IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE Chancery Court Chambers

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN RE GFI GROUP INC. STOCKHOLDER LITIGATION : Civil Action : No. 0-VCL - - - Chancery Court Chambers New Castle County Courthouse 00 North King Street Wilmington, Delaware Friday, February, 0 :0 p.m. - - - BEFORE: HON. J. TRAVIS LASTER, Vice Chancellor. - - - TELEPHONIC SCHEDULING CONFERENCE ------------------------------------------------------ New Castle County Courthouse 00 North King Street - Suite 00 Wilmington, Delaware 0 (0) -0

0 0 APPEARANCES: (Via teleconference) STUART M. GRANT, ESQ. MARY S. THOMAS, ESQ. BRENDA F. SZYDLO, ESQ. Grant & Eisenhofer, P.A. -and- KEVIN H. DAVENPORT, ESQ. Prickett, Jones & Elliott, P.A. -and- MARK LEBOVITCH, ESQ. JOHN VIELANDI, ESQ. EDWARD G. TIMLIN, ESQ. of the New York Bar Bernstein, Litowitz, Berger & Grossmann LLP -and- DANIEL ALBERT, ESQ. MICHAEL C. WAGNER, ESQ. of the Pennsylvania Bar Kessler Topaz Meltzer & Check, LLP for Plaintiffs EDWARD B. MICHELETTI, ESQ. JENNESS E. PARKER, ESQ. Skadden, Arps, Slate, Meagher & Flom LLP for Defendants CME Group Inc., Commodore Acquisition Corp., Commodore Acquisition LLC, Cheetah Acquisition Corp., and Cheetah Acquisition LLC SAMUEL A. NOLEN, ESQ. KEVIN M. GALLAGHER, ESQ. Richards, Layton & Finger, P.A. -and- GLENN M. KURTZ, ESQ. ANDREW W. HAMMOND, ESQ. of the New York Bar White & Case LLP for Defendants Frank Fanzilli, Jr., and Richard McGee (Appearances Cont'd)...

0... (Appearances Cont'd) WILLIAM M. LAFFERTY, ESQ. LINDSAY M. KWOKA, ESQ. Morris, Nichols, Arsht & Tunnell LLP -and- TARIQ MUNDIYA, ESQ. TODD G. COSENZA, ESQ. of the New York Bar Willkie Farr & Gallagher, LLP for Defendants Michael Gooch, Colin Heffron, Nick Brown, Jersey Partners Inc., New JPI Inc., and GFI Brokers Holdco Ltd. KATHALEEN ST. J. McCORMICK, ESQ. PAUL J. LOUGHMAN, ESQ. Young, Conaway, Stargatt & Taylor LLP for Defendant Marisa Cassoni - - - 0

0 0 THE COURT: Good afternoon, everyone. This is Travis Laster speaking. Who will be speaking for the plaintiffs? MR. GRANT: Your Honor, Stuart Grant will be speaking, at least in the beginning, and then we'll turn it over to Mark Lebovitch. THE COURT: Thank you, Mr. Grant. Who will be speaking for the defendants? MR. LAFFERTY: Your Honor, this is Bill Lafferty. I will, I think be doing the talking at least for the management defendants, and I don't know about the other defendants. So -- MR. NOLEN: Your Honor, it's Sam Nolen at Richards Layton. I have here with me Kevin Gallagher in my office, and also Glenn Kurtz and Andy Hammond of White & Case. We'll be speaking for the special committee defendants and, with Your Honor's permission, Mr. Kurtz will be doing the speaking. MR. MICHELETTI: Your Honor -- MS. McCORMICK: This is Kathleen -- THE COURT: I have Mr. Lafferty's letter, but I didn't want to interrupt whoever it was, if there's somebody else that wanted to say something?

0 0 MR. MICHELETTI: I just wanted to let the Court know, Your Honor, that you have Ed Micheletti and Janness Parker from Skadden Arps on, on behalf of CME. THE COURT: Thank you, Mr. Micheletti. And I got your letter as well. I appreciate it. MS. McCORMICK: And -- THE COURT: Mr. Grant, do you want to go ahead. MR. GRANT: I think the court reporter wanted to say something. THE REPORTER: I believe that was Ms. McCormick trying to introduce herself. MS. McCORMICK: Kathaleen McCormick on behalf of defendant Marisa Cassoni. In the event we need to speak, I will be speaking on her behalf. THE COURT: Okay. Sorry about that, Ms. McCormick. It was nothing personal. Mr. Grant. MR. GRANT: Your Honor, I guess a lot of letters in and some discussions, and maybe some agreements on certain things. I'm not sure anyone is opposing the expedition, but having been burned once by what we shall call a miscommunication, the idea of

0 0 getting burned a second time was not high on my list. So that's why I asked and pushed if we could continue on with this conference. And I just, on the merits, I will just turn it over to Mr. Lebovitch, with the Court's permission. THE COURT: Sure. Mr. Lebovitch, go ahead. MR. LEBOVITCH: Thank you, Your Honor. I know Your Honor's received the papers, so I'm really not going to rehash every one of what we think are the wild twists of the past few weeks. I do want to just briefly observe that what started out as kind of a strong disloyalty case has just evolved into a set of circumstances I don't know that anyone could have envisioned and that's rarely seen. When I last argued before the Court, it was our first motion to expedite, and what we had was the CME sale and a management buyout of the IDB business and we spoke of the parties claims, we spoke of bribery, kind of the concept with greed. Back then, when that was it, you had conflicted directors who understood that fiduciary duty 0 is create and empower a special committee and the conflicted directors excuse themselves from the board's process.

0 0 Today, the situation has turned upside-down. We're seeing exactly the conflicted directors whose plan has been rejected by the shareholders, and they're now in a box, and they're facing a complete loss of control over their company. And what I mean by that is they used their -- Gooch and Heffron, they used their equity veto to force the CME deal on the board and to prevent the special committee from exploring any real alternatives. Now that the CME deal is voted down and BGC made an offer that very deliberately side-steps the equity veto, those fiduciaries, they do face losing essentially their position and becoming a minority in a company controlled by a man that they personally detest. And that's BGC and its owner. And ironically, the dead hand tail that was part of our case from the beginning is playing an important role here. Gooch and Heffron cannot tender to BGC at any price. And more than that -- and it becomes relevant when we're going to talk about this search for strategic alternatives -- they can't tender to anyone for an entire year, even if they liked the person. Their financial interests really are

0 0 completely adverse to the other shareholders, who now have the opportunity to sell their shares at the maximum price that came out of a very public, very active bidding war. And the other shareholders do not have to become minority investors. So really, what we're seeing is, I think, the acts of desperate fiduciaries using sheer bullying and, frankly, an unapologetic abuse of power. But I want to focus on the D- that we provided the Court this morning, because it came out last night well after we filed our motion, and it changes the landscape in numerous ways that we think are important. Basically, because of the company's admissions. When we filed our emergency motion Wednesday night, that was obviously following getting the e-mail we got from Mr. Kurtz, we knew some of the special committee's story, at least their position as reflected in the e-mail. We didn't know where the company would be. So we were asking for discovery, we were asking for a prompt hearing or trial, kind of wanted to see how things were going to play out. But we knew that for the Court to grant equitable relief, there may be a need for discovery and, essentially, factual determinations if the company disputed what

0 0 the special committee said. While we acknowledge that for some of the aspects of relief that we would be seeking at some point there may well still be a need for discovery, the company's admissions in last night's D-, we think, show that there isn't a dispute and that the Court may well have the power and ability to very rapidly grant the very necessary equitable relief. And I just want to maybe turn to page of the D-, if Your Honor has that, and walk you through it. But what we learn in the D- at page, and consider how it affects the relief that's being sought, is, first, the special committee told us in that e-mail that they did not authorize what we believed was a truly cynical exploration of strategic alternatives. And at page we learn that that's the case -- at least can infer that -- because the disclosure in the paragraph -- the first paragraph that starts with the words "Later that day," we learn that on January 0, after the CME deal was voted down by shareholders, we learned that a majority vote of the board recommended to terminate the amended CME agreement. But it says "... upon the recommendation of the Special Committee." And then there's another

0 0 0 sentence that says "At the meeting, the board also determined to explore strategic alternatives...," And it goes on. I think in light of Mr. Kurtz's e-mail, the company's own disclosure of last night confirms that the special committee did not support the search for alternatives, and that affects potentially what actually went down at the board meeting and the loyalty of the directors who voted to do that. And second, this is confirming our February press release theory. We said that the board never approved the February press release. The company has confirmed it under the paragraph that talks about "On February, 0, GFI issued a press release." The next paragraph says, "Later that day, the Board met and had extensive discussions regarding potential strategic transactions." So I think that what we learn, what is now confirmed, is that having previously sent letters in his own name which the shareholders chose to ignore, Mr. Gooch issued a press release on behalf of the board without even holding a meeting to figure out the board's position, whether or not that meeting included the special committee. And I'll note that,

0 0 you know, as we point out in the papers, considering how close BGC got to achieving their percent tender condition, I think it's very fair to infer that Gooch's deception had its intended effect. Now third -- and this is, I think, the most remarkable fact that's in this D-, I think it brings to mind several of the most egregious loyalty cases that have ever come before this Court. Gooch and Heffron have effectively disbanded the special committee, or at least stripped it of its power. When this deal was announced, or I guess when the process was ongoing in 0, Gooch and Heffron created and the board created a special committee that was broadly empowered, pursuant to a board resolution, to review any strategic alternatives. Now, on page, what we see is that the board, in the same paragraph I just quoted from, on February, the board authorized management to engage in discussions with third parties and to further explore these potential transactions. And then on page 0, under the heading "The Board has Authorized the Exploration of All Strategic Alternatives," we see, in the third sentence, "The Board has authorized GFI Management to explore these

0 0 potential transactions." And so we think the company's now confirming that notwithstanding the resolution, notwithstanding the special committee's opposition, they have essentially given power to management, which we can all rightly, I think, conclude is giving power to the two people who are subject to the tail and who would never want to be subject to being a minority under the thumb of Howard Lutnick, and who have shown their opposition and essentially the conduct through which they're going to oppose BGC at all costs. Now, this does bring to mind some cases. We cited them without even really appreciating how deep the special committee had been undermined. But in Hollinger vs. Black, Conrad Black, his equity position was not enough to force the board to do his bidding. He used his fiduciary power to override the special committee, and we know that then-vice Chancellor Strine had absolutely no problem using the full breadth of the Court's equitable powers, including not only enjoining Black from selling his shares to Barclays, but actually restraining him from interfering with the strategic review process and enmeshing himself with that. And what the Court said

0 0 is his own conduct "made it impossible" to include him in a strategic process as the leader. And then we also cited the T. Rowe Price vs. Rubin case, where you had a conflicted fiduciary essentially neutralize and side-step a special committee that was not doing his bidding and, again, the Vice Chancellor had no problem granting injunctive relief here. Here what we see is currently, today, as of today, the shareholders have a choice between.0 per share, which is less than.0 that BGC did in fact have on the table, I believe as of last Monday. But it's -- but the choice is.0 or some higher number versus the far lower price where the stock is going to trade if BGC walks away. And so we will be asking the Court to exercise its power quickly. You know, the D- affects what we're seeking, and this is why we wanted to have this call. Because of the facts that aren't contested, we believe there's not really a need for a full evidentiary hearing on all of these issues. And we're also looking at the Court's time. It may be that it's perfectly sufficient if the Court wants to have an

0 0 oral argument essentially on an injunction sometime even early next week, where we just go on the facts that are here. And we think that that's enough for the Court to enjoin the conflicted directors from enmeshing themselves and interfering with the special committee, and even the board process, as it relates to BGC. We think it would be a problem for the board to meet today or tomorrow to consider BGC with Gooch and Heffron participating. And we frankly think that if that relief is granted, it's entirely possible that one or two board meetings where Gooch and Heffron aren't present might sort this all out. And, you know, that said, we recognize that if the Court is either not inclined to decide this promptly, we will pursue discovery, we're going to seek the earliest possible hearing. And if, after additional board meetings where Gooch and Heffron are present, or even if there's meetings where they're not present but Ms. Cassoni still does what we think inexplicably favors Gooch and Heffron over the obvious interests of the shareholders, we think that then you would have to have discovery and an evidentiary hearing. In particular, last night's D- may

0 0 well tip BGC over the percent. They only need a few shares to get there. And we're going to have the board condition. It is not like other conditions that are dependent on outside forces. It's not an antitrust condition. It's not a financing condition or something else that relies on third parties. This is a condition wholly within the control of the board. And I'll just posit, Your Honor, that if a director, acting in good faith, concludes that.0 or.0, or whatever can be negotiated, is better than letting this company go into free-fall, then it's a necessary corollary that you expand the board to allow that tender offer to happen. It's not a big deal because you're going to be transferring control. That's the whole point. And we think, you know, frankly, turning against the shareholders, where the sole effect is entrenching Gooch and Heffron, it is inexplicable. It does look like bad faith. But if we get there, we would need discovery. And if we can't get a hearing really quickly, then we would seek that discovery into the conflicted directors and Ms. Cassoni so that we can get whatever relief is there.

0 0 And my last point, Your Honor, is I do admit, for all the admissions that have come out of the parties that have been, I think, pretty funny, including Mr. Kurtz' e-mail and what we see in the D-, Mr. Kurtz was obviously pretty cautious and, I would say, very deliberate in what he shared with us. And respectfully, I mean, we would be in a much better position, and perhaps the Court would be in a better position, if we learned a little bit more -- if Mr. Kurtz, you know, is permitted to speak with the Court, a little bit more of an explanation of what's been going on. Because all we know is something is very deeply broken in this board process with the special committee, but we don't -- we don't know exactly why or how that's played out. But I'll just save any further comments till after I hear from the Court, if I can answer any of your questions, or if we hear from other counsel. THE COURT: Let me ask you a few questions. So let's differentiate between your loyalty claim, which I think is clearly colorable, probably even much stronger than colorable. But that's only part of the question, in terms of

0 0 scheduling. If these guys have really done the types of things you say they've done, why don't we have a damages case? I've got a price out there that I can key off of. We're going to know where the stock settles if the deal's lost. Why can't I let you-all go after these two, and maybe three, folks for a damages remedy? MR. LEBOVITCH: Your Honor, I'll give two answers to that. First of all, we are talking about hundreds of millions of dollars of lost value. We referenced -- I think it was S&P or Fitch, saying that if no deal gets done here, this company is going to be downgraded, its business is deteriorating. We would expect the stock to drop by hundreds of millions of dollars. And so I don't know that a monetary recovery from these individuals is viable. And more importantly, I know that -- THE COURT: Is it going to drop more than 0 percent? MR. LEBOVITCH: Sorry? THE COURT: Is it going to drop more than 0 percent? I mean, we know they've got 0 percent of the company. MR. LEBOVITCH: Well, we don't know,

0 0 because what we've had is a premium to the unaffected price that's now 0 percent. And we know that. That's where --.0 is 0 percent or close to 0 percent higher than where the stock traded before the deal was announced. And, Your Honor, I'll concede that if there wasn't a pending all-cash tender offer, Your Honor might say, well, Mr. Lebovitch, that's the way the cookie crumbles because there's no competing bid out there. But the shareholders have an offer out there that followed the heated bidding war. And I've been through this, where if there's not a competing bid, and the Court will say, well, there's disloyal conduct here but we don't have another bidder. Here, there is another bid. And I always felt that has legal significance, and so I thought that that would mean the Court would use its powers to fix the problem as it goes. And I'll tell you, Your Honor, it may be that if Your Honor has a hearing -- either decides today or we have an argument on Tuesday that's more fulsome -- about whether the existing admissions justify enjoining Gooch and Heffron from interfering with the process, okay, I think we can do that. It's exactly what happened in the Black vs. -- in the Hollinger vs. Black case. If

0 0 Your Honor grants that relief, it's possible that -- THE COURT: The Hollinger vs. Black case was nowhere near that fast. MR. LEBOVITCH: No, I understand that. MR. GRANT: Your Honor -- MR. LEBOVITCH: I understand that, but I -- MR. GRANT: Mark, can I jump in for one second? MR. LEBOVITCH: Yeah. MR. GRANT: Your Honor, this is Stuart Grant. In answer to your very direct question, I think the defendants have a little under 0 percent and, quite frankly, right now the stock is almost 00 percent, or if a deal at.0, it's almost 00 percent of the unaffected price. So quite frankly -- first of all, we don't know, if they did a negotiated deal, whether it would be more than.0. So I don't know what the -- you know, it's not enumerated. Whatever the first part of the subtraction equation is minus whatever it settles down to could well be more than what Gooch and his colleague can afford. So I think there is a real question of whether that judgment could ever be paid.

0 0 0 THE COURT: All right. Next question, for whoever wants to field it as to you and Mr. Lebovitch. Why isn't this the special committee's water to carry? If they have the powers that you believe them to have, such that this is the board improperly overriding them and violating their prerogatives, why aren't they the people who should be bringing this claim, rather than you? MR. LEBOVITCH: Well, Your Honor, we've been on them for a long time as this process unfolded. And they are defendants. When we started this case, you know, they were named as defendants. I think the crux of what that question is maybe should be directed to Mr. Kurtz, but my answer for you is the fact that they have so far only sent out, I think, that very cautious e-mail, and not taken a litigation position, should not prejudice the right of the shareholders to say this process is broken and we're the ones that are going to be hurt by that. But I suppose Mr. Kurtz can answer why he hasn't sought to essentially realign, if we're right about these facts. MR. GRANT: Your Honor, this is --

0 0 THE COURT: I want to stay with you guys for a while. Was that you, Mr. Grant, or was that going to be Mr. Kurtz? MR. GRANT: No. This is Mr. Grant. Just to follow that up, I think the special committee has shown in numerous instances that they are spineless. Cassoni, you know, seems to waffle back and forth and, you know, is part of the process, not part of the process. But for whatever reason, she -- and potentially others -- seem to be under Gooch's thumb, and they're not stepping up. You know, quite frankly, had they stepped up right at the beginning and done the right thing, we might not even be here. But I think the special committee has shown several instances where they have, at a minimum, shall we say, not shown best practices and, quite frankly, I believe have breached their fiduciary duty. MR. LEBOVITCH: You know what? I'm sorry to -- MR. GRANT: They actually -- MR. LEBOVITCH: Actually, Mr. Grant, there's one thing that we didn't put in our papers that I do want to raise for Your Honor. Ms. Cassoni was on the special committee originally. I don't

0 0 know -- again, Mr. Kurtz can answer this. But it's occurred to me that having represented Ms. Cassoni until she decided she wanted different lawyers -- I don't know who supplied the lawyers, but until she decided she wanted to break off of White & Case and, I guess, Richards, Layton's representation, they represented her. And so maybe -- I'm speculating, maybe that constrained the special committee from essentially taking action adverse to Ms. Cassoni. I don't know the answer to that. THE COURT: You don't think that's just a testament to Ms. McCormick's abilities as a lawyer? MR. LEBOVITCH: I have nothing against anyone hiring Ms. McCormick at any time, but it's clearly unusual for a special committee member to vote in favor of a lower-priced deal that has greater conditions and then gets her own lawyers and decides to align herself with the controller. THE COURT: Well, I think obviously that's between Young Conway and Richards and White & Case. They're all good shops. I wouldn't draw any inference from that, either. MR. LEBOVITCH: Absolutely.

0 0 THE COURT: I'm focusing on your relief on page of your motion. Does the D- moot the need for (i), which was a request for a disclosure requiring that Gooch and Heffron correct the statements made in the January 0/February press releases? MR. LEBOVITCH: The answer to that, I think, is no, because this talks about just the process, frankly, in light of the disclosures that were made. And even though I've read through the D- and I'm reaching conclusions that the special committee posed, I think there would have to be disclosures about the basis for the special committee's position, because I believe the tender offer came to its closing where investors thought that the board as a whole reached conclusions. There was no hint that the special committee had taken a different position. And it's our position -- why I started hounding Mr. Kurtz to explain himself. So I think that would have to be further disclosure of what happened. And, frankly, in light of the D- yesterday, it does reflect a fissure on the board. Shareholders considering the tender offer now would

0 0 have to understand the whole process that led to this so that they can assess what they're going to do about any recommendation by Gooch or board members who are siding with him. THE COURT: All right. That should cover it for now. I thought I had another question, but it's left my mind. Perhaps it will return to me. Now, Mr. Lafferty, I saw your letter saying that you don't oppose expedition. Do you have a preference as to when and how? MR. LAFFERTY: Your Honor, I think the way we looked at it was that, you know, as I said in the letter and as I said to Ms. Thomas last night, that we don't oppose expedition. We did ask for some clarity about what precisely it is the plaintiffs were asking for. And indeed, I've now heard that change yet again. I mean, our point is simply we want to know what the claims are they're going to proceed on and what relief they want, and -- I mean do they want a trial? Do they not want a trial? Initially they asked for a trial. Now I hear Mr. Lebovitch asking for some sort of a hearing next week, which doesn't seem at all ripe to me, because I think, you know, as

0 0 you've heard, there are facts that need to be explored. There needs to be a record made. No matter whether it is a trial ultimately or a preliminary injunction hearing, there needs to be some factual development for the Court. And, you know, Mr. Lebovitch and Mr. Grant wanted the conference, notwithstanding our agreement, because they wanted to go through all that and they wanted a soapbox to get on. I wanted to be clear that we don't agree with them on all the facts, that we intend to oppose them, and we intend to oppose the relief, but I'm not going to sit here and go through facts that I'm not comfortable sort of putting -- you know, sort of putting my stamp of approval on. Mr. Lebovitch basically gave testimony today, and I'm not prepared to do that. The facts will need to speak for themselves. We intend to oppose them on the merits when it's heard. I think ultimately, you know, again, our belief is, again, whatever the relief is they are ultimately seeking, we think, is not going to be granted. And so we're prepared to go forward on whatever basis the Court says we should go forward on. I do think that Your Honor's point about damages is

0 0 true. I mean, there will potentially some day, you know, potentially be a damage claim here. You know, the plaintiffs well know that there are now discussions, and the fact that there are discussions going on with BGC is public. Both the company and BGC have said so. That is going on, and we're going to know wherever that comes out at some point. But those facts are still in flux, so that's sort of a whole other developing saga that is going to be the subject of, I'm sure, further factual development. So, I mean, my final mind is we're indifferent. We're prepared to go forward on whatever basis Your Honor thinks, if there's going to be any basis, as long as the plaintiffs put their stake down and tell us clearly, "These are the claims. This is the relief we want," we know what we're shooting at. THE COURT: Okay. Thank you, Mr. Lafferty. And I did not take you as conceding any of the factual points. So that's understandable. Mr. Kurtz, do you want to share with me your thoughts? MR. KURTZ: Yeah. That would be great, Your Honor. Maybe I can go through a few of the items and respond at least to plaintiffs'

0 0 allegations about the committee. I think it's worth noting at the outset that we represent two totally independent directors. They have been for some time fellow board members of, and they enjoy relationships with, the insiders, but they have no interest in the insider deal. They took on a job to maximize value for disinterested stockholders and to replicate an arm's-length transaction. And frankly, they had no idea what they were getting themselves into. There's been a satisfying component of the work, which is the committee has been successful in generating a strong auction which produced, at one point, 00 percent premium to the unaffected trading price at the time of the announcement of the CME deal, but it's also been incredibly frustrating, because the committee's not been able to actually deliver that value to stockholders, because their independent recommendations have been rejected by insiders and they have only two of the three votes that are needed to take action. I -- let me start with a disclosure issue. Then I would like to talk about plaintiffs, and then we can decide whether you want to hear about process. But the disclosure issues have been becoming

0 0 increasingly problematic, from our standpoint. At the outset, of course, the full board was provided with notice of an intention to make a disclosure or securities filing and provided drafts and an opportunity to comment. That's no longer the case, and the most recent disclosures, we think, are not accurate. We didn't know they were going out, we didn't have an opportunity to comment on them. Some of that's been addressed in the papers. I think what I would address is the D-, since that's new. Mr. Lebovitch relies on it as confirming some facts, but we actually have some problems with it, because it says, on page -- which is where Mr. Lebovitch was reading -- that "Based on the result, the Board determined by a majority vote of the Directors, upon the recommendation of the Special Committee, to terminate the amended CME merger agreement and..." some other agreements. The actual facts for that was that the special committee resolved and submitted as recommendations a five-step process, which started with the termination of the CME agreement, in order to -- and then subject to the endorsement, the signing of the BGC agreement, and then the satisfaction of the

0 0 BGC conditions -- primarily the board condition -- the supplying of disclosure schedules, and some other actions that were required in order to consummate the deal. So there wasn't a recommendation just in a vacuum to terminate the CME deal. And when we got to the board meeting, which lasts all of about five minutes, the special committee members said, "Wait a minute, we got to talk about BGC. It's expiring Monday morning." And the chairman of the board, Mr. Gooch, the insider, said, "We're not going to have any discussion about that," and then proceeded to a vote to terminate the CME agreement in a vacuum. Not only was it not, quote, the "recommended action by a majority" but, in fact, the special committee said if we can't ask questions, we can't vote on it. And they said, "We don't need your vote," and they proceeded to pass it without any participation by the special committee. So we're seeing problems. Another problem we're seeing in the process is sort of unhappy with having any other voice in the room. The board has silenced the special committee's personal advisors. Initially White & Case and Richards Layton

0 0 0 would speak in the boardroom. And just as soon as there started to be some movement to support BGC, the insiders declared that counsel for the special committee could no longer speak. And then, maybe more troublingly, the last two meetings -- or at least the meeting on this Monday and a meeting before then, we were actually barred from listening in or participating. The special committee members said they needed their legal counsel. The insiders said you can't have it, notwithstanding Your Honor's recent article about the need for personal advisors, which seemed to us to be particularly forceful where you're in such a complex environment, with a 0 percent shareholder with negative control, litigation, and a live auction. At this point, even though the special committee was authorized by resolution of the board to be exclusively in charge of transactions, it's the insiders that are now negotiating with BGC. They haven't apprised the board of the status of those negotiations, the relevant facts, and they said they won't do that unless the committee members agreed that they won't disclose that to their personal advisors for purposes of getting legal advice. So we're really

0 0 neutered, and we're really put in a difficult position. That's probably an appropriate time to talk about the allegation of plaintiffs about spineless activity. That's actually a pretty reckless allegation to make. The record -- and Your Honor will see it at some point -- is going to prove it to be incredibly wrong. This has been one of the most hard-fought processes that Delaware will have seen, and I think Delaware will be pretty proud about. Everyone on the special committee is very unpopular. At the bottom of the caption, advisors, like we said, aren't even allowed to speak or show up anymore. There were restrictions on what the special committee could do or say until the CME deal was terminated, because there was a no-shop in there. And since that time has come, there really hasn't been any opportunity or, we really understand, a basis for seeking any kind of injunctive relief. We sort of thought long and hard, and we can't really come up with a legal claim to do something here, given what directors are allowed to do. And we're not sure how you get an injunction that kind of gives the process over to two-fifths of the board.

0 0 We'd love for that to happen. If that happened, I think we could pretty quickly deliver value, but we haven't seen it. We view it sort of as Your Honor initially questioned, which is isn't it really a damages case. And if there's a damages case, there's already a plaintiff here and they're handling it, and they're more than capable of handling it. We haven't brought a claim, and we're probably not the right party to bring a damages claim. In fact, we're a defendant. But if anybody has sat around, we really -- we did kind of walk close to where we thought we could get to when we filed an opposition to the motion -- it was really a partial opposition to the motion, application for a preliminary injunction, and we disclosed what was going on. And the process has been difficult. We've had difficulty getting meetings scheduled. We've been able to meet almost immediately when we were supporting the CME deal, each and every time they matched, but it takes repeated requests to be able to get a meeting for BGC. And sometimes the insiders don't let the meeting take place at all. The insiders dominate the meetings

0 0 when they're there. I've already mentioned the silencing of the advisors. They determine the agenda. They dominate the discussions and the deliberations. And although for a while they actually tried to pursue abstention, so to speak, by not casting votes until we got to. -- at which time the insiders actually cast aside the last remnants of abstention and started voting against the BGC deal. So we've had difficulty with that. There's been -- the non-special committee members have cited concerns with the conditionality of the BGC bid and with their ability to fund. We don't have any problem with that. We disagree with those objections. But of course, the only way we could have addressed those matters is to be able to negotiate. But because we had -- with BGC. And because we had a no-shop, the only way to do that was to get a determination that it was reasonably likely to lead to or could lead to a superior proposal. That's something we were able to get through early, but once it got up to., the board would no longer give us that opportunity. They wouldn't make that -- they wouldn't follow that recommendation. And as a consequence, we couldn't even speak to BGC to try to resolve any concerns

0 0 anybody legitimately had about conditionality. Matters sort of got worse after the CME deal terminated. And I've given you some background on that shouldn't have been terminated, in our view, without adopting a new deal. Unlike the non-special committee members, the disinterested stockholders understood the $.0, and at one point $.0, was more than.. And so they voted down the CME transaction. That meant that we had nothing left but BGC. And of course, the special committee wanted to be able to sign that up with the caveat that they would, before they signed it, try to negotiate it back up to the.0. And that was the meeting where the board just refused to even have a discussion about it and terminated the board meeting, you know, within a matter of minutes. And then it expired, before we had another meeting, the following Monday at a.m. Instead, what the insiders said is they were going to explore strategic alternatives. We have problems with that. The first problem is we've already done that. The insiders spent months doing that before coming to terms with CME, or at least deciding that they might come to terms with CME, and forming a special committee about a year ago in

0 0 January. And the special committee then spent about months on alternative strategies and developed, as I said, a pretty furious auction which had a lot of bidding going on. And we've had, therefore, a long opportunity for any interested bidders to emerge and, of course, nobody has emerged. And on top of all that, the percent shareholder, JPI, is locked up with CME for months. And so we don't know how they're able to do anything to even generate a new market. And the reality is that the insiders were advocating last Friday morning that the shareholders needed to quickly tender in to them or vote in favor of their deal at., without a further market check. And, therefore, sort of difficult to understand how you can't then take a higher number at.0 without a market check. And the idea that BGC's not real or is too conditional and they're bad faith, and lots of other things that have been said about them, seems inconsistent with the fact that the insiders are themselves, in usurping the special committee, negotiating with BGC in an effort to get for themselves $.0. And we don't really know if they're

0 0 trading away anything to get that, but obviously if $.0 is a good deal when the insiders can take advantage of it, it's a good deal when it's offered to the disinterested shareholders. The CME merger agreement contains a fiduciary out, consistent with Delaware law. That was designed to permit the special committee and GFI to negotiate superior proposals, even if the insiders would be unable to take advantage of them because they had partnered up with a lower bidder. And you can't just sort of time it all out and move to a brand new process just because the insider's no longer able to participate in the sale of the business or the purchase of the business. So we've had a pretty difficult time with it. The record's going to demonstrate that we've been trying really hard to do something. We're not sure what we can do. We're still not sure what we -- even seeing plaintiffs' papers, we're still not sure what's out there, other than damages. And maybe there's something creative that we missed. If that's the case, we'll chime in. We're supportive of any kind of relief, which helps us maximize value on behalf of the

0 0 disinterested shareholders. We will continue to oppose as long as the committee is in place, any action that purports to diminish the returns to disinterested stockholders or would favor an insider, and we'll do -- we've been doing our work hard, and we'll do our work right until the end of this thing. THE COURT: All right. Thank you, Mr. Kurtz. That was very helpful. It's helpful to have your views as well as, through you, the views of your clients, and I appreciate it. In terms of time, would you rather -- the plaintiffs have put two things on the table. One would be some type of abbreviated paper-based application that would happen, sounds like, early next week. The other would be some type of mini-trial on the merits on limited issues on the th. Without limiting you to those -- if you've got some other idea, that would be fine with me -- what are your thoughts on the manner in which we should proceed? Do you have a preference for one of those alternatives or some different approach? MR. KURTZ: My view is if we can do anything quickly and on an expedited basis, and even maybe commentary as we go through the claims may move

0 0 this process. The ultimate problem, the big gorilla in the room here, is you need to -- the only way you can satisfy the conditions in order to be able to consummate a tender offer with BGC that matter at this point is to be able to provide them with two-thirds of the board. There's actually a way to do it, it's a really simple way to do it, and that is a majority of the board of directors, which is now at five but can be expanded to nine. Just take new designations, and then the two special committee members would resign. And that would give you what you need to satisfy the condition. But we're not -- you need three votes on the board in order to be able to designate and expand the board of directors in order to satisfy that remaining condition in the BGC tender offer. And I don't know whether the plaintiffs have a way that they think we can get there, other than through maybe fear as to what the alternatives might be for those that aren't participating in efforts to bring value to disinterested stockholders. And if there's a way and it requires an evidentiary hearing, then I support that. If there's a way that can be done on what really shouldn't be a highly contentious record,

0 0 because the facts are the facts, I support that. But I'm just not -- I still haven't figured out a way to satisfy that condition without a third vote. THE COURT: All right. Well, that's helpful. MR. GRANT: Your Honor -- THE COURT: Who is that? MR. GRANT: Stuart Grant. You know, one of the things of relief that we will ask for is basically to preclude Gooch and Heffron from being involved in this whole process, neutering them based on their fiduciary duty. That will give them three votes left, and to, I believe they can expand the board. That's one of the areas of relief. Now, whether that requires a full trial or they can be enjoined from interfering with a process because of the breaches of fiduciary duty, I don't know. I guess that's part of the reason why we wanted to have this conference, because we wanted to make sure that whatever procedurally we set up, the Court has the ability to provide the relief that's needed. Because we agree with the special committee that that is what's needed to meet the tender offer condition. It is within their power, but the two

0 0 0 interested directors are abusing their power to prevent the balance of the board from doing what they need to do. MR. KURTZ: I'm sorry. But just to clarify that so we don't go down the wrong road -- and maybe Mr. Grant has an idea I don't have -- my understand of the governance documents is not that it's a majority of a quorum, but that it's a majority of the board. And, therefore, we would need three. If we thought we could have done it on two, we may have actually come in for relief ourselves. So maybe somebody has a different read, but it's not our read. MR. LEBOVITCH: Your Honor, this is Mark Lebovitch. Just to clarify our position, you do need three directors, and that's why, when I spoke earlier, I said that it may or may not sort itself out if we enjoin Gooch and Heffron from interfering with the board. Clearly Ms. Cassoni has switched sides for some reason or another, and that's why we thought right now, while the board has to be able to act, it would be appropriate to have -- because we believe there aren't contested facts about Gooch and Heffron's role here -- an order that would leave three people on the board.

0 0 It is possible that you would then have a three-person board meeting at which Ms. Cassoni would hold out, and that's why there may have to be a second stage. Again, I don't know what Mr. Kurtz knows, and so we may be naive to think that if it's three people in the boardroom, that they would come to what we believe to be the obvious conclusion for the benefit of shareholders, but it may be that keeping Gooch and Heffron out of the boardroom wouldn't change the outcome. We just don't know. And maybe that's -- maybe Mr. Kurtz has a deeper insight than we do. THE COURT: Thank you, everyone. I've heard what I want to hear. MR. LAFFERTY: Your Honor, this is Mr. Lafferty. Can I just say one other thing? And I'll stand down if you've heard enough. I'll -- THE COURT: Well, since you're the only one who hasn't been talking, I should give you at least a couple of minutes, but I really do not want to get into governance documents speculation or people's respective views about that. I don't think it's most helpful. But go ahead. MR. LAFFERTY: And I apologize, Your Honor, and I'm not trying to prolong this. I thought

0 0 we were going to have a scheduling conference, not an ever-developing -- yeah. Honestly, this is pretty extraordinary, because the plaintiffs aren't sure what they're asking for. It keeps changing. My point has always been, look, we're prepared to move forward. There needs to be a factual record, I believe, put before Your Honor. And we don't agree with everything that Mr. Kurtz said. I also am of the view that it's far from clear to me what role the special committee has, now that there is no interested-party transaction on the table. The CME deal is -- it's over. It's been voted down. It's been terminated. So, you know, the idea that we're going to have some presentation next week at which the Court could possibly conclude that certain directors ought to be stripped of their rights as directors, with no factual development or factual record or factual presentation, to me, is utterly extraordinary, and I would not agree with that concept. I don't think that makes any sense. And if there's going to be a hearing at which that type of relief is considered, there ought to be facts put before Your Honor. THE COURT: Great. Thank you,

Mr. Lafferty. 0 0 So here's what we're going to do: We are certainly going to have some type of factual development. I would be shocked if Mr. Gooch and Mr. Heffron agreed with events as Mr. Lebovitch views them or as Mr. Kurtz has described them. That doesn't mean that I won't be ultimately swayed and find quite credible the testimony of independent directors who don't have a dog in the fight or any other reason to shade their testimony or their views and, hence, generally can be counted on to call things straight. But it is possible that Mr. Gooch and Mr. Heffron may disagree with the account that the independent directors put forth, and that would require me to make -- either on a probabilistic basis or, in the event of some type of merits hearing, a preponderance basis -- an assessment of the facts. In light of that, I think that what makes the most sense is to proceed to a merits hearing, and I will reserve two days, rather than the one that the plaintiff has requested. We'll block out the th and the th. I am going to adopt the schedule that the plaintiffs proposed on pages and of the motion to expedite, with the modification that the

0 0 plaintiffs will have until close of business tomorrow -- and I'll be more specific. Let's say a little bit before close of business, since I know we don't like close of business. We'll say :00 tomorrow -- to file their supplement to the complaint. By giving the plaintiff that extra time, I'm expecting you-all to be as targeted as you can in terms of identifying the relief that you're planning to seek and the matters that are going to be subject to this highly expedited discovery. Similarly, in terms of the updated document production that's contemplated by February, I don't think it's fair for you just all to say "update." I think you should be more directed in telling people what you want. Whether the depositions are limited to Gooch and Cassoni, I leave that to the plaintiffs. I think, in something like this, notwithstanding the fast pace, it may well be important to depose more than those two, and so I won't limit you to two depositions. I don't want you, you know, going crazy, but if you want to take additional depositions, or if Mr. Lafferty wants to depose the special committee members, if he's worried that they will provide testimony that he won't be able

0 0 to anticipate, that all needs to happen, and you're just going to have to get it done. The opening brief that's going to be filed on February needs to be specific about the exact relief you're seeking. The reason why I'm allowing for some development between the complaint and the th is it may be that, depending on the testimony, you can forego some type of relief or seek others. But what I'm not going to do is have Mr. Lafferty have to respond in his answering brief to a moving target. So whatever you guys put in your opening brief on February th, that's what we're going with. And then we'll have the th and th for a merits hearing. The reason why I think it's important to go to a merits hearing is so that I can make factual determinations. And I think it's highly likely that some form of affirmative injunctive relief may be appropriate if the plaintiffs are correct in terms of establishing what they say. Normally a disclosure injunction is negative. It says, "Don't go forward with the transaction until you have done X, Y, and Z." And X, Y, and Z includes, in the disclosure context, disclose the specified facts.

0 0 Here, what the plaintiffs are seeking is an order requiring that Gooch and Heffron correct the statements made in the January 0 and February press releases, and Mr. Lebovitch has indicated today that he may want additional affirmative disclosure. This doesn't strike me as something where I would be issuing a negative injunction. The negative injunction would be, in theory, don't close BGC until this stuff goes out, but that's precisely contrary to the type of relief that people are contemplating. Namely, people want to be able to proceed with BGC. Not only that, but BGC isn't one of the wrongdoers. So it would be odd, to me, to think that there would be some type of injunctive relief of a prohibitive nature, of a negative nature, directed at BGC. So consequently, at a minimum, to preserve the possibility of that type of mandatory-disclosure-related relief, I think we need to go to a merits hearing. I also think that to the extent some of this other more muscular relief that the plaintiffs are contemplating is in play, it would be prudent to hear some live testimony, rather than do something on a preliminary record. What I will also allow -- did I drop