EXHIBIT 1.1
$57,500,000
__% Exchangeable Subordinated Notes Due 2003
SOUTHWEST SECURITIES GROUP, INC.
UNDERWRITING AGREEMENT
----------------------
New York, New York
_______, 1999
FORUM CAPITAL MARKETS LLC
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ASSOCIATES, INC.
c/o Forum Capital Markets LLC
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Southwest Securities Group, Inc., a Delaware corporation (the "Company"),
confirms its agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc. and Forum Capital
Markets LLC (the "Underwriters," which term shall also include any underwriter
substituted as provided in Section 11), with respect to the sale by the Company
and the purchase by the Underwriters, acting severally and not jointly, of
$50,000,000 aggregate principal amount of the Company's __% Exchangeable
Subordinated Notes due 2004 (the "Notes"). The Exchangeable Subordinated Notes
will be issued pursuant to the provisions of an indenture dated as of the date
hereof (the "Indenture") between the Company and Norwest Bank Minnesota,
National Association, as trustee (the "Trustee"). The Indenture will be in
substantially the form filed as an exhibit to the Registration Statement (as
defined below). Such $50,000,000 aggregate principal amount of Exchangeable
Subordinated Notes are hereafter referred to as the "Firm Notes." Upon the
request of the Underwriters, as provided in Section 2(b) hereof, the Company
shall also issue and sell to the Underwriters, acting severally and not jointly,
up to an additional $7,500,000 aggregate principal amount of Exchangeable
Subordinated Notes for the purpose of covering over-allotments, if any. Such
$7,500,000 aggregate principal amount of Exchangeable Subordinated Notes are
hereinafter referred to as the "Option Notes," and together with the Firm Notes
are hereinafter referred to as the "Notes." The Notes are exchangeable at
maturity for a number of shares of Class A common stock, par value $.01 per
share, of Knight/Trimark Group, Inc. (the "Knight/Trimark Common Stock") or at
the Company's option cash of equal value, at a rate determined by reference to
the market price of the Knight/Trimark Common Stock at maturity of the Notes.
The Company hereby confirms its agreement with the Underwriters with respect to
the sale by the Company and the purchase by the Underwriters of the Notes, as
set forth herein.
1. Representations and Warranties of the Company. The Company represents
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and warrants to, and agrees with, the Underwriters as of the date hereof, and as
of the Closing Date
(as defined in Section 2(c)) and each Option Closing Date (as defined in Section
2(b)), if any, as follows:
(a) 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-3, No. 333-_____, including the
related preliminary prospectus dated ____________, 1999 and any subsequent
preliminary prospectus ("Preliminary Prospectus"), for the registration of the
Notes under the Securities Act of 1933, as amended (the "Securities Act"), which
registration statement and amendment or amendments have been prepared by the
Company in conformity with the requirements of the Securities Act, the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the rules and
regulations of the Commission under the Securities Act (the "Regulations") and
the rules and regulations under the Trust Indenture Act. The Company has
complied with the conditions for the use of Form S-3. Except as the context may
otherwise require, said registration statement, as amended, on file with the
Commission at the time said registration statement becomes effective (including
the prospectus, financial statements, schedules, exhibits and all other
documents filed as a part thereof or incorporated therein (including but not
limited to those documents or information incorporated by reference therein) and
all information deemed to be a part thereof as of such time pursuant to
paragraph (b) of Rule 430(A) of the Regulations is hereinafter called the
"Registration Statement," and the form of prospectus in the form first filed
with the Commission pursuant to Rule 424(b) of the Regulations or, if no filing
pursuant to Rule 424(b) is made, such form of prospectus included in the
Registration Statement, together with any documents thereafter incorporated by
reference therein, is hereinafter called the "Prospectus." If the Company files
an abbreviated registration statement to register additional Notes and relies
upon Rule 462(b) under the Securities Act for such registration statement to
become effective upon filing with the Commission (the "Rule 462 Registration
Statement"), then any reference herein to the term "Registration Statement"
shall be deemed to refer to both the registration statement referred to above
and the Rule 462 Registration Statement. For purposes hereof, "Rules and
Regulations" means the rules and regulations adopted by the Commission under the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or the Trust Indenture Act, as applicable.
(b) 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 thereof or the
qualification of the Trustee, and no proceedings for a stop order suspending the
effectiveness of the Registration Statement, any of the Company's securities or
the qualification of the Trustee have been instituted or are pending or, to the
knowledge of the Company, threatened. Each of any Preliminary Prospectus, the
Registration Statement and the Prospectus at the time of filing thereof with the
Commission, conformed with the requirements of the Securities Act, the Trust
Indenture Act and the Rules and Regulations in all material respects. Neither
the Registration Statement nor the Prospectus at the time of filing thereof
contained an 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,
in light of the circumstances under which they were made, not misleading, except
that this representation and warranty does not apply to statements made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Underwriters expressly for use in the
Registration Statement or Prospectus. When the Registration Statement or any
amendment
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thereto was or is declared effective, the Closing Date and each Option Closing
Date, if any, the Registration Statement and the Prospectus will conform to the
requirements of the Securities Act, the Trust Indenture Act and the Rules and
Regulations. At all times subsequent to the effective date of the Registration
Statement through the last to occur of the Closing Date, the last Option Closing
Date, if any, or the last date the Prospectus may be required to be delivered in
connection with sales by the Underwriters or a dealer, the Registration
Statement and the Prospectus will conform to the requirements of the Securities
Act, the Trust Indenture Act and the Rules and Regulations. Neither the
Registration Statement nor the Prospectus, nor any amendment or supplement
thereto, as of such respective dates, with respect to the Registration
Statement, or during such respective periods, with respect to the Prospectus,
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 (with respect to the Prospectus, 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 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 Registration Statement or Prospectus. The Company acknowledges that the
only such written information is that contained under the caption "Underwriting"
in the Prospectus and the Registration Statement.
(c) The Company is subject to Section 13 or 15(d) of the Exchange
Act. The documents incorporated by reference into the Registration Statement
(the "Incorporated Documents"), when they were filed with the Commission (or, if
any amendment with respect to any such document was filed, when such amendment
was filed), complied with the requirements of the Exchange Act and the
regulations thereunder and, when read together with the other information in the
Prospectus, at the time the Registration Statement and any amendments thereto
become or became effective, at the Closing and any Option Closing did not and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. Any Incorporated Documents filed subsequent
to the date of the Prospectus shall, when filed with the Commission, conform in
all respect to the requirements of the Exchange Act and the Rules and
Regulations, as applicable. All reports and statements required to be filed by
the Company under the Securities Act and the Exchange Act have been filed,
together with all exhibits required to be filed therewith.
(d) All the Company's subsidiaries (collectively, the "Subsidiaries")
are listed on Annex I attached hereto. The Company and each of the Subsidiaries
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation. The Company
and each of the Subsidiaries 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 require such qualification
or licensing, except where the failure to be so qualified or licensed would not
have a material adverse effect on the condition, financial or otherwise, results
of operations, business or prospects of the Company and the Subsidiaries, taken
as a whole (a "Material Adverse Effect"). The Company does not own or control,
directly or indirectly, any corporation, partnership, limited liability company,
association or other entity other than the Subsidiaries. None of the
Subsidiaries owns more than 10% of or controls, directly or indirectly, any
corporation, partnership, limited liability company, association or other entity
except other Subsidiaries. The Company owns, either directly or
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through other Subsidiaries, all of the outstanding capital stock of each
Subsidiary free and clear of all liens, charges, claims, encumbrances, pledges,
security interests defects or other restrictions or equities of any kind
whatsoever; and all outstanding capital stock of the Subsidiaries has been duly
authorized and validly issued and is fully paid and non-assessable and not
issued in violation of any preemptive rights or applicable securities laws. Each
of the Company and the Subsidiaries has all requisite power and authority
(corporate and other), and has obtained any and all necessary authorizations,
approvals, orders, licenses, certificates, franchises and permits (collectively
"Approvals") of and from all governmental or regulatory officials and bodies, to
own or lease its properties and conduct its business as described in the
Prospectus except for Approvals which if not so obtained would not have a
Material Adverse Effect; each of the Company and the Subsidiaries is and has
been doing business in compliance with all such Approvals and all federal,
foreign, state and local laws, rules and regulations, except for such failures
to comply as would not have a Material Adverse Effect; and neither the Company
nor any of the Subsidiaries has received any notice of proceedings relating to
the revocation or modification of any such Approval. Each Subsidiary which
accounted for more than 5% of the Company's consolidated assets at March 26,
1999 or more than 10% of the Company's consolidated revenues during the 12
months then ended or which is reasonably expected to exceed such percentages
with respect to the Company's next four fiscal quarters ending after the date
hereof are indicated on Annex I, and all such Subsidiaries are hereinafter
referred to collectively as the "Significant Subsidiaries."
(e) The Company has an authorized capitalization as set forth in the
Prospectus under the caption "Capitalization," and will have the adjusted
capitalization set forth therein as of the period indicated therein, based upon
the assumptions set forth therein. Neither the Company nor any of the
Subsidiaries is a party to or bound by any instrument, agreement or other
arrangement, including, but not limited to, any voting trust agreement,
stockholders' agreement or other agreement or instrument, affecting the
securities or rights or obligations of securityholders of the Company or
providing for it to issue, sell, transfer or acquire any capital stock, rights,
warrants, options or other securities of the Company or any of the Subsidiaries,
except for this Agreement and the Indenture and as set forth in the Registration
Statement. The Notes and all other securities issued or issuable by the Company
and the Subsidiaries conform, or, when issued and paid for, will conform in all
material respects to all statements with respect thereto contained in the
Prospectus. All issued and outstanding securities of the Company and the
Subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable; 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 the preemptive
rights of any securityholder of the Company or any of the Subsidiaries or
similar contractual rights granted by the Company or any of the Subsidiaries.
(f) The Notes will be issued pursuant to the terms and conditions of
the Indenture, and the Indenture conforms to the description thereof contained
in the Registration Statement. At the Closing Date, the Indenture will conform
to the requirements of the Trust Indenture Act and the Rules and Regulations
applicable to an indenture which is qualified thereunder. The Notes have been
duly authorized and, when validly authenticated, issued, delivered and paid for
in the manner contemplated by the Indenture, will be duly authorized, validly
issued and outstanding obligations of the Company entitled to the benefits of
the Indenture. The Notes are not and will not be subject to any preemptive or
other similar rights of
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any securityholder of the Company or any of the Subsidiaries; all corporate
action required to be taken for the authorization, issue and sale of the Notes
has been duly and validly taken; and the certificates representing the Notes
will be in due and proper form. No holder of any securities of the Company has
any right to require registration of shares of Common Stock or other securities
of the Company because of the filing of the Registration Statement or the
consummation of the transactions contemplated hereby. Upon the issuance and
delivery pursuant to the terms of this Agreement and the Indenture of the Notes
to be sold by the Company hereunder and thereunder, the Underwriters will
acquire good and marketable title thereto free and clear of any lien, charge,
claim, encumbrance, pledge, security interest, defect or other restriction or
equity of any kind whatsoever.
(g) The consolidated financial statements of the Company and the
Subsidiaries together with the related notes thereto set forth in or
incorporated by reference in the Registration Statement and the Prospectus
fairly present the financial position, changes in stockholders' equity, cash
flow and results of operations of the Company and the Subsidiaries at the
respective dates and for the respective periods to which they apply, and such
historical financial statements have been prepared in conformity with generally
accepted accounting principles and the Rules and Regulations, consistently
applied throughout the periods involved. Except as described in or contemplated
by the Prospectus (i) there has been no material adverse change or development
involving a material prospective change in the condition, financial or
otherwise, or in the earnings, business, prospects or results of operations of
the Company and the Subsidiaries taken as a whole, whether or not arising in the
ordinary course of business, since the date of the financial statements included
in the Registration Statement and the Prospectus, and (ii) the outstanding debt,
the property, both tangible and intangible, and the businesses of each of the
Company and the Subsidiaries conform in all material respects to the
descriptions thereof contained in the Registration Statement and the Prospectus.
Financial information set forth in the Prospectus (including that incorporated
by reference) fairly presents on the basis stated in the Prospectus, the
information set forth therein and has been derived from or compiled on a basis
consistent with that of the audited financial statements included in the
Prospectus.
(h) Each of the Company and the Subsidiaries has filed all income and
franchise tax returns required to be filed (after giving effect to all
permissible extensions) through the date hereof by it in any jurisdiction, and
has paid all taxes shown to be due on such returns or claimed to be due from
such entities, other than those being contested in good faith, except where the
failure to so file or pay would not have a Material Adverse Effect. All tax
liabilities, including those being contested by the Company or the Subsidiaries
are adequately reserved for in the Company's financial statements (in accordance
with generally accepted accounting principles). No tax deficiency has been
asserted and no tax proceedings are pending or, to the knowledge of the Company,
threatened against the Company or any of the Subsidiaries which, if adversely
determined would have a Material Adverse Effect, and to the knowledge of the
Company, no such deficiency or proceeding is contemplated.
(i) No transfer tax, stamp duty or other similar tax is payable by or
on behalf of the Underwriters in connection with (i) the issuance by the Company
of the Securities, (ii) the purchase by the Underwriters of the Notes from the
Company or (iii) the consummation by the Company of any of its obligations under
this Agreement or the Indenture.
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(j) Each of the Company and the Subsidiaries maintains liability,
casualty and other insurance (subject to customary deductions and retentions)
against such risk of the types and in the amounts customarily maintained by
companies of comparable size to the Company engaged in similar businesses in
similar industries, all of which insurance is in full force and effect. There
are no facts or circumstances known to the Company which would have the effect
under any such insurance policy or surety bond of relieving any insurer of its
obligation to satisfy in all material respects any valid claim of the Company or
any of the Subsidiaries.
(k) There is no action, suit, proceeding, arbitration, litigation or
governmental proceeding pending or, to the knowledge of the Company, threatened
or contemplated against (or circumstances that are reasonably likely to give
rise to the same), or involving the properties or businesses of, the Company or
any of the Subsidiaries which (i) questions the validity of the capital stock of
the Company or any of the Subsidiaries or this Agreement or the Indenture or of
any action taken or to be taken by the Company or any of the Subsidiaries
pursuant to or in connection with this Agreement or the Indenture or (ii) except
as in the Registration Statement or the Prospectus, would have a Material
Adverse Effect.
(l) The Company has full corporate right, power and authority to
authorize, issue, deliver and sell the Notes, to enter into this Agreement and
the Indenture and to consummate the transactions provided for in such
agreements. This Agreement has been duly and properly authorized, executed and
delivered by the Company. This Agreement constitutes, and when the Company has
duly executed and delivered the Indenture, the Indenture (assuming the due
execution and delivery thereof by the Trustee) will constitute, a legal, valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms, except to the extent that enforcement thereof may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity) and except to the extent that rights to
indemnification and contribution may be limited by federal or state securities
laws or public policy relating thereto. None of the Company's issue and sale of
the Notes, the execution or delivery of this Agreement or the Indenture, its
performance hereunder and thereunder or its consummation of the transactions
contemplated herein and therein conflicts or will conflict with or results or
will result in any breach or violation of any of the terms or provisions of, or
constitutes or will constitute a default under, or results or will result in the
creation or imposition of any lien, charge, claim, encumbrance, pledge, security
interest, defect or other restriction or equity of any kind whatsoever upon any
property or assets of the Company (including, without limitation, the
Knight/Trimark Common Stock) or any of the Subsidiaries pursuant to the terms
of, (i) the certificate of incorporation or by-laws of the Company or any of the
Subsidiaries, (ii) any license, contract, indenture, mortgage, deed of trust,
voting trust agreement, stockholders' agreement, note, loan or credit agreement
or other agreement or instrument to which the Company or any of the Subsidiaries
is a party or by which it is or may be bound or to which its properties or
assets is or may be subject, or any indebtedness, or (iii) any statute,
judgment, decree, order, rule or regulation applicable to the Company or any of
the Subsidiaries of any arbitrator, court, regulatory body or administrative
agency or other governmental agency or body, having jurisdiction over the
Company or any of the Subsidiaries or any of their respective activities or
properties except, in the case of clauses (ii) and (iii), such conflict,
breaches, defaults, creations, impositions and violations that would not have a
Material Adverse Effect.
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(m) No consent, approval, authorization or order of, and no filing
with, any court, arbitrator, regulatory body, government agency or other body,
domestic or foreign, is required for the execution, delivery or performance by
the Company of this Agreement or the Indenture or the transactions contemplated
hereby or thereby, except such as have been or may be obtained under the
Securities Act or the Exchange Act or may be required under state securities or
Blue Sky laws or the rules of the National Association of Securities Dealers,
Inc. (the "NASD") in connection with the Underwriters' purchase and distribution
of the Notes.
(n) Subsequent to the respective dates as of which information is set
forth in the Prospectus and except as may otherwise be indicated or contemplated
herein or therein, unless the Company has notified the Underwriters in writing
otherwise, neither the Company nor any of the Subsidiaries has (i) issued any
securities or incurred any material liability or obligation, direct or
contingent, for borrowed money not in the ordinary course of business, (ii)
entered into any material transaction other than in the ordinary course of
business or (iii) declared or paid any dividend, other than regular cash
dividends, or made any other distribution on or in respect of its capital stock
of any class, and there has not been any change in the capital stock from the
description thereof in the Registration Statement or any material adverse change
in or affecting the general affairs, management, financial operations,
stockholders' equity or results of operation of the Company or any of the
Subsidiaries.
(o) Neither the Company nor any of its Subsidiaries (i) is in
violation of its certificate of incorporation or by-laws, (ii) is in default in
the performance of any obligation, agreement or condition contained in any
license, contract, indenture, mortgage, installment sale agreement, lease, deed
of trust, voting trust agreement, stockholders' agreement, note, loan or credit
agreement, purchase order, agreement or instrument evidencing an obligation for
borrowed money or other material agreement or instrument to which the Company or
any of the Subsidiaries is a party or by which the Company or any of the
Subsidiaries may be bound or to which the property or assets of the Company or
any of the Subsidiaries is subject or affected or (iii) is in violation in any
respect of any law, ordinance, governmental rule, regulation or court decree to
which it or its property or assets may be subject, except any violation or
default under the foregoing clause (ii) or (iii) as would not have a Material
Adverse Effect.
(p) The Company believes that each of the Company and the
Subsidiaries currently has a good employer/employee relationship with its
employees. The Company and the Subsidiaries are in compliance with all federal,
state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours,
except for such failures to comply as would not have a Material Adverse Effect.
There are no pending investigations involving the Company or any of the
Subsidiaries by the U.S. Department of Labor or, to the Company's knowledge, any
such investigations by any other governmental agency responsible for the
enforcement of such federal, state, local or foreign laws and regulations that
would have a Material Adverse Effect. There is no unfair labor practice charge
or complaint against the Company or any of the Subsidiaries pending before the
National Labor Relations Board or any strike, picketing, boycott, dispute,
slowdown or stoppage pending or threatened against or involving the Company or
any of the Subsidiaries. Neither the Company nor any of the Subsidiaries is or
every have been a party to any collective bargaining agreement, and no
collective bargaining agreement is currently being negotiated by the Company or
any of the Subsidiaries. No grievance or arbitration proceeding is pending or
threatened under
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any expired or existing collective bargaining agreements of the Company or any
of the Subsidiaries. No material labor dispute with the employees of the Company
or any of the Subsidiaries exists or, to the best of the Company's knowledge, is
imminent.
(q) No "employee pension benefit plan," "employee welfare benefit
plan" or "multi-employer plan" ("ERISA Plans") as such terms are defined in
Sections 3(2), 3(1) and 3(37), respectively, of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), maintained or sponsored by the
Company or any of the Subsidiaries (or any trust created thereunder) has engaged
in a "prohibited transaction" within the meaning of Section 406 of ERISA or
Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"),
which could subject the Company or any of the Subsidiaries to any tax penalty or
civil penalty on prohibited transactions which has not been adequately corrected
and which might reasonably be expected to have a Material Adverse Effect. No
"accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of
the events set forth in Section 4043(b) of ERISA (other than events with respect
to which the 30-day notice under Section 4043 of ERISA has been waived) has
occurred with respect to any employee benefit plan which might reasonably be
expected to have a Material Adverse Effect. Each ERISA Plan is in compliance
with all reporting, disclosure and other requirements of the Code and ERISA as
they relate to such ERISA Plan, except for noncompliance which could not be
reasonably expected to have a Material Adverse Effect. Determination letters
have been received from the Internal Revenue Service with respect to each ERISA
Plan which is intended to comply with Code Section 401(a) stating that such
ERISA Plan and the attendant trust are qualified thereunder. Neither the Company
nor any of the Subsidiaries has ever completely or partially withdrawn from a
"multi-employer plan" as so defined.
(r) Neither the Company or any of the Subsidiaries, nor any of its
affiliates has taken or will take, directly or indirectly, any action designed
to or which has constituted or which might reasonably be expected to cause or
result in, under the Exchange Act or otherwise, stabilization or manipulation of
the price of any security of the Company or Knight/Trimark Group, Inc. to
facilitate the sale or resale of the Notes or otherwise.
(s) Each of the Company and the Subsidiaries (i) owns or has the
right to use all patents, trademarks, service marks, trade names, copyrights,
technology, and all licenses and rights with respect to the foregoing, used in
the conduct of its business without, to the knowledge of the Company and the
Subsidiaries, infringing upon the right of any person, corporation or other
entity, except where the failure to so own or have such right would not, in the
aggregate, have a Material Adverse Effect and (ii) has no reason to believe, and
has not received any written notice, that the conduct of their respective
businesses infringe or conflict with any such rights of others with respect to
any of the foregoing.
(t) Each of the Company and the Subsidiaries has good and marketable
title to, or valid and enforceable leasehold estates in, all items of real and
personal property which are material to its business, in each case, except as
disclosed in the Prospectus, free and clear of all liens, charges, claims,
encumbrances, pledges, security interests, defects and other restrictions that
would have a Material Adverse Effect.
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(u) To the Company's knowledge, KPMG Peat Marwick are independent
certified public accountants of the Company as required by the Securities Act
and the Rules and Regulations.
(v) Neither the Company nor any of the Subsidiaries has, nor, to the
knowledge of the Company, has any officer, director or employee of the Company
or any of the Subsidiaries or any other person acting on behalf of the Company
or any of the Subsidiaries, for the benefit of the Company or any such
Subsidiaries at any time during the last five years, (i) made any unlawful gift
or contribution to any candidate for federal, state, local or foreign political
office, or failed to disclose fully any such gift or contribution in violation
of law, or (ii) made any payment to any federal, state, local or foreign
governmental officer or official, which would be reasonably likely to subject
the Company or any of the Subsidiaries to any damage or penalty in any civil,
criminal or governmental litigation or proceeding (domestic or foreign). Each of
the Company's and the Subsidiaries' internal accounting controls are sufficient
to cause the Company and the Subsidiaries to comply with the Foreign Corrupt
Practices Act of 1977, as amended.
(w) The minute books of the Company and each of the Subsidiaries have
been made available to the Underwriters, contain a complete summary of all
meetings and actions of the directors and stockholders of each of the Company
and the Subsidiaries since the time of their respective incorporation and
reflect all transactions referred to in such minutes accurately in all respects.
(x) Neither the Company nor any of the Subsidiaries has been notified
or is otherwise aware that it is potentially liable, or is considered
potentially liable, under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, or any similar law ("Environmental
Laws"), except as would not have a Material Adverse Effect. To the Company's
knowledge, the Company and the Subsidiaries are in compliance with all
applicable existing Environmental Laws, except for such instances of non-
compliance which would not have a Material Adverse Effect. The term "Hazardous
Material" means (i) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, (ii)
any "hazardous waste" as defined by the Resource Conservation and Recovery Act,
as amended, (iii) any petroleum or petroleum product, (iv) any polychlorinated
biphenyl and (v) any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material, waste or substance regulation under or within the meaning of
any other Environmental Law. To the Company's knowledge, no disposal, release or
discharge of "Hazardous Material" has occurred on, in, at or about any of the
facilities or properties of the Company or any of the Subsidiaries, except for
those instances which are in compliance with Environmental Laws or in the
aggregate would not have a Material Adverse Effect. Except as described in the
Prospectus, to the Company's knowledge: (i) there has been no storage, disposal,
generation, transportation, handling or treatment of Hazardous Material by the
Company or any of the Subsidiaries (or to the knowledge of the Company, any of
its predecessors in interest) at, upon or from any of the property now or
previously owned or leased by the Company or any of the Subsidiaries in
violation of any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit or which would require remedial action which has not been
taken, under any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit, except for such violations and failures to take remedial
action which would not result in,
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singularly or in the aggregate, a Material Adverse Effect; (ii) there has been
no material spill, discharge, leak, emission, injection, escape, dumping or
release of any kind onto such property or into the environment surrounding such
property by the Company or any of the Subsidiaries of any Hazardous Materials,
except for such spills, discharges, leaks, emissions, injections, escapes,
dumping or releases which are in compliance with Environmental Laws or would not
result in, singularly or in the aggregate, a Material Adverse Effect.
(y) The Company is not an "investment company," a company controlled
by an "investment company" or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company" as such terms are defined
in the Investment Company Act of 1940, as amended.
(z) None of the proceeds of the sale of the Notes will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Notes to be considered a "purpose credit"
within the meanings of Regulation G, T, U or X of the Board of Governors of the
Federal Reserve Board.
(aa) The Company and the Subsidiaries have complied and will comply
with all the provisions of Florida H.B. 1771, codified as Section 517.075 of the
Florida Statutes, and all regulations promulgated thereunder relating to issuers
doing business with Cuba.
(bb) Except as set forth in this Agreement, there are no claims,
payouts, issuances, arrangements or understandings, whether oral or written, for
services in the nature of a finder's or origination fee with respect to the sale
of the Notes hereunder or any other arrangement, agreement, understanding,
payment or issuance with respect to the Company, any of the Subsidiaries or any
of their respective officers, directors or affiliates that would constitute
underwriters' compensation as determined by the NASD. For these purposes,
underwriters' compensation means total expenses payable by the Company to or on
behalf of the Underwriters which normally would be paid by the Underwriters,
fees and expenses of Underwriters' Counsel (as defined herein), finders fees,
financial consulting and advisory fees or other items of value accruing to the
Underwriters and related persons, which items of value include, but are not
necessarily limited to, stock, options, warrants and convertible and other debt
securities if the same are deemed to have been received in connection with or in
relation to the offering contemplated by this Agreement and when given by or
acquired from the Company or related parties of the Company or persons in
control of or under common control with the Company or related parties of the
Company.
(cc) The Indenture has been duly qualified under the Trust Indenture
Act, and all fees required to be paid with respect to the execution of the
Indenture and the issuance of the Notes have been paid or will be paid when due.
(dd) Neither the Company nor any of the Subsidiaries is an "affiliate"
(as defined for purposes of Section 2(11) of the Securities Act) of The
Knight/Trimark Group, Inc.; neither the Company nor any of the Subsidiaries has
material non-public information with respect to The Knight/Trimark Group, Inc.;
and neither the Company nor any of the Subsidiaries
10
has the right to cause the registration under the Securities Act of the shares
of Knight/Trimark Common Stock owned by the Company.
(ee) The Company owns of record and beneficially __________ shares of
Knight/Trimark Common Stock, free and clear of any liens, claims or encumbrances
(except for transfer restrictions imposed by the Securities Act because such
shares of Knight/Trimark Common Stock are restricted securities under the
Securities Act). The Knight/Trimark Common Stock owned by the Company was
acquired July 8, 1998.
(ff) The Company is familiar with its obligations under NASD Rule 2720
and it is in compliance with Sections (f) and (g) thereof.
2. Purchase by the Underwriters; Delivery and Payment.
--------------------------------------------------
(a) On the basis of the representations, warranties and agreements
contained herein, and subject to the terms and conditions set forth herein, the
Company agrees to issue and sell to the Underwriters, and the Underwriters
agree, severally and not jointly, to purchase from the Company, the aggregate
principal amount of Firm Notes set forth opposite the name of such Underwriter
in Schedule I attached hereto at a purchase price equal to 96.5% of the
principal amount thereof, plus any additional amount of Firm Notes which each
underwriter may become obligated to purchase pursuant to Section 11.
(b) In addition, on the basis of the representations, warranties and
agreements contained herein, and subject to the terms and conditions set forth
herein, the Company hereby grants an option to the Underwriters to purchase,
severally and not jointly, any or all of the Option Notes at a price equal to
96.5% of the principal amount thereof plus accrued interest from the Closing
Date to the applicable Option Closing Date. Such option will expire at 5:00 p.m.
New York time 45 days after the date hereof, and may be exercised in whole or in
part from time to time only for the purpose of covering over-allotments which
may be made in connection with the offering and distribution of the Firm Notes
upon notice by the Underwriters to the Company setting forth the aggregate
principal amount of Option Notes as to which the Underwriters are then
exercising the option and the time and date of delivery and payment therefor.
Any such time and date of delivery and payment (an "Option Closing Date") shall
be determined by the Underwriters, but shall not be later than five full
business days after the exercise of such option unless otherwise agreed by the
Company and the Underwriters.
(c) Delivery of, and payment for, the Firm Notes shall be made at
10:00 a.m., New York City time, on ___________, 1999, or at such other date or
time as shall be agreed by the Underwriters and the Company (such date and time
being referred to herein as the "Closing Date"). Delivery of, and payment for,
the Firm Notes and the Option Notes shall be made at the offices of ▇▇▇▇▇▇ ▇▇▇▇
& ▇▇▇▇▇▇ LLP ("Underwriters' Counsel"), New York, New York, or any such other
place as shall be agreed by the Underwriters and the Company. On the Closing
Date, the Company shall deliver or cause to be delivered to the Underwriters
certificates for the Firm Notes against payment to or upon the order of the
Company of the purchase price by certified or official bank check or by wire or
book-entry transfer, in each case in immediately available funds. On each Option
Closing Date, the Company shall deliver or cause to be delivered to the
11
Underwriters certificates for the Option Notes purchased thereat against payment
to or upon the order of the Company of the purchase price by certified or
official bank check or by wire or book-entry transfer, in each case in
immediately available funds. Upon delivery, the Notes shall be in such
denominations and registered in such names as the Underwriters shall have
requested in writing not less than one full business day prior to the Closing
Date. The Company shall make the certificates for the Notes available for
inspection by the Underwriters in New York, New York, not later than one full
business day prior to the Closing Date.
(d) Notwithstanding any provision of this Section 2 to the contrary,
the proceeds of the offering will be held in escrow in accordance with NASD Rule
2720 until such time as the Company delivers to the Underwriters evidence of
compliance with Section (e) of such Rule.
3. Public Offering of the Notes. As soon after the Registration Statement
----------------------------
becomes effective as the Underwriters deem advisable, the Underwriters shall
make a public offering of the Notes (other than to residents of any jurisdiction
in which the qualification of the Notes is required and has not become
effective) at the price and upon the other terms set forth in the Prospectus.
The Underwriters may from time to time increase or decrease the public offering
price after the distribution of the Notes has been completed to such extent as
the Underwriters in their sole discretion deem advisable. The Underwriters may
enter into one or more agreements as the Underwriters, in each of their sole
discretion, deem advisable with one or more broker-dealers who shall act as
dealers in connection with such public offering.
4. Covenants and Agreements of the Company. The Company covenants and
---------------------------------------
agrees with the Underwriters as follows:
(a) The Company shall use its best efforts to cause the Registration
Statement and any amendments thereto to become effective as promptly as
practicable and will not at any time, whether before or after the effective date
of the Registration Statement, file any amendment to the Registration Statement
or supplement to the Prospectus or file any document under the Securities Act or
Exchange Act during any time that a prospectus relating to the Securities is
required to be delivered under the Securities Act of which the Underwriters and
Underwriters' Counsel shall not previously have been advised and furnished with
a copy, or to which the Underwriters or Underwriters' Counsel shall have
reasonably objected, or which is not in compliance with the Securities Act, the
Exchange Act, the Trust Indenture Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof,
the Company will advise the Underwriters and if requested confirm in writing,
(i) when the Registration Statement, as amended, becomes effective and, if the
provisions of Rule 430A promulgated under the Securities Act will be relied
upon, when the Prospectus has been filed in accordance with said Rule 430A and
when any post-effective amendment to the Registration Statement becomes
effective, (ii) of the issuance by the Commission of any stop order or of the
initiation, or the threatening, of any proceeding suspending the effectiveness
of the Registration Statement or the qualification of the Trustee or any order
preventing or suspending the use of the Preliminary Prospectus or the
Prospectus, or any amendment or supplement thereto, or the institution of
proceedings for that purpose, (iii) of the issuance by the Commission or by any
12
state securities commission of any proceedings for the suspension of the
qualification of any of the Notes for offering or sale in any jurisdiction or of
the initiation, or the threatening, of any proceeding for that purpose, (iv) of
the receipt of any comments from the Commission; and (v) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information. If the Commission or
any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company will make every reasonable effort to
obtain promptly the lifting of such order or suspension at the earliest possible
time.
(c) The Company shall file the Prospectus or transmit the Prospectus
by a means reasonably calculated to result in filing with the Commission
pursuant to Rule 424(b)(1) (or, if applicable and if consented to by the
Underwriters, pursuant to Rule 424(b)(4)) on or before the date it is required
to be filed under the Securities Act and the Rules and Regulations.
(d) The Company will give the Underwriters notice of its intention to
file or prepare any amendment to the Registration Statement (including any post-
effective amendment) or any amendment or supplement to the Prospectus (including
any revised prospectus which the Company proposes for use by the Underwriters in
connection with the offering of the Notes which differs from the corresponding
prospectus on file at the Commission at the time the Registration Statement
becomes effective, whether or not such revised prospectus is required to be
filed pursuant to Rule 424(b) of the Rules and Regulations), and will furnish
the Underwriters with copies of any such amendment or supplement a reasonable
amount of time prior to such proposed filing or use, as the case may be, and
will not file any such prospectus to which the Underwriters or Underwriters'
Counsel shall reasonably object.
(e) The Company will furnish to the Underwriters and Underwriters'
Counsel, without charge, one photocopy of the manually executed Registration
Statement (including exhibits thereto) and, so long as delivery of a prospectus
by an Underwriter or dealer may be required by the Securities Act, as many
copies of each Preliminary Prospectus and Prospectus and any supplement thereto
as the Underwriters may reasonably request.
(f) The Company shall endeavor in good faith, in cooperation with the
Underwriters at or prior to the time the Registration Statement becomes
effective, to qualify the Notes for offering and sale under the securities laws
of such jurisdictions as the Underwriters may designate to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution contemplated hereby but in any event not longer than
90 days from the date hereof, 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, subject itself to taxation or file a general consent to service of
process in any such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Underwriters 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 for
so long as may be necessary to complete the distribution contemplated hereby but
in any event not longer than 90 days from the date hereof.
13
(g) During the time when a prospectus is required to be delivered
under the Securities Act, the Company shall comply with all requirements imposed
upon it by the Securities Act and the Exchange Act, as now and hereafter amended
and by the Rules and Regulations, as from time to time in force, so far as
necessary to permit the continuance of sales of or dealings in the Notes in
accordance with the provisions hereof and the Prospectus, or any amendments or
supplements thereto. If at any time when a prospectus relating to the Notes is
required to be delivered under the Securities Act, any event shall have occurred
as a result of which, in the opinion of counsel for the Company or Underwriters'
Counsel, the Prospectus, as then amended or supplemented, includes an 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, or if
it is necessary at any time to amend the Prospectus to comply with the
Securities Act, the Company will notify the Underwriters promptly and prepare
and file with the Commission an appropriate amendment or supplement in
accordance with Section 10 of the Securities Act, each such amendment or
supplement to be reasonably satisfactory to Underwriters' Counsel, and the
Company will furnish to the Underwriters copies of such amendment or supplement
as soon as available and in such quantities as the Underwriters may reasonably
request.
(h) 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 of the
Registration Statement 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 securityholders, in the manner specified in Rule
158(b) of the Rules and Regulations, and to the Underwriters an earnings
statement which will be in the detail required by, and will otherwise comply
with, the provisions of Section 11(a) of the Securities Act and Rule 158(a) of
the Rules and Regulations, which statement need not be audited unless required
by the Securities Act, covering a period of at least 12 consecutive months after
the effective date of the Registration Statement.
(i) For so long as the Company is a reporting company under either
Section 13 or 15(d) of the Exchange Act, the Company will deliver to the
Underwriters during the period ending at the earlier of the fifth anniversary of
the date hereof or the date no Notes remain outstanding:
(i) concurrently with furnishing such annual reports to its
securityholders, 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;
(ii) copies of the Quarterly Report on Form 10-Q and Annual
Report on Form 10-K;
(iii) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders generally;
14
(iv) as soon as they are available, copies of all reports and
financial statements filed with the Commission, any state securities
commission, the NASD, the Nasdaq Stock Market ("Nasdaq"), the New York
Stock Exchange or any other securities exchange;
(v) every press release containing a material news item which
was released by or on behalf of the Company or any of the
Subsidiaries; and
(vi) any additional information of a public nature concerning
the Company or any of the Subsidiaries (and any future subsidiaries)
or their respective businesses which the Underwriters may reasonably
request.
The foregoing financial statements will be on a consolidated basis to the extent
that the accounts of the Company and its Subsidiaries are consolidated, and will
be accompanied by similar financial statements for any Subsidiary which is not
so consolidated.
(j) For a period of four years after the Closing Date, the Company
shall timely file all such reports, forms or other documents as may be required
(including, but not limited to, such disclosure as may be required pursuant to
Rule 463 under the Securities Act) from time to time under the Securities Act,
the Exchange Act and the Rules and Regulations, and all such reports, forms and
documents filed will comply as to form and substance with the applicable
requirements under the Securities Act, the Exchange Act and the Rules and
Regulations.
(k) The Company shall furnish to the Underwriters as early as
practicable prior to each of the date hereof, the Closing Date and each Option
Closing Date, if any, but no later than two full business days prior thereto, a
copy of the latest available unaudited interim consolidated statements of
operations and balance sheets of the Company and the Subsidiaries (which in no
event shall be as of a date more than 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 letters to be furnished pursuant to Section 6(j)
hereof.
(l) Until the earlier of the completion of the distribution of the
Notes or 90 days from the date hereof, neither the Company nor any of the
Subsidiaries shall, without the prior written consent of the Underwriters and
Underwriters' Counsel (which consent shall not be unreasonably withheld), issue,
directly or indirectly, any press release or other communication or hold any
press conference with respect to the Company, any of the Subsidiaries, their
respective activities or the offering contemplated hereby, other than trade
releases issued in the ordinary course of the Company's business consistent with
past practices with respect to the Company's operations.
(m) For a period of four years after the effective date of the
Registration Statement, the Company shall use reasonable efforts to provide to
the Underwriters, at the Underwriters' request and at the Company's sole
expense, with a report on Blue Sky qualifications relating to secondary sales of
the Company's securities prepared by counsel to the Company; provided, however
that the Underwriters shall not make any such request unless the
15
Notes are not listed on the Nasdaq Stock Market or a national securities
exchange at the time of such request.
(n) The Company shall use the proceeds from the sale of the Notes in
the manner described in the Prospectus under the caption "Use of Proceeds."
(o) The Company shall use its reasonable efforts to do and perform
all things required to be done and performed under this Agreement by it that are
within its control prior to or after the Closing Date and to use reasonable
efforts to satisfy all conditions precedent on its part to the delivery of the
Notes.
(p) The Company shall not, so long as the Notes are outstanding, be
or become, or be or become owned by, an open-end investment company, unit
investment trust or face-amount certificate company that is or is required to be
registered under Section 8 of the Investment Company Act, and the Company will
not be or become, or be or become owned by, a closed-end investment company
required to be registered, but not registered thereunder.
(q) In connection with the offering, until the Underwriters shall
have notified the Company of the completion of the resale of the Notes, to not,
and to use its reasonable best efforts to not permit any affiliated purchasers
(as defined in Regulation M under the Exchange Act), either alone or with one or
more other persons to, bid for or purchase, for any account in which it or any
of its affiliated purchasers has a beneficial interest, any Notes or
Knight/Trimark Common Stock, or attempt to induce any person to purchase any
Notes or Knight/Trimark Common Stock; and to not, and to use its reasonable best
efforts to not permit any of its affiliated purchasers to, make bids or
purchases for the purpose of creating actual, or apparent, active trading in or
of raising the price of the Notes.
(r) The Company shall not take any action prior to the execution and
delivery of the Indenture which, if taken after such execution and delivery,
would have violated any of the covenants contained in the Indenture.
(s) The Company will comply with the provisions of NASD Rule 2720 for
so long as the Notes are outstanding.
5. Payment of Expenses.
-------------------
(a) The Company will pay all expenses incident to the performance of
the obligations of the Company under this Agreement and the Indenture,
including, without limitation: (i) the fees and expenses of accountants and
counsel for the Company, (ii) all costs and expenses incurred in connection with
the preparation, duplication, printing (including mailing and handling charges),
filing, delivery and mailing (including the payment of postage with respect
thereto) of each Preliminary Prospectus and the Prospectus and any amendments
and supplements thereto, in quantities as hereinabove stated, (iii) the printing
and filing of the Registration Statement and each amendment thereto and any
registration under the Securities Act; (iv) the printing, engraving, issuance
and delivery of the Notes, (v) the qualification of the Notes under state or
foreign securities or "Blue Sky" laws and determination of the status of such
securities under legal investment laws, including the costs of printing and
mailing the "Preliminary Blue Sky Memorandum" and, the "Supplemental Blue Sky
Memorandum," and
16
reasonable disbursements and fees of counsel for the Underwriters in connection
therewith, (vi) costs and expenses of travel, food and lodging of Company
personnel in connection with the "road show," information meetings and
presentations, (vii) fees and expenses of the transfer agent and registrar,
(viii) fees and expenses of the Trustee, including the Trustee's counsel, in
connection with the Indenture and the Notes, (ix) fees incurred in connection
with the rating, if any, of the Notes, (x) any transfer tax, stamp duty or
similar tax payable by the Underwriters in connection with the purchase by the
Underwriters of the Notes, (xi) the fees payable to the NASD incurred in
connection with its review of the Underwriting terms of the offering of the
Securities, (xii) all costs of placing tombstone advertisements in The New York
Times, The Wall Street Journal and the Investment Dealers Digest and (xiii) all
other costs and expenses incident to the performance of its obligations
hereunder which are not specifically otherwise provided for in this Section.
(b) If this Agreement is terminated for any reason other than as a
result of a breach of this Agreement by the Underwriters, the Company shall
reimburse and indemnify the Underwriters for then reasonable actual accountable
out-of-pocket expenses, including the reasonable fees and expenses of
Underwriters' Counsel. In addition, the Company shall remain liable for all Blue
Sky counsel fees and expenses and Blue Sky filing fees as described above.
6. Conditions of the Underwriters' Obligations. The obligations of the
-------------------------------------------
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company herein as of the date hereof and
as of the Closing Date and each Option Closing Date, if any, as if they had been
made on and as of the Closing Date or each Option Closing Date, as the case may
be; and the performance by the Company on and as of the Closing Date and each
Option Closing Date, if any, of its covenants and obligations hereunder and to
the following further conditions:
(a) The Registration Statement (including the Statement of
Eligibility and Qualification of the Trustee on Form T-1 (the "Form T-1"), shall
have become effective not later than 5:30 p.m. New York time on the date hereof
or at such later time and date as may have been approved by the Underwriters and
no stop order suspending the effectiveness of the Registration Statement
(including the Form T-1) shall have been issued and no proceedings for that
purpose shall have been instituted or shall be pending or, to the knowledge of
the Company or the Underwriters, threatened by the Commission, and any request
on the part of the Commission for additional information shall have been
complied with to the reasonable satisfaction of Underwriters' Counsel. If the
Company has elected to rely upon Rule 430A of the Rules and Regulations, the
price of the Securities and any price-related information previously omitted
from the effective Registration Statement pursuant to such Rule 430A shall have
been transmitted to the Commission for filing pursuant to Rule 424(b) of the
Rules and Regulations within the prescribed time period, and prior to the
Closing Date the Company shall have provided evidence satisfactory to the
Underwriters of such timely filing, or a post-effective amendment providing such
information shall have been promptly filed and declared effective in accordance
with the requirements of Rule 430A of the Rules and Regulations.
(b) The Underwriters shall not have advised the Company that the
Registration Statement, or any supplement or amendment thereto, contains an
untrue statement of fact which, in the Underwriters' reasonable opinion, is
material or omits to state a fact which,
17
in the Underwriters' reasonable 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 Underwriters' reasonable opinion, is material or omits to
state a fact which, in the Underwriters' reasonable 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. No order
suspending the sale of the Securities in any jurisdiction shall have been issued
on either the Closing Date or the relevant Option Closing Date, if any, and no
proceedings for that purpose shall have been instituted or shall, to the
knowledge of the Underwriters, be threatened.
(c) On or prior to the Closing Date and each Option Closing Date, if
any, the Underwriters shall have received from Underwriters' Counsel such
opinion or opinions with respect to the organization of the Company, the
validity of the Notes, the Underlying Stock, the Registration Statement and
other related matters as the Underwriters may request and Underwriters' Counsel
shall have received such papers and information as they request to enable it to
pass upon such matters.
(d) On the Closing Date, the Underwriters shall have received the
opinion of Gardere & ▇▇▇▇▇, L.L.P., counsel to the Company, dated the Closing
Date, addressed to the Underwriters and in form and substance satisfactory to
the Underwriters and Underwriters' Counsel to the effect that:
(i) (A) the Company and each of the Significant Subsidiaries
has been duly incorporated and is validly existing as a corporation in
corporate and tax good standing under the laws of its jurisdiction of
incorporation, (B) the Company and each of the Significant
Subsidiaries is duly qualified to do business and in good standing as
a foreign corporation in the states designated on Annex I and (C) the
Company and each of the Significant Subsidiaries has all requisite
corporate power and authority and authority and all necessary
governmental authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all governmental
regulatory officials and bodies (except where the failure to so have
any such authorizations, approvals, orders, licenses, certificates,
franchises or permits, individually or in the aggregate, would not
have a Material Adverse Effect) to own their respective properties and
to conduct their respective businesses as now being conducted as
described in the Prospectus, if so described;
(ii) the Company's authorized capital stock as of March 26, 1999
is as set forth under the heading "Capitalization" in the Prospectus;
(iii) the Company owns of record, directly or indirectly, all the
outstanding shares of capital stock of each of the Subsidiaries free
and clear of any liens, charges, claims, pledges, security interests,
defects or other encumbrances;
(iv) except for the Indenture and this Agreement and as
disclosed in the Registration Statement, to such counsel's knowledge,
neither the Company nor any of the Subsidiaries are party to or bound
by any instrument, agreement or
18
other arrangement providing for it to issue any capital stock, rights,
warrants, options or other securities of the Company or any of its
Subsidiaries or the Knight/Trimark Common Stock owned by the Company.
(v) all outstanding shares of capital stock of the Company are
authorized, validly issued, fully-paid and non-assessable; to such
counsel's knowledge, none of such securities were issued in violation
of any preemptive rights of stockholders of the Company or similar
contractual rights granted by the Company or applicable securities
laws, and were not issued and sold other than in compliance with
applicable federal securities laws; the holders of outstanding
securities of the Company are not entitled to any pre-emptive rights
with respect to the Notes or the Knight/Trimark Common Stock pursuant
to the Company's Certificate of Incorporation or By-laws, as amended,
or any other instrument known to such counsel; all of the outstanding
shares of capital stock of each of the Subsidiaries are authorized
and, assuming receipt by each such Subsidiary of full payment
therefor, were validly issued, and such counsel has no knowledge that
such shares are not fully paid and nonassessable;
(vi) the Company's issuance of the Notes, and performance of
its obligations thereunder, have been duly authorized by the Company;
when executed by the Company and authenticated by the Trustee in
accordance with the Indenture and delivered to the Underwriters
against payment of the agreed consideration therefor in accordance
with the terms of this Agreement, the Notes will be validly issued;
the Notes and the Indenture conform in all material respects to the
description thereof in the Registration Statement and the Prospectus;
(vii) the form of the Notes is in the form required by the
Indenture; when executed by the Company and authenticated by the
Trustee in accordance with the Indenture and delivered to the
Underwriters against payment of the agreed consideration therefor in
accordance with the terms of this Agreement, the Notes will be duly
authorized and binding obligations of the Company enforceable against
the Company in accordance with their terms; upon issuance and delivery
of the certificates representing the Notes to the Underwriters
pursuant to this Agreement and the Indenture, assuming that the
Underwriters take delivery of said certificates representing the Notes
in good faith and without notice of any adverse claim (within the
meaning of the Uniform Commercial Code as in effect in the State of
New York), the Underwriters will acquire good title thereto free and
clear of any adverse claim (within the meaning of the Uniform
Commercial Code as in effect in the State of New York);
(viii) the Registration Statement (including the Form T-1
attached as an Exhibit thereto) has become effective under the
Securities Act; a Prospectus containing the information permitted to
be omitted under Rule 430A has been filed in accordance with Rule
424(b); to such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or the qualification of
19
the Trustee is in effect or proceedings for that purpose are pending
before or contemplated by the Commission;
(ix) the Registration Statement and the Prospectus (except for
the financial statements and the notes thereto and the schedules and
other financial and statistical data included therein or omitted
therefrom and the Form T-1, as to which no opinion need be rendered)
comply as to form in all material respects with the requirements of
the Securities Act, the Trust Indenture Act, and the rules and
regulations under the Securities Act and the Trust Indenture Act; the
documents incorporated by reference into the Registration Statement
(except for the financial statements and the notes thereto and the
schedules and other financial and statistical data included therein,
as to which no opinion need be rendered) comply as to form in all
material respects with the Exchange Act and the rules and regulations
of the Commission thereunder;
(x) the Indenture has been qualified under the Trust Indenture
Act;
(xi) the statements in the Registration Statement and
Prospectus, insofar as they refer to statements of law or legal
conclusions, and the statements in the Registration Statement and
Prospectus, insofar as they are descriptions of this Agreement, the
Indenture and the Notes, are accurate in all material respects in the
context in which they were given and present fairly the subject matter
thereof; to such counsel's knowledge, the statements in the
Registration Statement and Prospectus, insofar as they are
descriptions of other agreements or other legal documents to which the
Company or any of its Subsidiaries is a party or by which any of them
or their respective properties are bound, are accurate in all material
respects and present fairly the subject matter thereof; to such
counsel's knowledge, there is no action, arbitration, suit or other
proceeding against the Company or any of its Subsidiaries, or
involving the properties or business of the Company or any of its
Subsidiaries, which (i) questions the validity of the capital stock of
the Company or any of the Subsidiaries or of this Agreement, the
Indenture or of any action taken or to be taken by the Company or any
of its Subsidiaries in connection with any of the foregoing or (ii)
except as disclosed in the Registration Statement, could have a
Material Adverse Effect.
(xii) the Company has all requisite corporate power and
authority to execute, deliver, and perform its obligations under this
Agreement and the Indenture and to consummate the transactions
contemplated herein and therein; the Company has duly authorized the
execution and delivery of, and performance by the Company of its
obligations under, this Agreement and the Indenture; the Company has
duly executed and delivered this Agreement and the Indenture;
(xiii) this Agreement and the Indenture each constitute a legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms; the execution and delivery by
the Company of, and the performance of its obligations under, this
Agreement, the Indenture and the Notes
20
do not result in any breach or violation of any applicable statute,
rule or regulation;
(xiv) the execution and delivery by the Company of this
Agreement, the Indenture and the Notes the performance by the Company
hereunder and thereunder the compliance by the Company with the
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby do not and will not conflict with or
result in any breach or violation of, constitute a default under, or
result in the creation or imposition of any lien, charge, claim,
pledge, security interest or other encumbrance upon any property or
assets of the Company or any of the Subsidiaries pursuant to the terms
of (A) the certificate or articles of incorporation or by-laws of the
Company or any of the Subsidiaries to (B) any license, contract,
indenture, mortgage, deed of trust, voting trust agreement,
stockholders' agreement, note, loan or credit agreement or other
agreement or instrument listed as an exhibit to any of the
Incorporated Documents or (C) any statute, rule or regulation or, to
the best of such counsel's knowledge, any judgment, decree or order
applicable to the Company or any of the Subsidiaries of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body having jurisdiction over the Company or
any of its Subsidiaries or any of their respective activities or
properties. Such counsel need express no opinion in this paragraph
(xiv) as to state securities or blue sky laws or with respect to
matters of fact relating to compliance with any financial covenants,
ratios or tests or any aspect of the financial condition or results of
operations of the Company;
(xv) neither the Company nor any of the Subsidiaries is in
violation of its respective certificate or articles of incorporation
or by-laws; to such counsel's knowledge, neither the Company nor any
of the Subsidiaries is in breach of, or in default with respect to,
any provisions of any license, contract, indenture, mortgage, deed of
trust, voting trust agreement, stockholders' agreement, note, loan or
credit agreement or other agreement or instrument of which such
counsel has knowledge to which the Company or any of the Subsidiaries
is a party or by which any of them is or may be bound or to which any
of their respective properties or assets is or may be subject, except
for such breaches or defaults which in the aggregate would not have a
Material Adverse Effect; and to such counsel's knowledge, neither the
Company nor any of the Subsidiaries is in violation of any law, rule
or regulation applicable to it or any judgment, decree or order of any
judicial or governmental authority of which such counsel has knowledge
by which the Company or any of the Subsidiaries may be bound or to
which any of their respective properties or assets is or may be
subject, except for such violations which in the aggregate would not
have a Material Adverse Effect;
(xvi) neither the issuance of the Notes nor the performance by
the Company of this Agreement, the Indenture and the Notes and the
transactions contemplated hereby and thereby requires any consent,
approval, authorization or other order of or registration or filing
with, any court, regulatory body or government agency or body, other
than such as already has been made or obtained
21
and such as may be required under state securities or Blue Sky laws or
the rules of the NASD;
(xvii) the statements in the Prospectus under the captions
"Business-Legal Proceedings," and "Certain United States Federal
Income Tax Considerations" insofar as such statements constitute
matters of law, summaries of legal matters, documents or proceedings
referred to therein, or legal conclusions, have been reviewed by such
firm and are correct in all material respects;
(xviii) the statements set forth in the Prospectus under the
caption "Description of the DARTS" accurately summarize in all
material respects the terms of the Notes and the Indenture;
(xix) neither the execution and delivery by the Company of, nor
the performance of its obligations under, this Agreement and the
Indenture, nor the sale, issuance, execution or delivery by the
Company of the Notes will violate Regulations G, T, U or X of the
Federal Reserve Board; and
(xx) the Company is not an "investment company," a company
controlled by, under common control with, or controlling an
"investment company" or a "promoter" or "principal underwriter" for,
an "investment company" as such terms are defined in the Investment
Company Act of 1940, as amended.
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 reasonably satisfactory to Underwriters'
Counsel) of other counsel acceptable to Underwriters' Counsel, familiar with the
applicable laws; and (B) as to matters of fact, to the extent they deem proper,
on certificates and written statements of responsible officers 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 and the Subsidiaries, provided, that
copies of any such statements or certificates shall be delivered to
Underwriters' Counsel if requested. The opinion of such counsel for the Company
shall state that the opinion of any such other counsel is in form satisfactory
to such counsel and that the Underwriters and they are justified in relying
thereon. At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinion of Gardere & ▇▇▇▇▇, L.L.P., dated such Option
Closing Date, addressed to the Underwriters and in form and substance
satisfactory to the Underwriters and Underwriters' Counsel confirming as of such
Option Closing Date the statements made by such counsel in their opinion
delivered on the Closing Date.
(e) Gardere & ▇▇▇▇▇, L.L.P. shall state in the opinion letters
contemplated by Section 6(d) that such counsel has participated in conferences
with officers and other representatives of the Company and representatives of
the independent public accountants for the Company and the Subsidiaries and the
Underwriters, at which conferences the contents of the
22
Registration Statement and related matters were discussed, and, although such
counsel is not passing upon, and does not assume any responsibility for, the
accuracy, completeness or fairness of the statements contained in the
Registration Statement, on the basis of the foregoing, no facts have come to the
attention of such counsel which has lead them to believe that the Registration
Statement as of its effective date contained an 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, except that such
counsel need express no opinion or belief with respect to the financial
statements and related notes and other financial, statistical or accounting data
included in the Registration Statement or excluded therefrom.
(f) On or prior to the Closing Date and each Option Closing Date, if
any, Underwriters' Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require and have requested
reasonably in advance for the purpose of enabling them to review or pass upon
the matters referred to in Section 6(c) or in order to evidence the accuracy,
completeness or satisfaction of any of the representations, warranties or
conditions of the Company herein contained.
(g) On and as of the Closing Date and each Option Closing Date, if
any: (i) there shall have been no material adverse change and no development
involving a prospective material adverse change in the condition, financial or
otherwise, prospects, stockholders' equity or the business activities of the
Company and the Subsidiaries taken as a whole, 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 or Knight/Trimark Group,
Inc.; (ii) there shall have been no transaction, not in the ordinary course of
business, entered into by the Company or any of the Subsidiaries, from the
latest date as of which the financial condition of the Company and the
Subsidiaries is set forth in the Registration Statement and Prospectus which is
materially adverse to the Company and the Subsidiaries taken as a whole; (iii)
neither the Company nor any of the Subsidiaries shall be in default under any
provision of any instrument relating to any material outstanding indebtedness;
(iv) no material amount of the assets of the Company or any of the Subsidiaries
shall have been pledged or mortgaged, except as set forth in the Prospectus; (v)
no action, suit or proceeding, at law or in equity, shall have been pending or,
threatened (or circumstances which could reasonably be expected to give rise to
same shall have arisen) against the Company or any of the Subsidiaries, or
affecting any of their respective properties or businesses, before or by any
court or federal, state or foreign commission, board or other administrative
agency wherein an unfavorable decision, ruling or finding may have a Material
Adverse Effect, except as set forth in the Prospectus; and (vi) no stop order
shall have been issued under the Securities Act and no proceedings therefor
shall have been initiated or threatened by the Commission or any state
regulatory authority.
(h) On the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received a certificate of the Company signed by the
president or chairman and by the chief financial or chief accounting officer of
the Company, in their capacities as such, dated the Closing Date or such Option
Closing Date, as the case may be, to the effect that each of such persons has
carefully examined the Registration Statement, the Prospectus, this Agreement
and the Indenture and that:
23
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects, as if made on and
as of the Closing Date or such Option Closing Date, as the case may be, and
the Company has complied in all material respects with all agreements and
covenants and satisfied all conditions contained in this Agreement and the
Indenture on its part to be performed or satisfied at or prior to the
Closing Date or such Option Closing Date, as the case may be;
(ii) no stop order suspending the effectiveness of the Registration
Statement or any part thereof or the qualification of the Trustee is in
effect and no proceedings for that purpose are pending or, to such
officer's knowledge, threatened;
(iii) since the date of the most recent financial statements included
in the Prospectus, there has been no material adverse change in the
condition, financial or otherwise business, prospects or results of
operation of the Company and the Subsidiaries, taken as a whole, except as
set forth in the Prospectus;
(iv) 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 or 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 none of the Prospectus or 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, in light of the circumstances under which they were
made, not misleading; and
(v) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus: (a) neither the
Company nor any of the Subsidiaries has incurred up to and including the
Closing Date or the Option Closing Date, as the case may be, other than in
the ordinary course of its business, any material liabilities or
obligations, direct or contingent, except as disclosed in the Prospectus;
(b) neither the Company nor any of the Subsidiaries has paid or declared
any dividends or other distributions, other than regular cash dividends, on
its capital stock except as disclosed in the Prospectus; (c) neither the
Company nor any of the Subsidiaries has entered into any material
transactions not in the ordinary course of business, except as disclosed in
the Prospectus; (d) there has not been any material change in the capital
stock of the Company from the description thereof in the Registration
Statement; (e) neither the Company nor any of the Subsidiaries has
sustained any material loss or damage to its property or assets, whether or
not insured; and (f) there is no litigation which is pending or to the best
of the Company's knowledge threatened against the Company, any of the
Subsidiaries or any affiliated party of any of the foregoing which would
have a Material Adverse Effect and which is required to be set forth in an
amended or supplemented Prospectus which has not been set forth.
24
(i) On or prior to the Closing Date and each Option Closing Date, if
any, the Underwriters shall have received a certificate signed by the
secretary of the Company, in his capacity as such, dated the Closing Date
or such Option Closing Date, as the case may be, as to:
(i) the absence of any contemplated proceeding for the merger,
consolidation, liquidation or dissolution of the Company or any
Subsidiary, as the case may be, or the sale of all or substantially
all of its assets;
(ii) the due adoption and full force and effect of the By-laws
of the Company (with a copy of the By-laws attached);
(iii) resolutions adopted by the Board of Directors of the
Company and/or a committee thereof authorizing the offering of the
Notes and the consummation of the transactions contemplated by this
Agreement and the Indenture (with copies of such resolutions
attached); and
(iv) the incumbency, authorization and signatures of certain
officers and directors of the Company, including all those signing
this Agreement, the Indenture and/or any certificate delivered at such
closing.
(j) By no later than 5:00 p.m. New York City time on the date hereof
the Underwriters shall have received a letter, dated such date, addressed to the
Underwriters in form and substance satisfactory in all respects (including the
non-material nature of the changes or decreases, if any, referred to in clause
(iii) below) to the Underwriters and Underwriters' Counsel, relating to the
Company's fiscal year ended June 26, 1998 and subsequent thereto, from KPMG Peat
Marwick LLP:
(i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of the
Securities Act and the Exchange Act and the applicable Rules and
Regulations;
(ii) stating that it is their opinion that the consolidated
financial statements and supporting schedules of the Company included
in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Securities
Act;
(iii) stating that, on the basis of procedures which included a
reading of the latest available interim consolidated financial
statements of the Company (with an indication of the date of the
latest available unaudited consolidated financial statements of the
Company), a reading of the latest available minutes of the
stockholders and board of directors and the various committees of the
board of directors of each of the Company and the Subsidiaries,
consultations with officers and other employees of each of the Company
and the Subsidiaries responsible for financial and accounting matters
and other procedures specified by the American Institute of Certified
Public Accountants for a review of interim financial information,
nothing has come to their attention which would lead them to believe
that:
25
(A) the unaudited consolidated financial statements of the
Company included in the Registration Statement are not in
conformity with generally accepted accounting principles applied
on a basis substantially consistent with that of the audited
consolidated financial statements contained in the Registration
Statement;
(B) at the date of the latest available balance sheet read
by KPMG Peat Marwick LLP, and at a subsequent date not more than
five business days prior to the date of delivery of such letter,
there has been any increase in consolidated short-term
indebtedness or long-term indebtedness of the Company and the
Subsidiaries, or any decrease in the stockholders' equity or net
current assets or net assets of the Company, as compared with
amounts shown in the latest balance sheet included in the
Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was any
change or decrease, setting forth the amount of such change or
decrease; or
(C) the period from the date of the latest income statement
included in the Registration Statement to the date of the latest
available income statement read by Ernst & Young LLP, and at a
subsequent date not more than five business days prior to the
date of delivery of such letter, there was any decrease in
consolidated net revenues or net income, or net income per common
share of the Company, in each case as compared with the
corresponding period of the previous year, other than as set
forth in or contemplated by the Registration Statement, or, if
there was any such decrease, setting forth the amount of such
decrease.
(iv) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings, statements
and/or other financial information pertaining to the Company and the
Subsidiaries contained in the Registration Statement (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 the Subsidiaries 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 set forth in the letter and
found them to be in agreement with such results; and
(v) statements as to such other matters incident to the
transaction contemplated hereby as the Underwriters may request.
(k) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from KPMG Peat Marwick LLP a letter, dated as
of the Closing Date or such Option Closing Date, as the case may be, to the
effect that they reaffirm that statements made in the letter furnished pursuant
to Section 6(j), except that the specified date referred to shall be a date not
more than five days prior to the Closing Date or such Option Closing Date, as
the case may be, and, if the Company has elected to rely on Rule 430A of the
26
Rules and Regulations, to the further effect that they have carried out
procedures as specified in clause (iv) of Section 6(j) with respect to certain
amounts, percentages and financial information as specified by the Underwriters
and deemed to be a part of the Registration Statement pursuant to Rule 430A(b)
and have found such amounts, percentages and financial information to be in
agreement with the records specified in such clause (iv).
(l) The Company shall have delivered to the Underwriters a letter
from KPMG Peat Marwick LLP addressed to the Company stating that they have not
with respect to the Company's fiscal year ended June 26, 1998 brought to the
attention of any of the Company's or the Subsidiaries management any `weakness'
as defined in Statement of Auditing Standard No. 60 "Communication of Internal
Control Structure Related Matters Noted in an Audit" in any of Company's or the
Subsidiaries' internal controls.
(m) On each of the Closing Date and each Option Closing Date, if any,
there shall have been duly tendered to the Underwriters the appropriate
principal amount of Notes.
(n) Trading in the Company's common stock shall not have been
suspended by the New York Stock Exchange at any time after May __, 1999, and
trading in the Knight/Trimark Common Stock shall not have been suspended by the
Nasdaq Stock Market at any time after May __, 1999.
(o) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or the
over-the-counter market shall have been suspended or limited, or minimum prices
shall have been established on either of such exchanges or such market by the
Commission, by such exchange or by any other regulatory body or governmental
authority having jurisdiction, or trading in securities of the Company or
Knight/Trimark Group, Inc. on any exchange or in the over-the-counter market
shall have been suspended or (ii) any moratorium on commercial banking
activities shall have been declared by Federal or New York State authorities or
(iii) an outbreak or escalation of hostilities or a declaration by the United
States of a national emergency or war or such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States shall be
such) as to make it, in the judgment of the Underwriters, impracticable or
inadvisable to proceed with the offering or the delivery of the Notes on the
terms and in the manner contemplated in the Registration Statement.
(p) The Indenture shall have been duly executed and delivered by the
Company and the Trustee and the Notes shall have been duly executed and
delivered by the Company and duly authenticated by the Trustee.
(q) On or prior to the date hereof, the Underwriters shall have
received clearance from the NASD as to the amount of compensation allowable or
payable to the Underwriters, as described in the Registration Statement.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to the Underwriters.
27
If any condition to the Underwriters' obligations hereunder to be
fulfilled prior to or at the Closing Date or the relevant Option Closing Date,
as the case may be, is not so fulfilled, the Underwriters may terminate this
Agreement or, if the Underwriters so elect, they may waive any such conditions
which have not been fulfilled or extend the time for their fulfillment.
7. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless each of the
Underwriters (for purposes of this Section 7, "Underwriters" shall include the
officers, directors, partners, employees and agents of each of the Underwriters,
including specifically each person who may be substituted for an Underwriter as
provided in Section 11), and each person, if any, who controls an Underwriter
("controlling person") within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, from and against any and all losses, claims,
damages, expenses or liabilities, joint or several (and actions, proceedings,
suits and litigation in respect thereof), whatsoever (including but not limited
to any and all reasonable expenses whatsoever incurred in investigating,
preparing or defending against any action, suit, proceeding or litigation,
commenced or threatened, or claim whatsoever), as the same are incurred, to
which any of the Underwriters or any such controlling person may become subject,
under the Securities Act, the Exchange Act or any other statute or at common law
or otherwise insofar as such losses, claims, damages, expenses or liabilities
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in (i) any Preliminary Prospectus, the Registration
Statement or the Prospectus (as from time to time amended and supplemented) (ii)
any post-effective amendment or amendments or any new registration statement and
prospectus in which are included securities of the Company for use in the same
offering or (iii) any blue sky application or other document executed by the
Company specifically for that purpose or based upon written information
furnished by the Company filed in any state or other jurisdiction in order to
qualify any or all of the Securities under the securities laws thereof (any such
application, document or information being hereinafter called a "Blue Sky
Application), or arise out of or are based upon the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of the Prospectus, in the
light of the circumstances under which they were made), provided, however, that
the Company shall not be liable in any such case to the extent, but only to the
extent, that any such loss, claim, damage, expense or liability arises out of or
is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Underwriters
("Underwriters Information") specifically for inclusion therein and provided,
further, that with respect to any untrue statement or omission or alleged untrue
statement or omission made in any Preliminary Prospectus or the Prospectus, the
indemnification provided for herein shall not apply to any loss, liability,
claim, damage or expense to the extent the same results from the sale of Notes
to a person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Prospectus, or in the case of an untrue
statement or omission or alleged untrue statement or omission in the Prospectus,
a copy of the amended Prospectus or supplement thereto, if the Company has
previously furnished sufficient copies thereof, based upon the number of copies
requested by the Underwriters, to the Underwriters a reasonable time in advance
and the claim, damage or expense of such person results from an untrue statement
or alleged untrue statement or omission or alleged omission of a material fact
contained in a Preliminary Prospectus or Prospectus that was corrected in the
Prospectus or
28
amendment or supplement thereto. The indemnity agreement in this Section 7(a)
shall be in addition to any liability which the Company may have at common law
or otherwise.
(b) The Underwriters agree severally and not jointly to indemnify and
hold harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement and each other person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, to the same extent as the foregoing indemnity from the
Company to the Underwriters, but only with respect to statements or omissions
made in conformity with the Underwriters Information in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any amendment
thereof or supplement thereto.
(c) Promptly after receipt by an indemnified party under this Section
7 of notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made against one
or more indemnifying parties under this Section 7, notify each party against
whom indemnification is to be sought in writing of the commencement thereof (but
the failure to notify an indemnifying party shall not relieve it from any
liability which it may have under Section 7 (a) or (b) unless and to the extent
that it has been prejudiced in a material respect by such failure or from the
forfeiture of substantial rights and defenses). In case any such action, suit or
proceeding is brought against any indemnified party, and it notifies an
indemnifying party or parties of the commencement thereof, the indemnifying
party or parties will be entitled to participate therein, and to the extent it
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party,
which may be the same counsel as counsel to the indemnifying party.
Notwithstanding the foregoing, the indemnified party or parties shall have the
right to employ its or their own counsel in any such case but the fees and
expenses of such counsel shall be at the expense of such indemnified party or
parties unless (i) the employment of such counsel shall have been authorized in
writing by the indemnifying parties in connection with the defense of such
action at the expense of the indemnifying party, (ii) the indemnifying parties
shall not have employed counsel reasonably satisfactory to such indemnified
party to take charge of the defense of such action within a reasonable time
after notice of commencement of the action or (iii) such indemnified party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to one or
all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of such
indemnified party or parties), in any of which events such fees and expenses of
one additional counsel reasonably satisfactory o the indemnifying parties shall
be borne by the indemnifying parties. In no event shall the indemnifying parties
be liable for fees and expenses of more than one counsel (in addition to any
local counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
Anything in this Section 7 to the contrary notwithstanding, an indemnifying
party shall not be liable for any settlement of any claim or action effected
without its written consent.
(d) In order to provide for just and equitable contribution in any
case in which (i) an indemnified party makes claim for indemnification pursuant
to this Section 7, but it is
29
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of this Section 7 provide
for indemnification in such case, or (ii) contribution under the Securities Act
may be required, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid as a result of such
losses, claims, damages, expenses or liabilities (or actions, suits, proceedings
or litigation in respect thereof) (A) in such proportion as is appropriate to
reflect the relative benefits received by each of the contributing parties, on
the one hand, and the party to be indemnified on the other hand, from the
offering of the Securities or (B) if the allocation provided by clause (A) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of each of the contributing parties, on the one hand, and the
party to be indemnified, on the other hand, in connection with the statements or
omissions that resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company, on the one hand, and the
Underwriters, on the other, shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Notes (before deducting expenses)
bear to the total discounts received by the Underwriters hereunder, in each case
as set forth in the table on the cover page of the Prospectus. Relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Underwriters, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, expenses or liabilities (or actions, suits, proceedings
or litigation in respect thereof) referred to above in this Section 7(d) shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating, preparing or defending any
such action, claim, suit, proceeding or litigation. Notwithstanding the
provisions of this Section 7(d), no Underwriter shall be required to contribute
any amount in excess of the underwriting discount applicable to the Notes
purchased by the Underwriters hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person, if
any, who controls the Company within the meaning of the Securities Act, each
officer of the Company who 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 this Section 7(d). Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit,
proceeding or litigation against such party in respect to which a claim for
contribution may be made against another party or parties under this Section
7(d), notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have hereunder or otherwise than under this Section 7(d), or to the extent that
such party or parties were not adversely affected by such omission. The
contribution agreement set forth above shall be in addition to any liabilities
which any indemnifying party may have at common law or otherwise.
8. Representations and Agreements to Survive Delivery. All
--------------------------------------------------
representations, warranties and agreements contained in this Agreement or
contained in certificates of officers of
30
the Company submitted pursuant hereto shall be deemed to be representations,
warranties and agreements at the Closing Date and each Option Closing Date, as
the case may be, and the agreements of the Company and the provisions with
respect to the payment of expenses contained in Sections 5 and 10 and the
respective indemnity agreements contained in Section 7 shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any Underwriter, the Company, any of the Subsidiaries or any
controlling person, and shall survive termination of this Agreement or the
issuance and delivery of the Securities to the Underwriters.
9. Effective Date. This Agreement shall become effective at 10:00 a.m.,
--------------
New York City time, on the next full business day following the date hereof, or
at such earlier time after the Registration Statement becomes effective as the
Underwriters, in their discretion, shall release the Notes for the sale to the
public; provided, however, that the provisions of Sections 5, 7 and 10 of this
Agreement shall at all times be effective. For purposes of this Section 9, the
Notes to be purchased hereunder shall be deemed to have been so released upon
the earlier of dispatch by the Underwriters of telegrams to securities dealers
releasing the Notes for offering or the release by the Underwriters for
publication of the first newspaper advertisement which is subsequently published
relating to the Notes.
10. Termination.
-----------
(a) Subject to Section 10(b), the Underwriters shall have the right
to terminate this Agreement (i) if trading on the New York Stock Exchange, the
American Stock Exchange, the Nasdaq Stock Market or in the over-the-counter
market shall have been suspended, or minimum or maximum prices for trading shall
have been fixed, or maximum ranges for prices for securities shall have been
required in the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction; (ii) if the
United States shall have become involved in a war or major hostilities, or there
shall have been an escalation in an existing war or major hostilities, or a
national emergency shall have been declared in the United States; (iii) if a
moratorium in foreign exchange trading has been declared; (iv) if the Company or
any of the Subsidiaries shall have sustained a loss material or substantial to
the Company or any of the Subsidiaries 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 Underwriters' opinion, make
it inadvisable to proceed with the delivery of the Notes; (v) if there shall
have been such a material adverse change in the conditions or prospects of the
Company or any of the Subsidiaries as in the Underwriters' judgment would make
it inadvisable to proceed with the offering, sale and/or delivery of the
Securities; or (vi) if there shall have been such a material adverse change in
the general market, political or economic conditions in the United States or
elsewhere, as in the Underwriters' judgment would make it inadvisable to proceed
with the offering, sale and/or delivery of the Notes.
(b) If this Agreement is terminated by the Underwriters in accordance
with the provisions of Section 10(a) or Section 12 or if this Agreement shall
not be carried out within the time specified herein, or any extension thereof
granted to the Underwriters, by reason of any failure on the part of the Company
to perform any undertaking or satisfy any condition of this Agreement by it to
be performed or satisfied (including, without limitation, pursuant to Section 6,
Section 10(a) or Section 12), then the Company shall promptly reimburse and
indemnify the
31
Underwriters for all of their reasonable out-of-pocket expenses, including the
fees and disbursements of Underwriters' Counsel. In addition, the Company shall
remain liable for all Blue Sky counsel fees and expenses and Blue Sky filing
fees. Notwithstanding any contrary provision contained in this Agreement, any
election hereunder or any termination of this Agreement (including, without
limitation, pursuant to Sections 6, 10, 11 and 12), and whether or not this
Agreement is otherwise carried out, the provisions of Section 5 and Section 7
shall not be in any way affected by such election or termination or failure to
carry out the terms of this Agreement or any part hereof.
11. Substitution of the Underwriters. If one or more of the Underwriters
--------------------------------
shall fail (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 6, Section 10 or Section 12) to
purchase the Securities which it or they are obligated to purchase on such date
under this Agreement (the "Defaulted Securities"), the Underwriters shall have
the right, within 48 hours thereafter, to make arrangement for one or more of
the non-defaulting Underwriters, or any other underwriters, to purchase all, but
not less than all, of the Defaulted Securities in such amounts as may be agreed
upon and upon the terms herein set forth; if, however, the Underwriters shall
not have completed such arrangements within such 48 hour period, then:
(i) if the principal amount of Defaulted Securities does not
exceed 10% of the aggregate principal amount of Firm Notes to be
purchased on such date, the non-defaulting Underwriters shall be
obligated to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters; or
(ii) if the principal amount of Defaulted Securities exceeds 10%
of the aggregate principal amount of Firm Notes, this Agreement shall
terminate without liability on the part of any non-defaulting
Underwriters.
No action taken pursuant to this Section 11 shall relieve any
defaulting Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
In the event of any such default which does not result in a
termination of this Agreement, the Underwriters shall have the right to postpone
the Closing Date for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements.
12. Default by the Company. If the Company shall fail at the Closing Date
----------------------
or 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 Securities to be purchased on an Option Closing Date, the Underwriters
may, at their option, by notice from the Underwriters to the Company, terminate
the Underwriters' obligation to purchase Option Notes from the Company on such
date) without any liability on the part of any non-defaulting party other than
pursuant to Sections 5, 7 and 10. No action taken pursuant to this Section 12
shall relieve the Company from liability, if any, in respect of such default.
32
13. Notices. All notices and communications hereunder, except as herein
-------
otherwise specifically provided, shall be given 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 them at
Forum Capital Markets LLC, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: Mr. C. ▇▇▇▇▇ ▇▇▇▇▇▇▇, with a copy to ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇ LLP, Two
Stamford Plaza, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq. Notices to the Company shall be directed to the Company
at Southwest Securities Group, Inc., ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇ Attention: General Counsel, with a copy to Gardere & ▇▇▇▇▇, L.L.P., ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
14. Parties. This Agreement shall inure solely to the benefit of and
-------
shall be binding upon the Underwriters, the Company and the controlling persons,
directors and officers referred to in Section 7, 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 Notes from the Underwriters shall be deemed to be a successor by
reason merely of such purchase.
15. Construction. This Agreement shall be governed by and construed and
------------
enforced in accordance with the laws of the state of New York without giving
effect to choice of law or conflict of laws principles.
16. 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 instrument.
17. 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
Underwriters and the Company.
If the foregoing correctly sets forth the understanding between the
Underwriters 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,
SOUTHWEST SECURITIES GROUP, INC.
By:______________________
Name:
Title:
Confirmed and accepted as of
the date first above written.
33
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ASSOCIATES, INC.
FORUM CAPITAL MARKETS LLC
By: FORUM CAPITAL MARKETS LLC
By:_________________
Name:
Title:
34
SCHEDULE I
----------
Principal amount of
Name of Underwriter Notes to be Purchased
------------------- ---------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc.............................. $
Forum Capital Markets LLC.................................... $______
Total.......................................... $
=======
35
ANNEX I
Jurisdictions in
which Qualified
Name State of to
---- --------
Incorporation Conduct Business
------------- ----------------
_________________
* Denotes significant Subsidiary.
36