[Draft--06/01/99]
7,600,000 Shares of Common Stock
Wit Capital Group, Inc.
UNDERWRITING AGREEMENT
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June 3, 1999
BEAR, ▇▇▇▇▇▇▇ & CO. INC.
Wit Capital Corporation, as e-Manager
▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC
as Representatives of the
several Underwriters named in
Schedule I attached hereto
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c/o Bear, ▇▇▇▇▇▇▇ & Co. Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear Sirs:
Wit Capital Group, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Company"), proposes, subject to the
terms and conditions stated herein, to issue and sell to the several
underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
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7,600,000 shares (the "Firm Shares") of its common stock, par value $.01 per
share (the "Common Stock") and, for the sole purpose of covering over-allotments
in connection with the sale of the Firm Shares, at the option of the
Underwriters, up to an additional 1,140,000 shares (the "Additional Shares") of
Common Stock. The Firm Shares and any Additional Shares purchased by the
Underwriters are referred to herein as the "Shares". The Shares are more
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fully described in the Registration Statement referred to below.
1. Representations and Warranties of the Company. The Company
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represents and warrants to, and agrees with, the Underwriters that:
(a) The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-1 (No. 333-74619), and may
have filed an amendment or amendments thereto, for the registration of the
Shares under the Securities Act of 1933, as amended (the "Act"). Such
registration statement, including the prospectus, financial statements and
schedules, exhibits and all other documents filed as a part thereof, as amended
at the time of effectiveness of the registration statement, including any
information deemed to be a part thereof as of the time of effectiveness pursuant
to paragraph (b) of Rule 430A or Rule 434 of the Rules and Regulations of the
Commission under the Act (the "Regulations"), is herein called the "Registration
Statement", and the prospectus, in the form first filed with the Commission
pursuant to Rule 424(b) of the Regulations or filed as part of the Registration
Statement at the time of effectiveness if no Rule 424(b) or Rule 434 filing is
required, is herein called the "Prospectus". The term "preliminary prospectus"
as used herein means a preliminary prospectus as described in Rule 430 of the
Regulations.
(b) At the time of the effectiveness of the Registration Statement or
the effectiveness of any post-effective amendment to the Registration Statement,
when the Prospectus is first filed with the Commission pursuant to Rule 424(b)
or Rule 434 of the Regulations, when any supplement to or amendment of the
Prospectus is filed with the Commission and at the Closing Date and the
Additional Closing Date, if any (as hereinafter respectively defined), the
Registration Statement and the Prospectus and any amendments thereof and
supplements thereto complied or will comply in all material respects with the
applicable provisions of the Act and the Regulations and did not or will not
contain an untrue statement of a material fact and did not or will not omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein (i) in the case of the Registration Statement, not
misleading and (ii) in the case of the Prospectus, in light of the circumstances
under which they were made, not misleading. When the preliminary prospectus
dated May 18, 1999 relating to the Shares was first filed with the Commission
(whether filed as part of the
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registration statement for the registration of the Shares or any amendment
thereto or pursuant to Rule 424(a) of the Regulations) and when any amendment
thereof or supplement thereto was first filed with the Commission, such
preliminary prospectus and any amendments thereof and supplements thereto
complied in all material respects with the applicable provisions of the Act and
the Regulations and did not contain an untrue statement of a material fact and
did not omit to state any material fact required to be stated therein or
necessary in order to make the statements therein in light of the circumstances
under which they were made not misleading. No representation and warranty is
made in this subsection (b), however, with respect to any information contained
in or omitted from the Registration Statement or the Prospectus or any related
preliminary prospectus or any amendment thereof or supplement thereto in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Underwriter through you as herein stated
expressly for use in connection with the preparation thereof. If Rule 434 is
used, the Company will comply with the requirements of Rule 434.
(c) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, who have certified the financial statements
and supporting schedules included in the Registration Statement, are independent
public accountants with respect to the Company as required by the Act and the
Regulations.
(d) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as disclosed in
the Registration Statement and the Prospectus, there has been no material
adverse change or any development involving a prospective material adverse
change in the business, prospects, properties, operations, condition (financial
or other) or results of operations of the Company and its subsidiaries taken as
a whole, whether or not arising from transactions in the ordinary course of
business (a "Material Adverse Effect"), and since the date of the latest balance
sheet presented in the Registration Statement and the Prospectus, neither the
Company nor any of its subsidiaries has incurred or undertaken any liabilities
or obligations, direct or contingent, which are material to the Company and its
subsidiaries taken as a whole, except for liabilities or
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obligations which are reflected in the Registration Statement and the
Prospectus.
(e) This Agreement and the transactions contemplated herein have been
duly and validly authorized by the Company and this Agreement has been duly and
validly executed and delivered by the Company.
(f) The execution, delivery, and performance of this Agreement and
the consummation of the transactions contemplated hereby do not and will not (i)
conflict with or result in a breach of any of the terms and provisions of, or
constitute a default (or an event which with notice or lapse of time, or both,
would constitute a default) under, or result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Company or
any of its subsidiaries pursuant to, any agreement, instrument, franchise,
license or permit to which the Company or any of its subsidiaries is a party or
by which any of such corporations or their respective properties or assets may
be bound or (ii) violate or conflict with any provision of the certificate of
incorporation or by-laws of the Company or any of its subsidiaries or any
judgment, decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over the Company
or any of its subsidiaries or any of their respective properties or assets. No
consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any public, governmental or regulatory
agency or body having jurisdiction over the Company or any of its subsidiaries
or any of their respective properties or assets is required for the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby, including the issuance, sale and delivery of
the Shares to be issued, sold and delivered by the Company hereunder, except the
registration under the Act of the Shares and such consents, approvals,
authorizations, orders, registrations, filings, qualifications, licenses and
permits as may be required under state securities or Blue Sky laws and the rules
of the National Association of Securities Dealers, Inc. (the "NASD") in
connection with the purchase and distribution of the Shares by the Underwriters.
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(g) All of the outstanding shares of (i) the Company's Class C common
stock, par value $.01 per share (the "Class C Common Stock"), and (ii) the
Company's Series A through E preferred stock, par value $.01 per share
(collectively, the "Series Preferred Stock"), are duly and validly authorized
and issued, fully paid and nonassessable and were not issued and are not now in
violation of or subject to any preemptive rights, except such rights as have
been waived. The Shares, when issued, delivered and sold in accordance with
this Agreement, will be duly and validly issued and outstanding, fully paid and
nonassessable, and will not have been issued in violation of or be subject to
any preemptive rights, except such rights as have been waived. The Company had,
at March 31, 1999 (after giving effect to the 7 for 10 reverse stock split of
the Class C Common Stock and Series E Preferred Stock as described in the
Prospectus), an authorized and outstanding capitalization as set forth in the
Registration Statement and the Prospectus under the caption "Capitalization".
The Company's Class B common stock, par value $.01 per share (the "Class B
Common Stock"), the Class C Common Stock, the Common Stock, the Firm Shares, the
Additional Shares and the Series Preferred Stock conform to the descriptions
thereof contained in the Registration Statement and the Prospectus.
(h) Each of the Company and its subsidiaries has been duly organized
and is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation. Each of the Company and its subsidiaries is duly
qualified and in good standing as a foreign corporation in each jurisdiction in
which the character or location of its properties (owned, leased or licensed) or
the nature or conduct of its business makes such qualification necessary, except
for those failures to be so qualified or in good standing which will not,
individually or in the aggregate, have a Material Adverse Effect. Each of the
Company and its subsidiaries has all requisite power and authority, and all
necessary consents, approvals, authorizations, orders, registrations,
qualifications, licenses and permits of and from all public, regulatory or
governmental agencies and bodies, to own, lease and operate its properties and
conduct its business as now being conducted and as described in the Registration
Statement and the Prospectus, and no such consent, approval, authorization,
order, registration, qualification, license or permit contains a materially
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burdensome restriction not adequately disclosed in the Registration Statement
and the Prospectus.
(i) Neither the Company nor any of its subsidiaries is in violation
or default of (i) any provision of its certificate of incorporation or by-laws
(or other organizational documents), (ii) the terms of any indenture, contract,
lease, mortgage, deed of trust, note agreement, loan agreement or other
agreement, obligation, condition, covenant or instrument to which it is a party
or bound or to which its property is subject or (iii) any statute, law, rule,
regulation, judgment, order or decree of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority having
jurisdiction over the Company or such subsidiary or any of its properties, as
applicable, except, with respect to clauses (ii) and (iii) only, for violations
or defaults that would not, individually or in the aggregate, have a Material
Adverse Effect.
(j) Except as described in the Prospectus, there is no litigation or
governmental proceeding to which the Company or any of its subsidiaries is a
party or to which any property of the Company or any of its subsidiaries is
subject or which is pending or, to the knowledge of the Company, contemplated
against the Company or any of its subsidiaries which might reasonably be
expected to result in a Material Adverse Effect or which is required to be
disclosed in the Registration Statement and the Prospectus.
(k) There is no statute, regulation, contract or other document of a
character required to be described in the Registration Statement or the
Prospectus, or, in the case of a contract or other document, to be filed as an
exhibit to the Registration Statement, that is not described or filed, as the
case may be, as required.
(l) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which constitutes or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of shares of Common Stock to facilitate the sale or
resale of the Shares.
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(m) The financial statements, including the notes thereto, and the
supporting schedule included in the Registration Statement and the Prospectus
present fairly the consolidated financial position of the Company and its
subsidiaries as of the dates indicated and the consolidated results of their
operations and cash flows for the periods specified; except as otherwise stated
in the Registration Statement, said financial statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis; and the supporting schedule included in the Registration Statement
presents fairly the information required to be stated therein; and the other
financial and statistical information and data included in the Registration
Statement and the Prospectus is, in all material respects, accurately presented
and prepared on a basis consistent with such financial statements and the books
and records of the Company.
(n) Except such rights as have been waived or as described in the
Prospectus, no holder of securities of the Company has any rights to the
registration of securities of the Company because of the filing of the
Registration Statement or otherwise in connection with the sale of the Shares
contemplated hereby.
(o) The Company is not, and upon consummation of the transactions
contemplated hereby will not be, subject to registration as an "investment
company" under the Investment Company Act of 1940.
(p) The Common Stock of the Company, including the Shares, has been
approved for quotation on the Nasdaq National Market, subject only to official
notice of issuance.
(q) No labor dispute with the employees of the Company or any of its
subsidiaries exists or, to the knowledge of the Company, is imminent, and the
Company is not aware of any existing, threatened or imminent labor dispute or
disturbance by the employees of any of its principal customers, suppliers,
contractors or providers of outsourced services that might have a Material
Adverse Effect.
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(r) The Company and its subsidiaries own, possess, license or have
rights to use all patents, patent applications, trade and service marks, trade
and service ▇▇▇▇ registrations, trade names, copyrights, licenses, inventions,
technology, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures) and
other intellectual property (collectively, the "Intellectual Property")
necessary for the conduct of the Company's business as now conducted or as
proposed in the Prospectus to be conducted. Except as described in the
Prospectus, (i) to the Company's knowledge, there is no material infringement by
third parties of any such Intellectual Property, (ii) there is no pending or, to
the Company's knowledge, threatened action, suit, proceeding or claim by others
challenging the Company's rights in or to any such Intellectual Property, and
the Company is unaware of any facts which would form a reasonable basis for any
such claim, (iii) there is no pending or, to the Company's knowledge, threatened
action, suit, proceeding or claim by others challenging the validity or scope of
any such Intellectual Property, and the Company is unaware of any facts which
would form a reasonable basis for any such claim, (iv) there is no pending or,
to the Company's knowledge, threatened action, suit, proceeding or claim by
others that the Company infringes or otherwise violates any patent, trademark,
copyright, trade secret or other proprietary rights of others, and the Company
is unaware of any other fact which would form a reasonable basis for any such
claim, (v) to the Company's knowledge, there is no U.S. patent or published U.S.
patent application which contains claims that dominate or may dominate any
Intellectual Property described in the Prospectus as being owned by or licensed
to the Company or that interferes with the issued or pending claims of any such
Intellectual Property and (vi) there is no prior art of which the Company is
aware that may render any U.S. patent held by the Company invalid or any U.S.
patent application held by the Company unpatentable which has not been disclosed
to the U.S. Patent and Trademark Office. True and correct copies of all
material licenses and other material agreements between the Company, its
subsidiaries and any third parties relating to the Intellectual Property, and
all amendments and supplements thereto, have been provided to the Underwriters
or their counsel.
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(s) The Company and its subsidiaries (i) are in compliance in all
material respects with any and all applicable foreign, Federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all material permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses and (iii) are in compliance with all
terms and conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, individually or in
the aggregate, have a Material Adverse Effect.
(t) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for cleanup, closure of properties or compliance with Environmental
Laws or any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties) which would,
individually or in the aggregate, have a Material Adverse Effect.
(u) The Company and its subsidiaries own no real property and have
good and marketable title to all personal property owned by them which is
material to the business of the Company and its subsidiaries, in each case free
and clear of all liens, encumbrances and defects except such as are described in
the Prospectus or such as do not materially affect the value of such property
and do not materially interfere with the use made of such property by the
Company and its subsidiaries; and any real property and buildings held under
lease by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not materially interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries, in each case except
as described in or contemplated by the Prospectus.
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(v) The Company and each of its subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as (i) the Company believes are prudent and customary in the businesses
in which it is engaged and (ii) are consistent with insurance coverage
maintained by similar companies in similar businesses; neither the Company nor
any such subsidiary has been refused any insurance coverage sought or applied
for, and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not result in a
Material Adverse Effect.
(w) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(x) No relationship, direct or indirect, exists between or among the
Company or any of its subsidiaries on the one hand, and the directors, officers,
stockholders, customers, suppliers or providers of outsourced services of the
Company or any of its subsidiaries on the other hand, which is required by the
Act to be described in the Registration Statement and the Prospectus which is
not so described.
(y) The Company and its subsidiaries have implemented a comprehensive
program to analyze and address the risk that their internal information
technology and non-information technology systems may be unable to recognize and
properly execute date-sensitive functions involving certain dates prior to and
any dates after December 31, 1999 (the "Year 2000 Problem"), and the Company
believes, based
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on such assessment, that its and its subsidiaries' computer hardware and
software systems are and will be able to process date information prior to and
after December 31, 1999 without any errors, aborts, delays or other
interruptions in operations associated with the Year 2000 Problem; and the
Company has contacted those of its vendors with whom it has important financial
or operational relationships and believes (i) based on information received from
such vendors, that each such vendor has remedied or will remedy on a timely
basis the Year 2000 Problem and (ii) that it could find a suitable replacement
vendor without significant delay or expense in the event that any such vendor
fails to remedy on a timely basis the Year 2000 Problem.
(z) There are no transfer taxes or other similar fees or charges
under Federal law or the laws of any state, or any political subdivision
thereof, required to be paid in connection with the execution and delivery of
this Agreement or the issuance by the Company or sale by the Company of the
Securities.
(aa) No subsidiary of the Company is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on such subsidiary's capital stock, from repaying to the Company
any loans or advances to such subsidiary from the Company or from transferring
any of such subsidiary's property or assets to the Company or any other
subsidiary of the Company, except as described in or contemplated by the
Prospectus.
(bb) Each of the Company and its subsidiaries has fulfilled its
obligations, if any, under the minimum funding standards of Section 302 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the
regulations thereunder with respect to each "plan" (as defined in Section 3(3)
of ERISA and such regulations) in which employees of the Company and its
subsidiaries are eligible to participate and each such plan is in compliance in
all material respects with the presently applicable provisions of ERISA and such
regulations. The Company and its subsidiaries have not incurred any unpaid
liability to the Pension Benefit Guaranty Corporation (other than for the
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payment of premiums in the ordinary course) or to any such plan under Title IV
of ERISA.
2. Purchase, Sale and Delivery of the Shares.
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(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriters and the Underwriters,
severally and not jointly, agree to purchase from the Company, at a purchase
price per share of $., the number of Firm Shares set forth opposite the
respective names of the Underwriters in Schedule I hereto plus any additional
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number of Shares which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 10 hereof.
(b) Payment of the purchase price for, and delivery of certificates
for, the Shares shall be made at the offices of Cravath, Swaine & ▇▇▇▇▇,
Worldwide Plaza, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other
place as shall be agreed upon by you and the Company, at 10:00 A.M. on the third
or fourth business day (as permitted under Rule 15c6-1 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (unless postponed in
accordance with the provisions of Section 10 hereof) following the date of the
effectiveness of the Registration Statement (or, if the Company has elected to
rely upon Rule 430A of the Regulations, the third or fourth business day (as
permitted under Rule 15c6-1 under the Exchange Act) after the determination of
the initial public offering price of the Shares), or such other time not later
than 10 business days after such date as shall be agreed upon by you and the
Company (such time and date of payment and delivery being herein called the
"Closing Date"). Payment shall be made to the Company by wire transfer of
immediately available funds to an account designated by the Company, against
delivery to you for the respective accounts of the Underwriters of certificates
for the Firm Shares to be purchased by them. Certificates for the Firm Shares
shall be registered in such name or names and in such authorized denominations
as you may request in writing at least two full business days prior to the
Closing
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Date. The Company will permit you to examine and package such certificates for
delivery at least one full business day prior to the Closing Date. If you so
elect, delivery of the Firm Shares purchased from the Company may be made by
credit through full fast transfer to the accounts at The Depository Trust
Company designated by you.
(c) In addition, the Company hereby grants to the Underwriters the
option to purchase up to 1,140,000 Additional Shares at the same purchase price
per share to be paid by the Underwriters to the Company for the Firm Shares as
set forth in this Section 2, for the sole purpose of covering over-allotments in
the sale of Firm Shares by the Underwriters. This option may be exercised at
any time, in whole or in part, on or before the thirtieth day following the date
of the Prospectus, by written notice by you to the Company. Such notice shall
set forth the aggregate number of Additional Shares as to which the option is
being exercised and the date and time, as reasonably determined by you, when the
Additional Shares are to be delivered (such date and time being herein sometimes
referred to as the "Additional Closing Date"); provided, however, that the
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Additional Closing Date shall not be earlier than the Closing Date or earlier
than the second full business day after the date on which the option shall have
been exercised nor later than the eighth full business day after the date on
which the option shall have been exercised (unless such time and date are
postponed in accordance with the provisions of Section 10 hereof). Certificates
for the Additional Shares shall be registered in such name or names and in such
authorized denominations as you may request in writing at least two full
business days prior to the Additional Closing Date. The Company will permit you
to examine and package such certificates for delivery at least one full business
day prior to the Additional Closing Date. If you so elect, delivery of the
Additional Shares purchased from the Company may be made by credit through full
fast transfer to the accounts at The Depository Trust Company designated by you.
The number of Additional Shares to be sold to each Underwriter shall
be the number which bears the same ratio to the aggregate number of Additional
Shares being purchased as the number of Firm Shares set forth opposite the name
of such Underwriter in Schedule I hereto (or such number increased as set forth
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in Section 10 hereof) bears to 7,600,000, subject, however, to such adjustments
to
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eliminate any fractional shares as you in your sole discretion shall make.
Payment for the Additional Shares shall be made by wire transfer of
immediately available funds to an account designated by the Company, and the
closing shall take place at the offices of Cravath, Swaine & ▇▇▇▇▇, Worldwide
Plaza, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such other location as
may be mutually acceptable, upon delivery of the certificates for the Additional
Shares to you for the respective accounts of the Underwriters.
3. Offering. Upon your authorization of the release of the Firm
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Shares, the Underwriters propose to offer the Shares for sale to the public upon
the terms set forth in the Prospectus.
4. Covenants of the Company. The Company covenants and agrees with
-------------------------
the Underwriters that:
(a) If the Registration Statement has not yet been declared effective
the Company will use its best efforts to cause the Registration Statement and
any amendments thereto to become effective as promptly as possible, and if Rule
430A is used or the filing of the Prospectus is otherwise required under Rule
424(b) or Rule 434, the Company will file the Prospectus (properly completed if
Rule 430A has been used) pursuant to Rule 424(b) or Rule 434 within the
prescribed time period and will provide evidence satisfactory to you of such
timely filing. If the Company elects to rely on Rule 434, the Company will
prepare and file a term sheet that complies with the requirements of Rule 434.
The Company will notify you immediately (and, if requested by you,
will confirm such notice in writing) (i) when the Registration Statement and any
amendments thereto become effective, (ii) of any request by the Commission for
any amendment of or supplement to the Registration Statement or the Prospectus
or for any additional information, (iii) of the mailing or the delivery to the
Commission for filing of any amendment of or supplement to the Registration
Statement or the Prospectus, (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement
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or any post-effective amendment thereto or of the initiation, or the
threatening, of any proceedings therefor, (v) of the receipt of any comments
from the Commission, and (vi) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Shares for sale in
any jurisdiction or the initiation or threatening of any proceeding for that
purpose. If the Commission shall propose or enter a stop order at any time, the
Company will make every reasonable effort to prevent the issuance of any such
stop order and, if issued, to obtain the lifting of such order as soon as
possible. The Company will not file any amendment to the Registration Statement
or any amendment of or supplement to the Prospectus (including the prospectus
required to be filed pursuant to Rule 424(b) or Rule 434) that differs from the
prospectus on file at the time of the effectiveness of the Registration
Statement before or after the effective date of the Registration Statement to
which you shall reasonably object in writing after being timely furnished in
advance a copy thereof.
(b) If at any time when a prospectus relating to the Shares is
required to be delivered under the Act any event shall have occurred as a result
of which the Prospectus as then amended or supplemented would, in the judgment
of the Underwriters or the Company, include an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it shall be necessary, in the
judgment of the Underwriters or the Company, at any time to amend or supplement
the Prospectus or Registration Statement to comply with the Act or the
Regulations, the Company will notify you promptly and prepare and file with the
Commission an appropriate amendment or supplement (in form and substance
satisfactory to you) which will correct such statement or omission and will use
its best efforts to have any amendment to the Registration Statement declared
effective as soon as possible.
(c) The Company will promptly deliver to you one signed copy of the
Registration Statement, including exhibits and all amendments thereto, and will
maintain in the Company's files manually signed copies of such documents for at
least five years from the date of filing. The
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Company will promptly deliver to each of the Underwriters such number of copies
of any preliminary prospectus, the Prospectus, the Registration Statement, and
all amendments of and supplements to such documents, if any, as you may
reasonably request.
(d) The Company shall cause to be prepared and delivered, at its
expense, within one business day from the effective date of this Agreement, to
Bear, ▇▇▇▇▇▇▇ & Co. Inc., Wit Capital Corporation and ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC
an "electronic Prospectus" to be used by the Underwriters in connection with the
offering and sale of the Shares. As used herein, the term "electronic
Prospectus" means a form of Prospectus, and any amendment or supplement thereto,
that meets each of the following conditions: (i) it shall be encoded in an
electronic format, satisfactory to Bear, ▇▇▇▇▇▇▇ & Co. Inc., that may be
transmitted electronically by Bear, ▇▇▇▇▇▇▇ & Co. Inc. and the other
Underwriters to offerees and purchasers of the Shares for at least during the
period when the Prospectus is required to be delivered under the Act or the
Exchange Act ("the Prospectus Delivery Period"); (ii) it shall disclose the same
information as the paper Prospectus and Prospectus filed with the Commission
through its "▇▇▇▇▇" system (as such term is defined in Regulation S-T
promulgated by the Commission), except to the extent that graphic and image
material cannot be disseminated electronically, in which case such graphic and
image material shall be replaced in the electronic Prospectus with a fair and
accurate narrative description or tabular representation of such material, as
appropriate and (iii) it shall be in or convertible into a paper format or an
electronic format, reasonably satisfactory to Bear, ▇▇▇▇▇▇▇ & Co. Inc., that
will allow investors to store and have continuously ready access to the
Prospectus at any future time, without charge to investors (other than any fee
charged for subscription to the system as a whole and for on-line time). Such
electronic Prospectus may consist of a Rule 434 preliminary prospectus, together
with the applicable term sheet, provided that it otherwise satisfies the format
and conditions described in the immediately preceding sentence.
(e) The Company will endeavor in good faith, in cooperation with you,
at or prior to the time of effectiveness of the Registration Statement, to
qualify the
17
Shares for offering and sale under the securities laws relating to the offering
or sale of the Shares of such jurisdictions as you may designate and to maintain
such qualification in effect for so long as required for the distribution
thereof, but in no event for longer than one year; except that in no event shall
the Company be obligated in connection therewith to qualify as a foreign
corporation or to execute a general consent to service of process.
(f) The Company will make generally available (within the meaning of
Section 11(a) of the Act) to its security holders and to you as soon as
practicable, but not later than 45 days after the end of its fiscal quarter in
which the first anniversary date of the effective date of the Registration
Statement occurs, an earning statement (in form complying with the provisions of
Rule 158 of the Regulations) covering a period of at least 12 consecutive months
beginning after the effective date of the Registration Statement.
(g) The Company shall engage and maintain, at its expense, a
registrar and transfer agent for the Common Stock.
(h) During the period of 180 days from the date of the Prospectus,
the Company will not, without the prior written consent of Bear, ▇▇▇▇▇▇▇ & Co.
Inc., issue, offer, sell, contract to sell, pledge or otherwise dispose of (or
enter into any transaction which is designed to, or could be expected to, result
in the disposition (whether by actual disposition or effective economic
disposition due to cash settlement or otherwise) by the Company or any affiliate
of the Company or any person in privity with the Company or any affiliate of the
Company) directly or indirectly, including the filing (or participation in the
filing) of a registration statement with the Commission in respect of, or
establish or increase a "put equivalent position" or liquidate or decrease a
"call equivalent position" within the meaning of the rules promulgated under
Section 16 of the Exchange Act with respect to, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock,
or publicly announce an intention to effect any such transaction, and the
Company will obtain the undertaking of the holder of all shares of Class B
Common Stock to be outstanding after the
18
consummation of the transactions contemplated hereby not to engage in any of the
aforementioned transactions with respect to shares of Class B Common Stock
during such 180-day period; provided, however, that the Company may (i)
-------- -------
sell the Shares hereunder, (ii) issue and sell Class C Common Stock
pursuant to any employee stock option plan, stock ownership plan, retirement
plan or dividend reinvestment plan of the Company in effect on the date of this
Agreement, (iii) issue Class C Common Stock issuable upon the conversion of
securities or the exercise of warrants outstanding on the date of this Agreement
and (iv) issue and sell shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock, or grant or issue any
options, rights or warrants to purchase shares of Common Stock and issue shares
of Common Stock upon conversion, exercise of exchange thereof (all such shares
of Common Stock referred to in this clause (iv) are collectively referred to as
"Supplemental Shares") in connection with raising additional capital or making
acquisitions so long as each person who acquires any Supplemental Shares enters
into an agreement with the Company that contains provisions to the effect that
such person may not sell, offer to sell, solicit an offer to buy, contract to
sell, pledge, grant any option to purchase, or otherwise transfer or dispose of,
any such Supplemental Shares, without the prior written consent of Bear, ▇▇▇▇▇▇▇
& Co. Inc. at any time during the period of 180 days from the date of the
Prospectus (which agreement shall provide that such provisions may not be
amended, nor may the performance of any obligations under such provisions be
waived, without the prior written consent of Bear, ▇▇▇▇▇▇▇ & Co. Inc.), and the
certificates evidencing such Supplemental Shares bear a legend that sets forth
such restrictions on transfer or disposition.
(i) During a period of three years from the effective date of the
Registration Statement, the Company will furnish to you copies of (i) all
reports to its shareholders and (ii) all reports, financial statements and proxy
or information statements filed by the Company with the Commission or any
national securities exchange.
(j) The Company will apply the proceeds from the sale of the Shares
as set forth under "Use of Proceeds" in the Prospectus.
19
(k) The Company will use its best efforts to cause the Shares to be
qualified for inclusion in the Nasdaq National Market.
(l) During a period of 180 days from the date of the Prospectus, the
Company shall not propose, or agree to any proposal, to amend any provision of
the Company's certificate of incorporation that relates the restrictions on
transferability of the Class C Common Stock contained therein without the prior
written consent of Bear, ▇▇▇▇▇▇▇ & Co. Inc.
5. Payment of Expenses. Whether or not the transactions contemplated
--------------------
in this Agreement are consummated or this Agreement is terminated, the Company
hereby agrees to pay all costs and expenses incident to the performance of the
obligations of the Company hereunder, including those in connection with (i)
preparing, printing, duplicating, filing and distributing the Registration
Statement, as originally filed and all amendments thereof (including all
exhibits thereto), any preliminary prospectus, the Prospectus and any amendments
or supplements thereto (including, without limitation, fees and expenses of the
Company's accountants and counsel), the underwriting documents and all other
documents related to the public offering of the Shares (including those supplied
to the Underwriters in reasonable quantities as hereinabove stated), (ii) the
issuance, transfer and delivery of the Shares to the Underwriters, including any
transfer or other taxes payable thereon, (iii) the qualification of the Shares
under state or foreign securities or Blue Sky laws, including the costs of
printing and mailing a preliminary and final "Blue Sky Survey" and the fees of
counsel for the Underwriters and such counsel's disbursements in relation
thereto, (iv) quotation of the Shares on the Nasdaq National Market, (v) filing
fees of the Commission and the NASD, (vi) the cost of printing certificates
representing the Shares and (vii) the cost and charges of any transfer agent or
registrar.
20
6. Conditions of Underwriters' Obligations. The obligations of the
----------------------------------------
Underwriters to purchase and pay for the Firm Shares and the Additional Shares,
as provided herein, shall be subject to the accuracy of the representations and
warranties of the Company herein contained, as of the date hereof and as of the
Closing Date (for purposes of this Section 6 "Closing Date" shall refer to the
Closing Date for the Firm Shares and any Additional Closing Date, if different,
for the Additional Shares), to the absence from any certificates, opinions,
written statements or letters furnished to you or to Cravath, Swaine & ▇▇▇▇▇
("Under writers' Counsel") pursuant to this Section 6 of any misstatement or
omission, to the performance by the Company of its obligations hereunder, and to
the following additional conditions:
(a) The Registration Statement shall have become effective not later
than (i) if pricing pursuant to Rule 430A, 5:30 P.M., New York time, on the date
of this Agreement or (ii) if pricing pursuant to a pricing amendment, 12:00
P.M., New York time, on the date an amendment to the Registration Statement
containing the public offering price has been filed with the Commission, or at
such later time and date as shall have been consented to in writing by you; if
the Company shall have elected to rely upon Rule 430A or Rule 434 of the
Regulations, the Prospectus shall have been filed with the Commission in a
timely fashion in accordance with Section 4(a) hereof; and, at or prior to the
Closing Date no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof shall have been issued and no
proceedings therefor shall have been initiated or threatened by the Commission.
(b) At the Closing Date you shall have received the opinion of
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP, counsel for the Company, dated the Closing Date
addressed to the Underwriters and in form and substance satisfactory to
Underwriters' Counsel, to the effect that:
(i) Each of the Company and its wholly owned subsidiary, Wit Capital
Corporation, a New York corporation (the "Subsidiary"), has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of
21
incorporation. Each of the Company and the Subsidiary is duly qualified and
in good standing as a foreign corporation in each jurisdiction in which the
character or location of its properties (owned, leased or licensed) or the
nature or conduct of its business makes such qualification necessary,
except for those failures to be so qualified or in good standing which will
not in the aggregate have a material adverse effect on the Company and the
Subsidiary taken as a whole. Each of the Company and the Subsidiary has all
requisite corporate authority to own, lease and license its respective
properties and conduct its business as now being conducted and as described
in the Registration Statement and the Prospectus. All the issued and
outstanding capital stock of the Subsidiary has been duly and validly
issued and is fully paid and nonassessable and, to such counsel's
knowledge, was not issued in violation of preemptive rights, except such
rights as have been waived, and is owned directly or indirectly by the
Company, free and clear of any lien, encumbrance, claim, security interest,
restriction on transfer, shareholders' agreement, voting trust or other
defect of title whatsoever.
(ii) The Company has authorized capital stock as set forth in the
Registration Statement and the Prospectus. All of the outstanding shares
of Class C Common Stock and Series Preferred Stock are duly and validly
authorized and issued, are fully paid and nonassessable and, to such
counsel's knowledge, were not issued in violation of or subject to any
preemptive rights, except such rights as have been waived. The Shares to
be delivered on the Closing Date have been duly and validly authorized and,
when issued, sold and delivered by the Company in accordance with this
Agreement, will be duly and validly issued, fully paid and nonassessable
and, to such counsel's knowledge, will not have been issued in violation of
or subject to any preemptive rights, except such rights as have been
waived. The Class B Common Stock, the Class C Common Stock, the Common
Stock, the Firm Shares, the Additional Shares and the Series Preferred
Stock conform to the descriptions thereof contained in the Registration
Statement and the Prospectus.
22
(iii) The Shares to be sold under this Agreement to the Underwriters
have been duly registered pursuant to Section 12 of the Exchange Act.
(iv) This Agreement has been duly and validly authorized, executed
and delivered by the Company.
(v) There is no litigation or governmental or other action, suit,
proceeding or investigation before any court or before or by any public,
regulatory or governmental agency or body pending or to the best of such
counsel's knowledge, threatened against, or involving the properties or
business of, the Company or the Subsidiary, which is of a character
required to be disclosed in the Registration Statement and the Prospectus
which has not been properly disclosed therein.
(vi) There is no statute, regulation, contract or other document
known to such counsel of a character required to be described in the
Registration Statement or the Prospectus, or, in the case of a contract or
other document, to be filed as an exhibit to the Registration Statement,
that is not described or filed, as the case may be, as required.
(vii) The execution, delivery, and performance of this Agreement and
the consummation of the transactions contemplated hereby by the Company do
not and will not (A) conflict with or result in a breach of any of the
terms and provisions of, or constitute a default (or an event which with
notice or lapse of time, or both, would constitute a default) under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or the Subsidiary pursuant to,
any agreement, instrument, franchise, license or permit known to such
counsel to which the Company or the Subsidiary is a party or by which
either of such corporations or their respective properties or assets may be
bound or (B) violate or conflict with any provision of the certificate of
incorporation or by-laws of the Company or the Subsidiary, or, to the
knowledge of such counsel, any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or
23
regulatory agency or body having jurisdiction over the Company or the
Subsidiary or any of their respective properties or assets. No consent,
approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any public, governmental, or
regulatory agency or body having jurisdiction over the Company or the
Subsidiary or any of their respective properties or assets is required for
the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, except for (1) such
as may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the Underwriters (as to
which such counsel need express no opinion) and (2) such as have been made
or obtained under the Act and the rules of the NASD.
(viii) The Company is not, and upon consummation of the transactions
contemplated hereby will not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(ix) The Registration Statement and the Prospectus and any
amendments thereof or supplements thereto (other than the financial
statements and the supporting schedule and other financial data included
therein, as to which no opinion need be rendered) comply as to form in all
material respects with the requirements of the Act and the Regulations.
(x) The Registration Statement is effective under the Act, and, to
the best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
thereof has been issued and no proceedings therefor have been initiated or
threatened by the Commission; and all filings required by Rule 424(b) of
the Regulations have been made.
(xi) To such counsel's knowledge, no holder of any security of the
Company has any right, not effectively satisfied or waived, to require
inclusion of shares of Common Stock or any other security of the Company in
the Registration Statement.
24
In addition, such opinion shall also contain a statement that such
counsel has participated in conferences with officers and representatives of the
Company, representatives of the independent public accountants for the Company
and the Underwriters at which the contents of the Registration Statement and the
Prospectus and related matters were discussed, and no facts have come to the
attention of such counsel which would lead such counsel to believe that either
the Registration Statement at the time it became effective (including the
information deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b) or Rule 434, if applicable), or any
amendment thereof made prior to the Closing Date as of the date of such
amendment, contained an untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus as of its date (or any
amendment thereof or supplement thereto made prior to the Closing Date as of the
date of such amendment or supplement) and as of the Closing Date contained or
contains an untrue statement of a material fact or omitted 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 (it being understood that such counsel need express no belief or
opinion with respect to the financial statements and schedules and other
financial data included therein).
The opinion of such counsel shall be limited to the laws of the United
States, the General Corporation Law of the State of Delaware and the laws of the
State of New York and, 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, the General Corporation Law of the State of Delaware and the laws of the
State of New York, 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
reasonably acceptable to Underwriters' Counsel, familiar with the applicable
laws; (B) as to matters of fact, to the extent they deem proper, on certificates
of responsible officers of the Company and certificates or other written
statements of
25
officers of departments of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company and the
Subsidiary, provided that copies of any such statements or certificates shall be
delivered to Underwriters' Counsel. 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, in their opinion, you and they are justified in relying
thereon.
(c) At the Closing Date you shall have received the opinion of
Potter, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, special Delaware counsel to the Company, dated
the Closing Date addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel, to the effect that [(i) the
reclassification of the Company's then-outstanding common stock, par value $.01
per share, into Class C Common Stock, which was effected pursuant to an
amendment to the Company's certificate of incorporation filed with the Secretary
of State of the State of Delaware on May 26, 1999 (the "Amendment"), is legal
and valid under the General Corporation Law of the State of Delaware, (ii) the
restrictions on transfer relating to the Class C Common Stock set forth in the
Amendment are legal and valid under the General Corporation Law of the State of
Delaware and (iii) the 10 for 7 reverse stock split relating to the Class C
Common Stock and Series E Preferred Stock effected on June 2, 1999 was validly
adopted and approved by the stockholders of the Company in accordance with the
Company's certificate of incorporation and by-laws and the General Corporation
Law of the State of Delaware]./1/
(d) All proceedings taken in connection with the sale of the Firm
Shares and the Additional Shares as herein contemplated shall be satisfactory in
form and substance to you and to Underwriters' Counsel, and the Underwriters
shall have received from said Underwriters' Counsel a favorable opinion, dated
as of the Closing Date with respect to the issuance and sale of the Shares, the
Registration Statement and the Prospectus and such other related matters as you
may reasonably require, and the Company shall have furnished to
___________________________
/1/ To be discussed with Delaware counsel.
26
Underwriters' Counsel such documents as they request for the purpose of enabling
them to pass upon such matters.
(e) At the Closing Date you shall have received a certificate of a
Co-Chief Executive Officer and the Chief Financial Officer of the Company, dated
the Closing Date to the effect that (i) the condition set forth in subsection
(a) of this Section 6 has been satisfied, (ii) as of the date hereof and as of
the Closing Date the representations and warranties of the Company set forth in
Section 1 hereof are accurate, (iii) as of the Closing Date the obligations of
the Company to be performed hereunder on or prior thereto have been duly
performed and (iv) subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, the Company and its
subsidiaries have not sustained any material loss or interference with their
respective businesses or properties from fire, flood, hurricane, accident or
other calamity, whether or not covered by insurance, or from any labor dispute
or any legal or governmental proceeding, and there has not been any material
adverse change, or any development involving a prospective material adverse
change, in the business prospects, properties, operations, condition (financial
or otherwise), or results of operations of the Company and its subsidiaries
taken as a whole, except in each case as described in or contemplated by the
Prospectus.
(f) At the time this Agreement is executed and at the Closing Date,
you shall have received a letter, from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, independent public
accountants for the Company, dated, respectively, as of the date of this
Agreement and as of the Closing Date addressed to the Underwriters and in form
and substance satisfactory to you, to the effect that: (i) they are independent
certified public accountants with respect to the Company within the meaning of
the Act and the Regulations and stating that the answer to Item 10 of the
Registration Statement is correct insofar as it relates to them; (ii) stating
that, in their opinion, the financial statements and schedules of the Company
included in the Registration Statement and the Prospectus and covered by their
opinion therein comply as to form in all material respects with the applicable
accounting requirements of the Act and the applicable published rules and
regulations of the Commission thereunder; (iii) on the
27
basis of procedures consisting of a reading of the latest available unaudited
interim consolidated financial statements of the Company and its subsidiaries, a
reading of the minutes of meetings and consents of the shareholders and boards
of directors of the Company and its subsidiaries and the committees of such
boards subsequent to March 31, 1999, inquiries of officers and other employees
of the Company and its subsidiaries who have responsibility for financial and
accounting matters of the Company and its subsidiaries with respect to
transactions and events subsequent to March 31, 1999 and other specified
procedures and inquiries to a date not more than five days prior to the date of
such letter, nothing has come to their attention that would cause them to
believe that: (A) the unaudited consolidated financial statements and schedules
of the Company presented in the Registration Statement and the Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the applicable published rules and regulations of
the Commission thereunder or that such unaudited consolidated financial
statements are not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited consolidated financial statements of the Company and its
subsidiaries included in the Registration Statement and the Prospectus; (B) with
respect to the period subsequent to March 31, 1999 there were, as of the date of
the most recent available monthly consolidated financial statements of the
Company and its subsidiaries, if any, and as of a specified date not more than
five days prior to the date of such letter, any changes in the capital stock or
long-term indebtedness of the Company or any decrease in the net current assets
or stockholders' equity of the Company, in each case as compared with the
amounts shown in the most recent balance sheet presented in the Registration
Statement and the Prospectus, except for changes or decreases which the
Registration Statement and the Prospectus disclose have occurred or may occur or
which are set forth in such letter; or (C) that during the period from April 1,
1999 to the date of the most recent available monthly consolidated financial
statements of the Company and its subsidiaries, if any, and to a specified date
not more than five days prior to the date of such letter, there was any
decrease, as compared with the corresponding period in the prior fiscal year, in
total revenues, or any increase, as compared with the
28
corresponding period in the prior fiscal year, in operating loss or total or per
share net loss, except for decreases or increases, as the case may be, which the
Registration Statement and the Prospectus disclose have occurred or may occur or
which are set forth in such letter; and (iv) stating that they have compared
specific dollar amounts, numbers of shares, percentages of revenues and
earnings, and other financial information pertaining to the Company and its
subsidiaries set forth in the Registration Statement and the Prospectus, which
have been specified by you prior to the date of this Agreement, to the extent
that such amounts, numbers, percentages, and information may be derived from the
general accounting and financial records of the Company and its subsidiaries or
from schedules furnished by the Company, and excluding any questions requiring
an interpretation by legal counsel, with the results obtained from the
application of specified readings, inquiries, and other appropriate procedures
specified by you set forth in such letter, and found them to be in agreement.
(g) Prior to the Closing Date the Company shall have furnished to you
such further information, certificates and documents as you may reasonably
request.
(h) You shall have received from the holder of all shares of Class B
Common Stock to be outstanding after the consummation of the transactions
contemplated hereby an agreement to the effect that such holder will not,
directly or indirectly, without the prior written consent of Bear, ▇▇▇▇▇▇▇ & Co.
Inc., offer, sell, contract to sell, pledge or otherwise dispose of (or enter
into any transaction which is designed to, or could be expected to, result in
the disposition (whether by actual disposition or effective economic disposition
due to cash settlement or otherwise) by such person or by the Company or any
affiliate of the Company or any person in privity with the Company or any
affiliate of the Company) directly or indirectly, including the filing (or
participation in the filing) of a registration statement with the Commission in
respect of, or establish or increase a "put equivalent position" or liquidate or
decrease a "call equivalent position" within the meaning of the rules
promulgated under Section 16 of the Exchange Act with respect to, any shares of
Class B Common Stock or any securities convertible into or exercisable or
exchangeable for Class B Common Stock, or publicly announce
29
an intention to effect any such transaction, for a period of 180 days after the
date of the Prospectus; provided, however, that such agreement shall in any way
-------- -------
limit the rights of the Company to issue and sell Class C Common Stock or Common
Stock as provided in Section 4(h) of this Agreement.
(i) At the Closing Date, the Shares shall have been approved for
quotation on the Nasdaq National Market.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to you or to
Underwriters' Counsel pursuant to this Section 6 shall not be in all material
respects reasonably satisfactory in form and substance to you and to
Underwriters' Counsel, all obligations of the Underwriters hereunder may be
canceled by you at, or at any time prior to, the Closing Date and the
obligations of the Underwriters to purchase the Additional Shares may be
canceled by you at, or at any time prior to, the Additional Closing Date.
Notice of such cancelation shall be given to the Company in writing, or by
telephone, telex or telegraph, confirmed in writing.
30
7. Indemnification.
----------------
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against
any and all losses, liabilities, claims, damages and expenses whatsoever as
incurred (including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the registration
statement for the registration of the Shares, as originally filed or any
amendment thereof, or any related preliminary prospectus or the Prospectus, or
in any supplement thereto or amendment thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such case to the
-------- -------
extent but only to the extent that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any Underwriter through you expressly for use therein. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have including under this Agreement.
(b) Each Underwriter severally, and not jointly, agrees to indemnify
and hold harmless the Company, each of the directors of the Company, each of the
officers of the Company who shall have signed the Registration Statement, and
each other person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, against any losses,
liabilities, claims, damages and expenses whatsoever as incurred (including but
not limited to attorneys' fees and any and
31
all expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation), jointly or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement for the registration of the Shares, as originally filed
or any amendment thereof, or any related preliminary prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that any
such loss, liability, claim, damage or expense arises out of or is based upon
any such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter through
you expressly for use therein; provided, however, that in no case shall
-------- -------
any Underwriter be liable or responsible for any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter
hereunder. This indemnity will be in addition to any liability which any
Underwriter may otherwise have including under this Agreement. The Company
acknowledges that the statements set forth in the last paragraph of the cover
page and in the eighth, eleventh and fourteenth paragraphs and the first
sentence of the sixth paragraph under the caption "Underwriting" in the
Prospectus constitute the only information furnished in writing by or on behalf
of any Underwriter expressly for use in the registration statement relating to
the Shares as originally filed or in any amendment thereof, any related
preliminary prospectus or the Prospectus or in any amendment thereof or
supplement thereto, as the case may be.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party
32
against whom indemnification is to be sought in writing of the commencement
thereof (but the failure so to notify an indemnifying party shall not relieve it
from any liability which it may have under this Section 7). In case any such
action is brought against any indemnified party, and it notifies an indemnifying
party of the commencement thereof, the indemnifying party 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 satisfactory to
such indemnified 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 one of the indemnifying parties in connection
with the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to have 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 the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying parties. Anything in
this subsection to the contrary notwithstanding, an indemnifying party shall not
be liable for any settlement of any claim or action effected without its written
consent; provided, however, that such consent was not unreasonably withheld.
-------- -------
8. Contribution. In order to provide for contribution in
-------------
circumstances in which the indemnification provided for in Section 7 hereof is
for any reason held to be unavailable from any indemnifying party or is
insufficient to hold harmless a party indemnified thereunder, the Company and
the Underwriters shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provision (including any investigation,
33
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after
deducting in the case of losses, claims, damages, liabilities and expenses
suffered by the Company any contribution received by the Company from persons,
other than the Underwriters, who may also be liable for contribution, including
persons who control the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, officers of the Company who signed the
Registration Statement and directors of the Company) as incurred to which the
Company and one or more of the Underwriters may be subject, in such proportions
as is appropriate to reflect the relative benefits received by the Company and
the Underwriters from the offering of the Shares or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in Section 7
hereof, in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company and the
Underwriters in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Underwriters shall be deemed to be in the same proportion as (x) the
total proceeds from the offering (net of underwriting discounts and commissions
but before deducting expenses) received by the Company and (y) the underwriting
discounts and commissions received by the Underwriters, respectively, in each
case as set forth on the cover page of the Prospectus. The relative fault of the
Company and of the Underwriters 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 the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, however, that no intent or knowledge of, or
-------- -------
access to information or opportunity to correct or prevent any such statement or
omission by, Wit Capital Corporation shall be attributed to any other
Underwriter. The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined by
34
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above. Notwithstanding the
provisions of this Section 8, (i) in no case shall any Underwriter be liable or
responsible for any amount in excess of the underwriting discount applicable to
the Shares purchased by such Underwriter hereunder, and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding the provisions of this Section 8
and the preceding sentence, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. For purposes of this Section 8, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act shall have the same rights to contribution as such
Underwriter, and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to clauses (i) and (ii) of the second preceding
sentence. Any party entitled to contribution will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such party in
respect of which a claim for contribution may be made against another party or
parties, notify each party or parties from whom contribution may be sought, but
the omission to so 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 under this Section 8 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its consent;
provided, however, that such consent was not unreasonably withheld.
-------- -------
9. Qualified Independent Underwriter.
----------------------------------
35
(a) The Company hereby confirms its engagement of the services of
Bear, ▇▇▇▇▇▇▇ & Co. Inc. as, and Bear, ▇▇▇▇▇▇▇ & Co. Inc. hereby confirms its
agreement with the Company to render services without compensation as, a
"qualified independent underwriter" (in such capacity, the "QIU") within the
meaning of Rule 2720(b)(15) of the Conduct Rules of the NASD with respect to the
offering and sale of the Shares.
(b) The QIU hereby represents and warrants to, and agrees with, the
Company and the other Underwriters that, with respect to the offering and sale
of the Shares as described in the Prospectus:
(i) the QIU qualifies as, and constitutes, a "qualified independent
underwriter" within the meaning of Rule 2720(b)(15) of the Conduct Rules of
the NASD;
(ii) the QIU has participated in the preparation of the Registration
Statement and the Prospectus and has exercised the usual standards of "due
diligence" in respect thereto;
(iii) the QIU has agreed in acting as a "qualified independent
underwriter" within the meaning of Rule 2720(b)(15) of the Conduct Rules of
the NASD to undertake the legal responsibilities and liabilities of an
underwriter under the Act, specifically including those inherent in Section
11 thereof;
(iv) based upon, among other factors, the information set forth in
the Prospectus and its review of such other documents and the taking of
such other actions as the QIU, in its sole discretion, has deemed necessary
or appropriate for the purposes of delivering its recommendation hereunder,
the QIU recommends, as of the date of the execution and delivery of this
Agreement, that the price at which the Shares are to be distributed to the
public shall not be
36
higher than that set forth on the cover page of the Prospectus, which price
should in no way be considered or relied upon as an indication of the value
of the Shares; and
(v) the QIU will furnish to the other Representatives on the Closing
Date a letter, dated the date thereof, in form and substance satisfactory
to the other Representatives, to the effect of clauses (i) through (iv)
above.
(c) The Company, the QIU and the other Underwriters agree to comply
in all material respects with all of the requirements of Rule 2720 of the
Conduct Rules of the NASD applicable to them in connection with the offering and
sale of the Shares. The Company agrees to cooperate with the Underwriters,
including the QIU, to enable the Underwriters to comply with Rule 2720 of the
Conduct Rules of the NASD and to enable the QIU to perform the services
contemplated by this Agreement.
(d) The Company agrees promptly to reimburse the QIU for all out-of-
pocket expenses, including fees and disbursements of counsel, reasonably
incurred in connection with the services to be rendered as QIU hereunder.
(e) The QIU hereby consents to the references to it in its capacity
as "qualified independent underwriter" as set forth under the caption
"Underwriting" in the Prospectus.
(f) The Company will indemnify and hold harmless the QIU against any
losses, claims, damages or liabilities, joint or several, to which the QIU may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon the QIU's acting (or alleged failing to act) as a "qualified independent
underwriter" within the meaning of Rule 2720(b)(15) of the Conduct Rules of the
NASD with respect to the offering and sale of the Shares and will reimburse the
QIU for any legal or other expenses reasonably incurred by the QIU in connection
with
37
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred.
10. Default by an Underwriter.
--------------------------
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Shares or Additional Shares hereunder, and if the
Firm Shares or Additional Shares with respect to which such default relates do
not (after giving effect to arrangements, if any, made by you pursuant to
subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares
or Additional Shares, the Firm Shares or Additional Shares to which the default
relates shall be purchased by the non-defaulting Underwriters in proportion to
the respective proportions which the numbers of Firm Shares set forth opposite
their respective names in Schedule I hereto bear to the aggregate number of Firm
----------
Shares set forth opposite the names of the non-defaulting Underwriters.
(b) In the event that such default relates to more than 10% of the
Firm Shares or Additional Shares, as the case may be, you may in your discretion
arrange for yourself or for another party or parties (including any non-
defaulting Underwriter or Underwriters who so agree) to purchase such Firm
Shares or Additional Shares, as the case may be, to which such default relates
on the terms contained herein. In the event that within 5 calendar days after
such a default you do not arrange for the purchase of the Firm Shares or
Additional Shares, as the case may be, to which such default relates as provided
in this Section 10, this Agreement or, in the case of a default with respect to
the Additional Shares, the obligations of the Underwriters to purchase and of
the Company to sell the Additional Shares shall thereupon terminate, without
liability on the part of the Company with respect thereto (except in each case
as provided in Section 5, 7(a) and 8 hereof) or the Underwriters, but nothing in
this Agreement shall relieve a defaulting Underwriter or Underwriters of its or
their liability, if any, to the other Underwriters and the Company for damages
occasioned by its or their default hereunder.
(c) In the event that the Firm Shares or Additional Shares to which
the default relates are to be purchased by the non-defaulting Underwriters, or
are to be
38
purchased by another party or parties as aforesaid, you or the Company shall
have the right to postpone the Closing Date or Additional Closing Date, as the
case may be, for a period, not exceeding five business days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus or in any other documents and arrangements, and the Company
agrees to file promptly any amendment or supplement to the Registration
Statement or the Prospectus which, in the opinion of Underwriters' Counsel, may
thereby be made necessary or advisable. The term "Underwriter" as used in this
Agreement shall include any party substituted under this Section 10 with like
effect as if it had originally been a party to this Agreement with respect to
such Firm Shares and Additional Shares.
11. Survival of Representations and Agreements. All representations
-------------------------------------------
and warranties, covenants and agreements of the Underwriters and the Company
contained in this Agreement, including the agreements contained in Section 5,
the indemnity agreements contained in Section 7 and the contribution agreements
contained in Section 8, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any Underwriter or any
controlling person thereof or by or on behalf of the Company, any of its
officers and directors or any controlling person thereof, and shall survive
delivery of and payment for the Shares to and by the Underwriters. The
representations contained in Section 1 and the agreements contained in Sections
5, 7, 8 and 12(d) hereof shall survive the termination of this Agreement,
including termination pursuant to Section 10 or 12 hereof.
12. Effective Date of Agreement; Termination.
-----------------------------------------
39
(a) This Agreement shall become effective, upon the later of when (i)
you and the Company shall have received notification of the effectiveness of the
Registration Statement or (ii) the execution of this Agreement. If either the
initial public offering price or the purchase price per Share has not been
agreed upon prior to 5:00 P.M., New York time, on the fifth full business day
after the Registration Statement shall have become effective, this Agreement
shall thereupon terminate without liability to the Company or the Underwriters
except as herein expressly provided. Until this Agreement becomes effective as
aforesaid, it may be terminated by the Company by notifying you or by you by
notifying the Company. Notwithstanding the foregoing, the provisions of this
Section 12 and of Sections 1, 5, 7 and 8 hereof shall at all times be in full
force and effect.
(b) You shall have the right to terminate this Agreement at any time
prior to the Closing Date or the obligations of the Underwriters to purchase the
Additional Shares at any time prior to the Additional Closing Date, as the case
may be, if (A) any domestic or international event or act or occurrence has
materially disrupted, or in your opinion will in the immediate future materially
disrupt, the market for the Company's securities or securities in general; or
(B) if trading on the New York or American Stock Exchanges or on Nasdaq 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, on
the New York or American Stock Exchanges or on Nasdaq by the New York or
American Stock Exchanges, the NASD or by order of the Commission or any other
governmental authority having jurisdiction; or (C) if a banking moratorium has
been declared by a state or Federal authority or if any new restriction
materially adversely affecting the distribution of the Firm Shares or the
Additional Shares, as the case may be, shall have become effective; or (D) (i)
if, after the date hereof, the United States becomes engaged in hostilities or
there is an escalation of hostilities involving the United States or there is a
declaration of a national emergency or war by the United States or (ii) if there
shall have been such change in political, financial or economic conditions if
the effect of any such event in (i) or (ii) as in your judgment makes it
impracticable or inadvisable to proceed with the offering, sale and delivery
40
of the Firm Shares or the Additional Shares, as the case may be, on the terms
contemplated by the Prospectus.
(c) Any notice of termination pursuant to this Section 12 shall be by
telephone, telex, or telegraph, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than pursuant to (i) notification by you as
provided in Section 12(a) hereof or (ii) Section 10(b) or 12(b) hereof), or if
the sale of the Shares provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth herein is not
satisfied or because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or comply with any provision hereof, the
Company will, subject to demand by you, reimburse the Underwriters for all out-
of-pocket expenses (including the fees and expenses of their counsel), incurred
by the Underwriters in connection herewith.
13. Notices. All communications hereunder, except as may be
--------
otherwise specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
in writing, to such Underwriter c/o Bear, ▇▇▇▇▇▇▇ & Co. Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention of [Bear ▇▇▇▇▇▇▇ to provide]; if sent to the
Company, shall be mailed, delivered, or telegraphed and confirmed in writing to
the Company, ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention of:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Co-Chief Executive Officers.
14. Parties. This Agreement shall inure solely to the benefit of,
--------
and shall be binding upon, the Underwriters and the Company and the controlling
persons, directors, officers, employees and agents referred to in Sections 7 and
8, and their respective successors 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 provision herein contained.
The term "successors and assigns" shall not include a purchaser, in its capacity
as such, of Shares from any of the Underwriters.
41
15. Governing Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of New York, but without regard to
principles of conflicts of law.
42
If the foregoing correctly sets forth the understanding between you
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,
WIT CAPITAL GROUP, INC.
by
----------------------
Name:
Title:
Accepted as of the date
first above written:
BEAR, ▇▇▇▇▇▇▇ & CO. INC.,
Wit Capital Corporation, as e-Manager
▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC
On behalf of themselves and the other
Underwriters named in Schedule I
----------
hereto
BY: BEAR, ▇▇▇▇▇▇▇, & CO. INC.
by
-----------------------
Name:
Title:
43
SCHEDULE I
Name of Underwriter Number of Firm
Shares to be
Purchased
--------------------------------------------
Bear, ▇▇▇▇▇▇▇ & Co. Inc.
--------------------------------------------
Wit Capital Corporation
--------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
Total
--------------------------------------------