PURCHASE AND SALE AGREEMENT PURCHASE AND SALE AGREEMENT made this 23rd day of March 2001 (this "Agreement"), by and among National Association of Securities Dealers, Inc., a Delaware corporation (the "NASD"), and The Nasdaq Stock Market, Inc., a Delaware corporation ("Nasdaq"). WHEREAS, the NASD is the owner of 95,454,209 shares of the common stock, par value $.01 per share, of Nasdaq (the "Common Stock"); WHEREAS, in furtherance of enabling Nasdaq and the NASD to meet a principal goal of the restructuring of Nasdaq--the reduction of the NASD's ownership of Nasdaq--as well as to assist the NASD in fulfilling its commitment to attempt to eliminate its ownership interest in Nasdaq by June 2002, the NASD desires to sell and Nasdaq desires to purchase, 18,461,538 shares of Common Stock (the "Shares") on the terms and subject to the conditions provided for herein; WHEREAS, Nasdaq and Hellman & Friedman Capital Partners IV, L.P. and its affiliates (collectively, "H&F") have entered into a letter of intent whereby Nasdaq has agreed to issue, and H&F has agreed to purchase (the "H&F Transaction"), $240,000,000 aggregate principal amount of Nasdaq's 4% convertible subordinated debentures (the "Debentures"); and WHEREAS, Nasdaq intends to use substantially all the proceeds from the H&F Transaction to purchase the Shares on the terms and subject to the conditions provided for herein. NOW, THEREFORE, in consideration of the provisions contained herein, the parties hereto agree as follows: 1. PURCHASE AND SALE OF THE SHARES. 1.01 Sale of the Shares. On the terms and subject to the conditions contained herein, the NASD agrees to sell to Nasdaq and Nasdaq agrees to buy from the NASD the Shares at the Closing described in Section 2 hereof. 1.02 Delivery of the Shares. At the Closing, the NASD shall deliver to Nasdaq validly issued certificates representing the Shares duly endorsed in blank or accompanied by stock powers duly executed in blank, with all necessary stock transfer stamps affixed thereto. 1.03 Purchase Price. The purchase price for the Shares shall be $13 per Share for an aggregate purchase price of $239,999,994 (the "Purchase Price"). 1.04 Payment of the Purchase Price. At the Closing, Nasdaq shall pay to the NASD the Purchase Price by wire transfer of immediately available funds to an account specified by the NASD for such purpose. 2. THE CLOSING; COVENANTS. 2.01 Closing. The closing of the purchase and sale of the Shares provided for in this Agreement (the "Closing") shall take place at the offices of The Nasdaq Stock Market, Inc., 33 Whitehall Street, New York, New York, 10004, at 10 a.m. on the third business day after satisfaction of all the conditions provided for in Sections 5 and 6 hereof, other than those that are satisfied on the Closing Date, or at such other place and time as the parties hereto shall agree in writing (the time and date of such Closing being referred to herein as the "Closing Date"). 2.02 Further Actions. The parties hereto agree to use their reasonable best efforts to have the Closing occur as soon as practicable consistent with the provisions of this Agreement. 2.03 Charter Amendment. The NASD agrees that it shall, at any meeting (whether annual or special and whether or not an adjourned or postponed meeting) of stockholders of Nasdaq, however called, vote or consent, in person or by proxy, all shares of Common Stock owned by it, in favor of an amendment to the Restated Certificate of Incorporation of Nasdaq to permit the holders of the Debentures to vote on an as-converted basis on all matters that holders of Common Stock have the right to vote, subject to the five percent voting limitation that applies to all other stockholders. 2.04 Investor Rights Agreement. The parties hereto agree to negotiate in good faith an investor rights agreement (the "Investor Rights Agreement") having substantially the same terms as those set forth on the term sheet attached hereto as Exhibit I (the "Term Sheet") as well as other such customary terms as may be agreed upon by the parties. 2.05 Voting Agreement. At any meeting of Nasdaq's stockholders held prior to the date upon which Nasdaq becomes registered to operate as a national securities exchange by the Securities and Exchange Commission, the NASD agrees to vote all shares of Common Stock held by it in favor of the nominee for election to the Board of Directors of Nasdaq designated by H&F in connection with the H&F Transaction. 3. REPRESENTATIONS AND WARRANTIES OF THE NASD. The NASD represents and warrants to Nasdaq as follows: 3.01 Organization and Standing. The NASD is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. 3.02 Binding Agreement. This Agreement will be duly and validly executed and delivered on behalf of the NASD and, assuming due authorization, execution and delivery by Nasdaq, will constitute the legal and binding obligation of the NASD enforceable against the NASD in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and to general equity principles (whether considered in a proceeding in equity or at law). 3.03 Title to Shares. The NASD has good and valid title to the Shares, free and clear of all liens, charges, claims, security interests, restrictions, options, proxies, voting trusts or other encumbrances (each an "Encumbrance"). Assuming Nasdaq has the requisite power and authority to be lawful owner of the Shares, upon delivery to Nasdaq at the Closing of certificates representing the Shares, and upon the NASD's receipt of the Purchase Price for the Shares, Nasdaq will acquire all of the NASD's right, title and interest in and to the Shares being sold to it and will receive good and valid title to the Shares, free and clear of any and all Encumbrances. 3.04 Required Approvals, Notices and Consents. No material consent or approval of, other action by, or any notice to, any governmental body or agency, domestic or foreign, or any third party is required in connection with the execution and delivery by the NASD of this Agreement or the consummation by the NASD of the transaction contemplated hereby. 4. REPRESENTATIONS AND WARRANTIES OF NASDAQ. Nasdaq represents and warrants to the NASD as follows: 4.01 Organization and Standing. Nasdaq is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. 4.02 Binding Agreement. This Agreement will have been duly and validly authorized, executed and delivered by Nasdaq and, assuming due authorization, execution and delivery by the NASD, will constitute the legal and binding obligation of Nasdaq enforceable against Nasdaq in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other laws relating to or affecting creditors' rights generally and to general equity principles (whether considered in a proceeding in equity or at law). 4.03 Required Approvals, Notices and Consents. No material consent or approval of, other action by, or any notice to, any governmental body or agency, domestic or foreign, or any third party is required in connection with the execution and delivery by Nasdaq of this Agreement or the consummation by Nasdaq of the transaction contemplated hereby. 5. CONDITIONS TO OBLIGATIONS OF THE NASD. The obligations of the NASD are subject to the fulfillment on or prior to the Closing as follows: 5.01 Representations, Warranties and Agreements. The representations and warranties of Nasdaq shall be true and correct in all material respects on the Closing Date as though made on and as of such date and Nasdaq shall have performed all other obligations and agreements contained in this Agreement to be performed prior to the Closing. 5.02 Statutes, Rules and Regulations. No statute, rule, regulation or order of any court or administrative agency shall be in effect which prohibits the consummation of the transactions contemplated hereby. 6. CONDITIONS TO OBLIGATIONS OF NASDAQ. The obligations of Nasdaq are subject to the fulfillment on or prior to the Closing as follows: 6.01 Representations, Warranties and Agreements. The representations and warranties of the NASD shall be true and correct in all material respects on the Closing Date as though made on and as of such date and the NASD shall have performed all other obligations and agreements contained in this Agreement to be performed prior to the Closing. 6.02 Statutes, Rules and Regulations. No statute, rule, regulation or order of any court or administrative agency shall be in effect which prohibits the consummation of the transactions contemplated hereby. 6.03 H&F Transaction. The H&F Transaction shall have been consummated. 7. TERMINATION. 7.01 Termination. This Agreement may be terminated at any time prior to the Closing: (a) by the mutual written consent of the parties; and (b) by either party in the event the Closing has not occurred on or before May 1, 2001, unless the failure of such consummation shall be due to a breach of this Agreement by the party seeking to terminate this Agreement. 7.02 Effect of Termination. In the event of the termination of this Agreement pursuant to Section 7.01, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto (or any stockholder, director, officer, partner, employee, agent, consultant or representative of such party) except that (a) nothing herein shall relieve any party from liability for, or eliminate the rights of any party relating to, any willful breach of this Agreement and (b) this Section 7.02 and Section 8.02 shall survive termination of this Agreement. 8. MISCELLANEOUS. 8.01 Entire Agreement. This Agreement embodies the entire agreement and understanding of the parties with respect to the subject matter hereof and supersede any and all prior agreements, arrangements and undertakings, whether written or oral, relating to matters provided for herein and therein. There are no provisions, undertakings, representations or warranties relative to the subject matter of this Agreement not expressly set forth herein and therein. 8.02 Expenses. Except as otherwise specifically provided in this Agreement, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transaction contemplated hereby shall be paid by the party incurring such expense. 8.03 Notices. Any notice, demand, claim, notice of claim, request or communication required or permitted to be given under the provisions of this Agreement shall be in writing and shall be deemed to have been duly given if delivered personally by facsimile transmission or sent by first class or certified mail, postage prepaid to the following addresses, If to the NASD: National Association of Securities Dealers, Inc. 1735 K Street, N.W. Washington, D.C. 20006 Telecopier: (202) 728-8894 Attention: General Counsel with a copy to: Shearman & Sterling 599 Lexington Avenue New York, New York 10022 Telecopier: (212) 848-7179 Attention: Robert Mundheim, Esq. and James B. Bucher, Esq. If to Nasdaq: The Nasdaq Stock Market, Inc. 33 Whitehall Street New York, New York 10004 Telecopier: (202) 728-8321 Attention: General Counsel with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Telecopier: (212) 735-2000 Attention: Matthew J. Mallow, Esq. and Eric J. Friedman, Esq. or to such other address as any party may request by notifying in writing all of the other parties to this Agreement in accordance with this Section 8.03. Any such notice shall be deemed to have been received on the date of personal delivery, the date set forth on the Postal Service return receipt, the date of delivery shown on the records of the overnight courier or the date shown on the facsimile confirmation, as applicable. 8.04 Survival of Representations and Warranties. Each of the representations and warranties made by the parties in this Agreement shall terminate 12 months after the Closing. 8.05 Benefit and Assignment. This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. There shall be no assignment of any interest under this Agreement by any party. Nothing herein, express or implied, is intended to or shall confer upon any other person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 8.06 Waiver. Any waiver of any provision of this Agreement shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition, of this Agreement. The failure of any party to assert any of its rights hereunder shall not constitute a waiver of any such rights. 8.07 Amendment. This Agreement may not be amended or modified except by an instrument in writing signed by, or on behalf of, the NASD and Nasdaq. 8.08 Construction of this Agreement. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual agreement, and this Agreement shall not be deemed to have been prepared by any single party hereto. The headings of the sections and subsections of this Agreement are inserted as a matter of convenience and for reference purposes only and in no respect define, limit or describe the scope of this Agreement or the intent of any section or subsection. This Agreement may be executed in one or more counterparts and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 8.09 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws (as opposed to the conflicts of law provisions) of the State of New York. 8.10 Public Announcements. No party hereto shall make any public announcement concerning the transactions contemplated by this Agreement without the prior approval of the other party hereto, except as such announcement may be required by the applicable law. Notwithstanding the foregoing, the parties hereto acknowledge that promptly after the execution of this Agreement and the Closing, the parties will make public disclosure, to be mutually agreed upon, of the transactions contemplated by this Agreement. 8.11 Specific Performance. The parties recognize and agree that if for any reason any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached, immediate and irreparable harm or injury would be caused for which money damages would not be an adequate remedy. Accordingly, each party agrees that, in addition to any other available remedies, each other party shall be entitled to an injunction restraining any violation or threatened violation of the provisions of this Agreement without the necessity of posting a bond or other form of security. In the event that any action should be brought in equity to enforce the provisions of the Agreement, no party will allege, and each party hereby waives the defense, that there is an adequate remedy at law. 8.12 Further Assurances. The NASD hereby agrees that it shall from time to time, at the request of Nasdaq, execute and deliver to Nasdaq any and all instruments or documents as Nasdaq may reasonably request for the purpose of vesting in Nasdaq the full right, title and interest of the NASD in and to the Shares. 8.13 Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. 8.14 Anti-dilution Rights. As of the date hereof, the NASD hereby agrees that the anti-dilution rights contemplated by the Term Sheet and to be included in the Investor Rights Agreement shall not apply to (i) the issuance of the Debentures by Nasdaq to H&F in connection with the H&F Transaction and (ii) the issuance of any shares of Common Stock by Nasdaq upon conversion of all or any portion of the Debentures by the holders thereof. IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of the date first above written. NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. By: --------------------------------- Name: Title: THE NASDAQ STOCK MARKET, INC. By: --------------------------------- Name: Title: Exhibit I to Purchase and Sale Agreement Investor Rights Term Sheet NASDAQ/NASD DRAFT INVESTOR RIGHTS AGREEMENT TERM SHEET ELIGIBLE SECURITIES o Subject to legal requirements prior to Exchange Registration, all shares of Common Stock now owned by the NASD (excluding shares of Common Stock underlying outstanding and unexpired warrants) ("Registrable Common Shares") o Shares of Common Stock returned to the NASD by the Voting Trustee upon the expiration of unexercised warrants TIMING o Nasdaq's initial underwritten public offering will trigger the NASD's registration rights. Subject to the terms herein, the NASD will have the right to "piggyback" on the registration statement filed in connection with Nasdaq's initial public offering and thereafter, the NASD may exercise "demand" registration rights. DEMAND REGISTRATION o The NASD would have two long-form demand registrations (i.e., Form S-1), provided, however, that if Nasdaq was S-3 eligible by July 1, 2002, the NASD shall be entitled to only one long-form demand registration, and unlimited short-form demand registrations (i.e., Form S-3). o The aggregate offering price for the shares included in each demand registration statement must not be less than $50 million, unless otherwise agreed to by the NASD and Nasdaq o A nationally-recognized investment bank selected by the NASD from a list of underwriters to be agreed upon mutually by the NASD and Nasdaq must be used as an underwriter in any demand registration in which the aggregate offering price exceeds $50 million and the plan of distribution involves the sale of shares other than in open market transactions o Nasdaq is not required to file a registration statement pursuant to a demand by the NASD within 90 days of the effective date of any other registration statement filed by Nasdaq pursuant to the Securities Act (180 days if the registration statement filed by Nasdaq is for the initial public offering of Common Stock), excluding registration statements filed in connection with benefit plans or acquisitions o Nasdaq may postpone for up to 120 days in any 12-month period the filing or effectiveness of a registration statement pursuant to a NASD demand if the Nasdaq Board determines in good faith at the time of the NASD demand that the filing of such registration statement would materially interfere with any transaction or event involving Nasdaq. Nasdaq acknowledges that during any such postponement it will continue to cooperate with the NASD so that Nasdaq will be able to promptly file or request effectiveness of the registration statement, as the case may be, upon termination of any postponement period o Nasdaq may include shares of its own account in any registration statement filed pursuant to a NASD demand. The number of shares to be included by Nasdaq in a piggyback registration is subject to being "cut back" if the managing underwriter of the offer determines that the inclusion of all the shares requested to be registered by Nasdaq will materially and adversely affect the offering based on marketing factors SHELF REGISTRATION o The NASD may make one demand for the filing of a shelf registration statement covering an offering of shares underlying unexercised and unexpired warrants to be made on an continuous basis pursuant to Rule 415. In addition, the NASD may use a demand registration to request a shelf registration covering open market resales of Registrable Common Shares. PIGGYBACK REGISTRATION o The NASD may include its registrable Common Stock shares in any offering of Common Stock or other class of equity securities registered under the Securities Act other than a registration of an employee stock option or incentive plan, etc., on Form S-8, and registration on Form S-4 of securities proposed to be issued in exchange for securities or assets of another corporation or in connection with a merger or consolidation involving Nasdaq o The number of shares to be included by the NASD in a piggyback registration is subject to being "cut back" if the managing underwriter of the offer determines that the inclusion of all the shares requested to be registered by the NASD will materially and adversely affect the offering based on marketing factors, provided, however, that with respect to any registration for which a registration statement is filed prior to the earlier of (i) six months after the consummation of the IPO and (ii) December 31, 2002, any shares requested to be included by any other party exercising piggyback registration rights will be "cut-back" first before any shares of the NASD are "cut-back" o Nasdaq has sole discretion in determining the price of the securities offered in a piggyback offering, subject to the NASD's right to withdraw its securities if it disagrees with the offering price set by Nasdaq TAG-ALONG RIGHT o If, prior to the initial public offering of Common Stock, Nasdaq proposes to sell shares for cash in a private transaction exempt from registration under the Securities Act, the NASD shall have the right to include in such sale the number of shares of Common Stock it owns equal to, unless otherwise agreed to by the NASD and Nasdaq, the product of (x) the number of shares of Common Stock then owned by the NASD and (y) a fraction with the numerator equal to the number of shares to be sold by Nasdaq in the private transaction and a denominator equal to the number of outstanding shares of Common Stock o The tag-along right would not apply if (i) the aggregate purchase price of the shares being sold by Nasdaq in such private transaction or series of related transactions is less than $10 million, (ii) the sale is to any of the previously identified possible purchasers listed on an exhibit to the Agreement, (iii) Nasdaq and the NASD agree in writing for Nasdaq to acquire from the NASD a number of shares equal to the number of shares that the NASD would otherwise have been entitled to include in such private sale prior to commencement of any such sale by Nasdaq, (iv) the sale is in connection with a joint venture, strategic alliance or other similar arrangement , in any such case the primary purpose of which is other than for the Company to raise capital and the consideration involved in such transaction is not predominantly comprised of cash, in each case as determined in good faith by the Nasdaq Board; provided, however, the parties agree that any such transaction which involves cross-shareholdings obtained through substantially similar cash investments shall not be deemed primarily to raise capital or to predominantly involve cash consideration, or (v) any issuance of shares of Common Stock (or securities convertible into shares of Common Stock) by Nasdaq pursuant to equity plans or arrangements for employees, officers, directors or consultants o The tag-along right will terminate automatically upon the effectiveness of a registration statement for the initial public offering of Common Stock ANTI-DILUTION RIGHTS o In the event that, prior to Nasdaq's registration as an exchange, Nasdaq intends to issue any shares of its Common Stock (or securities convertible into Common Stock) and (i) the NASD would not otherwise sell Nasdaq shares in connection with such issuance and (ii) as a result of such issuance, the NASD's ownership in Nasdaq would be diluted by 5% or more, then (x) Nasdaq must provide written notice to the NASD that Nasdaq intends to make such issuance not less than 30 day's prior to such issuance and (y) such issuance may not be consummated by Nasdaq without the prior consent of the NASD, which consent may not be unreasonably withheld or delayed, provided, however, that the foregoing provisions shall not apply with respect to (i) the issuance of $240,000,000 aggregate principal amount of Nasdaq's 4% convertible subordinated debentures (the "Debentures") to be issued by Nasdaq to Hellman & Friedman Capital Partners IV, L.P. and its affiliates (collectively, "H&F") as referred to in the Purchase and Sale Agreement, dated March 23, 2001, between Nasdaq and the NASD (the "Purchase and Sale Agreement") and (ii) the issuance of any shares of Common Stock by Nasdaq upon conversion of all or any portion of the Debentures by the holders thereof o In the event that, after Nasdaq's registration as an exchange, Nasdaq intends to issue any shares of its Common Stock (or securities convertible into Common Stock) and (i) the NASD would not otherwise sell Nasdaq shares in connection with such issuance and (ii) as a result of such issuance, the NASD's ownership in Nasdaq would be diluted by 5% or more, then Nasdaq must provide prior written notice to the NASD that Nasdaq intends to make such issuance which notice, to the extent practicable in light of commercial considerations, should be not less than 15 day's prior to such issuance. Nasdaq's obligation to provide prior notice will terminate at any time when the NASD ceases to hold 5% of Nasdaq's outstanding Common Stock provided, however, that the foregoing provisions shall not apply with respect to (i) the issuance of the Debentures to be issued by Nasdaq to H&F as referred to in the Purchase and Sale Agreement and (ii) the issuance of any shares of Common Stock by Nasdaq upon conversion of all or any portion of the Debentures by the holders thereof o The notice and consent rights described above will (x) not be deemed to affect the parties' obligations under any other provisions of the Investor Rights Agreement or under applicable law or regulations and (y) will not apply to equity plans or arrangements for employees, officers, directors or consultants LOCK-UP o The NASD shall not be permitted to transfer any shares of Common Stock for a period of (i) 180 days (subject to a longer period as may be requested by the underwriters) following the consummation of the initial public offering of the Common Stock, and (ii) 90 days (subject to a longer period as may be requested by the underwriters) following the effectiveness of any other registration statement filed by Nasdaq pursuant to the Securities Act, unless such registration statement relates to the registration of shares of Common Stock issuable pursuant to Nasdaq stock option plans REGISTRATION EXPENSES o All registration expenses (other than underwriting discounts and commissions on the NASD's shares) shall be borne by Nasdaq INDEMNIFICATION o Nasdaq would be liable for any false or misleading information contained in a registration statement except for any information about the NASD included in a registration statement (for which the NASD would be liable) VOTING o Upon Exchange Registration, the NASD will vote all shares owned by it which are not subject to the Voting Trust Agreement in the same proportion as all other holders of shares of Common Stock OTHER TERMS o In connection with any underwritten public offering, Nasdaq and the selling shareholders shall enter into an underwriting agreements containing customary terms, including indemnification. o The Agreement would contain other customary terms
Source: OneCLE Business Contracts.