Employment Agreement - Instinet Group Inc. and Edward J. Nicoll
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into as
of this 20th day of September, 2002 by and between Instinet Group Incorporated,
a Delaware corporation (together with any successor thereto, the "Company"), and
Edward J. Nicoll ("Executive").
WITNESSETH:
WHEREAS, Executive is currently employed by Datek Online
Holdings Corp ("Datek") as its Chief Executive Officer and is simultaneously
employed by Island Holding Company, Inc. (or any successor thereto, "Island")
and is serving as the Chairman of the Board of Directors of Island, in each
case, pursuant to the terms of the Amended and Restated Employment Agreement
between Executive and Datek, dated as of October 15, 1999 (the "Datek
Employment Agreement");
WHEREAS, pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of June 9, 2002, among the Company, Instinet
Merger Corporation, a wholly owned subsidiary of the Company ("Merger Sub"),
and Island, Merger Sub and Island will merge (the "Merger") and the surviving
corporation to the Merger will become a direct wholly owned subsidiary of the
Company;
WHEREAS, in connection with the execution of the Merger
Agreement, the Company and Executive entered into a letter agreement, dated as
of June 9, 2002 (together with Exhibit A thereto, the "Letter Agreement"),
which, among other things, provides that Executive will assume the position of
Chief Executive Officer of the Company, commencing on the date that includes
the effective time of the Merger (the "Closing Date"), sets forth the principal
terms of Executive's employment with the Company and provides that the Company
and Executive will enter into a definitive agreement setting forth such
principal terms;
WHEREAS, the Company desires to secure the exclusive services
of Executive on the terms and conditions set forth in this Agreement and
Executive desires to accept such employment, on such terms and conditions, in
each case, commencing on the Closing Date;
WHEREAS, each of the Company and Executive agrees that
Executive will have a prominent role in the management of the business, and the
development of the goodwill, of the Company and its Affiliates (as defined
below), and will establish and develop relations and contacts with the
principal customers and suppliers of the Company and its Affiliates in the
United States, Europe and Asia (collectively, the "Restricted Territory"), all
of which constitute valuable goodwill of, and could be used by Executive to
compete unfairly with, the Company and its Affiliates; and
WHEREAS, (i) in the course of his employment with the
Company, Executive will obtain confidential and proprietary information and
trade secrets concerning the business and operations of the Company and its
Affiliates in the Restricted Territory that could be used to compete unfairly
with the Company and its Affiliates; (ii) Executive will create and develop
certain work products, inventions and other intellectual property which
constitute an essential
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portion of the property of the Company and its Affiliates, (iii) the covenants
and restrictions contained in Sections 8 through 14, inclusive, are intended to
protect the legitimate interests of the Company and its Affiliates in their
respective goodwill, trade secrets and other confidential and proprietary
information and intellectual property; and (iv) Executive desires to be bound
by such covenants and restrictions.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and promises contained herein and for other good and valuable
consideration, the Company and Executive hereby agree as follows:
l. Agreement to Employ; Effective Date of Agreement.
Upon the terms and subject to the conditions of this Agreement and subject to
consummation of the Merger, the Company hereby employs Executive effective as
of the Closing Date, and Executive hereby accepts such employment with the
Company effective as of such date.
2. Term; Position and Responsibilities.
(a) Term of Employment. Unless Executive's employment
shall sooner terminate pursuant to Section 7, the Company shall employ
Executive on the terms and subject to the conditions of this Agreement for a
term commencing on the Closing Date and ending on the three year anniversary of
the Closing Date (the "Initial Term"). Effective upon the expiration of the
Initial Term and of each Additional Term (as defined below), Executive's
employment hereunder shall be deemed to be automatically extended, upon the
same terms and conditions, for an additional period of one year (each, an
"Additional Term"), in each such case, commencing upon the expiration of the
Initial Term or the then current Additional Term, as the case may be, unless
the Company or Executive shall have given notice, at least 6 months prior to
the expiration of the Initial Term or such Additional Term, of its or his
intention not to extend the Employment Period (as defined below) hereunder. Any
such notice of nonextension delivered by the Company to Executive shall be
deemed a termination of Executive's employment by the Company Without Cause as
of (i) the last day of the Initial Term or then current Additional Term, as the
case may be, or (ii) any earlier date specified by the Company in such notice,
provided that such earlier date is not less than 30 days after the date such
notice is delivered. Any such notice of nonextension delivered by Executive to
the Company shall be deemed a termination of Executive's employment by
Executive without Good Reason as of the last day of the Initial Term or then
current Additional Term, as the case may be. The period during which Executive
is employed by the Company pursuant to this Agreement shall be referred to as
the "Employment Period."
(b) Position and Responsibilities. During the Employment
Period, Executive shall serve as Chief Executive Officer of the Company,
reporting directly to the Board of Directors of the Company (the "Board"), and
shall have such duties and responsibilities as are customarily assigned to
individuals serving in such position, including, without limitation, the
authority to hire, fire and determine the compensation of senior executives and
other key employees of the Company in accordance with the corporate governance
principals and procedures of the Company and the Compensation Committee of the
Board (the "Compensation Committee"), and such other duties consistent with
Executive's title and position as the Board specifies from time to time.
Executive shall devote all of his skill, knowledge, commercial
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efforts and working time to the conscientious and faithful performance of his
duties and responsibilities for the Company (except for (i) vacation time as
provided by Company policy and absence for sickness or similar disability and
(ii) to the extent that it does not interfere with the performance of
Executive's duties hereunder, (A) such reasonable time as may be devoted to the
fulfillment of Executive's civic responsibilities and, subject to the prior
written approval of the Compensation Committee (which approval, in the case of
the Compensation Committee's consideration of those directorships held by
Executive immediately prior to the date of the Merger Agreement, will not be
unreasonably withheld) and to compliance with the provisions of Sections 8
through 14, inclusive, service on boards of directors of other corporations and
entities and (B) such reasonable time as may be necessary from time to time for
personal financial matters).
Effective on the Closing Date, Executive shall become a
member of the Board. Thereafter, during the Employment Period, the Company
shall use its reasonable best efforts to cause Executive to be nominated and
re-elected to serve as a member of the Board at each annual meeting of the
shareholders of the Company at which Executive's election will be subject to a
shareholder vote.
3. Base Salary. As compensation for the services to be
performed by Executive during the Employment Period, the Company shall pay
Executive a base salary at an annualized rate of $600,000, payable in
installments on the Company's regular payroll dates. The Compensation Committee
shall review Executive's base salary for increase annually during the period of
his employment hereunder and, in its sole discretion, may adjust such base
salary upward from time to time based upon such factors as the Compensation
Committee shall consider relevant. The annual base salary payable to Executive
under this Section 3 shall hereinafter be referred to as the "Base Salary".
4. Incentive Compensation and Equity Arrangements.
(a) Annual Incentive Bonus. During the Employment Period
and subject to the review and approval of the Compensation Committee, Executive
shall be eligible to participate in the annual bonus program maintained by the
Company for its senior executives (the "Annual Bonus Plan"). Provided that,
except to the extent expressly provided otherwise in Section 7(f), Executive's
employment with the Company has not terminated prior to the last day of the
fiscal year of the Company in respect of which the applicable Bonus is payable,
Executive shall have the opportunity to receive an annual bonus (the "Bonus")
under the Annual Bonus Plan, which may be paid in cash, restricted stock,
options or other non-cash compensation, in an amount to be determined by the
Compensation Committee based on the achievement by the Company of such
performance objectives as may be established from time to time by the
Compensation Committee or other committee of the Board; provided that:
(i) for the portion of calendar year 2002
commencing on January 1, 2002 and ending on the Closing Date (the
"Pre-Closing Period"), Executive shall be entitled to an annual bonus
payable by Island in such amount as shall be determined by the
Compensation Committee of the Board of Directors of Island, provided
that the amount of such bonus shall not exceed the product of (x)
$500,000, multiplied by (y) a fraction, the numerator of which is
equal to the number of days in the Pre-Closing Period and the
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denominator of which is 365, such bonus to be payable in cash, as
soon as reasonably practicable following the Closing Date;
(ii) for the portion of calendar year 2002
commencing on the Closing Date and ending on December 31, 2002 (the
"Post-Closing Period"):
(A) Executive's target Bonus (the "2002
Target Bonus") shall equal the product of (x) $2 million,
multiplied by (y) a fraction, the numerator of which is equal
to the number of days in the Post-Closing Period and the
denominator of which is 365 and shall be payable to Executive
(assuming his continued employment through at least December
31, 2002) if the Compensation Committee determines that the
Company has achieved 100% of the performance objectives for
the Post-Closing Period relating to the integration of the
businesses of the Company and Island established by the
Compensation Committee;
(B) Executive shall be entitled to a
minimum Bonus (the "Minimum 2002 Bonus") equal to 50% of the
2002 Target Bonus (assuming such continued employment
through at least December 31, 2002);
(C) subject to clause (D), the Minimum 2002
Bonus and any portion of the 2002 Target Bonus that is
payable in excess of the Minimum 2002 Bonus will be paid in
cash; and
(D) on or prior to the Closing Date,
Executive may elect, in a written instrument submitted to the
Company, to receive up to 50% of the Minimum 2002 Bonus, net
of applicable withholding taxes, in a number of shares of
common stock of the Company (the "Common Stock") equal to the
quotient of (x) dollar amount of the Minimum 2002 Bonus to be
paid in such shares, divided by (y) the closing price per
share of Common Stock on September 23, 2002, as reported on
the New York Stock Exchange (the "September 23rd Share
Price").
(iii) for calendar year 2003, Executive's target
Bonus shall equal $2 million and shall be payable to Executive
(assuming his continued employment through at least the end of the 2003
fiscal year and otherwise in accordance with the terms of this
Agreement and the Annual Bonus Plan) if the Compensation Committee
determines that the Company has achieved 100% of the performance
objectives relating to the integration of the businesses of the Company
and Island and any other financial performance targets established by
the Compensation Committee for such calendar year after consultation
with Executive.
(b) Option Grants. (i) In General. During the Employment
Period, Executive shall be eligible to participate in the Instinet 2000 Stock
Option Plan (as the same may be amended and in effect from time to time, the
"2000 Option Plan") and any subsequent stock option plan maintained by the
Company for its senior executives, in all such cases, at a level commensurate
with Executive's title and position with the Company, provided that Executive
shall be entitled to receive an annual grant of options for calendar year 2003
in accordance with Section 4(b)(iii) below. The terms and conditions of all
options to purchase shares of Common
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Stock granted to Executive under the 2000 Option Plan or under any subsequent
stock option plan maintained by the Company or its Affiliates (collectively,
the "Options"), including the grant, vesting, exercise, payment and all other
terms of such Options, shall be governed by the terms of the stock option plan
under which such Options are granted, as such plan or plans may be amended and
in effect from time to time, except the terms "cause," "good reason," "without
cause" and "disability" shall have the respective meanings assigned to such
terms herein for all purposes of any Options granted to Executive under the
Option Plan or under any such subsequent stock option plan.
(ii) Special Retention Grant. Effective as of the Closing
Date and subject to consummation of the Merger and Executive's commencement of
employment with the Company pursuant to this Agreement, Executive shall receive
a one-time grant of options (the "Retention Options") to purchase 575,000
shares of Common Stock (which number shall not be subject to adjustment in
respect of any dividend which may be declared or paid by the Company with a
record date on or prior to the Closing Date)(1), at an exercise price per share
equal to the September 23rd Share Price, as determined in accordance with the
2000 Option Plan. Subject to Executive's continued employment from the Closing
Date to the applicable vesting date specified herein, 25% of the Retention
Options will become vested on the eighteen month anniversary of the Closing
Date and the remaining 75% of the Retention Options will become vested in
thirty-six equal increments, on each monthly anniversary of the Closing Date
thereafter, commencing with the nineteen calendar month anniversary of the
Closing Date. All other terms and conditions of the Retention Options will
subject to and governed by the terms and provisions of the 2000 Option Plan.
(iii) 2003 Annual Option Grant. Subject to Executive's
continued employment through the applicable date of grant, Executive will be
eligible to receive an annual grant under the 2000 Option Plan for calendar
year 2003 of options (the "2003 Annual Options") to purchase 300,000 shares of
Common Stock (which number shall not be subject to adjustment in respect of any
dividend which may be declared or paid by the Company with a record date on or
prior to the Closing Date), at an exercise price per share equal to the
reported closing selling price per share of Common Stock on the NASDAQ National
Market on the last trading prior to the date of grant, as determined in
accordance with the 2000 Option Plan. The 2003 Annual Options will be granted
to Executive on the date that annual awards under the 2000 Option Plan are
granted to the Company's other senior executives, currently anticipated to be
in February of 2003. Subject to Executive's continued employment from the date
of grant to the applicable vesting date specified herein, 25% of the 2003
Annual Options will become vested on the first anniversary of the date of grant
and the remaining 75% of the 2003 Annual Options will become vested in
thirty-six equal increments, on each monthly anniversary of the date of grant
thereafter, commencing with the thirteen calendar month anniversary of the date
of grant. All other terms and conditions of the 2003 Annual Options will
subject to and governed by the terms and provisions of the 2000 Option Plan.
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(1) Note that the number of option shares to be granted at the closing and in
'03 has been established after giving effect to the extraordinary cash dividend
to be declared prior to the Closing Date and the exercise price will be
determined based on the market price for the Common Stock after the record
date, which will also reflect the effects of the dividend.
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(c) Island Equity Awards. On the date hereof, Executive
holds (i) options to purchase 50,000 shares of Class A common stock of Island
(the "Island Options") that were granted to Executive pursuant to the terms of
the Island ECN 2001 Stock Incentive Plan (as the same may be amended and in
effect from time to time, the "Island Incentive Plan") and the related grant
agreements evidencing such Island Options and listed on Schedule A attached
hereto (collectively, the "Island Grant Agreements") and (ii) stock
appreciation rights with respect to 136,790 shares of Class A common stock of
Island (the "Island SARs" and, together with the Island Options, the "Island
Equity Awards") that were granted to Executive pursuant to The Datek Online
Holdings Corp. 2001 Special Island Stock Appreciation Right Plan (the "Datek
SAR Plan") and the related grant agreements evidencing such Island SARs and
listed on Schedule B attached hereto (collectively, the "Datek SAR Grant
Agreements" and, together with the Island Incentive Plan, the Island Grant
Agreements and the Datek SAR Plan, the "Island Award Documents"). Pursuant to
the terms of the Merger Agreement, at the Effective Time of the Merger (as
defined in the Merger Agreement), all of Executive's Island Equity Awards that
are then outstanding will be converted into and constitute an option (with
respect to Island Options) or stock appreciation right (with respect to Island
SARs) to purchase or with respect to, as the case may be, a number of shares of
Common Stock, at an exercise or base price per share, in each case determined
in accordance with the Merger Agreement, on the same terms and conditions as
were applicable to the corresponding Island Equity Award immediately prior to
the Effective Time, except as specifically provided below in this Section 4(c).
Executive hereby acknowledges and confirms that, pursuant to
the Letter Agreement, Executive has waived any and all rights he may have or
have had to the accelerated vesting and/or exercisability of any of the Island
Equity Awards as provided in the Letter Agreement, all of the relevant terms and
conditions of which are incorporated herein by reference as if fully set forth
herein. Executive hereby further acknowledges and agrees that the terms or
phrases "cause," "good reason," "without cause" and "disability," as used in any
of the Island Award Documents (or similar terms used in such agreements) shall
have the respective meanings assigned to such terms herein for all purposes of
such Island Award Documents and (ii) in the event of any termination of
Executive's employment, including any such termination for good reason or
without cause, as so defined, Executive's rights, if any, in respect of the
vesting and/or exercisability of any then outstanding Island Equity Awards will
be governed exclusively by the provisions of the Letter Agreement and Section
7(f)(i) herein.
(d) Lock-Up. During the period commencing on the date
hereof and ending the eighteen month anniversary of the Closing Date (the
"Holding Period"), Executive shall not be permitted to and shall not, directly
or indirectly, sell, transfer, pledge, assign, alienate, hypothecate or
otherwise dispose of or encumber all or any portion of any shares of Common
Stock beneficially owned by Executive, including without limitation by gift,
operation of law or otherwise, other than (i) in the event that, during the
Holding Period, Executive exercises any Options or Island Equity Awards that
are options to purchase Common Stock, Executive shall be permitted to sell a
number of shares of Common Stock having an aggregate market value at the time
of such sale equal to the aggregate Federal, state and local income and
employment taxes incurred and payable by Executive as a result of such exercise
of options, (ii) by will or by the laws of descent and distribution to the
estate of Executive upon Executive's death or (iii) following any termination
of Executive's employment with the Company Without Cause (as defined below) or,
subject to the prior written consent of the Compensation Committee, which
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may be given or withheld in its absolute discretion, following a resignation by
Executive from employment with the Company for Good Reason (as defined below).
Any purported or attempted transfer of any shares of Common Stock in violation
of this Section 4(d) or otherwise shall be null and void.
During the Holding Period, any stock certificates or other
documents evidencing any shares of Common Stock beneficially owned by Executive
shall be held in the custody of the Secretary of the Company, provided that,
upon the written request of Executive, the Company shall issue and deliver to
Executive a stock certificate for any shares of Common Stock Executive is
permitted to sell or transfer in accordance with and under the circumstances
described in clause (i), (ii) or (iii) of the forgoing paragraph, free and clear
of all restrictions. The Company may deliver stop transfer instructions with
respect to the shares of Common Stock subject to restrictions on transfer
pursuant to this Agreement to implement such restrictions and may cause any
stock certificates or other documents representing such shares to bear
appropriate legends on the face thereof during the Holding Period. Executive
shall cooperate with the Company with respect to the delivery of the applicable
shares of Common Stock to the custody of the Company and the application of any
legend on the applicable share certificates or other documents. Notwithstanding
the foregoing custody arrangement, during the Holding Period Executive shall
retain all of the rights of a stockholder with respect to such shares of Common
Stock, including voting and dividend rights. Upon the expiration of the Holding
Period, the Company shall issue and deliver to Executive a stock certificate for
such shares of Common Stock, free and clear of all restrictions hereunder and
without the legends referred to in this paragraph.
5. Employee Benefits. During the Employment Period,
Executive shall be eligible to participate in the employee benefit plans and
programs maintained by the Company from time to time in which senior executives
of the Company are eligible to participate, including to the extent maintained
by the Company life, medical, dental, accidental and disability insurance plans
and profit sharing, pension, retirement, deferred compensation and savings
plans, in accordance with the terms and conditions thereof as in effect from
time to time. The benefits referred to in this Section 5 shall be provided to
Executive on a basis that is commensurate with Executive's position and duties
with the Company.
6. Perquisites and Expenses.
(a) General. During the Employment Period, Executive
shall be eligible to participate in all special benefit or perquisite programs
of the Company generally available from time to time to senior executives of
the Company, on the terms and conditions thereof as in effect from time to
time.
(b) Business Travel, Lodging, etc. During the Employment
Period, the Company shall reimburse Executive for reasonable travel, lodging,
meal and other reasonable expenses incurred by him in connection with the
performance of his duties and responsibilities hereunder upon submission of
evidence, satisfactory to the Company, of the incurrence and purpose of each
such expense and otherwise in accordance with the terms and conditions of the
Company's business expense reimbursement policy applicable to its senior
executives as in effect from time to time.
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(c) Vacation. During the Employment Period, Executive
shall be entitled to paid vacation on an annualized basis in the amount
provided by Company policy.
7. Termination of Employment.
(a) Termination Due to Death or Disability. Executive's
employment may be terminated by the Company due to Executive's Disability (as
defined below). A "Disability" termination shall occur if, because of
Executive's physical or mental incapacity, Executive has been unable for a
period of 180 consecutive days or a non-consecutive period of four months in
any twelve consecutive month period to perform his material duties hereunder
and thereafter the Company gives notice of termination to Executive as a result
thereof prior to Executive's return to full time performance of his material
duties hereunder. If there is disagreement between the parties as to
Executive's Disability, a determination thereof shall be made by a physician
chosen by Executive and reasonably acceptable to the Company. In the event that
Executive's employment hereunder terminates due to his death or is terminated
by the Company due to Executive's Disability, no termination benefits shall be
payable to or in respect of Executive except as provided in Section 7(f) (ii).
(b) Termination by the Company for Cause. Executive's
employment may be terminated by the Company for Cause (as defined in the 2000
Option Plan). In the event of a termination of Executive's employment by the
Company for Cause, no termination benefits shall be payable to or in respect of
Executive except as provided in Section 7(f)(ii).
(c) Termination Without Cause. Executive's employment
may be terminated by the Company Without Cause (as defined below). In the event
of a termination of Executive's employment by the Company Without Cause, no
termination benefits shall be payable to or in respect of Executive except as
provided in Section 7(f)(i). For purposes of this Agreement, a termination
"Without Cause" shall mean a termination of Executive's employment by the
Company other than due to Executive's death or Disability as described in
Section 7(a) and other than for Cause as described in Section 7(b).
(d) Termination by Executive. Executive may terminate
his employment for any reason, including for Good Reason (as defined below). In
the event of a termination of Executive's employment by Executive other than
for Good Reason, no termination benefits shall be payable to or in respect of
Executive except as provided in Section 7(f)(ii) and in the event of a
termination of Executive's employment by Executive for Good Reason, no
termination benefits shall be payable to or in respect of Executive except as
provided in Section 7(f)(i). For purposes of this Agreement, a termination of
employment by Executive for "Good Reason" shall mean a termination by Executive
of his employment with the Company within 30 days following the occurrence,
without Executive's consent, of any of the following events: (i) a material
diminution in the Executive's position or operational duties, authority or
responsibilities for the Company; (ii) a material decrease in the Executive's
base pay, fees, incentive compensation opportunities, and/or employee benefits
and prerequisites; or (iii) a requirement that the Executive relocate his or
her primary place of employment or service by more that 30 miles; provided that
the Executive shall have given the Company notice of the event or events
constituting Good Reason and the Company shall have failed to cure such event
or events within 10 business days after receipt of such notice.
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(e) Notice of Termination; Date of Termination.
(i) Notice of Termination. Any termination by the Company
pursuant to Section 7(a), 7(b) or 7(c), or by Executive pursuant to Section
7(d), shall be communicated by a written Notice of Termination addressed to the
other party to this Agreement. A "Notice of Termination" shall mean a notice
stating that Executive or the Company, as the case may be, is electing to
terminate Executive's employment with the Company, stating the proposed
effective date of such termination, indicating the specific provision of this
Section 7 under which such termination is being effected and, if applicable,
setting forth in reasonable detail the circumstances claimed to provide the
basis for such termination.
(ii) Date of Termination. The term "Date of Termination"
shall mean (i) if Executive's employment is terminated by his death, the date
of his death, (ii) if Executive's employment is terminated by the Company for
Cause, the date on which Notice of Termination is given or, if later, the
effective date of termination specified in such Notice of Termination, and
(iii) except as provided in clause (iv), if Executive's employment is
terminated by the Company Without Cause, due to Executive's Disability or by
Executive for any reason, the date specified in the applicable Notice of
Termination, provided that such date shall not be less than 30 days nor more
than 60 days after the date on which Notice of Termination is given and (iv) if
Executive's employment terminates pursuant to Section 2(a) in connection with
the delivery by either party of a notice of nonrenewal, the applicable date
determined in accordance with Section 2(a). The Employment Period shall expire
on the Date of Termination.
(f) Payments Upon Certain Terminations.
(i) In the event of a termination of Executive's
employment by the Company Without Cause or a termination by Executive of his
employment for Good Reason during the Employment Period, the Company shall pay
to Executive (or, following his death, to Executive's estate) within 30 days of
the Date of Termination his (x) full Base Salary through the Date of
Termination, (y) reimbursement for any unreimbursed business expenses incurred
by Executive prior to the Date of Termination that are subject to reimbursement
pursuant to Section 6(b) and (z) payment for vacation time accrued as of the
Date of Termination but unused (such amounts under clauses (x), (y) and (z),
collectively the "Accrued Obligations"). In addition, in the event of any such
termination of Executive's employment; provided Executive executes and delivers
to the Company a Release and Discharge of Claims substantially in the form
previously provided to Executive in connection with the execution of this
Agreement, Executive (or, following his death, Executive's estate) shall be
entitled to the following payments and benefits:
(A) continued payments of the Base Salary, payable in
installments in accordance with the Company's regular payroll policies,
for the period beginning on the Date of Termination and ending on the
eighteen month anniversary of the Date of Termination (the "Severance
Period");
(B) a portion of Executive's Bonus for the fiscal year
of the Company that includes the Date of Termination, such portion to
equal the product (such product, the "Pro Rata Bonus") of (1) the
Bonus that would have been payable to Executive for such year had he
remained employed for the entire fiscal year and had Executive and the
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Company each achieved (but not exceeded) the target performance
objectives for such year established by the Board or a committee
thereof, multiplied by (2) a fraction, the numerator of which is
equal to the number of days in such fiscal year that precede the Date
of Termination and the denominator of which is equal to 365, such
amount to be payable to Executive within five business days following
the date (the "Bonus Payment Date") annual bonuses for such fiscal
year are actually paid by the Company to its active executives;
(C) payment of an amount equal to 150% of the Average
Annual Bonus (as defined below) within 10 days following the Date of
Termination;
(D) continued coverage during the Severance Period under
the Company's medical and dental insurance plans referred to in
Section 5 (the "Continued Benefits") for Executive and his eligible
dependents participating in such plans immediately prior to the Date
of Termination, subject to timely payment by Executive of all
premiums, contributions and other co-payments required to be paid by
active senior executives of the Company under the terms of such plans
as in effect from time to time;
(E) with respect to any Options and Islands Equity
Awards held by Executive immediately prior to the Date of
Termination, (1) those Options and Island Equity Awards that have not
become vested prior to the Date of Termination and that would, based
solely on Executive's continued employment, have become vested during
the Severance Period but for Executive's termination of employment,
shall continue to vest and become exercisable in accordance with
their respective terms during the Severance Period as though
Executive had continued to be employed by the Company for such
period, (2) all other Options and Island Equity Awards that have not
become vested prior to the Date of Termination shall expire on the
Date of Termination and (3) to the extent vested, outstanding Options
and Island Equity Awards shall be exercisable during the Severance
Period and for the period following the expiration of the Severance
Period ending on the earlier of (x) the normal expiration date of the
applicable Option or Island Equity Award, (y) the 30th day following
the expiration of the Severance Period and (z) any later date
provided in clause (ii) of Section II(a) of the Letter Agreement with
respect to the Island Equity Awards specifically referenced therein;
and
(F) the Holding Period shall expire solely on the
conditions and to the extent provided in Section 4(d) hereof.
The term "Average Annual Bonus" means the average of the
annual cash Bonuses plus the value, as determined by the Board, as of the date
of grant of any non-cash Bonuses paid to Executive under the Annual Incentive
Bonus Plan for each of the three complete fiscal years of the Company ending
immediately prior to the Date of Termination during which Executive was
employed by the Company or, if Executive has been employed by the Company for
an aggregate period of less than three fiscal years, the average of such annual
Bonuses paid to Executive by the Company under the Annual Incentive Bonus Plan
for Executive's period of employment, except that in the event of a termination
by the Company Without Cause or a termination by Executive of his employment
for Good Reason as of a Date of Termination prior to January 1, 2004, the term
"Average Annual Bonus" shall mean an amount equal to $2 million.
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Executive shall not have a duty to mitigate the costs to the
Company under this Section 7 (f) (i), nor shall any payments from the Company
to Executive of Base Salary, Average Annual Bonus and Pro Rata Bonus be
reduced, offset or canceled by any compensation or fees earned by (whether or
not paid currently) or offered to Executive during the Severance Period by a
subsequent employer or other Person (as defined below) for which Executive
performs services, including but not limited to consulting services. The
foregoing notwithstanding, should Executive receive health and medical benefits
coverage by a subsequent employer during the Severance Period, all similar
health and medical benefits coverage provided by the Company to Executive shall
immediately terminate.
(ii) If Executive's employment shall terminate upon his
death or Disability or if the Company shall terminate Executive's employment
for Cause or Executive shall terminate his employment without Good Reason in
any such case during the Employment Period, the Company shall pay to Executive
(or, in the event of Executive's death, to his estate) the Accrued Obligations
within 30 days following the Date of Termination. In addition, if Executive's
employment shall terminate upon his death or Disability during the Employment
Period, the Company shall pay to Executive (or, in the event of Executive's
death, to his estate) the Pro Rata Bonus, if any, in one lump sum within five
business days following the Bonus Payment Date for the fiscal year of the
Company that includes the Date of Termination.
(iii) Except as specifically set forth in this Section
7(f), no benefits payable to Executive under any otherwise applicable plan,
policy, program or practice of the Company or its Affiliates in which Executive
was a participant during his employment with the Company or its Affiliates
shall be limited by this Section 7(f), provided that Executive shall not be
entitled to receive any payments or benefits under any such plan, policy,
program or practice providing any bonus or incentive compensation or severance
compensation or benefits (and the provisions of this Section 7(f) shall
supersede the provisions of any such plan, policy, program or practice).
(g) Resignation upon Termination. Effective as of any
Date of Termination under this Section 7 or otherwise as of the date of
Executive's termination of employment with the Company, Executive shall resign,
in writing, from all Board memberships and other positions then held by him, or
to which he has been appointed, designated or nominated, with the Company and
its Affiliates.
8. Unauthorized Disclosure. During the period of
Executive's employment with the Company and following any termination of such
employment, without the prior written consent of the Board or its authorized
representative, except to the extent required by an order of a court having
jurisdiction or under subpoena from an appropriate government agency, in which
event, Executive shall use reasonable efforts to consult with the Board prior
to responding to any such order or subpoena, and except as required in the
appropriate performance of his duties hereunder, Executive shall not disclose
any confidential or proprietary trade secrets, customer lists, drawings,
designs, programs, software, protocols, information regarding product
development, marketing plans, sales plans, manufacturing plans, management
organization information (including but not limited to data and other
information relating to members of the Board of Directors of the Company or any
of its Affiliates or to management of the Company or any of its Affiliates),
operating policies or manuals, business plans, financial records, packaging
design or other financial, commercial, business or technical information (a)
relating to the
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Company or any of its Affiliates or (b) that the Company or any of its
Affiliates may receive belonging to suppliers, customers or others who do
business with the Company or any of its Affiliates (collectively, "Confidential
Information") to any third person unless such Confidential Information has been
previously disclosed to the public or is in the public domain (other than by
reason of Executive's breach of this Section 8).
9. Non-Competition. During the period of Executive's
employment with the Company and the period of (a) 18 months after the Date of
Termination in the event of termination of Executive's employment by the
Company without Cause or by Executive for Good Reason, or (b) 12 months after
the Date of Termination in the event of termination of Executive's employment
for any other reason (such periods, collectively, the "Restriction Period"),
Executive shall not, directly or indirectly, become employed by, engage in
business with, serve as an agent or consultant to, or become a partner, member,
principal, stockholder or other owner of, any Person that competes anywhere in
the Restricted Territory, with the Business (as defined below); provided
however, that the foregoing shall not prohibit Executive from (i) holding five
percent (5%) or less of an interest in the equity or debt securities of any
publicly traded company; (ii) after the Employment Term, working for a
competing entity in a noncompeting division or subsidiary or (iii) engaging in
any activity with the prior written approval of the Board.
10. Non-Solicitation of Employees. During the
Restriction Period, Executive shall not, directly or indirectly, for his own
account or for the account of any other Person, anywhere in the Restricted
Territory, (i) solicit for employment, employ or otherwise interfere with the
relationship of the Company or any of its Affiliates with any natural person
throughout the world (x) who is or was employed by or otherwise engaged to
perform services for the Company or any of its Affiliates at any time during
which Executive was employed by the Company (in the case of any such activity
by Executive during the period of Executive's employment with the Company) or
(y) who is or was employed by or otherwise engaged to perform services for the
Company or any of its Affiliates at any time during the six-month period
preceding such solicitation, employment or interference (in the case of any
such activity by Executive after the date of Executive's termination of
employment), other than any such solicitation or employment on behalf of the
Company or its Affiliates during Executive's employment with the Company, or
(ii) induce any employee of the Company or its Affiliates who is a member of
management to engage in any activity which Executive is prohibited from
engaging in under any of Sections 8, 9, 10 or 11 or to terminate his employment
with the Company. For purposes of this Section 10 and Section 11, the terms
"solicit" and "solicitation" mean 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.
11. Non-Solicitation of Customers. During the
Restriction Period, Executive shall not, directly or indirectly, for his own
account or for the account of any other Person, anywhere in the Restricted
Territory, solicit or otherwise attempt to establish any business relationship
of a nature that is competitive with the business or relationship of the
Company or any of its Affiliates with any Person (x) which is or was a customer
or client of the Company or any of its Affiliates at any time during which
Executive was employed by the Company (in the case of any such activity by
Executive during the period of Executive's employment with the Company) or (y)
which is or was a customer or client of the Company or any of its Affiliates at
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any time during the twelve-month period preceding the Date of Termination (in
the case of any such activity by Executive after the date of Executive's
termination of employment), other than any such solicitation on behalf of the
Company or any of its Affiliates during Executive's employment with the Company.
12. Return of Documents. In the event of the termination
of Executive's employment for any reason, Executive shall deliver to the
Company all of the property of the Company and its Affiliates and the
non-personal documents and data of any nature and in whatever medium of each of
the Company and its Affiliates, and he shall not take with him any such
property, documents or data or any reproduction thereof, or any documents
containing or pertaining to any Confidential Information.
13. Work Product. Executive agrees to disclose in
confidence to the Company any and all inventions, improvements, designs,
original works of authorship, formulas, processes, computer software programs,
databases and trade secrets (including, but not limited to, market information
and marketing designs, proposals and concepts) (all taken together, the
"Developments") that Executive makes, conceives, first reduces to practice, or
creates, either alone or jointly with others while Executive is employed by the
Company and that: (a) result from any work performed by Executive for the
Company, whether or not in the normal course of Executive's duties or during
normal business hours; (b) reasonably relate to the actual or anticipated
business, services, products, research or development of Executive; or (c) are
developed with the use of the Company time, equipment, supplies or facilities.
Executive must promptly disclose Developments to the Company whether or not
such Developments are patentable, copyrightable or protectible as trade
secrets. Executive understands and agrees that all Developments shall be the
sole and exclusive property of the Company and shall constitute "work made for
hire" (as that term is defined under Section 101 of the U.S. Copyright Act, 17
U.S.C. Section 101) with the Company being the person for whom the work was
prepared and that all intellectual property rights therein shall be the sole
and exclusive property of the Company, and that in the event that any such
Development is deemed not to be a "work made for hire," Executive hereby
irrevocably assigns, transfers and conveys to the Company, exclusively and
perpetually, all right, title and interest which Executive may have or acquire
in and to such Development throughout the world, including without limitation
any copyrights and patents, and the right to secure registrations, renewals,
reissues, and extensions thereof. Executive agrees to sign any documents and to
do all things necessary, without additional compensation, whether during
Executive's employment or after, to assist the Company to register, perfect,
maintain and/or enforce the Company's rights in any Development, including
without limitation any patent, copyright, trade secret or other right or
interest.
14. Injunctive Relief with Respect to Covenants; Forum,
Venue and Jurisdiction. Executive acknowledges and agrees that the covenants,
obligations and agreements of Executive contained in Sections 8, 9, 10, 11, 12
and 13 relate to special, unique and extraordinary matters and that a violation
of any of the terms of such covenants, obligations or agreements will cause the
Company irreparable injury for which adequate remedies are not available at
law. Therefore, Executive agrees that the Company shall be entitled to an
injunction, restraining order or such other equitable relief (without the
requirement to post bond) as a court of competent jurisdiction may deem
necessary or appropriate to restrain Executive from committing any violation of
such covenants, obligations or agreements. These injunctive
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remedies are cumulative and in addition to any other rights and remedies the
Company may have. The Company and Executive hereby irrevocably submit to the
exclusive jurisdiction of the courts of New York, and the Federal courts of the
United States of America, in each case located in New York City in respect of
the injunctive remedies set forth in this Section 14 and the interpretation and
enforcement of Sections 8, 9, 10, 11, 12, 13 and 14 insofar as such
interpretation and enforcement relate to any request or application for
injunctive relief in accordance with the provisions of this Section 15, and the
parties hereto hereby irrevocably agree that (a) the sole and exclusive
appropriate venue for any suit or proceeding relating solely to such injunctive
relief shall be in such a court, (b) all claims with respect to any request or
application for such injunctive relief shall be heard and determined
exclusively in such a court, (c) any such court shall have exclusive
jurisdiction over the person of such parties and over the subject matter of any
dispute relating to any request or application for such injunctive relief, and
(d) each hereby waives any and all objections and defenses based on forum,
venue or personal or subject matter jurisdiction as they may relate to an
application for such injunctive relief in a suit or proceeding brought before
such a court in accordance with the provisions of this Section 14. All disputes
not relating to any request or application for injunctive relief in accordance
with this Section 14 shall be resolved by arbitration in accordance with
Section 17(b).
Notwithstanding any other provision hereof, the Company's
obligations to pay Executive any amount or provide Executive with any benefit or
right pursuant to Section 7(f) is subject to Executive's compliance with his
obligations under Sections 8 through 14, inclusive, and in the event that
Executive fails in any material respect to comply with any such obligations, the
Company's obligations to make any additional payments or provide any additional
benefits or other rights or entitlements to Executive pursuant to any provision
of this Agreement shall immediately cease and Executive shall be required to
immediately repay to the Company all amounts theretofore paid to Executive
pursuant to Section 7(f).
15. Assumption of Agreement. The Company shall require
any Successor thereto, by agreement in form and substance reasonably
satisfactory to Executive, to expressly assume 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. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as
Executive would be entitled hereunder if the Company had terminated Executive's
employment Without Cause as described in Section 7, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
16. Indemnification. The Company agrees both during and
after the Employment Term to indemnify Executive to the fullest extent
permitted by its Certificate of Incorporation against actions or inactions of
Executive during the Employment Term as an officer, director or employee of the
Company or any of its Subsidiaries or Affiliates or as a fiduciary of any
benefit plan of any of the foregoing. The Company also agrees to provide
Executive with directors and officers insurance coverage both during and, with
regard to matters occurring during the Employment Term after the Employment
Term. Such coverage shall be at a level at least equal to the level being
maintained at such time for the then current officers and directors or, if then
being maintained at a higher level with regard to any prior period activities
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for officers or directors during such prior period, such higher amount with
regard to Executive's activities during such prior period.
17. Entire Agreement; Survival of Letter Agreement.
(a) Entire Agreement. This Agreement (including the Schedules hereto), together
with the Surviving Provisions of the Letter Agreement (as defined below),
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof. All prior correspondence and proposals (including but
not limited to summaries of proposed terms) and all prior promises,
representations, understandings, arrangements and agreements relating to such
subject matter (including but not limited to those made to or with Executive by
any other Person and those contained in any prior employment, consulting or
similar agreement entered into by Executive and the Company or any predecessor
thereto or Affiliate thereof) are merged herein and superseded hereby, other
than the Surviving Provisions of the Letter Agreement.
(b) Survival of Letter Agreement. From and after the
date hereof, all of the Surviving Provisions of the Letter Agreement shall
continue in full force and effect in accordance with their terms and shall be
deemed incorporated herein by reference as if fully set forth herein. For
purposes hereof, the term "Surviving Provisions of the Letter Agreement" shall
mean all of the terms and provisions of the Letter Agreement, other than
Section III of the Letter Agreement and Exhibit A to the Letter Agreement.
18. Miscellaneous.
(a) Binding Effect; Assignment. This Agreement shall be
binding on and inure to the benefit of the Company and its successors and
permitted assigns. This Agreement shall also be binding on and inure to the
benefit of Executive and his heirs, executors, administrators and legal
representatives. This Agreement shall not be assignable by any party hereto
without the prior written consent of the other parties hereto, except as
provided pursuant to this Section 18(a). The Company may effect such an
assignment without prior written approval of Executive upon the transfer of all
or substantially all of its business and/or assets (by whatever means), provided
that the Successor to the Company shall expressly assume and agree to perform
this Agreement in accordance with the provisions of Section 15.
(b) Arbitration. Any dispute or controversy arising
under or in connection with this Agreement (except in connection with any
request or application for injunctive relief in accordance with Section 14)
shall be resolved by binding arbitration. The arbitration shall be held in New
York City and, except to the extent inconsistent with this Agreement, shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect at the time of the arbitration, and
otherwise in accordance with principles which would be applied by a court of
law or equity. The arbitrator shall be acceptable to both the Company and
Executive. If the parties cannot agree on an acceptable arbitrator, the dispute
shall be heard by a panel of three arbitrators, one appointed by the Company,
one appointed by Executive, and the third appointed by the other two
arbitrators. All expenses of arbitration shall be borne by the party who incurs
the expense, or, in the case of joint expenses, by both parties in equal
portions.
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(c) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
reference to principles of conflicts of laws.
(d) Taxes. The Company may withhold from any payments
made under this Agreement all applicable taxes, including but not limited to
income, employment and social insurance taxes, as shall be required by law.
(e) Amendments. No provision of this Agreement may be
modified, waived or discharged unless such modification, waiver or discharge is
approved by the Board or a Person authorized thereby and is agreed to in
writing by Executive. No waiver by any party hereto at any time of any breach
by any 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. No waiver of any provision of this Agreement shall be implied
from any course of dealing between or among the parties hereto or from any
failure by any party hereto to assert its rights hereunder on any occasion or
series of occasions.
(f) Severability. In the event that any one or more of
the provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
(g) Notices. Any notice or other communication required
or permitted to be delivered under this Agreement shall be (i) in writing, (ii)
delivered personally, by courier service or by certified or registered mail,
first-class postage prepaid and return receipt requested, (iii) deemed to have
been received on the date of delivery or, if so mailed, on the third business
day after the mailing thereof, and (iv) addressed as follows (or to such other
address as the party entitled to notice shall hereafter designate in accordance
with the terms hereof):
(A) If to the Company, to it at:
Office of the General Counsel
Instinet Group Incorporated
3 Times Square
New York, New York 10036
Attention: Paul Merolla
Telephone: 212-310-7548
Facsimile: 646-223-9017
(B) if to Executive, to him at his residential address
as currently on file with the Company.
(h) Voluntary Agreement; No Conflicts. Executive
represents that he is entering into this Agreement voluntarily and that
Executive's employment hereunder and compliance with the terms and conditions
of this Agreement will not conflict with or result in the breach by Executive
of any agreement to which he is a party or by which he or his properties or
assets may be bound.
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(i) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
(j) Headings. The section and other headings contained
in this Agreement are for the convenience of the parties only and are not
intended to be a part hereof or to affect the meaning or interpretation hereof.
(k) Certain Definitions.
"Affiliate": with respect to any Person, means any other
Person that, directly or indirectly through one or more intermediaries,
Controls, is Controlled by, or is under common Control with the first Person,
including but not limited to a Subsidiary of the first Person, a Person of which
the first Person is a Subsidiary, or another Subsidiary of a Person of which the
first Person is also a Subsidiary.
"Business": means the creation and delivery of transactional
products and products related to the financial services sector and brokerage
services related thereto delivered largely, but not exclusively, through
advanced technology, that permit or aid the Company's customers to invest in,
purchase and sell securities (whether fixed income or equity, both during normal
market hours and after hours), and any and all other businesses that after the
date hereof, and from time to time during the Employment Period, are material
with respect to the Company's and its Affiliates' businesses.
"Control": with respect to any Person, means the possession,
directly or indirectly, severally or jointly, of the power to direct or cause
the direction of the management policies of such Person, whether through the
ownership of voting securities, by contract or credit arrangement, as trustee or
executor, or otherwise.
"Person": any natural person, firm, partnership, limited
liability company, association, corporation, company, trust, business trust,
governmental authority or other entity.
"Subsidiary": with respect to any Person, each corporation or
other Person in which the first Person owns or Controls, directly or indirectly,
capital stock or other ownership interests representing 50% or more of the
combined voting power of the outstanding voting stock or other ownership
interests of such corporation or other Person.
"Successor": of a Person means a Person that succeeds to the
first Person's assets and liabilities by merger, liquidation, dissolution or
otherwise by operation of law, or a Person to which all or substantially all the
assets and/or business of the first Person are transferred.
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IN WITNESS WHEREOF, the Company has duly executed this
Agreement by its authorized representatives, and Executive has hereunto set his
hand, in each case effective as of the date first above written.
INSTINET GROUP INCORPORATED
By: /s/ Mark D. Nienstedt
------------------------------------
Name: Mark D. Nienstedt
Title: Acting President and CEO
Executive:
/s/ Edward J. Nicoll
---------------------------------------
Name: Edward J. Nicoll
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