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WARRANT AGREEMENT
among
eSpeed, Inc.,
and
The Freedom Participants Identified Herein
Dated as of April 4, 2001
TABLE OF CONTENTS
Page
Section 1 Certain Definitions.............................................................................3
Section 2 Issue of Warrants and Form of Warrant Certificates..............................................6
Section 3 Signature and Registration......................................................................6
Section 4 Transfer, Split-Up, Combination and Exchange of Warrant Certificates; Mutilated,
Destroyed, Lost or Stolen Warrant Certificates..................................................7
Section 5 Exercise of Warrants; Exercise Price; Expiration Date of Warrants...............................7
Section 6 Cancellation and Destruction of Warrant Certificates............................................9
Section 7 Reservation and Availability of Shares of eSpeed Class A Common Stock or Cash; Taxes............9
Section 8 Representations and Warranties of the Freedom Participants......................................9
Section 9 Certain Agreements of the Freedom Participants.................................................10
Section 10 eSpeed Class A Common Stock Record Date........................................................10
Section 11 Adjustments....................................................................................10
Section 12 Adjusted Exercise Price or Share Rate..........................................................15
Section 13 Reclassification, Consolidation, Merger, Combination, Sale or Conveyance.......................16
Section 14 Fractional Warrants and Fractional Shares of eSpeed Class A Common Stock.......................17
Section 15 Right of Action................................................................................17
Section 16 Agreement of Warrant Certificate Holders.......................................................17
Section 17 Warrant Certificate Holder Not Deemed a Stockholder............................................18
Section 18 Issuance of New Warrant Certificates...........................................................18
Section 19 Purchase of Warrants...........................................................................18
Section 20 Notice of Proposed Actions.....................................................................18
Section 21 General Covenants of eSpeed....................................................................19
Section 22 Piggyback Registration.........................................................................20
Section 23 Notices........................................................................................22
Section 24 Supplements and Amendments.....................................................................22
Section 25 Successors.....................................................................................22
Section 26 Benefits of this Agreement.....................................................................23
Section 27 Governing Law..................................................................................23
Section 28 Captions.......................................................................................23
Section 29 Termination....................................................................................23
Section 30 Counterparts...................................................................................23
Exhibit I Form of Warrant Certificate
Exhibit II Form of Election to Purchase
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WARRANT AGREEMENT
This Warrant Agreement (this "Agreement") is entered into as
of April 4, 2001 among eSpeed, Inc., a Delaware corporation ("eSpeed"), Xxxxxxx
Xxxxx Canada Inc., BMO Xxxxxxx Xxxxx Inc., RBC Dominion Securities Inc., Scotia
Capital Inc., TD Securities Inc., and CIBC World Markets Inc. (collectively the
"Freedom Participants" and individually, a "Freedom Participant").
W I T N E S S E T H
WHEREAS eSpeed has entered into a Share Purchase Agreement,
dated as of January 29, 2001, with, among others, Freedom International
Brokerage Inc., an Ontario corporation ("Freedom"), the Freedom Participants and
Freedom International Holding, L.P. ("Holdings') (the "Share Purchase
Agreement"), providing for the purchase by Holdings of shares of Freedom
International Brokerage Company, a Nova Scotia unlimited liability company ("New
Freedom"), which will be formed from the amalgamation of Freedom and a company
with no assets or liabilities and which will continue with the current business
of Freedom, subject to a new shareholders' agreements and technology
arrangements; and
WHEREAS the Share Purchase Agreement provides that eSpeed will
issue on the Closing Date to Royal Bank of Canada ("Royal Bank") or its nominee,
Roytor & Co. ("Nominee"), 400,000 warrants (the "Warrants"), each Warrant
entitling the holder to purchase one share of eSpeed Class A Common Stock (as
hereinafter defined) subject to adjustment, upon the terms and subject to the
conditions hereinafter set forth;
WHEREAS eSpeed is duly authorized to create and issue the
Warrants as herein provided;
WHEREAS all things have been done and performed to make the
Warrants, when certified and issued by eSpeed, legal, valid, and binding upon
eSpeed with the benefits of and subject to the terms of this Agreement;
WHEREAS the foregoing two recitals are made as representations
and warranties by eSpeed;
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereby agree as follows:
Section 1 Certain Definitions
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For purposes of this Agreement, the following terms have the
meanings indicated. Capitalized terms used and not defined herein have the
meanings ascribed thereto in the Share Purchase Agreement.
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(a) "Affiliate" of any Person means any other Person directly
or indirectly controlling, controlled by or under common control with, such
Person at the time at which the determination of affiliation is made. For
purposes of this Agreement, neither New Freedom nor any of its subsidiaries
shall be considered an Affiliate of any Person.
(b) "Allocation Date" means one of the days that is 30 days
after one of the first, second or third anniversaries of the Closing Date.
(c) "Business Day" means any day other than a Saturday, Sunday
or a day on which banks are generally not open for business in the City of
Toronto or New York.
(d) "Close of Business" on any given date shall mean 5:00
P.M., New York City time, on such date; provided, however, that if such date is
not a Business Day, it shall mean 5:00 P.M., New York City time, on the next
succeeding Business Day.
(e) "Closing Date" means the date hereof.
(f) "Closing Price" with respect to a share of eSpeed Class A
Common Stock on any day means the last reported sale price on that day during
regular trading hours or, in case no reported sale takes place on such day, the
average of the last reported bid and asked prices, regular way, on that day
during regular trading hours, in either case, as reported in the consolidated
transaction reporting system with respect to securities reported on Nasdaq or,
if the shares of eSpeed Class A Common Stock are not then quoted on Nasdaq, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
shares of eSpeed Class A Common Stock are then listed or admitted to trading or,
if the shares of eSpeed Class A Common Stock are not quoted on Nasdaq and then
not listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices during regular trading hours on such other nationally recognized
quotation system then in use, or, if on any such day the shares of eSpeed Class
A Common Stock are not quoted on any such quotation system, the average of the
closing bid and asked prices as furnished by a professional market maker
selected by the Board of Directors of eSpeed making a market in the shares of
eSpeed Class A Common Stock. If the shares of eSpeed Class A Common Stock are
not then publicly held or so listed, quoted or publicly traded, the term
"Closing Price" means the fair market value of a share of eSpeed Class A Common
Stock, as determined in good faith by the Board of Directors of eSpeed.
(g) "Commercial Contribution" means, with respect to a Freedom
Participant, (i) the aggregate electronic trading volume generated by such
Freedom Participant through trades of any product made over an eSpeed platform
or trading system, times the average commission rate received by eSpeed or New
Freedom, as applicable, for such transactions plus (ii) the aggregate amount of
commissions actually paid by such Freedom Participant to eSpeed or New Freedom,
as applicable, with respect to such transactions. Amounts in currencies other
than Dollars calculated pursuant to this definition shall be converted into
Dollars in accordance with the standard currency conversion method used by
eSpeed at the time of such conversion.
(h) "Current Market Price" has the meaning set forth in
Section 14(a).
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(i) "Distribution" has the meaning set forth in Section 5(a).
(j) "Dollars" and "$" mean U.S. dollars.
(k) "eSpeed Class A Common Stock" means the Class A common
stock, par value $0.01 per share, of eSpeed.
(l) "eSpeed Commercial Contribution Statement" has the meaning
set forth in Section 5(f).
(m) "Equity Securities" of any Person means any and all common
stock, preferred stock, any other class of capital stock and partnership or
limited liability company interests in such Person or any other similar
interests in any such Person that is not a corporation, partnership or limited
liability company.
(n) "Exercise Period" means the period beginning 45 Business
Days after the second anniversary of the Closing Date and ending at the Close of
Business on the fifth anniversary of the Closing Date.
(o) "Exercise Price" has the meaning set forth in Section 2,
which the Parties agree to be $22.43125 per share as of the Closing Date.
(p) "Freedom Registrable Shares" means at any particular time
shares of eSpeed Class A Common Stock held by a Freedom Participant that (i)
were issued to Freedom Participants as a result of the exercise of the Warrants
and (ii) may not at such time be resold by such Freedom Participant pursuant to
Rule 144 or Rule 145 under the Securities Act.
(q) "Hedging Activities" means any transactions intended to
reduce the economic risk of ownership of the Warrants (including, without
limitation, the sale of any option or contract to purchase or the purchase of
any option or contract to sell or any other derivative) or that would, directly
or indirectly, have the effect (or substantially the economic equivalent effect)
of selling short the eSpeed Class A Common Stock or the Warrants.
(r) "Share Purchase Agreement" has the meaning set forth in
the recitals hereto.
(s) "Nasdaq" means The Nasdaq Stock Market.
(t) "Offer Time" has the meaning set forth in Section 11(e).
(u) "Person" means any corporation (including a limited or
unlimited liability company), general or limited partnership, joint venture,
estate, trust, association, organization or other entity or governmental or
regulatory authority or agency.
(v) "Purchased Shares" has the meaning set forth in
Section 11(e).
(w) "Securities Act" means the U.S. Securities Act of 1933 or
any successor U.S. federal statute, and the rules and regulations of the U.S.
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Securities Exchange Commission or any successor authority promulgated
thereunder, all as the same shall be in effect from time to time.
(x) "Share Rate" has the meaning set forth in Section 2.
(y) "Trading Day " has the meaning set forth in Section 13.
(z) "Trigger Event" has the meaning set forth in
Section 11(c).
(aa) "Warrant Amount" has the meaning set forth in
Section 5(a).
(bb) "Warrant Certificates" has the meaning set forth in
Section 2.
(cc) "Warrant Percentage" has the meaning set forth in
Section 5(a).
(dd) "Warrantholder" means a holder of a Warrant
Certificate.
(ee) "Warrants" has the meaning set forth in the recitals
hereto.
Section 2. Issue of Warrants and Form of Warrant Certificates
(a) A total of 400,000 Warrants are hereby created and
authorized to be issued hereunder upon the terms and conditions herein set
forth, and shall be executed by eSpeed, each Warrant entitling the registered
holders thereof to acquire a number of shares of eSpeed Class A Common Stock for
each such Warrant (the "Share Rate"), subject to adjustment as provided herein,
at an initial Share Rate of one share of eSpeed Class A Common Stock for each
Warrant.
(b) The certificates representing Warrants, including the form
of election to purchase eSpeed Class A Common Stock (collectively, the "Warrant
Certificates") shall be substantially in the form of Exhibit I hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as eSpeed may deem appropriate and as are not
inconsistent with the provisions of this Agreement or as may be required to
comply with any law or with any rule or regulation made pursuant thereto, or to
conform to usage. Subject to the provisions of Section 18, the Warrant
Certificates, when issued, shall be dated the Closing Date and on their face
shall entitle the holders thereof to purchase such number of shares of eSpeed
Class A Common Stock as shall be set forth therein at the Current Market Price
per share determined as at the last Business Day before the date of the Share
Purchase Agreement (the "Exercise Price"), payable in cash; provided that such
number of shares and the Exercise Price shall be subject to the adjustments
provided in this Agreement.
Section 3. Signature and Registration
Each Warrant Certificate shall be executed on behalf of eSpeed
by its Chief Executive Officer, Vice Chairman or President, either manually or
by facsimile signature, and have affixed thereto eSpeed's seal or a facsimile
thereof which shall be attested by the Secretary or an Assistant Secretary of
eSpeed, either manually or by facsimile signature.
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Section 4. Transfer, Split-Up, Combination and Exchange of
Warrant Certificates; Mutilated, Destroyed, Lost or Stolen Warrant Certificates
(a) The Freedom Participants and their respective nominees
shall not, and shall use their best efforts to ensure that Royal Bank shall not,
sell, transfer, assign, hypothecate, pledge, hedge or otherwise convey the
Warrants or any portion thereof issued, whether by dividend, distribution or
otherwise, except for transfers by Royal Bank of Warrant Certificates to the
Freedom Participants or their respective nominees on an Allocation Date and in
accordance with the terms hereof.
(b) At any time on an Allocation Date or during the Exercise
Period a Warrant Certificate may be, at the option of the registered holder
thereof, subject to any restrictions on transferability provided by U.S. Federal
or state securities laws, split up, combined or exchanged for another Warrant
Certificate or Warrant Certificates entitling Freedom Participants to purchase a
like aggregate number of shares of eSpeed Class A Common Stock as the Warrant
Certificate or Warrant Certificates surrendered shall have entitled the
registered holder thereof to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Warrant Certificate shall make such
request in writing delivered to eSpeed, and shall surrender the Warrant
Certificate or Warrant Certificates to be transferred, split up, combined or
exchanged at the principal office of eSpeed. Thereupon eSpeed shall sign and
deliver to the Person entitled thereto a Warrant Certificate or Warrant
Certificates, as the case may be, as so requested. eSpeed may require payment of
a sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split-up, combination or exchange of Warrant
Certificates, together with reimbursement to eSpeed of all reasonable expenses
incidental thereto.
(c) Upon receipt by eSpeed of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of a Warrant Certificate,
and, in case of loss, theft or destruction, of indemnity or security
satisfactory to eSpeed, and reimbursement to eSpeed of all reasonable expenses
incidental thereto, and upon surrender to eSpeed and cancellation of the Warrant
Certificate if mutilated, eSpeed shall make and deliver a new Warrant
Certificate of like tenor to the registered holder in lieu of the Warrant
Certificate so lost, stolen, destroyed or mutilated.
Section 5. Exercise of Warrants; Exercise Price; Expiration
Date of Warrants
(a) On the Closing Date, 400,000 Warrants represented by a
Warrant Certificate will be issued to Royal Bank and registered in the name of
the Nominee. Royal Bank will initially hold all of the Warrants. The Freedom
Participants shall use their best efforts to ensure that Royal Bank shall not
transfer any Warrant to any entity other than a Freedom Participant or its
nominee and then only in accordance with this Section 5(a). Royal Bank may
arrange for the subdivision and distribution of the Warrants only with respect
to the Distribution of Warrants to a Freedom Participant or its nominee on an
Allocation Date. On the Allocation Dates in 2002 and 2003, the Freedom
Participants shall use their best efforts to cause Royal Bank, subject to
paragraphs (f) and (g) hereof, to distribute 133,333 Warrants to the Freedom
Participants or their respective nominees and on the Allocation Date in 2004,
subject to paragraphs (f) and (g) hereof, to distribute 133,334 Warrants to the
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Freedom Participants or their respective nominees so that on each such
Allocation Date, each Freedom Participant or its nominee receives a portion of
such Warrants distributed on that date equal to its respective Warrant Amount
(each such distribution, a "Distribution"). The "Warrant Amount" for each
Freedom Participant or its nominee with respect to a Distribution on an
Allocation Date shall be equal to its Warrant Percentage multiplied by the
number of Warrants to be distributed on such Distribution Date. The "Warrant
Percentage" for such Freedom Participant or its nominee with respect to a
Distribution shall be equal to the Commercial Contribution of such Freedom
Participant, in the case of the Distribution on the first Allocation Date, for
the period from and including the date of the Share Purchase Agreement to and
excluding the first anniversary of the Closing Date, in the case of the
Distribution on the second Allocation Date, for the period from and including
the first anniversary of the Closing Date to and excluding the second
anniversary of the Closing Date, and in the case of the Distribution on the
third Allocation Date, for the period from and including the second anniversary
of the Closing Date to and excluding the third anniversary of the Closing Date,
expressed as a percentage of the sum of all Commercial Contributions of all
Freedom Participants during the applicable period, as set out in the eSpeed
Commercial Contribution Statement.
(b) A Warrant may be exercised only during the Exercise
Period.
(c) During the Exercise Period and subject to paragraph (d)
below, the registered holder of any Warrant Certificate may exercise the
Warrants evidenced thereby in whole or in part upon surrender of the Warrant
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to eSpeed at its principal office, together with payment of the
Exercise Price in immediately available funds for each share of eSpeed Class A
Common Stock for which the Warrants are exercised. Each Warrant not exercised
during the Exercise Period shall become void, and all rights under the
applicable unexercised Warrant Certificates and all rights under this Agreement
shall cease as of such time.
(d) Upon receipt of a Warrant Certificate, with the form of
election to purchase duly executed, accompanied by payment of the Exercise Price
for the shares of eSpeed Class A Common Stock to be purchased and an amount
equal to any applicable tax or governmental charge referred to in Section 7 in
cash, or by certified check or bank draft payable to the order of eSpeed, eSpeed
shall thereupon promptly (i) requisition from any transfer agent of the eSpeed
Class A Common Stock certificates for the number of whole shares of eSpeed Class
A Common Stock to be purchased, (ii) pay an amount of cash required to be paid
in lieu of the issuance of fractional shares and (iii) after receipt of such
certificates, cause the same to be delivered to or upon the order of the
registered Warrantholder, registered in such name or names as may be designated
by such Warrantholder, and when appropriate, after receipt promptly deliver such
cash to or upon the order of the registered Warrantholder.
(e) In case any registered Warrantholder exercises less than
all Warrants evidenced by a Warrant Certificate, a new Warrant Certificate
evidencing the Warrants equivalent to the Warrants remaining unexercised shall
be issued by eSpeed to such registered Warrantholder or to his or her duly
authorized assigns, subject to the provisions of Section 14.
(f) eSpeed shall give to Royal Bank and to each Freedom
Participant prior to each Allocation Date a written statement (the "eSpeed
Commercial Contribution Statement") setting forth the Warrant Amount and the
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Warrant Percentage of each Freedom Participant for the period in respect of
which Warrants will be allocated on such Allocation Date, together with the
calculation of each such Warrant Percentage. Such statement shall be delivered
in accordance with Section 23. Absent manifest error, none of the Freedom
Participants shall dispute the eSpeed Commercial Contribution Statements and the
calculations therein if eSpeed has made such calculations in good faith.
(g) If, in the eSpeed Commercial Contribution Statement, eSpeed
states that:
(i) a Freedom Participant has failed to deliver to
eSpeed, with a copy to New Freedom, a certificate,
executed by a senior officer of the Freedom
Participant for and on behalf of the Freedom
Participant and not in his personal capacity, to the
effect that the Freedom Participant has not breached
any of its obligations under Section 9 hereof during
the Allocation Period for which the Warrants are
being distributed, within 30 days of a written
request for such certificate having been made to the
Freedom Participant, with a copy to New Freedom, by
eSpeed in accordance with Section 9 hereof, and
(ii) accordingly, eSpeed shall state in the eSpeed
Commercial Contribution Statement that such Freedom
Participant shall not be entitled to receive any
further Warrants on any Distribution made under the
Warrant Agreement and that any Warrants previously
delivered to the Freedom Participant under the
Warrant Agreement and hereunder are required to be
redelivered to Royal Bank for redistribution by Royal
Bank to the other Freedom Participants in the same
proportions that such other Freedom Participants will
receive Warrants for the Allocation Period for which
the Warrants are being distributed;
then the Freedom Participant that failed to deliver such certificate and its
nominee shall not be entitled to receive any further Distributions of Warrants
and the Warrants redelivered to Royal Bank by such Freedom Participant shall be
redistributed to the other Freedom Participants in the same proportions that
such other Freedom Participants will receive Warrants for the Allocation Period
for which the Warrants are being distributed in accordance with the procedures
set out in the eSpeed Commercial Contribution Statement. Such Freedom
Participant shall redeliver any Warrants previously delivered to it to Royal
Bank, which shall redistribute them to the other Freedom Participants in the
same proportions that such other Freedom Participants had received Warrants for
the Allocation Period for which the Warrants are being distributed.
Section 6. Cancellation and Destruction of Warrant
Certificates
All Warrant Certificates surrendered for the purpose of
exercise, split-up, combination or exchange shall be cancelled by eSpeed, and no
Warrant Certificates shall be issued in lieu thereof except as expressly
permitted by the provisions of this Agreement.
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Section 7. Reservation and Availability of Shares of eSpeed
Class A Common Stock or Cash; Taxes
(a) eSpeed hereby covenants and agrees that, from and after
the Closing Date until the termination of the Exercise Period, it shall cause to
be reserved and kept available out of its authorized and unissued shares of
eSpeed Class A Common Stock or its authorized and issued shares of eSpeed Class
A Common Stock held in its treasury, free from preemptive rights, the number of
shares of eSpeed Class A Common Stock that will be sufficient to permit the
exercise in full of all outstanding Warrants.
(b) eSpeed shall not be responsible for any tax or
governmental charge that may be payable in connection with the issuance or
delivery of the Warrant Certificates, the transfer of Warrant Certificates or
the issuance or delivery of certificates for eSpeed Class A Common Stock to
Warrantholders. In addition, eSpeed shall not be required to issue or deliver
any certificate for shares of eSpeed Class A Common Stock upon the exercise of
any Warrant until any such tax or governmental charge shall have been paid (any
such tax or governmental charge being payable by the holder of such Warrant
Certificate at the time of surrender) or until it has been established to
eSpeed's satisfaction that no such tax or governmental charge is due.
Section 8. Representations and Warranties of the Freedom
Participants
Each Freedom Participant hereby represents and warrants to
eSpeed as follows:
(a) Organization, Good Standing and Qualification. It will
obtain a representation and warranty from Royal Bank to eSpeed that as at the
Closing Date:
(i) Royal Bank is a bank, duly organized, validly
existing and in good standing under the Bank Act
(Canada) and that it has all requisite power and
authority to own and operate its properties and
assets (including to hold the Warrants as registered
owner thereof) and to carry on its business as
presently conducted and is qualified to do business
and is in good standing in Canada; and
(ii) the Nominee is a limited partnership, duly organized,
validly existing and in good standing under the laws
of Ontario and that it has all requisite power and
authority to own and operate its properties and
assets (including to hold the Warrants as registered
owner thereof) and to carry on its business as
presently conducted and is qualified to do business
and is in good standing in Canada.
(b) Corporate Authority. Each Freedom Participant has all
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver, and perform its respective obligations
under, this Agreement and to consummate the transactions contemplated hereby.
This Agreement is a valid and binding agreement of each Freedom Participant,
enforceable against each Freedom Participant in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles. The execution, delivery and
performance of this Agreement by each Freedom Participant do not, and the
consummation of transactions contemplated hereby will not, constitute or result
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in a breach or violation of, or a default under, the organizational documents of
any Freedom Participant.
Section 9. Certain Agreements of the Freedom Participants
From the date hereof until the date on which all of the
Warrants become exercisable pursuant to the terms of this Agreement, the Freedom
Participants shall not, and shall use their best efforts to ensure that Royal
Bank does not, effect any Hedging Activities with respect to the Warrants,
including, without limitation, short sales against the box or any other
derivative transaction.
Section 10. eSpeed Class A Common Stock Record Date
Each Person in whose name any certificate for shares of eSpeed
Class A Common Stock is issued upon the exercise of Warrants shall for all
purposes be deemed to have become the holder of record for the eSpeed Class A
Common Stock represented thereby on, and such certificate shall be dated the
date upon which the Warrant Certificate evidencing such Warrants was duly
surrendered and payment of the Exercise Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the eSpeed Class A Common Stock transfer books of
eSpeed are closed, such Person shall be deemed to have become the record holder
of such shares on, and such certificate shall be dated, the next succeeding
Business Day on which the eSpeed Class A Common Stock transfer books of eSpeed
are open.
Section 11. Adjustments
The number and kind of securities purchasable upon the
exercise of the Warrants and the Exercise Price thereof shall be subject to
adjustment from time to time after the date hereof as follows:
(a) Stock Dividends. In case eSpeed after the date hereof
shall pay a dividend or make a distribution to all holders of shares of eSpeed
Class A Common Stock in shares of eSpeed Class A Common Stock, then in any such
case the Share Rate in effect at the opening of business on the day following
the record date for the determination of stockholders entitled to receive such
dividend or distribution shall be increased to a Share Rate obtained by
multiplying such Share Rate by a fraction of which (i) the numerator shall be
the number of shares of eSpeed Class A Common Stock outstanding at the close of
business after such dividend or distribution and (ii) the denominator shall be
the sum of such number of shares of eSpeed Class A Common Stock outstanding
prior to such dividend or distribution, and the Exercise Price in effect at the
opening of business on the day following the record date for the determination
of stockholders entitled to receive such dividend or distribution shall be
reduced to a price obtained by multiplying such Exercise Price by a fraction of
which (i) the numerator shall be the number of shares of eSpeed Class A Common
Stock outstanding at the close of business on such record date and (ii) the
denominator shall be the sum of such number of shares of eSpeed Class A Common
Stock outstanding and the total number of shares of eSpeed Class A Common Stock
constituting such dividend or distribution, and such increase and reduction
shall become effective immediately after the opening of business on the day
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following such record date. For purposes of this subsection (a), the number of
shares of eSpeed Class A Common Stock at any time outstanding shall not include
shares held in eSpeed's treasury but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of eSpeed Class A
Common Stock. eSpeed will not pay any dividend or make any distribution on
shares of eSpeed Class A Common Stock held in eSpeed's treasury.
(b) Stock Splits and Reverse Splits. In case after the date
hereof outstanding shares of eSpeed Class A Common Stock shall be subdivided or
redivided by a stock split (or other similar event of general applicability to
the eSpeed Class A Common Stock) ("Stock Split") into a greater number of shares
of eSpeed Class A Common Stock, the Share Rate shall be adjusted by multiplying
such Share Rate by a fraction of which (i) the numerator shall be the number of
shares of eSpeed Class A Common Stock outstanding at the close of business after
such Stock Split and (ii) the denominator shall be the sum of such number of
shares of eSpeed Class A Common Stock outstanding prior to such Stock Split, and
the Exercise Price in effect at the opening of business on the day following the
day upon which such subdivision becomes effective shall be proportionately
reduced, and, conversely, in case after the date hereof outstanding shares of
eSpeed Class A Common Stock shall be combined by a reverse Stock Split (or other
similar event of general applicability to the eSpeed Class A Common) into a
smaller number of shares of eSpeed Class A Common Stock, the Share Rate shall be
adjusted by multiplying such Share Rate by a fraction of which (i) the numerator
shall be the number of shares of eSpeed Class A Common Stock outstanding at the
close of business after such reverse Stock Split and (ii) the denominator shall
be the sum of such number of shares of eSpeed Class A Common Stock outstanding
prior to such reverse Stock Split, and the Exercise Price in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the opening
of business on the day following the day upon which such subdivision or
combination becomes effective.
(c) Other Issuances. In case eSpeed after the date hereof
shall issue rights, options or warrants to holders of shares of eSpeed Class A
Common Stock entitling them to subscribe for or purchase shares of eSpeed Class
A Common Stock at a price per share less than the Closing Price per share on the
record date for the determination of stockholders entitled to receive such
rights, options or warrants, the Share Rate in effect at the opening of business
on the day following such record date shall be adjusted to a Share Rate obtained
by multiplying such Share Rate by a fraction of which (i) the numerator shall be
the number of shares of eSpeed Class A Common Stock outstanding at the close of
business on such record date plus the number of additional shares of eSpeed
Class A Common Stock so to be offered for subscription or purchase, and (ii) the
denominator shall be the number of shares of eSpeed Class A Common Stock
outstanding at the close of business on such record date plus the number of
shares of eSpeed Class A Common Stock that the aggregate offering price of the
total number of shares so to be offered would purchase at the Closing Price on
such record date, such adjustment to become effective immediately after the
opening of business on the day following such record date, and the Exercise
Price in effect at the opening of business on the day following such record date
shall be adjusted to an Exercise Price obtained by multiplying such Exercise
Price by a fraction of which (i) the numerator shall be the number of shares of
eSpeed Class A Common Stock outstanding at the close of business on such record
date plus the number of shares of eSpeed Class A Common Stock that the aggregate
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offering price of the total number of shares so to be offered would purchase at
the Closing Price on such record date and (ii) the denominator shall be the
number of shares of eSpeed Class A Common Stock outstanding at the close of
business on such record date plus the number of additional shares of eSpeed
Class A Common Stock so to be offered for subscription or purchase, such
adjustment to become effective immediately after the opening of business on the
day following such record date; provided, however, that no adjustment shall be
made if eSpeed issues or distributes to each Warrantholder the right to receive,
upon the exercise of the Warrants held by such Warrantholder after such Warrants
become exercisable, the rights, options or warrants that such Warrantholder
would have been entitled to receive had the Warrants held by such Warrantholder
been exercised prior to such record date. For purposes of this subsection (c),
the number of shares of eSpeed Class A Common Stock at any time outstanding
shall not include shares held in eSpeed's treasury but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of shares
of eSpeed Class A Common Stock. Rights or warrants issued by eSpeed to all
holders of eSpeed Class A Common Stock entitling the holders thereof to
subscribe for or purchase Equity Securities, which rights or warrants (i) are
deemed to be transferred with such shares of eSpeed Class A Common Stock, (ii)
are not exercisable or (iii) are issued in respect of future issuances of eSpeed
Class A Common Stock, including shares of eSpeed Class A Common Stock issued
upon exercise of the Warrants evidenced by a Warrant Certificate, in each of
cases (i) through (iii) until the occurrence of a specified event or events (a
"Trigger Event"), shall for purposes of this subsection (c) not be deemed issued
until the occurrence of the earliest Trigger Event.
(d) Special Dividends. In case eSpeed, after the date hereof,
shall distribute to all holders of shares of eSpeed Class A Common Stock
evidence of its indebtedness, cash, property or assets (excluding any regular
periodic cash dividend), Equity Securities (other than eSpeed Class A Common
Stock) or rights, options or warrants to subscribe (excluding those referred to
in subsection (c) above) for Equity Securities, in each such case the Share Rate
will be adjusted by multiplying the Share Rate in effect on such record date by
a fraction of which (i) the numerator of which shall be the total number of
eSpeed Class A Shares outstanding on such record date multiplied by such Closing
Price, and (ii) the denominator of which shall be the total number of Class A
Shares outstanding on such record date multiplied by the Closing Price on the
earlier of the record date and the date on which eSpeed announces its intention
to make such distribution, less the aggregate fair market value (as determined
by the Board of Directors of eSpeed at the time such distribution is authorized)
of such shares or rights, options or warrants or evidences of indebtedness or
cash, securities or other property or assets so distributed, and the Exercise
Price in effect immediately prior to the close of business on the record date
for the determination of stockholders entitled to receive such distribution
shall be adjusted to a price obtained by multiplying such Exercise Price by a
fraction of which (i) the numerator shall be the Closing Price per share of
eSpeed Class A Common Stock on such record date, less the then-current fair
market value as of such record date (as determined by the Board of Directors of
eSpeed in its good faith judgment) of the portion that such shares or rights,
options or warrants or evidences of indebtedness or cash, securities or other
property or assets so distributed represent of the value of one share of eSpeed
Class A Common Stock, and (ii) the denominator shall be such Closing Price, such
adjustment to become effective immediately prior to the opening of business on
the day following such record date; provided, however, that no adjustment shall
be made if eSpeed grants to each Warrantholder the right to receive, upon the
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exercise of the Warrants held by such Warrantholder after such Warrants become
exercisable, such shares or rights, options or warrants or evidences of
indebtedness or cash, securities or other property or assets that such
Warrantholder would have been entitled to receive had such Warrants been
exercised prior to such record date. eSpeed shall provide any Warrantholder,
upon receipt of a written request therefor, with any indenture or other
instrument defining the rights of the holders of shares or rights, options or
warrants or evidences of indebtedness or cash, securities or other property or
assets so distributed referred to in this subsection (d). Rights or warrants
issued by eSpeed to all holders of eSpeed Class A Common Stock entitling the
holders thereof to subscribe for or purchase Equity Securities, which rights or
warrants (i) are deemed to be transferred with such shares of eSpeed Class A
Common Stock, (ii) are not exercisable or (iii) are issued in respect of future
issuances of eSpeed Class A Common Stock, including shares of eSpeed Class A
Common Stock issued upon exercise of the Warrants evidenced by the Warrant
Certificate, in each of cases (i) through (iii) until the occurrence of a
Trigger Event, shall for purposes of this subsection (d) not be deemed issued
until the occurrence of the earliest Trigger Event.
(e) Tender or Exchange Offer. In case after the date hereof a
tender or exchange offer made by eSpeed or any Affiliate of eSpeed for all or
any portion of the eSpeed Class A Common Stock shall be consummated and such
tender offer shall involve an aggregate consideration having a fair market value
(as determined by the Board of Directors of eSpeed in its good faith judgment)
at the last time (the "Offer Time") tenders may be made pursuant to such tender
or exchange offer (as it may be amended) that, together with the aggregate of
the cash plus the fair market value (as determined by the Board of Directors of
eSpeed in its good faith judgment), as of the Offer Time, of consideration
payable in respect of any tender or exchange offer previously consummated by
eSpeed or any such subsidiary for all or any portion of the eSpeed Class A
Common Stock and in respect of which no Exercise Price adjustment pursuant to
this subsection (e) has been made, exceeds 5% of the product of the Closing
Price of the eSpeed Class A Common Stock at the Offer Time multiplied by the
number of shares of eSpeed Class A Common Stock outstanding (including any
tendered shares) at the Offer Time, the Exercise Price shall be reduced so that
the same shall equal the price determined by multiplying the Exercise Price in
effect immediately prior to the Offer Time by a fraction of which (i) the
numerator shall be (A) the product of the Closing Price of the eSpeed Class A
Common Stock at the Offer Time multiplied by the number of shares of eSpeed
Class A Common Stock outstanding (including any tendered shares) at the Offer
Time minus (B) the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of all shares validly
tendered and not withdrawn as of the Offer Time (the shares deemed so accepted,
up to any such maximum, being referred to as the "Purchased Shares") and (ii)
the denominator shall be the product of (A) such Closing Price at the Offer Time
multiplied by (B) such number of outstanding shares at the Offer Time minus the
number of Purchased Shares, such reduction to become effective immediately prior
to the opening of business on the day following the Offer Time. For purposes of
this subsection (e), the number of shares of eSpeed Class A Common Stock at any
time outstanding shall not include shares held in the treasury of eSpeed but
shall include shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of eSpeed Class A Common Stock.
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(f) Notwithstanding anything in this Section 11 to the
contrary, no adjustment in the Exercise Price or number of shares of eSpeed
Class A Common Stock issuable upon exercise of a Warrant shall be required
unless such adjustment would require an increase or decrease in the Exercise
Price of at least $0.25 or in the number of shares of eSpeed Class A Common
Stock issuable upon exercise of a Warrant of at least 1%; provided, however,
that any adjustments which by reason of this paragraph (f) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or the nearest ten-thousandth of a share, as the case may be.
(g) All Warrants originally issued by eSpeed prior to any
adjustment made to the Exercise Price pursuant to this Section 11 shall evidence
the right to purchase, at the adjusted Exercise Price, the number of shares of
eSpeed Class A Common Stock purchasable from time to time hereunder upon
exercise of the Warrants, all subject to further adjustment as provided herein.
(h) Irrespective of any adjustment or change in the Exercise
Price or the number of shares of eSpeed Class A Common Stock issuable upon the
exercise of the Warrants, the Warrant Certificates theretofore and thereafter
issued may continue to express the Exercise Price per share and the number of
shares which were expressed upon the initial Warrant Certificates issued under
this Agreement.
(i) eSpeed hereby agrees that it shall not, by amendment of
its certificate of incorporation or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed by it under this
Agreement.
(j) In any case in which this Section 11 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, eSpeed may elect to defer until the occurrence of such event
the issuance to the holder of any Warrant exercised after such record date of
the shares of eSpeed Class A Common Stock; provided, however, that eSpeed shall
deliver to such holder a due xxxx or other appropriate instrument evidencing
such holder's right to receive such additional shares upon the occurrence of the
event requiring such adjustment.
(k) eSpeed shall be entitled, but not required, to make such
reductions in the Exercise Price, in addition to those expressly required by
this Section 11, as and to the extent that it in its sole discretion may
determine to be advisable in order that any event treated for Federal income tax
purposes as a distribution of stock or stock rights shall not be taxable to the
recipients.
(l) eSpeed shall be entitled, but not required, to make such
reductions in the Exercise Price, in addition to those expressly required by
this Section 11, as and to the extent that it in its sole discretion shall
determine to be advisable, including, without limitation, in order that any
dividend in or distribution of shares of eSpeed Class A Common Stock or shares
of capital stock of any class other than eSpeed Class A Common Stock,
subdivision, reclassification or combination of shares of eSpeed Class A Common
Stock, issuance of rights or warrants, or any other transaction having a similar
15
effect, shall not be treated as a distribution of property by eSpeed to its
stockholders under Section 305 of the Internal Revenue Code of 1986, as amended,
or any successor provision and shall not be taxable to them.
Section 12. Adjusted Exercise Price or Share Rate
With respect to adjustments in the Exercise Price or the Share
Rate as provided in Sections 11 or 13:
(a) eSpeed shall (i) promptly prepare a certificate setting
forth the Exercise Price as so adjusted or the number of shares of eSpeed Class
A Common Stock issuable upon exercise of each Warrant as so adjusted, and a
brief statement of the facts accounting for such adjustment and (ii) mail a
brief summary thereof to each holder of Warrants.
(b) The adjustments shall, in the case of any adjustment to
the Share Rate, be computed to the nearest one one-hundredth of a share of
eSpeed Class A Common Stock, and in the case of any adjustments in the Share
Rate and/or Exercise Price, apply cumulatively to successive subdivisions,
consolidations, distributions, issuances or other events resulting in any
adjustment.
(c) In the event of any question arising with respect to
adjustments to the number and kind of securities purchasable upon the exercise
of the Warrants or the Exercise Price, or any other adjustments applicable to
the Warrants contemplated by the Warrant Agreement, such question shall be
conclusively determined by eSpeed's auditors or, if they are unable or unwilling
to act, by such firm of chartered accountants as is appointed by eSpeed and
acceptable to the Freedom Participants. Such accountants shall have access to
all necessary records of eSpeed and such determination shall be binding upon
eSpeed and the Warrantholders absent manifest error.
(d) If and whenever eSpeed shall take any action affecting or
relating to the eSpeed Class A Shares, other than any action described in
Section 11 or Section 13, which in the opinion of the directors would
prejudicially affect the rights of any holders of Warrants, the Share Rate
and/or Exercise Price will be adjusted by the Board of Directors in such manner,
if any, and at such time, as the Board of Directors may in their sole discretion
determine to be equitable in the circumstances to such holders.
Section 13. Reclassification, Consolidation, Merger,
Combination, Sale or Conveyance
In case any of the following occurs while any Warrants are
valid and outstanding: (a) any reclassification or change of the outstanding
shares of eSpeed Class A Common Stock (other than a change in par value, or from
par value to no par value, or as covered by Section 11(a) or (b)), (b) any
consolidation, merger or combination of eSpeed with or into another corporation
as a result of which holders of eSpeed Class A Common Stock are entitled to
receive stock, securities or other property or assets (including cash) with
respect to or in exchange for such eSpeed Class A Common Stock or (c) any sale
or conveyance of the property or assets of eSpeed as, or substantially as, an
entirety to any other entity as a result of which holders of eSpeed Class A
16
Common Stock are entitled to receive stock, securities or other property or
assets (including cash) with respect to or in exchange for such eSpeed Class A
Common Stock, then eSpeed, or any successor corporation or transferee, as the
case may be, shall make appropriate provision by amendment of this Agreement or
by the successor corporation or transferee executing with eSpeed an agreement so
that the holders of Warrants then outstanding shall have the right, upon
exercise of such Warrants, to receive the kind and amount of securities, cash
and other property receivable upon such reclassification, change, consolidation,
merger, combination, sale or conveyance as would be received by a holder of the
number of shares of eSpeed Class A Common Stock issuable upon exercise of such
Warrant immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance.
If the holders of eSpeed Class A Common Stock may elect from
choices the kind or amount of securities, cash and other property receivable
upon any reclassification, consolidation, merger, combination, sale or
conveyance, then for purposes of this Section 13 the kind and amount of
securities, cash and other property receivable upon such reclassification,
consolidation, merger, combination, sale or conveyance shall be deemed to be the
choice specified by a Warrantholder, which specification shall be made by such
Warrantholder within the same time period as is allotted to holders of eSpeed
Class A Common Stock. If a Warrantholder fails to make any specification, such
Warrantholder's choice shall be deemed to be whatever choice is made by a
majority of holders of eSpeed Class A Common Stock not affiliated with eSpeed or
any other party to the reclassification, consolidation, merger, combination,
sale or conveyance. Such new Warrants shall provide for adjustments which, for
events subsequent to the effective date of such new Warrants, shall be as nearly
equivalent as may be practicable to the adjustments provided for in Section 11
and this Section 13. The above provisions of this Section 13 shall similarly
apply to successive reclassifications, consolidations, mergers, combinations,
sales or conveyances. The term "Trading Day" shall mean a day on which Nasdaq is
open for the transaction of business.
eSpeed shall mail by first-class mail, postage prepaid, to
each registered Warrantholder, written notice of the execution of any amendment
or agreement referred to in this Section 13 and all other documents provided to
holders of eSpeed Class A Common Stock. Any new agreement entered into by the
successor corporation or transferee shall provide for adjustments, which shall
be as nearly equivalent as may be practicable to the adjustments provided for in
Section 11. The provisions of this Section 13 shall similarly apply to
successive reclassifications, changes, consolidations, mergers, sales and
conveyances of any kind described above.
Section 14. Fractional Warrants and Fractional Shares of
eSpeed Class A Common Stock
(a) eSpeed shall not be required to issue fractions of
Warrants or to distribute Warrant Certificates which evidence fractional
Warrants. In lieu of such fractional Warrants, there shall be paid to the
Persons to whom Warrant Certificates representing such fractional Warrants would
otherwise be issuable an amount in cash (without interest) equal to the product
of such fraction of a Warrant multiplied by the Current Market Price per whole
Warrant. The "Current Market Price" per share of eSpeed Class A Common Stock (or
per Warrant) on any date shall be deemed to be the average of the daily Closing
17
Prices per share of eSpeed Class A Common Stock for the 10 consecutive Trading
Days immediately prior to such date.
(b) eSpeed shall not be required to issue fractions of shares
of eSpeed Class A Common Stock upon exercise of Warrants or to distribute stock
certificates that evidence fractional shares of eSpeed Class A Common Stock. In
lieu of fractional shares, there shall be paid to the registered holders of
Warrant Certificates at the time such Warrant Certificates are exercised as
herein provided an amount in cash (without interest) equal to the product of
such fractional part of a share of eSpeed Class A Common Stock multiplied by the
Current Market Price per share of eSpeed Class A Common Stock.
(c) Each holder of a Warrant Certificate by accepting the same
shall be deemed to waive his or her right to receive any fractional Warrant or
any fractional share of eSpeed Class A Common Stock upon exercise of a Warrant.
Section 15. Right of Action
Rights of action in respect of the Warrant Agreement are
vested in any registered Warrantholder, and any registered Warrantholder,
including Royal Bank, or any group of registered Warrantholders, including Royal
Bank, may enforce, and may institute and maintain any suit, action or proceeding
against eSpeed to enforce, or otherwise act in respect of, such rights of such
Warrantholders.
Section 16. Agreement of Warrant Certificate Holders
Each holder of a Warrant Certificate by accepting the same
shall be deemed to consent and agree with eSpeed and with every other
Warrantholder that:
(a) the Warrant Certificates are not transferable without the
consent of eSpeed or pursuant to Section 5; with eSpeed's consent, the Warrant
Certificates are transferable only on the registry books of eSpeed if
surrendered at the principal office of eSpeed, duly endorsed or accompanied by a
proper instrument of transfer, and only in accordance with this Agreement; and
(b) eSpeed may deem and treat the Person in whose name the
Warrant Certificate is registered as the absolute owner thereof and of the
Warrants evidenced thereby (notwithstanding any notations of ownership or
writing on the Warrant Certificates made by anyone other than eSpeed) for all
purposes whatsoever, and eSpeed shall not be affected by any notice to the
contrary.
Section 17. Warrant Certificate Holder Not Deemed a
Stockholder
No holder, as such, of any Warrant Certificate shall be
entitled to vote, receive dividends or distributions on, or be deemed for any
purpose the holder of, eSpeed Class A Common Stock or any other securities of
eSpeed which may at any time be issuable on the exercise or conversion of the
Warrants represented thereby, nor shall anything contained in this Agreement or
in any Warrant Certificate be construed to confer upon the holder of any Warrant
18
Certificate, as such, any of the rights of a stockholder of eSpeed or any right
to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 20), or to receive dividends or
distributions or subscription rights, or otherwise, until the Warrant or
Warrants evidenced by such Warrant Certificate shall have been exercised in
accordance with the provisions of this Agreement.
Section 18. Issuance of New Warrant Certificates
Notwithstanding any of the provisions of this Agreement or of
the Warrants to the contrary, eSpeed may, at its option, issue new Warrant
Certificates evidencing Warrants in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the Exercise Price in
accordance with this Agreement and the number or kind or class of shares of
stock or other securities or property purchasable under the several Warrant
Certificates made in accordance with the provisions of this Agreement.
Section 19. Purchase of Warrants
eSpeed shall have the right, except as limited by applicable
law or other agreements, to negotiate the purchase of Warrants from one or more
Warrantholders at such time, in such manner and for such consideration as may be
agreed.
Section 20. Notice of Proposed Actions
In case eSpeed shall propose (a) to declare a dividend on
shares of eSpeed Class A Common Stock payable in shares of capital stock of any
class or to make any other distribution (other than aggregate cash dividends and
distributions not in excess of $1.00 for the fiscal year ending December 31,
2001, $1.50 for the fiscal year ending December 31, 2002, $2.00 for the fiscal
year ending December 31, 2003, $2.50 for the fiscal year ending December 31,
2004 and $3.00 for the fiscal year ending December 31, 2005, payable out of
retained earnings or earned surplus) to all holders of eSpeed Class A Common
Stock (including any distribution made in connection with a consolidation or
merger in which eSpeed is the continuing corporation), (b) to offer rights,
options or warrants to all holders of eSpeed Class A Common Stock entitling them
to subscribe for or purchase eSpeed Class A Common Stock (or securities
convertible into or exercisable or exchangeable for eSpeed Class A Common Stock
or any other securities), (c) to offer any shares of capital stock in a
reclassification of shares of eSpeed Class A Common Stock (including any such
reclassification in connection with a consolidation or merger in which eSpeed is
the continuing corporation), (d) to effect any consolidation or merger into or
with, or to effect any sale or other transfer (or to permit one or more of its
subsidiaries to effect any sale or other transfer), in one or more transactions,
of more than 75% of the assets or net income of eSpeed and its subsidiaries
(taken as a whole) to, any other Person, or (e) to effect the liquidation,
dissolution or winding-up of eSpeed, then, in each such case, eSpeed shall give
to each registered Warrantholder, in accordance with Section 23, a notice of
such proposed action, which shall specify the record date for the purpose of
such stock dividend, distribution of rights or warrants, or the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding-up is to take place and the date of participation
therein by the holders of eSpeed Class A Common Stock, if any such date is to be
19
fixed, and such notice shall be so given in the case of any action covered by
clause (a) and (b) above at least 10 days prior to the record date for
determining holders of eSpeed Class A Common Stock for purposes of such action,
and in the case of any such other action, at least 10 days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of eSpeed Class A Common Stock, whichever may be earlier. The failure to
give any notice as and when required by this Section 20 or any defect therein
shall not affect the legality or validity of the action taken by eSpeed or the
vote upon any such action. Unless specifically required by Section 11, the
Exercise Price, the number of shares of eSpeed Class A Common Stock covered by
each Warrant and the number of Warrants outstanding shall not be subject to
adjustment as a result of eSpeed being required to give notice pursuant to this
Section 20.
Section 21. General Covenants of eSpeed
eSpeed covenants that so long as any Warrants remain
outstanding:
(a) It will at all times maintain its corporate existence and
will carry on and conduct its business in accordance with good business
practice.
(b) It will reserve and there will remain unissued out of its
authorized capital a sufficient number of shares in eSpeed Class A Common Stock
to satisfy the rights of acquisition on the exercise of the Warrants as provided
for herein.
(c) It will cause the shares in eSpeed Class A Common Stock
from time to time subscribed for or deemed to have been subscribed for pursuant
to the exercise of the Warrants in the manner herein provided to be duly issued
and delivered in accordance with the Warrants and the terms hereof.
(d) It will use its reasonable best efforts to maintain the
listing of the shares in eSpeed Class A Common Stock which are outstanding on
NASDAQ and to complete all necessary requirements in connection with the listing
and posting for trading of the shares in eSpeed Class A Common Stock issuable on
the exercise of the Warrants on such exchange as soon as practicable following
the issue of such shares in eSpeed Class A Common Stock.
(e) All of the shares in eSpeed Class A Common Stock which are
issued on the exercise of the Warrants shall be issued as fully paid and
non-assessable and the holders thereof shall not be liable to eSpeed or its
creditors in respect of the issue of such shares in eSpeed Class A Common Stock.
(f) It will do, execute, acknowledge and deliver, or cause to
be done, executed, acknowledged and delivered, all other acts, deeds and
assurances in law as a Warrantholder may reasonably require for the better
accomplishing and effecting the intentions and provisions of this Agreement.
(g) If, in the opinion of a Warrantholder, acting reasonably,
any instrument is required to be filed with, or any permission, order or ruling
is required to be obtained from, any securities regulator in Canada or the
United States or any other step is required under any federal or provincial law
20
of Canada or under any federal or state law of the United States before any
eSpeed Class A Common Stock may be issued or delivered to a Warrantholder upon
exercise of its Warrants, eSpeed covenants that it will use its best efforts to
file such instrument, obtain such permission, order or ruling or take all such
other actions, at its expense, as may be required or appropriate in the
circumstances.
(h) eSpeed will give written notice of the issue of the eSpeed
Class A Common Stock pursuant to the exercise of Warrants, in such detail as may
be required, to NASDAQ and to each securities regulator in Canada and the United
States where there is legislation requiring the giving of any such notice.
Section 22. Piggyback Registration
(a) Subject to the terms and conditions set forth in this
Section 22, if eSpeed proposes for any reason to register shares of eSpeed Class
A Common Stock under the Securities Act (other than on Form S-4 or Form S-8
promulgated under the Securities Act or any successor forms thereto, or in
connection with a registration primarily for the benefit of employees) at any
time during the one-year period beginning on the date that is 45 Business Days
after the third anniversary of the Closing Date, it shall promptly give written
notice to each of the Freedom Participants of its intention to so register such
shares and, upon the written request, given within 15 days after delivery of
such notice by eSpeed, of any Freedom Participant to include in such
registration Freedom Registrable Shares held by such Freedom Participant (which
request shall specify the number of Freedom Registrable Shares proposed to be
included in such registration by such Freedom Participant and shall state the
intended method of disposition of such Freedom Registrable Shares by such
Freedom Participant), eSpeed shall use commercially reasonable efforts to cause
all such Freedom Registrable Shares to be included in such registration on the
same terms and conditions as the securities otherwise being sold in such
registration. In the event that the proposed registration by eSpeed is an
underwritten public offering of shares of eSpeed Class A Common Stock, any
request pursuant to this Section 22 to register Freedom Registrable Shares shall
specify that such Freedom Registrable Shares are to be included in the
underwriting on the same terms and conditions as the shares of eSpeed Class A
Common Stock, if any, otherwise being sold through underwriters under such
registration.
(b) If the managing underwriter advises eSpeed that the
inclusion of all Freedom Registrable Shares, together with all other shares of
eSpeed Class A Common Stock proposed to be included in such registration would
interfere materially with the successful marketing (including pricing) of any of
such other shares of eSpeed Class A Common Stock proposed to be registered by
eSpeed, then eSpeed may in its sole discretion exclude all such Freedom
Registrable Shares (or any portion thereof) from such registration and any
offering related thereto.
(c) In the event that less than all of the Freedom Registrable
Shares requested to be included in a registered offering are included in such
offering by operation of paragraph (b) above, the number of Freedom Registrable
Shares to be included in such offering shall be allocated among the selling
Freedom Participants on a pro rata basis corresponding, with respect to each
selling Freedom Participant, to the ratio that the number of Freedom Registrable
21
Shares requested by such selling Freedom Participant to be included bears to the
aggregate number of Freedom Registrable Shares requested to be included by all
such selling Freedom Participants.
(d) eSpeed shall not be obligated to effect the registration
of any Freedom Registrable Shares pursuant to this Section 22 unless the Freedom
Participants electing to participate consent to customary conditions of a
reasonable nature that are imposed by eSpeed. Without limiting the generality of
the foregoing, whenever Freedom Registrable Shares are registered pursuant to
this Section 22, each Freedom Participant participating in such registration
shall, as a condition to the including of Freedom Registrable Shares held by
such Freedom Participant in such registration, provide eSpeed on a timely basis
with such information and materials as eSpeed may reasonably request in order to
effect the registration of the Freedom Registrable Shares.
(e) Notwithstanding anything in this Section 22 to the
contrary, eSpeed shall have no obligation to include any Freedom Registrable
Shares proposed to be included in any registration relating to a secondary
offering of such of eSpeed Class A Common Stock by one or more third parties if
(i) the terms of any agreement providing for such secondary offering do not
provide for the inclusion of the Freedom Registrable Share pursuant to piggyback
registration rights and (ii) such third parties do not consent to the inclusion
of such Freedom Registrable Shares.
(f) All expenses incurred by eSpeed in effecting a
registration and sale of Freedom Registrable Shares under this Section 22,
including, without limitation, all registration and filing fees (including all
expenses incident to filing with Nasdaq), fees and expenses of complying with
securities and "blue-sky" laws, printing expenses, expenses incurred in
composing the registration statement and all amendments, supplements and
exhibits thereto, expenses incurred by eSpeed in marketing and assisting in the
marketing of such Freedom Registrable Shares, the fees, disbursements and
expenses of managing underwriter or underwriters, the fees and expenses of
counsel and independent auditors including fees of counsel and accountants
incurred in connection with the preparation of customary opinions of counsel and
independent auditors shall be borne by the selling Freedom Participants on a pro
rata basis corresponding, with respect to each selling Freedom Participant, to
the ratio that the number of Freedom Registrable Shares requested by such
selling Freedom Participant to be included bears to the aggregate number of
eSpeed Class A Common Stock to be included in such registration; provided,
however, that under all circumstances, all underwriting discounts, income and
transfer taxes, if any, selling commissions and legal fees and expenses of
counsel to the Freedom Participants participating in any registration under this
Section 22 shall not be borne by eSpeed but shall be borne solely by such
participating Freedom Participants in respect of their Freedom Registrable
Shares.
Section 23. Notices
Notices or demands authorized by this Agreement to be given or
made (a) by any Warrantholder to or on eSpeed, or (b) by eSpeed to any
Warrantholder, shall be deemed given (x) on the date delivered, if delivered
personally, (y) on the second Trading Day following the deposit thereof with
Federal Express or another recognized overnight courier, if sent by Federal
Express or another recognized overnight courier, and (z) on the sixth Trading
22
Day following the mailing thereof with postage prepaid, if mailed by registered
or certified mail (return receipt requested), in each case to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(i) If to eSpeed, to:
eSpeed, Inc.
Xxx Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: President
fax: (000) 000-0000
and to
Attention: General Counsel
fax: (000) 000-0000
(ii) If to any Warrantholder, to the address of such holder as
shown on the registry books of eSpeed.
Section 24. Supplements and Amendments
(a) eSpeed may from time to time supplement or amend this
Agreement without the approval of any Warrantholders in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, or to make any other
provisions with regard to matters or questions arising hereunder which eSpeed
may deem necessary or desirable all of which shall not adversely affect the
interests of the holders of Warrant Certificates.
(b) In addition to the foregoing, with the consent of holders
of not less than a majority in number of the then outstanding Warrants, eSpeed
may modify this Agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
modifying in any manner the rights of the Warrantholders; provided, however,
that no modification of the terms (including but not limited to the adjustments
described in Section 10) upon which the Warrants are exercisable or reducing the
percentage required for consent to modification of this Agreement may be made
without the consent of the holder of each outstanding Warrant affected thereby.
Section 25. Successors
All covenants and provisions of this Agreement by or for the
benefit of eSpeed shall bind and inure to the benefit of their respective
successors and assigns.
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Section 26. Benefits of this Agreement
Nothing in this Agreement shall be construed to give any
Person other than eSpeed and the registered Warrantholders any legal or
equitable right, remedy or claim under this Agreement.
Section 27. Governing Law
This Agreement and each Warrant Certificate issued hereunder
shall be governed by, and construed in accordance with, the laws of the State of
New York.
Section 28. Captions
The captions of the sections of this Agreement have been
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
Section 29. Termination
(a) This Agreement shall terminate on the fifteenth day
following the earlier to occur of (i) the end of the Exercise Period and (ii)
the date on which there remains no Warrant outstanding.
(b) Following the termination of this Agreement, this
Agreement shall cease to be of further effect except to the extent Royal Bank or
eSpeed have not performed any of their obligations hereunder and Royal Bank, on
demand of eSpeed and upon delivery to Royal Bank of a certificate of eSpeed
stating that all conditions precedent to the satisfaction and discharge of this
Agreement have been complied with, shall execute proper instruments
acknowledging satisfaction of and discharging this Agreement.
Section 30. Counterparts
This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
eSPEED, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxx
-----------------------------------
Authorized Officer
By:
-----------------------------------
Authorized Officer
XXXXXXX XXXXX CANADA INC.
By: /s/ Xxxxxx Xxx
-----------------------------------
Authorized Officer
By: /s/ Xxxxxxx Xxxxxxxxx
-----------------------------------
Authorized Officer
BMO XXXXXXX XXXXX, INC.
By: /s/ X.X. Xxxxxxxxxx
-----------------------------------
Authorized Officer
By: /s/ X.X. Xxxxxxxx
-----------------------------------
Authorized Officer
RBC DOMINION SECURITIES INC.
By: /s/ Xxxxx X. XxXxxxxx
-----------------------------------
Authorized Officer
By: /s/ Xxxxxxxx X. Xxxxxx
-----------------------------------
Authorized Officer
SCOTIA CAPITAL INC.
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------------
Authorized Officer
By: /s/ Xxxx Xxxxxx
-----------------------------------
Authorized Officer
25
TD SECURITIES INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------
Authorized Officer
By: /s/ Xxxxxxx X. XxXxxx
-----------------------------------
Authorized Officer
CIBC WORLD MARKETS INC.
By: /s/ Xxxxx X. Xxxxxxxxx
-----------------------------------
Authorized Officer
By: /s/ Xxxxxx Xxxxxxxxx
-----------------------------------
Authorized Officer
26
WARRANT CERTIFICATE
Certificate No. 1 400,000 Warrants
----- -------
NOT EXERCISABLE AFTER APRIL 3, 2006
Warrant Certificate
eSPEED, INC.
NEITHER THIS WARRANT NOR THE SHARES OF CLASS A COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AND NEITHER THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION
SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
This certifies that Roytor & Co. ("Holdco") or its registered
assigns, is the registered owner of the number of Warrants set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Warrant Agreement, dated as of April 4, 2001 (the "Warrant
Agreement"), among eSpeed, Inc., a Delaware corporation ("eSpeed") and the
Freedom Participants identified therein to purchase from eSpeed during the
Exercise Period at the principal office of eSpeed in New York City, during
regular business hours, the number of shares of common stock, par value $0.01
per share, of eSpeed ("eSpeed Class A Common Stock") represented hereby at a
price per share of eSpeed Class A Common Stock, payable in cash only, equal to
the Current Market Price per share as at the last Business Day before the date
of the Share Purchase Agreement (as defined in the Warrant Agreement) (the
"Exercise Price"), in each case upon presentation and surrender of this Warrant
Certificate with the Form of Election to Purchase duly executed. The number of
Warrants evidenced by this Warrant Certificate (and the number of shares of
eSpeed Class A Common Stock which may be purchased upon exercise thereof) set
forth above and the Exercise Price set forth above are the number and Exercise
Price as of January 26, 2001, based on the shares of eSpeed Class A Common Stock
as constituted at such date. As provided in the Warrant Agreement, the Exercise
Price and the number of shares of eSpeed Class A Common Stock which may be
purchased upon the exercise of the Warrants evidenced by this Warrant
Certificate are subject to modification and adjustment upon the occurrence of
certain events.
Terms defined in the Warrant Agreement, and not otherwise
defined herein, shall have, for the purposes of this Warrant Certificate, the
27
meaning ascribed to them in the Warrant Agreement. This Warrant Certificate is
subject to all of the terms, provisions and conditions of the Warrant Agreement,
which terms, provisions and conditions are hereby incorporated herein by
reference and made a part hereof and to which Warrant Agreement reference is
hereby made for a full description of the rights, limitations of rights,
obligations, duties and immunities hereunder of eSpeed and the holders of the
Warrant Certificates. Copies of the Warrant Agreement are on file at the
above-mentioned office of eSpeed. After 5:00 P.M., New York City time, on the
last Business Day (as defined in the Warrant Agreement) of the Exercise Period,
all Warrants evidenced by this Warrant Certificate shall become null and void
and of no value.
Holdco or its registered assigns may allocate and transfer the
Warrants represented by this Warrant Certificate to the Freedom Participants in
accordance with Section 5 of the Warrant Agreement. Neither this Warrant
Certificate nor any of the Warrants represented by this Warrant Certificate may
be sold, transferred, assigned, hypothecated, pledged or otherwise conveyed by
Holdco or its registered assigns, except as expressly permitted by Section 4(a)
of the Warrant Agreement.
At any time during the Exercise Period, this Warrant
Certificate, with or without other Warrant Certificates, upon surrender at the
principal office of eSpeed, may be exchanged for another Warrant Certificate or
Warrant Certificates of like tenor and date evidencing Warrants entitling the
holder to purchase a like aggregate number of shares of eSpeed Class A Common
Stock, in each case as the Warrants evidenced by the Warrant Certificate or
Warrant Certificates surrendered shall have entitled such holder to purchase or
receive. If this Warrant Certificate shall be exercised in part, the holder
hereof shall be entitled to receive upon surrender hereof another Warrant
Certificate or Warrant Certificates for the number of Warrants not exercised.
eSpeed shall make a cash payment in lieu of issuing fractional
Warrants or fractional shares of eSpeed Class A Common Stock, as provided in the
Warrant Agreement.
No holder of this Warrant Certificate, as such, shall be
entitled to vote, receive dividends or distributions on, or be deemed for any
purpose the holder of, eSpeed Class A Common Stock or of any other securities of
eSpeed which may at any time be issuable on the exercise hereof, nor shall
anything contained in the Warrant Agreement or herein be construed to confer
upon the holder hereof, as such, any of the rights of a stockholder of eSpeed or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as expressly provided in the Warrant Agreement), or to
receive dividends or subscription rights, or otherwise, until the Warrant or
Warrants evidenced by this Warrant Certificate shall have been exercised as
provided in the Warrant Agreement.
WITNESS the facsimile signature of the proper officers of
eSpeed. Dated as of April 4, 2001.
ATTEST: ESPEED, INC.
By:
----------------------------- -----------------------------------
Secretary Authorized Officer
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Exhibit II
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Warrant Certificate.)
To: eSpeed, Inc.,
The undersigned hereby irrevocably elects to exercise
__________________ Warrants represented by this Warrant Certificate to purchase
the shares of eSpeed Class A Common Stock issuable upon the exercise of such
Warrants and requests that Certificates for such shares of eSpeed Class A Common
Stock be issued in the name of and delivered to:
Please insert Social Security
or other identifying number
--------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
--------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------
Dated:
--------------------------------- --------------------------------
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of this
Warrant Certificate)
Signature Guaranteed:
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