As filed with the Securities and Exchange Commission on April 30, 2001
File No. -
- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
The Nasdaq Stock Market, Inc.
(Exact Name of Registrant as
Specified in Its Charter)
Delaware 52-1165937
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
One Liberty Plaza
New York, New York 10006
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number,
including area code:
212-858-4750
Copies to:
Edward S. Knight, Esq. Matthew J. Mallow, Esq.
The Nasdaq Stock Market, Inc. Eric J. Friedman, Esq.
One Liberty Plaza Skadden, Arps, Slate, Meagher & Flom LLP
New York, New York 10006 Four Times Square
New York, New York 10036
Securities to be registered pursuant to Section 12(b) of the Act:
Not Applicable
Title of each class Name of each exchange on which
to be so registered each class to be registered
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
Item 1. Business..............................................................
Item 2. Financial Information.................................................
Item 3. Properties............................................................
Item 4. Security Ownership of Certain Beneficial Owners and Management........
Item 5. Directors and Executive Officers......................................
Item 6. Executive Compensation................................................
Item 7. Certain Relationships and Related Transactions........................
Item 8. Legal Proceedings.....................................................
Item 9. Market Price of and Dividends on the Registrant's Common Equity
and Related Stockholder Matters.......................................
Item 10. Recent Sales of Unregistered Securities...............................
Item 11. Description of Registrant's Securities to be Registered...............
Item 12. Indemnification of Directors and Officers.............................
Item 13. Financial Statements and Supplementary Data...........................
Item 14. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.............................................
Item 15. Financial Statements and Exhibits.....................................
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.....................................
Certain statements in this registration statement (the
"Registration Statement") contain or may contain information that is
forward-looking within the meaning of Section 27A of the Securities Act of
1933, as amended (the "Securities Act"), and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Actual results may
differ materially from those described in the forward-looking statements
and will be affected by a variety of risks and factors including, without
limitation, the risks described in "Item 1. Business--Risk Factors" of this
Registration Statement. Readers should carefully review this Registration
Statement in its entirety, including, but not limited to, The Nasdaq Stock
Market, Inc.'s ("Nasdaq") financial statements and the notes thereto.
Nasdaq undertakes no obligation to publicly release any revisions to such
forward-looking statements to reflect events or circumstances after the
date hereof.
Item 1. Business.
Nasdaq Overview
Nasdaq, is the world's largest electronic, screen-based equity securities
market and the largest equity securities market in the world based on
dollar volume. Through its deployment of advanced technology, Nasdaq is
positioning itself to become the world's first truly global securities
market. Since its inception in 1971, Nasdaq has been at the forefront of
innovation and a leader in utilizing technology to enhance the securities
markets. Nasdaq's total share volume for the year ended December 31, 2000
increased approximately 63.5% compared to the year ended December 31, 1999
to 442.7 billion shares, which represented approximately 61.6% of the total
shares traded in the United States. Dollar volume for the year ended
December 31, 2000 increased 85.2% compared to the year ended December 31,
1999 to $20.4 trillion, approximately 62.9% of the dollar volume of all
equity shares traded in the United States. For the year ended December 31,
2000, Nasdaq share volume averaged approximately 1.76 billion shares daily
and the dollar volume on Nasdaq averaged $81 billion per day. In addition,
the market value of Nasdaq-listed companies has increased over the last
five years from $1.5 trillion at December 31, 1996 to $3.6 trillion at
December 31, 2000, which represents approximately 22.3% of total U.S.
equity market value compared to 17% five years ago.
There are approximately 4,700 companies listed on Nasdaq, making it the
market of choice for more companies than any other U.S. equities market. As
of December 31, 2000, Nasdaq was home to the highest percentage of
publicly-traded technology and service companies in the U.S., including 77%
of computer hardware and peripherals companies, 96% of computer networking
companies, 87% of computer software and data processing companies, 87% of
semiconductor companies, 72% of telecommunications and electronic
companies, and 81% of biotechnology companies. In addition, as of December
31, 2000, there were over 480 foreign companies listed on Nasdaq, more than
on any other U.S. equities market. Of all U.S. initial public offerings in
the year ended December 31, 2000, 397 companies, or approximately 88% of
initial public offerings on primary U.S. exchanges, were brought to market
on Nasdaq and raised over $52.5 billion in equity capital.
Nasdaq's top 100 U.S. and international non-financial listed stocks,
reflecting Nasdaq's largest growth companies across major industry groups,
comprise the Nasdaq-100 Index(R). As of March 31, 2001, the companies in
the Nasdaq-100 Index had an average market capitalization of approximately
$16.1 billion and an average daily trading share volume of 11.8 million
shares. From March 31, 1991 to March 31, 2001, the Nasdaq-100 Index rose by
approximately 494%. In addition, the Nasdaq Composite Index(R) rose by
approximately 282% over the same 10 year period, compared with an
approximate 209% gain for the S&P 500 Index(R), an approximate 239% gain
for the Dow Jones Industrial Average, and an approximate 190% gain for the
NYSE Composite Index(R). The Nasdaq Composite Index measures all domestic
and non-U.S. based common stocks listed on Nasdaq. This index is
market-value weighted so that each company's security affects the index in
proportion to its market value.
Nasdaq, initially an automated quotation system, has evolved into an
electronic screen-based display and execution system to provide price
discovery and high levels of liquidity for thousands of equity securities.
Since its inception, Nasdaq has expanded its services through the
innovative deployment of technology to provide better price discovery and
trade executions, enhanced services for issuer listings, and broader
information dissemination. Nasdaq has three main revenue sources:
o transaction services, which accounted for approximately
45.5% of Nasdaq's revenues for the year ended December
31, 2000;
o market information services, which accounted for
approximately 29.8% of Nasdaq's revenues for the year
ended December 31, 2000; and
o issuer services, which accounted for approximately 21.3%
of Nasdaq's revenues for the year ended December 31,
2000.
Nasdaq's total revenues increased from $332.2 million for the year ended
December 31, 1996 to $868.0 million for the year ended December 31, 2000,
representing a compounded annual growth rate of 27.2% that was primarily
due to a strong increase in market information and transaction services
revenues. Nasdaq's total revenues for the year ended December 31, 2000 of
$868.0 million increased $233.8 million, or 36.9% from $634.2 million for
the year ended December 31, 1999. The growth in revenues for the year
ending December 31, 2000 was due primarily to the growth in trading volumes
and market information services. See "Item 15. Financial Statements and
Exhibits."
Industry Overview
Historically, stock markets have served as gathering points for buyers and
sellers of securities. In the U.S., traditional stock markets operate in an
order-driven "physical" environment-a single trading floor where orders are
routed through a designated dealer called a specialist. Structured to
respond to incoming orders, floor-based stock markets employ an auction
system that channels trades for a particular stock through a specialist.
This gives one specialist an exclusive franchise to make a market in a
particular security. The basic function of a specialist is to maintain an
orderly market while allowing public agency orders to interact with one
another.
Development of advanced communication and computer technology, as well as
certain regulatory developments, changed the needs and expectations of the
securities industry. In response, a new stock market model was pioneered by
Nasdaq in 1971: a quotation-driven, floor-less, screen-based, electronic
dealer market model. This market linked widely dispersed buyers and sellers
without the limitation of a single location or the restriction of
channeling all trades through a single specialist. The Nasdaq model
accommodates a system of multiple geographically dispersed market makers
and alternative trading systems ("ATSs"). These ATSs that are linked
together via a screen-based, electronic trading and execution system
include both crossing systems and electronic communications networks
("ECNs")(1). Nasdaq information technology receives and then simultaneously
broadcasts quotes representing investor orders or market maker interest to
more than 500,000 computer terminals worldwide.
- --------
(1) Crossing systems collect orders to buy and sell, and thereafter,
at predetermined times match buyers and sellers in a batch
processing mode. ECNs are formally defined in Rule 11 Ac1-1 of the
Exchange Act. Their primary function is to act as a venue for the
display of subscriber limit orders.
Market makers openly compete with one another for investors' orders and are
responsible for providing continuous, two-sided quotes (the "bid" and
"ask"). Excluding ECNs, which actively display orders in many stocks of
Nasdaq-listed companies, there is an average of approximately 14 market
makers for each stock traded on Nasdaq. Some of Nasdaq's more actively
traded stocks far exceed this average and some stocks have over 80 market
makers. Collectively, the market makers provide continuous depth (the
numbers of buyers and sellers) and liquidity (the ease with which the
market can absorb volume buying and selling without dramatic fluctuation in
price) while maintaining an orderly market.
Nasdaq has evolved to incorporate features of both quotation-driven
(dealer) and order-driven (auction) markets. The SEC Order Handling Rules
of 1996 generally provide a means for investors to have their best-priced
limit orders (orders to buy or sell stock at a specified price) displayed
to all market participants. When an investor's limit order is priced better
than the market maker quote to which the investor (or his broker) has given
his limit order, the investor's order can determine the inside spread (the
difference between a stock's best buy and sell price). Nasdaq's
implementation of these rules further enhanced both the depth and liquidity
of the market.
The securities industry is once again undergoing sweeping changes, spurred
by factors such as: rapid advances in information technology (in particular
the Internet); globalization of securities trading; the dramatic increase
in trading volume in the stock markets; regulatory changes (in particular
the Order Handling Rules and the SEC's Regulation ATS); and the emergence
of ATSs. These changes present the securities industry with the challenge
of developing a stock market model that can provide a natural center of
liquidity and depth and, therefore, of price discovery. To be successful, a
stock market may be required to provide globally dispersed buyers and
sellers round-the-clock stock price quotation and immediate execution of
trades in a low-cost environment.
Nasdaq's Strategic Initiatives
Nasdaq's strategic initiatives include enhancing its market structure,
pursuing global market expansion through the creation of Nasdaq Japan, Inc.
("Nasdaq Japan") and Nasdaq Europe S.A./N.V. and exploring alliances with
foreign exchanges, competing for listings, competing for trading volume in
exchange-listed securities, and creating a market for listing and trading
single stock futures.
Enhancing Market Structure.
Nasdaq National Market ("NNM") Execution System. The NNM Execution System
(also known as "SuperSOES(sm)") is an improved order execution system
designed to provide automatic execution capability for market makers and
order entry firms and streamline Nasdaq's transaction systems. The NNM
Execution System will combine features of the existing SelectNet(R) and
Small Order Execution System ("SOES(sm)"). SelectNet is an order delivery
and negotiation system that facilitates order execution. It currently links
all market participants that trade Nasdaq stocks and is the primary system
that market makers use to trade with one another. SOES currently provides
for the automatic execution of small orders of public customers. The
central purpose of the NNM Execution System is to encourage and assist
market participants to provide liquidity by increasing their ability to
manage the receipt and execution of the dramatically increased volume of
orders prevalent in today's Nasdaq market.
Among other things, NNM Execution System rules:
o permit automatic execution of both customer and market
maker proprietary orders against the best priced quote in
the market;
o establish a larger maximum automatic execution order
entry size of up to 999,999 shares for NNM securities;
o reduce time delays between NNM executions against the
same market maker at the same price level; and
o enable system interaction with a market maker's reserve
size in NNM securities.
The new system was recently approved by the SEC and is tentatively
scheduled to begin operating in the third quarter of 2001.
Nasdaq Order Display Facility. On January 10, 2001, the SEC approved a rule
proposal to establish the Nasdaq Order Display Facility
("SuperMontage(sm)") to improve the Nasdaq market structure and make it a
strong natural center of liquidity. SuperMontage, a fundamental market
enhancement, is an improved user interface designed to refine how market
participants can access, process, display, and integrate orders and quotes
in Nasdaq. SuperMontage has several strategic implications. First, it is
intended to attract more orders to the Nasdaq market by providing a
comprehensive display of the interest at or near the inside market (i.e,
the highest bid and the lowest offer for a security, which is also called
the "inside quote"). Second, SuperMontage is intended to increase
competition and market transparency. Third, SuperMontage will provide
pre-trade anonymity to market participants using a Nasdaq system. As such,
prior to execution, no one will know the identity of the firm displaying
the order unless such firm reveals its identity.
In the January 10 approval order, the SEC imposed certain conditions on
both Nasdaq and the National Association of Securities Dealers, Inc. (the
"NASD") that must be met prior to the implementation of SuperMontage. These
conditions include that:
o the NASD will offer a quote and trade reporting
alternative that satisfies the Order Handling Rules,
Regulation ATS, and other regulatory requirements for
ATSs and market makers;
o NASD quotes disseminated through the exclusive securities
information processor ("ESIP") will identify the ATS or
market maker source of the quote; and
o participation in SuperMontage will be entirely voluntary.
Assuming these conditions can be met and Nasdaq can successfully implement
SuperMontage, Nasdaq will add SuperMontage to the Nasdaq Workstation II(R)
("NWII"), which will show the top three price levels: the best bid/best
offer in Nasdaq, and the two subsequent price levels. In each case, this
display will be accompanied by the aggregate order size at each price
level. Nasdaq market makers and ECNs that are members of The Nasdaq Stock
Market will be able to display their orders anonymously at these price
levels in SuperMontage, thus encouraging display of greater trading
interest. As currently envisioned, SuperMontage displays the aggregate
trading interest in a security at the top of the screen by aggregating
multiple levels of trading interest of identified market participants and
any non-identified interest that exists in such security, which is entered
into the Nasdaq system. Market participants will be able to access the best
prices in SuperMontage electronically using enhanced versions of Nasdaq's
NNM Execution System and SelectNet services. Thus, Nasdaq will provide
order delivery and automatic execution against the prices displayed in
SuperMontage. Nasdaq will continue to offer the ability for market
participants to negotiate transactions with specific market makers and ECNs
electronically at sizes above the quote size in Nasdaq.
By allowing (but not requiring) market participants to give the Nasdaq system
multiple orders at a single as well as at multiple price levels,
SuperMontage will assist market participants with the management of their
back book, i.e., orders that are not at the top price point in the market
maker's book/system. This functionality will also assist market
participants with compliance with the Order Handling Rules. Other system
enhancements will make it easier for ECNs to participate in automatic
execution.
Pursuing Global Market Expansion. The forces of technology and deregulation
are accelerating the pace of globalization in the trading and processing of
securities. Nasdaq believes that the foundation to create a global exchange
should be built on a strong regional presence in the dominant capital
centers of the world. At this time, those centers are the United States,
Europe, and parts of Asia, particularly Japan. By establishing centers for
price discovery and trading in these key regions, the foundation will be
developed for electronically linking these markets to establish a global
platform.
Nasdaq Japan. In June 1999, a joint venture agreement was entered into with
SOFTBANK Corp. of Japan to capitalize a new company, Nasdaq Japan Planning
Company, Inc. (subsequently renamed Nasdaq Japan, Inc.), which is
undertaking to develop and implement a new electronic stock market in Japan
as a section of the Osaka Securities Exchange (the "OSE"). On April 19,
2000, Nasdaq Japan signed a Business Collaboration Agreement with the OSE
to establish Nasdaq Japan Market as a new market section of the OSE. The
Nasdaq Japan Market began operations on June 19, 2000. In its first phase
of operations, prior to its deployment of Nasdaq/Indigo Markets technology,
Nasdaq Japan will recruit initial public offerings of companies for listing
and will trade these securities on the existing OSE system. As of March 31,
2001, 41 companies are trading on the interim trading platform. The Nasdaq
Japan Market operates under the umbrella of the OSE, which provides
regulatory and listing review as well as clearance and settlement services.
In addition, Nasdaq Japan intends to be competitive in the trading of U.S.
listed securities and exchange-traded funds ("ETFs") in Japan, with the
trading of the Nasdaq-100 QQQ ETF planned to begin in 2001.
On October 24, 2000, Nasdaq Japan sold in a private placement transaction
an approximately 15 percent stake for approximately $48 million to a group
of 13 major Japanese, U.S., and European brokerages, thereby reducing the
ownership interest of Nasdaq Global Holdings ("Nasdaq Global") in Nasdaq
Japan to approximately 39 percent. Nasdaq Global is a wholly- owned
subsidiary of Nasdaq. Ten of the new investors sit on an advisory council
that recently elected one director to represent them on Nasdaq Japan's
seven member board. The proceeds of this private placement will be used
primarily for working capital and the development of a more sophisticated
and efficient share-trading platform.
Nasdaq Europe S.A./N.V. In March 2001, Nasdaq acquired an initial 68% stake
in EASDAQ S.A./N.V. ("EASDAQ") with an immediate aim to dilute its interest
to 51% through the introduction of other strategic partners as
shareholders. EASDAQ is a pan-European stock market for emerging growth
companies and is headquartered in Brussels. Under the agreement, Nasdaq has
restructured EASDAQ into Nasdaq Europe S.A./N.V., which expects to become a
globally linked pan-European market. By the end of the second quarter of
2001, it is expected that Nasdaq Europe S.A./N.V. will launch the newly
developed European Trading System ("ETS"). ETS is expected to offer similar
functionality as The Nasdaq Stock Market while being adaptable to the needs
and requirements of the European market. In addition, Nasdaq Europe
S.A./N.V. intends to introduce a hybrid market model (similar to
SuperMontage) customized to European best practices later this year. This
market model will integrate market maker quotes into an anonymous,
voluntary limit order book and provide expanded negotiation facilities and
trade reporting.
Canadian Alliance. In April 2000, Nasdaq entered into a cooperative
agreement with the Provincial Government of Quebec for the development of a
new securities market within Canada called Nasdaq Canada. Nasdaq Canada
will be developed in stages, and may culminate in the creation of an
autonomous pan-Canadian market. The first stage commenced on November 21,
2000 with the installation of Nasdaq terminals in 10 Canadian securities
firms in Montreal, Canada. These terminals allow these firms to trade
Nasdaq- listed securities directly through their local broker, including
the over 40 Canadian firms previously listed solely on Nasdaq in the United
States. The second stage is scheduled to commence following the
implementation of SuperMontage.
Competing for Listings. Nasdaq will continue to pursue new listings
aggressively. As of December 31, 2000, there were 4,734 issuers listed on
Nasdaq. From January 1 through December 31, 2000, 397 new issuers listed on
Nasdaq following their initial public offerings, which raised over $52.5
billion. Since 1990, over 88% of companies having initial public offerings
on primary U.S. markets have chosen to list on Nasdaq. Nevertheless,
Nasdaq's overall number of listings has declined in each of the last five
fiscal years from a record high of 5,556 listings as of December 31, 1996
as a result of Nasdaq imposing more rigorous listing standards and
consolidation of listings due to increased merger and acquisition activity.
Nasdaq's strategies for maintaining its current listings and gaining new
listings include marketing and building brand identity, contacting key
decision makers, and providing value-added issuer services.
Marketing. Marketing efforts center on creating a valuable brand-an
important factor in attracting and retaining large world class growth
companies. Nasdaq's branding strategy is designed to convey to the public
that the world's innovative, successful growth companies are listed on
Nasdaq. New and existing companies value being listed on a market that is
recognized around the world, and that helps position them as highly
attractive to investors of all types. Nasdaq employs a variety of
initiatives and tools in its marketing efforts, including media
advertising, Internet publishing (Nasdaq.com), and international road
shows.
Contacting Key Decision Makers. Nasdaq's issuer services directors are
continually engaged with each key Nasdaq-listed company. A schedule of
calls and visits along with contact with various industry and market forums
are used to enhance customer satisfaction, keep companies informed of new
developments at Nasdaq, and discuss the benefits of a listing on Nasdaq.
Nasdaq also has created a program to educate investment bankers, capital
market dealers, institutional investors, and other constituencies that
influence listing decisions.
Issuer Services. Nasdaq provides value-added information services,
products, and programs to Nasdaq-listed companies. This combination of
online real time data and analytical information, along with a series of
seminars and other programs, is designed to help management of listed
companies make better equity management decisions. Nasdaq offers a variety
of value-added products and services to Nasdaq-listed companies, and each
company is assigned a Nasdaq issuer service director.
Competing for Trading Volume in Exchange-Listed Securities. Nasdaq
InterMarket consists of exchange-listed stocks traded off the floor of an
exchange. For the year ended December 31, 2000, Nasdaq InterMarket
accounted for approximately 10.6% of trades in stocks listed on the New
York Stock Exchange, Inc. (the "NYSE") and approximately 16.2% of trades in
stocks listed on the American Stock Exchange LLC ("Amex"). The vast
majority of Nasdaq InterMarket trades are reported to the Consolidated Tape
Association ("CTA") Plan by two major wholesale market makers. One ECN
currently quotes in Nasdaq InterMarket; other ECNs report trades through
Nasdaq systems to CTA and some are planning to begin quoting in Nasdaq
InterMarket. Additionally, there is significant trading activity accounted
for by NASD members that trade exchange-listed stocks away from a
registered exchange. The Nasdaq-like open architecture of Nasdaq
InterMarket allows market participants to provide fast, low-cost executions
for the sector of the market accounted for by online traders.
The current business environment provides the opportunity for a vigorous
Nasdaq InterMarket effort to increase market share by encouraging
additional market makers and ECNs to participate. Nasdaq InterMarket
operates a transaction credit program designed to lower costs for
InterMarket participants executing trades through Nasdaq facilities. The
program allows InterMarket participants to share in the tape revenue Nasdaq
receives as the participant in the CTA Plan. In addition, in May 2000,
Nasdaq redesigned certain systems to improve the InterMarket trading
environment. As more quotes and orders are displayed within Nasdaq
InterMarket, trading among its participants could expand, increasing the
value of the Nasdaq facilities that support Nasdaq InterMarket.
Creating a Single Stock Futures Market. On March 20, 2001, Nasdaq entered
into a non-binding letter of intent and is currently negotiating a
definitive agreement with the London International Financial Futures and
Options Exchange ("LIFFE") to create a new U.S. joint venture company that
will list and trade single stock futures. The products of the new joint
venture are expected to be traded through the LIFFE CONNECT(TM) electronic
system.
Products and Services
Nasdaq's revenue sources can be classified into three principal categories:
(1) transaction services, which accounted for approximately 45.5% of
Nasdaq's revenues for the year ended December 31, 2000; (2) market
information services, which accounted for approximately 29.8% of Nasdaq's
revenues for the year ended December 31, 2000; and (3) issuer services,
which accounted for approximately 21.3% of Nasdaq's revenues for the year
ended December 31, 2000.
Transaction Services. Transaction services provide dealers and traders with
price discovery, order routing and processing, and trade reporting and
comparison tools supported by key technologies.
Dissemination of Quotes. Nasdaq provides quotation collection, processing,
and dissemination to its market participants. Subscribers to the system pay
a monthly fee based generally on the number of display terminals used by
the subscriber. Using the network, market makers and ECN operators enter
quotes that are then processed and broadcast to all other subscribers. The
highest bid and lowest offer combine to set the inside market.
Order Routing and Processing. Historically, orders for Nasdaq-listed stocks
were communicated via the telephone. However, advances in technology made
routing with electronic systems prevalent. Since the late 1980s, Nasdaq has
provided order routing services that during the last few years have
experienced increased usage. Approximately 27% of Nasdaq's share volume
comes from orders routed using a Nasdaq system. The remaining 73% comes
from third-party networks and proprietary systems.
Nasdaq has four systems that provide for order routing and/or execution:
SelectNet, SOES, Advanced Computerized Execution System ("ACES"), and the
Computer Assisted Execution Systemsm ("CAESsm"). SelectNet and SOES, as
well as Nasdaq's plan to leverage them into the NNM Execution System, are
described above. See "--Nasdaq's Strategic Initiatives-Enhancing Market
Structure-Nasdaq National Market ("NNM") Execution System." SelectNet and
SOES accounted for approximately 16.8% of revenues for the year ended
December 31, 2000.
The third Nasdaq trading system, ACES, is an order routing service that is
used by market makers to execute order flow from order entry firms with
which the market maker has a relationship. The order entry firms can route
orders directly to specified market makers through their NWIIs or their own
proprietary systems. These orders are executed within the market makers'
internal trading systems and execution reports are routed back to the order
entry firms. ACES is often used by market makers to connect with firms
whose order traffic is too sparse to justify the fixed costs of
establishing a proprietary network linkage. ACES fees accounted for
approximately 2.0% of Nasdaq's revenues for the year ended December 31,
2000.
The fourth system, CAES, is the Nasdaq InterMarket transaction service
system. CAES is linked to the Intermarket Trading System ("ITS"), which
links Nasdaq InterMarket with U.S. stock exchanges that are participants in
the ITS Plan. CAES allows NASD member firms to direct orders in
exchange-listed securities to other Nasdaq InterMarket market makers for
automated execution (i.e., automatic response as well as automatic
execution). Technology enhancements made during 2000 allow Nasdaq
InterMarket participants to accept the delivery of CAES and ITS orders if
the recipient provides an automated response. The ITS interface allows
CAES/ITS market makers to direct and receive orders from the securities
exchanges that trade ITS eligible securities. With the exception of the
Cincinnati Stock Exchange, other securities exchanges currently do not
provide for automatic execution of orders sent to them via CAES/ITS. The
current fee for CAES orders is $0.50 for the originating party (i.e., the
sender). The current fee for ITS orders is $1.00 for the originating party
(i.e., the sender). CAES and ITS fees accounted for less than 1% of
Nasdaq's revenues for the year ended December 31, 2000.
Trade Reporting and Comparison--Automated Confirmation Transaction
Servicesm ("ACTsm"). U.S. securities laws require that all registered stock
exchanges and securities associations establish a transaction reporting
plan by which information (specifically price and volume) concerning trades
executed in qualified securities in those markets is centrally collected
and disseminated to vendors, which in turn sell it to the public. This
procedure furthers the goal of transparency, a stated objective of U.S.
securities policy designed to protect investors. Transactions in
Nasdaq-listed securities, exchange listed securities traded
over-the-counter ("OTC"), and other equity securities traded OTC are
reported to ACT. A protocol establishes which of the two parties to the
trade are assigned reporting responsibility. During market open hours,
members are to report trades within 90 seconds. Alternative procedures are
in place for reporting trades executed after hours. ACT has a schedule of
fees that reflect the services it provides. Tape-only trade reports are
assessed a nominal fee, while trades that require comparison matching
generally are assessed a higher fee depending upon the size of the trade.
ACT fees accounted for approximately 11.5% of Nasdaq's revenues for the
year ended December 31, 2000.
Market Information Services. As a market operator, Nasdaq collects and
disseminates quote and trade information. Using its network system, Nasdaq
accepts orders and quotes from market makers and ECNs and disseminates
these orders and quotes to a wide range of market participants. Of
particular interest among these quotes are the inside quotes.
Broker/dealers also use the Nasdaq system (specifically ACT) to report
transactions promptly. As a result, participants in Nasdaq have real-time
access to quote and trade data. Interested parties that are not direct
market participants in Nasdaq also can receive real-time information
through a number of data products.
Nasdaq has two primary data products designed to serve the varying levels
of detail desired by different brokers and dealers and their customers. The
first product is called Level 1. This product provides subscribers with the
current inside quote and most recent transaction price. Professional
subscribers to this product currently pay $20 per terminal per month for
the service, which is typically delivered to the subscriber through a
third-party data vendor. A vendor or a broker/dealer can provide
non-professional customers with Level 1 information at a reduced fee
calculated on a per query basis of $.005 with a cap of $1 per month per
user. The growth in online investing has increased the usage of these fee
structures by online brokerage firms and other Internet services. The
second data product, the Nasdaq Quotation Dissemination Service ("NQDS"),
currently priced at $50 per terminal per month for professional subscribers
and $10 per terminal per month for non-professional customers, provides
subscribers with the quotes of each individual market maker and ECN, in
addition to the inside quotes and last transaction price. NQDS is not
priced on a per query basis.
Issuer Services. At December 31, 2000, Nasdaq listed 4,734 domestic and
international companies, the largest number of listings of any equity
market in the world. Since the end of 1994, 3,294 initial public offerings,
approximately 85.5% of all initial public offerings in U.S. primary
markets, listed on Nasdaq. Nasdaq charges issuers an initial listing fee, a
listing of additional shares fee, and an annual fee. The initial listing
fee includes a one-time listing application fee of $5,000 and a total
shares outstanding ("TSO") fee. The total maximum fee for the initial
listing application is $95,000. The fee for listing of additional shares is
based on the TSO, which Nasdaq reviews quarterly. The fee is $2,000, or
$.01 per additional share, whichever is higher, up to a maximum of $17,500
per quarter and an annual maximum of $35,000. Annual fees are based on TSO
and range from $10,710 to $50,000 for NNM securities.
Other Markets
The Nasdaq Stock Market is the flagship market of Nasdaq and has two tiers
of listed companies: The Nasdaq National Marketsm, which includes over
3,700 companies, and The Nasdaq SmallCap Marketsm, with over 850 smaller,
emerging growth companies. Nasdaq also operates the Nasdaq InterMarket,
which is described under "--Nasdaq's Strategic Initiatives-Competing for
Trading Volume in Exchange-Listed Securities," as well as the OTC Bulletin
Board.
OTC Bulletin Board. The OTC Bulletin Board(R) is an electronic,
screen-based market for securities that currently are not listed on Nasdaq
or any primary exchange. At present, the OTC Bulletin Board is a quotation
service, as companies do not list on the OTC Bulletin Board. NASD members
may post quotes only for companies that file periodic reports with the SEC
and/or with a banking or insurance regulatory authority. In addition, such
companies are required to be current with their periodic filings.
Last year, in conjunction with Nasdaq's application to become registered as
a national securities exchange ("Exchange Registration"), the Nasdaq Board
of Directors (the "Nasdaq Board") and the NASD Board of Governors (the
"NASD Board" and, together with the Nasdaq Board, the "Boards"), approved
several rule changes that are designed to enhance the OTC Bulletin Board
and permit Nasdaq to continue to operate it after Exchange Registration.
First, the Boards approved a program for Nasdaq to enter into a listing
agreement with each OTC Bulletin Board issuer and impose new listing
standards to ensure the quality of these issuers. Second, both Boards
approved the creation of an automated order delivery system for the OTC
Bulletin Board that would allow orders to be delivered and executed via
NWII. Finally, to accompany the new listing standards and order delivery
system, the Boards approved enhanced market rules that provide for limit
order protection, short interest reporting, and intraday trading halt
authority.
Nasdaq has submitted to the SEC drafts of these proposed rules and has
discussed an exemption request that would allow Nasdaq to continue to
operate the OTC Bulletin Board after Exchange Registration. The SEC has not
yet approved the rules or the exemption request. Therefore, it is not
certain whether Nasdaq will continue to operate the OTC Bulletin Board
following Exchange Registration.
Technology
Nasdaq was the world's first electronic screen-based stock market and its
use of new computer networking, telecommunications, and information
technologies distinguishes it from other U.S. securities markets. Nasdaq
embraces automation through the effective use of technology as the key to
the future of financial markets. Using technology, Nasdaq eliminates the
need for a physical trading floor and enables securities firms across the
country to compete freely with one another in a screen-based environment.
Nasdaq also employs technology to maximize its ability to communicate with
investors, issuers, traders, the media, and others. Nasdaq technologies
include:
Nasdaq Workstation II. Introduced in 1995, NWII is a proprietary front-end
interface for Nasdaq's quotation network. This network of workstations
gives securities traders access to a centralized quotation service,
automated trade executions, real-time reporting, trade negotiations, and
clearing. Nasdaq's trading terminals are now on the desks of approximately
9,000 users. With NWII, traders are immediately connected to Nasdaq's
electronic trading network. NWII employs advanced Windows technology to
create a fast, flexible, and convenient trading environment running on a
variety of platforms that can be integrated with most in-house systems.
Also available is an Application Programming Interface ("API") through which
approximately 2,400 users currently customize NWII to meet their own
presentation needs.
The Nasdaq Network. Nasdaq's primary telecommunications network, called the
Enterprise Wide Network II ("EWNII"), was designed, built, and is managed
by WorldCom Inc. This network is one of the world's largest, most reliable,
and sophisticated networks delivering time-sensitive information from
Nasdaq's technology centers to traders nationwide. The EWNII is presently
capable of handling trading four billion shares per day. The advanced
design of the EWNII allows Nasdaq to scale the network to greater levels of
capacity as market conditions dictate. Since the introduction of the EWNII
in August 1999 the capacity of the network has been doubled to meet growing
market demand.
The Processing Complex. Nasdaq's quote, trade execution, and trade
reporting systems are based on mainframe technology and are located in a
processing complex in Trumbull, Connecticut. The systems routinely handle
trade volume of over two billion shares daily and over 4,000 transactions
per second. In addition, these systems have substantial reserve capacity to
handle far greater levels of activity. An alternate processing complex
located in Rockville, Maryland backs up the Trumbull technology center.
Data Repository. Market data from Nasdaq's quote and trade execution
systems are transferred via high-speed communications links to a market
data repository in Rockville, Maryland. At this facility, eight terabytes
of online data are available for real-time analysis, historical analysis,
market surveillance and regulation, and data mining. The information is
provided to applications and users through relational database and
higher-level access facilities. The data is also available for delivery to
Internet applications.
Nasdaq Tools. On March 7, 2000, Nasdaq purchased Financial Systemware, Inc.
("FSI"), a manufacturer of software products. FSI became a wholly-owned
subsidiary of Nasdaq that has been named Nasdaq Tools, Inc. ("Nasdaq
Tools"). Nasdaq Tools has an order routing and quote management product
that allows for, among other things, automatic execution of a liability
order, automatic updating of a security's market, and the ability to
decline subsequent orders at the same price. Nasdaq Tools is in the process
of introducing a new service bureau product. "Tools Plus" is a position
management system with real-time valuation, including profit and loss
calculations, automatic execution and display of orders, risk management
features, direct ECN access (for SEC Ordering Handling Rule compliance),
and storage of information in a database and/or report format. It also
provides an Order Audit Trail System ("OATS(sm)") compliance feature that
handles transaction reporting via e-mail to regulatory agencies.
Strategic Technology Alliances. Historically, Nasdaq has demonstrated an
ability to adapt current technology to provide an efficient, robust, and
fault tolerant price discovery network. To continue its successful
evolution, Nasdaq has formed partnerships and alliances with innovative
technology leaders, including the following:
WorldCom. In November 1997, Nasdaq committed to a six-year, $600 million
dollar contract for WorldCom Inc. to build and maintain the EWNII, a custom
Extranet that would expand Nasdaq's daily trading capacity to four billion
shares a day, with the capability of scaling up to eight billion shares a
day. The EWNII is one of the world's largest and most sophisticated
information systems, delivering time-sensitive information from Nasdaq's
Trumbull, Connecticut technology center to traders nationwide and giving
Nasdaq sophisticated routing and information collection capabilities.
Microsoft. Nasdaq uses Microsoft technology to drive Nasdaq.com and other
Web sites. In addition, Microsoft products are in broad use throughout
Nasdaq, including Microsoft Exchange for e-mail and sharing information; NT
and Windows 2000 servers for application, file, and print support; and
Windows workstations for applications and professional productivity. Future
potential technology alliances with Microsoft include site and information
linkages between Nasdaq.com and Microsoft's MoneyCentral Web site. The
alliance may sponsor industry standard solutions for Internet-based
financial information exchange and management.
TIBCO. Nasdaq has formed an alliance with TIBCO Software Inc. ("TIBCO") to
develop a series of innovative applications utilizing TIBCO information bus
technology, which simplifies and manages communications between diverse
systems and platforms. These applications include the real-time
dissemination of market data, population of data on the Nasdaq.com Web
site, and planned use of the technology in next-generation workstation
products. Future uses of TIBCO technology may include the development and
deployment of next-generation market systems, and extension of
publish-and-subscribe technology to additional data distribution channels
inside and outside Nasdaq.
Primex. On December 9, 1999, Nasdaq signed a letter of intent with Primex
Trading N.A., LLC to provide investors and market makers with a new
electronic trading platform. The new system will allow users to seek price
improvement opportunities for their customers' orders by electronically
exposing them to participants who compete for the orders based on price
within the context of the best quotes publicly displayed. The technology
will be offered exclusively to Nasdaq and is scheduled to launch in 2001.
IndigoMarkets. IndigoMarkets(sm) Ltd., a joint venture company with SSI
Ltd. of India, was established in May 2000. Nasdaq Global currently has a
55% interest in the venture. The company will create market systems for
Nasdaq global markets, including Nasdaq Japan. IndigoMarkets is also
expected to license its products to other customers worldwide. In October
2000, Indigo Markets created a wholly-owned Indian subsidiary, Indigo
Markets India Private Ltd. The purpose of the new subsidiary is to license
products to Indian customers as well as to provide ongoing maintenance and
consulting services.
BIOS Group. On June 25, 1999, Nasdaq and the BIOS Group, a research and
development organization based in Santa Fe, New Mexico, formed the
Nasdaq/BIOS R&D Joint Venture, LLC (the "Nasdaq BIOS JV"). This joint
venture is owned 50% by Nasdaq and 50% by the BIOS Group. The purpose of
the joint venture is to spawn inventions and applied research to advance
the business objectives of Nasdaq. Nasdaq will retain a right of first
refusal on any intellectual property generated as a result of the joint
venture. Nasdaq has the exclusive right to any technologies related to its
business objectives.
Competition
Price Discovery and Trading Services. Nasdaq's core trading service is the
provision of the Nasdaq network that provides for the entry and real-time
broadcast of quotes to market makers and ECNs. Competing stock exchanges or
network providers may develop ways to replicate Nasdaq's network more
efficiently than Nasdaq and persuade a critical mass of market participants
to switch to the new network/market. Another threat to Nasdaq's network
revenue could emerge if competing stock exchanges were able to find ways to
link into the network effectively while avoiding the subscription fees paid
by member firms. The SEC could require Nasdaq to distribute the quotations
of independent exchanges or the NASD through the Nasdaq network without
permitting Nasdaq to charge the same quotation fees that Nasdaq may assess
on Nasdaq quote providers. If this were to occur, Nasdaq would, in effect,
incur added costs potentially without an opportunity to recover such costs
from its full user base. In addition, Nasdaq's order routing systems face a
number of forms of competition from ECNs and third-party service bureaus
that handle order routing.
Issuer Listings. Nasdaq competes primarily with the NYSE for listings.
Every year, a number of Nasdaq-listed companies leave Nasdaq for the NYSE.
For the year ended December 31, 2000, 25 companies moved from Nasdaq to the
NYSE while one switched from the NYSE to Nasdaq.
In addition, for smaller companies, the option of not listing on any market
also exists. Markets for the securities of such companies are made by
securities firms who voluntarily post quotes or indications of interest.
Two leading vehicles for posting of quotes are the OTC Bulletin Board,
currently owned and operated by Nasdaq, and the NQB Pink Sheets owned by
the National Quotation Bureau, a privately-held firm. The National
Quotation Bureau currently operates an electronic version of the Pink
Sheets, allowing for the more frequent updating of quotes. This enhancement
to the Pink Sheets may lead some companies to reconsider the value of a
Nasdaq listing and increase the level of listing competition Nasdaq faces
at the small-company end of the spectrum.
Data and Information Services. Nasdaq's data services revenue is under
competitive threat from other stock exchanges that trade Nasdaq stocks,
including the established regional exchanges. Current SEC regulations
permit national securities exchanges to trade certain securities that are
not listed on an exchange, including NNM securities, pursuant to Nasdaq's
Unlisted Trading Privileges Plan ("UTP Plan") that is submitted to and
approved by the SEC. Currently, only the Chicago Stock Exchange and the
Cincinnati Stock Exchange have developed a quote and trade linkage with
Nasdaq and trade Nasdaq securities. There are, however, three other members
of the UTP Plan that are eligible to, but do not currently, trade Nasdaq
securities in part because these members have not developed the appropriate
linkage. Recently, another exchange has indicated an interest in joining
the UTP Plan. In addition, two ECNs have made application to the SEC to
become registered as national securities exchanges and, if successful, may
become participants in the UTP Plan.
During the last few years, there has been an increase in the number of
ECNs. In general, ECNs subscribe to the network service, report trades to
ACT, and use Nasdaq's order routing systems. On one level, an ECN performs
the same function as a market maker bringing buyers and sellers together.
However, ECNs pose a potential threat to Nasdaq's business because under
the new SEC guidelines, they could register as securities exchanges. In
this case, they would be eligible for a share of the revenue generated by
the sale of Nasdaq's data products, and their use of Nasdaq's systems could
diminish.
Employees
As of December 31, 2000, Nasdaq had approximately 1,200 employees. None of
its employees is subject to collective bargaining agreements or is
represented by a union. Nasdaq considers its relations with its employees
to be good.
Recent Restructuring Transactions
At a special meeting of NASD members held on April 14, 2000, more than a
majority of NASD members approved a plan to restructure and broaden the
ownership in Nasdaq (the "Restructuring") through a two-phase private
placement of (1) newly-issued shares of Common Stock, and (2) warrants
issued by the NASD (the "Warrants") to purchase shares of Common Stock
owned by the NASD. The Restructuring was intended, among other things, to
strategically realign the ownership of Nasdaq, minimize potential conflicts
of interest between Nasdaq and NASD Regulation, Inc. ("NASDR"), and allow
Nasdaq to respond to current and future competitive challenges caused by
technological advances and the increasing globalization of financial
markets.
In connection with the first phase of the Restructuring ("Phase I"), (1)
the NASD separated Amex from The Nasdaq-Amex Market Group ("Market Group"),
a holding company that was a wholly-owned subsidiary of the NASD; (2)
Market Group was then merged with and into Nasdaq; (3) Nasdaq effected a
49,999-for-one stock dividend creating 100 million shares of Common Stock
outstanding (all of which were initially owned by the NASD); and (4) Nasdaq
authorized the issuance of an additional 30.9 million in new shares of
Common Stock to be offered for sale by Nasdaq as part of the Restructuring.
In Phase I, on June 28, 2000, Nasdaq sold an aggregate of 23,663,746 shares
of Common Stock for an aggregate consideration of $260,301,206. The NASD
sold an aggregate of 6,415,049 Warrants to purchase an aggregate amount of
25,660,196 shares of Common Stock and an aggregate of 323,196 shares of
Common Stock owned by the NASD for an aggregate consideration of
$74,120,695.
In the second phase of the Restructuring ("Phase II"), on January 18, 2001,
Nasdaq sold an aggregate of 5,028,797 shares of Common Stock for an
aggregate consideration of $65,374,361. The NASD sold an aggregate of
4,392,345 Warrants to purchase an aggregate amount of 17,569,380 shares of
Common Stock and an aggregate of 4,222,295 shares of Common Stock owned by
the NASD for an aggregate consideration of $116,382,665. Investors in Phase
I and Phase II consisted of NASD members, Nasdaq market participants,
issuers with securities quoted on Nasdaq, and other strategic partners.
On March 23, 2001, Nasdaq entered into an agreement to issue and sell
$240,000,000 in aggregate principal amount of its 4% Convertible
Subordinated Debentures due 2006 (the"Subordinated Debentures") to Hellman
& Friedman Capital Partners IV, L.P. and certain of its affiliates
(collectively, "Hellman & Friedman"). The Subordinated Debentures are
convertible into an aggregate of 12,000,000 shares of Common Stock, subject
to adjustment. The transaction is expected to close in the second quarter
of 2001. Upon consummation of the transaction, Hellman & Friedman will own
approximately 9.8 percent of Nasdaq on an as-converted basis. In connection
with the transaction, Nasdaq has agreed to use its best efforts to seek
stockholder approval of a charter amendment that would provide for voting
debt in order to permit Hellman & Friedman to vote on an as-converted basis
on all matters on which common stockholders have the right to vote, subject
to the five percent voting limitation in Nasdaq's Restated Certificate of
Incorporation (the "Certificate of Incorporation"). In addition, Nasdaq has
also agreed that in the event that the Nasdaq Board approves an exemption
from the foregoing five percent limitation for any person (other than an
exemption granted in connection with a strategic market alliance) and seeks
the concurrence of the SEC with respect thereto, Nasdaq will grant Hellman
& Friedman a comparable exemption from such limitation and use its best
efforts to obtain SEC concurrence of such exemption. In connection with the
transaction, Nasdaq agreed to grant Hellman & Friedman certain registration
rights with respect to the shares of Common Stock underlying the
Subordinated Debentures. Additionally, Nasdaq agreed to permit Hellman &
Friedman to designate one person reasonably acceptable to Nasdaq for
nomination as a director of Nasdaq for so long as Hellman & Friedman own
Subordinated Debentures and/or shares of Common Stock issued upon
conversion representing at least 50% of the shares of Common Stock issuable
upon conversion of the Subordinated Debentures initially purchased. Nasdaq
has elected F. Warren Hellman to fill a vacant directorship on the Nasdaq
Board pursuant to the foregoing provision to be effective upon the
consummation of the sale of the Subordinated Debentures to Hellman &
Friedman.
On March 23, 2001, Nasdaq entered into an agreement with the NASD whereby
Nasdaq would use the net proceeds from the sale of the Subordinated
Debentures to purchase 18,461,538 shares of Common Stock from the NASD for
$13 per share for an aggregate purchase price of $239,999,994. This
transaction will be consummated concurrently with the issuance and sale of
the Subordinated Debentures. In connection with the transaction, Nasdaq and
the NASD have agreed to enter into an Investor Rights Agreement pursuant to
which Nasdaq will grant the NASD certain demand and piggyback registration
rights with respect to the shares of Common Stock owned by it.
On April 25, 2001, the Nasdaq Board approved in principle to take steps to
prepare for an initial public offering (the "IPO") of its Common Stock. The
timing of the IPO will depend on a variety of factors including Exchange
Registration, the progress of several important technology initiatives
(e.g., SuperMontage), and market conditions.
Risk Factors
This Registration Statement contains forward-looking statements that
involve risks and uncertainties. Nasdaq's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including the risks faced by Nasdaq described
below and elsewhere in this Registration Statement.
The risks and uncertainties described below are not the only ones facing
Nasdaq. Additional risks and uncertainties not presently known to Nasdaq or
that Nasdaq currently believes to be immaterial may also adversely affect
Nasdaq's business. If any of the following risks actually occur, Nasdaq's
business, financial condition, or operating results could be materially
adversely affected.
Nasdaq's operating results could fluctuate significantly in the future.
Nasdaq's operating results may fluctuate significantly in the future as a
result of a variety of factors, including: (i) a decrease in the trading
volume in Nasdaq; (ii) increased competition from alternative market venues
that might reduce market share and create pricing pressure; (iii)
competition from the NYSE or new competing exchanges for new listings; (iv)
a reduction in market data revenue; (v) the rate at which Nasdaq obtains
new listings and maintains its current listings; (vi) regulatory changes
and compliance costs; (vii) Nasdaq's ability to utilize its capital
effectively; (viii) Nasdaq's ability to manage personnel, overhead, and
other expenses, in particular technology expenses; and (ix) general market
and economic conditions.
Nasdaq's business could be harmed by market fluctuations and other risks
associated with the securities industry generally.
A substantial portion of Nasdaq's revenues is tied to the trading volume of
its listed securities. Trading volume is directly affected by economic and
political conditions, broad trends in business and finance, and changes in
volume and price levels of securities transactions. An adverse change
affecting the economy or the securities markets could result in a decline
in trading volume. Nasdaq is also particularly affected by declines in
trading volume in technology and Internet-related stocks because a
significant portion of its customers trade in these types of stocks and a
large number of technology and Internet-related companies are listed on
Nasdaq. A downturn in the initial public offering market is also likely to
have an adverse effect on Nasdaq's revenues, including, in particular,
revenues from listing fees. A decline in trading volume would lower
transaction services revenues, and Nasdaq's profitability may be adversely
affected if it is unable to reduce costs at the same rate. For example, in
the first quarter of 2001, 31 initial public offerings were brought to
market on Nasdaq compared to 165 in the first quarter of 2000. There were
also 95 de-listed companies in the first quarter of 2001 compared to 36
during the same time period last year. Consequently, Nasdaq's issuer
services revenues declined in the first quarter of 2001. Further downward
trends in general market conditions could adversely affect Nasdaq's
revenues and reduce its profitability if Nasdaq cannot reduce its costs at
the same rate to offset such trends.
Substantial competition could reduce Nasdaq's market share and harm
Nasdaq's financial performance.
Nasdaq has spent a considerable amount of time and money in developing its
trading network. While Nasdaq believes that its network is currently the
most widely used, fault tolerant, and efficient network available for
trading equities, it is possible that a competing securities exchange,
network provider, or technology company could develop ways to replicate
Nasdaq's network more efficiently than Nasdaq and persuade a critical mass
of market participants to switch to a new network. The NYSE has announced
that it might buy or build its own electronic network for trading Nasdaq
stocks and has announced that it is in discussions with seven other
exchanges in Europe, Asia, and the Americas to form a set of global
alliances that would be intended to allow investors to trade throughout the
day. This could have an adverse effect on Nasdaq's business, financial
condition, and results of operation.
SelectNet is Nasdaq's automated market service that enables securities
firms to route orders, negotiate terms, and execute trades in Nasdaq
securities. If there is an increase in the number of market makers or ECNs
that determine they do enough order routing traffic to justify setting up a
proprietary network for their traffic, Nasdaq may be forced to reduce its
fees further or risk losing its share of the order routing business. In
addition, certain system providers link many Nasdaq market makers. These
systems may be able to increase the number of orders executed through their
systems versus the Nasdaq systems. A reduction in the order routing
business could have an adverse effect on Nasdaq's business, financial
condition, and operating results.
The traditional products and services offered by markets are being
unbundled. Historically, Nasdaq has provided listings, execution services,
information services, and regulatory services to the investing public.
Currently, there are many competitors operating in the execution services
market. Nasdaq has not historically implemented pricing strategies that
isolate its various businesses. Due to competition in the execution
services business, as well as Nasdaq's past practice of bundling products
and services, it is uncertain whether Nasdaq will be able to compete
successfully in this business. Furthermore, Nasdaq faces multiple pricing
constraints, including in particular, regulatory constraints, that may
prevent it from competing effectively in certain markets.
Substantial competition could reduce Nasdaq's issuer services revenues.
Nasdaq faces competition for listings from other primary exchanges,
especially from the NYSE. In addition to competition for initial listings,
Nasdaq also competes with the NYSE to maintain listings. In the past, a
number of issuers listed on Nasdaq have left Nasdaq for the NYSE each year.
The largest 50 Nasdaq-listed issuers (based on U.S. market value) accounted
for approximately 51% of total dollar volume traded on Nasdaq for the year
ended December 31, 2000. The loss of one or more of these issuers would
result in a significant decrease in revenues from Nasdaq's transaction
services. Historically, Rule 500 of the NYSE, which required supermajority
stockholder approval before a listed company could delist from the NYSE,
made it extremely difficult for issuers on the NYSE to leave voluntarily.
As of December 31, 2000 only two issuers have transferred from the NYSE to
Nasdaq. A recent amendment to Rule 500 allows a company to delist from the
NYSE if it obtains the approval of its board of directors and its audit
committee, publishes a press release announcing its proposed delisting and
sends a written notice to its largest 35 stockholders of record (U.S.
stockholders of record if a non-U.S. issuer) alerting them to the proposed
delisting. Nasdaq believes that Rule 500 in its modified form may continue
to constitute an impediment to Nasdaq's ability to compete for NYSE
listings.
Nasdaq has invested a considerable amount of capital and time competing for
issuer listings with other primary exchanges. In addition to the listing
fee, a listing generates revenue from execution services and sales of
market data. ATSs do not currently provide listing venues, although such
systems can register as an exchange and compete with traditional exchanges
for the execution and market data business. At least two ECNs have applied
to become registered as a national securities exchange. If these new
exchanges are successful in attracting trading volume and do not continue
to use Nasdaq transaction systems, traditional listings will become less
profitable to Nasdaq as they will not provide corresponding revenue from
trade executions and the sale of market data. In addition, if ATSs become
exchanges, they may enter the competition for issuer listings. There can be
no assurances that Nasdaq will be able to maintain or increase its listing
revenues. The reduction in initial listings or the loss of a top issuer
could have an adverse effect on Nasdaq's business, financial condition, and
operating results.
Nasdaq's data service revenues are threatened by other exchanges trading
Nasdaq stocks.
Current SEC regulations permit national securities exchanges to trade
certain securities that are listed on Nasdaq pursuant to the UTP Plan.
Nasdaq's UTP Plan entitles these exchanges to a share of Nasdaq's data
revenue, roughly proportional to its share of trading as measured by share
volume and number of trades. Currently, only two UTP Plan participants
trade Nasdaq securities and their respective share of trades is minimal.
The Boston Stock Exchange, Philadelphia Stock Exchange, and the Pacific
Exchange have indicated their intent to commence trading in Nasdaq
securities pursuant to the UTP Plan. In addition, at least two ECNs have
applied for exchange registration and expressed interest in becoming UTP
Plan participants. If the UTP Plan participants' share of trades in Nasdaq
stocks increases substantially, Nasdaq's financial condition and operating
results could be adversely affected. In addition, since the allowable costs
that are shared by UTP Plan participants and the fees Nasdaq can charge for
data products are not exclusively set by Nasdaq, Nasdaq's control over its
revenue and cost base under the UTP Plan is limited. Current amendments to
the UTP Plan under negotiation include (i) an increase in the number of the
eligible securities over a one year period from 1,000 to all 4,734 NNM and
SmallCap securities, and (ii) the elimination of the floor and ceiling
limits on the amount of market data revenue Nasdaq must share with the UTP
Plan participants. These and other amendments could have a materially
adverse effect on Nasdaq's business, financial condition, and operating
results.
Nasdaq could lose its status as an exclusive securities information
processor because of recent regulatory developments.
Nasdaq serves as a securities information processor ("SIP") for purposes of
collecting and disseminating quotation and last sale information for
transactions effected in its market. Nasdaq also acts as an ESIP pursuant
to the UTP Plan. Under the UTP Plan, Nasdaq collects quotation and last
sale information from competing exchanges (currently the Chicago Stock
Exchange and the Cincinnati Stock Exchange) and consolidates such
information with its own. Nasdaq sells this information to vendors for a
fee ("Tape Fees"), and the data vendors in turn sell the last sale and
quotation data publicly. Under the revenue sharing provision of the UTP
Plan, Nasdaq is permitted to deduct certain costs associated with acting as
an ESIP from the total amount of Tape Fees collected. After these costs are
deducted from the Tape Fees, Nasdaq distributes to the respective UTP Plan
participants their pro-rata share of Tape Fees.
While Nasdaq is currently the ESIP for NNM securities, Nasdaq is working
with the other UTP Plan participants to enter into a Request-for-Proposal
("RFP") process to select a new processor. This process is the result of
the SEC's conditions for extending the UTP Plan beyond its March 2001
termination date. The SEC has required that there be good faith
negotiations among the UTP Plan participants on a revised UTP Plan that
provides for either (i) a fully viable alternative ESIP for all Nasdaq
securities, or (ii) a fully viable alternative non-exclusive SIP. To avoid
conflicts of interest, the SEC cautioned that in the event the revised UTP
Plan provides for an exclusive consolidating SIP, a UTP Plan
participant--particularly Nasdaq--should not operate such SIP unless (i)
the SIP is chosen on the basis of bona fide competitive bidding and the
participant submits the successful bid, and (ii) any decision to award a
contract to a UTP Plan participant, and any ensuing renewal of such
contract, is made without that UTP Plan participant's direct or indirect
voting participation. The UTP Plan participants are currently in the
nascent stages of creating the RFP, and it will likely take months to
solicit competing bids and come to a joint decision on a new SIP. The SEC
also imposed other conditions relating to the NASD's access to the
alternative SIP.
Nasdaq also has been participating in the meetings of the SEC Advisory
Committee on Market Data. The dialogue has touched on potentially
fundamental changes to SEC rules and policies that govern SIPs and national
market system plans. Nasdaq's written position on this issue presents two
alternative approaches that ensure the continuation of broad dissemination
of consolidated national best-bid-and-offer and consolidated last sale
information, but that focus on the ability for exchanges to compete in an
open environment. The first alternative is to eliminate mandatory
participation in the national market system plans, including the UTP Plan,
and allow exchanges to choose among several competing SIPs to distribute
their data. The second alternative, as an interim approach, is to maintain
a single national market system plan with a single ESIP, but one that is
more limited in scope and function. The SEC Advisory Committee on Market
Data is expected to present its recommendations at the end of September
2001.
Nasdaq may lose trade reporting revenues if more market participants bypass
the comparison feature of its trade reporting system.
If market participants establish clearing relationships with the same
clearing firm, they would not have to utilize ACT for comparison/clearing
purposes. Thus, firms can form joint clearance and settlement arrangements
to reduce ACT comparison fees. In addition, Nasdaq has adopted a rule
establishing a cap on monthly ACT risk management fees that a clearing firm
must pay on behalf of a correspondent firm. Nasdaq has also proposed an
interpretation to the SEC detailing which firms are effectively
"self-clearing" with respect to affiliated correspondents and thus relieved
of their obligation to pay ACT risk management fees for trades cleared on
behalf of those correspondents. Both of these rules will reduce ACT risk
management fees collected by Nasdaq. If more market participants bypass
ACT, Nasdaq's business, financial condition, and operating results could be
materially adversely affected. See "Item 1. Business-Products and Services."
Certain Congressional and SEC reviews could result in a reduction in data
fees that could reduce Nasdaq's revenues.
The SEC is reviewing concerns by industry members that the present level of
data fees do not properly reflect the costs associated with their
collection, processing, and distribution. As noted above, the SEC has
established the SEC Advisory Committee on Market Data and its
recommendation is due on September 30, 2001. Nasdaq has argued that there
are regulatory, market capacity, and other related costs of operating the
market. A fee realignment that does not recognize the full market costs of
creating and delivering market data could reduce overall data revenues in
the future and adversely affect Nasdaq's business, financial condition, and
operating results.
Legislation was introduced and hearings were held in the last session of
Congress pertaining to whether stock exchanges and markets have a property
right to quote and trade data. Hearings were held again on this subject in
March and April 2001. Since securities firms are required to supply the
market operator with quote and trade information, some have argued that the
operator has no right to be able to sell the data back to the securities
firms. This issue continues to be debated and the outcome could have a
significant impact on the viability of Nasdaq's data revenue and, as a
consequence, on its business, financial condition, and operating results.
Nasdaq is subject to extensive regulation that may harm its ability to
compete with less regulated entities.
Under current federal securities laws, changes in Nasdaq's rules and
operations, including its pricing structure, must be approved by the SEC.
The SEC may approve, disapprove, or recommend changes to proposals
submitted by Nasdaq. In addition, the SEC may delay the initiation of the
public comment process or the approval process. This delay in approving
changes, or the altering of any proposed change, could have an adverse
effect on Nasdaq's business, financial condition, and operating results.
System limitations and failures could harm Nasdaq's business.
Nasdaq's business depends on the integrity and performance of the computer
and communications systems supporting it. If Nasdaq's systems cannot be
expanded to cope with increased demand or fail to perform, Nasdaq could
experience: (i) unanticipated disruptions in service, (ii) slower response
times, and (iii) delays in the introduction of new products and services.
These consequences could result in lower trading volumes, financial losses,
decreased customer service and satisfaction, litigation or customer claims,
and regulatory sanctions. Nasdaq has experienced occasional systems
failures and delays in the past and it could experience future systems
failures and delays.
Nasdaq uses internally developed systems to operate its business, including
transaction processing systems to accommodate increased capacity. However,
if Nasdaq's trading volume increases unexpectedly, Nasdaq will need to
expand and upgrade its technology, transaction processing systems and
network infrastructure. Nasdaq does not know whether it will be able
to project accurately the rate, timing, or cost of any increases, or expand
and upgrade its systems and infrastructure to accommodate any increases in
a timely manner.
Nasdaq's systems and operations also are vulnerable to damage or
interruption from human error, natural disasters, power loss, sabotage,
computer viruses, intentional acts of vandalism, and similar events. Nasdaq
currently maintains multiple computer facilities to provide full service
during system disruptions, and has facilities in place that are expected to
maintain service during a system disruption. Any system failure that causes
an interruption in service or decreases the responsiveness of Nasdaq's
service could impair its reputation, damage its brand name, and negatively
impact its revenues. Nasdaq also relies on a number of third parties for
systems support. Any interruption in these third-party services or a
deterioration in the performance of these services could also be disruptive
to Nasdaq's business and have a material adverse effect on its business,
financial condition, and operating results.
Nasdaq may not be able to keep up with rapid technological and other
competitive changes affecting the structure of the securities markets.
The markets in which Nasdaq competes are characterized by rapidly changing
technology, evolving industry standards, frequent enhancements to existing
services and products, the introduction of new services and products, and
changing customer demands. These market characteristics are heightened by
the emerging nature of the Internet and the trend for companies from many
industries to offer Internet-based products and services. In addition, the
widespread adoption of new Internet, networking, or telecommunications
technologies or other technological changes could require Nasdaq to incur
substantial expenditures to modify or adapt its services or infrastructure.
Nasdaq's future success will depend on its ability to respond to changing
technologies on a timely and cost-effective basis. Nasdaq's operating
results may be adversely affected if it cannot successfully develop,
introduce, or market new services and products. In addition, any failure by
Nasdaq to anticipate or respond adequately to changes in technology and
customer preferences, or any significant delays in other product
development efforts, could have a material adverse effect on Nasdaq's
business, financial condition, and operating results.
The rapid evolution of the worldwide securities markets requires Nasdaq to
be proactive in addressing developments affecting the securities markets
and to explore the numerous opportunities and alternatives that present
themselves. Consequently, senior officers of Nasdaq have conducted
exploratory discussions with a number of major U.S. and foreign securities
exchanges, regarding cooperation, joint ventures, marketing affiliations,
combinations, or other collaborative activities. Nasdaq anticipates that
such discussions will continue but cannot predict the results of any such
discussions. See "Item 1. Business-Nasdaq's Strategic Initiatives" and
"-Pursuing Global Market Expansion."
Nasdaq may have difficulty managing its growth.
Over the last several years, Nasdaq has experienced significant growth in
its business and the number of its employees. Nasdaq may not be able to
continue to manage its growth successfully. In an attempt to stimulate
future growth, Nasdaq has undertaken several initiatives to increase its
business, including enhancing existing products, developing new products,
and forming strategic relationships. The increased costs associated with
Nasdaq's initiatives may not be offset by corresponding increases in its
revenues. The growth of Nasdaq's business has required, and will continue
to require, Nasdaq to increase its investment in technology, management
personnel, market regulatory services, and facilities. No assurance can be
made that Nasdaq has made adequate allowances for the costs and risks
associated with this expansion, that its systems, procedures, or controls
will be adequate to support its operations, or that its management will be
able to offer and expand its services successfully. If Nasdaq is unable to
manage its growth effectively, its business, financial condition, and
operating results could be adversely affected.
Nasdaq may need additional funds to support its business plan.
Nasdaq depends on the availability of adequate capital to maintain and
develop its business. Nasdaq believes that its current capital requirements
will be met from internally generated funds and from the funds raised in
connection with the Restructuring. However, based upon a variety of
factors, including the rate of market acceptance of Nasdaq's new products,
the cost of service and technology upgrades, and regulatory costs, Nasdaq's
capital requirements may vary from those currently planned. There can be no
assurance that additional capital will be available on a timely basis, or
on favorable terms or at all.
Nasdaq may not be successful in executing its international strategy.
In order to take advantage of anticipated opportunities that will arise
outside the United States, Nasdaq intends to invest significant resources
in developing strategic partnerships with non-U.S. stock markets. In June
1999, a joint venture agreement was entered into with SOFTBANK Corp. of
Japan to form a new electronic equity market in Japan. In February 2000,
Nasdaq signed a joint venture agreement to form Nasdaq Europe Planning
Company Limited, to create a new pan-European electronic stock exchange
modeled after Nasdaq. A memorandum of understanding signed by Nasdaq, the
London Stock Exchange, and the Deutsche Borse AG contemplated the merger of
these two European exchanges to form a pan-European growth stock market.
This proposed collaborative venture did not occur and the memorandum of
understanding was cancelled. In March 2001, Nasdaq acquired a majority
interest in EASDAQ, subsequently restructured as Nasdaq Europe S.A./N.V.,
as part of its plans to expand in Europe.
Nasdaq has had only very limited experience in developing localized
versions of its services and in marketing and operating its services
internationally. To date, Nasdaq's international efforts have not yet
achieved profitability. There can be no assurance that Nasdaq will be able
to succeed in marketing its branded services and developing localized
services in international markets. Nasdaq may experience difficulty in
managing its international operations because of, among other things,
competitive conditions overseas, difficulties in supervising foreign
operations, managing currency risk, established domestic markets, language
and cultural differences, political and economic instability, and changes
in regulatory requirements or the failure to obtain requested regulatory
changes and approvals. Any of the above could have an adverse effect on the
success of Nasdaq's international operations and, consequently, on Nasdaq's
business, financial condition, and operating results. See "Item 1.
Business-Nasdaq's Strategic Initiatives" and "-Pursuing Global Market
Expansion."
Strategic relationships undertaken by Nasdaq are unproven for growth.
Nasdaq has recently entered into several important strategic relationships
and its prospects depend to some extent upon the development of these
relationships. A number of Nasdaq's current strategic relationships are new
and, consequently, unproven. For a description of these relationships, see
"Item 1. Business-Nasdaq's Strategic Initiatives." Nasdaq intends to
continue to seek strategic relationships actively, and believes such
relationships will generate a significant portion of its growth in the
medium term. Nasdaq's business, financial condition, and operating results
could be adversely affected if it does not establish additional, and
maintain existing, strategic relationships on commercially reasonable terms
or if any of its strategic relationships do not result in a significant
increase in revenues.
Extended hours trading may have a negative impact on Nasdaq's business.
Today, market participants, including some ECNs, are trading beyond
traditional market hours (9:30 a.m. to 4:00 p.m., Eastern time). Extending
trading hours may put additional stress on the financial services industry.
Nasdaq has extended the availability of its trade reporting and quotation
systems from 8:00 a.m. until 6:30 p.m. Eastern time. Specifically, the
systems involved include ACT, ACES, CAES/ITS, SelectNet, the NQDS, Nasdaq
Trade Dissemination Service, and Nasdaq Level 1 Service (which disseminates
real-time, inside quote updates, as well as the 4:00 p.m. closing prices).
Certain Nasdaq participants have been unable to modify their technology to
accommodate the expansion of trading hours and attendant regulatory
requirements. To date, volume in extended hours trading remains relatively
low. However, to the extent that a large extended hours session develops
and participants in Nasdaq are not prepared to handle the additional
capacity, Nasdaq may lose trading volume to more technologically advanced
competitors. In addition, insufficient interest in extended hours trading
could result in decreased liquidity, increased volatility, or degeneration
of price discovery, all of which could potentially undermine the public
confidence in Nasdaq and adversely affect Nasdaq's business, financial
condition, and operating results. In addition, the revenues generated by
trading in the extended hours market may not be sufficient to cover costs
associated with such trading.
Failure to protect its intellectual property rights could harm Nasdaq's
brand-building efforts and ability to compete effectively.
To protect its rights to its intellectual property, Nasdaq relies on a
combination of trademark laws, copyright laws, patent laws, trade secret
protection, confidentiality agreements, and other contractual arrangements
with its employees, affiliates, clients, strategic partners, and others.
The protective steps Nasdaq has taken may be inadequate to deter
misappropriation of its proprietary information. Nasdaq may be unable to
detect the unauthorized use of, or take appropriate steps to enforce, its
intellectual property rights. Nasdaq has registered, or applied to
register, its trademarks in the U.S. and in 40 foreign jurisdictions and
has pending U.S. and foreign applications for other trademarks. Effective
trademark, copyright, patent, and trade secret protection may not be
available in every country in which Nasdaq offers or intends to offer its
services. Failure to protect its intellectual property adequately could
harm its brand and affect its ability to compete effectively. Further,
defending its intellectual property rights could result in the expenditure
of significant financial and managerial resources, which could adversely
affect Nasdaq's business, financial condition, and operating results.
Lack of operating history as a for-profit entity with private ownership
interests.
While Nasdaq has an established operating history, it has only operated as
a for-profit company with private ownership interests since June 28, 2000.
Therefore, Nasdaq is subject to the risks and uncertainties associated with
any newly independent company. Nasdaq has had access to many support
functions of the NASD, including: cash management and other financial
services, real estate, legal, surveillance, and other regulatory services,
information services, and corporate and administrative services. Nasdaq has
entered into, and intends to enter into, various intercompany arrangements
with the NASD and its affiliates for the provision of these services on an
on-going or transitional basis. See "-Nasdaq faces potential conflicts of
interest with related parties" and "-The intercompany agreements may not be
effected on terms as favorable to Nasdaq as could have been obtained from
unaffiliated third parties" and "Item 7. Certain Relationships and Related
Transactions." In addition, Nasdaq's initiatives designed to increase
operating efficiencies may not yield the expected benefits or efficiencies
and may be subject to delays, unexpected costs, and cost overruns, all of
which could have an adverse effect on Nasdaq's business, financial
condition, and operating results.
Failure to attract and retain key personnel may adversely affect Nasdaq's
ability to conduct its business.
Nasdaq's future success depends on the continued service and performance of
its senior management and certain other key personnel. For example, Nasdaq
is dependent on specialized systems personnel to operate, maintain, and
upgrade its systems. The inability of Nasdaq to retain key personnel or
retain other qualified personnel could adversely affect Nasdaq's business,
financial condition, and operating results. See "Item 5. Directors and
Executive Officers."
Nasdaq is subject to risks relating to litigation and potential securities
laws liability.
Many aspects of Nasdaq's business potentially involve substantial risks of
liability. While Nasdaq enjoys immunity for certain self-regulatory
organization activities, it could be exposed to substantial liability under
federal and state securities laws, other federal and state laws and court
decisions, as well as rules and regulations promulgated by the SEC and
other federal and state agencies. These risks include, among others,
potential liability from disputes over the terms of a trade, the claim that
a system failure or delay cost a customer money, that Nasdaq entered into
an unauthorized transaction or that it provided materially false or
misleading statements in connection with a securities transaction. As
Nasdaq intends to defend any such litigation actively, significant legal
expenses could be incurred. An adverse resolution of any future lawsuit or
claim against Nasdaq could have an adverse effect on its business,
financial condition, and operating results.
Nasdaq's networks may be vulnerable to security risks.
As with other computer networks, it is possible that Nasdaq's networks may
be vulnerable to unauthorized access, computer viruses, and other security
problems. Persons who circumvent security measures could wrongfully use
Nasdaq's information or cause interruptions or malfunctions in Nasdaq's
operations. Nasdaq is required to continue to expend significant resources
to protect against the threat of security breaches or to alleviate problems
caused by any such breaches. Although Nasdaq intends to continue to
implement industry-standard security measures, these measures may prove to
be inadequate and result in system failures and delays that could lower
trading volumes and have an adverse effect on Nasdaq's business, financial
condition, and operating results.
Nasdaq faces potential conflicts of interest with related parties.
As of April 17, 2001, the NASD beneficially owns, on a fully diluted basis,
approximately 41% of Nasdaq's outstanding Common Stock (approximately 74%
if no Warrants are exercised). See "Item 10. Recent Sales of Unregistered
Securities." Until Exchange Registration, the shares of Common Stock
underlying any unexpired and unexercised tranches of arrants sold in the
Restructuring by the NASD, as well as the shares of Common Stock purchased
through the valid exercise of such Warrants, will be voted at the direction
of the NASD. In addition, after giving effect to the increase in the size
of the Nasdaq Board effective immediately after the 2001 Annual Meeting, 10
of the 18 members of the Nasdaq Board will also be members of the NASD
Board. Until Exchange Registration, the NASD will be in a position to
continue to control substantially all matters affecting Nasdaq, including
any determination with respect to the direction and policies of Nasdaq,
acquisition or disposition of assets, future issuances of securities of
Nasdaq, Nasdaq's incurrence of debt, and any dividend payable on the Common
Stock.
Conflicts of interest may arise between Nasdaq and the NASD, or its
affiliates, in a number of areas relating to their past and ongoing
relationships, including the nature, quality, and pricing of services
rendered; shared marketing functions; tax and employee benefit matters;
indemnity agreements; sales or distributions by the NASD of all or any
portion of its ownership interest in Nasdaq; or the NASD's ability to
influence certain affairs of Nasdaq prior to Exchange Registration. There
can be no assurance that the NASD and Nasdaq will be able to resolve any
potential conflict or that, if resolved, Nasdaq would not receive more
favorable resolution if it were dealing with an unaffiliated party.
Conflicts may also arise between Nasdaq and Amex by virtue of commitments
made by the NASD in connection with its acquisition of Amex.
The intercompany agreements may not be effected on terms as favorable to
Nasdaq as could have been obtained from unaffiliated third parties.
For purposes of governing their ongoing relationship, Nasdaq and the NASD,
or their affiliates, have entered into, or intend to enter into, various
agreements involving the provision of services such as market surveillance
and other regulatory functions, cash management and other financial
services, legal, facilities sharing, information services, corporate, and
other administrative services. However, as of the date hereof, Nasdaq has
only fully negotiated a contract with the NASDR pursuant to which NASDR
will regulate Nasdaq trading activity. The NASDR will continue regulating
trading activity on Nasdaq under the new long-term contract that
establishes the various functions NASDR will perform and the price that
Nasdaq will pay for these functions. The functions covered under this
contract are substantially the same type and scope as those NASDR had
previously performed under the Plan of Allocation and Delegation of
Functions by the NASD to Subsidiaries (the "Delegation Plan").
The terms of the other intercompany agreements have not yet been fully
negotiated. Although it is the intention of the parties to negotiate
agreements that provide for arm's length, fair market value pricing, there
can be no assurance that these contemplated agreements, or the transactions
provided in them, will be effected on terms as favorable to Nasdaq as could
have been obtained from unaffiliated third parties. The cost to Nasdaq for
such services could increase at a faster rate than its revenues and could
adversely affect Nasdaq's business, financial condition, and operating
results. See "Item 7. Certain Relationships and Related Transactions."
The SEC may challenge or not approve Nasdaq's plan to become a national
securities exchange or it may require changes in the manner Nasdaq conducts
its business before granting this approval.
The SEC may not approve Nasdaq's proposal to be registered as a national
securities exchange or may require changes in the manner Nasdaq conducts
its business before granting this approval. Failure to be so registered
could adversely effect Nasdaq's competitive position and could have a
material adverse effect on Nasdaq's business conditions and business
prospects.
In connection with Exchange Registration, certain changes must be made to
the national market system plans. Certain participants may object to, or
request modifications to amendments proposed by Nasdaq. Failure to resolve
these issues in a timely manner could delay Exchange Registration.
There can be no assurance that Exchange Registration will occur or that the
registration process will occur in a timely manner. Because of the nature
of the regulatory process and the variety of market structure issues that
would have to be resolved across all markets, the registration process
could be lengthy. The failure to be approved as an exchange by the SEC may
have negative implications on the ability of Nasdaq to fund its planned
initiatives.
The SEC has not yet agreed and may not agree to Nasdaq's proposal to
continue to operate the OTC Bulletin Board after Exchange Registration.
Nasdaq may face competition from the establishment of a "residual market"
by the NASD.
In the SEC's January 2001 order approving SuperMontage, it noted that in
order to address concerns that Nasdaq's position as an ESIP would compel
participation in SuperMontage, the NASD has committed to provide NASD
members with the ability to opt-out of SuperMontage by providing an
alternative quotation and transaction reporting facility for NASD members.
The SEC explained that the NASD alternative should be operational
contemporaneously with SuperMontage and should provide a market-neutral
electronic linkage to Nasdaq, as well as other marketplaces. The SEC stated
that this quotation and trade reporting facility must satisfy the Order
Handling Rules, Regulation ATS, and other regulatory requirements for ATSs,
ECNs, and market makers. In a March 2001 order approving a temporary
extension of the UTP Plan, the SEC stated that the revised UTP Plan must
provide for either (1) a fully viable alternative ESIP for all Nasdaq
securities, or (2) a fully viable alternative nonexclusive SIP in the event
that the UTP Plan does not provide for an ESIP. See "-Nasdaq could lose its
status as an exclusive securities information processor because of recent
regulatory developments." In this order, the SEC also stated that under the
revised UTP Plan, the NASD must provide direct or indirect access to the
alternative SIP, whether exclusive or non-exclusive, by any of its members
that qualifies, and to disseminate transaction information and individually
identified quotation information for these members through the SIP. In
addition, the SEC has also indicated that the approval of Exchange
Registration is linked to the NASD's obligation to provide an alternative
facility to allow NASD members to trade exchange listed securities. As a
result, it is likely that the NASD will be required to build a residual
market for Nasdaq, NYSE, and Amex listed securities. If this market becomes
a viable alternative to Nasdaq, then Nasdaq faces the risk of reduced
market share in transactions and market data revenues, which would
adversely affect Nasdaq's business, financial condition, and operating
results.
Nasdaq will not pay cash dividends for the foreseeable future.
Nasdaq anticipates that earnings, if any, will be retained for the
development of its business and that no cash dividends will be declared on
the Common Stock for the foreseeable future.
Provisions of Delaware law and Nasdaq's governing documents may delay or
prevent its takeover.
Nasdaq is organized under the laws of the State of Delaware and was
incorporated in 1979. Certain provisions of Delaware law may have the
effect of delaying or preventing a transaction that would cause a change in
Nasdaq's control. In addition, certain provisions of the Certificate of
Incorporation and Nasdaq's By-Laws (the "By-Laws") may delay, defer, or
prevent this type of transaction, even if Nasdaq's stockholders consider
the transaction to be in their best interests. For example, the Certificate
of Incorporation places limitations on the voting rights of persons, other
than the NASD or any other person as may be approved by the Nasdaq Board
prior to the time such person owns more than 5% of the then outstanding
shares of Common Stock, who otherwise would be entitled to exercise voting
rights in respect of more than 5% of the then outstanding shares of Common
Stock. As a result, third parties are limited from exercising voting
control over Nasdaq. Moreover, it is possible that the SEC might object to
any action of the Nasdaq Board that would permit certain persons from being
exempted from the foregoing restriction on voting power. In addition, in
response to the SEC's concern about a concentration of ownership of Nasdaq,
Nasdaq's Exchange Registration application includes a rule that prohibits
any Nasdaq member or any person associated with a Nasdaq member from
beneficially owning more than five percent of the outstanding shares of
Common Stock. Other provisions make the removal of incumbent directors and
the election of new directors more time consuming and difficult, which may
discourage third parties from attempting to obtain control of Nasdaq, even
if the change in control would be in the best interests of its
stockholders. See "Item 11. Description of Registrant's Securities to be
Registered."
Item 2. Financial Information.
The following table presents summary consolidated financial and operating
data for Nasdaq. The data presented in this table are derived from
"Selected Consolidated Financial Data of Nasdaq" and the consolidated
financial statements and notes thereto which are included elsewhere in this
Registration Statement. You should read those sections for a further
explanation of the financial data summarized here. You should also read the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Nasdaq" section, which describes a number of factors which
have affected Nasdaq's financial results.
Selected Consolidated Financial Data
Year ended December 31,
1996 1997 1998 1999 2000
-------------------------------- ---------------- - ------------- - ---------------
(in thousands, except per share data and
number of listed companies)
Statement of Income Data:
Revenues:
Transaction services $118,500 $174,741 $160,506 $283,652 $395,123
Market information services 99,446 126,436 152,665 186,543 258,251
Issuer services 111,832 113,019 137,344 163,425 184,595
Other 2,452 2,530 308 628 30,040
--------------- --------------- --------------- ------------- ---------------
Total revenues 332,230 416,726 450,823 634,248 868,009
Expenses:
Compensation and benefits 54,090 64,324 78,565 98,129 133,496
Marketing and advertising 34,356 53,817 42,483 62,790 45,908
Depreciation and amortization 24,405 31,336 34,984 43,696 65,645
Professional and contract services 17,233 22,259 35,127 35,282 61,483
Computer operations and data
communications 45,757 61,438 72,111 100,493 138,228
Travel, meetings, and training 6,547 7,310 7,750 10,230 12,113
Occupancy 4,380 4,883 5,354 6,591 14,766
Publications, supplies, and postage 4,512 5,223 5,208 4,670 7,181
Other 9,121 14,560 16,704 24,809 26,505
--------------- --------------- --------------- ------------- ---------------
Total direct expenses 200,401 265,150 298,286 386,690 505,325
Support cost from related parties, net 70,293 85,880 100,841 115,189 128,522
--------------- --------------- --------------- ------------- ---------------
Total expenses 270,694 351,030 399,127 501,879 633,847
Net operating income 61,536 65,696 51,696 132,369 234,162
Interest 6,341 7,522 9,269 12,201 20,111
Provision for income taxes (27,522) (33,187) (26,010) (58,421) (105,018)
Minority interest in earnings - - - - 872
--------------- --------------- --------------- ------------- ---------------
Net income 40,355 40,031 34,955 86,149 150,127
Weighted average common shares
outstanding(1) 100,000,000 100,000,000 100,000,000 100,000,000 112,090,493
Basic and diluted net income per share $0.40 $0.40 $0.35 $0.86 $1.34
Other Data:
EBITDA(3) $ 92,418 $ 97,032 $ 86,680 $ 176,065 $ 322,049
Capital expenditures 54,361 79,887 33,605 94,193 119,040
Net cash provided by operating activities 62,469 76,755 56,723 134,625 232,696
Net cash used in investing activities (50,726) (123,064) (58,150) (130,657) (269,385)
Net cash provided by financing activities 21 29,766 156 3,876 270,748
Number of listed companies 5,556 5,487 5,068 4,829 4,734
Shares traded 138,100,000 163,900,000 202,000,000 272,600,000 442,700,000
As of December 31,
1999 2000
(In thousands)
Balance Sheet Data:
Cash and cash equivalents $10,598 $262,257
Working capital 154,372 472,341
Total assets 578,254 1,075,317
Total stockholders' equity 352,012 764,901
- ------------------------------------
(1) Gives effect to the June 28, 2000, 49,999-for-one stock dividend
of the shares of Common Stock for years ended 1996- 2000.
(2) The pro forma basic and diluted net income per share figures
assume that no benefit has been derived from the net proceeds of
the Restructuring offerings.
(3) EBITDA consists of earnings before net interest, income taxes,
depreciation, and amortization. EBITDA is presented to clarify
Nasdaq's operating results and it is not intended to represent
cash flow or results of operations in accordance with generally
accepted accounting principles.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion of the financial condition and results of
operations of Nasdaq should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this
Registration Statement. This discussion contains forward-looking statements
that involve risks and uncertainties. Nasdaq's actual results may differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including, but not limited to, those set forth
under "Item 1. Business--Risk Factors" and elsewhere in this Registration
Statement.
Overview
As of December 31, 2000, the NASD owned approximately 60% of Nasdaq
assuming all Warrants purchased in Phase I are fully exercised
(approximately 81% assuming no Warrants are exercised). Phase II of the
Restructuring closed in January 2001. Subsequent to the closing of Phase
II, the NASD owns approximately 41% of Nasdaq assuming all Warrants
purchased in Phase I and Phase II are fully exercised (approximately 74%
assuming no Warrants are exercised). Transactions between Nasdaq and the
NASD are on a cost basis and are allocated on a monthly basis through
transfer pricing mechanisms.
Revenues
Nasdaq's revenues increased from $450.8 million for the year ended December
31, 1998 to $868.0 million for the year ended December 31, 2000,
representing a compound annual growth rate of 38.8%. Nasdaq's total
revenues for the year ended December 31, 2000 were $868.0 million,
representing a 36.9% increase from $634.2 million for the year-ended
December 31, 1999.
Nasdaq has three main revenue sources: transaction services, market
information services, and issuer services. For the year ended December 31,
2000, transaction services revenues of $395.1 million increased $111.4
million or 39.3% from $283.7 million for the year ended December 31, 1999.
Transaction services consist of SelectNet, the NWII, SOES, ACT, and other
direct execution and comparison services. SelectNet, the high-volume
automated execution service, provided revenues of $113.5 million, an
increase of $30.4 million or 36.6% for the year ended December 31, 2000
from $83.1 million for the year ended December 31, 1999, primarily due to
an increase in average trade volume.
SOES, a system providing for the automatic execution of small market
orders, provided revenues of $32.2 million for the year ended December 31,
2000, an increase of $12.5 million or 63.2% from $19.7 million for the year
ended December 31, 1999, primarily due to an increase in volume of SOES
executions. The NNM Execution System will result in the migration of
significant volume from SelectNet to SOES upon its implementation, which is
currently scheduled for the third quarter of 2001. The integrated pricing
approach envisioned for NNMS is consistent with the volume-based discount
pricing introduced in 1999. It is expected that under this plan lost
revenue from migrated SelectNet volume will be replaced by additional NNM
Execution System revenue.
ACT, the automated service that speeds the post-execution steps of
reporting price and volume comparison and clearing of pre-negotiated trades
completed in Nasdaq and OTC Bulletin Board securities, provided revenues of
$100.0 million for the year ended December 31, 2000, an increase of $31.9
million or 46.8% from $68.1 million for the year ended December 31, 1999,
primarily due to increases in volume.
NWII is the trader's direct connection to Nasdaq. This primary trading
device, along with APIs, provided over $121.6 million in revenues for the
year ended December 31, 2000, an increase of $34.0 million or 38.8% from
$87.6 million in revenues for the year ended December 31, 1999.
For the year ended December 31, 2000, market information revenues of $258.3
million increased $71.8 million or 38.5% from $186.5 million for the year
ended December 31, 1999. The majority of revenues in market information are
generated by Nasdaq's Level 1 and last sale service fees that are based on
the number of terminals or access lines that a user may subscribe to
receive market information or are alternatively assessed on a per-quote fee
basis for non-professional users. These services allow real-time access to:
(1) inside quotes (highest bid and lowest ask) for all securities listed on
the NNM and The Nasdaq SmallCap Market; (2) inside quotes for OTC Bulletin
Board securities; (3) trade price and volume information for Nasdaq, OTC
Bulletin Board, and other over-the-counter equities; (4) intraday
calculations for the major Nasdaq indexes; and (5) daily net asset values
and associated information for over 8,000 money market and mutual funds.
Level 1 revenues increased by approximately $24.6 million or 18.2% to
$159.6 million for the year ended December 31, 2000 from $135.0 million for
the year ended December 31, 1999.
Another major revenue contributor in market information is NQDS. This
continuous stream of quoted trade information allows information vendors to
create a display similar to the NWII. In addition to providing subscribers
with the inside quotes, NQDS provides subscribers with quotes of each
individual market maker and ECNs. NQDS revenues increased by approximately
$42.3 million or 130.6% to $74.8 million for the year ended December 31,
2000 from $32.5 million for the year ended December 31, 1999.
The final major component of market information revenues relates to Nasdaq
InterMarket tape revenues. Nasdaq InterMarket tape revenues increased by
approximately $4.7 million or 27.4% to $21.9 million for the year ended
December 31, 2000, from $17.2 million for the year ended December 31, 1999.
The overall growth in market information revenues is primarily due to an
increase in nonprofessional demand as measured by the increase in the
number of average nonprofessional market data terminals in service of
507,000 or 268.0% to 696,000 for the year ended December 31, 2000 from
189,000 for the year ended December 31, 1999. Additionally, the growth was
driven by an increase in the average number of non- professional quote
inquiries of 15.4 million per day or 112.9% to 29.0 million per day for the
year ended December 31, 2000 from 13.6 million per day for the year ended
December 31, 1999.
Issuer services revenues of $184.6 million increased $21.2 million or 13.0%
for the year ended December 31, 2000 from $163.4 million for the year ended
December 31, 1999. Issuer revenues are generated through fees for initial
listings, secondary offerings, and annual renewal fees for companies listed
on Nasdaq.
Results of Operations
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
Revenues
Total revenues were $868.0 million for the year ended December 31, 2000,
representing a 36.9% increase from $634.2 million for the year ended
December 31, 1999. This increase was largely driven by growth in trading
volumes. Overall average daily share volume on Nasdaq increased by 62.4%,
from 1.08 billion shares per day for the year ended December 31, 1999 to
1.77 billion shares per day for the year ended December 31, 2000. Market
information services revenues of $258.3 million increased $71.8 million or
38.5% for the year ended December 31, 2000 from $186.5 million for the year
ended December 31, 1999 primarily due an increase in nonprofessional demand
partially offset by fee adjustments for nonprofessional market information
users. Transaction services revenues of $395.1 million increased $111.4
million or 39.3% for the year ended December 31, 2000 from $283.7 million
for the year ended December 31, 1999, primarily due to an increase in
average daily share volume demand partially offset by fee adjustments.
Issuer services revenues of $184.6 million increased $21.2 million or 13.0%
for the year ended December 31, 2000 from $163.4 million for the year ended
December 31, 1999, primarily due to a 17.1% increase in the average size of
initial public offerings and secondary offerings.
Direct Expenses
Direct expenses increased $118.6 million or 30.7% to $505.3 million for the
year ended December 31, 2000 from $386.7 million for the year ended
December 31, 1999.
Compensation costs increased $35.4 million or 36.1% to $133.5 million for
the year ended December 31, 2000 from $98.1 million for the year ended
December 31, 1999 primarily due to an increase in headcount of
approximately 171 employees or 16.4% to 1,214 employees as of December 31,
2000, from 1,043 employees as of December 31, 1999. The majority of new
employees are technology staff needed for system enhancements and
development initiatives and are performing services for Nasdaq that would
have been otherwise provided by independent contractors.
Marketing and advertising costs decreased $16.9 million or 26.9% to $45.9
million for the year ended December 31, 2000 from $62.8 million for the
year ended December 31, 1999, primarily due to a decrease in scale of the
media advertising campaign run in the fall of 2000 as compared to the fall
campaign run in 1999.
Computer operations and data communications costs increased $37.7 million
or 37.5% to $138.2 million for the year ended December 31, 2000 from $100.5
million for the year ended December 31, 1999, due to significant
investments in software licenses and hardware maintenance costs for the
operating environment to accommodate the growth in share volume.
Professional and contract services costs, net of amounts capitalized under
Statement of Position 98-1 as described in the notes to consolidated
financial statements, increased $26.2 million or 74.2% to $61.5 million for
the year ended December 31, 2000 from $35.3 million for the year ended
December 31, 1999. The main projects included in current year professional
and contract services expense are Nasdaq Global and related international
initiatives, design costs related to Nasdaq.com and Nasdaq online, vendor
services for the new Nasdaq MarketSite(SM)("MarketSite") and broadcast
facility located in Times Square, New York, and helpdesk and desktop
support costs provided by Electronic Data Systems Corporation ("EDS").
Depreciation expense increased $21.9 million or 50.1% to $65.6 million for
the year ended December 31, 2000 from $43.7 million for the year ended
December 31, 1999, primarily due to purchases of computer hardware
necessary to handle the growth in trading volumes.
The remaining direct expenses increased $14.3 million or 30.9% to $60.6
million for the year ended December 31, 2000 from $46.3 million for the
year ended December 31, 1999. This was primarily due to an increase in
occupancy costs as a result of the MarketSite and broadcast facility in
Times Square, New York.
Support Costs
Support costs from related parties increased by $13.3 million or 11.5% to
$128.5 million for the year ended December 31, 2000 from $115.2 million for
the year ended December 31, 1999. Specifically, Nasdaq incurred increased
surveillance and other regulatory charges from NASDR. Surveillance and
other regulatory charges are comprised primarily of the costs relating to
technological investments for market surveillance as well as direct costs
for enforcement and other regulation services. Surveillance and other
regulatory charges from NASDR increased by $14.8 million or 22.7% to $79.9
million for the year ended December 31, 2000 from $65.1 million for the
year ended December 31, 1999. Additionally, contributing to the increase is
a decline in the amount of Nasdaq costs charged to Amex of $9.1 million or
65.0% to $4.9 million for the year ended December 31, 2000 from $14.0
million for the year ended December 31, 1999. These increases are partially
offset by a decrease in support costs from the NASD of $10.5 million or
16.4% to $53.6 million for the year ended December 31, 2000 from $64.1
million for the year ended December 31, 1999, primarily since support of
Nasdaq's computer desktop operations was outsourced to EDS effective June
1, 1999. Prior to June 1, 1999, these services were provided to Nasdaq by
the NASD. Amounts charged to related parties are netted against charges
from related parties in the "Support cost from related parties, net" line
item on the Consolidated Statements of Income.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Revenues
Total revenues increased $183.4 million or 40.7% to $634.2 million for the
year ended December 31, 1999 from $450.8 million for the year ended
December 31, 1998. Results for the year ended December 31, 1999 reflect the
strong U.S. equity market performance experienced as evidenced by an
increase in average daily share volume on Nasdaq of approximately 35% as
compared to the previous year. Transaction services revenues of $283.7
million increased $123.2 million or 76.8% for the year ended December 31,
1999 from $160.5 million for the year ended December 31, 1998, primarily
due to an increase in average daily share volume of 108.5% to over 1.3
million average trades per day during the year ended December 31, 1999 as
compared to over 0.6 million average trades per day during the year ended
December 31, 1998. Market information services revenues of $186.5 million
increased $33.4 million or 22.2% for the year ended December 31, 1999 from
$152.7 million for the year ended December 31, 1998, primarily due to a
35.7% growth in the number of subscribers of market quote and trade data
services. Issuer services revenues of $163.4 million increased $26.1
million or 19.0% for the year ended December 31, 1999 from $137.3 million
for the year ended December 31, 1998, primarily due to an increase in the
number and size of initial public offerings, spin-offs, and movement of
issuers into Nasdaq from other markets.
Direct Expenses
Direct expenses increased $88.4 million or 29.6% to $386.7 million for the
year ended December 31, 1999 from $298.3 million for the year ended
December 31, 1998.
Compensation costs increased $19.5 million or 24.8% to $98.1 million for
the year ended December 31, 1999 from $78.6 million for the year ended
December 31, 1998, primarily due to an increase in headcount of
approximately 228 employees to 1,042 employees as of December 31, 1999,
from 814 employees as of December 31, 1998 that represents a 28.0% increase
in headcount. The majority of new employees are technology staff needed for
system enhancements and development initiatives and are performing services
for Nasdaq that would have been otherwise provided by independent
contractors.
Marketing and advertising costs increased $20.3 million or 47.8% to $62.8
million for year ended December 31, 1999 from $42.5 million for the year
ended December 31, 1998, primarily due to an extensive media advertising
campaign run during the fall of 1999 to promote brand-awareness.
Computer operations and data communications costs increased $28.4 million
or 39.4% to $100.5 million for the year ended December 31, 1999 from $72.1
million for the year ended December 31, 1998, primarily due to the initial
installation of circuits for EWNII in 1998. EWNII is the new Nasdaq network
to connect Nasdaq's computerized market facilities to market participants.
Professional and contract services costs net of amounts capitalized under
Statement of Position 98-1 as described in the notes to consolidated
financial statements included elsewhere in this Registration Statement
increased $0.2 million or 0.6% to $35.3 million for the year ended December
31, 1999, from $35.1 million for the year ended December 31, 1998. The main
projects included in current year professional and contract services
expense are development costs related to the New Amex Equity Book ("NAMEX")
and the Integrated Quote Management System ("IQMS"). NAMEX displays to
market professionals the aggregate size and price of equity orders on the
book away from the best bid and offer. The costs incurred by Nasdaq in
assisting Amex in the development of NAMEX are charged back to Amex as
support costs provided to related parties. Amounts charged to related
parties are netted against charges from related parties in the "Support
cost from related parties net," line item on the Consolidated Statement of
Income. For the year ended December 31, 1999, approximately $11.7 million
of NAMEX development costs that would have otherwise been capitalized as an
internally developed software cost were expensed in the fourth quarter of
1999 by Nasdaq after a determination not to implement the system. IQMS was
intended to replace Nasdaq's current quotation environment, consolidate
Nasdaq's various quotation applications and enable Nasdaq to handle
decimalization, an industry-wide initiative to convert securities systems
pricing figures from fractions to decimals. In May 2000, it was determined
that designing the current system to handle the decimalization would
present lower technological risk than would further work on IQMS.
Depreciation expense increased $8.7 million or 24.9% to $43.7 million for
the year ended December 31, 1999 from $35.0 million for the year ended
December 31, 1998, primarily due to purchases of computer hardware
necessary to handle the growth in Nasdaq trading volume.
The remaining direct expenses increased $11.3 million or 32.3% to $46.3
million for the year ended December 31, 1999 from $35.0 million for the
year ended December 31, 1998. This was primarily due to an increase in
other direct expenses that includes a $5.6 million increase in the
allowance related to performance under the EWNII contract with WorldCom
Inc. Nasdaq partnered with WorldCom Inc. to deploy a state of the art
communications infrastructure to link Nasdaq's computerized market
facilities to the market participants. WorldCom Inc. provides networking
and management services to the EWNII in return for revenues generated by
EWNII and a deposit fee paid by Nasdaq. Although the deposit will
be refunded if Nasdaq attains certain revenue targets, the allowance is
established for any unrecoverable amounts. Other direct expenses also
increased due to Nasdaq's contribution to The Nasdaq Stock Market
Educational Foundation, Inc. of $10.0 million for the year ended December
31, 1999 compared to $5.0 million for the year ended December 31, 1998.
Contributions to The Nasdaq Stock Market Educational Foundation, Inc. were
made in the fourth quarters of the years ended December 31, 1998 and
December 31, 1999. The foundation is a non-profit membership organization
established and operated exclusively to advance educational purposes,
principally involving the study of business, economics, and finance.
Support Costs
Support costs from related parties increased by $14.4 million or 14.3% to
$115.2 million for the year ended December 31, 1999 from $100.8 million for
the year ended December 31, 1998, primarily due to the increase in support
charges from the NASD which largely represent costs incurred by the NASD to
develop and maintain technology on behalf of Nasdaq. Specifically, support
costs from the NASD increased by $11.5 million or 21.9% to $64.1 million
for the year ended December 31, 1999 from $52.6 million for the year ended
December 31, 1998, primarily due to an increase in technology development
costs as a result of Nasdaq Japan, various Year 2000 ("Y2K") initiatives,
and an increase in overall network environment costs necessary to support
the increase in trade volume. In addition, Nasdaq incurred surveillance and
other regulatory charges from NASDR. Surveillance and other regulatory
charges are comprised primarily of the costs relating to technological
investments for market surveillance as well as direct costs for enforcement
and other regulation services. Surveillance and other regulatory charges
from NASDR increased by $7.8 million or 13.6% to $65.1 million for the year
ended December 31, 1999, from $57.3 million for the year ended December 31,
1998. Nasdaq charged Amex $14.0 million as support costs provided to
related parties in the year ended December 31, 1999. This amount consists
of $9.2 million of non-technology services provided such as marketing
services performed by Nasdaq on behalf of Amex as well as $4.8 million of
technological support related to the development of new systems such as
NAMEX and the enhancement of existing Amex systems. Amounts charged to
related parties are netted against charges from related parties in the
"Support cost from related parties, net" line item on the Consolidated
Statements of Income.
Liquidity and Capital Resources
December 31, 2000 compared to December 31, 1999
Cash and cash equivalents and available for sale securities totaled $494.4
million as of December 31, 2000, an increase of $330.2 million from $164.2
million as of December 31, 1999. Working capital increased $318.3 million
to $472.6 million as of December 31, 2000, from $154.3 million as of
December 31, 1999.
Cash and cash equivalents increased $251.7 million to $262.3 million as of
December 31, 2000, primarily due to cash provided by financing activities
as a result of the net proceeds received from Phase I which equaled $253.3
million.
For the year ended December 31, 2000, operating activities provided net
cash inflows of $232.7 million, primarily due to cash received from
customers of $713.0 million less cash paid to suppliers, employees, and
related parties of $403.4 million and income taxes paid of $101.2 million.
Net cash used in investing activities was $269.4 million for the twelve
months ended December 31, 2000, due in part to capital expenditures to
complete construction of the MarketSite and broadcast facility in Times
Square. In addition, Nasdaq continued to make capital investments in
technology to continue to support Nasdaq's system capacity needs. The
remaining cash used in investing activities is attributable to purchases of
investments with the proceeds of the Phase I offering that exceeded the
sales and maturities of investments.
Cash provided by financing activities was $288.3 million as of December 31,
2000 primarily due to the net proceeds received from Phase I which equaled
approximately $253.3 million. Nasdaq will use the proceeds to invest in new
technology, implement and form strategic alliances, implement its pricing
strategies, and build its brand identity through marketing programs.
Additionally, in connection with the closing of Phase II on January 18,
2001, Nasdaq yielded net proceeds of approximately $63.7 million. Nasdaq
believes that the liquidity provided by existing cash and cash equivalents,
investments, and cash generated from operations will provide sufficient
capital to meet operating requirements.
December 31, 1999 compared to December 31, 1998
Cash and cash equivalents and available for sale securities totaled $164.2
million as of December 31, 1999, an increase of $31.6 million from $132.6
million as of December 31, 1998. Working capital increased $33.5 million to
$154.3 million as of December 31, 1999, from $120.8 million as of December
31, 1998.
Cash and cash equivalents increased $7.8 million to $10.6 million as of
December 31, 1999, primarily due to cash provided by operating activities
of $134.6 million, partially offset by cash used in investing activities of
$130.7 million.
In the year ended December 31, 1999, operating activities provided net cash
inflows of $134.6 million, primarily due to cash received from customers of
$527.9 million less cash paid to suppliers, employees, and related parties
of $352.9 million.
Net cash used in investing activities was $130.7 million in the year ended
December 31, 1999, due in part to an increase in capital expenditures
related to construction of the new MarketSite and broadcast facility in
Times Square in New York City totaling approximately $31.0 million. In
addition, Nasdaq made capital investments of approximately $60.0 million in
technology to continue to support Nasdaq's system capacity needs. The
remaining cash used in investing activities is attributable to purchases of
investments that exceeded the proceeds from sales and maturities of
investments.
Nasdaq had no significant financing activities during the year ended
December 31, 1999, as the cash generated by operations was sufficient to
fund planned growth and capital requirements.
Quantitative and Qualitative Disclosure About Market Risk
Market risk represents the risks of changes in the value of a financial
instrument, derivative or non-derivative, caused by fluctuations in
interest rates, foreign exchange rates, and equity prices. As of December
31, 2000, Nasdaq's investment portfolio consists primarily of floating rate
securities, obligations of U.S. Government sponsored enterprises, municipal
bonds, and commercial paper. Nasdaq's primary market risk is associated
with fluctuations in interest rates and the effects that such fluctuations
may have on its investment portfolio and outstanding debt. The weighted
average maturity of the fixed income portion of the portfolio is 1.05 years
as of December 31, 2000. Nasdaq's outstanding debt obligation specifies a
fixed interest rate until May 2007 and a floating interest rate based on
the lender's cost of funds until maturity in 2012. The investment portfolio
is held primarily in short term investments with maturities averaging
approximately one year, therefore management does not believe that a one
percent fluctuation in market interest rates will have a material effect on
Nasdaq's investment portfolio and outstanding debt.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities." Statement of Financial
Accounting Standards ("SFAS") No.133 provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. In June 1999, the FASB issued SFAS No. 137 "Accounting
for Derivative Instruments and Hedging Activities-Deferral of the Effective
Date of FASB Statement No. 133" that defers the date of adoption of SFAS
No. 133 such that it is effective for fiscal years beginning after June 15,
2000. In June 2000, the FASB issued SFAS No. 138 "Accounting for Certain
Derivative Instruments and Certain Hedging Activities-an Amendment of FASB
Statement No. 133" that addresses a limited number of issues causing
implementation difficulties for a large number of entities preparing to
apply SFAS No. 133. Nasdaq believes that the adoption of SFAS No. 133 will
not have a significant impact on its operating results or cash flows.
Item 3. Properties.
Nasdaq's principal technology services, systems engineering, and market
operations are located in approximately 162,000 square feet of Nasdaq-owned
space in Trumbull, Connecticut. Nasdaq also leases 44,000 and 57,000 square
feet of office space in two facilities in Trumbull, Connecticut. A small
back-up site for market operations is located in Norwalk, Connecticut. The
NASD and Nasdaq are in the process of a real estate swap transaction, which
would transfer ownership of an approximate 110,000 square feet facility
housing the Nasdaq data center in Rockville, Maryland to Nasdaq in exchange
for a Nasdaq- owned office building of approximately 58,000 square feet.
Nasdaq also occupies approximately 8,000 square feet in one of the NASD's
Rockville, Maryland locations where Market Watch is co-located with NASDR's
Market Regulation. In Gaithersburg, Maryland, Nasdaq occupies an
approximate 66,000 square feet space, leased by the NASD. This lease
expires in 2001 and will be replaced by a Nasdaq lease of approximately
78,000 square feet in the nearby Blackwell facility in Rockville, Maryland.
Nasdaq has a marketing facility of approximately 26,000 square feet in New
York's Times Square, originally leased by the NASD but scheduled for
assignment to Nasdaq. Nasdaq is currently in the process of relocating its
headquarters in New York, New York from the NASD leased space at 33
Whitehall to One Liberty Plaza, where Nasdaq will occupy approximately
78,000 square feet of space subleased from the NASD. Nasdaq also occupies
an approximate 24,000 square feet space on Rector Street in New York City,
which is an assigned lease from Amex. Nasdaq occupies an approximate 3,500
square feet space in Jersey City, New Jersey, which houses Nasdaq Tools. In
Washington D.C., Nasdaq occupies an approximate 40,000 square feet space
within 1735 and 1801 K Street locations. In addition, Nasdaq leases
administrative and sales facilities in Menlo Park, California, London,
England, and Sao Paulo, Brazil. Nasdaq's Chicago operations will sublease
space from the NASD.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth the beneficial ownership of Nasdaq's Common
Stock by all persons who are beneficial owners of more than five percent of
the Common Stock and the beneficial ownership of Nasdaq's Common Stock and
Nasdaq Japan's common shares by (1) each director, (2) Nasdaq's Chief
Executive Officer ("CEO") and four most highly compensated executive
officers other than the CEO, who were serving as executive officers at the
end of 2000, and (3) all directors and executive officers as a group.
Except as otherwise indicated, Nasdaq believes that the beneficial owners
listed below, based on information furnished by such owners, will have sole
investment and voting power with respect to such shares, subject to
community property laws where applicable. Unless otherwise indicated, the
business address of such persons is One Liberty Plaza, New York, New York,
10006. As of April 17, 2001, approximately 128,692,543 shares of Common
Stock were outstanding and approximately 14,100 common shares of Nasdaq
Japan were outstanding.
Name of beneficial owner Common Stock Percent Common Shares Percent
Beneficially Owned of Class of Nasdaq Japan of Class
Beneficially Owned
- ---------------------------------- ----------------------- ------------ ------------------------- ------------
National Association of
Securities Dealers, Inc............ 95,454,209(1) 74
1735 K Street, N.W.
Washington, D.C. 20006
Dr. Josef Ackermann................ -(2) - - -
H. Furlong Baldwin................. - - - -
Frank E. Baxter.................... -(3) - - -
Alfred R. Berkeley, III............ - - - -
Michael W. Brown................... - - - -
Michael Casey...................... -(4) - - -
Michael W. Clark................... -(5) - - -
William S. Cohen................... - - - -
F. Warren Hellman.................. -(6) - - -
John D. Markese.................... - - - -
E. Stanley O'Neal.................. -(7) - - -
Vikram S. Pandit................... -(8) - - -
Kenneth D. Pasternak............... -(9) - - -
David S. Pottruck.................. -(10) - - -
Arthur Rock........................ - - - -
Richard C. Romano.................. 20,000(11) * - -
Hardwick Simmons................... - - - -
Arvind Sodhani..................... -(12) - - -
Sir Martin Sorrell................. - - - -
Frank G. Zarb...................... 60,000(13) * 35(14) *
Alfred R. Berkeley, III............ 15,900(15) * - -
J. Patrick Campbell................ 30,000(16) * - -
John L. Hilley..................... 30,000(17) * 475(18) 3.4
Richard G. Ketchum................. 40,000(19) * 19(20) *
All directors and executive
officers as a group
(33 persons)....................... 333,100 * 548 3.9
- ----------------------------
* Less than one percent
(1) Includes approximately 43,231,976 shares of Common Stock underlying the
unexercised, unexpired outstanding Warrants and includes the 18,461,538
shares of Common Stock the NASD has agreed to sell to Nasdaq.
(2) Dr. Ackermann is head of Corporate and Institutional Clients Group of
Deutsche Bank AG which, together with its affiliates, owns an aggregate of
1,500,300 shares of Common Stock. Dr. Ackermann disclaims beneficial
ownership of such shares.
(3) Mr. Baxter is the Chairman of the Jefferies Group, Inc. which, together
with its affiliates, owns an aggregate of 115,912 shares of Common Stock.
Mr. Baxter disclaims beneficial ownership of such shares.
(4) Mr. Casey is an officer of Starbucks Corporation which owns an
aggregate of 10,000 shares of Common Stock. Mr. Casey disclaims beneficial
ownership of such shares.
(5) Mr. Clark is an officer of Credit Suisse First Boston, Inc., which,
together with its affiliates, owns 1,604,650 shares of Common Stock. Mr.
Clark disclaims beneficial ownership of such shares.
(6) Mr. Hellman is co-founder and Chairman of Hellman & Friedman LLC. Upon
consummation of the proposed sale by Nasdaq of the $240,000,000 aggregate
principal amount of Subordinated Debentures (convertible into an aggregate
of 12,000,000 shares of Common Stock, subject to adjustment), Hellman &
Friedman will beneficially own the share of Common Stock underlying their
Subordinated Debentures. Mr. Hellman is a voting member of the investment
committee which indirectly exercises sole voting and investment power with
respect to the Subordinated Debentures. Mr. Hellman disclaims beneficial
ownership of the Subordinated Debentures except to the extent of his
indirect pecuniary interest in the Subordinated Debentures.
(7) Mr. O'Neal is an officer of Merrill Lynch & Co. which, together with
its affiliates, owns 1,875,000 shares of Common Stock. Mr. O'Neal disclaims
beneficial ownership of such shares.
(8) Mr. Pandit is an officer of Morgan Stanley Dean Witter & Co. which,
together with its affiliates, owns 1,126,200 shares of Common Stock. Mr.
Pandit disclaims beneficial ownership of such shares.
(9) Mr. Pasternak is Chairman, CEO, and President of Knight Trading Group,
Inc. which, together with its affiliates, owns an aggregate of 1,125,000
shares of Common Stock. Mr. Pasternak disclaims beneficial ownership of
such shares.
(10) Mr. Pottruck is an officer of The Charles Schwab Corporation which,
together with its affiliates, owns 1,125,000 shares of Common Stock. Mr.
Pottruck disclaims beneficial ownership of such shares.
(11) Represents an aggregate of 20,000 owned by Romano Brothers & Co. Mr.
Romano is the President and majority stockholder of Romano Brothers & Co.
(12) Mr. Sodhani is an officer of Intel Corporation which owns 430,000
shares of Common Stock. Mr. Sodhani disclaims beneficial ownership of such
shares.
(13) Represents 60,000 shares of restricted stock issued under Nasdaq's
Equity Incentive Plan which have not yet vested. Under the terms of this
plan, Mr. Zarb has the right to direct the voting of such shares.
(14) Represents options to purchase an aggregate of 35 Nasdaq Japan common
shares.
(15) Represents 15,900 shares of restricted stock issued under Nasdaq's
Equity Incentive Plan which have not yet vested. Under the terms of this
plan, Mr. Berkeley has the right to direct the voting of such shares.
(16) Represents 30,000 shares of restricted stock issued under Nasdaq's
Equity Incentive Plan which have not yet vested. Under the terms of this
plan, Mr. Campbell has the right to direct the voting of such shares.
(17) Represents 30,000 shares of restricted stock issued under Nasdaq's
Equity Incentive Plan which have not yet vested. Under the terms of this
plan, Mr. Hilley has the right to direct the voting of such shares.
(18) Represents shares of restricted stock.
(19) Represents 40,000 shares of restricted stock issued under Nasdaq's
Equity Incentive Plan which have not yet vested. Under the terms of this
plan, Mr. Ketchum has the right to direct the voting of such shares.
(20) Represents options to purchase an aggregate of 19 shares of Nasdaq
Japan common shares.
Item 5. Directors and Executive Officers.
The directors and executive officers of Nasdaq are as follows:
Name Age Position
- ------------------------- --------- -----------------------------------
Frank G. Zarb 66 Chairman of the Nasdaq Board Class 2
Hardwick Simmons 60 CEO, Director Nominee Class 1
Dr. Josef Ackermann 53 Director Nominee Class 2
H. Furlong Baldwin 69 Director Class 2
Alfred R. Berkeley, III 56 Vice Chairman and Director Class 1
Frank E. Baxter 64 Director Class 1
Michael W. Brown 55 Director Class 1
Michael Casey 55 Director Class 3
Michael W. Clark 41 Director Nominee Class 1
William S. Cohen 60 Director Nominee Class 1
F. Warren Hellman 66 Director Nominee Class 2
John D. Markese 55 Director Class 1
E. Stanley O'Neal 49 Director Class 3
Vikram S. Pandit 45 Director Class 3
Kenneth D. Pasternak 47 Director Nominee Class 1
David S. Pottruck 52 Director Class 3
Arthur Rock 74 Director Class 3
Richard C. Romano 68 Director Class 2
Arvind Sodhani 47 Director Class 1
Sir Martin Sorrell 56 Director Class 2
Richard G. Ketchum 50 President
Gregor S. Bailar 37 Executive Vice President--Operations and
Technology and Chief Information Officer
J. Patrick Campbell 52 Executive Vice President, Chief Operating
Officer, and President of Nasdaq U.S.
Markets
Steven Dean Furbush 42 Executive Vice President--Transaction
Services
John M. Hickey 64 Executive Vice President
John L. Hilley 53 Executive Vice President--Strategic
Development and Chairman and Chief
Executive Officer of Nasdaq International
Edward S. Knight 50 Executive Vice President and General
Counsel
Gordon F. Martin 53 Executive Vice President and Chief
Financial Officer
Steven Randich 38 Executive Vice President and Chief
Technology Officer
Denise B. Stires 38 Executive Vice President--Marketing and
Investor Services
John N. Tognino 62 Executive Vice President
John T. Wall 59 President, Nasdaq International
David P. Warren 47 Executive Vice President--Chief
Administrative Officer
David Weild IV 44 Executive Vice President--Issuer Affairs
Frank G. Zarb, a Staff Director, has been Chairman of the Nasdaq Board
since January 2000 and Chairman of the NASD Board since 1997. Mr. Zarb was
the CEO of Nasdaq from 1997 to February 2001 and CEO of the NASD from 1997
to November 2000. Prior to joining the NASD in 1997, Mr. Zarb was Chairman,
CEO, and President of Alexander & Alexander Services, Inc., an insurance
brokerage and professional services consulting firm, from June 1994 through
January 1997. Mr. Zarb is a member of the Board of Trustees of the Gerald
R. Ford Foundation and a former Chairman of the Board of Hofstra
University, where he still serves as a Board member.
Hardwick Simmons, a Staff Director nominee, became CEO of Nasdaq in
February 2001. Prior to joining Nasdaq, Mr. Simmons served from May 1991 to
December 2000 as President and CEO of Prudential Securities Incorporated,
the investment and brokerage firm, and Prudential Securities Group Inc.,
the firm's holding company. Mr. Simmons is a former member of Prudential
Securities' Operating Committee, Operating Council, and the board of
directors of Prudential Securities Group Inc. Prior to joining Prudential
Securities in 1991, Mr. Simmons was President of the Private Client Group
at Shearson Lehman Brothers, Inc.
Dr. Josef Ackermann, an Industry Director, was elected to the Nasdaq Board
in April 2001 to be effective immediately following Nasdaq's 2001 annual
meeting of stockholders (the "2001 Annual Meeting"). Dr. Ackermann is
Chairman of Corporate and Investment Banking of Deutsche Bank AG, a global
bank and financial services firm, and will become Speaker of the Board of
Managing Directors at Deutsche Bank AG in 2002. Dr. Ackermann has served on
the Board of Managing Directors of Deutsche Bank AG since 1996. Prior to
this position, Dr. Ackermann was President of the Executive Board of Credit
Suisse from 1993. Dr. Ackermann serves on the board of directors of
Vodafone Group Plc and Stora Enso Oyj.
H. Furlong Baldwin, a Non-Industry Director, was elected to the Nasdaq
Board in July 2000. Mr. Baldwin has been a member of the NASD Board since
1999. Mr. Baldwin is Chairman of the Mercantile Bankshares Corporation, a
multibank holding company. Mr. Baldwin joined Mercantile-Safe Deposit &
Trust Company in 1956 and was elected President in 1970 of Mercantile-Safe
Deposit & Trust Company and Mercantile Bankshares Corporation and Chairman
and CEO in 1976. Mr. Baldwin serves on the board of directors of Mercantile
Safe Deposit & Trust Company, Merchantile Bankshares Corporation,
Constellation Energy Group, CSX Industries, Offitbank, Wills Group, and The
St. Paul Companies.
Alfred R. Berkeley III, a Staff Director, was elected to the Nasdaq Board in
1996. Mr. Berkeley has been Vice Chairman of Nasdaq since July 2000 and was
President of Nasdaq from June 1996 to July 2000. Prior to joining Nasdaq, Mr.
Berkeley served for five years as Managing Director and Senior Banker of the
Corporate Finance Department of Alex. Brown & Sons Incorporated, a financial
services firm. Mr. Berkeley is a member of the board of directors of Princeton
Capital Management, Inc. Mr. Berkeley is not standing for re-election to the
Nasdaq Board when his term ends in connection with the 2001 Annual Meeting.
Frank E. Baxter, an Industry Director, was elected to the Nasdaq Board in
1998. Mr. Baxter is Chairman of the Jefferies Group, Inc., a holding
company whose affiliated companies offer a variety of services for
institutional investors. Mr. Baxter joined Jefferies & Co. in 1974 and
during his time has served as President, Chief Operating Officer ("COO")
and CEO. Mr. Baxter is a Director of Investment Technology Group, Inc. and
Burdett, Buckeridge, & Young, Australia.
Michael W. Brown, a Non-Industry Director, served as the Chairman of the
Nasdaq Board from 1996 to January 2000 and was elected to the Nasdaq Board
in 1995. Mr. Brown is the former Chief Financial Officer ("CFO") of
Microsoft Corporation a software developer and manufacturer. Mr. Brown
spent 18 years with the public accounting firm of Deloitte and Touche LLP.
Mr. Brown currently serves on the board of directors of Administaff Inc.,
and FatKat Inc. Mr. Brown is a member of the Thomas Weisel Partners
Advisory Board, XML Fund Advisory Board and is a Fellow at Bios, L.P. Mr.
Brown is not standing for re-election to the Nasdaq Board when his term
ends in connection with the 2001 Annual Meeting.
Michael Casey, a Non-Industry Director, was elected to the Nasdaq Board in
January 2001. Mr. Casey has been Executive Vice President, CFO, and Chief
Administrative Officer of Starbucks Corporation, a food services and retail
store licensing corporation, since September 1997. Prior to his current
position, Mr. Casey was Senior Vice President and CFO of Starbucks from
August 1995 to September 1997.
Michael W. Clark, an Industry Director nominee, is a Managing Director and
Head of Global Equity Trading at Credit Suisse First Boston, Inc. ("CSFB"),
a global investment bank serving institutional, corporate, government, and
individual clients, and a member of its Global Equity Management Committee.
Mr. Clark also serves on the firm's Operating Committee and is a member of
the Managing Director Evaluation Committee and Co-Head of the Global
Recruiting Committee. Mr. Clark joined CSFB as a Vice President in 1991.
Prior to assuming his present role in 1995, Mr. Clark was in charge of
CSFB's global convertible trading and risk management.
William S. Cohen, a Public Director, was elected to the Nasdaq Board in
April 2001 to be effective immediately following the 2001 Annual Meeting.
Secretary Cohen is the Chairman and CEO of The Cohen Group, a strategic
business consulting firm. He was previously the Secretary of Defense during
the Clinton Administration from 1997-2001. Secretary Cohen represented
Maine in the U.S. Senate for three terms and in the U.S. House of
Representatives for three terms before retiring in 1996.
F. Warren Hellman, a Non-Industry Director, was elected to the Nasdaq Board
in March 2001 to be effective upon the consummation of the proposed sale by
Nasdaq of the Subordinated Debentures to Hellman & Friedman. Mr. Hellman
co-founded Hellman & Friedman, a private equity investment firm, in 1984
and served as general partner until 1998, when the firm became Hellman &
Friedman LLC. Mr. Hellman currently serves as Chairman of the firm. Mr.
Hellman has also been the general partner of FWH Associates, an investment
partnership, since 1985, the general partner of the Pacific Ave. Group, an
investment partnership, since 1994, and the general partner of Locust
Street Group, an investment partnership, since 1997. Prior to his current
positions, Mr. Hellman was a general partner of Hellman, Ferri Investment
Associates, Matrix Management Company I and II, and Lehman Brothers. Mr.
Hellman serves on the board of directors of WPP Group plc, Levi Strauss &
Co., D.N.&E. Walter & Co., and Il Fornaio (America) Corp.
John D. Markese, a Public Director, was elected to the Nasdaq Board as a
Class 3 director in April 2001 to be effective immediately following the
2001 Annual Meeting. Mr. Markese has been a member of the Nasdaq Board
since 1996. Mr. Markese is President of the American Association of
Individual Investors, a not-for-profit organization specializing in
providing education in stock investment and mutual funds, since 1992 and an
Executive Vice President from 1986 to 1992. Mr. Markese holds a Doctorate
in Finance from the University of Illinois. Mr. Markese also serves on the
board of directors of the Alliance for Investor Education.
E. Stanley O'Neal, an Industry Director, was elected to the Nasdaq Board in
January 2001. Mr. O'Neal is Executive Vice President of Merrill Lynch &
Co., Inc., a global financial services firm, and President of its U.S.
Private Client Group since February 2000. Prior to his current positions,
Mr. O'Neal was Executive Vice President and CFO of Merrill Lynch from March
1998 to February 2000; Executive Vice President and Co-Head of Corporate
and Institutional Client Group from April 1997 to March 1998 and Managing
Director and Head of Global Capital Markets Group from April 1995 to April
1997. Mr. O'Neal joined Merrill Lynch in 1987.
Vikram S. Pandit, an Industry Director, was elected to the Nasdaq Board in
January 2001. Since September 2000 Mr. Pandit has been Co-President and
Chief Operating Officer of the Institutional Securities Group of Morgan
Stanley Dean Witter & Co. ("MSDW"), a global financial services firm. Prior
to his current position, Mr. Pandit was Head of MSDW's Worldwide
Institutional Equity Division from May 1997 until September 2000; Head of
Morgan Stanley Group Inc.'s Equity Division from January 1997 until May
1997; and Head of Morgan Stanley Group Inc.'s Equity Derivatives business
from May 1994 until December 1996. Mr. Pandit has been a Managing Director
of Morgan Stanley & Co. Incorporated since January 1990.
Kenneth D. Pasternak, an Industry Director nominee, is Chairman of the
Board, CEO and President of Knight Trading Group, Inc. ("Knight"), a market
maker in U.S. equity securities. Mr. Pasternak was named Chairman of the
Board of Knight in October 2000 and has been a member of its board of
directors since July 1998. Since 1995, Mr. Pasternak has been the CEO and a
trading room supervisor for Knight Securities, L.P., Knight's wholly-owned
Nasdaq/OTC securities market maker, and its President from 1995 to 1999.
Prior to Knight, Mr. Pasternak served as Senior Vice President, Limited
Partner, and Trading Room Manager for Spear Leeds & Kellogg/Troster Singer
from 1979 until 1994. Mr. Pasternak serves on the NASD Board and on the
Advisory Committee of BRASS Utility, LLC (BRUT).
David S. Pottruck, an Industry Director, was elected to the Nasdaq Board in
July 2000. Mr. Pottruck has been a member of the NASD Board since 2000. Mr.
Pottruck is President and Co-Chief Executive Officer and a member of the
board of directors of The Charles Schwab Corporation, a holding company
whose subsidiaries engage in securities brokerage and financial services.
Mr. Pottruck joined The Charles Schwab Corporation in 1984 and became
President in 1992. Mr. Pottruck serves on the board of directors of Intel
Corporation, McKesson HBOC Inc., Dovebid, and the U.S. Ski and Snowboard
Team Foundation. Mr. Pottruck is also a trustee of the University of
Pennsylvania.
Arthur Rock, a Non-Industry Director, was elected to the Nasdaq Board in
July 2000. Mr. Rock has been a member of the NASD Board since 1998. Mr.
Rock is Principal of Arthur Rock & Co., a venture capital firm in San
Francisco, California he founded in 1969. Mr. Rock is currently a Director
Emeritus of Intel Corporation and serves on the board of directors of
Echelon Corporation.
Richard C. Romano, an Industry Director, was elected to the Nasdaq Board in
July 2000. Mr. Romano has been President of Romano Brothers & Company, a
securities broker dealer, since 1964. Mr. Romano is Vice Chairman of the
NASD Small Firm Advisory Board.
Arvind Sodhani, a Non-Industry Director, was elected to the Nasdaq
Board in 1997. From July 2000 to December 2000, Mr. Sodhani served as a
non-voting member of the Nasdaq Board. Mr. Sodhani is Vice President and
Treasurer of Intel Corporation, a semiconductor manufacturer of chips and
computer networking products. Mr. Sodhani joined Intel in 1981 and became a
Vice President in 1990.
Sir Martin Sorrell, a Non-Industry Director, was elected to the Nasdaq
Board in January 2001. Sir Martin is a founder and, since 1986, has been
Group Chief Officer of WPP Group plc, a global communication services
organization. Prior to this position, Sir Martin was the Group Finance
Director of Saatchi & Saatchi Company, PLC.
Richard G. Ketchum became President of Nasdaq in July 2000. Mr. Ketchum is
responsible for all aspects of Nasdaq's operations, including the
development and formulation of legal, regulatory, and market policies, as
well as international initiatives. Prior to his current position, Mr.
Ketchum served as President of the NASD since 1998, COO of the NASD since
1993 and Executive Vice President of the NASD since 1991. Mr. Ketchum
serves as a director of the Depository Trust and Clearing Corporation.
Gregor S. Bailar became Executive Vice President and Chief Information
Officer ("CIO") of Nasdaq in October 2000. As CIO, Mr. Bailar oversees all
aspects of information technology at Nasdaq and works closely with the
organization's executive management. Prior to his current position, Mr.
Bailar served as an Executive Vice President and CIO of the NASD since
December 1997. Mr. Bailar joined the NASD from Citicorp N.A., a financial
services company, where he served as Managing Director and Vice President
of Advanced Development for Global Corporate Banking from 1994 to 1997.
J. Patrick Campbell became Executive Vice President, President U.S. Markets
and COO of Nasdaq in October 2000. Mr. Campbell is responsible for the
day-to-day operation of Nasdaq. Prior to his current position, Mr. Campbell
served as an Executive Vice President, Market Services of the NASD since
1997. Prior to joining the NASD, Mr. Campbell was Senior Executive Vice
President of The Ohio Company, a regional brokerage firm, where he was also
a member of that firm's Board of Directors and Executive Committee. Mr.
Campbell was at The Ohio Company since 1973. While a senior executive for
The Ohio Company, Mr. Campbell was a member of the Board of Directors from
1990 to 1993.
Steven Dean Furbush became an Executive Vice President of Nasdaq
Transaction Services in January 2001. Prior to his current position, Mr.
Furbush was Senior Vice President of Nasdaq Transaction Services from
October 2000 to January 2000, Managing Director of Nasdaq InterMarket from
October 1999 to October 2000, and Chief Economist from June 1995 to October
1999.
John M. Hickey became an Executive Vice President and Senior Technology
Advisor in November 2000. Prior to his current position, Mr. Hickey was
Executive Vice President and Chief Technology Officer of the NASD from
January 1995 to November 2000. Prior to joining the NASD in January 1984,
Mr. Hickey was Vice President in charge of Corporate Systems Development at
Chemical Bank, a bank and financial services firm, from 1974 to 1984.
John L. Hilley became an Executive Vice President of Strategic Development
in January 2001 and has been Chairman and CEO of Nasdaq International since
July 1999. Mr. Hilley joined the NASD as Executive Vice President for
Strategic Development in February 1998. Prior to joining the NASD, Mr.
Hilley served in the White House as senior advisor to President Clinton
since February 1996. Mr. Hilley has also held a number of senior staff
positions in the U.S. Senate.
Edward S. Knight became an Executive Vice President and General Counsel in
October 2000. Prior to his current position, Mr. Knight served as Executive
Vice President and Chief Legal Officer of the NASD since July 1999. Prior
to joining the NASD, Mr. Knight served as General Counsel of the U.S.
Department of the Treasury from September 1994 to June 1999.
Gordon F. Martin became an Executive Vice President and CFO of Nasdaq in
October 2000. Mr. Martin oversees the operation and maintenance of all
corporate financial systems. From February 2000 to October 2000, Mr. Martin
was Executive Vice President and CFO of the NASD. Prior to joining the
NASD, Mr. Martin was a Managing Director for CIBC World Markets Corp. in
New York, a global investment banking firm from 1996 to 2000. Prior to
that, Mr. Martin was Vice President at Westpac Banking Corporation, a
financial services provider, from 1993 to 1996, and a Senior Vice President
of Marine Midland Bank, a financial services firm, from 1976 to 1993.
Steven Randich became Executive Vice President and Chief Technology Officer
of Nasdaq in October 2000. Prior to his current position, Mr. Randich was
Executive Vice President and CIO for the Chicago Stock Exchange from
November 1996 to October 2000. Prior to that, Mr. Randich held management
positions with International Business Machines Corporation, the software
and hardware manufacturer, from October 1990 to November 1996.
Denise B. Stires became Executive Vice President of Marketing and Investor
Services in March 2001. Ms. Stires was Chief Marketing Officer of
BuyandHold Inc., an online financial services company providing
dollar-based brokerage services to individuals and corporations, from 2000
to 2001. Prior to that, Ms. Stires was Senior Vice President, Marketing
Director of DLJdirect, the online discount brokerage service of CSFB from
1997 to 2000, and Vice President, Marketing of SWATCH, a division of SMH,
Incorporated based in Switzerland, a manufacturer of watches from 1995 to
1996.
John N. Tognino became Executive Vice President of Nasdaq Global Sales and
Member Affairs in January 1999. Prior to his current position, Mr. Tognino
was President and CEO of the Security Traders Association ("STA") and the
STA Foundation. Mr. Tognino has been in the securities industry for 42
years and spent more than 35 of those years with Merrill Lynch & Co., Inc.
At the time of his retirement from Merrill Lynch & Co., Inc. in 1993, Mr.
Tognino was a Managing Director for Global Equities. Mr. Tognino also
served as a member of the Board of Directors from 1984 to 1987, and again
in 1995.
John T. Wall became an Executive Vice President of Nasdaq in February 1994
and President of Nasdaq International in October 1997. Mr. Wall is
responsible for the strategic development and international marketing of
Nasdaq's products and services. Mr. Wall is also responsible for non-U.S.
company listings, as well as promoting and directing the overall
globalization of the marketplace. Mr. Wall established Nasdaq's operations
in London and negotiates the sale of Nasdaq's computerized systems to other
world markets. Mr. Wall joined the NASD in 1965 and during his tenure has
been head of Regulation, Membership, and Qualifications Testing. Mr. Wall
currently sits on Hong Kong's International Committee for Listing New
Enterprises.
David P. Warren became Executive Vice President and Chief Administrative
Officer of Nasdaq in April 2001. Mr. Warren oversees human resources and
all administrative services including real estate, property management and
purchasing. Prior to his current position, Mr. Warren was CFO of the Long
Island Power Authority from 1998 to 2000, Deputy Treasurer of the State of
Connecticut from 1995 to 1997, and a Vice President at CSFB from 1987 to
1995.
David Weild IV became Executive Vice President of Issuer Affairs of Nasdaq
in March 2001. Prior to his current position, Mr. Weild held various
positions with Prudential Securities Incorporated, the investment and
brokerage firm, including President of Prudential Securities.Com from 2000
to 2001, Managing Director and Head of High Technology from 1997 to 2000,
Managing Director of Investment Banking and Head of Corporate Finance from
1995 to 1997, and Managing Director and Head of Global Equity Transactions
from 1990 to 1995.
Item 6. Executive Compensation.
SUMMARY COMPENSATION TABLE
The following table sets forth compensation awarded to, earned by, or paid
to the individuals who were, as of December 31, 2000, the CEO and the four
most highly compensated employees other than the CEO, for all services
rendered to Nasdaq and its subsidiaries for the fiscal year ended December
31, 2000.
- -----------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
- -----------------------------------------------------------------------------------------------------------------------------------
Awards Payouts
- -----------------------------------------------------------------------------------------------------------------------------------
Other Securities
Annual Restricted Underlying
Name and Principal Compensation Stock Options/ LTIP All Other
Position Year Salary Bonus(2) Awards Award(s) SARs Payouts Compensation
($) ($) ($) ($) (#) ($) ($)(1)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- -----------------------------------------------------------------------------------------------------------------------------------
Frank G. Zarb, 2000 1,333,333 6,000,000 441,0554(4) -- -- -- 17,892
Chairman,(3) Nasdaq
- -----------------------------------------------------------------------------------------------------------------------------------
Alfred R. Berkeley, 2000 522,500 650,000 -- -- -- -- 13,405
III, Vice Chairman,
Nasdaq
- -----------------------------------------------------------------------------------------------------------------------------------
Richard G. Ketchum, 2000 522,500 1,750,000 -- -- -- -- 13,405
President, Nasdaq
- -----------------------------------------------------------------------------------------------------------------------------------
John L. Hilley, 2000 450,000 950,000 408,720 -- -- -- 13,085
Executive Vice
President,
Nasdaq and
Chairman and
Chief Executive
Officer,Nasdaq
International
- -----------------------------------------------------------------------------------------------------------------------------------
J. Patrick Campbell, 2000 409,000 750,000 -- -- -- -- 12,764
Executive Vice
President, Chief
Operation Officer,
and Nasdaq
U.S. Markets
- -----------------------------------------------------------------------------------------------------------------------------------
- --------
1 Includes $800,000, $130,000, $950,000, $390,000 and
$270,000 with respect to Messrs. Zarb, Berkeley, Ketchum,
Hilley and Campbell, respectively, which amounts will
be paid only if the individuals remain employed by Nasdaq
on December 31, 2002 or in the event of their prior
retirement, permanent disability, death or involuntary
termination without cause.
2 Represents Nasdaq contributions to 401(k) plan and
payment in respect of a forgiveness of loan in the amount
of $7,692 for Mr. Zarb; $3,205 for each Messrs. Berkeley and
Ketchum; $2,885 for Mr. Hilley; and $2,564 for
Mr. Campbell.
3 Mr. Zarb served as the CEO during the fiscal year ended
December 31, 2000 and until February 1, 2001.
4 Includes $221,735 in respect of the purchase of Mr.
Zarb's residence.
Employment Agreements
The NASD and Nasdaq are parties to an employment agreement with Frank Zarb
(the "Zarb Agreement"). The Zarb Agreement had an initial term of three
years commencing on February 24, 1997 (the "Initial Term") and continues
for an additional period of two years immediately following the Initial
Term (the "Additional Term," the Initial Term and the Additional Term
collectively, referred to as the "Term"). The Zarb Agreement provides for
(i) an annual base salary of $1,200,000 from the commencement of the
Initial Term through October 31, 2000 and $2,000,000 during the period
commencing on November 1, 2000 through the remainder of the Term and (ii)
incentive compensation as the Management Compensation Committee of the NASD
may award in its discretion, provided that the amount of such compensation
for each full year of service during the Term may not be not less than 50%
of Mr. Zarb's base salary for such year, and provided further that such
compensation for the second year of the Additional Term may not be less
than $4,000,000. Under the Zarb Agreement, during the first year of the
Additional Term, the aggregate annual base salary and incentive
compensation paid to Mr. Zarb by the NASD may not be less than the
aggregate annual amount paid to Mr. Zarb for the second or third year of
the Initial Term, whichever was greater and, during the second year of the
Additional Term, the aggregate annual base salary and incentive
compensation paid to Mr. Zarb by the NASD may not be less than the
aggregate annual amount paid to Mr. Zarb for the third year of the Initial
Term or the first year of the Additional Term, whichever was greater. Under
the terms of the Zarb Agreement, Nasdaq will (1) fully vest all stock
options granted to Mr. Zarb upon the earlier of (x) the termination of the
Term or (y) Zarb's relinquishment of his position and duties under the
circumstances set forth in the Zarb Agreement, and shall permit the
exercise of the options during the three month period thereafter for
incentive stock options and during the five year period thereafter for all
other stock options and (2) cause all restrictions on any restricted stock
awarded to Mr. Zarb by Nasdaq to lapse upon the earlier of (i) the
termination of the Term or (ii) Zarb's relinquishment of his position and
duties under the circumstances set forth in the Zarb Agreement.
Under the terms of the Zarb Agreement, Mr. Zarb became fully vested in his
benefits under the NASD Supplemental Executive Retirement Plan upon the
completion of the Initial Term. Under the Zarb Agreement, on February 24,
2002 and for a period of five years thereafter, unless Mr. Zarb terminates
his employment earlier (other than for relinquishment of his position under
the circumstances set forth in the Zarb Agreement), Mr. Zarb will be
entitled to an annual consulting fee of $100,000 and certain fringe
benefits and perquisites, provided that Mr. Zarb makes himself available to
provide consulting services to the CEO of the NASD during such period and
does not commence employment with another employer or recommence employment
with the NASD during such period.
Mr. Zarb's employment may be terminated due to (i) death or disability (ii)
by the NASD for "cause" or (iii) by Mr. Zarb for "good reason" upon
thirty-days written notice. If Mr. Zarb terminates his employment for "good
reason" or if the NASD terminates Mr. Zarb's employment other than for
cause, Mr. Zarb is entitled to (1) a cash payment equal to the product of
(x) the sum of the minimum incentive compensation and base salary described
above multiplied by (y) the remaining number of full and partial months in
the Term, (2) the retirement benefits Mr. Zarb would have been entitled to
had he completed the Term and (3) continuation of certain other benefits.
Nasdaq has entered into an employment agreement (the "Employment
Agreements") with each of Richard G. Ketchum, J. Patrick Campbell and John
L. Hilley (each an "Executive" collectively, the "Executives"). The term of
the Employment Agreements commenced as of December 29, 2000 and will
continue until December 31, 2003 with automatic one-year renewals, unless
either party, at least six months prior to the expiration of the term,
gives a notice of its intent not to renew the term.
The Employment Agreements with Messrs. Ketchum and Campbell provide for an
annual salary at a rate not less than the rate of annual salary in effect
as of the effective date. Mr. Hilley's Employment Agreement provides for an
annual salary at a rate not less than the rate of annual salary in effect
for 1999. The Employment Agreements with Messrs. Ketchum and Campbell
provide for guaranteed incentive compensation for each year during the term
in an amount equal to 100% of base salary as in effect on December 31 of
the preceding year.
Under the terms of the Employment Agreements, the Executives will be fully
vested in their supplemental retirement benefits (the "SERP Benefit") under
Nasdaq's Supplemental Retirement Plan, upon the attainment of age 55 (53 in
the case of Mr. Ketchum) while employed and completion of five years of
service or if the Executives' employment with Nasdaq terminates (i) due to
death or disability (ii) by Nasdaq without "cause" or (iii) by the
Executive for "good reason." With respect to Mr. Hilley, the final average
compensation for purposes of determining SERP benefits will be deemed to be
the sum of (a) one-half of his annual salary and (b) one-third of one-half
of his annual salary. The Executives are also entitled to receive equity
awards under Nasdaq's equity plans and other fringe benefits. Under the
terms of the Employment Agreement, each Executive is entitled to receive a
payment in an amount equal to two times the Executive's then effective base
salary (the "Stay Bonus") if the Executive is (i) employed by Nasdaq as of
August 9, 2003, (ii) if the Executive's employment is terminated due to
death or disability or (iii) if the Executive terminates employment for
"good reason" or Nasdaq terminates the Executive's employment without
"cause."
If the Executive's employment is terminated without "cause" or if the
Executive terminates employment for "good reason," Nasdaq is obligated to
pay to the Executive (i) the Stay Bonus if not previously paid; (ii) a pro
rata portion of the incentive compensation for the year of termination; and
(iii) continuation of base salary and incentive compensation until the
later of (x) the end of the term of the Employment Agreement or (y) 24
months from the date of such termination of employment. If the Executive
becomes subject to any "golden parachute" excise tax, Nasdaq is obligated
to make additional payments to the Executive to offset the effect of such
tax, provided that the Executive agrees to be subject to certain
restrictive covenants relating to non-competition, non-solicitation, non-
disparagement and confidentiality.
PENSION PLAN TABLE
Nasdaq's executive officers participate in Nasdaq's qualified and
supplemental defined benefit pensions plans. Under these plans executive
officers earn a benefit expressed as an annual annuity equal to 6% of their
final average compensation for each year of service. Average annual
compensation is the average annual salary plus one-third of the annual
bonus for the highest five-year period of service. The estimated credited
years of service for Mr. Zarb is 3.85 years, Mr. Berkeley is 4.58 years,
Mr. Ketchum is 9.67 years, Mr. Hilley is 2.85 years, and Mr. Campbell is
3.97 years. The following table sets forth the benefit payable under the
plan for various levels of remuneration and years of service. Such benefits
are not reduced by benefits received under social security or other
offsets.
- -------------------------------------------------------------------------------------------------------
Years of Service
- -------------------------------------------------------------------------------------------------------
Remuneration 5 10 15 20 25 30
- -------------------------------------------------------------------------------------------------------
500,000 150,000 300,000 300,000 300,000 300,000 300,000
600,000 180,000 360,000 360,000 360,000 360,000 360,000
700,000 210,000 420,000 420,000 420,000 420,000 420,000
800,000 240,000 480,000 480,000 480,000 480,000 480,000
900,000 270,000 540,000 540,000 540,000 540,000 540,000
1,000,000 300.000 600,000 600,000 600,000 600,000 600,000
1,500,000 450,000 900,000 900,000 900,000 900,000 900,000
2,000,000 600,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000
3,000,000 900,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000
- -------------------------------------------------------------------------------------------------------
Item 7. Certain Relationships and Related Transactions.
The NASD
Nasdaq's legal authority to operate as a stock market is delegated to it by
the NASD under the Delegation Plan. Although Nasdaq has initiated the
process with the SEC for Exchange Registration, Exchange Registration is
not expected to occur until later this year at the earliest. As a result,
prior to Exchange Registration, Nasdaq will continue to operate under the
Delegation Plan, under which the NASD has delegated responsibility for
market operation functions to Nasdaq. Though Nasdaq exercises primary
responsibility for market-related functions, including market-related
rulemaking and interpretations, all actions taken pursuant to delegated
authority by the NASD are subject to review, ratification, or rejection by
the NASD Board. As long as the Delegation Plan remains in effect, the NASD
Board will continue to have authority over Nasdaq. The current structure
will continue until Nasdaq is reconstituted as a self-regulatory
organization, which will become effective upon Exchange Registration.
Currently, Mr. Zarb is Chairman of the NASD Board and Messrs. Baldwin,
Baxter, Berkeley, Brown, Markese, Pottruck, Rock, Romano, and Sodhani are
members of the NASD Board as well as members of the Nasdaq Board.
In June 2000, in connection with the Restructuring, the NASD separated Amex
from Market Group, a holding company of the NASD which also held Nasdaq,
and then merged Market Group with and into Nasdaq. Following this merger,
Nasdaq effected a 49,999-for-one stock dividend creating 100 million shares
of Common Stock, all of which were initially owned by the NASD.
On June 28, 2000, the NASD and Nasdaq entered into a Separation and Common
Services Agreement pursuant to which the NASD continues to provide Nasdaq
certain administrative, corporate, and infrastructure services that were
provided by the NASD to Nasdaq prior to June 28, 2000. Nasdaq pays to the
NASD the cost of any services provided, including the incidental expenses
associated with such services. Nasdaq expects the cost of the services
provided by the NASD to be approximately $9 million per year under this
agreement. Under the Separation and Common Services Agreement, Nasdaq has
also agreed to provide the NASD the access to Nasdaq technology that the
NASD requires to satisfy its obligations to Amex under the transaction
agreement the NASD entered into in connection with the 1998 acquisition of
the assets of Amex, for so long as such obligations may continue.
Additionally, Nasdaq has agreed to continue to provide all services it
provided to Amex as of June 28, 2000, for so long as such obligations may
continue. The NASD reimburses Nasdaq for the cost of rendering such
services and access to Amex. The Separation and Common Services Agreement
continues until December 31, 2001 and will automatically renew until
December 31, 2002 in the event it is not superceded by another separation
and services agreement between the NASD and Nasdaq.
On June 28, 2000 Nasdaq and NASDR, a wholly-owned subsidiary of the NASD
entered into the Regulatory Services Agreement pursuant to which NASDR or
its subsidiaries will provide regulatory services to Nasdaq and its
subsidiaries of the same type and scope as were provided by NASDR to Nasdaq
prior to June 28, 2000. Each of the services is provided on a function-
by-function basis for a specified number of years, subject to Nasdaq being
able to terminate its receipt of specific services prior to the expiration
of this time under certain conditions. Nasdaq will pay to NASDR the cost of
any services provided plus a fair market mark-up. Nasdaq expects the cost
of these services provided by the NASDR to be approximately $90 million per
year. The Regulatory Services Agreement also provides for Nasdaq's access
to certain NASDR software that has been or will be developed for Nasdaq.
Nasdaq pays the NASD and certain of its subsidiaries for the use of
approximately 298,000 square feet of office space. Nasdaq pays
approximately $14.3 million in the aggregate per year to the NASD for the
use of this space.
On March 23, 2001, Nasdaq entered into an agreement with the NASD whereby
Nasdaq would repurchase 18,461,538 shares of Common Stock from the NASD for
$13 per share or an aggregate purchase price of $239,999,994. This price
was determined following discussions between members of management of
Nasdaq and members of management of the NASD and is the same price at which
shares of Common Stock were sold in January 2001 in the second phase of the
Restructuring. The transaction is expected to close in the second quarter
2001. In connection with the transaction, Nasdaq and the NASD have agreed
to enter into an Investor Rights Agreement pursuant to which Nasdaq will
grant the NASD certain demand and piggyback registration rights with
respect to the shares of Common Stock owned by it.
Hellman & Friedman Capital Partners IV, L.P.
On March 23, 2001, Nasdaq entered into an agreement to issue and sell
$240,000,000 in aggregate principal amount of the Subordinated Debentures
to Hellman & Friedman. The Subordinated Debentures are convertible into an
aggregate of 12,000,000 shares of Common Stock, subject to adjustment. The
transaction is expected to close in the second quarter 2001. Upon
consummation of the transaction, Hellman & Friedman will own approximately
9.8 percent of Nasdaq on an as-converted basis. In connection with the
transaction, Nasdaq has agreed to use its best efforts to seek stockholder
approval of a charter amendment that would provide for voting debt in order
to permit Hellman & Friedman to vote on an as-converted basis on all
matters on which common stockholders have the right to vote, subject to the
five percent voting limitation in the Certificate of Incorporation. In
addition, Nasdaq has also agreed that in the event that the Nasdaq Board
approves an exemption from the foregoing five percent limitation for any
person pursuant to the Certificate of Incorporation (other than an
exemption granted in connection with a strategic market alliance) and seeks
the concurrence of the SEC with respect thereto, Nasdaq will grant Hellman
& Friedman a comparable exemption from such limitation and use its best
efforts to obtain SEC concurrence of such exemption. In connection with the
transaction, Nasdaq agreed to grant Hellman & Friedman certain registration
rights with respect to the shares of Common Stock underlying the
Subordinated Debentures. Additionally, Hellman & Friedman will be permitted
to designate one person reasonably acceptable to Nasdaq for nomination as a
director of Nasdaq for so long as Hellman & Friedman owns Subordinated
Debentures and/or shares of Common Stock issued upon conversion
representing at least 50% of the shares of Common Stock issuable upon
conversion of the Subordinated Debentures initially purchased. Nasdaq has
elected F. Warren Hellman as a director of Nasdaq pursuant to the foregoing
provision effective immediately upon the consummation of the sale of
Subordinated Debentures to Hellman & Friedman. Arthur Rock, a member of the
Nasdaq Board of Directors, is affiliated with the Hellman & Friedman
entities purchasing the Subordinated Debentures.
Directors and Officers
Mr. Romano, a member of the Nasdaq Board, is the President and majority
stockholder of Romano Brothers & Co., a securities firm registered with the
NASD. As a member of the NASD, Romano Brothers & Co. participated in the
Restructuring through the purchase of 20,000 shares of Common Stock and 300
Warrants to purchase an aggregate of 1,200 shares of Common Stock for an
aggregate purchase price of $263,300.
In July 2000, certain officers of Nasdaq were awarded an aggregate of 475
restricted Nasdaq Japan common shares as well as options to purchase an
aggregate of 92 Nasdaq Japan common shares. See "Item 4. Security Ownership
of Certain Beneficial Owners and Management" and "Item 1. Business -
Nasdaq's Strategic Initiatives - Pursuing Global Market Expansion -
Nasdaq Japan, Inc."
In connection with Nasdaq's Equity Incentive Plan, officers of Nasdaq
received awards of options to purchase shares of Common Stock and/or
restricted shares of Common Stock. See "Item 9. Market Price of and
Dividends on Registrants' Common Equity and Related Stockholder Matters."
Directors and officers may receive equity-based awards in the future. In
connection with Nasdaq's Employee Stock Purchase Plan, employees (including
employees who are directors) have the opportunity to purchase shares of
Common Stock.
Item 8. Legal Proceedings.
Nasdaq is not currently a party to any litigation that it believes could
have a material adverse effect on its business, financial condition, or
operating results. However, from time to time, Nasdaq has been threatened
with, or named as a defendant, in lawsuits.
Item 9. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
No established public trading market exists for the Common Stock.
As of April 25, 2001 there were outstanding options to purchase an
aggregate of 9,659,290 shares of Common Stock that were granted to officers
and employees of Nasdaq and its subsidiaries. In the first quarter of 2001,
Nasdaq awarded an aggregate of 534,850 shares of restricted Common Stock to
officers and employees of Nasdaq and its subsidiaries. In addition, there
are currently outstanding Warrants to purchase 43,231,976 shares of Common
Stock that were issued in the Restructuring. The shares underlying the
Warrants are all issued and outstanding and held by the NASD. When issued,
the Subordinated Debentures will be convertible at any time prior to their
maturity for an aggregate of 12,000,000 shares of Common Stock, subject to
adjustment.
All the 95,454,209 shares of Common Stock beneficially owned by the NASD as
of April 17, 2001 are subject to sale pursuant to Rule 144 under the
Securities Act, subject to the limitations set forth therein and other
contractual limitations.
As of April 17, 2001, Nasdaq had approximately 1,803 holders of record of
its Common Stock.
Nasdaq does not pay, and does not anticipate paying in the foreseeable
future, any cash dividends on its common equity.
Item 10. Recent Sales of Unregistered Securities.
In Phase I, on June 28, 2000, Nasdaq sold an aggregate of 23,663,746 shares
of Common Stock for an aggregate consideration of $260,301,206 to investors
consisting of NASD members, Nasdaq market participants, issuers with
securities quoted on Nasdaq, and other strategic partners. In Phase II , on
January 18, 2001, Nasdaq sold an aggregate of 5,028,797 shares of Common
Stock for an aggregate consideration of $65,374,361 to investors consisting
of NASD members, Nasdaq market participants, issuers with securities quoted
on Nasdaq, and other strategic partners. The shares of Common Stock sold by
Nasdaq in Phase I and Phase II were issued in private transactions exempt
under Regulation D of the Securities Act.
On March 23, 2001, Nasdaq agreed to issue and sell $240,000,000 in
aggregate principal amount of its Subordinated Debentures to Hellman &
Friedman. The Subordinated Debentures will be convertible into an aggregate
of 12,000,000 shares of Common Stock, subject to adjustment. The
transaction is expected to close in the second quarter of 2001. Upon
consummation of the transaction, Hellman & Friedman will own approximately
9.8 percent of Nasdaq on an as-converted basis. In connection with the
transaction, Nasdaq has granted Hellman & Friedman certain registration
rights with respect to the shares of Common Stock underlying the
Subordinated Debentures. The Subordinated Debentures will be sold in a
private transaction pursuant to Section 4(2) of the Securities Act, which
exempts sales of securities that do not involve a public offering.
As of April 25, 2001, Nasdaq granted options to purchase an aggregate of
9,659,290 shares of Common Stock to officers and employees of Nasdaq and
its subsidiaries pursuant to its Equity Incentive Plan. In addition, in
2001, Nasdaq has awarded an aggregate of 534,850 shares of restricted
Common Stock to officers and employees of Nasdaq and its subsidiaries
pursuant to its Equity Incentive Plan. A maximum of 500,000 shares of
Common Stock have been approved by Nasdaq for sale pursuant to its Employee
Stock Purchase Plan for the first offering period ending June 29, 2001. All
the foregoing grants of options and restricted Common Stock and sales of
shares of Common Stock were made, or will be made, pursuant to Rule 701
under the Securities Act, which exempts issuances of securities under
certain written compensatory employee benefit plans.
Item 11. Description of Registrant's Securities to be Registered.
General
The authorized capital stock of Nasdaq consists of 300,000,000 shares of
Common Stock, par value $.01 per share, and 30,000,000 shares of preferred
stock, par value $.01 per share. As of April 17, 2001, there were
128,692,543 shares of Common Stock outstanding and no shares of preferred
stock outstanding.
Common Stock
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders except that any person, other
than the NASD or any other person as may be approved for such exemption by
the Nasdaq Board prior to the time such person owns more than 5% of the
then outstanding shares of Common Stock, who otherwise would be entitled to
exercise voting rights in respect of more than 5% of the then outstanding
shares of Common Stock will be unable to exercise voting rights in respect
of any shares in excess of 5% of the then outstanding shares of Common
Stock. At any meeting of the stockholders of Nasdaq, a majority of the
shares of Common Stock in respect of which voting rights can be exercised
will constitute a quorum for such meeting. In response to the SEC's concern
about a concentration of ownership of Nasdaq, Nasdaq's Exchange
Registration application includes a rule that prohibits any member of
Nasdaq or a person associated with such member from beneficially owning
more than 5% of the outstanding shares of Common Stock.
Nasdaq has agreed to use its best efforts to seek stockholder approval of a
charter amendment that would provide for voting debt in order to permit
holders of the Subordinated Debentures to vote on an as-converted basis on
all matters on which common stockholders have the right to vote, subject to
the five percent voting limitation. Under the Certificate of Incorporation,
Nasdaq's Board may waive the application of the 5% voting limitation to
persons other than brokers, dealers, their affiliates, and persons subject
to statutory disqualification under Section 3(a)(39) of the Exchange Act.
In the event that the Nasdaq Board approves an exemption from the five
percent voting limitation (other than an exemption granted in connection
with a strategic market alliance) and seeks the concurrence of the SEC with
respect thereto, Nasdaq has agreed to grant Hellman & Friedman a comparable
exemption from such limitation and use its best efforts to obtain SEC
concurrence of such exemption.
Holders of Common Stock are entitled to receive ratably such dividends, if
any, as may be declared from time to time by the Nasdaq Board out of funds
legally available for them. In the event of liquidation, dissolution, or
winding up of Nasdaq, the holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to
prior distribution rights of preferred stock, if any, then outstanding. The
Common Stock has no preemptive or conversion rights or other subscription
rights. There are no redemption or sinking fund provisions applicable to
the Common Stock. All outstanding shares of Common Stock are fully paid and
non-assessable, and the shares of Common Stock to be issued upon completion
of this offering will be fully paid and non-assessable.
Preferred Stock
The Nasdaq Board may provide by resolution for the issuance of preferred
stock, in one or more series, and to fix the powers, preferences, and
rights, and the qualifications, limitations, and restrictions thereof, of
this preferred stock, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences, sinking fund
provisions, if any, and the number of shares constituting any series or the
designation of such series. The issuance of preferred stock could have the
effect of decreasing the market price of the Common Stock and could
adversely affect the voting and other rights of the holders of Common
Stock.
Certain Provisions of the Certificate of Incorporation and By-Laws
Some provisions of the Certificate of Incorporation and By-Laws, which
provisions are summarized above and in the following paragraphs, may be
deemed to have an anti-takeover effect and may delay, defer, or prevent a
tender offer or takeover attempt that a stockholder might consider in its
best interest, including those attempts that might result in a premium over
the market price for the shares held by stockholders.
Classified Board of Directors
The Nasdaq Board is divided into three classes, with one class to be
elected each year to serve a three-year term. As a result, approximately
one-third of the Nasdaq Board will be elected each year. These provisions,
when coupled with the provision limiting the voting rights of certain
persons, other than the NASD, and the provision authorizing the Nasdaq
Board to fill vacant directorships or increase the size of the Nasdaq
Board, may prevent a stockholder from removing incumbent directors and
simultaneously gaining control of the Nasdaq Board by filling the vacancies
created by such removal with its own nominees. In addition, stockholders of
Nasdaq can only remove directors for cause with an affirmative vote of the
holders of not less than 66 2/3 % of the outstanding shares of capital stock of
Nasdaq eligible to vote for directors.
The Nasdaq Board has resolved that Frank E. Baxter, Alfred R. Berkeley III,
Michael W. Brown, John D. Markese, and Arvind Sodhani will serve as Class 1
directors whose terms expire at the 2001 Annual Meeting; that H. Furlong
Baldwin, Richard C. Romano, Sir Martin S. Sorrell, and Frank G. Zarb will
serve as Class 2 directors whose terms expire at the 2002 annual meeting of
stockholders and; that Michael Casey, E. Stanley O'Neal, Vikram S. Pandit,
David S. Pottruck, and Arthur Rock will serve as Class 3 directors whose
terms expire at the 2003 annual meeting of stockholders. There currently is
one vacancy in the Class 2 directors. The Nasdaq Board has elected F.
Warren Hellman to fill such vacancy as a Class 2 director effective upon
the consummation of the issuance and sale of the Subordinated Debentures to
Hellman & Friedman.
Pursuant to the Certificate of Incorporation and the By-Laws, the Nasdaq
Board, at its discretion, is authorized to fix the number of directors
constituting the Nasdaq Board. The number of voting directors on the Nasdaq
Board is currently fixed at 15, consisting of five Class I directors, five
Class 2 directors, and five Class 3 directors. On April 25, 2001 the Nasdaq
Board resolved to increase the number of voting members from 15 to 18,
increasing the size of each class by one, effective immediately following
the 2001 Annual Meeting. The Nasdaq Board has elected William S. Cohen, a
Class 1 director, Dr. Josef Ackermann, a Class 2 director, and John D.
Markese, a Class 3 director to fill these new vacancies effective upon such
increase in the size of the Nasdaq Board. At the 2001 Annual Meeting,
Nasdaq has nominated Frank E. Baxter, Michael W. Clark, Kenneth D.
Pasternak, Hardwick Simmons, and Arvind Sodhani for election to the Nasdaq
Board. Alfred R. Berkeley, III, Michael W. Brown, and John D. Markese will
not stand for re-election as Class 1 directors at the 2001 Annual Meeting,
although Mr. Markese will be elected as a Class 3 director effective
immediately after the 2001 Annual Meeting.
Pursuant to the By-Laws, the number of Non-Industry Directors (as defined
below), including at least one Public Director (as defined below) and at
least two representatives of Nasdaq- listed companies (an "Issuer
Representative"), is required to equal or exceed the number of Industry
Directors (as defined below), unless the Nasdaq Board consists of 9 or
fewer directors. In such case only one director is required to be an Issuer
Representative.
If a director position becomes vacant, whether because of death,
disability, disqualification, removal, or resignation, Nasdaq's Nominating
Committee will nominate, and the Nasdaq Board will elect by majority vote,
a person satisfying the classification (Industry, Non- Industry, or Public
Director), if applicable, for the directorship to fill such vacancy, except
that if the remaining term is not more than six months, no replacement is
required.
The following is a general description of Nasdaq's director
classifications:
o Industry Director means a Director (excluding any two
officers of Nasdaq, selected at the sole discretion of
the Nasdaq Board, amongst those officers who may be
serving as directors (the "Staff Directors")) who (i) has
served in the prior three years as an officer, director,
or employee of a broker or dealer, excluding an outside
director or a director not engaged in the day-to-day
management of a broker or dealer; (ii) is an officer,
director (excluding an outside director), or employee of
an entity that owns more than 10 percent of the equity of
a broker or dealer, and the broker or dealer accounts for
more than five percent of the gross revenues received by
the consolidated entity; (iii) owns more than five
percent of the equity securities of any broker or dealer,
whose investments in brokers or dealers exceed 10 percent
of his or her net worth, or whose ownership interest
otherwise permits him or her to be engaged in the
day-to-day management of the broker or dealer; (iv)
provides professional services to brokers or dealers, and
such services constitute 20 percent or more of the
professional revenues received by the director or member
or 20 percent or more of the gross revenues received by
the director's or member's firm or partnership; (v)
provides professional services to a director, officer, or
employee of a broker, dealer, or corporation that owns 50
percent or more of the voting stock of a broker or
dealer, and such services relate to the director's,
officer's, or employee's professional capacity and
constitute 20 percent or more of the professional
revenues received by the director or 20 percent or more
of the gross revenues received by the director's or
member's firm or partnership; or (vi) has a consulting or
employment relationship with or provides professional
services to the NASD, NASDR, Nasdaq, or Amex or has had
any such relationship or provided such services at any
time within the prior three years.
o Non-Industry Director means a Director (excluding the
Staff Directors) who is (i) a Public Director; (ii) an
officer or employee of an issuer of securities listed on
The Nasdaq Stock Market, or traded in the
over-the-counter market; or (iii) any other individual
who would not be an Industry Director.
o Public Director means a Director who has no material
business relationship with a broker or dealer, the NASD,
NASDR, or Nasdaq.
Advance Notice Requirements for Stockholder Proposals and Directors Nominations
The By-Laws provide that stockholders seeking to bring business before an
annual meeting of stockholders, or to nominate candidates for election as
directors at an annual meeting of stockholders, must provide timely notice
in writing. To be timely, a stockholder's notice must be delivered to or
mailed and received at Nasdaq's principal executive offices not less than
90 nor more than 120 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, that in the event that
the annual meeting is called for a date that is not within 30 days before
or 70 days after such anniversary date, notice by the stockholder in order
to be timely must be received not earlier than 120 days prior to the
meeting and not later than the later of 90 days prior to the meeting and
the close of business on the 10th day following the date on which notice of
the date of the annual meeting was first made public. In the case of a
special meeting of stockholders called for the purpose of electing
directors, notice by the stockholder in order to be timely must be received
not earlier than 120 days prior to the meeting and later than the later of
90 days prior to the meeting and the close of business on the 10th day
following the day on which public disclosure of the date of the special
meeting and Nasdaq's nominees was first made. In addition, the By-Laws
specify certain requirements as to the form and content of a stockholder's
notice. These provisions may preclude stockholders from bringing matters
before an annual meeting of stockholders or from making nominations for
directors at an annual or special meeting of stockholders.
Stockholder Action; Special Meeting of Stockholders
The Certificate of Incorporation provides that stockholders are not
entitled to act by written consent in lieu of a meeting. Delaware law vests
the board of directors of a Delaware corporation with the authority to call
special meetings of stockholders and permits the corporation to authorize
in its certificate of incorporation or by-laws other persons to also have
such authority. The Certificate of Incorporation and By-Laws do not vest
any other persons with such authority.
Amendments; Supermajority Vote Requirements
The General Corporation Law of the State of Delaware provides generally
that the affirmative vote of a majority of the shares entitled to vote on
any matter is required to amend a corporation's certificate of
incorporation, unless a corporation's certificate of incorporation requires
a greater percentage. The Certificate of Incorporation imposes
supermajority stockholder vote (66%) requirements in connection with
stockholder amendments to the By- Laws and in connection with the amendment
of certain provisions of the Certificate of Incorporation, including those
provisions of the Certificate of Incorporation relating to the limitations
on voting rights of certain persons, the classified board of directors,
removal of directors, and prohibitions on stockholder action by written
consent.
Authorized But Unissued Shares
The authorized but unissued shares of Common Stock and preferred stock will
be available for future issuance without stockholder approval. These
additional shares may be utilized for a variety of corporate purposes,
including future public or private offerings to raise additional capital,
corporate acquisitions, and employee benefit plans. The existence of
authorized but unissued shares of Common Stock and preferred stock could
render more difficult, or discourage an attempt to obtain control of Nasdaq
by means of a proxy contest, tender offer, merger or otherwise.
Transfer Restrictions on Common Stock
The shares of Common Stock cannot be, directly or indirectly, offered,
sold, gifted, pledged, assigned, transferred, or otherwise disposed of
(each, for the purposes hereof, a "Transfer") except subject to all
applicable laws and:
(1) with the prior written consent of Nasdaq; or
(2) until the earlier of (i) the date on which a registration
statement filed with the SEC in connection with an initial public
offering of shares of Common Stock is declared effective (the
"Effective Date"), or (ii) the expiration of two years following
June 28, 2000 if a registration statement has not been filed with
the SEC in connection with an initial public offering of shares of
Common Stock during such two-year period; provided, however, that
Nasdaq may elect, in its sole discretion, to further restrict the
Transferability of any shares of Common Stock including, without
limitation, the shares of Common Stock purchased upon exercise of
any Warrants, for a period of 180 days following the Effective
Date by giving written notice of such election to holders of
Common Stock at least 10 days prior to the Effective Date; or
(3) to a Majority Affiliate. Any Transfer to a Majority Affiliate for
consideration will require that the transferor deliver to Nasdaq,
an opinion of the transferor's counsel to the effect that the
Transfer of securities by the transferor to a Majority Affiliate
(A) complies with the transfer restriction provisions set forth
herein and (B) does not require registration under the Securities
Act or registration or qualification under any applicable state
securities laws. Any Transfer to a Majority Affiliate without
consideration will require the transferor to make a written
representation to Nasdaq that the Transfer complies with the
provisions set forth in this section and was made without
consideration.
The following terms are defined as set forth below:
"Affiliate" means, with respect to any specified Person, any other
Person who, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified
Person.
"Majority Affiliate" of any Person means an Affiliate of such
Person: (a) a majority of the voting stock or beneficial ownership of which
is owned by such Person, or by any Person who, directly or indirectly, owns
a majority of the voting stock or beneficial ownership of such Person; (b)
who, directly or indirectly, owns a majority of the voting stock or
beneficial ownership of such Person; and (c) any Majority Affiliate of any
Affiliate described in clause (a) or clause (b) above.
"Person" means any individual, company, limited liability company,
corporation, trust, estate, association, nominee, or other entity.
Delaware Business Combination Statute
Nasdaq is organized under Delaware law.
Delaware law generally prohibits a publicly-held or widely-held corporation
from engaging in a "business combination" with an "interested stockholder"
for three years after the stockholder becomes an interested stockholder. An
"interested stockholder" is a person who directly or indirectly owns 15% or
more of the corporation's outstanding voting stock. A "business
combination" includes a merger, asset sale or other transaction that
results in a financial benefit to the interested stockholder. However,
Delaware law does not prohibit these business combinations if:
(1) before the stockholder becomes an interested stockholder the
corporation's board approved either the business combination or
the transaction that resulted in the stockholder becoming an
interested stockholder;
(2) after the transaction that results in the stockholder becoming an
interested stockholder, the interested stockholder owns at least
85% of the corporation's outstanding voting stock (excluding
certain shares); or
(3) the corporation's board approves the business combination and the
holders of at least two-thirds of the corporation's outstanding
voting stock that the interested stockholder does not own
authorize the business combination at a meeting of stockholders.
Item 12. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law allows for the
indemnification of officers, directors, and any corporate agents in terms
sufficiently broad to indemnify such person under certain circumstances for
liabilities, including reimbursement for expenses, incurred arising under
the Securities Act. The Certificate of Incorporation and By-Laws provide
that Nasdaq shall indemnify its directors, officers, employees, and members
of the Nasdaq Listing and Hearing Review Council to the fullest extent
permitted by Delaware law. Nasdaq, in its discretion, may indemnify its
agents to the fullest extent and under the circumstances permitted by the
Delaware General Corporation Law. The directors and officers of Nasdaq are
covered by insurance policies indemnifying them against certain
liabilities, including certain liabilities arising under the Securities
Act, which might be incurred by them in such capacities and against which
they may not be indemnified by Nasdaq.
Item 13. Financial Statements and Supplementary Data.
The following table presents selected quarterly financial data for Nasdaq.
The data presented in this table are derived from "Selected Consolidated
Financial Data of Nasdaq" and the consolidated financial statements and
notes thereto which are included elsewhere in this Registration Statement.
You should read those sections for a further explanation of the financial
data summarized here. You should also read the "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Nasdaq"
section, which describes a number of factors which have affected Nasdaq's
financial results. The consolidated financial statements are as set forth
in the "Index to Consolidated Financial Statements" on page F-1.
Selected Quarterly Financial Data
(in thousands, except EPS information)
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
1999 1999 1999 1999 Total 1999
Revenues $133,860 $152,833 $169,136 $178,419 $634,248
Total expenses 93,552 108,610 122,751 176,966 501,879
Net operating income 40,308 44,223 46,385 1,453 132,369
Interest 2,497 3,314 3,425 2,964 12,201
Taxes (16,456) (20,483) (19,332) (2,150) (58,421)
Net income 26,350 27,054 30,478 2,267 86,149
Basic and diluted EPS $0.26 $0.27 $0.30 $0.02 $0.86
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
2000 2000 2000 2000 Total 2000
Revenues $219,312 $226,421 $213,321 $208,954 $868,009
Total expenses 131,708 140,228 162,127 199,783 633,847
Net operating income 87,604 86,193 51,194 9,171 234,162
Interest 2,225 3,240 5,727 8,919 20,111
Taxes (36,114) (35,070) (28,170) (5,663) (105,018)
Net income 53,715 54,362 28,751 13,299 150,127
Basic and Diluted EPS $0.54 $0.54 $0.23 $0.11 $1.34
Item 14. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not applicable.
Item 15. Financial Statements and Exhibits.
(a) List separately all financial statements filed.
See "Index to Consolidated Financial Statements."
(b) Exhibits.
Exhibit
Number
3.1 Restated Certificate of Incorporation of The Nasdaq Stock Market,
Inc.
3.2 By-Laws of The Nasdaq Stock Market, Inc.
4.1 Form of Common Stock certificate.
7A Qualitative Disclosure about market risk (incorporated herein by
reference to "Item 2 - Financial Information" of this Form 10).
9.1 Voting Trust Agreement dated June 28, 2000, among The Nasdaq Stock
Market, Inc., the National Association of Securities Dealers, Inc.
and The Bank of New York.
9.2 First Amendment to the Voting Trust Agreement, dated as of January
18, 2001, among The Nasdaq Stock Market, Inc., the National
Association of Securities Dealers, Inc. and The Bank of New York.
10.1 Network Service Agreement, dated November 19, 1997, between MCI
Telecommunications Corporation and The Nasdaq Stock Market, Inc.*
10.2 Consolidated Agreement, between Unisys Corporation and The Nasdaq
Stock Market, Inc.*
10.3 Network User License Agreement, dated November 30, 1993, between
Oracle Corporation and The Nasdaq Stock Market, Inc.*
10.4 Software License and Services Agreement, dated November 30, 1993,
between Oracle Corporation and The Nasdaq Stock Market, Inc.*
10.5 Regulatory Services Agreement, dated June 28, 2000, between NASD
Regulation, Inc. and The Nasdaq Stock Market, Inc.*
10.6 Separation and Common Services Agreement, dated as of June 28,
2000, between the National Association of Securities Dealers, Inc.
and The Nasdaq Stock Market, Inc.
10.7 The Nasdaq Stock Market, Inc. Employee Stock Purchase Plan.
10.8 The Nasdaq Stock Market, Inc. Equity Incentive Plan.
10.9 Securities Purchase Agreement, dated as of March 23, 2001, among
The Nasdaq Stock Market, Inc., Hellman & Friedman Capital Partners
IV, L.P. and the other purchasers listed in the signature pages
thereto.
10.10 Purchase and Sale Agreement, dated March 23, 2001, by and between
the National Association of Securities Dealers, Inc. and The
Nasdaq Stock Market, Inc.
10.11 Employment Agreement between the National Association of
Securities Dealers, Inc. and Frank G. Zarb effective on February
24, 1997.
10.12 Instrument of Amendment, dated March 18, 1998, to Employment
Agreement between National Association of Securities Dealers, Inc.
and Frank G. Zarb, effective on February 24, 1997.
10.13 Instrument of Amendment, dated as of August 20, 1999, to
Employment Agreement between National Association of Securities
Dealers, Inc. and Frank G. Zarb, effective on February 24, 1997,
as amended effective March 18, 1998.
10.14 Instrument of Amendment, dated March 30, 2000, to Employment
Agreement between National Association of Securities Dealers, Inc.
and Frank G. Zarb, effective on February 24, 1997, as amended
effective March 18, 1998, and subsequently amended in May, 1999.
10.15 Instrument of Amendment, effective as of July 27, 2000, to
Employment Agreement between National Association of Securities
Dealers, Inc. and Frank G. Zarb, effective on February 24, 1997,
as amended effective March 18, 1998, and subsequently amended in
May, 1999, and subsequently amended on March 30, 2000.
10.16 Instrument of Amendment, effective as of November 1, 2000, to
Employment Agreement between National Association of Securities
Dealers, Inc. and Frank G. Zarb, effective on February 24, 1997,
as amended effective March 18, 1998, and subsequently amended in
May, 1999, and subsequently amended on March 30, 2000, and as of
July 27, 2000.
10.17 Instrument of Amendment, effective as of April 25, 2001, to
Employment Agreement between National Association of Securities
Dealers, Inc. and Frank G. Zarb, effective on February 24, 1997,
as subsequently amended effective March 18, 1998, August 20, 1999,
March 30, 2000, July 27, 2000 and November 1, 2000.
10.18 Employment Agreement by and between The Nasdaq Stock Market, Inc.
and J. Patrick Campbell, effective as of December 29, 2000.
10.19 Employment Agreement by The Nasdaq Stock Market, Inc. and John L.
Hilley, effective as of December 29, 2000.
10.20 Employment Agreement by and between The Nasdaq Stock Market, Inc.
and Richard G. Ketchum, effective as of December 29, 2000.
10.21 Employment Agreement by and between The Nasdaq Stock Market, Inc.
and Hardwick Simmons, dated as of January 31, 2001.
11 Statement regarding computation of per share earnings (incorporated
herein by reference to "Item 2. Financial Information" of this Form
10).
12 Computations of Ratios (not applicable).
21.1 List of all subsidiaries.
- ------------------------------------
* Confidential treatment has been requested from the Securities and
Exchange Commission for certain portions of this exhibit.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
THE NASDAQ STOCK MARKET, INC.
By:/s/ Hardwick Simmons
----------------------------------
Name: Hardwick Simmons
Title: Chief Executive Officer
Date: April 30, 2001
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The following audited, and consolidated financial statements of
The Nasdaq Stock Market, Inc. and its subsidiaries are presented herein on
the page indicated:
Report of Independent Auditors.............................................F -2
Consolidated Balance Sheets................................................F -3
Consolidated Statements of Income..........................................F -5
Consolidated Statements of Changes in Stockholders' Equity.................F -6
Consolidated Statements of Cash Flows......................................F -7
Notes to Consolidated Financial Statements.................................F -8
2 Report of Independent Auditors
Board of Directors
The Nasdaq Stock Market, Inc.
We have audited the accompanying consolidated balance sheets of
The Nasdaq Stock Market, Inc. ("Nasdaq") (a majority owned subsidiary of
the National Association of Securities Dealers, Inc.) as of December 31,
2000 and 1999, and the related consolidated statements of income, changes
in stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 2000. These consolidated financial statements are
the responsibility of Nasdaq's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of The Nasdaq Stock Market, Inc. at December 31, 2000 and 1999,
and the consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States.
As discussed in Note 3 to the consolidated financial statements,
effective January 1, 1999, Nasdaq adopted Statement of Position 98-1
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use."
Ernst & Young LLP
Washington, D.C.
January 26, 2001
The Nasdaq Stock Market, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
December 31,
2000 1999
---------------------------------
Assets
Current assets:
Cash and cash equivalents $ 262,257 $ 10,598
Investments:
Available-for-sale, at fair value 232,090 153,566
Held-to-maturity, at amortized cost 21,967 10,697
Receivables, net 172,660 112,403
Receivables from related parties 8,250 7,168
Deferred tax asset 5,763 5,213
Other current assets 14,869 12,701
---------------------------------
Total current assets 717,856 312,346
Investments:
Held-to-maturity, at amortized cost 6,612 17,720
Property and equipment:
Land, buildings and improvements 80,727 56,173
Data processing equipment and software 370,066 246,999
Furniture, equipment and
leasehold improvements 134,638 101,658
---------------------------------
585,431 404,830
Less accumulated depreciation and amortization (252,380) (192,719)
---------------------------------
Total property and equipment, net 333,051 212,111
Investment in warrants, at cost - 33,480
Other assets 17,798 2,597
---------------------------------
Total assets $ 1,075,317 $ 578,254
=================================
See accompanying notes to consolidated financial statements.
The Nasdaq Stock Market, Inc.
Consolidated Balance Sheets
(In thousands, except share amounts)
December 31,
2000 1999
---------------------------------
Liabilities
Current liabilities:
Accounts payable and accrued expenses $ 117,867 $ 68,585
Accrued personnel costs 37,273 30,505
Deferred revenue 6,068 9,787
Other accrued liabilities 29,306 17,839
Due to banks 13,876 8,819
Payables to related parties 19,158 11,742
---------------------------------
Total current liabilities 223,548 147,277
Long-term debt 25,000 25,000
Accrued pension costs 10,390 7,073
Non-current deferred tax liability, net 26,782 10,928
Deferred revenue, investment in warrants, at cost - 33,480
Other liabilities 9,153 2,484
---------------------------------
Total long-term liabilities 71,325 78,965
Total liabilities 294,873 226,242
Minority interests 15,543 -
Stockholders' Equity
Common stock, $.01 par value, 300,000,000 authorized,
123,663,746 issued and outstanding 1,237 1,000
Additional paid-in capital 265,603 149
Unrealized gains on available-for-sale investments, net of tax 321 1,742
Foreign currency translation, net of minority interests (1,508) -
of ($1,185) in 2000
Retained earnings 499,248 349,121
---------------------------------
Total stockholders' equity 764,901 352,012
---------------------------------
Total liabilities, minority interest and stockholders' equity $ 1,075,317 $ 578,254
=================================
See accompanying notes to consolidated financial statements.
The Nasdaq Stock Market, Inc.
Consolidated Statements of Income
(In thousands, except share amounts)
Years ended December 31,
2000 1999 1998
------------------------------------------------------------
Revenue
Transaction services $ 395,123 $ 283,652 $ 160,506
Market information services 258,251 186,543 152,665
Issuer services 184,595 163,425 137,344
Other 30,040 628 308
------------------------------------------------------------
Total revenue 868,009 634,248 450,823
------------------------------------------------------------
Expenses
Compensation and benefits 133,496 98,129 78,565
Marketing and advertising 45,908 62,790 42,483
Depreciation and amortization 65,645 43,696 34,984
Professional and contract services 61,483 35,282 35,127
Computer operations and data communications
138,228 100,493 72,111
Travel, meetings and training 12,113 10,230 7,750
Occupancy 14,766 6,591 5,354
Publications, supplies and postage 7,181 4,670 5,208
Other 26,505 24,809 16,704
------------------------------------------------------------
Total direct expenses 505,325 386,690 298,286
------------------------------------------------------------
Support cost from related parties, net 128,522 115,189 100,841
------------------------------------------------------------
Total expenses 633,847 501,879 399,127
------------------------------------------------------------
Net operating income 234,162 132,369 51,696
Interest 20,111 12,201 9,269
Provision for income taxes (105,018) (58,421) (26,010)
Minority interests in earnings 872 - -
------------------------------------------------------------
Net income $ 150,127 $ 86,149 $ 34,955
============================================================
============================================================
Basic earnings per common share $ 1.34 $ 0.86 $ 0.35
============================================================
See accompanying notes to consolidated financial statements.
The Nasdaq Stock Market, Inc.
Consolidated Statements of Changes in Stockholders' Equity
(In thousands, except share amounts)
Accumulated
Number of Additional Other
Common Shares Common Paid in Retained Comprehensive
Outstanding(1) Stock (1) Capital(1) Earnings Income (Loss) Total
------------------------------------------------------------------------------------------
Balance, January 1, 1998 100,000,000 1,000 $ 149 $ 228,017 - $229,166
Net income - - - 34,955 - 34,955
Unrealized gains on -----------
available-for-sale investments, - - - - $ 2,020
net of tax of $1,088 2,020
-----------
Comprehensive income - - - - - 36,975
-----------------------------------------------------------------------------------------
Balance, December 31, 1998 100,000,000 1,000 149 262,972 2,020 266,141
Net income - - - 86,149 - 86,149
Unrealized losses on
available-for-sale investments, - - - - (278) (278)
net of tax of $(149)
----------
Comprehensive income - - - - - 85,871
-----------------------------------------------------------------------------------------
Balance, December 31, 1999 100,000,000 1,000 149 349,121 1,742 352,012
Net income - - - 150,127 - 150,127
Unrealized losses on
available-for-sale investments, net - - - (1,421) (1,421)
of tax of $(765) -
Foreign currency translation, net of
Minority interests of $(1,185) - - - (1,508)
- (1,508)
----------
Comprehensive income - - - - - 147,198
Capital contribution - - 30,000 - - 30,000
Minority interest resulting from
original share of equity in
Nasdaq Europe - - (17,600) - - (17,600)
Net proceeds from Phase I offering 23,663,746 $ 237 253,054 - - 253,291
========================================================================================
Balance, December 31, 2000 123,663,746 $ 1,237 $ 265,603 $ 499,248 $ (1,187) $ 764,901
========================================================================================
See accompanying notes to consolidated financial statements.
(1) Gives effect to the June 28, 2000 49,999-for-one stock dividend of the
shares of Common Stock for years December 31, 1998 and 1999.
The Nasdaq Stock Market, Inc.
Consolidated Statement of Cash Flows
(In thousands)
Years ended December 31,
2000 1999 1998
-----------------------------------------------------
Cash flow from operating activities
Cash received from customers $ 713,036 $ 527,946 $ 400,918
Cash paid to suppliers and employees (281,387) (248,173) (212,006)
Cash paid to related parties, net (122,188) (104,761) (109,563)
Income taxes paid (101,171) (49,992) (24,131)
Interest received, net 19,624 10,320 7,699
Other 4,782 (715) (6,194)
-----------------------------------------------------
Cash provided by operating activities 232,696 134,625 56,723
Cash flow from investing activities
Proceeds from redemptions of
available-for-sale investments 154,931 107,328 -
Purchases of available-for-sale investments (237,569) (131,291) -
Proceeds from maturities of held-to-maturity
investments 10,811 30,743 100,845
Purchases of held-to-maturity investments (10,973) (30,990) (129,624)
Purchases of property and equipment, net (186,585) (106,447) (29,371)
-----------------------------------------------------
Cash used in investing activities (269,385) (130,657) (58,150)
Cash flow from financing activities
Increase in due to banks 5,057 3,876 156
Proceeds from Phase I private placement 253,291 - -
offering
Contributions from minority shareholders 30,000 - -
-----------------------------------------------------
Cash provided by financing activities 288,348 3,876 156
Increase (decrease) in cash and cash 251,659 7,844 (1,271)
equivalents
Cash and cash equivalents at beginning of 10,598 2,754 4,025
period
-----------------------------------------------------
Cash and cash equivalents at end of period $ 262,257 $ 10,598 $ 2,754
=====================================================
Reconciliation of net income to cash provided
by operating activities
Net income $ 150,127 $ 86,149 $ 34,955
Depreciation and amortization 65,645 43,696 34,984
Minority interests in earnings (872) - -
Increase in receivables, net (60,257) (39,897) (18,762)
(Increase) decrease in receivables from
related parties (1,082) 2,497 (6,670)
Increase in other current assets (2,168) (6,521) (380)
Increase in deferred tax asset (550) (1,316) -
Decrease (increase) in other assets (15,201) 4,866 (4,688)
Increase in accounts payable and accrued 49,282 18,815 7,607
expenses
Increase in accrued personnel costs 6,768 9,660 3,966
(Decrease) increase in deferred revenue (3,719) 1,413 2,758
Increase in other accrued liabilities 11,467 2,569 9,545
Increase (decrease) in payables to related 7,416 7,931 (2,052)
parties
Increase (decrease) in accrued pension costs 3,317 2,507 (3,414)
Increase in non-current deferred tax 15,854 2,770 -
liability, net
Increase (decrease) in other liabilities 6,669 (514) (1,126)
-----------------------------------------------------
Cash provided by operating activities $ 232,696 $ 134,625 $ 56,723
See accompanying notes to consolidated financial statements.
The Nasdaq Stock Market, Inc.
Notes to Consolidated Financial Statements
(In thousands)
1. Organization and Nature of Operations
The Nasdaq Stock Market, Inc. ("Nasdaq") is the parent company of Nasdaq
Global Holdings ("Nasdaq Global"); Quadsan Enterprises, Inc. ("Quadsan");
Nasdaq Tools, Inc. ("Nasdaq Tools"); Nasdaq Investment Product Services,
Inc. ("NIPS"); and Nasdaq International Market Initiatives, Inc. ("NIMI");
collectively referred to as Nasdaq. Nasdaq is a majority owned subsidiary
of the National Association of Securities Dealers, Inc. (the "NASD").
At a special meeting of the NASD members held on April 14, 2000, more than
a majority of NASD members approved a plan to broaden the ownership in
Nasdaq through a two-phase private placement of (1) newly-issued shares of
Common Stock, and (2) Common Stock and Warrants to purchase shares of
Common Stock owned by the NASD (the "Restructuring"), to NASD members,
Nasdaq market participants, Nasdaq issuers, institutional investors and
other strategic partners. The Restructuring is intended, among other
things, to strategically realign the ownership of Nasdaq, minimize
potential conflicts of interest between Nasdaq and NASD Regulation, Inc.
("NASDR") and allow Nasdaq to respond to current and future competitive
challenges caused by technological advances and the increasing
globalization of financial markets.
In connection with the first phase ("Phase I") of the Restructuring, (1)
the NASD separated The American Stock Exchange LLC ("Amex") from The
Nasdaq-Amex Market Group, Inc. ("Market Group"), a holding company which
was a subsidiary of the NASD; (2) Market Group was then merged with and
into Nasdaq; (3) Nasdaq then effected a 49,999-for-one stock dividend
creating 100 million shares of Common Stock outstanding (all of which were
initially owned by the NASD); and (4) Nasdaq authorized the issuance of an
additional 30.9 million in new shares to be offered for sale by Nasdaq. All
share and per share amounts have been retroactively adjusted to reflect the
June 28, 2000 49,999-for-one stock dividend.
Phase I of the Restructuring closed on June 28, 2000 with Nasdaq selling
23.7 million of its newly issued shares, yielding net proceeds of
approximately $253.3 million. As of December 31, 2000, the NASD owned
approximately 81% of Nasdaq. During Phase I of the Restructuring, the NASD
sold Warrants to purchase shares of Nasdaq Common Stock, that if fully
exercised, would decrease the NASD's ownership to approximately 60%. The
second phase ("Phase II") of the Restructuring closed on January 18, 2001
(see note 14).
Nasdaq uses a multiple market maker system to operate an electronic,
screen-based equity market. Nasdaq's principal business products are price
discovery and trading services, listing of issues, and the sale of related
data and information. The majority of this business is transacted with
listed companies, market data vendors and firms in the broker/dealer
industry within the United States.
Nasdaq Global, which is incorporated in Switzerland, is the holding company
for Nasdaq's investments in Nasdaq Europe Planning Company Limited, Nasdaq
Europe S.A./N.V. and Nasdaq Japan, Inc. ("Nasdaq Japan"). Quadsan
Enterprises, Inc. ("Quadsan") is a Delaware Investment Holding Company
which provides investment management services for Nasdaq. Nasdaq Investment
Product Services, Inc. ("NIPS") is the sponsor of the Nasdaq-100 Trust,
Series I. Nasdaq International Market Initiatives, Inc. ("NIMI") offers a
variety of consulting services to assist emerging and established
securities markets around the world with both technology applications and
regulation. Nasdaq Tools, Inc. ("Nasdaq Tools") provides software products
and services related to the broker/dealer industry to be used in
conjunction with the Nasdaq Workstation II ("NWII") software.
2. Significant Transactions
In February 2000, the NASD signed a joint venture agreement to form Nasdaq
Europe Planning Company Limited. To establish Nasdaq Europe Planning
Company Limited, the NASD contributed capital of $10.0 million and three
other investors contributed $10.0 million each. In exchange for the capital
contribution, the NASD received an ownership interest of 56%. As a part of
the Restructuring, the NASD's ownership interest in Nasdaq Europe was
transferred to Nasdaq Global.
On March 7, 2000, Nasdaq acquired Financial Systemware, Inc. ("FSI", now
known as Nasdaq Tools), a company which develops and markets a set of
software utilities which can be loaded on a NWII terminal to enhance the
features and functionalities of the NWII software. This acquisition has
been accounted for using the purchase method of accounting, and
accordingly, assets acquired and liabilities assumed have been recorded at
their estimated fair values at the date of acquisition. The results of
operations of Nasdaq Tools are included in the consolidated statements of
income and stockholders' equity from the acquisition date. Periods prior to
the acquisition date are not included in the consolidated statements of
income and stockholders' equity.
Upon closing of the transaction, Nasdaq acquired 100% of FSI's issued and
outstanding stock for $7.3 million. Goodwill recorded as a result of the
acquisition is being recognized as expense on a straight-line basis over
five years. Additionally, the Nasdaq Tools principals, the sellers, will
collectively be paid $25.0 million. Of this amount, $10.0 million was paid
upon closing and is being recognized as expense on a straight-line basis
over five years. Five cash payments of $3.0 million each will be paid over
the five years following closing, contingent upon the continued employment
and development efforts of the Nasdaq Tools principals. The unamortized
goodwill and other intangible assets related to the acquisition of Nasdaq
Tools are $5.4 million and $8.3 million, respectively, as of December 31,
2000 and are included in other assets in the consolidated balance sheets.
In October 2000, Nasdaq Japan sold an approximately 15 percent stake for
approximately $48 million to a group of 13 major Japanese, U.S. and
European brokerages, thereby reducing Nasdaq Global's interest to
approximately 39.1 percent. Nasdaq Japan will use the proceeds primarily
for working capital and the development of a hybrid market model with quote
and order functionality.
3. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Nasdaq and
its majority owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include demand cash and all non-restricted
investments purchased with a remaining maturity of three months or less at
the time of purchase. Such investments included in cash and cash
equivalents in the consolidated balance sheets were $218.5 million and $7.1
million at December 31, 2000 and 1999, respectively.
Investments
Under Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities,"
management determines the appropriate classification of investments at the
time of purchase. Investments for which Nasdaq does not have the intent or
ability to hold to maturity are classified as "available-for-sale" and are
carried at fair market value, with the unrealized gains and losses, net of
tax, reported as a separate component of stockholders' equity. Investments
for which Nasdaq has the intent and ability to hold to maturity are
classified as "held-to-maturity" and are carried at amortized cost. The
amortized cost of debt securities classified as held-to-maturity or
available-for-sale is adjusted for amortization of premiums and accretion
of discounts and is included in interest income and interest expense as
appropriate. Realized gains and losses on sales of securities are included
in earnings using the specific identification method.
A decline in the market value of any available-for-sale or held-to-maturity
security below cost, that is deemed to be other than temporary, results in
a reduction in carrying amount to fair value. The impairment is charged to
earnings and a new cost basis for the security is established.
Receivables, Net
Nasdaq's receivables are concentrated with NASD member firms, market data
vendors and Nasdaq issuers. Receivables are shown net of reserves for
uncollectable accounts. Reserves are calculated based on the age and source
of the underlying receivable and are tied to past collections experience.
Total reserves netted against receivables in the consolidated balance
sheets were $5.4 million and $3.0 million at December 31, 2000 and 1999,
respectively.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation.
Equipment acquired under capital leases is recorded at the lower of fair
market value or the present value of future lease payments. Depreciation
and amortization are provided on the straight-line method. Estimated useful
lives generally range from 10 years to 40 years for buildings and
improvements, 2 years to 5 years for data processing equipment and
software, and 5 years to 10 years for furniture and equipment. Leasehold
improvements are amortized using the straight-line method over the lesser
of the useful life of the improvement or the term of the applicable lease.
Impairment of Long-Lived Assets
In the event that facts and circumstances indicate that long-lived assets
or other assets may be impaired, such as obsolesence, an evaluation of
recoverability would be performed. If an evaluation is required, the
estimated future undiscounted cash flows associated with the asset would be
compared to the asset's carrying amount to determine if a write-down is
required. If a write-down is required, Nasdaq would prepare a discounted
cash flow analysis to determine the amount of the write-down.
Deferred Revenue
Deferred revenues represent cash received and billed receivables which are
unearned, until services are provided.
Revenue Recognition
Market information services revenues are based on the number of
presentation devices in service and quotes delivered through those devices.
Market information services revenues are recognized in the month that
information is provided. Transaction services revenues are variable based
on service volumes and are recognized as transactions occur. Issuer annual
listing services revenues are recognized ratably over the following 12
month period. Issuer initial listing fees are recognized in the month
listing occurs. Issuer additional share fees are recognized in the period
the incremental shares are issued.
Advertising Costs
Nasdaq expenses advertising costs, which included media advertising and
production cost, in the periods in which the costs are incurred. Media
advertising and production costs included as marketing and advertising in
the consolidated statements of income totaled $35.3 million, $45.3 million
and $36.2 million for 2000, 1999, and 1998, respectively.
Software Costs
Significant purchased application software, and operational software that
is an integral part of computer hardware, are capitalized and amortized on
the straight-line method over their estimated useful lives. All other
purchased software is charged to expense as incurred.
Nasdaq adopted Statement of Position ("SOP") 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use"
effective January 1, 1999. The provisions of this SOP require certain costs
incurred in connection with developing or obtaining internal use software
to be capitalized. Unamortized capitalized software development costs of
$37.8 million and $14.7 million as of December 31, 2000 and 1999,
respectively, are carried in data processing equipment and software in the
consolidated balance sheets. Amortization of costs capitalized under SOP
98-1 totaled $2.3 million and $0.5 million for 2000 and 1999 and is
included in depreciation and amortization in the consolidated statements of
income.
Income Taxes
Nasdaq and its subsidiaries are taxable entities. Deferred tax assets and
liabilities are determined based on differences between the financial
statement carrying amounts and the tax basis of existing assets and
liabilities (i.e., temporary differences) and are measured at the enacted
rates that will be in effect when these differences reverse.
Foreign Currency Translation
Assets and liabilities of non-U.S. subsidiaries that operate in a local
currency environment are translated to U.S. dollars at exchange rates in
effect at the balance sheet date. Translation adjustments resulting from
this process are charged or credited to other comprehensive income. Revenue
and expenses are translated at average exchange rates during the year.
Gains and losses on foreign currency translations are included in other
expenses.
Minority Interests
Minority interests in the consolidated balance sheets represents the
minority owners' share of equity as of the balance sheet date. Minority
interests in the consolidated statements of income represents the minority
owners' share of the income or loss of certain consolidated subsidiaries.
Classifications
Certain amounts for the prior year have been reclassified to conform with
the 2000 presentation.
4. Investments
Investments consist of U.S. Treasury securities, obligations of U.S.
Government sponsored enterprises, municipal bonds, equity securities and
other financial instruments. Following is a summary of investments
classified as available-for-sale which are carried at fair value as of
December 31, 2000:
Gross Unrealized
Amortized
Cost Gain Loss Fair Value
-----------------------------------------------------
Due in one year or less $ 89,094 $ 204 $ (1) $ 89,297
Due after one year through five years 123,433 665 (1,615) 122,483
Equity securities 19,069 3,584 (2,343) 20,310
-----------------------------------------------------
$ 231,596 $ 4,453 $ (3,959) $ 232,090
=====================================================
Following is a summary of investments classified as held-to-maturity which are
carried at amortized cost as of December 31, 2000:
Gross Unrealized
Amortized
Cost Gain Loss Fair Value
-----------------------------------------------------
Due in one year or less $ 21,967 $ 19 $ (32) $ 21,954
Due after one year through five years 6,612 26 - 6,638
-----------------------------------------------------
$ 28,579 $ 45 $ (32) $ 28,592
=====================================================
Following is a summary of investments classified as available-for-sale which are
carried at fair value as of December 31, 1999:
Gross Unrealized
Amortized
Cost Gain Loss Fair Value
-----------------------------------------------------
Due in one year or less $ 17,472 $ 43 $ - $ 17,515
Due after one year through five years 114,288 94 (2,100) 112,282
Equity securities 19,125 5,642 (998) 23,769
-----------------------------------------------------
$ 150,885 $ 5,779 $ (3,098) $ 153,566
=====================================================
Following is a summary of investments classified as held-to-maturity which are
carried at amortized cost as of December 31, 1999:
Gross Unrealized
Amortized
Cost Gain Loss Fair Value
---------------------------------------------------
Due in one year or less $ 10,697 $ 7 $ (178) $ 10,526
Due after one year through five years 17,720 - (439) 17,281
---------------------------------------------------
$ 28,417 $ 7 $ (617) $ 27,807
===================================================
At December 31, 2000 and 1999, investments with a carrying amount of
approximately $28.0 million were pledged as collateral under Nasdaq's $25.0
million note payable.
5. Fair Value of Financial Instruments
Nasdaq considers cash and cash equivalents, accounts receivable,
investments, investments in subsidiaries, accounts payable and accrued
expenses, due to banks, and long-term debt to be its financial instruments.
The carrying amount reported in the balance sheet for cash and cash
equivalents, accounts receivable, investments, accounts payable and accrued
expenses, and due to banks closely approximate their fair values. The
approximate fair value of Nasdaq's long-term debt was estimated using a
discounted cash flow analysis, based on Nasdaq's assumed incremental
borrowing rates for similar types of borrowing arrangements. This analysis
indicates that the fair value of Nasdaq's long-term debt at December 31,
2000 and 1999 approximates its carrying amount. The fair value of its
investments in subsidiaries is not determinable since these investments do
not have quoted market prices.
6. Long-Term Debt
In May 1997, Nasdaq entered into a $25.0 million note payable with a
financial institution (the "Lender"). Principal payments are scheduled to
begin in 2007 and continue in equal monthly installments until maturity in
2012. The note requires monthly interest payments through May 2007 at an
annual rate of 7.41%. After May 2007, Nasdaq will incur interest equal to
the Lender's cost of funds rate, as defined in the agreement, plus .5%.
Interest expensed and paid under the agreement totaled approximately $1.9
million for each of the years ended December 31, 2000, 1999 and 1998.
7. Income Taxes
The income tax provision includes the following amounts:
Years Ended December 31,
2000 1999 1998
-----------------------------------------------------
Current income taxes:
Federal $ 75,727 $ 46,482 $ 22,930
State 14,208 11,599 5,196
------------------------------------------------------
Total current income taxes 89,935 58,081 28,126
Deferred income taxes:
Federal 12,081 273 (1,695)
State 3,002 67 (421)
------------------------------------------------------
Total deferred income taxes 15,083 340 (2,116)
------------------------------------------------------
Total provision for income taxes $ 105,018 $ 58,421 $ 26,010
------------------------------------------------------
Income taxes paid during the periods $ 101,171 $ 49,992 $ 24,131
7. Income Taxes
Reconciliations of the statutory United States federal income tax rates to
the effective tax rates are as follows:
Years Ended December 31,
2000 1999 1998
-----------------------------------------------------
Federal 35.0% 35.0% 35.0%
State 3.8 5.2 5.1
Foreign losses without US benefit 1.8 - -
Other, net 0.6 0.2 2.6
-------------------------------------------------------
Effective rate 41.2% 40.4% 42.7%
=======================================================
Components of Nasdaq's deferred tax assets and liabilities consisted of the
following:
December 31,
2000 1999
-------------------- ---------------------
Deferred tax assets:
Deferred fees $ 453 $ 2,233
Compensation and benefits 171 179
Bad debts 5,139 2,801
-------------------- ---------------------
Total deferred tax assets 5,763 5,213
Deferred tax liabilities:
Depreciation (12,492) (9,966)
Software development costs (19,624) (5,184)
Other 5,334 4,222
-------------------- ---------------------
Total deferred tax liabilities, net $ (26,782) $ (10,928)
==================== =====================
Due to the Nasdaq's foreign operations, it has approximately $3.9 million
of foreign deferred tax assets, primarily Net Operating Losses and Start-Up
costs. These in-country deferred tax assets have been fully reserved by an
offsetting Valuation Allowance as it is not "more likely than not" that
these deferred tax assets will be realized.
8. Employee Benefits
Nasdaq is a participating employer in a noncontributory, defined-benefit
pension plan, along with other arrangements, that the NASD maintains for
the benefit of eligible employees of its subsidiaries. The benefits are
primarily based on years of service and the employees' average salary
during the highest 60 consecutive months of employment. The plan assets
consist primarily of fixed income and equity securities.
The following table sets forth the plans' funded status and amounts
recognized in the Nasdaq balance sheets of December 31:
Pension Benefits
2000 1999
---------------------------------------
Change in benefit obligation
Benefit obligation at beginning of year $ 39,773 $ 33,184
Service cost 4,543 3,304
Interest cost 3,246 2,448
Actuarial losses 5,488 7,363
Benefits paid (1,988) (2,246)
(Gain) loss due to change in discount rate 2,605 (4,280)
---------------------------------------
Benefit obligation at end of year $ 53,667 $ 39,773
---------------------------------------
Change in plan assets
Fair value of plan assets at beginning of year $ 28,312 $ 22,801
Actual return on plan assets 2,058 5,276
Company contributions 3,082 2,480
Benefits paid (1,988) (2,245)
---------------------------------------
Fair value of plan assets at end of year $ 31,464 $ 28,312
---------------------------------------
Funded status of the plan (underfunded) $ (22,203) (11,461)
Unrecognized net actuarial gain 8,393 1,444
Unrecognized prior service cost 906 976
Unrecognized transition obligation/(asset) (390) (447)
---------------------------------------
Accrued benefit cost $ (13,294) $ (9,488)
=======================================
As of December 31, 2000 and 1999, $2.9 million and $2.4, respectively, of
the accrued pension liability is carried as current in the accounts payable
and accrued expenses line of the consolidated balance sheets.
Pension Benefits
2000 1999
------------------------------------
Weighted-average assumptions as of December 31
Discount rate 7.5% 8.0%
Expected return on plan assets 9.0 9.0
Rate of compensation increase 5.2 5.3
Pension Benefits
2000 1999 1998
-----------------------------------------------------
Components of net periodic benefit cost
Service cost $ 4,543 $ 3,304 $ 2,817
Interest cost 3,246 2,448 2,039
Expected return on plan assets (2,533) (2,261) (1,693)
Amortization of unrecognized transition asset (57) (57) (57)
Recognized net actuarial loss 145 101 65
Prior service cost recognized 131 133 131
Curtailment/settlement loss recognized 1,296 - -
-----------------------------------------------------
Benefit cost $ 6,771 $ 3,668 $ 3,302
=====================================================
Nasdaq also participates in a voluntary savings plan for eligible employees
of the NASD and its subsidiaries. Employees are immediately eligible to
make contributions to the plan and are also eligible for an employer
contribution match at an amount equal to 100% of the first 4% of eligible
employee contributions. Eligible plan participants may also receive an
additional discretionary match from Nasdaq. Savings plan expense for the
years ended December 31, 2000, 1999, 1998 was $3.7 million, $2.9 million,
and $2.0 million, respectively. The expense included a discretionary match
authorized by the NASD Board of Governors totaling $1.3 million for the
year ended December 31, 2000, $1.3 million for the year ended December 31,
1999, and $1.0 million for the year ended December 31, 1998.
In October 2000, the Nasdaq Board of Directors (the "Nasdaq Board")
approved the implementation of an equity incentive plan and an employee
stock purchase plan. The plans will be submitted to Nasdaq stockholders for
their approval. As of December 31, 2000, no grants have been made under the
plans.
9. Leases
Nasdaq leases certain office space and equipment in connection with its
operations. The majority of these leases contain escalation clauses based
on increases in property taxes and building operating costs. Certain of
these leases also contain renewal options. Rent expense for operating
leases was $9.9 million for the year ended December 31, 2000, $4.0 million
for the year ended December 31, 1999 and $1.4 million for the year ended
December 31, 1998.
Future minimum lease payments under noncancellable operating leases with
initial or remaining terms of one year or more consisted of the following
at December 31, 2000:
Year ending December 31:
2001 $ 13,455
2002 16,034
2003 16,047
2004 16,376
2005 16,234
Remaining years 126,259
--------------------
Total minimum lease payments $ 204,405
====================
Future minimum lease payments under noncancellable capital leases with initial
or remaining terms of one year or more consisted of the following at December
31, 2000:
Year ending December 31:
2001 $ 6,462
2002 6,462
2003 3,231
2004 -
2005 -
Remaining years -
--------------------
Total minimum lease payments $ 16,155
====================
10. Warrants
In connection with the OptiMark, Inc. ("OptiMark") partnership, OptiMark agreed
to issue to Nasdaq warrants to purchase up to an aggregate of 11.25 million
shares of its common stock, $0.01 par value per share. The warrants are
exercisable in several tranches upon the achievement of certain milestones,
which are based primarily upon the average daily share volume of Nasdaq
securities traded through the OptiMark Trading System. The first milestone was
the warrant commencement date, which occurred on October 11, 1999. On that date,
Nasdaq received two fully exercisable warrants from OptiMark to purchase 4.5
million shares. The first 2.25 million shares may be purchased at an exercise
price of $5.00 per share. All remaining warrants provide that shares may be
purchased at an exercise price of $7.00 per share. The warrants are exercisable
through the earlier of (i) the last day that the OptiMark System continues to be
available on all NWII workstations and (ii) the fifth anniversary of the warrant
commencement date, or October 11, 2004. As of October 11, 1999, these warrants
had a combined value of $33.5 million which is considered to be the cost of
these warrants. The deferred revenue associated with these warrants was to be
amortized into income based on share volume traded through the OptiMark System.
In September 2000, OptiMark announced a strategic change in its business that
will allow it to focus on providing technology solutions to electronic
marketplaces. As part of the change, OptiMark decided to suspend trading
operations on the OptiMark System. As a result, Nasdaq management has concluded
that its investment in warrants in OptiMark as well as the realization of the
deferred revenue related to these warrants is impaired. Therefore, in September
2000, Nasdaq reduced its investment in warrants and related deferred revenue to
zero. Nasdaq will monitor OptiMark's implementation of its new business model
and assess the value of the warrants at each balance sheet date.
11. Commitments and Contingencies
In November 1997, Nasdaq entered into an agreement with WorldCom Inc. to replace
the existing data network that connects the Nasdaq market facilities to market
participants. The contract contains a minimum guarantee of $300 million to be
incurred through November 2003. Billings under the contract are $143.3 million
as of December 31, 2000. Management anticipates that the minimum guarantee under
the contract will be achieved.
In October 2000, Nasdaq entered into a contract with OptiMark under which
OptiMark was engaged to provide software development services in connection with
the development of the SuperMontage system. Nasdaq will pay OptiMark for the
SuperMontage development for a period not to exceed twelve months. Additionally,
OptiMark will be entitled to receive incentive payments if it meets certain
delivery milestones agreed to in the contract. If Nasdaq uses OptiMark's
services for the full twelve months of expected development effort and OptiMark
meets all of its deliverables, then Nasdaq will be required to pay up to $14.2
million.
Nasdaq may be subject to claims arising out of the conduct of its business.
Currently, there are certain legal proceedings pending against Nasdaq.
Management believes, based upon the opinion of counsel, that any liabilities or
settlements arising from these proceedings will not have a material effect on
the financial position or results of operations of Nasdaq. Management is not
aware of any unasserted claims or assessments that would have a material adverse
effect on the financial position and the results of operations of Nasdaq.
12. Related Party Transactions
Related party receivables and payables are the result of various transactions
between Nasdaq and its affiliates. Payables to related parties are comprised
primarily of the regulation charge from NASDR, a wholly owned subsidiary of the
NASD. NASDR charges Nasdaq for costs incurred related to Nasdaq market
regulation and enforcement. Support charges from the NASD to Nasdaq represent
another significant component of payables to related parties. The support charge
includes an allocation of a portion of the NASD's administrative expenses as
well as its costs incurred to develop and maintain technology on behalf of
Nasdaq. The remaining component of payables to related parties is cash
disbursements funded by the NASD on behalf of Nasdaq.
Receivables from related parties are primarily attributable to costs incurred by
Amex and funded by Nasdaq related to various Amex technology projects. The
remaining portion of the receivable from related parties balance is related to
cash disbursements funded by Nasdaq on behalf of its affiliates. Disbursements
made by Nasdaq on behalf of affiliates relate mainly to office supply and
utility charges where Nasdaq represents the largest portion.
Surveillance Charge from NASDR
NASDR incurs costs associated with surveillance monitoring, legal and
enforcement activities related to the regulation of Nasdaq. These costs are
charged to Nasdaq based upon the NASD management's estimated percentage of costs
incurred by each NASDR department that are attributable directly to Nasdaq
market surveillance. The following table represents Nasdaq management's estimate
of the costs charged by NASDR to Nasdaq:
December 31,
2000 1999 1998
----------------------------------------------------
Compensation $ 32,018 $ 32,529 $ 29,894
Professional and contract services 27,110 20,000 16,193
Occupancy 399 1,687 1,945
Publications, supplies and postage 2,924 1,661 1,744
Computer ops. and data comm. 5,010 3,430 2,503
Depreciation 8,435 3,831 3,205
Travel, meetings and training 2,848 1,841 1,670
Other 1,106 150 192
----------------------------------------------------
Total $ 79,850 $ 65,129 $ 57,346
====================================================
12. Related Party Transactions (continued)
On June 28, 2000 Nasdaq entered into a Regulatory Services Agreement with
NASDR (the "Regulatory Services Agreement"). Under the terms of this
agreement, NASDR will provide Nasdaq regulatory services and related
administrative functions necessary for NASDR's performance of such
services. Through December 31, 2000, NASDR's fees charged to Nasdaq will
reflect NASDR's cost of furnishing the services. After December 31, 2000,
pricing will be determined on a "cost-plus basis" for each service. The
initial term of the Regulatory Services Agreement expires on June 28, 2010.
Nasdaq is subject to termination fees, payable to NASDR, if it terminates
its receipt of services under the agreement for convenience.
Support Charge from the NASD
The NASD provides various administrative services to Nasdaq including legal
assistance, accounting and managerial services. It is the NASD's policy to
charge these expenses and other operating costs to Nasdaq based upon usage
percentages determined by management of the NASD and Nasdaq. Additionally,
the NASD incurs certain costs related to the development and maintenance of
technology for Nasdaq. Technology development costs are allocated directly
to Nasdaq based upon specific projects requested by Nasdaq. Technology
maintenance costs are allocated based upon Nasdaq's share of computer
usage. The following table represents Nasdaq management's estimate of the
composition of costs charged by the NASD to Nasdaq:
December 31,
2000 1999 1998
--------------------------------------------------
Compensation $ 25,899 $ 25,956 $ 25,942
Professional and contract services 9,986 16,671 7,784
Occupancy 9,576 4,637 5,212
Publications, supplies and postage 1,544 2,295 2,368
Computer ops. and data comm. 1,500 5,243 4,145
Depreciation 2,894 6,514 5,335
Travel, meetings and training 1,504 2,020 1,551
Other 701 759 267
--------------------------------------------------
Total $ 53,604 $ 64,095 $ 52,604
==================================================
On June 28, 2000 Nasdaq entered into a Separation and Common Services
Agreement with the NASD (the "NASD Separation Agreement"). Under the terms
of this agreement, NASD will provide Nasdaq the same administrative,
corporate and infrastructure services it currently provides. The rates and
methodology to be used in determining the cost of such services will be
consistent with past practices. Nasdaq intends to develop its internal
capabilities in the future in order to reduce its reliance on the NASD for
such services. In addition, Nasdaq will provide the NASD continued access
to such Nasdaq technology as NASD requires to satisfy its obligation to
Amex under the transaction agreement between NASD and Amex in connection
with the NASD's 1998 acquisition of Amex. Nasdaq will also continue to
provide all services it currently provides to Amex. Nasdaq's costs for
rendering such access and services will be recoverable from the NASD.
Nasdaq and the NASD are negotiating a more detailed "Master Agreement" to
supersede the NASD Separation Agreement that expires December 31, 2001. If
such a Master Agreement is not executed prior to January 1, 2002, the NASD
Separation Agreement automatically renews for an additional twelve months.
Nasdaq Charge to the American Stock Exchange LLC ("Amex")
Nasdaq incurs technology costs on behalf of Amex related to development of
new Amex systems and enhancement of existing Amex systems. Additionally,
Nasdaq incurs certain operating costs such as marketing on behalf of Amex.
Amounts are charged based upon specific projects requested by Amex. Amounts
charged from Nasdaq to Amex are included in support costs from related
parties and are summarized as follows:
December 31,
2000 1999 1998
---------------------------------------------------
Compensation $ 345 $ 600 $ 1,128
Professional and contract services 4,389 13,090 7,334
Publications, supplies and postage 11 19 35
Other 187 326 612
---------------------------------------------------
Total $ 4,932 $ 14,035 $ 9,109
===================================================
In the opinion of management, all methods of cost allocation described
above are reasonable for the services rendered.
13. Capital Stock and Earnings Per Share
Each share of Common Stock has one vote, except that any person, other than
the NASD or any other person as may be approved for such exemption by the
Nasdaq Board prior to the time such person owns more than 5% of the
then-outstanding shares of Common Stock, who would otherwise be entitled to
exercise voting rights in respect of more than 5% of the then-outstanding
shares of Common Stock will be unable to exercise voting rights for any
shares in excess of 5% of the then-outstanding shares of Common Stock. The
voting rights associated with the shares of Common Stock underlying the
Warrants, as well as the shares of Common Stock purchased through the valid
exercise of Warrants, will be governed by the voting trust agreement (the
"Voting Trust Agreement") entered into by the NASD, Nasdaq and The Bank of
New York, as voting trustee (the "Voting Trustee"). Initially, the holders
of the Warrants (each, a "Warrant Holder" and, collectively, the "Warrant
Holders") will not have any voting rights with respect to the shares of
Common Stock underlying such Warrants. Until Nasdaq becomes registered with
the Securities and Exchange Commission as a national securities exchange
("Exchange Registration"), the shares of Common Stock underlying
unexercised and unexpired Warrant tranches, as well as the shares of Common
Stock purchased through the exercise of Warrants, will be voted by the
Voting Trustee at the direction of the NASD. The voting rights associated
with the shares of Common Stock underlying unexercised and expired Warrant
tranches will revert to the NASD. However, the NASD has determined,
commencing upon Exchange Registration, to vote its shares of Common Stock
(other than shares underlying then outstanding Warrants) in the same
proportion as the other stockholders of Nasdaq. Upon Exchange Registration,
the Warrant Holders will have the right to direct the Voting Trustee as to
the voting of the shares of Common Stock underlying unexercised and
unexpired Warrant tranches until the earlier of the exercise or the
expiration of such Warrant tranches. The shares of Common Stock purchased
upon a valid exercise of a Warrant tranche prior to Exchange Registration
will be released from the Voting Trust Agreement upon Exchange
Registration. The shares of Common Stock purchased upon a valid exercise of
a Warrant tranche after Exchange Registration will not be subject to the
Voting Trust Agreement.
There are 30,000,000 shares of preferred stock authorized, and none issued
and outstanding.
The following table sets forth the computation of basic earnings per share.
December 31,
2000 1999 1998
--------------------------------------------------
Numerator for basic earnings per share $ 150,127 $ 86,149 $ 34,955
Denominator for basic weighted average shares 112,090,493 100,000,000 100,000,000
Basic earnings per share $ 1.34 $ 0.86 $ 0.35
14. Subsequent Events (Unaudited)
Phase II Private Placement
- --------------------------
Phase II closed on January 18, 2001 with Nasdaq selling approximately 5.0
million shares, yielding net proceeds of approximately $63.7 million.
Subsequent to the closing of Phase II, the NASD owns approximately 74% of
Nasdaq. In the Phase I and Phase II offerings, the NASD sold Warrants to
purchase shares of the common stock of Nasdaq, and if fully exercised, the
NASD's ownership would be decreased to approximately 41%.
Nasdaq Europe S.A./N.V.
- -----------------------
On March 27, 2001, Nasdaq acquired a majority ownership interest in the
European Association of Securities Dealers Automated Quotation S.A./N.V.
("EASDAQ"), a Belgium-based, pan-European stock exchange for $12.5 million.
Nasdaq plans to restructure the company into a globally linked,
pan-European market and rename it Nasdaq Europe S.A./N.V.
Nasdaq's acquisition has been accounted for using the purchase method of
accounting.
Hellman & Friedman
- ------------------
In March 2001, Nasdaq entered into an agreement to issue and sell $240.0
million in aggregate principal amount of its 4% convertible subordinated
debentures due 2006 (the "Subordinated Debentures") to Hellman & Friedman
Capital Partners IV, L.P. and its affiliates (collectively, "Hellman &
Friedman"). The annual 4% coupon will be payable in arrears in cash and the
Subordinated Debentures will be convertible at any time into shares of
Common Stock at $20.00 per share. The transaction is scheduled to close in
the second quarter of 2001.
On a fully diluted basis, Hellman & Freidman will have an approximate 9.8%
equity ownership position in Nasdaq. Nasdaq has agreed to use its best
efforts to seek stockholder approval of a charter amendment that would
provide for voting debt in order to permit Hellman & Friedman to vote on an
as-converted basis on all matters on which common stockholders have the
right to vote, subject to the current five percent voting limitation in
Nasdaq's Restated Certificate of Incorporation (the "Certificate of
Incorporation"). Nasdaq has agreed to grant Hellman & Friedman certain
registration rights with respect to the shares of Common Stock underlying
the Subordinated Debentures. Additionally, Hellman & Friedman will be
permitted to designate one person reasonably acceptable to Nasdaq for
nomination as a director of Nasdaq for so long as Hellman & Friedman owns
Subordinated Debentures and/or shares of Common Stock issued upon
conversion representing at least 50% of the shares of Common Stock issuable
upon conversion of the Subordinated Debentures initially purchased.
On March 23, 2001, Nasdaq entered into an agrement with the NASD whereby
Nasdaq would use the net proceeds from the sale of the Subordinated
Debentures to purchase 18,461,538 shares of Common Stock from the NASD for
$13 per share or an aggregate purchase price of $239,999,994.
LIFFE
- -----
In March 2001, Nasdaq entered into a non-binding letter of intent with the
London International Financial Futures and Options Exchange ("LIFFE") to
create a new U.S. joint venture company which will list single stock
futures The products of this joint venture are expected to be traded
through the LIFFE CONNECT(TM) electronic system. Nasdaq has committed up to
$15 million plus the rights to use certain trademarks in this venture.
Nasdaq Europe Planning Company Limited
- --------------------------------------
In February and March 2001, Nasdaq repurchased the ownership interests of
certain minority shareholders in Nasdaq Europe Planning Company Limited for
a total of $20 million.
EXHIBIT INDEX
Exhibit
Number Description
3.1 Restated Certificate of Incorporation of The Nasdaq Stock Market, Inc.
3.2 By-Laws of The Nasdaq Stock Market, Inc.
4.1 Form of Common Stock certificate.
7A Qualitative Disclosure about market risk (incorporated herein by
reference to "Item 2. Financial Information" of this Form 10).
9.1 Voting Trust Agreement dated June 28, 2000, among The Nasdaq Stock
Market, Inc., the National Association of Securities Dealers, Inc.
and The Bank of New York.
9.2 First Amendment to the Voting Trust Agreement, dated as of January
18, 2001, among The Nasdaq Stock Market, Inc., the National
Association of Securities Dealers, Inc. and The Bank of New York.
10.1 Network Service Agreement, dated November 19, 1997, between MCI
Telecommunications Corporation and The Nasdaq Stock Market, Inc.*
10.2 Consolidated Agreement, between Unisys Corporation and The Nasdaq
Stock Market, Inc.*
10.3 Network User License Agreement, dated November 30, 1993, between
Oracle Corporation and The Nasdaq Stock Market, Inc.*
10.4 Software License and Services Agreement, dated November 30, 1993,
between Oracle Corporation and The Nasdaq Stock Market, Inc.*
10.5 Regulatory Services Agreement, dated June 28, 2000, between NASD
Regulation, Inc. and The Nasdaq Stock Market, Inc.*
10.6 Separation and Common Services Agreement, dated as of June 28,
2000, between the National Association of Securities Dealers, Inc.
and The Nasdaq Stock Market, Inc.
10.7 The Nasdaq Stock Market, Inc. Employee Stock Purchase Plan.
10.8 The Nasdaq Stock Market, Inc. Equity Incentive Plan.
10.9 Securities Purchase Agreement, dated as of March 23, 2001, among
The Nasdaq Stock Market, Inc., Hellman & Friedman Capital Partners
IV, L.P. and the other purchasers listed in the signature pages
thereto.
10.10 Purchase and Sale Agreement, dated March 23, 2001, by and between
the National Association of Securities Dealers, Inc. and The
Nasdaq Stock Market, Inc.
10.11 Employment Agreement between the National Association of
Securities Dealers, Inc. and Frank G. Zarb effective on February
24, 1997.
10.12 Instrument of Amendment, dated March 18, 1998, to Employment
Agreement between National Association of Securities Dealers, Inc.
and Frank G. Zarb, effective on February 24, 1997.
10.13 Instrument of Amendment, dated as of August 20, 1999, to
Employment Agreement between National Association of Securities
Dealers, Inc. and Frank G. Zarb, effective on February 24, 1997,
as amended effective March 18, 1998.
10.14 Instrument of Amendment, dated March 30, 2000, to Employment
Agreement between National Association of Securities Dealers, Inc.
and Frank G. Zarb, effective on February 24, 1997, as amended
effective March 18, 1998, and subsequently amended in May, 1999.
10.15 Instrument of Amendment, effective as of July 27, 2000, to
Employment Agreement between National Association of Securities
Dealers, Inc. and Frank G. Zarb, effective on February 24, 1997,
as amended effective March 18, 1998, and subsequently amended in
May, 1999, and subsequently amended on March 30, 2000.
10.16 Instrument of Amendment, effective as of November 1, 2000, to
Employment Agreement between National Association of Securities
Dealers, Inc. and Frank G. Zarb, effective on February 24, 1997,
as amended effective March 18, 1998, and subsequently amended in
May, 1999, and subsequently amended on March 30, 2000, and as of
July 27, 2000.
10.17 Instrument of Amendment, effective as of April 25, 2001, to
Employment Agreement between National Association of Securities
Dealers, Inc. and Frank G. Zarb, effective on February 24, 1997,
as subsequently amended effective March 18, 1998, August 20, 1999,
March 30, 2000, July 27, 2000 and November 1, 2000.
10.18 Employment Agreement by and between The Nasdaq Stock Market, Inc.
and J. Patrick Campbell, affective as of December 29, 2000.
10.19 Employment Agreement by The Nasdaq Stock Market, Inc. and John L.
Hilley, effective as of December 29, 2000.
10.20 Employment Agreement by and between The Nasdaq Stock Market, Inc.
and Richard G. Ketchum, effective as of December 29, 2000.
10.21 Employment Agreement by and between The Nasdaq Stock Market, Inc.
and Hardwick Simmons, dated as of January 31, 2001.
11 Statement regarding computation of per share earnings (incorporated
herein by reference to "Item 2. Financial Information" of this Form
10).
12 Computations of ratios (not applicable).
21.1 List of all subsidiaries.
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
THE NASDAQ STOCK MARKET, INC.
The undersigned, Joan C. Conley, Corporate Secretary of The Nasdaq
Stock Market, Inc. ("Nasdaq"), a Delaware corporation, does hereby certify:
FIRST: That the name of the corporation is The Nasdaq Stock
Market, Inc. The date of the filing of its original Certificate of
Incorporation with the Secretary of State of the State of Delaware was
November 13, 1979. The name under which Nasdaq was originally incorporated
was "NASD Market Services, Inc."
SECOND: That the Certificate of Incorporation of Nasdaq is hereby
amended and restated to read in its entirety as follows:
ARTICLE FIRST
The name of the corporation is The Nasdaq Stock Market, Inc.
ARTICLE SECOND
The address of Nasdaq's registered office in the State of Delaware
is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware
19801. The name of Nasdaq's registered agent at such address is The
Corporation Trust Company.
ARTICLE THIRD
The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware, and,
without limiting the generality of the foregoing business or purposes to be
conducted or promoted, shall include, to the extent applicable to Nasdaq,
the responsibilities and functions set forth in the "Plan of Allocation and
Delegation of Functions by NASD to Subsidiaries," as approved by the
Securities and Exchange Commission, as amended from time to time.
ARTICLE FOURTH
A. The total number of shares of stock which Nasdaq shall have the
authority to issue is Three Hundred Thirty Million (330,000,000),
consisting of Thirty Million (30,000,000) shares of Preferred Stock, par
value $.01 per share (hereinafter referred to as "Preferred Stock"), and
Three Hundred Million (300,000,000) shares of Common Stock, par value $.01
per share (hereinafter referred to as "Common Stock").
B. The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors of Nasdaq (the "Board") is hereby
authorized to provide for the issuance of shares of Preferred Stock in one
or more series and, by filing a certificate pursuant to the applicable law
of the State of Delaware (hereinafter referred to as "Preferred Stock
Designation"), to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the
qualifications, limitations and restrictions thereof. The authority of the
Board with respect to each series shall include, but not limited to,
determination of the following:
(1) The designation of the series, which may be by distinguishing
number, letter or title.
(2) The number of shares of the series, which number the Board may
thereafter (except where otherwise provided in the Preferred Stock
Designation) increase or decrease (but not below the number of shares
thereof then outstanding).
(3) The amounts payable on, and the preferences, if any, of shares
of the series in respect of dividends, and whether such dividends, if any,
shall be cumulative or noncumulative.
(4) Dates at which dividends, if any, shall be payable.
(5) The redemption rights and price or prices, if any, for shares
of the series.
(6) The terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series.
(7) The amounts payable on, and the preferences, if any, of shares
of the series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of Nasdaq.
(8) Whether the shares of the series shall be convertible into or
exchangeable for shares of any other class or series, or any other
security, of Nasdaq or any other corporation, and, if so, the specification
of such other class or series or such other security, the conversion or
exchange price or prices or rate or rates, any adjustments thereof, the
date or dates at which such shares shall be convertible or exchangeable and
all other terms and conditions upon which such conversion or exchange may
be made.
(9) Restrictions on the issuance of shares of the same series or
of any other class or series.
(10) The voting rights, if any, of the holders of shares of the
series.
C. 1. Except as may otherwise be provided in this Restated
Certificate of Incorporation (including any Preferred Stock Designation) or
by applicable law, each holder of Common Stock, as such, shall be entitled
to one vote for each share of Common Stock held of record by such holder on
all matters on which stockholders generally are entitled to vote, and no
holder of any series of Preferred Stock, as such, shall be entitled to any
voting powers in respect thereof.
2. Notwithstanding any other provision of this Restated
Certificate of Incorporation, but subject to subparagraph 6 of this
paragraph C. of this Article Fourth, in no event shall any record owner of
any outstanding Common Stock which is beneficially owned, directly or
indirectly, as of any record date for the determination of stockholders
entitled to vote on any matter, by a person (other than an Exempt Person)
who beneficially owns shares of Common Stock ("Excess Shares") in excess of
five percent (5%) of the then-outstanding shares of Common Stock, be
entitled or permitted to vote any Excess Shares. For all purposes hereof,
any calculation of the number of shares of Common Stock outstanding at any
particular time, including for purposes of determining the particular
percentage of such outstanding shares of Common Stock of which any person
is the beneficial owner, shall be made in accordance with the last sentence
of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date of filing this Restated Certificate of Incorporation.
3. The following definitions shall apply to this paragraph
C. of this Article Fourth:
(a) "Affiliate" shall have the meaning ascribed to
that term in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the
date of filing this Restated Certificate of
Incorporation.
(b) A person shall be deemed the "beneficial owner"
of, shall be deemed to have "beneficial ownership" of and
shall be deemed to "beneficially own" any securities:
(i) which such person or any of such person's
Affiliates is deemed to beneficially own, directly or
indirectly, within the meaning of Rule l3d-3 of the
General Rules and Regulations under the Exchange Act as
in effect on the date of the filing of this Restated
Certificate of Incorporation;
(ii) which such person or any of such person's
Affiliates has (A) the right to acquire (whether such
right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement
or understanding (other than customary agreements with
and between underwriters and selling group members with
respect to a bona fide public offering of securities), or
upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided,
however, that a person shall not be deemed the beneficial
owner of, or to beneficially own, securities tendered
pursuant to a tender or exchange offer made by or on
behalf of such person or any of such person's Affiliates
until such tendered securities are accepted for purchase;
or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a
person shall not be deemed the beneficial owner of, or to
beneficially own, any security by reason of such
agreement, arrangement or understanding if the agreement,
arrangement or understanding to vote such security (1)
arises solely from a revocable proxy or consent given to
such person in response to a public proxy or consent
solicitation made pursuant to, and in accordance with,
the applicable rules and regulations promulgated under
the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other person and with respect to which
such person or any of such person's Affiliates has any
agreement, arrangement or understanding (other than
customary agreements with and between underwriters and
selling group members with respect to a bona fide public
offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the
proviso to (b)(ii)(B) above) or disposing of such
securities;
provided, however, that (A) no person who is an officer,
director or employee of an Exempt Person shall be deemed,
solely by reason of such person's status or authority as
such, to be the "beneficial owner" of, to have
"beneficial ownership" of or to "beneficially own" any
securities that are "beneficially owned" (as defined
herein), including, without limitation, in a fiduciary
capacity, by an Exempt Person or by any other such
officer, director or employee of an Exempt Person, and
(B) the Voting Trustee, as defined in the Voting Trust
Agreement by and among Nasdaq, the National Association
of Securities Dealers, Inc., a Delaware corporation (the
"NASD"), and The Bank of New York, a New York banking
corporation, as such may be amended from time to time
(the "Voting Trust Agreement"), shall not be deemed,
solely by reason of such person's status or authority as
such, to be the "beneficial owner" of, to have
"beneficial ownership" of or to "beneficially own" any
securities that are governed by and held in accordance
with the Voting Trust Agreement.
(c) A "person" shall mean any individual, firm,
corporation, partnership, limited liability company or
other entity.
(d) "Exempt Person" shall mean Nasdaq or any
Subsidiary of Nasdaq, in each case including, without
limitation, in its fiduciary capacity, or any employee
benefit plan of Nasdaq or of any Subsidiary of Nasdaq, or
any entity or trustee holding Common Stock for or
pursuant to the terms of any such plan or for the purpose
of funding any such plan or funding other employee
benefits for employees of Nasdaq or of any Subsidiary of
Nasdaq.
(e) "Subsidiary" of any person shall mean any
corporation or other entity of which securities or other
ownership interests having ordinary voting power
sufficient to elect a majority of the board of directors
or other persons performing similar functions are
beneficially owned, directly or indirectly, by such
person, and any corporation or other entity that is
otherwise controlled by such person.
(f) The Board shall have the power to construe and
apply the provisions of this paragraph C. of this Article
Fourth and to make all determinations necessary or
desirable to implement such provisions, including, but
not limited to, matters with respect to (1) the number of
shares of Common Stock beneficially owned by any person,
(2) whether a person is an Affiliate of another, (3)
whether a person has an agreement, arrangement or
understanding with another as to the matters referred to
in the definition of beneficial ownership, (4) the
application of any other definition or operative
provision hereof to the given facts, or (5) any other
matter relating to the applicability or effect of this
paragraph C. of this Article Fourth.
4. The Board shall have the right to demand that any
person who is reasonably believed to hold of record or beneficially own
Excess Shares supply Nasdaq with complete information as to (a) the record
owner(s) of all shares beneficially owned by such person who is reasonably
believed to own Excess Shares, and (b) any other factual matter relating to
the applicability or effect of this paragraph C. of this Article Fourth as
may reasonably be requested of such person.
5. Any constructions, applications, or determinations
made by the Board, pursuant to this paragraph C. of this Article Fourth, in
good faith and on the basis of such information and assistance as was then
reasonably available for such purpose, shall be conclusive and binding upon
Nasdaq and its stockholders.
6. Notwithstanding anything herein to the contrary,
subparagraph 2 of this paragraph C. of this Article Fourth shall not be
applicable to any Excess Shares beneficially owned by (a) the NASD or its
Affiliates until such time as the NASD beneficially owns five percent (5%)
or less of the outstanding shares of Common Stock or (b) any other person
as may be approved for such exemption by the Board prior to the time such
person beneficially owns more than five percent (5%) of the outstanding
shares of Common Stock. The Board, however, may not approve an exemption
under this Section 6(b): (i) for a registered broker or dealer or an
Affiliate thereof (provided that, for these purposes, an Affiliate shall
not be deemed to include an entity that either owns ten percent or less of
the equity of a broker or dealer, or the broker or dealer accounts for one
percent or less of the gross revenues received by the consolidated entity);
or (ii) an individual or entity that is subject to a statutory
disqualification under Section 3(a)(39) of the Exchange Act. The Board may
approve an exemption for any other stockholder if the Board determines that
granting such exemption would (A) not reasonably be expected to diminish
the quality of, or public confidence in, The Nasdaq Stock Market or the
other operations of Nasdaq, on the ability to prevent fraudulent and
manipulative acts and practices and on investors and the public, and (B)
promote just and equitable principles of trade, foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to and facilitating transactions in
securities or assist in the removal of impediments to or perfection of the
mechanisms for a free and open market and a national market system.
7. In the event any provision (or portion thereof) of
this paragraph C. of this Article Fourth shall be found to be invalid,
prohibited or unenforceable for any reason, the remaining provisions (or
portions thereof) of this paragraph C. of this Article Fourth shall remain
in full force and effect, and shall be construed as if such invalid,
prohibited or unenforceable provision (or portion hereof) had been stricken
herefrom or otherwise rendered inapplicable, it being the intent of Nasdaq
and its stockholders that each such remaining provision (or portion
thereof) of this paragraph C. of this Article Fourth remains, to the
fullest extent permitted by law, applicable and enforceable as to all
stockholders, including stockholders that beneficially own Excess Shares,
notwithstanding any such finding.
ARTICLE FIFTH
A. The business and affairs of Nasdaq shall be managed by, or
under the direction of, the Board. The total number of directors
constituting the entire Board shall be fixed from time to time by the
Board.
B. The Board (other than those directors elected by the holders of
any series of Preferred Stock provided for or fixed pursuant to the
provisions of Article Fourth hereof, (the "Preferred Stock Directors"))
shall be divided into three classes, as nearly equal in number as possible,
designated Class I, Class II and Class III. Class I directors shall
initially serve until the first annual meeting of stockholders following
the effectiveness of this Restated Certificate of Incorporation; Class II
directors shall initially serve until the second annual meeting of
stockholders following the effectiveness of this Restated Certificate of
Incorporation; and Class III directors shall initially serve until the
third annual meeting of stockholders following the effectiveness of this
Restated Certificate of Incorporation. Commencing with the first annual
meeting of stockholders following the effectiveness of this Restated
Certificate of Incorporation, directors of each class the term of which
shall then expire shall be elected to hold office for a three-year term and
until the election and qualification of their respective successors in
office. In case of any increase or decrease, from time to time, in the
number of directors (other than Preferred Stock Directors), the number of
directors in each class shall be apportioned as nearly equal as possible.
C. Subject to the rights of the holders of any one or more series
of Preferred Stock then outstanding, newly created directorships resulting
from any increase in the authorized number of directors or any vacancies in
the Board resulting from death, resignation, retirement, disqualification,
removal from office or other cause shall only be filled by the Board. Any
director so chosen shall hold office until the next election of the class
for which such directors shall have been chosen and until his successor
shall be elected and qualified. No decrease in the number of directors
shall shorten the term of any incumbent director.
D. Except for Preferred Stock Directors, any director, or the
entire Board, may be removed from office at any time, but only for cause
and only by the affirmative vote of at least 66 2/3% of the total voting
power of the outstanding shares of capital stock of Nasdaq entitled to vote
generally in the election of directors ("Voting Stock"), voting together as
a single class.
E. During any period when the holders of any series of Preferred
Stock have the right to elect additional directors as provided for or fixed
pursuant to the provisions of Article Fourth hereof, then upon commencement
and for the duration of the period during which such right continues: (i)
the then otherwise total authorized number of directors of Nasdaq shall
automatically be increased by such specified number of directors, and the
holders of such Preferred Stock shall be entitled to elect the additional
directors so provided for or fixed pursuant to said provisions, and (ii)
each such additional director shall serve until such director's successor
shall have been duly elected and qualified, or until such director's right
to hold such office terminates pursuant to said provisions, whichever
occurs earlier, subject to his earlier death, disqualification, resignation
or removal. Except as otherwise provided by the Board in the resolution or
resolutions establishing such series, whenever the holders of any series of
Preferred Stock having such right to elect additional directors are
divested of such right pursuant to the provisions of such stock, the terms
of office of all such additional directors elected by the holders of such
stock, or elected to fill any vacancies resulting from death, resignation,
disqualification or removal of such additional directors, shall forthwith
terminate and the total authorized number of directors of Nasdaq shall
automatically be reduced accordingly.
ARTICLE SIXTH
A. A director of Nasdaq shall not be liable to Nasdaq or its
stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent that such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of
the State of Delaware as the same exists or may hereafter be amended.
B. Any repeal or modification of paragraph A. shall not adversely
affect any right or protection of a director of Nasdaq existing hereunder
with respect to any act or omission occurring prior to such repeal or
modification.
ARTICLE SEVENTH
No action that is required or permitted to be taken by the
stockholders of Nasdaq at any annual or special meeting of stockholders may
be effected by written consent of stockholders in lieu of a meeting of
stockholders.
ARTICLE EIGHTH
In furtherance of, and not in limitation of, the powers conferred
by law, the Board is expressly authorized and empowered to adopt, amend or
repeal the By-Laws of Nasdaq; provided, however, that the By-Laws adopted
by the Board under the powers hereby conferred may be amended or repealed
by the Board or by the stockholders having voting power with respect
thereto, provided further that, notwithstanding any other provision of this
Restated Certificate of Incorporation or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to any
affirmative vote of the holders of any particular class or series of the
stock required by law or this Restated Certificate of Incorporation, the
affirmative vote of the holders of at least 66 2/3% percent of the total
voting power of the outstanding Voting Stock, voting together as a single
class, shall be required in order for the stockholders to adopt, alter,
amend or repeal any By-Law.
ARTICLE NINTH
Nasdaq reserves the right to amend, alter, change, or repeal any
provisions contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred
herein are granted subject to this reservation; provided, however, that the
affirmative vote of the holders of at least 66 2/3% of the voting power of
the outstanding Voting Stock, voting together as a single class, shall be
required to amend, repeal or adopt any provision inconsistent with
paragraph C. of Article Fourth, Article Fifth, Article Seventh, Article
Eighth or this Article Ninth.
ARTICLE TENTH
Nasdaq shall have perpetual existence.
ARTICLE ELEVENTH
In light of the unique nature of Nasdaq and its operations and in
light of Nasdaq's status as a self-regulatory organization, the Board of
Directors, when evaluating (A) any tender or exchange offer or invitation
for tenders or exchanges, or proposal to make a tender or exchange offer or
request or invitation for tenders or exchanges, by another party, for any
equity security of Nasdaq, (B) any proposal or offer by another party to
(1) merge or consolidate Nasdaq or any subsidiary with another corporation
or other entity, (2) purchase or otherwise acquire all or a substantial
portion of the properties or assets of Nasdaq or any subsidiary, or sell or
otherwise dispose of to Nasdaq or any subsidiary all or a substantial
portion of the properties or assets of such other party, or (3) liquidate,
dissolve, reclassify the securities of, declare an extraordinary dividend
of, recapitalize or reorganize Nasdaq, (C) any action, or any failure to
act, with respect to any holder or potential holder of Excess Shares
subject to the limitations set forth in subparagraph 2 of paragraph C. of
Article Fourth, (D) any demand or proposal, precatory or otherwise, on
behalf of or by a holder or potential holder of Excess Shares subject to
the limitations set forth in subparagraph 2 of paragraph C. of Article
Fourth or (E) any other issue, shall, to the fullest extent permitted by
applicable law, take into account all factors that the Board of Directors
deems relevant, including, without limitation, to the extent deemed
relevant, (i) the potential impact thereof on the integrity, continuity and
stability of The Nasdaq Stock Market and the other operations of Nasdaq, on
the ability to prevent fraudulent and manipulative acts and practices and
on investors and the public, and (ii) whether such would promote just and
equitable principles of trade, foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing information
with respect to and facilitating transactions in securities or assist in
the removal of impediments to or perfection of the mechanisms for a free
and open market and a national market system.
THIRD: That such Restated Certificate of Incorporation has been
duly adopted by Nasdaq in accordance with the applicable provisions of
Sections 242 and 245 of the General Corporation Law of the State of
Delaware and in accordance with Section 228 of the General Corporation Law
of the State of Delaware (by the written consent of its sole stockholder).
IN WITNESS WHEREOF, the undersigned has executed this certificate
this 27th day of June, 2000.
THE NASDAQ STOCK MARKET, INC.
By:/s/Joan C. Conley
---------------------------------------
(signature)
Joan C. Conley
------------------------------------------
(printed name)
Senior Vice President and Corporate Secretary
------------------------------------------
(title)
Exhibit 3.2
BY-LAWS OF THE NASDAQ STOCK MARKET, INC.
ARTICLE I
DEFINITIONS
When used in these By-Laws, unless the context otherwise requires,
the term:
(a) "Act" means the Securities Exchange Act of 1934, as amended;
(b) "Board" means the Board of Directors of Nasdaq;
(c) "broker" means any individual, corporation, partnership,
association, joint stock company, business trust, unincorporated
organization, or other legal entity engaged in the business of effecting
transactions in securities for the account of others, but does not include
a bank;
(d) "Commission" means the Securities and Exchange Commission;
(e) "day" means calendar day;
(f) "dealer" means any individual, corporation, partnership,
association, joint stock company, business trust, unincorporated
organization, or other legal entity engaged in the business of buying and
selling securities for such individual's or entity's own account, through a
broker or otherwise, but does not include a bank, or any person insofar as
such person buys or sells securities for such person's own account, either
individually or in some fiduciary capacity, but not as part of a regular
business;
(g) "Delaware law" means the General Corporation Law of the State
of Delaware;
(h) "Delegation Plan" means the "Plan of Allocation and Delegation
of Functions by NASD to Subsidiaries" as approved by the Commission, and as
amended from time to time;
(i) "Director" means a member of the Board;
(j) "Industry Director" or "Industry member" means a Director
(excluding any two officers of Nasdaq, selected at the sole discretion of
the Board, amongst those officers who may be serving as Directors (the
"Staff Directors") or Nasdaq Listing and Hearing Review Council or
committee member who (1) is or has served in the prior three years as an
officer, director, or employee of a broker or dealer, excluding an outside
director or a director not engaged in the day-to-day management of a broker
or dealer; (2) is an officer, director (excluding an outside director), or
employee of an entity that owns more than ten percent of the equity of a
broker or dealer, and the broker or dealer accounts for more than five
percent of the gross revenues received by the consolidated entity; (3) owns
more than five percent of the equity securities of any broker or dealer,
whose investments in brokers or dealers exceed ten percent of his or her
net worth, or whose ownership interest otherwise permits him or her to be
engaged in the day-to-day management of a broker or dealer; (4) provides
professional services to brokers or dealers, and such services constitute
20 percent or more of the professional revenues received by the Director or
member or 20 percent or more of the gross revenues received by the
Director's or member's firm or partnership; (5) provides professional
services to a director, officer, or employee of a broker, dealer, or
corporation that owns 50 percent or more of the voting stock of a broker or
dealer, and such services relate to the director's, officer's, or
employee's professional capacity and constitute 20 percent or more of the
professional revenues received by the Director or member or 20 percent or
more of the gross revenues received by the Director's or member's firm or
partnership; or (6) has a consulting or employment relationship with or
provides professional services to the NASD, NASD Regulation, Nasdaq, or
Amex (and any predecessor) or has had any such relationship or provided any
such services at any time within the prior three years;
(k) "NASD" means the National Association of Securities Dealers,
Inc.;
(l) "Nasdaq" means The Nasdaq Stock Market, Inc.;
(m) "Nasdaq Listing and Hearing Review Council" means a body
appointed by the Board pursuant to Article V of these By-Laws;
(n) "NASD Board" means the NASD Board of Governors;
(o) "NASD Regulation" means NASD Regulation, Inc.;
(p) "Nominating Committee" means the Nominating Committee
appointed pursuant to these By-Laws;
(q) "Non-Industry Director" or "Non-Industry member" means a
Director (excluding the Staff Directors) or Nasdaq Listing and Hearing
Review Council or committee member who is (1) a Public Director or Public
member; (2) an officer or employee of an issuer of securities listed on
Nasdaq, or traded in the over-the-counter market; or (3) any other
individual who would not be an Industry Director or Industry member;
(r) "person associated with a member" or "associated person of a
member" means: (1) a natural person who is registered or has applied for
registration under the Rules of the Association; or (2) a sole proprietor,
partner, officer, director, or branch manager of a member, or other natural
person occupying a similar status or performing similar functions, or a
natural person engaged in the investment banking or securities business who
is directly or indirectly controlling or controlled by a member, whether or
not any such person is registered or exempt from registration with the NASD
under these By-Laws or the Rules of the Association; and (3) for purposes
of Rule 8210, any other person listed in Schedule A of Form BD of a member.
(s) "Public Director" or "Public member" means a Director or
Nasdaq Listing and Hearing Review Council or committee member who has no
material business relationship with a broker or dealer or the NASD, NASD
Regulation, or Nasdaq;
(t) "Rules of the Association" or "Rules" means the numbered rules
set forth in the NASD Manual beginning with the Rule 0100 Series, as
adopted by the NASD Board pursuant to the NASD By-Laws, as hereafter
amended or supplemented;
(u) "Amex" means American Stock Exchange LLC.
ARTICLE II
OFFICES
Location
Sec. 2.1 The address of the registered office of Nasdaq in the
State of Delaware and the name of the registered agent at such address
shall be: The Corporation Trust Company, 1209 Orange Street, Wilmington,
Delaware 19801. Nasdaq also may have offices at such other places both
within and without the State of Delaware as the Board may from time to time
designate or the business of Nasdaq may require.
Change of Location
Sec. 2.2 In the manner permitted by law, the Board or the
registered agent may change the address of Nasdaq's registered office in
the State of Delaware and the Board may make, revoke, or change the
designation of the registered agent.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Annual Meetings of Stockholders
Sec. 3.1 (a) Nominations of persons for election to the Board and
the proposal of business to be considered by the stockholders may be made
at an annual meeting of stockholders only (i) pursuant to Nasdaq's notice
of meeting (or any supplement thereto), (ii) by or at the direction of the
Board or the Nominating Committee or (iii) by any stockholder of Nasdaq who
was a stockholder of record of Nasdaq at the time the notice provided for
in this Section 3.1 is delivered to the Secretary of Nasdaq, who is
entitled to vote at the meeting and who complies with the notice procedures
set forth in this Section 3.1.
(b) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to Section 3.1(a)(iii),
the stockholder must have given timely notice thereof in writing to the
Secretary of Nasdaq and any such proposed business other than the
nominations of persons for election to the Board must constitute a proper
matter for stockholder action. To be timely, a stockholder's notice shall
be delivered to the Secretary at the principal executive offices of Nasdaq
not later than the close of business on the ninetieth day nor earlier than
the close of business on the one hundred twentieth day prior to the first
anniversary of the preceding year's annual meeting (provided, however, that
in the event that the date of the annual meeting is more than thirty days
before or more than seventy days after such anniversary date, notice by the
stockholder must be so delivered not earlier than the close of business on
the one hundred twentieth day prior to such annual meeting and not later
than the close of business on the later of the ninetieth day prior to such
annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made by Nasdaq). For
purposes of the first annual meeting of stockholders of Nasdaq held after
2000, the first anniversary of the 2000 annual meeting of stockholders
shall be deemed to be May 15, 2001. In no event shall the public
announcement of an adjournment or postponement of an annual meeting
commence a new time period (or extend any time period) for the giving of a
stockholder's notice as described above. Such stockholder's notice shall
set forth: (i) as to each person whom the stockholder proposes to nominate
for election as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Act and Rule 14a-11 thereunder (and
such person's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected); (ii) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
text of the proposal or business (including the text of any resolutions
proposed for consideration and in the event that such business includes a
proposal to amend the By-Laws of Nasdaq, the language of the proposed
amendment), the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (iii) as to the
stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (A) the name and address of such
stockholder, as they appear on Nasdaq's books, and of such beneficial
owner, (B) the class and number of shares of capital stock of Nasdaq which
are owned beneficially and of record by such stockholder and such
beneficial owner, (C) a representation that the stockholder is a holder of
record of stock of Nasdaq entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to propose such business or
nomination, and (D) a representation whether the stockholder or the
beneficial owner, if any, intends or is part of a group which intends (1)
to deliver a proxy statement and/or form of proxy to holders of at least
the percentage of Nasdaq's outstanding capital stock required to approve or
adopt the proposal or elect the nominee and/or (2) otherwise to solicit
proxies from stockholders in support of such proposal or nomination. Nasdaq
may require any proposed nominee to furnish such other information as it
may reasonably require to determine the eligibility of such proposed
nominee to serve as a director of Nasdaq.
(c) Notwithstanding anything in the second sentence of Section
3.1(b) to the contrary, in the event that the number of directors to be
elected to the Board at an annual meeting is increased and there is no
public announcement by Nasdaq naming the nominees for the additional
directorships at least one hundred days prior to the first anniversary of
the preceding year's annual meeting, a stockholder's notice required by
this Section 3.1 shall also be considered timely, but only with respect to
nominees for the additional directorships, if it shall be delivered to the
Secretary at the principal executive offices of Nasdaq not later than the
close of business on the tenth day following the day on which such public
announcement is first made by Nasdaq.
Special Meetings of Stockholders
Sec. 3.2 Only such business shall be conducted at a special
meeting of stockholders as shall have been brought before the meeting
pursuant to Nasdaq's notice of meeting. Nominations of persons for election
to the Board may be made at a special meeting of stockholders at which
directors are to be elected pursuant to Nasdaq's notice of meeting (a) by
or at the direction of the Board or the Nominating Committee or (b)
provided that the Board has determined that directors shall be elected at
such meeting, by any stockholder of Nasdaq who is a stockholder of record
at the time the notice provided for in this Section 3.2 is delivered to the
Secretary of Nasdaq, who is entitled to vote at the meeting and upon such
election and who complies with the notice procedures set forth in this
Section 3.2. In the event Nasdaq calls a special meeting of stockholders
for the purpose of electing one or more directors to the Board, any such
stockholder entitled to vote in such election may nominate a person or
persons (as the case may be) for election to such position(s) as specified
in Nasdaq's notice of meeting, if the stockholder's notice required by
Section 3.1(b) shall be delivered to the Secretary at the principal
executive offices of Nasdaq not earlier than the close of business on the
one hundred twentieth day prior to such special meeting and not later than
the close of business on the later of the ninetieth day prior to such
special meeting or the tenth day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board to be elected at such meeting. In no event
shall the public announcement of an adjournment or postponement of a
special meeting commence a new time period (or extend any time period) for
the giving of a stockholder's notice as described above.
General
Sec. 3.3 (a) Only such persons who are nominated in accordance
with the procedures set forth in this Article III shall be eligible to be
elected at an annual or special meeting of stockholders of Nasdaq to serve
as directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance
with the procedures set forth in this Article III. Except as otherwise
provided by law, the chairman of the meeting shall have the power and duty
(i) to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Article III (including
whether the stockholder or beneficial owner, if any, on whose behalf the
nomination or proposal is made solicited (or is part of a group which
solicited) or did not so solicit, as the case may be, proxies in support of
such stockholder's nominee or proposal in compliance with such
stockholder's representation as required by Section 3.1(b)(iii)(D)) and
(ii) if any proposed nomination or business was not made or proposed in
compliance with this Article III, to declare that such nomination shall be
disregarded or that such proposed business shall not be transacted.
Notwithstanding the foregoing provisions of this Article III, if the
stockholder (or a qualified representative of the stockholder) does not
appear at the annual or special meeting of stockholders of Nasdaq to
present a nomination or business, such nomination shall be disregarded and
such proposed business shall not be transacted, notwithstanding that
proxies in respect of such vote may have been received by Nasdaq.
(b) For purposes of this Article III, "public announcement" shall
include disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a
document publicly filed by Nasdaq with the Commission pursuant to Section
13, 14, or 15(d) of the Act.
(c) Notwithstanding the foregoing provisions of this Article III,
a stockholder shall also comply with all applicable requirements of the Act
and the rules and regulations thereunder with respect to the matters set
forth in this Article III. Nothing in Article III shall be deemed to affect
any rights (i) of stockholders to request inclusion of proposals in
Nasdaq's proxy statement pursuant to Rule 14a-8 under the Act or (ii) of
the holders of any series of Preferred Stock to elect directors pursuant to
any applicable provisions of the Restated Certificate of Incorporation.
Conduct of Meetings
Sec. 3.4 The date and time of the opening and the closing of the
polls for each matter upon which the stockholders will vote at a meeting
shall be announced at the meeting by the person presiding over the meeting.
The Board may adopt by resolution such rules and regulations for the
conduct of the meeting of stockholders as it shall deem appropriate. Except
to the extent inconsistent with such rules and regulations as adopted by
the Board, the person presiding over any meeting of stockholders shall have
the right and authority to convene and to adjourn the meeting, to prescribe
such rules, regulations and procedures and to do all such acts as, in the
judgment of such chairman, are appropriate for the proper conduct of the
meeting. Such rules, regulations or procedures, whether adopted by the
Board or prescribed by the presiding officer of the meeting, may include,
without limitation, the following: (a) the establishment of an agenda or
order of business for the meeting; (b) rules and procedures for maintaining
order at the meeting and the safety of those present; (c) limitations on
attendance at or participation in the meeting to stockholders of record of
Nasdaq, their duly authorized and constituted proxies or such other persons
as the chairman of the meeting shall determine; (d) restrictions on entry
to the meeting after the time fixed for the commencement thereof; and (e)
limitations on the time allotted to questions or comments by participants.
Unless and to the extent determined by the Board or the person presiding
over the meeting, meetings of stockholders shall not be required to be held
in accordance with the rules of parliamentary procedure.
ARTICLE IV
BOARD OF DIRECTORS
General Powers
Sec. 4.1 The property, business, and affairs of Nasdaq shall be
managed by or under the direction of the Board. The Board may exercise all
such powers of Nasdaq and have the authority to perform all such lawful
acts as are permitted by law, the Restated Certificate of Incorporation,
these By-Laws, or the Delegation Plan for the organization, development,
and operation of electronic data processing and communications facilities,
including computer hardware and software, for the purposes of: (a)
supporting the operation, regulation, and surveillance of The Nasdaq Stock
Market and other organized securities markets established for trading
equity securities, debt securities, derivative instruments, or other
financial products that may be developed; (b) supporting the efficient
clearance and settlement of securities transactions; (c) supporting various
elements of the national market system pursuant to Section 11A of the Act
and the rules thereunder; (d) assisting the NASD in fulfilling its
self-regulatory responsibilities as set forth in Section 15A of the Act;
and (e) supporting such other initiatives as the Board may deem
appropriate. To the fullest extent permitted by applicable law, the
Restated Certificate of Incorporation, and these By-Laws, the Board may
delegate any of its powers to a committee appointed pursuant to Section
4.13 or to Nasdaq staff in a manner not inconsistent with the Delegation
Plan.
Number of Directors
Sec. 4.2 The exact number of members of the Board shall be
determined by resolution adopted by the Board from time to time. Any new
Director position created as a result of an increase in the size of the
Board shall be filled in accordance with the Restated Certificate of
Incorporation.
Qualifications
Sec. 4.3 Directors need not be stockholders of Nasdaq. The number
of Non-Industry Directors, including at least one Public Director and at
least one issuer representative, shall equal or exceed the number of
Industry Directors, unless the Board consists of ten or more Directors. In
such case at least two Directors shall be issuer representatives.
Election
Sec. 4.4 Except as otherwise provided by law, these By-Laws, or
the Delegation Plan, after the first meeting of Nasdaq at which Directors
are elected, a class of Directors of Nasdaq shall be elected each year at
the annual meeting of the stockholders, or at a special meeting called for
such purpose in lieu of the annual meeting. If the annual election of
Directors is not held on the date designated therefor, the Directors shall
cause such election to be held as soon thereafter as convenient.
Resignation
Sec. 4.5 Any Director may resign at any time either upon notice of
resignation to the Chair of the Board, the Chief Executive Officer, the
President, or the Secretary. Any such resignation shall take effect at the
time specified therein or, if the time is not specified, upon receipt
thereof, and the acceptance of such resignation, unless required by the
terms thereof, shall not be necessary to make such resignation effective.
Removal
Sec. 4.6 Any or all of the Directors may be removed from office at
any time, but only for cause, by the affirmative vote at least 66 2/3
percent of the total voting power of the outstanding shares of capital
stock of Nasdaq entitled to vote generally in the election of directors,
voting together as a single class.
Disqualification
Sec. 4.7 The term of office of a Director shall terminate
immediately upon a determination by the Board, by a majority vote of the
remaining Directors, that: (a) the Director no longer satisfies the
classification for which the Director was elected; and (b) the Director's
continued service as such would violate the compositional requirements of
the Board set forth in Section 4.3. If the term of office of a Director
terminates under this Section, and the remaining term of office of such
Director at the time of termination is not more than six months, during the
period of vacancy the Board shall not be deemed to be in violation of
Section 4.3 by virtue of such vacancy.
Filling of Vacancies
Sec. 4.8 If a Director position becomes vacant, whether because of
death, disability, disqualification, removal, or resignation, the
Nominating Committee shall nominate, and the Board shall elect by majority
vote, a person satisfying the classification (Industry, Non-Industry, or
Public Director), if applicable, for the directorship as provided in
Section 4.3 to fill such vacancy, except that if the remaining term of
office for the vacant Director position is not more than six months, no
replacement shall be required.
Quorum and Voting
Sec. 4.9 (a) At all meetings of the Board, unless otherwise set
forth in these By-Laws or required by law, a quorum for the transaction of
business shall consist of a majority of the Board. In the absence of a
quorum, a majority of the Directors present may adjourn the meeting until a
quorum be present.
(b) Except as provided herein or by applicable law, the vote of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board.
Regulation
Sec. 4.10 The Board may adopt such rules, regulations, and
requirements for the conduct of the business and management of Nasdaq, not
inconsistent with law, the Restated Certificate of Incorporation, these
By-Laws, the Rules of the Association, or the By-Laws of the NASD, as the
Board may deem proper. A Director shall, in the performance of such
Director's duties, be fully protected in relying in good faith upon the
books of account or reports made to Nasdaq by any of its officers, by an
independent certified public accountant, by an appraiser selected with
reasonable care by the Board or any committee of the Board or by any agent
of Nasdaq, or in relying in good faith upon other records of Nasdaq.
Meetings
Sec. 4.11 (a) An annual meeting of the Board shall be held for the
purpose of organization, election of officers, and transaction of any other
business. If such meeting is held promptly after and at the place specified
for the annual meeting of the stockholders, no notice of the annual meeting
of the Board need be given. Otherwise, such annual meeting shall be held at
such time and place as may be specified in a notice given in accordance
with Section 4.12.
(b) Regular meetings of the Board may be held at such time and
place, within or without the State of Delaware, as determined from time to
time by the Board. After such determination has been made, notice shall be
given in accordance with Section 4.12.
(c) Special meetings of the Board may be called by the Chair of
the Board, by the Chief Executive Officer, by the President, or by at least
one-third of the Directors then in office. Notice of any special meeting of
the Board shall be given to each Director in accordance with Section 4.12.
(d) Directors or members of any committee appointed by the Board
may participate in a meeting of the Board or of such committee through the
use of a conference telephone or other communications equipment by means of
which all persons participating in the meeting may hear one another, and
such participation in a meeting shall constitute presence in person at such
meeting for all purposes.
Notice of Meetings; Waiver of Notice
Sec. 4.12 (a) Notice of any meeting of the Board shall be deemed
to be duly given to a Director if: (i) mailed to the address last made
known in writing to Nasdaq by such Director as the address to which such
notices are to be sent, at least seven days before the day on which such
meeting is to be held; (ii) sent to the Director at such address by
telegraph, telefax, cable, radio, or wireless, not later than the day
before the day on which such meeting is to be held; or (iii) delivered to
the Director personally or orally, by telephone or otherwise, not later
than the day before the day on which such meeting is to be held. Each
notice shall state the time and place of the meeting and the purpose(s)
thereof.
(b) Notice of any meeting of the Board need not be given to any
Director if waived by that Director in writing or by electronic
transmission (or by telegram, telefax, cable, radio, or wireless and
subsequently confirmed in writing or by electronic transmission) whether
before or after the holding of such meeting, or if such Director is present
at such meeting, subject to Article X, Section 10.3(b).
(c) Any meeting of the Board shall be a legal meeting without any
prior notice if all Directors then in office shall be present thereat,
except when a Director attends the meeting for the express purpose of
objecting at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened.
Committees
Sec. 4.13 (a) The Board may, by resolution or resolutions adopted
by the Board, appoint one or more committees. Except as herein provided,
vacancies in membership of any committee shall be filled by the Board. The
Board may designate one or more Directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting
of the committee. In the absence or disqualification of any member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute
a quorum, may unanimously appoint another Director to act at the meeting in
the place of any such absent or disqualified member. Members of a committee
shall hold office for such period as may be fixed by a resolution adopted
by the Board. Any member of a committee may be removed from such committee
only by the Board, after appropriate notice.
(b) The Board may, by resolution or resolutions adopted by a
majority of the whole Board, delegate to one or more committees the power
and authority to act on behalf of the Board in carrying out the functions
and authority delegated to Nasdaq by the NASD under the Delegation Plan.
Such delegations shall be in conformance with applicable law, the Restated
Certificate of Incorporation, these By-Laws, and the Delegation Plan.
Action taken by a committee pursuant to such delegated authority shall be
subject to review, ratification, or rejection by the Board. In all other
matters, the Board may, by resolution or resolutions adopted by the Board,
delegate to one or more committees that consist solely of one or more
Directors the power and authority to act on behalf of the Board in the
management of the business and affairs of Nasdaq to the extent permitted by
law and not inconsistent with the Delegation Plan. A committee, to the
extent permitted by law and provided in the resolution or resolutions
creating such committee, may authorize the seal of Nasdaq to be affixed to
all papers that may require it.
(c) Except as otherwise provided by applicable law, no committee
shall have the power or authority of the Board with regard to: amending the
Restated Certificate of Incorporation or the By-Laws of Nasdaq; adopting an
agreement of merger or consolidation; recommending to the stockholders the
sale, lease, or exchange of all or substantially all Nasdaq's property and
assets; or recommending to the stockholders a dissolution of Nasdaq or a
revocation of a dissolution. Unless the resolution of the Board expressly
so provides, no committee shall have the power or authority to authorize
the issuance of stock.
(d) The Board may appoint an Executive Committee, which shall, to
the fullest extent permitted by Delaware Law and other applicable law, have
and be permitted to exercise all the powers and authority of the Board in
the management of the business and affairs of Nasdaq between meetings of
the Board, and which may authorize the seal of Nasdaq to be affixed to all
papers that may require it. The number of Non-Industry Directors on the
Executive Committee shall equal or exceed the number of Industry Directors
on the Executive Committee. The percentage of Public Directors on the
Executive Committee shall be at least as great as the percentage of Public
Directors on the whole Board. An Executive Committee member shall hold
office for a term of one year.
(e) The Board may appoint a Finance Committee. The Finance
Committee shall advise the Board with respect to the oversight of the
financial operations and conditions of Nasdaq, including recommendations
for Nasdaq's annual operating and capital budgets and proposed changes to
the rates and fees charged by Nasdaq. A Finance Committee member shall hold
office for a term of one year.
(f) The Board shall appoint a Management Compensation Committee. The
Management Compensation Committee shall consider and recommend compensation
policies, programs, and practices for employees of Nasdaq. A majority of
Management Compensation Committee members shall be Non-Industry Directors. The
Chief Executive Officer shall be an ex-officio, non-voting member of the
Management Compensation Committee. A Management Compensation Committee member
shall hold office for a term of one year.
(g) The Board shall appoint an Audit Committee.
(i) The Audit Committee shall consist of four or five
Directors, none of whom shall be officers or employees of Nasdaq. A
majority of the Audit Committee members shall be Non-Industry Directors.
The Audit Committee shall include two Public Directors. A Public Director
shall serve as Chair of the Committee. An Audit Committee member shall hold
office for a term of one year.
(ii) No member of the Audit Committee shall participate in
the consideration or decision of any matter relating to a particular Nasdaq
member, company, or individual if such Audit Committee member has a
material interest in, or a professional, business, or personal relationship
with, that member, company, or individual, or if such participation shall
create an appearance of impropriety. An Audit Committee member shall
consult with the General Counsel of Nasdaq to determine if recusal is
necessary. If a member of the Audit Committee is recused from consideration
of a matter, any decision on the matter shall be by a vote of a majority of
the remaining members of the Audit Committee.
(h) The Board may appoint a Nominating Committee. The Nominating
Committee shall nominate Directors for each vacant or new Director position
on the Board and members for each vacant or new position on the Nasdaq
Listing and Hearing Review Council for appointment by the Board.
(i) The Nominating Committee shall consist of no fewer than
six and no more than nine members. The number of Non-Industry members on
the Nominating Committee shall equal or exceed the number of Industry
members on the Nominating Committee. If the Nominating Committee consists
of six members, at least two shall be Public committee members. If the
Nominating Committee consists of seven or more members, at least three
shall be Public committee members. No officer or employee of Nasdaq shall
serve as a member of the Nominating Committee in any voting or non-voting
capacity. No more than three of the Nominating Committee members and no
more than two of the Industry committee members shall be current members of
the Nasdaq Board.
(ii) A Nominating Committee member may not simultaneously
serve on the Nominating Committee and the Board, unless such member is in
his or her final year of service on the Board, and following that year,
that member may not stand for election to the Board until such time as he
or she is no longer a member of the Nominating Committee.
(iii) Members of the Nominating Committee shall be appointed
annually by the Board and may be removed by majority vote of the Board.
(iv) The Secretary shall collect from each nominee for Director
such information as is reasonably necessary to serve as the basis for a
determination of the nominee's classification as an Industry, Non-Industry, or
Public Director, if applicable, and the Secretary shall certify to the
Nominating Committee each nominee's classification, if applicable. Directors
shall update the information submitted under this subsection at least annually
and upon request of the Secretary, and shall report immediately to the Secretary
any change in such information.
(i) Each committee may adopt its own rules of procedure and may
meet at stated times or on notice as such committee may determine. Each
committee shall deep regular minutes of its proceedings and report the same
to the Board when required.
(j) Unless otherwise provided by these By-Laws, a majority of a
committee shall constitute a quorum for the transaction of business, and
the vote of a majority of the members of such committee present at a
meeting at which a quorum is present shall be an act of such committee.
(k) Upon request of the Secretary of Nasdaq, each prospective
committee member who is not a Director shall provide to the Secretary such
information as is reasonably necessary to serve as the basis for a
determination of the prospective committee member's classification as an
Industry, Non-Industry, or Public committee member. The Secretary of Nasdaq
shall certify to the Board each prospective committee member's
classification. Such committee members shall update the information
submitted under this subsection at least annually and upon request of the
Secretary of Nasdaq, and shall report immediately to the Secretary any
change in such information.
Conflicts of Interest; Contracts and Transactions Involving Directors
Sec. 4.14 (a) A Director or a member of the Nasdaq Listing and
Hearing Review Council or a committee shall not directly or indirectly
participate in any adjudication of the interests of any party if that
Director or Nasdaq Listing and Hearing Review Council or committee member
has a conflict of interest or bias, or if circumstances otherwise exist
where his or her fairness might reasonably be questioned. In any such case,
the Director or Nasdaq Listing and Hearing Review Council or committee
member shall recuse himself or herself or shall be disqualified.
(b) No contract or transaction between Nasdaq and one or more of
its Directors or officers, or between Nasdaq and any other corporation,
partnership, association, or other organization in which one or more of its
Directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason if: (i) the
material facts pertaining to such Director's or officer's relationship or
interest and the contract or transaction are disclosed or are known to the
Board or the committee, and the Board or committee in good faith authorizes
the contract or transaction by the affirmative vote of a majority of the
disinterested Directors, even though the disinterested Directors be less
than a quorum; (ii) the material facts are disclosed or become known to the
Board or committee after the contract or transaction is entered into, and
the Board or committee in good faith ratifies the contract or transaction
by the affirmative vote of a majority of the disinterested Directors, even
though the disinterested Directors be less than a quorum; or (iii) the
material facts pertaining to the Director's or officer's relationship or
interest and the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders.
Communication of Views Regarding NASD or NASD Regulation
Election or Nomination
Sec. 4.15 Nasdaq, the Board, any committee, the Nasdaq Listing and
Hearing Review Council, and Nasdaq staff shall not take any position
publicly or with an NASD member or person associated with or employed by a
member with respect to any candidate in a contested election or nomination
held pursuant to the NASD By-Laws or the NASD Regulation By-Laws. A
Director, committee member, or Nasdaq Listing and Hearing Review Council
member may communicate his or her views with respect to a candidate if such
individual acts solely in his or her individual capacity and disclaims any
intention to communicate in any official capacity on behalf of Nasdaq, the
Board, the Nasdaq Listing and Hearing Review Council, or any committee.
Nasdaq, the Board, the Nasdaq Listing and Hearing Review Council, any
committee, and the Nasdaq staff shall not provide any administrative
support to any candidate in a contested election or nomination conducted
pursuant to the NASD By-Laws or the NASD Regulation By-Laws.
Action Without Meeting
Sec. 4.16 Any action required or permitted to be taken at a
meeting of the Board or of a committee may be taken without a meeting if
all Directors or all members of such committee, as the case may be, consent
thereto in accordance with applicable law.
ARTICLE V
NASDAQ LISTING AND HEARING REVIEW COUNCIL
Appointment And Authority
Sec. 5.1 The Board shall appoint a Nasdaq Listing and Hearing
Review Council. The Nasdaq Listing and Hearing Review Council may be
authorized to act for the Board in a manner consistent with these By-Laws,
the Rules of the Association, and the Delegation Plan with respect to
listing decisions. The Nasdaq Listing and Hearing Review Council also shall
consider and make recommendations to the Board on policy and rule changes
relating to issuer listings. The Board may delegate such other powers and
duties to the Nasdaq Listing and Hearing Review Council as the Board deems
appropriate in a manner not inconsistent with the Delegation Plan.
Number of Members and Qualifications
Sec. 5.2 (a) The Nasdaq Listing and Hearing Review Council shall
consist of no fewer than eight and no more than 18 members, of which not
more than 50 percent may be engaged in market-making activity or employed
by a member whose revenues from market-making activity exceed ten percent
of its total revenues. The Nasdaq Listing and Hearing Review Council shall
include at least five Non-Industry members.
(b) As soon as practicable following the appointment of members,
the Nasdaq Listing and Hearing Review Council shall elect a Chair from
among its members. The Chair shall have such powers and duties as may be
determined from time to time by the Nasdaq Listing and Hearing Review
Council. The Board, by resolution adopted by a majority of Directors then
in office and after notice to the NASD Board, may remove the Chair from
such position at any time for refusal, failure, neglect, or inability to
discharge the duties of Chair.
Nomination Process
Sec. 5.3 The Secretary of Nasdaq shall collect from each nominee
for the office of member of the Nasdaq Listing and Hearing Review Council
such information as is reasonably necessary to serve as the basis for a
determination of the nominee's qualifications and classification as an
Industry or Non-Industry member, and the Secretary shall certify to the
Nominating Committee each nominee's qualifications and classification.
After appointment to the Nasdaq Listing and Hearing Review Council, each
member shall update such information at least annually and upon request of
the Secretary, and shall report immediately to the Secretary any change in
such information.
Term of Office
Sec. 5.4 (a) Except as otherwise provided in this Article, each
Nasdaq Listing and Hearing Review Council member shall hold office for a
term of two years or until a successor is duly appointed and qualified,
except in the event of earlier termination from office by reason of death,
resignation, removal, disqualification, or other reason.
(b) The Nasdaq Listing and Hearing Review Council shall be divided
into two classes. The term of office of those of the first class shall
expire in January 1999, and the term of office of those of the second class
shall expire one year thereafter. Beginning in January 1999, members shall
be appointed for a term of two years to replace those whose terms expire.
(c) Beginning in 1999, no member may serve more than two
consecutive terms, except that if a member is appointed to fill a term of
less than one year, such member may serve up to two consecutive terms
following the expiration of such member's initial term.
Resignation
Sec. 5.5 A member of the Nasdaq Listing and Hearing Review Council
may resign at any time upon written notice to the Board. Any such
resignation shall take effect at the time specified therein, or if the time
is not specified, upon receipt thereof, and the acceptance of such
resignation, unless required by the terms thereof, shall not be necessary
to make such resignation effective.
Removal
Sec. 5.6 Any or all of the members of the Nasdaq Listing and
Hearing Review Council may be removed from office at any time for refusal,
failure, neglect, or inability to discharge the duties of such office by
majority vote of the Board.
Disqualification
Sec. 5.7 Notwithstanding Section 5.4, the term of office of a
Nasdaq Listing and Hearing Review Council member shall terminate
immediately upon a determination by the Board, by a majority vote, that:
(a) The member no longer satisfies the classification (Industry or
Non-Industry) for which the member was elected; and (b) the member's
continued service as such would violate the compositional requirements of
the Nasdaq Listing and Hearing Review Council set forth in Section 5.2. If
the term of office of a Nasdaq Listing and Hearing Review Council member
terminates under this Section, and the remaining term of office of such
member at the time of termination is not more than six months, during the
period of vacancy the Nasdaq Listing and Hearing Review Council shall not
be deemed to be in violation of Section 5.2 by virtue of such vacancy.
Filling of Vacancies
Sec. 5.8 If a position on the Nasdaq Listing and Hearing Review
Council becomes vacant, whether because of death, disability,
disqualification, removal, or resignation, the Nominating Committee shall
nominate, and the Board shall appoint a person satisfying the
qualifications for the position as provided in Section 5.2(a) to fill such
vacancy, except that if the remaining term of office for the vacant
position is not more than six months, no replacement shall be required.
Quorum and Voting
Sec. 5.9 At all meetings of the Nasdaq Listing and Hearing Review
Council, unless otherwise set forth in these By-Laws, a quorum for the
transaction of business shall consist of a majority of the Nasdaq Listing
and Hearing Review Council, including one Non-Industry member. In the
absence of a quorum, a majority of the members present may adjourn the
meeting until a quorum is present.
Meetings
Sec. 5.10 The members of the Nasdaq Listing and Hearing Review
Council may participate in a meeting through the use of a conference
telephone or other communications equipment by means of which all persons
participating in the meeting may hear one another, and such participation
in a meeting shall constitute presence in person at such meeting for all
purposes.
ARTICLE VI
COMPENSATION
Compensation of Board, Council, and Committee Members
Sec. 6.1 The Board may provide for reasonable compensation of the
Chair of the Board, the Directors, Nasdaq Listing and Hearing Review
Council members, and the members of any committee. The Board may also
provide for reimbursement of reasonable expenses incurred by such persons
in connection with the business of Nasdaq.
ARTICLE VII
OFFICERS, AGENTS, AND EMPLOYEES
Principal Officers
Sec. 7.1 The principal officers of Nasdaq shall be elected by the
Board and shall include a Chair, a Chief Executive Officer, a President, a
Secretary, a Treasurer, and such other officers as may be designated by the
Board. One person may hold the offices and perform the duties of any two or
more of said principal offices, except the offices and duties of President
and Vice President or of President and Secretary. None of the principal
officers, except the Chair of the Board, need be Directors of Nasdaq.
Election of Principal Officers; Term of Office
Sec. 7.2 (a) The principal officers of Nasdaq shall be elected
annually by the Board at the annual meeting of the Board convened pursuant
to Section 4.11(a). Failure to elect any principal officer annually shall
not dissolve Nasdaq.
(b) If the Board shall fail to fill any principal office at an
annual meeting, or if any vacancy in any principal office shall occur, or
if any principal office shall be newly created, such principal office may
be filled at any regular or special meeting of the Board.
(c) Each principal officer shall hold office until a successor is
duly elected and qualified, or until death, resignation, or removal.
Subordinate Officers, Agents, or Employees
Sec. 7.3 In addition to the principal officers, Nasdaq may have
one or more subordinate officers, agents, and employees as the Board may
deem necessary, each of whom shall hold office for such period and exercise
such authority and perform such duties as the Board, the Chief Executive
Officer, the President, or any officer designated by the Board, may from
time to time determine. Agents and employees of Nasdaq shall be under the
supervision and control of the officers of Nasdaq, unless the Board, by
resolution, provides that an agent or employee shall be under the
supervision and control of the Board.
Delegation of Duties of Officers
Sec. 7.4 The Board may delegate the duties and powers of any
officer of Nasdaq to any other officer or to any Director for a specified
period of time and for any reason that the Board may deem sufficient.
Resignation and Removal of Officers
Sec. 7.5 (a) Any officer may resign at any time upon notice of
resignation to the Board, the Chief Executive Officer, the President, or
the Secretary. Any such resignation shall take effect upon receipt of such
notice or at any later time specified therein. The acceptance of a
resignation shall not be necessary to make the resignation effective.
(b) Any officer of Nasdaq may be removed, with or without cause,
by resolution adopted by a majority of the Directors then in office at any
regular or special meeting of the Board or by a written consent signed by
all of the Directors then in office. Such removal shall be without
prejudice to the contractual rights of the affected officer, if any, with
Nasdaq.
Bond
Sec. 7.6 Nasdaq may secure the fidelity of any or all of its
officers, agents, or employees by bond or otherwise.
Chair of the Board
Sec. 7.7 The Chair of the Board shall preside at all meetings of
the Board and stockholders at which the Chair is present. The Chair shall
exercise such other powers and perform such other duties as may be assigned
to the Chair from time to time by the Board.
Chief Executive Officer
Sec. 7.8 The Chief Executive Officer shall, in the absence of the
Chair of the Board, preside at all meetings of the Board and stockholders
at which the Chief Executive Officer is present. The Chief Executive
Officer shall be the chief executive officer of Nasdaq and shall have
general supervision over the business and affairs of Nasdaq. The Chief
Executive Officer shall have all powers and duties usually incident to the
office of the Chief Executive Officer, except as specifically limited by a
resolution of the Board. The Chief Executive Officer shall exercise such
other powers and perform such other duties as may be assigned to the Chief
Executive Officer from time to time by the Board.
President
Sec. 7.9 The President shall, in the absence of the Chair of the
Board and the Chief Executive Officer, preside at all meetings of the Board
and stockholders at which the President is present. The President shall
have general supervision over the business and affairs of Nasdaq. The
President shall have all powers and duties usually incident to the office
of the President, except as specifically limited by a resolution of the
Board. The President shall exercise such other powers and perform such
other duties as may be assigned to the President from time to time by the
Board.
Vice President
Sec. 7.10 The Board shall elect one or more Vice Presidents. In
the absence or disability of the President or if the office of President
becomes vacant, the Vice Presidents in the order determined by the Board,
or if no such determination has been made, in the order of their seniority,
shall perform the duties and exercise the powers of the President, subject
to the right of the Board at any time to extend or restrict such powers and
duties or to assign them to others. Any Vice President may have such
additional designations in such Vice President's title as the Board may
determine. The Vice Presidents shall generally assist the President in such
manner as the President shall direct. Each Vice President shall exercise
such other powers and perform such other duties as may be assigned to such
Vice President from time to time by the Board, the Chief Executive Officer
or the President. The term "Vice President" used in this Section shall
include the positions of Executive Vice President, Senior Vice President,
and Vice President.
Secretary
Sec. 7.11 The Secretary shall act as Secretary of all meetings of
the stockholders and of the Board at which the Secretary is present, shall
record all the proceedings of all such meetings in a book to be kept for
that purpose, shall have supervision over the giving and service of notices
of Nasdaq, and shall have supervision over the care and custody of the
corporate records and the corporate seal of Nasdaq. The Secretary shall be
empowered to affix the corporate seal to documents, the execution of which
on behalf of Nasdaq under its seal, is duly authorized, and when so
affixed, may attest the same. The Secretary shall have all powers and
duties usually incident to the office of Secretary, except as specifically
limited by a resolution of the Board. The Secretary shall exercise such
other powers and perform such other duties as may be assigned to the
Secretary from time to time by the Board, the Chief Executive Officer or
the President.
Assistant Secretary
Sec. 7.12 In the absence of the Secretary or in the event of the
Secretary's inability or refusal to act, any Assistant Secretary, approved
by the Board, shall exercise all powers and perform all duties of the
Secretary. An Assistant Secretary shall also exercise such other powers and
perform such other duties as may be assigned to such Assistant Secretary
from time to time by the Board or the Secretary.
Treasurer
Sec. 7.13 The Treasurer shall have general supervision over the
care and custody of the funds and over the receipts and disbursements of
Nasdaq and shall cause the funds of Nasdaq to be deposited in the name of
Nasdaq in such banks or other depositories as the Board may designate. The
Treasurer shall have supervision over the care and safekeeping of the
securities of Nasdaq. The Treasurer shall have all powers and duties
usually incident to the office of Treasurer except as specifically limited
by a resolution of the Board. The Treasurer shall exercise such other
powers and perform such other duties as may be assigned to the Treasurer
from time to time by the Board, the Chief Executive Officer or the
President.
Assistant Treasurer
Sec. 7.14 In the absence of the Treasurer or in the event of the
Treasurer's inability or refusal to act, any Assistant Treasurer, approved
by the Board, shall exercise all powers and perform all duties of the
Treasurer. An Assistant Treasurer shall also exercise such other powers and
perform such other duties as may be assigned to such Assistant Treasurer
from time to time by the Board or the Treasurer.
ARTICLE VIII
INDEMNIFICATION
Indemnification of Directors, Officers, Employees, Agents, Nasdaq Listing
and Hearing Review Council and Committee Members
Sec. 8.1 (a) Nasdaq shall indemnify, and hold harmless, to the
fullest extent permitted by Delaware law as it presently exists or may
thereafter be amended, any person (and the heirs, executors, and
administrators of such person) who, by reason of the fact that he or she is
or was a Director, officer, or employee of Nasdaq or a Nasdaq Listing and
Hearing Review Council or committee member, or is or was a Director,
officer, or employee of Nasdaq who is or was serving at the request of
Nasdaq as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, enterprise, or non-profit entity,
including service with respect to employee benefit plans, is or was a
party, or is threatened to be made a party to:
(i) any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by or in the right of Nasdaq) against expenses
(including attorneys' fees and disbursements), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by such person
in connection with any such action, suit, or proceeding; or
(ii) any threatened, pending, or completed action or suit
by or in the right of Nasdaq to procure a judgment in its favor against
expenses (including attorneys' fees and disbursements) actually and
reasonably incurred by such person in connection with the defense or
settlement of such action or suit.
(b) Nasdaq shall advance expenses (including attorneys' fees and
disbursements) reasonably and actually incurred in defending any action,
suit, or proceeding in advance of its final disposition to persons
described in subsection (a); provided, however, that the payment of
expenses incurred by such person in advance of the final disposition of the
matter shall be conditioned upon receipt of a written undertaking by that
person to repay all amounts advanced if it should be ultimately determined
that the person is not entitled to be indemnified under this Section or
otherwise.
(c) Nasdaq may, in its discretion, indemnify and hold harmless, to
the fullest extent permitted by Delaware law as it presently exists or may
thereafter be amended, any person (and the heirs, executors, and
administrators of such persons) who, by reason of the fact that he or she
is or was an agent of Nasdaq or is or was an agent of Nasdaq who is or was
serving at the request of Nasdaq as a director, officer, employee, or agent
of another corporation, partnership, trust, enterprise, or non-profit
entity, including service with respect to employee benefit plans, was or is
a party, or is threatened to be made a party to any action or proceeding
described in subsection (a).
(d) Nasdaq may, in its discretion, pay the expenses (including
attorneys' fees and disbursements) reasonably and actually incurred by an
agent in defending any action, suit, or proceeding in advance of its final
disposition; provided, however, that the payment of expenses incurred by
such person in advance of the final disposition of the matter shall be
conditioned upon receipt of a written undertaking by that person to repay
all amounts advanced if it should be ultimately determined that the person
is not entitled to be indemnified under this Section or otherwise.
(e) Notwithstanding the foregoing or any other provision of these
By-Laws, no advance shall be made by Nasdaq to an agent or non-officer
employee if a determination is reasonably and promptly made by the Board by
a majority vote of those Directors who have not been named parties to the
action, even though less than a quorum, or, if there are no such Directors
or if such Directors so direct, by independent legal counsel, that, based
upon the facts known to the Board or such counsel at the time such
determination is made: (1) The person seeking advancement of expenses (i)
acted in bad faith, or (ii) did not act in a manner that he or she
reasonably believed to be in or not opposed to the best interests of
Nasdaq; (2) with respect to any criminal proceeding, such person believed
or had reasonable cause to believe that his or her conduct was unlawful; or
(3) such person deliberately breached his or her duty to Nasdaq.
(f) The indemnification provided by this Section in a specific
case shall not be deemed exclusive of any other rights to which a person
seeking indemnification may be entitled, both as to action in his or her
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
officer, Nasdaq Listing and Hearing Review Council or committee member,
employee, or agent and shall inure to the benefit of such person's heirs,
executors, and administrators.
(g) Notwithstanding the foregoing, but subject to subsection (j),
Nasdaq shall be required to indemnify any person identified in subsection
(a) in connection with a proceeding (or part thereof) initiated by such
person only if the initiation of such proceeding (or part thereof) by such
person was authorized by the Board.
(h) Nasdaq's obligation, if any, to indemnify or advance expenses
to any person who is or was serving at its request as a director, officer,
employee, or agent of another corporation, partnership, joint venture,
trust, enterprise, or non-profit entity shall be reduced by any amount such
person may collect as indemnification or advancement from such other
corporation, partnership, joint venture, trust, enterprise, or non-profit
entity.
(i) Any repeal or modification of the foregoing provisions of this
Section shall not adversely affect any right or protection hereunder of any
person respecting any act or omission occurring prior to the time of such
repeal or modification.
(j) If a claim for indemnification or advancement of expenses
under this Article is not paid in full within 60 days after a written claim
therefor by an indemnified person has been received by Nasdaq, the
indemnified person may file suit to recover the unpaid amount of such claim
and, if successful in whole or in part, shall be entitled to be paid the
expense of prosecuting such claim. In any such action, Nasdaq shall have
the burden of proving that the indemnified person is not entitled to the
requested indemnification or advancement of expenses under Delaware law.
Indemnification Insurance
Sec. 8.2 Nasdaq shall have power to purchase and maintain
insurance on behalf of any person who is or was a Director, officer, Nasdaq
Listing and Hearing Review Council or committee member, employee, or agent
of Nasdaq, or is or was serving at the request of Nasdaq as a director,
officer, employee, or agent of another corporation, partnership, joint
venture, trust, enterprise, or non-profit entity against any liability
asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not
Nasdaq would have the power to indemnify such person against such liability
hereunder.
ARTICLE IX
CAPITAL STOCK
Certificates
Sec. 9.1 Each stockholder shall be entitled to a certificate or
certificates in such form as shall be approved by the Board, certifying the
number of shares of capital stock in Nasdaq owned by such stockholder.
Signatures
Sec. 9.2 (a) Certificates for shares of capital stock of Nasdaq
shall be signed in the name of Nasdaq by two officers with one being the
Chair of the Board, the Chief Executive Officer, the President, or a Vice
President, and the other being the Secretary, the Treasurer, or such other
officer that may be authorized by the Board. Such certificates may be
sealed with the corporate seal of Nasdaq or a facsimile thereof.
(b) If any such certificates are countersigned by a transfer agent
other than Nasdaq or its employee, or by a registrar other than Nasdaq or
its employee, any other signature on the certificate may be a facsimile. In
the event that any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall cease to
be such officer, transfer agent, or registrar before such certificate is
issued, such certificate may be issued by Nasdaq with the same effect as if
such person were such officer, transfer agent, or registrar at the date of
issue.
Stock Ledger
Sec. 9.3 (a) A record of all certificates for capital stock issued
by Nasdaq shall be kept by the Secretary or any other officer, employee, or
agent designated by the Board. Such record shall show the name and address
of the person, firm, or corporation in which certificates for capital stock
are registered, the number of shares represented by each such certificate,
the date of each such certificate, and in the case of certificates which
have been canceled, the date of cancellation thereof.
(b) Nasdaq shall be entitled to treat the holder of record of
shares of capital stock as shown on the stock ledger as the owner thereof
and as the person entitled to vote such shares and to receive notice of
meetings, and for all other purposes. Nasdaq shall not be bound to
recognize any equitable or other claim to or interest in any share of
capital stock on the part of any other person, whether or not Nasdaq shall
have express or other notice thereof.
Transfers of Stock
Sec. 9.4 (a) The Board may make such rules and regulations as it
may deem expedient, not inconsistent with law, the Restated Certificate of
Incorporation, or these By-Laws, concerning the issuance, transfer, and
registration of certificates for shares of capital stock of Nasdaq. The
Board may appoint, or authorize any principal officer to appoint, one or
more transfer agents or one or more transfer clerks and one or more
registrars and may require all certificates for capital stock to bear the
signature or signatures of any of them.
(b) Transfers of capital stock shall be made on the books of
Nasdaq only upon delivery to Nasdaq or its transfer agent of: (i) a written
direction of the registered holder named in the certificate or such
holder's attorney lawfully constituted in writing; (ii) the certificate for
the shares of capital stock being transferred; and (iii) a written
assignment of the shares of capital stock evidenced thereby.
Cancellation
Sec. 9.5 Each certificate for capital stock surrendered to Nasdaq
for exchange or transfer shall be canceled and no new certificate or
certificates shall be issued in exchange for any existing certificate other
than pursuant to Section 9.6 until such existing certificate shall have
been canceled.
Lost, Stolen, Destroyed, and Mutilated Certificates
Sec. 9.6 In the event that any certificate for shares of capital
stock of Nasdaq shall be mutilated, Nasdaq shall issue a new certificate in
place of such mutilated certificate. In the event that any such certificate
shall be lost, stolen, or destroyed, Nasdaq may, in the discretion of the
Board or a committee appointed thereby with power so to act, issue a new
certificate for capital stock in the place of any such lost, stolen, or
destroyed certificate. The applicant for any substituted certificate or
certificates shall surrender any mutilated certificate or, in the case of
any lost, stolen, or destroyed certificate, furnish satisfactory proof of
such loss, theft, or destruction of such certificate and of the ownership
thereof. The Board or such committee may, in its discretion, require the
owner of a lost or destroyed certificate, or the owner's representatives,
to furnish to Nasdaq a bond with an acceptable surety or sureties and in
such sum as will be sufficient to indemnify Nasdaq against any claim that
may be made against it on account of the lost, stolen, or destroyed
certificate or the issuance of such new certificate. A new certificate may
be issued without requiring a bond when, in the judgment of the Board, it
is proper to do so.
Fixing of Record Date
Sec. 9.7 The Board may fix a record date in accordance with
Delaware law.
ARTICLE X
MISCELLANEOUS PROVISIONS
Corporate Seal
Sec. 10.1 The seal of Nasdaq shall be circular in form and shall
bear, in addition to any other emblem or device approved by the Board, the
name of Nasdaq, the year of its incorporation, and the words "Corporate
Seal" and "Delaware." The seal may be used by causing it to be affixed or
impressed, or a facsimile thereof may be reproduced or otherwise used in
such manner as the Board may determine.
Fiscal Year
Sec. 10.2 The fiscal year of Nasdaq shall begin the 1st day of
January in each year, or such other month as the Board may determine by
resolution.
Waiver of Notice
Sec. 10.3 (a) Whenever notice is required to be given by law, the
Restated Certificate of Incorporation, or these By-Laws, a waiver thereof
by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders, Directors, or members of a committee of
Directors need be specified in any waiver of notice.
(b) Attendance of a person at a meeting shall constitute a waiver
of notice of such meeting, except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
Execution of Instruments, Contracts, Etc.
Sec. 10.4 (a) All checks, drafts, bills of exchange, notes, or
other obligations or orders for the payment of money shall be signed in the
name of Nasdaq by such officer or officers or person or persons as the
Board, or a duly authorized committee thereof, may from time to time
designate. Except as otherwise provided by law, the Board, any committee
given specific authority in the premises by the Board, or any committee
given authority to exercise generally the powers of the Board during
intervals between meetings of the Board, may authorize any officer,
employee, or agent, in the name of and on behalf of Nasdaq, to enter into
or execute and deliver deeds, bonds, mortgages, contracts, and other
obligations or instruments, and such authority may be general or confined
to specific instances.
(b) All applications, written instruments, and papers required by
any department of the United States Government or by any state, county,
municipal, or other governmental authority, may be executed in the name of
Nasdaq by any principal officer or subordinate officer of Nasdaq, or, to
the extent designated for such purpose from time to time by the Board, by
an employee or agent of Nasdaq. Such designation may contain the power to
substitute, in the discretion of the person named, one or more other
persons.
Form of Records
Sec. 10.5 Any records maintained by Nasdaq in the regular course
of business, including its stock ledger, books of account, and minute
books, may be kept on, or be in the form of, magnetic tape, computer disk,
or any other information storage device, provided that the records so kept
can be converted into clearly legible form within a reasonable time.
ARTICLE XI
AMENDMENTS; EMERGENCY BY-LAWS
By Stockholders
Sec. 11.1 These By-Laws may be altered, amended, or repealed, or
new By-Laws may be adopted, at any meeting of the stockholders by the
affirmative vote of the holders of at least 66 2/3 percent of the voting
power of the then outstanding stock entitled to vote, voting together as a
single class, provided that, in the case of a special meeting, notice that
an amendment is to be considered and acted upon shall be inserted in the
notice or waiver of notice of said meeting.
By Directors
Sec. 11.2 To the extent permitted by the Restated Certificate of
Incorporation, these By-Laws may be altered, amended, or repealed, or new
By-Laws may be adopted, at any regular or special meeting of the Board by a
resolution adopted by a vote of a majority of the whole Board.
Emergency By-Laws
Sec. 11.3 The Board may adopt emergency By-Laws subject to repeal
or change by action of the stockholders which shall, notwithstanding any
different provision of law, the Restated Certificate of Incorporation, or
these By-Laws, be operative during any emergency resulting from any nuclear
or atomic disaster, an attack on the United States or on a locality in
which Nasdaq conducts its business or customarily holds meetings of the
Board or the stockholders, any catastrophe, or other emergency condition,
as a result of which a quorum of the Board or a committee thereof cannot
readily be convened for action. Such emergency By-Laws may make any
provision that may be practicable and necessary under the circumstances of
the emergency.
Exhibit 4.1
[ Q ] [ LOGO ] SHARES
COMMON STOCK SEE REVERSE FOR
CERTAIN DEFINITIONS
THE NASDAQ STOCK MARKET, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.O1 PAR VALUE PER
SHARE OF
THE NASDAQ STOCK MARKET, INC.
The shares represented by this certificate are transferable only on the
books of The Nasdaq Stock Market, Inc. by the holder of record thereof, or
by his, her or its duly authorized attorney or legal representative, upon
surrender of this certificate properly endorsed. The shares are subject to
substantial restrictions upon transfer described on the reverse side. This
certificate and the shares represented hereby are issued and shall be held
subject to all the provisions contained in the corporation's official
corporate papers filed with the Secretary of the State of Delaware (copies
of which are on file with the Transfer Agent), to all of the provisions the
holder by acceptance hereof, assents.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar. IN WITNESS WHEREOF, The Nasdaq Stock Market,
Inc. has caused this certificate to be signed by an authorized person.
Dated:
CHAIRMAN AND CHIEF
COUNTERSIGNED AND REGISTERED: EXECUTIVE OFFICER
The Bank of New York
BY TRANSFER AGENT
AND REGISTRAR [Corporate Seal]
SECRETARY
AUTHORIZED SIGNATURE
THE NASDAQ STOCK MARKET, INC.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM
UNDER SUCH ACT. THIS CERTIFICATE IS SUBJECT TO, AND MAY BE TRANSFERRED ONLY
IN COMPLIANCE WITH, THE CONDITIONS SPECIFIED UNDER THE SECTION ENTITLED
"TRANSFER RESTRICTIONS" IN THE PRIVATE PLACEMENT MEMORANDUM DATED NOVEMBER
15, 2000. A COPY OF SUCH PRIVATE PLACEMENT MEMORANDUM IS ON FILE AT THE
PRINCIPAL OFFICES OF THE NASDAQ STOCK MARKET, INC. AND THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
The shares represented by this certificate are issued subject to
all provisions of the certificate of incorporation and by-laws of The
Nasdaq Stock Market, Inc. (the "Corporation") as from time to time amended
(copies of which are on file at the principal executive offices of the
Corporation).
The Board of Directors of the Corporation is authorized by
resolution(s), from time to time adopted, to provide for the issuance of
preferred stock in series and to fix and state the voting powers,
designations, preferences, and relative, participating, optional, or other
special rights of the shares of each such series and the qualifications,
limitations, and restrictions thereof. The Corporation will furnish to any
stockholder upon request and without charge a full description of the
powers, designations, preferences and relative, participating, optional or
special rights of each class of stock and any series thereof and the
qualifications, limitations or restrictions of such preferences and/or
rights.
The affirmative vote of not less than two-thirds of the
outstanding voting power of the corporation's voting stock is required to
amend certain provisions of the Corporation's certificate of incorporation
and stockholder amendments to the Corporation's by-laws.
The Corporation's certificate of incorporation provides that no
person, other than the National Association of Securities Dealers, Inc. or
any other person as may be approved for such exemption by the Board of
Directors of the Corporation prior to the time such person owns more than
5% of the then outstanding shares, is entitled to exercise voting rights in
respect of more than 5% of the then-outstanding shares. At any meeting of
the stockholders of the Corporation, a majority of the shares in respect of
which voting rights can be exercised will constitute a quorum for such
meeting.
The following abbreviations, when used in the inscription on the
face of this certificate, shall be construed as though they were written
out in full according to applicable laws or regulations:
TEN COM -- as tenants in UNIF GIFT MIN ACT-- .....Custodian.....
common (Cust) (Minor)
TEN ENT -- as tenants by under Uniform Gifts to Minors
the entireties Act..................
JT TEN -- as joint tenants (State)
with right of
survivorship and
not as tenants UNIF TRAN MIN ACT-- .....Custodian(until age...)
in common (Cust)
......under Uniform Transfers
(Minor)
to Minors Act ..............
(State)
Additional abbreviations may also be used though not in the above list.
For value received, _____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OR ASSIGNEE
______________________________________
|______________________________________|
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
shares of common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________________
to transfer the said shares on the books of the within named Corporation
with full power of substitution in the premises.
Dated:______________________ X ___________________________________
X ___________________________________
NOTICE: The signatures (s) to
this assignment must correspond
with the name(s) as written
upon the face of the
certificate in every
particular, without alteration
or enlargement or any change
whatever.
SIGNATURE(S) GUARANTEED:
____________________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED IN ACCORDANCE
WITH THE MEDALLION SIGNATURE GUARANTEE PROGRAM BY A
BANK OR TRUST COMPANY HAVING AN OFFICE OR
CORRESPONDENT IN THE UNITED STATES.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, OR DESTROYED
THE COMPANY MAY REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE
OF A REPLACEMENT CERTIFICATE.
VOTING TRUST AGREEMENT
This Voting Trust Agreement (this "Agreement") dated as of June 28,
2000, by and among The Nasdaq Stock Market, Inc., a Delaware corporation
("Nasdaq" or the "Company"), the National Association of Securities
Dealers, Inc., a Delaware non-stock corporation (the "NASD"), and The Bank
of New York, a New York banking corporation, as voting trustee (the "Voting
Trustee").
W I T N E S S E T H:
WHEREAS, in accordance with the Warrant Agreement, dated as
of June 28, 2000 (the "Warrant Agreement"), by and among the NASD, The Bank
of New York, a New York banking corporation, as the warrant agent (the
"Warrant Agent"), and the Voting Trustee, certain persons (each, a
"Purchaser" and, collectively, the "Purchasers") have acquired warrants
(the "Warrants") to purchase an aggregate of 25,660,196 shares of the
Company's common stock, par value $.01 per share (the "Common Stock"),
owned and held by the NASD (such shares initially underlying the Warrants
being hereinafter referred to as the "Shares"); and
WHEREAS, pursuant to the provisions of this Agreement and
the Warrant Agreement, upon the execution hereof, the Shares will be
deposited with and transferred to the Voting Trustee by the NASD to be held
in accordance with the provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto agree as follows:
Section 1. Creation of Voting Trust. Subject to the terms
and conditions hereof, there is hereby created and established a voting
trust in respect of the Shares to be known as the "Voting Trust." The
Voting Trustee hereby accepts the trust created hereby and agrees to serve
as trustee hereunder. The Company shall promptly file an executed copy of
this Agreement at the registered office of the Company in the State of
Delaware, which copy shall be open to the inspection of any stockholder of
the Company, or any beneficiary of the Voting Trust, daily during business
hours, as provided in Section 218 of the General Corporation Law of the
State of Delaware (the "DGCL").
Section 2. Deposit of Shares. (a) On the date of execution
of this Agreement, the NASD shall transfer and deliver to the Voting
Trustee, to be held by it pursuant to the provisions of this Agreement, the
certificate or certificates representing the Shares, duly endorsed in blank
and accompanied by proper instruments of assignment and transfer as the
Voting Trustee may request duly executed in blank. After the filing of a
copy of this Agreement in the registered office of the Company in the State
of Delaware as provided in Section 1 hereof, each certificate representing
the Shares so transferred to the Voting Trustee shall be surrendered to the
Company and cancelled, and new certificates therefor shall be issued to,
and in the name of, the Voting Trustee or a nominee of the Voting Trustee.
Such certificates shall contain a legend stating that they have been issued
pursuant to this Agreement and that fact shall be noted in the stock ledger
of the Company as required by Section 218 of the DGCL.
(b) All certificates for the Shares at any time delivered to
the Voting Trustee hereunder shall be held by the Voting Trustee under and
pursuant to the terms and conditions of this Agreement. The Voting Trustee
shall not have the authority to, and shall not, sell, transfer, assign,
pledge, hypothecate or otherwise dispose of or encumber the Shares or any
rights therein or thereto, except to the extent otherwise specifically
provided in this Agreement. The Voting Trustee shall have no beneficial
interest in or discretionary authority with respect to the Shares, its
interest being limited solely to that necessary to carry out its
obligations under this Agreement.
Section 3. Voting Trust Arrangements Until Exchange
Registration. Until the Securities and Exchange Commission grants national
securities exchange status under the Securities and Exchange Act of 1934,
as amended, to the Company ("Exchange Registration"), the following
provisions shall apply to the Shares subject to the Voting Trust. The
Company shall notify the Voting Trustee of Exchange Registration promptly
after it occurs.
(a) Upon each valid exercise (each, an "Exercise") of a
Warrant pursuant to the provisions of the Warrant Agreement, the Voting
Trustee shall, upon the request of the Warrant Agent pursuant to Section 7
of the Warrant Agreement, promptly deliver to the transfer agent for the
Common Stock (the "Transfer Agent") a notice (which shall include a copy of
the form of election to purchase (the "Purchase Form"), as executed by or
on behalf of the exercising holder of the Warrant (the "Warrant Holder"))
of such Exercise, and a request that the Transfer Agent make an appropriate
notation in its records of the shares of Common Stock or other securities
purchased (such shares being hereinafter referred to as "Purchased Shares")
pursuant to such Exercise.
(b) Upon receiving confirmation from the Transfer Agent that
it has made a notation of Exercise pursuant to Section 3(a) hereof, the
Voting Trustee shall cause a voting trust certificate (each, a "Voting
Trust Certificate"), to be issued in the form attached hereto as Exhibit A,
representing such Purchased Shares in the name or names designated by the
exercising Warrant Holder in the Purchase Form (such named person being
hereinafter referred to as the "Beneficial Owner").
(c) Within two (2) business days (which shall mean for the
purposes of this Agreement each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the City of New
York are authorized or obligated by law to close) of receiving a Warrant
Expiration Notice (as defined in the Warrant Agreement) from the Warrant
Agent, the Voting Trustee shall cause the release ("Release") of the number
of Shares specified in such notice from the Voting Trust and shall promptly
cause the Transfer Agent to deliver to the NASD the certificates
representing such Shares, duly endorsed for transfer, or with duly executed
stock powers attached, and shall take all such other actions as are
appropriate, or as the NASD may reasonably request, to cause the transfer
of such Shares, together with all other property relating to or allocable
to such Shares and held by the Voting Trustee pursuant to the provisions of
this Agreement, to the NASD. Each Release shall terminate the provisions of
this Agreement with respect to the Shares that are the subject of such
Release.
Section 4. Voting Trust Arrangements Upon Exchange
Registration. Upon Exchange Registration, the following provisions shall
apply to the Shares subject to the Voting Trust.
(a) Promptly after receiving notice of Exchange Registration
from the Company, the Voting Trustee shall notify each holder of a Voting
Trust Certificate of the occurrence of Exchange Registration and directing
such holder to surrender its Voting Trust Certificate to the Voting Trustee
at its office in the Borough of Manhattan, the City of New York, State of
New York (the "Voting Trustee Office"). Within two (2) business days of the
surrender to the Voting Trustee at the Voting Trustee Office of the Voting
Trust Certificate representing such Purchased Shares by the Beneficial
Owner thereof, and payment in full of any fees and expenses of the Voting
Trustee then outstanding in respect of such Purchased Shares by such
Beneficial Owner, the Voting Trustee shall cause to be delivered promptly
to such Beneficial Owner the certificates representing the appropriate
number of Purchased Shares, duly endorsed for transfer by the Voting
Trustee, or with duly executed stock powers attached, and shall take all
such other actions as are appropriate, or as the NASD may reasonably
request, to cause the transfer of such Purchased Shares, together with all
other property relating to or allocable to such Purchased Shares and held
by the Voting Trustee for the benefit of the Beneficial Owner thereof
pursuant to this Agreement and the Warrant Agreement, to such Beneficial
Owner. Upon delivery of the certificates representing the Purchased Shares
in the aforesaid manner, the Voting Trustee shall be released from any
further obligation or duty under this Agreement and the Warrant Agreement
with respect to such Purchased Shares and the Voting Trust and the
provisions of this Agreement shall terminate with respect to all the
Purchased Shares being held by the Voting Trustee pursuant to Section 3 (b)
hereof. All Voting Trust Certificates surrendered to the Voting Trustee in
accordance with the foregoing provisions shall be cancelled by the Voting
Trustee. Such cancelled Voting Trust Certificates shall then be disposed of
by the Voting Trustee in a manner satisfactory to the Voting Trustee or
delivered to the NASD.
(b) The Warrant Holders of unexpired and unexercised
Warrants shall have, and the Warrant Certificates held by such holders
shall evidence, the right to direct the Voting Trustee as to voting of the
Shares underlying the Warrants held by such holder pursuant to and in the
manner set forth in Section 7(b) hereof. The Voting Trustee shall be
entitled to rely, from time to time, upon an Outstanding Warrants Notice
(as defined in the Warrant Agreement) received from the Warrant Agent for
the purpose of determining the identity of Warrant Holders of unexercised
and unexpired Warrants and the number of Shares in respect of which the
foregoing voting rights may be exercised.
(c) Upon each Exercise of a Warrant, the Voting Trustee,
upon the request of the Warrant Agent pursuant to Section 7 of the Warrant
Agreement and payment in full of any fees and expenses of the Voting
Trustee then outstanding in respect of such Purchased Shares by such
Warrant Holder, shall deliver to the Transfer Agent a notice (which shall
include a copy of the form of election to purchase as executed by or on
behalf of the Warrant Holder) of such Exercise, and a request that the
Transfer Agent make an appropriate notation in its records of such Exercise
and cause to be delivered to the Warrant Agent with all reasonable
dispatch, in such name or names as the exercising Warrant Holder may
designate, a certificate or certificates representing the number of
Purchased Shares and the provisions of this Agreement shall terminate with
respect to such Purchased Shares. Upon taking the foregoing actions, the
Voting Trustee shall be released from any further obligation or duty under
this Agreement with respect to such Purchased Shares.
(d) Within two (2) business days of receiving a Warrant
Expiration Notice from the Warrant Agent, the Voting Trustee shall cause
the Release of the number of Shares specified in such notice from the
Voting Trust and shall promptly cause the Transfer Agent to deliver to the
NASD the certificates representing such Shares, duly endorsed for transfer,
or with duly executed stock powers attached, and shall take all such other
actions as are appropriate, or as the NASD may reasonably request, to cause
the transfer of such Shares, together with all other property relating to
or allocable to such Shares and held by the Voting Trustee pursuant to the
provisions of this Agreement, to the NASD. Each Release shall terminate the
provisions of this Agreement with respect to the Shares that are the
subject of such Release.
Section 5. Mutilated or Missing Voting Trust Certificates.
The Voting Trustee, under such rules and regulations as it in its
discretion may prescribe with respect to indemnity or otherwise, may
provide for the issuance and delivery of new Voting Trust Certificates in
lieu of lost, stolen or destroyed Voting Trust Certificates or in exchange
for mutilated Voting Trust Certificates.
Section 6. Transfer Restrictions. (a) All Voting Trust
Certificates issued pursuant to this Agreement shall be subject to the same
restrictions on Transfer (as defined in the Private Placement Memorandum)
that are applicable to shares of Common Stock set forth in the section
entitled "Transfer Restrictions - Common Stock" in the Private Placement
Memorandum.
(b) Any attempt to Transfer any Voting Trust Certificates
other than in accordance with the provisions of Sections 6(a) shall be null
and void, and the Voting Trustee shall not register any such Transfer. Each
Voting Trust Certificate issued pursuant to this Agreement shall have the
following legend noted conspicuously upon its face or reverse side:
THE SECURITIES REPRESENTED BY THIS VOTING TRUST CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT. THIS VOTING TRUST CERTIFICATE IS
SUBJECT TO, AND MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH, THE CONDITIONS
SPECIFIED IN THE VOTING TRUST AGREEMENT DATED AS OF JUNE 28, 2000, AS SUCH
MAY BE AMENDED FROM TIME TO TIME, AMONG THE NASDAQ STOCK MARKET, INC., THE
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (THE "NASD") AND THE BANK
OF NEW YORK, AS VOTING TRUSTEE. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE NASD.
Section 7. Voting. (a) Until Exchange Registration, all the
Shares subject to the Voting Trust, including, without limitation, the
Purchased Shares being held by the Voting Trustee pursuant to the
provisions of Section 3(b) hereof, shall be voted by the Voting Trustee
solely in accordance with the written instructions of the NASD. The voting
rights associated with the Shares that are Released by the Voting Trustee
pursuant to the provisions of Section 3(c) hereof shall revert to the NASD.
(b) Upon Exchange Registration, Warrant Holders of unexpired
and unexercised Warrants shall have the right, in the manner set forth in
the following paragraph and subject to the limitation set forth in the
Company's Certificate of Incorporation, to direct the Voting Trustee as to
the voting of the Shares underlying such Warrants until the earlier of the
exercise or the expiration of such Warrants with respect to such Shares.
The voting rights associated with the Shares that are Released by the
Voting Trustee pursuant to the provisions of Section 4(d) shall revert to
the NASD.
As soon as practicable after the receipt of any notice of
any meeting at which the holders of shares of Common Stock are entitled to
vote, or of solicitation of consents or proxies from holders of shares of
Common Stock, the Voting Trustee shall fix a date for giving of
instructions for voting at such meeting or in respect of such consent or
proxy, which date shall not be less than two (2) business days prior to the
date of such meeting or the date on which such consent or proxy need to be
given. The Voting Trustee shall give ten (10) days prior written notice to
each of the holders of unexpired and unexercised Warrants appearing on its
records (i) of such notice of meeting, (ii) a statement that each such
holder at the close of business on the specified record date (the "Record
Date") will be entitled, subject to any applicable provisions of law and
the terms of this Agreement, the Warrants and the Common Stock, to instruct
the Voting Trustee to vote or cause to be voted the Shares underlying any
unexercised and unexpired Warrant tranches of such holder as of the Record
Date (the "Eligible Shares") in accordance with the written instructions
provided by each such holder no later than two (2) days prior to the date
the vote or solicitation of consents or proxies are required and (iii) a
statement as to the number of Eligible Shares held by each such holder.
The Voting Trustee shall not, under any circumstances,
exercise any discretion as to voting nor shall it vote or attempt to
exercise the right to vote the Eligible Shares except pursuant to and in
accordance with written instructions from the holders as described above.
Eligible Shares for which no specific voting instructions are received by
the Voting Trustee from the holder thereof shall not be voted, provided,
however, that the Voting Trustee shall cause such shares to be counted as
present for purposes of establishing a quorum at any meeting of Nasdaq's
stockholders.
Section 8. Dividends and Distributions. (a) Subject to the
provisions of Section 8(b) hereof, the parties hereto agree that all cash
dividends and distributions, and any other securities or other property
distributed or paid with respect to the shares of Common Stock or other
securities or property held by the Voting Trustee shall be paid or
transferred, as the case may be, directly to (i) the NASD, in respect of
the Shares underlying any unexercised and unexpired Warrants, except as set
forth in Section 8(d) hereof or Section 11(b) of the Warrant Agreement, and
(ii) the Beneficial Owners of the Purchased Shares that are being held by
the Voting Trustee pursuant to Section 3(b) hereof, except as set forth in
Section 11(b) of the Warrant Agreement. The Voting Trustee shall have no
responsibility or liability with regard to the payment of such dividends or
other distributions or other securities or property. Notwithstanding the
foregoing, if the Voting Trustee receives payments of such dividends or
distributions or other securities or property, it shall promptly distribute
such dividends or distributions or other securities or property to the
persons set forth in clause (i) and (ii) above, promptly after (and in any
event within five (5) business days) the receipt of such dividends or other
distributions or other securities or property, provided, however, that the
Voting Trustee shall not be required to transfer to the NASD any such
dividends or distributions or other securities or property to which the
NASD is entitled pursuant to this Section 8(a) until receipt of a
certificate of the NASD, signed by its Chairman, President or any Senior
Vice President or any Vice President, certifying that the NASD is entitled
to such dividends or distributions or other securities or property pursuant
to the terms of this Agreement. The NASD shall also be entitled to any
interest or gain on investments made by the Voting Trustee pursuant to
Section 8(d) hereof which shall be paid to the NASD on demand as provided
in this Agreement.
(b) Any shares of Common Stock or other securities
("Adjustment Securities") issued in an Adjustment Event (as defined in the
Warrant Agreement) in respect of Shares shall be deposited with the Voting
Trustee and held for the pro rata benefit of the recipients of the Shares
from the Voting Trust Agreement (the "Recipients"). Prior to Exchange
Registration, any Voting Trust Certificates issued pursuant to this
Agreement shall be deemed to represent any Adjustment Securities
distributed in respect of the Purchased Shares represented by such Voting
Trust Certificates. Upon Exchange Registration, any outstanding Warrant
Certificates representing unexercised and unexpired Warrants shall be
deemed to represent the right to direct the Voting Trustee as to the voting
of such Adjustment Securities to the extent such securities entitle the
holders thereof to voting rights.
(c) Any securities or other property distributed to the NASD
pursuant to the occurrence of any event described in Section 8(b) of the
Warrant Agreement shall be deposited with the Voting Trustee and held for
the pro rata benefit of the Recipients.
(d) Any interest, dividends or other income in respect of
property held by the Voting Trustee for the benefit of the Recipients
pursuant to the terms of this Agreement and the Warrant Agreement shall be
distributed to the NASD. All cash received and held by the Voting Trustee
pursuant to the terms of this Agreement and the Warrant Agreement shall,
upon the written request of the NASD, be invested in securities issued or
guaranteed by the United States or any agency or instrumentality thereof or
investments in time deposits, certificates of deposit or money market
deposits maturing within 90 days of the date of the acquisition thereof and
entitled to U.S. Federal deposit insurance for the full amount thereof or
issued by a bank or trust company which is organized under the laws of the
United States or any state thereof having capital in excess of $500 million
or in shares of any investment company registered under the Investment
Company Act of 1940 invested primarily in any of the foregoing.
Furthermore, the Voting Trustee may temporarily invest any funds awaiting
investment in any of the foregoing investments in The Bank of New York Cash
Reserve Fund, provided that such obligations will mature by their terms
within six (6) months following the making of such investment. The NASD
shall be entitled to any net income or gain resulting from such investments
and shall reimburse the Voting Trustee for any losses realized in respect
of such investments. The Voting Trustee shall not be liable for any losses
as a result of any investments made by it pursuant to and in compliance
herewith.
(e) In the event the Company or any third party makes a
tender offer for outstanding shares of Common Stock or offers to exchange
other securities or other property for outstanding shares of Common Stock
(an "Offer"), the NASD may, but shall not be obligated to, regardless of
what action it may take with respect to any other shares of Common Stock
owned by it, tender, or cause the Voting Trustee to tender, for purchase or
exchange pursuant to such Offer, any or all of the Shares held by the
Voting Trustee, and any securities or other property acquired thereby shall
be deposited with the Voting Trustee and held for the pro rata benefit of
the Recipients. The NASD, however, may, but shall not be obligated to,
cause the Voting Trustee to sell, at any time, all or any such securities
or other property so acquired, in which event the proceeds of such sale,
after deducting the expenses of such sale and taxes payable as a result
thereof, shall be held by the Voting Trustee for the pro rata benefit of
the Recipients.
Section 9. The Voting Trustee. (a) Subject to the provisions
of this Agreement, the Voting Trustee shall manage the Voting Trust created
hereby.
(b) The Voting Trustee shall be entitled to such
compensation as the Company, the NASD and the Voting Trustee shall from
time to time agree in writing for all services rendered by it hereunder
(which compensation shall not be limited by any provision of law in regard
to the compensation of a Voting Trustee of an express trust).
(c) The Voting Trustee is expressly authorized to incur and
pay all reasonable, properly documented charges and other expenses that the
Voting Trustee deems necessary and proper in the performance of the Voting
Trustee's duties under this Agreement and the Company and NASD shall
jointly and severally reimburse the Voting Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Voting Trustee in accordance with any provision of this Agreement
(including the reasonable compensation and the expenses and disbursements
of its agents and counsel), except any such expense, disbursement or
advance as may be attributable to its gross negligence, willful misconduct
or bad faith. The Company and the NASD, jointly and severally, shall
indemnify the Voting Trustee for any and all loss, damage, claims,
liability or expense, including taxes (other than taxes based upon,
measured by or determined by the income of the Voting Trustee), arising out
of or in connection with the acceptance or administration of the Voting
Trust, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except to the extent that such loss,
damage, claim, liability or expense is due to its own gross negligence,
willful misconduct or bad faith.
(d) In acting hereunder, the Voting Trustee shall have only
such duties as are specified herein and no implied duties shall be read
into this Agreement, and the Voting Trustee shall not be liable for any act
done, or omitted to be done, by it in the absence of its gross negligence,
willful misconduct or bad faith. The Voting Trustee shall be free from
liability to the Company or the NASD in acting or relying upon any writing,
notice, certificate or document believed by the Voting Trustee in good
faith after reasonable inquiry to be genuine and to have been signed by an
authorized officer of the Company or the NASD, as the case may be.
(e) The Voting Trustee may resign by giving 45 days' advance
written notice of resignation to the Company or the NASD. Within ten (10)
calendar days after receiving the foregoing notice of resignation from the
Voting Trustee, NASD and the Company shall jointly agree on and appoint a
successor Voting Trustee. If a successor Voting Trustee has not accepted
such appointment by the end of such ten-day period, the Voting Trustee may,
in its sole discretion, apply to a court of competent jurisdiction for the
appointment of a successor Voting Trustee or for other appropriate relief.
The costs and expenses (including reasonable attorneys' fees and expenses)
incurred by the Voting Trustee in connection with such proceeding shall be
paid by, and be deemed a joint and several obligation of, the NASD and the
Company. The Voting Trustee shall continue to serve until its successor
accepts its appointment hereunder.
(f) In connection with the appointment of a successor
Trustee in the event of the resignation or removal of the Voting Trustee,
the Voting Trustee shall, simultaneously with the execution by the
successor Trustee of a counterpart of this Agreement, transfer and deliver
(or cause to be transferred and delivered) to the successor Trustee the
Shares and all other securities or other property that are held in the name
of the Voting Trustee or subject to the Voting Trust immediately prior to
such execution. The successor Trustee shall file an executed copy of this
Agreement, as amended, at the registered office of the Company in the State
of Delaware, which copy shall be open to the inspection of any stockholder
of the Company, or any beneficiary of the Voting Trust, daily during
business hours, as provided in Section 218 of the DGCL, and thereafter the
successor Trustee shall become the Voting Trustee for all purposes of this
Agreement, and shall succeed to all of the rights and obligations of the
Voting Trustee hereunder. Certificates representing the Shares so
transferred to the successor Trustee shall be surrendered and canceled, and
a new certificate(s) therefor shall be issued in the name of the successor
Trustee. Such certificate(s) shall state that they have been issued
pursuant to this Agreement, as amended, and that fact shall be noted in the
stock ledger of the Company, as required by Section 218 of the DGCL. In the
event a successor Trustee shall be appointed after a record date has passed
with respect to any vote of the stockholders of the Company and prior to
the stockholders meeting or the taking of action by written consent
relating to such record date, the Voting Trustee as of such record date
shall vote the Shares and/or execute a written consent with respect thereto
in accordance with the instructions of the successor Trustee in accordance
with the terms of this Agreement.
(g) The Company and the NASD hereby acknowledge that the
Voting Trustee has had, presently may have and may in the future have other
business relationships with any one or more of the Warrant Holders, the
Company or the NASD that are unrelated to its duties and obligations under
this Agreement, and hereby waive and release the Voting Trustee from any
conflict of interest which such relationship may create; provided, that in
the event such conflict of interest results in or arises in connection with
litigation between any such Warrant Holder and the Company or any other
Warrant Holder or the NASD, the Company or the NASD shall have the right
immediately to remove the Voting Trustee within ten (10) business days
following notice of such conflict to them from the Voting Trustee or notice
of such conflict from any of them to the Voting Trustee (the "Conflict
Notice"). Notwithstanding an election by the Company or the NASD to remove
the Voting Trustee as provided in the previous sentence, the foregoing
waiver and release shall apply to any actions taken by the Voting Trustee
or which the Voting Trustee refrains from taking in accordance with
instructions authorized under this Agreement during the period between
delivery of such Conflict Notice and the Voting Trustee's removal.
(h) The Voting Trustee represents that it is acquiring the
Shares only in its capacity as trustee to hold in trust pursuant to the
provisions of this Agreement.
(i) In the event the Voting Trustee receives conflicting
instructions under this Agreement, the Voting Trustee shall be fully
protected in refraining from acting until such conflict is resolved to the
satisfaction of the Voting Trustee except that if such conflict arises by
virtue of the receipt of later dated instructions from the same party, the
Voting Trustee shall follow the later dated instructions in accordance with
this Agreement. The Voting Trustee shall be obligated to contact promptly
the party giving the conflicting instructions to ascertain the nature of
any conflict, and in the event such conflict cannot be resolved, the Voting
Trustee shall have the right to institute a bill of interpleader in any
court referred to in Section 16(b) of this Agreement to determine the
rights and obligations of the parties, and the party giving the conflicting
instructions shall pay all costs, expenses and disbursements in connection
therewith, including reasonable attorneys' fees.
(j) The Voting Trustee may consult at any time with counsel
satisfactory to it (who may be counsel for the Company or the NASD) and the
Voting Trustee shall incur no liability or responsibility to the Company or
the NASD in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or the advice of
such counsel.
Section 10. Benefit and Binding Effect; Assignment. This
Agreement and all covenants herein contained shall be binding upon and
shall inure to the benefit of each of the parties hereto and their
respective heirs, executors, administrators and personal representatives
and their successors and assigns. This Agreement shall not be assigned by
any party hereto without the prior written consent of the other parties
hereto, provided, however, that either the Company or the NASD may assign
this Agreement to any entity controlling, controlled by or under common
control with the Company or the NASD, as the case may be, without the prior
written consent of the Voting Trustee. The provisions of this Agreement
shall apply, to the full extent set forth herein, with respect to the
transfer of Shares of the Company or of any successor securities of the
Company that (whether by merger, consolidation, sale of assets, or
otherwise) may be issued in respect of, in exchange for, or in substitution
of, such Shares.
Section 11. Notices. Any notice required or permitted by
this Agreement must be in writing and must be sent by facsimile, by
nationally recognized commercial overnight courier, or mailed by U.S.
registered or certified mail, addressed to the other party at the address
below or to such other address for notice (or facsimile number, in the case
of a notice by facsimile) as a party gives the other party written notice
of in accordance with this Section 11. Any such notice will be effective as
of the date of receipt:
(a) If to the Company, to:
The Nasdaq Stock Market, Inc.
1735 K Street, NW
Washington, D.C. 20006-1500
Fax: (202) 728-8321
Attention: Office of General Counsel - Contracts Group
(b) If to the NASD, to:
National Association of Securities Dealers, Inc.
1735 K Street, NW
Washington, D.C. 20006-1500
Fax: (202) 293-6260
Attention: General Counsel
(c) If to the Voting Trustee, to:
The Bank of New York
101 Barclay Street, 21W
New York, NY 10286
Fax: (212)815-7181
Attention: Insurance Trust and Escrow Unit
or such other address or fax number as such party may hereafter specify for
such purpose by notice to the other parties hereto.
Section 12. Trademarks, etc. The Voting Trustee agrees that
it will not use the names "National Association of Securities Dealers,
Inc.," "NASD," "NASD Regulation, Inc.," "NASD Regulation," "NASDR," "The
Nasdaq Stock Market, Inc.," "Nasdaq", "American Stock Exchange LLC", or
"AMEX" in any advertising, informational, promotional or other media or
materials of the Voting Trustee without the prior written consent of the
NASD. The Voting Trustee shall not use any trademark, service mark,
copyright, or patent of the NASD or any of its subsidiaries or affiliates,
registered, or unregistered without the prior written consent of the NASD.
Section 13. Amendments. From and after the date hereof, the
Voting Trustee shall, if either the Company or the NASD so directs from
time to time, agree to supplement or amend this Agreement without the
approval of any holders of Voting Trust Certificates in order (i) to cure
any ambiguity, (ii) to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provisions herein, or
(iii) to make any other provisions in regard to matters or questions
arising hereunder which the Company or the NASD may deem necessary or
desirable and which shall not adversely affect the interests of the holders
of Voting Trust Certificates issued pursuant to this Agreement; provided,
however, this Agreement shall not otherwise be modified, supplemented or
altered in any respect except with the consent in writing of the holders of
Voting Trust Certificates whose Voting Trust Certificates represent not
less than a majority of the Purchased Shares then represented by Voting
Trust Certificates. Upon delivery of a certificate from an appropriate
officer of the Company or the NASD which states that the proposed
supplement or amendment is in compliance with the terms of this Section 13,
the Voting Trustee shall execute such supplement or amendment.
Notwithstanding any other provision hereof, the Voting Trustee's consent
must be obtained in connection with any amendment or supplement pursuant to
this Section 13 which alters the Voting Trustee's rights or duties set
forth in this Agreement.
Section 14. Enforceability. In the event that any part of
this Agreement shall be held to be invalid or unenforceable, the remaining
parts thereof shall nevertheless continue to be valid and enforceable as
though the invalid portions were not a part hereof.
Section 15. Termination. This Agreement shall terminate upon
the later of the close of business on (i) the last business day prior to
the sixth anniversary date of this Agreement or (ii) the date of Exchange
Registration. The provisions of Sections 9 and 12 hereof shall survive the
termination of this Agreement and/or resignation or removal of the Voting
Trustee.
Section 16. Governing Law; Consent to Jurisdiction.
(a) This Agreement shall be construed in accordance with and
governed by the internal laws of the State of Delaware.
(b) Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby shall be brought in
any federal court located in the State of Delaware or any Delaware state
court, and each of the parties hereby consents to the exclusive
jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or proceeding
which is being brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, to the
fullest extent permitted by applicable law, each party agrees that service
of process on such party as provided in Section 11 shall be deemed
effective service of process on such party.
Section 17. Counterparts. This Agreement may be signed in
counterparts and all signed copies of this Agreement will together
constitute one original of this Agreement. This Agreement shall become
effective when each party hereto shall have received counterparts thereof
signed by all the other parties hereto.
Section 18. Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and shall in no way
be construed to define, limit, describe, explain, modify, amplify, or add
to the interpretation, construction or meaning of any provision of, or
scope or intent of, this Agreement nor in any way affect this Agreement.
[The remainder of this page has been intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this
Voting Trust Agreement to be duly executed as of the date first above
written.
THE NASDAQ STOCK MARKET, INC.
By:
------------------------------------
Name:
Title:
NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC.
By:
-------------------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
-------------------------------------
Name:
Title:
FIRST AMENDMENT
to
VOTING TRUST AGREEMENT
among
THE NASDAQ STOCK MARKET, INC.,
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
and
THE BANK OF NEW YORK, AS VOTING TRUSTEE
Dated as of January 18, 2001
FIRST AMENDMENT, made as of this 18 day of January, 2001 (the
"First Amendment") to the Voting Trust Agreement, dated June 28, 2000 (as
so amended, the "Voting Trust Agreement"), by and among The Nasdaq Stock
Market, Inc., a Delaware corporation, the National Association of
Securities Dealers, Inc., a Delaware non-stock corporation (the "NASD"),
and The Bank of New York, a New York banking corporation, as Voting Trustee
(the "Voting Trustee").
WHEREAS, in accordance with the Warrant Agreement, dated as of June
28, 2000 (the "Original Warrant Agreement"), by and among the NASD, The
Bank of New York, as the warrant agent, and the Voting Trustee, certain
persons acquired warrants (the "Phase I Warrants") to purchase an aggregate
of 25,660,196 shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), owned and held by the NASD (such shares
initially underlying the Phase I Warrants being hereinafter referred to as
the "Phase I Shares") in the first phase ("Phase I") of a private placement
transaction;
WHEREAS, in accordance with the Amended and Restated Warrant
Agreement, dated as of January 18, 2001 (the "Amended and Restated Warrant
Agreement"), by and among the NASD, The Bank of New York, as the warrant
agent, and the Voting Trustee, certain persons acquired warrants (the
"Phase II Warrants") to purchase an aggregate of 17,569,380 shares of
Common Stock, owned and held by the NASD (such shares initially underlying
the Phase II Warrants being hereinafter referred to as the " Phase II
Shares") in the second phase ("Phase II") of a private placement
transaction;
WHEREAS, on June 28, 2000, pursuant to the provisions of the Voting
Trust Agreement and the Original Warrant Agreement, all the Phase I Shares
were deposited with and transferred to the Voting Trustee by the NASD to be
held in accordance with the provisions of the Voting Trust Agreement;
WHEREAS, pursuant to the provisions of the Voting Trust Agreement
and the Amended and Restated Warrant Agreement, upon the execution hereof,
all the Phase II Shares will be deposited with and transferred to the
Voting Trustee by the NASD to be held in accordance with the provisions of
the Voting Trust Agreement;
WHEREAS, the parties to the Voting Trust Agreement desire to amend
the Voting Trust Agreement in the manner set forth below.
NOW, THEREFORE, the parties hereto agree as follows:
1. SECTION 2(A).
Section 2(a) of the Voting Trust Agreement is hereby amended and
supplemented to add the following to the end thereof:
"On the closing date of Phase II, the NASD shall transfer and
deliver to the Voting Trustee, to be held by it pursuant to the
provisions of the Voting Trust Agreement, the certificate or
certificates representing the Phase II Shares, as applicable, duly
endorsed in blank and accompanied by proper instruments of
assignment and transfer as the Voting Trustee may request duly
executed in blank. After the filing of a copy of this First
Amendment in the registered office of the Company in the State of
Delaware as provided in Section 1 of the Voting Trust Agreement,
each certificate representing the Phase II Shares so transferred to
the Voting Trustee shall be surrendered to the Company and
cancelled, and new certificates therefor shall be issued to, and in
the name of, the Voting Trustee or a nominee of the Voting Trustee.
Such certificates shall contain a legend stating that they have
been issued pursuant to the Voting Trust Agreement and that fact
shall be noted in the stock ledger of the Company as required by
Section 218 of the DGCL."
2. DEFINITIONS.
All references to "Shares" in the Voting Trust Agreement shall mean
collectively the Phase I Shares and the Phase II Shares.
All references to "Warrants" in the Voting Trust Agreement shall
mean collectively the Phase I Warrants and the Phase II Warrants.
3. COUNTERPARTS.
This First Amendment may be executed by each of the parties hereto
in any number of counterparts, each of which counterpart, when so executed
and delivered, shall be deemed to be an original and all such counterparts
shall together constitute one and the same agreement.
4. GOVERNING LAW.
This First Amendment shall be interpreted, construed, enforced and
administered in accordance with the internal substantive laws (and not the
choice of law rules) of the State of Delaware.
IN WITNESS WHEREOF, each of the parties has caused this First
Amendment to be executed by a duly authorized officer as of the day and
year first written above.
THE NASDAQ STOCK MARKET, INC.
By:
------------------------------------
Name:
Title:
NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC.
By:
-----------------------------------
Name:
Title:
THE BANK OF NEW YORK, AS
VOTING TRUSTEE
By:
-------------------------------------
Name:
Title:
Exhibit 10.1
------------
EWN II(TM) Agreement
THIS AGREEMENT, dated as of November 19, 1997 ("Effective Date") is
made by and between MCI Telecommunications Corporation, a Delaware
corporation, whose principal offices are located at 1801 Pennsylvania
Avenue, N.W., Washington, D.C. 20006 (MCI) and The Nasdaq Stock Market,
Inc. (Nasdaq), a Delaware corporation, whose principal offices are located
at 1735 K Street, N.W., Washington, D.C. 20006.
WHEREAS, Nasdaq desires to replace certain of its current private data
networks with services provided by MCI utilizing a private line network or
equivalent to private line network (including certain MCI supplied
equipment, software and services) procured to meet its enterprise-wide
needs;
WHEREAS, Nasdaq released a Request for Proposal, dated February 1992,
as amended (by Appendix F, attached hereto, dated 9/16/97) which states the
requirements for networking and management services to meet certain of its
and the Corporations' (as defined below) business and technical
requirements (set forth as Attachment 1, incorporated herein and referred
to as the RFP); and
WHEREAS, Nasdaq desires to procure and MCI desires to provide
(procure, install, manage, operate, and maintain) a network service which
meets the requirements and specifications of the RFP and the EWNII(TM)
Specification dated 9/16/97, as amended by the mutually agreed EWNII(TM)
Design Document, excluding all Stage 1 and Stage 2 SDLC references (set
forth as Attachment 2, incorporated herein and referred to as the
Response). The RFP and the Response shall collectively be referred to
herein as Specifications. In the event that the Response, in reference to
the RFP requirements, has explicitly proposed a substitute requirement, a
different means or method to meet the RFP requirement, or has otherwise
taken an exception to meeting a requirement, the terms of the Response
prevail to the extent of that substitution, different means or method, or
exception.
NOW THEREFORE, in consideration of the foregoing and the mutual
promises and conditions herein contained, MCI and Nasdaq, intending to be
legally bound, agree as follows:
Section 1. Definitions.
1.1. At Cost means: (1) if provided for by MCI Tariff, at the MCI
Tariff rate; (2) if under an agreement which prohibits disclosure of the
cost to Nasdaq, then at the price or rate calculated as mutually agreed
upon in Attachment 3; or (3) otherwise, at the best price reasonably
available to MCI at the time, given the size and nature of the procurement
(documented upon request of Nasdaq), plus an administrative markup not to
exceed 4%.
1.2. Availability means the successful transmission and receipt of
data for every MCI Service authorized at that site through that Router/Hub
Port.
1.3. Best Efforts shall mean a standard of performance that involves
more than indifference to the other party's interests and requires more
than a duty to attempt to act with diligence to fulfill an obligation, but
does not require a party to disregard its own interests. Meeting a standard
of best efforts may require a party to incur losses to a reasonable extent
for the benefit of the other party and to exceed prevailing business
practices, but does not require the party to imperil its own existence or
to make total efforts to fulfill the obligation irrespective of all other
considerations.
1.4. Business Day shall mean any day that the Nasdaq Stock Market has
Market Hours.
1.5. A Component is a piece of hardware or a piece of software used by
MCI to provide MCI Service under this Agreement. Components include
Separable Components as defined in Section 1.16 of the Agreement.
1.6. Confidential Information means information that is transmitted or
otherwise provided by or on behalf of either party to the other party, or
to which a party gains access, in the course of or incidental to the
performance of this Agreement, and that should reasonably have been
understood by the receiving party because of legends or other markings, the
circumstances of disclosure or the nature of the information itself, to be
proprietary and confidential to the disclosing party, an affiliate of the
disclosing party or to a third party. Confidential Information may be
disclosed in written or other tangible form (including on magnetic media)
or by oral, visual or other means.
1.7. The Corporations means The Nasdaq Stock Market, Inc. and/or its
affiliates and subsidiaries.
1.8. Data Stream means a logical telecommunications path from the
nearest originating to the furthest terminating Component.
1.9. Expedite shall mean a Nasdaq order to accelerate (by any number
of days) a provisioning interval set forth in Attachment 3.
1.10. Market Hours shall mean those hours when any market operated
by the Corporations is accepting electronic entry of quotation, execution,
electronic negotiation, or trade reporting data.
1.11. MCI Day shall mean any day that MCI is officially open for
business.
1.12. MCI Service shall mean all Services and the Network supplied
under this Agreement, including any individual Service.
1.13. The Network is the combination of all the Components utilized
under this Agreement with which MCI provides private data or equivalent to
private data network service.
1.14. Network Management Scripts means those software based
instructions that can be created by or on behalf of MCI as the user of the
TEMIP network management application software in order to manage and
maintain various functions of that application, i.e. collection of backbone
router events.
1.15. A Router/Hub Port is a telecommunications path from the nearest
originating to the furthest terminating Component containing logical data
streams.
1.16 A Separable Component shall mean a Component that may reasonably
be separated from the Components without adversely affecting MCI's ability
to operate in the ordinary course of its business and which MCI has
procured by purchase, license or lease specifically for the provisioning of
the MCI Service. For the purpose of clarity, Separable Components shall
include the items of equipment MCI has procured (by lease, purchase or
license) and placed on the premises of Nasdaq, the Corporations, the
Subscribers or other authorized users of the MCI Service and such similar
items as MCI shall have specifically placed in service on MCI premises in
order to provide the MCI Services and Separable Components shall not
include MCI's basic service network, such as fiber optic transmission lines
and associated equipment and facilities and MCI's network management
centers and associated equipment and facilities.
1.17. Service means any features or functionality ordered by Nasdaq
from MCI under this Agreement, including but not limited to: network
management services, billing services, Installation services, and
Maintenance services.
1.18. Subscriber means any entity (other than the Corporations)
authorized by the Corporations to receive information via the MCI Service
from the Corporations, or an entity (other than the Corporations)
authorized by the Corporations to connect to the Network.
Section 2. Transition. This Agreement shall not be construed to
supersede the agreement between the parties, dated July 20, 1993 (the "EWN
I Agreement"), with respect to the provision of services to Nasdaq
thereunder. The parties agree that the provisions of the EWN I Agreement
shall govern the provision and purchase of services thereunder, while the
provisions of this Agreement shall apply only to the provisions and
purchase of MCI Services described herein, including but not limited to:
Installation, testing, acceptance, use of and payment for such MCI
Services. Upon completion of the Installation Schedule for EWN II or in
accordance with some other schedule mutually agreed by the parties, MCI
shall decommission and deinstall EWN I (in accordance with the cost
schedule of the EWN I Agreement), MCI shall take and use all EWN I
components (as defined in the EWN I Agreement) as MCI determines in its
sole discretion. Upon the deinstallation of the final router port (as
defined in the EWN I Agreement), which shall occur no later than 60 days
after the end of the EWN II Installation Schedule, the EWNI Agreement shall
terminate, provided that Nasdaq shall remain liable for charges incurred
and not paid under the EWNI Agreement.
Section 3. Payment.
3.1. ***** *
3.2. (i) The price for MCI Service is set forth in Attachment 3 or the
price otherwise stated in this Agreement. MCI may invoice Nasdaq for MCI
Service upon commencement of any 24-hour Test and Acceptance criteria
(discussed in Section 10.4). If the Service fails the 24-hour Test and
Acceptance criteria, MCI shall credit Nasdaq for the Service charge until
the Service passes the 24-hour Test and Acceptance criteria. MCI shall
provide Nasdaq with monthly invoices as well as such electronic reporting
and delivery of billing information as agreed to between the parties.
(ii) MCI shall deliver each invoice to Nasdaq within thirty (30) days
of the date of the invoice. Nasdaq shall to pay each MCI invoice within 30
days of the receipt by Nasdaq of such invoice. MCI shall provide Notice (in
accordance with Section 16 below) to Nasdaq on or after the 30th day if MCI
has not received payment of the invoice. Nasdaq shall pay MCI a late charge
equal to interest at one of the following rates as Nasdaq may elect: nine
percent (9%) per annum or the prime rate per annum, as published in the
Wall Street Journal (or as otherwise agreed between the parties) and
compounded daily on the past due amount from the 15th day following
Nasdaq's receipt of MCI's Notice of late payment until such past due
amounts are paid to MCI, except that such interest shall not apply to past
due amounts that are the subject of a bona fide dispute as described below
except to the extent that Nasdaq is ultimately obligated to pay such
disputed amounts.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed
separately with the Securities and Exchange Commission.
If MCI (a) delivers more than one monthly invoice in any 20 day period
or (b) delivers monthly invoices out of sequence and, as a result of either
(a) or (b), Nasdaq is not able to perform the invoice verification
processes Nasdaq uses under the EWN I Agreement (or reasonably similar
processes as they may be adapted for use under this Agreement) in time to
make payment when due, MCI's rights to receive payment and/or security
hereunder shall be suspended for an amount of time reasonably sufficient to
enable Nasdaq to perform such verification processes and to make payment.
For the purpose of clarity, MCI shall not have the right to receive late
payment interest on amounts as to which the payment obligation has been
suspended hereunder for the duration of such suspension.
(iii) Nasdaq may withhold amounts otherwise due on an invoice in the
event there is a bona fide dispute as to Nasdaq's payment obligation. In
such event, Nasdaq shall provide Notice explaining in reasonable detail the
basis for Nasdaq's dispute. Nasdaq will pay the disputed portion of any
invoice within sixty (60) days of the date of receipt of the invoice by
Nasdaq (such payment being without prejudice to any argument or right of
Nasdaq), unless Nasdaq has initiated arbitration proceedings within that
time period. MCI shall give interest on any credits or money settlements of
disputed amounts that Nasdaq has previously paid at the rate of interest
set forth above (as elected by MCI) calculated from the date of payment of
the disputed amount that gives rise to the credit or settlement.
(iv) ******
(v) In the event Nasdaq has satisfied the Revenue Commitment prior to
expiration of the initial term, the parties shall thereafter discuss
potential reductions in the price for MCI Service.
3.3. *****
3.4. Taxes. All charges are exclusive of federal, state and local
gross sales, use, excise, utility and gross receipts taxes, other similar
tax-like charges, and tax-related surcharges imposed on MCI or Nasdaq in
connection with MCI's provision and/or Nasdaq's use of the MCI Services,
which Nasdaq agrees to pay. Taxes based on MCI's net income or real or
personal property shall be the sole responsibility of MCI. In the event
that Nasdaq provides MCI with a duly authorized exemption certificate, MCI
agrees to exempt Nasdaq in accordance with law effective on the date the
exemption certificate is received by MCI, provided that MCI is also
entitled under applicable law to receive the exemption for which Nasdaq has
provided a certificate.
Section 4. Orders for Service.
4.1 Orders for any Installation, Add, Inside Move, Change or
Disconnect under this Agreement shall be provided to MCI solely by Nasdaq.
Such orders shall include authorization allowing MCI to work with any
designated Subscriber where Nasdaq deems appropriate. MCI shall not accept
orders for any Installation, Add, Inside Move, Change or Disconnect or any
other Service under this Agreement from any Subscriber directly.
4.2 Orders for MCI Service will be controlled by the terms of this
Agreement. Pre-printed terms of either party's purchase order shall have no
binding effect on either party.
Section 5. Specifications. MCI warrants and represents that MCI
Service will meet the Specifications.
Section 6. Conflicts. MCI warrants and represents that it is under no
other duty or agreement nor during the effectiveness of this Agreement will
it enter into any duty or Agreement which conflicts with or will materially
and adversely affect MCI's ability to perform this Agreement. Assignment of
this Agreement in accordance with its terms shall not be deemed a violation
or breach of this warranty.
Section 7. Intellectual Property Violations.
7.1. ******
7.2. *****
Section 8. Commitment to Proposed Architecture.
8.1. During the term of this Agreement (subject to any provisions as
may be agreed for any period covered by a De-installation Plan, (a) MCI
Service shall support at least the protocols in the Specifications as those
standards exist presently and as they may be modified in the future and (b)
every Component of MCI Service will continue to be covered under the
Maintenance Section, and will be upwardly compatible with the prior
Components of MCI Service. In particular this means that each
Component--while it is free to implement new features not available in
earlier Components of MCI Service: (a) must be able to communicate, without
a degradation in performance or function, with any then existing Component
of MCI Service and with any existing Corporation or Subscriber Router/Hub
Port (as it is then configured), and with any component of any vendor which
meets the same applicable standard(s); and (b) all changes or upgrades in
peripherals or in MCI Service itself will not require change in Corporation
application software or hardware.
8.2. MCI agrees to regularly advise Nasdaq of emerging technologies
that could positively impact the functional and financial performance of
the MCI Service to Nasdaq. Both parties agree that financial benefits may
be realized as a result of the implementation of new and improved
technologies. Should Nasdaq desire to incorporate such new technologies
into the MCI Service, both parties agree to negotiate in good faith the
terms and conditions associated with the implementation of such new
technologies.
Section 9. Installation Schedule.
9.1. The term Installation shall mean the carrying out and completion
of all work, including procurement of Components, site surveys, scheduling,
physical and logical connection of all Components to the Network to ensure
that the Router/Hub Port is fully integrated into the MCI Service (to meet
Specifications), testing, correction of any problems which cause the
Router/Hub Port not to meet Specifications, required to meet the
Specifications in connection with a site at which the MCI Service is to be
provided under this Agreement.
9.2. The parties will agree on a schedule ending 18 months from the
Effective Date that includes the milestones in Attachment 7 and all
Installations for Subscribers on EWNI and which is subject to change by
mutual agreement of the parties (Installation Schedule). MCI will use its
Best Efforts to meet the Installation Schedule in 18 months. For 20 months
from the Effective Date, the penalties under Attachment 7 do not apply to
any Installation. After the end of the 20th month following the Effective
Date, MCI shall be subject to the penalties in Attachment 7 with respect to
all Installations. The application of penalties in accordance with this
Section shall be subject to Section 20.2.
9.3. If Nasdaq alters any site's scheduled Installation date and the
present and altered Installation dates are both more than 27 MCI Days in
the future, no charge to Nasdaq may be made.
9.4. MCI may charge Nasdaq the Expedite charge in Attachment 3 for any
Expedite of a site's Installation date requested by Nasdaq less than 27 MCI
Days before the then current Installation date, provided that, MCI
completes the Installation by the advanced Installation date or would have
completed the Installation by the advanced Installation date but for one or
more of the reasons described in Section 20.2 excusing MCI performance in
accordance therewith.
9.5. Installation shall be performed during the hours directed by
Nasdaq, unless an alternative is mutually agreed upon by the parties.
Section 10. Installation Procedure.
10.1 All work associated with an Installation must be performed in a
good and workmanlike manner, in accordance with manufacturer and industry
standards and specifications. All Separable Components used in the
provision of MCI Service shall have been purchased new for MCI Service
under this Agreement.
10.2. After completion of work associated with an Installation, MCI
shall insure that the exterior of Components and the surrounding areas are
clean and that all discarded parts, supplies and other waste is removed
from the premises. In any Installation, MCI shall use only replacement
parts that perform to at least the manufacturers' specifications of the
replaced item when new.
10.3. Subject to Section 20.2, in the event it is foreseen that an
Installation cannot be met or an Installation is not completed by the
Installation date, MCI shall use Best Efforts to resolve the problem .
10.4. During Installation, MCI will perform a 24-hour test procedure
to verify that the MCI Service through the Router/Hub Port at the site
meets Test and Acceptance criteria. The Test and Acceptance criteria are
set forth in Attachment 6. The testing methodology may change from time to
time to accommodate an improvement or efficiency in applicable technology
provided the new Acceptance criteria is no less stringent that the original
Acceptance criteria.
10.5. If during the 24-hour acceptance test period, a Router/Hub Port
does not meet the Test and Acceptance criteria, MCI shall repair the
problem and provide additional test periods, until the Service meets the
24-hour Test and Acceptance criteria. If the Service fails the initial
24-hour Test and Acceptance criteria, MCI shall credit Nasdaq for the
Service charge until the Service passes the 24-hour Test and Acceptance
criteria.
Section 11. MCI Notice of Requirements. MCI shall conduct an on-site
survey on the Subscriber's premise and shall coordinate with the Subscriber
in order to conduct the survey. MCI shall also provide Notice to Nasdaq of
any facility requirements that must be in place at a Subscriber's site
prior to commencement of any on-site Installation. Such Notice must be
provided a minimum of 10 MCI Days prior to commencement of any on-site
Installation. MCI shall confirm the date for commencement of on-site
Installation at least 3 and not more than 5 MCI Days prior to commencement
of the Installation at that site. Exceptions to this will be noted where
MCI and Nasdaq agree that circumstances require a different Notice
interval.
Section 12. Installation, Inside Moves, Changes, Relocations and
Disconnect.
12.1. As used in this Section: an Installation is as defined in
Section 9.1; a Disconnect is a de-Installation that requires the
termination of a local telecommunications company circuit; an Inside Move
is a Disconnect at one location and an Installation at a different location
where no new local telecommunications company circuit is procured. a
Relocation is a de-Installation at one site and an Installation at a
different site where a new local telecommunications company circuit is
procured; a Change is any other Installation or de-Installation of MCI
Service.
12.2. Charges and time parameters for Installations, Relocations,
Inside Moves, and Disconnects are set forth in Attachment 3. Should Nasdaq
order an Expedite from MCI of any interval set forth in Attachment 3, then
MCI shall be entitled to charge Nasdaq the appropriate charge in Attachment
3. Except where inconsistent with terms of this Section, Services shall
meet the requirements of the Maintenance Section of this Agreement.
12.3 Any other Services like those or related to those described in
this Section are At Cost, on an individual case basis.
Section 13. Defect Notification.
13.1. ******
13.2. *****
Section 14. Personnel.
14.1. In no event shall a party or employees or agents of that party
be or be considered employees or agents of the other party. Except as
stated herein, matters governing the terms and conditions of employment of
a party's employees and agents are entirely within the control of that
party. Except as stated herein, each party's business matters such as work
schedules, wage rates, withholding income taxes, disability benefits or the
matter and means through which a party's obligations to its employees or
other agents will be accomplished are entirely within the discretion of the
party.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
14.2. Each party will be responsible for the supervision, direction
and control of its own personnel while engaged in performance of activities
under this Agreement.
14.3. When this Agreement requires performance by MCI or Nasdaq
employees or other agents or contractors on the other party's (including
the Corporations') premises, the performing party shall carry and maintain
Worker's Compensation and Employer's Liability Insurance covering its
employees or other agents (or require its agents to carry and maintain such
insurance) in accordance with the statutory requirement applicable to the
location where services are to be performed. The performing party shall
also carry and maintain adequate insurance coverage (or require its agents
to carry and maintain such insurance) against losses or damages caused by
the performing party's (including its other agents) negligence. Nasdaq
understands that MCI self-ensures a large portion of its public liability
insurance, and Nasdaq is free to do the same.
14.4. ***** *
14.5 *****
14.6. Nasdaq may provide Notice to MCI of MCI Network Management and
Project Management personnel it finds to be key to the performance of MCI's
duties under this Agreement. Such personnel may be reassigned subject to
MCI's standard personnel policies, provided MCI provides a reasonable
transition period to: (1) another person capable of performing the same
duties with equivalent qualifications; or (2) a means acceptable to Nasdaq
by which the same duties are performed by competent personnel.
14.7. Either party may provide Notice to the other with a list of its
employees directly involved in performance of services under this Agreement
who, during the effectiveness of this Agreement, may not be hired as an
employee, consultant, or other agent of the other party to perform in or
for the organizations identified below without the designating party's
prior written consent, unless that person has not been an employee or
subcontractor of the designating party for 6 months. For Nasdaq this
prohibits hiring by or in order to provide services only to Nasdaq's
Information Technology Division (or its successor). For MCI this prohibits
hiring by or in order to provide services only to MCI National Account
Project Management, Account Team, MCI Complex Bids/Technical Services or
the Global Network Management Center (or their respective successors)
providing services to a securities, commodities, or financial: institution,
market, or vendor.
14.8. Each party will comply with all applicable governmental
regulations, pay all applicable taxes, and exercise control over its
personnel (including other agents). Each party shall be responsible for its
own employee taxes or other governmental taxes, fines, or fees (including
all such taxes, any interest or penalties and reasonable attorney's fees
and costs related thereto) related to the employment of its personnel, and
shall indemnify and hold harmless the other party from any liability
therefor.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
14.9. MCI shall obtain all approvals, permits, and licenses and pass
all inspections, required for MCI Service under applicable law. Nasdaq
shall assist in obtaining such, where necessary.
14.10. MCI may perform its obligations through its subsidiaries or
affiliates, or through the use of MCI-selected independent subcontractors
or manufacturers; provided that MCI shall be solely responsible for the
performance, duty, quality, and any breach by any agent of MCI, as if such
agent were MCI. MCI shall obtain (or cause its subcontractors to obtain)
any necessary permits, business licenses, bonds, or other governmental
authority to perform its obligations under this Agreement.
14.11. Nasdaq shall use reasonable efforts to provide MCI with
administrative office space consisting of at least 3 offices and 11
cubicles. However, in no event will a failure or breach of this duty by
Nasdaq be considered a breach of this Agreement.
Section 15. Ownership of Intellectual Property/Licensing of Software
15.1. Except as otherwise expressly provided by this Agreement,
nothing herein shall be deemed to grant or transfer to a party or any third
party any right in, or license under, any patents, copyrights, trade secret
rights, trademarks, service marks or other intellectual property rights
owned by, or licensed by a third party to, the other party, or as to
Nasdaq, the Corporations, and as to MCI, its affiliates.
15.2. The parties acknowledge and agree that as of the Effective Date,
MCI is not licensing or otherwise providing any software, whether in object
code, source code, or any other form, directly to Nasdaq or any other
Corporation, under this Agreement for use on a stand-alone basis in order
to access or otherwise use the MCI Service. If during the term of this
Agreement, it is anticipated that such stand-alone licensing of software is
desirable in connection with the MCI Service, then as a condition to any
such license, the parties shall endeavor to negotiate in good faith
appropriate applicable terms and conditions. If agreed upon by the parties,
such terms and conditions shall be incorporated into this Agreement by way
of written amendment unless otherwise determined by the parties.
15.3. If during the term of this Agreement Nasdaq requests that MCI
provide custom development in connection with the MCI Service, then if MCI
agrees to undertake such development the parties shall endeavor to
negotiate in good faith prior to commencement of the work appropriate
applicable terms and conditions including without limitation the
specifications and schedule for the deliverables, the ownership of any
resulting intellectual property rights, and the consideration to be
provided for the work. If agreed upon by the parties, such terms and
conditions shall be incorporated into this Agreement by way of written
amendment unless otherwise determined by the parties.
Section 16. Points of Contact.
16.1. The term Notice means written communications directed to the
persons below in the manner directed in this section. Such communications
shall be deemed to have been duly given upon actual receipt by the parties,
or upon constructive receipt if sent by certified mail, return receipt
requested, or any other delivery service which actually obtains a signed
delivery receipt, addressed to the person named below to the following
addresses or to such other address as any party hereto shall hereafter
specify by written notice to the other party hereto.
For MCI:
***** *
For Nasdaq:
*****
16.2. In addition to the above communications, notices of material
dispute or default shall also be delivered, with the same delivery
requirements as stated in 16.1, to the following addresses:
For MCI:
MCI Telecommunications Corporation
MCI Law and Pubic Policy-Commercial Law
5 International Drive
Rye Brook, New York, 10573
For Nasdaq:
The Nasdaq Stock Market, Inc.
1735 K Street, N.W.
Washington, DC 20006
Attn: Office of General Counsel - Nasdaq Contracts Group
Section 17. Equipment Insurance. MCI shall maintain replacement value
insurance for Components located on the Corporation's and Subscriber
premises. Notwithstanding the foregoing, the Corporations and Subscribers
shall be liable for replacement value of any such Components at their
respective locations to the extent of loss caused by either of them or
damage by negligence, abuse or misuse, vandalism, failure to provide the
same electrical or other operating environment as at Installation, or
unauthorized alterations or attachments in violation of MCI prior provided
specifications for said Components. MCI may self insure as necessary to
comply with the terms of this subsection.
Section 18. Warranties.
18.1. *****
18.2. *****
18.3 *****
18.4. In the event that this Agreement is terminated or upon
expiration of the term hereof, Nasdaq may provide MCI Notice that it
intends to license, lease, purchase or otherwise obtain an assignment of
all or any portion of the Separable Components. Nasdaq thereafter may
require MCI to make any or all of the Separable Components available to the
Corporations for license, lease, or sale under reasonable terms and
conditions, subject to any third party rights. In addition, with respect to
any such license, lease, or sale, Nasdaq shall pay MCI all costs to
Disconnect, package, and ship said Separable Components to the
Corporations. If the parties are unable to agree to reasonable terms, the
parties shall submit the matter to arbitration pursuant to the arbitration
provisions of this Agreement. MCI shall take no action to adversely affect
Nasdaq's ability to license the Separable Components from a third party.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
THE PARTIES ACKNOWLEDGE THAT MCI'S OBLIGATION HEREUNDER SHALL BE
LIMITED TO CONVEYING ONLY SUCH RIGHTS AND TITLE AS MCI MAY HAVE AND WHICH
MAY BE TRANSFERABLE. THE SEPARABLE COMPONENTS MADE AVAILABLE IN ACCORDANCE
WITH THIS SECTION 18.4 SHALL BE MADE AVAILABLE ON AN AS IS, WHERE IS, BASIS
WITHOUT ANY WARRANTIES (WHETHER EXPRESS OR IMPLIED) WHATSOEVER. IN
PARTICULAR, MCI DISCLAIMS ALL IMPLIED WARRANTIES WITH RESPECT TO SUCH
SEPARABLE COMPONENTS, INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
18.5. Nasdaq warrants that any components attached to the Network that
are Nasdaq-provided shall conform to FCC standards as stated in Part 68 of
the FCC's rules.
18.6. WITHOUT DEROGATION OF THE FOREGOING, THE WARRANTIES EXPRESSLY
STATED IN THIS AGREEMENT ARE THE EXCLUSIVE WARRANTIES AND NO OTHER
WARRANTY, EXPRESS OR IMPLIED, SHALL APPLY. MCI SPECIFICALLY DISCLAIMS THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
AND ANY WARRANTIES OF NONFRINGEMENT OF THIRD PARTY RIGHTS.
18.7. Nasdaq represents and warrants as follows: (i) that it is duly
organized, validly existing and in good standing under the laws of its
State of formation; (ii) that it has the power and authority to execute,
deliver and perform its obligations under this Agreement; (iii) that the
person executing this Agreement on behalf of Nasdaq has been given the
authority to bind Nasdaq and the Agreement constitutes or will constitute a
legally binding and enforceable obligation of Nasdaq, except as such
enforceability may be limited by provisions of applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar
law affecting creditor's rights and remedies generally or by general
principles of equity; (iv) that the execution, delivery and performance of
the Agreement will not be in contravention of, or will result in a material
breach of any of the terms of Nasdaq's organizational documents, contracts
or instruments to which Nasdaq is a party under which it is bound.
18.8. MCI represents and warrants as follows: (i) that it is duly
organized, validly existing and in good standing under the laws of its
State of formation; (ii) that it has the power and authority to execute,
deliver and perform its obligations under this Agreement; (iii) that the
person executing this Agreement on behalf of MCI has been given the
authority to bind MCI and the Agreement constitutes or will constitute a
legally binding and enforceable obligation of MCI, except as such
enforceability may be limited by provisions of applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar
law affecting creditor's rights and remedies generally or by general
principles of equity; (iv) that the execution, delivery and performance of
the Agreement will not be in contravention of, or will result in a material
breach of any of the terms of MCI's organizational documents, contracts or
instruments to which MCI is a party under which it is bound.
Section 19. Encumbrances.
19.1. Nasdaq shall keep the Components free and clear of all liens and
encumbrances created by or through Nasdaq or the Corporations and shall
otherwise cooperate to defend the interest of MCI and/or its Assignee in
the Components and to maintain the status of the Components as equipment or
personal property and not as attachments to real property. Nasdaq will
promptly discharge any lien created by or through Nasdaq or the
Corporations on the Components, or otherwise cause the removal of such lien
before foreclosure, but in any event within 45 MCI Days of actual knowledge
by Nasdaq of the lien. In the event a lien created by or through Nasdaq or
the Corporations is imposed on the Components that may have an adverse
effect on a proposed MCI action, then it must be removed in time to avoid
such adverse affect. If requested by MCI, Nasdaq will, at Nasdaq's expense,
furnish a waiver of any interest in the Components from any party having an
interest in the real estate or building owned, leased, or used by Nasdaq in
which the Components are located. Nasdaq shall permit and shall cause the
Corporations to permit MCI or its Assignee reasonable access to inspect
said Components (located on their respective premises) during normal
business hours. Nasdaq shall reasonably assist, at the request of MCI, in
attempting to arrange reasonable access to a Subscriber premises to permit
MCI to inspect said Components during normal business hours. In the event
that there is a failure or threatened failure of Nasdaq or the Corporations
to perform its or their obligations under this Section, then MCI shall be
entitled to discharge or otherwise cause the removal of any such
encumbrance or lien and shall be entitled to reimbursement by Nasdaq with
interest at the rate stated in Section 3.2 for any amounts reasonably
expended in so doing.
19.2. Nasdaq agrees to execute and deliver, upon demand, any documents
necessary, in MCI's reasonable opinion, to evidence MCI's or its Assignee's
interest in the Separable Components. In addition, Nasdaq appoints MCI as
its attorney-in-fact for the sole purpose of executing and delivering any
UCC financing statements required to protect and perfect any such interest.
19.3. Nasdaq agrees to provide a notice to the Subscribers of a
mutually agreeable text provided by MCI informing the Subscribers that they
shall keep the Components free and clear of all liens, and of the
possibility of reasonable inspection as provided under this Agreement.
Nasdaq shall indemnify MCI for any costs, damages, expenses (including
reasonable attorneys fees), incurred by MCI or its Assignee to discharge
any liens created by or through Nasdaq, the Corporations or Subscribers,
and to defend title to the Components.
19.4 In order to assure that Nasdaq shall have quiet enjoyment of the
MCI Services, MCI shall take all actions necessary or appropriate to
prevent any third party from taking any action under any lien or other
encumbrance created by, through, or because of MCI that threatens in any
material respect to inhibit MCI's ability to perform hereunder (a "Third
Party Action"), including but not limited to discharging or otherwise
causing the removal of any such lien or encumbrance. MCI shall provide
Nasdaq prompt Notice of any actual or threatened Third Party Action of
which MCI has knowledge. In the event that there is a failure or threatened
failure of MCI to take all actions (as described hereinabove) in respect of
a Third Party Action, then Nasdaq shall be entitled to discharge or
otherwise cause the removal of any such encumbrance or lien and shall be
entitled to reimbursement by MCI with interest at the rate stated in
Section 3.2 for any amounts reasonably expended in so doing.
Section 20. Performance Remedies and Liabilities.
20.1. Performance remedies are set forth in Attachment 7.
20.2. MCI shall not be liable for failure to meet Installation, Inside
Move, Change, Relocation or Disconnect schedules nor for the monetary
performance remedies in Attachment 7 on a Router/Hub Port-specific basis
for: a) failure caused by the negligence of Nasdaq, the Corporations,
Subscribers, or others authorized by Nasdaq to use the MCI Service with
regard to the Separable Components located on Subscriber/Nasdaq/Corporation
premises; or b) failure during the period that there is a failure of
relevant power, equipment, systems or services at Nasdaq's (including the
Corporations') or a Subscriber's site that are not provided by MCI; or c)
failure during any period of scheduled maintenance or any period during
which work requires access to the portion of the Subscriber site where
access lines are physically terminated or the Nasdaq data center, but MCI
or its agents or subcontractors are not afforded access; or d) failure
during periods when repair requires release of Separable Components of the
Network but Nasdaq, Subscriber or any of the Corporations elects not to
release such Separable Components for testing or repair and continues to
use the Service on an impaired basis. However, in the case of failure
caused by Nasdaq, Corporation, or Subscriber negligence, MCI shall use its
reasonable efforts to repair the failure as soon as is practicable. For the
purpose of clarity, MCI shall be excused from failure to meet an
Installation, Inside Move, Change, Relocation or Disconnect schedule or any
other performance obligation under Attachment 7 to the extent (but only to
such extent) that Nasdaq, the Corporations or a Subscriber or other entity
authorized by Nasdaq to use the MCI Service has failed or refused to
perform any act reasonably required on its or their part, consistent with
standard industry practices to enable MCI to meet its performance
obligation after MCI has made reasonable efforts to communicate any such
requirements to Nasdaq. In addition, MCI shall not be liable to the extent
(but only to such extent) as MCI is unable to meet the requirement due to
force majeure (as described in Section 44) or the acts or omissions of any
third party (excluding MCI agents, subcontractors and local access
providers) which MCI does not control or have the right to control.
20.3. An interruption period begins from the earlier of: (1) the time
of Network Management system detection; or (2) report of the problem to
MCI, unless the interruption begins outside the PPM, in which case the
interruption period begins with the next PPM. An interruption period ends
when MCI Service is operating according to the Repair Criteria set forth in
Attachment 8. If Nasdaq (including the Corporations) or Subscriber reports
the MCI Service to be inoperative but the Subscriber denies MCI reasonable
access then, for monetary performance remedy purposes, the MCI Service is
deemed to be impaired, but not interrupted until such release is given. MCI
must notify Nasdaq if access to a site or the release of a Router/Hub Port
is necessary for service restoration, but MCI believes the necessary access
or release has been denied or not granted.
20.4. MCI does not guarantee nor make any warranty with respect to
Maintenance and/or Installations at sites at which there is present an
atmosphere that is explosive, prone to fire, dangerous or otherwise
unsuitable for such Installations.
Section 21. Other Remedies and Liabilities.
21.1. NEITHER NASDAQ AND/OR THE CORPORATIONS NOR MCI AND/OR ITS
AFFILIATES SHALL BE LIABLE ONE TO THE OTHERS OR TO ANY SUBCONTRACTOR OF THE
OTHERS, OR OTHER THIRD PARTY, WHETHER BASED ON CONTRACT, TORT (INCLUDING,
WITHOUT LIMITATION, NEGLIGENCE), WARRANTY OR ANY OTHER CAUSE OF ACTION, FOR
ANY LOSS OF DATA, INFORMATION OR USE, PROFITS,OPPORTUNITY OR REVENUE OR FOR
ANY INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES ARISING FROM OR RELATED
TO THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY
THEREOF.
21.2 ***** *
Section 22. Sharing of Use. MCI warrants that the MCI Service can be:
(1) used by employees and agents of Nasdaq, the Corporations, and the
Subscribers; (2) used to process data for Nasdaq, the Corporations or any
Subscriber; and (3) transferred or assigned among the Corporations without
consent or additional fees, provided that Nasdaq provides MCI Notice no
later than 10 days after the transfer or assignment, and within 15 days of
delivery of such Notice, Nasdaq delivers to MCI or its Assignee a guarantee
of payment (in a form reasonably acceptable to MCI or its Assignee) of all
charges which may be incurred in respect of the Service which is
transferred or assigned. Upon transfer, Nasdaq shall cause such Corporation
to expressly assume in writing Nasdaq's obligations (including those
related to Separable Components) to the extent of the transfer and Nasdaq
shall remain liable for all obligations not transferred.
Section 23. Diversity of Carriers and Routes and Backup.
MCI must provide, during the effectiveness of this Agreement, diverse
transmission paths and associated Components (and if available through
diverse carriers or diverse points of presence, local loops) through
electronically and physically diverse transportation methods such that
nothing on the diverse paths can have a common single point of failure.
Additionally, if local loop diversity is not available, then if requested
by Nasdaq, MCI must provide, if possible, At Cost, diverse transmission
paths and associated Components through electronically and physically
diverse transportation methods such that nothing on the diverse paths can
have a common single point of failure.
Section 24. Maintenance.
24.1. Maintenance shall mean Services conforming to the requirements
of this Section. All maintenance and repair work must be performed in a
good and workmanlike manner, in accordance with manufacturer and industry
standards and specifications in order to keep MCI Service operating within
Specifications. MCI may charge Nasdaq At Cost for mutually agreed-upon
equipment replacement or repair only to the extent replacement or repair
costs are attributable to: (1) damage or loss due to negligence, misuse or
abuse; (2) failure to provide the same operating environment as at
Installation (including but not limited to the failure to provide the same
electrical power, or conditioning, or humidity control); (3) unauthorized
alterations; (4) attachments of equipment to Separable Components in
violation of MCI prior provided specifications; or (5) movement of
Separable Components not authorized by MCI.
24.2. MCI Service coverage, which includes hours for remote
monitoring, hours for on-site NCC coverage at Nasdaq Data Centers, and
hours for performance measurement (PPM), is detailed in Attachment 9.
24.3. In the event of a situation that makes a Corporation data center
inoperable or unusable for any period of time, Nasdaq may request MCI to
provide connectivity to an alternate data center as expediently as possible
At Cost. MCI will provide support to such alternative data center 24 hours
a day, seven days a week At Cost.
24.4. Nasdaq shall provide MCI reasonable access to any Nasdaq
premises to permit MCI to respond to a service call or to perform
preventive maintenance during the hours permitted by Nasdaq. Nasdaq shall
assist, at the request of MCI, in attempting to arrange reasonable access
to a Subscriber premises to permit MCI to respond to a service call or to
perform preventive maintenance. During the time a Subscriber denies MCI
reasonable access, MCI's obligations under the Performance Remedies and
Liabilities Section are suspended for affected Router/Hub Ports.
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
24.5. After completion of work, MCI shall insure that the exterior of
Components and the surrounding areas are clean and that all discarded
parts, supplies and other waste is removed from the premises. In any
maintenance or repair MCI shall use only replacement parts that perform to
at least the manufacturers' specifications of the replaced item when new.
24.6. Except for the uses and accesses contemplated by this Agreement,
at no time will Nasdaq (including the Corporations) personnel, agents,
subcontractors or any other entity under Nasdaq's control, intentionally
make an unauthorized use, unauthorized access, or interfere with, download,
disassemble or otherwise perform unauthorized manipulation of, any MCI
Components (including, but not limited to, DECmcc, Circuit View work
stations, TMS, COMS, NETPRO) used to provide the MCI Service except with
the express authorization and under the direction of MCI. Except for cables
at a Subscriber's premises, at no time will MCI personnel, agents,
subcontractors ,or any other entity under MCI's control, intentionally use,
access, interfere with, download, disassemble, or otherwise manipulate, any
Nasdaq hardware or software except with the express authorization of Nasdaq
(e.g., to enable MCI to resolve trouble tickets). The Corporations shall
not reverse engineer or decompile any MCI provided software. Nasdaq agrees
to provide a notice to the Subscribers of a mutually agreeable text
provided by MCI informing the Subscribers, the Corporations, its agents,
subcontractors or any entity under its control, that they shall not violate
the terms of this provision. MCI shall have the right, upon providing
Nasdaq reasonable advance notice, to correct, deinstall, or restore any MCI
Component which Nasdaq, the Corporations or any Subscriber has
disassembled, manipulated or otherwise modified without MCI's prior express
authorization or direction. Nasdaq shall reimburse MCI for the cost of any
such correction, deinstallation or restoration.
Section 25. ***** *
Section 26. Progress Meetings and Reports.
26.1. Until completion of Installation of the sites in Attachment 6,
MCI and Nasdaq representatives (including one management level
representative able to discuss status, resolve problems, and accept
responsibility for completion of action items from each of: the MCI
International Data Networks Group (or its successor(s)) and MCI Project
Management) shall meet once a week in person or by conference call. MCI
must produce before the meeting, a written progress report outlining status
and known material problems. MCI shall produce, before the next meeting,
minutes and a list of action items coming out of each meeting.
26.2. During the effectiveness of this Agreement, MCI and Nasdaq
representatives (including one management level representative able to
discuss status, resolve problems, and accept responsibility for completion
of action items from each of: the MCI Network Operations; and Project
Management) shall meet in person or by conference call once every other
week or as mutually agreed to by the Parties. MCI shall produce, before the
next meeting, minutes and a list of action items coming out of each
meeting.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
Section 27. Regulatory Responsibilities.
27.1. MCI shall not be responsible for obtaining any necessary
Securities and Exchange Commission approvals, but shall cooperate with
Nasdaq in such, as requested.
27.2. Nasdaq shall not be responsible for obtaining any necessary
Federal Communication Commission, state or other applicable regulatory
authority or approvals for MCI Service, but shall cooperate with MCI in
such, as requested.
27.3. MCI understands that the MCI Service, the Corporations, and the
Corporations' ability to perform obligations under this Agreement are
subject to the Securities Exchange Act of 1934, and the jurisdiction of the
Securities and Exchange Commission and other regulatory bodies. In the
event a rule, regulation, or final decision of a court or regulatory body
having jurisdiction over Nasdaq (or the Corporations) has the effect of
substantially inhibiting Nasdaq's use of the MCI Services (by, for example,
prohibiting Nasdaq from providing its trading network services to the
Subscribers), then Nasdaq may terminate this Agreement upon Notice to MCI
without liability for the Revenue Commitment. If acts or omissions of MCI
in connection with its performance of this Agreement were not a reasonable
and substantial cause of such rule, regulation or final decision leading to
such termination, Nasdaq shall be liable to MCI for an amount (which the
parties agree is reasonable) equal to MCI's reasonably unavoidable
reasonable out of pocket costs and expenses incurred in performing this
Agreement through the effective date of such termination and including any
reasonable costs incurred thereafter in winding down plus (ii) a reasonable
amount of profit in respect of the MCI Services rendered through the
effective date of such termination. For the purpose of this provision, a
reasonable profit shall be calculated using MCI's pre-tax profit margin
averaged over the two (2) quarters preceding such termination (exclusive
the effects of any extraordinary items). The parties will agree on a
reasonable schedule for payment of the amounts described above. If within
60 days of such termination event the parties are unable to agree on such
amount and/or schedule, then either party may commence an arbitration under
the arbitration procedures of this Agreement for the purpose of resolving
the dispute.
27.4. Nasdaq understands that the MCI Service, MCI and MCI's ability
to perform obligations under this Agreement are subject to the
Communications Act of 1934, and the jurisdiction of the Federal
Communications Commission and other regulatory bodies. In the event a rule,
regulation, or final decision of a court or regulatory body having
jurisdiction over MCI has the effect of substantially prohibiting MCI from
providing MCI Services, MCI may terminate this Agreement upon written
Notice to Nasdaq without liability under the provisions of the Termination
Section of this Agreement, but subject to the provisions of Section 18.4.
If acts or omissions of MCI in connection with its performance of this
Agreement were a reasonable and substantial cause of such rule, regulation
or final decision leading to such termination, then MCI shall pay Nasdaq an
amount (which the parties agree is reasonable) for Nasdaq's reasonable
costs to migrate to a new service or carrier.
27.5. MCI and Nasdaq understand that a Subscribers ability to perform
obligations under this Agreement are subject to the Securities Exchange Act
of 1934, the jurisdiction of the Securities and Exchange Commission, the
Securities Investors Protection Corporation (SIPC), and other regulatory
bodies.
Section 28. Tariff.
28.1. ***** *
28.2. *****
28.3. *****
Section 29. Term and Termination.
29.1. The initial term of this Agreement shall run for a period of 6
years, commencing with the Effective Date, unless terminated or canceled
earlier by either party in accordance with the provisions hereof. At the
conclusion of the 6 year period, this Agreement shall then automatically
renew for successive 6 month terms until a party gives Notice of
termination to the other not later than the beginning date of the next 6
month term.
29.2. In the event a party breaches a material obligation under this
Agreement, the other party may provide Notice of such breach and proposed
termination. The party receiving the Notice shall have 60 days from the
receipt of such Notice to cure the stated breach (except where this
Agreement expressly provides for an alternate cure period). If the party
has not cured the breach within the applicable cure period, the
non-breaching party may then give a Notice of termination.
29.3. Except for a termination for Nasdaq's breach of Section 3.2(iv),
within 60 days of the date of the termination or cancellation Notice, the
parties shall agree on a plan (the "De-installation Plan"), which shall
include Regional de-installation, and continuation of other
obligations--including network management--for a period of eighteen (18)
months after the end of the last term, and which shall take into account
changes in the Specifications which may reasonably be expected to be
appropriate as the MCI Services are discontinued pursuant to such plan. If
the parties have not reached agreement on a De-installation Plan within
this 60 day period, either party may initiate arbitration procedures.
Unless otherwise agreed by the parties, the arbitrator(s) shall hear the
matter and produce a De-installation Plan within 60 days of the
arbitration.
29.4. The parties agree that each of the following events, by way of
example and not limitation, shall constitute a material breach of this
Agreement: (i) Nasdaq failure to pay or to secure payment of MCI charges in
accordance with its rights and obligations under Section 3.2; (ii) if
either party becomes insolvent, makes an assignment for the benefit of
creditors, files a voluntary petition or has an involuntary petition filed
or action commenced against it under the United States Bankruptcy Code, or
any similar federal or state law, becomes the subject of any proceedings
related to its liquidation, insolvency or for the appointment of a receiver
or similar officer for it, makes an assignment for the benefit of all or
substantially all its creditors, or enters into an agreement for the
composition, extension, or readjustment of all or substantially all of its
obligations and such event is not cured within thirty (30) days of its
occurrence; (iii) if MCI materially breaches a material obligation under a
material agreement with a third party (and fails to cure such breach in
accordance with the terms of such agreement) which is reasonably required
in order for MCI to meet its obligations hereunder; or (iv) if either party
assigns this Agreement in violation of the provisions of Section 32.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
29.5 MCI may not cease the provision of MCI Service in whole or in
part prior to the end of the term or during the De-installation Plan period
described in Section 29.3 unless in accordance with Section 40.3 or one of
the following occurs:
(a) Nasdaq has breached its obligations under Section 3.2 (iv) and has
failed to cure such breach in accordance with the terms of Section
3.2(iv); or
(b) Nasdaq or the Corporations are in material breach of any material
obligations (other than payment as described in Section 3.2(iv)) which
Nasdaq or the Corporations have failed to cure after receiving Notice
of breach and of proposed termination as required under Section 29.2
of this Agreement and MCI has applied for and obtained from a court of
competent jurisdiction an order permitting it to terminate provision
of the MCI Service in part or in full, with the court having
considered (i) the balance of hardships from the termination of the
MCI Service on MCI and Nasdaq, (ii) MCI's likelihood of success on the
merits on its claim of material breach, and (iii) public interest
factors. MCI shall serve on Nasdaq all appropriate pleadings to
support MCI's application for an order to terminate provision of the
MCI Service in such time that Nasdaq can timely object to MCI's
request for such an order.
Section 30. [Not Used]
Section 31. [Not Used]
Section 32. Subsequent Parties; Limited Relationship. The obligations
under this Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective permitted successors, or
assigns. MCI shall not assign or transfer (including by operation of law)
this Agreement without the prior written consent of Nasdaq. Nasdaq shall
not assign this Agreement, without written consent of MCI, except to
another of the Corporations. Nothing in this Agreement, express or implied,
is intended to or shall (a) confer on any person other than the parties
hereto (and any of the Corporations), or their respective permitted
successors or assigns, any rights to remedies under or by reason of this
Agreement; (b) constitute the parties hereto partners or participants in a
joint venture; or (c) appoint one party the agent of the other.
Nasdaq hereby consents to MCI's right to assign its right to that
portion of the payments due under this Agreement which are allocable to the
Separable Components (the "Component Payments") to the entity holding an
ownership interest in the Separable Components (the "Assignee"), provided
that, MCI shall remain liable for all its obligations not assigned
hereunder. In the event that MCI or Nasdaq is in default under this
Agreement or MCI is in default under its agreement with the Assignee and
this Agreement is terminated, and Nasdaq has determined that it will retain
use of the Separable Components under Section 18.4, then the Assignee may
at any time direct Nasdaq by written Notice to make future Component
Payments directly to such Assignee. Upon receipt of such Notice, Nasdaq
shall thereafter make all Component Payments directly to the Assignee, at
such location specified by the Assignee, free of any claim, counterclaim,
recoupment, reduction, defense or offset with respect to MCI or any other
person or entity other than Assignee, all of which Nasdaq hereby expressly
waives with respect to Assignee, but reserves as to MCI.
The Assignee shall not be entitled to recover from Nasdaq any payments
made by Nasdaq to MCI in good faith before Nasdaq's receipt of the
Assignee's Notice described herein.
Upon assignment to a Corporation, Nasdaq shall notify MCI no later
than 10 days following the assignment, cause such Corporation entity to
expressly undertake, or by law undertake, Nasdaq's obligations (including
those related to Components) to the extent of the assignment and deliver to
MCI (within 15 days of delivery of the Notice of assignment to MCI) or its
Assignee a guarantee of payment (in a form reasonably acceptable to MCI or
its Assignee) of all charges which may be incurred by such Corporation
under this Agreement. Upon Notice to Nasdaq of a breach of its obligation
to cause a Corporation to undertake Nasdaq's obligations or to deliver an
acceptable guarantee to MCI or the Assignee, Nasdaq shall have a 30 day
cure period.
Any unpermitted assignment, pledge, mortgage, or encumbrance of this
Agreement, MCI Service, or any Component shall be void from its inception
and shall not release the assigning party from its obligations under this
Agreement.
Section 33. [Not used.]
Section 34. Test Bed. The terms for DEV NET II are contained in
Attachment 13 hereto.
Section 35. Documentation. Subject to its finalization and acceptance
by MCI during the term of this Agreement, MCI shall provide to Nasdaq the
documentation described in Attachment 10 (the "Technical Documentation").
The Technical Documentation shall be deemed the Confidential Information of
MCI pursuant to Section 43 of this Agreement.
Section 36. Security/Capacity/Disaster Recovery Matters.
36.1. MCI shall have, during the effectiveness of this Agreement,
up-to-date documentation of the physical configuration of the Network,
including Installed locations, detailed information about all Components
(including circuit routes), as well as documentation of MCI's disaster
recovery and security mechanisms and contingency plans. MCI shall give
Notice of any alteration in an MCI Service security mechanism or disaster
recovery plan.
36.2 MCI shall permit Nasdaq (including its agent or appropriate
governmental representative), as required by its board, a court, or a
governmental authority with jurisdiction over the Corporations (e.g. the
Securities and Exchange Commission or the General Accounting Office) to
make physical inspections of the premises housing physical Components of
the Network, with reasonable Notice during normal business hours for the
purpose of reviewing MCI Service (including capacity, security,
Availability, integrity, privacy, and similar topics). MCI shall also make
available to such persons reasonable access during normal business hours to
MCI technical personnel and documentation to answer questions relating to
past, present and future MCI Service (including capacity, security,
Availability, integrity, privacy, and similar topics). MCI shall also
reasonably cooperate with Nasdaq in compiling data for submissions required
by regulatory authorities (e.g., SEC Automation Review Policy filings) or
for Nasdaq internal system and Network planning purposes.
36.3. Nasdaq shall permit MCI (including its agent or appropriate
governmental representative), as required by a court, or a governmental
authority with jurisdiction over MCI (e.g. the FCC or an applicable state
commission) to make physical inspections of the Corporations' premises
housing physical Components of the Network, with reasonable Notice during
normal business hours for the purpose of reviewing MCI Service (including
capacity, security, Availability, integrity, privacy, and similar topics).
Nasdaq shall also make available to such persons reasonable access during
normal business hours to Nasdaq technical personnel and documentation to
answer questions related to past, present, and future MCI Service
(including capacity, security, Availability, integrity of data, privacy,
and similar topics).
36.4. Each party shall give Notice to the other party of the names of
the Network security/disaster recovery points of contact. In the event of
disaster or security breach, each point of contact shall be the person
responsible for coordinating and directing action by that party to resolve
a security breach or disaster. These points of contact shall periodically
stage mutually agreed upon Network tests of the disaster recovery plans and
test response to security breaches; and MCI shall provide prompt Notice to
Nasdaq of the results of each test and each response. MCI agrees to
support, as required, the monthly (maximum) testing of Nasdaq's disaster
recovery and security testing scenarios. MCI shall promptly provide Notice
to Nasdaq of any security breach that did or potentially could impact the
MCI Service and MCI's response.
Section 37. Survival of Provisions. The obligations of the Payment,
Confidentiality, Use of Nasdaq/MCI name and Marks, Indemnification,
Limitation of Liability, Arbitration sections of this Agreement, any
warranties, and any other provisions which by their nature are intended to
survive shall survive the completion of performance, expiration or any
termination of the Agreement.
Section 38. [Not used]
Section 39. Use of Nasdaq/MCI name and Marks. MCI and its affiliates
shall not use the names National Association of Securities Dealers, Inc.,
NASD, Inc., Nasdaq, Inc., NASD Regulation, Inc., Nasdaq International
Market Initiatives, Inc., or NASD, Nasdaq, or NIMI (or the corporate names
of other affiliates of Nasdaq ) in any advertising or promotional media
without the prior written consent of Nasdaq. MCI and its affiliates shall
not use any trademark or service mark of the Corporations, registered or
unregistered, without prior written consent of Nasdaq. Nothing in this
Agreement shall grant Nasdaq (including the Corporations) the right to use
any trademark or service mark, trade name or confusingly similar mark of
MCI and/or its affiliates or refer to MCI and/or its affiliates directly,
or indirectly, in connection with any product, service, promotion or
advertising without MCI's prior written approval. MCI understands that the
imposition of this requirement may cause Nasdaq to delete reference to MCI
and/or its affiliates in its communications about MCI Service to
Subscribers, the Corporations, and their employees, directors,
subcontractors, and other agents. Nasdaq shall advise the Corporations and
Subscribers in writing not to use the names of any subcontractor of MCI
and/or its affiliates, in advertising or promotional media in describing
this Agreement or the work hereunder, without that entity's consent.
Section 40. Intellectual Property Indemnification.
40.1 (A) MCI, at its expense, will indemnify, defend and hold harmless
any and all of Nasdaq, the Corporations, Subscribers and their respective
officers, directors, employees, and agents (collectively "Nasdaq
Indemnitees") as to any third party claim, action, suit, or other
proceeding ("Claim") alleging that the MCI Service or any portion or
Component thereof provided hereunder by MCI to any of the Nasdaq
Indemnitees infringes any patent, copyright, trademark, or other
proprietary right, or constitutes misappropriation of a trade secret right,
arising under the laws of the United States, Canada or Mexico (hereinafter
collectively the "Primary Market").
(B) As to any Claim alleging that the MCI Service or any portion
or Component thereof provided hereunder by MCI to any of the Nasdaq
Indemnitees infringes any patent, copyright, trademark, or other
proprietary right or constitutes misappropriation of a trade secret right,
arising under the laws of a country not within the Primary Market:
(1) where MCI directly provides the MCI Service
in the country in which the right which is the
subject of the Claim arises, then MCI shall, at
its expense, defend, indemnify and hold harmless
the Nasdaq Indemnitees from and against such
Claim; and
(2) where MCI provides the MCI Service through a
third party and not directly by MCI in the
country in which the right which is the subject
of the Claim arises, then the defense and
indemnity and hold harmless for such Claim
available to the Nasdaq Indemnitees shall be
only that which MCI is able to pass through from
such third party ("Pass Through Indemnities"),
provided that (i) it is MCI's policy as of the
Effective Date in contracting with such third
parties to request that such parties provide the
indemnify, defense and hold harmless reference
above, (ii) in the event MCI ever changes such
practice MCI will promptly inform Nasdaq in
writing, and (iii) as to any country outside of
the Primary Market, Nasdaq shall have the right
to inquire as to whether MCI is providing the
MCI Service through a third party, and if so,
MCI shall promptly provide Notice to Nasdaq in
writing as to the existence, nature and the
extent any material limitations on such Pass
Through Indemnities.
(C) With respect to any indemnification obligations set forth in
40.1(A) and 40.1(B) above as to which MCI is directly providing the
indemnity, MCI will indemnify and hold harmless the Nasdaq Indemnitees for
damages finally awarded against any of them or agreed to by MCI in
settlement of such Claim, and for any and all reasonable costs incurred by
the respective Nasdaq Indemnitee(s) in connection with such Claim;
provided, MCI shall have the exclusive right to defend, countersue, or
settle any such Claim and to collect all damages, costs, fees, and other
charges awarded from any such Claim.
40.2 (A) Notwithstanding anything to the contrary in Section 40.1,
MCI shall have no obligation to defend or indemnify any Nasdaq Indemnitee
for any Claim to the extent arising out of or directly relating to: (i)
detailed technical designs or specifications dictating the manner in which
the MCI Service is implemented or designed, which designs or specifications
are provided by a Nasdaq Indemnitee (provided the foregoing shall not apply
if MCI knows that such designs or specifications are infringing or to any
infringements resulting from a choice by MCI of a means of meeting the
detailed technical designs or specifications when a noninfringing choice
was known to MCI); (ii) modifications made directly to the MCI Service by
any Nasdaq Indemnitee or its third party agent, other than modifications
made by or with the written consent of MCI or its third party agent (or
oral consent confirmed in writing), (iii) use of the MCI Service by any
Nasdaq Indemnitee in combination with any other products, software,
services or documentation not provided by MCI, if an element of such Claim
is based upon products, software, services or documentation not provided by
MCI; (iv) sale or other provision of the MCI Service by any Nasdaq
Indemnitee to third parties, or (v) Nasdaq Indemnitee transmitted content,
data, or other information.
(B) Nasdaq shall defend, indemnify and hold MCI and all of its
affiliates and their respective officers, directors, employees, and agents
(collectively "MCI Indemnitees") harmless from and against any such claims
covered by the exclusions set forth in 40.2 (A) (i), (ii), (iv) and (v)
above.
(C) With respect to any indemnification obligations set forth in
40.2(B) above as to which Nasdaq is directly providing the indemnity,
Nasdaq will indemnify and hold harmless the MCI Indemnitees for damages
finally awarded against any of them or agreed to by Nasdaq in settlement of
such Claim, and for any and all reasonable costs incurred by the respective
MCI Indemnitee(s) in connection with such Claim; provided, Nasdaq shall
have the exclusive right to defend, countersue, or settle any such Claim
and to collect all damages, costs, fees, and other charges awarded from any
such Claim.
40.3 If any Nasdaq Indemnitee's use of MCI Service is enjoined or
otherwise prohibited, or if MCI reasonably believes that there exists a
threat of the same, MCI shall as fast as is practicable, at its expense:
(i) obtain for the Nasdaq Indemnitee the right to continue to use the
affected MCI Service; (ii) replace the affected MCI Service with a
non-infringing service that conforms to the requirements of this Agreement;
or (iii) modify the affected MCI Service so that it becomes non-infringing
and otherwise conforms to the requirements of this Agreement. The election
among the foregoing remedies shall be at MCI's sole discretion.
40.4 MCI hereby agrees to promptly provide Notice to Nasdaq in writing
of any and all motions or other pleadings served on MCI by third parties
seeking injunctive relief which, if granted, would adversely and materially
affect the MCI Service. In such case, MCI shall give Nasdaq the
opportunity, at Nasdaq's option, to assist MCI in defending against such
motion or other pleading and to assist MCI in any negotiations related to
the settlement of such motion or other pleading.
40.5 In any case where MCI or a third party providing a Pass Through
Indemnity fails to perform under Sections 40.1 (A) or (B), Nasdaq shall
bear no liability to MCI and its affiliates for any action(s) it may take
in good faith in the defense, pursuit, settlement or enforcement with
respect to such Claim(s). In such event, MCI shall provide reasonable
information and assistance to Nasdaq in the defense of such Claim(s), and
such information and assistance will be provided at MCI's expense. In any
case where Nasdaq fails to perform under Section 40.2(B), MCI shall bear no
liability to Nasdaq and the Corporations for any action(s) it may take in
good faith in the defense, pursuit, settlement or enforcement with respect
to such Claim(s). In such event, Nasdaq shall provide reasonable
information and assistance to MCI in the defense of such Claim(s), and such
information and assistance will be provided at Nasdaq's expense. In any
case involving the MCI Service where MCI does not owe the Nasdaq
Indemnitees an obligation to defend, indemnify and hold them harmless, the
Nasdaq Indemnitees shall bear no liability to MCI and its affiliates for
any action(s) the Nasdaq Indemnitees may take in good faith in the defense,
pursuit, settlement or enforcement of such Claim(s). In all such cases,
however, MCI shall provide reasonable information and assistance to the
Nasdaq Indemnitees in the defense, pursuit, settlement, and enforcement of
such Claim(s), and such information and assistance will be provided at the
Nasdaq Indemnitees' expense. In any case involving a Claim arising under
Section 40.2(A)(iii) where Nasdaq does not owe the MCI Indemnitees an
obligation to defend, indemnify and hold them harmless, the MCI Indemnitees
shall bear no liability to Nasdaq and the Corporations for any action(s)
the MCI Indemnitees may take in good faith in the defense, pursuit,
settlement or enforcement of such Claim(s). In all such cases, however,
Nasdaq shall provide reasonable information and assistance to the MCI
Indemnitees in the defense, pursuit, settlement, and enforcement of such
Claim(s), and such information and assistance will be provided at the MCI
Indemnitees' expense.
40.6. THIS SECTION SETS FORTH THE SOLE AND EXCLUSIVE REMEDIES OF THE
NASDAQ INDEMNITEES AND THE MCI INDEMNITEES, RESPECTIVELY, AND THE ENTIRE
OBLIGATION AND LIABILITY OF MCI AND NASDAQ, RESPECTIVELY, AS TO ANY CLAIMS
OF INFRINGEMENT OR MISAPPROPRIATION OF THIRD PARTY RIGHTS IN CONNECTION
WITH THIS AGREEMENT.
Section 41. General Indemnification. Each party agrees to indemnify
and hold harmless the other (including the other's affiliates and their
respective employees, officers, directors, and agents) and against any
damages finally awarded and the reasonable costs and expenses incurred by
the indemnified party (including reasonable attorney's fees) and arising
out of any third party claim, suit, litigation or proceeding alleging that
the acts or omissions of the indemnifying party in the performance of this
Agreement proximately caused personal injury to (including personal injury
resulting in death) or damage to tangible real or personal property of such
third party.
Section 42. Indemnification Procedure.
Except as set forth to the contrary in Section 40.4 and 40.5, any
right to indemnification is conditioned on: (1) prompt Notice of the claim
after the party to be indemnified becomes aware of the claim (in a time
frame that does not prejudice the defense of the claim); (2) reasonable
information and assistance by the indemnified party as required to settle,
defend, or bring a counter suit in conjunction with any claim, but at the
expense of the indemnified party; and (3) the indemnifying party retaining
sole authority to defend or settle the claim, provided that the indemnified
party's cooperation is without waiver of that party's (including the
Corporations') attorney-client, work product, or other legal privilege. The
indemnifying party shall provide the indemnified party with periodic
updates as to the status of any claim, provided that any such updates shall
be Confidential Information under this Agreement and that the indemnifiying
party shall not be obligated to privide any information in any fashion that
could violate, destroy or threaten the subsequent assertion of any
privilege otherwise available to the indemnifying party or any third party
in connection with such claim. Notwithstanding the foregoing, the failure
of an indemnified party to undertake any of the foregoing actions shall not
relieve the indemnifying party of its indemnity obligation except to the
extent that the indemnifying party's ability to fulfill such obligation has
been materially prejudiced thereby. The provisions of this Section 42 shall
apply to both Claims arising under Section 40 as well as claims arising
under Section 41.
Section 43. ***** *
Section 44. Force Majeure. Either party shall have an extension of
time to perform any obligation under this Agreement (except for the
preexisting obligation(s) to pay moneys due hereunder) when prevented by
causes (such as labor disputes, strikes, Acts of God, floods, earthquakes,
casualty, war, acts of public enemy, riots, embargoes, regulations of a
governmental authority with jurisdiction of the party--including the
Corporations) that are not its fault and are beyond its control. Such
extension shall continue during the pendency of the force majeure event, as
long as the party whose performance is affected is using not less than all
reasonable efforts under the circumstances to overcome the effects of the
force majeure event. In the event the party claiming force majeure cannot
overcome the effects of the force majeure by employment of such efforts,
then the parties may negotiate a mutually agreeable alternative means to
overcome the effects of the force majeure, provided that such agreement
shall include any equitable adjustment of the charges applicable to MCI
Service hereunder as appropriate to compensate for any additional costs
which may be incurred to implement the agreed alternative. In the absence
of any such agreement, Nasdaq have a right to terminate this Agreement
without further liability to MCI (except for charges incurred prior to the
effectiveness of such termination) if the event of force majeure continues
for a period of twenty (20) consecutive days and MCI shall have a right to
terminate this Agreement without further liability to Nasdaq (except for
charges incurred prior to the effectiveness of such termination) if the
event of force majeure continues for a period of sixty (60) consecutive
days.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
Section 45. Arbitration and Applicable Law. Unless the parties agree
upon another arbitration forum, any claim, dispute, controversy or other
matter in question (Dispute) arising out of or relating to this Agreement
or the breach thereof, shall be settled by final, binding, arbitration to
be held in New York City, New York, in accordance with the then effective
Commercial Arbitration Rules of the American Arbitration Association, or
their successor. Judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. A party shall initiate
arbitration by giving Notice to the other of a demand for arbitration. The
parties shall attempt to meet within 20 calendar days of the Notice to
resolve the Dispute and attempt to agree on a single arbitrator. In the
absence of such agreement, each party will provide Notice to the other of
the name of one arbitrator within another 10 calendar days. After these two
arbitrators are named, the two arbitrators will select a third within 10
calendar days. Parties may enforce the arbitration duties and subsequent
awards in a court of law. The arbitrator shall have no power or authority
to make awards or issue orders of any kind prohibited by this Agreement.
Section 46. Security Regulations. MCI personnel will be instructed to
comply with security regulations pertinent to each Corporation or
Subscriber location and any oral security instructions or demands of that
location's personnel. MCI personnel, when deemed appropriate by Nasdaq in
its sole discretion, will be issued a visitor identification card by
Nasdaq. Such cards will be surrendered by MCI personnel upon demand by
Nasdaq and without further demand upon expiration or termination of this
Agreement. MCI shall not attempt to gain access to restricted areas, to
systems, or to Confidential Information in the possession of the
Corporations or Subscribers beyond the access permitted by that entity.
Section 47. Entire Agreement. This document, the Attachments, and the
Specifications (collectively the Agreement) constitute the entire agreement
between the parties with respect to the subject matter hereof, and
supersedes all prior negotiations, communications, writings and
understandings. In the event of a conflict between the Specifications and
this document (including the Attachments), the terms of this document shall
prevail.
Section 48. Governing Law. As to MCI's rights and obligations
hereunder, this Agreement shall be deemed to have been made in the State of
New York and shall be construed and enforced in accordance with, and the
validity and performance hereof shall be governed by the Communications Act
of 1934, as amended, and all applicable orders, rules, decisions, and
regulations under such act, and to the extent such act is not applicable,
by the laws of the State of New York, without reference to principles of
conflicts of laws thereof. As to Nasdaq's rights and obligations hereunder,
this Agreement shall be deemed to have been made in the State of New York
and shall be construed and enforced in accordance with, and the validity
and performance hereof shall be governed by as amended, and the Securities
Exchange Act of 1934, as amended, and all applicable orders, rules,
decisions, and regulations under such act, and to the extent such act is
not applicable, by the laws of the State of New York, without reference to
principles of conflicts of laws thereof. The parties hereby consent to
submit to the jurisdiction of the courts of the State of New York in
connection with an action or proceeding instituted relating to this
Agreement. In the event of any conflict between construction and
enforcement under the Communications Act of 1934 and the Securities
Exchange Act of 1934, the matter shall be decided by applying the
construction that most closely appears to effect the intentions of the
parties as evidenced by the remainder of this Agreement.
Section 49. Authorization. This Agreement shall not be binding upon a
party unless executed by an authorized officer of that party. MCI, Nasdaq,
and the persons executing this Agreement represent that such persons are
duly authorized by all necessary and appropriate corporate or other action
to execute the Agreement on behalf of MCI and Nasdaq.
Section 50. Headings. Section headings in this Agreement are included
for convenience only and are not to be used to construe or interpret this
Agreement.
Section 51. Amendment, Waiver, and Severability.
51.1. Except as otherwise provided herein, no provision of this
Agreement may be amended, modified, or waived, unless by an instrument in
writing executed by MCI and an officer of Nasdaq.
51.2. No failure on the part of Nasdaq or MCI to exercise, no delay in
exercising, and no course of dealing with respect to any right, power, or
privilege under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege under this Agreement.
51.3. If any of the provisions of this Agreement, or application
thereof to any person or circumstance, shall to any extent be held invalid
or unenforceable, the remainder of this Agreement, or the application of
such terms or provisions to persons or circumstances other than those as to
which they are held invalid or unenforceable, shall not be affected thereby
and each such term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
Section 52. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, and such
counterparts together shall constitute one and the same instrument.
Section 53. Attachments. The following attachments are incorporated
into and made part of this Agreement:
ATTACHMENT 1 - The RFP
ATTACHMENT 2 - The Response
ATTACHMENT 3 - Pricing and Service Intervals
ATTACHMENT 4 - Legal Actions - MCI
ATTACHMENT 5 - Legal Actions - Nasdaq
ATTACHMENT 6 - Test and Acceptance Criteria
ATTACHMENT 7 - Performance Remedies
ATTACHMENT 8 - Repair Criteria
ATTACHMENT 9 - Service Coverage
ATTACHMENT 10 - EWN II Documentation
ATTACHMENT 11 - Appendix F
ATTACHMENT 12 - Sample PD Report
ATTACHMENT 13 - DEV Net II
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers.
The Nasdaq Stock Market, Inc. (Nasdaq),
By
------------------------------------
Name
------------------------------------
Title
------------------------------------
MCI Telecommunications Corporation (MCI),
By
------------------------------------
Name
------------------------------------
Title
------------------------------------
ATTACHMENT 1
THE RFP
ATTACHMENT 2
THE RESPONSE
ATTACHMENT 3
PRICING AND SERVICE INTERVALS
*****
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
ATTACHMENT 4
LEGAL ACTIONS - MCI
NONE
ATTACHMENT 5
LEGAL ACTIONS - NASDAQ
NONE
ATTACHMENT 6
TEST AND ACCEPTANCE CRITERIA
***** *
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
ATTACHMENT 7
PERFORMANCE REMEDIES MATRICES
AND FLOW CHARTS
***** *
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
Attachment 7
EWNII
Performance Remedy
Single T-1 Configuration
(Availability - Hours/Circuit)
Attachment 7
EWNII
Performance Remedy
(Availability - Hours/Circuit)
(Chronic)
Attachment 7
NETWORK RESPONSE TIME
Attachment 7
RBS
Attachment 7
Installation Remedy
*****
ATTACHMENT 8
REPAIR CRITERIA
The repair of a failed EWN II T-1 local loop will be coordinated by MCI
Operations and will follow Digital Data Network (DDN) repair requirements
for a Digital Data Service (DDS) Circuit. The DDS stress testing procedures
are outlined in MCI's Private Line Handbook (MCIT 040 450 4025) which may
change from time to time, in the DDS Section. The DDS Stress test duration
is 25 minutes, and must pass strict testing objectives as outlined in the
Private Line Handbook.
The repair of a EWN II Customer Premise router and/or hub (collectively
referred to as CPE) will be conducted by the operations personnel located
at the EWN II Network Control Center (NCC). Router testing will be
conducted via NCC Management Platforms utilizing test procedures customary
and reasonable within the industry to verify proper router configuration,
and confirm that it is a reachable entity within the Network.
ATTACHMENT 9
SERVICE COVERAGE
Principal Period of Maintenance (PPM) the time periods used for the
Performance Remedy measurements are Monday through Friday, 7:00 a.m. to
7:00 p.m. eastern standard/daylight time, for all sites Network-wide.
Staff On Site MCI will provide staffing in Rockville, MD and Trumbull, CT,
Monday through Friday, 7 a.m. to 11:30 p.m. eastern standard/daylight time,
to provide Network monitoring, maintenance and support of the MCI Service.
Remote Monitoring MCI will provide remote monitoring for all hours that MCI
does not provide on-site staffing in Rockville, MD and Trumbull, CT, to
provide Network Management support from the Global Network Management
Center (GNMC).
ATTACHMENT 10
EWN II DOCUMENTATION
1. Functional Specification Document
2. IP Address Scheme Document
3. Domain Name Service Document
4. Logical Topology Document
5. Installation Test Plans
6. NMS Functional Specification Document
7. DEVNET II Summary Document
ATTACHMENT 11
APPENDIX F
ATTACHMENT 12
NASDAQ SAMPLE PD REPORT
ATTACHMENT 13
DEV NET II
The parties agree that MCI will provide a development network ("DEVnet II")
that will not be connected to the Network which will permit MCI, its
subcontractor Digital Equipment Corporation and Nasdaq to test
applications, Components and simulations of the Network pursuant to
specifications to be provided to MCI by Nasdaq.
Notwithstanding anything in this Agreement to the contrary, the parties
understand that MCI will use commercially reasonable efforts to create,
maintain and support the DEVnet II, but its failure to do so shall in no
way be deemed to be a material breach of this Agreement. Other than the
performance credits specified in this Attachment 13, MCI will have no
liability to Nasdaq with respect to DEVnet II, including its creation,
maintenance, support or performance.
In the event of a dispute between the parties concerning the installation,
performance or otherwise relating to DEVnet II, if Nasdaq chooses, the
parties shall use their reasonable endeavors to settle such dispute in
accordance with the following procedure:
(i) A party which considers that a dispute exists shall draw such
dispute to the attention of the other party's representation as set forth
below (or another of at least the same level), or their successor:
Nasdaq: ***** *
MCI: *****
(ii) If such dispute is not resolved within ten (10) days, or such other
shorter time as Nasdaq identifies or such other longer time as the parties may
mutually agree, such dispute shall be referred to
Nasdaq: *****
MCI: *****
(iii) If such dispute is not resolved within ten (10) days, or such other
shorter time as Nasdaq identifies or such other longer time as the parties may
mutually agree, such dispute shall be referred to
Nasdaq: *****
MCI: *****
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
CURRENT DEVNET II OBJECTIVES
The following is a description of the current objectives of DEVnet II:
1. Principal Period of Maintenance. The Principal Period of
Maintenance ("PPM") for this network is Monday through Friday eastern
standard/daylight time from 7:00 a.m. to 11:30 p.m. (5X16). Performance
objectives will only be measured during the PPM. If a problem is reported
or if problems with the system are detected outside of the PPM, the
measurement hours begin at the start of the next PPM; otherwise the hours
of measurement begin upon reporting or system detection of the problem.
2. Trouble Reporting. MCI will accept trouble reports twenty four (24)
hours a day, seven (7) days a week, with repair efforts initiated and
measured during the PPM. Trouble reports received outside of the PPM will
be addressed on a reasonable efforts basis. Corrective action underway at
the close of the PPM will be continued upon NASDAQ's request, at an
additional cost to NASDAQ; otherwise, problems unresolved at the close of
the PPM will be re-addressed at the beginning of the PPM.
3. Network Monitoring. NCC will actively monitor the performance of
DEVnet II from its Trumbull, Connecticut location from Monday through
Friday during the hours of 7:00 a.m. to 11:30 p.m. eastern
standard/daylight time.
4. DEVnet II Network Availability Objective. DEVnet II Network
Availability will be measured over a twelve (12) month rolling period with
results reported on a monthly basis and will be measured from the LAN at
the Data Center to the router port at the Nasdaq premises:
a. DEVnet II Network Availability = Total Time during the PPM minus
Down Time / Total Time during the PPM
b. DEVnet II Network Availability Objective : 98.80%
5. Network Response Time. Network response Time for DEVnet II is equal
to the time it takes an IP Datagram to leave the source node, traverse the
backbone components, and return to the source node. This does not include
response time of NASD provided components. MCI will measure response time
for interactive (query/response) traffic as noted above. The source node
will be the NMS System at the Data Center. The destination node will be
varied to produce a representative sample. The sample will occur at
regularly scheduled intervals during both open and off market hours. The
sample packet size will be 177 bytes. Response time will be reported
regularly, based on hourly averages for both open and off market hours. The
goal is an average of 750 milliseconds.
6. Variability of Broadcast. The definition of variability of
broadcast is measured by RBS (DECrbs) based upon embargo time, release
time, and a 500 millisecond window at the INP closest to the NASD user. RBS
(DECrbs) determines the variance and if the 500 millisecond is exceeded an
SNMP element (variability counter is set). An alarm will be defined to
check the counter and report when the variability window has been exceeded.
MCI will collect the number of broadcasts periodically that exceed the 500
millisecond window and tabulate a daily total of broadcasts that are
outside of the 500 millisecond specification. The out of specification
count will then be divided by the total messages for the day to derive the
percentage of messages that did not meet specification. This percentage
will not exceed one tenth of one percent (0.1%).
7. Mean Time to Repair. DEVnet II will be measured during the PPM at
both the network and access circuit levels as follows:
Network: 8 Hours MTTR
Access Circuit: 4 Hours MTTR
8. Failure to Meet Network Availability Objectives.
(a) In the event that at the end of a month during the service term in
which DEVnet II is implemented, actual DEVnet II Network Availability (as
measured over a twelve (12) month rolling period) is less than the DEVnet
II Network Availability Objectives provided in Paragraph 4 above (a "DEVnet
II Performance Failure"), then MCI shall have a period of 60 days (the
"Cure Period") to cause DEVnet II to operate at levels so that when
measured at the conclusion of the Cure Period actual DEVnet II Network
Availability (as measure over a twelve (12) month rolling period) is equal
to or greater than the DEVnet II Network Availability Objectives. In the
event that at the conclusion of the Cure Period, actual DEVnet II Network
availability (as measured over a twelve (12) month rolling period) is less
than the DEVnet II Network Availability Objectives, MCI shall credit to
Nasdaq, as Nasdaq's sole and exclusive remedy resulting from or relating to
the DEVnet II Performance Failure, the amount of $10,000 for the month in
which the DEVnet II Performance Failure occurred. For purposes of
calculating DEVnet II Network Availability on a rolling 12 month period
only, availability for those months in which DEVnet II was not yet
implemented shall be deemed to be equal to the DEVnet II Network
Availability Objective.
Example 1:
(i) Actual DEVnet II Network Availability at the conclusion of month 14
(utilizing months 3-14) 99.00%
(ii) DEVnet II Network Availability Objective 99.80%
(iii) Actual DEVnet II Network Availability at the conclusion of
Cure Period month 16 (utilizing months 5-16) 99.50%
(iv) Credit due for DEVnet II Performance Failure for month 14 $10,000
Example 2:
(i) Actual DEVnet II Network Availability at the conclusion of month 6
(utilizing months 1-6 and 6 months at 99.80%) 99.00%
(ii) DEVnet II Network Availability Objective 99.80%
(iii) Actual DEVnet II Network Availabilityat the conclusion of Cure Period
(utilizing months 1-8 and 4 months at 99.80%) 99.85%
(iv) No Credit due for DEVnet II Performance Failure
(b) The above DEVnet II objectives have been established in concert
with Nasdaq's operating criteria and requirements for this network, and
have been mutually agreed to by both Nasdaq and MCI. These objectives have
served as a design baseline and will also be used to measure and evaluate
actual network performance. Other than as provided for in 8 (a) above, the
performance objectives contained in this Attachment are not intended as a
remedy for any other purpose.*****
Exhibit 10.2
CONSOLIDATED AGREEMENT
This Consolidated Agreement (Agreement) is being entered by and
between The Nasdaq Stock Market, Inc. (Nasdaq or Customer), a Delaware
Corporation that is a subsidiary of the National Association of Securities
Dealers, Inc. (a Securities Self-Regulatory Organization, registered with
the United States Securities and Exchange Commission and subject to the
Securities Exchange Act of 1934) (NASD) (NASD and its affiliates are
collectively referred to as the Corporations), whose principal place of
business is located at 1735 K Street, N.W., Washington, D.C. 20006.
Unisys Corporation ("Unisys") will sell and license Products and
services and Customer agrees to purchase and license those Products and
services under the following terms and conditions:
1. Definitions
1.1. Software means the object code or microcode versions of computer
programs and any related documentation, excluding maintenance diagnostics.
Software also means the source code version where provided by Unisys.
1.2. Products means equipment, Software, documentation (including manuals
and education materials) and Software maintenance releases and updates.
1.3. Software Processing Unit ("SPU") means equipment which controls and
executes Software.
1.4. SURETY Support Services means various forms of installation and
support for the Products.
1.5. Proprietary Information means Software, diagnostics, including manuals
and any other information conspicuously marked and subject to confidential
treatment hereunder of Unisys or its licensors.
1.6. Professional Services means all technical and consultative services
other than SURETY Support Services.
1.7. Installation Date means the date Unisys Customer executes a Notice of
Acceptance following installation and successful testing at Customer's site
subject to the acceptance criteria in Attachment 1 hereto, or, if equipment
or Software is to be installed by Customer, the tenth day following
shipment.
2. Effective Date
This Agreement will become effective when signed by a duly authorized
representative of Unisys and a duly authorized officer of Nasdaq and will
continue in effect until terminated according to its terms. The Initial
Term of this Agreement is for the period from the Effective Date until
December 31, 1998. Unless Unisys gives 180 days Notice of voluntary
termination to Customer prior to the end of the current term, this
Agreement shall renew until December 31 of the next year. Unless Customer
gives 60 days Notice of voluntary termination to Unisys prior to the end of
the current term, this Agreement shall renew until December 31 of the next
year. The terms of this Agreement apply to software licenses until they
expire by their own terms.
3. Schedules - Ordering Procedure
3.1. Unisys will furnish to Customer and Customer will accept and pay for
the Products and services itemized on the following schedules which,
together with the terms on the Schedules, are an integral part of this
Agreement.
Schedule Name
A Equipment Sale
B SURETY Support Services
C Software Licenses
D Professional Services
Attachment 1 Acceptance Criteria
Attachment 2 Expansion Equipment
Attachment 3 Additional Terms
All references to Products and services in this Agreement are to the
Products and services listed on the Schedules and on any Schedules
submitted to and accepted by Unisys pursuant to Section 0 and to any
Products and services supplied by Unisys with such listed Products and
services.
3.2. Customer may order additional Products and services under this
Agreement by submitting properly completed Unisys Supplemental Schedule
Orders referencing this Agreement. All orders will refer to this Agreement
by number and will be signed by Customer. All education lecture courses
must be ordered on a Customer Education Enrollment Application. No
preprinted term on any Schedule Order or on any purchase order form shall
be binding on the parties.
3.3. All orders are subject to acceptance by Unisys. Acceptance by Unisys
will be effective when communicated in writing to Customer. The receipt or
deposit by Unisys of a Customer down payment will not constitute acceptance
of an order. Any down payment received from Customer will be returned if
the order is not accepted by Unisys.
3.4. If Unisys fails to deliver any order within ten (10) days of the date
and time reasonably requested in the order, Nasdaq, without waiving any
other remedy available to it under law or this Agreement, may cancel the
order upon 10 days notice with an opportunity to cure within the 10 days,
or if the failure to deliver substantially impairs the value of the entire
Agreement, terminate this Agreement.
3.5. Unisys may substitute Unisys Products of equivalent or superior
functionality and performance in the event that any of the Products ordered
are not available at the time of shipment. Unisys shall give Notice to
Customer prior to such substitution and unless Unisys has obtained
Customers consent to the substitution, Customer shall have fifteen (15)
days after notification to cancel the order. Customer may make changes or
request substitutions subject to Unisys consent, not unreasonably withheld,
provided, that Nasdaq shall reimburse Unisys for out-of-pocket expenses
directly resulting from the Customer requested change or substitution.
4. Delivery, Installation, and Acceptance
4.1. Unisys will arrange for delivery of Products and Customer will pay
Unisys for transportation charges stated in the order letter. Customer will
also pay for all non-standard cables and other site-specific installation
materials required to install the equipment at Customer's site, provided,
the Charges for Additional Work Section is complied with.
4.2. Unisys will provide Customer with one copy of the then-current user
documentation, in paper or electronic form, for use with the Products
ordered and Unisys will provide environmental specifications for equipment,
where applicable. Prior to delivery of equipment, Customer will prepare the
installation site in accordance with such specifications and will continue
to maintain the installation site in accordance with such specifications.
4.3. Customer will install all items of equipment with the designation "Y"
in the "Customer installable" column when there is no installation charge
listed on Schedule A. Unisys will install all other items of equipment.
Customer will install all items of Software other than those for which a
fixed installation charge is indicated on Schedule C. All Products to be
installed by Unisys will be installed during Unisys normal working hours,
unless otherwise provided in this Agreement, or unless instructed by
Customer. Any installation services provided outside of PPM shall be as
stated in the applicable order letter.
4.4. Customer may arrange for installation by Unisys of Customer
installable Products, subject to the Unisys charges and conditions
applicable to Nasdaq under Schedule D. However, during Customer's PPM, the
Unisys on-site maintenance engineer may provide above service without
additional charge to Nasdaq in the event that all of the on-site engineer's
primary responsibilities have been completed.
4.5. If additional labor and rigging is required for installation due to
Customer's special site requirements, Customer will pay those costs
including costs to meet union or local law requirements.
5. Payment
5.1. Invoices for Products will be sent upon shipment. Notwithstanding any
statement in the invoice, payment of such invoices shall be due and owing
to Unisys within 30 days after Acceptance, as defined in this Agreement.
Unisys shall instruct its billing and collection and other personnel about
the operative terms of this Agreement.
5.2. Charges for SURETY Support Services will be invoiced in advance,
monthly, annually, or at other periodic intervals; otherwise, charges will
be invoiced after the services are performed. Hourly use, page and remote
service charges will be invoiced monthly unless otherwise indicated.
5.3. Charges for Professional Services will be invoiced monthly as the
services are performed, or as otherwise provided in writing between the
parties.
5.4. Except as provided in this Agreement, all charges must be paid no
later than 30 days from the date of receipt of the invoice.
5.5. If Nasdaq has a bona fide dispute about any item or amount, Nasdaq
shall pay all amounts not in dispute; all disputed amounts are not due
until the dispute is resolved. Unisys may impose a late payment charge
equal to the lesser of (a) 1-1/2% per month or (b) the maximum rate allowed
by law.
5.6. Additional charges may apply to services rendered outside contracted
hours or beyond normal coverage at Customer's request, e.g. premium and
minimum charges, provided, the Charges for Additional Work Section is
complied with. All travel and related expenses require Customer's prior
written consent.
6. Taxes
6.1. Except as hereinafter stated, Customer will pay any tax that Unisys
becomes obligated to pay after Customer's Installation Date by virtue of
this Agreement, exclusive of taxes based on the net income or personal
property of Unisys.
6.2. All personal property and similar taxes assessed after title has
passed to Customer hereunder, will be paid by Customer.
7. Price Protection
7.1. The charges for Products in any accepted order will remain firm
through the Installation Date, unless through no fault of Unisys shipment
takes place more than one year after the date of the order. If Unisys
notifies Customer that an increase in charges will apply to its order,
Customer may terminate the affected part of its order by giving written
notice to Unisys within 15 days of the date of notification of the
increase.
7.2. ***** *
7.3. *****
7.4. During the Initial Term of this Agreement, Unisys will extend to
Nasdaq the right to buy additional quantities of Unisys Hardware styles
initially ordered under this Agreement at the net price offered herein.
Customer shall also be entitled to a quoted net price on purchases of
certain Hardware not initially ordered hereunder but listed in Attachment 2
to this Agreement, entitled "Expansion Equipment".
7.5 *****
7.6. *****
8. Customer's Operational Responsibilities
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
8.1. Customer acknowledges it has independently determined that the
Products and services ordered under this Agreement meet its requirements.
8.2. Customer has sole responsibility for use of the Products, including
operating procedures, audit controls, accuracy and security of input and
output data, restart and recovery routines, and other procedures necessary
for Customer's intended use of the Products.
8.3. Unless otherwise agreed upon in writing by the parties, Nasdaq is
responsible for data back-up relating to the system which is the subject of
this Agreement.
8.4. If Unisys is providing SURETY Support Services, Customer will (a)
maintain the operating environment in accordance with Unisys specifications
that have been supplied to Customer by Unisys, (b) provide working and
adequate storage space for use by Unisys personnel near the equipment, (c)
provide Unisys full access to the equipment and sufficient computer time,
subject only to Customer's security rules and the needs of the Nasdaq Stock
Market" during operational hours, (d) follow Unisys procedures for
determining if remedial service is required, (e) follow Unisys instructions
for operator maintenance and obtaining services, (f) attempt to provide a
memory dump and additional data in machine readable form as Confidential
Information, if requested, (g) attempt to reproduce suspected errors or
malfunctions in Software in Nasdaq's development environment outside hours
that the markets are operated by Nasdaq or as considered appropriate by
Customer, and (h) install all error corrections and maintenance releases
supplied by Unisys that do not affect Customer's application programs, and
after sufficient testing by Nasdaq.
8.5. Professional Services supplied by Unisys under this Agreement are
provided to assist Customer. Customer, not Unisys, will be responsible for
determining objectives.
9. Protection of Proprietary Information
9.1. Protection of the Corporation's proprietary information is subject to
a separate agreement. Customer will keep in confidence and protect
Proprietary Information from disclosure to third parties (except the
Corporations and each of their employees, officers, directors, and other
agents) to the same degree the Corporations do so with respect to their own
similar proprietary information and restrict its use to implementation of
the Corporation's systems. The Corporations acknowledge that unauthorized
disclosure of Proprietary Information may cause substantial economic loss
to Unisys or its licensors. All materials containing Proprietary
Information will be marked with "Proprietary", "Confidential", or when
noted as such to Customer prior to its disclosure. Proprietary information
will not be copied, in whole or in part, except for the use of persons
authorized under this Paragraph for the uses stated herein for Customer's
authorized use. Each copy, including its storage media, will be marked by
Customer with all notices which appear on the copied portion of the
original. Any of the Corporations may disclose information to the extent
demanded by a court, revealed to a government agency with regulatory
jurisdiction over one or more of the Corporations, or in its regulatory
responsibilities over its members and associated persons under the Exchange
Act of 1934. The obligation of non-disclosure shall not extend to: (1)
information that is already in the possession of the other party (including
the Corporations) and not under a duty of non-disclosure; (2) information
that is generally known or revealed to the public; (3) information that is
revealed to either party (including the Corporations) by a third
party--unless the receiving party knows that the third party is under a
duty of non-disclosure; or (4) information that a party (including the
Corporations) develops independently of the disclosure. The obligation of
non-disclosure shall survive for a period of three years from the date of
disclosure to a party (including the Corporations).
9.2. Upon termination or cancellation of any license granted under this
Agreement, Customer will destroy (and, upon Notice by Unisys, in writing,
certify destruction) or return to Unisys all copies of the Software the
license for which has been so terminated or canceled (except archival
copies reasonably made for backup/historical, security, or regulatory
purposes that are a general back-up of the SPU, which shall be treated as
Proprietary Information and will not be used to operate the Nasdaq market
system).
9.3. Any ideas, concepts, know-how, data-processing techniques, Software,
documentation, diagrams, schematics, blueprints, or any other deliverable
developed by Unisys personnel (alone or jointly with Customer) in
connection with Professional Services provided to Customer will be treated
in accordance with the following principals:
9.3.1. ***** *
9.3.2. *****
9.3.3. *****
9.3.4. *****
9.3.5. *****
9.3.6. *****
9.4. Customer acknowledges that all other Unisys-provided support
materials, including without limitation, diagnostic software, are the
property of and may include Proprietary Information of Unisys. Such
materials will be used only by appropriate Unisys personnel and that Unisys
has the right to remove such materials from Customer's facility at any
time. This provision applies even though such materials may be listed in
the Unisys price lists, catalogs, invoices or contracts.
9.5. Customer will inform and instruct its employees of their obligations
under this Section.
9.6. The obligations of this Section survive any rescission, termination,
or cancellation of this Agreement.
10. License
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
10.1. Unisys grants to Customer a non-exclusive and nontransferable (except
to one or more of the Corporations) license to use Software (including
related documentation) on the Unisys SPU for which it was originally
licensed, according to the terms and conditions of this Agreement, in
conjunction with the business of the Corporations which includes but is not
limited to, the input from, processing at the request of, and dissemination
to, third parties of data related to entities, issuers, issues, markets,
financial instruments, qualification and other testing, insurance, and news
referring or related to the above, including that from markets operated and
entities regulated by the Corporations. Full use and access to the Software
and documentation can be granted to employees, independent contractors, and
other agents of the Corporations in conjunction with the above business of
the Corporations, provided, that Customer shall defend, indemnify and hold
Unisys harmless against any breaches of this Agreement by the Corporations,
their directors, independent contractors and other agents.
10.2. Customer agrees that Unisys may from time-to-time, at mutually agreed
upon times, upon reasonable advanced Notice, not during hours that the
Corporation's market systems are operational, and in such a manner so as
not to disrupt the business of the Corporations, inspect the computer site
in order to audit the Unisys software installed at Customer's site.
10.3. Customer may develop application programs, may modify any Unisys
Software, and may combine such with other programs or materials to form an
updated work, provided that upon discontinuance or termination of the
license, the Unisys application Software will be removed from the updated
work and returned to Unisys. Unisys must be notified of any alteration of
the operating system software. Unisys makes no representation regarding
compatibility of future software releases, nor assumes any corrective
obligation, with respect to Customer's alteration of the operating system
software.
10.4. Except to the extent permitted by law, Customer will not decompile or
disassemble any Software provided under this Agreement or modify Software
which bears a copyright notice of any third party. Customer may make and
maintain archival copies (reasonably made for backup/historical, security,
or regulatory purposes) of each item of Software, and each copy will
contain all legends and notices and will be subject to the same conditions
and restrictions as the original.
10.5. If the SPU on which any item of Software is licensed becomes
temporarily unavailable, use of such Software may be temporarily
transferred to an alternative SPU.
10.6. Except for the purposes stated in this agreement, no license is
granted to Customer to use any Unisys proprietary operating system Software
to (a) assess, test or develop any hardware products either for others or
where they are to be marketed by Customer for compensation, or (b) develop
any software program other than an application program. This license
restriction does not apply to MS/DOS, UNIX, and CTOS/BTOS operating
systems. Application programs mean programs for performing specific
automatic data processing tasks such as payroll, inventory control,
information retrieval or repetitive arithmetic operations, but excludes
programs such as environmental programs, handlers, operating systems, and
data base management programs, unless such programs are used for interface
and interoperability purposes between Unisys and other systems.
10.7. If Customer desires to use Software in a service bureau mode except
as described in this Agreement, at a location other than Customer's
computer centers, or as described in Section 0, Customer shall request
prior permission in writing from Unisys. Unisys will then advise Customer
whether, and under what terms and conditions, Unisys will license the
Software as requested. All restrictions applicable to Customer will also
apply to any permitted service bureau users. Unisys agrees that the
Corporations' present uses are permitted under this Agreement.
10.8. This Agreement does not transfer to Customer title to any
intellectual property contained in any Software, documentation or
Proprietary Information.
10.9 ***** *
11. Warranties and Disclaimers
11.1. EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, THERE ARE NO
WARRANTIES, EXPRESS OR IMPLIED, BY OPERATION OF LAW OR OTHERWISE. UNISYS
DISCLAIMS THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE AS TO BOTH UNISYS AND NON-UNISYS PRODUCTS AND SERVICES.
UNISYS WARRANTIES EXTEND SOLELY TO THE CORPORATIONS.
12. Equipment:
12.1.***** *
12.2. Because equipment requires on-going maintenance, the preceding
warranty is not a substitute for SURETY Support Services, which are
available to Customer for a charge.
13. Software:
13.1.*****
14. SURETY Support Services:
14.1. Unisys warrants that equipment and Software will be supported in
accordance with the specific SURETY Service Plan selected. Except as stated
in this Agreement, Unisys sole and exclusive obligations under this
warranty will be to conform to the Service Descriptions. Equipment parts
which are removed for replacement by Unisys become the property of Unisys.
Unisys warrants and represents that it will have good and clear title, free
of any liens or encumbrances to replacement hardware parts; replacement
conveys such title to Nasdaq. Any replacement item shall perform to at
least the manufacturers' specifications of the replaced item when new.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
* ***** Confidential Treatment has been requested for the redacted portions.
The confidential redacted portions have been filed separately with the
Securities and Exchange Commission.
14.2. To determine eligibility and prerequisites for SURETY Support
Services, Unisys may require inspection, at Customer expense, of equipment
which (a) has not been maintained continuously by Unisys from the date of
purchase by Customer or (b) has been relocated.
14.3. All equipment, interconnected by signal and power cables, and
non-application Software, located at the same site and which are subject to
SURETY Support Services are required to be supported at the same Service
Level as the SPU. Local area networks, workstations and remote data
communication Products are not required to be at the same Service Level as
the SPU.
14.4. SURETY Support Services do not cover the parts and service required
to repair damage attributable to (i) unapproved attachments or alterations,
out-of-specification supplies, or defects in design, material or
workmanship of non-Unisys-provided products and services, (ii) accidents,
misuse, negligence or failure of Customer to follow previously provided
instructions for proper use, care and cleaning of equipment, (iii) external
factors (e.g., failure or fluctuation of electrical power or air
conditioning, fire, flood); or (iv) failure by Customer to comply with
Unisys previously provided environmental specifications.
14.5. ***** *
14.6. Unisys agrees to provide preventive maintenance service to the
mainframe at the Customer's back-up computer center between the hours of 12
a.m. and 4 a.m. (EST/EDT) each Saturday and to the mainframe at Customer's
primary computer center between the hours of 6 p.m. and 12 p.m. (EST/EDT)
each Sunday. The frequency and duration of preventive maintenance shall be
in accordance with Unisys technical publications and mutually agreed to
between the Unisys local customer service manager (CSM) and Customer's
operations representative. If Monday is a Holiday, then if requested by
Nasdaq on 2 weeks notice (oral or written to the local Unisys field service
manager), Unisys shall perform the preventive maintenance services on
Monday, without additional charge.
14.7. With respect to Customer's primary and back-up computer centers,
Unisys agrees to make commercially reasonable efforts during hours outside
the PPM to cause a CSE to respond to Customer's call for Remedial
Maintenance within three hours, such efforts subject to availability of
field personnel and timeliness of Customer's authorization process.
15. Professional Services:
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
15.1. Unisys will provide the Professional Services noted on Schedule D (or
other task order) in the time frame noted therein. Such services shall be
of the highest quality provided by Unisys and in no event less than
generally accepted standards within the industry. Such services shall
include comprehensive documentation, fixing of bugs or other defects, and
transitional training as would generally be expected within the industry.
15.2. Unisys may assign, reassign, and substitute personnel at any time and
may provide the same or similar services and materials to other customers,
as long as such activity does not interfere with Unisys ability to fully
comply, in a timely manner, with the provisions of this Agreement.
15.3. Unisys will maintain accurate and complete records as to time spent
in its performance of the Services and will allow Nasdaq or its designated
agents to examine such records from time to time upon written request in
order that Nasdaq may ascertain the correctness of invoices submitted to
Nasdaq by Unisys.
15.4. Unisys will make all reasonable efforts to make available the same
consultant for modification or correction of work prepared under a previous
work order, if reasonably requested by Nasdaq.
16. Unisys Obligations for Services.
16.1. Unisys shall provide all insurance coverage required by applicable
laws, regulations, or employment agreements, including, without limitation,
medical and workman's compensation.
16.2. Unisys shall be responsible for payment of all unemployment, social
security and other payroll taxes of all individuals on whom Unisys is
legally obligated to pay such taxes, who are engaged in the performance of
the Services. If, at any time, any liability is asserted against the
Corporations for unemployment, social security or any other payroll tax
related to Unisys or any individuals or subcontractors employed by or
associated with Unisys, then Unisys shall be liable to, indemnify and hold
harmless the Corporations from any such liability, including, without
limitation, any such taxes, any interest or penalties related thereto, and
reasonable attorney's fees and costs.
16.3. Unisys shall be responsible to Nasdaq for the quality of work and
performance of any Unisys subcontractor to the same extent as if such were
performed by Unisys itself.
16.4. Except for on-site Unisys Customer Service Engineers (CSE), Nasdaq
reserves the right to interview and approve or reasonably disapprove all
Unisys-provided personnel prior to start of work.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
16.5. ***** *
16.6. Nasdaq may terminate any Task Order for any reason by giving written
Notice to Unisys that the subject Task Order will terminate not less than
ten (10) days from receipt of the Notice. Nasdaq will pay Unisys the amount
due for authorized work and expenses incurred in completion of such
authorized work as of the effective date of termination.
17. Alterations and Attachments
17.1. If Unisys is providing SURETY Support Services, Customer will give
Unisys prior written notice of any proposed unapproved alterations or
attachments to equipment. Unisys has no obligation to provide SURETY
Support Services for unapproved attachments and alterations. Should Unisys
agree to maintain, support or correct unapproved alterations or
attachments, Unisys may impose additional charges, or require that Nasdaq
return the Products to their condition absent the unapproved alterations
and attachments before performing the requested SURETY services. Unisys
obligation to provide SURETY Software support services extends to the
Software as unmodified by Customer.
17.2. Unisys is not responsible for any malfunction, nonperformance or
degradation of performance of Products, supplies or maintenance support
materials caused by or resulting directly or indirectly from any unapproved
alteration or attachment unless Unisys has contractually committed to
maintain the unapproved alteration or attachment that causes the
malfunction, or Nasdaq returns the affected Products to their condition
absent the unapproved alterations and attachments.
17.3. Unisys warranties will not apply to the extent that an unapproved
alteration or attachment directly or indirectly results in any malfunction,
nonperformance or degradation of performance of Unisys Products; in
addition, Customer will be solely responsible for resulting infringement,
personal injury or damage to property and Products that arises to the
extent of the unapproved alteration or attachment.
17.4. For purposes of this Agreement, "unapproved attachment or
alterations" means: the incorporation into, or connection by power and
signal cables and non-application Software to, Unisys Products of
non-Unisys-provided or non-Unisys approved components, boards and
subassemblies into equipment; the incorporation into, or connection by
power and signal cables and non-application Software to, Unisys Products of
components, boards and subassemblies into equipment that are not generally
accepted in the industry as Unisys-compatible; as well as non-Unisys
supplied or un-notified Customer modifications to Software.
18. ***** *
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
19. Intellectual Property Indemnification
19.1. Unisys, at its own expense, will be liable to, defend, indemnify, and
hold harmless Customer (including the Corporations and each of their
employees, directors, and other agents) against claims that Products
furnished under this Agreement infringe a third party's patent or
copyright, or misappropriate trade secret protected under law, provided
Customer: (a) gives Unisys prompt written Notice of such claims, (b)
permits Unisys to defend or settle the claims, and (c) provides reasonable
assistance to Unisys in defending or settling the claims. The duty of
assistance in litigation shall not require and is without waiver of the
attorney-client, work product, or other legal privileges of the
Corporations.
19.2. As to any Product which is subject to a claim of infringement or
misappropriation, Unisys may elect to (a) obtain the right of continued use
of such Product for Customer or (b) replace or modify such Product to avoid
such claim. If neither alternative is available on commercially reasonable
terms, then, in the case of equipment, at the request of Unisys, Customer
will discontinue use and return such equipment and Unisys will grant to
Customer a refund for the price paid to Unisys, less a reasonable offset
for use and obsolescence; in the case of Software, the applicable license
will be terminated and no further charges will accrue. Customer will
receive a pro-rata credit for any unused months on any pre-paid ETP
Software license.
19.3. Unisys will not defend or indemnify Customer to the extent any claim
of infringement or misappropriation (a) is asserted by a parent, subsidiary
or affiliate of Customer, (b) results from Customer's design (which has not
been approved by Unisys in writing) or Customer's unapproved alteration or
attachment of any Product, or (c) results from use of any Product in
combination with any non-Unisys provided Product, except where the
indemnified party is an aider, abetter or contributing infringer.
19.4. This Section states the entire liability of Unisys and Customer's
sole and exclusive remedies for patent or copyright infringement and trade
secret misappropriation.
20. Termination and Cancellation
20.1. Unisys may suspend SURETY Support Services if any payment (other than
one disputed for a bona fide reason, until such dispute is resolved) for
such service under this Agreement is past due more than 60 days, until
payment is received in full, at which time Unisys shall perform all missed
SURETY Support Services.
20.2. Unisys may terminate SURETY Support Services for or change the levels
of support available to an item of Software upon six months written Notice
prior to the expiration of the then-current term for SURETY Support
Services.
20.3. Nasdaq may terminate SURETY Support Services for any particular
Product upon 30 days Notice. Unisys may terminate SURETY Support Services
for any particular Product upon expiration of the applicable term by
providing 180 days prior written notice. Failure to give such notice will
result in a renewal or extension of the license or service in accordance
with the provisions of this Agreement. Nasdaq may elect, without prejudice
to any other rights or remedies, to terminate SURETY Support services upon
30 days notice if, in Nasdaq's opinion, Unisys is not providing an adequate
level of service that leads to a loss of trust and confidence in Unisys
services by Nasdaq. As soon as is practicable, authorized representatives
of the parties shall meet and in good faith attempt to resolve the
problems. However, if Nasdaq is not satisfied with the Unisys proposed
resolution, then in the event of termination, Unisys shall promptly refund
to Nasdaq on a pro rata basis any unused portion of prepaid service. The
licenses for any Software automatically terminate upon Customer's permanent
discontinuance of use of the SPU on which the Software was licensed, at
which time Customer must either destroy or return the Software and Software
documentation to Unisys (except archival copies reasonably made for
backup/historical, security, or regulatory purposes). Upon termination or
cancellation of SURETY Support Services, all diagnostics will be returned
to Unisys.
20.4. Without prejudice to other remedies, Unisys may cancel this Agreement
or any order placed under it, for default if, upon written notice, Customer
fails to (i) make any payment identified as delinquent (including payment
of charges for Services) within 60 days of receipt of Notice of delinquency
or (ii) cure any default relating to Sections 0 or 0 within 30 days of
receipt of Notice of default.
20.5. Unisys may suspend SURETY Support Services on 30 days prior written
Notice if Unisys determines that any unapproved alterations or attachments,
or failure to install a maintenance release that does not affect Customer's
application programs will interfere with the provision of such services,
until Customer has returned the affected hardware or software to an
unaltered or current release condition.
20.6. The terms of this Agreement apply to those obligations that survive
any cancellation, termination, or rescission, namely--Proprietary
Information and Non-Use of NASD Name sections of this Agreement, and any
indemnification obligations or warranties.
20.7. Further, either party may terminate this Agreement immediately if the
other party becomes insolvent, admits in writing its inability to pay its
debts as they mature, makes an assignment for the benefit of creditors,
files or has filed against it by a third party any petition under any
Bankruptcy Act, or an application for a receiver of the other party is made
by anyone and such petition or application is not resolved favorably to the
other party within sixty (60) days. Customer has the rights of software
lessee under the Bankruptcy Code.
21. ***** *
22. Notices
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
22.1. The term Notices means written communications under this Agreement,
shall be deemed to have been duly given upon actual receipt by the parties,
or upon constructive receipt if sent by certified mail, return receipt
requested, or any other delivery method that obtains a signed delivery
receipt when addressed to the person(s) named below at the following
addresses or to such other address as any party hereto shall hereafter
specify by written Notice to the other party or parties hereto:
(a) if to Unisys:
*****
Unisys Corporation
2 Enterprise Drive
Shelton, CT 06484
***** *****
Unisys Corporation
8008 Westpark Drive
McLean, VA 22021
*****
Unisys Corporation
2 Oak Way
Berkeley Heights, NJ 07922-2705
Attn: Law Department
Unisys Corporation
Township Line and Union Meeting Roads
Blue Bell PA 19424
*****
(b) if to Customer:
Name: *****
Title: *****
Address: 80 Merritt Blvd.
Trumbull, Connecticut
06611 *****
Telephone #:******
and:
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
Name: *****
Title: *****
Address: 80 Merritt Blvd.
Trumbull, Connecticut 06611
*****
Telephone #:*****
With, in the event of a dispute, required copies to:
Name: *****
Title: *****
Address: 80 Merritt Blvd.
Trumbull, Connecticut 06611
Telephone #:*****
and:
The Nasdaq Stock Market, Inc.,
1735 K Street, N.W.
Washington, D.C. 20006
Attn: Office of General Counsel - Nasdaq Contracts Group
23. Arbitration
23.1 Any claim, dispute, or controversy (referred to collectively in this
Section as "Dispute") or other matter arising out of or relating to this
Agreement shall exclusively be subject to final, binding arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association ("AAA") provided, however, that submission of any
Dispute shall not (absent agreement between the parties) be to the AAA. Any
such arbitration will be conducted in New York City. Each party is to
specify one arbitrator within thirty days of receipt by the respondent
party of the written arbitration demand which is to be sent by certified
mail, return receipt requested. After these two arbitrators are named, the
arbitrators will select a third arbitrator within twenty days. This third
arbitrator is to have experience and knowledge of electronic computers, the
computer business, or the securities business. If the arbitrators fail to
appoint a third arbitrator within this time frame, the parties shall
request the AAA (provided such does not require submission of the remainder
of the suit to the AAA) to provide a list of potential arbitrators, and the
parties will select the third arbitrator from that list that is not
objectionable to either party, pursuant to the rules of the AAA. If the
parties fail to agree to a third arbitrator from the list, then the AAA
will appoint the third arbitrator, who is to have experience and knowledge
of electronic computers, the computer business, or the securities business.
A party may enforce the arbitration duties and subsequent awards in court.
23.2 Except as provided in Sections Error! Reference source not found. and
Error! Reference source not found., the arbitrators will have no authority
to award punitive damages, nor any other damages not measured by the
prevailing party's actual damages, and may not, in any event, make any
ruling, finding or award that directly conflicts with the terms and
conditions of this Agreement.
23.3 Either party, before or during any arbitration, may apply to a court
having jurisdiction for a temporary restraining order or preliminary
injunction where such relief is necessary to protect its interests pending
completion of the arbitration proceedings. Arbitration will not be required
for actions for recovery of specific property, such as actions for
replevin.
23.4 Prior to initiation of arbitration or any other form of legal or
equitable proceeding, the aggrieved party will give the other party written
Notice in accordance with Section 22, describing the Dispute as to which it
intends to initiate action. The parties shall attempt to meet within 20
days of such Notice to attempt to resolve the Dispute. If the parties are
unable to resolve the Dispute within the 20 days period, arbitration may be
initiated.
24. Other Provisions
24.1. All risk of loss or damage to Products procured by Customer hereunder
will pass to Customer upon delivery on the Customer's computer floor, and,
if applicable, after inspection of the uncrated Product by Customer at that
time.
24.2. Neither party will be liable for monetary damages or specific
performance for failure to fulfill its obligations when due to causes
beyond its reasonable control and without the fault or negligence of such
party. Such causes may include, but are not limited to: labor disputes,
strikes, fires, acts of God, floods, earthquakes, war, acts of the public
enemy, riots, acts of military authorities, embargoes, inability to secure
raw materials, or transportation facilities, or unavailability of
communications facilities. However, the aggrieved party may exercise its
other rights under this Agreement.
24.3. Any failure or delay by either party in exercising any right or
remedy will not constitute a waiver.
24.4. THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
24.5. This Agreement (that includes the Consolidated Agreement, its
Schedules, and the Specifications that are incorporated herein by
reference) constitutes the entire agreement between the parties with
respect to the Products and services provided hereunder and supersedes all
prior proposals and agreements, both written and oral, and all other
written and oral communications between the parties. The terms and
conditions of this Agreement will supersede all other terms and conditions,
including any preprinted terms on any purchase orders.
24.6. Unisys may assign its right to receive payments without Customer's
prior written consent. Any such assignment, however, will not change the
obligations of Unisys to Customer. Customer may share the use of any
Products or this Agreement (including discount arrangements), or assign or
transfer its rights or obligations under this Agreement, in whole or in
part, to the National Association of Securities Dealers, Inc., Nasdaq,
Ltd., or any parent, subsidiary, or sister entity of the above now or
hereafter created without Unisys consent, provided, that Customer remains
responsible to Unisys for the obligations of such other entity or entities.
Customer may also elect to assign Customer's right to purchase and lease
back items ordered hereunder to a third party with prior consent of Unisys
which shall not be unreasonably withheld or delayed, provided that the
lessor meets Unisys usual and customary credit standards, at anytime prior
to acceptance of the order, and subject to any reasonably agreeable
assignment of purchase rights consistent with the terms of this Agreement.
Otherwise neither party may assign or transfer its rights or obligations or
this Agreement (including by operation of law). Unisys may subcontract any
services described in this Agreement to third parties selected by Unisys,
provided, Unisys remains liable for the quality of work and performance of
any Unisys subcontractor to the same extent as if such were performed by
Unisys itself.
24.7. Nothing in the Agreement, express or implied, is intended to or shall
(a) confer on any person other than the parties hereto (and any of the
Corporations), or their respective permitted successors or assigns, any
rights to remedies under or by reason of this Agreement; (b) constitute the
parties hereto partners or participants in a joint venture; or (c) appoint
one party the agent of the other.
24.8. The terms and conditions of this Agreement may be modified only in
writing signed by a Unisys Vice President, General Manager or Contracts
Manager and a duly authorized officer of Customer.
24.9. No arbitration proceeding or legal action, regardless of its form,
related to or arising out of this Agreement, may be brought by either party
more than two years after the cause of action first accrued.
24.10. Each paragraph and provision of this Agreement is severable, and if
one or more paragraphs or provisions are declared invalid, the remaining
provisions of this Agreement will remain in full force and effect.
25. Permits and Licenses. Unisys warrants and represents that it now has
and will maintain throughout the term of this Agreement, all necessary
permits and licenses (and associated insurance or bonds) to perform any
work required under this Agreement. To the extent any additional special
permits are required (e.g. building or electrical permits), Nasdaq will
procure such permits at its own cost, unless otherwise agreed between the
parties.
26. Standards. Unisys warrants that it shall perform all work in a good and
workmanlike manner, in accordance with manufacturer and industry standards
and specifications, and that its work will not cause any Product or any of
the Corporations to violate any State or Federal law, including but not
limited to radiation, emission, toxic substance, and OSHA. Unisys will
comply with all applicable laws including, but not limited to, employee
taxes, sales/use taxes, American with Disabilities Act, environmental and
toxic waste disposal, and equal employment laws. After completion of work,
Unisys shall insure that the exterior of any equipment and the surrounding
areas are clean and that all discarded parts, supplies and other waste are
placed in Customer's appropriate disposal facilities (e.g., wastebaskets,
dumpsters), provided such does not cause the Corporations to violate any
applicable law or regulation.
27. Nasdaq or Third Party Repair. If Unisys is unable or unwilling to
perform maintenance, repair, or modification work, then notwithstanding any
term in the Agreement, Nasdaq may perform or authorize a third party to
perform maintenance, repair, or modification work. In the event Customer
undertakes such repairs, then Customer shall provide written Notice within
48 hours to Unisys, identifying the equipment on which the emergency
repairs have been performed and any Unisys spare parts used by Customer.
Unisys reserves the right to impose additional charges if such repairs or
modifications undertaken by Customer can be satisfactorily demonstrated by
Unisys to require corrective work or to have caused material harm,
necessitating Unisys to perform a comprehensive examination of the
equipment in order to certify it as eligible for continued enrollment under
Unisys maintenance. In the event that the equipment is irrevocably damaged,
Unisys shall have the right to void the warranty to maintain the equipment
in "good working order" and Customer may elect to continue maintenance
services by Unisys on a "reasonable efforts" basis or terminate maintenance
as to the equipment.
28. Insurance. Unisys will maintain throughout the life of this Agreement,
adequate liability insurance.
29. Subcontractor Liens. Unisys will promptly pay all subcontractors,
holding in trust any monies paid by Nasdaq for work done by
sub-contractors. Unisys will promptly pay any amount subject to a
subcontractor lien or otherwise cause the removal of such lien before
foreclosure. Unisys will also ensure, to then extent permitted by law,
through agreements with its subcontractors that in the event of non-payment
by Unisys to the subcontractor after payment for that subcontractor's work
to Unisys by Nasdaq, the subcontractor will waive the right to assert
mechanic's liens against Nasdaq property.
30. ***** *
31. Permits and Emissions Requirements. Unisys warrants and represents that
its Equipment will meet the requirements of, and shall assist Nasdaq in
obtaining, all approvals, permits, and licenses and passing all
inspections, required for the Equipment under State and Federal law,
including, but not limited to: electrical, radiation, emission,
environmental, and toxic substances laws.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
32. Defect Notification. To date, Unisys has no knowledge of any hostile
code occurring in its 2200 Series software. In the event it is established
that hostile code has infected Unisys 2200 Series software, Unisys will
inform Customer of the presence of such hostile code and will use
reasonable efforts to locate and neutralize the effect of such hostile
code.
33. Non-use Of Customer Proprietary Name and Marks. Unisys shall not use
the names National Association of Securities Dealers, Inc., The Nasdaq
Stock Market, Inc., Nasdaq, Inc., NASD Market Services, Inc., or "NASD,"
"The Nasdaq Stock Market", "Nasdaq," or "MSI" or any other of the
Corporations' names in any advertising or promotional media without the
prior written consent of Nasdaq. Unisys shall not use any trademark,
service mark, copyright, or patent of the Corporations, registered or
unregistered, without written consent of Nasdaq.
34. Security Regulations. Unisys personnel will be instructed to comply
with security regulations pertinent to each Corporation location and any
oral security instructions or demands of Corporation personnel. Unisys
personnel, when deemed appropriate by a Corporation in its sole discretion,
will be issued a visitor identification card by Corporation. Such cards
will be surrendered by Unisys personnel upon demand by a Corporation and
without further demand upon expiration or termination of this Agreement.
35. Confidentiality. Unisys acknowledges that it may be given access to
areas in which it may observe or acquire private, secret, or material
non-public information of any of the Corporations (including but not
limited to information relating to: investigatory matters, personnel
matters, regulatory matters, matters involving broker/dealers, issues, or
issuers) in performing its obligations under this Agreement. Unisys shall
use such information only in fulfillment of its obligations under this
Agreement; shall hold such information in confidence; and shall not use,
disclose, copy, or publish any such information without the prior written
approval of Nasdaq. The duties in this Section do not apply to information:
(1) lawfully within Unisys possession prior to this Agreement; (2) that is
voluntarily disclosed by a third-party so long as that party does not
breach any obligation not to reveal such information; (3) is voluntarily
disclosed to the public by any of the Corporations; or (4) is generally
known to the public.
36. Conflicts. Unisys represents and warrants to Nasdaq that it is now
under no contract or obligation, nor will it enter into a contract or
assume an obligation during the term of this Agreement that would
materially interfere with Unisys duties and responsibilities under this
Agreement.
37. Escalation Procedures. In instances which result in the inability of
Customer's system to accomplish productive work processing, Unisys has a
Management Escalation Procedure. Unisys agrees to comply with the Unisys
policy respecting Management Escalation which provides as follows:
(a) A Customer Service Engineer initiates Management
Escalation one hour after a Unisys Customer Service
Engineer on-site or initial remote diagnostics are unable
to correct a problem.
(b) Management Escalation complies with an established Timetable.
Notification Management to
Responsibility be Notified Time
-------------- ----------- ----
***** *
Unisys agrees that appropriate resources, within the scope of
authority of the Unisys employees put on notice in accordance with
the above Escalation Timetable, will be devoted to correcting
Customer's equipment malfunction.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
38. Agreement is Proprietary Information. This Agreement shall be treated
as Confidential or Proprietary Information under this Agreement.
39. Counterparts. The Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and such
counterparts together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers.
=============================================================
FOR PUBLICLY TRADED COMPANIES. Nasdaq and its affiliates
(Corporations) have an internal policy of monitoring or
restricting trading by certain of its employees in publicly
traded stocks where the granting, renewal, or termination
of the agreement is considered by the publicly traded
company to be a "significant" event (one that could affect
the price of your company's stock or require a public
announcement). While the Corporations offer no
representation or warranty about the enforcement of its
policy or the securities activities of anyone associated
with the Corporations, if your company believes its
contracts with the Corporations may be "significant",
please initial here _________.
=============================================================
Unisys, (Unisys)
By:
-------------------------------------------
Name:
-------------------------------------------
- -
Title:
-------------------------------------------
AUTHORIZED OFFICER
Date:
-------------------------------------------
Executed this ______ day of _____________,
19____, for and on behalf of:
The Nasdaq Stock Market, Inc. (Nasdaq),
By:
-------------------------------------------
Name:
-------------------------------------------
Title:
-------------------------------------------
Schedule A - Equipment Sale
***** *
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
Schedule B - Definitions and Service Descriptions
***** *
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
Schedule C - Software Licenses
***** *
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
Schedule D - Professional Services
***** *
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
Attachment 1
Nasdaq Acceptance Criteria
--------------------------
***** *
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
Attachment 2
ATTACHMENT II EXPANSION EQUIPMENT
LIST NET
ITEM STYLE NO. DESCRIPTION PRICE PRICE
1 UPK9222322 IP Upgrade ***** *
2 UPK9222333 PCC/PCU/ICC Upgrade *****
3 UPK9422633 PCC/IP Upgrade *****
4 UPK9633844 PCC/IPE/ICC Upgrade *****
5 UPK9844848 ICC Upgrade *****
6 229000-M64 Memory Expansion *****
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
Attachment 3
Additional Terms
***** *
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
Exhibit 10.3
NETWORK USER LICENSE AGREEMENT
between
THE NASDAQ STOCK MARKET, INC.
and
ORACLE CORPORATION
This Network User License Agreement ("User Agreement") shall be governed by the
terms of the Software License and Services Agreement between The Nasdaq Stock
Market, Inc. ("Client") and Oracle Corporation ("Oracle") effective November 30,
1993 (the "Agreement") and the terms set forth below.
1. PROGRAMS AND DEFINITIONS
1.1 LICENSED PROGRAMS
1.1.1 "Licensed Programs" means the Programs in the Program Set(s)
that are currently available in production release as of the
Effective Date for use on the corresponding Hardware and as
specified in the License Type.
Program Set A: Hardware
Programs (Computer/Operating System) License Type
Oracle7 Sequent Dynix/ PTX Deployment
procedural option Unisys Dynix/ PTX
distributed option Sun 4/ Solaris
parallel server option Sun 4/ Sun OS
SQL*Net SCO/ Unix
SQL*Net TCP/IP Macintosh/ Mac OS
SQL*Plus PC Compatible/ Netware
PC Compatible/ OS/2
PC Compatible/ MS DOS
Program Set B: Hardware
Programs (Computer/Operating System) License Type
Oracle 7 Sequent Dynix/ PTX Full-use
procedural option Unisys Dynix/ PTX
distributed option Sun 4/ Solaris
parallel server option Sun 4/ Sun OS
SQL*Net SCO/Unix
SQL*Net TCP/IP Macintosh/ Mac OS
CDE Tools bundle PC Compatible/ OS/2
(SQL*Forms/Menu, PC Compatible/ MS DOS
SQL*Plus, PC Compatible/ MS WINDOWS
SQL*Reportwriter)
Pro*C
The "Hardware" shall be defined as the Computer/Operating System
combinations listed above that are owned, leased to, or under the sole
control of Client or an Agent at a location where the Licensed Programs
are installed and used in accordance with Paragraph 1.8 C. of the
Agreement.
1.1.2 During the User Agreement Term, Client may add Computer/Operating
System combinations, except those for massively parallel processors,
("Additional Hardware") to the Hardware specified above on the
following Program Set at no additional charge, provided: (i) the
Licensed Programs are available in production release status on the
Additional Hardware at the time Client elects to add the Additional
Hardware; and (ii) Client has continuously maintained Technical Support
for the Licensed Programs.
Program Set Number of Additional Hardware
----------------------------------------------------------------------
Program Set A 10
Program Set B 10
Oracle shall ship to the Client Location five (5) master copies of the
Licensed Programs for each Additional Hardware added. These Licensed
Programs may only be copied and installed in accordance with Section 4
of this User Agreement.
Client acknowledges that the Licensed Programs for use on the
Additional Hardware specified above may not be currently available and
may not become available during the User Agreement Term. Client agrees
that it has not relied on the availability of such Licensed Programs in
executing this User Agreement and further agrees that the availability
of such Licensed Programs will not affect Client's payment obligations
under Section 2 below. Oracle is under no obligation and does not imply
that it will make available any Programs or Program/Hardware
combinations that are not currently available.
1.1.3 During the User Agreement Term after Client has added all Additional
Hardware allowed under Section 1.1.2 above, Client may exchange a
Computer/Operating System listed in the Hardware or added to the
Hardware under Section 1.1.2 above ("Prior Hardware") for a
Computer/Operating System (except those for massively parallel
processors) ("New Hardware"), at no charge provided that Client is
under Technical Support services for the Licensed Programs on the Prior
Hardware at the time the transfer is ordered.
Oracle shall ship to the Client Location five (5) master copies of the
Licensed Programs for each New Hardware added. These Licensed Programs
may only be copied and installed in accordance with Section 4 of this
User Agreement.
Client acknowledges that the Licensed Programs for use on the New
Hardware specified above may not be currently available and may not
become available during the User Agreement Term. Client agrees that it
has not relied on the availability of such Licensed Programs in
executing this User Agreement and further agrees that the availability
of such Licensed Programs will not affect Client's payment obligations
under Section 2 below. Oracle is under no obligation and does not imply
that it will make available any Programs or Program/Hardware
combinations that are not currently available.
1.1.4 During the User Agreement Term, for each of the Current Programs
specified below which have already been licensed to Client under this
User Agreement the no charge technical support Update for each shall be
made available to Client on the applicable Hardware and for the
applicable License Type when and if such Programs are made available in
production release; provided Client is under contract with Oracle to
receive Technical Support for each of the current Programs specified
below at the time the applicable technical support Update for each is
released:
Current Programs Update License Type
SQL*Forms/SQL*Menu Oracle Forms Full-use
SQL*ReportWriter Oracle Reports
1.2 LICENSE TYPE
"Full Use Programs" are defined as an unaltered version of the Licensed
Programs with all functions intact.
"Deployment Programs" are limited to use solely in conjunction with and
in support of a Client Entity's business Application(s) ("Client
Application(s)") and as restricted below. The combination of the
Deployment Programs and a Client Application shall be defined as the
Application Package.
a. The Application Package under Client Application control may
be used to create new tables or alter tables only to the
extent necessary to implement the Application Package's
functions. The Application Package may not allow use of the
Deployment Programs' Create or Alter commands or any other
command that would allow the User to create tables or alter
tables outside the scope of those necessary for the operation
of the Client Application(s).
b. The Application Package may not allow use of the Deployment
Programs' SQL*Forms modules or any other functionality that
would enable modification of forms created by the Application
Package or generation of new forms.
c. The Application Package may not allow use of the Deployment
Programs outside the scope of the Application Package, or to
be used to create any new application programs, or expand the
functionality of the Application Package, or for any general
database management.
1.3 USER
A. For Program Set A, one "Concurrent User" is defined as one individual
employed by Client, an Entity Employee, Agent Individual, or Subscriber
Designee who may use the Programs under Paragraph 1.8 of the Agreement,
or one individual authorized by a Sublicensee in accordance with
Exhibit A to this User Agreement to access one or more Oracle instances
online within Client or a Client Entity at the same point in time from
the same device. Each additional process (e.g., a report, update, or
query requested through an application program, or batch process) shall
also be counted as a Concurrent User.
If multiplexing software or hardware (which is software or hardware
whose primary purpose is to reduce the number of Concurrent Users
directly connected to an Oracle instance, e.g. a TP monitor) is used,
then the number of Concurrent Users shall be measured as the number of
distinct inputs to the multiplexing front-end. Otherwise, the number of
Concurrent Users shall be measured as the number of unique connections
to the same Oracle instance.
B. For Program Set B, "Concurrent User(s)" is defined as each session
connected to the database by individuals employed by Client (or an
Entity Employee, Agent Individual, or Subscriber Designee who may use
the Programs under Paragraph 1.8 of the Agreement) on the specified
Computer at the same point in time. This includes all batch processes
and on-line users. If multiplexing software or hardware (e.g. a TP
monitor) is used to reduce the number of sessions directly connected to
the database, the number of Concurrent Users must be measured as the
number of distinct inputs to the multiplexing front-end.
C. The maximum number of Concurrent Users of the Program Sets on the
Hardware shall be as follows:
Program Set Number of Concurrent Users
Program Set A 2,250 Concurrent Users
Program Set B 48 Concurrent Users
All references to User in this User Agreement shall mean Concurrent
User.
1.3.1 During the User Agreement Term, Client shall have the option to
increase the number of Concurrent Users of the Licensed Programs in
Program Sets A and B for use on the relevant Hardware in additional
User Increments (with a minimum of one User Increment per order) as
specified below:
Number of
Concurrent Maximum Number of
Users per User Increments Client may Additional Fee
Program Set User Increment Acquire under this Option per User Increment
Program Set A ***** * *****
***** *****
***** *****
***** *****
Program Set B ***** *****
- ---------
* *****Confidential Treatment has been requested for the redacted portions.
The confidential redacted portions have been filed with the Securities and
Exchange Commission.
Orders placed against this option must be sequential (i.e. For a
purchase of 1200 additional Concurrent Users for Program Set A, Client
would pay (i) ***** per 100 Concurrent Users for the first 500
Concurrent Users, (ii) ***** per 100 Concurrent Users for the second
500 Concurrent Users, and (iii) ***** per 100 Concurrent Users for the
next 200 Concurrent Users). The total number of additional Concurrent
Users is not reset to zero after each purchase (i.e. If Client chose to
purchase another 700 Concurrent Users for Program Set A after the above
mentioned 1200 Concurrent User purchase, Client would pay (i) ***** per
100 Concurrent Users for the first 300 Concurrent Users and (ii) *****
per 100 Concurrent Users for the next 400 Concurrent Users). For each
order, applicable sales tax will be added to the Additional Fee. All
applicable fees shall be due and payable on the date that Client
notifies Oracle in writing of its exercise of this option. Upon
election, this payment obligation is noncancelable, and the sum paid is
nonrefundable, except as provided in the Agreement. At the time of each
order , Client may obtain Standard Technical Support services from
Oracle as set forth in Section 6.2 below at the following fees:
Technical Support Fee as a Percentage of the
Additional Fee per Concurrent User
Year of
User Agreement Term Increment ordered
First Year *****
Second Year *****
Third Year *****
Fourth Year *****
1.4 USER AGREEMENT TERM
The "User Agreement Term" shall be from the Effective Date to December
31, 1998.
1.5 TERRITORY
The "Territory" shall be defined as the Client Entities facilities in
the United States. The "Territory" from which a Subscriber Designee may
access a Program, in accordance with Paragraph 1.8 of the Agreement,
shall be worldwide except for the countries and nationals thereof
excluded in this Section 1.5. During the User Agreement Term, Client
may request from Oracle written permission to add additional countries
to the Territory, which permission shall not be unreasonably withheld.
Such additional countries shall exclude the following countries and
nationals thereof: Afghanistan, People's Republic of China, Laos,
Latvia, Lithuania, Mongolia, Romania, Libya, Hungary, Poland, Albania,
Bulgaria, Czechoslovakia, Estonia, the geographic area formerly
comprising the Union of Soviet Socialist Republics, Cuba, Cambodia,
North Korea, Vietnam, South Africa (Military and Police), Iran, Iraq,
Syria, Haiti, Montenegro, Serbia and any other country or entity to
which the United States Department of Commerce or other United States
government agency prohibits shipment. Client shall have the right to
request from Oracle written permission to install the Licensed Programs
in such countries and/or have Users in such countries upon Oracle's
prior written consent, which shall not be unreasonably withheld. Client
acknowledges that the Program(s) are subject to export controls imposed
on Oracle and Client by the U.S. Export Administration Act of 1979, as
amended (the "Act"), and the regulations promulgated thereunder (the
Act and the regulations shall be referred to collectively as the "DOC
Regulations"). Client certifies that neither the Program(s) nor any
direct product thereof are intended to be used for any purposes
prohibited by the DOC Regulations, including, without limitation,
nuclear, chemical, or biological weapons proliferation. Further, Client
shall not transfer the Program(s) outside of the Territory for which
Client has rights under this User Agreement. Client agrees to comply
fully with all relevant regulations of the United States Departments of
Commerce, Treasury, and State, and all other U.S. governmental agencies
to assure the Program(s) are not exported in violation of U.S.
governmental agency regulations. The obligations under this Section
shall survive the expiration of this User Agreement. Upon Oracle's
reasonable request, Client shall make records available to Oracle to
allow Oracle to confirm compliance with Client's obligations as set
forth under this Section.
1.6 CLIENT
For purposes of this User Agreement, the term "Client" means Client and
Client Entities, as defined in the Agreement, and located in the United
States as of the Effective Date. If the Territory is expanded pursuant
to Section 1.5 to include other countries, "Client" shall be further
defined to include additional Client Entities as provided in the
Agreement located in the additional countries.
2. FEES AND PAYMENTS
The license fee for this User Agreement shall be ***** * Client shall
be granted the one-time only right to apply ***** in license fees
previously paid to Oracle, which are associated with the termination of
Client's Program licenses under Customer Support Identification (CSI)
number ***** as a credit toward such User Agreement license fees.
Client's Program licenses under CSI numbers ***** shall also be
terminated. Therefore, Client's total license fee payment obligation
under this User Agreement shall be ***** This fee shall be due and
payable in two installments the first installment of ***** shall be due
and payable within ***** days of the Effective Date and the second
installment of ***** shall be due and payable on November 29, 1994.
This payment obligation is noncancelable and the sum paid is
nonrefundable, except as provided in the Agreement. The pricing
specified herein is specific to this User Agreement and the fees
contained herein may not be reduced by any existing credits or any
other discounts. Except as specified under Section 1.3.1 above,
licenses for any additional Users, Programs, Hardware, or Operating
Systems that are acquired under the Agreement shall be at terms and
fees as determined when such additional licenses are acquired.
Applicable sales tax shall be charged to Client based on the point of
delivery of the master copy and paid under the terms of the Agreement.
Client is responsible for payment of any use tax or other tax arising
from use of the Licensed Programs in any other Location.
- ---------
* *****Confidential Treatment has been requested for the redacted portions.
The confidential redacted portions have been filed with the Securities and
Exchange Commission.
3. LICENSE GRANT
In consideration for the payment specified in Section 2 above, Oracle
grants to Client a non-exclusive, non-transferable license to use the
Licensed Programs for the applicable License Type on the applicable
Hardware, as specified in Sections 1.1.1, 1.1.2, and 1.1.3 in the
Territory under the terms of the Agreement, for up to the maximum
number of Concurrent Users specified in Section 1.3 C. above as
increased, if at all, for additional fees under Section 1.3.1 above.
During the User Agreement Term, Client shall be permitted to
reconfigure its Computers and its use of the Licensed Programs provided
that (i) Client does not install the Licensed Programs outside the
Territory; (ii) the Licensed Programs are installed only on the
Hardware as listed in Section 1.1.1. plus Additional Hardware and New
Hardware added, if any, under Sections 1.1.2 and 1.1.3 ("Total
Hardware"); and (iii) the total number of Concurrent Users specified in
Section 1.3 C. plus Concurrent Users added, if any, under Section 1.3.1
("Total Concurrent Users") who may access the Licensed Programs
installed on the Total Hardware does not exceed the Total Concurrent
Users. Upon expiration of the User Agreement Term, the Licensed
Programs on the Computers comprising the Hardware shall be fixed in
accordance with Section 4 below.
4. DELIVERY AND INSTALLATION
Oracle shall deliver to Client ***** copies of the software media and
***** sets of documentation ("master copy") for each Licensed Program
for use on the applicable Hardware to the following Client location:
9513 Key West Avenue, Rockville, Maryland 20850 ("Client Location").
Client shall be responsible for copying the software media and
installing the Licensed Programs. Unless otherwise specified herein,
Client shall acquire no right to copy documentation. The Acceptance
Period for each of the Licensed Programs shall commence on delivery of
the master copy of the Licensed Programs, and all subsequent copies
shall be deemed accepted upon acceptance of the master copy. Upon
expiration of the User Agreement Term, the Concurrent Users, server
Computers, and types of Computer/Operating Systems shall be fixed for
the Territory as follows: (1) the number of Concurrent Users for the
Licensed Programs within each Program Set shall be fixed at the total
number of Concurrent Users acquired for the Program Set under Sections
1.3 C. and 1.3.1 above; (2) the types of Computer/Operating Systems
shall be fixed to the Hardware types acquired under Sections 1.1.1,
1.1.2, and 1.1.3 above ("Total Hardware"); and (3) the number and
make/model of server Computers shall be fixed at the number of server
Computers upon which the Licensed Programs are installed as of the
expiration of the User Agreement Term ("Installed Servers") plus an
additional number of server Computers, within the Total Hardware, equal
to ***** * of the Installed Servers ("Uninstalled Servers") upon which
the Licensed Programs may be installed after the User Agreement Term.
The number of personal computers will not be fixed. Upon fixing of the
Licensed Programs on the Computers, the Program licenses shall be
perpetual subject to the terms of the Agreement. Thereafter, unless
this User Agreement is extended or modified, Program licenses for use
on additional Computers or licenses for additional Users shall be
acquired separately.
- ---------
* *****Confidential Treatment has been requested for the redacted portions.
The confidential redacted portions have been filed with the Securities and
Exchange Commission.
During the User Agreement Term, Client may order Oracle documentation
for the Licensed Programs at Oracle's standard fees in effect when each
order is placed less the Discount Percentage corresponding to the List
Price of Documentation for a single order.
List Price of Documentation Discount Percentage
------------------------------------------------------
(Single Order)
$1,000 - $1,999 ***** *
$2,000 - $3,999 *****
$4,000 - $5,999 *****
$6,000 and over *****
5. REPORTING
On each anniversary of the Effective Date, Client shall notify Oracle
in writing of: (i) the number of personal computers and the location,
models and serial numbers of all server Computers on which the Licensed
Programs are installed; (ii) the Computer/Operating Systems on which
the Licensed Programs are installed; and (iii) the number of users
using each Program Set. When reporting, ordering or communicating with
Oracle under this User Agreement, Client shall reference: (a) this User
Agreement (include Effective Date); and (b) the contract number and
Effective Date of the Agreement.
6. TECHNICAL SUPPORT
6.1 Until November 30, 1994 ("First Support Year"), Client shall receive
Standard Technical Support services for all Licensed Programs licensed
under this User Agreement (except for additional Concurrent Users
acquired under Section 1.3.1 above and additional Programs acquired
under Section 9 below) payable in advance for an annual Technical
Support fee of ***** . For the remaining years of the User Agreement
Term, provided Client has continuously maintained Technical Support
services, Client may acquire Standard Technical Support services for
all Licensed Programs licensed under this User Agreement (except for
additional Concurrent Users acquired under Section 1.3.1 above and
additional Programs acquired under Section 9 below) payable in advance
in annual installments as specified below. After the User Agreement
Term, Client may obtain annual Technical Support services from Oracle
under Oracle's Technical Support fees and policies in effect when such
services are ordered, but in any event in accordance with the
Agreement.
Support Year Technical Support Fee
-----------------------------------------------
Second Year ***** *
Third Year *****
Fourth Year *****
6.2 Client shall designate and provide to Oracle the name of one (1) Client
employee who shall serve as an on-site technical contact ("Technical
Contact") to act as the sole liaison between Client and Oracle for the
Technical Support services provided under this User Agreement. Client
shall also provide the names of two (2) employees who shall serve as
backups to the Technical Contact. Notwithstanding the foregoing, Client
may designate up to an additional fifty (50) individuals authorized by
Client to use the Telephone Assistance portion of Technical Support
services. Client shall notify Oracle whenever the designated Technical
Contact responsibilities are transferred to another employee. For any
Technical Support updates to the Licensed Programs provided during the
User Agreement Term, Oracle shall ship to the Client Location five (5)
Technical Support update copies for each Hardware type. Client shall be
responsible for copying and installing the updates on the Computers for
which the Licensed Programs are licensed.
- ---------
* *****Confidential Treatment has been requested for the redacted portions.
The confidential redacted portions have been filed with the Securities and
Exchange Commission.
7. VERIFICATION
Oracle may, at its expense, audit the number of copies of the Licensed
Programs in use by Client, the Computers on which the Licensed Programs
are installed, and the number of users using the Licensed Programs. Any
such audit shall be scheduled in advance and shall be conducted during
hours agreed upon by the parties, at Client's facilities and shall not
interfere unreasonably with Client's business activities. If an audit
reveals that Client has underpaid fees to Oracle, Client shall be
invoiced for the underpaid fees based on the Price List in effect when
the audit is completed. Audits shall be conducted no more than once
annually.
8. ASSIGNMENT
The rights granted under this User Agreement may not be assigned or
transferred to any third party without the express written consent of
Oracle Corporation. However, Client may, upon written notice to Oracle,
assign all Client's rights and obligations under this User Agreement to
a Client Entity, provided that prior to such assignment the Client
Entity agrees in writing to be bound by the terms of this User
Agreement and the Agreement.
9. ADDITIONAL PROGRAMS
9.1 During the User Agreement Term, Client may order, for installation in
the United States, production release versions of all Programs
available in production release and listed in Oracle's U.S. Price List
in effect when such Programs are ordered, except those Programs
designated by Oracle as Manufacturing Programs. The license fee for
such Programs shall be at a discount of ***** * off Oracle's standard
list license fees as listed in Oracle's U.S. Price List in effect when
such Programs are ordered, plus applicable sales tax. Such license fees
shall be due and payable on Client's written election of the option
provided hereunder. This payment obligation is noncancelable and the
sum paid is nonrefundable except as provided in the Agreement. During
the User Agreement Term, Client may purchase annual Basic Technical
Support for the Programs licensed under this Section 9.1 payable in
advance for an annual Basic Technical Support fee of ***** of the
discounted Program license fees paid to Oracle for the Programs. After
the User Agreement Term, Client may obtain Technical Support services
from Oracle for such Programs under Oracle's Technical Support fees and
policies in effect when such services are ordered, but in any event in
accordance with the Agreement. Programs acquired under this Section 9.1
shall not become part of any Program Set or be a Licensed Program (as
defined in Section 1.1 above) under this User Agreement.
Client acknowledges that the Programs specified in this Section 9 above
may not be currently available and may not become available during the
User Agreement Term. Client agrees that it has not relied on the
availability of such Programs in executing this User Agreement and
further agrees that the availability of these Programs will not affect
Client's payment obligations under this User Agreement. Oracle is under
no obligation to make available any Programs or Program/Hardware
combinations that are not currently available.
10. TRAINING
In consideration for the payment to Oracle of ***** within ***** of the
Effective Date, Client shall receive ***** Oracle standard Training
Units which are valid for ***** from the Effective Date of this User
Agreement to be used as provided under the Price List in effect as of
the Effective Date. When the ***** Training Units have expired or been
used up, Client may, during the remainder of the User Agreement Term,
purchase additional Training Units at a discount of ***** off list
price, and to be used as provided in the Price List in effect when the
Training Units are ordered. Each Training Unit may be used to acquire
one (1) day of instruction, excluding Client's expenses, for one (1)
Client employee at an Oracle Education Center in the United States.
11. Documentation
During the User Agreement Term, Client shall have the option, to
receive the annual copying rights stated in this Section for the fees
stated in this Section. In consideration for the payment to Oracle of
***** * Oracle shall deliver to Client Location one (1) copy of
copy-ready documentation for each of the Licensed Programs licensed
herein. Client shall have the right to make ***** copies of such
documentation for a period of ***** beginning on the date Client
exercises this option. During the same year, Client shall also have the
right to make ***** copies of any updates to such documentation
released by Oracle before the end of that year. Such updates shall be
shipped to Client in copy-ready form. Documentation copied under this
Section may only be used with the Licensed Programs licensed under this
User Agreement. This payment shall be due and payable on the date
Client exercises this option. This payment obligation is noncancelable
and the sum paid is nonrefundable, except as provided in the Agreement.
Thereafter, Client may renew the annual right to make ***** copies of
documentation at Oracle's standard fees in effect when Client exercises
the renewal option.
12. CONFIDENTIALITY
Client and Oracle agree that the pricing and terms of this User
Agreement shall be considered as Confidential Information under the
Agreement.
13. CONFLICT
In the event of conflict between this User Agreement and the Agreement,
this User Agreement will control.
14. SURVIVAL
Sections 1.2, 1.3, 1.5, 1.6, 3, the first paragraph of 4, 5, 6.2, 7, 8,
12, 13, and 14 shall survive expiration of this User Agreement.
15. Pricing Warranty
During the term of this User Agreement, Oracle shall provide Client
Entities with the relevant percentages of discount stated in this User
Agreement for future procurements of Programs or Services in the United
States. In the event that Client Entity orders Programs or Services for
which Oracle ***** during the User Agreement Term, Oracle will provide
***** * to Client Entities during the User Agreement Term. ***** The
term ***** shall not include any entity where it is acting as a third
party re-seller or where the entity is a federal, state or local
government or is an educational institution or a charitable
organization. This Section states Oracle's sole liability and Client
Entities' exclusive remedy for this obligation.
- ---------
* *****Confidential Treatment has been requested for the redacted portions.
The confidential redacted portions have been filed with the Securities and
Exchange Commission.
The Effective Date of this User Agreement is November 30, 1993.
THE NASDAQ STOCK MARKET, INC. ORACLE CORPORATION
By: By:
------------------------ -----------------------------
Name: Name:
------------------------ -----------------------------
Title: Title:
------------------------ -----------------------------
- --------
* ***** Confidential Treatment has been requested for the redacted portions. The
confidential redacted portions have been filed with the Securities and Exchange
Commission.
Exhibit 10.4
SOFTWARE LICENSE AND SERVICES AGREEMENT
This Software License and Services Agreement (the "Agreement") is between
Oracle Corporation, a Delaware corporation with its principal place of
business at 500 Oracle Parkway, Redwood City, California 94065 ("Oracle")
and The Nasdaq Stock Market, Inc., a Delaware corporation (hereinafter
"Client"), which is a wholly owned subsidiary of the National Association
of Securities Dealers, Inc. (a Securities Self-Regulatory Organization,
registered with the United States Securities and Exchange Commission and
subject to the Securities and Exchange Act of 1934 (NASD)), with its
principal place of business at 1735 K Street, N.W., Washington, D.C. 20006.
The terms of this Agreement shall apply to each Program license granted,
and to all services provided under this Agreement and any Order Form placed
under this Agreement. When completed and executed by both parties, an Order
Form shall evidence the Program licenses granted and the services that are
to be provided by Oracle.
This Agreement is being signed by The Nasdaq Stock Market, Inc. The Nasdaq
Stock Market, Inc., the National Association of Securities Dealers, Inc.,
Nasdaq International, Ltd., Securities Dealers Insurance Company, Ltd.,
National Clearing Corporation, and any majority owned subsidiary of Client
or the NASD (i.e. a subsidiary in which Client or NASD owns, directly or
indirectly, more than fifty percent of the voting stock) in existence as of
the Effective Date of this Agreement (each hereinafter referred to as a
"Client Entity") may acquire a Program license(s) and/or service(s) as a
Client in accordance with the terms and conditions of this Agreement, for
installation in the United States or the United Kingdom as applicable,
provided that the Client Entity agrees in writing to be bound by the terms
of this Agreement and the applicable Order Form. By placing an Order Form
under this Agreement for a Program license(s) and/or service(s) the Client
Entity agrees that the Program license(s) and service(s) is subject to this
Agreement and the relevant Order Form and that the Client Entity shall
perform its obligations in accordance with the terms of this Agreement and
the relevant Order Form. Any United States or United Kingdom majority owned
subsidiary of Client or NASD (i.e. a subsidiary in which Client or NASD
owns, directly or indirectly, fifty percent) and any joint venture of
Client or NASD (i.e. a United States or United Kingdom joint venture fifty
percent of which is owned, directly or indirectly, by Client or NASD) may
be added to the Client Entities specified in this paragraph upon prior
written notice to Oracle provided that the subsidiary or joint venture is
not a competitor of Oracle in the areas of the Programs and associated
technical support services, however a subsidiary or joint venture which is
a competitor may be added to the Client Entities with Oracle's prior
written consent which consent will not be unreasonably withheld. If a
Client Entity's name is changed and/or a Client Entity is merged with
another Client Entity, and the name change or merger does not include a
merger with any other entity, then the renamed Client Entity and/or
survivor of the merged Client Entities shall be deemed to be a Client
Entity under this Agreement.
I. DEFINITIONS
1.1. "Program" or "Programs" shall mean the computer software in object
code form owned or distributed by Oracle for which Client is
granted a license under this Agreement; the user guides and
manuals for use of the software ("Documentation"); and Updates.
1.2. "Order Form" shall mean Oracle's standard form for ordering
Program licenses and services. When placing orders under this
Agreement, Client shall reference the Oracle Agreement number
above and the Effective Date of this Agreement.
1.3 "Price List" shall mean Oracle's standard commercial fee schedule
that is in effect when a Program license or any other products or
services are ordered by Client.
1.4 "Designated System" shall mean the computer hardware and operating
system designated on the relevant Order Form or as set forth in
the relevant business arrangement on the Order Form.
1.5 "Supported Program License" shall mean a Program license for which
Client has ordered Technical Support for the relevant time period.
"Technical Support" shall mean Program support as provided under
Oracle's policies in effect on the date Technical Support is
ordered, but in any event in accordance with this Agreement.
1.6 "Commencement Date" shall mean the date on which the Programs are
delivered to Client, or if no delivery is necessary, the Effective
Date set forth on the relevant Order Form.
1.7 "Update(s)" shall mean subsequent releases of the Programs which
are generally made available for Supported Program Licenses at no
additional charge, other than media and handling charges. Updates
shall not include any options or future products which Oracle
licenses separately.
1.8 USER
A. "User", unless otherwise specified in the Order Form, shall mean a
specific individual employed by Client who is authorized by Client
to use the Programs licensed on the Designated System, regardless
of whether the individual is actively using the Programs at any
given time.
B. Notwithstanding the preceding Paragraph, Client may train or
authorize an individual, in addition to one employed by Client,
to use the Programs licensed by Client subject to the following
conditions:
(i) the individual is either: (a) an employee of a Client
Entity ("Entity Employee"); (b) furnished by a third party,
who is not a competitor (i.e. each of the following
companies, any subsidiary or affiliate of any of the
companies, and any joint venture in which any of the
companies is a participant is a competitor: Sybase,
Informix, Ingres/ASK, and other direct RDBMS competitors
(except Unisys) and GAIN Inc.) of Oracle, under contract to
perform computer programming or data processing services for
Client or a Client Entity ("Agent Individual"). Client shall
have a sixty (60) day grace period from the Effective Date
of this Agreement to determine if any of its third parties
are competitors; or (c) a person authorized by a third party
under contract to receive services from Client or a Client
Entity ("Subscriber Designee");
(ii) the individual uses the Programs in accordance with
this Agreement and the applicable Order Form as further
limited by this Paragraph B.;
(iii) use of the Programs by: (a) an Entity Employee is
solely for Client's own internal data processing; (b) an
Agent Individual is solely to develop applications and
process data for Client's own internal data processing; and
(c) a Subscriber Designee is through a front end application
furnished by a Client Entity via remote communications
access and solely to read and input data into a Client
Entity's database in the ordinary course of the services
received from a Client Entity and neither the third party
nor the Subscriber Designee can copy, download, or transfer
the Programs;
(iv) Client remains the licensee of the Programs and the
Programs are only installed on the Designated System (or
"Hardware" if so defined in the applicable Order Form) and
at Client's location (and such other Client or Client Entity
location, if any, stated in the applicable Order Form);
(v) the individuals are deemed, for the purposes of this
Paragraph B., to be employees of Client when using the
Programs;
(vi) each individual is counted as a User as defined herein
(or as defined in the applicable Order Form if User is
defined differently therein) and is subject to the
limitations, if any, regarding the number of Users in the
applicable Order Form;
(vii) the Client Entity and third party shall protect
Oracle's rights in the Programs and Confidential Information
in accordance with this Agreement. If a Client Entity or a
third party fails to do so then Client shall terminate use
of the Programs by any Client Entity (including Entity
Employees) or third party (including Agent Individuals
and/or Subscriber Designees) who fails to do so or who fails
to use the Programs in accordance with this Paragraph 1.8 B.
Cure of such failure shall be in accordance with Paragraph
4.3. Oracle will provide reasonable assistance to Client for
the enforcement of Oracle's rights in the Programs and
Confidential Information;
(viii) the Client Entity and third party have agreed, in a
written agreement with Client (as to a third party the
written agreement may be with a Client Entity), to terms
substantially equivalent to those in items (i) through (vii)
of this Paragraph B.; and
(ix) Client shall indemnify and hold Oracle harmless from
breach of this Agreement and/or the applicable Order Form
whether by a Client Entity or Entity Employee. Client shall
indemnify and hold Oracle harmless from breach of this
Agreement and/or the applicable Order Form whether by a
third party, as defined in (i) (c) of this Paragraph 1.8 B,
or a Subscriber Designee if there is not an agreement with
such third party which complies with (viii) of this
Paragraph 1.8 B, or Client or a Client Entity fails to
terminate such third party's and the Subscriber Designee's
use of and access to the Programs in accordance with (vii)
of this Paragraph 1.8 B. Client and Client Entities shall
use reasonable security measures to prevent third parties
and Agent Individuals from violating the provisions of this
Paragraph 1.8 B.
C. Client may temporarily relocate the Programs licensed pursuant to
this Agreement for installation on the Designated System to a CPU
of the same operating system as the Designated System ("Temporary
CPU"), which is owned or under the sole control of a third party,
under contract to perform computer programming services for Client
or a Client Entity, and located at the third party's address in
the United States ("Agent"), provided that:
(i) Client remains the licensee of the Programs;
(ii) Prior to installing the Programs on the Temporary CPU, Client
and the Agent enter into a written agreement which: (a) restricts
the Agent's use of the Program(s) in accordance with this
Paragraph C. and Paragraph 1.8 B. above; (b) does not include
warranties, express or implied, made on behalf of Oracle or with
respect to Oracle products; (c) prohibits transfer or duplication
of
the any Program(s), except for backup or archival copies to provide the
services to Client; (d) prohibits causing or permitting the reverse
engineering, disassembly or decompilation of the Program(s); (e) states
that all rights, title, and interest in the Program(s) shall at all times
remain the property of Oracle or Oracle's licensor; (e) disclaims Oracle's
liability, whether direct, indirect, incidental, special, or consequential
arising from the use of the Program(s); (f) requires the Agent to protect
Oracle's rights and interests in the Program(s) and Confidential
Information in accordance with this Agreement; and which (g) specifies
Oracle as a third party beneficiary of said agreement for the purposes of
enforcing the provisions of this Paragraph C.;
(iii) The Agent uses the Program(s) in accordance with this
Agreement and the applicable Order Form as further limited
by this Paragraph C. and Paragraph 1.8 B. above and not for
any other purposes. Access to the Program(s) is limited to
those individuals who are performing computer programming or
data processing services for Client or a Client Entity;
(iv) The Programs may be installed and operated on both
Client's Designated System and the Agent's Temporary CPU for
a period of fifteen (15) days ("Switch-over Period") to
facilitate relocation to the Temporary CPU. Client shall
discontinue use of the Programs on the Designated System
located at Client's site upon expiration of the Switch-over
Period. Notwithstanding the preceding sentence and after
expiration of the Switch-over Period, Client may continue to
maintain a backup or archival copy(ies) of the Program(s)
while the Programs are installed and used on the Temporary
CPU, provided that the Program(s) are not installed or used
by Client on the Designated System during the period the
Programs are installed or used on the Temporary CPU. (Note -
If an Order Form contains a fixing date and the number of
computers is not limited, then this subparagraph (iv) shall
not apply until the fixing date.);
(v) The Agent discontinues use of the Program(s) immediately upon
the termination or expiration of: (a) its agreement with
Client; (b) the Order Form or the Program licenses; or (c)
this Agreement and promptly returns the Program(s), and any
copy thereof, to Client in accordance with Paragraph 4.5 of
this Agreement. Client shall use reasonable means available,
both contractual and technical, to ensure that each
Program(s) supplied to the Agent is installed, used, and
protected in accordance with the provisions of this
Paragraph C. If the Agent fails to comply with the
provisions of this Paragraph C., Client shall immediately
notify the Agent and Oracle of same. If the Agent fails to
promptly correct the noncompliance following such
notification Client shall terminate the Agent's right to use
the Program(s);
(vi) ORACLE MAKES NO REPRESENTATIONS NOR EXTENDS ANY
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED,
INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, NOR ASSUMES ANY
OBLIGATIONS OR RESPONSIBILITIES WHATSOEVER WITH RESPECT
TO PERFORMANCE OF THE PROGRAM(S) WHICH ARE INSTALLED ON
THE TEMPORARY CPU AND/OR USED BY THE AGENT.
Notwithstanding anything to the contrary in the preceding
sentence, the parties agree that the warranty between
Oracle and Client shall remain as stated in this
Agreement; AND
(vii) IN NO EVENT SHALL ORACLE BE LIABLE FOR ANY DIRECT,
INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES,
INCLUDING LOSS OF PROFITS, REVENUE, DATA, OR USE INCURRED
BY CLIENT OR ANY THIRD PARTY, WHETHER IN AN ACTION IN
CONTRACT OR TORT, ARISING EITHER DIRECTLY OR INDIRECTLY
FROM AN AGENT'S USE OF THE PROGRAM(S), EVEN IF ORACLE OR
ANY OTHER PERSON HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES. Notwithstanding anything to the contrary in
the preceding sentence, the parties agree that
Infringement Indemnity in Paragraph 5.1 shall remain as
stated in this Agreement.
1.9 "Oracle Application Programs" shall be Programs designated as
application software by Oracle.
1.10 "Limited Production Programs" shall be Programs not specified on the
Price List or specified as Limited Production, Tier 3 or with special
restrictions on the Price List.
II. PROGRAM LICENSE
2.1 Rights Granted
A. Oracle grants to Client a nonexclusive license to use the Programs
Client obtains under this Agreement, as follows:
i. to use the Programs solely for Client's own internal
data processing operations on the Designated System or
on a backup system if the Designated System is
inoperative or on a hot-site backup system operated by a
Client Entity, up to any applicable maximum number of
designated Users (if any User limitation applies).
Client may not use the Programs for third-party
training, commercial time-sharing, rental, or service
bureau use. Notwithstanding the prohibition against use
of the Programs for "third party training" and "service
bureau" activities, "Client's own internal data
processing" shall: (a) not prohibit use of the Programs
by a Client Entity Employee, Agent Individual, or
Subscriber Designee under Paragraphs 1.8 B and C above;
(b) include the internal business data of Client or a
Client Entity or data, received from a third party by
Client or a Client Entity, that is related to entities
regulated by the Client Entities, issuers, issues,
markets (e.g. financial, commodity, or barter but not
wholesale or retail stores), financial instruments,
professional testing, identification or verification
products, insurance, and news referring to or related to
the above, including those markets operated and
regulated by a Client Entity; and (c) not prohibit
training of Client Entity Employee, Agent Individual, or
Subscriber Designee Users;
ii. to use the Documentation provided with the Programs in
support of Client's authorized use of the Programs;
iii. to copy the Programs for archival or backup purposes;
no other copies shall be made without Oracle's prior
written consent. All titles, trademarks, copyright and
restricted notices shall be reproduced in such copies.
All archival and backup copies of the Programs are
governed by the terms of this Agreement; and
iv. to modify the Programs, or combine them with other
software products. The Programs or such portions thereof
included in such software products shall remain the
property of Oracle and shall be governed by the terms of
this Agreement. A software application developed by
Client or a Client Entity or by an Agent (other than
Oracle) for Client or a Client Entity, using a
Program(s) that is licensed by Oracle to provide a
licensee with a programming language for the development
of software applications, will be the property of Client
except for any Program code and/or works derivative, if
any, of any Program contained in such software
application. Ownership of a software application, other
than a Program, developed by Oracle for Client or a
Client Entity will be determined in the Services
Agreement.
Client shall not copy or use the Programs (including
the Documentation) except as otherwise specified in this
Agreement.
B. Client agrees not to cause or permit the reverse engineering,
disassembly, or decompilation of the Programs.
C. Oracle shall retain all title, copyright, and other proprietary
rights in the Programs and all modifications, enhancements, and
other works derivative of the Programs. A software application
developed by Client or a Client Entity or by an Agent (other than
Oracle) for a Client or a Client Entity, using a Program(s) that
is licensed by Oracle to provide a licensee with a programming
language for the development of software applications, will be
the property of Client except for any Program code and/or works
derivative, if any, of any Program contained in such software
application. Ownership of a software application, other than a
Program, developed by Oracle for Client or a Client Entity will
be determined in the Services Agreement. Client does not acquire
any rights, express or implied, in the Programs, other than those
specified in this Agreement.
D. The Programs are not intended for use in any nuclear, aviation,
mass transit, medical, or other inherently dangerous
applications. It shall be Client's responsibility to take all
appropriate measures to ensure the safe use of such applications
if the Programs are used for such purposes, and Oracle disclaims
liability for any damages caused by such use of the Programs.
E. Other Oracle Programs may be embedded in or delivered with Oracle
Programs licensed under this Agreement. Client shall be limited
to use of Oracle Programs licensed under this Agreement. Client's
right to use any Oracle Programs embedded within or delivered
with or as part of an Oracle Application Program shall be limited
to use necessary to implement the Oracle Application Program;
Client shall have no right to use such Programs outside the scope
of the Oracle Application Program, including development or any
other uses.
2.2 Acceptance of Program
A. For each Program License for which delivery is required under this
Agreement, Client shall have a 15 day Acceptance Period, beginning on
the Commencement Date, in which to evaluate the Program. During the
Acceptance Period, Client may cancel the license by giving written
notice to Oracle and returning the Program in accordance with
Paragraph 4.5 below. Unless such cancellation notice is given, the
license will be deemed to have been accepted by Client at the end of
the Acceptance Period. If Client is granted a right to copy license
and no delivery is necessary, subsequent copies shall be deemed
accepted upon acceptance of the master copy.
B. Notwithstanding the foregoing, Client may license a Program(s) at no
charge under a Trial License Agreement prior to ordering such
Program(s) under this Agreement. If a license for the Program(s) is
subsequently purchased by Client there shall be no Acceptance Period
under Paragraph 2.2 A. above for the Program.
2.3 Transfer and Assignment
A. Within the United States, a Program license may be transferred to
another computer system of like configuration (same model and
operating system), or the Designated System may be transferred to
another location within Client's organization, upon written
notice to Oracle. All other transfers, including transfer of a
Program license outside the United States, shall be permitted
only with Oracle's prior written consent, which consent shall not
be unreasonably withheld, and shall be subject to a transfer fee,
if any, as specified in Oracle's Price List and policies in
effect at the time of the transfer.
B. The rights granted herein are restricted for use solely by
Client, except as provided in Paragraph 1.8 B. above. Client may
not authorize or allow the use or the remarketing of the Programs
by a third party, and may not assign or transfer the Programs or
the Agreement to a third party without the prior written consent
of Oracle, which shall not be withheld unreasonably. However,
Client may, upon written notice to Oracle, assign this Agreement
to a Client Entity, provided that prior to such assignment the
Client Entity agrees in writing to be bound by the terms of this
Agreement.
2.4 Verification
On Oracle's written notice, not more frequently than annually,
Client shall furnish Oracle with a signed certification (a)
stating whether or not the Programs are being used pursuant to
the terms of this Agreement, including any User limitations; and
(b) listing the number of Users (including Agents, Subscribers
and employees of Client and Client Entities), location, types,
and serial numbers (except serial numbers for personal computers)
of the Designated Systems of Client and each Client Entity on
which the Programs are run. Such certification will be to the
best of Client's knowledge and belief.
Oracle may, at its expense, audit from Client's and Client
Entities' records the number of copies of the Programs in use by
Client and Client Entities, the Designated System(s) on which the
Programs are installed, and the number of Users using the
Programs. Any such audit shall be scheduled in advance and shall
be conducted at a mutually agreeable time at Client's and/or
Client Entities' facilities and shall not unreasonably interfere
with Client's and Client Entities' business activities. If an
audit reveals that Client has underpaid fees to Oracle, Client
shall be invoiced for such underpaid fees based on the terms in
effect at the time the audit is completed. Audits shall be
conducted no more than once annually. The parties agree that
Client's signed certification prepared under this Paragraph,
and/or the results of an audit of Client's use of the Programs,
shall be Confidential Information under Paragraph 7.1 of this
Agreement and is subject to applicable securities regulations.
III. TECHNICAL SERVICES
3.1 Technical Support Services
Technical Support services ordered by Client will be provided under
Oracle's Technical Support policies in effect on the date Technical
Support is ordered, but in any event in accordance with this
Agreement, subject to the payment by Client of the applicable fees.
Client may terminate Technical Support Services without terminating
any Program licenses. Provided Client is currently under Technical
Support services, upon Client's identification of a problem with a
Program which significantly affects the operation of the Program,
Oracle shall ***** *. At Client's request, Oracle will provide remote
assistance in the installation of each Supported Program license.
Reinstatement of lapsed Technical Support services is subject to
Oracle's Technical Support reinstatement fees in effect on the date
Technical Support is re-ordered. Limited Production Programs and
pre-production releases of Programs may not be eligible for standard
Technical Support Services; Client may obtain Technical Support
Services for Limited Production Programs on a time and materials
basis.
3.2 Consulting and Training Services
Oracle anticipates that it will provide off-site training services
agreed to by the parties under the terms of this Agreement and
consulting services and on-site training agreed to by the parties
under the terms of a separate consulting services agreement. Any
consulting services acquired from Oracle shall be bid separately from
the Program licenses and Client may acquire the Program licenses
without acquiring any consulting services.
3.3 Incidental Expenses
For any on site services requested by Client, Client shall reimburse
Oracle for actual, reasonable travel and out-of-pocket expenses
incurred as agreed upon by the parties.
IV. TERM AND TERMINATION
4.1 Term
Each Program license granted under this Agreement shall remain in
effect perpetually (if not otherwise specified on the Order Form),
unless terminated as provided in Paragraph 4.2 or 4.3 below.
4.2 Termination by Client
Client may terminate this Agreement or any license upon written notice
if Oracle breaches a material term of this Agreement and fails to
correct the breach within thirty (30) days following receipt of
written notice specifying the breach. If such breach, except one
involving a Client Entity's proprietary rights or Confidential
Information, is not reasonably curable within such thirty (30) day
period, Client shall not unreasonably withhold approval of a longer
cure period provided that Oracle promptly commences to cure such
breach and diligently pursues the curing of such breach.
4.3 Termination by Oracle
Oracle may terminate this Agreement or any license upon written notice
if Client breaches a material term of this Agreement and fails to
correct the breach within 30 days following written notice specifying
the breach. If such breach, except one involving Oracle's proprietary
rights or Confidential Information, is not reasonably curable within
such thirty (30) day period, Oracle shall not unreasonably withhold
approval of a longer cure period provided that Client promptly
commences to cure such breach and diligently pursues the curing of
such breach.
4.4 Effect of Termination
Termination of this Agreement or any license shall not limit either
party from pursuing any other remedies available to it, including
injunctive relief, nor shall such termination relieve Client's
obligation to pay all fees that have accrued or that Client has agreed
to pay under any Order Form or other similar ordering document under
this Agreement unless so ordered or determined by a court. The
parties' rights and obligations under Paragraphs 2.1.B, 2.1.C, 2.1.D,
and 2.3.B, and Articles IV, V, VI and VII shall survive termination of
this Agreement.
If Client materially breaches this Agreement, including failing to
make any payments required hereunder when due under any Order Form or
other similar ordering document to this Agreement, then Oracle may
declare all sums due and to become due hereunder immediately due and
payable. Notwithstanding the previous sentence, Oracle may not declare
all sums due and payable for a breach which Client is curing in
accordance with Paragraph 4.3 above.
4.5 Return of Programs Upon Termination
If a license granted under this Agreement expires or otherwise
terminates, Client shall (a) cease using the applicable Programs, and
(b) certify to Oracle within one month after expiration or termination
that Client has destroyed or has returned to Oracle the Programs and
all copies. If Client inadvertently fails to provide such
certification, Client shall have a cure period in accordance with
Paragraph 4.3 of this Agreement. This requirement applies to copies in
all forms, partial and complete, in all types of media and computer
memory, and whether or not modified or merged into other materials.
Notwithstanding the foregoing, Client may retain copies of the
Programs in archived media and may use the archived copies to retrieve
data provided that the Programs are not used to retrieve the data and
that all partial and complete copies of the Programs on the archived
media are destroyed in the regular course of eliminating archival
copies. Before returning Programs to Oracle, Client shall acquire a
Return Material Authorization ("RMA") number from Oracle at (415)
506-1500.
V. INDEMNITY, WARRANTIES, REMEDIES, LIMITATION OF LIABILITY
5.1 Infringement Indemnity
Oracle will defend and indemnify and hold Client, Client Entities, and
Agents (only for a claim under this Paragraph in which the claimed
infringement is alleged to have occurred during the term of this
Agreement while a Program is temporarily installed at the Agent's site
in accordance with this Agreement) employees, officers, and directors
of Client, Client Entities, and Agents (as limited above in this
Paragraph) harmless against a claim that Programs furnished and used
within the scope of this Agreement misappropriate a trade secret or
trademark, or infringe a copyright or patent, of any country which is
a signatory to the Berne Convention or the Universal Copyright
Convention and which has executed implementing legislation, provided
that: (a) Client notifies Oracle in writing within 30 days of its
receipt of written notice of the claim; (b) Oracle has sole control of
the defense and all related settlement negotiations; and (c) Client
provides Oracle with the reasonable assistance, information, and
authority necessary to perform Oracle's obligations under this
paragraph, however, Client shall not be required to waive, nor shall
this clause be construed as a waiver of, any privileges under the
attorney work product or attorney-client privilege doctrines.
Reasonable out-of-pocket expenses incurred by Client in providing such
assistance will be reimbursed by Oracle.
Oracle shall have no liability for any claim of infringement to the
extent it is based on: (a) use of a superseded or altered release of
Programs if such infringement would have been avoided by the use of a
current unaltered release of the Programs that Oracle provides to
Client; or (b) the combination, operation, or use of any Programs
furnished under this Agreement with software, hardware, or other
materials not furnished by Oracle if such infringement would have been
avoided by the use of the Programs without such software, hardware, or
other materials unless the combination, operation, or use is the
normal use (e.g. the operating system under which a Program runs) of
the Programs in accordance with this Agreement and the applicable
Order Form.
In the event the Programs are held or are believed by Oracle to
infringe, Oracle shall have the option, at its expense, to (a) modify
the Programs to be noninfringing; (b) obtain for Client a license to
continue using the Programs; or (c) terminate the license for the
infringing Programs and refund the license fees paid for those
Programs. As of the Effective Date of this Agreement, to the best of
Oracle's knowledge, there exist no claims or encumbrances which, in
Oracle's opinion, would preclude Client's right to use the Programs in
accordance with this Agreement. This Paragraph 5.1 states Oracle's
entire liability and Client's exclusive remedy for infringement.
Oracle's obligations under this Paragraph shall survive termination or
expiration of this Agreement or the relevant Program license only for
claims of infringement in which the claimed infringement is alleged to
have occurred during the term of this Agreement or the relevant
Program license.
5.2 Warranties and Disclaimers
A. Warranties
i. Program License Warranties
For each Supported Program License and
each Update received for a Supported Program License, Oracle
warrants for a period of one year from the Commencement Date
that the Programs, unless modified by Client, will perform the
functions described in the Documentation provided by Oracle
when operated on the Designated System. Oracle will undertake
to correct any reported error condition in accordance with its
technical support policies but in any event in accordance with
this Agreement.
Oracle does not warrant that the Programs
will meet Client's requirements, that the Programs will
operate in the combinations which Client may select for use,
that the operation of the Programs will be uninterrupted or
error-free, or that all Program errors will be corrected.
If Client does not obtain Technical Support
services, the Programs are distributed "as is."
ii. Media Warranty
Oracle warrants that: (a) the media and
software Programs will not be returned material (this shall
not prohibit Oracle from using recycled media which has been
magnetically degaussed); (b) the Programs will be the
production release current as of the effective date of the
applicable Order Form, unless otherwise agreed by the parties;
and (c) the tapes, diskettes or other media will be free of
defects in materials and workmanship under normal use for 90
days from the Commencement Date.
iii. Services Warranty
Oracle warrants that its Technical Support
and consulting services will be performed consistent with
generally accepted industry standards. This warranty shall be
valid for 90 days from performance of each Technical Support
or consulting service even if a subsequent service is the same
as a service performed prior to it.
iv. Virus Warranty
Provided that Client is under contract to
receive Technical Support from Oracle for a licensed Program,
Oracle warrants that it will use reasonable efforts to provide the
Program to Client without viruses (i.e. code embedded in a Program
whose purpose is to halt effective operation or use of the Program
on conditions set by or triggered by an event or a person other
than Client, Oracle, or Oracle's licensor) (Oracle will provide,
upon receipt of Client's written request, Oracle's then current
procedures to prevent introduction of viruses.) or trap doors (i.e.
circumvention of the Program's documented security enforcing
mechanisms by means of the Program itself by a person in order to
obtain unauthorized access to the Program) (collectively referred
to as "Virus"). Client acknowledges that a Program's documented
security mechanisms are dependent on the environment in which the
Program is executed (e.g. the capability of security mechanisms in
the operating system, network, and hardware) and Client's
implementation of the Program's documented security mechanisms
(e.g. the setting of options, privileges and parameters for the
Program). For the purpose of this Subparagraph the term Virus shall
not include Embedded Devices under Paragraph 7.10 of this
Agreement. Oracle will use reasonable efforts to notify Client's
Technical Contact if a Virus that equates to an Oracle Priority
One/Critical Condition is discovered in a Program. Client will use
reasonable efforts to notify Oracle's Technical Support if Client
discovers a Virus in a Program. If Client discovers a Virus in a
Program, then Client will use reasonable efforts to provide Oracle
with reasonable information to help identify and isolate the Virus.
Oracle will use reasonable efforts to work with Client to classify
and resolve the Virus in accordance with the Technical Support
Services Section of this Agreement. If Oracle requests return of
the infected Program, Client shall label the media as Virus
infected and return it to Oracle and Oracle shall send Client a
replacement copy of the Program at no additional charge. As used in
this Subparagraph "reasonable efforts" shall mean reasonable
efforts relative to the seriousness of the problem.
B. Limitations on Warranties
i. The warranties above are exclusive and in lieu of all other
warranties, whether express or implied, including the implied
warranties of merchantability and fitness for a particular
purpose.
ii. As an accommodation to Client, Oracle may supply Client with
Limited Production Programs or with pre-production releases of
Programs (which may be labeled "Alpha" or "Beta"). These products
are not suitable for production use. Oracle does not warrant
Limited Production Programs, pre-production releases or computer
based training products; these products are distributed "as is."
5.3 Exclusive Remedies
For any breach of warranties contained in Paragraph 5.2 above,
Client's exclusive remedy, and Oracle's entire liability, shall be:
A. For Programs
The correction of Program errors which cause breach of the
warranty, or if Oracle is unable, within a reasonable time, to make
the Program operate as warranted, Client shall be entitled to recover
the fees paid to Oracle for the Program license or Update (for an
Update the recoverable fees will be one half of the annual Technical
Support fee paid by Client for the twelve month Technical Support
period in which the Update was provided), as applicable.
B. For Media
The replacement of defective media returned within 90 days
of the Commencement Date.
C. For Services
The reperformance of the services, or if Oracle is unable
to perform the services as warranted, Client shall be entitled to
recover the fees paid to Oracle for the deficient services.
5.4 Limitation of Liability
***** * in no event shall either party be liable for any indirect,
incidental, special or consequential damages or damages for loss of
profits, revenue, data, or use, incurred by either party or any third
party, whether in an action in contract or tort, even if the other
party or any other person has been advised of the possibility of such
damages***** each party's liability for damages hereunder shall in no
event exceed the amount of fees paid by Client under this Agreement,
and if such damages result from Client's use of the Program or
services, such liability shall be limited to fees paid for the relevant
Program or services giving rise to the liability.
The provisions of this Article V allocate the risks under this
Agreement between Oracle and Client. Oracle's pricing reflects this
allocation of risk and the limitation of liability specified herein.
VI. PAYMENT PROVISIONS
6.1. Invoicing and Payment
Invoices for payment of license fees shall be payable on the
Commencement Date. Technical Support fees shall be payable annually in
advance; such fees will be those in effect at the beginning of the
period for which the fees are paid. All other applicable fees shall be
payable when invoiced. All fees shall be deemed overdue if they remain
unpaid 31 days after they become payable. Any amounts payable by
Client hereunder, during the first year from the Effective Date of
this Agreement, which remain unpaid ninety (90) days after the due
date shall be subject to late penalty fees equal to 1.5% per month
from the due date until such amount is paid. Any amounts payable by
Client hereunder, after the first year from the Effective Date of this
Agreement, which remain unpaid sixty (60) days after the due date
shall be subject to late penalty fees equal to 1.5% per month from the
due date until such amount is paid. If Client's procedures require
that an invoice be submitted against a purchase order before payment
can be made, Client will be responsible for issuing the purchase order
at the time of order. Oracle will use reasonable efforts to invoice
Client within six (6) months of the date that the charges were due to
have been invoiced, failure to invoice Client within that period shall
not relieve Client of its obligations to pay the charges. Client
agrees to pay actual shipping charges.
- --------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
6.2. Taxes
The fees listed in this Agreement do not include taxes; if Oracle is
required to pay sales, use, property, value-added, or other federal,
state or local taxes based on the licenses or services granted in this
Agreement or on Client's use of Programs or services, then such taxes
shall be billed to and paid by Client. This paragraph shall not apply
to taxes based on Oracle's net or gross income or corporate franchise
taxes.
VII. GENERAL TERMS
7.1 Nondisclosure
For the purposes of this Paragraph "party" and "Client" shall also
include Client Entity and Agent. By virtue of this Agreement, the
parties may have access to information that is confidential to one
another ("Confidential Information"). Confidential Information shall
be limited to the Programs and information which is: (a) disclosed by
the Discloser in writing and marked "confidential" at the time of
disclosure; (b) disclosed by the discloser and identified as
confidential at the time of disclosure in a manner which would put a
reasonable person on notice that such information is Confidential
Information; (c) information relating to strategic business,
financial, product planning or development, personnel, computer system
development, or computer system operation; or (d) information relating
to investigatory matters, regulatory matters, matters involving
broker/dealers, issues, or issuers. Client shall use reasonable
efforts to disclose to Oracle only Confidential Information that is
necessary for Oracle's performance under this Agreement. Client's
failure to use reasonable efforts to so limit disclosure of
Confidential Information will not necessarily excuse Oracle's breach
of this Paragraph but may reduce Oracle's potential liability to
Client depending on the extent to which Client's failure contributed
to Oracle's breach.
A party's Confidential Information shall not include information that:
(a) is or becomes a part of the public domain or is publicly known,
through no act or omission of the other party; (b) was in the other
party's lawful possession prior to the disclosure and had not been
obtained by the other party either directly or indirectly from the
disclosing party; (c) is lawfully disclosed to the other party by a
third party without restriction on disclosure; or (d) is independently
developed by the other party. Client shall not disclose the results of
benchmark tests of the Programs to any third party without Oracle's
prior written approval. The parties agree, both during the term of
this Agreement and for a period of two years after termination of this
Agreement and of all licenses granted hereunder, to hold each other's
Confidential Information in confidence, except for Confidential
Information, as defined in item (d) of the first subparagraph of this
Paragraph 7.1, for which the obligation of non-disclosure shall
survive until the Confidential Information is publicly known. The
parties agree, that unless required by law, not to make each other's
Confidential Information available in any form to any third party or
to use each other's Confidential Information for any purpose other
than the implementation of Programs, licenses, or services under this
Agreement or discussions related thereto. Each party agrees to take
all reasonable steps to ensure that Confidential Information is not
disclosed or distributed by its employees or agents in violation of
the provisions of this Agreement using the same standard of care such
party takes with respect to their own confidential information of like
nature and value, but no less than a reasonable standard of care.
In the event either party receives a subpoena or other validly issued
administrative or judicial process demanding Confidential Information
of the other party, the recipient shall promptly notify the owner of
Confidential Information and tender to it the defense of such demand.
Unless the demand shall have been timely limited, quashed or extended,
the recipient shall thereafter comply with such demand, but only to
the extent required by law. If requested by the party to whom the
defense has been tendered, the recipient shall cooperate (at the
expense of the requesting party) in the defense of such demand.
Oracle shall not use the names National Association of Securities
Dealers, Inc., The Nasdaq Stock Market, Inc. or "NASD" or "Nasdaq" in
any written advertising or promotional media without the prior written
consent of Client. Client shall not use the name Oracle Corporation or
"Oracle", or any mark beginning with the letters "Ora" where its use
would be likely to cause confusion in the marketplace over the source
being Oracle, in any written advertising or promotional media without
the prior written consent of Oracle. Neither party shall use any
trademark, service mark, copyright or patent of the other party's
corporations listed in this paragraph, without the written consent of
the other party. Notwithstanding the firegoing, either party may use
the name(s) of the other party orally in conversations or in writing
with customers or prospects to indicate that Client is a licensee of
Oracle Programs. However, Oracle may not describe Client's
implementation of the Programs or services or Client Entity
application without prior written consent which will not be
unreasonably withheld. The parties' obligations under this paragraph
shall survive expiration or termination of this Agreement.
Nothing contained in this Paragraph shall be construed to prohibit
Client from: (i) submitting evaluations of the Programs to its Board
of Directors or an Agent in order that the Board may compare
competitive products, provided that each Agent and member of the Board
is bound by the obligations of confidentiality set forth herein;
and/or (ii) permitting representatives of a government agency having
regulatory jurisdiction over Client or a Client Entity to audit
Client's database systems, but only to the extent required for such
government agency to determine whether Client or a Client Entity is in
compliance with applicable government regulations; nor shall it be
construed to prohibit either party from permitting auditors, lawyers,
or entities with a fiduciary duty to either party, or Agent
Individuals under Paragraph 1.8 or management consultants who have
signed a nondisclosure agreement which obligates them to provisions
substantially equivalent to those of this Agreement with respect to
Confidential Information, to review this Agreement and Client's
implementation of the Programs.
7.2 Reserved
7.3 Reserved
7.4 Notice
"All notices, including notices of address change, required to be sent
hereunder shall be in writing and shall be deemed to have been given when
mailed, postage prepaid, by registered or certified mail, return receipt
requested, or any other delivery method that actually obtains a signed
delivery receipt, when addressed to the person named below at the
appropriate addresses below or to such other address as any party hereto
shall specify by written notice to the other party or parties hereto:
If to Oracle for notices of default of dispute: If to Client for notices of default or dispute:
Oracle Corporation The Nasdaq Stock Market,Inc.
Corporate Legal Department 1735 K Street N.W.
500 Oracle Parkway Washington, D.C. 20006
Mail Code 659507 Attn. Office of General Counsel
Redwood Shores, CA 94065 (NASDAQ Contracts Group).
If to Oracle for notice other then above: If to Client for notice
other then above:
Oracle Corporation ***** *
Contract Administration ***** 500 Oracle Parkway
***** Mail Code 659315 80 Merritt Boulevard
Redwood Shores, CA 94065 Trumbull, CT 06611
*****
Invoices, purchase orders, and Order Forms shall be mailed by first
class mail to the first address listed in the relevant Order Form (if
to Client) or to the Oracle address on the Order Form (if to Oracle).
To expedite order processing, Client acknowledges Transmitted Copies
as binding documents equivalent to original documents. "Transmitted
Copies" shall mean Order Forms and other ordering documents which: (i)
contain no modifications or amendments to this Agreement; (ii) are
copied or reproduced and transmitted to Oracle via photocopy,
facsimile, or any other process which accurately reproduces and
transmits the original documents; and (iii) are accepted by Oracle.
7.5 Severability
In the event any provision of this Agreement is held to be invalid or
unenforceable, the remaining provisions of this Agreement will remain
in full force and effect.
7.6 Waiver
The waiver by either party of any default or breach of this Agreement
shall not constitute a waiver of any other or subsequent default or
breach. Except for actions for nonpayment or breach of either party's
proprietary rights, no action, regardless of form, arising out of this
Agreement may be brought by either party more than two years after the
cause of action has accrued.
7.7 Export Administration
Client agrees to comply fully with all relevant export laws and
regulations of the United States to assure that neither the Programs,
nor any direct product thereof, are exported, directly or indirectly,
in violation of United States law.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
7.8. General Indemnification
Each party ("Indemnifying Party") shall defend and indemnify the other
party and its employees, officers, and directors (Indemnified Party")
against any liability, damage or expense which the Indemnified Party
may sustain, incur, or be required to pay, arising out of or in
connection with claims for personal bodily injury or wrongful death or
damage to tangible personal property resulting from any negligent act
or omission of the Indemnifying Party or a person employed by the
Indemnifying Party acting within the scope of his/her employment in
the performance of this Agreement while on a party's premises;
provided that:
(a) The Indemnifying Party is notified in writing of any claim
promptly after the Indemnified Party becomes aware of it;
(b) The Indemnifying Party has sole control of the defense of such
claim and of all negotiations for its settlement or compromise
(Notwithstanding anything to the contrary in this item (b), if in
the Indemnified Party's reasonable judgement the claim may exceed
***** * then the Indemnified Party may, at its own expense and upon
prior written notice to the Indemnifying Party, have counsel of
its choice participate in the defense of such claim and all
negotiations for its settlement or compromise. In such event the
Indemnifying Party and the Indemnified Party shall cooperate with
each other to the extent that their interests do not conflict.);
and
(c) The Indemnified Party gives the Indemnifying Party information
reasonably available and assistance necessary to facilitate the
settlement or defense of such claim and, to the extent permitted
by law, the Indemnified Party makes any defenses available to it
available to the Indemnifying Party; however, the Indemnified
Party shall not be required to waive, nor shall this clause be
construed as a waiver of, any privileges under the attorney work
product or attorney-client privilege doctrines.
The Indemnifying Party's indemnity obligation under this Paragraph
shall be reduced to the extent by which the liability, damage, or
expense results from the willful misconduct, negligent act or omission
of employees, agents, or subcontractors of the Indemnified Party, or a
third party(s). For the purpose of this Paragraph, "tangible personal
property" shall not include software, documentation, data or data
files nor shall the indemnity obligation stated in this Paragraph
apply to damages incurred by use of any software.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
The Indemnifying Party's obligations under this Paragraph shall
survive termination or expiration of this Agreement only for claims
involving personal bodily injury, wrongful death, or damage to
tangible personal property where the act is alleged to have occurred
during the term of this Agreement. If a claim under this Paragraph is
solely between Oracle and Client (e.g. there are no other parties to
the claim or action) then item (c) of this Paragraph shall not apply.
The parties agree that they may not sue each other for the loss of an
employee's services. The Indemnifying Party's indemnity obligation,
except that for personal injury, shall be limited to the ***** * or to
the amount of the applicable Order Form which gave rise to the claim.
7.9. Security Regulations
Oracle personnel may be instructed, while on site, to comply with
reasonable security regulations pertinent to each Nasdaq location. If
any Oracle personnel refuses to comply with such security regulations
then the personnel may be escorted out of or refused admittance to the
location. Oracle personnel also may be issued a visitor identification
card by Client. Such identification cards will be surrendered upon
Client's demand therefor.
7.10 Embedded Devices
For the purpose of this Paragraph 7.10, (i) a "Disabling Device" shall
mean code embedded in a Program, by Oracle or its licensor, if its
purpose is to halt all or substantially impede use of the Program, on
conditions set by Oracle or its licensor and (ii) a "Compliance
Device" shall mean code embedded in a Program, by Oracle or its
licensor, if its purpose is to limit use of the Program(s), hardware,
and/or user(s) to, and/or to monitor use of same for compliance with,
the rights granted in this Agreement and/or the applicable Program
license. Oracle warrants, as of the Effective Date below, that the
Programs licensed by Client do not contain a Disabling Device or
Compliance Device. ***** If Oracle or its licensor subsequently embeds
a Compliance Device in the Program, Oracle shall notify Client of same
provided that Client is under contract to receive Technical Support
from Oracle for the Program. If a Compliance Device does not function
correctly, Client shall report it to Oracle and provide Oracle with
reasonable information to help identify and isolate the Compliance
Device and Oracle shall correct the Compliance Device provided that
Client is under contract to receive Technical Support from Oracle for
the Program.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
Any attempt by Oracle (or any entity claiming by, through, or on
behalf of Oracle) to take possession of the Programs from Client or to
use Programs or Services to prevent all or substantially impede use of
the Programs by Client (not including correctly functioning Compliance
Devices under the first subparagraph of this Paragraph 7.10) must be
pursuant to court order. In such event, except for breach of Oracle's
proprietary rights in the Programs, Client retains the right to
substitute collateral of equal value (including the right to
substitute an escrow account for the disputed amount) in the event of
a foreclosure.
7.11 IP Bankruptcy Protection Act
In the event of Oracle's bankruptcy pursuant to the Bankruptcy Act and
an attendant rejection of this Agreement or any license hereunder
pursuant to Section 365n thereof, the parties intend that the
provisions of the IP Bankruptcy Protection Act shall apply and that
Client shall be entitled to retain possession of all Embodiments of
Intellectual Property delivered to it by Oracle under this Agreement
subject to the terms and conditions of this Agreement.
7.12 Insurance
Both parties shall provide the following insurance coverage during the
term of this Agreement:
(a) Worker's Compensation Insurance as required by the laws of
the relevant state;
(b) Employer's Liability Insurance in such customary amounts
carried by employers in like business; and
(c) Comprehensive General Liability and Property Damage
Insurance including Contractual Liability coverages as
follows:
General Liability $5,000,000 per occurrence
Employer's Liability $5,000,000 per accident
Automobile Liability $5,000,000 combined single limit
Either party shall supply the other party with a certificate(s) of
insurance evidencing such coverages, within a reasonable time of
receipt of a written request for same.
7.13 Subsequent Parties; Limited Relationship
This Agreement shall inure to the benefit of and shall be binding upon
the parties hereto and their respective permitted successors, or
assigns. Nothing in this Agreement, express or implied, is intended to
or shall (a) confer on any person, other than the parties hereto (and
any of the Corporations) or their respective permitted successors or
assigns, any rights to remedies under or by reason of this Agreement;
(b) constitute the parties hereto partners or participants in a joint
venture; or (c) appoint one party the agent of the other.
7.14 Headings
Section headings are included for convenience only and are not to be
used to construe or interpret the Agreement.
7.15 Counterparts
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and such counterparts together
shall constitute but one and the same instrument.
7.16 Releases of Foreign Programs
Client may purchase a license for a foreign release of a Program if
the foreign release of the Program is available in production release
on Oracle's Price List in effect at the time Client orders the Program
and at such fees as are agreed upon by the parties for use outside the
United States, except in countries where Oracle legally cannot, or
chooses not to, do business.
7.17 Entire Agreement
This Agreement constitutes the complete agreement between the parties
and supersedes all prior or contemporaneous agreements or
representations, written or oral, concerning the subject matter of
this Agreement. This Agreement may not be modified or amended except
in a writing signed by a duly authorized representative of each party
(i.e. a duly authorized officer of Client on behalf of Client and a
duly authorized signatory on behalf of Oracle); no other act,
document, usage or custom shall be deemed to amend or modify this
Agreement.
All orders will be on Order Forms. It is expressly agreed that all
terms of any Client purchase order or other ordering document shall be
superseded by the terms of this Agreement. This Agreement shall also
supersede the terms of any unsigned license agreement included in any
package for Oracle-furnished software, except terms contained in such
unsigned license agreement that limit usage of the Programs (e.g. such
as the number and type of Users of a Program(s), the type of computer
and operating system on which the Programs may be installed, the
license type, and the installation and number of copies of the Program
that can be made).
The Effective Date of this Agreement shall be November 30, 1993.
Executed by Client: Executed by Oracle Corporation:
Authorized Signature: Authorized Signature:
---------------------- ----------------------
Name: Name:
-------------------------------------- ------------------------------------------
Title: Title:
------------------------------------- -----------------------------------------
======================================================
ORACLE (R) For Publicly Traded Companies. Nasdaq and its
[Graphic Omitted] affiliates (Corporations) have an internal policy
of monitoring or restricting trading by certain
of its employees in publicly traded stocks where
the granting, renewal, or termination of the
agreement is considered by the publicly traded
company to be a "significant" event (one that
could affect the price of your company's stock or
require a public announcement). While the
Corporations offer no representation or warranty
about the enforcement of its policy or the
securities activities of anyone associated with
the Corporations, if your company believes its
contracts with the Corporations may be
"significant", please initial here ----------- .
Oracle has reviewed the paragraph above and does
not believe that this contract with NASD is
"significant".
Oracle Corporation
500 Oracle Parkway
Redwood Shores, CA 94065
(415) 506-7000
======================================================
Oracle is a registered trademark of Oracle Corporation.
EXHIBIT A
TECHNICAL SUPPORT LEVELS
Oracle's current Technical Support Services are set forth below and are
subject to change without notice:
a. Basic Annual Support includes:
o Telephone Technical Assistance
- 5:00 a.m. to 6:00 p.m. (Pacific Time), Monday through Friday
- Problem solving, bug reporting, documentation clarification,
technical guidance
- Program updates and associated documentation
o Real Time Support System (RTSS) dial-in access
- Log/Update/Review TARs
- Review Bugs
- Access the Support Bulletin Board
o Quarterly newsletter and Technical Bulletins
b. Standard Support includes:
o Basic Support
o Telephone Technical Assistance 24 hours a day/7
days a week
c. Extended Support includes:
o Standard Support
o Telephone Technical Assistance
- Toll-free 800 number
- 24 hours a day/7 days a week
o Monthly Technical Assistance Request (TAR) reports
d. PC Standard Support includes:
o Telephone Technical Assistance
- 5:00 a.m. to 6:00 p.m. (Pacific Time), Monday through Friday
- Problem solving, bug reporting, documentation clarification,
technical guidance
- Software Product Updates
e. PC Updates includes:
o Software Updates shipped with associated
documentation
In the event, Client permits Technical Support Services to lapse, reinstatement
of such Services shall be subject to a fee which is currently calculated at
***** * of the list price license fees for the Program on which Technical
Support has lapsed, as set forth in the Price List in effect when the Technical
Support Services are reinstated.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
Exhibit 10.5
REGULATORY SERVICES AGREEMENT
between
NASD REGULATION, INC.
and
THE NASDAQ STOCK MARKET, INC.
Dated as of June 28, 2000
TABLE OF EXHIBITS
Exhibit 1 Statement of Work
Exhibit 2 Change Control Procedures
THIS REGULATORY SERVICES AGREEMENT (Agreement), dated as of June
28, 2000 (Effective Date), is by and between NASD Regulation, Inc., a
Delaware nonprofit corporation with its principal place of business located
at 1735 K Street, N.W., Washington, D.C. 20006 (NASD Regulation) and The
Nasdaq Stock Market, Inc. (Nasdaq), a Delaware corporation with its
principal place of business presently located at 1735 K Street, N.W.,
Washington, D.C. 20006 [
W I T N E S S E T H:
WHEREAS, Nasdaq desires to procure effective and fair regulatory
services;
WHEREAS, NASD Regulation is uniquely qualified to provide such
services to Nasdaq; and
WHEREAS, NASD Regulation desires to provide to Nasdaq, and Nasdaq
desires to obtain from NASD Regulation, the regulatory and related services
described in this Agreement on the terms and conditions set forth in this
Agreement for Nasdaq.
NOW, THEREFORE, for and in consideration of the agreements set
forth below, Nasdaq and NASD Regulation hereby agree as follows:
SECTION 1 DEFINITIONS AND CONSTRUCTION.
1.01 Definitions. The following defined terms used throughout this
Agreement will have the meanings specified below. Additional definitions of
specific terms used in this Agreement may be found in subsequent Sections.
Affiliate will mean, as to any entity, any other entity that,
directly or indirectly, Controls, is Controlled by or is under
common Control with such entity.
Agreement will mean this Regulatory Services Agreement by and
between Nasdaq and NASD Regulation.
Century Compliant will mean, with respect to Software and Systems,
that such Software and Systems, respectively, will (1) operate and
produce data on and after January 1, 2000 (including taking into
effect that such year is a leap year), accurately and without
delay, interruption or error and (2) accept, calculate, process,
maintain, write and output, accurately and without delay,
interruption or error, all dates, whether before, on or after
12:00 a.m. January 1, 2000 (including taking into effect that such
year is a leap year), and any time periods determined or to be
determined based on any such dates.
Change(s) will mean any change in (1) the Services, (2) the
Systems that would materially alter the functionality, performance
standards or technical environment of the Systems, (3) the manner
in which the Services are provided, (4) the composition of the
Services or an applicable Service Tower, (5) the Fees, or (6)
relevant operating and security procedures.
Change Control Procedures will mean the written description that
defines how Changes will be implemented.
Change in Control will mean the (1) consolidation or merger of a
Party with or into any entity pursuant to which that Party is not
the surviving entity (2) sale, transfer or other disposition of
all or substantially all of the assets of a Party, (3) acquisition
by any entity, or group of entities acting in concert, of
beneficial ownership of 51 percent or more (or such lesser
percentage that constitutes Control) of the outstanding voting
securities or other ownership interests of a Party or (4) other
reorganization of a Party.
Claim will mean any (1) written demand or (2) civil, criminal,
administrative or investigative action or proceeding by a third
party against either Nasdaq or NASD Regulation.
Control will mean, with respect to any entity, the possession,
directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, whether
through the ownership of voting securities (or other ownership
interest), by contract or otherwise.
Fees will mean the amounts payable by Nasdaq to NASD Regulation
under the terms of this Agreement for: (i) for the Services
provided; and (ii) any other amounts payable by Nasdaq to NASD
Regulation pursuant to NASD Regulation's performance of this
Agreement.
Governmental Authority will mean any Federal, state, municipal,
local, territorial, or other governmental department, regulatory
authority, judicial or administrative body, whether domestic,
foreign or international.
Intellectual Property. shall mean patents, patent applications,
registered and unregistered trade marks and service marks,
registered and unregistered copyrights, trade names, computer
programs, data bases, trade secrets, proprietary information and
include all rights in information created under laws governing
patents, copyrights, mask works, trade secrets, trademarks,
publicity rights, or any other law that permits a person,
independently of contract, to control or preclude another person's
use of the information on the basis of the rights holder's
interest in the information.
Interest will mean the prime commercial rate plus one percent per
annum as announced from time to time by Chase Manhattan Bank, or
its successors or assigns, at its principal office in the United
States.
Law will mean any declaration, decree, directive, legislative
enactment, order, ordinance, regulation, rule or other binding
restriction of or by any Governmental Authority.
Losses will mean any and all damages, fines, penalties,
deficiencies, losses, liabilities (including settlements and
judgments) and expenses (including interest, court costs,
reasonable fees and expenses of attorneys, accountants and other
experts and professionals or other reasonable fees and expenses of
litigation or other proceedings or of any Claim, default or
assessment) but not expenses of the indemnified party (except
those of cooperation set forth in Section 21.04(3)) if the
indemnifying Party is defending the indemnified Party.
Machines will mean computers and related equipment, including
central processing units and other processors, controllers,
modems, communications and telecommunications equipment (voice,
data and video), cables, storage devices, printers, terminals,
other peripherals and input and output devices, and other tangible
mechanical and electronic equipment intended for the processing,
input, output, storage, manipulation, communication, transmission
and retrieval of information and data and Related Documentation
used by the Parties in their performance of this Agreement.
Nasdaq will mean The Nasdaq Stock Market, Inc. and its subsidiaries
and affiliated entities.
Nasdaq Data will mean Nasdaq Market Data, but shall not include:
(1) data that NASD Regulation has obtained elsewhere or by
regulatory mandate, or is able to obtain elsewhere (including, but
not limited to, data obtained from NASD member firms on a
voluntary or prescribed basis) notwithstanding having obtained
such data from Nasdaq; (2) data derived by NASD Regulation using
Nasdaq Market Data; (3) NASD Regulation Confidential Information;
or (4) NASD Regulation proprietary information.
Nasdaq Market Data will mean certain data and other information
relating to: (i) securities or other financial instruments,
products, vehicles or devices traded in the Nasdaq Stock Market or
other markets operated by Nasdaq (including over-the-counter
Bulletin Board and any other third market facility) (ii) Persons
regulated by Nasdaq or the activities of such Persons; or (iii)
information gathered by Nasdaq from other sources that is
reasonably required by NASD REGULATION to provide the Services..
NASD Regulation will mean NASD Regulation, Inc. and other present
or future subsidiaries and affiliated organizations of the
National Association of Securities Dealers, Inc. (NASD) that
assist or facilitate NASD Regulation's provision of regulatory
services to Nasdaq.
Parties will mean Nasdaq and NASD Regulation, collectively.
Party will mean either Nasdaq or NASD Regulation, as the case may
be.
Person will mean a natural person, proprietorship, corporation,
partnership or other entity whatsoever.
Related Documentation will mean, with respect to Software, Systems
and Machines and related tools and utilities, all materials,
documentation, specifications, technical manuals, user manuals,
flow diagrams, file descriptions and other written information
that describes the function and use of such Software, Systems or
Machines, as applicable.
Services will mean, collectively, the regulatory and related
services provided by NASD Regulation to Nasdaq pursuant to this
Agreement, and any assistance provided to Nasdaq by NASD
Regulation after the termination or expiration of this Agreement.
Software will mean the object code and the source code versions of
any applications programs, operating system software, computer
software languages, utilities, other computer programs and Related
Documentation, in whatever form or media, including the tangible
media upon which such applications programs, operating system
software, computer software languages, utilities, other computer
programs and Related Documentation are recorded or printed,
together with all corrections, improvements, updates, upgrades,
versions and releases thereof used by the Parties in their
performance of this Agreement.
Systems will mean the Software, Machines and related tools,
utilities and equipment, collectively, used by a Party to perform
this Agreement.
Term will mean the Initial Term and any renewal of this Agreement
pursuant to Section 3.02 herein and, if applicable, the Extension
Period.
1.02 Incorporation and References. In this Agreement and
the Exhibits to this Agreement:
(1) the Exhibits to this Agreement are hereby incorporated into and
deemed part of this Agreement and all references to this Agreement
will include the Exhibits to this Agreement;
(2) references to an Exhibit, Section or Article will be to such Exhibit
to, or Section or Article of this Agreement unless otherwise provided;
(3) references to any Law will mean references to such Law in changed
or supplemented form or to a newly adopted Law replacing a
previous Law; and
(4) references to and mentions of the word "including" or the phrase
"e.g." will mean "including, without ---- limitation."
1.03 Headings. The Article and Section headings, Table of
Contents and Table of Exhibits are for reference and convenience only and
will not be considered in the interpretation of this Agreement.
1.04 Interpretation of Documents. Except as otherwise
expressly set forth in the body of this Agreement or in any of the
Exhibits, in the event of a conflict between the provisions in the body of
this Agreement and the Exhibits, the provisions in the body of this
Agreement will prevail.
SECTION 2 SERVICES.
2.01 Designated Services. Commencing as of the
Commencement Date and continuing throughout the Term and any period of
termination assistance pursuant to Section 20 herein, NASD Regulation will
provide to Nasdaq:
(1) full regulatory services including, without limitation, those
services currently being performed by NASD Regulation plus
specified Member Operations as set forth in the Statement of Work
between the Parties, a copy of which is attached hereto as Exhibit
1 and made a part of this Agreement;
(2) NASD Regulation administrative functions reasonably related
necessary for NASD Regulation's performance in connection with any
of the foregoing; and
(3) any services or responsibilities not specifically described in
this Agreement that are mutually agreed upon by the Parties. These
Services, however, will not include any services that are provided
by NASD Regulation pursuant to agreements governed by Section
17(d), Rule 17d-1, or Rule 17d-2 of the Securities Exchange Act of
1934.
2.02 Service Towers. NASD Regulation will organize all of
the Services that it provides to Nasdaq in performance of this Agreement
into a series of towers. Each tower will represent a collection of services
that NASD Regulation has determined to be related due to interrelationships
among the types of services to be provided and the different skill
requirements required to perform them (Service Tower). Nasdaq must purchase
all of the Services in a Service Tower from NASD Regulation. Nasdaq cannot
purchase some Services, but not others in the same Service Tower. The
existing Service Towers upon the Effective Date of this Agreement are: (i)
Member Operations; (ii) Surveillance, Examinations and Investigations;
(iii) Formal Disciplinary Process; and (iv) Dispute Resolution. A more
detailed description of each of these Service Towers is set forth in
Exhibit 1 attached hereto. Notwithstanding the attachment of Exhibit 1, the
Parties shall undertake a review of the Exhibit after the execution of the
Agreement to ensure the Exhibit's accuracy in anticipation of the
commencement of the provision of Services. Services shall commence upon the
effectiveness of Nasdaq's registration as a national securities exchange
("Commencement Date"). The Parties will, thereafter, amend Exhibit 1 as
often as may be reasonably necessary to accurately reflect the Services
being provided by NASD Regulation to Nasdaq.
2.03 ***** *
2.04 Nasdaq Services. Nasdaq will provide such specific
Nasdaq services to NASD Regulation as NASD Regulation may require to
provide the Services to Nasdaq under this Agreement. Nasdaq will provide
such services to NASD Regulation on such terms as the Parties may agree
upon.
SECTION 3 TERM.
3.01 Initial Term. The initial term of this Agreement will
commence on the Commencement Date and continue for a period of ten (10)
years from the Commencement Date (Initial Term) unless this Agreement is
terminated by the Parties prior to that date in accordance with the
provisions of Section 19 herein.
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
3.02 Renewal. Unless this Agreement is terminated earlier
pursuant to Section 19 herein, Nasdaq will provide NASD Regulation with
written notice of its intent to renew this Agreement at least one (1) year
prior to the expiration of the Initial Term of this Agreement. If Nasdaq
does not intend to renew this Agreement, this Agreement will expire at the
end of the Initial Term. The Parties may renew this Agreement for such
length of time and upon such revised terms as they may mutually agree upon.
3.03 Extension Period. If the notice from Nasdaq made
pursuant to Section 3.02 herein indicates that Nasdaq desires to renew this
Agreement and the Parties have not agreed on the terms and conditions
applicable to the renewal of this Agreement within thirty (30) days prior
to the expiration of the Initial Term of this Agreement then, upon notice
by Nasdaq delivered prior to the expiration of the Initial Term, the term
of this Agreement will be extended for such period as may be mutually
agreed upon by the Parties (Extension Period), upon the same terms and
conditions and charges as are in effect as of the expiration of the Initial
Term of this Agreement. If during the Extension Period the Parties are
unable to reach agreement on the terms and conditions applicable to a
renewal of this Agreement, this Agreement will expire at the end of the
Extension Period unless the Parties mutually agree in writing to a
continuation of the Extension Period.
SECTION 4 PROVISION OF SERVICES.
4.1 ***** *
4.02 *****
4.02.1 *****
4.02.2 Independent Report. Upon receipt of a proposal
pursuant to Section 4.02.1 herein, NASD Regulation may request that the
Parties retain an independent third party to analyze whether the services
being proposed are comparable in scope and quality to those being performed
by NASD Regulation. The Parties will share the cost of this analysis
equally. Such independent third party will have sixty (60) days to provide
a written analysis of its findings to the Parties.
4.02.3 *****
4.02.4 *****
4.02.5 ***** .
4.03 Bidding on Services. NASD Regulation will have the
right to bid on the provision of regulatory services to Nasdaq during the
Term of this Agreement.
Section 5 SHARING OF RESOURCES.
5.01 Use of Facilities. Either Party may allow the other
Party to use a portion of any of its office facilities to further the
performance of this Agreement. Such facilities may be either leased or
owned by the Parties. The use of such facility by another Party does not
constitute a leasehold interest in favor of such Party. The Parties further
agree that they will adhere to the following guidelines when using another
Party's facility:
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
(1) the facilities will be used in an efficient manner.
(2) the Party using the facility will keep the facilities in good
order, not commit or permit waste or damage to such facility, not
use such facility for any unlawful purpose and will comply with
all of the other Party's standard policies and procedures for the
use of the facility that are in effect from time to time,
including procedures for the physical security of the facility.
(3) the Party using the facility will not make any improvements or
changes involving structural, mechanical or electrical alterations
to it without the other Party's prior approval.
(4) when the facility is no longer required for performance of the
Services, the facility will be returned to the other Party in the
same condition as when such usage began, ordinary wear and tear
excepted.
(5) the Parties will evaluate whether such usage should continue on a
quarterly basis. If the Parties agree to increase the amount of
space to be allocated and the Party providing the facility is
unable to provide such additional space, then the Party using such
space will: (i) allocate the required amount of additional space
at one of its own facilities; or (ii) if the Party is unable to
provide such space at one of its own facilities, it may procure it
from a third party. The Party procuring such space from a third
party may request that the pricing methodology for the Services
provided through that space be adjusted to incorporate the
incremental cost of such space. All such requests must be
submitted for approval by the Operations Committee created
pursuant to Section 9.03 herein.
5.02. Use of Other Resources. The Parties may also agree to
provide any of their other respective resources to the other Party on a
temporary basis, upon such terms and conditions as the Parties may mutually
agree upon, to further the performance of this Agreement.
SECTION 6 SERVICE LEVELS.
6.01 Service Levels. NASD Regulation will perform the
Services in accordance with Section 2.03. NASD Regulation further agrees
that it will conform to the performance standards mutually agreed upon by
the Parties for any new Services.
6.02 Adjustment of Service Levels. NASD Regulation and Nasdaq
will review the performance standards for the provision of the Services at
least annually and make such adjustments as they deem reasonably necessary.
Either Party may, however, at any time upon notice to the other Party: (i)
initiate a review and propose adjustments to any performance standard that
such Party in good faith reasonably believes is incorrect; and (ii) propose
that the feasibility of specific cost reduction or limitation strategies be
considered by the Parties. Any modification or elimination of an existing
performance standard or addition of a new standard will not become
effective until agreed upon in writing by the Parties. Any disagreement
between the Parties about an existing or proposed performance standard will
be resolved through the dispute resolution procedures set forth in Section
18 herein.
6.03 Measurement Reporting. NASD Regulation will implement
such reporting mechanisms or tools or provide such reports as the Parties
believe may be reasonably necessary to effectively monitor NASD
Regulation's performance of the Services against applicable performance
standards. Such mechanisms will: (i) permit reporting at a level of detail
sufficient to verify NASD Regulation's compliance with applicable
performance standards; and (ii) be subject to audit by Nasdaq or its
designee pursuant to the provisions of Section 15 herein. NASD Regulation
will provide Nasdaq and its designees with access to such mechanisms and
procedures upon request, for inspection and verification purposes. The cost
of implementing and maintaining such mechanisms will be included in the
pricing methodologies for the Services.
SECTION 7 NASD REGULATION SERVICE LOCATIONS.
7.01 Service Locations. NASD Regulation will give Nasdaq prior
notice of any proposed addition, deletion, rearrangement or relocation of
the facilities used by NASD Regulation to provide the Services to Nasdaq.
7.02 Security Procedures. NASD Regulation will maintain and
enforce security procedures at the facilities used by NASD Regulation to
provide the Services that are at least equal to industry standards for
locations similar to the NASD Regulation facilities.
7.03 Data Security. NASD Regulation will establish and
maintain safeguards to protect the integrity and confidentiality of Nasdaq
Data (Data Safeguards) that will be no less rigorous than data security
policies in effect at comparable Nasdaq facilities within thirty (30) days
after the Commencement Date of this Agreement. NASD Regulation will revise
and maintain these Data Safeguards at Nasdaq's reasonable request. In the
event NASD Regulation intends to implement a change to the Data Safeguards
that was not requested by Nasdaq it will first notify Nasdaq and obtain its
written consent. In the event NASD Regulation discovers or is notified of a
breach or potential breach of security relating to Nasdaq Data, NASD
Regulation will immediately: (i) notify the Nasdaq Program Executive (as
defined in Section 9.02 herein) of such breach or potential breach; and
(ii) if the applicable Nasdaq Data was in the possession of NASD Regulation
at the time of such breach or potential breach, NASD Regulation will: (a)
investigate and remediate the effects of the breach or potential breach;
and (b) provide Nasdaq with reasonable assurances that such breach or
potential breach will not recur.
SECTION 8 PERSONNEL.
8.01 Conduct of Personnel. Each Party warrants that while
on-site at a facility of the other Party, its personnel (including
independent contractors) will comply with the sections of the other Party's
Employee Handbook related to Equal Employment Opportunities, Sexual
Harassment, and Substance Abuse Policies. Each Party will provide the other
Party with current copy of its Employee Handbook within ten (10) days after
the Commencement Date of this Agreement. Each Party will also promptly
provide the other Party with copies of any updates to its Employee
Handbook. Each Party will indemnify and hold the other harmless (including
its officers, directors, employees, subcontractors, and other agents)
against any third party claims related to violations of the indemnified
party's Equal Employment Opportunities, Sexual Harassment, and Substance
Abuse Policies.
8.02 Security. Each Party will instruct its personnel to
comply with the security regulations pertinent to each of the other Party's
facilities that they visit. Each Party will indemnify and hold the other
harmless (including its officers, directors, employees, subcontractors, and
other agents) against any Losses occurring as a result of failure to comply
with the indemnified party's security regulations.
8.03 Removal of Personnel. If either Party notifies the other
Party that it is not satisfied with the performance of an employee of that
Party, that Party will promptly (a) investigate the matter and take
appropriate action which may include: (i) removing the applicable person
from the provision of the services related to that Party's performance of
this Agreement and providing the notifying Party with prompt written notice
of such removal; and (ii) replacing the applicable person with a similarly
qualified individual; or (b) take such other action as it deems appropriate
to prevent a recurrence. For alleged breaches of security and violations of
confidentiality while a Party's personnel is on the other Party's site or
in instances where a Party reasonably believes that the other Party's
personnel poses a risk to the operation of its business while on that
Party's site, the Party may remove the personnel in question, provided,
that, it first notifies the other Party of its concerns if it is reasonably
feasible for it to do so. The Party whose personnel were removed will
promptly replace such personnel at its own cost.
8.04 Improper Securities Transactions and Holdings. In the
event that either Party suspects that any employee of the other Party who
has been involved in the performance of this Agreement has been involved in
improper, illegal or unethical use of any data or information gained from
such performance, it may notify the other Party of such involvement and
request that it conduct an investigation of such individual. The Party
requesting such investigation will provide such assistance to the other
Party in such Party's conduct of this investigation as that Party may
reasonably request.
SECTION 9 MANAGEMENT AND CONTROL. The Parties will: (i) each appoint their
representatives to the committees set forth in this Section 9 within thirty
(30) days after the Commencement Date of this Agreement; and (ii) promptly
notify the other Party of their selected representatives to each of these
committees. Each Party will have one vote on each committee. Either the
President of each Party or a Party's Program Executive may designate issues
for resolution on a "fast track" in committees, in mediation, and in
arbitration. The Parties will then undertake all reasonable efforts to
resolve such issues within thirty (30) days (within each phase) of the
other Party's receipt of notice that such issues have been designated as
"fast tracked."
9.01 Periodic Meetings. Each Party will appoint a manager who
will act as its liaison to the other Party. This individual will: (i)
attend periodic or ad hoc, but at least monthly, meetings, to resolve any
daily operational issues that may have arisen during the performance of
this Agreement; (ii) attend weekly and monthly status meetings; (iii) serve
as the Party's primary contact for the receipt of relevant information
about the performance of this Agreement; and (iv) report monthly to his or
her Party's Program Executive (as hereinafter defined) on any material
issues related to the performance of the Agreement that may have arisen
between the Parties. The Parties may change their representatives to this
committee at any time by providing the other Party with written notice of
such change.
9.02 Program Executives. Each Party will also appoint an
Executive Vice President level manager (Program Executive) who will serve
as the primary representative of that Party under this Agreement. Each
Party may, in its sole discretion, change its Program Executive at any time
upon notice to the other Party. Each Program Executive will: (i) have
overall responsibility for managing and coordinating the daily performance
of his or her Party's obligations under this Agreement; and (ii) be
authorized to act for and on behalf of his or her Party with respect to all
matters relating to this Agreement. Notwithstanding the foregoing, a
Program Executive may, upon notice to the other Party, delegate such of his
or her responsibilities to other employees of his or her Party as the
Program Executive deems appropriate. The Parties may change their
representatives to this committee at any time by providing the other Party
with written notice of such change.
9.03 Operations Committee. A committee will be formed by the
Parties that will be composed of each Party's Program Executive and such
other individuals as each Party may appoint to this Committee (Operations
Committee). This committee will meet at least monthly and will have
responsibility for: (i) overseeing the Parties' performance of this
Agreement; (ii) evaluating proposals for new Services; (iii) determining
reporting requirements; (iv) approving expense variances related to the
provision of the Services; (v) evaluating and implementing Change Control
Procedures (as hereinafter defined); and (vi) such other functions as the
members of the committee deem necessary to ensure the effective performance
of this Agreement. The Program Executive of each Party will brief the
Executive Steering Committee (as hereinafter defined) about the issues
considered by the Operations Committee at least quarterly. The Parties may
change their representatives to this committee at any time by providing the
other Party with written notice of such change.
9.04 Executive Steering Committee. A Committee composed of
the President of each Party and/or their designees will meet at least
quarterly to: (i) resolve any material issues that may have arisen between
the Parties during the performance of this Agreement; and (ii) evaluate
and, if necessary, alter any existing policies or procedures of the Parties
to enhance their effectiveness in performing this Agreement. (Executive
Steering Committee). The members of the Executive Steering Committee may,
upon notice to the other Party, delegate such of their responsibilities
arising from their participation on this Committee to such other of their
employees as they deem appropriate.
9.05 Internal Committees. Each Party may be allowed to
provide representatives to such internal committees of the other Party as
the Parties may mutually agree upon. Each Party may, for example, be
represented on and consult with such internal committees of the other Party
as may be directly related to its performance of this Agreement.
9.06 Product Development Process. Each Party will be
represented and involved in the product development process of the other
Party for products that are directly related to the performance of this
Agreement. Each Party may also contract directly with the other Party for
the provision of specific additional services that are necessary for the
development of such products.
9.07 Change Control Procedures. NASD Regulation will notify
Nasdaq of any material non-emergency change in the provision of the
Services. NASD Regulation further agrees that it will follow the procedures
set forth in Exhibit 2 (Change Control Procedures) in notifying Nasdaq of
such material changes. The Parties will develop Exhibit 2 within ninety
(90) days after the Commencement Date of this Agreement and the Exhibit
will be attached hereto. Emergency changes will be implemented in
accordance with the procedures set forth in Section 9.08 herein. NASD
Regulation will submit any material change that is projected to result in a
direct and documented increase in NASD Regulation's cost of providing the
Services to the Operations Committee for its review and approval prior to
implementing such change.
9.08 Emergency Changes. NASD Regulation may make such
emergency changes to the Services, allocate such resources, and provide
such additional Services as it, in its reasonable judgment, determines must
be made immediately to ensure that: (i) the provision of the Services
remains fully operational; or (ii) other Services provided by NASD
Regulation that are critical to the operation of Nasdaq continue to be
provided without interruption. NASD Regulation may make such emergency
changes without following the procedures set forth in Exhibit 2, provided,
that, it notifies Nasdaq that it has made such changes, if material, as
soon as it is reasonably able to do so, but in no case more than two (2)
business days after NASD Regulation makes such changes. The Parties will
consult as to the need for such emergency changes if it is feasible for
them to do so.
9.09 Management Reports. NASD Regulation will provide Nasdaq
with such documentation and written reports as may be mutually agreed upon
by the Parties as reasonably required to efficiently monitor NASD
Regulation's provision of the Services.
SECTION 10 PROPRIETARY RIGHTS.
10.01 ***** *
10.02 *****
10.03 *****
10.04 Trademarks. Each Party will retain all right, title and
interest in and to its trademarks and service marks, registered or
unregistered (collectively, the Marks). Within sixty (60) days after the
Commencement Date of this Agreement, each Party will provide the other
Party with a then-current list of its Marks and further agrees to provide
the other Party with an updated list of its Marks on a periodic basis
during the Term of this Agreement. Neither Party will use the Marks of the
other Party in any of its materials, whether in printed or electronic
format, without the prior written consent of the other Party. Each Party
further agrees that it will use the other Party's Marks in a dignified
manner, consistent with the general reputation of the Marks and the other
Party, and in accordance with good trademark practice.
SECTION 11 DATA.
11.01 Ownership of Nasdaq Data. All Nasdaq Data is, or will
be, and will remain the property of Nasdaq and will be deemed Confidential
Information (as hereinafter defined) of Nasdaq.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
11.02 ***** *
11.03 Use of Nasdaq Market Data. NASD Regulation may use the
Nasdaq Market Data for regulatory purposes and to comply with any requests
for information from governmental agencies that oversee its operations.
NASD Regulation may also manipulate or process the Nasdaq Market Data to
produce such derivative information as may be necessary for NASD
Regulation's regulatory purposes. NASD Regulation will be the sole owner
of such derivative information. Nasdaq shall also be able to create such
derivative information and be the owner of such derivative information.
11.04 Nasdaq's Obligation to Correct Errors. With respect to
errors, gaps, or inaccuracies in the data and the reports delivered to NASD
Regulation under this Agreement, Nasdaq will monitor the data that it
provides to NASD Regulation and, and as promptly as reasonably practicable,
will correct such errors, gaps, or inaccuracies in such data and the
reports delivered to NASD Regulation under this Agreement that are
identified by NASD Regulation and communicated to Nasdaq. Nasdaq will be
solely responsible for the cost of such corrections. Nasdaq will also, as
promptly as reasonably practicable: (i) correct any other errors, gaps,
or inaccuracies in the Nasdaq Market Data or such reports upon its becoming
aware of such errors, gaps, or inaccuracies even if it has not been
notified of such items by NASD Regulation; and (ii) notify NASD Regulation
that it has undertaken such corrections at Nasdaq's expense.
11.05 MDS Information. Pursuant to the provisions of Section
10.03 herein, Nasdaq will be responsible for maintaining, supporting, and,
if necessary, changing such Nasdaq Systems as may be required by Nasdaq to
furnish such data to NASD Regulation as NASD Regulation may require for
regulatory purposes. Nasdaq will also allow representatives from NASD
Regulation to participate in any decisions involving the modification or
replacement of such Systems. Nasdaq will be solely responsible for the cost
of the maintenance and support of such Systems.
SECTION 12 CONTINUED PROVISION OF SERVICES.
12.01 Disaster Recovery Plan. Each Party will develop a
disaster recovery plan and provide a copy of such plan to the other Party
upon its completion.
12.02 Force Majeure. Neither Party will be liable for delay
or failure in performance of any of the acts required by this Agreement
when such delay or failure arises from circumstances beyond its reasonable
control (including, without limitation, acts of God, flood, war, explosion,
sabotage, terrorism, embargo, civil commotion, acts or omissions of any
government entity, supplier delays, communications failure, equipment or
software malfunction, or labor disputes), and without the gross negligence
or willful misconduct, of the Party. The Party prevented from performing
its obligations under this Agreement by such force majeure event will be
excused from such performance for as long as such: (i) force majeure event
continues; and (ii) such Party continues to use its best efforts to
recommence performance of its obligations under this Agreement whenever and
to whatever extent possible without delay, including through the use of
alternate sources, workaround plans or other means. If the period of
non-performance exceeds thirty (30) calendar days, then the party to whom
the performance is due shall have the right to terminate this Agreement on
fifteen (15) additional calendar days prior written notice.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
12.03 Payment for Unperformed Services. If NASD Regulation
fails to provide the Services in accordance with this Agreement due to the
occurrence of a force majeure event, the Fees will be adjusted in a manner
such that Nasdaq is not responsible for the payment of any Fees for
Services that NASD Regulation failed to provide.
SECTION 13 PAYMENTS AND INVOICING.
13.01 ***** *
13.02 *****
13.03 *****
13.04 *****
13.05 Payment Procedures. NASD Regulation will invoice Nasdaq
monthly for the cost of Services provided to Nasdaq during the preceding
month. NASD Regulation will also include the cost of specific disbursements
and incidental expenses incurred by NASD Regulation in its provision of the
Services to Nasdaq during the same period. The format of such invoices will
be mutually agreed upon by the Parties within sixty (60) days after the
Commencement Date of this Agreement. Nasdaq will pay all invoices not in
dispute within thirty (30) days of its receipt of such invoice. If Nasdaq
disputes any amount, it will notify NASD Regulation of its disagreement
within 10 business days of its receipt of such invoice. Each Party's
Program Executive will then attempt to resolve such disagreement. If the
Parties are unable to resolve any such disagreement within 15 business days
of Nasdaq's receipt of such invoice, then Nasdaq will pay all amounts not
then in dispute. The Parties will then resolve any remaining disagreements
through the dispute resolution procedures set forth in Section 18 herein.
Nasdaq will have no right of set-off for amounts due or alleged to be due
Nasdaq from NASD Regulation. All invoices may be paid by electronic funds
transfer.
13.06 Overdue Invoices. NASD Regulation may charge Nasdaq
Interest on any invoices that Nasdaq fails to pay within forty-five (45)
days of its receipt of such invoice. Such Interest may be assessed monthly.
13.07 Cost Savings. The parties will review and consider cost
saving measures at least annually during the term of the Agreement.
SECTION 14 TAXES.
14.01 Generally. The Fees paid to NASD Regulation for
Services in the United States will be inclusive of any applicable sales,
use, gross receipts, excise, or other taxes attributable to periods on or
after the Commencement Date based upon or measured by NASD Regulation's
cost in providing the Services to Nasdaq. Nasdaq, however, will not be
responsible for the payment of any tax assessed on the personal property or
net income of NASD Regulation. All other taxes for the Services (including
any non-United States tax) are the full liability of Nasdaq, and Nasdaq
will pay to NASD Regulation, or reimburse NASD Regulation for the payment
of, or pay directly to the taxing authority, any such taxes however
designated, imposed or levied. To the extent that any sales, use, gross
receipts, excise, value-added or services tax is required by Law to be
separately identified in NASD Regulation's billings to Nasdaq, NASD
Regulation will separately identify such tax.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
14.02 Taxes, Assessments and Real Property-Related Levies.
Nasdaq and NASD Regulation will each bear sole responsibility for all
taxes, assessments and other real property-related levies on its owned or
leased real property, unless NASD Regulation leases or buys property at the
request of Nasdaq, in which event, Nasdaq will be responsible for
applicable taxes.
SECTION 15 AUDITS.
15.01 Services. Upon reasonable prior notice from the other
Party, each Party will provide the other Party or its designee, and any of
the other Party's regulators with reasonable access to and any reasonable
assistance that they may require for the purpose of performing audits or
inspections of the Services and the business of the other Party relating to
the Services. The Party conducting an audit will do so in a manner that is
consistent with the provisions of Section 16 herein.
15.02 ***** *
15.03 Records. NASD Regulation will maintain complete and
accurate records in connection with this Agreement and all transactions
related thereto, including all records and supporting documentation that is
reasonably appropriate or necessary to document the Services and the Fees
paid or payable by Nasdaq under this Agreement.
15.04 Facilities. Each Party that is being audited under this
Section 15, will temporarily provide the Party conducting the audit and its
representatives with: (i) a reasonable amount of work space on its
premises; (ii) office furnishings (including lockable cabinets if
possible); (iii) telephone and facsimile services; (iv) utilities; and (v)
such office-related equipment and duplicating services as the Party
conducting the audit or its designated representatives may reasonably
require to perform the audits described in this Section.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
SECTION 16 CONFIDENTIALITY. The Parties will remain bound by the
confidentiality provisions set forth in this Section 16 unless they each
establish reasonable procedures to protect the confidential and proprietary
information of the other Party, that are acceptable to the other Party,
within thirty (30) days after the Commencement Date of this Agreement.
16.01 General Obligations. The Parties acknowledge and agree
that they may each be given access to confidential or proprietary
information of the other in performing their obligations under this
Agreement (Confidential Information). The prices charged by NASD Regulation
for the Services, the pricing structure, and the pricing methodology will
be deemed to be Confidential Information. Each Party will use such
information only in performance of its obligations under this Agreement;
will hold such information in confidence; and will not disclose, copy or
publish any such information without the prior written approval of the
owner of such information, provided, however, that each Party may disclose
such Confidential Information as may be required to comply with applicable
regulatory requirements or requests for information from governmental
agencies having oversight responsibilities over such Party. Any Party
disclosing such information in compliance with applicable regulatory or
oversight requirements will request confidential treatment of such
information. Notes, documents, summaries or reports which either Party
prepares from Confidential Information to the extent such specifically
refer or relate to Confidential Information are themselves Confidential
Information. The obligations of this Section will survive for a period of
ten (10) years after the expiration or termination of the Agreement.
16.02 Standard of Care. The Parties acknowledge the sensitive
and secret nature of the Confidential Information they will have access to
and agree that they will treat each such Confidential Information as
strictly confidential and will exercise the same degree of care in the
protection of the Confidential Information as they each exercise with
respect to their own proprietary property and trade secrets, but in no
event less than a reasonable degree of care given the nature of the
Confidential Information.
16.03 Permitted Disclosures. 18.2 The Party receiving
Confidential Information (Receiving Party) will be permitted to disclose
relevant aspects of the disclosing Party's (Disclosing Party) Confidential
Information to its officers, directors, agents, professional advisors,
subcontractors and employees and to the officers, directors, agents,
professional advisors, subcontractors and employees of its Affiliates, to
the extent that such disclosure is not restricted under this Agreement.
Such disclosure will only be permittedto the extent that it is reasonably
necessary for the performance of the Receiving Party's duties and
obligations or the determination, preservation or exercise of the Receiving
Party's rights and remedies under this Agreement; provided, that, the
Receiving Party will take all reasonable measures to ensure that
Confidential Information of the Disclosing Party is not disclosed or
duplicated in contravention of the provisions of this Agreement by such
officers, directors, agents, professional advisors, contractors,
subcontractors and employees. Notwithstanding the taking of such reasonable
measures, each Party will be responsible for the acts and omissions of its
officers, directors, agents, professional advisors, contractors,
subcontractors and employees. The Receiving Party may, however, lawfully
disclose such Confidential Information without the prior written approval
of the owner of such information if such information is: (1) lawfully
within the Receiving Party's possession prior to the Effective Date of this
Agreement; (2) voluntarily disclosed by a third party so long as that party
does not breach any obligation not to reveal such information; (3)
voluntarily disclosed to the public by the Disclosing Party; (4) is
generally known to the public; or (v) is independently developed by the
Receiving Party.
16.04 Compliance with Legal Process. The obligations in
this Section will not restrict any disclosure pursuant to any Law (provided
that the Receiving Party gives prompt notice to the Disclosing Party of
such order). In the event the Receiving Party receives a subpoena or other
validly issued administrative or judicial process requesting the Disclosing
Party's Confidential Information, the Receiving Party will provide prompt
actual notice of receipt and a copy of the subpoena or other document(s) to
the Disclosing Party. The Disclosing Party will have the opportunity to
intervene in the proceeding before any deadline for complying with the
subpoena or other process. The Receiving Party will not comply with such
subpoena or other process until the earlier to occur of receiving written
notification from the Disclosing Party that it may proceed, receiving an
order from a court or other administrative or judicial body not to
disclose, or the deadline for complying with any portion or all of the
process.
16.05 Unauthorized Acts. Without limiting either Party's
rights in respect of a breach of this Article, the Receiving Party will:
(1) promptly notify the Disclosing Party of any unauthorized
possession, use or knowledge, or attempt thereof, of the
Disclosing Party's Confidential Information by any person or
entity that may become known to Receiving Party;
(2) promptly furnish to the Disclosing Party full details of the
unauthorized possession, use or knowledge, or attempt thereof, and
assist the Disclosing Party in investigating or preventing the
recurrence of any unauthorized possession, use or knowledge, or
attempt thereof, of the Disclosing Party's Confidential
Information;
(3) reasonably cooperate with the Disclosing Party (at the Disclosing
Party's expense) in any litigation and investigation against third
parties deemed necessary by the Disclosing Party to protect its
proprietary rights (such cooperation will not require, nor shall
be deemed to be, a violation of any legal privilege); and
(4) promptly use its commercially reasonable efforts to prevent a
recurrence of any such unauthorized possession, use or knowledge,
or attempt thereof, of Confidential Information.
16.06 Return of Confidential Information. Each Party agrees
that all Confidential Information, including any copies thereof, will be
returned to the owner of such Confidential Information or destroyed within
ten (10) calendar days of the expiration or termination of the obligations
of the Parties pursuant to Section 16.01 herein. The Parties acknowledge
and agree that their obligations will continue for a period of ten (10)
years after the termination or expiration of the Agreement pursuant to
Section 16.01 herein. Notes and other documents referencing or relating to
Confidential Information may be made and kept by the Parties, but will
continue to be governed by the provisions of this Section 16 until they are
destroyed.
16.07 Intellectual Property. All intellectual property rights
associated with the Confidential Information, including without limitation,
patent, trademark, copyright, trade secret rights, and moral rights will
remain in the Party owning the Confidential Information.
16.08 Costs. Each Party will bear the cost it incurs as a
result of its compliance with this Section 16.
SECTION 17 REPRESENTATIONS AND WARRANTIES.
17.01 By Nasdaq. Nasdaq represents and warrants that:
(1) Nasdaq is a corporation duly incorporated, validly existing and in
good standing under the Laws of Delaware;
(2) Nasdaq has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement;
(3) the execution, delivery and performance of this Agreement by
Nasdaq (a) has been duly authorized by Nasdaq and (b) will not
conflict with, result in a breach of or constitute a default under
any other agreement to which Nasdaq is a party or by which Nasdaq
is bound;
(4) Nasdaq is duly licensed, authorized or qualified to do business
and is in good standing in every jurisdiction in which a license,
authorization or qualification is required for the ownership or
leasing of its assets or the transaction of business of the
character transacted by it, except where the failure to be so
licensed, authorized or qualified would not have a material
adverse effect on Nasdaq's ability to fulfill its obligations
under this Agreement;
(5) Nasdaq is, to the best of its knowledge, in compliance in all
material respects with all Laws applicable to Nasdaq, the
violation of which would have a material impact on Nasdaq's or
NASD Regulation's ability to fulfill its obligations under this
Agreement, and has obtained all applicable permits and licenses
required of Nasdaq in connection with its obligations under this
Agreement;
(6) except as permitted by Section 16 herein, Nasdaq has not disclosed
any Confidential Information of NASD Regulation;
(7) there is no outstanding litigation, arbitrated matter or other
dispute to which Nasdaq is a party which, if decided unfavorably
to Nasdaq, would reasonably be expected to have a material adverse
effect on NASD Regulation's or Nasdaq's ability to fulfill their
respective obligations under this Agreement;
(8) it has the right, free and clear of any liens or encumbrances to
grant the rights and deliver the Nasdaq Market Data (except that
part of the Nasdaq Market Data not initially compiled by Nasdaq,
for which Nasdaq will obtain the right prior to the commencement
of Services) to NASD Regulation and perform its obligations under
this Agreement. Further, Nasdaq warrants and represents that none
of the Nasdaq Market Data (except that part of the Nasdaq Market
Data not initially compiled by Nasdaq) provided to NASD Regulation
or other right granted violates any patent, copyright, trade
secret, trademark, trade dress, or other intellectual property
right of any third party. Nasdaq will defend NASD Regulation
against any and all third party claims relating to the
infringement of any patent, copyright, trade secret, trademark,
trade dress, or other proprietary right related to any item or
right granted by Nasdaq under this Agreement (except that part of
the Nasdaq Market Data not initially compiled by Nasdaq) and
agrees to hold harmless and indemnify NASD Regulation and its
officers, directors, subcontractors, employees and agents, against
any and all judgments finally awarded to and settlements reached
with such third party. Notwithstanding anything otherwise set
forth in this Agreement, if as a result of such third party claim,
Nasdaq can no longer provide the Nasdaq Market Data or provide a
regulatory System for providing regulatory Services to Nasdaq, but
Nasdaq is still receiving Services that require such Nasdaq Market
Data or such regulatory System, then, notwithstanding anything
otherwise set forth in this Agreement, Nasdaq shall, at its option
either replace such Nasdaq Market Data or such regulatory System
or be responsible to NASD Regulation for the cost of such
replacement. Indemnification will also extend to claims and losses
against NASD Regulation as an aider, abetter or contributing
infringer. Indemnification will be NASD Regulation's sole remedy
and Nasdaq's sole liability as to claims of infringement.
(9) Nasdaq will inform NASD Regulation of any known defects in any of
the Nasdaq Market Data or any System used by Nasdaq in the
performance of this Agreement which might interfere with the data
and services provided to NASD Regulation by Nasdaq during the term
of this Agreement. Nasdaq warrants and represents that it knows of
no defect in its Systems' security mechanisms, of any "Trojan
Horses" (code inserted by a manufacturer or Nasdaq, which is not
described in the documentation, whose purpose is to provide a
person or computer other than Nasdaq the ability to gain control
of all or some of the system on conditions set by or triggered by
any event or an unauthorized person), viruses (code embedded in
the system whose purpose is to halt effective operation or use of
the system on conditions set by or triggered by an event or an
unauthorized person), trap doors (means by which an unauthorized
user may circumvent the security protections of Nasdaq's Systems
or gain unauthorized access), and similar devices. Nasdaq will use
reasonable efforts to promptly notify NASD Regulation of any later
discovered defects in its security mechanisms, such as "Trojan
Horses," viruses, trap doors, or similar devices for a period of
the term of this Agreement plus ten (10) years thereafter.
(10) Nasdaq shall comply in all material respects with all Laws
applicable to Nasdaq and, except as otherwise provided in this
Agreement, will obtain all applicable permits and licenses
required of Nasdaq in connection with its obligations under this
Agreement.
(11) Nasdaq's ability to furnish the Nasdaq Market Data or otherwise
perform its obligations under this Agreement that are required by
NASD Regulation to provide the Services will not be adversely
affected by the failure of any Nasdaq System, or third party
System used by Nasdaq, to be Century Compliant.
17.02 By NASD Regulation. NASD Regulation represents and
warrants that:
(1) it is a corporation duly incorporated, validly existing and in
good standing under the Laws of Delaware;
(2) it has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement;
(3) the execution, delivery and performance of this Agreement by it
(a) has been duly authorized by it and (b) will not conflict with,
result in a breach of or constitute a default under and other
agreement to which it is a party or by which it is bound;
(4) it is duly licensed, authorized or qualified to do business and is
in good standing in every jurisdiction in which a license,
authorization or qualification is required for the ownership or
leasing of its assets or the transaction of business of the
character transacted by it, except where the failure to be so
licensed, authorized or qualified would not have a material
adverse effect on its ability to fulfill its obligations under
this Agreement;
(5) it, to the best of its knowledge, is in compliance in all material
respects with all Laws applicable to it, the violation of which
would have a material impact on Nasdaq's or its ability to fulfill
its obligations under this Agreement, and it has obtained all
applicable permits and licenses required of it in connection with
its obligations under this Agreement;
(6) except as permitted by Section 16 herein, it has not disclosed any
Confidential Information of Nasdaq; and
(7) there is no outstanding litigation, arbitrated matter or other
dispute to which it is a party which, if decided unfavorably to
it, would reasonably be expected to have a material adverse effect
on Nasdaq's or NASD Regulation's ability to fulfill their
respective obligations under this Agreement.
(8) it has the right, free and clear of any liens or encumbrances to
grant the rights and deliver the Services to Nasdaq and perform
its obligations under this Agreement. Further, NASD Regulation
warrants and represents that none of the Services provided to NASD
Regulation or other right granted violates any patent, copyright,
trade secret, trademark, trade dress, or other intellectual
property right of any third party. NASD Regulation will defend
Nasdaq against any and all third party claims relating to the
infringement of any patent, copyright, trade secret, trademark,
trade dress, or other proprietary right related to any Service
provided or right granted by NASD Regulation under this Agreement
and agrees to hold harmless and indemnify Nasdaq and its officers,
directors, subcontractors, employees and agents, against any and
all judgments finally awarded to and settlements reached with such
third party Notwithstanding anything otherwise set forth in this
Agreement, if as a result of such third party claim, NASD
Regulation can no longer provide the Services or provide the
Intellectual Property in Section 10.02 to Nasdaq, but, in the case
of Services, Nasdaq is still receiving Services and, in the case
of said Intellectual Property, Nasdaq is still using the
Intellectual Property, then, notwithstanding anything otherwise
set forth in this Agreement, NASD Regulation shall, at its option
either replace such Services or Intellectual Property or be
responsible to Nasdaq for the cost of such replacement.
Indemnification will also extend to claims and losses against
Nasdaq as an aider, abetter or contributing infringer.
Indemnification will be Nasdaq's sole remedy and NASD Regulation's
sole liability as to claims of infringement.
(9) NASD Regulation will inform Nasdaq of any known defects in any
System or other software developed or acquired by NASD Regulation
in providing the Services to Nasdaq which might materially
interfere with the Services provided to Nasdaq by NASD Regulation
during the term of this Agreement. NASD Regulation warrants and
represents that it knows of no defect in its Systems, that are
used to support the Services, security mechanisms, of any "Trojan
Horses" (code inserted by a manufacturer or NASD Regulation, which
is not described in the documentation, whose purpose is to provide
a person or computer other than NASD Regulation the ability to
gain control of all or some of the system on conditions set by or
triggered by any event or an unauthorized person), viruses (code
embedded in the system whose purpose is to halt effective
operation or use of the system on conditions set by or triggered
by an event or an unauthorized person), trap doors (means by which
an unauthorized user may circumvent the security protections of
the systems or gain unauthorized access), and similar devices.
NASD Regulation will use reasonable efforts to promptly notify
Nasdaq of any later discovered defects in its security mechanisms,
such as "Trojan Horses," viruses, trap doors, or similar devices
for a period of the term of the Agreement plus ten (10) years
thereafter.
(10) NASD Regulation will comply in all material respects with all Laws
applicable to NASD Regulation and, except as otherwise provided in
this Agreement, will obtain all applicable permits and licenses
required of NASD Regulation in connection with its obligations
under this Agreement
(11) NASD Regulation's ability to furnish the Services or otherwise
perform its obligations under this Agreement will not be adversely
affected by the failure of any NASD Regulation System, or any
third party System used by NASD Regulation, to be Century
Compliant.
17.03 DISCLAIMER. EXCEPT AS SPECIFIED IN SECTION 17.01
AND SECTION 17.02 HEREIN, NEITHER NASDAQ NOR NASD REGULATION MAKES ANY
OTHER WARRANTIES WITH RESPECT TO THE SERVICES PROVIDED UNDER THIS AGREEMENT
AND EACH EXPLICITLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
SPECIFIC PURPOSE.
SECTION 18 DISPUTE RESOLUTION.
18.01 Dispute Resolution. This Section governs any dispute,
disagreement, claim and/or controversy (hereinafter collectively referred
to as a Dispute) between the Parties arising out of or relating to this
Agreement, or breach thereof. A Party must file with the other, written
notice of any Dispute prior to the institution of the following dispute
resolution process:
18.02 Negotiation. In the event any Dispute arises out of or
relates to this contract, or the breach thereof, the Parties to this
Agreement shall use their best efforts to settle any Dispute through
negotiation. If the Parties do not reach a resolution of the Dispute
through negotiation within a period of thirty (30) business days from the
initial notification of this Dispute, then upon written notice by either
Party, all disputes will be submitted to mediation. The Parties will adhere
to the following procedures in conducting these negotiations:
18.02.1 Program Executive Negotiation. First, the
Dispute will be considered by the Program Executives selected by each Party
pursuant to Section 9 herein. These executives will meet and attempt to
resolve the Dispute within ten (10) business days of their being notified
of such matter. Each Dispute that is not settled within such ten (10) day
period will be referred to Operations Committee Negotiations pursuant to
the provisions of Section 18.02.2 herein.
18.02.2 Operations Committee Mediation. Second, the
Dispute will be considered by the Operations Committee created by the
Parties pursuant to Section 9 herein which will meet in an attempt to
resolve the Dispute within ten (10) business days of the completion of the
Program Executive Negotiation. Each Dispute that is not settled within such
ten (10) business day period will then be referred to Executive Steering
Committee Negotiations pursuant to the provisions of Section 18.02.3
herein.
18.02.3 Executive Steering Committee Negotiation. The
Dispute will then be considered by the Executive Steering Committee of the
Parties that was created pursuant to Section 9 herein. This committee will
meet in an attempt to resolve the Dispute within ten (10) business days of
the Operations Committee Negotiation. If the Dispute cannot be resolved by
the Executive Steering Committee, it will then be referred to mediation
pursuant to the provisions of Section 18.03 herein. The Program Executive,
Operations Committee, Executive Steering Committee Negotiations and the
NASD Board Option, as set forth below, will have been without prejudice to
the legal position of either Party, and will be considered settlement
discussions under applicable rules of evidence.
18.02.4 NASD Board Option. For Disputes involving
material new changes to the Services, if the Dispute cannot be resolved by
the Executive Steering Committee, a Party may then refer the Dispute to the
NASD Board in an attempt to resolve the Dispute.
18.03 Mediation. In the event that any Dispute fails to
settle through negotiation or the NASD Board Option, the Parties agree that
the Dispute will be submitted to mediation administered under the American
Arbitration Association's (AAA) Commercial Mediation Rules. If within
thirty (30) days after service of a written demand for mediation the
Parties fail to settle their dispute to their mutual satisfaction, any
remaining Dispute(s) shall be settled by arbitration. Any Dispute submitted
to mediation shall suspend the requirements for filing a notice of claim
until the conclusion of the mediation process.
18.04 Binding Arbitration. Absent settlement by negotiation
or mediation, the Parties agree that compulsory, binding arbitration will
be the exclusive means of dispute resolution. The Parties may not commence
arbitration of a Dispute until they have exhausted all reasonable efforts
to resolve such Dispute through negotiation and mediation pursuant to
Sections 18.02 and 18.03 herein The parties further agree that any
arbitration shall be held in Washington, DC, and will be administered by
the AAA in accordance with its Commercial Arbitration Rules, and that
judgment on the award of the arbitrator(s) may be rendered in any court
having jurisdiction thereof. Unless otherwise agreed by the Parties, the
arbitration shall be conducted using the following procedure:
(1) Either Party may serve upon the other a notice specifying the
nature of the Dispute, and demanding that the Dispute be submitted to
arbitration. The notice shall be made no later than the expiration of the
time set forth in Section 18.03 herein, or within thirty (30) days from the
date of the last mediation session. The Parties will not file a notice
after the date where applicable statutes of limitations or laches would bar
the institution of any proceedings. Each Party will use commercially
reasonable efforts (and shall allow the other Party to join) any third
party that the Parties have agreed is indispensable to the arbitration. The
arbitration shall proceed even if the third party refuses jurisdiction.
(2) In any Dispute involving aggregate damages of up to $500,000
(exclusive of Interest, attorneys' fees, and costs), the Parties will
attempt to agree on a single arbitrator within ten (10) days after receipt
of service of the notice referenced in Section 18.04(1) herein, or such
longer period as the Parties may agree. Absent such agreement, the
arbitrator will be selected by the AAA from its large and complex case
pool. Any Dispute in excess of $500,000 shall be decided by three (3)
arbitrators selected by the AAA from its large and complex case pool.
(3) The arbitrator(s) selected will have a background in, and
knowledge of, the subject matter of the Dispute. If arbitrator(s) with such
experience are not available, the arbitrator(s) will be selected by the AAA
from available arbitrators on its retired federal judge's pool.
(4) Consistent with the expedited nature of arbitration and this
Agreement, discovery shall be limited to requests for production of
documents, depositions and interrogatories. All discovery shall be
completed within ninety (90) days following the appointment of
arbitrator(s). The arbitrator(s) shall rule on any discovery disputes, and
their determination shall be conclusive.
(5) Interrogatories shall be limited to the identification by name,
last known address and telephone number of: (a) all persons having
knowledge of the Dispute and a brief summary of their knowledge; (b) any
experts who may be called as witnesses and a summary of their testimony;
and (c) any expert(s) used for consultation if such expert(s)' opinions
and/or impressions will be used by an expert witness.
(6) Depositions will be limited in time to three (3) hours for each
Party. All objections shall be reserved for the arbitration hearing except
for those based on privilege and proprietary or confidential information.
(7) The Agreement will not prohibit either Party from seeking judicial
review or confirmation of the arbitrator(s)' award. A Party shall file a
written request for judicial review or confirmation of the arbitrator(s)'
decision within 30 days of receipt of service of the award. Notice of
filing shall comply with requirements set forth in the Federal Rules of
Civil Procedure and the Federal Arbitration Act.
18.05 Continuity of Services. Each Party acknowledges that
the timely and complete performance of its obligations pursuant to this
Agreement is critical to the business and operations of the other Party. In
the event of a dispute between Nasdaq and NASD Regulation, the Parties will
continue to perform their respective obligations under this agreement in
good faith during the resolution of such dispute unless and until this
Agreement expires or is terminated in accordance with its provisions.
Nothing in this Section 18.06 will interfere with a Party's right to
terminate this Agreement as set forth in this Agreement.
SECTION 19 TERMINATION.
19.01 Termination for Breach. Either Party may terminate this
Agreement due to a material breach by the other Party. The Party aggrieved
by the breach will give written notice to the other Party that this
Agreement will be terminated not earlier than thirty (30) calendar days
from receipt of such notice, and such notice will state with specificity
the grounds for termination. If the breach is curable, without adversely
affecting the performance of this Agreement, the Party in breach will have
the right to cure such breach, at its own expense, prior to the date stated
for termination, and, should the breach be cured and written notice of such
cure served on the aggrieved Party prior to the date stated for
termination, such notice will vacate the notice to terminate. If the breach
is not reasonably curable within this period, then termination will not
occur if the Party receiving the notice promptly commenced, and diligently
continued, to cure the default. Nasdaq will have 90 days from its written
receipt of a notice from NASD Regulation of its failure to provide the
Nasdaq Market Data under this Agreement to cure such failure. Nasdaq's
failure to provide the Nasdaq Market Data will not constitute a material
breach of this Agreement if such failure is cured within 90 days from its
written receipt of a notice from NASD Regulation as to its failure to
provide the Nasdaq Market Data. If the breach is not reasonably curable
within that 90 day period, then termination will not occur if Nasdaq
promptly has commenced, and diligently continued, to cure the default.
Disputes between the Parties as to whether Nasdaq's provision of Nasdaq
Market Data breaches this Agreement will be resolved through the dispute
resolution procedures set forth in Section 18 herein.
19.02 ***** *
19.03 Financial Weakness. If either Party's financial
condition at any time does not, in the reasonable judgment of the other
Party, justify continuance of this Agreement on the terms of payment set
forth in Section 13 herein, the Party that is concerned will be entitled to
request that the other Party provide it with adequate assurances of its
intent and ability to perform its obligations hereunder. If the Party that
has been requested to provide such assurances fails to provide such
reasonable assurances within thirty (30) days of the other Party's request,
the Party requesting such assurances will be entitled to terminate this
Agreement upon (15) additional calendar days prior written notice to the
other Party.
19.04 Bankruptcy or Insolvency. In the event of the
bankruptcy or insolvency of a Party, or in the event any proceeding is
brought against a Party and not dismissed within ninety (90) days, whether
voluntary or involuntary under the bankruptcy or insolvency laws, the other
Party will be entitled to terminate this Agreement upon thirty (30)
calendar days prior written notice at any time during the period for filing
claims against the estate.
19.05 Performance Until Termination. Notwithstanding the
delivery of a notice of default or notice of termination by either Party to
the other, all obligations to perform Services and to pay for such Services
will continue in effect and be duly observed and complied with by both
Parties until the effective date of any termination.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
19.06 Return of Documents. Upon termination of this Agreement
for any reason, each Party will, without additional cost to or demand from
the other Party, return to the other Party in an orderly and expeditious
manner all information, records, documentation, data, and other property
supplied to it by the other Party, and will certify in writing that it has
done so, provided, that, if any payments to a Party remain unpaid upon the
termination of this Agreement, the Party who is owed payment will place all
such property into escrow with an independent escrow agent until such
payments have been made. The Parties will each pay half of the cost of such
escrow arrangements. The Parties further agree that their return of
Confidential Information to the other Party will be governed by the
provisions of Section 16 herein.
19.07 ***** *
SECTION 20 TERMINATION FEES.
20.01 *****
20.02 Pricing Adjustment for Partial Termination. If either
Party terminates a portion of the Services pursuant to Section 19.02 herein
or any other provision of this Agreement, then NASD Regulation will make a
corresponding reduction in the future Fees that it charges Nasdaq pursuant
to Section 13 herein to reflect the termination of such Services.
20.03 Termination Fees. Except as otherwise specifically set
forth in this Section 20, no termination fees will be payable by Nasdaq in
connection with the expiration of this Agreement.
20.04 Termination Assistance Services. After the termination
or expiration of this Agreement, unless such termination is due to the
material breach of Nasdaq, NASD Regulation will provide such Services to
Nasdaq as Nasdaq may require at NASD Regulation's then-current rates on the
effective date of such termination. NASD Regulation will not be obligated
to provide such Services to Nasdaq if the cause of such termination is
Nasdaq's internalization of such Services.
SECTION 21 INDEMNIFICATION.
21.01 Indemnification. Each Party agrees to indemnify and
hold harmless the other Party against all judgments awarded to, or
settlements with, any third party relating to the breach of any terms,
provisions, covenants, warranties or representations contained herein
and/or in connection with the performance of this Agreement or any
provision hereof. NASD Regulation further agrees that it will indemnify and
hold harmless Nasdaq from and against all direct costs and expenses
incurred by Nasdaq (including Nasdaq's reasonable attorney's fees)
resulting from, related to or arising out of the Services furnished by NASD
Regulation under this Agreement to the extent that such costs and expenses
are incurred as a result of the negligence or willful misconduct of NASD
Regulation. NASD Regulation agrees to indemnify and hold harmless Nasdaq
against any and all claims, damages, losses and expenses (including
reasonable attorneys' fees) arising from or in connection with any claim,
demand or legal action by a third party, related directly to: (i) NASD
Regulation's misuse of Nasdaq Data or information furnished to NASD
Regulation by Nasdaq pursuant to the provisions of Section 11 herein.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
21.02 Physical Injuries. NASD Regulation will be solely
responsible for any physical injuries, including death, to persons and any
damage to tangible personal or real property occurring on account of or in
connection with its operations and in performance of the Agreement and will
indemnify and hold harmless Nasdaq from any and all loss and liability
related thereto, including: (i) liability for the payment of workers
compensation and disability benefits; (ii) any and all claims on account of
such injuries to persons or physical damage to property; and (iii) all
costs and expenses in suits (including reasonable attorney's fees and
costs) that may be brought against Nasdaq on account of any such injuries
to persons or physical damage to property, provided, however, that NASD
Regulation will not be obligated to indemnify and hold harmless Nasdaq from
any loss or liability arising out of injuries or damage caused by or
resulting from the negligence of Nasdaq, its agents. employees, officers or
subcontractors. Nasdaq will be solely responsible for any physical
injuries, including death, to persons and any damage to tangible personal
or real property occurring on account of or in connection with its
operations and will indemnify and hold harmless NASD Regulation from any
and all loss and liability related thereto, including, but not limited to,
liability for the payment of workers compensation and disability benefits,
any and all claims on account of such injuries to persons or physical
damage to property, and all costs and expenses in suits (including
reasonable attorney's fees and costs) that may be brought against NASD
Regulation on account of any such injuries to persons or physical damage to
property, provided, however, that Nasdaq will not be obligated to indemnify
and hold harmless NASD Regulation from any loss or liability arising out of
injuries or damage caused by or resulting from the negligence of NASD
Regulation, its agents. employees, officers or subcontractors.
21.03 This section intentionally left blank.
21.04 Procedures. (1). The Party claiming indemnification
under this Section 21 will promptly notify the other Party (and, in the
case of any action, suit, arbitration, or judicial or administrative
proceeding, will so notify no later than fifteen (15) calendar days after
the Party claiming indemnification has received notice thereof or has been
served with a complaint or other process) when it has knowledge of
circumstances or the occurrence of any events that are likely to result in
an indemnification obligation under this Section 21 or when any action,
suit, arbitration, or judicial or administrative proceeding is pending or
threatened that is covered by this subsection.
(2). Upon request, and to the extent permitted by applicable
law, the indemnifying Party will have the right to defend, settle, or
compromise any such suit or proceeding, at its expense, provided that: (A)
it demonstrates to the satisfaction of the Party claiming indemnification
that it is financially able to defend such action and to pay any
settlement, award or judgment; (B) counsel retained by it are reasonably
satisfactory to the Party claiming indemnification; and (C) that no
settlement will be made which imposes any obligations on (other than the
payment of money which is made by the indemnifying Party on behalf of the
indemnified Party), or is prejudicial to, the Party claiming
indemnification, without the prior consent of the Party claiming
indemnification, which consent will not be unreasonably withheld.
(3). The Party claiming indemnification will reasonably
cooperate with the other Party in the defense of any such suit or
proceeding, and the other Party will reimburse the Party claiming
indemnification for its reasonable expenses with respect thereto. Such
cooperation will include, but not be limited to, the making of statements
and affidavits, attendance at hearings and trials, production of documents,
assistance in securing and giving evidence and obtaining the attendance of
witnesses. The Party claiming indemnification will not be required to waive
its attorney-client or other privileges.
(4). Failure by the Party claiming indemnification to
promptly notify the other Party as required by this subsection will not
invalidate the claim for indemnification, unless such failure has a
material adverse effect on the settlement, defense, or compromise of the
matter that is the subject of the claim for indemnification. In addition,
the Party claiming indemnification will be responsible for any claims or
losses which could have been avoided or mitigated by prompt notice as
required by this subsection.
21.05 No Third Party Beneficiaries. Nothing in this Agreement
will entitle any person or entity to any rights as a third-party
beneficiary under this Agreement.
SECTION 22 DAMAGES.
22.01 Direct Damages. Neither of the Parties will be liable
to the other for any direct damages arising out of or relating to its
performance or failure to perform under this Agreement; provided, however,
that, notwithstanding anything otherwise set forth below in this Section
22.01, each of the Parties will continue to be liable for Claims or Losses
arising from or related to (i) damage to persons or property ; (ii) gross
negligence or willful misconduct; or (iii) the gross negligence or willful
misconduct of their officers, directors, employees, agents or
subcontractors.
Except as otherwise set forth in this Agreement for
indemnifying NASD Regulation from third party judgments or settlements and
for the exceptions set forth above, if Nasdaq is for any reason held liable
to NASD Regulation or to any other individual or entity, whether in
contract or in tort, the liability of Nasdaq within a single year of the
Agreement (from the Commencement Date of the Agreement) is limited to
$500.00.
22.02 Consequential Damages. Except as set forth in Sections
17.01 (8) and 17.02 (8), neither Nasdaq nor NASD Regulation will be liable
for the other`s, nor will the measure of damages include any, punitive,
indirect, incidental, special or consequential damages, including lost
profits or savings, arising out of or relating to its performance or
failure to perform under this Agreement, even if such Party has been
advised of the possibility of such losses or damages.
22.03 Exclusions. The limitations or exculpations of
liability set forth in Sections 22.01 and 22.02 herein will not apply to:
(i) reimbursable amounts; (ii) indemnification Claims, as set forth in
Section 21 herein; or (iii) breaches of Sections 14 or 16 herein.
22.04 Allocation of Risk. THE PARTIES UNDERSTAND AND AGREE
THAT THE PRICING UNDER THIS AGREEMENT, INCLUDING THE PRICING FOR THE
SERVICES AND THE NASDAQ MARKET DATA, REASONABLY REFLECTS THE ALLOCATION OF
RISK AND LIMITATION OF LIABILITY SET FORTH IN THIS AGREEMENT.
22.05. Nasdaq Data Not Initially Compiled by Nasdaq. NASDAQ
SHALL NOT BE LIABLE TO NASD REGULATION OR TO ANY OTHER INDIVIDUAL OR ENTITY
FOR THE UNAVAILABILITY, INTERRUPTION, DELAY, INCOMPLETENESS OR INACCURACY
OF NASDAQ MARKET DATA NOT INITIALLY COMPILED BY NASDAQ, EXCEPT AS SET FORTH
IN THIS AGREEMENT FOR THE PROVISION OF SERVICES.
SECTION 23 INSURANCE.
23.01 General Insurance Requirements. Within ten days of
execution of this agreement, each Party will furnish the Other with
certificate(s) of insurance on standard Accord forms, executed by a duly
authorized representative of each insurer evidencing compliance with the
insurance requirements set forth herein. Manuscript certificates of
insurance shall not be deemed acceptable evidence of insurance. All
certificates shall provide for thirty (30) days' written notice to prior to
the cancellation or material change of any insurance referred to therein.
Failure of either Party to demand a certificate of insurance or other
evidence of full compliance with these insurance requirements or failure of
either Party to identify a deficiency from evidence provided will not be
construed as a waiver of the obligation to maintain the requisite
insurance. Each Party will keep in full force and effect during the term of
the agreement the required insurance coverage.
23.01.1 Adequacy of Coverage. By requiring insurance herein,
neither Party represents that coverage and limits will necessarily be
adequate to protect the other, and such coverage and limits shall not be
deemed as a limitation on each Party's liability under the indemnities
granted in this contract.
23.01.2 Cross-Liability Coverage. If each Party's liability
policies do not contain the standard ISO separation of insureds provision,
or a substantially similar clause, they shall be endorsed to provide
cross-liability coverage.
23.01.3 Deductibles & Self-Insured Retention Levels. Each
Party alone will determine the appropriate deductible or self-insured
retention level for each of its required insurance policies. Each party is
responsible for paying the full amount for the self-insured retention level
or reimburse the insurer for any deductibles. If the other Party incurs any
cost due to the first's deductible or self-insured retention level, the
first party will reimburse the other for the full amount incurred.
Deductibles and self-insured retention levels will be provided on the
Accord form for the required insurance.
23.01.4 Acceptability of Insurers. Insurers must be licensed
in the state where service is provided and have a policy holder rating
("Best Rating") of at least a "A- minus" and a financial size category of
at least a "Class VII" as rated in the most recent edition of "Best's Key
Rating Guide" for insurance companies. During the term of the agreement, if
the insurer's Best ratings are revised below the minimum carrier ratings,
the appropriate Party must obtain acceptable insurance within ninety (90)
days. Self-insurance by either Party is not deemed acceptable.
23.02 NASD Regulation Insurance Requirements. NASD Regulation
will maintain the following insurance coverage during the Term of this
Agreement:
Commercial General and Umbrella Liability Insurance.
a) NASD Regulation shall maintain Commercial General
Liability (CGL) insurance and, if necessary, Commercial
Umbrella insurance with a limit of not less than $10,000,000
each occurrence.
i) CGL insurance will cover liability arising from
premises, operations, independent contractors, T
products-completed operations, personal injury and
advertising injury, and liability assumed under an
insured contract including the tort liability of
another assumed in a business contract.
ii) Nasdaq shall be included as an additional insured
under the CGL and under the commercial umbrella, if
any. This insurance shall apply as primary insurance
with respect to any other insurance or self-insurance
programs afforded to Nasdaq. There shall be no
endorsement or modification of the CGL to make it
excess over other available insurance; alternatively,
if the CGL states that it is excess or pro rata, the
policy shall be endorsed to be primary with respect to
the additional insured.
iii) Waiver of Subrogation. NASD Regulation waives all rights
against the Nasdaq and its agents, officers, directors
and employees for recovery of damages to the extent
these damages are covered by the commercial general
liability or commercial umbrella liability insurance
maintained pursuant to this paragraph.
b) Automobile and Umbrella Liability Insurance
i) NASD Regulation shall maintain automobile liability
and, if necessary, commercial umbrella liability
insurance with a limit of not less than $2,000,000 each
accident.
ii) Such insurance shall cover liability arising out of any
auto (including owned, hired, and non-owned autos).
iii) Coverage shall be written on Insurance Standards
Office Form CA 0001, or a substitute form providing
equivalent liability coverage. If necessary, the policy
shall be endorsed to provide contractual liability
coverage equivalent to that provided in the 1990 and
later editions of CA 0001.
(iv) Waiver of Subrogation. NASD Regulation waives all
rights against Nasdaq and its agents, officers,
directors and employees for recovery of damages to the
extent these damages are covered by the business auto
liability or commercial umbrella liability insurance
obtained by NASD Regulation pursuant to this Agreement
or under any applicable auto physical damage coverage.
c) Workers Compensation Insurance.
i) NASD Regulation shall maintain workers compensation
and employers liability insurance. The commercial
umbrella and/or employers liability limits shall not be
less than $5,000,000 each accident for bodily injury by
accident or $5,000,000 each employee for bodily injury
by disease.
ii) Waiver of Subrogation. NASD Regulation waives all rights
against Nasdaq and its agents, officers, directors, and
employees for recovery of damages to the extent these
damages are covered by the workers compensation and
employers liability or commercial umbrella liability
insurance obtained by Tenant pursuant to this
Agreement.
d) Fidelity/Crime Policy
i) NASD Regulation shall maintain a fidelity bond or
commercial crime policy in the amount of $25,000,000
for each loss or series of related losses to cover the
dishonest acts of its employees. The policy will
include coverage for fidelity, on premises, in transit,
forgery or alterations and securities coverages to
include endorsements for independent contractors,
facsimile transmission, unauthorized signatures, and
wire transfers.
ii) NASD Regulation's fidelity bond shall be endorsed
to name Nasdaq as a Loss Payee as its interests may
apply. However, losses otherwise payable to Nasdaq
under such Crime insurance will be reduced by fifty
percent (50%) whenever such covered dishonest acts
involve both NASD Regulation employees and Nasdaq
employees.
e) Computer Crime Policy
i) NASD Regulation shall maintain a Computer Crime
policy in the amount of $10,000,000 to cover its
employees, agents and third party for computer systems
fraud, data processing service operations fraud, voice
initiated transfer fraud, facsimile transfer fraud,
destruction of data or programs by hacker, destruction
of data or programs by virus .
ii) NASD Regulation's Computer Crime policy shall be
endorsed to name Nasdaq as a Loss Payee as its
interests may apply. However, losses otherwise payable
to Nasdaq under such insurance will be reduced by fifty
percent (50%) whenever such covered dishonest acts
involve both NASD Regulation employees and Nasdaq
employees.
f) Professional Liability Insurance
i) NASD Regulation shall maintain a professional liability
insurance covering the errors and omissions of NASD
Regulation, its officers, directors, employees and
agents, committed in connection with this Agreement in
an amount not less than $10,000,000.
g) Commercial Property Insurance.
i) NASD Regulation will maintain Property insurance to
cover the replacement cost of its personal property,
decorations, trade fixtures, furnishings, improvements
and betterments, and supplies without deduction for
depreciation, and business interruption/extra expense
for a period of indemnity not less than twelve(12)
months. Nasdaq shall not be liable for any damage to or
loss of personal property sustained by NASD Regulation,
whether or not it is insured, unless such loss was
caused by the gross negligence or willful misconduct of
Nasdaq, its employees, officers, directors, or agents.
ii) Waiver of Subrogation. NASD Regulation hereby
waives any recovery of damages against Nasdaq, its
employees, officers, directors, agents, or
representatives for loss or damage to the building,
tenant improvements and betterments, fixtures,
equipment, and any other personal property to the
extent covered by the commercial property insurance.
23.03 Nasdaq Insurance Requirements.
Commercial General and Umbrella Liability Insurance.
a) Nasdaq shall maintain CGL insurance and, if necessary,
Commercial Umbrella insurance with a limit of not less than
$10,000,000 each occurrence.
i) CGL insurance will cover liability arising from
premises , operations, independent contractors,
products-completed operations, personal injury and
advertising injury, and liability assumed under an
insured contract including the tort liability of
another assumed in a business contract.
ii) NASD Regulation shall be included as an additional
insured under the CGL and under the commercial
umbrella, if any. This insurance shall apply as primary
insurance with respect to any other insurance or
self-insurance programs afforded to NASD Regulation.
There shall be no endorsement or modification of the
CGL to make it excess over other available insurance;
alternatively, if the CGL states that it is excess or
pro rata, the policy shall be endorsed to be primary
with respect to the additional insured.
iii) Waiver of Subrogation. Nasdaq waives all rights
against the NASD Regulation and its agents, officers,
directors and employees for recovery of damages to the
extent these damages are covered by the commercial
general liability or commercial umbrella liability
insurance maintained pursuant to this paragraph.
b) Automobile and Umbrella Liability Insurance
i) Nasdaq shall maintain automobile liability and, if
necessary, commercial umbrella liability insurance with
a limit of not less than $2,000,000 each accident.
ii) Such insurance shall cover liability arising out of any
auto (including owned, hired, and non-owned autos).
iii) Coverage shall be written on Insurance Standards
Office Form CA 0001, or a substitute form providing
equivalent liability coverage. If necessary, the policy
shall be endorsed to provide contractual liability
coverage equivalent to that provided in the 1990 and
later editions of CA 0001.
iv) Waiver of Subrogation. Nasdaq waives all rights
against NASD Regulation and its agents, officers,
directors and employees for recovery of damages to the
extent these damages are covered by the business auto
liability or commercial umbrella liability insurance
obtained by Nasdaq pursuant to this Agreement or under
any applicable auto physical damage coverage.
c) Workers Compensation Insurance.
i) Nasdaq shall maintain workers compensation and
employers liability insurance. The commercial umbrella
and/or employers liability limits shall not be less
than $5,000,000 each accident for bodily injury by
accident or $5,000,000 each employee for bodily injury
by disease.
ii) Waiver of Subrogation. Nasdaq waives all rights
against NASD Regulation and its agents, officers,
directors, and employees for recovery of damages to the
extent these damages are covered by the workers
compensation and employers liability or commercial
umbrella liability insurance obtained by Tenant
pursuant to this Agreement.
d) Fidelity/Crime Policy
i) Nasdaq shall maintain a fidelity bond or commercial
crime policy in the amount of $5,000,000 for each loss
or series of related losses to cover the dishonest acts
of its employees. The policy will include coverage for
fidelity, on premises, in transit, forgery or
alterations and securities coverages to include
endorsements for independent contractors, facsimile
transmission, unauthorized signatures, and wire
transfers.
e) Computer Crime Policy
i) Nasdaq shall maintain a Computer Crime policy in
the amount of $10,000,000 to cover its employees,
agents and third party for computer systems fraud, data
processing service operations fraud, voice initiated
transfer fraud, facsimile transfer fraud, destruction
of data or programs by hacker, destruction of data or
programs by virus.
ii) Nasdaq's Computer Crime policy shall be endorsed
to name NASD Regulation as a Loss Payee as its
interests may apply. However, losses otherwise payable
to NASD Regulation under such insurance will be reduced
by fifty percent (50%) whenever such covered dishonest
acts involve both NASD Regulation employees and Nasdaq
employees.
f) Professional Liability Insurance
i) Nasdaq shall maintain a professional liability
insurance covering the errors and omissions of Nasdaq,
its officers, directors, employees and agents committed
in connection with this Agreement in an amount not less
than $10,000,000.
g) Commercial Property Insurance.
i) Nasdaq will maintain Property insurance to cover
the replacement cost of its personal property,
decorations, trade fixtures, furnishings, improvements
and betterments, and supplies without deduction for
depreciation, and business interruption/extra expense
for a period of indemnity not less than twelve(12)
months. NASD Regulation shall not be liable for any
damage to or loss of personal property sustained by
Nasdaq, whether or not it is insured, unless such loss
was caused by the gross negligence or willful
misconduct of NASD Regulation, its employees, officers,
directors, or agents.
ii) Waiver of Subrogation. Nasdaq hereby waives any
recovery of damages against NASD Regulation, its
employees, officers, directors, agents, or
representatives for loss or damage to the building,
tenant improvements and betterments, fixtures,
equipment, and any other personal property to the
extent covered by the commercial property insurance.
23.04 Subcontractors Insurance Requirements. Each Party is
responsible for ensuring that its agents, third parties (but not those
third parties which initially compile Nasdaq Market Data) or subcontractors
used in the performance of this Agreement are adequately insured. The
contracting Party with the agent will ensure that its insurance is excess
of the agent's insurance to provide adequate coverage to the other Party.
Each party will ensure that its agents maintain the following minimum
insurance coverages and limits:
Workers Compensation - Statutory limits required in the state
where services are performed.
Employers Liability - $500,000 per accident, $500,000 per
employee disease and $500,000 policy limit for disease.
Automobile Liability - $1,000,000 each person/each accident
including owned, hired, and non-owned autos).
Commercial General Liability Policy will include Broad Form
Contractual Liability, Bodily Injury, Property Damage,
Personal Injury and Completed Operations with a minimum limit
of $1,000,000 combined single limit per occurrence and
$2,000,000 aggregate.
Umbrella Liability - Minimum required coverage is $5,000,000.
Higher umbrella limits may be used to offset lower levels of
underlying insurance requirements. The policy must reference
each of the above policies.
SECTION 24 MISCELLANEOUS PROVISIONS.
24.01 Assignment. Neither Party may assign this Agreement
without the prior written consent of the other Party, which consent will
not be unreasonably withheld, conditioned or delayed, provided, however,
that either Party may assign this Agreement to a corporation controlling,
controlled by or under common Control with the assigning Party. The consent
of a Party to any assignment of this Agreement will not constitute such
Party's consent to further assignment. This Agreement will be binding on
the Parties and their respective successors and permitted assigns. Any
assignment in contravention of this subsection will be void.
24.02 Notices. All notices and other communications required
or permitted to be given under this Agreement will be in writing and will
be deemed to have been duly given upon (i) actual receipt by the notified
Party or (ii) constructive receipt (as of the date marked on the return
receipt) if sent by certified mail or overnight delivery service, return
receipt requested, to the following addresses:
(a) If to NASD Regulation:
***** *
With, in the case of notice of breach or default, a required
copy to: *****
(b) If to Nasdaq:
*****
With, in the case of notice of breach or default, a required
copy to: *****
Either Party may change its address for notification purposes by giving the
other Party ten (10) days prior written notice of its new address.
24.03 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all
of which taken together shall constitute one single agreement between the
Parties.
24.04 Relationship. The Parties intend to create an
independent contractor relationship and nothing contained in this Agreement
will be construed to make either Nasdaq or NASD Regulation partners, joint
venturers, principals, agents or employees of the other. NASD Regulation
and its personnel, in performance of this Agreement, are acting as
independent contractors and not as employees or agents of Nasdaq. Neither
Party will have any right, power or authority, express or implied, to bind
the other. NASD Regulation will provide all insurance coverage required by
applicable laws, regulations, or employment agreements, including, without
limitation, medical and workman's compensation. NASD Regulation will be
responsible for payment of all unemployment, social security, and other
payroll taxes and all benefits of all individuals who are engaged in the
performance of the Services. If, at any time, any liability is asserted
against Nasdaq for unemployment, social security or any other payroll tax
related to NASD Regulation or any individuals or subcontractors employed by
or associated with NASD Regulation, then NASD Regulation will indemnify and
hold harmless Nasdaq from any such liability, including, without
limitation, any such taxes, any interest or penalties related thereto, and
reasonable attorney's fees and costs.
- ---------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
24.05 Consents, Approvals and Requests. Except as
specifically set forth in this Agreement, all consents and approvals to be
given by either Party under this Agreement will not be unreasonably
withheld, conditioned or delayed.
24.06 Severability. If any provision of this Agreement is
held by a court of competent jurisdiction to be contrary to Law, then the
remaining provisions of this Agreement, if capable of substantial
performance, will remain in full force and effect.
24.07 Waiver. No failure on the part of NASD Regulation or
Nasdaq to exercise, no delay in exercising, and no course of dealing with
respect to any right, power, or privilege under this Agreement will operate
as a waiver thereof, nor will any single or partial exercise of any such
right, power, or privilege preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege under this
Agreement.
24.08 Remedies Cumulative. No right or remedy herein
conferred upon or reserved to either Party is intended to be exclusive of
any other right or remedy, and each and every right and remedy will be
cumulative and in addition to any other right or remedy under this
Agreement, or under applicable law, whether now or hereafter existing.
24.09 Entire Agreement. This Agreement and the Exhibits to
this Agreement represent the entire agreement between the Parties with
respect to its subject matter, and there are no other representations,
understandings or agreements between the Parties relative to such subject
matter.
24.10 Amendments. No amendment to, or change, waiver or
discharge of, any provision of this Agreement will be valid unless in
writing and signed by an authorized representative of each of the Parties.
24.11 Survival Of Provisions. The terms of this Agreement
apply to those rights that survive any cancellation, termination, or
rescission, namely-- Confidentiality, Intellectual Property rights and
Indemnification sections of this Agreement, the provision and receipt of
Nasdaq Data, disclaimers of warranties, limitations of liability and any
warranties. Payment obligations of one Party to the other arising prior to
the cancellation, termination or recession of this Agreement will survive
the expiration of termination of this Agreement.
24.12 Governing Law. This Agreement will be deemed to have
been made in the State of New York and will be construed and enforced in
accordance with, and the validity and performance hereof will be governed
by, the laws of the State of New York, without reference to its principles
of conflicts of laws. The Parties hereby consent to submit to the
jurisdiction of the federal or state courts of or for the State of New York
in connection with any action or proceeding instituted relating to this
Agreement.
24.13 Covenant of Further Assurances. Nasdaq and NASD
Regulation covenant and agree that, subsequent to the execution and
delivery of this Agreement and, without any additional consideration, each
of Nasdaq and NASD Regulation will execute and deliver any further legal
instruments and perform any acts that are or may become necessary to
effectuate the purposes of this Agreement.
24.14 Export. Nasdaq and NASD Regulation agree that they each
will comply with all applicable export laws and regulations of the United
States. Each Party will cooperate with the other Party in connection the
requirements of this Section, including promptly furnishing any end-user
certificates, affidavits regarding re-export or other applicable
certificates or documents.
24.15 ***** *
24.16 Approvals. Each Party warrants that it will, at its
sole expense, comply with all applicable laws, regulations, and
requirements, and that its performance of the Agreement will not cause it
to violate any State, Federal or local Laws. Each Party will at all times
exercise due care, prudence and diligence in carrying out its duties and
responsibilities under the Agreement. Each Party will 24.1 obtain and
maintain all necessary licenses, permits or government approvals as may be
necessary for it to perform the Agreement. Each Party further warrants that
it will cooperate with and assist the other Party in obtaining and
maintaining any such approvals as applicable, to the extent reasonably
possible if: (i) requested to do so by the other party in writing; and (ii)
without limiting the requesting Party's obligations under this Agreement.
24.17 Publicity. Each Party will: (i) submit to the other
Party all advertising, written sales promotions, press releases and other
publicity matters relating to this Agreement in which the other Party's
name or Mark(s) is/are mentioned or which contains language from which the
connection of said name or marks may be inferred or implied (in each
instance, including the Marks); and (ii) not publish or use such
advertising, sales promotions, press releases or publicity matters without
the other Party's prior written consent.
24.18 Error Correction. The Fees are based on information and
data furnished by the Parties during the negotiation of this Agreement. The
Parties acknowledge that they have to the extent possible, verified and
validated such information and data and that the Parties believe that it is
reflective of conditions in existence as of the Effective Date of this
Agreement. If, however, at any time during the first twelve (12) months
after the Commencement Date of this Agreement, either Party identifies a
material error in the information or data used to calculate these Fees,
then the Parties will negotiate an equitable adjustment to the Fees. In
addition, if in the time period stated above either Party identifies a
material error in an assumption in the description of a tower of NASD
Regulation Services that was approved by Nasdaq prior to the Commencement
Date of this Agreement that would have a material impact on NASD
Regulation's costs to provide the Services included in such tower, then the
parties will negotiate an equitable adjustment to the Fee for NASD
Regulation's provision of the Services in such tower to Nasdaq.
24.19 Authorization. This Agreement will not be binding upon
the Parties unless executed by an authorized officer of NASD Regulation and
Nasdaq. Nasdaq and NASD Regulation and the persons executing this Agreement
represent that such persons are duly authorized by all necessary and
appropriate corporate or other action to execute this Agreement on behalf
of NASD Regulation and Nasdaq.
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
24.20 Interpretation. The masculine, feminine or neuter
gender and the singular or plural number will be deemed to include the
other gender or numbers where the context so indicates or requires. Unless
otherwise expressly provided, references to days, months or years are to
calendar days, months or years. Person or persons includes individuals,
partnerships, corporations, government agencies or other entities.
IN WITNESS WHEREOF, the Parties hereto have each caused this
Agreement to be signed and delivered by their duly authorized
representative.
NASD Regulation, Inc. The Nasdaq Stock Market, Inc.
(NASD Regulation) (Nasdaq)
By: By:
----------------------------- -----------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
----------------------------- -----------------------------
EXHIBIT 1
***** *
- --------
* ***** Confidential Treatment has been requested for the redacted
portions. The confidential redacted portions have been filed separately
with the Securities and Exchange Commission.
Exhibit 10.6
SEPARATION AND COMMON SERVICES AGREEMENT
THIS SEPARATION AND COMMON SERVICES AGREEMENT (AGREEMENT),
dated as of June 28, 2000 (EFFECTIVE DATE), is by and between the National
Association of Securities Dealers, Inc., a Delaware nonprofit corporation
with its principal place of business located at 1735 K Street, N.W.,
Washington, D.C. 20006 (NASD), and The Nasdaq Stock Market, Inc. (NASDAQ),
a Delaware corporation with its principal place of business located at 1735
K Street, N.W., Washington, D.C. 20006.
WHEREAS, NASD desires to provide to Nasdaq, and Nasdaq
desires to obtain from NASD, the services described in general terms in
this Agreement, on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the agreements
set forth below, Nasdaq and NASD hereby agree as follows:
1. Term. This Agreement will commence on the Effective Date and continue
through December 31, 2001 (TERM). The Parties intend to continue to
negotiate a more detailed agreement (MASTER AGREEMENT) on this subject
matter that, upon execution by the Parties, will supercede this Agreement.
In the event the Parties do not execute such Master Agreement prior to
January 1, 2002, this Agreement will automatically renew upon the
expiration of its Term for an additional 12 months. The Parties will
diligently and with their best efforts attempt to negotiate the Master
Agreement as quickly as possible.
2. Services. Commencing as of the Effective Date and continuing throughout
the Term, including any renewal of the Term, NASD will provide to Nasdaq
(a) the same administrative, corporate and infrastructure services that are
currently provided by NASD for Nasdaq's benefit; and (b) any services or
responsibilities not currently provided that may be mutually agreed upon by
the Parties. (clauses (a) and (b) of this Section are hereinafter
collectively referred to as the SERVICES). Notwithstanding the foregoing,
in the event that Nasdaq determines prior to December 31, 2000, that it
will not utilize certain Services, it may provide written notice of that
decision to NASD. Any such notice must be received by NASD prior to
December 31, 2000. Following such notice, the parties will negotiate a
transition period for NASD to cease rendering the unutilized Services and a
reasonable termination fees and costs. Any transition period shall be not
less than 60 days from receipt by NASD of the said notice.
3. Commitment to Amex. Nasdaq agrees to provide to NASD continued access to
such Nasdaq technology as NASD requires to satisfy its obligation to the
American Stock Exchange (AMEX) under the transaction agreement NASD entered
into in connection with the 1998 acquisition of the assets of Amex, for so
long as such obligations may continue. Nasdaq also agrees to provide all
services it currently provides to Amex as of the date of this Agreement
(e.g. Listing Qualifications), for so long as such obligations may
continue. Nasdaq will recover from NASD its costs for rendering such
services and access.
4. Ownership and Licensing of Intellectual Property.
(a) Each Party will remain the owner of its respective proprietary
intellectual property as well any enhancements or derivative works related
to such property prepared by either Party (collectively INTELLECTUAL
PROPERTY). Each Party will grant to the other a royalty-free, fully
paid-up, revocable, worldwide, non-exclusive, non-transferable license to
use, copy or modify such Intellectual Property as necessary to carry out
the terms of this Agreement. Nasdaq may not grant its venture partners a
sublicense to use any Intellectual Property that it licenses from NASD
without NASD's prior written approval.
(b) Jointly developed Intellectual Property developed for the
Services shall be jointly owned by the Parties. Neither Party shall be
required to obtain the consent of the other Party for any use of such
jointly developed Intellectual Property, nor shall either Party need to
account to the other for any revenue from such jointly developed
Intellectual Property. Notwithstanding the foregoing, Nasdaq may not grant
any other entity, including any of its venture partners, a sub-license to
use any such jointly owned Intellectual Property without NASD's prior
written approval.
5. Force Majeure. Neither Party will be liable for delay or failure in
performance of any of the acts required by this Agreement when such delay
or failure arises from circumstances beyond its reasonable control
(including, without limitation, acts of God, fire, flood, war, explosion,
sabotage, terrorism, embargo, civil commotion, acts or omissions of any
government entity, supplier delays, communications or power failure,
equipment or software malfunction, or labor disputes), and without the
gross negligence or willful misconduct, of the Party.
6. Payment Procedures for NASD Services. NASD will invoice Nasdaq quarterly
for the cost of the Services that NASD will provide to Nasdaq during the
upcoming quarter, and will include the cost of specific disbursements and
incidental expenses incurred by NASD in its provision of the Services to
Nasdaq during the previous quarter. Rates and methodology shall be
consistent with the past budget practices of the Parties.
7. Dispute Resolution.
7.1. Dispute Resolution. This Section 7 governs any dispute,
disagreement, claim or controversy between the parties arising out of or
relating to this Agreement, its breach or the arbitration provisions (the
DISPUTED MATTER). All Disputed Matters will be considered by an Executive
Steering Committee to be established by the Parties. If the Disputed Matter
cannot be resolved by the Executive Steering Committee, the Disputed Matter
will then be referred to the binding arbitration as set forth immediately
below.
7.2. Binding Arbitration. All claims, disputes,
controversies and other matters in question between the parties to this
Agreement arising out of or relating to this Agreement or the breach
thereof that cannot be resolved by the parties will be settled by binding
arbitration in accordance with the rules and procedures of the American
Arbitration Association or such other rules and procedures as are agreed to
by the arbitrators or the Parties. Although the Parties agree that
compulsory and binding arbitration will be the exclusive means of dispute
resolution, judicial review of any arbitration decision or proceeding
(other than entry or enforcement of an arbitration award/judgment) or of
any matter arising under the terms of this Agreement, whether or not
submitted to the binding arbitration process required by this Agreement,
will be brought solely in the federal or local courts of the State of New
York. The foregoing procedures will not preclude either Party from pursuing
all available remedies for infringement of a trademark, trade secret,
registered patent or copyright.
8. Indemnification. Each Party agrees to indemnify and hold harmless the
other Party against all losses, costs and expenses (including reasonable
attorney's fees) that the other Party may incur by reason of the breach of
any terms or provisions contained herein and/or in connection with the
performance of this Agreement or any provision hereof. Each Party further
agrees to indemnify and hold harmless the other against all losses, costs
and expenses (including reasonable attorney's fees) that the other may
incur by reason of any third party suit or the breach of any terms,
provisions, covenants, warranties or representations contained herein
and/or in connection with the performance of this Agreement or any
provision hereof. Nothing in this Agreement will entitle any person or
entity to any rights as a third-party beneficiary under this Agreement.
9. Damages. Neither of the Parties or their respective affiliates will be
liable to the other (or any other entity) for any direct damages arising
out of or relating to its performance or failure to perform under this
Agreement; provided, however, that each of the Parties will continue to be
liable for Claims or Losses arising from or related to: (i) its
infringement of the other Party's Intellectual Property; (ii) damage caused
by it to the persons or property of the other Party; (iii) its gross
negligence or willful misconduct; or (iv) the gross negligence or willful
misconduct of its officers, directors, employees, agents or subcontractors.
Neither Nasdaq nor NASD will be liable for, nor will the measure of damages
include, any punitive, indirect, incidental, special or consequential
damages, lost profits or savings, lost opportunity or trading losses,
arising out of or relating to its performance or failure to perform under
this Agreement, even if such party has been advised of the possibility of
such losses or damages. The limitations or exculpations of liability set
forth herein will not apply to: (i) reimbursable amounts; (ii)
indemnification Claims, as set forth in Section 9 herein; or (iii) any
breaches of confidentiality.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
taken together shall constitute one single agreement between the Parties.
11. Entire Agreement. This Agreement and the Exhibits to this Agreement
represent the entire agreement between the Parties with respect to its
subject matter, and there are no other representations, understandings or
agreements between the Parties relative to such subject matter.
12. Amendment. No amendment to, or change, waiver or discharge of, any
provision of this Agreement will be valid unless in writing and signed by
an authorized representative of each of the Parties.
13. Survivability. The terms of this Agreement apply to those rights that
survive any cancellation, termination, or rescission, namely - Ownership of
Intellectual Property, and Indemnification sections of this Agreement.
Payment obligations of one Party to the other arising prior to the
cancellation, termination or recession of this Agreement will survive the
expiration of termination of this Agreement.
14. Governing Law. This Agreement will be deemed to have been made in the
State of New York and will be construed and enforced in accordance with,
and the validity and performance hereof will be governed by, the laws of
the State of New York, without reference to its principles of conflicts of
laws. The Parties hereby consent to submit to the jurisdiction of the
federal or state courts of or for the State of New York in connection with
any action or proceeding instituted relating to this Agreement.
IN WITNESS WHEREOF, the Parties hereto have each caused
this Agreement to be signed and delivered by their duly authorized
representative.
National Association of Securities The Nasdaq Stock Market, Inc.
Dealers, Inc. (NASD) (Nasdaq)
By: By:
------------------------------- --------------------------
Name: Name:
----------------------------- -------------------------
Title: Title:
---------------------------- ------------------------
Exhibit 10.7
THE NASDAQ STOCK MARKET, INC. 2000 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED 2/14/01)
SECTION 1.
PURPOSE. The purpose of The Nasdaq Stock Market, Inc. 2000 Employee Stock
Purchase Plan (the "Plan") is to provide employees of The Nasdaq Stock
Market, Inc. (the "Company") and its subsidiaries with an opportunity to
become part owners of the Company by purchasing Shares (as defined below)
through semi-annual offerings financed by payroll deductions and/or lump
sum payment contributions. It is the intention of the Company to have the
Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of Code
(as defined below). The provisions of the Plan shall be construed
accordingly.
SECTION 2.
DEFINITIONS. As used in the Plan, the following terms shall have
the meanings set forth below:
(a) "Affiliate" shall mean (i) any entity that, directly or indirectly, is
controlled by the Company, (ii) any entity in which the Company has a
significant equity interest and (iii) an affiliate of the Company, as
defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act, in
each case as determined by the Committee.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Change in Control" means the first to occur of any one of the events
set forth in the following paragraphs:
(i) any "Person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than (A) the Company, (B) any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company, (C) any entity owned, directly or
indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of Shares, and (D) the NASD),
is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly (not including any
securities acquired directly (or through an underwriter) from the
Company or its Affiliates), of 25% or more of the Company's then
outstanding Shares;
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving on
the Board: individuals who, on the effective date (as provided in
Section 12(a) of the Plan), were members of the Board and any new
director (other than a director whose initial assumption of office
is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to
the election of directors of the Company) whose appointment or
election by the Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors on the effective date of the Plan or whose
appointment, election or nomination for election was previously so
approved or recommended;
(iii) there is consummated a merger or consolidation of the
Company with any other corporation or the Company issues Shares in
connection with a merger or consolidation of any direct or indirect
subsidiary of the Company with any other corporation, other than
(A) a merger or consolidation that would result in the Shares of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving or parent entity) more than
50% of the Company's then outstanding Shares or 50% of the combined
voting power of such surviving or parent entity outstanding
immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no "Person" (as defined
below), directly or indirectly, acquired 25% or more of the
Company's then outstanding Shares (not including any securities
acquired directly (or through an underwriter) from the Company or
its Affiliates); or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets (or any transaction
having a similar effect), other than a sale or disposition by the
Company of all or substantially all of the Company's assets to an
entity, at least 50% of the combined voting power of the voting
securities of which are owned directly or indirectly by
stockholders of the Company in substantially the same proportions
as their ownership of the Company immediately prior to such sale.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Committee" shall mean a committee of the Board designated by the Board
to administer the Plan.
(f) "Compensation" shall mean the total earnings, prior to withholding,
paid to an Employee during the applicable pay period, including overtime
and cash bonus payments. Compensation shall exclude relocation expenses,
tax gross ups, referral bonuses, tuition reimbursement, the imputed value
of group life insurance, car allowances, contest earnings, any employer
contributions to a 401(k) plan, stock option gains, any amount included in
income in respect of restricted shares, any unpaid deferred cash bonuses or
other similar extraordinary remuneration received by such Employee.
(g) "Employee" shall mean any individual who is a regular employee of the
Company or of any participating Subsidiary whose customary employment with
the Company is at least 20 hours per week or five months in any calendar
year (within the meaning of Sections 423(b)(4) and (c) of the Code,
respectively). For purposes of the Plan, the employment relationship shall
be treated as continuing intact while the individual is on sick leave or
other leave of absence approved by the Company. Where the period of leave
exceeds 90 days and the Employee's right to reemployment is not guaranteed
either by statute or by contract, the employment relationship shall be
deemed to have terminated on the ninety-first day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering Period.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" with respect to the Shares, as of any date, shall
mean the fair market value of a Share as determined by the Committee in its
sole discretion; provided that (i) if the Shares are admitted to trading on
a national securities exchange, fair market value shall be the closing sale
price at the regular trading session reported for such share on such
exchange on the last day preceding such date on which sale was reported or
(ii) if the Shares are admitted to trading on the Nasdaq Stock Market or
other comparable market system, fair market value shall be the closing sale
price at the regular trading session reported on such system on the last
date preceding such date on which a sale was reported.
(k) "NASD" shall mean the National Association of Securities Dealers, Inc.
(l) "Offering Period" shall mean a period of approximately six months, or
such other period (not to exceed one year) as determined by the Committee.
(m) "Participant" shall mean an Employee who elects to participate in the
Plan by filing an Enrollment Form (as defined herein).
(n) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.
(o) "Purchase Date" shall mean the date the Plan administrator shall
acquire Shares for Participants (which shall be the last day of the
Offering Period, unless otherwise determined by the Committee).
(p) "SEC" shall mean the Securities and Exchange Commission or any
successor thereto and shall include the staff thereof.
(q) "Shares" shall mean shares of the common stock, $0.01 par value, of the
Company, or such other securities of the Company as may be designated by
the Committee from time to time.
(r) "Subsidiary" shall mean a subsidiary of the Company as defined under
Section 424(f) of the Code.
SECTION 3.
ADMINISTRATION.
(a) Authority of Committee. The Plan shall be administered by the
Committee. Subject to the express provisions of the Plan and applicable
law, and in addition to other express powers and authorizations conferred
on the Committee by the Plan, the Committee shall have full power and
authority to construe and interpret the Plan and may from time to time
adopt such rules and regulations for carrying out the Plan as it may deem
necessary or desirable for the administration of the Plan, including, but
not limited to, the determination of Offering Periods hereunder.
(b) Committee Discretion Binding. Unless otherwise expressly provided in
the Plan, all designations, determinations, interpretations, and other
decisions under or with respect to the Plan, shall be within the sole
discretion of the Committee, may be made at any time and shall be final,
conclusive, and binding upon all Persons, including the Company, any
Subsidiary, any Participant, any Employee, and any designated beneficiary.
(c) Delegation. Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers or managers of the Company
or any Subsidiary, or to a committee of such officers or managers, the
authority, subject to such terms and limitations as the Committee shall
determine, to administer the Plan.
(d) No Liability. No member of the Board or Committee shall be liable for
any action taken or determination made in good faith with respect to the
Plan.
(e) Agreements. The Committee may in its sole discretion determine from
time to time that the Company shall offer to enter into Agreements
hereunder ("Agreements") with all of the Participants, provided, however,
that it shall be under no obligation to do so.
SECTION 4.
SHARES AVAILABLE FOR AWARDS.
(a) Shares Available. Subject to adjustment as provided in Section 4(b),
the number of Shares which may be sold under the Plan shall not exceed
2,000,000. Subject to such overall limit, the Committee may specify the
maximum number of Shares that may be offered in any particular Offering
Period. In the event that any Shares offered during an Offering Period are
not purchased, such unpurchased Shares may again be sold under the Plan.
(b) Adjustments. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee
to be appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the
Plan, then the Committee shall, in such manner as it may deem appropriate
make such equitable adjustments in the Plan and the then outstanding
offerings as it deems necessary and appropriate, including but not limited
to changing the number of Shares reserved under the Plan and the price of
the current offering.
(c) Source of Shares. Shares which are to be delivered under the Plan may
be obtained by the Company from its treasury, by purchases on the open
market once a market has developed or from private sources, or by issuing
authorized but unissued Shares. Any issuance of authorized but unissued
Shares shall be approved by the Board or the Committee. Authorized but
unissued Shares may not be delivered under the Plan if the purchase price
thereof is less than the par value of the Shares.
(d) Oversubscription. If the number of Shares that Participants become
entitled to purchase is greater than the number of Shares offered in a
particular Offering Period or remaining available, the available Shares
shall be allocated by the Committee among such Participants in such manner
as it deems fair and equitable.
SECTION 5.
ELIGIBILITY. All Employees (including Employees who are directors) of the
Company or of any Subsidiary designated by the Committee, will be eligible
to participate in the Plan, in accordance with such rules as may be
prescribed from time to time; provided, however, that such rules shall
neither permit nor deny participation in the Plan contrary to the
requirements of the Code (including, but not limited to, Section 423(b)(3),
(4) and (5) thereof) and regulations promulgated thereunder. No Employee
shall be eligible to participate in the Plan until the completion of six
months of service as of the Enrollment Date with: (1) the Company; (2) a
participating Subsidiary; or (3) for purposes of the first two Offering
Periods, service with the NASD, NASD Regulation, Inc., or any other
Affiliate designated by the Committee. For any subsequent Offering Period,
the Committee may determine whether service with an entity other than the
Company or a participating Subsidiary may count toward the six month
period. During an Offering Period, no Employee may participate under the
Plan if such Employee would own 5% or more of the outstanding Shares. For
purposes of the preceding sentence, the rules of Section 424(d) of the Code
shall apply in determining the Share ownership of an Employee, and Shares
which the Employee would be permitted to purchase under the current
Offering Period shall be treated as Shares owned by the Employee.
SECTION 6.
PARTICIPATION AND OFFERINGS.
(a) The Company may authorize one or more Offering Periods to Employees to
purchase Shares under the Plan. The Committee may at any time suspend an
Offering Period if required by law or if the Committee determines in good
faith that it is in the best interests of the Company.
(b) Eligible Employees may become Participants in such Offering Periods at
such time(s) as determined by the Committee by filing a form of enrollment
("Enrollment Form") with the Company authorizing specified regular payroll
deductions or lump-sum payments. Subject to paragraph (c) below, payroll
deduction for such purpose shall be in 1% increments of Compensation
subject to a minimum of 1% and a maximum deduction of 10% of Compensation
per pay period. Notwithstanding the foregoing, in no event may the sum of a
Participant's lump-sum contributions and regular payroll deductions exceed
10% of a participant's Compensation for the applicable Offering Period,
except in the case of any initial Offering Period during the calendar year
2000, in which case the total contributions cannot exceed 10% of the
Participant's Compensation for the calendar 2000 year.
(c) Notwithstanding anything else contained herein, no Employee may
purchase Shares under this Plan and any other qualified employee stock
purchase plan (within the meaning of Section 423 of the Code) of the
Company or its Subsidiaries at a rate which exceeds $25,000 of Fair Market
Value of Shares for each calendar year in which a purchase is executed. For
purposes of this Section 6, Fair Market Value shall be determined as of the
first date of the applicable Offering Period.
(d) The Company and participating Subsidiaries will establish Participant
recordkeeping accounts authorizing a payroll deduction pursuant to Section
6(b). The Committee may, in its discretion, authorize the payment of
interest on Participant contributions.
(e) A Participant may, by written notice at any time during the Offering
Period, direct the Company to reduce or increase payroll deductions (or, if
the payment for Shares is being made through periodic cash payments, notify
the Company that such payments will be increased, reduced, or terminated),
subject to a maximum of one change per Offering Period.
(f) A Participant may elect to withdraw all of his or her entire account
prior to the end of the Offering Period. Any such withdrawal will terminate
such Participant's participation for the remainder of the Offering Period.
If a Participant withdraws from an Offering Period, payroll deductions
shall not resume at the beginning of the succeeding Offering Period unless
the Participant delivers to the Company a new Enrollment Form.
As of the last day of the Offering Period, the record-keeping account of
each Participant shall be totaled (including any accrued interest payments,
if so authorized pursuant to section 6(d)). Subject to the provisions of
this Section 6(f), if such account contains sufficient funds to purchase
one or more Shares as of that date, the Employee shall be deemed to have
purchased Shares at the price determined under Section 7 below; such
Participant's account will be charged, on that date, for the amount of the
purchase, and for all purposes under the Plan the Participant shall be
deemed to have acquired the Shares on that date. Fractional shares shall be
issued, as necessary. The registrar for the Company will make an entry on
its books and records evidencing that such Shares have been duly issued as
of that date; provided, however, that a Participant may, in the
alternative, elect in writing prior thereto to receive a stock certificate
representing the amount of such full Shares acquired, in which case any
fractional shares credited to the Participant shall be settled by a cash
payment.
(g) Each Participant may be requested to notify the Company of any
disposition of Shares purchased pursuant to the Plan prior to the
expiration of the holding periods set forth in section 423(a) of the Code.
SECTION 7.
PURCHASE PRICE. The purchase price of a Share pursuant to a transaction
under the Plan shall be the lesser of: (a) 85% of the Fair Market Value of
a Share on the Enrollment Date of the applicable Offering Period, and (b)
85% of the Fair Market Value of a Share on the Purchase Date of the
applicable Offering Period.
SECTION 8.
TERMINATION OF EMPLOYMENT. Unless otherwise specified in an Agreement, upon
a Participant's ceasing to be an Employee of the Company or a participating
Subsidiary, for any reason, he or she shall be deemed to have elected to
withdraw from the Plan and the payroll deductions credited to such
Participant's account (including interest) during the Offering Period, but
not yet used, shall be returned to the Participant or, in the case of his
or her death, to the person's designated beneficiary or estate.
SECTION 9.
TRANSFERABILITY. Neither payroll deductions credited to a Participant's
account nor any rights with regard to the purchase of Shares under the Plan
may be assigned, transferred, pledged, or otherwise disposed of in any way
(other than by will, laws of descent and distribution, or beneficiary
designation) by a Participant. Any such attempt at assignment, transfer,
pledge, or other disposition shall be without effect, except that the
Company may treat such act as an election to withdraw funds from an
Offering Period in accordance with Section 6(f) hereof. SECTION 10.
CHANGE IN CONTROL. Unless otherwise specified in an Agreement,
notwithstanding anything in the Plan to the contrary, in the event of a
Change in Control of the Company, if the Committee determines that the
operation or administration of the Plan could prevent Participants from
obtaining the benefit of accrued purchase rights under the Plan, the Plan
may be terminated in any manner deemed by the Committee to provide
equitable treatment to Participants. Equitable treatment may include, but
is not limited to, payment to each Participant of the amount of
contributions and interest in such Participant's account as of the date of
the Change in Control, plus an additional amount determined by (A)
calculating the number of full Shares that could have been purchased for
the Participant immediately prior to the Change in Control at the purchase
price (determined under Section 7 at the beginning of the Offering Period
(the "Purchase Price")) and (B) multiplying that number of Shares by the
difference between the Purchase Price per Share and the highest price paid
per Share in connection with the Change in Control of the Company.
SECTION 11.
GENERAL PROVISIONS.
(a) Amendments. The Board may, from time to time, alter, amend, suspend,
discontinue or terminate the Plan or any portion thereof or alter or amend
any and all Agreements; provided, however, that no such action of the Board
may, without the requisite stockholder approval, make any amendment for
which stockholder approval is necessary to comply with any tax or
regulatory requirement, including for this purpose, any approval
requirement which is a prerequisite for exemptive relief under Section
16(b) of the Exchange Act or Sections 423 and 424 of the Code. In addition,
the Committee may, from time to time, amend the Plan or any portion thereof
or amend any and all Agreements, in each case, to (i) cure any ambiguity or
to correct or supplement any provision of the Plan or any Agreement which
may be defective or inconsistent with any other provision of the Plan or
any Agreement or (ii) make any other provisions in regard to matters or
questions arising under the Plan or the Agreements which the Committee may
deem necessary or desirable and which, in the judgment of the Committee, is
not material; provided, however, that no such action of the Committee may,
without the requisite stockholder approval, make any amendment for which
stockholder approval is necessary to comply with any tax or regulatory
requirement, including for this purpose, any approval requirement which is
a prerequisite for exemptive relief under Section 16(b) of the Exchange Act
or Sections 423 and 424 of the Code.
(b) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employment of the
Company or any Subsidiary. Further, the Company or a Subsidiary may at any
time dismiss a Participant from employment, free from any liability or any
claim under the Plan, unless otherwise expressly provided in the Plan.
(c) No Rights as Stockholder. Subject to the provisions of the Plan, no
Participant or holder or beneficiary of any purchase shall have any rights
as a stockholder with respect to any Shares to be distributed under the
Plan until he or she has become the holder of such Shares.
(d) Obligatory Status. Participation in the Plan shall impose no obligation
upon a Participant to purchase any Shares under the Plan.
(e) Application of Funds. The proceeds received by the Company from the
sale of Shares pursuant to purchases under the Plan will be used for
general corporate purposes.
(f) Severability. If any provision of the Plan becomes or is deemed to be
invalid, illegal, or unenforceable in any jurisdiction or as to any person,
or would disqualify the Plan or any purchase under any law deemed
applicable by the Committee, such provision shall be construed or deemed
amended to conform to the applicable laws, or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially
altering the intent of the Plan, such provision shall be stricken as to
such jurisdiction, and the remainder of the Plan shall remain in full force
and effect.
(g) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware without giving effect to
the conflict of law principles thereof.
(h) Other Laws. The Committee may refuse to issue or transfer any Shares
if, acting in its sole discretion, it determines that the issuance or
transfer of such Shares or such other consideration might violate any
applicable law or regulation (including applicable non-U.S. laws or
regulations) or entitle the Company to recover the same under Section
16(b), and any payment tendered to the Company by a Participant, other
holder or beneficiary in connection with the purchase of such Shares shall
be promptly refunded to the relevant Participant, holder, or beneficiary.
Without limiting the generality of the foregoing, no Plan provision shall
be construed as an offer to sell securities of the Company, and no such
offer shall be outstanding, unless and until the Committee in its sole
discretion has determined that any such offer, if made, would be in
compliance with all applicable requirements of the U.S. federal or non-U.S.
securities laws and any other laws to which such offer, if made, would be
subject.
(i) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
(j) Information Provided to Participants. The Company shall provide
financial statements to Participants at least annually and such other
information as may be required by law.
SECTION 12.
TERM OF THE PLAN.
(a) Effective Date. The Plan shall be effective December 12, 2000, subject
to its approval by the stockholders of the Company as provided in Section
423(b)(2) of the Code and the regulations thereunder.
(b) Expiration Date. The Plan shall terminate on the tenth anniversary of
the Effective Date or, subject to the provisions of Section 11(a) above,
coincident with the completion of any offering under which the limitation
on the total number of shares in Section 4(a) above has been reached, if
earlier or as provided under Section 10.
Exhibit 10.8
THE NASDAQ STOCK MARKET, INC. EQUITY INCENTIVE PLAN
(AS AMENDED 2/14/01)
SECTION 1.
PURPOSE. The purposes of The Nasdaq Stock Market, Inc. Equity Incentive
Plan (the "Plan") are to promote the interests of The Nasdaq Stock Market,
Inc. (the "Company") and its stockholders by (i) attracting and retaining
key employees, consultants and non-employee directors of the Company and
its Affiliates; (ii) motivating such individuals by means of
performance-related incentives to achieve long-range performance goals,
(iii) enabling such individuals to participate in the long-term growth and
financial success of the Company and (iv) linking compensation to the
long-term interests of stockholders. From and after the time the Company
becomes "publicly-held" within the meaning of Section 162(m) of the Code,
the Board may determine that the Plan is intended, to the extent
applicable, to satisfy the requirements of Section 162(m) and the Plan
shall be interpreted in a manner consistent with the requirements thereof.
SECTION 2.
DEFINITIONS. As used in the Plan, the following terms shall have the
meanings set forth below:
(a) "Affiliate" shall mean (i) any entity that, directly or indirectly, is
controlled by the Company, (ii) any entity in which the Company has a
significant equity interest and (iii) an affiliate of the Company, as
defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act, in
each case as determined by the Committee.
(b) "Award" shall mean any Option, Restricted Stock, Restricted Stock Unit
or Other Stock-Based Award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, in the discretion
of the Company, be transmitted electronically to any Participant, but need
not be executed or acknowledged by a Participant.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Cause" shall mean, unless otherwise defined in the applicable Award
Agreement or an employment agreement between the Participant and the
Company, (i) the engaging by the Participant in willful misconduct that is
injurious to the Company or its Affiliates, (ii) the embezzlement or
misappropriation of funds or property of the Company or its Affiliates by
the Participant, or the conviction of the Participant of a felony or the
entrance of a plea of guilty or nolo contendere by the Participant to a
felony, (iii) the willful failure or refusal by the Participant to
substantially perform his or her duties or responsibilities that continues
after being brought to the attention of the Participant (other than any
such failure resulting from the Participant's incapacity due to
Disability), or (iv) the violation by the Participant of any restrictive
covenants entered into between the Participant and the Company or the
Company's Guidelines for Appropriate Conduct as described in the Company's
Employee Handbook, or the Company's Code of Conduct. Any determination of
Cause shall be made by the Committee in its sole discretion. Any such
determination shall be final and binding on a Participant.
(f) "Change in Control" means the first to occur of any one of the events
set forth in the following paragraphs:
(i) any "Person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than (A) the Company, (B) any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company, (C) any entity owned, directly or
indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of Shares, and (D) the National
Association of Securities Dealers, Inc.), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly (not including any securities acquired
directly (or through an underwriter) from the Company or its
Affiliates), of 25% or more of the Company's then outstanding
Shares;
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then serving on
the Board: individuals who, on the effective date (as provided in
Section 13(a) of the Plan), were members of the Board and any new
director (other than a director whose initial assumption of office
is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to
the election of directors of the Company) whose appointment or
election by the Board or nomination for election by the Company's
stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors on the effective date of the Plan or whose
appointment, election or nomination for election was previously so
approved or recommended;
(iii) there is consummated a merger or consolidation of the
Company with any other corporation or the Company issues Shares in
connection with a merger or consolidation of any direct or indirect
subsidiary of the Company with any other corporation, other than
(A) a merger or consolidation that would result in the Shares of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving or parent entity) more than
50% of the Company's then outstanding Shares or 50% of the combined
voting power of such surviving or parent entity outstanding
immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no "Person" (as defined
below), directly or indirectly, acquired 25% or more of the
Company's then outstanding Shares (not including any securities
acquired directly (or through an underwriter) from the Company or
its Affiliates); or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets (or any transaction
having a similar effect), other than a sale or disposition by the
Company of all or substantially all of the Company's assets to an
entity, at least 50% of the combined voting power of the voting
securities of which are owned directly or indirectly by
stockholders of the Company in substantially the same proportions
as their ownership of the Company immediately prior to such sale.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.
(h) "Committee" shall mean a committee of the Board designated by the Board
to administer the Plan. From and after the time that the Shares are
registered pursuant to Section 12 under the Exchange Act, unless otherwise
determined by the Board, the Committee shall be composed of not less than
the minimum number of persons from time to time required by Section 16 and
Section 162(m), each of whom, to the extent necessary to comply with
Section 16 and Section 162(m) only, is a "Non-Employee Director" and an
"Outside Director" within the meaning of Section 16 and Section 162(m),
respectively.
(i) "Disability" shall mean, unless otherwise defined in the applicable
Award Agreement or an employment agreement between the Participant and the
Company, a disability that would qualify as such under the Company's then
current long-term disability plan.
(j) "Eligible Recipient" shall mean an officer, director, employee,
consultant or adviser of the Company or of any Affiliate.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(l) "Fair Market Value" with respect to the Shares, as of any date, shall
mean the fair market value of a Share as determined by the Committee in its
sole discretion; provided that (i) if the Shares are admitted to trading on
a national securities exchange, fair market value shall be the closing sale
price at the regular trading session reported for such share on such
exchange on the last day preceding such date on which sale was reported or
(ii) if the Shares are admitted to trading on Nasdaq or other comparable
market system, fair market value shall be the closing sale price at the
regular trading session reported on such system on the last date preceding
such date on which a sale was reported.
(m) "Incentive Stock Option" shall mean an option to purchase Shares from
the Company that is granted under Section 6 of the Plan and that is
intended to meet the requirements of Section 422 of the Code or any
successor provision thereto.
(n) "Non-Qualified Stock Option" shall mean an option to purchase Shares
from the Company that is granted under Section 6 of the Plan and that is
not intended to be an Incentive Stock Option.
(o) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
(p) "Other Stock-Based Award" shall mean any award granted under Section 8
of the Plan.
(q) "Parent" shall have the meaning set forth in Section 424(e) of the
Code.
(r) "Participant" shall mean any Eligible Recipient who receives an Award
under the Plan.
(s) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.
(t) "Restoration Option" shall mean a stock option granted pursuant to
Section 6(f).
(u) "Restricted Stock" shall mean any Share granted under Section 7 of the
Plan.
(v) "Restricted Stock Unit" shall mean any unit granted under Section 7 of
the plan.
(w) "Retirement" shall mean, unless otherwise defined in the applicable
Award Agreement or an employment agreement between the Participant and the
Company, retirement of a Participant from the employ or service of the
Company or any of its Affiliates in accordance with the terms of the
applicable Company retirement plan or, if a Participant is not covered by
any such plan, retirement on or after such date as the Participant has both
attained the age of 55 years and has 10 years of employment with the
Company.
(x) "SEC" shall mean the Securities and Exchange Commission or any
successor thereto and shall include the staff thereof.
(y) "Section 16" shall mean Section 16 of the Exchange Act and the rules
promulgated thereunder and any successor provision thereto as in effect
from time to time.
(z) "Section 162(m)" shall mean Section 162(m) of the Code and the rules
promulgated thereunder or any successor provision thereto as in effect from
time to time.
(aa) "Shares" shall mean shares of the common stock, $ .01 par value, of
the Company, or such other securities of the Company as may be designated
by the Committee from time to time.
(bb) "Subsidiary" shall have the meaning set forth in Section 424(f) of the
Code.
(cc) "Substitute Awards" shall mean Awards solely granted in assumption of,
or in substitution for, outstanding awards previously granted by a company
acquired by the Company or with which the Company combines.
SECTION 3.
ADMINISTRATION.
(a) Authority of Committee. The Plan shall be administered by the Committee
or, in the Board's sole discretion, by the Board. Subject to the terms of
the Plan and applicable law, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the Committee shall
have full power and authority to: (i) designate Participants; (ii)
determine the type or types of Awards to be granted to a Participant; (iii)
determine the number of Shares to be covered by, or with respect to which
payments, rights, or other matters are to be calculated in connection with,
Awards; (iv) determine the terms and conditions of any Award; (v) determine
whether, to what extent, and under what circumstances Awards may be
settled, or exercised in cash, Shares, other securities, other Awards or
other property, or canceled, forfeited, or suspended and the method or
methods by which Awards may be settled, exercised, canceled, forfeited, or
suspended; (vi) determine whether, to what extent, and under what
circumstances cash, Shares, other securities, other Awards, other property,
and other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(vii) interpret and administer the Plan and any instrument or agreement
relating to, or Award made under, the Plan; (viii) establish, amend,
suspend, or waive such rules and regulations and appoint such agents as it
shall deem appropriate for the proper administration of the Plan; and (ix)
make any other determination and take any other action that the Committee
deems necessary or desirable for the administration of the Plan.
(b) Committee Discretion Binding. Unless otherwise expressly provided in
the Plan, all designations, determinations, interpretations, and other
decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be
final, conclusive, and binding upon all Persons, including any Eligible
Recipient, Participant or any holder or beneficiary of any Award.
(c) Delegation. Subject to the terms of the Plan and applicable law, the
Committee may delegate to one or more officers or managers of the Company
or any Affiliate, or to a committee of such officers or managers, the
authority, subject to such terms and limitations as the Committee shall
determine, to grant Awards to, or to cancel, modify or waive rights with
respect to, or to alter, discontinue, suspend, or terminate Awards held by,
Participants who are not officers or directors of the Company for purposes
of Section 16 or who are otherwise not subject to Section 16.
(d) No Liability. No member of the Board or Committee shall be liable for
any action taken or determination made in good faith with respect to the
Plan or any Award granted hereunder.
SECTION 4.
SHARES AVAILABLE FOR AWARDS.
(a) Shares Available. Subject to adjustment as provided in Section 4(b),
the number of Shares with respect to which Awards may be granted under the
Plan shall be 20,000,000 and the number of Shares with respect to which
Awards (other than Options) may be granted under the Plan shall be
2,500,000. If, after the effective date of the Plan, any Shares covered by
an Award granted under the Plan, or to which such an Award relates, are
forfeited, or if such an Award is settled for cash or otherwise terminates
or is canceled without the delivery of Shares, then the Shares covered by
such Award, or to which such Award relates, or the number of Shares
otherwise counted against the aggregate number of Shares with respect to
which Awards may be granted, to the extent of any such settlement,
forfeiture, termination or cancellation, shall again become Shares with
respect to which Awards may be granted. In the event that any Option or
other Award granted hereunder is exercised through the delivery of Shares
or in the event that withholding tax liabilities arising from such Award
are satisfied by the withholding of Shares by the Company, the number of
Shares available for Awards under the Plan shall be increased by the number
of Shares so surrendered or withheld. Notwithstanding the foregoing and
subject to adjustment as provided in Section 4(b), from and after the date
that the Plan is intended to comply with the requirements of Section
162(m), no Participant may receive Awards under the Plan in any calendar
year that relate to more than 1,000,000 Shares, except during the first
year of the Plan, in which case no Participant may receive Awards that
relate to more than 2,000,000 Shares.
(b) Adjustments. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee
to be appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the
Plan, then the Committee shall, in such manner as it may deem equitable:
(i) adjust any or all of (A) the number of Shares or other securities of
the Company (or number and kind of other securities or property) with
respect to which Awards may be granted, (B) the maximum number of Shares
subject to an Award granted to a Participant pursuant to Section 4(a), (C)
the number of Shares or other securities of the Company (or number and kind
of other securities or property) subject to outstanding Awards, and (D) the
grant or exercise price with respect to any Award; (ii) if deemed
appropriate, provide for an equivalent award in respect of securities of
the surviving entity of any merger, consolidation or other transaction or
event having a similar effect; or (iii) if deemed appropriate, make
provision for a cash payment to the holder of an outstanding Award;
provided, in each case, that, unless otherwise determined by the Committee,
(A) with respect to Awards of Incentive Stock Options no such adjustment
shall be authorized to the extent that such authority would cause the Plan
to violate Section 422(b)(1) of the Code, as from time to time amended, and
(B) with respect to any Award no such adjustment shall be authorized to the
extent that such authority would be inconsistent with the Plan's meeting
the requirements of Section 162(m).
(c) Substitute Awards. Any Shares underlying Substitute Awards shall not be
counted against the Shares available for Awards under the Plan.
(d) Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized and
unissued Shares or of treasury Shares.
SECTION 5.
ELIGIBILITY. Any Eligible Recipient shall be eligible to be designated a
Participant.
SECTION 6.
STOCK OPTIONS.
(a) Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Participants to whom Options
shall be granted, the number of Shares to be covered by each Option, the
option price and the conditions and limitations applicable to the exercise
of the Option. The Committee shall have the authority to grant Incentive
Stock Options, or to grant Non-Qualified Stock Options, or to grant both
types of options; provided that only employees of the Company or any Parent
or Subsidiary may be granted Incentive Stock Options. In the case of
Incentive Stock Options, the terms and conditions of such grants shall be
subject to and comply with such rules as may be prescribed by Section 422
of the Code, as from time to time amended, and any regulations implementing
such statute.
(b) Exercise Price. The Committee in its sole discretion shall establish
the exercise price at the time each Option is granted. Except in the case
of Substitute Awards, the exercise price of an Option may not be less than
the Fair Market Value on the date of grant of such Option.
(c) Exercise. Each Option shall be exercisable at such times and subject to
such terms and conditions as the Committee may, in its sole discretion,
specify in the applicable Award Agreement or thereafter. The Committee may
impose such conditions with respect to the exercise of options, including
without limitation, any relating to the application of federal, state or
foreign securities laws or the Code, as it may deem necessary or advisable;
provided that (to the extent required at the time of grant by California
"blue sky" laws), Options granted to individuals other than officers,
directors or consultants of the Company shall be exercisable at the rate of
at least 20% per year over five years from the date of grant.
Notwithstanding the foregoing, an Option shall not be exercisable after the
expiration of 10 years from the date such Option was granted.
(d) Early Exercise. The Committee may provide at the time of grant or any
time thereafter, in its sole discretion, that any Option shall be
exercisable that otherwise would not then be exercisable, provided that, in
connection with such exercise, the Participant enters into a form of
Restricted Stock Award Agreement approved by the Committee.
(e) Payment. No Shares shall be delivered pursuant to any exercise of an
Option until payment in full of the option price is received by the
Company. Such payment may be made in cash, or its equivalent, or by
exchanging Shares owned by the Participant for at least six months (which
are not the subject of any pledge or other security interest), or through
any broker's cashless exercise procedure approved by the Committee, or by a
combination of the foregoing, provided that the combined value of all cash
and cash equivalents and the Fair Market Value of any such Shares so
tendered to the Company as of the date of such tender is at least equal to
such option price.
(f) Restoration Options. In the event that any Participant delivers Shares
in payment of the exercise price of any Option granted hereunder in
accordance with paragraph (e) above, the Committee shall have the authority
to grant or provide for the automatic grant of a Restoration Option to such
Participant. A Restoration Option shall entitle the Participant to purchase
a number of Shares equal to the number of Shares delivered upon exercise of
the original Option and, in the discretion of the Committee, the number of
shares, if any, tendered to the Company to satisfy any withholding tax
liability arising in connection with the exercise of the original Option. A
Restoration Option shall have a per share exercise price of not less than
100% of the Fair Market Value of a Share on the date of grant of such
Restoration Option, a term not longer than the remaining term of the
original Option at the time of exercise thereof, and such other terms and
conditions (including provisions relating to forfeiture of such Restoration
Options in the event that specified share ownership is not maintained) as
the Committee in its sole discretion shall determine.
SECTION 7.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS.
(a) Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Participants to whom Shares of
Restricted Stock and Restricted Stock Units shall be granted, the number of
Shares of Restricted Stock and/or the number of Restricted Stock Units to
be granted to each Participant, the duration of the period during which,
and the conditions under which, the Restricted Stock and Restricted Stock
Units may be forfeited to the Company, and the other terms and conditions
of such Awards. Notwithstanding the foregoing (to the extent required at
the time of grant by California "blue sky" laws), the purchase price per
share of Restricted Stock, if any, shall not be less than 85% of the Fair
Market Value per Share (100% in the case of 10% stockholders) on such date
or at the time the purchase is consummated.
(b) Transfer Restrictions. Shares of Restricted Stock and Restricted Stock
Units may not be sold, assigned, transferred, pledged or otherwise
encumbered, except, in the case of Restricted Stock, as provided in the
Plan or the applicable Award Agreements. Certificates issued in respect of
Shares of Restricted Stock shall be registered in the name of the
Participant and deposited by such Participant, together with a stock power
endorsed in blank, with the Company. Upon the lapse of the restrictions
applicable to such Shares of Restricted Stock, the Company shall deliver
such certificates to the Participant or the Participant's legal
representative.
(c) Payment. Each Restricted Stock Unit shall have a value equal to the
Fair Market Value of a Share. Restricted Stock Units shall be paid in cash,
Shares, other securities or other property, as determined in the sole
discretion of the Committee, upon the lapse of the restrictions applicable
thereto, or otherwise in accordance with the applicable Award Agreement.
(d) Dividends and Distributions. Dividends and other distributions paid on
or in respect of Restricted Stock or Restricted Stock Units may be paid
directly to the Participant, or may be reinvested in additional Shares of
Restricted Stock or in additional Restricted Stock Units, as determined by
the Committee in its sole discretion.
SECTION 8.
OTHER STOCK-BASED AWARDS. The Committee shall have authority to grant to
Participants an Other Stock-Based Award, which shall consist of any right
that is (i) not an Award described in Sections 6 or 7 above and (ii) an
Award of Shares or an Award denominated or payable in, valued in whole or
in part by reference to, or otherwise based on or related to, Shares
(including, without limitation, securities convertible into Shares), as
deemed by the Committee to be consistent with the purposes of the Plan.
Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the terms and conditions of any such Other
Stock-Based Award.
SECTION 9.
TERMINATION OF EMPLOYMENT/SERVICE. The Committee shall have the full power
and authority to determine the terms and conditions that shall apply to any
Award upon a termination of employment/service, including a termination by
the Company without Cause, by a Participant voluntarily, or by reason of
death, Disability or Retirement. In addition, prior to the termination of
all transfer restrictions applicable to the Shares described in the Private
Placement Memorandum dated March 10, 2000, upon a termination of
employment/service the Company shall have a repurchase right with respect
to any Shares acquired upon exercise or settlement of an Award equal to the
Fair Market Value on the date of repurchase.
SECTION 10.
CHANGE IN CONTROL. Upon a Change in Control occurring, all Awards of
Options or Restricted Stock that would otherwise have become vested in the
one-year period following the Change in Control had the Participant
remained employed during that one year period shall vest immediately, and
in the case of such vested Awards that are Options, become exercisable in
accordance with their terms. In the event that the employment of the
Participant is terminated by the Company other than for Cause within the
one year period following the Change in Control, or in such other
circumstances as provided in the Award, all other remaining Awards of
Options or Restricted Stock, as the case may be, shall vest immediately
upon such a termination and, in the case of such vested Awards that are
Options, become immediately exercisable in accordance with their terms.
SECTION 11.
AMENDMENT AND TERMINATION.
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time;
provided that no such amendment, alteration, suspension, discontinuation or
termination shall be made without requisite stockholder approval if such
approval is necessary to comply with any tax or regulatory requirement for
which or with which the Board deems it necessary or desirable to comply. In
addition, the Committee may amend the Plan or any portion thereof at any
time to (i) cure any ambiguity or to correct or supplement any provision of
the Plan which may be defective or inconsistent with any other provision of
the Plan or (ii) make any other provisions in regard to matters or
questions arising under the Plan which the Committee may deem necessary or
desirable and which, in the judgment of the Committee, is not material;
provided that no such amendment shall be made without requisite stockholder
approval if such approval is necessary to comply with any tax or regulatory
requirement for which or with which the Board or the Committee deems it
necessary or desirable to comply.
(b) Amendments to Awards. The Committee may waive any conditions or rights
under, amend any terms of, or alter, suspend, discontinue, cancel or
terminate, any Award theretofore granted, prospectively or retroactively;
provided that any such waiver, amendment, alteration, suspension,
discontinuance, cancellation or termination that would adversely affect the
rights of any Participant or any holder or beneficiary of any Award
theretofore granted shall not to that extent be effective without the
consent of the affected Participant, holder, or beneficiary; and provided
further that the Committee shall not have the power to amend the terms of
previously granted Awards to reduce, or cancel such Awards and grant
substitute Awards which would have the effect of reducing the exercise
price except pursuant to paragraph (c) below.
(c) Adjustment of Awards upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make adjustments
in the terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 4(b) hereof) affecting the
Company, any Affiliate, or the financial statements of the Company or any
Affiliate, or of changes in applicable laws, regulations, or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan; provided
that, unless otherwise determined by the Committee, no such adjustment
shall be authorized to the extent that such authority would be inconsistent
with the Plan's meeting the requirements of Section 162(m) to the extent
Section 162(m) applies to an Award.
SECTION 12.
GENERAL PROVISIONS.
(a) Dividend Equivalents. In the sole and complete discretion of the
Committee, an Award may provide the Participant with dividends or dividend
equivalents, payable in cash, Shares, other securities or other property on
a current or deferred basis.
(b) Transferability. Except as provided below, no Award shall be assigned,
alienated, pledged, attached, sold or otherwise transferred or encumbered
by a Participant, except by will or the laws of descent and distribution.
Notwithstanding the foregoing, a Participant may transfer any vested Award,
other than an Incentive Stock Option, to members of his or her immediate
family (defined as his or her spouse, children or grandchildren) or to one
or more trusts for the exclusive benefit of such immediate family members
or partnerships in which such immediate family members are the only
partners if the Award Agreement so provides, the transfer is approved by
the Committee and the Participant does not receive any consideration for
the transfer. Any such transferred Award shall continue to be subject to
the same terms and conditions that were applicable to such Award
immediately prior to its transfer (except that such transferred Award shall
not be further transferable by the transferee).
(c) No Rights to Awards. No Person shall have any claim to be granted any
Award, and there is no obligation for uniformity of treatment of Employees,
Non-Employee Directors, consultants, Participants, or holders or
beneficiaries of Awards. The terms and conditions of Awards need not be the
same with respect to each recipient.
(d) Share Certificates. All certificates for Shares or other securities of
the Company or any Affiliate delivered under the Plan pursuant to any Award
or the exercise thereof shall be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the Plan or
the rules, regulations, and other requirements of the SEC, any stock
exchange or interdealer market system upon which such Shares or other
securities are then listed, and any applicable federal or state laws, and
the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(e) Stockholders Agreement. The Committee may require that a Participant,
as a condition of the grant or exercise of an Award, execute a stockholders
agreement containing terms and conditions generally applicable to some or
all of the stockholders of the Company.
(f) Withholding. A participant may be required to pay to the Company or any
Affiliate and the Company or any Affiliate shall have the right and is
hereby authorized to withhold from any Award, from any payment due or
transfer made under any Award or under the Plan or from any compensation or
other amount owing to a Participant the amount (in cash, Shares, other
securities, other Awards or other property) of any applicable withholding
or other taxes in respect of an Award, its exercise, or any payment or
transfer under an Award or under the Plan and to take such other action as
may be necessary in the opinion of the Company to satisfy all obligations
for the payment of such taxes. The Committee may provide in an Award
Agreement that a Participant can satisfy the foregoing requirement by
electing to have the Company withhold Shares having a Fair Market Value
equal to the minimum amount of tax required to be withheld.
(g) Award Agreements. Each Award hereunder shall be evidenced by an Award
Agreement that shall be delivered to the Participant and shall specify the
terms and conditions of the Award and any rules applicable thereto. In the
event of a conflict between the terms of the Plan and any Award Agreement,
the terms of the Award Agreement shall prevail.
(h) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing
in effect other compensation arrangements, which may, but need not, provide
for the grant of options, restricted stock, Shares and other types of
Awards provided for hereunder (subject to stockholder approval if such
approval is required), and such arrangements may be either generally
applicable or applicable only in specific cases.
(i) No Right to Employment. The grant of an Award shall not be construed as
giving a Participant the right to be retained in the employ of the Company
or any Affiliate. Further, the Company or an Affiliate may at any time
dismiss a Participant from employment, free from any liability or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any
Award Agreement.
(j) No Rights as Stockholder. Subject to the provisions of the applicable
Award, no Participant or holder or beneficiary of any Award shall have any
rights as a stockholder with respect to any Shares to be distributed under
the Plan until he or she has become the holder of such Shares.
Notwithstanding the foregoing, in connection with each grant of Restricted
Stock hereunder, the applicable Award shall specify if and to what extent
the Participant shall not be entitled to the rights of a stockholder in
respect of such Restricted Stock.
(k) Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan and any Award Agreement
shall be determined in accordance with the laws of the State of Delaware
without giving effect to the conflict of law principles thereof.
(l) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal, or unenforceable in any jurisdiction
or as to any Person or Award, or would disqualify the Plan or any Award
under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to the applicable laws, or if it
cannot be construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, Person or Award and
the remainder of the Plan and any such Award shall remain in full force and
effect.
(m) Other Laws. The Committee may refuse to issue or transfer any Shares or
other consideration under an Award if, acting in its sole discretion, it
determines that the issuance or transfer of such Shares or such other
consideration might violate any applicable law or regulation or entitle the
Company to recover the same under Section 16(b) of the Exchange Act, and
any payment tendered to the Company by a Participant, other holder or
beneficiary in connection with the exercise of such Award shall be promptly
refunded to the relevant Participant, holder, or beneficiary. Without
limiting the generality of the foregoing, no Award granted hereunder shall
be construed as an offer to sell securities of the Company, and no such
offer shall be outstanding, unless and until the Committee in its sole
discretion has determined that any such offer, if made, would be in
compliance with all applicable requirements of the U.S. federal or non-U.S.
securities laws and any other laws to which such offer, if made, would be
subject.
(n) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a
Participant or any other Person. To the extent that any Person acquires a
right to receive payments from the Company or any Affiliate pursuant to an
Award, such right shall be no greater than the right of any unsecured
general creditor of the Company or any Affiliate.
(o) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award, and the Committee shall determine
whether cash, other securities, or other property shall be paid or
transferred in lieu of any fractional Shares or whether such fractional
Shares or any rights thereto shall be canceled, terminated or otherwise
eliminated.
(p) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
(q) Information Provided to Participants. The Company shall provide
financial statements to Participants at least annually and such other
information as may be required by law.
SECTION 13.
TERM OF THE PLAN.
(a) Effective Date. The Plan shall be effective as of December 5, 2000.
(b) Expiration Date. No new Awards shall be granted under the Plan after
the tenth anniversary of the Effective Date. Unless otherwise expressly
provided in the Plan or in an applicable Award Agreement, any Award granted
hereunder may, and the authority of the Board or the Committee to amend,
alter, adjust, suspend, discontinue, or terminate any such Award or to
waive any conditions or rights under any such Award shall, continue after
the authority for grant of new Awards hereunder has been exhausted.
Exhibit 10.9
SECURITIES PURCHASE AGREEMENT
dated as of
March 23, 2001
among
THE NASDAQ STOCK MARKET, INC.,
HELLMAN & FRIEDMAN CAPITAL PARTNERS IV, L.P.,
and
THE OTHER PURCHASERS LISTED ON THE SIGNATURE PAGES
HEREOF
TABLE OF CONTENTS
----------------------
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions...............................................1
ARTICLE 2
PURCHASE AND SALE OF SECURITIES
SECTION 2.01. Commitment to Purchase....................................3
SECTION 2.02. The Closing...............................................4
SECTION 2.03. Use of Proceeds...........................................4
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
SECTION 3.01. Corporate Existence and Power.............................4
SECTION 3.02. Corporate Authorization...................................5
SECTION 3.03. Governmental Authorization................................5
SECTION 3.04. Noncontravention..........................................5
SECTION 3.05. Capitalization............................................5
SECTION 3.06. Subsidiaries..............................................6
SECTION 3.07. Financial Statements......................................7
SECTION 3.08. Absence of Certain Changes................................7
SECTION 3.09. Selling Documents.........................................8
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER
SECTION 4.01. Private Placement.........................................8
SECTION 4.02. Authority; No Other Action................................9
SECTION 4.03. Binding Effect............................................9
ARTICLE 5
COVENANTS OF THE ISSUER
SECTION 5.01. Conduct of the Company...................................9
SECTION 5.02. Access to Information....................................10
SECTION 5.03. Notices of Certain Events................................10
SECTION 5.04. Voting Rights............................................11
ARTICLE 6
COVENANTS OF THE PURCHASERS
SECTION 6.01. Confidentiality..........................................11
ARTICLE 7
COVENANTS OF THE PURCHASERS AND THE ISSUER
SECTION 7.01. Reasonable Best Efforts; Further Assurances..............12
SECTION 7.02. Certain Filings..........................................12
SECTION 7.03. Public Announcements.....................................13
ARTICLE 8
CONDITIONS PRECEDENT TO CLOSING
SECTION 8.01. Conditions to Each Party's Obligations...................13
SECTION 8.02. Conditions to Each Purchaser's Obligations...............13
SECTION 8.03. Conditions to Issuer's Obligations.......................14
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices..................................................15
SECTION 9.02. No Waivers; Amendments...................................15
SECTION 9.03. Survival of Provisions...................................15
SECTION 9.04. Indemnification..........................................15
SECTION 9.05. Expenses; Documentary Taxes..............................17
SECTION 9.06. Termination..............................................17
SECTION 9.07. Successors and Assigns...................................18
SECTION 9.08. Headings.................................................19
SECTION 9.09. Severability.............................................19
SECTION 9.10. Specific Performance.....................................19
SECTION 9.11. New York Law.............................................19
SECTION 9.12. Counterparts; Effectiveness..............................19
SECTION 9.13. Entire Agreement.........................................19
EXHIBITS
Exhibit A -- Form of Convertible Subordinated Debenture
Exhibit B -- Form of Securityholders Agreement
Exhibit C -- Form of Amendment to Certificate of Incorporation
Exhibit D -- Form of Purchase and Sale Agreement
SECURITIES PURCHASE AGREEMENT
AGREEMENT dated as of March 23, 2001 among The Nasdaq Stock
Market, Inc., a Delaware corporation (the "Issuer"), Hellman & Friedman
Capital Partners IV, L.P., a Delaware limited partnership ("HFCP IV") and
the other purchasers listed on the signature pages hereof (together with
HFCP IV, the "Purchasers").
WHEREAS, the Issuer has authorized the sale and issuance of
$240,000,000 of its 4% Convertible Subordinated Debentures due 2006 in the
form attached hereto as Exhibit A (the "Securities"); and
WHEREAS, the Purchasers desire to purchase the Securities, and the
Issuer desires to issue and sell the Securities to the Purchasers, on the
terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used
herein, have the following meanings:
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with such
Person. For the purposes of this definition, "control" when used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agreement" means this agreement, as the same may be amended from
time to time.
"Balance Sheet" means the unaudited consolidated balance sheet of
the Issuer and its Subsidiaries as of the Balance Sheet Date.
"Balance Sheet Date" means December 31, 2000.
"Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized by law
to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $.01 per share,
of the Issuer.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For the purposes of this Agreement, any Person shall be deemed
to own subject to Lien any asset that it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"Material Adverse Effect" means a material adverse effect on the
business, assets, condition (financial or otherwise) or results of
operations of the Issuer and its Subsidiaries, taken as a whole.
"Person" means an individual or a corporation, partnership,
association, trust, or any other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
"Preferred Stock" means the preferred stock, par value $.01 per
share, of the Issuer.
"Regulation D" means Regulation D under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Securityholders Agreement" means the Securityholders Agreement
among the Issuer, and the Purchasers, substantially in the form attached as
Exhibit B hereto.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time
directly or indirectly owned by such Person.
"Transactions" means the transactions contemplated by the
Transaction Documents.
"Transaction Documents" means this Agreement, the Securityholders
Agreement, and the Securities.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
Term Section
Accredited Investor 4.01
Charter Amendment 5.04
Closing 2.02
Closing Date 2.02
Damages 9.04
HFCP IV Preamble
Indemnified Person 9.04
Indemnifying Person 9.04
Issuer Preamble
Issuer Securities 3.05
NASD 2.03
PPM 3.10
Purchase and Sale Agreement 2.03
Purchasers Preamble
Subsidiary Securities 3.06
ARTICLE 2
PURCHASE AND SALE OF SECURITIES
SECTION 2.01. Commitment to Purchase. Upon the basis of the
representations and warranties herein contained of each Purchaser, but
subject to the terms and conditions hereinafter stated, the Issuer agrees
to issue and sell to each Purchaser and each Purchaser, upon the basis of
the representations and warranties herein contained of the Issuer, but
subject to the terms and conditions hereinafter stated, agrees, severally
but not jointly, to purchase from the Issuer the Securities in the amounts
and for the aggregate purchase price set forth below the name of such
Purchaser on the signature pages hereof.
SECTION 2.02. The Closing. (a) The purchase and sale of the
Securities shall take place at a closing (the "Closing") at the offices of
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York as soon as
possible, but in no event later than five Business Days, after satisfaction
of the conditions set forth in Article 8, or at such other time or location
as the Issuer and the Purchasers shall agree. The date and time of Closing
are referred to herein as the "Closing Date."
(b) At the Closing, each Purchaser shall deliver to the Issuer,
by wire transfer to an account designated by the Issuer not later than five
Business Days prior to the Closing Date, an amount, in immediately
available funds, equal to the aggregate purchase price of the Securities
being purchased by such Purchaser from the Issuer.
(c) At the Closing, the Issuer shall deliver to each Purchaser,
against payment of the purchase price, certificates evidencing the
Securities in definitive form and registered in such names as such
Purchaser shall request not later than five Business Days prior to the
Closing Date.
SECTION 2.03. Use of Proceeds. Concurrently with the Closing, the
Issuer shall apply substantially all of the proceeds of the issuance of the
Securities to repurchase shares of Common Stock held by the National
Association of Securities Dealers, Inc. (the "NASD") pursuant to the
Purchase and Sale Agreement to be entered into between the NASD and the
Issuer substantially in the form of Exhibit D hereto (the "Purchase and
Sale Agreement").
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
The Issuer represents and warrants to each Purchaser as follows:
SECTION 3.01. Corporate Existence and Power. The Issuer is a
corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has all corporate powers
and all material governmental licenses, authorizations, permits, consents
and approvals required to carry on its business as now conducted. The
Issuer is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where such qualification is necessary,
except for those jurisdictions where failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. The
Issuer has heretofore delivered to the Purchasers true and complete copies
of the certificate of incorporation and bylaws of the Issuer as currently
in effect.
SECTION 3.02. Corporate Authorization. The execution, delivery and
performance by Issuer of this Agreement and the consummation of the
transactions contemplated hereby are within the Issuer's corporate powers
and have been duly authorized by all necessary corporate action on the part
of the Issuer. This Agreement constitutes a valid and binding agreement of
the Issuer, and the Securities when issued will constitute valid and
binding obligations of the Issuer. The shares of Common Stock issuable upon
conversion of the Securities will, when issued, be validly issued, fully
paid and nonassessable, free and clear of any Lien and free of any other
restriction or limitation (including any restriction on the right to vote,
sell or otherwise dispose of such shares of Common Stock) except as
provided under applicable securities laws or as set forth in the
Securityholders Agreement and the Issuer's certificate of incorporation and
bylaws.
SECTION 3.03. Governmental Authorization. The execution, delivery
and performance by the Issuer of this Agreement and the consummation of the
transactions contemplated hereby require no action by or in respect of, or
filing with, any governmental body, agency or official other than (i)
compliance with any applicable requirements of the HSR Act; (ii) approval
of the Charter Amendment by the Commission; and (iii) such other actions or
filings which have been taken or made or shall be taken or made on or prior
to the Closing Date.
SECTION 3.04. Noncontravention. The execution, delivery and
performance by the Issuer of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (i) violate the
certificate of incorporation or bylaws of the Issuer or any of its
Subsidiaries, (ii) assuming compliance with the matters referred to in
Section 3.03, violate any applicable law, rule, regulation, judgment,
injunction, order or decree, (iii) require any consent or other action by
any Person under, constitute a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of the
Issuer or any of its Subsidiaries or to a loss of any benefit to which the
Issuer or any of its Subsidiaries is entitled under any provision of any
material agreement or other instrument binding upon the Issuer or any of
its Subsidiaries or (iv) result in the creation or imposition of any Lien
on any asset of the Issuer or any of its Subsidiaries.
SECTION 3.05. Capitalization. (a) The authorized capital stock of
the Issuer consists of (i) 300,000,000 shares of Common Stock and (ii)
30,000,000 shares of Preferred Stock. As of the date hereof, there are (i)
128,692,543 shares of Common Stock outstanding, all of which were validly
issued, fully paid and nonassessable and were issued free of preemptive
rights; (ii) no shares of Preferred Stock outstanding; (iii) 22,000,000
shares reserved for issuance pursuant to the Issuer's equity incentive plan
and employee stock purchase plan; and (iv) 10,165,040 shares of Common
Stock (including shares underlying options to purchase shares of Common
Stock) granted under the Issuer's equity incentive plan. As of the date
hereof, the NASD owns 95,454,209 shares of Common Stock and assuming the
full exercise of all outstanding warrants issued by the NASD to purchase
outstanding shares of Common Stock owned by it, the NASD owns approximately
40.6% of the Issuer.
(b) Except as set forth in this Section 3.05, there are no
outstanding (i) shares of capital stock or voting securities of the Issuer,
(ii) securities of the Issuer convertible into or exchangeable for shares
of capital stock or voting securities of the Issuer or (iii) options or
other rights to acquire from the Issuer, or any other obligation of the
Issuer to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
the Issuer (the items in clauses 3.05(b)(i), 3.05(b)(ii) and 3.05(b)(iii)
being referred to collectively as the "Issuer Securities"). Except for the
Purchase and Sale Agreement, there are no outstanding obligations of the
Issuer or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any Issuer Securities.
SECTION 3.06. Subsidiaries. (a) Each Subsidiary of the Issuer is a
corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation, has all corporate powers and
all material governmental licenses, authorizations, permits, consents and
approvals required to carry on its business as now conducted. Each
Subsidiary of the Issuer is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to
be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect. All Subsidiaries of the Issuer as of the date
hereof and their respective jurisdictions of incorporation are identified
on Schedule 3.06.
(b) Except as disclosed on Schedule 3.06, all of the outstanding
capital stock or other voting securities of each Subsidiary of the Issuer
(except for any directors' qualifying shares) is owned by the Issuer,
directly or indirectly, free and clear of any Lien and free of any other
limitation or restriction (including any restriction on the right to vote,
sell or otherwise dispose of such capital stock or other voting
securities). There are no outstanding (i) securities of the Issuer or any
Subsidiary of the Issuer convertible into or exchangeable for shares of
capital stock or voting securities of any Subsidiary of the Issuer or (ii)
options or other rights to acquire from the Issuer or any Subsidiary of the
Issuer, or other obligation of the Issuer or any Subsidiary of the Issuer
to issue, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of any
Subsidiary of the Issuer (the items in clauses 3.06(b)(i) and 3.06(b)(ii)
being referred to collectively as the "Subsidiary Securities"). There are
no outstanding obligations of the Issuer or any Subsidiary of the Issuer to
repurchase, redeem or otherwise acquire any outstanding Subsidiary
Securities.
(c) Except as set forth on Schedule 3.06, the Issuer has no
ownership interest or other investment convertible into or exchangeable for
an ownership interest in any Person.
SECTION 3.07. Financial Statements. The audited consolidated
balance sheets as of December 31, 1998 and 1999 and the related audited
consolidated statements of income and cash flows for each of the years
ended December 31, 1998 and 1999 and the unaudited consolidated balance
sheet for the nine months ended September 30, 2000 and the related
unaudited consolidated statements of income and cash flows for the nine
months ended September 30, 2000 as well as the unaudited consolidated
balance sheet as of December 31, 2000 and the related unaudited
consolidated statements of income and cashflows for the year ended December
31, 2000 of the Issuer and the Subsidiaries of the Issuer have been
delivered by the Issuer to the Purchasers. Such financial statements fairly
present, in all material respects, in conformity with generally accepted
accounting principles applied on a consistent basis (except as may be
indicated in the notes thereto and except in the case of unaudited
financials for the absence of footnotes and subject to normal year-end
adjustments), the consolidated financial position of the Issuer and the
Subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended.
SECTION 3.08. Absence of Certain Changes. Except as set forth on
Schedule 3.08, (x) since the Balance Sheet Date, the business of the Issuer
and its Subsidiaries has been conducted in the ordinary course consistent
with past practices and (y) there has not been:
(a) any event, occurrence or facts which, individually or in the
aggregate, has had or would reasonably be expected to have a Material
Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of
the Issuer, or any repurchase, redemption or other acquisition by
the Issuer or any of its Subsidiaries of any outstanding shares of
capital stock or other securities of the Issuer or any of its
Subsidiaries;
(c) any amendment of any material term of any outstanding
security of the Issuer or any of its Subsidiaries;
(d) any incurrence, assumption or guarantee by the Issuer or any
of its Subsidiaries of any indebtedness for borrowed money other
than in the ordinary course of business and in amounts and on
terms consistent with past practices;
(e) any creation or other incurrence by the Issuer or any of its
Subsidiaries of any Lien on any material asset other than in the
ordinary course of business consistent with past practices;
(f) any making of any loan, advance or capital contributions to
or investment in any Person other than loans, advances or capital
contributions to or investments in Subsidiaries of the Issuer set
forth on Schedule 3.06 made in the ordinary course of business
consistent with past practices; or
(g) any change in any method of accounting or accounting practice
by the Issuer or any of its Subsidiaries except for any such
change after the date hereof required by reason of a concurrent
change in generally accepted accounting principles.
SECTION 3.09. Selling Documents. As of January 18, 2001, except as
set forth in Schedule 3.09, the Private Placement Memorandum, dated
November 15, 2000 of the Issuer (the "PPM") did not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements contained therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER
Each Purchaser hereby represents and warrants to the Issuer as
follows:
SECTION 4.01. Private Placement. (a) Such Purchaser understands
that the offering and sale of the Securities is intended to be exempt from
registration under the Securities Act pursuant to Section 4(2) of the
Securities Act.
(b) The Securities to be acquired by such Purchaser pursuant to
this Agreement are being acquired for its own account and without a view to
the resale or distribution of such Securities or any interest therein other
than in a transaction exempt from registration under the Securities Act.
(c) Such Purchaser is an "Accredited Investor" as such term is
defined in Regulation D.
(d) Such Purchaser has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits
and risks of its investment in the Securities and such Purchaser is capable
of bearing the economic risks of such investment, including a complete loss
of its investment in the Securities.
(e) Such Purchaser has been given the opportunity to ask
questions of, and receive answers from, the Issuer concerning the terms and
conditions of the Securities and other related matters. Such Purchaser
further represents and warrants that the Issuer has made available to such
Purchaser or its agents all documents and information relating to an
investment in the Securities requested by or on behalf of such Purchaser.
In evaluating the suitability of an investment in the Securities, such
Purchaser has not relied upon any other representations or other
information (whether oral or written) made by or on behalf of the Issuer
other than as set forth in this Agreement.
SECTION 4.02. Authority; No Other Action. (a) The execution,
delivery and performance of this Agreement and the Securityholders
Agreement are within such Purchaser's powers and have been duly authorized
on its part by all requisite corporate or partnership action.
(b) No action by or in respect of, or filing with, any
governmental authority, agency or official is required for the execution,
delivery and performance by such Purchaser of this Agreement and the
Securityholders Agreement other than compliance with the applicable
requirements of the HSR Act.
SECTION 4.03. Binding Effect. Each of this Agreement and the
Securityholders Agreement has been duly executed by such Purchaser and
consti tutes a valid and binding agreement of such Purchaser.
ARTICLE 5
COVENANTS OF THE ISSUER
The Issuer agrees that:
SECTION 5.01. Conduct of the Company. Except as set forth in
Schedule 5.01, from the date hereof until the Closing Date, the Issuer and
each of its Subsidiaries shall conduct its businesses in the ordinary
course consistent with past practice and to use its best efforts to
preserve intact its business organizations and relationships with third
parties and to keep available the services of its present officers and
employees. Without limiting the generality of the foregoing, except as set
forth in Schedule 5.01, from the date hereof until the Closing Date,
neither Issuer nor any of its Subsidiaries will, without the prior written
consent of the Purchasers:
(a) except for the Charter Amendment, adopt or propose any change
in its certificate of incorporation or bylaws;
(b) merge or consolidate with any other Person, sell, transfer or
otherwise dispose of all or substantially all of its assets, or acquire a
material amount of assets from any other Person outside the ordinary course
of business; or
(c) agree or commit to do any of the foregoing.
The Issuer will not, and will not permit any of its Subsidiaries to (i)
take or agree or commit to take any action that would make any
representation or warranty of the Issuer hereunder inaccurate in any
material respect at, or as of any time prior to, the Closing Date or (ii)
omit or agree or commit to omit to take any action necessary to prevent any
such representation or warranty from being inaccurate in any material
respect at any such time.
SECTION 5.02. Access to Information. (a) From the date hereof
until the Closing Date, the Issuer will (i) give, and will cause each of
its Subsidiaries to give, the Purchasers, their counsel, financial
advisors, auditors and other authorized representatives reasonable access
during normal business hours to the offices, properties, books and records
of the Issuer and its Subsidiaries, (ii) furnish, and will cause the Issuer
and each of its Subsidiaries to furnish, to the Purchasers, their counsel,
financial advisors, auditors and other authorized representatives such
financial and operating data and other information relating to the Issuer
or any of its Subsidiaries as such Persons may reasonably request and (iii)
instruct the employees, counsel and financial advisors of the Issuer or any
of its Subsidiaries to cooperate with the Purchasers in their investigation
of the Issuer or any of its Subsidiaries. Any investigation pursuant to
this Section shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of the Issuer.
SECTION 5.03. Notices of Certain Events. The Issuer shall promptly
notify the Purchasers of:
(a) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with
the transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or involving
or otherwise affecting the Issuer or any of its Subsidiaries that, if
determined or resolved adversely in accordance with the plaintiff's
demands, would reasonably be expected to have a Material Adverse Effect or
that relate to the transactions contemplated by this Agreement.
SECTION 5.04. Voting Rights. At the 2001 annual meeting of
stockholders of the Issuer, the Issuer shall present for stockholder
approval, and shall recommend the approval and adoption of, an amendment to
its certificate of incorporation substantially in the form of Exhibit C,
with such changes as may be required by the Commission that are reasonably
acceptable to the Issuer and the Purchasers (the "Charter Amendment"). The
Issuer shall use all reasonable best efforts to achieve the adoption of the
Charter Amendment.
ARTICLE 6
COVENANTS OF THE PURCHASERS
The Purchasers agrees that:
SECTION 6.01. Confidentiality. The Purchasers and their Affiliates
will hold, and will use their reasonable best efforts to cause their
respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled
to disclose by judicial or administrative process or by other requirements
of law, all confidential documents and information concerning the Issuer or
any of its Subsidiaries furnished to the Purchasers or their Affiliates in
connection with the transactions contemplated by this Agreement or the
Securityholders Agreement, except to the extent that such information can
be shown to have been (i) previously known on a nonconfidential basis by
the Purchasers, (ii) in the public domain through no fault of the
Purchasers or (iii) acquired by the Purchasers from sources other than the
Issuer or any of its Subsidiaries which sources, to the Purchasers'
knowledge lawfully acquired such information; provided that the Purchasers
may disclose such information to its officers, directors, employees,
accountants, counsel, consultants, advisors and agents in connection with
the transactions contemplated by this Agreement so long as such Persons are
informed by the Purchasers of the confidential nature of such information
and are directed by the Purchasers to treat such information
confidentially. The Purchasers will be responsible for the breach by any
such persons of this Section 6.01. If this Agreement is terminated, the
Purchasers and its Affiliates will, and will use their reasonable best
efforts to cause their respective officers, directors, employees,
accountants, counsel, consultants, advisors and agents to, destroy or
deliver to the Issuer, upon request, all documents and other materials, and
all copies thereof, obtained by the Purchasers or its Affiliates or on
their behalf from the Issuer or any of its Subsidiaries in connection with
this Agreement that are subject to such confidence.
ARTICLE 7
COVENANTS OF THE PURCHASERS AND THE ISSUER
The Purchasers and the Issuer agree that:
SECTION 7.01. Reasonable Best Efforts; Further Assurances. Subject
to the terms and conditions of this Agreement, the Purchasers and the
Issuer will use their reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary or
desirable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement. The Issuer and the Purchasers
agree, and the Issuer, prior to the Closing, and the Purchasers, after the
Closing, agree to cause the Issuer and each of its Subsidiaries, to execute
and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions
contemplated by this Agreement.
SECTION 7.02. Certain Filings. The Purchasers and the Issuer shall
cooperate with one another (i) in determining whether any action by or in
respect of, or filing with, any governmental body, agency, official or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated by this
Agreement and (ii) in taking such actions or making any such filings,
furnishing information required in connection therewith and seeking timely
to obtain any such actions, consents, approvals or waivers.
SECTION 7.03. Public Announcements. The parties agree to consult
with each other before issuing any press release or making any public
statement with respect to this Agreement or the transactions contemplated
hereby and, except for any press releases and public statements the making
of which may be required by applicable law or any listing agreement with
any national securities exchange, will not issue any such press release or
make any such public statement prior to such consultation. Notwithstanding
the foregoing, the parties agree to issue a joint press release upon the
Closing.
ARTICLE 8
CONDITIONS PRECEDENT TO CLOSING
SECTION 8.01. Conditions to Each Party's Obligations. The
obligations of each party hereto to consummate the transactions
contemplated hereby is subject to the satisfaction, at or prior to the
Closing Date, of the following conditions:
(a) Any applicable waiting period under the HSR Act relating to
the transaction contemplated hereby shall have expired or been terminated;
and
(b) The purchase and sale of the Securities shall not be
prohibited by any applicable law, court order or governmental regulation;
and
SECTION 8.02. Conditions to Each Purchaser's Obligations. The
obligation of each Purchaser to purchase the Securities to be purchased by
it hereunder is subject to the satisfaction, at or prior to the Closing
Date, of the following conditions:
(a) The representations and warranties of the Issuer contained
herein shall be true and correct in all material respects on and as of the
Closing Date as if made on and as of such date; the Issuer shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by
it at or prior to the Closing Date; and such Purchaser shall have received
a certificate dated the Closing Date signed by an authorized officer of the
Issuer to the foregoing effect;
(b) The Securityholders Agreement shall have been executed and
delivered by the Issuer;
(c) Such Purchaser shall have received duly executed certificates
representing the Securities being purchased by such Purchaser pursuant
hereto;
(d) Such Purchaser shall have received all documents reasonably
requested by it relating to the existence of the Issuer, the corporate
authority for entering into, and the validity of, this Agreement, the
Securityholders Agreement and the Securities, all in form and substance
reasonably satisfactory to it;
(e) The consents and approvals identified in Section 3.03 shall
have been received and not withdrawn;
(f) F. Warren Hellman shall have been appointed to the Board of
Directors of the Issuer effective as of the Closing; and
(g) The Issuer and the NASD shall have entered into the Purchase
and Sale Agreement, the Purchase and Sale Agreement shall not have been
amended in any manner adverse to the Purchasers, and concurrently with the
Closing hereunder the Issuer shall apply all or substantially all of the
proceeds of the issuance and sale of the Securities to repurchase shares of
Common Stock held by the NASD on the terms and conditions set forth in the
Purchase and Sale Agreement.
SECTION 8.03. Conditions to Issuer's Obligations. The obligations
of the Issuer to issue and sell the Securities to the Purchasers pursuant
to this Agreement are subject to the satisfaction, at or prior to the
Closing Date, of the following conditions:
(a) The representations and warranties of each Purchaser contained
herein shall be true and correct in all material respects on and as of the
Closing Date as if made on and as of such date; and each Purchaser shall
have performed and complied in all material respects with all agreements
required by this Agreement to be performed or complied with by such
Purchaser at or prior to the Closing Date and the Issuer shall have
received a certificate dated the Closing Date signed by an authorized
officer of each of the Purchasers to the foregoing effect; and
(b) The Issuer shall have received all documents reasonably
requested by it relating to the existence of the Purchasers, the authority
for entering into, and the validity of this Agreement and the
Securityholders Agreement, all in form and substance reasonably
satisfactory to it.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including
telecopier or similar writing) and shall be given to such party at its
address or telecopier number set forth on the signature page hereof, or
such other address or telecopier number as such party may hereinafter
specify for the purpose to the party giving such notice. Each such notice,
request or other communication shall be effective (i) if given by telecopy,
when such telecopy is transmitted to the telecopy number specified pursuant
to this Section 9.01 and confirmation of receipt is received or, (ii) if
given by mail, 72 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid or, (iii) if given
by any other means, when delivered at the address specified in this Section
9.01.
SECTION 9.02. No Waivers; Amendments. (a) No failure or delay on
the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of
any other right, power or privilege.
(b) Any provision of this Agreement may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by all
parties hereto.
SECTION 9.03. Survival of Provisions. The representations and
warranties contained in this Agreement shall survive and remain in full
force and effect in accordance with their terms until the date which is
three months after the date on which the Issuer delivers to the Purchasers
full audited financial statements of the Issuer and its Subsidiaries for
fiscal year 2001; provided that the representations and warranties
contained in Section 3.02 and Article 4 shall survive indefinitely.
SECTION 9.04. Indemnification. (a) The Issuer hereby agrees to
indemnify and hold harmless each Purchaser, any Affiliate of any Purchaser,
any Person controlling any Purchaser or such Affiliate and their respective
directors, officers, agents and employees from and against any losses,
claims, damages, expenses and liabilities (including, without limitation,
reasonable expenses of investigation and reasonable attorneys' fees and
expenses in connection with any action, suit or proceeding) ("Damages") to
which such person may become subject as the result of any breach of
representation, warranty or covenant made or to be performed on the part of
the Issuer under this Agreement, the Securityholders Agreement, or the
Securities or any third-party action, claim or proceeding directly
resulting from the matters or transactions which are the subject of or
contemplated by this Agreement or the Securityholders Agreement or the
Securities (or any use made or proposed to be made by the Issuer of the
proceeds from the sale of the Securities) and will reimburse any such
person for all reasonable expenses (including reasonable counsel fees and
expenses) as they are incurred by any such person in connection with any
such breach of representation, warranty or covenant or investigating,
preparing or defending any such action or proceeding, pending or
threatened, whether or not such person is a party thereto; provided that
with respect to indemnification or reimbursement by the Issuer pursuant to
this Section, (i) the Issuer shall not be liable unless the aggregate
amount of Damages exceeds $1,000,000, and the Issuer shall only be liable
for Damages in excess of such amount, and (ii) the Issuer's maximum
liability shall not exceed the purchase price of the Securities.
(b) Each Purchaser hereby agrees to indemnify, defend and hold
harmless the Issuer and its Affiliates, any Person controlling the Issuer
or its Affiliates and their respective directors, officers, agent and
employees from and against any Damages to which such person may become
subject as a result of any breach of any representation, warranty or
covenant made or to be performed on the part of such Purchaser under this
Agreement or the Securityholders Agreement and will reimburse any such
person for all reasonable expenses (including reasonable counsel fees and
expenses) as they are incurred by any such person in connection with any
such breach of representation, warranty or covenant or investigating,
preparing or defending any such action or proceeding, pending or
threatened, whether or not such person is a party thereto; provided that
with respect to indemnification or reimbursement by the Purchasers pursuant
to this Section, (i) the Purchasers shall not be liable unless the
aggregate amount of Damages exceeds $1,000,000, and the Purchasers shall
only be liable for Damages in excess of such amount, and (ii) the
Purchaser's maximum liability shall not exceed the purchase price of the
Securities.
(c) Promptly after receipt by any person (the "Indemnified
Person") of notice of any demand, claim or circumstances which would or
might give rise to a claim or the commencement of any action, proceeding or
investigation in respect of which indemnity may be sought pursuant to
Section 9.04(a) or (b), such Indemnified Person shall give notice thereof
to the person against whom such indemnity may be sought (the "Indemnifying
Person"). Notwithstanding the foregoing, the failure so to give prompt
notice to such person will not relieve such Indemnifying Person from
liability, except to the extent such failure or delay materially prejudices
such Indemnifying Person. The Indemnifying Person shall be entitled to
participate in any such action and to assume the defense thereof, at the
Indemnifying Person's expense and with counsel reasonably satisfactory to
the Indemnified Person. After notice from the Indemnifying Person to such
Indemnified Person of its election so to assume the defense thereof, the
Indemnified Person shall have the right to participate in such action and
to retain its own counsel, but the Indemnifying Person shall not be liable
to such Indemnified Person hereunder for any legal expenses of other
counsel or any other expenses, in each case, subsequently incurred by such
Indemnified Person, in connection with the defense thereof other than
reasonable costs of investigation, unless (i) the Indemnifying Person has
agreed to pay such fees and expenses, (ii) the Indemnifying Person shall
have failed to employ counsel reasonably satisfactory to the Indemnified
Person in a timely manner or (iii) the Indemnified Person shall have been
advised by outside counsel that representation of the Indemnified Person by
counsel provided by the Indemnifying Person pursuant to the foregoing would
be inappropriate due to an actual or potential conflicting interest between
the Indemnifying Person and the Indemnified Person, including situations in
which there are one or more legal defenses available to the Indemnified
Person that are different from or additional to those available to the
Indemnifying Person; provided however, that the Indemnifying Person shall
not, in connection with any one such action or proceeding or separate but
substantially similar actions or proceedings arising out of the same
general allegations, be liable for the fees and expenses of more than one
firm of attorneys at one time for the Indemnified Person.
(d) Except in the case of fraud, or with respect to matters for
which the remedy of specific performance or injunctive relief or other
equitable remedies are appropriate or available, the respective rights to
indemnification as provided for in this Section 9.04, shall constitute each
party's sole remedy and no party shall have any other liability or damages
to the other party; provided, however, that nothing contained herein shall
prevent the Indemnified Person from pursuing remedies as may be available
to such party under applicable law in the event of an Indemnifying Person's
failure to comply with its indemnification obligations hereunder.
SECTION 9.05. Expenses; Documentary Taxes. The Issuer shall
reimburse the Purchasers at Closing for all of their respective documented
out-of-pocket reasonable expenses, including reasonable fees and
disbursements of counsel, accountants and other consultants, in connection
with their investigation of the Issuer, their evaluation of the
transactions contemplated hereby, and the preparation of this Agreement,
the Securityholders Agreement and the Securities and any amendments
thereto, up to a maximum of $1,000,000. The Issuer shall pay any and all
stamp, transfer and other similar taxes payable or determined to be payable
in connection with the execution and delivery of this Agreement or the
Securityholders Agreement, or the issuance of the Securities.
SECTION 9.06. Termination. (a) This Agreement may be terminated at
any time prior to the Closing:
(i) by mutual written agreement of the Issuer and the Purchasers;
(ii) by the Issuer or the Purchasers if the Closing shall not have
been consummated on or before May 31, 2001;
(iii) by the Issuer or the Purchasers if there shall be any law or
regulation that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or if
consummation of the transactions contemplated hereby would violate
any nonappealable final order, decree or judgment of any court or
governmental body having competent jurisdiction;
(iv) by the Issuer or the Purchasers, if there has been a material
misrepresentation, breach of warranty or breach of covenant or
other obligation hereunder on the part of the Purchasers (in the
case of termination by the Issuer) or the Issuer (in the case of
termination by the Purchasers); or if any condition to such
party's obligations hereunder becomes incapable of fulfillment
through no fault of such party; or
(v) by the Issuer or the Purchasers, if the Purchase and Sale
Agreement is terminated for any reason.
The party desiring to terminate this Agreement pursuant to clauses
9.06(a)(ii), (iii), (iv) or (v) shall give notice of such termination to
the other parties.
(b) If this Agreement is terminated as permitted by Section
9.06(a), such termination shall be without liability of either party (or
any stockholder, director, officer, employee, agent, consultant or
representative of such party) to the other parties to this Agreement;
provided that if such termination shall result from the willful (i) failure
of any party to fulfill a condition to the performance of the obligations
of the other parties, (ii) failure to perform a covenant of this Agreement
or (iii) breach by any party hereto of any representation or warranty or
agreement contained herein, such party shall be liable for damages incurred
or suffered by the other party as a result of such failure or breach.
SECTION 9.07. Successors and Assigns. The Issuer may not assign
any of its rights and obligations hereunder without the prior written
consent of the Purchasers. No Purchaser may assign its rights and
obligations hereunder without the consent of the Issuer, except to any
Affiliate of the Purchaser. This Agreement shall be binding upon the Issuer
and the Purchasers and their respective successors and assigns. Neither
this Agreement nor any provision hereof shall be construed so as to confer
any right or benefit upon any Person other than parties to this Agreement
and their respective successors and permitted assigns.
SECTION 9.08. Headings. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of any provisions hereof.
SECTION 9.09. Severability. The invalidity or unenforceability of
any provisions of this Agreement in any jurisdiction shall not affect the
validity, legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of this
Agreement, including any such provision, in any other jurisdiction, it
being intended that all rights and obligations of the parties hereunder
shall be enforceable to the fullest extent permitted by law.
SECTION 9.10. Specific Performance. The parties hereto agree that
if any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached, irreparable damage
would occur, no adequate remedy at law would exist and damages would be
difficult to determine, and that the parties shall be entitled to specific
performance of the terms hereof and immediate injunctive relief, without
the necessity of proving the inadequacy of money damages as a remedy, in
addition to any other remedy at law or equity.
SECTION 9.11. New York Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York without
giving effect to conflicts of laws principles thereof.
SECTION 9.12. Counterparts; Effectiveness. This Agreement may be
executed in any number of counterparts each of which shall be an original
with the same effect as if the signatures thereto and hereto were upon the
same instrument.
SECTION 9.13. Entire Agreement. This Agreement constitutes the
entire agreement and understanding among the parties hereto and supersedes
any and all prior agreements and understandings, written or oral, relating
to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized signatories as of the
date first above written.
THE NASDAQ STOCK MARKET, INC.
By /s/Frank G. Zarb
-------------------------------------
Name: Frank G. Zarb
Title: Chairman
33 Whitehall Street
New York, NY 10004
Telephone: 212-858-4750
Telecopier: 212-858-5150
HELLMAN & FRIEDMAN CAPITAL
PARTNERS IV, L.P.
by its General Partner, H&F Investors IV, LLC
by its Managing Member, H&F Investors III, Inc.
By/s/Patrick J. Healy
----------------------------------------
Name: Patrick J. Healy
Title: Vice President
Address: c/o Hellman & Friedman LLC
One Maritime Plaza
12th Floor
San Francisco, California 94111
Attention: Richard M. Levine
Telephone: (415) 788-5111
Telecopier: (415) 391-4648
Aggregate
Purchase
Principal Amount Price
---------------- ---------
$193,463,369 $193,463,369
H & F EXECUTIVE FUND IV, L.P.
by its General Partner, H&F Investors IV, LLC
by its Managing Member, H&F Investors III, Inc.
By /s/Patrick J. Healy
----------------------------------------------
Name: Patrick J. Healy
Title: Vice President
Address: c/o Hellman & Friedman LLC
One Maritime Plaza
12th Floor
San Francisco, California 94111
Attention: Richard M. Levine
Telephone: (415) 788-5111
Telecopier: (415) 391-4648
Aggregate
Purchase
Principal Amount Price
---------------- ---------
$4,302,898 $4,302,898
H & F INTERNATIONAL PARTNERS IV-A, L.P.
by its General Partner, H&F Investors IV, LLC
by its Managing Member, H&F Investors III, Inc.
By /s/Patrick J. Healy
----------------------------------------------
Name: Patrick J. Healy
Title: Vice President
Address: c/o Hellman & Friedman LLC
One Maritime Plaza
12th Floor
San Francisco, California 94111
Attention: Richard M. Levine
Telephone: (415) 788-5111
Telecopier: (415) 391-4648
Aggregate
Purchase
Principal Amount Price
---------------- ----------
$31,757,949 $31,757,949
H & F INTERNATIONAL PARTNERS IV-B, L.P.
by its General Partner, H&F Investors IV, LLC
by its Managing Member, H&F Investors III, Inc.
By /s/Patrick J. Healy
---------------------------------------------
Name: Patrick J. Healy
Title: Vice President
Address: c/o Hellman & Friedman LLC
One Maritime Plaza
12th Floor
San Francisco, California 94111
Attention: Richard M. Levine
Telephone: (415) 788-5111
Telecopier: (415) 391-4648
Aggregate
Purchase
Principal Amount Price
---------------- ---------
$10,475,784 $10,475,784
Exhibit A
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR FOREIGN JURISDICTION
AND MAY NOT BE OFFERED OR SOLD WITHOUT COMPLIANCE WITH APPLICABLE FEDERAL,
STATE OR FOREIGN SECURITIES LAWS. THIS SECURITY IS ALSO SUBJECT TO
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE SECURITYHOLDERS AGREEMENT,
DATED AS OF [ ], 2001, A COPY OF WHICH MAY BE OBTAINED FROM THE NASDAQ
STOCK MARKET, INC.
No. [ ]
$ [ ]
THE NASDAQ STOCK MARKET, INC.
4.0% Convertible Subordinated Note due 2006
The Nasdaq Stock Market, Inc., a Delaware corporation (together
with its successors and assigns, the "Issuer"), for value received hereby
promises to pay to [ ] (together with its successors, transferees and
assigns, the "Holder") the principal sum of [AMOUNT IN WORDS] Dollars ($[
]) (the "Principal Amount") by wire transfer of immediately available funds
to the Holder's account (the "Bank Account") at a bank in the United States
specified by the Holder from time to time, in lawful money of the United
States together with interest thereon calculated from the date hereof in
accordance with the provisions of this Note.
This Note was issued pursuant to the Securities Purchase Agreement
(the "Agreement"), dated as of o, 2001 among the Issuer, Hellman & Friedman
Capital Partners IV, L.P. and certain other parties listed on the signature
pages thereto. Unless the context otherwise requires, as used herein,
"Note" means any of the 4.0% Convertible Subordinated Notes issued pursuant
to the Agreement and any other similar Convertible Subordinated Notes
issued by the Issuer in exchange for, or to effect a transfer of, any Note
and "Notes" means all such Notes in the aggregate.
This Note shall bear interest, commencing [ ], 2001, at a rate per
annum (the "Interest Rate") equal to 4.0%. Further, the Issuer shall pay
interest on any overdue Principal Amount at a rate per annum equal to 6.0%
(the "Overdue Rate"), and interest on overdue installments of interest, to
the extent lawful, at the Overdue Rate. Interest on this Note will be
calculated on the basis of a 360-day year of twelve 30-day months.
Notwithstanding anything herein to the contrary, the interest or
any amount deemed to be interest payable by the Issuer with respect to this
Note shall not exceed the maximum amount permitted by applicable law and,
to the extent that any payments in excess of such permitted amount are
received by the Holder, such excess shall be considered payments in respect
of the principal amount of this Note. All sums paid or agreed to be paid to
the Holder for the use, forbearance or retention of the indebtedness of the
Issuer to the Holder shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full of the principal so that the interest on
account of such indebtedness shall not exceed the maximum amount permitted
by applicable law.
Section 1.1. Certain Terms Defined. The following terms (except as
otherwise expressly provided or unless the context otherwise clearly
requires) for all purposes of this Note shall have the respective meanings
specified below. All accounting terms used herein and not expressly defined
shall have the meanings given to them in accordance with U.S. generally
accepted accounting principles, and the term "generally accepted accounting
principles" shall mean such accounting principles which are generally
accepted as of the date hereof. The terms defined in this Section 1.1
include the plural as well as the singular.
"Acceleration Notice" shall have the meaning set forth in Section
4.1.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control"
when used with respect to any Person means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized by law
to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated)
of such Person's capital stock whether now outstanding or issued after the
date of this Note, including without limitation, with respect to the
Issuer, the Common Stock and the Preferred Stock.
"Common Stock" means any and all shares of common stock, par value
$0.01 per share, of the Issuer.
"Debt" of any Person means at any date, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes, or other similar
instruments, (iii) all obligations of such Person in respect of letters of
credit or other similar instruments (or reimbursement obligations with
respect thereto), except letters of credit or other similar instruments
issued to secure payment of Trade Payables, (iv) all obligations of such
Person to pay the deferred purchase price of property or services, except
Trade Payables, (v) all obligations of such Person as lessee under capital
leases, (vi) all Debt of others secured by a Lien on any asset of such
Person, whether or not such Debt is assumed by such Person and (vii) all
Debt of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an Event
of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Default Notice" shall have the meaning set forth in Section 7.2.
"Event of Default" means any event or condition specified as such
in Section 4.1 which shall have continued for the period of time, if any,
therein designated.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or
other obligation of any other Person and, without limiting the generality
of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or other obligation of such
other Person (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or services,
to take-or-pay, or to maintain financial statement conditions or otherwise)
or (ii) entered into for the purpose of assuring in any other manner the
obligee of such Debt or other obligation for the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Holders" shall have the meaning set forth in Section 9.2.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For the purposes of this Note, the Issuer shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement,
capitalized lease or other title retention agreement relating to such
asset.
"NASD" means the National Association of Securities Dealers, Inc.,
and its successors.
"Notice of Default" shall have the meaning set forth in Section
4.1(d).
"Person" means any individual or a corporation, partnership,
association, trust, or any other entity or organization including a
government or political subdivision or an agency or instrumentality
thereof.
"Preferred Stock" means any and all shares of preferred stock, par
value $.01 per share, of the Issuer.
"Securityholders Agreement" means the Securityholders Agreement
dated as of o, 2001 among the Issuer, Hellman & Friedman Capital Partners
IV, L.P. and the other parties listed on the signature pages thereto, as
amended from time to time.
"Senior Debt" means (i) the Senior Notes and (ii) any Debt of the
Issuer which, by its terms or the terms of any instrument or agreement
pursuant to which such Debt is issued, is expressly made senior in right of
payment to the Notes.
"Senior Notes" means the Issuer's 7.41% Senior Notes due March
2007 issued in May 1997.
"Trade Payables" means accounts payable or any other indebtedness
or monetary obligations to trade creditors created or assumed by the Issuer
in the ordinary course of business in connection with the obtaining of
materials or services.
Section 2. Payment of Principal and Interest.
Section 2.1. Scheduled Payment of Principal. The Issuer shall pay
the Principal Amount, together with all accrued and unpaid interest
thereon, if any, in cash to the Holder of this Note on [ ], 2006.
Section 2.2. Payment of Interest. The Issuer shall pay interest on
this Note quarterly in arrears, on March 15, June 15, September 15, and
December 15 (unless such day is not a Business Day, in which event on the
next succeeding Business Day) (each an "Interest Payment Date") of each
year in which this Note remains outstanding, commencing with June 15, 2001,
on the unpaid Principal Amount outstanding in lawful money of the United
States at the Interest Rate, or Overdue Rate, as the case may be, as set
forth above, by wire transfer of immediately available funds, to the Bank
Account, from the most recent Interest Payment Date to which interest has
been paid in full on this Note, or if no interest has been paid on this
Note, from [ ], 2001, until payment in full of the Principal Amount has
been made.
Section 2.3. Payment Obligations Absolute and Unconditional. No
provision of this Note shall alter or impair the obligations of the Issuer,
which are absolute and unconditional, to pay the Principal Amount of and
interest on this Note at the place, times, and rate, and in the currency,
herein prescribed.
Section 2.4. Pro Rata Payment. The Issuer agrees that any payments
to the Holders of the Notes (whether for principal, interest or otherwise)
shall be made pro rata among all such Holders based upon the aggregate
unpaid Principal Amount of the Notes held by each such Holder. If any
Holder of a Note obtains any payment (whether voluntary, involuntary, by
application of offset or otherwise) of principal or interest on such Note
in excess of such Holder's pro rata share of payments obtained by all
Holders of the Notes, such Holder shall make such payments to the other
Holders of the Notes as is necessary to cause such Holders to share the
excess payment ratably among each of them as provided in this Section.
Section 3. Covenants.
The Issuer agrees that, so long as any amount payable under this
Note remains unpaid:
Section 3.1. Information. The Issuer will deliver to the Holder,
subject to appropriate confidentiality arrangements in the cases of (a) and
(b) below:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Issuer, a balance sheet of the Issuer as
of the end of such fiscal year and the related statements of profit and
loss for such fiscal year, setting forth in each case in comparative form
the figures for the previous fiscal year, and accompanied by a report
thereon of Ernst and Young LLP or other independent public accountants of
nationally recognized standing;
(b) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the
Issuer, a balance sheet of the Issuer as of the end of such quarter and the
related statements of profit and loss for such quarter and for the portion
of the Issuer's fiscal year then ended, setting forth in each case in
comparative form the figures for the corresponding quarter and the
corresponding portion of the Issuer's previous fiscal year, all certified
(subject to normal year-end adjustments) as to fairness of presentation,
consistency and, except for the absence of footnotes, generally accepted
accounting principles by the chief financial officer or the chief
accounting officer of the Issuer;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the chief accounting officer of the Issuer
stating whether any Default exists on the date of such certificate and, if
any Default then exists, setting forth the details thereof and the action
which the Issuer is taking or proposes to take with respect thereto; and
(d) within ten days after any executive officer of the Issuer
obtains knowledge of any Default, if such Default is then continuing, a
certificate of the chief financial officer or the chief accounting officer
of the Issuer setting forth the details thereof and the action which the
Issuer is taking or proposes to take with respect thereto.
Section 3.2 Conduct of Business and Maintenance of Existence. The
Issuer will preserve, renew and keep in full force and effect its corporate
existence and its rights, privileges and franchises necessary or desirable
in the normal conduct of its business; provided that the foregoing shall
not prevent the Issuer from, directly or indirectly, (a) consolidating or
merging with or into another Person (whether or not the Issuer is the
surviving entity in such transaction) or (b) selling, assigning, leasing,
transferring, conveying or otherwise disposing of all or substantially all
of its properties or assets, in one or more related transactions, to
another Person, if either (A) the Issuer is the surviving entity in any
such consolidation or merger, or (B) the Person formed by or surviving any
such consolidation or merger or to which such sale, assignment, lease,
transfer, conveyance or other disposition shall have been made is a
corporation, limited liability company or other entity organized or
existing under the laws of the United States, any state thereof or the
District of Columbia and such Person assumes all of the obligations of the
Issuer under this Note pursuant to agreements reasonably satisfactory to
the Holder.
Section 4. Events of Default and Remedies.
Section 4.1. Event of Default Defined; Acceleration of Maturity;
Waiver of Default. In case one or more of the following events ("Events of
Default") (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body) shall have
occurred and be continuing:
(a) default in the payment of any interest upon any of the Notes
as and when the same shall become due and payable, and continuance of such
default for a period of 30 days; or
(b) default in the payment of all or any part of the principal of
any of the Notes as and when the same shall become due and payable; or
(c) failure on the part of the Issuer duly to observe or perform
any other of the covenants or agreements on the part of the Issuer
contained in the Notes (other than those covered by clauses (a) through (b)
above) for a period of 60 days after the date on which written notice
specifying such failure, stating that such notice is a "Notice of Default"
hereunder and demanding that the Issuer remedy the same, shall have been
given by registered or certified mail, return receipt requested, to the
Issuer; or
(d) any acceleration of the maturity of any Debt of the Issuer or
any of its subsidiaries having a principal amount greater than $50,000,000;
or
(e) a final and non-appealable judgment or order (not covered by
insurance) for the payment of money shall be rendered against the Issuer or
any of its subsidiaries in excess of $50,000,000 in the aggregate for all
such judgments or orders (treating any deductibles, self insurance or
retention as not so covered), and such judgment or order shall continue
unsatisfied for a period of 60 days; or
(f) a court having jurisdiction shall enter a decree or order for
relief in respect of the Issuer in an involuntary case under applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Issuer or for any substantial
part of the property of the Issuer or ordering the winding up or
liquidation of the affairs of the Issuer, and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
(g) the Issuer shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consent to the entry of an order for relief in an involuntary
case under any such law, or consent to the appointment or taking possession
by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of the Issuer or for any substantial part of the property
of the Issuer, or the Issuer shall make any general assignment for the
benefit of creditors.
then, and in each and every such case (other than an Event of
Default specified in Sections 4.1(f) or 4.1(g) hereof), the Holders of at
least a majority in aggregate principal amount of the Notes then
outstanding, by notice in writing to the Issuer (the "Acceleration
Notice"), may declare the entire principal amount of the Notes and the
interest accrued thereon to be due and payable immediately, and upon any
such declaration the same shall become immediately due and payable;
provided that if an Event of Default specified in Section 4.1(f) or 4.1(g)
occurs, the principal amount of and accrued interest on the Notes shall
become and be immediately due and payable without any declaration or other
act on the part of any Holder.
Section 4.2. Powers and Remedies Cumulative; Delay or Omission Not
Waiver of Default. No right or remedy herein conferred upon or reserved to
any Holder is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not
prevent the concurrent assertion or employment of any other appropriate
right or remedy.
No delay or omission of any Holder to exercise any right or power
accruing upon any Event of Default occurring and continuing as aforesaid
shall impair any such right or power or shall be construed to be a waiver
of any such Event of Default or an acquiescence therein; and every power
and remedy given by the Notes or by law may be exercised from time to time,
and as often as shall be deemed expedient, by any Holder.
Section 4.3. Waiver of Past Defaults. The Holders of the Notes may
waive, in accordance with Section 8.1, any past Default or Event of Default
hereunder and its consequences. In the case of any such waiver, the Issuer
and the Holders of the Notes shall be restored to their former positions
and rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of
Default arising therefrom shall be deemed to have been cured, and not to
have occurred for every purpose of the Notes; but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
Section 5.1 Conversion Rights. (a) Subject to the provisions of
this Section 5, the Holders of the Notes shall have the right, at any time
and from time to time, at such Holder's option, to convert the Principal
Amount of this Note, in whole or part (the "Conversion Amount"), into fully
paid and non-assessable shares of Common Stock at the then effective
Conversion Ratio (as such term is defined below). The number of shares of
Common Stock deliverable upon conversion of each $1,000 Conversion Amount
of the Notes, adjusted as hereinafter provided, is referred to herein as
the "Conversion Ratio". The Conversion Ratio, as of the date of issue of
the Notes is 50.0000, subject to adjustment from time to time pursuant to
Section 5.1(f) hereof.
(b)(i) In order to exercise the conversion privilege, the Holder of
the Note to be converted shall surrender the Note, with a written notice to
the Issuer that such Holder elects to exercise its conversion privilege,
and stating the Conversion Amount of Notes which the Holder seeks to
convert. The date of receipt of the Note or Notes by the Issuer shall be
the conversion date (the "Conversion Date").
(ii) As promptly as practicable (but no later than two days) after
the Conversion Date, the Issuer shall issue and shall deliver to
such Holder, or on the Holder's written order to the Holder's
permitted transferee in accordance with the terms of the
Securityholders Agreement, a certificate or certificates for the
whole number of shares of Common Stock issuable upon the
conversion of such Note or Notes in accordance with the provisions
of this Section 5.1.
(iii) In the case where only part of a Note is converted, the
Issuer shall execute and deliver (at its own expense) a new Note
of any authorized denomination as requested by a Holder in an
aggregate principal amount equal to and in exchange for the
unconverted portion of the Principal Amount of the Note so
surrendered.
(iv) The Issuer shall made a cash payment equal to all accrued and
unpaid interest on the Principal Amount so surrendered for
conversion (other than interest payments payable to a holder of
record on a prior Interest Payment Date) to the Conversion Date.
(v) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which
the Notes to be converted shall have been surrendered, and the
person in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder of record of the shares
of Common Stock represented thereby on such date and such
conversion shall be into a number of shares of Common Stock
resulting from applying the Conversion Ratio in effect at such
time on such date. All shares of Common Stock delivered upon
conversion of the Notes will upon delivery be duly and validly
issued and fully paid and non-assessable, free of all Liens and
charges and not subject to any preemptive rights. Upon the
surrender of any Notes for conversion, such Notes or part thereof
so converted shall no longer be deemed to be outstanding and all
rights of a Holder with respect to such Notes or part thereof so
converted including the rights, if any, to receive interest,
notices and consent rights shall immediately terminate on the
Conversion Date except the right to receive the Common Stock and
other amounts payable pursuant to this Section 5.1. Any Notes or
part thereof so converted shall be retired and cancelled.
(c) (i) The Issuer covenants that it will at all times during
which the Notes shall be outstanding reserve and keep available, free from
preemptive rights, such number of its authorized but unissued shares of
Common Stock as shall from time to time be required for the purpose of
effecting conversions of outstanding Notes. Before taking any action which
would cause an adjustment increasing the Conversion Ratio such that the
amount resulting from dividing $1,000 by the Conversion Ratio in effect at
such time on such date would be below the then par value of the shares of
Common Stock issuable upon conversion of the Notes, the Issuer will take
any corporate action which may, in the opinion of counsel, be necessary in
order that the Issuer may validly and legally issue fully paid and
nonassessible shares of Common Stock at such adjusted Conversion Ratio.
(ii) Prior to the delivery of any securities which the Issuer
shall be obligated to deliver upon conversion of the Notes, the
Issuer shall comply with all applicable federal and state laws and
regulations which require action to be taken by the Issuer.
(d) The Issuer will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock on conversion of the Notes pursuant hereto; provided
that the Issuer shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issue or delivery of shares of
Common Stock in a name other than that of the holder of the Notes to be
converted and no such issue or delivery shall be made unless and until the
person requesting such issue or delivery has paid to the Issuer the amount
of any such tax or has established, to the satisfaction of the Issuer, that
such tax has been paid.
(e) If the conversion is in connection with an underwritten
offering of securities registered pursuant to the Securities Act of 1933,
as amended, the conversion may, at the option of any Holder tendering Notes
for conversion, be conditioned upon the closing with the underwriter of the
sale of securities pursuant to such offering, in which event the Holders
entitled to receive the Common Stock issuable upon such conversion of the
Notes shall not be deemed to have converted such Notes until immediately
prior to the closing of the sale of securities in such offering.
(f) (i) In case the Issuer shall at any time after the date of
issue of the Notes (A) declare a dividend or make a distribution on Common
Stock payable in Common Stock, (B) subdivide or split the outstanding
Common Stock, (C) combine or reclassify the outstanding Common Stock into a
smaller number of shares, (D) issue any shares of its Capital Stock in a
reclassification of Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Issuer is the
continuing corporation), or (E) consolidate with, or merge with or into,
any other Person, the Conversion Ratio in effect at the time of the record
date for any such dividend or distribution or of the effective date of any
such subdivision, split, combination, consolidation, merger or
reclassification shall be proportionately adjusted so that the conversion
of the Note after such time shall entitle the Holder to receive the
aggregate number of shares of Common Stock or other securities of the
Issuer (or shares of any security into which such shares of Common Stock
have been combined, consolidated, merged, converted or reclassified
pursuant to clause (C), (D) or (E) above) which, if this Note had been
converted immediately prior to such time, such Holder would have owned upon
such conversion and been entitled to receive by virtue of such dividend,
distribution, subdivision, split, combination, consolidation, merger or
reclassification, assuming for purposes of this subsection (f) that such
Holder (x) is not a Person with which the Issuer consolidated or into which
the Issuer merged or which merged into the Issuer or to which such
recapitalization, sale or transfer was made, as the case may be
("constituent person") and (y) failed to exercise any rights of election as
to the kind or amount of securities, cash and other property receivable
upon such reclassification, change, consolidation, merger,
recapitalization, sale or transfer (provided, that if the kind or amount of
securities, cash and other property receivable upon such reclassification,
change, consolidation, merger, recapitalization, sale or transfer is not
the same for each share of Common Stock of the Issuer held immediately
prior to such reclassification, change, consolidation, merger,
recapitalization, sale or transfer by other than a constituent person and
in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this Section 5.1(f) the
kind and amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, recapitalization, sale or
transfer by each non-electing share shall be deemed to be the kind and
amount so receivable per share by a plurality of the non-electing shares).
Such adjustment shall be made successively whenever any event listed above
shall occur.
(ii) For purposes of any computation under this Section 5.1(f),
the number of shares of Common Stock outstanding at any given time
shall not include shares owned or held by or for the account of
the Issuer. All calculations under this Section 5.1(f) shall be
made to the nearest four decimal points.
(iii) In the event that, at any time as a result of the provisions
of this Section 5.1(f), the holder of this Note upon subsequent
conversion shall become entitled to receive any shares of Capital
Stock of the Issuer other than Common Stock, the number of such
other shares so receivable upon conversion of this Note shall
thereafter be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions
contained herein.
(g) No fractional shares of Common Stock shall be issued upon
conversion of the Notes. In lieu of fractional shares, the Issuer shall pay
cash equal to such fraction multiplied by the Closing Price for shares of
Common Stock on the trading day immediately preceding the related
Conversion Date. "Closing Price" means (1) if the shares of such class of
Common Stock then are listed and traded on the National Market of the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ"), the last reported sale price on such day; (2) if the shares of
such class of Common Stock then are not traded on the NASDAQ National
Market, the average of the highest reported bid and lowest reported asked
price on such day as reported by NASDAQ; (3) if the shares of such class of
Common Stock then are not listed and traded on the NASDAQ, the closing
price on such day as reported by the principal national securities exchange
on which the shares are listed and traded; or (4) if the shares of such
class of Common Stock are not then listed or traded on NASDAQ or a national
securities exchange, the fair market value as determined in good faith by
the Issuer's Board of Directors.
(h) Upon the occurrence of each adjustment or readjustment of the
Conversion Ratio pursuant to this Section 5.1, the Issuer at its expense
shall promptly compute such adjustment or readjustment in accordance with
the terms hereof and furnish to each Holder of Notes outstanding a
certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based and
shall file a copy of such certificate with its corporate records. The
Issuer shall, upon the reasonable written request of any Holder of Notes,
furnish or cause to be furnished to such Holders a similar certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion
Ratio then in effect, and (iii) the number of shares of Common Stock and
the amount, if any, of other property which then would be received upon the
conversion of the Notes. Despite such adjustment or readjustment, the form
of each or all Notes, if the same shall reflect the initial or any
subsequent Conversion Ratio, need not be changed in order for the
adjustments or readjustments to be valid in accordance with the provisions
of this Note, which shall control.
(i) The Issuer will not, by amendment of its certificate of
incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue of sale of securities or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the Issuer, but will at all times in good faith assist in the carrying out
of all the provisions of this Section 5.1 and in the taking of all such
action as may be necessary or appropriate in order to protect the
conversion rights of the Holders of the Notes against impairment to the
extent required hereunder. Nothing in this Section 5.1 shall affect the
continued accrual of interest on the outstanding Notes in accordance with
the terms of this Note.
(j) Notwithstanding any other provision of this Section 5.1, prior
to the Exchange Registration Date (as defined below), the Holders of the
Notes shall not have the right to convert the Principal Amount of this Note
plus accrued and unpaid interest thereon into shares of Common Stock to the
extent, but only to the extent, such conversion would result in The
National Association of Securities Dealers holding less than 50% of the
combined voting power in the Issuer. "Exchange Registration Date" means the
date upon which the Issuer becomes registered to operate as a national
securities exchange by the Securities and Exchange Commission.
Section 6.1. Voting Rights. (a) The Holders of this Note shall be
entitled to such voting rights as may be provided in the certificate of
incorporation of the Issuer, in this Section 6.1, and as otherwise may be
provided by law.
(b) Without the written consent of the Holders of a majority in
Principal Amount of the Notes or the vote of Holders of a majority in
Principal Amount of the Notes at a meeting of the Holders of the Notes
called for such purpose, the Issuer will not amend, alter or repeal any
provision of the Certificate of Incorporation (by merger or otherwise) so
as to adversely affect the preferences, rights or powers of the Holders of
the Notes.
Section 7. Subordination.
Section 7.1. Notes Subordinated to Senior Debt. The Issuer
covenants and agrees and each Holder, by his acceptance hereof likewise
covenants and agrees, that all Notes shall be issued subject to the
provisions of Section 7 of this Note; and each person holding any Note,
whether upon original issue or upon transfer, assignment or exchange
thereof accepts and agrees that the payment of the principal amount of and
interest on the Notes by the Issuer shall, to the extent and in the manner
herein set forth, be subordinated and junior in right of payment, to the
prior payment in full of Senior Debt.
Section 7.2. No Payment on Notes in Certain Circumstances. (a) If
any default in the payment of any principal of or interest on any Senior
Debt when due and payable, whether at maturity, upon any redemption, by
declaration or otherwise, occurs and is continuing, no payment shall be
made by the Issuer with respect to the principal of or interest on the
Notes or to acquire any of the Notes for cash or property other than
conversion of the Notes into Common Stock in accordance with Section 5.1
hereof.
(b) If any event of default (other than a default in payment of
the principal of or interest on any Senior Debt) occurs and is continuing
(or if such an event of default would occur upon any payment with respect
to the Notes) with respect to any Senior Debt, as such event of default is
defined in such Senior Debt, permitting the holders thereof to accelerate
the maturity thereof and if the holder or holders or a representative of
such holder or holders gives written notice of the event of default to the
Issuer (a "Default Notice"), then, unless and until such event of default
has been cured or waived or has ceased to exist, the Issuer shall not be
obligated to, and shall not, (x) make any payment of or with respect to the
principal of or interest on the Notes or (y) acquire any of the Notes for
cash or property or otherwise other than conversion of the Notes into
Common Stock in accordance with Section 5.1 hereof. After the event of
default in such Default Notice has been cured or waived or ceases to exist,
the Issuer shall, subject to Section 7.2(a), promptly pay to the Holders of
the Notes all sums which the Issuer would have been obligated to pay from
the date of the Default Notice but for this Section 7.2(b).
(c) Notwithstanding the foregoing, in the event that any payment
in cash shall be received by any Holder when such payment is prohibited by
Section 7.2(a) or 7.2(b), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior
Debt or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Debt may have been
issued, as their respective interests may appear, but only to the extent of
the amounts then due and owing on the Senior Debt, if any.
Section 7.3 Payment Over of Proceeds Upon Dissolution, Etc. (a)
Upon any payment or distribution of assets of the Issuer of any kind or
character, whether in cash, property or securities, to creditors upon any
dissolution or winding-up or total or partial liquidation or reorganization
of the Issuer, whether voluntary or involuntary or in bankruptcy,
insolvency, receivership or other proceedings, all amounts due or to become
due upon all Senior Debt shall first be paid in full, or such payment duly
provided for, before any payment is made on account of the principal of or
interest on the Notes, or any acquisition of the Notes for cash or property
is made, other than conversion of the Notes into Common Stock in accordance
with Section 5.1 hereof. Upon any such dissolution, winding-up, liquidation
or reorganization, any payment or distribution of assets of the Issuer of
any kind or character, whether in cash, property or securities, to which
the Holders of the Notes would be entitled, except for the provisions
hereof, other than conversion of the Notes into Common Stock in accordance
with Section 5.1 hereof, shall be paid by the Issuer or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making
such payment or distribution, or by the Holders of the Notes if received by
them, directly to the holders of Senior Debt (pro rata to such holders on
the basis of the respective amounts of Senior Debt held by such holders) or
their respective representatives, or to the trustee or trustees under any
indenture pursuant to which any of such Senior Debt may have been issued,
as their respective interests may appear, for application to the payment of
Senior Debt remaining unpaid until all such Senior Debt has been paid in
full after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of Senior Debt.
(b) Notwithstanding the foregoing, in the event that any payment
or distribution of assets of the Issuer of any kind or character, whether
in cash, property or securities, other than conversion of the Notes into
Common Stock in accordance with Section 5.1 hereof, shall be received by
any Holder when such payment or distribution is prohibited by Section
7.3(a), such payment or distribution shall be held in trust for the benefit
of, and shall be paid over or delivered to, the holders of Senior Debt (pro
rata to such holders on the basis of the respective amount of Senior Debt
held by such holders) or their respective representatives, or to the
trustee or trustees under any indenture pursuant to which any of such
Senior Debt may have been issued, as their respective interests may appear,
for application to the payment of Senior Debt remaining unpaid until all
such Senior Debt has been paid in full, after giving effect to any
concurrent payment, distribution or provision therefor to or for the
holders of such Senior Debt.
(c) For purposes of Section 7 of this Note, the words "cash,
property or securities" shall not be deemed to include (x) shares of stock
of the Issuer as reorganized or readjusted, (y) any payment or distribution
of securities of the Issuer or any other Issuer authorized by an order or
decree giving effect, and stating in such order or decree that effect is
given, to the subordination of the Notes to the Senior Debt, and made by a
court of competent jurisdiction in a reorganization proceeding under any
applicable bankruptcy, insolvency or other similar law, or (z) securities
of the Issuer or any other Issuer provided for by a plan of reorganization
or readjustment which are subordinated, to at least the same extent as the
Notes, to the payment of all Senior Debt then outstanding; provided that
(i) if a new Issuer results from such reorganization or readjustment, such
Issuer assumes the Senior Debt and (ii) the rights of the holders of the
Senior Debt are not, without the consent of such holders, altered by such
reorganization or readjustment. Notwithstanding anything to the contrary in
this Section 7, (i) a court referred to in clause (x) above may give
effect, and state that it is giving effect to the subordination of the
Notes in an order or decree which authorizes the payment in full of Senior
Debt in assets other than cash or cash equivalents and (ii) any assets
which the holders of the Notes are permitted to receive in accordance with
the provisions of this Section 7 shall not be subject to any claim by or on
behalf of the holders of Senior Debt.
7.4. Subrogation. Subject to the payment in full of all Senior
Debt, the Holders of the Notes shall be subrogated to the rights of the
holders of Senior Debt to receive payments or distributions of cash,
property or securities of the Issuer applicable to the Senior Debt until
the principal amount of and interest on the Notes shall be paid in full;
and, for the purposes of such subrogation, (a) no payments or distributions
to the holders of the Senior Debt of any cash, property or securities to
which the Holders of the Notes would be entitled except for the provisions
of Section 7 of this Note, and no payment over pursuant to the provisions
of Section 7 of this Note to the holders of Senior Debt by the Holders of
the Notes shall, as between the Issuer, its creditors other than holders of
Senior Debt, and the Holders of the Notes, be deemed to be a payment by the
Issuer to or on account of the Senior Debt, and (b) no payment or
distributions of cash, property or securities to or for the benefit of the
holders of the Notes pursuant to the subrogation provision of Section 7,
which would otherwise have been paid to the holders of Senior Debt shall,
as between the Issuer, its creditors other than holders of Senior Debt, and
the Holders of the Notes, be deemed to be a payment by the Issuer to or for
the account of the Notes. It is understood that the provisions of this
Section are and are intended solely for the purpose of defining the
relative rights of the Holders of the Notes, on the one hand, and the
holders of the Senior Debt, on the other hand.
If any payment or distribution to which the Holders of the Notes
would otherwise have been entitled but for the provisions of this Section
7, shall have been applied, pursuant to the provisions of this Section 7,
to the payment of all amounts payable under Senior Debt, then and in such
case, the Holders of the Notes shall be entitled to receive from the
holders of such Senior Debt any payments or distributions received by such
holders of Senior Debt in excess of the amount required to make payment in
full of such Senior Debt.
Section 7.5. Obligations of Issuer Unconditional. Nothing
contained in Section 6.1 or elsewhere in the Notes is intended to or shall
impair, as between the Issuer and the Holders of the Notes, the obligation
of the Issuer, which is absolute and unconditional, to pay to the Holders
of the Notes the principal amount of and interest on the Notes as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders of the Notes
and creditors of the Issuer other than the holders of the Senior Debt, nor
shall anything herein or therein prevent any Holder from exercising all
remedies otherwise permitted by applicable law upon default under this
Note, subject to the rights, if any, under Section 7 of the holders of the
Senior Debt in respect of cash, property or securities of the Issuer
received upon the exercise of any such remedy.
Without limiting the generality of the foregoing, nothing
contained in Section 7 will restrict the right of the Holders of the Notes
to take any action to declare the Notes to be due and payable prior to
their stated maturity pursuant to Section 4.1 or to pursue any rights or
remedies hereunder.
Section 7.6. Reliance on Judicial Order or Certificate of
Liquidating Agent. Upon any payment or distribution of assets of the Issuer
referred to in Section 7, the Holders of the Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction
in which bankruptcy, dissolution, winding-up, liquidation or reorganization
proceedings are pending, or a certificate of the receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment
or distribution, delivered to the Holders of the Notes, for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of the Senior Debt and other indebtedness of the Issuer, the amount
thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to Section 7 of this Note.
Section 7.7. Subordination Rights Not Impaired by Acts or
Omissions of the Issuer or Holders of Senior Debt. No right of any present
or future holders of any Senior Debt to enforce subordination as provided
herein will at any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Issuer or by any act or failure to act,
in good faith, by any such holder, or by any noncompliances by the Issuer
with the terms of this Note, regardless of any knowledge thereof which any
such holder may have or otherwise be charged with. The holders of Senior
Debt may extend, renew, modify or amend the terms of the Senior Debt or any
security therefor and release, sell or exchange such security and otherwise
deal freely with the Issuer, all without affecting the liabilities and
obligations of the Holders of the Notes.
Section 7.8. Section 7 Not to Prevent Events of Default. The
failure to make a payment on account of principal of or interest on the
Notes by reason of any provision of Section 7 will not be construed as
preventing the occurrence of an Event of Default.
Section 8.
Section 8.1. Modification of Notes. Any provision of this Note may
be amended or, subject to Section 4, waived with the written consent of the
Issuer and the Holders of at least a majority in aggregate principal amount
of the Notes then outstanding; provided that no such amendment or waiver
shall (a) extend the final maturity of any Note, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of
interest thereon, or reduce any amount payable on the conversion thereof,
or impair or affect the rights of any Holder to institute suit for the
payment thereof or adversely affect the ranking of the Notes with respect
to the outstanding Debt of the Issuer, in each such case, without the
consent of each Holder of each Note so affected, (b) reduce the aforesaid
percentage of Notes, the consent of the Holders of the Notes of which is
required for any such amendment or waiver, without the consent of the
Holders of all Notes then outstanding, or (c) modify the terms of the Notes
so as to affect adversely the rights of any holder of Senior Debt at the
time outstanding to the benefits of subordination hereunder without the
consent of such holder. The Issuer shall promptly notify all of the Holders
of the Notes after the making of any amendment or waiver pursuant to this
Section 8.1.
Section 9. Miscellaneous
Section 9.1. Transfer Restrictions. The Note is transferable and
assignable to one or more purchasers, provided that such transfer or
assignment is made in compliance with the Securities Act of 1933, as
amended, and any applicable state and foreign securities laws and in
compliance with Article 2 of the Securityholders Agreement. The Issuer
agrees to issue from time to time a replacement Note or Notes in the form
hereof and in such denominations as the Holder may request to facilitate
such transfers and assignments. In addition, after delivery of an indemnity
in form and substance reasonably satisfactory to the Issuer, the Issuer
also agrees to issue a replacement Note if this Note has been lost, stolen,
mutilated or destroyed.
Section 9.2. Registration. The Issuer shall keep at its principal
office a register (the "Register") in which shall be entered the name and
address of the registered holder of this Note and particulars of this Note
and of all transfers of this Note. References to the "Holders" shall mean
the Persons listed in the Register as the payees of the Notes unless any
payee shall have presented a Note to the Issuer for transfer and the
transferee shall have been entered in the Register as a subsequent holder,
in which case the term shall mean such subsequent holder. The ownership of
this Note shall be proven by the Register. For the purpose of paying
interest and principal on this Note, the Issuer shall be entitled to rely
on the name and address in the Register and notwithstanding anything to the
contrary contained in this Note, no Event of Default shall occur under
Section 4.1(a) or (b) if payment of interest and principal is made in
accordance with the name and address and particulars contained in the
Register.
Section 9.3. Governing Law. This Note shall be deemed to be a
contract under the laws of the State of New York, and for all purposes
shall be construed in accordance with the laws of said State, except as may
otherwise be required by mandatory provisions of law.
Section 9.4. Waiver of Presentment, Acceptance. The parties
hereto, including all guarantors or endorsers, hereby waive presentment,
demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance and enforcement of this Note,
except as specifically provided herein. The Holder of this Note by
acceptance hereof agrees to be bound by the provisions of the Notes which
are expressly binding on the Holder.
Section 9.5. Section Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
duly executed under its corporate seal.
Dated: [ ], 2001
[Seal]
THE NASDAQ STOCK MARKET, INC.
By:
--------------------------------
Name:
Title:
Exhibit B
SECURITYHOLDERS AGREEMENT
dated as of
___________, 2001
among
THE NASDAQ STOCK MARKET, INC.,
HELLMAN & FRIEDMAN CAPITAL PARTNERS IV, L.P.,
and
THE OTHER SECURITYHOLDERS LISTED
ON THE SIGNATURE PAGES HEREOF
TABLE OF CONTENTS
----------------------
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions...............................................1
ARTICLE 2
RIGHTS AND OBLIGATIONS WITH RESPECT TO TRANSFER
SECTION 2.01. Transfer by Holders.......................................4
SECTION 2.02. Restrictive Legends.......................................5
ARTICLE 3
REGISTRATION RIGHTS
SECTION 3.01. Demand Registration.......................................6
SECTION 3.02. Piggyback Registration....................................7
SECTION 3.03. Reduction of Offering.....................................7
SECTION 3.04. Registration Procedures...................................8
SECTION 3.05. Registration Expenses....................................11
SECTION 3.06. Indemnification by the Company...........................11
SECTION 3.07. Indemnification by Selling Holders.......................12
SECTION 3.08. Conduct of Indemnification Proceedings...................12
SECTION 3.09. Contribution.............................................13
SECTION 3.10. Participation in Underwritten Registrations..............15
SECTION 3.11. Rule 144.................................................15
SECTION 3.12. Holdback Agreements......................................15
SECTION 3.13. Transfer of Registration Rights..........................16
ARTICLE 4
PRE-EMPTIVE RIGHTS
SECTION 4.01. Pre-emptive Rights.......................................16
ARTICLE 5
BOARD APPOINTMENT OBLIGATION; INFORMATION RIGHTS; VOTING RIGHTS
SECTION 5.01. Board Appointment Obligation.............................18
SECTION 5.02. Information Rights.......................................18
SECTION 5.03. Additional Rights of the Holders.........................19
SECTION 5.04. Voting Rights............................................19
ARTICLE 6
MISCELLANEOUS
SECTION 6.01. Notices..................................................20
SECTION 6.02. Amendments; Waivers......................................20
SECTION 6.03. Termination..............................................20
SECTION 6.04. Successors, Assigns, Transferees.........................20
SECTION 6.05. Headings.................................................20
SECTION 6.06. No Inconsistent Agreements...............................21
SECTION 6.07. Severability.............................................21
SECTION 6.08. Recapitalization, Etc....................................21
SECTION 6.09. Specific Performance.....................................21
SECTION 6.10. Other Agreements.........................................21
SECTION 6.11. New York Law.............................................21
SECTION 6.12. Counterparts.............................................22
SECTION 6.13. Entire Agreement.........................................22
SECURITYHOLDERS AGREEMENT
SECURITYHOLDERS AGREEMENT dated as of _____________, 2001 (this
"Agreement") among The Nasdaq Stock Market, Inc., a Delaware corporation,
(together with any successor thereto, the "Company"), Hellman & Friedman
Capital Partners IV, L.P., a Delaware limited partnership ("HFCP IV"), and
the other securityholders listed on the signature pages hereof (together
with HFCP IV and their respective successors and permitted assigns, the
"Holders").
WHEREAS, the Company and the Holders have entered into a
Securities Purchase Agreement dated as of _____________, 2001 (the
"Securities Purchase Agreement"); and
WHEREAS, it is a condition precedent to the closing of the
transactions contemplated by the Securities Purchase Agreement that the
parties hereto execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises and covenants set forth herein, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used
herein, have the following meanings:
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with such
Person. For the pur poses of this definition, "control" when used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. Notwithstanding the foregoing, for
purposes of this Agreement, no NASD member shall be considered an
"Affiliate" of the NASD.
"Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized by law
to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $.01 per share,
of the Company.
"Competitor" means any Person that is principally engaged in
transaction services, market information services, or issuer services
related to securities trading on an exchange or similar market.
"Equity Securities" means the Notes and the Note Shares.
"Event of Default" has the meaning set forth in Section 4.1 of the
Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Initial Public Offering" means the first underwritten public
offering by the Company under the Securities Act.
"NASD" means the National Association of Securities Dealers, Inc.
and its successors.
"Note Shares" means the shares of Common Stock issued, or to be
issued, upon conversion of the Notes in accordance with their terms, and
any shares of Common Stock issued pursuant to a stock dividend, stock
split, or recapitalization in respect of such shares.
"Notes" means the 4.0% Convertible Subordinated Notes due 2006 of
the Company.
"Person" means an individual or a corporation, partnership,
association, trust, or any other entity or organization, including a
government or political subdivision or an agency or instrumentality
thereof.
"Preferred Stock" means the preferred stock, par value $0.01 per
share, of the Company.
"Registrable Securities" means the Note Shares; provided, that
such securities shall cease to be Registrable Securities when (i) a
registration statement relating to such securities shall have been declared
effective by the Commission and such securities shall have been disposed of
pursuant to such effective registration statement or (ii) such securities
have been disposed of pursuant to Rule 144 or may be disposed of pursuant
to Rule 144(k).
"Registration Expenses" means all (i) registration and filing
fees, (ii) fees and expenses of compliance with securities or blue sky laws
(including reasonable fees and disbursements of a qualified independent
underwriter, if any, counsel in connection therewith and the reasonable
fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (iii) printing expenses,
(iv) internal expenses of the Company (including, without limitation, all
salaries and expenses of officers and employees performing legal or
accounting duties), (v) fees and disbursements of counsel for the Company,
(vi) customary fees and expenses for independent certified public
accountants retained by the Company (including the expenses of any comfort
letters or costs associated with the delivery by independent certified
public accountants of a comfort letter or comfort letters), (vii) fees and
expenses of any special experts retained by the Company in connection with
such registration, (viii) reasonable fees and expenses of one counsel for
the Holders, (ix) fees and expenses of listing the Registrable Securities
on a securities exchange or on the Nasdaq National Market System, (x)
rating agency fees, (xi) reasonable fees and expenses of counsel for the
Underwriter, (xii) reasonable fees and expenses of the Underwriter
(excluding discounts or commissions relating to the distribution of the
Registrable Securities) and (xiii) out-of-pocket expenses of the Company
(including the expenses of any "roadshow" or similar marketing activity
undertaken in connection with the distribution of the Registrable
Securities).
"Rule 144" means Rule 144 under the Securities Act, as such rule
may be amended from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Holder" means a Holder who proposes to Transfer
Registrable Securities pursuant to Article 3.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time
directly or indirectly owned by such Person.
"Third Party" means a prospective purchaser of Equity Securities
from a Holder in an arm's-length transaction where such purchaser is not
the Company, an Affiliate of the Company or an Affiliate of such Holder.
"Underwriter" means a securities dealer who purchases any
Registrable Securities as a principal in connection with a distribution of
such Registrable Securities and not as part of such dealer's market-making
activities.
(b) Each of the following terms is defined in the Section set
forth opposite each term:
Term Section
---- -------
ATS 2.01(b)
Board 5.01(a)
Damages 3.06
Demand Registrant 3.01(a)
Demand Registration 3.01(a)
ECN 2.01(b)
H&F Designee 5.01(a)
Indemnified Party 3.08
Indemnifying Party 3.08
NASD Priority Termination Date 3.03
New Securities 4.01(a)
Piggyback Registration 3.02
Preemptive Rights 4.01(a)
Proportionate Percentage 4.01(a)
Registration Request 3.01(a)
Shelf Demand 3.01(a)
Shelf Registration 3.01(a)
Transfer 2.01(a)(ii)
ARTICLE 2
RIGHTS AND OBLIGATIONS WITH RESPECT TO TRANSFER
SECTION 2.01. Transfer by Holders. (a) Subject to Section 3.12,
until the earlier of (i) the effective date of the registration statement
filed in connection with the Company's Initial Public Offering, or (ii)
June 28, 2002, without the prior written consent of the Company, no Holder
shall transfer, sell, assign, or otherwise dispose of ("Transfer") its
Equity Securities, in whole or in part, other than to its Affiliates.
(b) Following the expiration of the period set forth in Section
2.01(a):
(i) without the prior written consent of the Company, no Holder
shall Transfer any Equity Securities (other than in a registered
public offering or in compliance with Rule 144) to another
securities exchange, alternative trading system ("ATS"),
electronic communications network ("ECN"), the NASD, any
Competitor, or any Affiliate of any of the foregoing; and
(ii) with respect to any Transfer of Equity Securities by a Holder
other than (A) a Transfer to an Affiliate or a Transfer in a
registered public offering or in compliance with Rule 144, and (B)
a Transfer in accordance with Section 2.01(b)(i), the Holder shall
consult with the Company in good faith prior to such Transfer,
taking into account the circumstances of such proposed Transfer.
(c) Subject to compliance with all applicable securities laws and
this Agreement, each Holder may Transfer its Equity Securities, in whole or
in part, without restriction; provided that, the transferee (other than in
a Transfer pursuant to a registered public offering under the Securities
Act or in compliance with Rule 144) shall have executed and delivered to
each other party hereto an instrument confirming that such transferee
agrees to be bound by the terms of this Agreement applicable to the
transferor, whereupon such transferee shall become a Holder for purposes of
this Agreement.
SECTION 2.02. Restrictive Legends. (a) Each certificate for Equity
Securities issued to any Holder or to a subsequent transferee shall (unless
otherwise permitted by the provisions of Section 2.02(b)) include a legend
in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR
FOREIGN JURISDICTION AND MAY NOT BE OFFERED OR SOLD EXCEPT IN
COMPLIANCE WITH APPLICABLE FEDERAL, STATE OR FOREIGN SECURITIES
LAWS. THIS SECURITY IS ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER, AS SET FORTH IN THE SECURITYHOLDERS AGREEMENT, DATED AS
OF _____________, 2001, A COPY OF WHICH MAY BE OBTAINED FROM THE
NASDAQ STOCK MARKET, INC.
(b) In connection with a proposed Transfer of any Equity
Securities permitted under Section 2.01, any Holder may, (i) upon providing
evidence reasonably satisfactory to the Company that such Equity Security
is not a "restricted security" (as defined in Rule 144) or (ii) after
expiration of the applicable holding period under Rule 144, exchange the
certificate representing such Equity Security for a new certificate that
does not bear the legend set forth in Section 2.02(a).
ARTICLE 3
REGISTRATION RIGHTS
SECTION 3.01. Demand Registration. (a) Request for Registration.
At any time beginning 180 days after the consummation of the Company's
Initial Public Offering, for so long as any Holder owns any Registrable
Securities, any Holder of Notes (a "Demand Registrant") may make a written
request (the "Registration Request") for registration under the Securities
Act of Registrable Securities having a value (based on the average closing
sale price per Common Share for 10 trading days preceding the Registration
Request) of not less than $50,000,000 (or, if less, all of the Registrable
Securities then held by the Holders) (a "Demand Registration"), unless
otherwise agreed by the Company and the Selling Holders. Notwithstanding
the foregoing, the Company shall not be required to file a registration
statement pursuant to a Registration Request within 90 days of the
effective date of any other registration statement filed by the Company
pursuant to the Securities Act, excluding registration statements filed on
Form S-4 or S-8 (or any substitute form that may be adopted by the
Commission). Any Registration Request will specify the number of
Registrable Securities proposed to be sold and the intended method of
disposition thereof. The Holders shall be entitled to request: (i) two
Demand Registrations on Form S-1 or any equivalent registration form;
provided, however, that if on or before July 1, 2002, the Company is
eligible to register securities on Form S-3, the Holders shall only be
entitled to request one Demand Registration on Form S-1 or any equivalent
registration form and (ii) unlimited Demand Registrations on Form S-3 or
any equivalent registration form (but no more than two in any twelve-month
period); and provided further, that if the NASD makes a demand to the
Company for the filing of a shelf registration statement pursuant to a
contractual right of registration, then the Company shall provide notice to
the Holders of such demand by the NASD and, if requested by the Holders (a
"Shelf Demand"), the Company shall file a shelf registration statement
pursuant to Section 415 of the Securities Act covering open market sales of
the Registrable Securities (the "Shelf Registration"), which Shelf
Registration shall be considered a Demand Registration for purposes of this
Agreement. The Holders shall be entitled to request only one Shelf Demand
pursuant to this Agreement.
(b) Effective Registration. A registration requested pursuant to
this Section 3.01 shall not be deemed to be effected (i) if a registration
statement with respect thereto shall not have become effective (other than
due to any action or inaction by a Holder), (ii) if, after it has become
effective, such registration is interfered with for any reason (other than
due to any action or inaction by a Holder) by any stop order, injunction or
other order or requirement of the Commission or any other governmental
agency or any court, and the result of such interference is to prevent the
Holder from disposing of the Registrable Securities to be sold thereunder
in accordance with the intended methods of disposition or (iii) if the
conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with any underwritten registration
shall not be satisfied or waived with the consent of the Company, the
Demand Registrant or the lead Underwriter, as applicable (other than due to
any action or inaction by a Holder).
(c) Underwriting. The offering of Registrable Securities pursuant
to any Demand Registration shall be in the form of an underwritten
offering, a block trade or an open market transaction, as determined by the
Demand Registrant. The Demand Registrant shall, if applicable, select the
lead Underwriter and any additional investment bankers and managers in
connection with the offering from a list of nationally-recognized
investment banks reasonably agreed to between the Company and the Demand
Registrant.
SECTION 3.02. Piggyback Registration. If the Company proposes to
file a registration statement under the Securities Act with respect to an
offering of its equity securities (i) for its own account (other than a
registration statement on Form S-4 or S-8 (or any substitute form that may
be adopted by the Commission)) or (ii) for the account of any holders of
its securities, then the Company shall give written notice of such proposed
filing to the Holders as soon as practicable (but in any event not less
than 10 days before the anticipated filing date), and such notice shall
offer the Holders the opportunity to register (a "Piggyback Registration")
any or all of the Registrable Securities. If any Holder wishes to register
securities of the same class or series as covered by the applicable
Piggyback Registration, such registration shall be on the same terms and
conditions as such Piggyback Registration. If, at any time after giving
written notice of its intention to register any equity securities and prior
to the effective date of a registration statement filed in connection with
such registration, the Company shall determine for any reason not to
register such equity securities, the Company may, at its election, give
written notice of such determination to each Holder and, thereupon, shall
not be obligated to register any Registrable Securities in connection
therewith.
SECTION 3.03. Reduction of Offering. Notwithstanding any provision
to the contrary contained herein, if the lead Underwriter of an offering
described in Section 3.01 or 3.02 delivers a written opinion to the Company
that the offering price of the securities proposed to be included in such
offering would be materially and adversely affected by inclusion of all the
securities of each class requested to be included, the number of securities
to be registered by each holder shall be reduced to the extent recommended
by such lead Underwriter; provided, that (i) priority in a registration
initiated by a holder exercising a contractual right to demand such
registration shall be (a) first, the securities offered for the account of
such holder, (b) second, with respect to a registration for which a
registration statement is filed prior to the NASD Priority Termination Date
only, securities requested to be registered by the NASD pursuant to a
contractual right of registration, and (c) third, pro rata among any other
securities of the Company requested to be registered for its own account or
pursuant to a contractual right of registration, and (ii) priority in a
registration initiated by the Company pursuant to Section 3.02 shall be (a)
first, securities offered for the account of the Company, (b) second, with
respect to a registration for which a registration statement is filed prior
to the NASD Priority Termination Date only, securities requested to be
registered by the NASD pursuant to a contractual right of registration, and
(c) third, pro rata among other securities of the Company requested to be
registered pursuant to a contractual right of registration. For purposes of
this Section 3.03, "NASD Priority Termination Date" shall mean the earlier
of (i) the date which is six months after the date on which the Initial
Public Offering is consummated, and (ii) December 31, 2002.
SECTION 3.04. Registration Procedures. Whenever the Company is
required to effect the registration of Registrable Securities pursuant to
Section 3.01, the Company will use its reasonable best efforts to effect
the registration and the sale of such Registrable Securities in accordance
with the intended method of disposition thereof as promptly as practicable,
and in connection with any such Registration Request:
(a) The Company will as expeditiously as possible prepare and file
with the Commission a registration statement (including any necessary
amendments and supplements), subject to Section 3.01(a), on any form for
which the Company then qualifies or which counsel for the Company shall
deem appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with the
intended method of distribution thereof, and the prospectus used in
connection therewith and use its reasonable best efforts to cause such
filed registration statement to become and remain effective, in the case of
registration that is not a Shelf Registration, for a period of 90 days or
such shorter period as necessary to complete the disposition of all
securities covered by such registration statement in accordance with the
intended method or methods of disposition thereof or, in the case of a
Shelf Registration, on a continuous basis until the earlier of (i) the date
on which all of the Registrable Securities covered by such Shelf
Registration are sold and (ii) the date on which the securities covered by
the Shelf Registration cease to be Registrable Securities; provided that if
the Company shall furnish to the Demand Registrant a certificate signed by
either its Chairman, President, or a Vice-President stating that in the
good faith judgment of its Board of Directors, the filing or effectiveness
of such registration statement would materially interfere with any proposed
acquisition, disposition, financing or other transaction involving the
Company or its subsidiaries, notwithstanding anything in this Section 3.04
to the contrary, the Company may postpone for up to 120 days in any
twelve-month period the filing or effectiveness of a registration statement
pursuant to a Holder's Registration Request; however, the Company will
during any such postponement take all action reasonably necessary or
desirable in order to be able to promptly file or request effectiveness of
the registration statement, as the case may be, upon termination of any
such postponement period.
(b) The Company will, if requested, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish to
each Selling Holder and each Underwriter, if any, such number of copies of
such registration statement, each amendment and supplement thereto (in each
case including all exhibits thereto and documents incorporated by reference
therein), the prospectus included in such registration statement (including
each preliminary prospectus) and such other documents as the Selling Holder
or such Underwriter may reasonably request in order to facilitate the sale
of the Registrable Securities. The Company will provide the Selling Holders
and the Underwriters reasonable time to review such documents and the
Company will consider in good faith incorporating any comments or other
information in such documents as the Selling Holder or the lead Underwriter
reasonably requests.
(c) After the filing of the registration statement, the Company
will promptly notify the Selling Holder of any stop order issued or
threatened by the Commission and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered.
(d) The Company will use its reasonable best efforts to (i)
register or qualify the Registrable Securities under such other securities
or blue sky laws of such jurisdictions in the United States as the Selling
Holder reasonably requests to keep such registration or qualification in
effect for so long as such registration statement remains in effect, and to
take any other action which may be reasonably necessary or advisable to
enable the Selling Holder to consummate the disposition in such
jurisdictions of the securities owned by the Selling Holder and (ii) cause
such Registrable Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company, to enable the Selling Holder to
consummate the disposition of such Registrable Securities; provided, that
the Company will not be required to (i) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but
for this paragraph (d), (ii) subject itself to taxation in any such
jurisdiction other than taxation arising with respect to the registration
of securities or (iii) consent to general service of process in any such
jurisdiction.
(e) At any time when a prospectus relating to the sale of
Registrable Securities is required to be delivered under the Securities
Act, the Company will immediately notify the Selling Holder of the
occurrence of an event requiring the preparation of a supplement or
amendment to such prospectus so that, as thereafter delivered to the
Holders of such Registrable Securities, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading and promptly make available to the Selling Holder and the
Underwriters any such supplement or amendment. The Selling Holder agrees
that, upon receipt of any notice from the Company of the happening of any
event of the kind described in the preceding sentence, the Selling Holder
will forthwith discontinue the offer and sale of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until receipt of the copies of such supplemented or amended prospectus and,
if so directed by the Company, the Selling Holder will deliver to the
Company all copies, other than permanent file copies then in the possession
of the Selling Holder, of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice. In the event
the Company shall give such notice, the Company shall extend the period
during which such registration statement shall be maintained effective as
provided in Section 3.04(a) by the number of days during the period from
and including the date of the giving of such notice to the date when the
Company shall make available to the Selling Holder such supplemented or
amended prospectus.
(f) The Company will enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as
are reasonably required in order to expedite or facilitate the disposition
of such Registrable Securities, including without limitation furnishing the
Underwriters and Selling Holders with reasonable access to, and causing the
cooperation of, all personnel reasonably requested by the Underwriters and
the Selling Holders subject to appropriate confidentiality agreements to
assist in arranging such meetings with third parties as the Underwriters
and the Selling Holders may reasonably request, including without
limitation any "roadshow" or other similar marketing activity undertaken in
connection with the distribution of the Registrable Securities.
(g) The Company will furnish to the Selling Holder and to each
Underwriter, if any, a signed counterpart, addressed to the Selling Holder
or such Underwriter, of (i) an opinion or opinions of counsel to the
Company and (ii) a comfort letter or comfort letters from the Company's
independent public accountants, each in customary form and covering such
matters as are customarily covered by opinions and comfort letters, as the
Selling Holder or the lead Underwriter therefor reasonably requests.
(h) The Company will otherwise use its reasonable best efforts to
comply with all applicable rules and regulations of the Commission, and
make available to its securityholders, as soon as reasonably practicable,
an earnings statement covering a period of 12 months, beginning within
three months after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act.
(i) The Company will provide and cause to be maintained a transfer
agent and registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the effective
date of such registration statement.
(j) The Company will use its reasonable best efforts (i) to cause
all Registrable Securities covered by such registration statement to be
listed on any national securities exchange (if such Registrable Securities
are not already listed), and on each other securities exchange, on which
similar securities issued by the Company are then listed, if the listing of
such Registrable Securities is then permitted under the rules of such
exchange; or (ii) to secure the designation of all such Registrable
Securities covered by such registration statement as a Nasdaq "national
market system security" within the meaning of Rule 11Aa2-1 of the
Commission or, failing that, to secure Nasdaq authorization for such
Registrable Securities, in each case if the Registrable Securities so
qualify, and, without limiting the generality of the foregoing, to arrange
for at least two market makers to register as such with respect to such
Registrable Securities with the NASD or the Company, as applicable, if
requested by the Holder or by the lead Underwriter.
(k) Subject to the provisions of Section 3.03, the Company may
include in such registration shares of Common Stock for its own account as
well as shares of Common Stock requested to be included in such
registration by any holder of Common Stock (other than the Holders)
pursuant to a contractual right of registration.
SECTION 3.05. Registration Expenses. Registration Expenses (other
than underwriting discounts and commissions on the Holders' Registrable
Securities) incurred in connection with any registration made or requested
to be made pursuant to this Article 3 will be borne by the Company, whether
or not any such registration statement becomes effective.
SECTION 3.06. Indemnification by the Company. To the extent
permitted by applicable law, the Company agrees to indemnify and hold
harmless each Selling Holder, its officers, directors and agents, and each
Person, if any, who controls each such Selling Holder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, from
and against any and all losses, claims, damages, liabilities and expenses
(collectively, "Damages") caused by any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information furnished in writing to
the Company by or on behalf of any such Selling Holder expressly for use
therein. In addition, the indemnification provided in this Section 3.06
shall not inure to the benefit of any Selling Holder, if the Selling Holder
(or any underwriter or underwriters of the offering) failed to send or give
a copy of the final prospectus or any such amendment thereof or supplement
thereto, whichever is most recent, to the person asserting any such Damages
at or prior to the written confirmation of the sale of the securities by
such underwriter or underwriters to such person if there would have been no
liability if the final prospectus or any such amendment thereof or
supplement thereto had been delivered. The Company also agrees, to the
extent permitted by applicable law, to indemnify any Underwriters of the
Registrable Securities, their officers and directors and each Person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Selling Holders provided in this Section 3.06.
SECTION 3.07. Indemnification by Selling Holders. To the extent
permitted by applicable law, each Selling Holder agrees, severally but not
jointly, to indemnify and hold harmless the Company, its officers,
directors and agents and each Person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act, to the same extent as the foregoing indemnity from the
Company to such Selling Holder, but only with reference to information
related to such Selling Holder furnished in writing by or on behalf of such
Selling Holder expressly for use in any registration statement or
prospectus relating to the Registrable Securities, or any amendment or
supplement thereto, or any preliminary prospectus. Each Selling Holder also
agrees, to the extent permitted by applicable law, to indemnify and hold
harmless Underwriters of the Registrable Securities, their officers and
directors and each Person who controls such Underwriters on substantially
the same basis as that of the indemnification of the Company provided in
this Section 3.07.
SECTION 3.08. Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant
to Section 3.06 or 3.07, such Person (the "Indemnified Party") shall
promptly notify the Person against whom such indemnity may be sought (the
"Indemnifying Party") in writing. Notwithstanding the foregoing, the
failure so to give prompt notice to such person will not relieve such
Indemnifying Party from liability, except to the extent such failure or
delay materially prejudices such Indemnifying Party. The Indemnifying Party
shall be entitled to participate in any such action and to assume the
defense thereof, at the Indemnifying Party's expense and with counsel
reasonably satisfactory to the Indemnified Party. After notice from the
Indemnifying Party to such Indemnified Party of its election so to assume
the defense thereof, the Indemnified Party shall have the right to
participate in such action and to retain its own counsel, but the
Indemnifying Party shall not be liable to such Indemnified Party hereunder
for any legal expenses of other counsel or any other expenses, in each
case, subsequently incurred by such Indemnified Party, in connection with
the defense thereof other than reasonable costs of investigation, unless
(i) the Indemnifying Party has agreed to pay such fees and expenses, (ii)
the Indemnifying Party shall have failed to employ counsel reasonably
satisfactory to the Indemnified Party in a timely manner or (iii) the
Indemnified Party shall have been advised by outside counsel that
representation of the Indemnified Party by counsel provided by the
Indemnifying Party pursuant to the foregoing would be inappropriate due to
an actual or potential conflicting interest between the Indemnifying Party
and the Indemnified Party, including situations in which there are one or
more legal defenses available to the Indemnified Party that are different
from or additional to those available to the Indemnifying Party; provided
however, that the Indemnifying Party shall not, in connection with any one
such action or proceeding or separate but substantially similar actions or
proceedings arising out of the same general allegations, be liable for the
fees and expenses of more than one firm of attorneys at one time for the
Indemnified Party. The Indemnifying Party shall not be liable for any
settlement of any proceeding effected without its consent, but if settled
with such consent, or if there be a final judgment for the plaintiff, the
Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any loss or liability (to the extent stated above)
by reason of such settlement or judgment. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Party is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Party, unless such settlement (x)
includes an unconditional release of such Indemnified Party from all
liability arising out of such proceeding and (y) provides that such
Indemnified Party does not admit any fault or guilt with respect to the
subject matter of such proceeding.
SECTION 3.09. Contribution. (a) If the indemnification provided
for herein is for any reason unavailable to the Indemnified Parties in
respect of any losses, claims, damages or liabilities referred to herein,
then each such Indemnifying Party, to the extent permitted by applicable
law, in lieu of indemnifying such Indemnified Party, shall contribute to
the amount paid or payable by such Indemnified Party as a result of such
losses, claims, damages or liabilities (i) as between the Company and any
Selling Holder on the one hand and the Underwriters on the other, in such
proportion as is appropriate to reflect the relative benefits received by
the Company and such Selling Holder on the one hand and the Underwriters on
the other from the offering of the securities, or if such allocation is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits but also the relative fault of the
Company and such Selling Holder on the one hand and of the Underwriters on
the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations and (ii) as between the Company on the one hand
and any Selling Holder on the other, in such proportion as is appropriate
to reflect the relative fault of the Company and of such Selling Holder in
connection with such statements or omissions, as well as any other relevant
equitable considerations. The relative benefits received by the Company and
any Selling Holder on the one hand and the Underwriters on the other shall
be deemed to be in the same proportion as the total proceeds from the
offering (net of underwriting discounts and commissions but before
deducting expenses) received by the Company and such Selling Holder bear to
the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of
the prospectus. The relative fault of the Company and any Selling Holder on
the one hand and of the Underwriters on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company and such
Selling Holder or by the Underwriters. The relative fault of the Company on
the one hand and any Selling Holder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by such party, and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
(b) The Company and each Selling Holder agree that it would not be
just and equitable if contribution pursuant to this Section 3.09 were
determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an
Indemnified Party as a result of the losses, claims, damages or liabilities
referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 3.09, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Registrable Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission, and no
Selling Holder shall be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities of such
Selling Holder were offered to the public (less underwriters' discounts and
commissions) exceeds the amount of any damages which such Selling Holder
has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
SECTION 3.10. Participation in Underwritten Registrations. No
Person may participate in any underwritten registration hereunder unless
such Person (a) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents reasonably required under the terms of such
underwriting arrangements and these registration rights.
SECTION 3.11. Rule 144. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of
the Securities Act relating to any class of equity securities, the Company
covenants that it will file any reports required to be filed by it under
the Securities Act and the Exchange Act and will take such further action
as the Selling Holder shall reasonably request, all to the extent required
from time to time to enable the Selling Holders to sell Registrable
Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities
Act, as such Rule is amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission.
SECTION 3.12. Holdback Agreements. (a) Restrictions on Public Sale
by Holders. If and to the extent requested of all shareholders of the
Company by the lead Underwriter of an underwritten public offering of
equity securities of the Company, the Holders agree not to effect, except
as part of such registration, any offer, sale, pledge, transfer or other
distribution or disposition or any agreement with respect to the foregoing,
of the issue being registered or a similar security of the Company, or any
securities convertible into or exchangeable or exercisable for such
securities, including a sale pursuant to Rule 144, during the seven day
period prior to, and during such period that the lead Underwriter may
reasonably request, no greater than 90 days (or 180 days following the
Initial Public Offering), beginning on, the effective date of such
registration statement.
(b) Restrictions on Public Sale by the Company. The Company
agrees (i) not to effect any public sale or distribution of any securities
similar to those being registered in accordance with Section 3.01 or
Section 3.02, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to, and during
such period as the lead Underwriter may reasonably request, no greater than
90 days (or 180 days following the Initial Public Offering), beginning on,
the effective date of any registration statement (except as part of such
registration statement and except pursuant to registrations on Form S-4 or
S-8 or any successor or similar form thereto); and (ii) that any agreement
entered into after the date of this Agreement pursuant to which the Company
issues or agrees to issue any privately placed securities shall contain a
provision under which holders of such securities agree not to effect any
public sale or distribution of any such securities during the periods
described in (i) above, in each case including a sale pursuant to Rule 144
(except as part of any such registration, if permitted).
SECTION 3.13. Transfer of Registration Rights. The rights of each
Holder under this Article 3 are transferable to each transferee of such
Holder to whom the transferor assigns its rights pursuant to a Transfer
that complies with the terms of Section 2.01(c).
ARTICLE 4
PRE-EMPTIVE RIGHTS
SECTION 4.01. Pre-emptive Rights. (a) Prior to the Initial Public
Offering, if the Company shall propose to issue or sell New Securities (as
hereinafter defined) or enter into any contracts, commitments, agreements,
understandings or arrangements of any kind relating to the issuance or sale
of any New Securities, in any such case the primary purpose of which (as
determined in good faith by the Company's Board of Directors) is for the
Company to raise capital, then the Company's Board of Directors shall
consider in good faith the desirability and appropriateness of permitting
the Holders to participate in such offerings of New Securities (the
"Preemptive Rights") including granting each Holder the right to purchase
up to that number of New Securities, at the same price and on the same
terms proposed to be issued or sold by the Company, so that each Holder
would, after the issuance or sale of all such New Securities, hold the same
proportionate interest of the issued and outstanding equity securities of
the Company (calculated a fully-diluted basis) as was held by each Holder
(on a fully-diluted basis) immediately prior to the issuance or sale of
such New Securities (the "Proportionate Percentage"). "New Securities"
means any Common Stock or options, warrants or other securities or rights
convertible or exchangeable into or exercisable for any Common Stock or any
other such equity securities; provided, however, that "New Securities"
shall not include: (i) any securities issued or issuable on conversion of
the Convertible Subordinated Notes or pursuant to the exercise of any
rights, warrants, options or other agreements outstanding on the date of
this Agreement including, without limitation, any security convertible or
exchangeable, with or without consideration, into or for any stock, options
and warrants; (ii) options and securities issued to management, directors
or employees of the Company or its Subsidiaries in the ordinary course of
business and equity securities issuable upon exercise thereof; or (iii)
securities issued in consideration for, or in connection with, any merger,
consolidation or other acquisition of all or substantially all of the
assets constituting a business.
(b) The Company shall give each Holder written notice of its
intention to issue and sell New Securities, describing the type of New
Securities, the price and the general terms and conditions upon which the
Company proposes to issue the same. If the Company's Board of Directors
decides to grant the Holders Preemptive Rights, each Holder shall have 10
days from the giving of such notice to agree to purchase all (or any part)
of its Proportionate Percentage of New Securities for the price and upon
the terms and conditions specified in the notice by giving written notice
to the Company and stating therein the quantity of New Securities to be
purchased. In the event that fewer than all Holders elect to purchase their
portion of the New Securities in the manner described above, those Holders
electing to purchase New Securities shall be offered the opportunity to
purchase the unsubscribed portion, pro rata on the basis of the number of
shares of Common Stock owned by each such Holder (on an as-converted
basis).
(c) If the Holders fail to exercise in full their Preemptive
Rights within such 10 days, the Company shall have 90 days thereafter to
enter into a binding agreement to sell the remainder of the New Securities
in respect of which such Holders' Preemptive Rights were not exercised, at
a price and upon general terms and conditions no more favorable to the
purchasers thereof than specified in the Company's notice to the Holders
pursuant to clause (b) of this Section 4.01. If the Company has not entered
into a binding agreement to sell the New Securities within such 90 days,
the Company shall not thereafter agree to issue or sell any New Securities,
without again offering each Holder the right to purchase its Proportionate
Percentage of the New Securities in the manner provided above.
(d) Notwithstanding anything in this Agreement to the contrary,
each Holder shall have the right to assign its rights under this Article 4
to one or more of its Affiliates; provided that each such Affiliate shall
have agreed to be bound by the terms of this Agreement.
ARTICLE 5
BOARD APPOINTMENT OBLIGATION; INFORMATION RIGHTS; VOTING RIGHTS
SECTION 5.01. Board Appointment Obligation. (a) For so long as the
initial Holders beneficially own Equity Securities representing at least
50% of the number of shares of Common Stock (on an as-converted basis)
initially acquired by such Holders, such Holders shall have the right to
designate one person reasonably acceptable to the Company (the "H&F
Designee") for nomination as director to the board of directors (the
"Board") of the Company. The Company hereby agrees to (i) include the H&F
Designee as one of the nominees to the Board on each slate of nominees for
election to the Board proposed by management of the Company, (ii) to
recommend the election of the H&F Designee to the shareholders of the
Company, and (iii) without limiting the foregoing, to otherwise use its
best efforts to cause the H&F Designee to be elected to the Board. The
Company hereby agrees to use its best efforts to cause the appointment of
the H&F Designee to the Finance Committee of the Board. The initial H&F
Designee shall be F. Warren Hellman.
(b) In the event that the H&F Designee for any reason ceases to
serve as a director during his term of office, to the extent Holders are
entitled to designate an H&F Designee, the resulting vacancy on the Board
shall be filled by a director designated by the initial Holders reasonably
acceptable to the Company.
SECTION 5.02. Information Rights. Subject to appropriate
confidentiality arrangements, the Company will provide HFCP IV, or such
other Holder as the Holders shall designate:
(a) as soon as available and in any event within 90 days after the
end of each fiscal year of the Company, a balance sheet of the Company as
of the end of such fiscal year and the related statements of profit and
loss and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, and accompanied
by a report thereon of Ernst & Young LLP or other independent public
accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of the Company,
a balance sheet of the Company as of the end of such quarter and the
related statements of profit and loss and cash flows for such quarter and
for the portion of the Company's fiscal year then ended, setting forth in
each case in comparative form the figures for the corresponding quarter and
the corresponding portion of the Company's previous fiscal year, all
certified (subject to normal year-end adjustments) as to fairness of
presentation, consistency and, except for the absence of footnotes,
generally accepted accounting principles by the chief financial officer or
the chief accounting officer of the Company;
(c) to the extent prepared by the Company and provided to
management of the Company, as soon as available and in any event within 10
days after the end of each month, a balance sheet of the Company as of the
end of such month and the related statements of profit and loss and cash
flows for such month, setting forth in each case, in comparative form the
figures for the corresponding month of the Company's previous fiscal year;
and
(d) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the chief accounting officer of the Company
stating whether any Event of Default exists on the date of such certificate
and, if any Event of Default then exists, setting forth the details thereof
and the action which the Company is taking or proposes to take with respect
thereto.
SECTION 5.03. Additional Rights of the Holders. For so long as the
initial Holders beneficially own Equity Securities representing at least
25% of the number of shares of Common Stock (on an as-converted basis)
initially acquired by such Holders, promptly upon a request by any Holder
to the chief executive officer, the chief financial officer, the general
counsel or the chief information officer of the Company, the Company will,
subject to appropriate confidentiality arrangements, provide reasonable
access at reasonable times to such aforementioned officers of the Company
and the Company's public accountants to discuss such financial, operating
and other information regarding the business of the Company and its
Subsidiaries as such Holder may reasonably request.
SECTION 5.04. Voting Rights. If the Board of Directors of the
Company approves an exemption for any Person from the limitation on voting
rights set forth in Section C(2) of Article Fourth of the Company
certificate of incorporation (other than an exemption granted in connection
with the establishment of a strategic alliance with another exchange or
similar market), the Company shall simultaneously grant a similar exemption
to the holders of the Equity Securities and shall use its best efforts to
obtain the concurrence of the Securities and Exchange Commission with
respect thereto.
ARTICLE 6
MISCELLANEOUS
SECTION 6.01. Notices. Any notice, request, instruction or other
document to be given hereunder by any party hereto to another party hereto
shall be in writing (including fax or similar writing) and shall be given
to such party at its address or telecopier number set forth on its
signature page, or to such other address as the party to whom notice is to
be given may provide in a written notice to the party giving such notice, a
copy of which written notice shall be on file with the Secretary of the
Company. Each such notice, request or other communication shall be
effective (i) if given by fax, when such fax is transmitted to the fax
number specified in this Section and confirmation of receipt is received or
(ii) if given by mail, 72 hours after such communication is deposited in
the mails with first class postage prepaid addressed as aforesaid or (iii)
if given by any other means, when delivered at the address specified in
this Section 6.01.
SECTION 6.02. Amendments; Waivers. (a) No failure or delay on the
part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of
any other right, power or privilege.
(b) Neither this Agreement nor any term or provision hereof may
be amended or waived in any manner other than by instrument in writing
signed, in the case of an amendment, by the Holders and the Company, or in
the case of a waiver, by the party against whom the enforcement of such
waiver is sought.
SECTION 6.03. Termination. This Agreement shall terminate and be
of no further force or effect with respect to each Holder upon such date
that such Holder no longer holds any Equity Securities; provided, that the
rights and obligations of the Company and the Holders under Section 3.06
through 3.09 shall survive any such termination.
SECTION 6.04. Successors, Assigns, Transferees. The provisions of
this Agreement shall be binding upon and accrue to the benefit of the
parties hereto and their respective heirs, successors and assigns. Neither
this Agreement nor any provision hereof shall be construed so as to confer
any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and permitted assigns.
SECTION 6.05. Headings. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning
or construction of any provisions hereof.
SECTION 6.06. No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or grant rights superior to the rights granted to the
Holders of Equity Securities in this Agreement. The Company represents and
warrants to each Holder that it has not previously entered into any
agreement with respect to any of its debt or equity securities granting any
registration rights to any Person, except for an agreement with the NASD.
SECTION 6.07. Severability. The invalidity or unenforceability of
any provisions of this Agreement in any jurisdiction shall not affect the
validity, legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of this
Agreement, including any such provision, in any other jurisdiction, it
being intended that all rights and obligations of the parties hereunder
shall be enforceable to the fullest extent permitted by law.
SECTION 6.08. Recapitalization, Etc. In the event that any capital
stock or other securities are issued in respect of, in exchange for, or in
substitution of, any shares of Common Stock by reason of any
reorganization, recapitalization, reclassification, merger, consolidation,
spin-off, partial or complete liquidation, stock dividend, split-up, sale
of assets, distribution to stockholders or combination of the shares of
Common Stock or any other change in capital structure of the Company,
appropriate adjustments shall be made with respect to the relevant
provisions of this Agreement so as to fairly and equitably preserve, the
original rights and obligations of the parties hereto under this Agreement.
SECTION 6.09. Specific Performance. The parties hereto agree that
if any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached, irreparable damage
would occur, no adequate remedy at law would exist and damages would be
difficult to determine, and that the parties shall be entitled to specific
performance of the terms hereof and immediate injunctive relief, without
the necessity of proving the inadequacy of money damages as a remedy, in
addition to any other remedy at law or equity.
SECTION 6.10. Other Agreements. Nothing contained in this
Agreement shall be deemed to be a waiver of, or release from, any
obligations any party hereto may have under, or any restrictions on the
transfer of shares of Common Stock or other securities of the Company or
any direct or indirect subsidiary of the Company imposed by, any other
agreement.
SECTION 6.11. New York Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
giving effect to the conflicts of laws principles thereof.
SECTION 6.12. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original with the same
effect as if the signatures thereto and hereto were upon the same
instrument.
SECTION 6.13. Entire Agreement. This Agreement, together with the
Securities Purchase Agreement, the Notes and the amendment to the Company's
certificate of incorporation, constitutes the entire agreement and
understanding of the parties hereto in respect of the subject matter
contained herein and therein, and there are no restrictions, promises,
representations, warranties, covenants, or undertakings with respect to the
subject matter hereof, other than those expressly set forth or referred to
herein or therein. This Agreement, the Securities Purchase Agreement, the
Notes and the amendment to the Company's certificate of incorporation
supersede all prior agreements and understandings between the parties
hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
THE NASDAQ STOCK MARKET, INC.
By
____________________________________
Name: Frank G. Zarb
Title: Chairman
The Nasdaq Stock Market, Inc.
33 Whitehall Street
New York, New York 10004
Telephone: 212-858-4750
Telecopier:
HELLMAN & FRIEDMAN CAPITAL
PARTNERS IV, L.P.
by its General Partner, H&F Investors IV, LLC
by its Managing Member, H&F Investors III, Inc.
By
______________________________________
Name: Patrick J. Healy
Title: Vice President
Address: c/o Hellman & Friedman LLC
One Maritime Plaza
12th Floor
San Francisco, California 94111
Attention: Richard M. Levine
Telephone: (415) 788-5111
Telecopier: (415) 391-4648
HELLMAN & FRIEDMAN EXECUTIVE
FUND IV, L.P.
by its General Partner, H&F Investors IV, LLC
by its Managing Member, H&F Investors III, Inc.
By
______________________________________
Name: Patrick J. Healy
Title: Vice President
By______________________________________
Name:
Title:
Address: c/o Hellman & Friedman LLC
One Maritime Plaza
12th Floor
San Francisco, California 94111
Attention: Richard M. Levine
Telephone: (415) 788-5111
Telecopier: (415) 391-4648
HELLMAN & FRIEDMAN INTERNATIONAL
FUND IV-A, L.P.
by its General Partner, H&F Investors IV, LLC
by its Managing Member, H&F Investors III, Inc.
By_______________________________________
Name:
Title:
By_____________________________________
Name:
Title:
Address: c/o Hellman & Friedman LLC
One Maritime Plaza
12th Floor
San Francisco, California 94111
Attention: Richard M. Levine
Telephone: (415) 788-5111
Telecopier: (415) 391-4648
HELLMAN & FRIEDMAN INTERNATIONAL
FUND IV-B, L.P.
by its General Partner, H&F Investors IV, LLC
by its Managing Member, H&F Investors III, Inc.
By_______________________________________
Name:
Title:
By______________________________________
Name:
Title:
Address: c/o Hellman & Friedman LLC
One Maritime Plaza
12th Floor
San Francisco, California 94111
Attention: Richard M. Levine
Telephone: (415) 788-5111
Telecopier: (415) 391-4648
Exhibit 10.10
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT made this 23rd day of March 2001
(this "Agreement"), by and among National Association of Securities
Dealers, Inc., a Delaware corporation (the "NASD"), and The Nasdaq Stock
Market, Inc., a Delaware corporation ("Nasdaq").
WHEREAS, the NASD is the owner of 95,454,209 shares of the
common stock, par value $.01 per share, of Nasdaq (the "Common Stock");
WHEREAS, in furtherance of enabling Nasdaq and the NASD to
meet a principal goal of the restructuring of Nasdaq--the reduction of the
NASD's ownership of Nasdaq--as well as to assist the NASD in fulfilling its
commitment to attempt to eliminate its ownership interest in Nasdaq by June
2002, the NASD desires to sell and Nasdaq desires to purchase, 18,461,538
shares of Common Stock (the "Shares") on the terms and subject to the
conditions provided for herein;
WHEREAS, Nasdaq and Hellman & Friedman Capital Partners IV,
L.P. and its affiliates (collectively, "H&F") have entered into a letter of
intent whereby Nasdaq has agreed to issue, and H&F has agreed to purchase
(the "H&F Transaction"), $240,000,000 aggregate principal amount of
Nasdaq's 4% convertible subordinated debentures (the "Debentures"); and
WHEREAS, Nasdaq intends to use substantially all the
proceeds from the H&F Transaction to purchase the Shares on the terms and
subject to the conditions provided for herein.
NOW, THEREFORE, in consideration of the provisions contained
herein, the parties hereto agree as follows:
1. PURCHASE AND SALE OF THE SHARES.
1.01 Sale of the Shares. On the terms and subject to the
conditions contained herein, the NASD agrees to sell to Nasdaq and Nasdaq
agrees to buy from the NASD the Shares at the Closing described in Section
2 hereof.
1.02 Delivery of the Shares. At the Closing, the NASD shall
deliver to Nasdaq validly issued certificates representing the Shares duly
endorsed in blank or accompanied by stock powers duly executed in blank,
with all necessary stock transfer stamps affixed thereto.
1.03 Purchase Price. The purchase price for the Shares shall
be $13 per Share for an aggregate purchase price of $239,999,994 (the
"Purchase Price").
1.04 Payment of the Purchase Price. At the Closing, Nasdaq
shall pay to the NASD the Purchase Price by wire transfer of immediately
available funds to an account specified by the NASD for such purpose.
2. THE CLOSING; COVENANTS.
2.01 Closing. The closing of the purchase and sale of the
Shares provided for in this Agreement (the "Closing") shall take place at
the offices of The Nasdaq Stock Market, Inc., 33 Whitehall Street, New
York, New York, 10004, at 10 a.m. on the third business day after
satisfaction of all the conditions provided for in Sections 5 and 6 hereof,
other than those that are satisfied on the Closing Date, or at such other
place and time as the parties hereto shall agree in writing (the time and
date of such Closing being referred to herein as the "Closing Date").
2.02 Further Actions. The parties hereto agree to use their
reasonable best efforts to have the Closing occur as soon as practicable
consistent with the provisions of this Agreement.
2.03 Charter Amendment. The NASD agrees that it shall, at
any meeting (whether annual or special and whether or not an adjourned or
postponed meeting) of stockholders of Nasdaq, however called, vote or
consent, in person or by proxy, all shares of Common Stock owned by it, in
favor of an amendment to the Restated Certificate of Incorporation of
Nasdaq to permit the holders of the Debentures to vote on an as-converted
basis on all matters that holders of Common Stock have the right to vote,
subject to the five percent voting limitation that applies to all other
stockholders.
2.04 Investor Rights Agreement. The parties hereto agree to
negotiate in good faith an investor rights agreement (the "Investor Rights
Agreement") having substantially the same terms as those set forth on the
term sheet attached hereto as Exhibit I (the "Term Sheet") as well as other
such customary terms as may be agreed upon by the parties.
2.05 Voting Agreement. At any meeting of Nasdaq's
stockholders held prior to the date upon which Nasdaq becomes registered to
operate as a national securities exchange by the Securities and Exchange
Commission, the NASD agrees to vote all shares of Common Stock held by it
in favor of the nominee for election to the Board of Directors of Nasdaq
designated by H&F in connection with the H&F Transaction.
3. REPRESENTATIONS AND WARRANTIES OF THE NASD. The NASD
represents and warrants to Nasdaq as follows:
3.01 Organization and Standing. The NASD is a corporation
duly incorporated, validly existing and in good standing under the laws of
the State of Delaware.
3.02 Binding Agreement. This Agreement will be duly and
validly executed and delivered on behalf of the NASD and, assuming due
authorization, execution and delivery by Nasdaq, will constitute the legal
and binding obligation of the NASD enforceable against the NASD in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and to
general equity principles (whether considered in a proceeding in equity or
at law).
3.03 Title to Shares. The NASD has good and valid title to
the Shares, free and clear of all liens, charges, claims, security
interests, restrictions, options, proxies, voting trusts or other
encumbrances (each an "Encumbrance"). Assuming Nasdaq has the requisite
power and authority to be lawful owner of the Shares, upon delivery to
Nasdaq at the Closing of certificates representing the Shares, and upon the
NASD's receipt of the Purchase Price for the Shares, Nasdaq will acquire
all of the NASD's right, title and interest in and to the Shares being sold
to it and will receive good and valid title to the Shares, free and clear
of any and all Encumbrances.
3.04 Required Approvals, Notices and Consents. No material
consent or approval of, other action by, or any notice to, any governmental
body or agency, domestic or foreign, or any third party is required in
connection with the execution and delivery by the NASD of this Agreement or
the consummation by the NASD of the transaction contemplated hereby.
4. REPRESENTATIONS AND WARRANTIES OF NASDAQ. Nasdaq
represents and warrants to the NASD as follows:
4.01 Organization and Standing. Nasdaq is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware.
4.02 Binding Agreement. This Agreement will have been duly
and validly authorized, executed and delivered by Nasdaq and, assuming due
authorization, execution and delivery by the NASD, will constitute the
legal and binding obligation of Nasdaq enforceable against Nasdaq in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
laws relating to or affecting creditors' rights generally and to general
equity principles (whether considered in a proceeding in equity or at law).
4.03 Required Approvals, Notices and Consents. No material
consent or approval of, other action by, or any notice to, any governmental
body or agency, domestic or foreign, or any third party is required in
connection with the execution and delivery by Nasdaq of this Agreement or
the consummation by Nasdaq of the transaction contemplated hereby.
5. CONDITIONS TO OBLIGATIONS OF THE NASD. The obligations of
the NASD are subject to the fulfillment on or prior to the Closing as
follows:
5.01 Representations, Warranties and Agreements. The
representations and warranties of Nasdaq shall be true and correct in all
material respects on the Closing Date as though made on and as of such date
and Nasdaq shall have performed all other obligations and agreements
contained in this Agreement to be performed prior to the Closing.
5.02 Statutes, Rules and Regulations. No statute, rule,
regulation or order of any court or administrative agency shall be in
effect which prohibits the consummation of the transactions contemplated
hereby.
6. CONDITIONS TO OBLIGATIONS OF NASDAQ. The obligations of
Nasdaq are subject to the fulfillment on or prior to the Closing as
follows:
6.01 Representations, Warranties and Agreements. The
representations and warranties of the NASD shall be true and correct in all
material respects on the Closing Date as though made on and as of such date
and the NASD shall have performed all other obligations and agreements
contained in this Agreement to be performed prior to the Closing.
6.02 Statutes, Rules and Regulations. No statute, rule,
regulation or order of any court or administrative agency shall be in
effect which prohibits the consummation of the transactions contemplated
hereby.
6.03 H&F Transaction. The H&F Transaction shall have been
consummated.
7. TERMINATION.
7.01 Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by the mutual written consent of the parties; and
(b) by either party in the event the Closing has not
occurred on or before May 1, 2001, unless the failure of such consummation
shall be due to a breach of this Agreement by the party seeking to
terminate this Agreement.
7.02 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 7.01, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
(or any stockholder, director, officer, partner, employee, agent,
consultant or representative of such party) except that (a) nothing herein
shall relieve any party from liability for, or eliminate the rights of any
party relating to, any willful breach of this Agreement and (b) this
Section 7.02 and Section 8.02 shall survive termination of this Agreement.
8. MISCELLANEOUS.
8.01 Entire Agreement. This Agreement embodies the entire
agreement and understanding of the parties with respect to the subject
matter hereof and supersede any and all prior agreements, arrangements and
undertakings, whether written or oral, relating to matters provided for
herein and therein. There are no provisions, undertakings, representations
or warranties relative to the subject matter of this Agreement not
expressly set forth herein and therein.
8.02 Expenses. Except as otherwise specifically provided in
this Agreement, all costs and expenses, including, without limitation, fees
and disbursements of counsel, financial advisors and accountants, incurred
in connection with this Agreement and the transaction contemplated hereby
shall be paid by the party incurring such expense.
8.03 Notices. Any notice, demand, claim, notice of claim,
request or communication required or permitted to be given under the
provisions of this Agreement shall be in writing and shall be deemed to
have been duly given if delivered personally by facsimile transmission or
sent by first class or certified mail, postage prepaid to the following
addresses,
If to the NASD:
National Association of Securities Dealers, Inc.
1735 K Street, N.W.
Washington, D.C. 20006
Telecopier: (202) 728-8894
Attention: General Counsel
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopier: (212) 848-7179
Attention: Robert Mundheim, Esq. and
James B. Bucher, Esq.
If to Nasdaq:
The Nasdaq Stock Market, Inc.
33 Whitehall Street
New York, New York 10004
Telecopier: (202) 728-8321
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Telecopier: (212) 735-2000
Attention: Matthew J. Mallow, Esq. and
Eric J. Friedman, Esq.
or to such other address as any party may request by notifying in writing
all of the other parties to this Agreement in accordance with this Section
8.03.
Any such notice shall be deemed to have been received on the
date of personal delivery, the date set forth on the Postal Service return
receipt, the date of delivery shown on the records of the overnight courier
or the date shown on the facsimile confirmation, as applicable.
8.04 Survival of Representations and Warranties. Each of the
representations and warranties made by the parties in this Agreement shall
terminate 12 months after the Closing.
8.05 Benefit and Assignment. This Agreement will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. There shall be no assignment of any
interest under this Agreement by any party. Nothing herein, express or
implied, is intended to or shall confer upon any other person any legal or
equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
8.06 Waiver. Any waiver of any provision of this Agreement
shall be valid only if set forth in an instrument in writing signed by the
party to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of
the same term or condition, or a waiver of any other term or condition, of
this Agreement. The failure of any party to assert any of its rights
hereunder shall not constitute a waiver of any such rights.
8.07 Amendment. This Agreement may not be amended or
modified except by an instrument in writing signed by, or on behalf of, the
NASD and Nasdaq.
8.08 Construction of this Agreement. The language used in
this Agreement shall be deemed to be the language chosen by the parties
hereto to express their mutual agreement, and this Agreement shall not be
deemed to have been prepared by any single party hereto. The headings of
the sections and subsections of this Agreement are inserted as a matter of
convenience and for reference purposes only and in no respect define, limit
or describe the scope of this Agreement or the intent of any section or
subsection. This Agreement may be executed in one or more counterparts and
by the different parties hereto in separate counterparts, each of which
when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
8.09 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws (as opposed to
the conflicts of law provisions) of the State of New York.
8.10 Public Announcements. No party hereto shall make any
public announcement concerning the transactions contemplated by this
Agreement without the prior approval of the other party hereto, except as
such announcement may be required by the applicable law. Notwithstanding
the foregoing, the parties hereto acknowledge that promptly after the
execution of this Agreement and the Closing, the parties will make public
disclosure, to be mutually agreed upon, of the transactions contemplated by
this Agreement.
8.11 Specific Performance. The parties recognize and agree
that if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise
breached, immediate and irreparable harm or injury would be caused for
which money damages would not be an adequate remedy. Accordingly, each
party agrees that, in addition to any other available remedies, each other
party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement without the
necessity of posting a bond or other form of security. In the event that
any action should be brought in equity to enforce the provisions of the
Agreement, no party will allege, and each party hereby waives the defense,
that there is an adequate remedy at law.
8.12 Further Assurances. The NASD hereby agrees that it
shall from time to time, at the request of Nasdaq, execute and deliver to
Nasdaq any and all instruments or documents as Nasdaq may reasonably
request for the purpose of vesting in Nasdaq the full right, title and
interest of the NASD in and to the Shares.
8.13 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
8.14 Anti-dilution Rights. As of the date hereof, the NASD
hereby agrees that the anti-dilution rights contemplated by the Term Sheet
and to be included in the Investor Rights Agreement shall not apply to (i)
the issuance of the Debentures by Nasdaq to H&F in connection with the H&F
Transaction and (ii) the issuance of any shares of Common Stock by Nasdaq
upon conversion of all or any portion of the Debentures by the holders
thereof.
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first above written.
NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC.
By:
---------------------------------
Name:
Title:
THE NASDAQ STOCK MARKET, INC.
By:
---------------------------------
Name:
Title:
Exhibit I to
Purchase and Sale Agreement
Investor Rights Term Sheet
NASDAQ/NASD
DRAFT INVESTOR RIGHTS AGREEMENT
TERM SHEET
ELIGIBLE SECURITIES o Subject to legal requirements
prior to Exchange Registration,
all shares of Common Stock now
owned by the NASD (excluding
shares of Common Stock
underlying outstanding and
unexpired warrants)
("Registrable Common Shares")
o Shares of Common Stock returned
to the NASD by the Voting
Trustee upon the expiration of
unexercised warrants
TIMING o Nasdaq's initial underwritten
public offering will trigger
the NASD's registration rights.
Subject to the terms herein,
the NASD will have the right to
"piggyback" on the registration
statement filed in connection
with Nasdaq's initial public
offering and thereafter, the
NASD may exercise "demand"
registration rights.
DEMAND REGISTRATION o The NASD would have two
long-form demand registrations
(i.e., Form S-1), provided,
however, that if Nasdaq was S-3
eligible by July 1, 2002, the
NASD shall be entitled to only
one long-form demand
registration, and unlimited
short-form demand registrations
(i.e., Form S-3).
o The aggregate offering price
for the shares included in each
demand registration statement
must not be less than $50
million, unless otherwise
agreed to by the NASD and
Nasdaq
o A nationally-recognized
investment bank selected by the
NASD from a list of
underwriters to be agreed upon
mutually by the NASD and Nasdaq
must be used as an underwriter
in any demand registration in
which the aggregate offering
price exceeds $50 million and
the plan of distribution
involves the sale of shares
other than in open market
transactions
o Nasdaq is not required to file
a registration statement
pursuant to a demand by the
NASD within 90 days of the
effective date of any other
registration statement filed by
Nasdaq pursuant to the
Securities Act (180 days if the
registration statement filed by
Nasdaq is for the initial
public offering of Common
Stock), excluding registration
statements filed in connection
with benefit plans or
acquisitions
o Nasdaq may postpone for up to
120 days in any 12-month
period the filing or
effectiveness of a registration
statement pursuant to a NASD
demand if the Nasdaq Board
determines in good faith at the
time of the NASD demand that
the filing of such registration
statement would materially
interfere with any transaction
or event involving Nasdaq.
Nasdaq acknowledges that during
any such postponement it will
continue to cooperate with the
NASD so that Nasdaq will be
able to promptly file or
request effectiveness of the
registration statement, as the
case may be, upon termination
of any postponement period
o Nasdaq may include shares of
its own account in any
registration statement filed
pursuant to a NASD demand. The
number of shares to be included
by Nasdaq in a piggyback
registration is subject to
being "cut back" if the
managing underwriter of the
offer determines that the
inclusion of all the shares
requested to be registered by
Nasdaq will materially and
adversely affect the offering
based on marketing factors
SHELF REGISTRATION o The NASD may make one demand
for the filing of a shelf
registration statement covering
an offering of shares
underlying unexercised and
unexpired warrants to be made
on an continuous basis pursuant
to Rule 415. In addition, the
NASD may use a demand
registration to request a shelf
registration covering open
market resales of Registrable
Common Shares.
PIGGYBACK REGISTRATION o The NASD may include its
registrable Common Stock shares
in any offering of Common Stock
or other class of equity
securities registered under the
Securities Act other than a
registration of an employee
stock option or incentive plan,
etc., on Form S-8, and
registration on Form S-4 of
securities proposed to be
issued in exchange for
securities or assets of another
corporation or in connection
with a merger or consolidation
involving Nasdaq
o The number of shares to be
included by the NASD in a
piggyback registration is
subject to being "cut back" if
the managing underwriter of the
offer determines that the
inclusion of all the shares
requested to be registered by
the NASD will materially and
adversely affect the offering
based on marketing factors,
provided, however, that with
respect to any registration for
which a registration statement
is filed prior to the earlier
of (i) six months after the
consummation of the IPO and
(ii) December 31, 2002, any
shares requested to be included
by any other party exercising
piggyback registration rights
will be "cut-back" first before
any shares of the NASD are
"cut-back"
o Nasdaq has sole discretion in
determining the price of the
securities offered in a
piggyback offering, subject to
the NASD's right to withdraw
its securities if it disagrees
with the offering price set by
Nasdaq
TAG-ALONG RIGHT o If, prior to the initial public
offering of Common Stock,
Nasdaq proposes to sell shares
for cash in a private
transaction exempt from
registration under the
Securities Act, the NASD shall
have the right to include in
such sale the number of shares
of Common Stock it owns equal
to, unless otherwise agreed to
by the NASD and Nasdaq, the
product of (x) the number of
shares of Common Stock then
owned by the NASD and (y) a
fraction with the numerator
equal to the number of shares
to be sold by Nasdaq in the
private transaction and a
denominator equal to the number
of outstanding shares of Common
Stock
o The tag-along right would not
apply if (i) the aggregate
purchase price of the shares
being sold by Nasdaq in such
private transaction or series
of related transactions is less
than $10 million, (ii) the sale
is to any of the previously
identified possible purchasers
listed on an exhibit to the
Agreement, (iii) Nasdaq and the
NASD agree in writing for
Nasdaq to acquire from the NASD
a number of shares equal to the
number of shares that the NASD
would otherwise have been
entitled to include in such
private sale prior to
commencement of any such sale
by Nasdaq, (iv) the sale is in
connection with a joint
venture, strategic alliance or
other similar arrangement , in
any such case the primary
purpose of which is other than
for the Company to raise
capital and the consideration
involved in such transaction is
not predominantly comprised of
cash, in each case as
determined in good faith by the
Nasdaq Board; provided,
however, the parties agree that
any such transaction which
involves cross-shareholdings
obtained through substantially
similar cash investments shall
not be deemed primarily to
raise capital or to
predominantly involve cash
consideration, or (v) any
issuance of shares of Common
Stock (or securities
convertible into shares of
Common Stock) by Nasdaq
pursuant to equity plans or
arrangements for employees,
officers, directors or
consultants
o The tag-along right will
terminate automatically upon
the effectiveness of a
registration statement for the
initial public offering of
Common Stock
ANTI-DILUTION RIGHTS o In the event that, prior to
Nasdaq's registration as an
exchange, Nasdaq intends to
issue any shares of its Common
Stock (or securities
convertible into Common Stock)
and (i) the NASD would not
otherwise sell Nasdaq shares in
connection with such issuance
and (ii) as a result of such
issuance, the NASD's ownership
in Nasdaq would be diluted by
5% or more, then (x) Nasdaq
must provide written notice to
the NASD that Nasdaq intends to
make such issuance not less
than 30 day's prior to such
issuance and (y) such issuance
may not be consummated by
Nasdaq without the prior
consent of the NASD, which
consent may not be unreasonably
withheld or delayed, provided,
however, that the foregoing
provisions shall not apply with
respect to (i) the issuance of
$240,000,000 aggregate
principal amount of Nasdaq's 4%
convertible subordinated
debentures (the "Debentures")
to be issued by Nasdaq to
Hellman & Friedman Capital
Partners IV, L.P. and its
affiliates (collectively,
"H&F") as referred to in the
Purchase and Sale Agreement,
dated March 23, 2001, between
Nasdaq and the NASD (the
"Purchase and Sale Agreement")
and (ii) the issuance of any
shares of Common Stock by
Nasdaq upon conversion of all
or any portion of the
Debentures by the holders
thereof
o In the event that, after
Nasdaq's registration as an
exchange, Nasdaq intends to
issue any shares of its Common
Stock (or securities
convertible into Common Stock)
and (i) the NASD would not
otherwise sell Nasdaq shares in
connection with such issuance
and (ii) as a result of such
issuance, the NASD's ownership
in Nasdaq would be diluted by
5% or more, then Nasdaq must
provide prior written notice to
the NASD that Nasdaq intends to
make such issuance which
notice, to the extent
practicable in light of
commercial considerations,
should be not less than 15
day's prior to such issuance.
Nasdaq's obligation to provide
prior notice will terminate at
any time when the NASD ceases
to hold 5% of Nasdaq's
outstanding Common Stock
provided, however, that the
foregoing provisions shall not
apply with respect to (i) the
issuance of the Debentures to
be issued by Nasdaq to H&F as
referred to in the Purchase and
Sale Agreement and (ii) the
issuance of any shares of
Common Stock by Nasdaq upon
conversion of all or any
portion of the Debentures by
the holders thereof
o The notice and consent rights
described above will (x) not be
deemed to affect the parties'
obligations under any other
provisions of the Investor
Rights Agreement or under
applicable law or regulations
and (y) will not apply to
equity plans or arrangements
for employees, officers,
directors or consultants
LOCK-UP o The NASD shall not be permitted
to transfer any shares of
Common Stock for a period of
(i) 180 days (subject to a
longer period as may be
requested by the underwriters)
following the consummation of
the initial public offering of
the Common Stock, and (ii) 90
days (subject to a longer
period as may be requested by
the underwriters) following the
effectiveness of any other
registration statement filed by
Nasdaq pursuant to the
Securities Act, unless such
registration statement relates
to the registration of shares
of Common Stock issuable
pursuant to Nasdaq stock option
plans
REGISTRATION EXPENSES o All registration expenses
(other than underwriting
discounts and commissions on
the NASD's shares) shall be
borne by Nasdaq
INDEMNIFICATION o Nasdaq would be liable for any
false or misleading information
contained in a registration
statement except for any
information about the NASD
included in a registration
statement (for which the NASD
would be liable)
VOTING o Upon Exchange Registration, the
NASD will vote all shares owned
by it which are not subject to
the Voting Trust Agreement in
the same proportion as all
other holders of shares of
Common Stock
OTHER TERMS o In connection with any
underwritten public offering,
Nasdaq and the selling
shareholders shall enter into
an underwriting agreements
containing customary terms,
including indemnification.
o The Agreement would contain
other customary terms
Exhibit 10.11
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
EMPLOYMENT AGREEMENT WITH
FRANK G. ZARB
THIS AGREEMENT (the "Agreement"), made and entered into as indicated
below, and effective for all purposes on February 24, 1997 (the "Effective
Date"), by and between NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC., a
membership corporation created and existing under and by virtue of the laws
of the State of Delaware, with its offices at 1735 K Street, N.W.,
Washington, D.C. 20006, hereinafter called the "Association," and FRANK G.
ZARB, of 910 Fifth Avenue, Apartment l0A, New York, NY 10021, hereinafter
called "Zarb."
WITNESSETH:
WHEREAS, the Association desires to have the benefits of Zarb's
knowledge and experience as its President and Chief Executive Officer, and
Zarb desires such employment with the Association.
NOW, THEREFORE, in consideration of the premises, of the sum of One
Dollar ($1.00) by each of the parties in hand to the other paid, and of the
mutual covenants set forth below, the Association and Zarb do hereby agree,
each with the other, that the following shall constitute the employment
agreement covering Zarb:
1. Until this Agreement is terminated as hereinafter provided, the
Association shall employ Zarb as its President and Chief Executive Officer,
and Zarb shall serve as an employee of the Association in such capacity.
During the period of his employment hereunder, Zarb shall perform the usual
duties to be performed by one holding the offices of President and Chief
Executive Officer, and Zarb shall perform such other management duties and
responsibilities reasonably related to such offices as may be assigned to
him from time to time by the Board of Governors or the Executive Committee
of the Association. It is also intended that Zarb shall be the official
spokesman and representative of the Association in all matters affecting
its interests. Zarb shall devote his full time and best efforts to such
duties during the period of his employment under this Agreement; provided,
however, that nothing in this Agreement shall preclude Zarb from (i)
engaging in personal activities involving charitable, community,
educational, religious, and similar organizations, speaking engagements,
and similar activities and (ii) subject to Paragraph 16, managing his
personal investments and affairs, to the extent that such activities are
not in any manner inconsistent with or in conflict with the performance of
Zarb's duties under this Agreement.
2. During the Term (as defined in Paragraph 3), the Association shall
pay Zarb for his services hereunder an annual base salary of $1,200,000,
which shall be payable during the year in approximately equal periodic
installments as may be agreed upon by the Association and Zarb. In
addition, the Association shall annually pay Zarb such incentive
compensation as the Management Compensation Committee of the Association
may award in its discretion, provided that the amount of such incentive
compensation for each full year of service during the Term (as defined in
Paragraph 3) shall be not less than fifty percent (50%) of Zarb's base
salary for such year.
3. This Agreement shall continue in effect for three (3) years from
the Effective Date, which period shall hereinafter be referred to as the
"Term," subject to earlier termination in one of the following ways:
(a) This Agreement shall terminate automatically upon Zarb's death,
or upon his being adjudicated incompetent by a court of competent
jurisdiction, or upon Zarb's becoming permanently disabled. For purposes of
this Agreement, "permanently disabled" shall mean the inability of Zarb to
perform substantially all his duties in the manner required hereunder
whether by reason of illness or injury or otherwise (whether physical or
mental) incapacitating Zarb for a continuous period exceeding 120 days.
Such permanent disability shall be certified by a physician chosen by the
Association and reasonably acceptable to Zarb (if he is then able to
exercise sound judgment). Should Zarb not acquiesce (or should he be unable
to acquiesce) in the selection of the certifying physician, a physician
chosen by Zarb (or, if he is not then able to exercise sound judgment, by
his spouse or legal representative) and reasonably acceptable to the
Association shall be required to concur in the medical determination of
permanent disability (as described above), and, failing that, the two
physicians shall designate a third physician whose decision shall be
determinative, as of the end of the calendar month in which such
concurrence or third physician's decision, as the case may be, is made;
(b) Zarb may terminate this Agreement for good reason, upon not less
than thirty (30) days' written notice to the Association, if the
Association (i) reduces his position, duties, or authority, (ii) fails to
secure the agreement of any successor entity to the Association to assume
fully the Association's obligations under this Agreement, or (iii) commits
any other material breach of this Agreement which is not remedied by the
Association within thirty (30) days after receiving notice thereof from
Zarb; and
(c) The Association may terminate this Agreement for cause if;
(1) Zarb shall be convicted of any crime involving the purchase
or sale of any security, mail or wire fraud, or moral turpitude;
(2) Zarb shall file a petition for bankruptcy protection or
shall be unable to discharge the claims of his creditors as such claims
mature; or
(3) Zarb shall be convicted of a theft or an embezzlement.
4. This Agreement may be extended beyond the Term by written agreement
of Zarb and the Association.
5. Upon completion of the Term or as otherwise provided in Paragraph 6
or 7, Zarb shall be entitled to receive a supplemental retirement benefit
from the Association equal to the present value of: (i) the benefit he
would have accrued under the NASD Employees Retirement Plan (the "NASD
Retirement Plan") during the Term if the full amount of his compensation
under Paragraph 2 were taken into account as compensation under the NASD
Retirement Plan (without regard to section 401(a) (17) of the Internal
Revenue Code), if the limitations on benefits otherwise applicable under
the NASD Retirement Plan by reason of section 415 of the Internal Revenue
Code were disregarded, and if the vesting provisions of the NASD Retirement
Plan were disregarded; less (ii) any vested benefit he actually accrued
under the NASD Retirement Plan during the Term. Determination of the
present value of such supplemental retirement benefit shall be made using
the actuarial assumptions then applicable for determining lump sum
distributions under the NASD Retirement Plan (as if such supplemental
retirement benefit were paid under the NASD Retirement Plan). The
Association shall pay such supplemental retirement benefit to Zarb in a
lump Sum within fifteen (15) days after the completion of the Term or at
such other time as provided in Paragraph 6 or 7. Except as otherwise
provided in Paragraph 6 or 7, Zarb shall not be entitled to receive any
supplemental retirement benefit under this Paragraph 5 if his employment
with the Association terminates prior to his completion of the Term.
6. If this Agreement is terminated under Paragraph 3(a) by reason of
Zarb's death, Zarb's surviving widow or Zarb's estate (if there is no
surviving widow) shall be entitled to receive from the Association at such
time: (i) his base salary to the date of termination; (ii) a pro-rata
portion of the minimum incentive compensation amount described in Paragraph
2 to the date of termination (determined by the ratio that the number of
days for which Zarb was employed since the later of the Effective Date or
the most recent anniversary of the Effective Date bears to 365) ; (iii) the
supplemental retirement benefit described in Paragraph 5 accrued to the
date of termination (taking into account the provisions of the NASD
Retirement Plan applicable to a participant's death but disregarding any
portion of the Term following the date of Zarb's death); and (iv) those
benefits which Zarb is entitled to receive under the terms of the
Association's employee benefit plans and arrangements. If this Agreement is
terminated under Paragraph 3(a) by reason of any event other than Zarb's
death, Zarb shall be entitled to receive from the Association at such time:
(i) his base salary to the date of termination; (ii) a pro-rata portion of
the minimum incentive compensation amount described in Paragraph 2 to the
date of termination (determined by the ratio that the number of days for
which Zarb was employed since the later of the Effective Date or the most
recent anniversary of the Effective Date bears to 365); (iii) the
supplemental retirement benefit described in Paragraph 5 accrued to the
date of termination (taking into account the provisions of the NASD
Retirement Plan applicable to a participant's disability but disregarding
any portion of the Term following the date of Zarb's termination); and (iv)
those benefits which Zarb is entitled to receive under the terms of the
Association's employee benefit plans and arrangements.
7. (a) If this Agreement is terminated by Zarb for good reason
under Paragraph 3(b), or if this Agreement is terminated by the
Association other than for cause, Zarb shall be entitled to receive from
the Association: (i) his annual base salary and the minimum incentive
compensation amount described in Paragraph 2 (expressed as a monthly
amount); multiplied by (ii) the remaining number of full or partial months
in the Term; plus (iii) the supplemental retirement benefit described in
Paragraph 5 to which Zarb would have been entitled if he had completed the
Term; and (iv) those benefits which Zarb is entitled to receive under the
terms of the Association's employee benefit plans and arrangements. Any
payments under this Paragraph 7(a) shall be made at the time such payments
would otherwise have been made under this Agreement if Zarb had completed
the Term.
(b) If this Agreement is terminated by Zarb other than for good
reason (as defined in Paragraph 3(b)), Zarb shall be entitled to receive
from the Association at such time: (i) his base salary to the date of
termination; (ii) a pro-rata portion of the minimum incentive compensation
amount described in Paragraph 2 (determined by the ratio that the number of
days for which Zarb was employed since the later of the Effective Date or
the most recent anniversary of the Effective Date bears to 365); and (iii)
those benefits which Zarb is entitled to receive under the terms of the
Association's employee benefit plans and arrangements.
8. If this Agreement is terminated by the Association for cause under
Paragraph 3(c), Zarb shall be entitled to receive from the Association at
such time: (i) his base salary to the date of termination; (ii) a pro-rata
portion of the minimum incentive compensation amount described in Paragraph
2 (determined by the ratio that the number of days for which Zarb was
employed since the later of the Effective Date or the most recent
anniversary of the Effective Date bears to 365); and (iii) those benefits
which Zarb is entitled to receive under the terms of the Association's
employee benefit plans and arrangements.
9. If Zarb and the Association agree to extend this Agreement beyond
the Term pursuant to Paragraph 4, Zarb shall be entitled to receive, with
respect to each year of his employment under this Agreement after the Term,
a supplemental retirement benefit from the Association equal to the present
value of: (i) the benefit he would have accrued under the NASD Retirement
Plan during such year if the full amount of his compensation under
Paragraph 2 were taken into account as compensation under the NASD
Retirement Plan (without regard to section 401(a)(17) of the Internal
Revenue Code), if the limitations on benefits otherwise applicable under
the NASD Retirement Plan by reason of section 415 of the Internal Revenue
Code were disregarded, and if the vesting provisions of the NASD Retirement
Plan were disregarded; less (ii) any vested benefit he actually accrued
under the NASD Retirement Plan during such year. Determination of the
present value of such supplemental retirement benefit shall be made using
the actuarial assumptions then applicable for determining lump sum
distributions under the NASD Retirement Plan (as if such supplemental
retirement benefit were paid under the NASD Retirement Plan). The
Association shall pay such supplemental retirement benefit to Zarb in a
lump sum on the last day of the calendar year in which it was accrued or,
in the case of the last year for which he is employed under this Agreement,
the date on which his employment under this Agreement terminates.
10. If Zarb establishes his principal residence in the
Washington, D.C. metropolitan area in connection with his employment under
this Agreement, the Association shall reimburse Zarb for: (i) moving
expenses (within the meaning of section 217(b) of the Internal Revenue
Code) incurred in connection with the establishment of such residence; (ii)
to ensure his personal safety, the cost of installing a home security
system in such residence (if recommended by an independent security study
and provided that such reimbursement shall not exceed $10,000); and (iii)
the cost of appropriate temporary housing in the Washington, D.C.
metropolitan area incurred for a period of up to three (3) months after the
commencement of his employment under this Agreement. If in connection with
the establishment of such residence and within the first six (6) months of
his employment under this Agreement Zarb offers his Long Island residence
for sale on the general real estate market, the Association shall provide
for the purchase or sale of such residence at an amount equal to
100-percent of its fair market value (as determined in accordance with
customary appraisal and timing standards for such transactions by one or
more independent appraisers approved by the Association and reasonably
acceptable to Zarb).
11. Upon presentation of appropriate receipts or vouchers in a manner
consistent with the expense substantiation policy of the Association
generally applicable to its executive officers and in accordance with the
provisions of such policy regarding the timing and amount of expense
reimbursements, the Association shall reimburse Zarb for reasonable
business-related expenses incurred in connection with his performance of
services under this Agreement and in the interest of the Association's
business, including, but not limited to, expenses for such items as
entertainment, travel, hotels, meals, dues, admission fees, and house
charges of various clubs in the New York City and Washington, D.C.
metropolitan areas, as well as for the travel, hotel, and meals of his wife
on those occasions (including meetings of the Board of Governors of the
Association) when the proper representation of the Association makes it
advisable for her to accompany him. In the case of travel, hotel, and meals
for Zarb's wife, the reimbursements provided under this Paragraph 11 shall
include such amounts as may be necessary for Zarb to pay any taxes imposed
with respect to such reimbursements (which amounts shall be paid to Zarb by
January 31 of the year following the year in which the expenses were
incurred). In the case of dues and initiation and other fees for private
clubs, the amount of reimbursements under this Paragraph 11 shall not
exceed $20,000 for any year.
12. The Association shall reimburse Zarb for the annual expenses he
incurs for personal financial and tax counseling, provided that the amount
of such reimbursement for any year shall not exceed $25,000.
13. The Association shall provide Zarb with the use of an automobile
and, to ensure his personal safety, a driver trained in personal security
(if recommended by an independent security study) with respect to Zarb's
performance of services under this Agreement in both the New York City and
Washington, D.C. metropolitan areas. Zarb's use of such automobile and
driver shall he exclusive with respect to whichever of those two
metropolitan areas is the situs of Zarb's principal residence; for the
other metropolitan area, such automobile and driver shall be available, as
appropriate, for use by other members of the Board of Governors and other
executives of the Association.
14. The Association shall provide Zarb any health, life, or disability
insurance, pension, retirement, savings, or any other benefit plan or
arrangement now or hereafter maintained by the Association for its senior
executives generally, and Zarb's participation therein shall be in
accordance with the provisions thereof generally applicable to such
executives. Zarb shall receive at least four (4) weeks of paid vacation per
annum.
15. The Association shall reimburse Zarb for any legal fees and
expenses incurred in the negotiation of this Agreement, provided that the
amount of such reimbursement shall not exceed $20,000. In the event of any
dispute between Zarb and the Association under this Agreement which is
wholly or partly resolved in Zarb's favor, the Association shall reimburse
Zarb for reasonable legal fees and expenses incurred in connection with
such dispute. The reimbursements provided under this Paragraph 15 shall
include such amounts as may be necessary for Zarb to pay any taxes imposed
with respect to such reimbursements.
16. Any equity securities of, or any beneficial interest in, Travelers
Group Inc. directly or indirectly owned or controlled by Zarb, a member of
his immediate family, or a trust of which Zarb or such family member is a
beneficiary as of the effective Date, including options to purchase such
equity securities, hereinafter referred to as the "Travelers Stock," may be
retained by Zarb, such family member, or such trust during Zarb's
employment under this Agreement, provided: (i) that Zarb provides the Audit
Committee of the Association with reasonable advance notice of any
transaction which Zarb, such family member, or such trust proposes to
engage in with respect to the Travelers Stock, including any purchase,
sale, pledge, or hypothecation thereof; (ii) that Zarb obtains approval
from the Audit Committee of any transaction described in clause (i) prior
to the execution thereof; and (iii) that Zarb shall recuse himself from any
action or decision of the Association or its subsidiaries that directly
relates to Travelers Group Inc. or any subsidiary or affiliate thereof.
With respect to any other beneficial interest directly or indirectly owned
or controlled by Zarb, a member of his immediate family, or a trust of
which Zarb or such family member is a beneficiary in any entity (other than
Travelers Group Inc.) that is a member of, or is affiliated with a member
of, the Association, Zarb shall be subject to the general policies of the
Association regarding such interests.
17. It is understood and agreed that the Association has voluntarily
offered the inducements herein provided to Zarb for the purpose of his
better protection and the protection of his wife, children and their issue.
Accordingly, it is understood and agreed that neither Zarb nor his wife nor
his children nor their issue shall have the right to alienate, anticipate,
commute, pledge, encumber or assign any part or all of said benefits
provided for any or all of them under this Agreement, and that none of said
benefits or payments shall be subject to the claim of any creditors of any
or all of them and, in particular, none of said benefits or payments shall
be subject to attachment or garnishment or other legal process by any
creditor of Zarb, his wife, children, or their issue.
18. It is understood and agreed that no responsibility for any
payments called for hereunder to Zarb, his wife, children, or their issue
shall attach to the officers, members of the Board of Governors, or any
member of the Association, but that all such payments are the obligation of
the Association as a separate and distinct entity.
19. It is understood and agreed that this Agreement shall be binding
upon the Association and Zarb, upon the successors or assigns of the
Association, and upon the heirs, executors, administrators, and assigns of
Zarb.
20. This Agreement shall not be assigned by either Zarb or the
Association except that the Association shall have the right to assign its
rights hereunder to any successor in interest of the Association. If
assigned to any such successor of the Association, all references to the
Association shall be read to refer to such successor.
21. Except as otherwise expressly provided, this Agreement embodies
the entire understanding between Zarb and the Association with respect to
the matters covered herein.
22. In case any one or more of the provisions contained in this
Agreement should be invalid, illegal, or unenforceable in any respect, the
validity, legality, or enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
23. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, and all of which shall constitute one
and the same Agreement.
24. The exclusive procedure for resolution of any dispute under this
Agreement shall be by arbitration in the District of Columbia in accordance
with the rules then obtaining of the American Arbitration Association (the
"AAA"). Within fifteen (15) days after either party's receipt of a demand
for arbitration, each party shall appoint an arbitrator and request the AAA
to appoint a third and presiding arbitrator in accordance with its then
existing rules. The award of the arbitrators shall be in writing and shall
state the reason for the decision, shall be final and binding upon the
parties, and judgment upon the award may be entered in any court having
jurisdiction thereof. Except as provided in Paragraph 15, the expenses of
arbitration including, without limitation, filing fees and arbitrators'
fees and expenses, if any, shall be divided equally between the parties.
25. It is understood and agreed that any notice to either party shall
be in writing and shall be sufficiently given if sent to such party by
registered or certified mail, postage prepaid, at the address of such party
set forth above. Either party hereto may change the address to which
notices shall be sent by written notice of such new or changed address
given to the other party hereto.
26. It is understood and agreed that this Agreement may be amended by
mutual consent of the parties hereto which must be evidenced by a document
executed with the same formality as this Agreement.
27. This Agreement shall be construed, interpreted and applied under
and in accordance with the laws of the State of Delaware.
CONCLUSION
IN WITNESS WHEREOF, the corporate party hereto has caused this
Agreement to be duly executed and delivered on the date indicated below,
and the individual party hereto has executed and delivered this Agreement
on the date indicated below, effective for all purposes on February 24,
l997.
NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC.
2/24/97
- ----------------------- By /s/ ILLEGIBLE
Date -----------------------
Chairman of the Board
of Governors
(Corporate Seal)
1/21/97 /s/ Frank G. Zarb
- ----------------------- -------------------------
Date Frank G. Zarb
Exhibit 10.12
INSTRUMENT OF AMENDMENT
INSTRUMENT OF AMENDMENT dated March 18, 1998 (the "Amendment"),
between NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (the
"Association") and FRANK G. ZARB ("Zarb") to the employment agreement
effective on February 24, 1997, between the Association and Zarb (the
"Employment Agreement").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Association and Zarb have entered into the Employment
Agreement;
WHEREAS, Paragraph 26 of the Employment Agreement provides that
the Employment Agreement may be amended by the mutual consent of the
parties which consent must be evidenced by a document executed with the
same formality as the Employment Agreement;
WHEREAS, the Association and Zarb desire to amend the Employment
Agreement to provide Zarb with certain post-retirement benefits in exchange
for his agreement to provide certain post-retirement consulting services.
NOW, THEREFORE, it is agreed that the Employment Agreement is
hereby amended in the following manner:
1. Paragraph 5 of the Employment Agreement is hereby amended
by designating the existing substantive provision therein
as subparagraph (a), and by adding new subparagraphs (b),
(c) and (d) therein to read as follows:
"(b) Upon completion of the Term, Zarb
shall be entitled to receive at the Association's
expense for a period of three years thereafter (i)
the full-time and exclusive use of an automobile
of his choice and driver and (ii) appropriate
office and secretarial services; provided, that
Zarb's receipt of the benefits described in this
subparagraph (b) shall be contingent upon his
satisfaction of the consulting duties set forth in
subparagraph (c) below.
(c) Upon completion of the Term and in
consideration of the Association's agreement to
provide the benefits described in subparagraph (b)
above, Zarb agrees to make himself available for a
period of three years thereafter upon reasonable
prior notice to provide consulting services to the
Chief Executive Officer of the Association on
matters relating to the nature and scope of his
duties during the Term; provided, however, that in
no event shall Zarb be required to provide such
consulting services for more than 100 hours during
any 12 month period (including travel time
associated with such consulting services).
(d) Notwithstanding the foregoing, the
obligations of the Association and Zarb under
subparagraphs (b) and (c) above shall cease prior
to the end of the three year period reflected in
subparagraph (c) if Zarb commences employment with
another employer (or if Zarb becomes re-employed
by the Association)."
2. All of the terms and conditions of the Employment Agreement
as amended by this Instrument of Amendment shall remain in
full force and effect throughout the Term thereof.
IN WITNESS WHEREOF, the corporate party hereto has caused this
Instrument of Amendment to be duly executed and delivered on the date
indicated below, and the individual party hereto has executed and delivered
this Instrument of Amendment on the date indicated below, effective for all
purposes on March 18, 1998.
NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC.
By
--------------------------
Chairman of the Management
Compensation Committee
- -----------------------
Date
(Corporate Seal)
- --------------------- -------------------------------
Date Frank G. Zarb
Exhibit 10.13
INSTRUMENT OF AMENDMENT
INSTRUMENT OF AMENDMENT dated as of August 20, 1999, between
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (the "Association") and
FRANK G. ZARB ("Zarb") to the employment agreement effective on February
24, 1997, as amended effective March 18, 1998, between the Association and
Zarb (the "Employment Agreement").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Association and Zarb have entered into the Employment
Agreement;
WHEREAS, Paragraph 26 of the Employment Agreement provides that
the Employment Agreement may be amended by the mutual consent of the
parties which consent must be evidenced by a document executed with the
same formality as the Employment Agreement;
WHEREAS, the Employment Agreement will continue in effect until
February 24, 2000, unless earlier terminated in accordance with its terms;
WHEREAS, Paragraph 4 of the Employment Agreement provides that the
Employment Agreement may be extended beyond such stated term by written
agreement of Zarb and the Association; and
WHEREAS, the Association and Zarb desire to amend the Employment
Agreement to extend the Employment Agreement for one year beyond such
stated term to allow the Association to select and appoint an individual to
succeed Zarb as its President and Chief Executive Officer and to provide a
transition period for such succession, and, in addition, to amend the
Employment Agreement as otherwise provided herein.
NOW, THEREFORE, it is agreed that the Employment Agreement shall
be and the same hereby is amended in the following manner:
1. Paragraph 1 of the Employment Agreement is amended by
deleting the first two sentences thereof and substituting
the following in lieu thereof:
"Until this Agreement is terminated as hereinafter
provided, the Association shall employ Zarb, and Zarb
shall serve as an employee of the Association, in the
capacity of its President and Chief Executive
Officer, provided, however, that, effective April 10,
1997, Zarb shall be the Association's President,
Chairman and Chief Executive Officer, and, effective
January 22, 1998, Zarb shall be the Association's
Chairman and Chief Executive Officer. During the
period of his employment hereunder, Zarb shall
perform the usual duties to be performed by one
holding such offices, and Zarb shall perform such
other management duties and responsibilities
reasonably related to such offices as may be assigned
to him from time to time by the Board of Governors or
the Executive Committee of the Association."
2. Paragraph 1 of the Employment Agreement is further
amended by designating the existing substantive provision
thereof as subparagraph (a) and by adding a new
subparagraph (b) thereof to read in its entirety as
follows:
"(b) The foregoing subparagraph (a) of
this Paragraph 1 to the contrary notwithstanding,
Zarb shall relinquish his duties or positions as
Chairman and Chief Executive Officer of the
Association during the Additional Term (as
hereinafter defined) if, his successor being duly
appointed, the Association and Zarb mutually
determine that such relinquishment may facilitate his
successor's transition to such office; however, such
relinquishment shall not be considered a termination
of the Term and shall have no effect on the
Association's obligation to continue to pay and
provide Zarb the compensation and benefits otherwise
provided for in this Agreement for the remainder of
the Term. Zarb agrees to make himself available for
the balance of the Term upon reasonable prior notice
to provide consulting services to the Association on
matters relating to the nature and scope of his
duties prior to relinquishment of his duties or
positions pursuant to this Paragraph 1(b)."
3. Paragraph 2 of the Employment Agreement is amended by
designating the existing substantive provision thereof as
subparagraph (a) and by adding new subparagraph (b)
thereof to read in its entirety as follows:
"(b) Notwithstanding any provision of
subparagraph (a) of this Paragraph 2 to the contrary,
during the Additional Term, the aggregate annual base
salary and incentive compensation paid to Zarb by the
Association shall not be less than such aggregate
annual amount paid to Zarb for the second or third
year of the Initial Term, whichever was greater."
4. Paragraph 3 of the Employment Agreement is amended by
deleting so much of such paragraph as precedes
subparagraph (a) thereof and substituting the following
in lieu thereof:
"This Agreement shall continue in effect for an
initial term of three (3) years from the Effective
Date (the "Initial Term") and for an additional one
(1) year commencing immediately upon the close of the
Initial Term (the "Additional Term"), and the Initial
Term together with the Additional Term shall be
referred to herein as the "Term," subject to earlier
termination in one of the following ways:"
5. Subparagraph (a) of Paragraph 5 of the Employment
Agreement is amended to read, in its entirety, as
follows:
"(a) Zarb shall be a "Grandfathered
Participant" in the National Association of
Securities Dealers, Inc. Supplemental Executive
Retirement Plan (the "Supplemental Retirement Plan")
(capitalized terms used in this Paragraph 5(a), but
not otherwise defined in this Agreement shall have
the meanings given such terms in the Supplemental
Retirement Plan). Upon completion of the Initial Term
or as otherwise provided in Paragraph 6 or 7, Zarb
shall be entitled to a Retirement Benefit, as if he
has fully satisfied the Supplemental Retirement
Plan's eligibility and vesting requirements for a
full Retirement Benefit. Such Retirement Benefit
shall be equal to six percent (6%) of Zarb's Final
Average Compensation multiplied by the number of
Years of Service attained by Zarb upon his
termination of employment hereunder, less any vested
benefit that he accrued under the NASD Retirement
Plan. Zarb's Final Average Compensation, for purposes
of the Supplemental Retirement Plan, shall be
computed for the entire period of his actual service
with the Association. Notwithstanding the foregoing
to the contrary, Zarb's Retirement Benefit as
aforesaid shall not be less than the supplemental
retirement benefit to which he would have been
entitled upon his termination of employment under the
terms of this Agreement as in effect immediately
following the amendment of this Agreement dated March
18, 1998. Except as otherwise provided in Paragraph 6
or 7, Zarb shall not be entitled to receive any
Retirement Benefit under this Paragraph 5(a) if his
employment with the Association terminates prior to
his completion of the Initial Term. The Association
shall pay the Retirement Benefit to Zarb in a
lump-sum within fifteen (15) days after Zarb's
termination of employment hereunder or at such other
time as provided in Paragraph 6 or 7."
6. Subparagraph (b) of Paragraph 5 of the Employment
Agreement is amended to read, in its entirety, as
follows:
"(b) Upon completion of the Term, Zarb
shall be entitled to receive at the Association's
expense for a period of three years thereafter (i)
the full-time and exclusive use of an automobile of
his choice and driver, (ii) appropriate office and
secretarial services and (iii) payment or
reimbursement of dues, initiation and other fees and
charges for various clubs in the New York City and/or
Washington, D.C., metropolitan areas upon
presentation of appropriate receipts or other
documentation (in the case of this clause (iii), not
exceeding $20,000 for any year); provided that Zarb's
receipt of the benefits described in this
subparagraph (b) shall be contingent upon his
satisfaction of the consulting duties set forth in
subparagraph (c) below."
7. Clause (iii) of the first sentence of Paragraph 6 of the
Employment Agreement is amended to read, in its entirety,
as follows:
"(iii) the Retirement Benefit described in Paragraph
5 accrued to the date of termination (taking into
account the provisions of the Supplemental Retirement
Plan applicable to a participant's death but
disregarding the portion of the Term following the
date of Zarb's death);"
8. Clause (iii) of the second sentence of Paragraph 6 of the
Employment Agreement is amended to read, in its entirety,
as follows:
"(iii) the Retirement Benefit described in Paragraph
5 accrued to the date of termination (disregarding
the portion of the Term following the date of Zarb's
termination);"
9. Paragraph 7(a) of the Employment Agreement is amended by
substituting "Retirement Benefit" for "supplemental
retirement benefit" where the latter appears in clause
(iii) of the first sentence thereof.
10. Paragraph 9 of the Employment Agreement is amended by
deleting the substantive provisions thereof in their
entirety and substituting "Not used." in lieu thereof.
11. Paragraph 10 of the Employment Agreement is amended by
designating the existing substantive provision thereof as
subparagraph (a) and by adding a new subparagraph (b)
thereof to read in its entirety as follows:
"(b) If Zarb transfers his principal
residence from the Washington, D.C., metropolitan
area to the New York City metropolitan area in
connection with his employment under this Agreement,
the Association shall reimburse Zarb for: (i) moving
expenses (within the meaning of Section 217(b) of the
Internal Revenue Code) incurred in connection with
such establishment of his principal residence in the
New York City metropolitan area; (ii) to ensure his
personal safety, the cost of installing a home
security system in such residence (if recommended by
an independent security study and provided that such
reimbursement shall not exceed $10,000); and (iii)
the cost of an appropriate efficiency apartment in
the Washington, D.C., metropolitan area during the
remaining Term. If, in connection with the
establishment of such residence and within the first
six (6) months following transfer of his employment
under this Agreement from the Washington, D.C.,
metropolitan area to the New York City metropolitan
area, Zarb offers his Washington, D.C., metropolitan
area residence for sale on the general real estate
market, the Association shall provide for the
purchase or sale of such residence at an amount equal
to 100-percent of its fair market value (as
determined in accordance with customary appraisal and
timing standards for such transactions by one or more
appraisers approved by the Association and reasonably
acceptable to Zarb)."
12. All of the terms and conditions of the Employment Agreement
as amended by this Instrument of Amendment shall remain in
full force and effect throughout the term of the Employment
Agreement, as extended hereby.
IN WITNESS WHEREOF, the corporate party hereto has caused
this Instrument of Amendment to be duly executed and delivered on the date
indicated below, and the individual party hereto has executed and delivered
this Instrument of Amendment on the date indicated below, effective for all
purposes as of August 20, 1999.
NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC.
By
---------------------------
Chairman of the Management
- ----------------------- Compensation Committee
Date
Compensation Committee
(Corporate Seal)
- --------------------- -------------------------------
Date Frank G. Zarb
Exhibit 10.14
INSTRUMENT OF AMENDMENT
INSTRUMENT OF AMENDMENT dated March 30, 2000 (the "Amendment"),
between NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (the
"Association") and FRANK G. ZARB ("Zarb") to the employment agreement
effective on February 24, 1997, as amended effective March 18, 1998, and
subsequently amended in May, 1999, between the Association and Zarb (the
"Employment Agreement").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Association and Zarb have entered into the Employment
Agreement;
WHEREAS, Paragraph 26 of the Employment Agreement provides that
the Employment Agreement may be amended by the mutual consent of the
parties which consent must be evidenced by a document executed with the
same formality as the Employment Agreement;
WHEREAS, the Association and Zarb intended Paragraph 14 of the
Employment Agreement to permit Zarb to participate in the Association's
post-retirement medical, dental, and vision benefits upon Zarb's retirement
or termination of employment for any reason regardless of Zarb's years of
service with the Association upon such retirement or termination;
WHEREAS, Paragraph 10 of the Employment Agreement provides that
the Association shall reimburse Zarb for certain expenses incurred in
connection with a transfer of Zarb's principal residence from the
Washington D.C., metropolitan area to the New York City metropolitan area;
and
WHEREAS, the Association and Zarb wish to modify the Employment
Agreement in order to more clearly express the intention to provide Zarb
with post-retirement medical, dental and vision benefits and to provide
that the Association shall reimburse Zarb for airfare expenses incurred by
Zarb and Zarb's spouse in connection with locating and establishing a
principal residence in the New York City metropolitan area.
NOW, THEREFORE, it is agreed that the Employment Agreement is
hereby amended in the following manner:
1. Paragraph 14 of the Employment Agreement is hereby
amended by designating the existing substantive provision
therein as subparagraph (a), and by adding new
subparagraph (b) to read as follows:
"(b) Upon Zarb's retirement or termination
of employment with the Association for any reason
and regardless of Zarb's years of service with the
Association upon such retirement or termination,
provided Zarb pays the full cost of coverage for
himself and any eligible dependents and provided
that Zarb was participating in one of the
Association's medical plans at such time, Zarb
shall be entitled to receive the following: (i)
medical coverage under the CIGNA Super 65 Plan (or
a successor plan); (ii) if Zarb participates in a
dental plan at retirement or termination,
continuation of coverage under such dental plan
for a period of 18 months; and (iii) if Zarb
participates in a vision plan at retirement or
termination, continuation of coverage under such
vision plan for a period of 18 months."
2. The first sentence of Paragraph 10(b) of the Employment
Agreement is hereby amended to read in its entirety as
follows:
"(b) If Zarb transfers his principal
residence from the Washington, D.C., metropolitan
area to the New York City metropolitan area in
connection with his employment under this
Employment Agreement, the Association shall
reimburse Zarb for: (i) moving expenses (within
the meaning of Section 217(b) of the Internal
Revenue Code) incurred in connection with such
establishment of his principal residence in the
New York City metropolitan area; (ii) airfare
expenses incurred by Zarb and Zarb's spouse in
connection with locating and establishing his
principal residence in the New York City
metropolitan area; (iii) to ensure his personal
safety, the cost of installing a home security
system in such residence (if recommended by an
independent security study and provided that such
reimbursement shall not exceed $10,000); and (iv)
the cost of an appropriate efficiency apartment in
the Washington D.C., metropolitan area during the
remaining Term."
3. All of the terms and conditions of the Employment
Agreement as amended by this Instrument of Amendment
shall remain in full force and effect throughout the Term
thereof.
IN WITNESS WHEREOF, the corporate party hereto has caused this
Instrument of Amendment to be duly executed and delivered on the date
indicated below, and the individual party hereto has executed and delivered
this Instrument of Amendment on the date indicated below, effective for all
purposes on March 30, 2000.
NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC.
By
--------------------------
Chairman of the Management
Compensation Committee
- ----------------------
Date
(Corporate Seal)
- --------------------- -------------------------------
Date Frank G. Zarb
Exhibit 10.15
INSTRUMENT OF AMENDMENT
INSTRUMENT OF AMENDMENT, effective as of July 27, 2000 (the
"Amendment"), between NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (the
"Association") and FRANK G. ZARB ("Zarb") to the employment agreement
effective on February 24, 1997, as amended effective March 18, 1998,
subsequently amended as of August, 1999, and subsequently amended on March
30, 2000, between the Association and Zarb (the "Employment Agreement").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Association and Zarb have entered into the Employment
Agreement;
WHEREAS, Paragraph 26 of the Employment Agreement provides that
the Employment Agreement may be amended by the mutual consent of the
parties which consent must be evidenced by a document executed with the
same formality as the Employment Agreement;
WHEREAS, the Association and Zarb wish to modify the Employment
Agreement to provide Zarb with certain further post-retirement benefits in
exchange for his agreement to provide certain post-retirement consulting
services; and
WHEREAS, the Association and Zarb wish to modify the Employment
Agreement in order to compensate Zarb for any New York state and local
taxes he may incur in connection with the performance of the services
described hereunder in New York City and New York State with respect to his
employment with the Association for the years 1999 and 2000.
NOW, THEREFORE, it is agreed that the Employment Agreement is
hereby amended in the following manner:
1. Subparagraph (b) of Paragraph 5 of the Employment Agreement
is amended to read, in its entirety, as follows:
"(b) Upon completion of the Term and for a period
of three years thereafter, the Association shall
indemnify and hold Zarb harmless to the fullest extent
permitted by applicable law with regard to any action or
inaction of Zarb as an officer, director or employee of
the Association or as a fiduciary of any benefit plan of
the Association; and further upon completion of the Term
and for a period of three years thereafter, Zarb shall be
entitled to receive at the Association's expense: (i) the
full-time and exclusive use of an automobile of his
choice and driver, (ii) appropriate office and
secretarial services, (iii) payment or reimbursement of
dues, initiation and other fees and charges for various
clubs in the New York City and/or Washington, D.C.,
metropolitan areas upon presentation of appropriate
receipts or other documentation (in the case of this
clause (iii), not exceeding $20,000 for any year), (iv)
upon presentation of appropriate receipts or vouchers in
a manner consistent with the expense substantiation
policy of the Association generally applicable to its
executive officers and in accordance with the provisions
of such policy regarding the timing and amount of expense
reimbursements, payment or reimbursement of reasonable
business-related expenses incurred, including, but not
limited to, expenses for such items as entertainment,
travel, hotels, and meals, as well as for the travel,
hotel, and meals of Zarb's wife on those occasions when
the proper representation of the Association makes it
advisable for her to accompany him, provided that in the
case of travel, hotel, and meals for Zarb's wife, the
reimbursements provided under this clause (iv) shall
include such amounts as may be necessary for Zarb to pay
any taxes imposed with respect to such reimbursements
(which amounts shall be paid to Zarb by January 31 of the
year following the year in which the expenses were
incurred), and (v) to ensure the personal safety of Zarb
and his wife, at such times and as reasonably required by
the circumstances, the cost of a personal bodyguard for
Zarb and his wife and/or surveillance of his personal
residence and/or other reasonable method of security; and
provided further that Zarb's receipt of the benefits
described in this subparagraph (b) shall be contingent
upon Zarb's agreement to make himself available to
provide the consulting services set forth in subparagraph
(c) below."
2. The first sentence of Paragraph 10(b) of the Employment
Agreement is hereby amended to read in its entirety as
follows:
"(b) If Zarb transfers his principal residence
from the Washington, D.C., metropolitan area to the New
York City metropolitan area in connection with his
employment under this Employment Agreement, the
Association shall reimburse Zarb for: (i) moving expenses
(within the meaning of Section 217(b) of the Internal
Revenue Code) incurred in connection with the
establishment of his principal residence in the New York
City metropolitan area and the establishment of any
interim residence in the New York City metropolitan area
prior to the establishment of his principal residence;
(ii) airfare expenses incurred by Zarb and Zarb's wife in
connection with locating and establishing such residences
in the New York City metropolitan area; (iii) to ensure
his personal safety, the cost of installing a home
security system in each such residence (if recommended by
an independent security study and provided that such
reimbursement shall not exceed $10,000); and (iv) the
cost of an appropriate efficiency apartment in the
Washington D.C., metropolitan area during the remaining
Term."
3. Paragraph 11 of the Employment Agreement is hereby amended
by designating the existing substantive provision therein as
subparagraph (a), and by adding new subparagraph (b) to read
as follows:
"(b) If any remuneration paid to Zarb by the
Association hereunder, or otherwise, is subject to New
York state and/or local income taxes for the 1999 and/or
2000 calendar year, whether such amount is reported in
Zarb's income tax return for the applicable year or
whether such New York tax liability is assessed at a
later date by the New York state and/or local taxing
authorities, the Association shall pay Zarb an additional
amount with respect to each such year such that the net
amount retained by Zarb in each year, after deduction of
any such New York taxes and any United States Federal,
state or local income tax or payroll tax on such
additional amount, is equal to the gross amount of New
York state and local tax imposed upon such remuneration
for the applicable year, less: (i) any federal tax
savings attributable to the payment of such New York
state and local tax for the applicable year, and (ii) any
tax credits received by Zarb from the state of his
residency as a result of the payment of such New York
state and local tax for the applicable year. In providing
for the additional amount as set forth in this
subparagraph (b), it is the intent of the parties that
Zarb be fully reimbursed for any such New York state and
local tax liability he may incur in connection with his
performance of services to the Association in 1999 and
2000, as provided hereunder."
4. All of the terms and conditions of the Employment Agreement
as amended by this Instrument of Amendment shall remain in
full force and effect throughout the term thereof and, to
the extent applicable, for three years thereafter.
IN WITNESS WHEREOF, the corporate party hereto has caused this
Instrument of Amendment to be duly executed and delivered on the date
indicated below, and the individual party hereto has executed and delivered
this Instrument of Amendment on the date indicated below, effective for all
purposes as of July 27, 2000.
NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC.
_____________________ By_____________________________
Date Chairman of the Management
Compensation Committee
(Corporate Seal)
- --------------------- -------------------------------
Date Frank G. Zarb
Exhibit 10.16
INSTRUMENT OF AMENDMENT
INSTRUMENT OF AMENDMENT, effective as of November 1, 2000 (the
"Amendment"), between NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (the
"Association") and FRANK G. ZARB ("Zarb") to the employment agreement
effective on February 24, 1997, as amended effective March 18, 1998, and
subsequently amended as of August, 1999, on March 30, 2000, and as of July
27, 2000, between the Association and Zarb (the "Employment Agreement").
W I T N E S S E T H:
WHEREAS, the Association and Zarb have entered into the Employment
Agreement;
WHEREAS, Paragraph 26 of the Employment Agreement provides that
the Employment Agreement may be amended by the mutual consent of the
parties which consent must be evidenced by a document executed with the
same formality as the Employment Agreement;
WHEREAS, the Employment Agreement will continue in effect until
February 24, 2001, unless earlier terminated in accordance with its terms;
WHEREAS, Paragraph 4 of the Employment Agreement provides that the
Employment Agreement may be extended beyond such stated term by written
agreement of Zarb and the Association;
WHEREAS, the Association and Zarb desire to amend the Employment
Agreement to extend the Employment Agreement for one year beyond such
stated term to allow the Association to select and appoint an individual to
succeed Zarb as the Chairman and Chief Executive Officer of The Nasdaq
Stock Market, Inc. and to provide a transition period for such succession,
and, in addition, to amend the Employment Agreement as otherwise provided
herein;
WHEREAS, the Employment Agreement provides that the Association
shall provide Zarb with certain post-retirement benefits for a period of
three years after the completion of the term of the Employment Agreement in
exchange for his agreement to provide certain post-retirement consulting
services during such three-year period; and
WHEREAS, the Association and Zarb wish to modify the Employment
Agreement to extend the period in which the Association shall provide Zarb
with such post-retirement benefits and in which Zarb shall provide such
post-retirement consulting services to the Association for two years beyond
such stated term, and, in addition, to amend the Employment Agreement as
otherwise provided herein.
NOW, THEREFORE, it is agreed that the Employment Agreement is
hereby amended in the following manner:
1. Paragraph 1(b) of the Employment Agreement is amended hereby
to read, in its entirety, as follows:
"(b) The foregoing subparagraph (a) of this
Paragraph 1 to the contrary notwithstanding, Zarb shall
relinquish his duties or positions as Chairman and Chief
Executive Officer of the Association during the
Additional Term (as hereinafter defined) if, his
successor being duly appointed, the Association and Zarb
mutually determine that such relinquishment may
facilitate his successor's transition to such office;
however, neither such relinquishment nor Zarb's
relinquishment of his duties or positions as Chairman and
Chief Executive Officer of The Nasdaq Stock Market, Inc.
shall be considered a termination of the Term and shall
have no effect on the Association's obligation to
continue to pay and provide Zarb the compensation and
benefits otherwise provided for in this Agreement for the
remainder of the Term. Zarb agrees to make himself
available for the balance of the Term upon reasonable
prior notice to provide consulting services to the
Association on matters relating to the nature and scope
of his duties prior to relinquishment of his duties or
positions pursuant to this Paragraph 1(b)."
2. Paragraph 2(a) of the Employment Agreement is amended hereby
to read, in its entirety, as follows:
"(a) The Association shall pay Zarb for his
services hereunder an annual base salary of: (i)
$1,200,000 from the commencement of the Term (as defined
in Paragraph 3) through October 31, 2000, and (ii)
$2,000,000 during the period commencing on November 1,
2000 through the remainder of the Term (as defined in
Paragraph 3), which annual base salary shall be payable
during the year in approximately equal periodic
installments as may be agreed upon by the Association and
Zarb. In addition, the Association shall annually pay
Zarb such incentive compensation as the Management
Compensation Committee of the Association may award in
its discretion, provided that the amount of such
compensation for each full year of service during the
Term (as defined in Paragraph 3) shall not be not less
than fifty percent (50%) of Zarb's base salary for such
year, and provided further that such compensation for the
second year of the Additional Term (as defined in
Paragraph 3) shall be no less than $4,000,000.
Furthermore, to the extent that the Association grants
Zarb stock options prior to the termination of the Term
(as defined in Paragraph 3), such options shall fully
vest upon the termination of the Term and shall be
exercisable during the three (3) month period
thereafter."
3. The first sentence in Paragraph 2(b) of the Employment
Agreement is amended hereby to read, in its entirety,
as follows:
"(b) Notwithstanding any provision of this
Paragraph 2 to the contrary, during the first year of the
Additional Term, the aggregate annual base salary and
incentive compensation paid to Zarb by the Association
shall not be less than such aggregate annual amount paid
to Zarb for the second or third year of the Initial Term,
whichever was greater."
4. Paragraph 2 of the Employment Agreement is further amended
hereby by adding new subparagraph (c) thereof to read, in
its entirety, as follows:
"(c) Notwithstanding any provision of this
Paragraph 2 to the contrary, during the second year of
the Additional Term, the aggregate annual base salary and
incentive compensation paid to Zarb by the Association
shall not be less than such aggregate annual amount paid
to Zarb for the third year of the Initial Term or the
first year of the Additional Term, whichever was
greater."
5. Paragraph 3 of the Employment Agreement is amended by
deleting so much of such paragraph as precedes subparagraph
(a) thereof and substituting the following in lieu thereof:
"This Agreement shall continue in effect for an initial
term of three (3) years from the Effective Date (the
"Initial Term") and for an additional two (2) years
commencing immediately upon the close of the Initial Term
(the "Additional Term"), and the Initial Term together
with the Additional Term shall be referred to herein as
the "Term," subject to earlier termination in one of the
following ways:"
6. Paragraph 5(b) of the Employment Agreement is amended hereby
to read, in its entirety, as follows:
"(b) Upon completion of the Term and for a period
of five years thereafter, the Association shall indemnify
and hold Zarb harmless to the fullest extent permitted by
applicable law with regard to any action or inaction of
Zarb as an officer, director or employee of the
Association or as a fiduciary of any benefit plan of the
Association; and further upon completion of the Term and
for a period of five years thereafter, Zarb shall be
entitled to receive at the Association's expense: (i) the
full-time and exclusive use of an automobile of his
choice and driver; (ii) appropriate office and
secretarial services; (iii) payment or reimbursement of
dues, initiation and other fees and charges for various
clubs in the New York City and/or Washington, D.C.,
metropolitan areas upon presentation of appropriate
receipts or other documentation (in the case of this
clause (iii), not exceeding $20,000 for any year); (iv)
upon presentation of appropriate receipts or vouchers in
a manner consistent with the expense substantiation
policy of the Association generally applicable to its
executive officers and in accordance with the provisions
of such policy regarding the timing and amount of expense
reimbursements, payment or reimbursement of reasonable
business-related expenses incurred, including, but not
limited to, expenses for such items as entertainment,
travel, hotels, and meals, as well as for the travel,
hotel, and meals of Zarb's wife on those occasions when
the proper representation of the Association makes it
advisable for her to accompany him, provided that in the
case of travel, hotel, and meals for Zarb's wife, the
reimbursements provided under this clause (iv) shall
include such amounts as may be necessary for Zarb to pay
any taxes imposed with respect to such reimbursements
(which amounts shall be paid to Zarb by January 31 of the
year following the year in which the expenses were
incurred); (v) an appropriate efficiency apartment in the
Washington D.C. metropolitan area; (vi) an appropriate
corporate apartment in the Borough of Manhattan, New York
City; (vii) to ensure the personal safety of Zarb and his
wife, at such times and as reasonably required by the
circumstances, a personal bodyguard for Zarb and his wife
and/or surveillance of his personal residences and/or
other reasonable method of security; (viii) a T1-line
telephone system connected to the telephone system of the
Association and appropriate maintenance thereof and a
home security system in each of his residences in the New
York City metropolitan area and Florida; and (ix)
reimbursement of Zarb for the annual expenses he incurs
for personal financial and tax counseling, provided that
the amount of such reimbursement for any calendar year
shall not exceed $50,000; (x) reimbursement of Zarb for
any legal fees and expenses incurred in the negotiation
of this Agreement, provided that the amount of such
reimbursement for any calendar year shall not exceed
$20,000, and, in the event of any dispute between Zarb
and the Association under this Agreement which is wholly
or partly resolved in Zarb's favor, reimbursement of Zarb
for reasonable legal fees and expenses incurred in
connection with such dispute, provided that the
reimbursement provided under this clause (x) shall
include such amounts as may be necessary for Zarb to pay
any taxes imposed with respect to such reimbursements;
and (xi) an annual consulting fee of $100,000, which
shall be payable during the year in approximately equal
periodic installments as may be agreed upon by the
Association and Zarb; and provided further that Zarb's
receipt of the benefits described in this subparagraph
(b) shall be contingent upon Zarb's agreement to make
himself available to provide the consulting services set
forth in subparagraph (c) below."
7. Paragraphs 5(c) and (d) of the Employment Agreement are
further amended hereby to read, in their entirety, as
follows:
"(c) Upon completion of the Term and in
consideration of the Association's agreement to provide
the benefits described in subparagraph (b) above, Zarb
agrees to make himself available for a period of five
years thereafter upon reasonable prior notice to provide
consulting services to the Chief Executive Officer of the
Association on matters relating to the nature and scope
of his duties during the Term; provided, however, that in
no event shall Zarb be required to provide such
consulting services for more than 100 hours during any 12
month period (including travel time associated with such
consulting services).
(d) Notwithstanding the foregoing, the obligations
of the Association and Zarb under subparagraphs (b) and
(c) above shall cease prior to the end of the five year
period reflected in subparagraph (c) if Zarb commences
employment with another employer (or if Zarb becomes
re-employed by the Association)."
8. The first sentence of Paragraph 10(b) of the Employment
Agreement is hereby amended to read in its entirety as
follows:
"(b) If Zarb transfers his principal residence
from the Washington, D.C., metropolitan area to the New
York City metropolitan area in connection with his
employment under this Agreement, the Association shall
reimburse Zarb for: (i) moving expenses (within the
meaning of Section 217(b) of the Internal Revenue Code)
incurred in connection with the establishment of his
principal residence in the New York City metropolitan
area and the establishment of any interim residence in
the New York City metropolitan area prior to the
establishment of his principal residence; (ii) airfare
expenses incurred by Zarb and Zarb's wife in connection
with locating and establishing such residences in the New
York City metropolitan area; (iii) the cost of installing
and maintaining a T1-line telephone system connected to
the telephone system of the Association and, to ensure
his personal safety, the cost of installing and
maintaining a home security system in each of his
residences in the New York City metropolitan area and
Florida (if recommended by an independent security
study); (iv) the cost of an appropriate efficiency
apartment in the Washington D.C., metropolitan area
during the remaining Term; and (v) the cost of an
appropriate corporate apartment in the Borough of
Manhattan, New York City during the remaining Term."
9. Paragraph 12 of the Employment Agreement is hereby amended
to read, in its entirety, as follows:
"The Association shall reimburse Zarb for the
annual expenses he incurs for personal financial and tax
counseling, provided that the amount of such
reimbursement for any calendar year shall not exceed
$50,000."
10. All of the terms and conditions of the Employment Agreement
as amended by this Instrument of Amendment shall remain in
full force and effect throughout the term thereof and, to
the extent applicable, for five years thereafter.
IN WITNESS WHEREOF, the corporate party hereto has caused this
Instrument of Amendment to be duly executed and delivered on the date
indicated below, and the individual party hereto has executed and delivered
this Instrument of Amendment on the date indicated below, effective for all
purposes on November 1, 2000.
NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC.
_____________________ By_____________________________
Date Chairman of the Management
Compensation Committee
(Corporate Seal)
- --------------------- -------------------------------
Date Frank G. Zarb
Exhibit 10.17
INSTRUMENT OF AMENDMENT
INSTRUMENT OF AMENDMENT effective as of April 25, 2001 (the
"Amendment"), between NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (the
"Association"), The Nasdaq Stock Market, Inc. (the "Nasdaq") and FRANK G.
ZARB ("Zarb") to the employment agreement effective on February 24, 1997,
as subsequently amended effective March 18, 1998, August 20, 1999, March
30, 2000, July 27, 2000 and November 1, 2000, between the Association and
Zarb (the "Employment Agreement").
W I T N E S S E T H:
WHEREAS, the Association and Zarb have entered into the Employment
Agreement;
WHEREAS, Paragraph 26 of the Employment Agreement provides that
the Employment Agreement may be amended by the mutual consent of the
parties which consent must be evidenced by a document executed with the
same formality as the Employment Agreement;
WHEREAS, the Association, Zarb and the Nasdaq wish to modify the
Employment Agreement so that the Nasdaq is a party to the Employment
Agreement; and
WHEREAS, the Association, the Nasdaq and Zarb wish to modify the
Employment Agreement in order to more clearly express the intention to
provide Zarb with certain benefits upon the relinquishment of his duties
and positions as Chairman and Chief Executive Officer of the Association,
and, in addition, to amend the Employment Agreement as otherwise provided
herein.
NOW, THEREFORE, it is agreed that the Employment Agreement is
hereby amended in the following manner:
1. Paragraph 1(b) of the Employment Agreement is hereby amended
to read, in its entirety, as follows:
"(b) The foregoing subparagraph (a) of this
Paragraph 1 to the contrary notwithstanding, Zarb shall
relinquish his duties or positions as Chairman and Chief
Executive Officer of the Association during the
Additional Term (as hereinafter defined) if, his
successor being duly appointed, the Association and Zarb
mutually determine that such relinquishment may
facilitate his successor's transition to such office;
however, neither such relinquishment nor Zarb's
relinquishment of his duties or positions as Chairman and
Chief Executive Officer of The Nasdaq Stock Market, Inc.
shall be considered a termination of the Term and shall
have no effect on the Association's obligation (i) to
continue to pay and provide Zarb the compensation and
benefits otherwise provided for in this Agreement for the
remainder of the Term, including, but not limited to,
accruing benefits under the Supplemental Retirement Plan
or (ii) effective February 24, 2002, to pay and provide
the compensation and benefits to which Zarb would have
been entitled upon completion of the Term if he had not
earlier relinquished his duties or positions pursuant to
this Paragraph 1(b). Zarb agrees to make himself
available for the balance of the Term upon reasonable
prior notice to provide services to the Association on
matters relating to the nature and scope of his duties
prior to relinquishment of his duties or positions
pursuant to this Paragraph 1(b)."
2. Paragraph 2(a) of the Employment Agreement is hereby amended
by replacing the last sentence thereof with the following:
"Furthermore, The Nasdaq Stock Market, Inc. (the
"Nasdaq") shall fully vest all stock options granted to
Zarb upon the earlier of (i) the termination of the Term
or (ii) Zarb's relinquishment of his position and duties
pursuant to Paragraph 1(b) and shall permit the exercise
of the options during the three (3) month period
thereafter for incentive stock options (as defined in
Section 422 of the Internal Revenue Code of 1986, as
amended) and during the five (5) year period thereafter
for all other stock options. Also, the Nasdaq shall cause
all restrictions on any restricted stock awarded to Zarb
by the Nasdaq to lapse upon the earlier of (i) the
termination of the Term or (ii) Zarb's relinquishment of
his position and duties pursuant to Paragraph 1(b)."
3. Paragraph 5(a) of the Employment Agreement is hereby amended
to read in its entirety as follows:
"(a) Zarb shall be a "Grandfathered Participant"
in the National Association of Securities Dealers, Inc.
Supplemental Executive Retirement Plan (the "Supplemental
Retirement Plan") (capitalized terms used in this
Paragraph 5(a), but not otherwise defined in this
Agreement shall have the meanings given such terms in the
Supplemental Retirement Plan). Upon completion of the
Initial Term or as otherwise provided in Paragraphs 6 or
7, Zarb shall be entitled to a Retirement Benefit, as if
he has fully satisfied the Supplemental Retirement Plan's
eligibility and vesting requirements for a full
Retirement Benefit. Such Retirement Benefit shall be
equal to six percent (6%) of Zarb's Final Average
Compensation multiplied by the number of Years of Service
attained by Zarb through February 24, 2002, or his
earlier termination of employment other than as a result
of his relinquishment of his position and duties pursuant
to Paragraph 1(b) hereof, less any vested benefit that he
accrued under the NASD Retirement Plan. Zarb's Final
Average Compensation, for purposes of the Supplemental
Retirement Plan, shall be computed for the entire period
of his actual service with the Association, including
service after his relinquishment of his position and
duties pursuant to Paragraph 1(b) hereof. Notwithstanding
the foregoing to the contrary, Zarb's Retirement Benefit
as aforesaid shall not be less than the supplemental
retirement benefit to which he would have been entitled
upon his termination of employment under the terms of
this Agreement as in effect immediately following the
amendment of this Agreement dated March 18, 1998. Except
as otherwise provided in Paragraph 6 or 7, Zarb shall not
be entitled to receive any Retirement Benefit under this
Paragraph 5(a) if his employment with the Association
terminates prior to his completion of the Initial Term.
The Association shall pay the Retirement Benefit to Zarb
in a lump-sum (i) within fifteen (15) days after February
24, 2002, (ii) within fifteen (15) days after his earlier
termination of employment other than as a result of his
relinquishment of his position and duties pursuant to
Paragraph 1(b) hereof, or (iii) at such other time as
provided in Paragraph 6 or 7."
4. Paragraph 5(b) of the Employment Agreement is hereby amended
to read in its entirety as follows:
"On February 24, 2002, unless Zarb earlier
terminates his employment, other than as a result of his
relinquishment of his position and duties pursuant to
Paragraph 1(b) hereof, and for a period of five years
thereafter, (X) the Association and the Nasdaq shall
indemnify and hold Zarb harmless to the fullest extent
permitted by applicable law with regard to any action or
inaction of Zarb as an officer, director, employee or
consultant of the Association or the Nasdaq or as a
fiduciary of any benefit plan of the Association or the
Nasdaq and (Y) Zarb shall be entitled to receive at the
Nasdaq's expense: (i) the full-time and exclusive use of
an automobile of his choice and driver; (ii) appropriate
office and secretarial services; (iii) payment or
reimbursement of dues, initiation and other fees and
charges for various clubs in the New York City and/or
Washington, D.C., metropolitan areas upon presentation of
appropriate receipts or other documentation (in the case
of this clause (iii), not exceeding $20,000 for any
year); (iv) upon presentation of appropriate receipts or
vouchers in a manner consistent with the expense
substantiation policy of the Nasdaq generally applicable
to its executive officers and in accordance with the
provisions of such policy regarding the timing and amount
of expense reimbursements, payment or reimbursement of
reasonable business-related expenses incurred, including,
but not limited to, expenses for such items as
entertainment, travel, hotels, and meals, as well as for
the travel, hotel, and meals of Zarb's wife on those
occasions when the proper representation of the Nasdaq
makes it advisable for her to accompany him, provided
that in the case of travel, hotel, and meals for Zarb's
wife, the reimbursements provided under this clause (iv)
shall include such amounts as may be necessary for Zarb
to pay any taxes imposed with respect to such
reimbursements (which amounts shall be paid to Zarb by
January 31 of the year following the year in which the
expenses were incurred); (v) an appropriate efficiency
apartment in the Washington D.C. metropolitan area; (vi)
an appropriate corporate apartment in the Borough of
Manhattan, New York City; (vii) to ensure the personal
safety of Zarb and his wife, at such times and as
reasonably required by the circumstances, a personal
bodyguard for Zarb and his wife and/or surveillance of
his personal residences and/or other reasonable method of
security; (viii) a T1-line telephone system connected to
the telephone system of the Nasdaq and appropriate
maintenance thereof and a home security system in each of
his residences in the New York City metropolitan area and
Florida; and (ix) reimbursement of Zarb for the annual
expenses he incurs for personal financial and tax
counseling, provided that the amount of such
reimbursement for any calendar year shall not exceed
$50,000; (x) reimbursement of Zarb for any legal fees and
expenses incurred in the negotiation of this Agreement,
provided that the amount of such reimbursement for any
calendar year shall not exceed $20,000, and, in the event
of any dispute between Zarb and the Association and/or
the Nasdaq under this Agreement which is wholly or partly
resolved in Zarb's favor, reimbursement of Zarb for
reasonable legal fees and expenses incurred in connection
with such dispute, provided that the reimbursement
provided under this clause (x) shall include such amounts
as may be necessary for Zarb to pay any taxes imposed
with respect to such reimbursements; and (xi) an annual
consulting fee of $100,000, which shall be payable during
the year in approximately equal periodic installments as
may be agreed upon by the Nasdaq and Zarb; and provided
further that Zarb's receipt of the benefits described in
clause (Y) of this subparagraph (b) shall be contingent
upon Zarb's agreement to make himself available to
provide the consulting services set forth in subparagraph
(c) below."
5. Paragraph 5(c) of the Employment Agreement is hereby amended
to read in its entirety as follows:
"On February 24, 2002, unless Zarb earlier
terminates his employment, other than as a result of his
relinquishment of his position and duties pursuant to
Paragraph 1(b) hereof, and in consideration of the
Nasdaq's agreement to provide the benefits described in
clause (Y) of subparagraph 5(b) above, Zarb agrees to
make himself available for a period of five years
thereafter upon reasonable prior notice to provide
consulting services to the Chief Executive Officer of the
Nasdaq on matters relating to the nature and scope of his
duties during the Term; provided, however, that in no
event shall Zarb be required to provide such consulting
services for more than 100 hours during any
12-month-period (including travel time associated with
such consulting services).
6. All of the terms and conditions of the Employment Agreement
as amended by this Instrument of Amendment shall remain in
full force and effect throughout the Term thereof.
IN WITNESS WHEREOF, the corporate party hereto has caused this
Instrument of Amendment to be duly executed and delivered on the date
indicated below, and the individual party hereto has executed and delivered
this Instrument of Amendment on the date indicated below, effective for all
purposes on April 25, 2001.
NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC.
_____________________ By_____________________________
Date Chairman of the Management
Compensation Committee
(Corporate Seal)
The Nasdaq Stock Market, Inc.
_____________________ By_____________________________
Date Chairman of the Management
Compensation Committee
(Corporate Seal)
- --------------------- -------------------------------
Date Frank G. Zarb
Exhibit 10.18
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made and entered into effective as
of December 29, 2000 by and between The Nasdaq Stock Market, Inc. (the
"Company") and Patrick Campbell (the "Executive").
WHEREAS, the Company desires to continue to employ the
Executive and to enter into an agreement embodying the terms of such
employment and considers it essential to its best interests and the best
interests of its stockholders to foster the continued employment of the
Executive by the Company during the term of the Agreement;
WHEREAS, the Executive desires to accept such employment
and enter into such an agreement; and
WHEREAS, the Executive is willing to accept employment on
the terms hereinafter set forth in this agreement (the "Agreement").
NOW, THEREFORE, in consideration of the premises and
mutual covenants herein and for other good and valuable consideration, the
parties hereby agree as follows:
1. Term of Employment. Subject to Section 9, the term of
the Executive's employment under this Agreement shall commence on December
30, 2000 (the "Effective Date") and shall end on December 31, 2003;
provided however, that such term shall be automatically extend for
additional one year (1) year periods unless, not later than six (6) months
prior to the expiration of the initial period (or any extension thereof
pursuant to this Section 1), either party hereto shall provide written
notice of its or his desire not to extend the term hereof to the other
party hereto (the initial period together with each one-year extension
shall be referred to hereinafter as the "Employment Term").
2. Position.
(a) The Executive shall serve as the President Nasdaq
U.S. Markets. In such position, the Executive shall have such duties and
authority as shall be determined from time to time by the Board of
Directors of the Company (the "Board") or the Chief Executive Officer (the
"CEO") of the Company or it or his designee. During the Employment Term,
the Executive shall devote his full time and best efforts to his duties
hereunder; provided however, that nothing in this Agreement shall preclude
the Executive from (i) engaging in personal activities involving
charitable, community, educational, religious or similar organizations,
(ii) managing his personal investments and affairs to the extent that such
activities are not in any manner inconsistent with or in conflict with the
performance of the Executive's duties hereunder and (iii) continuing to
serve as a member of the board of directors or board of advisors of the
entities set out on Schedule A annexed hereto. Pursuant to the Company's
Code of Conduct, the Executive shall be required to: (i) disclose to the
Audit Committee the names of the board of directors on which he currently
serves and (ii) obtain prior approval from the Audit Committee for service
as a new director of any publicly traded company. The Executive agrees to
accept the final Audit Committee decision on the suitability of all present
and future directorships as binding.
3. Base Salary. During the Employment Term, the Company
shall pay the Executive annual base salary (the "Base Salary") at the
annual rate no less than the rate of base salary in effect as of the
Effective Date. Base Salary shall be payable in regular installments in
accordance with the Company's usual payroll practices. The Management
Compensation Committee of the Board (the "Compensation Committee") shall
review Base Salary for the purpose of increasing it in accordance with its
normal review procedures.
4. Incentive Compensation/Bonus. With respect to each
calendar year during the Employment Term the Company shall pay to the
Executive such incentive compensation (hereinafter the "Incentive
Compensation") as the Compensation Committee may award in its discretion,
with a guarantee of 100% of Base Salary determined as of the December 31st
of the preceding year for each of the 2001, 2002 and 2003 calendar years.
Incentive Compensation shall be pro rated for any employment during a
calendar year of less than twelve (12) months (determined by the ratio that
the number days during which the Executive was employed during a calendar
year bears to 365). Incentive Compensation for each calendar year shall be
paid at the same time as the Company pays Incentive Compensation awards to
other executives, but in no event later than the March 1st following the
calendar year with respect to which the Incentive Compensation relates.
5. Employee Benefits.
(a) Employee Benefits-Generally. During the Employment
Term, the Executive shall be provided with benefits on the same basis as
benefits are generally made available to other senior executives of the
Company, including without limitation, medical, dental, vision, disability,
life insurance and pension benefits. The Executive shall be entitled to
four (4) weeks paid vacation.
(b) SERP Enhancements. The Executive shall be entitled to
continue to participate in the NASD Supplemental Executive Retirement Plan
(the "SERP"). Notwithstanding any term or condition contained in the SERP
to the contrary:
(i) Section 4.1 of the SERP shall be applied as if
the age and service requirements stated therein were age 55 and five (5)
years of service rather than age 55 and ten (10) years of service.
Accordingly, the Executive shall be 100% vested in his accrued SERP benefit
upon the later of his attainment of age 55 while employed and his
completion of five (5) years of service.
(ii) Section 4.1 of the SERP shall be applied as if
the age and service requirements stated therein were satisfied upon the
Executive's termination of employment prior to the end of the Employment
Term (x) on account of his death or Disability (as defined in Section 9(b)
hereof), (y) by the Company without Cause pursuant to Section 9(c) hereof,
or (z) by the Executive for Good Reason pursuant to Section 9(c) hereof.
Accordingly, under such circumstances the Executive shall be 100% vested in
his SERP benefit even if his employment terminates prior to his attaining
age 55 and having completed five (5) years of service with the Company.
(iii) The death benefit provided in Section 5.1 of
the SERP shall become payable if the Executive dies before his SERP benefit
commences, but after having satisfied the requirements of Section 4.1 of
the SERP as modified by Section 5(b)(i) or (ii) (and if the foregoing
conditions are satisfied, such death benefit will be payable even if the
Executive's death occurs after he has left employment with the Company with
vested SERP rights, but before the SERF benefit commences).
(iv) Section 4.3 of the SERP (relating to early
retirement) shall be applied as if the service requirement stated therein
were five (5) years of service rather than ten (10) years of service;
provided, that this special rule shall not permit the Executive's SERP
benefit to start earlier than age 55.
(v) The special provisions of this Section 5(b) shall
not accelerate the rate at which the SERP benefit accrues so that the
amount of the accrued SERP benefit shall be determined with reference to an
accrual over a period of 3,650 days as provided in Section 4.2(a) of the
SERP.
6. Equity. The Executive shall be granted pursuant to The
Nasdaq Stock Market, Inc. Equity Compensation Plan (the "Stock Plan") which
has been adopted by the Board and may from time to time be amended, options
to purchase shares of the Company's common stock in a number commensurate
with the Executive's title and responsibility (subject to applicable
adjustments pursuant to Section 4(b) of the Stock Plan), with a term of ten
(10) years from the date of grant and an option exercise price equal to
fair market value of the Company's common stock on the date of grant. Such
option shall be subject to all the terms and conditions of the Stock Plan,
and a stock option agreement to be entered into by and between the Company
and the Executive.
7. Fringe Benefits.
(a) Business Expenses. During the Employment
Term, reasonable business expenses incurred by the Executive in the
performance of his duties hereunder shall be reimbursed by the Company in
accordance with the policy established by the Compensation Committee.
Accordingly, the Executive's expenses associated with business travel shall
be reimbursed by the Company in accordance with such policy, and where
appropriate the Executive's spouse shall be permitted to travel with the
Executive and the Executive shall be similarly reimbursed for the cost of
his spouse's travel.
(b) Transportation and Housing.
(i) During the Employment Term, in accordance
with the directives of the Compensation Committee, the Executive shall be
provided with reasonable transportation for business purposes while in New
York City and/or Washington, D.C.
(ii) During the Employment Term, the Company
shall provide the Executive with either (A) financial assistance in
purchasing (or renting) a residence in the New York metropolitan area, (B)
the use of a corporate apartment in New York City or (C) a housing
allowance; provided, however, that with respect to each calendar year
during the Employment Term the provision of benefits described in this
Section 7(b)(ii) (the "Housing Program") shall not exceed 15% of the sum of
the Executive's Base Salary and Incentive Bonus with respect to such
calendar year. All such benefits provided under the Housing Program shall
be subject to the prior approval and consent of the Board or a Committee,
thereof.1
(c) Legal Fees. The Company shall pay or
reimburse the Executive for his reasonable legal fees and
expenses incurred in connection with the negotiation and execution of this
Agreement upon presentation by the Executive of written invoices or
receipts setting forth in reasonable detail the basis for such legal fees
and expenses.
8. Stay Pay. Subject to the Executive's employment with
the Company on August 9, 2002 (the "Stay Pay Date"), the Company shall pay
the Executive an additional bonus equal to two (2) times his Base Salary as
in effect on the Stay Pay Date (the "Stay Pay Bonus"); provided, however,
that the Executive's earlier death or Disability (as defined in Section
9(c) hereof) while employed or termination pursuant to Section 9(c) hereof
shall also be a Stay Pay Date. The Stay Pay Bonus shall be paid in a lump
sum within 30 business days following the Stay Pay Date. The Company and
the Executive may at the end of initial Employment Term without regard to
any extension thereof pursuant to the last sentence of Section 1 hereof,
agree to an additional stay payment in consideration of the renewal of the
Employment Term at such time.
9. Termination. Notwithstanding any other provision of
the Agreement:
(a) For Cause by the Company. The Employment
Term and the Executive's employment hereunder may be terminated by the
Company for "Cause." For purposes of the Agreement, "Cause" shall mean (i)
the Executive's conviction of, or pleading nolo contendere to, a felony,
(ii) the Executive's conviction of, or pleading nolo contendere to, any
crime, whether a felony or misdemeanor, involving the purchase or sale of
any security, mai1 or wire fraud, theft, embezzlement, moral turpitude or
Company property; (iii) the Executive's gross neglect of his duties
hereunder or (iv) the Executive's willful misconduct in connection with the
performance of his duties hereunder or any other material breach by the
Executive of this Agreement; provided, however that the Executive shall not
be deemed to have been terminated for Cause unless (i) reasonable notice
has been delivered to him setting forth the reasons for the Company's
intention to terminate him for Cause and (ii) a period of thirty (30) days
has elapsed since delivery of such notice. If the Executive is terminated
for Cause, he shall be entitled to receive his Base Salary through the date
of termination. Upon termination of the Executive's employment for Cause
pursuant to this Section 9(a), the Executive shall have no further rights
to any compensation (including any Incentive Compensation or Stay Pay
Bonus) or any other benefits under the Agreement. All other benefits, if
any, due the Executive following the Executive's termination of employment
pursuant to this Section 9(a) shall be determined in accordance with the
plans, policies and practices of the Company.
- -------- 1
The actual form of housing assistance will be worked
out with outside advisers to determine an appropriate package for the
Executive consistent with corporate practice in New York City and the
Executive's individual needs.
(b) Disability or Death. The Employment Term and
the Executive's employment hereunder shall terminate upon his death and the
Company may terminate the Executive if he becomes physically or mentally
incapacitated and is therefore unable for a period of 45 consecutive
working days or 75 working days in a six (6) month period to perform his
duties (such incapacity is hereinafter referred to as "Disability"). Any
question as to the existence of the Disability of the Executive as to which
the Executive and the Company cannot agree shall be determined in writing
by a qualified independent physician mutually acceptable to the Executive
and the Company. If the Executive and the Company cannot agree as to a
qualified independent physician, each shall appoint such a physician and
those two physicians shall select a third who shall make such determination
in writing. The determination of Disability made in writing to the Company
and the Executive shall be final and conclusive for all purposes of this
Agreement.
Upon termination of the Executive's employment hereunder
for either Disability or death, the Executive or his estate (as the case
may be) shall be entitled to receive (i) any accrued but unpaid Base Salary
through the end of the month in which such termination occurs, (ii) all
unpaid Base Salary for the remainder of the Employment Term, (iii) all
unpaid Annual Incentive Compensation for the remainder of the Employment
Term, (iv) the Stay Pay Bonus provided by Section 8 hereof if not already
paid and (v) all other current cash obligation of the Company to the
Executive (e.g. unused vacation). All other benefits, if any, due the
Executive following termination pursuant to this Section 9(b) shall be
determined in accordance with the plans, policies and practices of the
Company; provided, however, that the Executive shall not participate in any
other severance plan, policy or program of the Company.
(c) Termination by the Executive for Good Reason
or by the Company without Cause. The Employment Term and the Executive's
employment hereunder may be terminated by the Executive for "Good Reason"
as defined below upon not less than thirty (30) days written notice to the
Company. For purposes of this Agreement "Good Reason" shall mean the
Company (i) reducing the Executive's position, duties, or authority, (ii)
failing to secure the agreement of any successor entity to the Company that
the Executive shall continue in this position without reduction in
position, duties or authority, (iii) committing any other material breach
of this Agreement which is not remedied by the Company (if capable of
remedy) within thirty (30) days after receiving notice thereof from the
Executive or (iv) the Company providing notice of nonrenewal of the
Employment Term in accordance with Section 1 hereof.
If the Executive's employment is terminated by the
Company without "Cause" (other than by reason of his Disability or death)
or the Executive terminates this Agreement for Good Reason, the Executive
shall be entitled to receive: (i) any accrued but unpaid Base Salary
through the date of such termination, (ii) the Stay Pay Bonus provided by
Section 8 hereof if not already paid, (iii) all other current cash
obligations of the Company to the Executive (e.g. unused vacation) and (iv)
a prorata portion of the Incentive Compensation due the Executive pursuant
to Section 4 and calculated in accordance with Section 4. In addition, the
Executive shall be entitled to receive his Base Salary and Incentive
Compensation through the later of (i) the balance of the Term or (ii)
twenty-four months from the date of such termination (the "Severance
Period"). Such severance shall be paid in a lump sum within thirty (30)
days following the termination date. The Company shall provide continued
health coverage at its expense for the Severance Period. All other
benefits, if any, due the Executive following termination pursuant to this
Section 9(c) shall be determined in accordance with the plans, policies and
practices of the Company; provided, however, that the Executive shall not
participate in any severance plan, policy or program of the Company.
(d) Termination by the Executive without Good
Reason. The Employment Term and the Executive's employment hereunder may be
terminated by the Executive for any reason upon 60 days notice to the
Company. Upon a termination by the Executive pursuant to this Section 9(d)
the Executive shall be entitled to his Base Salary through the date of such
termination. Upon termination of the Executive pursuant to this Section
9(d), the Executive shall have no further rights, other than those set
forth in this Section 9(d), to any compensation or any other benefits under
the Agreement. All other benefits, if any, due the Executive following
termination pursuant to this Section 9(d) shall be determined in accordance
with the plans, policies and practices of the Company; provided, however,
that the Executive shall not participate in any severance plan, policy or
program of the Company.
(e) Mitigation/Offset. Following the termination
of his employment under any of the above clauses of this Section 9, the
Executive shall have no obligation or duty to seek subsequent employment or
engagement as an employee (including self employment) or as a consultant or
otherwise mitigate the Company's obligations hereunder; nor shall the
payments provided by this Section 9 be reduced by the compensation earned
by the Executive, as an employee or consultant from such subsequent
employment or consultancy.
(f) Excise Tax Payments.
(i) Gross-Up Payment. If it shall be
determined that any payment or distribution of any type to or in respect of
the Executive, by the Company, or any other person, whether paid or payable
or distributed or distributable pursuant to the terms of the Agreement or
otherwise (the "Total Payments"), is or will be subject to the excise tax
imposed by Section 4999 of the Internal Code of 1986, as amended (the
"Code") or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, are collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes) imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Total Payments.
(ii) Determination by Accountant.
(A) All computations and determinations
relevant to this Section 9(f) shall be made by a national accounting firm
selected by the Company from among the five (5) largest accounting firms in
the United States (the "Accounting Firm") which firm may be the Company's
accountants. Such determinations shall include whether any of the Total
Payments are "parachute payments" (within the meaning of Section 280G of
the Code). In making the initial determination hereunder as to whether a
Gross-Up Payment is required the Accounting Firm shall determine that no
Gross-Up Payment is required, if the Accounting Firm is able to conclude
that no "Change of Control" has occurred (within the meaning of Section
280G of the Code) on the basis of "substantial authority" (within the
meaning of Section 6230 of the Code) and shall provide opinions to that
effect to both the Company and the Executive. If the Accounting Firm
determines that a Gross-Up Payment is required, the Accounting Firm shall
provide its determination (the "Determination"), together with detailed
supporting calculations regarding the amount of any Gross-Up Payment and
any other relevant matter both to the Company and the Executive by no later
than ten (10) days following the Termination Date, if applicable, or such
earlier time as is requested by the Company or the Executive (if the
Executive reasonably believes that any of the Total Payments may be subject
to the Excise Tax). If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall furnish the Executive and the Company
with a written statement that such Accounting Firm has concluded that no
Excise Tax is payable (including the reasons therefor) and that the
Executive has substantial authority not to report any Excise Tax on his
federal income tax return.
(B) If a Gross-Up Payment is determined
to be payable, it shall be paid to the Executive within twenty (20) days
after the Determination (and all accompanying calculations and other
material supporting the Determination) is delivered to the Company by the
Accounting Firm. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive, absent manifest error.
(C) As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments not made by the Company should have been made
("Underpayment"), or that Gross-Up Payments will have been made by the
Company which should not have been made ("Overpayments"). In either such
event, the Accounting Firm shall determine the amount of the Underpayment
or Overpayment that has occurred. In the case of an Underpayment, the
amount of such Underpayment (together with any interest and penalties
payable by the Executive as a result of such Underpayment) shall be
promptly paid by the Company to or for the benefit of the Executive.
(D) In the case of an Overpayment, the
Executive shall, at the direction and expense of the Company, take such
steps as are reasonably necessary (including the filing of returns and
claims for refund), follow reasonable instructions from, and procedures
established by, the Company, and otherwise reasonably cooperate with the
Company to correct such Overpayment, provided, however, that (i) the
Executive shall not in any event be obligated to return to the Company an
amount greater than the net after-tax portion of the Overpayment that he
has retained or has recovered as a refund from the applicable taxing
authorities and (ii) this provision shall be interpreted in a manner
consistent with the intent of Section 9(f)(i), which is to make the
Executive whole, on an after-tax basis, from the application of the Excise
Taxes, it being acknowledged and understood that the correction of an
Overpayment may result in the Executive repaying to the Company an amount
which is less than the Overpayment.
(E) The Executive shall notify the
Company in writing of any claim by the Internal Revenue Service relating to
the possible application of the Excise Tax under Section 4999 of the Code
to any of the payments and amounts referred to herein and shall afford the
Company, at its expense, the opportunity to control the defense of such
claim.
10. Non-Competition/Confidentiality. (a) The Executive
acknowledges and recognizes the highly competitive nature of the businesses
of the Company and accordingly agrees as follows:
(a) During the Employment Term and for a period
of one (1) year following the earlier of (i) the expiration of the
Employment Term and (ii) the date the Executive ceases to be employed by
the Company (the "Restricted Period"), the Executive will not directly or
indirectly, (A) engage in any "Competitive Business" (as defined below) for
the Executive's own account, (B) enter the employ of, or render any
services to, any person engaged in a Competitive Business, (C) acquire a
financial interest in, or otherwise become actively involved with, any
person engaged in a Competitive Business, directly or indirectly, as an
individual, partner, shareholder, officer, director, principal, agent,
trustee or consultant, or (D) interfere with business relationships
(whether formed before or after the date of the Agreement) between the
Company and customers or suppliers of the Company. For purposes of this
Agreement Competitive Business shall mean (i) any national securities
exchange registered with the Securities and Exchange Commission, (ii)
Electronic Communications Network or (iii) any other entity that engages in
substantially the same business as the Company.
(b) Notwithstanding anything to the contrary in
the Agreement, the Executive may, directly or indirectly own, solely as an
investment, securities of any person engaged in the business of the Company
which are publicly traded on a national or regional stock exchange or on
the over-the-counter market if the Executive (A) is not a controlling
person of, or a member of a group which controls, such person and (B) does
not, directly or indirectly, own 5% or more of any class of securities of
such person.
(c) During the Restricted Period, the Executive
will not, directly or indirectly, solicit or encourage to cease to work
with the Company any consultant or employee then under contract or employed
by or with the Company.
(d) The Executive hereby agrees that he will
comply with the Company's general policies regarding confidentiality.
Without in any way limiting the foregoing sentence, the Executive further
agrees that he will not, at any time during or after the Employment Term,
make use of or divulge to any other person, firm or corporation any trade
or business secret, process, method or means, or any other confidential
information concerning the business or policies of the Company, which he
may have learned in connection with his employment. For purposes of this
Agreement, a "trade or business secret, process, method or means, or any
other confidential information" shall mean and include written information
treated as confidential or as a trade secret by the Company. The
Executive's obligation under this Section 10(d) shall not apply to any
information which (i) is known publicly; (ii) is in the public domain or
hereafter enters the public domain without the fault of the Executive;
(iii) is known to the Executive prior to his receipt of such information
from the Company, as evidenced by written records of the Executive or (iv)
is hereafter disclosed to the Executive by a third party not under an
obligation of confidence to the Company. The Executive agrees not to remove
from the premises of the Company, except as an employee of the Company in
pursuit of the business of the Company or except as specifically permitted
in writing by the Board, any document or other object containing or
reflecting any such confidential information. The Executive recognizes that
all such documents and objects, whether developed by him or by someone
else, will be the sole exclusive property of the Company. Except as
specifically authorized by the Board upon termination of his employment
hereunder, the Executive shall forthwith deliver to the Company all such
confidential information, including without limitation all lists of
customers, correspondence, accounts, records and any other documents
(whether or not electronically or digitally produced) or property made or
held by him or under his control in relation to the business or affairs of
the Company, and no copy of any such confidential information shall be
retained by him.
(e) It is expressly understood and agreed that
although the Executive and the Company consider the restrictions contained
in this Section 10 to be reasonable, if a final judicial determination is
made by a court of competent jurisdiction that the time or territory or any
other restriction contained in the Agreement is an unenforceable
restriction against the Executive, the provisions of the Agreement shall
not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable. Alternatively, if any
court of competent jurisdiction finds that any restriction contained in the
Agreement is unenforceable, and such restriction cannot be amended so as to
make it enforceable, such finding shall not affect the enforceability of
any of the other restrictions contained herein.
11. Nondisparagement. The Executive agrees (whether
during or after the Executive's employment with the Company) not to issue,
circulate, publish or utter any false or disparaging statements, remarks or
rumors about the Company or its shareholders unless giving truthful
testimony under subpoena.
12. Specific Performance. The Executive acknowledges and
agrees that the Company's remedies at law for a breach or threatened breach
of any of the provisions of Section 10 or Section 11 would be inadequate
and, in recognition of this fact, the Executive agrees that, in the event
of such a breach or threatened breach, in addition to any remedies at law,
the Company, without posting any bond, shall be entitled to obtain
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy
which may then be available.
13. Miscellaneous.
(a) Acceptance. The Executive hereby represents
that his performance and execution of the Agreement does not and
will not constitute a breach of any agreement or arrangement to which he is
a party or is otherwise bound, including, without limitation, any
noncompetition or employment agreement.
(b) Governing Law. The Agreement shall be
governed by and construed in accordance with the laws of the State of New
York without regard to conflict of law provisions.
(c) Entire Agreement/Amendments. The Agreement
contains the entire understanding of the parties with respect to the
employment of the Executive by the Company and any and all employment
agreement previously entered into shall be null and void. There are no
restrictions, agreements, promises, warranties, covenants or by and between
the Company and the Executive undertakings between the parties with respect
to the subject matter herein other than those expressly set forth herein.
The Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(d) No Waiver. The failure of a party to insist
upon strictadherence to any term of the Agreement on any
occasion shall not be considered a waiver of such party's rights or deprive
such party of the right thereafter to insist upon strict adherence to that
term or any other term of the Agreement.
(e) Severability. In the event that any one or
more of the provisions of the Agreement shall be or become invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability
of the remaining provisions of the Agreement shall not be affected thereby.
(f) Successor/Assignment. The Agreement is
confidential and personal and neither of the parties hereto shall, without
the consent of the other, assign or transfer this Agreement or any rights
or obligations hereunder. Without limiting the foregoing, the Executive's
right to receive payments hereunder shall not be assignable or transferable
whether by pledge, creation of a security interest or otherwise, other than
a transfer by your will or by the laws of descent distribution. In the
event of any attempted assignment or transfer contrary to this paragraph,
the Company shall have no liability to pay the assignee or transferee any
amount so attempted to be assigned or transferred. The Agreement shall be
binding upon any successor of the Company, its assets, or its business,
subsidiaries, affiliates (whether direct or indirect, by purchase, merger,
consolidation or otherwise). In the event that any successor fails to agree
in writing to assume this Agreement prior to the effective date of such
event, then all entitlements in this Agreement cash or otherwise shall be
immediately payable in full by the Company at such time of event
notwithstanding any other provisions in this Agreement to the contrary.
(g) Notice. For the purpose of the Agreement,
notices and all other communications provided for in the Agreement shall be
in writing and shall be deemed to have been duly given when delivered or
mailed by United States registered mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the execution
page of the Agreement, provided that all notices to the Company shall be
directed to the attention of the Chief Executive Officer or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt.
(h) Withholding Taxes. The Company may withhold
from any amounts payable under the Agreement such Federal, state and local
taxes as may be required to be withheld pursuant to any applicable law or
regulation.
(i) Counterparts. The Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
[Remainder of this page left intentionally blank]
IN WITNESS WHEREOF, the parties hereto have duly executed
the Agreement as of the day and year first above written.
EXECUTIVE
/s/ Patrick Campbell
----------------------------------
Patrick Campbell
THE NASDAQ STOCK MARKET, INC
By: /s/ Frank Zarb
-------------------------------
Frank Zarb
/s/ Todd A. Robinson
----------------------------------
Todd A. Robinson
Chairman, Management Compensation
Committee
Schedule A
Board of Directors and
Board of Advisors Membership
Patrick Campbell
E.F. Wildermuth Foundation
The Nasdaq Investment Products Services
Ohio University Foundation Board
D.C. Charter School Board
Exhibit 10.19
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made and entered into effective as
of December 29, 2000 by and between The Nasdaq Stock Market, Inc. (the
"Company") and John Hilley (the "Executive").
WHEREAS, the Company desires to continue to employ the
Executive and to enter into an agreement embodying the terms of such
employment and considers it essential to its best interests and the best
interests of its stockholders to foster the continued employment of the
Executive by the Company during the term of the Agreement;
WHEREAS, the Executive desires to accept such employment
and enter into such an agreement; and
WHEREAS, the Executive is willing to accept employment on
the terms hereinafter set forth in this agreement (the "Agreement").
NOW, THEREFORE, in consideration of the premises and
mutual covenants herein and for other good and valuable consideration, the
parties hereby agree as follows:
1. Term of Employment. Subject to Section 9, the term of
the Executive's employment under this Agreement shall commence on December
30, 2000 (the "Effective Date") and shall end on December 31, 2003;
provided however, that such term shall be automatically extend for
additional one year (1) year periods unless, not later than six (6) months
prior to the expiration of the initial period (or any extension thereof
pursuant to this Section 1), either party hereto shall provide written
notice of its or his desire not to extend the term hereof to the other
party hereto (the initial period together with each one-year extension
shall be referred to hereinafter as the "Employment Term").
2. Position.
(a) The Executive shall serve as the Company's Executive
Vice President, Strategic Development and Chairman and Chief Executive
Officer of Nasdaq International. In such position, the Executive shall have
such duties and authority as shall be determined from time to time by the
Board of Directors of the Company (the "Board") or the Chief Executive
Officer (the "CEO") of the Company or it or his designee. During the
Employment Term, the Executive shall devote his full time and best efforts
to his duties hereunder; provided however, that nothing in this Agreement
shall preclude the Executive from (i) engaging in personal activities
involving charitable, community, educational, religious or similar
organizations, (ii) managing his personal investments and affairs to the
extent that such activities are not in any manner inconsistent with or in
conflict with the performance of the Executive's duties hereunder and (iii)
continuing to serve as a member of the board of directors or board of
advisors of the entities set out on Schedule A annexed hereto. Pursuant to
the Company's Code of Conduct, the Executive shall be required to: (i)
disclose to the Audit Committee the names of the board of directors on
which he currently serves and (ii) obtain prior approval from the Audit
Committee for service as a new director of any publicly traded company. The
Executive agrees to accept the final Audit Committee decision on the
suitability of all present and future directorships as binding.
3. Annual Salary. During the Employment Term, the Company
shall pay the Executive annual salary (the "Annual Salary") at the annual
rate no less than the rate of Annual Salary in effect for the 1999 calendar
year. Annual Salary shall be payable in regular installments in accordance
with the Company's usual payroll practices. The Management Compensation
Committee of the Board (the "Compensation Committee") shall review Annual
Salary for the purpose of increasing it in accordance with its normal
review procedures.
4. Employee Benefits.
(a) Employee Benefits-Generally. During the Employment
Term, the Executive shall be provided with benefits on the same basis as
benefits are generally made available to other senior executives of the
Company, including without limitation, medical, dental, vision, disability,
life insurance and pension benefits. The Executive shall be entitled to
four (4) weeks paid vacation.
(b) SERP Enhancements. The Executive shall be entitled to
continue to participate in the NASD Supplemental Executive Retirement Plan
(the "SERP"). Notwithstanding any term or condition contained in the SERP
to the contrary:
(i) Section 4.1 of the SERP shall be applied as
if the age and service requirements stated therein were age 55 and five (5)
years of service rather than age 55 and ten (10) years of service.
Accordingly, the Executive shall be 100% vested in his accrued SERP benefit
upon the later of his attainment of age 55 while employed and his
completion of five (5) years of service.
(ii) Section 4.1 of the SERP shall be applied as
if the age and service requirements stated therein were satisfied upon the
Executive's termination of employment prior to the end of the Employment
Term (x) on account of his death or Disability (as defined in Section 9(b)
hereof), (y) by the Company without Cause pursuant to Section 9(c) hereof,
or (z) by the Executive for Good Reason pursuant to Section 9(c) hereof.
Accordingly, under such circumstances the Executive shall be 100% vested in
his SERP benefit even if his employment terminates prior to his attaining
age 55 and having completed five (5) years of service with the Company.
(iii) The death benefit provided in Section 5.1
of the SERP shall become payable if the Executive dies before his SERP
benefit commences, but after having satisfied the requirements of Section
4.1 of the SERP as modified by Section 4(b)(i) or (ii) (and if the
foregoing conditions are satisfied, such death benefit will be payable even
if the Executive's death occurs after he has left employment with the
Company with vested SERP rights, but before the SERP benefit commences).
(iv) Section 4.3 of the SERP (relating to early
retirement) shall be applied as if the service requirement stated therein
were five (5) years of service rather than ten (10) years of service;
provided, that this special rule shall not permit the Executive's SERP
benefit to start earlier than age 55.
(v) The special provisions of this Section 4(b)
shall not accelerate the rate at which the SERP benefit accrues so that the
amount of the accrued SERP benefit shall be determined with reference to an
accrual over a period of 3,650 days as provided in Section 4.2(a) of the
SERP.
(vi) For purposes of determining the Executive's
Final Average Compensation, the Executive's "Compensation" shall be deemed
to be the sum of (x) one-half of his Annual Salary and (y) one-third of
one-half of his Annual Salary.
5. Equity.
(a) The Executive shall be granted pursuant to
The Nasdaq Stock Market, Inc. Equity Compensation Plan (the "Stock Plan")
which has been adopted by the Board and may from time to time be amended,
options to purchase shares of the Company's common stock in a number
commensurate with the Executive's title and responsibility (subject to
applicable adjustments pursuant to Section 4(b) of the Stock Plan), with a
term of ten (10) years from the date of grant and an option exercise price
equal to fair market value of the Company's common stock on the date of
grant. Such option shall be subject to all the terms and conditions of the
Stock Plan, and a stock option agreement to be entered into by and between
the Company and the Executive.
(b) In addition, and notwithstanding anything in
the Agreement to the contrary, the Executive shall be eligible for stock
options and/or equity participation in Nasdaq-Japan, Nasdaq-Europe, and
Nasdaq-Global in the amount and manner provided by Section 3 of the Letter
Agreement entered into by and between the Executive and the National
Association of Securities Dealers, Inc. dated January 21, 2000.
6. Fringe Benefits.
(a) Business Expenses. During the Employment
Term,reasonable business expenses incurred by the Executive in the performance
of his duties hereunder shall be reimbursed by the Company in accordance
with the policy established by the Compensation Committee. Accordingly, the
Executive's expenses associated with business travel shall be reimbursed by
the Company in accordance with such policy, and where appropriate the
Executive's spouse shall be permitted to travel with the Executive and the
Executive shall be similarly reimbursed for the cost of his spouse's
travel.
(b) Transportation and Housing.
(i) During the Employment Term, in
accordance with the directives of the Compensation Committee, the Executive
shall be provided with reasonable transportation for business purposes
while in New York City and/or Washington, D.C.
(ii) During the Employment Term, the
Company shall provide the Executive with either (A) financial assistance in
purchasing (or renting) a residence in the New York metropolitan area, (B)
the use of a corporate apartment in New York City or (C) a housing
allowance; provided, however, that with respect to each calendar year
during the Employment Term the provision of benefits described in this
Section 7(b)(ii) (the "Housing Program") shall not exceed 15% of the sum of
the Executive's Annual Salary with respect to such calendar year. All such
benefits provided under the Housing Program shall be subject to
the prior approval and consent of the Board or a Committee, thereof.(1)
(c) Legal Fees. The Company shall pay or
reimburse the Executive for his reasonable legal fees and expenses incurred
in connection with the negotiation and execution of this Agreement upon
presentation by the Executive of written invoices or receipts setting forth
in reasonable detail the basis for such legal fees and expenses.
7. Stay Pay. Subject to the Executive's employment with
the Company on August 9, 2002 (the "Stay Pay Date"), the Company shall pay
the Executive an additional bonus equal to two (2) times his Annual Salary
as in effect on the Stay Pay Date (the "Stay Pay Bonus"); provided,
however, that the Executive's earlier death or Disability (as defined in
Section 8(c) hereof) while employed or termination pursuant to Section 9(c)
hereof shall also be a Stay Pay Date. The Stay Pay Bonus shall be paid in a
lump sum within 30 business days following the Stay Pay Date. The Company
and the Executive may at the end of initial Employment Term without regard
to any extension thereof pursuant to the last sentence of Section 1 hereof,
agree to an additional stay payment in consideration of the renewal of the
Employment Term at such time.
8. Termination. Notwithstanding any other provision of
the Agreement:
- ---------
(1) The actual form of housing assistance will be worked out with outside
advisers to determine an appropriate package the Executive consistent
with corporate practice in New York City and the Executive's
individual needs.
(a) For Cause by the Company. The Employment
Term and the Executive's employment hereunder may be terminated by the
Company for "Cause." For purposes of the Agreement, "Cause" shall mean (i)
the Executive's conviction of, or pleading nolo contendere to, a felony,
(ii) the Executive's conviction of, or pleading nolo contendere to, any
crime, whether a felony or misdemeanor, involving the purchase or sale of
any security, mail or wire fraud, theft, embezzlement, moral turpitude or
Company property; (iii) the Executive's gross neglect of his duties
hereunder or (iv) the Executive's willful misconduct in connection with the
performance of his duties hereunder or any other material breach by the
Executive of this Agreement; provided, however that the Executive shall not
be deemed to have been terminated for Cause unless (i) reasonable notice
has been delivered to him setting forth the reasons for the Company's
intention to terminate him for Cause and (ii) a period of thirty (30) days
has elapsed since delivery of such notice. If the Executive is terminated
for Cause, he shall be entitled to receive his Annual Salary through the
date of termination. Upon termination of the Executive's employment for
Cause pursuant to this Section 8(a), the Executive shall have no further
rights to any compensation (including any Stay Pay Bonus) or any other
benefits under the Agreement. All other benefits, if any, due the Executive
following the Executive's termination of employment pursuant to this
Section 8(a) shall be determined in accordance with the plans, policies and
practices of the Company.
(b) Disability or Death. The Employment Term and
the Executive's employment hereunder shall terminate upon his death and the
Company may terminate the Executive if he becomes physically or mentally
incapacitated and is therefore unable for a period of 45 consecutive
working days or 75 working days in a six (6) month period to perform his
duties (such incapacity is hereinafter referred to as "Disability"). Any
question as to the existence of the Disability of the Executive as to which
the Executive and the Company cannot agree shall be determined in writing
by a qualified independent physician mutually acceptable to the Executive
and the Company. If the Executive and the Company cannot agree as to a
qualified independent physician, each shall appoint such a physician and
those two physicians shall select a third who shall make such determination
in writing. The determination of Disability made in writing to the Company
and the Executive shall be final and conclusive for all purposes of this
Agreement.
Upon termination of the Executive's employment hereunder
for either Disability or death, the Executive or his estate (as the case
may be) shall be entitled to receive (i) any accrued but unpaid Annual
Salary through the end of the month in which such termination occurs, (ii)
all unpaid Annual Salary for the remainder of the Employment Term, (iii)
the Stay Pay Bonus provided by Section 8 hereof if not already paid and
(iv) all other current cash obligation of the Company to the Executive
(e.g. unused vacation). All other benefits, if any, due the Executive
following termination pursuant to this Section 8(b) shall be determined in
accordance with the plans, policies and practices of the Company; provided,
however, that the Executive shall not participate in any other severance
plan, policy or program of the Company.
(c) Termination by the Executive for Good Reason
or by the Company without Cause. The Employment Term and the Executive's
employment hereunder may be terminated by the Executive for "Good Reason"
as defined below upon not less than thirty (30) days written notice to the
Company. For purposes of this Agreement "Good Reason" shall mean the
Company (i) reducing the Executive's position, duties, or authority, (ii)
failing to secure the agreement of any successor entity to the Company that
the Executive shall continue in this position without reduction in
position, duties or authority, (iii) committing any other material breach
of this Agreement which is not remedied by the Company (if capable of
remedy) within thirty (30) days after receiving notice thereof from the
Executive or (iv) the Company providing notice of nonrenewal of the
Employment Term in accordance with Section 1 hereof.
If the Executive's employment is terminated by the
Company without "Cause" (other than by reason of his Disability or death)
or the Executive terminates this Agreement for Good Reason, the Executive
shall be entitled to receive: (i) any accrued but unpaid Annual Salary
through the date of such termination, (ii) the Stay Pay Bonus provided by
Section 8 hereof if not already paid and (iii) all other current cash
obligations of the Company to the Executive (e.g. unused vacation). In
addition, the Executive shall be entitled to receive his Annual Salary
through the later of (i) the balance of the Term or (ii) twenty-four months
from the date of such termination (the "Severance Period"). Such severance
shall be paid in a lump sum within thirty (30) days following the
termination date. The Company shall provide continued health coverage at
its expense for the Severance Period. All other benefits, if any, due the
Executive following termination pursuant to this Section 8(c) shall be
determined in accordance with the plans, policies and practices of the
Company; provided, however, that the Executive shall not participate in any
severance plan, policy or program of the Company.
(d) Termination by the Executive without Good
Reason. The Employment Term and the Executive's employment hereunder may be
terminated by the Executive for any reason upon 60 days notice to the
Company. Upon a termination by the Executive pursuant to this Section 8(d)
the Executive shall be entitled to his Annual Salary through the date of
such termination. Upon termination of the Executive pursuant to this
Section 8(d), the Executive shall have no further rights, other than those
set forth in this Section 8(d), to any compensation or any other benefits
under the Agreement. All other benefits, if any, due the Executive
following termination pursuant to this Section 8(d) shall be determined in
accordance with the plans, policies and practices of the Company; provided,
however, that the Executive shall not participate in any severance plan,
policy or program of the Company.
(e) Mitigation/Offset. Following the termination
of his employment under any of the above clauses of this Section 8, the
Executive shall have no obligation or duty to seek subsequent employment or
engagement as an employee (including self employment) or as a consultant or
otherwise mitigate the Company's obligations hereunder; nor shall the
payments provided by this Section 8 be reduced by the compensation earned
by the Executive, as an employee or consultant from such subsequent
employment or consultancy.
(f) Excise Tax Payments.
(i) Gross-Up Payment. If it shall be
determined that any payment or distribution of any type to or in respect of
the Executive, by the Company, or any other person, whether paid or payable
or distributed or distributable pursuant to the terms of the Agreement or
otherwise (the "Total Payments"), is or will be subject to the excise tax
imposed by Section 4999 of the Internal Code of 1986, as amended (the
"Code") or any interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, are collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes) imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Total Payments.
(ii) Determination by Accountant.
(A) All computations and determinations
relevant to this Section 8(f) shall be made by a national accounting firm
selected by the Company from among the five (5) largest accounting firms in
the United States (the "Accounting Firm") which firm may be the Company's
accountants. Such determinations shall include whether any of the Total
Payments are "parachute payments" (within the meaning of Section 280G of
the Code). In making the initial determination hereunder as to whether a
Gross-Up Payment is required the Accounting Firm shall determine that no
Gross-Up Payment is required, if the Accounting Firm is able to conclude
that no "Change of Control" has occurred (within the meaning of Section
280G of the Code) on the basis of "substantial authority" (within the
meaning of Section 6230 of the Code) and shall provide opinions to that
effect to both the Company and the Executive. If the Accounting Firm
determines that a Gross-Up Payment is required, the Accounting Firm shall
provide its determination (the "Determination"), together with detailed
supporting calculations regarding the amount of any Gross-Up Payment and
any other relevant matter both to the Company and the Executive by no later
than ten (10) days following the Termination Date, if applicable, or such
earlier time as is requested by the Company or the Executive (if the
Executive reasonably believes that any of the Total Payments may be subject
to the Excise Tax). If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall furnish the Executive and the Company
with a written statement that such Accounting Firm has concluded that no
Excise Tax is payable (including the reasons therefor) and that the
Executive has substantial authority not to report any Excise Tax on his
federal income tax return.
(B) If a Gross-Up Payment is determined
to be payable, it shall be paid to the Executive within twenty (20) days
after the Determination (and all accompanying calculations and other
material supporting the Determination) is delivered to the Company by the
Accounting Firm. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive, absent manifest error.
(C) As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments not made by the Company should have been made
("Underpayment"), or that Gross-Up Payments will have been made by the
Company which should not have been made ("Overpayments"). In either such
event, the Accounting Firm shall determine the amount of the Underpayment
or Overpayment that has occurred. In the case of an Underpayment, the
amount of such Underpayment (together with any interest and penalties
payable by the Executive as a result of such Underpayment) shall be
promptly paid by the Company to or for the benefit of the Executive.
(D) In the case of an Overpayment, the
Executive shall, at the direction and expense of the Company, take such
steps as are reasonably necessary (including the filing of returns and
claims for refund), follow reasonable instructions from, and procedures
established by, the Company, and otherwise reasonably cooperate with the
Company to correct such Overpayment, provided, however, that (i) the
Executive shall not in any event be obligated to return to the Company an
amount greater than the net after-tax portion of the Overpayment that he
has retained or has recovered as a refund from the applicable taxing
authorities and (ii) this provision shall be interpreted in a manner
consistent with the intent of Section 8(f)(i), which is to make the
Executive whole, on an after-tax basis, from the application of the Excise
Taxes, it being acknowledged and understood that the correction of an
Overpayment may result in the Executive repaying to the Company an amount
which is less than the Overpayment.
(E) The Executive shall notify the
Company in writing of any claim by the Internal Revenue Service relating to
the possible application of the Excise Tax under Section 4999 of the Code
to any of the payments and amounts referred to herein and shall afford the
Company, at its expense, the opportunity to control the defense of such
claim.
9. Non-Competition/Confidentiality. (a) The Executive
acknowledges and recognizes the highly competitive nature of the businesses
of the Company and accordingly agrees as follows:
(a) During the Employment Term and for a period
of one (1) year following the earlier of (i) the expiration of the
Employment Term and (ii) the date the Executive ceases to be employed by
the Company (the "Restricted Period"), the Executive will not directly or
indirectly, (A) engage in any "Competitive Business" (as defined below) for
the Executive's own account, (B) enter the employ of, or render any
services to, any person engaged in a Competitive Business, (C) acquire a
financial interest in, or otherwise become actively involved with, any
person engaged in a Competitive Business, directly or indirectly, as an
individual, partner, shareholder, officer, director, principal, agent,
trustee or consultant, or (D) interfere with business relationships
(whether formed before or after the date of the Agreement) between the
Company and customers or suppliers of the Company. For purposes of this
Agreement Competitive Business shall mean (i) any national securities
exchange registered with the Securities and Exchange Commission, (ii)
Electronic Communications Network or (iii) any other entity that engages in
substantially the same business as the Company.
(b) Notwithstanding anything to the contrary in
the Agreement, the Executive may, directly or indirectly own, solely as an
investment, securities of any person engaged in the business of the Company
which are publicly traded on a national or regional stock exchange or on
the over-the-counter market if the Executive (A) is not a controlling
person of, or a member of a group which controls, such person and (B) does
not, directly or indirectly, own 5% or more of any class of securities of
such person.
(c) During the Restricted Period, the Executive
will not, directly or indirectly, solicit or encourage to cease to work
with the Company any consultant or employee then under contract or employed
by or with the Company.
(d) The Executive hereby agrees that he will
comply with the Company's general policies regarding confidentiality.
Without in any way limiting the foregoing sentence, the Executive further
agrees that he will not, at any time during or after the Employment Term,
make use of or divulge to any other person, firm or corporation any trade
or business secret, process, method or means, or any other confidential
information concerning the business or policies of the Company, which he
may have learned in connection with his employment. For purposes of this
Agreement, a "trade or business secret, process, method or means, or any
other confidential information" shall mean and include written information
treated as confidential or as a trade secret by the Company. The
Executive's obligation under this Section 10(d) shall not apply to any
information which (i) is known publicly; (ii) is in the public domain or
hereafter enters the public domain without the fault of the Executive;
(iii) is known to the Executive prior to his receipt of such information
from the Company, as evidenced by written records of the Executive or (iv)
is hereafter disclosed to the Executive by a third party not under an
obligation of confidence to the Company. The Executive agrees not to remove
from the premises of the Company, except as an employee of the Company in
pursuit of the business of the Company or except as specifically permitted
in writing by the Board, any document or other object containing or
reflecting any such confidential information. The Executive recognizes that
all such documents and objects, whether developed by him or by someone
else, will be the sole exclusive property of the Company. Except as
specifically authorized by the Board upon termination of his employment
hereunder, the Executive shall forthwith deliver to the Company all such
confidential information, including without limitation all lists of
customers, correspondence, accounts, records and any other documents
(whether or not electronically or digitally produced) or property made or
held by him or under his control in relation to the business or affairs of
the Company, and no copy of any such confidential information shall be
retained by him.
(e) It is expressly understood and agreed that
although the Executive and the Company consider the restrictions contained
in this Section 9 to be reasonable, if a final judicial determination is
made by a court of competent jurisdiction that the time or territory or any
other restriction contained in the Agreement is an unenforceable
restriction against the Executive, the provisions of the Agreement shall
not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable. Alternatively, if any
court of competent jurisdiction finds that any restriction contained in the
Agreement is unenforceable, and such restriction cannot be amended so as to
make it enforceable, such finding shall not affect the enforceability of
any of the other restrictions contained herein.
10. Nondisparagement. The Executive agrees (whether
during or after the Executive's employment with the Company) not to issue,
circulate, publish or utter any false or disparaging statements, remarks or
rumors about the Company or its shareholders unless giving truthful
testimony under subpoena.
11. Specific Performance. The Executive acknowledges and
agrees that the Company's remedies at law for a breach or threatened breach
of any of the provisions of Section 9 or Section 10 would be inadequate
and, in recognition of this fact, the Executive agrees that, in the event
of such a breach or threatened breach, in addition to any remedies at law,
the Company, without posting any bond, shall be entitled to obtain
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy
which may then be available.
12. Miscellaneous.
(a) Acceptance. The Executive hereby represents
that his performance and execution of the Agreement does not and will not
constitute a breach of any agreement or arrangement to which he is a party
or is otherwise bound, including, without limitation, any noncompetition or
employment agreement.
(b) Governing Law. The Agreement shall be
governed by and construed in accordance with the laws of the State of New
York without regard to conflict of law provisions.
(c) Entire Agreement/Amendments. The Agreement
contains the entire understanding of the parties with respect to the
employment of the Executive by the Company and any and all employment
agreement previously entered into shall be null and void, except with
respect to the provisions of the letter agreement entered into by and
between the Executive and the National Association of Securities Dealers,
Inc. dated January 21, 2000 specifically preserved by Section 5(b) of the
Agreement. There are no restrictions, agreements, promises, warranties,
covenants or by and between the Company and the Executive undertakings
between the parties with respect to the subject matter herein other than
those expressly set forth herein. The Agreement may not be altered,
modified, or amended except by written instrument signed by the parties
hereto.
(d) No Waiver. The failure of a party to insist
upon strict adherence to any term of the Agreement on any occasion shall
not be considered a waiver of such party's rights or deprive such party of
the right thereafter to insist upon strict adherence to that term or any
other term of the Agreement.
(e) Severability. In the event that any one or
more of the provisions of the Agreement shall be or become invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability
of the remaining provisions of the Agreement shall not be affected thereby.
(f) Successor/Assignment. The Agreement is
confidential and personal and neither of the parties hereto shall, without
the consent of the other, assign or transfer this Agreement or any rights
or obligations hereunder. Without limiting the foregoing, the Executive's
right to receive payments hereunder shall not be assignable or transferable
whether by pledge, creation of a security interest or otherwise, other than
a transfer by your will or by the laws of descent distribution. In the
event of any attempted assignment or transfer contrary to this paragraph,
the Company shall have no liability to pay the assignee or transferee any
amount so attempted to be assigned or transferred. The Agreement shall be
binding upon any successor of the Company, its assets, or its business,
subsidiaries, affiliates (whether direct or indirect, by purchase, merger,
consolidation or otherwise). In the event that any successor fails to agree
in writing to assume this Agreement prior to the effective date of such
event, then all entitlements in this Agreement cash or otherwise shall be
immediately payable in full by the Company at such time of event
notwithstanding any other provisions in this Agreement to the contrary.
(g) Notice. For the purpose of the Agreement,
notices and all other communications provided for in the Agreement shall be
in writing and shall be deemed to have been duly given when delivered or
mailed by United States registered mail, return receipt requested, postage
prepaid, addressed to the respective addresses set forth on the execution
page of the Agreement, provided that all notices to the Company shall be
directed to the attention of the Chief Executive Officer or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be
effective only upon receipt.
(h) Withholding Taxes. The Company may withhold
from any amounts payable under the Agreement such Federal, state and local
taxes as may be required to be withheld pursuant to any applicable law or
regulation.
(i) Counterparts. The Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
[Remainder of this page left intentionally blank.]
IN WITNESS WHEREOF, the parties hereto have duly executed the Agreement as
of the day and year first above written.
EXECUTIVE
/s/ John Hilley
-----------------------------------
John Hilley
THE NASDAQ STOCK MARKET, INC.
By: /s/ Frank Zarb
--------------------------------
Frank Zarb
/s/ Todd A. Robinson
-----------------------------------
Todd A. Robinson
Chairman, Management Compensation
Committee
Exhibit 10.20
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made and entered into effective as of
December 29, 2000 by and between The Nasdaq Stock Market, Inc. (the
"Company") and Richard G. Ketchum (the "Executive").
WHEREAS, the Company desires to continue to employ the Executive
and to enter into an agreement embodying the terms of such employment and
considers it essential to its best interests and the best interests of its
stockholders to foster the continued employment of the Executive by the
Company during the term of the Agreement;
WHEREAS, the Executive desires to accept such employment and enter
into such an agreement; and
WHEREAS, the Executive is willing to accept employment on the
terms hereinafter set forth in this agreement (the "Agreement").
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein and for other good and valuable consideration, the parties
hereby agree as follows:
1. Term of Employment. Subject to Section 9, the term of the
Executive's employment under this Agreement shall commence on December 30,
2000 (the "Effective Date") and shall end on December 31, 2003; provided
however, that such term shall be automatically extend for additional one
year (1) year periods unless, not later than six (6) months prior to the
expiration of the initial period (or any extension thereof pursuant to this
Section 1), either party hereto shall provide written notice of its or his
desire not to extend the term hereof to the other party hereto (the initial
period together with each one-year extension shall be referred to
hereinafter as the "Employment Term").
2. Position.
(a) The Executive shall serve as the Company's President. In such
position, the Executive shall have such duties and authority as shall be
determined from time to time by the Board of Directors of the Company (the
"Board") or the Chief Executive Officer (the "CEO") of the Company or it or
his designee. During the Employment Term, the Executive shall devote his
full time and best efforts to his duties hereunder; provided however, that
nothing in this Agreement shall preclude the Executive from (i) engaging in
personal activitiesinvolving charitable, community, educational, religious
or similar organizations, (ii) managing his personal investments and
affairs to the extent that such activities are not in any manner
inconsistent with or in conflict with the performance of the Executive's
duties hereunder and (iii) continuing to serve as a member of the board of
directors or board of advisors of the entities set out on Schedule A
annexed hereto. Pursuant to the Company's Code of Conduct, the Executive
shall be required to: (i) disclose to the Audit Committee the names of the
board of directors on which he currently serves and (ii) obtain prior
approval form the Audit Committee for service as a new director of any
publicly traded company. The Executive agrees to accept the final Audit
Committee decision on the suitability of all present and future
directorships as binding.
3. Base Salary. During the Employment Term, the Company shall pay
the Executive annual base salary (the "Base Salary") at the annual rate no
less than the rate of base salary in effect as of the Effective Date. Base
Salary shall be payable in regular installments in accordance with the
Company's usual payroll practices. The Management Compensation Committee of
the Board (the "Compensation Committee") shall review Base Salary for the
purpose of increasing it in accordance with its normal review procedures.
4. Incentive Compensation/Bonus. With respect to each calendar
year during the Employment Term the Company shall pay to the Executive such
incentive compensation (hereinafter the "Incentive Compensation") as the
Compensation Committee may award in its discretion, with a guarantee of
100% of Base Salary determined as of the December 31st of the preceding
year for each of the 2001, 2002 and 2003 calendar years. Incentive
Compensation shall be pro rated for any employment during a calendar year
of less than twelve (12) months (determined by the ratio that the number
days for which the Executive was employed during a calendar year bears to
365). Incentive Compensation for each calendar year shall be paid at the
same time as the Company pays Incentive Compensation awards to other
executives, but in no event later than the March 1st following the calendar
year with respect to which the Incentive Compensation relates.
5. Employee Benefits.
(a) Employee Benefits-Generally. During the Employment Term,
the Executive shall be provided with benefits on the same basis as benefits
are generally made available to other senior executives of the Company,
including without limitation, medical, dental, vision, disability, life
insurance and pension benefits. The Executive shall be entitled to four (4)
weeks paid vacation.
(b) SERP Enhancements. The Executive shall be entitled to
continue to participate in the NASD Supplemental Executive Retirement Plan
(the "SERP"). Notwithstanding any term or condition contained in the SERP
to the contrary:
(i) Section 4.1 of the SERP shall be applied as if the age and
service requirements stated therein were age 53 and five (5) years of
service rather than age 55 and ten (10) years of service. Accordingly,
the Executive shall be 100% vested in his accrued SERP benefit upon
the later of his attainment of age 53 while employed and his
completion of five (5) years of service.
(ii) Section 4.1 of the SERP shall be applied as if the age
and service requirements stated therein were satisfied upon the
Executive's termination of employment prior to the end of the
Employment Term (x) on account of his death or Disability (as defined
in Section 9(b) hereof), (y) by the Company without Cause pursuant to
Section 9(c) hereof, or (z) by the Executive for Good Reason pursuant
to Section 9(c) hereof. Accordingly, under such circumstances the
Executive shall be 100% vested in his SERP benefit even if his
employment terminates prior to his attaining age 53 and having
completed five (5) years of service with the Company.
(iii) The death benefit provided in Section 5.1 of the SERP
shall become payable if the Executive dies before his SERP benefit
commences, but after having satisfied the requirements of Section 4.1
of the SERP as modified by Section 5(b)(i) or (ii) (and if the
foregoing conditions are satisfied, such death benefit will be payable
even if the Executive's death occurs after he has left employment with
vested SERP rights, but before the SERP benefit commences).
(iv) Section 4.3 of the SERP (relating to early retirement)
shall be applied as if the service requirement stated therein were
five (5) years of service rather than ten (10) years of service;
provided, that this special rule shall not permit the Executive's SERP
benefit to start earlier than age 55. By way of example, if the
Executive's employment terminates at age 54 after having completed at
least 5 years of service, his accrued SERP benefit may be paid to him
no earlier than his attainment of age 55, in accordance with Section
4.3 of the SERP.
(v) The special provisions of this Section 5(b) shall not
accelerate the rate at which the SERP benefit accrues so that the
amount of the accrued SERP benefit shall be determined with reference
to an accrual over a period of 3,650 days as provided in Section
4.2(a) of the SERP.
6. Equity. The Executive shall be granted pursuant to The Nasdaq
Stock Market, Inc. Equity Compensation Plan (the "Stock Plan") which has
been adopted by the Board and may from time to time be amended, options to
purchase shares of the Company's common stock in a number commensurate with
the Executive's title and responsibility (subject to applicable adjustments
pursuant to Section 4(b) of the Stock Plan), with a term of ten (10) years
from the date of grant and an option exercise price equal to fair market
value of the Company's common stock on the date of grant. Such option shall
be subject to all the terms and conditions of the Stock Plan, and a stock
option agreement to be entered into by and between the Company and the
Executive.
7. Fringe Benefits.
(a) Business Expenses. During the Employment Term, reasonable
business expenses incurred by the Executive in the performance of his
duties hereunder shall be reimbursed by the Company in accordance with the
policy established by the Compensation Committee. Accordingly, the
Executive's expenses associated with business travel shall be reimbursed by
the Company in accordance with such policy, and where appropriate the
Executive's spouse shall be permitted to travel with the Executive and the
Executive shall be similarly reimbursed for the cost of his spouse's
travel.
(b) Transportation and Housing.
(i) During the Employment Term, in accordance with the
directives of the Compensation Committee, the Executive shall be
assigned the use of a Company provided automobile and driver in
both Washington, D.C. and New York City during the business week
for personal and business use and at other times as required for
business purposes.
(ii) During the Employment Term, the Company shall provide
the Executive with either (A) financial assistance in purchasing
(or renting) a residence in the New York metropolitan area, (B)
the use of a corporate apartment in New York City or (C) a housing
allowance; provided, however, that with respect to each calendar
year during the Employment Term the provision of benefits
described in this Section 7(b)(ii) (the "Housing Program") shall
not exceed 15% of the sum of the Executive's Base Salary and
Incentive Bonus with respect to such calendar year. All such
benefits provided under the Housing Program shall be subject to
the prior approval and consent of the Board or a Committee,
thereof.1
(c) Legal Fees. The Company shall pay or reimburse the Executive
for his reasonable legal fees and expenses incurred in connection with the
negotiation and execution of this Agreement upon presentation by the
Executive of written invoices or receipts setting forth in reasonable
detail the basis for such legal fees and expenses.
8. Stay Pay. Subject to the Executive's employment with the
Company on August 9, 2002 (the "Stay Pay Date"), the Company shall pay the
Executive an additional bonus equal to two (2) times his Base Salary as in
effect on the Stay Pay Date (the "Stay Pay Bonus"); provided, however, that
the Executive's earlier death or Disability (as defined in Section 9(c)
hereof) while employed or termination pursuant to Section 9(c) hereof shall
also be a Stay Pay Date. The Stay Pay Bonus shall be paid in a lump sum
within 30 business days following the Stay Pay Date. The Company and the
Executive may at the end of initial Employment Term without regard to any
extension thereof pursuant to the last sentence of Section 1 hereof, agree
to an additional stay payment in consideration of the renewal of the
Employment Term at such time.
9. Termination. Notwithstanding any other provision of the
Agreement:
- -------------------------
1 The actual form of housing assistance will be worked out with outside
advisers to determine an appropriate package for the Executive
consistent with corporate practice in New York City and the
Executive's individual needs.
(a) For Cause by the Company. The Employment Term and the
Executive's employment hereunder may be terminated by the Company for
"Cause." For purposes of the Agreement, "Cause" shall mean (i) the
Executive's conviction of, or pleading nolo contendere to, a felony, (ii)
the Executive's conviction of, or pleading nolo contendere to, any crime,
whether a felony or misdemeanor, involving the purchase or sale of any
security, mail or wire fraud, theft, embezzlement, moral turpitude or
Company property, (iii) the Executive's gross neglect of his duties
hereunder or (iv) the Executive's willful misconduct in connection with the
performance of his duties hereunder or any other material breach by the
Executive of this Agreement; provided, however that the Executive shall not
be deemed to have been terminated for Cause unless (i) reasonable notice
has been delivered to him setting forth the reasons for the Company's
intention to terminate him for Cause and (ii) a period of thirty (30) days
has elapsed since delivery of such notice. If the Executive is terminated
for Cause, he shall be entitled to receive his Base Salary through the date
of termination. Upon termination of the Executive's employment for Cause
pursuant to this Section 9(a), the Executive shall have no further rights
to any compensation (including any Incentive Compensation or Stay Pay
Bonus) or any other benefits under the Agreement. All other benefits, if
any, due the Executive following the Executive's termination of employment
pursuant to this Section 9(a) shall be determined in accordance with the
plans, policies and practices of the Company.
(b) Disability or Death. The Employment Term and the
Executive's employment hereunder shall terminate upon his death and the
Company may terminate the Executive if he becomes physically or mentally
incapacitated and is therefore unable for a period of 45 consecutive
working days or 75 working days in a six (6) month period to perform his
duties (such incapacity is hereinafter referred to as "Disability"). Any
question as to the existence of the Disability of the Executive as to which
the Executive and the Company cannot agree shall be determined in writing
by a qualified independent physician mutually acceptable to the Executive
and the Company. If the Executive and the Company cannot agree as to a
qualified independent physician, each shall appoint such a physician and
those two physicians shall select a third who shall make such determination
in writing. The determination of Disability made in writing to the Company
and the Executive shall be final and conclusive for all purposes of this
Agreement.
Upon termination of the Executive's employment hereunder for
either Disability or death, the Executive or his estate (as the case may
be) shall be entitled to receive (i) any accrued but unpaid Base Salary
through the end of the month in which such termination occurs, (ii) all
unpaid Base Salary for the remainder of the Employment Term, (iii) all
unpaid Annual Incentive Compensation for the remainder of the Employment
Term, (iv) the Stay Pay Bonus provided by Section 8 hereof if not already
paid and (v) all other current cash obligation of the Company to the
Executive (e.g. unused vacation). All other benefits, if any, due the
Executive following termination pursuant to this Section 9(b) shall be
determined in accordance with the plans, policies and practices of the
Company; provided, however, that the Executive shall not participate in any
other severance plan, policy or program of the Company.
(c) Termination by the Executive for Good Reason or by the
Company without Cause. The Employment Term and the Executive's employment
hereunder may be terminated by the Executive for "Good Reason" as defined
below upon not less than thirty (30) days written notice to the Company.
For purposes of this Agreement "Good Reason" shall mean the Company (i)
reducing the Executive's position, duties, or authority, (ii) failing to
secure the agreement of any successor entity to the Company that the
Executive shall continue in this position without reduction in position,
duties or authority, (iii) committing any other material breach of this
Agreement which is not remedied by the Company (if capable of remedy)
within thirty (30) days after receiving notice thereof from the Executive
or (iv) the Company providing notice of nonrenewal of the Employment Term
in accordance with Section 1 hereof
If the Executive's employment is terminated by the Company without
"Cause" (other than by reason of his Disability or death) or the Executive
terminates this Agreement for Good Reason, the Executive shall be entitled
to receive: (i) any accrued but unpaid Base Salary through the date of such
termination, (ii) the Stay Pay Bonus provided by Section 8 hereof if not
already paid, (iii) all other current cash obligations of the Company to
the Executive (e.g. unused vacation) and (iv) a prorata portion of the
Incentive Compensation due the Executive pursuant to Section 4 and
calculated in accordance with Section 4. In addition, the Executive shall
be entitled to receive his Base Salary and Incentive Compensation through
the later of (i) the balance of the Term or (ii) twenty-four months from
the date of such termination (the "Severance Period"). Such severance shall
be paid in a lump sum within thirty (30) days following the termination
date. The Company shall provide continued health coverage at its expense
for the Severance Period. All other benefits, if any, due the Executive
following termination pursuant to this Section 9(c) shall be determined in
accordance with the plans, policies and practices of the Company; provided,
however, that the Executive shall not participate in any severance plan,
policy or program of the Company.
(d) Termination by the Executive without Good Reason. The
Employment Term and the Executive's employment hereunder may be terminated
by the Executive for any reason upon 60 days notice to the Company. Upon a
termination by the Executive pursuant to this Section 9(d) the Executive
shall be entitled to his Base Salary through the date of such termination.
Upon termination of the Executive pursuant to this Section 9(d), the
Executive shall have no further rights, other than those set forth in this
Section 9(d), to any compensation or any other benefits under the
Agreement. All other benefits, if any, due the Executive following
termination pursuant to this Section 9(d) shall be determined in accordance
with the plans, policies and practices of the Company; provided, however,
that the Executive shall not participate in any severance plan, policy or
program of the Company.
(e) Mitigation/Offset. Following the termination of his
employment under any of the above clauses of this Section 9, the Executive
shall have no obligation or duty to seek subsequent employment or
engagement as an employee (including self employment) or as a consultant or
otherwise mitigate the Company's obligations hereunder; nor shall the
payments provided by this Section 9 be reduced by the compensation earned
by the Executive, as an employee or consultant from such subsequent
employment or consultancy.
(f) Excise Tax Payments.
(i) Gross-Up Payment. If it shall be determined that any
payment or distribution of any type to or in respect of the Executive, by
the Company, or any other person, whether paid or payable or distributed or
distributable pursuant to the terms of the Agreement or otherwise (the
"Total Payments"), is or will be subject to the excise tax imposed by
Section 4999 of the Internal Code of 1986, as amended (the "Code") or any
interest or penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, are collectively referred to
as the "Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes) imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Total Payments.
(ii) Determination by Accountant.
(A) All computations and determinations relevant to this
Section 9(f) shall be made by a national accounting firm selected by the
Company from among the five (5) largest accounting firms in the United
States (the "Accounting Firm") which firm may be the Company's accountants.
Such determinations shall include whether any of the Total Payments are
"parachute payments" (within the meaning of Section 280G of the Code). In
making the initial determination hereunder as to whether a Gross-Up Payment
is required the Accounting Firm shall determine that no Gross-Up Payment is
required, if the Accounting Firm is able to conclude that no "Change of
Control" has occurred (within the meaning of Section 280G of the Code) on
the basis of "substantial authority" (within the meaning of Section 6230 of
the Code) and shall provide opinions to that effect to both the Company and
the Executive. If the Accounting Firm determines that a Gross-Up Payment is
required, the Accounting Firm shall provide its determination (the
"Determination"), together with detailed supporting calculations regarding
the amount of any Gross-Up Payment and any other relevant matter both to
the Company and the Executive by no later than ten (10) days following the
Termination Date, if applicable, or such earlier time as is requested by
the Company or the Executive (if the Executive reasonably believes that any
of the Total Payments may be subject to the Excise Tax). If the Accounting
Firm determines that no Excise Tax is payable by the Executive, it shall
furnish the Executive and the Company with a written statement that such
Accounting Firm has concluded that no Excise Tax is payable (including the
reasons therefor) and that the Executive has substantial authority not to
report any Excise Tax on his federal income tax return.
(B) If a Gross-Up Payment is determined to be payable, it
shall be paid to the Executive within twenty (20) days after the
Determination (and all accompanying calculations and other material
supporting the Determination) is delivered to the Company by the Accounting
Firm. Any determination by the Accounting Firm shall be binding upon the
Company and the Executive, absent manifest error.
(C) As a result of uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments not made
by the Company should have been made ("Underpayment"), or that Gross-Up
Payments will have been made by the Company which should not have been made
("Overpayments"). In either such event, the Accounting Firm shall determine
the amount of the Underpayment or Overpayment that has occurred. In the
case of an Underpayment, the amount of such Underpayment (together with any
interest and penalties payable by the Executive as a result of such
Underpayment) shall be promptly paid by the Company to or for the benefit
of the Executive.
(D) In the case of an Overpayment, the Executive shall, at
the direction and expense of the Company, take such steps as are reasonably
necessary (including the filing of returns and claims for refund), follow
reasonable instructions from, and procedures established by, the Company,
and otherwise reasonably cooperate with the Company to correct such
Overpayment, provided, however, that (i) the Executive shall not in any
event be obligated to return to the Company an amount greater than the net
after-tax portion of the Overpayment that he has retained or has recovered
as a refund from the applicable taxing authorities and (ii) this provision
shall be interpreted in a manner consistent with the intent of Section
9(f)(i), which is to make the Executive whole, on an after-tax basis, from
the application of the Excise Taxes, it being acknowledged and understood
that the correction of an Overpayment may result in the Executive repaying
to the Company an amount which is less than the Overpayment.
(E) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service relating to the possible
application of the Excise Tax under Section 4999 of the Code to any of the
payments and amounts referred to herein and shall afford the Company, at
its expense, the opportunity to control the defense of such claim.
10. Non-Competition/Confidentiality. (a) The Executive
acknowledges and recognizes the highly competitive nature of the businesses
of the Company and accordingly agrees as follows:
(a) During the Employment Term and for a period of one (1)
year following the earlier of (i) the expiration of the Employment Term and
(ii) the date the Executive ceases to be employed by the Company (the
"Restricted Period"), the Executive will not directly or indirectly, (A)
engage in any "Competitive Business" (as defined below) for the Executive's
own account, (B) enter the employ of, or render any services to, any person
engaged in a Competitive Business, (C) acquire a financial interest in, or
otherwise become actively involved with, any person engaged in a
Competitive Business, directly or indirectly, as an individual, partner,
shareholder, officer, director, principal, agent, trustee or consultant, or
(D) interfere with business relationships (whether formed before or after
the date of the Agreement) between the Company and customers or suppliers
of the Company. For purposes of this Agreement Competitive Business shall
mean (i) any national securities exchange registered with the Securities
and Exchange Commission, (ii) Electronic Communications Network or (iii)
any other entity that engages in substantially the same business as the
Company.
(b) Notwithstanding anything to the contrary in the Agreement,
the Executive may, directly or indirectly own, solely as an investment,
securities of any person engaged in the business of the Company which are
publicly traded on a national or regional stock exchange or on the
over-the-counter market if the Executive (A) is not a controlling person
of, or a member of a group which controls, such person and (B) does not,
directly or indirectly, own 5% or more of any class of securities of such
person.
(c) During the Restricted Period, the Executive will not,
directly or indirectly, solicit or encourage to cease to work with the
Company any consultant or employee then under contract or employed by or
with the Company.
(d) The Executive hereby agrees that he will comply with the
Company's general policies regarding confidentiality. Without in any way
limiting the foregoing sentence, the Executive further agrees that he will
not, at any time during or after the Employment Term, make use of or
divulge to any other person, firm or corporation any trade or business
secret, process, method or means, or any other confidential information
concerning the business or policies of the Company, which he may have
learned in connection with his employment. For purposes of this Agreement,
a "trade or business secret, process, method or means, or any other
confidential information" shall mean and include written information
treated as confidential or as a trade secret by the Company. The
Executive's obligation under this Section 10(d) shall not apply to any
information which (i) is known publicly; (ii) is in the public domain or
hereafter enters the public domain without the fault of the Executive;
(iii) is known to the Executive prior to his receipt of such information
from the Company, as evidenced by written records of the Executive or (iv)
is hereafter disclosed to the Executive by a third party not under an
obligation of confidence to the Company. The Executive agrees not to remove
from the premises of the Company, except as an employee of the Company in
pursuit of the business of the Company or except as specifically permitted
in writing by the Board, any document or other object containing or
reflecting any such confidential information. The Executive recognizes that
all such documents and objects, whether developed by him or by someone
else, will be the sole exclusive property of the Company. Except as
specifically authorized by the Board upon termination of his employment
hereunder, the Executive shall forthwith deliver to the Company all such
confidential information, including without limitation all lists of
customers, correspondence, accounts, records and any other documents
(whether or not electronically or digitally produced) or property made or
held by him or under his control in relation to the business or affairs of
the Company, and no copy of any such confidential information shall be
retained by him.
(e) It is expressly understood and agreed that although the
Executive and the Company consider the restrictions contained in this
Section 10 to be reasonable, if a final judicial determination is made by a
court of competent jurisdiction that the time or territory or any other
restriction contained in the Agreement is an unenforceable restriction
against the Executive, the provisions of the Agreement shall not be
rendered void but shall be deemed amended to apply as to such maximum time
and territory and to such maximum extent as such court may judicially
determine or indicate to be enforceable. Alternatively, if any court of
competent jurisdiction finds that any restriction contained in the
Agreement is unenforceable, and such restriction cannot be amended so as to
make it enforceable, such finding shall not affect the enforceability of
any of the other restrictions contained herein.
11. Nondisparagement. The Executive agrees (whether during or
after the Executive's employment with the Company) not to issue, circulate,
publish or utter any false or disparaging statements, remarks or rumors
about the Company or its shareholders unless giving truthful testimony
under subpoena.
12. Specific Performance. The Executive acknowledges and
agrees that the Company's remedies at law for a breach or threatened breach
of any of the provisions of Section 10 or Section 11 would be inadequate
and, in recognition of this fact, the Executive agrees that, in the event
of such a breach or threatened breach, in addition to any remedies at law,
the Company, without posting any bond, shall be entitled to obtain
equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy
which may then he available.
13. Miscellaneous.
(a) Acceptance. The Executive hereby represents that his
performance and execution of the Agreement does not and will not constitute
a breach of any agreement or arrangement to which he is a party or is
otherwise bound, including, without limitation, any noncompetition or
employment agreement.
(b) Governing Law. The Agreement shall be governed by and
construed in accordance with the laws of the State of New York without
regard to conflict of law provisions.
(c) Entire Agreement/Amendments. The Agreement contains
the entire understanding of the parties with respect to the employment of
the Executive by the Company and any and all employment agreement
previously entered into shall be null and void. There are no restrictions,
agreements, promises, warranties, covenants or by and between the Company
and the Executive undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. The
Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(d) No Waiver. The failure of a party to insist upon
strict adherence to any term of the Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the
right thereafter to insist upon strict adherence to that term or any other
term of the Agreement.
(e) Severability. In the event that any one or more of the
provisions of the Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions of the Agreement shall not be affected thereby.
(f) Successor/Assignment. The Agreement is confidential
and personal and neither of the parties hereto shall, without the consent
of the other, assign or transfer this Agreement or any rights or
obligations hereunder. Without limiting the foregoing, the Executive's
right to receive payments hereunder shall not be assignable or transerable
whether by pledge, creation of a security interest or otherwise, other than
a transfer by your will or by the laws of descent distribution. In the
event of any attempted assignment or transfer contrary to this paragraph,
the Company shall have no liability to pay the assignee or transferee any
amount so attempted to be assigned or transferred. The Agreement shall be
binding upon any successor of the Company, its assets, or its business,
subsidiaries, affiliates (whether direct or indirect, by purchase, merger,
consolidation or otherwise). In the event that any successor fails to agree
in writing to assume this Agreement prior to the effective date of such
event, then all entitlements in this Agreement cash or otherwise shall be
immediately payable in full by the Company at such time of event
notwithstanding any other provisions in this Agreement to the contrary.
(g) Notice. For the purpose of the Agreement, notices and
all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the execution page of
the Agreement, provided that all notices to the Company shall be directed
to the attention of the Chief Executive Officer or to such other address as
either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only
upon receipt.
(h) Withholding Taxes. The Company may withhold from any
amounts payable under the Agreement such Federal, state and local taxes as
may be required to be withheld pursuant to any applicable law or
regulation.
(i) Counterparts. The Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
[Remainder of this page left intentionally blank.]
IN WITNESS WHEREOF, the parties hereto have duly executed the
Agreement as of the day and year first above written.
EXECUTIVE
/s/ Richard G. Ketchum
----------------------------------------------
Richard G. Ketchum
THE NASDAQ STOCK MARKET INC.
By: /s/ Frank Zarl
----------------------------------------------
Frank Zarl
/s/ Todd A. Robinson
----------------------------------------------
Todd A. Robinson
Chairman, Management Compensation Committee
Schedule A
Board of Directors and
Board of Advisors Membership
Richard G. Ketchum
None
Exhibit 10.21
CONFIDENTIAL
EXECUTION COPY
THE NASDAQ STOCK MARKET, INC.
EMPLOYMENT AGREEMENT
WITH
Hardwick Simmons
THIS AGREEMENT (the "Agreement") made and entered into as
indicated below, by and between The Nasdaq Stock Market, Inc., a
corporation created and existing under and by virtue of the laws of the
State of Delaware, with its offices at 1735 K Street, N.W., Washington, DC
20006, hereinafter called "Nasdaq" and Hardwick Simmons, hereinafter called
"Simmons."
WITNESSETH:
WHEREAS, Nasdaq desires to have the benefits of Simmons'
knowledge and experience as its Chief Executive Officer, and Simmons
desires such employment with Nasdaq, commencing February 1, 2001 (the
"Effective Date").
NOW, THEREFORE, in consideration of the promises, of the sum
of One Dollar ($1.00) by each of the parties in hand to the other paid, and
of the mutual covenants set forth below, Nasdaq and Simmons do hereby
agree, each with the other, that the following shall constitute the
employment agreement covering Simmons:
1. From and after the Effective Date, until this Agreement
expires or is terminated as hereinafter provided, Nasdaq shall employ
Simmons as its Chief Executive Officer, and Simmons shall serve as an
employee of Nasdaq in such capacity. During the period of his employment
hereunder, Simmons shall perform the usual duties to be performed by one
holding the offices of Chief Executive Officer, and Simmons shall perform
such other management duties and responsibilities reasonably related to
such offices as may be assigned to him from time to time by the Board of
Directors of Nasdaq (the "Board").
2. During the Term, Simmons shall devote his full time and
best efforts to his duties hereunder during the period of his employment
under this Agreement; provided, however, that nothing in this Agreement
shall preclude Simmons from (i) engaging in personal activities involving
charitable, community, educational, religious, and similar organizations,
speaking engagements, and similar activities and (ii) managing his personal
investments and affairs, to the extent that such activities are not in any
manner inconsistent with or in conflict with the performance of Simmons'
duties under this Agreement and (iii) continuing to serve as a member of
the Boards of Directors or Boards of Advisors of the entities described on
Schedule A hereto. Pursuant to the Nasdaq Code of Conduct, Simmons will be
required to: (i) disclose to the Audit Committee the names of the Boards of
Directors for which he is currently a member and (ii) obtain prior approval
from the Audit Committee for service as a new director of a publicly traded
company. Simmons agrees to accept the final Audit Committee decision on the
suitability of all present and future directorships as binding.
3. During the Term (as hereinafter defined), Nasdaq shall
pay Simmons for his services hereunder an annual base salary of $750,000
("Base Salary"), which shall be payable during the year on the same
schedule as all other Nasdaq employees. Base Salary shall be reviewed
annually by the Management Compensation Committee of the Board (the
"Compensation Committee").
(a) In addition, Nasdaq shall pay annually Simmons such
incentive compensation (hereinafter the "Incentive Compensation") as the
Compensation Committee may award in its discretion, with a guarantee of
$1,750,000 for the first year of employment. Incentive Compensation for the
second and third years of the Agreement shall be no less than 100% of Base
Salary as of December 31 of the preceding year. Incentive Compensation
shall be pro rated for any employment during any calendar year of less than
twelve months (determined by the ratio that the number of days for which
Simmons was employed in any calendar year bears to 365). Incentive
Compensation for each calendar year shall be paid at the same time as
Nasdaq pays Incentive Compensation awards to other executives, but in no
case later than March 1 of each calendar year with respect to the prior
calendar year, provided, however, that if the Term shall end prior to June
30 of any calendar year, such Incentive Compensation for the calendar year
in which the Term ends shall be paid within 60 days of the last day of
employment.
4. This Agreement shall continue in effect for three (3)
years from the Effective Date, which period shall hereinafter be referred
to as the "Term," subject to earlier termination in one of the following
ways:
(a) This Agreement shall terminate automatically upon
Simmons' death, or upon his being adjudicated incompetent by a court of
competent jurisdiction, or upon Simmons' becoming "Permanently Disabled".
For purposes of this Agreement, "Permanently Disabled" shall mean the
inability of Simmons to perform substantially all of his duties in the
manner required hereunder whether by reason of illness or injury or
otherwise (whether physical or mental) incapacitating Simmons for a
continuous period exceeding 120 days. Such Permanent Disability shall be
certified by a physician chosen by Nasdaq and reasonably acceptable to
Simmons (if he is then able to exercise sound judgement).
(b) Simmons may terminate this Agreement for "Good
Reason" as defined in this Section 4(b), upon not less than thirty (30)
days written notice to Nasdaq. For purposes of this Agreement "Good Reason"
shall mean Nasdaq (i) reducing his position, duties, or authority, (ii)
failing to secure the agreement of any successor entity to Nasdaq that
Simmons shall continue in this position without reduction in position,
duties or authority, or (iii) committing any other material breach of this
Agreement which is not remedied by Nasdaq (if capable of remedy) within
thirty (30) days after receiving notice thereof from Simmons.
(c) Nasdaq may terminate the Agreement for "Cause."
Cause shall mean:
(1) Simmons' conviction of, or pleading nolo
contendere to, a felony;
(2) Simmons' conviction of, or pleading nolo
contendere to, any crime, whether a felony or misdemeanor,
involving the purchase or sale of any security, mail or wire
fraud, theft, an embezzlement, or moral turpitude or Nasdaq
property;
(3) Simmons' gross neglect of his duties hereunder;
or
(4) Simmons' willful misconduct in connection with
the performance of his duties hereunder or other material breach
by Simmons of this Agreement;
provided however that Simmons shall not be deemed to have been
terminated for Cause unless (i) reasonable notice has been
delivered to him setting forth the reasons for Nasdaq's intention
to terminate him for Cause, and (ii) a period of thirty (30) days
has elapsed since delivery of such notice during which Simmons was
afforded an opportunity to cure, if capable of cure, the reasons
for the Nasdaq's intention to terminate him for Cause.
5. (a) The Term of this Agreement may be extended by written
agreement of Simmons and Nasdaq.
(b) Notwithstanding the foregoing, Simmons shall
relinquish his duties or position of Chief Executive Officer of Nasdaq if,
his successor being duly appointed, Nasdaq and Simmons mutually determine
that such relinquishment may facilitate his successor's transition to such
office: however, neither such relinquishment nor Simmons' relinquishment of
his duties as Chief Executive Officer of Nasdaq shall be considered a
termination of the Term, nor shall such relinquishment be considered Good
Reason for purposes of this Agreement, and shall have no effect on Nasdaq's
obligation to continue to pay and provide Simmons the compensation and
benefits otherwise provided for in this Agreement for the remainder of the
Term. Simmons agrees to make himself available for the balance of the Term
upon reasonable notice to provide consulting services to Nasdaq on matters
relating to the nature and scope of his duties prior to relinquishment of
his duties or positions pursuant to this Paragraph 5.
6. End of the Term.
Upon expiration of the Term, Simmons shall be entitled to
receive a supplemental retirement benefit from Nasdaq equal to the present
value of (i) the benefit he would have accrued under the NASD Supplemental
Executive Retirement Plan (the "NASD Retirement Plan") during the Term if
the full amount of his compensation under Paragraph 3 were taken into
account as compensation under the NASD Retirement Plan (if the limitations
on benefits otherwise applicable under the NASD Retirement Plan by reason
of Section 415 of the Internal Revenue Code were disregarded) and if the
vesting provisions of the NASD Retirement Plan were disregarded; less (ii)
any vested benefit he actually accrued under the NASD Retirement Plan
during the Term. Determination of the present value of such supplemental
retirement benefit shall be made using the actuarial assumptions then
applicable for determining lump sum distribution under the NASD Retirement
Plan (as if such supplemental retirement benefit were paid under the NASD
Retirement Plan). Nasdaq shall pay such supplemental retirement benefit to
Simmons in a lump sum within fifteen (15) days after the expiration of the
Term or at such other time as provided in Paragraph 7 or 8. Except as
otherwise provided in Paragraph 7 or 8, Simmons shall not be entitled to
receive any supplemental retirement benefit under this Paragraph 6 if his
employment with Nasdaq terminates prior to his completion of the Term
(without regard to any extension entered into pursuant to Section 4
hereof).
7. (a) Termination on Account of Death.
If this Agreement is terminated under Paragraph 4(a) by
reason of Simmons' death, Simmons' surviving spouse or Simmons' estate (if
there is no surviving spouse) shall be entitled to receive from Nasdaq at
such time: (i) his Base Salary through the date of death; (ii) a pro-rata
portion of the minimum Incentive Compensation amount described in Paragraph
3(a) through the date of death (determined as set forth in Paragraph 3(a));
(iii) the supplemental retirement benefit described in Paragraph 6 accrued
to the date of death (taking into account the provisions of the NASD
Retirement Plan applicable to a participant's death but disregarding any
portion of the Term following the date of Simmons' death); and (iv) those
benefits which Simmons is entitled to receive under the terms of Nasdaq's
employee benefit plans and arrangements.
(b) Termination on Account of Permanent Disability
If this Agreement is terminated under Paragraph 4(a) by
reason of Simmons' Permanent Disability, Simmons shall be entitled to
receive from Nasdaq at such time: (i) his Base Salary to the date of
termination; (ii) a pro-rata portion of the minimum Incentive Compensation
amount described in Paragraph 3(a) to the date of termination (determined
as set forth in Paragraph 3(a)); (iii) the supplemental retirement benefit
described in Paragraph 6 accrued to the date of termination (taking into
account the provisions of the NASD Retirement Plan applicable to a
participant's Permanent Disability but disregarding any portion of the Term
following the date of Simmons' termination); and (iv) those benefits which
Simmons is entitled to receive under the terms of Nasdaq's employee benefit
plans and arrangements.
8. (a) Termination by Simmons for Good Reason or by Nasdaq
without Cause.
If this Agreement is terminated by Simmons for Good Reason
under Paragraph 4(b), or if this Agreement is terminated by Nasdaq other
than on account of Cause, death, or Permanent Disability, Simmons shall be
entitled to receive from Nasdaq: (i) his annual Base Salary and the minimum
Incentive Compensation amount described in Paragraph 3, expressed as a
monthly amount multiplied by the remaining number of full or partial months
in the Term; (ii) the supplemental retirement benefit described in
Paragraph 6 to which Simmons would have been entitled if he had completed
the Term; and (iii) those benefits which Simmons is entitled to receive
under the terms of Nasdaq's employee benefit plans and arrangements. Any
payments under this paragraph shall be made at the time such payments would
otherwise have been made under this Agreement if Simmons had completed the
Term.
(b) Termination by Simmons other than for Good Reason.
If this Agreement is terminated by Simmons other than for
Good Reason, Simmons shall be entitled to receive from Nasdaq at such time:
(i) his Base Salary to the time of termination; (ii) a pro-rata portion of
the minimum Incentive Compensation amount described in Paragraph 3
(determined as set forth in Paragraph 3); and (iii) those benefits which
Simmons is entitled to receive under the terms of Nasdaq's employee benefit
plans and arrangements.
9. Termination for Cause.
If this Agreement is terminated by Nasdaq for Cause pursuant
to Paragraph 4(c), Simmons shall be entitled to receive from Nasdaq at such
time: (i) his Base Salary through the date of termination; (ii) a pro-rata
portion of the minimum Incentive Compensation amount described in Paragraph
3 (determined as set forth in Paragraph 3); and (iii) those benefits which
Simmons is entitled to receive under the terms of Nasdaq's employee benefit
plans and arrangements.
10. Extension of the Agreement.
If Simmons and Nasdaq agree to extend the Term of this
Agreement pursuant to Paragraph 4, Simmons shall be entitled to receive,
with respect to each additional period of his employment under this
Agreement, a supplemental retirement benefit from Nasdaq equal to the
present value of: (i) the benefit he would have accrued under the NASD
Retirement Plan during such period if the full amount of his compensation
under Paragraph 3 were taken into account as compensation under the NASD
Retirement Plan, if the limitations on benefits otherwise applicable under
the NASD Retirement Plan by reason of Section 415 of the Internal Revenue
Code were disregarded, and if the vesting provisions of the NASD Retirement
Plan were disregarded; less (ii) any vested benefit he actually accrued
under the NASD Retirement Plan during such year. Determination of the
present value of such supplemental retirement benefit shall be made using
the actuarial assumptions then applicable for determining lump sum
distributions under the NASD Retirement Plan (as if such supplemental
retirement benefit was paid under the NASD Retirement Plan). Nasdaq shall
pay such supplemental retirement benefit to Simmons in a lump sum on the
last day of the calendar year in which it was accrued or, in the case of
the last year for which he is employed under this Agreement, the date on
which his employment under this Agreement terminates.
11. Stock Options.
(a) On the Effective Date, Simmons shall be granted
pursuant to the The Nasdaq Stock Market, Inc. Equity Compensation Plan (the
"Stock Plan") which has been adopted by the Board and may from time to time
be amended, an option to purchase 2,000,000 shares of Nasdaq common stock
(subject to applicable adjustments pursuant to Section 4(b) of the Stock
Plan), with a term of 10 years from the date of grant and an option
exercise price equal to the fair market value of Nasdaq common stock on the
date of grant. Fair market value shall be determined under the terms of the
Stock Plan. Subject to Simmons continued employment with Nasdaq, such
option shall become exercisable (vest) with respect to one-third (1/3) of
the shares underlying the option on each of the first, second, and third
anniversaries of the date of grant. Notwithstanding the foregoing, upon a
Change in Control (as defined in the Stock Plan) the terms set forth in the
Stock Plan shall apply to such option. Such option shall be subject to all
the terms and conditions of the Stock Plan, including, without limitation,
any repurchase rights.
Upon any termination of Simmons' employment hereunder
prior to the end of the Term by Simmons for Good Reason or by Nasdaq
without Cause (and not on account of death or Permanent Disability), such
option to the extent not then vested shall fully vest and shall remain
exercisable through the expiration of its term.
In the event that Simmons is terminated on account of
his death or Permanent Disability, such option to the extent vested shall
remain exercisable for a period of 365 days following such termination.
In the event that Simmons is terminated on account of
Cause, such option shall immediately expire upon such termination without
further consideration to Simmons.
In the event that Simmons' employment hereunder is
terminated by Simmons other than for Good Reason or death prior to the end
of the Term, such option to the extent vested shall expire ninety (90) days
following such termination of employment by Simmons.
In the event that the Term shall end and shall not be
renewed pursuant to Paragraphs 4 and 10, such option shall continue through
the expiration of its term.
12. In connection with his employment under this Agreement,
and to ensure his personal safety, Nasdaq shall reimburse Simmons for the
cost of installing a home security system in his permanent residence (if
recommended by an independent security study); and provided that such
reimbursement shall not exceed $10,000.
13. Upon presentation of appropriate receipts or vouchers in
a manner consistent with the expense substantiation policy of Nasdaq
generally applicable to its executive officers and in accordance with the
provisions of such policy regarding the timing and amount of expense
reimbursements, Nasdaq shall reimburse Simmons and his spouse for
reasonable business-related expenses incurred in connection with his
performance of services under this Agreement and in the interest of
Nasdaq's business, including, but not limited to, expenses for such items
as entertainment, travel, hotels, meals, dues, admission fees, and house
charges of various clubs in New York City, as well as for the travel,
hotel, and meals of his spouse on those occasions (including meetings of
the Board) when the proper representation of Nasdaq makes it advisable for
his spouse to accompany him. In the case of dues and initiation and other
fees for private clubs, the amount of reimbursements under this Paragraph
shall not exceed $20,000 for any year.
14. Nasdaq shall reimburse Simmons for the annual expense he
incurs for personal financial and tax counseling, provided that the amount
of such reimbursement for any year shall not exceed $20,000.
15. Nasdaq shall provide Simmons with the use of an
automobile and, to ensure his personal safety, a driver trained in personal
security (if recommended by an independent security study) with respect to
Simmons' performance of services under this Agreement in New York City.
16. The reimbursements and benefits provided under
paragraphs 11 through 16 shall include such amounts as may be necessary for
Simmons to pay any taxes imposed with respect to such reimbursements or
benefits (which amounts shall be paid to Simmons by January 31 of the
calendar year following the year following the year in which the expenses
were incurred).
17. Nasdaq shall provide Simmons any health, life, or other
disability insurance, pension, retirement, savings, or any other benefit
plan or arrangement now or hereafter maintained by Nasdaq for its senior
executives generally, and Simmons' participation therein shall be in
accordance with the provisions thereof generally applicable to such
executives. Simmons shall receive at least four (4) weeks of paid vacation
per annum.
18. Upon presentation of an invoice, Nasdaq shall reimburse
Simmons for any legal fees and expenses incurred in the negotiation of this
Agreement, provided that the amount of such reimbursement shall not exceed
$20,000.
19. It is understood and agreed that this Agreement shall be
binding upon Nasdaq and Simmons and upon the successors or assigns of
Nasdaq, and shall inure to the benefit of the heirs, executors and
administrators of Simmons.
20. This Agreement shall not be assigned by either Simmons
or Nasdaq except that Nasdaq shall have the right to assign its rights
hereunder to any successor in interest of Nasdaq, provided that such
successor assumes, in writing, all obligations of Nasdaq hereunder. If
assigned to any successor of Nasdaq, all references to Nasdaq shall be read
to refer to such successor.
21. Except as otherwise expressly provided, this Agreement
embodies the entire understanding between Simmons and Nasdaq with respect
to the matter covered herein.
22. In case any one of the provisions contained in this
Agreement should be invalid, illegal, or unenforceable in any respect, the
validity, legality, or enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
23. This Agreement may be executed in any number of
counterparts, each which shall be deemed an original, and all of which
shall constitute one and, the same Agreement.
24. The exclusive procedure for resolution of any dispute
under this Agreement shall be by arbitration in the District of Columbia or
New York City in accordance with the rules then in effect of the American
Arbitration Association (the "AAA"). In the event of any dispute between
Simmons and Nasdaq under this Agreement, which is wholly, or partly
resolved in Simmons's favor, Nasdaq shall reimburse Simmons for reasonable
legal fees and expenses incurred in connection with such dispute.
25. It is understood and agreed that any notice to either
party shall be in writing and shall be sufficiently given if sent to such
party by registered or certified mail, postage prepaid, at the residence or
business address of such party set forth above. Either party hereto may
change the address to which notices shall be sent by written notice of such
new or changed address given to the other party hereto.
26. It is understood and agreed that this Agreement may be
amended by mutual consent of the parties hereto which must be evidences by
a document executed with the same formality as the Agreement.
[remainder of page left intentionally blank]
CONCLUSION
IN WITNESS WHEREOF, the corporate party hereto has caused
the Agreement to be duly executed and delivered on the date indicated
below, and the individual party hereto has executed and delivered this
Agreement on the date indicated below, effective for all purposes as of
_______________, 2000.
The Nasdaq Stock Market, Inc.
Date: _______ By:__________________________
Chairman of the Board
Date: _______ By:__________________________
Chairman of the NASD Management
Compensation Committee
Date: _______ By:__________________________
Hardwick Simmons
SCHEDULE A
Boards of Directors:
Advisory Boards:
AMENDMENT ONE TO THE
EMPLOYMENT AGREEMENT
This Amendment is hereby entered into by and between The
Nasdaq Stock Market, Inc. ("Nasdaq") and Hardwick Simmons ("Simmons")
effective as of February 1, 2001.
WITNESSETH
WHEREAS, Nasdaq and Simmons have entered into on December 7,
2000 a certain employment agreement, to be effective as of February 1, 2001
(the "Employment Agreement"), providing for Simmons' employment with
Nasdaq; and
WHEREAS, Nasdaq and Simmons desire to amend the Employment
Agreement.
NOW THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Paragraph 11 of the Employment Agreement is hereby
amended to read in its entirety as follows:
(a) (i) On the Effective Date, Simmons shall be granted
pursuant to the Nasdaq Stock Market, Inc. Equity Compensation Plan (the
"Stock Plan") which has been adopted by the Board and may from time to time
be amended, an option to purchase 1,000,000 shares of Nasdaq common stock
(subject to applicable adjustments pursuant to Section 4(b) of the Stock
Plan), with a term of ten (10) years from the date of grant and an option
exercise price equal to the fair market value of Nasdaq common stock on the
date of grant. Fair market value shall be determined under the terms of the
Stock Plan. Subject to Simmons' continued employment with Nasdaq, such
option shall become exercisable (vest) with respect to one-third (1/3) of
the shares underlying such option on each of the first, second, and third
anniversaries of the Effective Date.
(ii) Subject to Simmons' continued employment with
Nasdaq, on the first anniversary of the Effective Date, Simmons
shall be granted, pursuant to the Stock Plan, an option to
purchase 1,000,000 shares of Nasdaq common stock (subject to
applicable adjustments pursuant to Section 4(b) of the Stock
Plan), with a term of ten (10) years from the date of grant and an
option exercise price equal to the fair market value of Nasdaq
common stock on the date of grant. Fair market value shall be
determined under the terms of the Stock Plan. Subject to Simmons'
continued employment with Nasdaq, such option shall become
exercisable (vest) with respect to one-third (1/3) of the shares
underlying such option on the date of grant and on each of the
first and second anniversaries of the date of grant.
(b) Notwithstanding the foregoing upon a Change in Control
(as defined in the Stock Plan) the terms set forth in the Stock Plan shall
apply to the options granted pursuant to both Paragraphs 1 (a)(i) and 1
(a)(ii) hereof (collectively hereinafter the "Option"). The Option shall be
subject to the following terms in addition to all the terms and conditions
set forth in the Stock Plan, including without limitation, any repurchase
rights:
(i) Upon any termination of Simmons' employment
hereunder prior to the end of the Term by Simmons for Good Reason
or by Nasdaq without Cause (and not on account of death or
Permanent Disability), the Option to the extent not then vested
shall fully vest and shall remain exercisable through the
expiration of its term.
(ii) In the event that Simmons is terminated on
account of his death or Permanent Disability, the Option to the
extent vested shall remain exercisable for a period of 365 days
following such termination.
(iii) In the event that Simmons is terminated on
account of Cause, the Option shall immediately expire upon such
termination without further consideration to Simmons.
(iv) In the event that Simmons' employment hereunder
is terminated by Simmons other than for Good Reason prior to the
end of the Term, the Option to the extent vested shall expire
ninety (90) days following such termination of employment by
Simmons.
(v) In the event that the Term shall end and shall
not be renewed pursuant to Paragraphs 4 and 10, the Option shall
continue through the expiration of its term.
2. Except as specially set forth above, all other provisions
of the Employment Agreement shall remain unchanged and in full force
effect.
[Remainder of the page left intentionally blank.]
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed as of January 31, 2001.
By: /s/ Hardwick Simmons
_____________________________
Hardwick Simmons
THE NASDAQ STOCK MARKET, INC.
By: /s/ Frank Zarb
_____________________________
Frank Zarb
/s/ Todd A. Robinson
______________________________
Todd A. Robinson
Chairman, Management Compensation
Exhibit 21.1
S U B S I D I A R I E S
1. Nasdaq Tools, Inc. (incorporated in Delaware)
2. Quadsan Enterprises Inc. (incorporated in Delaware)
3. Nasdaq Global Holdings (incorporated in Switzerland)
o Nasdaq International Ltd (incorporated in United Kingdom)
o Nasdaq Ltda (incorporated in Brazil)
o Nasdaq Europe Planning Company Ltd. (incorporated in United
Kingdom)
o Nasdaq Japan, Inc. (incorporated in Japan)
o Nasdaq Europe SA/NV (incorporated in Belgium)
o IndigoMarkets Ltd. (incorporated in Bermuda)
4. Nasdaq Investment Product Services Inc. (incorporated in Delaware)
5. Nasdaq International Market Initiatives Inc. (incorporated in
Delaware)
6. Nasdaq Educational Foundation Inc. (formed in Delaware)
7. Nasdaq - BIOS R&D Joint Venture (formed in Delaware)
