Document:

EXHIBIT 10.26

 

EMPLOYMENT AGREEMENT

 

AGREEMENT, dated as of the 19th day of December, 2001, between
Archipelago Holdings, L.L.C., a Delaware limited liability company having its
principal executive offices in Chicago, Illinois (including any successor thereto,
the “Company”), and Gerald D. Putnam (the “Executive”).

 

WHEREAS, Executive currently serves as the Chief Executive Officer
of the Company;

 

WHEREAS, the Company recognizes the Executive’s substantial
contribution to the growth and success of the Company, desires to provide for
the continued employment of the Executive and to make certain changes in the
Executive’s employment arrangements with the Company, which the Board of
Managers of the Company (the “Board”) has determined will reinforce and encourage
the continued attention and dedication to the Company of the Executive as a
member of the Company’s senior management in the best interests of the Company
and its members;

 

WHEREAS, the Executive is willing to continue in the service of
the Company on the terms and conditions set forth below;

 

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

 

1.                                       Employment Period. 
The Company hereby agrees to employ the Executive, and the Executive
hereby agrees to work in the employ of the Company, subject to the terms and
conditions of this Agreement, for the period commencing on the date hereof (the
“Effective Date”) and ending on the third anniversary of the Effective Date
(the “Employment Period”).  Commencing
on the second anniversary of the Effective Date and on each anniversary
thereafter, the Employment Period shall be automatically extended for one year
terms unless either the Company or the Executive shall give the other party not
less than 90 days’ prior written notice of the intention to terminate this Agreement.

 

2.                                       Terms of
Employment.

 

(a)                                  Position and
Duties.

 

(i)                                     During the Employment Period, the
Executive shall serve as Chief Executive Officer with the appropriate
authority, duties and responsibilities attendant to such position (including,
but not limited to, the right to hire, fire, promote and demote key personnel
of the Company).  It is expressly
understood and agreed that the Executive shall not have the power or authority
to cause the Company or

 

 

any subsidiary of the Company to take any action in respect of a
Board Decision, Significant Decision or Fundamental Decision (as defined in
Sections 3.3, 3.4 and 3.5 of the Eighth Amended and Restated Limited Liability
Company Agreement of Archipelago Holdings, L.L.C., as may be amended from time
to time (the “LLC Agreement”)) without the prior approval of the Board in
accordance with Section 3.2(j) of the LLC Agreement.

 

(ii)                                  During the Employment Period, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote substantially all of his attention and
time during normal business hours to the business and affairs of the Company
and, to the extent necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive’s reasonable best efforts to perform
faithfully and efficiently such responsibilities.  During the Employment Period it shall not be a violation of this
Agreement for the Executive to (A) serve, with prior approval of the Board, on
corporate, civic or charitable boards or committees, (B) deliver lectures or
fulfill speaking engagements, and (C) manage personal investments, so long as
such activities do not significantly interfere with the performance of the
Executive’s responsibilities as an employee of the Company in accordance with
this Agreement.  It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date and are listed on Annex
A hereto, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective
Date shall not thereafter be deemed to interfere with the performance of the
Executive’s responsibilities to the Company.

 

(iii)                               Effective upon termination of his
employment, the Executive shall no longer have the authority to either bind the
Company in any legal fashion or otherwise to conduct or engage in conduct that
would appear to so bind the Company.

 

(b)                                 Compensation.

 

(i)                                     Annual Base Salary. 
During the Employment Period, the Executive shall receive an annual base
salary (“Annual Base Salary”) of at least $550,000 through the end of the first
anniversary of the Effective Date and $600,000 after the first anniversary of
the Effective Date.  Any increase in
Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. 
Annual Base Salary shall not be reduced at any time (including after any
such increase), other than as part of an across the board salary reduction
applicable to all other senior officers of the Company, and the term Annual
Base Salary as utilized in this Agreement shall refer to Annual Base Salary as
so increased or decreased.

 

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(ii)                                  Annual Bonus. 
Starting with the 2002 calendar year, during the Employment Period, the
Executive shall be paid an annual cash bonus (“Annual Bonus”) with a target
level of not less than 300% of Annual Base Salary.  The Compensation Committee of the Board (the “Compensation
Committee”) will set at the beginning of each year objective performance
measures, the attainment, or partial attainment, of which (as determined by the
Compensation Committee after the end of each year) will determine the actual amount
of the Annual Bonus payable to the Executive for such year (which may be higher
or lower than the target level).  For
the 2001 calendar year, the Executive’s annual cash bonus will be based upon a
target level equal to 300% of $400,000.

 

(iii)                               Stock Options upon IPO. 
At the time of the Company’s initial public offering of the Company’s
stock, the Executive will, provided that he is still the Chief Executive
Officer of the Company at such time, be awarded stock options under the
Company’s stock option plan to purchase 1,000,000 shares of the Company’s
stock, at an exercise price equal to 1.5 times the public offering price in
such initial public offering and subject to the other terms and conditions
specified in such stock option plan and the applicable award agreement.

 

(iv)                              Other Employee Benefit Plans. 
During the Employment Period, except as otherwise expressly provided
herein, the Executive shall be entitled to participate in all employee benefit,
welfare and other plans, practices, policies and programs and fringe benefits
(collectively, “Employee Benefit Plans”) on a basis no less favorable than that
provided to other senior officers of the Company.

 

3.                                       Termination of
Employment.

 

(a)                                  Death or
Disability.  The Executive’s employment shall terminate
automatically upon the Executive’s death during the Employment Period.  If the Company determines in good faith that
the Disability of the Executive has occurred during the Employment Period
(pursuant to the definition of Disability set forth below), it may give to the
Executive written notice in accordance with Section 11(b) of its intention
to terminate the Executive’s employment. 
In such event, the Executive’s employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the “Disability Effective Date”), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive’s duties. 
For purposes of this Agreement, “Disability” shall mean the absence of
the Executive from the Executive’s duties with the Company on a full-time basis
for 90 days during any consecutive twelve month period as a result of
incapacity in which he is unable to perform the duties set forth above due to
mental or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Executive or the Executive’s legal representative.

 

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(b)                                 Cause. 
The Company may terminate the Executive’s employment during the
Employment Period with or without Cause. 
For purposes of this Agreement, “Cause” shall mean:

 

(i)                                     the willful failure by the
Executive to substantially perform the Executive’s responsibilities under this
Agreement, after demand for substantial performance has been given by the Board
in writing 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 and material breach by
the Executive of Section 8(a), 8(b) or 8(c);

 

(v)                                 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

 

(vi)                              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 purposes of this provision, no act or failure to act, on the
part of the Executive, shall be considered “willful” unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive’s action or omission was in the best interests of the
Company.  Any act, or failure to act,
based upon authority given pursuant to a resolution duly adopted by the Board
or based upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good faith and
in the best interests of the Company. 
The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
two-thirds (2/3) of the entire membership of the Board (excluding the
Executive) at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board) finding that,
in the good faith opinion of the Board, the Executive is guilty of the conduct
described above, and specifying the particulars thereof in detail.

 

(c)                                  Good
Reason.  The Executive’s employment may
be terminated by the
Executive with or without Good Reason. 
For purposes of

 

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this Agreement, “Good Reason” shall mean in the absence of a
written consent of the Executive:

 

(i)                                     the assignment to the Executive of
any duties inconsistent with the Executive’s title, position, authority, duties
or responsibilities as contemplated by Section 2(a)(i), or any other
action by the Company which results in a diminution in such title, position,
authority, duties or responsibilities, other than an isolated, insubstantial
and inadvertent action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;

 

(ii)                                  any failure by the Company to
comply with any of the provisions of Section 2(b), other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;

 

(iii)                               any purported termination by the
Company of the Executive’s employment otherwise than as expressly permitted by
this Agreement;

 

(iv)                              any failure by the Company to
comply with and satisfy Section 9(c); or

 

(v)                                 any requirement that the
Executive’s principal office be based anywhere more than 50 miles from 100 South
Wacker Drive, Chicago, Illinois.

 

(d)                                 Notice of
Termination.  Any termination by the Company or by the
Executive shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 11(b).  For purposes of this Agreement, a “Notice of Termination” means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of the Executive’s employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more than
30 days after the giving of such notice). 
The failure by the Executive or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive’s or the
Company’s rights hereunder.

 

(e)                                  Date of
Termination.  “Date of Termination” means if the
Executive’s employment is terminated by the Company other than for

 

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Disability, or by the Executive, the date of receipt of the Notice
of Termination or any later date specified therein within 30 days of such
notice, and if the Executive’s employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the Executive
or the Disability Effective Date, as the case may be.

 

4.                                       Obligations of the
Company upon Termination.

 

(a)                                  Other Than for
Cause; Good Reason.  If, during the Employment Period, the
Company shall terminate the Executive’s employment other than for Cause or
Disability, or the Executive shall terminate employment for Good Reason:

 

(i)                                     the Company shall, in lieu of any
future amounts and benefits payable under Section 2(b), pay to the
Executive in a lump sum in cash within 30 days after the Date of Termination:

 

(A)                              the amount equal to the sum of (x)
three times the Executive’s Annual Base Salary plus (y) three times the average
Annual Bonus (or, with respect to calendar years prior to 2002, the year end
bonus) actually paid or payable to the Executive in the two years preceding the
year in which the Date of Termination occurs (the “Average Annual Bonus”); and

 

(B)                                the sum of (x) the Executive’s
Annual Base Salary through the Date of Termination to the extent not
theretofore paid, plus (y) the product of (1) the Average Annual Bonus
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 365, to the extent not theretofore
paid (the sum of the amounts described in clauses (x) and (y) shall be
hereinafter referred to as the “Accrued Obligations”);

 

(ii)                                  for 36 months following the Date of
Termination, the Company shall continue to provide at its expense medical and
dental benefits to the Executive, his spouse and eligible dependents on the
same basis as such benefits are then currently provided to the Executive (the
“Medical Benefits”); provided that such Medical Benefits shall be secondary to
any other coverage obtained by the Executive; provided, however, that if the
Company’s welfare plans do not permit such coverage, the Company will provide
the Executive the Medical Benefits (with the same after tax effect) outside of
such plans;

 

(iii)                               any Company stock options or other
Company equity awards granted to the Executive after the Effective Date

 

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shall immediately vest and be exercisable or payable pursuant to
their terms; and

 

(iv)                              to the extent not theretofore paid
or provided, the Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or contract
(including any bonus awarded, but not yet paid) or agreement of the Company and
its affiliated companies through the Date of Termination (such other amounts
and benefits shall be hereinafter referred to as the “Other Benefits”).

 

(b)                                 Death; Disability. 
If, during the Employment Period, the Executive’s employment shall
terminate on account of death or Disability, this Agreement shall terminate
without further obligations to the Executive other than to provide the
Executive (or his estate) (i) the Accrued Obligations, (ii) the Medical
Benefits and (iii) the Other Benefits.

 

(c)                                  Cause; Other than
for Good Reason.  If, during the Employment Period, the
Company shall terminate the Executive’s employment for Cause or the Executive
terminates his employment without Good Reason, this Agreement shall terminate
without further obligations to the Executive other than the obligation to pay
to the Executive (i) his Annual Base Salary through the Date of Termination to
the extent theretofore unpaid and (ii) the Other Benefits.

 

(d)                                 Condition. 
The Company shall not be required to make the payments and provide the
benefits specified in this Section 4 unless the Executive executes and
delivers to the Company an agreement releasing the Company, its affiliates and
its officers, directors and employees from all liability (other than the
payments and benefits under this Agreement).

 

5.                                       Non-exclusivity of
Rights.  Nothing in this Agreement shall prevent or
limit the Executive’s continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to Section 11(g),
shall anything herein limit or otherwise affect such rights as the Executive
may have under any contract or agreement with the Company or any of its
affiliated companies.  Amounts which are
vested benefits or which the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement; provided that the Executive shall not be eligible for severance
benefits under any other program or policy of the Company.

 

6.                                       Full Settlement. 
The Company’s obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations

 

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hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Executive or others.  In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement, and such amounts shall not be reduced
whether or not the Executive obtains other employment.

 

7.                                       Certain Additional
Payments by the Company.

 

(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 7) (a “Payment”) would be subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code (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 7,
including whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment 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 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.  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 7, shall be paid by the Company to the Executive within
ten 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 an
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

 

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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 (“Overpayments”),
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 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.

 

8.                                       Covenants Not to
Compete or Solicit Company Clients and Employees; Confidential Information.

 

(a)                                  Non-Compete. 
During the term of this Agreement, and for a one year period after the
Date of Termination by the Company for Cause or by the Executive without Good
Reason, the Executive shall not directly or indirectly anywhere in the world,
own, manage, operate, join, control, or participate in the ownership,
management, operation or control of, or be employed by or connected in any
manner with, any competing business, whether for compensation or otherwise,
without the prior written consent of the Company.  For the purposes of this Agreement, a “competing business” shall
be any business which either (i) engages in any business which is an
“electronic communications network” (as defined under Rules 11Ac1-1 and 11Ac1-4
under the Exchange Act) or “exchange” (within the meaning of
Section 3(a)(1) of the Exchange Act or Rule 3a1-1 under the Exchange Act,
as the same may from time to time be re-proposed, adopted or amended) or other
facility for matching or executing orders that in each case provides for the
trading of equity securities (A) of United States issuers and/or (B) of
non-United States issuers whose equity securities are listed for trading on a
United States stock exchange or trade through the National Association of
Securities Dealers, Inc. Automated Quotation System or (ii) holds a 5% or
greater equity, voting or profit interest in any enterprise that engages in
such a competitive activity.  Should the
Executive, directly or indirectly, own, manage, operate, join, control or
participate in the ownership, management, operation or control of, or be
employed by or connected in any manner with, any competing business, all
payments under this Agreement shall cease.

 

(b)                                 Non-Solicit. 
During the term of this Agreement, and for a one year period after the
Date of Termination by the Company or the

 

9

 

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
inviting, encouraging or requesting any person or entity to take or refrain
from taking the actions specified in (i) and (iii) above, respectively.

 

(c)                                  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.

 

(d)                                 Survival. 
Any termination of the Executive’s employment or of this Agreement shall
have no effect on the continuing operation of this Section 8.

 

(e)                                  Blue Pencil. 
The terms and provisions of this Section 8 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 8 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 8 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.

 

(f)                                    Consideration. 
The parties acknowledge that this Agreement would not have been entered
into and the benefits described in

 

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Sections 2, 4 or 7 would not have been promised in the absence of
the Executive’s promises under this Section 8.

 

9.                                       Successors.

 

(a)                                  This Agreement is personal to the
Executive and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution.  This Agreement shall
inure to the benefit of and be enforceable by the Executive’s legal representatives.

 

(b)                                 This Agreement shall inure to the
benefit of and be binding upon the Company and its successors and assigns.

 

(c)                                  The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. 
As used in this Agreement, “Company” shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid.

 

10.                                 Disputes.

 

(a)                                  Mandatory
Arbitration.  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, and subject
to the provisions of this Section 10, any controversy or claim between the
Executive and the Company arising out of or relating to or concerning this
Agreement or any aspect of the Executive’s employment with the Company or the
termination of that employment (together, an “Employment Matter”) 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)
the decision must not be a compromise but must be the adoption of the submission
by one of the parties, (ii) each arbitrator will agree to treat as confidential
evidence and other information presented to them, (iii) there will be no
authority to award punitive damages (and the Executive and the Company agree
not to request any such award), (iv) the Optional Rules for Emergency Measures
of Protection will apply, and (v) a decision must be rendered within 20
business days of the parties’ closing statements or submission of post-hearing
briefs.

 

(b)                                 Injunctions and
Enforcement of Arbitration Awards.  The Executive or the
Company may bring an action or special proceeding in a state or federal court
of competent jurisdiction sitting in the County of Chicago, Illinois to enforce
any arbitration award under Section 10(a).  Also, the Company

 

11

 

may bring such an action or proceeding, in addition to its rights
under Section 10(a) and whether or not an arbitration proceeding has been
or is ever initiated, to temporarily, preliminarily or permanently enforce any
part of Section 8.  The Executive
agrees that (i) violating any part of Section 8 would cause damage to the
Company that cannot be measured or repaired, (ii) the Company therefore is entitled
to an injunction, restraining order or other equitable relief restraining any
actual or threatened violation of Section 8, (iii) no bond will need to be
posted for the Company to receive such an injunction, order or other relief and
(iv) no proof will be required that monetary damages for violations of
Section 8 would be difficult to calculate and that remedies at law would
be inadequate.

 

(c)                                  Jurisdiction
and Choice of Forum.
The Executive and the Company irrevocably
submit to the exclusive jurisdiction of any state or federal court located in
Chicago, Illinois over any Employment Matter that is not otherwise arbitrated
or resolved according to Section 10(a).  This includes any action or proceeding to
compel arbitration or to enforce an arbitration award.  Both the Executive and the Company (i) acknowledge
that the forum stated in this Section 10(c) has a reasonable relation to
this Agreement and to the relationship between the Executive and the Company
and that the submission to the forum will apply even if the forum chooses to
apply non-forum law, (ii) waive, to the extent permitted by law, any objection
to personal jurisdiction or to the laying of venue of any action or proceeding
covered by this Section 10(c) in the forum stated in this
Section 10(c), (iii) agree not to commence any such action or proceeding
in any forum other than the stated in this Section 10(c) and (iv) agree
that, to the extent permitted by law, a final and non-appealable judgment in
any such action or proceeding in any such court will be conclusive and binding
on the Executive and the Company. 
However, nothing in this Agreement precludes the Executive or the
Company from bringing any action or proceeding in any court for the purpose of
enforcing the provisions of Sections 10(a) and this Section 10(c).

 

(d)                                 Waiver
of Jury Trial.  To the
extent permitted by law, the Executive and the Company waive any and all rights
to a jury trial with respect to any Employment Matter.

 

(e)                                  Governing
Law.  This
Agreement will be governed by and construed in accordance with the law of the
State of Illinois applicable to contracts made and to be performed entirely
within that State.

 

(f)                                    Reimbursement of
Expenses.  If a final and non-appealable order is
entered as a result of any Employment Matter which finds in part or in full for
the Executive, the Company shall reimburse the Executive for all reasonable
legal fees and expenses, if any, incurred by the Executive in connection with
such Employment Matter, together with interest at the applicable federal rate.

 

12

 

(g)                                 Interest. 
If any payment under this Agreement is delayed as a result of an
Employment Matter, it will be paid after the final resolution of such matter
together with interest at the applicable federal rate.

 

11.                                 Miscellaneous.

 

(a)                                  The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect.  This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto
or their respective successors and legal representatives.

 

(b)                                 All notices and other
communications hereunder shall be in writing and shall be given by hand
delivery to the other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:

 

If to the Executive:

                                

                                

 

If to the Company:

 

Archipelago Holdings, L.L.C.

100 South Wacker Drive, 20th Floor

Chicago, Illinois 60606

Telecopy: (312) 621-0487

Attn:  General Counsel

 

or to such other address as either party shall have furnished to
the other in writing in accordance herewith. 
Notice and communications shall be effective when actually received by
the addressee.

 

(c)                                  The invalidity or unenforceability
of any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.

 

(d)                                 The Company may withhold from any
amounts payable under this Agreement such Federal, state, local or foreign
taxes as shall be required to be withheld pursuant to any applicable law or
regulation.

 

(e)                                  The Executive’s or the Company’s
failure to insist upon strict compliance with any provision of this Agreement
or the failure to assert any right the Executive or the Company may have
hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 3(c) or the
Company’s right to terminate the Executive for Cause pursuant to
Section 3(b), shall not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement.

 

13

 

(f)                                    It is the parties intention that
this Agreement not be construed more strictly with regard to the Executive or
the Company.

 

(g)                                 From and after the Effective Date
this Agreement shall supersede any other employment or severance agreement
between the parties.

 

(h)                                 Any reference to a
Section herein is a reference to a section of this Agreement unless
otherwise stated.

 

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s
hand and, pursuant to the authorization from its Board of Managers, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.

 

 

	
   

  	
    /s/GERALD D. PUTNAM

  
	
   

  	
  Gerald D. Putnam

  
	
   

  	
   

  
	
   

  	
  Archipelago Holdings, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/WILLIAM F. CRUGER, JR.

  
	
   

  	
   

  	
   William F. Cruger, Jr.

  
	
   

  	
  Title:   Chairman,
  Compensation Committee

  

 

 

14Exhibit
10.27

 

AMENDMENT
TO EMPLOYMENT AGREEMENT

 

THIS AMENDMENT, dated as of
May 4, 2004, between Archipelago Holdings, L.L.C., a Delaware
limited liability company having its principal executive offices in Chicago,
Illinois (including any successor thereto, the “Company”), and Gerald D. Putnam
(the “Executive”) amends the Employment Agreement between the Company and the
Executive dated as of December
19, 2001 (the “Employment Agreement”).

 

IT IS HEREBY AGREED AS
FOLLOWS:

 

1.             The following sentence shall be added after
the first sentence of Section 2(b)(i) of the Employment Agreement:

 

Effective as of January 1,
2004, the Annual Base Salary shall be $750,000.

 

2.             The following clause shall be inserted prior
to the period at the end of the first sentence of Section 2(b)(ii) of the
Employment Agreement:

 

,
provided, however, that starting with the 2004 calendar year and all succeeding
years during the Employment Period, the Annual Bonus will have a target level
of not less than 200% of Annual Base Salary

 

3.             Section 2(b)(iii) of the Employment Agreement
is hereby revised to read in its entirety as follows:

 

Equity-Based and Other Long-Term
Compensation. 
At the time of the Company’s initial public offering of the Company’s
stock, the Executive will, provided that he is still the Chief Executive
Officer of the Company at such time, be awarded stock options under the
Company’s stock option plan to purchase 750,000 shares of the Company’s stock
(which number shall be adjusted based upon the ratio applicable to the conversion
of the Company’s shares at the time of the initial public offering, such
adjustment currently expected to result in an option to purchase 166,650 shares
based on an anticipated conversion ratio of .2222 shares for each pre-offering
share), at an exercise price equal to the public offering price in such initial
public offering, that will vest in equal installments of 25% on the first,
second, third and fourth anniversaries of the initial public offering and that
will be subject to the other terms and conditions specified in such stock
option plan and the applicable award agreement, which terms shall incorporate
the provisions of this Agreement.  In
addition, to the foregoing, the Executive shall receive awards of stock options
or other equity-based, long-term incentive or similar compensation under the
Company’s stock option, stock incentive or similar plans or programs on an
annual basis consistent with the timing, levels and other terms and conditions
of such awards made to other senior executives of the Company. Such awards will
be subject to the terms and conditions specified in such plan or program and
the applicable award agreement, which terms shall incorporate the provisions of
this Agreement.

 

 

4.             A new
Section 11 (i) shall be added to the Employment Agreement:

 

(i)            In the
event any term of this Agreement is more favorable to Executive than the
corresponding terms of any Company plan in which Executive participates or of
any agreement applicable to any option, equity-based or other award granted to
Executive by the Company, then the terms of this Agreement shall govern and the
benefit under each such Company plan and Executive’s rights and benefits under
each such award shall be determined in accordance with the terms of this
Agreement. For the avoidance of any doubt, in the event of the termination of
Executive’s employment under circumstances described in Section 4(a), the
provisions of Section 4(a)(iii) shall apply to each stock option and to each
equity award whenever granted to the Executive and Executive will be subject to
a right of recapture provision in an stock option, equity or incentive award
granted to him which arises upon a breach of restrictive covenants or other
detrimental activity only in the event Executive’s willful and material breach
of Section 8(a), 8(b) or 8(c) of this Agreement.

 

The
terms of the Employment Agreement not hereby amended shall be and remain in
full force and effect, and are not affected by this Amendment.

 

IN
WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and,
pursuant to the authorization from its Board of Managers, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.

 

	
   

  	
  /s/ Gerald Putnam

  	
   

  
	
   

  	
  Gerald D. Putnam

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Archipelago Holdings, L.L.C.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William Crueger

  	
   

  
	
   

  	
  Name:  William Cruger

  
	
   

  	
  Title:  Chairman of
  Compensation Committee

  
					

 

2

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