CONFORMED COPY
SECURITIES PURCHASE AGREEMENT
between
NATIONAL DISCOUNT BROKERS GROUP, INC.
and
DB U.S. FINANCIAL MARKETS HOLDING CORPORATION
Dated as of May 15, 2000
TABLE OF CONTENTS
Page
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ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale....................................................1
1.2 Closing..............................................................1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Organization and Corporate Power.....................................2
2.2 Authorization........................................................2
2.3 Government Approvals.................................................2
2.4 Authorized and Outstanding Stock.....................................3
2.5 Subsidiaries.........................................................3
2.6 Securities Law Compliance............................................4
2.7 Commission Documents; Financial Information and Controls.............4
2.8 Absence of Certain Events; No Material Adverse Effect................5
2.9 Litigation...........................................................6
2.10 Compliance with Laws and Other Instruments...........................6
2.11 Taxes................................................................6
2.12 Intellectual Property; Proprietary Rights; Employee Restrictions.....7
2.13 Date Compliance......................................................7
2.14 Agreements of Directors, Officers and Employees......................8
2.15 Governmental and Industrial Approvals................................8
2.16 Contracts and Commitments............................................8
2.17 Employee Matters.....................................................9
2.18 No Brokers or Finders................................................9
2.19 Transactions with Affiliates.........................................9
2.20 Assumptions, Guarantees, etc. of Indebtedness of Other Persons.......9
2.21 Investment Company Act...............................................9
2.22 Disclosures..........................................................9
ARTICLE III
REPRESENTATIONS OF THE PURCHASER
3.1 Representations and Warranties......................................10
3.2 Wholly Owned Subsidiary.............................................11
ARTICLE IV
CONDITIONS TO THE PURCHASER'S OBLIGATION
4.1 Effect of Conditions................................................11
4.2 Representations and Warranties......................................11
4.3 Performance.........................................................11
4.4 Board Election......................................................12
4.5 Opinions of Counsel.................................................12
4.6 Certified Documents, etc............................................12
4.7 No Material Adverse Effect..........................................12
4.8 Registration Rights Agreement.......................................12
4.9 Stockholder Agreement...............................................12
4.10 Venture Agreements..................................................12
4.11 HSR Act.............................................................12
4.12 Listing of Purchased Shares.........................................13
4.13 Consents and Waivers................................................13
4.14 Establishment of Firewalls..........................................13
4.15 Common Stock Certificate............................................13
ARTICLE V
CONDITIONS OF THE COMPANY'S OBLIGATION
5.1 Effect of Conditions................................................13
5.2 Representations and Warranties......................................13
5.3 Performance.........................................................13
5.4 Registration Rights Agreement.......................................13
5.5 Stockholder Agreement...............................................13
5.6 Venture Agreements..................................................14
5.7 HSR Act.............................................................14
5.8 Consents and Waivers................................................14
5.9 Listing of Purchased Shares.........................................14
5.10 Establishment of Firewalls..........................................14
5.11 Tender of Purchase Price............................................14
5.12 Fairness Opinion....................................................14
5.13 Opinions of Counsel.................................................14
5.14 Certified Documents, etc............................................15
ARTICLE VI
MISCELLANEOUS
6.1 Survival of Representations.........................................15
6.2 Parties in Interest.................................................15
6.3 Amendments and Waivers..............................................15
6.4 Notices.............................................................15
6.5 Expenses............................................................16
6.6 Counterparts........................................................16
6.7 Effect of Headings..................................................17
6.8 Adjustments.........................................................17
6.9 Governing Law.......................................................17
6.10 Assignment..........................................................17
6.11 Waiver of Jury Trial................................................17
6.12 Attorneys' Fees.....................................................17
6.13 Termination.........................................................17
Exhibit A Form of Registration Rights Agreement
Exhibit B Form of Stockholder Agreement
Exhibit C Form of U.S. Research Agreement
Exhibit D Form of U.S. Underwriting Agreement
Schedule 2.2 Related Agreements
Schedule 2.4(c) Outstanding Obligations Regarding Common Stock
Schedule 2.5 Subsidiaries and Investments
Schedule 2.7(b) Material Liabilities and Obligations
Schedule 2.8 Certain Events and Commitments
Schedule 2.9 Litigation
Schedule 2.12 Intellectual Property
Schedule 2.15(b) Pending Registrations
Schedule 2.16 Certain Contracts
Schedule 2.18 Brokers and Finders
Schedule 2.20 Guarantees
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT is entered into as of May 15, 2000
by and among National Discount Brokers Group, Inc., a Delaware corporation (the
"Company"), and DB U.S. Financial Markets Holding Corporation, a Delaware
corporation (the "Purchaser").
WHEREAS, the Purchaser has indicated a desire to purchase from the
Company 3,000,000 shares of (the "Purchased Shares") the Company's common stock,
$0.01 par value per share (the "Common Stock");
WHEREAS, the Company has indicated a desire to sell an aggregate of
3,000,000 shares of Common Stock to the Purchaser; and
WHEREAS, in consideration of, and in connection with, such purchase and
sale of Common Stock, the Company and the Purchaser have indicated their
intention to pursue certain strategic alliances involving on-line discount
brokerage services both in the United States and elsewhere;
NOW, THEREFORE, for and in consideration of the mutual consents and
agreements herein contained, the parties hereto do hereby covenant and agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale. Subject to the terms and conditions hereinafter
set forth, at the Closing (as defined below) the Company shall issue and sell to
the Purchaser, and the Purchaser shall purchase from the Company, the Purchased
Shares, at a price per share equal to forty-five dollars and thirty-one cents
($45.31) payable as provided in Section 1.2. The Purchased Shares shall have all
the rights, terms and privileges of Common Stock as set forth in the Certificate
of Incorporation. Capitalized terms used herein without definition shall have
the meanings set forth in Annex A.
1.2 Closing. Subject to the satisfaction or waiver of the conditions
set forth in Articles IV and V hereof, a closing (the "Closing") for the sale
and purchase of the Purchased Shares shall take place at the offices of Cleary,
Gottlieb, Xxxxx & Xxxxxxxx, One Liberty Plaza, New York, New York, at 10:00
A.M., on the second Business Day following receipt by the parties of the
regulatory approvals and other consents and approvals specified in Sections
4.11, 4.12, 5.7 and 5.8, hereof, or such other date, time and place as shall be
mutually agreed upon by the Company and the Purchaser (the "Closing Date"). At
the Closing, the Company will deliver the Purchased Shares in the form of a
certificate issued in the name of the Purchaser (or any DB Group Member), upon
receipt by the Company of payment in U.S. dollars of the full purchase price
therefor by or on behalf of the Purchaser to the Company by wire transfer of
immediately available funds to an account designated in writing by the Company
to the Purchaser.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser on and as
of the date hereof as follows:
2.1 Organization and Corporate Power. Each of the Company and its
Principal Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all requisite power and authority to own its properties and to carry on its
business as currently conducted. Each of the Company and its Principal
Subsidiaries is duly licensed or qualified to do business as a foreign
corporation in each jurisdiction wherein the character of its property or the
nature of the activities currently conducted by it makes such qualification
necessary, except where the failure to so qualify is not reasonably likely to
have a Material Adverse Effect.
2.2 Authorization. The Company has all necessary power and has taken
all necessary corporate action required for the due authorization, execution,
delivery and performance by the Company of this Agreement and the agreements and
instruments set forth on Schedule 2.2 hereto (collectively, the "Related
Agreements"), the consummation of the transactions contemplated herein or
therein and the due authorization, issuance and delivery of the Purchased
Shares. The issuance of the Purchased Shares will not require any further
corporate action and is not and will not be subject to any preemptive right,
right of first refusal or the like in favor of any other Person. This Agreement
and the Related Agreements will each be a legal, valid and binding obligation of
the Company enforceable in accordance with its terms, except that the
enforceability hereof or thereof may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding may be brought.
2.3 Government Approvals. No consent, approval, license or
authorization of, or designation, declaration or filing with, any Governmental
Entity will be required on the part of the Company in connection with the
execution, delivery and performance by the Company of this Agreement, any of the
Related Agreements or the issuance of the Purchased Shares, except for (a) those
which have been made or granted; (b) the filing of registration statements with
the Securities and Exchange Commission (the "Commission") at the times and in
the manner required by the Registration Rights Agreement and, in connection
therewith, the filing of notices with any applicable state securities
commission; (c) the listing of the Purchased Shares on the New York Stock
Exchange; (d) the filing of Form D with the Commission; and (e) any required
filing under the HSR Act and the expiration or termination of any required
waiting period thereunder (or extension thereof).
2.4 Authorized and Outstanding Stock.
(a) The authorized capital stock of the Company immediately prior to
the Closing will consist of 51,000,000 shares of capital stock, of which
50,000,000 shares are Common Stock and 1,000,000 shares are Preferred Stock.
(b) As of the date hereof, the issued and outstanding capital stock of
the Company consists of 17,998,567 shares of Common Stock. As of the date
hereof, options to purchase 1,943,859 shares of Common Stock have been granted
and are unexercised under the Company's stock option plans. All of the issued
and outstanding shares of capital stock of the Company are, and when issued in
accordance with the terms hereof, the Purchased Shares will be, duly authorized
and validly issued and fully paid and non-assessable, with no personal liability
attaching to the ownership thereof, and will be free and clear of all Liens,
claims, charges, Encumbrances, or transfer restrictions imposed by or through
the Company, except for restrictions imposed by (i) federal or state securities
or "blue sky" laws; and (ii) this Agreement. The designations, powers,
preferences, rights, qualifications, limitations and restrictions in respect of
each class or series of capital stock of the Company are as set forth in the
Certificate of Incorporation, and all such designations, powers, preferences,
rights, qualifications, limitations and restrictions are valid, binding and
enforceable in accordance with their terms and in accordance with applicable
Law.
(c) Except as set forth in Schedule 2.4(c) hereto, (i) no subscription,
warrant, option, convertible security or other right (contingent or otherwise)
to purchase or acquire any shares of capital stock of the Company is authorized
or outstanding; (ii) the Company has no obligation (contingent or otherwise) to
issue any subscription, warrant, option, convertible security or other such
right or to issue or distribute to holders of any shares of its capital stock
any evidences of indebtedness or assets of the Company; (iii) the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any shares of its capital stock or any interest therein or to pay any dividend
or make any other distribution in respect thereof; and (iv) there are no
agreements, written or oral, between the Company and any holder of its capital
stock or, to the Knowledge of the Company, among any holders of its capital
stock, relating to the acquisition, disposition or voting of the capital stock
of the Company. Except as set forth in Schedule 2.4(c) hereto, no Person is
entitled to (i) any preemptive right, right of first refusal or similar right
granted by the Company with respect to the issuance of any capital stock of the
Company. Except as set forth in Schedule 2.4(c) hereto and as provided in the
Registration Rights Agreement, no Person has been granted rights by the Company
with respect to the registration of any capital stock of the Company under the
Securities Act of 1933, as amended (the "Securities Act"). All of the issued and
outstanding shares of the Company's capital stock have been offered, issued and
sold by the Company in compliance with applicable federal and state securities
laws.
2.5 Subsidiaries. Except as set forth in the SEC Documents and Schedule
2.5 hereto, the Company has no Subsidiaries nor any material investment or other
interest in, or any outstanding loan or advance in excess of $2,500,000 to or
from, any officer or director of the Company or any Person who owns 5% or more
of the issued and outstanding capital stock of the Company. The Company owns of
record and beneficially, free and clear of all Liens, claims, charges or
Encumbrances, all of the issued and outstanding capital stock of each of its
Principal Subsidiaries.
2.6 Securities Law Compliance. Assuming the representations, warranties
and covenants of the Purchaser set forth in Section 3.1 hereof are true and
correct in all material respects, the offer and sale of the Purchased Shares
pursuant to this Agreement will be exempt from the registration requirements of
Section 5 of the Securities Act. Neither the Company nor any Person acting on
its behalf has, in connection with the offer and sale of the Purchased Shares,
engaged in (i) any form of general solicitation or general advertising (as those
terms are used within the meaning of Rule 502(c) under the Securities Act); (ii)
any action involving a public offering within the meaning of Section 4(2) of the
Securities Act; or (iii) any action that would require the registration under
the Securities Act of the offering and sale of the Purchased Shares pursuant to
this Agreement or that would violate applicable state securities or "blue sky"
laws. The Company has not made, and will not prior to the Closing make, directly
or indirectly, any offer or sale of the Purchased Shares or of securities of the
same or similar class as the Purchased Shares if, as a result, the offer and
sale contemplated hereby could fail to be entitled to an exemption from the
registration requirements of the Securities Act. As used herein, the terms
"offer" and "sale" have the meanings specified in Section 2(3) of the Securities
Act.
2.7 Commission Documents; Financial Information and Controls.
(a) The Company has made available to the Purchaser true and complete
copies of all SEC Documents filed by it with the Commission since June 1, 1997.
As of their respective filing dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act, the Exchange Act and the
rules and regulations of the Commission thereunder applicable to the SEC
Documents, and as of their respective dates, none of the SEC Documents contained
any untrue statement of a material fact or omitted to state a 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. The consolidated financial statements of the Company and its
consolidated subsidiaries included in the SEC Documents comply as of their
respective dates in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto (except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q promulgated by the Commission),
and present fairly in all material respects as of their respective dates the
consolidated financial position of the Company and the subsidiaries and the
consolidated results of their operations and their consolidated cash flows for
each of the respective periods, in conformity with GAAP. As used in this
Agreement, the consolidated balance sheet of the Company and its consolidated
subsidiaries at May 31, 1999, previously provided to the Purchaser, is
hereinafter referred to as the "Balance Sheet," and May 31, 1999 is hereinafter
referred to as the "Balance Sheet Date."
(b) Except as set forth in Schedule 2.7(b) and to the extent expressly
set forth in the Balance Sheet (including the notes, schedules or exhibits
thereto) or as expressly disclosed in the SEC Documents, (i) as of the Balance
Sheet Date, neither the Company nor the Principal Subsidiaries had any material
liabilities or obligations (whether absolute, contingent, accrued or otherwise)
that would be required to be included on a balance sheet prepared in accordance
with GAAP; and (ii) since the Balance Sheet Date, the Company and its
consolidated Subsidiaries have not incurred any such material liabilities or
obligations other than in the ordinary course of business and not exceeding
$5,000,000 in the aggregate.
(c) The Company has received a representation from
PricewaterhouseCoopers LLP in connection with the audit of the Company's
financial statements for the year ended May 31, 1999 to the effect that
PricewaterhouseCoopers LLP are independent public accountants as required by the
Securities Act and the rules and regulations of the Commission thereunder, and
the Company has no Knowledge that PricewaterhouseCoopers LLP are not independent
public accountants as so required.
(d) The Company and each of its Subsidiaries maintain systems of
internal accounting controls sufficient to provide reasonable assurances that
(i) material transactions are executed in accordance with management's general
or specific authorization; (ii) material transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to the respective material assets of the Company and each such
Subsidiary, as the case may be, is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any material
differences.
2.8 Absence of Certain Events; No Material Adverse Effect. Except as
disclosed in Schedule 2.8 or in the SEC Documents filed with the Commission
prior to the date hereof, since the Balance Sheet Date, the Company and its
Principal Subsidiaries have conducted their respective business operations in
the ordinary course, and there has not occurred any event or condition having,
or that is reasonably likely to have, a Material Adverse Effect. Without
limiting the generality of the foregoing, other than as is disclosed in the SEC
Documents filed with the Commission prior to the date hereof or Schedule 2.8
hereto, since the Balance Sheet Date there has not occurred:
(a) any change or agreement to change the character or nature of the
business of the Company or any of its Principal Subsidiaries;
(b) any purchase, sale, transfer, assignment, conveyance or pledge of
the assets or properties of the Company or any of its Principal Subsidiaries,
except in the ordinary course of business;
(c) any waiver or modification by the Company or any of its Principal
Subsidiaries of any right or rights reasonably likely to have a Material Adverse
Effect;
(d) any liability, contract, agreement, license, loan, advance, or
capital expenditure or other commitment entered into or assumed by or on behalf
of the Company or any of its Principal Subsidiaries relating to the business,
assets or properties of the Company or any of its Principal Subsidiaries,
whether oral or written, except in the ordinary course of business or that is
not reasonably likely to have a Material Adverse Effect;
(e) any change in the accounting principles, methods, practices or
procedures followed by the Company in connection with the business of the
Company or any change in the depreciation or amortization policies or rates
theretofore adopted by the Company in connection with the business of the
Company and the Principal Subsidiaries;
(f) any declaration or payment of any dividends, or other distributions
in respect of the outstanding shares of capital stock of the Company or any
other change in the authorized capitalization of the Company, except as
contemplated in this Agreement; or
(g) any commitment by the Company (contingent or otherwise) to do any
of the foregoing.
2.9 Litigation. Except as otherwise set forth on Schedule 2.9, there is
no litigation or governmental proceeding or investigation pending, including
without limitation any proceeding, investigation or arbitration by the
Commission, the National Association of Securities Dealers, Inc. ("NASD"), any
stock exchange, other self-regulatory organization or state securities
commission or the National Securities Clearing Corporation, The Depository Trust
Company or any other clearing agency or, to the Knowledge of the Company,
threatened, against the Company or any Principal Subsidiary which, if determined
adversely to the Company or any of its Principal Subsidiaries is reasonably
likely to have, singly or in the aggregate, a Material Adverse Effect or prevent
the consummation of the transactions contemplated by this Agreement.
2.10 Compliance with Laws and Other Instruments. The Company is in
compliance with all of the provisions of this Agreement, and the Company and the
Principal Subsidiaries are in compliance with their respective constituent
documents (including without limitation any charter, by-laws or similar
document) and, except where such non-compliance is not reasonably likely to have
a Material Adverse Effect, with the provisions of each mortgage, indenture,
lease, license, other agreement or instrument, and each judgment, decree,
judicial order, statute and regulation (whether issued under domestic, foreign
or international law) by which any of them is bound or to which any of them or
any of their respective properties is subject, including, without limitation, of
the NASD, any stock exchange, the National Securities Clearing Corporation, The
Depository Trust Company and any other clearing agency, which apply to the
conduct of their respective businesses. Neither the execution, delivery or
performance of this Agreement or any of the Related Agreements, nor the offer,
issuance, sale or delivery of the Purchased Shares, will violate, or result in
any breach of, or constitute a default under, or result in the imposition of any
encumbrance upon any asset of the Company or any Principal Subsidiary pursuant
to any provision of the constituent documents of the Company or such Principal
Subsidiary, or any statute, rule or regulation, material contract or lease,
judgment, decree or other material document or instrument by which the Company
or such Principal Subsidiary is bound or to which the Company, such Principal
Subsidiary or any of their respective properties is subject, or, to the
Knowledge of the Company, will cause the Company or such Principal Subsidiary to
lose the benefit of any right or privilege it currently enjoys or, to the
Knowledge of the Company, cause any Person who is expected to normally do
business with the Company or such Principal Subsidiary to discontinue to do so
on the same basis, except where such discontinuance is not reasonably likely to
have a Material Adverse Effect.
2.11 Taxes. The Company and each Subsidiary have filed all material Tax
Returns (including statements of estimated Taxes owed) required to be filed
within the applicable periods for such filings (taking into account any
extensions) and have paid all Taxes required to be paid as indicated by the
applicable Tax Return. All such Tax Returns are true, correct and complete,
except where the failure to be true, correct and complete in the aggregate would
not be likely to have a Material Adverse Effect. The Company and each Subsidiary
have filed all other Tax Returns required to be filed within the applicable
periods for such filing (taking into account any extensions) and have paid all
amounts due with respect to Taxes (regardless of whether such amounts are shown
on a Tax Return), except to the extent that the failure to file such Tax Returns
or pay such Taxes would not in the aggregate be likely to have a Material
Adverse Effect. All Tax liabilities have been adequately provided for in the
consolidated financial statements of the Company. For purposes of this
Agreement, the terms "Tax" and "Taxes" shall include all federal, state, local
and foreign taxes, including any interest and penalties that may become payable
in respect thereof, and including income, franchise, property, sales and use,
withholding, payroll, stamp, value-added, transfer, excise and employment taxes.
2.12 Intellectual Property; Proprietary Rights; Employee Restrictions.
For purposes of this Agreement, "Intellectual Property Rights" shall mean (a)
all registered copyrights, copyright registrations and copyright applications,
trademark registrations and applications for registration, patents and patent
applications, trademarks, service marks, trade names and Internet domain names
that are used by the Company in the Company's business or by a Principal
Subsidiary in its business as currently conducted, together with all other
intellectual property rights owned by the Company and/or any of its Principal
Subsidiaries and used in connection with its business and all licenses,
assignments and releases of intellectual property rights of others in material
works embodied in the Company's or any Principal Subsidiary's products; (b) any
and all intellectual property rights, licenses, databases, computer programs and
other computer software user interfaces, know-how, trade secrets, customer
lists, proprietary technology, processes and formulae, source code, object code,
algorithms, architecture, structure, display screens, layouts, development
tools, instructions, templates and marketing materials created by or on behalf
of the Company or any Principal Subsidiary; and (c) inventions, trade dress,
logos and designs created by or on behalf of the Company or any Principal
Subsidiary. The Company and each of its Principal Subsidiaries own or possess
all requisite licenses or other rights to use all the Intellectual Property
Rights in order to conduct their business as conducted and as proposed to be
conducted, except where the lack of any such license or right is not reasonably
likely to have a Material Adverse Effect. Except as set forth on Schedule 2.12,
the present business activities or products of the Company and any of its
Principal Subsidiaries do not materially infringe any Intellectual Property
Rights of others, and any non-material infringements would not, individually or
in the aggregate, be likely to have a Material Adverse Effect.
2.13 Date Compliance. All data and data sensitive systems of the
Company are fully Date Compliant. "Date Compliant" shall mean (a) that such data
and data sensitive systems are able to manage and manipulate data involving
dates, including, but not limited to, single-century formulas and multi-century
formulas, date data century recognition and calculations that accommodate same
century and multi-century formulas, comparing and sequencing, and leap year
calculations; (b) that a subsequent abnormally ending scenario within the data
and data sensitive systems or the generation of incorrect values involving such
dates will not occur; and (c) that all date-related user interface
functionalities, data fields, continuing date values, date data interface values
and date-related functions will provide valid and unambiguous results.
2.14 Agreements of Directors, Officers and Employees. To the Knowledge
of the Company, no director, officer or employee of or consultant to the Company
or any Principal Subsidiary is in violation of any terms of any employment
contract, non-competition agreement, non-disclosure agreement, patent disclosure
or assignment agreement or other contract or agreement containing restrictive
covenants relating to the right of any such director, officer, employee or
consultant to be employed or engaged by the Company or the Principal Subsidiary
because of the nature of the business conducted or proposed to be conducted by
the Company or the Principal Subsidiary, or relating to the use of trade secrets
or proprietary information of others.
2.15 Governmental and Industrial Approvals. (a) The Company and each of
its Principal Subsidiaries have all material permits, licenses, orders,
franchises and other rights and privileges of all federal, state, local or
foreign governmental or regulatory bodies necessary for the Company and the
Principal Subsidiaries to conduct their respective businesses as currently
conducted or proposed to be conducted except to the extent the failure of the
Company or any such Subsidiary to have any such permit, license, order,
franchise or other right or privilege would not be reasonably likely to result
in a Material Adverse Effect. Except when the failure is reasonably likely to
result in a Material Adverse Effect, all such permits, licenses, orders,
franchises and other rights and privileges are in full force and effect and, to
the Knowledge of the Company, no suspension or cancellation of any of them is
threatened, and none of such permits, licenses, orders, franchises or other
rights and privileges will be affected by the consummation of the transactions
contemplated in this Agreement and the Related Agreements.
(a) Each of National Discount Brokers Corporation and NDB Capital
Markets Corporation is registered as a broker-dealer with the Commission, is a
duly qualified member of the NASD and is duly qualified or registered as a
broker-dealer in each jurisdiction where the failure to be so qualified or
registered is reasonably likely to have a Material Adverse Effect. Neither the
Company nor any of the Principal Subsidiaries is not registered or qualified as
a broker-dealer with the Commission or in any jurisdiction where the failure to
be so registered or qualified is reasonably likely to result in a Material
Adverse Effect. Except as set forth on Schedule 2.15(b), the applications for
which are being diligently prosecuted, neither the Company nor any Principal
Subsidiary is required to obtain any registration as an investment adviser, a
commodity trading advisor, a commodity pool operator, a futures commission
merchant, an insurance agent, a sales person or in any similar capacity with the
Commission, the NASD, the Commodity Futures Trading Commission, any clearing
agency, or any securities commission or self-regulatory organization in the
United States, that has not been obtained or is not in full force and effect,
nor has the Company or any such Subsidiary received notice of any requirement to
register as any of the foregoing in any jurisdiction outside the United States,
where the failure to obtain such registration would be reasonably likely to have
a Material Adverse Effect.
2.16 Contracts and Commitments. All of the contracts of the Company and
each Principal Subsidiary that are in effect on the date of this Agreement and
that are required to be described in the SEC Documents or to be filed as
exhibits thereto prior to the date hereof are described in the SEC Documents
filed prior to the date hereof or filed as exhibits thereto and are in full
force and effect, except where the failure to have described or filed any such
contract is not reasonably likely to have a Material Adverse Effect. True and
correct copies of all material contracts to which the Company or its Principal
Subsidiaries are parties on or prior to the date hereof which will be required
to be described or filed as an Exhibit in the SEC Documents following the date
hereof have been made available to the Purchaser except as listed on Schedule
2.16. The contracts listed in Schedule 2.16 are in full force and effect.
Neither the Company nor any of its Principal Subsidiaries nor, to the Knowledge
of the Company, any other party is in material breach of or in default under any
such contract.
2.17 Employee Matters. (a) The Company is in compliance in all material
respects with all currently applicable provisions of ERISA; no "reportable
event" (as defined in ERISA) has occurred with respect to any "pension plan" (as
defined in ERISA) for which the Company would have any liability; the Company
has not incurred and does not expect to incur liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any pension plan or
(ii) Sections 412 or 4971 of the Code; and each pension plan for which the
Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the loss of
such qualification.
(a) The transactions contemplated by this Agreement (alone or together
with any other event which, standing alone, would not by itself trigger such
entitlement or acceleration) will not (i) entitle any person to any benefit
under any Plan; or (ii) accelerate the time of payment or vesting, or increase
the amount, of any compensation due to any person under any Plan.
2.18 No Brokers or Finders. Except as set forth in Schedule 2.18, no
person has or will have, as a result of the transactions contemplated by this
Agreement, any right, interest or claim against or upon the Company, any of its
Principal Subsidiaries or the Purchaser for any commission, fee or other
compensation as a finder or broker because of any act or omission by the Company
or any of its Principal Subsidiaries.
2.19 Transactions with Affiliates. There are no loans, leases or other
agreements, understandings or continuing transactions between the Company or any
Principal Subsidiary on the one hand, and any officer or director of the Company
or any Principal Subsidiary or any person owning five percent (5%) or more of
the Common Stock of the Company or any respective family member or affiliate of
such officer, director or shareholder, on the other hand, which are required to
be disclosed in the SEC Documents and which are not so disclosed.
2.20 Assumptions, Guarantees, etc. of Indebtedness of Other Persons.
Except as set forth on Schedule 2.20 and other than in the ordinary course of
its business, neither the Company nor any Principal Subsidiary has assumed,
guaranteed, endorsed or otherwise become directly or contingently liable on or
for any indebtedness of any other Person, except a Subsidiary and guarantees by
endorsement of negotiable instruments for deposit or collection.
2.21 Investment Company Act. The Company is not an "investment
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
2.22 Disclosures. Neither this Agreement, any Schedule or Exhibit to
this Agreement, the Related Agreements contains any untrue statement of a
material fact by the Company or omits a material fact required to make the
statements made herein or therein, in light of the circumstances under which
they were made, not misleading.
ARTICLE III
REPRESENTATIONS OF THE PURCHASER
3.1 Representations and Warranties. The Purchaser hereby represents and
warrants to the Company, understanding and agreeing that the Company is entering
into this Agreement in part in reliance on such representations and warranties,
as follows:
(a) The Purchaser is an "accredited investor" as that term is defined
in Rule 501(a) of Regulation D promulgated under the Securities Act;
(b) The Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
all requisite power and authority to own its properties and to carry on its
business as currently conducted. The Purchaser is duly authorized to execute
this Agreement and the Related Agreements to which it is a party, and assuming
due execution and delivery by the Company of the Agreement and the Related
Agreements to which it is a party, this Agreement and the Related Agreements to
which the Purchaser is a party constitute legal, valid and binding obligations
of the Purchaser, enforceable against the Purchaser in accordance with their
respective terms, except that the enforceability hereof or thereof may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and that
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding may be brought;
(c) The Purchaser has been advised by the Company that the Purchased
Shares have not been registered under the Securities Act, that the Purchased
Shares will be issued on the basis of the statutory exemption provided by
Section 4(2) of the Securities Act or Regulation D promulgated thereunder, or
both, relating to transactions by an issuer not involving any public offering
and under similar exemptions under certain state securities laws, that this
transaction has not been reviewed by, passed on or submitted to any federal or
state agency or self-regulatory organization where an exemption is being relied
upon (other than any required filing under the HSR Act), and that the Company's
reliance thereon is based in part upon the representations made by the Purchaser
in this Agreement and the Related Agreements. The Purchaser acknowledges that it
has been informed by the Company of, or is otherwise familiar with, the nature
of the limitations imposed by the Securities Act and the rules and regulations
thereunder on the transfer of securities;
(d) The Purchaser is purchasing the Purchased Shares for investment
purposes, for its own account and not with a view to, or for sale in connection
with, any distribution thereof in violation of federal or state securities laws,
and it has had access to such financial and other information and has been
afforded the opportunity to ask such questions of representatives of the Company
and receive answers thereto as it deems necessary in connection with the
purchase of the Purchased Shares;
(e) By reason of its business or financial experience, the Purchaser
has the capacity to protect its own interest in connection with the transactions
contemplated hereunder;
(f) No Person has or will have, as a result of the transaction
contemplated by this Agreement, any right, interest or claim against or upon the
Purchaser, the Company, or any of its Principal Subsidiaries for any commission,
fee or other compensation as a finder or broker because of any act or omission
by the Purchaser;
(g) The Purchaser understands that an investment in the Common Stock
bears a high degree of risk and represents that it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of purchasing the Purchased Shares and is able to bear the
economic risk of its investment for an indefinite period of time;
(h) The principal executive offices of the Purchaser are located in the
State of New York. No material consent, approval, license or authorization of,
or designation, declaration or filing with, any court or Governmental Entity is
or will be required on the part of the Purchaser in connection with the
execution, delivery and performance by the Purchaser of this Agreement or any of
the Related Agreements, except for (i) those which have already been made or
granted; (ii) any required filing under the HSR Act and the expiration or
termination of any required waiting period thereunder (or any extension
thereof); and (iii) the filing with the Commission of Forms 3 and 13D under the
Exchange Act; and
(i) The Purchaser is not (i) a "Related Party" as that term is defined
for purposes of Section 312.03(b)(1) of the New York Stock Exchange Listed
Company Manual; (ii) a subsidiary, affiliate or other closely-related person of
a Related Party; or (iii) a company or entity in which a Related Party has a
substantial direct or indirect interest.
3.2 Wholly Owned Subsidiary. The Purchaser is wholly owned, directly or
indirectly, by DB.
ARTICLE IV
CONDITIONS TO THE PURCHASER'S OBLIGATION
4.1 Effect of Conditions. The obligation of the Purchaser to purchase
and pay for the Purchased Shares at the Closing, if any, shall be subject to the
satisfaction, or the waiver thereof by the Purchaser, of each of the conditions
set forth in this Article.
4.2 Representations and Warranties. The representations and warranties
of (a) the Company contained in this Agreement and the Stockholder Agreement;
and (b) the Company and each Affiliate of the Company party thereto contained in
the U.S. Research Agreement and the U.S. Underwriting Agreement shall be true
and correct on and as of the Closing Date, and the Purchaser shall have received
a certificate dated the Closing Date and signed on behalf of the Company to that
effect.
4.3 Performance. The Company and each Affiliate of the Company party to
the U.S. Research Agreement and the U.S. Underwriting Agreement, as applicable,
shall have performed and complied in all material respects with all of the
agreements, covenants and conditions contained in this Agreement, the
Stockholder Agreement, the U.S. Research Agreement and the U.S. Underwriting
Agreement required to be performed or complied with by it at or prior to the
Closing, and the Purchaser shall have received a certificate dated the Closing
Date and signed on behalf of the Company and each such Affiliate to that effect.
4.4 Board Election. Concurrently with the Closing, the DB
Representative shall have been appointed as a member of the Board of Directors.
4.5 Opinions of Counsel. The Purchaser shall have received opinions,
dated as of the date of the Closing, from Xxxxxxx, Del Deo, Dolan, Griffinger &
Xxxxxxxxx, P.C. and Xxxxxx, Xxxxx & Bockius LLP, each counsel to the Company,
and from Xxxxx X. Xxxxxxxx, Xx., Executive Vice President, Secretary and General
Counsel of the Company, each in form and scope reasonably satisfactory to the
Purchaser.
4.6 Certified Documents, etc. Counsel for the Purchaser shall have
received a copy of the Certificate of Incorporation certified by the Secretary
of State of the State of Delaware and a copy of the Company's By-laws certified
by the Secretary of the Company, as well as any and all other documents,
including authorizing resolutions, certificates as to votes adopted and
incumbency of officers and certificates from appropriate authorities as to the
legal existence and good standing of the Company and its Principal Subsidiaries,
which the Purchaser or its counsel may reasonably request.
4.7 No Material Adverse Effect. No Material Adverse Effect shall have
occurred since the date of this Agreement.
4.8 Registration Rights Agreement. The Purchaser shall have received
from the Company a counterpart of the Registration Rights Agreement executed by
the Company, Go2Net, Vulcan and IAT Reinsurance Syndicate, Ltd.
4.9 Stockholder Agreement. The Purchaser shall have received from the
Company a counterpart of the Stockholder Agreement executed by the Company.
4.10 Venture Agreements. The Purchaser shall have received from the
Company (a) a counterpart of each of the U.S. Research Agreement and the U.S.
Underwriting Agreement executed by the Company or an Affiliate of the Company;
and (b) a counterpart of each of the term sheets summarizing the principal terms
of each of the European Joint Venture and the Worldwide Joint Venture initialed
by the Company or an Affiliate of the Company, which term sheets shall be in
form and substance reasonably satisfactory to the Purchaser and shall include
Exclusivity and Non-Competition Provisions that shall be binding in accordance
with their terms from and including the Closing until the execution by the
parties of definitive agreements relating to the European Joint Venture and the
Worldwide Joint Venture.
4.11 HSR Act. All required filings under the HSR Act shall have been
made by the parties required to do so, and any waiting period thereunder (and
any extension thereof) applicable to the transactions contemplated hereby shall
have expired or shall have terminated, and neither the Company nor the Purchaser
shall be subject to any injunction or temporary restraining order against
consummation of the transactions contemplated hereby.
4.12 Listing of Purchased Shares. The Purchased Shares shall have been
approved for listing on the NYSE.
4.13 Consents and Waivers. The Company, the Purchaser and any of their
respective Affiliates party to any of the Related Agreements shall have obtained
all other consents or waivers necessary to execute this Agreement and the
Related Agreements, to issue the Purchased Shares and to carry out the
transactions contemplated hereby and thereby. All corporate and other action and
governmental filings necessary to effectuate the terms of this Agreement, the
Related Agreements and the other agreements and instruments to be executed and
delivered by the Company and the Purchaser in connection herewith shall have
been made or taken by it, except the filing by the Company of Form D with the
Commission.
4.14 Establishment of Firewalls. The Purchaser shall have received from
the Company evidence reasonably satisfactory in all material respects to the
Purchaser of the establishment of appropriate "firewalls" between the Purchaser
and its Affiliates, on the one hand, and the Company and its Affiliates, on the
other hand, with respect to their respective businesses.
4.15 Common Stock Certificate. The Company shall have delivered a stock
certificate to the Purchaser representing the Purchased Shares.
ARTICLE V
CONDITIONS OF THE COMPANY'S OBLIGATION
5.1 Effect of Conditions. The obligation of the Company to sell the
Purchased Shares to the Purchaser at the Closing, if any, shall be subject to
the satisfaction, or the waiver thereof by the Company, of each of the
conditions set forth in this Article.
5.2 Representations and Warranties. The representations and warranties
of (a) the Purchaser contained in this Agreement; and (b) DB contained in the
U.S. Research Agreement, the U.S. Underwriting Agreement and the Stockholder
Agreement shall be true and correct on and as of the Closing Date, and the
Company shall have received a certificate dated the Closing Date and signed on
behalf of the Purchaser and DB, as applicable, to that effect.
5.3 Performance. The Purchaser or DB, as applicable, shall have
performed and complied in all material respects with all of the agreements,
covenants and conditions contained in this Agreement, the Stockholder Agreement,
the U.S. Research Agreement and the U.S. Underwriting Agreement required to be
performed or complied with by it at or prior to the Closing, and the Company
shall have received a certificate dated the Closing Date and signed on behalf of
the Purchaser and DB, as applicable, to that effect.
5.4 Registration Rights Agreement. The Company shall have received from
the Purchaser a counterpart of the Registration Rights Agreement executed by the
Purchaser, Go2Net, Vulcan and IAT Reinsurance Syndicate, Ltd.
5.5 Stockholder Agreement. The Company shall have received from the
Purchaser a counterpart of the Stockholder Agreement executed by DB.
5.6 Venture Agreements. The Company shall have received from the
Purchaser (a) a counterpart of each of the U.S. Research Agreement and the U.S.
Underwriting Agreement executed by DB; and (b) a counterpart of each of the term
sheets summarizing the principal terms of the European Joint Venture and the
Worldwide Joint Venture initialed by each Affiliate of the Purchaser party to
such term sheets, which term sheets shall be in form and substance reasonably
satisfactory to the Company and shall include Exclusivity and Non-Competition
Provisions that shall be binding in accordance with their terms from and
including the Closing until the execution by the parties of definitive
agreements relating to the European Joint Venture and the Worldwide Joint
Venture.
5.7 HSR Act. All required filings under the HSR Act shall have been
made by the parties required to do so, and any waiting period thereunder (and
any extension thereof) applicable to the transactions contemplated hereby shall
have expired or shall have terminated, and neither the Company nor the Purchaser
shall be subject to any injunction or temporary restraining order against
consummation of the transactions contemplated hereby.
5.8 Consents and Waivers. The Company, the Purchaser and any of their
respective Affiliates party to any of the Related Agreements shall have obtained
all consents or waivers necessary to execute this Agreement and the Related
Agreements, to issue the Purchased Shares and to carry out the transactions
contemplated hereby and thereby. All corporate and other action and governmental
filings necessary to effectuate the terms of this Agreement, the Related
Agreements and the other agreements and instruments to be executed and delivered
by the Company, the Purchaser and, to the extent required, any of their
respective Affiliates in connection herewith shall have been made or taken by
it, except the filing by the Company of Form D with the Commission.
5.9 Listing of Purchased Shares. The Purchased Shares shall have been
approved for listing on the NYSE.
5.10 Establishment of Firewalls. The Company shall have received from
the Purchaser, DB and, to the extent required, any of their respective
Affiliates evidence reasonably satisfactory in all material respects to the
Company of the establishment of appropriate "firewalls" between the Purchaser
and its Affiliates, on the one hand, and the Company and its Affiliates, on the
other hand, with respect to their respective businesses.
5.11 Tender of Purchase Price. The Purchaser shall have tendered
payment for the Purchased Shares in accordance with Section 1.2 hereof.
5.12 Fairness Opinion. The Board of Directors shall have received an
opinion from the Company's financial advisor, dated as of the date of the
Closing, that the consideration to be received by the Company for the Purchased
Shares is fair to the Company from a financial point of view.
5.13 Opinions of Counsel. The Company shall have received opinions,
dated as of the date of the Closing, from Cleary, Gottlieb, Xxxxx & Xxxxxxxx,
U.S. counsel to DB, and from internal counsel for DB, each in form and scope
reasonably satisfactory to the Company.
5.14 Certified Documents, etc. Counsel for the Company shall have
received (i) a copy of the certificate of incorporation of the Purchaser
certified by the Secretary of State of the State of Delaware and a copy of the
Purchaser's By-laws certified by the Secretary of the Purchaser, as well as any
and all other documents, including authorizing resolutions, certificates as to
votes adopted and incumbency of officers and certificates from appropriate
authorities as to the legal existence and good standing of the Purchaser, which
the Company or its counsel may reasonably request; and (ii) such certificates of
officers of DB similar in form and scope to those customarily provided by DB in
connection with offerings of its debt securities in the public markets.
ARTICLE VI
MISCELLANEOUS
6.1 Survival of Representations. The representations, warranties,
covenants and agreements made herein or in any certificates or documents
executed in connection herewith shall survive the execution and delivery hereof
and the Closing of the transactions contemplated hereby for a period of two (2)
years, regardless of any investigation made by or on behalf of either party
hereto or any of their respective Affiliates or their respective officers,
directors, employees or agents.
6.2 Parties in Interest. Except as otherwise set forth herein, all
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the
respective successors and permitted assigns of the parties hereto.
6.3 Amendments and Waivers. Amendments or additions to this Agreement
may be made and compliance with any term, covenant, agreement, condition or
provision set forth herein may be omitted or waived (either generally or in a
particular instance and either retroactively or prospectively) upon the written
consent of the Company and the Purchaser. This Agreement (including the
Schedules and Exhibits annexed hereto, which are an integral part of this
Agreement) constitutes the full and complete agreement of the parties with
respect to the subject matter hereof, except that the provisions of the letter
of intent, dated March 27, 2000, between the Company and Deutsche Bank Americas
Holding Corporation specified therein as being binding and enforceable shall
remain in full force and effect until the consummation of the Closing.
6.4 Notices. All notices, requests, consents, reports and demands shall
be in writing and shall be hand delivered, sent by facsimile or other electronic
medium, or mailed, postage prepaid, to the Company or to the Purchaser at the
address set forth below or to such other address as may be furnished in writing
to the other parties hereto:
The Company: National Discount Brokers Group, Inc.
00 Xxxxxxxx Xxxxx Xxxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: President
Tel: (000) 000-0000
Fax: 000-000-0000
E-mail: xxxxxxx@xxxxxxxx.xxx
with copy to: National Discount Brokers, Group, Inc.
00 Xxxxxxxx Xxxxx Xxxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: General Counsel
Tel: 000-000-0000
Fax: 000-000-0000
E-mail: xxxxxxxxx@xxxxxxxx.xxx
DB U.S. Financial Markets
Holding Corporation: DB U.S. Financial Markets Holding Corporation
x/x Xxxxxxxx Xxxx XX, Xxx Xxxx Branch
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
Tel: 000-000-0000
with copy to: Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
E-mail: xxxxxxx@xxxx.xxx
All such notices, request, demands, consents and other communications
shall be deemed to have been duly given or sent two (2) days following the date
on which mailed, or on the date on which delivered by hand, by facsimile
transmission or e-mail (receipt confirmed), as the case may be, and addressed as
aforesaid.
6.5 Expenses. Each party hereto will pay its own expenses in connection
with the transactions contemplated hereby.
6.6 Counterparts. This Agreement and any exhibit hereto may be executed
in multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument. One or more counterparts
of this Agreement or any exhibit hereto may be delivered via telecopier, with
the intention that they shall have the same effect as an original counterpart
hereof.
6.7 Effect of Headings. The article and section headings herein are for
convenience only and shall not affect the construction or interpretation hereof.
6.8 Adjustments. All provisions of this Agreement shall be
automatically adjusted to reflect any stock dividend, stock split or other such
form of recapitalization.
6.9 Governing Law. The parties hereby agree that this Agreement, and
the respective rights, duties and obligations of the parties hereunder, shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to principles of conflicts of laws thereunder. To the
fullest extent permitted by applicable law, each of the parties hereby (i)
irrevocably consents and agrees that any legal or equitable action or proceeding
arising under or in connection with this Agreement shall be brought exclusively
in the courts of the United States of America for the Southern District of New
York; and (ii) by execution and delivery of this Agreement, irrevocably submits
to and accepts, with respect to any such action or proceeding, for itself and in
respect of its properties and assets, for purposes of this Agreement, the
jurisdiction of the aforesaid courts, and irrevocably waives any objection to
venue in such courts.
6.10 Assignment. Neither the Purchaser nor the Company may assign or
transfer any of its rights pursuant to this Agreement unless the assigning
Person shall have first obtained the express written consent of the other party
hereto, except that the Purchaser may assign or transfer any of its rights
pursuant to this Agreement in connection with (and in proportion to) its
transfer of any Purchased Shares to any DB Group Member.
6.11 Waiver of Jury Trial. Each of the Company and the Purchaser hereby
expressly waives its rights to a jury trial of any claim or cause of action
based upon or arising out of this Agreement. Each of the Company and the
Purchaser also waives any bond or surety or security upon such bond which might,
but for this waiver, be required of any party. The scope of this waiver is
intended to be all encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this Agreement, including without
limitation, contract claims, tort claims, breach of duty claims, and all other
common law and statutory claims. The Company and the Purchaser further warrant
and represent that each of them has reviewed this waiver with its legal counsel,
and that each voluntarily waives its jury trial rights following consultation
with legal counsel. This waiver is irrevocable and may only be modified by
written amendment to this Agreement signed by each of the parties. In the event
of litigation, this Agreement may be filed as a written consent to a trial
(without a jury) by the court.
6.12 Attorneys' Fees. If any legal proceeding is initiated by any party
hereto to enforce this Agreement or otherwise with respect to the subject matter
of this Agreement, the prevailing party or parties shall be entitled to recover
reasonable attorneys' fees incurred in connection with any such proceedings.
6.13 Termination. This Agreement shall be terminable (a) upon the
mutual consent of the parties hereto; and (b) by either party hereto upon
written notice to the other party if the Closing shall not have occurred on or
prior to the later of (i) June 16, 2000; and (ii) the date that is three (3)
Business Days after the satisfaction of the conditions specified in Sections
4.11 and 5.7 hereof, but in no event later than November 16, 2000.
IN WITNESS WHEREOF, the Company and the Purchaser have caused this
Agreement to be duly executed and delivered by their representatives thereunto
duly authorized as of the date first above written.
NATIONAL DISCOUNT BROKERS GROUP, INC.
By: /s/ Xxxxx X. Xxxxxxxx, Xx.
--------------------------
Name: Xxxxx X. Xxxxxxxx, Xx.
Title: Executive Vice President
DB U.S. FINANCIAL MARKETS HOLDING CORPORATION
By: /s/ Xxxx X. Xxxx
----------------
Name: Xxxx X. Xxxx
Title: President and Chief Executive Officer
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President and Chief Financial
Officer
Schedule 2.2
Related Agreements
1. Securities Research Agreement between National Discount Brokers Corporation
and Deutsche Bank AG
2. Stockholder Agreement between National Discount Brokers Group, Inc. and
Deutsche Bank AG
3. Registration Rights Agreement among National Discount Brokers Group, Inc. and
the Stockholders listed therein, including DB U.S. Financial Markets Holding
Corporation
4. Letter Agreement between Deutsche Bank AG and National Discount Brokers
Group, Inc. regarding participation in, among other things, initial public
offerings of equity securities in the United States
5. The paragraph headed "Non-Competition" in European Joint Venture - Summary of
Principal Terms
6. The paragraph headed "Non-Competition" in Worldwide Joint Venture - Summary
of Principal Terms
Schedule 2.4(c)
Outstanding Obligations Regarding Common Stock
1. Options to purchase common stock of the Company granted under the Company's
stock option plans, copies of which are filed with the Securities and
Exchange Commission.
2. There are certain voting provisions related to the Company's common
stock and certain rights of first refusal of the Company to purchase its
common stock in the Securities Purchase Agreement dated as of February 5,
2000 among National Discount Brokers Group, Inc. and Go2Net, Inc. and
Vulcan Ventures Incorporated.
3. The Company routinely enters into employment letters promising to grant
options to purchase the Company's common stock to the prospective employee
pursuant to the Company's stock option plans.
4. The Company is obligated to register shares of its common stock pursuant to
the Registration Rights Agreement dated February 5, 2000 among National
Discount Brokers Group, Inc., IAT Reinsurance Syndicate, Ltd., Vulcan
Ventures Incorporated and Go2Net, Inc.
5. The Company has obligations under its stock option plans to accept stock
upon exercise of stock options and in payment of taxes upon the exercise of
options thereunder.
6. There is a Voting Trust Agreement between Xxxxxx Xxxxxx and Xxxxxx Xxxxxx, a
copy of which has been filed with the Securities and Exchange Commission.
7. Existing employment agreements between the Company and each of Xxxxxx
Xxxxxx, Xxxxx X. Xxxxxxxx, Xx. and Xxxxxx Xxxxxxxx, which are filed with
the Securities and Exchange Commission, grant certain rights regarding
Common Stock and obligate the Company to issue stock options in the future.
Schedule 2.5
Subsidiaries And Investments
1. The Company and its subsidiaries have investments as follows (as of April
30, 2000):
Number of
Company Security Shares
--------------------------------------------------------------------------------
National Discount
Brokers Group, Inc. Xxxxxx X. Xxxxxx Company, Inc. -
common 8,000
XxxxXxxx.xxx - common 100,000
Campus Pipeline, Inc.
Series B preferred 122,594
Insys Consulting Services,
Inc.-common 200,000
REDIBook ECN LLC shares 125,000
NDB Capital Markets
Corporation SYNXIS Corp. - common 100,000
National Association of Securities
Dealers, Inc. - common 750,000
National Association of Securities
Dealers, Inc. - warrants to
purchase four shares of common 187,500
stock
National Discount
Brokers Corporation 24/7 Corporation (formerly
AwardTrack, Inc.) - common 960,882
National Association of Securities
Dealers, Inc. - warrants to
purchase four shares of common 300
stock
2. The Company makes loans to, and receives loans from, its subsidiaries
3. Loan to Insys Consulting Services, Inc. 1,500,000
Schedule 2.7(b)
Material Liabilities And Obligations
1. Advertising agreement with Yahoo! Inc.
2. Advertising agreement with Go2Net, Inc.
3. Master Services Agreement between ADP Financial Information Services, Inc.
and Millennium Clearing Company, LLC dated March 24, 2000 and related
schedules and agreements
4. Advertising agreement with The Motley Fool, Inc.
5. Advertising agreement with Raging Bull, Inc.
6. Leases of equipment for 00 Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxx Xxxxxx scheduled
in the attachment hereto.
7. Real Estate Lease for 00 Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxx Xxxxxx
8. Construction cost associated with the buildout of 00 Xxxxxx Xxxxxx, Xxxxxx
Xxxx, Xxx Xxxxxx
9. Underwriting Agreement in connection with the public offering of the
Company's Common Stock in June 1999
10. The Company intends to form a clearing broker which will need capital of
approximately $100,000,000
11. Bank United co-branding agreement
SEE ATTACHMENT
NATIONAL DISCOUNT BROKERS
Lease Schedule
As of 5/18/2000
Assign. P.O.
Leasing Company Schedule Lease Type Assignment To Date Number Vendor
--------------- -------- ---------- ------------- ------- ---- ------
1 Princeton Credit Corp A-1 Operating Summit Bank 7/1/1998 955HFA Boxhill
2 Princeton Credit Corp A-2 Operating Summit Bank 7/1/1998 Allied
3 Princeton Credit Corp A-3 Operating The CIT Group 11/1/1998 1002AH Allied
4 Princeton Credit Corp A-4 Operating The CIT Group 2/1/1999 980909ML1 Allied
5 Princeton Credit Corp A-5 Operating Xxxxxx Financial Inc. 4/1/1999 981028ML1 (**) Sequent
Allied/Box
6 Princeton Credit Corp A-5 Operating Xxxxxx Financial Inc. 4/1/1999 981023RR1 / 2 hill
7 Princeton Credit Corp A-5 Operating Xxxxxx Financial Inc. 4/1/1999 9905HA Allied
981210ML1/
8 Princeton Credit Corp A-8 Operating Xxxxxx Financial Inc. 4/1/1999 9908ML Sequent
9 Princeton Credit Corp A-9 Operating Xxxxxx Financial Inc. 8/1/1999 99213HA Allied
10 Princeton Credit Corp A-10 Operating Xxxxxx Financial Inc. 8/1/1999 99242HA Allied
11 Princeton Credit Corp A-11 Operating Xxxxxx Financial Inc. 8/1/1999 99191RR Allied
12 Princeton Credit Corp A-11-1 Operating 7/19/1999 99191RR Allied
13 Princeton Credit Corp A-12 Operating Xxxxxx Financial Inc. 8/1/1999 99172HA Allied
14 Princeton Credit Corp A-13 Operating Xxxxxx Financial Inc. 8/1/1999 99180HA1 Allied
15 Princeton Credit Corp A-13-1 Operating 7/19/1999 99180HA1 Allied
16 MRC Computer NDB-01- Operating Bit by Bit
03
17 MRC Computer NDB-04 Operating Xxxxxx
18 MRC Computer NDB-05 Operating 00082KS Allied
TOTAL
NATIONAL DISCOUNT BROKERS
Lease Schedule
As of 5/18/2000
Tax Rate: 8.25%
Monthly Monthly
# of Amount Amount
Equipment Project Cost Months excl. taxes incl. taxes
--------- ------- ---- ------ ----------- -----------
Raid Box Turbo
1 Princeton Credit Corp w/ Failover Web II $ 46,370.00 24 $1,831.00 $1,982.06
2 Princeton Credit Corp 2 Sun Enterprise 4000 Web II $202,388.00 24 $7,297.00 $7,899.00
Sun Enterprise
3 Princeton Credit Corp Server Base Pkg Data Mart $126,950.00 24 $4,684.00 $5,070.43
4 Princeton Credit Corp Test Developm Sys Y2K $ 50,202.55 24 $1,886.00 $2,041.60
Full scale regression
5 Princeton Credit Corp Testing Y2K $ 80,670.00 12 $6,246.00 $6,761.30
Sun Ultra 5 $2,397.00 $2,594.75
6 Princeton Credit Corp Workstation Market Data $ 61,324.88 24 $2,335.00 $2,527.64
7 Princeton Credit Corp E450 Server Base Web II $ 59,664.40 24
Little Sequent Hard $3,473.00 $3,759.52
8 Princeton Credit Corp Upgrade TCAM $ 86,767.00 24 $3,563.00 $3,856.95
IPO/Interapp $17,325.00 $18,754.31
9 Princeton Credit Corp 450 Server Base P(Anil) $ 88,948.00 24
10 Princeton Credit Corp E4500 servers Web II $433,177.95 24 $2,199.00 $2,380.42
11 Princeton Credit Corp SUN E450 servers -
Delayed Quote Market Data $ 54,540.00 24 $435.00 $470.89
SUN E450 servers - $4,401.00 $4,764.08
12 Princeton Credit Corp Delayed Quote Market Data $ 10,080.00 21 $17,544.00 $18,991.38
13 Princeton Credit Corp 336 Mhz ultrasparc Web II $109,152.00 24 $505.00 $546.66
14 Princeton Credit Corp E4500, Ultra 10, E450 Web II $435,342.60 24
15 Princeton Credit Corp E4500, Ultra 10, E450 Web II $11,700.00 21 $45,680.00 $45,680.00
16 MRC Computer 500 MHZ PC's 90 Xxxxxx $983,275.00 18 $1,259.00 $1,259.00
$8,225.00 $8,225.00
17 MRC Computer Xxxxxx Copiers 90 Xxxxxx $31,000.00 24
18 MRC Computer Sun Servers E4501 90 Xxxxxx $243,388.02 24
$131,285.00 $137,564.98
TOTAL $3,114,940.40
NATIONAL DISCOUNT BROKERS
Lease Schedule
As of 5/18/2000
As of: 5/18/2000
Ending Remain. Total Payments 4 Mo. Lease Rate
Begin Month Month Months incl. taxes Alert Comments Factor
----------- ----- ------ ----------- ----- -------- ------
1 Princeton Credit Corp 6/1/1998 5/31/2000 0 $47,569.38 X 0.03949
2 Princeton Credit Corp 6/1/1998 6/30/2000 1 $189,576.06 X 0.03605
3 Princeton Credit Corp 7/1/1998 6/30/2000 1 $121,690.32 X 0.03690
4 Princeton Credit Corp 11/1/1998 10/31/2000 6 $48,998.28 X 0.03757
Extended to
5 Princeton Credit Corp 11/1/1998 5/31/2000 0 $81,135.54 5/31/00 0.07743
6 Princeton Credit Corp 11/1/1998 10/31/2000 6 $62,274.06 0.03909
7 Princeton Credit Corp 3/1/1999 2/28/2001 10 $60,663.30 0.03914
8 Princeton Credit Corp 2/1/1999 1/31/2001 9 $90,228.54 0.04003
9 Princeton Credit Corp 6/1/1999 5/31/2001 13 $92,566.74 0.04006
10 Princeton Credit Corp 7/1/1999 6/30/2001 14 $450,103.50 0.04000
11 Princeton Credit Corp 5/1/1999 4/30/2001 12 $57,130.02 0.04032
12 Princeton Credit Corp 8/1/1999 4/30/2001 12 $9,888.64 0.04315
13 Princeton Credit Corp 5/1/1999 4/30/2001 12 $114,337.98 0.04032
14 Princeton Credit Corp 5/1/1999 4/30/2001 12 $455,793.12 0.04030
15 Princeton Credit Corp 8/1/1999 4/30/2001 12 $11,479.91 0.04316
16 MRC Computer 3/1/2000 7/1/2001 14 $822,240.00 0.04646
17 MRC Computer 4/1/2000 4/1/2002 23 $30,216.00 0.04061
18 MRC Computer 4/1/2000 3/31/2002 23 $197,400.00 0.03379
TOTAL $2,943,291.39
Payments are due the beginning of the month.
*Per Xxxx Xxxxxxxxx of Princeton, interim payments do not count towards the
lease payments (thus a start pymt date of 10/4, for example, means the lease
pymts start at 11/1). **Extend for 3 months per Xxxx Xxxx.
Schedule 2.8
Certain Events And Commitments
1. NDB Capital Markets Corporation purchased shares of common stock and
warrants to purchase common stock of the National Association of Securities
Dealers, Inc.
2. Master Services Agreement between ADP Financial Information Services, Inc.
and Millenium Clearing Company, LLC dated March 24, 2000 and related
schedules and agreements
3. Advertising agreement with Yahoo! Inc.
4. Advertising agreement with Go2Net, Inc.
5. Real Estate lease at 00 Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxx Xxxxxx
6. Improvements to real estate at 00 Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxx Xxxxxx
7. Lease of equipment for 00 Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxx Xxxxxx
8. Formation of Millennium Clearing Company, LLC. Capitalization of
approximately $100,000,000 will be needed
9. Advertising agreement with The Motley Fool, Inc.
10. Advertising agreement with Raging Bull, Inc.
11. Bank United co-branding agreement
Schedule 2.9
Litigation
SEE ATTACHMENTS
In addition to the attachments, NDB Capital Markets has been named in an NASD
arbitration by Island ECN Inc. in connection with the non-payment of fees to
island ECN by NDB Capital Markets. NDB Capital Markets is one of several broker
dealers named by Island ECN Inc. NDB Capital Markets has answered the complaint
denying liability and filing a counterclaim.
National Discount Brokers Group, Inc.
Xxxxx X. Xxxxxxxx, Xx.
Executive Vice President,
Secretary and General Counsel
April 18, 2000
PricewaterhouseCoopers LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Gentlemen:
I am writing in connection with your review of the financial statements of
National Discount Brokers Group, Inc. (the "Company") conducted as at and for
the three and nine month periods ended February 29, 2000. This letter
supplements my audit response letter to you dated January 12, 2000 (the "Audit
Response").
Except as disclosed in the Company's Form 10-Q for the quarter ended February
29, 2000, I am aware of the following matters which have occurred since the
Audit Response.
1. Sherwood Securities Corp. (now NDB Capital Markets Corporation) ("SHWD") is
the subject of two inquiries by the National Association of Securities
Dealers Regulation, Inc. ("NASDR") regarding SHWD's involvement in locked
and crossed markets. One inquiry concerned initial public offerings from
March 1, 1999 to June 15, 1999 and the other involved trading activity
during the period January 1, 1998 to June 30, 1998. While the NASDR had
initially proposed a consent settlement to the latter inquiry which imposed
a $10,000 fine and a censure, that settlement has been opposed by SHWD. I
am not aware that the NASDR has responded to SHWD's objections to date.
Sherwood responded to the initial public offering inquiry by letter dated
October 21, 1999. The NASDR has not responded to SHWD's letter.
2. National Discount Brokers Corporation ("NDB") was the subject of an
examination by the Securities and Exchange Commission (the "Commission") in
November, 1999. As a result of the examination, the staff of the Commission
requested a meeting with management. At that meeting which occurred on
December 20, 1999, the staff was critical of the direction of customer
order flow by NDB to SHWD. The staff alleged that based upon the quality of
SHWD's execution of those orders based upon reports prepared by a third
party audit service, at least some of the orders should have been directed
to other market makers. By letter dated January 31, 2000, the Commission
staff documented the results of their examination. By letter dated Xxxxx 0,
0000, XXX responded to the Commission's findings. The Commissions staff did
indicate the file was not being forwarded to enforcement personnel of the
Commission, and that they would send a letter of caution to NDB.
3. Letter of Acceptance, Waiver and Consent (TAMMS Examination No. TMMS
9B-99016)
As a result of its 1999 Trading and Market Surveillance ("TAMMS")
Examination, by NASDR, SHWD has received a Letter of Acceptance, Waiver and
Consent ("AWC"). The examination found SHWD to have violated SEC Rule
11Ac1-4 (the Display Rule), NASD Conduct Rule 2320 (Best Execution) and
NASD Conduct Rule 3370 (Affirmative Determination). In the AWC the NASDR
has proposed a settlement which imposes a censure and $6,000 fine (composed
of a fine of $2,500 for violations of SEC Rule 11Ac1-4; $2,500 for
violations of NASD Conduct Rule 2320; and $ 1,000 for violations of NASD
Conduct Rule 3370). SHWD has yet to respond to the NASDR regarding this
matter.
4. Letter of Acceptance, Waiver and Consent No. CMS000047 AWC
On May 15, 1998, the day after the conclusion of a trading suspension
period for stock symbol "SLUP", SHWD published a quotation for SLUP
securities in a quotation medium and placed 6 orders into Instinet for
SHWD's proprietary account. SHWD failed to file a Form 211 with the NASD at
least 3 business days before SHWD's quotations were published or displayed
in a quotation medium. This action violated SEC Rule 15c2-11 and NASD
Conduct Rule 2110 and NASD marketplace rule 6740 and NASD Conduct Rule
2110. In the AWC the NASD proposed in the way of settlement a fine of
$5,000 and the undertaking of revised written supervisory procedures
designed to prevent future violations of SEC Rule 15c2-11 and NASD Rule
6740. SHWD has yet to respond to the NASDR regarding this matter.
5. Executed AWC dated March 30, 1999 MRDTM97-0777-41 MRD200019361
In March 1999, SHWD executed and forwarded to NASDR the above noted AWC.
However, the file was misplaced by the NASDR and upon recent review, the
NASDR has requested that "a few errors" be corrected. The AWC commenced due
to the receipt of a customer complaint received by the NASDR and the
subsequent review conducted by the NASD Market Regulation Department. The
review concentrated on Order Display Handling as required by SEC Rule
11Ac1-1 (c) (5), SEC Rule 11Ac 1-4, NASD Conduct Rules 2320, 2110 and
IM-2110-2. The scope of review encompassed the period between August
through October 1998. The NASD proposed and SHWD consented to the
imposition of the following sanctions: a fine (paid) of $4,000.00
($2,000.00 for the ECN Rule; $1,000.00 for Limit Order Protection and Limit
Order Display, and $1,000.00 for Best Execution). SHWD has yet to respond
to the changes requested by NASDR.
6. Proposed AWC Re: Late Trades 1997
During the week of April 10, 2000 SHWD was verbally advised by NASDR that
an AWC would be forthcoming for the above referenced matter. The situation
had previously been handled by former General Counsel Xxxxx Xxxxxx and by
Xxxxx Xxxxx Esq. of Solomon, Xxxxxxxx et al. The matter concerns .SLD Late
Trade Reporting problems discovered during an NASDR Review that encompassed
the time period of May 27, 1997 through June 20, 1997. SHWD was found to
have been in violation of NASD Marketplace Rules 4632 (a), 4642 (a), 6420
(a) and NASD Conduct Rules 2110 and 3010. SHWD has yet to receive the
written AWC from NASDR.
7. Stock Pulse Tradename
By letter dated March 10, 2000, from Xxxxxx & Xxxxx LLP, Xxx Xxx & Company
Inc. claimed that the use by NDB of the name "Stock Pulse" violated two
trademarks of theirs and directed NDB to cease using the name. This matter
was referred to Xxxxxxx, Del Deo, Dolan, Griffinger & Xxxxxxxxx, PC. NDB is
currently in negotiations with Xxx Xxx & Company Inc.'s counsel to resolve
this matter.
8. Xxxxxxxx Internet Security Patents
By letter dated March 16, 2000, the law firm of Morris, Nichols, Arsht &
Xxxxxxx notified NDB that Xx. Xxxx Xxxxxxxx owed certain patents covering
rudimentary internet security. The firm offered to provide NDB with a
license and threatened litigation (including injunctive relief) if a
license is not obtained. This matter has been referred to the law firm of
Xxxxxxx, Del Deo, Dolan, Griffinger & Xxxxxxxxx, P.C. for analysis. The
letter requires a response from NDB by April 10, 2000. No response has yet
been provided.
9. Arbitration Matters at NDB
Attached hereto and incorporated herein by reference is the list of
arbitrations at the date of this letter, which involve NDB as a party.
The information set forth herein is as of the date of this letter, and I assume
no obligation to advise you of changes which hereafter may be brought to my
attention.
This response is limited by, and intended to be in accordance with, the ABA
Statement of Policy Regarding Lawyers' Responses to Auditors' Requests for
Information (December 1975), including the Commentary which is an integral part
thereof. This response is solely for your information, and it may not be quoted
in whole or in part or otherwise referred to in any financial statements of
National Discount Brokers Group, Inc. or any of their affiliates, or in any
related documents, nor may it be used by or provided to any governmental agency
or other person, without my prior written consent, except as provided in such
ABA Statement of Policy.
Very truly yours,
Xxxxx X. Xxxxxxxx, Xx.
Executive Vice President & General Counsel
FEL:rv
-----------------------------------------------------------------------------------------------------------
GENERAL CLAIM / DEFENSE
-----------------------------------------------------------------------------------------------------------
ID # DATE NAME/ CLAIM REQUESTED DEFENSE
REFERENCE # RELIEF
-----------------------------------------------------------------------------------------------------------
1 8/19/199 XXXXXXXX, CUSTOMER DISPUTES 3/18/97 BUY $1,035,000 THE CUSTOMER WAS AWARE OF THE
XXXXXXX OF 1,000 MERCK AND SUBSEQUENT POSITION AS EVIDENCED BY NUMEROUS
98-01786 MARGIN SELLOUT TRADES INVOLVING MERCK AND MERCK
OPTIONS IMMEDIATELY SUBSEQUENT TO
ACQUIRING THE POSITION IN MERCK.
RESPONSE FILED 10/8/98
-----------------------------------------------------------------------------------------------------------
2 7/1/1999 XXXX XX CUST SEEKING LOSSES AS A $28,292.55 THE CUSTOMER, BY HER OWN
99-02714 / RESULT OF ALLEGED UNAUTHORIZED ADMISSION, FAILED TO KEEP
0XX000000 TRADING CONFIDENTIAL HER ACCOUNT
INFORMATION LEADING TO TRADES
ENTERED BY A THIRD PARTY.
RESPONSE FILED 9/2/99 NEGOTIATING
SETTLEMENT
-----------------------------------------------------------------------------------------------------------
3 8/20/1999 SKUROWITZ CUST SEEKING LOSSES AS A $22,050.00 THE ORDER WAS ENTERED AFTER THE
XXXXXX & ARIVA RESULT OF ALLEGED DELAYS IN START OF THE OPENING ROTATION FOR
99-03269 / EXECUTING TWO OPTION SELL THE OPTION IN QUESTION. HENCE,
0XX000000 ORDERS THE CUSTOMER'S ORDER WAS NOT
ENTITLED TO THE OPENING PRICE.
RESPONSE FILED 9/24/99
-----------------------------------------------------------------------------------------------------------
4 8/24/1999 XXXXXXX X. CUSTOMER CLAIMS MISTAKENLY $105,000.00 SUBSEQUENT TO PLACING THE ORDER,
XXXX PLACED 10,000 SHARE ORDER THE CUSTOMER REPEATEDLY VIEWED THE
99-03660 / INSTEAD OF 1,000 SHARES. FEELS 10,000-SHARE PENDING ORDER AND
0XX000000 WE SHOULD HAVE STOPPED HIM AND 10,000-SHARE EXECUTION.
HOLDS NDB RESPONSIBLE FOR RESPONSE FILED 10/13/99
LOSSES ASSOCIATED WITH TRADE
-----------------------------------------------------------------------------------------------------------
5 9/24/1999 XXXXX XXXXXX CUSTOMERS CLAIM THAT THEIR $9,337.50 AGAINST THE CUSTOMER'S WISHES NDB
& XXXXX ACCOUNT WAS MISHANDLED, FROZE THE CUSTOMER'S ACCOUNT AS
99-03262 / MANIPULATED, AND OVERCHARGED; PER A COURT ORDER AS A RESULT OF A
4RX216366 FEELS NDB WAS NEGLIGENT IN DIVORCE IN THE FAMILY. CLAIM IS
MAINTAINING ITS COMPUTER WITHOUT MERIT
SYSTEM; AND THAT NDB BROKE RESPONSE FILED 10/19/99
NASD REPORTING RULES, IN 1995
THROUGH 1997.
-----------------------------------------------------------------------------------------------------------
6 12/6/1999 TUNG, HSUE CLAIMANTS DAMAGES WERE $400,000.00 CLAIMANT'S DAMAGES ARE NOT DUE TO
99-4232 / INCURRED AS A RESULT OF THE ACTION OF NDB BUT BY BROKERS
4KB-216366 ALLEGED FRAUDULENT ACTIVITIES WHO FRAUDULENTLY CAUSED THE
BY A REGISTERED REPRESENTATIVE ACCOUNT TO BE TRANSFERRED FROM NDB
AT ANOTHER FIRM, WHO ILLEGALLY AND THEN EXECUTED UNAUTHORIZED
TRANSFERRED XX. XXXX'X NDB TRADES AND DIVERTED PROCEEDS TO
ACCOUNT AND SUBSEQUENTLY THEMSELVES.
LIQUIDATED THE ASSETS. PREPARING RESPONSE
-----------------------------------------------------------------------------------------------------------
7 12/27/1999PUNSKI, CUSTOMER IS SEEKING DAMAGES AS $50,000.00 NDB WAS WITHIN THEIR RIGHTS TO
CHARLOTTE A RESULT OF HAVING TO SELL RAISE THE HOUSE REQUIREMENTS ON
99-05653 / SECURITIES TO MEET MARGIN SECURITIES. THE MARGIN DEPARTMENT
4KB-041871 CALLS DUE TO AN INCREASE IN TOOK STEPS TO ALERT THE CLAIMANT
HOUSE REQUIREMENTS. CUSTOMER AND EXTENDED ADDITIONAL TIME TO
FEELS SHE SHOULD HAVE NEVER MEET THE CALL. FILED WITHOUT
BEEN TO THE INCREASE. ACTION LETTER FROM THE NASD
RECEIVED OCTOBER 1999.
PREPARING RESPONSE
-----------------------------------------------------------------------------------------------------------
8 12/31/1999 XXXXXXXXX, CLAIMENT STATES THAT NDB WAS $20,600.00 THE MARGIN DEPARTMENT ACTED IN
BARRET UNREASONABLE IN INSISTING THAT ACCORDANCE WITH ITS PROCEDURES IN
99-05407 / CLAIMANT EITHER WIRE FUNDS IN HANDLING THE CUSTOMER'S MARGIN
4RX-176660 OR LIQUIDATE HOLDINGS IN ORDER CALL. THE CONDITION OF THE
TO SATISFY A MARGIN CALL. ACCOUNT WARRANTED THAT IMMEDIATE
ACTION BE TAKEN IN THE ACCOUNT.
RESPONSE FILED 1/25/00
-----------------------------------------------------------------------------------------------------------
9 4/30/2000 SHRAYBAMAN, HIS LOSSES RESULTED FROM AN $2,170.00 THE MARGIN DEPARTMENT WAS
IGOR ALLEGED UNAUTHORIZED TRADE. COMPELLED TO TAKE IMMEDIATE ACTION
00-01266 / HOWEVER, THE TRADE IN QUESTION IN THE CUSTOMER'S ACCOUNT DUE TO
4RX-065343 RESULTED FROM THE NEED TO MEET MARKET CONDITIONS. FILED WITHOUT
AN OUTSTANDING MARGIN CALL. ACTION LETTER FROM THE NASD
RECEIVED MARCH 2000.
NEGOTIATING SETTLEMENT
-----------------------------------------------------------------------------------------------------------
10 4/30/2000 XXXXX, XXXXXX HE ALLEGES NDB'S SYSTEM $6,411.51 THE CUSTOMER TOOK NO ACTION TO
E PROBLEMS LED TO AN INADVERTANT MITIGATE HIS LOSS DESPITE BEING
00-01300 / SHORT SALE THAT WAS LATER MADE AWARE THAT A SHORT POSITION
4RX-180019 COVERED AT A LOSS. EXISTED IN THE ACCOUNT. ALTHOUGH
AN NDB SYSTEM PROBLEM MAY HAVE
CAUSED THE INADVERTENT SHORT SALE,
94% OF THE CLAIM AMOUNT OF LOSS IS
DUE TO CUSTOMER'S INACTION.
PREPARING RESPONSE
$1,678,862
-----------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------
STATUS
---------------------------------------------------------------------------
ID # DATE NAME/ RELATED HEARING CUST ARBITRATOR NDB
REFERENCE # DEPARTMENT REQUESTED? REP BY SELECTED? COUNSEL
COUNSEL?
Y/N Y/N Y/N
--------------------------------------------------------------------------
1 8/19/199 XXXXXXXX, TRADING Y Y N D. XXXXX
XXXXXXX / MARGIN
98-01786
--------------------------------------------------------------------------
2 7/1/1999 XXXX XX X/X X X X X. XXXXX
00-00000 /
0XX000000
--------------------------------------------------------------------------
3 8/20/1999 SKUROWITZ TRADING N N N D. XXXXX
XXXXXX & ARIVA
99-03269 /
0XX000000
--------------------------------------------------------------------------
4 8/24/1999 XXXXXXX X. XXXXXXX X X X X. XXXXX
XXXX
00-00000 /
0XX000000
--------------------------------------------------------------------------
5 9/24/1999 XXXXX XXXXXX N/A N N N X. XXXXX
& XXXXX
99-03262 /
4RX216366
--------------------------------------------------------------------------
6 12/6/1999 TUNG, HSUE X/X X X X X. XXXXX
00-0000 /
0XX-000000
--------------------------------------------------------------------------
7 12/27/1999PUNSKI, MARGIN Y Y N D. XXXXX
XXXXXXXXX
99-05653 /
4KB-041871
--------------------------------------------------------------------------
8 12/31/1999 XXXXXXXXX, MARGIN N N N X. XXXXX
BARRET
99-05407 /
4RX-176660
--------------------------------------------------------------------------
9 4/30/2000 SHRAYBAMAN, MARGIN N N N
IGOR
00-01266 /
4RX-065343
--------------------------------------------------------------------------
10 4/30/2000 XXXXX, XXXXXX X/X X X X
X
00-00000 /
0XX-000000
--------------------------------------------------------------------------
TOTAL PENDING CLAIMS
--------------------------------------------------------------------------
$1,678,862
--------------------------------------------------------------------------
Schedule 2.12
Intellectual Property
1. The Company has been advised that its use of the name "Stock Pulse" may
violate the intellectual property of Xxx Xxx & Company, Inc.
2. The Company has been advised that encryption technology utilized by it may
violate patents held by Xxxx Xxxxxxxx.
Schedule 2.15(b)
Pending Registrations
1. Several officers and employees of the Company's Subsidiaries are in the
process of applying for registration at the federal and state level to act
as registered representatives or principals. Millennium Clearing Corporation
is seeking registration as a broker/dealer.
Schedule 2.16
Certain Contracts
1. Advertising agreement with Yahoo!
2. Advertising agreement with Go2Net, Inc.
3. Master Services Agreement referred to in Schedule 2.7(b)
4. Agreement pursuant to which NDB Capital Markets purchased common shares and
warrants to purchase common shares of National Association of Securities
Dealers, Inc.
5. Clearing Agreement with Broadcort
6. Clearing Agreement with Pershing
7. Advertising Agreement with The Motley Fool, Inc.
8. Advertising Agreement with Raging Bull, Inc.
9. Leases of equipment for 00 Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxx Xxxxxx
10. Real Estate Lease for 00 Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxx Xxxxxx
11. Bank United co-branding agreement
Schedule 2.18
Brokers and Finders
1. Credit Suisse First Boston, as financial advisor to the Company for
purposes of Section 5.12 of the foregoing Agreement.
Schedule 2.20
Guarantees
None
