Section 1445 of the Code.
3.28 Investment Company. The Company is not an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
3.29 Restructuring. Except for the actions described in Schedule 3.4, (a)
the Restructuring was completed prior to June 30, 1996, and (b) all of the
Company's Subsidiaries have been dissolved and each Subsidiary's affairs has
been wound-up in accordance with each Subsidiary's applicable law.
3.30 PSE-OptiMark Agreement. The PSE-OptiMark Agreement is in full force
and effect and binding upon the Company and PSE in accordance with its terms.
The Company is not in breach and, to the best of the Company's knowledge, PSE is
not in breach of the PSE-OptiMark Agreement. Regulatory Approval (as defined in
the PSE-OptiMark Agreement) has not been denied by the SEC. Neither the Company
nor PSE has "Terminated" the PSE-OptiMark Agreement (as defined therein), nor do
any grounds exist for the Termination of the PSE-OptiMark Agreement by either
party thereto.
SECTION 4 INVESTOR REPRESENTATIONS
To induce the Company to enter into this Agreement, each Investor hereby
severally and not jointly represents to the Company as follows:
4.1 Authorization. The execution of this Agreement and all other documents
executed pursuant to hereto have been duly authorized by all necessary action on
the part of the Investor, has been duly executed and delivered, and constitutes
a valid, binding and enforceable agreement of the Investor.
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4.2 Investment Intent. The Investor is acquiring the Preferred Shares for
its own account, for investment, and not with a present view to any
"distribution" thereof within the meaning of the 1933 Act. The Investor was not
formed or organized for the purpose of acquiring the Preferred Shares.
4.3 Restrictions on Transfer. The Investor understands that, because the
Preferred Shares have not been registered under the Securities Laws, the
Investor cannot dispose of any or all of the Preferred Shares or the Conversion
Shares unless such Securities are subsequently registered under the Securities
Laws or exemptions from such registration are available. The Investor
understands that each certificate representing the Preferred Shares and the
Conversion Shares will bear a legend substantially as follows:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of
any state. These securities may not be sold, pledged or otherwise
transferred except pursuant to an effective registration statement under
the securities laws or a written opinion of counsel reasonably
satisfactory to the Company that such registration is not required.
4.4 Sophistication. The Investor is sufficiently knowledgeable and
experienced in the making of venture capital investments so as to be able to
evaluate the risks and merits of its investment in the Company, and is able to
bear the economic risk of loss of its investment in the Company.
4.5 Reliance by Company. The Investor has been advised that the Preferred
Shares have not been and are not being registered under the Securities Laws and
that in issuing the Preferred Shares the Company is relying upon, among other
things, the representations and warranties of the Investors contained in this
Section 4.
4.6 Brokers. No broker, finder, agent or similar intermediary has acted on
behalf of the Investor in connection with this Agreement or the transactions
contemplated hereby, and there are no brokerage commissions, finder's fees or
similar fees or commissions payable in connection therewith.
4.7 Accreditation. The Investor is an "accredited investor" as that term
is defined under Regulation D adopted under the 0000 Xxx.
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SECTION 5 INDEMNIFICATION
5.1 General.
(a) The Company shall, to the full extent permitted by law, and in
addition to any such rights which any Indemnified Party (as defined herein) may
have pursuant to statute, common law, separate agreement, the Company's
Certificate of Incorporation or By-laws, or otherwise, indemnify, defend and
hold harmless each Investor (including its respective subsidiaries, affiliates,
directors, officers, members, partners, employees and agents, an "Indemnified
Investor") and each person (a "Controlling Person" and, collectively with
Indenmified Investors, the "Indemnified Parties") who controls any of them
within the meaning of Section 15 of the 1933 Act, from and against any and all
Losses (including Losses incurred by the Indemnified Party in any action between
the Company and the Indemnified Party or between the Indemnified Party and any
third party or otherwise) resulting from, arising out of or relating to (i) any
breach of any representation or warranty, covenant or agreement by the Company
in the Transaction Documents and/or any Certificate or Schedule delivered by the
Company pursuant thereto, including, without limitation, any legal,
administrative or other actions (including actions brought by the Investors or
the Company or any equity holders of the Company or derivative actions brought
by any Person claiming through or in the Company's name), proceedings or
investigations (whether formal or informal), or written threats thereof, based
upon, relating to or arising out of the Transaction Documents and/or any
Certificate or Schedule delivered by the Company pursuant thereto, the
transactions contemplated thereby, or any Indemnified Party's role therein or in
transactions contemplated thereby; (ii) by reason of their status as a security
holder, creditor, director, agent, representative or controlling person of the
Company (including, without limitation, any and all Losses under the Securities
Laws, at common law or otherwise, which relate directly or indirectly to the
registration, purchase, sale or ownership of the Securities or to any fiduciary
obligation owed with respect thereto); provided, however, that the Company will
not be liable to the extent that Losses arise from and are based on an untrue
statement or omission or alleged untrue statement or omission in a registration
statement or prospectus which is made in reliance on and in conformity with
information furnished to the Company by or on behalf of such Indemnified Party.
The indemnification and contribution provided for in this Section 5.1 will
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Parties or any officer, director, employee, agent or
Controlling Person of the Indemnified Parties.
(b) If the indemnification provided for in this Section 5.1 is for
any reason held by a court of competent jurisdiction to be unavailable to an
Indemnified Party in respect of any Losses referred to above, then the Company,
in lieu of indemnifying such Indemnified Party thereunder, shall contribute to
the amount paid or payable by such Indemnified Party as a result of such Losses
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Investors, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Investors in connection
with the action or inaction which resulted in such Losses, as well as any other
relevant equitable
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considerations. In connection with any registration of the Company's securities,
the relative benefits received by the Company and the Investors shall be deemed
to be in the same respective proportions that the net proceeds from the offering
(before deducting expenses) received by the Company and the Investors, in each
case as set forth in the table on the cover page of the applicable prospectus,
bear to the aggregate public offering price of the securities so offered. The
relative fault of the Company and the Investors shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Investors and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(c) The Company and the Investors agree that it would not be just
and equitable if contribution pursuant to the foregoing paragraph (b) were
determined by pro rata or per capita allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the foregoing paragraph (b). In connection with any registration of the
Company's securities, in no event shall an Investor be required to contribute
any amount under this Section 5.1 in excess of the lesser of (i) that proportion
of the total of such Losses indemnified against equal to the proportion of the
total securities sold under such registration statement which is being sold by
such Investors or (ii) the proceeds received by such Investor from its sale of
securities under such registration statement. No person found guilty of
fraudulent misrepresentation (within the meaning of the Securities Laws) shall
be entitled to contribution from any person who was not found guilty of such
fraudulent misrepresentation.
5.2 Notice; Defense of Claims.
(a) Promptly after receipt by an Indemnified Party of notice of any
third party or other claim, liability or expense to which the indemnification
obligations hereunder would apply, including in connection with any governmental
proceeding, the Indemnified Party shall give notice thereof in writing to the
indemnifying party or parties, but the omission to so notify the indemnifying
party or parties promptly will not relieve the indemnifying party or parties
from any liability except to the extent that the indemnifying party or parties
shall have been materially prejudiced as a result of the failure or delay in
giving such notice. Such notice shall state the information then available
regarding the amount and nature of such claim, liability or expense and shall
specify the provision or provisions of this Agreement under which the liability
or obligation is asserted.
(b) In the case of any third party claim, if within twenty (20) days
after receiving the notice described in the preceding paragraph the indemnifying
party or parties (i) give written notice to the Indemnified Parties stating that
they intend to defend in good faith against such claim, liability or expense at
their own cost and expense and (ii) provide assurance and security reasonably
acceptable to such Indemnified Parties that such indemnification will be paid
fully and promptly if required and such Indemnified Parties will not incur cost
or expense during the proceeding, then counsel for the defense shall be selected
by the indemnifying party or parties (subject to the consent of such Indemnified
Parties which consent shall not be unreasonably withheld) and such Indemnified
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Parties shall not be eligible for any payment with respect to such claim,
liability or expense as long as the indemnifying party or parties are conducting
a good faith and diligent defense at their own expense; provided, however, that
the assumption of defense of any such matters by the indemnifying party or
parties shall relate solely to the claim, liability or expense that is subject
or potentially subject to indemnification. If the indemnifying party or parties
assume such defense in accordance with the preceding sentence, they shall have
the right, with the consent of such Indemnified Parties, which consent shall not
be unreasonably withheld, to settle all indemnifiable matters related to claims
by third parties which are susceptible to being settled provided the
indemnifying party or parties' obligation to indemnify such Indemnified Parties
therefor will be fully satisfied and the settlement includes a complete release
of such Indemnified Parties. The indemnifying party or parties shall keep the
such Indemnified Parties apprised of the status of the claim, liability or
expense and any resulting suit, proceeding or enforcement action, shall furnish
such Indemnified Parties with all documents and information that such
Indemnified Parties shall reasonably request and shall consult with such
Indemnified Parties prior to acting on major matters, including settlement
discussions. Notwithstanding anything herein stated, such Indemnified Parties
shall at all times have the right to fully participate in such defense at its
own expense directly or through counsel; provided, however, if the named parties
to the action or proceeding include both the indemnifying party or parties and
the Indemnified Parties and representation of both parties by the same counsel
would be inappropriate under applicable standards of professional conduct, the
expense of separate counsel for such Indemnified Parties shall be paid by the
indemnifying party or parties. If no such notice of intent to dispute and defend
is given by the indemnifying party or parties, or if such diligent good faith
defense is not being or ceases to be conducted, such Indemnified Parties shall,
at the expense of the indemnifying party or parties, undertake the defense of
(with counsel selected by such Indemnified Parties), and shall have the right to
compromise or settle, such claim, liability or expense. If such claim, liability
or expense is one that by its nature cannot be defended solely by the
indemnifying party or parties, then such Indemnified Parties shall make
available all information and assistance that the indemnifying party or parties
may reasonably request and shall cooperate with the indemnifying party or
parties in such defense.
5.3 Satisfaction of Indemnification Obligations. Any indemnity payable
pursuant to this Section 5 shall be paid within the later of (a) thirty (30)
days after the Indemnified Party's request therefor or (b) after a final
non-appealable determination of Loss, and ten (10) days prior to the date on
which the Loss upon which the indemnity is based is required to be satisfied by
the Indemnified Party, if applicable.
SECTION 6 GENERAL
6.1 Amendments: Waivers and Consents. For the purposes of this Agreement
and all agreements, documents and instruments executed pursuant hereto, except
as otherwise specifically set forth herein or therein, no course of dealing
between the Company on the one hand and any Investor on the other and no delay
on the part of any party hereto in exercising any rights hereunder or thereunder
shall operate as a waiver of the rights hereof and thereof. Except as otherwise
provided herein or therein, amendments in or additions to, and any consents
required by, this
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Agreement may be made, and compliance with any term, covenant, condition or
provision set forth herein may be omitted or waived (either generally or in a
particular instance and either retroactively or prospectively) by a Consent of
the Investors and (in the case of any such amendment or addition) the Company.
Any amendment or waiver effected in accordance with this Section 6.1 shall be
binding upon each holder of Preferred Shares and the Conversion Shares, each
future holder of all such Securities, and the Company.
6.2 Survival of Representations, Warranties and Covenants; Assignability
of Rights. All covenants, agreements, representations and warranties of the
Company made herein and in the Schedules and Exhibits delivered or furnished by
or on behalf of the Company to any Investor in connection herewith shall be
deemed material and to have been relied upon by such Investor, and, except as
otherwise provided in this Agreement, shall survive the delivery of the
Securities indefinitely, regardless of any instruction or any investigation by
or on behalf of the Investors, and shall not merge in the performance of any
obligation and shall bind the Company's successors, assigns and heirs, whether
so expressed or not. Except as otherwise provided in this Agreement, all such
covenants, agreements, representations and warranties shall inure to the benefit
of the Investors successors and assigns and to transferees of the Securities,
whether so expressed or not. The representations and warranties made by the
Investors in Section 4 of this Agreement shall survive the delivery of the
Securities and shall bind the Investors' successors and assigns and shall inure
to the benefit of the Company's successors and assigns.
6.3 Governing Law. This Agreement shall be deemed to be a contract made
under, and shall be construed in accordance with, the laws of the State of New
York without giving effect to principles of conflicts of law.
6.4 Section Headings; Counterparts. The descriptive headings in this
Agreement have been inserted for convenience only and shall not be deemed to
limit or otherwise affect the construction of any provision thereof or hereof.
This Agreement may be executed simultaneously in any number of counterparts,
each of which when so executed and delivered shall be taken to be an original;
but such counterparts shall together constitute but one and the same document.
6.5 Notices and Demands. Any notice or demand which, by any provision of
this Agreement or any agreement, document or instrument executed pursuant hereto
or thereto, except as otherwise provided therein, is required or provided to be
given shall be deemed to have been sufficiently given or served and received for
all purposes upon the earlier to occur of actual delivery or five days after
being sent by certified or registered mail, postage and charges prepaid, return
receipt requested, or by express delivery providing receipt of delivery, to the
following addresses: if to the Company, at its address as shown on the signature
page hereof, or at any other address designated by the Company to each of the
Investors in writing; if to an Investor, at its mailing address as shown on
Schedule 2.1 hereto, or at any other address designated by such Investor to the
Company and the other Investors in writing; and if to an assignee of an
Investor, at its address as designated to the Company and the other Investors in
writing.
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6.6 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions of this Agreement.
6.7 Expenses. The Company shall pay its costs and expenses, and each of
the Investors shall pay its respective costs and expenses, incurred with respect
to the negotiation, execution, delivery and performance of this Agreement and
the agreements, documents and instruments contemplated hereby or executed
pursuant hereto.
6.8 Publicity. Except as may be required by applicable Requirement of Law,
none of the parties hereto shall issue a publicity release or public
announcement or otherwise make any disclosure concerning the Transaction
Documents (other than the PSE-OptiMark Agreement) or the transactions
contemplated thereby, without prior approval by the Company and Consent of the
Investors; provided, however, that nothing in this Agreement shall restrict any
Investor from disclosing information (a) that is already publicly available; (b)
to a prospective transferee in connection with any contemplated transfer of any
of the Preferred Shares or Conversion Shares; and (c) to its attorneys,
accountants, consultants and other advisors to the extent necessary to obtain
their services in connection with such Investor's investment in the Company. If
any announcement is required by law to be made by any party hereto, prior to
making such announcement such party will deliver a draft of such announcement to
the other parties and shall give the other parties an opportunity to comment
thereon.
6.9 Further Assurances. Each of the parties shall execute such documents
and perform such further acts (including, without limitation, obtaining any
consents, exemptions, authorizations or other actions by, or giving any notices
to, or making any filings with, any governmental agency or any other Person) as
may be reasonably required or desirable to carry out or to perform the
provisions of this Agreement.
6.10 Integration. This Agreement together with the other Transaction
Documents, including the Schedules, Exhibits, documents and instruments referred
to herein or therein, constitutes the entire agreement, and supersedes all other
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as a
sealed instrument as of the day and year first above written.
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Company:
OptiMark Technologies, Inc.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxx, Chief Executive Officer
Investors:
General Atlantic Partners 35, L.P.
By: General Atlantic Partners, LLC, its General
Partner
By: /s/ J. Xxxxxxx Xxxxx
-------------------------------------------
A Managing Member
GAP Coinvestment Partners, L.P.
By: /s/ J. Xxxxxxx Xxxxx
-------------------------------------------
General Partner
Dow Xxxxx & Company, Inc.
By: /s/ Xxxx X. Xxxxxxx
-------------------------------------------
Title: Senior Vice President
------------------------------------
/s/ Xxxxx X. Xxxxxx
-----------------------------------------------
Xxxxx X. Xxxxxx
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Schedule 2.1
First Closing Second Closing
------------- --------------
Investor Shares Price Shares Price
-------- ------ ----- ------ -----
General Atlantic Partners 35, L.P. 348,826 $2,556,895 813,927 $5,966,085
0 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
GAP Coinvestment Partners, L.P. 60,451 443,105 141,053 1,033,915
0 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Dow Xxxxx & Company, Inc. 204,639 1,500,000 477,490 3,500,000
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Xxxxx X. Xxxxxx 40,928 300,000 95,498 700,000
The Llama Company
Xxx XxXxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
------- ---------- --------- -----------
TOTALS 654,844 $4,800,000 1,527,968 $11,200,000
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