Exhibit 10.18

 

AGREEMENT

 

THIS AGREEMENT, made and entered into this 7th day of November 2003, by and
between CHICAGO MERCANTILE EXCHANGE Inc. (“Employer” or “CME”), a Delaware
Business Corporation, having its principal place of business at 30 South Wacker
Drive, Chicago, Illinois, and Craig S. Donohue (“Employee”).

 

R E C I T A L S:

 

WHEREAS, Employer wishes to retain the services of Employee in the capacity of
Chief Executive Officer upon the terms and conditions hereinafter set forth and
Employee wishes to accept such employment;

 

NOW, THEREFORE, in consideration of the mutual promises contained herein, the
parties mutually agree as follows:

 

1) Employment. Subject to the terms of the Agreement, Employer hereby agrees to
employ Employee during the Agreement Term as Chief Executive Officer and
Employee hereby accepts such employment. Employee shall report to the Employer’s
Board of Directors, or any successor to the Board of Directors (hereinafter,
“Board” shall mean the Board of Directors of Employer and/or any successor
thereto). The duties of Employee shall include, but not be limited to, the
performance of all duties associated with executive oversight and management of
the Employer. Employee will provide such business and professional services in
the performance of his duties that are consistent with Employee’s position as
Chief Executive Officer, and as shall reasonably be assigned to him by the
Board. Employee shall devote his full time, ability and attention to the
business of Employer during the Agreement Term.

 

Notwithstanding anything to the contrary contained herein, nothing in the
Agreement shall preclude Employee from participating in the affairs of any
governmental, educational or other charitable institution, engaging in
professional speaking and writing activities, and serving as a member of the
board of directors of a publicly held corporation (except for a competitor of
Employer), provided Employee notifies the Board prior to his participating in
any such activities and as long as the Board does not determine that any such
activities interfere with or diminish Employee’s obligations under the
Agreement. Employee shall be entitled to retain all fees, royalties and other
compensation derived from such activities, in addition to the compensation and
other benefits payable to him under the Agreement, but shall disclose such fees
to Employer.

 

2) Agreement Term. Employee shall be employed hereunder for a term commencing on
January 1, 2004, and expiring on December 31, 2006, unless sooner terminated as
herein provided (“Agreement Term”). The Agreement Term may be extended or
renewed only by the mutual written agreement of the parties.

 

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3) Compensation.

 

  (a) Annual Base Salary. Effective January 1, 2004, and continuing through
December 31, 2006, Employer shall pay to Employee a base salary at a rate not
less than $700,000.00 per year (“Base Salary”), payable in accordance with the
Employer’s normal payment schedule.

 

  (b) Bonuses. Employee shall be eligible to participate in the Employer’s
Annual Incentive Plan (the “AIP”) as in existence or as amended from time to
time in accordance with its terms as applicable to Employee.

 

  (c) Equity Compensation. Employee shall be eligible to participate in the
Employer’s Equity Incentive Plan, as in existence or as amended from time to
time, in accordance with the terms of the Plan for executives in the Office of
the CEO. In the event of a “Change of Control” (as defined in Employer’s Amended
and Restated Omnibus Stock Plan (“Plan”)) that occurs prior to the Employee’s
termination of employment with the Employer, all options and shares previously
granted to Employee, whether pursuant to this Agreement or otherwise, will have
vesting accelerated so as to become 100% vested. Thereafter, the options will
continue to be subject to the terms, definitions and provisions of the Plan and
any related option agreement. If Employee is involuntarily terminated without
Cause within sixty (60) days prior to a Change of Control, all unvested options
and shares which would have been outstanding had the Employee been employed on
the date of Change of Control become granted and 100% vested.

 

4) Benefits. Employee shall be entitled to insurance, vacation and other
employee benefits commensurate with his position in accordance with Employer’s
policies for executives in effect from time to time. Employee acknowledges
receipt of a summary of Employer’s employee benefits policies in effect as of
the date of this Agreement.

 

5) Expense Reimbursement. During the Agreement Term, Employer shall reimburse
Employee, in accordance with Employer’s policies and procedures, for all proper
expenses incurred by him in the performance of his duties hereunder.

 

6) Termination.

 

  a) Death. Upon the death of Employee, this Agreement shall automatically
terminate and all rights of Employee and his heirs, executors and administrators
to compensation and other benefits under this Agreement shall cease, except for
compensation which shall have accrued to the date of death, including accrued
Base Salary, and other employee benefits to which Employee is entitled upon his
death, in accordance with the terms of the plans and programs of CME.

 

  b)

Disability. Employer may, at its option, terminate this Agreement upon written
notice to Employee if Employee, because of physical or mental incapacity or
disability, fails to perform the essential functions of his position required of
him hereunder for a continuous

 

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period of 90 days or any 120 days within any 12-month period. Upon such
termination, all obligations of Employer hereunder shall cease, except for
payment of accrued Base Salary, and other employee benefits to which Employee is
entitled upon his termination hereunder, in accordance with the terms of the
plans and programs of CME. In the event of any dispute regarding the existence
of Employee’s disability hereunder, the matter shall be resolved as follows: (1)
by the determination of a physician selected by the Board; (2) Employee shall
have the right to challenge that determination by presenting a contrary
determination from a physician of his choice; (3) in such event, a physician
selected by agreement of the Employee and the Board will make the final
determination. The Employee shall submit to appropriate medical examinations for
purposes of making the medical determinations hereunder.

 

  c) Cause. Employer may, at its option, terminate Employee’s employment under
this Agreement for Cause. As used in this Agreement, the term “Cause” shall mean
any one or more of the following:

 

  (1) any refusal by Employee to perform his duties and responsibilities under
this Agreement or violation of any rule, regulation or guideline imposed by a
regulatory or self regulatory body having jurisdiction over Employer, as
determined after investigation by the Board. Employee, after having been given
written notice by Employer, shall have seven (7) days to cure such refusal or
violation;

 

  (2) any intentional act of fraud, embezzlement, theft or misappropriation of
Employer’s funds by Employee, as determined after investigation by the Board, or
Employee’s admission or conviction of a felony or of any crime involving moral
turpitude, fraud, embezzlement, theft or misrepresentation;

 

  (3) any gross negligence or willful misconduct of Employee resulting in a
financial loss or liability to the Employer or damage to the reputation of
Employer, as determined after investigation by the Board;

 

  (4) any breach by Employee of any one or more of the covenants contained in
Section 7, 8 or 9 hereof.

 

The exercise of the right of CME to terminate this Agreement pursuant to this
Section 6(c) shall not abrogate any other rights or remedies of CME in respect
of the breach giving rise to such termination.

 

If Employer terminates Employee’s employment for Cause, he shall be entitled to
accrued Base Salary through the date of the termination of his employment, other
employee benefits to which Employee is entitled upon his termination of
employment with Employer, in accordance with the terms of the plans and programs
of CME. Upon termination for cause, Employee will forfeit any unvested or
unearned compensation or long-term incentives, unless otherwise provided herein
or specified in the terms of the plans and programs of CME.

 

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  d) Termination Without Cause. Upon 30 days prior written notice to Employee,
Employer may terminate this Agreement for any reason other than a reason set
forth in sections (a), (b) or (c) of this Section 6. If, during the Agreement
Term, Employer terminates the employment of Employee hereunder for any reason
other than a reason set forth in subsections (a), (b) or (c) of this Section 6:

 

  (1) Employee shall be entitled to receive accrued Base Salary through the date
of the termination of his employment, and other employee benefits to which
Employee is entitled upon his termination of employment with Employer, in
accordance with the terms of the plans and programs of Employer; and

 

  (2) a one time lump sum severance payment equal to 2 times his Base Salary as
of the date of Employee’s termination for the remaining term of the Agreement,
but not more than 24 months of his Base Salary as of the date of the Employee’s
termination, subject to Employee’s execution of a general release in a form and
of a substance satisfactory to CME.

 

  e) Voluntary Termination. Upon 60 days prior written notice to CME (or such
shorter period as may be permitted by CME), Employee may voluntarily terminate
his employment with CME prior to the end of the Agreement Term for any reason.
If Employee voluntarily terminates his employment pursuant to this subsection
(e), he shall be entitled to receive accrued Base Salary through the date of the
termination of his employment and other employee benefits to which Employee is
entitled upon his termination of employment with CME, in accordance with the
terms of the plans and programs of CME.

 

7) Confidential Information and Non-Compete. Employee acknowledges that the
successful development of CME’s services and products, including CME’s trading
programs and systems, current and potential customer and business relationships,
and business strategies and plans requires substantial time and expense. Such
efforts generate for CME valuable and proprietary information (“Confidential
Information”) which gives CME a business advantage over others who do not have
such information. Confidential information includes, but is not limited to the
following: trade secrets, technical, business, proprietary or financial
information of CME not generally known to the public, business plans, proposals,
past and current prospect and customer lists, trading methodologies, systems and
programs, training materials, research data bases and computer software; but
shall not include information or ideas acquired by Employee prior to his
employment with CME if such pre-existing information is generally known in the
industry and is not proprietary to CME.

 

(a) Employee shall not at anytime during the Agreement Term or thereafter, make
use of or disclose, directly or indirectly to any competitor or potential
competitor of CME, or divulge, disclose or communicate to any person, firm,
corporation, or other legal entity in any manner whatsoever, or for his own
benefit and that of any person or entity other than Employer, any Confidential
Information. This subsection shall not apply to the extent Employee remains

 

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employed by Employer and is required to disclose Confidential Information to any
regulatory agency or as otherwise required by law. This subsection shall not
apply following termination for any reason to the extent Employee is required by
law to testify in a legislative, judicial or regulatory proceeding, or is
otherwise required by law to disclose Confidential Information; provided,
however, that following termination for any reason, Employee will promptly
notify Employer if Employee is requested by any entity or person to divulge
Confidential Information, and will use his best efforts to ensure that Employer
has sufficient time to intervene and/or object to such disclosure or otherwise
act to protect its interests. Employee shall not disclose any Confidential
Information while any such objection is pending.

 

(b) Employee agrees that while employed and for a period of one (1) year
following the termination of his employment with CME for any reason, the
Employee will not accept employment with or act or provide services as an
independent contractor or consultant for or on behalf of any derivatives
exchange or for any person, organization or entity providing clearing services.
Employee acknowledges that such restriction is necessary to protect the
Confidential Information he learned through his employment with Employer.

 

(c) Upon termination for any reason, Employee shall return to Employer all
records, memoranda, notes, plans, reports, computer tapes and equipment,
software and other documents or data which constitute Confidential Information
which he may then possess or have under his control (together with all copies
thereof) and all credit cards, keys and other materials and equipment which are
Employer’s property that he has in his possession or control.

 

(d) If, at any time of enforcement of this Section 7, a court holds that the
restrictions stated herein are unreasonable, the parties hereto agree that a
maximum period, scope or geographical area reasonable under the circumstances
shall be substituted for the stated period, scope or area and that the court
shall be allowed to revise the restrictions contained herein to cover the
maximum period, scope and area permitted by law.

 

8) Non-solicitation.

 

  a) General. Employee acknowledges that Employer invests in recruiting and
training, and shares Confidential Information with, it employees. As a result,
Employee acknowledges that Employer’s employees are of special, unique and
extraordinary value to Employer.

 

  b) Non-solicitation. Employee further agrees that for a period of one (1) year
following the termination of his employment with CME for any reason he shall not
in any manner, directly or indirectly, induce or attempt to induce any employee
of CME to terminate or abandon his or her employment with CME for any purpose
whatsoever.

 

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  c) Reformation. If, at any time of enforcement of this Section 8, a court
holds that the restrictions stated herein are unreasonable, the parties hereto
agree that the maximum period, scope or geographical area reasonable under the
circumstances shall be substituted for the stated period, scope or area and that
the court shall be allowed to revise the restrictions contained herein to cover
the maximum period, scope and area permitted by law.

 

9) Intellectual Property. During the Agreement Term, Employee shall disclose to
CME and treat as confidential information all ideas, methodologies, product and
technology applications that he develops during the course of his employment
with CME that relates directly or indirectly to CME’s business. Employee hereby
assigns to CME his entire right, title and interest in and to all discoveries
and improvements, patentable or otherwise, trade secrets and ideas, writings and
copyrightable material, which may be conceived by Employee or developed or
acquired by him during his employment with CME, which may pertain directly or
indirectly to the business of the CME. Employee shall at any time during or
after the Agreement Term, upon CME’s request, execute, acknowledge and deliver
to CME all instruments and do all other acts which are necessary or desirable to
enable CME to file and prosecute applications for, and to acquire, maintain and
enforce, all patents, trademarks and copyrights in all countries with respect to
intellectual property developed or which was being developed during Employee’s
employment with CME.

 

10) Remedies. Employee agrees that given the nature of CME’s business, the scope
and duration of the restrictions in paragraphs 7, 8 and 9 are reasonable and
necessary to protect the legitimate business interests of CME and do not unduly
interfere with Employee’s career or economic pursuits. Employee recognizes and
agrees that a breach of any or all of the provisions of Sections 7, 8 and 9 will
constitute immediate and irreparable harm to CME’s business advantage, for which
damages cannot be readily calculated and for which damages are an inadequate
remedy. Accordingly, Employee acknowledges that CME shall therefore be entitled
to seek an injunction or injunctions to prevent any breach or threatened breach
of any such section. Employee agrees to reimburse CME for all costs and
expenses, including reasonable attorney’s fees and costs, incurred by CME in
connection with the enforcement of its rights under Sections 7, 8 and 9 of this
Agreement.

 

11) Survival. Sections 7, 8, 9 and 10 of this Agreement shall survive and
continue in full force and effect in accordance with their respective terms,
notwithstanding any termination of the Agreement.

 

12) Arbitration. Except with respect to Sections 7, 8, and 9, any dispute or
controversy between CME and Employee, whether arising out of or relating to this
Agreement, the breach of this Agreement, or otherwise, shall be settled by
arbitration in Chicago, Illinois, in accordance with the following:

 

(a) Arbitration hearings will be conducted by the American Arbitration
Association (AAA). Except as modified herein, arbitration hearings will be
conducted in accordance with AAA’s rules.

 

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(b) State and federal laws contain statues of limitation which prescribe the
time frames within which parties must file a law suit to have their disputes
resolved through the court system. These same statutes of limitation will apply
in determining the time frame during which the parties must file a request for
arbitration.

 

(c) If Employee seeks arbitration, Employee shall submit a filing fee to the AAA
in an amount equal to the lesser of the filing fee charged in the state or
federal court in Chicago, Illinois. The AAA will bill Employer for the balance
of the filing and arbitrator’s fees.

 

(d) The arbitrator shall have the same authority to award (and shall be limited
to awarding) any remedy or relief that a court of competent jurisdiction could
award, including compensatory damages, attorney fees, punitive damages and
reinstatement. Employer and Employee may be represented by legal counsel or any
other individual at their own expense during an arbitration hearing.

 

(e) Judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof.

 

(f) Except as necessary in court proceedings to enforce this arbitration
provision or an award rendered hereunder, or to obtain interim relief, neither a
party nor an arbitrator may disclose the existence, content or results of any
arbitration hereunder without the prior written consent of CME and Employee.

 

13) Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed given when (i) delivered
personally or by overnight courier to the following address of the other party
hereto (or such other address for such party as shall be specified by notice
given pursuant to this Section) or (ii) sent by facsimile to the following
facsimile number of the other party hereto (or such other facsimile number for
such party as shall be specified by notice given pursuant to this Section), with
the confirmatory copy delivered by overnight courier to the address of such
party pursuant to this Section 14:

 

If to CME, to:

 

Terry Duffy

Chairman, Chicago Mercantile Exchange Inc.

Chicago Mercantile Exchange Inc.

30 South Wacker Drive

Chicago, IL 60606

(312) 930-3100

 

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With a copy to:

Kathleen M. Cronin

Managing Director, General Counsel and Corporate Secretary

Chicago Mercantile Exchange Inc.

30 South Wacker Drive

Chicago, IL 60606

(312) 930-3488

 

If to Employee, to:

 

Craig S. Donohue

2600 Shannon Road

Northbrook, IL 60062

(847)-272-3265

 

14) Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under applicable law or rule in any jurisdiction,
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision of this Agreement or the
validity, legality or enforceability of such provision in any other
jurisdiction, but this Agreement shall be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.

 

15) Entire Agreement. This Agreement constitutes the entire Agreement and
understanding between the parties with respect to the subject matter hereof and
supersedes and preempts any prior understandings, agreements or representations
by or between the parties, written or oral, which may have related in any manner
to the subject matter hereof. No other agreement or amendment to this Agreement
shall be binding upon either party including, without limitation, any agreement
or amendment made hereafter unless in writing, signed by both parties.

 

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16) Successors and Assigns. This Agreement shall be enforceable by Employee and
his heirs, executors, administrators and legal representatives, and by CME and
its successors and assigns.

 

17) Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Illinois without regard to
principles of conflict of laws.

 

18) Acknowledgment. Employee acknowledges that he has read, understood, and
accepts the provisions of this Agreement.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.

 

    Chicago Mercantile Exchange           Craig S. Donohue By:   /s/    TERRENCE
A. DUFFY                   /s/    CRAIG S. DONOHUE            

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Terrence A. Duffy

         

Craig S. Donohue

Date:

 

11/7/03

     

Date:

 

11/7/03

 

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