EXHIBIT 10.3
STOCK OPTION AGREEMENT
AGREEMENT, dated as of February 7, 2003 by and between MarketAxess
Holdings Inc. (the "Company") and Xxxxxxx XxXxx (the "Executive").
PRELIMINARY STATEMENT
The Board of Directors of the Company (the "Board") has authorized
this grant of a non-qualified stock option (the "Option") on February 7, 2003 to
purchase Two Million Six Hundred Sixty Six Thousand Six Hundred Sixty Seven
(2,666,667) shares of the Company's common stock, par value $.001 per share (the
"Common Stock") at a price per share of $0.90 (the "Exercise Price"). Unless
otherwise indicated, any capitalized term used but not defined herein shall have
the meaning ascribed to such term in the Restricted Stock Purchase Agreement,
dated as of April 19, 2000, by and between the Company and the Executive (the
"Purchase Agreement"). By signing and returning this Agreement, the Executive
agrees to comply with all applicable laws and regulations.
Accordingly, the parties hereto agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, the Executive is hereby granted an Option to purchase from the Company
Two Million Six Hundred Sixty Six Thousand Six Hundred Sixty Seven (2,666,667)
shares of Common Stock, at a price per share equal to the Exercise Price. No
part of the Option granted hereby is intended to qualify as an "incentive stock
option" under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
2. EXERCISE; VESTING.
(a) Except as set forth in paragraphs (c) through (g) of this
Section 2, the Option shall become exercisable in three equal annual
installments of Eight Hundred Eighty Eight Thousand Eight Hundred Eighty Nine
(888,889) shares on each of December 31, 2003, 2004 and 2005 respectively, which
shall be cumulative; provided, that the Executive's Service has not been
terminated prior to that date. There shall be no proportionate or partial
vesting in the periods prior to each vesting date and all vesting shall occur
only on the appropriate vesting date.
(b) To the extent that the Option has become vested and exercisable
with respect to shares of Common Stock, the Option may thereafter be exercised
by the Executive, in whole or in part, at any time or from time to time prior to
the expiration of the Option as provided herein. Upon expiration of the Option,
the Option shall be canceled and no longer exercisable.
(c) Upon the death or the permanent or total disability (as defined
in Section 22(e)(3) of the Code, a "Disability") of the Purchaser, the Option
shall become fully vested and exercisable.
(d) In the event the Executive's Service is terminated by the
Company without Cause, five hundred thousand (500,000) shares of Common Stock
minus the number of shares of Common Stock that are vested as a result of such
termination without Cause pursuant to Section 3(c) of that certain agreement,
dated as of the date hereof, by and between the Company and the Executive
relating to the grant of an incentive stock option to purchase 333,333 shares of
Common Stock, shall immediately vest and become exercisable.
(e) In the event of a Change in Control in which the holders of the
Company's outstanding capital stock receive only cash in exchange for such
capital stock, the Option shall become fully vested and exercisable immediately
prior to such Change in Control. In the event of any other Change in Control,
the unvested portion of the Option shall immediately become fully vested and
exercisable upon any termination of the Executive's Service by the Company (or
any successor thereto) without Cause occurring after such Change in Control.
(f) In the event that the Executive engages in Detrimental Activity
(as defined on Exhibit B attached hereto) prior to the exercise of the Option,
the Option shall terminate and expire as of the date the Executive engaged in
such Detrimental Activity. As a condition of the exercise of the Option, the
Executive may be required to certify (or be deemed to have certified) at the
time of exercise in a manner acceptable to the Company that the Executive has
not engaged in, and does not intend to engage in, any Detrimental Activity. In
the event the Executive engages in Detrimental Activity, the Company shall be
entitled to those rights described in Section 7 hereof and the following
sentence. In the event the Executive engages in Detrimental Activity during the
one (1) year period commencing on the date any portion of the Option is
exercised, the Company shall be entitled to recover from the Executive at any
time within one (1) year after such exercise, and the Executive shall pay over
to the Company, an amount equal to any gain realized as the result of the
exercise (whether at the time of exercise or thereafter). This Section 2(f)
shall cease to apply upon a Change in Control.
(g) Notwithstanding any other provision to the contrary in this
Agreement, any unvested portion of the Option shall, upon such termination of
the Executive's Service, be non-exercisable and shall be canceled.
3. MANNER OF EXERCISE/EFFECTIVE TIME OF EXERCISE.
(a) Cash Exercise. To the extent exercisable pursuant to Section 2,
this Option may be exercised by the Executive, in whole or in part, by
surrendering this Option, with the purchase/exercise form appended hereto as
Exhibit A duly executed by such Executive or by such Executive's duly authorized
attorney, at the principal office of the Company, or at such other office or
agency as the Company may designate, accompanied by payment in full of the
Exercise Price payable in respect of the number of shares of Common Stock
purchased upon such exercise. The Exercise Price may be paid by cash, check or
wire transfer of immediately available funds.
(b) Effective Time of Exercise. Each exercise of this Option shall
be deemed to have been effected immediately prior to the close of business on
the day on which this Option shall have been surrendered to the Company as
provided above. At such time, the Executive shall be deemed to have become the
holder of record of such certificates of Common Stock.
2
4. OPTION TERM. The Option shall expire on the tenth anniversary of
the date hereof, subject to earlier termination in the event of the termination
of the Executive's Service as specified in Section 5 below.
5. TERMINATION.
Subject to Section 4 above, the Option, to the extent vested at the
time of the termination of the Executive's Service, shall remain exercisable as
follows:
(a) In the event of the termination of the Executive's Service by
reason of death or Disability, the Option shall remain exercisable until the
earlier of (i) two (2) years from the date of such termination or (ii) the
expiration of the stated term of the Option pursuant to Section 4 hereof.
(b) In the event of the termination of the Executive's Service by
the Company without Cause, the vested portion of the Option shall remain
exercisable until the earlier of (i) one (1) year from the date of such
termination or (ii) the expiration of the stated term of the Option pursuant to
Section 4 hereof.
(c) In the event the Executive voluntary resigns from Service (other
than a voluntary resignation described in Section 5(d) below), the vested
portion of the Option shall remain exercisable until the earlier of (i) ninety
(90) days from the date of such resignation or (ii) the expiration of the stated
term of the Option pursuant to Section 4 hereof.
(d) In the event of the termination of the Executive's Service by
the Company for Cause or in the event the Executive voluntary resigns from
Service within ninety (90) days after an event that would be grounds for a
termination of the Executive's Service for Cause, the entire Option (whether or
not vested) shall terminate and expire upon such termination or resignation, as
the case may be.
(e) Any portion of the Option that is not vested as of the date of
the termination of the Executive's Service for any reason shall terminate and
expire as of the date of such termination.
6. RESTRICTION ON TRANSFER OF OPTION.
(a) No part of the Option shall be transferred, sold, assigned,
negotiated, pledged, hypothecated, encumbered or otherwise disposed of
("Transferred"), whether for value or no value and whether voluntarily or
involuntarily, other than by will or by the laws of descent and distribution.
During the lifetime of the Executive the Option may be exercised only by the
Executive or the Executive's guardian or legal representative. In addition, the
Option shall not be Transferred in any way, except as provided by law or herein,
and the Option shall not be subject to execution, attachment or similar process.
Upon any attempt to Transfer the Option or in the event of any levy upon the
Option by reason of any execution, attachment or similar process contrary to the
provisions hereof, the Option shall immediately become null and void.
(b) Notwithstanding anything to the contrary contained in Section
6(a) above, the Option shall be Transferable, in whole or in part, to a Family
Member (as defined below) of
3
the Executive. Any portion of the Option that is Transferred to a Family Member
pursuant to the preceding sentence (i) may not be subsequently Transferred
otherwise than by will or by the laws of descent and distribution and (ii)
remains subject to the terms of this Agreement. Any shares of Common Stock
acquired upon exercise of the Option by a permissible transferee of the Option
or a permissible transferee pursuant to a Transfer after the exercise of the
Option shall be subject to the terms of this Agreement, including, without
limitation, the provisions of Section 7 below.
(c) For purposes hereof, a "Family Member" shall mean, solely to the
extent provided for in Rule 701 under the Securities Act, any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any person
sharing the Executive's household (other than a tenant or employee), a trust in
which these persons have more than fifty percent (50%) of the beneficial
interest, a foundation in which these persons (or the employee) control the
management of assets, and any other entity in which these persons (or the
employee) own more than fifty percent (50%) of the voting interests or as
otherwise defined in Rule 701 under the Securities Act.
7. COMPANY CALL RIGHTS.
(a) In the event of the termination of the Executive's Service by
the Company for Cause or in the event the Executive voluntary resigns from
Service, the Company may at any time within the ten (10) month period following
the later of the date of such termination or resignation or the date the
Executive acquires shares of Common Stock upon exercise of the Option following
such termination or resignation: (i) repurchase from the Executive the
outstanding vested portion of the Option based on the difference between the
Exercise Price and the Fair Market Value on the date of repurchase and (ii)
repurchase from the Executive any shares of Common Stock previously acquired by
the Executive through the exercise of the Option that are held by the Executive
for at least six (6) months and one (1) day after the date of exercise, at a
repurchase price equal to Fair Market Value on the date of repurchase.
(b) (i) If the Company elects to exercise call rights under this
Section 7, it shall do so by delivering to the Executive a notice of such
election, specifying the number of shares to be purchased and such closing date
and time that is within the ten (10) month period. Such closing shall take place
at the Company's principal executive offices.
(ii) At such closing, the Company will pay the Executive the
repurchase price as specified in this Section 7 in cash, or by cancellation of
indebtedness of the Executive to the Company.
(c) Notwithstanding the foregoing, the Company shall cease to have
rights pursuant to this Section on and after the initial public offering of the
Common Stock.
8. SECURITIES REPRESENTATIONS. Upon the exercise of the Option prior
to the registration pursuant to the Securities Act of the Common Stock subject
to the Option, the Executive will be deemed to acknowledge and make the
following representations and warranties and any issuances of Common Stock by
the Company shall be made in reliance upon the following express representations
and warranties of the Executive:
4
(a) shares of the Common Stock are being acquired for the
Executive's own account and not with a view to, or for sale in connection with,
the distribution thereof, nor with any present intention of distributing or
selling any of such shares of Common Stock;
(b) the Executive is aware that there are substantial risks in
subscribing to purchase, and in purchasing, the shares of Common Stock;
(c) representatives of the Company have answered any questions the
Executive has asked about the Company and the Executive has received any
additional information that he has requested;
(d) the Executive has been advised that the shares of Common Stock
have not been registered under the Securities Act on the ground that no
distribution or public offering of the shares of Common Stock is to be effected
(it being understood, however, that the shares of Common Stock are being issued
and sold in reliance on the exemption provided under Rule 701 under the
Securities Act), and in this connection the Company is relying in part on the
Executive's representations set forth in this Section;
(e) in deciding to subscribe for the shares of Common Stock, the
Executive has relied solely upon an independent investigation of the Company's
business and upon consultation, to the extent deemed necessary by the Executive,
with his legal and financial advisers with respect to that business and the
nature of the investment and the Executive has not acted upon the basis of any
other representations or warranties;
(f) the Executive has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of the
purchase of the shares of Common Stock contemplated by this Agreement, and the
Executive is able to bear the substantial economic risks of that investment and
can afford a complete loss of that investment;
(g) the Executive is an "accredited investor" (as defined in
Regulation D promulgated under the Act);
(h) in the event that the Executive is permitted to Transfer or
otherwise dispose of the shares of Common Stock, the Executive may only do so
pursuant to a registration statement under the Securities Act and qualification
under applicable state securities laws or pursuant to an opinion of counsel
satisfactory to the Company that such registration and qualification are not
required, and that the transaction (if it involves a sale in the
over-the-counter market or on a securities exchange) does not violate the
provisions of Rule 144 under the Securities Act. A stop-transfer order will be
placed on the books of the Company respecting the certificates evidencing the
shares of Common Stock, and such certificates shall bear any required legends,
until such time as the shares of Common Stock evidenced by such certificates
shall have been registered under the Securities Act or shall have been
Transferred in accordance with an opinion of counsel for the Company that such
registration is not required;
(i) the Transfer of the shares of Common Stock have not been
registered under the Securities Act, and the shares of Common Stock must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available and the Company is under no
obligation to register the shares of Common Stock;
5
(j) the Executive understands that the shares of Common Stock
acquired upon exercise of the Option are restricted securities within the
meaning of Rule 144 promulgated under the Securities Act; that the exemption
from registration under Rule 144 will not be available unless (i) a public
trading market then exists for the common stock of the Company, (ii) adequate
information concerning the Company is then available to the public, and (iii)
other terms and conditions of Rule 144 or any exemption therefrom are complied
with; and that any sale of the shares of Common Stock may be made only in
limited amounts in accordance with such terms and conditions;
(k) the Executive understands that there is no market, and there
cannot be any assurance that there will ever be a market, for the purchase and
sale of the shares of Common Stock, and the shares of Common Stock will not be
readily acceptable as collateral for loans;
(l) the Executive is not a nonresident alien for the purpose of
income taxation; and
(m) the Executive is not relying upon any representation or warranty
regarding the Company or the business of the Company in making the decision to
purchase the shares of Common Stock and hereby acknowledges that the Company has
disclaimed such representation or warranty whether arising by contract, law or
otherwise and agrees that such disclaimer shall be effective.
9. RIGHTS AS A STOCKHOLDER. The Executive shall have no rights as a
stockholder with respect to any shares covered by the Option unless and until
the Executive has become the holder of record of the shares, and no adjustments
shall be made for dividends in cash or other property, distributions or other
rights in respect of any such shares of Common Stock.
10. FRACTIONAL SHARES. The Company shall not issue fractions of
shares of Common Stock upon exercise of this Option or scrip in lieu thereof. If
any fraction of a share of Common Stock would, except for the provisions of this
Section 10, be issuable upon exercise of this Option, or any part hereof, the
Company shall in lieu thereof pay to the person entitled thereto an amount in
cash equal to the current value of such fraction, calculated to the nearest one-
thousandth (1/1000) of a share, to be computed (i) if the Common Stock is listed
on any national securities exchange on the basis of the last sales price of the
Common Stock on such exchange (or the quoted closing bid price if there shall
have been no sales) on the date of conversion, or (ii) if the Common Stock shall
not be so listed on the basis of the mean between the closing bid and asked
prices for the Common Stock on the date of conversion as reported by NASDAQ, or
its successor, and if there are no such closing bid and asked prices, on the
basis of the Fair Market Value per share as determined by the Board of Directors
of the Company.
11. ADJUSTMENTS. The grant of the Option to the Executive shall not
affect in any way the right or power of the officers or the Board of Directors
of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the capital structure or the business of the
Company, any merger or consolidation of the Company, the dissolution or
liquidation of the Company, any sale or transfer of all or part of its assets or
business or any other corporate act or proceeding. The Board shall adjust the
number of shares of Common
6
Stock subject to the Option to reflect any adjustment, recapitalization,
reorganization or other change in the capital structure or the business of the
Company, any merger or consolidation of the Company, the dissolution or
liquidation of the Company, any sale or transfer of all or part of its assets or
business or any other corporate act or proceeding.
12. TRUSTS, ETC. Nothing contained in this Agreement and no action
taken pursuant to this Agreement shall create or be construed to create a trust
of any kind, or a fiduciary relationship, between the Company and the Executive
or the executor, administrator or other personal representative or designated
beneficiary of the Executive, or any other persons. Any reserves that may be
established by the Company in connection with this Agreement shall continue to
be part of the general funds of the Company, and no individual or entity other
than the Company shall have any interest in such funds until paid to the
Executive. If and to the extent that the Executive or the Executive `s executor,
administrator or other personal representative, as the case may be, acquires a
right to receive any payment from the Company pursuant to this Agreement, such
right shall be no greater than the right of an unsecured general creditor of the
Company.
13. NOTICES. Any notice or communication given hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, or
by United States mail, to the appropriate party at the address set forth below
(or such other address as the party shall from time to time specify):
If to the Company, to:
MarketAxess Holdings Inc.
000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Compensation Committee of the Board of Directors
If to the Executive, to the address indicated after the Executive's
signature at the end of this Agreement.
14. NO OBLIGATION TO CONTINUE EMPLOYMENT. This Agreement is not an
agreement of employment. This Agreement does not guarantee that the Company or
any affiliate thereof will employ the Executive for any specific time period,
nor does it modify in any respect the Company's right to terminate or modify the
Executive's employment or compensation.
15. REGISTRATION RIGHTS. Any shares of Common Stock issued upon
exercise of the Option shall be deemed to be "Registrable Other Holder
Securities" as such term is defined in that certain Sixth Amended and Restated
Registration Rights Agreement, dated as of April 4, 2002, by and among the
Company, the Executive and the other parties thereto and the holder of such
shares shall be entitled to, among other things, the registration rights set
forth therein.
16. AGREEMENT. As a condition to the receipt of shares of Common
Stock pursuant to this Agreement, to the extent required by the Board of
Directors, the Executive shall execute and deliver a stockholder's agreement or
such other documentation, which shall set forth
7
certain restrictions on transferability of the shares of Common Stock acquired
upon exercise, a right of first refusal of the Company with respect to shares,
and such other terms as the Board of Directors shall from time to time
establish. Such stockholder's agreement or other documentation shall apply to
the Common Stock acquired hereunder and covered by such stockholder's agreement
or other documentation. The Company may require, as a condition of exercise, the
Executive to become a party to any other existing stockholder agreement.
[END OF TEXT. SIGNATURE PAGE FOLLOWS.]
8
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
MARKETAXESS HOLDINGS INC.
By: /s/ Xxxxxxx XxXxx
-------------------------------
Authorized Officer
/s/ Xxxxxxx XxXxx
----------------------------------
Xxxxxxx XxXxx
Social Security No.: On file
Home Address: On file
9
EXHIBIT A
PURCHASE/EXERCISE FORM
(To Be Signed Only upon Exercise of Option)
To MarketAxess Holdings Inc.:
The undersigned, the holder of the within Option, hereby irrevocably
elects to exercise the purchase right represented by such Option, for and to
purchase thereunder, __________ shares of Common Stock of MarketAxess Holdings
Inc. and herewith makes payment of $___________ therefor. The undersigned
requests that the certificates for such shares be issued in the name of, and be
delivered to, Xxxxxxx XxXxx.
Dated:
--------------- ---------------------------------
Xxxxxxx XxXxx
(Signature must conform in all
respects to name of the Executive as
specified on the face of the Option)
---------------------------------
Address
EXHIBIT B
DEFINITION OF DETRIMENTAL ACTIVITY
For purposes of this Agreement, "Detrimental Activity" shall mean: (a) the
disclosure to anyone outside the Company or its affiliates, or the use in any
manner other than in the furtherance of the Company's or its affiliate's
business, without written authorization from the Company, of any confidential
information or proprietary information, relating to the business of the Company
or its affiliates that is acquired by an Executive prior to the termination of
the Executive's Service; (b) activity while employed or performing services that
results, or if known could result, in the termination of the Executive's Service
that is classified by the Company as a termination for Cause; (c) engaging in
Solicitation (as defined below) without, in all cases, written authorization
from the Company; (d) the making of disparaging comments or statements by the
Executive, or the inducement of others by the Executive to make any disparaging
comments or statements, to the press, the Company's or its affiliates'
employees, consultants or any individual or entity with whom the Company or its
affiliates has a business relationship which could reasonably be expected to
adversely affect in any manner: (i) the conduct of the business of the Company
or its affiliates (including, without limitation, any products or business plans
or prospects); or (ii) the business reputation of the Company or its affiliates,
or any of their products, or their past or present officers, directors or
employees; (e) without written authorization from the Company, engaging in
Competition (as defined below). For purposes of sub-sections (a), (c), and (e)
above, the Board of Directors of the Company shall each have authority to
provide the Executive with written authorization to engage in the activities
contemplated thereby and no other person shall have authority to provide the
Executive with such authorization. Except as specifically provided in any other
agreement between the Executive and the Company, Detrimental Activity shall not
be deemed to occur after the end of the one (1) year period following the date
of termination of the Executive's Service.
"Competition" means the Executive's participation, directly or indirectly,
as an individual proprietor, partner, stockholder, officer, employee, director,
joint venturer, investor, lender, consultant or in any capacity whatsoever
(within the United States or in any foreign country where the Company or its
affiliates does business) in a business (whether a division, unit, subsidiary or
affiliate), other than the Company and its affiliates: (i) that is engaged in
the design, development, operation or promotion of a multi-dealer electronic
platform or electronic commerce network (ECN) for fixed income securities (or
other fixed income instruments) information research, distribution, trading
and/or other transactions; (ii) whose principal business is electronic
distribution, research and/or trading of fixed income securities (or other fixed
income instruments); or (iii) that is not included in subsections (i) or (ii)
and as to which the Company or its affiliates have taken demonstrable steps at
the time of termination of the Executive's employment. Competition does not
include: (i) the Executive's ownership of not more than 1% of the total
outstanding stock of a publicly held company; or (ii) the Executive's
performance of services for any enterprise to the extent such services are not
performed, directly or indirectly, for a business in the aforesaid Competition
(including, without limitation, his performance of services for any entity which
has a division or business unit engaging in competition with the Company's or
its affiliates' business, if such performance does not in any capacity, directly
or indirectly, involve work with or assistance to such division or business
unit). The meaning of "as to which the Company has taken demonstrable steps"
shall be determined
by the Board of Directors of the Company in good faith based on written
memoranda or similar writings or communications and such determination shall be
conclusive and binding for all purposes hereunder.
"Solicitation" means (i) recruiting, soliciting or inducing any
nonclerical employee or consultant of the Company or its affiliates to terminate
his or her employment with, or otherwise cease or reduce his or her relationship
with, the Company or such affiliate; (ii) hiring or assisting another person or
entity to hire any nonclerical employee or consultant of the Company or its
affiliates or any person who, to the Executive's knowledge, within six months
before was such a person; or (iii) soliciting or inducing any person or entity
to terminate, or otherwise to cease, reduce, or diminish in any way its
relationship with or prospective relationship with the Company or its
affiliates. You may however, if requested by any entity with which you are not
affiliated, serve as a reference for any person who at the time of the request
is not an employee of, or consultant to, the Company or its affiliates.
