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EXHIBIT 10.2
REVENUE SHARING AGREEMENT
This Revenue Sharing Agreement ("this Agreement") is entered into as of
the 31st day of December, 1996, by and between OptiMark Technologies, Inc., a
Delaware corporation (the "Company"), and the Chicago Board Options Exchange,
Incorporated, a Delaware non-stock corporation ("CBOE").
1. DEFINITIONS. For purposes of this Agreement, in addition to terms
defined elsewhere herein, the following terms shall have the indicated meanings:
(a) "Equity Options Commencement Date" means the first day on which the
Exchange has made OptiMark-Securities Available with respect to equity options
classes representing at least eighty percent (80%) of the average daily contract
volume of all equity options classes, excluding FLEX equity options from the
calculation, measured over the then most recent six complete calendar months.
(b) "Exchange" means the registered national securities exchange
operated by CBOE.
(c) "Flex Options Commencement Date" means the first day on which the
Exchange has made OptiMark-Securities Available with respect to FLEX options
classes representing at least eighty percent (80%) of the average daily contract
volume of all FLEX options classes, measured over the then most recent six
complete calendar months.
(d) "Gross Revenues" of the Company means the gross revenues of the
Company (including, for this purpose, the Company's allocable share of the gross
revenues of any consolidated or majority-owned subsidiaries and any other
controlled entities) from all sources, determined in accordance with generally
accepted accounting principles consistently applied.
(e) "Index Options Commencement Date" means the first day on which the
Exchange has made OptiMark-Securities Available with respect to index options
classes representing at least eighty percent (80%) of the average daily contract
volume of all index options classes, excluding FLEX index options from the
calculation, measured over the then most recent six complete calendar months.
(f) "Made Available", "Making Available" and like terms, as applied to
OptiMark-Securities and the Exchange, means that the necessary communication
links between OptiMark-Securities and the relevant systems of the Exchange have
been established such that persons wishing to utilize OptiMark-Securities as a
facility of the Exchange may do so.
(g) "OptiMark-Securities" means the market structuring technology and
related software which is generally described in Exhibit A hereto, including all
derivatives, releases and subsequent versions of such technology and software,
regardless of platform or operating media.
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(h) "Warrant" means the Common Stock Purchase Warrant of even date
issued by the Company in favor of CBOE.
(i) "Warrant Expiration Date" shall have the meaning provided in the
Warrant.
2. ESTABLISHMENT, CREDITS AND DEBITS TO REVENUE ACCRUAL ACCOUNT. The
Company hereby establishes an internal account called the "CBOE Revenue Accrual
Account". The initial balance in the CBOE Revenue Accrual Account shall be zero.
At the end of each complete calendar month from and after the date of this
Agreement through December 31, 2005, the CBOE Revenue Accrual Account shall be
credited with (increased by) one and one-half percent (1.5%) of all Gross
Revenues of the Company for that month, up to an aggregate maximum amount of
credits equal to Two Million Two Hundred Fifty Thousand Dollars (US $2,250,000).
All payments from the CBOE Revenue Accrual Account under Section 3 below shall
be debited (subtracted) from the CBOE Revenue Accrual Account. The CBOE Revenue
Accrual Account shall not bear interest.
3. DISTRIBUTIONS.
(a) Amount.
(i) Promptly following the end of the calendar quarter during
which occurs the Equity Options Commencement Date (if any), the Company shall
pay to CBOE the lesser of (A) an amount equal to the balance in the CBOE Revenue
Accrual Account as of the end of such quarter, or (B) $900,000. If the payment
to CBOE under the foregoing sentence is less than $900,000, the Company shall
continue to make payments to CBOE promptly following the end of each complete
calendar quarter thereafter, in an amount equal to the balance of the CBOE
Revenue Accrual Account as of the end of such quarter , until the earliest to
occur of (I) the Warrant Expiration Date, (II) the date on which all payments to
CBOE under this paragraph (i) have totaled $900,000, or (III) the date (if any)
on which CBOE unilaterally and permanently withdraws OptiMark-Securities from
Availability through the Exchange with respect to twenty percent (20%) or more
of the average daily contract volume of all equity options classes, excluding
FLEX equity options from the calculation, measured over the then most recent six
complete calendar months.
(ii) Promptly following the end of the calendar quarter during
which occurs the Index Options Commencement Date (if any), the Company shall pay
to CBOE the lesser of (A) an amount equal to the balance in the CBOE Revenue
Accrual Account as of the end of such quarter, or (B) $900,000. If the payment
to CBOE under the foregoing sentence is less than $900,000, the Company shall
continue to make payments to CBOE promptly following the end of each complete
calendar quarter thereafter, in an amount equal to the balance of the CBOE
Revenue Accrual Account as of the end of such quarter, until the earliest to
occur of (I) the Warrant Expiration Date, (II) the date on which all payments to
CBOE under this paragraph (ii) have totaled $900,000, or (III) the
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date (if any) on which CBOE unilaterally and permanently withdraws
OptiMark-Securities from Availability through the Exchange with respect to
twenty percent (20%) or more of the average daily contract volume of all FLEX
options classes, measured over the then most recent six complete calendar
months.
(iii) Promptly following the end of the calendar quarter
during which occurs the Flex Options Commencement Date (if any), the Company
shall pay to CBOE the lesser of (A) an amount equal to the balance in the CBOE
Revenue Accrual Account as of the end of such quarter, or (B) $450,000. If the
payment to CBOE under the foregoing sentence is less than $450,000, the Company
shall continue to make payments to CBOE promptly following the end of each
complete calendar quarter thereafter, in an amount equal to the balance of the
CBOE Revenue Accrual Account as of the end of such quarter, until the earliest
to occur of (I) the Warrant Expiration Date, (II) the date on which all payments
to CBOE under this paragraph (iii) have totaled $450,000, or (III) the date (if
any) on which CBOE unilaterally and permanently withdraws OptiMark-Securities
from Availability through the Exchange with respect to twenty percent (20%) or
more of the average daily contract volume of all index options classes,
excluding FLEX index options from the calculation, measured over the then most
recent six complete calendar months.
(b) Allocation. In the event that, at the time the Company is required
to make a payment to CBOE under paragraph 3(a) above, CBOE is eligible to
receive payments under more than one sub-paragraph of paragraph 3(a), to the
extent possible the payment shall be allocated equally among all two or three
eligible categories in respect of which OptiMark-Securities has been made
Available, up to the respective cap amount for each such category.
4. REVENUE STATEMENT. Within twenty (20) days following request by CBOE
from time to time, the Company shall deliver to CBOE a written statement,
certified by the Chief Financial Officer of the Company to be accurate and
complete, attesting to: (i) the total Gross Revenues of the Company from and
after the date of this Agreement through and including the end of the most
recent calendar month, and (ii) the then-current balance in the CBOE Revenue
Accrual Account, if any (a "Revenue Statement"). The Company shall maintain, at
its executive offices, books of account concerning Gross Revenues and credits
and debits to the CBOE Revenue Accrual Account under this Agreement. Such books
of account shall be maintained in accordance with generally accepted accounting
principles consistently applied and shall be consistent with the general ledger
of the Company. CBOE, or a certified public accountant on CBOE's behalf may, at
CBOE's sole expense, examine such books of account solely for the purpose of
verifying the accuracy thereof. Such examination may take place during normal
business hours, upon reasonable advance written notice, and not more than twice
per year; provided, however, that if any such examination of the Company's books
of account reveals a discrepancy to CBOE's detriment of more than five percent
(5%) in the CBOE Revenue Accrual Account, then (x) the Company shall pay or
reimburse CBOE for the auditing expenses incurred in connection with such
examination, and (y) CBOE shall be entitled thereafter
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to examine the Company's books of account for such purpose at any time and the
Company shall pay the costs of each such examination.
5. DISCLAIMER. The Company acknowledges that, notwithstanding any
implication in this Agreement to the contrary, CBOE shall have the unilateral
right at any and all times to temporarily or permanently cease to make
OptiMark-Securities Available through the Exchange with respect to any class, or
all classes, of options upon notice to the Company.
6. TERMINATION. This Agreement and the Company's obligation to make
payments hereunder shall terminate upon the first to occur of (i) the date on
which the maximum amounts required to be paid under all sub-paragraphs of
paragraph 3(a) above have been paid out, (ii) the date on which CBOE permanently
ceases to make OptiMark-Securities Available through the Exchange with respect
to all options traded on the Exchange (after having first made
OptiMark-Securities Available with respect to any options traded on the
Exchange) or (iii) the Warrant Expiration Date. No further payments shall be
made to CBOE under this Agreement after the termination of this Agreement.
7. MISCELLANEOUS.
(a) Except as provided above to the contrary, each of the parties shall
bear their own costs and expenses in connection with this Agreement.
(b) All notices required or permitted under this Agreement shall be in
writing and given by prepaid Federal Express or other nationally recognized
overnight delivery service as follows (or to any other addresses which either
party subsequently may designate by notice):
i) if to CBOE, to:
Chicago Board Options Exchange, Incorporated
LaSalle at Van Buren
Xxxxxxx, XX 00000
attn: Xxxxxxx Du Four
ii) If to the Company, to:
OptiMark Technologies, Inc.
attn: Xxxxxxx X. Xxxxxx
000 Xxxx Xxxxxx
Xxxxxxx, XX 00000
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with a copy to
Xxxxxx, Xxxxxxx & Xxxxxxxxxx, P.C.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, XX, 00000
attn: Xxxxxx X. Xxxxxxxxxx, Esq.
(c) This Agreement shall not be assignable by either party except in
connection with a merger, consolidation, sale of all or substantially all
assets, or analogous transaction in which a third party succeeds to all or
substantially all of the business and assumes all or substantially all of the
liabilities (including the obligations under this Agreement) of one of the
parties hereto. Any non-permitted assignment shall be void ab initio. This
Agreement shall bind and inure to the benefit of the parties and their
respective successors and permitted assigns.
(d) This Agreement may be executed in several counterparts, all of
which taken together shall constitute a single agreement between the parties.
(e) No delay or omission by either party hereto to exercise any right
or power occurring upon any noncompliance or default by the other party with
respect to any of the terms of this Agreement shall impair any such right or
power or be construed to be a waiver thereof. A waiver by either of the parties
hereto of any of the covenants, conditions, or agreements to be performed by the
other shall not be construed to be a waiver of any succeeding breach thereof or
of any other covenant, condition, or agreement herein contained.
(f) This Agreement, the Warrant and their Exhibits constitute the
entire agreement between the parties with respect to their subject matter, and
all prior negotiations, agreements and letters of intent are superseded and
merged herein. No change, waiver, or discharge hereof shall be valid unless it
is in writing and is executed by the party against whom such change, waiver, or
discharge is sought to be enforced.
(g) In the event any party hereto initiates any legal action or suit in
connection with any dispute concerning the interpretation of this Agreement or
the enforcement of any provision hereof, the prevailing party in such action or
suit shall be entitled to recover all of its costs of action or suit (including
without limitation reasonable attorneys' and expert witness fees) from the other
party.
(h) This Agreement shall for all purposes be construed and enforced in
accordance with, and governed by, the laws of the State of Colorado.
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IN WITNESS WHEREOF, the parties have set their hands and seals as of the
date first set forth above.
CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED
By: /s/ Xxxxx X. Xxxxxxx
Title: Chairman
OPTIMARK TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx,
Chief Executive Officer
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EXHIBIT A
DEFINITION OF OPTIMARK-SECURITIES (fka MJTX)
OptiMark-Securities (the "Service") describes a service to be implemented
and offered by OptiMark Technologies, Inc. or its Affiliates (the "Company").
The Service will incorporate a market mechanism developed and owned by the
Company and with regard to which patents are pending. The market mechanism
features two innovations: 1) an anonymous and non-disclosed representation of
trading desire in terms of a "satisfaction profile", which may be thought of as
a normalized bivariate (extendible to multivariate) utility function in
price/size space; and 2) a means of optimizing the sequential allocation of
trades between buyers and sellers at different prices and sizes based upon a
measure of "mutual satisfaction."
The Service will be accessible via TCP/IP network protocols, and access to
the transaction facility will be via network providers of the users' choice that
might include, for example, Dow Xxxxx Telerate, Bridge or IBM. Users will send
profiles to a computer facility operated by the Company, where they will be
processed using software incorporating the Company's proprietary algorithms. The
Company will also provide application programming interfaces to network
providers.
At the user's site, the Service will include a sophisticated graphical
user interface initially running under Microsoft Windows (3.1 through 95), OS/2
or UNIX to simplify and enhance the customers' ability to define and enter
profiles. At the central site, the Service will include a computer to computer
interface (CTCI) for receiving computer-generated profiles. The Service will
process quotation feeds from third parties, including the real-time feeds
available from the Consolidated Quotation Service ("CQS"), the Options Price
Reporting Authority ("OPRA"), and the National Association of Securities Dealers
Automated Quotation Service ("NASDAQ").
