EXECUTION COPY
AMERITRADE OPTION EXERCISE AGREEMENT
THIS AMERITRADE OPTION EXERCISE AGREEMENT (the "Agreement")
dated as of October 18, 2002 by and among INSTINET GROUP INCORPORATED, a
Delaware corporation ("Instinet"), DATEK ONLINE HOLDINGS CORP., a Delaware
corporation ("Datek"), and AMERITRADE HOLDING CORPORATION, a Delaware
corporation ("Ameritrade"). Capitalized terms used but not defined herein shall
have the respective meanings given them in the Hedge Option Agreements (as
defined below).
RECITALS
WHEREAS, Datek and Island Holding Corporation, a Delaware corporation
("Island"), as successor to The Island ECN, Inc., are parties to two Hedge
Option Agreements, each dated as of April 10, 2001 (the "Hedge Option
Agreements"), relating to certain stock appreciation rights granted to employees
of Datek pursuant to the Datek Online Holdings Corp. 2001 Special Island Stock
Appreciation Right Plan (the "SAR Plan");
WHEREAS, on September 9, 2002, Datek merged with and into a
wholly-owned subsidiary of Ameritrade and in connection therewith Ameritrade
assumed the SAR Plan;
WHEREAS, effective as of September 20, 2002, Island merged with and
into a wholly-owned subsidiary of Instinet (the "Merger");
WHEREAS, by virtue of the Merger and pursuant to Section 3(c) of the
Hedge Option Agreements, the right of Datek to purchase Option Shares pursuant
to the Hedge Option Agreements has been converted into the right to purchase
shares of common stock, par value $.01 per share, of Instinet (the "Shares") at
an exchange ratio of 1.30488293010049 Shares per Option Share;
WHEREAS, Instinet, Ameritrade and certain other parties thereto entered
into a Registration Rights Agreement, dated as of September 20, 2002 (the
"Registration Rights Agreement"), relating to registration rights with respect
to certain securities of Instinet, including up to 1,651,238 Shares that may be
issuable to Datek under the Hedge Option Agreements (the "Instinet Shares");
WHEREAS, Ameritrade, as successor to Datek under the SAR Plan, wishes
to exercise over the Registration Period (as defined below) all of the
outstanding Options under the Hedge Option Agreements and to purchase all of the
Instinet Shares and Instinet has agreed to facilitate the sale of the Instinet
Shares by Ameritrade by preparing and filing a "shelf" registration statement on
Form S-3;
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the parties hereto hereby agree as follows:
ARTICLE I
EXERCISE OF OPTIONS; REGISTRATION OF SHARES
SECTION 1.1. Exercise of Options. The parties hereby agree that
Ameritrade is entitled to exercise all of Datek's rights under the Hedge Option
Agreements and that Datek no longer has any rights or obligations under the
Hedge Option Agreements. Notwithstanding any provision in the Hedge Option
Agreements to the contrary, Ameritrade is entitled to exercise, during the
Registration Period (as defined below) only, all of the outstanding Options
pursuant to the Hedge Option Agreements and to purchase the Instinet Shares. At
any time and from time to time during the Registration Period, Ameritrade may
exercise any or all of the outstanding Options by giving written notice to
Instinet of the exact number of Options to be exercised and the corresponding
number of Instinet Shares to be purchased pursuant to the exercised Options (the
"Exercise Notice"). Notwithstanding any provision in the Hedge Option Agreements
to the contrary, upon payment by Ameritrade to Instinet in cash of the exercise
price of $0.91 per Instinet Share covered by such Exercise Notice (such exercise
price representing the full Exercise Price for such Instinet Share as required
by the Hedge Option Agreements), Instinet shall deliver to Ameritrade a
certificate representing the purchased Instinet Shares, registered in the name
of Ameritrade or its designee, or shall transmit electronically to a brokerage
account designated by Ameritrade the purchased Instinet Shares, as both parties
may mutually agree; provided, that in no event shall Instinet be required to
deliver the purchased Instinet Shares earlier than three business days after its
receipt of the relevant Exercise Notice. Payment of the exercise price for any
Instinet Shares will be made by wire transfer to account number 066-609852 at
JPMorgan Chase, NY, NY (ABA 000000000). Any and all unexercised Options shall
expire at the expiration of the Registration Period.
SECTION 1.2. Registration Statement. Subject to the terms and
conditions set forth herein and in reliance on the representations and
warranties contained herein, as soon as reasonably practicable after the date
hereof, Instinet shall prepare and file with the U.S. Securities and Exchange
Commission (the "SEC") a "shelf" registration statement (the "Registration
Statement") for the resale by Ameritrade of the Instinet Shares on a continuous
or delayed basis pursuant to Rule 415 under the Securities Act of 1933, as
amended, subject to the limitations provided herein. Instinet shall use its
reasonable best efforts (i) to have the Registration Statement declared
effective by the SEC as soon as practicable after the Registration Statement has
been filed with the SEC and (ii) to keep such Registration Statement
continuously effective and free of material misstatements or omissions
(including the preparation and filing of any amendments and supplements
necessary for that purpose) for the period (the "Registration Period") from the
date the Registration Statement becomes effective until the earlier of (x) the
date on which Ameritrade has consummated the sale of all of the Instinet Shares
under the Registration Statement and (y) 30 days from the date the Registration
Statement first became effective. Ameritrade shall furnish to Instinet such
information regarding Ameritrade and the distribution proposed by Ameritrade as
Instinet may reasonably request in writing and as shall be reasonably required
in connection with the Registration Statement.
SECTION 1.3. Instinet Blackout Rights. If the filing, initial
effectiveness or continued use of the Registration Statement at any time would
require Instinet to disclose material non-public information which disclosure
(i) would be required to be made in the Registration Statement so that the
Registration Statement would not be materially misleading, (ii) would not be
required to be made at such time but for the filing, effectiveness or continued
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use of the Registration Statement and (iii) would be materially detrimental to
Instinet or would materially interfere with any material financing, acquisition,
corporate reorganization or merger or other transaction involving Instinet and
any of its subsidiaries and that, as a result of such potential disclosure or
interference, it is in the best interests of Instinet to delay the filing or
initial effectiveness of, or suspend the use of, the Registration Statement at
such time, and if Instinet delivers to Ameritrade a certificate signed by the
chief executive officer and the general counsel of Instinet to that effect, then
Instinet may delay the filing or initial effectiveness of, or suspend the use
of, such Registration Statement for such period of time not to exceed 120 days
as is determined in good faith by Instinet to be necessary for such purpose. If
the Registration Statement has become effective and Instinet exercises its
rights under the preceding sentence, Ameritrade agrees to suspend, immediately
upon its receipt of the notice referred to above, its use of the prospectus
(including all amendments and supplements to such prospectus and all material
incorporated by reference in such prospectus) relating to the Registration
Statement in connection with any sale or offer to sell the Instinet Shares and
agrees not to disclose to any other Person (as defined below) the fact that
Instinet has exercised such rights or any related facts. Instinet shall
immediately notify Ameritrade of the expiration of any period during which it
exercised its rights under this Section 1.3 and shall immediately notify
Ameritrade that the use of the prospectus may be resumed or as soon as
reasonably practicable provide to Ameritrade copies of a supplemented or amended
prospectus that complies with the provisions of the Securities Act. Ameritrade
shall be entitled to commence or resume disposition of its Instinet Shares after
Ameritrade is notified by Instinet that the use of the prospectus may be resumed
or after receipt by Ameritrade of the copies of the supplemented or amended
prospectus, as the case may be, and, if so directed by Instinet, Ameritrade will
deliver to Instinet (at Instinet's expense) all copies, other than permanent
file copies then in Ameritrade's possession, of the prospectus covering the
Instinet Shares which are current at the time of the receipt of notice of such
suspension. If Ameritrade is required to suspend the use of a prospectus
pursuant to this Section 1.3, the applicable Registration Period shall be
extended by the same number of days as the days such use is suspended. For
purposes herein, "Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust unincorporated association,
government (and any department or agency thereof) or other entity.
SECTION 1.4. Registration Expenses. Except as provided herein, Instinet
shall pay all Registration Expenses (as defined below) with respect to the
Registration Statement. Except as provided herein, Ameritrade shall be
responsible for its own fees and expenses of counsel and financial advisors and
its internal administrative and similar costs, which shall not constitute
Registration Expenses. For purposes herein, "Registration Expenses" means any
and all expenses incident to performance of or compliance with the registration
of the Instinet Shares pursuant to this Article I, including, without
limitation, (i) the fees, disbursements and expenses of Instinet's counsel and
accountants; (ii) all expenses, including filing fees, in connection with the
preparation, printing and filing of the Registration Statement, any preliminary
prospectus or final prospectus, any amendments and supplements thereto and the
mailing and delivering of copies thereof to Ameritrade and any dealers; (iii)
the cost of printing or producing any blue sky or legal investment memoranda and
any other documents in connection with the offering, sale or delivery of the
Instinet Shares; (iv) all expenses in connection with the qualification of the
Instinet Shares for offering and sale under state securities laws, including the
fees and disbursements of counsel for Ameritrade in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(v) transfer agents' and registrars' fees and
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expenses and the fees and expenses of any other agent or trustee appointed in
connection with such offering, sale or delivery; (vi) all security engraving and
security printing expenses; (vii) all fees and expenses payable in connection
with the listing of the Instinet Shares on any securities exchange or automated
interdealer quotation system; and (viii) the reasonable fees and expenses of one
counsel for Ameritrade incurred in connection with the registration hereunder.
SECTION 1.5. Withdrawal; No Further Obligations. (a) Sections 2.7
(other than subsection (p)), 2.10, 2.11 and 2.14 of the Registration Rights
Agreement are hereby incorporated by reference herein solely to the extent
necessary to permit Ameritrade to effect sales of Instinet Shares under the
Registration Statement as if Ameritrade were a Selling Holder (as defined in the
Registration Rights Agreement) (and the applicable Holder's Representative (as
defined in the Registration Rights Agreement)) and as if the Instinet Shares
were Registrable Securities (as defined in the Registration Rights Agreement);
it being agreed for the purpose of such incorporation that Ameritrade has no
right to make underwritten offerings under the Registration Statement. Except to
the extent expressly set forth in the preceding sentence, Ameritrade hereby
withdraws from the Registration Rights Agreement pursuant to Section 3.12
thereof. Contemporaneously with the signing of this Agreement, Ameritrade agrees
to send written notice of its withdrawal from the Registration Rights Agreement
to the Group R Holders' Representative (as defined in the Registration Rights
Agreement).
(b) Except for the provisions of the Registration Rights Agreement
incorporated by reference herein pursuant to Section 1.5(a), (i) Instinet has no
rights or obligations under the Registration Rights Agreement as it relates to
Ameritrade and, following the expiration of the Registration Period, neither
Instinet nor Island shall have any further obligations with respect to the
Registration Statement or any rights or obligations under the Hedge Option
Agreements and (ii) Ameritrade has no rights or obligations under the
Registration Rights Agreement and, following the expiration of the Registration
Period, shall have no further rights with respect to the Registration Statement
or any rights or obligations under the Hedge Option Agreements.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. Representations; Warranties. Each party (the "Representing
Party") hereby represents to each of the other two parties that:
(i) the Representing Party has the legal authority to execute, deliver
and perform this Agreement;
(ii) this Agreement has been duly and validly executed and delivered by
such Representing Party;
(iii) this Agreement constitutes a legal, valid and binding obligation
of the Representing Party, enforceable against such party in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws
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affecting creditors' rights generally and to general principles of equity
(whether considered in a proceeding in equity or at law); and
(iv) the execution and delivery of this Agreement by the Representing
Party and the consummation of the transactions contemplated hereby do not and
will not (A) require any material governmental approval or (B) violate or
conflict with, result in a breach of, or constitute a default under, (x) any
provision of any certificate of incorporation, certificate of formation,
certificate of limited partnership, by-laws, partnership agreement, limited
liability company agreement or other similar constituent, organizational and
governing documents, as applicable, of the Representing Party, (y) any material
contract to which the Representing Party is a party or by which such
Representing Party may be bound or (z) any material applicable law.
ARTICLE III
MISCELLANEOUS
SECTION 3.1. Notices All notices, demands and other communications
hereunder shall be in writing (including telecopier or similar writing) and
shall be given to the party to whom it is addressed at such party's address, as
set forth below, or as such party may hereinafter specify for the purpose by
notice to the other party. Each such notice, demand or other communication shall
be effective (i) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified below and confirmation is received, (ii) if given by
overnight courier, one business day after deposit thereof with a national
overnight courier service, or (iii) if given by any other means, when delivered
at the address specified in this Section 3.1.
INSTINET
Instinet Group Incorporated
Xxxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
Telecopy No.: 000-000-0000
with a copy to:
Instinet Group Incorporated
Xxxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxx
Telecopy No.: 000-000-0000
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and
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopy No.: 212-225-3999
AMERITRADE OR DATEK
Ameritrade Holding Corporation
000 Xxxxxxxx Xxxxxxxx Xxxxxxx
Xxxxxx Xxxxx
Xxxxxxxxx Xxxxxxxx, Xxxxxxxx 00000
Telecopy No: 000-000-0000
Attention: Xxxxx X.X. Xxxxxx, Esq.
with a copy to:
Mayer, Brown, Xxxx & Maw
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telecopy No: 000-000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
SECTION 3.2. Waivers; Remedies; Amendments; Termination (a) No failure
or delay on the part of any party in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
(b) The parties hereto acknowledge that in the event that any of the
provisions of this Agreement are not performed in accordance with their specific
terms or are otherwise breached then money damages will be inadequate and no
adequate remedy at law may be available. Accordingly, each party hereto agrees
that each other party hereto shall have the right to enforce its rights and the
obligations of the other parties hereto not only by an action for damages but
also by an action for specific performance, injunction and/or other equitable
relief. The parties hereto agree to waive any requirement for the posting of any
bond in connection with such remedy.
(c) This Agreement shall not be amended, modified or terminated other
than by a written instrument executed by each of the parties hereto.
SECTION 3.3. Successors and Assigns. This Agreement shall be binding
on, and shall inure to the benefit of, the parties hereto and their respective
successors and assigns.
SECTION 3.4. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York.
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SECTION 3.5. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
SECTION 3.6. 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 3.7. Amendment to Agreements. The parties agree that the
provisions of this Agreement relating to the Hedge Option Agreements and the
parties' rights and obligations thereunder constitute an amendment to the Hedge
Option Agreements pursuant to Section 8(a) thereof.
SECTION 3.8 Continued Effectiveness. Unless Instinet obtains a consent
or waiver from the Holders of Registrable Securities (as defined in that certain
Registration Rights Agreement, dated as of October 1, 2001, by and among
Instinet, Xxxxx X. Xxxxxx, Xxxxx X. Xxxxx, Overunder, LLC, Xxxx X. XxXxxxxx, XX,
Xxxx Xxxxx, Xxxxx Xxxxx, Xxxxxx Xxx Xxxx and Xxxxxx Xxxxx) that they shall not
exercise any piggyback rights they may have with respect to the Registration
Statement, Instinet shall keep effective the Registration Statement on Form S-3
(Registration No. 333-84960) (the "ProTrader Registration Statement") covering
Shares issued in connection with the acquisition by Instinet of ProTrader Group,
L.P. until the earlier of the expiration of the Registration Period or the sale
of all of the Shares covered by the ProTrader Registration Statement.
SECTION 3.9 Third Party Beneficiaries. Except as set forth Section 2.10
of the Registration Rights Agreement incorporated herein by reference pursuant
to Section 1.5(a), nothing contained in this Agreement, express or implied, is
intended to confer upon any other Person any benefits, rights or remedies.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the date first
above written.
INSTINET GROUP INCORPORATED
By: /s/ Xxxx Xxxxxxxxx
---------------------------------
Name: Xxxx Xxxxxxxxx
Title: CFO
AMERITRADE HOLDING CORPORATION
By: /s/ Xxxx X. Xxxxxxxxx
---------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: EVP/CAO
DATEK ONLINE HOLDINGS CORP.
By: /s/ J. Xxxxx Xxxxxxxx
---------------------------------
Name: J. Xxxxx Xxxxxxxx
Title: President
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