Exhibit 10.1
CONFIDENTIAL TREATMENT REQUESTED BY OPTIONABLE, INC. OF CERTAIN
PORTIONS OF THIS AGREEMENT IN ACCORDANCE WITH RULE 24B-2
UNDER THE SECURITIES EXCHANGE ACT OF 1934.
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STOCK AND WARRANT PURCHASE AGREEMENT
BY AND AMONG
OPTIONABLE, INC.,
XXXX XXXXXXXXX,
RIDGECREST CAPITAL, INC.,
XXXXXXXX CAPITAL, INC.
AND
NYMEX HOLDINGS, INC.
Dated as of April 10, 2007
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TABLE OF CONTENTS
Page
1. Definitions.........................................................1
2. Sale and Purchase of the Securities.................................5
3. Closing.............................................................5
4. Consideration for the Warrant.......................................5
5. Representations and Warranties of the Purchaser.....................6
5.1 Organization...............................................6
5.2 Authorization; Enforceability..............................6
5.3 No Conflicts...............................................6
5.4 Brokers....................................................6
5.5 Investment Representations and Warranties..................6
5.6 Acquisition for Own Account................................7
5.7 Ability to Protect Its Own Interests and Bear Economic
Risks......................................................7
5.8 Accredited Investor........................................7
5.9 Access to Information......................................7
5.10 General Solicitation.......................................7
5.11 Consents...................................................7
6. Representations and Warranties of the Company and the Founders......7
6.1 Organization...............................................8
6.2 Authorization; Enforceability..............................8
6.3 No Conflicts...............................................8
6.4 Capitalization.............................................9
6.5 Due Issuance and Authorization of Capital Stock............9
6.6 Subsidiaries...............................................9
6.7 Consents..................................................10
6.8 Financial Statements......................................10
6.9 Title to Property and Assets..............................10
6.10 SEC Documents.............................................10
6.11 Intellectual Property.....................................11
6.12 Foreign Corrupt Practices Act.............................13
6.13 Material Contracts........................................13
6.14 Voting and Registration Rights............................14
6.15 Form S-3 Eligibility......................................14
6.16 Issuances Exempt..........................................14
6.17 No Integrated Offering....................................15
6.18 Absence of Certain Developments...........................15
6.19 No Undisclosed Liabilities................................15
6.20 Litigation................................................16
6.21 Compliance with Laws......................................16
6.22 Taxes.....................................................16
6.23 Employee Relations........................................17
6.24 Brokers...................................................19
6.25 Environmental Matters.....................................19
6.26 Related-Party Transactions................................19
6.27 Insurance.................................................20
6.28 Corporate Records.........................................20
6.29 Disclosure................................................20
6.30 No Consents...............................................20
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TABLE OF CONTENTS
(continued)
7. Representations and Warranties of the Founders.....................20
7.1 Organization of the Founders..............................20
7.2 Authorization of the Founders.............................21
7.3 Unencumbered Title, No Conflicts..........................21
7.4 Brokers...................................................21
7.5 Disclosure................................................22
8. Conditions to the Parties' Obligations.............................22
8.1 Conditions to Each Party's Obligations....................22
8.2 Conditions of the Purchaser's Obligations.................22
8.3 Conditions of the Company's and Founders' Obligations.....25
9. Covenants of the Company...........................................27
9.1 Maintain Corporate Rights and Facilities..................27
9.2 Maintain Insurance........................................27
9.3 Notice of Litigation, Disputes and Adverse Changes;
Other Information.........................................27
9.4 Internal Accounting Controls..............................27
9.5 Indemnification of the Board of Directors.................27
9.6 Use of Proceeds...........................................28
9.7 Reservation of Common Stock...............................28
9.8 Investor Rights Agreement.................................28
10. Restrictive Legends................................................28
11. Miscellaneous......................................................29
11.1 Waivers and Amendments....................................29
11.2 Notices...................................................29
11.3 Termination of Agreement..................................31
11.4 Survival of Representations and Warranties................31
11.5 Limitation on Liability...................................31
11.6 No Implied Waivers........................................31
11.7 Successors and Assigns....................................31
11.8 Headings..................................................32
11.9 Governing Law.............................................32
11.10 Expenses..................................................32
11.11 Jurisdiction..............................................32
11.12 Waiver of Jury Trial......................................32
11.13 Counterparts; Effectiveness...............................32
11.14 Entire Agreement..........................................33
11.15 Severability..............................................33
11.16 Commercially Reasonable Efforts...........................33
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LIST OF EXHIBITS
EXHIBIT A List of Founders
EXHIBIT B Form of Non-Competition
EXHIBIT C Form of Registration Rights Agreement
EXHIBIT D Form of Investor Rights Agreement
EXHIBIT E Form of Warrant
EXHIBIT F Form of Waiver
EXHIBIT G Form of Employment Agreement with Xxxxx Xxxxxxx
EXHIBIT H Marketing Consideration
EXHIBIT I Technology Consideration
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STOCK AND WARRANT PURCHASE AGREEMENT
This STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement") is made
and entered into as of the 10th day of April, 2007 by and among Optionable,
Inc., a Delaware corporation (the "Company"), Xxxx Xxxxxxxxx, Xxxxxx X'Xxxxxx,
through Ridgecrest Capital, Inc., a New York corporation ("Ridgecrest") and
Xxxxx Xxxxxxx, through Xxxxxxxx Capital, Inc., a New York corporation
("Xxxxxxxx") (each a "Founder" and, collectively, the "Founders") and NYMEX
Holdings, Inc. (the "Purchaser").
W I T N E S S E T H
WHEREAS, each of the Founders desires to sell to the Purchaser shares
of Common Stock, the Company desires to issue and sell to the Purchaser the
Warrant and the Purchaser desires to purchase from each of the Founders and the
Company, such shares of Common Stock and the Warrant, respectively, all in
accordance with the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants herein contained, the parties hereto
hereby agree as follows:
1. Definitions. Except as otherwise expressly provided herein, all
accounting terms used in this Agreement, whether or not defined in this Section
1, shall be construed in accordance with GAAP. In addition, the following terms
shall have the following meanings:
"Affiliate" of any Person means any other Person which directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such Person. The term "control" (including the
terms "controlling," "controlled by" and "under common control with") as used
with respect to any Person means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" means this Stock and Warrant Purchase Agreement.
"Balance Sheet" has the meaning assigned to it in Section 6.8.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in New York,
New York.
"Certifications" has the meaning assigned to it in Section 6.10 hereof.
"Closing" has the meaning assigned to it in Section 3 hereof.
"Closing Date" has the meaning assigned to it in Section 3 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Company's common stock, par value $0.0001 per
share.
"Company" has the meaning assigned to it in the introductory paragraph
of this Agreement and any successor corporation.
"CFTC" has the meaning assigned to it in Section 6.30.
"DTC" has the meaning assigned to it in Section 6.5.
"Employee Benefit Plans" has the meaning assigned to it in Section 6.23
hereof.
"Encumbrances" has the meaning assigned to it in Section 6.5 hereof.
"Environmental Laws" has the meaning assigned to it in Section 6.25(b)
hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" has the meaning assigned to it in Section 2 hereof.
"Financial Statements" has the meaning assigned to it in Section 6.8
"Founder" has the meaning assigned it in the introductory paragraph of
this Agreement.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"Governmental Approval" means any licenses, permits, certificates,
consents, orders, approvals and other authorizations from governmental
authorities.
"Governmental Entity" means any national, federal, state, municipal,
local, territorial, foreign or other government or any department, commission,
board, bureau, agency, regulatory authority or instrumentality thereof, or any
court, judicial, administrative or arbitral body or public or private tribunal,
or any self-regulatory entity or agency.
"Hazardous Material" has the meaning assigned to it in Section 6.25(b)
hereof.
"Intellectual Property" means Trademarks; patents and industrial
designs (including any continuations, divisionals, continuations-in-part,
renewals, reissues, and applications for any of the foregoing); copyrights
(including any registrations and applications for any of the foregoing); "mask
works" (as defined under 17 USC ss. 901) and any registrations and applications
for "mask works"; Trade Secrets; rights of publicity and privacy relating to the
use of the names, likenesses, voices, signatures and biographical information of
real persons; in each case used in or necessary for the conduct of the Company's
and each Subsidiary's business as currently conducted.
"Investor Rights Agreement" means an Investor Rights Agreement in
substantially the form attached hereto as Exhibit D.
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"Knowledge of the Company" as to a fact or matter means (a) actual
knowledge of a fact or matter by a designated senior officer of the Company and
(b) knowledge that such officer would reasonably be expected to obtain after
making the same inquiry of employees of the Company reporting directly to such
officer that a prudent businessperson would have made in the management and
conduct of his or her own business and affairs in order to obtain a commercially
reasonable understanding of such fact or matter. For this purpose, the
designated senior officers of the Company shall mean Xxxx Xxxxxxxxx, Xxxxx
Xxxxxxx, Xxxxxx X'Xxxxxx and Xxxx Xxxxx Xxxxxxxx.
"License Agreements" has the meaning assigned to it in Section 6.11(b)
hereof.
"Liquidation" means any voluntary or involuntary liquidation,
dissolution, or winding up of the affairs of the Company.
"Material Adverse Change" means any material adverse developments
relating to the business, prospects, assets, operations, properties or
conditions (financial or otherwise) of the Company and its Subsidiaries
considered as a whole, or the Investor and its subsidiaries considered as a
whole, as appropriate.
"Non-Competition Agreement with Xxxxxx X'Xxxxxx" means a
Non-Competition Agreement between the Company and Xxxxxx X'Xxxxxx in
substantially the form attached hereto as Exhibit B.
"Permitted Encumbrance" means (a) Tax liens, workers or unemployment
compensation liens, and mechanic's, materialman's, supplier's, vendor's,
laborer's, employer's or similar liens, in each case arising in the ordinary
course of business and securing amounts that are not yet delinquent or are being
contested in good faith by appropriate proceedings and for which there are
adequate reserves (determined on a basis consistent with GAAP) on the books and
accounts of the Company and Subsidiaries, (b) in the case of owned or leased
real property, imperfections of title and liens which, individually or in the
aggregate, do not materially detract from the value or materially interfere with
the current or planned use of such property and (c) liens disclosed on Schedule
1 hereto.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, incorporated organization,
association, corporation, institution, public benefit corporation, Governmental
Entity or other entity and shall include any successor (by merger or otherwise)
of such entity.
"Xxxxxxxx" has the meaning assigned to it in the introductory paragraph
of this Agreement.
"Preferred Stock" has the meaning assigned to it in Section 6.4(a)
hereof.
"Purchase Price" has the meaning assigned to it in Section 2 hereof.
"Purchased Shares" has the meaning assigned it in Section 2 hereof.
"Purchaser" has the meaning assigned it in the introductory paragraph
of this Agreement.
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"Real Property" has the meaning assigned to it in Section 6.9 hereof.
"Registration Rights Agreement" means a Registration Rights Agreement
in substantially the form attached hereto as Exhibit C.
"Ridgecrest" has the meaning assigned to it in the introductory
paragraph of this Agreement.
"SEC" means the Securities and Exchange Commission, and any successor
agency thereto.
"SEC Documents" has the meaning assigned to it in Section 6.10 hereof.
"Securities" has the meaning assigned to it in Section 2 hereof.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder as shall be in effect from time to
time.
"Software" means any and all (a) computer programs, including any and
all software implementation of algorithms, models and methodologies, whether in
source code or object code form, (b) computerized databases and compilations,
including any and all data and collections of data, and (c) all documentation,
including user manuals and training materials, relating to any of the foregoing.
"Subsidiary" means any corporation, association, trust, limited
liability company, partnership, joint venture or other business association or
entity at least 50% of the outstanding voting securities of which are at the
time owned or controlled directly or indirectly by the Company.
"Tax" or "Taxes" means any federal, state, local or foreign income,
gross receipts, license, payroll, employment, severance, stamp, occupation,
premium, windfall profits, customs duties, franchise, withholding, social
security, unemployment, real property, personal property, sales, use, transfer,
value added, estimated or other tax of any kind whatsoever, including any
interest, penalties or additions thereto.
"Tax Return" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Trade Secrets" means technology, trade secrets and other confidential
information, know-how, inventions, proprietary processes, formulae, algorithms,
models, and methodologies.
"Trademarks" means trademarks, service marks, trade names, internet
domain names, designs, logos, slogans, and general intangibles of like nature,
together with all goodwill, registrations and applications related to the
foregoing.
"Transaction Documents" means this Agreement, the Investor Rights
Agreement, the Warrant, the Waiver and the Registration Rights Agreement.
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"Waiver" means a Waiver by Xxxx Xxxxxxxxx in substantially the form
attached hereto as Exhibit F.
"Warrant" means a warrant, in substantially the form attached hereto as
Exhibit E.
"Warrant Shares" means the shares of Common Stock that may be purchased
upon exercise of the Warrant.
2. Sale and Purchase of the Securities. Upon the terms and subject to
the conditions herein contained, (a) each of the Founders severally agrees, to
sell to the Purchaser, and the Purchaser agrees to purchase from each of the
Founders, at the Closing, that number of shares of Common Stock set forth
opposite such Founder's name on Part I of Exhibit A (collectively, the
"Purchased Shares"), representing 19.0% of the Company's outstanding Common
Stock on a fully diluted basis, excluding shares of Common Stock issuable upon
exercise of the Warrant, for a purchase price of $2.69 per share (the "Purchase
Price") and (b) the Company agrees to sell to the Purchaser and the Purchaser
agrees to purchase from the Company, at the Closing, the Warrant, which is
exercisable from time to time, at a price per share (the "Exercise Price") equal
to $4.30, subject to anti-dilution adjustments as set forth in the Warrant, for
a period of 18 months from the Closing Date and will then expire. The Purchased
Shares are duly authorized, validly issued, fully paid and nonassessable. The
Purchased Shares together with the Warrant are collectively referred to as the
"Securities".
3. Closing The closing of the sale to, and purchase by, the Purchaser
of the Securities (the "Closing") shall occur at the offices of Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP, Four Times Square, New York, New York 10036-6522, on
the third Business Day after the satisfaction or waiver of all of the conditions
set forth in Section 7 hereof or at such other time and place as the Company,
the Founders and the Purchaser may agree (the "Closing Date"). At the Closing,
(i) each Founder shall deliver to the Purchaser one or more certificates
evidencing the Purchased Shares being sold by such Founder accompanied by
appropriate stock powers or other instruments of transfer duly endorsed,
assigning such Purchased Shares to the Purchaser, against delivery to such
Founder of his or her respective portion of the Purchase Price for the Purchased
Shares, as set forth on Exhibit A, payable by wire transfer of immediately
available funds to an account that such Founder will designate in writing to the
Purchaser at least two Business Days prior to the Closing Date, (ii) the Company
shall deliver to the Purchaser the Warrant, and (iii) the Purchaser shall
deliver to each Founder their respective portions of the Purchase Price by wire
of immediately available funds to the accounts that each Founder will designate
in writing to the Purchaser at least two Business Days prior to the Closing
Date.
4. Consideration for the Warrant. As consideration for the Warrant, the
Purchaser will provide the Company with the marketing and technology
consideration described in Exhibit H (Marketing Consideration) and Exhibit I
(Technology Consideration). In addition, the Company agrees to exclusively clear
all OTC products through the Purchaser's NYMEX ClearPort(R) clearing system for
a period of ten years (provided that the Purchaser continues to offer clearance
for a particular product through the NYMEX Clearport(R) clearing system). In
consideration thereof, the Purchaser agrees to pay the Company an incentive fee
as set forth on Exhibit J.
5
5. Representations and Warranties of the Purchaser The Purchaser
represents and warrants to the Company and the Founders as follows:
5.1 Organization. The Purchaser (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, (b) has its principal place of business and chief executive office at
One North End Avenue, World Financial Center, New York, New York, and (c) has
the requisite corporate power and authority to own or lease and operate its
assets and carry on its business as presently being conducted.
5.2 Authorization; Enforceability. The Purchaser has the
requisite corporate power and authority to enter into this Agreement and the
other Transaction Documents to which it is a party. The execution, delivery and
performance by the Purchaser of this Agreement and each of the other Transaction
Documents to which it is a party, and the consummation by the Purchaser of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action on the part of the Purchaser. This Agreement has been
duly and validly executed and delivered by the Purchaser and, when executed,
each other Transaction Document to which it is a party will be duly and validly
executed and delivered by the Purchaser, and, assuming due and valid execution
and delivery by the Company, constitute or will constitute the valid and binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with their respective terms, except to the extent enforcement may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally, and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
5.3 No Conflicts. The execution, delivery and performance of
this Agreement and each other Transaction Document to which it is a party, and
the consummation of the transactions contemplated hereby and thereby will not
result in (a) a violation of the amended and restated certificate of
incorporation or amended and restated bylaws of the Purchaser or (b) conflict
with or result in the breach of the terms, conditions or provisions of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give rise to any right of termination,
acceleration or cancellation under, any agreement, lease, mortgage, license,
indenture, instrument or other contract to which the Purchaser is a party other
than, in the case of this clause (b), such conflicts, breaches or defaults that
would not have a material adverse effect on the condition (financial or
otherwise), properties, assets, liabilities, business, prospects or operations
of the Purchaser and it subsidiaries.
5.4 Brokers. There is no broker, investment banker, financial
advisor, finder or other Person which has been retained by or is authorized to
act on behalf of the Purchaser who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
5.5 Investment Representations and Warranties. The Purchaser
understands that the Securities are "restricted securities" and have not been,
and will not be upon issuance, as the case may be, registered under the
Securities Act or any applicable state securities laws, and that the
certificates evidencing the Securities shall bear a legend to that effect unless
prior to exercise of the Warrant, the Common Stock issuable upon exchange
thereof shall have been so registered.
6
5.6 Acquisition for Own Account. The Purchaser is acquiring
the Securities for its own account for investment and not with a view to or for
distributing or reselling such Securities or any part thereof in violation of
the Securities Act or any applicable state securities law, has no present
intention of distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no present arrangement or
understanding with any other persons regarding the distribution of such
Securities (it being understood that this representation and warranty does not
limit the Purchaser's right to sell the Securities pursuant to an effective
registration statement or otherwise in compliance with applicable federal and
state law) in violation of the Securities Act or any applicable state securities
law.
5.7 Ability to Protect Its Own Interests and Bear Economic
Risks. The Purchaser, by reason of the business and financial experience of its
management, has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Securities, and has so evaluated the merits and
risks of such investment. The Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.
5.8 Accredited Investor. The Purchaser is an "accredited
investor" as that term is defined in Regulation D promulgated under the
Securities Act.
5.9 Access to Information. The Purchaser has been given access
to all Company documents, records, and other information, has received physical
delivery of all such documents, records and information which the Purchaser has
requested, and has had adequate opportunity to ask questions of, and receive
answers from, the Company's officers, employees, agents, accountants, and
representatives concerning the Company's business, operations, financial
condition, assets, liabilities, and all other matters relevant to its investment
in the Securities. The foregoing, however, does not limit or modify the
representations or warranties of the Company in the Transaction Documents or the
right of the Purchaser to rely upon such representations or warranties.
5.10 General Solicitation. The Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
5.11 Consents.
No consent, approval, authorization, order, registration or
qualification of or with any court or arbitrator or governmental or regulatory
authority, including but not limited to the CFTC, is required for the
execution, delivery and performance by the Purchaser of this Agreement and the
consummation by the Purchaser of the transactions contemplated hereby except
those consents, approvals, authorizations, orders, registrations or
qualifications which Purchaser has obtained.
6. Representations and Warranties of the Company and the Founders. The
Company and the Founders, jointly and severally, represent and warrant to the
Purchaser as follows:
7
6.1 Organization. The Company (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, (b) is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction where the nature of the property owned or
leased by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified and in good
standing would not, individually or in the aggregate, reasonably be expected to
result in a "Material Adverse Change" with respect to the Company, (c) has its
principal place of business and chief executive office at 000 Xxxxxxxx Xxxxxx,
Xxxxxxxx, XX and (d) has the requisite corporate power and authority to own or
lease and operate its assets and carry on its business as presently being
conducted.
6.2 Authorization; Enforceability. The Company has the
requisite corporate power and authority to enter into this Agreement and the
other Transaction Documents to which it is a party. The execution, delivery and
performance by the Company of this Agreement and each of the other Transaction
Documents to which it is a party, and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Warrant Shares), have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly and
validly executed and delivered by the Company and, when executed, each other
Transaction Document to which it is a party will be duly and validly executed
and delivered by the Company, and, assuming due and valid execution and delivery
by the Purchaser, constitute or will constitute the valid and binding obligation
of the Company, enforceable against the Company in accordance with their
respective terms, except to the extent enforcement may be limited by : (a)
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally, and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
6.3 No Conflicts. The execution, delivery and performance of
this Agreement and each other Transaction Document to which it is a party, and
the consummation of the transactions contemplated hereby and thereby (including,
without limitation, the issuance and reservation for issuance, as applicable, of
the Securities) will not (a) result in a violation of the certificate of
incorporation or bylaws of the Company, (b) conflict with or result in the
breach of the terms, conditions or provisions of or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give rise to any right of termination, acceleration or cancellation under,
any agreement, lease, mortgage, license, indenture, instrument or other contract
to which the Company or any Subsidiary is a party, other than, in the case of
this clause (b), such conflicts, breaches or defaults that would not have a
material adverse effect on the condition (financial or otherwise), properties,
assets, liabilities, business, prospects or operations of the Company and it
Subsidiaries, (c) result in a violation of any law, rule, regulation, order,
judgment or decree of any Governmental Entity applicable to the Company or any
Subsidiary or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (d) result in the creation of any Encumbrance upon any of
their assets. Neither the Company nor any Subsidiary is in violation of its
certificate of incorporation, certificate of formation, articles of
organization, limited liability company agreement, partnership agreement or
bylaws (as applicable in each case), and neither the Company nor any Subsidiary
is in default (and no event has occurred which, with notice or lapse of time or
both, would cause the Company or any Subsidiary to be in default) under, nor has
there occurred any event giving others (with notice or lapse of time or both)
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture or instrument to which the Company or any
Subsidiary is a party. The Company is not in violation of the qualification or
maintenance requirements of the Over-the-Counter Bulletin Board and is not
subject to any threat of a proceeding or any proceeding to disqualify the Common
Stock from qualification to trade on the Over-the-Counter Bulletin Board.
8
6.4 Capitalization. The authorized capital stock of the
Company consists of 100,000,000 shares of Common Stock, par value $0.0001 per
share and 5,000,000 shares of preferred stock, $.0001 par value ("Preferred
Stock"). As of the date hereof there are 52,268,203 issued shares of Common
Stock of which 52,263,403 shares of Common Stock are outstanding and 4,800
shares of Common Stock are held in the Company's treasury. No shares of
Preferred Stock are, issued or outstanding.
6.5 Due Issuance and Authorization of Capital Stock. All of
the outstanding shares of capital stock of the Company have been duly
authorized, validly issued and are fully paid and nonassessable. The Warrant
Shares have been duly authorized and upon issuance in accordance with the terms
of this Agreement and the Warrant, all such Warrant Shares will be validly
issued, fully paid and nonassessable. The sale, transfer and delivery of the
Warrant to the Purchaser pursuant to the terms hereof and the issuance of the
Warrant Shares to the Purchaser upon exercise of the Warrant will vest in the
Purchaser good and valid title to such Securities, free and clear of any lien,
claim, judgment, charge, mortgage, security interest, pledge, escrow equity or
other encumbrance (collectively, "Encumbrances")
6.6 Subsidiaries.
(a) Each Subsidiary is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, has all power and authority and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except for those the absence of which would not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Change.
Each Subsidiary is duly qualified to do business and is in good standing in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary, except for those
jurisdictions where failure to be so qualified would not, individually or in the
aggregate, result in a Material Adverse Change. All of the outstanding shares of
capital stock of each Subsidiary are validly issued, full paid and
nonassessable, and, except as set forth in Schedule 6.6, all such shares are
owned by the Company or another Subsidiary free and clear of any liens, claims
or Encumbrances and not subject to any option or right to purchase any such
shares. Except for the Subsidiaries, the Company has no other equity interest in
any corporation, partnership, joint venture, limited liability company or other
Person.
(b) There are (i) no outstanding securities
convertible into, exchangeable for or carrying the right to acquire any class of
securities of the Subsidiaries (whether from the Company, the Subsidiaries or
otherwise), or subscriptions, warrants, options, rights or other arrangements or
commitments of any kind that relate to or require the issuance, sale or other
disposition or transfer of any of the Subsidiaries' respective equity securities
(whether or not presently issued) or any interest therein, (ii) no arrangements
by which the Company or any Subsidiary is or may become bound to issue
additional shares of capital stock of any Subsidiary, nor are any such issuances
or arrangements contemplated, and (iii) no obligations (contingent or otherwise)
of any Subsidiary to purchase, redeem or otherwise acquire any of its equity
securities or any interests therein or to pay any dividend or make any
distribution in respect thereof.
9
6.7 Consents. Except as set forth on Schedule 6.7, neither the
execution, delivery or performance of this Agreement or any other Transaction
Document by the Company, nor the consummation by it of the obligations and
transactions contemplated hereby or thereby (including, without limitation, the
issuance, the reservation for issuance and the delivery of the Securities)
requires any consent of, authorization by, exemption from, filing with or notice
to any Governmental Entity or any other Person, other than the filings under
applicable securities laws required to comply with the Company's registration
obligations under the Registration Rights Agreement.
6.8 Financial Statements. The Company has caused to be
delivered to the Purchaser an audited consolidated balance sheet of the Company
and the Subsidiaries as of December 31, 2006 (the "Balance Sheet"), and audited
consolidated statements of income and retained earnings and cash flows of the
Company and the Subsidiaries for the year ended December 31, 2006 (collectively
with the Balance Sheet, the "Financial Statements"), together with an
unqualified opinion thereon from the Company's independent accountants. The
Financial Statements have been prepared in accordance with GAAP during the
periods involved (except as may be otherwise indicated in such financial
statements or the notes thereto and fairly present, in all material respects,
the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended.
6.9 Title to Property and Assets. Neither the Company nor any
Subsidiary owns any real property. Each of the Company and the Subsidiaries owns
or has valid leaseholds in its personal property and assets free and clear of
all Encumbrances, except for Permitted Encumbrances. With respect to any real
property, the Company is not in material violation of any of its leases. All
machinery, equipment, furniture, fixtures and other personal property and all
plants, buildings, structures and other facilities, including, without
limitation, office space used by the Company and the Subsidiaries in the conduct
of its business, are in good operating condition and fit for operation in the
ordinary course of business (subject to normal wear and tear) except for any
defects which will not materially interfere with the conduct of normal
operations of the Company and the Subsidiaries. The Company has delivered to the
Purchaser true and complete copies of any leases related to the real property
used by the Company and the Subsidiaries in the conduct of their business (the
"Real Property").
10
6.10 SEC Documents. Since May 2005, the Company has timely
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act (all of the foregoing filed prior to the date hereof and after May
2005, and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein, being hereinafter
referred to herein as the "SEC Documents"). As of their respective dates, the
SEC Documents complied with the requirements of the Exchange Act or the
Securities Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to the Company, and none of the SEC Documents,
at the time they were filed with the SEC, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The chief executive
officer and the chief financial officer of the Company have signed, and the
Company has furnished to the SEC, all certifications required by Sections 302
and 906 of the Xxxxxxxx-Xxxxx Act of 2002 (the "Certifications"). Such
Certifications contain no qualifications or exceptions to the matters certified
therein and have not been modified or withdrawn, and neither the Company nor any
of it officers has received notice from any Governmental Entity questioning or
challenging the accuracy, completeness, content, form or manner of filing or
submission of such Certifications. Since the adoption of the Xxxxxxxx-Xxxxx Act,
the Company has complied in all material respects with the laws, rules and
regulations thereunder which were applicable to it.
6.11 Intellectual Property.
(a) Schedule 6.11(a) sets forth, for the Intellectual
Property owned by the Company or any Subsidiary, a complete and accurate list of
all U.S. and foreign (i) patents and patent applications; (ii) trademark
registrations (including Internet domain registrations), trademark applications,
and material unregistered trademarks; (iii) copyright and mask work
registrations, copyright and mask work applications, and material unregistered
copyrights; and (iv) Software.
(b) Schedule 6.11(b) sets forth a complete and
accurate list of all material agreements (whether oral or written, and whether
between the Company, Subsidiaries and third parties or inter-corporate) to which
the Company or a Subsidiary is a party or otherwise bound, (i) granting or
obtaining any right to use or practice any rights under any Intellectual
Property (other than licenses for readily available commercial software programs
having an acquisition price of less than $5,000), or (ii) restricting the
Company's or any Subsidiaries' rights to use any Intellectual Property,
including license agreements, development agreements, distribution agreements,
settlement agreements, consent to use agreements, and covenants not to xxx
(collectively, the "License Agreements").
(c) Except as set forth on Schedule 6.11(c):
(i) The License Agreements are valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms (except to the extent
enforcement may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect
relating to creditors' rights generally, and (b) general principles of
equity (regardless of whether enforceability is considered in a
proceeding at law or in equity), and there exists no event or
condition which will result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default by the
Company or any Subsidiary or to the Knowledge of the Company, of any
other party under any such License Agreement.
11
(ii) Neither the Company nor any of its
Subsidiaries have licensed or sublicensed its rights in any material
Intellectual Property other than pursuant to the License Agreements.
(iii) No royalties, honoraria or other fees
are payable by the Company or any Subsidiary to any third parties for
the use of or right to use any Intellectual Property except pursuant
to the License Agreements.
(iv) The Company or a Subsidiary owns, free
and clear of all or Encumbrances, or, has a valid right to use, all of
the Intellectual Property. The Company or a Subsidiary is listed in
the records of the appropriate United States, state, or foreign
registry as the sole current owner of record for each application and
registration listed on Schedule 6.11(a). All proprietary Intellectual
Property was either developed: (A) by employees of the Company or any
Subsidiary within the scope of their employment, or (B) by independent
contractors who have properly assigned all of their rights to the
Company or any Subsidiary pursuant to written agreements.
(v) The Intellectual Property owned by the
Company or any Subsidiary and, to the Knowledge of the Company, any
Intellectual Property used by the Company or any Subsidiary, is
subsisting, in full force and effect, and has not been cancelled,
expired, or abandoned, and, to the Knowledge of the Company is valid
and enforceable.
(vi) There is no pending or, to the
Knowledge of the Company, threatened claim, suit, arbitration or other
adversarial proceeding before any court, agency, arbitral tribunal, or
registration authority in any jurisdiction involving the Intellectual
Property owned by the Company or its Subsidiaries, or, to the
Knowledge of the Company, the Intellectual Property licensed to the
Company or any Subsidiary, alleging that the activities or the conduct
of the Company's or any Subsidiary's businesses infringe upon, violate
or constitute the unauthorized use of the intellectual property rights
of any third party or challenging the Company's or any Subsidiary's
ownership, use, validity, enforceability or registrability of any
Intellectual Property. There are no settlements, forebearances to xxx,
consents, judgments, or orders or similar obligations other than the
License Agreements which (i) restrict the Company's or any
Subsidiary's right to use any Intellectual Property, (ii) restrict the
Company's or any Subsidiary's businesses in order to accommodate a
third party's intellectual property rights or (iii) permit third
parties to use any Intellectual Property owned or controlled by the
Company or any Subsidiary.
(vii) To the Knowledge of the Company, the
conduct of the Company's and any Subsidiary's business as currently
conducted or contemplated to be conducted does not infringe upon
(either directly or indirectly such as through contributory
infringement or inducement to infringe) any intellectual property
rights owned or controlled by any third party. To the Knowledge of the
Company, no third party is misappropriating, infringing, diluting or
violating any Intellectual Property owned or used by the Company or
any Subsidiary and no such claims, suits, arbitrations or other
adversarial proceedings have been brought or threatened against any
third party by the Company or any Subsidiary.
12
(viii) The Company and each Subsidiary take
reasonable and prudent measures to protect the confidentiality of
Trade Secrets, including requiring their employees, contractors and
agents and other parties having access thereto to execute written
non-disclosure agreements. To the Knowledge of the Company, no Trade
Secret has been disclosed or authorized to be disclosed to any third
party other than pursuant to a written non-disclosure agreement that
adequately protects the Company's and the applicable Subsidiary's
proprietary rights in and to such Trade Secrets. Schedule 6.11(c) set
forth a list of each such written non-disclosure agreement. To the
Knowledge of the Company, no party to any non-disclosure agreement
relating to its Trade Secrets is in material breach or default
thereof.
(ix) No current or former stockholder,
director, officer, employee, contractor, agent or consultant of the
Company or any Subsidiary (or any of their respective predecessors in
interest) will, after giving effect to the transactions contemplated
herein, own or retain any rights to use any of the Intellectual
Property owned or used by the Company or any Subsidiary.
(d) The transactions contemplated hereby will not
result in the loss or impairment of the Company's or any Subsidiary's right to
own or use any of the Intellectual Property, nor will it require the consent of
any Governmental Entity or third party in respect of any such Intellectual
Property.
(e) All Trademarks have been in continuous use by the
Company or its Subsidiaries, and the Trademarks listed in Schedule 6.11(a) for
which the Company or any Subsidiary has obtained or applied for a registration
have been continuously used in the form appearing in, and in connection with the
goods and services listed in, their respective registration certificates. To the
Knowledge of the Company or the Founders, there has been no prior use of such
Trademarks by any third party which would confer upon said third party superior
rights in such Trademarks. The Company and its Subsidiaries have adequately
policed the Trademarks against third party infringement so as to maintain the
validity of such Trademarks.
6.12 Foreign Corrupt Practices Act. Neither the Company nor
any Subsidiary, director, officer, agent, employee or other Person acting on
behalf of the Company or any Subsidiary has, in the course of his, her or its
actions for, or on behalf of, the Company or any Subsidiary, offered or made,
directly or indirectly through any other Person, any payments of anything of
value (in the form of a contribution, gift, entertainment or other expense), to
(a) any Person employed by, or acting in an official capacity on behalf of, any
Governmental Entity, or (b) any foreign or domestic government official,
political party or official of such party, or any candidate for political office
or employee thereof. Neither the Company, any Subsidiary, nor any director,
officer, agent, employee or other Person acting on behalf of the Company or any
Subsidiary has violated or is in violation of any provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or unlawful payment to any foreign or domestic
government or political party official, employee, appointee or candidate.
13
6.13 Material Contracts. Each material contract of the Company
and any of its Subsidiaries involving aggregate payments by or to the Company in
excess of $250,000 or with a term in excess of two (2) years is listed on
Schedule 6.13 hereof. Each such contract is the legal, valid and binding
obligation of the Company, enforceable against the Company and/or such
Subsidiary, as the case may be, in accordance with its terms, except to the
extent enforcement may be limited by: (a) bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditors' rights generally, and (b) general principals of equity (regardless
of whether enforceability is considered in a proceeding at law or in equity).
There has not occurred any breach, violation or default or any event that, with
the lapse of time, the giving of notice or the election of any Person, or any
combination thereof, would constitute a breach, violation or default by the
Company or its Subsidiary, as the case may be, under any such contract or, to
the Knowledge of the Company or its Subsidiary or the Founders, as the case may
be, by any other Person to any such contract. Neither the Company nor any
Subsidiary has been notified that any party to any material contract intends to
cancel, terminate, not renew or exercise an option under any material contract,
whether in connection with the transactions contemplated hereby or otherwise.
The Company is not materially restricted by agreement from carrying on its
business anywhere in the world.
6.14 Voting and Registration Rights. Except for the Investor
Rights Agreement, there are no provisions of the certificate of incorporation or
the bylaws of the Company or any of its Subsidiaries, no agreements to which the
Company or any of its Subsidiaries is a party and no agreements by which the
Company, any of its Subsidiaries or the Securities are bound, which (a) may
affect or restrict the voting rights of the Purchaser with respect to the
Securities in its capacity as a stockholder of the Company, (b) restrict the
ability of the Purchaser, or any successor thereto or assignee or transferee
thereof, to transfer the Securities, (c) would adversely affect the Company's or
the Purchaser's right or ability to consummate the transactions contemplated by
this Agreement or comply with the terms of the Transaction Documents and the
transactions contemplated hereby or thereby, (d) require the vote of more than a
majority of the Company's issued and outstanding Common Stock, voting together
as a single class, to take or prevent any corporate action, other than those
matters requiring a class vote under Delaware law, or (e) entitle any party to
nominate or elect any director of the Company or require any of the Company's
stockholders to vote for any such nominee or other Person as a director of the
Company in each case, except as provided for in this Agreement. Except as
disclosed on Schedule 6.14, the Company is not under any obligation, contractual
or otherwise, to register for sale any of its securities under the Securities
Act.
6.15 Form S-3 Eligibility. The Company is currently eligible
under the eligibility requirements of General Instruction I to Registration
Statement on Form S-3 to register the resale of its Common Stock on a
registration statement on Form S-3 under the Securities Act. To the Knowledge of
the Company, there exist no facts or circumstances that would reasonably be
expected to prohibit or delay the preparation and filing of a registration
statement on Form S-3 with respect to the Purchased Shares and the Warrant
Shares in accordance with the terms of this Agreement and the Registration
Rights Agreement.
6.16 Issuances Exempt. Assuming the truth and accuracy of the
representations and warranties of the Purchaser contained in Section 5 hereof,
the offer, sale, and issuance of the Securities will be exempt from the
registration requirements of the Securities Act, and will have been registered
or qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable state
securities laws. All shares of capital stock and other securities issued by the
Company prior to the Closing Date have been issued in transactions either
registered under the Securities Act or exempt from the registration requirements
under the Securities Act and all applicable state securities or "blue sky" laws,
and in compliance with all applicable corporate laws. Except as set forth on
Schedule 6.16, the Company has not offered any of its capital stock, or any
other securities, for sale to, or solicited any offers to buy any of the
foregoing from the Company, or otherwise approached or negotiated with any other
Person in respect thereof, in such a manner as to require registration under the
Securities Act. No holder of any of the Company's capital stock has any
rescission rights.
14
6.17 No Integrated Offering. Neither the Company, nor any of
its Affiliates or any other Person acting on the Company's behalf, has directly
or indirectly engaged in any form of general solicitation or general advertising
with respect to the Securities nor have any of such Persons made any offers or
sales of any security or solicited any offers to buy any security under
circumstances that would require registration of the Securities under the
Securities Act or cause this offering of Securities to be integrated with any
prior offering of securities of the Company for purposes of the Securities Act.
6.18 Absence of Certain Developments. Since December 31, 2006,
neither the Company nor its Subsidiaries have suffered any Material Adverse
Change. Since December 31, 2006, the Company and its Subsidiaries have conducted
their business in the ordinary and usual course consistent with past practices
and have not (a) sold, leased, transferred or otherwise disposed of any of the
assets (other than dispositions in the ordinary course of business consistent
with past practices), (b) terminated or amended in any material respect any
material contract or lease to which the Company or any of its Subsidiaries is a
party or to which it is bound or to which its properties are subject, (c)
suffered any loss, damage or destruction, whether or not covered by insurance,
which has resulted in or is reasonably likely to result in a Material Adverse
Change with respect to the Company, (d) made any change in the accounting
methods or practices it follows, whether for general financial or Tax purposes
(other than as required by GAAP), (e) incurred any liabilities (other than in
the ordinary course of business or contractual liabilities) which, individually
or in the aggregate, have resulted in a Material Adverse Change with respect to
the Company, (f) incurred, created or suffered to exist any Encumbrances (other
than Permitted Encumbrances) on its assets, (g) increased the compensation
payable or to become payable to any of its officers or employees or increased
any bonus, severance, accrued vacation, insurance, pension or other employee
benefit plan, payment or arrangement made by the Company or any of its
Subsidiaries for or with any such officers or employees out of the ordinary
course of business, (h) suffered any labor dispute, strike, or other work
stoppage, (i) made or obligated itself to make any capital expenditures in
excess of $250,000 individually or in the aggregate, (j) entered into any
contract or other agreement requiring the Company or a Subsidiary to make
payments in excess of $250,000 per annum, individually or in the aggregate,
other than in the ordinary course of business consistent with past practices,
(k) paid any dividends, whether in cash or property, on account of, or
repurchased any of, the Common Stock, or (l) entered into any agreement to do
any of the foregoing.
15
6.19 No Undisclosed Liabilities. Schedule 6.18 sets forth an
accurate list of (a) all liabilities of the Company and its Subsidiaries in
excess of $250,000 that are not reflected on the Financial Statements, or in the
SEC Documents (other than trade payables in the ordinary course of business),
and (b) all loan agreements, indemnity or guaranty agreements, bonds, mortgages,
liens, pledges or other security agreements to which the Company or any
Subsidiary is a party. Except as set forth on Schedule 6.19, since the date of
the Financial Statements, neither the Company nor any Subsidiary has incurred
any liabilities of any kind, character and description, whether accrued,
absolute, secured or unsecured, contingent or otherwise other than (i)
liabilities or obligations incurred in the ordinary course of business, (ii)
liabilities or obligations that arise out of facts or events that are within the
scope of the subject matter of any other representation or warranty contained in
this Article 6 and such facts or events did not require disclosure by virtue of
any knowledge, time or materiality limitation contained in the relevant
representation or warranty and (iii) liabilities or obligations that
individually or in the aggregate would not reasonably be expected to result in a
Material Adverse Change with respect to the Company.
6.20 Litigation. Except as set forth on Schedule 6.20, there
is no claim, action, proceeding, lawsuit, inquiry, arbitration or investigation
before or by any court, public board, arbitrator, Governmental Entity including,
without limitation, the SEC or the National Association of Securities Dealers,
pending or, to the Knowledge of the Company, threatened against or affecting the
Company, any Subsidiary, or their respective properties or their respective
directors or officers in their capacities as such. To the Knowledge of the
Company, there are no facts which, if known by a potential claimant or
Governmental Entity, could reasonably be expected to give rise to a claim or
proceeding which, if asserted or conducted with results unfavorable to the
Company or any Subsidiary, is reasonably likely to result in a Material Adverse
Change with respect to the Company or is reasonably likely to prevent or
materially delay the consummation of the transactions contemplated hereby.
Neither the Company nor any Subsidiary is subject to any outstanding order,
ruling, judgment or decree that is reasonably likely to result in a Material
Adverse Change with respect to the Company or is reasonably likely to prevent or
materially delay the consummation of the transactions contemplated hereby.
6.21 Compliance with Laws. The business of the Company and its
Subsidiaries is not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity, including without limitation, the SEC and
the NASD, except for violations that, either singly or in the aggregate, are not
reasonably likely to result in a Material Adverse Change with respect to the
Company. Neither the Company nor any Subsidiary has received notification from
any Governmental Entity, including without limitation, the SEC and the NASD, (a)
asserting a violation of any law, statute, ordinance or regulation or the terms
of any judgments, orders, decrees, injunctions or writs applicable to the
conduct of its business, (b) threatening to revoke any license, franchise,
permit or government authorization, or (c) restricting or in any way limiting
its operations as currently conducted or proposed to be conducted. Neither the
Company, nor to the Company's Knowledge, any of its officers, directors,
employees, affiliates or agents has violated any law, regulation, ordinance,
judgment, order or decree which is reasonably likely to give rise to the
initiation of an enforcement action by the SEC or NASD.
16
6.22 Taxes.
(a) Filing of Tax Returns and Payment of Taxes. The
Company and each of its Subsidiaries has duly and timely filed (or has had duly
and timely filed on its behalf) with the appropriate taxing authorities all Tax
Returns required to be filed through the date hereof (after giving effect to any
valid extension of time in which to make such filings), and all such Tax Returns
are true, correct and complete in all material respects. The Company and each of
its Subsidiaries has paid on a timely basis all material Taxes due and payable.
Neither the Company nor any of its Subsidiaries is currently the beneficiary of
any extension of time within which to file any Tax Return, and no written claim
has been made by an authority in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction.
(b) Audits, Investigations, Disputes or Claims. No
deficiencies for Taxes of the Company or any of its Subsidiaries have been
claimed, proposed or assessed in writing against the Company or any of its
Subsidiaries by any taxing or other governmental authority that have not been
fully paid or finally settled, and adequate reserves or accruals in accordance
with GAAP have been established in the books of the Company and its Subsidiaries
with respect to any unpaid Taxes. There are no audits, investigations, disputes
or claims relating to the Taxes or Tax Returns of the Company or any of its
Subsidiaries currently being conducted or made by any taxing authority. Neither
the Company nor any of its Subsidiaries has executed a waiver with respect to
any statute of limitations relating to the assessment or collection of any
Taxes.
(c) Prior Affiliated Groups and Other Entity
Liability. Neither the Company nor any of its Subsidiaries has been a member of
an affiliated group of corporations within the meaning of Section 1504 of the
Code or of any group that has filed a combined, consolidated or unitary Tax
Return (other than Tax Returns filed by a group the common parent of which was
the Company). Neither the Company nor any of its Subsidiaries has any liability
for the Taxes of any Person (other than the Company or any of its Subsidiaries)
(i) under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local or foreign law), (ii) as a transferee or successor, (iii) by
contract or (iv) otherwise.
(d) Tax Sharing Agreements. Neither the Company nor
any of its Subsidiaries is a party to any Tax sharing agreements or similar
arrangements (including indemnity arrangements) with any Person other than the
Company or any of its Subsidiaries.
(e) No Withholding. The Company and each of its
Subsidiaries has, in all material respects, withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party and
has filed all material Tax Returns required to be filed with respect thereto.
6.23 Employee Relations.
(a) All bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock and stock option plans, employment or
severance contracts, health and medical insurance plans, life insurance and
disability insurance plans, other material employee benefit plans, contracts or
arrangements which cover employees or former employees of the Company or the
Subsidiaries including, but not limited to, "employee benefit plans" within the
meaning of Section 3(3) of ERISA (the "Employee Benefit Plans"), are listed on
Schedule 6.23. No Employee Benefit Plans are or were collectively bargained for
or have terms requiring assumption or any guarantee by the Purchaser.
17
(b) There have been no violations of ERISA or the
Code relating to any Employee Benefit Plan that is reasonably likely to result
in a Material Adverse Change with respect to the Company relating to any
Employee Benefit Plan. The Company has timely filed all documents, notes and
reports (including IRS Form 5500) for each such Employee Benefit Plan with the
applicable Governmental Entities and has timely furnished all required documents
to the participants or beneficiaries of each such Employee Benefit Plans.
(c) Except as set forth on Schedule 6.23, the Company
and its Subsidiaries have no employment contracts with any of its employees not
expressly terminable at will and no collective bargaining agreements covering
any of its employees. Further, the Company and its Subsidiaries have no
policies, procedures or handbooks providing for other than at-will employment.
To the Knowledge of the Company, no employee of or consultant to the Company or
any Subsidiary is in material violation of any term of any employment contract
or any other contract or agreement relating to the relationship of any such
employee or consultant with the Company or any Subsidiary. The Company and each
Subsidiary have operated and administered all employee compensation and benefit
plans, programs and arrangements in accordance with their terms and with all
applicable laws in all material respects. To the Knowledge of the Company, no
key employee intends to terminate his or her employment with the Company or any
Subsidiary, nor does the Company or any Subsidiary have any present intention to
terminate the employment of any key employee.
(d) The Company and its Subsidiaries are not
delinquent in payments to any of their employees for any earned wages, salaries,
commissions, bonuses or other direct compensation for any services performed
through the date hereof or amounts required to be reimbursed to them to the date
hereof that are due and owing under federal, state or local law. The Company and
its Subsidiaries are in material compliance with all applicable federal, state
and local laws, rules and regulations respecting employment, employment
practices, labor, terms and conditions of employment and wages and hours. All
Persons treated by the Company and its Subsidiaries as independent contractors
for any purpose do satisfy and have satisfied the requirements of law to be so
treated, and the Company and its Subsidiaries have fully and accurately reported
the amounts paid by the Company and its Subsidiaries to or on behalf of such
persons on IRS Forms 1099 when required to do so. No individual who has
performed services for or on behalf of the Company and its Subsidiaries, and who
has been treated by the Company and its Subsidiaries as an independent
contractor, is classifiable as a "leased employee," within the meaning of
Section 414(n)(2) of the Code, with respect to the Company and its Subsidiaries
or with respect to any customer of the Company and its Subsidiaries. Neither the
Company nor any Subsidiary is bound by or subject to (and none of its assets or
properties is bound by or subject to) any written or oral, express or implied,
commitment or arrangement with any labor union, and, to the Knowledge of the
Company, no labor union has requested or has sought to represent any of the
employees, representatives or agents of the Company or any Subsidiary. There is
no labor strike, dispute, slowdown or stoppage actually pending or, to the
Knowledge of the Company, threatened against or involving the Company or any
Subsidiary. There are no suits, actions, disputes, claims (other than routine
claims for benefits), investigations or audits pending or, to the Knowledge of
the Company, threatened in connection with any Employee Benefit Plan, but
excluding any of the foregoing which is not reasonably likely to result in a
Material Adverse Change with respect to the Company or any Subsidiary.
18
(e) No director or officer or other employee of the
Company or any Subsidiary will become entitled to any retirement, severance or
similar benefit or enhanced or accelerated benefit (including any acceleration
of vesting or lapse of repurchase rights or obligations with respect to any
Employee Benefit Plan) solely as a result of the transactions contemplated in
this Agreement; and no payment made or to be made to any current or former
employee or director of the Company or any of its Affiliates by reason of the
transactions contemplated hereby (whether alone or in connection with any other
event, including, but not limited to, a termination of employment) will
constitute an "excess parachute payment" within the meaning of Section 280G of
the Code.
6.24 Brokers. There is no broker, investment banker, financial
advisor, finder or other Person which has been retained by or is authorized to
act on behalf of the Company or any of the Founders who might be entitled to any
fee or commission in connection with the transactions contemplated by this
Agreement.
6.25 Environmental Matters.
(a) (i) No written notice, notification, demand,
request for information, citation, summons, complaint or order has been received
by, and no investigation, action, claim, suit, proceeding or review is pending
or, to the Knowledge of the Company, threatened by any Person against, the
Company or any Subsidiary, and no penalty has been assessed against the Company
or any Subsidiary, in each case, with respect to any matters relating to or
arising out of any Environmental Law; (ii) the Company and its Subsidiaries are
in compliance with all Environmental Laws except as would not reasonably be
expected to result in a Material Adverse Change with respect to the Company; and
(iii) to the Knowledge of the Company, there are no liabilities of or relating
to the Company or any Subsidiary relating to or arising out of any Environmental
Law, and there is no existing condition, situation or set of circumstances,
which in either case could reasonably be expected to result in a Material
Adverse Change with respect to the Company.
(b) For purposes of this Agreement, the term
"Environmental Laws" means federal, state, local and foreign statutes, laws,
judicial decisions, regulations, ordinances, rules, judgments, orders, codes,
injunctions and permits relating to the protection of human health and the
environment from exposure to or damage from Hazardous Materials; and the term
"Hazardous Material" means all substances or materials regulated as hazardous,
toxic, explosive, dangerous, flammable or radioactive under any Environmental
Law including, but not limited to: (i) petroleum, asbestos, or polychlorinated
biphenyls and (ii) in the United States, all substances defined as "Hazardous
Substances," "Oils," "Pollutants" or "Contaminants" in the National Oil and
Hazardous Substances Pollution Contingency Plan, 40 C.F.R. Part 300.
19
6.26 Related-Party Transactions. Except as set forth on
Schedule 6.26 hereto, no employee, officer, director, stockholder or Affiliate
of the Company or any of its Subsidiaries or member of his or her immediate
family is currently indebted to the Company or any of its Subsidiaries, nor is
the Company or any of its Subsidiaries indebted (or committed to make loans or
extend or guarantee credit) to any of such individuals. Except as set forth on
Schedule 6.26, to the Knowledge of the Company, none of such Persons has any
direct or indirect ownership interest in any firm or corporation which is an
Affiliate of the Company or with which the Company has a business relationship,
or any firm or corporation that competes with the Company, except that
employees, officers, or directors of the Company and members of their immediate
families may own stock in an amount not to exceed 1% of the outstanding capital
stock of publicly traded companies that may compete with the Company, or with
which the Company may have a business relationship. Except as set forth on
Schedule 6.26, to the Knowledge of the Company, no employee, director, officer
or stockholder of the Company and no member of the immediate family of any
employee, officer, director or stockholder of the Company is directly or
indirectly interested in any material contract with the Company.
6.27 Insurance. The Company has a directors' and officers'
liability insurance policy that is in full force and effect with extended
coverage sufficient in amount to cover liabilities to which its directors and
officers may be subject by virtue of their positions and as is customarily
carried by companies engaged in the same or similar business as the Company.
Schedule 6.27 sets forth a list of all insurance policies currently in effect
that insure the business, operations, assets, directors, officers or employees
of the Company and the Subsidiaries, the name of the carrier and the terms and
amount of coverage. To the Knowledge of the Company, no default or event has
occurred that is reasonably likely to give rise to a material default under any
such policy.
6.28 Corporate Records. Copies of the respective certificates
of incorporation of the Company and its Subsidiaries, each certified by the
Secretary of State of the State of incorporation of each such corporation, and
of the bylaws of the Company and its Subsidiaries, certified by the Secretary of
each such corporation, heretofore delivered to the Purchaser are true and
complete copies of such instruments as amended to the date of this Agreement.
Such certificates of incorporation and bylaws are in full force and effect. The
corporate records of the Company and each Subsidiary are correct and complete in
all material respects.
6.29 Disclosure. No representation or warranty by the Company
contained in this Agreement, and no representation, warranty or statement by the
Company contained in any certificate or schedule furnished or to be furnished at
the Closing to the Purchaser pursuant to this Agreement, contains any untrue
statement by the Company of a material fact or omits to state any material fact
necessary to make any statement herein or therein not misleading.
6.30 No Consents. No consent, approval, authorization, order,
registration or qualification of or with any court or arbitrator or governmental
or regulatory authority, including but not limited to the Commodity Futures
Trading Commission (the "CFTC") is required for the execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby other than as may be required by reason
of the participation of Purchaser in such transactions.
20
7. Representations and Warranties of the Founders. Each of the
Founders, severally and only with respect to itself, or himself, represents and
warrants as follows:
7.1 Organization of the Founders. Each of Ridgecrest and
Xxxxxxxx represents and warrants with respect to itself that (a) it is duly
organized, validly existing and in good standing under the laws of its state of
formation and (b) has the requisite corporate or other power and authority to
own or lease and operate its assets and carry on its business as presently being
conducted.
7.2 Authorization of the Founders. Each of Ridgecrest and
Xxxxxxxx represent and warrant that it has the requisite corporate and other
power and authority to enter into this Agreement and the other Transaction
Documents to which it is a party. The execution, delivery and performance by
each of Ridgecrest and Xxxxxxxx of this Agreement and each of the other
Transaction Documents to which it is a party, and the consummation by each such
entity of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary corporate or other action on its part.
7.3 Unencumbered Title, No Conflicts.
(a) On the Closing Date such Founder will have valid
and unencumbered title to the Purchased Shares to be delivered by such Founder
on the Closing Date and full right, power and authority to enter into this
Agreement and to sell, assign, transfer and deliver the Purchased Shares to be
delivered by such Founder on the Closing Date; and upon delivery of and payment
for the Purchased Shares on the Closing Date, the Purchaser will acquire valid
and unencumbered title to the Purchased Shares to be delivered by such Founder
on the Closing Date.
(b) Upon delivery of the Purchased Shares to be sold
by the Founder and payment therefor pursuant hereto, and assuming the Purchaser
has no notice of adverse claims, the Purchaser shall be a "protected purchaser"
of such Purchased Shares within the meaning of Section 8-303 of the UCC.
(c) Such Founder is the beneficial owner of the
number of shares of Common Stock set forth opposite such Founder's name in Part
II of Exhibit A hereto.
(d) The execution, delivery and performance of this
Agreement and each other Transaction Document to which such Founder is a Party,
and the consummation of the transactions contemplated hereby and thereby will
not (a) result in a violation of the certificate of incorporation or bylaws, or
other organizational documents of any such Founder which is not a natural
person, or (b) conflict with or result in the breach of the terms, conditions or
provisions of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give rise to any right of
termination, acceleration or cancellation under, any agreement, lease, mortgage,
license, indenture, instrument or other contract to which any of the Founders is
a party, (c) result in a violation of any law, rule, regulation, order, judgment
or decree of any Governmental Entity applicable to any of the Founders or by
which any property or asset of any of the Founders is bound or affected, or (d)
result in the creation of any Encumbrance upon any of their assets.
21
7.4 Brokers. There is no broker, investment banker, financial
advisor, finder or other Person which has been retained by or is authorized to
act on behalf of such Founder who might be entitled to receive any fee or
commission in connection with the transaction contemplated by this Agreement.
7.5 Disclosure. No representation or warranty by the Founders
contained in this Agreement, and no representation, warranty or statement by the
Founders contained in any certificate or schedule furnished or to be furnished
at the Closing to the Purchaser pursuant to this Agreement, contains any untrue
statement by the Founders of a material fact or omits to state any material fact
necessary to make any statement herein or therein not misleading.
8. Conditions to the Parties' Obligations.
8.1 Conditions to Each Party's Obligations. The respective
obligations of each party to consummate the transactions contemplated hereunder
are subject to the fulfillment prior to or on the Closing Date of all of the
following conditions:
(a) No Litigation. There shall not be any litigation
challenging or seeking damages in connection with the transactions contemplated
by this Agreement or by the Transaction Documents.
(b) No Statute, etc. There shall not be any statute,
rule, regulation, injunction, order or decree, enacted, enforced, promulgated,
entered, issued or deemed applicable to this Agreement or the transactions
contemplated hereby by any Governmental Entity prohibiting or enjoining the
transactions contemplated by this Agreement or by the Transaction Documents.
8.2 Conditions of the Purchaser's Obligations. The obligations
of the Purchaser to consummate the transactions contemplated hereunder are
subject to the fulfillment prior to or on the Closing Date of all of the
following conditions, any of which may be waived in whole or in part by the
Purchaser:
(a) Representations and Warranties of the Company
Correct. The representations and warranties made by the Company herein shall be
true and correct in all material respects (or in all respects for any
representation and warranty qualified as to materiality or Material Adverse
Change) on the Closing Date with the same force and effect as if they had been
made on and as of the Closing Date, except to the extent that any such
representation and warranty is made as of a certain date, in which case it shall
be true and correct as of such certain date.
(b) Performance of the Company. All covenants,
agreements and conditions contained in this Agreement to be performed or
complied with by the Company on or prior to the Closing Date shall have been
performed or complied with in all material respects.
(c) Representations and Warranties of the Founders
Correct. The representations and warranties made by the Founders herein shall be
true and correct in all material respects (or in all respects for any
representation and warranty qualified as to materiality or Material Adverse
Change) on the Closing Date with the same force and effect as if they had been
made on and as of the Closing Date, except to the extent that any such
representation and warranty is made as of a certain date, in which case it shall
be true and correct as of such certain date.
22
(d) Performance of the Founders. All covenants,
agreements and conditions contained in this Agreement to be performed or
complied with by the Founders on or prior to the Closing Date shall have been
performed or complied with in all material respects.
(e) Xxxx Xxxxxxxxx Waiver. Xxxx Xxxxxxxxx shall have
executed the Waiver to waive any requirement under the Loan Agreement, dated
March 22, 2004, as amended, between him and the Company that (i) the Company
make any prepayment of principal thereunder, or (ii) the Company begin to pay
interest thereunder, as a result of any exercise or exercises of the Warrant.
(f) Certificate of Officer. The Company shall have
delivered to the Purchaser a certificate dated the Closing Date, executed by its
Chief Executive Officer, certifying the satisfaction by the Company of the
conditions specified in paragraphs (a) and (b) of this Section 8.2.
(g) Certificate of Founder. Each Founder shall have
delivered to the Purchaser a certificate dated the Closing Date, executed by
such Founder, or by a duly authorized officer thereof, certifying the
satisfaction by such Founder of the conditions specified in paragraphs (c) and
(d) of this Section 8.2. insofar as they relate to such Founder.
(h) Qualification Under State Securities Laws. All
registrations, qualifications, permits and approvals required under applicable
state securities laws shall have been obtained for the lawful execution,
delivery and performance of this Agreement and each other Transaction Document,
including, without limitation, the offer and sale of the Securities.
(i) Registration Rights Agreement. The Company shall
have executed and delivered the Registration Rights Agreement.
(j) Warrant. The Company shall have executed and
delivered the Warrant.
(k) Investor Rights Agreement. The Company and the
Founders shall have executed and delivered the Investor Rights Agreement.
(l) Employment Agreement. The Company and Xxxxx
Xxxxxxx shall have executed and delivered an Employment Agreement, in
substantially the form attached hereto as Exhibit G.
(m) Non-Competition Agreement with Xxxxxx X'Xxxxxx.
The Company and Xxxxxx X'Xxxxxx shall have executed and delivered a
Non-Competition Agreement in substantially the form attached hereto as Exhibit
B.
(n) Supporting Documents. The Purchaser shall have
received the following:
23
(i) A favorable opinion from Xxxxxx Xxxx &
Xxxxxx LLP, counsel to the Company, dated the Closing Date, in form
and substance reasonably satisfactory to the Purchaser with respect
to: (A) the Company's corporate existence, power, authority and good
standing; (B) the due authorization, execution and delivery of this
Agreement and each of the Transaction Documents and the due
authorization of the issuance of the Securities contemplated hereby;
(C) the validity and enforceability of the Transaction Documents; (D)
no conflicts of the Transaction Documents with the charter or bylaws
of the Company, any contract known to such counsel, any applicable
laws or any judgment, order or decree known to such counsel and
applicable to the Company or any Subsidiary; (E) the Company's
capitalization (including that all outstanding securities, including
the Purchased Shares, are validly issued, fully paid and
non-assessable); (F) the due authorization of the Warrant Shares and
upon issuance thereof in accordance with the terms of the Warrant that
such shares will be validly issued, fully paid and nonassessable; (G)
the sale of the Purchased Shares and the issuance of the Warrant as
exempt transactions under the Securities Act; (H) the exemption from
registration under the Securities Act of the Warrant Shares when
issued pursuant to this Agreement; (I) no threatened or pending legal
or governmental investigations, actions, suits or proceedings known to
such counsel against or affecting the Company or any Subsidiary or
which would reasonably be expected to result in a Material Adverse
Change with respect to the Company; and (J) no Governmental Approvals
required to be obtained by the Company for the execution and delivery
of, or the consummation of the transactions contemplated by, the
Transaction Documents;
(ii) A favorable opinion from Xxxxxx Xxxx &
Xxxxxx LLP, counsel to the Founders, dated the Closing Date, in form
and substance reasonably satisfactory to the Purchaser with respect
to: (A) the corporate existence, power, authority and good standing of
each of Ridgecrest and Xxxxxxxx; (B) the due authorization, execution
and delivery of this Agreement and each of the Transaction Documents
by each of the Founders and the due authorization of the sale of the
Purchased Shares contemplated hereby; (C) the validity and
enforceability of the Transaction Documents; (D) no conflicts of the
Transaction Documents with the charter or bylaws of each of Ridgecrest
and Xxxxxxxx, any contract known to such counsel, any applicable laws
or any judgment, order or decree known to such counsel and applicable
to any Founder (E) upon delivery of the Purchased Shares to be sold by
the Founder and payment therefor pursuant hereto, and assuming the
Purchaser has no notice of adverse claims, the Purchaser shall be a
"protected purchaser" of such Purchased Shares within the meaning of
Section 8-303 of the UCC;
(iii) Copies of resolutions of the Board of
Directors of the Company, certified by the Secretary or other
authorized officer of the Company, authorizing and approving the
execution, delivery and performance of the Transaction Documents to
which the Company is a party and all other documents and instruments
to be delivered by the Company pursuant hereto and thereto;
(iv) Copies of resolutions of the board of
directors of each of the Founders, which is not a natural person
certified by the respective secretary or other authorized officer of
each such Founder, authorizing and approving the execution, delivery
and performance of the Transaction Documents to which such Founder is
a party and all other documents and instruments to be delivered by
such Founder pursuant hereto and thereto;
24
(v) A certificate of incumbency executed by
the Secretary of the Company (A) certifying the names, titles and
signatures of the officers authorized to execute the Transaction
Documents to be executed by the Company and (B) further certifying
that the certificate of incorporation and bylaws of the Company
delivered to the Purchaser at the time of the execution of this
Agreement have been validly adopted and have not been amended or
modified;
(vi) A certificate of good standing with
respect to the Company from the Secretary of State of Delaware and a
certificate of good standing with respect to each of Ridgecrest and
Xxxxxxxx from the Secretary of State of New York; and
(vii) Such additional supporting
documentation and other information with respect to the transactions
contemplated by this Agreement as the Purchaser or its counsel,
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, may reasonably request.
(o) Composition of Board of Directors. On the Closing
Date, the Company's Board of Directors shall be composed of Xxxx
Xxxxxxxxx, Xxxxx Xxxxxxx, Xxxxxx X'Xxxxxx, Xxxxxx Xxxxxx and Xxxxxxxx
Xxxxxx.
(p) Consents and Waivers. The Company and each of the
Founders shall have obtained all consents or waivers necessary to
execute and perform their respective obligations under this Agreement
and the other Transaction Documents, to issue the Warrant and the
Warrant Shares, and to carry out the transactions contemplated hereby
and thereby. All corporate and other action and governmental filings
necessary to effectuate the terms of this Agreement, the other
Transaction Documents and the Warrant, and other agreements and
instruments executed and delivered by the Company in connection
herewith shall have been made or taken.
(q) No Material Adverse Change. There shall have been
no Material Adverse Change with respect to the Company (as reasonably
determined by the Purchaser) between January 22, 2007 and the Closing
Date.
8.3 Conditions of the Company's and Founders' Obligations. The
obligations of the Company and the Founders to consummate the transactions
contemplated hereunder are subject to the fulfillment prior to or on the Closing
Date of all of the following conditions, any of which may be waived in whole or
in part by the Company, with respect to the obligations of the Company and the
Founders with respect to the obligations of the Founders:
(a) Representations and Warranties Correct. The
representations and warranties made by the Purchaser herein shall be true and
correct in all material respects (or in all respects for any representation and
warranty qualified as to materiality) on the Closing Date with the same force
and effect as if they had been made on and as of the Closing Date, except to the
extent that any such representation and warranty is made as of a certain date,
in which case it shall be true and correct as of such certain date.
25
(b) Performance. All covenants, agreements and
conditions contained in this Agreement to be performed or complied with by the
Purchaser on or prior to the Closing Date shall have been performed or complied
with in all material respects.
(c) Certificate of Officer. The Purchaser shall have
delivered to the Company and each Founder a certificate dated the Closing Date,
executed by an authorized officer, certifying the satisfaction of the conditions
specified in paragraphs (a) and (b) of this Section 8.3.
(d) No Material Adverse Change. There shall have been
no Material Adverse Change with respect to the Purchaser (as reasonably
determined by the Company or the Founders) between January 22, 2007 and the
Closing Date.
(e) Registration Rights Agreements. The Purchaser and
the Company shall have executed and delivered the Registration Rights Agreement.
(f) Investor Rights Agreement. The Purchaser, the
Company and the Founders shall have executed and delivered the Investor Rights
Agreement.
(g) Supporting Documents. The Company and each
Founder shall have receivedthe following:
(i) Copies of resolutions of the Board of
Directors of the Purchaser, certified by the Secretary or other
authorized officer of the Purchaser, authorizing and approving the
execution, delivery and performance of the Transaction Documents to
which the Purchaser is a party and all other documents and instruments
to be delivered by the Purchaser pursuant hereto and thereto;
(ii) A certificate of incumbency executed by
the Secretary of the Purchaser (A) certifying the names, titles and
signatures of the officers authorized to execute the Transaction
Documents to be executed by the Purchaser and (B) further certifying
that the certificate of incorporation and bylaws of the Purchaser
delivered to the Company at the time of the execution of this
Agreement have been validly adopted and have not been amended or
modified; and
(iii) A certificate of good standing with
respect to the Purchaser from the Secretary of State of Delaware; and
(iv) Such additional supporting
documentation and other information with respect to the transactions
contemplated by this Agreement as the Company, the Founders or their
counsel, Xxxxxx Xxxx & Xxxxxx LLP, respectively, may reasonably
request.
26
(v) Consents and Waivers. The Purchaser
shall have obtained all consents or waivers necessary to execute and
perform its obligations under this Agreement and the other Transaction
Documents and to carry out the transactions contemplated hereby and
thereby. All corporate and other action and governmental filings
necessary to effectuate the terms of this Agreement, the other
Transaction Documents and other agreements and instruments executed
and delivered by the Purchaser in connection herewith shall have been
made or taken.
9. Covenants of the Company. The Company agrees that the Company (and
each of its Subsidiaries unless the context otherwise requires) will use
commercially reasonable efforts to do the following:
9.1 Maintain Corporate Rights and Facilities. The Company
shall maintain and preserve its corporate existence and all rights, franchises,
licenses, Intellectual Property and other authority reasonably deemed adequate
by the Company for the conduct of its business; maintain its properties,
equipment and facilities in good order and repair; and conduct its business in
an orderly manner without voluntary interruption, each consistent with past
practice.
9.2 Maintain Insurance. The Company shall maintain in full
force and effect a policy or policies of insurance, including, without
limitation, a directors and officers liability insurance policy, issued by
insurers of recognized responsibility, insuring it, its directors and officers,
its properties and its business against such losses and risks, and in such
amounts, as are customary in the case of corporations of established reputation
engaged in the same or a similar business.
9.3 Notice of Litigation, Disputes and Adverse Changes; Other
Information. The Company shall promptly notify the Purchaser of (i) each legal
action, suit, arbitration or other administrative or governmental investigation
or proceeding (whether federal, state, local or foreign) instituted or, to the
Knowledge of the Company, threatened against the Company (or of any occurrence
or dispute which involves a reasonable likelihood of any such action, suit,
arbitration, investigation or proceeding being instituted), or (ii) any other
occurrence or change of circumstance relating to the Company which, in either
such case, could reasonably be expected to materially and adversely affect the
Company's condition (financial or otherwise), properties, assets, liabilities,
business, prospects or operations (except for any changes that are the effect or
result of economic factors generally affecting the economy as a whole).
9.4 Internal Accounting Controls. The Company shall maintain a
system of internal accounting controls administered in accordance with Section
13(b)(2) of the Exchange Act.
9.5 Indemnification of the Board of Directors. The Company
shall reimburse all directors of the Company for their reasonable out-of-pocket
expenses in connection with attending meetings of the Company's Board of
Directors and all committees thereof and all reasonable out-of-pocket expenses
otherwise incurred in fulfilling their duties as directors. The Company's
certificate of incorporation, or the Company's bylaws if no provisions in the
certificate of incorporation relate to directors' liability or indemnification,
shall at all times (i) eliminate the liabilities of directors to the maximum
extent permitted by the law and (ii) require the indemnification of all of the
Company's directors against liability for actions and omissions to act in their
capacity as directors of the Company to the maximum extent that such individuals
may lawfully be so indemnified by the Company.
27
9.6 Use of Proceeds. The Company shall use the proceeds to the
Company from the sale of the Warrant Shares to provide the Company with working
capital and for general corporate purposes.
9.7 Reservation of Common Stock. The Company shall reserve and
keep available out of its authorized but unissued Common Stock the number of
shares required from time to time for issuance upon the exercise of the Warrant
(including any additional shares which may become so issuable by reason of the
operation of anti-dilution provisions of the Warrant).
9.8 Investor Rights Agreement. The Company shall not recognize
any transfer or other disposition on the stock record books of the Company or
otherwise effect the transfer or other disposition of any shares of capital
stock or other securities (whether debt or equity securities) of the Company
which have been transferred or otherwise disposed of in a manner not in
compliance with Section 2 of the Investor Rights Agreement without the prior
approval of the Purchaser.
10. Restrictive Legends. The Purchaser acknowledges that the Warrant
and each share of Common Stock issuable upon exercise of the Warrant shall be
stamped or otherwise imprinted with a legend in substantially the form set forth
in subsections (a) and (b), respectively, unless prior to exercise of the
Warrant, the Common Stock issuable upon exercise thereof shall have been
registered under the Securities Act:
(a) THIS WARRANT IS NON TRANSFERABLE OTHER THAN TO A
WHOLLY OWNED SUBSIDIARY OR OTHER AFFILIATE OF NYMEX. A STATEMENT OF THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS OF EACH CLASS OF STOCK OF THE CORPORATION OR SERIES THEREOF AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS
WILL BE FURNISHED BY THE CORPORATION, WITHOUT CHARGE, TO EACH WARRANTHOLDER WHO
SO REQUESTS, UPON REQUEST TO THE SECRETARY OF THE CORPORATION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN INVESTOR RIGHTS
AGREEMENT DATED APRIL 10, 2007. A COPY OF SUCH INVESTOR RIGHTS AGREEMENT WILL BE
FURNISHED WITHOUT CHARGE BY THE CORPORATION TO THE HOLDER HEREOF UPON WRITTEN
REQUEST.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES OF COMMON STOCK OF
OPTIONABLE, INC. UNDERLYING THIS WARRANT ARE SUBJECT TO A REGISTRATION RIGHTS
AGREEMENT DATED APRIL 10, 2007. A COPY OF SUCH REGISTRATION RIGHTS AGREEMENT
WILL BE FURNISHED WITHOUT CHARGE BY THE CORPORATION TO THE HOLDER HEREOF UPON
WRITTEN REQUEST.
28
(b) THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED
UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SECURITIES IS EFFECTIVE UNDER
THE ACT OR (II) THE TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE ACT AND,
IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH
EFFECT HAS BEEN RENDERED BY COUNSEL.
A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OF THE
CORPORATION OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS WILL BE FURNISHED BY THE
CORPORATION, WITHOUT CHARGE, TO EACH STOCKHOLDER WHO SO REQUESTS, UPON REQUEST
TO THE SECRETARY OF THE CORPORATION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN INVESTOR RIGHTS
AGREEMENT DATED APRIL 10, 2007. A COPY OF SUCH INVESTOR RIGHTS AGREEMENT WILL BE
FURNISHED WITHOUT CHARGE BY THE CORPORATION TO THE HOLDER HEREOF UPON WRITTEN
REQUEST.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A REGISTRATION
RIGHTS AGREEMENT DATED APRIL 10, 2007. A COPY OF SUCH REGISTRATION RIGHTS
AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE CORPORATION TO THE HOLDER
HEREOF UPON WRITTEN REQUEST.
11. Miscellaneous.
11.1 Waivers and Amendments. No provision of this Agreement
may be waived, modified, supplemented or amended except in a written instrument
signed, in the case of an amendment, by each Founder, the Company and the
Purchaser or, in the case of a waiver, by the party against whom enforcement of
any such waiver is sought. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.
11.2 Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
hand delivered or mailed postage prepaid by registered or certified mail or
transmitted by facsimile transmission (with immediate telephonic confirmation
thereafter),
29
(a) If to the Purchaser:
NYMEX Holdings, Inc.
Xxx Xxxxx Xxx Xxxxxx
World Financial Center
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxxxx Xxxxx, Esq. and Xxxxxxx Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
with a copy to (which shall not constitute notice):
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxxx, Esq. and Xxxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
or (b) If to the Company:
Optionable, Inc.
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Facsimile No.: 000-000-0000
with a copy to (which shall not constitute notice):
Xxxxxx Xxxx & Xxxxxx LLP
13th Floor, 000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
or (c) if to the Founders:
Xxxxxxxx Capital, Inc.
c/o Optionable, Inc.
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Facsimile No.: 000-000-0000
And
Xxxx Xxxxxxxxx
c/o Optionable, Inc.
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Facsimile No.: 000-000-0000
And
Ridgecrest Capital, Inc.
c/o Optionable, Inc.
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxx X'Xxxxxx
Facsimile : 000-000-0000
with a copy to (which shall not constitute notice):
Xxxxxx Xxxx & Xxxxxx LLP
13th Floor, 000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
30
or at such other address as the Company, the Purchaser or any Founder each may
specify by written notice to the others, and each such notice, request, consent
and other communication shall for all purposes of the Agreement be treated as
being effective or having been given when delivered if delivered personally,
upon receipt of facsimile confirmation if transmitted by facsimile, or, if sent
by mail, at the earlier of its receipt or 72 hours after the same has been
deposited in a regularly maintained receptacle for the deposit of United States
mail, addressed and postage prepaid as aforesaid.
11.3 Termination of Agreement. This Agreement may be
terminated prior to the Closing by mutual consent of the Purchaser, the Founders
and the Company.
11.4 Survival of Representations and Warranties. The
representations and warranties contained herein shall survive for thirty-six
(36) months after the Closing, except that Section 6.7, 6.8, 6.10, 6.12, 6.22,
6.25, 6.29 and 6.30 shall survive the Closing for the applicable statue of
limitations and Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.9, 6.14, 6.20, 6.21,
7.1, 7.2 and 7.3 shall survive indefinitely. Each of the Company, the Purchaser
and each Founder shall be responsible only for its own representations and
warranties hereunder.
11.5 Limitation on Liability. The liability of each of the
Company and each Founder for any breach of its representations and warranties
herein shall be limited to the amount of consideration received by such party,
including, in the case of the Company, the Exercise Price.
11.6 No Implied Waivers. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
11.7 Successors and Assigns. All the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective parties hereto, their successors and permitted
assigns. None of the parties hereto may assign any of its rights or obligations
hereunder without the prior written consent of the other parties hereto, except
that the Purchaser may, without the prior consent of the Founders or the
Company, assign its rights hereunder to any of its Affiliates. Except as
expressly set forth herein, this Agreement shall not inure to the benefit of or
be enforceable by any other Person. Notwithstanding the foregoing, nothing
contained in this Section 11.7 shall have any effect on (a) any other provision
of this Agreement that contemplates or requires that any transferee or assignee
of any of the Founders be required to be bound by any obligation hereunder and
(b) any of the rights of a holder of any of the Securities as such.
31
11.8 Headings. The headings and other captions in this
Agreement are for convenience and reference only and shall not be used in
interpreting, construing or enforcing any provision of this Agreement.
11.9 Governing Law. The internal laws, and not the laws of
conflicts (other than Section 5-1401 of the General Obligations Law of the State
of New York), of New York shall govern the enforceability and validity of this
Agreement, the construction of its terms and the interpretation of the rights
and duties of the parties.
11.10 Expenses. Each of the Company, the Founders and the
Purchaser shall pay its own fees and expenses in connection with the
consummation of the transactions contemplated hereby, provided however, the
Company shall pay stamp Taxes, which may be payable with respect to the
execution and delivery of this Agreement, or the issuance, delivery or
acquisition of the Warrant and the Warrant Shares upon the exercise of the
Warrant.
11.11 Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any federal or state court located in the County and State of New York, and each
of the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 11.2 shall be deemed
effective service of process on such party.
11.12 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
11.13 Counterparts; Effectiveness. This Agreement may be
executed in any number of counterparts (including by facsimile) and by different
parties hereto in separate counterparts, with the same effect as if all parties
had signed the same document. All such counterparts shall be deemed an original,
shall be construed together and shall constitute one and the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
32
11.14 Entire Agreement. This Agreement and the other
Transaction Documents contain the entire agreement among the parties hereto with
respect to the subject matter hereof and supersede and replace all other prior
agreements, written or oral, among the parties hereto with respect to the
subject matter hereof.
11.15 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
11.16 Commercially Reasonable Efforts. The Company and the
Purchaser shall each cooperate with the other and use (and shall cause their
respective Subsidiaries to use) their respective commercially reasonable efforts
to promptly (i) take or cause to be taken all necessary actions, and do or cause
to be done all things, necessary, proper or advisable under this Agreement and
applicable laws to consummate and make effective all the transactions
contemplated by this Agreement as soon as practicable, including, without
limitation, preparing and filing promptly and fully all documentation to effect
all necessary filings, notices, petitions, statements, registrations,
submissions of information, applications and other documents and (ii) obtain all
approvals required to be obtained from any Governmental Entity or third party
necessary, proper or advisable to the transactions contemplated by this
Agreement.
[Execution Page Follows]
33
IN WITNESS WHEREOF, the parties hereto have caused this Stock and
Warrant Purchase Agreement to be duly executed as of the day and year first
above written.
OPTIONABLE, INC.
By: /s/ Xxxxx Xxxxxxx
-------------------------------
Name: Xxxxx Xxxxxxx
Title: Chief Executive Officer
NYMEX HOLDINGS, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
-------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Chairman
Xxxx Xxxxxxxxx
/s/ Xxxx Xxxxxxxxx
-------------------------------
Xxxx Xxxxxxxxx
RIDGECREST CAPITAL, INC.
By: /s/ Xxxxxx X'Xxxxxx
-------------------------------
Name: Xxxxxx X'Xxxxxx
Title: Vice President
XXXXXXXX CAPITAL, INC.
By: /s/ Xxxxx Xxxxxxx
-------------------------------
Name: Xxxxx Xxxxxxx
Title: Vice President
34
Exhibit A
List of Founders
PART I
Name of Founder Entity Controlled by Founder and Number of Shares Sold Aggregate Amount of
Selling Common Stock to the to Purchaser Purchase Price to be
Purchaser Paid to Founder
Xxxx Xxxxxxxxx N/A 7,000,000 18,830,000.00
Xxxxxx X'Xxxxxx Ridgecrest Capital, Inc. 1,853,886 4,986,953.45
Xxxxx Xxxxxxx Xxxxxxxx Capital, Inc. 1,905,000 5,124,450
PART II
Name of Founder Number of Shares of Common Stock Beneficially Owned
Xxxx Xxxxxxxxx 15,190,150
Xxxxxx X'Xxxxxx 5,708,016(1)
Xxxxx Xxxxxxx 2,717,437(2)
________________
(1) Includes 3,904,158 shares owned by Ridgecrest Capital, Inc. and 1,803,858
shares owned by Xx. X'Xxxxxx'x daughters.
(2) Includes 2,305,000 shares owned by Xxxxxxxx Capital, Inc. and 113,665
shares owned by Xx. Xxxxxxx'x daughter. In addition, Xx. Xxxxxxx holds
warrants exercisable for 50,000 shares of Common Stock and options
exercisable for 10,000 shares of Common Stock, all of which are currently
exercisable.
A-1
EXHIBIT B
Exhibit B
Form of Non-Competition Agreement with Xxxxxx X'Xxxxxx
A-2
FORM OF NON-COMPETITION AGREEMENT
NON-COMPETITION AGREEMENT (this "Agreement") dated as of April 10,
2007, by and between Optionable, Inc. a Delaware corporation (the "Company") and
Xxxxxx X'Xxxxxx (the "Restricted Party").
WHEREAS, the Company and the Restricted Party are parties to a Stock
and Warrant Purchase Agreement, dated as of April 10, 2007, (the "Stock and
Warrant Purchase Agreement") among the Company, the Restricted Party (through
Ridgecrest Capital, Inc., a New York Corporation), Xxxxx Xxxxxxx (through
Xxxxxxxx Capital, Inc., a New York Corporation), Xxxx Xxxxxxxxx, an individual,
and NYMEX Holdings, Inc. ("NYMEX");
WHEREAS, pursuant to the Stock and Warrant Purchase Agreement, NYMEX
will make a significant investment in the Company through the purchase of shares
of Common Stock of the Company from the Restricted Party, Xxxxx Xxxxxxx and Xxxx
Xxxxxxxxx and the purchase of a warrant from the Company;
WHEREAS, the Restricted Party has valuable knowledge and expertise with
respect to the business of the Company and its Confidential Information (as
defined in Section 2 below) which, if used to compete against the Company, would
have a material adverse effect on the Company;
WHEREAS, in recognition of the Restricted Party's knowledge and
expertise, NYMEX has requested that the Restricted Party enter into a
non-competition agreement with the Company as an inducement to, and condition
of, NYMEX's agreement to make its investment in the Company;
WHEREAS, it is a condition of NYMEX's obligation to close the
transactions contemplated by the Stock and Warrant Purchase Agreement that the
Company and the Restricted Party have entered into this Agreement; and
WHEREAS, the Restricted Party will receive, directly and indirectly,
substantial and valuable consideration upon the consummation of the transactions
contemplated in the Stock and Warrant Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, agreements and understandings contained herein and for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein without being otherwise
defined shall have the meanings assigned to them in the Stock and Warrant
Purchase Agreement.
2. Restrictive Covenants. The Restricted Party acknowledges that the
business in which the Company is engaged is intensely competitive and: (i) by
reason of the Restricted Party's appointment and duties, he is privy to
substantial and vital confidential information of the Company, not generally
published or available to the public, concerning the organization, business and
affairs, products and technology, and customers of the Company, including but
not limited to, business plans, operational methods, financial information and
projections, technical processes and data, product development plans, research
and development, lists of customers, interests and needs of customers, business
plans and policies, overhead and cost information, profit margins, pricing
methods or prices considered or actually charged, lists and records of sales and
contracts, computer software applications and other programs, source codes,
object codes, marketing techniques and materials, marketing and development
plans, price lists, pricing policies, personnel information and other trade
secrets (the "Confidential Information"); (ii) the disclosure of any of the
foregoing to existing or potential competitors of the Company would place the
Company at a serious competitive disadvantage and could do serious damage to the
business of the Company; (iii) by the Restricted Party's training, experience
and expertise, the Restricted Party's services to the Company are extraordinary,
special and unique; (iv) the purposes of the covenants in this Agreement are to
protect the goodwill and Confidential Information of the Company; and (v) NYMEX
has required that the Restricted Party enter into this Agreement as a condition
to its agreement to make its investment in the Company and NYMEX would not close
the transactions contemplated by the Stock and Warrant Purchase Agreement
without the Restricted Party agreeing to be bound by this Agreement.
Accordingly, the Restricted Party willingly agrees to be bound by the following
restrictions :
(a) During the course of the Restricted Party's employment
with the Company and at all times after the termination of the
Restricted Party's employment with the Company for any reason, the
Restricted Party shall not, directly or indirectly, whether
individually, as an officer, director, employee, consultant, owner,
investor, partner or stockholder of any business, or in any other
capacity, make known, disclose, furnish, make available or utilize any
of the Confidential Information, other than in the proper performance
of the duties contemplated herein. The Restricted Party agrees to
return all Confidential Information, including all photocopies,
extracts and summaries thereof, and any such information stored
electronically or in any other manner to the Company at any time upon
request by the Company and upon the termination of the Restricted
Party's employment for any reason. Nothing contained in this Section
2(a) shall be deemed to preclude the Restricted Party from: (i) using
his own general skills, knowledge and experience; (ii) using or
disclosing any Confidential Information which becomes public through no
fault of the Restricted Party; or (ii) disclosing Confidential
Information pursuant to subpoena, court order or legal process,
provided that the Restricted Party gives the Company advance written
notice of the required disclosure so that the Company may, if it
wishes, seek an appropriate protective order.
(b) During the course of the Restricted Party's employment
with the Company and for a period of nine (9) months following the
termination of the Restricted Party's employment with the Company for
any reason (the "Non-Competition Period"), the Restricted Party shall
not, directly or indirectly, whether as officer, director, employee,
consultant, owner, investor, partner or stockholder, be engaged in or
have any financial interest in (other than an interest of less than
five percent (5%) of the stock of a publicly traded company) or
affiliation with or render any services to or for any person, firm,
company or organization which provides "Competitive Services" (as
defined below) to brokerage firms, other financial institutions
providing energy brokerage services or clearinghouses, anywhere in the
United States, it being understood and acknowledged by the Restricted
Party that the Company conducts business and offers Competitive
Services on a nationwide basis. The term Competitive Services shall
mean natural gas and other energy brokerage services. Notwithstanding
the foregoing, it shall not be a violation of this Section 2(b) for the
Restricted Party to become an officer, director, employee, consultant,
owner, investor, partner or stockholder of any person, firm, company or
organization which provides "Competitive Services" if, and only if, the
Restricted Party's primary responsibilities to or for such person,
firm, company or organization do not involve, and do in any significant
manner relate to, providing Competitive Services to brokerage firms,
other financial institutions providing energy brokerage services or
clearinghouses, anywhere in the United States.
2
(c) During the Non-Competition Period, the Restricted Party
shall not, directly or indirectly, for his benefit or for the benefit
of any person, firm or entity (other than the Company):
(i) cause or attempt to cause any Customer (as
defined below) or Prospective Customer (as defined below) of
the Company on whom the Restricted Party called or with whom
the Restricted Party became acquainted during employment with
the Company to obtain Competitive Services from any person,
firm, company or organization other than the Company or to
cease doing business with, or reduce the amount of Competitive
Services obtained from, the Company. For purposes of this
Agreement, "Customer" shall mean any brokerage firm, financial
institution, energy trader, hedge fund or other entity which
was a customer of or had an account with the Company during
the one (1) year period preceding the Restricted Party's
termination of employment for any reason. For purposes of this
Agreement, "Prospective Customer" shall mean any brokerage
firm, financial institution, energy trader, hedge fund or
other entity for which the Company had submitted a written
proposal to provide services within the one (1) year period
preceding the Restricted Party's termination of employment for
any reason (including the expiration of the Term); or
(ii) enter into any partnership, limited liability
company, corporation, new or joint venture or similar
arrangement with, or hire or retain or attempt to hire or
retain, any person who is, or at any time during the one (1)
year period preceding the termination of the Restricted
Party's employment with the Company for any reason, was an
employee of or consultant to the Company, without the prior
written consent of the Company, such consent to be within the
Company's sole and absolute discretion.
(d) The Restricted Party acknowledges that the restrictions
specified in this Section 2 are reasonable in view of the nature of the
business in which the Company is engaged, the Restricted Party's
position with the Company, and the Restricted Party's knowledge of the
Company's business, and that any breach of this Section 2 may cause the
Company irreparable harm for which there is no adequate remedy at law,
and as a result of this, the Company will be entitled to seek the
issuance by a court of competent jurisdiction of an injunction,
restraining order or other equitable relief in favor of the Company,
without the necessity of posting a bond, restraining the Restricted
Party from committing or continuing to commit any such violation. Any
right to obtain an injunction, restraining order or other equitable
relief hereunder will not be deemed to be a waiver of any right to
assert any other remedy the Company may have at law or in equity.
3
(e) The Restricted Party acknowledges and agrees that the
duration and geographic scope of the covenants contained in this
Section 2 are fair and reasonable. Accordingly, the Restricted Party
agrees that, in the event that any of the covenants contained in this
Section 2 is nevertheless judicially determined to be unenforceable
because of the duration or geographic scope thereof, the court making
such determination is hereby directed to reduce such duration and/or
scope to the extent necessary to enable such court to determine that
such covenant is reasonable and enforceable, and to enforce such
covenant as so amended.
(f) The provisions of this Section 2 shall survive the
termination of the Restricted Party's employment for any reason.
3. Notices. Any notice, request, instruction or other document to be
given hereunder by any party hereto to the other party shall be in writing and
shall be given (and will be deemed to have been duly given upon receipt) by
delivery in person, by electronic facsimile transmission, cable, telegram, telex
or other standard forms of written telecommunications, by overnight courier or
by registered or certified mail, postage prepaid,
if to the Company, to
Optionable, Inc.
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to (which shall not constitute notice)
Xxxxxx Xxxx & Xxxxxx LLP
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
if to the Restricted Party, to
Xxxxxx X'Xxxxxx
000 Xxxxx Xxxx
Xxxxxxxxxx Xxxxx, XX 00000
4. Binding Effect; Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the Company and its successors and assigns. This
Agreement shall be binding upon the Restricted Party. Neither this Agreement nor
any right or interest hereunder shall be assignable or transferable by the
Restricted Party, or his, her or its beneficiaries, distributees or legal
representatives.
4
5. Modification and Waiver. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Restricted Party and the Company.
6. Entire Agreement. This Agreement sets forth the entire understanding
of the parties hereto with respect to the subject matter hereof and supersedes
all prior or contemporaneous agreements, written or oral, between them as to
such subject matter.
7. Headings. The headings contained herein are solely for the purpose
of reference, are not part of this Agreement and shall not in any way affect the
meaning or interpretation of this Agreement.
8. Severability. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument. Furthermore, in lieu of any such invalid
or unenforceable term or provision, the parties hereto intend that there shall
be added as a part of this Agreement a provision as similar in terms to such
invalid or unenforceable provision as may be possible and be valid and
enforceable. If any of the covenants of this Agreement are held to be
unreasonable, arbitrary, or against public policy, such covenants will be
considered divisible with respect to scope, time, and geographic area, and in
such lesser scope, time and geographic area, will be effective, binding and
enforceable against the Restricted Party.
9. Counterparts; Facsimile Execution. This Agreement may be executed in
one or more counterparts, all of which taken together shall constitute one and
the same instrument. Any counterpart or other signature to this Agreement that
is obtained by facsimile shall be deemed for all purposes as constituting good
and valid execution and delivery by such party of this Agreement and shall be as
effective as delivery of an original counterpart.
10. Governing Law; Jurisdiction.
(a) This Agreement and the legal relations between the parties
hereto shall be governed by and construed in accordance with the laws
of the State of New York, without regard to its conflict of laws rules.
(b) Each of the parties hereto hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of New York and the United States of America
located in the State of New York (the "New York Courts") for any action
or proceeding arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any action
or proceeding relating thereto except in such courts), and further
agrees that service of any process, summons, notice or document by U.S.
registered mail to his or its respective address set forth in Section 3
hereof shall be effective service of process for any action or
5
proceeding brought against it in any such court. Nothing herein shall
in any way be deemed to limit the ability of any party hereto (i) to
serve any such legal process, summons, notices and documents in any
other manner permitted by applicable law, (ii) to obtain jurisdiction
over the other parties hereto in such other manner, as may be permitted
by applicable law, or (c) to bring any action or proceeding for
enforcement of a judgment entered by a New York Court in any other
jurisdiction. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any
action or proceeding arising out of this Agreement or the transactions
contemplated hereby in a New York Court, and hereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
[The remainder of this page intentionally left blank.]
6
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
OPTIONABLE, INC.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
XXXXXX X'XXXXXX
By:
------------------------------------
Name: Xxxxxx X'Xxxxxx
7
Exhibit C
Form of Registration Rights Agreement
A-3
================================================================================
REGISTRATION RIGHTS AGREEMENT
between
OPTIONABLE, INC. and
NYMEX HOLDINGS, INC.
___________________
Dated as of April 10, 2007
================================================================================
TABLE OF CONTENTS
Page
TABLE OF CONTENTS
Page
1. Certain Definitions...................................................1
2. Demand Registrations..................................................4
(a) Right to Request Registration................................4
(b) Number of Demand Registrations...............................4
(c) Priority on Demand Registrations.............................4
(d) Restrictions on Demand Registrations.........................5
(e) Selection of Underwriters....................................5
(f) Other Registration Rights....................................5
(g) Effective Period of Demand Registrations.....................6
3. Piggyback Registrations...............................................6
(a) Right to Piggyback...........................................6
(b) Priority on Primary Registrations............................7
(c) Priority on Secondary Registrations..........................7
(d) Selection of Underwriters....................................7
4. S-3 Registrations.....................................................7
5. Holdback Agreements...................................................8
6. Registration Procedures...............................................8
7. Registration Expenses................................................13
8. Indemnification......................................................14
9. Participation in Underwritten Registrations..........................15
10. Rule 144.............................................................16
11. Miscellaneous........................................................16
(a) Notices.....................................................16
(b) No Waivers..................................................17
(c) Expenses....................................................17
(d) Successors and Assigns......................................17
(e) Governing Law...............................................17
(f) Jurisdiction................................................17
(g) Waiver of Jury Trial........................................18
(h) Counterparts; Effectiveness.................................18
(i) Entire Agreement............................................18
(j) Captions....................................................18
(k) Severability................................................18
(l) Amendments..................................................18
(m) Aggregation of Stock........................................19
(n) Equitable Relief............................................19
i
REGISTRATION RIGHTS AGREEMENT dated as of April 10, 2007 by and between
Optionable Inc., a Delaware corporation (the "Company"), and NYMEX Holdings,
Inc., a Delaware corporation (the "Stockholder").
WHEREAS, this Agreement is being entered into contemporaneously with
the consummation of the transactions contemplated by that certain Stock and
Warrant Purchase Agreement, dated as of April 10, 2007 (the "Stock and Warrant
Purchase Agreement"), by and among Xxxx Xxxxxxxxx, Xxxxxx X'Xxxxxx (through
Ridgecrest Capital, Inc., a New York corporation), Xxxxx Xxxxxxx (through
Xxxxxxxx Capital, Inc., a New York corporation) (each a "Founder" and,
collectively, the "Founders") and the Company, on the one hand, and the
Stockholder on the other hand; and
WHEREAS, each of the Founders desires to sell to the Stockholder shares
of Common Stock, the Company desires to issue and sell to the Stockholder the
Warrant, and the Stockholder desires to purchase from each of the Founders and
the Company, such shares of Common Stock and the Warrant, respectively, all in
accordance with the terms and provisions of the Stock and Warrant Purchase
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valid consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. Certain Definitions.
In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the following meanings:
"Affiliate" of any Person means any other Person which directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such Person. The term "control" (including the
terms "controlling," "controlled by" and "under common control with") as used
with respect to any Person means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise. Notwithstanding anything to the contrary herein, none of (i) the
Holder (and its Affiliates) nor (ii) any of the individual Founders (and their
Affiliates) shall be deemed to be an Affiliate of any other.
"Agreement" means this Registration Rights Agreement, including all
amendments, modifications and supplements and any exhibits or schedules to any
of the foregoing, and shall refer to this Registration Rights Agreement as the
same may be in effect at the time such reference becomes operative.
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in New York,
New York.
"Common Stock" means common stock, par value $0.0001 per share, of the
Company.
1
"Company" has the meaning set forth in the introductory paragraph of
this Agreement, and any successor corporation.
"Demand Registration" has the meaning set forth in Section 2(a) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Founders" has the meaning set forth in the recitals to this Agreement.
"Full Cooperation" means, in connection with any underwritten offering,
where, in addition to the cooperation otherwise required by this Agreement, (a)
members of senior management of the Company (including the chief executive
officer and chief financial officer) fully cooperate with the underwriter(s) in
connection therewith and make themselves available to participate in "road-show"
and other customary marketing activities in such locations (domestic and
foreign) as recommended by the underwriter(s) (including one-on-one meetings
with prospective purchasers of the Registrable Common Stock) and (b) the Company
prepares preliminary and final prospectuses (including preliminary and final
prospectus supplements in the case of an offering pursuant to an S-3
Registration) for use in connection therewith containing such additional
information as reasonably requested by the underwriter(s) (in addition to the
minimum amount of information required by law, rule or regulation).
"Governmental Entity" means any national, federal, state, municipal,
local, territorial, foreign or other government or any department, commission,
board, bureau, agency, regulatory authority or instrumentality thereof, or any
court, judicial, administrative or arbitral body or public or private tribunal.
"Holder" means any holder of Registrable Common Stock and any
transferees of such Registrable Common Stock from such Holders. For purposes of
this Agreement, the Company may deem and treat the registered holder of
Registrable Common Stock as the Holder and absolute owner thereof, and the
Company shall not be affected by any notice to the contrary.
"Holders' Counsel" has the meaning set forth in Section 6(a)(vii)
hereof.
"Initiating Holder" has the meaning set forth in Section 2(a) hereof.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, incorporated organization,
association, corporation, institution, public benefit corporation, Governmental
Entity or any other entity, and shall include any successor (by merger or
otherwise) of such entity.
"Piggyback Registration" has the meaning set forth in Section 3(a)
hereof.
"Piggyback Registration Statement" has the meaning set forth in Section
3(a) hereof.
"Prospectus" means the prospectus or prospectuses included in any
Registration Statement, as amended or supplemented by any prospectus supplement
with respect to the terms of the offering of any portion of the Registrable
Common Stock covered by such Registration Statement and by all other amendments
and supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus or prospectuses.
2
"Registrable Common Stock" means the shares of Common Stock of the
Company purchased by the Stockholder on the date hereof pursuant to the Stock
and Warrant Purchase Agreement, including such shares issuable from time to time
upon exercise of the Warrant, or issuable with respect to any such shares to
protect the Stockholder against dilution; provided, however, Registrable Common
Stock shall not include any securities sold by a Person to the public either
pursuant to a Registration Statement or Rule 144 under the Securities Act. All
references herein to a "Holder" or "Holder of Registrable Common Stock" shall
include the holder of the Warrant to the extent of the Common Stock then
underlying the Warrant. For purposes of determining the number of shares of
Registrable Common Stock held by a Holder and the number of shares of
Registrable Common Stock outstanding, for purposes of this Agreement (including
the definition of "Holder") but not for any other purpose, the holder of record
of the Warrant shall be deemed to be a Holder of the number of shares of Common
Stock issuable upon exercise of the Warrant and all such Common Stock shall be
deemed to be outstanding shares of Registrable Common Stock.
"Registration Expenses" has the meaning set forth in Section 7(a)
hereof.
"Registration Statement" means any registration statement of the
Company which covers any of the Registrable Common Stock 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 materials incorporated by reference in such Registration
Statement.
"S-3 Registration" has the meaning set forth in Section 4 hereof.
"SEC" means the Securities and Exchange Commission, or any successor
agency thereto.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, as shall be in effect from time to
time.
"Stockholder" has the meaning set forth in the introductory paragraph
of this Agreement.
"Stock and Warrant Purchase Agreement" has the meaning set forth in the
recitals to this Agreement.
"Suspension Notice" has the meaning set forth in Section 6(f) hereof.
"underwritten registration or underwritten offering" means a
registration in which securities of the Company are sold to underwriters for
reoffering to the public.
"Warrant" means the warrant issued by the Company to the Stockholder
pursuant to the Stock and Warrant Purchase Agreement to purchase from time to
time such number of shares of Common Stock so as to increase the Stockholder's
ownership of the Company's Common Stock to an amount not to exceed 40% of the
Company's then outstanding Common Stock on a fully diluted basis (based on the
assumption that the Stockholder had retained ownership of all the shares of
Common Stock purchased under the Stock and Warrant Purchase Agreement, plus all
shares of Common Stock issued upon exercise of the Warrant).
3
"Withdrawn Demand Registration" has the meaning set forth in Section
2(g) hereof.
2. Demand Registrations.
(a) Right to Request Registration. Any time after the date hereof, the
Stockholder and/or one or more of its permitted transferees (the "Initiating
Holder(s)") may request registration under the Securities Act in an underwritten
offering of all or part of the Registrable Common Stock or an underwritten take
down off of an existing, effective shelf registration statement of all or part
of the Registrable Common Stock (each, a "Demand Registration"); provided that
(i) the anticipated offering price of each Demand Registration is at least
$5,000,000 and (ii) the Company shall not be obligated to effectuate more than
one underwritten offering pursuant to a Demand Registration in any six-month
period, unless any or all of the shares included in the first Demand
Registration statement, including any such shares included in an underwritten
take down off of an existing, effective shelf registration statement, remain
unsold. In connection with each such Demand Registration, the Company shall
cause there to occur Full Cooperation. Each request for a Demand Registration
shall state the number of shares of Registrable Common Stock proposed to be sold
and the intended methods of disposition thereof.
Within ten days after receipt of any such request for Demand
Registration, the Company shall give written notice of such request to all other
Holders of Registrable Common Stock and shall, subject to the provisions of
Section 2(d) hereof, include in such registration all such Registrable Common
Stock with respect to which the Company has received written requests for
inclusion therein within 15 days after the receipt of the Company's notice.
(b) Number of Demand Registrations. Subject to the provisions of
Section 2(a) hereof, the Holders of Registrable Common Stock shall be entitled
to request an aggregate of two Demand Registrations. A registration shall not
count as one of the permitted Demand Registrations (i) until it has become
effective, (ii) if the Initiating Holder is not able to register at least 50% of
the Registrable Common Stock requested by such Initiating Holder to be included
in such Demand Registration, (iii) in the case of a Demand Registration that
would be the last permitted Demand Registration requested hereunder, if the
Initiating Holder is not able to register all of the Registrable Common Stock
requested to be included by the Initiating Holder in such Demand Registration,
or (iv) if there is not Full Cooperation in connection therewith.
(c) Priority on Demand Registrations. Except as provided in Section
2(g) hereof, the Company shall not include in any Demand Registration any
securities which are not Registrable Common Stock without the written consent of
the Holders of a majority of the shares of Registrable Common Stock to be
included in such registration, and without the written consent of the managing
underwriters. If the managing underwriters of the requested Demand Registration
advise the Company in writing that in their opinion the number of shares of
Registrable Common Stock proposed to be included in any such Demand Registration
exceeds the number of shares which can be sold in such offering and/or that the
number of shares of Registrable Common Stock proposed to be included in any such
Demand Registration would adversely affect the price per share of the Company's
equity securities to be sold in such offering, the Company shall include in such
Demand Registration only the number of shares of Registrable Common Stock which
in the opinion of such managing underwriter(s) can be sold. If the number of
shares which can be sold is less than the number of shares of Registrable Common
Stock proposed to be registered or sold in the Demand Registration, the amount
of Registrable Common Stock to be so sold shall be allocated (i) first, to the
shares of Registrable Common Stock requested to be registered by the Initiating
Holders, and (ii) second, pro rata among the other Holders of Registrable Common
Stock desiring to participate in such Demand Registration on the basis of the
amount of such Registrable Common Stock initially proposed to be registered or
sold off of an existing, effective shelf registration statement by such other
Holders.
4
(d) Restrictions on Demand Registrations. If the Company's Board of
Directors, in its good faith judgment, determines that any Demand Registration
should not be made or continued because (i) it would interfere with any material
financing, acquisition, corporate reorganization or merger or other material
transaction involving the Company or (ii) it would result in premature
disclosure of a matter the Company's Board of Directors has determined would not
be in the best interest of the Company to be disclosed at such time, the Company
may postpone the filing of a registration statement or, in case a registration
statement has been filed, may cause such registration statement to be withdrawn,
for up to 90 days; provided, however, that in no event shall the Company
withdraw a Registration Statement after such Registration Statement has been
declared effective; and provided, further, however, that in any of the events
described above, the Initiating Holder requesting such Demand Registration shall
be entitled to withdraw such request and, if such request is withdrawn, such
Demand Registration shall not count as one of the permitted Demand
Registrations. Notwithstanding the foregoing, for the duration of any such
withdrawal or postponement period, the Company shall use commercially reasonable
efforts to continue to prepare such Registration Statement and any related
materials so that the Company will be in a position to file such Registration
Statement when the withdrawal or postponement period shall have expired. The
Company shall provide written notice to the Initiating Holder requesting such
Demand Registration of (x) any postponement or withdrawal of the filing or
effectiveness of a Registration Statement pursuant to this Section 2(d) hereof,
(y) the Company's decision to file or seek effectiveness of such Registration
Statement following such withdrawal or postponement and (z) the effectiveness of
such Registration Statement. The Company may defer the filing of a particular
Registration Statement pursuant to this Section 2(d) hereof only once during any
twelve-month period.
(e) Selection of Underwriters. The Initiating Holder(s) shall have the
right to select the managing underwriter(s) to administer the underwritten
offering made pursuant to any Demand Registration subject to the approval of the
Company, which will not be unreasonably withheld.
(f) Other Registration Rights. The Company shall not grant to any
Person the right, other than as set forth herein and except to employees of the
Company with respect to registrations on Form S-8 (or any successor forms
thereto), to request the Company to register any securities of the Company
except such rights as are not more favorable than or inconsistent with the
rights granted to the Holders herein. In the event the Company grants rights
which are more favorable, the Company will make such provisions available to the
Holders and will enter into any amendments necessary to confer such rights on
the Holders. No Person, other than as set forth herein, shall be permitted to
exercise piggyback or other similar registration rights in any Demand
Registration unless all of the shares of Registrable Common Stock requested to
be registered by the Initiating Holders are included on such Demand
Registration.
5
(g) Effective Period of Demand Registrations. After any Demand
Registration filed pursuant to this Agreement has become effective or after a
final Prospectus relating to an underwritten take down off of an existing,
effective shelf registration statement has been filed, the Company shall use its
commercially reasonable efforts to keep such Demand Registration effective
(including any shelf registration statement supplemented by a prospectus
supplement) for a period of at least 120 days from the date on which the SEC
declares such Demand Registration effective or, in the case of an underwritten
take down off of an existing, effective shelf registration statement, from the
date of filing of the final Prospectus (if such Demand Registration is not
effective during any period within such 120 days, such 120-day period shall be
extended by the number of days during such period when such Demand Registration
is not effective) or, if earlier, until all of the Registrable Common Stock
covered by such Demand Registration has been sold. If the Company shall withdraw
any Demand Registration pursuant to Section 2(d) hereof (a "Withdrawn Demand
Registration"), the Initiating Holder of the Registrable Common Stock remaining
unsold and originally covered by such Withdrawn Demand Registration shall be
entitled to a replacement Demand Registration which (subject to the provisions
of this Section 2) the Company shall use its commercially reasonable efforts to
keep effective for a period commencing on the effective date of such Demand
Registration or, in the case of an underwritten take down off of an existing,
effective shelf registration statement, from the date of filing of the final
Prospectus, and ending on the earlier to occur of the date (i) which is 120 days
from the effective date of such Demand Registration or, in the case of an
underwritten take down off of an existing, effective shelf registration
statement, from the date of filing of the final Prospectus and (ii) on which all
of the Registrable Common Stock covered by such Demand Registration has been
sold. Such additional Demand Registration otherwise shall be subject to all of
the provisions of this Agreement.
3. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register any
of its common equity securities on a registration statement (the "Piggyback
Registration Statement") under the Securities Act (other than a registration
statement on Form S-8 or on Form S-4 or any similar successor forms thereto) or
to effectuate a take down off of an existing, effective shelf registration
statement, whether for its own account or for the account of one or more
stockholders of the Company, and the registration form to be used may be used
for any registration of Registrable Common Stock (a "Piggyback Registration"),
the Company shall give written notice to all Holders at least 10 Business Days
prior to the initial filing of such Piggyback Registration Statement or
Prospectus relating to an underwritten take down off of an existing, effective
shelf registration statement or the date of the commencement of any such
offering of its intention to effect such sale or registration and, subject to
Sections 3(b) and 3(c) hereof, shall include in such Piggyback Registration
Statement or Prospectus all Registrable Common Stock of the same class of the
securities that are being registered and that are the subject of the offering
with respect to which the Company has received a written request from a Holder
for inclusion therein within 5 Business Days after the date of the Company's
notice. The Company may postpone or withdraw the filing or the effectiveness of
a Piggyback Registration at any time in its sole discretion.
6
(b) 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 in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number of
securities which can be sold in such offering and/or that the number of shares
of Registrable Common Stock proposed to be included in any such registration
would adversely affect the price per share of the Company's equity securities to
be sold in such offering, the Company shall include in such registration (i)
first, the securities the Company proposes to sell, and (ii) second, the
Registrable Common Stock requested to be included therein by the Holders, and
other securities requested to be included in such registration pro rata among
the Holders and the holders of such securities on the basis of the number of
shares requested to be registered by the Holders and such holders or as the
Holders and such other holders may otherwise agree.
(c) Priority on Secondary Registrations. If a Piggyback Registration is
an underwritten secondary registration on behalf of a holder of the Company's
securities other than Registrable Common Stock, and the managing underwriters
advise the Company in writing 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 and/or that the number of shares of Registrable Common
Stock proposed to be included in any such registration would adversely affect
the price per share of the Company's equity securities to be sold in such
offering, the Company shall include in such registration (i) first, the
securities requested to be included therein by the holders requesting such
registration pro rata among the holders of such securities on the basis of the
number of shares requested to be registered by such holders, (ii) second, the
Registrable Common Stock requested to be included in such registration pro rata
among the Holders thereof on the basis of the number of shares requested to be
registered by such Holders and (iii) third, other securities requested to be
included in such registration pro rata among the holders of such securities on
the basis of the number of shares requested to be registered by such holders or
as such holders may otherwise agree.
(d) Selection of Underwriters. If any Piggyback Registration is an
underwritten primary offering, the Company shall have the right to select the
managing underwriter or underwriters to administer any such offering.
4. S-3 Registrations.
If at any time that the Company is eligible to use Form S-3 or any
successor thereto, the Initiating Holder requests that the Company file a
Registration Statement on Form S-3 or any successor thereto for a public
offering of all or any portion of the Registrable Common Stock held by such
Holders, then the Company shall use its commercially reasonable efforts to
register under the Securities Act on Form S-3 or any successor thereto (an "S-3
Registration"), for public sale in accordance with the method of disposition
specified in such notice, the number of shares of Registrable Common Stock
specified in such notice; provided, however, that (i) no more than two such S-3
Registrations shall be required in any 12 month period and (ii) the Company
shall have no obligation to register such shares of Registrable Common Stock
pursuant to this Section 4 if (based on current market prices) the number of
shares of Registrable Common Stock specified in such notice would not yield
gross proceeds to the selling stockholders of at least $5,000,000. An S-3
Registration shall not count as a Demand Registration, unless such registration
is for an underwritten offering or an underwritten take down off of an existing,
effective shelf registration statement, in which case it shall be subject to the
provisions of Section 2 hereof to count as a Demand Registration.
7
Whenever the Company is required by this Section 4 to use its
commercially reasonable efforts to effect the registration of Registrable Common
Stock on Form S-3, each of the procedures and requirements of Section 2 hereof
(including but not limited to the requirement that the Company notify all
Holders from whom notice has not been received and provide them with the
opportunity to participate in the offering) shall apply to such registration.
The Company shall maintain the effectiveness of any such S-3 Registration until
the earlier of the date on which (i) all of the Registrable Common Stock
included thereon has been sold, and (ii) all of the Registrable Common Stock may
be sold without restriction or limitation pursuant to Rule 144(k) under the
Securities Act. There is no limitation on the number of registrations pursuant
to this Section 4 that the Company is obligated to effect.
5. Holdback Agreements.
The Company agrees not to effect any sale or distribution of any of its
equity securities during the 10 days prior to and during the 90 days beginning
on the effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration or the date of the filing of a final
Prospectus relating to an underwritten take down off of an existing, effective
shelf registration statement (except as part of such underwritten registration
or pursuant to registrations on Form S-8 or S-4 or any successor forms thereto)
unless the underwriters managing the offering otherwise agree to a shorter
period or request a longer period, such period not to exceed 180 days; provided,
however, that in no event will the Company be required not to sell or distribute
its equity securities for more than an aggregate of 270 days in any period of
360 consecutive days solely as a result of any Demand Registration of NYMEX, not
including any holdback agreements relating to any other offering whether or not
NYMEX participates.
6. Registration Procedures.
(a) Whenever the Holders request that any Registrable Common Stock be
registered or sold in an underwritten take down off of an existing, effective
shelf registration statement, each pursuant to this Agreement, the Company shall
use its commercially reasonable efforts to effect the registration or the filing
of the Prospectus, as applicable, and the sale of such Registrable Common Stock
in accordance with the intended methods of disposition thereof, and pursuant
thereto the Company shall as expeditiously as possible, but in no event later
than 60 days after any such request:
8
(i) prepare and file with the SEC a Registration
Statement with respect to such Registrable Common Stock and
use its commercially reasonable efforts to cause such
Registration Statement to become effective as soon as
practicable thereafter, but in no event later than 45 days
after the filing of such Registration Statement, in the case
of an S-3 Registration and 90 days after the filing of such
Registration Statement in the case of a Registration Statement
on Form S-1; and before filing a Registration Statement or
Prospectus or any amendments or supplements thereto, furnish
to the Holders of Registrable Common Stock covered by such
Registration Statement and the underwriter or underwriters, if
any, copies of all such documents proposed to be filed,
including documents incorporated by reference in the
Prospectus and, if requested by such Holders, the exhibits
incorporated by reference, and such Holders shall have the
opportunity to object to any information pertaining to such
Holders that is contained therein and the Company will make
the corrections reasonably requested by such Holders with
respect to such information prior to filing any Registration
Statement or amendment thereto or any Prospectus or any
supplement thereto;
(ii) prepare and file with the SEC 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 a period of not
less than (A) in the case of a Demand Registration, 120 days,
or (B) in the case of an S-3 Registration, the earlier of the
date on which (i) all of the Registrable Common Stock included
thereon has been sold, and (ii) all of the Registrable Common
Stock may be sold without restriction or limitation pursuant
to Rule 144(k) under the Securities Act, or, in the case of
each of (A) or (B) above, such shorter period as is necessary
to complete the distribution of the securities covered by such
Registration Statement and 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;
(iii) furnish to each seller of Registrable Common
Stock such number of 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 Common Stock owned by such seller;
(iv) use its commercially reasonable efforts to
register or qualify such Registrable Common Stock under such
other securities or blue sky laws of such jurisdictions as any
seller of Registrable Common Stock reasonably requests and do
any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Common
Stock owned by such seller (provided, that the Company will
not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to
qualify but for this subparagraph (iv), (B) subject itself to
taxation in any such jurisdiction or (C) consent to general
service of process in any such jurisdiction);
9
(v) notify each seller of such Registrable Common
Stock, at any time when a Prospectus relating thereto is
required to be delivered under the Securities Act, of the
occurrence of any event as a result of which the Prospectus
included in such Registration Statement contains an untrue
statement of a material fact or omits to state any material
fact necessary to make the statements therein not misleading,
and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such Prospectus so that,
as thereafter delivered to the purchasers of such Registrable
Common Stock, such Prospectus shall not contain an untrue
statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading;
(vi) in the case of an underwritten offering, enter
into such customary agreements (including underwriting
agreements in customary form) and take all such other actions
as are prudent and reasonable in order to expedite or
facilitate the disposition of such Registrable Common Stock
(including, without limitation, making members of senior
management of the Company available to participate in, and
cause them to cooperate with the underwriters in connection
with, "road-show" and other customary marketing activities
(including one-on-one meetings with prospective purchasers of
the Registrable Common Stock)) organized by the managing
underwriter and cause to be delivered to the underwriters and
the sellers, if any, opinions of counsel to the Company in
customary form, covering such matters as are customarily
covered by opinions for an underwritten public offering as the
underwriters may request and addressed to the underwriters and
the sellers;
(vii) make available, at reasonable times for
inspection by any seller of Registrable Common Stock, any
underwriter participating in any disposition pursuant to such
Registration Statement, any attorney, accountant or other
agent retained by the underwriter and one counsel retained by
Holders holding a majority of the Registrable Common Stock
being registered in such registration ("Holders' Counsel"),
all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to
supply all information reasonably requested by any such
seller, underwriter, attorney, accountant, agent or Holders'
Counsel in connection with such Registration Statement;
(viii) use its commercially reasonable efforts to
cause all such Registrable Common Stock to be listed on each
securities exchange on which securities of the same class
issued by the Company are then listed or, if no such similar
securities are then listed, on the OTC Bulletin Board or on
Nasdaq or such other national securities exchange selected by
the Company;
(ix) provide a transfer agent and registrar for all
such Registrable Common Stock not later than the effective
date of such Registration Statement;
10
(x) if requested, cause to be delivered, immediately
prior to the effectiveness of the Registration Statement (and,
in the case of an underwritten take down off of an existing,
effective shelf registration statement, at the time of the
pricing and the delivery of any Registrable Common Stock sold
pursuant thereto), letters from the Company's independent
certified public accountants addressed to each selling Holder
(unless such selling Holder does not provide to such
accountants the appropriate representation letter required by
rules governing the accounting profession) and each
underwriter, if any, stating that such accountants are
independent public accountants within the meaning of the
Securities Act and the applicable rules and regulations
adopted by the SEC thereunder, and otherwise in customary form
and covering such financial and accounting matters as are
customarily covered by letters of the independent certified
public accountants delivered in connection with primary or
secondary underwritten public offerings, as the case may be;
(xi) make generally available to its stockholders a
consolidated earnings statement (which need not be audited)
covering a period of 12 months beginning after the effective
date of a Registration Statement as soon as reasonably
practicable after the end of such period, but no later than 15
months after the effective date of the Registration Statement,
which earnings statement shall satisfy the requirements of an
earnings statement under Section 11(a) of the Securities Act;
and
(xii) promptly notify each seller of Registrable
Common Stock and the underwriter or underwriters, if any:
(1) when the Registration Statement, any
pre-effective amendment, the Prospectus or
any free writing prospectus or
post-effective amendment to the Registration
Statement has been filed and, with respect
to the Registration Statement or any
post-effective amendment, when the same has
become effective;
(2) of any written request by the SEC for
amendments or supplements to the
Registration Statement or Prospectus;
(3) of the notification to the Company by
the SEC of its initiation of any proceeding
with respect to the issuance by the SEC of
any stop order suspending the effectiveness
of the Registration Statement; and
(4) of the receipt by the Company of any
notification with respect to the suspension
of the qualification of any Registrable
Common Stock for sale under the applicable
securities or blue sky laws of any
jurisdiction.
(b) [Intentionally left blank.]
11
(c) The Company shall make available to Holder's Counsel, each
preliminary Prospectus, free writing prospectus and Prospectus and each
amendment or supplement thereto, each letter written by or on behalf of the
Company to the SEC or the staff of the SEC (or other governmental agency or
self-regulatory body or other body having jurisdiction, including any domestic
or foreign securities exchange), and each item of correspondence from the SEC or
the staff of the SEC (or other governmental agency or self-regulatory body or
other body having jurisdiction, including any domestic or foreign securities
exchange), in each case relating to a Registration Statement (other than any
portion thereof which contains information for which the Company has sought
confidential treatment). The Company will promptly notify Holder's Counsel by
facsimile of the effectiveness of each Registration Statement or any
post-effective amendment. The Company will promptly respond to any and all
comments received from the SEC, with a view towards causing each Registration
Statement or any amendment thereto to be declared effective by the SEC as soon
as practicable and shall file an acceleration request as soon as practicable
following the resolution or clearance of all SEC comments or, if applicable,
following notification by the SEC that any such Registration Statement or any
amendment thereto will not be subject to review.
(d) At all times after the Company has filed a registration statement
with the SEC pursuant to the requirements of either the Securities Act or the
Exchange Act, the Company shall file all reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder, and take such further action as any Holders may
reasonably request, all to the extent required to enable such Holders to be
eligible to sell Registrable Common Stock pursuant to Rule 144 under the
Securities Act (or any similar rule then in effect).
(e) The Company may require each seller of Registrable Common Stock as
to which any registration is being effected to furnish and such seller shall
furnish, to the Company any other information regarding such seller and the
distribution of such securities as the Company may from time to time reasonably
request in writing.
(f) Each seller of Registrable Common Stock agrees by having its stock
treated as Registrable Common Stock hereunder that, upon notice of the happening
of any event as a result of which the Prospectus included in such Registration
Statement contains an untrue statement of a material fact or omits any material
fact necessary to make the statements therein not misleading (a "Suspension
Notice"), such seller will forthwith discontinue disposition of Registrable
Common Stock for a reasonable length of time until such seller is advised in
writing by the Company that the use of the Prospectus may be resumed and is
furnished with a supplemented or amended Prospectus as contemplated by Section
6(c) hereof, and, if so directed by the Company, such seller will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such seller's possession, of the Prospectus covering such Registrable
Common Stock current at the time of receipt of such notice; provided, however,
that such postponement of sales of Registrable Common Stock by the Holders shall
not exceed one hundred and twenty (120) days in the aggregate in any one year.
If the Company shall give any notice to suspend the disposition of Registrable
Common Stock pursuant to a Prospectus, the Company shall extend the period of
time during which the Company is required to maintain the Registration Statement
effective pursuant to this Agreement by the number of days during the period
from and including the date of the giving of such notice to and including the
date such seller either is advised by the Company that the use of the Prospectus
may be resumed or receives the copies of the supplemented or amended Prospectus
contemplated by Section 6(c). In any event, the Company shall not be entitled to
deliver more than three (3) Suspension Notices in any one year. Nothing in this
Section 6(f) shall be deemed to extend the 60 day limit to any postponement or
withdrawal period as described in Section 2(d) regarding restrictions on Demand
Registrations.
12
7. Registration Expenses.
(a) All reasonable, documented out of pocket expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, listing application fees, printing expenses,
transfer agent's and registrar's fees, costs of distributing Prospectuses in
preliminary and final form as well as any supplements thereto, and fees and
disbursements of counsel for the Company and all independent certified public
accountants and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses") (but not including any underwriting
discounts or commissions attributable to the sale of Registrable Common Stock or
legal fees and expenses of the Holders, which shall be borne by the Holders),
shall be borne 50% by the Company, on the one hand, and 50% by the Holders on
the other, subject to the provisions of Section 7(b) hereof. In addition, the
Company shall pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly review, the
expense of any liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which they are to be
listed.
(b) In connection with each registration initiated hereunder, if
another holder of the Company's Common Stock exercises piggyback rights with
respect to or is otherwise included in such registration, then, in such event,
the portion of the Company's reasonable out of pocket documented expenses to be
borne by the Holder shall be the lesser of (i) 50%, and (ii) the Holders' pro
rata portion, of such expenses (based on the Holders' proportionate number of
shares included in such registration statement). For the avoidance of doubt, the
reasonable, documented out of pocket expenses of the Company shall not include
(i) any amounts for which the Company received reimbursement from other selling
stockholders or (ii) any amounts payable by the Company for counsel fees or
other similar fees, commissions and expenses incurred by other selling
stockholders. If the Holders exercise piggyback rights with respect to an
offering by the Company, the Company shall bear all reasonable, documented out
of pocket expenses of any such piggyback registrations other than (i) the
Holders' pro rata portion of such expenses (based on the Holders' proportionate
number of shares included in such registration statement) and (ii) fees and
expenses of Holders' Counsel and underwriter discounts; provided, however, that
in no event shall the expenses to be borne by the Holders exceed 50% of the
Company's reasonable, documented out of pocket expenses. For purposes of the
proviso set forth in the preceding sentence, the reasonable, documented out of
pocket expenses of the Company shall not include (i) any amounts for which the
Company received reimbursement from other selling stockholders or (ii) any
amounts payable by the Company for counsel fees or other similar fees,
commissions and expenses incurred by other selling stockholders
(c) The obligations set forth in Section 7(a) and Section 7(b) hereof
shall apply irrespective of whether a registration, once properly demanded, if
applicable, becomes effective, is withdrawn or suspended, is converted to
another form of registration and irrespective of when any of the foregoing shall
occur.
13
8. Indemnification.
(a) The Company shall indemnify, to the fullest extent permitted by
law, each Holder, its officers, directors and Affiliates and each Person who
controls such Holder (within the meaning of Section 15 of the Securities Act)
against all losses, claims, damages, liabilities and reasonable expenses arising
out of or based upon any untrue or alleged untrue statement of material fact
contained in any Registration Statement, free writing prospectus, Prospectus or
preliminary Prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading or any violation or
alleged violation by the Company of the Securities Act, the Exchange Act or
applicable "blue sky" laws, except insofar as the same are made in reliance and
in conformity with information relating to such Holder furnished in writing to
the Company by such Holder expressly for use therein or caused by such Holder's
failure to deliver to such Holder's immediate purchaser a copy of the
Registration Statement, free writing prospectus or Prospectus or any amendments
or supplements thereto (if the same was required by applicable law to be so
delivered) after the Company has furnished such Holder with a sufficient number
of copies of the same. In connection with an underwritten offering, the Company
shall indemnify such underwriters, their officers and directors and each Person
who controls such underwriters (within the meaning of the Securities Act) to the
same extent as provided above with respect to the indemnification of the
Holders.
(b) In connection with any Registration Statement in which a Holder of
Registrable Common Stock is participating, each such Holder shall furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such Registration Statement, free
writing prospectus or Prospectus and, shall indemnify, to the fullest extent
permitted by law, the Company, its officers, directors and Affiliates, and each
Person who controls the Company (within the meaning of Section 15 of the
Securities Act) against all losses, claims, damages, liabilities and reasonable
expenses arising out of or based upon any untrue or alleged untrue statement of
material fact contained in the Registration Statement, free writing prospectus,
Prospectus or preliminary Prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only to the extent that the same are made in reliance and in conformity with
information relating to such Holder furnished in writing to the Company by such
Holder expressly for use therein or caused by such Holder's failure to deliver
to such Holder's immediate purchaser a copy of the Registration Statement, free
writing prospectus or Prospectus or any amendments or supplements thereto (if
the same was required by applicable law to be so delivered) after the Company
has furnished such Holder with a sufficient number of copies of the same;
provided, however, that the obligation to indemnify shall be several, not joint
and several, among such Holders and the liability of each such Holder shall be
in proportion to and limited to the net amount received by such Holder from the
sale of Registrable Common Stock pursuant to such Registration Statement.
14
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) permit such indemnifying party to assume
the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party shall not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably withheld). The
indemnified party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be paid by the indemnified party unless (i) the indemnifying party
fails to assume the defense of such action or (ii) the named parties to any such
action include both the indemnifying party and the indemnified party and such
parties have been advised by counsel to the indemnifying party that either (x)
representation of such indemnified party and the indemnifying party by the same
counsel would be inappropriate under applicable standards of professional
conduct or (y) there may be one or more legal or equitable defenses available to
the indemnified party which are different from, in conflict with or additional
to those available to the indemnifying party. In either such case, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified parties, it being understood, however, that the
indemnifying party shall not be liable for the fees and expenses of more than
one separate firm or attorneys (in additional to any local counsel) for all
indemnified parties. Failure to give prompt written notice shall not release the
indemnifying party from its obligations hereunder.
(d) The indemnification provided for under this Agreement shall remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities.
(e) If the indemnification provided for in or pursuant to this Section
8 is due in accordance with the terms hereof, but is held by a court to be
unavailable or unenforceable in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
which result in such losses, claims, damages, liabilities or expenses as well as
any other relevant equitable considerations. The relative fault of the
indemnifying party on the one hand and of the indemnified Person on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the indemnifying
party or by the indemnified party, and by such party's relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. In no event shall the liability of any selling Holder be
greater in amount than the amount of net proceeds received by such Holder upon
such sale or the amount for which such indemnifying party would have been
obligated to pay by way of indemnification if the indemnification provided for
under Section 8(a) or 8(b) hereof had been available under the circumstances.
9. Participation in Underwritten Registrations.
No Person may participate in any registration hereunder which is
underwritten unless such Person (a) 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 (b) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
15
10. Rule 144.
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder, and it will take such further action
as any Holder may reasonably request to make available adequate current public
information with respect to the Company meeting the current public information
requirements of Rule 144(c) under the Securities Act, to the extent required to
enable such Holder to sell Registrable Common Stock without registration under
the Securities Act within the limitation of the exemptions provided by (i) Rule
144 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 SEC. Upon the
request of any Holder, the Company will deliver to such Holder a written
statement as to whether it has complied with such information and requirements.
11. Miscellaneous.
(a) Notices. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be hand delivered
or mailed postage prepaid by registered or certified mail or by facsimile
transmission (with immediate telephone confirmation thereafter),
If to the Company:
Optionable Inc.
000 Xxxxxxxx Xxxxxx,
Xxxxxxxx, XX
Attention: Xxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxxx Xxxx & Xxxxxx LLP
13th Floor, 000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
If to the Stockholder:
NYMEX Holdings, Inc.
Xxx Xxxxx Xxx Xxxxxx
Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxxx, Esq. and Xxxxxxx X.
Xxxxxxxxx, Esq.
Facsimile No.:(000) 000-0000
16
If to a transferee Holder, to the address of such Holder set forth in
the transfer documentation provided to the Company;
in each case with copies to (which shall not constitute notice):
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxx X. Xxxxxxxx, Esq. and Xxxxxxx X.
Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
or at such other address as such party each may specify by written notice to the
others, and each such notice, request, consent and other communication shall for
all purposes of the Agreement be treated as being effective or having been given
when delivered personally, upon receipt of facsimile confirmation if transmitted
by facsimile, or, if sent by mail, at the earlier of its receipt or 72 hours
after the same has been deposited in a regularly maintained receptacle for the
deposit of United States mail, addressed and postage prepaid as aforesaid.
(b) No Waivers. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
(c) Expenses. Except as otherwise provided for herein or otherwise
agreed to in writing by the parties, all costs and expenses incurred by each
party in connection with the preparation of this Agreement shall be paid by such
party.
(d) Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, it being understood that subsequent Holders of the
Registrable Common Stock are intended third party beneficiaries hereof.
(e) Governing Law. The internal laws, and not the laws of conflicts
(other than Section 5-1401 of the General Obligations Law of the State of New
York), of New York shall govern the enforceability and validity of this
Agreement, the construction of its terms and the interpretation of the rights
and duties of the parties.
(f) Jurisdiction. Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby may be brought in any federal
or state court located in the County and State of New York, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 11(a) hereof shall be
deemed effective service of process on such party.
17
(g) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(h) Counterparts; Effectiveness. This Agreement may be executed in any
number of counterparts (including by facsimile) and by different parties hereto
in separate counterparts, with the same effect as if all parties had signed the
same document. All such counterparts shall be deemed an original, shall be
construed together and shall constitute one and the same instrument. This
Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
(i) Entire Agreement. This Agreement contains the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes and replaces all other prior agreements, written or oral, among the
parties hereto with respect to the subject matter hereof.
(j) Captions. The headings and other captions in this Agreement are for
convenience and reference only and shall not be used in interpreting, construing
or enforcing any provision of this Agreement.
(k) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such a
determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
(l) Amendments. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
without the prior written consent of the holders of a majority of the
Registrable Common Stock (as constituted on the date hereof); provided, however,
that without a Holder's written consent no such amendment, modification,
supplement or waiver shall affect adversely such Holder's rights hereunder in a
discriminatory manner inconsistent with its adverse effects on rights of other
Holders hereunder (other than as reflected by the different number of shares
held by such Holder); provided, further, that the consent or agreement of the
Company shall be required with regard to any termination, amendment,
modification or supplement of, or waivers or consents to departures from, the
terms hereof, which affect the Company's obligations hereunder. This Agreement
cannot be changed, modified, discharged or terminated by oral agreement.
18
(m) Aggregation of Stock. All Registrable Common Stock held by or
acquired by any Affiliated Persons will be aggregated together for the purpose
of determining the availability of any rights under this Agreement.
(n) Equitable Relief. The parties hereto agree that legal remedies may
be inadequate to enforce the provisions of this Agreement and that equitable
relief, including specific performance and injunctive relief, may be used to
enforce the provisions of this Agreement.
[Execution Page Follows]
IN WITNESS WHEREOF, this Registration Rights Agreement has been duly
executed by each of the parties hereto as of the date first written above.
NYMEX Holdings, Inc.
By:
----------------------------------------------
Name:
Title:
Optionable, Inc.
By:
-----------------------------------------------
Name:
Title:
19
Exhibit D
Form of Investor Rights Agreement
A-4
INVESTOR RIGHTS AGREEMENT
INVESTOR RIGHTS AGREEMENT (this "Agreement"), dated as of
April 10, 2007, by and among: (a) Optionable, Inc., a Delaware corporation (the
"Company"), (b) NYMEX Holdings, Inc., a Delaware corporation (the "Investor"),
and (c) Xxxx Xxxxxxxxx, Xxxxxx X'Xxxxxx, through Ridgecrest Capital, Inc., a New
York corporation ("Ridgecrest"), and Xxxxx Xxxxxxx, through Xxxxxxxx Capital,
Inc., a New York corporation ("Xxxxxxxx") (each a "Founder" and collectively,
the "Founders").
WHEREAS, as part of the transactions contemplated by the Stock
and Warrant Purchase Agreement, dated as of April 10, 2007 (the "Stock and
Warrant Purchase Agreement"), by and among the Company, the Investor and the
Founders, the Investor is purchasing (i) an aggregate 10,758,886 shares of
Common Stock (as defined below) of the Company from the Founders, and (ii) the
Warrant (as defined below) from the Company;
WHEREAS, the Investor, the Founders and the Company desire to
enter into this Agreement for the purpose of governing certain aspects of the
Stockholders' (as defined below) relationships with each other and the Company;
and
WHEREAS, it is in the best interests of the Company and the
Stockholders that such aspects of their relationships be so governed;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein and intending to be legally bound the parties
hereto hereby agree as follows:
Section 1. Definitions. As used in this Agreement, the
following terms shall have the meanings ascribed to them below:
(a) "Acceptance Period" has the meaning set forth in Section
2(a)(i) hereof.
(b) "Accepted Number" has the meaning set forth in Section
2(a)(ii) hereof.
(c) "Affiliate" of any Person means any other Person which
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person. The term "control"
(including the terms "controlling," "controlled by" and "under common control
with") as used with respect to any Person means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise. Notwithstanding anything to the contrary herein, none of
(i) the Investor (and its Affiliates) nor (ii) any of the individual Founders
(and their Affiliates) shall be deemed to be an Affiliate of any other.
(d) "Agreement" has the meaning set forth in the introductory
paragraph.
(e) "Business Day" means any day that is not a Saturday, a
Sunday or other day on which banks are required or authorized by law to be
closed in New York, New York.
(f) "Change of Control" means the acquisition by any
independent third party or group (within the meaning of Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act, or any successor provision), including any
group acting for the purpose of acquiring, holding or disposing of securities
(within the meaning of Rule 13d-5(b)(1) under the Exchange Act), in a single
transaction or in a related series of transactions, by way of merger,
consolidation or other business combination or purchase of beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act, or any successor
provision) of 50% or more of the total voting power of the Common Stock or
voting stock of the Company (directly or through the acquisition of voting power
of voting stock of any of the Company's direct or indirect parent companies, if
applicable).
(g) "Common Stock" means the common stock, par value $0.0001
per share, of the Company.
(h) "Company" has the meaning set forth in the introductory
paragraph and any successor corporation.
(i) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(j) "Excluded Stock" means any shares of Common Stock (A)
issued upon exercise of options granted under the Company's 2004 stock option
plan, (B) issued upon exercise of any other options, warrants or other rights
outstanding on the date hereof, (C) issued to officers and employees pursuant to
employment agreements in existence on the date hereof, (D) issued as
consideration when any corporation or business is acquired, merged into, or
becomes part of the Company or a subsidiary of the Company, (E) issued upon
exercise of any options, warrants or other rights assumed by the Company in
connection with a merger or other acquisition, provided, that such options,
warrants or other rights assumed by the Company shall not have been issued in
connection with or in contemplation of such merger or acquisition, (F) issued in
good faith in connection with any other acquisition of assets in an arms-length
transaction between the Company and an unaffiliated third party, (G) issued to,
or pursuant to rights granted to, unaffiliated market makers who enter into
warrant agreements with the Company and the issuance of such shares, or the
exercise of such rights, is (x) subject to the achievement by the market maker
of specified volume milestones in cleared products, and (y) at an issuance, or
exercise, price that is not less than the fair market value of the Common Stock
on the date of grant, or (H) issued to, or pursuant to rights granted to,
unaffiliated landlords, equipment lessors, lenders, other financial
institutions, or other vendors to, or strategic partners of, the Company;
provided, that any shares issuable pursuant to sections (D), (F) and (H) above
in excess of 300,000 shares in the aggregate, and any shares issuable pursuant
to section (G) above in excess of 1,200,000 shares in the aggregate shall not
constitute Excluded Stock.
(k) "First Offer" has the meaning set forth in Section 2(a)(i)
hereof.
(l) "Founders" has the meaning set forth in the introductory
paragraph.
(m) "Governmental Entity" means any national, federal, state,
municipal, local, territorial, foreign or other government or any department,
commission, board, bureau, agency, regulatory authority or instrumentality
thereof, or any court, judicial, administrative or arbitral body or public or
private tribunal.
2
(n) "Investor" has the meaning set forth in the introductory
paragraph.
(o) "Investor Director" has the meaning set forth in Section 4
hereof.
(p) "Offer" has the meaning set forth in Section 2(c) hereof.
(q) "Offered Shares" has the meaning set forth in Section
2(a)(i) hereof.
(r) "own," "hold" or "held" (and words of similar import),
with respect to any shares of Common Stock, means either held of record or
beneficially owned within the meaning of Rule 13d-3 under the Exchange Act.
(s) "Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, incorporated
organization, association, corporation, institution, public benefit corporation,
Governmental Entity or other entity, and shall include any successor (by merger
or otherwise) of such entity.
(t) "Registration Rights Agreement" means that certain
Registration Rights Agreement, dated as of the date hereof, by and between the
Company and the Investor.
(u) "SEC" means the Securities and Exchange Commission or any
successor agency thereto.
(v) "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC thereunder, as shall be in
effect from time to time.
(w) "Stock and Warrant Purchase Agreement" has the meaning set
forth in the recitals.
(x) "Stockholder" means the Investor and each Founder and, as
the context requires, their respective transferees to the extent that they are
required to be bound by the terms and provisions hereof and/or to the extent
that they have succeeded to the transferor's rights hereunder pursuant to the
terms and provisions hereof.
(y) "Stockholder Acceptance Period" has the meaning set
forth in Section 2(b)(i) hereof.
(z) "Stockholder Accepted Number" has the meaning set forth in
Section 2(b)(ii) hereof.
(aa) "Stockholder First Offer" has the meaning set forth in
Section 2(b)(i) hereof.
(bb) "Stockholder Offered Shares" has the meaning set forth in
Section 2(b)(i) hereof.
3
(cc) "Stockholder Offeror" has the meaning set forth in
Section 2(b)(i) hereof.
(dd) "Third Party" means any Person (other than the Investor
or a Founder) that (i) is a prospective transferee of (A) Offered Shares from
the Company or (B) Stockholder Offered Shares from any Stockholder or (ii) makes
an Offer to the Company or any Founder.
(ee) "Transfer" has the meaning set forth in Section 2(a)(i)
hereof.
(ff) "Voting Stock" means the Common Stock and any other class
or series of securities of the Company having the power to elect directors (and
shall include any shares of Voting Stock issuable upon exercise, conversion or
exchange of securities exercisable or exchangeable for or convertible into
shares of Voting Stock).
(gg) "Warrant" means the warrant issued by the Company to the
Investor pursuant to the Stock and Warrant Purchase Agreement to purchase from
time to time such number of shares of Common Stock so as to increase the
Investor's ownership of the Company's Common Stock to an amount not to exceed
40% of the Company's then outstanding Common Stock on a fully diluted basis
(based on the assumption that the Investor had retained ownership of all the
shares of Common Stock purchased under the Stock and Warrant Purchase Agreement,
plus all shares of Common Stock issued upon exercise of the Warrant).
Section 2. Right of First Refusal; Change of Control Offers.
For so long as the Investor owns or holds at least 5,379,443 shares of Common
Stock:
(a) Transfers by the Company.
(i) If at any time the Company proposes to sell,
transfer or otherwise dispose of (a "Transfer"), any shares of Common
Stock (a "Company Offer"), options to purchase or rights to subscribe
for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities (other than
shares issuable upon the exercise of options, warrants or convertible
securities outstanding as of January 22, 2007) (the "Offered Shares")
to any bona fide Third Party, the Company shall, before such Transfer,
deliver to the Stockholders an offer (the "First Offer") to Transfer to
the Stockholders a pro rata percentage of the Offered Shares based on
each Stockholder's percentage ownership interest in the Company and
upon the terms set forth in this Section 2(a). The First Offer shall
state that the Company proposes to Transfer the Offered Shares and
specify the number of Offered Shares and the terms (including the
purchase price) of the proposed Transfer and the maximum number of
Offered Shares each Stockholder would be entitled to purchase pursuant
to this Section 2(c), which is equal to such Stockholder's pro-rata
portion of the Offered Shares. The First Offer shall remain open and
irrevocable for a period of fifteen (15) days (the "Acceptance Period")
from the date of its receipt by the Stockholders.
(ii) Any of the Stockholders may accept the First
Offer, in whole or in part, by delivering to the Company written notice
within the Acceptance Period, which notice shall state the number of
Offered Shares such Stockholder desires to purchase (the "Accepted
Number").
4
(iii) The Transfer of Offered Shares to a
Stockholder, to the extent a Stockholder has exercised its rights under
this Section 2(a), shall be made on a Business Day, as designated by
the Company, not less than ten (10) nor more than thirty (30) days
after expiration of the Acceptance Period on the terms and conditions
specified in the First Offer, which terms and conditions shall be
identical to the terms of the proposed Transfer to the Third Party.
(iv) If the number of Offered Shares exceeds the
aggregate Accepted Number of Offered Shares with respect to which the
Stockholders exercised their rights under this Section 2(a), the First
Offer shall be deemed to be withdrawn with respect to such excess and
the Company may Transfer, subject to the provisions of Section 3
hereof, such excess Offered Shares on the terms, conditions and
purchase price specified in the First Offer (which shall be the same
terms, conditions and purchase price available to a Stockholder
exercising rights pursuant to this Section 2(a)) to any Third Party
within ninety (90) days after expiration of the Acceptance Period. If
such Transfer is not made within such 90 day period, the restrictions
provided for in this Section 2(a) shall again become effective.
(v) In the event the Company or such Third Party, as
the case maybe, shall modify the terms of the proposed Transfer of
Offered Shares in any way, the Company shall send an amended First
Offer to each of the Stockholders. Each Stockholder shall, if it so
desires to exercise its right of First Offer, as so amended, prior to
the later of five (5) days after the date such amended First Offer is
received by such Stockholder or the end of the original Acceptance
Period, deliver to the Offeror an amended notice of acceptance
specifying the amended Accepted Number and/or such other amended term
of acceptance pursuant to this Section 2(a).
(b) Transfers by a Stockholder.
(i) In the event of a proposed Transfer of Common
Stock beneficially owned by any of the Stockholders (a "Stockholder
Offeror") which, in one or a series of related transactions, represents
5% or more of the Company's then outstanding Common Stock on a fully
diluted basis ("Stockholder Offered Shares") to any bona fide Third
Party, the Stockholder Offeror shall, before such Transfer, deliver to
the other Stockholders an offer (the "Stockholder First Offer") to
Transfer to such Stockholders a pro rata percentage of the Stockholder
Offered Shares based on each other Stockholder's percentage ownership
interest in the Company and upon the terms set forth in this Section
2(b); provided, however, that this Section 2(b) shall not apply in
connection with (A) any sales by the Investor in an underwritten
offering or in any such other offering by the Investor, both as
described in the Registration Rights Agreement or pursuant to Rule 144
(provided that the purchaser of the shares sold by the Investor in any
such non-underwritten offering shall not, as a result of such purchase
from the Investor, hold more than 5% of the Common Stock of the
Company), (B) any transfers by the Investor to a wholly-owned
subsidiary, (C) any distribution to the stockholders of the Investor,
(D) in the case of a Founder which is a corporation (v) any transfer to
a wholly-owned subsidiary, or (w) any distribution to the stockholders
of such corporation, (E) in the case of a Founder (or any distributee
of shares from a Founder permitted by clause (D)(w), above), any
transfer to (x) a spouse, sibling or lineal ancestor or descendant or
any adopted children, (y) a trust or trusts of which a Founder (or
permitted distributees) are the primary beneficiaries or charitable
remainder trusts in which any such stockholder (or permitted
distributee) has an interest, or (z) a partnership or limited liability
5
company in which any such Founder (or permitted distributees) are the
only partners or members, as the case may be; provided, however that
any such transferee or other recipient receiving shares of Common Stock
pursuant to a transfer governed by subsections (B), (C), (D) or (E) of
this Section 2(b) will agree to become bound by the same restrictions
on transfer and right of first refusal provisions and in the same
manner as the Investor and the Founders, as applicable. The Stockholder
First Offer shall state that the Stockholder Offeror proposes to
Transfer the Stockholder Offered Shares and specify the number of
Stockholder Offered Shares and the terms (including the purchase price)
of the proposed Transfer. The Stockholder First Offer shall remain open
and irrevocable for a period of fifteen (15) days (the "Stockholder
Acceptance Period") from the date of its receipt by the other
Stockholders.
(ii) The other Stockholders may accept the
Stockholder First Offer by delivering to the Stockholder Offeror
written notice within the Stockholder Acceptance Period, which notice
shall state the number of Stockholder Offered Shares such other
Stockholder desires to purchase (the "Stockholder Accepted Number").
(iii) The Transfer of Stockholder Offered Shares to
the other Stockholders to the extent the other Stockholders have
exercised their rights under this Section 2(b), shall be made on a
Business Day, as designated by the Stockholder Offeror, not less than
ten (10) nor more than thirty (30) days after expiration of the
Stockholder Acceptance Period on the terms and conditions specified in
the Stockholder First Offer, which terms and conditions shall be
identical to the terms of the proposed Transfer to the Third Party.
(iv) If the number of Stockholder Offered Shares
exceeds the aggregate Stockholder Accepted Number of Stockholder
Offered Shares with respect to which the other Stockholders exercised
their rights under this Section 2(b), the Stockholder First Offer shall
be deemed to be withdrawn with respect to such excess and the
Stockholder Offeror may Transfer, subject to the provisions of Section
3 hereof, such excess Stockholder Offered Shares on the terms,
conditions and purchase price specified in the Stockholder First Offer
(which shall be the same terms, conditions and purchase price available
to the other Stockholders exercising rights pursuant to this Section
2(b)) to any Third Party within ninety (90) days after expiration of
the Stockholder Acceptance Period. If such Transfer is not made within
such 90 day period, the restrictions provided for in this Section 2(b)
shall again become effective.
(v) In the event a Stockholder Offeror or such Third
Party, as the case maybe, shall modify the terms of the proposed
Transfer of Stockholder Offered Shares in any way, the Stockholder
Offeror shall send an amended Stockholder First Offer to the other
Stockholders. The other Stockholders shall, if they so desire to
exercise their right of Stockholder First Offer, as so amended, prior
to the later of five (5) days after the date such amended Stockholder
First Offer is received by such other Stockholders or the end of the
original Stockholder Acceptance Period, deliver to the Stockholder
Offeror an amended notice of acceptance specifying the amended
Stockholder Accepted Number and/or such other amended term of
acceptance pursuant to this Section 2(b).
6
(c) Transfer Leading to Change of Control. In the event that
any of the Company or the Founders has received a bona fide offer (an "Offer")
by an independent Third Party to purchase shares of capital stock of the Company
(including shares with preferential voting rights and shares issuable upon
conversion or exercise of options and warrants or other convertible securities
of the Company) that would reasonably likely lead to a Change of Control, before
accepting such Offer (i) the Company or the Founder, as the case may be, shall,
within three (3) days of receipt of such Offer, provide written notice to the
Investor of the identity of the independent Third Party and the material terms
and conditions of the Offer, and (B) afford the Investor a period of ten (10)
days in which to submit its own proposal for a Change of Control transaction. In
the event that the Company or the Founder, as the case may be, does not receive
a proposal for a Change of Control transaction from the Investor within such 10
day period, the Company or the Founder, as the case may be, shall be free to
accept the Offer upon terms no less favorable than those set forth in the
original Offer. In the event that the Company does receive a proposal for a
Change of Control transaction from the Investor, the Board of Directors of the
Company, in the good faith exercise of its business judgment, may determine to
accept neither offer, to accept the offer which the Board of Directors finds to
be more favorable to the Company or to solicit additional offers from the
independent Third Party, the Company and others. In the event of any
inconsistency between the provisions of Section 2(a) and this Section 2(c) with
respect to an Offer likely to lead to a Change of Control, the provisions of
this Section 2(c) shall control.
(d) The right of first refusal set forth in Sections 2(a) and
2(b) above shall not apply with respect to Excluded Stock.
Section 3. Standstill. The Investor will not purchase any
additional shares of the Company's Common Stock until the one year anniversary
of the date hereof, provided, however, that, notwithstanding the foregoing, the
foregoing shall not restrict, limit, prohibit or prevent (i) the Investor
Director from taking any action or omitting to take any action in his capacity
as a director of the Company, (ii) the Investor from voting its securities at
any meeting of the stockholders or by written consent in lieu thereof in any
manner determined by the Investor, (iii) any representative of the Investor who
serves as a director, officer or Affiliate of any other company (other than a
subsidiary of the Investor) from taking any action or omitting to take any
action in his capacity as a director, officer or Affiliate of such company, (iv)
the Investor from exercising its rights of first refusal (as described in
Section 2), (v) the Investor from exercising the Warrant, or (vi) the Investor
from investing in any entity that, prior to contemplation of any such
investment, owns or holds shares of the Company's Common Stock.
7
Section 4. Corporate Governance.
(a) As of the date hereof and for so long as the Investor owns
or holds at least 5,379,443 shares of Common Stock, the Investor will be
entitled to designate one (1) person (reasonably acceptable to the Company) that
the Company is required to nominate as a member of the Company's board of
directors (the "Investor Director"), who shall initially be Xxxxxxxx Xxxxxx, and
each of the Founders shall be required to vote shares they own or hold in
approval of such nomination. For so long as the Investor owns or holds at least
5,379,443 shares of Common Stock, the Investor shall be required to vote its
shares in favor of each individual nominated as a member of the Company's board
of directors by the board of directors, by the nominating committee of the
Company or such other ad hoc committee as may be acting in such nominating role.
As of the date hereof the Company agrees to increase the number of members of
the Company's board of directors by one and to fill such additional position
with the Investor Director. Subject to applicable law and the rules governing
the over the counter bulletin board market or any national securities exchange
on which equity securities of the Company may be listed hereafter, as
applicable, as of the date hereof and for so long as the Investor owns or holds
at least 5,379,443 shares of Common Stock, the Investor Director shall have the
right to be designated to serve on each committee of the board of directors
(other than the audit committee, which shall be comprised solely of independent
directors).
(b) The Founders agree that in the event of any vacancy on the
Board of Directors, whether caused by the death, disability, retirement,
resignation, removal, termination of term of office or otherwise, with respect
to any Investor Director, the Founders will use their commercially reasonable
efforts to call, or to cause the appropriate officers of the Company to call, a
special or general meeting of stockholders and to vote, and to cause their
Affiliates to vote, all shares of Voting Stock beneficially owned or held of
record by them and their Affiliates for, or to take and to cause their
Affiliates to take all actions by written consent in respect of all such shares
of Voting Stock in lieu of any such meeting, and shall take all reasonable
actions within their control that are necessary to cause, the election to the
Board of Directors of another individual designated by the Investor to fill such
vacancy; provided that the foregoing shall not apply in the event that the Board
of Directors takes such action to so constitute the Board of Directors without
stockholder action.
(c) The Investor may at any time request that a person
nominated by it in accordance with this Section 4 be removed as a member of the
Board of Directors, with or without cause, and upon the written request of the
Investor to the Founders, the Founders agree to vote, and to cause their
respective Affiliates to vote, all of their Voting Stock to effect such removal.
(d) The Company agrees to cooperate with the Investor, and to
take all such actions that it may lawfully take, to achieve the results intended
by this Section 4.
(e) Notwithstanding anything to the contrary contained in this
Agreement, for so long as the Investor owns or holds 5,379,443 shares of Common
Stock, no transfer of shares of Voting Stock by the Investor or by the Founders
(or any of their respective Affiliates), other than transfers of less than 5% of
the Company's then outstanding shares of Common Stock on a fully diluted basis
permitted under Section 2(b)(i), shall be effective and the Company agrees that
no such purported transfer shall be recognized by it or registered on its books
and records, unless the transferee agrees in writing to be bound by the
obligations of the Investor or the Founders, as applicable, set forth in this
Section 4.
Section 5. Protective Provisions. For so long as the Investor
owns or holds at least 5,379,443 shares of Common Stock, consent of the Investor
Director, which consent, will not be unreasonably withheld, is required for:
8
(a) The issuance, authorization or increase in the authorized
amount of, or the issuance or authorization of any obligation or security
convertible into or evidencing a right to purchase, or the reclassification of
any of the Company's authorized stock into any stock of any class, or any
obligation or security convertible into or evidencing a right to purchase, any
stock of any class ranking senior to the Common Stock of the Company purchased
by the Investor as to voting or dividends or upon the distribution of assets
upon the Company's dissolution, liquidation or the winding up of its affairs
with an aggregate (since the date hereof) liquidation preference, either in one
or a series of related transactions, of greater than $10.0 million;
(b) Acquiring any business or assets (including through the
entry into any joint venture or strategic alliance) involving aggregate
consideration or commitments having a value (taking into account the value of
any non-cash consideration paid or committed to) in excess of $30.0 million,
individually or in the aggregate from the date hereof, or making any sales or
other dispositions of businesses or assets (including issuance or sales of
capital stock of subsidiaries to third parties) having a value (taking into
account the value of any non-cash consideration paid or committed to) in excess
of $10.0 million, individually or in the aggregate, in each case during any 18
month period;
(c) Any related party transaction or series of related
party transactions in excess of $5.0 million;
(d) Any (x) dividend or distribution (whether made in cash,
securities or other property) declared or paid on or with respect to, or any
repurchase or optional redemption of, any shares of capital stock of the Company
or (y) issuance of debt (including convertible or exchangeable debt), which, in
the case of each of (x) and (y), exceed $10.0 million in the aggregate (since
the date hereof); and
(e) The Company or any subsidiary to engage in any business
other than any business which is the same, similar, ancillary or related to any
of the businesses that the Company and its subsidiaries were engaged in on
January 22, 2007.
Section 6. Information, Audit and Inspection Rights.
(a) Financial and Other Reports. For so long as the
Investor owns at least 5,379,443 shares of Common Stock:
(i) So long as the Company is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company will use its reasonable best efforts to file with the SEC, at
the times specified for the filing of such information, and shall
simultaneously furnish the Investor with copies of, such annual and
quarterly reports as are specified in Sections 13 or 15(d) of the
Exchange Act and applicable to a U.S. person subject to such sections.
If the Company has not filed such annual or quarterly reports with the
SEC within fifteen (15) calendar days of the times specified for the
filing of such information, the Company shall be required to,
immediately thereafter, provide the Investor with the financial
information set forth in Section 6(a)(ii) below.
9
(ii) At any time that the Company is not subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act,
the Company shall furnish to the Investor (x) quarterly unaudited
summary consolidated financial information within 45 days after the end
of each quarter, and (y) annual consolidated audited financial
statements within 75 days after each year end, which, in the case of
(x) and (y) above, shall be prepared in accordance with U.S. generally
accepted accounting principles applied on a consistent basis.
(iii) If the Investor is required to consolidate the
Company into the Investor's financial statements, the Company shall
furnish such additional information as may be reasonably requested by
the Investor and necessary for such consolidation.
(iv) The Investor and, to the extent applicable, its
regulators will have reasonable access to information and the Company's
management and other employees.
(v) The Investor and its external and internal
auditors will have the right to audit or examine the Company's books
and records and its policies and procedures, within reasonable bounds
of frequency and amount of time required from the Company.
(vi) The Company will provide such other assistance
and cooperation as is reasonably requested by the Investor and its
auditors and regulators.
(vii) Confidentiality. For so long as the Company is
subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Investor, its employees and agents shall remain
subject to the confidentiality provisions set forth in the
Non-Disclosure Agreement by and between the New York Mercantile
Exchange, Inc. and the Company dated December 5, 2006, other than to
the extent information furnished pursuant to Section 6(a)(iii) is
consolidated in the Investor's financial statements as provided
therein.
(b) Rule 144. For so long as the Investor owns or holds any of
its initial investment of 10,758,886 shares of Common Stock or shares issued
upon exercise of the Warrant, the Company covenants that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder, and it will take
such further action as the Investor may reasonably request to make available
adequate current public information with respect to the Company meeting the
current public information requirements of Rule 144(c) under the Securities Act,
to the extent required to enable the Investor to sell the Company's Common Stock
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 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 SEC. Upon the request of any Holder, the Company will deliver to
the Investor a written statement as to whether it has complied with such
information and requirements.
10
(c) Expenses. The Investor shall bear all of the reasonable,
documented out of pocket costs and expenses associated with the information,
examination and audit provisions set forth in this Section 6 other than as
provided in Sections 6(a)(i) and Section 6(a)(ii) hereof and Section 6(c) and
shall promptly reimburse the Company for any documented expenses incurred by the
Company in connection therewith, provided, however, that in the event the
Company is otherwise required to have its financial information audited in its
capacity as a public company, the Investor shall not be responsible to bear any
costs or expenses in connection therewith. Notwithstanding the foregoing, the
Investor shall bear all of the reasonable, documented, out of pocket costs and
expenses relating to services not normally associated with the Company's
examination and audit process, but which are incurred in connection therewith in
response to a request for additional information by the Investor pursuant to
this Section 6.
Section 7. Effectiveness of Agreement; Termination. Without
affecting any other provision or parties to this Agreement, this Agreement shall
terminate and the rights and obligations of the parties hereto shall have no
force or effect at such time as the Investor ceases to own or hold any shares of
Common Stock issued pursuant to the Stock and Warrant Purchase Agreement,
including shares issued or issuable upon exercise of the Warrant. For the
purposes of the immediately preceding sentence, all shares issuable upon
exercise of the Warrant shall be deemed to be held by the Investor not
withstanding the fact that the Warrant has not yet been executed as it relates
to such shares.
Section 8. Amendments. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, except by a written instrument executed by the Stockholders and
the Company. This Agreement cannot be changed, modified, discharged or
terminated by oral agreement.
Section 9. No Inconsistent Agreement. Neither the Company nor
any Stockholder shall enter into any agreement with respect to the Common Stock
beneficially owned or held of record by it which is inconsistent with the rights
granted to the Investor or the Founders in this Agreement or otherwise conflicts
with the provisions hereof.
Section 10. Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
hand delivered or mailed postage prepaid by registered or certified mail or by
facsimile transmission (with immediate telephonic confirmation thereafter),
(a) If to the Investor:
New York Mercantile Exchange
One North End Avenue
World Financial Center
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxxx, Esq.
Xxxxxxx X. Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
with a copy to (which shall not constitute notice):
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxxx, Esq.
Xxxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
11
or (b) If to the Company:
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxxx Xxxx & Xxxxxx LLP
13th Floor, 000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
or (c) if to any Founder, to the address(es) set forth on the
counterpart signature pages of this Agreement signed by such Founders;
or at such other address as the Company or the Stockholders each may specify by
written notice to the others, and each such notice, request, consent and other
communication shall for all purposes of the Agreement be treated as being
effective or having been given when delivered if delivered personally, upon
receipt of facsimile confirmation if transmitted by facsimile, or, if sent by
mail, at the earlier of its receipt or 72 hours after the same has been
deposited in a regularly maintained receptacle for the deposit of United States
mail, addressed and postage prepaid as aforesaid.
Section 11. Successors and Assigns. All the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective parties hereto, the successors and
permitted assigns of each party hereto and their respective successors of the
Company, whether so expressed or not, provided, however, that any such assignee
shall agree to execute a joinder to this agreement and be bound by the
provisions hereof.
Section 12. Counterparts; Effectiveness. This Agreement may be
executed in any number of counterparts (including by facsimile) and by different
parties hereto in separate counterparts, with the same effect as if all parties
had signed the same document. All such counterparts shall be deemed an original,
shall be construed together and shall constitute one and the same instrument.
This Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
12
Section 13. Headings. The headings and other captions in this
Agreement are for convenience and reference only and shall not be used in
interpreting, construing or enforcing any provision of this Agreement.
Section 14. Governing Law. The internal laws, and not the laws
of conflicts (other than Section 5-1401 of the General Obligations Law of the
State of New York), of New York shall govern the enforceability and validity of
this Agreement, the construction of its terms and the interpretation of the
rights and duties of the parties.
Section 15. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
Section 16. Entire Agreement. This Agreement contains the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersedes and replaces all other prior agreements, written or oral,
among the parties hereto with respect to the subject matter hereof.
Section 17. Specific Performance. Each party hereto, in
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under this Agreement without proof of actual damages and without the
requirement of posting bond or other security. Each party hereto hereby agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Agreement and hereby
agrees to waive the defense in any action for specific performance that a remedy
at law would be adequate.
Section 18. Jurisdiction. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
brought in any federal or state court located in the County and State of New
York, and each of the parties hereby consents to the jurisdiction of such courts
(and of the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 10 shall be deemed
effective service of process on such party.
Section 19. Waiver of Jury Trial. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
13
Section 20. Aggregation of Stock. All Common Stock held by or
acquired by any Affiliated Person will be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
Section 21. No Implied Waivers. No failure or delay by any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
Section 22. Specific Share Count Number. Any references in
this Agreement to a specific number of shares of Common Stock of the Company
shall be subject to proportional adjustments for stock splits, stock dividends,
recapitalizations and the like.
[Execution Page Follows]
14
IN WITNESS WHEREOF, this Agreement has been duly executed by each of
the parties hereto as of the date first written above.
OPTIONABLE, INC.
By:
-------------------------------
Name: Xxxxx Xxxxxxx
Title: Chief Executive Officer
NYMEX HOLDINGS, INC.
By:
-------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Chairman
FOUNDERS:
Xxxx Xxxxxxxxx
By:
-------------------------------
Name: Xxxx Xxxxxxxxx
c/o Optionable, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
RIDGECREST CAPITAL, INC.
By:
-------------------------------
Name: Xxxxxx X'Xxxxxx
Title:
c/o Optionable, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
XXXXXXXX CAPITAL, INC.
By:
-------------------------------
Name: Xxxxx Xxxxxxx
Title:
c/o Optionable, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
15
Exhibit E
Form of Warrant
A-5
WARRANT
to Purchase Common Stock of
Optionable, Inc.
Warrant No. 0001
Original Issue
Date: April 10, 2007
THIS WARRANT IS NON TRANSFERABLE OTHER THAN TO A WHOLLY OWNED SUBSIDIARY OR
OTHER AFFILIATE OF NYMEX.
A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OF THE
CORPORATION OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS WILL BE FURNISHED BY THE
CORPORATION, WITHOUT CHARGE, TO EACH WARRANTHOLDER WHO SO REQUESTS, UPON REQUEST
TO THE SECRETARY OF THE CORPORATION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN INVESTOR RIGHTS
AGREEMENT DATED APRIL 10, 2007. A COPY OF SUCH INVESTOR RIGHTS AGREEMENT WILL BE
FURNISHED WITHOUT CHARGE BY THE CORPORATION TO THE HOLDER HEREOF UPON WRITTEN
REQUEST.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES OF COMMON STOCK OF
OPTIONABLE, INC. UNDERLYING THIS WARRANT ARE SUBJECT TO A REGISTRATION RIGHTS
AGREEMENT DATED APRIL 10, 2007. A COPY OF SUCH REGISTRATION RIGHTS AGREEMENT
WILL BE FURNISHED WITHOUT CHARGE BY THE CORPORATION TO THE HOLDER HEREOF UPON
WRITTEN REQUEST.
Warrant No. 0001
Warrant
to Purchase Such Number of Shares of Common Stock of
Optionable, Inc.
So as to Increase NYMEX Holdings, Inc.'s Ownership of Optionable, Inc. to an
Amount Not to Exceed 40% of the then Outstanding Common Stock of Optionable,
Inc. on a Fully Diluted Basis (Based on the Assumption that NYMEX Holdings, Inc.
had Retained Ownership of 10,758,886 Shares of the Common Stock of Optionable,
Inc. Originally Purchased by NYMEX Holdings, Inc. Pursuant to the Stock and
Warrant Purchase Agreement, (as Defined Herein) Plus all Shares of Warrant Stock
(as Defined Herein) Acquired upon Exercise of this Warrant from Time to Time
THIS IS TO CERTIFY THAT NYMEX Holdings, Inc., a Delaware corporation
("NYMEX"), or its permitted assigns, is entitled, at any time and from time to
time prior to the Expiration Date (as defined herein) to purchase from
Optionable, Inc., a Delaware corporation (the "Company"), such shares of Common
Stock (as defined herein) so as to increase NYMEX's ownership of the Company's
Common Stock to an amount not to exceed forty percent (40%) of the Company's
then outstanding Common Stock on a fully diluted basis (based on the assumption
that NYMEX had retained all of the Purchased Shares (as defined herein) plus,
all shares of Warrant Stock (as defined herein) acquired upon exercise of this
Warrant from time to time), at a purchase price of $4.30 per share (the initial
"Exercise Price", subject to adjustment as provided herein).
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Affiliate" of any Person means any other Person which directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such Person. The term "control" (including the
terms "controlling," "controlled by" and "under common control with") as used
with respect to any Person means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise. Notwithstanding anything to the contrary herein, none of (i) the
Holder (and its Affiliates) nor (ii) any of the individual Founders (and their
Affiliates) shall be deemed to be an Affiliate of any other.
"Appraisal Procedure" means the following procedure to determine the
fair market value, as to any security, for purposes of the definition of "Fair
Market Value" or the fair market value, as to any other property (in either
case, the "Valuation Amount"). The Valuation Amount shall be determined in good
faith jointly by the Board of Directors and NYMEX, as representative of the
Holders; provided, however, that if such parties are not able to agree on the
Valuation Amount within a reasonable period of time (not to exceed twenty (20)
Business Days), the Valuation Amount shall be determined by an investment
banking firm of national reputation, which firm shall be reasonably acceptable
to the Board of Directors and NYMEX. If the Board of Directors and NYMEX are
unable to agree upon an acceptable investment banking firm within ten (10) days
after the date either party proposed that one be selected, the investment
banking firm will be selected by an arbitrator located in New York City, New
York, selected by the American Arbitration Association (or if such organization
ceases to exist, the arbitrator shall be chosen by a court of competent
jurisdiction). The arbitrator shall select the investment banking firm (within
ten (10) days of his appointment) from a list, jointly prepared by the Board of
Directors and NYMEX, of not more than six investment banking firms of national
reputation in the United States, of which no more than three may be named by the
Board of Directors and no more than three may be named by NYMEX. The arbitrator
may consider, within the ten day period allotted, arguments from the parties
regarding which investment banking firm to choose, but the selection by the
arbitrator shall be made in its sole discretion from the list of six. The Board
of Directors and NYMEX shall submit their respective valuations and other
relevant data to the investment banking firm, and the investment banking firm
shall, within thirty days of its appointment, make its own determination of the
Valuation Amount. The determination of the final Valuation Amount by such
investment banking firm shall be final and binding upon the parties. The Company
and NYMEX shall each bear 50% of the fees and expenses of the investment banking
firm and arbitrator (if any) used to determine the Valuation Amount. If required
by any such investment banking firm or arbitrator, the Company shall execute a
retainer and engagement letter containing reasonable terms and conditions,
including, without limitation, customary provisions concerning the rights of
indemnification and contribution by the Company in favor of such investment
banking firm or arbitrator and its officers, directors, partners, employees,
agents and Affiliates.
2
"Business Day" means any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in New York,
New York.
"Common Stock" means the Common Stock of the Company, par value $0.0001
per share.
"Company" has the meaning assigned to it in the preamble, and any
successor corporation.
"Designated Office" has the meaning assigned to it in Section 8 hereof.
"Excluded Stock" has the meaning assigned to it in Section 4.11 hereof.
"Exercise Date" has the meaning assigned to it in Section 2.1(a)
hereof.
"Exercise Notice" has the meaning assigned to it in Section 2.1(a)
hereof.
"Exercise Price" means, in respect of a share of Warrant Stock, the
initial Exercise Price set forth in the preamble of this Warrant as adjusted
from time to time pursuant to Section 4 hereof.
"Expiration Date" means October 10, 2008.
"Fair Market Value" means, as to any security, the Twenty Day Average
of the average closing prices of such security's sales on all domestic
securities exchanges on which such security may at the time be listed, or, if
there have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of such
day, including such prices listed on The Nasdaq Stock Market, including The
Nasdaq Global Select Market, The Nasdaq Global Market and The Nasdaq Capital
Market, as of 4:00 P.M., New York City time, on such day, or, if on any day such
security is not listed on The Nasdaq Stock Market, the average of the highest
bid and lowest asked prices on such day in the domestic over the counter market
as reported by the National Quotation Bureau, Incorporated, or any similar or
successor organization (and in each such case excluding any trades that are not
bona fide, arm's length transactions). If at any time such security is not
listed on any domestic securities exchange or quoted on the domestic over the
counter market, the "Fair Market Value" of such security shall be the fair
market value thereof as determined in accordance with the Appraisal Procedure,
using any appropriate valuation method, assuming an arms length sale to an
independent party. "Fair Market Value" means, with respect to property other
than securities, the "fair market value" determined in accordance with the
Appraisal Procedure.
"Founders" means Xxxx Xxxxxxxxx, Xxxxxx X'Xxxxxx (through Ridgecrest
Capital, Inc., a New York corporation), and Xxxxx Xxxxxxx (through Xxxxxxxx
Capital, Inc., a New York corporation).
"GAAP" means United States generally accepted accounting principles
consistently applied.
3
"Governmental Entity" means any national, federal, state, municipal,
local, territorial, foreign or other government or any department, commission,
board, bureau, agency, regulatory authority or instrumentality thereof, or any
court, judicial, administrative or arbitral body or public or private tribunal.
"Holder" means (a) with respect to this Warrant, NYMEX or such other
Person in whose name the Warrant is registered on the books of the Company
maintained for such purpose and (b) with respect to any shares of Warrant Stock,
the Person in whose name such Warrant Stock is registered on the books of the
Company maintained for such purpose.
"Investor Rights Agreement" means the Investor Rights Agreement, dated
as of April 10, 2007, by and among the Company, NYMEX and the Founders.
"Lien" means any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Uniform Commercial Code or comparable law of any jurisdiction).
"NYMEX" has the meaning assigned to it in the preamble.
"Outstanding" means, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any Subsidiary, and shall include all shares issuable in
respect of outstanding certificates representing fractional interests in shares
of Common Stock.
"Original Issue Date" means April 10, 2007, the date on which the
Original Warrant was issued by the Company pursuant to the Stock and Warrant
Purchase Agreement.
"Original Warrant" means the Warrant originally issued by the Company
on April 10, 2007, pursuant to the Stock and Warrant Purchase Agreement.
"Per Share Purchase Price" has the meaning assigned to it in Section
4.1 hereof.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, incorporated organization,
association, corporation, institution, public benefit corporation, Governmental
Entity or any other entity and shall include any successor (by merger or
otherwise) of such entity.
"Purchased Shares" means the aggregate of 10,758,886 shares of the
Company's Outstanding Common Stock purchased by NYMEX from the Founders on the
date hereof pursuant to the Stock and Warrant Purchase Agreement.
"Record Date" has the meaning set forth in Section 4.3(b).
4
"SEC" means the Securities and Exchange Commission, or any successor
agency thereto.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, as shall be in effect from time to
time.
"Stock and Warrant Purchase Agreement" means the Stock and Warrant
Purchase Agreement, dated as of April 10, 2007, by and among the Company, NYMEX
and the Founders (as such term is defined in the Stock and Warrant Purchase
Agreement).
"Subsidiary" means any corporation, association, trust, limited
liability company, partnership, joint venture or other business association or
entity at least fifty percent (50%) of the outstanding voting securities of
which are at the time owned or controlled, directly or indirectly, by the
Company.
"Transfer" means any disposition of any Warrant Stock or of any
interest therein, which would constitute a "sale" thereof or a transfer of a
beneficial interest therein within the meaning of the Securities Act.
"Twenty Day Average" means, with respect to any prices and in
connection with the calculation of Fair Market Value, the average of such prices
over the twenty Business Days ending on the Business Day immediately prior to
the day as of which "Fair Market Value" is being determined.
"Warrant Price" means an amount equal to (i) the number of shares of
Warrant Stock being purchased upon exercise of this Warrant pursuant to Section
2.1 hereof, multiplied by (ii) the Exercise Price.
"Warrants" means the Original Warrant and all Warrants issued in
substitution for the Original Warrant. All Warrants shall at all times be
identical as to terms and conditions, except as to the their date of issuance
and the number of shares of Common Stock for which the Warrant may be
exercisable.
"Warrant Stock" means the shares of Common Stock issued, issuable or
both (as the context may require) upon the exercise of Warrants.
2. EXERCISE OF WARRANT
2.1 Manner of Exercise.
(a) From and after the Original Issue Date and at any time
before 5:00 P.M., New York time, on the Expiration Date, NYMEX may from time to
time exercise this Warrant, on any Business Day, for all or any part of the
number of shares of Warrant Stock (subject to adjustment as provided herein)
purchasable hereunder. In order to exercise this Warrant, in whole or in part,
NYMEX shall (i) deliver to the Company at its Designated Office a written notice
of NYMEX's election to exercise this Warrant (an "Exercise Notice")
substantially in the form attached to this Warrant as Annex A, which Exercise
Notice shall be irrevocable and specify the number of shares of Warrant Stock to
be purchased, together with this Warrant and (ii) pay to the Company the Warrant
Price in full. The date on which such delivery and payment shall have taken
place being hereinafter sometimes referred to as the "Exercise Date". Any
Warrants not exercised by 5:00 PM, New York time, on the Expiration Date shall
expire.
5
(b) Upon receipt by the Company of such Exercise Notice,
surrender of this Warrant and payment of the Warrant Price (in accordance with
Section 2.1(c) hereof), the Company shall, as promptly as practicable, and in
any event within five (5) Business Days thereafter, execute (or cause to be
executed) and deliver (or cause to be delivered) to the Holder a certificate or
certificates representing the shares of Warrant Stock issuable upon such
exercise registered in the name of the exercising Holder, together with cash in
lieu of any fraction of a share, as hereafter provided. The stock certificate or
certificates so delivered shall be, to the extent possible, in such denomination
or denominations as the exercising Holder shall reasonably request in the
Exercise Notice and shall be registered in the name of the Holder or, subject to
compliance with Section 3.3, below, such other name as shall be designated in
the Exercise Notice. This Warrant shall be deemed to have been exercised and
such certificate or certificates of Warrant Stock shall be deemed to have been
issued, and NYMEX or any other Person so designated to be named therein shall be
deemed to have become a holder of record of such shares of Warrant Stock for all
purposes, as of the Exercise Date.
(c) Payment of the Warrant Price shall be made at the option
of the exercising Holder in cash or by delivery of a certified or official bank
check or bank cashier's check payable to the order of the Company, or by wire
transfer of immediately available funds, in the amount of such Warrant Price.
Payment shall be made to the Company at its Designated Office prior to the close
of business on the Exercise Date.
2.2 Payment of Taxes. All shares of Warrant Stock issuable
upon the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable, issued without violation of any preemptive
or similar rights of any stockholder of the Company and free and clear of all
Liens. The Company shall pay all expenses (including stamp taxes) in connection
with the issue or delivery of the shares of Warrant Stock, unless such tax or
charge is imposed by law upon the Holder. In addition, the Company shall not be
required to pay any tax or governmental charge which may be issuable upon
exercise of this Warrant payable in respect of any Transfer involved in the
issue and delivery of shares of Warrant Stock in a name other than that of the
exercising Holder, and no such issue or delivery shall be made unless and until
the Person requesting such issue has paid to the Company the amount of any such
tax, or has established to the satisfaction of the Company that such tax has
been paid.
2.3 Fractional Shares. The Company shall not be required to
issue a fractional share of Warrant Stock upon exercise of any Warrant. In lieu
of any fraction of a share to which any Holder would otherwise be entitled, the
Company shall make a cash payment equal to the Fair Market Value of one share of
Common Stock on the Exercise Date multiplied by such fraction.
6
3. TRANSFER, DIVISION AND COMBINATION
3.1 Compliance with Securities Act.
(a) The Holder, by acceptance hereof, agrees to comply in all
respects with the provisions of this Section 3.1 and further agrees that the
Holder is acquiring this Warrant and the shares of Warrant Stock issuable upon
exercise hereof for its own account for investment and not with a view to or for
distributing or reselling such Warrant or shares of Warrant Stock or any part
thereof in violation of the Securities Act or any applicable state securities
law, has no present intention of distributing this Warrant or the shares of
Warrant Stock issuable upon exercise hereof, has no present arrangement or
understanding with any persons regarding the distribution of this Warrant or the
shares of Warrant Stock issuable upon exercise hereof (it being understood that
this representation and warranty does not limit the Holder's right to sell the
shares of Warrant Stock issuable upon exercise hereof pursuant to an effective
registration statement or otherwise in compliance with applicable federal and
state law) in violation of the Securities Act or any applicable state securities
law and that such Holder will not offer, sell or otherwise dispose of this
Warrant or any Warrant Stock to be issued upon exercise hereof except under
circumstances that will not result in a violation of the Securities Act and in
accordance with this Section 3.
(b) All shares of Warrant Stock issued upon exercise of this
Warrant (unless registered under the Securities Act) shall be stamped or
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 (THE "ACT"), OR APPLICABLE
STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED UNLESS (I) A
REGISTRATION STATEMENT COVERING SUCH SECURITIES IS EFFECTIVE UNDER THE
ACT OR (II) THE TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE ACT
AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE
CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.
A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK
OF THE CORPORATION OR SERIES THEREOF AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS WILL BE
FURNISHED BY THE CORPORATION, WITHOUT CHARGE, TO EACH STOCKHOLDER WHO
SO REQUESTS, UPON REQUEST TO THE SECRETARY OF THE CORPORATION.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
INVESTOR RIGHTS AGREEMENT DATED APRIL 10, 2007. A COPY OF SUCH INVESTOR
RIGHTS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE CORPORATION TO
THE HOLDER HEREOF UPON WRITTEN REQUEST.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
REGISTRATION RIGHTS AGREEMENT DATED APRIL 10, 2007. A COPY OF SUCH
REGISTRATION RIGHTS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE
CORPORATION TO THE HOLDER HEREOF UPON WRITTEN REQUEST.
7
(c) The Holder understands that this Warrant and the shares of
Warrant Stock issuable on exercise hereof are "restricted securities" and have
not been, and will not be upon issuance, as the case may be, registered under
the Securities Act or any applicable state securities law.
(d) The Holder, whether on his or her own or by reason of the
business and financial experience of its management, has such knowledge,
sophistication and experience in business and financial matters so as to be
capable of evaluating the merits and risks of the prospective investment in this
Warrant and the shares of Warrant Stock issuable upon exercise hereof, and has
so evaluated the merits and risks of such investment. The Holder is able to bear
the economic risk of an investment in this Warrant and the shares of Common
Stock issuable upon exercise hereof and, at the present time, is able to afford
a complete loss of such investment.
(e) The Holder is an "accredited investor" as that term is
defined in Regulation D promulgated under the Securities Act.
3.2 Transfer of this Warrant. This Warrant is non-transferable
other than to a wholly-owned subsidiary of NYMEX or other Affiliate of NYMEX
(which is not a natural person) and any attempted transfer or assignment other
than as set forth in this Section 3.2 shall be void. Upon compliance with the
provisions of this Section 3.2, each transfer of this Warrant and all rights
hereunder, in whole or in part, shall be registered on the books of the Company
to be maintained for such purpose, upon surrender of this Warrant at the
Designated Office and compliance with the terms hereof, together with a written
assignment of this Warrant in the form of Annex B hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any transfer taxes
described in Section 2.2 in connection with the making of such transfer. Upon
such compliance, surrender and delivery and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned and this Warrant shall promptly be cancelled.
3.3 Warrant Stock Certificates. Each new certificate
evidencing Warrant Stock shall bear the appropriate restrictive legend set forth
in Section 3.1 hereof, except that (a) any such certificate representing Warrant
Stock issued to a Holder other than NYMEX or one of its permitted assigns shall
not bear the third legend relating to the Investor Rights Agreement and (b) such
certificate shall not bear such restrictive legend if the Warrant Stock is part
of a registered offering pursuant to an effective registration statement filed
with the SEC, or if, in the opinion of counsel for the Company, such legend is
not required in order to establish or assist in compliance with any provisions
of the Securities Act or any applicable state securities laws.
8
3.4 Mutilation or Loss. Upon receipt by the Company from the
Holder of evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement or if an affidavit
of loss of the Holder shall be a sufficient indemnity) and, in case of
mutilation, upon surrender and cancellation hereof, the Company will execute and
deliver in lieu hereof a new Warrant of like tenor to such Holder; provided,
however, that, in the case of mutilation, no indemnity shall be required if this
Warrant in identifiable form is surrendered to the Company for cancellation.
Upon the issuance of any new Warrant under this Section 3.4, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto.
3.5 Expenses. Except as provided in Section 3.4, the Company
shall prepare, issue and deliver at its own expense any new Warrant required to
be issued hereunder.
3.6 Maintenance of Books. The Company agrees to maintain, at
the Designated Office (as defined in Section 8 hereof), books for the
registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The Exercise Price shall be subject to adjustment from time to time as
set forth in this Section 4.
4.1 Upon Issuance of Common Stock. If the Company shall, at
any time or from time to time after the Original Issue Date and on or before the
Expiration Date, issue any shares of capital stock, options to purchase or
rights to subscribe for capital stock, securities by their terms convertible
into or exchangeable for capital stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities without consideration
or for consideration per share less than the higher of (x) $2.69 (the "Per Share
Purchase Price") and (y) the Fair Market Value per share of the Common Stock at
the time of such issuance, then the Exercise Price shall forthwith be lowered to
a price equal to the price obtained by multiplying:
(i) the Exercise Price in effect immediately prior to
the issuance of such Common Stock, options, rights or securities by
(ii) a fraction of which (x) the numerator shall be
the sum of (A) the number of shares of Common Stock Outstanding on a
fully diluted basis immediately prior to such issuance and (B) the
number of additional shares of Common Stock which the aggregate
consideration for the number of shares of Common Stock so offered would
purchase at the greater of the Per Share Purchase Price or the Fair
Market Value per share of Common Stock immediately prior to such
issuance and (y) the denominator shall be the number of shares of
Common Stock Outstanding on a fully diluted basis immediately after
such issuance.
9
The provisions of this Section 4.1 shall not apply to any issuance of Excluded
Stock and no adjustment shall be required pursuant to this Section 4.1 with
respect thereto.
4.2 Provisions Applicable to Adjustments. For the purposes of
any adjustment of the Exercise Price pursuant to Section 4.1, the following
provisions shall be applicable:
(i) In the case of the issuance of capital stock for
cash in a public offering or private placement, the consideration shall
be deemed to be the amount of cash paid therefor before deducting
therefrom any discounts, commissions or placement fees payable by the
Company to any underwriter or placement agent in connection with the
issuance and sale thereof.
(ii) In the case of the issuance of capital stock for
a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the Fair Market Value thereof.
(iii) In the case of the issuance of options to
purchase or rights to subscribe for capital stock, securities by their
terms convertible into or exchangeable for capital stock, or options to
purchase or rights to subscribe for such convertible or exchangeable
securities (except for options to acquire Excluded Stock (as defined in
Section 4.11 hereof)):
(A) the aggregate maximum number of shares of capital stock
deliverable upon exercise of any such options to purchase or
rights to subscribe for capital stock shall be deemed to have
been issued at the time such options or rights were issued and
for a consideration equal to the consideration (determined in the
manner provided in subparagraphs (i) and (ii) of this Section
4.2), if any, received by the Company upon the issuance of such
options or rights plus the minimum purchase price provided in
such options or rights for the capital stock covered thereby;
(B) the aggregate maximum number of shares of capital stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible
or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such
securities, options, or rights were issued and for a
consideration equal to the consideration received by the Company
for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be
received by the Company upon the conversion or exchange of such
securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner
provided in paragraphs (i) and (ii) of this Section 4.2);
10
(C) on any change in the number of shares or exercise price of
capital stock deliverable upon exercise of any such options or
rights or conversions of or exchanges for such securities, other
than a change resulting from the anti dilution provisions
thereof, the Exercise Price shall forthwith be readjusted to such
Exercise Price as would have been obtained had the adjustment
made upon the issuance of such options, rights or securities not
converted prior to such change or options or rights related to
such securities not converted prior to such change been made upon
the basis of such change;
(D) upon the expiration of any options to purchase or rights to
subscribe for capital stock which shall not have been exercised,
the Exercise Price computed upon the original issue thereof (or
upon the occurrence of a record date with respect thereto), and
any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if the only additional shares of
capital stock issued were the shares of capital stock, if any,
actually issued upon the exercise of such options to purchase or
rights to subscribe for capital stock, and the consideration
received therefor was the consideration actually received by the
Company for the issue of the options to purchase or rights to
subscribe for capital stock that were exercised, plus the
consideration actually received by the Company upon such
exercise; and
(E) no further adjustment of the
Exercise Price adjusted upon the
issuance of any such options,
rights, convertible securities or
exchangeable securities shall be
made as a result of the actual
issuance of capital stock on the
exercise of any such rights or
options or any conversion or
exchange of any such securities.
4.3 Upon Stock Dividends, Subdivisions or Splits.
(a) If, at any time after the Original Issue Date and on or
before the Expiration Date, the number of shares of Common Stock Outstanding is
increased by a stock dividend payable in shares of Common Stock or by a
subdivision or split up of shares of Common Stock, then, following the record
date for the determination of holders of Common Stock entitled to receive such
stock dividend, or to be affected by such subdivision or split up, the Exercise
Price shall be appropriately decreased by multiplying the Exercise Price by a
fraction, the numerator of which is the number of shares of Common Stock
Outstanding immediately prior to such increase and the denominator of which is
the number of shares of Common Stock Outstanding immediately after such increase
in Outstanding shares.
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(b) If, at any time after the Original Issue Date, the Company
shall declare or pay a dividend or make a distribution to all or substantially
all holders of Outstanding Common Stock, in either case, of evidences of
indebtedness, cash or other property or securities (excluding dividends referred
to in Section 4.3(a) above) or shall issue to all or substantially all holders
of Outstanding Common Stock rights or warrants to subscribe for or purchase any
of its securities (other than options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock, or options to purchase or rights to subscribe for such convertible
or exchangeable securities in respect of which the Holder becomes entitled to
purchase Common Stock or securities by their terms convertible into or
exchangeable for Common Stock referred to in Section 4.1 above), then in each
such case the Exercise Price shall be forthwith lowered so that the same shall
equal the price determined by multiplying the Exercise Price in effect
immediately prior to the close of business on the date (the "Record Date") fixed
for the determination of holders of Common Stock entitled to receive such
dividend or distribution by a fraction, (i) the numerator of which shall be the
Fair Market Value of the Common Stock as of the Business Day next preceding the
Record Date less the Fair Market Value, as of the Record Date, of the portion of
the evidences of indebtedness, cash or other property or securities so
distributed, or of such rights or warrants, in each case, applicable to one
share of Common Stock, and (ii) the denominator of which shall be the Fair
Market Value of the Common Stock as of the Business Day next preceding the
Record Date, with such adjustment to become effective immediately prior to the
opening of business on the day following the Record Date. Notwithstanding the
foregoing, in the event that, with respect to any dividend or distribution to
which this Section 4.3(b) would otherwise apply, the numerator in the fraction
referred to in the first sentence of this Section 4.3(b) is zero (or is a
negative number), then the adjustment provided by this Section 4.3(b) shall not
be made and in lieu of such adjustment, the Company shall deliver to the Holder
on the date fixed for payment to stockholders of the Company of such divided or
distribution, the evidences of indebtedness, assets, other property or
securities, rights or warrants so distributed in respect of the number of shares
of Warrant Stock (determined as of the close of business on the Record Date)
issuable upon exercise hereof.
4.4 Upon Combinations or Reverse Stock Splits. If, at any time
after the Original Issue Date, the number of shares of Common Stock Outstanding
is decreased by a combination or reverse stock split of the Outstanding shares
of Common Stock into a smaller number of shares of Common Stock, then, following
the record date to determine shares affected by such combination or reverse
stock split, the Exercise Price shall be appropriately increased by multiplying
the Exercise Price by a fraction, the numerator of which is the number of shares
of Common Stock Outstanding immediately prior to such decrease and the
denominator of which is the number of shares of Common Stock Outstanding
immediately after such decrease in Outstanding shares.
12
4.5 Upon Reclassifications, Reorganizations, Consolidations or
Mergers. In the event of any capital reorganization of the Company, any
reclassification of the stock of the Company (other than a change in par value
or from par value to no par value or from no par value to par value or as a
result of a stock dividend or subdivision, split up or combination of shares),
or any consolidation or merger of the Company with or into another Person (where
the Company is not the surviving Person or where there is a change in or
distribution with respect to the Common Stock), each Warrant shall after such
reorganization, reclassification, consolidation, or merger be exercisable for
the kind and number of shares of stock or other securities or property of the
Company or of the successor Person resulting from such consolidation or
surviving such merger, if any, to which the holder of the number of shares of
Common Stock deliverable (immediately prior to the time of such reorganization,
reclassification, consolidation or merger) upon exercise of such Warrant would
have been entitled upon such reorganization, reclassification, consolidation or
merger. The provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations, or mergers. The Company
shall not effect any such reorganization, reclassification, consolidation or
merger unless, prior to the consummation thereof, the successor Person (if other
than the Company) resulting from such reorganization, reclassification,
consolidation or merger, shall assume, by written instrument, the obligation to
deliver to the Holders such shares of stock, securities or assets, which, in
accordance with the foregoing provisions, such Holders shall be entitled to
receive upon such conversion.
4.6 Deferral in Certain Circumstances. In any case in which
the provisions of this Section 4 shall require that an adjustment shall become
effective immediately after a record date of an event, the Company may defer
until the occurrence of such event (a) issuing to the Holder with respect to any
Warrants exercised after such record date and before the occurrence of such
event the shares of capital stock issuable upon such exercise by reason of the
adjustment required by such event and issuing to such Holder only the shares of
capital stock issuable upon such exercise before giving effect to such
adjustments, and (b) paying to such Holder any amount in cash in lieu of a
fractional share of capital stock pursuant to Section 2.3 above; provided,
however, that the Company shall deliver to such Holder an appropriate instrument
or due bills evidencing such Holder's right to receive such additional shares or
such cash.
4.7 Appraisal Procedure. In any case in which the provisions
of this Section 4 shall necessitate that the Appraisal Procedure be utilized for
purposes of determining an adjustment to the Exercise Price, the Company may
defer until the completion of the Appraisal Procedure and the determination of
the adjustment (1) issuing to the Holder of any Warrant exercised after the date
of the event that requires the adjustment and before completion of the Appraisal
Procedure and the determination of the adjustment, the shares of capital stock
issuable upon such exercise by reason of the adjustment required by such event
and issuing to such Holder only the shares of capital stock issuable upon such
exercise before giving effect to such adjustment and (2) paying to such Holder
any amount in cash in lieu of a fractional share of capital stock pursuant to
Section 2.3 above; provided, however, that the Company shall deliver to such
Holder an appropriate instrument or due bills evidencing such Holder's right to
receive such additional shares or such cash.
4.8 Adjustment of Number of Shares Purchasable. Upon any
adjustment of the Exercise Price as provided in Sections 4.1, 4.3, 4.4 and 4.5
Holders of the Warrants shall thereafter be entitled to purchase upon the
exercise thereof, at the Exercise Price resulting from such adjustment, the
number of shares of Warrant Stock (calculated to the nearest 1/100th of a share)
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Warrant Stock issuable on the exercise
hereof immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
13
4.9 Notice of Adjustment of Exercise Price. Whenever the
Exercise Price is adjusted as herein provided:
(i) the Company shall compute the adjusted Exercise
Price in accordance with this Section 4 and shall prepare a certificate
signed by the treasurer or chief financial officer of the Company
setting forth the adjusted Exercise Price and showing in reasonable
detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed at the Designated Office; and
(ii) a notice stating that the Exercise Price has
been adjusted and setting forth the adjusted Exercise Price shall
forthwith be prepared by the Company, and as soon as practicable after
it is prepared, such notice shall be mailed by the Company at its
expense to all Holders at its last address as it shall appear in the
warrant register.
4.10 Form of Warrant. Irrespective of and without limiting any
adjustment in the Exercise Price or the number of shares purchasable upon the
exercise of the Warrant, Warrants thereafter issued may continue to express the
same price and number and kind of shares as are stated in the original Warrant.
4.11 Exceptions. This Section 4 shall not apply to any shares
of Common Stock (A) issued upon exercise of options granted under the Company's
2004 stock option plan, (B) issued upon exercise of any other options, warrants
or other rights outstanding on the date hereof, (C) issued to officers and
employees pursuant to employment agreements in existence on the date hereof, (D)
issued as consideration when any corporation or business is acquired, merged
into, or becomes part of the Company or a subsidiary of the Company, (E) issued
upon exercise of any options, warrants or other rights assumed by the Company in
connection with a merger or other acquisition, provided, that such options,
warrants or other rights assumed by the Company shall not have been issued in
connection with or in contemplation of such merger or acquisition, (F) issued in
good faith in connection with any other acquisition of assets in an arms-length
transaction between the Company and an unaffiliated third party, (G) issued to,
or pursuant to rights granted to, unaffiliated market makers who enter into
warrant agreements with the Company and the issuance of such shares, or the
exercise of such rights, is (x) subject to the achievement by the market maker
of specified volume milestones in cleared products, and (y) at an issuance, or
exercise, price that is not less than the fair market value of the Common Stock
on the date of grant, or (H) issued to, or pursuant to rights granted to,
unaffiliated landlords, equipment lessors, lenders, other financial
institutions, or other vendors to, or strategic partners of, the Company
(collectively, the "Excluded Stock"); provided, that any shares issuable
pursuant to sections (D), (F) and (H) above in excess of 300,000 shares in the
aggregate, and any shares issuable pursuant to section (G) above in excess of
1,200,000 shares in the aggregate shall not constitute Excluded Stock.
14
5. NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION
The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company shall take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Warrant Stock upon the exercise of this Warrant,
free and clear of all Liens, and shall use its commercially reasonable efforts
to obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK
6.1 The Company shall at all times reserve and keep available
for issuance upon the exercise of the Warrant such number of its authorized but
unissued shares of Common Stock as will be required for issuance of the Warrant
Stock. All shares of Warrant Stock issuable pursuant to the terms of this
Warrant, when issued upon exercise of this Warrant with payment therefor in
accordance with the terms hereof, shall be duly and validly issued and fully
paid and nonassessable, not subject to preemptive rights and shall be free and
clear of all Liens. Before taking any action that would result in an adjustment
in the number of shares of Warrant Stock for which this Warrant is exercisable
or in the Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction over such action. If any shares of
Warrant Stock required to be reserved for issuance upon exercise of the Warrant
require registration or qualification with any Governmental Entity under any
federal or state law (other than under the Securities Act or any state
securities law) before such shares may be so issued, the Company will in good
faith and as expeditiously as possible and at its expense endeavor to cause such
shares to be duly registered.
6.2 Before taking any action that would cause an adjustment
reducing the Exercise Price below the then par value (if any) of the shares of
Warrant Stock deliverable upon exercise of the Warrant or that would cause the
number of shares of Warrant Stock issuable upon exercise of the Warrant to
exceed (when taken together with all other Outstanding shares of Common Stock)
the number of shares of Common Stock that the Company is authorized to issue,
the Company will take any corporate action that, in the opinion of its counsel,
is necessary in order that the Company may validly and legally issue the full
number of fully paid and nonassessable shares of Warrant Stock issuable upon
exercise of the Warrant at such adjusted exercise price.
15
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS;
WARRANTHOLDER NOT DEEMED A STOCKHOLDER
7.1 Notices of Corporate Actions.
In case at any time after the original Issue Date and on or before the
Expiration Date there shall be:
(a) any grant by the Company to the holders of its Common
Stock, rights or warrants to subscribe for or purchase any shares of capital
stock of any class; or
(b) any reclassification of the Common Stock (other than a
subdivision or combination of the outstanding shares of Common Stock), or of any
consolidation, merger or share exchange to which the Company is a party and for
which approval of any stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company (except (i) a
merger or other reorganization in which the Company shall be the surviving
corporation and holders of Common Stock receive no consideration in respect of
their shares and (ii) a merger of the Company into a wholly owned subsidiary of
the Company, the principal purpose of which, in the good faith determination of
the Board of Directors, is to change the state of incorporation of the Company);
or
(c) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
(d) the Company or any Subsidiary shall commence a tender
offer for all or a portion of the Outstanding shares of Common Stock (or shall
amend any such tender offer to change the maximum number of shares being sought
or the amount or type of consideration being offered therefore);
then the Company shall cause to be filed at the Designated Office, and shall
cause to be mailed to NYMEX at its last address as it shall appear in the
warrant register, (i) at least twenty (20) days prior to the applicable record
or effective date hereinafter specified, a notice stating (x) the date on which
a record is to be taken for the purpose of such dividend, distribution or
granting of rights or warrants, or, if a record is not to be taken, the date as
of which the holders of Common Stock of record who will be entitled to such
dividend, distribution, rights or warrants are to be determined, or (y) the date
on which such reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution, liquidation
or winding up, or (ii) on the date on which such tender offer commenced, a
notice stating the date on which such tender offer commenced, the date on which
such tender offer is scheduled to expire unless extended, the consideration
offered and the other material terms thereof (or the material terms of the
amendment thereto. Such notice shall also set forth such facts with respect
thereto as shall be reasonably necessary to indicate the effect of such action
(to the extent such effect may be known at the date of such notice) on the
Exercise Price and the number and kind or class of shares or other securities or
property which shall be deliverable or purchasable upon the occurrence of such
action or deliverable upon exercise of the Warrant. Neither the failure to give
any such notice nor any defect therein shall affect the legality or validity of
any action described in clauses (a) through (d) of this Section 7.1.
16
7.2 Taking of Record. In the case of all dividends or other
distributions by the Company to the holders of its Common Stock with respect to
which any provision hereof refers to the taking of a record of such holders, the
Company will in each such case take such a record and will take such record as
of the close of business on a Business Day.
7.3 Closing of Transfer Books. The Company shall not at any
time close its stock transfer books so as to result in preventing or delaying
the exercise of the Warrant.
7.4 Warrant Holder Not Deemed a Stockholder. The Company may
deem and treat the registered Holder of the Warrant as the absolute owner
thereof (notwithstanding any notation of ownership or other writing thereon made
by anyone), for the purpose of any exercise thereof and for all other purposes,
and neither the Company nor any agent thereof shall be affected by any notice to
the contrary. Accordingly, the Company shall not be bound to recognize any
equitable or other claim to, or interest in, the Warrant on the part of any
Person other than such registered Holder, whether or not it shall have express
or other notice thereof. Prior to the valid exercise of the Warrant, no Holder
of the Warrant, as such, shall be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to consent to an
action of the stockholders, to receive dividends or other distributions, to
exercise any preemptive right, or to receive any notice of meetings of
stockholders and, except as otherwise provided in the Agreement, shall not be
entitled to receive any notice of any proceedings of the Company.
8. OFFICE OF THE COMPANY
As long as the Warrant remains outstanding, the Company shall maintain
an office or agency, which may be the principal executive offices of the Company
(the "Designated Office"), where the Warrant may be presented for exercise,
registration of transfer, division or combination as provided in this Warrant.
Such Designated Office shall initially be the office of the Company at 000
Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000. The Company may from time to time
change the Designated Office to another office of the Company or its agent
within the United States by notice given to all registered Holders at least ten
(10) Business Days prior to the effective date of such change.
9. MISCELLANEOUS
9.1 No Implied Waivers. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
9.2 Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
hand delivered or mailed postage prepaid by registered or certified mail or
transmitted by facsimile transmission (with immediate telephonic confirmation
thereafter),
17
(a) If to NYMEX:
NYMEX Holdings, Inc.
Xxx Xxxxx Xxx Xxxxxx
Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxxx, Esq.
Xxxxxxx X. Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
with a copy to (which shall not constitute notice):
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxxx, Esq.
Xxxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
or
(b) If to the Company:
Optionable, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxxx Xxxx & Xxxxxx LLP
13th Floor, 000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
or at such other address as the parties each may specify by written notice to
the others, and each such notice, request, consent and other communication shall
for all purposes of the Warrant be treated as being effective or having been
given when delivered if delivered personally, upon receipt of facsimile
confirmation if transmitted by facsimile, or, if sent by mail, at the earlier of
its receipt or seventy-two (72) hours after the same has been deposited in a
regularly maintained receptacle for the deposit of United States mail, addressed
and postage prepaid as aforesaid.
18
9.3 Limitation of Liability. No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Warrant Stock,
and no enumeration herein of the rights or privileges of the Holder hereof,
shall give rise to any liability of such Holder to pay the Exercise Price for
any Warrant Stock other than pursuant to an exercise of this Warrant or any
liability as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
9.4 Remedies. Each Holder of Warrants and/or Warrant Stock, in
addition to being entitled to exercise its rights granted by law, including
recovery of damages, shall be entitled to specific performance of its rights
provided under this Warrant. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
9.5 Successors and Assigns. This Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be binding upon
the successors of the Company and the permitted successors and assigns of the
Holder hereof.
9.6 Amendment. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived only with the written
consent of the Company and the Holder or, in the case of any transfer of this
Warrant to multiple Persons, the written consent of the Company and two-thirds
of the Holders. Notwithstanding the foregoing, without a Holder's written
consent no such modification, amendment or waiver shall affect adversely such
Holder's rights hereunder in a discriminatory manner inconsistent with its
adverse effects on rights of other Holders hereunder (other than as reflected by
the different number of shares of Warrant Stock held by such Holders). This
Warrant cannot be changed, modified, discharged or terminated by oral agreement.
9.7 Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
9.8 Headings. The headings and other captions in this Warrant
are for the convenience and reference only and shall not be used in
interpreting, construing or enforcing any provision of this Warrant.
9.9 Governing Law; Jurisdiction; Waiver of Jury Trial. The
Internal Laws, and not the laws of conflicts (other than Section 5 1401 of the
general obligations law of the state of New York), of New York shall govern the
enforceability and validity of this warrant, the construction of its terms and
the interpretation of the rights and duties of the Company. Any suit, action or
proceeding seeking to enforce any provision of, or based on any matter arising
out of or in connection with, this Warrant or any other Warrant or the
transactions contemplated hereby may be brought in any federal or state court
located in the County and State of New York, and each of the parties hereby
consents to the jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
in any such court or that any such suit, action or proceeding which is brought
in any such court has been brought in an inconvenient forum. Process in any such
suit, action or proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court. Without limiting
the foregoing, each party agrees that service of process on such party as
provided in Section 9.2 shall be deemed effective service of process on such
party.
19
9.10 Aggregation of Stock. All Warrant Stock held by or
acquired by Affiliated Persons will be aggregated together for the purpose of
determining the availability of any rights under this Warrant.
9.11 Entire Agreement. This Warrant contains the entire
agreement with respect to the subject matter hereof and supersedes and replaces
all other prior agreements, written or oral, with respect to the subject matter
hereof.
9.12 Waiver of Jury Trial. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY
[Execution Page Follows]
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the Original Issue Date.
Optionable, Inc.
By:
-------------------------------------
Name:
Title:
20
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ______ shares of Common Stock of Optionable,
Inc. and herewith makes payment therefor in __________, all at the price and on
the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any securities
or other property issuable upon such exercise) be issued in the name of and
delivered to _________________ whose address is
______________________________________________________________________________
_______________________________
(Name of Registered Owner)
_______________________________
(Signature of Registered Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
------------------------------------------------------------ -------------------
and does hereby irrevocably constitute and appoint ________ _____________
attorney in fact to register such transfer onto the books of Optionable Inc.
maintained for the purpose, with full power of substitution in the premises.
21
Dated: Print Name:
Signature:
Witness:
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
22
Exhibit F
Form of Waiver
A-6
WAIVER
WAIVER AGREEMENT, effective as of April 10, 2007 (the
"Waiver"), with respect to that certain Loan Agreement, dated as of March 22,
2004, between Optionable, Inc., a Delaware corporation (the "Borrower") and Xxxx
Xxxxxxxxx, an individual (the "Lender") (the "Loan Agreement").
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender are parties to the Loan
Agreement;
WHEREAS, Section 2.b.2 of the Loan Agreement provides, in
part, that following the first financing, the Borrower shall prepay Lender a
certain portion of the Loan (as defined in the Loan Agreement) and shall begin
to pay interest on the remaining unpaid balance;
WHEREAS, the Borrower and the Lender are parties to a Stock
and Warrant Purchase Agreement, dated as of April 10 , 2007, (the "Stock and
Warrant Purchase Agreement") by and among the Borrower, the Lender, NYMEX
Holdings, Inc. ("NYMEX"), Xxxxxx X'Xxxxxx, through Ridgecrest Capital, Inc., a
New York corporation and Xxxxx Xxxxxxx, through Xxxxxxxx Capital, Inc., a New
York corporation; and
WHEREAS, Section 8.2(e) of the Stock and Warrant Purchase
Agreement provides that the execution and delivery by Lender of this Waiver is a
condition to NYMEX's obligation to close the transactions contemplated by the
Stock and Warrant Purchase Agreement; and
WHEREAS, closing of the transactions contemplated by the Stock
and Warrant Purchase Agreement will confer substantial benefits upon both the
Borrower and the Lender;
NOW THEREFORE, in consideration of the premises, the mutual
covenants contained herein and the benefits to be conferred upon each as a
result of the closing of the transactions contemplated by the Stock and Warrant
Purchase Agreement, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, terms defined
in the Loan Agreement shall have the meanings assigned to them in the Loan
Agreement when used herein.
2. Waiver to Loan Agreement. The Lender hereby waives any
requirement under the Loan Agreement (a) that the Company make any prepayment of
principal thereunder, or (b) that the Company begin to pay interest thereunder,
as a result of any exercise or exercises of the Warrant (as defined in the Stock
and Warrant Purchase Agreement).
3. Conditions to Effectiveness. This Waiver shall be effective
on the date when the Stock and Warrant Purchase Agreement shall have been
executed by the parties thereto (the "Waiver Effective Date").
4. Miscellaneous.
(a) Governing Law. The validity, interpretation,
performance and enforcement of this Agreement shall be governed by the
laws of the State of New York, without giving effect to the laws, rules
or principles of such State regarding conflicts of laws (other than
Section 5-104 of the General Obligations Laws of the State of New
York).
(b) Benefit Assignment. This Waiver shall be binding
upon and shall inure to the benefit of Borrower and Lender and their
respective successors and permitted assigns. Neither Borrower nor
Lender may assign any of their respective rights or delegate any of
their respective duties under this Waiver without the prior written
consent of the other party and any assignment or delegation of this
Waiver by either party without the prior written consent of the other
party shall be void.
(c) Third Party Beneficiaries. NYMEX shall be a third
party beneficiary of the waiver by Lender set forth in Section 2 of
this Waiver.
(d) Severability; Reformation. If a court of
competent jurisdiction determines that any provision of this Waiver is
invalid, unenforceable or illegal for any reason, such determination
shall not affect or impair the validity, legality and enforceability of
the other provisions of this Waiver which shall remain in full force
and effect in the same manner and to the same extent as if the invalid,
unenforceable or illegal provision had not been contained in this
Waiver. If any such invalidity, unenforceability or illegality of a
provision of this Waiver becomes known or apparent to any of the
parties, the parties shall negotiate promptly and in good faith in an
attempt to make appropriate changes and adjustments to such provision
specifically and this Waiver generally to achieve as closely as
possible, consistent with applicable law, the intent and spirit of such
provision specifically and this Waiver generally.
(e) Headings. The headings set forth in this Waiver
have been inserted for convenience of reference only, shall not be
considered a part of this Waiver and shall not limit, modify or affect
in any way the meaning or interpretation of this Waiver.
4
(f) Amendments and Modifications. No addition to, and
no cancellation, renewal, extension, modification or amendment of, this
Waiver shall be binding upon any party unless such addition,
cancellation, renewal, extension, modification or amendment is
expressly set forth in a written instrument which is executed and
delivered by all of the parties hereto by authorized representatives of
each party.
(g) Waiver. No waiver of any provision of this Waiver
shall be binding upon a party unless such waiver is expressly set forth
in a written instrument which is executed and delivered on behalf of
such party by an authorized representative of such party. Such waiver
shall be effective only to the extent specifically set forth in such
written instrument. Neither the exercise (from time to time and at any
time) by a party of, nor the delay or failure (at any time or for a
period of time) to exercise, any right, power or remedy shall
constitute a waiver of the right to exercise, or impair, limit or
restrict the exercise of, such right, power or remedy or any other
right, power or remedy at any time and from time to time thereafter. No
waiver of any right, power or remedy of a party shall be deemed to be a
waiver of any other right, power or remedy of such party or shall,
except to the extent expressly so waived, impair, limit or restrict the
exercise of such right, power or remedy.
(h) Counterparts. This Waiver may be executed in any
one or more counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the same
instrument.
[Execution Page Follows]
5
IN WITNESS WHEREOF, the parties have caused this Waiver to be
executed and delivered by their respective duly authorized officers as of the
day and year first above written.
OPTIONABLE, INC.,
as Borrower
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
XXXX XXXXXXXXX,
as Lender
By:
-------------------------------------
Name: Xxxx Xxxxxxxxx
(SIGNATURE PAGE TO WAIVER AGREEMENT)
6
Exhibit G
Form of Employment Agreement with Xxxxx Xxxxxxx
A-7
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of April
10, 2007 (as so amended and restated, this "Agreement"), between OPTIONABLE,
INC., a Delaware corporation ("Employer"), and XXXXX X. XXXXXXX ("Employee").
W I T N E S S E T H:
WHEREAS, Employer is engaged in the business of providing
trading and brokerage services to brokerage firms, financial institutions,
energy traders, and hedge funds, and developing an automated electronic trading
system;
WHEREAS, Employer and Employee are the parties to an
Employment Agreement dated as of October 30, 2005 (the "Original Agreement");
WHEREAS, Employer and Employee wish to set forth certain
amendments to, and restate, the Original Employment Agreement effective as of
April 10, 2007; and
WHEREAS, Employee seeks to continue to be employed by Employer
and Employer seeks to continue to so engage Employee as its Chief Executive
Officer and Vice Chairman upon the terms and conditions of this Agreement as so
amended and restated;
NOW, THEREFORE, in consideration of the mutual covenants and
promises herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending legally to be bound, agree as follows.
1. Employment. Employer agrees to employ Employee and Employee accepts
employment with Employer, on the terms and conditions set forth in this
Agreement.
2. Term of Employment. Employer hereby employs Employee and Employee
hereby accepts employment for a term commencing on October 30, 2005 (the
"Commencement Date"), and expiring on that date five (5) years after the
Commencement Date, unless sooner terminated as hereinafter provided (the
"Employment Period"). This Agreement shall be renewable for succeeding terms, if
any (each of the Employment Period and each successive term of employment
hereunder, a "Term") only by written agreement by Employer and Employee entered
into within thirty (30) days prior to the expiration of the then current Term.
In the absence of such renewal, this Agreement shall terminate at the end of the
then current Term.
3. Duties During Employment. Employee shall be employed by Employer
during each Term as its Chief Executive Officer. As soon as practicable after
the execution and delivery of this agreement, the Board of Directors shall vote
on the election of Employee as a Director of Employer.
In carrying out his duties under this Agreement, Employee shall have
such powers and duties usually incident to the office of Chief Executive
Officer. Employee shall have authority do such acts and to make such contracts
as are necessary or proper to carry on the business of Employer, including but
not limited to:
(a) managing and overseeing the brokerage operations of the
Employer;
(b) managing and overseeing the marketing operations of the
Employer;
(c) management and oversight of employees of the Employer;
(d) leading senior level management and participating in Board
meetings at the request of the directors; and
(e) use of his best efforts to carry into effect the policies,
initiatives and directives of the Board.
Employee agrees that he shall devote no less than eighty (80%) percent of his
working time to carrying out his duties and obligations hereunder. It is
expressly acknowledged, however, that, subject to the preceding sentence,
Employee shall be permitted to continue to be active in and pursue other
business activities and opportunities (whether or not now existing) provided,
that while employed hereunder he shall abide by the Restrictive Covenants set
forth in Section 7 below. Moreover, and subject to the first sentence of this
paragraph and the Employee's duty of loyalty to Employer, it is understood that
Employee may engage in personal activities of a civic, charitable or educational
nature and may manage his personal investments.
4. Place of Performance. Employee's place of employment shall be
Briarcliff Manor, New York ("Place of Performance") and shall not be changed
without Employee's prior written consent.
5. Compensation. As compensation for all of the services to be rendered
hereunder, whether or not anticipated as being within the scope of this
Agreement, Employer shall compensate Employee as follows.
(a) Employee's gross salary during the Employment Period
("Fixed Compensation") shall be as follows:
(i) upon entering into this agreement, $20,833;
(ii) from October 30, 2005 to December 31, 2005,
$46,875;
(iii)from January 1 to December 31, 2006, $275,000;
(iv) from January 1, 2007 to December 31, 2007,
$300,000;
(v) from January 1 to December 31, 2008, $325,000;
and
(vi) from January 1, 2009 to December 31, 2009:
$350,000;
payable in accordance with the Employer's regular payroll policies and subject
to usual payroll deductions provided by law.
2
(b) During the Employment Period and beginning with the first
month of the quarter in which the amount payable to Employee, pursuant to the
Addendum to Master Services Agreement dated April 12, 2005, is fully paid,
Employer shall pay Employee (i) cash compensation amounting to five percent (5%)
of Gross Revenues of Employer, and (ii) stock compensation ("Stock
Compensation") amounting to two percent (2%) of the Gross Revenues of Employer
(together the "Variable Compensation"). Gross Revenue is defined as the total
gross revenue related to any all aspects of the brokerage business, including
incentive received from exchanges, based on generally accepted accounting
principles. Stock will be granted at fair value at the date of grant. The
Variable Compensation will be paid (in the case of cash) and issued (in the case
of stock) on a quarterly basis. It is understood that shares of Employer's
common stock constituting the Stock Compensation will be "restricted stock," as
such term is defined in Rule 144 of the Securities and Exchange Commission.
(c) Employer shall issue common stock purchase options to
Employee to purchase that number of shares of common stock equal to twenty
percent (20%) of the number of shares of common stock issuable under warrants
which become exercisable pursuant to any Order Flow Agreements. Order Flow
Agreements being those agreements in which the Employer has agreed to issue
warrants to an entity based on the volume of orders that such entity has placed
with the Employer. Such options will be Non-Statutory Stock Options granted
under Employer's 2004 Stock Option Plan (the "Plan") at fair value at the date
of grant and will be fully-vested upon grant.
(d) Employer shall issue to Employee 5,000 common stock
purchase options each time a firm registers with and executes its first 10,000
lots on Employer's OPEX platform. The total number of options issuable under
this Section 5(d) will be limited to 2,500,000. Such options will be
Non-Statutory Options granted under the Plan at fair value at the date of grant
and will be fully-vested upon grant.
(e) Employee shall be entitled to paid annual vacation,
personal leave and holidays in accordance with the policies of Employer.
Employee will be entitled to participate in health, welfare, and pension plans
and any other employee benefit plan of Employer on the same basis as such
benefits are generally available to similarly situated employees of Employer.
(f) Employer will advance to or reimburse Employee for all
reasonable travel and entertainment and other reasonable expenses incurred by
the Employee in connection with his performance under this Agreement upon
submission of written or printed receipts in accordance with Employer's usual
and customary policy. Employer agrees that Employee's travel by first class air
travel and by executive limousine ground transportation are reasonable expenses.
(g) Employer shall advance to or reimburse Employee for the
annual or monthly premium of Employee's life insurance policy of one million
dollars ($1,000,000) where the beneficiary is the Employee's estate (immediate
family), provided that Employee submits to Employer a copy of the invoice for
such premium upon request.
3
(h) Upon notice to be given to Employee not less than thirty
(30) days prior to the expiration of the Term, Employer shall have the right to
require that Employee continue to abide by the Restrictive Covenants set forth
in Sections 7(b) and (c) below following the expiration of the Term, in which
case Employer shall continue to pay Employee his Fixed Compensation, at the rate
in effect on the last day of the Term, in accordance with Employee's regular
payroll policies and subject to usual payroll deduction provided by law, through
the last day of the Restrictive Period (as defined in Section 7(b) below). For
the avoidance of doubt, an early termination of this Agreement pursuant to
Section 6 below does not constitute the expiration of the Term.
6. Early Termination. This Agreement may be terminated by either party
at any time before the expiration of the Term in accordance with the terms and
conditions set forth in this Section 6.
(a) If Employee resigns from his employment under this
Agreement without Good Reason, as defined below, or if Employer terminates
Employee's employment for Cause, as defined below, Employer shall have no
financial obligation to Employee except to pay his Fixed Compensation through
the date of termination and continue his employee benefits through such date.
Employer shall give Employee written notice of a termination for Cause, and
Employee shall give written notice to Employer of resignation for Good Reason.
For purposes of this Agreement, "Cause" shall mean (i) the Employee's willful
misconduct in the performance of his duties hereunder, provided that Employer
shall have given written notice of such willful misconduct to Employee and
Employee shall not have substantially cured such willful misconduct within
fifteen (15) days after his receipt of such notice; (ii) a non-appealable
conviction of a felony; (iii) issuance of a final consent decree,
cease-and-desist or similar order against Employee prohibiting Employee from
engaging in the securities and/or commodities business or (iv) Employee's breach
of any of the Restrictive Covenants set forth in Section 7 below. For purposes
of this Agreement, "Good Reason" shall mean the occurrence of any of the
following: (A) Employer shall have materially defaulted in its obligations
hereunder; (B) a material diminution in Employee's authority, or
responsibilities, or (C) a change in Employee's Place of Performance without
Employee's prior written consent.
(b) Upon the sale or merger or other business combination of
Employer and another company or companies (excluding NYMEX Holdings, Inc. or its
affiliates), Employee will be entitled to a lump sum payment of 50% of the
unpaid Fixed Compensation should he desire not to be employed with the new or
successor entity.
(c) If Employee becomes incapable, by reason of death or
Disability, as defined below, of performing his duties under this Agreement,
Employer may terminate Employee on the following terms. Employer will pay to
him, or to a person duly authorized to act on his or his estate's behalf, a lump
sum equal to the sum of any unpaid Fixed Compensation accrued to the date of
termination (the "Section 6(d) Sum"). In such circumstances, payment of the
Section 6(d) Sum shall satisfy all financial obligations of Employer to Employee
under this Agreement, but Employee's employment hereunder shall continue for the
duration of the condition that occasioned the Disability, after which his
employment for all purposes shall cease. For purposes of this Agreement,
"Disability" shall mean the inability of Employee, by reason of physical or
mental illness or injury, substantially to perform his duties hereunder for a
period of time exceeding 180 days in the aggregate during any period of twelve
consecutive months. Employer shall give Employee or a person duly authorized to
act on his behalf written notice of a termination based on Disability.
4
(d) Employee shall have no duty to mitigate Employer's damages
or losses, if any, with respect to any payments due him pursuant to this Section
6, by seeking or accepting other employment. Moreover, should Employee seek and
accept other employment no amounts payable to Employee by a subsequent employer
shall be deemed to offset to any amounts owed by Employer to Employee under this
Agreement.
(e) For the avoidance of doubt, if either Employer terminates
Employee's employment without Cause or Employee resigns for Good Reason,
Employee shall be entitled to all amounts hereunder as though Employee continued
to work until five (5) years after the Commencement Date.
7. Restrictive Covenants. Employee acknowledges that the business in
which Employer is engaged is intensely competitive and: (i) by reason of
Employee's appointment and duties, he will be privy to substantial and vital
confidential information of Employer, not generally published or available to
the public, concerning the organization, business and affairs, products and
technology, and customers of Employer, including but not limited to, business
plans, operational methods, financial information and projections, technical
processes and data, product development plans, research and development, lists
of customers, interests and needs of customers, business plans and policies,
overhead and cost information, profit margins, pricing methods or prices
considered or actually charged, lists and records of sales and contracts,
computer software applications and other programs, source codes, object codes,
marketing techniques and materials, marketing and development plans, price
lists, pricing policies, personnel information and other trade secrets (the
"Confidential Information"); (ii) the disclosure of any of the foregoing to
existing or potential competitors of Employer would place Employer at a serious
competitive disadvantage and could do serious damage to the business of
Employer; and (iii) by Employee's training, experience and expertise, Employee's
services to Employer will be extraordinary, special and unique. Accordingly,
Employee willingly agrees to be bound by the following restrictions:
(a) During the Term and at all times after the termination of
Employee's employment with Employer for any reason (including the expiration of
the Term), Employee shall not, directly or indirectly, whether individually, as
an officer, director, employee, consultant, owner, investor, partner or
stockholder of any business, or in any other capacity, make known, disclose,
furnish, make available or utilize any of the Confidential Information, other
than in the proper performance of the duties contemplated herein. Employee
agrees to return all Confidential Information, including all photocopies,
extracts and summaries thereof, and any such information stored electronically
or in any other manner to Employer at any time upon request by Employer and upon
the termination of Employee's employment for any reason (including the
expiration of the Term). Nothing contained in this Section 7(a) shall be deemed
to preclude Employee from: (i) using his own general skills, knowledge and
experience; (ii) using or disclosing any Confidential Information which becomes
public through no fault of Employee; or (iii) disclosing Confidential
Information pursuant to subpoena, court order or legal process, provided that
Employee gives Employer advance written notice of the required disclosure so
that Employer may, if it wishes, seek an appropriate protective order.
5
(b) During the Term and for a period of nine (9) months
following the termination of Employee's employment with Employer for any reason
(including the expiration of the Term if Employer makes the election
contemplated by Section 5(h) above) (the "Restrictive Period"), Employee shall
not, directly or indirectly, whether as officer, director, employee, consultant,
owner, investor, partner or stockholder, be engaged in or have any financial
interest in (other than an interest of less than five percent (5%) of the stock
of a publicly traded company) or affiliation with or render any services to or
for any person, firm, company or organization which provides "Competitive
Services" (as defined below) to brokerage firms, other financial institutions
providing energy brokerage services or clearinghouses, anywhere in the United
States, it being understood and acknowledged by Employee that Employer conducts
business and offers Competitive Services on a nationwide basis. The term
Competitive Services shall mean natural gas and other energy brokerage services.
Notwithstanding the foregoing, it shall not be a violation of this Section 7(b)
for Employee to become an officer, director, employee, consultant, owner,
investor, partner or stockholder of any person, firm, company or organization
which provides "Competitive Services" if, and only if, Employee's primary
responsibilities to or for such person, firm, company or organization do not
involve, and do not in any significant manner relate to, providing Competitive
Services to brokerage firms, other financial institutions providing energy
brokerage services or clearinghouses, anywhere in the United States.
(c) During the Restrictive Period, Employee shall not,
directly or indirectly, for his benefit or for the benefit of any person, firm
or entity (other than Employer):
(i) cause or attempt to cause any Customer or
Prospective Customer of Employer on whom Employee called or with whom Employee
became acquainted during employment with Employer to obtain Competitive Services
from any person, firm, company or organization other than Employer or to cease
doing business with, or reduce the amount of Competitive Services obtained from,
Employer. For purposes of this Agreement, "Customer" shall mean any brokerage
firm, financial institution, energy trader, hedge fund or other entity which was
a customer of or had an account with Employer during the one (1) year period
preceding Employee's termination of employment for any reason (including the
expiration of the Term). For purposes of this Agreement, "Prospective Customer"
shall mean any brokerage firm, financial institution, energy trader, hedge fund
or other entity for which Employer had submitted a written proposal to provide
services within the one (1) year period preceding Employee's termination of
employment for any reason (including the expiration of the Term); or
(ii) enter into any partnership, limited liability
company, corporation, new or joint venture or similar arrangement with, or hire
or retain or attempt to hire or retain, any person who is, or at any time during
the one (1) year period preceding the termination of Employee's employment with
Employer for any reason (including the expiration of the Term), was an employee
of or consultant to Employer, without the prior written consent of the Employer,
such consent to be within Employer's sole and absolute discretion.
(d) Employee acknowledges that the restrictions specified in
this Section 7 are reasonable in view of the nature of the business in which
Employer is engaged, Employee's position with Employer, and Employee's knowledge
of Employer's business, and that any breach of this Section 7 may cause Employer
irreparable harm for which there is no adequate remedy at law, and as a result
of this, Employer will be entitled to seek the issuance by a court of competent
jurisdiction of an injunction, restraining order or other equitable relief in
favor of Employer, without the necessity of posting a bond, restraining Employee
from committing or continuing to commit any such violation. Any right to obtain
an injunction, restraining order or other equitable relief hereunder will not be
deemed to be a waiver of any right to assert any other remedy Employer may have
at law or in equity.
6
(e) Employee acknowledges and agrees that the duration and
geographic scope of the covenants contained in this Sections 7 are fair and
reasonable. Accordingly, Employee agrees that, in the event that any of the
covenants contained in this Section 7 is nevertheless judicially determined to
be unenforceable because of the duration or geographic scope thereof, the court
making such determination is hereby directed to reduce such duration and/or
scope to the extent necessary to enable such court to determine that such
covenant is reasonable and enforceable, and to enforce such covenant as so
amended.
(f) The provisions of this Section 7 shall survive the
termination of Employee's employment for any reason (including the expiration of
the Term) and this Agreement.
8. Termination of Consulting Agreement. Upon execution of this
Agreement, the Consulting Agreement, dated April 1, 2004 between the Employer
and the Employee, which is pursuant to the Master Services Agreement, dated
April 1, 2004, between the Employer and Capital Energy Services LLC, is
terminated retroactively on October 15, 2005. However, all other terms of the
Master Services Agreement, other than those relating to the Consultant, will
remain unchanged.
9. Governing Law; Jurisdiction; Venue. This Agreement shall be governed
by and is to be construed and enforced in accordance with the internal laws of
the State of New York without regard to principles of conflicts of laws. Any
action to enforce any term hereof shall be brought in the state or federal
courts located in the City of New York, State of New York, to which jurisdiction
and venue all parties hereby submit themselves.
10. Notices. All notices required to be given under this Agreement
shall be in writing and shall be deemed effective when delivered in person, by
facsimile transmission, overnight mail service or by certified U.S. mail,
addressed, in the case of Employee, to him at his residential address as
reflected in the Employer's personnel records or, in the case of Employer, to
000 Xxxxxxxxxxxxx Xxxx, Xxxxx Xxxxxxxx, Xxxxx 000, Xxxxxxxxxx Xxxxx, XX 00000,
or to such other address as Employee or Employer may designate in writing to the
other party.
11. Miscellaneous.
(a) This Agreement contains the entire agreement and
understanding between the parties and supersedes all other prior agreements,
discussions, negotiations, commitments, and understandings between them with
respect to the subject matter hereof. There are no representations, agreements,
arrangements or understandings, oral or written, between the parties concerning
the subject matter hereof which are not fully expressed herein.
7
(b) No waiver by either party of or failure to assert any
provision or condition of this Agreement by him or it to be performed or right
to be exercised shall be deemed a waiver of such or similar or dissimilar
provisions and conditions or rights at the same time or any prior or subsequent
time.
(c) This Agreement shall be binding upon, and inure to the
benefit of, the parties hereto and their heirs, successors, assigns and personal
representations. In no event may Employee assign any rights or duties under this
Agreement and in no event may Employer assign any rights or duties under this
Agreement without the prior written authorization of Employee, provided,
however, that Employer may assign its rights under this Agreement in connection
with any merger, consolidation or sale of substantially all of its assets
subject to Section 6(b).
(d) Each in consultation with its respective legal counsel,
Employer and Employee have participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.
(e) Employer shall indemnify and hold Employee harmless with
respect to any liability, loss or expense, including reasonable attorneys' fees
("Loss") (Employee shall have the right to choose such attorneys, subject to the
consent of Employer, which consent shall not be unreasonably withheld) incurred
by him, as a result of any claim relating to or arising out of the performance
of duties pursuant to this Agreement, provided, however, that if it is
determined that the Loss arose as a result of Employee's willful misconduct or
gross negligence, then Employee shall not be entitled to indemnification for
such Loss and Employee shall be required promptly to return to Employer any
amounts paid by Employer pursuant to this Section 11(e).
(f) In the event that any one or more of the provisions of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remainder hereof shall not in any
way be affected or impaired thereby and any such provision or provisions shall
be enforced to the fullest extent permitted by law. Moreover, if any one or more
of the provisions contained in this Agreement are held to be excessively broad
as to duration, scope, activity or subject, such provisions will be construed by
limiting and reducing them so as to be enforceable to the maximum extent
compatible with applicable law.
[Signatures appear on the following page]
8
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the year and day first above written.
EMPLOYER
Optionable, Inc.
By:
-------------------------------------
Xxxxxx X'Xxxxxx, President
EMPLOYEE
Xxxxx X. Xxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxx
As to Section 8 only:
CAPITAL ENERGY SERVICES LLC
By:
-------------------------------------
Xxxxx X. Xxxxxxx, Managing Director
9
Exhibit H
Marketing Consideration
Purchaser and the Company agree to develop a marketing plan, which plan will
detail proposed expenditures by Purchaser and joint activities, within thirty
(30) days of the date of this Agreement. In addition, the Purchaser will provide
sufficient space for up to twenty (20) of the Company's traders to be set-up on
the Purchaser's trading floor in an area to be determined in the Purchaser's
reasonable discretion and subject to CFTC and other regulatory restrictions and
approvals, if any, during a term to be agreed upon by the Purchaser and the
Company within thirty (30) days of the date of this Agreement.
* * *
A-8
Exhibit I
Technology Consideration
Purchaser operates the ClearPort technology network, which is a flexible,
internet-based system that provides a market gateway to trading and clearing
services ("ClearPort"). Company has developed a real-time electronic trade
matching and brokerage system ("OPEX"). Purchaser will host OPEX in Purchaser's
data center and will provide Company with computer and networking hardware,
software, bandwidth and ancillary infrastructure and services to be agreed upon
and that are reasonably necessary to interconnect OPEX with ClearPort (the
"Hosting Services"). Purchaser shall dedicate sufficient resources to be agreed
upon to the provision of the Hosting Services to allow OPEX to clear through
ClearPort all OTC products that are not traded bilaterally. In addition,
Purchaser shall provide Company with an application programming interface to be
agreed upon for ClearPort and reasonably cooperate with Company to improve the
connectivity between OPEX and ClearPort (the "Collaboration Services").
Collectively, the Hosting Services and the Collaboration Services are referred
to herein as the "Services." The time and scope of the Services are to be agreed
upon by the Company and the Purchaser within thirty (30) days of this Agreement.
* * *
A-9
Exhibit J
Incentive Fee
In consideration thereof, and following receipt of CFTC approval and amendment
of the Purchaser's Market Maker Program, the Purchaser agrees to pay the Company
an incentive fee for business cleared through the NYMEX ClearPort(R) clearing
system of ***%.
* * *
*** CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPERATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMISSIONS.
A-10
DISCLOSURE SCHEDULES
Reference is made to the Stock and Warrant Purchase Agreement (the "Agreement"),
dated as of April 10, 2007, by and among Optionable, Inc. (the "Company"), Xxxx
Xxxxxxxxx, Ridgecrest Capital, Inc., Xxxxxxxx Capital, Inc. (each, a "Founder"
and, collectively, the "Founders") and NYMEX Holdings, Inc. Unless otherwise
noted herein, any capitalized term in these Schedules shall have the same
meaning assigned to such term in the Agreement. Disclosures made under the
heading of one section may apply to, augment or qualify disclosures under all
sections to which such disclosures reasonably relate. Section and schedule
headings are provided herein for convenience only. The inclusion of any item
herein shall not be deemed to be an admission of any obligation of liability to
any third party.
Schedule 6.6
Subsidiaries
1. The Company owns 49% of the outstanding common stock of Opex International,
Inc.
Schedule 6.7
Consents
None
Schedule 6.11
Intellectual Property
Patents
A SYSTEM AND METHOD FOR REAL-TIME OPTIONS TRADING OVER A GLOBAL COMPUTER NETWORK
--------------------------- --------------------- -------------- ----------------- ----------------------- ---------------------
UNITED STATES 100K522-US1 FCA 4/26/2002 10/133,972 PUBLISHED
--------------------------- --------------------- -------------- ----------------- ----------------------- ---------------------
UNITED STATES 100K522-US2 DIV 3/7/2006 11/370,346 PUBLISHED
(divisional)
--------------------------- --------------------- -------------- ----------------- ----------------------- ---------------------
SELECTABLE MARKET TRANSACTION OVER A NETWORK
--------------------------- --------------------- -------------- ----------------- ----------------------- ---------------------
UNITED STATES 000K529-US0 NEW 6/11/2001 09/878,864 PENDING
--------------------------- --------------------- -------------- ----------------- ----------------------- ---------------------
SYSTEM AND METHOD FOR REAL-TIME OPTIONS TRADING OVER A COMPUTER NETWORK
--------------------------- --------------------- -------------- ----------------- ----------------------- ---------------------
UNITED STATES 000K528-US0 NEW 8/31/2000 09/653,102 PENDING
--------------------------- --------------------- -------------- ----------------- ----------------------- ---------------------
UNITED STATES 100K528-US1 DIV 2/17/2005 11/060,455 PUBLISHED
--------------------------- --------------------- -------------- ----------------- ----------------------- ---------------------
Servicemarks
OPEX
OPEX RealMarks
OPEX Analytics
Optionable
Software
OPEX v. X.X
Schedule 6.13
Material Contracts
1. Master Services Agreement with Capital Energy Services LLC ("CES"),
dated April 1, 2004 including the Consulting Agreement as a part
thereof and Addendum, dated October 7, 2004
2. Addendum to Master Services Agreement
3. Employment Agreement, as amended, between the Company and Xxxxxx X.
X'Xxxxxx
4. Employment Agreement between the Company and Xxxxx X. Xxxxxxx, dated
October 30, 2005
5. Optionable, Inc. 2004 Stock Option Plan
6. Form of Incentive Stock Option Agreement
7. Nonstatutory Stock Option Agreement
8. Prepaid Commission Agreement, dated February 3, 2003, between the
Company and Xxxx Xxxxxxxxx
9. Revolving Credit Facility Agreement, dated June 5, 2003, between the
Company and Platinum Value Arbitrage Fund LP
10. $500,000 Revolving Promissory Note from the Company to Platinum Value
Arbitrage Fund LP dated June
5, 2003
11. Prepaid Commission Agreement, dated June 9, 2003, between the Company
and Platinum Partners Value Arbitrage Fund LLP
12. Loan Agreement, dated February 13, 2004, between the Company and Xxxx
Xxxxxxxxx
13. $250,000 Promissory Note, dated February 13, 2004, from the Company to
Xxxx Xxxxxxxxx
14. $250,000 Promissory Note Extension Agreement, dated September 9, 2004
15. Loan Agreement, dated March 8, 2004, between the Company and Xxxx
Xxxxxxxxx
16. $50,000 Promissory Note, dated March 8, 2004, from the Company to Xxxx
Xxxxxxxxx
17. $50,000 Promissory Note Extension Agreement, dated September 9, 2004
18. Loan Agreement, dated March 22, 2004, between the Company and Xxxx
Xxxxxxxxx
19. $5,621,753.18 Promissory Note, dated March 22, 2004, from the Company
to Xxxx Xxxxxxxxx
20. Addendum to Loan Agreement, dated March 22, 2004
21. Addendum to Promissory Note, dated March 22, 2004
22. Revolving Credit Facility Agreement, dated April 15, 2004, between the
Company and Xxxx Xxxxxxxxx
23. $50,000 Promissory Note, dated April 15, 2004, from the Company to Xxxx
Xxxxxxxxx
24. Amendment to Master Services Agreement
25. Termination Agreement (of Master Service Agreement)
26. Agreement of Lease between DP LLC and Optionable, Inc, dated November ,
2006
27. Warrant Agreement for the Purchase of Common Stock dated February 23,
2006
28. Service and Repurchase Agreement entered into as of January 31, 2007
29. Acquisition Agreement, dated March 23, 2007, between the Company, Xxxxx
Xxxxxxxxx, Xxxxxxx Xxxxx, and Xxxxxx XxXxxx
30. Agreement between FTN and Optionable, Inc. dated October 18, 2006,
terminated on January [18], 2007
Schedule 6.14
Voting and Registration Rights
None
Schedule 6.16
Issuances Exempt
None
Schedule 6.19
Undisclosed Liabilities
We acquired two NYMEX trading rights in March 2007 for approximately $1,180,500.
By letter dated February 26, 2007, the staff of the Market Regulation Department
of the National Association of Securities Dealers, Inc. ("NASD") informed the
Company that the NASD was conducting a review of trading activity in the
Company's common stock. The Company provided the NASD with the requested
information on March 8, 2007. A copy of NASD's letter has previously been
provided to NYMEX.
Schedule 6.20
Litigation
None
Schedule 6.22
Taxes
None
Schedule 6.23
Employee Relations
We have employment agreements with the following individuals:
Xxxxx Xxxxxxx
Xxxxxx X'Xxxxxx
Xxxxxx Xxxxxxx
Xxxx Xxxxxxx
Xxxxx Xxxxxxxxx
Xxxxxxx Town
Xxxxxx XxXxxx
The Company pays its brokers commissions amounting to approximately 50% of the
revenues such brokers generate, less overhead.
The Company pays variable compensation to its Chief Executive Officer pursuant
to his employment agreement.
The Company may pay bonuses on an ad hoc basis, based on performance, to certain
employees. Payments pursuant to such ad hoc bonuses did not exceed $50,000, in
the aggregate, during 2006.
The Company pays health insurance premiums on behalf of its employees.
The Company has adopted its 2004 Stock Option Plan in December 2004 pursuant to
which it grants options to its employees from time to time.
Schedule 6.26
Related-Party Transactions
1. Travel and expense reimbursement in the ordinary course of business.
2. The Company was party to a Master Services Agreement with CES pursuant to
which the Company provided brokerage services on the floor of the New York
Mercantile Exchange. Xx. X'Xxxxxx, the Company's President, is a 50% stockholder
of CES. Xx. Xxxxxxx, the Company's Chief Executive Officer is the Managing
Director and a 50% stockholder of CES. Pursuant to this arrangement, the Company
was paying to CES a minimum annual fixed fee of $50,000 and assuming all
expenses directly incurred by CES's associated floor brokerage services.
Additionally, the Company owes to CES $1,525,000 payable on April 1, 2014.
However, upon a Capital Raise (as defined below), the Company will pay up to
10.67% of the amount raised during the Capital Raise, up to $762,500, to CES,
with the remaining principal and accrued interest of 12% from the date of the
Capital Raise payable on April 1, 2014.
Pursuant to this arrangement, our share of revenues and expenses of the floor
brokerage services amounted to approximately $3.6 million and $741,000,
respectively, during 2006, and $2.0 million and $860,000, respectively, during
2005. We have received $2.6 million and $1.0 million from CES in connection with
such floor brokerage services during 2006 and 2005, and CES owes us
approximately $488,000 as of December 31, 2006. This agreement was terminated in
January 2007 and our floor operations are now assumed by a subsidiary, OPEX
International, Inc. In April 2005, CES assigned its rights to the Company's
liability of $1,525,000 equally to Xx. X'Xxxxxx and Xx. Xxxxxxx, co-owners of
CES.
3. In April 2005, the Company modified the terms of the agreements under which
the Company initially owed $5,762,753, $765,000 and $765,000 to Xxxx Xxxxxxxxx,
the Company's Chairman of the Board, Xx. Xxxxxxx and Xx. X'Xxxxxx, respectively.
The modified terms provide that, among other things, in the event the Company
raises more than $1,000,000 additional equity or debt financing (a "Capital
Raise"), the interest rate accrued after such event will be reduced from 12% to
4.68%. In 2006, we modified the terms of the agreements to allow prepayments at
our discretion.
In connection with the modified terms, the Company made principal repayments of
$400,000 and $177,243 on the amount due to Xx. Xxxxxxxxx during 2006 and 2005,
respectively, of which $69,638 was offset in 2005 against an accounts receivable
of one of the Company's clients, which is not affiliated with Xx. Xxxxxxxxx.
Additionally, the Company made principal repayment of $558,697 and $203,803 on
the amount due to Xx. Xxxxxxx during 2006 and 2005, respectively, and $200,000
and $53,803 on the amount due to Xx. X'Xxxxxx, during 2006 and 2005,
respectively.
4. The Company has recognized revenues from brokerage commissions of
approximately $3,480, $206,119 and $63,000 during 2006 and $75,000, $9,000 and
$21,000, during 2005, from Northern Lights Energy LLC, Platinum Partners, L.P.
and Fenmore Holdings LLC, respectively, entities in which Xx. Xxxxxxxxx is the
managing partner or a stockholder. The aggregate amount owed to us from such
entities amounted to approximately $289,000 as of December 31, 2006.
5. Pursuant to an agreement providing for the reimbursement of certain
administrative expenses for services provided to a coffee bean roaster, Sleepy
Hollow Coffee Roasters, Inc. ("Sleepy Hollow"), a company owned by Messrs.
X'Xxxxxx and Xxxxxxx, the Company charged an administrative fee of $17,000 and
$17,000 to Sleepy Hollow during 2006 and 2005, respectively.
Schedule 6.27
Insurance
General Liability Policy Information
Property Information
Personal Property Personal Property Limit: 203,146
Deductible: 500
Liability Coverage/Limits Information
Combined Single Limit: 1,000,000
Medical Expense: 5,000
Fire Damage: 300,000
Hired Auto: 1,000,000
Non Owned Auto: 1,000,000
Umbrella
Limit Each Occurrence: 1,000,000
Retained Limit: 10,000
Workers Compensation
Directors' and Officers' and Corporate Liability Insurance
Aggregate Limit of Liability for the Policy Period (inclusive of Costs of
Defense): $2,500,000
Applicable Retentions
Securities Claims: Judgments and Settlements (all coverages) None
Costs of Defense (Coverage A.) $0
Costs of Defense (Coverage B.) $150,000
Judgments, Settlements and Costs of Defense
(Coverage A.) $0
Judgments, Settlements and Costs of Defense (Coverage B. 2.) $100,000
