THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Archipelago Holdings, Inc. (Retired) (AX.X)

3/31/2005 Proxy Information

Incorporation Transaction

Prior to the consummation of our initial public offering in August of 2004, we completed a series of transactions in order to convert Archipelago Holdings, L.L.C. into Archipelago Holdings, Inc. The transactions are as follows:

• On August 11, 2004, Archipelago Holdings, L.L.C., a Delaware limited liability company, converted into Archipelago Holdings, Inc., a Delaware corporation, and the members of Archipelago Holdings, L.L.C. received 0.222222 shares of Common Stock of Archipelago Holdings, Inc. for each of their membership interests in Archipelago Holdings, L.L.C.

• After the conversion of Archipelago Holdings, L.L.C. into Archipelago Holdings, Inc., GAP Archa Holdings, Inc. (a member of Archipelago Holdings, L.L.C. before the conversion described above that became a stockholder of Archipelago Holdings, Inc. upon the conversion), was merged with Archipelago Holdings, Inc. The stockholders of GAP Archa Holdings, Inc. received shares of Common Stock of Archipelago Holdings, Inc. for their shares of Common Stock of GAP Archa Holdings, Inc. and the shares of Archipelago Holdings, Inc. Common Stock owned by GAP Archa Holdings, Inc. prior to the merger were cancelled.

As approved by the board of managers of Archipelago Holdings L.L.C. on July 16, 2004, we made a cash distribution to the members of Archipelago Holdings L.L.C. immediately prior to the incorporation transactions. In accordance with the terms of the limited liability company agreement of Archipelago Holdings, L.L.C., the cash distribution provided funds to our members to permit them to pay the taxes that the members will owe for their share of Archipelago's profits in 2004 as a limited liability company through the date of the incorporation transactions, calculated primarily based on the highest federal and state income tax rate applicable for tax withholding purposes to an individual. The cash distribution was approximately $24.6 million.

Relationships with Directors, Officers, 5% Owners and Investors with Representatives on Our Board of Managers (Exclusive of Trading Activity)

In the ordinary course of our business and in connection with our financing activities, we have entered into a number of transactions with our directors, officers, investors that hold a 5% or greater equity interest in our Company and investors that had a right prior to our conversion to appoint a representative to our board of managers. We believe that these transactions were entered into on the basis of commercial terms prevailing in the market at the time we entered into each transaction.

The Pacific Exchange and PCX Equities

Acquisition Agreement: On January 3, 2005, we entered into an acquisition agreement with PCXH, under which we agreed to acquire PCXH and all of its wholly-owned subsidiaries, including PCX and PCX Equities, subject to the receipt of approval of the PCXH shareholders and applicable regulatory approvals. Upon completion of the acquisition, PCXH, PCX and PCX Equities will operate as wholly-owned subsidiaries of Archipelago. Under the terms of the Agreement, after March 31, 2005 and through the closing of the transaction, at the request of PCXH, Archipelago will lend operating funds to PCXH or its wholly owned operating subsidiaries such as the Pacific Exchange, in an aggregate amount not to exceed $10.0 million. The aggregate amount of all loan payments will be deducted from the calculation of seller's working capital at closing, or repaid by PCXH or its subsidiaries to Archipelago in the form of Archipelago Common Stock if the transaction fails to close. The Agreement contains customary representations and warranties and conditions to closing. The Agreement also contains customary termination provisions which, under certain circumstances in the event of a termination under the Agreement, may subject the parties to liability for the payment of termination fees or reimbursement of expenses, and includes a provision which permits either party to terminate the agreement if the transaction fails to close by September 30, 2005. Currently, we cannot predict the effects of our proposed acquisition of PCXH on our current relationships with the Pacific Exchange which are described below.

Regulatory Fees. In July 2000, we entered into a facility services agreement with the Pacific Exchange governing our relationship with the Pacific Exchange and PCX Equities, a for-profit corporate subsidiary of the Pacific Exchange to which the Pacific Exchange has delegated certain regulatory authority for ArcaEx. Under the terms of this agreement and a related contribution agreement, the Pacific Exchange granted us the exclusive right to establish and operate ArcaEx as a facility of PCX Equities with respect to instruments traded on or eligible to be traded on the equities floor of the Pacific Exchange, as well as the right to receive all transaction fees, all market data fees and all listing fees from the operation of ArcaEx. The Pacific Exchange also agreed not to engage in any commercial arrangements competitive with ArcaEx, except as otherwise provided in the facility services agreement.

Under the terms of the amended and restated facility services agreement, we are required to negotiate in good faith with the Pacific Exchange to establish the regulatory fee we will pay the Pacific Exchange each year, and to reimburse the Pacific Exchange for certain expenses. In 2004, we paid the Pacific Exchange approximately $7.2 million for regulatory services and reimbursement of expenses.

Registered Representative Fees. Broker-dealers that are registered to trade on ArcaEx are required to register certain employees, known as registered representatives, with the Pacific Exchange. The Pacific Exchange shares with us the fees it collects in connection with registration of representatives. We currently receive approximately 45% of those fees collected by the Pacific Exchange. In 2004, we received $4.5 million from the Pacific Exchange for registered representative fees. These amounts were offset against the regulatory fee we owed to the Pacific Exchange, rather than being paid separately to us.

Collection of Market Data Fees. Through PCX, we participate in the consolidation, dissemination and sale of market data in U.S. exchange-listed securities and Nasdaq-listed securities. We receive market data fees, based on the level of trading activity on ArcaEx, for providing data to centralized aggregators that in turn sell the data to third-party consumers such as Thomson Financial Inc. and Bloomberg, L.P. The Pacific Exchange is a direct participant in the plans governing the consolidation and dissemination of market data, and as a direct participant in these plans collects tape revenues for trading activities on ArcaEx. Under the terms of the facility services agreement, we are entitled to all market data fees earned in connection with trading activities on ArcaEx. Market data fees collected by the Pacific Exchange as a direct participant in these plans and paid to us under the terms of the facility services agreement totaled $45.5 million in 2004.

Directorships. Gerald D. Putnam, our Chairman and Chief Executive Officer, is currently a member of the board of directors of the Pacific Exchange. Members of the board of directors are entitled to $5,000 annual compensation for their service on the board, plus additional compensation for attending board meetings. Mr. Putnam has waived his right to this compensation.

Philip D. DeFeo, Chairman and Chief Executive Officer of the Pacific Exchange, is currently a member of our Board, and was formerly a member of our board of managers. We did not pay our managers a fee, but reimbursed expenses incurred in connection with board activities. In 2004, we paid Mr. DeFeo $47,418 in cash for reimbursement of expenses and director compensation. For more information see the information above under the section heading —Compensation—Director Compensation.

Under our certificate of incorporation, for so long as ArcaEx remains an equities trading facility of PCX Equities and our facility services agreement with the Pacific Exchange and PCX Equities remains in effect, one of our directors will be required to be a member of the board of directors of the Pacific Exchange or an officer or employee of the Pacific Exchange nominated by the board of directors of the Pacific Exchange. Mr. DeFeo currently serves in this capacity.

Certificate of Incorporation and By-laws. Under our Certificate of Incorporation and By-laws, for so long as ArcaEx remains an equities trading facility of PCX Equities and our facility services agreement with the Pacific Exchange and PCX Equities remains in effect, any amendment to our Certificate of Incorporation or By-laws will be submitted to the board of directors of the Pacific Exchange. If the board of directors of the Pacific Exchange determines that the amendment is required under Section 19 of the Exchange Act to be filed with, or filed with and approved by, the SEC, then the amendment will not take effect until it is so filed or filed and approved. Any resolution of our Board authorizing a proposed amendment to our Certificate of Incorporation will provide that such amendment will be abandoned and not filed with the Secretary of State of the State of Delaware, notwithstanding stockholder approval of the amendment, unless the conditions described in this paragraph have been fulfilled.

Gerald D. Putnam and GSP

Business Development Functions. In 2004 we entered into arrangements with Pleasure Marine, L.L.C., pursuant to which we rented a yacht for business development functions. The domestic partner of Mr. Putnam's sister operates the yacht as an independent contractor of Pleasure Marine. Pleasure Marine retains a percentage of the rental fees paid by Archipelago. We paid rental fees for the yacht in the amount of $0.4 million in 2004. During 2004 we hosted 26 business development functions on the yacht with an average of approximately 20 guests attending each function. We have discontinued this arrangement in 2005.

Back-Office Services. ASB, L.L.C., a service bureau located in Chicago, Illinois, has provided to our subsidiary Wave Securities, L.L.C certain back-office services, including offering and managing routing technology to alternative execution venues, clearing technology, as well as reporting to the NASD's Order Audit Trail Systems through which NASD members are required to report information regarding Nasdaq transactions. Mr. Putnam and his wife indirectly own 40% of ASB,. and under Wave's past arrangement with ASB, Wave paid ASB $100,000 per month for these services. Since July of 2004, however, these services have been provided to Wave by Townsend Analytics, Ltd. and we do not expect Wave to engage in any future transactions with ASB.

Trading on ArcaEx. Mr. Putnam and his wife indirectly own approximately 40% of Terra Nova Trading, L.L.C. ("TNT"), a broker-dealer that currently owns less than 1% of our outstanding Common Stock. TNT regularly engages in trading activities on ArcaEx. As a result of its trading activities and the execution services we provide, in 2004:

• we received transaction fees from TNT in an aggregate amount equal to $4.7 million;

• we made liquidity payments to TNT in an aggregate amount equal to $1.5 million; and

• we made rebate payments in an aggregate amount equal to $34,247 to TNT, with whom we agreed to share a portion of the market data fees we received in connection with trades in exchange-listed securities executed by TNT on ArcaEx.

We believe that all payments to TNT, and all amounts charged to TNT, are determined based on prevailing market rates, terms and conditions that are available to all other market participants.

Indemnification. Pursuant to a contribution agreement entered into in January 1999, Mr. Putnam agreed to indemnify us and affiliates of Goldman, Sachs & Co. and E*TRADE Group, Inc. for liability and certain legal expenses incurred in connection with the Lozman litigation discussed above in "Legal Proceedings—Matters Relating to Mr. Putnam." GDP, Inc. paid legal expenses on our behalf in the amount of $71,838.85 in 2004. Mr. Putnam owns 100% of GDP, Inc.

Non-competition. Pursuant to the limited liability company agreement of Archipelago Holdings, L.L.C., Mr. Putnam and GSP, L.L.C. agreed that, subject to limited exceptions, they will not, and will not permit any of their affiliates to, manage, be employed by or provide consulting or other goods or services to, own any interest in or operate or control any ECN, alternative trading system, exchange or other facility for matching or executing orders, in each case that provides for the trading of equity securities of U.S. issuers and/or non-U.S. issuers whose equity securities are traded on a U.S. stock exchange or Nasdaq, for 24 months after the date that Mr. Putnam is no longer a manager, officer, employee or consultant of Archipelago or any of its subsidiaries. Mr. Putnam owns a controlling interest in GSP.

Richard C. Breeden

Effective June 1, 2004, Richard C. Breeden, a member of our current Board of Directors, began providing consulting services to us through Richard C. Breeden & Co. under a contract providing for a minimum fee of $150,000 per quarter and a minimum term of one year. We paid Richard C. Breeden & Co. $500,000 in 2004 under this consulting agreement. In addition, in 2004, we paid Mr. Breeden individually $29,738 in cash and 5,238 in restricted stock units for reimbursement of expenses and director compensation. For more information regarding compensation of our directors see the information above under the section heading—Compensation—Director Compensation.

Goldman Sachs

We have entered into commercial arrangements with subsidiaries of The Goldman Sachs Group, Inc., ("Goldman Sachs"), which indirectly holds a 15.4% equity interest in our Company. Prior to our initial public offering in August 2004, Goldman Sachs had the right to appoint a representative to our board of managers. Goldman, Sachs & Co. ("GSC"), a subsidiary of Goldman Sachs, was a lead underwriter in our initial public offering. A summary of the arrangements we had with Goldman Sachs during 2004 include:

• Initial Public Offering: We paid approximately $11.9 million in offering expenses and underwriting discounts and commissions in connection with our initial public offering in August 2004. Of this amount, approximately $1.7 million was paid to GSC.

• Clearing Arrangements. Each of Archipelago Securities, L.L.C., Archipelago Trading Services, L.L.C. and Wave Securities, L.L.C. has entered into a clearing agreement with Spear, Leeds & Kellogg, L.P., ("SLK"), a subsidiary of Goldman Sachs. Under these agreements, SLK provides clearing and settlement services in connection with our outbound routing and agency brokerage services. Pursuant to a letter agreement dated January 17, 2002, we also agreed to appoint SLK as the clearing agent in the future for any of our other subsidiaries that engage in order routing services or brokerage services on substantially the same terms and conditions as set forth in our existing clearing agreements with SLK. This letter agreement will remain in effect as long as the clearing agreement between Wave and SLK remains in effect. The agreement may be terminated by either party without cause upon 120 days prior written notice. Under these agreements, we paid SLK an aggregate amount of $11.4 million in 2004.

• Advisory Fees. In 2004 Archipelago entered into a definitive Financial Advisory Services Engagement with GSC in connection with our proposed acquisition of PCXH and all of its subsidiaries. The fees payable by Archipelago to GSC under the terms of the Engagement include: (i) a transaction fee equal to the lesser of (A) $500,000 and (B) 20% of any payment made to Archipelago due to the termination of the transaction; or (ii) a transaction fee of $500,000 if the transaction is completed. Under the terms of the Engagement, Archipelago has also agreed to reimburse GSC's reasonable out-of-pocket expenses, including attorney's fees, in an aggregate amount not to exceed $100,000. We did not pay GSC any fees in 2004 for these financial advisory services.

• DOT System. In July 2002, one of our subsidiaries, Archipelago Securities, L.L.C., entered into an agreement for orders routed to the NYSE's Designated Order Turnaround, or DOT, system with SLK. Pursuant to this agreement, SLK provides direct order routing services for trades directed to the NYSE's DOT system. We paid fees under this agreement to SLK in an aggregate amount of $0.9 million in 2004. Director and Officer Indemnification

In 2004 we entered into an agreement that provides indemnification to persons who

• were officers or managers of Archipelago Holdings, L.L.C., our predecessor;

• were officers or directors of Archipelago Holdings, Inc.; and/or

• have been authorized by the board of managers of Archipelago Holdings, L.L.C. or by the Board of Directors of Archipelago Holdings, Inc. to take actions on behalf of Archipelago Holdings, L.L.C. or Archipelago Holdings, Inc. in connection with registration statements for our initial public offering and sale of shares of our Common Stock (including shares issuable in connection with employee benefit plans) and the reorganization of Archipelago Holdings, L.L.C. as Archipelago Holdings, Inc. for all losses, damages, costs and expenses incurred by the indemnified person arising out of the relevant registration statements or the reorganization. This agreement is in addition to our indemnification obligations under our By-laws

Registration Rights Agreement

We have entered into a registration rights agreement pursuant to which we have agreed to register shares of our Common Stock that two groups of stockholders received before our initial public offering under the circumstances described below. One group, referred to as the General Atlantic Stockholders, constitutes affiliates of General Atlantic Partners, L.L.C., which currently beneficially owns approximately 21.4% of our Common Stock. The other group, referred to as the Class A Stockholders, includes (directly or indirectly through subsidiaries or affiliates), among others, The Goldman Sachs Group, Inc., Credit Suisse First Boston Next Fund, Inc., Merrill Lynch L.P. Holdings, Inc. and J.P. Morgan Chase & Co.

Demand Registration. The Class A Stockholders have six demand registration rights, pursuant to which they may require us to register their shares beginning 180 days after our initial public offering. The General Atlantic Stockholders have two demand registration rights, which they can exercise the earlier of:

• one year after the date of our initial public offering; and

• 90 days after we consummate a demand registration made by the Class A Stockholders.

Registration on Form S-3. Once we are eligible to use Form S-3, the two groups of stockholders have the right to request an unlimited number of registrations on Form S-3.

Piggy-back Rights. Each of the stockholders in the two groups other than those originally requesting registration pursuant to a demand can request to participate in, or "piggy-back" on, any demand registration. Each of the stockholders in these two groups also can piggy-back on a registration on Form S-3.

Piggy-back Registration. If we file a registration statement for an offering of Common Stock for ourselves or for stockholders other than those in the two groups, we must offer the stockholders in the two groups the opportunity to register their registrable securities.

Conditions and Limitations; Expenses. The registration rights of these two groups of stockholders are subject to conditions and limitations, including the right of the underwriters to limit the number of shares to be included in a registration and our right to delay or withdraw a registration statement under specified circumstances. In addition, we are not obligated to effect a demand registration if those initiating the demand (determined in accordance with the agreement) propose to sell their registrable securities at an aggregate price to the public of less than:

• $30 million in the case of a firm commitment underwriting; or

• $15 million if the demand registration is not in the form of a firm commitment underwriting. We are not required to effect an S-3 registration if the proposed aggregate price to the public of the securities being registered is less than $10 million. Other than underwriting discounts and commissions and brokers' commissions, we will pay all registration expenses in connection with a registration, whether or not such registration becomes effective, unless, in the case of a demand registration or an S-3 registration, the registration is withdrawn at the request of those initiating the registration (determined in accordance with the agreement), subject to specified exceptions.