Filed by NYSE Group, Inc.
Pursuant to Rule 425 under the Securities Act of 1933, as amended,
and deemed filed pursuant to Rule 14a-12 of the
Securities Exchange Act of 1934, as amended
Subject Companies:
New York Stock Exchange, Inc.
Archipelago Holdings, Inc.
(Commission File No. 001-32274)
Date: November 14, 2005
On November 11, 2005, the New York Stock Exchange, Inc. issued the following
bulletin to its members:
* * *
Special Membership Bulletin
[LETTERHEAD OF RICHARD BERNARD]
DATE: NOVEMBER 11, 2005
TO: NYSE MEMBERS
FROM: RICHARD BERNARD
RE: TRANSFER OF SEATS TO FAMILY MEMBERS AND GRANTOR RETAINED
ANNUITY TRUSTS
In response to requests from members wishing to take advantage of tax-planning
opportunities associated with the anticipated NYSE-Archipelago merger, NYSE will
be filing with the SEC for members to transfer their seats to family members
and/or grantor retained annuity trusts, commonly known as GRATs. This plan, if
approved, should create even greater tax planning flexibility for members than
the previously announced plan, which was to permit transfers only to GRATs.
Below is a Summary of Steps describing how to transfer NYSE seats first into a
limited liability company (or "LLC") and then to transfer interests in the LLC
to a GRAT and/or to family members. Each document required of a member or the
member's legal counsel is underscored on first reference. Documents highlighted
in bold must follow the NYSE form or contain provisions required by NYSE. After
the Summary of Steps, there is information on how to submit the required
documentation and the associated application and initiation fees. The final part
of this Red Border concerns the impact of LLC structures on members who intend
to vote in the merger via proxy.
BACKGROUND. An amendment of the NYSE Constitution (previously approved by the
members) and a rule change must become effective under SEC rules in order for
NYSE to permit seats to be transferred to LLCs and for the LLC interests to be
transferred to family members and/or placed in GRATs. We expect to file our
proposal with the SEC in the next several days. Text of the Constitutional
amendment, the current proposed form of rule, and a copy of this Red Border
memorandum are available at www.nyse.com/nysellc. Members and their advisors are
urged to check this webpage regularly for updates on the transfer of seats to
LLCs and the transfer of LLC units to family members and GRATs.
SUMMARY OF STEPS. If the filing becomes effective under SEC rules, the following
steps will be necessary for any member wishing to transfer his or her seat to an
LLC and to transfer LLC interests to family members and/or GRATs:
(1) Preparation of a draft CERTIFICATE OF FORMATION for a
single-owner, single-purpose LLC and a draft LLC
AGREEMENT containing special provisions required by
NYSE rules.
(2) Preparation of a draft DESIGNATION OF MANAGER of the
LLC.
(3) If the seat is leased, preparation of a draft LEASE
SUBSTITUTION AGREEMENT to be used to terminate any
existing lease and create a new lease running from
the LLC to the existing lessee which will terminate
upon the merger.
(4) Preparation of a draft MEMBERSHIP TRANSFER,
ACKNOWLEDGEMENT AND RELEASE, to be used for purposes
of effectuating the transfer of the seat to the LLC.
(5) If the member plans to transfer LLC interests to one
or more GRATs, preparation of one or more draft GRAT
INSTRUMENTS, naming the initial Trustee thereof.
(6) Preparation of a draft DEED OF GIFT in respect of
each proposed transferee of LLC interests, specifying
the interest to be transferred to each transferee.
(7) Preparation of a draft TRANSFEREE AGREEMENT TO BE
BOUND in respect of each proposed transferee of LLC
interests.
(8) Preparation of a draft QUALIFYING WRITTEN NOTICE TO
AND WAIVER BY NYSE AND THE LLC MANAGER pertaining to
the proposed transfer(s).
(9) Preparation of a draft LETTER OF INSTRUCTION to be
signed by the transferring member.
(10) Preparation of legal counsel's FIRST-PHASE SUBMISSION
LETTER and draft SECOND-PHASE SUBMISSION LETTER. The
prescribed form of First-Phase Submission Letter
(used in connection with submitting draft documents)
includes a CERTIFICATE OF MEMBER, and the prescribed
form of Second-Phase Submission Letter (used in
connection with submitting executed documents that
have been approved in draft by NYSE) includes a
SUPPLEMENTAL CERTIFICATE OF MEMBER.
(11) Preparation of a REV. FORM U4 (06-2003) in respect of
the proposed LLC manager (unless the transferring
NYSE member will be the manager of his or her LLC)
and each proposed transferee of LLC interests (i.e.,
each GRAT trustee, other than the transferring member
if he or she is the GRAT trustee, and each family
member transferee) if the transfer would change or
create control of the LLC within the meaning of NYSE
Rule 2.
(12) Submission to NYSE's designated legal counsel of the
following documents:
(a) First-Phase Submission Letter
(b) Certificate of Member (with attached draft
documents)
(c) Rev. Form U4 (06-2003) for each transferee
for which this submission is required
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(d) Application fee ($5,000, by check payable to
New York Stock Exchange, Inc.)
(e) Initiation fee ($5,075, by check payable to
New York Stock Exchange, Inc.)
The Exchange will not charge a lease transition fee.
The initiation fee will be refunded if the NYSE rule
change permitting transfers to LLCs does not become
effective or if NYSE denies a member's request to
transfer his or her seat to an LLC.
(13) If NYSE approves the request made in the First-Phase
Submission Letter, issuance by NYSE of a Letter of
Provisional Approval.
(14) Formation of the LLC, execution of those documents
identified above which were not executed in
connection with the First-Phase Submission, and
submission to NYSE's designated legal counsel of the
following documents:
(a) Second-Phase Submission Letter
(b) Supplemental Certificate of Member (with
attached copies of executed documents)
(c) Membership Transfer, Acknowledgement and
Release (executed)
(d) Qualifying Written Notice to and Waiver by
NYSE and the LLC Manager (duplicate
originals) (not yet executed by NYSE)
(e) Letter of Instruction (executed)
(15) Issuance by NYSE of a Letter of Confirmation stating
that the LLC has been substituted for the member and
is a Limited Transfer Member of NYSE within the
meaning of NYSE's Constitution and approving those
transfers of LLC interests that require NYSE
approval.
NYSE APPROVAL OF TRANSFEREES OF LLC INTERESTS. A transferee of LLC interests
will require NYSE approval (and as such will require the submission of Rev. Form
U4 (06-2003) as described above) if the transferee will receive a controlling
interest in the LLC or if the transferor will relinquish control. Generally
speaking, an interest will be a controlling interest if it is 25% or more of the
voting or profits interest in the LLC or if it includes a veto power over the
LLC. For these purposes, transfers to multiple family members and/or GRATs
ordinarily will not be aggregated for purposes of applying the 25% threshold,
but those transfers may nonetheless require approval if they confer veto rights
on any one or more transferees. Also, if the aggregate of proposed transfers
would reduce the member's interest in the LLC to 50% or less, NYSE approval of
the transferees will be required, even if no particular transferee will receive
a controlling interest.
DEFINITION OF FAMILY MEMBERS. For purposes of the merger, the term "family
member" refers to a member's spouse, domestic partner, child, stepchild,
grandchild, parent, parent-in-law, grandparent, uncle, aunt, cousin, nephew or
niece. This definition is derived from "lock-up" provisions that will apply to
NYSE Group, Inc. shares after the merger. Under the NYSE-Related Provisions of
each LLC Agreement, the "lock-up" limitations on NYSE Group, Inc. shares will
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apply to transfers of interests in the LLC as long as the LLC holds NYSE Group,
Inc. shares subject to the "lock-up."
REQUIRED DOCUMENTATION. In addition to the information already posted on NYSE's
website, at www.nyse.com/nysellc, NYSE plans in the coming days to post on its
website a prototype of the NYSE-Related Provisions that the rule, if approved,
will require, together with prototypes of the documents which are identified
above in bold, underscored type. All prototypes will be made available in Word
and in PDF formats, other than Rev. Form U4 (06-2003), which will be available
only in PDF format. All submissions must substantially follow the prototypes on
the website or they will be rejected.
Although NYSE has not promulgated proposed forms for the other required
documents, NYSE urges members and their advisors to opt for straightforward
documentation that will facilitate review by NYSE staff and outside counsel.
Please note, as we have stated before, that NYSE's outside counsel fees incurred
in the review of these documents will be billed back to members based on the
amount of time spent on a particular member's LLC-related documentation. Each
member agrees, by directing his or her counsel to submit the First-Phase
Submission Letter, to assume the obligation to reimburse NYSE and its successors
for these outside counsel fees.
QUESTIONS. Questions concerning legal documentation should be directed to
Alexander Lewis, Esq. (212-336-2825) or John Sare, Esq. (212-336-2760) at
Patterson, Belknap, Tyler & Webb LLP. Questions concerning Rev. Form U4
(06-2003) disclosures should be directed to Steven L. Fuller, NYSE's Director of
Membership Services (212-656-2071).
SUBMISSION OF DOCUMENTS. Each phase of the submissions submitted first via email
in a single PDF, emailed to NYSE's designated legal counsel, Patterson, Belknap,
Tyler & Webb LLP, at nysellc@pbwt.com. Please do not use that email address for
the submission of questions. A hard copy of each submission should be sent by
regular mail, Federal Express or Express Mail to John Sare, Esq., Patterson,
Belknap, Tyler & Webb LLP, 1133 Avenue of the Americas, New York, NY 10036. The
hard copy should include a signed ORIGINAL of the First-Phase or Second-Phase
Submission Letter (as appropriate) and Certificate of Member, together with all
other originals and copies that are required.
LIMITATIONS. We urge members to submit draft documentation, disclosures and
executed documentation as soon as possible. However, NYSE offers no assurances
that its review will be completed in advance of any particular date or event.
Nor can NYSE offer any assurances when or if the proposed Rule and
Constitutional amendment will become effective under SEC rules. NYSE has
undertaken to facilitate the creation of GRATs solely as a courtesy and
convenience to members and assumes no obligations or duties in so doing. NYSE
may approve or disapprove documents in its discretion, including documents that
follow the forms NYSE has provided. NYSE takes no position as to whether members
should or should not transfer their seats to LLCs or whether members should or
should not create GRATs, and neither NYSE nor its outside counsel is undertaking
to provide legal, tax or financial advice to NYSE members. NYSE reserves the
right, in its discretion, to change the procedures outlined in this memorandum
at any time. Accordingly, NYSE disclaims any and all responsibility for members'
legal fees or other costs or expenses associated with GRATs or LLCs, including
any possible tax benefits which the member for any reason is unable to realize
or to realize fully.
PROXY VOTING. At the time of submission of the executed documentation, the LLC
manager is urged to submit a merger-related proxy. Once NYSE issues its Letter
of Confirmation, the LLC
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manager's proxy will supersede any proxy previously submitted by the individual
member who created the LLC.
If a member is uncertain whether a Letter of Confirmation will be issued prior
to the merger vote, he or she should submit his or her INDIVIDUAL proxy. A proxy
submitted by an individual member will be accepted as a valid proxy if no Letter
of Confirmation is issued in advance of the merger BUT WILL BE DISREGARDED if a
Letter of Confirmation is issued. Because abstentions will be counted as votes
against the merger, members who favor the merger should ensure that managers of
LLCs they create either appear in person to vote or provide a proxy on behalf of
the LLC.
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IMPORTANT ACQUISITION INFORMATION WITH RESPECT TO THE MERGER
In connection with the proposed merger of the New York Stock Exchange, Inc.
("NYSE") and Archipelago Holdings, Inc. ("Archipelago"), NYSE Group, Inc. has
filed a registration statement on Form S-4 with the Securities and Exchange
Commission (SEC) containing a joint proxy statement/prospectus regarding the
proposed transaction. The parties have filed other publicly available relevant
documents concerning the proposed transaction with the SEC. The SEC declared the
Registration Statement effective on November 3, 2005.
NYSE MEMBERS AND ARCHIPELAGO STOCKHOLDERS ARE URGED TO READ THE FINAL JOINT
PROXY STATEMENT/ PROSPECTUS REGARDING THE PROPOSED TRANSACTION BECAUSE IT WILL
CONTAIN IMPORTANT INFORMATION. NYSE members and Archipelago stockholders can
obtain a free copy of the final joint proxy statement/prospectus, as well as
other filings containing information about NYSE and Archipelago without charge,
at the SEC's website (http://www.sec.gov). Copies of the final joint proxy
statement/prospectus can also be obtained, without charge, once they are filed
with the SEC, by directing a request to the Office of the Corporate Secretary,
NYSE, 11 Wall Street, New York 10005, 212-656-2061 or to Archipelago, Attention:
Investor Relations, at 100 S. Wacker Drive, Suite 1800, Chicago, Illinois 60606
or calling (888) 514-7284.
The NYSE, Archipelago and their respective directors and executive officers and
other members of management and employees may be deemed to be participants in
the solicitation of proxies from Archipelago stockholders in respect of the
proposed transaction. Information regarding Archipelago's directors and
executive officers is available in Archipelago's proxy statement for its 2005
annual meeting of stockholders, dated March 31, 2005.
Additional information regarding the interests of such potential participants
will be included in the joint proxy statement/prospectus and the other relevant
documents filed with the SEC when they become available. This correspondence
shall not constitute an offer to sell or the solicitation of an offer to buy any
securities, nor shall there be any sale of securities in any jurisdiction in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such jurisdiction. No offering
of securities shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as amended.
FORWARD-LOOKING STATEMENTS
Certain statements in this correspondence may contain forward-looking
information regarding the NYSE and Archipelago and the combined company after
the completion of the transactions that are intended to be covered by the safe
harbor for "forward-looking statements" provided by the Private Securities
Litigation Reform Act of 1995. These statements include, but are not limited to,
the benefits of the business combination transaction involving NYSE and
Archipelago, including future financial and operating results, the new company's
plans, objectives, expectations and intentions and other statements that are not
historical facts. Such statements are based upon the current beliefs and
expectations of NYSE's and Archipelago's management and are subject to
significant risks and uncertainties. Actual results may differ from those set
forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ from
those set forth in the forward-looking statements: the ability to obtain
governmental approvals of the transaction on the proposed terms and schedule;
the failure of NYSE members or Archipelago shareholders to approve the
transaction; the risk that the businesses will not be integrated successfully;
the risk that the cost savings and any other synergies from the transaction may
not be fully realized or may take longer to realize than expected; disruption
from the transaction making it more difficult to maintain relationships with
customers, employees or suppliers; competition and its effect on pricing,
spending, third-party relationships and revenues; social and political
conditions such as war, political unrest or terrorism; general economic
conditions and normal business uncertainty. Additional risks and factors are
identified in Archipelago's filings with the Securities Exchange Commission,
including its Report on Form 10-K for the fiscal year ending December 31, 2004
which is available on Archipelago's website at http://www.Archipelago.com, and
the Registration Statement on Form S-4 filed by NYSE Group, Inc. with the SEC on
July 21, 2005 (and amended on September 24, 2005, October 24, 2005 and November
3, 2005).
You should not place undue reliance on forward-looking statements, which speak
only as of the date of this document. Except for any obligation to disclose
material information under the Federal securities laws, none of the NYSE,
Archipelago or the combined company after the completion of the transactions
undertake any obligation to release publicly any revisions to any
forward-looking statements to reflect events or circumstances after the date of
this document.
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