[ ] Shares of Common Stock/1/
($.01 par value)
WEB STREET, INC.
UNDERWRITING AGREEMENT
----------------------
New York, New York
November [ ], 1999
XXXXXXXXXX & CO. INC.
PACIFIC CREST SECURITIES INC.
WEB STREET SECURITIES, INC.
As Representatives of the Several
Underwriters listed on Schedule A hereto
c/o Fahnestock & Co. Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Web Street, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Xxxxxxxxxx & Co. Inc. ("Xxxxxxxxxx"), Pacific Crest Securities
Inc., Web Street Securities, Inc. ("WSS") and each of the underwriters named in
Schedule A hereto (collectively, the "Underwriters"), for whom Xxxxxxxxxx,
Pacific Crest and WSS are acting as the representatives (the "Representatives"),
with respect to the sale by the Company, and the purchase by the Underwriters,
acting severally and not jointly, of 3,500,000 shares of the Company's common
stock, $.01 par value per share ("Common Stock"). Such shares of Common Stock
are hereinafter referred to as the "Firm Shares".
Upon your request, as provided in Section 3(c) of this Agreement, the
Company and the persons named in Schedule B hereto (the "Selling Stockholders")
shall also sell to the Underwriters, acting severally and not jointly, up to an
additional 525,000 shares of Common Stock for the purpose of covering over-
allotments, if any (the "Option Shares"). The Firm Shares and the Option Shares
are hereinafter referred to as the "Securities". The Securities are more fully
described in the Registration Statement and the Prospectus referred to below.
---------------------
/1/ Plus an option to purchase from the Company and the Selling
Stockholders up to 525,000 additional shares to cover over-allotments.
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1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each of the Underwriters, as of the
date hereof, as follows:
(1) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form S-1 (File No. 333-85849), including any
related preliminary prospectus ("Preliminary Prospectus"), for the registration
of the Securities under the Securities Act of 1933 (the "Act"), and the rules
and regulations promulgated thereunder, which registration statement and
amendment or amendments have been prepared by the Company in conformity with the
requirements of the Act and the rules and regulations promulgated thereunder.
The Company will next file with the Commission either (1) prior to the effective
date of such registration statement, a further amendment to such registration
statement (including the form of final prospectus) or (2) after the effective
date of such registration statement, a final prospectus in accordance with Rules
430A and 424(b). In the case of clause (2), the Company has included in such
registration statement, as amended at the Effective Date, all information (other
than Rule 430A information) required by the Act and the rules promulgated
thereunder to be included in such registration statement and the Prospectus. The
Company will furnish a copy of any amendment to such Registration Statement, or
any Registration Statement filed pursuant to Rule 462(b) under the Act (a
"462(b) Registration Statement", to the Representatives at least two business
days before filing such Registration Statement amendment, and will not file any
other amendment thereto or any Rule 462(b) Registration Statement to which the
Underwriters shall have objected in writing. Except as the context may otherwise
require, such registration statement, as amended, on file with the Commission at
the time the registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed as a
part thereof and all information deemed to be a part thereof as of such time
pursuant to paragraph (b) of Rule 430A or 462(b) under the Act), is hereinafter
called the "Registration Statement", and the form of prospectus in the form
first filed with the Commission pursuant to Rule 424(b) under the Act, is
hereinafter called the "Prospectus".
(2) Neither the Commission nor any state regulatory authority has
issued any order preventing or suspending the use of any Preliminary Prospectus,
the Registration Statement or the Prospectus or any part of any of the
foregoing, and no proceedings for a stop order suspending the effectiveness of
the Registration Statement or any of the Company's securities have been
instituted or are pending or to the Company's knowledge, threatened.
(3) Each of the Preliminary Prospectus, Registration Statement and
Prospectus, at the time of filing thereof, conformed, or will conform; as the
case may be, to the requirements of the Act and the rules and regulations
promulgated thereunder, and none of the Preliminary Prospectus, Registration
Statement or Prospectus, at the time of filing thereof, contained or will
contain an untrue statement of a material fact or omitted or will omit to state
a
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material fact required to be stated therein and necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty does not
apply to statements made or omitted in reliance upon, and in conformity with,
written information furnished to the Company with respect to the Underwriters by
or on behalf of the Underwriters, expressly for use in such Preliminary
Prospectus, Registration Statement or Prospectus, or any amendment thereof or
supplement thereto.
(4) When the Registration Statement becomes effective and at all
times subsequent thereto up to the Closing Date and any Option Closing Date, and
during such longer period as the Prospectus may be required pursuant to the Act
to be delivered in connection with sales by the Underwriters or a dealer, the
Registration Statement and the Prospectus will conform in all respects to the
requirements of the Act and the rules and regulations promulgated thereunder.
Neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
does not apply to statements made or omitted in reliance upon, and in conformity
with, written information furnished to the Company with respect to the
Underwriters by or on behalf of the Underwriters, expressly for use in such
Preliminary Prospectus, Registration Statement or Prospectus, or any amendment
thereof or supplement thereto.
(5) Each of the Company and its Subsidiaries (as hereinafter defined)
(i) has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, (ii) other
than as disclosed in the Registration Statement, owns no interest in any
corporation, partnership, trust, joint venture or other business entity, (iii)
is duly qualified and licensed to do business, and is in good standing as a
foreign corporation, in each jurisdiction in which its ownership or leasing of
any properties or the character of its operations requires such qualification or
licensing, (iv) has all requisite corporate power and authority, and has
obtained any and all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all foreign and domestic
governmental or regulatory officials and bodies (including, without limitation,
those having jurisdiction over environmental or similar matters and the
activities of brokers and dealers), to own or lease its properties and conduct
its business as described in the Prospectus and (v) is and has been doing
business in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises, permits and all foreign, federal, state and
local laws, rules and regulations, (including, without limitation, timely filing
of all Financial and Operational Combined Uniform Single Reports required to be
filed with the Commission), and has not received any notice of proceedings
relating to the revocation or modification of any such authorization, approval,
order, license, certificate, franchise or permit which, if the subject of an
unfavorable decision, ruling or
4
finding, would, in the aggregate, have a material adverse effect on stockholders
equity in, or the condition (financial or otherwise), earnings, business
prospects or properties of, the Company and its Subsidiaries, taken as a whole
(a "Material Adverse Effect"). The disclosures in the Registration Statement
concerning the effects of foreign, federal, state and local laws, rules and
regulations on each of the Company's and the Subsidiaries' business as currently
conducted and as contemplated are correct in all material respects and do not
omit to state a material fact necessary to make the statements contained therein
not misleading in light of the circumstances in which they were made.
(6) The Company has a duly authorized equity capitalization as set
forth in the Prospectus under "Capitalization" and will have the adjusted duly
authorized equity capitalization set forth therein on the Closing Date and any
Option Closing Date, based upon the assumptions set forth therein. Neither the
Company nor any of its Subsidiaries is a party to, or bound by, any instrument,
agreement or other arrangement providing for it to issue any capital stock,
rights, warrants, options or other securities, except for this Agreement as
described in the Prospectus. The Securities and all other securities issued or
issuable by the Company conform or, when issued and paid for, will conform, in
all respects to all statements with respect thereto contained in the
Registration Statement and the Prospectus. All issued and outstanding securities
of the Company have been duly authorized and validly issued and are fully paid
and nonassessable, and the holders thereof have no rights of rescission with
respect thereto and are not subject to personal liability by reason of being
such holders; and none of such securities were issued in violation of any
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company. The Securities (i) are not and will
not be subject to any preemptive or other similar rights of any stockholder,
(ii) have been duly authorized for listing, subject to official notice of
issuance on the Nasdaq National Market, and (iii) when issued, paid for and
delivered in accordance with the terms hereof, will be validly issued, fully
paid and non-assessable and will conform to the description thereof contained in
the Prospectus. The holders of the Securities will not be subject to any
liability solely by reason of being such holders. All corporate action required
to be taken by the Company or any of it Subsidiaries for the authorization,
issue and sale of the Securities has been duly and validly taken; and the
certificates representing the Securities will be in due and proper form
according to the corporate law of Delaware. Upon the issuance and delivery,
pursuant to the terms hereof, of the Securities to be sold by the Company and
the Selling Stockholders hereunder, the Underwriters, will acquire good and
marketable title to such Securities, free and clear of any lien, charge, claim,
encumbrance, pledge, security interest, defect or other restriction or equity of
any kind whatsoever.
(7) The subsidiaries of the Company listed on Annex A hereto (each, a
"Subsidiary", and together, the "Subsidiaries") are the only subsidiaries of the
Company as defined by Rule 1-02 of Regulation S-X. All the outstanding shares of
capital stock of each Subsidiary have been duly and validly authorized and
issued and are fully paid and
5
nonassessable, and, except as otherwise set forth in the Prospectus, are owned
by the Company free and clear of any security interest, claim, lien or
encumbrance.
(8) The consolidated financial statements, including the related
notes and schedules thereto, included in the Registration Statement, each
Preliminary Prospectus and the Prospectus, fairly present the financial
position, income, changes in cash flow, changes in stockholders' equity, and
results of operations of the Company and its Subsidiaries at the respective
dates and for the respective periods to which they apply. Such financial
statements have been prepared in conformity with generally accepted accounting
principles, consistently applied throughout the periods involved. The
outstanding debt, the property, both tangible and intangible, and the business
of the Company and each of its Subsidiaries conform in all material respects to
the descriptions thereof contained in the Registration Statement and the
Prospectus. The other financial information set forth in the Prospectus fairly
present, on the basis stated in the Prospectus, the information set forth
therein, and have been derived from, or compiled on, a basis consistent with
that of the audited financial statements included in the Prospectus.
(9) Each of the Company and its Subsidiaries has filed all foreign,
Federal, state and local tax returns that are required to be filed or has
requested extensions thereof, whether or not arising from transactions in the
ordinary course of business, except as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto), and has paid all taxes
required to be paid by it and any other assessment, fine or penalty levied
against it, to the extent that any of the foregoing is due and payable, except
for any such assessment, fine or penalty that is (i) currently being contested
in good faith, whether or not arising from transactions in the ordinary course
of business, and (ii) set forth in the Prospectus (exclusive of any supplement
thereto).
(10) The Company and each of its Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; all policies of insurance and fidelity or surety bonds insuring the
Company or any of its Subsidiaries or their respective businesses, assets,
employees, officers and directors are in full force and effect; the Company and
its Subsidiaries are in compliance with the terms of such policies and
instruments in all respects; and there are no claims by the Company or any of
its Subsidiaries under any such policy or instrument as to which any insurance
company is denying liability or defending under a reservation of rights clause;
neither the Company nor any such Subsidiary has been refused any insurance
coverage sought or applied for; and neither the Company nor any such Subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at a
cost that would not have a Material Adverse Effect, whether or not arising from
transactions in the ordinary course of business, except as set forth in or
contemplated in the Prospectus (exclusive of any supplement thereto).
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(11) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding, domestic or foreign,
pending or threatened against (or, to the Company's knowledge, circumstances
that are reasonably likely give rise to the same), or involving the properties
or business of the Company or any of its Subsidiaries which (i) questions the
validity of its capital stock, this Agreement or any action taken or to be taken
by the Company or its Subsidiaries pursuant to, or in connection with, this
Agreement, (ii) is required to be disclosed in the Registration Statement which
is not so disclosed or (iii) except for matters disclosed in the Prospectus,
might, individually or in the aggregate, have a Material Adverse Effect.
(12) The Company and each of its Subsidiaries (i) are in compliance
in all respects with any and all applicable foreign, Federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses, (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, individually or in
the aggregate, have a Material Adverse Effect and (iv) have no costs or
liabilities associated with Environmental Laws (including, without limitation,
any capital or operating expenditures required for cleanup, closure of
properties or compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties) which would, individually or in the aggregate,
have a Material Adverse Effect.
(13) The Company has full legal right, corporate power and authority
to authorize, issue, deliver and sell the Securities being sold by it hereunder,
enter into this Agreement and consummate the transactions provided for in this
Agreement; and this Agreement has been duly and properly authorized, executed
and delivered by the Company. This Agreement constitutes a legal, valid and
binding agreement of the Company enforceable against the Company in accordance
with its terms. None of the Company's issuance or sale of the Securities or the
execution or delivery of this Agreement by the Company or the Selling
Stockholders, the Company's and the Selling Stockholders' performance hereunder,
consummation of the transactions contemplated herein or in the Registration
Statement, or the conduct of the Company's or its Subsidiaries', business as
described in the Registration Statement, the Prospectus, and any amendments or
supplements thereto, (A) results in or will result in any breach or violation of
any of the terms or provisions of, (B) constitutes or will constitute a default
under, or (C) results in or will result in the creation or imposition of any
lien,
7
charge, claim, encumbrance, pledge, security interest, defect or other
restriction of any kind whatsoever, upon any property or assets (tangible or
intangible) of the Company or any of its Subsidiaries pursuant to the terms of
any of the following: (i) the Amended and Restated Certificate of Incorporation
or Amended and Restated By-laws of the Company or the Charter or By-laws of its
Subsidiaries, (ii) any license, contract, indenture, mortgage, deed of trust,
voting trust agreement, stockholders agreement, note, indebtedness, loan, lease,
deed of trust, credit agreement or any other agreement or instrument to which
the Company or its Subsidiaries is a party or by which it is or may be bound or
to which any of its properties or assets (tangible or intangible) is or may be
subject, or (iii) any statute, judgment, decree, order, rule or regulation,
applicable to the Company or its Subsidiaries, of any arbitrator, court,
regulatory body or administrative agency or other governmental agency or body,
domestic or foreign, having jurisdiction over the Company, its Subsidiaries or
any of their activities or properties.
(14) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body, domestic or
foreign, is required in connection with the transactions contemplated herein or
the performance of this Agreement, except such as have been or may be obtained
under the Act, the Securities and Exchange Act of 1934 (the "Exchange Act"), and
the rules and regulations promulgated under these acts, or may be required under
state securities or Blue Sky laws, the rules of the National Association of
Securities Dealers, Inc. ("NASD") or the Nasdaq National Market in connection
with the Underwriters' purchase and distribution of the Securities, in the
manner contemplated herein and in the Prospectus.
(15) All executed agreements, contracts or other documents or copies
of executed agreements, contracts or other documents filed as exhibits to the
Registration Statement to which the Company or any of its Subsidiaries is a
party or by which it may be bound or to which any of its assets, properties or
business may be subject have been duly and validly authorized, executed and
delivered by it, and constitute the legal, valid and binding agreements of the
Company or such Subsidiary, enforceable against it in accordance with their
respective terms. The descriptions in the Registration Statement of agreements,
contracts and other documents are accurate in all material respects and fairly
present the information required to be shown with respect thereto on Form S-1.
There are no contracts or other documents which are required by the Act or the
rules and regulations promulgated thereunder to be described in the Registration
Statement or filed as exhibits to the Registration Statement which are not
described or filed as required, and the exhibits which have been filed are in
all material respects complete and correct copies of the documents of which they
purport to be copies.
(16) Neither the Company nor any of its Subsidiaries is in violation
or default of (A) any provision of its Charter or By-laws or (B) the terms of
any indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation,
8
condition, covenant or instrument to which it is a party or bound or to which
its property is subject.
(17) No labor problem or dispute with the employees of the Company or
any of its Subsidiaries exists or is threatened or imminent, and the Company is
not aware of any existing or imminent labor disturbance by the employees of any
of its or its Subsidiaries' principal suppliers, contractors or customers, that
could have a Material Adverse Effect, whether or not arising from transactions
in the ordinary course of business, except as set forth in or contemplated in
the Prospectus (exclusive of any supplement thereto).
(18) Neither the Company nor any of its Subsidiaries maintains,
sponsors or contributes, or at any time has maintained, sponsored or
contributed, to any program or arrangement that is or was subject to the
provisions of, or that provides or provided any benefits described in, the
Employee Retirement Income Security Act of 1974, and the regulations and
interpretation thereunder.
(19) Neither the Company, its Subsidiaries nor any of its employees,
directors, stockholders, partners, or affiliates of any of the foregoing has
taken or will take, directly or indirectly, any action designed to or which has
constituted or which might be expected to cause or result in, under the Exchange
Act and the rules and regulations promulgated thereunder, stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities or otherwise.
(20) The Company and each of its Subsidiaries owns or has obtained
licenses for the patents, patent applications, trade and service marks, trade
and service xxxx registrations, trade names, copyrights, licenses, inventions,
trade secrets, technology, know-how and other intellectual property referenced
or described in the Prospectus as being owned by or licensed to it
(collectively, the "Intellectual Property"). Except as set forth in the
Prospectus under the caption "Business-Intellectual Property and Other
Proprietary Rights", (A) there are no rights of third parties to any such
Intellectual Property, (B) there is no infringement by third parties of any such
Intellectual Property, (C) there is no pending or threatened action, suit,
proceeding or claim by others challenging the Company's or its Subsidiaries'
rights in or to any such Intellectual Property, and the Company is unaware of
any facts which would form a reasonable basis for any such claim, (D) there is
no domestic or foreign, pending or threatened, action, suit, proceeding or claim
by others challenging the validity or scope of any such Intellectual Property,
and the Company is unaware of any facts which would form a reasonable basis for
any such claim, (E) there is no pending or threatened action, suit, proceeding
or claim by others that the Company infringes or otherwise violates any patent,
trademark, copyright, trade secret or other proprietary rights of others, and
the Company is unaware of any other fact which would form a reasonable basis for
any such claim, (F) there is no U.S. patent or published U.S. patent application
which contains claims that dominate or may dominate any Intellectual Property
9
described in the Prospectus as being owned by or licensed to the Company or that
interferes with the issued or pending claims of any such Intellectual Property,
except in any case, for such rights, action, suits, proceedings, claims, patents
or patent applications as would not, in the aggregate, have a Material Adverse
Effect, and (G) there is no prior art of which the Company is aware that may
render any U.S. patent held by the Company invalid or any U.S. patent
application held by the Company unpatentable which has not been disclosed to the
U.S. Patent and Trademark Office. The Company owns, possesses, licenses or has
other rights to use, on reasonable terms, all Intellectual Property necessary
for the conduct of the Company's business as now conducted or as proposed in the
Prospectus to be conducted.
(21) The Company and each of its Subsidiaries has good and marketable
title to, or valid and enforceable leasehold estates in, all items of real and
personal property stated in the Prospectus to be owned or leased by it, free and
clear of all liens, charges, claims, encumbrances, pledges, security interests,
defects, or other restrictions or equities of any kind whatsoever, other than
those referred to in the Prospectus and taxes, lessor's interests and liens for
taxes not yet due and payable.
(22) Xxxxxx Xxxxxxxx LLP ("Xxxxxxxx"), which has certified certain
financial statements of the Company and delivered its report with respect to the
audited consolidated financial statements and schedules included in the
Prospectus, is an independent certified public accountant as required by the Act
and the rules and regulations promulgated thereunder.
(23) Except as described in the Prospectus under "Underwriting,"
there are no claims, payments, issuances, arrangements or understandings,
whether oral or written, of the Company for services in the nature of a finder's
or origination fee with respect to the sale of the Securities by it hereunder or
any other arrangements, agreements, understandings, payments or issuances with
respect to the Company or, to the Company's knowledge, any of its respective
officers, directors, stockholders, partners, employees or affiliates that may
affect the Underwriters' compensation, as determined by the NASD.
(24) The Company and each of its Subsidiaries have implemented a
comprehensive, detailed program to analyze and address the risk that the
computer hardware and software used by it may be unable to recognize and
properly execute date-sensitive functions involving certain dates prior to and
any dates after December 31, 1999 (the "Year 2000 Problem"), and reasonably
believes that to the extent any such risk ever existed it has been eliminated
and will not have a Material Adverse Effect; and the Company believes, after
inquiry, that each supplier, vendor, contractor or customer used or served by
the Company and each of its Subsidiaries has remedied or will remedy on a timely
basis the Year 2000 Problem, except to the extent that any failures to remedy
would not, in the aggregate, have a Material Adverse Effect.
10
(25) Neither the Company nor, to its knowledge, any of its officers,
employees, agents, or any other person acting on behalf of the Company, has,
directly or indirectly, given or agreed to give any money, gift or similar
benefit (other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer or
supplier, or official or employee of any governmental agency (domestic or
foreign) or instrumentality of any government (domestic or foreign) or any
political party or candidate for office (domestic or foreign) or other person
who was, is or may be in a position to help or hinder the business of the
Company or any of its Subsidiaries (or assist the Company in connection with any
actual or proposed transaction) which (i) might subject the Company, any of its
Subsidiaries, or any other such person, to any damage or penalty in any civil,
criminal or governmental litigation or proceeding (domestic or foreign), (ii) if
not given in the past, might have had a Material Adverse Effect, or (iii) if not
continued in the future, might have a Material Adverse Effect. The Company's and
each of its Subsidiaries' internal accounting controls are sufficient to cause
the Company and each such Subsidiary to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
(26) Except as set (i) forth in the Prospectus or (ii) as need not be
described pursuant to Item 404(b) of Regulation S-K under the Act, no officer,
director or stockholder of the Company, or any "affiliate" or "associate" (as
these terms are defined in Rule 405 under the Act) of any of the foregoing
persons or entities has or has had, either directly or indirectly, (i) an
interest in any person or entity which (A) furnishes or sells services or
products which are furnished or sold or are proposed to be furnished or sold by
the Company or any of its Subsidiaries, or (B) purchases from or sells or
furnishes to the Company or any of its Subsidiaries any goods or services, or
(ii) a beneficial interest in any contract or agreement to which the Company or
any of its Subsidiaries is a party or by which it may be bound or affected.
Except as set forth in the Prospectus under "Certain Transactions," there are no
existing agreements, arrangements, understandings or transactions, or proposed
agreements, arrangements, understandings or transactions, between or among the
Company or any of its Subsidiaries and any officer, director, or Principal
Stockholder (as such term is defined in the Prospectus) of the Company or any of
its Subsidiaries, or any partner, affiliate or associate of any of the foregoing
persons or entities.
(27) Any certificate signed by any officer of the Company, and
delivered to the Underwriters or to Cravath, Swaine & Xxxxx ("Underwriters'
Counsel"), shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby.
(28) Except as described in the Prospectus, no holders of any
securities of the Company or of any options, warrants or other convertible or
exchangeable securities of the Company have the right to include any securities
issued by the Company in the Registration Statement or any registration
statement to be filed by the Company or to require the Company to
11
file a registration statement under the Act, other than those holders who have
waived such rights. Except as described in the Prospectus, no holder of any
securities of the Company or any other person has the right, contractual or
otherwise, which has not been satisfied or effectively waived, to cause the
Company to sell or otherwise issue to them, or permit them to underwrite the
sale of, any of the Securities.
(29) Neither the Company nor any of its Subsidiaries is, nor upon
consummation of the transactions contemplated hereby will be, an "investment
company" within the meaning of such term under the Investment Company Act of
1940 (the "Investment Company Act"), and the rules and regulations of the
Commission promulgated thereunder.
(30) No Subsidiary of the Company is currently prohibited, directly
or indirectly, from paying any dividends to the Company, from making any other
distribution on such Subsidiary's capital stock, from repaying to the Company
any loans or advances to such Subsidiary from the Company or from transferring
any of such Subsidiary's property or assets to the Company or any other
Subsidiary of the Company, except as described in the Prospectus.
2. Representations and Warranties of the Selling Stockholders. Each
Selling Stockholder represents and warrants to, and agrees with, each
Underwriter that:
(1) Such Selling Stockholder is the lawful owner of the Securities to
be sold by such Selling Stockholder hereunder and upon sale and delivery of, and
payment for, such Securities, as provided herein, such Selling Stockholder will
convey to the Underwriters good and marketable title to such Securities, free
and clear of all liens, encumbrances, equities and claims whatsoever.
(2) Such Selling Stockholder has not taken, directly or indirectly,
any action designed to or which has constituted or which might reasonably be
expected to cause or result, under the Exchange Act and the rules and
regulations promulgated thereunder or otherwise, in stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities.
(3) Certificates in negotiable form for such Selling Stockholder's
Securities have been placed in custody, for delivery pursuant to the terms of
this Agreement, under a Custody Agreement and Power of Attorney duly authorized
(if applicable) executed and delivered by such Selling Stockholder, in the form
heretofore furnished to you (the "Custody Agreement") with [ ], as
Custodian (the "Custodian"); the Securities represented by the certificates so
held in custody for each Selling Stockholder are subject to the interests
hereunder of the Underwriters; the arrangements for custody and delivery of such
certificates, made by such Selling Stockholder hereunder and under the Custody
Agreement, are not subject to termination by any acts of such Selling
Stockholder, or by operation of law, whether by the
12
death or incapacity of such Selling Stockholder or the occurrence of any other
event; and if any such death, incapacity or any other such event shall occur
before the delivery of such Securities hereunder, certificates for the
Securities will be delivered by the Custodian in accordance with the terms and
conditions of this Agreement and the Custody Agreement as if such death,
incapacity or other event had not occurred, regardless of whether or not the
Custodian shall have received notice of such death, incapacity or other event.
(4) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by such Selling
Stockholder of the transactions contemplated herein, except such as may have
been obtained under the Act and the rules and regulations promulgated thereunder
and such as may be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Securities by the
Underwriters and such other approvals as have been obtained.
(5) Neither the sale of the Securities being sold by such Selling
Stockholder nor the consummation of any other of the transactions herein
contemplated by such Selling Stockholder or the fulfillment of the terms hereof
by such Selling Stockholder will conflict with, result in a breach or violation
of, or constitute a default under any law or the terms of any indenture or other
agreement or instrument to which such Selling Stockholder is a party or bound,
or any judgment, order or decree applicable to such Selling Stockholder of any
court, regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over such Selling Stockholder.
(6) To the best of their knowledge, such Selling Stockholder has no
reason to believe that the representations and warranties of the Company
contained in Section 1 are not true and correct, is familiar with the
Registration Statement and has no knowledge of any fact, condition or
information not disclosed in the Prospectus or any supplement thereto which has
materially adversely affected or may materially adversely affect the business of
the Company or any of its Subsidiaries; and the sale of Securities by such
Selling Stockholder pursuant hereto is not prompted by any information
concerning the Company or any of its Subsidiaries which is not set forth in the
Prospectus or any supplement thereto.
(7) In respect of any statements in or omissions from the
Registration Statement or the Prospectus or any supplements thereto made in
reliance upon and in conformity with information furnished in writing to the
Company by any Selling Stockholder specifically for use in connection with the
preparation thereof, such Selling Stockholder hereby makes the same
representations and warranties to each Underwriter as the Company makes to such
Underwriter under Section I(d) of this Agreement.
(8) Any certificate signed by any Selling Stockholder and delivered
to the Representatives or Underwriters' Counsel in connection with the offering
of the Securities shall
13
be deemed a representation and warranty by such Selling Stockholder, as to
matters covered thereby, to each Underwriter.
3. Purchase, Sale and Delivery of the Securities.
(1) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, and each Underwriter,
severally and not jointly, agrees to purchase from the Company at a price of
$[______] per share of Common Stock, that number of Firm Shares set forth in
Schedule A opposite the name of such Underwriter.
(2) Payment of the purchase price and delivery of certificates for
the Firm Shares shall be made at the offices of Cravath, Swaine & Xxxxx,
Worldwide Plaza, 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other
place as shall be agreed upon by the Representatives and the Company. Such
delivery and payment shall be made at 10:00 a.m. (New York City time) on
November [ ], 1999, or at such other time and date as shall be agreed upon by
the Representatives and the Company, but not more than three business days after
the foregoing date (such time and date of payment and delivery being herein
called the "Closing Date"). Delivery of the Firm Shares shall be made to the
Representatives for the respective accounts of the several Underwriters against
payment by the several Underwriters through the Representatives of the
respective aggregate purchase prices of the Firm Shares being sold by the
Company to or upon the order of the Company by wire transfer payable in same day
funds to the accounts specified by the Company. Delivery of the Firm Shares
shall be made through the facilities of The Depository Trust Company unless the
Representatives shall otherwise instruct.
(3) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company and the Selling Stockholders hereby
grant an option to the Underwriters to purchase all or any part of the Option
Shares at the same purchase price per share as the Underwriters shall pay for
the Firm Shares. Said option may be exercised only to cover over-allotments in
the sale of the Firm Shares by the Underwriters. Said option may be exercised
from time to time on or before the 30th day after the date of the Prospectus
upon written or telegraphic notice by the Representatives to the Company setting
forth the number of shares of the Option Shares as to which the several
Underwriters are exercising the option and any Option Closing Date. The number
of the Option Shares to be purchased by each Underwriter shall be the same
percentage of the total number of shares of the Option Shares to be purchased by
the several Underwriters as such Underwriter is purchasing of the Firm Shares,
subject to such adjustments as you in your absolute discretion shall make to
eliminate any fractional shares. The maximum number of Option Shares to be sold
by the Company is 55,000, and the maximum aggregate number of Option Shares to
be sold by the Selling Stockholders is 470,000. The maximum number of Option
Shares which each Selling Stockholder agrees to sell is set forth in Schedule II
hereto. In
14
the event that the Underwriters exercise less than their full over-allotment
option, (i) the Company will not sell any of its Option Shares until the Selling
Stockholders have sold all their Option Shares and (ii) the number of Option
Shares to be sold by each Selling Stockholder shall be pro rata, such that, as
nearly as practicable, for every Option Share purchased by the Underwriters,
Xxxxxx Xxxxxxxxx shall sell .74468 Option Shares and Xxxxxxx and Xxxxx Xxxxx
shall sell .25532 Option Shares.
Each Selling Stockholder will pay any applicable state transfer taxes
involved in the transfer to the several Underwriters of the Option Shares to be
purchased by them from such Selling Stockholder, and the respective Underwriters
will pay any additional stock transfer taxes then involved in further transfers.
(4) If the option provided for in Section (c) hereof is exercised
after the third business day prior to the Closing Date, the Company will deliver
the Option Shares (at the expense of the Company) to the Representatives at
Cravath, Swaine & Xxxxx, Worldwide Plaza, 000 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, on the date specified by the Representatives which shall be within three
business days after exercise of said option (each such date and time of payment
and delivery being herein called an "Option Closing Date"), against payment by
the several Underwriters through the Representatives thereof to, or upon the
order of, the Company by wire transfer payable in same day funds to the accounts
specified by the Company. Delivery of the Option Shares shall be made through
facilities of The Depository Trust Company unless the Representatives shall
otherwise instruct. If settlement for the Option Shares occurs after the Closing
Date, the Company will deliver to the Representatives on any settlement date for
the Option Shares, and the obligation of the Underwriters to purchase the Option
Shares shall be conditioned upon receipt of, supplemental opinions, certificates
and letters confirming as of such date the opinions, certificates and letters
delivered on the Closing Date pursuant to Section 7 hereof.
4. Public Offering of the Securities. It is understood that the
several Underwriters propose to offer the Securities for sale to the public as
set forth in the Prospectus.
5. Covenants and Agreements.
(1) The Company agrees with each of the several Underwriters that:
15
(1) The Company will use its best efforts to cause the Registration
Statement, if not effective at the date and time that this Agreement is executed
and delivered by the parties hereto (the "Execution Time"), and any amendment
thereof, to become effective as promptly as possible. Prior to the termination
of the offering of the Securities, the Company will not file any amendment of
the Registration Statement or supplement to the Prospectus or any Rule 462(b)
Registration Statement unless the Company has furnished the Representatives a
copy for their review prior to filing and will not file any such proposed
amendment or supplement to which the Representatives reasonably object. Subject
to the foregoing sentence, if the Registration Statement has become or becomes
effective pursuant to Rule 430A, or filing of the Prospectus is otherwise
required under Rule 424(b), the Company will cause the Prospectus, properly
completed, and any supplement thereto to be filed with the Commission pursuant
to the applicable paragraph of Rule 424(b) within the time period prescribed
therein and will provide evidence satisfactory to the Representatives of such
timely filing. The Company will promptly advise the Representatives (i) when the
Registration Statement, if not effective at the Execution Time, shall have
become effective, (ii) when the Prospectus, and any supplement thereto, shall
have been filed (if required) with the Commission pursuant to Rule 424(b) or
when any Rule 462(b) Registration Statement shall have been filed with the
Commission, (iii) when, prior to termination of the offering of the Securities,
any amendment to the Registration Statement shall have been filed or become
effective, (iv) of any request by the Commission or its staff for any amendment
of the Registration Statement, or any Rule 462(b) Registration Statement, or for
any supplement to the Prospectus or of any additional information, (v) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any proceeding for
that purpose and (vi) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company will use its best efforts to prevent the issuance of any
such stop order or the suspension of any such qualification and, if issued, to
obtain as soon as possible the withdrawal thereof.
(2) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act and the rules and regulations promulgated
thereunder, any event occurs as a result of which the Prospectus as then
supplemented would include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein in the light of
the circumstances under which they were made not misleading, or if it shall be
necessary to amend the Registration Statement or supplement the Prospectus to
comply with the Act and the rules and regulations promulgated thereunder, the
Company promptly will (A) notify the Representatives of any such event, (B)
prepare and file with the Commission, subject to the second sentence of Section
5(a)(i), an amendment or supplement which will correct such statement or
omission or effect such compliance and (C) supply any supplemented Prospectus to
each of the Underwriters in such quantities as each such Underwriter may
reasonably request.
16
(3) The Company shall endeavor in good faith, in cooperation with the
Representatives, at or prior to the Effective Date, to qualify the Securities
for offering and sale under the securities laws of such jurisdictions as the
Representatives may designate to permit the continuance of sales and dealings
therein for as long as may be necessary to complete the distribution, and shall
make such applications, file such documents and furnish such information as may
be required for such purpose; provided, however, the Company shall not be
required to qualify as a foreign corporation or file a general or limited
consent to service of process in any such jurisdiction. In each jurisdiction
where such qualification shall be effected, the Company will, unless the
Representatives agree that such action is not at the time necessary or
advisable, use all reasonable efforts to file and make such statements or
reports at such times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification.
(4) As soon as practicable, but in any event not later than 45 days
after the end of the 12-month period beginning on the day after the end of the
fiscal quarter of the Company during which the Effective Date occurs (90 days in
the event that the end of such fiscal quarter is the end of the Company's fiscal
year), the Company shall make generally available to its security holders, in
the manner specified in Rule 158 under the Act, and to the Representatives, an
earnings statement which will be in the detail required by, and will otherwise
comply with, the provisions of Section 11(a) of the Act and Rule 158 under the
Act.
(5) During a period of five years from the date hereof, the Company
will furnish to its stockholders annual reports (including financial statements
audited by independent public accountants) and will deliver to the
Representatives:
(1) concurrently with furnishing the above-mentioned quarterly
reports to its stockholders, statements of income of the Company for each
quarter, in the form furnished to the Company's stockholders and certified
by the Company's principal financial or accounting officer;
(2) concurrently with furnishing the above-mentioned annual reports
to its stockholders, a balance sheet of the Company as at the end of the
preceding fiscal year, together with statements of operations,
stockholders' equity, and cash flows of the Company for such fiscal year,
accompanied by a copy of the report thereon of independent certified public
accountants;
(3) as soon as they are available, copies of all reports (financial
or other) mailed to stockholders;
(4) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission securities
exchange on which any class of securities of the Common is listed; and
17
(5) every press release and every news item or article of interest
to the financial community in respect of the Company or its affiliates
which was released and prepared by or on behalf of the Company.
After November 1, 2001, delivery to the Underwriters will be deemed to
have been made to the extent the Company has filed the above-referenced
materials with the Commission and has notified the Representatives of such
filing by e-mail or such other notification as to which the Company and the
Representatives will agree.
(6) For a period of two years from the Closing Date, the Company
shall furnish to the Representatives, at the Representatives' request and at the
Company's sole expense, on a quarterly basis (i) a list of the securities
positions of participants in the Depositary Trust Company in the Common Stock
and (ii) as provided from the transfer agent to the Company, a list of holders
of all of the Company's securities.
(7) The Company will furnish to the Representatives and Underwriters'
Counsel, without charge, at such place as the Representatives may designate,
signed copies of the Registration Statement (including exhibits thereto) and to
each other Underwriter a copy of the Registration Statement (without exhibits
thereto) and, so long as delivery of a prospectus by an Underwriter or dealer
may be required by the Act and the rules and regulations promulgated thereunder,
as many copies of each Preliminary Prospectus and the Prospectus and any
supplement thereto as the Representatives may reasonably request.
(8) On or before the Effective Date, the Company shall provide the
Representatives with true copies of duly executed, legally binding and
enforceable agreements pursuant to which, for a period of not less that 180 days
from the Effective Date, subject to such exceptions as Xxxxxxxxxx may agree,
holders of all shares of Common Stock and any securities exchangeable or
exercisable for, or convertible into, Common Stock, agree not to, without the
prior written consent of Xxxxxxxxxx & Co. Inc., publicly, offer, sell, contract
to sell, pledge or otherwise dispose of (or enter into any transaction which is
designed to, or could be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise) by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company) directly or
indirectly, including the filing (or participation in the filing) of a
registration statement with the Commission in respect of, or establish or
increase a put equivalent position or liquidate or decrease a call equivalent
position within the meaning of the rules promulgated under Section 16 of the
Exchange Act with respect to, any other shares of Common Stock or any securities
convertible into, or exchangeable for, shares of Common Stock, or publicly
announce an intention to effect any such transaction. On or before the Closing
Date, the Company shall deliver instructions to the Transfer Agent
18
authorizing it to place appropriate legends on the certificates representing the
securities subject to the Lock-up Agreements and to place appropriate stop
transfer orders on the Company's ledgers.
(9) The Company will not, for a period of 180 days following the
Execution Time, without the prior written consent of Xxxxxxxxxx, offer, sell,
contract to sell, pledge or otherwise dispose of (or enter into any transaction
which is designed to, or could be expected to, result in the disposition
(whether by actual disposition or effective economic disposition due to cash
settlement or otherwise) by the Company or any affiliate of the Company or any
person in privity with the Company or any affiliate of the Company) directly or
indirectly, including the filing (or participation in the filing) of a
registration statement with the Commission in respect of, or establish or
increase a put equivalent position or liquidate or decrease a call equivalent
position within the meaning of the rules promulgated under Section 16 of the
Exchange Act with respect to, any other shares of Common Stock or any securities
convertible into, or exchangeable for, shares of Common Stock, or publicly
announce an intention to effect any such transaction; provided, however, that
the Company may issue and sell Common Stock and securities exercisable for
Common Stock pursuant to any employee stock option plan, stock ownership plan,
stock purchase plan or dividend reinvestment plan of the Company in effect at
the Execution Time and the Company may issue Common Stock issuable upon the
conversion of securities or the exercise of warrants outstanding at the
Execution Time. On or before the Closing Date, the Company shall deliver
instructions to the Transfer Agent authorizing it to place appropriate legends
on the certificates representing the securities subject to the Lock-up
Agreements and to place appropriate stop transfer orders on the Company's
ledgers.
(10) Neither the Company nor any of its officers, directors or
stockholders, nor any of their respective affiliates (within the meaning of the
Exchange Act) will take, directly or indirectly, any action designed to, or
which might in the future reasonably be expected to, cause or result in, under
the Exchange Act and the rules and regulations promulgated thereunder or
otherwise, stabilization or manipulation of the price of any securities of the
Company to facilitate the sale or resale of the Securities.
(11) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth under "Use of
Proceeds" in the Prospectus. Except as described in the Prospectus, no portion
of the net proceeds will be used, directly or indirectly, to acquire any
securities issued by the Company.
(12) The Company shall timely file all such reports, forms or other
documents as may be required from time to time, under the Act, the Exchange Act
and the rules and regulations promulgated thereunder and all such reports, forms
and documents filed will comply as to form and substance with the applicable
requirements under the Act, the Exchange Act and the rules and regulations
promulgated thereunder.
19
(13) The Company shall furnish to the Representatives, as early as
practicable prior to each of the date hereof, the Closing Date and any Option
Closing Date, but no later than two full business days prior thereto, a copy of
the latest available unaudited interim financial statements of the Company
(which in no event shall be as of a date more than thirty (30) days prior to the
date of the Registration Statement) which have been read by the Company's
independent public accountants, as stated in their letter to be furnished
pursuant to Section 7(k) hereof.
(14) The Company shall cause the Common Stock to be quoted on Nasdaq
or a national securities exchange for a period of five years from the date
hereof, and shall use its best efforts to maintain the Nasdaq quotation or
exchange listing of the Common Stock to the extent outstanding.
(2) Each Selling Stockholder agrees with the several Underwriters
that:
(1) As more fully set forth in the Lock-Up Agreement by and between
the Underwriters and each Selling Stockholder, (each, a "Lock-up Agreement"),
such Selling Stockholder will not, for the duration of such Lock-up Agreement,
without the prior written consent of Xxxxxxxxxx, publicly offer, sell, contract
to sell, pledge or otherwise dispose of (or enter into any transaction which is
designed to, or could be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise) by such Selling Stockholder or by the Company or any affiliate of the
Company or any person in privity with the Company or any affiliate of the
Company), directly or indirectly, including the filing (or participation in the
filing) of a registration statement with the Commission in respect of, or
establish or increase a put equivalent position or liquidate or decrease a call
equivalent position within the meaning of the rules promulgated under Section 16
of the Exchange Act with respect to, any shares of capital stock of the Company
or any securities convertible into or exercisable or exchangeable for such
capital stock, or publicly announce an intention to effect any such transaction.
In the event that the terms and conditions herein conflict with the terms and
conditions of the Lock-up Agreement, it is agreed that the provisions in the
Lock-up Agreement shall govern.
(2) Such Selling Stockholder will not take any action designed to, or
which has constituted or which might reasonably be expected to cause or result,
under the Exchange Act and the rules and regulations promulgated thereunder or
otherwise, in, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.
(3) Such Selling Stockholder will advise the Representatives promptly,
and if requested by the Representatives, will confirm such advice in writing, so
long as delivery of a prospectus relating to the Securities by an underwriter or
dealer may be required under the Act
20
and the rules and regulations promulgated thereunder, of any change in
information in the Registration Statement or the Prospectus relating to such
Selling Stockholder.
6. Payment of Expenses. The Company agrees to pay costs and
expenses in connection with the proposed public offering of the Securities,
including, but not limited to, the following matters: filing fees, printing and
duplicating costs, all postage and mailing expenses with respect to the
transmission of prospectuses, registrar, transfer agent fees, costs and expenses
related to "Tombstone" advertisements, "road show" and information meetings and
presentation costs (other than Fahnestocks's own travel costs), the Company's
own counsel and accounting fees, bound volumes and any issue and transfer taxes.
Xxxxxxxxxx and the Company will bear equally the cost of the independent
technology review, which has been undertaken together with UUCom. In addition,
the Company and the Selling Stockholders agree to pay to Xxxxxxxxxx a non-
accountable expense allowance equal to 0.5% of the gross proceeds of the
proposed public offering of the Securities (including any proceeds from sales of
Option Shares purchased pursuant to any exercise of the Over-Allotment Option,
including purchases from Selling Stockholders).
7. Conditions of the Underwriters' Obligations. The obligations of
the Underwriters hereunder shall be subject to (i) the continuing accuracy of
the representations and warranties of the Company and each of the Selling
Stockholders herein, as of the date hereof and as of the Closing Date and any
Option Closing Date, as if such representations and warranties had been made on
and as of the Closing Date or Option Closing Date, as the case may be, (ii) the
accuracy on and as of the Closing Date or any Option Closing Date, of the
statements of the officers of the Company made pursuant to the provisions
hereof, (iii) the performance by the Company and each of the Selling
Stockholders on and as of the Closing Date and any Option Closing Date, of its
or their covenants and obligations hereunder, (iv) the accuracy of the
statements of the Company and each of the Selling Stockholders made in any
certificates pursuant to the provisions hereof, and (v) the following further
conditions:
(1) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representatives agree in writing to a later time,
the Registration Statement will become effective not later than (i) 6:00 PM New
York City time on the date of determination of the public offering price, if
such determination occurred at or prior to 3:00 PM New York City time on such
date or (ii) 9:30 AM New York City time on the business day following the day on
which the public offering price was determined, if such determination occurred
after 3:00 PM New York City time on such date; if filing of the Prospectus, or
any supplement thereto, is required pursuant to Rule 424(b), the Prospectus, and
any such supplement, shall be filed in the manner and within the time period
required by Rule 424(b); and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or threatened.
21
(2) The Representatives shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue statement
of fact which, in the Representatives' opinion, is material, or omits to state a
fact which, in the Representatives' opinion, is material and is required to be
stated therein or is necessary to make the statements therein not misleading, or
that the Prospectus, or any supplement thereto, contains an untrue statement of
fact which, in the Representatives' opinion, is material, or omits to state a
fact which, in the Representatives' opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(3) On or prior to the Closing Date, the Representatives shall have
received from Underwriters' Counsel, such opinions or statements with respect to
the organization of the Company, the validity of the Securities, the compliance
as to form of the Registration Statement, and the Prospectus with the
requirements of the Act and the rules and regulations promulgated thereunder,
and other related matters as the Representatives requests. Underwriters' Counsel
shall have received such papers and information as it requests to enable it to
pass upon such matters.
(4) On the Closing Date, the Underwriters shall have received the
favorable opinion of Xxxxxx Xxxxxx & Xxxxx, counsel to the Company, dated the
Closing Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that:
(1) each of the Company and its Subsidiaries (A) has been duly
organized and incorporated, and based upon certificates of good standing or
authorization or the like received from applicable jurisdictions, is
validly existing as a corporation in good standing under the laws of its
jurisdiction, (B) is duly qualified and licensed and in good standing as a
foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations requires such
qualification or licensing, except for those failures to be so qualified
and in good standing which will not in the aggregate have a Material
Adverse Effect, (C) has all requisite corporate power and authority to own
or lease, as the case may be, and to operate its properties and conduct its
business as described in the Prospectus; (D) has obtained any and all
necessary authorizations, approvals, orders, licenses, certificates,
franchises and permits of and from all governmental or regulatory officials
and bodies (including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its properties and
conduct its business as described in the Prospectus; (E) to the best of its
knowledge, is and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates, franchises,
permits and all federal, state and local laws, rules and regulations; and
(F) to the best of its knowledge, has not received any notice of
proceedings relating to the revocation or modification of any such
authorization,
22
approval, order, license, certificate, franchise, or permit which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a Material Adverse Effect;
(2) the Company's authorized equity capitalization is as set forth in
the Prospectus; the capital stock of the Company conforms in all respects
to the description thereof contained in the Prospectus; the outstanding
shares of Common Stock (including the Option Shares) have been duly and
validly authorized and issued and are fully paid and nonassessable; the
Securities being sold hereunder by the Company have been duly and validly
authorized, and, when issued and delivered to, and paid for by, the
Underwriters pursuant to this Agreement, will be fully paid and
nonassessable; the Company has been notified by the Nasdaq National Market
that the Securities are duly approved for quotation, subject to official
notice of issuance, on the Nasdaq National Market; the certificates for the
Securities are in valid and sufficient form; and the holders of outstanding
shares of capital stock of the Company are not entitled to preemptive or
other rights to subscribe for the Securities; and, except as set forth in
the Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or rights to convert any
obligations into or exchange any securities for, shares of capital stock of
or ownership interests in the Company are outstanding;
(3) all issued and outstanding securities of each Subsidiary have
been duly authorized and validly issued and are fully paid and non-
assessable; the holders thereof have, to such counsel's knowledge, no
rights of rescission with respect thereto, and are not subject to personal
liability by reason of being holders of such Subsidiaries' securities; and
none of such securities were issued in violation of the preemptive rights
of any holders of any security of the Company; all outstanding shares of
capital stock of the Subsidiaries are owned by the Company either directly
or through wholly owned subsidiaries free and clear of any perfected
security interest and, to the knowledge of such counsel, after due inquiry,
any other security interest, claim, lien or encumbrance;
(4) the Registration Statement has become effective under the Act;
any required filing of the Prospectus, and any supplements thereto pursuant
to Rule 424(b), has been made in the manner and within the time period
required by Rule 424(b); to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been issued,
no proceedings for that purpose have been instituted or threatened and the
Registration Statement and the Prospectus (other than the financial
statements and other financial information contained therein, as to which
such counsel need express no opinion) comply as to form in all material
respects with the applicable requirements of the Act and the rules and
regulations promulgated thereunder.
23
(5) to the knowledge of such counsel, (A) there are no agreements,
contracts or other documents required by the Act and the rules and
regulations promulgated thereunder to be described in the Registration
Statement and the Prospectus and filed as exhibits to the Registration
Statement other than those described in the Registration Statement (or
required to be filed under the Exchange Act if upon such filing they would
be incorporated, in whole or in part, by reference therein) and the
Prospectus and filed as exhibits thereto, and the exhibits which have been
filed are correct copies of the documents of which they purport to be
copies; and (B) the descriptions in the Registration Statement and the
Prospectus and any supplement or amendment thereto of contracts and other
documents to which the Company or any of its Subsidiaries is a party or by
which it is bound, including any document to which the Company or any of
its Subsidiaries is a party or by which it is bound, incorporated by
reference into the Prospectus and any supplement or amendment thereto, are
accurate in all respects and fairly represent the information required to
be shown by Form S-1;
(6) to the knowledge of such counsel, (A) there is no action,
arbitration, suit, proceeding, inquiry, investigation, litigation,
governmental or other proceeding (including, without limitation, those
having jurisdiction over environmental or similar matters), pending or
threatened against the Company or any of its Subsidiaries (or circumstances
that may give rise to the same), or involving the properties or business of
the Company or any of its Subsidiaries which (x) is required to be
disclosed in the Registration Statement which is not so disclosed and
accurately summarized in all material respects in the Registration
Statement or (y) questions the validity of the capital stock of the
Company, any of its Subsidiaries or this Agreement or of any action taken
or to be taken by the Company pursuant to or in connection with any of the
foregoing; (B) no statute or regulation required to be described in the
Prospectus is not described as required; and (C) there is no action, suit
or proceeding, pending or threatened, against or affecting the Company or
its Subsidiaries before any court, arbitrator or governmental body, agency
or official (or any basis thereof known to such counsel) in which there is
a reasonable possibility of an adverse decision which may result in an
adverse change, which could adversely affect the present or prospective
ability of the Company to perform its obligations under this Agreement, or
which in any manner draws into question the validity or enforceability of
this Agreement;
(7) the Company has full legal right, power and authority to enter
into this Agreement and to consummate the transactions provided for herein;
this Agreement has been duly authorized, executed and delivered by the
Company; neither the issue and sale of the Securities, nor the consummation
of any other of the transactions herein contemplated nor the fulfillment of
the terms hereof will conflict with, result in a breach or violation of, or
imposition of any lien, charge or encumbrance upon any property or assets
of the Company or any of its Subsidiaries pursuant to, (A) the Charter or
By-laws
24
of the Company or any of its Subsidiaries (B) the terms of any indenture,
contract, lease, mortgage, deed of trust, note agreement, loan agreement or
other agreement, obligation, condition or covenant or instrument to which
the Company or any of its Subsidiaries is a party or bound or to which its
property is subject, or (C) any statute, law, rule, regulation, judgment,
order or decree applicable to the Company of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority
having jurisdiction over the Company or any of its properties;
(8) except as described in the Prospectus, no consent, approval,
authorization or order of, and no filing with, any court, regulatory body,
government agency or other body (other than such as already have been
obtained or may be required under Blue Sky laws, as to which no opinion
need be rendered) is required in connection with the issuance of the
Securities pursuant to the Prospectus, the performance of this Agreement
and the transactions contemplated hereby;
(9) to the knowledge of such counsel, neither the Company nor any of
its Subsidiaries is in breach of, or in default under, any term or
provision of any license, contract, indenture, mortgage, installment sale
agreement, deed of trust, lease, voting trust agreement, stockholders'
agreement, partnership agreement, note, loan or credit agreement or any
other agreement or instrument evidencing an obligation for borrowed money,
or any other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
may be bound or to which the property or assets (tangible or intangible) of
the Company or any of its Subsidiaries is subject or affected; and neither
the Company nor any of its Subsidiaries is in violation of any term or
provision of its Charter or By-laws, or to such counsel's knowledge, in
violation of any franchise, license, permit, judgment, decree, order,
statute, rule or regulation;
(10) the statements in the Prospectus under "REGULATION AND
SUPERVISION", "BUSINESS -- LEGAL PROCEEDINGS", "CERTAIN TRANSACTIONS,"
"DESCRIPTION OF CAPITAL STOCK" and "SHARES ELIGIBLE FOR FUTURE SALE" have
been reviewed by such counsel, and insofar as they refer to statements of
law, descriptions of statutes, licenses, rules or regulations or legal
conclusions, are correct in all respects;
(11) to the knowledge of such counsel, the persons listed under the
caption "PRINCIPAL AND SELLING STOCKHOLDERS" in the Prospectus are the
respective "beneficial owners" (as such phrase is defined in regulation
13d-3 under the Exchange Act) of the securities set forth opposite their
respective names thereunder, as and to the extent set forth therein;
25
(12) except as described in the Prospectus, no person, corporation,
trust, partnership, association or other entity has the right to include
and/or register any securities of the Company in the Registration
Statement, require the Company to file any registration statement or, if
filed, to include any security in such registration statement;
(13) to the knowledge of such counsel, except as described in the
Prospectus, there are no claims, payments, issuances, arrangements or
understandings for services in the nature of a finder's or origination fee
with respect to the sale of the Securities hereunder or financial
consulting arrangement or any other arrangements, agreements,
understandings, payments or issuances that may affect the Underwriters'
compensation, as determined by the NASD;
(14) assuming due execution by the parties thereto other than the
Company, the Lock-up Agreements are legal, valid and binding obligations of
the parties thereto, enforceable against the party and any subsequent
holder of the securities subject thereto in accordance with its terms
(except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and the
application of equitable principles in any action, legal or equitable, and
except as rights to indemnity or contribution may be limited by applicable
law);
(15) the Securities to be sold under this Agreement to the
Underwriters have been duly registered pursuant to Section 12 of the
Exchange Act; and
(16) neither the Company nor any of its Subsidiaries is, nor upon
consummation of the transactions contemplated hereby will be, an
"investment company" as such term is defined in the Investment Company Act.
Such counsel shall state that it has participated in conferences with
officers and other representatives of the Company and representatives of the
independent public accountants for the Company at which conferences such counsel
made inquiries of such officers, representatives and accountants and discussed
the contents of the Prospectus, the Registration Statement and the Prospectus,
as well as related matters and no facts have come to the attention of such
counsel which lead them to believe that either the Registration Statement or any
amendment thereto, at the time such Registration Statement or amendment became
effective or the Prospectus or amendment or supplement thereto, as of the date
of such opinion, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (it being understood that such counsel need
express no opinion with respect to the financial statements, related notes and
schedules and other financial data included therein).
26
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Underwriters' Counsel) of
other counsel acceptable to Underwriters' Counsel, familiar with the applicable
laws, (B) as to matters of fact, to the extent they deem proper, on certificates
and written statements of the Company, and certificates or other written
statements of officers of departments of various jurisdictions having custody of
documents respecting the corporate existence or good standing of the Company or
any of its Subsidiaries, provided that copies of any such statements or
certificates shall be delivered to Underwriters' Counsel if requested. Such
opinion shall state that Underwriters' Counsel is entitled to rely thereon.
Such opinion shall not state that it is to be governed or qualified
by, or that it is otherwise subject to, any treatise, written policy or other
document relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991), or any comparable
State bar accord.
(5) The Selling Stockholders shall have furnished to the
Representatives the opinion of counsel for the Selling Stockholders, dated the
Closing Date and addressed to the Representatives, to the effect that:
(1) this Agreement, the Custody Agreement and the Power of Attorney
have been duly authorized, executed and delivered by the Selling
Stockholders, the Custody Agreement and Power of Attorney is valid and
binding on the Selling Stockholders and each Selling Stockholder has full
legal right and authority to sell, transfer and deliver in the manner
provided in this Agreement and the Custody Agreement the Securities being
sold by such Selling Stockholder hereof;
(2) the delivery by each Selling Stockholder to the several
Underwriters of certificates for the Securities being sold hereunder by
such Selling Stockholder to the several Underwriters will pass good and
marketable title to such Securities to the several Underwriters, free and
clear of all liens, encumbrances, equities and claims whatsoever; and
(3) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by any Selling
Stockholder of the transactions contemplated herein, except such as may be
have been obtained under the Act and the rules and regulations promulgated
thereunder and such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters and such other approvals (specified in such
option) as have been obtained; and
27
Such opinion shall not state that it is to be governed or qualified
by, or that it is otherwise subject to, any treatise, written policy or other
document relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991), or any comparable
State bar accord.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance satisfactory to Underwriters' Counsel) of
other counsel acceptable to Underwriters' Counsel, familiar with the applicable
laws, (B) as to matters of fact, to the extent they deem proper, on certificates
and written statements of the Selling Stockholders, and certificates or other
written statements of officers of departments of various jurisdictions having
custody of documents respecting the corporate existence or good standing of the
Company or any of its Subsidiaries, provided that copies of any such statements
or certificates shall be delivered to Underwriters' Counsel if requested. Such
opinion shall also state that Underwriters' Counsel is entitled to rely thereon.
(6) An opinion from Xxxxx & XxXxxxxx, special counsel to the Company,
that WSS is in compliance with all applicable laws and regulations of the
Federal Republic of Germany regarding the WSS' providing services to residents
of the Federal Republic of Germany.
(7) At any Option Closing Date, the Underwriters shall have received
the favorable opinion of Xxxxxx Xxxxxx and Zavis, dated such Option Closing
Date, addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel, confirming, as of such Option Closing Date, the
statements made by Xxxxxx Xxxxxx and Xxxxx and in its opinion delivered on such
Closing Date.
(8) Prior to each of the Closing Date and any Option Closing Date,
(i) other than as set forth in the Registration Statement or Prospectus, there
shall have been no adverse change nor development involving a prospective
adverse change in the condition, financial or otherwise, prospects,
stockholders' equity or the business activities of the Company or any of its
Subsidiaries, whether or not in the ordinary course of business, from the latest
dates as of which such condition is set forth in the Registration Statement and
Prospectus; (ii) there shall have been no transaction, not in the ordinary
course of business, entered into by the Company or any of its Subsidiaries, from
the latest date as of which the financial condition of the Company and its
Subsidiaries, taken as a whole, is set forth in the Registration Statement and
Prospectus which is adverse to the Company and its Subsidiaries, taken as a
whole; (iii) neither the Company or any of its Subsidiaries, shall be in default
under any provision of any instrument relating to any outstanding indebtedness;
(iv) neither the Company nor any of its Subsidiaries shall have issued
28
any securities (other than the Securities); (v) neither the Company nor any of
its Subsidiaries shall have declared or paid any dividend or made any
distribution in respect of its capital stock of any class; (vi) there shall have
been no change in the capital stock of the Company, or any change in the debt
(long or short term) or liabilities or obligations of the Company or any of its
Subsidiaries (contingent or otherwise); (vii) no amount of the assets of the
Company or any of its Subsidiaries shall have been pledged or mortgaged, except
as set forth in the Registration Statement and Prospectus; (viii) no actions,
suits or proceedings, at law or in equity, shall have been pending or, to the
best knowledge of the Company, threatened (or circumstances giving rise to same)
against the Company or any of its Subsidiaries, or affecting any of its
properties or business, before or by any court or federal, state or foreign
commission, board or other administrative agency wherein unfavorable decisions,
rulings or findings may, in the aggregate, adversely affect the business,
operations, prospects, financial condition or income of the Company and its
Subsidiaries, taken as a whole, except as set forth in the Registration
Statement and Prospectus; and (viii) no stop order shall have been issued under
the Act and no proceedings therefor shall have been initiated or, to the best
knowledge of the Company, threatened or contemplated by the Commission.
(9) At each of the Closing Date and any Option Closing Date, the
Underwriters shall have received a certificate of the Company signed by the
principal executive officer and by the chief financial or chief accounting
officer of the Company, dated the Closing Date or such Option Closing Date, as
the case may be, to the effect that each such person has carefully examined the
Registration Statement, the Prospectus and this Agreement, and that:
(1) the representations and warranties of the Company in this
Agreement are true and correct in all respects as if made on and as of such
Closing Date or Option Closing Date, as the case may be, and the Company
has complied with all agreements and covenants and satisfied all conditions
contained in this Agreement on its part to be performed or satisfied at or
prior to such Closing Date or Option Closing Date, as the case may be;
(2) no stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued, and no proceedings for that
purpose have been instituted or are pending or, to the best of each of such
person's knowledge or the Company's knowledge, after due inquiry, are
contemplated or threatened;
(3) the Registration Statement and the Prospectus and, if any, each
amendment and each supplement thereto, contain all statements and
information required to be included therein, and none of the Registration
Statement, the Prospectus nor any amendment or supplement thereto includes
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading and neither the Prospectus nor any supplement thereto
29
included any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; and
(4) since the date of the most recent financial statements included
in the Prospectus (exclusive of any supplement thereto), there has been no
change in the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its Subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).
(10) Each Selling Stockholder shall have furnished to the
Representatives a certificate, signed by such Selling Stockholder, dated the
Closing Date, to the effect that the signer[s] of such certificate have
carefully examined the Registration Statement, the Prospectus, any supplement to
the Prospectus and this Agreement and that the representations and warranties of
such Selling Stockholder in this Agreement are true and correct in all respects
on and as of the Closing Date to the same effect as if made on the Closing Date.
(11) The Company shall have requested and caused Xxxxxxxx to have
furnished to the Representatives letters, at the Execution Time and at the
Closing Date, dated respectively as of the Execution Time and as of the Closing
Date, in form and substance satisfactory to the Representatives, confirming that
they are independent accountants within the meaning of the Act and that they
have performed a review of the unaudited interim financial information of the
Company for the nine-month period ended September 30, 1999, in accordance with
Statement on Auditing Standards No. 71, and stating in effect that:
(1) it is their opinion that the audited financial statements,
supporting schedules and pro forma financial statements of the Company
included in the Registration Statement and the Prospectus comply as to form
in all material respects with the applicable accounting requirements of the
Act and the rules and regulations promulgated thereunder and that the
Representatives may rely upon the opinion of Xxxxxxxx with respect to such
financial statements and supporting schedules included in the Registration
Statement;
(2) on the basis of a reading of the latest unaudited financial
statements made available by the Company and its Subsidiaries; their
limited review, in accordance with standards established under Statement on
Auditing Standards No. 71, of the unaudited interim financial information
for the nine month period ended [September 30], 1999, carrying out certain
specified procedures (but not an examination in accordance with generally
accepted auditing standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such letter; a
reading of the minutes
30
of the meetings of the stockholders and directors of the Company; and
inquiries of certain officials of the Company who have responsibility for
financial and accounting matters of the Company as to transactions and
events subsequent to December 31, 1998, nothing came to their attention
which caused them to believe that:
(1) any unaudited financial statements included in the
Registration Statement and the Prospectus do not comply as to form in
all material respects with applicable accounting requirements of the
Act and the rules and regulations promulgated thereunder with respect
to registration statements on Form S-1; and said unaudited financial
statements are not in conformity with generally accepted accounting
principles applied on a basis substantially consistent with that of
the audited financial statements included in the Registration
Statement and the Prospectus;
(2) with respect to the period subsequent to September 30, 1999,
there were any changes, at a specified date not more than five days
prior to the date of the letter, in the total liabilities of the
Company and its Subsidiaries or capital stock of the Company or
increases in the stockholders' deficit of the Company or decreases in
working capital (or increases in working capital deficit, as the case
may be) of the Company as compared with the amounts shown on the
September 30, 1999, consolidated balance sheet included in the
Registration Statement and the Prospectus, or for the period from
September 30, 1999 to such specified date there were any decreases, as
compared with the corresponding period in the preceding quarter in
revenues or gross profit, or for the period from September 30, 1999 to
such specified date there were any increases, as compared with the
corresponding period in the preceding quarter, in loss from operations
or net loss or in per share amounts of net loss of the Company, except
in all instances for changes or increases or decreases set forth in
such letter, in which case the letter shall be accompanied by an
explanation by the Company as to the significance thereof unless said
explanation is not deemed necessary by the Representatives; or
(3) the information included in the Registration Statement and
Prospectus in response to Regulation S-K, Item 301 (Selected Financial
Data), Item 302 (Supplementary Financial Information) and Item 402
(Executive Compensation) is not in conformity with the applicable
disclosure requirements of Regulation S-K;
(3) they have compared specific dollar amounts, numbers of shares,
number of active customer accounts, total customer trades, total customer
assets, average trades per day, percentages of revenues and earnings,
number of employees, statements and other
31
financial information pertaining to the Company or its Subsidiaries set
forth in the Prospectus (where, for purposes of this paragraph only the
term "Prospectus" includes any supplement thereto at the date of the
letter), in each case to the extent that such amounts, numbers,
percentages, statements and information may be derived from the general
accounting records, including work sheets, of the Company and excluding any
questions requiring an interpretation by legal counsel, with the results
obtained from the application of specified readings, inquiries and other
appropriate procedures (which procedures do not constitute an examination
in accordance with generally accepted auditing standards) set forth in the
letter and found them to be in agreement; and
(4) statements as to such other matters incident to the transaction
contemplated hereby as the Representatives may request.
(12) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto),
there shall not have been (i) any change or decrease specified in the letter or
letters referred to in paragraph (k) of this Section 7 or (ii) any change, or
any development involving a prospective change, in or affecting the condition
(financial or otherwise), earnings, business or properties of the Company and
its Subsidiaries taken as a whole, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto) the effect of which, in any
case referred to in clause (i) or (ii) above, is, in the sole judgment of the
Representatives, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Registration Statement (exclusive of any amendment thereof)
and the Prospectus (exclusive of any supplement thereto).
(13) The Company shall have delivered to the Representatives a letter
from Xxxxxxxx addressed to the Company stating that Xxxxxxxx has not, during the
immediately preceding two (2) year period, brought to the attention of the
Company's management, any "weakness," as defined in Statement of Auditing
Standards No. 60 "Communication of Internal Control Structure Related Matters
Noted in an Audit," in any of the Company's internal controls.
(14) On each of the Closing Date any Option Closing Date, there shall
have been duly tendered to the Representatives for the several Underwriters'
accounts the appropriate number of Securities.
(15) No order suspending the sale of the Securities in any
jurisdiction designated by the Representatives pursuant to subsection (c) of
Section 5 hereof shall have been issued on either the Closing Date or any Option
Closing Date, and no proceedings for that purpose shall have been instituted or
shall be contemplated.
32
(16) Prior to the Closing Date, any voting agreements or voting trusts
among shareholders of the Company of which the Company has knowledge, will be
amended to terminate upon the consummation of an initial public offering by the
Company of its Common Stock, provided, however, that the voting agreement
between Xxxxxx and Avi Fox need not be amended to so terminate.
(17) Prior to the Closing Date, the Company shall have furnished to
the Representatives such further information, certificates and documents as the
Representatives may reasonably request.
(18) the Company and WSS have implemented all changes recommended by
each of the Commission and the NASD following their most recent examinations of
the Company and WSS.
If any of the conditions specified in this Section 7, if not otherwise
qualified as to materiality, shall not have been fulfilled in all material
respects, and if otherwise qualified as to materiality, shall not have been
fulfilled in all respects, when and as provided in this Agreement, or if any of
the opinions and certificates mentioned above or elsewhere in this Agreement, if
not otherwise qualified as to materiality shall not be in all material respects,
and if otherwise qualified as to materiality shall not be, reasonably
satisfactory in form and substance to the Representatives and Underwriters'
Counsel, this Agreement and all obligations of the Underwriters hereunder may be
canceled at, or at any time prior to, the Closing Date by the Representatives.
Notice of such cancelation shall be given to the Company in writing or by
telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 7 shall be
delivered at the office of Cravath, Swaine & Xxxxx, at Worldwide Plaza, 000
Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, xx the Closing Date.
8. Reimbursement of Underwriters' Expenses. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 7 hereof is not satisfied,
because of any termination pursuant to Section 13 hereof or because of any
refusal, inability or failure on the part of the Company or any Selling
Stockholder to perform any agreement herein or comply with any provision hereof
other than by reason of a default by any of the Underwriters, the Company will
reimburse the Underwriters severally through Xxxxxxxxxx on demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by them in connection with the proposed purchase
and sale of the Securities.
9. Indemnification and Contribution.
33
(1) The Company agrees to indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each Underwriter
and each person who controls any Underwriter within the meaning of either the
Act or the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the registration statement for the registration of the Securities as originally
filed or in any amendment thereof, or in any Preliminary Prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Underwriter through the Representatives specifically for inclusion therein.
This indemnity agreement will be in addition to any liability which the Company
may otherwise have.
(2) Each Selling Stockholder severally agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who signs the
Registration Statement, each Underwriter, the directors, officers, employees and
agents of each Underwriter and each person who controls the Company or any
Underwriter within the meaning of either the Act or the Exchange Act and each
other Selling Stockholder, if any, to the same extent as the foregoing indemnity
from the Company to each Underwriter, but only with reference to written
information furnished to the Company by or on behalf of such Selling Stockholder
specifically for inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement will be in addition to any liability which
any Selling Stockholder may otherwise have.
(3) Each Underwriter severally and not jointly agrees to indemnify
and hold harmless the Company, each of its directors, each of its officers who
signs the Registration Statement, and each person who controls the Company
within the meaning of either the Act or the Exchange Act and each Selling
Stockholder, to the same extent as the foregoing indemnity to each Underwriter,
but only with reference to written information relating to such Underwriter
furnished to the Company by or on behalf of such Underwriter through the
Representatives specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability which any Underwriter may otherwise have. The Company and each Selling
Stockholder acknowledge that the statements set forth under the heading
"Underwriting", (i) the sentences related to concessions and reallowances and
34
(ii) the paragraph related to stabilization, syndicate covering transactions and
penalty bids in any Prospectus or the Registration Statement constitute the only
information furnished in writing by or on behalf of the several Underwriters for
inclusion in any Prospectus or the Registration Statement.
(4) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 9, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a), (b) or (c) above unless and to the extent it did
not otherwise learn of such action and such failure results in the forfeiture by
the indemnifying party of substantial rights and defenses and (ii) will not, in
any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraph (a), (b) or (c) above. The indemnifying party shall be entitled to
appoint counsel of the indemnifying party's choice at the indemnifying party's
expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
35
(5) In the event that the indemnity provided in paragraph (a), (b) or
(c) of this Section 9 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company, the Selling Stockholders and the
Underwriters agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which the
Company, one or more of the Selling Stockholders and one or more of the
Underwriters may be subject in such proportion as is appropriate to reflect the
relative benefits received by the Company, by the Selling Stockholders and by
the Underwriters from the offering of the Securities; provided, however, that in
no case shall any Underwriter (except as may be provided in any agreement among
underwriters relating to the offering of the Securities) be responsible for any
amount in excess of the underwriting discount or commission applicable to the
Securities purchased by such Underwriter hereunder. If the allocation provided
by the immediately preceding sentence is unavailable for any reason, the
Company, the Selling Stockholders and the Underwriters shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company, of the Selling Stockholders and of the
Underwriters in connection with the statements or omissions which resulted in
such Losses as well as any other relevant equitable considerations. Benefits
received by the Company and by the Selling Stockholders shall be deemed to be
equal to the total net proceeds from the offering (before deducting expenses)
received by each of them, and benefits received by the Underwriters shall be
deemed to be equal to the total underwriting discounts and commissions, in each
case as set forth on the cover page of the Prospectus. Relative fault shall be
determined by reference to, among other things, whether any untrue or any
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information provided by the Company, the
Selling Stockholders on the one hand or the Underwriters on the other, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
Company, the Selling Stockholders and the Underwriters agree that it would not
be just and equitable if contribution were determined by pro rata allocation or
any other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (e), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 9, each person who controls an Underwriter within the meaning of
either the Act or the Exchange Act and each director, officer, employee and
agent of an Underwriter shall have the same rights to contribution as such
Underwriter, and each person who controls the Company within the meaning of
either the Act or the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (e).
10. Representations and Indemnities to Survive Delivery. All
representations, warranties, agreements, indemnities and other statements of the
Company or its officers, of each
36
Selling Stockholder and of the Underwriters, contained in this Agreement or
contained in certificates of officers of the Company submitted pursuant hereto,
shall be deemed to be representations, warranties and agreements as of the
Closing Date and as of any Option Closing Date, as the case may be, and such
representations, warranties and agreements and the indemnity agreements
contained in Section 9 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any Underwriter,
the Company, any Selling Stockholder, or any controlling person of any
Underwriter, or the Company, and shall survive the termination of this Agreement
or the issuance, sale and delivery of the Securities to the Underwriters and the
Representatives, as the case may be.
11. Effective Date. This Agreement shall become effective upon the
later of when (i) the Underwriters and the Company shall have received
notification of the effectiveness of the Registration Statement or (ii) the
execution of this Agreement. If either the initial public offering price or the
purchase price per Security has not been agreed upon prior to 5:00 P.M., New
York time, on the fifth full business day after the Registration Statement shall
have become effective, this Agreement shall thereupon terminate without
liability to the Company or the Underwriters except as herein expressly
provided. Until this Agreement becomes effective as aforesaid, it may be
terminated by the Company by notifying the Representatives or by the
Representatives by notifying the Company. Notwithstanding the foregoing, the
provisions of this Section 11 and of Sections 1, 2, 6 and 9 hereof shall at all
times be in full force and effect.
12. Qualified Independent Underwriter.
(1) The Company hereby confirms its engagement of the services of
Xxxxxxxxxx as, and Xxxxxxxxxx hereby confirms its agreement with the Company to
render services without compensation as, a "qualified independent underwriter"
(in such capacity, the "QIU") within the meaning of Rule 2720(b)(15) of the
Conduct Rules of the NASD with respect to the offering and sale of the
Securities.
(2) The QIU hereby represents and warrants to, and agrees with, the
Company and the other Underwriters that, with respect to the offering and sale
of the Securities as described in the Prospectus:
(1) the QIU qualifies as, and constitutes, a "qualified independent
underwriter" within the meaning of Rule 2720(b)(15) of the Conduct Rules of
the NASD;
(2) the QIU has participated in the preparation of the Registration
Statement and the Prospectus and has exercised the usual standards of "due
diligence" in respect thereto;
(3) the QIU has agreed in acting as a "qualified independent
underwriter" within the meaning of Rule 2720(b)(15) of the Conduct Rules of
the NASD to undertake the
37
legal responsibilities and liabilities of an underwriter under the Act,
specifically including those inherent in Section 11 thereof;
(4) based upon, among other factors, the information set forth in the
Prospectus and its review of such other documents and the taking of such
other actions as the QIU, in its sole discretion, has deemed necessary or
appropriate for the purposes of delivering its recommendation hereunder,
the QIU recommends, as of the date of the execution and delivery of this
Agreement, that the price at which the Securities are to be distributed to
the public shall not be higher than that set forth on the cover page of the
Prospectus, which price should in no way be considered or relied upon as an
indication of the value of the Securities; and
(5) the QIU will furnish to the other Representatives on the Closing
Date a letter, dated the date of this Agreement, in form and substance
satisfactory to the other Representatives, to the effect of clauses (i)
through (iv) above.
(3) The Company, each of the Selling Stockholders, the QIU and the
other Underwriters agree to comply in all material respects with all of the
requirements of Rule 2720 of the Conduct Rules of the NASD applicable to them in
connection with the offering and sale of the Securities. The Company and each of
the Selling Stockholders agrees to cooperate with the Underwriters, including
the QIU, to enable the Underwriters to comply with Rule 2720 of the Conduct
Rules of the NASD and to enable the QIU to perform the services contemplated by
this Agreement.
(4) The QIU hereby consents to the references to it in its capacity
as "qualified independent underwriter" as set forth under the caption
"Underwriting" in the Prospectus.
(5) The Company and the Selling Stockholders will, jointly and
severally, indemnify and hold harmless the QIU against any losses, claims,
damages or liabilities, joint or several, to which the QIU may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon the
QIU's acting (or alleged failing to act) as a "qualified independent
underwriter" within the meaning of Rule 2720(b)(15) of the Conduct Rules of the
NASD with respect to the offering and sale of the Securities and will reimburse
the QIU for any legal or other expenses reasonably incurred by the QIU in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred.
13. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Representatives, by notice given to the Company
prior to delivery of and payment for the Securities, if at any time prior to
such time (i) trading in the Company's Common Stock shall have been suspended by
the Commission or the Nasdaq National Market or
38
trading in securities generally on the New York Stock Exchange or the Nasdaq
National Market shall have been suspended or limited or minimum prices shall
have been established on either of such Exchange or the Nasdaq National Market,
(ii) the Company shall have sustained a loss material or substantial to the
Company by fire, flood, accident, hurricane, earthquake, theft, sabotage or
other calamity or malicious act which, whether or not such loss shall have been
insured, will, in the Representatives' opinion, make it inadvisable to proceed
with the delivery of the Securities, (iii) Xxxxxx Xxx shall no longer serve the
Company in his present capacity, (iv) a banking moratorium shall have been
declared either by Federal or New York State authorities, (v) any domestic or
international event or act or occurrence has materially disrupted, or in the
Representatives' opinion will in the immediate future materially adversely
disrupt, the financial markets, (vi) any material adverse change in the
financial markets shall have occurred, or (vii) there shall have occurred any
outbreak or escalation of hostilities, declaration by the United States of a
national emergency or war, or other calamity or crisis the effect of which on
financial markets is such as to make it, in the sole judgment of the
Representatives, impractical or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Prospectus (exclusive of any
supplement thereto).
If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to (i) notification by you as
provided in Section 11 hereof or (ii) Section 13 or 14 hereof), or if the sale
of the Securities provided for herein is not consummated because any condition
to the obligations of the Underwriters set forth herein is not satisfied or
because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or comply with any provision hereof, the Company
will, subject to demand by the Representatives, reimburse the Underwriters for
all out-of-pocket expenses (including the fees and expenses of their counsel),
incurred by the Underwriters in connection herewith.
14. Default by an Underwriter. If any one or more Underwriters shall
fail to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter, the
Selling Stockholders or the Company. In the event of a default by any
Underwriter as set forth in this Section 14, the Closing Date shall be postponed
39
for such period, not exceeding five business days, as the Representatives shall
determine in order that the required changes in the Registration Statement and
the Prospectus or in any other documents or arrangements may be effected.
Nothing contained in this Agreement shall relieve any defaulting Underwriter of
its liability, if any, to the Company, the Selling Stockholders and any
nondefaulting Underwriter for damages occasioned by its default hereunder.
15. Default by the Company. If the Company shall fail on the Closing
Date or on any Option Closing Date, as applicable, to sell and deliver the
number of Securities which it is obligated to sell hereunder on such date, then
this Agreement shall terminate (or, if such default shall occur with respect to
any Option Shares to be purchased on an Option Closing Date, the Underwriters
may, at the Representatives' option, by notice from the Representatives to the
Company, terminate the Underwriters' obligation to purchase Option Shares from
the Company on such date) without any liability on the part of any non-
defaulting party other than pursuant to Section 6, Section 9 and Section 13
hereof. No action taken pursuant to this Section 15 shall relieve the Company
from liability, if any, in respect of such default.
16. Notices. All notices and communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representatives c/o Fahnestock & Co. Inc., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Xxxxx X. Xxxxxxxx, (Facsimile number: (000) 000-0000) with a
copy to Cravath, Swaine & Xxxxx, Worldwide Plaza, 000 Xxxxxx Xxxxxx, Xxx Xxxx,
XX 00000, Attention: Xxxxxx Xxxxxxxx, Esq., (Facsimile number: (000) 000-0000).
Notices to the Company shall be directed to the Company at Web Street, Inc. ,
000 Xxxx Xxxx Xxxx, 0xx Xxxxx, Xxxxxxxxx, XX 00000, (Facsimile number: (847)
267-9295), Attention: Xxxxxx Xxx, Chairman and Chief Executive Officer, with a
copy to Xxxxxx X. Xxxx, and a copy to Xxxxxx Xxxxxx & Zavis, 000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 0000, Xxxxxxx, XX 00000, Attention: Xxxx X. Xxxx, Esq., (Facsimile
Number: (000) 000-0000). Notices to the Selling stockholders shall be directed
to Xxxxxx X. Xxxxxxxxx, 0000 Xxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxx 00000, (Facsimile
Number (000) 000-0000), with a copy to Xxxxx Xxxxxxx & Xxxx LLP, 0000 Xxxx
Xxxxxx, Xxxxx 0000, Xxxxxx Xxxxx 00000, Attention: Xxxxxxx X. Xxxxx, Esq.,
(Facsimile Number: (000) 000-0000).
17. Parties. This Agreement shall inure solely to the benefit of and
shall be binding upon, the Underwriters, the Company, the Selling Stockholders,
and the controlling persons, directors and officers referred to in Section 7
hereof, and their respective successors, legal representatives and assigns, and
no other person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provisions herein contained. No purchaser of Securities from any Underwriter
shall be deemed to be a successor by reason merely of such purchase.
40
18. Applicable Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement shall be governed by and
construed in accordance with the laws of the State of New York. Each of the
parties irrevocably submits to the exclusive jurisdiction of the state and
federal courts of competent jurisdiction sitting in New York City and waives any
objection to venue in such courts.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same agreement.
20. Headings. The section headings used herein are for convenience
only and shall not affect the construction hereof.
21. Entire Agreement; Amendments. This Agreement constitutes the
entire agreement of the parties hereto and supersedes all prior written or oral
agreements, understandings and negotiations with respect to the subject matter
hereof. This Agreement may not be amended except in a writing, signed by the
Representatives and the Company.
If the foregoing correctly sets forth the understanding between the
Underwriters, the Selling Stockholders and the Company, please so indicate in
the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement among us.
Very truly yours,
WEB STREET, INC.
By: __________________________________
Xxxxxx X. Xxx
Co-Chairman and Chief Executive
Officer
41
Confirmed and accepted as of
the date first above written.
XXXXXXXXXX & CO. INC.
[________________________]
[WEB STREET SECURITIES, INC.]
For themselves and as Representatives
of the several Underwriters named
in Schedule A hereto.
By: XXXXXXXXXX & CO. INC.
By:____________________________
Name:
Title:
As Attorney-in-Fact for the
Representatives
By:___________________________
Name:
Title:
As Attorney-in-Fact for
the Selling Stockholders
By:____________________________
Name:
Title:
SCHEDULE A
Number of Securities
to be Purchased
--------------------
Xxxxxxxxxx & Co. Inc.
Pacific Crest Securities Inc.
Web Street Securities, Inc.
TOTAL: 3,500,000
SCHEDULE B [revise]
Selling Stockholders: Maximum Number of Securities
-------------------- ----------------------------
to be Sold
----------
[name]
[address, fax no.]........................
[name]
[address, fax no.]........................
------
Total...........................
======
