THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

International Securities Exchange, Inc. (ISE)

4/6/2006 Proxy Information

Mr. Porter is a founder and was the first Chairperson of International Securities Exchange, Inc. from 1997 to 2002.

Mr. Harkness has been a Managing Director of Wolverine Trading, LLC and a limited partner of Wolverine Holdings, L.P. since 1999. Wolverine Holdings, L.P. has 487,080 shares of Class A common stock with the company.

Class B trading activities

Holders of shares of our Class B common stock, as a class, elect six of our 15 directors, and some of the holders of shares of our Class B common stock are also owners of shares of our Class A common stock. Holders of shares of our Class B common stock, either directly or through affiliates, execute transactions on our exchange, and are charged transaction fees and other trading related charges for such transactions. Our transaction and other trading related charges are approved by the SEC. We also believe that these transactions were conducted on the basis of commercial terms prevailing in the market at the time of each transaction. For a list of our significant Class B shareholders, see “Security ownership by certain beneficial owners” on page 10.

Sales of Class B common stock. As a general matter, we must approve the sale or lease of shares of Class B-1 and Class B-2 common stock by our current Class B shareholders to other entities. We also must approve the entities to whom shares of Class B-1 and Class B-2 common stock are sold or leased to operate as members on our exchange. During 2005, we sold 3 shares of Class B-2 common stock for $1.5 million each. In 2005, we recognized related revenue of $4.5 million. As of March 30, 2006, we sold one additional share of Class B-2 common stock for $1.5 million.

Payment for order flow. Under our payment for order flow program, we pay some of our EAMs on behalf of our market makers for order flow sent to our exchange. Payment for order flow refers to the industry practice of paying order entry firms for their customer orders. Through our payment for order flow program, we assess fees to our PMMs and CMMs and at the direction of our PMMs, we administer payments to some EAMs. During 2005, we collected on average $8.6 million per month and distributed $6.5 million per month in payments to EAMs. Any unused funds are returned to the contributing PMMs and CMMs on a pro rata basis. The payment for order flow program maintains a reserve fund of $4.5 million, which will be returned to PMMs and CMMs if the program ceases.

Industry directors

Six of our 15 directors are elected by our Class B shareholders and each such director is affiliated with a Class B shareholder, and in some instances, the affiliated Class B shareholder is also a holder of Class A common stock. These industry directors receive certain compensation for their services as directors. For a discussion of director compensation, see “Directors’ Compensation and Benefits” on page 23.

Dividends

Quarterly Dividends. We currently intend to pay quarterly dividends on our Class A common stock for fiscal year 2006. We currently intend that the quarterly dividends expected to be declared in 2006 will be in an aggregate amount not less than the aggregate amount of the proceeds received from the sale of any Class B-2 memberships in fiscal year 2005, less taxes we pay on the proceeds and success bonuses we pay. There can be no assurances that any dividends will be paid in the anticipated amounts and frequency set forth in this proxy statement. In March 2006, we declared a dividend for the first quarter of 2006 in the amount of $0.05 per share of Class A common stock or approximately $1.9 million in the aggregate to shareholders of record as of March 23, 2006, which was paid on March 31, 2006.

Special Dividends. We declared and paid a special dividend in January 2005 of $0.37 per share of Class A common stock or $11.8 million in the aggregate. This special dividend reflected the net proceeds from the sale of shares of Class B-2 common stock in 2004. Some of our Class A shareholders are also Class B shareholders.

Our reorganization

In 2004, in connection with our initial public offering of shares of Class A common stock, we initiated a plan to reorganize into a holding company. It is currently contemplated that we will merge into International Securities Exchange, LLC, or ISE LLC, a wholly owned subsidiary of International Securities Exchange Holdings, Inc., or ISE Holdings. As a result of this merger, the shares of Class A common stock and options exercisable for our shares of Class A common stock will be converted into shares and options, respectively, of common stock of ISE Holdings and the shares of Class B common stock will be converted into trading and voting rights granted under ISE LLC’s operating agreement. Our proposed reorganization is subject to satisfaction of certain conditions, including SEC approval.

Following consummation of the merger, our Class A common shareholders will own the same percentage of ISE Holdings common stock that they owned of Class A common stock immediately prior to this merger. The rights of the holders of shares of Class B common stock held prior to the reorganization will remain the same following the reorganization except that the holders will not be entitled to payment upon our liquidation. Currently, the holders of Class B common stock are entitled to an amount equal to the par value of the Class B common stock, or $0.01 per share, in the event of our liquidation, dissolution or winding up. The trading and voting rights granted to our Class B shareholders under ISE LLC’s operating agreement will continue to provide the right to trade on our exchange, the right to elect six of ISE LLC’s 15 directors and certain “core rights.” The “core rights” relate to the right of Class B-1 and Class B-2 shareholders to approve any increase in the number of authorized shares of Class B-1 common stock and Class B-2 common stock, and after the reorganization will apply to the authorized number of trading rights.

As a result of the reorganization, ISE Holdings will operate as a holding company, while ISE LLC will conduct the business and operations of our exchange. ISE LLC, as our successor, will be a “national securities exchange” registered under Section 6 of the Exchange Act. We believe a holding company structure is important for us as a public company as it will provide us with greater organizational flexibility, facilitate our access to capital markets, promote new business opportunities, facilitate future acquisitions and the formation of strategic alliances and create a framework for future growth. The structure will allow us to engage in these activities and maintain our exchange, ISE LLC, as a separate and distinct regulated entity. Notwithstanding our current plans, it is possible that the reorganization may be structured differently as the result of regulatory concerns.

Amended Stockholders Agreement

We are party to a Stockholders Agreement with all of the Class A shareholders who owned shares of Class A common stock prior to our initial public offering, including, but not limited to, The Goldman Sachs Group, Inc., Strategic Investments I, Inc., an affiliate of Morgan Stanley & Co. Incorporated, or Morgan Stanley, Adirondack Trading Partners LLC, Deutsche Bank Securities Inc., Bear Stearns & Co. Inc., or Bear, Stearns, Knight Trading Group, Inc., Banc of America Securities LLC, Lehman Brothers Inc., Wolverine Trading LLC, David Krell and Gary Katz. The Stockholders Agreement, among other things, provides that shareholders who are a party:

• may not transfer their shares without the approval of the Board of Directors except for certain permitted transfers. Permitted transfers include transfers: (1) among family members, or by any family member or members to a trust, corporation, partnership, limited liability company or limited liability partnership, all of the beneficial interests in which are held by such family member or members; (2) to a legal representative of any shareholder in the event such shareholder becomes mentally incompetent; (3) by will or the laws of descent; and (4) by any shareholder to one of its affiliates;

• may not encumber, pledge or otherwise assign their shares;

• may not grant proxies or have other voting agreements or arrangements with respect to their shares;

• will have the right, if we are eligible to file a registration statement on Form S-3, to demand that we file a registration statement on Form S-3, subject to certain limitations; and

• will have a piggyback registration right, following our initial public offering of our securities, to be included in any registration statement whether for sale for our account or for the account of any of our security holders.

Amendment No. 1 to the Stockholders Agreement amended the Stockholders Agreement to provide for more specific “lock up” arrangements in connection with our initial public offering which have now expired.

The Stockholder Agreement also requires that all transferees of such Class A common stock (including permitted transferees) agree to be bound by such transfer restrictions to the extent such Class A common stock is not publicly registered nor sold pursuant to Rule 144. Additionally, all current holders of options to purchase shares of our Class A common stock issued pursuant to the 2002 Stock Option Plan, including our non-industry directors and our named executive officers, are required to become parties to the Stockholders Agreement, as amended, upon exercising any portion of their stock options.

The Stockholders Agreement, as amended, will generally terminate: (1) upon mutual consent of us and holders of two-thirds of the shares of Class A common stock; (2) as to a particular shareholder, the date on which such shareholder or its affiliates do not beneficially own any shares of Class A common stock; (3) the date of consummation of any merger or consolidation between us and any other corporation if, immediately thereafter, the shareholders and their affiliates hold, in the aggregate, capital stock representing less than a majority of the voting power of such corporation; or (4) the date that is two years following our initial public offering.

Underwriters for our public offerings

Some of the underwriters for our initial and our secondary public offering of our Class A common stock and their affiliates own or lease shares of Class B common stock on our exchange and, in some instances, are also holders of shares of our Class A common stock. Goldman Sachs & Co., UBS Securities LLC, Banc of America Securities LLC, Bear Stearns, Deutsche Bank Securities Inc., Merrill Lynch, Pierce, Fenner & Smith, Incorporated and Morgan Stanley, who were each a book-running manager or co-manager for our initial and secondary public offerings, either directly or indirectly through an affiliate own or lease shares of Class B common stock and/or hold shares of Class A common stock.

Credit facility and bank accounts

We have an uncommitted $10.0 million credit facility with JPMorgan Chase Bank, which is a financial institution affiliated with JPMorgan Securities Inc., one of our Class B-2 and Class B-3 shareholders. No amounts have been drawn under the credit facility. As of December 31, 2005, cash and cash equivalents held at JPMorgan Chase Bank amounted to approximately $25.9 million. Additionally, as of December 31, 2005 cash and cash equivalents held at affiliates of Citigroup, Inc., one of our Class B members, amounted to approximately $124.9 million.