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EXHIBIT 1.1
5,000,000 SHARES
ARTISTDIRECT, INC.
COMMON STOCK $.01 PAR VALUE PER SHARE
UNDERWRITING AGREEMENT
__________, 1999
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_____________, 2000
Xxxxxx Xxxxxxx & Co. Incorporated
Bear, Xxxxxxx & Co. Inc.
Deutsche Bank Securities Inc.
c/o Morgan Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs and Mesdames:
ARTISTdirect, Inc., a Delaware corporation (the "COMPANY"), proposes to
issue and sell to the several Underwriters named in Schedule I hereto (the
"UNDERWRITERS") 5,000,000 shares of its common stock, $.01 par value per share
(the "FIRM SHARES"). The Company also proposes to issue and sell to the several
Underwriters not more than an additional 750,000 shares of its common stock,
$.01 per value per share (the "ADDITIONAL SHARES") if and to the extent that
you, as Managers of the offering, shall have determined to exercise, on behalf
of the Underwriters, the right to purchase such shares of common stock granted
to the Underwriters in Section 2 hereof. The Firm Shares and the Additional
Shares are hereinafter collectively referred to as the "SHARES". The shares of
Common Stock, $.01 par value per share of the Company to be outstanding after
giving effect to the sales contemplated hereby are hereinafter referred to as
the "COMMON STOCK."
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement, including a prospectus, relating to the
Shares. The registration statement as amended at the time it becomes effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT"; the prospectus in the form first
used to confirm sales of Shares is hereinafter collectively referred to as the
"PROSPECTUS". If the Company has filed an abbreviated registration statement to
register additional shares of Common Stock pursuant to Rule 462(b) under the
Securities Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference
herein to the term "REGISTRATION STATEMENT" shall be deemed to include such Rule
462 Registration Statement.
Xxxxxx Xxxxxxx & Co. Incorporated ("XXXXXX XXXXXXX") has agreed to
reserve up to 575,000 of the Shares to be purchased by it under this Agreement
for sale to the Company's directors, officers, employees and business associates
and other parties related to the Company (collectively, "PARTICIPANTS"), as set
forth in the Prospectus under the heading "Underwriters" (the "DIRECTED SHARE
PROGRAM"). The Shares to be sold by Xxxxxx Xxxxxxx and its affiliates pursuant
to the Directed Share Program are referred to hereinafter as the "DIRECTED
SHARES." Any Directed Shares not orally confirmed for purchase by any
Participants by the end of the business day on which this Agreement is executed
will be offered to the public by the Underwriters as set forth in the
Prospectus.
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1. Representations and Warranties of the Company. The Company represents
and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or, to
the Company's knowledge, threatened by the Commission.
(b) (i) The Registration Statement, when it became effective,
did not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the Registration Statement and
the Prospectus comply and, as amended or supplemented, if applicable,
will comply in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder and (iii)
the Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in
this paragraph do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating
to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus and
is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(d) Each subsidiary of the Company that is a corporation has
been duly incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation and has
the corporate power and authority to own its property and to conduct its
business as described in the Prospectus. Each subsidiary of the Company
that is a limited liability company has been duly formed, is validly
existing as a limited liability company under the laws of the
jurisdiction of its formation and has the power and authority to own its
property and to conduct its business as described in the Prospectus.
Each subsidiary of the Company is duly qualified to transact business
and is in good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified
or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole; all of the issued shares
of capital stock or membership interests, as the case may be, of each
subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and are owned
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directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims.
(e) This Agreement has been duly authorized, executed and
delivered by the Company, and the Company has all requisite corporate
power and authority to (i) execute, deliver and perform its obligations
under this Agreement, (ii) execute, deliver and perform its obligations
under all other agreements and instruments executed and delivered by the
Company pursuant to or in connection with this Agreement, and (iii)
issue the Shares, in the manner and for the purpose contemplated by this
Agreement.
(f) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the issuance
of the Shares have been duly authorized and are validly issued, fully
paid and non-assessable.
(h) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of such
Shares will not be subject to any preemptive or similar rights.
(i) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will
not contravene any provision of applicable law or the certificate of
incorporation or by-laws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, except such as may be
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(k) There are no legal or governmental proceedings pending or,
to the Company's knowledge, threatened to which the Company or any of
its subsidiaries is a party or to which any of the properties of the
Company or any of its subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and are not so
described or any statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that
are not described or filed as required.
(l) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under
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the Securities Act, complied when so filed in all material respects with
the Securities Act and the applicable rules and regulations of the
Commission thereunder.
(m) The Company is not and, after giving effect to the offering
and sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be required to register as an
"investment company" as such term is defined in the Investment Company
Act of 1940, as amended.
(n) The Company and its subsidiaries have no actual knowledge
that they are not in compliance with all federal, state, local and
foreign statutes, executive orders, proclamations, regulations, rules,
directives, decrees, ordinances and similar provisions having the force
or effect of law and all judicial and administrative orders, rulings,
determinations and common law concerning the importation of merchandise,
the export or reexport of products, services and technology, and the
terms and conduct of international transactions applicable to the
Company and its subsidiaries in connection with the conduct of the
Company's or any subsidiary's business (including as the same relates to
record keeping requirements) ("INTERNATIONAL TRADE LAWS AND
REGULATIONS"); neither the Company nor any of its subsidiaries has
knowingly made or provided any false statement or omission to any agency
of any federal, state or local government, purchasers of products, or
foreign government or foreign agency, in connection with the exportation
of merchandise (including with respect to export licenses, exceptions
and other export authorizations and any filings required for or related
to exportation of any item), the importation of merchandise or other
approvals required by a foreign government or agency or any other
requirement relating to any International Trade Laws and Regulations,
except to the extent that any such false statement or omission would not
have a material adverse effect on the Company and its subsidiaries,
taken as a whole; neither the Company nor any of its subsidiaries has
made any payment, offer, gift, promise to give, or authorized or
otherwise participated in, assisted or facilitated any payment or gift
related to the Company's or any subsidiary's business that is prohibited
by the United States Foreign Corrupt Practices Act.
(o) The Company and its subsidiaries (i) are in compliance with
any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken as a
whole.
(p) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to
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third parties) which would, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(q) There are no contracts, agreements or understandings between
the Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with
respect to any securities of the Company or to require the Company to
include such securities with the Shares registered pursuant to the
Registration Statement, except with respect to the Third Amended and
Restated Registration Rights Agreement, dated as of November 12, 1999
(the "REGISTRATION RIGHTS AGREEMENT"), which rights to piggyback
registration under Section 4 of the Registration Rights Agreement have
been waived.
(r) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, (1) the
Company and its subsidiaries have not incurred any material liability or
obligation, direct or contingent, nor entered into any material
transaction not in the ordinary course of business; (2) neither the
Company nor any of its subsidiaries has purchased any of its outstanding
capital stock or membership interests, as the case may be, nor declared,
paid or otherwise made any dividend or distribution of any kind on its
capital stock or membership interests, as the case may be, other than
repurchases of shares from employees, artists and others described in
the Prospectus and ordinary and customary dividends; and (3) there has
not been any material change in the capital stock or membership
interests, as the case may be, short-term debt or long-term debt of the
Company and its subsidiaries, except in each case as described in the
Prospectus.
(s) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title
to all personal property owned by them which is material to the business
of the Company and its subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made
of such property by the Company and its subsidiaries; and any real
property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings
by the Company and its subsidiaries, in each case except as described in
the Prospectus.
(t) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all material patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and trade
names currently employed by them in connection with the business now
operated by them, and neither the Company nor any of its subsidiaries,
nor to their actual knowledge, any recording artist or other person or
entity that provides content for the Company's Web sites,
xxx.xxxxxxxxxxxx.xxx, xxx.xxxxxx.xxx, xxx.xxx.xxx,
xxx.xxxxxxxxxxxxxxx.xxx, or the ARTIST channels has received any notice
of infringement of or conflict with asserted rights of others with
respect to any of the
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foregoing which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse
affect on the Company and its subsidiaries, taken as a whole.
(u) No material labor dispute with the employees of the Company
or any of its subsidiaries exists, except as described in the
Prospectus, or, to the knowledge of the Company, is imminent; and the
Company is not aware of any existing, threatened or imminent labor
disturbance by the employees of any of its principal suppliers,
manufacturers or contractors that could have a material adverse effect
on the Company and its subsidiaries, taken as a whole.
(v) The Company and its subsidiaries are insured by the insurers
of recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses in which
they are engaged; neither the Company nor any of its subsidiaries has
been refused any insurance coverage sought or applied for; and neither
the Company nor any of its subsidiaries has any reason to believe that
it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that
would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole, except as described in the Prospectus.
(w) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such certificates,
authorizations and permits would not have a material adverse effect on
the Company and its subsidiaries taken as a whole, and neither the
Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
certificate, authorization or permit which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would have
a material adverse effect on the Company and its subsidiaries, taken as
a whole, except as described the Prospectus.
(x) The Company and each of its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable
assurance that (1) transactions are executed in accordance with
management's general or specific authorizations; (2) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability; (3) access to assets is permitted only in
accordance with management's general or specific authorization; and (4)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(y) As of the date hereof, except as set forth in the
Prospectus, (i) there are no outstanding subscriptions, options,
warrants, rights, convertible securities or other binding agreements or
commitments of any character obligating the Company or its subsidiaries
to issue any securities and (ii) there is no agreement, understanding or
arrangement among the Company or its subsidiaries and their respective
securityholders
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or any other Person relating to the ownership or disposition of any
capital stock in the Company or its subsidiaries or the governance of
the Company's or its subsidiaries' affairs, and such agreements,
arrangements or understandings will not be breached or violated as a
result of the execution and delivery of, or the consummation of the
transactions contemplated by, this Agreement.
(z) The consolidated financial statements of the Company
together with related notes set forth in the Prospectus fairly present
the financial condition of the Company and its subsidiaries, as of the
dates indicated, and the results of operations and changes in financial
position for the periods therein specified in conformity with generally
accepted accounting principles consistently applied throughout the
periods involved (except as otherwise stated therein); the summary and
selected financial data in the Prospectus present fairly the financial
information shown therein and have been prepared and compiled on a basis
consistent with audited financial statements included therein, except as
otherwise stated therein; and the pro forma financial information and
the related notes thereto included in the Prospectus have been prepared
using reasonable assumptions and have been prepared in accordance with
the applicable requirements of the Securities Act and include all
adjustments necessary to present fairly the pro forma financial
information included in the Prospectus at the respective dates and for
the respective periods indicated. KPMG LLP, which has reported upon the
audited financial statements included in the Prospectus, is an
independent public accounting firm as required by the Securities Act and
the rules and regulations thereunder.
(bb) The Company has reviewed its operations and that of its
subsidiaries to evaluate the extent to which the business or operations
of the Company or any of its subsidiaries will be affected by the Year
2000 Problem (that is, any significant risk that computer hardware or
software applications used by the Company and its subsidiaries will not,
in the case of dates or time periods occurring after December 31, 1999,
function at least as effectively as in the case of dates or time periods
occurring prior to January 1, 2000); as a result of such review, the
Company has no reason to believe, and does not believe, that (A) there
are any issues related to the Company's preparedness to address the Year
2000 Problem that are of a character required to be described or
referred to in the Registration Statement or Prospectus which have not
been accurately described in the Registration Statement or Prospectus
and (B) the Year 2000 Problem will have a material adverse effect on the
condition, financial or otherwise, or on the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, or
result in any material loss or interference with the business or
operations of the Company and its subsidiaries, taken as a whole.
(cc) The Nasdaq Stock Market, Inc. has approved the Shares for
quotation on the Nasdaq National Market, subject only to official notice
of issuance.
(dd) Except for the Shares, all outstanding shares of Common
Stock, and all securities convertible into or exercisable or
exchangeable for Common Stock, are subject to valid and binding
agreements (collectively, the "LOCK-UP AGREEMENTS") that restrict the
holders thereof from selling, making any short sale of, granting any
option for the purchase of, or otherwise transferring or disposing of,
any of such shares of Common
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Stock, or any such securities convertible into or exercisable or
exchangeable for Common Stock, for a period of 180 days after the date
of the Prospectus without the prior written consent of Xxxxxx Xxxxxxx &
Co. Incorporated.
(ee) The Company has imposed a stop-transfer instruction with
the Company's transfer agent in order to enforce the foregoing lock-up
provision imposed pursuant to the Registration Rights Agreement.
(ff) The merger of ARTISTdirect, LLC with and into the Company
pursuant to the Agreement and Plan of Merger, dated as of October 6,
1999 (the "MERGER AGREEMENT"), by and between ARTISTdirect, LLC and the
Company was duly and validly authorized by all necessary corporate
action on the part of both such entities, and the transactions
contemplated by the Merger Agreement have been consummated in accordance
with its terms.
(gg) The Registration Statement, the Prospectus and any
preliminary prospectus comply, and any amendments or supplements thereto
will comply, with any applicable laws or regulations of foreign
jurisdictions in which the Prospectus or any preliminary prospectus, as
amended or supplemented, if applicable, are distributed in connection
with the Directed Share Program.
(jj) No consent, approval, authorization or order of, or
qualification with, any governmental body or agency, other than those
obtained, is required in connection with the offering of the Directed
Shares in any jurisdiction where the Directed Shares are being offered,
except such as may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the Directed
Shares.
(jj) The Company has not offered, or caused Xxxxxx Xxxxxxx or
its affiliates to offer, Shares to any person pursuant to the Directed
Share Program with the specific intent to unlawfully influence (i) a
customer or supplier of the Company to alter the customer's or
supplier's level or type of business with the Company, or (ii) a trade
journalist or publication to write or publish favorable information
about the Company or its products.
2. Agreements to Sell and Purchase. The Company hereby agrees to
sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedule I hereto
opposite its name at $______ a share (the "PURCHASE PRICE").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to 750,000 Additional
Shares at the Purchase Price. If you, on behalf of the Underwriters, elect to
exercise such option, you shall so notify the Company in writing not later than
30 days after the date of this Agreement, which notice shall specify the number
of Additional Shares to be purchased by the Underwriters and the date on which
such shares are to
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be purchased. Such date may be the same as the Closing Date (as defined below)
but not earlier than the Closing Date nor later than ten business days after the
date of such notice. Additional Shares may be purchased as provided in Section 4
hereof solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. If any Additional Shares are to be
purchased, each Underwriter agrees, severally and not jointly, to purchase the
number of Additional Shares (subject to such adjustments to eliminate fractional
shares as you may determine) that bears the same proportion to the total number
of Additional Shares to be purchased as the number of Firm Shares set forth in
Schedule I hereto opposite the name of such Underwriter bears to the total
number of Firm Shares.
The Company hereby agrees that, without the prior written consent of
Xxxxxx Xxxxxxx & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 180 days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Shares to be sold hereunder, (B) the issuance by the Company of
shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof of which the
Underwriters have been advised in writing (C) transactions by any person other
than the Company relating to shares of Common Stock or other securities acquired
in open market transactions after the completion of the offering of the Shares,
(D) the grant of options, or the issuance of shares of Common Stock pursuant to
the exercise of options outstanding, under the Company's 1999 Employee Stock
Option Plan, 1999 Artist Stock Option Plan and/or 1999 Artist and Advisor Stock
Option Plan or (E) transactions related to the recission offer described in the
Registration Statement and/or Prospectus on the terms and conditions described
therein.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose to make a public offering of the Shares as soon after the
Registration Statement and this Agreement have become effective as in your
judgment is advisable. The Company is further advised by you that the Shares are
to be offered to the public initially at $_____________ a share (the "PUBLIC
OFFERING PRICE") and to certain dealers selected by you at a price that
represents a concession not in excess of $______ a share under the Public
Offering Price, and that any Underwriter may allow, and such dealers may
reallow, a concession, not in excess of $_____ a share, to any Underwriter or to
certain other dealers.
4. Payment and Delivery. Payment for the Firm Shares shall be made to
the Company in Federal or other funds immediately available in New York City
against delivery of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on ____________, 2000, or at
such other time on the same or such other date, not later than _________, 2000,
as shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "CLOSING DATE".
Payment for any Additional Shares shall be made to the Company in
Federal or
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other funds immediately available in New York City against delivery of such
Additional Shares for the respective accounts of the several Underwriters at
10:00 a.m., New York City time, on the date specified in the notice described in
Section 2 or at such other time on the same or on such other date, in any event
not later than ___________, 2000, as shall be designated in writing by you. The
time and date of such payment are hereinafter referred to as the "OPTION CLOSING
DATE".
The Firm Shares and Additional Shares shall be in book-entry form and
registered in such names and in such denominations as you shall request in
writing not later than one full business day prior to the Closing Date or the
Option Closing Date, as the case may be, with any transfer taxes payable in
connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The obligations of the
Company to sell the Shares to the Underwriters and the several obligations of
the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than 5:00 p.m. (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the following
further conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating
accorded any of the Company's securities by any "nationally
recognized statistical rating organization," as such term is
defined for purposes of Rule 436(g)(2) under the Securities Act;
and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a
whole, from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement) that, in your judgment, is material and adverse and
that makes it, in your judgment, impracticable to market the
Shares on the terms and in the manner contemplated in the
Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer
of the Company, to the effect set forth in Section 5(a)(i) above and to
the effect that the representations and warranties of the Company
contained in this Agreement are true and correct as of the Closing Date
and that the Company has complied with all of the agreements and
satisfied all of the
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conditions on its part to be performed or satisfied hereunder on or
before the Closing Date.
The officer signing and delivering such certificate may rely
upon the best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, outside counsel for the
Company, dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that
the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(ii) each subsidiary of the Company that is a
corporation has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction
of its incorporation, has the corporate power and authority to
own its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a
whole;
(iii) each subsidiary of the Company that is a limited
liability company is a duly formed and existing limited
liability company in good standing under the laws of the
jurisdiction of its organization, has the power and authority to
own its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a
whole;
(iv) the authorized capital stock of the Company
conforms as to legal matters to the description thereof
contained in the Prospectus;
(v) the shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly
issued, fully paid and non-assessable;
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(vi) all of the issued shares of capital stock or
membership interests, as the case may be, of each subsidiary of
the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and are owned directly by the
Company, or indirectly through one or more subsidiaries, free
and clear of all liens, encumbrances, equities or claims;
(vii) the Shares have been duly authorized and, when
issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be
subject to any preemptive or similar rights;
(viii) this Agreement has been duly authorized, executed
and delivered by the Company;
(ix) the merger of ARTISTdirect, LLC with and into the
Company pursuant to the Merger Agreement was duly and validly
authorized by all necessary corporate action on the part of both
such entities, and the transactions contemplated by the Merger
Agreement have been consummated in accordance with its terms;
(x) the execution and delivery by the Company of, and
the performance by the Company of its obligations under, this
Agreement will not contravene any existing provision of New
York, California or federal law other than applicable state
securities laws and Blue Sky laws as to which such counsel need
express no opinion, or the certificate of incorporation or
by-laws of the Company or, to the best of such counsel's
knowledge, any agreement or other instrument binding upon the
Company or any of its subsidiaries that is an exhibit to the
Registration Statement, or, to the best of such counsel's
knowledge, any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company or
any subsidiary, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is
required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the
securities or Blue Sky laws of the various states as to which
such counsel need express no opinion in connection with the
offer and sale of the Shares;
(xi) the statements (A) in the Prospectus under the
captions "Risk Factors - We depend upon intellectual property
rights and licensed material," "Risk Factors - Because our users
provide us with private information, we may be subject to
liability if this information were misused," "Risk Factors - We
may need to change the manner in which we conduct our business
if government regulation increases," "Risk Factors - Our
certificate of incorporation and bylaws, Delaware law and other
agreements contain provisions that could discourage a takeover,"
"Business - Government Regulation," "Business Intellectual
Property," "Management - Employment Agreements," "Management
Indemnification of Directors and Executive Officers and
Limitation of Liability," "Principal Stockholders, " "Certain
Transactions," "Description of Capital Stock,"
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and "Shares Eligible for Future Sale" (B) under the caption
"Underwriters" insofar as such statements relate to this
Agreement and (C) in the Registration Statement in Items 14 and
15, in each case insofar as such statements constitute summaries
of the legal matters, documents or proceedings referred to
therein, fairly present the information called for with respect
to such legal matters, documents and proceedings and fairly
summarize the matters referred to therein;
(xii) such counsel does not know of any legal or
governmental proceedings pending or threatened to which the
Company or any of its subsidiaries is a party or to which any of
the properties of the Company or any of its subsidiaries is
subject that are required to be described in the Registration
Statement or the Prospectus and are not so described or of any
statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration
Statement that are not described or filed as required;
(xiii) such counsel (A) is of the opinion that the
Registration Statement and Prospectus (except for financial
statements and schedules and other financial and statistical
data included therein as to which such counsel need not express
any opinion) comply as to form in all material respects with the
Securities Act and the applicable rules and regulations of the
Commission thereunder, (B) has no reason to believe that (except
for financial statements and schedules and other financial and
statistical data as to which such counsel need not express any
belief) the Registration Statement and the Prospectus included
therein at the time the Registration Statement became effective
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
to make the statements therein not misleading and (C) has no
reason to believe that (except for financial statements and
schedules and other financial and statistical data as to which
such counsel need not express any belief) the Prospectus
contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading.
(d) The Underwriters shall have received on the Closing Date an
opinion of O'Melveny & Xxxxx LLP, counsel for the Underwriters, dated
the Closing Date, covering the matters referred to in Sections
5(c)(vii), 5(c)(viii), 5(c)(xi), (but only as to the statements in the
Prospectus under "Description of Capital Stock" and "Underwriters") and
5(c)(xiv) above.
With respect to Section 5(c)(xiv) above, Xxxxxxx, Xxxxxxx &
Xxxxxxxx LLP and O'Melveny & Xxxxx LLP may state that their opinion and
belief are based upon their participation in the preparation of the
Registration Statement and Prospectus and any
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amendments or supplements thereto and review and discussion of the
contents thereof, but are without independent check or verification,
except as specified.
The opinion of Xxxxxxx, Phleger & Xxxxxxxx LLP described in
Section 5(c) above shall be rendered to the Underwriters at the request
of the Company and shall so state therein.
(e) The Underwriters shall have received on the Closing Date an
opinion, dated the closing date, of counsel reasonably acceptable to
the Underwriters to the effect that the Company is not and, after giving
effect to the offering and sale of the Shares and the application of the
proceeds thereof as described in the Prospectus, will not be an
"investment company" as such term is defined in the Investment Company
Act of 1940, as amended.
(f) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Underwriters, from KPMG LLP, independent public accountants,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information (including the
pro forma financial statements) contained in the Registration Statement
and the Prospectus; provided that the letter delivered on the Closing
Date shall use a "cut-off date" not earlier than the date hereof.
(g) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and the stockholders, officers and
directors of the Company relating to sales and certain other
dispositions of shares of Common Stock or certain other securities,
delivered to you on or before the date hereof, shall be in full force
and effect on the Closing Date.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably request with respect to the good
standing of the Company and its subsidiaries, the due authorization and issuance
of the Additional Shares and other matters related to the issuance of the
Additional Shares.
6. Covenants of the Company. In further consideration of the agreements
of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, four signed copies of the
Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and to furnish to you in New York City,
without charge, prior to 10:00 a.m. New York City time on the business
day next succeeding the date of this Agreement and during the period
mentioned in Section 6(c) below, as many copies of the Prospectus and
any supplements and amendments thereto or to the Registration Statement
as you may reasonably request.
(b) Before amending or supplementing the Registration Statement
or the Prospectus, to furnish to you a copy of each such proposed
amendment or supplement and not to file any such proposed amendment or
supplement to which you reasonably object, and to file with the
Commission within the applicable period specified in Rule 424(b) under
the Securities Act any prospectus required to be filed pursuant to such
Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters
the Prospectus is required by law to be delivered in connection with
sales by an Underwriter or dealer, any event shall
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occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein, in
the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Underwriters and to
the dealers (whose names and addresses you will furnish to the Company)
to which Shares may have been sold by you on behalf of the Underwriters
and to any other dealers upon request, either amendments or supplements
to the Prospectus so that the statements in the Prospectus as so amended
or supplemented will not, in the light of the circumstances when the
Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
(e) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement covering
the twelve-month period ending ___________, 2001 that satisfies the
provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder.
(f) To place stop transfer orders on any Directed Shares that
have been sold to Participants subject to the three month restriction on
sale, transfer, assignment, pledge or hypothecation imposed by NASD
Regulation, Inc. under its Interpretative Material 2110-1 on free-riding
and withholding to the extent necessary to ensure compliance with the
three month restrictions. Xxxxxx Xxxxxxx will notify the Company as to
which Participants will need to be so restricted.
(g) To comply with all applicable securities and other
applicable laws, rules and regulations in each jurisdiction in which the
Directed Shares are offered in connection with the Directed Share
Program.
7. Expenses. Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Company agrees to
pay or cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees, disbursements and
expenses of the Company's counsel and the Company's accountants in connection
with the registration and delivery of the Shares under the Securities Act and
all other fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof to the
Underwriters and dealers, in the quantities hereinabove specified, (ii) all
costs and expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii) the
cost of printing or producing any Blue Sky or Legal Investment memorandum in
connection with the offer and sale of the Shares under state securities laws and
all expenses in connection with the qualification of the Shares for offer and
sale under state securities laws as provided in Section 6(d) hereof, including
filing fees and the reasonable fees and disbursements of counsel for the
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Underwriters in connection with such qualification and in connection with the
Blue Sky or Legal Investment memorandum, (iv) all filing fees and the reasonable
fees and disbursements of counsel to the Underwriters incurred in connection
with the review and qualification of the offering of the Shares by the National
Association of Securities Dealers, Inc., including any fees incurred by counsel
on behalf of or disbursements by Xxxxxx Xxxxxxx in its capacity as "qualified
independent underwriter" (v) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8-A relating to the
Common Stock and all costs and expenses incident to quotation of the Shares on
the Nasdaq National Market, (vi) the cost of printing certificates representing
the Shares, (vii) the costs and charges of any transfer agent, registrar or
depositary, (viii) the costs and expenses of the Company relating to investor
presentations on any "road show" undertaken in connection with the marketing of
the offering of the Shares, including, without limitation, expenses associated
with the production of road show slides and graphics, fees and expenses of any
consultants engaged in connection with the road show presentations with the
prior approval of the Company, travel and lodging expenses of the
representatives and officers of the Company and any such consultants, and the
cost of any aircraft chartered in connection with the road show, (ix) all fees
and disbursements of counsel incurred by the Underwriters in connection with the
Directed Share Program and stamp duties, similar taxes or duties or other taxes,
if any, incurred by the Underwriters in connection with the Directed Share
Program and (x) all other costs and expenses incident to the performance of the
obligations of the Company hereunder for which provision is not otherwise made
in this Section. It is understood, however, that except as provided in this
Section, Section 8 entitled "Indemnity and Contribution", and the last paragraph
of Section 11 below, the Underwriters will pay all of their costs and expenses,
including fees and disbursements of their counsel, stock transfer taxes payable
on resale of any of the Shares by them and any advertising expenses connected
with any offers they may make.
8. Indemnity and Contribution.
(a) The Company and each subsidiary of the Company, whether
direct or indirect, jointly and severally, agree to indemnify and hold
harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities
Act or Section 20 of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages
or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein. The Company also agrees to
indemnify and hold harmless Xxxxxx Xxxxxxx and each person, if any, who
controls Xxxxxx Xxxxxxx within the meaning of either Section 15 of the
Act, or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages,
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liabilities and judgments incurred as a result of Xxxxxx Xxxxxxx'x
participation as a "qualified independent underwriter" within the
meaning of Rule 2720 of the National Association of Securities Dealers'
Conduct Rules in connection with the offering of the Shares, except for
any losses, claims, damages, liabilities, and judgments resulting from
Xxxxxx Xxxxxxx'x, or such controlling person's, willful misconduct.
(b) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, the directors of the Company,
the officers of the Company who sign the Registration Statement and each
person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from
and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably
incurred in connection with defending or investigating any such action
or claim) caused by any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only with reference
to information relating to such Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or
any amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of
which indemnity may be sought pursuant to Section 8(a)or 8(b), such
person (the "INDEMNIFIED PARTY") shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in
writing and the indemnifying party, upon request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified
party to represent the indemnified party and any others the indemnifying
party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the indemnifying party and
the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding (including
any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests
between them. It is understood that the indemnifying party shall not, in
respect of the legal expenses of any indemnified party in connection
with any proceeding or related proceedings in the same jurisdiction, be
liable for the fees and expenses of more than one separate firm (in
addition to any local counsel) for all such indemnified parties, and
that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by Xxxxxx Xxxxxxx, in
the case of parties indemnified pursuant to Section 8(a) and by the
Company, in the case of parties indemnified pursuant to Section 8(b).
The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with
such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to
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indemnify the indemnified party from and against any loss or liability
by reason of such settlement or judgment. Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated by the second and third sentences of
this paragraph, the indemnifying party agrees that it shall be liable
for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party
in accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that are
the subject matter of such proceeding. Notwithstanding anything
contained herein to the contrary, if indemnity may be sought pursuant to
Section 8(a) hereof in respect of such action or proceeding, then in
addition to such separate firm for the indemnified parties, the
indemnifying party shall be liable for the reasonable fees and expenses
of not more than one separate firm (in addition to any local counsel)
for Xxxxxx Xxxxxxx in its capacity as a "qualified independent
underwriter" and all persons, if any, who control Xxxxxx Xxxxxxx within
the meaning of either Section 15 of the Act or Section 20 of the
Exchange Act.
(d) To the extent the indemnification provided for in Section
8(a) or 8(b) is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to
therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other hand from the offering of
the Shares or (ii) if the allocation provided by clause 8(d)(i) above is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause 8(d)(i)
above but also the relative fault of the Company on the one hand and of
the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities,
as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on
the other hand in connection with the offering of the Shares shall be
deemed to be in the same respective proportions as the net proceeds from
the offering of the Shares (before deducting expenses) received by the
Company and the total underwriting discounts and commissions received by
the Underwriters, in each case as set forth in the table on the cover of
the Prospectus, bear to the aggregate Public Offering Price of the
Shares. The relative fault of the Company on the one hand and the
Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company or by the
Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or
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prevent such statement or omission. The Underwriters' respective
obligations to contribute pursuant to this Section 8 are several in
proportion to the respective number of Shares they have purchased
hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be
just or equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to
in Section 8(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of
this Section 8, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the
Shares underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages that such Underwriter has
otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Section 8 are not exclusive and shall not limit any
rights or remedies which may otherwise be available to any indemnified
party at law or in equity.
(f) The indemnity and contribution provisions contained in this
Section 8 and the representations, warranties and other statements of
the Company contained in this Agreement shall remain operative and in
full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter or by or on behalf
of the Company, its officers or directors or any person controlling the
Company and (iii) acceptance of and payment for any of the Shares.
9. Directed Share Program Indemnification.
(a) The Company and each subsidiary of the Company, whether
direct or indirect, jointly and severally, agree to indemnify and hold
harmless Xxxxxx Xxxxxxx and its affiliates and each person, if any, who
controls Xxxxxx Xxxxxxx or its affiliates within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act
("XXXXXX XXXXXXX ENTITIES"), from and against any and all losses,
claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending
or investigating any such action or claim) (i) caused by any untrue
statement or alleged untrue statement of a material fact contained in
any material prepared by or with the consent of the Company for
distribution to Participants in connection with the Directed Share
Program, or caused by any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; or (ii) related to, arising out of,
or in connection with the Directed Share Program other than losses,
claims, damages or liabilities (or
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expenses relating thereto) that are (A) caused by the failure of any
Participant to pay for and accept delivery of Directed Shares that the
Participant has agreed to purchase, (B) caused by the indication of
interest form prepared by Xxxxxx Xxxxxxx Entities for use in connection
with the Directed Share Program or (C) finally judicially determined to
have resulted from the bad faith or gross negligence of Xxxxxx Xxxxxxx
Entities.
(b) In case any proceeding (including any governmental
investigation) shall be instituted involving any Xxxxxx Xxxxxxx Entity
in respect of which indemnity may be sought pursuant to Section 9(a),
the Xxxxxx Xxxxxxx Entity seeking indemnity shall promptly notify the
Company in writing and the Company, upon request of the Xxxxxx Xxxxxxx
Entity, shall retain counsel reasonably satisfactory to the Xxxxxx
Xxxxxxx Entity to represent the Xxxxxx Xxxxxxx Entity and any other the
Company may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Xxxxxx Xxxxxxx Entity shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the
expense of such Xxxxxx Xxxxxxx Entity unless (i) the Company shall have
agreed to the retention of such counsel or (ii) the named parties to any
such proceeding (including any impleaded parties) include both the
Company and the Xxxxxx Xxxxxxx Entity and representation of both parties
by the same counsel would be inappropriate due to actual or potential
differing interests between them. The Company shall not, in respect of
the legal expenses of the Xxxxxx Xxxxxxx Entities in connection with any
proceeding or related proceedings the same jurisdiction, be liable for
the fees and expenses of more than one separate firm (in addition to any
local counsel) for all Xxxxxx Xxxxxxx Entities. Any such firm for the
Xxxxxx Xxxxxxx Entities shall be designated in writing by Xxxxxx
Xxxxxxx. The Company shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with
such consent or if there be a final judgment for the plaintiff, the
Company agrees to indemnify the Xxxxxx Xxxxxxx Entities from and against
any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time a Xxxxxx Xxxxxxx
Entity shall have requested the Company to reimburse it for fees and
expenses of counsel as contemplated by the second and third sentences of
this paragraph, the Company agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i)
such settlement is entered into more than 30 days after receipt by the
Company of the aforesaid request and (ii) the Company shall not have
reimbursed the Xxxxxx Xxxxxxx Entity in accordance with such request
prior to the date of such settlement. The Company shall not, without the
prior written consent of Xxxxxx Xxxxxxx, effect any settlement of any
pending or threatened proceeding in respect of which any Xxxxxx Xxxxxxx
Entity is or could have been a party and indemnity could have been
sought hereunder by such Xxxxxx Xxxxxxx Entity, unless such settlement
includes an unconditional release of the Xxxxxx Xxxxxxx Entities from
all liability on claims that are the subject matter of such proceeding.
(c) To the extent the indemnification provided for in Section
9(a) is unavailable to a Xxxxxx Xxxxxxx Entity or insufficient in
respect of any losses, claims, damages or liabilities referred to
therein, then the Company, in lieu of indemnifying the Xxxxxx Xxxxxxx
Entity thereunder, shall contribute to the amount paid or payable by the
Xxxxxx Xxxxxxx Entity as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Xxxxxx
Xxxxxxx Entities on the other hand from the offering of the
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Directed Shares or (ii) if the allocation provided by clause 9(c)(i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause 9(c)(i) above but also the relative fault of the Company on the
one hand and of the Xxxxxx Xxxxxxx Entities on the other hand in
connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company
on the one hand and of the Xxxxxx Xxxxxxx Entities on the other hand in
connection with the offering of the Directed Shares shall be deemed to
be in the same respective proportions as the net proceeds from the
offering of the Directed Shares (before deducting expenses) and the
total underwriting discounts and commissions received by the Xxxxxx
Xxxxxxx Entities for the Directed Shares, bear to the aggregate Public
Offering Price of the Shares. If the loss, claim, damage or liability is
caused by an untrue or alleged untrue statement of a material fact, the
relative fault of the Company on the one hand and the Xxxxxx Xxxxxxx
Entities on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement or the
omission or alleged omission relates to information supplied by the
Company or by the Xxxxxx Xxxxxxx Entities and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(d) The Company and the Xxxxxx Xxxxxxx Entities agree that it
would not be just or equitable if contribution pursuant to this Section
9 were determined by pro rata allocation (even if the Xxxxxx Xxxxxxx
Entities were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable
considerations referred to in Section 9(c). The amount paid or payable
by the Xxxxxx Xxxxxxx Entities as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by the
Xxxxxx Xxxxxxx Entities in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this Section
9, no Xxxxxx Xxxxxxx Entity shall be required to contribute any amount
in excess of the amount by which the total price at which the Directed
Shares distributed to the public were offered to the public exceeds the
amount of any damages that such Xxxxxx Xxxxxxx Entity has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. The remedies provided for in this Section
9 are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any Xxxxxx Xxxxxxx Entity at law or in equity.
(e) The indemnity and contribution provisions contained in this
Section 9 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement, (ii) any investigation made by
or on behalf of any Xxxxxx Xxxxxxx Entity or the Company, its officers
or directors or any person controlling the Company and (iii) acceptance
of and payment for any of the Directed Shares.
10. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the
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National Association of Securities Dealers, Inc., the Chicago Board of Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii)
trading of any securities of the Company shall have been suspended on any
exchange or in any over-the-counter market, (iii) a general moratorium on
commercial banking activities in New York shall have been declared by either
Federal or New York State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in your judgment, is material and adverse and (b) in
the case of any of the events specified in clauses 10(a)(i) through 10(a)(iv),
such event, singly or together with any other such event, makes it, in your
judgment, impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
11. Effectiveness; Defaulting Underwriters. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares that
it has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule I bears to the aggregate number of
Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; provided that in no event shall the number of
Shares that any Underwriter has agreed to purchase pursuant to this Agreement be
increased pursuant to this Section 11 by an amount in excess of one-ninth of
such number of Shares without the written consent of such Underwriter. If, on
the Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased, and arrangements satisfactory to you and the Company for
the purchase of such Firm Shares are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. If, on the Option Closing Date, any Underwriter
shall fail or refuse to purchase Additional Shares and the aggregate number of
Additional Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Additional Shares to be purchased, the
non-defaulting Underwriters shall have the option to (i) terminate their
obligation hereunder to purchase Additional Shares or (ii) purchase not less
than the number of Additional Shares that such non-defaulting Underwriters would
have been obligated to purchase in the absence of such default. Any action taken
under this paragraph shall not relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to
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perform its obligations under this Agreement, the Company will reimburse the
Underwriters or such Underwriters as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including the
fees and disbursements of their counsel) reasonably incurred by such
Underwriters in connection with this Agreement or the offering contemplated
hereunder.
12. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
13. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
14. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
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Very truly yours,
ARTISTdirect, INC.
By:
---------------------------------
Name:
Title:
Agreed to Sections 8 and 9:
ARTISTdirect HOLDINGS, L.L.C.
By:
---------------------------------
Name:
Title:
ARTISTdirect AGENCY, LLC
By:
---------------------------------
Name:
Title:
ARTISTdirect NEW MEDIA, LLC
By:
---------------------------------
Name:
Title:
KNEELING ELEPHANT RECORDS, LLC
By:
---------------------------------
Name:
Title:
S-1
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THE ULTIMATE BAND LIST, LLC
By:
---------------------------------
Name:
Title:
IMUSIC, INC.
By:
---------------------------------
Name:
Title:
Accepted as of the date hereof
XXXXXX XXXXXXX & CO. INCORPORATED
BEAR, XXXXXXX & CO. INC.
DEUTSCHE BANK SECURITIES INC.
Acting severally on behalf of themselves
and the several Underwriters named
in Schedule I hereto.
By: Xxxxxx Xxxxxxx & Co. Incorporated
By:
--------------------------------
Name:
Title:
S-2
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SCHEDULE I
UNDERWRITERS
NUMBER OF
FIRM SHARES
UNDERWRITER TO BE PURCHASED
Xxxxxx Xxxxxxx & Co. Incorporated
Bear, Xxxxxxx & Co. Inc.
Deutsche Bank Securities Inc.
----------------
Total
================
Schedule 1
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EXHIBIT A
FORM OF LOCK-UP LETTER
____________, 2000
Xxxxxx Xxxxxxx & Co. Incorporated
Bear, Xxxxxxx & Co. Inc.
Deutsche Bank Securities Inc.
c/o Morgan Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Dear Sirs and Mesdames:
The undersigned understands that Xxxxxx Xxxxxxx & Co. Incorporated
("XXXXXX XXXXXXX") proposes to enter into an Underwriting Agreement (the
"UNDERWRITING AGREEMENT") with ARTISTdirect, Inc., a Delaware corporation (the
"COMPANY"), providing for the public offering (the "PUBLIC OFFERING") by the
several Underwriters, including Xxxxxx Xxxxxxx (the "UNDERWRITERS"), of
5,000,000 shares (the "SHARES") of the Common Stock, $.01 par value per share,
of the Company (the "COMMON STOCK").
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Xxxxxx
Xxxxxxx on behalf of the Underwriters, it will not, during the period commencing
on the date hereof and ending 180 days after the date of the final prospectus
relating to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (a) transactions
relating to shares of Common Stock or other securities acquired in open market
transactions after the completion of the Public Offering or (B) the exercise of
options to purchase Common Stock granted under the Company's 1999 Employee Stock
Option Plan, 1999 Artist Stock Option Plan and/or 1999 Artist and Advisor Stock
Option Plan; provided, however, that the shares of Common Stock purchase upon
exercise of such options shall be otherwise subject to this Lock-Up Agreement.
In addition, the undersigned agrees that, without the prior written consent of
Xxxxxx Xxxxxxx on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending 180 days after the date of the
Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock. Notwithstanding the foregoing (i)
gifts and transfers by will or intestacy or (ii) transfers to (A) the
undersigned's members, partners, affiliates or immediate family or (B) a trust,
the
Exhibit A
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beneficiaries of which are the undersigned and/or members of the undersigned's
immediate family, shall not be prohibited by this agreement; provided that (x)
the donee or transferee agrees in writing to be bound by the foregoing in the
same manner as it applies to the undersigned and (y) if the donor or transferor
is a reporting person subject to Section 16(a) of the Securities Exchange Act of
1934 (the "EXCHANGE ACT"), any gifts or transfers made in accordance with this
paragraph shall not require such person to, and such person shall not
voluntarily, file a report of such transaction of Form 4 under the Exchange Act.
"Immediate family" shall mean spouse, lineal descendants, father, mother,
brother or sister of the transferor and father, mother, brother or sister of the
transferor's spouse.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
------------------------------------
(Name)
------------------------------------
(Address)
Exhibit A
2
