EXHIBIT 10.9
INSTINET GROUP INCORPORATED
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June 9, ▇▇▇▇
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Dear Matt:
Reference is made to (i) the Agreement and Plan of Merger (the
"Merger Agreement"), dated as of the date hereof, among Instinet Group
Incorporated ("Instinet"), Instinet Merger Corporation and Island Holding
Company, Inc. (together with any successor or assign thereto, "Island Holding")
and (ii) the Employment Agreement (the "Employment Agreement"), dated as of June
19, 2001, between you and Island ECN, Inc. ("Island"). Capitalized terms used
and not defined herein shall have the respective meaning ascribed thereto in the
Merger Agreement or the Employment Agreement, as applicable.
As provided in the Merger Agreement, it is a condition to
Instinet's willingness to enter into the Merger Agreement that you agree to the
provisions set forth in this letter agreement, including, without limitation,
the interpretation of certain terms of the Employment Agreement and your waiver
of certain of your rights under the Employment Agreement. Accordingly, to induce
Instinet to enter into the Merger Agreement and consummate the transactions
contemplated thereby and for other good and valuable consideration, the receipt
and sufficiency of which you hereby acknowledge, you and Instinet hereby agree,
effective as of the date hereof but (except with respect to paragraph III below)
subject to consummation of the Merger, as follows:
I. INTERPRETATION.
You hereby acknowledge and agree that any change or alteration
to your title, position, duties, status, authority or responsibilities and the
transfer of your employment from Island to Instinet resulting from or made in
connection with or in contemplation of the consummation of the transactions
contemplated by the Merger Agreement or the integration of the businesses of
Instinet and Island Holding thereafter will not constitute "Good Reason" as
defined in or for any purpose under the Employment Agreement.
II WAIVER OF CERTAIN RIGHTS.
You hereby acknowledge and agree that you will not, and you
hereby waive any all of your rights under the Employment Agreement to, resign
from your employment with Instinet, Island Holding or any of their respective
subsidiaries or affiliates, other than Datek Holdings Corp. ("Datek")
(collectively (excluding Datek), the "Instinet Group") with or without Good
Reason at any time after the date hereof, including, without limitation,
following
consummation of the transactions contemplated by the Merger Agreement, and in
connection with or as a result of such resignation be entitled to receive any
severance compensation, benefit, right or other entitlement pursuant to
Paragraph (B)(3) of Schedule I to the Employment Agreement or otherwise.
Notwithstanding the foregoing, subject to execution of a definitive employment
agreement by and between you and Instinet, as contemplated below, you will be
entitled to the severance compensation and benefits set forth in such agreement
in the event of your resignation from Instinet for "good reason," as defined
therein, if, to the extent and under the circumstances, if any, and in the
amounts provided therein.
III EXECUTION OF INSTINET EMPLOYMENT AGREEMENT.
You hereby covenant, acknowledge and agree that the summary of
principal terms attached hereto as Exhibit A (the "Summary") sets forth your
understanding of the principal terms of your compensation and employment
arrangements with Instinet effective as of the Effective Time and that, promptly
following the date hereof, you and Instinet will negotiate in good faith and
execute a definitive employment agreement with Instinet, which agreement will be
based on the Instinet standard form of senior executive employment agreement
previously provided to you and will include the terms set forth in such Summary.
You further understand and agree that the terms set forth in the Summary are
intended to be legally binding upon you and Instinet until such terms are
superceded upon the execution of such definitive employment agreement by you and
Instinet.
This letter agreement shall be governed by, and construed in
accordance with, the laws of the State of New York and may be executed in
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same instrument.
Please confirm your agreement to all of the terms and
provisions of this side letter, including Schedule A and Exhibit A hereto, by
signing and dating the enclosed copy of this letter agreement and returning such
executed copy to Instinet.
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Very truly yours,
Instinet Group Incorporated
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
Acknowledged, Accepted and Agreed as of this 9th day of June, 2002:
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Exhibit A
Summary of Principal Terms of
Employment Arrangements for ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: [To come] of Instinet Group Incorporated ("Instinet")
Reporting To the Chief Executive Officer of Instinet
Responsibilities:
Annual Salary: $350,000
Annual Bonus: Target bonus for 2002 (pro rated from closing) and
2003 of $1.4 million, based upon achievement of
financial targets and performance goals established
by the Compensation Committee of Instinet (the
"Committee"), after consultation with the CEO. In any
event, Executive will be entitled to a guaranteed
minimum bonus for 2002 of $700,000 (pro-rated as
described above) and any bonus payable by Island, as
approved by the Island Compensation Committee, for
the portion of the 2002 year preceding the closing,
as pro-rated for such portion of the 2002 year.
Long-Term On the date of the closing of the merger (the
Compensation; "Closing Date"), Executive will receive a one-time
Instinet Option special retention grant of options to purchase
Grants: 150,000 Instinet shares, at an exercise price per
share equal to the closing price of such shares on
the last trading day prior to the Closing Date.(1)
Subject to Executive's continued employment, 25% of
the special retention options will become vested on
the one year anniversary of the Closing Date and the
remaining 75% will become vested in 36 equal
increments, on each monthly anniversary of the
Closing Date, beginning with the thirteen month
anniversary of the Closing Date. All other terms of
the special options will be governed by the Instinet
2000 Stock Option Plan (the "Option Plan").
(1) Note that the number of option shares has been
established after giving effect to the extraordinary
cash dividend to be declared prior to the closing of
the Island Holding transaction and the exercise price
will be determined based on the market price for
Instinet shares after the record date, which will
also reflect the effects of the dividend.
Executive will be eligible for annual option grants
under the Option Plan, beginning in February 2003,
for such number of options as may be determined by
the Committee, commensurate with Executive's
position.
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(1) Note that the number of option shares has been established after giving
effect to the extraordinary cash dividend to be declared prior to the closing of
the Island Holding transaction and the exercise price will be determined based
on the market price for Instinet shares after the record date, which will also
reflect the effects of the dividend.
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Note that, upon a change in control of Instinet,
options granted under the Option Plan continue to
vest in accordance with their existing vesting
schedule, subject to acceleration in the event of a
subsequent termination without cause or resignation
for good reason.
Employee Benefits: Executive to participate in all employee and
executive benefit plans maintained by Instinet for
its executives.
Treatment of Island All options to purchase Island Holding shares
Holding Options: currently held by Executive will continue in
accordance with their current terms, as converted
into options to purchase Instinet shares in
accordance with the Merger Agreement.
Treatment of Datek SARs in respect of Datek Shares to be retained
Datek SARs in by Executive in accordance with their current terms,
respect of Datek which include accelerated vesting and exercisability
Shares: in the event of a Datek change in control or IPO
under certain circumstances.
Lock-Up: Executive would be precluded from selling more than
150,000 Instinet shares during the 12 month period
following the closing of the merger (including those
purchased upon exercise of any options).
Consequences of - Eighteen months' salary;
Termination without
Cause or Resignation - 150% of "average bonus" (based on
for Good Reason average of prior three years'
(subject to delivery bonuses);
of general release):
- continued vesting of options
(including special retention
options and converted Island
Holding options) over the eighteen
month severance period and
exercisability of vested options
during severance period and for 30
days following the expiration
thereof;
- eighteen months' medical benefits;
- pro rata bonus for year of
termination (based on target bonus
for that year); and
- expiration of lock-up on sales of
Instinet shares on termination
without cause. Compensation
Committee may waive lock-up in
whole or in part on a resignation
for good reason.
Definition of Executive would be required to acknowledge that the
Good Reason: merger and change in his position do not constitute
good reason under his existing agreement. Note that
Executive will also be required to waive any right to
resign within six months following the merger and
receive severance.
Going forward, good reason would include material
diminution in position,
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duties, etc., material decrease in base pay or
relocation.
Non-Compete/ In case of termination without cause or resignation
Non-Solicit, etc.: for good reason: 18 months following termination
(i.e., severance pay-out period); in all other cases,
12 months following termination.
Parachute Tax None.
Reimbursement
and Gross-Up:
Compensation Instinet and Executive will negotiate in good faith
Committee the terms of a definitive employment agreement to be
Approval; executed by Instinet and Executive, which definitive
Definitive employment agreement will contain all of the
Documentation: provisions herein and will be based upon the Instinet
standard form of senior executive employment
agreement.
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