Exhibit 10.3
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (the "Agreement") is entered into
as of June 9, 2002 by and among INSTINET GROUP INCORPORATED, a Delaware
corporation ("Instinet"), REUTERS LIMITED, a company organized under the laws of
England and Wales ("Reuters Limited", REUTERS C CORP., a Delaware corporation
("Reuters C Corp"), REUTERS HOLDINGS SWITZERLAND SA, a company organized under
the laws of Switzerland ("Reuters Holdings"), those entities listed on Exhibit B
hereto under the heading "Bain Entities" (collectively, the "Bain Group"), those
entities listed on Exhibit B hereto under the heading "Silver Lake Entities"
(collectively, the "Silver Lake Group"), those entities listed on Exhibit B
hereto under the heading "TA Entities" (collectively, the "TA Group" and,
together with the Bain Group and the Silver Lake Group, the "Island
Stockholders"), and, solely for purposes of paragraphs (a), (d), (e) and (f) of
Section 2.1, Section 3.4 and Article IV hereof, Edward Nicoll ("Nicoll").
RECITALS
WHEREAS, Instinet, Island Holding Company, Inc., a Delaware
corporation ("Island") and Daiquiri Merger Corporation, a Delaware corporation
and a wholly owned subsidiary of Instinet have entered into an Agreement and
Plan of Merger, dated as of the date hereof (as it may be amended, supplemented
or otherwise modified from time to time, the "Merger Agreement").
WHEREAS, the parties desire to enter into this Agreement to
set forth their agreement regarding certain corporate governance matters and
certain other matters with respect to the on-going relationship by and among the
parties hereto.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
for themselves and their respective successors and permitted assigns, hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. As used in this Agreement, the following
terms will have the following meanings, applicable both to the singular and the
plural forms of the terms described.
"Additional Island Director" means any director designated by
any Island Stockholder in connection with an increase in the total number of
directors of Instinet pursuant to the rights provided in Section 2.2(a)(ii).
"Affiliate" means, with respect to a given Person, any other
Person that, directly or indirectly, controls, is controlled by, or is under
common control with, such Person. For purposes of this definition and the
definition of "Permitted Transferee," "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"), as applied
to any Person, means the possession, directly or indirectly, of the power to
vote forty percent (40%) or more of the securities having voting power for the
election of directors (or other Persons acting in similar capacities) of such
Person or otherwise 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.
"Affiliated Reuters Directors" means those members of the
Board of Directors who have ever been officers or employees of a Reuters Entity
or who otherwise fail to qualify as Nasdaq Independent Directors due to their
relationship with Reuters Parent or any other Reuters Entity, substituting a
ten-year time limit for the time limits in Marketplace Rule 4200(a)(14) of the
Nasdaq Stock Market (or any successor provision of similar effect).
"Agreement" has the meaning ascribed thereto in the preamble
hereto, as such agreement may be amended and supplemented from time to time in
accordance with its terms.
"Approved Equity Issuance" means any issuance of equity
securities (or any securities convertible into or exchangeable or exercisable
for equity securities) by Instinet that has been approved by a majority of the
members of the Board of Directors.
"Bain Group" has the meaning ascribed thereto in the preamble
hereto.
"Board of Directors" means the board of directors of Instinet.
"Business Day" means any day other than a Saturday, Sunday or
any day on which banking institutions are authorized or obligated by law or
executive order to be closed in London or New York.
"Cause" means (a) the commission by an individual of any act
or omission that would constitute a felony or other crime under applicable
federal, state or foreign law determined by the members of the Board of
Directors (excluding the applicable individual, if a director) to be material to
such individual's role at Instinet, (b) the commission by an individual of any
act of moral turpitude, (c) fraud, dishonesty or a breach of fiduciary duty to
Instinet, its Affiliates and/or its stockholders, (d) continued alcohol or other
substance abuse by an individual that renders him incapable of performing his
material duties to the satisfaction of the Board of Directors or (e) any act or
omission by an individual that is a material violation of any applicable federal
or state or other securities law, regulation or rule or of any applicable rule
or regulation of any self-regulatory organization.
"Common Stock" means the common stock, par value $0.01 per
share, of Instinet, and any other class of Instinet's capital stock representing
the right to vote generally for the election of directors.
"Company Voting Agreement" means the Company Voting Agreement,
dated as of the date hereof, by and among Island, Instinet and those
stockholders of Island set forth on Annex A thereto.
"Conflicting Position" means a position as a director,
officer, partner, member or employee of any Person that is reasonably deemed by
the Nominating Committee of the Board of Directors to be a competitor of
Instinet, it being understood that the Nominating Committee may consider a
Person to be a "competitor" for this purpose if such Person designs, uses or
provides technology or intellectual property that serves similar purposes as or
could be used in place of any technology or intellectual property used in and
significant to the business of the Instinet Entities and the Nominating
Committee reasonably concludes that a nominee's ability to perform his or her
duties as a director, and otherwise act in the best interests of Instinet, could
be compromised by reason of his or her position as a director, officer, partner,
member or employee of such Person.
"Corporate Agreement" means the Amended and Restated Corporate
Agreement, dated as of the date hereof, by and between Reuters Limited and
Instinet, as the same may be further amended, supplemented or otherwise modified
from time to time in accordance with this Agreement.
"Datek" means Datek Online Holdings Corp., a Delaware
corporation.
"Datek Shares" means shares of the Class X Common Stock, par
value $.001 per share, of Datek, or any other security that is issued, directly
or indirectly, by Datek which represents only the right to receive capital stock
of Island directly or indirectly from Datek and that are held by a Holder that
has not withdrawn from this Agreement pursuant to Section 4.11.
"Datek Stockholders Agreement" means that certain Datek
Stockholders Agreement, dated as of the date hereof, by and among Instinet,
Reuters Limited and Datek, as the same may be amended, supplemented or otherwise
modified from time to time.
"Derivative Transaction" means any transaction involving a
security linked to the Common Stock, including any equity swap, put, put
equivalent, collar, sale of exchangeable security or similar transaction.
"Designated Independent Directors" has the meaning ascribed
thereto in Section 2.2(k).
"Effective Time" has the meaning ascribed thereto in the
Merger Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute.
"Holder" means each of the Island Stockholders, any Permitted
Transferee of such Island Stockholder who becomes an owner of Subject Shares, in
each case for so long as such Person owns Subject Shares and has not withdrawn
from the Agreement pursuant to Section 4.11.
"Initial Share Holding Period" has the meaning ascribed
thereto in Section 2.1(a).
"Instinet" has the meaning ascribed thereto in the preamble
hereto.
"Instinet Entities" means Instinet Parent, Instinet and their
respective Subsidiaries from time to time, and "Instinet Entity" shall mean any
of the Instinet Entities; provided, however, in each case, that any such
Instinet Entity shall cease to be a "Instinet Entity" under this Agreement at
such time as such Person no longer is a Subsidiary of Instinet Parent or
Instinet, as the case may be.
"Instinet Parent" means any Person who succeeds Instinet as
the parent corporation of the Instinet Entities as a result of a corporate
reorganization, merger or otherwise.
"Island" has the meaning ascribed thereto in the preamble
hereto.
"Island Designees" means those individuals designated by the
Bain Group, the Silver Lake Group and/or the TA Group pursuant to Section 2.2
and nominated by Instinet as directors.
"Island Director" means any director of Instinet who has been
designated by a Island Stockholder in accordance with the provisions of Section
2.2.
"Island Stockholders" has the meaning ascribed thereto in the
preamble hereto.
"Joinder Agreement" has the meaning ascribed thereto in the
definition of "Permitted Transferee."
"Legend" has the meaning ascribed thereto in Section 2.1(e).
"Market Transaction" means any transaction effected on an
exchange or in the over-the-counter market (as such terms are used in Section
4(4) of the Securities Act), on an "alternative trading system" (as defined in
Regulation ATS) or directly with a "market maker" (as defined in Section
3(a)(38) of the Exchange Act).
"Merger Agreement" has the meaning ascribed thereto in the
preamble hereto.
"Minimum Designee Amount" means 8,000,000 Subject Shares, as
adjusted at any time and from time to time following the date hereof to account
for any stock split, stock dividend, stock combination or similar event;
provided that for purposes of determining whether each Island Stockholder owns
Subject Shares representing at least the Minimum Designee Amount, shares of
Common Stock owned by Datek shall be deemed to be owned by a Island Stockholder
to the extent of such Island Stockholder's indirect ownership thereof, but only
for so long as the Datek Stockholders Agreement is in full force and effect,
through such Island Stockholder's ownership of capital stock of Datek (which,
for the purpose of calculating the Minimum Designee Amount, shall be that number
of shares of Common Stock that would be received by such Island Stockholder in
connection with a distribution of all shares of Common Stock in respect of the
capital stock of Datek).
"Nasdaq Independent Director" means a member of the Board of
Directors who qualifies as an "independent director" under Marketplace Rule
4200(a)(14) of the Nasdaq Stock Market (or any successor provision of similar
effect).
"Nicoll" has the meaning ascribed thereto in the preamble
hereto.
"Nominating Committee" means the Nominating Committee of the
Board of Directors.
"Permitted Transferee" means, in the case of any Holder, (i)
any other Holder or (ii) a corporation, partnership, limited liability company
or similar entity that is directly or indirectly owned and controlled (as such
term is used in the definition of "Affiliate" contained herein) by such Holder;
provided, however, that a transferee of a Holder that is not a Island
Stockholder shall be a Permitted Transferee only if such transferee is also a
Permitted Transferee of the Island Stockholder that originally held the
applicable Subject Shares, and provided, further that in each case (I) such
transferee assumes and agrees to perform and becomes a party to this Agreement
by duly executing an instrument substantially in the form provided as Exhibit A
attached hereto (a "Joinder Agreement") if not already a party hereto and (II)
the transferring Holder has complied with Section 4.10.
"Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization,
government (and any department or agency thereof) or other entity.
"Public Shares" means the number of shares of Common Stock
equal to the aggregate number of shares of Common Stock outstanding, minus the
aggregate number of (i) shares of Common Stock held by Reuters Entities (ii)
Subject Shares and (iii) other shares of Common Stock (x) that were not
distributed in an offering registered under the Securities Act, for so long as
such shares are subject to the volume and manner of sale restrictions of Rule
144 promulgated under the Securities Act (or any successor provision of similar
effect), or (y) to which the restrictions of Rule 145 under the Securities Act
(or any successor provision of similar effect) then apply.
"Registration Rights Agreement" means that certain
Registration Rights Agreement to be entered into by and among Instinet, the
Reuters Parties, the Island Stockholders, Finanzas B.V. and those additional
stockholders of Instinet, if any, party thereto.
"Reuters C Corp" has the meaning ascribed thereto in the
preamble hereto.
"Reuters Entities" means the Reuters Parent and Subsidiaries
of the Reuters Parent (other than Subsidiaries that constitute Instinet
Entities) from time to time, and "Reuters Entity" shall mean any of the Reuters
Entities; provided, however, in each case, that any Reuters Entity shall cease
to be a "Reuters Entity" under this Agreement at such time as such Person no
longer is a Subsidiary of the Reuters Parent.
"Reuters Holders" has the meaning ascribed to the term
"Holders" in the Corporate Agreement.
"Reuters Holdings" has the meaning ascribed thereto in the
preamble hereto.
"Reuters Limited" has the meaning ascribed thereto in the
preamble hereto.
"Reuters Parent" means the ultimate parent entity from time
to time, of Reuters Limited, which is currently Reuters Group PLC.
"Reuters Party" means each of Reuters Limited, Reuters C Corp,
Reuters Holdings, or any other Reuters Entity to which a Reuters Party transfers
shares of Common Stock or which acquires shares of Common Stock (other than any
Reuters Entity not wholly owned, directly or indirectly, by Reuters Parent that
pursuant to Section 2.2(c)(ii) is not required to execute a Joinder Agreement in
which it agrees to be treated as a Reuters Party hereunder, upon such
acquisition), in each case for so long as such Person owns shares of Common
Stock.
"Rule 13e-3 Transaction" has the meaning ascribed to such term
in Rule 13e-3 promulgated under the Exchange Act.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor statute.
"Silver Lake Group" has the meaning ascribed thereto in the
preamble hereto.
"Standstill Agreement" has the meaning ascribed thereto in
Section 2.4(b).
"Subject Shares" means all shares of Common Stock originally
acquired by a Island Stockholder or Nicoll pursuant to the Merger Agreement or
in respect of such Island Stockholder's or Nicoll's interest in Datek (and any
additional shares of Common Stock issued in respect of such shares subsequent to
the Effective Time pursuant to a stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares or any similar event)
that are held by a Holder that has not withdrawn from this Agreement pursuant to
Section 4.11.
"Subsidiary" means, as to any Person, any corporation,
association, partnership, joint venture or other business entity of which more
than 50% of the voting power of capital stock or other voting ownership
interests entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof is owned or
controlled, directly or indirectly, by such Person or by one or more of the
Subsidiaries of such Person or by a combination thereof.
"TA Group" has the meaning ascribed thereto in the preamble
hereto.
"Total Voting Power of Instinet" means the total number of
votes which may be cast in the election of members of the Board of Directors by
all holders of Common Stock.
"Transfer" means, with respect to securities, a transfer,
sale, assignment, pledge, hypothecation or other disposition, whether directly
or indirectly (pursuant to a Derivative Transaction, the creation of a
derivative security, by Transfer of other securities convertible into or
exchangeable or exercisable for, or any right to purchase or acquire, such
security or otherwise), the grant of an option or other right or the imposition
of a restriction on disposition or voting or by operation of law, provided that
a transfer, sale, assignment, pledge, hypothecation or other disposition of
shares of capital stock of Datek, other than Datek Shares, shall not constitute
a Transfer.
"Trigger Date" has the meaning ascribed thereto in the
certificate of incorporation of Instinet.
1.2. Internal References. Unless the context indicates
otherwise, references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement and references
to the parties shall mean the parties to this Agreement.
ARTICLE II
certain governance matters
2.1. Limitations on Transfer.
(a) Notwithstanding any other provision of this Agreement,
prior to the earlier to occur of (i) the date which is one year following the
Effective Time and (ii) the date on which Nicoll is terminated by Instinet,
other than in the case of a termination by Instinet for Cause or a termination
with the consent of at least two Island Stockholders then entitled to designate
directors under Section 2.2(a)(i) (the period from the Effective Time to the
earlier to occur of (i) and (ii), the "Initial Share Holding Period"), none of
any Holder or Nicoll shall Transfer any Subject Shares or Datek Shares, and no
Reuters Party shall Transfer any shares of Common Stock, other than (v) in the
case of Nicoll, in connection with estate and family planning so long as the
transferee has executed a Joinder Agreement in which it agrees to be treated as
Nicoll hereunder or by will or other instrument taking effect at death or by
applicable laws of descent and distribution, (w) to any Reuters Party, any other
Reuters Entity that has executed a Joinder Agreement in which it agrees to be
treated as a Reuters Party hereunder, or Instinet, (x) in the case of a transfer
by a Holder or any Reuters Party, to any Island Stockholder or (y) in the case
of a Transfer by a Holder, to a Permitted Transferee of such Holder or (z) in
the case of a Reuters Party, any pledge of any such securities or rights in
connection with bona fide debt financings (other than Derivative Transactions)
with a financial institution, provided that, in each case set forth in clauses
(w), (x) or (y), no such Transfer shall be effected unless and until (I) in the
case of a Transfer by a Island Stockholder, such Island Stockholder has complied
with Section 2.2(h) to the extent such Transfer would affect such Island
Stockholder's rights pursuant to Section 2.2 and (II) Instinet shall have been
furnished with information reasonably satisfactory to it demonstrating that such
Transfer is in compliance with the provisions hereof and any applicable
securities laws and shall have acknowledged such compliance and, in each case
set forth in clause (z), the interest of any such financial institution in such
shares shall be subject to all of the restrictions set forth in this Agreement.
(b) Following the expiration of the Initial Share Holding
Period and until the date which is three years following the Effective Time, the
Holders shall not Transfer any Subject Shares in a Market Transaction except in
accordance with and subject to the volume limitations specified in Rule 144(e)
promulgated under the Securities Act (or any successor paragraph or rule of
similar effect), without regard to any time limitations contained in Rule 144(k)
(or any successor paragraph or rule of similar effect), provided that for
purposes of determining compliance with paragraph (e) of Rule 144, all Holders
of Subject Shares shall be deemed to be acting in concert, for the purpose of
selling shares of Common Stock, with all other Holders of Subject Shares.
Notwithstanding the foregoing, the restrictions set forth in this Section 2.1(b)
shall not apply to Transfers by Holders pursuant to an underwritten offering
conducted in accordance with the Registration Rights Agreement.
(c) (i) No Holder may Transfer Subject Shares to a Permitted
Transferee of such Holder unless such Permitted Transferee has duly executed a
Joinder Agreement in which it agrees to be treated as a Holder (if not already a
Holder party to this Agreement) and such transferring Holder has complied with
Section 4.10. No Reuters Party may Transfer shares of Common Stock to another
Reuters Entity unless such Reuters Entity has duly executed a Joinder Agreement
in which it agrees to be treated as a Reuters Party (if not already a Reuters
Party party to this Agreement) and such transferring Reuters Party has complied
with Section 4.10.
(ii) No Reuters Entity (in the case of Reuters Entities not
wholly owned, directly or indirectly, by Reuters Parent, to the
extent that Reuters Limited or Reuters Parent has the power to
direct such Reuters Entity and such direction is consistent with
any fiduciary obligations such Reuters Entity might have to third
parties, it being understood that no Reuters Party shall act
through or in concert with any such non-wholly owned Reuters
Entity in any manner inconsistent with such Reuters Party's
obligations hereunder) may acquire shares of Common Stock from
any Person unless such Reuters Entity has duly executed a Joinder
Agreement in which it agrees to be treated as a Reuters Party.
(iii) No Reuters Party may Transfer shares of Common Stock
to a transferee that, alone or together with its Affiliates and
any "group" (as defined in the Exchange Act) of which such
transferee or Affiliates is or are a member, acquires from
Reuters Parties, in a transaction or a series of related
transactions, a number of shares of Common Stock representing at
least 10% of the aggregate number of shares of Common Stock then
outstanding, other than in a Market Transaction or pursuant to
the exercise by such Party of its registration rights under the
Corporate Agreement or the Registration Rights Agreement, as
applicable (excluding pre-arranged transactions in which the
shares are "crossed", "directed" or otherwise caused to be sold
to the particular transferee), unless in each case such
transferee and any such Affiliates and members of such "group"
agree in writing to be bound by such Reuters Party's obligations
under Section 2.3(a) with respect to such transferred shares, to
the same extent applicable to such Reuters Party.
(iv) At any time when Reuters Entities own shares of
Instinet's stock representing 20% or more of the Total Voting
Power of Instinet, no Reuters Party may Transfer shares of Common
Stock, in a transaction or a series of related transactions, to a
transferee that, immediately after giving effect to such Transfer
would, together with such transferees' Affiliates and any "group"
(as defined in the Exchange Act) of which such transferee or
Affiliates is or are a member, have beneficial ownership of
Instinet's stock representing 35% or more of the Total Voting
Power of Instinet, other than in a Market Transaction or pursuant
to the exercise by such Party of its registration rights under
the Corporate Agreement or the Registration Rights Agreement, as
applicable (excluding pre-arranged transactions in which the
shares are "crossed", "directed" or otherwise caused to be sold
to the particular transferee), unless in each case such
transferee and any such Affiliates and members of such "group"
agree in writing to be bound by Section 2.4 to the same extent
applicable to Reuters Limited (except that (A) the percentage of
additional shares of Common Stock that may be acquired in
reliance on clause (w) of Section 2.4(a) following the Transfer
from such Reuters Party shall be equal to the greater of (i) 40%
and (ii) that percentage of the Total Voting Power of Instinet
beneficially owned by such transferee, its Affiliates and any
such "group" immediately after giving effect to the Transfer from
such Reuters Party and (B) references in Section 2.4 to Reuters
Entities and Reuters Parent shall be deemed to refer to Persons
having an analogous relationship with such transferee and members
of any such group). Any such agreement by a transferee to be
bound by Section 2.4 shall not affect the obligations of any
other Person that otherwise remains subject to Section 2.4 in
accordance with its terms.
(d) The parties hereto hereby acknowledge and agree that
Instinet may impose stop transfer instructions with respect to the shares of
Common Stock subject to the restrictions contained in this Article II in order
to implement the restrictions on Transfers contained herein.
(e) (i) Each certificate representing Subject Shares, Datek
Shares and any shares of Common Stock held by any Reuters Party or by a Person
who is required, pursuant to Section 2.1(c)(iii) or Section 2.1(c)(iv), to agree
to be bound by the portions of this Agreement specified in such Sections, will
bear a legend on the face thereof substantially to the following effect (with
such additions thereto or changes therein as Instinet may be advised by counsel
are required by law or necessary to give full effect to this Agreement, the
"Legend"):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
STOCKHOLDERS AGREEMENT, DATED AS OF JUNE 9, 2002, AMONG
INSTINET GROUP INCORPORATED, REUTERS LIMITED, REUTERS C CORP.,
REUTERS HOLDINGS SWITZERLAND SA AND THE OTHER STOCKHOLDERS
PARTY THERETO, AS AMENDED AND SUPPLEMENTED FROM TIME TO TIME
IN ACCORDANCE WITH THE TERMS THEREOF. THE STOCKHOLDERS
AGREEMENT CONTAINS, AMONG OTHER THINGS, CERTAIN PROVISIONS
RELATING TO THE VOTING AND TRANSFER OF THE SHARES SUBJECT TO
THE AGREEMENT. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE, DIRECTLY OR INDIRECTLY, MAY
BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH
STOCKHOLDERS AGREEMENT. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF
THE PROVISIONS OF SUCH STOCKHOLDERS AGREEMENT APPLICABLE TO
THE SHARES REPRESENTED BY THIS CERTIFICATE."
(ii) Each Reuters Party and any Person who is required,
pursuant to Section 2.1(c)(iii) or Section 2.1(c)(iv), to agree
to be bound by the portions of this Agreement specified in such
Sections will cause any applicable shares of Common Stock, and
each Holder and Nicoll will cause any Datek Shares or shares of
Common Stock received by such Holder or Nicoll in respect of such
Holder's or Nicoll's interest in Datek, in each case held by such
party at the Effective Time or acquired by such party at any time
thereafter to be delivered to Instinet for the purpose of
applying the Legend. Instinet shall return to the delivering
party, as promptly as possible, any shares so delivered. The
delivery of such shares by the delivering party shall not in any
way affect such party's rights with respect to such shares.
(iii) The Legend will be promptly removed by (or at the
direction of) Instinet, with respect to any certificate
representing shares of Common Stock or Datek Shares, by the
delivery of substitute certificates without such Legend (w) with
respect to Subject Shares or any shares of Common Stock held by a
Reuters Party or by a Person who is required, pursuant to Section
2.1(c)(iii) or Section 2.1(c)(iv), to agree to be bound by the
portions of this Agreement specified in such Sections, in the
event of a Transfer permitted by this Agreement and in which the
transferee is not required to enter into a Joinder Agreement
pursuant to the terms of this Agreement or otherwise agree in
writing to be bound by certain provisions of this Agreement, (x)
with respect to Subject Shares held by any Holder, following
termination of this Agreement with respect to such Holder, (y)
with respect to any Datek Shares, following termination of this
Agreement with respect to all Subject Shares to which such Datek
Shares relate or (z) with respect to Subject Shares held by
Nicoll, following the expiration of the Initial Share Holding
Period.
(f) At least five days prior to any Transfer of shares of
Common Stock during the Initial Share Holding Period, the transferring party
shall give written notice of such Transfer to Instinet, the Holders and the
Reuters Parties. Each such notice required by this paragraph shall describe the
manner of the proposed Transfer and the number and nature of the securities
involved.
(g) Any Transfer or successive Transfer of capital stock of
Datek (other than Datek Stock) by an Island Stockholder shall be subject to the
provisions of Section 4(l) of the Company Voting Agreement, to the extent
provided therein.
2.2. Seats on Board of Directors.
(a) (i) Subject to the other provisions of this Section 2.2,
each of the Bain Group, the Silver Lake Group and the TA Group (in each case,
together with its respective Permitted Transferees (within the meaning of clause
(ii) of the definition thereof) and in each case, for so long as it owns Subject
Shares representing at least the Minimum Designee Amount) shall have the right
to designate one director of Instinet, and Instinet shall cause the nomination
of each of such designees in connection with any election of that class of
directors of Instinet to which such Island Stockholder's initial designee is
elected. Instinet and the Reuters Parties shall take all necessary action to
elect Stephen Pagliuca, Glenn Hutchins and Kevin Landry (or such other
individuals as the Bain Group, the Silver Lake Group and the TA Group,
respectively, may designate prior to the Effective Time, subject to the
provisions of this Section 2.2) as the initial Island Directors effective as of
the Effective Time.
(ii) If at any time when the Island Stockholders are
collectively entitled to designate at least one Island Designee
pursuant to this Section 2.2, the total number of directors of
Instinet is changed (excluding, for the purposes of such
calculation, an increase in the total number of directors of
Instinet effected in order to add Devin Wenig as a director for
so long as Mr. Wenig is a director), the number of directors that
the Island Stockholders shall collectively have the right to
designate pursuant to this Section 2.2(a) shall as promptly as
practicable be adjusted to equal the number (rounded up to the
nearest whole number) equal to (x) the total number of directors
of Instinet (taking into account any such increase or decrease in
the total number of directors) multiplied by the number of Island
Designees which the Island Stockholders are then entitled to
designate pursuant to Section 2.2(a)(i), divided by (y) thirteen,
provided, however, that if the total number of directors of
Instinet after such change in the total number of directors is
less than thirteen, each of the Island Stockholders shall have
the right to designate the minimum number of Island Designees
which such Island Stockholder is then entitled to designate
pursuant to Section 2.2(a)(i). In the event of any increase in
the total number of directors that results in the right of the
Island Stockholders to designate one or more Additional Island
Directors pursuant to this Section 2.2(a)(ii), the Island
Stockholders then entitled to designate directors pursuant to
Section 2.2(a)(i) shall unanimously indicate in writing to
Instinet which of them is entitled to designate such Additional
Island Director(s), and the Reuters Parties, Instinet and the
Island Stockholders shall take all available steps consistent
with the provisions of this Section 2.2 to effectuate the
increase in the number of Island Directors as rapidly as
reasonably possible following the designation of such Additional
Island Directors in accordance with this Section 2.2. Instinet
and the Reuters Parties shall use all reasonable efforts to
provide at least two days' notice to the Island Stockholders
prior to effecting any increase in the total number of directors
of Instinet that would entitle the Island Stockholders to
designate one or more Additional Island Directors pursuant to
this Section 2.2(a)(ii). The Island Stockholders may provide a
list of individuals who do not hold Conflicting Positions to the
Nominating Committee for its consideration as potential
Additional Island Directors to be designated in the future. The
Nominating Committee may at any time and from time to time
consider or reconsider such individuals for approval as directors
in the event the Island Stockholders have the right to designate
one or more Additional Island Directors pursuant to this Section
2.2. Provided such nominee(s) do not have any Conflicting
Positions, the Reuters Parties and Instinet shall take all
available steps to elect such nominee(s) and, provided that the
Island Stockholders notify Instinet and the Reuters Parties of
their proposed nominee(s) for Additional Island Directors within
one day following receipt of such notice of increase in total
number of directors, to do so simultaneously with such increase.
(iii) The Island Directors shall be divided as equally as
possible among the classes of directors provided for in
Instinet's certificate of incorporation in such manner as the
Island Stockholders that are then entitled to designate Island
Designees pursuant to this Section 2.2 unanimously direct
Instinet in writing or, if such direction is not provided to
Instinet, in such manner as Instinet shall determine consistent
with this sentence.
(b) No Island Designee may hold a Conflicting Position. In
connection with any election involving a proposed Island Designee, the
applicable Island Stockholder shall comply with the procedures of the Nominating
Committee with respect to such proposed Island Designee, including providing the
Nominating Committee with advance notice of the identity of such proposed Island
Designee and any additional information regarding such proposed Island Designee
as the Nominating Committee may reasonably request; provided that, in connection
with an increase in the total number of directors, no delay by the Nominating
Committee in reviewing and acting with respect to a proposed Island Designee
shall delay or prevent the proposed Island Designee from being added to the
Board of Directors prior to the next meeting of, or taking of action by
unanimous written consent by, the Board of Directors, provided that such Island
Designee does not have a Conflicting Position. In the event that a majority of
the members of the Nominating Committee not affiliated with the applicable
Island Stockholder object to the nomination of a proposed Island Designee, the
applicable Island Stockholder will consider such objection in good faith but may
require the election of such Island Designee, unless such objection is due to
the fact that such Island Designee holds a Conflicting Position, in which case
the applicable Island Stockholder shall withdraw its designation of such
proposed Island Designee. If such Island Stockholder elects, following such
consideration, to withdraw the designation of such proposed Island Designee (or
is required to so withdraw its designation pursuant to the preceding sentence),
such Island Stockholder shall promptly designate a replacement therefor, which
replacement Island Designee shall also be subject to the requirements of this
Section 2.2(b).
(c) Except with respect to a vacancy resulting from a removal
or resignation of a Island Director pursuant to Section 2.2(h), if a vacancy of
a position held by a Island Director occurs or exists on the Board of Directors
at any time and for any reason, including but not limited to a vacancy because
of the death, disability, retirement, resignation or removal of any director for
cause or otherwise, then the applicable Island Stockholder shall have the sole
right to designate an individual to fill such vacancy, and, subject to the
requirements of this Section 2.2, Instinet (subject to applicable fiduciary
duties) and the Reuters Parties shall take all available steps to elect such
nominee to fill such vacancy.
(d) To the extent permitted by law, Instinet shall use all
reasonable efforts to solicit from the stockholders of Instinet eligible to vote
for the election of directors proxies in favor of the nominees designated by the
Island Stockholders in accordance with this Section 2.2 in each instance in
which the Island Stockholders are entitled to designate directors.
(e) At the request of any Island Stockholder, Instinet shall
(x) use all reasonable efforts to (i) seek action by written consent as promptly
as practicable following such request, and the Reuters Parties shall join in
executing any such consent as promptly as practicable following such request, or
(ii) if action by written consent of stockholders is not then permitted by the
certificate of incorporation and bylaws of Instinet, cause a special meeting of
stockholders to be held proposing the removal of any director designated by such
Island Stockholder pursuant to this Section 2.2, provided that if in the
reasonable good faith determination of the Board of Directors it is materially
detrimental to do so, then Instinet may delay calling such special meeting;
provided that Instinet will cause such meeting to be held within 135 days of
such request by such Island Stockholder (and will permit an observer selected by
such Island Stockholder to attend all meetings of the Board of Directors held
during such 135 day period) and (y) to the extent permitted by law, use all
reasonable efforts to solicit from stockholders of Instinet eligible to vote for
the election of directors proxies to remove such specified directors, and the
Reuters Parties shall vote for such removal.
(f) In the event of a decrease in the total number of
Additional Island Directors entitled to be designated by the Island Stockholders
in connection with a decrease in the total number of directors pursuant to
Section 2.2(a)(ii) or pursuant to Section 2.2(g), the Island Stockholders then
entitled to designate directors pursuant to Section 2.2(a)(i) shall promptly
determine and unanimously indicate in writing to Instinet which Additional
Island Directors are to be removed. If the Island Stockholders fail to so
indicate in writing within seven days of the event causing such decrease in the
total number of Additional Island Directors, a majority of the members of the
Board of Directors (other than Island Directors) shall determine those
Additional Island Directors to be removed from the Board of Directors (x) based
on the reverse chronological order of the addition of such Additional Island
Directors to the Board of Directors or (y) so as to eliminate Additional Island
Directors in the order in which they will next come up for re-election, at the
option of such majority of the members of the Board of Directors.
(g) In the event that any Island Stockholder ceases to own
Subject Shares representing at least the Minimum Designee Amount, (i) the Island
Directors designated by such Island Stockholder shall be subject to removal, and
such Island Stockholder shall take all actions specified in Section 2.2(h) with
respect to such Island Director and (ii) the number of Additional Island
Directors, if any, which the Island Stockholders are then entitled to appoint
shall be recalculated in accordance with Section 2.2(a)(ii) taking into account
the termination of such Island Stockholder's rights, and the applicable Island
Stockholder(s) shall take all appropriate actions pursuant to paragraphs (f) and
(h) of this Section 2.2.
(h) Each Island Stockholder entitled to designate any Island
Director who becomes subject to removal pursuant to paragraph (f) or (g) of this
Section 2.2 shall cause such Island Director to immediately offer to tender to
the Board of Directors his or her resignation from the Board of Directors and,
if such resignation is requested by vote of a majority of the members of the
Board of Directors (other than Island Directors), such Island Director shall
immediately tender such resignation as provided in the certificate of
incorporation and bylaws of Instinet. In the event that any Island Director
fails to deliver his or her resignation as required pursuant to this Section
2.2(h), Instinet and the Reuters Parties shall be entitled to take all necessary
and appropriate action to cause such Island Director to be removed. Any vacancy
resulting from a resignation or removal of any Island Director pursuant to this
Section 2.2(h) and not eliminated by a decrease in the total number of directors
shall be filled, if at all, as provided in the certificate of incorporation and
bylaws of Instinet.
(i) If following his or her election to the Board of Directors
a Island Director accepts a Conflicting Position or a Conflicting Position held
by such Island Director not previously disclosed to the Board of Directors is
identified, the Island Stockholder entitled to designate such Island Director
shall cause such Island Director to immediately tender his or her resignation
from the Board of Directors as provided in the certificate of incorporation and
bylaws of Instinet. In the event that any Island Director fails to deliver his
or her resignation as required pursuant to this Section 2.2(i), Instinet and the
Reuters Parties shall be entitled to take all necessary and appropriate action
to cause such Island Director to be removed and in such case, the applicable
Island Stockholder shall have the rights set forth in Section 2.2(c).
(j) For so long as the Island Stockholders are entitled to
designate at least two Island Designees pursuant to Section 2.2(a)(i), one
Island Director shall be entitled to be nominated to serve on each committee of
the Board of Directors (other than any committee required by law or requirement
of any applicable self-regulatory organization or any stock exchange or
inter-dealer quotation system on which the Common Stock is listed or quoted to
consist solely of independent directors but only to the extent no Island
Director qualifies as an independent director; provided that no Island Director
shall serve on a committee to the extent such individual would be prohibited
from so serving by any such applicable law or requirement). The Island
Stockholders shall designate the Island Director entitled to serve on each
committee by unanimous written agreement delivered to Instinet.
(k) Prior to the Effective Time, the Reuters Parties shall
designate in writing three Nasdaq Independent Directors (together with their
successors, the "Designated Independent Directors"). Prior to the earliest to
occur of (i) the date which is three years from the Effective Time, (ii) the
date on which Reuters Entities cease to own shares of Instinet's stock
representing at least 35% of the Total Voting Power of Instinet, and (iii) the
first date on which the Island Stockholders are entitled to designate less than
two Island Designees pursuant to Section 2.2(a)(i), the Reuters Parties shall
vote the shares of Common Stock held by them to re-elect each of, and shall not
vote such shares to remove, any of the Designated Independent Directors, other
than for Cause or if such Designated Independent Director holds a Conflicting
Position, without the consent of at least one of the Island Stockholders then
entitled to designate directors under Section 2.2(a)(i), which consent shall not
be unreasonably withheld or delayed; provided, however, that in the event the
Reuters Parties' obligations under this Section 2.2(k) terminate pursuant to
clause (i) above, the Reuters Parties shall not vote the shares of Common Stock
held by them to remove any Designated Independent Director then serving prior to
the end of his or her then-current term other than for Cause, without the
consent of at least one of the Island Stockholders then entitled to designate
directors under Section 2.2(a)(i), which consent shall not be unreasonably
withheld or delayed. If, during the period specified in the preceding sentence,
a vacancy of a position held by a Designated Independent Director occurs or
exists on the Board of Directors at any time and for any reason, including but
not limited to a vacancy because of the death, disability, retirement,
resignation or removal of such Designated Independent Director, the Reuters
Parties shall vote the shares of Common Stock held by them to elect to such
position a successor Nasdaq Independent Director, designated by the Reuters
Parties and approved by the Nominating Committee and at least one of the Island
Stockholders then entitled to designate directors under Section 2.2(a)(i), which
approval shall not be unreasonably withheld or delayed (without limiting the
foregoing, it shall be deemed reasonable to withhold approval with respect to a
designee that is an Affiliated Reuters Director).
(l) Instinet and the Reuters Parties shall take all necessary
action to elect Nicoll as a director of Instinet effective as of the Effective
Time. So long as (i) Reuters Entities own shares of Instinet's stock
representing at least 35% of the Total Voting Power of Instinet and (ii) the
Island Stockholders are entitled to designate at least two Island Designees
pursuant to Section 2.2(a)(i), the Reuters Parties shall vote the shares of
Common Stock held by them to re-elect the individual then serving as Chief
Executive Officer of Instinet and shall not vote such shares to remove such
individual other than for Cause or in connection with the termination of such
individual's status as Chief Executive Officer of Instinet, without the consent
of at least one of the Island Stockholders then entitled to designate directors
under Section 2.2(a)(i).
2.3. Voting.
(a) Each Reuters Party agrees to cause all shares of Common
Stock beneficially owned by it to be voted in favor of (or, if unanimously
requested by the Island Stockholders and then permitted by the certificate of
incorporation and bylaws of Instinet, shall execute a written consent, as
promptly as practicable following such request, in favor of):
(i) the election or removal of, as the case may be, of those
individuals nominated as Island Directors in accordance with
Section 2.2,
(ii) subject to the rights of Reuters Limited set forth in
Section 2.4 of the Corporate Agreement, so long as (x) the
Reuters Entities own shares of Instinet's stock representing a
majority of the Total Voting Power of Instinet or the Reuters
Entities have the right to appoint, through stock ownership,
voting agreement or otherwise, a majority of the Board of
Directors and (y) the Island Stockholders are entitled to
designate at least two Island Designees pursuant to Section
2.2(a)(i), any Approved Equity Issuance, and
(iii) subject to the provisions set forth in Sections 2.2(k)
and 2.2(l), the election as directors of the individuals
nominated as directors pursuant to such Sections.
(b) Each Holder agrees to cause all shares of Common Stock
beneficially owned by such Holder to be voted in favor of:
(i) the election or removal, as the case may be, of those
individuals designated by Reuters Holders as directors of
Instinet in accordance with the terms of the Corporate Agreement,
(ii) prior to the date which is three years from the
Effective Time but only so long as (x) Reuters Entities own
shares of Instinet's stock representing at least 35% of the Total
Voting Power of Instinet and (y) the Island Stockholders are
entitled to designate at least two Island Designees pursuant to
Section 2.2(a)(i), the election of the Designated Independent
Directors as directors of Instinet, and
(iii) so long as (x) the Reuters Entities own shares of
Instinet's stock representing a majority of the Total Voting
Power of Instinet and (y) the Island Stockholders are entitled to
designate at least two Island Designees pursuant to Section
2.2(a)(i), any Approved Equity Issuance.
(c) Each Holder agrees to use its reasonable efforts to cause
the Island Directors to act in accordance with the terms of the Corporate
Agreement.
(d) So long as the Reuters Entities own shares of Instinet's
stock representing a majority of the Total Voting Power of Instinet or the
Reuters Entities have the right to appoint, through stock ownership, voting
agreement or otherwise, a majority of the Board of Directors, the Reuters
Parties will take all stockholder action necessary to cause Instinet's Board of
Directors, and committees thereof, to fulfill any obligation of such Board or
committee or of Instinet specified herein.
2.4. Reuters Market Purchase Limitation. (a) Until the earlier
to occur of (i) the date which is three years from the Effective Time and (ii)
the date on which the Island Stockholders are entitled to designate no more than
one Island Designee pursuant to Section 2.2(a)(i), Reuters Limited shall not,
and shall not permit any Reuters Entity (in the case of Reuters Entities not
wholly owned, directly or indirectly, by Reuters Parent, to the extent that
Reuters Limited or Reuters Parent has the power to direct such Reuters Entity
and such direction is consistent with any fiduciary obligations such Reuters
Entity might have to third parties, it being understood that no Reuters Party
shall act through or in concert with any such non-wholly owned Reuters Entity in
any manner inconsistent with such Reuters Party's obligations hereunder) to,
without the written consent of Island Stockholders holding at least a majority
of the aggregate number of the Subject Shares, acquire any additional shares of
Common Stock, provided that the foregoing shall not apply (w) to the acquisition
by Reuters Entities of up to that number of shares of Common Stock that will
result in Reuters Entities owning, pro forma for such acquisition, that
percentage of the Total Voting Power of Instinet beneficially owned by Reuters
Entities at the Effective Time (taking into account all shares of Common Stock
to be issued in exchange for shares of capital stock of Island in accordance
with the Merger Agreement), (x) to any Rule 13e-3 Transaction that satisfies the
penultimate sentence of this Section 2.4(a) and Section 2.5(b), (y) to
acquisitions (that are not Market Transactions or by means of a tender or
exchange offer), provided that following the consummation of such acquisition
there shall remain at least 20 million Public Shares outstanding or (z) in the
event that any Person or "group" (as defined in the Exchange Act), without the
prior consent of the Board of Directors, has commenced or publicly announced its
intention to commence a tender or exchange offer for, or otherwise publicly
announced, without the prior consent of the Board of Directors, an intention to
seek to acquire (directly or indirectly), 40% or more of the outstanding voting
securities of Instinet or any securities convertible into voting securities of
Instinet, or any options, warrants or other rights to acquire voting securities
of Instinet; provided that any acquisition of additional shares of Common Stock
by Reuters Limited or any other Reuters Entity in reliance on this clause (z)
shall only be permitted until 10 days following such time as the Person or
"group" publicly withdraws such tender or exchange offer or public effort to
acquire securities of Instinet or permits such tender or exchange offer to
expire, except that Reuters Limited or any other Reuters Entity shall be
permitted to continue and consummate any tender or exchange offer or other
public effort to acquire securities of Instinet commenced or publicly announced
prior to the date of such withdrawal. For so long as the limitations on
acquisitions of shares of Common Stock pursuant to the other provisions of this
Section 2.4(a) apply, Reuters Limited shall not, and shall not permit any
Reuters Entity (in the case of Reuters Entities not wholly owned, directly or
indirectly, by Reuters Parent, to the extent that Reuters Limited or Reuters
Parent has the power to direct such Reuters Entity and such direction is
consistent with any fiduciary obligations such Reuters Entity might have to
third parties, it being understood that no Reuters Party shall act through or in
concert with any such non-wholly owned Reuters Entity in any manner inconsistent
with such Reuters Party's obligations hereunder) to, engage in a Rule 13e-3
Transaction, unless (I) such Entities have made a confidential offer to the
Board of Directors with respect to such Rule 13e-3 Transaction and (II) no offer
or any willingness to make an offer has been directly or indirectly publicly
disclosed without the prior written approval of a majority of the Nasdaq
Independent Directors and the Island Directors, voting together. Notwithstanding
anything to the contrary contained in this Agreement, any failure of the
condition contained in clause (II) of the previous sentence may be waived by a
majority of the Nasdaq Independent Directors and the Island Directors, voting
together, provided that following any public disclosure referred to in clause
(II) above, Reuters Limited and any applicable Reuters Entities shall have
adopted and maintained a "no comment" position with respect to such matter
unless directed to do otherwise by any applicable self-regulatory organization
or any stock exchange or inter-dealer quotation system on which such Reuters
Entity's capital stock is listed or quoted.
(b) In the event that Instinet engages in discussions or
negotiations with any Person other than a Reuters Entity that could result in
such Person beneficially owning 40% or more of the outstanding voting securities
of Instinet or any securities convertible into voting securities of Instinet, or
any options, warrants or other rights to acquire voting securities of Instinet
(or a successor to Instinet in a merger or consolidation transaction) or all or
substantially all of its assets:
(i) Instinet shall (x) offer to and if requested by Reuters
Parent, participate in, parallel discussions with Reuters Limited
or its designated Reuters Entity (to the extent desired by
Reuters Limited) with respect to a transaction of the same type
and (y) entertain proposals from Reuters Limited or such Reuters
Entity with respect to any transaction of the type described in
this Section 2.4(b); provided that Reuters Limited enters into an
agreement with Instinet related to the process under which such
discussions or negotiations will be conducted (relating to such
matters as confidentiality, "standstill" obligations and other
customary provisions) (a "Standstill Agreement") that is no less
restrictive to Reuters Limited than the least restrictive
Standstill Agreement entered into between Instinet and the Person
or Persons with whom Instinet is engaged in such discussions or
negotiations; and
(ii) if any such Person (other than Reuters Limited or any
Reuters Entity) engages in such negotiations or is provided
confidential information in connection with a possible
transaction regarding Instinet and (x) is not required to enter
into a Standstill Agreement in connection therewith or does enter
into a Standstill Agreement that is less restrictive to such
Person than the restrictions of Section 2.4(a) are to Reuters
Entities and Reuters Limited enters into a comparable agreement,
the provisions of Section 2.4(a) shall be deemed to be suspended
(in the case where no standstill is required) until the date
which is six months following the date on which negotiations or
exchange of information with respect to such possible transaction
ceases, or amended as necessary so as to conform to such less
restrictive Standstill Agreement for the period covered by the
standstill provisions of such Standstill Agreement.
(c) The parties agree that the ability of Reuters Limited to
direct the actions of Reuters Entities not wholly owned by Reuters Parent is or
may be limited to the extent contemplated in Section 2.4(a) above, it being
understood that no Reuters Party shall act through or in concert with any such
non-wholly owned Reuters Entity in any manner inconsistent with such Reuters
Party's obligations hereunder. Reuters Limited shall not directly or indirectly
intentionally engage in any transaction that has the effect of causing a wholly
owned Reuters Entity to become not wholly owned solely for the purpose of
evading the restrictions contained in this Section 2.4.
(d) The provisions of this Section 2.4 shall cease to apply to
Reuters Entities 90 days after the first date on which the Reuters Entities
cease to own shares of Instinet's stock representing 35% or more of the Total
Voting Power of Instinet. Any such release of Reuters Entities from the
provisions of this Section 2.4 shall not affect the obligations of any other
Person that otherwise remains subject to this Section 2.4 in accordance with its
terms by reason of Section 2.1(c)(iv) or otherwise.
2.5. Certain Actions. So long as (i) (x) the Reuters Entities
own shares of Instinet's stock representing a majority of the Total Voting Power
of Instinet or (y) directors that at such time fail to qualify as Nasdaq
Independent Directors due to their relationship with a Reuters Entity constitute
a majority of the Board of Directors and (ii) the Island Stockholders are
entitled to designate at least two Island Designees pursuant to Section
2.2(a)(i), in addition to any action that the Board of Directors or any other
committee or subset thereof may elect or be required to take:
(a) the Board of Directors shall maintain a committee,
consisting solely of one director designated by the Reuters Parties, one Island
Director and the Chief Executive Officer of Instinet, which committee shall
determine the process by which Instinet will approve transactions and
relationships entered into following the Effective Time between Instinet
Entities, on the one hand, and the Reuters Entities, on the other hand. Such
committee shall determine the types of such transactions or relationships that
(i) may be approved by management, (ii) must be approved by such committee,
(iii) must be approved by the Board of Directors, and/or (iv) must be approved
by a majority of all Nasdaq Independent Directors and Island Directors, voting
together.
(b) Notwithstanding the foregoing, each of the following shall
require the prior approval of a majority of all Nasdaq Independent Directors and
Island Directors, voting together:
(i) entering into, modifying, amending or terminating any
agreement, understanding or arrangement between any Instinet
Entity and any Reuters Entity, which would be reasonably likely
to result, in the reasonable opinion of the committee referred to
in Section 2.5(a), in a transfer of value from Instinet Entities
to Reuters Entities (or vice versa) in excess of $35,000,000
(such as providing for payments, receipts or expenditures, or, in
the case of a modification or amendment, additional payments,
receipts or expenditures);
(ii) any Rule 13e-3 Transaction that requires the action of
the Board of Directors and any standstill agreement related to a
possible Rule 13e-3 Transaction; or
(iii) any amendment to the Corporate Agreement or the
entering into by Instinet of any new agreement between Instinet
and any Reuters Entity, in each case that materially improves the
corporate governance, veto or similar rights of any Reuters
Entity provided under the Corporate Agreement or prevents the
Reuters Parties from honoring their obligations under this
Agreement in the manner and within the time periods contemplated
by this Agreement.
(c) The provisions of this Section 2.5 shall not apply to
those agreements, understandings and relationships set forth on Section 3.24 or
4.2(vi) of the Parent Disclosure Schedule attached to the Merger Agreement or to
any implementation thereof consistent with the material terms thereof, except to
the extent the same are proposed to be materially modified or terminated after
the Effective Time.
2.6. Certain Charter and Bylaw Amendments. During the term of
this Agreement, Instinet shall not amend or modify any provision of the
certificate of incorporation or bylaws of Instinet in any way that prevents the
Holders from exercising their rights under this Agreement or prevents the
Reuters Parties from honoring their obligations under this Agreement in the
manner and within the time periods contemplated by this Agreement.
2.7. Actions Taken in Absence of Direction from Holders.
Whenever any Island Stockholder is required under this Agreement to provide
direction to Instinet in connection with the rights granted to such Island
Stockholder hereunder and fails to do so, none of Instinet, the Reuters Parties
and the Board of Directors shall be liable to such Island Stockholder or any
other Person for any failure to honor such rights.
2.8. Registration Rights. Each party hereto agrees to take all
requisite action in its power so that, at the Effective Time, the Registration
Rights Agreement is entered into on the terms of the term sheet described in
Section 4.17 of the Merger Agreement. In the event that the Registration Rights
Agreement is not entered into at the Effective Time, each party hereto shall
take all requisite action in its power so that it is entered into on such terms
as soon as possible following the Effective Time. Subject to compliance by the
Island Stockholders with their obligations pursuant to this Section 2.8, the
Reuters Entities shall not exercise any rights pursuant to Article III of the
Corporate Agreement until such time as the Registration Rights Agreement is
entered into and during such time as the Registration Rights Agreement is in
effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Each Reuters Party represents and warrants, with respect
to such Reuters Party as follows:
(a) Status and Authority. Such Reuters Party is a company duly
organized and validly existing under the laws of its jurisdiction of
organization. The execution and delivery by such Reuters Party of this Agreement
and the performance of its obligations hereunder have been duly authorized by
all necessary corporate action on the part of such Reuters Party, and this
Agreement has been duly executed and delivered by the duly authorized officers
of such Reuters Party and constitutes the valid, legal and binding obligation of
such Reuters Party.
(b) No Conflicts.
(i) The execution, delivery and performance of this
Agreement by such Reuters Party will not result in (A) any
conflict with the charter documents of any such Reuters Party,
(B) any material breach or violation of or default under any
statute, law, rule, regulation, judgment, decree, order or any
material mortgage, deed of trust, indenture, agreement or any
other instrument to which such Reuters Party is a party or by
which any of their respective material properties or assets are
bound, or (C) the creation or imposition of any lien, charge,
pledge or encumbrance thereon, except for such breaches,
violations or defaults and such liens, charges, pledges or
encumbrances as would not, individually or in the aggregate,
adversely affect the ability of such Reuters Party to perform its
obligations hereunder.
(ii) No consent, approval or authorization of or filing with
any governmental authority is required with respect to such
Reuters Party in connection with the execution and delivery of
this Agreement, and the performance by such Reuters Party of its
obligations hereunder.
(c) No Litigation. There are no judicial or administrative
actions, proceedings or investigations pending or, to the best knowledge of such
Reuters Party, threatened, which question the validity of this Agreement or any
action taken or to be taken by such Reuters Party in connection herewith.
3.2. Instinet represents and warrants as follows:
(a) Status and Authority. Instinet is a company duly
organized, validly existing and in good standing under the laws of Delaware. The
execution and delivery by Instinet of this Agreement and the performance of its
obligations hereunder have been duly authorized by all necessary corporate
action on the part of Instinet (except as contemplated by the Merger Agreement),
and this Agreement has been duly executed and delivered by the duly authorized
officers of Instinet and constitutes the valid, legal and binding obligation of
Instinet.
(b) No Conflicts.
(i) The execution, delivery and performance of this
Agreement by Instinet will not result in (A) any conflict with
the charter documents of any Instinet Entity, (B) any material
breach or violation of or default under any statute, law, rule,
regulation, judgment, decree, order or any material mortgage,
deed of trust, indenture, agreement or any other instrument to
which any Instinet Entity is a party or by which any of their
respective material properties or assets are bound, or (C) the
creation or imposition of any lien, charge, pledge or encumbrance
thereon, except for such breaches, violations or defaults and
such liens, charges, pledges or encumbrances as would not,
individually or in the aggregate, adversely affect the ability of
Instinet to perform its obligations hereunder.
(ii) No consent, approval or authorization of or filing with
any governmental authority is required with respect to Instinet
in connection with the execution and delivery of this Agreement,
and the performance by Instinet of its obligations hereunder.
(c) No Litigation. There are no judicial or administrative
actions, proceedings or investigations pending or to the best knowledge of
Instinet, threatened, which question the validity of this Agreement or any
action taken or to be taken by Instinet in connection herewith.
3.3. Each Island Stockholder, with respect to such Island
Stockholder, represents and warrants as follows:
(a) Status and Authority. Such Island Stockholder, is a
corporation, limited partnership or limited liability company duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization. The execution and delivery by such Island Stockholder, of this
Agreement and the performance of its obligations hereunder have been duly
authorized by all necessary corporate, limited partnership or limited liability
company action on the part of such Island Stockholder, and this Agreement has
been duly executed and delivered by the duly authorized officers or other
representatives of such Island Stockholder and constitutes the valid, legal and
binding obligation of such Island Stockholder.
(b) No Conflicts; No Liens.
(i) The execution, delivery and performance of this
Agreement by such Island Stockholder, will not result in (A) any
conflict with the charter documents of such Island Stockholder,
(B) any material breach or violation of or default under any
statute, law, rule, regulation, judgment, decree, order or any
material mortgage, deed of trust, indenture, agreement or any
other instrument to which any such Island Stockholder, is a party
or by which any of its respective material properties or assets
are bound, or (C) the creation or imposition of any lien, charge,
pledge or encumbrance thereon, except for such breaches,
violations or defaults and such liens, charges, pledges or
encumbrances as would not, individually or in the aggregate,
adversely affect the ability of such Island Stockholder, to
perform its obligations hereunder.
(ii) None of such Island Stockholder's Subject Shares or
Datek Shares are subject to any lien, charge, pledge or
encumbrance thereon.
(iii) No consent, approval or authorization of or filing
with any governmental authority is required with respect to such
Island Stockholder in connection with the execution and delivery
of this Agreement, and the performance by such Island Stockholder
of its obligations hereunder.
(c) No Litigation. There are no judicial or administrative
actions, proceedings or investigations pending or to the best knowledge of such
Island Stockholder, threatened, which question the validity of this Agreement or
any action taken or to be taken by such Island Stockholder in connection
herewith.
3.4. Nicoll represents and warrants as follows:
(a) Authority. Nicoll has the legal capacity and all requisite
power and authority to enter into this Agreement and to perform his obligations
hereunder. This Agreement constitutes the valid, legal and binding obligation of
Nicoll.
(b) No Conflicts; No Liens.
(i) The execution, delivery and performance of this
Agreement by Nicoll will not result in (A) any material breach or
violation of or default under any statute, law, rule, regulation,
judgment, decree, order or any material mortgage, deed of trust,
indenture, agreement or any other instrument to which Nicoll is a
party or by which any of his Subject Shares are bound, or (C) the
creation or imposition of any lien, charge, pledge or encumbrance
on Nicoll's Subject Shares.
(ii) None of Nicoll's Subject Shares or Datek Shares are
subject to any lien, charge, pledge or encumbrance thereon.
(ii) No consent, approval or authorization of or filing with
any governmental authority is required with respect to Nicoll in
connection with the execution and delivery of this Agreement, and
the performance by him of his obligations hereunder.
(c) No Litigation. There are no judicial or administrative
actions, proceedings or investigations pending or to the best knowledge of
Nicoll, threatened, which question the validity of this Agreement or any action
taken or to be taken by him in connection herewith.
ARTICLE IV
MISCELLANEOUS
4.1. Amendments. This Agreement may be amended, supplemented
or otherwise modified only by a writing duly executed by or on behalf of
Instinet, each Reuters Party and Holders of at least a majority of the Subject
Shares, provided, however, that no amendment to paragraphs (a), (d), (e) or (f)
of Section 2.1 or to Article IV that would adversely affect Nicoll shall be
effective unless duly executed by Nicoll and provided, further, however, that an
amendment that adversely affects any Holder disproportionately to other Holders
shall not be effective unless duly executed by or on behalf of such Holder. No
waiver by any party of any of the provisions hereof shall be effective unless
explicitly set forth in writing and executed by (i) Instinet, in the case of a
waiver of rights of Instinet, (ii) the Reuters Parties, in the case of a waiver
of rights of the Reuters Parties, and/or (iii) Holders of at least a majority of
the Subject Shares, in the case of a waiver of rights of Holders, provided,
however, that no waiver with respect to paragraphs (a), (d), (e) or (f) of
Section 2.1 or to Article IV that would adversely affect Nicoll shall be
effective unless duly executed by Nicoll and provided, further, however, that a
waiver that adversely affects any Holder disproportionately to other Holders
shall not be effective unless duly executed by or on behalf of such Holder.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
4.2. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid, illegal or
unenforceable to any extent, the remainder of this Agreement or such provision
of the application of such provision to such party or circumstances, other than
those to which it is so determined to be invalid, illegal or unenforceable,
shall remain in full force and effect to the fullest extent permitted by law and
shall not be affected thereby, unless such a construction would be unreasonable.
4.3. Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be deemed duly given upon actual
receipt, and shall be delivered (a) in person, (b) by registered or certified
mail, postage prepaid, return receipt requested or (c) by facsimile or other
generally accepted means of electronic transmission (provided that a copy of any
notice delivered pursuant to this clause (c) shall also be sent pursuant to
clause (a) or (b)) above, addressed as follows:
(a) if to Instinet, to:
Instinet Group Incorporated
Three Times Square
10th Floor
New York, New York 10036
Attention: General Counsel
Telecopy No.: 646-223-9017
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Yvette P. Teofan
Telecopy No.: 212-225-3999
(b) If to any Reuters Party, to:
Reuters Limited
85 Fleet Street
London, England
EC4B 4AJ
Attention: General Counsel
Telecopy No.: 011-44-207-542-5896
with a copy to:
Reuters America Inc.
The Reuters Building
3 Times Square
New York, New York 10036
Attention: General Counsel
Telecopy No: 646-223-4250
and to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Vince Pagano, Esq.
William E. Curbow, Esq.
Telecopy No.: 212-455-2502
(c) If to any Holder or Nicoll, to such Holder or Nicoll at
the address and telecopy number set forth beneath such Holder's
or Nicoll's name on the signature pages hereto or on Exhibit B
hereto (or, if applicable, such Holder's Joinder Agreement) with
a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attn: Alfred O. Rose, Esq.
Telecopy No.: (617) 951-7050;
or to such other addresses or telecopy numbers as may be specified by like
notice to the other parties.
4.4. Further Assurances. Each party hereto shall execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such instruments and take such other action as may be reasonably necessary or
advisable to carry out their obligations under this Agreement and under any
exhibit, document or other instrument delivered pursuant hereto.
4.5. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York.
4.6. Entire Agreement. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof.
4.7. Successors. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. Except as set forth in Section 4.10, nothing
contained in this Agreement, express or implied, is intended to confer upon any
other Person or entity any benefits, rights or remedies.
4.8. Jurisdiction; Specific Performance. The parties to this
Agreement agree that jurisdiction and venue in any action brought by any party
hereto pursuant to this Amendment shall properly lie and shall be brought in any
federal or state court located in the Borough of Manhattan, City and State of
New York. By execution and delivery of this Agreement, each party hereto
irrevocably submits to the jurisdiction of such courts for itself or herself and
in respect of its or her property with respect to such action. Each party hereto
hereby irrevocably agrees and consents to service of process for all purposes
under this Agreement at the address specified for such party in, or in
accordance with Section 4.3. Any service made on such party hereto shall be
effective when delivered regardless of whether notice thereof is given to the
affected party. The parties hereto irrevocably agree that venue would be proper
in such court, and hereby irrevocably waive any objection that such court is an
improper or inconvenient forum for the resolution of such action. The parties
hereto acknowledge and agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. The parties hereto agree
to waive any requirement for the posting of any bond in connection with such
remedy.
4.9. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original instrument,
but all of which together shall constitute but one and the same agreement.
4.10. Assignment. Neither this Agreement nor any right or
obligation hereunder is assignable by any party except with the prior written
consent of Instinet, each Reuters Party and the Holders of at least a majority
of the Subject Shares. Notwithstanding the foregoing, the rights and obligations
of (i) any Holder under this Agreement may be transferred or assigned without
such prior written consent to any Person that qualifies as a Permitted
Transferee (pursuant to clause (ii) of the definition thereof) and that acquires
Subject Shares and (ii) of any Reuters Party under this Agreement may be
transferred or assigned without such prior written consent in accordance with
the provisions of Section 2.1(c)(i), Section 2.1(c)(iii) and Section 2.1(c)(iv)
applicable to such Transfer. Any assignment of rights of Holder permitted
pursuant to this Section 4.10 may be made only if the assignee assumes all of
the assignor's obligations pursuant to this Agreement. Any assignment permitted
pursuant to the terms hereof shall be effective upon receipt by Instinet of (x)
written notice from the transferring Holder or Reuters Party stating the name
and address of any transferee and identifying the number of Subject Shares or
shares of Common Stock with respect to which the rights and obligations under
this Agreement are being transferred, (y) a Joinder Agreement from such
transferee to be bound by the terms of this Agreement, or, if applicable, a
written agreement agreeing to be bound by certain terms of this Agreement, and
(z) in the case of a Transfer by a Island Stockholder, to the extent required by
paragraphs (g) (taking into account the effect of such Transfer) and (h) of
Section 2.2, the resignations of any Island Director designated by such Island
Stockholder.
4.11. Termination. Except as otherwise provided herein, this
Agreement shall terminate and be of no further effect on the date which is ten
years from the Effective Time. Following the expiration of the Initial Share
Holding Period, upon five Business Days prior written notice to Instinet and the
Reuters Parties, any Holder may terminate this Agreement with respect to itself
and its Affiliates; provided that (x) in the case of termination by a Island
Stockholder, such Island Stockholder has complied with Section 2.2(h) and (y)
effective upon transmission of such notice, such Holder and its Affiliates shall
be deemed to have ceased to own Subject Shares representing at least the Minimum
Designee Amount. Upon such termination, such Holder shall no longer be
considered a Holder hereunder.
4.12. Effectiveness of Agreement. Notwithstanding anything in
this Agreement to the contrary, this Agreement shall become effective only upon
the Effective Time.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
INSTINET GROUP INCORPORATED
By:
------------------------------
Name:
Title:
REUTERS LIMITED
By:
------------------------------
Name: Devin Wenig
Title: Attorney in Fact
REUTERS C CORP.
By:
------------------------------
Name: Devin Wenig
Title: Authorized Officer
REUTERS HOLDINGS SWITZERLAND SA
By:
------------------------------
Name: Devin Wenig
Title: Attorney in Fact
TA/ADVENT VIII, L.P. ADVENT ATLANTIC & PACIFIC
III, L.P.
By: TA Associates VIII, LLC, By: TA Associates AAP III
its General Partner Partners, L.P.,
its General Partner
By: TA Associates, Inc., By: TA Associates, Inc.,
its Manager its General Partner
By: By:
----------------------- -----------------------
Name: Name:
Title: Title:
TA ATLANTIC & PACIFIC IV, L.P. TA EXECUTIVES FUND, LLC
By: TA Associates AP IV Partners, L.P., By: TA Associates, Inc.,
its General Partner its Manager
By:
By: TA Associates, Inc., -----------------------
its General Partner Name:
Title:
By:
-----------------------
Name:
Title:
TA INVESTORS, LLC TA IX, L.P.
By: TA Associates, Inc., its Manager By: TA Associates IX, LLC,
its General Partner
By:
-----------------------
Name: By: TA Associates, Inc.,
Title: its Manager
By:
----------------------
Name:
Title:
1998 GPH FUND, LLC
By:
------------------------
Name:
Title:
GPH DT PARTNERS
By:
------------------------
Name:
Title:
2000 EXCHANGE PLACE FUND,
LLC
By:
------------------------
Name:
Title:
BAIN CAPITAL FUND VII, LLC
BAIN CAPITAL VII
COINVESTMENT FUND, LLC
By: Bain Capital Partners
VII, L.P., their
General Partner
By: Bain Capital Investors,
LLC, its General
Partner
By:
-----------------------
Name:
Title:
BCI DATEK INVESTORS, LLC
By:
-----------------------
Name:
Title:
BCIP ASSOCIATES II
BCIP ASSOCIATES II-B
BCIP TRUST ASSOCIATES II
BCIP TRUST ASSOCIATES II-B
By: Bain Capital Investors,
LLC, their Managing
Partner
By:
-----------------------
Name:
Title:
SILVER LAKE PARTNERS, L.P.
By: Silver Lake Technology
Associates, L.L.C.,
its General Partner
By:
-----------------------
Name:
Title:
SILVER LAKE INVESTORS, L.P.
By: Silver Lake Technology
Associates, L.L.C.,
its General Partner
By:
-----------------------
Name:
Title:
SILVER LAKE TECHNOLOGY
INVESTORS, L.L.C.
By: Silver Lake Technology
Management, L.L.C., its
Managing Member
By:
-----------------------
Name:
Title:
Solely for purposes of
paragraphs (a), (d), (e)
and (f) of Section 2.1,
Section 3.4 and Article IV
hereof:
EDWARD NICOLL
----------------------------
Address and telecopy number
for notices:
EXHIBIT A
JOINDER
By execution of this Joinder, the undersigned agrees to become
a party to that certain Stockholders Agreement, dated as of June 9, 2002 (the
"Agreement"), among Instinet Group Incorporated, Reuters Limited, Reuters C
Corp, Reuters Holdings Switzerland SA, the Bain Group, the Silver Lake Group,
the TA Group, and Edward Nicoll. Capitalized terms used but not defined herein
shall have the meaning ascribed thereto in the Agreement. By execution of this
Joinder, the undersigned shall have all the rights of [a Holder] [a Reuters
Party] and shall observe all the obligations of [a Holder] [a Reuters Party], in
each case as specified in the Agreement and to have made on the date hereof all
representations and warranties set forth in Section [3.3] [3.1] of the
Agreement, modified, if necessary, to reflect the nature of the undersigned as a
trust, estate or other entity.
Name:________________________
Address for Notices: With Copies to:
______________________________ _____________________________
______________________________ _____________________________
______________________________ _____________________________
______________________________ _____________________________
______________________________ _____________________________
Signature:______________________________
Date:___________________________________
EXHIBIT B
ISLAND STOCKHOLDERS
NAME ADDRESS FOR NOTICES
- ---- -------------------
Bain Entities
- -------------
Bain Capital Fund VII, LLC c/o Bain Capital
Bain Capital VII Coinvestment Fund, LLC 111 Huntington Ave.
BCI Datek Investors, LLC Boston, MA 02199
BCIP Associates II Attn: John Connaughton
BCIP Associates II-B Facsimile: 617-516-2010
BCIP Trust Associates II
BCIP Trust Associates II-B with a copy to:
c/o Ropes & Gray
One International Place
Boston, MA 02110-2624
Attn: Al Rose
Facsimile: 617-951-7050
Silver Lake Entities
Silver Lake Partners, L.P. c/o Silver Lake Partners
Silver Lake Investors, L.P. 2725 Sand Hill Road
Silver Lake Technology Investors, L.L.C. Menlo Park, CA 94025
Attn: Karl Detweiler
Facsimile: 650-233-8125
Additional facsimile copy:
Attn: Mike Bingle
Facsimile: 212-981-3535
TA Entities
TA Atlantic & Pacific IV, L.P. c/o TA Associates
TA/Advent VIII, L.P. 125 High Street, Suite 2500
TA Investors, LLC Boston, MA 02110
TA Executives Fund, LLC Attn: Thomas Alber
TA IX, L.P. Facsimile: 617-574-6789
Advent Atlantic & Pacific III L.P.
GPH DT Partners
1998 GPH Fund, LLC
2000 Exchange Place Fund, LLC