<PAGE> 1
As filed with the Securities and Exchange Commission on March 26, 1999
Registration No. 333-
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ONLINETRADINGINC.COM CORP.
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(Name of Small Business Issuer in Its Charter)
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Florida 6211 65-0607814
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(State or Jurisdiction of (Primary Standard (IRS Employer Identification Number)
Incorporation or Organization) Industrial Classification
Code Number)
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2700 N. Military Trail, Suite 200
Boca Raton, Florida 33431
(561) 995-1010
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(Address and Telephone Number of Principal Executive Offices)
2700 N. Military Trail, Suite 200, Boca Raton, Florida 33431
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(Address of principal place of business or intended principal place of business)
Andrew A. Allen
Chief Executive Officer
onlinetradinginc.com corp.
2700 N. Military Trail, Suite 200
Boca Raton, Florida 33431
(561) 995-1010
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(Name, Address and Telephone Number of Agent for Service)
COPIES OF COMMUNICATIONS TO:
Dale S. Bergman, P.A. Neil Baritz, Esq.
Linda C. Frazier, Esq. Dreier & Baritz, LLP
Broad and Cassel 150 East Palmetto Park Road
201 South Biscayne Boulevard, Suite 3000 Suite 401
Miami, Florida 33131 Boca Raton, Florida 33432
Telephone No.: (305) 373-9400 Telephone No.: (561) 750-0910
Facsimile No.: (305) 373-9443 Facsimile No.: (561) 750-5045
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
<PAGE> 2
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
CALCULATION OF REGISTRATION FEE
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Proposed
Proposed Maximum Maximum
Title of each Class Amount Proposed Maximum Aggregate Amount of
of Securities to be Offering Price Offering Registration
to be Registered Registered Per Share(1) Price(1) Fee
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Common Stock, $0.01 par value.......... 2,300,000(2) $7.00 $16,100,000 $4,749.50
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Warrants, each to
purchase one share
of Common Stock...................... 2,300,000(2) $0.125 $287,500 $84.81
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Common Stock, $0.01 par value,
issuable upon exercise of
the Warrants(3)...................... 2,300,000(2) $8.40 $19,320,000 $5,699.40
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Underwriter's Warrants, each to
purchase one share of
Common Stock(4)...................... 200,000 $0.001 $200 (5)
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Common Stock, par value $0.01
per share, issuable upon
exercise of the
Underwriter's Warrants(3)............ 200,000 $8.40 $1,680,000 $495.60
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Underwriter's Warrants, each to
purchase one warrant(4).............. 200,000 $0.001 $200 (5)
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Warrants issuable upon exercise
of the Underwriter's Warrants........ 200,000 $0.15 $200 $8.85
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Common Stock, par value $0.01
per share, issuable upon
exercise of the warrants
underlying the Underwriter's
Warrants(3).......................... 200,000 $10.08 $2,016,000 $594.72
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Total $11,632.88
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(1) Estimated solely for the purpose of calculating the registration fee
and pursuant to Rule 457.
(2) Includes 300,000 shares of Common Stock and 300,000 warrants which may
issued upon exercise of a 45-day option granted to the Underwriters
solely to cover over-allotments, if any.
(3) Pursuant to Rule 416 under the Securities Act, this Registration
Statement also covers additional shares as may become issuable as a
result of the anti-dilution provisions contained in the warrants.
(4) Represents warrants to be issued by us to the Underwriter at the time
of delivery and acceptance of the securities to be sold by us to the
public hereunder.
(5) No fee required pursuant to Rule 457(g) under the Securities Act.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 3
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The information contained in this Prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
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PROSPECTUS SUBJECT TO COMPLETION, DATED MARCH 26, 1999
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ONLINETRADINGINC.COM CORP.
2,000,000 SHARES OF COMMON STOCK
AND REDEEMABLE WARRANTS TO PURCHASE
2,000,000 SHARES OF COMMON STOCK
This is our initial public offering and we are offering 2,000,000
shares of our common stock and redeemable warrants to purchase 2,000,000 shares
of common stock. The initial public offering price of our common stock is
anticipated to be between $6.50 and $7.00 per share. The initial public offering
price of our warrants will be $0.125 per warrant.
The common stock and warrants may be purchased separately and can be
transferred immediately. Each warrant entitles the holder to purchase one share
of common stock at a price of $____ per share, subject to adjustment in certain
circumstances, at any time commencing _______, 2000, through _____, 2005. The
warrants are redeemable by us at any time commencing _____, 2000, upon 30 days
notice, at a price of $0.125 per warrant, provided that the closing bid
quotation of our common stock on all 30 trading days ending on the third day
prior to the day on which we give notice has been at least 150% of the initial
public offering price of the common stock (currently $____), subject to
adjustment.
No public market currently exists for our common stock or our warrants
and we cannot assure you that a market will develop or be sustained after
completion of this offering. We anticipate that our common stock and warrants
will be listed on The Nasdaq SmallCap Market under the symbols "LINE" and
"LINEW."
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 6 OF
THIS PROSPECTUS.
THESE SHARES AND WARRANTS HAVE NOT BEEN APPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION. THESE ORGANIZATIONS HAVE NOT DETERMINED WHETHER THIS
PROSPECTUS IS COMPLETE OR ACCURATE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT US
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Per Share.................................. $ $ $
Per Warrant................................ $ $ $
Total...................................... $ $ $
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We have granted to the underwriters a 45-day option to purchase up to
an additional 300,000 shares of common stock and/or 300,000 warrants to cover
over-allotments.
The underwriters expect to deliver the shares against payment in Boca
Raton, Florida, on _____________, 1999.
WERBEL-ROTH SECURITIES, INC.
The date of this Prospectus is __________, 1999
<PAGE> 4
TABLE OF CONTENTS
PAGE
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SUMMARY.....................................................................1
FORWARD-LOOKING STATEMENTS..................................................6
RISK FACTORS................................................................6
USE OF PROCEEDS............................................................17
DIVIDEND POLICY............................................................18
DILUTION.................................................................. 19
CAPITALIZATION.............................................................20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................................21
BUSINESS...................................................................25
MANAGEMENT.................................................................36
PRINCIPAL SHAREHOLDERS.....................................................41
CERTAIN TRANSACTIONS.......................................................42
DESCRIPTION OF CAPITAL STOCK...............................................43
SHARES ELIGIBLE FOR FUTURE SALE............................................46
UNDERWRITING...............................................................47
LEGAL MATTERS..............................................................50
EXPERTS....................................................................50
WHERE YOU CAN FIND MORE INFORMATION........................................50
<PAGE> 5
SUMMARY
BECAUSE THIS IS A SUMMARY, IT DOES NOT CONTAIN ALL OF THE INFORMATION
THAT MAY BE IMPORTANT TO YOU. YOU SHOULD READ THE MORE DETAILED INFORMATION
CONTAINED IN THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED, ALL INFORMATION IN
THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT
OPTION; (II) DOES NOT GIVE EFFECT TO ________ SHARES OF COMMON STOCK ISSUABLE
UPON THE EXERCISE OF OUTSTANDING OPTIONS UNDER OUR 1999 STOCK OPTION PLAN; (III)
GIVES EFFECT TO A RECAPITALIZATION OF OUR CAPITAL STOCK EFFECTED IN MARCH 1999
AND (IV) DOES NOT GIVE EFFECT TO THE EXERCISE OF 2,000,000 WARRANTS ISSUED IN
CONNECTION WITH THIS OFFERING. UNLESS THE CONTEXT REQUIRES OTHERWISE, ALL
REFERENCES IN THIS PROSPECTUS TO "ONLINETRADINGINC.COM," "WE," "OUR" AND "US"
REFER TO ONLINETRADINGINC.COM CORP.
ABOUT US
GENERAL
onlinetradinginc.com provides financial brokerage services to
experienced investors and small to mid-sized financial institutions through a
variety of communication mediums, including the Internet. Unlike our name
suggests, we are not merely a real time online financial brokerage firm which
allows clients to trade directly over the Internet. We are a full-service
financial services firm with direct access to the securities markets via our
computerized intranet infrastructure that enhances our ability to obtain the
simplest, most direct execution of orders for our clients at the best possible
price. In addition, as a result of the technology we use, our brokers and our
clients have access to the most up-to-date electronic information on stocks,
market indices, analysts' research and news. We provide our clients, through
experienced brokers, the ability to execute orders before and after traditional
market hours. Moreover, we are in the process of upgrading our software and
technology to enable our clients to execute trades more efficiently over the
Internet.
Our manner of executing trades utilizing our computerized intranet
infrastructure eliminates middlemen to save costs and increase investing
efficiency. We believe our commitment to providing the best stock execution
prices directly to our clients, our refusal to accept payment for directing
orders to other broker-dealers, (i.e., accepting payment for order flow), and
our combination of information and research tools provide us a strategic
advantage over existing discount, deep discount, and Internet brokerage firms.
THE MARKET
The financial services market has changed considerably over the last 25
years. In 1975 when commissions for securities transactions became deregulated,
the era of negotiated commissions began. The unbundling of brokerage services
from other financial services has permitted investors to pick and choose among
various financial providers for specific services. At the same time, individuals
have greater education, technical capabilities, access to information and
investment choices. Investors are also more self-reliant and value conscious
and, as a result, are managing their own money and are increasingly reluctant to
pay high fees to full-service retail brokers. As a result, discount brokerage
firms willing to accept stock trades for lower commissions have begun to
proliferate. However, many discount brokerage firms do not typically provide the
full breadth of products and services offered by full-service firms, such as
regular access to a broker willing to make recommendations or discuss possible
investments, elaborate research reports or access to initial public offerings.
<PAGE> 6
As a result of increased competition among brokerage firms, deep
discount brokerage firms who advertise very low commission rates also entered
the market. However, many of these firms either (1) sell the order received from
its clients to another brokerage firm that makes a market in the stock being
traded, or (2) charge the client a mark-up or mark-down. We believe the selling
of order flow creates inefficiency in the trade execution which may increase the
clients' overall cost of the transaction.
As a result of the growth of the Internet as a tool to obtain
information, online trading is now the fastest growing segment of the brokerage
industry and is expected to continue to grow significantly. In a report dated
March 11, 1999, Forrester Research, Inc., an independent research firm,
estimates that during 1998, the number of North American households investing
online nearly doubled, reaching just under 2.4 million by the start of 1999, and
that the number of households investing online will increase to 4.3 million by
the end of 2000. In addition, industry experts project that retail commissions
generated by the online trading market will grow from approximately $268
million, or 15% of the commissions generated by discount brokerage firms in
1996, to as much as $2.2 billion, or 60% of total discount brokerage
commissions, by 2001.
OUR BUSINESS STRATEGY
We believe that we have been successful in creating a new level of
service in the financial services industry by using technology to provide
experienced clients direct access, through brokers, intranets and the Internet,
to a trading desk which goes directly to the source and avoids the middleman to
obtain the best possible execution price (i.e., a "Wall Street style trading
desk"). Our strategy is designed to ensure that the client obtains the best
possible execution price and access to relevant market information. We believe
opportunities exist in the financial services industry for a brokerage firm that
is able to provide experienced investors with the cost-savings created by (1)
direct access to professional trade executions, (2) access to up-to-date market
information and (3) the convenience of trading over the Internet.
onlinetradinginc.com was founded on the principle philosophy of providing our
brokers and our clients the best execution prices along with the most relevant
market information and investment research. We consistently analyze new
communication technologies, including the Internet, that will enable our brokers
to better serve our clients. We are determined to offer our clients, regardless
of the communication medium used, the simplest, most direct form of stock
execution.
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Our goal is to become a leader in the financial services industry by
capitalizing on the changes occurring in the financial services industry and
providing our clients with specialized services for competitive, fully disclosed
commission rates. We intend to achieve our goal by:
o targeting experienced investors and small to mid-sized financial
institutions who typically (1) execute more trades per year than other
categories of investors, (2) require access to market information, and
(3) require fast professional execution of their orders;
o providing value to our clients at the lowest overall cost, including
direct access to our trading desk which enables them to realize the
best possible execution price;
o providing our clients with value-added services, including access to
well-trained brokers and up-to-date market information;
o creating technologically innovative solutions to satisfy client needs,
including efficient order execution directly over the Internet; and
o providing our brokers with the tools to meet the needs of our clients.
BACKGROUND
We were incorporated in Florida in September 1995 as Online Trading,
Inc. In February 1999, we changed our name from Online Trading Inc. to
onlinetradinginc.com corp. and began doing business under the name
onlinetradinginc.com.
Our principal executive offices are located at 2700 North Military
Trail, Suite 200, Boca Raton, Florida 33431, and our telephone number is (561)
995-1010. Our World Wide Web site address is WWW.ONLINETRADINGINC.COM.
Information contained in our website should not be considered part of this
Prospectus.
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<PAGE> 8
ABOUT THE OFFERING
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Securities Offered ................................................. 2,000,000 shares of common stock and
warrants to purchase 2,000,000 shares of
common stock.
Securities to be Outstanding after the Offering .................... 10,000,000 shares of common stock, 2,000,000
warrants, each to purchase one share of common
stock, and 300 shares of Series A Redeemable
Preferred Stock.
Terms of Warrants
Exercise terms................................................. Exercisable for a period of five years
commencing _____________, 2000, each to
purchase one share of common stock at a
price of _____ per share.
Expiration date................................................ _________, 2005.
Redemption...................................................... Redeemable by us at any time commencing
_________, 2000, upon notice of not less
than 30 days, at a price of $0.125 per
warrant, provided that the closing bid
quotation of the common stock on all 30
trading days ending on the third day prior
to the day on which we give notice has been
at least 150% of the initial public offering
price of the common stock (currently $___),
subject to adjustment. The warrants will be
exercisable until the close of business
on the date fixed for redemption.
Use of Proceed...................................................... Sales and marketing, website enhancement,
expansion of client services, potential
acquisitions, branch office expansion,
network expansion and upgrade, hiring
additional personnel, Year 2000 readiness
and testing, working capital and general
corporate purposes.
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Risk Factors........................................................ The securities offered hereby involve a
high degree of risk.
Proposed Nasdaq Symbols............................................. Common Stock-LINE
Warrants-LINEW
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SUMMARY FINANCIAL INFORMATION
The following is a summary of our Financial Statements for the years
ended January 31, 1998 and 1999, and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements including the notes thereto included in
this Prospectus.
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YEAR ENDED
JANUARY 31,
---------------------------------------------
1999 1998
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STATEMENT OF OPERATIONS DATA:
Commissions.......................................... $5,525,427 $3,673,728
Total revenues....................................... $5,992,064 $3,548,385
Net income (loss).................................... $ 117,298 $ (19,428)
----------------------- ------------------
Net income (loss) per share.......................... $ 0.0147 $ (0.0026)
----------------------- ------------------
Weighted average number of common shares
outstanding........................................ 7,971,510 7,600,000
======================= ==================
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JANUARY 31, 1999
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ACTUAL PRO FORMA(1)
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BALANCE SHEET DATA:
Working capital............................................... $ 980,822 $ 13,113,322
Cash and cash equivalents..................................... $ 1,005,944 $ 13,138,444
Total assets.................................................. $ 2,154,588 $ 14,287,088
Total liabilities............................................. $ 1,534,622 $ 1,534,622
Shareholders' equity.......................................... $ 619,966 $ 12,752,466
</TABLE>
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(1) Adjusted to reflect the sale of the shares of common stock and warrants in
this offering (based on an assumed public offering price of $7.00 per share
and $0.125 per warrant) and the application of the net proceeds therefrom.
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<PAGE> 10
FORWARD-LOOKING STATEMENTS
Certain important factors may affect our actual results and could cause
those results to differ materially from any forward-looking statements made in
this Prospectus or that are otherwise made by us or on our behalf.
"Forward-looking statements" are not based on historical facts and are typically
phrased using words such as "may," "will," "expect," "believe," "anticipate,"
"intend," "could," "estimate" or "continue" and similar expressions or
variations.
RISK FACTORS
The shares offered are speculative and involve a high degree of risk.
You should carefully consider the following matters, as well as the other
information in this Prospectus, before investing.
Differences in actual results may be caused by factors such as those
discussed in the "Risk Factors" below as well as those discussed elsewhere in
this Prospectus.
WE HAVE A LIMITED OPERATING HISTORY UPON WHICH TO EVALUATE OUR PERFORMANCE.
We only commenced doing business in September 1995. Accordingly, we
have only a limited operating history upon which you can evaluate our prospects
and future performance. While we reported net income of $117,298 for the year
ended January 31, 1999, we reported a net loss of $19,428 for the year ended
January 31, 1999. You should consider our prospects based on the risks, expenses
and difficulties frequently encountered in the operation of a new business in a
rapidly evolving industry characterized by intense competition.
PERIODS OF DECLINING PRICES AND INACTIVITY OR UNCERTAINTY IN THE MARKET MAY HARM
OUR BUSINESS.
The securities business is volatile and is directly affected by
national and international political and economic conditions, broad trends in
business and finance, and fluctuations in volume and price levels of securities
transactions, all of which are beyond our control. The securities business is
also subject to various other risks, including client default on commitments
(such as margin obligations), litigation, and employee's misconduct, errors and
omissions. Losses associated with these risks could harm our business. Several
current trends are also affecting the securities industry, including regulation
at federal and state levels, the emergence of numerous discount brokers,
increased use of technology, and a steady decrease in the commissions charged to
clients of discount brokerage services. Historically, when the stock market
suffers large declines (i.e., a "bear market") the level of individual investor
activity declines. We will likely be adversely affected during any long-term
bear market. A general decrease in trading activity in these markets could
adversely affect the level of trading by our clients. These trends and/or future
changes may harm our business.
WE MAY NOT BE ABLE TO KEEP UP IN A COST-EFFECTIVE WAY WITH THIS EVOLVING MARKET.
The market for brokerage services, particularly over the Internet, is
rapidly evolving. As a result, the level of demand for online brokerage services
is uncertain. Our offering of brokerage services over the Internet involves a
relatively new approach to securities trading. As a result, intensive marketing
and sales efforts may be necessary to educate prospective clients
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regarding the uses and benefits of our brokerage services and products. If the
market for online brokerage services does not develop as we expect, our business
may be harmed.
WE RELY ON A LIMITED CLIENT BASE FOR A SUBSTANTIAL PORTION OF OUR BUSINESS.
Many of our clients are active investors. Active investors can lose a
significant amount of money quickly and become unable to continue to trade. Our
client base has expanded from approximately ______ accounts at January 31, 1998
to approximately _______ accounts at January 31, 1999. However, we are still
dependent on a limited client base for a substantial portion of our revenues.
WE MAY NOT BE ABLE TO KEEP UP IN A COST-EFFECTIVE WAY WITH RAPID TECHNOLOGICAL
CHANGES.
The market for brokerage services and, particularly, electronic
brokerage services over the Internet is characterized by rapid technological
change, changing client requirements, frequent service and product enhancements
and introductions, and emerging industry standards. The introduction of services
or products embodying new technologies and the emergence of new industry
standards can render existing services or products obsolete and unmarketable.
Our future success will depend, in part, on our ability to develop and use new
technologies, respond to technological advances, enhance our existing services
and products, and develop new services and products on a timely and
cost-effective basis. We cannot assure you that we will be successful in
pursuing new opportunities or will compete successfully in any new markets.
WE DEPEND ON ANDREW ALLEN, FARSHID TAFAZZOLI, STEVEN ZUM TOBEL AND DEREK
HERNQUIST AND THE LOSS OF ANY OF THEIR SERVICES COULD HARM OUR BUSINESS.
Our business is dependent upon a small number of key executive
officers, principally Andrew Allen, our Chairman and Chief Executive Officer;
Farshid Tafazzoli, our Chief Information Officer; Steven zum Tobel, our
President and Chief Financial Officer; and Derek J. Hernquist, our Vice
President and Director of Operations. The loss of services of any of these
individuals could harm our business. We have employment agreements with each of
these officers, and we maintain "key person" life insurance for our benefit on
Mr. Allen and Mr. Tafazzoli. Competition for key personnel and other highly
qualified technical and managerial personnel is intense. The loss of the
services of any of the key personnel or the inability to identify, hire, train
and retain other qualified personnel in the future could harm our business.
INTENSE COMPETITION FROM EXISTING AND NEW ENTITIES MAY ADVERSELY AFFECT OUR
REVENUES AND PROFITABILITY.
The market for brokerage services and, particularly, electronic
brokerage services, is new, rapidly evolving, intensely competitive and has few
barriers to entry. We expect competition to continue and intensify in the
future. A number of our competitors have significantly greater financial,
technical, marketing and other resources than us. Some of our competitors also
offer a wider range of services and financial products than us and have greater
name recognition and more extensive client bases than us. These competitors may
be able to respond more quickly to new or changing opportunities, technologies,
and client requirements than us and may be able to undertake more extensive
promotional activities, offer more attractive terms to clients, and adopt more
aggressive pricing policies than us. Moreover, current and potential competitors
have established or may establish cooperative relationships among
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<PAGE> 12
themselves or with third parties or may consolidate to enhance their services
and products. We cannot assure you that we will be able to compete effectively
with current or future competitors or that the competitive pressures faced by us
will not harm our business.
THERE ARE SIGNIFICANT COSTS ASSOCIATED WITH OUR PROPOSED NETWORK INFRASTRUCTURE
EXPANSION AND SUCH EXPANSION COULD CAUSE POTENTIAL DISRUPTIONS IN SERVICE.
We will need to expand our network infrastructure and client support
capabilities in anticipation of an expanded client base. Such expansion will
require us to make significant capital expenditures for servers, routers and
computer equipment, to increase bandwidth for internet connectivity, and to hire
and train additional client service personnel. Such expansion must be completed
without system disruptions, slower response times or degradation in speed of
order fulfillment and levels of client service. System disruptions, or
degradation in the level of client service during this process could harm our
business.
WE DEPEND HEAVILY ON COMPUTER SYSTEMS AND SYSTEM FAILURES COULD HARM OUR
BUSINESS.
We rely heavily on various electronic mediums. We receive trade orders
using the Internet and telephone. In addition, we process trade orders through
various avenues including, but not limited to, Instinet Corporation, SelectNet,
intranets, floor brokers, and Bear Stearns Securities Corp. (the "Clearing
Firm"). These methods of trading are heavily dependent on the integrity of the
electronic systems supporting them. Heavy stress placed on these systems during
peak trading times could cause our systems to operate at unacceptably low speeds
or fail altogether. Any significant degradation or failures of our computer
systems, those of the Clearing Firm, or any other systems in the trading process
(e.g., online service providers, record keeping and data processing functions
performed by third parties and third-party software such as Internet browsers)
could cause clients to suffer delays in trading. These delays could cause
substantial losses for our clients and could subject us to claims from clients
for losses, including litigation claiming fraud or negligence. We have created
operating redundancies in our systems and regularly conduct backups to protect
against system failures. In addition, if one of our offices was not operational,
under certain circumstances, some of our other offices could continue to service
clients through their facilities. These systems and/or safeguards may not be
sufficient in all circumstances.
EMPLOYEE MISCONDUCT IS DIFFICULT TO DETECT AND COULD HARM OUR BUSINESS.
There have been a number of highly publicized cases involving fraud or
other misconduct by employees in the financial services industry in recent
years, and we run the risk that employee misconduct could occur. Misconduct by
employees could include binding us to transactions that exceed authorized limits
or present unacceptable risks, or hiding from us unauthorized or unsuccessful
activities. In either case, this type of misconduct could result in unknown and
unmanaged risks or losses. Employee misconduct could also involve the improper
use of confidential information, which could result in regulatory sanctions and
serious reputational harm. It is not always possible to deter employee
misconduct, and the precautions we take to prevent and detect this activity may
not be effective in all cases.
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<PAGE> 13
ANY POSSIBLE COMPROMISES OF OUR SYSTEMS OR SECURITY COULD HARM OUR BUSINESS.
The secure transmission of confidential information over public
networks is a critical element of our operations. We rely on encryption and
authentication technology to provide the security and authentication necessary
to effect secure transmission of confidential information over the Internet. To
the best of our knowledge, to date, we have not experienced any security
breaches in the transmission of confidential information. Moreover, we
continually evaluate advanced encryption technology to ensure the continued
integrity of our systems. However, we cannot assure you that advances in
computer capabilities, new discoveries in the field of cryptography or other
events or developments will not result in a compromise of the technology or
other algorithms used by us and our vendors to protect client transaction and
other data. Any compromise of our systems or security could harm our business.
WE RELY VERY HEAVILY ON THE CLEARING FIRM AND TERMINATION OF OUR AGREEMENT WITH
THE CLEARING FIRM COULD HARM OUR BUSINESS.
Our clearing agreement may be terminated by either party upon 60 days
prior written notice. Termination of this agreement could harm our business.
Pursuant to our agreement, the Clearing Firm, on a fee basis, processes all
securities transactions for our account and the accounts of our clients.
Services of the Clearing Firm include billing and credit extension, control and
receipt, custody and delivery of securities, for which we pay a transaction
charge. We are dependent on the operational capacity and the ability of the
Clearing Firm for the orderly processing of transactions. In addition, by
engaging the processing services of a clearing firm, we are exempt from certain
capital reserve requirements and other complex regulatory requirements imposed
by federal and state securities laws. Moreover, we have agreed to indemnify and
hold the Clearing Firm harmless from certain liabilities or claims, including
claims arising from the transactions of our clients.
OUR SUCCESS WILL DEPEND HEAVILY ON THE ACCEPTANCE OF ONLINE COMMERCE AND THE
INTERNET, OF WHICH THERE IS NO ASSURANCE.
Acceptance of our Internet trading technology will depend upon the
continued adoption of the Internet as a widely used medium for commerce and
communication. The Internet may not prove to be a viable commercial marketplace
because of inadequate development of the necessary infrastructure, such as a
reliable network backbone, or timely development of complementary services and
products, such as high speed modems and high speed communication lines. The
Internet has experienced, and is expected to continue to experience, significant
growth in the number of users and amount of traffic. However, the Internet
infrastructure may not be able to support the demands placed on it by this
continued growth. In addition, the Internet could lose its viability due to
delays in the development or adoption of new standards and protocols to handle
increased levels of Internet activity or due to increased governmental
regulation. Moreover, critical issues concerning the commercial use of the
Internet, including security, reliability, cost, ease of use, accessibility and
quality of service, remain unresolved. These issues may negatively affect the
growth of Internet use or the attractiveness of commerce and communication on
the Internet. Our business will be materially harmed if critical issues
concerning the commercial use of the Internet are not favorably resolved, the
necessary infrastructure is not developed, or the Internet does not become a
viable commercial marketplace.
-9-
<PAGE> 14
WE EXTEND CREDIT TO OUR CLIENTS AND ARE SUBJECT TO RISKS AS A RESULT.
We are subject to the risks inherent in extending credit to the extent
that we permit our clients to purchase securities on a "margin" basis. A portion
of our clients' securities activities are transacted on a margin basis (through
the clearing broker which we have agreed to indemnify), pursuant to which credit
is extended to the client and secured by cash and securities in the client's
account or "short sales" (I.E., the sale of securities not yet purchased). These
risks are exacerbated during periods of volatile markets in which the value of
the collateral held by us could fall below the amount borrowed by the client. If
margin requirements are not sufficient to cover losses, we may be required to
sell or buy securities at prevailing market prices and incur losses to satisfy
client obligations.
WE ARE CURRENTLY SUBJECT TO SECURITIES REGULATION AND FAILURE TO COMPLY COULD
SUBJECT US TO PENALTIES OR SANCTIONS THAT COULD HARM OUR BUSINESS.
The securities industry in the United States is subject to extensive
regulation under both federal and state laws. In addition, the Securities and
Exchange Commission ("SEC"), National Association of Securities Dealers, Inc.
("NASD") and other self-regulatory organizations, such as the various stock
exchanges and state securities commissions, require strict compliance with their
rules and regulations. Broker-dealers are subject to regulations covering all
aspects of the securities business, including sales methods, trade practices
among broker-dealers, use and safekeeping of clients' funds and securities,
capital structure, record keeping and the conduct of directors, officers and
employees. Failure to comply with any of these laws, rules or regulations could
result in censure, fine, the issuance of cease-and-desist orders or the
suspension or expulsion of a broker-dealer or any of its officers or employees,
any of which could harm our business.
POTENTIAL GOVERNMENTAL REGULATION OF THE INTERNET AND ONLINE COMMERCE COULD HARM
OUR BUSINESS.
Due to the increasing popularity and use of the Internet and other
online services, various regulatory authorities are considering laws and/or
regulations with respect to the Internet or other online services covering
issues such as user privacy, pricing, content copyrights, and quality of
services. Furthermore, the growth and development of the market for online
commerce may prompt more stringent consumer protection laws that may impose
additional burdens on those companies conducting business online. Moreover, the
recent increase in the number of complaints by online traders could lead to more
stringent regulations of online trading firms and their practices by the SEC,
NASD and other regulatory agencies. The adoption of any additional laws or
regulations may decrease the growth of the Internet or other online services,
which could, in turn, decrease the demand for our trading systems and services
and increase our cost of doing business. Moreover, the applicability to the
Internet and other online services of existing laws in various jurisdictions
governing issues such as property ownership, sales and other taxes and personal
privacy is uncertain and may take years to resolve. In addition, as our services
are available over the Internet in multiple states and foreign countries, and as
we have numerous clients residing in these states and foreign countries, these
jurisdictions may claim that our company is required to qualify to do business
as a foreign corporation in each state and foreign country. While our company is
registered as a broker-dealer in 41 states, we are qualified to do business as a
foreign corporation in only a few states; failure by our company to qualify as a
broker-dealer in other jurisdictions or as an out-of-state or "foreign"
corporation in a jurisdiction
-10-
<PAGE> 15
where it is required to do so could subject our company to taxes and penalties
for the failure to qualify. Our business could be harmed by any these new
legislation or regulation, the application of laws and regulations from
jurisdictions whose laws do not currently apply to our business or the
applications of existing laws and regulations to the Internet and other online
services.
WE CONDUCT PROPRIETARY TRADING AND ANY POTENTIAL LOSSES WOULD REDUCE OUR ASSET
VALUE AND HARM OUR BUSINESS.
We operate a small proprietary trading department separate and distinct
from all client commission business. The trading department maintains
inventories of equity securities on both a long and short basis. To the extent
we have any long positions (i.e., own assets), a downturn in these markets could
result in a decline in the value of our positions resulting in losses and
reduced asset values. Conversely, to the extent we have short positions (i.e.,
have sold assets we do not own), an upturn in those markets could expose us to
unlimited losses as we attempt to cover our short position by acquiring assets
in a rising market.
FAILURE TO COMPLY WITH NET CAPITAL REQUIREMENTS COULD SUBJECT US TO SUSPENSION
OR REVOCATION BY THE SEC OR EXPULSION BY THE NASD.
The SEC, the NASD and various other regulatory agencies have stringent
rules with respect to the maintenance of specific levels of net capital by
securities brokers. Failure to maintain the required net capital may subject a
firm to suspension or revocation of registration by the SEC and suspension or
expulsion by the NASD and other regulatory bodies and ultimately could require
our liquidation. In addition, a change in the net capital rules, the imposition
of new rules or any unusually large charge against net capital could limit our
operations that require the intensive use of capital, such as the financing of
client account balances. A significant operating loss or any unusually large
charge against net capital could adversely affect our ability to expand or even
maintain our present levels of business, which could harm our business.
WE MAY NEED ADDITIONAL CAPITAL AND MAY NOT BE ABLE TO OBTAIN IT.
We currently anticipate that our available cash resources, combined
with the net proceeds from the Offering, will be sufficient to meet our
presently anticipated working capital and capital expenditure requirements for
the next 12 months. However, if we need to raise additional funds in order to
support further expansion, develop new or enhanced services and products,
respond to competitive pressures, acquire complementary businesses or
technologies or respond to unanticipated requirements, we cannot assure you that
additional financing will be available when needed on terms favorable to us.
WE RELY HEAVILY ON OUR INTELLECTUAL PROPERTY BUT HAVE LIMITED INTELLECTUAL
PROPERTY PROTECTION.
Our success and ability to compete is dependent to a significant degree
on our proprietary technologies, ideas, know-how and other proprietary
information. We rely primarily on confidentiality agreements and non-compete
agreements to protect our proprietary technology. We have no patents, no
trademarks and no registered copyrights. Notwithstanding the precautions we take
to protect our intellectual property rights, third parties may copy or
-11-
<PAGE> 16
otherwise obtain and use our proprietary technology without authorization or
otherwise infringe on our proprietary rights. In addition, third parties may
independently develop technologies similar to ours. Policing unauthorized use of
our intellectual property rights may be difficult, particularly because it is
difficult to control the ultimate destination or security of information
transmitted over the Internet. In addition, the laws of foreign countries may
afford inadequate protection of intellectual property rights. Our business may
be harmed if we are unable to protect our intellectual property rights.
OWNERSHIP OF OUR COMMON STOCK IS CONCENTRATED WITH OUR DIRECTORS AND EXECUTIVE
OFFICERS WHO CAN CONTROL THE COMPANY.
Upon completion of this offering, our directors and executive officers
will beneficially own approximately 80% of our common stock. Accordingly,
following completion of this offering, management will be in a position to
control us, elect all directors, cause an increase in our authorized capital or
our dissolution or merger or sale of assets, and, generally, to direct our
affairs.
INVESTORS WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
This offering involves an immediate and substantial dilution of $5.72
per share (547%) between the net tangible book value per share after the
offering and the initial public offering price per share.
BOARD HAS BROAD DISCRETION IN APPLICATION OF PROCEEDS.
Management will have significant flexibility in the use of the
proceeds. We intend to use the net proceeds from the sale of the shares of
common stock and warrants offered through this Prospectus for sales and
marketing, enhancement of our website, expansion of client service department,
potential acquisitions that have not yet been identified, expansion of branch
offices, expansion and upgrade of our network, hiring additional personnel and
readiness for the Year 2000. However, approximately 23.3% of the net proceeds of
this offering have been allocated to working capital and general corporate
purposes. The failure of our management to apply the funds effectively could
harm our business.
WE HAVE CONTRACTUAL OBLIGATIONS TO THE REPRESENTATIVE WHICH COULD REQUIRE US TO
INCUR ADDITIONAL EXPENSES AND/OR LIMIT OUR FLEXIBILITY.
We will have certain ongoing contractual obligations to Werbel-Roth
Securities, Inc. (the "Representative") following the consummation of this
offering. In addition, we have agreed to register, at our expense, the re-sale
of the 400,000 shares of common stock issuable upon exercise of the
Representative's Warrants and the warrants included therein on one occasion
during their exercise term and to include these securities in any appropriate
registration statement which is filed by us during the five years following the
date of this Prospectus.
-12-
<PAGE> 17
NO DIVIDENDS HAVE BEEN PAID AND NONE ARE CONTEMPLATED.
We have not paid any dividends on our common stock and do not presently
intend to. We anticipate that for the foreseeable future all earnings, if any,
will be retained for the operation and expansion of our business.
THERE WAS NO PRIOR PUBLIC MARKET FOR THE SECURITIES AND THERE IS THE POSSIBILITY
OF VOLATILITY OF THE STOCK PRICE.
Prior to this offering, there has been no public market for our common
stock or warrants. It is anticipated that our common stock and warrants will be
listed on The Nasdaq SmallCap Market; however, we cannot assure you that an
active trading market will develop or be sustained. The initial public offering
price will be determined by negotiations between us and the Representative, and
may not be indicative of the actual value of the common stock and may bear no
relationship to the price at which the common stock will trade after completion
of this offering. The market price of our common stock and warrants is subject
to wide fluctuations in response to variations in operating results, general
trends in our industry, actions taken by competitors, the overall performance of
the stock market and other factors.
THERE ARE MANY SHARES ELIGIBLE FOR FUTURE SALE AND SALES OF THOSE SHARES COULD
AFFECT THE MARKET PRICE NEGATIVELY.
Upon completion of the offering, we will have approximately 10,000,000
shares of common stock outstanding, including 2,000,000 shares of common stock
offered hereby and 8,000,000 "restricted" shares of common stock. The shares of
common stock offered hereby will be freely tradable without restriction or
further registration under the Securities Act of 1933, as amended the
"Securities Act"), by persons other than "affiliates" within the meaning of Rule
144 promulgated under the Securities Act. The holders of restricted shares
generally will be entitled to sell these shares in the public securities market
without registration under the Securities Act to the extent permitted by Rule
144 (or Rule 145, as applicable) promulgated under the Securities Act or any
exemption under the Securities Act. All of the 8,000,000 restricted shares are
currently eligible for sale under Rule 144 (with the exception of 266,667 shares
owned by Mr. Steven zum Tobel, our President and Chief Financial Officer, which
are subject to a right of redemption). However, the holders of the 8,000,000
restricted shares have agreed not to sell or dispose of those shares for a
period of 12 months from the date of this Prospectus without the written consent
of the Representative. Future sales of a substantial amount of common stock in
the public market, or the perception that future sales may occur, could
adversely affect the market price of the common stock and warrants prevailing
from time to time in the public market.
DELISTING OUR SECURITIES FROM THE NASDAQ STOCK MARKET WOULD SUBJECT US TO THE
PENNY STOCK RULES WHICH COULD AFFECT THE LIQUIDITY OF THE SECURITIES.
It is currently anticipated that the common stock and warrants will be
eligible for listing The Nasdaq SmallCap Market upon the completion of this
offering. In order to continue to be listed on Nasdaq, however, we must maintain
$2,000,000 in net tangible assets, a $1,000,000 market value of the public
float, have two market makers, a minimum bid price of $1.00 per share, and
maintain a minimum of two independent directors on our Board of Directors.
-13-
<PAGE> 18
Although we believe that we will be able to satisfy these maintenance criteria,
failure to do so in the future may result in the delisting of our securities
from Nasdaq, and trading, if any, in our securities would thereafter be
conducted in the OTC Bulletin Board. As a result of any delisting, an investor
could find it more difficult to dispose of, or to obtain accurate quotations as
to the market value of, our securities. In addition, if the common stock were to
become delisted from trading on Nasdaq and the trading price of the common stock
were to fall below $5.00 per share on the date our securities were delisted,
trading in these securities would also be subject to the requirements of certain
rules promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which require additional disclosure by broker-dealers in
connection with any trades involving a stock defined as a penny stock
(generally, any non-Nasdaq equity security that has a market price of less than
$5.00 per share, subject to certain exceptions). These rules require the
delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith, and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established clients and accredited investors (generally
institutions). For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. The additional
burdens imposed upon broker-dealers by these requirements may discourage
broker-dealers from effecting transactions in our securities, which could
severely limit the market price and liquidity of our securities and the ability
of purchasers in this offering to sell their securities in the secondary market.
REDEMPTION OF THE WARRANTS BY US COULD FORCE WARRANT HOLDERS TO EXERCISE THE
WARRANTS AT A TIME OR ON TERMS WHEN IT MAY BE DISADVANTAGEOUS TO THEM.
The warrants are subject to redemption by us at any time commencing on
______, 2000, upon notice of not less than 30 days, at a price of $0.125 per
warrant, provided that the closing bid quotation of the common stock on all 30
trading days ending on the third day prior to the day on which we give notice
has been at least 150% of the initial public offering price of the common stock
(currently $___), subject to adjustment. Redemption of the warrants could force
the holders to exercise the warrants and pay the exercise price at a time when
it may be disadvantageous for the holders to do so, to sell the warrants at the
then current market price when they might otherwise wish to hold the warrants,
or to accept the redemption price, which is likely to be substantially less than
the market value of the warrants at the time of redemption.
WARRANT HOLDERS MAY NOT BE ABLE TO EXERCISE WARRANTS.
We intend to qualify the sale of the common stock and warrants in a
limited number of states. Although certain exemptions in the securities laws of
certain states might permit the warrants to be transferred to purchasers in
states other than those in which the warrants were initially qualified, upon the
exercise of the warrants, we will be prevented from issuing common stock in the
states unless an exemption from qualification is available or unless the
issuance of common stock upon exercise of the warrants is qualified. We may
decide not to seek or may not be able to obtain qualification of the issuance of
the common stock in all of the states in which the ultimate purchasers of the
warrants reside. In this case, the warrants held by purchasers will expire and
have no value if the warrants cannot be sold. Accordingly, the market for the
warrants may be limited because of these restrictions. Further, a current
prospectus covering the common stock issuable upon exercise of the warrants must
be in effect before we may accept
-14-
<PAGE> 19
warrant exercises. We cannot assure you that we will be able to have a
prospectus in effect when this Prospectus is no longer current.
WE MAY ISSUE PREFERRED STOCK WITH PREFERENTIAL RIGHTS WHICH MAY ADVERSELY AFFECT
YOUR RIGHTS.
The rights of the holders of common stock will be subject to and may be
adversely affected by the rights of holders of any preferred stock that may be
issued in the future. Our Articles of Incorporation authorize our Board of
Directors to issue 1,000,000 shares of "blank check" Preferred Stock and to fix
the rights, preferences, privileges and restrictions, including voting rights,
of these shares, without further shareholder approval. Of the 1,000,000 shares
of Preferred Stock authorized, 300 shares have been designated Series A
Redeemable Preferred Stock.
CERTAIN ANTI-TAKEOVER PROVISIONS INCLUDED IN OUR ARTICLES OF INCORPORATION AND
THE FLORIDA STATUTES MAY DISCOURAGE, DELAY OR PREVENT A CHANGE OF CONTROL WHICH
MIGHT OTHERWISE BE BENEFICIAL TO THE HOLDERS.
Preferred stock could be issued to discourage, delay or prevent a
change in our control. Our Articles of Incorporation authorize the issuance of
"blank check" preferred stock with the designations, rights and preferences
determined by our Board of Directors. Accordingly, the Board of Directors can,
without shareholder approval, issue shares of preferred stock with dividend,
liquidation, conversion, voting or other rights that could adversely affect the
voting power or other rights of the holders of our common stock. As of the date
of this Prospectus, 300 shares of preferred stock have been designated Series A
Redeemable Preferred Stock and are currently issued and outstanding. Currently,
we do not have any plans to issue any additional series of our preferred stock.
Additionally, certain provisions of the Florida Business Corporation
Act could delay, defer or impede the removal of incumbent directors and could
make more difficult a merger, tender offer or proxy contest involving us, even
if these events could be beneficial to our shareholders. These provisions could
also limit the price that certain investors might be willing to pay in the
future for our common stock. In addition, Florida has certain laws that may
deter or frustrate takeovers of Florida corporations.
WE MAY NOT BE PREPARED FOR THE YEAR 2000 AND/OR THIRD-PARTIES ON WHICH WE RELY
MAY NOT BE PREPARED WHICH COULD HARM OUR BUSINESS.
With the new millennium approaching, many institutions around the world
are reviewing and modifying their computer systems to ensure that they are Year
2000 compliant. The issue, in general terms, is that many existing computer
systems and microprocessors with data functions (including those in
non-information technology equipment and systems) use only two digits to
identify a year in the date field with the assumption that the first two digits
of the year are always "19." Consequently, on January 1, 2000, computers that
are not Year 2000 compliant may read the year as 1900. Systems that calculate,
compare or sort using the incorrect date may malfunction.
Because we depend to a very substantial degree upon the proper
functioning of our computer systems, a failure of our systems to be Year 2000
compliant could harm our business.
-15-
<PAGE> 20
Failure of this kind could, for example, cause settlement of trades to fail,
lead to incomplete or inaccurate accounting, recording or processing of trades
in securities, currencies, commodities and other assets, result in generation of
erroneous results or give rise to uncertainty about our exposure to trading
risks and our need for liquidity. If not remedied, potential risks include
business interruption or shutdown, financial loss, regulatory actions,
reputational harm and legal liability.
In addition, we depend upon the proper functioning of third-party
computer and non-information technology systems. These parties include trading
counterparties, financial intermediaries such as stock and commodities
exchanges, depositories, clearing agencies, clearing houses and commercial banks
and vendors such as providers of telecommunication services and other utilities.
If third parties with whom we interact have Year 2000 problems that are not
remedied, the following problems could result:
o in the case of vendors, in disruption of important services upon which
we depend, such as telecommunications and electrical power;
o in the case of third-party data providers, in the receipt of inaccurate
or out-of-date information that would impair our ability to perform
critical data functions;
o in the case of financial intermediaries such as exchanges and clearing
agents, in failed trade settlements, an inability to trade in certain
markets and disruption of funding flows;
o in the case of banks and other lenders, in the disruption of capital
flows potentially resulting in liquidity stress; and
o in the case of counterparties and customers, in financial and
accounting difficulties for those parties that expose us to increased
credit risk and lost business.
Disruption or suspension of activity in the world's financial markets
is also possible. In addition, uncertainty about the success of remediation
efforts generally may cause many market participants to reduce the level of
their market activities temporarily as they assess the effectiveness of these
efforts during a "phase-in" period beginning in late 1999. This in turn could
result in a general reduction in trading and other market activities (and lost
revenues) as well as reduced funding availability in late 1999 and early 2000.
We cannot predict the impact that any reduction would have on our business.
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<PAGE> 21
USE OF PROCEEDS
We estimate we will receive $12,132,500 ($13,922,125 if the
underwriters' over-allotment option is exercised in full) from the sale of
2,000,000 shares of common stock and 2,000,000 warrants offered at an assumed
initial public offering price of $7.00 per share and $0.125 per warrant after
deducting the underwriting discount, underwriters' non-accountable expense
allowance and additional offering expenses payable by us (estimated to be
$265,000). The net proceeds are expected to be used as follows:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
AMOUNT PERCENTAGE
------------------- ------------------
<S> <C> <C>
Sales and Marketing (1) $3,500,000 28.9%
Website Enhancement and Programming(2) 2,000,000 16.5
Expansion of Client Service Department(3) 1,000,000 8.2
Potential Acquisitions(4) 1,000,000 8.2
Branch Office Expansion(5) 750,000 6.2
Network Expansion and Upgrade 600,000 5.0
Hiring Additional Management and Personnel 350,000 2.9
Year 2000 Readiness and Testing 100,000 .8
Working Capital and General Corporate Purposes 2,832,500 23.3
------------------- ------------------
12,132,500 100.0%
=================== ==================
</TABLE>
----------------------
(1) Represents costs associated with a national marketing and advertising
campaign, including advertisements in national newspapers and trade
publications and on the Internet, as well as salaries of personnel
engaged in these activities.
(2) Represents amounts to be used to enhance our website and complete the
programming to allow for more efficient execution of transactions
over the Internet, including the acquisition of additional computer
equipment and software.
(3) Represents costs of additional personnel and systems to provide
additional client support and continue software and program
development.
(4) We are continually evaluating potential acquisitions to provide our
clients with the best possible service and products. Currently, we
have no agreements for any specific acquisition.
(5) Management frequently explores possible locations for branch offices.
We currently have no agreement for any specific location in place.
If the underwriter exercises its over-allotment option in full, we will
realize additional net proceeds of $1,799,625 which will be added to our working
capital.
The foregoing represents our best estimate of the allocation of the net
proceeds of this offering based upon the current status of our business. This
estimate is based on certain assumptions, including continued expansion of our
client base and corresponding increases in revenues and that our proposed
network expansion can be completed and new services can be introduced without
unanticipated delays or costs. If any of these factors change, we may find it
necessary to reallocate a portion of the proceeds within the above-described
categories or use portions of the proceeds for other purposes. Our estimates may
prove to be inaccurate, new programs or activities may be undertaken which will
require considerable additional expenditures or unforeseen expenses may occur.
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<PAGE> 22
Based on currently proposed plans and assumptions relating to the
implementation of our business plans, we believe that the proceeds of this
offering, combined with cash flow from operations, will enable us to fund our
planned operations for a period of at least 12 months from the date of this
Prospectus. However, we cannot assure you we will realize cash flow from
operations or that the cash flow will be sufficient. If our plans change, our
assumptions change or prove to be inaccurate or if the proceeds of this offering
otherwise prove to be insufficient to implement our business plans, we may find
it necessary or desirable to reallocate a portion of the proceeds within the
above-described categories, use proceeds for other purposes, seek additional
financing or curtail our operations. We cannot assure you that any additional
financing will be available to us on acceptable terms, or at all.
Proceeds not immediately required for the purposes described above will
be invested principally in United States government securities, short-term
certificates of deposit, money market funds or other short-term interest-bearing
investments.
DIVIDEND POLICY
We have not paid dividends on our common stock and do not intend to pay
dividends for the foreseeable future. We intend to retain any earnings to
finance the development and expansion of our business. Payment of dividends in
the future will be subject to the discretion of our Board of Directors and will
depend upon our ability to generate earnings, our need for capital and our
overall financial condition, and as legally permissible, among other factors.
-18-
<PAGE> 23
DILUTION
The difference between the initial public offering price per share of
common stock and the net tangible book value per share after this offering
constitutes the dilution to investors in this offering. Net tangible book value
per share of common stock is determined by dividing our net tangible book value
(total tangible assets less total liabilities) by the number of shares of common
stock outstanding.
As of January 31, 1999, our net tangible book value was $619,966 or
$0.08 per share of common stock. Net tangible book value represents the amount
of our total assets, less any intangible assets and total liabilities. After
giving effect to the sale of the 2,000,000 shares of common stock and 2,000,000
warrants offered through this Prospectus (at an assumed initial public offering
price of $7.00 per share and $0.125 per warrant), and after deducting the
underwriting discount and other estimated expenses of the offering), our
adjusted pro forma net tangible book value as of January 31, 1999, would have
been $12,752,466 or $1.28 per share. This represents an immediate increase in
net tangible book value of $1.20 per share to existing shareholders and an
immediate dilution of $5.72 per share to investors in the offering. The
following table illustrates this per share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Initial public offering price............................... $7.00
Net tangible book value before offering................ $0.08
Increase attributable to investors in this offering.... $1.20
---------
Net tangible book value after offering................. .$1.28
-----------
Dilution to new investors................................... $5.72
===========
</TABLE>
If the underwriters exercise their over-allotment option in full, the
pro forma adjusted net tangible book value per share of common stock after the
offering would be $1.42, which would result in dilution to your investment of
$5.58 per share of common stock.
The following table shows, at January 31, 1999, a comparison of the
total number of shares of common stock purchased from us, the total
consideration paid and the average price paid per share by existing common
shareholders and to be paid by investors who purchase shares of common stock in
this offering (at an assumed initial public offering price of $7.00 per share):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------------ -------------------------------- PRICE
NUMBER PERCENT DOLLARS PERCENT PER SHARE
-------------- ----------- ---------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Existing Common Shareholders........ 8,000,000 80.0% $ 165,000 1.2% $0.02
New Investors....................... 2,000,000 20.0 14,000,000 98.8 $7.00
---------- ------- ------------- -----------
Total.......................... 10,000,000 100.0% $14,165,000 100.0%
========== ======= ============= ===========
</TABLE>
The above tables assume no exercise of the underwriter's over-allotment
option. If the option is exercised in full, the new investors will have paid
$16,000,000 for 2,300,000 shares of common stock, representing approximately
22.3% of the total number of shares of common stock outstanding.
-19-
<PAGE> 24
CAPITALIZATION
The following table sets forth our capitalization as of January 31,
1999, adjusted to give effect to the sale of 2,000,000 shares of common stock
and 2,000,000 warrants offered in this offering at an assumed initial public
offering price of $7.00 per share and $0.125 per warrant and the receipt of the
net proceeds from the sale. You should read this table in conjunction with our
financial statements and the notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JANUARY 31, 1999
--------------------------------------
AS
ACTUAL ADJUSTED(1)
---------------- ------------------
<S> <C> <C>
Short-term borrowings...................................................... $ 125,000 $ 125,000
Long-term borrowings....................................................... 400,000 400,000
Shareholders' equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, 300 shares
of Series A Redeemable Preferred Stock, stated value of $1,000 per
share, issued and
outstanding....................................................... 300,000 300,000
Common stock, $0.01 par value, 30,000,000 shares
authorized; 8,000,000 shares (actual), 10,000,000
shares (as adjusted) issued and outstanding....................... 80,000 100,000
Additional paid-in capital............................................ 95,026 12,207,526
Retained earnings..................................................... 144,940 144,940
---------------- ------------------
Total shareholders' equity................................................. 619,966 12,752,466
---------------- ------------------
Total capitalization....................................................... $ 1,144,966 $ 13,277,466
================ ==================
</TABLE>
- -----------------
(1) Adjusted to reflect the sale of 2,000,000 shares of common stock and
2,000,000 warrants in this offering at an assumed initial public
offering price of $7.00 per share and $0.125 per warrant and the
application of the net proceeds therefrom (after deducting the
underwriting discount, non-accountable expense allowance and the
estimated expenses of this offering).
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
onlinetradinginc.com is a fully-disclosed brokerage firm registered
with the SEC, the NASD, the Municipal Securities Rulemaking Board ("MSRB") and
41 state securities divisions and the District of Columbia. We have applications
pending with the remaining 8 continental states, and expect to be registered in
every state (except Hawaii and Puerto Rico) by May, 1999.
We are a full-service financial services firm targeting experienced
investors and small to mid-sized financial institutions (such as hedge funds,
money managers, mutual funds and pension funds.) We have generated positive
operating cash flows since inception, and we intend to continue our business
strategy while increasing brand awareness and customer loyalty.
We plan to expand our business and operations by utilizing, among other
things, the Internet to efficiently market and distribute our services to
additional potential clients. The anticipated expansion will require additional
capital to advertise nationally, improve the functionality of our web site,
expand our computer network, purchase additional equipment and hire additional
administrative and customer service personnel.
RESULTS OF OPERATIONS
YEAR ENDED JANUARY 31, 1999 COMPARED WITH YEAR ENDED JANUARY 31, 1998
Our total revenue for the fiscal year ended January 31, 1999 ("Fiscal
1999") was $5,992,064, a 69% increase over the total revenue of $3,548,385 for
the fiscal year ended January 31, 1998 ("Fiscal 1998"). Total revenue increased
as a result of an additional $1,851,699 in commissions, an additional $75,512 in
interest revenues due to an improved interest sharing agreement with the
Clearing Firm, and $328,495 in proprietary trading profits.
The increase in commission revenues was primarily due to servicing new
institutional and retail customer business. In Fiscal 1999, we began doing
business with ten new banks and three new mutual funds. We intend to continue to
attract new institutional business through targeted marketing directed towards
the small to midsize financial institution and experienced institutional
brokers. We added one new branch office late in the last quarter of Fiscal 1999
which also added an additional $127,864 in commission revenue.
The company had pretax earnings of $176,948 and net income of $117,298
for Fiscal 1999 compared to net losses of $19,428 for Fiscal 1998. The increase
in net income resulted from an increase in operating revenues combined with an
overall increase in our operating gross margins. We intend to continue our focus
on reducing transaction costs as our transaction volume continues to increase.
We paid $1,460,000 in management bonuses for Fiscal 1999 and $602,000 for Fiscal
1998. Pursuant to new employment agreements effective as of February 1, 1999,
the compensation of executive shareholder management has been set and
limitations have been placed on the amount of bonuses executive shareholder
management may receive.
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Our largest operating expense is our cost to clear trades through the
Clearing Firm, Instinet and Floorbrokers, i.e., our clearing costs. Our clearing
costs increased from $1,592,325 for Fiscal 1998 to $1,840,003 for Fiscal 1999.
Although the dollar amount of this expense increased, the expense as a
percentage of commission income earned decreased from 43.3% to 33.3%. This
decrease in variable costs percentage was primarily a result of negotiating
lower clearing rates with the Clearing Firm. The commission expense paid to
brokers increased from $200,499 in Fiscal 1998 to $1,144,616 in Fiscal 1999.
This increase was a result of hiring an additional five commission-based brokers
late in Fiscal 1998 and seven additional commission-based brokers in Fiscal
1999. Our salaries and benefits increased from $599,603 in Fiscal 1998 to
$736,385 for Fiscal 1999. The increase was a result of hiring our President and
Chief Financial Officer in March 1998, and instituting a retirement plan whereby
eligible employees may contribute up to $500 per month for which we match dollar
for dollar up to 3% of the employee's compensation. We contributed a total of
$46,987 for Fiscal 1999.
Occupancy and administrative expenses were $406,814 in Fiscal 1999 as
compared to $324,499 in Fiscal 1998. Although the expense increased in terms of
actual dollars, it declined as a percentage of revenues. We anticipate that
occupancy and administrative expenses will increase in the future as we expand
our number of branch offices and incur additional office lease expense. Included
in our occupancy and administrative expense was our telephone expense. Our
telephone and communication expenses increased from $96,150 in Fiscal 1998 to
$108,389 in Fiscal 1999. We anticipate these costs to continue to increase in
terms of dollar amounts, but as we grow, our telephone rates per minute have
declined and should continue to decline as a result of our increased long
distance volume.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily by raising
$465,000 in private equity and $525,000 in debt via subordinated loans.
Subordinated loans are traditional promissory notes that conform to NASD
standards and are, by agreement with the lender, subordinated to the claims of
all other creditors. Due to the fact that these loans are subordinated and that
they contain certain prepayment and repayment restrictions, SEC and NASD rules
permit us to consider our subordinated loans as part of our net capital. We
intend to repay the subordinated loans as they reach their maturity. In
addition, as co-underwriters of this offering, we may, if necessary, accept
temporary subordinated loans that will increase our net capital during the days
prior to the consummation of the offering to provide a reserve against the
anticipated increase in securities we will be holding and corresponding decrease
in liquid assets.
Cash and cash equivalents at January 31, 1999 were $1,005,944 as
compared to $218,335 at January 31, 1998. Working capital at January 31, 1999
was $980,822 as compared to $864,489 at January 31, 1998. Our ratio of current
assets to current liabilities was almost 2 to 1 at January 31, 1999, compared to
3.5 to 1 at January 31, 1998.
Pursuant to the SEC's net capital rule, we are currently required to
maintain net capital of $100,000 and a ratio of aggregate indebtedness to net
capital (the "net capital ratio") not to exceed 15 to 1. As of January 31, 1999,
our net capital ratio was 1.11 to 1. SEC rules also prohibit "equity capital"
(which, pursuant to the net capital rule includes the subordinated loans) from
being withdrawn or cash dividends from being paid if our net capital ratio would
exceed 10 to 1 or if we would have less than our minimum required net capital.
Accordingly, our ability to repay the subordinated loans may be restricted
pursuant to the net capital rule. At January 31, 1999, we had net capital of
$894,395, which was $794,395 in excess of our minimum required net capital.
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Net cash provided by operating activities was $837,167 in Fiscal 1999
and $92,246 in Fiscal 1998. The increase in cash flow from operating activities
was primarily the result of $117,298 in net income and an increase in accounts
payable and accrued liabilities.
Net cash used in investing activities was $74,558 during Fiscal 1999
and $83,345 during Fiscal 1998. Net cash used in investing activities was
primarily a result of purchasing additional computer systems, office equipment
and leasehold improvements. In addition, we signed a three-year operating lease
in March 1999 to secure the use of additional computers, equipment, and office
furniture.
Net cash provided by financing activities was $25,000 in Fiscal 1999
and $0 in Fiscal 1998. The increase in cash flows from financing activities was
a result of securing a $25,000 subordinated loan.
Based on currently proposed plans and assumptions relating to the
implementation of our business plan, we believe that the proceeds of this
offering, combined with cash flow from operations, will enable us to fund our
planned operations for a period of at least 12 months from the date of this
Prospectus. However, we cannot assure you that we will realize cash flow from
operations or that the cash flow will be sufficient. If not, or if our plans
change, our assumptions change or prove to be inaccurate, or if the proceeds of
this offering otherwise prove to be insufficient to implement our business
plans, we may require additional financing and may seek to raise funds through
subsequent equity or debt financings or other sources. We cannot assure you that
additional funds will be available in adequate amounts or on acceptable terms.
If funds are needed but are not available, our business would be harmed.
We anticipate that we will incur capital expenditures of approximately
$2,700,000 through the fiscal year ended January 31, 2000. These acquisitions
will be primarily computer equipment and software to increase the number of
users capable of accessing our systems and continue to enhance our worldwide
website.
ACCOUNTING STANDARDS
We intend to grant stock options to certain employees and consultants
with an exercise price not less than the fair market value at the date of grant.
Certain of these options will be granted as of the date of this Prospectus. We
will account for stock option grants to employees in accordance with Financial
Accounting Standards Board Statement No. 123, "Accounting for Stock-Based
Compensation."
YEAR 2000 READINESS
We have conducted an assessment of the Year 2000 issue and the
potential effect it will have on us and our business. We have determined that we
will not be required to materially modify or replace our information and
non-information technology systems to properly recognize and utilize dates
beyond December 31, 1999. We presently believe that with modifications
previously made to existing software, conversions to new software and
replacement of some hardware, the Year 2000 issue will be satisfactorily
resolved in our own
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<PAGE> 28
systems. However, even if these changes are successful, failure of third
parties, to which we are financially or operationally linked, to address their
own system problems could have a material adverse effect on us. Furthermore, the
investing and trading patterns of clients may be affected by Year 2000 issues as
clients become concerned about the Year 2000 issue and the effect it will have
on the U.S. and international stock markets and the securities industry
generally. Changes in these patterns may harm our business.
We continue to monitor and review the Year 2000 issue and, as
appropriate, modify or replace the software (and replace some hardware) in our
computer systems in our main and branch offices. We continue to monitor our own
internal systems to prepare for Year 2000 compliance. Our testing is expected to
involve major market participants, including competing firms and financial
intermediaries, such as stock exchanges and clearing agencies that are prominent
in the U.S. We have also initiated communications with counter-parties,
intermediaries and vendors with whom we have important financial and operational
relationships to determine the extent to which they are vulnerable to the Year
2000 issue. We have not yet received sufficient information from these parties
about their remediation plans to predict the outcome of their efforts.
To date, Year 2000 readiness has cost us an estimated $85,000
(including upgrades to existing systems) and will cost approximately $100,000
more to complete. Our Year 2000 program costs will be funded from the proceeds
of this offering. These costs are expensed as incurred. We cannot assure you
that these estimates will be correct; actual results could differ materially
from our plans.
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BUSINESS
OVERVIEW
onlinetradinginc.com provides financial brokerage services to
experienced investors and small to mid-sized financial institutions through a
variety of communication mediums, including the Internet. Unlike our name
suggests, we are not merely a real time online financial brokerage firm which
allows clients to trade directly over the Internet. We are a full-service
financial services firm with direct access to the various securities markets via
our computerized intranet infrastructure that enhances our ability to obtain the
simplest, most direct execution of orders for our clients at the best possible
price. In addition, as a result of the technology we use, our brokers and our
clients have access to the most up-to-date electronic information on stocks,
market indices, analysts' research and news. We provide our clients, through
experienced brokers, the ability to execute orders before and after traditional
market hours. Moreover, we are in the process of upgrading our software and
technology to enable our clients to execute trades more efficiently over the
Internet.
Our manner of executing trades utilizing our computerized intranet
infrastructure, eliminates middlemen to save costs and increase investing
efficiency. We believe our commitment to providing the best stock execution
prices directly to our clients, our refusal to accept payment for directing
orders to other broker-dealers (i.e., accepting payment for order flow), and our
combination of information and research tools will provide us a strategic
advantage over existing discount, deep discount, and Internet brokerage firms.
We were incorporated in Florida in September 1995 as Online Trading,
Inc. In February 1999, we changed our name from Online Trading Inc. to
onlinetradinginc.com corp. and began doing business under the name
onlinetradinginc.com.
THE MARKET
The financial services industry has changed considerably over the last
25 years. Before 1975, all stock exchanges required brokers to charge fixed
minimum commissions for trades of listed stock. Under pressure from Congress,
the Department of Justice and the SEC, in 1975, these policies were changed,
which allowed for negotiated commissions and the unbundling of investment
services. The unbundling of brokerage services from other financial services has
permitted investors to pick and choose among various financial providers for
specific services. All of these developments brought about the advent and
proliferation of the discount brokerage firm, which could separate financial
advisory services from execution services, and could execute trades at a lower
cost than a full-service broker.
As a result, discount brokerage firms willing to accept stock trades
for lower commissions have begun to proliferate. Like full service brokerage
firms, discount brokerage firms are covered by the government-sponsored
Securities Investor Protection Corporation ("SIPC") that insures accounts up to
$100,000 in cash and up to $400,000 in other assets. Unlike full service
brokerage firms, however, many discount brokerage firms do not typically provide
the full breadth of products and services offered by full-service firms, such as
regular access to a broker willing to make recommendations or discuss possible
investments, elaborate research reports or access to initial public offerings.
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As a result of increased competition among brokerage firms, deep
discount brokerage firms who advertise very low commission rates also entered
the market. These firms generally provide very little, if any, services and
merely effect trades for an extremely low price. However, many of these firms
either (1) sell the order received from their clients to another brokerage firm
that makes a market in the stock being traded, or (2) charge the client a
mark-up or mark-down. We believe the selling of order flow creates inefficiency
in the trade execution which may increase the client's overall cost of the
transaction.
At the same time, the use of the Internet as a tool for obtaining
information, communicating and effecting commerce is also changing the financial
services industry. The Internet provides investors with a wealth of information
about investing, including stock picks, technical charts, analysis and financial
corporate news. As a result, investors are more self-reliant and value
conscious, are managing their own money and are increasingly reluctant to pay
high fees to full-service retail brokers. This has led to significant growth in
online investing and the entry into the market of electronic or online trading
which has experienced phenomenal growth since the Internet "e-brokerages" were
introduced in 1994.
As a result of the growth of the Internet as a tool to obtain
information, online trading is now the fastest growing segment of the brokerage
industry and is expected to continue to grow significantly. In a report dated
March 11, 1999, Forrester Research, Inc., an independent research firm,
estimates that during 1998, the number of North American households investing
online nearly doubled, reaching just under 2.4 million by the start of 1999 and
that the number of households investing online will increase to 4.3 million by
the end of 2000. In addition, industry experts project that retail commissions
generated by the online trading market will grow from approximately $268
million, or 15% of the commissions generated by discount brokerages in 1996, to
as much as $2.2 billion, or 60% of total discount brokerage commissions, by
2001. Customers at the biggest online brokerage firms average 20 to 25 trades
per year, four to five times the number of trades per account executed at
traditional full-service brokerage firms. We believe that we are positioned to
service financially sophisticated and technologically capable brokerage
customers. The marketplace is demanding lower commissions, better trade
executions, access to more information and the convenience of 24 hour account
monitoring.
OUR BUSINESS
GENERAL FINANCIAL BROKERAGE SERVICES
We provide financial brokerage services to experienced investors,
including both individuals and small to mid-sized institutions (such as hedge
funds, money managers, mutual funds and pension funds). To support the
investment services provided to these investors, we effect transactions in
equity securities strictly on an agency basis for our clients. This means that
we always charge only an agreed upon commission and never earn income from
marking up or marking down our clients' stock orders. Our retail sales division
consists of 30 registered representatives of which six are registered
principals. Our retail customer accounts are carried on a "fully disclosed"
basis by the Clearing Firm, pursuant to a clearing agreement. This agreement
provides that our clients' securities positions and credit balances carry
unlimited insurance through Travelers Casualty Company that is supplemental to
standard SIPC protection. All customer credit balances are subject to immediate
withdrawal from the Clearing Firm, at the discretion of the client.
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We pride ourselves on effecting equity transactions only on an agency
basis as opposed to on a principal basis, meaning, we act as the agent for our
clients directly in the market. The opposite of an agency trade in the brokerage
industry is considered a principal trade. When performing a transaction on a
principal basis, brokerage firms are permitted to accept a client's order to
purchase, immediately purchase the securities in the market for the firm, and
then sell the securities to the client for a mark-up. Notwithstanding that, we
will not specifically preclude effecting transactions on a principal basis where
a client demands that we do so.
We also provide our clients with direct access to our trading desks
which are online directly with the various stock exchanges and institutional
buyers and sellers via various electronic crossing networks. Our brokers are
committed to using their trading desks to obtain for our clients the fastest
execution of their order at the best possible price at the time the order is
given. In addition, as a result of the technology we use, we can access the most
up-to-date electronic news information and research reports.
Given the trend towards communicating, obtaining information, and
effecting transactions through electronic means, we are committed to serving the
changing needs of our clients. As a result, we have a team of well-trained
registered brokers available to assist our clients by telephone, our intranet or
the Internet. Brokers are available 12 hours a day from 7:00 AM to 7:00 PM EST
Monday through Friday.
INTERNET-BASED BROKERAGE SERVICES
Through our Internet site, our clients currently have on-line access to
their account information. This electronic access enables our clients to review
the securities positions in their portfolio, confirm their buying power and
margin balances (if applicable), obtain stock quotes, enter orders for
execution, and review their recent trading activity. In addition to providing
information for their particular account, we also provide our clients, via the
Internet, pertinent market information regarding timely analysts' reports,
relevant earnings reports sorted by those companies that exceeded earnings
expectations and those that fell below expected earnings. We also provide our
clients with information about the overnight markets and the futures markets,
stocks that are trading before the market opens, and major company news through
the Internet.
We intend to use the Internet in various ways to help expand our
business. First, we intend to use the Internet to help our existing brokers
serve our clients better. The Internet will help our brokers disseminate
information to clients simultaneously, thereby allowing our brokers to
efficiently serve more clients. Second, we intend to use the Internet to serve
an ever growing number of investors who want to make 100% of their trading and
investment decisions on their own. Prior to providing this service, based upon
express representations and qualifications of prospective clients, we
pre-qualify these prospective clients to help ensure they are capable of making
their own trading and investing decisions.
We have a strong commitment to technology and are in the process of
upgrading the software and technology that enables our brokers and clients to
more efficiently use the Internet. A portion of the net proceeds of this
offering will be used to complete this upgrade. We anticipate introducing this
improved service to our clients by August, 1999.
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PROPRIETARY TRADING
We operate a small proprietary trading department separate and distinct
from all customer commission business. This department operates as a profit
center under strict internal controls. We charge the proprietary trading desk
commission rates above our costs, and we pay the department a percentage of the
trading profits generated. As a result, we at times maintain inventories in
equity securities on both a long and short basis. We never fill clients' orders
from the firm's inventories. While long inventory positions represent our
ownership of securities, short inventory positions represent obligations to
deliver specified securities at the current market price, which may differ from
market prices prevailing at the time of completion of the transaction.
Accordingly, both long and short inventory positions may result in losses or
gains as market values of securities fluctuate. To reduce the risk of losses,
long and short positions are revalued to the current market price each day and
are continuously monitored by us.
OUR BUSINESS STRATEGY
We believe that we have been successful in creating a new level of
service in the financial services industry by using technology to provide
experienced clients direct access, through brokers, intranets and the Internet,
to a trading desk which goes directly to the source and avoids the middleman to
obtain the best possible execution price (i.e., a "Wall Street style trading
desk"). Our strategy is designed to ensure that the client obtains the best
possible execution price and access to relevant market information. We believe
that opportunities exist in the financial services industry for a company that
is able to provide experienced investors with the overall cost-savings created
by (1) direct access to professional trade executions, (2) access to up-to-date
market information, and (3) the convenience of trading over the Internet.
onlinetradinginc.com was founded on the principle philosophy of providing our
brokers and clients the best execution prices along with the most relevant
market information and investment research. We consistently analyze new
technologies and communication mediums, including the Internet, that will enable
our brokers to better serve our clients. We are determined to offer our clients,
regardless of the communication medium used, the simplest, most direct form of
stock execution.
Our goal is to become a leader in the financial services industry and
build market share by capitalizing on the changes occurring in the financial
services industry and providing our clients with specialized services for
competitive, fully disclosed commission rates. We intend to achieve our goal by:
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o targeting experienced investors and small to mid-sized financial
institutions who typically (1) execute more trades per year than other
categories of investors, (2) require access to market information, and
(3) require fast execution of their orders;
o providing value to our clients at the lowest overall cost, including
direct access to our trading desk which enables them to realize the
best possible execution price;
o providing our clients with value-added services, including access to
well-trained brokers and up-to-date market information;
o creating technologically innovative solutions to satisfy client needs,
including efficient trading directly over the Internet; and
o providing our brokers with the tools to serve the needs of our
experienced clients.
TARGETING EXPERIENCED INVESTORS. Our clients are typically experienced
investors and small to mid-sized financial institutions, including professional
money managers, hedge fund managers and registered investment advisors. These
active market participants on average execute more trades per year than
traditional retail investors. Experienced investors also demand lower
commissions, real-time access to information and quick order execution in order
to effectuate their trading and investing strategies. We believe that the market
for these clients is currently under-serviced and, as a result, intend to
continue to target this market. We have established specific guidelines and
suitability minimums for un-assisted Internet trading accounts. The requirements
include, $100,000 minimum initial deposit, at least two years of trading or
investing experience, and net worth of at least $300,000. Through a standard
interview and based upon specific representations and qualifications of each
prospective client, we pre-qualify our accounts in an attempt to screen out less
experienced investors. In addition, we typically do not establish active trading
accounts for retirement or pension accounts.
PROVIDING VALUE TO OUR CLIENTS AT THE BEST POSSIBLE PRICE. Direct
access to our trading desk enables our clients to realize the best possible
execution price. While many discount brokerage firms may charge a significantly
lower flat fee for trades, many of these firms actually realize a gain on these
transactions by either (1) selling the order to another firm that will earn a
spread between the bid and ask price, or (2) charging the client a mark up or
mark down. As a result, the firm is compensated by the difference between what
the firm pays for the stock and what the client ultimately pays for the stock or
receives from the sale of the stock. Thus, any savings the client may have
realized by paying less in commissions are lost when the client eventually pays
more for the stock or sells the stock for less. We do not benefit from either of
these types of activities. We primarily utilize electronic execution systems
that enable money managers, professional traders, large institutions and
investors the ability to trade efficiently. We pass on the savings realized from
the electronic execution systems, which historically have been kept by
professionals and large institutions, directly to our clients.
PROVIDING OUR CLIENTS WITH VALUE-ADDED SERVICES. In addition to
providing our clients with lower overall costs for effecting trades, we also
provide our clients with some of the products and services provided by
full-service firms, including access to a pool of well-trained brokers and the
most current electronic news information and research reports. Most discount and
online brokerage firms do not have a staff of well-trained brokers readily
available to assist
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clients if they need investment advice. Our brokers are also available by
telephone in the event of electronic systems failures. We believe our team of
well-trained brokers offers our clients more than just execution services. At
onlinetradinginc.com, we provide our clients and brokers with electronic
research and electronic news from an ever growing database of news vendors to
enable them to make better informed business decisions. As the Internet expands,
research and market news become available 24 hours per day. We have the ability
to trade before and after traditional market hours (7:00 a.m. to 7:00 p.m.) and
provide this service to our clients.
CREATING TECHNOLOGICALLY INNOVATIVE SOLUTIONS TO SATISFY CLIENTS'
NEEDS. We are actively pursuing additional technologies to service the rapidly
evolving financial services industry. Specifically, we are developing technology
to enable our clients to trade equity securities more efficiently via the
Internet. We are also exploring other solutions to improve our products and
services to satisfy our clients' needs. We believe that a demand exists for a
brokerage firm that can provide experienced traditional retail brokers with the
technology to directly execute their own clients' orders. We also believe that
significant demand exists from experienced brokers who want more market
information to better serve clients. We have found that even though clients have
access to more information via the Internet, the majority of clients still
desire the assistance of an experienced broker to help guide their investment
decisions. We intend to enlarge our existing branch offices and expand our
branch office locations to every major metropolitan city across the U.S. and
provide brokers at their own locations with their own "Wall Street style trading
desk".
In addition to the above, we are continually exploring strategic
alliances, acquisitions and other opportunities to provide our clients with the
best possible service and products. We do not currently have any understandings,
commitments, arrangements or agreements with respect to any of those types of
arrangements.
STRATEGIC RELATIONSHIPS
We currently utilize the services of Bear Stearns Securities Corp. (the
"Clearing Firm") for all custody and clearing issues associated with brokerage
transactions. The Clearing Firm is the seventh largest securities firm in the
U.S. We realize the following benefits from our relationship with the Clearing
Firm:
o quality safekeeping and protection on entire net equity (cash and
securities) on all accounts;
o ability to participate in initial public offerings and other investment
banking transactions;
o ability to participate in a large database of no-load mutual funds; and
o professional and prompt handling of institutional and managed accounts.
Our relationship with Instinet Corporation affords us access to
information and enables us to trade directly and anonymously with other
brokerage firms, money managers, professional traders and large financial
institutions on behalf of our clients. As a result of this relationship, we are
also able to trade equities before the market opens at 9:30 a.m. and after the
market closes at 4:00 p.m. We pass on these advantages and efficiencies directly
to our clients, thereby
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affording them many more trading and investment opportunities than they would
have otherwise. Management believes that some of our clients' best opportunities
have come from the ability to take advantage of market moving news outside of
traditional market hours.
We are actively pursuing additional alliances with various companies to
increase trading volume and operational efficiencies and to further enhance name
recognition. In addition, we regularly examine new ways to provide additional
products and services to our clients.
SALES AND MARKETING
As evidence that a demand exists for our services, to date we have
experienced significant revenue growth and positive cash flows, all without a
formal marketing program. However, upon completion of the offering, we will seek
to increase onlinetradinginc.com's brand recognition to attract new brokers and
clients. We are developing a comprehensive marketing plan to attract more
clients, experienced brokers, as well as build market awareness, educate the
investing public and develop brand name recognition and loyalty. We believe that
our unique approach to doing business will create a loyal client base. We intend
to expand our market share through, among other things, direct-response
advertising, advertising on our own and other Web sites, a public relations
program, live seminars and television airtime. From time to time, we may choose
to increase spending on advertising to target specific groups of investors or to
decrease advertising expenditures in response to market conditions.
Initially, we intend to focus our marketing efforts on direct-mail or
direct-response advertising of our brokerage services as a less expensive and
more efficient way of building awareness about us, our products and our
services. Print advertisements will be placed in a broad range of business,
technology and financial publications, including, but not limited to THE WALL
STREET JOURNAL, BARRON'S, INVESTOR'S BUSINESS DAILY, AND FORBES. Online
advertising may be conducted through America Online, CompuServe and popular Web
sites such as: Yahoo!, theStreet.com, Wall Street Journal Interactive and
Barron's Online. We also may advertise on CNBC, CNNFN and other major business
cable television networks.
COMPETITION
The market for discount brokerage services, and particularly electronic
brokerage services, is new, rapidly evolving and intensely competitive and has
few barriers to entry. We expect competition to continue and intensify in the
future. We encounter direct competition from numerous other brokerage firms,
many of which provide electronic brokerage services which we currently do not
provide. These competitors include discount brokerage firms like Charles Schwab
& Co., Inc., Quick & Reilly, Inc. and E*Trade Group, Inc. We also encounter
competition from established full-commission brokerage firms as well as
financial institutions, mutual fund sponsors and other organizations, some of
which provide electronic brokerage services.
We believe that the principal competitive factors affecting the market
for our brokerage services are speed and accuracy of order execution, price and
reliability of trading systems, quality of client service, amount and timeliness
of information provided, ease of use, and innovation. Based on management's
experience and the success we have enjoyed to date, we believe that we presently
compete effectively with respect to each of these factors.
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<PAGE> 36
A number of our competitors have significantly greater financial,
technical, marketing and other resources. Some of our competitors also offer a
wider range of services and financial products and have greater name recognition
and more extensive client bases. These competitors may be able to respond more
quickly to new or changing opportunities, technologies, and client requirements,
and may be able to undertake more extensive promotional activities, offer more
attractive terms to clients, and adopt more aggressive pricing policies.
Moreover, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties or may
consolidate to enhance their services and products. We expect that new
competitors or alliances among competitors will emerge and may acquire
significant market share.
There can be no assurance that we will be able to compete effectively
with current or future competitors or that the competitive pressures we face
will not harm our business.
GOVERNMENT REGULATION
BROKER-DEALER REGULATION
The securities industry is subject to extensive regulation under
federal and state law. The SEC is the federal agency responsible for
administering the federal securities laws. In general, broker-dealers are
required to register with the SEC under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). We are a broker-dealer registered with the SEC.
Under the Exchange Act, every registered broker-dealer that does business with
the public is required to be a member of and is subject to the rules of the
NASD. The NASD has established Conduct Rules for all securities transactions
among broker-dealers and private investors, trading rules for the
over-the-counter markets, and operational rules for its member firms. The NASD
conducts examinations of member firms, investigates possible violations of the
federal securities laws and its own rules, and conducts disciplinary proceedings
involving member firms and associated individuals. The NASD administers
qualification testing for all securities principals and registered
representatives for its own account and on behalf of the state securities
authorities.
We are also subject to regulation under state law. We are currently
registered as a broker-dealer in 41 states and the District of Columbia. We have
applications pending with the remaining 8 continental states and expect to be
registered in every state (except Hawaii and Puerto Rico) by May 1999. An
amendment to the federal securities laws prohibits the states from imposing
substantive requirements on broker-dealers which exceed those imposed under
federal law. The recent amendment, however, does not preclude the states from
imposing registration requirements on broker-dealers that operate within their
jurisdiction or from sanctioning these broker-dealers for engaging in
misconduct.
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NET CAPITAL REQUIREMENTS; LIQUIDITY
As a registered broker-dealer and member of the NASD, we are subject to
the Net Capital Rule. The Net Capital Rule, which specifies minimum net capital
requirements for registered brokers-dealers, is designed to measure the general
financial integrity and liquidity of a broker-dealer and requires that at least
a minimum part of its assets be kept in relatively liquid form. In general, net
capital is defined as net worth (assets minus liabilities), plus qualifying
subordinated borrowings and certain discretionary liabilities, and less certain
mandatory deductions that result from excluding assets that are not readily
convertible into cash and from valuing conservatively certain other assets.
Among these deductions are adjustments (called "haircuts"), which reflect the
possibility of a decline in the market value of an asset prior to disposition.
Failure to maintain the required net capital may subject a firm to
suspension or revocation of registration by the SEC and suspension or expulsion
by the NASD and other regulatory bodies and ultimately could require the firm's
liquidation. The Net Capital Rule prohibits payments of dividends, redemption of
stock, the prepayment of subordinated indebtedness and the making of any
unsecured advance or loan to a shareholder, employee or affiliate, if the
payment would reduce the firm's net capital below a certain level.
The Net Capital Rule also provides that the SEC may restrict for up to
20 business days any withdrawal of equity capital, or unsecured loans or
advances to shareholders, employees or affiliates ("capital withdrawal") if the
capital withdrawal, together with all other net capital withdrawals during a
30-day period, exceeds 30% of excess net capital and the SEC concludes that the
capital withdrawal may be detrimental to the financial integrity of the
broker-dealer. In addition, the Net Capital Rule provides that the total
outstanding principal amount of a broker-dealer's indebtedness under certain
subordination agreements, the proceeds of which are included in its net capital,
may not exceed 70% of the sum of the outstanding principal amount of all
subordinated indebtedness included in net capital, par or stated value of
capital stock, paid in capital in excess of par, retained earnings and other
capital accounts for a period in excess of 90 days.
A change in the Net Capital Rule, the imposition of new rules or any
unusually large charge against net capital could limit those of our operations
that require the intensive use of capital, such as the financing of client
account balances, and also could restrict our ability to pay dividends, repay
debt and repurchase shares of our outstanding stock. A significant operating
loss or any unusually large charge against net capital could adversely affect
our ability to expand or even maintain our present levels of business, which
could harm our business.
We are a member of SIPC which provides, in the event of the liquidation
of a broker-dealer, protection for clients' accounts up to $500,000, subject to
a limitation of $100,000 for claims for cash balances. Our clients are carried
on the books and records of the Clearing Firm. The Clearing Firm has obtained
unlimited insurance through Travelers Casualty Company for the benefit of our
clients' accounts that is supplemental to SIPC protection.
ADDITIONAL REGULATION
Due to the increasing popularity and use of the Internet and other
online services, various regulatory authorities are considering laws and/or
regulations with respect to the Internet or other online services covering
issues such as user privacy, pricing, content copyrights, and quality of
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services. In addition, the growth and development of the market for online
commerce may prompt more stringent consumer protection laws that may impose
additional burdens on those companies conducting business online. Moreover, the
recent increase in the number of complaints by online traders could lead to more
stringent regulations of online trading firms and their practices by the SEC,
NASD and other regulatory agencies. Furthermore, the applicability to the
Internet and other online services of existing laws in various jurisdictions
governing issues such as property ownership, sales and other taxes and personal
privacy is uncertain and may take years to resolve. Finally, as our services are
available over the Internet in multiple states and foreign countries, and as we
have numerous clients residing in these states and foreign countries, these
jurisdictions may claim that our company is required to qualify to do business
as a foreign corporation in each such state and foreign country. While our
company is currently registered as a broker-dealer in 41 states, we are
qualified to do business as a foreign corporation in only a few states; failure
by our company to qualify as a broker-dealer in other jurisdictions or as an
out-of-state or "foreign" corporation in a jurisdiction where it is required to
do so could subject our company to taxes and penalties for the failure to
qualify. Our business could be harmed by any new legislation or regulation, the
application of laws and regulations from jurisdictions whose laws do not
currently apply to our business or the applications of existing laws and
regulations to the Internet and other online services.
EMPLOYEES
We currently have 34 full-time employees, of which 31 are registered
representatives and one of the remaining three has begun the registration
process. The employees are operating from the following branch locations:
Boca Raton, FL
Boston, MA
Osterville, MA (Cape Cod)
Pittsburgh, PA
Troy, MI
Hudson, OH
We have five people in management, 24 in sales, and four people in
administration. No employee is covered by a collective bargaining agreement or
is represented by a labor union. We consider our employee relations to be
excellent. We also have entered into independent contractor arrangements with
other individuals on an as-needed basis to assist with programming and
developing proprietary technologies.
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<PAGE> 39
FACILITIES
Our principal executive offices are located in an approximately 6,700
square foot facility in Boca Raton, Florida. This facility is occupied pursuant
to a lease expiring February 28, 2007 at a current annual rent of approximately
$118,000. We also lease approximately 1,200 square feet of office space for our
branch office in Osterville, Massachusetts. This space is occupied pursuant to a
lease expiring on November 30, 2003, at an annual rent of $24,000, with an
option to renew for an additional five-year term period. Additionally, we lease
approximately 1,300 square feet of office space for our branch office in
Pittsburgh, Pennsylvania. This office is occupied pursuant to a lease expiring
in February 2000 at an annual rent of $21,384. Finally, we lease approximately
500 square feet of office space for our branch office in Troy, Michigan pursuant
to a lease expiring in April, 1999 with an option to renew month-to-month for a
period of up to six additional months, at an annual rent of $7,200.
We have branch offices in Boston, Massachusetts, and Hudson, Ohio;
however, we are not a party to any lease agreements. The brokers established in
those offices have entered into the lease agreements and are responsible for the
lease obligations.
Management believes the existence of these branch offices and the
manner in which they are set up will be helpful if the company were to
experience systems failure. If one of our offices were not operational, under
certain circumstances, some of our other offices would continue to service
clients through their facilities. By way of example and not limitation, our
phone system has the ability to re-route calls to different locations in the
event the phone system for one location were to fail.
LEGAL PROCEEDINGS
We are not a party to any material proceedings.
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<PAGE> 40
MANAGEMENT
The following table sets forth the names, ages and positions held with
respect to each Director and Executive Officer:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----- ----- ---------
<S> <C>
Andrew A. Allen 39 Chairman of the Board, Chief Executive
Officer and Director
E. Steven zum Tobel 32 President, Chief Financial Officer, and
Director
Farshid Tafazzoli 26 Chief Information Officer and Director
Derek J. Hernquist 27 Vice President of Operations, Secretary and
Director
Benedict S. Gambino 41 Director
</TABLE>
- -----------
ANDREW A. ALLEN. Mr. Allen is our Chairman and co-founder. He
co-founded the company in September 1995. Mr. Allen served as President until
January 1999 and is presently serving as Chief Executive Officer. Prior to that,
Mr. Allen was employed by Schonfeld Securities, LLC as a firm trader and trainer
of other proprietary traders from May 1995 through September 1995. Mr. Allen has
over 19 years experience working in various capacities in the brokerage industry
from sales, marketing, trading, operations, and training at the following firms:
Prudential Securities, Oppenheimer & Company, and Schonfeld Securities, LLC. Mr.
Allen was also a member of the Chicago Board of Options Exchange ("CBOE") from
1985 to 1993. While at the CBOE, Mr. Allen also served on the Appeals Committee.
E. STEVEN ZUM TOBEL. Mr. zum Tobel joined us as Chief Compliance
Officer and Chief Financial Officer in March 1998. Mr. zum Tobel became
President in March 1999. Mr. zum Tobel has over 10 years experience surrounding
the brokerage industry with areas of expertise in financial reporting,
compliance, and operations. From September 1996 through February 1998, Mr. zum
Tobel was managing partner of zum Tobel & Ling, LLP, an audit and tax practice
that specialized in the brokerage industry. Prior to establishing his own
accounting and consulting practice, Mr. zum Tobel was Vice President of
Securities Consultants International LLC, a national brokerage consulting firm,
from December 1994 through September 1996. Prior to that, from May 1994 through
December 1994, Mr. zum Tobel was a systems consultant with Vilarino Plaza, Inc.
He has a B.A. degree in finance and an MBA with a concentration in finance from
Florida Atlantic University. Mr. zum Tobel is also a certified public
accountant.
FARSHID TAFAZZOLI. Mr. Tafazzoli is our Chief Information Officer and
co-founder. He co-founded the Company in September 1995. In 1993, Mr. Tafazzoli
joined Gulfstream Partners as a systems specialist. Mr. Tafazzoli applied his
systems experience in a trading environment, and accepted an opportunity to join
Spear Leeds & Kellog, the largest specialist firm on the New York Stock
Exchange, beginning in March 1994. Mr. Tafazzoli soon became a registered trader
capitalizing on his systems experience. Mr. Tafazzoli combined his technical
computer systems experience with his trading and investing experience and
co-founded onlinetradinginc.com in September 1995. Mr. Tafazzoli received a B.S.
in Administrative Studies from Nova Southeastern University.
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DEREK J. HERNQUIST. Mr. Hernquist joined the firm in January 1997 as
the manager of the trading desk. Mr. Hernquist is presently serving as Vice
President of Operations and Director. Mr. Hernquist began his career at Olde
Discount Brokerage in June 1992 where he remained until December 1995. In
January, 1996, Mr. Hernquist established his own trading and investing
partnership and became one of our clients. In January 1997, Mr. Hernquist
accepted a position to run our trading desk. Mr. Hernquist has a BA in finance
from the University of Arizona.
BENEDICT S. GAMBINO. Mr. Gambino co-founded the company in September
1995 as a passive shareholder and director. Mr. Gambino was a member on the CBOE
from 1981 to 1996. Mr. Gambino has been retired since 1996 although he continues
to act as a private investor.
There is no family relationship between any of the officers, key
employees and directors.
Within 90 days of the consummation of this offering, we intend to
secure the services of at least two non-employee directors. We also intend to
establish audit and compensation committees.
Directors hold their offices until the next annual meeting of our
shareholders and until their successors have been duly elected and qualified or
their earlier resignation, removal from office or death. There are currently no
committees of the Board of Directors. Upon consummation of this offering, we
intend to establish audit and compensation committees, each consisting of a
majority of non-employee directors.
Officers serve at the pleasure of the Board of Directors and until the
first meeting of the Board of Directors following the next annual meeting of our
shareholders and until their successors have been chosen and qualified.
DIRECTOR COMPENSATION
We do not currently pay our directors any fees for attending Board
meetings. We anticipate that following this offering we will pay non-employee
directors $500 plus travel reimbursements per Board meeting attended.
LIMITATION ON LIABILITY OF DIRECTORS
As permitted by Florida law, our Articles of Incorporation contain an
article limiting the personal liability of directors. The Articles of
Incorporation provide that each of our directors shall not be personally liable
for monetary damages for a breach of fiduciary duty as director except for
liability (i) for any breach of the director's duty of loyalty, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under the Florida Business Corporation Act, which
prohibits the unlawful payment of dividends or the repurchase or redemption of
stock, or (iv) for any transaction from which the director derived an improper
personal benefit. This article is intended to afford directors additional
protection, and limit their potential liability, from suits alleging a breach of
duty of care by a director.
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<PAGE> 42
EXECUTIVE COMPENSATION
The following table summarizes all compensation paid by us during the
fiscal year ended January 31, 1999 for our Chief Executive Officer and each
other executive officer whose annual compensation exceeded $100,000 during the
fiscal year ended January 31, 1999 (collectively the "Named Executive
Officers"). Our directors do not receive compensation for serving in this
capacity.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
-------------------------------------------------------------------------
COMPENSATION FOR THE FISCAL OTHER COMPENSATION FOR
YEAR ENDED THE FISCAL YEAR ENDED
JANUARY 31, 1999 JANUARY 31, 1999
------------------------------ -------------------------
NAME AND FISCAL SALARY BONUS
PRINCIPAL POSITION YEAR $ $(1) $
- --------------------------------------- ---------- -------------- ------------ -------------------------
<S> <C> <C> <C> <C>
Andrew Allen, Chairman 1999 74,000 525,000 0
and Chief Executive
Officer
Farshid Tafazzoli, Chief 1999 72,000 293,100 0
Information Officer and
Director
E. Steven zum Tobel, 1999 60,000 55,000 9,075(3)
Chief Financial Officer,
President and Director(2)
Derek J. Hernquist, 1999 60,000 82,000 0
Vice President of
Operations,
Secretary and Director
Benedict S. Gambino, 1999 72,000 300,000 28,000(5)
Director(4)
- ---------------
</TABLE>
(1) We paid $1,460,000 in management bonuses for Fiscal 1999 and $602,000
for Fiscal 1998. Pursuant to new employment agreements effective as of
February 1, 1999 for the fiscal year ended January 31, 2000, the
compensation of executive shareholder management has been set and
limitations have been placed on the amount of bonuses executive
shareholder management may receive.
(2) Mr. zum Tobel began his employment with the company in March 1998.
(3) Represents the value of shares issued in connection with Mr. zum
Tobel's employment.
(4) Mr. Gambino received his compensation in consideration for his duties
as a non-executive employee, and not as an executive officer or
director.
(5) Represents interest paid to the director with respect to an outstanding
loan to us.
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<PAGE> 43
EMPLOYMENT AGREEMENTS
We have entered into three-year employment agreements with each of
Messrs. Allen, Tafazzoli, zum Tobel and Hernquist which provide for an annual
base compensation of $200,000, $200,000, $120,000 and $50,000 respectively, and
bonuses as the Board of Directors may in its sole discretion from time to time
determine. Notwithstanding the foregoing, the employment agreements limit the
aggregate amount of bonuses that may be paid to employees to 5% of pre-tax
earnings. Moreover, Messrs. Allen, Tafazzoli, zum Tobel, Hernquist and Gambino
have agreed not to receive any bonuses until such time as the company earns
$3,300,000 in pre-tax earnings in any fiscal year.
The employment agreements provide for employment on a full-time basis
and contain a provision that the employee will not compete or engage in a
business competitive with our current or anticipated business during the term of
the employment agreement and for a period of one year thereafter. A state court
may determine not to enforce this provision or to otherwise limit its
enforceability.
Mr. zum Tobel received 400,000 shares of common stock in connection
with his employment. However, the unvested portion of these shares is subject to
redemption by the company if Mr. zum Tobel resigns from his employment or is
terminated for cause prior to February 28, 2001. These shares vest in equal
amounts over a three-year period commencing February 28, 1999.
STOCK OPTION PLAN
Under our 1999 Stock Option Plan (the "1999 Plan"), 1,000,000 shares of
common stock are reserved for issuance upon exercise of the options. The 1999
Plan is designed to serve as an incentive for retaining qualified and competent
directors, employees, consultants and independent contractors. Options will be
granted to certain persons in proportion to their contributions to the overall
success of the company as determined by the Board of Directors and our
Compensation Committee in their sole discretion.
Our Board of Directors, or a committee thereof, administers and
interprets the 1999 Plan and is authorized to grant options thereunder to all
eligible employees, including our directors and executive officers (whether
current or former employees), as well as consultants and independent
contractors. The 1999 Plan provides for the granting of both "incentive stock
options" (as defined in Section 422 of the Internal Revenue Code of 1986, as
amended) and nonstatutory stock options. Incentive stock options may only be
granted, however, to employees. Options can be granted under the 1999 Plan on
the terms and at the prices determined by the Board, or a committee thereof,
except that the per share exercise price of incentive stock options granted
under the 1999 Plan will not be less than the fair market value of the common
stock on the date of grant and, in the case of an incentive stock option granted
to a 10% shareholder, the per share exercise price will not be less than 110% of
the fair market value as defined in the 1999 Plan.
Options under the 1999 Plan that would otherwise qualify as incentive
stock options will not be treated as incentive stock options to the extent that
the aggregate fair market value of the
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<PAGE> 44
shares covered by the incentive stock options which are exercisable for the
first time by any individual during any calendar year exceeds $100,000.
Options granted under the 1999 Plan will be exercisable after the
period or periods specified in the option agreement. Incentive stock options
granted to employees will vest in equal installments over a period of five years
commencing on the first anniversary of the date of grant. Options granted under
the 1999 Plan are not exercisable after the expiration of ten years from the
date of the grant and are not transferable other than by will or by the laws of
descent and distribution. Adjustments in the number of shares subject to options
granted under the 1999 Plan can be made by the Board of Directors or the
appropriate committee in the event of a stock dividend or recapitalization
resulting in a stock split-up, combination or exchange of shares.
As of the date of this Prospectus, we have granted options under the
1999 Plan to purchase __________ shares of common stock to certain of our
employees, none of which are executive officers. These options will be
exercisable at a price equal to the initial public offering price per share of
the shares of common stock offered hereby and will expire ten years from the
date of grant. In addition, exercise of the options is contingent on the
optionee's continued employment by us.
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<PAGE> 45
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding beneficial
ownership of our common stock as of the date of this Prospectus, by (1) each
person who owns beneficially more than 5% of our outstanding common stock, (2)
each of the Named Executive Officers, and (3) all directors and executive
officers as a group.
<TABLE>
<CAPTION>
PERCENT BENEFICIALLY OWNED
----------------------------
NUMBER OF SHARES PRIOR TO AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED OFFERING OFFERING
- --------------------------------------- ------------------ -------- --------
<S> <C> <C> <C>
COMMON STOCK:
Andrew A. Allen............................ 2,453,334(2) 30.7% 24.5%
Farshid Tafazzoli.......................... 2,453,333 30.7 24.5
E. Steven zum Tobel........................ 400,000(3) 5.0 4.0
Derek J. Hernquist......................... 240,000 3.0 2.4
Benedict S. Gambino........................ 2,453,333 30.7 24.5
All directors and executive officers as a
group (5 persons).......................... 8,000,000 100.0% 79.9%
PREFERRED STOCK:
Benedict S. Gambino........................ 300 100.0% 100.0%
</TABLE>
- -----------------
(1) The business address of all directors and executive officers is c/o the
company, 2700 North Military Trail, Suite 200, Boca Raton, Florida
33431.
(2) Includes shares held as custodian for minor children.
(3) Includes shares which may be redeemed by us if Mr. zum Tobel terminates
his employment with us on or before March 1, 2001.
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<PAGE> 46
CERTAIN TRANSACTIONS
LOANS BY SHAREHOLDERS
In December 1998, Benedict Gambino, one of our directors and
shareholders, renewed a subordinated loan to us in the amount of $400,000. The
outstanding principal balance accrues interest at the rate of 5% per annum and
is due and payable on February 11, 2002.
RIGHT TO REDEEM SHARES OF STEVEN ZUM TOBEL
In February 1998, we issued 400,000 shares of common stock to Steven
zum Tobel as additional consideration for Mr. zum Tobel agreeing to join us.
Pursuant to the terms of Mr. zum Tobel's employment agreement, we may redeem the
unvested portion of these shares in the event Mr. zum Tobel resigns from his
employment or is terminated with cause, as defined in the Employment Agreement,
on or before February 28, 2001. See "Management - Employment Agreements."
APPROVAL OF AFFILIATED TRANSACTIONS
We believe that each of the foregoing transactions were on terms no
less favorable than those which could have been obtained from unaffiliated third
parties. Following completion of this offering, all transactions between us and
our directors, executive officers and principal shareholders will be on terms no
less favorable than could be obtained from unaffiliated third parties and have
been and will be approved by a majority of our independent outside directors,
when elected.
SUBORDINATED LOANS BY MANAGEMENT
As co-underwriters of this offering, we may, if necessary, accept
temporary subordinated loans that will increase our net capital during the days
prior to the consummation of the offering to provide a reserve against the
anticipated increase in securities we will be holding and corresponding decrease
in liquid assets.
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<PAGE> 47
DESCRIPTION OF CAPITAL STOCK
After this offering, our authorized capital stock will consist of (1)
30,000,000 shares of common stock, par value $0.01 per share, 10,000,000 shares
of which will be outstanding and (2) 1,000,000 shares of preferred stock, par
value $0.01 per share, 300 of which will be outstanding.
COMMON STOCK
Subject to the rights of the holders of any preferred stock that may be
outstanding and that may have preferential dividend rights, each holder of
common stock on the applicable record date is entitled to receive the dividends
declared by the Board of Directors out of funds legally available therefor, and,
in the event of liquidation, to share pro rata in any distribution of our assets
after payment or providing for the payment of liabilities and the liquidation
preference of any outstanding preferred stock.
Each holder of common stock is entitled to one vote for each share held
of record on the applicable record date on all matters presented to a vote of
shareholders, including the election of directors. Holders of common stock have
no cumulative voting rights or preemptive rights to purchase or subscribe for
any stock or other securities, and there are no conversion rights or redemption
or sinking fund provisions with respect to this stock. All outstanding shares of
common stock are, and the shares of common stock offered hereby will be, when
issued, fully paid and nonassessable.
PREFERRED STOCK
Our Board of Directors has the authority to issue 1,000,000 shares of
preferred stock in one or more series and to fix, by resolution, conditional,
full, limited or no voting powers, and the designations, preferences and
relative, participating, optional or other special rights, if any, and the
qualifications, limitations or restrictions thereof, if any, including the
number of shares in the series (which the Board may increase or decrease as
permitted by Florida law), liquidation preferences, dividend rates, conversion
or exchange rights, redemption provisions of the shares constituting any series
and such other special rights and protective provisions with respect to any
class or series as the Board may deem advisable without any further vote or
action by the shareholders. Any shares of preferred stock so issued could have
priority over the common stock with respect to dividend or liquidation rights or
both and could have voting and other rights of shareholders.
Of the 1,000,000 authorized shares of preferred stock, 300 shares have
been designated Series A Redeemable Preferred Stock (the "Series A Stock") and
all of these shares are issued and outstanding. The holder of the shares of the
Series A Stock has voting rights and is entitled to one vote per share of Series
A Stock. The stated value of each share of Series A Stock is $1,000. The holder
of Series A Stock is not entitled to dividends. The shares of Series A Stock are
not convertible into common stock. The shares of Series A Stock are redeemable
by the company, in whole or in part, at any time and from time to time, from and
after June 1, 1999, at a price of $1,100 per share.
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<PAGE> 48
We have no present plans to issue any additional shares of preferred
stock.
REDEEMABLE WARRANTS
Each warrant offered hereby entitles the registered holder thereof (the
"Warrant Holders") to purchase one share of common stock at a price of $___,
subject to adjustment in certain circumstances, at any time between ___, 1999
and 5:00 p.m., Eastern Time, on ______, 2004.
The warrants are redeemable by us at any time commencing ________,
2000, upon notice of not less than 30 days, at a price of $0.125 per warrant,
provided that the closing bid quotation of the common stock on all 30 trading
days ending on the third day prior to the day on which we give notice has been
at least 150% of the initial public offering price of the common stock
(currently $___), subject to adjustment. The warrant holders shall have the
right to exercise their warrants until the close of business on the date fixed
for redemption. The warrants will be issued in registered form under a warrant
agreement by and among us and our transfer agent as warrant agent (the "Warrant
Agreement"). The exercise price and number of shares of common stock or other
securities issuable on exercise of the warrants are subject to adjustment in
certain circumstances, including in the event of a stock dividend,
recapitalization, reorganization, merger or consolidation. However, the warrants
are not subject to adjustment for issuances of common stock at prices below the
exercise price of the warrants. Reference is made to the Warrant Agreement
(which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part) for a complete description of the terms and conditions
therein (the description herein contained being qualified by reference thereto).
The warrants may be exercised upon surrender of the warrant certificate
during the exercise period at the offices of the warrant agent, with the
exercise form on the reverse side of the warrant certificate completed and
executed as indicated, accompanied by full payment of the exercise price (by
certified check or bank draft payable to us) to the warrant agent for the number
of warrants being exercised. The warrant holders do not have the rights or
privileges of holders of common stock.
No warrant will be exercisable unless at the time of exercise we have
filed a current registration statement with the Commission covering the shares
of common stock issuable upon exercise or qualification under the securities
laws or the state of residence of the holder of such warrant. We will use our
best efforts to have all the shares registered or qualified on or before the
exercise date and to maintain a current prospectus relating thereto until the
expiration of the warrants, subject to the terms of the Warrant Agreement. While
it is our intention to do so, there can be no assurance that we will be able to
do so.
No fractional shares will be issued upon exercise of the warrants.
However if a warrant holder exercises all warrants then owned of record by him,
we will pay to this warrant holder, in lieu of the issuance of any fractional
share which is otherwise issuable, an amount in cash based on the market value
of the common stock on the last trading day prior to the exercise date.
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<PAGE> 49
ANTI-TAKEOVER EFFECTS OF OUR ARTICLES OF INCORPORATION AND BYLAWS
GENERAL
Certain provisions of our Articles of Incorporation and Bylaws may be
deemed to have an anti-takeover effect and may delay, defer or prevent a tender
offer or takeover attempt, including attempts that might result in a premium
being paid over the market price for the shares held by shareholders. The
following provisions may not be amended in our Articles of Incorporation or
Bylaws without the affirmative vote of the holders of two-thirds of the
outstanding shares of common stock.
SPECIAL MEETING OF SHAREHOLDERS
Our Articles of Incorporation and Bylaws provide that special meetings
of our shareholders be called only by a majority of the Board of Directors, our
Chief Executive Officer or holders of not less than one-third of our outstanding
voting stock.
ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS
Our Articles of Incorporation and Bylaws provide that shareholders
seeking to bring business before an annual meeting of shareholders, or to
nominate candidates for election as directors at an annual or special meeting of
shareholders, must provide timely notice thereof in writing. To be timely, a
shareholder's notice must be delivered to or mailed and received at our
principal executive offices not less than 60 days nor more than 90 days prior to
the meeting; provided, however, that in the event that less than 70 days' notice
or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder, to be timely, must be received no later
than the close of business on the 10th day following the day on which the notice
of the date of the meeting was mailed or the public disclosure was made,
whichever is first. The Bylaws also specify certain requirements as to the
content and form of a shareholder's notice. These provisions may preclude
shareholders from bringing matters before the shareholders at an annual or
special meeting or from making nominations for directors at an annual or special
meeting.
AMENDMENT OF BYLAWS
The Bylaws may only be altered, amended or repealed by the Board or the
affirmative vote of the holders of at least a majority of our outstanding shares
of common stock.
TRANSFER AGENT
The transfer agent for our common stock and the warrant agent for our
warrants is American Securities Transfer & Trust, Inc., Denver, Colorado.
-45-
<PAGE> 50
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, we will have 10,000,000 shares of
common stock outstanding. Of these shares, the 2,000,000 shares of common stock
sold in the offering will be freely tradeable without restriction under the
Securities Act. The remaining 8,000,000 shares of common stock will be
"restricted securities" as defined in Rule 144 and will become eligible for
public sale subject to the restrictions of Rule 144 commencing one year from
their issuance. All of the 8,000,000 restricted shares are currently eligible
for sale under Rule 144 (with the exception of 266,667 shares owned by Mr.
Steven zum Tobel, our President and Chief Financial Officer, which are subject
to a right of redemption).
In general, under Rule 144, if a period of at least one year has
elapsed since the later of the date the "restricted shares" (as that phrase is
defined in Rule 144) were acquired from us and the date they were acquired from
an "affiliate" of ours, as that term is defined in Rule 144 (an "Affiliate"),
then the holder of the restricted shares (including an Affiliate) is entitled to
sell a number of shares within any three-month period that does not exceed the
greater of 1% of the then outstanding shares of the common stock or the average
weekly reported volume of trading of the common stock on The Nasdaq SmallCap
Market during the four calendar weeks preceding the sale. The holder may only
sell the shares through unsolicited brokers' transactions or directly to market
makers. Sales under Rule 144 are also subject to certain requirements pertaining
to the manner of the sales, notices of the sales and the availability of current
public information concerning us. An Affiliate may sell shares not constituting
restricted shares in accordance with the foregoing volume limitations and other
requirements but without regard to the one-year holding period.
Under Rule 144(k), if a period of at least two years has elapsed
between the later of the date restricted shares were acquired from us and the
date they were acquired from an Affiliate, as applicable, a holder of these
restricted shares who is not an Affiliate at the time of the sale and has not
been an Affiliate for at least three months prior to the sale would be entitled
to sell the shares immediately without regard to the volume limitations and
other conditions described above.
Our directors, executive officers and shareholders who own an aggregate
of 8,000,000 shares of common stock (representing all of the issued and
outstanding shares prior to this offering) have entered into written agreements
not to sell or otherwise dispose of the shares of common stock beneficially
owned by them for 12 months after the date of this Prospectus without the
consent of the Representative.
We can make no predictions as to the effect, if any, that sales of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of significant amounts of the
common stock in the public market, or the perception that these sales may occur,
could adversely affect prevailing market prices.
-46-
<PAGE> 51
UNDERWRITING
Subject to certain terms and conditions contained in the Underwriting
Agreement among us, Werbel-Roth Securities, Inc., as the representative of the
underwriters (the "Representative"), the underwriters named below have severally
agreed to purchase from us, and we have agreed to sell to the several
underwriters, the number of shares of common stock and warrants set forth
opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
NAME OF UNDERWRITER SHARES WARRANTS
- ------------------- -------------------- -------------------
<S> <C> <C>
Werbel-Roth Securities, Inc.........................
onlinetradinginc.com................................ 500,000 500,000
-------------------- -------------------
Total................................. 2,000,000 2,000,000
==================== ===================
</TABLE>
The Underwriting Agreement provides that the obligations of the several
underwriters to purchase the common stock and warrants are subject to approval
of certain legal matters by counsel and to various other conditions. If any of
the shares of common stock or warrants are purchased by the underwriters
pursuant to the Underwriting Agreement, all the shares of common stock and
warrants (other than shares of common stock and warrants covered by the
over-allotment option described below) must be so purchased.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
certain payments that the underwriters may be required to make in respect
thereof. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers or controlling persons, we have
been advised that in the opinion of the SEC the indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
The underwriters propose to offer the shares of common stock and
warrants directly to the public at the offering price set forth on the cover
page of this Prospectus. The underwriters may allow to certain dealers who are
members of the NASD concessions, not in excess of $____ per share of common
stock and $___ per warrant, of which not in excess of $___ per share of common
stock and $___ per warrant may be reallowed to other dealers who are members of
the NASD. The offering prices, reallowances and concessions will not be changed
until after this offering has been completed.
We have granted a 45-day over-allotment option to the underwriters to
purchase up to 300,000 additional shares of common stock and/or 300,000 warrants
at the offering price less the underwriting discount and commissions. If the
underwriters exercise such over-allotment option, then each of the underwriters
will be committed, subject to certain conditions, to purchase the additional
shares and/or warrants in approximately the same proportion as set forth in the
above table. The underwriters may exercise this option only to cover
over-allotments made in connection with the sale of the shares of common stock
and/or warrants offered hereby.
-47-
<PAGE> 52
We have has agreed to pay the Representative a nonaccountable expense
allowance of 3% of the gross proceeds of this offering, of which $40,000 has
been paid as of the date of this Prospectus. We have also agreed to pay all
expenses in connection with qualifying the shares of common stock and warrants
offered hereby for sale under the laws of the states the Representative
designates, including expenses of counsel retained for that purpose by the
Representative.
We have agreed to sell to the Representative and its designees for an
aggregate of $100, warrants (the "Underwriter's Warrants") to purchase up to
200,000 shares of common stock at an exercise price of $_____ per share (120% of
the public offering price per share) and up to 200,000 warrants (each
exercisable to purchase on share of common stock at a price of $_____ per share)
at an exercise price of $0.15 per warrant (120% of the public offering price per
warrant). The Underwriter's Warrants may not be sold, transferred, assigned or
hypothecated for one year from the date of this Prospectus, except to the
officers and partners of the Representative and members of the underwriting
syndicate and selling group and are exercisable at any time and from time to
time, in whole or in part, during the five-year period commencing on the date of
this Prospectus (the "Warrant Exercise Term"). During the Warrant Exercise Term,
the holders of the Underwriter's Warrants are given, at nominal cost, the
opportunity to profit from a rise in the market price of the common stock. To
the extent that the Underwriter's Warrants are exercised, dilution to the
interests of our shareholders will occur. Further, the terms upon which we will
be able to obtain additional equity capital may be adversely affected since the
holders of the Underwriter's Warrants can be expected to exercise them at a time
when we would, in all likelihood, be able to obtain any needed capital on terms
more favorable to us than those provided in the Underwriter's Warrants. Any
profit realized by the Underwriter on the sale of the Underwriter's Warrants,
the underlying shares of common stock or the underlying warrants, or the shares
of common stock issuable upon exercise of the underlying warrants may be deemed
additional underwriting compensation. We have agreed, at the request of the
holders of a majority of the Underwriter's Warrants, at our expense, to register
the Underwriter's Warrants, the shares of common stock and warrants underlying
the Underwriter's Warrants, and the shares of common stock issuable upon
exercise of the underlying warrants under the Securities Act on one occasion
during the Warrant Exercise Term and to include the Underwriter's Warrants and
all the underlying securities in any appropriate registration statement which is
filed by us during the seven years following the date of this Prospectus.
This offering is being conducted in accordance with Rule 2720 of the
NASD. That rule requires, among other things, that the initial public offering
price can be no higher than that recommended by a "qualified independent
underwriter," as defined by the NASD, which underwriter has served in that
capacity and performed due diligence investigations and reviewed and
participated in the preparation of the Registration Statement of which this
Prospectus forms a part. The Representative in this offering served as the
qualified independent underwriter and received no additional compensation for
serving in this capacity.
Our directors, executive officers and our shareholders who own an
aggregate of 8,000,000 shares of common stock have entered into written
agreements not to sell or otherwise dispose of any of their common stock for a
period of 12 months from the date of this Prospectus, without the prior written
consent of the Representative.
Prior to this offering, there has been no public market for the common
stock or warrants. Consequently, the initial public offering price for the
common stock and the warrants has been
-48-
<PAGE> 53
determined by negotiations between us and the underwriters and is not
necessarily related to our asset value, net worth or other established criteria
of value. The factors considered in these negotiations, in addition to
prevailing market conditions, included the history of and prospects for the
industry in which we compete, an assessment of our management, our prospects,
our capital structure and certain other factors as were deemed relevant.
In connection with this offering, certain underwriters and selling
group members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the common stock
and/or the warrants. These transactions may include stabilization transactions
effected in accordance with Rule 104 of Regulation M, pursuant to which the
underwriters or selling group members may bid for or purchase common stock
and/or the warrants for the purpose of stabilizing its market price.
The underwriters also may create a short position for the account of
the underwriters by selling more common stock and/or the warrants in connection
with the offering than they are committed to purchase from us and in that a case
may purchase common stock and/or the warrants in the open market following
completion of the offering to cover all or a portion of that short position.
The underwriters may also cover all or a portion of that short
position, up to 300,000 shares of common stock and 300,000 warrants, by
exercising the over-allotment option. In addition, the Representative may impose
"penalty bids" under contractual arrangements with the underwriters, whereby it
may reclaim from an underwriter (or dealer participating in the offering) for
the account of other underwriters, the selling concession with respect to common
stock and/or the warrants that is distributed in any offering but subsequently
purchased for the account of the underwriters in the open market. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the common stock and/or the warrants at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph is required, and, if they are undertaken, they may be discontinued at
any time.
Under the securities laws of certain states, the shares and warrants
may be sold in those states only through registered or licensed broker-dealers
or pursuant to available exemptions from such requirements. In addition, in
certain states the securities may not be sold unless the securities have been
registered or qualified for sale in that state or an exemption from that
requirement is available and is complied with.
-49-
<PAGE> 54
LEGAL MATTERS
Broad and Cassel, a partnership including professional associations,
Miami, Florida will give an opinion regarding the validity of the common stock
and warrants offered under this Prospectus. Certain legal matters relating to
the offering will be passed upon for the Representative by Dreier & Baritz, LLP,
Boca Raton, Florida.
EXPERTS
The statements of financial condition of onlinetradinginc.com corp.
as of January 31, 1999 and January 31, 1998 and the related statements of
operations, changes in shareholders' equity and cash flows for the years then
ended included in this Prospectus and incorporated by reference in the
Registration Statement, have been audited by Ahearn, Jasco + Company, P.A.,
independent auditors, as stated in their report appearing herein and
incorporated by reference in the Registration Statement, and are included and
incorporated by reference in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a Registration Statement containing this
Prospectus and encompassing any amendments thereto on Form SB-2 pursuant to the
Securities Act with respect to the common stock and warrants being offered in
this offering. This Prospectus does not contain all the information set forth in
the Registration Statement and the exhibits and schedules thereto, certain
portions of which are omitted as permitted by SEC rules and regulations.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete; with respect to any
contract, agreement or other document filed as an exhibit to the Registration
Statement, please refer to the exhibit for a more complete description of the
matter involved, and each statement shall be deemed qualified in its entirety by
reference to the Registration Statement and to the financial statements,
schedules and exhibits filed as a part thereof.
The Registration Statement filed by us with the SEC can be inspected
and copied at the public reference facilities maintained by the SEC at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and the
Regional Offices of the SEC located in the Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and at 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies of those filings can be obtained from
the SEC's Public Reference Section, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates and may also be obtained from the
website that the SEC maintains at http://www.sec.gov. You may also call the SEC
at 1-800-SEC-0330 for more information.
As of the date of this Prospectus, we will become subject to the
reporting requirements of the Exchange Act and, in accordance therewith, will
file reports, proxy statements and other information with the Commission. These
reports, proxy statements and other information can be inspected and copied at
the public reference facilities of the Commission set forth above, and copies of
these materials can be obtained from the Commission's Public Reference Section
at prescribed rates. We intend to furnish our shareholders with annual reports
containing audited financial statements and any other periodic reports we deem
appropriate or as may be required by law.
-50-
<PAGE> 55
ONLINETRADINGINC.COM CORP.
TABLE OF CONTENTS
PAGE
----
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS
Statements of Financial Condition F-2
Statements of Operations F-3
Statement of Changes in Stockholders' Equity F-4
Statements of Cash Flows F-5
NOTES TO FINANCIAL STATEMENTS F-6 through F-13
<PAGE> 56
INDEPENDENT AUDITORS' REPORT
Board of Directors
onlinetradinginc.com corp.
We have audited the accompanying statements of financial condition of
onlinetradinginc.com corp. (the "Company") as of January 31, 1999 and 1998, and
the related statements of operations, changes in stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of onlinetradinginc.com corp. as
of January 31, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ Ahearn, Jasco + Company, P.A.
------------------------------------------
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
March 2, 1999, except for Note 9, for
which the date is March 25, 1999
F-1
<PAGE> 57
ONLINETRADINGINC.COM CORP.
STATEMENT OF FINANCIAL CONDITION
AS OF JANUARY 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,005,944 $ 218,335
Receivable from clearing organization 572,433 300,900
Other receivables 6,163 --
Securities owned, at market value 381,084 683,335
Deferred tax asset -- 4,250
Other current assets 9,420 561
-------------- -----------
TOTAL CURRENT ASSETS 1,975,044 1,207,381
PROPERTY AND EQUIPMENT, net 136,146 117,174
OTHER ASSETS 43,398 17,730
-------------- -----------
$ 2,154,588 $ 1,342,285
============== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 948,422 $ 211,110
Income taxes payable 45,800 --
Securities sold but not yet purchased, at market value -- 131,782
-------------- -----------
TOTAL CURRENT LIABILITIES 994,222 342,892
-------------- -----------
DEFERRED INCOME TAXES 15,400 5,800
-------------- -----------
SUBORDINATED LOANS 525,000 500,000
-------------- -----------
STOCKHOLDER'S EQUITY:
Preferred stock, $0.01 par value; 1,000,000 shares authorized; issued and
outstanding, 300 shares of Series A, stated value $1,000, voting,
redeemable at 110% of value 300,000 300,000
Common stock, $0.01 par value, 30,000,000 shares authorized;
issued and outstanding, 8,000,000 in 1999 and 7,600,000 and 1998 80,000 76,000
Additional paid-in capital
95,026 89,951
Retained earnings 144,940 27,642
-------------- -----------
TOTAL STOCKHOLDERS EQUITY 619,966 493,593
-------------- -----------
$ 2,154,588 $ 1,342,285
============== ===========
</TABLE>
See notes to financial statements.
F-2
<PAGE> 58
ONLINETRADINGINC.COM CORP.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JANUARY 31,1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------------- ---------------
<S> <C> <C>
REVENUES:
Commissions $ 5,525,427 $ 3,673,728
Net dealer inventory and investment gains and losses 328,495 (187,973)
Interest and dividends 138,142 62,630
-------------- --------------
TOTAL REVENUES 5,992,064 3,548,385
-------------- --------------
OPERATING EXPENSES:
Employee compensation and benefits 3,339,763 1,402,102
Clearing and other transaction costs 2,002,055 1,751,472
Occupancy and administration 406,814 324,499
Interest expense 36,566 71,805
Depreciation 29,918 20,485
-------------- --------------
TOTAL OPERATING EXPENSES 5,815,116 3,570,363
-------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES 176,948 (21,978)
INCOME TAX (PROVISION) BENEFIT (59,650) 2,550
-------------- --------------
NET INCOME (LOSS) $ 117,298 $ (19,428)
============== ==============
EARNINGS (LOSS) PER SHARE:
Basic $ 0.0147 $ (0.0026)
============== ==============
Diluted $ 0.0147 $ (0.0026)
============== ==============
Weighted average common shares outstanding 7,971,510 7,600,000
============== ==============
</TABLE>
See notes to financial statements.
F-3
<PAGE> 59
ONLINETRADINGINC.COM CORP.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 31, 1999 AND 1998
<TABLE>
<CAPTION>
Series A
Preferred Stock Common Stock
-------------------- ---------------------- Additional
Shares Amount at Shares Amount at Paid-In Retained
Issued Stated Value Issued Stated Value Capital Earnings Totals
------ ------------ -------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, February 1, 1997
as restated [see Note 9(a)] 300 $ 300,000 7,600,000 $ 76,000 $ 89,951 $ 47,070 $ 513,021
Net loss for the year ended
January 3l, 1998 -- -- -- -- -- (19,428) (19,428)
----- ------------ --------- ----------- ------------- ---------- ---------
BALANCES, January 31,1998 300 300,000 7,600,000 76,000 89,951 27,642 493,593
Common stock issued for services -- -- 400,000 4,000 5,075 -- 9,075
Net income for the year ended
January 31, 1999 -- -- -- -- -- 117,298 117,298
----- ------------ --------- ----------- ------------- ---------- ---------
BALANCES, January 31, 1999 300 $ 300,000 8,000,000 $ 80,000 $ 95,026 $ 144,940 $ 619,966
===== ============ ========= =========== ============= ========== =========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 60
ONLINETRADINGINC.COM CORP.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31,1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 117,298 $ (19,428)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 29,918 20,485
Common stock issued for services 9,075 --
Deferred income taxes 13,850 (2,550)
Changes in certain assets and liabilities:
Receivable from clearing organization (271,533) (172,401)
Other receivables (6,163) --
Securities owned at market value 302,251 84,619
Other current assets (8,859) (561)
Accounts payable and accrued expenses 737,312 170,867
Income taxes payable 45,800 (12,504)
Securities sold but not yet purchased, at market value (131,782) 23,719
------------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 837,167 92,246
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (48,891) (83,345)
Net change in other assets (25,667) --
------------- ------------
NET CASH USED IN INVESTING ACTIVITIES (74,558) (83,345)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of subordinated loan 25,000 --
------------- ------------
NET INCREASE IN CASH 787,609 8,901
CASH AND CASH EQUIVALENTS, Beginning of year 218,335 209,434
------------- ------------
CASH AND CASH EQUIVALENTS, End of year $ 1,005,944 $ 218,335
============= ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for income taxes $ -- $ 12,504
============= ============
Cash paid during the year for interest $ 35,831 $ 75,936
============= ============
</TABLE>
See notes to financial statements.
F-5
<PAGE> 61
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1999 AND 1998
===============================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
onlinetradinginc.com corp. (the "Company") was incorporated in
the State of Florida on September 7, 1995 and operates as a registered
securities broker/dealer under the rules of the National Association of
Securities Dealers ("NASD"). The Company is headquartered in Boca Raton,
Florida and has branch offices in Massachusetts, Pennsylvania, Michigan,
and Ohio.
The Company manages its customer accounts through Bear Stearns
Securities Corp., (the "clearing firm"), on a fully disclosed basis. The
clearing firm provides services, handles the Company's customers' funds,
holds securities, and remits monthly activity statements to the customers
on behalf of the Company. The amount receivable from brokers and dealers
relates to commissions earned by the Company for trades executed by the
other broker/ dealer on behalf of the Company.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
MARKETABLE SECURITIES
Marketable securities are valued at market value and securities
not readily marketable are valued at fair value as determined by the board
of directors. The resulting difference between cost and market (or fair
value) is included in income.
PROPERTY AND EQUIPMENT
Furniture, equipment and leasehold improvements are recorded at
cost and depreciated over the estimated useful lives of those assets using
the straight-line and accelerated methods. Expenditures for routine
maintenance and repairs are charged to expenses as incurred.
SECURITIES TRANSACTIONS
Proprietary securities transactions in regular-way trades are
recorded on the trade date, as if they settled. Profit and loss arising
from all securities and commodities transactions entered into for the
account and risk of the Company are recorded on a trade date basis.
Customers' securities and commodities transactions are reported on a
settlement date basis with related commission income and expenses reported
on a trade date basis.
Amounts receivable and payable for securities transactions that
have not reached their contractual settlement date are recorded net on the
statement of financial condition.
COMMISSIONS
Commissions and related clearing expenses are recorded on a
trade-date basis as securities transactions occur.
ADVERTISING
The costs of advertising, promotion, and marketing programs are
charged to operations in the year incurred. Such expense items totaled
$30,382 and $29,062, respectively, for the years ended January 31, 1999
and 1998.
F-6
<PAGE> 62
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1999 AND 1998
===============================================================================
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments
purchased with an original maturity of three months or less. The Company
occasionally maintains cash balances in financial institutions in excess
of the federally insured limits.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, accounts receivable, and accounts payable and accrued
expenses are reflected in the financial statements at cost, which
approximates fair value because of the short-term maturity of those
instruments. The fair value of the Company's subordinated loans payable,
as described in Note 7, approximate their recorded values.
INCOME TAXES
The Company accounts for income taxes in accordance with the
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," which requires the recognition of deferred tax liabilities
and assets at currently enacted tax rates for the expected future tax
consequences of events that have been included in the financial statements
and tax returns. A valuation allowance is recognized, if necessary, to
reduce the net deferred tax asset to an amount that is more likely than
not to be realized.
NET INCOME PER COMMON SHARE
The Company has adopted SFAS No. 128, "Earnings Per Share," which
requires companies with complex capital structures or common stock
equivalents to present both basic and diluted earnings per share ("EPS")
on the face of the income statement. Basic EPS is calculated as income
available to common stockholders divided by the weighted average number of
common shares outstanding during the period. Diluted EPS is calculated
using the "if converted" method for convertible securities and the
treasury stock method for options and warrants as previously prescribed by
Accounting Principles Board Opinion No. 15, "Earnings Per Share." The
adoption of SFAS 128 did not have an impact on the Company's reported
results.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS 130 and 131 are effective for
fiscal years beginning after December 15, 1997. Adoption of these
standards had no material impact on the Company's results of operations. A
statement of comprehensive income is not presented since the Company had
no items of other comprehensive income.
NOTE 2 - NET CAPITAL REQUIREMENTS
The Company is subject to the Securities and Exchange Commission
uniform net capital rule (rule 15c3-1), which requires the maintenance of
minimal net capital and requires that the ratio of aggregate indebtedness
to net capital, both as defined, shall not exceed 15 to 1. As of January
31, 1999, the Company had net capital of $894,395, which was $794,395 in
excess of its required net capital of $100,000.
F-7
<PAGE> 63
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1999 AND 1998
===============================================================================
NOTE 3 - PENSION PLAN
During the year ended January 31, 1999, the Company established a
"SIMPLE" retirement plan. Eligible employees may contribute up to $500 per
month for which the Company will match dollar-for-dollar, up to 3% of the
employees' compensation. Contributions by the Company under this plan
totaled $46,987 for the year ended January 31, 1999.
NOTE 4 - SECURITIES OWNED AND SECURITIES SOLD BUT NOT YET PURCHASED
Securities owned and securities sold but not yet purchased
consist of marketable trading and investment securities at quoted market
values. These securities consist of the following:
<TABLE>
<CAPTION>
1999 1998
----------------------------- -----------------------------
Sold, Sold,
Not Yet Not Yet
Owned Purchased Owned Purchased
------------ -------------- ----------- ---------------
<S> <C> <C> <C> <C>
Corporate stocks $ 224,428 $ -- $ 528,788 $ 131,782
Obligations of U.S. Government 156,656 -- 154,547 --
------------ -------------- ----------- ---------------
Total $ 381,084 $ -- $ 683,335 $ 131,782
============ ============== =========== ===============
</TABLE>
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at January 31,
1999 and 1998:
1999 1998
------------ ------------
Computers and equipment $ 145,009 $ 127,661
Furniture and fixtures 36,651 19,499
Leasehold improvements 14,521 --
------------ ------------
Total cost 196,181 147,160
Less: Accumulated depreciation (60,035) (29,986)
------------ ------------
Property and equipment, net $ 136,146 $ 117,174
============ ============
Depreciation expense for the years ended January 31, 1999 and
1998 was $29,918 and $20,485, respectively.
F-8
<PAGE> 64
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1999 AND 1998
===============================================================================
NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at January 31, 1999 and
1998 consist of the following:
1999 1998
------------ ------------
Accounts payable $ 163,074 $ 119,622
Accrued liabilities:
Research fees 124,828 --
Payroll, and related expenses 644,148 78,989
Interest payable 8,734 7,999
Professional fees and other 7,638 4,500
------------ ------------
Total $ 948,422 $ 211,110
============ ============
NOTE 7 - SUBORDINATED LOANS
The borrowings under subordinated agreements as of January 31,
1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Subordinated equity loan with a shareholder, unsecured, at a rate of 7%
with a scheduled maturity date of February 12, 1999. Renewed on December
17, 1998, to be effective February 12, 1999, at a rate of 5%. Scheduled
maturity on February 11, 2002. $ 400,000 $ 400,000
Subordinated loan, unsecured, at a rate of 5% with a scheduled maturity on
February 1, 2000. 100,000 100,000
Subordinated loan, unsecured, at a rate of 6% with a scheduled maturity on
August 31, 1999. 25,000 --
------------ -----------
$ 525,000 $ 500,000
============ ===========
</TABLE>
By being designated as subordinated, these loans are available in
computing net capital under the SEC's uniform net capital rule. To the
extent that the subordinated loans are required for the Company's
continued compliance with minimum net capital requirements, they may not
be repaid.
F-9
<PAGE> 65
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1999 AND 1998
===============================================================================
NOTE 8 - INCOME TAXES
A summary of the income tax provision (benefit) for the years
ended January 31, 1999 and 1998 is as follows:
1999 1998
---------- ----------
Currently payable:
Federal $ 36,360 $ --
State 9,440 --
Deferred provision (benefit) 13,850 (2,550)
---------- ----------
Income tax provision (benefit) $59,650 $(2,550)
========== ==========
Temporary differences between the reported amounts in the financial
statements and tax bases of assets and liabilities that give rise to
deferred income tax (assets) liabilities relate to the following:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Property and equipment, due to differences in depreciation $15,400 $ 5,800
Net operating loss carryovers -- (4,250)
---------- ----------
Net deferred income tax liability $ 15,400 $ 1,550
========== ==========
</TABLE>
The effective income tax rate varied from the statutory Federal
tax rate as follows:
1999 1998
--------- ----------
Federal statutory rate (benefit) 34% (34)%
State income taxes, net of federal income tax effect 5% (4)%
Other, including permanent differences, non-deductible
adjustments to deferred taxes
expenses and the effect of the rate brackets (5)% 26%
--------- ----------
Effective income tax rate (benefit) 34% (12)%
========= ==========
NOTE 9 - STOCKHOLDERS' EQUITY
(a) CAPITAL STOCK
On March 24, 1999, the shareholders and Directors affected an
amendment to the Company's articles of incorporation to change the number
of authorized common shares to 30,000,000 with a par value per share of
$0.01 and to change the number of authorized preferred shares to 1,000,000
with a par value of $0.01 per share. Prior to that date, the Company had
1,000 authorized common shares with no par value and authorized preferred
shares of 300,000 with a par value per share of $1,000. All of the shares
outstanding at that date were converted into 8,000,000 shares of the new
$0.01 par value common stock, and into 300 shares of Series A preferred
stock, par value $1,000 per share. The reported shares of the Company have
been restated to February 1, 1997, as well as other share and per share
amounts, as if a stock split had occurred.
F-10
<PAGE> 66
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1999 AND 1998
===============================================================================
NOTE 9 - STOCKHOLDERS' EQUITY (continued)
(a) CAPITAL STOCK (continued)
Each holder of the new $0.01 par value common stock is entitled
to one vote for each share held on all matters presented to a vote of
shareholders, including the election of directors. Holders of common stock
have no cumulative voting rights or preemptive rights to purchase or
subscribe for any stock or other securities, and there are no conversion
rights or redemption or sinking fund provisions with respect to this
stock.
The Company's Directors have the authority to issue 1,000,000
shares of the new $0.01 par value preferred stock in one or more series
and to fix, by resolution, conditional, full, limited or no voting powers,
and the designations, preferences and relative, participating, optional or
other special rights, if any, and the qualifications, limitations or
restrictions thereof, if any, including the number of shares in the series
(which the Board may increase or decrease as permitted by Florida law),
liquidation preferences, dividend rates, conversion or exchange rights,
redemption provisions of the shares constituting any series and such other
special rights and protective provisions with respect to any class or
series as the Board may deem advisable without any further vote or action
by the shareholders. Any shares of preferred stock so issued could have
priority over the common stock with respect to dividend or liquidation
rights or both and could have voting and other rights of shareholders. The
Board has authorized and issued a Series A preferred with the following
terms: 300 shares with a stated value of $1,000 per share, one vote per
share, and redeemable at 110% of stated value at the option of the
Company.
(b) STOCK OFFERING
On or about March 26, 1999, the Company expects to file an SEC
Registration Statement to register its common shares, and following its
being declared effective, the Company, through its underwriter, proposes
to sell a maximum of 2,000,000 shares of its common stock and 2,000,000
warrants. Each warrant will entitle the holder to purchase one share of
common stock at a price to be determined (depending on the initial public
offering price) for a period of five years. Under certain conditions, the
Company may repurchase the warrants after the expiration of a twelve-month
period following the initial issuance. The underwriter is entitled to an
over-allotment of 300,000 common shares and 300,000 warrants, and is also
entitled to purchase an additional block of 200,000 warrants to purchase
an aggregate of 200,000 shares of common stock at a price equal to 120% of
the public offering price, and 200,000 warrants to purchase warrants
having an exercise price of 120% above the exercise price of the publicly
sold warrants at the closing of the offering.
NOTE 10 - CONCENTRATIONS AND CREDIT RISKS
MAJOR CUSTOMERS
For the year ended January 31, 1998, one customer accounted for
$395,491 of the Company's gross revenues, while another accounted for
$369,086. For fiscal 1999, there were no individual customers that
accounted for over 10% of the Company's revenues.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company will periodically sell securities that it does not
currently own and will therefore be obligated to purchase such securities
at a future date. The Company had recorded these obligations in the
financial statements at January 31, 1998, at market values of the related
securities and would have incurred a loss if the market value of the
securities increases subsequent to January 31, 1998. As of January 31,
1999, the Company was not holding any of these securities.
F-11
<PAGE> 67
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1999 AND 1998
===============================================================================
NOTE 10 - CONCENTRATIONS AND CREDIT RISKS (continued)
The Company's customer securities activities are transacted on
either a cash or margin basis. In margin transactions, the Company extends
credit to its customers, subject to various regulatory and internal margin
requirements, collateralized by cash and securities in the customers'
accounts. In connection with these activities, the Company executes and
clears customer transactions involving the sale of securities not yet
purchased, substantially all of which are transacted on a margin basis
subject to individual exchange regulations. Such transactions may expose
the Company to significant off-balance-sheet risk in the event margin
requirements are not sufficient to fully cover losses that customers may
incur. In the event the customer fails to satisfy its obligations, the
Company may be required to purchase or sell financial instruments at
prevailing market prices to fulfill the customer's obligations. The
Company seeks to control the risks associated with its customer activities
by requiring customers to maintain margin collateral in compliance with
various regulatory and internal guidelines. The Company and its clearing
firm monitor required margin levels daily and, pursuant to such
guidelines, require the customers to deposit additional collateral or to
reduce positions when necessary.
The Company's customer financing and securities settlement
activities require the Company to pledge customer securities as collateral
in support of various secured financing sources such as bank loans and
securities loaned. In the event the counterparty is unable to meet its
contractual obligation to return customer securities pledged as
collateral, the Company may be exposed to the risk of acquiring the
securities at prevailing market prices in order to satisfy its customers
obligations. The Company controls this risk by monitoring the market value
of securities pledged on a daily basis and by requiring adjustments of
collateral levels in the event of excess market exposure. In addition, the
Company establishes credit limits for such activities and monitors
compliance on a daily basis.
CONCENTRATIONS OF CREDIT RISK
The Company is engaged in various trading and brokerage
activities in which counterparties primarily include broker-dealers,
banks, and other financial institutions. In the event counterparties do
not fulfill their obligations, the Company may be exposed to risk. The
risk of default depends on the creditworthiness of the counterparty or
issuer of the instrument. It is the Company's policy to review, as
necessary, the credit standing of each counterparty.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
The Company is obligated under four non-cancelable operating
leases for office space. Rent expense for the years ended January 31, 1999
and 1998 was as follows:
1999 1998
------------ ------------
Base rent $119,705 $ 89,634
Sublease income (14,300) (27,846)
------------ ------------
Rent expense, net $105,405 $ 61,788
============ ============
F-12
<PAGE> 68
ONLINETRADINGINC.COM CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JANUARY 31, 1999 AND 1998
===============================================================================
NOTE 11 - COMMITMENTS AND CONTINGENCIES (continued)
Future minimum rental payments required under the leases are as
follows:
Year ending
January 31,
-------------------
2000 $ 32,443
2001 27,248
2002 27,926
2003 30,855
2004 28,490
Thereafter 2,989
------------
$ 149,951
============
Operating lease commitments have been reduced for rental income
from noncancelable subleases totaling $1,079,255. If the sublessees were
to default on their obligations, the Company would ultimately be
responsible for the rental payments.
NOTE 12 - NET INCOME (LOSS) PER COMMON SHARE
For the years ended January 31, 1999 and 1998, basic and diluted
weighted average common shares include only common shares outstanding
since there were no common share equivalents.
A reconciliation of the number of common shares shown as
outstanding in the financial statements with the number of shares used in
the computation of weighted average common shares outstanding is shown
below:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Common shares outstanding at January 31st 8,000,000 7,600,000
Effect of weighting (28,490) --
------------- -------------
Weighted average common shares outstanding 7,971,510 7,600,000
============= =============
</TABLE>
The number of shares were restated to reflect the number of
shares issued upon the amendment of the articles of incorporation as if a
stock split had occurred (see Note 9).
F-13
<PAGE> 69
<TABLE>
<CAPTION>
==================================================================== ==========================================================
<S> <C>
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS
BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, THE
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING ONLINETRADINGINC.COM
BEEN AUTHORIZED BY US OR THE UNDERWRITERS. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN OUR AFFAIRS SINCE THE 2,000,000 SHARES OF
DATE HEREOF OR SINCE THE DATES AS OF WHICH INFORMATION IS SET COMMON STOCK
FORTH HEREIN. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES AND
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE AN OFFER IN SUCH JURISDICTION. REDEEMABLE WARRANTS
__________________ TO PURCHASE
2,000,000 SHARES OF COMMON STOCK
PROSPECTUS
WERBEL-ROTH SECURITIES, INC.
____________, 1999
Until __________, 1999 (25 days after the date of this
Prospectus), all dealers effecting transactions in the shares of
common stock, whether or not participating in this distribution, ____________________
may be required to deliver a Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
==================================================================== ==========================================================
</TABLE>
<PAGE> 70
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under the Florida Business Corporation Act
to indemnify its directors and officers to the extent provided for in such
statute. The Registrant's Articles of Incorporation and Bylaws provide that the
Registrant may insure, shall indemnify and shall advance expenses on behalf of
its officers and directors to the fullest extent not prohibited by law. The
Registrant is also a party to indemnification agreements with each of its
directors and officers.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that expenses payable by the Registrant in
connection with the offering described in this registration statement (other
than underwriting discounts and commissions) will be as follows:
Securities and Exchange Commission registration fee........... $ 11,632.88
NASD filing fee............................................... 4,440.41
Nasdaq SmallCap Market listing fee............................ 10,000.00
Printing and engraving expenses*.............................. 60,000.00
Accounting fees and expenses*................................. 40,000.00
Legal fees and expenses*...................................... 100,000.00
Blue Sky fees and expenses*................................... 20,000.00
Transfer Agent's fees and expenses*........................... 4,500.00
Miscellaneous*................................................ 14,426.71
-------------
TOTAL................................................. $ 265,000.00
=============
- -------------------
*Estimated.
All amounts except the Securities and Exchange Commission registration
fee, the NASD filing fee and the Nasdaq listing fee are estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In February 1997, the Registrant issued 240,000 shares of Common Stock
to Derek J. Hernquist as additional consideration for Hernquist agreeing to
become employed by the Registrant.
<PAGE> 71
In February 1998, the Registrant issued 400,000 shares of Common Stock
to Steven zum Tobel as additional consideration for Mr. zum Tobel agreeing to
become employed by the Registrant. Pursuant to the terms of an agreement between
the Registrant and Mr. zum Tobel, the shares vest over a period of time and the
Registrant may redeem the unvested portion of these shares if Mr. zum Tobel
resigns from his employment or is terminated with cause, as defined in the
Employment Agreement, on or before March 1, 2001.
In connection with the above-referenced issuances, we relied on Section
4(2) under the Securities Act of 1933, as amended, as transactions by an issuer
not involving any public offering. Each of the above investors had full access
to information relating to us and represented to us that he had the required
investment intent. In addition, the above-referenced securities will bear
appropriate restrictive legends, and stop transfer orders will be placed against
such securities.
ITEM 27. EXHIBITS.
EXHIBIT DESCRIPTION
1.1 Form of Underwriting Agreement(1)
3.1 Registrant's Amended and Restated Articles of Incorporation
3.2 Registrant's Amended and Restated Bylaws
4.1 Form of Underwriter's Warrant Agreement, including Form of Warrant
Certificate*(1)
4.2 Form of Public Warrant Agreement among the Registrant, and American
Securities Transfer & Trust, Inc. as Warrant Agent(1)
4.3 Form of Registrant's Public Warrant Certificate(1)
4.4 Form of Registrant's Common Stock Certificate(1)
5.1 Opinion of Broad and Cassel(1)
10.1 1999 Stock Option Plan*
10.2 Employment Agreement with Andrew Allen*(1)
10.3 Employment Agreement with Farshid Tafazzoli*(1)
10.4 Employment Agreement with E. Steven zum Tobel*(1)
10.5 Employment Agreement with Derek Hernquist*(1)
10.6 Office Lease dated August 13, 1998 between Registrant and
Highwoods/Florida Holdings, L.P.
10.7 Form of Indemnification Agreement between the Registrant and each of
its directors and executive officers*
10.8 Clearing Agreement with Bear Stearns Securities Corp.
23.1 Consent of Broad and Cassel (included in its opinion filed as Exhibit
5.1)(1)
23.2 Consent of Ahearn, Jasco + Company, P.A.
25.1 Power of Attorney (included on the signature page of this Registration
Statement)
- ---------------------------
* Compensation Plan or Arrangement
(1) To be filed by amendment.
<PAGE> 72
ITEM 28. UNDERTAKINGS.
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this Registration Statement to:
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
(4) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in such
names as required by the Underwriters to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense or any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
<PAGE> 73
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Boca Raton,
State of Florida, on March 25, 1999.
onlinetradinginc.com corp.
By: /s/ Andrew A. Allen
-----------------------------------
Andrew A. Allen,
Chairman and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Andrew A. Allen and E. Steven zum Tobel or any one of them, as his or her true
and lawful attorneys-in-fact and agents with full power of substitution and
resubstitution for him or her and in his or her name, place and stead in any and
all capacities to execute in the name of each person who is then an officer or
director of the Registrant any and all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement
relating to the offering hereunder pursuant to Rule 462 under the Securities Act
of 1933, as amended, and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents and each of them full power and
authority to do and perform each and every act and thing required or necessary
to be done in and about the premises as fully as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Andrew A. Allen Chairman, Chief Executive Officer March 25, 1999
- ----------------------------------- and Director
Andrew A. Allen (Principal Executive Officer)
/s/ E. Steven zum Tobel President, March 25, 1999
- ----------------------------------- Chief Financial Officer and Director
E. Steven zum Tobel (Principal Accounting Officer)
/s/ Farshid Tafazzoli Chief Information Officer and Director March 25, 1999
- -----------------------------------
Farshid Tafazzoli
/s/ Derek J. Hernquist Vice President of Operations, Secretary March 25, 1999
- ----------------------------------- and Director
Derek J. Hernquist
/s/ Benedict S. Gambino Director March 25, 1999
- -----------------------------------
Benedict S. Gambino
</TABLE>
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
onlinetradinginc.com corp.
ARTICLE I -- NAME
-----------------
The name of the company is onlinetradinginc.com corp. (the "Company").
ARTICLE II -- ADDRESS
---------------------
The current mailing address and principal place of business of the
Company is 2700 N. Military Trail, Suite 200, Boca Raton, Florida 33431.
ARTICLE III -- CAPITAL STOCK
----------------------------
The aggregate number of shares of all classes of capital stock which
the Company shall have the authority to issue is 30,000,000 shares of common
stock, par value $.01 per share (the "Common Stock"); and 1,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock").
A. PROVISIONS RELATING TO THE COMMON STOCK.
1. VOTING RIGHTS. Except as otherwise required by law or as may be
provided by the resolutions of the Board of Directors authorizing the issuance
of any class or series of the Preferred Stock, as herein provided, all rights to
vote and all voting power shall be vested exclusively in the holders of the
Common Stock with each share of Common Stock entitled to one vote.
2. DIVIDENDS. Subject to the rights of the holders of the Preferred
Stock, the holders of the Common Stock shall be entitled to receive when, as and
if declared by the Board of Directors, out of funds legally available therefor,
dividends and other distributions payable in cash, property, stock (including
shares of any class or series of the Company, whether or not shares of such
class or series are already outstanding) or otherwise.
THIS DOCUMENT PREPARED BY:
MIRIAM ALFONSO, ESQUIRE
BROAD AND CASSEL
FL BAR NO. 155251
201 S. BISCAYNE BOULEVARD, SUITE 3000
MIAMI, FLORIDA 33131
(305) 373-9461
<PAGE> 2
3. LIQUIDATING DISTRIBUTIONS. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary, and after the
holders of the Preferred Stock shall have been paid in full the amounts to which
they shall be entitled, if any, or a sum sufficient for such payment in full
shall have been set aside, the remaining net assets of the Company, if any,
shall be distributed pro rata to the holders of Common Stock in accordance with
their respective rights and interests to the exclusion of the holders of
Preferred Stock.
B. PROVISIONS RELATING TO PREFERRED STOCK.
1. GENERAL. The Preferred Stock may be issued from time to time, in one
or more classes or series, the shares of each class or series to have such
designations, powers, preferences and rights, and qualifications, limitations
and restrictions thereof as are stated and expressed herein and in the
resolution or resolutions providing for the issuance of such class or series
adopted by the Board of Directors as hereinafter prescribed.
2. PREFERENCES. Subject to the rights of the holders of the Company's
Common Stock, authority is hereby expressly granted to and vested in the Board
of Directors to authorize the issuance of the Preferred Stock from time to time,
in one or more classes or series, to determine and take necessary proceedings
fully to effect the issuance conversion and redemption of any such Preferred
Stock, and, with respect to each class or series of Preferred Stock, to fix and
state by the resolution or resolutions from time to time adopted providing for
the issuance thereof the following:
(a) whether or not the class or series is to have voting rights,
special or conditional, full or limited, or is to be without voting rights;
(b) the number of shares to constitute the class or series and the
designations thereof;
(c) the preferences and relative, participating, optional or other
special rights, if any, and the qualifications, limitations or restrictions
thereof, if any, with respect to any class or series;
(d) whether or not the shares of any class or series shall be
redeemable and if redeemable the redemption price or prices, and the time or
times at which and the terms and conditions upon which, such shares shall be
redeemable and the manner of redemption;
(e) whether or not the shares of a class or series shall be subject
to the operation of retirement or sinking funds to be applied to the purchase or
redemption of such shares for retirement, and if such retirement or sinking fund
or funds be established, the periodic amount thereof and the terms and
provisions relative to the operation thereof;
(f) the dividend rate, whether dividends are payable in cash, stock
or other property of the Company, the conditions upon which and the times when
such dividends are payable, the preference to or the relation to the payment of
the dividends payable, on any other
2
<PAGE> 3
class or classes or series of stock, whether or not such dividend shall be
cumulative or noncumulative, and if cumulative, the date or dates from which
such dividends shall accumulate;
(g) the preferences, if any, and the amounts thereof that the
holders of any class or series thereof shall be entitled to receive upon the
voluntary or involuntary dissolution of, or upon any distribution of the assets
of, the Company;
(h) whether or not the shares of any class or series shall be
convertible into, or exchangeable for, the shares of any other class or classes
or of any other series of the same or any other class or classes of the Company
and the conversion price or prices or ratio or ratios or the rate or rates at
which such conversion or exchange may be made, with such adjustments, if any, as
shall be stated and expressed or provided for in such resolution or resolutions;
and
(i) such other special rights and protective provisions with respect
to any class or series as the Board of Directors may deem advisable.
The shares of each class or series of the Preferred Stock may vary from
the shares of any other class or series thereof in any or all of the foregoing
respects. The Board of Directors may increase the number of shares of Preferred
Stock designated for any existing class or series by a resolution adding to such
class or series authorized and unissued shares of the Preferred Stock not
designated for any other class or series. The Board of Directors may decrease
the number of shares of the Preferred Stock designated for any existing class or
series by a resolution, subtracting from such series unissued shares of the
Preferred Stock designated for such class, or series, and the shares so
subtracted shall become authorized, unissued and undesignated shares of the
Preferred Stock.
ARTICLE IV -- REGISTERED AGENT
------------------------------
The street address of the Company's registered office is 201 South
Biscayne Boulevard, Suite 3000, Miami, Florida 33131. The name of the
Company's registered agent at that address is B&C Corporate Services, Inc.
ARTICLE V -- LIMITATION ON DIRECTOR LIABILITY
---------------------------------------------
A director shall not be personally liable to the Company or the holders
of shares of capital stock for monetary damages for breach of fiduciary duty as
a director, except (i) for any breach of the duty of loyalty of such director to
the Company or such holders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 607.0831 of the Florida Business Company Act (the "FBCA"), or (iv) for
any transaction from which such director derives an improper personal benefit.
This Article V shall be read to authorize the limitation of liability to the
fullest extent permitted under Florida law. If the FBCA is hereafter amended to
authorize the further or broader elimination or limitation of the personal
liability of directors, then the liability of a director of the Company shall be
eliminated or limited to the fullest extent permitted by the FBCA, as so
amended. No repeal or modification of this Article V shall adversely affect any
right of or protection afforded to a director of the Company existing
immediately prior to such repeal or modification.
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ARTICLE VI -- SPECIAL MEETING OF SHAREHOLDERS
---------------------------------------------
Except as otherwise required by law and subject to the rights of the
holders of the Preferred Stock, special meetings of shareholders of the Company
may be called only by (i) the Board of Directors pursuant to a resolution
approved by a majority of the entire Board of Directors, (ii) the Company's
Chief Executive Officer or (iii) the holders of at least one-third of the
outstanding shares of capital stock of the Company. Notwithstanding anything
contained in these Amended and Restated Articles of Incorporation to the
contrary, this Article VI shall not be altered, amended or repealed except by an
affirmative vote of at least two-thirds of the outstanding shares of capital
stock of the Company entitled to vote at a shareholders' meeting duly called for
such purpose.
ARTICLE VII -- INDEMNIFICATION
------------------------------
The Company shall indemnify and advance expenses to, and may purchase
and maintain insurance on behalf of, its officers and directors to the fullest
extent permitted by law as now or hereafter in effect. Without limiting the
generality of the foregoing, the Company's Bylaws may provide for
indemnification and advancement of expenses to officers, directors, employees
and agents on such terms and conditions as the Board of Directors may from time
to time deem appropriate or advisable.
ARTICLE VIII -- BYLAWS
----------------------
The Board of Directors shall have the power to adopt, amend or repeal
the Bylaws or any part hereof. Certain provisions of the Bylaws, as stated
therein, may not be altered, amended or repealed except by the affirmative vote
of at least two-thirds of the outstanding shares of capital stock of the Company
entitled to vote at a shareholders' meeting duly called for such purpose. Except
for such provisions requiring a two-thirds vote to alter, amend or repeal, the
Bylaws may be altered, amended or repealed, and new bylaws may be adopted, by
the shareholders upon the affirmative vote of at least a majority of the
outstanding shares of capital stock of the Company entitled to vote at a
shareholders' meeting duly called for such purpose.
Notwithstanding anything contained in these Amended and Restated
Articles of Incorporation to the contrary, this Article VIII shall not be
altered, amended or repealed except by an affirmative vote of at least
two-thirds of the outstanding shares of capital stock of the Company entitled to
vote at a shareholders' meeting duly called for such purpose.
ARTICLE X -- AMENDMENT
----------------------
Except as provided herein, these Amended and Restated Articles of
Incorporation may be altered, amended or repealed by the shareholders of the
Company in accordance with Florida law.
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IN WITNESS WHEREOF, the undersigned, for the purpose of amending and
restating the Company's Article of Incorporation pursuant to laws of the State
of Florida, has executed these Amended and Restated Articles of Incorporation as
of ________________, 1999.
onlinetradinginc.com corp., a Florida corporation
By:
-----------------------------------------
E. Steven zum Tobel, President
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<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
OF
onlinetradinginc.com corp.
ARTICLE I
OFFICES
SECTION 1. NAME. The name of the company is onlinetradinginc.com corp.,
a Florida corporation (the "Company").
SECTION 2. OTHER OFFICES. The location of the registered office of the
Company shall be as stated in the Articles of Incorporation, which location may
be changed from time to time by the Company's Board of Directors (the "Board of
Directors"). The Company may also have offices at such other places, either
within or without the State of Florida, as the Board of Directors may from time
to time determine or as the business of the Company may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETINGS. All annual meetings of the shareholders of
the Company for the election of directors and for such other business as may
properly come before the meeting shall be held on such date or at such time as
may be fixed, from time to time, by the Board of Directors, and at such place,
within or without the State of Florida, as may be designated by or on behalf of
the Board of Directors and stated in the notice of meeting or in a duly executed
waiver of notice thereof.
SECTION 2. SPECIAL MEETINGS. Except as otherwise required by law and
subject to the rights of the holders of the Preferred Stock, special meetings of
shareholders of the Company may be called only by (i) the Board of Directors
pursuant to a resolution approved by a majority of the entire Board of
Directors, (ii) the Company's Chief Executive Officer or (iii) the holders of at
least one-third of the outstanding shares of capital stock of the Company.
Special meetings of shareholders may be held at such time and date, and at such
place, within or without the State of Florida, as shall be designated by the
Board of Directors and set forth in the notice of meeting required pursuant to
Section 3 of this Article. Notwithstanding anything contained in these Bylaws to
the contrary, this Article II, Section 2 shall not be altered, amended or
repealed except by an affirmative vote of at least two-thirds of the outstanding
shares of capital stock of the Company entitled to vote at a shareholders'
meeting duly called for such purpose. Only such business as is set forth in the
notice of a special meeting may be transacted at such special meeting.
SECTION 3. NOTICE. A written notice of each meeting of shareholders
shall be given to each shareholder entitled to vote at the meeting, at the
address as it appears on the stock transfer records of the Company, not less
than ten nor more than 60 days before the date of the meeting, by or at the
direction of the President, the Secretary or the officer or persons calling the
meeting. The notice so given shall state the date, time and place of meeting
and, in the case of a special shareholders' meeting, the purpose or purposes for
which the meeting is called.
<PAGE> 2
SECTION 4. WAIVER OF NOTICE. Shareholders may waive notice of any
meeting before or after the date and time specified in the written notice of
meeting. Any such waiver of notice must be in writing, be signed by the
shareholder entitled to the notice and be delivered to the Company for inclusion
in the appropriate corporate records. Neither the business to be transacted at,
nor the purpose of, any shareholders' meeting need be specified in any written
waiver of notice. Attendance of a person at a shareholders' meeting shall
constitute a waiver of notice of such meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting.
SECTION 5. RECORD DATE. For the purpose of determining shareholders
entitled to notice of or to vote at a shareholders' meeting, to demand a special
meeting, or to take any other action, the Board of Directors may fix in advance
a date as the record date for any such determination of shareholders, such date
in any case to be not more than 70 days nor, in the case of a shareholders'
meeting, less than ten days, prior to the date on which the particular action
requiring such determination of shareholders is to be taken. If no record date
is fixed for the determination of shareholders entitled to notice or to vote at
a shareholders' meeting, then the record date for such shall be the close of
business on the day before the first notice is delivered to shareholders.
SECTION 6. QUORUM. A majority of the shares entitled to vote on a
matter, represented in person or by proxy, shall constitute a quorum for action
on that matter at a meeting of shareholders. If a quorum is not present or
represented at a meeting of shareholders, the holders of a majority of the
shares represented, and who would be entitled to vote at a meeting if a quorum
were present, may adjourn the meeting from time to time and to another place,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. Once a quorum has been established at a shareholders'
meeting, the subsequent withdrawal of shareholders, so as to reduce the number
of shares entitled to vote at the meeting below the number required for a
quorum, shall not affect the validity of any action taken at the meeting or any
adjournment thereof.
SECTION 7. VOTING. If a quorum is present, action on a matter, other
than the election of directors, shall be approved by an affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter, unless a greater number of affirmative votes or voting by
classes is required by Florida law or by the Articles of Incorporation.
Directors shall be elected by plurality vote in accordance with Article III,
Section 3 of these Bylaws. Each outstanding share shall be entitled to one vote
on each matter submitted to a vote at a meeting of shareholders, unless
otherwise provided under the Articles of Incorporation (or any resolution
authorizing any class or series of Preferred Stock) or under Florida law.
SECTION 8. PROXIES. A shareholder entitled to vote at any meeting of
shareholders or any adjournment thereof may vote in person or by proxy. A
shareholder may appoint a proxy to vote or otherwise act for him by signing an
appointment form, either personally or by his attorney-in-fact. An appointment
of proxy is effective when received by the Secretary or other officer or agent
authorized to tabulate votes.
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<PAGE> 3
A proxy is not valid after the expiration of 11 months after its date
unless the person executing it specifies therein the length for which it is to
continue in force. Unless prohibited by law, a proxy otherwise validly granted
by telegram shall be deemed to have been signed by the granting shareholder. All
questions regarding the qualification of voters, the validity of proxies and the
acceptance or rejection of votes shall be decided by the presiding officer of
the meeting.
SECTION 9. NO SHAREHOLDER ACTION WITHOUT A MEETING. Any action required
or permitted to be taken by the shareholders of the Company shall be taken at a
duly called annual or special meeting of such holders and may not be taken by
any consent in writing by such holders. Notwithstanding anything contained in
these Bylaws to the contrary, this Article II, Section 9 shall not be altered,
amended or repealed except by an affirmative vote of at least two-thirds of the
outstanding shares of capital stock of the Company entitled to vote at a
shareholders' meeting duly called for such purpose.
SECTION 10. ADVANCE NOTICE OF SHAREHOLDER PROPOSED BUSINESS AT ANNUAL
MEETING. At an annual meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be either (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (b) otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a shareholder. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of the Company. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Company, not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to shareholders,
notice by the shareholder to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure was made,
whichever first occurs. A shareholder's notice to the Secretary shall set forth
as to each matter the shareholder proposes to bring before the annual meeting
(i) a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and record address of the shareholder proposing such business, (iii)
the class and number of shares of the Company which are beneficially owned by
the shareholder, and (iv) any material interest of the shareholder in such
business.
Notwithstanding anything in the Bylaws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Article II, Section 10; provided, however, that
nothing in this Article II, Section 10, shall be deemed to preclude discussion
by any shareholder of any business properly brought before the annual meeting in
accordance with said procedure.
The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Article II, Section
10, and if he should so determine, he shall so declare to the meeting and any
such business not properly brought before the meeting shall not be transacted.
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<PAGE> 4
Notwithstanding anything contained in the Bylaws to the contrary, this
Article II, Section 10 shall not be altered, amended or repealed except by an
affirmative vote of at least two-thirds of the outstanding shares of capital
stock of the Company entitled to vote thereon.
ARTICLE III
DIRECTORS
SECTION 1. POWERS. All corporate powers shall be exercised by or under
the authority of, and the business and affairs of the Company shall be managed
under the direction of, the Board of Directors. Directors must be natural
persons who are at least 18 years of age but need not be residents of Florida or
shareholders of the Company.
SECTION 2. COMPENSATION. Directors of the Company who also serve as
officers or members of management ("Employee Directors") shall serve as
directors without compensation. Non-employee directors of the Company shall be
entitled to receive such compensation and benefits as is from time to time
determined by the Board of Directors. The Employee Directors may be paid their
expenses, if any, and the non-employee directors may be paid a fee and expenses,
if any, of attendance at each meeting of the Board of Directors or of any
committee. No such payments shall preclude any director from serving in any
other capacity and receiving compensation therefor.
SECTION 3. NUMBER, ELECTION AND TERM. The Company's Board of Directors
shall consist of not less than three nor more than ten members, with the exact
number to be fixed from time to time in accordance with a resolution adopted by
a majority of the entire Board of Directors. No decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director.
SECTION 4. VACANCIES. Whenever any vacancy on the Board of Directors
shall occur due to death, resignation, retirement, disqualification, removal,
increase in the number of directors, or otherwise, a majority of the remaining
directors in office, although less than a quorum of the Board of Directors, may
fill the vacancy for the balance of the unexpired term, at which time a
successor or successors shall be duly elected by the shareholders and qualified.
Notwithstanding the provisions of any other Article hereof, only the remaining
directors of the Company shall have the authority, in accordance with the
procedure stated herein, to fill any vacancy that arises on the Board of
Directors.
SECTION 5. REMOVAL OF DIRECTORS. A director may be removed from office
prior to the expiration of his or her term: (i) only for cause; and (ii) only
upon the affirmative vote of at least two-thirds of the outstanding shares of
capital stock of the Company entitled to vote for the election of directors.
SECTION 6. QUORUM AND VOTING. A majority of the number of directors
fixed by or in accordance with these Bylaws shall constitute a quorum for the
transaction of business at any meeting of directors. If a quorum is present when
a vote is taken, the affirmative vote of a majority of the directors present
shall be the act of the Board of Directors.
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<PAGE> 5
SECTION 7. DEEMED ASSENT. A director who is present at a meeting of the
Board of Directors or a committee of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless (i) the
director objects at the beginning of the meeting (or promptly upon his arrival)
to the holding of the meeting or transacting specified business at the meeting,
or (ii) the director votes against or abstains from the action taken.
SECTION 8. COMMITTEES. The Board of Directors, by resolution adopted by
a majority of the full Board of Directors, may designate from among its members
an executive committee, a compensation committee, an audit committee and one or
more other committees each of which must have at least two members and, to the
extend provided in the designating resolution, shall have and may exercise all
the authority of the Board of Directors, except such authority as may be
reserved to the Board of Directors under Florida law.
(a) EXECUTIVE COMMITTEE. The Board of Directors by resolution may
designate one or more directors to constitute an executive committee, which
committee, to the extent provided in such resolution, shall have and may
exercise all powers and authority of the Board of Directors in the management of
the business and affairs of the Company, except where action of the Board of
Directors is required by statute.
(b) OTHER COMMITTEES. The Board of Directors may by resolution create
other committees for such terms and with such powers and duties as the Board of
Directors shall deem appropriate.
(c) ORGANIZATION OF COMMITTEES. The chairman of all committees of the
Board of Directors shall be chosen by the members thereof. Each committee shall
elect a secretary, who shall be either a member of the committee or the
secretary of the Company. The chairman of each committee shall preside at all
meetings of such committee.
(d) MEETINGS. Regular meetings of each committee may be held without
the giving of notice if a day of the week, a time, and a place shall have been
established by the committee for such meetings. Special meetings (and, if the
requirements of the preceding sentence have not been met, regular meetings)
shall be called as provided in Section 9 with respect to notices of special
meetings of the Board of Directors.
(e) QUORUM AND MANNER OF ACTING. A majority of the members of each
committee shall be present either in person or by telephone, radio, television,
or similar means of communication through which all persons participating may
simultaneously hear each other at all times, at each meeting of such committee
in order to constitute a quorum for the transaction of business. The act of a
majority of the members so present at a meeting at which a quorum is present
shall be the act of such committee. The members of each committee shall act only
as a committee, and shall have no power or authority, as such, by virtue of
their membership on the committee.
(f) RECORD OF COMMITTEE ACTION; REPORTS. Each committee shall maintain
a record, which need not be in the form of complete minutes, of the action taken
by it at each meeting,
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<PAGE> 6
which record shall include the date, time and place of the meeting, the names of
the members present and absent, the action considered, and the number of votes
cast for and against the adoption of the action considered. All action by each
committee shall be reported to the Board of Directors at its meeting next
succeeding such action, such report to be in sufficient detail as to enable the
Board of Directors to be informed of the conduct of the Company's business and
affairs since the last meeting of the board.
(g) REMOVAL. Any member of any committee may be removed from such
committee, either with or without cause, at any time by resolution adopted by a
majority of the whole Board of Directors at any meeting of the board.
(h) VACANCIES. Any vacancy in any committee shall be filled by the
Board of Directors in the manner prescribed by these Bylaws.
SECTION 9. MEETINGS. Regular and special meetings of the Board of
Directors shall be held at the principal place of business of the Company or at
any other place, within or without the State of Florida, designated by the
person or persons entitled to give notice of or otherwise call the meeting.
Meetings of the Board of Directors may be called by the President or by any two
(2) directors. Members of the Board of Directors (and any committee of the Board
of Directors) may participate in a meeting of the Board of Directors (or any
committee of the Board of Directors) by means of a conference telephone or
similar communications equipment through which all persons participating may
simultaneously hear each other during the meeting; participation by these means
constitutes presence in person at the meeting.
SECTION 10. NOTICE OF MEETINGS. Regular meetings of the Board of
Directors may be held without notice of the date, time, place or purpose of the
meeting, so long as the date, time and place of such meetings are fixed
generally by the Board of Directors. Special meetings of the Board of Directors
must be preceded by at least two days' written notice of the date, time and
place of the meeting. The notice need not describe either the business to be
transacted at or the purpose of the special meeting.
SECTION 11. WAIVER OF NOTICE. Notice of a meeting of the Board of
Directors need not be given to a director who signs a waiver of notice either
before or after the meeting. Attendance of a director at a meeting shall
constitute a waiver of notice of that meeting and a waiver of any and all
objections to the place of the meeting, the time of the meeting and the manner
in which it has been called or convened, except when a director states, at the
beginning of the meeting or promptly upon arrival at the meeting, any objection
to the transaction of business because the meeting is not lawfully called or
convened. The waiver of notice need not describe either the business to be
transacted at or the purpose of the special meeting.
SECTION 12. DIRECTOR ACTION WITHOUT A MEETING. Any action required or
permitted to be taken at a meeting of the Board of Directors (or a committee of
the board) may be taken without a meeting if the action is taken by the written
consent of all members of the Board of Directors (or of the committee of the
Board of Directors). The action must be evidenced by one or more written
consents describing the action to be taken and signed by each director (or
committee member), which consent(s) shall be filed in the minutes of the
proceedings of the
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<PAGE> 7
Board of Directors. The action taken shall be deemed effective when the last
director signs the consent, unless the consent specifies otherwise.
SECTION 13. SHAREHOLDER NOMINATIONS FOR DIRECTOR CANDIDATES. Only
persons who are nominated in accordance with the following procedures shall be
eligible for election as directors. Nominations of persons for election to the
Board of Directors of the Company may be made at a meeting of shareholders by or
at the direction of the Board of Directors by any nominating committee or person
appointed by the Board of Directors or by any shareholder of the Company
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Article III, Section 13. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Company. To be timely, a shareholder's notice shall be delivered to or
mailed and received at the principal executive offices of the Company not less
than 60 days nor more than 90 days prior to the meeting; provided, however, that
in the event that less than 70 days' notice or prior public disclosure of the
date of the meting is given or made to shareholders, notice by the shareholder
to be timely must be so received not later than the close of business on the
tenth day following the date on which such notice of the date of the meeting was
mailed or such public disclosure was made whichever first occurs. Such
shareholder's notice to the Secretary shall set forth (a) as to each person whom
the shareholder proposes to nominate for election or re-election as a director,
(i) the name, age, business address and residence address of the person, (ii)
the principal occupation or employment of the persons, (iii) the class and
number of shares of capital stock of the Company which are beneficially owned by
the person, (iv) the consent of each nominee to serve as a director of the
Company if so elected, and (v) any other information relating to the person that
is required to be disclosed in solicitations for proxies for election of
directors pursuant to Rule 14a under the Securities Exchange Act of 1934, as
amended; and (b) as to the shareholder giving the notice, (i) the name and
record address of shareholder, and (ii) the class and number of shares of
capital stock of the Company which are beneficially owned by the shareholder.
The Company may require any proposed nominee to furnish such other information
as may reasonably be required by the Company to determine the eligibility of
such proposed nominee to serve as director of the Company. No person shall be
eligible for election as a director of the Company unless nominated in
accordance with the procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
SECTION 14. AMENDMENTS. Notwithstanding anything contained in the
Bylaws to the contrary, this Article III shall not be altered, amended or
repealed except by an affirmative vote of at least two-thirds of the outstanding
shares of capital stock of the Company entitled to vote thereon.
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<PAGE> 8
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the Company shall consist of a President,
one or more Vice Presidents and Secretaries and a Treasurer and if elected by
the Board of Directors by resolution, a Chairman. Such other officers and
assistant officers and agents as may be deemed necessary or desirable may be
appointed by the Board of Directors. Any two or more offices may be held by the
same person.
SECTION 2. DUTIES. The officers of the Company shall have the following
duties:
(a) The CHIEF EXECUTIVE OFFICER shall have general and active
management of the business and affairs of the Company subject to the direction
of the Board of Directors. The Chief Executive Officer shall see to it that all
orders and resolutions of the Board of Directors are carried into effect. In the
absence of the Chairman of the Board of Directors or in the event the Board of
Directors shall not have designated a Chairman of the Board of Directors, the
Chief Executive Officer shall preside at all meetings of the Board of Directors
and shareholders.
(b) The PRESIDENT shall have such powers and perform such duties as the
Board of Directors shall from time to time designate. In the absence or
disability of the Chief Executive Officer, the President shall have the powers
and shall exercise the duties of the Chief Executive Officer.
(c) Each VICE PRESIDENT, if any, shall have such powers and perform
such duties as the Board of Directors shall from time to time designate. In the
absence or disability of the President, a Vice President specifically designated
by the vote of the Board of Directors shall have the powers and shall exercise
the duties of the President.
(d) The SECRETARY shall have custody of and shall maintain all of the
corporate records (except the financial records), shall record the minutes of
all meetings of the shareholders and the Board of Directors, shall authenticate
records of the Company, shall send all notices of meetings and shall perform
such other duties as are prescribed by the Board of Directors or the President,
under whose supervision he shall be.
(e) The TREASURER shall have custody of all corporate funds, securities
and financial records, shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Company and shall deposit all monies and
other valuable effects in the name and to the credit of the Company in such
depositaries as may be designated by the Board of Directors. He shall disburse
the funds of the Company as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall render an account of all his
transactions as treasurer and of the financial condition of the Company at
regular meetings of the Board of Directors or when the Board of Directors so
requests. The Treasurer shall also perform such other duties as are prescribed
by the Board of Directors.
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(f) Each ASSISTANT SECRETARY and ASSISTANT TREASURER, if any, shall be
appointed by the Board of Directors and shall have such powers and shall perform
such duties as shall be assigned to them by the Board of Directors.
SECTION 3. RESIGNATION OF OFFICER. An officer may resign at any time by
delivering notice to the Company. The resignation shall be effective upon
receipt, unless the notice specifies a later effective date acceptable to the
Board of Directors. If the resignation is effective at a later date and the
Company accepts the future effective date, the Board of Directors may fill the
pending vacancy before the effective date provided the Board of Directors
provides that the successor officer does not take office until the future
effective date.
SECTION 4. REMOVAL OF OFFICER. The Board of Directors may remove any
officer at any time with or without cause.
SECTION 5. COMPENSATION. The compensation of officers shall be fixed
from time to time at the discretion of the Board of Directors. The Board of
Directors may enter into employment agreements with any officer of the Company.
ARTICLE V
STOCK CERTIFICATES
SECTION 1. ISSUANCE. Every holder of shares in this Company shall be
entitled to have a certificate representing all shares to which he is entitled.
No certificate shall be issued for any share until the consideration therefor
has been fully paid.
SECTION 2. FORM. Certificates representing shares in this Company shall
be signed by the President and the Secretary of the Company, or any other
officer so designated by the Board of Directors.
SECTION 3. LEGENDS FOR PREFERENCES AND RESTRICTIONS ON TRANSFER. If the
Company shall be authorized to issue more than one class of stock or more them
one series of any class, the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the certificate
which the Company shall issue to represent such class or series of stock,
provided that, except as otherwise provided by law, in lieu of the foregoing
requirements, there be set forth on the face or back of the certificate which
the Company shall issue to represent such class or series of stock, a statement
that the Company will furnish without charge to each shareholder who so requests
the powers, designations, preferences and relative, participating, optional, or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
A written restriction on the transfer or registration of transfer of a
security of the Company, if permitted by law and noted conspicuously on the
certificate representing the security may be enforced against the holder of the
restricted security or any successor or transferee of the holder
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<PAGE> 10
including an executor, administrator, trustee, guardian or other fiduciary
entrusted with like responsibility for the person or estate of the holder.
Unless noted conspicuously on the certificate representing the security, a
restriction, even though permitted by law, is ineffective except against a
person with actual knowledge of the restriction. If the Company issues any
shares that are not registered under the Securities Act of 1933, as amended, and
registered or qualified under the applicable state securities laws, the transfer
of any such shares shall be restricted substantially in accordance with the
following legend, or in such other form as the Board of Directors may provide
from time to time:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT OF 1933
AND ANY APPLICABLE STATE LAW, OR (2) AT HOLDER'S EXPENSE, AN OPINION
(SATISFACTORY TO THE COMPANY) OF COUNSEL (SATISFACTORY TO THE COMPANY) THAT
REGISTRATION IS NOT REQUIRED."
SECTION 4. FACSIMILE SIGNATURES. Any and all signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Company with the same
effect as if he were such officer, transfer agent or registrar at the date of
the issue.
SECTION 5. REGISTERED SHAREHOLDERS. The Company shall be entitled to
treat the holder of record of shares as the holder in fact and, except as
otherwise provided by the laws of Florida, shall not be bound to recognize any
equitable or other claim to or interest in the shares.
SECTION 6. TRANSFER OF SHARES. Shares of the Company shall be
transferred on its books only after the surrender to the Company or the transfer
agent of the share certificates duly endorsed by the holder of record or
attorney-in-fact. If the surrendered certificates are canceled, new certificates
shall be issued to the person entitled to them, and the transaction recorded on
the books of the Company.
SECTION 7. LOST, STOLEN OR DESTROYED CERTIFICATES. If a shareholder
claims to have lost or destroyed a certificate of shares issued by the Company,
a new certificate shall be issued upon delivery to the Company of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed, and, at the discretion of the Board of Directors, upon the deposit
of a bond or other indemnity as the Board of Directors reasonably requires.
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ARTICLE VI
DISTRIBUTIONS
The Board of Directors may, in its sole judgment and discretion, from
time to time authorize and declare, and the Company may pay, distributions on
its outstanding shares in cash, property or its own shares, unless the
distribution, after giving it effect, would result in (i) the Company being
unable to pay its debts as they become due in the usual course of business, or
(ii) a violation of applicable law.
ARTICLE VII
CORPORATE RECORDS
The Company shall keep as permanent records minutes of all meetings of
its shareholders and Board of Directors, a record of all actions taken by the
Board of Directors without a meeting, and a record of all actions taken by a
committee of the Board of Directors in place of the Board of Directors on behalf
of the Company. The Company shall also maintain accurate accounting records and
a record of its shareholders in a form that permits preparation of a list of the
names and addresses of all shareholders in alphabetical order by class of shares
showing the number and series of shares held by each.
ARTICLE VIII
INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS
SECTION 1. INDEMNIFICATION. The Company shall, and does hereby,
indemnify and hold harmless to the fullest extent permitted or authorized by
current or future legislation or current or future judicial or administrative
decisions (but, in the case of any such future legislation or decisions, only to
the extent that it permits the Company to provide broader indemnification rights
than permitted prior to such legislation or decisions), each person (including
here and hereinafter, the heirs, executors, administrators, personal
representatives or estate of such person) who was or is a party, or is
threatened to be made a party, or was or is a witness, to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "Proceeding"), from, against and in respect
of any liability (which for purposes of this Article shall include any judgment,
settlement penalty or fine) or cost, charge or expense (including attorneys'
fees and expenses) asserted against him or incurred by him by reason of the fact
that such indemnified person (1) is or was a director or officer of the Company
or (2) is or was an employee or agent of the Company as to whom the Company has
agreed in writing to grant such indemnity or (3) is or was serving, at the
request of the Company, as a director, officer, employee or trustee of another
Company, partnership, joint venture, trust or other enterprise (including
serving as a fiduciary of an employee benefit plan) or is or was serving as an
agent of such other Company, partnership, joint venture, trust or other
enterprise in each case, as to whom the Company has agreed in writing to grant
such indemnity. Each director, officer, employee or agent of the Company as to
whom indemnification rights
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have been granted under this Section 1 of this Article shall be referred to as
an "Indemnified Person".
Notwithstanding the foregoing, except as specified in Section 3 of this
Article, the Company shall not be required to indemnify an Indemnified Person in
connection with a Proceeding (or any part thereof) initiated by such Indemnified
Person unless the authorization for such Proceeding (or any part thereof) was
not cleared by the Board of Directors of the Company within 60 days after
receipt of notice thereof from such Indemnified Person stating his intent to
initiate such Proceeding and only then upon such terms and conditions as the
Board of Directors may deem appropriate.
SECTION 2. ADVANCE OF COSTS, CHARGES AND EXPENSES. Costs, charges and
expenses (including attorneys' fees and expenses) incurred by an officer or
director who is an Indemnified Person in defending a Proceeding shall be paid by
the Company, to the fullest extent permitted or authorized by current or future
legislation or current of future judicial or administrative decisions (but, in
the case of any such future legislation or decisions, only to the extent that it
permits the Company to provide broader rights to advance costs, charges and
expenses than permitted prior to such legislation or decisions), in advance of
the final disposition of such Proceeding, upon receipt of an undertaking by or
on behalf of the Indemnified Person to repay all amounts so advanced in the
event that it shall ultimately be determined that such person is not entitled to
be indemnified by the Company as authorized in this Article. The Company may,
upon approval of the Indemnified Person, authorize the Company's counsel to
represent such person in any Proceeding, whether or not the Company is a party
to such Proceeding. Such authorization may be made by the Chairman of the Board,
unless he is a party to such Proceeding, or by the Board of Directors by
majority vote, including directors who are parties to such Proceeding.
SECTION 3. PROCEDURE FOR INDEMNIFICATION. Any indemnification or
advance under this Article shall be made promptly and in any event within 45
days upon the written request of the Indemnified Person. The right to
indemnification or advances as granted by this Article shall be enforceable by
the Indemnified Person in any court of competent jurisdiction, if the Company
denies such request under this Article, in whole or in part, or if no
disposition thereof is made within 45 days. Such Indemnified Person's costs and
expenses incurred in connection with successfully establishing his right to
indemnification or advances, in whole or in part, in any such action shall also
be indemnified by the Company. It shall be a defense to any such action that the
claimant has not met the standard of conduct, if any, required by current or
future legislation or by current or future judicial or administrative decisions
for Indemnification (but, in the case of any such future legislation or
decisions, only to the extent that it does not impose a more stringent standard
of conduct than permitted prior to such legislation or decision), but the burden
of proving such defense shall be on the Company. Neither the failure of the
Company (including its Board of Directors or any committee thereof, its
independent legal counsel, and its shareholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct, if any, nor the fact that there has been an actual determination by the
Company (including its Board of Directors or any committee thereof, its
independent legal counsel, or its shareholders) that the claimant has not met
such applicable standard of conduct,
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<PAGE> 13
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
SECTION 4. RIGHTS NOT EXCLUSIVE; CONTRACT RIGHTS; SURVIVAL. The
indemnification provided by this Article shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under any agreement,
vote of shareholders or disinterested directors or otherwise, both as to actions
in such person's official capacity and as to actions in another capacity while
holding such office, and shall continue as to an Indemnified Person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors, administrators, personal representatives and
estate of such person. All rights to indemnification and advances under this
Article shall be deemed to be a contract between the Company and each
Indemnified Person who serves or served in such capacity at any time while this
Article is in effect and, as such, are enforceable against the Company. Any
repeal or modification of this Article or any repeal or modification of relevant
provisions of Florida's Company law or any other applicable laws shall not in
any way diminish these rights to indemnification of or advances to such
Indemnified Person, or the obligations of the Company arising hereunder, for
claims relating to matters occurring prior to such repeals or modification.
SECTION 5. INSURANCE. The Company may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee, trustee or agent of another Company partnership, joint
venture, trust or other enterprise (including serving as a fiduciary of an
employee benefit plan), with respect to any liability asserted against him and
incurred by him in any such capacity or arising out of his status as such,
whether or not the Company would have the power to indemnify him against such
liability under the provisions of this Article or the applicable provisions of
Florida law.
SECTION 6. SAVINGS CLAUSE. If this Article or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless, and make advances to,
each Indemnified Person as to costs, charges and expenses (including attorneys'
fees), liabilities, judgments, fines and amounts paid in settlement with respect
to any Proceeding, including any action by or in the right of the Company, to
the full extent permitted by any applicable portion of this Article that shall
not have been invalidated and as otherwise permitted by applicable law.
ARTICLE IX
MISCELLANEOUS
SECTION 1. CORPORATE SEAL. The corporate seal of the Company shall be
circular in form and shall include the name and jurisdiction of incorporation of
the Company.
SECTION 2. FISCAL YEAR. The fiscal year of the Company shall end on
January 31 of each calendar year, unless otherwise fixed by resolution of the
Board of Directors.
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<PAGE> 14
SECTION 3. CHECKS. All checks, drafts or other orders for the payment
of money, notes or other evidences of indebtedness issued in the name of the
Company shall be signed by the President, the Treasurer or such other officer(s)
or agent(s) of the Company as shall be determined from time to time by
resolution of the Board of Directors.
ARTICLE X
AMENDMENT
The Board of Directors shall have the power to adopt, amend or repeal
the Bylaws or any part hereof. Certain provisions of the Bylaws, as stated
herein, may not be altered, amended or repealed except by the affirmative vote
of at least two-thirds of the outstanding shares of capital stock of the Company
entitled to vote at a shareholders' meeting duly called for such purpose. Except
for such provisions requiring a two-thirds vote to alter, amend or repeal, the
Bylaws may be altered, amended or repealed, and new bylaws may be adopted, by
the shareholders upon the affirmative vote of at least a majority of the
outstanding shares of capital stock of the Company entitled to vote at a
shareholders' meeting duly called for such purpose. Notwithstanding anything
contained in these Bylaws to the contrary, this Article X shall not be altered,
amended or repealed except by an affirmative vote of at least two-thirds of the
outstanding shares of capital stock of the Company entitled to vote at a
shareholders' meeting duly called for such purpose.
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EXHIBIT 10.1
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onlinetradinginc.com corp.
1999 STOCK OPTION PLAN
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1. PURPOSE. The purpose of this Plan is to advance the interests of
onlinetradinginc.com corp., a Florida corporation (the "Company"), by providing
an additional incentive to attract, retain and motivate highly qualified and
competent persons who are key to the Company, including key employees,
consultants, independent contractors, officers and directors, and upon whose
efforts and judgment the success of the Company and its Subsidiaries is largely
dependent, by authorizing the grant of options to purchase Common Stock of the
Company to persons who are eligible to participate hereunder, thereby
encouraging stock ownership in the Company by such persons, all upon and subject
to the terms and conditions of this Plan.
2. DEFINITIONS. As used herein, the following terms shall have the
meanings indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Cause" shall mean any of the following:
(i) a determination by the Company that there has been a
willful, reckless or grossly negligent failure by the Optionee to perform his or
her duties as an employee of the Company;
(ii) a determination by the Company that there has been a
willful breach by the Optionee of any of the material terms or provisions of any
employment agreement between such Optionee and the Company;
(iii) any conduct by the Optionee that either results in his or
her conviction of a felony under the laws of the United States of America or any
state thereof, or of an equivalent crime under the laws of any other
jurisdiction;
(iv) a determination by the Company that the Optionee has
committed an act or acts involving fraud, embezzlement, misappropriation, theft,
breach of fiduciary duty or material dishonesty against the Company, its
properties or personnel;
(v) any act by the Optionee that the Company determines to be in
willful or wanton disregard of the Company's best interests, or which results,
or is intended to result, directly or indirectly, in improper gain or personal
enrichment of the Optionee at the expense of the Company;
(vi) a determination by the Company that there has been a
willful, reckless or grossly negligent failure by the Optionee to comply with
any rules, regulations, policies or procedures of the Company, or that the
Optionee has engaged in any act, behavior or
<PAGE> 2
conduct demonstrating a deliberate and material violation or disregard of
standards of behavior that the Company has a right to expect of its employees;
or
(vii) if the Optionee, while employed by the Company and for two
years thereafter, violates a confidentiality and/or noncompete agreement with
the Company, or fails to safeguard, divulges, communicates, uses to the
detriment of the Company or for the benefit of any person or persons, or misuses
in any way, any confidential information; PROVIDED, HOWEVER, that, if the
Optionee has entered into a written employment agreement with the Company which
remains effective and which expressly provides for a termination of such
Optionee's employment for "cause," the term "Cause" as used herein shall have
the meaning as set forth in the Optionee's employment agreement in lieu of the
definition of "Cause" set forth in this Section 2(b).
(c) "Change of Control" shall mean the acquisition by any person or
group (as that term is defined in the Exchange Act, and the rules promulgated
pursuant to that act) in a single transaction or a series of transactions of
thirty percent (30%) or more in voting power of the outstanding stock of the
Company and a change of the composition of the Board of Directors so that,
within two years after the acquisition took place, a majority of the members of
the Board of Directors of the Company, or of any corporation with which the
Company may be consolidated or merged, are persons who were not directors or
officers of the Company or one of its Subsidiaries immediately prior to the
acquisition, or to the first of a series of transactions which resulted in the
acquisition of thirty percent (30%) or more in voting power of the outstanding
stock of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean the stock option committee appointed by the
Board or, if not appointed, the Board.
(f) "Common Stock" shall mean the Company's Common Stock, par value
$.01 per share.
(g) "Director" shall mean a member of the Board.
(h) "Employee" shall mean any person, including officers, directors,
consultants and independent contractors employed by the Company or any parent or
Subsidiary of the Company within the meaning of Section 3401(c) or the
regulations promulgated thereunder.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" of a Share on any date of reference shall be
the Closing Price of a share of Common Stock on the business day immediately
preceding such date, unless the Committee in its sole discretion shall determine
otherwise in a fair and uniform manner. For this purpose, the "Closing Price" of
the Common Stock on any business day shall be (i) if the Common Stock is listed
or admitted for trading on any United States national securities exchange, or if
actual transactions are otherwise reported on a consolidated transaction
reporting system, the last reported sale price of the Common Stock on such
exchange or
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reporting system, as reported in any newspaper of general circulation, (ii) if
the Common Stock is quoted on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), or any similar system of automated
dissemination of quotations of securities prices in common use, the mean between
the closing high bid and low asked quotations for such day of the Common Stock
on such system, or (iii) if neither clause (i) nor (ii) is applicable, the mean
between the high bid and low asked quotations for the Common Stock as reported
by the National Quotation Bureau, Incorporated if at least two securities
dealers have inserted both bid and asked quotations for the Common Stock on at
least five (5) of the ten (10) preceding days. If the information set forth in
clauses (i) through (iii) above is unavailable or inapplicable to the Company
(e.g., if the Company's Common Stock is not then publicly traded or quoted),
then the "Fair Market Value" of a Share shall be the fair market value (i.e.,
the price at which a willing seller would sell a Share to a willing buyer when
neither is acting under compulsion and when both have reasonable knowledge of
all relevant facts) of a Share of the Common Stock on the business day
immediately preceding such date as the Committee in its sole and absolute
discretion shall determine in a fair and uniform manner.
(k) "Incentive Stock Option" shall mean an incentive stock option as
defined in Section 422 of the Code.
(l) "Non-Statutory Stock Option" or "Nonqualified Stock Option" shall
mean an Option which is not an Incentive Stock Option.
(m) "Officer" shall mean the Company's chairman, president, principal
financial officer, principal accounting officer (or, if there is no such
accounting officer, the controller), any vice president of the Company in charge
of a principal business unit, division or function (such as sales,
administration or finance), any other officer who performs a policy-making
function, or any other person who performs similar policy-making functions for
the Company. Officers of Subsidiaries shall be deemed Officers of the Company if
they perform such policy-making functions for the Company. As used in this
paragraph, the phrase "policy-making function" does not include policy-making
functions that are not significant. Unless specified otherwise in a resolution
by the Board, an "executive officer" pursuant to Item 401(b) of Regulation S-K
(17 C.F.R. Section 229.401(b)) shall be only such person designated as an
"Officer" pursuant to the foregoing provisions of this paragraph.
(n) "Option" (when capitalized) shall mean any stock option granted
under this Plan.
(o) "Optionee" shall mean a person to whom an Option is granted under
this Plan or any person who succeeds to the rights of such person under this
Plan by reason of the death of such person.
(p) "Plan" shall mean this 1999 Stock Option Plan of the Company, which
Plan shall be effective upon approval by the Board, subject to approval, within
12 months of the date thereof by holders of a majority of the Company's issued
and outstanding Common Stock.
(q) "Share" or "Shares" shall mean a share or shares, as the case may
be, of the Common Stock, as adjusted in accordance with Section 10 of this Plan.
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<PAGE> 4
(r) "Subsidiary" shall mean any corporation (other than the Company)
in any unbroken chain of corporations beginning with the Company if, at the time
of the granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
3. SHARES AND OPTIONS. Subject to adjustment in accordance with Section
10 hereof, the Company may grant to Optionees from time to time Options to
purchase an aggregate of up to One Million (1,000,000) Shares from Shares held
in the Company's treasury or from authorized and unissued Shares. If any Option
granted under this Plan shall terminate, expire, or be canceled, forfeited or
surrendered as to any Shares, the Shares relating to such lapsed Option shall be
available for issuance pursuant to new Options subsequently granted under this
Plan. Upon the grant of any Option hereunder, the authorized and unissued Shares
to which such Option relates shall be reserved for issuance to permit exercise
under this Plan. Subject to the provisions of Section 14 hereof, an Option
granted hereunder shall be either an Incentive Stock Option or a Non-Statutory
Stock Option as determined by the Committee at the time of grant of such Option
and shall clearly state whether it is an Incentive Stock Option or Non-Statutory
Stock Option. All Incentive Stock Options shall be granted within 10 years from
the effective date of this Plan.
4. LIMITATIONS. Options otherwise qualifying as Incentive Stock Options
hereunder will not be treated as Incentive Stock Options to the extent that the
aggregate Fair Market Value (determined at the time the Option is granted) of
the Shares, with respect to which Options meeting the requirements of Code
Section 422(b) are exercisable for the first time by any individual during any
calendar year (under all stock option or similar plans of the Company and any
Subsidiary), exceeds $100,000.
5. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by an option agreement that may
contain any term deemed necessary or desirable by the Committee, provided such
terms are not inconsistent with this Plan or any applicable law. Optionees shall
be those persons selected by the Committee from the class of all regular
Employees of the Company or its Subsidiaries, including Employee Directors and
Officers who are regular or former regular employees of the Company, Directors
who are not regular employees of the Company, as well as consultants to the
Company. Any person who files with the Committee, in a form satisfactory to the
Committee, a written waiver of eligibility to receive any Option under this Plan
shall not be eligible to receive any Option under this Plan for the duration of
such waiver.
(b) In granting Options, the Committee shall take into consideration
the contribution the person has made, or is expected to make, to the success of
the Company or its Subsidiaries and such other factors as the Committee shall
determine. The Committee shall also have the authority to consult with and
receive recommendations from Officers and other personnel of the Company and its
Subsidiaries with regard to these matters. The Committee may from time to time
in granting Options under this Plan prescribe such terms and conditions
concerning such Options as it deems appropriate, including, without limitation,
(i) the exercise price or prices of the Option or any installments thereof, (ii)
prescribing the date or dates on which the Option becomes and/or remains
exercisable, (iii) providing that the Option vests or becomes exercisable in
installments over a period of time, and/or upon the attainment of certain
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<PAGE> 5
stated standards, specifications or goals, (iv) relating an Option to the
continued employment of the Optionee for a specified period of time, or (v)
conditions or termination events with respect to the exercisability of any
Option, provided that such terms and conditions are not more favorable to an
Optionee than those expressly permitted herein; provided, however, that to the
extent not cancelled pursuant to Section 9(b) hereof, upon a Change in Control,
any Options that have not yet vested, may, in the sole discretion of the
Committee, vest upon such Change in Control.
(c) Incentive Stock Options granted to employees pursuant to this
Plan will vest in equal installments over a five year period commencing on the
first anniversary on the date of grant.
(d) The Options granted to employees under this Plan shall be in
addition to regular salaries, pension, life insurance or other benefits related
to their employment with the Company or its Subsidiaries. Neither this Plan nor
any Option granted under this Plan shall confer upon any person any right to
employment or continuance of employment (or related salary and benefits) by the
Company or its Subsidiaries.
6. EXERCISE PRICE. The exercise price per Share of any Option shall
be any price determined by the Committee but shall not be less than the par
value per Share; provided, however, that in no event shall the exercise price
per Share of any Incentive Stock Option be less than the Fair Market Value of
the Shares underlying such Option on the date such Option is granted and, in the
case of an Incentive Stock Option granted to a 10% shareholder, the per Share
exercise price will not be less than 110% of the Fair Market Value in accordance
with Section 14 of this Plan. Re-granted Options, or Options which are canceled
and then re-granted covering such canceled Options, will, for purposes of this
Section 6, be deemed to have been granted on the date of the re-granting.
7. EXERCISE OF OPTIONS.
(a) An Option shall be deemed exercised when (i) the Company has
received written notice of such exercise in accordance with the terms of the
Option, (ii) full payment of the aggregate option price of the Shares as to
which the Option is exercised has been made, (iii) the Optionee has agreed to be
bound by the terms, provisions and conditions of any applicable shareholders'
agreement, and (iv) arrangements that are satisfactory to the Committee in its
sole discretion have been made for the Optionee's payment to the Company of the
amount that is necessary for the Company or the Subsidiary employing the
Optionee to withhold in accordance with applicable Federal or state tax
withholding requirements. Unless further limited by the Committee in any Option,
the exercise price of any Shares purchased pursuant to the exercise of such
Option shall be paid in cash, by certified or official bank check, by money
order, with Shares or by a combination of the above; provided, however, that the
Committee in its sole discretion may accept a personal check in full or partial
payment of any Shares. If the exercise price is paid in whole or in part with
Shares, the value of the Shares surrendered shall be their Fair Market Value on
the date the Option is exercised. The Company in its sole discretion may, on an
individual basis or pursuant to a general program established by the Committee
in connection with this Plan, lend money to an Optionee to exercise all or a
portion of the Option granted hereunder. If the exercise price is paid in whole
or part with the Optionee's promissory note, such note shall (i) provide for
full recourse to the maker, (ii) be collateralized by the pledge of the Shares
that the Optionee purchases upon exercise of such Option, (iii) bear interest at
a
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<PAGE> 6
rate no less than the rate of interest payable by the Company to its principal
lender, and (iv) contain such other terms as the Committee in its sole
discretion shall require. No Optionee shall be deemed to be a holder of any
shares subject to an Option unless and until a stock certificate or certificates
for such shares are issued to the person(s) under the terms of this Plan. No
adjustments shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or property) or distributions or other rights for which the
record date is prior to the date such stock certificate is issued, except as
expressly provided in Section 10 hereof.
(b) No Optionee shall be deemed to be a holder of any Shares subject
to an Option unless and until a stock certificate or certificates for such
Shares are issued to such person(s) under the terms of this Plan. No adjustment
shall be made for dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights for which the
record date is prior to the date such stock certificate is issued, except as
expressly provided in Section 10 hereof.
8. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable in
such amounts, at such intervals, upon such events or occurrences and upon such
other terms and conditions as shall be provided in an individual Option
agreement evidencing such Option, except as otherwise provided in Section 5(b)
or this Section 8.
(a) The expiration date(s) of an Option shall be determined by the
Committee at the time of grant, but in no event shall an Option be exercisable
after the expiration of ten years from the date of grant of the Option.
(b) Unless otherwise expressly provided in any Option as approved by
the Committee, notwithstanding the exercise schedule set forth in any Option,
each outstanding Option, may, in the sole discretion of the Committee, become
fully exercisable upon the date of the occurrence of any Change of Control, but,
unless otherwise expressly provided in any Option, no earlier than six months
after the date of grant, and if and only if Optionee is in the employ of the
Company on such date.
(c) The Committee may in its sole discretion accelerate the date on
which any Option may be exercised and may accelerate the vesting of any Shares
subject to any Option or previously acquired by the exercise of any Option.
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<PAGE> 7
9. TERMINATION OF OPTION PERIOD.
(a) Unless otherwise expressly provided in any Option, the
unexercised portion of any Option shall automatically and without notice
immediately terminate and become forfeited, null and void at the time of the
earliest to occur of the following:
(i) three months after the date on which the Optionee's
employment is terminated for any reason other than by reason of (A) Cause, (B)
the termination of the Optionee's employment with the Company by such Optionee
following less than 60 days' prior written notice to the Company of such
termination (an "Improper Termination"), (C) a mental or physical disability
(within the meaning of Section 22(e) of the Code) as determined by a medical
doctor satisfactory to the Committee or (D) death;
(ii) immediately upon (A) the termination by the Company of the
Optionee's employment for Cause or (B) an Improper Termination;
(iii) one year after the date on which the Optionee's employment
is terminated by reason of a mental or physical disability (within the meaning
of Code Section 22(e)) as determined by a medical doctor satisfactory to the
Committee or the later of three months after the date on which the Optionee
shall die if such death shall occur during the one-year period specified herein;
or
(iv) one year after the date of termination of the Optionee's
employment by reason of death of the employee;
(b) The Committee in its sole discretion may, by giving written
notice ("Cancellation Notice"), cancel effective upon the date of the
consummation of any corporate transaction described in Subsection 10(d) hereof,
any Option that remains unexercised on such date. Such Cancellation Notice shall
be given a reasonable period of time prior to the proposed date of such
cancellation and may be given either before or after approval of such corporate
transaction.
(c) Upon Optionee's termination of employment as described in this
Section 9, or otherwise, any Option (or portion thereof) not previously vested
or not yet exercisable pursuant to Section 8 of this Plan or the vesting
schedule set forth in such Option shall be immediately canceled.
10. ADJUSTMENT OF SHARES.
(a) If at any time while this Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split, combination or exchange
of Shares (other than any such exchange or issuance of Shares through which
Shares are issued to effect an acquisition of another business or entity or the
Company's purchase of Shares to exercise a "call" purchase option), then and in
such event:
(i) appropriate adjustment shall be made in the maximum number
of Shares available for grant under this Plan, so that the same percentage of
the Company's issued and outstanding Shares shall continue to be subject to
being so optioned;
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<PAGE> 8
(ii) appropriate adjustment shall be made in the number of
Shares and the exercise price per Share thereof then subject to any outstanding
Option, so that the same percentage of the Company's issued and outstanding
Shares shall remain subject to purchase at the same aggregate exercise price;
and
(iii) such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive.
(b) Subject to the specific terms of any Option, the Committee may
change the terms of Options outstanding under this Plan, with respect to the
option price or the number of Shares subject to the Options, or both, when, in
the Committee's sole discretion, such adjustments become appropriate by reason
of a corporate transaction described in Subsection 10(d) hereof, or otherwise.
(c) Except as otherwise expressly provided herein, the issuance by
the Company of shares of its capital stock of any class, or securities
convertible into or exchangeable for shares of its capital stock of any class,
either in connection with a direct or unwritten sale or upon the exercise of
rights or warrants to subscribe therefor or purchase such Shares, or upon
conversion of shares of obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to the number of or exercise price of Shares then subject
to outstanding Options granted under this Plan.
(d) Without limiting the generality of the foregoing, the existence
of outstanding Options granted under this Plan shall not affect in any manner
the right or power of the Company to make, authorize or consummate (i) any or
all adjustments, reclassifications, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business; (ii) any merger or
consolidation of the Company or to which the Company is a party; (iii) any
issuance by the Company of debt securities, or preferred or preference stock
that would rank senior to or above the Shares subject to outstanding Options;
(iv) any purchase or issuance by the Company of Shares or other classes of
common stock or common equity securities; (v) the dissolution or liquidation of
the Company; (vi) any sale, transfer, encumbrance, pledge or assignment of all
or any part of the assets or business of the Company; or (vii) any other
corporate act or proceeding, whether of a similar character or otherwise.
(e) The Optionee shall receive written notice within a reasonable
time prior to the consummation of such action advising the Optionee of any of
the foregoing. The Committee may, in the exercise of its sole discretion, in
such instances declare that any Option shall terminate as of a date fixed by the
Board and give each Optionee the right to exercise his or her Option.
11. TRANSFERABILITY OF OPTIONS. No Option granted hereunder shall be
sold, pledged, assigned, hypothecated, disposed or otherwise transferred by the
Optionee other than by will or the laws of descent and distribution, unless
otherwise authorized by the Board, and no Option shall be exercisable during the
Optionee's lifetime by any person other than the Optionee.
12. ISSUANCE OF SHARES. As a condition of any sale or issuance of
Shares upon exercise of any Option, the Committee may require such agreements or
undertakings, if any, as
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<PAGE> 9
the Committee may deem necessary or advisable to assure compliance with any such
law or regulation including, but not limited to, the following:
(i) a representation and warranty by the Optionee to the
Company, at the time any Option is exercised, that he is acquiring the Shares to
be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(ii) (A) an agreement and undertaking to comply with all of the
terms, restrictions and provisions set forth in any then applicable
shareholders' agreement relating to the Shares, including, without limitation,
any restrictions on transferability, any rights of first refusal and any option
of the Company to "call" or purchase such Shares under then applicable
agreements, and
(B) any restrictive legend or legends, to be embossed or
imprinted on Share certificates, that are, in the discretion of the Committee,
necessary or appropriate to comply with the provisions of any securities law or
other restriction applicable to the issuance of the Shares.
13. ADMINISTRATION OF THIS PLAN.
(a) This Plan shall be administered by the Committee, which shall
consist of not less than two Directors. The Committee shall have all of the
powers of the Board with respect to this Plan. Any member of the Committee may
be removed at any time, with or without cause, by resolution of the Board and
any vacancy occurring in the membership of the Committee may be filled by
appointment by the Board.
(b) Subject to the provisions of this Plan, the Committee shall have
the authority, in its sole discretion, to: (i) grant Options, (ii) determine the
exercise price per Share at which Options may be exercised, (iii) determine the
Optionees to whom, and time or times at which, Options shall be granted, (iv)
determine the number of Shares to be represented by each Option, (v) determine
the terms, conditions and provisions of each Option granted (which need not be
identical) and, with the consent of the holder thereof, modify or amend each
Option, (vi) defer (with the consent of the Optionee) or accelerate the exercise
date of any Option, and (vii) make all other determinations deemed necessary or
advisable for the administration of this Plan, including re-pricing, canceling
and re-granting Options.
(c) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes of this Plan. The Committee's
determinations and its interpretation and construction of any provision of this
Plan shall be final, conclusive and binding upon all Optionees and any holders
of any Options granted under this Plan.
(d) Any and all decisions or determinations of the Committee shall
be made either (i) by a majority vote of the members of the Committee at a
meeting of the Committee or (ii) without a meeting by the unanimous written
approval of the members of the Committee.
(e) No member of the Committee, or any Officer or Director of the
Company or its Subsidiaries, shall be personally liable for any act or omission
made in good faith in connection with this Plan.
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<PAGE> 10
14. INCENTIVE OPTIONS FOR 10% SHAREHOLDERS. Notwithstanding any
other provisions of this Plan to the contrary, an Incentive Stock Option shall
not be granted to any person owning directly or indirectly (through attribution
under Section 424(d) of the Code) at the date of grant, stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company (or of its Subsidiary) at the date of grant unless the exercise price of
such Option is at least 110% of the Fair Market Value of the Shares subject to
such Option on the date the Option is granted, and such Option by its terms is
not exercisable after the expiration of five (5) years from the date such Option
is granted.
15. INTERPRETATION.
(a) This Plan shall be administered and interpreted so that all
Incentive Stock Options granted under this Plan will qualify as Incentive Stock
Options under Section 422 of the Code. If any provision of this Plan should be
held invalid for the granting of Incentive Stock Options or illegal for any
reason, such determination shall not affect the remaining provisions hereof, and
this Plan shall be construed and enforced as if such provision had never been
included in this Plan.
(b) This Plan shall be governed by the laws of the State of Florida.
(c) Headings contained in this Plan are for convenience only and
shall in no manner be construed as part of this Plan or affect the meaning or
interpretation of any part of this Plan.
(d) Any reference to the masculine, feminine, or neuter gender shall
be a reference to such other gender as is appropriate.
(e) Time shall be of the essence with respect to all time periods
specified for the giving of notices to the company hereunder, as well as all
time periods for the expiration and termination of Options in accordance with
Section 9 hereof (or as otherwise set forth in an option agreement).
16. AMENDMENT AND DISCONTINUATION OF THIS PLAN. Either the Board or
the Committee may from time to time amend this Plan or any Option without the
consent or approval of the shareholders of the Company; provided, however, that,
except to the extent provided in Section 9, no amendment or suspension of this
Plan or any Option issued hereunder shall substantially impair any Option
previously granted to any Optionee without the consent of such Optionee.
17. TERMINATION DATE. This Plan shall terminate ten years after the
date of adoption by the Board of Directors.
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<PAGE> 1
EXHIBIT 10.6
OFFICE LEASE
Palm Beach County, Florida
THIS OFFICE LEASE ("Lease"), made this the 13TH day of AUGUST, 1998, by
and between HIGHWOODS/FLORIDA HOLDINGS, L.P., a Delaware limited partnership,
hereinafter "Landlord" and hereinafter, ONLINE TRADING, INC., a Florida
corporation, hereinafter "Tenant":
W I T N E S S E T H :
Upon the terms and conditions hereinafter set forth, Landlord leases to
Tenant and Tenant leases from Landlord property referred to as the Premises, all
as follows:
1. PREMISES. The property hereby leased to Tenant is that area shown on
EXHIBIT A hereto attached, which consists of approximately 6,747 rentable square
feet, in Suite 200, (THE "PREMISES") which is located in what is sometimes
called the HIGHWOODS SQUARE III BUILDING (THE "BUILDING"), located at, 2700 N.
MILITARY TRAIL Boca Raton, Palm Beach County, Florida (THE "PREMISES"). The
Building is one of three buildings comprising an office project known as
HIGHWOODS SQUARE (THE "PROJECT") consisting of a total of 242,337 RENTABLE
SQUARE FEET.
The usable area of the Premises, 5,918 square feet, shall be
multiplied by the core area factor of 1.14, OR ACTUAL PER BOMA STANDARD OF
MEASUREMENT, WHICHEVER IS LESS, to determine the rentable square footage as
referred to above. Tenant hereby acknowledges and agrees that Base Rent, as
defined in PARAGRAPH 4, shall be computed based on the RENTABLE square footage
of the Premises, NOT THE USABLE square footage of the Premises. Tenant hereby
waives any right to assert any claim or to institute any litigation or other
legal proceedings against Landlord in which Tenant alleges that Landlord agreed
to calculate Base Rent for the Premises based upon the usable square footage of
the Premises. The foregoing waiver by Tenant has been made as a condition
precedent and material inducement to Landlord's agreement to enter into this
Lease.
2. TERM. The term of this Lease ("Lease Term") is for 96 months, and
shall commence FIVE (5) DAYS AFTER THE LATER TO OCCUR OF (a) COMPLETION OF THE
BUILDING, OR (b) SUBSTANTIAL COMPLETION OF THE TENANT IMPROVEMENTS, WHICH SHALL
BE EVIDENCED BY THE ISSUANCE OF A CERTIFICATE OF OCCUPANCY BY THE CITY OF BOCA
RATON. TENANT ACKNOWLEDGES THAT THE BUILDING IS PRESENTLY UNDER CONSTRUCTION.
LANDLORD ANTICIPATES (a) THAT IT WILL BE READY TO COMMENCE CONSTRUCTION OF
TENANT IMPROVEMENTS, BY SEPTEMBER 30, 1998, AND (b) THAT CONSTRUCTION OF THE
BUILDING WILL BE COMPLETE BY OCTOBER 31, 1998, ("Commencement Date"), and shall
expire (unless sooner terminated or extended as herein provided) at noon
on ____________ ("Expiration Date").
If Landlord, for any reason whatsoever, cannot deliver possession of
the Premises to Tenant on the Commencement Date, this Lease shall not be void or
voidable, no obligation of Tenant shall be affected thereby, and neither
Landlord nor Landlord's agents shall be liable to Tenant for any loss or damage
resulting from the delay in delivery of possession; provided, however, that in
such event, the Commencement Date and Expiration Date of this Lease, and all
other dates that may be affected by their change, shall be revised to conform to
the date of Landlord's delivery of possession to Tenant. The above, however, is
subject to the provision that the period permitted for the delay of delivery of
possession of the Premises shall not exceed sixty (60) days from the
Commencement Date set forth in the first sentence of this PARAGRAPH 2 (except
that those delays beyond Landlord's control or caused by Tenant ("Delays") shall
be excluded in calculating such period). If Landlord does not deliver possession
to Tenant within such period, Tenant may terminate this Lease by written notice
to Landlord; provided, that written notice shall be ineffective if given after
Tenant takes possession of any part of the Premises, or if given more than
seventy (70) days after the original Commencement Date plus the time of any
Delays. Unless expressly otherwise provided herein, Rent shall commence on the
earlier of: (a) the Commencement Date; (b) occupancy of the Premises by Tenant;
(c) the date Landlord has the Premises ready for occupancy by Tenant, as such
date is adjusted under the Work Letter, if any, attached hereto; or (d) the date
Landlord could have had them ready had there been no Delays attributable to
Tenant. Unless the context otherwise so requires, the term "Rent" as used herein
includes both Base Rent and Additional Rent as set forth in PARAGRAPHS 4 AND 5.
<PAGE> 2
If the Expiration Date, as determined herein, does not occur on the
last day of a calendar month, Landlord, at its option, may extend the Lease Term
by the number of days necessary to cause the Expiration Date to occur on the
last day of the last calendar month of the Lease Term. Tenant shall pay Base
Rent and Additional Rent for such additional days at the same rate payable for
the portion of the last calendar month immediately preceding such extension. The
Commencement Date, Lease Term (including any extension by Landlord pursuant to
this PARAGRAPH 2) and the Expiration Date shall be set forth in a Commencement
Letter or Commencement Agreement prepared by Landlord and executed by Tenant in
accordance with the provisions of this PARAGRAPH 2.
3. USE. The Premises may be used only for general office purposes in
connection with Tenant's present business. Tenant's Premises shall be occupied
for no other use without Landlord's prior written consent. Tenant shall never
make any use of the Premises which is in violation of any governmental laws,
rules or regulations, whether now existing or hereafter enacted, nor may Tenant
make any use of the Premises not permitted, or otherwise prohibited, by any
restrictive covenants which apply to the Premises. Tenant may not make any use
which is or may be a nuisance or trespass, which increases any insurance
premiums, or makes such insurance unavailable to Landlord on the Building. In
the event of an increase in any of Landlord's insurance premiums which results
from Tenant's use or occupancy of the Premises, if Tenant does not pay Landlord,
on demand, the amount of such increase, Landlord may treat such use as a default
hereunder.
4. BASE RENT. All Rent payable by Tenant shall be without previous
demand or notice therefor by Landlord and without set off or deduction. The base
rent for the Term shall be the sum of $1,079,317.59 ("Base Rent"), which shall
be payable in equal monthly installments of $9,839.38 for the first twelve
months, payable in advance on or before the first day of each calendar month
during the Term of this Lease, unless the Term commences on a day other than the
first day of a calendar month, in which event prorated Rent at the above rate
until the end of the month in which the Lease Term commences shall be due and
payable on the Commencement Date. In addition to such remedies as may be
provided under the default provisions of this Lease, Landlord shall be entitled
to a late charge of five percent (5%) of the amount of each monthly Rent payment
and any other charges not received by the fifth day of the month when due, and a
charge of the lower of a lawful bad check fee or five percent (5%) of the amount
of any check given by Tenant not paid when first presented by Landlord.
On the first anniversary of the Commencement Date and on each
anniversary thereafter for the first five (5) years of the Lease Term, the
amount of Base Rent shall be increased as follows: by multiplying the Base Rent
for the previous Lease Year by One Hundred Four Percent (104%). The Base Rent
for the final three (3) years of the Lease Term will be increased as follows: by
multiplying the Base Rent for the previous Lease Year by One Hundred Three
(103%). Such increased amount shall then be the Base Rent for that Lease Year.
"Lease Year" as used herein shall mean each twelve (12) month period commencing
on the Commencement Date or any anniversary thereof; provided that, if the
Commencement Date is other than the first day of a calendar month, then the
first Lease Year shall include such partial month together with the next
succeeding twelve (12) months, and each succeeding Lease Year shall begin on the
first day of the calendar month that corresponds to the month following the
Commencement Date.
5. ADDITIONAL RENT; INDEPENDENT COVENANTS.
(1) PAYMENT OF ADDITIONAL RENT. Landlord shall notify Tenant in
writing, giving calculations, if reasonably necessary, of the amount of
Additional Rent (as defined below) payable by Tenant, which Additional Rent
shall be payable monthly at the same time as, and in addition to, the Base Rent.
Tenant shall pay as Additional Rent any sales or use tax imposed on rents
collected by Landlord or any tax on rents in lieu of ad valorem taxes on the
Building, even though laws imposing such taxes attempt to require Landlord to
pay the same. If any such sales or use tax shall be imposed upon Landlord, and
Landlord shall be prohibited by applicable law from collecting the amount of
such tax from Tenant as Additional Rent, then Landlord, upon sixty (60) days
prior written notice to Tenant, may terminate this Lease, unless Tenant legally
can and does in fact reimburse Landlord for such tax.
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<PAGE> 3
(2) TENANT'S PROPORTIONATE SHARE OF DIRECT EXPENSE PASSTHROUGHS.
Tenant further shall pay as Additional Rent, which Additional Rent shall be
payable at the same time as, and in addition to, the Base Rent, Tenant's
Proportionate Share (hereafter defined) of all of Landlord's Direct Expenses
(hereinafter defined) as set forth on Lease Addendum No. 1 attached to this
Lease. TENANT'S PROPORTIONATE SHARE SHALL BE DETERMINED BY MULTIPLYING THE TOTAL
COST OF THE DIRECT EXPENSES BY A FRACTION, THE NUMERATOR OF WHICH IS THE
RENTABLE SQUARE FOOTAGE OF THE PREMISES, AND THE DENOMINATOR WHICH IS EQUAL TO
THE GREATER OF (i) THE RENTABLE SQUARE FOOTAGE OF THE PROJECT WHICH IS THEN
LEASED TO ALL TENANTS OF THE PROJECT, OR (ii) 95% OF THE TOTAL RENTABLE SQUARE
FOOTAGE IN THE PROJECT.
(3) DEFINITION OF ADDITIONAL RENT. The term "Additional Rent" as
used throughout this Lease shall mean all sums and charges other than Base Rent
due or payable by Tenant under this Lease.
(4) TENANT'S INDEPENDENT COVENANTS. Tenant's obligation to pay Rent
under this Lease is completely separate from and independent of any of
Landlord's obligations under this Lease.
6. SERVICES BY LANDLORD. Provided that Tenant is not then in default,
Landlord shall cause to be furnished to the Premises, in common with other
tenants, during business hours of 8:00 A.M. to 6:00 P.M., Monday through Friday
(excluding national and state holidays), the following services: janitorial
services (once per working day after normal working hours), water (if available
from city mains) for drinking, lavatory and toilet purposes, operator less
elevator service and heating and air conditioning for the reasonably comfortable
use and occupancy of the Premises, provided heating and cooling conforming to
any governmental regulation prescribing limitations thereon shall be deemed to
comply with this service. Landlord shall furnish the Premises with electricity
for the maintenance of building standard fluorescent lighting composed of 2' x
4' fixtures. Incandescent fixtures, table lamps, all lighting other than the
aforesaid building standard fluorescent light, dimmers and all lighting controls
other than controls for the aforesaid building standard fluorescent lighting
shall be serviced, replaced and maintained at Tenant's expense. Landlord shall
also furnish the Premises with electricity for lighting for the aforesaid
building standard fluorescent lighting and for the operation of general office
machines, such as electric typewriters, desk top computers, word processing
equipment, dictating equipment, adding machines and calculators, and general
service non-production type office copy machines. Landlord shall have the right
to enter and inspect the Premises and all electrical devices therein from time
to time. All additional costs resulting from Tenant's extraordinary usage of
heating, air conditioning or electricity shall be paid by Tenant upon demand as
Additional Rent for each month or portion thereof, and Tenant shall not install
equipment with unusual demands for any of the foregoing without Landlord's prior
written consent, which Landlord may withhold if it determines that in its
opinion such equipment may not be safely used in the Premises or that electrical
service is not adequate therefor. If heat generating machines or equipment shall
be used in the Premises by Tenant which affect the temperature otherwise
maintained by the heating and air conditioning system, Landlord shall have the
right to install supplemental air conditioning units in the Premises and the
cost thereof, including the cost of engineering and installation, and the cost
of operation and maintenance thereof, shall be paid by Tenant upon demand by
Landlord. Landlord shall further provide a reasonable pro rata amount of
unreserved free parking, in common with the other tenants, for Tenant's
employees and visitors.
So long as Landlord acts reasonably and in good faith, there shall
be no abatement or reduction of Rent by reason of any of the foregoing services
not being continuously provided to Tenant.
Tenant shall report immediately to Landlord any defective condition
in or about the Premises known to Tenant and if such defect is not so reported
and such failure to promptly report results in other damage, Tenant shall be
liable for same. Landlord shall not be liable to Tenant for any damage caused to
Tenant and its property due to the Building or any part or appurtenance thereof
being improperly constructed or being or becoming out of repair, or arising from
the leaking of gas, water, sewer or steam pipes, or from electricity.
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<PAGE> 4
7. TENANT'S ACCEPTANCE AND MAINTENANCE OF PREMISES; LIENS; LANDLORD'S
DUTIES AND RIGHTS. Tenant's occupancy of the Premises is Tenant's representation
to Landlord that it has examined and inspected the same, finds the Premises to
be as represented by Landlord and satisfactory for Tenant's intended use, and
constitutes Tenant's acceptance "as is," "where is" and with all faults.
Landlord makes no representation or warranty as to the condition of said
Premises. During Tenant move-in, the representative of the Tenant must be
on-site with any moving company to insure proper treatment of the Premises.
Elevators and multi-story office buildings must remain in use for the general
public during business hours. Any specialized use of elevators must be
coordinated with the Landlord's Property Manager. All packing material and
refuse must be properly disposed of. Any damage or destruction due to moving
will be the sole responsibility of the Tenant. Tenant shall deliver at the end
of this Lease each and every part of the Premises in good repair and condition,
ordinary wear and tear and damage by insured casualty excepted. The delivery of
key or other such tender of possession of the Premises to Landlord or to an
employee of Landlord shall not operate as a termination of this Lease or a
surrender of the Premises except upon written notice by Landlord. Tenant shall:
(a) keep the Premises and fixtures in good order; (b) make repairs and
replacements to the Premises or Building needed because of Tenant's misuse or
primary negligence; (C) repair and replace special equipment or decorative
treatments above Building standard installed by or at Tenant's request and that
serve the Premises only, except (A) to the extent the repairs or replacements
are needed because of Landlord's misuse or primary negligence, which are not
covered by Tenant's insurance, or the insurance Tenant is required to carry
under this Lease, whichever coverage is greater, or (B) if this Lease is ended
because of casualty loss or condemnation; and (d) not commit waste. Tenant,
however, shall make no structural or interior alterations of the Premises. If
Tenant requires alterations, Tenant shall provide Landlord's managing agent with
a complete set of construction drawings, and such agent shall then determine the
actual cost of the work to be done (to include a construction supervision fee of
5% to be paid to Landlord's managing agent). Tenant may then either agree to pay
Landlord to have the work done or withdraw its request for alterations. If
requested by Landlord on termination of this Lease or vacation of the Premises
by Tenant, Tenant shall restore the Premises, at Tenant's sole expense, to the
same condition as existed at the commencement of the Lease Term, ordinary wear
and tear and damage by insured casualty only excepted. Landlord, however, may
elect to require Tenant to leave alterations performed for Tenant unless at the
time of such alterations Landlord agreed in writing they could be removed on
expiration of this Lease.
Except for repairs and replacements that Tenant must make
under this PARAGRAPH 7, Landlord shall pay for and make all other repairs and
replacements to the Premises, common areas and Building (including Building
fixtures and equipment).
Tenant shall keep the Premises and the Building free from any
liens arising out of any work performed, materials furnished, or obligations
incurred by or on behalf of Tenant. Should any claim of lien or other lien be
filed against the Premises or the Building by reason of any act or omission of
Tenant or any of Tenant's agents, employees, contractors or representatives,
Tenant shall cause the same to be canceled and discharged of record by bond or
otherwise within ten (10) days after the filing thereof. Should Tenant fail to
discharge such lien within such ten (10) day period, Landlord may discharge the
same, in which event Tenant shall reimburse Landlord, on demand, as Additional
Rent, for the amount of the lien or the amount of the bond, if greater, plus all
administrative costs incurred by Landlord in connection therewith. The remedies
provided herein shall be in addition to all other remedies available to Landlord
under this Lease or otherwise.
Tenant shall have no power to do any act or make any contract
which may create or be the foundation of any lien, mortgage or other encumbrance
upon the reversionary or other estate of Landlord, or any interest of Landlord
in the Premises. NO CONSTRUCTION LIENS OR OTHER LIENS FOR ANY LABOR, SERVICES OR
MATERIALS FURNISHED TO THE PREMISES SHALL ATTACH TO OR AFFECT THE INTEREST OF
LANDLORD IN AND TO THE PREMISES OR THE BUILDING.
Except for non-standard items installed for Tenant's sole use,
Landlord shall make the repairs and replacements to maintain the Building in a
condition comparable to other first class office buildings in the Metropolitan
area where the Premises are located. This maintenance shall
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<PAGE> 5
include the roof, foundation, exterior walls, interior structural walls, all
structural components, and all exterior (outside of walls) systems, such as
mechanical, electrical, HVAC, and plumbing. Repairs or replacements required
under this PARAGRAPH 7 shall be made within a reasonable time (depending on the
nature of the repair or replacement needed) after receiving notice from Tenant
or having actual knowledge of the need for a repair or replacement.
Notwithstanding anything to the contrary set forth above in
this PARAGRAPH 7, if Tenant does not perform its maintenance obligations in a
timely manner as set forth in this Lease, commencing the same within five (5)
days of receipt of notice from Landlord specifying the work needed and
thereafter diligently and continuously pursuing completion of unfulfilled
maintenance obligations, Landlord shall have the right, but not the obligation,
to perform such maintenance, and any amounts so expended by Landlord shall be
paid by Tenant to Landlord within thirty (30) days after demand, with interest
at the maximum rate allowed by law (or the rate of fifteen percent (15%) per
annum, whichever is less) from the date of expenditure through the date paid.
8. DAMAGES TO PREMISES. If the Premises shall be partially damaged by
fire or other casualty insured under Landlord's insurance policies, and if
Landlord's lender(s) shall permit insurance proceeds paid as a result thereof to
be so used, then upon receipt of the insurance proceeds, Landlord shall, except
as otherwise provided herein, promptly repair and restore the same (exclusive of
improvements made by Tenant, Tenant's trade fixtures, decorations, signs, and
contents) substantially to the condition thereof immediately prior to such
damage or destruction; limited, however, to the extent of the insurance proceeds
received by Landlord. If by reason of such occurrence: (a) the Premises are
rendered wholly untenantable; (b) the Premises are damaged in whole or in part
as a result of a risk which is not covered by Landlord's insurance policies; (c)
Landlord's lender does not permit a sufficient amount of the insurance proceeds
to be used for restoration purposes; (d) the Premises are damaged in whole or in
part during the last two years of the Lease Term; or (e) the building containing
the Premises is damaged (whether or not the Premises are damaged) to an extent
of fifty percent (50%) or more of the fair market value thereof, Landlord may
elect either to repair the damage as aforesaid, or to cancel this Lease by
written notice of cancellation given to Tenant within sixty (60) days after the
date of such occurrence, and thereupon this Lease shall terminate. Tenant shall
vacate and surrender the Premises to Landlord within fifteen (15) days after
receipt of such notice of termination. In addition, Tenant may also terminate
this Lease by written notice given to Landlord at any time between the one
hundred eighty-first (181st) and one hundred ninety-sixth (196th) days after the
occurrence of any such casualty, if Landlord has failed to restore the damaged
portions of the Building (including the Premises) within one hundred eighty
(180) days of such casualty. However, if Landlord is prevented by causes beyond
its reasonable control (including, without limitation, those encompassed in the
meaning of the term FORCE MAJEURE) ("Delays"), from completing the restoration
within said one hundred eighty (180) day period, and if Landlord provides Tenant
with written notice of such cause for delay within fifteen (15) days of the
occurrence thereof, said notice to contain the reason for delay and a good faith
estimate of the period of the delay caused thereby, then Landlord shall have an
additional period beyond said one hundred eighty (180) days, equal to the Delays
in which to restore the damaged areas of the Building; and Tenant may not elect
to terminate this Lease until said additional period required for completion has
expired with the Building not having been substantially restored. In such case,
Tenant's fifteen (15) day notice of termination period shall begin to run upon
the expiration of Landlord's additional period for restoration set forth in the
preceding sentence. Upon the termination of this Lease as aforesaid, Tenant's
liability for the Rent and other charges reserved hereunder shall cease as of
the effective date of the termination of this Lease, subject, however, to the
provisions for abatement of Rent hereinafter set forth.
Unless this Lease is terminated as aforesaid, this Lease shall
remain in full force and effect, and Tenant shall promptly repair, restore, or
replace Tenant's improvements, trade fixtures, decorations, signs, and contents
in the Premises in a manner and to at least a condition equal to that existing
prior to their damage or destruction, and the proceeds of all insurance carried
by Tenant on said property shall be held in trust by Tenant for the purposes of
such repair, restoration, or replacement.
If, by reason of such fire or other casualty, the Premises are
rendered wholly untenantable, the Rent and other charges payable by Tenant shall
be fully abated, or if only partially
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damaged, such Rent and other charges shall be abated proportionately as to that
portion of the Premises rendered untenantable, in either event (unless the Lease
is terminated, as aforesaid) from the date of such casualty until the Premises
have been substantially repaired and restored, or until Tenant's business
operations are restored in the entire Premises, whichever shall first occur.
Tenant shall continue the operation of Tenant's business in the Premises or any
part thereof not so damaged during any such period to the extent reasonably
practicable from the standpoint of prudent business management. However, if such
damages or other casualty shall be caused by the negligence or other wrongful
conduct of Tenant or of Tenant's subtenants, licensees, contractors, or
invitees, or their respective agents or employees, there shall be no abatement
of Rent or other charges. Except for the abatement of the Rent and other charges
hereinabove set forth, Tenant shall not be entitled to, and hereby waives, all
claims against Landlord for any compensation or damage for loss of use of the
whole or any part of the Premises and/or for any inconvenience or annoyance
occasioned by any such damage, destruction, repair, or restoration.
9. ASSIGNMENT; SUBLEASE. Tenant may not assign or encumber this
Lease or its interest in the Premises arising under this Lease, and may not
sublet any part or all of the Premises without the written consent of Landlord
first had and obtained, which consent may not be unreasonably withheld. Any
assignment or sublease to which Landlord may consent (one consent not being any
basis that Landlord should grant any further consent) shall not relieve Tenant
of any or all of its obligations hereunder. For the purpose of this PARAGRAPH 9,
the word "assignment" shall be defined and deemed to include the following: (i)
if Tenant is a partnership, the withdrawal or change, whether voluntary,
involuntary or by operation of law of partners owning thirty percent (30%) or
more of the partnership, or the dissolution of the partnership; (ii) if Tenant
consists of more than one person, an assignment, whether voluntary, involuntary,
or by operation of law, by one person to one of the other persons that is a
Tenant; (iii) if Tenant is a corporation, any dissolution or reorganization of
Tenant, or the sale or other transfer of a controlling percentage (hereafter
defined) of capital stock of Tenant other than to an affiliate or subsidiary or
the sale of fifty-one percent (51%) in value of the assets of Tenant; and (iv)
if Tenant is a limited liability company, the change of members whose interest
in the company is fifty percent (50%) or more. The phrase "controlling
percentage" means the ownership of, and the right to vote, stock possessing at
least fifty-one percent (51%) of the total combined voting power of all classes
of Tenant's capital stock issued, outstanding and entitled to vote for the
election of directors, or such lesser percentage as is required to provide
actual control over the affairs of the corporation. Acceptance of Rent by
Landlord after any non-permitted assignment shall not constitute approval
thereof by Landlord. Notwithstanding the foregoing provisions of this PARAGRAPH
9, Tenant may assign or sublease part or all of the Premises without Landlord's
consent to: (i) any corporation or partnership that controls, is controlled by,
or is under common control with, Tenant; (ii) any corporation resulting from the
merger or consolidation with Tenant or to any entity that acquires all of
Tenant's assets as a going concern of the business that is being conducted on
the Premises, as long as the assignee or sublessee is a bona fide entity and
assumes the obligations of Tenant, and continues the same use as permitted under
PARAGRAPH 3, or (iii) ANY INDIVIDUAL EMPLOYEE OR CUSTOMER ACTIVELY ENGAGED IN
TRADING SECURITIES WITHIN THE PREMISES. However, Landlord must be given prior
written notice of any such assignment or subletting, and failure to do so shall
be a default hereunder. Landlord will never consent to an assignment or sublease
that might result in a use that conflicts with the rights of an existing tenant.
Furthermore, LANDLORD SHALL NEVER BE OBLIGATED TO CONSENT TO AN ASSIGNMENT OR
SUBLEASE TO ANY PARTY WHICH IS THEN A TENANT OR A PROSPECTIVE TENANT OF
LANDLORD'S, OR ANY AFFILIATE OF LANDLORD, EITHER WITH RESPECT TO SPACE WITHIN
THE BUILDING PROJECT, OR WITH RESPECT TO SPACE WITHIN ANY OTHER PROPERTY OWNED
BY LANDLORD OR ANY AFFILIATE OF LANDLORD. A PROSPECTIVE TENANT IS ANY PARTY WITH
WHICH LANDLORD OR ANY AFFILIATE OF LANDLORD HAS BEEN IN CONTACT, EITHER VERBALLY
OR IN WRITING, PERTAINING TO THE POSSIBILITY OF SUCH PARTY'S LEASING SPACE FROM
LANDLORD OR ANY OF LANDLORD'S AFFILIATES.
In no event shall this Lease be assignable by operation of any law,
and Tenant's rights hereunder may not become, and shall not be listed by Tenant
as an asset under any bankruptcy, insolvency or reorganization proceedings.
Tenant is not, may not become, and shall never represent itself to be an agent
of Landlord, and Tenant acknowledges that Landlord's title is paramount, and
that it can do nothing to affect or impair Landlord's title.
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If this Lease shall be assigned or the Premises or any portion
thereof sublet by Tenant at a rental that exceeds the rentals to be paid to
Landlord hereunder, attributable to the Premises or portion thereof so assigned
or sublet, then any such excess shall be paid over to Landlord by Tenant.
10. TENANT'S COMPLIANCE; INSURANCE REQUIREMENTS. Tenant shall comply
with all applicable laws, ordinances and regulations affecting the Premises, now
existing or hereafter adopted, including general rules and regulations for
tenants (a copy of the present rules are attached as EXHIBIT B) as may be
developed from time to time by Landlord effective as of the date delivered to
Tenant or posted on the Premises providing such rules are uniformly applicable
to all tenants in the Building.
Throughout the Term of this Lease, Tenant at its sole cost and
expense shall keep or cause to be kept for the mutual benefit of Landlord,
Landlord's managing agent, if any, and Tenant, public liability and property
damage insurance with combined single limit coverage of at least $1,500,000
(with appropriate cross-liability endorsements so showing), which policies
insure against all liability of Tenant, Tenant's authorized representatives, and
anyone for whom Tenant is responsible, arising out of and in connection with
Tenant's use of the Premises, and which shall insure Tenant's performance of the
indemnity provisions contained herein. Not more frequently than once every three
(3) years, Landlord may require the limits to be increased if in its reasonable
judgment (or that of its mortgagee) the coverage is insufficient. Tenant shall
also insure its personal property and fixtures located in the Premises and any
improvements made by Tenant for their full reasonable insurable value, and
Tenant shall neither have, nor make, any claim against Landlord for any loss or
damage to the same, regardless of the cause thereof.
Prior to taking possession of the Premises, and thereafter at least
ten (10) business days prior to the renewal dates thereof, Tenant shall deliver
to Landlord copies of original policies, or certificates thereof satisfactory to
Landlord, and a receipt for payment of the next year's premium. All such
policies shall be non-assessable and shall contain language to the extent
obtainable that: (a) any loss shall be payable notwithstanding any act or
negligence of Landlord or Tenant that might otherwise result in forfeiture of
the insurance, (b) that the policies are primary and non-contributing with any
insurance that Landlord may carry, and (c) that the policies cannot be canceled
or changed except after thirty (30) days' prior written notice to Landlord. If
Tenant fails to provide Landlord with insurance coverage and/or receipts as
required, Landlord may obtain such coverage and Tenant shall reimburse the cost
thereof on demand.
Anything in this Lease to the contrary notwithstanding, Landlord
hereby releases and waives unto Tenant (including all partners, stockholders,
officers, directors, employees and agents thereof), its successors and assigns,
and Tenant hereby releases and waives unto Landlord (including all partners,
stockholders, officers, directors, employees and agents thereof), its successors
and assigns, all rights to claim damages for any injury, loss, cost or damage to
persons or to the Premises or any other casualty, as long as the amount of which
injury, loss, cost or damage has been paid either to Landlord, Tenant, or any
other person, firm or corporation, under the terms of any fire, extended
coverage, public liability or other policy of insurance, to the extent such
releases or waivers are permitted under applicable law. All policies of
insurance carried or maintained pursuant to this Lease shall contain, or be
endorsed to contain, a provision whereby the insurer waives all rights of
subrogation against either Tenant or Landlord.
Subject to the terms of the preceding Paragraph, Tenant shall
indemnify and hold Landlord harmless from and against any and all claims arising
out of (a) Tenant's use of the Premises or any part thereof, (b) any activity,
work, or other thing done, permitted or suffered by Tenant in or about the
Premises or the Building, or any part thereof, (c) any breach or default by
Tenant in the performance of any of its obligations under this Lease, or (d) any
act or negligence of Tenant, or any officer, agent, employee, contractor,
servant, invitee or guest of Tenant; and in each case from and against any and
all damages, losses, liabilities, lawsuits, costs and expenses (including
attorneys' fees at all tribunal levels) arising in connection with any such
claim or claims as described in (a) through (d) above, or any action brought
thereon. If such action be brought against Landlord, Tenant upon notice from
Landlord shall defend the same through counsel selected by Tenant's insurer, or
other counsel acceptable to Landlord. Tenant assumes all risk of damage or loss
to its property or injury or death to persons in, on, or about the Premises,
from all causes except those for which the law
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imposes liability on Landlord regardless of any attempted waiver thereof, and
Tenant hereby waives such claims in respect thereof against Landlord. The
provisions of this PARAGRAPH 10 shall survive the termination of this Lease.
Landlord shall keep the Building, including the improvements,
insured against damage and destruction by fire, earthquake, vandalism, and other
perils in the amount of the full replacement value of the Building, as the value
may exist from time to time. The insurance shall include an extended coverage
endorsement of the kind required by institutional lenders.
Each party shall keep its personal property and trade fixtures in
the Premises and Building insured with "all risks" insurance in an amount to
cover one hundred percent (100%) of the replacement cost of the property and
fixtures. Tenant shall also keep any non-Building-standard improvements made to
the Premises at Tenant's request insured to the same degree as Tenant's personal
property.
Tenant covenants during the Lease Term and such further time as
Tenant occupies any part of the Premises to keep all of Tenant's employees
working in the Premises covered by worker's compensation insurance and required
statutory amounts and to furnish Landlord with certificates thereof upon written
request. Tenant's insurance policies required by this Lease shall: (a) be issued
by insurance companies licensed to do business in the state of Florida with
general policyholder's ratings of at least A- and a financial rating of at least
X in the most current BEST'S INSURANCE REPORTS available on the commencement
date, or if the BEST'S ratings are changed or discontinued, the parties shall
agree to a comparable method of rating insurance companies; (b) name the
nonprocuring party as an additional insured as its interest may appear [other
landlords or tenants may be added as additional insureds in a blanket policy];
(c) provide that the insurance is not to be canceled oR materially changed in
the scope or amount of coverage unless thirty (30) days advance notice is given
to the nonprocuring party; (d) be primary policies, not contributing with, or in
excess of, the coverage that the other party may carry; (e) provide that any
loss shall be payable notwithstanding any act or negligence of Landlord or
Tenant which might result in a forfeiture thereunder of such insurance or the
amount of proceeds payable; (f) have no deductible unless Landlord accepts a
policy showing a reasonable deductible; (g) have contractual coverage
endorsements insuring indemnities under this Lease; and (h) be maintained during
the entire Lease Term and any extension terms.
11. SUBORDINATION; ATTORNMENT; LANDLORD FINANCING. Tenant agrees
that this Lease is automatically subordinate to any mortgage or deed of trust
heretofore or hereafter executed by Landlord covering the Premises. Tenant
agrees that this Lease will be either subordinate or superior to any mortgage
heretofore or hereafter executed by Landlord covering the Premises, depending on
the requirements of such mortgagee. Tenant within ten (10) days of request to do
so from Landlord or its mortgagee will execute such agreement making this Lease
superior or subordinate and containing such other agreements and covenants on
Tenant's part as Landlord's mortgagee may request, and will agree to attorn to
said mortgagee provided the mortgagee agrees not to disturb Tenant's possession
hereunder so long as Tenant is in compliance with this Lease. Further, Tenant
agrees to execute within five (5) days of request therefor, and as often as
requested, estoppel certificates confirming any factual matter requested therein
which is true and is within Tenant's knowledge regarding this Lease, the
Premises, or Tenant's use thereof, including, but not limited to date of
occupancy, expiration date of this Lease, the amount of Rent due and date to
which Rent is paid, whether or not Tenant has any defense or offsets to the
enforcement of this Lease or the Rent payable hereunder or knowledge of any
default or breach by Landlord, and that this Lease together with any
modifications or amendments is in full force and effect. Tenant shall attach to
such estoppel certificate copies of all modifications or amendments.
Tenant agrees to give any mortgagee of Landlord which has provided a
non-disturbance agreement to Tenant, notice of, and a reasonable opportunity
(which shall in no event be less than thirty (30) days after written notice
thereof is delivered to mortgagee as herein provided) to cure, any Landlord
default hereunder; and Tenant agrees to accept such cure if effected by such
mortgagee. No termination of this Lease by Tenant shall be effective until such
notice has been given and the cure period has expired without the default having
been cured. Further Tenant agrees to permit such mortgagee (or other purchaser
at any foreclosure sale), and its successors and
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assigns, on acquiring Landlord's interest in the Premises and the Lease, to
become substitute Landlord hereunder, with liability only for such Landlord
obligations as accrue after Landlord's interest is so acquired. Tenant agrees to
attorn to any successor Landlord.
12. SIGNS. Tenant may not erect, install or display any sign or
advertising material upon the Building exterior, the exterior of the Premises,
or the exterior walls thereof, or in any window therein, without the prior
written consent of Landlord. Landlord shall furnish, install and maintain a
building standard directory at a location in or near the lobby and Building
standard suite signage, at Tenant's expense. TENANT MAY AT TENANT'S EXPENSE
UTILIZE ONE SPACE FOR SIGNAGE IDENTIFICATION ON ANY MARQUE SIGNAGE WHICH
LANDLORD MAY INSTALL IN THE GROUND NEAR THE BUILDING ENTRANCE. LANDLORD WILL
DETERMINE WHERE SUCH SIGNAGE WILL BE PLACED.
13. ACCESS TO PREMISES. Landlord shall have the right, at all
reasonable times, either itself or through its authorized agents, to enter the
Premises (i) to make repairs, alterations or changes as Landlord deems
necessary, (ii) to inspect the Premises, and (iii) to show the Premises to
prospective mortgagees and purchasers. Landlord shall have the right, either
itself or through its authorized agents, to enter the Premises at all reasonable
times for inspection to show prospective tenants if within one hundred eighty
(180) days of the termination date as extended by any exercised option, to allow
inspection by mortgagees, and to make such repairs, alterations or changes as
Landlord deems necessary. Tenant, its agents, employees, invitees, and guests,
shall have the right of ingress and egress to common and public areas of the
Building, provided Landlord by reasonable regulation may control such access for
the comfort, convenience, safety and protection of all tenants in the Building,
or as needed for making repairs and alterations.
14. DEFAULT; REMEDIES; TENANT WAIVERS. If Tenant: (i) fails to pay
when due any Rent, or any other sum of money which Tenant is obligated to pay,
and such breach shall continue and not be remedied within five (5) days after
Landlord shall have given Tenant written notice specifying the breach, then
Tenant shall be in default as provided in this Lease; or (ii) breaches any other
agreement, covenant or obligation herein set forth and such breach shall
continue and not be remedied within fifteen (15) days after Landlord shall have
given Tenant written notice specifying the breach, or if such breach cannot,
with due diligence, be cured within said period of fifteen (15) days and Tenant
does not within said fifteen (15) day period commence and thereafter with
reasonable diligence completely cure the breach within thirty (30) days after
notice; or (iii) files (or has filed against it and not stayed or vacated within
sixty (60) days after filing) any petition or action for relief under any
creditor's law (including bankruptcy, reorganization, or similar action), either
in state or federal court; or (iv) makes any transfer in fraud of creditors as
defined in Section 548 of the United States Bankruptcy Code (11 U.S.C. 548, as
amended or replaced) ("Code"), has a receiver appointed for its assets (and
appointment shall not have been stayed or vacated within thirty (30) days), or
makes an assignment for benefit of creditors; then Tenant shall be in default
hereunder, and, in addition to any other lawful right or remedy which it may
have, Landlord may, at its option, in addition to such other remedies as may be
available under Florida law: (x) terminate this Lease and Tenant's right of
possession; or (y) terminate Tenant's right to possession but not this Lease
and/or proceed in accordance with any and all of the following remedies:
(1) Landlord may, without further notice, re-enter the Premises in
accordance with applicable law and dispossess Tenant by summary proceedings or
otherwise, as well as the legal representative(s) of Tenant and/or other
occupant(s) of the Premises, and remove their effects and hold the Premises as
if this Lease had not been made, and Tenant hereby waives the service of notice
of intention to re-enter or to institute legal proceedings to that end; and/or
at Landlord's option,
(2) All Base Rent and all Additional Rent for the balance of the
Lease Term will, at the election of Landlord, be accelerated and the present
worth of same (as reasonably determined by Landlord) for the balance of the
Lease Term, net of amounts actually collected by Landlord, shall become
immediately due thereupon and be paid, together with all expenses of every
nature which Landlord may incur such as (by way of illustration and not
limitation) those for attorneys' fees, brokerage, advertising, and refurbishing
the Premises in good order or preparing them for re-rental; and/or at Landlord's
option,
(3) Landlord may re-let the Premises, or any part thereof, either in
the name of Landlord or otherwise, for a term or terms which may at Landlord's
option be less than or exceed the period which would otherwise have constituted
the balance of the Lease Term, and may grant
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concessions or free rent or charge a higher rental than that reserved in this
Lease; provided, however, Landlord shall have no obligation to re-let the
Premises, or any part thereof, and shall in no event be liable for failure to
re-let the Premises, or any part thereof, or, in the event of any such
re-letting, for refusal or failure to collect any rent due upon such re-letting,
and no such refusal or failure shall operate to release Tenant of any liability
under this Lease or otherwise to effect or reduce any such liability; and/or at
Landlord's option,
(4) Tenant or its legal representative(s) will also pay to Landlord
as agreed upon damages, in addition to such other damages that Landlord may be
legally entitled to, any deficiency between the Base Rent and all Additional
Rent hereby charged and/or agreed to be paid and the net amount, if any, of the
rents collected on account of this Lease or leases of the Premises for each
month of the period which would otherwise have constituted the balance of the
Lease Term.
All rights and remedies of Landlord are cumulative, and the exercise
of any one shall not be an election excluding Landlord at any other time from
exercise of a different or inconsistent remedy. No exercise by Landlord of any
right or remedy granted herein shall constitute or effect a termination of this
Lease unless Landlord shall so elect by written notice delivered to Tenant.
The failure of Landlord to exercise its rights in connection with
this Lease or any breach or violation of any term, covenant or condition or any
subsequent breach of the same or any other term, covenant or condition herein
contained shall not be deemed to be a waiver of such term, covenant or condition
or any subsequent breach of the same or any other covenant or condition herein
contained.
No acceptance by Landlord of a lesser sum than Base Rent,
administrative charges, Additional Rent and other sums then due shall be deemed
to be other than on account of the earliest installment of such payments due,
nor shall any endorsement or statement on any check or any letter accompanying
any check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the balance of such installment or pursue any other remedy provided in this
Lease. In addition, no payments of money by Tenant to Landlord after the
expiration or termination of this Lease after the giving of any notice by
Landlord to Tenant shall reinstate or extend the Lease Term, or make ineffective
any notice given to Tenant prior to the payment of such money. After the service
of notice or the commencement of a suit, or after final judgment granting
Landlord possession of the Premises, Landlord may receive and collect any sums
due under this Lease, and the payment thereof shall not make ineffective any
notice, or in any manner affect any pending suit or any judgment previously
obtained.
15. PROPERTY OF TENANT. Tenant shall timely pay any and all taxes
levied or assessed against or upon Tenant's equipment, fixtures, furniture,
leasehold improvements and personal property located in the Premises. Tenant (if
not in default hereunder), prior to the Expiration Date may remove all fixtures
and equipment which it has placed in the Premises, provided Tenant repairs all
damages caused by such removal. If Tenant does not remove its property from the
Premises upon termination (for whatever cause) of this Lease, such property
shall be deemed abandoned by Tenant, and Landlord may dispose of the same in
whatever manner Landlord may elect without any liability to Tenant.
16. SECURITY AGREEMENT. In addition to, but not lieu of, any
statutory lien which Landlord has under Florida law, including under Section
83.08, Florida Statutes, Tenant hereby grants to Landlord and Landlord shall
have at all times, a valid first priority security interest, to secure payment
of all sums of money due and payable under this Lease from Tenant and to secure
payment of any damages or loss which Landlord may suffer by reason of the breach
by Tenant of any term, covenant, or condition contained herein, in and to all
goods, inventory, equipment, fixtures, and all other tangible and intangible
personal property owned by Tenant and all insurance proceeds of or relating to
any of the foregoing (collectively, "Personal Property") presently or hereafter
situated in or about the Premises, and all proceeds therefrom, and such Personal
Property shall not be removed therefrom without the consent of Landlord until
all arrearages in Base Rent and any Additional Rent then due and payable to
Landlord under this Lease shall first have been paid and discharged and all the
provisions of this Lease have been fully complied with by Tenant. If Tenant
shall default under this Lease, or is no longer in possession of the Premises
for any reason,
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then Landlord may, in addition to any other remedies provided in this Lease or
allowed at law or in equity, all of which are cumulative, enter upon the
Premises and take possession of any and all of the Personal Property, without
liability for trespass or conversion, and sell the same at public or private
sale, with or without having such property at the sale, after giving Tenant
reasonable notice of the time and place of any public sale or of the time after
which any private sale is to be made, at which sale the Landlord or its assigns
may purchase such Personal Property unless otherwise prohibited by law. The
requirement of reasonable notice shall be met if such notice is given in the
manner prescribed in this Lease at least five (5) days before the date of the
sale. The proceeds from any such disposition of the Personal Property, less all
expenses incurred in connection with the taking of possession, holding, and
selling of the Personal Property (including, without limitation, reasonable
attorneys' fees and disbursements ) shall be applied as a credit against the
indebtedness secured by this security interest. Any surplus shall be paid to
Tenant or as otherwise required by law, and Tenant shall pay any deficiencies
forthwith. Although title to all of the Personal Property shall be in Tenant,
none of such property or any right or interest therein or thereto shall be
conveyed, transferred, assigned, mortgaged, or encumbered in any manner by
Tenant without the prior written consent of Landlord, which may be granted or
withheld in Landlord's sole discretion.
The provisions of this PARAGRAPH 16 shall constitute a security
agreement under the Uniform Commercial Code of the State of Florida ("UCC"), and
create a security interest in the Personal Property, and Tenant agrees to
execute, as debtor, such financing statements as Landlord may now or hereafter
reasonably request to perfect the foregoing security interest pursuant to the
UCC. Simultaneously with the execution of this Lease, Tenant agrees to execute
all UCC-1 financing statements necessary to perfect Landlord's security interest
granted by this PARAGRAPH 16. Tenant shall take all necessary action to maintain
and preserve such security interest including, but not limited to, the
executing, delivering, filing, refiling, recording, or re-recording of any
financing statements, continuation statements, or other security agreements, and
the giving of such instruments of further assurance as Landlord from time to
time may request to protect its security interest. Without limiting the
foregoing, Tenant appoints Landlord as Tenant's attorney-in-fact to execute,
deliver, and file such instruments for and on behalf of Tenant, but Landlord
shall not be required, and shall not be deemed to be under any duty to Tenant,
any guarantor or surety with respect to this Lease, or any other person to
protect, perfect, secure, or insure the security interest nor shall Landlord
have any obligation for, among other things, the filing of any financing
statements under the UCC. The limited power of attorney granted by Tenant in the
immediately preceding sentence, being coupled with an interest, is deemed to be
irrevocable by Tenant. Notwithstanding the expiration or sooner termination of
this Lease, the terms of this PARAGRAPH 16 shall survive as a security agreement
with respect to the security interest until repayment or satisfaction in full of
all obligations of Tenant under this Lease. The Personal Property shall at all
times remain in the Premises, subject to the control of Landlord. In the event
of a sale or ground lease of the Premises, the security interest shall be
automatically transferred to the purchaser or ground lessor. In addition,
Landlord may, at its election, file a copy of this Lease at any time as a
financing statement. Landlord, as secured party, shall be entitled to all of the
rights and remedies afforded a secured party under the UCC in addition to all
other rights and remedies under this Lease, at law, in equity or otherwise.
17. BANKRUPTCY. Landlord and Tenant understand that, notwithstanding
certain provisions to the contrary contained herein, a trustee or debtor in
possession under the Code may have certain rights to assume or assign this
Lease. Landlord and Tenant further understand that, in any event, Landlord is
entitled under the Code to adequate assurances of future performance of the
provisions of this Lease. The parties agree that, with respect to any such
assumption or assignment, the term "adequate assurance" shall include at least
the following:
(1) In order to assure Landlord that the proposed assignee will have
the resources with which to pay all Base Rent and any Additional Rent payable
pursuant to the provisions of this Lease, any proposed assignee must have, as
demonstrated to Landlord's satisfaction, a net worth (as defined in accordance
with generally accepted accounting principles consistently applied) of not less
than the net worth of Tenant on the date this Lease became effective, increased
by seven percent (7%), compounded annually, for each year from the Commencement
Date through the date of the proposed assignment. It is understood and agreed
that the financial condition and resources of Tenant were a material inducement
to Landlord in entering into this Lease.
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(2) Any proposed assignee must have been engaged in the conduct of
business for the five (5) years prior to any such proposed assignment, which
business does not violate the Permitted Uses, and such proposed assignee shall
continue to engage in the Permitted Uses. It is understood and agreed that
Landlord's asset will be substantially impaired if the trustee in bankruptcy or
any assignee of this Lease makes any use of the Premises other than the
Permitted Uses.
(3) Any proposed assignee of this Lease must assume and agree to be
personally bound by the provisions of this Lease.
18. EMINENT DOMAIN. If all of the Premises, or such part thereof as
will make the same unusable for the purposes contemplated by this Lease, be
taken under the power of eminent domain (or a conveyance in lieu thereof), then
this Lease shall terminate as of the date possession is taken by the condemnor,
and Rent shall be adjusted between Landlord and Tenant as of such date. If only
a portion of the Premises is taken and Tenant can continue use of the remainder,
then this Lease will not terminate, but Rent shall abate in a just and
proportionate amount to the loss of use occasioned by the taking. Landlord shall
be entitled to receive and retain the entire award for the affected portion of
the Building. Tenant shall have no right to advance any claim against Landlord
for any part of the award made to or received by Landlord for any taking and no
right or claim for any alleged value of the unexpired portion of this Lease or
its leasehold estate, or for costs of removal, relocation, business interruption
expense or any other damages arising out of such taking. Tenant, however, shall
not be prevented from making a claim against the condemning party (but not
against Landlord) for any moving expenses, loss of profits, or taking of
Tenant's personal property (other than its leasehold estate) to which Tenant may
be entitled; provided, however, any such award shall not reduce the amount of
the award otherwise payable to Landlord, if any.
19. QUIET ENJOYMENT. If Tenant promptly and punctually complies with
each of its obligations hereunder, it shall peacefully have and enjoy the
possession of the Premises during the Term hereof, provided that no action of
Landlord or other tenants working in other space in the Building, or in
repairing or restoring the Premises, shall be deemed a breach of this covenant,
or give to Tenant any right to modify this Lease either as to term, rent
payables, or other obligations to be performed.
20. SECURITY DEPOSIT. $28,925.50, which is the equivalent of two (2)
months Base Rent and Additional Rent per Tenant's initial Lease year Base Rent
Schedule and Additional Rent per Landlords projection for such calendar year.
LANDLORD WILL APPLY TENANT'S EXISTING $4,000.00 SECURITY DEPOSIT TOWARDS THAT
REQUIRED HEREIN.
21. NOTICES. All notices, demands and requests which may be given or
which are required to be given by either party to the other must be in writing.
All notices, demands and requests by Landlord or Tenant shall be sent by
express, registered or certified mail, return receipt requested, postage
prepaid, by overnight courier service such as Federal Express, by facsimile
transmission (with written confirmation of receipt of the transmission), or by
personal delivery and addressed as follows (or to such other address as a party
may specify by duly given notice):
RENT PAYMENT ADDRESS:
HIGHWOODS/FORSYTH L.P.
PO Box 550430
Tampa, Florida 33655-0430
LEGAL NOTICE ADDRESS FOR LANDLORD:
HIGHWOODS/FLORIDA HOLDINGS, L.P.
One Boca Place, 2255 Glades Road
Suite 112-E
Boca Raton, Florida 33431-7360
Attention: Mr. Timothy F. Vallace, Vice President
Telephone: 561-997-2255
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Telecopier: 561-997-5211
WITH A COPY TO:
HIGHWOODS PROPERTIES, INC.
c/o Highwoods Properties, Inc.
1500 San Remo Avenue
Suite 135
Coral Gables, FL 33146
Attention: Mr. Rudy Prio Touzet, Vice President
TENANT:
ONLINE TRADING, INC.
2700 N. Military Trail, 2nd Floor
Boca Raton, Fl 33431
Attention: Andrew Allen or Steve zum Tobel
Telephone: (561) 995-1010
Telecopier: (561) 995-0606
Notices will be deemed to be received, if personally delivered, upon
delivery, if sent by overnight courier, on the first (1st) business day after
being sent, if sent by mail, on the date set forth on the return receipt, if
sent by telecopier, on the date sent if confirmation of receipt shows delivery
on or before 5:00 p.m., or the next business day if confirmation of receipt
shows delivery after 5:00 p.m. The parties shall notify the other of any change
in address, which notification must be at least fifteen (15) days in advance of
it being effective.
Notices may be given on behalf of any party by such party's legal
counsel. The foregoing notice provisions shall in no way prohibit notices from
being given as provided in the rules of civil procedure of the State of Florida,
as the same may be amended from time to time and any notice so given shall
constitute notice herein.
22. HOLDING OVER. If Tenant shall hold over after the expiration of
the Lease Term or other termination of this Lease, such holding over shall not
be deemed to be a renewal of this Lease but shall be deemed to create a
month-to-month tenancy only, and by such holding over Tenant shall continue to
be bound by all of the terms and conditions of this Lease, except that during
such month-to-month tenancy, Tenant shall pay to Landlord (A) the greater of (i)
ONE AND THREE QUARTERS (1.75) times the monthly Base Rent Landlord is then
charging new tenants for space in the Building, or (ii) two (2) times the Base
Rent payable hereunder during the last month of the Lease Term, and (B) any and
all operating expenses and other forms of Additional Rent payable under the
terms of this Lease. Such month-to-month tenancy may be terminated by Landlord
or Tenant effective as of the last day of any calendar month by delivery to the
other of notice of such termination prior to the first day of such calendar
month. Tenant shall indemnify, defend and hold Landlord harmless from and
against any claim, damage, loss, liability, judgement, suit, disbursement or
expense (including consequential damages and reasonable attorneys' fees and
disbursements) (collectively, "Claims") resulting from failure to surrender
possession upon the Expiration Date or sooner termination of the Lease Term,
including any Claims made by any succeeding tenant, and such obligations shall
survive the expiration or sooner termination of this Lease.
23. BROKER'S COMMISSIONS. Tenant represents and warrants that it has
not dealt with any real estate broker, finder or other person, with respect to
this Lease in any manner. Tenant shall indemnify and hold Landlord harmless from
any and all damages resulting from claims that may be asserted against Landlord
by any broker, finder or other person, claiming to have dealt with Tenant in
connection with this Lease or any amendment or extension hereto, or which may
result
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in Tenant leasing other or enlarged space from Landlord. The provisions of this
PARAGRAPH 24 shall survive the termination of this Lease.
24. ENVIRONMENTAL COMPLIANCE.
(1) TENANT'S RESPONSIBILITY. Tenant shall not (either with or
without negligence) cause or permit the escape, disposal or release of any
biologically active or other hazardous substances, or materials. Tenant shall
not allow the storage or use of such substances or materials in any manner not
sanctioned by law or in compliance with the highest standards prevailing in the
industry for the storage and use of such substances or materials, nor allow to
be brought into the Building in which the Premises are located any such
materials or substances except to use in the ordinary course of Tenant's
business, and then only after written notice is given to Landlord of the
identity of such substances or materials. Tenant covenants and agrees that the
Premises will at all times during its use or occupancy thereof be kept and
maintained so as to comply with all now existing or hereafter enacted or issued
statutes, laws, rules, ordinances, orders, permits and regulations of all state,
federal, local and other governmental and regulatory authorities, agencies and
bodies applicable to the Premises and the Building, pertaining to environmental
matters or regulating, prohibiting or otherwise having to do with asbestos and
all other toxic, radioactive, or hazardous wastes or material including, but not
limited to, the federal Clean Air Act, the federal Water Pollution Control Act,
and the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as from time to time amended (all hereafter collectively called "Laws").
Tenant shall execute affidavits, representations and the like, from time to
time, at Landlord's request, concerning Tenant's best knowledge and belief
regarding the presence of hazardous substances or materials on the Premises.
(2) TENANT'S LIABILITY. Tenant shall hold Landlord free, harmless,
and indemnified from any penalty, fine, claim, demand, liability, cost, or
charge whatsoever which Landlord shall incur, or which Landlord would otherwise
incur, by reason of Tenant's failure to comply with this PARAGRAPH 25 including,
but not limited to: (1) the cost of bringing the Premises into compliance with
all Laws; (2) the reasonable cost of all appropriate tests and examinations of
the Premises to confirm that the Premises have been brought into compliance with
all Laws; and (3) the reasonable fees and expenses of Landlord's attorneys,
engineers, and consultants incurred by Landlord in enforcing and confirming
compliance with this PARAGRAPH 25.
(3) PROPERTY. For the purposes of this PARAGRAPH 25, the Premises
shall include the real estate covered by this Lease; all improvements thereon;
all personal property used in connection with the Premises (including that owned
by Tenant); and the soil, ground water, and surface water of the Premises, if
the Premises include any ground area.
(4) INSPECTIONS BY LANDLORD. Landlord and its engineers,
technicians, and consultants (collectively the "Auditors") may, from time to
time as Landlord deems appropriate, conduct periodic tests and examinations
("Audits") of the Premises to confirm and monitor Tenant's compliance with this
PARAGRAPH 25. Such Audits shall be conducted in such a manner as to minimize the
interference with Tenant's permitted activities on the Premises; however in all
cases, the Audits shall be of such nature and scope as shall be reasonably
required by then existing technology to confirm Tenant's compliance with this
PARAGRAPH 25. Tenant shall fully cooperate with Landlord and its Auditors in the
conduct of such Audits. The cost of such Audits shall be paid by Landlord unless
an Audit shall disclose a material failure of Tenant to comply with this
PARAGRAPH 25, in which case, the cost of such Audit, and the cost of all
subsequent Audits made during the Lease Term and within thirty (30) days
thereafter (not to exceed two [2] such Audits per calendar year), shall be paid
for on demand by Tenant.
(5) LANDLORD'S LIABILITY. Provided, however, the foregoing covenants
and undertakings of Tenant contained in this PARAGRAPH 25 shall not apply to any
condition or matter constituting a violation of any Law: (1) which existed prior
to the commencement of Tenant's use or occupancy of the Premises; (2) which was
not caused, in whole or in part, by Tenant or Tenant's agents, employees,
officers, partners, contractors or invitees; or (3) to the extent such violation
is
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caused by, or results from the acts or neglect of Landlord or Landlord's agents,
employees, officers, partners, contractors, guests, or invitees.
(6) TENANT'S LIABILITY AFTER TERMINATION OF LEASE. The covenants
contained in this PARAGRAPH 25 shall survive the expiration or termination of
this Lease, and shall continue for so long as Landlord and its successors and
assigns may be subject to any expense, liability, charge, penalty, or obligation
against which Tenant has agreed to indemnify Landlord under this PARAGRAPH 25.
25. RADON GAS. The following notification is provided pursuant to
Section 404.056(6), Florida Statutes: "Radon is a naturally-occurring
radioactive gas that, when it has accumulated in a building in sufficient
quantities, may present health risks to persons who are exposed to it over time.
Levels of Radon that exceed federal and state guidelines have been found in
buildings in Florida. Additional information regarding Radon and Radon testing
may be obtained from your county public health unit."
26. ATTORNEYS' FEES. In the event of any action or proceeding under
this Lease, THE PREVAILING PARTY shall be entitled to recover court costs and
the fees and disbursements of its attorneys in such action or proceeding
(whether at the administrative, trial or appellate levels) in such amount as the
court or administrative body may judge reasonable. The prevailing party shall
also be entitled to recover attorneys' fees and disbursements incurred in
connection with a Tenant default hereunder which does not result in the
commencement of any action or proceeding.
27. JURY TRIAL WAIVER. LANDLORD AND TENANT EACH HEREBY IRREVOCABLY,
KNOWINGLY AND VOLUNTARILY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES AGAINST THE OTHER OR THEIR
SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE
PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY
REMEDY.
28. MISCELLANEOUS. Headings of Paragraphs are for convenience only
and shall not be considered in construing the meaning of the contents of such
Paragraph. The invalidity of any portion of this Lease shall not have any effect
on the balance hereof. Should Landlord institute any legal proceedings against
Tenant for breach of any provision herein contained, and prevail in such action,
Tenant shall in addition be liable for the costs and expenses of Landlord,
including its reasonable attorneys' fees (at all tribunal levels). This Lease
shall be binding upon the respective parties hereto, and upon their heirs,
executors, successors and assigns. This agreement supersedes and cancels all
prior negotiations between the parties, and no changes shall be effective unless
in writing signed by both parties. Tenant acknowledges and agrees that it has
not relied upon any statements, representations, agreements or warranties except
those expressed in this Lease, and that this Lease contains the entire agreement
of the parties hereto with respect to the subject matter hereof. Landlord may
sell the Premises or the Building without affecting the obligations of Tenant
hereunder; upon the sale of the Premises or the Building, Landlord shall be
relieved of all responsibility for the Premises and shall be released from any
liability thereafter accruing under this Lease. If any security deposit or
prepaid Rent has been paid by Tenant, Landlord may transfer the security deposit
or prepaid Rent to Landlord's successor and upon such transfer, Landlord shall
be released from any liability for return of the security deposit or prepaid
Rent. This Lease may not be recorded without Landlord's prior written consent,
but Tenant agrees on request of Landlord to execute a memorandum hereof for
recording purposes. The singular shall include the plural, and the masculine,
feminine or neuter includes the other. If Landlord, or its employees, officers,
directors, stockholders or partners are ordered to pay Tenant a money judgment
because of Landlord's default under this Lease, said money judgment may only be
enforced against and satisfied out of: (i) Landlord's interest in the Building
in which the Premises are located including the rental income and proceeds from
sale; and (ii) any insurance or condemnation proceeds received because of damage
or condemnation to, or of, said Building that are available for use by Landlord.
No other assets of Landlord or said other parties exculpated by the preceding
sentence shall be liable for, or subject to, any such money judgment. This Lease
shall be interpreted and enforced in accordance with the laws of the State of
Florida. If requested by Landlord, Tenant shall furnish appropriate legal
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<PAGE> 16
documentation evidencing the valid existence and good standing of Tenant and the
authority of any person signing this Lease to act for Tenant. If Tenant signs as
a corporation, each of the persons executing this Lease on behalf of Tenant does
hereby covenant and warrant that Tenant is a duly authorized and existing
corporation, that Tenant has and is qualified to do business in the State of
Florida, that the corporation has full right and authority to enter into this
Lease and that each of the persons signing on behalf of the corporation is
authorized to do so. The submission of this Lease to Tenant for review does not
constitute a reservation of or option for the Premises, and this Lease shall
become effective as a contract only upon the execution and delivery by both
Landlord and Tenant. The date of execution shall be entered on the top of the
first page of this Lease by Landlord, and shall be the date on which the last
party signed the Lease, or as otherwise may be specifically agreed by both
parties. Such date, once inserted, shall be established as the final day of
ratification by all parties to this Lease, and shall be the date for use
throughout this Lease as the "Date of Execution" or "Execution Date".
29. SPECIAL CONDITIONS OR ADDENDUMS. The following addendum shall
apply, and where in conflict with earlier provisions in this Lease shall
control, and are incorporated herein and made a part of this Lease:
1. Lease Addendum No. 1, attached to this Lease.
2. Lease Addendum No. 2, attached to this Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed this lease in duplicate
originals, all as of the day and year first above written.
LANDLORD: TENANT:
HIGHWOODS/FLORIDA HOLDINGS, L.P. ONLINE TRADING INC., a Florida
corporation
By: Highwoods Properties, Inc., Agent
By: By:
------------------------------- ---------------------------
Title: Title:
---------------------------- ------------------------
(CORPORATE SEAL) (CORPORATE SEAL)
Witnesses: Witnesses:
- ---------------------------------- ------------------------------
Typed Name: Typed Name:
----------------------- -------------------
Typed Name: Typed Name:
----------------------- -------------------
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<PAGE> 17
ACKNOWLEDGMENTS
STATE OF FLORIDA
COUNTY OF PALM BEACH
The foregoing instrument was acknowledged before me this _______ day
of ______________, 199__, by _________________________, the ____________________
__________ of Highwoods Properties, Inc., Agent for HIGHWOODS/FLORIDA HOLDINGS,
L.P., a Delaware limited partnership. The foregoing individual [ ] is personally
known to me or [ ] has produced _____________________ as identification.
Notary Public - State of Florida
-------------------------------------------
Print Name:
--------------------------------
My Commission Number:
----------------------
My Commission Expires:
---------------------
STATE OF FLORIDA
COUNTY OF PALM BEACH
The foregoing instrument was acknowledged before me this _______ day
of _________________, 199__ , by _____________________, the ____________________
of _______________________ __________________, on behalf of the corporation.
The foregoing individual [ ] is personally known to me or [ ] has produced as
identification.
Notary Public - State of Florida
-------------------------------------------
Print Name:
--------------------------------
My Commission Number:
----------------------
My Commission Expires:
---------------------
17
<PAGE> 18
EXHIBIT A
PREMISES
[To be attached following Tenant approval of final plan.]
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EXHIBIT B
RULES AND REGULATIONS
1. ACCESS TO BUILDING. On Saturdays, Sundays, legal holidays and on weekdays
between the hours of 6:00 P.M. and 8:00 A.M., access to the Building and/or
to the halls, corridors, elevators or stairways in the Building may be
restricted and access shall be gained by use of a key or electronic card to
the outside doors of the Building. Landlord may from time to time establish
security controls for the purpose of regulating access to the Building.
Tenant shall cause each of its employees to comply with all such security
regulations so established.
2. PROTECTING PREMISES. The last member of Tenant to leave the Premises shall
close and securely lock all doors or other means of entry to the Premises and
shut off all utilities in the Premises.
3. BUILDING DIRECTORIES. The directories for the Building in the form selected
by Landlord shall be used exclusively for the display of the name and
location of tenants. Any additional names and/or name change requested by
Tenant to be displayed in the directories must be approved by Landlord and,
if approved, will be provided at the sole expense of Tenant.
4. LARGE ARTICLES. Furniture, freight and other large or heavy articles may be
brought into the Building only at times and in the manner designated by
Landlord and always at Tenant's sole responsibility. All damage done to the
Building, its furnishings, fixtures or equipment by moving or maintaining
such furniture, freight or articles shall be repaired at the expense of
Tenant.
5. SIGNS. Tenant shall not paint, display, inscribe, maintain or affix any sign,
placard, picture, advertisement, name, notice, lettering or direction on any
part of the outside or inside of the Building, or on any part of the inside
of the Premises which can be seen from the outside of the Premises, without
the written consent of Landlord, and then only such name or names or matter
and in such color, size, style, character and material as shall be first
approved by Landlord in writing. Landlord reserves the right to remove at
Tenant's expense all matter other than that above provided for without notice
to Tenant.
6. COMPLIANCE WITH LAWS. Tenant shall comply with all applicable laws,
ordinances, governmental orders or regulations and applicable orders or
directions from any public office or body having jurisdiction, whether now
existing or hereinafter enacted with respect to the Premises and the use or
occupancy thereof. Tenant shall not make or permit any use of the Premises
which directly or indirectly is forbidden by law, ordinance, governmental
regulations or order or direction of applicable public authority, which may
be dangerous to person or property or which may constitute a nuisance to
other tenants.
7. HAZARDOUS MATERIALS. Tenant shall not use or permit to be brought into the
Premises or the Building any flammable oils or fluids, or any explosive or
other articles deemed hazardous to persons or property, or do or permit to be
done any act or thing which will invalidate, or which, if brought in, would
be in conflict with any insurance policy covering the Building or its
operation, or the Premises, or any part of either, and will not do or permit
to be done anything in or upon the Premises, or bring or keep anything
therein, which shall not comply with all rules, orders, regulations or
requirements of any organization, bureau, department or body having
jurisdiction with respect thereto (and Tenant shall at all times comply with
all such rules, orders, regulations or requirements), or which shall increase
the rate of insurance on the Building, its appurtenances, contents or
operation.
8. DEFACING PREMISES AND OVERLOADING. Tenant shall not place anything or allow
anything to be placed in the Premises near the glass of any door, partition,
wall or window which may be unsightly from outside the Premises. Tenant shall
not place or permit to be placed any article of any kind on any window ledge
or on the exterior walls; blinds, shades, awnings or other forms of inside or
outside window ventilators or similar devices shall not be placed in or about
the outside windows in the Premises except to the extent that the character,
shape, color, material and make thereof is approved by Landlord. Tenant shall
not do any painting or decorating in the Premises or install any floor
coverings in the Premises or make, paint, cut or drill into, or in any way
deface any part of the Premises or Building without in each instance
obtaining the prior written consent of Landlord. Tenant shall not overload
any floor or part thereof in the Premises, or any facility in the Building or
any public corridors or elevators therein by bringing in or removing any
large or heavy articles and Landlord may direct and control the location of
safes, files, and all other heavy articles and, if considered necessary by
Landlord may require Tenant at its expense to supply whatever supplementary
supports necessary to properly distribute the weight.
9. OBSTRUCTION OF PUBLIC AREAS. Tenant shall not, whether temporarily,
accidentally or otherwise, allow anything to remain in, place or store
anything in, or obstruct in any way, any sidewalk, court, hall, passageway,
entrance, or shipping area. Tenant shall lend its full cooperation to keep
such areas free from all obstruction and in a clean and sightly condition,
and move all supplies, furniture and equipment as soon as received directly
to the Premises, and shall move all such items and waste (other than waste
customarily removed by Building employees) that are at any time being taken
from the Premises directly to the areas designated for disposal. All courts,
passageways, entrances, exits, elevators, escalators, stairways, corridors,
halls and roofs are not for the use of the general public and Landlord shall
in all cases retain the right to control and prevent access thereto by all
persons whose presence, in the judgment of Landlord, shall be prejudicial to
the safety, character, reputation and interest of the Building and its
tenants; provided, however, that
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nothing herein contained shall be construed to prevent such access to
persons with whom Tenant deals within the normal course of Tenant's business
so long as such persons are not engaged in illegal activities.
10. ADDITIONAL LOCKS. Tenant shall not attach, or permit to be attached,
additional locks or similar devices to any door or window, change existing
locks or the mechanism thereof, or make or permit to be made any keys for
any door other than those provided by Landlord. Upon termination of this
Lease or of Tenant's possession, Tenant shall immediately surrender all keys
to the Premises.
11. COMMUNICATIONS OR UTILITY CONNECTIONS. If Tenant desires signal, alarm or
other utility or similar service connections installed or changed, Tenant
shall not install or change the same without the approval of Landlord, and
then only under direction of Landlord and at Tenant's expense. Tenant shall
not install in the Premises any equipment which requires a greater than
normal amount of electrical current for the permitted use without the
advance written consent of Landlord. Tenant shall ascertain from Landlord
the maximum amount of load or demand for or use of electrical current which
can safely be permitted in the Premises, taking into account the capacity of
the electric wiring in the Building and the Premises and the needs of other
tenants in the Building, and shall not in any event connect a greater load
than that which is safe.
12. OFFICE OF THE BUILDING. Service requirements of Tenant will be attended to
only upon application at the office of Landlord. Employees of Landlord shall
not perform, and Tenant shall not engage them to do any work outside of
their duties unless specifically authorized by Landlord.
13. RESTROOMS. The restrooms, toilets, urinals, vanities and the other apparatus
shall not be used for any purpose other than that for which they were
constructed, and no foreign substance of any kind whatsoever shall be thrown
therein. The expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by Tenant who, or whose employees or
invitees, shall have caused it.
14. INTOXICATION. Landlord reserves the right to exclude or expel from the
Building any person who, in the judgment of Landlord, is intoxicated, or
under the influence of liquor or drugs, or who in any way violates any of
the rules and regulations of the Building.
15. NUISANCES AND CERTAIN OTHER PROHIBITED USES. Tenant shall not (a) install or
operate any internal combustion engine, boiler, machinery, refrigerating,
heating or air conditioning apparatus in or about the Premises; (b) engage
in any mechanical business, or in any service in or about the Premises or
Building, except those ordinarily embraced within the permitted use of the
Premises specified in PARAGRAPH 3; (c) use the Premises for housing,
lodging, or sleeping purposes; (d) prepare or warm food in the Premises or
permit food to be brought into the Premises for consumption therein (heating
coffee and individual lunches of employees excepted) except by express
permission of Landlord; (e) place any radio or television antennae on the
roof or on or in any part of the inside or outside of the Building other
than the inside of the Premises, or place a musical or sound producing
instrument or device inside or outside the Premises which may be heard
outside the Premises; (f) use any power source for the operation of any
equipment or device other than dry cell batteries or electricity; (g)
operate any electrical device from which may emanate waves that could
interfere with or impair radio or television broadcasting or reception from
or in the Building or elsewhere; (h) bring or permit to be in the Building
any bicycle, other vehicle, dog (except in the company of a blind person),
other animal or bird; (I) make or permit any objectionable noise or odor to
emanate from the Premises; (j) disturb, harass, solicit or canvass any
occupant of the Building; (k) do anything in or about the Premises which
could be a nuisance or tend to injure the reputation of the Building.
16. SOLICITATION. Tenant shall not canvass other tenants in the Building to
solicit business or contributions and shall not exhibit, sell or offer to
sell, use, rent or exchange any products or services in or from the Premises
unless ordinarily embraced within the Tenant's use of the Premises for which
specific authority granted in the lease agreement.
17. ENERGY CONSERVATION. Tenant shall not waste electricity, water, heat or air
conditioning and agrees to cooperate fully with Landlord to insure the most
effective operation of the Building's heating and air conditioning, and
shall not allow the adjustment (except by Landlord's authorized Building
personnel) of any controls.
18. BUILDING SECURITY. At all times other than normal business hours the
exterior Building doors and suite entry door(s) must be kept locked to
assist in security. The janitorial service, upon completion of its duties,
will lock all Building doors. Problems in Building and suite security should
be directed to Landlord at (561) 997-2255.
19. PARKING. Parking is in designated parking areas only. There may be no
vehicles in "no parking" zones or at curbs. Handicapped spaces are for
handicapped persons and the Police Department will ticket unauthorized
(unidentified) cars in handicapped spaces.
20. JANITORIAL SERVICE. The janitorial staff will remove all trash from trash
cans. Any container or boxes left in hallways or apparently discarded unless
clearly and conspicuously labeled DO NOT REMOVE may be removed without
liability to the Tenant. Any large volume of trash resulting from delivery
of furniture, equipment, etc., should be removed by the delivery company,
Tenant, or Landlord at Tenant's expense. Janitorial service will be provided
after hours each business day Monday through Friday. All requests should be
directed to Landlord at (561) 997-2255.
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21. CONSTRUCTION. Tenant shall make no structural or interior alterations of the
Premises. All structural and nonstructural alterations and modifications to
the Premises shall be coordinated through Landlord as outlined in PARAGRAPH
7 of the Lease. Completed construction drawings of the requested changes are
to be submitted to Landlord's construction department for pricing and
construction supervision.
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<PAGE> 22
EXHIBIT C
COMMENCEMENT AGREEMENT
THIS COMMENCEMENT AGREEMENT is made as of ________________, 199___, by
and between HIGHWOODS/FLORIDA HOLDINGS, L.P., a Delaware limited partnership
("Landlord") and ONLINE TRADING INC., a Florida corporation. ("TENANT").
W I T N E S S E T H :
WHEREAS, Landlord and Tenant have entered into a Lease Agreement dated
___________ (the "Lease"), covering premises situated in the Highwoods Square
III/ 2700 N. Military Trail Building, Boca Raton, Palm Beach County, Florida
("Premises") which Premises are more particularly described in the Lease; and,
WHEREAS, the Lease provided for the execution of a Commencement
Agreement establishing the actual date of the commencement of the term of the
lease of the Premises, and establishing the number of rentable square feet in
the Premises.
NOW, THEREFORE, the parties hereto agree as follows:
The term of the Lease actually commenced on __________________ 199__.
The initial term of the Lease shall terminate on ______________. The number of
rentable square feet in the Premises is agreed to be 6,806.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Agreement to
be duly executed, as of the day and year first above written.
TENANT:
ONLINE TRADING, INC., a Florida corporation
By:
--------------------------------
Typed Name:
------------------------
Typed Title:
-----------------------
(Corporate Seal)
Date:
------------------------------
LANDLORD:
HIGHWOODS/FLORIDA HOLDINGS, L.P.
By: Highwoods Properties, Inc., Agent
By:
--------------------------
Title:
-----------------------
(Corporate Seal)
Date:
-------------------------
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<PAGE> 23
LEASE ADDENDUM NO. 1
ADDITIONAL RENT - OPERATIONAL EXPENSE PASS THROUGHS. Tenant shall pay
monthly, as Additional Rent, one-twelfth (1/12) of Landlord's estimate of
Tenant's proportionate share ("Tenant's Proportionate Share") of all of the
Direct Expenses for the then-current calendar year, incurred on account of the
operation or maintenance of the PROJECT in which the Premises are situated.
Landlord will give Tenant notice from time to time of such estimated amounts,
and Tenant shall pay such amounts monthly to Landlord in the same manner and at
the same time as Base Rent. As soon as is reasonably practicable following the
end of each calendar year, Landlord will submit to Tenant an operating statement
("Operating Statement") showing in reasonable detail the Direct Expenses on a
per rentable square foot basis for the preceding calendar year, together with a
reconciliation of estimated payments made by Tenant as compared to the actual
Tenant's Proportionate Share paid for such calendar year. However, the failure
or delay by Landlord to provide Tenant with an Operating Statement shall not
constitute a waiver by Landlord of Tenant's obligation to pay the Direct
Expenses or a waiver of Landlord's rights to send such a statement thereafter or
a waiver of its right to reconcile the Direct Expenses. Within thirty (30) days
after receipt of an Operating Statement, Tenant shall pay to Landlord any
additional amounts owed to Landlord as shown on the Operating Statement. Any
funds owed by Landlord to Tenant shall be applied by Landlord against the next
accruing monthly installment(s) of Additional Rent due from Tenant. Tenant or
its representative shall have the right, upon not less than ten (10) days prior
notice rendered no later than twenty (20) days after delivery of an Operating
Statement, to review, at Tenant's sole expense, Landlord's books and records
with respect to the Direct Expenses during normal business hours, at the
location of Landlord's books and records, but no more than twice annually with
respect to any given calendar year. Unless Tenant shall take written exception
to any item contained in the Operating Statement within twenty (20) days after
delivery thereof, the Operating Statement shall be deemed final and accepted by
Tenant. If Tenant disputes an Operating Statement, Tenant shall pay the amount
set forth therein and any other funds then owed by Tenant under this Lease as a
condition precedent to any further review of the content of the Operating
Statement. Any payments due herein shall be prorated for any partial calendar
year occurring during the Lease Term. Tenant's obligation to pay any amounts due
herein and Landlord's obligation to refund any overpayments made by Tenant for
the final year of the Lease Term shall survive the Expiration Date or earlier
termination of this Lease.
The term "Direct Expense" as used herein shall include direct costs of
operation, repair and maintenance as determined by standard accounting practices
and shall include by way of illustration, but is not limited to ad valorem real
and personal property taxes, hazard and liability insurance premiums, utilities,
heat, air conditioning, janitorial service, labor, materials, supplies,
equipment and tools, permits, licenses, inspection fees, management fees, and
common area expenses. The term "Direct Expenses" shall not include depreciation
on the Building in which the Premises are situated or equipment therein,
interest, executive salaries, real estate brokers' commissions, or other
expenses that do not relate to the operation of the Project.
TENANT'S INITIAL LEASE YEAR ADDITIONAL RENT WILL BE CAPPED AT $8.50 PER RENTABLE
SQUARE FOOT. THEREFORE TENANT'S INITIAL LEASE YEAR ADDITIONAL RENT WILL BE THE
LESSOR OF THE LANDLORD'S PROJECTION OR $8.50 PER RENTABLE SQUARE FOOT. TENANT'S
ANNUAL ADDITIONAL RENT INCREASE SHALL BE CAPPED AT 107% OF THEIR PROPORTIONATE
SHARE OF THE PREVIOUS CALENDAR YEAR'S OPERATING EXPENSES, EXCEPT REAL ESTATE
TAXES, ELECTRICITY, INSURANCE AND ANY OTHER NON-CONTROLLABLE OPERATING EXPENSE
ASSOCIATED WITH THE DIRECT OPERATION OF THE PROJECT, WHICH WILL BE PASSED
THROUGH TO TENANT WITHOUT ANT CAP OR LIMITATION.
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<PAGE> 24
LEASE ADDENDUM NO. 2
TENANT IMPROVEMENT ALLOWANCE: Landlord will build out Tenants Premises, at
Landlord's expense, not to exceed $188,916.00. This is based on Tenant receiving
the equivalent of $28.00 per rentable square foot of Tenant's Premises. Landlord
will price Tenant's alteration requirements per architectural plans and
specifications reviewed with and approved by Tenant. Landlord will then review
such with Tenant prior to the commencement of construction to Tenant's Premises.
Should Tenant request additional Tenant Improvement monies from Landlord,
Landlord will consider providing such additional Tenant Improvement monies and
amortizing such over the Term of Tenant's Lease as Additional Rent due monthly
with Tenant's Base and Additional Rent. A nine and one-half (9.50%) annual costs
of funds will be applied to such additional Tenant Improvement monies if
utilized by Tenant.
RESERVED COVERED PARKING: Landlord, at Landlord's costs, shall provide Tenant
six (6) covered reserved parking spaces for Tenant's use for the life of this
Lease Term and any renewal periods, at a charge to Tenant of $20.00 per space
per month with annual increases of five (5%) percent effective each anniversary
of Tenant's Lease Commencement Date.
OPTION TO RENEW LEASE: Tenant shall receive one (1), five (5) year option to
extend this Lease at then fair market terms and conditions. Tenant shall provide
Landlord with a minimum of nine (9) months prior written notice of their intent
to exercise such renewal option. Landlord and Tenant will have ninety (90) days
from Landlord's receipt of Tenant's notice to renew, to finalize a mutually
acceptable Amendment to extend Tenant's Lease. If Tenant and Landlord are unable
to fully execute such an Amendment within such timeframe, then the option to
renew this Lease shall become null and void.
RIGHT OF FIRST REFUSAL: Tenant shall have the Right of First Refusal on up to
3,867 Rentable Square Feet contiguous to Tenant's Premises, upon the
availability of such space. Landlord and Tenant acknowledge that the subject
space contiguous to Tenant's original Premises is not expected to be available
for lease to an outside party for approximately four (4) years from Tenant's
Lease Commencement. Tenant will have seven (7) days from Landlord's notification
of an outside parties intent to Lease the contiguous Right of First Refusal
Space defined herein, to exercise their Right of First Refusal. If Tenant
exercises their Right of First Refusal, the Base Rent and Additional Rent
Schedule for Tenant's expansion space, will be consistent on a price per
Rentable Square Foot with Tenant's original Premises, Suite 200. Tenant will
also receive from Landlord a Tenant Improvement Allowance which will be the Pro
Rated equivalent on a dollars and cents per Rentable Square Foot basis of their
original Tenant Improvement Allowance. Such Pro Rating will be based on the
remaining Lease Term from Tenant's Expansion Space Commencement Date through the
then in effect Lease Expiration Date.
<PAGE> 25
LEASE ADDENDUM NO. 2, CONTINUED
TEMPORARY SPACE: Tenant will be permitted to Holdover in their previously leased
Suite 125 in Highwoods Square II/ 2650 N. Military Trail, from their Lease
Expiration Date of October 14, 1998 until the day preceding their Lease
Commencement for Suite 200 in Highwoods Square III/ 2700 N. Military Trail.
Tenant will only be responsible for Additional Rent during their Holdover
Tenancy in Suite 125 in Highwoods Square II/ 2650 N. Military Trail.
CABLE TELEVISION/ DIRECT TELEVISION: Landlord will provide best efforts to
provide Tenant the ability to have either Cable Television or Direct Television,
at Tenant's expense in Tenant's Premises.
<PAGE> 1
Exhibit 10.7
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement"), dated as of the ____
day of ___________, 1999, by and between onlinetradinginc.com corp., a Florida
corporation with its principal place of business at 2700 North Military Trail,
Suite 200, Boca Raton, Florida 33431 (the "Company"), and _________________,
________________________________________ (the "Executive").
R E C I T A L S:
A. The Company currently receives the benefits of the services of the
Executive as a member of the Company's Board of Directors and an executive
officer.
B. The Executive has requested indemnification and the Company is
willing to indemnify the Executive as a member of the Company's Board of
Directors and an executive officer to the fullest extent permitted by applicable
law and regulation.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein, the Company and the Executive agree as follows:
SECTION 1. MANDATORY INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS
OTHER THAN THOSE BY OR IN THE RIGHT OF THE COMPANY. Subject to Section 4 hereof
and to the extent and except as otherwise provided hereunder, the Company shall
indemnify and hold harmless the Executive from and against any and all claims,
damages, reasonable expenses (including, without limitation, attorneys' and
paralegals' fees), judgments, penalties, fines (including excise taxes assessed
with respect to an employee benefit plan) and amounts paid in settlement and all
other liabilities actually incurred by the Executive in connection with the
investigation, defense, prosecution, settlement or appeal of any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Company) and to which the Executive was or is a party or is threatened to be
made a party by reason of the fact that the Executive is or was a director,
officer, shareholder, employee or agent of the Company, or is or was serving at
the request of the Company as a director, officer, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan, or other enterprise, or by reason of anything done or not done by
the Executive in any such capacity or capacities; provided, however, that this
Agreement shall not eliminate or limit the liability of the Executive (i) for
any breach of the Executive's duty of loyalty to the Company or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for the willful or
negligent payment of unlawful dividends or unlawful stock repurchases or
redemptions in violation of Section 607.06401 of the Florida Business
Corporation Act, or (iv) for any transaction from which the Executive derived an
improper personal benefit. For purposes of this Agreement, the Executive is
considered to be serving as a fiduciary or similar capacity or as an agent of an
employee benefit plan at the Company's request if his duties to the Company also
impose duties on, or otherwise involve services by, the Executive to the plan or
to participants in or beneficiaries of the plan. Notwithstanding the foregoing,
the Company shall only indemnify the Executive for amounts paid in settlement if
<PAGE> 2
such settlement was consented to by the Company, which consent shall not be
unreasonably withheld.
SECTION 2. MANDATORY INDEMNIFICATION IN ACTIONS OR SUITS BY OR IN THE
RIGHT OF THE COMPANY. Subject to Section 4 hereof and to the extent and except
as otherwise provided hereunder, the Company shall indemnify and hold harmless
the Executive from and against any and all reasonable expenses (including,
without limitation, attorneys' and paralegals' fees) and/or amounts paid in
settlement actually incurred by the Executive in connection with the
investigation, defense, settlement or appeal of any threatened, pending or
completed action or suit by or in the right of the Company to procure a judgment
in its favor and to which the Executive was or is a party or is threatened to be
made a party by reason of the fact that the Executive is or was a director,
officer, shareholder, employee or agent of the Company, or is or was serving at
the request of the Company as a director, officer, partner, trustee, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, or by reason of anything done or not done by
the Executive in such capacity or capacities, provided that (i) the Executive
acted in good faith and in a manner the Executive reasonably believed to be in
or not opposed to the best interests of the Company, (ii) indemnification for
amounts paid in settlement shall not exceed the estimated expense of litigating
the proceeding to conclusion, (iii) no indemnification shall be made in respect
of any claim, issue or matter as to which the Executive shall have been adjudged
to be liable for misconduct in the performance of his duty to the Company unless
and only to the extent that the court in which such action, suit or proceeding
was brought (or any other court of competent jurisdiction) shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, the Executive is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper, and (iv) no
indemnification shall be made in respect of any claim, issue or matter in which
the Executive shall have been adjudged to be liable for any willful or negligent
payment of unlawful dividends or unlawful stock repurchases or redemptions in
violation of Section 607.06401 of the Florida Business Corporation Act or for
any transaction in which the Executive derived a personal benefit.
Notwithstanding the foregoing, the Company shall only indemnify the Executive
for amounts paid in settlement, if such settlement was consented to by the
Company, which consent shall not be unreasonably withheld.
SECTION 3. MANDATORY INDEMNIFICATION AGAINST EXPENSES INCURRED WHILE
TESTIFYING. Subject to Section 5 hereof, the Corporation shall indemnify the
Executive against expenses (including attorneys' fees and paralegals' fees)
incurred or paid by the Executive as a result of providing testimony in any
proceeding, whether civil, criminal, administrative or investigative (including
but not limited to any action or suit by or in the right of the Corporation to
procure a judgment in its favor), by reason of the fact that the Executive is or
was an officer, director, shareholder, employee, consultant, adviser or agent of
the Corporation, or is or was serving at the request of the Corporation as an
officer, director, partner, trustee, employee, adviser or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise
SECTION 4. REIMBURSEMENT OF EXPENSES FOLLOWING ADJUDICATION OF
NEGLIGENCE. Except as otherwise specified in Section 2 herein, the Company
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<PAGE> 3
shall reimburse the Executive for any expenses (including attorneys' fees and
paralegals' fees) and amounts actually and reasonably incurred or paid by him in
connection with the investigation, defense, settlement or appeal of any action
or suit described in Section 2 hereof that results in an adjudication that the
Executive was liable for negligence, gross negligence or recklessness (but not
willful misconduct) in the performance of his duty to the Company; provided,
however, that the Executive acted in good faith and in a manner he believed to
be in the best interests of the Company.
SECTION 5. AUTHORIZATION OF INDEMNIFICATION.
5.1 INDEMNIFICATION DETERMINATION. Any indemnification under
Sections 1 and 2 hereof (unless ordered by a court) and any reimbursement made
under Section 3 hereof, shall be made by the Company only as authorized in the
specific case upon a determination (the "Determination") that indemnification or
reimbursement of the Executive is proper in the circumstances because the
Executive has met the applicable standard of conduct set forth in Sections 1, 2
or 3 hereof, as the case may be and which Determination shall be based on the
presumptions, if applicable, set forth in this Section 5. Subject to Subsections
6.6, 6.7 and 6.8 of this Agreement, the Determination shall be made in the
following order of preference:
(1) first, by the Company's Board of Directors
(the "Board") by majority vote or consent of a quorum consisting of directors
who are not, at the time of the Determination, named parties to such action,
suit or proceeding ("Disinterested Directors"); or
(2) next, if such a quorum of Disinterested Directors
cannot be obtained, by majority vote of a committee duly designated by the Board
(in which designation all directors, whether or not Disinterested Directors, may
participate) consisting solely of two or more Disinterested Directors; or
(3) next, if such a committee cannot be designated,
by independent legal counsel (who may be the outside counsel regularly employed
by the Company) in a written opinion; or
(4) next, if such legal opinion cannot be obtained,
by vote of the holders of a majority of the Company's common stock that are
represented in person or by proxy and entitled to vote at a meeting called for
such purpose or by a written consent of the holders of a majority of the
outstanding shares of common stock of the Company in lieu thereof.
5.2 NO PRESUMPTIONS. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the Executive did not act in good faith and in a manner which the Executive
reasonably believed to be in or not opposed to the best interests of the
Company, and with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
5.3 BENEFIT PLAN CONDUCT. The Executive's conduct with respect to
an employee benefit plan for a purpose the Executive reasonably believed to be
in the interests of
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<PAGE> 4
the participants in and beneficiaries of the plan shall be deemed, in rendering
a Determination, to be conduct that the Executive reasonably believed to be not
opposed to the best interests of the Company.
5.4 RELIANCE AS SAFE HARBOR. For purposes of rendering any
Determination hereunder, the Executive shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company or, with respect to any criminal action or proceeding,
to have had no reasonable cause to believe the Executive's conduct was unlawful,
if the Executive's action is based on (i) the records or books of account of the
Company or another enterprise, including financial statements, (ii) information
supplied to the Executive by the officers of the Company or another enterprise
in the course of their duties, (iii) the advice of legal counsel for the Company
or another enterprise, or (iv) information or records given or reports made to
the Company or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the Company
or another enterprise. The term "another enterprise" as used in this Subsection
5.4 shall mean any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise of which the Executive is or was
serving at the request of the Company as a director, officer, partner, trustee,
employee or agent. The provisions of this Subsection 5.4 shall not be deemed to
be exclusive or to limit in any way the other circumstances in which the
Executive may be deemed to have met the applicable standard of conduct set forth
in Sections 1, 2 or 3 hereof, as the case may be.
5.5 SUCCESS ON MERITS OR OTHERWISE. Notwithstanding any other
provision of this Agreement, to the extent that the Executive has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described in Sections 1 or 2 hereof, or in defense of any claim,
issue or matter therein, the Executive shall be indemnified against expenses
(including, without limitation, attorneys' and paralegals' fees) actually and
reasonably incurred by the Executive in connection with the investigation,
defense, settlement or appeal thereof. For purposes of this Subsection 5.5, the
term "successful on the merits or otherwise" shall include, but not be limited
to, (i) any termination, withdrawal, or dismissal (with or without prejudice) of
any claim, action, suit or proceeding against the Executive without any express
finding of liability or guilt against the Executive, (ii) the expiration of 120
days after the making of any claim or threat of an action, suit or proceeding
without the institution of the same and without any promise or payment made to
induce a settlement, or (iii) the settlement of any action, suit or proceeding
under Section 1, 2 or 3 hereof pursuant to which the Executive pays less than
$10,000.
5.6 PARTIAL INDEMNIFICATION OR REIMBURSEMENT. If the Executive is
entitled under any provision of this Agreement to indemnification and/or
reimbursement by the Company for some or a portion of the claims, damages,
expenses (including, without limitation, attorneys' and paralegals' fees),
judgments, fines or amounts paid in settlement by the Executive in connection
with the investigation, defense, settlement or appeal of any action specified in
Sections 1, 2 or 3 hereof, but not, however, for the total amount thereof, the
Company shall nevertheless indemnify and/or reimburse the Executive for the
portion thereof to which the Executive is entitled. The party or parties making
the Determination shall determine the portion (if less than all) of such claims,
damages, expenses (including, without limitation, attorneys' and
4
<PAGE> 5
paralegals' fees), judgments, fines or amounts paid in settlement for which the
Executive is entitled to indemnification and/or reimbursement under this
Agreement.
SECTION 6. PROCEDURES FOR DETERMINATION OF WHETHER STANDARDS HAVE BEEN
SATISFIED.
6.1 COSTS. All costs of making the Determination required by
Section 5 hereof shall be borne solely by the Company, including, but not
limited to, the costs of legal counsel, proxy solicitations and judicial
determinations, and all costs of defending any suits or proceedings challenging
payments to the Executive under this Agreement. Provided the Executive prevails
in such matter, the Company shall also be solely responsible for paying all
reasonable expenses incurred by the Executive to enforce this Agreement,
including, but not limited to, the costs incurred by the Executive to obtain
court-ordered indemnification pursuant to Section 9 hereof, regardless of the
outcome of such application or proceeding.
6.2 TIMING OF THE DETERMINATION. The Company shall use its best
efforts to make the Determination contemplated by Section 5 hereof promptly. In
addition, the Company agrees:
(1) if the Determination is to be made by the Board
or a committee thereof, such Determination shall be made not later than 15 days
after a written request for a Determination (a "Request") is delivered to the
Company by the Executive;
(2) if the Determination is to be made by independent
legal counsel, such Determination shall be made not later than 30 days after a
Request is delivered to the Company by the Executive; and
(3) if the Determination is to be made by the
shareholders of the Company, such Determination shall be made not later than 90
days after a Request is delivered to the Company by the Executive.
The failure of the Company to use its best efforts to make a Determination
within the above specified time period shall constitute a Determination
approving full indemnification or reimbursement of the Executive notwithstanding
anything herein to the contrary. A Determination may be made in advance of (i)
the Executive's payment (or incurring) of expenses with respect to which
indemnification or reimbursement is sought, and/or (ii) final disposition of the
action, suit or proceeding with respect to which indemnification or
reimbursement is sought.
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<PAGE> 6
6.3 REASONABLENESS OF EXPENSES. Notwithstanding anything
contained herein to the contrary, prior to the payment of any expenses
hereunder, the Company shall determine the reasonableness of such expenses as
provided below. The Board shall use its best efforts to ensure that the
evaluation and finding as to the reasonableness of expenses incurred by the
Executive for purposes of this Agreement shall be made (in the following order
of preference) within 15 days of the Executive's delivery to the Company of a
request for reimbursement of expenses that includes a reasonable accounting of
expenses incurred:
(1) first, by the Board by a majority vote of a
quorum consisting of Disinterested Directors; or
(2) next, if a quorum cannot be obtained under
subdivision (1), by majority vote or consent of a committee duly designated by
the Board (in which designation all directors, whether or not Disinterested
Directors, may participate), consisting solely of two or more Disinterested
Directors.
All expenses shall be considered reasonable for purposes of this Agreement if
the finding contemplated by this Subsection 6.3 is not made within the
prescribed time due to the Company's failure to use its best efforts to comply
therewith. The finding required by this Subsection 6.3 must be made in advance
of the payment (or incurring) of the expenses for which indemnification or
reimbursement is sought.
6.4 PAYMENT OF INDEMNIFIED AMOUNT. Immediately following a
Determination that the Executive has met the applicable standard of conduct set
forth in Sections 1, 2 or 3 hereof, as the case may be, and/or the finding of
reasonableness of expenses contemplated by Subsection 6.3 hereof, the Company
shall pay to the Executive in cash the amount to which the Executive is entitled
to be indemnified and/or reimbursed, as the case may be, without further
authorization or action by the Board; provided, however, that the expenses for
which indemnification or reimbursement is sought have actually been incurred by
the Executive and the Executive is able to provide appropriate receipts.
6.5 SHAREHOLDER VOTE ON DETERMINATION. The Executive and any
other shareholder who is a party to the proceeding for which indemnification or
reimbursement is sought shall be entitled to vote on any Determination to be
made by the Company's shareholders, including a Determination made pursuant to
Subsection 6.7 hereof. In addition, in connection with each meeting at which a
shareholder Determination will be made, the Company shall solicit proxies that
expressly include a proposal to indemnify or reimburse the Executive. The
Company proxy statement relating to the proposal to indemnify or reimburse the
Executive shall not include a recommendation against indemnification or
reimbursement.
6.6 SELECTION OF INDEPENDENT LEGAL COUNSEL. If the Determination
required under Section 5 is to be made by independent legal counsel, such
counsel shall be selected by the Executive with the approval of the Board of
Directors, which approval shall not be unreasonably withheld. The fees and
expenses incurred by counsel in making any Determination (including
Determinations pursuant to Subsection 6.8 hereof) shall be borne solely by the
Company regardless of the results of any Determination and, if requested by
counsel, the Company shall give such counsel an appropriate written agreement
with respect to the payment of their fees and expenses and such other matters as
may be reasonably requested by counsel.
6.7 RIGHT OF EXECUTIVE TO APPEAL AN ADVERSE DETERMINATION BY
BOARD. If a Determination is made by the Board or a committee thereof that the
Executive did not meet the applicable standard of conduct set forth in Sections
1, 2 or 3 hereof, upon the written request of the Executive and the Executive's
delivery of $500 to the Company, the Company shall cause a new Determination to
be made by the Company's shareholders at the next regular or special
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<PAGE> 7
meeting of shareholders. Subject to Section 9 hereof, such Determination by the
Company's shareholders shall be binding and conclusive for purposes of this
Agreement.
6.8 RIGHT OF EXECUTIVE TO SELECT FORUM FOR DETERMINATION. If, at
any time subsequent to the date of this Agreement, "Continuing Directors", as
defined below, do not constitute a majority of the members of the Board, or
there is otherwise a change in control of the Company (as contemplated by Item
403(c) of Regulation S-K promulgated under the Securities Act of 1933, as
amended), then upon the request of the Executive, the Company shall cause the
Determination required by Section 5 hereof to be made by independent legal
counsel selected by the Executive and approved by the Board (which approval
shall not be unreasonably withheld), which counsel shall be deemed to satisfy
the requirements of Subsection 6.6 hereof. If none of the legal counsel selected
by the Executive are willing and/or able to make the Determination, then the
Company shall cause the Determination to be made by a majority vote or consent
of a Board committee consisting solely of Continuing Directors. If there are no
Continuing Directors, then the Company shall cause the Determination required by
Section 5 hereof to be made by the shareholders at the next regular or special
meeting of shareholders. For purposes of this Agreement, a "Continuing Director"
means either a member of the Board at the date of this Agreement or a person
nominated to serve as a member of the Board by a majority of the then Continuing
Directors.
6.9 ACCESS BY EXECUTIVE TO DETERMINATION. The Company shall
afford to the Executive and his representatives ample opportunity to present
evidence of the facts upon which the Executive relies for indemnification or
reimbursement, together with other information relating to any requested
Determination. The Company shall also afford the Executive the reasonable
opportunity to include such evidence and information in any Company proxy
statement relating to a shareholder Determination.
6.10 JUDICIAL DETERMINATIONS IN DERIVATIVE SUITS. In each action
or suit described in Section 2 hereof, the Company shall cause its counsel to
use its best efforts to obtain from the Court in which such action or suit was
brought (i) an express adjudication whether the Executive is liable for
negligence or misconduct in the performance of his duty to the Company, and, if
the Executive is so liable, (ii) a determination whether and to what extent,
despite the adjudication of liability but in view of all the circumstances of
the case (including this Agreement), the Executive is fairly and reasonably
entitled to indemnification.
SECTION 7. SCOPE OF INDEMNITY. The actions, suits and proceedings
described in Sections 1 and 2 hereof shall include, for purposes of this
Agreement, any actions that involve, directly or indirectly, activities of the
Executive both in his official capacities as a Company director or officer and
actions taken in another capacity while serving as director or officer,
including, but not limited to, actions or proceedings involving (i) compensation
paid to the Executive by the Company, (ii) activities by the Executive on behalf
of the Company, including actions in which the Executive is plaintiff, (iii)
actions alleging a misappropriation of a "corporate opportunity," (iv) responses
to a takeover attempt or threatened takeover attempt of the Company, (v)
transactions by the Executive in Company securities, and (vi) the Executive's
preparation for and appearance (or potential appearance) as a witness in any
proceeding relating, directly or indirectly, to the Company. In addition, the
Company agrees that, for purposes of this
7
<PAGE> 8
Agreement, all services performed by the Executive on behalf of, in connection
with or related to any subsidiary of the Company, any employee benefit plan
established for the benefit of employees of the Company or any subsidiary, any
corporation or partnership or other entity in which the Company or any
subsidiary has a 5% ownership interest, or any other affiliate of the Company,
shall be deemed to be at the request of the Company.
SECTION 8. ADVANCE FOR EXPENSES.
8.1 MANDATORY ADVANCE. Reasonable expenses (including, without
limitation, attorneys' and paralegals' fees) incurred by the Executive in
investigating, defending, settling or appealing any action, suit or proceeding
described in Sections 1 or 2 hereof shall be advanced by the Company in advance
of the final disposition of such action, suit or proceeding upon the request by
the Executive and said expenses shall be paid within 10 days following the
Executive's delivery to the Company of such written request for an advance
pursuant to this Section 8, together with a reasonable accounting of such
expenses. However, prior to the payment of any expenses hereunder, the Company
shall determine the reasonableness of such expenses as provided in Subsection
6.3.
8.2 UNDERTAKING TO REPAY. The Executive hereby undertakes and
agrees to repay to the Company any advances made pursuant to this Section 8 if
and to the extent that it shall ultimately be determined that the Executive is
not entitled to be indemnified by the Company for such amounts, as described
above.
8.3 MISCELLANEOUS. The Company shall make the advances
contemplated by this Section 8 regardless of the Executive's financial ability
to make repayment, and regardless whether indemnification of the Executive by
the Company will ultimately be required. Any advances and undertakings to repay
pursuant to this Section 8 shall be unsecured and interest-free.
SECTION 9. COURT ORDERED INDEMNIFICATION. Regardless of whether the
Executive has met the standard of conduct set forth in Sections 1, 2 or 3
hereof, as the case may be, and notwithstanding the presence or absence of any
Determination whether such standards have been satisfied, the Executive may
apply for indemnification (and/or reimbursement pursuant to Sections 3 or 13
hereof) to the court conducting any proceeding to which the Executive is a party
or to any other court of competent jurisdiction. Upon receipt of an application,
the court, after giving any notice the court considers necessary, may order
indemnification (and/or reimbursement) if it determines the Executive is fairly
and reasonably entitled to indemnification (and/or reimbursement) in view of all
the relevant circumstances (including this Agreement).
SECTION 10. NONDISCLOSURE OF PAYMENTS. Except as required by applicable
securities laws, neither party shall disclose any payments under this Agreement
unless prior approval of the other party is obtained. Any payments to the
Executive that must be disclosed shall, unless otherwise requested by law, be
described only in Company proxy or information statements relating to
special/annual meetings of the Company's shareholders and the Company shall
afford the Executive the reasonable opportunity to review all such disclosures
8
<PAGE> 9
and, if requested, to explain in such statement any mitigating circumstances
regarding the event reported.
SECTION 11. COVENANT NOT TO SUE, LIMITATION OF ACTIONS AND RELEASE OF
CLAIMS. No legal action shall be brought and no cause of action shall be
asserted by or on behalf of the Company (or any of its subsidiaries) against the
Executive, his spouse, heirs, executors, personal representatives or
administrators after the expiration of two years from the time the Executive
ceases (for any reason) to serve as either an officer or director of the
Company, and any claim or cause of action of the Company (or any of its
subsidiaries) shall be extinguished and deemed released unless asserted by
filing of a legal action within such two-year period.
SECTION 12. INDEMNIFICATION OF EXECUTIVE'S ESTATE. Notwithstanding any
other provision of this Agreement, and regardless of whether indemnification of
the Executive would be permitted and/or required under this Agreement, if the
Executive is deceased, the Company shall indemnify and hold harmless the
Executive's estate, spouse, heirs, administrators, personal representatives and
executors (collectively the "Executive's Estate") against, and the Company shall
assume, any and all claims, damages, expenses (including attorneys' and
paralegals' fees), penalties, judgments, fines and amounts paid in settlement
actually incurred by the Executive or the Executive's Estate in connection with
the investigation, defense, settlement or appeal of any action described in
Sections 1 or 2 hereof, to the same extent as the Executive. Indemnification of
the Executive's Estate pursuant to this Section 12 shall be mandatory and not
require a Determination or any other finding that the Executive's conduct
satisfied a particular standard of conduct.
SECTION 13. REIMBURSEMENT OF ALL LEGAL EXPENSES. Notwithstanding any
other provision of this Agreement, and regardless of the presence or absence of
any Determination, the Company promptly (but not later than 30 days following
the Executive's submission of a reasonable accounting) shall reimburse the
Executive for all attorneys' fees and related court costs and other expenses
incurred by the Executive in connection with the investigation, defense,
settlement or appeal of any action described in Section 1 or 2 hereof
(including, but not limited to, the matters specified in Section 6 hereof).
SECTION 14. MISCELLANEOUS.
14.1 NOTICE PROVISION. Any notice, payment, demand or
communication required or permitted to be delivered or given by the provisions
of this Agreement shall be deemed to have been effectively delivered or given
and received on the date personally delivered to the respective party to whom it
is directed, or when deposited by registered or certified mail, return receipt
requested, with postage and charges prepaid and addressed to the parties at the
addresses set forth above their signatures to this Agreement.
14.2 ENTIRE AGREEMENT. Except for the Company's Amended and
Restated Articles of Incorporation, this Agreement constitutes the entire
understanding of the parties and supersedes all prior understandings, whether
written or oral, between the parties with respect to the subject matter of this
Agreement.
9
<PAGE> 10
14.3 SEVERABILITY OF PROVISIONS. If any provision of this
Agreement is held to be illegal, invalid, or unenforceable under present or
future laws effective during the term of this Agreement, such provision shall be
fully severable; this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore, in
lieu of each such illegal, invalid, or unenforceable provision, there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible and be
legal, valid, and enforceable.
14.4 APPLICABLE LAW. This Agreement shall be governed by and
construed under the laws of the State of Florida, without application of the
principles of conflicts of laws.
14.5 EXECUTION IN COUNTERPARTS. This Agreement and any amendment
may be executed simultaneously or in two or more counterparts, each of which
together shall constitute one and the same instrument.
14.6 COOPERATION AND INTENT. The Company shall cooperate in good
faith with the Executive and use its best efforts to ensure that the Executive
is indemnified and/or reimbursed for liabilities described herein to the fullest
extent permitted by law.
14.7 AMENDMENT. No amendment, modification or alteration of the
terms of this Agreement shall be binding unless in writing, dated subsequent to
the date of this Agreement, and executed by the parties.
14.8 BINDING EFFECT. The obligations of the Company to the
Executive hereunder shall survive and continue as to the Executive even if the
Executive ceases to be a director, officer, employee and/or agent of the
Company. Each and all of the covenants, terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the successors to the Company
and, upon the death of the Executive, to the benefit of the estate, heirs,
executors, administrators and personal representatives of the Executive.
14.9 GENDER AND NUMBER. Wherever the context shall so require,
all words herein in the male gender shall be deemed to include the female or
neuter gender, all singular words shall include the plural and all plural words
shall include the singular.
14.10 NON-EXCLUSIVITY. The rights of indemnification and
reimbursement provided in this Agreement shall be in addition to any rights to
which the Executive may otherwise be entitled by statute, bylaw, agreement, vote
of shareholders or otherwise.
14.11 EFFECTIVE DATE. The provisions of this Agreement shall
cover claims, actions, suits and proceedings whether now pending or hereafter
commenced and shall be retroactive to cover acts or omissions or alleged acts or
omissions which heretofore have taken place.
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<PAGE> 11
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
The Company:
onlinetradinginc.com corp., a Florida
corporation
By:
----------------------------------
Name:
-------------------------------
Title:
-------------------------------
THE EXECUTIVE:
-------------------------------------
Name:
--------------------------------
11
<PAGE> 1
Exhibit 10.8
Online Trading Inc.
2650 North Military Trail, Suite #125
Boca Raton, Florida 33431
RE: AGREEMENT FOR SECURITIES CLEARANCE SERVICES
Gentlemen:
This Agreement sets forth the terms and conditions under which Bear,
Stearns Securities Corp. ("Bear Stearns Securities") will act as your clearing
broker to clear and carry on a fully disclosed basis, your customer margin and
cash accounts, and your proprietary accounts, and you will become a
correspondent of Bear Stearns Securities.
1. (a) Bear Stearns Securities will carry such of your customer
accounts as will be mutually agreed by the parties hereto: These accounts are
hereinafter called the "Accounts" and the legal and beneficial owners thereof
are hereinafter called the "Customers".
(b) For the purposes of the Securities Investor Protection Act and
the financial responsibility rules of the Securities and Exchange Commission,
Customers shall be deemed to be Customers of Bear Stearns Securities, as your
clearing agent.
(c) You agree that Bear Stearns Securities will be your only
clearing agent and that all transactions, in any account serviced by your firm,
will be cleared exclusively through Bear Stearns Securities. This provision can
be modified only with the written consent of the President of Bear Stearns
Securities.
2. (a) You shall have sole discretion to determine the amount of
commission charged to your Customers' accounts cleared by Bear Stearns
Securities. You agree to pay Bear Stearns Securities for its services pursuant
to this Agreement, on each order executed on your behalf on a national stock
exchange or over-the-counter, such amounts as set forth in Schedule A hereto.
(b) Bear Stearns Securities agrees to pay to you monthly such
commissions received by Bear Stearns Securities less any amounts due to Bear
Stearns Securities under this Agreement or otherwise and any expenses or other
sums to third parties paid on your behalf by Bear Stearns Securities.
3. Bear Stearns Securities agrees to notify your Customers in writing
concerning the respective obligations of the parties hereto pursuant to
paragraphs 4-14 of this Agreement and any other Customer related
responsibilities of the parties to this Agreement.
4. You agree to supply Bear Stearns Securities with copies of all
financial information and reports filed by you with the New York Stock Exchange,
Inc. (if a member), the National Association of Securities Dealers, Inc., the
Securities and Exchange Commission, and any other National Securities Exchange
(where a member) (including but not otherwise limited to monthly and quarterly
Financial and Operational Combined Uniform Single Reports i.e.,
<PAGE> 2
"FOCUS" Reports) simultaneously with the filing thereof. You shall submit to
Bear Stearns Securities on a monthly basis or, if so requested by Bear Stearns
Securities, at more frequent intervals, information and resorts relating to your
financial integrity, including but not otherwise limited to information
regarding your aggregate indebtedness ratio and net capital.
5. You will be responsible to Bear Stearns Securities for: (a) all
payments required so that all Accounts, cash and margin, shall be at all times
in compliance with Regulation T, as amended, promulgated by the Board of
Governors of the Federal Reserve Board, (b) maintaining margin in each margin
Account to the satisfaction of Bear Stearns Securities, (c) the payment of any
unsecured debit balance in an Account, (d) until funds are credited to Bear
Stearns Securities, all payment to Bear Stearns Securities on checks received by
it in connection with your Accounts, (e) payment and delivery of "when issued"
transactions in the Accounts, and (f) the delivery by Customers of securities in
good delivery form under all applicable rules and practices. Bear Stearns
Securities has sole discretion to execute buy-ins or sell-outs In any cash or
margin Account whenever it determines such action appropriate regardless whether
the Account complies with applicable margin maintenance requirements or has
requested extension of time in which to make payment. Any request by you that
Bear Stearns Securities should waive either buying-in or selling-out an Account
must be in writing signed by an officer, partner or principal of your firm and
you agree that if Bear Stearns Securities accedes to your request that you will
indemnify and hold Bear Stearns Securities, its controlling persons, successors
and assigns (such persons being the "Indemnified Parties") harmless against any
loss, liability, damage, claim, cost or expense (including but not limited to
fees and expenses of legal counsel) arising therefrom. Bear Stearns Securities
shall have sole discretion as to any application for an extension of time for
any Account to make any payment required by Regulation T.
6. (a) Bear Stearns Securities may, at its discretion, either buy back
in the "cash" market or borrow the day you are notified of option assignments
affecting shares which have been tendered and cause short positions in your
Accounts as of either the proration or withdrawal date. Shares purchased for
cash or borrowed will not be considered part of an Account's tendered position
until such shares are in Bear Stearns Securities' actual possession. Bear
Stearns Securities will reduce the tender for your firm accounts and the
Accounts by the size of the short or unrelieved shares.
(b) During a tender period in which there are competing and counter
tender offers for a security, Bear Stearns Securities will tender only on a
trade date basis the number of the shares net long in your firm account and the
Accounts as of either the proration or withdrawal date.
7. For each trade executed you agree to supply to Bear Stearns
Securities on trade date all the information necessary to complete an order
ticket. You further agree to comply with Bear Stearns Securities' procedures
concerning your obligation to provide timely notification of any omission of, or
error in, any detail of a trade or any discrepancy between the floor broker's
ticket and your order ticket as transmitted to us by you with regard to any
detail of a trade (collectively, "Trade Discrepancies"). You hereby agree to
indemnify and hold Bear Stearns Securities and the Indemnified Parties harmless
from and against, and pay immediately upon demand, any loss, liability, damage,
claim, cost or expense (including but not limited to fees and expenses of legal
counsel) arising out of or in connection with such Trade Discrepancies or as a
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<PAGE> 3
result of any investigation conducted in connection with such Trade
Discrepancies or in the defense or settlement of any action or proceeding
brought by any regulatory or self-regulatory organization arising out of or in
connection with such Trade Discrepancies.
8. For each account you agree to supply to Bear Stearns Securities a
new account report on such forms as Bear Stearns Securities will supply you and
to supply any other documentation and information which Bear Stearns Securities
may, in its sole discretion, request you to obtain from the Customer. Bear
Stearns Securities agrees to provide you with copies of its Customer Agreement
and such other forms necessary to enable you to document each Account. In the
event requested documentation or information is not promptly received by Bear
Stearns Securities, Bear Stearns Securities has the right to refuse to accept
orders for such Account, to close the Account and to withhold your commissions
and assess upon you any other penalties it sees fit.
9. Unless otherwise agreed to in writing by Bear Stearns Securities,
Bear Stearns Securities shall issue confirmations, statements and notices
directly to your Customers on Bear Stearns Securities' forms for such purpose
which shall bear the following: Transactions cleared through Bear, Stearns
Securities Corp., a wholly owned, guaranteed subsidiary of Bear Stearns & Co.
Inc. and will send you duplicate confirmations, statements and notices.
10. You agree that before you commence any trading in options for any
Account you will have a Senior Registered Options Principal registered with
either the American Stock Exchange, Inc. or the National Association of
Securities Dealers, Inc.
11. (a) This Agreement and all transactions in the Accounts, will be
subject to the applicable Constitution, Rules, By-Laws, Regulations and customs
of any securities market, association, exchange or clearing house where such
transactions are effected or of which Bear Stearns Securities is a member, and
also to all applicable U. S. Federal and state laws and regulations. All of the
foregoing are hereinafter called the "Applicable Rules".
(b) Except as otherwise specified in this Agreement you are solely
responsible for the conduct of the Accounts, and ensuring that the transactions
conducted response therein are in compliance with the Applicable Rules. Such
responsibility includes, but is not limited to: (i) using due diligence to learn
and on a continuing basis to know the essential facts of each Customer,
including verifying the address changes of each Customer, knowing all persons
holding power of attorney over any Account, being familiar with each order in
any Account and at all times to fully comply with Rule 405 of the New York Stock
Exchange, Inc., and any interpretations thereof, and all similar Applicable
Rules; (ii) selecting, investigating, training, and supervising all personnel
who open, approve or authorize transactions in the Accounts; (iii) establishing
written procedures for the conduct of the Accounts and ongoing review of all
transactions in Accounts, and maintaining compliance and supervisory personnel
adequate to implement such procedures; (iv) determining the suitability of all
transactions, including option transactions; (v) ensuring that there is a
reasonable basis for all recommendations made to Customers; (vi) determining the
appropriateness of the frequency of trading in Accounts; (vii) determining the
authorization and legality of each transaction in the Account; and (viii)
obtaining and maintaining all documents necessary for the performance of your
responsibilities under this Agreement and retaining such documents in accordance
with all the Applicable Rules.
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<PAGE> 4
(c) You will be responsible for responding to all your Customer
inquiries and complaints and you agree to promptly notify Bear Stearns
Securities in writing of complaints concerning Bear Stearns Securities.
(d) You hereby agree to indemnify and hold Bear Stearns Securities
and the Indemnified Parties harmless against any loss, liability, damage, claim,
cost or expense (including but not limited to fees and expenses of legal
counsel) caused by you directly or indirectly as a result of your breach of any
of the terms hereof. You hereby agree and warrant that you will maintain
appropriate brokers blanket bond insurance policies covering any and all acts of
your employees, agents and partners adequate to fully protect and indemnify Bear
Stearns Securities and the Indemnified Parties against any loss, liability,
damage, claim, cost or expense (including but not limited to fees and expenses
of legal counsel) which Bear Stearns Securities and the Indemnified Parties may
suffer or incur, directly or indirectly, as a result of any act of your
employees, agents or partners. This policy shall be obtained by an insurance
broker of Bear Stearns Securities' choosing. Coverage shall be in an amount
agreed by the parties, but in no event shall it be less than $1,000,000 per
occurrence. Further this insurance shall remain in effect while Bear Stearns
Securities acts as your clearance agent and will include coverage for any claims
discovered or made within 90 days following the termination of any such clearing
relationship. You further agree that if such a 90 day discovery feature is
exercisable at your option you hereby agree, in advance, to exercise such
option.
12. Bear Stearns Securities, in the performance of its role as creditor
pursuant to paragraph 14 of this Agreement, has the right, exercisable in its
sole discretion, to restrict trading in the Accounts or in your proprietary or
market making accounts to liquidating orders only or cash transactions only, or
to prohibit certain trading strategies or trading of certain types of
securities.
13. Bear Stearns Securities, unless otherwise agreed, will supply you
on each business day with copies of customer confirmations, margin status
reports, money line and a daily commission detail report. Unless you notify Bear
Stearns Securities within a reasonable time of all mistakes or discrepancies in
the above described reports and information, Bear Stearns Securities shall be
entitled to consider all the information supplied to you as correct.
14. Bear Stearns Securities agrees to:
(a) monitor and require your Customers to (i) make prompt payment
for purchases of securities, interest and other charges, (ii) deliver securities
sold and loaned, (iii) maintain money and securities in each Account as required
by the Applicable Rules, and to comply with any additional requirements as Bear
Stearns Securities as clearing broker, in its sole discretion, may require, upon
reasonable notice to you and your Customers;
(b) advise you of the necessity for buying in or selling out
positions in Accounts for failure to comply with payment or delivery
requirements and Bear Stearns Securities shall have the right in its discretion
to execute buy-ins or sell-outs if you decline or fall to act;
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<PAGE> 5
(c) arrange the extension of credit for margin purchases in
Accounts in accordance with the Applicable Rules, and with Bear Stearns
Securities' own additional requirements;
(d) transfer securities to and from accounts;
(e) provide custody, safekeeping and segregation of money and
securities of Customers carried by Bear Stearns Securities;
(f) arrange for the receipt and delivery of securities in exchange
and tender offers, rights and warrants offerings, redemptions and other similar
type transactions;
(g) maintain all books and records as are required by the
Applicable Rules governing brokers having custody of money and securities in the
Accounts; and
(h) notify you promptly in writing of complaints concerning you,
your employees or your agents.
15. Errors, misunderstandings or controversies, except those
specifically otherwise covered in this Agreement, between the Accounts and you
or any of your employees which shall arise out of your acts or omissions
(including, without limiting the foregoing, your failure to deliver promptly to
Bear Stearns Securities any instructions received by you from an Account with
respect to the voting, tender or exchange of shares held in such Account) shall
be your sole and exclusive responsibility. In the event that, by reason of such
error, misunderstanding or controversy, you in your discretion deem it advisable
to commence an action or proceeding against an Account, you shall indemnify and
hold Bear Stearns Securities and the Indemnified Parties harmless from any loss,
liability, damage, claim, cost or expense (including but not limited to fees and
expenses of legal counsel) which Bear Stearns Securities or the Indemnified
Parties may incur or sustain directly or indirectly in connection therewith or
under any settlement thereof. If such error, misunderstanding or controversy
shall result in the bringing of any action or proceeding against Bear Stearns
Securities or the Indemnified Parties, you shall indemnify and hold Bear Stearns
Securities and the Indemnified Parties harmless from any loss, liability,
damage, claim, cost or expense (including but not limited to fees and expenses
of legal counsel) which Bear Stearns Securities or the Indemnified Parties may
incur or sustain directly or indirectly in connection therewith or under any
settlement thereof.
16. Bear Stearns Securities agrees to indemnify and hold you harmless
and you agree to indemnify Bear Stearns Securities and the Indemnified Parties
and hold them harmless from and against any loss, liability, damage, claim, cost
or expense (including but not limited to fees and expenses of legal counsel)
arising out of or resulting from any failure by the indemnifying party or any of
its employees to carry out fully the duties and responsibilities assigned to
such herein or any breach of any representation, warranty or covenant herein by
such party under this Agreement. You hereby agree to indemnify and hold Bear
Stearns Securities and the Indemnified Parties harmless from and against any
loss, liability, damage, claim, cost or expense (including but not limited to
fees and expenses of legal counsel) sustained or incurred in connection herewith
in the event any Account fails to meet any initial margin call or maintenance
call.
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<PAGE> 6
17. You represent, warrant and covenant to Bear Stearns Securities as
follows:
(i) You will maintain at all times while this agreement is in full
force and effect net capital equal to the greater of the amount required by the
SEC net capital rules applicable to a correspondent introducing broker or
$150,000 unless Bear Stearns Securities has otherwise agreed in writing. You
will immediately notify Bear Stearns Securities when (1) your Aggregate
Indebtedness Ratio reaches or exceeds 10 to 1 or (2) if you have elected to
operate under paragraph (a)(1)(ii) of Rule 15c3-1 of the Securities Exchange Act
of 1934, as amended, when your net capital is less than the greater of $150,000
or 5% of aggregate debit items computed in accordance with Rule 15c3-3.
(ii) You are a member in good standing of the National Association
of Securities Dealers, Inc., or if you have applied for membership of the
National Association of Securities Dealers, Inc. you agree to furnish Bear
Stearns Securities upon your receipt thereof, with the National Association of
Securities Dealers, Inc.'s notification to you concerning the result of your
membership application and if your membership application is refused for any
reason whatsoever, Bear Stearns Securities has the right to forthwith terminate
this agreement. You are a member in good standing of every national securities
exchange or other securities association of which you are a member and you agree
to promptly notify Bear Stearns Securities of any additional exchange
memberships or affiliations. You shall also comply with whatever non-member
access rules have been promulgated by any national securities exchange or any
other securities exchange of which you are not a member.
(iii) You are and during the term of this Agreement will remain
duly registered or licensed and in good standing as a broker/dealer under the
Applicable Rules.
(iv) You have all the requisite authority in conformity with all
Applicable Rules to enter into this Agreement and to retain the services of Bear
Stearns Securities in accordance with the terms hereof and you have taken all
necessary action to authorize the execution of this Agreement and the
performance of the obligations hereunder.
(v) You are in compliance, and during the term of this Agreement
will remain in compliance with (1) the capital and financial reporting
requirements of every national securities exchange or other securities exchange
and/or securities association of which you are a member, (2) the capital
requirements of the Securities and Exchange Commission, and (3) the capital
requirements of every state in which you are licensed as a broker/dealer.
(vi) Unless otherwise agreed to in writing by Bear Stearns
Securities, you shall not generate any statements, billings or confirmations
representing any Account.
(vii) You shall keep confidential any information you may acquire
as a result of this Agreement regarding the business and affairs of Bear Stearns
Securities, which requirements shall survive the term of this Agreement.
18. Bear Stearns Securities represents, warrants and covenants to you
as follows:
(i) Bear Stearns Securities is a member in good standing of the
National Association of Securities Dealers, Inc., and principal exchanges.
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<PAGE> 7
(ii) Bear Stearns Securities is and during the term of this
Agreement will remain duly licensed and in good standing as a broker/dealer
under the Applicable Rules.
(iii) Bear Stearns Securities has all the requisite authority, in
conformity with all Applicable Rules to enter into and perform this Agreement
and has taken all necessary action to authorize the execution of this Agreement
and the performance of the obligations hereunder.
(iv) Bear Stearns Securities is in compliance, and during the term
of this Agreement will remain in compliance with (1) the capital and financial
reporting requirements of every national securities exchange and/or other
securities exchange or association of which it is a member, (2) the capital
requirements of the Securities and Exchange Commission, and (3) the capital
requirements of every state in which it is licensed as a broker/dealer.
(v) Bear Stearns Securities represents and warrants that the names
and addresses of your customers which have or which may come to its attention in
connection with the clearing and related functions it has assumed under this
Agreement are confidential and shall not be utilized by Bear Stearns Securities
except in connection with the functions performed by Bear Stearns Securities
pursuant to this Agreement. Notwithstanding the foregoing, should an Account
request, on an unsolicited basis, that Bear Stearns Securities become its
broker, acceptance of such Account by Bear Stearns Securities shall in no way
violate this representation and warranty, nor result in a breach of this
Agreement.
(vi) Bear Stearns Securities shall keep confidential any
information it may acquire as a result of this Agreement regarding your business
and affairs, which requirement shall survive the life of this Agreement.
19. Notwithstanding any provision in this Agreement, the following
events or occurrences shall constitute an Event of Default under this Agreement:
(i) either party hereto shall fail to perform or observe any term,
covenant or condition to be performed hereunder and such failure shall continue
to be unremedied for a period of 30 days after written notice from the
non-defaulting party to the defaulting party specifying the failure and
demanding that the same be remedied; or
(ii) any representation or warranty made by either party shall
prove to be incorrect at any time in any material respect; or
(iii) a receiver, liquidator or trustee of either party hereto or
of any property held by either party, is appointed by court order and such order
remains in effect for more than 30 days; or either party is adjudicated bankrupt
or Insolvent; or any property of either party is sequestered by court order and
such order remains in effect for more than 30 days; or a petition is filed
against either party under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect, and is not dismissed within 30
days after such filing; or
(iv) either party hereto files a petition in voluntary bankruptcy
or seeks relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of
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<PAGE> 8
debt, dissolution or liquidation law of any Jurisdiction, whether now or
hereafter in effect, or consents to the filing of any petition against it under
any such law; or
(v) either party hereto makes an assignment for the benefit of its
creditors, or admits in writing its inability to pay its debts generally as they
become due, or consents to the appointment of a receiver, trustee or liquidator
of either party, or of any property held by either party.
Upon the occurrence of any such Event of Default, the nondefaulting
party may, at its option, by notice to the defaulting party declare that this
Agreement shall be thereby terminated and such termination shall be effective as
of the date such notice has been communicated to the defaulting party. Upon the
occurrence by you of an Event of Default pursuant to paragraphs (iii), (iv), or
(v) above, Bear Stearns Securities shall be entitled to, upon the consent of the
Customer, to accept instructions directly from the Customer and to transfer the
Account directly to Bear Stearns Securities.
20. (a) In the event you execute your own orders and give Bear Stearns
Securities' name to the other broker for clearance and settlement, you agree
that you will only execute bona fide orders or request free delivery of cash or
securities where you have reasonable grounds to believe that the account and the
other broker have the financial capability to complete the transaction. Bear
Stearns Securities reserves the right at any time to place a limit (of either
dollars or number of securities) on the size of transactions that Bear Stearns
Securities in these circumstances will accept for clearance. If after you have
received notice of such limitation you execute an order in excess of the limit
established by Bear Stearns Securities, Bear Stearns Securities shall have the
right to notify the other party and other broker that it will not accept the
transaction for clearance and settlement. In the event any claim is asserted
against Bear Stearns Securities or the Indemnified Parties by the other broker
because of such action by Bear Stearns Securities, you agree to indemnify and
hold Bear Stearns Securities and the Indemnified Parties harmless from any loss,
liability, damage, cost or expense (including but not limited to fees and
expenses of legal counsel) arising directly or indirectly therefrom.
(b) in the event you execute orders away from Bear Stearns
Securities, Bear Stearns Securities will on a best efforts basis attempt to
clear the transaction within a reasonable period and utilize the same procedures
it utilizes when clearing transactions on behalf of other firms clearing through
Bear Stearns Securities. If either you or the other broker for any reason
whatsoever fall to settle the transaction, you will be solely liable to Bear
Stearns Securities for any and all loss, including expenses, caused thereby and
Bear Stearns Securities shall have no liability to you whatsoever in any such
circumstance. You further agree to take all appropriate capital charges on your
books arising out of or incurred in connection with your executing orders away
from Bear Stearns Securities.
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21. In the event you request that Bear Stearns Securities provide prime
brokerage services to your Customers when you act as the executing broker, as
such term is defined in a certain no-action letter issued by the Securities and
Exchange Commission on January 25, 1994 regarding prime brokerage (the
"No-Action Letter"), Bear Stearns Securities acts as your clearing agent, and
the prime broker settles such transactions and carries the positions for the
Customer:
(a) You hereby agree as follows:
(i) You will notify Bear Stearns Securities with respect to
each Customer Account for which you intend to act as an executing broker in a
prime brokerage arrangement.
(ii) You will be solely responsible for the conduct of the
Customer's Account, including but not limited to the responsibilities to know
your Customer, determine the suitability of all transactions, obtain all proper
documentation (including all new account documents), and conduct your own credit
review of the Customer.
(iii) Prior to effecting a short sale, you shall be responsible
for verifying with Bear Stearns Securities to ensure that all orders effected by
you will comply with all applicable short sale provisions in the Applicable
Rules, including but not limited to SEC Rule 10a-1 and NYSE Rule 440A, and you
will be responsible for verifying that securities can be borrowed in order to
effect a timely delivery against each short sale.
(iv) In the event of any execution error or trade discrepancy
between a trade as executed and a trade as recorded in the Customer's Account
with the prime broker, you shall be responsible for correcting such error or
resolving such discrepancy with Bear Stearns Securities or your customer by such
time as Bear Stearns Securities deems appropriate on the next business day after
trade date. You shall be liable to Bear Stearns Securities for any and all
losses, including expenses caused thereby, and Bear Stearns Securities shall
have no liability to you whatsoever in any circumstance. You agree to indemnify
and hold Bear Stearns Securities harmless from and against and pay promptly on
demand any loss, liability, damage, claim, cost or expense (including reasonable
fees and expenses of counsel) arising out of or incurred in connection with
such discrepancy or error.
(v) You shall retain in your possession copies of all
agreements that are necessary to enable you to execute prime brokerage trades
and, except to the extent undertaken by Bear Stearns Securities in this
Agreement, you shall preserve all records relating to such trades, as required
of an executing broker by the Applicable Rules and any SEC No-Action Letters
pertaining to prime brokerage arrangements (collectively, "No-Action Letters").
(b) Bear Stearns Securities hereby agrees as follows:
(i) Bear Stearns Securities will, on your behalf and pursuant
to your instructions, inform the prime broker of all trade data, including but
not limited to the contract amount, security involved, number of shares or
number of units, and whether the transaction was a long or short sale or a
purchase, by the morning of the next business day after trade date.
(ii) Bear Stearns Securities will treat the Customer as its own
customer and record the transactions in a cash or margin account at Bear Stearns
Securities. Bear Stearns Securities shall treat all disaffirmed and DK'd trades
as normal customer transactions. If the disaffirmed or DK'd trade is a short
sale, we shall treat the transaction as if it had been executed in a customer
margin account.
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<PAGE> 10
(iii) Bear Stearns Securities shall be responsible for issuing
confirmations directly to the Customer for each trade executed by you at Bear
Stearns Securities unless Bear Stearns receives written instructions from the
Customer explicitly requesting that the confirmations be sent to the Customer in
care of its prime broker, in which case Bear Stearns Securities will send the
confirmations to such Customer in care of the prime broker. In the event a trade
is disaffirmed or DK'd, Bear Stearns Securities will promptly send a
confirmation of the transaction to the customer in the manner described above.
(iv) If a Customer Account introduced by you to Bear Stearns
Securities is managed by an investment advisor, each confirmation may cover a
single bulk trade representing transactions that have been combined with those
of other accounts of such investment advisor.
(c) You hereby represent and covenant that you have entered into
all agreements concerning the prime broker arrangement that are required by the
Applicable Rules and No-Action Letters to enable you to execute prime brokerage
trades.
(d) Bear Stearns Securities hereby represents and covenants that
Bear Stearns Securities has and at all times during the term of this Addendum
shall maintain the minimum net capital required by the Applicable Rules and
No-Action Letters.
(e) In the event of a conflict between this paragraph 21 and any
other provision of this Agreement, this paragraph shall supercede the
conflicting provision only in respect of the provision of prime brokerage
services and only to the extent of the conflict.
22. (a) Bear Stearns Securities shall limit its services pursuant to
the terms of this Agreement to that of clearing functions and the related
services expressly set forth herein. Neither this Agreement nor any operation
hereunder shall create a general or limited partnership, association or joint
venture or agency relationship between you and Bear Stearns Securities.
(b) You shall not, without the prior written approval of Bear
Stearns Securities, place any advertisement in any newspaper, publication,
periodical or any other media if such advertisement in any manner makes
reference to Bear Stearns Securities or to the clearing arrangements and the
services embodied in this Agreement.
(c) Should you in any way hold yourself out as, advertise or
represent that you are the agent of Bear Stearns Securities, Bear Stearns
Securities shall have the power, at its option, to terminate this Agreement and
you shall be liable for any loss, liability, damage, claim, cost or expense
(including but not limited to fees and expenses of legal counsel) sustained or
incurred by Bear Stearns Securities as a result of such a representation of
agency or apparent authority to act as an agent of Bear Stearns Securities or
agency by estoppel. Notwithstanding the provisions of paragraph 27 below that
any dispute or controversy between the parties relating to or arising out of
this Agreement shall be referred to and settled by arbitration, in connection
with any breach by you of this paragraph 22, Bear Stearns Securities may, at any
time prior to the initial arbitration hearing pertaining to such dispute or
controversy, seek by application to the United States District Court for the
Southern District of New York or the Supreme Court of the State of New York for
the County of New York any such temporary or provisional relief or
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<PAGE> 11
remedy ("provisional remedy") provided for by the laws of the United States of
America or the laws of the State of New York as would be available in an action
based upon such dispute or controversy in the absence of an agreement to
arbitrate. The parties acknowledge and agree that it is their intention to have
any such application for a provisional remedy decided by the Court to which it
is made and that such application shall not be referred to or settled by
arbitration. No such application to either said Court for a provisional remedy,
nor any act or conduct by either party in furtherance of or in opposition to
such application, shall constitute a relinquishment or waiver of any right to
have the underlying dispute or controversy with respect to which such
application is made settled by arbitration in accordance with paragraph 27
below.
23. You agree that Bear Stearns Securities shall have a lien upon and
security interest in all your property, including but not limited to securities,
commodity futures, contracts, commercial paper, monies and any after acquired
property held by it in your trading or commission accounts as security for the
repayment of your obligations and liabilities to Bear Stearns Securities. You
further agree that Bear Stearns Securities may debit any cash balance in your
account or accounts and/or liquidate any securities or commodities held in your
account and credit the proceeds to its account in an amount necessary to satisfy
such obligations. This provision shall survive the termination of this
Agreement, thereby extending the right to any lien and security interest for the
duration of any account conversion period and until such time as, in the sole
discretion of Bear Stearns Securities, security for the repayment of your
obligations is no longer required.
24. The enumeration herein of specific remedies shall not be exclusive
of any other remedies. Any delay or failure by any party to this Agreement to
exercise any right herein contained, now or hereafter existing under the
Applicable Rules shall not be construed to be a waiver of such right, or to
limit the exercise of such right. No single, partial or other exercise of any
such right shall preclude the further exercise thereof or the exercise of any
other right.
25. This Agreement shall be submitted to and approved by the New York
Stock Exchange, Inc., or other regulatory and self-regulatory bodies vested with
the authority to review and approve this Agreement or any amendment or
modifications hereto. In the event of disapproval, the parties hereto agree to
bargain in good faith to achieve the requisite approval.
amended except by a writing signed by both parties hereto and may be terminated
upon thirty (30) days written notice to the other party. Bear Stearns Securities
agrees that it will send to you copies of all written notices sent to customers.
Notices to you shall be sent to:
Notices to Bear Stearns Securities shall be sent to the President of Bear,
Stearns Securities Corp., 245 Park Avenue, New York, N.Y. 10167, with a copy
to the Chief Legal Officer of Bear Stearns Securities. Termination shall not
affect any of the rights and liabilities of the parties hereto incurred before
the date of receipt of such notice of termination.
(b) This Agreement shall be binding upon and inure to the benefit
of the respective successors of the parties. Neither party may assign any of its
rights or obligations hereunder without the prior written consent of the other
party.
26. (a) This Agreement supersedes all
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<PAGE> 12
other agreements between the parties with respect to the transactions
contemplated herein. This Agreement may not be
27. (a) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
(b) All disputes and controversies relating to or in any way
arising out of this Agreement shall be settled by arbitration before and under
the rules and auspices of the New York Stock Exchange, Inc., unless the
transaction which gives rise to such dispute or controversy is effected in
another United States market which provides arbitration facilities, in which
case it shall be settled by arbitration under such facilities.
28. Bear Stearns Securities shall not be liable for losses caused
directly or indirectly by government restrictions, exchange or market rulings,
suspension of trading, war, strikes or any equipment or systems failure or other
conditions or occurrences beyond its control.
Please evidence your agreement to the foregoing by executing and
delivering to Bear Stearns Securities the enclosed copy hereof, whereupon you
and Bear Stearns Securities shall have entered into this Agreement.
Very truly yours,
BEAR, STEARNS SECURITIES CORP.
By:
-----------------------------------
President
ACCEPTED AND AGREED TO:
- -----------------------------------
Online Trading Inc.
By:
--------------------------------
Farshid Tafazzoli/Chairman
Title:
-----------------------------
Date:
------------------------------
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EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of onlinetradinginc.com
corp. on Form SB-2 of our Independent Auditors Report dated March 2, 1999 (March
25, 1999 as to Note 9) appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
AHEARN, JASCO + COMPANY, P.A.
Certified Public Accountants
Pompano Beach, Florida
March 26, 1999
