Employment Agreement [Amendment] - National Association of Securities Dealers Inc. and Frank G. Zarb
INSTRUMENT OF AMENDMENT
INSTRUMENT OF AMENDMENT, effective as of November 1, 2000 (the
"Amendment"), between NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (the
"Association") and FRANK G. ZARB ("Zarb") to the employment agreement
effective on February 24, 1997, as amended effective March 18, 1998, and
subsequently amended as of August, 1999, on March 30, 2000, and as of July
27, 2000, between the Association and Zarb (the "Employment Agreement").
W I T N E S S E T H:
WHEREAS, the Association and Zarb have entered into the Employment
Agreement;
WHEREAS, Paragraph 26 of the Employment Agreement provides that
the Employment Agreement may be amended by the mutual consent of the
parties which consent must be evidenced by a document executed with the
same formality as the Employment Agreement;
WHEREAS, the Employment Agreement will continue in effect until
February 24, 2001, unless earlier terminated in accordance with its terms;
WHEREAS, Paragraph 4 of the Employment Agreement provides that the
Employment Agreement may be extended beyond such stated term by written
agreement of Zarb and the Association;
WHEREAS, the Association and Zarb desire to amend the Employment
Agreement to extend the Employment Agreement for one year beyond such
stated term to allow the Association to select and appoint an individual to
succeed Zarb as the Chairman and Chief Executive Officer of The Nasdaq
Stock Market, Inc. and to provide a transition period for such succession,
and, in addition, to amend the Employment Agreement as otherwise provided
herein;
WHEREAS, the Employment Agreement provides that the Association
shall provide Zarb with certain post-retirement benefits for a period of
three years after the completion of the term of the Employment Agreement in
exchange for his agreement to provide certain post-retirement consulting
services during such three-year period; and
WHEREAS, the Association and Zarb wish to modify the Employment
Agreement to extend the period in which the Association shall provide Zarb
with such post-retirement benefits and in which Zarb shall provide such
post-retirement consulting services to the Association for two years beyond
such stated term, and, in addition, to amend the Employment Agreement as
otherwise provided herein.
NOW, THEREFORE, it is agreed that the Employment Agreement is
hereby amended in the following manner:
1. Paragraph 1(b) of the Employment Agreement is amended hereby
to read, in its entirety, as follows:
"(b) The foregoing subparagraph (a) of this
Paragraph 1 to the contrary notwithstanding, Zarb shall
relinquish his duties or positions as Chairman and Chief
Executive Officer of the Association during the
Additional Term (as hereinafter defined) if, his
successor being duly appointed, the Association and Zarb
mutually determine that such relinquishment may
facilitate his successor's transition to such office;
however, neither such relinquishment nor Zarb's
relinquishment of his duties or positions as Chairman and
Chief Executive Officer of The Nasdaq Stock Market, Inc.
shall be considered a termination of the Term and shall
have no effect on the Association's obligation to
continue to pay and provide Zarb the compensation and
benefits otherwise provided for in this Agreement for the
remainder of the Term. Zarb agrees to make himself
available for the balance of the Term upon reasonable
prior notice to provide consulting services to the
Association on matters relating to the nature and scope
of his duties prior to relinquishment of his duties or
positions pursuant to this Paragraph 1(b)."
2. Paragraph 2(a) of the Employment Agreement is amended hereby
to read, in its entirety, as follows:
"(a) The Association shall pay Zarb for his
services hereunder an annual base salary of: (i)
$1,200,000 from the commencement of the Term (as defined
in Paragraph 3) through October 31, 2000, and (ii)
$2,000,000 during the period commencing on November 1,
2000 through the remainder of the Term (as defined in
Paragraph 3), which annual base salary shall be payable
during the year in approximately equal periodic
installments as may be agreed upon by the Association and
Zarb. In addition, the Association shall annually pay
Zarb such incentive compensation as the Management
Compensation Committee of the Association may award in
its discretion, provided that the amount of such
compensation for each full year of service during the
Term (as defined in Paragraph 3) shall not be not less
than fifty percent (50%) of Zarb's base salary for such
year, and provided further that such compensation for the
second year of the Additional Term (as defined in
Paragraph 3) shall be no less than $4,000,000.
Furthermore, to the extent that the Association grants
Zarb stock options prior to the termination of the Term
(as defined in Paragraph 3), such options shall fully
vest upon the termination of the Term and shall be
exercisable during the three (3) month period
thereafter."
3. The first sentence in Paragraph 2(b) of the Employment
Agreement is amended hereby to read, in its entirety,
as follows:
"(b) Notwithstanding any provision of this
Paragraph 2 to the contrary, during the first year of the
Additional Term, the aggregate annual base salary and
incentive compensation paid to Zarb by the Association
shall not be less than such aggregate annual amount paid
to Zarb for the second or third year of the Initial Term,
whichever was greater."
4. Paragraph 2 of the Employment Agreement is further amended
hereby by adding new subparagraph (c) thereof to read, in
its entirety, as follows:
"(c) Notwithstanding any provision of this
Paragraph 2 to the contrary, during the second year of
the Additional Term, the aggregate annual base salary and
incentive compensation paid to Zarb by the Association
shall not be less than such aggregate annual amount paid
to Zarb for the third year of the Initial Term or the
first year of the Additional Term, whichever was
greater."
5. Paragraph 3 of the Employment Agreement is amended by
deleting so much of such paragraph as precedes subparagraph
(a) thereof and substituting the following in lieu thereof:
"This Agreement shall continue in effect for an initial
term of three (3) years from the Effective Date (the
"Initial Term") and for an additional two (2) years
commencing immediately upon the close of the Initial Term
(the "Additional Term"), and the Initial Term together
with the Additional Term shall be referred to herein as
the "Term," subject to earlier termination in one of the
following ways:"
6. Paragraph 5(b) of the Employment Agreement is amended hereby
to read, in its entirety, as follows:
"(b) Upon completion of the Term and for a period
of five years thereafter, the Association shall indemnify
and hold Zarb harmless to the fullest extent permitted by
applicable law with regard to any action or inaction of
Zarb as an officer, director or employee of the
Association or as a fiduciary of any benefit plan of the
Association; and further upon completion of the Term and
for a period of five years thereafter, Zarb shall be
entitled to receive at the Association's expense: (i) the
full-time and exclusive use of an automobile of his
choice and driver; (ii) appropriate office and
secretarial services; (iii) payment or reimbursement of
dues, initiation and other fees and charges for various
clubs in the New York City and/or Washington, D.C.,
metropolitan areas upon presentation of appropriate
receipts or other documentation (in the case of this
clause (iii), not exceeding $20,000 for any year); (iv)
upon presentation of appropriate receipts or vouchers in
a manner consistent with the expense substantiation
policy of the Association generally applicable to its
executive officers and in accordance with the provisions
of such policy regarding the timing and amount of expense
reimbursements, payment or reimbursement of reasonable
business-related expenses incurred, including, but not
limited to, expenses for such items as entertainment,
travel, hotels, and meals, as well as for the travel,
hotel, and meals of Zarb's wife on those occasions when
the proper representation of the Association makes it
advisable for her to accompany him, provided that in the
case of travel, hotel, and meals for Zarb's wife, the
reimbursements provided under this clause (iv) shall
include such amounts as may be necessary for Zarb to pay
any taxes imposed with respect to such reimbursements
(which amounts shall be paid to Zarb by January 31 of the
year following the year in which the expenses were
incurred); (v) an appropriate efficiency apartment in the
Washington D.C. metropolitan area; (vi) an appropriate
corporate apartment in the Borough of Manhattan, New York
City; (vii) to ensure the personal safety of Zarb and his
wife, at such times and as reasonably required by the
circumstances, a personal bodyguard for Zarb and his wife
and/or surveillance of his personal residences and/or
other reasonable method of security; (viii) a T1-line
telephone system connected to the telephone system of the
Association and appropriate maintenance thereof and a
home security system in each of his residences in the New
York City metropolitan area and Florida; and (ix)
reimbursement of Zarb for the annual expenses he incurs
for personal financial and tax counseling, provided that
the amount of such reimbursement for any calendar year
shall not exceed $50,000; (x) reimbursement of Zarb for
any legal fees and expenses incurred in the negotiation
of this Agreement, provided that the amount of such
reimbursement for any calendar year shall not exceed
$20,000, and, in the event of any dispute between Zarb
and the Association under this Agreement which is wholly
or partly resolved in Zarb's favor, reimbursement of Zarb
for reasonable legal fees and expenses incurred in
connection with such dispute, provided that the
reimbursement provided under this clause (x) shall
include such amounts as may be necessary for Zarb to pay
any taxes imposed with respect to such reimbursements;
and (xi) an annual consulting fee of $100,000, which
shall be payable during the year in approximately equal
periodic installments as may be agreed upon by the
Association and Zarb; and provided further that Zarb's
receipt of the benefits described in this subparagraph
(b) shall be contingent upon Zarb's agreement to make
himself available to provide the consulting services set
forth in subparagraph (c) below."
7. Paragraphs 5(c) and (d) of the Employment Agreement are
further amended hereby to read, in their entirety, as
follows:
"(c) Upon completion of the Term and in
consideration of the Association's agreement to provide
the benefits described in subparagraph (b) above, Zarb
agrees to make himself available for a period of five
years thereafter upon reasonable prior notice to provide
consulting services to the Chief Executive Officer of the
Association on matters relating to the nature and scope
of his duties during the Term; provided, however, that in
no event shall Zarb be required to provide such
consulting services for more than 100 hours during any 12
month period (including travel time associated with such
consulting services).
(d) Notwithstanding the foregoing, the obligations
of the Association and Zarb under subparagraphs (b) and
(c) above shall cease prior to the end of the five year
period reflected in subparagraph (c) if Zarb commences
employment with another employer (or if Zarb becomes
re-employed by the Association)."
8. The first sentence of Paragraph 10(b) of the Employment
Agreement is hereby amended to read in its entirety as
follows:
"(b) If Zarb transfers his principal residence
from the Washington, D.C., metropolitan area to the New
York City metropolitan area in connection with his
employment under this Agreement, the Association shall
reimburse Zarb for: (i) moving expenses (within the
meaning of Section 217(b) of the Internal Revenue Code)
incurred in connection with the establishment of his
principal residence in the New York City metropolitan
area and the establishment of any interim residence in
the New York City metropolitan area prior to the
establishment of his principal residence; (ii) airfare
expenses incurred by Zarb and Zarb's wife in connection
with locating and establishing such residences in the New
York City metropolitan area; (iii) the cost of installing
and maintaining a T1-line telephone system connected to
the telephone system of the Association and, to ensure
his personal safety, the cost of installing and
maintaining a home security system in each of his
residences in the New York City metropolitan area and
Florida (if recommended by an independent security
study); (iv) the cost of an appropriate efficiency
apartment in the Washington D.C., metropolitan area
during the remaining Term; and (v) the cost of an
appropriate corporate apartment in the Borough of
Manhattan, New York City during the remaining Term."
9. Paragraph 12 of the Employment Agreement is hereby amended
to read, in its entirety, as follows:
"The Association shall reimburse Zarb for the
annual expenses he incurs for personal financial and tax
counseling, provided that the amount of such
reimbursement for any calendar year shall not exceed
$50,000."
10. All of the terms and conditions of the Employment Agreement
as amended by this Instrument of Amendment shall remain in
full force and effect throughout the term thereof and, to
the extent applicable, for five years thereafter.
IN WITNESS WHEREOF, the corporate party hereto has caused this
Instrument of Amendment to be duly executed and delivered on the date
indicated below, and the individual party hereto has executed and delivered
this Instrument of Amendment on the date indicated below, effective for all
purposes on November 1, 2000.
NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC.
_____________________ By_____________________________
Date Chairman of the Management
Compensation Committee
(Corporate Seal)
--------------------- -------------------------------
Date Frank G. Zarb