Exhibit 10.3

 

EXECUTION VERSION

 

TRANSACTION AGREEMENT

 

Dated as of April 22, 2005

 

by and among

 

The Nasdaq Stock Market, Inc.,

 

Norway Acquisition Corp.

 

and

 

Iceland Acquisition Corp.

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TABLE OF CONTENTS

 

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ARTICLE I DEFINITIONS    1

Section 1.1

   General    1 ARTICLE II TRANSFER OF ASSETS AND LIABILITIES    20

Section 2.1

   Sale and Transfer of Newco Assets    20

Section 2.2

   Transfer of Newco Liabilities    21

Section 2.3

   Purchase Price; Payment of Merger Consideration; Reimbursement of Certain
Amounts Paid By Instinet Prior to the Closing    21

Section 2.4

   The Closing    22

Section 2.5

   Indebtedness of the Company and its Subsidiaries    22

Section 2.6

   Purchase Price Allocation    23

Section 2.7

   Working Capital    23

Section 2.8

   Collection of Aged Receivables    26

Section 2.9

   Working Capital Adjustment Shortfall    27

Section 2.10

   Collection Policies    28 ARTICLE III REPRESENTATIONS AND WARRANTIES    28

Section 3.1

   Representations and Warranties of Newco    28

Section 3.2

   Representations and Warranties of the Company    29

Section 3.3

   Representations and Warranties of Parent    30 ARTICLE IV TAX MATTERS    31

Section 4.1

   Indemnification    31

Section 4.2

   Tax Returns and Certain Refunds    32

Section 4.3

   Contest Provisions    33

Section 4.4

   Assistance and Cooperation    34

Section 4.5

   Application of VAB Tax Attributes    35

Section 4.6

   Allocation of VAB Tax Benefits    37

Section 4.7

   Remittance of VAB Tax Benefit Payments; Payment of Archipelago Tax Benefit   
38

Section 4.8

   Look-Back Mechanism    39

Section 4.9

   Resolution of All Tax Related Disputes    39

Section 4.10

   Transfer Taxes    40

Section 4.11

   Payments    40

 

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Section 4.12

   Survival Limitations    40

Section 4.13

   Exclusivity    40

Section 4.14

   Termination of Tax Sharing Agreements    40

Section 4.15

   338 Elections    41

Section 4.16

   Parent Capital Contributions    41

ARTICLE V INDEMNIFICATION

   42

Section 5.1

   Newco’s Agreement to Indemnify    42

Section 5.2

   Parent’s and the Company’s Agreement to Indemnify    42

Section 5.3

   Reduction of Indemnifiable Losses for Tax Benefits and Insurance Benefits
Received    42

Section 5.4

   Procedure for Indemnification    43

Section 5.5

   Pending Litigation    44

Section 5.6

   Remedies Exclusive    44

Section 5.7

   Purchase Price Adjustment    45 ARTICLE VI CERTAIN ADDITIONAL MATTERS    45

Section 6.1

   Further Assurances; Subsequent Transfers    45

Section 6.2

   Use of Names    46

Section 6.3

   Payment of Intercompany Accounts    47

Section 6.4

   Merger Agreement Provisions    47

Section 6.5

   No Additional Representations    48

Section 6.6

   Reasonable Efforts; Regulatory Consents, Authorizations, etc    48

Section 6.7

   Ancillary Agreements    51

Section 6.8

   Sharing of Certain Payments    52

Section 6.9

   Certain Restrictions Pending the Closing    52

Section 6.10

   Noncompetition and Non-Solicitation    52

Section 6.11

   Reimbursement of Certain Amounts Paid By Instinet Prior to the Closing    55

Section 6.12

   Sharing of Amounts Payable In Respect of the Exchange Fund    55

Section 6.13

   Settlement of Litigation Constituting Shared Transaction Liabilities    55

Section 6.14

   LJR Insurance Policy    56 ARTICLE VII ACCESS TO INFORMATION AND SERVICES   
56

Section 7.1

   Access to Information    56

 

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Section 7.2

   Litigation Cooperation    57

Section 7.3

   Retention of Records    57

Section 7.4

   Confidentiality    57

Section 7.5

   Publicity    58 ARTICLE VIII EMPLOYEE BENEFITS; LABOR MATTERS    58

Section 8.1

   Officers and Employees    58

Section 8.2

   Employee Benefits    58

Section 8.3

   Other Liabilities and Obligations    60

Section 8.4

   Preservation of Rights to Amend or Terminate Plans    60

Section 8.5

   Reimbursement; Indemnification    60 ARTICLE IX MISCELLANEOUS    61

Section 9.1

   Conditions to Closing    61

Section 9.2

   Termination Prior to the Closing    63

Section 9.3

   Effect of Termination    64

Section 9.4

   Survival    64

Section 9.5

   Entire Agreement; Third Party Beneficiaries    65

Section 9.6

   Fees and Expenses    65

Section 9.7

   No Waiver    65

Section 9.8

   Amendments    65

Section 9.9

   Governing Law    65

Section 9.10

   Notices    65

Section 9.11

   Interpretation    67

Section 9.12

   Counterparts    68

Section 9.13

   Specific Performance    68

Section 9.14

   Successors and Assigns    68

Section 9.15

   Severability    69

Section 9.16

   Jurisdiction; Venue; Consent to Service of Process    69

Section 9.17

   Waiver of Jury Trial    69

Section 9.18

   Company and ECN Entity Obligations    70

 

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SCHEDULES

 

Disclosure Schedule

 

EXHIBITS

 

Exhibit A – Form of Transition Services Agreement

 

Exhibit B – Form of Amendment to Clearing Agreement

 

Exhibit C – Form of Co-Location Agreement

 

Exhibit D – Form of Billing and VTE License Agreement

 

Exhibit E – Retained Business Balance Sheet as of December 31, 2004

 

Exhibit F – Newco Business Balance Sheet as of December 31, 2004

 

Exhibit G – Form of First Amendment to Sublease

 

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TRANSACTION AGREEMENT

 

THIS TRANSACTION AGREEMENT (this “Agreement”) is made and entered into as of
April 22, 2005, by and among The Nasdaq Stock Market, Inc., a Delaware
corporation (“Parent”), the Company (as defined herein) and Iceland Acquisition
Corp., a Delaware corporation (“Newco”).

 

WHEREAS, concurrently with the execution of this Agreement, the Company has
entered into an Agreement and Plan of Merger, dated as of the date hereof, by
and among Instinet Group Incorporated, a Delaware corporation (“Instinet”),
Parent and the Company (the “Merger Agreement”), pursuant to which, among other
things, the Company will merge with and into Instinet (the “Merger”); and

 

WHEREAS, immediately after the Effective Time (as defined herein), Parent, the
Company and Newco desire to consummate the sale to Newco of all the Newco Assets
(as defined herein), subject to the assumption of the Newco Liabilities (as
defined herein), and upon the terms and subject to the conditions set forth
herein.

 

NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth herein, the parties hereto,
intending to be legally bound hereby, agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1 General. As used in this Agreement, the following terms shall have
the following meanings:

 

“Accountant” shall have the meaning set forth in Section 4.9.

 

“Action” means any suit, claim, action, arbitration, inquiry, proceeding or
investigation by or before any Authority.

 

“Affiliate” means a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the person specified.

 

“Aged Receivable” means an accounts receivable of the Retained Business that is
outstanding for more than 90 days but for less than 181 days as of the close of
business on the final day of the month ending immediately prior to the Closing
Date to the extent it is reflected in “Accounts Receivable, net”, on the Final
Retained Business Working Capital Statement.

 

“Aged Receivable Collection Amount” shall have the meaning set forth in Section
2.9(c).

 

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“Aged Receivables Excess” shall have the meaning set forth in Section 2.8(a).

 

“Aged Receivables Percentage” means a fraction, the numerator of which equals
the Aged Receivables Excess, and the denominator of which equals the aggregate
amount of all Aged Receivables.

 

“Agreement” shall have the meaning set forth in the Recitals.

 

“Allocation Schedule” shall have the meaning set forth in Section 2.6.

 

“Ancillary Agreements” means (a) the Transition Services Agreement in the form
attached as Exhibit A, (b) the Amendment to Clearing Agreement in the form
attached as Exhibit B, (c) the Co-Location Agreement in the form attached as
Exhibit C and (d) the Billing and VTE License Agreement in the form attached as
Exhibit D.

 

“Antitrust Law” means any Law that is designed or intended to prohibit, restrict
or regulate actions having the purpose or effect of monopolization or restraint
of trade, or the lessening of competition through merger or acquisition,
specifically including, the Sherman Antitrust Act of 1890, the Clayton Act of
1914, the HSR Act, and the Federal Trade Commission Act of 1914.

 

“Applicable Authority” means the persons set forth on Part F of Schedule 1.1 of
the Disclosure Schedule.

 

“Archipelago Offset Amount” shall have the meaning set forth in the definition
of VAB Tax Attribute.

 

“Archipelago Sale” means any sale of shares of Archipelago Holdings Inc. held by
Instinet or any of its Subsidiaries as of the date of this Agreement and sold by
Instinet or any its Subsidiaries prior to the Closing Date.

 

“Archipelago Tax Benefit” means the economic benefit resulting from the
application of the Archipelago Offset Amount against the LJR Gain pursuant to
Section 4.5(b) or 4.5(c).

 

“Asset” means, with respect to any person, except as otherwise provided herein,
any and all of its right, title and interest in and to all of the rights,
properties, assets, claims, contracts and businesses of every kind, character
and description, whether real, personal or mixed, tangible and intangible,
whether accrued, contingent or otherwise, of every kind and description and
wherever located, owned or used by such person, including (i) all cash, cash
equivalents, notes and accounts receivable (whether current or non-current),
deposit accounts, securities accounts and other banks accounts; (ii) all
certificates of deposit, banker’s acceptances and other investment securities;
(iii) all patents, patent rights, trademarks, service marks, trademark and
service mark rights, trade names, trade name rights, domain names, copyrights,
data rights, privacy rights, publicity rights, registrations or applications for
any of the foregoing, trade secrets, works of authorship, technology and
know-how (including all data bases, customer lists,

 

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confidential information, discoveries, inventions and improvements), and other
proprietary rights and information; (iv) all rights existing under leases,
contracts, licenses, service agreements, sales and purchase agreements, other
agreements and business arrangements and all policies of insurance and proceeds,
benefits and rights to coverage under insurance policies; (v) all real estate
and all buildings and other improvements thereon; (vi) all leasehold
improvements and all equipment (including all office equipment), fixtures, trade
fixtures and furniture; (vii) all office supplies, other miscellaneous supplies
and other tangible property of any kind; (viii) all computer hardware, software,
computer programs and systems and documentation relating thereto, including all
databases and reference and resource materials; (ix) all prepayments or prepaid
expenses; (x) all claims, causes of action, rights of recovery, rights to sue
for past, present and future infringement of any intellectual property rights
and rights of set-off of any kind; (xi) the right to receive mail, accounts
receivable payments and other communications; (xii) all customer lists and
records pertaining to customers and accounts, personnel records, all lists and
records pertaining to suppliers and agents, and all books, ledgers, files and
business records of every kind and all minute books, stock ledgers and other
corporate books and records; (xiii) all advertising materials and all other
printed or written materials; (xiv) all permits, waivers, licenses, approvals
and authorizations of governmental authorities or third parties relating to the
ownership, possession or operation of the Assets; (xv) all capital stock,
partnership interests and other equity or ownership interests or rights,
directly or indirectly, in any Subsidiary of such person or other entity; (xvi)
all goodwill as a going concern and all other intangible properties; (xvii) all
net operating losses, tax credits, net capital losses or any other tax
attributes which are held by such person as a matter of Law; and (xviii) all
employee contracts, including the right thereunder to restrict the employee from
competing in certain respects.

 

“Assumed Non-U.S. Benefit Plans” has the meaning set forth in Section 8.2(b).

 

“Assumed U.S. Benefit Plans” has the meaning set forth in Section 8.2(a).

 

“Authority” means any court, arbitrator, administrative or other governmental
department, agency, commission, tribunal, authority or instrumentality, domestic
(including federal, state or local) or foreign or any Self-Regulatory
Organization, which has authority or jurisdiction over the Company or any of its
Subsidiaries or any of their respective properties or assets.

 

“Available Merger Consideration Cash” means all cash held in U.S. Dollars by
Instinet, including the net after-tax proceeds of the LJR Sale, at the Effective
Time to the extent such cash is immediately available without restriction for
use in the payment of Merger Consideration (as defined in the Merger Agreement)
and the cash out of the Company Options (as defined in the Merger Agreement)
pursuant to and in accordance with Article 3 of the Merger Agreement.

 

“Burdensome Condition” shall have the meaning set forth in Section 6.6(h).

 

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“Carry Tax Years” shall have the meaning set forth in Section 4.5(e).

 

“CBX” shall have the meaning set forth in Section 6.10(a).

 

“Closing” shall have the meaning set forth in Section 2.4.

 

“Closing Date” means the date on which the Merger is consummated, provided that
all of the conditions set forth in Section 9.1 have been satisfied or waived by
the applicable party or parties, which date shall be the first business day
following the last day of an Instinet fiscal month end unless another date is
agreed upon by the parties.

 

“Closing Date Newco Business Working Capital Amount” shall have the meaning set
forth in Section 2.7(a).

 

“Closing Date Receivables” means all accounts receivable of the Retained
Business that are outstanding for less than 181 days as of the close of business
of the final day of the month ending immediately prior to the Closing Date to
the extent reflected in “Accounts Receivable, net”, on the Final Retained
Business Working Capital Statement.

 

“Closing Date Retained Business Working Capital Amount” shall have the meaning
set forth in Section 2.7(a).

 

“Closing Date Working Capital Amounts” shall have the meaning set forth in
Section 2.7(a).

 

“Code” means the Internal Revenue Code of 1986.

 

“Company” means (a) prior to the Effective Time, Norway Acquisition Corp., a
Delaware corporation, and (b) after the Effective Time, Instinet, as the
surviving corporation in the Merger.

 

“Company Indemnitees” shall have the meaning set forth in Section 5.1.

 

“Company Percentage” means 85.58%.

 

“Consolidated Return” shall have the meaning set forth in Section 4.1.

 

“Convertible Notes Documents” means the Convertible Notes Securities Purchase
Agreement and the other Transaction Documents (as defined in the Convertible
Notes Securities Purchase Agreement).

 

“Convertible Notes Securities Purchase Agreement” means the Securities Purchase
Agreement, dated as of April 22, 2005, between Parent and Norway Acquisition
SPV, LLC, a Delaware limited liability company.

 

“Determination Month” shall have the meaning set forth in Section 2.8(a).

 

“Disclosure Schedule” means the disclosure schedule dated as of the date hereof
and attached hereto.

 

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“ECN Entities” means IHCI and each of its Subsidiaries, including the entities
set forth on Part A of Section 1.1 of the Disclosure Schedule.

 

“Effective Time” shall have the meaning provided for such term in the Merger
Agreement.

 

“ERISA” shall have the meaning set forth in Section 8.2(a).

 

“Excess Dissenting Shares Liability” shall have the meaning set forth in clause
(ii) of the definition of Shared Transaction Liabilities.

 

“Final Newco Business Working Capital Statement” shall have the meaning set
forth in Section 2.7(e).

 

“Final Retained Business Working Capital Statement” shall have the meaning set
forth in Section 2.7(e).

 

“First Parent Year” shall have the meaning set forth in Section 4.5(c).

 

“GAAP” means U.S. generally accepted accounting principles.

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

 

“IHCI” means INET Holding Company Inc., a Delaware corporation.

 

“Indemnifiable Losses” means any and all losses, Liabilities, claims, damages,
obligations, payments, costs and expenses (including the Liabilities, costs and
expenses of any and all Actions, demands, assessments, Judgments, settlements
and compromises relating thereto and reasonable attorneys’ fees and expenses in
connection therewith) suffered or incurred by an Indemnitee; provided, that the
foregoing does not include any losses, Liabilities, claims, damages,
obligations, payments, costs, fees or expenses arising out of or relating to any
claim for loss of profits or earnings, diminution in value or incidental,
indirect, special or consequential damages unless awarded against any Indemnitee
in a Third Party Claim.

 

“Indemnifying Party” means any party or other person who is required to
indemnify any other person pursuant to any indemnification provisions contained
in this Agreement.

 

“Indemnitee” means any party or other person who is entitled to receive
indemnification from an Indemnifying Person pursuant to any indemnification
provisions contained in this Agreement.

 

“INET Embedded Refund” means the extent to which the Final Retained Business
Working Capital Statement includes tax refunds that were filed for, but not
received, in both cases prior to the Closing; for the avoidance of doubt, the
Final Retained Business Working Capital Statement may reflect such filed for tax
refunds that

 

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were filed for as positive quantities within the “Deferred Tax Assets” and/or
“Taxes Receivable” line items, and/or within the “Taxes Payable” line item as
negative or “contra” entries.

 

“Information” shall have the meaning set forth in Section 7.1.

 

“Instinet” shall have the meaning set forth in the Recitals.

 

“Instinet Transaction Liabilities” means Liabilities incurred by Instinet and
its Affiliates for fees and expenses of investment bankers, attorneys,
accountants and other consultants and advisors and other out-of-pocket costs and
expenses incurred in connection with the transactions contemplated by the Merger
Agreement (or any other transactions considered by Instinet and its Subsidiaries
as alternatives to the Merger since November 18, 2004) and the LJR Sale that are
incurred prior to Closing or arise from or relate to arrangements, agreements or
commitments entered into or made by Instinet or its Affiliates prior to the
Effective Time, including Liabilities for filing fees and printing and mailing
costs and other expenses incurred in connection with the Proxy Statement (as
defined in the Merger Agreement) and other out-of-pocket costs and expenses
incurred in connection with Instinet’s and its Affiliates’ efforts to comply
with the pre-closing covenants and agreements contained in the Merger Agreement
(in all cases, excluding Parent/NAC Transaction Liabilities and Newco
Transaction Liabilities).

 

“IRS” shall have the meaning set forth in Section 2.6.

 

“Judgments” means any and all judgments, orders, writs, directives, rulings,
decisions, injunctions, decrees, assessments, settlement agreements (other than
settlement agreements under which there are no continuing obligations) or awards
of any Authority.

 

“Laws” means any and all applicable (a) federal, territorial, state, local and
foreign laws, ordinances and regulations; (b) codes, standards, rules,
requirements, orders and criteria issued under any federal, territorial, state,
local or foreign laws, ordinances or regulations; (c) rules, guidelines or
published interpretations of any Self-Regulatory Organization; and (d)
Judgments.

 

“Liabilities” means, with respect to any person, any and all liabilities and
obligations of such person, whether absolute, accrued, contingent, reflected on
a balance sheet (or in the notes thereto) or otherwise, including those arising
under any Law or Action, and those arising under any contract, commitment or
undertaking, and including Tax liabilities (other than liabilities for Newco
Business Taxes, Retained Business Taxes, Unallocated Taxes, Transaction Taxes
and Transfer Taxes).

 

“Lien” means any lien, encumbrance, pledge, mortgage, security interest, claim
under bailment, or storage contract.

 

“Listed” means, when referring to any Liability reflected on either the Final
Retained Business Working Capital Statement or the Final Newco Business Working
Capital Statement, “reflected on” or “reserved for” without regard to whether

 

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the amount of such Liability has been overstated, understated or is properly
valued on or quantified on such statement.

 

“LJR” means Lynch, Jones and Ryan, Inc., a Delaware corporation, and any
predecessors thereof.

 

“LJR Assets” means the Assets of LJR at the time of the LJR Sale.

 

“LJR Business” means the business of LJR at the time of the LJR Sale and all
former businesses of LJR.

 

“LJR Employees” means all employees of LJR at the time of the LJR Sale and all
former employees of LJR.

 

“LJR Gain” means the taxable gain recognized on the LJR Sale for income tax
purposes; provided, that, in the event that the Company reports both the LJR
Sale and the sale of the Newco Business as occurring within the same federal
income tax year of the Company pursuant to Section 4.16, the ordinary losses and
capital losses from the sale of the Newco Business shall be netted against the
ordinary gains and capital gains from the LJR Sale in accordance with applicable
Law, and the LJR Gain may accordingly be reduced (but not below zero).

 

“LJR Insurance Policy” means the insurance policy contemplated to be purchased
by Reuters America LLC in connection with the LJR Sale.

 

“LJR Liabilities” means Liabilities (other than Pre-Closing LJR Adjustment
Liabilities, Shared Transaction Liabilities relating to the LJR Sale and
Transaction Taxes relating to the LJR Sale) of the Company and its Subsidiaries
relating directly to LJR, the LJR Assets, the LJR Sale, the LJR Sale Agreement,
the LJR Business or the LJR Employees, in each case, to the extent such
Liability is or becomes a Liability of the Company, any ECN Entity or any Newco
Entity and is not reimbursed by Reuters Group PLC in a reasonable timely manner
in accordance with the LJR Sale Agreement (as defined in the Merger Agreement)
or covered by the LJR Insurance Policy and paid for by such insurance in a
reasonable timely manner.

 

“LJR Offset Loss” shall have the meaning set forth in the definition of “VAB Tax
Attributes.”

 

“LJR Sale” has the meaning provided for such term in the Merger Agreement.

 

“LJR Sale Agreement” has the meaning provided for such term in the Merger
Agreement.

 

“Merger” shall have the meaning set forth in the Recitals.

 

“Merger Agreement” shall have the meaning set forth in the Recitals.

 

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“Net VAB Transaction Loss” shall have the meaning set forth in the definition of
VAB Tax Attributes.

 

“Neutral Auditors” shall have the meaning provided in Section 2.7(d).

 

“Newco” shall have the meaning set forth in the Recitals.

 

“Newco Action” shall have the meaning set forth in Section 5.5.

 

“Newco Adverse Effect” means any event, occurrence, fact, condition, change, or
effect that (A) would have the effect of decreasing either the Available Merger
Consideration Cash or the Closing Date Retained Business Working Capital Amount
or (B) is or would have an adverse effect on: (i) the VAB Purchase, (ii) Newco’s
rights and obligations under this Agreement, (iii) Newco’s rights as a third
party beneficiary of the Merger Agreement, (iv) the Newco Assets, the Newco
Employees, the Newco Business or the Newco Liabilities, (v) the Final Newco
Business Working Capital Statement, (vi) the probability that the transactions
contemplated by this Agreement and the Merger Agreement will be consummated or
(vii) the condition (financial or other) of Newco or any of the Newco Entities
or any Affiliate of Newco; provided, that, notwithstanding the foregoing, none
of the following shall constitute a Newco Adverse Effect: (a) Parent or the
Company providing written notice to Instinet of a misrepresentation or breach of
any representation, warranty, covenant or agreement made by Instinet in the
Merger Agreement, (b) Parent or the Company asserting any right of termination
under Article 8 of the Merger Agreement (other than Section 8.1 of the Merger
Agreement) or (c) Parent or the Company asserting any right of termination under
this Agreement.

 

“Newco Assets” means all Assets of the Company as of the Closing Date, including
all cash of the Company (after giving effect to the transactions contemplated by
clause (i) of Section 2.3(b) and Section 2.3(c)) not used to pay Merger
Consideration (as defined in the Merger Agreement), cash out Company Options (as
defined in the Merger Agreement) or make payments in respect of Appraisal Shares
(as defined in the Merger Agreement) (calculated for this purpose to equal the
Merger Consideration which would have otherwise been payable in respect of such
Appraisal Shares) other than (a) the Retained Assets and (b) the LJR Assets. By
virtue of acquiring the Newco Assets pursuant to this Agreement, after the
Closing, Newco will directly or indirectly own all of the capital stock of the
Newco Entities and the Assets of such entities, including the Newco Proprietary
Name Rights, and such Assets of the Newco Entities will be considered Newco
Assets for purposes of this Agreement; provided, that for purposes of the
definition of Newco Adverse Effect and Sections 6.4(a), 6.6(b), 6.6(f) and
6.6(h), Newco Assets shall be deemed to include any Asset held by Instinet or
any of its Subsidiaries that is of a type that if held by the Company on the
Closing Date would constitute a Newco Asset.

 

“Newco Business” means all present and past businesses of Instinet and its
Subsidiaries (and their respective predecessors) other than the Retained
Business and the LJR Business.

 

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“Newco Business Balance Sheet” shall have the meaning set forth in Section
2.7(a).

 

“Newco Business Price” means $207,500,000.

 

“Newco Business Working Capital Amount” means, as of the close of business on a
given date, an amount equal to the “Stockholders Equity” (as such term is used
and calculated in the Newco Business Balance Sheet); provided, however, that,
when calculating the Newco Business Working Capital Amount, the accrual for each
Specified Non-Operating Liability (and related tax accruals) reflected thereon
shall be the same as the December 31, 2004 accruals, if any, reflected on the
Newco Business Balance Sheet for such Specified Non-Operating Liability.

 

“Newco Business Working Capital Statement” shall have the meaning set forth in
Section 2.7(a).

 

“Newco Business Working Capital Statement Proposals” shall have the meaning set
forth in Section 2.7(e).

 

“Newco Competing Business” shall have the meaning set forth in Section 6.10(a).

 

“Newco Economic Tax Period” means any taxable period beginning on or after
January 1, 2004 and ending no later than the Closing Date.

 

“Newco Employees” means:

 

(i) all employees of Instinet and its Subsidiaries as of immediately prior to
the Effective Time (other than the Retained Employees as of immediately prior to
the Effective Time);

 

(ii) the individual listed on Section 6.10(c) of the Disclosure Schedule; and

 

(iii) with respect to Liabilities, all former employees of Instinet and its
Subsidiaries (other than LJR Employees) that were (at the time the applicable
Liability was incurred) employed solely or primarily in connection with the
Newco Business;

 

provided, that for purposes of the definition of Newco Adverse Effect and
Section 6.4(a), Newco Employees shall be deemed to include any employee of
Instinet or any of its Subsidiaries who would be a Newco Employee if such person
were employed by the Company on the Closing Date.

 

“Newco Entities” means all of the direct and indirect Subsidiaries of Instinet
other than the ECN Entities, including the entities set forth on Part B of
Section 1.1 of the Disclosure Schedule, but excluding LJR.

 

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“Newco Indemnitees” shall have the meaning set forth in Section 5.2.

 

“Newco Liabilities” means, without duplication:

 

(i) the obligations of Newco to perform and comply with its representations,
warranties, covenants and agreements contained in this Agreement and Liabilities
arising from or relating to any breach by Newco of such representations,
warranties, covenants and agreements;

 

(ii) Liabilities (including indebtedness) Listed on the Final Newco Business
Working Capital Statement; provided, that if a specific and unique Liability is
Listed on both the Final Newco Business Working Capital Statement and the Final
Retained Business Working Capital Statement (it being understood that this
proviso shall not be deemed to apply to general balance sheet line items or
categories of Liabilities), such specific and unique Liability will be allocated
between Newco and the Newco Entities, on the one hand, and Parent, the Company
and the ECN Entities, on the other hand, in proportion to the relative amounts
of such Liability accrued, reflected or reserved for on such statements;

 

(iii) Liabilities of the Newco Entities (other than Retained Liabilities,
Pre-Closing LJR Adjustment Liabilities, Unallocated Liabilities, Undisclosed
Liabilities and Shared Transaction Liabilities);

 

(iv) Undisclosed Liabilities (whether first known to the parties before, on or
after the Closing Date) to the extent directly related to the Newco Business,
the Newco Assets or the Newco Employees;

 

(v) 50.0% of Pre-Closing Unallocated Undisclosed Liabilities;

 

(vi) the Newco Percentage of Unallocated Liabilities;

 

(vii) Newco Transaction Liabilities;

 

(viii) Newco Scheduled Liabilities;

 

(ix) the first $19,400,000 of Shared Transaction Liabilities (less the amount of
Pre-Closing Shared Transaction Liabilities paid by Instinet and its Subsidiaries
on or prior to the Closing Date);

 

(x) 50.0% of Pre-Closing Shared Transaction Liabilities in excess of the amount
provided in clause (ix) above (less the amount of Pre-Closing Shared Transaction
Liabilities paid by Instinet and its Subsidiaries on or prior to the Closing
Date) but in no event more than $2.5 million pursuant to this clause (x);

 

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(xi) the Newco Percentage of Post-Closing Shared Transaction Liabilities in
excess of the amount provided in clause (ix) above;

 

(xii) 50.0% of all Pre-Closing LJR Adjustment Liabilities (less the amount of
any such Pre-Closing LJR Adjustment Liabilities paid by Instinet and its
Subsidiaries on or prior to the Closing Date); and

 

(xiii) Liabilities that arise from or relate to the conduct of the Newco
Business following the Closing.

 

“Newco Names” shall have the meaning set forth in Section 6.2.

 

“Newco Percentage” means 14.42%.

 

“Newco Proprietary Name Rights” shall have the meaning set forth in Section 6.2.

 

“Newco Scheduled Liabilities” means the Liabilities set forth on Part C of
Section 1.1 of the Disclosure Schedule (it being understood that such
Liabilities shall be deemed to be Newco Liabilities and not Retained Liabilities
irrespective of whether or not any such Liabilities would fall within any
category of Retained Liabilities as set forth in the definition thereof).

 

“Newco Transaction Liabilities” means Liabilities incurred by Newco and its
Affiliates (i) for fees and expenses of investment bankers, attorneys,
accountants and other consultants and advisors and other out-of-pocket costs and
expenses, in each case, to the extent incurred in connection with the
transactions contemplated by this Agreement (it being understood that inclusion
of such fees and expenses in this definition shall have no effect on any
provision of the Convertible Notes Documents relating to the obligation of
Parent to reimburse such fees and expenses in accordance with the terms
thereof), (ii) that arise from or relate to any Action initiated by any
Authority or private party in connection with the transactions contemplated by
this Agreement and the Merger Agreement and (iii) for Newco’s out-of-pocket
costs and expenses, if any, associated with any attempt to transfer or failure
to transfer any Newco Asset.

 

“Parent” shall have the meaning set forth in the Recitals.

 

“Parent Competing Business” shall have the meaning set forth in Section 6.10(b).

 

“Parent/NAC Transaction Liabilities” means Liabilities, other than Shared
Transaction Liabilities, incurred by Parent, the Company and their Affiliates
(i) for fees and expenses of investment bankers, attorneys, accountants and
other consultants and advisors and other out-of-pocket costs and expenses, in
each case, to the extent incurred in connection with the transactions
contemplated by this Agreement and the Merger Agreement, (ii) that arise from or
relate to any Action initiated by any Authority or private party in connection
with the transactions contemplated by this Agreement and the Merger Agreement
and (iii) subject to Section 6.1, the out-of-pocket costs and expenses,

 

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if any, of Parent and the Company associated with any attempt to transfer or
failure to transfer any Newco Asset.

 

“Parent Tax Attributes” means any net operating losses, net capital losses or
tax credits (other than the VAB Tax Attributes) of Parent or any of its
Subsidiaries, including if held at the time of Closing, subsequently created,
subsequently acquired, or acquired as part of the Merger.

 

“Post-Closing Shared Transaction Liabilities” means Shared Transaction
Liabilities that are either (i) Instinet Transaction Liabilities that are not
paid or invoiced on or prior to the Closing Date or (ii) Shared Transaction
Litigation Liabilities that are not paid by Instinet or any Subsidiary thereof
on or prior to the Closing Date or which are not the subject of a settlement
(whether or not definitive) as of the Closing Date.

 

“Post-Closing Unallocated Undisclosed Liabilities” means Undisclosed Liabilities
that are incurred on or prior to the Closing Date but do not become known to the
parties until after the Closing Date, to the extent not directly related to the
Newco Business, the Newco Assets, the Newco Employees, the Retained Business,
the Retained Assets or the Retained Employees.

 

“Pre-Closing LJR Adjustment Liabilities” means Liabilities incurred by Instinet
and its Subsidiaries on or prior to the Closing Date pursuant to Section 2.3 or
2.4 of the LJR Sale Agreement (as defined in the Merger Agreement).

 

“Pre-Closing Shared Transaction Liabilities” means Shared Transaction
Liabilities that are either (i) Instinet Transaction Liabilities that are paid
on or prior to the Closing Date (or are the subject of an invoice delivered on
or prior to the Closing Date) or (ii) all Shared Transaction Litigation
Liabilities that are paid by Instinet or any Subsidiary thereof on or prior to
the Closing Date or which are the subject of a settlement (whether or not
definitive) as of the Closing Date.

 

“Pre-Closing Unallocated Undisclosed Liabilities” means Undisclosed Liabilities
that are incurred and become known to the parties on or prior to the Closing
Date to the extent not directly related to the Newco Business, the Newco Assets,
the Newco Employees, the Retained Business, the Retained Assets or the Retained
Employees.

 

“Pro Forma Loss Amount” means, for each taxable year beginning on or after
January 1, 2005 and ending on or prior to the Closing Date and the pre-Closing
portion (as determined below) of any taxable period beginning before and ending
after the Closing Date, the excess, if any, of (x) the aggregate amount of
deductions taken by the consolidated federal income tax group of which Instinet
is the common parent for the federal income tax year in which the LJR Sale
occurs less the amount of Restructuring Deductions taken by Instinet and its
Subsidiaries in such tax year over (y) the gross income of such consolidated
federal income tax group for such federal income tax year under Section 61 of
the Code less the LJR Gain; it being understood that if Instinet has not filed
its federal Tax Return for such tax year as of the Closing Date, Instinet shall

 

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estimate in good faith the amount of the Pro Forma Loss Amount, and such
estimate shall be adjusted when Instinet actually files such Tax Return. In the
case of taxable periods that begin before and end after the Closing, the Pro
Forma Loss Amount shall include only those amounts attributable to the portion
of such taxable period ending on and including the Closing Date, determined on
an “interim closing of the books” as of such date.

 

“Purchase Price” shall have the meaning set forth in Section 2.3.

 

“Reference Balance Sheets” shall have the meaning set forth in Section 2.7(a).

 

“Representatives” shall have the meaning set forth in Section 5.1.

 

“Resolution Period” shall have the meaning set forth in Section 2.7(c).

 

“Restructuring Deduction” means any Tax deduction of Instinet or any of its
Subsidiaries taken with respect to the period from and including January 1, 2005
to and including the Closing Date and attributable to any Restructuring Tax
Asset.

 

“Restructuring Tax Assets” means deferred tax assets of the Newco Business as of
December 31, 2004 relating to (i) accrued compensation (in the amount of $2.5
million as of December 31, 2004, comprised primarily of annual bonuses); (ii)
accrued restructuring (in the amount of $12.4 million as of December 31, 2004,
comprised primarily of severance, termination of leases and technology write
downs); and (iii) other accruals (in the amount of $7.8 million as of December
31, 2004, comprised primarily of accrued legal fees, accrued medical fees,
accrued communication, accrued post-retirement benefits, prepaid insurance,
deferred income, deferred rent, excess charitable deductions and supplemental
employee retirement plan expense), all as noted on the Newco Business Balance
Sheet and supporting 2004 tax provision.

 

“Retained Action” shall have the meaning set forth in Section 5.5.

 

“Retained Assets” means (i) all of the capital stock of IHCI, (ii) the rights of
the Company under this Agreement, (iii) all net operating losses, tax credits,
net capital losses or any other tax attributes which are held by the Company or
the Retained Business as a matter of Law (subject to the sharing of the economic
impact of such tax attributes pursuant to Article IV), (iv) the stock books,
minute books and corporate records of the Company and all other books and
records of the Company relating solely to the Retained Assets, the Assets of the
ECN Entities, the ECN Entities, the Retained Business or the Retained
Liabilities and (v) subject to Section 6.14, all of the Company’s rights, if
any, to coverage under the LJR Insurance Policy. By virtue of retaining all of
the capital stock of IHCI after the Closing, the Company will indirectly own all
of the Assets owned by IHCI, including the capital stock of the other ECN
Entities and the Assets of such entities, including the Retained Proprietary
Name Rights, and such Assets of the ECN Entities will be considered Retained
Assets for purposes of this Agreement.

 

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“Retained Business” means all present and past businesses of Instinet and its
Subsidiaries (and their respective predecessors) to the extent, in the case of
Instinet and its Subsidiaries (other than the ECN Entities) only, such
businesses constituted an electronic communications network or constituted a
broker-dealer to broker-dealer execution services business or the former
Instinet “sell-side” business.

 

“Retained Business Balance Sheet” shall have the meaning set forth in Section
2.7(a).

 

“Retained Business Price” means the amount equal to (x) $934,500,000, plus (y)
the amount (not to exceed $30,800,000) of Cash and Securities Owned (as such
terms are used on the Retained Business Balance Sheet) held by the ECN Entities
on the Closing Date as provided in Section 6.18 of the Merger Agreement.

 

“Retained Business Working Capital Adjustment” shall have the meaning set forth
in Section 2.7(f).

 

“Retained Business Working Capital Amount” means, as of the close of business on
a given date, an amount equal to the sum of (A) “Stockholder’s Equity” (as such
term is used in the Retained Business Balance Sheet), minus (B) the sum of (x)
“Intangible assets, net” (as such term is used in the Retained Business Balance
Sheet), (y) “Fixed assets, net” (as such term is used in the Retained Business
Balance Sheet) and (z) “Deferred Tax Assets, net” associated with fixed assets
and intangible assets, bad debt and net operating losses (as such terms are used
and calculated in the Retained Business Balance Sheet); provided, however, that,
for purposes of calculating the Retained Business Working Capital Amount, in no
event shall accounts receivable that are outstanding for more than 90 days but
for less than 181 days be reflected in an aggregate amount in excess of the
product of (i) 0.35 multiplied by (ii) the aggregate amount of all accounts
receivable of the Retained Business that are outstanding for less than 181 days
(notwithstanding the exclusion of such accounts receivable in the calculation of
the Retained Business Working Capital Amount, such excess accounts receivable
shall be reflected in “Accounts Receivable, net”, on the Retained Business
Working Capital Statement and the Final Retained Business Working Capital
Statement); provided, further, that, when calculating the Retained Business
Working Capital Amount the accrual for each Specified Non-Operating Liability
(and any related tax accruals) shall be the same as the December 31, 2004
accruals, if any, reflected on the Retained Business Balance Sheet for such
Specified Non-Operating Liability (it being understood that if the Retained
Business Balance Sheet did not contain any accrual for such Specified
Non-Operating Liability, there shall be no accrual therefor when calculating the
Retained Business Working Capital Amount).

 

“Retained Business Working Capital Statement” shall have the meaning set forth
in Section 2.7(a).

 

“Retained Business Working Capital Statement Proposals” shall have the meaning
set forth in Section 2.7(e).

 

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“Retained Employees” means:

 

(i) employees of the ECN Entities as of immediately prior to the Effective Time
(other than the individual listed on Section 6.10(c) of the Disclosure
Schedule); and

 

(ii) with respect to Liabilities, former employees of Instinet and its
Subsidiaries (other than LJR Employees) that were (at the time the applicable
Liability was incurred) employed solely or primarily in connection with the
Retained Business.

 

“Retained Liabilities” means, without duplication:

 

(i) the obligations of Parent and the Company to perform and comply with their
respective representations, warranties, covenants and agreements contained in
this Agreement and Liabilities arising from or relating to any breach by the
Company or Parent of such representations, warranties, covenants and agreements;

 

(ii) Liabilities (including indebtedness) Listed on the Final Retained Business
Working Capital Statement; provided, that if a specific and unique Liability is
Listed on both the Final Newco Business Working Capital Statement and the Final
Retained Business Working Capital Statement (it being understood that this
proviso shall not be deemed to apply to general balance sheet line items or
categories of Liabilities), such specific and unique Liability will be allocated
between Newco and the Newco Entities, on the one hand, and Parent, the Company
and the ECN Entities, on the other hand, in proportion to the relative amounts
of such Liability accrued, reflected or reserved for on such statements;

 

(iii) Liabilities of the ECN Entities (other than Newco Liabilities, Pre-Closing
LJR Adjustment Liabilities, Unallocated Liabilities, Undisclosed Liabilities and
Shared Transaction Liabilities);

 

(iv) Undisclosed Liabilities (whether first known to the parties before, on or
after the Closing Date) to the extent directly related to the Retained Business,
the Retained Assets or the Retained Employees;

 

(v) 50.0% of Pre-Closing Unallocated Undisclosed Liabilities;

 

(vi) the Company Percentage of Unallocated Liabilities;

 

(vii) Parent/NAC Transaction Liabilities;

 

(viii) Retained Scheduled Liabilities;

 

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(ix) Shared Transaction Liabilities to the extent not covered by clause (ix),
(x) and/or (xi) of the definition of Newco Liabilities;

 

(x) 50.0% of all Pre-Closing LJR Adjustment Liabilities; and

 

(xi) Liabilities that arise from or relate to the conduct of the Retained
Business following the Closing.

 

“Retained Names” shall have the meaning set forth in Section 6.2.

 

“Retained Proprietary Name Rights” shall have the meaning set forth in Section
6.2.

 

“Retained Scheduled Liabilities” means the Liabilities set forth on Part D of
Section 1.1 of the Disclosure Schedule (it being understood that such
Liabilities shall be deemed to be Retained Liabilities and not Newco Liabilities
irrespective or whether or not any such Liabilities would fall within any
category of Newco Liabilities set forth in the definition thereof).

 

“Reuters” shall have the meaning set forth in Section 8.2(b).

 

“Self-Regulatory Organization” means the National Association of Securities
Dealers, Inc., any domestic or foreign securities exchange, commodities
exchange, registered securities association, the Municipal Securities Rulemaking
Board, National Futures Association, and any other board or body, whether United
States or foreign, that is charged with the supervision or regulation of
brokers, dealers, commodity pool operators, commodity trading advisors or future
commission merchants.

 

“Shared Transaction Liabilities” means, without duplication, Liabilities
incurred by Instinet and its Subsidiaries that arise out of or relate to the
transactions contemplated by the Merger Agreement (or any transactions
considered by Instinet and its Subsidiaries as alternatives to the Merger since
November 18, 2004), including:

 

(i) Instinet Transaction Liabilities;

 

(ii) Liabilities arising from or relating to any Actions that arise from or
relate to the transactions contemplated by this Agreement and the Merger
Agreement, whether brought before or after the Closing and whether brought by
current or former stockholders or option holders of Instinet, any Authority or
third parties, including any obligation of the Company to make payments to
dissenting stockholders of Instinet (but only to the extent such Liabilities to
dissenting stockholders are in excess (such excess amount, the “Excess
Dissenting Shares Liability”) of the amount of Merger Consideration that would
have been payable in respect of the Appraisal Shares (as defined in the Merger
Agreement) held by such dissenting stockholders at the Effective Time if such
appraisal proceeding had not been brought) (the Liabilities described in this
clause (ii) being referred to as “Shared Transaction Litigation Liabilities”);

 

16

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provided, that notwithstanding anything to the contrary contained herein,
“Shared Transaction Liabilities” shall not include:

 

(a) any Parent/NAC Transaction Liabilities;

 

(b) any Newco Transaction Liabilities; or

 

(c) any Liabilities of Parent or the Company to (x) pay Merger Consideration (as
defined in the Merger Agreement), (y) cash out Company Options (as defined in
the Merger Agreement) or (z) make payments in respect of Appraisal Shares (as
defined in the Merger Agreement) except as set forth above with respect to any
Excess Dissenting Shares Liability.

 

“Shared Transaction Litigation Liabilities” shall have the meaning set forth in
clause (ii) of the definition of Shared Transaction Liabilities.

 

“Short Federal Tax Year” means the Company’s federal income tax year ending with
the date of the closing of the Merger.

 

“Specified Non-Operating Liabilities” means:

 

(i) Pre-Closing LJR Adjustment Liabilities;

 

(ii) LJR Liabilities;

 

(iii) Shared Transaction Liabilities;

 

(iv) Newco Scheduled Liabilities;

 

(v) Retained Scheduled Liabilities;

 

(vi) Unallocated Scheduled Liabilities; and

 

(vii) Undisclosed Liabilities.

 

“Subsidiary” means, with respect to any person, any corporation, limited
liability company, partnership, trust or other organization, whether
incorporated or unincorporated, of which (i) such person or any other Subsidiary
of such person is a general partner (excluding partnerships, the general
partnership interests of which held by such person and/or by any Subsidiary of
such person do not constitute a majority of the voting interest in such
partnership) or (ii) at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions is directly or indirectly owned
or controlled by such person or by any one or more of its Subsidiaries, or by
such person and one or more of its Subsidiaries.

 

“Target Retained Business Working Capital Amount” means the amount equal to (x)
$40,527,476, plus (y) the amount (not to exceed $30,800,000) of Cash and

 

17

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Securities Owned (as such terms are used on the Retained Business Balance Sheet)
held by the ECN Entities on the Closing Date as provided in Section 6.18 of the
Merger Agreement.

 

“Tax” means all (i) taxes imposed by any U.S. federal, state, local, foreign or
other Tax Authority, including all income, gross receipts, gains, profits,
windfall profits, gift, severance, ad valorem, capital, social security,
unemployment disability, premium, recapture, credit, excise, property, sales,
use, occupation, service, service use, leasing, leasing use, value added,
transfer, payroll, employment, withholding, estimated, license, stamp, franchise
or similar taxes of any kind whatsoever, including interest, penalties or
additions thereto; (ii) liabilities of the Company, any of its Subsidiaries, or
any of the Newco Entities for Taxes of any person (other than the Company, any
of its Subsidiaries, or any of the Newco Entities) under Treasury Regulation
Section 1.1502-6 (or any comparable provision of U.S. state or local or foreign
law) and (iii) liabilities of the Company, any of its Subsidiaries, or any of
the Newco Entities for the payment of any amounts pursuant to any tax-sharing,
tax allocation or similar agreement; provided, that the foregoing does not
include any losses, Liabilities, claims, damages, obligations, payments, costs,
fees or expenses arising out of or relating to any claim for loss of profits or
earnings, diminution in value or incidental, indirect, special or consequential
damages unless awarded against any Indemnitee in a Third Party Claim.

 

“Tax Attributes” shall have the meaning provided in the definition of VAB Tax
Attributes.

 

“Tax Authority” means any Authority or quasi-governmental or private body having
jurisdiction over the assessment, determination, collection or imposition of any
Tax.

 

“Tax Claim” means any claim with respect to Taxes made by any Tax Authority
that, if pursued successfully, would reasonably be expected to serve as the
basis for a claim for indemnification under Article IV.

 

“Tax Proceeding” shall have the meaning set forth in Section 4.3.

 

“Tax Return” means any report, return, documents, declaration or other
information (and any supporting schedules or attachments thereto) required to be
supplied to any Tax Authority or jurisdiction with respect to Taxes (including
any returns or reports filed on a consolidated, unitary, or combined basis)
(collectively, “Returns”), amended returns and claims for refund.

 

“Termination Date” means the date which is the first anniversary of the date of
this Agreement.

 

“Transactions” means the Merger, the LJR Sale and the sale of the Newco
Business.

 

“Transaction Taxes” shall have the meaning set forth in Section 4.1.

 

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“Third Party Claim” shall have the meaning set forth in Section 5.4(a).

 

“Unallocated Action” shall have the meaning set forth in Section 5.5.

 

“Unallocated Liabilities” means, without duplication:

 

(i) LJR Liabilities;

 

(ii) Post-Closing Unallocated Undisclosed Liabilities;

 

(iii) Unallocated Scheduled Liabilities;

 

(iv) the costs and expenses of maintaining policies of directors’ and officers’
liability insurance coverage under Section 6.9(c) of the Merger Agreement and
any Liabilities incurred by Parent or the Company under Section 6.9(b) of the
Merger Agreement in respect of the Company; and

 

(v) other Liabilities of the Company to the extent such Liabilities are not (a)
Liabilities of the type described in any clause of the definition of Newco
Liabilities (other than clause (vi) thereof) or (b) Liabilities of the type
described in any clause of the definition of Retained Liabilities (other than
clause (vi) thereof).

 

“Unallocated Scheduled Liabilities” means the Liabilities set forth on Part E of
Section 1.1 of the Disclosure Schedule (i.e., all Liabilities arising from or
relating to the Unallocated Actions).

 

“Unallocated Taxes” shall have the meaning set forth in Section 4.1

 

“Undisclosed Liabilities” means any Liabilities of Instinet or any Subsidiary
thereof (whether or not of a nature required to be set forth or reflected in a
consolidated balance sheet of Instinet prepared in accordance with GAAP) that
are incurred on or prior to the Closing Date and not (a) set forth, accrued,
reserved or otherwise reflected in the December 31, 2004 balance sheets included
in the Financial Statements (as defined in the Merger Agreement) or referred to
in the notes thereto, (b) set forth or referred to in the Company Disclosure
Schedule (as defined in the Merger Agreement) or (c) incurred since December 31,
2004 in the ordinary course of business of the Newco Business or the Retained
Business on a basis consistent with past practice.

 

“VAB Loss Year” shall have the meaning set forth in Section 4.5(d).

 

“VAB Purchase” shall have the meaning set forth in the Merger Agreement.

 

“VAB Tax Attributes” means, without duplication, (a) any Restructuring
Deduction, (b) any Pro Forma Loss Amount, (c) any net operating losses, tax
credits and net capital losses (collectively, “Tax Attributes”) related to or
created by (x) the operation of Instinet and its Subsidiaries through the
Closing Date, excluding any net operating loss

 

19

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available for any state or local income tax purposes as of the close of business
on December 31, 2004, or (y) the inability of the Company to utilize any portion
of the Net VAB Transaction Loss in the tax year in which such Net VAB
Transaction Loss is incurred, (d) any Tax deduction of Instinet or any of its
Subsidiaries attributable to (i) accounting, legal, investment banking,
consulting and other advisory fees and expenses incurred in anticipation of the
possibility of, or in connection with, any of the Transactions or (ii) the
vesting, cash-out, exercise, receipt, redemption or other disposition of any
form of equity-based compensation (including, without limitation, restricted and
unrestricted stock, performance shares, options and stock appreciation rights)
in connection with any of the Transactions, (e) the excess, if any, of (x) any
ordinary or capital loss related to or created by the Company’s disposition of
the Newco Business over (y) the sum of the amount of such loss that offsets or
is carried back to offset any ordinary or capital gain recognized on the LJR
Sale (the “LJR Offset Loss”) plus the amount of such loss that offsets or is
carried back to offset any net capital gain recognized on the Archipelago Sale
(the “Archipelago Offset Loss”), such excess being referred to herein as the
“Net VAB Transaction Loss”; it being understood that to the extent that the Net
VAB Transaction Loss is not fully utilized in the tax year in which such Net VAB
Transaction Loss is incurred as determined under Section 4.5(d), the unutilized
portion of such Net VAB Transaction Loss shall be treated as a net operating
loss and/or net capital loss described in clause (c)(y) of this definition
arising in the tax year of the incurrence of the Net VAB Transaction Loss; it
being further understood that neither the LJR Offset Loss nor the Archipelago
Offset Loss shall be deemed to be a VAB Tax Attribute.

 

“VAB Tax Benefits” means any economic benefit resulting from (i) the application
of any VAB Tax Attribute pursuant to Section 4.5 (whether in the form of
refunds, credits, offsets to Taxes for which Parent or any of its Subsidiaries
would otherwise be liable, or offsets to income that would otherwise give rise
to such Taxes) or (ii) any amount payable to Newco pursuant to clause (1) of
Section 4.16(b).

 

“Working Capital Shortfall” shall have the meaning set forth in Section
2.7(g)(i).

 

“Working Capital Statements” shall have the meaning set forth in Section 2.7(a).

 

ARTICLE II

 

TRANSFER OF ASSETS AND LIABILITIES

 

Section 2.1 Sale and Transfer of Newco Assets. Subject to the terms and
conditions of this Agreement, at the Closing, the Company shall sell, convey,
assign, transfer and deliver to Newco, free and clear of all Liens (other than
Liens in existence immediately prior to the Effective Time), all of the
Company’s right, title and interest in and to all Newco Assets of the Company.

 

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Section 2.2 Transfer of Newco Liabilities. Subject to the terms and conditions
of this Agreement, at the Closing, Newco shall assume and agree to pay, perform
and discharge when due, or cause to be assumed, paid, performed and discharged,
in due course, all of the Newco Liabilities of the Company and the ECN Entities.

 

Section 2.3 Purchase Price; Payment of Merger Consideration; Reimbursement of
Certain Amounts Paid By Instinet Prior to the Closing. (a) Subject to the terms
and conditions of this Agreement, in consideration of the aforesaid sale,
conveyance, assignment, transfer and delivery to Newco of the Newco Assets, at
the Closing, Newco shall (a) pay to the Company an amount of cash equal to the
Newco Business Price (it being understood that the cash held by the Company on
the Closing Date (after giving effect to Sections 2.3(b) and 2.3(c) below) and
available for inclusion in the Newco Assets may be used by Newco, in Newco’s
sole discretion, to pay a portion of the Newco Business Price) and (b) assume
and agree to pay, perform and discharge when due, or cause to be assumed, paid,
performed and discharged, in due course, all of the Newco Liabilities assumed by
Newco pursuant to Section 2.2 (collectively, the “Purchase Price”).

 

(b) Subject to the terms and conditions of this Agreement, Parent agrees that
(i) on the Closing Date, Parent shall deposit with the Company an amount in cash
equal to the sum of (x) the Retained Business Price, plus (y) the amount
required to be contributed by Parent to the Company pursuant to Section 4.16 and
(ii) subject to Section 6.12, Parent shall, or shall cause the Company to, (A)
satisfy the obligation of Parent and the Company to pay the Merger Consideration
(as defined in the Merger Agreement) and cash out the Company Options (as
defined in the Merger Agreement) pursuant to and in accordance with Article 3 of
the Merger Agreement out of the amounts represented by the Retained Business
Price, Newco Business Price, Available Merger Consideration Cash and the amount
required to be contributed by Parent to the Company pursuant to Section 4.16(a)
or clause (2) of the first sentence in Section 4.16(b), as the case may be; and
(B) subject to Newco’s obligation to pay the Newco Percentage of any Excess
Dissenting Shares Liability as contemplated by clause (ii) of the definition of
Shared Transaction Liabilities, make any payments required to be made in respect
of Appraisal Shares (as defined in the Merger Agreement).

 

(c) At the Closing, Parent shall contribute cash in U.S. Dollars to the Company
for inclusion in the Newco Assets an amount equal to the total amount (less any
accruals therefor reflected on the Retained Business Balance Sheet) of all
Liabilities of Instinet and its Subsidiaries that (A) are known to the parties
as of the Closing Date to have been paid by Instinet or any Subsidiary thereof
on or prior to the Closing Date and (B) would have been Retained Liabilities of
the types referred to in clauses (iv), (v), (vi), (vii), (viii), (ix) or (x) of
the definition of Retained Liabilities payable by Parent, the Company and the
ECN Entities following the Closing Date if not so paid on or prior to the
Closing Date. Except as provided in the foregoing, and subject to Section 6.11,
the parties agree that Parent and its Subsidiaries have no responsibility for
any Liabilities paid by Instinet or any Subsidiary thereof on or prior to the
Closing Date. The parties agree that any payments pursuant to this Section
2.3(c) will be treated

 

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for Tax purposes as an adjustment to the Purchase Price, unless otherwise
required by applicable Law.

 

Section 2.4 The Closing. Subject to the satisfaction or waiver of the conditions
set forth in Section 9.1 of this Agreement, the sale and transfer of the Newco
Assets and the assumption of the Newco Liabilities to be assumed pursuant to
Section 2.2 shall take place on the Closing Date at the offices of Skadden,
Arps, Slate, Meagher & Flom LLP immediately after the Effective Time (the
“Closing”). The parties hereto agree that (a) the sale, conveyance, assignment
and transfer of the Newco Assets contemplated pursuant to Section 2.1 shall be
effected at the Closing by delivery by the Company to Newco of (i) with respect
to those Newco Assets which are evidenced by capital stock certificates or
similar instruments, certificates duly endorsed in blank or accompanied by stock
powers or other instruments of assignment executed in blank and (ii) with
respect to all other Newco Assets, such good and sufficient instruments of
transfer and delivery as shall be necessary to vest in Newco all of the right,
title and interest of the Company in and to such Newco Assets, and (b) the
assumption of the Newco Liabilities contemplated pursuant to Section 2.2 shall
be effected by delivery by Newco to the Company of such good and sufficient
instruments of assumption, as shall be necessary for the assumption by Newco of
the Newco Liabilities to be assumed pursuant to Section 2.2. All of the
foregoing transfer or assumption instruments or other documents shall be in such
form as are reasonably satisfactory to the parties hereto.

 

Section 2.5 Indebtedness of the Company and its Subsidiaries. The parties agree
that:

 

(i) (A) with respect to any Newco Liabilities that constitute obligations for
money borrowed, Newco shall use its reasonable best efforts to cause the Company
and the ECN Entities and their respective capital stock or other equity
interests, properties and assets to be released and discharged from any and all
Liabilities, Liens, guarantees, and the like under such indebtedness (and the
Company shall, and shall cause the ECN Entities to, cooperate in seeking such
release and discharge), and Newco shall, or shall cause a Newco Entity to, pay,
perform and discharge such indebtedness pursuant to the terms thereof, and
perform and abide by all other obligations, covenants and agreements therein, in
each case, pending such release and discharge and (B) with respect to any
Retained Liabilities that constitute obligations for money borrowed, the Company
shall use its reasonable best efforts to cause the Newco Entities and their
respective capital stock or other equity interests, properties and assets to be
released and discharged from any and all Liabilities, Liens, guarantees and the
like under such indebtedness (and Newco shall, and shall cause the Newco
Entities to, cooperate in seeking such release and discharge), and the Company
shall, or shall cause an ECN Entity to, pay, perform and discharge such
indebtedness pursuant to the terms thereof, and perform and abide by all other
obligations, covenants and agreements therein, in each case, pending such
release and discharge; and

 

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(ii) (A) if the Company or any ECN Entity is a party to or bound by any
agreement or instrument governing any Newco Liabilities that constitute
obligations for money borrowed or any related guaranty, security agreement or
pledge, the Company shall, or shall cause such ECN Entity to, at the expense of
Newco, perform and abide by all obligations, covenants and agreements contained
therein pending the release and discharge contemplated by clause (i)(A) above
and (B) if any Newco Entity is a party to or bound by any agreement or
instrument governing any Retained Liabilities that constitute obligations for
money borrowed or any related guaranty, security agreement or pledge, Newco
shall, or shall cause such Newco Entity to, at the expense of the Company,
perform and abide by all obligations, covenants and agreements contained therein
pending the release and discharge contemplated by clause (i)(B) above.

 

Section 2.6 Purchase Price Allocation. The Purchase Price (including any
adjustments thereto) shall be allocated in accordance with a schedule which
Newco shall provide to Parent within 30 days after the Final Retained Business
Working Capital Statement shall have become final and binding on the parties
pursuant to Section 2.7 and which shall be agreed upon by Parent and Newco
within 15 days thereafter (the “Allocation Schedule”). The Allocation Schedule
shall be prepared by an independent third-party valuation firm engaged by Newco
that is reasonably acceptable to Parent. Parent and Newco shall each pay 50% of
Newco’s reasonable and documented out-of-pocket costs and expenses, including
the fees of such valuation firm, incurred by Newco in preparing the Allocation
Schedule. In the event that Parent and Newco are unable to agree on the
Allocation Schedule, the tax dispute resolution procedures set forth in Section
4.9 shall apply. After the Allocation Schedule is finalized, the parties shall
use the allocation and fair market value specified in the Allocation Schedule
for all Tax purposes and in all filings, declarations and reports with the
Internal Revenue Service (the “IRS”) in respect thereof, including the reports
required to be filed under Section 1060 of the Code. Newco shall prepare and
deliver IRS Form 8594 to the Company within ninety (90) days the Final Retained
Business Working Capital Statement shall have become final and binding on the
parties pursuant to Section 2.7 to be filed with the IRS. On any Tax Return and
in any Tax Proceeding (as defined in Section 4.3(b)), none of Parent, the
Company, the ECN Entities, Newco or the Newco Entities shall take any position
inconsistent with or represent that the allocation specified in the Allocation
Schedule is not correct. In the event that the allocation is disputed by any Tax
Authority, the party receiving notice of the dispute shall promptly notify and
consult with the other parties and keep the other parties reasonably apprised of
material developments concerning the resolution of such dispute.

 

Section 2.7 Working Capital.

 

(a) Within 30 days after the Closing Date, Newco shall deliver to Parent (i) a
statement (the “Retained Business Working Capital Statement”) in a form
substantially similar to the sample statement (which sets forth the Retained
Business Working Capital Amount as of the close of business on December 31,
2004) attached hereto as Exhibit E (the “Retained Business Balance Sheet”),
together with reasonable

 

23

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supporting documentation, setting forth the Retained Business Working Capital
Amount (the “Closing Date Retained Business Working Capital Amount”) as of the
close of business on the final day of the month ending immediately prior to the
Closing Date, and (ii) a statement (the “Newco Business Working Capital
Statement” and, together with the Retained Business Working Capital Statement,
the “Working Capital Statements”) in a form substantially similar to the sample
statement (which sets forth the Newco Business Working Capital Amount as of the
close of business on December 31, 2004) attached hereto as Exhibit F (the “Newco
Business Balance Sheet” and, together with the Retained Business Balance Sheet,
the “Reference Balance Sheets”), together with reasonable supporting
documentation, setting forth the Newco Business Working Capital Amount (the
“Closing Date Newco Business Working Capital Amount” and, together with the
Closing Date Retained Business Working Capital Amount, the “Closing Date Working
Capital Amounts”) as of the close of business on the final day of the month
ending immediately prior to the Closing Date.

 

(b) The Working Capital Statements shall be prepared in accordance with GAAP
applied on a basis consistent with the preparation of the Reference Balance
Sheets, except that irrespective of GAAP, the method of preparation of the
Reference Balance Sheets and/or the Company’s policies, the Working Capital
Statements shall be adjusted (i) to reflect the settlement of all inter-company
receivables, payables, loans and other accounts (and settling against cash) and
(ii) to reflect any inter-company dividend payments between the close of
business on the final day of the month ending immediately prior to the Closing
Date and the Closing.

 

(c) Parent and Newco shall mutually, from and after the Closing Date, provide
the other party and its Representatives access to all information, books and
records required or used by Newco and its advisors to prepare the Working
Capital Statements, and shall consult with each other during the preparation of
such statements. Unless Parent delivers written notice to Newco on or prior to
the 10th business day after Parent’s receipt from Newco of the Working Capital
Statements specifying any disputed items and the basis therefor, Parent shall be
deemed to have accepted and agreed to the Working Capital Statements. If Parent
so notifies Newco of its objection to either of the Working Capital Statements,
Parent and Newco shall, during 10 days following such notice (the “Resolution
Period”), attempt to resolve their differences and any resolution by them as to
any disputed amounts shall be final, binding and conclusive. If Parent and Newco
agree on the calculation of one or more of the Closing Date Working Capital
Amounts, then such agreed amount or amounts shall become final and binding on
the parties.

 

(d) If, at the conclusion of the Resolution Period, Parent and Newco are unable
to agree on the calculation of one or more of the Closing Date Working Capital
Amounts, the parties will refer the matter to KPMG LLP to resolve any disputes
between the parties regarding such calculation(s). If KPMG LLP is unavailable or
declines to serve in such capacity, the parties will, within five days of
notification by KPMG LLP that it will not accept such engagement, agree upon and
jointly engage another “Big 4” firm of independent public accountants (other
than PricewaterhouseCoopers LLP and Ernst & Young LLP); provided, that if Newco
and

 

24

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Parent are unable to agree on a “Big 4” firm of independent public accountants
within such five day period, then Parent and Newco shall each have the right to
request the American Arbitration Association to appoint a “Big 4” firm of
independent public accountants (other than PricewaterhouseCoopers LLP and Ernst
& Young LLP) to which to refer such disputes. The “Big 4” firm of independent
public accountants that is engaged by the parties to resolve disputes pursuant
to this Section 2.7(d) is referred to herein as the “Neutral Auditors”. The
parties hereto agree to execute, if requested by the Neutral Auditors, a
reasonable engagement letter. All fees and expenses relating to the work, if
any, to be performed by the Neutral Auditors shall be borne equally by Parent
and Newco.

 

(e) At a mutually agreed time within five business days following the date that
the parties engage the Neutral Auditors, each of the parties shall
simultaneously submit to the Neutral Auditors its final proposal (which proposal
shall specify the items as to which the parties have been able to agree pursuant
to this Section 2.7 and such party’s proposal as to the items in dispute) in
respect of (i) the Retained Business Working Capital Statement (the “Retained
Business Working Capital Statement Proposals”), to the extent items are in
dispute with respect to the Retained Business Working Capital Statement and (ii)
the Newco Business Working Capital Statement (the “Newco Business Working
Capital Statement Proposals”), to the extent items are in dispute with respect
to the Newco Business Working Capital Statement. Within 10 business days of such
final submissions, (i) to the extent items are in dispute with respect to the
Retained Business Working Capital Statement, the Neutral Auditors will select
one of the two Retained Business Working Capital Statement Proposals as being
most representative of the Closing Date Retained Business Working Capital Amount
and (ii) to the extent items are in dispute with respect to the Newco Business
Working Capital Statement, the Neutral Auditors will select one of the two Newco
Business Working Capital Statement Proposals as being most representative of the
Closing Date Newco Business Working Capital Amount, and the proposals so
selected shall be final and binding on the parties, and judgment thereon may be
entered by any court of competent jurisdiction. In making such determination,
the Neutral Auditors shall consider only those items or amounts as to which the
parties have been unable to agree pursuant to Section 2.7(c). The term “Final
Retained Business Working Capital Statement” means the definitive Retained
Business Working Capital Statement setting forth the Closing Date Retained
Business Working Capital Amount and the calculation thereof agreed or deemed to
have been agreed to by Parent and Newco in accordance with Section 2.7(c) or the
definitive Retained Business Working Capital Statement resulting from the
determinations made by the Neutral Auditors in accordance with this Section
2.7(e) (in addition to those items theretofore agreed to by Newco and Parent).
The term “Final Newco Business Working Capital Statement” means the definitive
Newco Business Working Capital Statement setting forth the Closing Date Newco
Business Working Capital Amount and the calculation thereof agreed or deemed to
have been agreed to by Parent and Newco in accordance with Section 2.7(c) or the
definitive Newco Business Working Capital Statement resulting from the
determinations made by the Neutral Auditors in accordance with this Section
2.7(e) (in addition to those items theretofore agreed to by Newco and Parent).

 

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(f) For purposes of this Agreement, “Retained Business Working Capital
Adjustment” shall equal the Closing Date Retained Business Working Capital
Amount as reflected on the Final Retained Business Working Capital Statement,
minus the Target Retained Business Working Capital Amount (provided, that if the
Target Retained Business Working Capital Amount is greater than the Closing Date
Retained Business Working Capital Amount as reflected on the Final Retained
Business Working Capital Statement, the Retained Business Working Capital
Adjustment shall be a negative number).

 

(g) If the Retained Business Working Capital Adjustment is a positive amount,
then Parent shall pay to Newco such amount using the following sources (as
necessary until such Retained Business Working Capital Adjustment has been paid
in full):

 

(i) from Parent’s cash on hand, an amount up to the sum of (x) $5,000,000 and
(y) the excess, if any, of the amount of Cash & Securities Owned included on the
Final Retained Business Working Capital Statement over $30,800,000 (any such
payment to be made promptly after the final determination of the Retained
Business Working Capital Adjustment in accordance with this Section 2.7) (with
the amount, if any, of the Retained Business Working Capital Adjustment
remaining unpaid after giving effect to such payment being referred to as the
“Working Capital Shortfall”); and

 

(ii) using amounts collected with respect to Closing Date Receivables under
procedures set forth in Section 2.9; and

 

(iii) on the first anniversary of the Closing Date, any amount of the Working
Capital Shortfall that has not been paid shall be paid by Parent to Newco from
cash on hand and Parent’s obligations pursuant to Section 2.9 shall terminate.

 

If the Retained Business Working Capital Adjustment is a negative number, then
Newco shall pay to Parent, promptly after the final determination of the
Retained Business Working Capital Adjustment in accordance with this Section
2.7, an amount equal to the Retained Business Working Capital Adjustment (as if
such number was a positive number). The parties agree that any payment of a
Retained Business Working Capital Adjustment pursuant to this Section 2.7 will
be treated for Tax purposes as an adjustment to the Purchase Price, unless
otherwise required by applicable Law.

 

Section 2.8 Collection of Aged Receivables. (a) In addition to the Retained
Business Working Capital Adjustment, if the aggregate amount of Aged Receivables
is in excess of the product of (i) 0.35 multiplied by (ii) the aggregate amount
of all Closing Date Receivables (such excess, the “Aged Receivables Excess”),
then within 10 business days after the end of each calendar month beginning the
month during which the Final Retained Business Working Capital Statement is
finally determined pursuant to Section 2.7 (each such month, a “Determination
Month”), Parent shall deliver to Newco a written statement setting forth the
amounts collected with respect to the Aged

 

26

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Receivables during the applicable Determination Month, together with reasonable
supporting documentation, and shall pay to Newco, by wire transfer of
immediately available funds to an account designated by Newco for such purposes,
an amount equal to the product of (i) the aggregate amount collected by Parent
with respect to the Aged Receivables during the applicable Determination Month,
multiplied by (ii) the Aged Receivables Percentage; provided, however, that
Parent shall not have any obligation pursuant to this Section 2.8(a) to pay to
Newco an aggregate amount in excess of the Aged Receivables Excess.
Notwithstanding the foregoing, calculations in respect of the first
Determination Month shall cover the period of time beginning on the Closing Date
and ending on the last day of such Determination Month.

 

(b) Parent’s obligations to allocate and pay to Newco amounts relating to
collected Aged Receivables under Section 2.8(a) shall terminate upon the earlier
of (i) 12 months after the end of the month during which the Closing Date
occurs, and (ii) the determination pursuant to this Section 2.8 that Parent has
allocated and paid to Newco an amount, in the aggregate, equal to the Aged
Receivables Excess.

 

Section 2.9 Working Capital Adjustment Shortfall. (a) If the Retained Business
Working Capital Adjustment is a positive amount or there is a Working Capital
Shortfall, then within 10 business days after the end of each calendar month
beginning the first Determination Month, Parent shall deliver to Newco a written
statement setting forth the amounts collected with respect to the Closing Date
Receivables during the applicable Determination Month, together with reasonable
supporting documentation, and shall pay to Newco, by wire transfer of
immediately available funds to an account designated by Newco for such purposes,
an amount equal to the aggregate amount collected by Parent or its Subsidiaries
with respect to the Closing Date Receivables during the applicable Determination
Month; provided, however, that Parent shall not have any obligation pursuant to
this Section 2.9(a) to pay to Newco an aggregate amount in excess of the Working
Capital Shortfall. Notwithstanding the foregoing, calculations in respect of the
first Determination Month shall cover the period of time beginning on the
Closing Date and ending on the last day of such Determination Month.

 

(b) Parent’s obligations to allocate and pay to Newco amounts relating to
collected Closing Date Receivables under Section 2.9(a) shall terminate upon the
earlier of the making of the payment required to be made pursuant to Section
2.7(g)(iii) or the determination pursuant to this Section 2.9 that Parent has
allocated and paid to Newco an amount, in the aggregate, equal to the Working
Capital Shortfall.

 

(c) Notwithstanding anything to the contrary in this Section 2.9, if there is
both an Aged Receivables Excess and a Working Capital Shortfall, and Parent or
any Subsidiary thereof collects an amount relating to an Aged Receivable (such
amount, an “Aged Receivable Collection Amount”) and Parent is required pursuant
to Section 2.8 to pay to Newco an amount in connection with such Aged Receivable
Collection Amount, then, for all purposes of this Section 2.9, Parent and its
Subsidiaries shall be deemed to have collected, with respect to such Aged
Receivable Collection Amount, an amount equal to the difference between (i) such
Aged Receivable Collection Amount, minus (ii) the amount payable to Newco
pursuant to Section 2.8. For the

 

27

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avoidance of doubt, no payment pursuant to Section 2.8 will reduce the amount of
the Working Capital Shortfall.

 

Section 2.10 Collection Policies. Parent will collect the Closing Date
Receivables in accordance with Parent’s standard collection practices.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES

 

Section 3.1 Representations and Warranties of Newco. Newco represents and
warrants to Parent and the Company on the date hereof and as of immediately
prior to the Closing as follows:

 

(a) Organization and Standing. Newco is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.

 

(b) Authorization. Newco has all requisite corporate power and authority to
execute this Agreement and to carry out and perform its obligations under this
Agreement and to consummate the transactions contemplated hereunder. The
execution, delivery and performance by Newco of this Agreement, and the
consummation of the transactions contemplated hereunder, have been duly and
validly authorized by all necessary action of Newco, and no other action on the
part of Newco or its stockholders is necessary for the authorization, execution,
delivery or performance by Newco of this Agreement and the consummation of the
transactions contemplated hereunder.

 

(c) Binding Agreement. This Agreement has been duly and validly executed and
delivered on behalf of Newco and, assuming due authorization, execution and
delivery by Parent and the Company, constitutes the legal and binding obligation
of Newco enforceable against Newco in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally and to general equity principles (whether considered in a proceeding
in equity or at law).

 

(d) Consents. Except as set forth in the Merger Agreement, no material
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, other action by, any Authority or any third party is
required in connection with the execution and delivery by Newco of this
Agreement or the consummation by Newco of the transactions contemplated under
this Agreement or the Merger Agreement.

 

(e) Financing. An Affiliate of Newco has delivered an equity commitment letter
to Newco and a contingency letter to Newco, Parent and the Company pursuant to
which such Affiliate of Newco has committed, among other things, subject to the
terms and conditions set forth therein, to provide Newco with up to $207,500,000
equity financing in connection with the transactions contemplated hereby. Such
letter agreements are valid and in full force and effect and have not been
amended or modified

 

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and such Affiliate’s obligations to fund its commitments thereunder are not
subject to any conditions other than as set forth in such letter.

 

(f) Information Supplied. None of the information supplied or to be supplied by
Newco specifically for inclusion or incorporation by reference in the Proxy
Statement (as defined in the Merger Agreement) will, at the date the Proxy
Statement is mailed to the Company Stockholders (as defined in the Merger
Agreement) or at the time of the Company Stockholders Meeting (as defined in the
Merger Agreement), contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary in order to
make the statement therein, in the light of the circumstances in which they are
made, not misleading.

 

Section 3.2 Representations and Warranties of the Company. The Company
represents and warrants to Newco on the date hereof and as of immediately prior
to the Closing as follows:

 

(a) Organization and Standing. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware.

 

(b) Authorization. The Company has all requisite corporate power and authority
to execute this Agreement and to carry out and perform its obligations under
this Agreement and to consummate the transactions contemplated hereunder. The
execution, delivery and performance by the Company of this Agreement, and the
consummation of the transactions contemplated hereunder, have been duly and
validly authorized by all necessary action of the Company, and no other action
on the part of the Company or its stockholder is necessary for the
authorization, execution, delivery or performance by the Company of this
Agreement and the consummation of the transactions contemplated hereunder.

 

(c) Binding Agreement. This Agreement has been duly and validly executed and
delivered on behalf of the Company and, assuming due authorization, execution
and delivery by Newco, constitutes the legal and binding obligation of the
Company enforceable against the Company in accordance with its terms, subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally and to general equity principles (whether considered in a proceeding
in equity or at law).

 

(d) Consents. Except as set forth in the Merger Agreement, no material
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, other action by, any Authority or any third party is
required in connection with the execution and delivery by the Company of this
Agreement or the consummation by the Company of the transactions contemplated
under this Agreement or the Merger Agreement.

 

(e) Merger Agreement Representations and Warranties. The representations and
warranties set forth in Article 5 of the Merger Agreement (other than

 

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Section 5.10) are true and correct on the date hereof and will be true and
correct in all material respects on the Closing Date.

 

(f) Limited Operations of the Company Prior to Closing. The Company was formed
on April 14, 2005 solely for the purpose of engaging in the transactions
contemplated by this Agreement and the Merger Agreement. Except for (i)
obligations or liabilities incurred in connection with its organization and the
transactions contemplated by this Agreement and the Merger Agreement and (ii)
Liabilities under this Agreement, the Merger Agreement and any other agreements
or arrangements contemplated hereby or thereby or entered into in furtherance
hereof or thereof, the Company has not incurred any Liabilities or engaged in
any business activities.

 

Section 3.3 Representations and Warranties of Parent. Parent represents and
warrants to Newco on the date hereof and as of immediately prior to the Closing
as follows:

 

(a) Organization and Standing. Parent is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware.

 

(b) Authorization. Parent has all requisite corporate power and authority to
execute this Agreement and to carry out and perform its obligations under this
Agreement and to consummate the transactions contemplated hereunder. The
execution, delivery and performance by Parent of this Agreement, and the
consummation of the transactions contemplated hereunder, have been duly and
validly authorized by all necessary action of Parent, and no other action on the
part of Parent or its stockholders is necessary for the authorization,
execution, delivery or performance by Parent of this Agreement and the
consummation of the transactions contemplated hereunder.

 

(c) Binding Agreement. This Agreement has been duly and validly executed and
delivered on behalf of Parent and, assuming due authorization, execution and
delivery by Newco, constitutes the legal and binding obligation of Parent
enforceable against Parent in accordance with its terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors’ rights generally and to
general equity principles (whether considered in a proceeding in equity or at
law).

 

(d) Consents. Except as set forth in the Merger Agreement, no material
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, other action by, any Authority or any third party is
required in connection with the execution and delivery by Parent of this
Agreement or the consummation by Parent of the transactions contemplated under
this Agreement or the Merger Agreement.

 

(e) Merger Agreement Representations and Warranties. The representations and
warranties of Parent set forth in Article 5 of the Merger Agreement (other than
Section 5.10) are true and correct on the date hereof and will be true and
correct in all material respects on the Closing Date.

 

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ARTICLE IV

 

TAX MATTERS

 

Section 4.1 Indemnification. The Company shall, and shall cause each of the ECN
Entities to, indemnify, defend and hold harmless the Newco Indemnitees (as
defined in Section 5.2) against, and shall reimburse the Newco Indemnitees for
(i) any and all Taxes imposed on the Newco Indemnitees with respect to any
taxable period relating to or attributable to the Retained Business or the ECN
Entities (the “Retained Business Taxes”), (ii) any and all Taxes imposed on the
Newco Indemnitees for Taxes of Parent or any of its Subsidiaries under Treasury
Regulation Section 1.1502-6 (or any comparable provision of U.S. state or local
or foreign law) but not any such Taxes relating to the consolidated group of
corporations of which Instinet is the common parent (the “Parent Consolidated
Tax”) and (iii) any and all Taxes imposed on the Newco Indemnitees that arise
from or relate to any taxable gain recognized on the LJR Sale, the sale of the
Newco Business or the transactions contemplated by the Merger Agreement
(“Transaction Taxes”). Newco shall indemnify, defend and hold harmless the
Company Indemnitees (as defined in Section 5.1) against, and shall reimburse the
Company Indemnitees for, any and all Taxes imposed on the Company Indemnitees
with respect to any taxable period relating to or attributable to the Newco
Business or the Newco Entities other than Transaction Taxes (the “Newco Business
Taxes”). Newco and the Company shall each use its reasonable best efforts to
recover any Retained Business Taxes or Newco Business Taxes from any Taxing
Authority or any third party with respect to which either Newco or the Company
has a tax-sharing, tax allocation or similar agreement, and any such recovered
Retained Business Taxes shall be for the account of the Company and any such
recovered Newco Business Taxes shall be for the account of Newco. With respect
to any Taxes that are paid or owed in connection with any consolidated, unitary,
combined or similar Tax Return that is required to be filed by or with respect
to the Company and that includes any of the Newco Entities for any taxable
period ending on or before the Closing Date (a “Consolidated Return”) but which
are neither Retained Business Taxes, Parent Consolidated Taxes or Transaction
Taxes on the one hand nor Newco Business Taxes on the other hand (“Unallocated
Taxes”), (x) the Company shall, and shall cause each of the ECN Entities to,
indemnify, defend and hold harmless the Newco Indemnitees against, and shall
reimburse the Newco Indemnitees for, the Company Percentage of such Unallocated
Taxes and (y) Newco shall indemnify, defend and hold harmless the Company
Indemnitees against, and shall reimburse the Company for, the Newco Percentage
of such Unallocated Taxes (it being understood that such Unallocated Taxes shall
not include any Transaction Taxes because the Company is intended to have sole
responsibility for any Transaction Taxes; it being further understood that Newco
and the Company shall each use its reasonable best efforts to recover any
Unallocated Taxes from any Tax Authority or any third party with respect to
which either Newco or the Company has a tax-sharing, tax allocation or similar
agreement and that any such recovered Unallocated Taxes shall be divided by the
Company and Newco in proportion to the Company Percentage and the Newco
Percentage respectively). It is understood that this Section 4.1 does not
address Transfer Taxes which are exclusively addressed in Section 4.10.

 

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Section 4.2 Tax Returns and Certain Refunds. (a) The Company shall timely file
or cause to be timely filed when due (taking into account all extensions
properly obtained) all Consolidated Returns and shall timely remit or cause to
be remitted to the relevant Tax Authority any Taxes due in respect of such
Consolidated Returns. In preparing any Consolidated Return, the Company shall
utilize to the maximum extent allowable by Law any available net operating
losses, tax credits, net capital losses and any other tax attributes to offset
the amount of Taxes that would otherwise be due with respect to such
Consolidated Return. The Company shall deliver to Newco, at least 30 days prior
to the due date of any such Consolidated Return (taking into account all
extensions properly obtained), a draft of such Consolidated Return as proposed
to be filed (together with any related work papers), and Newco shall have the
right to review such Consolidated Return and work papers and comment on such
draft Consolidated Return. At least ten days prior to the due date of such
Consolidated Return, the Company shall deliver to Newco a schedule detailing the
Company’s calculation of the Newco Business Taxes related to such Consolidated
Return, and Newco shall pay to the Company such amount in accordance with the
provisions of Section 4.11. In the event that Parent and Newco are unable to
agree on any matter (including the resolution of any comments made by Newco to
any draft Consolidated Return provided to it as contemplated above) relating to
a Consolidated Return, the tax dispute resolution procedures set forth in
Section 4.9 shall apply, with the exception that Parent and Newco shall each pay
50% of any costs associated with such procedures. The Company shall timely file
or cause to be timely filed when due (taking into account all extensions
properly obtained) all other Tax Returns that are required to be filed by or
with respect to the Retained Business or the Company or any ECN Entity for any
taxable period ending on or before the Closing Date (the “Company Separate
Returns”). The Company shall timely remit or cause to be remitted to the
relevant Tax Authority any Taxes due in respect of such Company Separate
Returns, provided, however, that procedures similar to those governing
Consolidated Returns above shall apply to Company Separate Returns with respect
to which Newco is responsible for Newco Business Taxes. Newco shall timely file
or cause to be timely filed when due (taking into account all extensions
properly obtained) all other Tax Returns that are required to be filed by or
with respect to the Newco Business or any Newco Entity for any taxable period or
a portion thereof ending on or before the Closing Date (the “Newco Separate
Returns”) and Newco shall timely remit or cause to be remitted to the relevant
Tax Authority any Taxes due in respect of such Newco Separate Returns.

 

(b) The parties agree that the closing of the Merger and the Closing shall occur
on the same day. The parties further agree to treat the sale by the Company to
Newco of the Newco Assets and the assumption by Newco of the Newco Liabilities
as occurring for federal income tax purposes prior to the close of business on
the day on which the closing of the Merger and the Closing occur, provided that
Parent and Newco agree that such position will more likely than not be sustained
if challenged by the Internal Revenue Service.

 

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(c) Refunds of Taxes shall be allocated as provided below between Parent and
Newco in the following order of priority:

 

(i) any INET Embedded Refund shall be for the account of Parent;

 

(ii) any refund resulting from the utilization of any net operating loss
available for any state or local income tax purposes as of the close of business
on December 31, 2004 shall be for the account of Parent and shall not be treated
as a VAB Tax Benefit;

 

(iii) any refund resulting from the carry back of the LJR Offset Amount shall be
for the account of Parent, and any refund resulting from the carry back of the
Archipelago Offset Amount shall be for the account of Newco, neither of which
shall be treated as a VAB Tax Benefit;

 

(iv) any refund of any estimated taxes to which the Company is entitled under
Section 4.16 shall be for the account of Parent and shall not be treated as a
VAB Tax Benefit;

 

(v) any refund of overpayments of Taxes made with respect to any Newco Economic
Tax Period to the extent attributable to Taxes paid in cash not pursuant to (iv)
above with respect to any such tax period (as opposed to resulting from the
carryback or carryforward of losses into any such tax period) shall be for the
account of Newco;

 

(vi) any refund attributable to the realization of a VAB Tax Benefit under
Section 4.5(b), (c) or (e) shall be allocated between Parent and Newco as
provided in Section 4.6;

 

(vii) any refund attributable to Retained Business Taxes and Newco Business
Taxes shall be for the account of Parent and Newco respectively;

 

(viii) any refund attributable to Unallocated Taxes shall be divided by the
Company and Newco in proportion to the Company Percentage and the Newco
Percentage respectively; and

 

(ix) any other refund shall be for the account of Newco.

 

Section 4.3 Contest Provisions. (a) If any Tax Authority asserts a Tax Claim in
writing, then the party hereto first receiving notice of such Tax Claim promptly
shall provide written notice thereof to the other party or parties hereto;
provided, however, that the failure of such party to give such prompt notice
shall not relieve the other party of any of its obligations under this Article
IV, except to the extent that the other party is actually prejudiced thereby.
Such notice shall specify in reasonable detail the basis for such Tax Claim and
shall include a copy of the relevant portion of any correspondence received from
the Tax Authority.

 

(b) Subject to Sections 4.3(c) and (d), the Company shall have the right to
control, at its own expense, any audit, examination, contest or other Action by

 

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or against any Tax Authority (a “Tax Proceeding”) in respect of any Consolidated
Return or Company Separate Return; provided, however, that if such Tax
Proceeding could materially increase the liability for Taxes of Newco or any of
its Affiliates, (i) the Company shall provide Newco with prompt notice of such
Tax Proceeding and a timely and reasonably detailed account of each phase of
such Tax Proceeding, (ii) the Company shall consult with Newco before taking any
significant action in connection with such Tax Proceeding, (iii) the Company
shall consult with Newco and offer Newco an opportunity to comment before
submitting any written materials prepared or furnished in connection with such
Tax Proceeding, (iv) the Company shall defend such Tax Proceeding diligently and
in good faith, (v) Newco shall be entitled to participate, at its own expense,
in such Tax Proceeding and receive copies of any written materials relating to
such Tax Proceeding received from the relevant Tax Authority, and (vi) the
Company shall not settle, compromise or abandon any such Tax Proceeding without
obtaining the prior written consent of Newco, which consent shall not be
unreasonably withheld, conditioned or delayed.

 

(c) Newco shall have the right to control, at its own expense, any Tax
Proceeding solely in respect of any Newco Business Taxes; provided, however,
that if such Tax Proceeding could materially increase the liability for Taxes of
the Company or any of its Affiliates, (i) Newco shall provide the Company with a
timely and reasonably detailed account of each phase of such Tax Proceeding,
(ii) Newco shall consult with the Company before taking any significant action
in connection with such Tax Proceeding, (iii) Newco shall consult with the
Company and offer the Company an opportunity to comment before submitting any
written materials prepared or furnished in connection with such Tax Proceeding,
(iv) Newco shall defend such Tax Proceeding diligently and in good faith, (v)
the Company shall be entitled to participate, at its own expense, in such Tax
Proceeding and receive copies of any written materials relating to such Tax
Proceeding received from the relevant Tax Authority, and (vi) Newco shall not
settle, compromise or abandon any such Tax Proceeding without obtaining the
prior written consent of the Company, which consent shall not be unreasonably
withheld, conditioned or delayed.

 

(d) In the event of a Tax Proceeding that involves (i) issues relating to any
Consolidated Return or Company Separate Return and (ii) issues relating to any
Newco Business Taxes, to the extent permitted under applicable Law, (x) the
Company shall have the right to control, subject to Section 4.3(a) and at its
own expense, the Tax Proceeding with respect to the former issues and (y) Newco
shall have the right to control, subject to Section 4.3(a) and at its own
expense, the Tax Proceeding with respect to the latter issues.

 

Section 4.4 Assistance and Cooperation. After the Closing Date, each of Parent,
the Company and Newco shall, and shall cause their respective Affiliates to:

 

(a) timely sign and deliver such certificates or forms as may be necessary or
appropriate to establish an exemption from (or otherwise reduce), or file Tax
Returns or other reports with respect to, Transfer Taxes;

 

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(b) reasonably assist the other party in preparing any Tax Returns which such
other party is responsible for preparing and filing in accordance with Section
4.2, and in connection therewith provide the other party necessary powers of
attorney;

 

(c) cooperate reasonably in preparing for and conducting any Tax Proceedings
regarding any Taxes;

 

(d) make available to the other and to any Tax Authority as reasonably requested
all information, records, and documents relating to Taxes; and furnish the other
with copies of all correspondence received from any Tax Authority in connection
with any Tax audit or information request with respect to any such taxable
period.

 

(e) use reasonable best efforts and cooperate with each other to file for any
available refund of Taxes as promptly as practicable;

 

(f) acknowledge the strong mutual interest of Parent and Newco to maximize the
value of VAB Tax Attributes and utilize the VAB Tax Attributes as expeditiously
as possible to create VAB Tax Benefits, and share all information that Parent
reasonably determines to be relevant to identifying and utilizing VAB Tax
Attributes; specifically, (i) Parent shall provide Newco with a copy of any
filed Tax Return that includes Parent or the Company excluding any portion of
any such Tax Return that Parent reasonably determines does not relate to any VAB
Tax Attribute and (ii) Parent and Newco agree to consult with each other in good
faith to explore strategic and structural initiatives, including during Parent’s
annual review of potential strategic and structural initiatives with its tax
advisors, to maximize the value and utilization rate of the VAB Tax Attributes;
provided, however, that Parent shall have the sole discretion to determine
whether or not to pursue any such strategic and structural initiatives; and

 

(g) use reasonable best efforts and cooperate with each other to execute the
Archipelago Sale on or prior to the Closing Date if such sale is requested by
Newco in its sole discretion.

 

Section 4.5 Application of VAB Tax Attributes. (a) Any Restructuring Deduction
shall be applied to reduce Taxes that would otherwise be payable in any taxable
year in which such Restructuring Deduction is incurred (a “Restructuring Year”),
as determined on a modified with and without basis with regard to any items of
income or loss incurred in such Restructuring Year but treating any net
operating losses, net capital losses or tax credits incurred in such
Restructuring Year and any VAB Tax Attributes carried into such Restructuring
Year as utilized prior to the utilization of any Parent Tax Attributes carried
into such Restructuring Year. For the avoidance of doubt, if the Company agrees
to file its Tax Return for the Short Federal Tax Year reporting both the Closing
and the LJR Sale as occurring in the Short Federal Tax Year pursuant to Section
4.16(a), both the LJR Offset Loss and the Archipelago Offset Loss shall be
deemed to be utilized prior to the utilization of any Restructuring Deductions.

 

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(b) As soon as practicable, but in any event within 30 days of the last day of
the Short Federal Tax Year, Parent, the Company and any of their respective
Subsidiaries, as applicable, shall file for any available refund of (x) any
federal estimated income taxes paid or applied toward such Short Federal Tax
Year and (y) any state and local estimated income taxes paid or applied toward
the corresponding state or local income tax year in which the Closing occurs, to
the extent that such quick refund mechanisms (“Quick State-Local Filings”) are
available for overpaid state and local estimated taxes. To the extent Quick
State-Local Filings are not available to recover any overpaid state or local
estimated taxes, Parent, the Company or any their respective Subsidiaries, as
applicable, shall file their state and local income tax returns for the state or
local taxable year in which the Closing occurs as soon as practicable, but in
any event within 150 days of the first date on which such returns may be filed
under applicable law; it being understood that the LJR Offset Loss (if the
Company agrees to file its Tax Return for the Short Federal Tax Year reporting
both the Closing and the LJR Sale as occurring in the Short Federal Tax Year
pursuant to Section 4.16(a)) and the Archipelago Offset Loss ( which is
anticipated to occur within such Short Federal Tax Year) shall be given priority
over any Tax Attribute in offsetting the LJR Gain.

 

(c) As soon as practicable, but in any event within 150 days of the close of the
Short Federal Tax Year and 180 days of the close of the first tax year in which
Parent and the Company are members of the same federal income tax consolidated
tax group (the “First Parent Year”) (or, in the case of state and local taxes,
any corresponding state or local tax year), as applicable, Parent, the Company
or their respective Subsidiaries, as applicable, shall carry back any VAB Tax
Attributes so available to be carried back (it being understood that the LJR
Offset Loss and the Archipelago Offset Loss, which are not VAB Tax Attributes,
will be carried back to offset the LJR Gain prior to the Net VAB Transaction
Loss, and any refund obtained from the carryback of the LJR Offset Loss and the
Archipelago Offset Loss shall be for the account of Parent and Newco
respectively, and neither the LJR Offset Loss nor the Archipelago Loss shall be
deemed to be the realization of a VAB Tax Attribute).

 

(d) If the Closing is not considered to occur for federal income tax purposes
within the same taxable year in which the LJR Sale occurs, subject to applicable
limitations under applicable Laws, the Net VAB Transaction Loss, to the extent
not carried back pursuant to Section 4.5(c), shall be applied to reduce Taxes
that would otherwise be payable by Parent, the Company or their respective
Subsidiaries, as applicable, in the taxable year in which such Net VAB
Transaction Loss is incurred (the “VAB Loss Year”), as determined on a modified
with and without basis with regard to any items of income or loss incurred in
such VAB Loss Year treating any net operating losses, net capital losses or tax
credits incurred in such VAB Loss Year and any VAB Tax Attributes carried into
such VAB Loss Year as utilized prior to the utilization of any Parent Tax
Attributes carried into such VAB Loss Year. To the extent that the availability
of the Net VAB Transaction Loss reduces the amount of any federal, state or
local estimated tax payable by Parent or any of its Subsidiaries with respect to
such VAB Loss Year determined on such modified with and without basis, a VAB Tax
Benefit shall be deemed to be created in the amount of such reduction as of the
due date of such estimated tax payment. As soon as practicable, but in any event
within 180 days of the

 

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close of such VAB Loss Year, the aggregate VAB Tax Benefit deemed to be realized
with respect to such VAB Loss Year shall be appropriately adjusted, and cash
payments shall be made between Newco and Parent to the extent necessary to
reflect the appropriate allocation of VAB Tax Benefits attributable to the Net
VAB Transaction Loss created during such entire VAB Loss Year, and the amount of
VAB Tax Benefits so created will be adjusted appropriately.

 

(e) In addition to any carry back of VAB Tax Attributes under Section 4.5(c),
Parent, the Company and their respective Subsidiaries, as applicable, shall
carry back or carry forward VAB Tax Attributes, subject to applicable
limitations under applicable Laws, to offset, in each applicable preceding or
successive tax year, any taxable income or gain with respect to which Parent,
Company or any of their respective Subsidiaries would be liable for Taxes in any
such tax year (collectively, the “Carry Tax Years”); it being understood that
any VAB Tax Attributes so carried back or carried forward shall be deemed
utilized in any Carry Tax Year prior to the utilization of Parent Tax
Attributes. As soon as practicable, but in any event within 180 days of any
Carry Tax Year (or, in the case of state and local taxes, any corresponding
state or local tax year), as applicable, Parent, the Company or their respective
Subsidiaries, as applicable, shall carry back or carry forward any VAB Tax
Attributes so available to be carried back or carried forward to offset net
taxable capital gain or ordinary income in such Carry Year.

 

(f) A VAB Tax Benefit allocable to Newco shall be created on the Closing Date
upon Parent’s cash contribution to the Company pursuant to Section 4.16(b) in an
amount equal to the amount referred to in subclause (1) of such Section; it
being understood that the creation of any VAB Tax Benefit under this Section
4.5(f) shall result in a corresponding reduction in the next VAB Tax Benefits
that would otherwise be for Newco’s account in an amount equal to the amount of
the VAB Tax Benefit created under this Section 4.5(f).

 

Section 4.6 Allocation of VAB Tax Benefits. VAB Tax Benefits shall be allocated
as follows:

 

(a) First, an aggregate of $30 million of VAB Tax Benefits shall be allocated to
Newco.

 

(b) Second, for VAB Tax Benefits in excess of those in (a) above (if any), the
sum of $22 million plus the amount of cash contributed by Parent to the capital
of the Company pursuant to Section 4.16 as a reimbursement for estimated Taxes
to the extent not already recovered through the carryback of the LJR Offset Loss
shall be allocated to the Company.

 

(c) Third, for VAB Tax Benefits in excess of those in (a) and (b) above, (if
any), the sum of $10 million plus the Pro Forma Loss Amount, if any, shall be
allocated to Newco.

 

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(d) Fourth, for VAB Tax Benefits in excess of those in (a), (b) and (c) above,
(if any), the next $18 million shall be allocated to the Company.

 

(e) Any remaining VAB Tax Benefits in excess of those in (a), (b), (c) and (d)
above (if any), shall be allocated 50% to the Company and 50% to Newco.

 

Section 4.7 Remittance of VAB Tax Benefit Payments; Payment of Archipelago Tax
Benefit. (a) Subject to Section 4.16, Parent shall pay (and shall cause its
Affiliates and Subsidiaries to pay, as appropriate) cash to Newco equal in
amount to VAB Tax Benefits allocable to Newco within five business days after
such VAB Tax Benefits have been realized by the Company. Refunds shall be deemed
to be realized when they are received by the Company. Credits and offsets to
Taxes shall be deemed to be realized when such amounts are offset against any
Taxes for the applicable year for which Parent or any of its Subsidiaries would
otherwise be liable, which utilization shall be deemed to occur on the date that
the applicable Tax Return is filed. With respect to any VAB Tax Benefit realized
with respect to (x) a Net VAB Transaction Loss that reduces any estimated tax
payment in the First Parent Year (or any corresponding state or local tax year)
or (y) a Restructuring Deduction that reduces any estimated tax payment in any
Restructuring Year (or any corresponding state or local tax year), such VAB Tax
Benefit shall be realized on the due date of such estimated tax payment.
Parent’s obligation to remit under this Section 4.7 shall be reduced by any
Taxes paid in cash by Parent and its Affiliates (and/or the economic cost of the
utilization by Parent and its Affiliates of any Tax Attributes, measured by the
amount of Taxes that Parent and its Affiliates would have otherwise paid if such
Parent Tax Attributes, other than VAB Tax Attributes, were not utilized, after
giving priority to any available VAB Tax Attributes) as a result of utilizing or
receiving such VAB Tax Benefits, and Newco’s entitlement to the VAB Tax Benefits
allocated to it under Section 4.6 shall be credited by the net amount of cash
paid to Newco pursuant to this Section 4.7 (i.e., after reduction by such cash
Taxes paid and/or such economic cost of such utilization of such Tax
Attributes). In determining the Company’s entitlement to VAB Tax Benefits
allocated to it under Section 4.6(a), principles similar to the preceding
sentence shall be used (i.e., using the net amount of VAB Tax Benefits realized
after reduction for cash Taxes paid and/or the economic cost of the utilization
by Parent and its Affiliates of any Tax Attributes, measured by the amount of
Taxes that Parent and its Affiliates would have otherwise paid if such Parent
Tax Attributes, other than VAB Tax Attributes, were not utilized after giving
priority to any available VAB Tax Attributes). Parent shall provide Newco with
notification of the anticipated utilization of the VAB Tax Attributes on or
before the original filing date of any Tax Return.

 

(b) Parent shall pay (and shall cause its Affiliates and Subsidiaries to pay, as
appropriate) cash to Newco equal in amount to Archipelago Tax Benefit within
five business days after the Archipelago Tax Benefit has been realized by the
Company. Any refund attributable to the Archipelago Tax Benefit shall be deemed
realized when received by the Company. Any offset to Taxes attributable to the
Archipelago Tax Benefit shall be deemed to be realized when such amounts are
offset against any Taxes for the applicable year for which Parent or any of its
Subsidiaries would otherwise be liable, which utilization shall be deemed to
occur on the date that the

 

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applicable Tax Return is filed. With respect to any Archipelago Tax Benefit that
reduces any estimated tax payment in any tax year, such Archipelago Tax Benefit
shall be realized on the due date of such estimated tax payment.

 

Section 4.8 Look-Back Mechanism. In the event Parent or any of its Subsidiaries
pay cash to Newco in respect of VAB Tax Benefits, and any Tax Authority
subsequently audits or otherwise commences a proceeding contesting the validity
or utilization of any VAB Tax Attribute underlying the allocation of such VAB
Tax Benefits, then the Company (i) shall have the right to control, at its own
expense, any such proceeding, (ii) shall promptly give notice to Newco of such
proceeding and shall provide Newco with a timely and reasonably detailed account
of each phase of such proceeding, (iii) shall consult with Newco before taking
any significant action in connection with such proceeding, (iv) shall consult
with Newco and offer Newco an opportunity to comment before submitting any
written materials prepared or furnished in connection with such proceeding, (v)
shall defend such proceeding diligently and in good faith, (vi) shall allow
Newco to participate, at its own expense, in such proceeding and shall provide
Newco with copies of any written materials relating to such proceeding received
from the relevant Tax Authority and (vii) shall not settle or otherwise
compromise such proceeding without the prior written consent of Newco, which
consent shall not be unreasonably withheld, conditioned or delayed. In the event
that after following the procedure set forth in the preceding sentence, the
proceeding is resolved in a manner (x) that does not fully preserve the economic
value of the applicable VAB Tax Benefit, and (y) that results in a cash payment
of Taxes by the Company to the applicable Tax Authority or the utilization of
Tax Attributes, other than VAB Tax Attributes, the Company shall, subject to the
review of Newco, recalculate the aggregate amount of VAB Tax Benefits
cumulatively realized as of the time of such cash payment or utilization and
including such cash payment or the Tax cost of such utilization as a reduction
of such aggregate amount. Such recalculated cumulative amount of VAB Tax
Benefits shall then be reallocated between Newco and the Company (the “Modified
Allocations”) on a first-dollar basis by redoing the calculations as provided in
Section 4.6 as if for the first time, starting with Section 4.6(a) and moving
sequentially to 4.6(b), (c), (d), (e) and (f). To the extent the Modified
Allocations are not sufficient to cover the previously allocated aggregate
amount of VAB Tax Benefits, each recipient of an uncovered previously allocated
amount of VAB Tax Benefits shall be responsible for an amount of cash equal to
its calculated share of such uncovered amount. The Company shall discharge its
responsibility for its calculated share of such uncovered amount in any event by
making the cash payment to the Tax Authority referred to above, whereas Newco
shall discharge its responsibility for its calculated share of such uncovered
amount by making a cash payment to the Company. To the extent that there are
remaining unrealized VAB Tax Attributes subsequent to any tax challenge for
which a cash payment has been made to a Tax Authority, VAB Tax Benefits
resulting from such remaining VAB Tax Attributes shall be subsequently allocated
as provided in Section 4.6 as though only an amount of VAB Tax Benefits equal to
the Modified Allocations had previously been allocated.

 

Section 4.9 Resolution of All Tax Related Disputes. With respect to any dispute
or a disagreement relating to Taxes and the allocation of Taxes pursuant to

 

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this Agreement between the parties, the parties shall cooperate in good faith to
resolve such dispute between them; but if the parties are unable to resolve such
dispute, the parties shall submit the dispute for resolution to a “Big 4”
accounting firm selected by mutual agreement of Newco and Parent; provided, that
if Newco and Parent are unable to agree on such accounting firm, then Newco and
Parent shall each have the right to request the American Arbitration Association
to appoint a “Big 4” accounting firm (such firm, the “Accountant”). Resolution
by the Accountant shall be final, conclusive and binding on the parties, and
judgment thereon may be entered by any court of competent jurisdiction.
Notwithstanding anything in this Agreement to the contrary, the fees and
expenses relating to any dispute as to the amount of Taxes owed by either of the
parties shall be paid by the Company, on the one hand, and Newco, on the other
hand, in proportion to each party’s respective liability for the portion of the
Taxes in dispute, as determined by the Accountant.

 

Section 4.10 Transfer Taxes. The Company and Newco shall be proportionately
responsible (in accordance with the Company Percentage and the Newco Percentage)
for and shall pay all sales (including bulk sales), use, value added,
documentary, stamp, gross receipts, registration, transfer, conveyance, excise,
recording, license and other similar fees or Taxes or governmental charges, if
any, as levied by any Tax Authority arising out of, in connection with or
attributable to the transactions contemplated by this Agreement (collectively,
“Transfer Taxes”). The party hereto with primary responsibility under applicable
Law for filing Tax Returns related to Transfer Taxes shall be responsible for
preparing and timely filing any Tax Returns required with respect to any
Transfer Taxes.

 

Section 4.11 Payments. Whenever in accordance with this Article IV one of the
parties is required to pay an amount to the other party, such payment shall be
made as of the later of (x) five business days after the date such payment was
requested or (y) five business days before the requesting party is required to
pay the related Tax, and any amount not paid by such date shall accrue interest
at the rate of 8% per annum (which shall not limit any other rights the
receiving party may have). The parties agree that any indemnity payments
pursuant to this Article IV will be treated for Tax purposes as an adjustment to
the Purchase Price, unless otherwise required by applicable Law.

 

Section 4.12 Survival Limitations. Notwithstanding any provisions of this
Agreement to the contrary, the obligations of a party to indemnify and hold
harmless another party pursuant to this Article IV shall survive until the
expiration of the applicable Tax statute of limitations, and the indemnification
provisions of this Article IV shall not be subject to any of the provisions of,
or limitations contained in, Article V.

 

Section 4.13 Exclusivity. Notwithstanding anything to the contrary contained in
this Agreement or in any agreement or instrument of assumption delivered in
connection with this Agreement, this Article IV and Section 9.18 shall
exclusively govern all indemnification claims for Taxes under this Agreement.

 

Section 4.14 Termination of Tax Sharing Agreements. Any tax sharing, tax
allocation or similar agreement to which any Newco Entity, on the one hand, and
the

 

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Company or any of its other Affiliates, on the other hand, are parties shall
terminate and shall cease to have any effect as of the Closing Date; it being
understood that this Section 4.14 shall not purport to terminate any tax
sharing, tax allocation or similar agreement to which Reuters plc or any of its
Affiliates is a party.

 

Section 4.15 338 Elections. Newco, and the Company shall work together in good
faith to determine the tax consequences to Newco and the Company of jointly
making an election under Section 338(h)(10) of the Code, or comparable provision
of state, local or other Law, with respect to any Newco Entity that is a member
of the Company’s consolidated group for federal income tax purposes. At Newco’s
request, the Company shall join Newco in making such an election if Newco agrees
to hold the Company Indemnitees harmless from any adverse Tax consequences
resulting from such elections. At least 10 days prior to making any election
under Section 338(g) of the Code, or comparable provision of state, local or
other Law, with respect to any Subsidiary of the Company, Newco shall notify the
Company in writing of its intent to make such elections. Newco shall hold the
Company Indemnitees harmless from any adverse Tax consequences resulting from
any such elections.

 

Section 4.16 Parent Capital Contributions. (a) If Parent and Newco agree, at
least 45 days prior to the Closing, that the Closing and the LJR Sale are more
likely than not to be treated as occurring in the same taxable year for federal
income tax purposes, (i) the Company shall file its Tax Return for the Short
Federal Tax Year reporting both the Closing and the LJR Sale as occurring in the
Short Federal Tax Year (unless there has been a subsequent change in Law which
prohibits such treatment, in which case section 4.16(b) shall apply) and (ii)
immediately prior to the Closing, Parent shall contribute to the capital of the
Company an amount of cash equal to any payments of federal, state and local
estimated taxes made by the Company with respect to such taxable year, and the
Company shall be entitled to file for a refund of such overpaid estimated taxes
to the extent of such contribution.

 

(b) If subparagraph (a) above does not apply, immediately prior to the Closing,
Parent shall contribute to the capital of the Company an amount of cash equal to
the sum of (1) the amount of Restructuring Deductions taken by the Company and
its Subsidiaries from January 1, 2005 through the Closing Date multiplied by the
highest marginal federal income tax rate then in effect plus any applicable
state and local income tax rates plus (2) any payments of federal, state and
local estimated taxes made by the Company with respect to such Tax Period, and
the Company shall be entitled to file for a refund to the extent of any such
overpaid estimated taxes to the extent of such contribution. The amount referred
to in (1) above shall be treated as the realization of, and remittance to Newco
with respect to, a VAB Tax Benefit and shall count toward the satisfaction of
the first $30 million of VAB Tax Benefits that are allocated to Newco under
Section 4.6(a). Accordingly, the available amount of VAB Tax Benefits shall be
reduced by the amount referred to in clause (1) above. At least 30 days prior to
the Closing, Parent shall provide Newco with a schedule calculating in
reasonable detail the amounts described in (1) and (2) above. Newco shall
provide Parent with any objections to such calculations within 10 days of
receiving such calculation and the parties shall in good faith attempt to agree
on such calculation. In the event that the

 

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parties are unable to agree on such calculation, the tax dispute resolution
procedures set forth in Section 4.9 shall apply with each of Parent and Newco
bearing 50% of the Accountant’s fees.

 

ARTICLE V

 

INDEMNIFICATION

 

Section 5.1 Newco’s Agreement to Indemnify. In addition to any other
indemnification provided hereunder, subject to the terms and conditions set
forth herein, from and after the Closing Date, Newco shall, and shall cause each
of the Newco Entities to, indemnify, defend and hold harmless Parent, the
Company and IHCI and each of their respective directors, officers, partners,
members, employees and other representatives, advisors and agents (collectively,
“Representatives”), Subsidiaries and Affiliates and all direct and indirect
Representatives of such Representatives, Subsidiaries and Affiliates
(collectively, the “Company Indemnitees”) from and against any and all
Indemnifiable Losses of the Company Indemnitees arising out of or resulting
from, directly or indirectly, the Newco Liabilities.

 

Section 5.2 Parent’s and the Company’s Agreement to Indemnify. In addition to
any other indemnification provided hereunder, subject to the terms and
conditions set forth herein, from and after the Closing Date, Parent and the
Company shall jointly and severally, and shall cause each of the ECN Entities
to, indemnify, defend and hold harmless Newco and each of its Representatives,
Subsidiaries and Affiliates, and all direct and indirect Representatives of such
Representatives, Subsidiaries and Affiliates (collectively, the “Newco
Indemnitees”) from and against any and all Indemnifiable Losses of the Newco
Indemnitees arising out of or resulting from, directly or indirectly, the
Retained Liabilities.

 

Section 5.3 Reduction of Indemnifiable Losses for Tax Benefits and Insurance
Benefits Received. For purposes of this Article V, Section 8.2 and Section 8.5,
the calculation of any Indemnifiable Loss will reflect (i) the amount of any Tax
benefit actually recognized by the Indemnitee for United States federal, state
or local income tax purposes in respect of such Indemnifiable Loss (net of any
tax cost incurred by the Indemnitee for United States federal, state or local
income tax purposes arising from the receipt of any indemnification payment
hereunder in respect of such Indemnifiable Loss (grossed up to reflect such
increase)), in each case, in the year in which such Tax benefit is recognized
and (ii) the amount of any insurance proceeds or indemnification payments
received by the Indemnitee in respect of such Indemnifiable Loss (net of all
reasonable costs and expenses incurred by the Indemnitee in recovering such
insurance proceeds). Each Indemnitee shall use its commercially reasonable
efforts to recover from its insurers or other sources of reimbursement or
recovery the maximum portion of any Indemnifiable Loss that is recoverable from
such sources. In the event any indemnification payment is made by an
Indemnifying Party to an Indemnitee in respect of an Indemnifiable Loss and the
Indemnitee thereafter receives any such Tax benefit, net insurance proceeds or
indemnification payments, the Indemnitee shall promptly

 

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reimburse such Indemnifying Party an amount equal to the amount of such Tax
benefit, net insurance proceeds or indemnification payments.

 

Section 5.4 Procedure for Indemnification.

 

(a) If an Indemnitee shall receive notice of the assertion by a person who is
not a party to this Agreement of any claim or of the commencement by any such
person of any Action (a “Third Party Claim”) with respect to which an
Indemnifying Party may be obligated to provide indemnification under Section 5.1
or Section 5.2, such Indemnitee shall give such Indemnifying Party prompt notice
thereof after becoming aware of such Third Party Claim; provided, that the
failure of any Indemnitee to give notice as provided in this Section 5.4 shall
not relieve the related Indemnifying Party of its obligations under this Article
V, except to the extent that such Indemnifying Party is actually prejudiced by
such failure to give notice. Such notice shall describe the Third Party Claim in
reasonable detail, and, if practicable, shall indicate the estimated amount of
the Indemnifiable Loss that has been or may be sustained or asserted by such
Indemnitee.

 

(b) If an Indemnitee gives notice of a Third Party Claim to an Indemnifying
Party, the Indemnifying Party shall have 30 days after receipt of notice to
elect, at its option, to take responsibility for resolving, and assume and
control the defense of, at its own expense and by its own counsel, any such
Third Party Claim and shall be entitled to assert any and all defenses available
to the Indemnitee to the fullest extent permitted by Law. If the Indemnifying
Party shall undertake to defend and resolve any such Third Party Claim, it shall
promptly notify the Indemnitee of its intention to do so, and the Indemnitee
agrees to cooperate as reasonably requested by the Indemnifying Party and its
counsel in the resolution of, or defense against, any such Third Party Claim;
provided, however, that the Indemnifying Party shall not admit any liability
with respect to such Third Party Claim without the prior written consent of the
Indemnitee, and shall not resolve, settle, compromise or discharge any such
Third Party Claim without the prior written consent of the Indemnitee (which
consent will not be unreasonably withheld or delayed) unless the relief consists
solely of the payment of money and includes a provision whereby the plaintiff or
claimant in the matter releases the Indemnitees from all liability with respect
thereto. Notwithstanding the foregoing, the Indemnitee shall have the right to
defend (but not admit liability, compromise, settle or otherwise resolve such
Third Party Claim without the prior written consent of the Indemnifying Party)
any Third Party Claim as to itself by its own separate counsel, and the
Indemnifying Party shall pay the reasonable fees, costs and expenses of such
separate counsel, as incurred, if the Indemnitee shall have determined in good
faith that an actual or potential conflict of interest makes representation by
the same counsel or the counsel selected by the Indemnifying Party
inappropriate. Further, the Indemnitee shall have the right to employ separate
counsel and to participate in the defense of any Third Party Claim (though such
separate counsel shall not appear of record), at the expense of the Indemnitee
(unless the Indemnifying Party agrees to pay the fees and expenses of such
separate counsel). In any event, the Indemnitee and Indemnifying Party and their
counsel shall cooperate in the defense of any Third Party Claim and keep such
persons informed of all developments relating to any such Third Party Claim, and
provide copies of all relevant correspondence

 

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and documentation relating thereto consistent with applicable rules of privilege
and legal ethics. All costs and expenses incurred in connection with the
Indemnitee’s cooperation shall be paid by the Indemnifying Party, as incurred.
If the Indemnifying Party receiving a notice of Third Party Claim does not elect
timely to take responsibility for resolving, and defend, such Third Party Claim
or does not defend such Third Party Claim in good faith, the Indemnitee shall
have the right, in addition to any other right or remedy it may have hereunder,
at the Indemnifying Party’s expense, to defend such Third Party Claim; provided,
however, that (i) the Indemnitee shall not have any obligation to participate in
the defense of, or defend, any such Third Party Claim; (ii) the Indemnitee’s
defense of or participation in the defense of any such claim shall not in any
way diminish or lessen the obligations of the Indemnifying Party under this
Article V; and (iii) the Indemnitee shall not resolve, settle, compromise or
discharge any such Third Party Claim without the prior written consent of the
Indemnifying Party.

 

Section 5.5 Pending Litigation. Following the Closing Date, (a) the Company
shall have exclusive authority and control over the investigation, prosecution,
defense and appeal of all Actions listed on Part A of Section 5.5 of the
Disclosure Schedule and all pending Actions relating to the Retained Business,
the Retained Assets, the Retained Employees or the Retained Liabilities and not
relating to the Newco Business, the Newco Assets, the Newco Employees or the
Newco Liabilities (each, a “Retained Action”), and may settle or compromise, or
consent to the entry of any Judgment with respect to, any such Action without
the consent of Newco, and (b) Newco shall have exclusive authority and control
over the investigation, prosecution, defense and appeal of all pending Actions
listed on Part B of Section 5.5 of the Disclosure Schedule and all pending
Actions relating to the Newco Business, the Newco Assets, the Newco Employees or
the Newco Liabilities and not relating to the Retained Business, the Retained
Assets, the Retained Employees or the Retained Liabilities (each, a “Newco
Action”), and may settle or compromise, or consent to the entry of any Judgment
with respect to, any such Action without the consent of the Company; provided,
that, notwithstanding anything to the contrary, neither the Company nor Newco
(nor any of their respective Subsidiaries) may settle or compromise, or consent
to the entry of any Judgment with respect to, any Retained Action or Newco
Action, without the prior written consent of the other party if such settlement,
compromise or consent to such Judgment (i) includes any form of relief binding
upon such other party or its Affiliates or their respective businesses or assets
or (ii) does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such other party (and any Affiliate of such other party
subject to such Action) of a full and final release from all Liability in
respect of such claim or litigation. For the avoidance of doubt, neither any of
the Actions listed on Part C of Section 5.5 of the Disclosure Schedule (each, an
“Unallocated Action”) nor any Action in respect of any Shared Transaction
Liabilities shall be a Retained Action or Newco Action.

 

Section 5.6 Remedies Exclusive. From and after the Closing and except as
otherwise specifically provided herein (including Articles IV and VIII), the
rights to indemnification provided in this Article V shall be the exclusive
monetary remedy for any Newco Liabilities or Retained Liabilities; provided that
nothing herein shall preclude assertion by any Indemnitee of any other rights or
the seeking of any and

 

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all other remedies against any Indemnifying Party in the event of fraud or in
the event of an Indemnifying Party’s failure to comply with its indemnification
obligations hereunder.

 

Section 5.7 Purchase Price Adjustment. The parties agree that any indemnity
payments pursuant to this Agreement will be treated for Tax purposes as an
adjustment to the Purchase Price, unless otherwise required by applicable Law.

 

ARTICLE VI

 

CERTAIN ADDITIONAL MATTERS

 

Section 6.1 Further Assurances; Subsequent Transfers.

 

(a) To the extent that any of the transfers, distributions, deliveries and
assumptions required to be made pursuant to Article II shall not have been so
consummated at or prior to Closing, the parties shall cooperate and use their
reasonable best efforts to effect such consummation as promptly thereafter as
reasonably practicable. Each of the parties hereto will execute and deliver such
further instruments of transfer, distribution and assumption and will take such
other actions as Newco or any of its Subsidiaries may reasonably request in
order to effectuate the purposes of this Agreement and to carry out the terms
hereof. Without limiting the generality of the foregoing, at any time and from
time to time after Closing, at the request of Newco or any of its Subsidiaries,
the Company and its Subsidiaries will execute and deliver such other instruments
of transfer and distribution, and take such action as Newco or any of its
Subsidiaries may reasonably deem necessary or desirable in order to more
effectively transfer, convey and assign to Newco or any of its Subsidiaries and
to confirm Newco’s or any of its Subsidiaries’, as the case may be, right, title
to or interest in, all of the Newco Assets, to put Newco and its Subsidiaries in
actual possession and operating control thereof and to permit Newco and its
Subsidiaries to exercise all rights with respect thereto (including rights under
contracts and other arrangements as to which the consent of any third party to
the transfer thereof shall not have previously been obtained) and to properly
assume and discharge the related Newco Liabilities.

 

(b) In the event and to the extent that the Company is unable to obtain any
consents required to transfer and assign to Newco any agreements, licenses and
other rights included in the Newco Assets, the Company (i) shall continue to be
bound thereby pending assignment to Newco or a Newco Entity designated by Newco
and (ii) shall, at the direction and expense of Newco, pay, perform and
discharge fully all of its obligations thereunder from and after the Closing and
prior to assignment to Newco or a Newco Entity, and Newco will indemnify the
Company for any Liabilities (other than Tax Liabilities) of the Company arising
out of such Assets, any reasonable out-of-pocket expenses associated with any
attempt to transfer or failure to transfer such Asset, which shall constitute
Newco Transaction Liabilities, or any Liabilities arising out of or resulting
from the Company’s actions taken in accordance with any such directions of
Newco. The Company shall, without further consideration therefor, pay, assign
and remit to Newco promptly all monies, rights and other consideration received
in respect of such agreements. The Company shall exercise or exploit its rights
and options under all such

 

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agreements, leases, licenses and other rights and commitments referred to in
this Section 6.1(b) when and only as reasonably directed by Newco. If and when
any such consent shall be obtained or such agreement, lease, license or other
right shall otherwise become assignable, the Company shall promptly assign all
its rights and obligations thereunder to Newco or a Newco Entity designed by
Newco without payment of further consideration and Newco shall, without the
payment of any further consideration therefor, assume such rights and
obligations.

 

(c) In the event that, subsequent to the Closing Date, the Company or Parent
shall either (i) receive written notice from Newco that certain specified Assets
of the Company or any Subsidiary of the Company which properly constitute Newco
Assets were not transferred to Newco on or prior to the Closing Date or (ii)
determine that certain Assets of the Company or any Subsidiary of the Company
which properly constitute Newco Assets were not transferred to Newco on or prior
to the Closing Date, then (assuming the accuracy of such notice or demand) as
promptly as practicable thereafter, the Company shall take all steps reasonably
necessary to transfer and deliver any and all of such Assets to Newco without
the payment by Newco of any further consideration therefor. In the event that,
subsequent to the Closing Date, Newco shall either (i) receive written notice
from the Company or Parent that certain specified Assets which properly
constitute Retained Assets were transferred to Newco or included with the Newco
Entities, or (ii) determine that certain Assets of Newco which properly
constitute Retained Assets were transferred to Newco or included with the Newco
Entities, then (assuming the accuracy of such notice or demand) as promptly as
practicable thereafter, Newco shall, and shall cause its Subsidiaries to, take
all steps reasonably necessary to transfer and deliver any and all of such
Assets to the Company or its Subsidiaries without the payment by the Company of
any further consideration therefor.

 

Section 6.2 Use of Names. Following the Closing Date, the Company and the ECN
Entities shall have the sole and exclusive ownership of and right to use, as
between the Company and the ECN Entities, on the one hand, and Newco and its
Subsidiaries, on the other hand, each of the names that are (i) set forth in
Part A of Section 6.2 of the Disclosure Schedule or (ii) used solely in
connection with the Retained Business (the “Retained Names”), and each of the
trade marks, trade names, service marks and other proprietary rights related to
such Retained Names (the “Retained Proprietary Name Rights”). Following the
Closing Date, Newco and its Subsidiaries shall have the sole and exclusive
ownership of and right to use, as between Newco and its Subsidiaries, on the one
hand, and the Company and the ECN Entities, on the other hand, all names used by
the Company and its Subsidiaries other than the Retained Names, including the
Names set forth on Part B of Section 6.2 of the Disclosure Schedule (the “Newco
Names”), and all other trade marks, trade names, service marks and other
proprietary rights related to such Newco Names (the “Newco Proprietary Name
Rights”). Notwithstanding the foregoing, neither the Company and the ECN
Entities, nor Newco and its Subsidiaries, shall use any names that are
confusingly similar to the Retained Names or the Newco Names, as applicable,
without the prior written consent of the other party, provided that the parties
agree that none of the Names set forth on Part A of Section 6.2 of the
Disclosure Schedule, on the one hand, and the Names set forth on Part

 

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B of Section 6.2 of the Disclosure Schedule, on the other hand, shall be deemed
to be “confusingly similar.” As promptly as practicable following the Closing
Date but in no event later than one hundred eighty (180) days following the
Closing Date, the parties hereto shall, and shall cause their respective
Subsidiaries and other Affiliates to, take all action necessary to cease using,
and change (including by amending any charter documents), any corporate or other
names which are the same as or confusingly similar to any of the Newco Names and
the Newco Proprietary Name Rights or the Retained Names and the Retained
Proprietary Name Rights, as the case may be.

 

Section 6.3 Payment of Intercompany Accounts. To the extent not previously paid
and settled in full, the parties shall use best efforts to cause Instinet on or
prior to the Closing Date to pay and settle in full for cash (or, failing such
payment prior to Closing, shall pay and settle in full for cash at Closing) all
intercompany receivables, payables, loans and other accounts in existence as of
the Effective Time between the Company and the ECN Entities, on the one hand,
and the Newco Entities, on the other hand.

 

Section 6.4 Merger Agreement Provisions. (a) Parent and the Company shall
provide Newco with as much prior written notice as is reasonably practicable
(which, if the circumstances permit, shall be not less than three business days’
notice) of any proposed agreement or consent by both or either of them to any
modifications of the terms and conditions of, or proposed delivery by both or
either of them of any consent or waiver or any exercise of any right of
termination under, the Merger Agreement. Parent and the Company will (i) use
their best efforts to allow Newco to participate directly in any negotiations or
discussions with Instinet relating to any such proposed modification, consent,
waiver or termination unless such action would not reasonably be expected to
have a Newco Adverse Effect and (ii) keep Newco informed of the status and any
developments with respect to any such proposed modification, consent, waiver or
termination. Neither Parent nor the Company will, without the prior written
consent of Newco, terminate the Merger Agreement pursuant to Section 8.1 thereof
or agree to any modification of any of the terms or conditions of, or give any
consent or waiver under, any provision of the Merger Agreement if such
modification, consent or waiver would reasonably be expected to have a Newco
Adverse Effect. Upon Newco’s request, but subject to Instinet’s willingness,
Parent and the Company will enter into such modifications of the terms and
conditions of, or give any consent or waiver under, the Merger Agreement
relating solely to the Newco Entities, the Newco Assets, the Newco Employees,
the Newco Business or the Newco Liabilities unless such action would reasonably
be expected to have an adverse effect on the probability that the transactions
contemplated by this Agreement or the Merger Agreement will be consummated.

 

(b) Prior to the Closing, Newco will promptly notify Parent and Parent will
promptly notify Newco, in the event that Newco or Parent, as the case may be,
becomes aware of (i) the occurrence or nonoccurrence of any event the occurrence
or nonoccurrence of which could reasonably be expected to cause (x) any
representation or warranty of Parent, the Company or Instinet contained in the
Merger Agreement to be untrue or inaccurate or (y) any covenant, condition or
agreement of

 

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Parent, the Company or Instinet or any Subsidiary of Instinet contained in the
Merger Agreement to not be complied with or satisfied and (ii) any failure of
Parent, the Company, Instinet or any Subsidiary of Instinet to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it under the Merger Agreement.

 

(c) Prior to the Closing, Parent agrees to use its reasonable best efforts to
ensure that Newco and its accountants, attorneys, consultants, financing sources
and other Representatives are provided access pursuant to Section 6.1 of the
Merger Agreement. Prior to the Closing, Newco agrees that it shall, and shall
cause its Affiliates to, comply with the obligations under Section 6.1 of the
Merger Agreement.

 

(d) After the Closing, Newco shall, and shall cause each Newco Entity to, as the
case may be, honor the applicable obligations under Section 6.7 of the Merger
Agreement with respect to the Newco Employees. After the Closing, the Company
shall, and shall cause each ECN Entity to, as the case may be, honor the
applicable obligations under Section 6.7 of the Merger Agreement with respect to
the Retained Employees.

 

(e) After the Closing, Newco shall, and shall cause each Newco Entity to, honor
the applicable obligations under Section 6.9 of the Merger Agreement as such
obligations relate to such Newco Entity. After the Closing, the Company shall,
and shall cause each ECN Entity to, honor the applicable obligations under
Section 6.9 of the Merger Agreement as such obligations relate to such ECN
Entity.

 

(f) The parties agree that the representations, warranties, covenants and
agreements in the Merger Agreement or in any certificate delivered pursuant
thereto shall not survive the consummation of the Merger or the termination of
the Merger Agreement (except for the covenants set forth in Sections 6.7 and 6.9
of the Merger Agreement).

 

Section 6.5 No Additional Representations. Newco acknowledges that it and its
representatives have received access to such books and records, facilities,
equipment, contracts and other assets of Instinet which it and its
representatives have deemed necessary and requested to review, and that it and
its representatives have had full opportunity to meet with the management of
Instinet to discuss the businesses and assets of Instinet. Newco acknowledges
that neither Instinet nor any other person has made any representation or
warranty, expressed or implied, as to the accuracy or completeness of any
information regarding Instinet furnished or made available to Parent, Newco and
their representatives except as expressly set forth in Article 4 of the Merger
Agreement (which includes the Schedules thereto) or in any certificate delivered
pursuant to Section 7.2 thereof.

 

Section 6.6 Reasonable Efforts; Regulatory Consents, Authorizations, etc. (a)
Each of the parties to this Agreement shall use commercially reasonable and good
faith efforts to consummate the transactions contemplated under this Agreement
and the Merger Agreement as of the earliest practicable date; provided, that,
unless

 

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otherwise agreed to by the parties, such date is the first business day
following the last day of an Instinet fiscal month end.

 

(b) Newco and Parent further agree to (i) promptly file or cause to be promptly
filed, with all appropriate Authorities, all notices, registrations,
declarations, applications and other documents as may be necessary to consummate
the transactions contemplated under this Agreement and the Merger Agreement and
(ii) thereafter diligently pursue obtaining all Required Regulatory Approvals
(as defined in the Merger Agreement) from such Authorities as may be necessary
to consummate the transactions contemplated under this Agreement and the Merger
Agreement. Newco and Parent further agree to use their commercially reasonable
efforts to seek and obtain all third party consents required to give effect to
the transfer and assignment of the Newco Assets or otherwise in connection with
the transactions contemplated by this Agreement.

 

(c) Subject to the terms and conditions of this Agreement, Newco and Parent
agree that each shall use its best efforts to take, or cause to be taken and do,
or cause to be done, all things necessary under applicable Antitrust Laws to
consummate the transactions contemplated under this Agreement and the Merger
Agreement as of the earliest practicable date. In furtherance and not in
limitation of the above, Newco and Parent agree that each shall (i) cause to be
filed any necessary notification or report with respect to the transactions
contemplated under this Agreement and the Merger Agreement, pursuant to any
applicable Antitrust Law, as soon as practicable after the date hereof; and with
respect to the HSR Act, in any event not later than the tenth business day after
the date hereof, (ii) supply as promptly as practicable any additional
information or documentary material that may be requested by any Authority
pursuant to any applicable Antitrust Law; and (iii) use, subject to the other
provisions of this Section 6.6, its best efforts to take all other actions
necessary to obtain all Required Regulatory Approvals or to cause the expiration
or termination of the applicable waiting periods under any applicable Antitrust
Law as soon as practicable. In furtherance and not in limitation of the above,
it is specifically understood that Newco and Parent shall each cause to be filed
with the United States Department of Justice and Federal Trade Commission a
Notification and Report Form for Certain Mergers and Acquisitions, pursuant to
the HSR Act, and shall include therein a request for early termination of the
waiting period specified under the HSR Act.

 

(d) In connection with the efforts referenced in Section 6.6(c) above, Newco and
Parent further agree that each will use its best efforts to (i) cooperate in all
respects with the other parties hereto in connection with any filing or
submission and in connection with any investigation or other inquiry, including
any Action initiated by a private party, pursuant to any applicable Antitrust
Law (including, by sharing copies of any such filings or submissions with the
other parties hereto reasonably in advance of the filing or submission thereof;
provided, that sensitive or competitive information shall be subject to review
on a counsel only basis pursuant to confidentiality undertakings); (ii) promptly
inform each other party hereto and Instinet of any communication received from,
or given by Newco or Parent to, any Authority regarding the transactions
contemplated under this Agreement and the Merger Agreement, and of any
communication received or given in connection with any Action by a private
party, in

 

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any such case, to the extent reasonably practicable, pursuant to an applicable
Antitrust Law and regarding any of the transactions contemplated under this
Agreement and the Merger Agreement; and (iii) permit each of the parties hereto
and Instinet an opportunity to review in advance of any communication intended
to be given by it to, and consult with the other parties hereto and Instinet in
advance of any meeting or conference with, any Authority or, in connection with
any proceeding by a private party, with such private party, in any such case, to
the extent reasonably practicable, pursuant to an applicable Antitrust Law and
to the extent permitted by such Authority or other person, give the other
parties hereto and Instinet the opportunity to attend and participate in such
meetings and conferences if either party and Instinet reasonably believes such
attendance and participation to be beneficial; provided, however, that materials
concerning the valuation of the Company and materials subject to third-party
confidentiality restrictions may be redacted.

 

(e) If, with respect to any filing contemplated by this Section 6.6, it is
necessary or advisable that a single filing be made on behalf of Newco and
Parent, each party shall closely cooperate in the preparation of such filing.
If, with respect to any filing contemplated by this Section 6.6, only one filing
fee is required for both parties, regardless of whether separate or joint
filings are made the party required to make such payment under applicable Law
shall pay the appropriate filing fee. In furtherance and not in limitation of
the foregoing, Newco shall be required to pay the filing fee pursuant to the HSR
Act with respect to the VAB Purchase and Parent shall be required to pay the
filing fee pursuant to the HSR Act with respect to the Merger.

 

(f) Subject to Section 6.6(h), in furtherance and not in limitation of the
efforts referred to above in Section 6.6(d), if any objections are asserted
pursuant to any applicable Antitrust Law by any Authority or private party, or
if any suit is instituted or threatened, which would otherwise prohibit or
materially impair or delay the consummation of the transactions contemplated
under this Agreement and the Merger Agreement, Newco and Parent agree that each
shall use its best efforts to resolve any such objections or suits so as to
permit consummation of the transactions contemplated under this Agreement and
the Merger Agreement, including selling or agreeing to sell, holding or agreeing
to hold separate, or otherwise disposing or agreeing to dispose of assets (which
may include any assets relating to the Newco Business), or conducting or
agreeing to conduct its business in such a manner as would resolve such
objections or suits, or permitting any of its Subsidiaries to take or agree to
take any such action. Notwithstanding the foregoing, the parties will each use
their commercially reasonable efforts to resist any action requested by any
Authority to sell, divest, discontinue or limit, before or after the Closing,
any of the Newco Assets or all or any portion of the Newco Business (other than
the disposition contemplated by the VAB Purchase).

 

(g) In the event that any Action is instituted, or threatened to be instituted,
by any Authority or private party, in any such case, pursuant to Antitrust Law,
challenging any of the transactions contemplated under this Agreement and the
Merger Agreement, each party to this Agreement agrees to cooperate in all
respects with each other and use its respective best efforts to defend, contest
and resist any such Action and to have vacated, lifted, reversed or overturned
any Judgment, whether temporary,

 

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preliminary or permanent, that is in effect and prohibits, prevents or restricts
consummation of the transactions contemplated under this Agreement and the
Merger Agreement.

 

(h) Notwithstanding anything in this Section 6.6 to the contrary, nothing in
this Section 6.6 shall require, or be construed to require Instinet, Newco,
Parent or the Company or any of their respective Subsidiaries to, in connection
with the receipt of any consent, waiver, approval, license or authorization by
any Authority or the defense of any Action, to (A) in the case of Parent and its
Affiliates, (i) sell, hold separate, divest, discontinue, or limit, or proffer
to, or agree to, sell, hold separate, divest, discontinue or limit, before or
after the Closing Date, any assets, businesses, or interest in any assets or
businesses of Parent or Instinet or any Instinet Subsidiary or any of their
respective Affiliates (or to consent to any sale, or agreement to sell or
discontinuance or limitation by Parent or Instinet or any Instinet Subsidiary or
any of their respective Affiliates, as the case may be, of any of their
respective assets or businesses) or (ii) agree to any conditions or terms
relating to or applying to, or requiring any changes, limitations or
restrictions on, the operation of any asset or business, including the market
practices and structure of Parent, that, in the case of either clause (A)(i) or
(A)(ii), is reasonably likely, individually or in the aggregate, to have a
material adverse effect on the assets, business, long-term earning capacity or
financial condition of Parent and its Affiliates (including the ECN Entities)
taken as a whole or (B) in the case of Newco and its Affiliates, (i) sell, hold
separate, divest, discontinue, or limit, or proffer to, or agree to, sell, hold
separate, divest, discontinue or limit, before or after the Closing Date, any
assets, businesses, or interest in any assets or businesses of Instinet or any
Instinet Subsidiary or any of their respective Affiliates to the extent any such
assets or businesses are part of the Newco Business or constitute Newco Assets
(or to consent to any sale, or agreement to sell or discontinuance or limitation
by Instinet or any Instinet Subsidiary or any of their respective Affiliates, as
the case may be, of any of their respective assets or businesses to the extent
any such assets or businesses are part of the Newco Business or constitute Newco
Assets) or (ii) agree to any conditions or terms relating to or applying to, or
requiring any changes, limitations or restrictions on, the operation of any
Newco Asset or the Newco Business, including the market practices and structure
of Newco and its Affiliates, that, in the case of either clause (B)(i) or
(B)(ii), is reasonably likely, individually or in the aggregate, to have a
material adverse effect on (x) the assets, business, long-term earning capacity
or financial condition of Newco and its Affiliates (including the Newco
Entities) taken as a whole, (y) the Newco Assets or (z) the Newco Business (any
such requirement specified in clause (B)(i) or (B)(ii), a “Burdensome
Condition”).

 

Section 6.7 Ancillary Agreements. (a) On the Closing Date, the parties shall
execute (and/or cause their respective Subsidiaries party thereto to execute)
the Ancillary Agreements.

 

(b) On the Closing Date, Parent shall cause the Company to execute and deliver
the First Amendment to Sublease in the form attached as Exhibit G. In addition,
on the Closing Date, the parties agree that the Company shall sublease to Newco
and Newco shall sublease from the Company on substantially the same terms as

 

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the Sublease (as amended) (or an assignment of the Sublease from the Company to
Newco; provided, that the Company shall remain obligated under the Sublease)
pursuant to which Newco shall, among other things, pay Parent a special payment
of $3,500,000, which shall be used by Parent to satisfy the consideration due
sublessor pursuant to Section 5 of the First Amendment to Sublease in the form
attached as Exhibit G.

 

Section 6.8 Sharing of Certain Payments. In the event that Parent receives a
Termination Fee (as defined in the Merger Agreement), Parent shall pay Newco an
amount equal to (i) (A) the Termination Fee less (B) any out-of-pocket fees and
expenses incurred by Newco or any of its Affiliates and subject to payment by
Parent pursuant to the Convertible Notes Securities Purchase Agreement less (C)
any fees and expenses subject to payment by Parent in connection with the bridge
financing from JPMorgan Chase in connection with the Convertible Notes
Securities Purchase Agreement, multiplied by (ii) the Newco Percentage. Such
amount shall be paid within five business days of the receipt by Parent of such
Termination Fee.

 

Section 6.9 Certain Restrictions Pending the Closing. (a) Newco agrees that,
from and after the date hereof and prior to the Closing, except (i) as otherwise
expressly permitted by this Agreement, (ii) for any action that constitutes an
exercise of Newco’s rights under Section 6.4, Section 9.1 or Section 9.2 or
(iii) as agreed in writing by Newco and Parent, Newco shall not, and shall not
permit any of its Subsidiaries to, take or agree, in writing or otherwise, to
take any action which could reasonably be expected to materially impair Newco’s
ability to perform its obligations under this Agreement or to prevent, impede or
delay the consummation of the transactions contemplated under this Agreement or
the Merger Agreement or result in the failure to satisfy any condition to the
consummation of the transactions hereunder or thereunder.

 

(b) Parent agrees that, from and after the date hereof and prior to the Closing,
except (i) as otherwise expressly permitted by this Agreement, (ii) for any
action that constitutes an exercise of Parent’s rights under Article 7 of the
Merger Agreement, Article 8 of the Merger Agreement, Section 9.1 or Section 9.2
or (iii) as agreed in writing by Parent and Newco, Parent shall not, and shall
not permit any of its Subsidiaries to, take or agree, in writing or otherwise,
to take any action which could reasonably be expected to materially impair
Parent’s or the Company’s ability to perform its obligations under this
Agreement or the Merger Agreement or to prevent, impede or delay the
consummation of the transactions contemplated under this Agreement or the Merger
Agreement or result in the failure to satisfy any condition to the consummation
of the transactions hereunder or thereunder.

 

Section 6.10 Noncompetition and Non-Solicitation. (a) During the period
beginning on the Closing Date and ending on the date which is three (3) years
following the Closing Date, neither Newco nor any Subsidiary thereof shall, with
respect to equity securities traded on any U.S. securities exchange or
over-the-counter market, without the prior written consent of Parent (i) own or
operate any (A) “electronic communications network” (as defined under Rules
11Ac1-1 and 11Ac1-4 under the Exchange Act), (B) Self-Regulatory Organization or
(C) “alternative trading system” (as defined in Rule 300 of Regulation ATS under
the Exchange Act) that (x) is required to

 

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comply with Rule 301(b)(5) of Regulation ATS under the Exchange Act (as in
effect on the date of this Agreement); provided, that each reference to “20
percent” in Rule 301(b)(5)(i) shall be read as if such reference is “5 percent”
and (y) provides execution services directly to registered broker-dealers (each
a “Newco Competing Business”); (ii) license, sell or provide the Continuous
Block Crossing software and systems (“CBX”) to any person that operates or, to
the knowledge of Newco, intends to operate a Newco Competing Business, (iii) use
CBX to develop, facilitate, enhance or operate a securities order execution or
matching system to be used by a Newco Competing Business, (iv) employ, engage or
utilize any Retained Employees (other than those individuals set forth in
Section 6.10(c) of the Disclosure Schedule) in the development, facilitation,
enhancement or operation of a securities order execution or matching system to
be used by a Newco Competing Business, or (v) enter into a transaction the
primary purpose of which is to acquire one (1) percent or more of the equity
interests or voting power of any person (other than the securities held as of
the Closing Date (as such may be adjusted and including stock dividends thereon
or securities issued in exchange therefor) by Instinet and its Subsidiaries and
listed on Section 6.10(a) of the Disclosure Schedule) that is principally
engaged in a Newco Competing Business. Notwithstanding the foregoing, a Newco
Competing Business shall not be deemed to include and Newco and its Subsidiaries
shall not be prohibited from (A) continuing to operate (in substantially the
same manner as currently operated) any business operated by the Newco Entities
as of the date hereof or as of the Closing Date, growing any such existing
business (other than by engaging in a Competing Business) or holding any of the
Newco Assets, (B) owning or operating any business that consists solely or
primarily of providing (1) matching or crossing services to buy-side customers,
(2) direct market access, (3) trade execution services for securities other than
cash equity securities (e.g., options or other derivative securities) or (4)
trade execution services in cash equity securities directly to institutional
customers or (C) acquiring any business that includes operations the conduct of
which by Newco and its Subsidiaries would, but for this sentence, otherwise
violate the restrictions of this Section 6.10(a), if the primary purpose of such
acquisition is not to acquire any Newco Competing Business; provided, that if
more than fifteen (15) percent of such acquired entity’s gross revenues are
derived from the Newco Competing Business during the twelve (12) calendar months
immediately preceding the month in which such acquisition occurs, then within
one (1) year after the date of such acquisition, Newco and its Subsidiaries
shall have ceased conducting such business or shall have entered a binding
agreement (which may be an agreement with Parent or an Affiliate thereof) for
the disposition of the Newco Competing Business. If any such binding agreement
shall terminate prior to the completion of the sale of such Newco Competing
Business, Newco and its Subsidiaries shall cease conducting such business or
enter into a new binding agreement for its disposition within three (3) months
after the date of such termination.

 

(b) During the period beginning on the Closing Date and ending on the date which
is three (3) years following the Closing Date, neither Parent nor any Subsidiary
thereof shall, within the United States or any foreign jurisdiction in which the
Newco Business is conducted as of the Closing Date (but only so long as Newco or
a Newco Entity conducts business in such jurisdiction), without the prior
written consent of Newco: (i) directly or indirectly, engage in the business of
providing trade execution services in cash equity securities directly to
institutional customers, other than products

 

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or services that are sponsored by broker-dealer customers; or (ii) enter into a
transaction the primary purpose of which is to acquire one (1) percent or more
of the equity interests or voting power of any person principally engaged in any
of the businesses described in clause (i) (a “Parent Competing Business”).
Notwithstanding the foregoing, Parent and its Subsidiaries shall not be
prohibited from acquiring any business that includes operations the conduct of
which by Parent and its Subsidiaries would, but for this sentence, otherwise
violate the restrictions of this Section 6.10(b), if the primary purpose of such
acquisition is not to acquire any Parent Competing Business; provided, that if
more than fifteen (15) percent of such acquired entity’s gross revenues are
derived from the Parent Competing Business during the twelve (12) calendar
months immediately preceding the month in which such acquisition occurs, then
within one (1) year after the date of such acquisition, Parent and its
Subsidiaries shall have ceased conducting such business or shall have entered a
binding agreement (which may be an agreement with Newco or an Affiliate thereof)
for the disposition of the Parent Competing Business. If any such binding
agreement shall terminate prior to the completion of the sale of such Parent
Competing Business, Parent and its Subsidiaries shall cease conducting such
business or enter into a new binding agreement for its disposition within three
(3) months after the date of such termination.

 

(c) Newco agrees that, for a period beginning on the date of this Agreement and
ending on the date two (2) years following the Closing Date, neither Newco nor
its Subsidiaries will solicit for employment or hire any of the Retained
Employees (other than the individual listed in Section 6.10(c) of the Disclosure
Schedule); provided, however, that it is understood that this Section 6.10(c)
shall not prohibit: (i) generalized solicitations by advertising and the like
that are not directed to the Retained Employees; (ii) solicitations or hires of
Retained Employees whose employment was terminated by Parent, the Company or any
ECN Entity or (iii) solicitations or hires of Retained Employees who have
terminated their employment with Parent, the Company or any ECN Entity without
any prior solicitation (which would otherwise violate this Section 6.10(c)) by
Newco or any Subsidiary thereof.

 

(d) Parent agrees that, for a period beginning on the date of this Agreement and
ending on the date two (2) years following the Closing Date, neither Parent nor
its Subsidiaries will solicit for employment or hire any of the Newco Employees;
provided, however, that it is understood that this Section 6.10(d) shall not
prohibit: (i) generalized solicitations by advertising and the like that are not
directed to the Newco Employees; (ii) solicitations or hires of Newco Employees
whose employment was terminated by Newco or any Newco Entity or (iii)
solicitations or hires of Newco Employees who have terminated their employment
with Newco or any Newco Entity without any prior solicitation (which would
otherwise violate this Section 6.10(d)) by Parent or any Subsidiary thereof.

 

(e) It is the intent and understanding of each party hereto that if, in any
action before any Authority legally empowered to enforce this Section 6.10, any
term, restriction, covenant, or promise is found to be unreasonable and for that
reason unenforceable, then such term, restriction, covenant, or promise shall
not thereby be terminated but that it shall be deemed modified to the extent
necessary to make it

 

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enforceable by such Authority and, if it cannot be so modified, that it shall be
deemed amended to delete therefrom such provision or portion adjudicated to be
invalid or unenforceable, such modification or amendment in any event to apply
only with respect to the operation of this Section 6.10 in the particular
jurisdiction in which such adjudication is made.

 

(f) Notwithstanding anything to the contrary contained in this Section 6.10, in
no event shall this Section 6.10 be deemed to apply to any Affiliate of Newco or
Parent (other than a Subsidiary of Newco or Parent, as applicable) solely
because such person is an Affiliate of Newco or Parent.

 

Section 6.11 Reimbursement of Certain Amounts Paid By Instinet Prior to the
Closing. Following the Closing, from time to time upon written notice by Newco
to Parent and receipt by Parent of evidence reasonably satisfactory to it of the
payment of such amounts by Instinet or any Subsidiary thereof prior to Closing,
Parent shall pay to Newco an amount (less any accruals therefor reflected on the
Retained Business Balance Sheet) equal to the amount of any Liabilities of
Instinet and its Subsidiaries that (A) were paid on or prior to the Closing Date
but not known to the parties as of the Closing Date to have been so paid (and
therefore not paid to Newco pursuant to Section 2.3(c)) and (B) would have been
Retained Liabilities of the types referred to in clauses (iv), (v), (vi), (vii),
(viii), (ix) or (x) of the definition of Retained Liabilities payable by Parent,
the Company and the ECN Entities following the Closing Date if not so paid on or
prior to the Closing Date. The parties agree that any payments pursuant to this
Section 6.11 will be treated for Tax purposes as an adjustment to the Purchase
Price, unless otherwise required by applicable Law.

 

Section 6.12 Sharing of Amounts Payable In Respect of the Exchange Fund. Parent
and the Company agree that promptly upon receipt (and in any event within five
business days thereof) of any amounts payable under Section 3.2 of the Merger
Agreement with respect to the Exchange Fund (as defined in the Merger
Agreement), including in connection with any interest payments thereon or
release thereof, Parent or the Company shall pay by wire transfer of immediately
available funds to an account designated by Newco for such purposes, an amount
without duplication equal to the product of (i) the total amount received by the
Parent or the Company in respect of the Exchange Fund and (ii) the Newco
Percentage. At any time after the Exchange Fund is delivered to Buyer pursuant
to Section 3.2 of the Merger Agreement, Parent shall notify Newco of any payment
of Merger Consideration to any holder of Certificates that had not theretofore
been surrendered for Merger Consideration. Promptly following written notice
thereof accompanied by evidence of such payment, Newco shall pay by wire
transfer of immediately available funds to an account designated by Parent for
such purpose (or by check with respect to any amounts under $10,000), an amount
equal to the product of (i) the Merger Consideration paid in respect of such
Certificates and (ii) the Newco Percentage.

 

Section 6.13 Settlement of Litigation Constituting Shared Transaction
Liabilities. (a) None of Newco, Parent or the Company shall, and shall not agree
to, admit liability in, resolve, settle or compromise any Action that
constitutes a Shared

 

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Transaction Litigation Liability without the prior written consent of the other
parties hereto unless the relief consists solely of the payment of money by the
settling party, which is not subject to reimbursement by any other party, does
not admit liability and includes a provision whereby the plaintiff or claimant
in the matter releases the other parties from all liability with respect
thereto.

 

(b) In the event any appraisal proceeding brought under Section 262 of the
General Corporation Law of the State of Delaware results in the payment of an
amount per share in respect of shares of Company Common Stock (as defined in the
Merger Agreement) outstanding prior to the Effective Time that is less than the
per share Merger Consideration (as defined in the Merger Agreement) (after
taking into account the costs and expenses of defending such Action), the
difference between the amount of such payment and the Merger Consideration shall
be split between Parent and Newco based on the Company Percentage and the Newco
Percentage.

 

Section 6.14 LJR Insurance Policy. Notwithstanding anything to the contrary
contained in this Agreement, including the definition of Retained Assets, in the
event that the Company shall receive any proceeds from the LJR Insurance Policy
following the Closing in respect of any LJR Liability paid by Instinet or any of
its Subsidiaries prior to the Closing, the Company shall assign and pay over to
Newco for no additional consideration 100% of such insurance proceeds.

 

ARTICLE VII

 

ACCESS TO INFORMATION AND SERVICES

 

Section 7.1 Access to Information. From and after the Closing (i) the Company
shall (A) afford to Newco and its authorized accountants, counsel and other
designated Representatives reasonable access (including using reasonable efforts
to give access to persons or firms possessing Information) and duplicating
rights during normal business hours and upon reasonable advance notice to all
records, books, contracts, instruments, computer data and other data and
information (collectively, “Information”) within the Company’s possession
insofar as such access is reasonably required by Newco and (B) at the request
and expense of Newco, use its reasonable efforts to cooperate with Newco and its
accountants and other Representatives in connection with the preparation of any
audits (and related financial statement preparation) and with the transition of
the Newco Business to a “stand-alone” business following the Closing, including
by assisting Newco in connection with any efforts by Newco to obtain insurance
coverage for the Newco Business, and (ii) Newco shall (A) afford to the Company
and its authorized accountants, counsel and other designated Representatives
reasonable access (including using reasonable efforts to give access to persons
or firms possessing Information) and duplicating rights during normal business
hours and upon reasonable advance notice to all Information within Newco’s
possession insofar as such access is reasonably required by the Company and (B)
at the request and expense of Parent, use its reasonable efforts to cooperate
with Parent and its accountants and other Representatives in connection with the
preparation of any audits (and related financial statement preparation) and with
the transition of the Retained Business to Parent. Information may be requested
under this

 

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Section 7.1 for, without limitation, audit, accounting, claims, litigation and
tax purposes, as well as for purposes of fulfilling disclosure and reporting
obligations.

 

Section 7.2 Litigation Cooperation. With respect to any Action that involves any
of the parties to this Agreement or any of the ECN Entities or Newco Entities
and relates to (x) the transactions contemplated by this Agreement or the Merger
Agreement or (y) Instinet or any current or former Subsidiary of Instinet or any
Liabilities or current or former Assets, employees or businesses thereof,
whether or not such Action is subject to indemnification hereunder, Parent and
the Company, on the one hand, and Newco, on the other hand, shall, upon written
request by the other, and at the expense of the requesting party (subject to the
indemnification and expense sharing provisions of this Agreement, to the extent
applicable), provide all cooperation and assistance, and shall furnish such
records and information, as may be reasonably requested by the other in
connection therewith, including, by using reasonable efforts to make available
to the other, its officers, directors, employees and agents as witnesses and to
attend such conferences, discovery proceedings, hearings, trials and appeals as
may be reasonably requested by the other in connection therewith. With respect
to (i) any such Action involving Shared Transaction Liabilities or (ii) any
Action initiated by any Authority or private party pursuant to any applicable
Antitrust Law and relating to the transactions contemplated by this Agreement or
the Merger Agreement, the parties agree, consistent with applicable rules of
privilege and legal ethics, to provide each other with timely and reasonably
detailed updates with respect to all material developments, consult with each
other before taking any significant actions in connection therewith and offer
each other the opportunity to comment before submitting to any Authority or
adverse party any written materials prepared or furnished in connection with
such Action.

 

Section 7.3 Retention of Records. Except as otherwise required by Law or agreed
to in writing, Newco and the Company shall each retain, for a period of at least
seven years following the Closing Date, all Information relating to (i) in the
case of Newco, the Retained Assets, the Retained Business and the Retained
Liabilities, and (ii) in the case of the Company, the Newco Assets, the Newco
Business and the Newco Liabilities. Notwithstanding the foregoing, except as
otherwise required by Law, either Newco or the Company may destroy or otherwise
dispose of any of such Information at any time, provided, that prior to such
destruction or disposal, (a) Newco or the Company, as the case may be, shall
provide no less than 90 or more than 120 days’ prior written notice to the other
party, specifying the Information proposed to be destroyed or disposed of and
(b) if the other party shall request in writing prior to the scheduled date for
such destruction or disposal that any of the Information proposed to be
destroyed or disposed of be delivered to the other party, Newco or the Company,
as the case may be, shall promptly arrange for the delivery of such of the
Information as was requested, at the expense of the requesting party.

 

Section 7.4 Confidentiality. Each party (which, for these purposes shall include
the Newco Entities, the Newco Business, the ECN Entities and the Retained
Business) shall hold, and shall cause its officers, employees, agents,
consultants, advisors and other Representatives to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or at the
direction of any Self-Regulatory Authority or,

 

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in the opinion of its counsel, by other requirements of Law, all non-public
Information concerning the other parties (which, for these purposes shall
include the Newco Entities, the Newco Business, the ECN Entities and the
Retained Business) furnished it by any such other party or its representatives
or otherwise in its possession (except to the extent that such Information can
be shown to have been (a) in the public domain through no fault of the party to
which it was furnished or (b) later lawfully acquired on a non-confidential
basis from other sources by the party to which it was furnished), and each party
shall not, without the prior written consent of the party that furnished such
Information, release or disclose such Information to any other person, except
its auditors, attorneys, financial advisors, financing sources, bankers and
other consultants, advisors and other representatives who have a need to know
such Information and who agree to be bound by the provisions of this Section
7.4. Each party shall be deemed to have satisfied its obligation to hold
confidential Information concerning or supplied by any other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar confidential Information.

 

Section 7.5 Publicity. Parent and the Company, on the one hand, and Newco, on
the other hand, each agree not to issue any press release or otherwise make any
public statement in any general circulation medium with respect to the
transactions contemplated under this Agreement or the Merger Agreement, without
the prior written consent of the other, which shall not be unreasonably
withheld; provided, however, that such parties may, without the consent of the
other, make any disclosures required to comply with applicable Laws and stock
listing requirements, except such consent shall be sought where practicable to
do so. The parties agree that the initial press release to be issued with
respect to the transactions contemplated under this Agreement and the Merger
Agreement shall be in the form agreed to by the parties.

 

ARTICLE VIII

 

EMPLOYEE BENEFITS; LABOR MATTERS

 

Section 8.1 Officers and Employees. The Newco Employees who are employed by the
Company or any of the Newco Entities immediately prior to the Closing Date shall
become employees of Newco or its Subsidiaries. The Retained Employees who are
employed by the Company or any of the ECN Entities immediately prior to the
Closing Date (other than the individual listed on Section 6.10(c) of the
Disclosure Schedule, who shall be deemed a Newco Employee) shall become
employees of the Parent or its Subsidiaries.

 

Section 8.2 Employee Benefits.

 

(a) U.S. Plans. Effective as of the Closing Date, Newco or a Subsidiary thereof
shall assume each “employee pension benefit plan” (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974 (“ERISA”)) and each
“employee welfare benefit plan” (as defined in Section 3(1) of ERISA) maintained
by the Company and all other employment, severance and benefit plans, contracts
or arrangements covering Newco Employees, including those plans, contracts and

 

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arrangements listed on Section 8.2(a) of the Disclosure Schedule (regardless of
whether they are funded or unfunded), other than any plans, contracts or
arrangements relating to equity-based compensation (the “Assumed U.S. Benefit
Plans”) and, for the avoidance of doubt, excluding any plans, contracts or
arrangements substantially for the benefit of Newco Employees who are located
outside of the United States. The Company and Newco shall take all such action
as may be necessary or appropriate in order to establish Newco as successor to
the Company as to all rights, duties, liabilities and obligations under or with
respect to each of the Assumed U.S. Benefit Plans, including obtaining the
written release of the Company and IHCI from such rights, duties, liabilities
and obligations under or with respect to the Assumed U.S. Benefit Plans.
Effective as of the Closing Date, all active participants other than Newco
Employees shall cease to participate actively in such plans. Newco shall succeed
the Company as the sponsor of the Assumed U.S. Benefit Plans, and agrees to
indemnify and hold the Company Indemnitees harmless from and against all
Indemnifiable Losses assessed against, resulting from, imposed upon or incurred
by the Company with respect to the Assumed U.S. Benefit Plans, other than any
Indemnifiable Losses with respect to Retained Employees.

 

(b) Non-U.S. Plans. Effective as of the Closing Date, Newco or a Subsidiary
thereof shall assume each employee benefit plan and all other employment,
severance and benefit plans, contracts or arrangements maintained by the Company
for the benefit of Newco Employees located in France, Germany and Japan,
including those plans, contracts and arrangements listed on Section 8.2(b) of
the Disclosure Schedule, other than plans, contracts or arrangements relating to
equity-based compensation (the “Assumed Non-U.S. Benefit Plans”). It is the
intention that, effective as of the Closing Date, Newco Employees who are
located in Hong Kong, Zurich and Spain will (to the extent permitted by Law)
continue their participation in those employee benefit plans sponsored by any
Affiliate or Affiliates of Reuters Group PLC (collectively with Reuters Group
PLC, “Reuters”) in which such Newco Employees participate immediately prior to
the Closing Date, and Newco or a Subsidiary thereof shall cooperate with Reuters
in order to effectuate such continued participation. It is the intention that,
effective as of the Closing Date, Newco Employees who are located in the UK will
continue their participation in The Reuters UK Healthcare Scheme (managed by
Norwich Union), the PPP Healthcare Scheme (available to Instinet UK expatriate
employees only), and the Reuters UK Retirement Plan, all of which are sponsored
by Reuters, and Newco or a Subsidiary thereof shall cooperate with Reuters in
order to effectuate such continued participation. For the avoidance of doubt,
Newco and its Subsidiaries shall not continue participation in the Reuters
Pension Fund, Reuters Unapproved Life Assurance Scheme or Reuters Unfunded
Unapproved Retirement Benefit Scheme on or after the Closing Date. Effective as
of the Closing Date, all employees of the Company other than Newco Employees
shall cease to participate actively in the each of the plans described in this
Section 8.2(b). Newco agrees to indemnify and hold the Company Indemnitees
harmless from and against all Indemnifiable Losses assessed against, resulting
from, imposed upon or incurred by the Company with respect to the Assumed
Non-U.S. Benefit Plans or any of the Reuters plans described in this Section
8.2(b) (including Newco’s obligations as a participating employer therein),
other than any Indemnifiable Losses with respect to Retained Employees.

 

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Section 8.3 Other Liabilities and Obligations. As of the Closing Date, with
respect to claims relating to any employee Liability or obligations not
otherwise provided for in this Agreement, including earned salary, wages or
other compensation and accrued holiday, vacation, health, dental or retirement
benefits, (a) Newco shall assume and be solely responsible for Liabilities and
obligations whatsoever of the Company for such claims made by all Newco
Employees and (b) the Company shall be solely responsible for Liabilities and
obligations whatsoever for claims made by all Retained Employees whether arising
out of events, occurrences or services performed before or following the Closing
Date.

 

Section 8.4 Preservation of Rights to Amend or Terminate Plans. Except as set
forth below, no provision of this Agreement shall be construed as a limitation
on the right of the Company or Newco to amend any plan or terminate its
participation therein which the Company or Newco would otherwise have under the
terms of such plan or otherwise, and no provision of this Agreement shall be
construed to create a right in any employee or beneficiary of such employee
under a plan that such employee or beneficiary would not otherwise have under
the terms of such plan itself. Notwithstanding the foregoing, the Company shall
not, and shall not permit any Subsidiary of the Company to, amend or terminate
(or commit or agree to amend or terminate) any Assumed U.S. Benefit Plans,
Assumed Non-U.S. Benefit Plans or other plans, contracts or arrangements
covering Newco Employees without the prior written consent of Newco.

 

Section 8.5 Reimbursement; Indemnification. Newco and the Company acknowledge
that the Company, on the one hand, and Newco, on the other hand, and their
respective Subsidiaries, may incur costs and expenses (including contributions
to plans and the payment of insurance premiums) pursuant to any of the employee
benefit or compensation plans, programs or arrangements which are, as set forth
in this Agreement, the responsibility of the other. Accordingly, the Company and
Newco agree to reimburse each other, as soon as practicable but in any event
within five business days of receipt from the other party of appropriate
verification, for all such costs and expenses reduced by the amount of any tax
reduction or recovery of tax benefit realized by the Company or Newco or any
such Subsidiary, as the case may be, in respect of the corresponding payment
made by it (as described in Section 5.3). Liabilities retained, assumed or
indemnified by Newco pursuant to this Article VIII shall in each case be deemed
to be Newco Liabilities, and Liabilities retained, assumed or indemnified by the
Company pursuant to this Article VIII shall in each case be deemed to be
Retained Liabilities, and, in each case, shall be subject to the indemnification
provisions set forth in Article V.

 

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ARTICLE IX

 

MISCELLANEOUS

 

Section 9.1 Conditions to Closing.

 

(a) Conditions to Newco’s Obligation to Close. The obligation of Newco to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or before the Closing, of all of the conditions set forth
below in this Section 9.1(a). Newco may (in its sole and absolute discretion)
waive in writing any or all of these conditions in whole or in part without
prior notice.

 

(i) The representations and warranties of Parent and the Company contained
herein that are not qualified as to materiality shall be true and correct in all
material respects as of the date hereof and as of the Closing Date with the same
effect as if such representations and warranties had been made on and as of the
Closing Date, and those representations and warranties of Parent and the Company
contained herein that are qualified as to materiality shall be true and correct
in all respects as of the date hereof and as of the Closing Date with the same
effect as if such representations and warranties had been made on and as of the
Closing Date, and each of Parent and the Company shall have performed in all
material respects its obligations and complied in all material respects with the
agreements and covenants required by this Agreement to be performed or complied
with on its part on or prior to the Closing Date.

 

(ii) Except as has not had, and would not reasonably be expected to have, a
Newco Adverse Effect (A) (x) the representations and warranties of Instinet
contained in the Merger Agreement that are not qualified as to Company Material
Adverse Effect (as defined in the Merger Agreement) or materiality shall be true
and correct in all material respects as of the date hereof and as of the Closing
Date, with the same effect as if such representations and warranties had been
made on and as of the Closing Date, (y) those representations and warranties of
Instinet contained in the Merger Agreement (other than Sections 4.8, 4.9 and
4.10 thereof) that are qualified as to Company Material Adverse Effect (as
defined in the Merger Agreement) or materiality shall be true and correct in all
respects as of the date hereof and as of the Closing Date with the same effect
as if such representations and warranties had been made on and as of the Closing
Date (except for representations and warranties which are as of a particular
date, which shall be true and correct as of such date) and (z) those
representations and warranties of Instinet contained in Sections 4.8, 4.9 and
4.10 of the Merger Agreement shall be true and correct in all respects as of the
date hereof and, after excluding any event, occurrence, fact, condition, change
or effect in each case arising or occurring after the date hereof and described
in clauses (1) through (5) of the definition of “Company Material Adverse
Effect” contained in the Merger Agreement, true and correct in all respects as
of the Closing Date (except for representations in such sections which are as of
a particular date, which shall be true and correct as of such date) and (B)
Instinet and each of its Subsidiaries shall have performed in all material
respects its obligations and complied in all material respects with its
agreements (and in all respects, in the case of the agreement set forth in the
last sentence of Section 6.18 of the Merger Agreement) and covenants required by
the Merger Agreement to be performed or complied with on its part on or prior to
the Closing Date.

 

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(iii) Parent shall have received from Instinet a certificate dated as of the
Closing Date and signed by an authorized officer of Instinet certifying its
compliance with the conditions set forth in Section 7.2(a) of the Merger
Agreement (other than any non-compliance which has not had, and would not be
expected to have, a Newco Adverse Effect), and Parent shall have delivered a
copy of such certificate to Newco.

 

(iv) All Required Regulatory Approvals (as defined in the Merger Agreement)
shall have been obtained, and any applicable waiting periods in connection
therewith shall have expired or been terminated, without the imposition of any
Burdensome Condition.

 

(v) There shall be no Law of any nature of any Authority that is in effect that
prohibits the consummation of the Merger or the VAB Purchase.

 

(vi) As of the Closing Date, (A) no Applicable Authority shall have threatened
any Action under any Antitrust Law seeking to enjoin or otherwise prevent the
consummation of the Merger or the VAB Purchase or to impose a Burdensome
Condition, and such threat is likely to be acted upon by such Applicable
Authority, and (B) there shall not be pending any Action by an Applicable
Authority under any Antitrust Law seeking to enjoin or otherwise prevent the
consummation of the Merger or the VAB Purchase or to impose a Burdensome
Condition, which Action either is pending in the court of first impression or is
on appeal, provided, however, that if such Applicable Authority shall have been
unsuccessful in its Action in the court of first impression and shall have taken
reasonable steps to obtain and shall have failed to obtain, a temporary (and
continuing) or permanent injunction or stay pending appeal (which decree is
continuing) with respect to the Merger or the VAB Purchase, clause (B) of this
Section 9.1(a)(vi) shall be deemed to be satisfied with respect to such Action.

 

(vii) Instinet shall have consummated the LJR Sale in accordance with the terms
of the LJR Sale Agreement (as defined in the Merger Agreement) and the Merger
Agreement.

 

(viii) The Merger shall have become effective pursuant to Section 251 of the
General Corporation Law of the State of Delaware.

 

(b) Conditions to Parent’s and the Company’s Obligations to Close. The
obligation of each of Parent and the Company to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment, at or before
the Closing, of all of the conditions set forth below in this Section 9.1(b).
Parent and the Company may (in their sole and absolute discretion) waive in
writing any or all of these conditions in whole or in part without prior notice.

 

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(i) The representations and warranties of Newco contained herein that are not
qualified as to materiality shall be true and correct in all material respects
as of the date hereof and as of the Closing Date, with the same effect as if
such representations and warranties had been made on and as of the Closing Date
and those representations and warranties of Newco contained herein that are
qualified as to materiality shall be true and correct in all respects as of the
date hereof and as of the Closing Date with the same effect as if such
representations and warranties had been made on and as of the Closing Date.

 

(ii) The Merger shall have become effective pursuant to Section 251 of the
General Corporation Law of the State of Delaware.

 

Section 9.2 Termination Prior to the Closing.

 

(a) Termination By Mutual Consent. This Agreement may be terminated at any time
prior to the Closing upon the mutual written consent of Parent, the Company and
Newco.

 

(b) Automatic Termination. This Agreement shall terminate automatically upon any
termination of the Merger Agreement as provided in Article 8 thereof.

 

(c) Termination by Newco. This Agreement may be terminated at any time prior to
the Closing by written notice from Newco to Parent if (i) the Closing shall not
have been consummated by the Termination Date; provided, however, that the right
to terminate this Agreement pursuant to clause (i) of this Section 9.2(c) shall
not be available to Newco if its breach of any provision of this Agreement
results in the failure of the Closing to be consummated by the Termination Date,
(ii) the adoption by the Company Stockholders (as defined in the Merger
Agreement) required by Section 7.1(c) of the Merger Agreement shall not have
been obtained at the Company Stockholders Meeting (as defined in the Merger
Agreement), after giving effect to all adjournments or postponements thereof, or
(iii) any Authority of competent jurisdiction shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement or the Merger Agreement and such order, decree or ruling or other
action shall have become final and nonappealable.

 

(d) Termination by Parent. Provided that neither the Parent nor the Company is
in material breach of any of its representations, warranties, covenants or
agreements in this Agreement, this Agreement may be terminated at any time prior
to the Closing, by written notice from Parent to Newco if there has been a
material breach of any representations, warranties, covenants or agreements made
by Newco in this Agreement, or any such representations and warranties shall
have become materially untrue or incorrect after the execution of this
Agreement, such that the conditions set forth in Section 9.1(b)(i) would not be
satisfied and such breach or failure to be true and correct is not cured within
30 calendar days following receipt of written notice from

 

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Parent to Newco of such breach or failure (or such longer period to which Parent
shall agree, during which Newco exercises reasonable best efforts to cure).

 

(e) Termination by Newco. Provided that Newco is not in material breach of any
of its representations, warranties, covenants or agreements in this Agreement,
this Agreement may be terminated at any time prior to the Closing, by written
notice from Newco to Parent if there has been a material breach of any
representations, warranties, covenants or agreements made by Parent or the
Company in this Agreement, or any such representations and warranties shall have
become materially untrue or incorrect after the execution of this Agreement,
such that the conditions set forth in Section 9.1(a)(i) would not be satisfied
and such breach or failure to be true and correct is not cured within 30
calendar days following receipt of written notice from Newco to Parent of such
breach or failure (or such longer period to which Newco shall agree, during
which Parent exercises reasonable best efforts to cure). In addition, provided
neither Parent nor the Company is in material breach of any of its
representations, warranties, covenants or agreements in the Merger Agreement,
this Agreement may be terminated at any time prior to Closing, by written notice
from Newco to Parent if there has been a material breach of any representation,
warranty, covenant or agreement made by Instinet in the Merger Agreement, or any
such representation and warranty shall have become materially untrue or
incorrect after the execution of the Merger Agreement, such that the conditions
set forth in Section 9.1(a)(ii) would not be satisfied and such breach or
failure to be true and correct is not cured within 30 calendar days following
receipt by Parent of written notice from Newco to Parent stating Newco’s
intention to terminate this Agreement under this Section 9.2(e) (or such longer
period during which Instinet exercises reasonable best efforts to cure, but in
no event later than 60 days).

 

Section 9.3 Effect of Termination. In the event of a termination of this
Agreement pursuant to Section 9.2, this Agreement shall become void and of no
effect, other than the provisions of Section 6.8 and Article IX without any
liability on the part of any party hereto or its Affiliates, directors,
officers, stockholders, members, managers, employees, agents and
Representatives; provided, however, that nothing herein shall relieve a party
from liability for any breach by such party of any of its representations,
warranties, covenants or agreements set forth in this Agreement, including
wrongful termination of this Agreement.

 

Section 9.4 Survival. The representations and warranties made in Article III and
the covenants and agreements of the parties in this Agreement which contemplate
performance prior to the Closing shall survive the Closing Date and the
consummation of the transactions contemplated by this Agreement for six months;
provided, that, if notice of an indemnification claim shall have been delivered
before the aforementioned time period has elapsed with respect to any breach of
any such representation, warranty, covenant or agreement such representation,
warranty, covenant or agreement shall survive until such claim is finally
resolved. Any covenant or agreement of the parties in this Agreement which
contemplates performance at or after the Closing shall survive in accordance
with its terms.

 

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Section 9.5 Entire Agreement; Third Party Beneficiaries. This Agreement
(together with the documents and instruments referred to herein, including the
Merger Agreement and the Convertible Notes Documents) (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and (b) is not intended to confer upon any person other than the parties hereto
and thereto any rights or remedies; provided, however, that (i) the Indemnitees
are intended to be third party beneficiaries of the provisions of Articles IV
and V and each of such persons shall have the right to enforce such provisions
as if they were parties hereto and (ii) Instinet is intended to and shall be a
third-party beneficiary with respect to Sections 6.4(b) (with respect to notices
regarding the failure to satisfy a condition to be satisfied by it under the
Merger Agreement), 6.6, 6.9, 7.5, this Section 9.5, 9.8 (to the extent relating
to Instinet’s other rights herein), 9.10(a) and 9.13.

 

Section 9.6 Fees and Expenses. Except as otherwise specifically provided in this
Agreement, and subject to the terms of the Convertible Notes Documents, all
costs, expenses or other Liabilities incurred by the parties hereto in
connection with this Agreement, the Merger Agreement and the transactions
contemplated hereunder and thereunder shall be paid by the party hereto or
thereto incurring such costs, expenses or other Liabilities.

 

Section 9.7 No Waiver. No waiver by any party hereto of any breach of any
covenant, agreement, representation or warranty hereunder shall be deemed a
waiver of any preceding or succeeding breach of the same. The exercise of any
right granted to any party herein shall not operate as a waiver of any default
or breach on the part of the other parties hereto. Each and all of the several
rights and remedies of any party hereto under this Agreement shall be construed
as cumulative and no one right as exclusive of the others.

 

Section 9.8 Amendments. No change, modification, alteration, amendment or
agreement to discharge in whole or in part, or waiver of, any of the terms and
conditions of this Agreement, shall be binding upon any party, unless the same
shall be made by a written instrument signed and executed by the authorized
representatives of each party, with the same formality as the execution of this
Agreement.

 

Section 9.9 Governing Law. This Agreement and all claims and Actions arising
from or relating to this Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware without reference
to such State’s principles of conflict of laws.

 

Section 9.10 Notices. (a) All notices, requests and demands to or upon the
respective parties hereto, and all statements and accountings given or required
to be given hereunder, shall be made by personal service, or sent by certified
mail, return receipt requested, postage prepaid, or by facsimile addressed as
follows, or to such other address as may hereafter be designated in writing by
the respective parties hereto, and shall be deemed received when delivered to
the designated address (and only if confirmed if delivered by facsimile):

 

  (i) if to Parent or the Company, to

 

The Nasdaq Stock Market, Inc.

One Liberty Plaza

New York, New York 10006

Attn: Office of General Counsel

Facsimile: (301) 978-8472

 

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with a copy to

 

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, New York 10036

Attn: Eric J. Friedman, Esq.

Facsimile: (212) 735-2000

 

and

 

  (ii) if to Newco, to it c/o

 

Silver Lake Partners

2725 Sand Hill Road, Suite 150

Menlo Park, CA 94025

Attention: Alan Austin

Facsimile: (650) 233-8125

 

with a copy to

 

Ropes & Gray LLP

45 Rockefeller Plaza

New York, New York 10111

Attention: Othon A. Prounis, Esq.

Facsimile: (212) 841-5725

 

and

 

  (iii) if to Instinet, to

 

Instinet Group Incorporated

3 Times Square

New York, New York 10036

Attention: Paul Merolla, Esq.

Facsimile: (646) 223-9017

 

with a copy to

 

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

Attention: Andrew J. Nussbaum, Esq.

Facsimile: (212) 403-2000

 

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(b) To the extent not otherwise to be provided under the Merger Agreement, each
of Parent and the Company agrees to deliver to Newco copies of all notices,
requests and demands to or from the parties to the Merger Agreement, and all
certificates, statements and accountings delivered or given or required to be
delivered or given under the Merger Agreement, each such delivery to be made in
accordance with the procedures set forth in Section 9.10(a); provided, however,
that if Parent or the Company elects to deliver any such notice, request, demand
or certificate, statement or accounting by certified mail as permitted by
Section 9.10(a), a copy thereof will also be delivered to Newco by personal
service or by confirmed facsimile in accordance with Section 9.10(a).

 

Section 9.11 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In this Agreement, unless a contrary intention
appears, (a) the words “herein,” “hereof” and “hereunder” and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section, Schedule, Exhibit or other subdivision, (b) whenever the words
“include,” “includes” or “including” are used in this Agreement, they shall be
deemed to be followed by the words “without limitation,” (c) reference to any
Article, Section, Schedule or Exhibit is reference to such Article or Section
of, or Schedule or Exhibit to, this Agreement, (d) “days” means calendar days
and “business day” means any day other than a Saturday or Sunday or day on which
banks in New York, New York are required or authorized to close, (e) all defined
terms in this Agreement have the defined meaning when used in any certificate or
other document made or delivered pursuant to this Agreement, unless otherwise
indicated therein, (f) all defined terms in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such term, and in each case, vice
versa, (g) references in this Agreement to specific Laws (such as the Code, HSR
Act and ERISA) or to specific provisions of Laws include all rules and
regulations promulgated thereunder, (h) “person” means any natural person or any
corporation, association, partnership, joint venture, limited liability, joint
stock or other company or trust, (i) references to the “Company and each of its
Subsidiaries,” the “Subsidiaries of the Company,” “Instinet and its
Subsidiaries” or the “Subsidiaries of Instinet” and other similar phrases shall
be deemed to include reference to each of the Subsidiaries of Instinet without
giving effect to the transfer of ownership of the Newco Entities at Closing, (j)
items listed or included within a definition are so listed or included without
duplication and (k) any statute defined or referred to herein or in any
agreement or instrument referred to herein means such statute as from time to
time amended, modified or supplemented, including by succession of comparable
successor statutes. No provisions of this Agreement shall be interpreted or
construed against any party hereto solely because such party or its legal
representative drafted such provision.

 

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Section 9.12 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.

 

Section 9.13 Specific Performance. The parties agree that if for any reason any
of the provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached, immediate and irreparable harm or
injury would be caused for which money damages would not be an adequate remedy.
Accordingly, each party and, with respect to the Sections of this Agreement
specified in Section 9.5, Instinet agrees that, in addition to any other
available remedy at law or equity, each party shall be entitled to an injunction
restraining any violation or threatened violation of the provisions of this
Agreement without the necessity of posting a bond or other form of security. In
the event that any Action should be brought in equity to enforce the provisions
of this Agreement, no party will allege, and each party hereby waives the
defense, that there is an adequate remedy at law.

 

Section 9.14 Successors and Assigns. (a) This Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties hereto, but any such assignment by any party hereto shall not relieve
such assigning party of any of its obligations or agreements hereunder unless
expressly agreed to in writing by each other party hereto in its sole
discretion; provided, however, that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of each other party hereto; provided, further, that nothing contained in
this Section 9.14(a) shall prevent Newco, Parent or the Company from assigning
(i) all or any part of its rights hereunder by way of collateral assignment to
any bank or financing institution or (ii) from transferring or assigning this
Agreement or its rights and obligations hereunder to an Affiliate, in either
case, so long as such assignment or transfer does not purport to relieve the
assignee of its obligations hereunder. Any attempted assignment in violation of
the foregoing shall be null and void.

 

(b) To the extent that Parent or its Subsidiaries, directly or indirectly,
whether by transfer of assets, transfer of stock, license or otherwise,
transfers, licenses or otherwise disposes of, in one or more transactions, to
any other person all or substantially all of the Retained Assets or the Retained
Business, Parent will cause the transferee of such Retained Assets or Retained
Business to assume specifically the Parent’s and the Company’s obligations under
this Agreement with respect thereto. Such assumption will not relieve Parent or
the Company of its obligations in respect thereof. To the extent that Newco or
its Subsidiaries, directly or indirectly, whether by transfer of assets,
transfer of stock, license or otherwise, transfers, licenses or otherwise
disposes of, in one or more transactions, to any other person all or
substantially all of the Newco Assets or the Newco Business, Newco will cause
the direct transferee of such Newco Assets or Newco Business to assume
specifically its obligations under this Agreement with respect thereto. Such
assumption will not relieve Newco of its obligations in respect thereof. Newco,
on the one hand, and Parent and the Company, on the other hand, agree that such
transferee may exercise all of Newco’s or Parent’s or the Company’s rights
hereunder, as the case may be, with respect to such Assets or businesses.
Notwithstanding anything to the contrary contained in this Section 9.14, in

 

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no event shall any parent company or other Affiliate (other than a Subsidiary)
of any such transferee of all or a portion of the Retained Assets, the Retained
Business, the Newco Assets or the Newco Business, as the case may be, be
required to assume any obligations under this Agreement. For purposes of this
Section 9.14(b), “all or substantially all” shall mean 50% or more of the
Retained Assets or Retained Business, in the case of a transfer by Parent or its
Subsidiaries, or 50% or more of the Newco Assets or Newco Business, in the case
of a transfer by Newco or its Subsidiaries. Notwithstanding anything to the
contrary contain herein, none of the matters set forth in Section 9.14 of the
Disclosure Schedule will be deemed to be dispositions of Newco Assets or Newco
Business for purposes of this Section 9.14.

 

Section 9.15 Severability. If any term or other provision of this Agreement is
determined by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced, all other terms and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in a
mutually acceptable manner.

 

Section 9.16 Jurisdiction; Venue; Consent to Service of Process. (a) Except as
otherwise provided in Sections 2.6, 2.7 or 4.9, each of the parties hereto (a)
consents to submit itself to the exclusive personal jurisdiction of the Delaware
Court of Chancery and any Federal court located in the State of Delaware in the
event of any Action arising out of or relating to this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, and (c) agrees that it will not bring any Action
arising out of or relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than the Delaware Court of
Chancery or a Federal court sitting in the State of Delaware. In any Action
arising out of or relating to this Agreement or any of the transactions
contemplated by this Agreement, each party irrevocably and unconditionally
waives and agrees not to assert by way of motion, as a defense or otherwise any
claims that it is not subject to the jurisdiction of the above courts, that such
Action is brought in an inconvenient forum or that the venue of such Action is
improper. Each of the parties also hereby agrees that any final and unappealable
Judgment against a party in connection with any such Action shall be conclusive
and binding on such party and that such award or Judgment may be enforced in any
court of competent jurisdiction, either within or outside of the United States.
A certified or exemplified copy of such Judgment shall be conclusive evidence of
the fact and amount of such Judgment.

 

(b) Each party hereto irrevocably consents to service of process in the manner
provided for the giving of notices pursuant to Section 9.10 of this Agreement.
Nothing in this Section 9.16 shall affect the right of any party to serve
process in any other manner permitted by applicable Law.

 

Section 9.17 Waiver of Jury Trial. To the fullest extent permitted by Law, each
of the parties irrevocably waives all right to trial by jury in any Action or

 

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counterclaim arising out of or relating to this Agreement or any of the
transactions contemplated by this Agreement.

 

Section 9.18 Company and ECN Entity Obligations. Notwithstanding anything to the
contrary contained in this Agreement, whenever this Agreement requires the
Company or, following the Closing, any ECN Entity, to take any action, such
requirement shall be deemed to include an undertaking on the part of Parent to
cause the Company or such ECN Entity to take such action and a guarantee of
performance thereof. In addition, at Closing, Parent shall cause Instinet to
execute and deliver to Newco a written instrument of assumption in a form
reasonably satisfactory to Newco pursuant to which Instinet (as surviving
corporation in the Merger and successor to Norway Acquisition Corp.)
acknowledges that it has succeeded to all of the rights and Liabilities of the
Company under this Agreement.

 

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IN WITNESS WHEREOF, the parties have caused this Transaction Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.

 

THE NASDAQ STOCK MARKET, INC.

By:

 

/s/ Adena Friedman

   

Name: Adena Friedman

   

Title: Executive Vice President

NORWAY ACQUISITION CORP.

By:

 

/s/ Ronald Hassen

   

Name: Ronald Hassen

   

Title: Treasurer

ICELAND ACQUISITION CORP.

By:

 

/s/ Michael Bingle

   

Name: Michael Bingle

   

Title: President