CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT. PORTIONS FOR
WHICH CONFIDENTIAL TREATMENT IS REQUESTED ARE DENOTED BY [ * ECONOMIC TERMS
OMITTED]. MATERIAL OMITTED HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
SUBSCRIPTION AGREEMENT
eSpeed, Inc.
Xxx Xxxxx Xxxxx Xxxxxx
000xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: General Counsel
Ladies and Gentlemen:
1. Subscription for Unit. The undersigned (the "Subscriber") hereby agrees
to purchase from eSpeed, Inc., a Delaware corporation (the "Company"), and the
Company hereby agrees to issue and sell to the Subscriber, a Unit (the "Unit")
consisting of (i) 789,071 shares (the "Shares") of Class A Common Stock, par
value $.01 per share (the "Class A Stock"), of the Company and (ii) warrants
exercisable to purchase up to an aggregate of 666,666 shares of Class A Stock
with an exercise price of $35.203125 per share (the "Underlying Warrant
Shares"), in the form attached hereto as Exhibit A (the "Warrants"), for an
aggregate purchase price for the Unit (the "Purchase Price") of $25.0 million.
2. Closing. The closing of the purchase and sale of the Unit under this
Subscription Agreement shall be held at the office of Xxxxxxx Berlin Shereff
Xxxxxxxx, LLP, The Chrysler Building, 000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, as soon as practicable (but in any event within two
business days) after the conditions in Section 8 have been satisfied or waived,
or at such other location or on such other date as the Subscriber and the
Company shall agree (the "Closing"). At the Closing, the Company shall deliver
to the Subscriber (i) the certificate or certificates representing the Shares
and the Warrants, free and clear of all liens and encumbrances (except (x) under
the provisions of applicable federal and foreign and state securities law and
(y) as a result of acts of the Subscriber), (ii) a copy of the Registration
Rights Agreement in the form attached hereto as Exhibit D (the "Registration
Rights Agreement"), duly executed by the Company, (iii) a certificate of an
officer of the Company certifying that the representations and warranties of the
Company set forth in this Subscription Agreement were true and correct in all
material respects as of the date when made and are true and correct in all
material respects as of the Closing as though made at that time (except for any
such representations and warranties that speak as of a specific date in which
case they shall be true as of such specific date), and (iv) a certificate of an
officer of Cantor Xxxxxxxxxx, X.X. ("CF") certifying that the representations
and warranties of CF set forth in this Subscription Agreement were true and
correct in all material respects as of the date when made and are true and
correct in all material respects as of the Closing as though made at that time
1
(except for any such representations and warranties that speak as of a specific
date in which case they shall be true as of such specific date). At the Closing,
the Subscriber shall deliver to the Company (i) the Purchase Price, in
accordance with the wire transfer instructions attached hereto as Exhibit B,
(ii) a copy of the Registration Rights Agreement duly executed by the
Subscriber, and (iii) a certificate of an officer of the Subscriber certifying
that the representations and warranties of the Subscriber set forth in this
Subscription Agreement were true and correct in all material respects as of the
date when made and are true and correct in all material respects as of the
Closing as though made at that time (except for any such representations and
warranties that speak as of a specific date in which case they shall be true as
of such specific date).
3. Investment in Verticals.
a. Commitment to Invest in Four Qualified Verticals. Subject to the express
terms and conditions of this Section 3, the Subscriber hereby agrees to
subscribe for an aggregate of $10.0 million in equity securities in a total of
four entities to be formed by the Company and CF within 12 months of the Closing
(i.e., $2.5 million in each entity) (the "12-Month Period"). Such 12-Month
Period may be increased by a period not to exceed six months if a public
offering by the Company is commenced during the 12-Month Period and disclosure
constraints resulting from such public offering dictate a delay (a "Black-Out
Period") as determined by the Company. Upon any such determination by the
Company, the Company shall so notify the Subscriber in writing prior to the
commencement of any Black-Out Period, which notice shall specify the time period
by which the 12-Month Period shall be increased and the new last day of the
12-Month Period. Such notice shall be binding on the parties. It is anticipated
that each such entity shall establish a new "vertical" electronic and telephonic
marketplace with the Company in which it will "broker" and possibly "clear"
transactions for its industry market participants and other clients. In
brokerage transactions, it is anticipated that the entity will operate an
anonymous electronic and telephonic marketplace (and also act as an agent for
disclosed principals in such marketplace) where participants can trade based on
a credit-risk matrix and other "rules" established by the participants. The
entity may maintain the anonymity of the counterparties by clearing the
financial aspects of the transaction. No such entity will intentionally expose
itself to any unmatched market risk on its marketplace products.
b. Commitment to Present Seven Qualified Verticals. During the 12-Month
Period, as the same may be extended by a Black-Out Period, the Company and CF
agree to present at least seven vertical opportunities to the Subscriber,
whether or not the Subscriber has previously satisfied its funding obligations
hereinafter discussed. During such period, the Company and CF will present the
seven vertical opportunities set forth on Annex A and may also present
additional vertical opportunities in their discretion. Any additional vertical
opportunity so presented shall encompass one or more products in which the
Subscriber or an Affiliate (as defined below) of the Subscriber is engaged in
trading at the time such vertical opportunity is presented to the Subscriber.
(The seven vertical opportunities set forth on Annex A and any additional
vertical opportunity meeting such trading criteria that the Company and CF
determine to present to the Subscriber are each referred to herein as a
"Qualified Vertical"). Each Qualified Vertical shall contain economic terms
(measured by a
2
blended valuation of revenue sharing and equity ownership) intended to reflect a
[ * ECONOMIC TERMS OMITTED] value split as between the industry market
participants (inclusive of the anchor participants) on the one hand and the
Company and CF on the other hand. It is agreed that a Qualified Vertical which
provides for an allocation of transaction revenues described in paragraphs (a)
and (b) of Schedule 4 to the Newco Term Sheet (as hereafter defined) of [
*ECONOMIC TERMS OMITTED] to the industry market participants in the aggregate
and [ *ECONOMIC TERMS OMITTED] to the Company, an allocation of the transaction
revenues described in paragraphs (c) and (d) of Schedule 4 to the Newco Term
Sheet of [ *ECONOMIC TERMS OMITTED] to the industry market participants in the
aggregate and [ *ECONOMIC TERMS OMITTED] to the Company, and an allocation of
equity participation in a Qualified Vertical of [ *ECONOMIC TERMS OMITTED] to
the industry market participants and [ *ECONOMIC TERMS OMITTED] to the Company
and CF taken together, shall be deemed to satisfy the [ *ECONOMIC TERMS OMITTED]
economic model (the "Agreed Upon Model"). The Agreed Upon Model shall be used if
the parties hereto cannot agree on a substitute model, which substitute model
may include warrants to purchase stock of the Company as the parties may agree.
As used in this Subscription Agreement, the word "Affiliate" means, with respect
to any specified party, any other individual, partnership, corporation or other
organization, whether incorporated or unincorporated, who, directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such specified party. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a party, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative of the foregoing.
c. Subscriber's Obligation to Fund the $10.0 Million. Upon the
expiration of the 12-Month Period, as the same may be extended by a Black-Out
Period, if the Subscriber has not funded or committed to fund, subject to the
conditions described in this Section 3, at least four Qualified Verticals, the
Subscriber shall be obligated to pay to the Company an amount equal to the
difference between (i) $10.0 million and (ii) the aggregate investments in
Qualified Verticals made by the Subscriber during the 12-Month Period, as the
same may be extended by a Black-Out Period (the "Investment Shortfall");
provided, however, that in the event that the Company and CF fail to present the
seven Qualified Verticals set forth on Annex A based upon the economic terms
described in Section 3(b) above to the Subscriber within the 12-Month Period, as
the same may be extended by a Black-Out Period, the Subscriber shall be relieved
of its obligation in respect of the Investment Shortfall and the restrictions
set forth in Section 6(c) of the Warrants. The relief from such obligation,
together with the lapsing of the contractual restrictions against swap and
hedging transactions with respect to the Warrants and the Underlying Warrant
Shares set forth in Section 6(c) of the Warrants, shall be the Subscriber's sole
remedy in the event that the Company and CF fail to
----------------------------
*This information has intentionally been omitted and has been
filed separately with the Securities and Exchange Commission.
It is subject to a confidential treatment request.
3
present the seven Qualified Verticals set forth on Annex A to the Subscriber
within the 12-Month Period, as the same may be extended by a Black-Out Period,
and such failure shall have no other effect on the transactions contemplated by
this Subscription Agreement, including the purchase of the Unit, or give rise to
any other right on the part of the Subscriber, including any right of rescission
hereunder or any right to receive any Additional Investment Right (as defined
below) or the equity contemplated thereby.
d. Terms of Newco Vertical. Set forth on the term sheet attached hereto as
Exhibit C (the "Newco Term Sheet") are the terms and conditions of the first
Qualified Vertical ("Newco") to be formed by the Company and CF. The Subscriber
shall notify the Company within 15 days of its receipt of notice from the
Company that the Company intends to proceed with the Newco Qualified Vertical as
to whether the Subscriber intends to invest in Newco (either directly or
indirectly through the formation of a limited liability company or other entity
as contemplated by the Newco Term Sheet). If the Subscriber intends to make such
investment, it and the Company and CF will negotiate in good faith and use
commercially reasonable efforts to negotiate and execute definitive agreements
embodying the terms of the Newco Term Sheet within 30 days of the Subscriber's
receipt of a draft of such documents from the Company. Funding of the
Subscriber's $2.5 million subscription commitment for its interest in Newco
shall not be due and the launch of Newco shall not occur until such definitive
agreements have been mutually agreed to and there are at least two additional
industry market participants who have each committed to invest $2.5 million in
Newco on substantially the same terms and conditions. Funding of the
Subscriber's $2.5 million subscription shall be made within two business days
after such commitment from the two other participants is obtained. Failure of
the parties to negotiate and execute definitive agreements in respect of Newco
within such time period or otherwise shall have no effect on the transactions
contemplated by this Subscription Agreement except as expressly provided in
Section 3(g), including the purchase of the Unit, or give rise to any other
right on the part of the Subscriber, including any right of rescission hereunder
or any right to receive any Additional Investment Right (as defined below) or
the equity contemplated thereby.
e. Deferred Rights of Subscriber to Invest in the LLC. Subscriber will have
the right for a 30 day period commencing October 1, 2001 to invest as an
industry market participant in Newco by becoming a member in the limited
liability company (the "LLC") to be formed to hold the interests of the energy
industry market participants in Newco (as more fully set forth in the Newco Term
Sheet) for a $2.5 million capital contribution to the LLC. Subscriber's right to
make any investment in the LLC shall terminate on November 1, 2001. If an
initial public offering of Newco shall occur prior to October 1, 2001,
Subscriber will have the right to accelerate its investment, in whole or in
part, in Newco so long as Subscriber's ownership does not exceed 4.9% of Newco's
outstanding stock. In such event, Subscriber shall have no board designee rights
prior to August 2001 and any board designee rights that it would have but for
this limitation may be exercised by the other LLC members acting collectively.
f. Terms of Other Qualified Verticals. The other Qualified Verticals
offered to the Subscriber will be on terms and conditions consistent with
Section 3(b) and otherwise substantially the same in all material respects as
the vertical described on the Newco
4
Term Sheet (provided that the number of industry market participants may vary in
each vertical and other changes which are attributable to differences among
products and regions may also be made so long as such changes are consistent
with the economic terms described in Section 3(b) and do not otherwise
materially alter the terms and conditions reflected in the Newco Term Sheet) and
shall be presented by the Company and CF to the Subscriber accompanied by
definitive agreements embodying such terms and conditions. Subject to Section
3(h), the terms of the other Qualified Verticals shall include the right of the
Subscriber, for up to four Qualified Verticals (the "Additional Investment
Right") to invest $25.0 million in restricted shares of Class A Stock at a 10%
discount to the arithmetic average of the daily closing sale price on The Nasdaq
Stock Market of the Class A Stock for the 10 trading days (the "10 Trading Day
Average") preceding the date of the Subscriber's investment in such new vertical
opportunity. The obligation of the Subscriber to invest in a Qualified Vertical
and the right of the Subscriber to exercise the Additional Investment Right
shall be subject to the satisfaction of each of the following conditions (the
"Additional Investment Conditions"): (i) the consummation and funding of a $2.5
million investment in said vertical by the Subscriber and each of three
additional industry market participants (which may include another anchor
participant) on substantially the same terms and conditions as the Subscriber,
(ii) the Subscriber making representations and warranties to the Company
substantially as provided in Section 7 hereof, and (iii) the Company and CF
making representations and warranties to the Subscriber substantially as
provided in Sections 5 and 6 hereof (subject to exceptions and schedules as are
required to make such representations and warranties accurate). Except as
provided in the next sentence, the Additional Investment Right shall be
exercisable only on the date of the consummation and funding of the $2.5 million
investment in said vertical by the Subscriber and three additional industry
market participants (the "Additional Investment Right Exercise Date"). In
addition, in the event that during the Twelve-Month Period, as the same may be
extended by a Black-Out Period, the Company makes a public announcement with
respect to a definitive agreement with three or more industry market
participants disclosing their investment in a Qualified Vertical and Subscriber
does not or has not previously invested in such Qualified Vertical, then the
Subscriber will be given the opportunity (exercisable upon notice to the Company
within one business day following such public announcement) to invest $25.0
million in restricted shares of Class A Stock at a 10% discount to the 10
Trading Day Average for the 10 trading days immediately preceding such public
announcement. If the Subscriber later invests in any such Qualified Vertical, it
will not be entitled to an Additional Investment Right in connection with the
same Qualified Vertical. The Subscriber's purchase of any additional equity of
the Company, whether pursuant to the Additional Investment Right or otherwise
provided herein, shall be subject to Company stockholder approval, if required.
The Company agrees to submit for a vote of its common stockholders, at its next
annual meeting of stockholders, the approval of the issuance of any such shares,
if such approval is determined to be required. CF agrees to vote the shares of
common stock of the Company beneficially owned by it in favor of such issuance.
Any shares of Class A Stock purchased upon exercise of the Additional Investment
Right or otherwise in accordance with the terms hereof will be subject to a
12-month lock-up on transferability.
g. Time Frames For Other Qualified Verticals. Within 30 days of the
Subscriber's receipt of notice of a new Qualified Vertical, the Subscriber shall
notify the
5
Company as to whether it intends to invest in such Qualified Vertical. If the
Subscriber notifies the Company within the requisite time period that it intends
to invest in such Qualified Vertical, the Subscriber, the Company and CF will
negotiate with each other in good faith and use commercially reasonable efforts
to negotiate and execute definitive documentation required for such vertical
within 30 days of delivery to Subscriber of a draft of such documents (which
documents shall be delivered following identification of the other industry
market participants and such participants' indication of their intention to
invest in such vertical). Funding of such subscription shall be made within two
business days after such commitment from the three other industry market
participants is obtained. If the Subscriber does not provide any such notice,
then it shall be deemed that the Subscriber declined to participate in such
Qualified Vertical. If (i) at least three additional industry market
participants are not willing to invest in the Qualified Vertical (two in the
case of Newco) on the same terms and conditions, or (ii) the parties are unable
to reach agreement on the definitive agreements relating to the Qualified
Vertical after good faith negotiations thereon, then (a) the Subscriber
nevertheless shall be deemed to have satisfied its obligation to invest in one
Qualified Vertical for purposes of calculation of the Investment Shortfall
pursuant to Section 3(c), (b) the Subscriber will not be entitled to exercise
the Additional Investment Right in respect of such Qualified Vertical, and (c)
the Subscriber's Warrants will not accelerate in vesting pursuant to Section 4
of the Warrant in respect of such Qualified Vertical. Except as expressly
provided herein, the inability of the parties to reach agreement on definitive
documents or the failure of the Additional Investment Conditions to be satisfied
shall have no effect on the transactions contemplated by this Subscription
Agreement, including the purchase of the Unit, or give rise to any other right
on the part of the Subscriber, including any right of rescission hereunder or
any right to receive the Additional Investment Right or the equity contemplated
thereby.
h. Put/Call Arrangement. In the event an Additional Investment Right is
available to Lion 1 under Section 3(f) prior to October 1, 2001, Subscriber's
Additional Investment Right shall be exercisable only as follows, Subscriber
shall have the right, if it elects to do so, on the Additional Investment Right
Exercise Date, to (x) purchase such portion of the shares of Class A Common
Stock of the Company as are purchasable upon exercise of such Additional
Investment Right and will result in its ownership not exceeding 4.9% of the then
outstanding Class A Common Stock of the Company and (y) to enter into a put/call
arrangement with the Company. The call would provide to Subscriber the right to
a call option (the "Call") enabling Subscriber to purchase from the Company any
remaining shares of Class A Common Stock of the Company which would have been
available for purchase upon exercise of such Additional Investment Right, but
for the 4.9% limitation above. The call will be exercisable for a 5 business day
period commencing October 1, 2001, at a price per share equal to the 10 Trading
Day Average for the 10 trading days immediately preceding the Additional
Investment Right Exercise Date, plus interest at the LIBOR rate most closely
applicable based upon the length of the interest period, from the Additional
Investment Right Exercise Date through the date of exercise of the Call. The
Company shall have a put right (the "Put") to require Subscriber to purchase
from the Company the same number of shares of Class A Common Stock and at the
same price per share and interest thereon as is applicable to the corresponding
Call. The Put shall be exercisable during the same five business day period as
is applicable to the corresponding Call. The shares available for purchase upon
exercise of a Put
6
or Call and the purchase price per share shall be subject to adjustment for
stock splits, stock dividends and similar recapitalization events. 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, the Put and Call 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 the Put/Call would have been entitled to sell/purchase if the Put/Call had
been exercised 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 the
Put/Call obligation.
4. Transfer Restrictions.
a. Restricted Shares. The Subscriber understands and agrees that the
Shares, the Warrants and the Underlying Warrant Shares have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or any
foreign or state securities laws and that, accordingly, they will not be
transferable except as permitted under various exemptions contained in the
Securities Act, foreign or state securities laws, or upon satisfaction of the
registration and prospectus delivery requirements of the Securities Act. The
Subscriber acknowledges and agrees that it must bear the economic risk of the
Shares, the Warrants and the Underlying Warrant Shares for an indefinite period
of time since they have not been registered under the Securities Act and
therefore cannot be transferred unless they are subsequently registered or an
exemption from registration is available.
b. Legend. The Subscriber agrees with the Company that the certificates
evidencing the Shares, the Warrants and the Underlying Warrant Shares
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW. THESE SECURITIES MAY NOT BE PLEDGED, HYPOTHECATED,
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY
EXEMPTION THEREFROM UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAW."
c. Removal of Legend. The legend endorsed on the certificates pursuant to
Section 4(b) hereof shall be removed and the Company shall issue a certificate
without such legend to the holder thereof at such time as the securities
evidenced thereby cease to be restricted securities upon the earliest to occur
of (i) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration statement, (ii) the
securities shall have been sold to the public pursuant to Rule 144 (or any
successor provision) under the
7
Securities Act, or (iii) such securities may be sold by the holder without
restriction or registration under Rule 144(k) under the Securities Act (or any
successor provision).
d. Lock-Up. The Subscriber further understands and agrees that it may not,
without the Company's prior written consent, directly or indirectly, make any
offer, sale, short sale, assignment, transfer, pledge, encumbrance, contract to
sell, grant of an option to purchase or other disposition of, or enter into any
swap or other hedging transaction relating to, the Shares, or any interest
therein, for a period of 12 months following the Closing, and the certificates
evidencing the Shares shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFERS, ASSIGNMENTS AND OTHER DISPOSITIONS, AS
PROVIDED IN THE SUBSCRIPTION AGREEMENT, DATED APRIL 26, 2000, A COPY
OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY."
The foregoing legend shall be removed upon the expiration of said 12-month
period. Without limitation of the foregoing, the Subscriber agrees that if it
transfers its rights hereunder to a Subsidiary pursuant to Section 16(k) hereof,
the Subscriber shall not sell, assign or transfer the stock of such Subsidiary
during the 12-month lock-up period other than to another Affiliate of the
Subscriber, which Affiliate shall assume all of the obligations of such
Subsidiary hereunder without relieving the assigning party of its obligations
hereunder. Following such an assumption by the Affiliate, the restriction on
sale, assignment or transfer of the stock of such Subsidiary shall be lifted.
e. Stop Transfer Notations. The Company and any transfer agent acting on
its behalf may maintain on the Company's register for the Class A Stock
appropriate "stop transfer" notations with respect to the Shares and the
Underlying Warrant Shares unless such Subsidiary has become a reassignee.
5. Representations and Warranties of the Company. The Company represents
and warrants to the Subscriber that:
a. Organization of the Company and its Subsidiaries. Each of the Company
and its Subsidiaries (as defined below) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization and has
all requisite corporate, partnership or limited liability company power and
authority to carry on its business as now being conducted. Each of the Company
and its Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification or
licensing necessary, except where the failure to be so qualified, licensed or in
good standing would not have a material adverse effect on (i) the business,
properties, condition (financial or otherwise), or results of operations of the
Company and its Subsidiaries,
8
taken as a whole, or (ii) the ability of the Company to consummate the
transactions contemplated hereby (a "Material Adverse Effect"). As used in this
Subscription Agreement, the word "Subsidiary" means, with respect to any party,
any corporation or other organization, whether incorporated or unincorporated,
of which (i) such party or any other Subsidiary of such party is a general
partner or (ii) at least 50% of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
b. Valid Offering of Shares.
(1) Upon issuance of the Unit pursuant to this Subscription Agreement,
the Shares and the Warrants will be duly and validly issued, fully paid and
non-assessable, and the Subscriber will receive good title thereto, free and
clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever and free of any other restriction
(including any restriction on the right to use, vote, sell or otherwise dispose
of such capital stock or other ownership interests) (collectively, "Liens"),
except (i) under the provisions of applicable federal and foreign and state
securities law and (ii) as a result of acts of the Subscriber. Upon the issuance
of the Warrants pursuant to this Subscription Agreement, the Underlying Warrant
Shares will be duly and validly authorized and reserved for issuance, and, upon
issuance of the Underlying Warrant Shares upon exercise of the Warrants in
accordance with the terms thereof, the Underlying Warrant Shares will be duly
and validly issued, fully paid and non-assessable; and the holder of the
Warrants will receive good title to the Underlying Warrant Shares, free and
clear of all Liens, except (i) under the provisions of applicable federal and
foreign and state securities law and (ii) as a result of acts of the holder of
the Warrants.
(2) Neither the Company nor its Subsidiaries has taken any action that
would result in the offering and sale of the Shares, the Warrants and the
Underlying Warrant Shares pursuant to this Subscription Agreement being treated
as a public offering and not a valid private offering under the law.
c. Authority; No Conflict; Required Filings and Consents.
(1) The Company has (or, as applicable, prior to the Closing will have)
all requisite corporate power and authority to enter into this Subscription
Agreement, the Warrants and the Registration Rights Agreement and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Subscription Agreement, the Warrants and the Registration Rights Agreement
and the consummation of the transactions contemplated hereby and thereby have
been (or, as applicable, prior to the Closing will be) duly authorized by all
necessary and appropriate corporate action on the part of the Company. No
stockholder action is necessary to authorize the issuance and sale of the Unit.
This Subscription Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in
9
accordance with its terms, except as such enforceability may be limited by or
subject to any bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and subject to
general principles of equity. The Warrants and the Registration Rights
Agreement, when executed and delivered by the Company, will constitute the
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except as such enforceability
may be limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and subject to general principles of equity.
(2) The execution and delivery of this Subscription Agreement, the Warrants
and the Registration Rights Agreement by the Company do not, and the
consummation of the transactions contemplated hereby and thereby will not, (i)
conflict with, or result in any violation or breach of, any provision of the
Certificate of Incorporation or Bylaws of the Company, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit) under, or
require a consent or waiver under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, contract or other agreement,
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets may be bound,
or (iii) conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any of its Subsidiaries or any of its or their properties or
assets, except in the case of clauses (ii) and (iii) for any such conflicts,
violations, breaches, defaults, terminations, cancellations or accelerations
which are not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect.
(3) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency, commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to the Company or any of its Subsidiaries in
connection with the execution and delivery of this Subscription Agreement, the
Warrants or the Registration Rights Agreement, or the consummation of the
transactions contemplated hereby or thereby, except (i) the filings and
approvals required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (ii) regulatory filings, applications or
approvals required in connection with the formation or operation of a Qualified
Vertical, if any, (iii) applications to list the Shares, the Underlying Warrant
Shares and the shares issuable pursuant to the Additional Investment Right on
The NASDAQ Stock Market and (iv) any such consents, approvals, orders,
authorizations, registrations, declarations and filings, the absence of which is
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect.
d. Public Filings; Financial Statements.
(1) Since December 3, 1999, the Company has filed with the Securities
and Exchange Commission (the "SEC") all reports, schedules, forms, registration
statements and other documents required to be filed by it as a registrant under
the Securities
10
Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Except for matters otherwise corrected by the subsequent filing with the SEC of
an appropriate amendment prior to the date of this Subscription Agreement, such
reports, forms, and documents filed by the Company with the SEC prior to the
date of this Subscription Agreement and since December 3, 1999 (the "Company SEC
Reports") (including any financial statements filed as a part thereof or
incorporated by reference therein) did not, at the time they were filed (or if
amended or superseded by a filing prior to the date of this Subscription
Agreement, then on the date of such filing), contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such
Company SEC Reports or necessary in order to make the statements in such Company
SEC Reports, in the light of the circumstances under which they were made, not
misleading.
(2) Each of the consolidated financial statements (including, in each
case, any related notes) of the Company contained in the Company SEC Reports was
prepared in accordance with the books of account and other financial records of
the Company and in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act), and fairly
presented the consolidated financial position of the Company and its
Subsidiaries as of the dates, and the consolidated results of its operations and
cash flows for the periods, indicated, except that the unaudited interim
financial statements were subject to normal and recurring year-end adjustments
which were not material in amount.
(3) As of the date hereof, there are no liabilities, contingencies,
changes, facts or circumstances that have not been publicly disclosed by the
Company and that could reasonably be expected to have a Material Adverse Effect.
e. Intellectual Property. Except as set forth in the Company SEC Reports,
the operations of the Company and its Subsidiaries do not infringe upon any
intellectual property rights owned, possessed or used by any third party, and to
the knowledge of the Company there is no valid basis for any claim of such
infringement against it or its Subsidiaries in respect of the use of the
Intellectual Property now used, except, in any such case, as is not reasonably
likely to have a Material Adverse Effect. As used in this Subscription
Agreement, "Intellectual Property" shall mean all material patents, patent
applications, trademarks, trademark registrations, applications for trademark
registrations, trade secrets, service marks, service xxxx registrations,
applications for service xxxx registrations, trade names, labels, slogans,
claims of copyright, copyright registrations, applications for copyright
registrations, copyrights, drawings, designs, software, code and proprietary
know-how owned or licensed by the Company and used in the operation of its
business, other than widely-available "shrink-wrap" software.
f. Brokers. None of the Company or any of its officers, directors or
employees have employed any broker or finder, or incurred any liability for any
brokerage fees, commissions, finder's or other similar fees or expenses in
connection with the transactions contemplated by this Subscription Agreement.
11
6. Representations and Warranties of CF. CF represents and warrants to the
Subscriber that:
a. Organization of CF and its Subsidiaries. CF is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite partnership power and authority to carry on
its business as now being conducted. CF is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so qualified, licensed or in good standing would not have a material adverse
effect on (i) the business, properties, condition (financial or otherwise), or
results of operations of CF or (ii) the ability of CF to consummate the
transactions contemplated hereby (a "CF Material Adverse Effect").
b. Authority; No Conflict; Required Filings and Consents.
(1) CF has (or, as applicable, prior to the Closing will have) all
requisite partnership power and authority to enter into this Subscription
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Subscription Agreement and the consummation of the
transactions contemplated hereby have been (or, as applicable, prior to the
Closing will be) duly authorized by all necessary and appropriate partnership
action on the part of CF. This Subscription Agreement has been duly executed and
delivered by CF and constitutes the legal, valid and binding obligation of CF,
enforceable against CF in accordance with its terms, except as such
enforceability may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and subject to general principles of equity.
(2) The execution and delivery of this Subscription Agreement by CF do
not, and the consummation of the transactions contemplated hereby will not, (i)
conflict with, or result in any violation or breach of, any provision of the
limited partnership agreement of CF, (ii) result in any violation or breach of,
or constitute (with or without notice or lapse of time, or both) a default (or
give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any material benefit) under, or require a consent or
waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which CF is a party or by which it or its properties or assets may
be bound, or (iii) conflict with or violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to CF or any of its properties or assets, except in the case of
clauses (ii) and (iii) for any such conflicts, violations, breaches, defaults,
terminations, cancellations or accelerations which are not, individually or in
the aggregate, reasonably likely to have a CF Material Adverse Effect.
(3) No consent, approval, order or authorization of, or registration,
declaration or filing with, a Governmental Entity is required by or with respect
to CF in connection with the execution and delivery of this Subscription
Agreement or the consummation of the transactions contemplated hereby or
thereby, except (i) the filings and
12
approvals required under the HSR Act, (ii) regulatory filings, applications or
approvals required in connection with the formation or operation of a Qualified
Vertical, if any, and (iii) any such consents, approvals, orders,
authorizations, registrations, declarations and filings, the absence of which is
not, individually or in the aggregate, reasonably likely to have a CF Material
Adverse Effect.
c. Intellectual Property. The operations of CF do not infringe upon any
intellectual property rights owned, possessed or used by any third party, and to
the knowledge of CF there is no valid basis for any claim of such infringement
against it or its Subsidiaries in respect of the use of the CF Intellectual
Property now used, except, in any such case, as is not reasonably likely to have
a CF Material Adverse Effect. As used in this Subscription Agreement, "CF
Intellectual Property" shall mean all material patents, patent applications,
trademarks, trademark registrations, applications for trademark registrations,
trade secrets, service marks, service xxxx registrations, applications for
service xxxx registrations, trade names, labels, slogans, claims of copyright,
copyright registrations, applications for copyright registrations, copyrights,
drawings, designs, software, code and proprietary know-how owned or licensed by
CF and used in the operation of its business, other than widely-available
"shrink wrap" software.
7. Representations and Warranties of the Subscriber. The Subscriber
represents and warrants to the Company that:
a. Organization of the Subscriber. The Subscriber is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite corporate or partnership power and authority
to carry on its business as now being conducted. The Subscriber is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such licensing necessary, except where the
failure to be so qualified, licensed or in good standing would not have a
material adverse effect on (i) the business, properties, condition (financial or
otherwise) or results of operation of the Subscriber and its Subsidiaries, taken
as a whole, or (ii) the ability of the Subscriber to consummate the transactions
contemplated hereby (a "Subscriber Material Adverse Effect").
b. Authority; No Conflict; Required Filings and Consents.
(1) The Subscriber has all requisite power and authority to enter into
this Subscription Agreement and the Registration Rights Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Subscription Agreement and the Registration Rights Agreement
and the consummation of the transactions contemplated hereby and thereby by the
Subscriber have been duly authorized by all necessary action on the part of the
Subscriber. This Subscription Agreement has been duly executed and delivered by
the Subscriber and constitutes the legal, valid and binding obligation of the
Subscriber, enforceable against the Subscriber in accordance with its terms,
except as such enforceability may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and subject
13
to general principles of equity. The Registration Rights Agreement, when
executed and delivered by the Subscriber, will constitute the legal, valid and
binding obligation of the Subscriber, enforceable against the Subscriber in
accordance with its terms, except as such enforceability may be limited by or
subject to any bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and subject to
general principles of equity.
(2) The execution and delivery of this Subscription Agreement and the
Registration Rights Agreement by the Subscriber does not, and the consummation
of the transactions contemplated hereby and thereby will not, (i) conflict with,
or result in any violation or breach of, any provision of the Certificate of
Incorporation or Bylaws or other operative organizational documents of the
Subscriber, (ii) result in any violation or breach of, or constitute (with or
without notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, or require a consent or waiver under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, contract
or other agreement, instrument or obligation to which the Subscriber or any of
its Subsidiaries or Affiliates is a party, or (iii) conflict with or violate any
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Subscriber or any of its
Subsidiaries or Affiliates or any its or their properties or assets, except in
the case of clauses (ii) and (iii) for any such conflicts, violations, breaches,
defaults, terminations, cancellations or accelerations which are not,
individually or in the aggregate, reasonably likely to have a Subscriber
Material Adverse Effect.
(3) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to the Subscriber (or any of its Subsidiaries or Affiliates) in
connection with the execution and delivery of this Subscription Agreement or the
Registration Rights Agreement or the consummation of the transactions
contemplated hereby and thereby, except (i) the filings and approvals required
under the HSR Act, (ii) regulatory filings, applications or approvals required
in connection with the formation or operation of a Qualified Vertical, if any,
and (iii) any such consents, approvals, orders, authorizations, registrations,
declarations and filings the absence of which is not, individually or in the
aggregate, reasonably likely to have a Subscriber Material Adverse Effect.
c. Knowledge and Experience. The Subscriber has sufficient knowledge and
experience in financial and business matters to be capable of evaluating the
merits and risks of an unregistered, non-liquid investment such as an investment
in the Company and has evaluated the merits and risks of such an investment. The
Subscriber is not relying on the Company with respect to the corporate tax,
legal and economic considerations involved in this investment or to its
investment in the LLC. The Subscriber understands that the offer and sale of the
Shares, the Warrants and Underlying Warrant Shares have not been approved or
disapproved by the SEC or any other Governmental Entity.
14
d. No other Representations or Warranties. No representations or warranties
have been made to the Subscriber by the Company or any director, officer,
employee, agent or Affiliate of the Company, other than the representations of
the Company set forth herein, and the decision of the Subscriber to purchase the
Unit is based on the information contained in this Subscription Agreement, the
Company SEC Reports and the Subscriber's own independent investigation of the
Company. The Subscriber acknowledges and agrees that the Company may now, or in
the future, be in negotiations with respect to, or enter into, arrangements,
agreements or understandings relating to other business opportunities (which may
include vertical opportunities) and that the Company does not have now, nor will
it have at any time after execution of this Agreement, any obligation to provide
the Subscriber with any information, other than that which is contained in this
Subscription Agreement and that which is disclosed in the Company SEC Reports.
e. Ability to Withstand Loss of Investment. The overall commitment of the
Subscriber to investments which are not readily marketable is not
disproportionate to the net worth of the Subscriber, and the Subscriber's
acquisition of the Unit will not cause such overall commitment to become
excessive. The Subscriber understands that a total loss of capital is possible.
The Subscriber acknowledges that it is capable of bearing a complete loss of its
investment in the Company.
f. No Public Solicitation. The Subscriber acknowledges that neither the
Company nor any person or entity acting on its behalf has offered to sell any of
the Shares, the Warrants or the Underlying Warrant Shares to the Subscriber by
means of any form of general solicitation or advertising, including without
limitation (i) any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media, or broadcast over
television or radio, and (ii) any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.
g. Accredited Investor Status. The Subscriber is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act.
h. Acquiring for Investment Purposes. The Subscriber is acquiring the
Shares and the Warrants solely for its own account, for investment purposes
only, and not with a view towards their resale or distribution.
i. No Brokers, Finders, etc. The Subscriber has not employed any broker,
financial advisor or finder, or incurred any liability for any brokerage fees,
commissions, finder's or other similar fees or expenses in connection with the
transactions contemplated by this Subscription Agreement.
15
j. No Action Taken to Invalidate Private Placement. The Subscriber has not
taken any action that would result in the offering of the Shares, the Warrants
and the Underlying Warrant Shares pursuant to this Subscription Agreement being
treated as a public offering and not a valid private offering under the law.
8. Conditions to Closing.
a. Conditions applicable to Each Party. The respective obligations of each
party to this Subscription Agreement set forth herein to purchase and sell the
Unit shall be subject to the satisfaction (or waiver by each party) of each of
the following conditions on and as of the Closing:
(1) No litigation, investigation, inquiry, proceeding, statute, rule,
regulation, order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by or in any court or
governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters
contemplated hereby which has the effect of making the
transactions contemplated by this Subscription Agreement illegal
or otherwise prohibiting the consummation of any of the
transactions contemplated by this Subscription Agreement.
(2) All approvals required under the HSR Act shall have been received
(or all applicable waiting periods, and any extensions thereof,
under the HSR Act shall have expired or otherwise been
terminated).
(3) The Subscriber and the Company shall have entered into the
Registration Rights Agreement.
b. Conditions to Obligations of the Company. The obligations of the Company
set forth herein to issue and sell the Unit also shall be subject to the
satisfaction (or waiver by the Company) of each of the following conditions on
and as of the Closing:
(1) The representations and warranties of the Subscriber made herein
shall have been true and correct in all material respects as of
the date when made and as of the Closing as though made at that
time (except for any such representations and warranties that
speak as of a specific date).
(2) The Subscriber shall have performed, satisfied and complied in
all material respects with the covenants, agreements and
conditions required thereby to be performed, satisfied or
complied with by the Subscriber at or prior to the Closing,
including payment of the Purchase Price.
16
c. Conditions to Obligations of the Subscriber. The obligations of the
Subscriber set forth herein to purchase the Unit also shall be subject to the
satisfaction (or waiver by the Subscriber) of each of the following conditions
on and as of the Closing:
(1) The representations and warranties of the Company and CF set
forth in this Subscription Agreement shall be true and correct in
all material respects as of the date when made and as of the
Closing as though made at that time (except for any such
representations and warranties that speak as of a specific date).
(2) The Company and CF shall have performed, satisfied and complied
in all material respects with the covenants, agreements and
conditions required thereby to be performed, satisfied and
complied with by them at or prior to the Closing, including
delivery of the executed certificates for the Shares and the
Warrants.
9. Indemnification.
a. Agreement to Indemnify.
(1) Subject to the express provisions of Section 3 as to the
Subscriber'ssole remedy for the failure of the Company and CF to present the
seven Qualified Verticals set forth on Annex A to the Subscriber within the
12-Month Period, as the same may be extended by a Black-Out Period, the Company
agrees to indemnify, defend and hold harmless the Subscriber (and its officers,
directors, Affiliates and permitted assigns) from and against any and all
losses, claims, liabilities, damages, deficiencies, costs or expenses (including
interest, penalties and reasonable attorneys' fees, disbursements and related
charges) (collectively, "Losses") based upon, arising out of or otherwise in
respect of (x) any inaccuracy in or breach of any representations or warranties
made by the Company contained in this Subscription Agreement or any action taken
by the Subscriber or its Affiliates in reliance upon the accuracy of such
representations or warranties or (y) failure of the Company to perform any of
the agreements or covenants contained herein, except to the extent such Losses
are based upon, arise out of or are otherwise in respect of any inaccuracy in or
breach of any representations or warranties made by the Subscriber contained in
this Subscription Agreement or the failure of the Subscriber to perform any of
the agreements or covenants contained herein.
(2) The Subscriber agrees to indemnify, defend and hold harmless the
Company (and its officers, directors, Affiliates and permitted assigns) from and
against any and all Losses based upon, arising out of or otherwise in respect of
(x) any inaccuracy in or breach of any representations or warranties made by the
Subscriber contained in this Subscription Agreement or any action taken by the
Company or its Affiliates in reliance upon the accuracy of such representations
or warranties or (y) the failure of the Subscriber to perform any of the
agreements or covenants contained herein, except to the extent such Losses
17
are based upon, arise out of or are otherwise in respect of any inaccuracy in or
breach of any representations or warranties made by the Company contained in
this Subscription Agreement or the failure of the Company to perform any of the
agreements or covenants contained herein.
b. Indemnification Procedure.
(1) A party entitled to indemnification pursuant to this Section 9 (an
"Indemnified Party") shall provide written notice to the indemnifying party (the
"Indemnifying Party") of any claim of such Indemnified Party for indemnification
under this Subscription Agreement promptly after the date on which such
Indemnified Party has actual knowledge of the existence of such claim. Such
notice shall specify the nature of such claim in reasonable detail and the
Indemnifying Party shall be given reasonable access to any documents or
properties within the control of the Indemnified Party as may be useful or
necessary in the investigation of the basis for such claim. The failure to so
notify the Indemnifying Party shall not constitute a waiver of such claim except
to the extent that the Indemnifying Party is materially prejudiced by such
failure.
(2) If any Indemnified Party seeks indemnification hereunder based upon
a claim asserted by a third party, then the Indemnifying Party shall have the
right (without prejudice to the right of any Indemnified Party to participate at
its expense through counsel of its own choosing) to defend such claim at its
expense and through counsel of its own choosing (and reasonably acceptable to
the Indemnified Party) if it gives written notice of its intention to do so no
later than 20 days following notice thereof by an Indemnified Party; provided,
however, that, if, in the reasonable opinion of counsel to the Indemnified
Party, separate counsel is required because a conflict of interest would
otherwise exist, the Indemnified Party shall have the right to select separate
counsel to participate in the defense of such action on its behalf, at the
expense of the Indemnifying Party; provided further, however, that the
Indemnified Party shall always have the right to select separate counsel to
participate in the defense of such action on its behalf, at its own expense. If
the Indemnifying Party does not so choose to defend any such claim asserted by a
third party for which any Indemnified Party would be entitled to indemnification
hereunder, then the Indemnified Party shall be entitled to recover from the
Indemnifying Party all of the reasonable attorney's fees and other costs and
expenses of litigation incurred in the defense of such claim. It is understood
that the Indemnifying Party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, in any case be liable for the fees
and expenses of more than one separate firm (in addition to any local counsel)
for all Indemnified Parties. Notwithstanding the assumption of the defense of
any claim by an Indemnifying Party, the Indemnified Party shall have the right
to approve the terms of any settlement of a claim (which approval shall not be
unreasonably withheld or delayed) if such settlement (i) does not include as an
unconditional term the giving by the claimant or the plaintiff to the
Indemnified Party a release from all liability in respect to such claim or (ii)
requires anything from the Indemnified Party other than the payment of money
damages which the Indemnifying Party has agreed to pay in full. The Indemnifying
Party shall not be liable for any settlement of any proceeding effected without
its prior written consent (not to be unreasonably withheld or delayed).
18
10. Termination. Notwithstanding anything to the contrary set forth in this
Subscription Agreement, this Subscription Agreement may be terminated and the
transactions contemplated herein abandoned at any time prior to the Closing:
(1) by mutual written consent of the Company and the Subscriber;
(2) by the Company or the Subscriber if the Closing shall not have
occurred by July 31, 2000 (which date will be extended (x) up to 90 days as
necessary to obtain any regulatory approval or the lifting of any order which is
necessary for the Closing and (y) to that date which is 60 days following the
date of the parties' full compliance with a second request for information by
the Federal Trade Commission or the Department of Justice in respect of the
Company's or the Subscriber's filing under the HSR Act); provided, however, that
the right to terminate this Subscription Agreement under this Section 10 shall
not be available to any party whose failure to fulfill any obligation under this
Subscription Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date;
(3) by the Company or the Subscriber if a court of competent
jurisdiction shall have issued an order, decree or ruling permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Subscription Agreement, and such order, decree, ruling or other action
shall have become final and non-appealable;
(4) by the Company if (i) the representations or warranties made by the
Subscriber are not true and correct, in all material respects, when made or at
the Closing (except for any such representations or warranties that speak as of
a specific date, which must be true and correct in all material respects as of
such specific date), or (ii) the Subscriber fails to comply in any material
respect with any of its covenants or agreements contained herein; or
(5) by the Subscriber if (i) the representations and warranties made by
the Company are not true and correct, in all material respects, when made or at
the Closing (except for any such representations or warranties that speak as of
a specific date, which must be true and correct in all material respects as of
such specific date), or (ii) the Company fails to comply in any material respect
with any of its covenants or agreements contained herein.
The termination of this Subscription Agreement pursuant to clauses (2), (3), (4)
and (5) above shall be without prejudice to the right of the non-breaching party
to pursue any and all remedies available to it (including the commencement of
any action or other proceeding or the assertion of any equitable right) as a
result of such breach.
11. Covenants of CF and the Company.
a. CF hereby covenants and agrees that at such time as when the Subscriber
and The Xxxxxxxx Companies, Inc., and their respective assignees under Section
16(k) have made an aggregate equity investment in the Company of an amount equal
to at least $100.0 million valued on a cost basis and for so long as such
parties maintain ownership of equity securities having such cost basis, CF shall
use its best efforts to cause one designee jointly
19
selected by such parties to be nominated to the Board of Directors of the
Company, subject to such parties' collective agreement as to the one designee,
and CF shall vote its shares of common stock of the Company in favor of such
designee.
b. The Company and CF hereby covenant and agree that each will use its best
efforts to maintain a sufficient level of authorized shares of Class A Stock as
is required to meet its obligations to the anchor participants pursuant to the
transactions contemplated hereby, including with respect to the Shares issuable
upon the exercise of the Warrants and the Additional Investment Rights. The
Company agrees to use its best efforts to satisfy any NASDAQ (or other
applicable exchange) requirements for the listing of any shares of Class A
Common Stock to be issued at the Closing or upon exercise of the Warrants or the
Additional Investment Rights.
12. Additional Covenants of CF. CF hereby covenants and agrees that it
will, or (if applicable) cause its Affiliate to, enter into assignment
agreements for each Qualified Vertical on terms and conditions substantially the
same in all material respects as (but subject to changes attributable to
differences among the products and regions) that which is contemplated by
Schedule 1 and 2 of the Newco Term Sheet. CF further covenants and agrees that
prior to the Closing, it will convert a sufficient number, if any, of the shares
of Class B Common Stock of the Common Stock of the Company owned by it into
Class A Common Stock such that, after giving effect to such conversion, the
Shares to be purchased by Subscriber at the Closing represent not more than 4.9%
of the outstanding shares of Class A Common Stock of the Company on the date of
the Closing.
13. Right of the Company and CF to Issue Securities to Other Industry
Market Participants. Nothing contained herein shall limit the rights of the
Company or CF (or any Subsidiary or Affiliate thereof) to issue or transfer
securities of the Company not referred to or contemplated herein or in the Newco
Term Sheet to any third party in order to induce such party to become an anchor
participant or industry market participant in any Qualified Vertical set forth
on Annex A or for any other purpose, whether relating to a Qualified Vertical or
otherwise. Notwithstanding the foregoing, the Company shall not offer, during
the six month period commencing with the date hereof, any of its equity
securities or other material benefits in order to induce the Specified Party (as
defined in a separate letter agreement) to become an anchor participant in any
Qualified Vertical set forth on Annex A on terms more favorable than the terms
offered pursuant to this Subscription Agreement with respect to its investment
in the Company without also offering (as promptly as practicable after a
definitive agreement is reached with the Specified Party) the same more
favorable terms to the Subscriber. A term which is more beneficial in any
material respect shall be deemed to include, but not be limited to, a material
commitment by a Specified Party (i) not to compete with the Qualified Vertical;
(ii) to support the business of the Qualified Vertical; or (iii) to participate
with the Company in a vertical marketplace that is not a Qualified Vertical. The
offer to a Subscriber under this Section 13 shall be exercisable for 10 business
days after delivery by the Company to Subscriber of the definitive documentation
embodying the more favorable terms. No such offer to a Subscriber shall be
required to be made prior to the Closing or if this agreement is terminated
under Section 10 hereof for any reason. In the event an offer
20
is made to the Specified Party prior to the Closing which would otherwise
require an offer to Subscriber hereunder, the same offer shall be made to
Subscriber as promptly as practicable after the Closing. The Company's
obligation to offer the Subscriber the more favorable terms offered to the
Specified Party shall be extended (x) for an additional six months (for a total
term of 12 months from the date hereof) if the Subscriber and/or The Xxxxxxxx
Companies, Inc., and their respective assignees under Section 16(k) invest in at
least two Qualified Verticals during the initial six month period from the date
hereof or (y) for an additional 12 months (for a total term of 18 months from
the date hereof) if the Subscriber and/or The Xxxxxxxx Companies, Inc., and
their respective assignees under Section 16(k) invest in at least four Qualified
Verticals during the initial 12 month period from the Closing.
14. Non-Exclusive Agreement. Nothing contained herein shall limit the
rights of the Company, CF or the Subscriber (or any Subsidiary or Affiliate
thereof) to form or participate in, whether as equity holder, consultant, joint
venturer, manager or otherwise, any business opportunity relating to a
"vertical" marketplace and there shall be no obligation, express or implied, to
first offer the right to participate in any such marketplace to any other party;
provided, however, that the Company and CF will agree to certain non-compete
restrictions which relate to sales of products traded by Newco to retail
customers as further described under "Scope of Newco" in the Newco Term Sheet.
15. Covenant of the Subscriber. The Subscriber agrees that neither it nor
any of its Subsidiaries or Affiliates will make, and the Subscriber will use its
reasonable best efforts to prevent any of its or their respective directors,
officers or agents or any person otherwise acting on behalf of any of the
foregoing from making, any purchase, offer, sale, short sale, assignment,
transfer, pledge, encumbrance, contract to sell, grant of an option to purchase
or other disposition of, or enter into any swap relating to, any securities of
the Company, or any interest therein, during any period which governs the
calculation of the purchase price of any securities of the Company which the
Subscriber may have a right to purchase in the future under the terms of this
Agreement.
16. General.
a. The Subscriber acknowledges and agrees that any information or data it
has acquired from or about the Company, not otherwise properly in the public
domain, was received in confidence. The Subscriber agrees not to divulge,
communicate or disclose, except as may be required by law or for the performance
of this Subscription Agreement, including in connection with the solicitation of
industry market participants, or use to the detriment of the Company or for the
benefit of any other person or persons, or misuse in any way, any confidential
information of the Company, including any scientific, technical, trade or
business secrets of the Company and any scientific, technical, trade or business
materials that are treated by the Company as confidential or proprietary,
including, but not limited to, ideas, discoveries, inventions, developments and
improvements belonging to the Company and confidential information obtained by
or given to the Company about or belonging to third parties.
21
b. The parties hereto agree to execute such further instruments and to take
such further action as may reasonably be necessary to consummate the
transactions contemplated by this Subscription Agreement. Each party will use
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate the transactions contemplated by this
Subscription Agreement as promptly as practicable after the date hereof,
including (i) preparing and filing as promptly as practicable all documentation
to effect all necessary applications, notices, petitions, filings and other
documents and to obtain as promptly as practicable all consents, waivers,
licenses, orders, registrations, approvals, permits and authorizations necessary
or advisable to be obtained from any third party and/or any Governmental Entity
in order to consummate the transactions contemplated by this Subscription
Agreement and (ii) taking all reasonable steps as may be necessary to obtain all
such material consents, waivers, licenses, registrations, permits,
authorizations, tax rulings, orders and approvals. In furtherance and not in
limitation of the foregoing, each party hereto agrees to make an appropriate
filing of a Notification and Report Form pursuant to the HSR Act with respect to
the transactions contemplated hereby as promptly as practicable after the date
hereof and to supply as promptly as practicable any additional information and
documentary material that may be requested pursuant to the HSR Act and to take
all other actions necessary to cause the expiration or termination of the
applicable waiting periods under the HSR Act as soon as practicable. Nothing in
this Subscription Agreement shall require any party (or any of its Subsidiaries
or Affiliates) to sell, hold separate or otherwise dispose of or conduct their
business in a specified manner, or agree to sell, hold separate or otherwise
dispose of or conduct their business in a specified manner, whether as a
condition to obtaining any approval from a Governmental Entity or for any other
reason.
c. All notices and other communications hereunder shall be in writing and
shall be deemed to have been given if delivered personally or sent by facsimile
transmission, overnight courier, or certified, registered or express mail,
postage prepaid. Any such notice shall be deemed given when so delivered
personally or sent by facsimile transmission (provided that a confirmation copy
is sent by overnight courier), one day after deposit with an overnight courier,
or if mailed, three days after the date of deposit in the United States mails,
as follows:
If to the Company to:
eSpeed, Inc.
Xxx Xxxxx Xxxxx Xxxxxx
000xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn.: General Counsel
22
with a copy to:
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
If to CF to:
Cantor Xxxxxxxxxx, X.X.
Xxx Xxxxx Xxxxx Xxxxxx
000xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn.: General Counsel
If to the Subscriber to the address set forth below its signature:
d. This Subscription Agreement and exhibits hereto contain the entire
agreement between the parties hereto with respect to the matters contemplated
herein and supersedes all prior agreements or understandings among the parties
related to such matters.
e. This Subscription Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
f. This Subscription Agreement may be amended, modified, superseded,
canceled, renewed or extended, and the terms or covenants hereof may be waived,
only by a written instrument executed by all of the parties hereto or, in the
case of a waiver, by the party waiving compliance. Except as otherwise
specifically provided in this Subscription Agreement, no waiver by either party
hereto of any breach by the other party hereto of any condition or provision of
this Subscription Agreement to be performed by such other party shall be deemed
a waiver of a similar or dissimilar provision or condition at the same or at any
prior or subsequent time.
g. This Subscription Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York, without giving effect to the principles of conflicts of
laws thereof. Each party hereto (i) hereby irrevocably and unconditionally
submits to the exclusive jurisdiction of any court of the State of Delaware or
any federal court sitting in the State of Delaware for purposes of any suit,
action or other proceeding arising out of this Subscription Agreement or the
subject matter hereof brought by any party hereto, (ii) hereby waives and agrees
not to assert, by way of motion, as a defense, or otherwise, in any such suit,
action or proceeding, any claim that it is
23
not subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that the suit, action
or proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Subscription Agreement or the
subject matter hereof may not be enforced in or by such court, and (iii) hereby
waives in any such action, suit, or proceeding any offsets or counterclaims.
Each party hereto hereby consents to service of process by certified mail at the
address set forth in Section 16(c) hereof and agrees that its submission to
jurisdiction and its consent to service of process by mail is made for the
express benefit of the other party hereto. Final judgment against any party, in
any action, suit or proceeding shall be conclusive, and may be enforced in other
jurisdictions (1) by suit, action or proceeding on the conclusive evidence of
the fact and of the amount of any indebtedness or liability of the party therein
described or (2) in any other manner provided by or pursuant to the laws of such
other jurisdiction.
h. Headings to the Sections in this Subscription Agreement are intended
solely for convenience and no provision of this Subscription Agreement is to be
construed by reference to the heading, of any Section.
i. This Subscription Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same agreement. Delivery of a telecopied version of one
or more signatures to this Subscription Agreement shall be deemed adequate
delivery for purposes of this Subscription Agreement.
j. Any term or provision of this Subscription Agreement which is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Subscription
Agreement or affecting the validity or enforceability of any of the terms and
provisions of this Subscription Agreement in any other jurisdiction.
k. This Subscription Agreement is not transferable or assignable by the
Company, the Subscriber or CF; provided, however, that any party may assign its
rights and obligations under this Subscription Agreement to a wholly-owned
Subsidiary of such party; provided, further, however, that such assignment shall
not relieve the assigning party from its obligations hereunder.
24
IN WITNESS WHEREOF, the Subscriber has executed this Subscription
Agreement this 26th day of April, 2000.
SUBSCRIBER:
Dynegy, Inc.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
Address: 0000 Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: General Counsel
Fax No.:
Taxpayer ID #
AGREED AND ACCEPTED this 26th
day of April, 2000.
eSPEED, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
CANTOR XXXXXXXXXX, X.X.
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chairman
25
EXHIBITS
Exhibit A - Form of Warrant
Exhibit B - Wire Transfer Instructions
Exhibit C - Newco Term Sheet
Exhibit D - Form of Registration Rights Agreement
Annex A -- Qualified Verticals
26
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 _________, 2010 [representing
10th anniversary of issuance].
WARRANT TO PURCHASE CLASS A COMMON STOCK
OF
eSPEED, INC.
FOR VALUE RECEIVED, eSPEED, INC. (the "Company"), a Delaware corporation,
hereby certifies that Dynegy, Inc. (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 (as the same may be accelerated
pursuant to Section 4(c) hereof) and prior to 5:00 P.M., Eastern Standard Time,
on ________, 2010 [representing 10th anniversary of issuance] a total of 666,666
fully paid and non-assessable shares of Class A Common Stock, par value $.01 per
share, of the Company for a purchase price of $35.203125 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.") 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 as hereinafter provided under
Section 3.
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 (as the same may be accelerated pursuant to Section 4(c)
hereof) and prior to 5:00 P.M., Eastern
1
Standard Time, on _________, 2010 [representing 10th anniversary of issuance] 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 value of a share.
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.
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
2
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.
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 an amount determined by multiplying the Warrant Shares
issuable prior to such adjustment by a fraction determined by dividing (x) the
Per Share Warrant Price in effect immediately prior to the event causing such
adjustment by (y) such 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.
3
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.
4. Exercisability.
a. Exercise Date. This Warrant shall be vested immediately and shall be
exercisable as to all Warrant Shares commencing _________ [the date which is 5
1/2 years after the date of issuance] (the "Exercise Date"), subject to
acceleration as set forth in subsection (c) below.
b. Commitment to Invest in Four Qualified Verticals. The Initial Holder has
agreed to invest $2.5 million in each of four Qualified Verticals (as defined
below) pursuant to the terms of that certain Subscription Agreement, dated as of
April 26, 2000, by and between the Company and the Initial Holder (the
"Subscription Agreement"). Such investment is required to be made during the
12-month period following the date hereof (the "12-Month Period"; which period
may be increased by not more than six months (the "Black-Out Period") if a
public offering by the Company is commenced during such 12-Month Period and
disclosure constraints resulting from such public offering dictate a delay as
determined by the Company). Upon any such determination by the Company, the
Company shall so notify the Initial Holder in writing prior to the commencement
of any Black-Out Period, which notice shall specify the time period by which the
12-Month Period shall be increased and the new last
4
day of the 12-Month Period. Such notice shall be binding on the parties. For
purposes of this agreement, a "Qualified Vertical" shall have the meaning
ascribed to it in Section 3(b) of the Subscription Agreement.
c. Acceleration of Exercisability.
(i) Satisfaction of Acceleration Condition. Upon each satisfaction of
an Acceleration Condition (as defined below), this Warrant shall become
exercisable as to 25% of the aggregate Warrant Shares (i.e., [166,666] shares of
Class A Stock). An "Acceleration Condition" shall be deemed satisfied after the
occurrence of each of the following: (1) the formation of a Qualified Vertical,
(2) the consummation and funding of a $2.5 million investment in a Qualified
Vertical by the Subscriber and each of the three additional industry market
participants (two in the case of the Newco Qualified Vertical, as defined in
Section 3 of the Subscription Agreement), and (3) the consummation of the
Initial Holder's first transaction on the exchange of said Qualified Vertical
[any market participant's first transaction on the exchange in the case of
Dynegy, Inc.]; provided that in any event the Acceleration Condition shall be
deemed satisfied on the eight-week anniversary of the satisfaction of the
conditions set forth in clauses (1) and (2) above.
(ii) Not Exercisable Prior to First Anniversary of Date of Issuance.
Notwithstanding the provisions of subsection (c)(i) above, in no event will this
Warrant, or any portion thereof, become exercisable prior to [____] October
2001. In the event that an Acceleration Condition is satisfied prior to such
date, then the exercisability of this Warrant in connection with such
satisfaction shall be deferred until [___].
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. Subject to Section 6(c) hereof, 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
5
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 of 1933, as amended, 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.
b. Registration Rights. The Warrant Shares are the subject of the
Registration Rights Agreement attached to the Subscription Agreement as Exhibit
D.
c. Swap or Hedging Transactions. Subject to Section 3(c) of the
Subscription Agreement, without the prior written consent of the Company, the
Holder may not enter into any swap or other hedging transaction relating to the
Warrants or the Warrant Shares.
d. Transfer. Subject to Section 4(c), without the prior written consent of
the Company, neither this Warrant, nor any interest herein, may be sold,
assigned, transferred, pledged, encumbered or otherwise disposed of. Any sale,
assignment, transfer, pledge, encumbrance or other disposition of this Warrant
attempted contrary to the provisions of this Warrant, or any levy of execution,
attachment or other process attempted upon the Warrant, shall be null and void
and without effect. The provision of this Section 6(d) shall not be applicable
to the Warrant Shares.
Without limitation of the foregoing, Subscriber agrees that if it transfers its
rights hereunder to a Subsidiary pursuant to Section 16(k) of the Subscription
Agreement, it shall not sell, assign or transfer the stock of such Subsidiary
during the 12-month lock-up.
e. 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
6
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.
9. Communication. No notice or other communication under this Warrant shall
be effective unless the same is in writing and is mailed by first-class mail,
postage prepaid, addressed to:
a. the Company at Xxx Xxxxx Xxxxx Xxxxxx, 000xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: General Counsel, or such other address as the Company has
designated in writing to the Holder, or
b. the Holder at 0000 Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000,
Attention: General Counsel, 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.
7
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
a duly authorized officer as of this ______ day of April, 2000.
eSPEED, INC.
By:____________________________
Name:
Title:
8
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__________________________
Address___________________
___________________
1
EXHIBIT B
Wire transfer instructions to be provided by eSpeed prior to Closing.
1
EXHIBIT C
THE NEWCO TERM SHEET
Scope of Newco
Newco is intended to be an electronic and telephonic marketplace for
North American wholesale transactions in natural gas, electricity, coal and
sulfur dioxide and nitrogen dioxide emissions (the "Newco Products").
Newco's activities will be limited to the wholesale market. Newco will
not intentionally expose itself to any unmatched market risk on the Newco
Products and, prior to July 31, 2001, will not take physical title to the Newco
Products. Newco will not buy or sell Newco Products from or to residential or
commercial end-user customers for their end use ("Retail Customers"). eSpeed,
Inc. ("eSpeed"), Cantor Xxxxxxxxxx, X.X. ("CF") and their respective
subsidiaries will agree not to hold an equity interest, invest, manage or
otherwise participate in any entity that buys or sells Newco Products to Retail
Customers; provided, however, that nothing contained herein shall prohibit
eSpeed or CF or any of their respective subsidiaries from (x) acting solely as a
technology provider in any such marketplace, (y) from acquiring less than 25% of
the voting securities of an entity that buys or sells Newco Products to Retail
Customers so long as the acquired entity is not primarily engaged in the
business of buying or selling Newco Products to Retail Customers, or (z) trading
in the ordinary course of business in securities of entities that are themselves
engaged in the business of buying or selling Newco Products to Retail Customers.
For purposes of the preceding sentence, "primarily engaged" shall mean that the
acquired entity derives more than 17.5% of its revenues from the business of
buying or selling Newco Products to Retail Customers.
Equity Participation in Newco
It is anticipated that Newco will have a total of three stockholders
consisting of a limited liability company (the "LLC") formed by the
participating Anchors for the benefit of up to 10 energy industry participants,
inclusive of the participating Anchors (the "EIPs"), eSpeed and CF. The initial
EIPs will be comprised of the participating Anchors, and the additional EIPs
will be selected from an agreed upon list of 10 - 15 acceptable industry market
participants (the "List"). The initial participating Anchor will be The Xxxxxxxx
Companies, Inc. ("Xxxxxxxx"). Any of the participating Anchors, eSpeed and CF
may invite an additional industry market participant to invest in Newco from
said List until the 9th month anniversary of the closing date with respect to
the initial LLC investment in Newco as described below (the "Initial Newco
Closing Date"). Invitations to additional industry market participants shall be
accepted on a first come first served basis. If invitees can not be
distinguished on the basis of the time of their willingness to commit, the Board
of Newco shall resolve any oversubscription issues in its sole discretion. In
the event that there are fewer than seven EIPs after the 9th month
1
anniversary of the Initial Newco Closing Date, eSpeed and CF shall have the
right to invite additional industry market participants from the List for an
additional 9-month period as set forth under the caption "LLC Investment" below.
The LLC, EIPs, eSpeed and CF will enter into a Stockholders' Agreement to
provide for (i) voting of Newco Board members as set forth below in this Newco
Term Sheet under the Section captioned "Management of Newco", (ii) rights of
first refusal and co-sale rights (including tag-along and drag-along rights),
(iii) non-solicitation and confidentiality obligations and (iv) the agreement of
each such stockholder to cause actions that require the consent of eSpeed or CF
designees on the Board of Newco not to be taken without requisite consent. The
Stockholders' Agreement shall terminate following the initial public offering of
Newco, except for the matters addressed in (i) and (iii) above and the matters
in (iv) above but only as they relate to transaction commissions (including any
reductions) and data pricing.
All share information set forth below is on a fully-diluted basis as of
the Initial Newco Closing Date.
LLC Investment: In exchange for a cash investment of
$2.5 million from the participating
Anchor, the LLC will initially
receive 7.5% of the outstanding
common stock of Newco and warrants
to purchase an additional 67.5% of
the outstanding common stock of
Newco. These Newco warrants will be
exercisable in increments of $2.5
million for 7.5% of the outstanding
common stock of Newco if and only
if an additional EIP becomes a
member of the LLC and invests $2.5
million in the LLC. Each time an
EIP is added, the warrants shall
become exercisable by the LLC in
exchange for an additional $2.5
million investment by the LLC in
Newco. Upon the 9th month
anniversary of the Initial Newco
Closing Date if there are fewer
than seven EIPs, eSpeed and CF
shall have the right to invite
additional industry market
participants from the List for a
period of an additional 9 months.
If after such 18 month period there
are (i) at least eight EIPs, then
any unexercised Newco warrants will
be allocated pro rata among the
EIPs and (ii) less than eight EIPs,
then a portion of the unexercised
Newco warrants will be forfeited as
set forth in Annex A and any
unforfeited unexercised Newco
warrants will be allocated pro rata
among the EIPs. If any warrants are
so forfeited, the exercise price
per share of common stock of Newco
issuable upon exercise of the
remaining warrants held by Newco
shall be reduced by multiplying the
exercise price by a fraction, the
numerator of which shall be the
number of shares of outstanding
common stock of Newco then
2
owned by eSpeed and CF and the
denominator shall be the number of
shares of outstanding common stock
of Newco held by the LLC, including
for such purpose, the shares
underlying unforfeited Newco
warrants held by the LLC. Such
exercise price may also be reduced
in another economically appropriate
manner to address such forfeiture
as equitably determined by the
parties. The Newco warrants shall
be exercisable for a 30 day period
from any such allocation. Each EIP
shall make an additional capital
contribution to the LLC in the
amount required to exercise any
unexercised Newco warrants so
allocated to it. If an EIP fails to
make such contribution, the
unexercised Newco warrants so
allocated to it will be allocated
pro rata among the other EIPs who
desire to make such
non-contributing EIP's
contribution.
Dynegy, Inc. ("Dynegy") will have
the right for a 30 day period
commencing October 1, 2001 to
acquire an EIP interest in Newco
through an investment in the LLC for
$2.5 million. Dynegy's right to make
any investment in the LLC shall
terminate on November 1, 2001. If an
initial public offering of Newco
shall occur prior to October 1,
2000, Dynegy will have the right to
accelerate its investment, in whole
or in part, in Newco so long as
Dynegy's ownership does not exceed
4.9% of Newco's outstanding stock;
provided that, in such event, Dynegy
shall have no Board designee rights
prior to August 2001 and any Board
designee rights that it would have
but for this limitation may be
exercised by the other LLC members
acting collectively.
The LLC operating agreement will
provide that [ * ECONOMIC TERMS
OMITTED ]of the Newco common stock
(inclusive of shares acquired by the
LLC upon exercise of the Newco
warrants) will be allocated equally
among the EIPs and the remaining [
*ECONOMIC TERMS OMITTED] of the
Newco common stock (inclusive of
shares acquired by the LLC upon
exercise of the Newco warrants) (the
"Jumpball Shares") will be allocated
among the EIPs based upon the
3
-------------
*This information has intentionally been omitted and has been filed separately
with the Securities and Exchange Commission. It is subject to a confidential
treatment request.
Cumulative Transaction Revenue paid
by each EIP and received by Newco
and eSpeed in the aggregate in the
Newco/eSpeed trading system (i.e.,
100% of electronic and
non-electronic (as set forth on
paragraphs (a) through (c) of
Schedule 4 to this Newco Term Sheet)
transaction service revenues
("Transaction Revenues") in the
Newco Products measured over the
five year period from the Initial
Newco Closing Date (the "Cumulative
Transaction Revenue").
Non-transaction revenue, such as
data, ancillary service and
advertising revenue, shall not be
included as transaction revenue. No
EIP shall be entitled to receive
more than two times its pro rata
share of the Jumpball Shares with
pro ration to be based solely upon
the number of EIPs (the "Jumpball
Cap"). In the event that an EIP
would otherwise be entitled to
receive more than the Jumpball Cap,
then any such excess shares shall be
allocated among the other EIP's in
proportion to their Cumulative
Transaction Revenue to the extent
that, together with such additional
allocation, they would not be
entitled to receive more than the
Jumpball Cap.
As soon as reasonably practicable,
but in no event later than 30 days
following each full quarterly period
after the Initial Newco Closing
Date, CF shall prepare and circulate
to each EIP a quarterly report
reasonably detailing the total
volume and transaction revenue
generated and paid by (i) such EIP
and (ii) all the EIPs in the
aggregate to Newco and eSpeed for
such quarter. As soon as reasonably
practicable, but in no event later
than 90 days following each
anniversary of the Initial Newco
Closing Date, CF shall prepare and
circulate to each EIP a statement
(the "Statement") reasonably
detailing the total volume and
transaction revenue and percentage
of transaction revenue generated and
paid by (i) such EIP and (ii) all
the EIPs in the aggregate to Newco
and eSpeed for the preceding
12-month period. The annual
Statement shall be certified at
Newco's expense by a firm of
certified public accountants
selected by Newco (the "Selected
Accounting Firm"), which firm may
differ from year to year. The EIPs
shall have a period of 60 days after
receipt of the Statement to present
in writing to CF and the other EIPs
any objections thereto, setting
forth the specific item or items to
which each such objection relates
and the specific basis for each such
objection. A
4
Statement shall be deemed to be
acceptable to an EIP unless it
shall have made a written objection
thereto within such 60 day period.
If an EIP shall raise any such
objection within such 60 day period
and such EIP and CF shall fail to
reach an agreement with respect to
any such objection, then such
disputed objection shall, not later
than 30 days after one of the
parties affirmatively terminates
discussions in writing with respect
to such objection, be submitted for
resolution to the Selected
Accounting Firm. The EIP and CF
shall use reasonable efforts to
cause said accounting firm, within
30 days of its appointment, to
resolve the disputes submitted to
it. The fees and expenses of this
accounting firm shall be paid (i)
by the disputing EIP, if the
discrepancy between the
calculations in the Statement and
the calculations of such accounting
firm is less than 2% of the
Statement's calculations, and (ii)
by Newco, if the discrepancy
between the calculations of such
accounting firm is 2% or greater.
Any such resolution by this
accounting firm concerning any item
in dispute shall be final and
binding on the parties without
further right of appeal. In no
event shall an EIP be entitled to
review or object to the transaction
revenues of any other EIP or the
combined Cumulative Transaction
Revenue for all EIPs.
Once the Statement reflecting the
Cumulative Transaction Revenue of
each EIP which is delivered
following the fifth anniversary of
the closing of the Initial Newco
Closing Date becomes final and
binding, the shares of Newco common
stock shall be allocated among the
EIPs in proportion to their
Cumulative Transaction Revenue as
described above.
The LLC operating agreement will
provide that it may not be amended
in any manner which would modify the
allocation provisions set forth
therein without eSpeed's consent.
eSpeed's Investment: In exchange for an aggregate cash
investment of $2.0 million, eSpeed
will receive 5% of the outstanding
equity of Newco on the Initial
Newco Closing Date.
CF's Investment: In exchange for (i) an aggregate
cash investment of $4.25 million,
(ii) the assignment of certain
rights under the
5
services agreement between eSpeed
and CF described on Schedule 1, and
(iii) the transfer of certain
business assets described on
Schedule 2, CF will receive 20% of
the outstanding equity of Newco on
the Initial Newco Closing Date.
Management of Newco
Newco shall be formed as soon as there are a total of three EIPs
(including the participating Anchors) and rights to designate Newco Board
members shall be as follows:
------------------------------- --------------------------- -------------------------- ---------------------------
Total Number of EIPs Total Number to be Total Total
--------------------- ------------------- ------ -----
(including Participating Designated by all the EIPs Number to Number to
------------------------- -------------------------- --------- ---------
Anchors) (One Per EIP) be be
-------- ------------- -- --
Designated Designated
----------- ----------
By eSpeed by CF
------------------------------- --------------------------- -------------------------- ---------------------------
3 3 1 1
------------------------------- --------------------------- -------------------------- ---------------------------
4 4 1 1
------------------------------- --------------------------- -------------------------- ---------------------------
5 5 1 1
------------------------------- --------------------------- -------------------------- ---------------------------
6 6 1 1
------------------------------- --------------------------- -------------------------- ---------------------------
7 7 2 1
------------------------------- --------------------------- -------------------------- ---------------------------
As additional EIPs are added, each EIP shall have the right to designate one
Board member and eSpeed and CF shall have the right to designate directors in
proportion to their collective equity participation in Newco (e.g., if eSpeed
and CF own 25% of the equity securities of Newco they shall have the right to
collectively designate 25% of the Board); provided that in no event shall eSpeed
and CF have less than one Board designee each and if the number of designees is
an odd number, eSpeed shall designate the extra director. The director designee
of an EIP, eSpeed or CF shall be a full-time employee of such party or its
wholly-owned subsidiary, its ultimate parent entity or a wholly-owned subsidiary
of its ultimate parent entity. The majority of the designees of the
non-competing EIPs shall have the right to remove the designee of any EIP if
such EIP or its designee participates in the management (whether by contract,
equity ownership, representation on the Board of Directors or otherwise) of an
entity which is competitive with Newco; provided that, any such participation in
the management of a competitive entity in existence at the time a party becomes
an EIP and disclosed by the EIP at the time of its investment in Newco shall not
be grounds for removal. An EIP shall lose its director designee rights if its
economic interest in Newco common stock held by the LLC falls below 2.5% of the
outstanding shares held by the parties to the Stockholders' Agreement. In the
event that an EIP loses its director designee rights pursuant to the preceding
two sentences, the other EIPs, voting together, shall have the right to fill the
seats that become vacant as a result of such loss of designee rights. All action
of the Newco Board shall be taken by majority
6
vote of the Newco Board, except for those matters set forth on Schedule 3 which
shall require the approval of a majority of the Newco Board as well as a
majority of the director designees of either eSpeed or CF.
Newco Services Agreement
Upon formation, Newco will enter into a services agreement with eSpeed
pursuant to which eSpeed will provide the global technology infrastructure for
the transactional and technology related elements of the marketplace as well as
access to its futures exchange to be hosted by eSpeed in exchange for a
percentage of transactional and other revenues. The terms of such service
agreement are set forth on Schedule 4.
Newco Administrative Services Agreement
Upon formation, Newco will enter into an administrative services
agreement with CF pursuant to which CF will act as market operator and will
manage the day-to-day administrative operations of Newco. The terms of such
administrative services agreement are set forth on Schedule 5.
Registration Rights of eSpeed, CF, the Anchors and the other EIPs
eSpeed, CF and the EIPs will be entitled to those registration rights
with respect to their Newco common stock set forth on Schedule 6.
7
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
by and among
eSpeed, Inc.
and
The Investors Named Herein
1
TABLE OF CONTENTS
ARTICLE I DEMAND REGISTRATIONS..................................................................................1
1.1 Requests for Registration.............................................................................1
-------------------------
1.2 Number of Demand Registrations; Expenses..............................................................2
----------------------------------------
1.3 Effective Registration Statement......................................................................2
--------------------------------
1.4 Priority on Demand Registrations......................................................................3
--------------------------------
1.5 Selection of Underwriter..............................................................................3
------------------------
ARTICLE II PIGGYBACK REGISTRATIONS..............................................................................3
2.1 Right to Piggyback....................................................................................4
------------------
2.2 Piggyback Expenses....................................................................................4
------------------
2.3 Priority on Primary Registrations.....................................................................4
---------------------------------
2.4 Priority on Secondary Registrations...................................................................5
-----------------------------------
ARTICLE III HOLDBACK AGREEMENTS.................................................................................5
ARTICLE IV REGISTRATION PROCEDURES..............................................................................5
ARTICLE V REGISTRATION EXPENSES.................................................................................8
5.1 Registration Expenses.................................................................................8
---------------------
5.2 Holders' Expenses.....................................................................................8
-----------------
ARTICLE VI UNDERWRITTEN AND OTHER OFFERINGS.....................................................................9
6.1 Underwriting Agreement................................................................................9
----------------------
6.2 Obligations of Participants...........................................................................9
---------------------------
ARTICLE VII INDEMNIFICATION.....................................................................................9
7.1 Company's Indemnification Obligations.................................................................9
-------------------------------------
7.2 Holder's Indemnification Obligations.................................................................11
------------------------------------
7.3 Notices; Defense; Settlement.........................................................................11
----------------------------
7.4 Indemnity Provision..................................................................................12
-------------------
ARTICLE VIII DEFINITIONS.......................................................................................12
8.1 Terms................................................................................................12
-----
8.2 Defined Terms in Corresponding Sections..............................................................14
---------------------------------------
ARTICLE IX MISCELLANEOUS.......................................................................................14
9.1 Amendments and Waivers...............................................................................14
----------------------
9.2 Successors and Assigns...............................................................................15
----------------------
9.3 Notices..............................................................................................15
-------
9.4 Headings.............................................................................................16
--------
9.5 Gender...............................................................................................16
------
9.6 Invalid Provisions...................................................................................16
------------------
9.7 Governing Law; Forum; Process........................................................................16
-----------------------------
9.8 Counterparts.........................................................................................17
------------
9.9 Additional Investors.................................................................................17
--------------------
ARTICLE X RULE 144 REPORTING...................................................................................17
i
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
April __, 2000, by and among eSpeed, Inc., a Delaware corporation (the
"Company"), the parties that have executed the signature pages hereto (the
"Initial Investors") and such other parties that otherwise execute a joinder
agreement and become a party hereto (collectively, the "Investors").
RECITALS
WHEREAS, as an inducement to each of the Initial Investors to
invest in the Company, the Company desires to grant to each of the Initial
Investors registration rights with respect to the shares (the "Shares") of Class
A Common Stock (as defined in Section 8.1 below) and warrants to purchase shares
of Class A Common Stock (the "Warrants") issued to the Initial Investors on the
date hereof as set forth on Schedule A hereto, on the terms and subject to the
conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and
agreements and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
DEMAND REGISTRATIONS
1.1 Requests for Registration . Subject to Sections 1.2
and 1.3 hereof, the Initial Investors may request, in writing, registration
under the Securities Act of all or part of their Registrable Securities. Within
15 days after receipt of any such request, the Company will give notice of such
request to all other Investors and to other persons holding piggyback
registration rights entitling them to have securities of the Company included
within such registration ("Other Holders"). Thereafter, the Company will use all
reasonable efforts to effect the registration under the Securities Act (i) on
Form S-1 or any similar long-form registration statement (a "Long-Form
Registration") or (ii) on Form S-3 or any similar short-form registration
statement (a "Short-Form Registration") if the Company qualifies to effect a
Short- Form Registration, and will include in such registration all Registrable
Securities and securities of the Company held by the Other Holders with respect
to which the Company has received written requests for inclusion therein within
20 days after the receipt of the Company's notice, subject to the provisions of
Section 1.4. All registrations initiated by an Investor pursuant to this Section
1.1 are referred to herein as "Demand Registrations". The Company shall not be
required to effect any underwritten Demand Registration requested by an Initial
Investor if either (a) within the 12 months preceding the receipt by the Company
of such request, the Company has filed and has had declared effective by the
Commission a Registration Statement with respect to an underwritten offering
under this Section 1.1 or has filed and has had declared effective by the
Commission another Registration Statement with respect to an underwritten
offering to which the Piggyback Registration rights set forth in Article II
hereof apply and such Initial Investor had an opportunity to include all the
1
shares requested to be included in such Registration Statements; and provided
further that the Company shall not be required to effect any Demand Registration
requested by an Initial Investor if such Investor may sell all of the
Registrable Securities requested to be included in such Demand Registration
without registration under the Securities Act, pursuant to the exemption
provided by (i) Rule 144(k) under the Securities Act, as such rule may be
amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the Commission.] The rights of an Initial Investor pursuant to this
Section 1.1 shall be assignable in accordance with the provisions of Section
9.9.
1.2 Number of Demand Registrations; Expenses . Subject to
Sections 1.1 and 1.3 hereof, each of the Initial Investors shall be entitled to
(i), from and after the one year anniversary of the date hereof, one Demand
Registration and (ii), from and after the date on which such Initial Investor's
Warrants become fully exercisable, one additional Demand Registration, with no
more than one of such Demand Registrations being a Long-Form Registration;
provided, however, that the Company need not effect any requested Demand
Registration unless the expected proceeds of such registration exceed
$20,000,000. The Company will pay all Registration Expenses in connection with
any Demand Registration.
1.3 Effective Registration Statement . A registration
requested pursuant to Section 1.1 of this Agreement shall not be deemed to have
been effected (i) unless a Registration Statement with respect thereto has been
declared effective by the Commission, (ii) if after it has become effective,
such registration is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or court for
any reason, and, as a result thereof, the Registrable Securities covered thereby
have not been sold or (iii) the Registration Statement does not remain effective
for a period of at least 180 days beyond the effective date thereof or, with
respect to an underwritten offering of Registrable Securities, until 45 days
after the commencement of the distribution by the holders of the Registrable
Securities included in such Registration Statement. If a registration requested
pursuant to this Article I is deemed not to have been effected as provided in
this Section 1.3, then the Company shall continue to be obligated to effect the
number of Demand Registrations set forth in Section 1.2 without giving effect to
such requested registration. The Initial Investors of the Registrable Securities
shall be permitted to withdraw all or any part of the Registrable Securities
from a Demand Registration at any time prior to the effective date of such
Demand Registration; provided that in the event of, and concurrently with such
withdrawal, the Initial Investors responsible for such Demand Registration shall
either (x) pay or reimburse the Company for all fees and expenses (including
counsel fees and expenses) incurred by them and the Company prior to such
withdrawal or (y) agree to forfeit one of its Demand Registration rights
hereunder.
1.4 Priority on Demand Registrations . If the Company
includes in any underwritten Demand Registration any securities which are not
Registrable Securities and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and other
shares of Common Stock proposed to be included exceeds the number of Registrable
Securities and other securities which can be
2
sold in such offering, the Company will include in such registration (i) first,
the number of Registrable Securities requested to be included which, in the
opinion of such underwriters, can be sold, by the Investor initiating the Demand
Registration, (ii) second, that number of other shares of Common Stock proposed
to be included in such registration equally between Cantor Xxxxxxxxxx Securities
and its Affiliates, and their successors and assigns on the one hand (the
"Priority Piggyback Registration Holders"), and any other Investors exercising
their Piggyback Registration rights on the one hand and (iii) third, that number
of other shares of Common Stock proposed to be included in such registration,
pro rata among any other holders exercising their respective piggyback
registration rights thereof based upon the total number of shares which such
holders propose to include in such registration.
1.5 Selection of Underwriter. If the Investor exercising
its right to a Demand Registration so elects, the offering of such Registrable
Securities pursuant to such Demand Registration shall be in the form of an
underwritten offering. The Company shall select one or more nationally
recognized firms of investment bankers to act as the lead managing Underwriter
or Underwriters in connection with such offering and shall select any additional
investment bankers and managers to be used in connection with the offering.
1.6 Limitations, Conditions and Qualifications to
Obligations for a Demand Registration. The Company shall be entitled to
postpone, for a reasonable period of time (but not exceeding 90 days), the
filing of any registration statement otherwise required to be prepared and filed
by it pursuant to Section 1.1 if the Company determines, in its good faith
judgment, that such registration and offering would interfere with any material
financing, acquisition, corporate reorganization or other material transaction
involving the Company or any of its Affiliates and promptly gives the holders of
Registrable Securities requesting registration thereof pursuant to Section 1.1
written notice of such determination, containing an approximation of the
anticipated delay. If the Company shall so postpone the filing of a registration
statement, holders of Registrable Securities requesting the Demand Registration
pursuant to Section 1.1 shall have the right to withdraw the request for
registration by giving written notice to the Company within 30 days after
receipt of the notice of postponement and, in the event of such withdrawal, such
request shall not be counted for purposes of the requests for registration to
which holders of Registrable Securities are entitled pursuant to Section 1.1
hereof.
ARTICLE II
PIGGYBACK REGISTRATIONS
2.1 Right to Piggyback. From and after the date which is
12 months from the date of this Agreement, whenever the Company proposes to
register any of its equity securities under the Securities Act (other than a
registration effected in connection with a Company stock option or other
employee benefit plan (such as a Registration Statement on Form S-8), a
registration effected in connection with the conversion of debt securities, a
registration on any form that does not include substantially the same
3
information as would be required to be included in a registration statement
covering the sale of Registrable Securities (such as a Registration Statement on
Form S-4), or a registration effected in connection with an acquisition), and
the form of registration statement to be used may be used for the registration
of Registrable Securities (a "Piggyback Registration"), the Company will give
notice (the "Notice") to all Investors of its intention to effect such a
registration and will include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein, subject to the provisions of Section 2.3 and 2.4 hereof. Such requests
for inclusion shall be in writing and delivered to the Company within 20 days
after the Investor's receipt of the Notice and shall specify the number of
Registrable Securities intended to be disposed of and the intended method of
distribution thereof. Any holder shall have the right to withdraw its request
for inclusion of its Registrable Securities in any Registration Statement
pursuant to this Section 2.1 by giving written notice to the Company of its
request to withdraw. The Company may withdraw a Piggyback Registration at any
time prior to the time it becomes effective. The Company is not required to
include in a registration any Registrable Securities which the holder is not
then entitled to offer to sell whether by contractual restriction or by law.
2.2 Piggyback Expenses. The Registration Expenses of the
Investors will be paid by the Company in all Piggyback Registrations
2.3 Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering, the Company will include in such
registration (i) first, the securities the Company proposes to sell, (ii)
second, that number of other shares of Common Stock proposed to be included in
such registration by the Priority Piggyback Registration Holders and (iii)
third, that number of other shares of Common Stock proposed to be included in
such registration, pro rata among any other holders (including the Investors)
exercising their respective piggyback registration rights thereof based upon the
total number of shares which such holders (including the Investors) propose to
include in such registration.
2.4 Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders
(other than the Investors) of the Company's securities, and the managing
underwriters advise the Company that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the number of shares of Common Stock requested to be included by the holders
exercising their demand registration rights, and (ii) second, that number of
other shares of Common Stock proposed to be included in such registration, pro
rata among any other holders (including the Investors) exercising their
respective piggyback registration rights thereof based upon the total number of
shares which such holders (including the Investors) propose to include in such
registration.
4
ARTICLE III
HOLDBACK AGREEMENTS
In the event the Company or another holder of the Company's
stock proposes to enter into an underwritten public offering, each holder of
Registrable Securities agrees to enter into an agreement with the managing
underwriters not to effect any sale or distribution of equity securities of the
Company, or any securities convertible, exchangeable or exercisable for or into
such securities, during the period beginning on the date of such offering and
extending for up to 90 days; provided that such holders shall not be so
obligated unless the Company and each of its Affiliates enter into the same or
comparable lock-up agreement for the same period and further shall not be so
obligated if such holder then owns less than 2% of the outstanding Class A
Common Stock.
ARTICLE IV
REGISTRATION PROCEDURES
Whenever holders of Registrable Securities have requested that
any Registrable Securities be registered pursuant to this Agreement (the
"Selling Holders"), the Company will use reasonable efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company will:
(a) use reasonable efforts to prepare and file with the
Commission a Registration Statement with respect to such Registrable Securities
as soon as practicably thereafter and, in the case of a Demand Registration
within 60 days (subject to a postponement pursuant to Section 1.6) of the
request for a Demand Registration and use all reasonable efforts to cause such
Registration Statement to become and remain effective until the completion of
the distribution contemplated thereby; provided, that as promptly as practicable
before filing a Registration Statement or Prospectus or any amendments or
supplements thereto, the Company will (i) furnish to the Selling Holders copies
of all such documents proposed to be filed and (ii) notify each Selling Holder
of Registrable Securities covered by such Registration Statement of (x) any
request by the Commission to amend such Registration Statement or amend or
supplement any Prospectus, or (y) any stop order issued or threatened by the
Commission, and take all reasonable actions required to prevent the entry of
such stop order or to promptly remove it if entered; and provided further that
the Company shall not be required to keep such Registration Statement effective
for more than (i) 45 days in the case of a Piggyback Registration or a Demand
Registration with respect to an underwritten offering or (ii) 180 days in the
case of a Demand Registration (or such shorter period which will terminate when
all Registrable Securities covered by such Registration Statement have been
sold, but not prior to the expiration of the applicable period referred to in
Section 4(3) of the Securities Act and Rule 174 thereunder, if applicable);
(b) (i) prepare and file with the Commission such
amendments and supplements to such Registration Statement and the Prospectus
used in connection
5
therewith as may be necessary to keep such Registration Statement effective for
as long as such registration is required to remain effective pursuant to the
terms hereof and (ii) comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement;
(c) furnish to each Selling Holder, without charge, such
number of conformed copies of such Registration Statement, each amendment and
supplement thereto, the Prospectus included in such Registration Statement
(including each preliminary Prospectus) and such other documents as such seller
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Selling Holder;
(d) use all reasonable efforts to register or qualify
such Registrable Securities under such other securities or "blue sky" laws of
such jurisdictions in the United States in which a registration or qualification
is required as any Selling Holder thereof shall reasonably request, to keep such
registration or qualification in effect for so long as such Registration
Statement remains in effect and do any and all other acts and things which may
be reasonably necessary or advisable to enable such Selling Holder to consummate
the disposition in such jurisdictions of the Registrable Securities owned by
such Selling Holder; provided, however, that the Company will not be required to
(i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this clause (d), (ii) subject itself to
taxation in any such jurisdiction or (iii) consent to general service of process
in any such jurisdiction;
(e) notify each Selling Holder, at a time when a
Prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event known to the Company as a result of which the
Prospectus included in such Registration Statement, as then in effect, contains
an untrue statement of a material fact or omits to state any fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and, at the request of
any such Selling Holder, the Company will prepare and furnish such Selling
Holder a reasonable number of copies of a supplement to or an amendment of such
Prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such Prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(f) make available for inspection by any Selling Holder,
any underwriter participating in any disposition pursuant to such Registration
Statement and any attorney, accountant or other agent retained by any such
Selling Holder or underwriter, all applicable, non-confidential due diligence
documents of the Company which are requested, and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such
6
seller, underwriter, attorney, accountant or agent in connection with such
Registration Statement to enable them to conduct a reasonable investigation
within the meaning of the Securities Act, including a customary accountant's
"comfort" letter and opinion of counsel to the Company;
(g) subject to other provisions hereof, use all
reasonable efforts to cause such Registrable Securities covered by such
Registration Statement to be registered with or approved by such other
governmental agencies or authorities or self-regulatory organizations as may be
necessary to enable the Selling Holders thereof to consummate the disposition of
such Registrable Securities;
(h) promptly notify the Selling Holders of the issuance
of any stop order by the Commission or the issuance by any state securities
commission or other regulatory authority of any order suspending the
qualification or exemption from qualification of any of the Registrable
Securities under state securities or "blue sky" laws, and use every reasonable
effort to obtain the lifting at the earliest possible time of any stop order
suspending the effectiveness of any Registration Statement or of any order
preventing or suspending the use of any preliminary Prospectus; and
(i) promptly notify the Selling Holders of the occurrence
of any pending material merger, acquisition, corporate reorganization or other
material transaction involving the Company or any of its Affiliates which makes
it imprudent for the Company to be in registration, as determined in the good
faith judgment of the Company (a "Black-Out Period"). The Company shall not
impose Black-Out Periods that, either individually or in the aggregate, exceed
90 days during any fiscal year of the Company.
The Company may require each Selling Holder to promptly
furnish in writing to the Company such information regarding the distribution of
the Registrable Securities as the Company may from time to time reasonably
request and such other information as may be legally required in connection with
such registration including, without limitation, all such information as may be
requested by the Commission or any regulatory authority. The Company may exclude
from such Registration Statement any holder who fails to provide such
information.
Each Selling Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
paragraph (a), (e), (h) or (i) above, such Selling Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until such Selling Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
paragraph (a) or (e) above, or in the case of a Black-Out Period until the
Company notifies the Selling Holders that the period has ended, and, if so
directed by the Company, such Selling Holder will deliver to the Company all
copies, other than permanent file copies then in such Selling Holder's
possession, of the most recent prospectus covering such Registrable Securities
at the time of receipt of such notice. The periods referred to in paragraph (a)
above for maintaining the effectiveness
7
of the Registration Statement shall be extended for a period equal to the period
during which the disposition of the Registrable Securities is discontinued as
set forth in the immediately preceding sentence.
ARTICLE V
REGISTRATION EXPENSES
5.1 Registration Expenses. All registration and filing
fees, fees and expenses of compliance with securities or "blue sky" laws,
printing expenses, listing fees for securities to be registered on a national
securities exchange or The Nasdaq Stock Market and all independent certified
public accountants, underwriters (excluding discounts and commissions), fees and
expenses of counsel to the Company and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses") will be borne by
the Company as provided in Sections 1.2 and 2.2 of this Agreement, but subject
to the provisions of Section 1.3 of this Agreement.
5.2 Holders' Expenses. The Company shall have no
obligation to pay (i) any underwriting discounts or commissions attributable to
the sale, or potential sale, of Registrable Securities, which expenses will be
borne by all Selling Holders of Registrable Securities included in such
registration; and (ii) any fees or expenses of counsel or others retained by the
Selling Holders in connection with the sale, or potential sale, of Registrable
Securities.
ARTICLE VI
UNDERWRITTEN AND OTHER OFFERINGS
6.1 Underwriting Agreement. If requested by the
underwriters for any underwritten offering involving the Registrable Securities,
the Company will enter into an underwriting agreement with such underwriters for
such offering, such agreement to be reasonably satisfactory to the Company and
to contain such representations and warranties by the Company and such other
terms as are generally included in agreements of this type, including, without
limitation, indemnities customarily included in such agreements. The holders of
the Registrable Securities will cooperate in good faith with the Company in the
negotiation of the underwriting agreement.
6.2 Obligations of Participants. No Person may
participate in any underwritten registration hereunder unless such Person (i)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements, escrow agreements and
other documents required under the terms of such underwriting arrangements and
consistent with the provisions of this Agreement. In addition, the Company may
require each Selling Holder to promptly furnish in writing to the Company such
information regarding the distribution of the Registrable Securities as the
Company
8
may from time to time reasonably request and such other information as may be
legally required in connection with such registration including, without
limitation, all such information as may be requested by the Commission or the
NASD. The Company may exclude from such Registration Statement any Holder who
fails to provide such information.
ARTICLE VII
INDEMNIFICATION
7.1 Company's Indemnification Obligations. The Company
agrees to indemnify and hold harmless each of the holders of any Registrable
Securities covered by any Registration Statement referred to herein and each
other Person, if any, who controls such holder within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act (collectively, the
"Holder Indemnitees"), as follows:
(i) against any and all loss, liability, claim,
damage or reasonable expense arising out of or based upon an untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment or supplement thereto), including all documents
incorporated therein by reference, or in any preliminary Prospectus or
Prospectus (or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading;
(ii) against any and all loss, liability, claim,
damage and reasonable expense to the extent of the aggregate amount paid in
settlement of any litigation, investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim based upon any such
untrue statement or omission or any such alleged untrue statement or omission,
if such settlement is effected with the prior written consent of the Company;
and
(iii) against any and all reasonable expense incurred
by them in connection with investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim based upon any such untrue statement or
omission or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under clause (i) or (ii) above;
provided, that this indemnity does not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with information furnished to the Company by or on behalf of any
holder expressly for use in the preparation of any Registration Statement (or
any amendment or supplement thereto), including all documents incorporated
therein by reference, or in any preliminary Prospectus or Prospectus (or any
amendment or supplement thereto); provided further,
9
that (other than in connection with an underwritten offering) the Company will
not be liable to any holder or any other Holder Indemnitee under the indemnity
agreement in this Section 7.1 with respect to any preliminary Prospectus or the
final Prospectus or the final Prospectus as amended or supplemented, as the case
may be, to the extent that any such loss, liability, claim, damage or expense of
such Holder Indemnitee results from the fact that such holder sold Registrable
Securities to a Person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the final Prospectus or of the
final Prospectus as then amended or supplemented, whichever is most recent, if
the Company has previously and timely furnished copies thereof to such holder;
and provided further, that the Company will not be liable to any holder or any
other Holder Indemnitee under the indemnity agreement in this Section 7.1 to the
extent that any such loss, liability, claim or expense arises out of or is based
upon an untrue statement or omission in any Prospectus, even if an amended and
corrected Prospectus is not furnished to such holder, but only to the extent
that the holder, after being notified by the Company pursuant to paragraph (e)
of Article III hereof, continues to use such Prospectus and in such case and to
the extent of, and with respect to, damages which arise after the holder
receives such notice.
7.2 Holder's Indemnification Obligations. In connection
with any Registration Statement in which a holder of Registrable Securities is
participating, each such holder agrees to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 7.1 of this
Agreement) the Company and each Person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act with respect to any statement or alleged statement in or omission or alleged
omission from such Registration Statement, any preliminary, final or summary
Prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made about
such holder in reliance upon and in conformity with information furnished to the
Company by or on behalf of such holder expressly for inclusion in such
Registration Statement. The obligations of each holder pursuant to this Section
7.2 are to be several and not joint; provided that, with respect to each claim
pursuant to this Section 7.2, each such holder's maximum liability under this
Section shall be limited to an amount equal to the net proceeds received by such
holder (after deducting any underwriting discount) from the sale of Registrable
Securities being sold pursuant to such Registration Statement or Prospectus by
such holder.
7.3 Notices; Defense; Settlement. Promptly after receipt
by an indemnified party hereunder of written notice of the commencement of any
action or proceeding involving a claim referred to in Section 7.1 or Section 7.2
of this Agreement, such indemnified party will, if a claim in respect thereof is
to be made against an indemnifying party, give written notice to the latter of
the commencement of such action; provided, that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying party
of its obligations under Section 7.1 or Section 7.2 of this Agreement except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party will be entitled to participate in and to assume the
defense
10
thereof, jointly with any other indemnifying party similarly notified, to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof, unless in the reasonable opinion of counsel to such indemnified
party a conflict of interest between such indemnified and indemnifying parties
may exist in respect of such claim, in which case the indemnifying party shall
not be liable for the fees and expenses of (i) more than one counsel for all the
Selling Holders, selected by a majority of the Selling Holders or (ii) more than
one counsel for the Company in connection with any one action or separate but
similar or related actions, as applicable. An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable opinion of counsel to any indemnified party a conflict of interest
may exist between such indemnified party and any other of such indemnified
parties with respect to such claim, in which event the indemnifying party shall
be obligated to pay the fees and expenses of such additional counsel or
counsels. The indemnifying party will not, without the prior written consent of
each indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not such
indemnified party or any Person who controls such indemnified party is a party
to such claim, action, suit or proceeding), unless such settlement, compromise
or consent includes an unconditional release of such indemnified party from all
liability arising out of such claim, action, suit or proceeding. Notwithstanding
anything to the contrary set forth herein, and without limiting any of the
rights set forth above, in any event any party will have the right to retain, at
its own expense, counsel with respect to the defense of a claim.
7.4 Indemnity Provision. The Company and each holder of
Registrable Securities requesting registration shall provide for the foregoing
indemnity (with appropriate modifications) in any underwriting agreement with
respect to any required registration or other qualification of securities under
any Federal or state law or regulation of any governmental authority.
ARTICLE VIIIDEFINITIONS
8.1 Terms. As used in this Agreement, the following
defined terms shall have the meanings set forth below:
"Affiliate" means, with respect to any specified party, any other
individual, partnership, corporation or other organization, whether incorporated
or unincorporated, who, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such specified party. The term "control" means the
11
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a party, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative of the foregoing.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of New York are authorized or obligated to
close.
"Class A Common Stock" means the Class A Common Stock, par value $.01
per share, of the Company and any securities into which the Class A Common Stock
shall have been changed or any securities resulting from any reclassification or
recapitalization of the Class A Common Stock.
"Commission" means the U.S. Securities and Exchange Commission.
"Common Stock" means the shares of Common Stock, regardless of
designation, of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar Federal statute then in effect, and any reference to a particular
section thereof shall include a reference to the equivalent section, if any, of
any such similar Federal statute, and the rules and regulations thereunder.
"NASD" means the National Association of Securities Dealers, Inc.
"Person" means any individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Prospectus" means the Prospectus included in any Registration
Statement (including without limitation, a Prospectus that disclosed information
previously omitted from a Prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any Prospectus supplement, with respect to the terms
of the offering of any portion of the securities covered by such Registration
Statement, and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such Prospectus.
"Registrable Securities" means (i) the Shares, (ii) the Class A Common
Stock issued or issuable at any time upon the exercise of the Warrants, and
(iii) any securities issued or received in respect of, or in exchange or in
substitution for any of the foregoing. Registrable Securities will continue to
maintain their status as Registrable Securities in the hands of a transferee
from an Investor of a majority of the Registrable Securities held by such
Investor provided such transferee executes a joinder agreement described by
Section 9.9. After the transfer (in one or more transactions) of a majority of
the Registrable Securities held by an Investor, any remaining Registrable
Securities held by
12
such Investor shall cease to be Registrable Securities. As to any particular
Registrable Securities, such securities will cease to be Registrable Securities
when they (w) have been effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them, (x) may
be sold pursuant to Rule 144 under the Securities Act without volume or manner
of sale limitation (or any similar provisions then in force), (y) have been
otherwise transferred and the Company has delivered a new certificate or other
evidence of ownership for such securities not bearing a restrictive legend and
not subject to any stop order and such securities may be publicly resold by the
Person receiving such certificate without complying with the registration
requirements of the Securities Act, or (z) have ceased to be outstanding
"Registration Statement" means any Registration Statement of the
Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective amendments,
all exhibits and all material incorporated by reference in such Registration
Statement.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute then in effect, and any reference to a particular
section thereof shall include a reference to a comparable section, if any, of
any such similar Federal statute, and the rules and regulations thereunder.
8.2 Defined Terms in Corresponding Sections . The
following defined terms, when used in this Agreement, shall have the meaning
ascribed to them in the corresponding Sections of this Agreement listed below:
"Agreement" -- Preamble
"Company" -- Preamble
"Demand Registration" -- Section 1.1
"Holder Indemnitees" -- Section 7.1
"Initial Investors" -- Preamble
"Investors" -- Preamble
"Long-Form Registration" -- Section 1.1
"Notice" -- Section 2.1
"Other Holders" -- Section 1.1
"Piggyback Registration" -- Section 2.1
"Priority Piggyback Registration Holders" -- Section 1.4
"Registration Expenses" -- Section 5.1
"Selling Holder" -- Article IV
13
"Shares" -- Recitals
"Short-Form Registration" -- Section 1.1
"Warrants" -- Recitals
ARTICLE IX
MISCELLANEOUS
9.1 Amendments and Waivers. Except as otherwise provided
herein, no modification, amendment or waiver of any provision of this Agreement
will be effective against the Company or any holder of Registrable Securities,
unless such modification, amendment or waiver is approved in writing by the
Company and the Investors representing a majority of the Registrable Securities
then outstanding. The failure of any party to enforce any of the provisions of
this Agreement will in no way be construed as a waiver of such provisions and
will not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
9.2 Successors and Assigns. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto will bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not.
9.3 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission or
mailed by pre-paid registered or certified mail, return receipt requested or
mailed by overnight courier prepaid to the parties at the following addresses or
facsimile numbers:
If to the Company, to:
eSpeed, Inc.
Xxx Xxxxx Xxxxx Xxxxxx
000xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn.: General Counsel
with a copy to:
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn.: General Counsel
14
If to any Investor, to the address set forth on the signature
page hereto.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 9.3, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section 9.3, be deemed given upon receipt of confirmation,
(iii) if delivered by mail in the manner described above to the address as
provided in this Section 9.3, be deemed given on the earlier of the third full
Business Day following the day of mailing or upon receipt, and (iv) if delivered
by overnight courier to the address provided in this Section 9.3, be deemed
given on the earlier of the first Business Day following the date sent by such
overnight courier or upon receipt. Any party from time to time may change its
address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other parties hereto.
9.4 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
9.5 Gender. Whenever the pronouns "he" or "his" are used
herein they shall also be deemed to mean "she" or "hers" or "it" or "its"
whenever applicable. Words in the singular shall be read and construed as though
in the plural and words in the plural shall be construed as though in the
singular in all cases where they would so apply.
9.6 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (i) such provision will be
fully severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
9.7 Governing Law; Forum; Process. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York, without giving effect to principles of conflicts of law. Each of the
parties hereto hereby irrevocably and unconditionally submits to the exclusive
jurisdiction of any court of the State of Delaware or any federal court sitting
in the State of Delaware for purposes of any suit, action or other proceeding
arising out of this Agreement (and agrees not to commence any action, suit or
proceedings relating hereto except in such courts). Each of the parties hereto
agrees that service of any process, summons, notice or document by U.S.
registered mail at its address set forth herein shall be effective service of
process for any action, suit or proceeding brought against it in any such court.
Each of the parties
15
hereto hereby irrevocably and unconditionally waives any objection to the laying
of venue of any action, suit or proceeding arising out of this Agreement, which
is brought by or against it, in the courts of the State of Delaware or any
federal court sitting in the State of Delaware and hereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any such court
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
9.8 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
9.9 Additional Investors. Any transferee of a majority of
Registrable Securities held by an Investor shall be entitled to the benefits of
this Agreement, upon execution by such transferee of a joinder agreement in form
reasonably satisfactory to the Company stating that such transferee agrees to be
bound by the terms hereof as an "Investor". An Investor shall no longer be
entitled to the benefits of this Agreement upon its transfer (in one or more
transactions) of a majority of the Registrable Securities held by such Investor.
ARTICLE X
RULE 144 REPORTING
The Company hereby agrees as follows:
(a) The Company shall use its reasonable efforts to make and
keep public information available, as those terms are understood and defined in
Rule 144 under the Securities Act.
(b) The Company shall use its reasonable efforts to file with
the Commission in a timely manner all reports and other documents as the
Commission may prescribe under Section 13(a) or 15(d) of the Exchange Act at any
time while the Company is subject to such reporting requirements of the Exchange
Act.
(c) The Company shall furnish to each holder of Registrable
Securities forthwith upon a reasonable request a written statement by the
Company as to its compliance with the reporting requirements of Rule 144 and of
the Securities Act and the Exchange Act.
16
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
COMPANY:
eSPEED, INC.
By:_______________________________
Name:
Title:
INITIAL INVESTORS:
THE XXXXXXXX COMPANIES, INC.
By:_______________________________
Name:
Title:
Address: Xxx Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
DYNEGY, INC.
By:_______________________________
Name:
Title:
Address: 0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
17
Schedule A
18
CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT. PORTIONS FOR
WHICH CONFIDENTIAL TREATMENT IS REQUESTED ARE DENOTED BY [ *ECONOMIC TERMS
OMITTED]. MATERIAL OMITTED HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
SUBSCRIPTION AGREEMENT
----------------------
eSpeed, Inc.
Xxx Xxxxx Xxxxx Xxxxxx
000xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: General Counsel
Ladies and Gentlemen:
1. Subscription for Unit. The undersigned (the "Subscriber") hereby
agrees to purchase from eSpeed, Inc., a Delaware corporation (the "Company"),
and the Company hereby agrees to issue and sell to the Subscriber, a Unit (the
"Unit") consisting of (i) 789,071 shares (the "Shares") of Class A Common Stock,
par value $.01 per share (the "Class A Stock"), of the Company and (ii) warrants
exercisable to purchase up to an aggregate of 666,666 shares of Class A Stock
with an exercise price of $35.203125 per share (the "Underlying Warrant
Shares"), in the form attached hereto as Exhibit A (the "Warrants"), for an
aggregate purchase price for the Unit (the "Purchase Price") of $25.0 million.
2. Closing. The closing of the purchase and sale of the Unit under this
Subscription Agreement shall be held at the office of Xxxxxxx Berlin Shereff
Xxxxxxxx, LLP, The Chrysler Building, 000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, as soon as practicable (but in any event within two
business days) after the conditions in Section 8 have been satisfied or waived,
or at such other location or on such other date as the Subscriber and the
Company shall agree (the "Closing"). At the Closing, the Company shall deliver
to the Subscriber (i) the certificate or certificates representing the Shares
and the Warrants, free and clear of all liens and encumbrances (except (x) under
the provisions of applicable federal and foreign and state securities law and
(y) as a result of acts of the Subscriber), (ii) a copy of the Registration
Rights Agreement in the form attached hereto as Exhibit D (the "Registration
Rights Agreement"), duly executed by the Company, (iii) a certificate of an
officer of the Company certifying that the representations and warranties of the
Company set forth in this Subscription Agreement were true and correct in all
material respects as of the date when made and are true and correct in all
material respects as of the Closing as though made at that time (except for any
such representations and warranties that speak as of a specific date in which
case they shall be true as of such specific date), and (iv) a certificate of an
officer of Cantor Xxxxxxxxxx, X.X. ("CF") certifying that the representations
and warranties of CF set forth in this Subscription Agreement were true and
correct in all material respects as of the date when made and are true and
correct in all material respects as of the Closing as though made at that time
(except for any such representations and warranties that speak as of a specific
date in which case they shall be true as
1
of such specific date). At the Closing, the Subscriber shall deliver to the
Company (i) the Purchase Price, in accordance with the wire transfer
instructions attached hereto as Exhibit B, (ii) a copy of the Registration
Rights Agreement duly executed by the Subscriber, and (iii) a certificate of an
officer of the Subscriber certifying that the representations and warranties of
the Subscriber set forth in this Subscription Agreement were true and correct in
all material respects as of the date when made and are true and correct in all
material respects as of the Closing as though made at that time (except for any
such representations and warranties that speak as of a specific date in which
case they shall be true as of such specific date).
3. Investment in Verticals.
a. Commitment to Invest in Four Qualified Verticals. Subject
to the express terms and conditions of this Section 3, the Subscriber hereby
agrees to subscribe for an aggregate of $10.0 million in equity securities in a
total of four entities to be formed by the Company and CF within 12 months of
the Closing (i.e., $2.5 million in each entity) (the "12-Month Period"). Such
12-Month Period may be increased by a period not to exceed six months if a
public offering by the Company is commenced during the 12-Month Period and
disclosure constraints resulting from such public offering dictate a delay (a
"Black-Out Period") as determined by the Company. Upon any such determination by
the Company, the Company shall so notify the Subscriber in writing prior to the
commencement of any Black-Out Period, which notice shall specify the time period
by which the 12-Month Period shall be increased and the new last day of the
12-Month Period. Such notice shall be binding on the parties. It is anticipated
that each such entity shall establish a new "vertical" electronic and telephonic
marketplace with the Company in which it will "broker" and possibly "clear"
transactions for its industry market participants and other clients. In
brokerage transactions, it is anticipated that the entity will operate an
anonymous electronic and telephonic marketplace (and also act as an agent for
disclosed principals in such marketplace) where participants can trade based on
a credit-risk matrix and other "rules" established by the participants. The
entity may maintain the anonymity of the counterparties by clearing the
financial aspects of the transaction. No such entity will intentionally expose
itself to any unmatched market risk on its marketplace products.
b. Commitment to Present Seven Qualified Verticals. During the
12-Month Period, as the same may be extended by a Black-Out Period, the Company
and CF agree to present at least seven vertical opportunities to the Subscriber,
whether or not the Subscriber has previously satisfied its funding obligations
hereinafter discussed. During such period, the Company and CF will present the
seven vertical opportunities set forth on Annex A and may also present
additional vertical opportunities in their discretion. Any additional vertical
opportunity so presented shall encompass one or more products in which the
Subscriber or an Affiliate (as defined below) of the Subscriber is engaged in
trading at the time such vertical opportunity is presented to the Subscriber.
(The seven vertical opportunities set forth on Annex A and any additional
vertical opportunity meeting such trading criteria that the Company and CF
determine to present to the Subscriber are each referred to herein as a
"Qualified Vertical"). Each Qualified Vertical shall contain economic terms
(measured by a blended valuation of
2
revenue sharing and equity ownership) intended to reflect a [ * ECONOMIC TERMS
OMITTED] value split as between the industry market participants (inclusive of
the anchor participants) on the one hand and the Company and CF on the other
hand. It is agreed that a Qualified Vertical which provides for an allocation of
transaction revenues described in paragraphs (a) and (b) of Schedule 4 to the
Newco Term Sheet (as hereafter defined) of [ *ECONOMIC TERMS OMITTED] to the
industry market participants in the aggregate and [ *ECONOMIC TERMS OMITTED] to
the Company, an allocation of the transaction revenues described in paragraphs
(c) and (d) of Schedule 4 to the Newco Term Sheet of [ *ECONOMIC TERMS OMITTED]
to the industry market participants in the aggregate and [ *ECONOMIC TERMS
OMITTED] to the Company, and an allocation of equity participation in a
Qualified Vertical of [ *ECONOMIC TERMS OMITTED] to the industry market
participants and [ *ECONOMIC TERMS OMITTED] to the Company and CF taken
together, shall be deemed to satisfy the [ *ECONOMIC TERMS OMITTED] economic
model (the "Agreed Upon Model"). The Agreed Upon Model shall be used if the
parties hereto cannot agree on a substitute model, which substitute model may
include warrants to purchase stock of the Company as the parties may agree. As
used in this Subscription Agreement, the word "Affiliate" means, with respect to
any specified party, any other individual, partnership, corporation or other
organization, whether incorporated or unincorporated, who, directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such specified party. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a party, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative of the foregoing.
c. Subscriber's Obligation to Fund the $10.0 Million. Upon the
expiration of the 12-Month Period, as the same may be extended by a Black-Out
Period, if the Subscriber has not funded or committed to fund, subject to the
conditions described in this Section 3, at least four Qualified Verticals, the
Subscriber shall be obligated to pay to the Company an amount equal to the
difference between (i) $10.0 million and (ii) the aggregate investments in
Qualified Verticals made by the Subscriber during the 12-Month Period, as the
same may be extended by a Black-Out Period (the "Investment Shortfall");
provided, however, that in the event that the Company and CF fail to present the
seven Qualified Verticals set forth on Annex A based upon the economic terms
described in Section 3(b) above to the Subscriber within the 12-Month Period, as
the same may be extended by a Black-Out Period, the Subscriber shall be relieved
of its obligation in respect of the Investment Shortfall and the restrictions
set forth in Section 6(c) of the Warrants. The relief from such obligation,
together with the lapsing of the contractual restrictions against swap and
hedging transactions with respect to the Warrants and the Underlying Warrant
Shares set forth in Section 6(c) of the Warrants, shall be the Subscriber's sole
remedy in the event that the Company and CF fail to present the seven Qualified
Verticals set forth on Annex A to the Subscriber within the 12-Month Period, as
the same may be extended by a Black-Out Period, and such failure shall have no
other effect on the transactions contemplated by this Subscription Agreement,
including the purchase of the Unit, or give rise to
--------
*This information has intentionally been omitted and has been
filed separately with the Securities and Exchange Commission.
It is subject to a confidential treatment request.
3
any other right on the part of the Subscriber, including any right of rescission
hereunder or any right to receive any Additional Investment Right (as defined
below) or the equity contemplated thereby.
d. Terms of Newco Vertical. Set forth on the term sheet
attached hereto as Exhibit C (the "Newco Term Sheet") are the terms and
conditions of the first Qualified Vertical ("Newco") to be formed by the Company
and CF. The Subscriber shall notify the Company within 15 days of its receipt of
notice from the Company that the Company intends to proceed with the Newco
Qualified Vertical as to whether the Subscriber intends to invest in Newco
(either directly or indirectly through the formation of a limited liability
company or other entity as contemplated by the Newco Term Sheet). If the
Subscriber intends to make such investment, it and the Company and CF will
negotiate in good faith and use commercially reasonable efforts to negotiate and
execute definitive agreements embodying the terms of the Newco Term Sheet within
30 days of the Subscriber's receipt of a draft of such documents from the
Company. Funding of the Subscriber's $2.5 million subscription commitment for
its interest in Newco shall not be due and the launch of Newco shall not occur
until such definitive agreements have been mutually agreed to and there are at
least two additional industry market participants who have each committed to
invest $2.5 million in Newco on substantially the same terms and conditions.
Funding of the Subscriber's $2.5 million subscription shall be made within two
business days after such commitment from the two other participants is obtained.
Failure of the parties to negotiate and execute definitive agreements in respect
of Newco within such time period or otherwise shall have no effect on the
transactions contemplated by this Subscription Agreement except as expressly
provided in Section 3(g), including the purchase of the Unit, or give rise to
any other right on the part of the Subscriber, including any right of rescission
hereunder or any right to receive any Additional Investment Right (as defined
below) or the equity contemplated thereby.
e. [Intentionally Left Blank]
f. Terms of Other Qualified Verticals. The other Qualified
Verticals offered to the Subscriber will be on terms and conditions consistent
with Section 3(b) and otherwise substantially the same in all material respects
as the vertical described on the Newco Term Sheet (provided that the number of
industry market participants may vary in each vertical and other changes which
are attributable to differences among products and regions may also be made so
long as such changes are consistent with the economic terms described in Section
3(b) and do not otherwise materially alter the terms and conditions reflected in
the Newco Term Sheet) and shall be presented by the Company and CF to the
Subscriber accompanied by definitive agreements embodying such terms and
conditions. The terms of the other Qualified Verticals shall include the right
of the Subscriber, for up to four Qualified Verticals (the "Additional
Investment Right") to invest $25.0 million in restricted shares of Class A Stock
at a 10% discount to the arithmetic average of the daily closing sale price on
The Nasdaq Stock Market of the Class A Stock for the 10 trading days (the "10
Trading Day Average") preceding the date of the Subscriber's investment in such
new vertical opportunity. The obligation of the Subscriber to invest in a
Qualified Vertical and the right of the Subscriber to exercise the Additional
Investment Right shall be subject to the satisfaction of each of the following
conditions (the "Additional Investment Conditions"): (i) the consummation and
funding of a $2.5
4
million investment in said vertical by the Subscriber and each of three
additional industry market participants (which may include another anchor
participant) on substantially the same terms and conditions as the Subscriber,
(ii) the Subscriber making representations and warranties to the Company
substantially as provided in Section 7 hereof, and (iii) the Company and CF
making representations and warranties to the Subscriber substantially as
provided in Sections 5 and 6 hereof (subject to exceptions and schedules as are
required to make such representations and warranties accurate). Except as
provided in the next sentence, the Additional Investment Right shall be
exercisable only on the date of the consummation and funding of the $2.5 million
investment in said vertical by the Subscriber and three additional industry
market participants (the "Additional Investment Right Exercise Date"). In
addition, in the event that during the Twelve-Month Period, as the same may be
extended by a Black-Out Period, the Company makes a public announcement with
respect to a definitive agreement with three or more industry market
participants disclosing their investment in a Qualified Vertical and Subscriber
does not or has not previously invested in such Qualified Vertical, then the
Subscriber will be given the opportunity (exercisable upon notice to the Company
within one business day following such public announcement) to invest $25.0
million in restricted shares of Class A Stock at a 10% discount to the 10
Trading Day Average for the 10 trading days immediately preceding such public
announcement. If the Subscriber later invests in any such Qualified Vertical, it
will not be entitled to an Additional Investment Right in connection with the
same Qualified Vertical. The Subscriber's purchase of any additional equity of
the Company, whether pursuant to the Additional Investment Right or otherwise
provided herein, shall be subject to Company stockholder approval, if required.
The Company agrees to submit for a vote of its common stockholders, at its next
annual meeting of stockholders, the approval of the issuance of any such shares,
if such approval is determined to be required. CF agrees to vote the shares of
common stock of the Company beneficially owned by it in favor of such issuance.
Any shares of Class A Stock purchased upon exercise of the Additional Investment
Right or otherwise in accordance with the terms hereof will be subject to a
12-month lock-up on transferability.
g. Time Frames For Other Qualified Verticals. Within 30 days
of the Subscriber's receipt of notice of a new Qualified Vertical, the
Subscriber shall notify the Company as to whether it intends to invest in such
Qualified Vertical. If the Subscriber notifies the Company within the requisite
time period that it intends to invest in such Qualified Vertical, the
Subscriber, the Company and CF will negotiate with each other in good faith and
use commercially reasonable efforts to negotiate and execute definitive
documentation required for such vertical within 30 days of delivery to
Subscriber of a draft of such documents (which documents shall be delivered
following identification of the other industry market participants and such
participants' indication of their intention to invest in such vertical). Funding
of such subscription shall be made within two business days after such
commitment from the three other industry market participants is obtained. If the
Subscriber does not provide any such notice, then it shall be deemed that the
Subscriber declined to participate in such Qualified Vertical. If (i) at least
three additional industry market participants are not willing to invest in the
Qualified Vertical (two in the case of Newco) on the same terms and conditions,
or (ii) the parties are unable to reach agreement on the definitive agreements
relating to the Qualified Vertical after good faith negotiations thereon, then
(a) the Subscriber nevertheless shall be deemed to have satisfied its obligation
to invest in one Qualified Vertical for purposes of calculation of the
Investment Shortfall pursuant to Section 3(c), (b) the Subscriber will not be
entitled to exercise
5
the Additional Investment Right in respect of such Qualified Vertical, and (c)
the Subscriber's Warrants will not accelerate in vesting pursuant to Section 4
of the Warrant in respect of such Qualified Vertical. Except as expressly
provided herein, the inability of the parties to reach agreement on definitive
documents or the failure of the Additional Investment Conditions to be satisfied
shall have no effect on the transactions contemplated by this Subscription
Agreement, including the purchase of the Unit, or give rise to any other right
on the part of the Subscriber, including any right of rescission hereunder or
any right to receive the Additional Investment Right or the equity contemplated
thereby.
4. Transfer Restrictions.
a. Restricted Shares. The Subscriber understands and agrees
that the Shares, the Warrants and the Underlying Warrant Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or any foreign or state securities laws and that, accordingly, they will not be
transferable except as permitted under various exemptions contained in the
Securities Act, foreign or state securities laws, or upon satisfaction of the
registration and prospectus delivery requirements of the Securities Act. The
Subscriber acknowledges and agrees that it must bear the economic risk of the
Shares, the Warrants and the Underlying Warrant Shares for an indefinite period
of time since they have not been registered under the Securities Act and
therefore cannot be transferred unless they are subsequently registered or an
exemption from registration is available.
b. Legend. The Subscriber agrees with the Company that the
certificates evidencing the Shares, the Warrants and the Underlying Warrant
Shares shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAW. THESE
SECURITIES MAY NOT BE PLEDGED, HYPOTHECATED, SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
ANY EXEMPTION THEREFROM UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAW."
c. Removal of Legend. The legend endorsed on the certificates
pursuant to Section 4(b) hereof shall be removed and the Company shall issue a
certificate without such legend to the holder thereof at such time as the
securities evidenced thereby cease to be restricted securities upon the earliest
to occur of (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (ii) the securities shall have been sold to the public pursuant to
Rule 144 (or any successor provision) under the Securities Act, or (iii) such
securities may be sold by the holder without restriction or registration under
Rule 144(k) under the Securities Act (or any successor provision).
6
d. Lock-Up. The Subscriber further understands and agrees that
it may not, without the Company's prior written consent, directly or indirectly,
make any offer, sale, short sale, assignment, transfer, pledge, encumbrance,
contract to sell, grant of an option to purchase or other disposition of, or
enter into any swap or other hedging transaction relating to, the Shares, or any
interest therein, for a period of 12 months following the Closing, and the
certificates evidencing the Shares shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON TRANSFERS, ASSIGNMENTS AND
OTHER DISPOSITIONS, AS PROVIDED IN THE SUBSCRIPTION
AGREEMENT, DATED APRIL 26, 2000, A COPY OF WHICH IS
ON FILE WITH THE SECRETARY OF THE COMPANY."
The foregoing legend shall be removed upon the expiration
of said 12-month period. Without limitation of the foregoing, the Subscriber
agrees that if it transfers its rights hereunder to a Subsidiary pursuant to
Section 16(k) hereof, the Subscriber shall not sell, assign or transfer the
stock of such Subsidiary during the 12-month lock-up period other than to
another Affiliate of the Subscriber, which Affiliate shall assume all of the
obligations of such Subsidiary hereunder without relieving the assigning party
of its obligations hereunder. Following such an assumption by the Affiliate, the
restriction on sale, assignment or transfer of the stock of such Subsidiary
shall be lifted unless such Subsidiary has become a reassignee.
e. Stop Transfer Notations. The Company and any transfer agent
acting on its behalf may maintain on the Company's register for the Class A
Stock appropriate "stop transfer" notations with respect to the Shares and the
Underlying Warrant Shares.
5. Representations and Warranties of the Company. The Company
represents and warrants to the Subscriber that:
a. Organization of the Company and its Subsidiaries. Each of
the Company and its Subsidiaries (as defined below) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite corporate, partnership or limited liability
company power and authority to carry on its business as now being conducted.
Each of the Company and its Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so qualified, licensed or in good standing would not have a material adverse
effect on (i) the business, properties, condition (financial or otherwise), or
results of operations of the Company and its Subsidiaries, taken as a whole, or
(ii) the ability of the Company to consummate the transactions contemplated
hereby (a "Material Adverse Effect"). As used in this Subscription Agreement,
the word "Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party or
any other Subsidiary of such party is a general partner or (ii) at least 50% of
the securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation
7
or other organization is directly or indirectly owned or controlled by such
party or by any one or more of its Subsidiaries, or by such party and one or
more of its Subsidiaries.
b. Valid Offering of Shares.
(1) Upon issuance of the Unit pursuant to this
Subscription Agreement, the Shares and the Warrants will be duly and validly
issued, fully paid and non-assessable, and the Subscriber will receive good
title thereto, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever and free of
any other restriction (including any restriction on the right to use, vote, sell
or otherwise dispose of such capital stock or other ownership interests)
(collectively, "Liens"), except (i) under the provisions of applicable federal
and foreign and state securities law and (ii) as a result of acts of the
Subscriber. Upon the issuance of the Warrants pursuant to this Subscription
Agreement, the Underlying Warrant Shares will be duly and validly authorized and
reserved for issuance, and, upon issuance of the Underlying Warrant Shares upon
exercise of the Warrants in accordance with the terms thereof, the Underlying
Warrant Shares will be duly and validly issued, fully paid and non-assessable;
and the holder of the Warrants will receive good title to the Underlying Warrant
Shares, free and clear of all Liens, except (i) under the provisions of
applicable federal and foreign and state securities law and (ii) as a result of
acts of the holder of the Warrants.
(2) Neither the Company nor its Subsidiaries
has taken any action that would result in the offering and sale of the Shares,
the Warrants and the Underlying Warrant Shares pursuant to this Subscription
Agreement being treated as a public offering and not a valid private offering
under the law.
c. Authority; No Conflict; Required Filings and Consents.
(1) The Company has (or, as applicable, prior to
the Closing will have) all requisite corporate power and authority to enter into
this Subscription Agreement, the Warrants and the Registration Rights Agreement
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Subscription Agreement, the Warrants and the
Registration Rights Agreement and the consummation of the transactions
contemplated hereby and thereby have been (or, as applicable, prior to the
Closing will be) duly authorized by all necessary and appropriate corporate
action on the part of the Company. No stockholder action is necessary to
authorize the issuance and sale of the Unit. This Subscription Agreement has
been duly executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by or
subject to any bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and subject to
general principles of equity. The Warrants and the Registration Rights
Agreement, when executed and delivered by the Company, will constitute the
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except as such enforceability
may be limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and subject to general principles of equity.
8
(2) The execution and delivery of this
Subscription Agreement, the Warrants and the Registration Rights Agreement by
the Company do not, and the consummation of the transactions contemplated hereby
and thereby will not, (i) conflict with, or result in any violation or breach
of, any provision of the Certificate of Incorporation or Bylaws of the Company,
(ii) result in any violation or breach of, or constitute (with or without notice
or lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material benefit)
under, or require a consent or waiver under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound, or (iii) conflict with or violate any permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or any of its Subsidiaries or any of its or
their properties or assets, except in the case of clauses (ii) and (iii) for any
such conflicts, violations, breaches, defaults, terminations, cancellations or
accelerations which are not, individually or in the aggregate, reasonably likely
to have a Material Adverse Effect.
(3) No consent, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency, commission or other governmental authority or instrumentality
("Governmental Entity") is required by or with respect to the Company or any of
its Subsidiaries in connection with the execution and delivery of this
Subscription Agreement, the Warrants or the Registration Rights Agreement, or
the consummation of the transactions contemplated hereby or thereby, except (i)
the filings and approvals required under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) regulatory filings,
applications or approvals required in connection with the formation or operation
of a Qualified Vertical, if any, (iii) applications to list the Shares, the
Underlying Warrant Shares and the shares issuable pursuant to the Additional
Investment Right on The NASDAQ Stock Market and (iv) any such consents,
approvals, orders, authorizations, registrations, declarations and filings, the
absence of which is not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect.
d. Public Filings; Financial Statements.
(1) Since December 3, 1999, the Company has
filed with the Securities and Exchange Commission (the "SEC") all reports,
schedules, forms, registration statements and other documents required to be
filed by it as a registrant under the Securities Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Except for matters otherwise
corrected by the subsequent filing with the SEC of an appropriate amendment
prior to the date of this Subscription Agreement, such reports, forms, and
documents filed by the Company with the SEC prior to the date of this
Subscription Agreement and since December 3, 1999 (the "Company SEC Reports")
(including any financial statements filed as a part thereof or incorporated by
reference therein) did not, at the time they were filed (or if amended or
superseded by a filing prior to the date of this Subscription Agreement, then on
the date of such filing), contain any untrue statement of a material fact or
omit to state a material fact required to be stated in such Company SEC Reports
or necessary in order to make the statements in such Company SEC Reports, in the
light of the circumstances under which they were made, not misleading.
9
(2) Each of the consolidated financial
statements (including, in each case, any related notes) of the Company contained
in the Company SEC Reports was prepared in accordance with the books of account
and other financial records of the Company and in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q
under the Exchange Act), and fairly presented the consolidated financial
position of the Company and its Subsidiaries as of the dates, and the
consolidated results of its operations and cash flows for the periods,
indicated, except that the unaudited interim financial statements were subject
to normal and recurring year-end adjustments which were not material in amount.
(3) As of the date hereof, there are no
liabilities, contingencies, changes, facts or circumstances that have not been
publicly disclosed by the Company and that could reasonably be expected to have
a Material Adverse Effect.
e. Intellectual Property. Except as set forth in the Company
SEC Reports, the operations of the Company and its Subsidiaries do not infringe
upon any intellectual property rights owned, possessed or used by any third
party, and to the knowledge of the Company there is no valid basis for any claim
of such infringement against it or its Subsidiaries in respect of the use of the
Intellectual Property now used, except, in any such case, as is not reasonably
likely to have a Material Adverse Effect. As used in this Subscription
Agreement, "Intellectual Property" shall mean all material patents, patent
applications, trademarks, trademark registrations, applications for trademark
registrations, trade secrets, service marks, service xxxx registrations,
applications for service xxxx registrations, trade names, labels, slogans,
claims of copyright, copyright registrations, applications for copyright
registrations, copyrights, drawings, designs, software, code and proprietary
know-how owned or licensed by the Company and used in the operation of its
business, other than widely-available "shrink-wrap" software.
f. Brokers. None of the Company or any of its officers,
directors or employees have employed any broker or finder, or incurred any
liability for any brokerage fees, commissions, finder's or other similar fees or
expenses in connection with the transactions contemplated by this Subscription
Agreement.
6. Representations and Warranties of CF. CF represents and warrants to
the Subscriber that:
a. Organization of CF and its Subsidiaries. CF is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite partnership power and
authority to carry on its business as now being conducted. CF is duly qualified
or licensed to do business and is in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so qualified, licensed or in good standing would not have a
material adverse effect on (i) the business, properties, condition (financial or
otherwise), or results of operations of CF or (ii) the ability of CF to
consummate the transactions contemplated hereby (a "CF Material Adverse
Effect").
b. Authority; No Conflict; Required Filings and Consents.
10
(1) CF has (or, as applicable, prior to the
Closing will have) all requisite partnership power and authority to enter into
this Subscription Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Subscription Agreement and the
consummation of the transactions contemplated hereby have been (or, as
applicable, prior to the Closing will be) duly authorized by all necessary and
appropriate partnership action on the part of CF. This Subscription Agreement
has been duly executed and delivered by CF and constitutes the legal, valid and
binding obligation of CF, enforceable against CF in accordance with its terms,
except as such enforceability may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and subject to general principles of equity.
(2) The execution and delivery of this
Subscription Agreement by CF do not, and the consummation of the transactions
contemplated hereby will not, (i) conflict with, or result in any violation or
breach of, any provision of the limited partnership agreement of CF, (ii) result
in any violation or breach of, or constitute (with or without notice or lapse of
time, or both) a default (or give rise to a right of termination, cancellation
or acceleration of any obligation or loss of any material benefit) under, or
require a consent or waiver under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, contract or other agreement,
instrument or obligation to which CF is a party or by which it or its properties
or assets may be bound, or (iii) conflict with or violate any permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to CF or any of its properties or
assets, except in the case of clauses (ii) and (iii) for any such conflicts,
violations, breaches, defaults, terminations, cancellations or accelerations
which are not, individually or in the aggregate, reasonably likely to have a CF
Material Adverse Effect.
(3) No consent, approval, order or authorization
of, or registration, declaration or filing with, a Governmental Entity is
required by or with respect to CF in connection with the execution and delivery
of this Subscription Agreement or the consummation of the transactions
contemplated hereby or thereby, except (i) the filings and approvals required
under the HSR Act, (ii) regulatory filings, applications or approvals required
in connection with the formation or operation of a Qualified Vertical, if any,
and (iii) any such consents, approvals, orders, authorizations, registrations,
declarations and filings, the absence of which is not, individually or in the
aggregate, reasonably likely to have a CF Material Adverse Effect.
c. Intellectual Property. The operations of CF do not infringe
upon any intellectual property rights owned, possessed or used by any third
party, and to the knowledge of CF there is no valid basis for any claim of such
infringement against it or its Subsidiaries in respect of the use of the CF
Intellectual Property now used, except, in any such case, as is not reasonably
likely to have a CF Material Adverse Effect. As used in this Subscription
Agreement, "CF Intellectual Property" shall mean all material patents, patent
applications, trademarks, trademark registrations, applications for trademark
registrations, trade secrets, service marks, service xxxx registrations,
applications for service xxxx registrations, trade names, labels, slogans,
claims of copyright, copyright registrations, applications for copyright
registrations, copyrights, drawings, designs, software, code and proprietary
know-how owned or licensed by CF and used in the operation of its business,
other than widely-available "shrink wrap" software.
11
7. Representations and Warranties of the Subscriber. The Subscriber
represents and warrants to the Company that:
a. Organization of the Subscriber. The Subscriber is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate or partnership
power and authority to carry on its business as now being conducted. The
Subscriber is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such licensing necessary,
except where the failure to be so qualified, licensed or in good standing would
not have a material adverse effect on (i) the business, properties, condition
(financial or otherwise) or results of operation of the Subscriber and its
Subsidiaries, taken as a whole, or (ii) the ability of the Subscriber to
consummate the transactions contemplated hereby (a "Subscriber Material Adverse
Effect").
b. Authority; No Conflict; Required Filings and Consents.
(1) The Subscriber has all requisite power and
authority to enter into this Subscription Agreement and the Registration Rights
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Subscription Agreement and the Registration
Rights Agreement and the consummation of the transactions contemplated hereby
and thereby by the Subscriber have been duly authorized by all necessary action
on the part of the Subscriber. This Subscription Agreement has been duly
executed and delivered by the Subscriber and constitutes the legal, valid and
binding obligation of the Subscriber, enforceable against the Subscriber in
accordance with its terms, except as such enforceability may be limited by or
subject to any bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and subject to
general principles of equity. The Registration Rights Agreement, when executed
and delivered by the Subscriber, will constitute the legal, valid and binding
obligation of the Subscriber, enforceable against the Subscriber in accordance
with its terms, except as such enforceability may be limited by or subject to
any bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and subject to general principles
of equity.
(2) The execution and delivery of this
Subscription Agreement and the Registration Rights Agreement by the Subscriber
does not, and the consummation of the transactions contemplated hereby and
thereby will not, (i) conflict with, or result in any violation or breach of,
any provision of the Certificate of Incorporation or Bylaws or other operative
organizational documents of the Subscriber, (ii) result in any violation or
breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any material benefit) under, or require a consent or
waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which the Subscriber or any of its Subsidiaries or Affiliates is a
party, or (iii) conflict with or violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Subscriber or any of its Subsidiaries or Affiliates or any its
or their properties or assets, except in the case of clauses (ii) and (iii) for
any such conflicts, violations, breaches,
12
defaults, terminations, cancellations or accelerations which are not,
individually or in the aggregate, reasonably likely to have a Subscriber
Material Adverse Effect.
(3) No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity is
required by or with respect to the Subscriber (or any of its Subsidiaries or
Affiliates) in connection with the execution and delivery of this Subscription
Agreement or the Registration Rights Agreement or the consummation of the
transactions contemplated hereby and thereby, except (i) the filings and
approvals required under the HSR Act, (ii) regulatory filings, applications or
approvals required in connection with the formation or operation of a Qualified
Vertical, if any, and (iii) any such consents, approvals, orders,
authorizations, registrations, declarations and filings the absence of which is
not, individually or in the aggregate, reasonably likely to have a Subscriber
Material Adverse Effect.
c. Knowledge and Experience. The Subscriber has sufficient
knowledge and experience in financial and business matters to be capable of
evaluating the merits and risks of an unregistered, non-liquid investment such
as an investment in the Company and has evaluated the merits and risks of such
an investment. The Subscriber is not relying on the Company with respect to the
corporate tax, legal and economic considerations involved in this investment or
to its investment in the LLC. The Subscriber understands that the offer and sale
of the Shares, the Warrants and Underlying Warrant Shares have not been approved
or disapproved by the SEC or any other Governmental Entity.
d. No other Representations or Warranties. No representations
or warranties have been made to the Subscriber by the Company or any director,
officer, employee, agent or Affiliate of the Company, other than the
representations of the Company set forth herein, and the decision of the
Subscriber to purchase the Unit is based on the information contained in this
Subscription Agreement, the Company SEC Reports and the Subscriber's own
independent investigation of the Company. The Subscriber acknowledges and agrees
that the Company may now, or in the future, be in negotiations with respect to,
or enter into, arrangements, agreements or understandings relating to other
business opportunities (which may include vertical opportunities) and that the
Company does not have now, nor will it have at any time after execution of this
Agreement, any obligation to provide the Subscriber with any information, other
than that which is contained in this Subscription Agreement and that which is
disclosed in the Company SEC Reports.
e. Ability to Withstand Loss of Investment. The overall
commitment of the Subscriber to investments which are not readily marketable is
not disproportionate to the net worth of the Subscriber, and the Subscriber's
acquisition of the Unit will not cause such overall commitment to become
excessive. The Subscriber understands that a total loss of capital is possible.
The Subscriber acknowledges that it is capable of bearing a complete loss of its
investment in the Company.
f. No Public Solicitation. The Subscriber acknowledges that
neither the Company nor any person or entity acting on its behalf has offered to
sell any of the Shares, the Warrants or the Underlying Warrant Shares to the
Subscriber by means of any form of general solicitation or advertising,
including without limitation (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media, or
broadcast over
13
television or radio, and (ii) any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.
g. Accredited Investor Status. The Subscriber is an
"accredited investor" within the meaning of Rule 501 of Regulation D promulgated
under the Securities Act.
h. Acquiring for Investment Purposes. The Subscriber is
acquiring the Shares and the Warrants solely for its own account, for investment
purposes only, and not with a view towards their resale or distribution.
i. No Brokers, Finders, etc. The Subscriber has not employed
any broker, financial advisor or finder, or incurred any liability for any
brokerage fees, commissions, finder's or other similar fees or expenses in
connection with the transactions contemplated by this Subscription Agreement.
j. No Action Taken to Invalidate Private Placement. The
Subscriber has not taken any action that would result in the offering of the
Shares, the Warrants and the Underlying Warrant Shares pursuant to this
Subscription Agreement being treated as a public offering and not a valid
private offering under the law.
8. Conditions to Closing.
a. Conditions applicable to Each Party. The respective
obligations of each party to this Subscription Agreement set forth herein to
purchase and sell the Unit shall be subject to the satisfaction (or waiver by
each party) of each of the following conditions on and as of the Closing:
(1) No litigation, investigation, inquiry,
proceeding, statute, rule, regulation,
order, decree, ruling or injunction shall
have been enacted, entered, promulgated or
endorsed by or in any court or governmental
authority of competent jurisdiction or any
self-regulatory organization having
authority over the matters contemplated
hereby which has the effect of making the
transactions contemplated by this
Subscription Agreement illegal or otherwise
prohibiting the consummation of any of the
transactions contemplated by this
Subscription Agreement.
(2) All approvals required under the HSR Act
shall have been received (or all applicable
waiting periods, and any extensions thereof,
under the HSR Act shall have expired or
otherwise been terminated).
(3) The Subscriber and the Company shall have
entered into the Registration Rights
Agreement.
14
b. Conditions to Obligations of the Company. The obligations
of the Company set forth herein to issue and sell the Unit also shall be subject
to the satisfaction (or waiver by the Company) of each of the following
conditions on and as of the Closing:
(1) The representations and warranties of the
Subscriber made herein shall have been true
and correct in all material respects as of
the date when made and as of the Closing as
though made at that time (except for any
such representations and warranties that
speak as of a specific date).
(2) The Subscriber shall have performed,
satisfied and complied in all material
respects with the covenants, agreements and
conditions required thereby to be performed,
satisfied or complied with by the Subscriber
at or prior to the Closing, including
payment of the Purchase Price.
c. Conditions to Obligations of the Subscriber. The
obligations of the Subscriber set forth herein to purchase the Unit also shall
be subject to the satisfaction (or waiver by the Subscriber) of each of the
following conditions on and as of the Closing:
(1) The representations and warranties of the
Company and CF set forth in this
Subscription Agreement shall be true and
correct in all material respects as of the
date when made and as of the Closing as
though made at that time (except for any
such representations and warranties that
speak as of a specific date).
(2) The Company and CF shall have performed,
satisfied and complied in all material
respects with the covenants, agreements and
conditions required thereby to be performed,
satisfied and complied with by them at or
prior to the Closing, including delivery of
the executed certificates for the Shares and
the Warrants.
9. Indemnification.
a. Agreement to Indemnify.
(1) Subject to the express provisions of Section
3 as to the Subscriber's sole remedy for the failure of the Company and CF to
present the seven Qualified Verticals set forth on Annex A to the Subscriber
within the 12-Month Period, as the same may be extended by a Black-Out Period,
the Company agrees to indemnify, defend and hold harmless the Subscriber (and
its officers, directors, Affiliates and permitted assigns) from and against any
and all losses, claims, liabilities, damages, deficiencies, costs or expenses
(including interest, penalties and reasonable attorneys' fees, disbursements and
related charges) (collectively, "Losses") based upon, arising out of or
otherwise in respect of (x) any inaccuracy in or breach of any representations
or warranties made by the Company contained in this Subscription Agreement or
any action taken by the Subscriber or its Affiliates in reliance upon the
accuracy of such representations or warranties or (y) failure of the Company to
perform any of the agreements or
15
covenants contained herein, except to the extent such Losses are based upon,
arise out of or are otherwise in respect of any inaccuracy in or breach of any
representations or warranties made by the Subscriber contained in this
Subscription Agreement or the failure of the Subscriber to perform any of the
agreements or covenants contained herein.
(2) The Subscriber agrees to indemnify, defend
and hold harmless the Company (and its officers, directors, Affiliates and
permitted assigns) from and against any and all Losses based upon, arising out
of or otherwise in respect of (x) any inaccuracy in or breach of any
representations or warranties made by the Subscriber contained in this
Subscription Agreement or any action taken by the Company or its Affiliates in
reliance upon the accuracy of such representations or warranties or (y) the
failure of the Subscriber to perform any of the agreements or covenants
contained herein, except to the extent such Losses are based upon, arise out of
or are otherwise in respect of any inaccuracy in or breach of any
representations or warranties made by the Company contained in this Subscription
Agreement or the failure of the Company to perform any of the agreements or
covenants contained herein.
b. Indemnification Procedure.
(1) A party entitled to indemnification pursuant
to this Section 9 (an "Indemnified Party") shall provide written notice to the
indemnifying party (the "Indemnifying Party") of any claim of such Indemnified
Party for indemnification under this Subscription Agreement promptly after the
date on which such Indemnified Party has actual knowledge of the existence of
such claim. Such notice shall specify the nature of such claim in reasonable
detail and the Indemnifying Party shall be given reasonable access to any
documents or properties within the control of the Indemnified Party as may be
useful or necessary in the investigation of the basis for such claim. The
failure to so notify the Indemnifying Party shall not constitute a waiver of
such claim except to the extent that the Indemnifying Party is materially
prejudiced by such failure.
(2) If any Indemnified Party seeks
indemnification hereunder based upon a claim asserted by a third party, then the
Indemnifying Party shall have the right (without prejudice to the right of any
Indemnified Party to participate at its expense through counsel of its own
choosing) to defend such claim at its expense and through counsel of its own
choosing (and reasonably acceptable to the Indemnified Party) if it gives
written notice of its intention to do so no later than 20 days following notice
thereof by an Indemnified Party; provided, however, that, if, in the reasonable
opinion of counsel to the Indemnified Party, separate counsel is required
because a conflict of interest would otherwise exist, the Indemnified Party
shall have the right to select separate counsel to participate in the defense of
such action on its behalf, at the expense of the Indemnifying Party; provided
further, however, that the Indemnified Party shall always have the right to
select separate counsel to participate in the defense of such action on its
behalf, at its own expense. If the Indemnifying Party does not so choose to
defend any such claim asserted by a third party for which any Indemnified Party
would be entitled to indemnification hereunder, then the Indemnified Party shall
be entitled to recover from the Indemnifying Party all of the reasonable
attorney's fees and other costs and expenses of litigation incurred in the
defense of such claim. It is understood that the Indemnifying Party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, in any case be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Indemnified
16
Parties. Notwithstanding the assumption of the defense of any claim by an
Indemnifying Party, the Indemnified Party shall have the right to approve the
terms of any settlement of a claim (which approval shall not be unreasonably
withheld or delayed) if such settlement (i) does not include as an unconditional
term the giving by the claimant or the plaintiff to the Indemnified Party a
release from all liability in respect to such claim or (ii) requires anything
from the Indemnified Party other than the payment of money damages which the
Indemnifying Party has agreed to pay in full. The Indemnifying Party shall not
be liable for any settlement of any proceeding effected without its prior
written consent (not to be unreasonably withheld or delayed).
10. Termination. Notwithstanding anything to the contrary set forth in
this Subscription Agreement, this Subscription Agreement may be terminated and
the transactions contemplated herein abandoned at any time prior to the Closing:
(1) by mutual written consent of the Company and
the Subscriber;
(2) by the Company or the Subscriber if the
Closing shall not have occurred by July 31, 2000 (which date will be extended
(x) up to 90 days as necessary to obtain any regulatory approval or the lifting
of any order which is necessary for the Closing and (y) to that date which is 60
days following the date of the parties' full compliance with a second request
for information by the Federal Trade Commission or the Department of Justice in
respect of the Company's or the Subscriber's filing under the HSR Act);
provided, however, that the right to terminate this Subscription Agreement under
this Section 10 shall not be available to any party whose failure to fulfill any
obligation under this Subscription Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date;
(3) by the Company or the Subscriber if a court
of competent jurisdiction shall have issued an order, decree or ruling
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Subscription Agreement, and such order, decree, ruling or
other action shall have become final and non-appealable;
(4) by the Company if (i) the representations
or warranties made by the Subscriber are not true and correct, in all material
respects, when made or at the Closing (except for any such representations or
warranties that speak as of a specific date, which must be true and correct in
all material respects as of such specific date), or (ii) the Subscriber fails to
comply in any material respect with any of its covenants or agreements contained
herein; or
(5) by the Subscriber if (i) the representations
and warranties made by the Company are not true and correct, in all material
respects, when made or at the Closing (except for any such representations or
warranties that speak as of a specific date, which must be true and correct in
all material respects as of such specific date), or (ii) the Company fails to
comply in any material respect with any of its covenants or agreements contained
herein.
The termination of this Subscription Agreement pursuant to clauses (2), (3), (4)
and (5) above shall be without prejudice to the right of the non-breaching party
to pursue any and all remedies available to it (including the commencement of
any action or other proceeding or the assertion of any equitable right) as a
result of such breach.
17
11. Covenants of CF and the Company.
a. CF hereby covenants and agrees that at such time as when
the Subscriber and Dynegy, Inc., and their respective assignees under Section
16(k) have made an aggregate equity investment in the Company of an amount equal
to at least $100.0 million valued on a cost basis and for so long as such
parties maintain ownership of equity securities having such cost basis, CF shall
use its best efforts to cause one designee jointly selected by such parties to
be nominated to the Board of Directors of the Company, subject to such parties'
collective agreement as to the one designee, and CF shall vote its shares of
common stock of the Company in favor of such designee.
b. The Company and CF hereby covenant and agree that each will
use its best efforts to maintain a sufficient level of authorized shares of
Class A Stock as is required to meet its obligations to the anchor participants
pursuant to the transactions contemplated hereby, including with respect to the
Shares issuable upon the exercise of the Warrants and the Additional Investment
Rights. The Company agrees to use its best efforts to satisfy any NASDAQ (or
other applicable exchange) requirements for the listing of any shares of Class A
Common Stock to be issued at the Closing or upon exercise of the Warrants or the
Additional Investment Rights.
12. Additional Covenants of CF. CF hereby covenants and agrees that it
will, or (if applicable) cause its Affiliate to, enter into assignment
agreements for each Qualified Vertical on terms and conditions substantially the
same in all material respects as (but subject to changes attributable to
differences among the products and regions) that which is contemplated by
Schedule 1 and 2 of the Newco Term Sheet. CF further covenants and agrees that
prior to the Closing, it will convert a sufficient number, if any, of the shares
of Class B Common Stock of the Common Stock of the Company owned by it into
Class A Common Stock such that, after giving effect to such conversion, the
Shares to be purchased by Subscriber at the Closing represent not more than 4.9%
of the outstanding shares of Class A Common Stock of the Company on the date of
the Closing.
13. Right of the Company and CF to Issue Securities to Other Industry
Market Participants. Nothing contained herein shall limit the rights of the
Company or CF (or any Subsidiary or Affiliate thereof) to issue or transfer
securities of the Company not referred to or contemplated herein or in the Newco
Term Sheet to any third party in order to induce such party to become an anchor
participant or industry market participant in any Qualified Vertical set forth
on Annex A or for any other purpose, whether relating to a Qualified Vertical or
otherwise. Notwithstanding the foregoing, the Company shall not offer, during
the six month period commencing with the date hereof, any of its equity
securities or other material benefits in order to induce the Specified Party (as
defined in a separate letter agreement) to become an anchor participant in any
Qualified Vertical set forth on Annex A on terms more favorable than the terms
offered pursuant to this Subscription Agreement with respect to its investment
in the Company without also offering (as promptly as practicable after a
definitive agreement is reached with the Specified Party) the same more
favorable terms to the Subscriber. A term which is more beneficial in any
material respect shall be deemed to include, but not be limited to, a material
commitment by a Specified Party (i) not to compete with the Qualified Vertical;
(ii) to
18
support the business of the Qualified Vertical; or (iii) to participate with the
Company in a vertical marketplace that is not a Qualified Vertical. The offer to
a Subscriber under this Section 13 shall be exercisable for 10 business days
after delivery by the Company to Subscriber of the definitive documentation
embodying the more favorable terms. No such offer to a Subscriber shall be
required to be made prior to the Closing or if this agreement is terminated
under Section 10 hereof for any reason. In the event an offer is made to the
Specified Party prior to the Closing which would otherwise require an offer to
Subscriber hereunder, the same offer shall be made to Subscriber as promptly as
practicable after the Closing. The Company's obligation to offer the Subscriber
the more favorable terms offered to the Specified Party shall be extended (x)
for an additional six months (for a total term of 12 months from the date
hereof) if the Subscriber and/or Dynegy, Inc., and their respective assignees
under Section 16(k) invest in at least two Qualified Verticals during the
initial six month period from the date hereof or (y) for an additional 12 months
(for a total term of 18 months from the date hereof) if the Subscriber and/or
Dynegy, Inc., and their respective assignees under Section 16(k) invest in at
least four Qualified Verticals during the initial 12 month period from the
Closing.
14. Non-Exclusive Agreement. Nothing contained herein shall limit the
rights of the Company, CF or the Subscriber (or any Subsidiary or Affiliate
thereof) to form or participate in, whether as equity holder, consultant, joint
venturer, manager or otherwise, any business opportunity relating to a
"vertical" marketplace and there shall be no obligation, express or implied, to
first offer the right to participate in any such marketplace to any other party;
provided, however, that the Company and CF will agree to certain non-compete
restrictions which relate to sales of products traded by Newco to retail
customers as further described under "Scope of Newco" in the Newco Term Sheet.
15. Covenant of the Subscriber. The Subscriber agrees that neither it
nor any of its Subsidiaries or Affiliates will make, and the Subscriber will use
its reasonable best efforts to prevent any of its or their respective directors,
officers or agents or any person otherwise acting on behalf of any of the
foregoing from making, any purchase, offer, sale, short sale, assignment,
transfer, pledge, encumbrance, contract to sell, grant of an option to purchase
or other disposition of, or enter into any swap relating to, any securities of
the Company, or any interest therein, during any period which governs the
calculation of the purchase price of any securities of the Company which the
Subscriber may have a right to purchase in the future under the terms of this
Agreement.
19
16. General.
a. The Subscriber acknowledges and agrees that any information
or data it has acquired from or about the Company, not otherwise properly in the
public domain, was received in confidence. The Subscriber agrees not to divulge,
communicate or disclose, except as may be required by law or for the performance
of this Subscription Agreement, including in connection with the solicitation of
industry market participants, or use to the detriment of the Company or for the
benefit of any other person or persons, or misuse in any way, any confidential
information of the Company, including any scientific, technical, trade or
business secrets of the Company and any scientific, technical, trade or business
materials that are treated by the Company as confidential or proprietary,
including, but not limited to, ideas, discoveries, inventions, developments and
improvements belonging to the Company and confidential information obtained by
or given to the Company about or belonging to third parties.
b. The parties hereto agree to execute such further
instruments and to take such further action as may reasonably be necessary to
consummate the transactions contemplated by this Subscription Agreement. Each
party will use reasonable best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the transactions
contemplated by this Subscription Agreement as promptly as practicable after the
date hereof, including (i) preparing and filing as promptly as practicable all
documentation to effect all necessary applications, notices, petitions, filings
and other documents and to obtain as promptly as practicable all consents,
waivers, licenses, orders, registrations, approvals, permits and authorizations
necessary or advisable to be obtained from any third party and/or any
Governmental Entity in order to consummate the transactions contemplated by this
Subscription Agreement and (ii) taking all reasonable steps as may be necessary
to obtain all such material consents, waivers, licenses, registrations, permits,
authorizations, tax rulings, orders and approvals. In furtherance and not in
limitation of the foregoing, each party hereto agrees to make an appropriate
filing of a Notification and Report Form pursuant to the HSR Act with respect to
the transactions contemplated hereby as promptly as practicable after the date
hereof and to supply as promptly as practicable any additional information and
documentary material that may be requested pursuant to the HSR Act and to take
all other actions necessary to cause the expiration or termination of the
applicable waiting periods under the HSR Act as soon as practicable. Nothing in
this Subscription Agreement shall require any party (or any of its Subsidiaries
or Affiliates) to sell, hold separate or otherwise dispose of or conduct their
business in a specified manner, or agree to sell, hold separate or otherwise
dispose of or conduct their business in a specified manner, whether as a
condition to obtaining any approval from a Governmental Entity or for any other
reason.
c. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered personally or sent
by facsimile transmission, overnight courier, or certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally or sent by facsimile transmission (provided that a
confirmation copy is sent by overnight courier), one day after deposit with an
overnight courier, or if mailed, three days after the date of deposit in the
United States mails, as follows:
20
If to the Company to:
eSpeed, Inc.
Xxx Xxxxx Xxxxx Xxxxxx
000xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn.: General Counsel
with a copy to:
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
If to CF to:
Cantor Xxxxxxxxxx, X.X.
Xxx Xxxxx Xxxxx Xxxxxx
000xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn.: General Counsel
If to the Subscriber to the address set forth below its
signature:
d. This Subscription Agreement and exhibits hereto contain the
entire agreement between the parties hereto with respect to the matters
contemplated herein and supersedes all prior agreements or understandings among
the parties related to such matters.
e. This Subscription Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
f. This Subscription Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms or covenants hereof may
be waived, only by a written instrument executed by all of the parties hereto
or, in the case of a waiver, by the party waiving compliance. Except as
otherwise specifically provided in this Subscription Agreement, no waiver by
either party hereto of any breach by the other party hereto of any condition or
provision of this Subscription Agreement to be performed by such other party
shall be deemed a waiver of a similar or dissimilar provision or condition at
the same or at any prior or subsequent time.
21
g. This Subscription Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the laws
of the State of New York, without giving effect to the principles of conflicts
of laws thereof. Each party hereto (i) hereby irrevocably and unconditionally
submits to the exclusive jurisdiction of any court of the State of Delaware or
any federal court sitting in the State of Delaware for purposes of any suit,
action or other proceeding arising out of this Subscription Agreement or the
subject matter hereof brought by any party hereto, (ii) hereby waives and agrees
not to assert, by way of motion, as a defense, or otherwise, in any such suit,
action or proceeding, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is exempt or immune
from attachment or execution, that the suit, action or proceeding is brought in
an inconvenient forum, that the venue of the suit, action or proceeding is
improper or that this Subscription Agreement or the subject matter hereof may
not be enforced in or by such court, and (iii) hereby waives in any such action,
suit, or proceeding any offsets or counterclaims. Each party hereto hereby
consents to service of process by certified mail at the address set forth in
Section 16(c) hereof and agrees that its submission to jurisdiction and its
consent to service of process by mail is made for the express benefit of the
other party hereto. Final judgment against any party, in any action, suit or
proceeding shall be conclusive, and may be enforced in other jurisdictions (1)
by suit, action or proceeding on the conclusive evidence of the fact and of the
amount of any indebtedness or liability of the party therein described or (2) in
any other manner provided by or pursuant to the laws of such other jurisdiction.
h. Headings to the Sections in this Subscription Agreement are
intended solely for convenience and no provision of this Subscription Agreement
is to be construed by reference to the heading, of any Section.
i. This Subscription Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same agreement. Delivery of a telecopied
version of one or more signatures to this Subscription Agreement shall be deemed
adequate delivery for purposes of this Subscription Agreement.
j. Any term or provision of this Subscription Agreement which
is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Subscription Agreement or affecting the validity or enforceability of any of the
terms and provisions of this Subscription Agreement in any other jurisdiction.
k. This Subscription Agreement is not transferable or
assignable by the Company, the Subscriber or CF; provided, however, that any
party may assign its rights and obligations under this Subscription Agreement to
a wholly-owned Subsidiary of such party; provided, further, however, that such
assignment shall not relieve the assigning party from its obligations hereunder.
22
IN WITNESS WHEREOF, the Subscriber has executed this
Subscription Agreement this 26th day of April, 2000.
SUBSCRIBER:
The Xxxxxxxx Companies, Inc.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------
Name: Xxxxxxx X. Xxxxxx
Title: Director, Energy Solutions
Xxxxxxxx Energy Marketing &
Trading Company
Address: Xxx Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attn: General Counsel
Fax No.:
Taxpayer ID #
AGREED AND ACCEPTED this 26th
day of April, 2000.
eSPEED, INC.
By:/s/ Xxxxxx X. Xxxxxxx
---------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
CANTOR XXXXXXXXXX, X.X.
By:/s/ Xxxxxx X. Xxxxxxx
---------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chairman
23
EXHIBITS
--------
Exhibit A - Form of Warrant
Exhibit B - Wire Transfer Instructions
Exhibit C - Newco Term Sheet
Exhibit D - Form of Registration Rights Agreement
Annex A -- Qualified Verticals
24
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 __________, 2010 [representing
10th anniversary of issuance].
WARRANT TO PURCHASE CLASS A COMMON STOCK
OF
eSPEED, INC.
FOR VALUE RECEIVED, eSPEED, INC. (the "Company"), a Delaware
corporation, hereby certifies that The Xxxxxxxx Companies, Inc. (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 (as the same
may be accelerated pursuant to Section 4(c) hereof) and prior to 5:00 P.M.,
Eastern Standard Time, on ________, 2010 [representing 10th anniversary of
issuance] a total of 666,666 fully paid and non-assessable shares of Class A
Common Stock, par value $.01 per share, of the Company for a purchase price of
$35.203125 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.") 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 as
hereinafter provided under Section 3.
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 (as the same may be accelerated pursuant to Section 4(c)
hereof) and prior to 5:00 P.M., Eastern Standard Time, on _________, 2010
[representing 10th anniversary of issuance] by the Holder of this Warrant by the
surrender of this Warrant (with the subscription form at the end hereof duly
1
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 value of a share.
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.
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.
2
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 an amount determined by multiplying the Warrant
Shares issuable prior to such adjustment by a fraction determined by dividing
(x) the Per Share Warrant Price in effect immediately prior to the event causing
such adjustment by (y) such 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
3
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.
4. Exercisability.
a. Exercise Date. This Warrant shall be vested immediately and
shall be exercisable as to all Warrant Shares commencing _________ [the date
which is 5 1/2 years after the date of issuance] (the "Exercise Date"), subject
to acceleration as set forth in subsection (c) below.
b. Commitment to Invest in Four Qualified Verticals. The
Initial Holder has agreed to invest $2.5 million in each of four Qualified
Verticals (as defined below) pursuant to the terms of that certain Subscription
Agreement, dated as of April 26, 2000, by and between the Company and the
Initial Holder (the "Subscription Agreement"). Such investment is required to be
made during the 12-month period following the date hereof (the "12-Month
Period"; which period may be increased by not more than six months (the
"Black-Out Period") if a public offering by the Company is commenced during such
12-Month Period and disclosure constraints resulting from such public offering
dictate a delay as determined by the Company). Upon any such determination by
the Company, the Company shall so notify the Initial Holder in writing prior to
the commencement of any Black-Out Period, which notice shall specify the time
period by which the 12-Month Period shall be increased and the new last day of
the 12-Month Period. Such notice shall be binding on the parties. For purposes
of this agreement, a "Qualified Vertical" shall have the meaning ascribed to it
in Section 3(b) of the Subscription Agreement.
c. Acceleration of Exercisability.
(i) Satisfaction of Acceleration Condition. Upon
each satisfaction of an Acceleration Condition (as defined below), this Warrant
shall become exercisable as to 25% of the aggregate Warrant Shares (i.e.,
[166,666] shares of Class A Stock). An "Acceleration Condition" shall be deemed
satisfied after the occurrence of each of the following: (1) the formation of a
Qualified Vertical, (2) the consummation and funding of a $2.5 million
investment in a Qualified Vertical by the Subscriber and each of the three
additional industry
4
market participants (two in the case of the Newco Qualified Vertical, as defined
in Section 3 of the Subscription Agreement), and (3) the consummation of the
Initial Holder's first transaction on the exchange of said Qualified Vertical
[any market participant's first transaction on the exchange in the case of
Dynegy, Inc.]; provided that in any event the Acceleration Condition shall be
deemed satisfied on the eight-week anniversary of the satisfaction of the
conditions set forth in clauses (1) and (2) above.
(ii) Not Exercisable Prior to First Anniversary of
Date of Issuance. Notwithstanding the provisions of subsection (c)(i) above, in
no event will this Warrant, or any portion thereof, become exercisable prior to
[____] [the first anniversary of the date of issuance]. In the event that an
Acceleration Condition is satisfied prior to such date, then the exercisability
of this Warrant in connection with such satisfaction shall be deferred until
[___].
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. Subject to Section 6(c) hereof, 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 of 1933, as amended, 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.
5
b. Registration Rights. The Warrant Shares are the subject of
the Registration Rights Agreement attached to the Subscription Agreement as
Exhibit D.
c. Swap or Hedging Transactions. Subject to Section 3(c) of
the Subscription Agreement, without the prior written consent of the Company,
the Holder may not enter into any swap or other hedging transaction relating to
the Warrants or the Warrant Shares.
d. Transfer. Subject to Section 4(c), without the prior
written consent of the Company, neither this Warrant, nor any interest herein,
may be sold, assigned, transferred, pledged, encumbered or otherwise disposed
of. Any sale, assignment, transfer, pledge, encumbrance or other disposition of
this Warrant attempted contrary to the provisions of this Warrant, or any levy
of execution, attachment or other process attempted upon the Warrant, shall be
null and void and without effect. The provision of this Section 6(d) shall not
be applicable to the Warrant Shares. Without limitation of the foregoing,
Subscriber agrees that if it transfers its rights hereunder to a Subsidiary
pursuant to Section 16(k) of the Subscription Agreement, it shall not sell,
assign or transfer the stock of such Subsidiary during the 12-month lock-up.
e. 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.
6
9. Communication. No notice or other communication under this Warrant
shall be effective unless the same is in writing and is mailed by first-class
mail, postage prepaid, addressed to:
a. the Company at Xxx Xxxxx Xxxxx Xxxxxx, 000xx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: General Counsel, or such other address as the
Company has designated in writing to the Holder, or
b. the Holder at Xxx Xxxxxxxx Xxxxxx, Xxxxx, Xxxxxxxx 00000,
Attention: General Counsel, 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.
7
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
a duly authorized officer as of this ______ day of April, 2000.
eSPEED, INC.
By:____________________________
Name:
Title:
8
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__________________________
Address____________________
____________________
EXHIBIT B
Wire transfer instructions to be provided by eSpeed prior to Closing.
1
EXHIBIT C
THE NEWCO TERM SHEET
Scope of Newco
Newco is intended to be an electronic and telephonic marketplace for
North American wholesale transactions in natural gas, electricity, coal and
sulfur dioxide and nitrogen dioxide emissions (the "Newco Products").
Newco's activities will be limited to the wholesale market. Newco will
not intentionally expose itself to any unmatched market risk on the Newco
Products and, prior to July 31, 2001, will not take physical title to the Newco
Products. Newco will not buy or sell Newco Products from or to residential or
commercial end-user customers for their end use ("Retail Customers"). eSpeed,
Inc. ("eSpeed"), Cantor Xxxxxxxxxx, X.X. ("CF") and their respective
subsidiaries will agree not to hold an equity interest, invest, manage or
otherwise participate in any entity that buys or sells Newco Products to Retail
Customers; provided, however, that nothing contained herein shall prohibit
eSpeed or CF or any of their respective subsidiaries from (x) acting solely as a
technology provider in any such marketplace, (y) from acquiring less than 25% of
the voting securities of an entity that buys or sells Newco Products to Retail
Customers so long as the acquired entity is not primarily engaged in the
business of buying or selling Newco Products to Retail Customers, or (z) trading
in the ordinary course of business in securities of entities that are themselves
engaged in the business of buying or selling Newco Products to Retail Customers.
For purposes of the preceding sentence, "primarily engaged" shall mean that the
acquired entity derives more than 17.5% of its revenues from the business of
buying or selling Newco Products to Retail Customers.
Equity Participation in Newco
It is anticipated that Newco will have a total of three stockholders
consisting of a limited liability company (the "LLC") formed by the
participating Anchors for the benefit of up to 10 energy industry participants,
inclusive of the participating Anchors (the "EIPs"), eSpeed and CF. The initial
EIPs will be comprised of the participating Anchors, and the additional EIPs
will be selected from an agreed upon list of 10 - 15 acceptable industry market
participants (the "List"). The initial participating Anchor will be The Xxxxxxxx
Companies, Inc. ("Xxxxxxxx"). Any of the participating Anchors, eSpeed and CF
may invite an additional industry market participant to invest in Newco from
said List until the 9th month anniversary of the closing date with respect to
the initial LLC investment in Newco as described below (the "Initial Newco
Closing Date"). Invitations to additional industry market participants shall be
accepted on a first come first served basis. If invitees can not be
distinguished on the basis of the time of their willingness to commit, the Board
of Newco shall resolve any oversubscription issues in its sole discretion. In
the event that there are fewer than seven EIPs after the 9th month anniversary
of the Initial Newco Closing Date, eSpeed and CF shall have the right to invite
additional industry market participants from the List for an additional 9-month
period as set forth under the caption "LLC
1
Investment" below. The LLC, EIPs, eSpeed and CF will enter into a Stockholders'
Agreement to provide for (i) voting of Newco Board members as set forth below in
this Newco Term Sheet under the Section captioned "Management of Newco", (ii)
rights of first refusal and co-sale rights (including tag-along and drag-along
rights), (iii) non-solicitation and confidentiality obligations and (iv) the
agreement of each such stockholder to cause actions that require the consent of
eSpeed or CF designees on the Board of Newco not to be taken without requisite
consent. The Stockholders' Agreement shall terminate following the initial
public offering of Newco, except for the matters addressed in (i) and (iii)
above and the matters in (iv) above but only as they relate to transaction
commissions (including any reductions) and data pricing.
All share information set forth below is on a fully-diluted basis as of
the Initial Newco Closing Date.
LLC Investment: In exchange for a cash investment of
$2.5 million from the participating
Anchor, the LLC will initially
receive 7.5% of the outstanding
common stock of Newco and warrants
to purchase an additional 67.5% of
the outstanding common stock of
Newco. These Newco warrants will be
exercisable in increments of $2.5
million for 7.5% of the outstanding
common stock of Newco if and only
if an additional EIP becomes a
member of the LLC and invests $2.5
million in the LLC. Each time an
EIP is added, the warrants shall
become exercisable by the LLC in
exchange for an additional $2.5
million investment by the LLC in
Newco. Upon the 9th month
anniversary of the Initial Newco
Closing Date if there are fewer
than seven EIPs, eSpeed and CF
shall have the right to invite
additional industry market
participants from the List for a
period of an additional 9 months.
If after such 18 month period there
are (i) at least eight EIPs, then
any unexercised Newco warrants will
be allocated pro rata among the
EIPs and (ii) less than eight EIPs,
then a portion of the unexercised
Newco warrants will be forfeited as
set forth in Annex A and any
unforfeited unexercised Newco
warrants will be allocated pro rata
among the EIPs. If any warrants are
so forfeited, the exercise price
per share of common stock of Newco
issuable upon exercise of the
remaining warrants held by Newco
shall be reduced by multiplying the
exercise price by a fraction, the
numerator of which shall be the
number of shares of outstanding
common stock of Newco then owned by
eSpeed and CF and the denominator
shall be the number of shares of
outstanding common stock of Newco
held by the LLC, including for such
purpose, the shares underlying
unforfeited Newco warrants held by
the LLC. Such exercise price may
also be reduced in another
economically appropriate manner to
address such forfeiture
2
as equitably determined by the
parties. The Newco warrants shall
be exercisable for a 30 day period
from any such allocation. Each EIP
shall make an additional capital
contribution to the LLC in the
amount required to exercise any
unexercised Newco warrants so
allocated to it. If an EIP fails to
make such contribution, the
unexercised Newco warrants so
allocated to it will be allocated
pro rata among the other EIPs who
desire to make such
non-contributing EIP's
contribution.
Dynegy, Inc. ("Dynegy") will have
the right for a 30 day period
commencing October 1, 2001 to
acquire an EIP interest in Newco
through an investment in the LLC for
$2.5 million. Dynegy's right to make
any investment in the LLC shall
terminate on November 1, 2001. If an
initial public offering of Newco
shall occur prior to October 1,
2000, Dynegy will have the right to
accelerate its investment, in whole
or in part, in Newco so long as
Dynegy's ownership does not exceed
4.9% of Newco's outstanding stock;
provided that, in such event, Dynegy
shall have no Board designee rights
prior to August 2001 and any Board
designee rights that it would have
but for this limitation may be
exercised by the other LLC members
acting collectively.
The LLC operating agreement will
provide that [ * ECONOMIC TERMS
OMITTED]of the Newco common stock
(inclusive of shares acquired by the
LLC upon exercise of the Newco
warrants) will be allocated equally
among the EIPs and the remaining [ *
ECONOMIC TERMS OMITTED] of the Newco
common stock (inclusive of shares
acquired by the LLC upon exercise of
the Newco warrants) (the "Jumpball
Shares") will be allocated among the
EIPs based upon the Cumulative
Transaction Revenue paid by each EIP
and received by Newco and eSpeed in
the aggregate in the Newco/eSpeed
trading system (i.e., 100% of
electronic and non-electronic (as
set forth on paragraphs (a) through
(c) of Schedule 4 to this Newco Term
Sheet) transaction service revenues
("Transaction Revenues") in the
Newco Products measured over the
five year period from the Initial
Newco Closing Date (the "Cumulative
Transaction Revenue").
Non-transaction revenue, such as
data, ancillary service and
----------------------
*This information has intentionally been omitted and has been filed separately
with the Securities and Exchange Commission. It is subject to a confidential
treatment request.
3
advertising revenue, shall not be
included as transaction revenue. No
EIP shall be entitled to receive
more than two times its pro rata
share of the Jumpball Shares with
pro ration to be based solely upon
the number of EIPs (the "Jumpball
Cap"). In the event that an EIP
would otherwise be entitled to
receive more than the Jumpball Cap,
then any such excess shares shall be
allocated among the other EIP's in
proportion to their Cumulative
Transaction Revenue to the extent
that, together with such additional
allocation, they would not be
entitled to receive more than the
Jumpball Cap.
As soon as reasonably practicable,
but in no event later than 30 days
following each full quarterly period
after the Initial Newco Closing
Date, CF shall prepare and circulate
to each EIP a quarterly report
reasonably detailing the total
volume and transaction revenue
generated and paid by (i) such EIP
and (ii) all the EIPs in the
aggregate to Newco and eSpeed for
such quarter. As soon as reasonably
practicable, but in no event later
than 90 days following each
anniversary of the Initial Newco
Closing Date, CF shall prepare and
circulate to each EIP a statement
(the "Statement") reasonably
detailing the total volume and
transaction revenue and percentage
of transaction revenue generated and
paid by (i) such EIP and (ii) all
the EIPs in the aggregate to Newco
and eSpeed for the preceding
12-month period. The annual
Statement shall be certified at
Newco's expense by a firm of
certified public accountants
selected by Newco (the "Selected
Accounting Firm"), which firm may
differ from year to year. The EIPs
shall have a period of 60 days after
receipt of the Statement to present
in writing to CF and the other EIPs
any objections thereto, setting
forth the specific item or items to
which each such objection relates
and the specific basis for each such
objection. A Statement shall be
deemed to be acceptable to an EIP
unless it shall have made a written
objection thereto within such 60 day
period. If an EIP shall raise any
such objection within such 60 day
period and such EIP and CF shall
fail to reach an agreement with
respect to any such objection, then
such disputed objection shall, not
later than 30 days after one of the
parties affirmatively terminates
discussions in writing with respect
to such objection, be submitted for
resolution to the Selected
Accounting Firm. The EIP and CF
shall use reasonable efforts to
cause said accounting firm, within
30 days of its appointment, to
resolve the disputes submitted to
4
it. The fees and expenses of this
accounting firm shall be paid (i) by
the disputing EIP, if the
discrepancy between the calculations
in the Statement and the
calculations of such accounting firm
is less than 2% of the Statement's
calculations, and (ii) by Newco, if
the discrepancy between the
calculations of such accounting firm
is 2% or greater. Any such
resolution by this accounting firm
concerning any item in dispute shall
be final and binding on the parties
without further right of appeal. In
no event shall an EIP be entitled to
review or object to the transaction
revenues of any other EIP or the
combined Cumulative Transaction
Revenue for all EIPs.
Once the Statement reflecting the
Cumulative Transaction Revenue of
each EIP which is delivered
following the fifth anniversary of
the closing of the Initial Newco
Closing Date becomes final and
binding, the shares of Newco common
stock shall be allocated among the
EIPs in proportion to their
Cumulative Transaction Revenue as
described above.
The LLC operating agreement will
provide that it may not be amended
in any manner which would modify the
allocation provisions set forth
therein without eSpeed's consent.
eSpeed's Investment: In exchange for an
aggregate cash investment of $2.0
million, eSpeed will receive 5% of
the outstanding equity of Newco on
the Initial Newco Closing Date.
CF's Investment: In exchange for (i) an aggregate
cash investment of $4.25 million,
(ii) the assignment of certain
rights under the services agreement
between eSpeed and CF described on
Schedule 1, and (iii) the transfer
of certain business assets
described on Schedule 2, CF will
receive 20% of the outstanding
equity of Newco on the Initial
Newco Closing Date.
Management of Newco
Newco shall be formed as soon as there are a total of three EIPs
(including the participating Anchors) and rights to designate Newco Board
members shall be as follows:
5
------------------------------- --------------------------- -------------------------- ---------------------------
Total Number of EIPs Total Number to be Total Total
--------------------- ------------------- ------ -----
(including Participating Designated by all the EIPs Number to Number to
------------------------- -------------------------- --------- ---------
Anchors) (One Per EIP) be be
-------- ------------- -- --
Designated Designated
----------- ----------
By eSpeed by CF
--------- -----
------------------------------- --------------------------- -------------------------- ---------------------------
3 3 1 1
------------------------------- --------------------------- -------------------------- ---------------------------
4 4 1 1
------------------------------- --------------------------- -------------------------- ---------------------------
5 5 1 1
------------------------------- --------------------------- -------------------------- ---------------------------
6 6 1 1
------------------------------- --------------------------- -------------------------- ---------------------------
7 7 2 1
------------------------------- --------------------------- -------------------------- ---------------------------
As additional EIPs are added, each EIP shall have the right to designate one
Board member and eSpeed and CF shall have the right to designate directors in
proportion to their collective equity participation in Newco (e.g., if eSpeed
and CF own 25% of the equity securities of Newco they shall have the right to
collectively designate 25% of the Board); provided that in no event shall eSpeed
and CF have less than one Board designee each and if the number of designees is
an odd number, eSpeed shall designate the extra director. The director designee
of an EIP, eSpeed or CF shall be a full-time employee of such party or its
wholly-owned subsidiary, its ultimate parent entity or a wholly-owned subsidiary
of its ultimate parent entity. The majority of the designees of the
non-competing EIPs shall have the right to remove the designee of any EIP if
such EIP or its designee participates in the management (whether by contract,
equity ownership, representation on the Board of Directors or otherwise) of an
entity which is competitive with Newco; provided that, any such participation in
the management of a competitive entity in existence at the time a party becomes
an EIP and disclosed by the EIP at the time of its investment in Newco shall not
be grounds for removal. An EIP shall lose its director designee rights if its
economic interest in Newco common stock held by the LLC falls below 2.5% of the
outstanding shares held by the parties to the Stockholders' Agreement. In the
event that an EIP loses its director designee rights pursuant to the preceding
two sentences, the other EIPs, voting together, shall have the right to fill the
seats that become vacant as a result of such loss of designee rights. All action
of the Newco Board shall be taken by majority vote of the Newco Board, except
for those matters set forth on Schedule 3 which shall require the approval of a
majority of the Newco Board as well as a majority of the director designees of
either eSpeed or CF.
Newco Services Agreement
Upon formation, Newco will enter into a services agreement with eSpeed
pursuant to which eSpeed will provide the global technology infrastructure for
the transactional and technology related elements of the marketplace as well as
access to its futures exchange to be hosted by eSpeed in exchange for a
percentage of transactional and other revenues. The terms of such service
agreement are set forth on Schedule 4.
6
Newco Administrative Services Agreement
Upon formation, Newco will enter into an administrative services
agreement with CF pursuant to which CF will act as market operator and will
manage the day-to-day administrative operations of Newco. The terms of such
administrative services agreement are set forth on Schedule 5.
Registration Rights of eSpeed, CF, the Anchors and the other EIPs
eSpeed, CF and the EIPs will be entitled to those registration rights
with respect to their Newco common stock set forth on Schedule 6.
7
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
by and among
eSpeed, Inc.
and
The Investors Named Herein
1
TABLE OF CONTENTS
ARTICLE I DEMAND REGISTRATIONS..................................................................................1
1.1 Requests for Registration.............................................................................1
-------------------------
1.2 Number of Demand Registrations; Expenses..............................................................2
----------------------------------------
1.3 Effective Registration Statement......................................................................2
--------------------------------
1.4 Priority on Demand Registrations......................................................................2
--------------------------------
1.5 Selection of Underwriter..............................................................................3
------------------------
ARTICLE II PIGGYBACK REGISTRATIONS..............................................................................3
2.1 Right to Piggyback....................................................................................3
------------------
2.2 Piggyback Expenses....................................................................................4
------------------
2.3 Priority on Primary Registrations.....................................................................4
---------------------------------
2.4 Priority on Secondary Registrations...................................................................4
-----------------------------------
ARTICLE III HOLDBACK AGREEMENTS.................................................................................5
ARTICLE IV REGISTRATION PROCEDURES..............................................................................5
ARTICLE V REGISTRATION EXPENSES.................................................................................8
5.1 Registration Expenses.................................................................................8
---------------------
5.2 Holders' Expenses.....................................................................................8
-----------------
ARTICLE VI UNDERWRITTEN AND OTHER OFFERINGS.....................................................................8
6.1 Underwriting Agreement................................................................................8
----------------------
6.2 Obligations of Participants...........................................................................8
---------------------------
ARTICLE VII INDEMNIFICATION.....................................................................................9
7.1 Company's Indemnification Obligations.................................................................9
-------------------------------------
7.2 Holder's Indemnification Obligations.................................................................10
------------------------------------
7.3 Notices; Defense; Settlement.........................................................................10
----------------------------
7.4 Indemnity Provision..................................................................................11
-------------------
ARTICLE VIII DEFINITIONS.......................................................................................11
8.1 Terms................................................................................................11
-----
8.2 Defined Terms in Corresponding Sections..............................................................13
---------------------------------------
ARTICLE IX MISCELLANEOUS.......................................................................................14
9.1 Amendments and Waivers...............................................................................14
----------------------
9.2 Successors and Assigns...............................................................................14
----------------------
9.3 Notices..............................................................................................14
-------
9.4 Headings.............................................................................................15
--------
9.5 Gender...............................................................................................15
------
9.6 Invalid Provisions...................................................................................15
------------------
9.7 Governing Law; Forum; Process........................................................................15
-----------------------------
9.8 Counterparts.........................................................................................16
------------
9.9 Additional Investors.................................................................................16
--------------------
ARTICLE X RULE 144 REPORTING...................................................................................16
i
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of
April __, 2000, by and among eSpeed, Inc., a Delaware corporation (the
"Company"), the parties that have executed the signature pages hereto (the
"Initial Investors") and such other parties that otherwise execute a joinder
agreement and become a party hereto (collectively, the "Investors").
RECITALS
WHEREAS, as an inducement to each of the Initial Investors to
invest in the Company, the Company desires to grant to each of the Initial
Investors registration rights with respect to the shares (the "Shares") of Class
A Common Stock (as defined in Section 8.1 below) and warrants to purchase shares
of Class A Common Stock (the "Warrants") issued to the Initial Investors on the
date hereof as set forth on Schedule A hereto, on the terms and subject to the
conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and
agreements and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
DEMAND REGISTRATIONS
1.1 Requests for Registration. Subject to Sections 1.2
and 1.3 hereof, the Initial Investors may request, in writing, registration
under the Securities Act of all or part of their Registrable Securities. Within
15 days after receipt of any such request, the Company will give notice of such
request to all other Investors and to other persons holding piggyback
registration rights entitling them to have securities of the Company included
within such registration ("Other Holders"). Thereafter, the Company will use all
reasonable efforts to effect the registration under the Securities Act (i) on
Form S-1 or any similar long-form registration statement (a "Long-Form
Registration") or (ii) on Form S-3 or any similar short-form registration
statement (a "Short-Form Registration") if the Company qualifies to effect a
Short- Form Registration, and will include in such registration all Registrable
Securities and securities of the Company held by the Other Holders with respect
to which the Company has received written requests for inclusion therein within
20 days after the receipt of the Company's notice, subject to the provisions of
Section 1.4. All registrations initiated by an Investor pursuant to this Section
1.1 are referred to herein as "Demand Registrations". The Company shall not be
required to effect any underwritten Demand Registration requested by an Initial
Investor if either (a) within the 12 months preceding the receipt by the Company
of such request, the Company has filed and has had declared effective by the
Commission a Registration Statement with respect to an underwritten offering
under this Section 1.1 or has filed and has had declared effective by the
Commission another Registration Statement with respect to an underwritten
offering to which the Piggyback Registration rights set forth in Article II
hereof apply and such Initial Investor had an opportunity to include all the
shares requested to be included in such Registration Statements; and provided
further that the Company shall not be required to effect any Demand Registration
requested by an Initial Investor if such Investor may sell all of the
1
Registrable Securities requested to be included in such Demand Registration
without registration under the Securities Act, pursuant to the exemption
provided by (i) Rule 144(k) under the Securities Act, as such rule may be
amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the Commission.] The rights of an Initial Investor pursuant to this
Section 1.1 shall be assignable in accordance with the provisions of Section
9.9.
1.2 Number of Demand Registrations; Expenses . Subject to
Sections 1.1 and 1.3 hereof, each of the Initial Investors shall be entitled to
(i), from and after the one year anniversary of the date hereof, one Demand
Registration and (ii), from and after the date on which such Initial Investor's
Warrants become fully exercisable, one additional Demand Registration, with no
more than one of such Demand Registrations being a Long-Form Registration;
provided, however, that the Company need not effect any requested Demand
Registration unless the expected proceeds of such registration exceed
$20,000,000. The Company will pay all Registration Expenses in connection with
any Demand Registration.
1.3 Effective Registration Statement . A registration
requested pursuant to Section 1.1 of this Agreement shall not be deemed to have
been effected (i) unless a Registration Statement with respect thereto has been
declared effective by the Commission, (ii) if after it has become effective,
such registration is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or court for
any reason, and, as a result thereof, the Registrable Securities covered thereby
have not been sold or (iii) the Registration Statement does not remain effective
for a period of at least 180 days beyond the effective date thereof or, with
respect to an underwritten offering of Registrable Securities, until 45 days
after the commencement of the distribution by the holders of the Registrable
Securities included in such Registration Statement. If a registration requested
pursuant to this Article I is deemed not to have been effected as provided in
this Section 1.3, then the Company shall continue to be obligated to effect the
number of Demand Registrations set forth in Section 1.2 without giving effect to
such requested registration. The Initial Investors of the Registrable Securities
shall be permitted to withdraw all or any part of the Registrable Securities
from a Demand Registration at any time prior to the effective date of such
Demand Registration; provided that in the event of, and concurrently with such
withdrawal, the Initial Investors responsible for such Demand Registration shall
either (x) pay or reimburse the Company for all fees and expenses (including
counsel fees and expenses) incurred by them and the Company prior to such
withdrawal or (y) agree to forfeit one of its Demand Registration rights
hereunder.
1.4 Priority on Demand Registrations . If the Company
includes in any underwritten Demand Registration any securities which are not
Registrable Securities and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and other
shares of Common Stock proposed to be included exceeds the number of Registrable
Securities and other securities which can be sold in such offering, the Company
will include in such registration (i) first, the number of Registrable
Securities requested to be included which, in the opinion of such underwriters,
can be sold, by the Investor initiating the Demand Registration, (ii) second,
that number of other shares of Common Stock proposed to be included in such
registration equally between Cantor Xxxxxxxxxx Securities and its Affiliates,
and their successors and assigns on the one hand (the "Priority Piggyback
Registration Holders"), and any other Investors exercising their Piggyback
Registration rights on the one
2
hand and (iii) third, that number of other shares of Common Stock proposed to be
included in such registration, pro rata among any other holders exercising their
respective piggyback registration rights thereof based upon the total number of
shares which such holders propose to include in such registration.
1.5 Selection of Underwriter. If the Investor exercising
its right to a Demand Registration so elects, the offering of such Registrable
Securities pursuant to such Demand Registration shall be in the form of an
underwritten offering. The Company shall select one or more nationally
recognized firms of investment bankers to act as the lead managing Underwriter
or Underwriters in connection with such offering and shall select any additional
investment bankers and managers to be used in connection with the offering.
1.6 Limitations, Conditions and Qualifications to
Obligations for a Demand Registration. The Company shall be entitled to
postpone, for a reasonable period of time (but not exceeding 90 days), the
filing of any registration statement otherwise required to be prepared and filed
by it pursuant to Section 1.1 if the Company determines, in its good faith
judgment, that such registration and offering would interfere with any material
financing, acquisition, corporate reorganization or other material transaction
involving the Company or any of its Affiliates and promptly gives the holders of
Registrable Securities requesting registration thereof pursuant to Section 1.1
written notice of such determination, containing an approximation of the
anticipated delay. If the Company shall so postpone the filing of a registration
statement, holders of Registrable Securities requesting the Demand Registration
pursuant to Section 1.1 shall have the right to withdraw the request for
registration by giving written notice to the Company within 30 days after
receipt of the notice of postponement and, in the event of such withdrawal, such
request shall not be counted for purposes of the requests for registration to
which holders of Registrable Securities are entitled pursuant to Section 1.1
hereof.
ARTICLE II
PIGGYBACK REGISTRATIONS
2.1 Right to Piggyback . From and after the date which is
12 months from the date of this Agreement, whenever the Company proposes to
register any of its equity securities under the Securities Act (other than a
registration effected in connection with a Company stock option or other
employee benefit plan (such as a Registration Statement on Form S-8), a
registration effected in connection with the conversion of debt securities, a
registration on any form that does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of Registrable Securities (such as a Registration Statement on
Form S-4), or a registration effected in connection with an acquisition), and
the form of registration statement to be used may be used for the registration
of Registrable Securities (a "Piggyback Registration"), the Company will give
notice (the "Notice") to all Investors of its intention to effect such a
registration and will include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein, subject to the provisions of Section 2.3 and 2.4 hereof. Such requests
for inclusion shall be in writing and delivered to the Company within 20 days
after the Investor's receipt of the Notice and shall specify the number of
Registrable Securities intended to be
3
disposed of and the intended method of distribution thereof. Any holder shall
have the right to withdraw its request for inclusion of its Registrable
Securities in any Registration Statement pursuant to this Section 2.1 by giving
written notice to the Company of its request to withdraw. The Company may
withdraw a Piggyback Registration at any time prior to the time it becomes
effective. The Company is not required to include in a registration any
Registrable Securities which the holder is not then entitled to offer to sell
whether by contractual restriction or by law.
2.2 PiggybackExpenses. The Registration Expenses of
the Investors will be paid by the Company in all Piggyback Registrations
2.3 Priority on Primary Registrations . If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in such offering, the Company will include in such
registration (i) first, the securities the Company proposes to sell, (ii)
second, that number of other shares of Common Stock proposed to be included in
such registration by the Priority Piggyback Registration Holders and (iii)
third, that number of other shares of Common Stock proposed to be included in
such registration, pro rata among any other holders (including the Investors)
exercising their respective piggyback registration rights thereof based upon the
total number of shares which such holders (including the Investors) propose to
include in such registration.
2.4 Priority on Secondary Registrations . If a Piggyback
Registration is an underwritten secondary registration on behalf of holders
(other than the Investors) of the Company's securities, and the managing
underwriters advise the Company that in their opinion the number of securities
requested to be included in such registration exceeds the number which can be
sold in such offering, the Company will include in such registration (i) first,
the number of shares of Common Stock requested to be included by the holders
exercising their demand registration rights, and (ii) second, that number of
other shares of Common Stock proposed to be included in such registration, pro
rata among any other holders (including the Investors) exercising their
respective piggyback registration rights thereof based upon the total number of
shares which such holders (including the Investors) propose to include in such
registration.
ARTICLE III
HOLDBACK AGREEMENTS
In the event the Company or another holder of the Company's
stock proposes to enter into an underwritten public offering, each holder of
Registrable Securities agrees to enter into an agreement with the managing
underwriters not to effect any sale or distribution of equity securities of the
Company, or any securities convertible, exchangeable or exercisable for or into
such securities, during the period beginning on the date of such offering and
extending for up to 90 days; provided that such holders shall not be so
obligated unless the Company and each of its Affiliates enter into the same or
comparable lock-up agreement for the same period and further shall not be so
obligated if such holder then owns less than 2% of the outstanding Class A
Common Stock.
4
ARTICLE IV
REGISTRATION PROCEDURES
Whenever holders of Registrable Securities have requested that
any Registrable Securities be registered pursuant to this Agreement (the
"Selling Holders"), the Company will use reasonable efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company will:
(a) use reasonable efforts to prepare and file with the
Commission a Registration Statement with respect to such Registrable Securities
as soon as practicably thereafter and, in the case of a Demand Registration
within 60 days (subject to a postponement pursuant to Section 1.6) of the
request for a Demand Registration and use all reasonable efforts to cause such
Registration Statement to become and remain effective until the completion of
the distribution contemplated thereby; provided, that as promptly as practicable
before filing a Registration Statement or Prospectus or any amendments or
supplements thereto, the Company will (i) furnish to the Selling Holders copies
of all such documents proposed to be filed and (ii) notify each Selling Holder
of Registrable Securities covered by such Registration Statement of (x) any
request by the Commission to amend such Registration Statement or amend or
supplement any Prospectus, or (y) any stop order issued or threatened by the
Commission, and take all reasonable actions required to prevent the entry of
such stop order or to promptly remove it if entered; and provided further that
the Company shall not be required to keep such Registration Statement effective
for more than (i) 45 days in the case of a Piggyback Registration or a Demand
Registration with respect to an underwritten offering or (ii) 180 days in the
case of a Demand Registration (or such shorter period which will terminate when
all Registrable Securities covered by such Registration Statement have been
sold, but not prior to the expiration of the applicable period referred to in
Section 4(3) of the Securities Act and Rule 174 thereunder, if applicable);
(b) (i) prepare and file with the Commission such
amendments and supplements to such Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective for as long as such registration is required to remain
effective pursuant to the terms hereof and (ii) comply with the provisions of
the Securities Act with respect to the disposition of all securities covered by
such Registration Statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such Registration
Statement;
(c) furnish to each Selling Holder, without charge, such
number of conformed copies of such Registration Statement, each amendment and
supplement thereto, the Prospectus included in such Registration Statement
(including each preliminary Prospectus) and such other documents as such seller
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Selling Holder;
(d) use all reasonable efforts to register or qualify
such Registrable Securities under such other securities or "blue sky" laws of
such jurisdictions in the United States in which
5
a registration or qualification is required as any Selling Holder thereof shall
reasonably request, to keep such registration or qualification in effect for so
long as such Registration Statement remains in effect and do any and all other
acts and things which may be reasonably necessary or advisable to enable such
Selling Holder to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such Selling Holder; provided, however, that the
Company will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
clause (d), (ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction;
(e) notify each Selling Holder, at a time when a
Prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event known to the Company as a result of which the
Prospectus included in such Registration Statement, as then in effect, contains
an untrue statement of a material fact or omits to state any fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and, at the request of
any such Selling Holder, the Company will prepare and furnish such Selling
Holder a reasonable number of copies of a supplement to or an amendment of such
Prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such Prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(f) make available for inspection by any Selling Holder,
any underwriter participating in any disposition pursuant to such Registration
Statement and any attorney, accountant or other agent retained by any such
Selling Holder or underwriter, all applicable, non-confidential due diligence
documents of the Company which are requested, and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such Registration Statement to enable them to conduct a
reasonable investigation within the meaning of the Securities Act, including a
customary accountant's "comfort" letter and opinion of counsel to the Company;
(g) subject to other provisions hereof, use all
reasonable efforts to cause such Registrable Securities covered by such
Registration Statement to be registered with or approved by such other
governmental agencies or authorities or self-regulatory organizations as may be
necessary to enable the Selling Holders thereof to consummate the disposition of
such Registrable Securities;
(h) promptly notify the Selling Holders of the issuance
of any stop order by the Commission or the issuance by any state securities
commission or other regulatory authority of any order suspending the
qualification or exemption from qualification of any of the Registrable
Securities under state securities or "blue sky" laws, and use every reasonable
effort to obtain the lifting at the earliest possible time of any stop order
suspending the effectiveness of any Registration Statement or of any order
preventing or suspending the use of any preliminary Prospectus; and
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(i) promptly notify the Selling Holders of the occurrence
of any pending material merger, acquisition, corporate reorganization or other
material transaction involving the Company or any of its Affiliates which makes
it imprudent for the Company to be in registration, as determined in the good
faith judgment of the Company (a "Black-Out Period"). The Company shall not
impose Black-Out Periods that, either individually or in the aggregate, exceed
90 days during any fiscal year of the Company.
The Company may require each Selling Holder to promptly
furnish in writing to the Company such information regarding the distribution of
the Registrable Securities as the Company may from time to time reasonably
request and such other information as may be legally required in connection with
such registration including, without limitation, all such information as may be
requested by the Commission or any regulatory authority. The Company may exclude
from such Registration Statement any holder who fails to provide such
information.
Each Selling Holder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
paragraph (a), (e), (h) or (i) above, such Selling Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the Registration
Statement covering such Registrable Securities until such Selling Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
paragraph (a) or (e) above, or in the case of a Black-Out Period until the
Company notifies the Selling Holders that the period has ended, and, if so
directed by the Company, such Selling Holder will deliver to the Company all
copies, other than permanent file copies then in such Selling Holder's
possession, of the most recent prospectus covering such Registrable Securities
at the time of receipt of such notice. The periods referred to in paragraph (a)
above for maintaining the effectiveness of the Registration Statement shall be
extended for a period equal to the period during which the disposition of the
Registrable Securities is discontinued as set forth in the immediately preceding
sentence.
ARTICLE V
REGISTRATION EXPENSES
5.1 Registration Expenses . All registration and filing
fees, fees and expenses of compliance with securities or "blue sky" laws,
printing expenses, listing fees for securities to be registered on a national
securities exchange or The Nasdaq Stock Market and all independent certified
public accountants, underwriters (excluding discounts and commissions), fees and
expenses of counsel to the Company and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses") will be borne by
the Company as provided in Sections 1.2 and 2.2 of this Agreement, but subject
to the provisions of Section 1.3 of this Agreement.
5.2 Holders' Expenses . The Company shall have no
obligation to pay (i) any underwriting discounts or commissions attributable to
the sale, or potential sale, of Registrable Securities, which expenses will be
borne by all Selling Holders of Registrable Securities included in such
registration; and (ii) any fees or expenses of counsel or others retained by the
Selling Holders in connection with the sale, or potential sale, of Registrable
Securities.
7
ARTICLE VI
UNDERWRITTEN AND OTHER OFFERINGS
6.1 Underwriting Agreement . If requested by the
underwriters for any underwritten offering involving the Registrable Securities,
the Company will enter into an underwriting agreement with such underwriters for
such offering, such agreement to be reasonably satisfactory to the Company and
to contain such representations and warranties by the Company and such other
terms as are generally included in agreements of this type, including, without
limitation, indemnities customarily included in such agreements. The holders of
the Registrable Securities will cooperate in good faith with the Company in the
negotiation of the underwriting agreement.
6.2 Obligations of Participants . No Person may
participate in any underwritten registration hereunder unless such Person (i)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements, escrow agreements and
other documents required under the terms of such underwriting arrangements and
consistent with the provisions of this Agreement. In addition, the Company may
require each Selling Holder to promptly furnish in writing to the Company such
information regarding the distribution of the Registrable Securities as the
Company may from time to time reasonably request and such other information as
may be legally required in connection with such registration including, without
limitation, all such information as may be requested by the Commission or the
NASD. The Company may exclude from such Registration Statement any Holder who
fails to provide such information.
ARTICLE VII
INDEMNIFICATION
7.1 Company's Indemnification Obligations . The Company
agrees to indemnify and hold harmless each of the holders of any Registrable
Securities covered by any Registration Statement referred to herein and each
other Person, if any, who controls such holder within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act (collectively, the
"Holder Indemnitees"), as follows:
(i) against any and all loss, liability, claim,
damage or reasonable expense arising out of or based upon an untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment or supplement thereto), including all documents
incorporated therein by reference, or in any preliminary Prospectus or
Prospectus (or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading;
8
(ii) against any and all loss, liability, claim,
damage and reasonable expense to the extent of the aggregate amount paid in
settlement of any litigation, investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim based upon any such
untrue statement or omission or any such alleged untrue statement or omission,
if such settlement is effected with the prior written consent of the Company;
and
(iii) against any and all reasonable expense incurred
by them in connection with investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim based upon any such untrue statement or
omission or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under clause (i) or (ii) above;
provided, that this indemnity does not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with information furnished to the Company by or on behalf of any
holder expressly for use in the preparation of any Registration Statement (or
any amendment or supplement thereto), including all documents incorporated
therein by reference, or in any preliminary Prospectus or Prospectus (or any
amendment or supplement thereto); provided further, that (other than in
connection with an underwritten offering) the Company will not be liable to any
holder or any other Holder Indemnitee under the indemnity agreement in this
Section 7.1 with respect to any preliminary Prospectus or the final Prospectus
or the final Prospectus as amended or supplemented, as the case may be, to the
extent that any such loss, liability, claim, damage or expense of such Holder
Indemnitee results from the fact that such holder sold Registrable Securities to
a Person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the final Prospectus or of the final
Prospectus as then amended or supplemented, whichever is most recent, if the
Company has previously and timely furnished copies thereof to such holder; and
provided further, that the Company will not be liable to any holder or any other
Holder Indemnitee under the indemnity agreement in this Section 7.1 to the
extent that any such loss, liability, claim or expense arises out of or is based
upon an untrue statement or omission in any Prospectus, even if an amended and
corrected Prospectus is not furnished to such holder, but only to the extent
that the holder, after being notified by the Company pursuant to paragraph (e)
of Article III hereof, continues to use such Prospectus and in such case and to
the extent of, and with respect to, damages which arise after the holder
receives such notice.
7.2 Holder's Indemnification Obligations . In connection
with any Registration Statement in which a holder of Registrable Securities is
participating, each such holder agrees to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 7.1 of this
Agreement) the Company and each Person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act with respect to any statement or alleged statement in or omission or alleged
omission from such Registration Statement, any preliminary, final or summary
Prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made about
such holder in reliance upon and in conformity with information furnished to the
Company by or on behalf of such holder expressly for inclusion in
9
such Registration Statement. The obligations of each holder pursuant to this
Section 7.2 are to be several and not joint; provided that, with respect to each
claim pursuant to this Section 7.2, each such holder's maximum liability under
this Section shall be limited to an amount equal to the net proceeds received by
such holder (after deducting any underwriting discount) from the sale of
Registrable Securities being sold pursuant to such Registration Statement or
Prospectus by such holder.
7.3 Notices; Defense; Settlement . Promptly after receipt
by an indemnified party hereunder of written notice of the commencement of any
action or proceeding involving a claim referred to in Section 7.1 or Section 7.2
of this Agreement, such indemnified party will, if a claim in respect thereof is
to be made against an indemnifying party, give written notice to the latter of
the commencement of such action; provided, that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying party
of its obligations under Section 7.1 or Section 7.2 of this Agreement except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified,
to the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof, unless in the reasonable opinion of counsel to such indemnified
party a conflict of interest between such indemnified and indemnifying parties
may exist in respect of such claim, in which case the indemnifying party shall
not be liable for the fees and expenses of (i) more than one counsel for all the
Selling Holders, selected by a majority of the Selling Holders or (ii) more than
one counsel for the Company in connection with any one action or separate but
similar or related actions, as applicable. An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable opinion of counsel to any indemnified party a conflict of interest
may exist between such indemnified party and any other of such indemnified
parties with respect to such claim, in which event the indemnifying party shall
be obligated to pay the fees and expenses of such additional counsel or
counsels. The indemnifying party will not, without the prior written consent of
each indemnified party, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not such
indemnified party or any Person who controls such indemnified party is a party
to such claim, action, suit or proceeding), unless such settlement, compromise
or consent includes an unconditional release of such indemnified party from all
liability arising out of such claim, action, suit or proceeding. Notwithstanding
anything to the contrary set forth herein, and without limiting any of the
rights set forth above, in any event any party will have the right to retain, at
its own expense, counsel with respect to the defense of a claim.
7.4 Indemnity Provision . The Company and each holder of
Registrable Securities requesting registration shall provide for the foregoing
indemnity (with appropriate modifications) in any underwriting agreement with
respect to any required registration or other
10
qualification of securities under any Federal or state law or regulation of any
governmental authority.
ARTICLE VIII
DEFINITIONS
8.1 Terms . As used in this Agreement, the following
defined terms shall have the meanings set forth below:
"Affiliate" means, with respect to any specified party, any other
individual, partnership, corporation or other organization, whether incorporated
or unincorporated, who, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such specified party. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a party, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative of the foregoing.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of New York are authorized or obligated to
close.
"Class A Common Stock" means the Class A Common Stock, par value $.01
per share, of the Company and any securities into which the Class A Common Stock
shall have been changed or any securities resulting from any reclassification or
recapitalization of the Class A Common Stock.
"Commission" means the U.S. Securities and Exchange Commission.
"Common Stock" means the shares of Common Stock, regardless of
designation, of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar Federal statute then in effect, and any reference to a particular
section thereof shall include a reference to the equivalent section, if any, of
any such similar Federal statute, and the rules and regulations thereunder.
"NASD" means the National Association of Securities Dealers, Inc.
"Person" means any individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Prospectus" means the Prospectus included in any Registration
Statement (including without limitation, a Prospectus that disclosed information
previously omitted from a Prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any Prospectus supplement, with
11
respect to the terms of the offering of any portion of the securities covered by
such Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"Registrable Securities" means (i) the Shares, (ii) the Class A Common
Stock issued or issuable at any time upon the exercise of the Warrants, and
(iii) any securities issued or received in respect of, or in exchange or in
substitution for any of the foregoing. Registrable Securities will continue to
maintain their status as Registrable Securities in the hands of a transferee
from an Investor of a majority of the Registrable Securities held by such
Investor provided such transferee executes a joinder agreement described by
Section 9.9. After the transfer (in one or more transactions) of a majority of
the Registrable Securities held by an Investor, any remaining Registrable
Securities held by such Investor shall cease to be Registrable Securities. As to
any particular Registrable Securities, such securities will cease to be
Registrable Securities when they (w) have been effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, (x) may be sold pursuant to Rule 144 under the Securities Act
without volume or manner of sale limitation (or any similar provisions then in
force), (y) have been otherwise transferred and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend and not subject to any stop order and such securities may be
publicly resold by the Person receiving such certificate without complying with
the registration requirements of the Securities Act, or (z) have ceased to be
outstanding
"Registration Statement" means any Registration Statement of the
Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective amendments,
all exhibits and all material incorporated by reference in such Registration
Statement.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute then in effect, and any reference to a particular
section thereof shall include a reference to a comparable section, if any, of
any such similar Federal statute, and the rules and regulations thereunder.
8.2 Defined Terms in Corresponding Sections . The
following defined terms, when used in this Agreement, shall have the meaning
ascribed to them in the corresponding Sections of this Agreement listed below:
"Agreement" -- Preamble
"Company" -- Preamble
"Demand Registration" -- Section 1.1
"Holder Indemnitees" - Section 7.1
"Initial Investors" -- Preamble
12
"Investors" -- Preamble
"Long-Form Registration" -- Section 1.1
"Notice" -- Section 2.1
"Other Holders" -- Section 1.1
"Piggyback Registration" -- Section 2.1
"Priority Piggyback Registration Holders" -- Section 1.4
"Registration Expenses" -- Section 5.1
"Selling Holder" -- Article IV
"Shares" -- Recitals
"Short-Form Registration" -- Section 1.1
"Warrants" -- Recitals
ARTICLE IX
MISCELLANEOUS
9.1 Amendments and Waivers . Except as otherwise provided
herein, no modification, amendment or waiver of any provision of this Agreement
will be effective against the Company or any holder of Registrable Securities,
unless such modification, amendment or waiver is approved in writing by the
Company and the Investors representing a majority of the Registrable Securities
then outstanding. The failure of any party to enforce any of the provisions of
this Agreement will in no way be construed as a waiver of such provisions and
will not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
9.2 Successors and Assigns . All covenants and agreements
in this Agreement by or on behalf of any of the parties hereto will bind and
inure to the benefit of the respective successors and assigns of the parties
hereto whether so expressed or not.
9.3 Notices . All notices, requests and other
communications hereunder must be in writing and will be deemed to have been duly
given only if delivered personally against written receipt or by facsimile
transmission or mailed by pre-paid registered or certified mail, return receipt
requested or mailed by overnight courier prepaid to the parties at the following
addresses or facsimile numbers:
If to the Company, to:
eSpeed, Inc.
One World Trade Center
000xx Xxxxx
00
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn.: General Counsel
with a copy to:
Xxxxxxx Berlin Shereff Xxxxxxxx, LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn.: General Counsel
If to any Investor, to the address set forth on the signature
page hereto.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 9.3, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section 9.3, be deemed given upon receipt of confirmation,
(iii) if delivered by mail in the manner described above to the address as
provided in this Section 9.3, be deemed given on the earlier of the third full
Business Day following the day of mailing or upon receipt, and (iv) if delivered
by overnight courier to the address provided in this Section 9.3, be deemed
given on the earlier of the first Business Day following the date sent by such
overnight courier or upon receipt. Any party from time to time may change its
address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other parties hereto.
9.4 Headings . The headings used in this Agreement have
been inserted for convenience of reference only and do not define or limit the
provisions hereof.
9.5 Gender . Whenever the pronouns "he" or "his" are used
herein they shall also be deemed to mean "she" or "hers" or "it" or "its"
whenever applicable. Words in the singular shall be read and construed as though
in the plural and words in the plural shall be construed as though in the
singular in all cases where they would so apply.
9.6 Invalid Provisions . If any provision of this
Agreement is held to be illegal, invalid or unenforceable under any present or
future law, and if the rights or obligations of any party hereto under this
Agreement will not be materially and adversely affected thereby, (i) such
provision will be fully severable, (ii) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (iii) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom and (iv) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible.
14
9.7 Governing Law; Forum; Process . This Agreement shall
be governed by and construed in accordance with the internal laws of the State
of New York, without giving effect to principles of conflicts of law. Each of
the parties hereto hereby irrevocably and unconditionally submits to the
exclusive jurisdiction of any court of the State of Delaware or any federal
court sitting in the State of Delaware for purposes of any suit, action or other
proceeding arising out of this Agreement (and agrees not to commence any action,
suit or proceedings relating hereto except in such courts). Each of the parties
hereto agrees that service of any process, summons, notice or document by U.S.
registered mail at its address set forth herein shall be effective service of
process for any action, suit or proceeding brought against it in any such court.
Each of the parties hereto hereby irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement, which is brought by or against it, in the courts of the State
of Delaware or any federal court sitting in the State of Delaware and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
9.8 Counterparts . This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
9.9 Additional Investors . Any transferee of a majority
of Registrable Securities held by an Investor shall be entitled to the benefits
of this Agreement, upon execution by such transferee of a joinder agreement in
form reasonably satisfactory to the Company stating that such transferee agrees
to be bound by the terms hereof as an "Investor". An Investor shall no longer be
entitled to the benefits of this Agreement upon its transfer (in one or more
transactions) of a majority of the Registrable Securities held by such Investor.
ARTICLE X
RULE 144 REPORTING
The Company hereby agrees as follows:
(a) The Company shall use its reasonable efforts to make
and keep public information available, as those terms are understood and defined
in Rule 144 under the Securities Act.
(b) The Company shall use its reasonable efforts to file
with the Commission in a timely manner all reports and other documents as the
Commission may prescribe under Section 13(a) or 15(d) of the Exchange Act at any
time while the Company is subject to such reporting requirements of the Exchange
Act.
(c) The Company shall furnish to each holder of
Registrable Securities forthwith upon a reasonable request a written statement
by the Company as to its compliance with the reporting requirements of Rule 144
and of the Securities Act and the Exchange Act.
15
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
COMPANY:
eSPEED, INC.
By:_______________________________
Name:
Title:
INITIAL INVESTORS:
THE XXXXXXXX COMPANIES, INC.
By:_______________________________
Name:
Title:
Address: Xxx Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
DYNEGY, INC.
By:_______________________________
Name:
Title:
Address: 0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
16
