Pacific Exchange Demutualization Plan Approved - Seat Owners Vote Overwhelmingly To Convert To For-Profit Corporation

The Pacific Exchange (PCX) announced yesterday that its seat owners voted overwhelmingly in favor of a plan to convert the PCX from a not-for-profit membership organization to a for-profit stock corporation. The final tally was 443 in favor (90 percent) to 51 against. The Exchange has 552 seats, each with a vote.

"The PCX Board of Governors and I are gratified by the strong support for our demutualization proposal," said PCX Chairman and CEO Philip D. DeFeo. "Demutualization is critical to our competitive position in the marketplace. We are pleased that our seat owners recognize the importance of making fundamental changes to our corporate structure going forward."

The proposal requires approval by the Securities and Exchange Commission and the California Department of Corporations, which are expected to act by the second quarter of 2004. When it is effective, seat owners will receive 1,000 shares of common stock in PCX Holdings, Inc., a new entity, for each seat owned. PCX Holdings will own the Pacific Exchange and its subsidiary, PCX Equities, Inc., a for-profit corporation established in 2001 when the Exchange demutualized its equities business. The Pacific Exchange will continue operating the options business; PCX Equities will remain the regulator of the Archipelago Exchange (ArcaEx). PCX seat owners will also receive non-transferable trading rights as part of the transaction.

"Demutualization offers many advantages," DeFeo said. "It makes the Exchange more attractive as a strategic partner and investment opportunity. It allows us to make decisions and implement change faster. It aligns the interests of shareholders and management, and positions us to compete in a world where all exchanges will be demutualized entities. This is a landmark event in the Pacific Exchange's long, rich history."