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EXHIBIT 10.3
PSE-OPTIMARK AGREEMENT
This PSE-OptiMark Agreement ("this Agreement") is entered into effective
as of the 27th day of August, 1996 by and between The Pacific Stock Exchange
Incorporated, a Delaware corporation ("PSE"), and OptiMark Technologies, Inc., a
Delaware corporation (the "Company").
- Recitals -
A. The Company owns and has applied for patents on certain market
structuring technology referred to by the Company as "OptiMark(TM)". PSE has
become generally familiar with the potential capabilities of OptiMark(TM). The
Company desires to present OptiMark(TM) for trading equities and equity options
to the investment community as a facility of a securities exchange or otherwise.
PSE desires to make OptiMark(TM) available to the financial community in
connection with trading on the Pacific Exchange, in the manner and subject to
the terms and conditions stated below.
B. Effective simultaneously with the execution and delivery of this
Agreement, pursuant to a Stock Purchase Agreement of even date among the Company
and certain investors designated therein (the "Stock Purchase Agreement"), the
Company is closing the first stage ($4.8 million) of a total $16 million
offering of the Company's Series A Convertible Participating Preferred Stock.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, in addition to other
terms defined elsewhere herein, the following terms shall have the indicated
meanings.
(a) "1934 Act" means the Securities Exchange Act of 1934, as
amended, and all applicable rules and regulations thereunder.
(b) "Affiliates" of a party means that party's officers,
directors, employees, and any corporations or other entities that control, are
controlled by, or are under common control with that party.
(c) "Exchange Warrants" means PSE's rights to acquire Exchange
Listed Equities Warrant Shares, Exchange Listed Options Warrant Shares, Exchange
UTP Warrant Shares, and Exchange After-Hours Warrant Shares, all as described in
the Purchase Warrant.
(d) "OptiMark-Securities" refers to the service described
generally in Exhibit B attached hereto, as it exists on the date hereof and as
it may be modified from time to time hereafter.
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(e) "Other Exchange Applications" means the Availability of
OptiMark-Securities through one or more Other Exchanges for (i) equity
securities listed on such Other Exchange(s) during normal trading hours, (ii)
equity securities pursuant to unlisted trading privileges on such Other
Exchange(s), if any, (iii) options during normal trading hours, if any, and (iv)
equity securities after-hours, if applicable.
(f) "Other Exchanges" means (i) securities exchanges registered
under Section 6 of the 1934 Act, other than the Pacific Exchange, including
without limitation the New York, American, Boston, Chicago, Cincinnati and
Philadelphia Stock Exchanges, and the Chicago Board Options Exchange, and (ii)
securities exchanges licensed, registered or otherwise authorized to do business
as such under the laws of any country other than the United States.
(g) "Pacific Exchange" means the securities exchange operated
by PSE, registered under Section 6 of the ▇▇▇▇ ▇▇▇.
(h) "PSE Applications" means the Availability of
OptiMark-Securities through the Pacific Exchange for (i) equity securities
listed on the Pacific Exchange during normal trading hours (i.e., the PSE Listed
Application), (ii) equity securities pursuant to Pacific Exchange Unlisted
Trading Privileges (UTP), (iii) options during normal trading hours, and (iv)
equity securities after-hours.
(i) "PSE Listed Application" means the Availability of
OptiMark-Securities through the Pacific Exchange for equity securities listed on
the Pacific Exchange during normal trading hours.
(j) "PSE Warrants" means PSE's rights to acquire PSE Listed
Equities Warrant Shares, PSE Listed Options Warrant Shares, PSE UTP Warrant
Shares, and PSE After-Hours Warrant Shares, all as described in the Purchase
Warrant.
(k) "Purchase Warrant" means the Common Stock Purchase Warrant
of even date issued by the Company to PSE.
(l) "Regulatory Approval" means grant of all Rule Changes by
the staff of or the SEC.
(m) "Rule Changes" means all rule changes, no action letters,
exemptions and/or waivers necessary under the 1934 Act, if any, to allow PSE
Applications.
(n) "SEC" means the U.S. Securities and Exchange Commission.
(o) "Users" means the Pacific Exchange's members and other
brokers, dealers and investors who wish to utilize OptiMark-Securities.
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(p) As used herein, phrases such as "Availability", "made
Available", "make Available through" or "making Available" as applied to
OptiMark-Securities and the relevant PSE Applications mean that, on or after the
Initial Operational Capability Date (as defined in Section 5(c) below), the PSE
Interfaces (as defined in Section 4(a) below) permit the necessary
communications between OptiMark-Securities and the relevant systems of the
Pacific Exchange described in Section 4(a) such that Users have the ability to
utilize OptiMark-Securities subject to entering into a User Agreement (as
defined in Section 11 below) with the Company or its Affiliates. Notwithstanding
the use of such phrases in the Agreement, PSE is not providing, or offering to
provide, OptiMark-Securities to Users, either directly or indirectly.
2. OPTIMARK DEVELOPMENT. The Company promptly shall commence and
diligently shall pursue, using commercially reasonable efforts, the development,
refinement and implementation of OptiMark-Securities for PSE Applications. The
Company initially shall focus principally on development, refinement and
implementation of OptiMark-Securities for the PSE Listed Application. The
Company expects to develop OptiMark-Securities for the PSE Listed Application in
the following stages:
==============================================================================================================================
Estimated
Stage Schedule
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Requirements analysis 1/15/96 - 8/6/96
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Detailed hardware design 8/7/96 - 10/1/96
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Detailed software design 8/7/96 - 10/29/96
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Engineering development 8/7/96 - 10/17/97
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Coding and unit testing 8/23/96 - 3/20/97
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System integration and testing 1/27/97 - 8/22/97
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System installation 8/25/97 - 9/19/97
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Formal acceptance test report 8/22/97
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Operational testing 9/22/97 - 10/17/97
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System operational (PSE Listed Application) 10/17/97
==============================================================================================================================
3. RULE CHANGES. The Company shall cause its counsel promptly to
commence, diligently to pursue and as soon as practicable to deliver to PSE (a)
a detailed written analysis as to whether, in the Company's view, any Rule
Changes are necessary and, if so (b) a proposed formal written request for such
Rule Changes for presentation by PSE to the SEC, with all supporting documents
that the Company believes are required (a "Rule Filing"). PSE and its counsel
shall review the Company's analysis and Rule Filing, shall determine
independently whether, in PSE's view, any Rule Changes are necessary and, if so,
shall finalize the Rule Filing in consultation with the Company. The Company
promptly shall deliver to PSE any supplemental information and supporting
documentation reasonably requested by PSE in this respect. The form and
substance of any Rule Filing shall be determined by PSE and shall be subject to
the Company's reasonable approval, not to be unreasonably withheld or delayed.
If PSE determines that a Rule Filing is required, PSE shall submit the Rule
Filing to the SEC as soon as practicable. PSE thereafter diligently shall pursue
Regulatory Approval, using
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commercially reasonable efforts, including to the extent necessary or
appropriate (i) attending public hearings and meetings with the SEC, in
Washington, D.C. and elsewhere, and (ii) responding to requests by the SEC and
comment letters to or from the SEC, in consultation with the Company.
4. INTERFACE DEVELOPMENT.
(a) As soon as practicable, the Company shall deliver to PSE
detailed specifications for the hardware and software needed to allow
OptiMark-Securities to interface with PSE's computerized order book, including
the terminals in use by Users, the Intermarket Trading System (ITS),
Consolidated Quote System (CQS), Consolidated Tape System (CTS), and PCOAST (fka
Scorex) system (generally, "PSE Interfaces"). All of such specifications for PSE
Interfaces shall be subject to PSE's approval, not to be unreasonably withheld
or delayed. The date on which PSE gives such approval (if any) is referred to
below as the "Interface Specifications Approval Date".
(b) For purposes of this Agreement, the "Interface Development
Commencement Date" means the latest to occur of the following:
(i) the Interface Specifications Approval Date;
(ii) the "Second Closing" under and pursuant to the Stock
Purchase Agreement;
(iii) the submission of the Rule Filing to the SEC by PSE,
if Rule Changes are deemed necessary in accordance with Section 3 ("Rule
Changes") above; and
(iv) execution and delivery by the Company, PSE and
International Business Machines Corporation ("IBM") of a contract,
satisfactory to PSE and the Company in their discretion (an "IBM
Contract"), under which IBM will provide technical assistance to PSE in
connection with design, development and testing of the PSE Interfaces.
(c) Promptly following the Interface Development Commencement
Date, PSE shall commence and diligently shall pursue, using commercially
reasonable efforts, the design, development and testing of the PSE Interfaces.
PSE initially shall focus principally on development of PSE Interfaces for the
PSE Listed Application.
(d) The Company shall pay to IBM under the IBM Contract such
amounts as may reasonably be necessary to assist PSE in the design, development
and testing of the PSE Interfaces, not to exceed $1,000,000.
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5. KEY DATES.
(a) The date (if any) on which OptiMark-Securities for the PSE
Listed Application is complete and operational in all material respects and
ready for system integration and testing, subject only to readiness of the
related PSE Interfaces, is referred to below as the "Software Completion Date".
(b) The date (if any) on which all PSE Interfaces needed for
the PSE Listed Application are complete and operational in all material respects
and ready for system integration and testing, subject only to readiness of
OptiMark-Securities, is referred to below as the "Interface Completion Date".
(c) The date (if any) on which both (i) OptiMark-Securities and
all related PSE Interfaces needed for the PSE Listed Application have been fully
tested and are ready for actual Availability on the Pacific Exchange, subject
only to PSE making OptiMark-Securities Available, and (ii) Regulatory Approval
has been obtained or has been deemed unnecessary by both parties, is referred to
below as the "Initial Operational Capability Date".
6. COOPERATION; PROGRESS REPORTS; MEETINGS.
(a) The Company shall provide all cooperation and assistance as
PSE reasonably may request from time to time in connection with PSE's
development and implementation of the PSE Interfaces under this Agreement. PSE
shall provide all cooperation and assistance related to PSE Interfaces as the
Company reasonably may request from time to time in connection with the
Company's development and implementation of OptiMark-Securities for PSE
Applications under this Agreement.
(b) PSE and the Company shall participate in a monthly
conference call during which each shall report to the other as to the status and
prospects of the project contemplated by this Agreement.
(c) At such times as PSE reasonably may request, the Company
shall provide to PSE a written report in reasonable detail as to the status of
the development of OptiMark-Securities under this Agreement, including any known
or anticipated potential problems (whether or not resolved or resolvable) and a
comparison of the Company's progress against the schedule set forth in Section 2
("OptiMark Development") above. At such times as the Company reasonably may
request, PSE shall provide to the Company a written report in reasonable detail
as to the status of the development of the PSE Interfaces for the PSE Listed
Application and other PSE Applications, including any known or anticipated
potential problems (whether or not resolved or resolvable).
(d) Once each calendar quarter, in San Francisco,
representatives of PSE and the Company shall meet for a formal mutual status
presentation and discussion concerning the development of OptiMark-Securities
and related PSE Interfaces.
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(e) From time to time upon reasonable prior notice from the
other party, each party shall allow the other party access to its premises for
purposes of design review, "walk-throughs", and discussions between the parties'
management and line personnel concerning the status and conduct of work being
performed under this Agreement.
7. INDUSTRY PROMOTION.
(a) As soon as practicable following the date of this
Agreement, the Company shall prepare and submit to PSE a proposed, detailed
written marketing plan for promoting OptiMark-Securities as a facility of the
Pacific Exchange. PSE and the Company shall attempt to finalize the marketing
plan as soon as practicable thereafter.
(b) Following agreement between the parties as to the final,
detailed marketing plan, if any (the agreed version is referred to below as the
"Marketing Plan"), upon the reasonable request of the Company from time to time,
PSE shall, to the extent specified in the Marketing Plan (i) promote
OptiMark-Securities to Other Exchanges, (ii) co-sponsor with the Company a
series of seminars in major U.S. financial centers promoting OptiMark-Securities
to institutional money managers, and (iii) generally assist the Company in
promoting OptiMark-Securities to the financial community in the U.S. and abroad.
The Company shall pay all of PSE's out-of-pocket expenses in connection with any
promotion abroad of OptiMark-Securities.
(c) PSE's obligations under this Section 7 shall be suspended
for such time(s), if any, as (i) the Company is more than three months behind on
the development schedule for OptiMark-Securities set forth in Section 2
("OptiMark Development") above, (ii) the SEC indicates that Regulatory Approval
is unlikely, or (iii) the parties are in disagreement as to whether a Rule
Filing is necessary.
8. BURDEN ON PSE. Notwithstanding anything to the contrary set forth
elsewhere herein, the obligations of PSE under this Agreement (a) shall not
require any disruption whatsoever to trading activities on the Pacific Exchange,
and (b) shall not unreasonably interfere with the normal duties of PSE and its
staff.
9. FORCE MAJEURE. Each party shall be excused from delays in
performing or failure to perform under this Agreement if and to the extent that
such delays or failures result from causes beyond the reasonable control of such
party, including without limitation fire, flood, epidemic, earthquake,
explosion, accident, riot, war, civil disturbance, labor dispute, strike or any
Act of God (generally, "Force Majeure"); provided that, in order to be excused
from delay or failure to perform, the affected party must (i) promptly notify
and keep the other party appropriately informed of the claim of Force Majeure,
and (ii) diligently use commercially reasonable efforts to eliminate the Force
Majeure. Each deadline set forth in this Agreement (including without limitation
the deadlines set forth in Section 10 ("Termination") below) shall be
appropriately extended, day-for-day, in the event of a Force Majeure.
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10. TERMINATION.
(a) For purposes of this Section 10, "Termination" of this
Agreement means termination of the parties' obligations under Section 2
("OptiMark Development"), Section 3 ("Rule Changes"), Section 4 ("Interface
Development"), Section 6 ("Cooperation; Progress Reports; Meetings") and Section
7 ("Industry Promotion") above and Section 13 ("Publicity") below. Except as
otherwise provided below, Termination shall be effective upon written notice to
the other party, which notice shall cite the paragraph of this Section 10 under
which Termination is being effected and specify the reasons for Termination in
reasonable detail. Except as otherwise provided below, Section 12 ("Ownership;
License"), Section 14 ("Confidentiality") and Section 17 ("Breach;
Indemnification; Remedies") shall survive any Termination of this Agreement.
(b) If the Company has not delivered to PSE a proposed Rule
Filing (if necessary) within 60 days following the date of this Agreement or
fails to deliver additional information for the Rule Filing within 30 days of a
reasonable request therefor by PSE, PSE may Terminate this Agreement at any time
thereafter; provided that PSE may not Terminate this Agreement under this
paragraph (b) following the Company's delivery of the proposed Rule Filing or
the referenced requested information to PSE. In connection with any Termination
of this Agreement under this paragraph (b), (i) the Purchase Warrant shall
remain outstanding in its entirety, and (ii) the Paragraph 13(c) License (as
defined below) shall be cancelled automatically.
(c) If the Company notifies PSE that the Company has determined
in good faith that a Rule Filing is necessary (such notice to specify in detail
the exact Rule Changes that are necessary) but PSE disagrees in writing, and the
parties fail to resolve the dispute (despite good faith efforts) on or before
January 31, 1997, the Company may Terminate this Agreement at any time
thereafter. In connection with any Termination of this Agreement under this
paragraph (c), (i) the Exchange Warrants shall remain outstanding and (ii) the
PSE Warrants and the Paragraph 13(c) License shall be cancelled automatically.
(d) If the Company notifies PSE that the Company has determined
in good faith that a Rule Filing is not necessary but PSE disagrees in writing,
PSE may Terminate this Agreement at any time thereafter. In connection with any
Termination of this Agreement under this paragraph (d), (i) the PSE Warrants
shall be cancelled, (ii) the Exchange Warrants shall remain outstanding, and
(iii) the Paragraph 13(c) License shall remain in effect if (but only if) the
Company has expended at least $500,000 under the IBM Contract pursuant to
Section 4(d) above; otherwise, the Paragraph 13(c) License shall be cancelled
automatically.
(e) For purposes of this paragraph (e), the "Next PSE Board
Meeting" means the next regularly scheduled meeting of the full board of
directors of PSE (the "PSE Board"), which meeting is at least 45 days beyond the
date that the Company delivers its proposed Rule Filing to PSE. If the Company
and PSE have agreed that Rule Changes are necessary and at the Next PSE Board
Meeting (i) the PSE Board does not
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consider or disapproves the Rule Filing, (ii) the PSE Board refuses to allow PSE
to make a Rule Filing, or (iii) the PSE Board approves or conditionally approves
the Rule Filing and the making of a Rule Filing, and in any such case PSE does
not submit a Rule Filing to the SEC within 30 days following the Next PSE Board
Meeting, then the Company may Terminate this Agreement at any time thereafter;
provided that the Company may not Terminate this Agreement under this paragraph
(e) following submission of the Rule Filing to the SEC by PSE; and provided
further, however, in the case of clause (e)(iii) above, if the Board seeks
additional information from the Company, the Company may not Terminate this
Agreement unless PSE has not submitted the Rule Filing to the SEC within 45 days
following the date on which the Company has complied with such request for
additional information in all material respects. In connection with any
Termination of this Agreement under this paragraph (e), the Purchase Warrant and
the Paragraph 13(c) License shall be cancelled automatically.
(f) If Regulatory Approval is denied, or if Regulatory Approval
has not been received within twelve months following submission of the Rule
Filing to the SEC by PSE, either party may Terminate this Agreement at any time
thereafter. In connection with any Termination of this Agreement under this
paragraph (f), (i) the Purchase Warrant shall remain outstanding in its
entirety, and (ii) the Paragraph 13(c) License shall remain in effect if (but
only if) the Company has expended at least $500,000 under the IBM Contract
pursuant to Section 4(d) above; otherwise, the Paragraph 13(c) License shall be
cancelled automatically.
(g) If the Software Completion Date has not occurred by March
31, 1998, PSE may Terminate this Agreement at any time thereafter; provided,
however, that PSE may not Terminate this Agreement under this paragraph (g)
following the Software Completion Date. In connection with any Termination of
this Agreement under this paragraph (g), (i) the PSE Warrants shall be
cancelled, (ii) the Exchange Warrants shall remain outstanding, and (iii) the
Paragraph 13(c) License shall remain in effect if (but only if) the Company has
expended at least $500,000 under the IBM Contract pursuant to Section 4(d)
above; otherwise, the Paragraph 13(c) License shall be cancelled automatically.
(h) If the Interface Completion Date has not occurred by the
later of (i) eight months following the Interface Development Commencement Date,
or (ii) thirty days following the Software Completion Date, the Company may
Terminate this Agreement at any time thereafter; provided, however, that the
Company may not Terminate this Agreement under this paragraph (h) following the
Interface Completion Date. In connection with any Termination of this Agreement
under this paragraph (h), (x) the PSE Warrants shall be cancelled, (y) the
Exchange Warrants shall remain outstanding, and (z) the Paragraph 13(c) License
shall remain in effect if (but only if) the Company has expended at least
$500,000 under the IBM Contract pursuant to Section 4(d) above; otherwise, the
Paragraph 13(c) License shall be cancelled automatically.
(i) If within 30 days following the Initial Operational
Capability Date PSE has not made OptiMark-Securities Available with respect to
at least fifty percent (50%) of the total number of issues of listed equity
securities traded on the Pacific
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Exchange during normal business hours, the Company may Terminate this Agreement
at any time thereafter; provided, however, that the Company may not Terminate
this Agreement under this paragraph (i) following the date (if any) on which PSE
actually makes OptiMark-Securities Available to Users for the PSE Listed
Application. In connection with any Termination of this Agreement under this
paragraph (i), (i) the PSE Warrants shall be cancelled, (ii) the Exchange
Warrants shall remain outstanding, and (iii) the Paragraph 13(c) License shall
remain in effect if (but only if) the Company has expended at least $500,000
under the IBM Contract pursuant to Section 4(d) above; otherwise, the Paragraph
13(c) License shall be cancelled automatically.
(j) If PSE fails to satisfy in all material respects the
specific objective obligations of PSE as stated in the Marketing Plan, if any,
after written notice from the Company and a reasonable opportunity to cure, the
Company may Terminate this Agreement at any time thereafter. In connection with
any Termination of this Agreement under this paragraph (j), (i) the PSE Warrants
shall be cancelled, (ii) the Exchange Warrants shall remain outstanding, and
(iii) the Paragraph 13(c) License shall remain in effect if (but only if) the
Company has expended at least $500,000 under the IBM Contract pursuant to
Section 4(d) above; otherwise, the Paragraph 13(c) License shall be cancelled
automatically.
(k) In the event any Force Majeure precludes or materially
impairs the Company's ability to perform under this Agreement for a period of
120 consecutive days or more, PSE shall have the right to Terminate this
Agreement at any time thereafter; provided that PSE may not Terminate this
Agreement under this paragraph (k) following elimination of the Force Majeure.
In connection with any Termination of this Agreement under this paragraph (k),
(i) the PSE Warrants shall be cancelled, (ii) the Exchange Warrants shall remain
outstanding, and (iii) the Paragraph 13(c) License shall remain in effect if
(but only if) the Company has expended at least $500,000 under the IBM Contract
pursuant to Section 4(d) above; otherwise, the Paragraph 13(c) License shall be
cancelled automatically.
(l) In the event any Force Majeure precludes or materially
impairs PSE's ability to perform under this Agreement for a period of 120
consecutive days or more, the Company shall have the right to Terminate this
Agreement at any time thereafter; provided that the Company may not Terminate
this Agreement under this paragraph (l) following elimination of the Force
Majeure. In connection with any Termination of this Agreement under this
paragraph (l), (i) the PSE Warrants shall be cancelled, (ii) the Exchange
Warrants shall remain outstanding, and (iii) the Paragraph 13(c) License shall
remain in effect if (but only if) the Company has expended at least $500,000
under the IBM Contract pursuant to Section 4(d) above; otherwise, the Paragraph
13(c) License shall be cancelled automatically.
(m) If the Company has not closed the second stage ($11.2
million) of its total $16 million offering under the Stock Purchase Agreement by
January 31, 1997, PSE may Terminate this Agreement at any time thereafter;
provided, however, that PSE may not Terminate this Agreement under this
paragraph (m) following the date (if any) on which the Company completes the
second stage of its offering under the Stock Purchase Agreement. In connection
with any Termination of this Agreement under this
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paragraph (m), (i) the Purchase Warrant shall remain outstanding in its
entirety, and (ii) the Paragraph 13(c) License shall be cancelled automatically.
11. USER AGREEMENTS. Upon the implementation of OptiMark-Securities
for PSE Applications, there will be one or more written agreements with each
User ("User Agreements"). Each User Agreement shall include (a) an appropriate
limited right for the User to access OptiMark-Securities, (b) limited liability
of the Company and its Affiliates, and limited remedies of Users against the
Company and its Affiliates, (c) an exculpation of PSE and its Affiliates in form
and substance satisfactory to PSE, and (d) other terms and conditions deemed to
be necessary by the Company or its Affiliates in connection with effectuating
the foregoing from time to time. Each User shall pay fees for use of
OptiMark-Securities, which fees the Company may change from time to time (the
"Fee Schedule"). Under the Fee Schedule, PSE specialists shall be entitled to
certain fee exceptions as set forth on Exhibit A to this Agreement. If the
Company or its Affiliates ever offers to the specialists of one or more Other
Exchanges a more favorable fee structure for OptiMark-Securities than set forth
on Exhibit A, the Company or its Affiliates simultaneously shall offer the more
favorable fee structure to PSE's specialists.
12. PUBLICITY. Any press release or other publicity by the Company
describing this Agreement or otherwise referencing PSE that occurs prior to
agreement on the Marketing Plan or that is not entirely consistent with the
Marketing Plan shall be subject to prior written approval by PSE, not to be
unreasonably withheld or delayed.
13. OWNERSHIP; LICENSE.
(a) Nothing in this Agreement grants to PSE any ownership,
license or other proprietary or property rights in OptiMark(TM) or
OptiMark-Securities or in any intellectual property rights therein. PSE shall
assign to the Company all of PSE's ownership, intellectual property and other
proprietary or property rights in any system, method, apparatus or work of
authorship hereafter developed or created in whole or in part by PSE relating
principally to or used principally in OptiMark(TM) or OptiMark-Securities or any
copy or embodiment thereof.
(b) Subject to the Paragraph 13(c) License, nothing in this
Agreement grants to the Company any ownership, license or other proprietary or
property rights in the PSE Interfaces or in any intellectual property rights
therein. The Company and its Affiliates shall assign to PSE all of the
ownership, intellectual property and other proprietary or property rights of the
Company and its Affiliates in any system, method, apparatus or work of
authorship hereafter developed or created in whole or in part by the Company
relating principally to or used principally in the PSE Interfaces or any copy or
embodiment thereof.
(c) PSE hereby grants to the Company a perpetual fully-paid,
nonexclusive, nontransferable (except in accordance with this Agreement) right
and license to use and modify the PSE Interfaces, in whatever stage of
completion they may exist from time to time, in connection with (and only in
connection with) any use of
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OptiMark(TM) and/or OptiMark-Securities (the "Paragraph 13(c) License").
Promptly upon request by the Company from time to time, if the Paragraph 13(c)
License has not theretofore terminated, PSE shall deliver to the Company any and
all object code, source code and supporting documentation related to the PSE
Interfaces. The Company may modify the PSE Interfaces from time to time in
connection with the Paragraph 13(c) License; provided that any modification that
impacts the use of OptiMark-Securities for PSE Applications shall be subject to
the prior written approval of PSE, not to be unreasonably withheld or delayed.
The Paragraph 13(c) License is subject to cancellation as described in Section
10 ("Termination") above.
(d) Each party will execute, and the IBM Contract will require
IBM to execute, such assignments and other documents as may be necessary to
implement and carry out the provisions of this Section 13, and each party will
cooperate, and the IBM Contract will require IBM to cooperate, with the other
party in obtaining patents, copyright registrations or other proprietary rights
protections for that which the other party is intended to own as provided in
this Section 13.
14. CONFIDENTIALITY.
(a) PSE and the Company may provide to each other confidential
or proprietary business and technical information in connection with this
Agreement ("Confidential Information"). For the avoidance of doubt, all
technical information relating to OptiMark(TM), OptiMark-Securities and the PSE
Interfaces (including source code) shall be regarded as Confidential
Information. The Company and PSE each shall keep in strict confidence and not
disclose to any other person the Confidential Information of the other party
except as necessary in the normal operation of OptiMark-Securities and the PSE
Interfaces. The Company and PSE agree to use the Confidential Information of the
other party only as necessary for the purposes of this Agreement.
(b) Notwithstanding anything to the contrary in Section 14(a)
above, the following will not be considered to be Confidential Information:
(i) information that is now or hereafter becomes
generally known to the applicable trade without breach of this
Agreement by the receiving party and its Affiliates;
(ii) information that is shown by the receiving party to
have been in the possession of the receiving party prior to the
date of this Agreement, and was not subject to a prior agreement
of confidence;
(iii) information which, subsequent to disclosure by the
disclosing party, is lawfully obtained or received by the
receiving party from a third party, without a breach of this
Agreement, and without a breach of another agreement of
confidentiality by the third party;
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(iv) information which is developed by an employee of the
receiving party or a third party having no access to and making no
use of the disclosing party's Confidential Information; and
(v) information contained in published patent
applications or patents.
Specific information shall not be deemed to be within the foregoing exceptions
merely because it is embraced in general disclosures. In addition, any
combination of features shall not be deemed to be within the foregoing
exceptions unless the combination itself and its principle of operation are
within the foregoing exceptions.
(c) The receiving party agrees to treat the disclosing party's
Confidential Information with at least the same degree of care (but not less
than reasonable care) that it uses in protecting its own confidential
information of a similar nature. The receiving party may disclose the disclosing
party's Confidential Information only to its own employees, officers, directors
and to counsel whose work requires such disclosure for the purpose of this
Agreement. The receiving party (other than counsel) may also disclose the
disclosing party's Confidential Information to individuals having an agent or
consultant relationship with the receiving party, but only if (i) the receiving
party wishes to obtain assistance from such individuals in furtherance of the
purposes of this Agreement; and (ii) such individuals have first executed an
agreement agreeing to hold the disclosing party's Confidential Information in
confidence and use the disclosing party's Confidential Information only in
connection with services performed on behalf of the receiving party. The
receiving party shall cause its Affiliates not to disclose or use the disclosing
party's Confidential Information in a manner which would violate this Agreement.
(d) Notwithstanding any of the foregoing, the receiving party
may disclose the disclosing party's Confidential Information if required to do
so by law or pursuant to a subpoena or order of a court or other governmental
entity or self-regulatory organization provided (i) the receiving party promptly
gives the disclosing party prior notice of the requirement to disclose the
Confidential Information and reasonable opportunity to obtain a protective order
or similar relief; and (ii) disclosure is limited to that necessary to comply
with the applicable law, subpoena or order.
(e) Neither the execution of this Agreement nor the delivery of
any Confidential Information to the other party shall (unless otherwise
expressly provided herein) be construed as granting any right in or license
under the Confidential Information or under any present or future invention,
patent, patent application, trade secret, trademark or copyright of the
disclosing party.
15. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company hereby incorporates and makes unto PSE all of
the Company's representations and warranties set forth in Section 3 of the Stock
Purchase
13
Agreement and PSE is entitled to rely thereon as though PSE were an "Investor"
(as defined in the Stock Purchase Agreement).
(b) The definition of OptiMark-Securities set forth on Exhibit
B to this Agreement accurately describes in all material respects the current
capabilities of OptiMark(TM) and the Company's reasonable expectations as to the
capabilities of OptiMark-Securities. The Company shall use its best efforts to
develop OptiMark-Securities in all material respects consistent with both
Exhibit B and the presentations made to PSE and the members of the Pacific
Exchange.
16. DISCLAIMER. The Company acknowledges that, notwithstanding any
occurrence of the Initial Operational Capability Date, PSE has no obligation
ever to make OptiMark-Securities Available (or, if ever made Available, to keep
OptiMark-Securities Available) for any PSE Applications.
17. BREACH; INDEMNIFICATION; REMEDIES.
(a) In the event of any breach of any representation, warranty
or agreement of the Company in this Agreement that is susceptible to cure, (i)
PSE shall notify the Company of the breach, and (ii) the Company shall have
thirty days following such notice within which to cure the breach. Any curable
breach not so cured within the thirty-day period, and any uncurable breach of
this Agreement, is referred to below as a "Breach".
(b) The Company shall indemnify and hold PSE and PSE's
Affiliates harmless from and against any and all claims, causes of action,
liabilities, damages and related costs of investigation and enforcement
(including reasonable attorneys' fees) ("Losses") (unless and except to the
extent caused by the gross negligence, willful misconduct, violation of law
and/or violation of any Rule Changes by PSE and/or its Affiliates) incurred by
PSE and/or its Affiliates arising from or caused by (i) the negligence, gross
negligence or intentional misconduct of the Company, its Affiliates and/or IBM
in connection with this Agreement or the IBM Contract, (ii) the use of
OptiMark-Securities by Users, or (iii) any Breach of this Agreement by the
Company. Notwithstanding the foregoing, the Company shall have no liability to
PSE for any Losses arising from or caused by PSE's failure to comply with its
own constitution or rules, or to perform any obligation or satisfy any duty owed
to its members, their agents and/or their employees thereunder.
(c) Promptly following the assertion of any claim that may give
rise to indemnification under paragraph (b), PSE shall give notice of the claim
to the Company and shall demand indemnification therefor. In response, the
Company may notify PSE of the intent of the Company to fully assume defense of
the claim. If the Company assumes defense of the claim, (i) PSE shall provide to
the Company whatever information may be available to PSE and otherwise shall
provide reasonable assistance to the Company with respect to the claim, (ii) PSE
shall be entitled to participate in any related litigation or other proceeding,
using its own counsel at its own expense, (iii) the Company shall have
14
full charge of the proceedings, (iv) any settlement shall be subject to the
consent of PSE, not to be unreasonably withheld or delayed, and (v) the Company
shall pay any judgment or settlement. The Company's assumption of defense or
failure to assume the defense shall not operate as a waiver of any right it may
have to contest whether the claim was within the scope of Section 17(b). If the
Company does not fully assume defense of the claim, PSE may assume defense of
the claim and the Company shall be bound by any settlement, judgment or other
resolution of the claim achieved by PSE.
(d) Section 10 ("Termination") above and paragraph (e)
immediately below set forth the sole and exclusive rights and remedies of the
Company in connection with this Agreement. Except as set forth in Section 10 and
paragraph (e), THE COMPANY HEREBY WAIVES ALL RIGHTS, REMEDIES AND DAMAGES
AGAINST PSE UNDER OR OTHERWISE RELATED TO THIS AGREEMENT, WHETHER SOUNDING IN
CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE. By way of example and not of
limitation, PSE MAKES NO REPRESENTATIONS OR WARRANTIES TO THE COMPANY WHATSOEVER
IN CONNECTION WITH THE PARAGRAPH 13(C) LICENSE, INCLUDING WITHOUT LIMITATION ANY
WARRANTIES AS TO OWNERSHIP, INFRINGEMENT ON INTELLECTUAL PROPERTY RIGHTS OF
THIRD PARTIES, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE. This
paragraph (d) shall apply notwithstanding the failure of any remedy of its
essential purpose.
(e) The parties acknowledge that any breach of Section 13
("Ownership; License") or Section 14 ("Confidential Information") above could
not be remedied adequately by damages. Accordingly, upon such a breach, in
addition to any other rights and remedies available under this Agreement, at law
or in equity, the offended party shall be entitled to temporary, preliminary and
permanent injunctive relief against the breaching party from any court of
competent jurisdiction, without bond or other security.
18. MISCELLANEOUS.
(a) Except as provided above to the contrary, each of the
parties shall bear their own costs and expenses in connection with this
Agreement.
(b) All notices required or permitted under this Agreement
shall be in writing and given by prepaid Federal Express or other nationally
recognized overnight delivery service as follows (or to any other addresses
which either party subsequently may designate by notice):
i) if to PSE, to:
The Pacific Stock Exchange Incorporated
attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
15
with a copy in the same manner to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Howard, Rice, Nemerovski, Canady, ▇▇▇▇ & ▇▇▇▇▇▇
A Professional Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ii) If to the Company, to:
OptiMark Technologies, Inc.
attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy in the same manner to:
▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(c) This Agreement shall not be assignable by either party except in
connection with a merger, consolidation, sale of all or substantially all
assets, or analogous transaction in which a third party succeeds to all or
substantially all of the business and assumes all or substantially all of the
liabilities (including the obligations under this Agreement) of one of the
parties hereto. Any non-permitted assignment shall be void ab initio. This
Agreement shall bind and inure to the benefit of the parties and their
respective successors and permitted assigns.
(d) Each party, in rendering performance under this Agreement, is
acting solely as an independent contractor. Neither party undertakes by this
Agreement or otherwise to perform any obligation of the other party, whether by
regulation or contract. In no way is either party to be construed as the agent
or fiduciary or to be acting as the agent or fiduciary of the other party in any
respect, or to have the power or authority to bind the other party, legally or
otherwise, any other provisions of this Agreement notwithstanding.
(e) This Agreement may be executed in several counterparts, all of
which taken together shall constitute a single agreement between the parties.
(f) No delay or omission by either party hereto to exercise any right
or power occurring upon any noncompliance or default by the other party with
respect to any of the terms of this Agreement shall impair any such right or
power or be construed to be a waiver thereof. A waiver by either of the parties
hereto of any of the covenants, conditions, or agreements to be performed by the
other shall not be construed to be a
16
waiver of any succeeding breach thereof or of any other covenant, condition, or
agreement herein contained.
(g) This Agreement, the Purchase Warrant, the Revenue Sharing
Agreement and their Exhibits constitute the entire agreement between the parties
with respect to their subject matter, and all prior negotiations, agreements and
letters of intent are superseded and merged herein. No change, waiver, or
discharge hereof shall be valid unless it is in writing and is executed by the
party against whom such change, waiver, or discharge is sought to be enforced.
(h) If any provision of this Agreement shall be held void, voidable,
invalid or inoperative, no other provision of this Agreement shall be affected
as a result thereof and, accordingly, the remaining provisions of this Agreement
shall remain in full force and effect as though such void, invalid or
inoperative provision had not been contained herein. In such event, the parties
agree to negotiate in good faith substitute provisions which shall effect the
parties' original intent in entering into this Agreement as nearly as possible.
(i) In the event any party hereto initiates any legal action or suit
in connection with any dispute concerning the interpretation of this Agreement
or the enforcement of any provision hereof, the prevailing party in such action
or suit shall be entitled to recover all of its costs of action or suit
(including without limitation reasonable attorneys' and expert witness fees)
from the other party.
(j) This Agreement shall for all purposes be construed and enforced in
accordance with, and governed by, the internal laws of the State of California,
without giving effect to principles of conflict of laws. The exclusive venue for
any litigation related to this Agreement shall be the Superior Court in and for
San Francisco County, California or, if jurisdictionally available, the U.S.
District Court for the Northern District of California.
IN WITNESS WHEREOF, the parties have set their hands and seals as of the
date first set forth above.
THE PACIFIC STOCK EXCHANGE INCORPORATED
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
OPTIMARK TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer
17
EXHIBIT A
(to PSE-OptiMark Agreement)
FEE SCHEDULE EXCEPTIONS FOR PSE SPECIALISTS
1. Blanket Exemption for Trades Aggregating Less Than Average Daily
Volume. Daily trading of U.S. listed equities utilizing OptiMark-Securities by
PSE specialists as a group, up to a total number of shares equal to the average
daily trading volume in U.S. listed equities for such group for the 120 trading
days prior to commencement of trading through OptiMark-Securities of U.S. listed
equities on the Pacific Exchange, shall be exempt from any fee charge regardless
of how the trade is represented in OptiMark-Securities. Specialist trades that
exceed the blanket exemption on a given trading day will be subject to the Fee
Schedule unless exempt under paragraphs 2 or 3 below.
2. Specific Exemption for Two Dimensional Orders of 1,000 Shares or
Less. Individual trades by PSE specialists of 1,000 shares or less (or
aggregations of such trades) that specify only price and size and DO NOT use the
multi-dimensional trade representation capabilities of OptiMark-Securities shall
be exempt from any fee charge, whether or not exempt under paragraph 1 above.
3. Specific Exemption for Undisplayed Three Dimensional Book Interest
Where No Price Improvement is Obtained. Individual trades of any size by PSE
specialists that result from undisplayed book orders that DO use the
multi-dimensional interest representation capabilities of OptiMark-Securities
but DO NOT receive price improvement over the best bid or offer at a full (1.0)
satisfaction level, shall be exempt from any fee charge whether or not exempt
under paragraph 1 above.
4. Other Trades. All other PSE specialist trades executed through
OptiMark-Securities, including trades resulting from orders between exchanges,
that are not otherwise exempt under paragraphs 1, 2 or 3 above, will be subject
to the Fee Schedule. Unexecuted "linked" trades may also be subject to the Fee
Schedule.
18
EXHIBIT B
(to PSE-OptiMark Agreement)
DEFINITION OF OPTIMARK-SECURITIES (fka MJTX)
OptiMark-Securities (the "Service") describes a service to be implemented
and offered to Users by OptiMark Technologies, Inc. or its Affiliates (the
"Company"). The Service will incorporate a market mechanism developed and owned
by the Company and with regard to which patents are pending. The market
mechanism features two innovations: 1) an anonymous and non-disclosed
representation of trading desire in terms of a "satisfaction profile", which may
be thought of as a normalized bivariate (extendible to multivariate) utility
function in price/size space; and 2) a means of optimizing the sequential
allocation of trades between buyers and sellers at different prices and sizes
based upon a measure of "mutual satisfaction."
The Service will be accessible via TCP/IP network protocols, and access
to the transaction facility will be via network providers of the Users' choice
that might include, for example, Dow ▇▇▇▇▇ Telerate, Bridge or IBM. Customers
will send profiles to a computer facility operated by the Company, where they
will be processed using software incorporating the Company's proprietary
algorithms. The Company will also provide application programming interfaces to
network providers.
At the User's site, the Service will include a sophisticated graphical
user interface initially running under Microsoft Windows (3.1 through 95), OS/2
or UNIX to simplify and enhance the customers' ability to define and enter
profiles. At the central site, the Service will include a computer to computer
interface (CTCI) for receiving computer-generated profiles. The Service will
process quotation feeds from third parties, including the real-time feeds
available from the Consolidated Quotation Service ("CQS") and the National
Association of Securities Dealers Automated Quotation Service ("NASDAQ").
