Employment Agreement [Amendment] - National Association of Securities Dealers Inc., NASDAQ Stock Market Inc. and Frank G. Zarb
INSTRUMENT OF AMENDMENT
INSTRUMENT OF AMENDMENT effective as of April 25, 2001 (the
"Amendment"), between NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (the
"Association"), The Nasdaq Stock Market, Inc. (the "Nasdaq") and FRANK G.
ZARB ("Zarb") to the employment agreement effective on February 24, 1997,
as subsequently amended effective March 18, 1998, August 20, 1999, March
30, 2000, July 27, 2000 and November 1, 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 Association, Zarb and the Nasdaq wish to modify the
Employment Agreement so that the Nasdaq is a party to the Employment
Agreement; and
WHEREAS, the Association, the Nasdaq and Zarb wish to modify the
Employment Agreement in order to more clearly express the intention to
provide Zarb with certain benefits upon the relinquishment of his duties
and positions as Chairman and Chief Executive Officer of the Association,
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 hereby amended
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 (i) to
continue to pay and provide Zarb the compensation and
benefits otherwise provided for in this Agreement for the
remainder of the Term, including, but not limited to,
accruing benefits under the Supplemental Retirement Plan
or (ii) effective February 24, 2002, to pay and provide
the compensation and benefits to which Zarb would have
been entitled upon completion of the Term if he had not
earlier relinquished his duties or positions pursuant to
this Paragraph 1(b). Zarb agrees to make himself
available for the balance of the Term upon reasonable
prior notice to provide 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 hereby amended
by replacing the last sentence thereof with the following:
"Furthermore, The Nasdaq Stock Market, Inc. (the
"Nasdaq") shall fully vest all stock options granted to
Zarb upon the earlier of (i) the termination of the Term
or (ii) Zarb's relinquishment of his position and duties
pursuant to Paragraph 1(b) and shall permit the exercise
of the options during the three (3) month period
thereafter for incentive stock options (as defined in
Section 422 of the Internal Revenue Code of 1986, as
amended) and during the five (5) year period thereafter
for all other stock options. Also, the Nasdaq shall cause
all restrictions on any restricted stock awarded to Zarb
by the Nasdaq to lapse upon the earlier of (i) the
termination of the Term or (ii) Zarb's relinquishment of
his position and duties pursuant to Paragraph 1(b)."
3. Paragraph 5(a) of the Employment Agreement is hereby amended
to read in its entirety as follows:
"(a) Zarb shall be a "Grandfathered Participant"
in the National Association of Securities Dealers, Inc.
Supplemental Executive Retirement Plan (the "Supplemental
Retirement Plan") (capitalized terms used in this
Paragraph 5(a), but not otherwise defined in this
Agreement shall have the meanings given such terms in the
Supplemental Retirement Plan). Upon completion of the
Initial Term or as otherwise provided in Paragraphs 6 or
7, Zarb shall be entitled to a Retirement Benefit, as if
he has fully satisfied the Supplemental Retirement Plan's
eligibility and vesting requirements for a full
Retirement Benefit. Such Retirement Benefit shall be
equal to six percent (6%) of Zarb's Final Average
Compensation multiplied by the number of Years of Service
attained by Zarb through February 24, 2002, or his
earlier termination of employment other than as a result
of his relinquishment of his position and duties pursuant
to Paragraph 1(b) hereof, less any vested benefit that he
accrued under the NASD Retirement Plan. Zarb's Final
Average Compensation, for purposes of the Supplemental
Retirement Plan, shall be computed for the entire period
of his actual service with the Association, including
service after his relinquishment of his position and
duties pursuant to Paragraph 1(b) hereof. Notwithstanding
the foregoing to the contrary, Zarb's Retirement Benefit
as aforesaid shall not be less than the supplemental
retirement benefit to which he would have been entitled
upon his termination of employment under the terms of
this Agreement as in effect immediately following the
amendment of this Agreement dated March 18, 1998. Except
as otherwise provided in Paragraph 6 or 7, Zarb shall not
be entitled to receive any Retirement Benefit under this
Paragraph 5(a) if his employment with the Association
terminates prior to his completion of the Initial Term.
The Association shall pay the Retirement Benefit to Zarb
in a lump-sum (i) within fifteen (15) days after February
24, 2002, (ii) within fifteen (15) days after his earlier
termination of employment other than as a result of his
relinquishment of his position and duties pursuant to
Paragraph 1(b) hereof, or (iii) at such other time as
provided in Paragraph 6 or 7."
4. Paragraph 5(b) of the Employment Agreement is hereby amended
to read in its entirety as follows:
"On February 24, 2002, unless Zarb earlier
terminates his employment, other than as a result of his
relinquishment of his position and duties pursuant to
Paragraph 1(b) hereof, and for a period of five years
thereafter, (X) the Association and the Nasdaq 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, employee or
consultant of the Association or the Nasdaq or as a
fiduciary of any benefit plan of the Association or the
Nasdaq and (Y) Zarb shall be entitled to receive at the
Nasdaq'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 Nasdaq 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 Nasdaq
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 Nasdaq 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 and/or
the Nasdaq 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 Nasdaq and Zarb; and provided
further that Zarb's receipt of the benefits described in
clause (Y) of 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."
5. Paragraph 5(c) of the Employment Agreement is hereby amended
to read in its entirety as follows:
"On February 24, 2002, unless Zarb earlier
terminates his employment, other than as a result of his
relinquishment of his position and duties pursuant to
Paragraph 1(b) hereof, and in consideration of the
Nasdaq's agreement to provide the benefits described in
clause (Y) of subparagraph 5(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
Nasdaq 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).
6. 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.
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 April 25, 2001.
NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC.
_____________________ By_____________________________
Date Chairman of the Management
Compensation Committee
(Corporate Seal)
The Nasdaq Stock Market, Inc.
_____________________ By_____________________________
Date Chairman of the Management
Compensation Committee
(Corporate Seal)
--------------------- -------------------------------
Date Frank G. Zarb