Stockholders Agreement

STOCKHOLDERS AGREEMENT


STOCKHOLDERS AGREEMENT (this "Agreement") is made as of this sixth day of April, 2002 by and among Arrow Stock Holding Corporation, a Delaware corporation (the "Company"), the stockholders listed on Schedule A as the "Ricketts Holders" and the stockholders listed on Schedule B as the "Datek Holders." Certain capitalized terms are defined in Section 1 below.


RECITALS


WHEREAS, concurrently with the execution of this Agreement, the Company, Ameritrade Holding Corporation ("Ameritrade"), Arrow Merger Corp., Dart Merger Corp. and Datek Online Holdings Corp., a Delaware corporation ("Datek"), have entered into that certain Agreement and Plan of Merger, dated as of the date hereof (as may be amended, the "Merger Agreement"), pursuant to which, among other things, two subsidiaries of the Company will be merged into Ameritrade and Datek (the "Mergers") so that Ameritrade and Datek will each become a wholly-owned subsidiary of the Company and the Ricketts Holders and the Datek Holders will be issued shares of Common Stock of the Company; as of the Effective Time the Company will change its name to "Ameritrade Holding Corporation;"


WHEREAS, the Ricketts Holders and the Datek Holders desire to provide for certain terms relating to the governance of the Company and to set forth certain continuing rights and obligations with respect to the respective interests (after consummation of the Mergers) of the Ricketts Holders and the Datek Holders in the Company, in each case on the terms and conditions set forth in this Agreement; and


WHEREAS, the Merger Agreement contemplates that this Agreement will be executed concurrently with the execution of the Merger Agreement, with its provisions to be effective upon consummation of the Mergers.


NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:


1. GENERAL


1.1. EFFECTIVE DATE. This Agreement shall not be effective, and the parties shall not be bound by any obligations hereunder, until the closing occurs under the Merger Agreement on the Closing Date. In the event that the Merger Agreement is terminated, this Agreement shall automatically terminate without any action on the part of any party.


1.2. DEFINED TERMS. The following capitalized terms, as used in this Agreement, shall have the meanings set forth below.


"Affiliate" means (i) with respect to any specified Person that is not a natural Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such specified Person, and (ii) with respect to any natural Person, any Family Member of such natural Person.


"Board" means the Board of directors of the Company.


"Closing Date" has the meaning provided in the Merger Agreement.


"Commission" means the United States Securities and Exchange Commission.


"Common Stock" means the Common Stock, $0.01 par value per share, of the Company and any other equity securities issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or in replacement of or upon conversion of such shares or otherwise in connection with a combination of shares, recapitalization, merger, consolidation or other corporate reorganization).


"Competitor" means a competitor of the Company or any of its subsidiaries who is so determined in the reasonable judgment of the Board. Any person who is, or has an Affiliate who is, a bank, electronic clearing network, stock exchange, broker dealer, clearing firm, or trading software licensor having operations in the United States substantially similar to those conducted by the Company or its subsidiaries (other than any fund, trust or account managed or advised by an investment bank, bank, investment advisor or similar investment fund) at the time of the proposed Transfer will be presumed to be a Competitor unless the Board determines in its reasonable judgment that such Person is not a Competitor. All determinations made by the Board under this definition will be made in good faith after due consideration of all relevant information.


"Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, either through the ownership of voting securities or by contract.


"Co-Sale Offeree" means, with respect to each Co-Sale Transaction, each Holder other than the Transferring Holder.


"Co-Sale Transaction" means any Transfer in connection with which the Transferor is required to comply with the provisions of Section 3.2.


"Datek Holders" means, so long as such person is holding Shares (and has not been designated as a person no longer having rights or obligations under this Agreement in accordance with Section 2.4), the persons identified on Schedule B as "Datek Holders", their successors and permitted assigns.


"Distribution" means a distribution as described in clause (iv) of the definition of Excluded Transfer.


"Effective Time" has the meaning provided in the Merger Agreement.


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"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.


"Excluded Transfer" means a Transfer by a Holder (i) pursuant to a Rule 144 Transaction or pursuant to a Registered Public Offering; (ii) with respect to any Holder who is a natural person, to a Family Member of such Holder; provided that such Transferee exercises a Joinder Agreement and becomes a Ricketts Holder, or a Datek Holder as the case may be, hereunder; (iii) with respect to any other Holder, to any Affiliate of such Holder; provided that such Affiliate executes a Joinder Agreement and becomes a Datek Holder, or a Ricketts Holder as the case may be, hereunder; (iv) to a limited partner, member or general partner of the Holder receiving Shares in a distribution of assets of the Holder to its members or partners; or (v) to a broker-dealer or similar firm in an equity derivative contract including a prepaid or other forward sale of Shares.


"Family Member" means (i) a spouse, descendant, or any other Person related by blood, adoption or marriage to such individual or such individual's spouse, (ii) any trust, family partnership or limited liability company whose beneficiaries shall primarily be such individual and/or such individual's spouse and/or any Person related by blood or adoption to such individual or such individual's spouse, and (iii) the estate or heirs of such individual.


"Fully Converted Basis" means, with respect to calculating the number of shares of Common Stock held by a person, all such shares then outstanding plus all shares of Common Stock issuable upon the exercise, conversion or exchange of other securities of the Company held by such Holder.


"Holders" means, collectively, the Ricketts Holders and the Datek Holders.


"Joinder Agreement" means a Joinder Agreement substantially in the form set forth on Exhibit A; a Joinder Agreement need only be signed by the assignee and the Company.


"M&A Transaction" means (i) the merger or consolidation of the Company with any person, (ii) the sale, lease or exchange of all or substantially all of the Company's assets or properties determined on a consolidated basis in any transaction or series of related transactions or (iii) any transaction or series of related transactions pursuant to which the Company issues Common Stock or securities convertible into or exchangeable or exercisable for Common Stock, other than a Registered Public Offering for cash, and, in the case of (i), (ii) and (iii), if such transaction requires approval of the stockholders of the Company.


"Original Datek Holdings" means the Shares held by all of the Datek Holders in the aggregate as set forth on Schedule C immediately after the Effective Time, as adjusted to reflect stock splits, combinations, recapitalizations and similar transactions after the Effective Time.


"Original Ricketts Holdings" means the Shares held by all of the Ricketts Holders and Family Members of the Ricketts Holders in the aggregate as set forth on Schedule C immediately after the Effective Time, as adjusted to reflect stock splits, combinations, recapitalizations and similar transactions after the Effective Time.


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"Outside Date" means the date which is one day after the Company's annual meeting of stockholders in 2006.


"Permitted Transferee" means a Transferee under the clauses (ii), (iii) or (iv) of the definition of "Excluded Transfer."


"Person" or "person" means an individual, a corporation, an association, a partnership, a limited liability company, an estate, a trust, a joint venture, an unincorporated organization and any other entity or organization, governmental or otherwise, or division of any of the foregoing.


"Qualified M&A Transaction" means:


(i) for the period from and after the Closing Date until March 27, 2005, an M&A Transaction that is approved by a majority of the entire Board and is recommended by the directors for approval by the stockholders of the Company; provided that this majority includes the affirmative vote of at least one Datek Director and at least one Ricketts Director (so long as this approval and recommendation has not been withdrawn by the Board); or


(ii) for the period from and after March 27, 2005 until the Second Outside Date, an M&A Transaction that is approved by a majority of the entire Board and is recommended by the directors for approval by the stockholders of the Company (so long as this approval and recommendation has not been withdrawn by the Board).


"Registered Public Offering" means an offering of shares of Common Stock that is registered under the Securities Act and is distributed to the public.


"Ricketts Holders" means, so long as such person is holding Shares (and has not been designated as a person no longer having rights or obligations under this Agreement in accordance with Section 2.4), the persons identified on Schedule A as "Ricketts Holders", their successors and permitted assigns.


"Rule 144 Transaction" means a transfer of Shares complying with Rule 144 or Rule 145 under the Securities Act as such rules are in effect on the date of such transfer which has been effected pursuant to a "brokers transaction" as defined in clauses (1) and (2) of paragraph (g) of Rule 144 as in effect on the date hereof.


"Second Outside Date" means the date which is one day after the Company's annual meeting of stockholders in 2007.


"Securities Act" means the Securities Act of 1933, as amended from time to time, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.


"Shares" means, collectively, any shares of Common Stock and securities convertible into Common Stock owned by any Holder.


"Transfer" means any direct or indirect transfer, donation, sale, assignment, pledge, hypothecation, grant of a security interest in or other disposal or attempted disposal of all or any


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portion of a security or of any rights associated therewith, whether voluntary or involuntary; provided that "Transfer" shall not include the granting of a security interest in Shares to secure indebtedness for borrowed money (so long as the Shares will remain subject to this Agreement upon any foreclosure thereon). "Transferred" means the accomplishment of a Transfer, and "Transferee" means each recipient of a Transfer.


"Transferring Holder" means any Holder who proposes to Transfer all or a portion of the Shares held by such Holder.


"Unqualified M&A Transaction" means for the period from and after the Closing Date until March 27, 2005, an M&A Transaction in which (i) the Board approval did not include the approval of at least one Datek Director and at least one Ricketts Director or (ii) the Board approval did not include a majority of the entire Board.


1.3. RULES OF CONSTRUCTION.


For all purposes of this Agreement unless otherwise expressly provided:


(a) "own", "ownership", "held" and "holding" refer to ownership or holding beneficially, nominally or as record holder or record owner;


(b) references to Sections, Exhibits, Schedules and Annexes refer to Sections of this Agreement and Exhibits, Schedules and Annexes attached to this Agreement;


(c) any uses of the masculine, feminine or neuter gender shall also be deemed to include any other gender, as appropriate;


(d) the headings and captions in this Agreement are for convenience of reference only and shall not define, limit or otherwise affect any of its terms; and


(e) "including" means including without limitation.


2. GOVERNANCE


2.1. BOARD REPRESENTATION. Each Holder shall vote all of the voting securities of the Company held by it in a manner so as to effect the following:


(a) The authorized number of directors comprising the Board shall be nine (9) members, classified into three (3) classes of three directors each: (x) Class I having a term expiring at the annual meeting of stockholders of the Company in 2003 and every third year thereafter; (y) Class II having a term expiring at the annual meeting of stockholders of the Company in 2004 and every third year thereafter; and (z) Class III having a term expiring at the annual meeting of stockholders of the Company in 2005 and every third year thereafter.


(b) Through the Outside Date, the persons to be elected as directors to the Board shall be designated as follows:


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(i) the Datek Holders shall have the right to
designate one Class I Director, one Class II Director and one Class III
Director (each, a "Datek Director");


(ii) the Ricketts Holders shall have the right to
designate one Class I Director, one Class II Director and one Class III
Director (each, a "Ricketts Director"); and


(iii) (x) the Datek Holders shall have the right to
designate one director (who shall be a Class I Director, the "Datek
Independent Director"), (y) the Ricketts Holders shall have the right
to designate one director (who shall be a Class II Director, the
"Ricketts Independent Director"), and (z) together the Datek
Independent Director and the Ricketts Independent Director shall
designate a third director (who shall be a Class III Director) (these
directors, the "Independent Directors"); provided that any person
designated as an Independent Director must (A) be reasonably acceptable
to a majority of the Datek Directors and a majority of the Ricketts
Directors; (B) not be an Affiliate or Family Member of any Ricketts
Holder or Datek Holder; and (C) not be employed by the Company or any
of its subsidiaries.


(c) Until three years after the Outside Date, in the event of any vacancy on the Board due to death, disability, retirement, resignation or removal of a Datek Director (or Ricketts Director) designated in accordance with Section 2.1, unless his or her resignation or removal is pursuant to Section 2.4, the replacement director shall be designated by a majority of the remaining Datek Directors (or the remaining Ricketts Directors, as the case may be). In the event of any such vacancy on the Board of an Independent Director designated in accordance with Section 2.1, the replacement Independent Director shall be designated in the same manner as the Independent Director as to whom the vacancy developed. Until three years after the Outside Date, each Datek Holder (and each Ricketts Holder) shall not vote Shares held by it in favor of a removal (other than for cause) of a Director designated by the Ricketts Holders (or the Datek Holders, as the case may be) pursuant to Section 2.1(a), except as provided in Section 2.4.


(d) Until three years after the Outside Date, if, for any reason, any director designated in accordance with Section 2.1 is not elected to the Board, the Holders will call a special meeting or act by written consent to vote for the removal of the director not so designated under Section 2.1 and to vote for the election of the person so designated to the Board.


(e) After the annual meeting of stockholders of the Company in 2006, the Holders will no longer be required to vote their Shares for any director as provided in Section 2.1 nor take any action required by Section 2.2, except as may be required under Section 2.1(c) and (d).


(f) No party shall designate a director who (i) has been removed for cause from the Board; or (ii) has ever been convicted of a felony; or (iii) is or, within 10 years prior to the date of designation, has been subject to any injunction for violation of any federal or state securities law.


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(g) Any designation made by the Datek Holders or the Ricketts Holders under this Section 2.1, Section 2.3 or Section 2.4 will be made by giving notice to the Company, the Datek Holders and the Ricketts Holders, accompanied by a certificate that the designation has been validly made in accordance with an agreement or understanding among the Datek Holders (or the Ricketts Holders, as the case may be).


2.2. AGREEMENT TO VOTE. Each Holder shall vote all of the Shares held by it for the persons designated pursuant to Section 2.1 and shall take all other necessary or desirable actions within its control (including calling a meeting of stockholders of the Company, attending all meetings in person or by proxy for purposes of obtaining a quorum, voting to remove directors not designated in accordance with the provisions of this Agreement and executing all written consents in lieu of meetings, as applicable) to effectuate the provisions of this Section 2. The Company, subject to the Board's fiduciary duties, shall take all necessary and desirable actions within its control (including calling special meetings of the Board and stockholders) to effectuate the provisions of this Section 2.


2.3. COMMITTEES. Until the Second Outside Date, (i) the Company shall, subject to the Board's fiduciary duties, cause at least one Datek Director designated by the Datek Holders and one Ricketts Director designated by the Ricketts Holders to be appointed to each of the committees of the Board, and (ii) if the Datek Director (or the Ricketts Director, as the case may be) serving on any such committee shall cease to serve as a director of the Company for any reason or otherwise is unable to fulfill his or her duties on any such committee unless his or her ceasing to serve on such committee is pursuant to Section 2.4, the Company, subject to the fiduciary duties of the Board, shall cause the director to be succeeded by another Datek Director (or a Ricketts Director, as the case may be) designated by the remaining Datek Directors (or the Ricketts Directors, as the case may be).


2.4. REDUCTIONS IN DIRECTORS.


(a) If, at any time, the aggregate number of Shares held by the Datek Holders falls below a Target Percentage Level of the Original Datek Holdings, then immediately prior to the following annual meeting of the stockholders of the Company, the total number of Datek Directors shall be reduced (if necessary) to the total number shown below opposite such Target Percentage Level. This reduction will be accomplished by the resignation or removal of one or more Datek Directors (as selected by the Datek Holders) immediately prior to the annual meeting. Upon the resignation or removal of a director pursuant to this Section 2.4(a), one Datek Holder (as selected by the Datek Holders), together with its Affiliates who are otherwise subject to this Agreement, will no longer constitute a Datek Holder and will have no further rights and obligations under this Agreement.


TOTAL NUMBER OF
---------------
TARGET PERCENTAGE LEVEL DATEK DIRECTORS
----------------------- ---------------
33% or more 3


22% - 32.9% 2


11% - 21.9% 1


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