EXHIBIT 10.3


 


LICENSE AGREEMENT


 


LICENSE AGREEMENT, dated as of January 7, 1999 (the “Effective
Date”), by and between ARCHIPELAGO HOLDINGS, L.L.C., a Delaware limited
liability company with its principal offices located at 100 South Wacker Drive,
Suite 2060, Chicago, IL 60606, and TOWNSEND ANALYTICS, LTD., an Illinois
corporation with its principal offices located at 100 South Wacker Drive, Suite
2040, Chicago, Illinois 60606 (“TAL”).


 


WITNESSETH:


 


WHEREAS, Archipelago Holdings, L.L.C., through its Affiliates, will
operate an “electronic communications network” (“ECN”) as contemplated by the
Limited Liability Company Agreement of Archipelago Holdings, L.L.C.;


 


WHEREAS, TAL has developed certain software for operating an ECN and
Archipelago Holdings, L.L.C. desires to use such software;


 


WHEREAS, TAL is willing to license such software to Archipelago and
Archipelago is willing to accept such license, pursuant to the terms and
subject to the conditions set forth below;


 


NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein, as well as good and valuable consideration, including $10.00
paid to TAL, the receipt of which is hereby acknowledged, Archipelago Holdings,
L.L.C. and TAL hereby agree and contract with one another as follows:


 


ARTICLE I


 


DEFINITIONS


 


1.1           DEFINITIONS.
For the purpose of this License Agreement, the following terms shall have the
following meanings:


 


“Affiliate” shall mean with respect to any Person (i) any other Person
that directly or indirectly through one or more intermediaries controls or is
controlled by or is under common control with such Person, (ii) any other
Person owning or controlling 25% or more of the outstanding voting securities
of or other ownership interests in such Person or (iii) any officer, director,
manager or partner of such Person.


 


“Archipelago” means Archipelago Holdings, L.L.C., a Delaware limited
liability company that is the signatory to this License Agreement and all
Affiliates of Archipelago Holdings, L.L.C. existing as of the Effective Date or
any entity that shall in the future become an Affiliate of Archipelago
Holdings, L.L.C.


 


“Archipelago Materials” means any hardware, software, firmware,
databases,


 

















 


platforms or other materials used to operate the Software except
software specifically developed by TAL.


 


“Archipelago Subscriber” means any Person who is subscribing or will
subscribe to the Services, as defined below, of Archipelago on the Effective
Date of this License Agreement or thereafter.


 


“Business Day” means any day other than a Sunday or a day on which
banking institutions in Chicago, Illinois are authorized or obligated by law,
regulation or executive order to be closed.


 


“Development” means any fix, update, upgrade, development, improvement
or modification of the Software, including new versions and new releases,
resulting from a request from Archipelago pursuant to the Support Agreement.


 


“Documentation” means all written or electronically recorded materials
prepared by or on behalf of TAL relating to the Software, including all
Functional Specifications and Technical Specifications.


 


“ECN” means an electronic communications network, as such term is
defined in Rule 11Ac1-1(a)(8) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Although the ECN to be operated by Archipelago
will initially be limited to handling Nasdaq securities, for purposes of this
License Agreement it is assumed that Archipelago’s ECN may in the future be
expanded to handle exchange-listed securities as well. In addition, if ECNs are
in the future permitted, and Archipelago’s ECN elects, to operate, register and
be regulated as an “exchange” within the meaning of Section 3(a)(1) of the
Exchange Act, this License Agreement will continue to apply to Archipelago’s
ECN if and when it becomes registered as an exchange.


 


“Enhancements” means fixes, updates, upgrades, developments,
improvements or modifications of the Software, including new versions and new
releases, or any part thereof, developed by TAL or it Affiliates independently
of any request by Archipelago for a Development under the Support Agreement or
otherwise acquired by TAL or its Affiliates during the term of the Support
Agreement.


 


“Functional Specifications” means the operational capabilities of the
Software and the Enhancements thereto.


 


“Governmental Body” means any supranational body or organization,
country or government (federal, state, local, or foreign), any governmental or
regulatory body thereof, any political subdivision thereof, any agency,
instrumentality or authority thereof, any self-regulatory organization the
rules and regulations of which are enforceable by law (including any such
securities, futures or commodity exchange), or any court of competent
jurisdiction.


 


“Intellectual Property Right” means any patent, copyright, trademark,
service mark (and any application or registration respecting the foregoing),
trade secret, know-how and other intellectual property right of any type.


 


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“License Agreement” means this License Agreement.


 


“Object Code” means the computer readable code for the Software and
Enhancements, which has been translated by a compiler for execution on
Archipelago’s computer.


 


“Person” shall mean an individual, corporation (including any
non-profit corporation), association, general or limited partnership,
organization, business, firm, limited liability company, joint venture, trust,
estate, or other entity, association or organization, whether constituting a
separate legal entity or not.


 


“Services” means the services provided by Archipelago to Archipelago
Subscribers.


 


“Software” means the software developed by or on behalf of TAL or its
Affiliates that is used to operate the business of Archipelago, together with
any Enhancements or Developments thereto developed, licensed or acquired by TAL
or its Affiliates. Specific components of the Software are listed on
Schedule A hereto.


 


“Source Code” means the form of code for the Software, which is human
readable and which can be translated by a compiler for execution on
Archipelago’s computer.


 


“Subscriber Agreement” means the agreement that an Archipelago
Subscriber may execute in order to utilize the Service.


 


“Support Agreement” means the Support, Development and Enhancement
Agreement dated as of the Effective Date between TAL and Archipelago.


 


“Technical Specifications” means the technical specifications
developed, licensed or acquired by or on behalf of TAL or its Affiliates for or
in connection with the Software.


 


 


ARTICLE II


 


LICENSE


 


2.1           SOFTWARE
LICENSE. TAL hereby grants to Archipelago a royalty free, worldwide, perpetual,
nontransferable (except as provided herein), exclusive (as provided herein)
license to use, reproduce, display, distribute (as provided in
Section 2.2), modify, enhance and create derivative works of the Software
for any business purpose of Archipelago. Such business purpose may not consist
solely of the distribution of the Software for a fee. Except as specified
herein, such license shall extend to Object Code, Source Code and the
Documentation.


 


2.2           RIGHT
TO SUBLICENSE. TAL hereby grants to Archipelago the right to grant a sublicense
to use the Software, in Object Code only, to any entity that is not an
Affiliate provided that any such sublicense must be in furtherance of a


 


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business purpose of Archipelago. Such business purpose may not consist
solely of the distribution of the Software for a fee.


 


2.3           EXCLUSIVITY
OF LICENSE. TAL agrees that the license granted herein to the elements of the
Software listed on Schedule A and designated as exclusive shall be
exclusive to Archipelago, and that no other license will be granted by TAL or
any of its Affiliates in respect of such Software. The license to all other elements
of the Software listed on Schedule A shall be non-exclusive.


 


2.4           EXCLUSIVE
FIELD OF USE. So long as Archipelago, or a valid transferee of Archipelago’s
rights hereunder, shall operate an ECN or exchange (with the meaning of
Section 3(a)(1) of the Exchange Act or proposed Rule 3a1-1 under the
Exchange Act, as the same may be from time to time be re-proposed, adopted or
amended) or other facility for matching or executing orders that provides for
the trading of equity securities (i) of United States issuers or (ii) of
non-United States issuers whose equity securities are listed for trading on a
United States stock exchange or trade through the NASDAQ system, TAL agrees
that it will not license the Software to any other Person for such purpose or
use the Software itself for such purpose. This exclusive field of use does not
extend to the routing of orders for the securities described above to other
execution points.


 


2.5           TRANSFER
OF LICENSE. This License Agreement may only be transferred in a sale of all or
substantially all of the assets of Archipelago or a sale of a majority of the
voting interests of Archipelago provided that, in the case of a sale of all or
substantially all of the assets of Archipelago, such third party must agree to
be bound by the terms of this License Agreement. This License Agreement may not
be sold in any liquidation, foreclosure or insolvency proceeding unless it is
sold with all or substantially all the assets of Archipelago.


 


2.6           OWNERSHIP.
Any modification or enhancement of, or derivative work relating to, the
Software developed by Archipelago or any third party consultants hired by
Archipelago will be the property of Archipelago. Any Enhancements developed or
acquired by TAL will be property of TAL and shall be considered Software under
the License Agreement, and Archipelago shall have the rights to such Software
specified in the License Agreement. Unless otherwise agreed by the Parties at
the time of a request for a Development or thereafter, any Development shall be
the property of TAL and shall be considered Software under the License
Agreement, and Archipelago shall have the rights to such Software as specified
in the License Agreement.


 


2.7           REGULATORY
LICENSES AND PERMISSIONS. Archipelago shall be responsible for obtaining and maintaining
all regulatory licenses, permissions and approvals necessary to operate an ECN.


 


2.8           NECESSARY
EQUIPMENT. Archipelago shall be responsible for providing all hardware and
third party software required to operate the Software, including, but not limited
to the Microsoft Windows operating system and Microsoft SQL Server. If
requested by Archipelago or any of its Affiliates, TAL will provide a list,
which may be modified from time to time, of currently recommended hardware


 


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and software.


 


ARTICLE III


 


DELIVERY OF OBJECT CODE, DOCUMENTATION,


AND SOURCE CODE


 


3.1           OBJECT
CODE AND DOCUMENTATION. TAL has provided to Archipelago the Object Code and all
available Documentation for the Software, and TAL has installed the Object Code
on Archipelago equipment at TAL’s principal office location. Upon Archipelago’s
request, TAL will install from time to time the Software at Archipelago’s
backup location or at any other location designated by Archipelago from time to
time. Archipelago will reimburse TAL for its reasonable out-of-pocket travel
and living expenses, if any, incurred with any such installation.


 


3.2           SOURCE
CODE. TAL shall provide to Archipelago’s Chief Technology Officer the Source
Code for the most current version of the Software. If any changes are made to
the Source Code, TAL shall promptly, but in no event later than two (2)
business days after a request by Archipelago, provide the Source Code for the
Software to Archipelago. TAL will also provide Archipelago all Documentation
relating thereto and with instructions regarding relevant third party compilers
and libraries necessary to compile the Source Code. Archipelago is responsible
for obtaining those compilers and libraries and for ensuring that they are
properly licensed to Archipelago. Upon Archipelago’s request, TAL will promptly
install the Source Code on one or more computers provided by Archipelago that
contain the appropriate compilers and ascertain that the Source Code compiles.
Archipelago will reimburse TAL for its reasonable out-of-pocket travel and
living expenses, if any, incurred with any such installation.


 


 


ARTICLE IV


 


INDEMNIFICATION


 


4.1           INDEMNIFICATION
BY TAL. TAL, at its own expense, shall indemnify and hold harmless Archipelago
and their respective directors, managers, partners, officers, employees,
members, shareholders and agents from and defend any action brought against
same with respect to any claim, demand, cause of action, debt or liability,
including attorneys’ fees, relating to any claim that the Software, including
any Object Code, Source Code or Documentation, used hereunder infringe or
violate any patents, copyrights, trade secrets, licenses or other proprietary
rights of any third party, except to the extent that any such infringement is
due to (i) any Archipelago Materials or (ii) any modifications by a party other
than TAL or one of its Affiliates and other than at the direction of, or
pursuant to instructions from, TAL or one of its Affiliates. In the event of
any such infringement or violation, TAL shall use its best efforts to either
(x) modify or replace infringing portions of the Software with software of
substantially similar functionality, or (y) obtain license(s) for the
infringing portions.


 


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4.2           INDEMNIFICATION
BY ARCHIPELAGO. Archipelago may, in its sole discretion, have Archipelago
Subscribers execute Subscriber Agreements with Archipelago. Such Subscriber
Agreements may include an indemnification in a form approved by TAL, in its
reasonable business judgment, in favor of TAL for claims, demands, causes of
action, debts or liabilities, including attorneys’ fees, arising out of the use
of the Service by the Subscriber. In such cases in which Archipelago does not
obtain a Subscriber Agreement containing such an indemnity, Archipelago, at its
own expense, shall indemnify and hold harmless TAL and its Affiliates, and
their respective directors, partners, officers, employees, shareholders and
agents from and defend any action brought against same with respect to any
claim, demand, cause of action, debt or liability, including attorneys’ fees,
to the extent that it is based on a claim arising out of the use of the Service
by the Subscriber, but such indemnity shall only apply to the extent that such
claim is not due to TAL’s gross negligence or willful misconduct or to any
obligation of TAL to indemnify Archipelago pursuant to Section 4.1.


 


4.3           NOTICE
OF ASSERTED LIABILITY. Promptly after receipt by any party (the “Indemnitee”)
of notice of any claim or the commencement of any action against it in respect
of which indemnity or reimbursement may be sought hereunder (an ‘Assertion”),
such Indemnitee shall promptly give written notice of the Assertion (the
“Claims Notice”) to any other party (or parties) obligated to provide
indemnification pursuant to this Article (the “Indemnitor”), but the
failure to so notify any Indemnitor shall not relieve any Indemnitor of any
liability it may have to the Indemnitee hereunder except to the extent such
Indemnitor has been materially prejudiced thereby. The Indemnitor shall have
the right to assume the defense of such Assertion, at its own expense, with
counsel chosen by the Indemnitor and reasonably satisfactory to the Indemnitee.
Notwithstanding that the Indemnitor may elect to assume the defense of any
Assertion, the Indemnitee shall have the right to participate in the
investigation and defense thereof, with separate counsel chosen by such
Indemnitee, but in such event the fees and expenses of such counsel shall be
paid by such Indemnitee unless (a) the Indemnitor shall have agreed to pay such
fees and expenses, (b) the Indemnitor shall have failed to assume the defense
of such Assertion with counsel reasonably satisfactory to such Indemnitee or
(c) in the reasonable judgment of such Indemnitee, based upon the written
advice of its counsel, a conflict of interest exists between the Indemnitor and
such Indemnitee with respect to such Assertion (in which case, if such
Indemnitee notifies the Indemnitor that such Indemnitee elects to employ
separate counsel, the Indemnitor shall not assume the defense of such Assertion
on behalf of such Indemnitee and shall be obligated to pay the reasonable fees
and expenses of such separate counsel). Notwithstanding anything to the
contrary in this Section, the Indemnitor shall not, without the written consent
of such Indemnitee (which consent shall not be unreasonably withheld or
delayed), settle or compromise any action in any manner that, in the reasonable
judgment of such Indemnitee or its counsel, may adversely affect such
Indemnitee; provided, however, that the Indemnitor may, without the written
consent of the Indemnitee, settle or compromise any action or consent to the
entering of any judgment which is for money damages only and includes as an
unconditional term thereof the


 


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delivery by the claimant or plaintiff to such Indemnitee of a duly
executed written release of such Indemnitee from all liability in respect of
such Assertion, which release shall be satisfactory in form and substance to
counsel to such Indemnitee.


 


ARTICLE V


 


LIMITATION OF LIABILITY


 


5.1           IN
NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR SPECIAL, INCIDENTAL,
INDIRECT OR CONSEQUENTIAL DAMAGES, DAMAGES FROM LOSS OF USE, DATA, PROFITS OR
BUSINESS OPPORTUNITIES, OR FAILURE TO ACHIEVE COST SAVINGS, IN CONTRACT, TORT
OR OTHERWISE, EVEN IF EITHER PARTY SHALL HAVE BEEN ADVISED IN ADVANCE OF THE
POSSIBILITY OF SUCH LOSS, COST OR DAMAGES, ARISING OUT OF OR IN CONNECTION WITH
THIS LICENSE AGREEMENT. NOTWITHSTANDING THE FOREGOING, THE LIMITATIONS OF
LIABILITY OF THIS SECTION 5.1 WILL NOT APPLY TO THE INDEMNIFICATION
OBLIGATIONS OF ARCHIPELAGO OR TAL PURSUANT TO ARTICLE IV OR FOR VIOLATIONS
OF ARTICLE VI.


 


ARTICLE VI


 


CONFIDENTIALITY


 


6.1           DISCLOSURE
OF CONFIDENTIAL INFORMATION.


 


(a)           The parties acknowledge that each party (in
such capacity, a “Disclosing Party”) has disclosed or will disclose certain
Confidential Information to the other and its Affiliates (in such capacity, a
“Receiving Party”). For purposes hereof, and subject to the provisions of
Section 6.2, the term “Confidential Information” means (i) the Software
and Documentation, (ii) any information relating to the Disclosing Party or its
Affiliates and designated in writing as confidential, proprietary or marked
with words of like import, (iii) any information relating to the Disclosing
Party or its Affiliates that is orally conveyed, if the Disclosing Party
provides specific written notice that such oral communication shall be deemed
Confidential Information and delivers such writing to the Receiving Party
within ten (10) days of the oral conveyance and (iv) any information that the
Receiving Party should know in its reasonable business judgment is the
Confidential Information of the Disclosing Party.


 


(b)           The Receiving Party acknowledges the
confidential and proprietary nature of the Confidential Information and agrees
not to reveal or disclose any Confidential Information for any purpose (except
as permitted by the second immediately succeeding sentence) to any other Person
who is not an employee, manager, consultant, member or Affiliate of the
Receiving Party, or to use any Confidential Information for any purpose other
than as contemplated hereby, in each case, without the prior written consent of
the Disclosing Party. The


 


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Receiving Party agrees to maintain adequate security procedures and
take reasonable precautions (no less rigorous than the Receiving Party takes
with respect to its own comparable Confidential Information, but, in no event,
less than due diligence and care) to prevent misuse, unauthorized or
inadvertent disclosure or loss of the Confidential Information of the
Disclosing Party. In the event that a Receiving Party wishes to disclose
Confidential Information to one of its professional advisors, consultants,
agents or business partners it may do so only if such third party agrees to
abide by the terms of this Article VI.


 


6.2           EXCLUSIONS.
Notwithstanding anything contained herein to the contrary, Confidential
Information shall not include information which:


 


(a)           at or prior to the time of disclosure by the
Disclosing Party was known to the Receiving Party other than by reason of
unlawful appropriation by the Receiving Party;


 


(b)           at or after the time of disclosure by the
Disclosing Party becomes generally available to the public through no act or
omission on the Receiving Party’s part;


 


(c)           is developed by the Receiving Party
independent of any Confidential Information it receives from the Disclosing
Party;


 


(d)           is received by the Receiving Party from a
third party not known by the Receiving Party not to be free to make such
disclosure without breach of any legal obligation; or


 


(e)           is required to be disclosed pursuant to any
statute, regulation, order, subpoena or document discovery request, provided
that prior written notice of such disclosure is furnished to the Disclosing
Party as soon as practicable in order to afford the Disclosing Party an
opportunity to seek a protective order (it being agreed that if the Disclosing
Party is unable to obtain or does not seek a protective order and the Receiving
Party is legally compelled to disclose such information, disclosure of such
information may be made without liability).


 


6.3           NOTIFICATION
OF PROHIBITED USE OR DISCLOSURE. The Receiving Party shall notify the
Disclosing Party promptly upon discovery of any prohibited use or disclosure of
the Confidential Information, or any other breach of this Article by the
Receiving Party, and shall fully cooperate with the Disclosing Party to help
the Disclosing Party, to the extent practicable, regain possession of the
Confidential Information and prevent the further prohibited use or disclosure
of the Confidential Information.


 


6.4           THIS
LICENSE AGREEMENT. The terms of this License Agreement shall be deemed to be
Confidential Information of both parties but may be disclosed by Archipelago to
its permitted sublicensees and prospective sublicensees who agree


 


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to be bound by the confidentiality provisions of the License Agreement.


 


6.5           COPYRIGHT
NOTICES. The Receiving Party agrees that it will not remove any statutory
copyright notice or evidence of confidentiality contained on or included in the
Confidential Information. The Receiving Party will reproduce any such notice or
evidence on any reproduction of all or any part of the Confidential
Information, and, if requested by the Disclosing Party, will, at the election
of the Receiving Party, either attach such a notice or evidence on any
Confidential Information inadvertently provided without such a notice or
evidence, or return or destroy such Confidential Information.


 


ARTICLE VII


 


REPRESENTATIONS AND WARRANTIES


 


7.1           TAL’S
REPRESENTATIONS AND WARRANTIES. TAL represents and warrants that:.


 


(a)           TAL has the full power and authority to
execute, deliver and perform this License Agreement.


 


(b)           This License Agreement has been duly and
validly authorized, executed and delivered by TAL and constitutes a valid and
binding obligation of TAL enforceable in accordance with its terms.


 


(c)           The execution, delivery and performance by
TAL of this License Agreement as contemplated hereby will not (i) conflict
with, or result in the breach or termination of, or constitute a default under,
any agreement of any kind or any judgment or decree, to which TAL is in any way
bound, except for such conflicts, breaches or defaults as would not, in the
aggregate, have a material adverse effect on the ability of TAL to perform its
obligations under this License Agreement or (ii) constitute a violation by TAL
of any applicable law or regulation of any Governmental Body, or any rule or
written policy of any industry association of competent jurisdiction, or
require TAL to obtain or make any consent, approval, or filing of any kind
with, or notification to, any Person or Governmental Body, or any industry
association the sanctions of which are enforced by law or subject Archipelago
to any penalty or sanction.


 


(d)           TAL will keep the Software free at all times
from liens or encumbrances.


 


(e)           The Software and the marketing of the
Service thereof by Archipelago and the use of the Service by Subscribers does
not and will not in any manner contravene, breach or constitute an unauthorized
use, infringement, or misappropriation of any Intellectual Property Right or
any other property or proprietary right of any Person, provided that the
foregoing representations and warranties in this clause (e) will not apply to
the Software to the extent it has been modified by a party other than TAL or
one of its Affiliates and other than at the


 


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direction of, or pursuant to instructions from, TAL or one of its
Affiliates.


 


(f)            TAL owns all, or has the rights to, the
Intellectual Property Rights in the Software, Object Code, Source Code and
Documentation and has all rights necessary to grant the licenses and rights it
grants hereunder under on the terms and conditions provided herein without the
approval or consent of any third party.


 


(g)           TAL has taken reasonable steps to protect
and maintain the Intellectual Property Rights in the Software, Object Code,
Source Code and Documentation.


 


(h)           The Software listed on Schedule A
provides functionality that is substantially the same as the software currently
used by TAL to provide ECN and related broker/dealer services, including but
not limited to order routing and matching, gateways, trade reporting, trade
processing and exception processing; provided, however, that such functionality
does not include (1) the display of market price quotations, news, and other
information for analysis as provided by TAL’s RealTick III software, and (2)
initiating order entry, position management, etc. as provided by TAL’s
RealTrade software; both RealTick III and RealTrade will be made available to
Archipelago pursuant to a separate License and Distribution Agreement.


 


(i)            Prior to January 1, 1999, the Software
shall recognize the advent of the year 2000 and will correctly recognize and
manipulate date information relating to dates on or after January 1, 2000,
including any leap years, and the operation and functionality of the Software
will not be adversely affected by the advent of the year 2000 or any
manipulation of data featuring information relating to dates. The Software will
comply with all regulatory and governmental requirements concerning year 2000
compliance. TAL shall use its best efforts to remediate any deficiency in the
Software concerning year 2000 compliance.


 


(j)            To the best of TAL’s knowledge, TAL
represents and warrants that the Software does not and will not, contain any
“viruses.” TAL further represents and warrants that the Software does not and
will not, contain any “time-bombs,” “usage authorization codes,” or other codes
or programming devices that might or might be used to access, modify, delete,
damage, deactivate or disable the Software or other software, computer hardware
or data of Archipelago, other than with respect to TAL’s “permissioning system”
which TAL shall remove from the Software as soon as reasonably practical
following a request by Archipelago.


 


(k)           TAL is not subject to any contractual or
other obligation or restriction that prohibits or would prohibit, or impairs or
would impair, its grant of licenses and rights or the performance of its
obligations hereunder upon the terms and conditions provided herein.


 


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(l)            TAL EXPRESSLY DISCLAIMS ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED WITH RESPECT TO THE SOFTWARE, DOCUMENTATION AND
RELATED MATERIALS, OR THEIR QUALITY OF PERFORMANCE INCLUDING WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. TAL MAKES NO
REPRESENTATION CONCERNING THE LIKELIHOOD OF PROFITABLE TRADING USING THE
SOFTWARE AND DOCUMENTATION. EXCEPT AS PROVIDED HEREIN, THE SOFTWARE ARE
LICENSED “AS IS” AND “WITH ALL FAULTS”.


 


(m)          EXCEPT AS OTHERWISE PROVIDED IN CLAUSES (i)
AND (j) OF THIS SECTION 7.1, TAL DOES NOT WARRANT THAT THE SOFTWARE OR THE
DOCUMENTATION WILL BE ERROR OR BUG FREE OR THAT ALL ERRORS IN THE SOFTWARE CAN
BE CORRECTED.


 


7.2           REPRESENTATIONS
AND WARRANTIES OF ARCHIPELAGO. Archipelago represents and warrants to TAL that:


 


(a)           Archipelago has the full power and authority
to execute, deliver and perform this License Agreement.


 


(b)           This License Agreement has been duly and
validly authorized, executed and delivered by Archipelago and constitutes a
valid and binding obligation of Archipelago enforceable in accordance with its
terms.


 


(c)           The execution, delivery and performance by
Archipelago of this License Agreement as contemplated hereby will not (i)
conflict with, or result in the breach or termination of, or constitute a
default under, any agreement of any kind or any judgment or decree, to which
Archipelago is in any way bound, except for such conflicts, breaches or
defaults as would not, in the aggregate, have a material adverse effect on the
ability of Archipelago to perform its obligations under this License Agreement
or (ii) constitute a violation by Archipelago of any applicable law or
regulation of any Governmental Body, or any rule or written policy of any
industry association of competent jurisdiction, or require Archipelago to
obtain or make any consent, approval, or filing of any kind with, or
notification to, any Person or any Governmental Body, or any industry
association the sanctions of which are enforced by law.


 


(d)           Archipelago holds all permits,
registrations, licenses, variances, exemptions, orders and approvals from
Governmental Bodies which are material to the performance by Archipelago of its
obligations under this Agreement in the jurisdictions in which Archipelago
proposes to perform such obligations (collectively, the “Archipelago Permits”),
except for such permits, registrations, licenses, variances, exemptions, orders
and approvals that have not been received as of the Effective Date and which
Archipelago will seek within a reasonable period after the Effective Date.
Archipelago is in compliance with the terms of all Archipelago Permits it
currently holds, except where any such non-compliance would not, in the
aggregate, have a material


 


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adverse effect on the ability of Archipelago to perform its obligations
under this Agreement. Archipelago is in compliance with all federal, state,
local and foreign laws, statutes, ordinances, codes, regulations, orders,
requirements, standards and procedures of any Governmental Body which are applicable
to its businesses except where any such non-compliance would not, in the
aggregate, (x) have a material adverse effect on the ability of Archipelago to
perform its obligations under this Agreement, (y) cause TAL to violate any such
federal, state, local or foreign law, ordinance, code, regulation, order,
requirement, standard or procedure or (z) subject TAL to any increased cost or
penalty.


 


ARTICLE VIII


 


SALE OF TAL’S BUSINESS


 


8.1           CONDITIONS
OF SALE OR TRANSFER. As a condition to the sale, transfer, lease, assignment or
other disposition by TAL of all or more than a de minimis portion of TAL’s
businesses or assets relating to TAL’s performance hereunder, TAL shall require
that such Person execute an instrument in form and substance reasonably satisfactory
to Archipelago agreeing to be bound by the provisions of this License Agreement
as and to the extent of TAL.


 


ARTICLE IX


 


MISCELLANEOUS


 


9.1           USE
OR SALES TAX. Archipelago will be responsible for paying, as and when due, any
use or sales tax required to be paid in connection with the use of the
Software.


 


9.2           FEES.
Archipelago shall be responsible for paying any and all fees related to the use
of the Software which may be charged or applied by the SEC, the NASD, or other
regulatory and/or Governmental Bodies.


 


9.3           WAIVER
OF COMPLIANCE. Any failure of either party to comply with any obligation
hereunder may be expressly waived in writing by the other party, but such
waiver or failure to insist upon strict compliance with such obligation shall
not operate as a waiver of, or estoppel with respect to, any subsequent
failure.


 


9.4           NOTICES.
Any notice or other communication required or permitted hereunder shall be in
writing, and shall have been sufficiently given if hand delivered, signature
required, if sent by certified or registered mail, return receipt required, if
sent by overnight delivery service, signature required, or if sent by telecopy
and promptly confirmed by dispatching the hard copy by another permitted method
of giving notice. Notice given by hand delivery, certified or registered mail
or overnight delivery service shall be effective upon receipt of signature, and
notice first given by telecopy shall be effective upon telephonic confirmation
of receipt of the appropriate number of pages and dispatch of the


 


11

















 


hard copy. Notices or other communications shall be delivered or
telecopied to the address or telecopy number set forth below (or to such other
address or telecopy number as a party by notice to the other may provide):


 


 


If to Archipelago, to:


 


Archipelago Holdings, L.L.C.


100 South Wacker Drive, Suite 2060


Chicago, IL 60606


Fax:


Voice number for confirmation: 312-960-1314


Attention:  Chief Executive
Officer


 


If to TAL, to:


 


Townsend Analytics; Ltd.


100 South Wacker Drive


Suite 2040


Chicago, Illinois 60606


Attention: President


 


9.5           CONSENT
TO JURISDICTION. Each party consents specifically to the non-exclusive
jurisdiction of the federal courts of the United States sitting in the Northern
District of Illinois and the courts of the State of Illinois sitting in the
County of Cook (and any court to which an appeal therefrom may be taken) for
purposes of all legal proceedings arising out of or relating to this License
Agreement or the transactions contemplated hereby, and each party irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum. Each party irrevocably waives its right to a
trial by jury and consents that service of process may be effected by mail in
accordance with the notice provisions contained in this Section 9.5.


 


9.6           ENFORCEMENT
OF AGREEMENT. The parties hereto agree that money damages or other remedy at
law would not be sufficient or adequate remedy for any breach or violation of,
or a default under, this License Agreement by them and that in addition to all
other remedies available to them, each of them shall be entitled to seek an
injunction restraining such breach, violation or default or threatened breach,
violation or default and to any other equitable relief, including, without
limitation, specific performance, without bond or other security being
required.


 


9.7           COMPLETE
AGREEMENT; AMENDMENTS. This License Agreement may not be amended, supplemented
or modified except by written agreement executed by both Parties. This License
Agreement (including the Exhibits and Schedules) contains, and is intended as,
a complete statement of the arrangements between the parties with respect to
the subject matter and supersedes all prior agreements between the parties with
respect to those matters. This License Agreement shall supersede


 


12

















 


and replace any previous agreement or understanding between the parties
with respect to the confidential or proprietary information of either party,
with effect from the first date of disclosure of such information.


 


9.8           SEVERABILITY.
If any term or clause of this License Agreement is held to be illegal, invalid
or unenforceable, the validity or enforceability of the remainder of this
License Agreement shall not be affected thereby. If any Governmental Body
construes any term or clause of this License Agreement to be unreasonable
because of the duration of such term or clause, such Governmental Body shall
have the power to reduce the duration of such term or clauses and to enforce
such term or clause as so reduced.


 


9.9           COUNTERPARTS.
This License Agreement may be executed in any number of separate counterparts,
each such separate counterpart shall be an original instrument, and all such
counterparts shall together constitute the same agreement.


 


9.10         GOVERNING
LAW. This License Agreement shall be governed by and construed in accordance
with the laws of the State of Illinois without giving effect to the principles
of conflicts of laws thereof.


 


9.11         BINDING
EFFECT: NO THIRD-PARTY BENEFICIARIES; ASSIGNMENT. This License Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns. Nothing in this License Agreement shall
create or be deemed to create any rights in any Person other than TAL or
members of Archipelago. Except as provided elsewhere in this Agreement no party
may assign any of its rights or delegate any of its duties under this License
Agreement without the prior written consent of the other not to be unreasonably
withheld or delayed.


 


9.12         RELATIONSHIP
OF THE PARTIES. There is no joint venture, partnership, agency or fiduciary
relationship existing between the parties and the parties do not intend to
create any such relationship by this License Agreement.


 


9.13         NO
BROKERS OR FINDERS. Archipelago and TAL respectively represent and warrant to
the other that it has not employed or utilized the services of any broker or
finder in connection with this License Agreement or the transaction
contemplated hereby.


 


9.14         FORCE MAJEURE. Neither
TAL nor any of its Affiliates, or Archipelago shall be liable or deemed to be
in default under any provision of this License Agreement for any delay or
failure to perform under this License Agreement resulting directly or
indirectly from any cause beyond the reasonable control of TAL, any Affiliates
of TAL, or Archipelago (as the case may be), including, without limitation,
Acts of God, war, fire, electrical failure, explosion, earthquake, flood,
elements, governmental order or regulation, acts of public enemy, labor
disputes, strikes, lockouts, supply shortages, equipment failures, malfunctions
of software provided by third parties and other failures or delays or failures
caused by third parties (including third party providers of services used in connection
with the performance of this License Agreement).


 


13

















 


 


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


 


 


	
  ARCHIPELAGO HOLDINGS, L.L.C.

  
	
   

  
	
  BY:

  	
  /S/ GERALD D. PUTNAM

  	
   

  
	
   

  	
   

  
	
  PRINT NAME: GERALD D. PUTNAM

  
	
  PRINT
  TITLE:         CHIEF EXECUTIVE
  OFFICER

  
	
   

  	
   

  
	
   

  	
   

  
	
  TOWNSEND ANALYTICS LTD.

  
	
   

  
	
   

  
	
  BY:

  	
  /S/ STUART TOWNSEND

  	
   

  
	
  PRINT NAME: STUART TOWNSEND

  
	
  PRINT
  TITLE:         PRESIDENT

  
						



 


 

















 


SCHEDULE A


 


 


CO-OWNED SOFTWARE


 


 


I.              GATEWAYS
— Provide access to external systems.


 


1.             Client Access - Gateways that connect the
client’s desktop application to the Trade Server over the WAN or the Internet.


•              FIX Gate & FIX
Reporter


•              CMS Gate


 


2.             External Liquidity — Gateways that connect
to external sources of liquidity.


•              SelectNet


•              ISI


•              ISLAND


•              SOES


•              Bloomberg


•              Instinet


•              MASH


•              CSS


 


II.            ORDER MANAGING AND EXECUTING — The hub of
the system, which executes or routes orders based upon internal rules.


 


1.             Managing and routing - The client’s
desktop software communicates to the Trader Server through one of the client
access gateways. The Trade Server maintains the client’s order and application
information. It will decide where to route based upon client preferences and
internal rules.


•              Trade server


 


2.             ECN Book Server - Has the logic and
information that is used to execute the client’s order, post it to the national
market or place it on the internal book. Provides an audit trail and publishes
the top of the book.


•              ELF’s Trade server


•              ELF (ELF is
comprised of the following functions: (i) a NASDAQ interface, (ii) matching
function, and (iii) processing of trades and quotes. ELF is the exclusive
element of this License Agreement to the extent that TAL shall not license,
whether directly or indirectly through a sublicense through one or more
intermediaries, all three functionalities of ELF to any other party)


•              ABBA


 


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III.           BROKERAGE
OPERATION AND CLEARING —


1.             Clearing - Is a match and forward
environment. Places the executions into a file and forwards the file to
Southwest Securities.


•              Trade Capture SK


•              Trade Capture


•              Clearing Gateway


•              Exception Processing


 


2.             Brokerage Operation — Maintains the
customer’s account and billing information. Handles all regulatory requirements
and management reporting.


•              HTML Risk Manager


•              HTML Account Manager


•              ECN Billing


 


 


2