The terms of the agreement include two components valued at up to $150 million. At the close, the approximately $50 million in cash is subject to an adjustment based on actual working capital at Libertas, and $25 million of unregistered Knight stock is subject to certain contractual transfer restrictions. The agreement also includes a potential earn-out of up to $75 million of unregistered Knight stock based on future performance of Libertas in the threeyear period following the close.

"Libertas is a fast-growing, fixed income boutique that provides buy-side clients with wellrespected proprietary research and much-needed liquidity in the trading process," said Thomas M. Joyce, Chairman and CEO, Knight Capital Group. "Since its founding, Libertas has exhibited steady revenue growth and trading volumes that belie the firm's modest size. Following the deal close, Knight will have a powerful equity and fixed income distribution network."

Founded by Chief Executive Officer Gary Katcher in 2002, Libertas is a privately-held, riskless principal, fixed income broker-dealer specializing in high-yield, distressed, assetbacked and mortgage-backed securities (ABS/MBS). Libertas also provides clients with proprietary research on companies and target sectors. Based in Greenwich, C.T., the firm has 59 employees and satellite offices in New York, London and Hong Kong. Upon close of the agreement, Mr. Katcher will report to Mr. Joyce and become a member of the Knight management team.

"Joining Knight presents a perfect fit and the next logical step for Libertas. Our shared strong client focus, combined with the deep resources of Knight Capital Group, will allow us to grow all aspects of our fixed income business much faster than if we had opted to remain independent," Mr. Katcher said.

Knight provides market access and trade execution services across multiple asset classes to more than 1,700 buy-side firms. According to industry reports, revenues from institutional fixed income trading in high-yield, distressed and ABS/MBS amount to approximately $2 billion annually.

The closing of the transaction is subject to customary closing conditions, including the receipt of regulatory approvals, and is expected to be completed in the fall of 2008. The acquisition is expected to be cash flow positive immediately following the closing of the transaction and accretive to earnings per share in 2009. Upon the close of the acquisition, Libertas will operate as a wholly-owned operating subsidiary of Knight Capital Group. Libertas is a member of FINRA and is authorized and regulated by the Financial Services Authority (FSA) and the Securities Futures Commission (SFC).

The advisors to Knight on the transaction are Sandler O'Neill + Partners and Skadden, Arps, Slate, Meagher & Flom LLP. The advisor to Libertas is Proskauer Rose LLP.