Document:

Exhibit 10.37

 

EXECUTION COPY

 

 

AMENDED AND RESTATED 

CHANGE IN CONTROL SEVERANCE AGREEMENT

 

THIS AMENDED AND RESTATED AGREEMENT is entered into as of the 15th day
of June, 2004, by and between Archipelago Holdings, L.L.C., a Delaware limited
liability company, and its successors (the “Company”), and Steven
C. Rubinow (“Executive”).

 

W I T N E S S E T H

 

WHEREAS, the Company considers the establishment and maintenance of a
sound and vital management to be essential to protecting and enhancing the best
interests of the Company and its members; and

 

WHEREAS, the Company recognizes that the possibility of a change in
control may arise and that such possibility may result in the departure or
distraction of management personnel to the detriment of the Company and its
members; and

 

WHEREAS, the Board (as defined in Section 1) has determined that
it is in the best interests of the Company and its members to secure
Executive’s continued services and to ensure Executive’s continued dedication
to his duties in the event of any threat or occurrence of a Change in Control
(as defined in Section 1) of the Company; and

 

WHEREAS, the Company and Executive entered into a Change in Control
Severance Agreement as of May 23, 2002 (the “Original Agreement”);

 

WHEREAS, the Company and Executive desire to amend and restate the
Original Agreement; and

 

WHEREAS, the Board has authorized the Company to enter into this
Agreement.

 

NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Executive hereby
agree that the Original Agreement be amended and restated as follows:

 

1.                                       Definitions.  As used in this Agreement, the following
terms shall have the respective meanings set forth below:

 

(a)                                  “Board”
means the Board of Managers of the Company (or the Board of Directors of the
Company in the event the Company becomes, or any successor to the Company is or
becomes, a corporation).

 

 

(b)                                 “Bonus
Amount” means the Executive’s actual annual incentive bonus paid
or payable by the Company (or its Subsidiaries) for the year immediately prior
to the year in which the Change in Control occurs.

 

(c)                                  “Cause”
means (i) the willful failure by the Executive to substantially perform
the Executive’s responsibilities, after demand for substantial performance has
been given by the Board that specifically identifies how the Executive has not
performed such responsibilities; (ii) the willful engaging by the
Executive in illegal conduct or gross misconduct which is materially and demonstrably
injurious to the Company; (iii) the conviction of a felony or a guilty or
nolo contendere plea by the Executive with respect thereto; (iv) the
willful engaging by the Executive in fraud in connection with the business of
the Company or misappropriation of the Company’s funds or property; or
(v) the willful engaging by the Executive in any conduct which constitutes
an employment disqualification under applicable law (including statutory
disqualification as defined under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)). 
For purpose of this paragraph (c), no act or failure to act by
Executive shall be considered “willful” unless done or omitted to be done by
Executive in bad faith and without reasonable belief that Executive’s action or
omission was in the best interests of the Company or its affiliates.  Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board, based upon
the advice of counsel for the Company or upon the instructions of the Company’s
chief executive officer shall be conclusively presumed to be done, or omitted
to be done, by Executive in good faith and in the best interests of the
Company.

 

(d)                                 “Change in
Control” means the occurrence of any one of the following
events:

 

(i)                                     individuals
who, on the day after the consummation of the initial public offering of the
Company’s shares of stock (the “IPO Date”), constituted the Board (the
“Incumbent
Directors”) cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a manager or
director of the Board subsequent to the IPO Date (A) whose election or
nomination for election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named as a
nominee for manager or director, without written objection to such nomination)
shall be an Incumbent Director or (B) who was appointed, designated or elected
pursuant to the terms of the Ninth Amended and Restated Limited Liability
Company Agreement of the Company, as the same may be amended or supplemented
from time to time (the “LLC Agreement”) shall be an Incumbent Director; provided,
however, that with respect to clause (A) no individual initially elected
or nominated as a manager or director of the Board as a result of an actual or
threatened election contest with respect to managers or directors or as a
result of any other actual or threatened solicitation of proxies or consents by
or on behalf of any person other than the Board shall be deemed to be an
Incumbent Director; and, provided, further that if

 

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the IPO Date has not occurred by December 31, 2004, then for
purposes of this Section 1(d), the “IPO Date” shall mean the date hereof;

 

(ii)                                  any
“person” (as such term is defined in Section 3(a)(9) of the Exchange Act
and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or
becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 40% or
more of the combined voting power of the Company’s then outstanding securities
eligible to vote for the election of managers or directors of, or possessing
the right to appoint or designate 40% or more of the managers or directors to,
the Board (the “Company Voting Securities”); provided,
however, that the event described in this paragraph (ii) shall not
be deemed to be a Change in Control by virtue of any of the following
acquisitions:  (A) by the Company or any Subsidiary, (B) by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any Subsidiary, (C) by any underwriter temporarily holding securities
pursuant to an offering of such securities, (D) pursuant to a
Non-Qualifying Transaction (as defined in paragraph (iii)), or
(E) pursuant to any acquisition by Executive or any group of persons
including Executive (or any entity controlled by Executive or any group of
persons including Executive); and, provided, further, that a
person shall not be deemed a beneficial owner of 40% of such combined voting
power solely by reason of the ability, together with other members of the
Company,  to appoint, designate or elect
managers to the Board pursuant to the terms of the LLC Agreement; or

 

(iii)                               the
consummation of a merger, consolidation, statutory share exchange, sale of all
or substantially all of the Company’s assets or similar form of transaction (including
a transaction whereby another business is acquired by the Company by way of a
contribution to the Company) involving the Company or any of its Subsidiaries
that requires the approval of the Company’s members or stockholders, whether
for such transaction or the issuance of securities in the transaction (a “Business
Combination”), unless immediately following such Business
Combination:  (A) at least 55% of
the total voting power of (x) the entity resulting from such Business
Combination (the “Surviving Corporation”), or (y) if
applicable, the ultimate parent entity that directly or indirectly has
beneficial ownership of at least 95% of the voting securities eligible to elect
managers or directors of the Surviving Corporation (the “Parent Corporation”),
is represented by Company Voting Securities that were outstanding immediately
prior to such Business Combination (or, if applicable, is represented by shares
into which such Company Voting Securities were converted pursuant to such
Business Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company Voting
Securities among the holders thereof immediately prior to the Business
Combination, (B) no person (other than any employee benefit plan (or
related trust) sponsored or maintained by the Surviving Corporation or the
Parent Corporation), is or becomes the beneficial owner, directly or
indirectly, of 40% or

 

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more of the total voting power of the outstanding voting securities
eligible to elect persons to the board of managers or board of directors of the
Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) and (C) at least a majority of the members of the board of
managers or board of directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation) following the consummation of
the Business Combination were Incumbent Directors at the time of the Board’s
approval of the execution of the initial agreement providing for such Business
Combination (any Business Combination which satisfies all of the criteria
specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying
Transaction”).

 

Notwithstanding the foregoing, a Change in Control of the Company shall
not be deemed to occur solely because any person acquires beneficial ownership
of more than 40% of the Company Voting Securities as a result of the
acquisition of Company Voting Securities by the Company which reduces the
number of Company Voting Securities outstanding; (provided, that if
after such acquisition by the Company such person becomes the beneficial owner
of additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control of the Company shall then occur).

 

(e)                                  “Date of
Termination” means (i) subject to Section 9(b), the
effective date on which Executive’s employment by the Company terminates as
specified in a prior written notice by the Company or Executive, as the case
may be, to the other, delivered pursuant to Section 10 or (ii) if
Executive’s employment by the Company (or its Subsidiaries) terminates by
reason of death, the date of death of Executive.

 

(f)                                    “Disability”
means termination of Executive’s employment by the Company due to Executive’s
absence from Executive’s duties with the Company (or its Subsidiaries) on a
full-time basis for at least one hundred eighty (180) days in any consecutive twelve
(12) month period as a result of Executive’s incapacity due to physical or
mental illness.

 

(g)                                 “Good
Reason” means, without Executive’s express written consent, the
occurrence of any of the following events after a Change in Control:

 

(i)                                     any
change in the duties or responsibilities (including reporting responsibilities)
of Executive that is inconsistent in any material and adverse respect with
Executive’s position(s), duties, responsibilities or status with the Company
(or its Subsidiaries) immediately prior to such Change in Control (including
any material and adverse diminution of such duties or responsibilities) or a
material and adverse change in Executive’s titles with the Company (or its
Subsidiaries) as in effect immediately prior to such Change in Control; provided,
that, no change in duties, responsibilities or title shall constitute a Good
Reason event until nine (9) months after a Change in Control (unless such
period is

 

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shortened by the person who is the CEO of the Company immediately prior
to the Change in Control);

 

(ii)                                  a
reduction by the Company (or its Subsidiaries) in Executive’s rate of annual
base salary or annual target bonus opportunity (including any material and
adverse change in the formula for such annual bonus target) as in effect on the
date hereof, or, if greater, immediately prior to such Change in Control or as
the same may be increased from time to time thereafter;

 

(iii)                               any
requirement of the Company (or its Subsidiaries) that Executive (A) be
based anywhere more than fifty (50) miles from the office where Executive is
located as of May 23, 2002 or (B) travel on Company (or its Subsidiaries)
business to an extent substantially greater than the travel obligations of Executive
immediately prior to such Change in Control; provided, that, no increase
in travel shall constitute a Good Reason event until nine (9) months after a
Change in Control (unless such period is shortened by the person who is the CEO
of the Company immediately prior to the Change in Control); or

 

(iv)                              the
failure of the Company to obtain the assumption agreement from any successor as
contemplated in Section 9(b).

 

An isolated, insubstantial and inadvertent action taken in good faith
and which is remedied by the Company within ten (10) days after receipt of
notice thereof given by Executive shall not constitute Good Reason.  Executive’s right to terminate employment
for Good Reason shall not be affected by Executive’s incapacities due to mental
or physical illness and Executive’s continued employment shall not constitute
consent to, or a waiver of rights with respect to, any event or condition
constituting Good Reason.

 

(h)                                 “Qualifying
Termination” means a termination of Executive’s employment (i)
by the Company other than for Cause or (ii) by Executive for Good Reason.  Termination of Executive’s employment on
account of death, Disability or Retirement shall not be treated as a Qualifying
Termination.

 

(i)                                     “Retirement”
means Executive’s mandatory retirement (not including any mandatory early
retirement) in accordance with the Company’s (or its Subsidiary’s) retirement
policy generally applicable to its salaried employees, as in effect immediately
prior to the Change in Control, or in accordance with any retirement
arrangement established with respect to Executive with Executive’s written
consent.

 

(j)                                     “Subsidiary”
means any corporation or other entity in which the Company has a direct or
indirect ownership interest of 50% or more of the total combined voting power
of the then outstanding securities or interests of such corporation or other
entity entitled to vote generally in the election of directors or in which the
Company has the right to receive 50% or more of the distribution of profits or
50% or more of the assets or liquidation or dissolution.

 

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(k)                                  “Termination
Period” means the period of time beginning with a Change in
Control and ending one (1) year following such Change in Control.  Notwithstanding anything in this Agreement
to the contrary, if (i) Executive’s employment is terminated prior to a
Change in Control for reasons that would have constituted a Qualifying
Termination if they had occurred following a Change in Control; (ii) Executive
reasonably demonstrates that such termination (or Good Reason event) was at the
request of a third party who had indicated an intention or taken steps
reasonably calculated to effect a Change in Control; and (iii) a Change in
Control involving such third party (or a party competing with such third party
to effectuate a Change in Control) does occur, then for purposes of this
Agreement, the date immediately prior to the date of such termination of
employment or event constituting Good Reason shall be treated as a Change in
Control.  For purposes of determining
the timing of payments and benefits to Executive under Section 4, the date
of the actual Change in Control shall be treated as Executive’s Date of
Termination under Section 1(e).

 

2.                                       Obligation
of Executive.  In the event of a
tender or exchange offer, proxy contest, or the execution of any agreement
which, if consummated, would constitute a Change in Control, Executive agrees
not to voluntarily leave the employ of the Company, other than as a result of
Disability, Retirement or an event which would constitute Good Reason if a
Change in Control had occurred, until the Change in Control occurs or, if
earlier, such tender or exchange offer, proxy contest, or agreement is
terminated or abandoned.

 

3.                                       Term
of Agreement.  This Agreement shall
be effective on the date hereof and shall continue in effect until the third
anniversary of the date hereof. 
Commencing on the first anniversary of the date hereof and each
anniversary thereafter, this Agreement shall be automatically extended for
additional one year terms unless the Company gives the Executive written notice
of its intention to terminate further automatic extensions and permit this
Agreement to expire at the end of the then current term; provided, however,
that, this Agreement shall in any event continue in effect for a period of one
(1) year after a Change in Control, if such Change in Control shall have
occurred during the term of this Agreement. 
Notwithstanding anything in this Section to the contrary, this Agreement
shall terminate if Executive or the Company terminates Executive’s employment
prior to a Change in Control, except as provided in Section 1(k).

 

4.                                       Payments
Upon Termination of Employment.

 

(a)                                  Qualifying
Termination.  If during the
Termination Period the employment of Executive shall terminate pursuant to a
Qualifying Termination, then the Company shall provide the following
compensation and benefits to Executive:

 

(i)                                     Within
ten (10) days following the Date of Termination, the Company shall pay a
lump-sum cash amount equal to the sum of (A) Executive’s base salary through
the Date of Termination and any bonus amounts which have become payable, to the
extent not theretofore paid or deferred, (B) a pro  rata

 

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portion of Executive’s annual bonus for the fiscal year in which
Executive’s Date of Termination occurs in an amount at least equal to
(1) Executive’s Bonus Amount, multiplied by (2) a fraction, the numerator
of which is the number of days in the fiscal year in which the Date of
Termination occurs through the Date of Termination and the denominator of which
is three hundred sixty-five (365), and reduced by (3) any amounts paid from the
Company’s annual incentive plan for the fiscal year in which Executive’s Date
of Termination occurs and (C) any compensation previously deferred by Executive
other than pursuant to a tax-qualified plan (together with any interest and
earnings thereon) and any accrued vacation pay, in each case to the extent not
theretofore paid;

 

(ii)                                  Within
ten (10) days following the Date of Termination, the Company shall pay a
lump-sum cash amount equal to (A) two (2) times Executive’s highest annual rate
of base salary during the 12-month period immediately prior to Executive’s Date
of Termination, plus (B) two (2) times Executive’s Bonus Amount (provided
that the total amount payable under this Section 4(a)(ii) shall not be
less than $1,500,000);

 

(iii)                               For
a period of twenty-four (24) months following Executive’s Date of Termination,
the Company shall provide Executive (and Executive’s dependents, if applicable)
with the same level of medical, dental, accident, disability and life insurance
benefits upon substantially the same terms and conditions (including
contributions required by Executive for such benefits) as existed immediately
prior to Executive’s Date of Termination (or, if more favorable to Executive,
as such benefits and terms and conditions existed immediately prior to the
Change in Control); provided, that, if Executive cannot continue to
participate in the Company plans providing such benefits, the Company shall
otherwise provide such benefits on the same after-tax basis as if continued
participation had been permitted. 
Notwithstanding the foregoing, in the event Executive becomes reemployed
with another employer and becomes eligible to receive welfare benefits from
such employer, the welfare benefits described herein shall be secondary to such
benefits during the period of Executive’s eligibility, but only to the extent
that the Company reimburses Executive for any increased cost and provides any
additional benefits necessary to give Executive the benefits provided
hereunder;

 

(iv)                              Any
Company share options or share (or other equity-based) awards previously
granted to Executive, whether vested or not, as of the Date of Termination
shall be fully vested as of the Date of Termination, and, notwithstanding any
provision to the contrary in Executive’s share option award agreement, all
unexercised Company share options as of the Date of Termination shall be
exercisable until the one (1) year anniversary of the Date of Termination and
one half of any unexercised Company share options as of the Date of Termination
(without regard to any share options exercised prior to the one (1) year
anniversary of the Date of Termination) shall be exercisable between the one

 

7

 

(1) year and two (2) year anniversary of the Date of Termination, and
the “Right of Recapture” provision in Executive’s share option award agreement
shall no longer be applicable;

 

(v)                                 To
the maximum extent permitted under applicable law, all contributions made by
the Company, for the account of Executive, to any and all tax qualified pension
plans of the Company (including but not limited to the Section 401(k) plan
of the Company) shall immediately vest in full on the Date of Termination.  If such accelerated vesting is not permitted
under applicable law, the Company shall, within ten (10) days following the
Date of Termination, pay to the Executive an additional lump-sum cash amount
equal to the sum of the then unvested portions of all such Company
contributions; plus

 

(vi)                              Outplacement
services with a cost of up to $20,000 for a period of up to twelve (12) months
shall be made available at the expense of the Company through and at the
facilities of a reputable and experienced outplacement services provider
selected by the Company with the approval of the Executive, which approval
shall not be withheld unreasonably.

 

(b)                                 Non-Qualifying
Termination.  If during the
Termination Period the employment of Executive shall terminate other than by
reason of a Qualifying Termination, then the Company shall pay to Executive
within thirty (30) days following the Date of Termination, a lump-sum cash
amount equal to the sum of (i) Executive’s base salary through the Date of
Termination and any bonus amounts which have become payable, to the extent not
theretofore paid or deferred, and (ii) any compensation previously deferred
by Executive other than pursuant to a tax-qualified plan (together with any
interest and earnings thereon) and any accrued vacation pay, in each case to
the extent not theretofore paid.  The
Company may make such additional payments, and provide such additional benefits,
to Executive as the Company and Executive may agree in writing.

 

(c)                                  Condition.  The Company shall not be required to make
the payments and provide the benefits specified in Section 4(a) unless
Executive executes and delivers to the Company an agreement releasing the
Company, its affiliates and its officers, directors and employees from all
claims and liabilities Executive may have (other than for the payments,
benefits and enforcement of rights provided under this Agreement).

 

5.                                       Section 280G.

 

(a)                                  Gross-Up.  Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment, award,
benefit or distribution (including any acceleration) by the Company (or any of
its affiliates) or any entity which effectuates a Change in Control (or any of
its affiliates) to or for the benefit of the Executive (whether pursuant to the
terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 5) (a

 

8

 

“Payment”) would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”),
or any interest or penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the “Excise Tax”), then the
Executive shall be entitled to receive an additional payment (a “Gross-Up
Payment”) in an amount such that after payment by the Executive
of all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.

 

(b)                                 Determination.  All determinations required to be made under
this Section 5, including whether and when a Gross-Up Payment is required,
the amount of such Gross-Up Payment, the amount of any Option Redetermination
(as defined below) and the assumptions to be utilized in arriving at such
determination, shall be made by the Company’s independent auditors or such
other certified public accounting firm of national standing reasonably
acceptable to the Executive as may be designated by the Company (the “Accounting
Firm”) which shall provide detailed supporting calculations both
to the Company and the Executive within fifteen (15) business days of the
receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. 
Notwithstanding the foregoing, in the event (i) the Board shall
determine prior to the Change in Control that the Accounting Firm is precluded
from performing such services under applicable auditor independence rules, (ii)
the Audit Committee of the Board determines that it does not want the
Accounting Firm to perform such services because of auditor independence
concerns or (iii) the Accounting Firm is serving as accountant or auditor for
the person(s) effecting the Change in Control, the Board shall appoint another
nationally recognized public accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder).  All fees
and expenses of the Accounting Firm shall be borne solely by the Company.  Any
Gross-Up Payment, as determined pursuant to this Section 5, shall be paid
by the Company to the Executive within ten (10) days of the later of (i) the
due date for the payment of any Excise Tax and (ii) the receipt of the
Accounting Firm’s determination.  If
the Accounting Firm determines that no Excise Tax is payable by the Executive,
it shall furnish the Executive with a written opinion to such effect, and to
the effect that failure to report the Excise Tax, if any, on the Executive’s
applicable federal income tax return will not result in the imposition of a
negligence or similar penalty.  Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive.  As a result of the
uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made (“Underpayment”)
or Gross-Up Payments are made by the Company which should not have been made (“Overpayment”),
consistent with the calculations required to be made hereunder.  In the event the Executive is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid

 

9

 

by the Company to or for the benefit of the Executive.  In the event the amount of Gross-Up Payment
exceeds the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been
made and any such Overpayment shall be promptly paid by the Executive to or for
the benefit of the Company.  The
Executive shall cooperate, to the extent his expenses are reimbursed by the
Company, with any reasonable requests by the Company in connection with any
contests or disputes with the Internal Revenue Service in connection with the
Excise Tax.

 

(c)                                  Option
Redetermination.  In the event that
the Company determines that the value of any accelerated vesting of share
options held by the Executive shall be redetermined within the context of
Treasury Regulation §1.280G-1 Q/A 33 (the “Option Redetermination”), the Executive
shall (i) file with the Internal Revenue Service an amended federal income tax
return that claims a refund of the overpayment of the Excise Tax attributable
to such Option Redetermination and (ii) promptly pay the refundable Excise Tax
to the Company.

 

6.                                       Withholding
Taxes.  The Company may withhold
from all payments due to Executive (or his beneficiary or estate) hereunder all
taxes which, by applicable federal, state, local or other law, the Company is
required to withhold therefrom.

 

7.                                       Reimbursement
of Expenses.  If any contest or
dispute shall arise under this Agreement involving termination of Executive’s
employment with the Company or involving the failure or refusal of the Company
to perform fully in accordance with the terms hereof and a final and
non-appealable order is entered which finds in part or in full for Executive,
the Company shall reimburse Executive for all reasonable legal fees and
expenses, if any, incurred by Executive in connection with such contest or
dispute, together with interest in an amount equal to the applicable federal
rate.

 

8.                                       Scope
of Agreement.  Nothing in this
Agreement shall be deemed to entitle Executive to continued employment with the
Company or its Subsidiaries, and, except as provided in Section 1(k), if
Executive’s employment with the Company shall terminate prior to a Change in
Control, Executive shall have no further rights under this Agreement; provided,
however, that any termination of Executive’s employment during the
Termination Period shall be subject to all of the provisions of this Agreement.

 

9.                                       Successors;
Binding Agreement.

 

(a)                                  This
Agreement shall not be terminated by any Business Combination.  In the event of any Business Combination,
the provisions of this Agreement shall be binding upon the Surviving
Corporation (and the Parent Corporation, if any), and such Surviving
Corporation (and the Parent Corporation, if any) shall be treated as the
Company hereunder.

 

10

 

(b)                                 The
Company agrees that in connection with any Business Combination, it will cause
any successor entity to the Company unconditionally to assume, by written instrument
delivered to Executive (or his beneficiary or estate), all of the obligations
of the Company hereunder.  Failure of
the Company to obtain such assumption prior to the effectiveness of any such
Business Combination that constitutes a Change in Control, shall be a breach of
this Agreement and shall constitute Good Reason hereunder and shall entitle
Executive to compensation and other benefits from the Company in the same
amount and on the same terms as Executive would be entitled hereunder if Executive’s
employment were terminated following a Change in Control by reason of a
Qualifying Termination.  For purposes of
implementing the foregoing, the date on which any such Business Combination
becomes effective shall be deemed the date Good Reason occurs, and shall be the
Date of Termination if requested by Executive.

 

(c)                                  This
Agreement shall inure to the benefit of and be enforceable by Executive’s
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. 
If Executive shall die while any amounts would be payable to Executive
hereunder had Executive continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement
to such person or persons appointed in writing by Executive to receive such
amounts or, if no person is so appointed, to Executive’s estate.

 

10.                                 Notice.  (a) 
For purposes of this Agreement, all notices and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or by reputable commercial delivery
service or five (5) days after deposit in the United States mail, certified and
return receipt requested, postage prepaid, addressed as follows:

 

If to the Executive:

 

 

If to the Company:

 

100 South Wacker Drive

Chicago, Illinois 60606

Attention: 
General Counsel

 

or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.

 

(b)                                 Subject
to Section 9(b), a written notice of Executive’s Date of Termination by
the Company or Executive, as the case may be, to the other, shall (i) indicate
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, set forth in reasonable detail the facts and circumstances
claimed to provide a

 

11

 

basis for termination of Executive’s employment under the provision so
indicated and (iii) specify the termination date (which date shall be not less
than fifteen (15) (thirty (30), if termination is by the Company for
Disability) nor more than sixty (60) days after the giving of such notice).  The failure by Executive or the Company to
set forth in such notice any fact or circumstance which contributes to a
showing of Good Reason or Cause shall not waive any right of Executive or the
Company hereunder or preclude Executive or the Company from asserting such fact
or circumstance in enforcing Executive’s or the Company’s rights hereunder.

 

11.                                 Full
Settlement; Resolution of Disputes. 
(a)  The Company’s obligation to
make any payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall be in lieu and in full settlement of all other
severance payments to Executive under any other severance or employment
agreement between Executive and the Company (or its Subsidiaries), and any
severance plan of the Company (or its subsidiaries).  The Company’s obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action
which the Company may have against Executive or others.  In no event shall Executive be obligated to
seek other employment or take other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this Agreement and, except
as provided in Section 4(b), such amounts shall not be reduced whether or
not Executive obtains other employment.

 

(b)                                 Except
to the extent required by applicable rules and regulations of any
self-regulatory organization of which the Company or Archipelago, L.L.C., an
affiliate of the Company, is a member, any controversy or claim between the
Executive and the Company arising out of or relating to or concerning this
Agreement will be finally settled by arbitration in Chicago, Illinois
administered by the American Arbitration Association (the “AAA”) under its
Commercial Arbitration Rules then in effect. 
However, the AAA’s Commercial Arbitration Rules will be modified in the
following ways:  (i) each arbitrator will agree to treat as
confidential evidence and other information presented to them, (ii) there
will be no authority to award punitive damages (and the Executive and the
Company agree not to request any such award) and (iii) a decision must be
rendered within 10 business days of the parties’ closing statements or
submission of post-hearing briefs.

 

12.                                 Employment
with Subsidiaries.  Employment with
the Company for purposes of this Agreement shall include employment with any
Subsidiary.

 

13.                                 Survival.  The respective obligations and benefits
afforded to the Company and Executive as provided in Sections 4 (to the
extent that payments or benefits are owed as a result of a termination of
employment that occurs during the term of this Agreement), 5 (to the extent
that Payments are made to Executive as a result of a Change in Control that
occurs during the term of this Agreement), 6, 7, 9(c) and 11 shall survive
the termination of this Agreement.

 

12

 

14.                                 GOVERNING
LAW; VALIDITY.  THE INTERPRETATION,
CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
ILLINOIS  WITHOUT
REGARD TO THE PRINCIPLE OF CONFLICTS OF LAWS. 
THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT
SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS
AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN FULL FORCE AND EFFECT.

 

15.                                 Covenants Not to Solicit Company
Clients and Employees; Confidential Information.

 

(a)                                  Non-Solicit. 
During the term of this Agreement, and for a one year period after the
Date of Termination by the Company or the Executive for any reason, the
Executive shall not, in any manner, directly or indirectly, (i) solicit any
client or prospective client of the Company or its affiliates to whom the
Executive provided services, or for whom the Executive transacted business, or
whose identity became known to the Executive in connection with the Executive’s
employment with the Company or its affiliates to transact business with a
competing business or reduce or refrain from doing any business with the
Company or its affiliates, (ii) interfere with or damage (or attempt to
interfere with or damage) any relationship between the Company or its
affiliates and any such client or prospective client, or (iii) solicit or hire
any person who at such time is, or who within the past six months was, an
employee of the Company or its affiliates to apply for or accept employment
with any competing business.  The term
“solicit” as used in this Agreement means any communication of any kind
whatsoever, regardless of by whom initiated, inviting, encouraging or
requesting any person or entity to take or refrain from taking any action.

 

(b)                                 Confidential Information. 
The Executive hereby acknowledges that, as an employee of the Company,
he will be making use of, acquiring and adding to confidential information of a
special and unique nature and value relating to the Company and its strategic
plan and financial operations.  The
Executive further recognizes and acknowledges that all confidential information
is the exclusive property of the Company, is material and confidential, and is
critical to the successful conduct of the business of the Company.  Accordingly, the Executive hereby covenants
and agrees that he will use confidential information for the benefit of the
Company only and shall not at any time, directly or indirectly, during the term
of this Agreement and thereafter divulge, reveal or communicate any
confidential information to any person, firm, corporation or entity whatsoever,
or use any confidential information for his own benefit or for the benefit of
others.

 

(c)                                  Survival. 
Any termination of the Executive’s employment or of this Agreement shall
have no effect on the continuing operation of this Section 15.

 

13

 

(d)                                 Blue Pencil. 
The terms and provisions of this Section 15 are intended to be
separate and divisible provisions and if, for any reason, any one or more of
them is held to be invalid or unenforceable, neither the validity nor the
enforceability of any other provision of this Agreement shall thereby be
affected.  The parties hereto
acknowledge that the potential restrictions on the Executive’s future
employment imposed by this Section 15 are reasonable in both duration and
geographic scope and in all other respects. 
If for any reason any court of competent jurisdiction shall find any
provisions of this Section 15 unreasonable in duration or geographic scope
or otherwise, the Executive and the Company agree that the restrictions and
prohibitions contained herein shall be effective to the fullest extent allowed
under applicable law in such jurisdiction.

 

(e)                                  Consideration. 
The parties acknowledge that this Agreement would not have been entered
into and the benefits described in Sections 4, 5 or 7 would not have been
promised in the absence of the Executive’s promises under this Section 15.

 

16.                                 Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.

 

17.                                 Miscellaneous.  No provision of this Agreement may be
modified or waived unless such modification or waiver is agreed to in writing
and signed by Executive and by a duly authorized officer of the Company.  No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. 
Failure by Executive or the Company to insist upon strict compliance
with any provision of this Agreement or to assert any right Executive or the
Company may have hereunder, including without limitation, the right of
Executive to terminate employment for Good Reason, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.  Except as otherwise
specifically provided herein, the rights of, and benefits payable to,
Executive, his estate or his beneficiaries pursuant to this Agreement are in
addition to any rights of, or benefits payable to, Executive, his estate or his
beneficiaries under any other employee benefit plan or compensation program of
the Company.

 

14

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized officer of the Company and Executive has executed
this Agreement as of the day and year first above written.

 

	
   

  	
  ARCHIPELAGO HOLDINGS, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/GERALD D. PUTNAM

  
	
   

  	
  Name:  Gerald D. Putnam

  
	
   

  	
  Title:    Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
  /s/STEVEN C. RUBINOW

  
	
   

  	
  Steven C. Rubinow

  

 

15Exhibit 10.38

 

EXECUTION COPY

 

 

CHANGE IN CONTROL SEVERANCE AGREEMENT

 

THIS AGREEMENT is entered into as of the 15th day of June, 2004, by and
between Archipelago Holdings, L.L.C., a Delaware limited liability company, and
its successors (the “Company”), and Joseph Lombard (“Executive”).

 

W I T N E S S E T H

 

WHEREAS, the Company considers the establishment and maintenance of a
sound and vital management to be essential to protecting and enhancing the best
interests of the Company and its members; and

 

WHEREAS, the Company recognizes that the possibility of a change in
control may arise and that such possibility may result in the departure or
distraction of management personnel to the detriment of the Company and its
members; and

 

WHEREAS, the Board (as defined in Section 1) has determined that
it is in the best interests of the Company and its members to secure
Executive’s continued services and to ensure Executive’s continued dedication
to his duties in the event of any threat or occurrence of a Change in Control
(as defined in Section 1) of the Company; and

 

WHEREAS, the Board has authorized the Company to enter into this
Agreement.

 

NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Executive hereby
agree as follows:

 

1.                                       Definitions.  As used in this Agreement, the following
terms shall have the respective meanings set forth below:

 

(a)                                  “Board”
means the Board of Managers of the Company (or the Board of Directors of the
Company in the event the Company becomes, or any successor to the Company is or
becomes, a corporation).

 

(b)                                 “Bonus
Amount” means the Executive’s actual annual incentive bonus paid
or payable by the Company (or its Subsidiaries) for the year immediately prior
to the year in which the Change in Control occurs.

 

(c)                                  “Cause”
means (i) the willful failure by the Executive to substantially perform
the Executive’s responsibilities, after demand for substantial performance has
been given by the Board that specifically identifies how the Executive has not
performed such responsibilities; (ii) the willful engaging by the
Executive in

 

 

illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company; (iii) the conviction of a felony or
a guilty or nolo contendere plea by the Executive with respect thereto;
(iv) the willful engaging by the Executive in fraud in connection with the
business of the Company or misappropriation of the Company’s funds or property;
or (v) the willful engaging by the Executive in any conduct which
constitutes an employment disqualification under applicable law (including
statutory disqualification as defined under the Securities Exchange Act of
1934, as amended (the “Exchange Act”)).  For purpose of this paragraph (c), no
act or failure to act by Executive shall be considered “willful” unless done or
omitted to be done by Executive in bad faith and without reasonable belief that
Executive’s action or omission was in the best interests of the Company or its
affiliates.  Any act, or failure to act,
based upon authority given pursuant to a resolution duly adopted by the Board,
based upon the advice of counsel for the Company or upon the instructions of
the Company’s chief executive officer shall be conclusively presumed to be
done, or omitted to be done, by Executive in good faith and in the best
interests of the Company.

 

(d)                                 “Change in
Control” means the occurrence of any one of the following
events:

 

(i)                                     individuals
who, on the day after the consummation of the initial public offering of the
Company’s shares of stock (the “IPO Date”), constituted the Board (the
“Incumbent
Directors”) cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a manager or
director of the Board subsequent to the IPO Date (A) whose election or
nomination for election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named as a
nominee for manager or director, without written objection to such nomination)
shall be an Incumbent Director or (B) who was appointed, designated or elected
pursuant to the terms of the Ninth Amended and Restated Limited Liability Company
Agreement of the Company, as the same may be amended or supplemented from time
to time (the “LLC Agreement”) shall be an Incumbent Director; provided, however,
that with respect to clause (A) no individual initially elected or nominated as
a manager or director of the Board as a result of an actual or threatened
election contest with respect to managers or directors or as a result of any
other actual or threatened solicitation of proxies or consents by or on behalf
of any person other than the Board shall be deemed to be an Incumbent Director;
and, provided, further that if the IPO Date has not occurred by
December 31, 2004, then for purposes of this Section 1(d), the “IPO
Date” shall mean the date hereof;

 

(ii)                                  any
“person” (as such term is defined in Section 3(a)(9) of the Exchange Act
and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or
becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 40% or
more of the combined voting power of the Company’s then outstanding securities

 

2

 

eligible to vote for the election of managers or directors of, or
possessing the right to appoint or designate 40% or more of the managers or
directors to, the Board (the “Company Voting Securities”); provided,
however, that the event described in this paragraph (ii) shall not
be deemed to be a Change in Control by virtue of any of the following
acquisitions:  (A) by the Company or any Subsidiary, (B) by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any Subsidiary, (C) by any underwriter temporarily holding securities
pursuant to an offering of such securities, (D) pursuant to a
Non-Qualifying Transaction (as defined in paragraph (iii)), or
(E) pursuant to any acquisition by Executive or any group of persons
including Executive (or any entity controlled by Executive or any group of
persons including Executive); and, provided, further, that a
person shall not be deemed a beneficial owner of 40% of such combined voting
power solely by reason of the ability, together with other members of the
Company,  to appoint, designate or elect
managers to the Board pursuant to the terms of the LLC Agreement;

 

(iii)                               the
consummation of a merger, consolidation, statutory share exchange, sale of all
or substantially all of the Company’s assets or similar form of transaction
(including a transaction whereby another business is acquired by the Company by
way of a contribution to the Company) involving the Company or any of its
Subsidiaries that requires the approval of the Company’s members or
stockholders, whether for such transaction or the issuance of securities in the
transaction (a “Business Combination”), unless
immediately following such Business Combination:  (A) at least 55% of the total voting power of (x) the
entity resulting from such Business Combination (the “Surviving Corporation”),
or (y) if applicable, the ultimate parent entity that directly or
indirectly has beneficial ownership of at least 95% of the voting securities
eligible to elect managers or directors of the Surviving Corporation (the “Parent
Corporation”), is represented by Company Voting Securities that
were outstanding immediately prior to such Business Combination (or, if
applicable, is represented by shares into which such Company Voting Securities
were converted pursuant to such Business Combination), and such voting power
among the holders thereof is in substantially the same proportion as the voting
power of such Company Voting Securities among the holders thereof immediately
prior to the Business Combination, (B) no person (other than any employee
benefit plan (or related trust) sponsored or maintained by the Surviving
Corporation or the Parent Corporation), is or becomes the beneficial owner,
directly or indirectly, of 40% or more of the total voting power of the
outstanding voting securities eligible to elect persons to the board of
managers or board of directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation) and (C) at least a majority
of the members of the board of managers or board of directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation)
following the consummation of the Business Combination were Incumbent Directors
at the time of the Board’s approval of the execution of the initial agreement
providing for such Business Combination (any Business 

 

3

 

Combination which satisfies all of the criteria specified in (A), (B)
and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or

 

(iv)                              the
sale by the Company of 80% or more of membership interests in Wave Securities,
L.L.C. or the sale by Wave Securities, L.L.C. of 80% or more of its assets, in
either case, to an independent third party which is unrelated to the Company.

 

Notwithstanding the foregoing, a Change in Control of the Company shall
not be deemed to occur solely because any person acquires beneficial ownership
of more than 40% of the Company Voting Securities as a result of the
acquisition of Company Voting Securities by the Company which reduces the
number of Company Voting Securities outstanding; (provided, that if
after such acquisition by the Company such person becomes the beneficial owner
of additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control of the Company shall then occur).

 

(e)                                  “Date of
Termination” means (i) subject to Section 9(b), the
effective date on which Executive’s employment by the Company terminates as
specified in a prior written notice by the Company or Executive, as the case
may be, to the other, delivered pursuant to Section 10 or (ii) if
Executive’s employment by the Company (or its Subsidiaries) terminates by
reason of death, the date of death of Executive.

 

(f)                                    “Disability”
means termination of Executive’s employment by the Company due to Executive’s
absence from Executive’s duties with the Company (or its Subsidiaries) on a
full-time basis for at least one hundred eighty (180) days in any consecutive
twelve (12) month period as a result of Executive’s incapacity due to physical
or mental illness.

 

(g)                                 “Good
Reason” means, without Executive’s express written consent, the
occurrence of any of the following events after a Change in Control:

 

(i)                                     any
change in the duties or responsibilities (including reporting responsibilities)
of Executive that is inconsistent in any material and adverse respect with
Executive’s position(s), duties, responsibilities or status with the Company
(or its Subsidiaries) immediately prior to such Change in Control (including
any material and adverse diminution of such duties or responsibilities) or a
material and adverse change in Executive’s titles with the Company (or its
Subsidiaries) as in effect immediately prior to such Change in Control; provided,
that, no change in duties, responsibilities or title shall constitute a Good
Reason event until nine (9) months after a Change in Control (unless such
period is shortened by the person who is the CEO of the Company immediately
prior to the Change in Control);

 

(ii)                                  a
reduction by the Company (or its Subsidiaries) in Executive’s rate of annual
base salary or annual target bonus opportunity (including any

 

4

 

material and adverse change in the formula for such annual bonus
target) as in effect on the date hereof, or, if greater, immediately prior to
such Change in Control or as the same may be increased from time to time
thereafter;

 

(iii)                               any
requirement of the Company (or its Subsidiaries) that Executive (A) be
based anywhere more than fifty (50) miles from the office where Executive is
located as of April 1, 2004 or (B) travel on Company (or its
Subsidiaries) business to an extent substantially greater than the travel
obligations of Executive immediately prior to such Change in Control; provided,
that, no increase in travel shall constitute a Good Reason event until nine (9)
months after a Change in Control (unless such period is shortened by the person
who is the CEO of the Company immediately prior to the Change in Control); or

 

(iv)                              the
failure of the Company to obtain the assumption agreement from any successor as
contemplated in Section 9(b).

 

An isolated, insubstantial and inadvertent action taken in good faith
and which is remedied by the Company within ten (10) days after receipt of
notice thereof given by Executive shall not constitute Good Reason.  Executive’s right to terminate employment
for Good Reason shall not be affected by Executive’s incapacities due to mental
or physical illness and Executive’s continued employment shall not constitute
consent to, or a waiver of rights with respect to, any event or condition
constituting Good Reason.

 

(h)                                 “Qualifying
Termination” means a termination of Executive’s employment (i)
by the Company other than for Cause or (ii) by Executive for Good Reason.  Termination of Executive’s employment on
account of death, Disability or Retirement shall not be treated as a Qualifying
Termination.

 

(i)                                     “Retirement”
means Executive’s mandatory retirement (not including any mandatory early
retirement) in accordance with the Company’s (or its Subsidiary’s) retirement
policy generally applicable to its salaried employees, as in effect immediately
prior to the Change in Control, or in accordance with any retirement
arrangement established with respect to Executive with Executive’s written
consent.

 

(j)                                     “Subsidiary”
means any corporation or other entity in which the Company has a direct or
indirect ownership interest of 50% or more of the total combined voting power
of the then outstanding securities or interests of such corporation or other
entity entitled to vote generally in the election of directors or in which the
Company has the right to receive 50% or more of the distribution of profits or
50% or more of the assets or liquidation or dissolution.

 

(k)                                  “Termination
Period” means the period of time beginning with a Change in
Control and ending one (1) year following such Change in Control.  Notwithstanding anything in this Agreement
to the contrary, if (i) Executive’s employment is terminated prior to a
Change in Control for reasons that would have

 

5

 

constituted a Qualifying Termination if they had occurred following a
Change in Control; (ii) Executive reasonably demonstrates that such
termination (or Good Reason event) was at the request of a third party who had
indicated an intention or taken steps reasonably calculated to effect a Change
in Control; and (iii) a Change in Control involving such third party (or a
party competing with such third party to effectuate a Change in Control) does
occur, then for purposes of this Agreement, the date immediately prior to the
date of such termination of employment or event constituting Good Reason shall
be treated as a Change in Control.  For
purposes of determining the timing of payments and benefits to Executive under
Section 4, the date of the actual Change in Control shall be treated as
Executive’s Date of Termination under Section 1(e).

 

2.                                       Obligation
of Executive.  In the event of a
tender or exchange offer, proxy contest, or the execution of any agreement
which, if consummated, would constitute a Change in Control, Executive agrees
not to voluntarily leave the employ of the Company, other than as a result of
Disability, Retirement or an event which would constitute Good Reason if a
Change in Control had occurred, until the Change in Control occurs or, if
earlier, such tender or exchange offer, proxy contest, or agreement is
terminated or abandoned.

 

3.                                       Term
of Agreement.  This Agreement shall
be effective on the date hereof and shall continue in effect until the third
anniversary of the date hereof. 
Commencing on the first anniversary of the date hereof and each
anniversary thereafter, this Agreement shall be automatically extended for
additional one year terms unless the Company gives the Executive written notice
of its intention to terminate further automatic extensions and permit this
Agreement to expire at the end of the then current term; provided, however,
that, this Agreement shall in any event continue in effect for a period of one
(1) year after a Change in Control, if such Change in Control shall have
occurred during the term of this Agreement. 
Notwithstanding anything in this Section to the contrary, this
Agreement shall terminate if Executive or the Company terminates Executive’s employment
prior to a Change in Control, except as provided in Section 1(k).

 

4.                                       Payments
Upon Termination of Employment.

 

(a)                                  Qualifying
Termination.  If during the
Termination Period the employment of Executive shall terminate pursuant to a
Qualifying Termination, then the Company shall provide the following
compensation and benefits to Executive:

 

(i)                                     Within
ten (10) days following the Date of Termination, the Company shall pay a
lump-sum cash amount equal to the sum of (A) Executive’s base salary through
the Date of Termination and any bonus amounts which have become payable, to the
extent not theretofore paid or deferred, (B) a pro  rata portion
of Executive’s annual bonus for the fiscal year in which Executive’s Date of
Termination occurs in an amount at least equal to (1) Executive’s Bonus
Amount, multiplied by (2) a fraction, the numerator of which is the number of
days in the fiscal year in which the Date of Termination occurs through the
Date

 

6

 

of Termination and the denominator of which is three hundred sixty-five
(365), and reduced by (3) any amounts paid from the Company’s annual incentive
plan for the fiscal year in which Executive’s Date of Termination occurs and
(C) any compensation previously deferred by Executive other than pursuant to a
tax-qualified plan (together with any interest and earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid;

 

(ii)                                  Within
ten (10) days following the Date of Termination, the Company shall pay a
lump-sum cash amount equal to (A) two (2) times Executive’s highest annual rate
of base salary during the 12-month period immediately prior to Executive’s Date
of Termination, plus (B) two (2) times Executive’s Bonus Amount (provided
that the total amount payable under this Section 4(a)(ii) shall not be
less than $1,200,000);

 

(iii)                               For
a period of twenty-four (24) months following Executive’s Date of Termination,
the Company shall provide Executive (and Executive’s dependents, if applicable)
with the same level of medical, dental, accident, disability and life insurance
benefits upon substantially the same terms and conditions (including
contributions required by Executive for such benefits) as existed immediately
prior to Executive’s Date of Termination (or, if more favorable to Executive,
as such benefits and terms and conditions existed immediately prior to the
Change in Control); provided, that, if Executive cannot continue to
participate in the Company plans providing such benefits, the Company shall
otherwise provide such benefits on the same after-tax basis as if continued
participation had been permitted. 
Notwithstanding the foregoing, in the event Executive becomes reemployed
with another employer and becomes eligible to receive welfare benefits from
such employer, the welfare benefits described herein shall be secondary to such
benefits during the period of Executive’s eligibility, but only to the extent
that the Company reimburses Executive for any increased cost and provides any
additional benefits necessary to give Executive the benefits provided
hereunder;

 

(iv)                              Any
Company share options or share (or other equity-based) awards previously
granted to Executive, whether vested or not, as of the Date of Termination
shall be fully vested as of the Date of Termination, and, notwithstanding any
provision to the contrary in Executive’s share option award agreement, all
unexercised Company share options as of the Date of Termination shall be
exercisable until the one (1) year anniversary of the Date of Termination and
one half of any unexercised Company share options as of the Date of Termination
(without regard to any share options exercised prior to the one (1) year
anniversary of the Date of Termination) shall be exercisable between the one
(1) year and two (2) year anniversary of the Date of Termination, and the
“Right of Recapture” provision in the Executive’s share option award agreement
shall no longer be applicable;

 

7

 

(v)                                 To
the maximum extent permitted under applicable law, all contributions made by
the Company, for the account of Executive, to any and all tax qualified pension
plans of the Company (including but not limited to the Section 401(k) plan
of the Company) shall immediately vest in full on the Date of Termination.  If such accelerated vesting is not permitted
under applicable law, the Company shall, within ten (10) days following the
Date of Termination, pay to the Executive an additional lump-sum cash amount
equal to the sum of the then unvested portions of all such Company
contributions; plus

 

(vi)                              Outplacement
services with a cost of up to $20,000 for a period of up to twelve (12) months
shall be made available at the expense of the Company through and at the facilities
of a reputable and experienced outplacement services provider selected by the
Company with the approval of the Executive, which approval shall not be
withheld unreasonably.

 

(b)                                 Non-Qualifying
Termination.  If during the
Termination Period the employment of Executive shall terminate other than by
reason of a Qualifying Termination, then the Company shall pay to Executive
within thirty (30) days following the Date of Termination, a lump-sum cash
amount equal to the sum of (i) Executive’s base salary through the Date of
Termination and any bonus amounts which have become payable, to the extent not
theretofore paid or deferred, and (ii) any compensation previously
deferred by Executive other than pursuant to a tax-qualified plan (together
with any interest and earnings thereon) and any accrued vacation pay, in each
case to the extent not theretofore paid. 
The Company may make such additional payments, and provide such
additional benefits, to Executive as the Company and Executive may agree in
writing.

 

(c)                                  Condition.  The Company shall not be required to make
the payments and provide the benefits specified in Section 4(a) unless
Executive executes and delivers to the Company an agreement releasing the
Company, its affiliates and its officers, directors and employees from all
claims and liabilities Executive may have (other than for the payments,
benefits and enforcement of rights provided under this Agreement).

 

5.                                       Section 280G.

 

(a)                                  Gross-Up.  Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment, award,
benefit or distribution (including any acceleration) by the Company (or any of
its affiliates) or any entity which effectuates a Change in Control (or any of
its affiliates) to or for the benefit of the Executive (whether pursuant to the
terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 5) (a “Payment”)
would be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the “Code”), or any interest or penalties
are incurred by the Executive with respect to such excise tax (such excise tax,
together with

 

8

 

any such interest and penalties, are hereinafter collectively referred
to as the “Excise Tax”), then the Executive shall be entitled to
receive an additional payment (a “Gross-Up Payment”) in an amount such
that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.

 

(b)                                 Determination.  All determinations required to be made under
this Section 5, including whether and when a Gross-Up Payment is required,
the amount of such Gross-Up Payment, the amount of any Option Redetermination
(as defined below) and the assumptions to be utilized in arriving at such
determination, shall be made by the Company’s independent auditors or such
other certified public accounting firm of national standing reasonably
acceptable to the Executive as may be designated by the Company (the “Accounting
Firm”) which shall provide detailed supporting calculations both
to the Company and the Executive within fifteen (15) business days of the
receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. 
Notwithstanding the foregoing, in the event (i) the Board shall
determine prior to the Change in Control that the Accounting Firm is precluded
from performing such services under applicable auditor independence rules, (ii)
the Audit Committee of the Board determines that it does not want the
Accounting Firm to perform such services because of auditor independence
concerns or (iii) the Accounting Firm is serving as accountant or auditor for
the person(s) effecting the Change in Control, the Board shall appoint another
nationally recognized public accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder).  All fees
and expenses of the Accounting Firm shall be borne solely by the Company.  Any
Gross-Up Payment, as determined pursuant to this Section 5, shall be paid
by the Company to the Executive within ten (10) days of the later of (i) the
due date for the payment of any Excise Tax and (ii) the receipt of the
Accounting Firm’s determination.  If
the Accounting Firm determines that no Excise Tax is payable by the Executive,
it shall furnish the Executive with a written opinion to such effect, and to
the effect that failure to report the Excise Tax, if any, on the Executive’s
applicable federal income tax return will not result in the imposition of a
negligence or similar penalty.  Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive.  As a result of the
uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made (“Underpayment”)
or Gross-Up Payments are made by the Company which should not have been made (“Overpayment”),
consistent with the calculations required to be made hereunder.  In the event the Executive is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Executive.  In the event the amount of Gross-Up Payment
exceeds the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been

 

9

 

made and any such Overpayment shall be promptly paid by the Executive
to or for the benefit of the Company. 
The Executive shall cooperate, to the extent his expenses are reimbursed
by the Company, with any reasonable requests by the Company in connection with
any contests or disputes with the Internal Revenue Service in connection with
the Excise Tax.

 

(c)                                  Option
Redetermination.  In the event that
the Company determines that the value of any accelerated vesting of share
options held by the Executive shall be redetermined within the context of
Treasury Regulation §1.280G-1 Q/A 33 (the “Option Redetermination”), the Executive
shall (i) file with the Internal Revenue Service an amended federal income tax
return that claims a refund of the overpayment of the Excise Tax attributable
to such Option Redetermination and (ii) promptly pay the refundable Excise Tax
to the Company.

 

6.                                       Withholding
Taxes.  The Company may withhold
from all payments due to Executive (or his beneficiary or estate) hereunder all
taxes which, by applicable federal, state, local or other law, the Company is
required to withhold therefrom.

 

7.                                       Reimbursement
of Expenses.  If any contest or
dispute shall arise under this Agreement involving termination of Executive’s
employment with the Company or involving the failure or refusal of the Company
to perform fully in accordance with the terms hereof and a final and
non-appealable order is entered which finds in part or in full for Executive,
the Company shall reimburse Executive for all reasonable legal fees and
expenses, if any, incurred by Executive in connection with such contest or
dispute, together with interest in an amount equal to the applicable federal
rate.

 

8.                                       Scope
of Agreement.  Nothing in this
Agreement shall be deemed to entitle Executive to continued employment with the
Company or its Subsidiaries, and, except as provided in Section 1(k), if
Executive’s employment with the Company shall terminate prior to a Change in
Control, Executive shall have no further rights under this Agreement; provided,
however, that any termination of Executive’s employment during the
Termination Period shall be subject to all of the provisions of this Agreement.

 

9.                                       Successors;
Binding Agreement.

 

(a)                                  This
Agreement shall not be terminated by any Business Combination.  In the event of any Business Combination,
the provisions of this Agreement shall be binding upon the Surviving
Corporation (and the Parent Corporation, if any), and such Surviving
Corporation (and the Parent Corporation, if any) shall be treated as the
Company hereunder.

 

(b)                                 The
Company agrees that in connection with any Business Combination, it will cause
any successor entity to the Company unconditionally to assume, by written
instrument delivered to Executive (or his beneficiary or estate), all of the
obligations of the Company hereunder. 
Failure of the Company to obtain such

 

10

 

assumption prior to the effectiveness of any such Business Combination
that constitutes a Change in Control, shall be a breach of this Agreement and
shall constitute Good Reason hereunder and shall entitle Executive to
compensation and other benefits from the Company in the same amount and on the
same terms as Executive would be entitled hereunder if Executive’s employment
were terminated following a Change in Control by reason of a Qualifying
Termination.  For purposes of
implementing the foregoing, the date on which any such Business Combination
becomes effective shall be deemed the date Good Reason occurs, and shall be the
Date of Termination if requested by Executive.

 

(c)                                  This
Agreement shall inure to the benefit of and be enforceable by Executive’s
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. 
If Executive shall die while any amounts would be payable to Executive
hereunder had Executive continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement
to such person or persons appointed in writing by Executive to receive such
amounts or, if no person is so appointed, to Executive’s estate.

 

10.                                 Notice.  (a) 
For purposes of this Agreement, all notices and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or by reputable commercial delivery
service or five (5) days after deposit in the United States mail, certified and
return receipt requested, postage prepaid, addressed as follows:

 

If to the Executive:

 

 

If to the Company:

 

100 South Wacker Drive

Chicago, Illinois 60606

Attention: 
General Counsel

 

or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.

 

(b)                                 Subject
to Section 9(b), a written notice of Executive’s Date of Termination by
the Company or Executive, as the case may be, to the other, shall (i) indicate
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive’s employment under the
provision so indicated and (iii) specify the termination date (which date shall
be not less than fifteen (15) (thirty (30), if termination is by the Company
for Disability) nor more than sixty (60) days after the giving of such
notice).  The failure by Executive or
the Company to set forth in such

 

11

 

notice any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of Executive or the Company hereunder
or preclude Executive or the Company from asserting such fact or circumstance
in enforcing Executive’s or the Company’s rights hereunder.

 

11.                                 Full
Settlement; Resolution of Disputes. 
(a)  The Company’s obligation to
make any payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall be in lieu and in full settlement of all other
severance payments to Executive under any other severance or employment
agreement between Executive and the Company (or its Subsidiaries), and any
severance plan of the Company (or its subsidiaries).  The Company’s obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action
which the Company may have against Executive or others.  In no event shall Executive be obligated to
seek other employment or take other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this Agreement and, except
as provided in Section 4(b), such amounts shall not be reduced whether or
not Executive obtains other employment.

 

(b)                                 Except
to the extent required by applicable rules and regulations of any self-regulatory
organization of which the Company or Archipelago, L.L.C., an affiliate of the
Company, is a member, any controversy or claim between the Executive and the
Company arising out of or relating to or concerning this Agreement will be
finally settled by arbitration in Chicago, Illinois administered by the
American Arbitration Association (the “AAA”) under its Commercial Arbitration
Rules then in effect.  However, the
AAA’s Commercial Arbitration Rules will be modified in the following
ways:  (i) each arbitrator will agree to treat as confidential
evidence and other information presented to them, (ii) there will be no
authority to award punitive damages (and the Executive and the Company agree
not to request any such award) and (iii) a decision must be rendered
within 10 business days of the parties’ closing statements or submission
of post-hearing briefs.

 

12.                                 Employment
with Subsidiaries.  Employment with
the Company for purposes of this Agreement shall include employment with any
Subsidiary.

 

13.                                 Survival.  The respective obligations and benefits
afforded to the Company and Executive as provided in Sections 4 (to the
extent that payments or benefits are owed as a result of a termination of
employment that occurs during the term of this Agreement), 5 (to the extent
that Payments are made to Executive as a result of a Change in Control that
occurs during the term of this Agreement), 6, 7, 9(c) and 11 shall survive
the termination of this Agreement.

 

14.                                 GOVERNING
LAW; VALIDITY.  THE INTERPRETATION,
CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
ILLINOIS  WITHOUT
REGARD TO

 

12

 

THE PRINCIPLE OF CONFLICTS OF LAWS. 
THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT
SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS
AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN FULL FORCE AND EFFECT.

 

15.                                 Covenants Not to Solicit Company
Clients and Employees; Confidential Information.

 

(a)                                  Non-Solicit. 
During the term of this Agreement, and for a one year period after the
Date of Termination by the Company or the Executive for any reason, the
Executive shall not, in any manner, directly or indirectly, (i) solicit any
client or prospective client of the Company or its affiliates to whom the
Executive provided services, or for whom the Executive transacted business, or
whose identity became known to the Executive in connection with the Executive’s
employment with the Company or its affiliates to transact business with a
competing business or reduce or refrain from doing any business with the
Company or its affiliates, (ii) interfere with or damage (or attempt to
interfere with or damage) any relationship between the Company or its
affiliates and any such client or prospective client, or (iii) solicit or hire
any person who at such time is, or who within the past six months was, an
employee of the Company or its affiliates to apply for or accept employment
with any competing business.  The term
“solicit” as used in this Agreement means any communication of any kind
whatsoever, regardless of by whom initiated, inviting, encouraging or requesting
any person or entity to take or refrain from taking any action.

 

(b)                                 Confidential Information. 
The Executive hereby acknowledges that, as an employee of the Company,
he will be making use of, acquiring and adding to confidential information of a
special and unique nature and value relating to the Company and its strategic
plan and financial operations.  The
Executive further recognizes and acknowledges that all confidential information
is the exclusive property of the Company, is material and confidential, and is
critical to the successful conduct of the business of the Company.  Accordingly, the Executive hereby covenants
and agrees that he will use confidential information for the benefit of the
Company only and shall not at any time, directly or indirectly, during the term
of this Agreement and thereafter divulge, reveal or communicate any
confidential information to any person, firm, corporation or entity whatsoever,
or use any confidential information for his own benefit or for the benefit of
others.

 

(c)                                  Survival. 
Any termination of the Executive’s employment or of this Agreement shall
have no effect on the continuing operation of this Section 15.

 

(d)                                 Blue Pencil. 
The terms and provisions of this Section 15 are intended to be
separate and divisible provisions and if, for any reason, any one or more of
them is held to be invalid or unenforceable, neither the validity nor the
enforceability of any other provision of this Agreement shall thereby be
affected.  The parties hereto

 

13

 

acknowledge that the
potential restrictions on the Executive’s future employment imposed by this
Section 15 are reasonable in both duration and geographic scope and in all
other respects.  If for any reason any
court of competent jurisdiction shall find any provisions of this
Section 15 unreasonable in duration or geographic scope or otherwise, the
Executive and the Company agree that the restrictions and prohibitions
contained herein shall be effective to the fullest extent allowed under
applicable law in such jurisdiction.

 

(e)                                  Consideration. 
The parties acknowledge that this Agreement would not have been entered
into and the benefits described in Sections 4, 5 or 7 would not have been
promised in the absence of the Executive’s promises under this Section 15.

 

16.                                 Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.

 

17.                                 Miscellaneous.  No provision of this Agreement may be
modified or waived unless such modification or waiver is agreed to in writing
and signed by Executive and by a duly authorized officer of the Company.  No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. 
Failure by Executive or the Company to insist upon strict compliance
with any provision of this Agreement or to assert any right Executive or the
Company may have hereunder, including without limitation, the right of
Executive to terminate employment for Good Reason, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.  Except as otherwise
specifically provided herein, the rights of, and benefits payable to,
Executive, his estate or his beneficiaries pursuant to this Agreement are in
addition to any rights of, or benefits payable to, Executive, his estate or his
beneficiaries under any other employee benefit plan or compensation program of
the Company.

 

14

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized officer of the Company and Executive has executed
this Agreement as of the day and year first above written.

 

	
   

  	
  ARCHIPELAGO HOLDINGS, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/GERALD D. PUTNAM

  
	
   

  	
  Name:  Gerald D. Putnam

  
	
   

  	
  Title:    Chief Executive
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
  /s/JOSEPH LOMBARD

  
	
   

  	
  Joseph Lombard

  

 

15

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