IntercontinentalExchange, Inc. and the Chicago Board Options Exchange today announced that they have entered into an agreement that is intended to bolster the proposed merger of ICE and CBOT Holdings.

The deal would resolve the issues relating to the CBOE exercise rights. Under the agreement: full members of the Chicago Board of Trade holding CBOE exercise rights would receive US$500,000 in value for each right, or up to US$665.5 million in total to compensate members of CBOT for the loss of the exercise right. The consideration would be paid equally by CBOE and ICE, with holders of exercise rights being entitled to receive cash and/or debt securities convertible into both stock of the newly combined ICE/CBOT Holdings and common shares of CBOE after its demutualization.

The exclusive agreement between ICE and CBOE is contingent on the completion of the proposed merger of ICE and CBOT Holdings. ICE and CBOE have also entered into an agreement in principle for a broad commercial partnership, including technology and product development, and access to the distribution capabilities of each exchange.

The firms argue that the competing bid for the CBOT, proposed by CME Holdings, provides no value for the exercise right eligibility of CBOT members, and no certain resolution to this critical issue. The ICE-CBOE proposal would provide CBOT members with immediate value for their exercise rights and the ability to hold equity in CBOE following its planned demutualization. In addition, ICE and CBOE’s agreement in principle regarding a commercial partnership provides an opportunity to create ongoing value for ICE stockholders and CBOE members.

“This strategic agreement would resolve existing litigation and uncertainty for both CBOT and CBOE members, while unlocking substantial value for CBOT members, many of whom remain CBOT Holdings stockholders. It also frees CBOE to pursue a demutualization for the benefit of its members, and importantly, accelerates ICE’s ability to deliver value in options products for our stockholders and customers,” said Jeffrey Sprecher, chairman and CEO of ICE, in a release.

William Brodsky, CBOE chairman and CEO, said, “We are pleased that ICE sought to address the exercise right issue and we are delighted to participate in a proposal that provides significant benefits for each organization. The offer provides CBOT members with substantial value, liquidity, and for those who choose, equity participation in CBOE. This is a unique opportunity to provide certainty for both CBOE and CBOT members, and to remove an obstacle that has impeded progress for members at both exchanges.”

“This exclusive agreement with CBOE affirms ICE’s consistently stated intention to provide a constructive resolution to this long-running dispute. We are eliminating a costly and potentially open-ended distraction that would otherwise persist following a completed merger between ICE and CBOT. We believe this agreement enhances our already superior proposal to merge with CBOT and underscores ICE’s innovation and leadership,” said Sprecher.

He added, “ICE stockholders stand to benefit through an enhanced offer for CBOT as well as a long-term cooperative relationship with the world’s premier options exchange. The transaction structure — in which ICE and CBOE jointly share the cost of resolving the member rights issue — is a highly efficient use of capital.”