EXHIBIT 1.1
____________ Shares
CDNOW, INC.
Common Stock
UNDERWRITING AGREEMENT
______________, 1998
BT ALEX. ▇▇▇▇▇ INCORPORATED
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear Sirs:
1. INTRODUCTORY. CDnow, Inc., a Pennsylvania corporation (the
"Company") and the selling stockholders named in Schedule A hereto (the "Selling
Stockholders") propose to sell to BT Alex. ▇▇▇▇▇ Incorporated ("Alex. ▇▇▇▇▇" or
the "Underwriter"), an aggregate of __________ shares of Common Stock, no par
value share (the "Common Stock"), of the Company of which __________ will be
sold by the Company and ___________ by the Selling Stockholders. The aggregate
of __________ shares so proposed to be sold is hereinafter referred to as the
"Firm Stock." At the Underwriter's option the Company proposes to sell to the
Underwriter up to an additional ___________ shares of Common Stock
(collectively, the "Option Stock"). The Firm Stock and the Option Stock are
hereinafter collectively referred to as the "Stock."
2. (a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Underwriter that:
(i) A registration statement on Form S-1 (File No. 333-
52367), with respect to the Stock, including any prospectuses included
therein, copies of which have heretofore been delivered to you, has been
prepared by the Company and has been filed under the Securities Act of
1933, as amended (the "Securities Act"), and the rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder; one or more preeffective amendments to such
registration statement, including in each case an amended preeffective
prospectus, copies of which filings have heretofore been delivered to you,
have also been so prepared and filed. Such registration statement at the
time which it became or becomes effective is referred to hereinafter as the
"Registration Statement." If it is contemplated, at the time this Agreement
is executed, that a post-effective amendment to the Registration Statement
will be filed and
must be declared effective before the offering of the Stock may commence,
the term "Registration Statement" as used in this Agreement means the
Registration Statement as amended by said post-effective amendment. The
term "Registration Statement" as used in this Agreement shall also include
any registration statement relating to the Stock, in the form in which it
is filed, that is filed and declared effective pursuant to Rule 462(b)
under the Securities Act. The term "Prospectus" as used in this Agreement
means the prospectus in the form included in the Registration Statement,
or, if the prospectus included in the Registration Statement omits
information in reliance on Rule 430A under the Securities Act and such
information is included in a prospectus filed with the Commission pursuant
to Rule 424(b) under the Securities Act, the term "Prospectus" as used in
this Agreement means the prospectus in the form included in the
Registration Statement as supplemented by the addition of the Rule 430A
information contained in the prospectus filed with the Commission pursuant
to Rule 424(b). The term "Preeffective Prospectus" as used in this
Agreement means the prospectus subject to completion in the form included
in the Registration Statement at the time of the initial filing of the
Registration Statement with the Commission, and as such prospectus shall
have been amended from time to time prior to the date of the Prospectus.
(ii) The Commission has not issued or, to the knowledge of
the Company, threatened to issue any order preventing or suspending the use
of any Preeffective Prospectus, and, at the time when it became or becomes
effective, the Registration Statement conformed or will conform in all
material respects to the requirements of the Securities Act. If the
Registration Statement was declared effective prior to the execution and
delivery of this Agreement, on the date the Registration Statement was
declared effective, the Registration Statement conformed in all material
respects with the requirements of the Securities Act and did not include
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading and, at the time of the filing of the Prospectus pursuant to
Rule 424(b), the Prospectus will conform in all material respects to the
requirements of the Securities Act and will not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading. If the
Registration Statement is declared effective subsequent to the execution
and delivery of this Agreement, on the date the Registration Statement
becomes effective, the Registration Statement and the Prospectus will
conform in all material respects to the requirements of the Securities Act,
and on the date the Registration Statement is declared effective, neither
the Registration Statement nor the Prospectus will include any untrue
statement of a material fact or will omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that the foregoing representations,
warranties and agreements shall not apply to information contained in or
omitted from the Registration Statement or the Prospectus or any amendment
or supplement thereto in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of the Underwriter,
specifically for use in the preparation thereof; there is no permit, lease,
contract, agreement or document required to be described in the
Registration Statement or Prospectus or to be filed as an exhibit to the
Registration Statement which is not described or filed therein as
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required; and all descriptions of any such permits, leases, contracts,
agreements or documents contained in the Registration Statement fairly
presents in all material respects the information called for by the
Securities Act and the Rules and Regulations with respect to such permits,
leases, contracts, agreements or documents and fairly summarize in all
material respects the matters referred to therein.
(iii) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus, and
except as set forth or contemplated in the Prospectus, neither the Company
nor any of its subsidiaries has incurred any material liabilities or
obligations, direct or contingent, not in the ordinary course of business,
nor entered into any material transactions not in the ordinary course of
business, and there has not been any material adverse change in the
condition (financial or otherwise), properties, business affairs,
management, business prospects or results of operations of the Company and
its subsidiaries considered as a whole, or any change in the capital stock
(other than pursuant to the exercise of outstanding stock options or
warrants) of the Company and its subsidiaries which is material to the
Company and its subsidiaries considered as a whole.
(iv) The financial statements, together with the related
notes and schedules, set forth in the Prospectus and elsewhere in the
Registration Statement fairly present in all material respects, on the
basis stated in the Registration Statement, the financial position and the
results of operations and cash flows of the Company at the respective dates
or for the respective periods therein specified. Such statements and
related notes and schedules have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis except as may
be set forth in the Prospectus. The selected financial and statistical data
set forth in the Prospectus under the captions "Selected Financial And
Operating Data" are in conformity with the Rules and Regulations. The pro
forma financial information included in the Registration Statement and the
Prospectus has been prepared in accordance with the applicable published
rules and regulations of the Commission with respect to pro forma financial
information and the assumptions used in preparing such information are
reasonable.
(v) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, who has expressed its opinion on
the audited financial statements and related schedules included in the
Registration Statement and the Prospectus, are independent public
accountants as required by the Securities Act and the Rules and
Regulations.
(vi) The Company has and each of its subsidiaries has been
duly organized and is validly existing and in good standing (validly
subsisting with respect to the Company) as a corporation under the laws of
its jurisdiction of incorporation, with corporate power and corporate
authority to own or lease its properties and to conduct its businesses as
described in the Prospectus; except as described in the Prospectus, the
Company is and each of its subsidiaries is in possession of and operating
in compliance with all material grants, authorizations, licenses, permits,
easements, consents, certificates and orders required for the conduct of
their respective businesses, all of which are, to the Company's knowledge,
valid and in full force and effect; and, except as described in the
Prospectus, the Company is and
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each of its subsidiaries is duly qualified to do business and in good
standing as a foreign corporation in all other jurisdictions where its
ownership or leasing of properties or the conduct of its businesses
requires such qualification, except where the failure to be so qualified
and in good standing would not have a material adverse effect on the
Company and its subsidiaries taken as a whole (a "Material Adverse
Effect"). The Company has and each of its subsidiaries has all necessary
consents, approvals, authorizations, orders, registrations, qualifications,
licenses and permits of and from all public regulatory or governmental
agencies and bodies to own, lease and operate their respective properties
and conduct their respective businesses as now being conducted and as
described in the Registration Statement and the Prospectus except where the
failure to have any such consent, approval, authorization, order,
registration, qualification, license and permit would not have a Material
Adverse Effect, and no such consent, approval, authorization, order,
registration, qualification, license or permit contains a materially
burdensome restriction not adequately disclosed in the Registration
Statement and the Prospectus. The Company owns 100% of the capital stock of
CDnow Investments, Inc and CDnow Trademarks, Inc., in each case, free and
clear of any liens, encumbrances, equities or claims. Other than the
ownership of not more than 5% of the securities of any publicly traded
corporation, the Company does not directly or indirectly own or control any
other corporations or entities.
(vii) The Company's authorized and outstanding capital
stock is on the date hereof, and will be on the Closing Dates (as defined
below), as set forth under the heading "Capitalization" in the Prospectus;
the outstanding shares of common stock (including the outstanding shares of
Stock) of the Company conform to the description thereof in the Prospectus
and have been duly authorized and validly issued and are fully paid and
nonassessable; have been duly authorized for quotation on the Nasdaq
National Market, subject to official notice of issuance; have been issued
in compliance with all federal and state securities laws; and have not been
issued in violation of (other than violations subsequently cured and
waived) or subject to any preemptive rights or similar rights to subscribe
for or purchase securities. Except as disclosed in and or contemplated by
the Prospectus, neither the Company nor its subsidiaries have outstanding
any options or warrants to purchase, or any preemptive rights or other
rights to subscribe for or to purchase any securities or obligations
convertible into capital stock, or any contracts or commitments to issue or
sell shares of its capital stock or any such options, rights, convertible
securities or obligations. The description of the options or other rights
granted or exercised under the Company's 1996 Equity Compensation Plan (the
"Plan") or other arrangements as set forth in the Prospectus, fairly
present in all material respects the information required to be shown with
respect to such options and rights. All outstanding shares of capital stock
of each subsidiary of the Company have been duly authorized and validly
issued, and are fully paid and non-assessable.
(viii) The shares of Stock to be issued and sold by the
Company to the Underwriter hereunder have been duly authorized and, when
issued and delivered against payment therefor as provided herein, will be
validly issued, fully paid and nonassessable and free of any preemptive or
similar rights and will conform to the description thereof in the
Prospectus.
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(ix) Except as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any of
its subsidiaries or affiliates is a party or of which any property of the
Company or any subsidiary or affiliate is subject, that are required to be
described in the Registration Statement or the Prospectus that are not so
described. Neither the Company nor any of its subsidiaries is a party or
subject to the provisions of any material injunction, judgment, decree or
order of any court, regulatory body or other governmental agency or body
that is not described in the Prospectus.
(x) The execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions herein
contemplated by the Company will not result in a breach or violation of any
of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, note agreement or other material
agreement or instrument to which the Company or any of its subsidiaries is
a party or by which it or any of them or any of their properties is or may
be bound, the Articles of Incorporation or By-laws of the Company or any of
its subsidiaries, or any law, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of
its subsidiaries or any of its properties or will result in the creation of
a materially burdensome lien on any of the properties of the Company or any
of its subsidiaries.
(xi) No consent, approval, authorization or order of any
court or governmental agency or body or self-regulatory body is required
for the consummation by the Company of the transactions contemplated by
this Agreement, except such as may be required by the Commission or the
National Association of Securities Dealers, Inc. (the "NASD") or under the
securities or "Blue Sky" laws of any jurisdiction in connection with the
purchase and distribution of the Stock by the Underwriters.
(xii) The Company has the full corporate power and
corporate authority to enter into this Agreement and to perform its
obligations hereunder (including to issue, sell and deliver the Stock), and
this Agreement has been duly and validly authorized, executed and delivered
by the Company and is a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that rights to indemnity and contribution hereunder may be limited
by federal or state securities laws or the public policy underlying such
laws and except as the enforcement hereof may be limited by applicable
bankruptcy, insolvency, moratorium, fraudulent conveyance or similar laws
affecting creditors' rights generally, or by general equitable principles
regardless of whether considered in a proceeding at law or in equity.
(xiii) Subject to such qualifications as are set forth in
the Prospectus, the Company is and its subsidiaries are in all material
respects in compliance with, and are currently conducting their businesses
in conformity with, all applicable federal, state, local and foreign laws,
rules and regulations of each court or governmental agency or body having
jurisdiction over the Company and its subsidiaries except where the failure
to be in compliance or to so conduct their businesses would not have a
material adverse effect on the
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Company and its subsidiaries, taken as a whole; to the knowledge of the
Company, except as set forth in the Registration Statement and the
Prospectus, no prospective change in any of such federal or state laws,
rules or regulations has been adopted which, when made effective, would
have a material adverse effect on the operations of the Company and its
subsidiaries.
(xiv) The Company and its subsidiaries have filed all
necessary federal, state, local and foreign income, payroll, franchise and
other tax returns and have paid all taxes shown as due thereon or with
respect to any of their properties, except for those taxes (i) for which
the Company has established adequate reserves in its financial statements
or (ii) that, in the aggregate, the Company's failure to pay would not have
a Material Adverse Effect.
(xv) No person or entity has the right to require
registration of shares of Common Stock or other securities of the Company
because of the filing or effectiveness of the Registration Statement,
except for persons and entities who have expressly waived such right or who
have been given proper notice and have failed to exercise such right within
the time or times required under the terms and conditions of such right.
(xvi) Neither the Company nor, to its knowledge, any of its
officers, directors or affiliates has taken or will take, directly or
indirectly, any action designed or intended to stabilize or manipulate the
price of any security of the Company, or which caused or resulted in, or
which might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any security of the Company.
(xvii) Except as described in the Prospectus, the Company
and its subsidiaries own, possess or have a valid right to use all
trademarks, trademark registrations, service marks, service ▇▇▇▇
registrations, tradenames, copyrights, licenses, inventions, trade secrets
and rights described in the Prospectus as being owned by them or any of
them or necessary for the conduct of their respective businesses. To the
Company's knowledge, except as described in the Prospectus, no claim has
been made against the Company or its subsidiaries alleging the infringement
by the Company or its subsidiaries of any patent, trademark, service ▇▇▇▇,
tradename, copyright, trade secret, license in or other intellectual
property right or franchise right of any person. Except as set forth in the
Prospectus (including, without limitation, uncertainties relating to making
content available in Germany and the possibility that distributors in
foreign countries may seek to enjoin the sale of music-related items by an
Internet retailer), the Company's business as now conducted and as proposed
to be conducted does not and, to its knowledge, will not infringe or
conflict with any patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses or other intellectual property or
franchise right of any person.
(xviii) The Company and its subsidiaries have performed all
material obligations required to be performed by them under any indenture,
mortgage, deed of trust, note agreement or other material agreement or
instrument to which they are a party or by which they or any of their
properties may be bound, and neither the Company nor any of its
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subsidiaries nor, to the Company's knowledge, any other party to such
indenture, mortgage, deed of trust, note agreement or other agreement or
instrument is in default under or in breach of any such obligations which
default or breach would reasonably be expected to have a material adverse
effect on the Company and its subsidiaries taken as a whole. Neither the
Company nor any of its subsidiaries has received any notice of such default
or breach.
(xix) The Company is not involved in any labor dispute nor
to the Company's knowledge is any such dispute threatened. The Company is
not aware that (A) any executive, key employee or significant group of
employees of the Company or any subsidiary plans to terminate employment
with the Company or any such subsidiary or (B) any such executive or key
employee is subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar agreement that would be violated by the
present or proposed business activities of the Company and its
subsidiaries. Neither the Company nor any subsidiary has or expects to have
any liability for any prohibited transaction or funding deficiency or any
complete or partial withdrawal liability with respect to any pension,
profit sharing or other plan which is subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), to which the Company or
any subsidiary makes or ever has made a contribution and in which any
employee of the Company or any subsidiary is or has ever been a
participant. With respect to such plans, the Company and each subsidiary
are in compliance in all material respects with all applicable provisions
of ERISA.
(xx) The real property and buildings held under lease by
the Company and its subsidiaries are held by them under valid and binding
leases with such exceptions as would not have a material adverse effect on
the Company and its subsidiaries considered as a whole or as are described
in the Prospectus.
(xxi) Other than as contemplated by this Agreement, there
is no broker, finder or other party that is entitled to receive from the
Company any brokerage or finder's fee or other fee or commission as a
result of any of the transactions contemplated by this Agreement.
(xxii) The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xxiii) To the Company's knowledge, neither the Company nor
any of its subsidiaries nor any employee or agent of the Company or any of
its subsidiaries has made any payment of funds of the Company or any of its
subsidiaries or received or retained
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any funds in violation of any law, rule or regulation, which payment,
receipt or retention of funds is of a character required to be disclosed in
the Prospectus.
(xxiv) Neither the Company nor any of its subsidiaries is
an "investment company," as such term is defined in the Investment Company
Act of 1940, as amended.
(b) REPRESENTATIONS AND WARRANTIES AND AGREEMENTS OF THE SELLING
STOCKHOLDERS. Each Selling Stockholder severally represents and warrants to the
Underwriter that such Selling Stockholder:
(i) Now has, and on the First Closing Date (as hereinafter
defined) will have, valid title to the Stock to be sold by such Selling
Stockholder, free and clear of any "Adverse Claim" within the meaning of
the Uniform Commercial Code as in effect in the Commonwealth of
Pennsylvania ("Adverse Claim") and has full legal right and capacity to
enter into this Agreement, the Power of Attorney and the Custody Agreement
(each as hereinafter defined).
(ii) Now has, and on the First Closing Date will have, upon
delivery of and payment for each share of Stock being sold by such Selling
Stockholder hereunder, full legal right and capacity required by law to
sell, transfer, assign and deliver such shares, and no consent, approval,
authorization or order of any court or governmental agency or body or self-
regulatory body is required for the consummation by such Selling
Stockholder of the transactions contemplated by this Agreement, except such
as may be required by the Commission or the National Association of
Securities Dealers, Inc. (the "NASD") or under the securities or "Blue Sky"
laws of any jurisdiction in connection with the purchase and distribution
of the Stock by the Underwriter; and, upon delivery and payment for such
shares as contemplated hereby, the Underwriter will acquire valid title to
such shares, free and clear of any Adverse Claim.
(iii) Has duly executed and delivered a power of attorney
in substantially the form heretofore delivered to the Underwriter (the
"Power of Attorney"), appointing ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇, and each of
them, as attorney-in-fact (the "Attorneys-in-fact") with authority to
execute and deliver this Agreement on behalf of such Selling Stockholder,
to authorize the delivery of the shares of Stock to be sold by such Selling
Stockholder hereunder and otherwise to act on behalf of such Selling
Stockholder in connection with the transactions contemplated by this
Agreement.
(iv) Has duly executed and delivered a custody agreement in
substantially the form heretofore delivered to the Representatives (the
"Custody Agreement"), with StockTrans, Inc., as custodian (the
"Custodian"), pursuant to which certificates in negotiable form for the
shares of Stock to be sold by such Selling Stockholder hereunder have been
placed in custody for delivery under this Agreement.
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(v) Has, by execution and delivery of each of this
Agreement, the Power of Attorney and the Custody Agreement, created valid
and binding obligations of such Selling Stockholder, enforceable against
such Selling Stockholder in accordance with its terms, except to the extent
that rights to indemnity and contribution hereunder may be limited by
federal or state securities laws or the public policy underlying such laws
and except as the enforcement hereof may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, moratorium or similar laws
affecting creditors' rights generally, or by general equitable principles
regardless of whether considered in a proceeding at law or in equity.
(vi) The performance of this Agreement, the Custody
Agreement and the Power of Attorney, and the consummation of the
transactions contemplated hereby and thereby will not result in a breach or
violation by such Selling Stockholder of any of the terms or provisions of,
or constitute a default by such Selling Stockholder under, any indenture,
mortgage, deed of trust, trust, loan agreement, lease, franchise, license
or other material agreement or material instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder or any of its
properties is bound, or any judgment of any court or governmental agency or
body applicable to such Selling Stockholder or any of its properties, or to
such Selling Stockholder's knowledge, any statute, decree, order, rule or
regulation of any court or governmental agency or body applicable to such
Selling Stockholder or any of his properties.
(vii) The information pertaining to such Selling
Stockholder under the caption "Principal and Selling Stockholders" in the
Prospectus fairly presents in all material respects the information called
for by Item 507 of Regulation S-K of the Rules and Regulations with respect
to such Selling Stockholder.
(viii) Such Selling Stockholder has not taken and will not
take, directly or indirectly, any action designed to, or which has
constituted, or which might reasonably be expected to cause or result in
the stabilization or manipulation of the price of the Common Stock of the
Company and, other than as permitted by the Securities Act, the Selling
Stockholder will not distribute any prospectus or other offering material
in connection with the offering of the Shares.
Each Selling Stockholder agrees that the shares of Stock represented
by the certificates held in custody under the Custody Agreement are coupled with
and subject to the interests of the Underwriter, the Company and the other
Selling Stockholders hereunder, and that the arrangement for such custody and
the appointment of the Attorneys-in-fact are to that extent irrevocable other
than as set forth in the Power of Attorney and the Custody Agreement; that the
obligations of such Selling Stockholder hereunder shall not be terminated by
operation of law, whether by death or incapacity of such Selling Stockholder, or
any other event, that if such Selling Stockholder should die or become
incapacitated or any other such event occurs, before the delivery of the Stock
hereunder, certificates for the Stock to be sold by such Selling Stockholder
shall be delivered on behalf of such Selling Stockholder in accordance with the
terms and conditions of this Agreement and the Custody Agreement, and action
taken by the Attorneys-in-fact or any of them under the Power of Attorney shall
be as valid as if such death, incapacity or other such event had not
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occurred, whether or not the Custodian, the Attorneys-in-fact or any of them
shall have notice of such death, incapacity or such other event.
3. PURCHASE BY, AND SALE AND DELIVERY TO, UNDERWRITER--CLOSING
DATES. The Company and the Selling Stockholders agree to sell to the
Underwriter the Firm Stock on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Underwriter agrees, to purchase the Firm Stock
from the Company and the Selling Stockholders.
The purchase price per share to be paid by the Underwriter to the
Company and the Selling Stockholders will be $______ per share (the "Purchase
Price").
The Company will deliver the number of shares of Firm Stock set forth
in paragraph 1 hereof and the Attorneys-in-fact and Custodian will deliver the
number of shares of Firm Stock set forth in Paragraph 1 hereof to the
Underwriter for the account of the Underwriter (in the form of definitive
certificates, issued in such names and in such denominations as the Underwriter
may direct by notice in writing to the Company and the Custodian not later than
the second full business day preceding the First Closing Date (as defined below)
against payment of the aggregate Purchase Price therefor by wire transfer of
same-day funds, payable to the order of the Company, all, as selected by Alex.
▇▇▇▇▇, at the offices of (x) Alex. ▇▇▇▇▇, Baltimore, Maryland or (y) ▇▇▇▇▇▇,
▇▇▇▇▇ & Bockius LLP, Philadelphia, Pennsylvania. The time and date of the
delivery and closing shall be at 10:00 A.M., Baltimore Time), on July ___, 1998.
The time and date of such payment and delivery are herein referred to as the
"First Closing Date". The First Closing Date and the location of delivery of,
and the form of payment for, the Firm Stock may be varied by agreement among the
Company and Alex. ▇▇▇▇▇.
The Company, the Custodian and the Attorneys-in-fact shall make the
certificates for the Stock available to the Underwriter for examination not
later than 10:00 A.M., Baltimore Time, on the business day preceding the First
Closing Date at the offices of (x) Alex. ▇▇▇▇▇, Baltimore, Maryland or (y)
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP, Philadelphia, Pennsylvania, as selected by Alex.
▇▇▇▇▇.
The Underwriter agrees to make a public offering of the Firm Stock at
the public offering price as set forth in the Prospectus as soon after the
effectiveness of the Registration Statement as in their judgment is advisable.
The Representatives shall promptly advise the Company of the making of the
initial public offering.
For the purpose of covering any over-allotments in connection with the
distribution and sale of the Firm Stock as contemplated by the Prospectus, the
Selling Stockholders and the Company hereby grants to the Underwriters an option
to purchase up to __________ shares. The price per share to be paid for the
Option Stock shall be the Purchase Price. The option granted hereby may be
exercised as to all or any part of the Option Stock at any time prior to or
after the First Closing Date (with oral or written notice of such exercise to be
made at least two business days prior to the closing date for the sale of the
Option Stock), but may not be exercised more than once and such exercise must
occur not more than thirty (30) days subsequent to the effective date of this
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Agreement. No Option Stock shall be sold and delivered unless the Firm Stock
previously has been, or simultaneously is, sold and delivered. The right to
purchase the Option Stock or any portion thereof may be surrendered and
terminated at any time upon notice by the Underwriter to the Company.
The option granted hereby may be exercised by the Underwriter by
giving written notice to the Company setting forth the number of shares of the
Option Stock to be purchased by it and the date and time for delivery of and
payment for the Option Stock. Each date and time for delivery of and payment
for the Option Stock (which may be the First Closing Date, but not earlier) is
herein called the "Option Closing Date" and shall in no event be earlier than
two (2) business days nor later than ten (10) business days after oral or
written notice is given. (The Option Closing Date and the First Closing Date
are herein called the "Closing Dates.") Upon exercise of the option by the
Underwriter, the Company shall sell to the Underwriter the number of shares of
Option Stock set forth in the written notice of exercise and the Underwriter
agrees, subject to the terms and conditions herein set forth, to purchase the
number of such shares determined as aforesaid.
The Company will deliver the Option Stock to the Underwriter (in the
form of definitive certificates, issued in such names and in such denominations
as the Underwriter may direct by notice to the Company no later than the second
full business day preceding the Option Closing Date, against payment of the
aggregate Purchase Price therefor by wire transfer of same-day funds, payable as
directed by the Company, all at the offices of (x) Alex. ▇▇▇▇▇, Baltimore,
Maryland or (y) ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP, Philadelphia, Pennsylvania, as
selected by Alex. ▇▇▇▇▇. The Company shall make the certificates for the Option
Stock available to the Underwriter for examination not later than 10:00 A.M.,
Baltimore Time, on the business day preceding the Option Closing Date at the
offices of (x) Alex. ▇▇▇▇▇, Baltimore, Maryland or (y) ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius
LLP, Philadelphia, Pennsylvania, as selected by Alex. ▇▇▇▇▇. The Option Closing
Date and the location of delivery of, and the form of payment for, the Option
Stock may be varied by agreement between the Company and Alex. ▇▇▇▇▇.
If on the First Closing Date, any Selling Stockholder fails to sell
the Stock which such Selling Stockholder has agreed to sell on such date as set
forth in Schedule A hereto, the Company agrees that it will sell or arrange for
the sale of that number of shares of Common Stock to the Underwriter which
represents Stock which such Selling Stockholder has failed to so sell, as set
forth in Schedule A hereto, or such lesser number as may be requested by the
Underwriter.
4. COVENANTS AND AGREEMENTS OF THE COMPANY AND THE SELLING
STOCKHOLDERS. The Company covenants and agrees with the Underwriter that:
The Company will (i) if the Company and the Underwriter have determined not to
proceed pursuant to Rule 430A, use its reasonable commercial efforts to cause
the Registration Statement to become effective, (ii) if the Company and the
Underwriter have determined to proceed pursuant to Rule 430A, use its reasonable
commercial efforts to comply with the provisions of and make all requisite
filings with the Commission pursuant to Rule 430A and Rule 424 of the Rules and
Regulations and (iii) if the Company and the Underwriter have determined to
deliver Prospectuses pursuant to Rule 434 of the Rules and Regulations, to use
its reasonable commercial efforts to comply with all the
-11-
applicable provisions thereof. The Company will advise the Underwriter promptly
as to the time at which the Registration Statement becomes effective, if it has
not yet become effective, will advise the Underwriter promptly of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the institution of any proceedings for that
purpose, and in the event of the institution of such proceedings, will use its
reasonable commercial efforts to prevent the issuance of any such stop order and
to obtain as soon as is reasonably practicable the lifting thereof, if issued.
The Company will advise the Underwriter promptly of the receipt of any comments
of the Commission or any request by the Commission for any amendment of or
supplement to the Registration Statement or the Prospectus or for additional
information and will not at any time file any amendment to the Registration
Statement or supplement to the Prospectus which shall not previously have been
submitted to the Underwriter a reasonable time prior to the proposed filing
thereof or to which the Underwriter shall reasonably object in writing within a
reasonable time or which is not in compliance with the Securities Act and the
Rules and Regulations.
If at any time after the effective date of the Registration Statement when a
prospectus relating to the Stock is required to be delivered under the
Securities Act any event relating to or affecting the Company or any of its
subsidiaries occurs as a result of which the Prospectus or any other prospectus
as then in effect would include an untrue statement of a material fact, or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or if it is
necessary at any time to amend the Prospectus to comply with the Securities Act,
the Company will promptly notify the Representatives thereof and will prepare an
amended or supplemented prospectus which will correct such statement or
omission; and in case the Underwriter is required to deliver a prospectus
relating to the Stock nine (9) months or more after the effective date of the
Registration Statement, the Company upon the request of the Underwriter and at
the expense of the Underwriter will prepare promptly such prospectus or
prospectuses as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Securities Act.
The Company will deliver to the Underwriter, at or before the First Closing
Date, (4) signed copies of the Registration Statement, as originally filed with
the Commission, and all amendments thereto including all financial statements
and exhibits thereto, and will deliver to the Underwriter such number of copies
of the Registration Statement, including such financial statements but without
exhibits, and all amendments thereto, as the Underwriter may reasonably request.
The Company will deliver or mail to or upon the reasonable order of the
Underwriter, from time to time until the effective date of the Registration
Statement, as many copies of the Preeffective Prospectus as the Underwriter may
reasonably request. The Company will deliver or mail to or upon the reasonable
order of the Underwriter on the date of the public offering, and thereafter from
time to time during the period when delivery of a prospectus relating to the
Stock is required under the Securities Act, as many copies of the Prospectus, in
final form or as thereafter amended or supplemented as the Underwriter may
reasonably request; provided, however, that the expense of the preparation and
delivery of any prospectus required for use nine (9) months or more after the
effective date of the Registration Statement shall be borne by the Underwriter.
The Company will cooperate with the Underwriter to enable the Stock to be
registered or qualified for offering and sale by the Underwriter and by dealers
under the securities laws of such jurisdictions in the United States as the
Underwriter may designate and at the request of the Underwriter will
-12-
make such applications and furnish such consents to service of process or other
documents as may be required of it as the issuer of the Stock for that purpose;
provided, however, that the Company shall not be required to qualify to do
business, to file a general consent to service of process or subject itself to
taxation in any such jurisdiction where it is not now so subject nor shall the
Company or any stockholder of the Company be required to escrow or forfeit any
shares that they currently hold. The Company will advise the Underwriter
promptly after the Company becomes aware of the suspension of the qualifications
or registration of (or any such exception relating to) the Common Stock of the
Company for offering, sale or trading in any jurisdiction or of any initiation
or threat of any proceeding for any such purpose, and in the event of the
issuance of any orders suspending such qualifications, registration or
exception, the Company will, with the cooperation of the Underwriter (which the
Underwriter covenants to provide), use its reasonable commercial efforts to
obtain the withdrawal hereof.
The Company will furnish to its stockholders annual reports containing financial
statements certified by independent public accountants. During the period of
five (5) years from the date hereof, the Company will deliver to the
Underwriter, as soon as they are available, copies of each annual report of the
Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of income, stockholders' equity and cash flows for
the year then ended and the opinion thereon of the Company's independent public
accountants and will deliver to the Underwriter, (i) as soon as they are
available, copies of any other reports or communication (financial or other)
which the Company shall make available to any of its stockholders generally as
such and (ii) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission, or the NASD or any
national securities exchange. Similar reports shall be furnished for all
subsidiaries whose accounts are not consolidated but which at the time are
significant subsidiaries as defined in the Rules and Regulations.
The Company has received approval for listing the Stock, subject to official
notice of issuance, on the Nasdaq National Market.
The Company will maintain a transfer agent and a registrar (if required by its
jurisdiction of incorporation) for its Common Stock.
The Company will not offer, sell, assign, transfer, encumber, contract to sell,
grant an option to purchase or otherwise dispose of any shares of Common Stock,
securities convertible into or exercisable or exchangeable for Common Stock or
other derivative securities whose value is derived form the value of the Common
Stock during the 90 days following the date of the Prospectus, other than the
Company's sale of Common Stock hereunder and the Company's issuance of Common
Stock upon the exercise of warrants and of stock options which are presently
outstanding and described in the Prospectus or pursuant to employee benefit
plans described in the Prospectus.
Except to the extent arising from conditions beyond the control of the Company,
the Company will apply the net proceeds from the sale of the Stock as set forth
in the description under "Use of Proceeds" in the Prospectus.
-13-
The Company will supply you with copies of all correspondence to and from, and
all documents issued to and by, the Commission in connection with the
registration of the Stock under the Securities Act.
Prior to the Closing Dates the Company will furnish to you, as soon as they have
been prepared, copies of any unaudited interim consolidated financial statements
of the Company and its subsidiaries for any periods subsequent to the periods
covered by the financial statements appearing in the Registration Statement and
the Prospectus.
The Company shall not invest, or otherwise use the proceeds received by the
Company from its sale of the Stock in such a manner as would require the Company
to register as an investment company under the Investment Company Act of 1940,
as amended (the "1940 Act").
The Company will not take, directly or indirectly, any action designed to cause
or result in, or that has constituted or might reasonably be expected to
constitute, the stabilization or manipulation of the price of any securities of
the Company.
Each of the Selling Stockholders covenants and agrees with the
Underwriter that:
(i) Without the prior written consent the Underwriter he
will not, directly or indirectly (a) offer, sell, pledge, contract to sell
(including any short sale), grant any option to purchase or otherwise dispose of
any shares of common stock of the Company ("Shares") which may be deemed to be
beneficially owned by him on the date hereof in accordance with the rules and
regulations of the Securities and Exchange Commission and Shares which may be
issued to him upon exercise of a stock option or warrant owned by him other than
Shares purchased in the open market, or (b) enter into any Hedging Transaction
(as defined below) relating to such Shares (each of the foregoing clauses (a)
and (b) are hereinafter referred to as a "Disposition") for a period of 45 days
after the effective date of the Registration Statement (the "Lock-Up Period").
The foregoing restriction is expressly intended to preclude each Selling
Stockholder from engaging in any Hedging Transaction or other transaction which
is designed to or reasonably expected to lead to or result in a Disposition by
him during the Lock-Up Period even if the securities would be disposed of by
someone other than him. "Hedging Transaction" means any short sale (whether or
not against the box) or any purchase, sale or grant of any right (including,
without limitation, any put or call option) with respect to any security (other
than a broad-based market basket or index) that includes, relates to or derives
any significant part of its value from the Shares; provided that the exercise of
an option or warrant to purchase Shares or the conversion of any convertible
securities into Shares shall not be a Hedging Transaction. Notwithstanding the
foregoing, a Selling Stockholder may transfer by gift, will or intestacy any or
all of the Shares beneficially owned by him; provided, however, that in any such
case it shall be a condition to the transfer that the transferee execute an
agreement stating that the transferee is receiving and holding such Shares
subject to the provisions of this Section 4(i) and there shall be no further
transfer of such Shares except in accordance with this Section 4(i).
-14-
(ii) Each of the Selling Stockholders agrees to deliver to
you prior to or at the Closing Date a properly completed and executed
United States Treasury Department Form W-8 or W-9, as applicable.
(iii) Such Selling Stockholder will not take, directly or
indirectly, an action designed to cause or result in, or that might
reasonably be expected to constitute, the stabilization or manipulation of
the price of any securities of the Company.
5. PAYMENT OF EXPENSES.
The Company will pay (directly or by reimbursement) all costs, expenses and fees
incident to the performance of the Company and the Selling Stockholders under
this Agreement, including the following: the fees and expenses of the Company's
independent public accountants; the fees and disbursements of counsel for the
Company and the Selling Stockholders (except as expressly provided below with
respect to counsel to be paid for by the Selling Stockholders and except as
provided in Sections 4(b) and (c) hereof); the filing fees of the Commission;
the costs of preparing stock certificates (including printing and engraving
costs); all fees and expenses of the registrar and transfer agent for the Common
Stock; all necessary transfer and other stamp taxes in connection with the
issuance and sale of the Stock by the Company to the Underwriter hereunder; the
cost of printing and delivering to, or as requested by, the Underwriter copies
of the Registration Statement, Preliminary Prospectus, Prospectus and any
supplements or amendments thereto except as provided in Sections 4(b) and (c)
hereof; the NASD filing fees incident to securing any required review by the
NASD of the terms of the sale of the Stock; the listing fee of the Nasdaq
National Market; and the expenses, including the reasonable and ordinary fees
and disbursements of counsel for the Underwriters incurred in connection with
review by the NASD of the terms of the sale of the Stock and exemptions from
qualifying or registering (or obtaining qualification or registration of) all or
any part of the Stock for offer or sale under the Blue Sky or other securities
laws of such jurisdictions within the United States as the Underwriter may
designate. To the extent, if at all, that any Selling Stockholder engages
special legal counsel to represent such Selling Stockholder in connection with
this offering, the fees and expenses of such counsel shall be borne by such
Selling Stockholder. The Company shall not, however, be required to pay for any
of the Underwriters' expenses (other than the fees ordinary incident to securing
any required review by the NASD and those related to qualification under state
securities or "blue sky" laws), except as provided in Section 11 hereof.
Each Selling Stockholder will pay (directly or by reimbursement) all fees and
expenses incident to the performance of such Selling Stockholder's obligations
under this Agreement which are not otherwise specifically provided for herein,
including but not limited to any fees and expenses of counsel for such Selling
Stockholder, and all transfer, stamp and other taxes incident to the sale and
delivery of the Stock to be sold by such Selling Stockholder to the Underwriter
hereunder.
6. INDEMNIFICATION AND CONTRIBUTION.
The Company and each Selling Stockholder, severally and not jointly, agree to
indemnify and hold harmless the Underwriter and each person, if any, who
controls the Underwriter within the meaning
-15-
of the Securities Act and the respective officers, directors, partners,
employees, representatives and agents of the Underwriter (collectively, the
"Underwriter Indemnified Parties" and, each, an "Underwriter Indemnified
Party"), against any losses, claims, damages, liabilities or expenses
(including, except as set forth below with respect to counsel fees, the
reasonable cost of investigating and defending against any claims therefor and
counsel fees incurred in connection therewith) which may be based upon the
Securities Act, or any other statute or at common law, on the ground or alleged
ground that any Preeffective Prospectus, the Registration Statement or the
Prospectus (or the Registration Statement or the Prospectus as amended or
supplemented) includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, unless such statement or omission was made in reliance upon, and
in conformity with, written information furnished to the Company or any
subsidiary by the Underwriter specifically for use in the preparation thereof;
provided, however, that neither the Company nor any Selling Stockholder will not
be liable to any Underwriter Indemnified Party with respect to any loss, claim,
damage, expense or liability arising out of or based upon any untrue statement
or alleged untrue statement or omission or alleged omission to state a material
fact in the Preeffective Prospectus which is corrected in the Prospectus if the
person asserting such loss, claim, damage, expense or liability was not sent or
given a copy of the Prospectus at or prior to the written confirmation of the
sale of Stock to such person. In no event shall the liability of any Selling
Stockholder to the Underwriter Indemnified Parties under this Agreement
(including, without limitation liabilities arising with respect to such Selling
Stockholder's representations hereunder) exceed the proceeds, net of
underwriting discounts and commissions, received by such Selling Stockholder
from the Underwriter in the offering of the Stock and net of any damages that
the Selling Stockholder was otherwise required to pay by reason of such untrue
or allegedly untrue statement or omission. The Company or such Selling
Stockholder will be entitled to participate at its own expense in the defense
or, if the Company so elects, the Company will be entitled to assume the defense
of any suit brought to enforce any such liability, but if the Company elects to
assume the defense, such defense shall be conducted by counsel chosen by it. In
the event the Company elects to assume the defense of any such suit and retain
such counsel, any Underwriter Indemnified Parties, defendant or defendants in
the suit, may retain additional counsel but shall bear the fees and expenses of
such counsel unless (i) the Company shall have specifically authorized the
retaining of such counsel or (ii) the parties to such suit include any such
Underwriter Indemnified Parties, and the Company and such Underwriter
Indemnified Parties have been advised by counsel to the Underwriter that one or
more legal defenses may be available to it or them which may not be available to
the Company, in which case the Company shall not be entitled to assume the
defense of such suit notwithstanding its obligation to bear the fees and
expenses of such counsel. It is understood that the Company Indemnified Parties
and Stockholder Indemnified Parties shall not, collectively in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees and expenses of more than one separate firm for all
Underwriter Indemnified Parties. The Company and the Selling Stockholders
against whom indemnity may be sought shall not be liable to indemnify any person
for any settlement of any such claim effected without the consent of the Company
or such Selling Stockholder, as applicable. In no case is the Company or any
Selling Stockholder to be liable with respect to any claims made against any
Underwriter Indemnified Party against whom the action is brought unless such
Indemnified Party shall have notified the Company and the Selling Stockholder in
writing within a reasonable time after the summons or other first legal process
giving information
-16-
of the nature of the claim shall have been served upon the Underwriter
Indemnified Party, but failure to notify the Company and the Selling
Stockholders of such claim shall not relieve them from any liability which they
may have to any Underwriter Indemnified Party otherwise then on account of its
indemnity agreement contained in this paragraph. This indemnity agreement is not
exclusive and will be in addition to any liability which the Company or any
Selling Stockholder might otherwise have.
The Underwriter, agrees to indemnify and hold harmless the Company, each of its
directors, each person named as a prospective director in the Registration
Statement, each of its officers who have signed the Registration Statement and
each person, if any, who controls the Company within the meaning of the
Securities Act (collectively, the "Company Indemnified Parties"), and the
Selling Stockholders and each person, if any, who controls any Selling
Stockholder within the meaning of the Securities Act (collectively, the
"Stockholder Indemnified Parties") against any losses, claims, damages,
liabilities or expenses (including, the reasonable cost of investigating and
defending against any claims therefor and, except as set forth below, counsel
fees incurred in connection therewith), joint or several, which arise out of or
are based in whole or in part upon the Securities Act, the Exchange Act or any
other federal, state, local or foreign statute or regulation, or at common law,
on the ground or alleged ground that any Preeffective Prospectus, the
Registration Statement or the Prospectus (or the Registration Statement or the
Prospectus, as amended or supplemented) includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
in which they were made, not misleading, but only insofar as any such statement
or omission was made in reliance upon, and in conformity with, written
information furnished to the Company by such Underwriter specifically for use in
the preparation thereof; provided, however, that in no case is the Underwriter
to be liable with respect to any claims made against any Company Indemnified
Party or Stockholder Indemnified Party against whom the action is brought unless
such Company Indemnified Party or Stockholder Indemnified Party shall have
notified the Underwriter in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the claim shall
have been served upon the Company Indemnified Party or Stockholder Indemnified
Party, but failure to notify the Underwriter of such claim shall not relieve it
from any liability which it may have to any Company Indemnified Party or
Stockholder Indemnified Party otherwise than on account of its indemnity
agreement contained in this paragraph. The Underwriter shall be entitled to
participate at its own expense in the defense, or, if it so elects, to assume
the defense of any suit brought to enforce any such liability, but, if the
Underwriter elects to assume the defense, such defense shall be conducted by
counsel chosen by it. In the event that the Underwriter elects to assume the
defense of any such suit and retain such counsel, the Company Indemnified
Parties or Stockholder Indemnified Parties or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them, respectively, unless (i) the Underwriter
shall have specifically authorized the retaining of such counsel or (ii) the
parties to such suit includes any such Company Indemnified Parties or Selling
Stockholder Indemnified Parties and the Underwriter, and the Underwriter or such
Company Indemnified Parties have been advised by counsel to the Company (in the
case of the Company Indemnified Parties) or the Selling Stockholders (in the
case of the Selling Stockholder Indemnified Parties) that one or more legal
defenses may be available to it or them which may not be available to the
Underwriter, in which case the Underwriter shall not be entitled to assume the
defense of such suit notwithstanding
-17-
its obligation to bear the fees and expenses of such counsel. It is understood
that the Underwriter Indemnified Parties shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm for all Company
Indemnified Parties and Stockholder Indemnified Parties. The Underwriter shall
not be liable to indemnify any person for any settlement of any such claim
effected without the Underwriter's consent. This indemnity agreement is not
exclusive and will be in addition to any liability which the Underwriter might
otherwise have and shall not limit any rights or remedies which may otherwise be
available at law or in equity to any Company Indemnified Party or Stockholder
Indemnified Party.
If the indemnification provided for in this Section 6 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Stockholders on the one hand,
and the Underwriter on the other, from the offering of the Stock. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of the
Company and the Selling Stockholders on the one hand and the Underwriter on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof), as well as any the relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriter on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
the Company and the Selling Stockholders bear to the total underwriting
discounts and commissions received by the Underwriter, in each case as set forth
in the table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, the Selling
Stockholders or the Underwriter and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Selling Stockholders and the Underwriter agree that
it would not be just and equitable if contribution were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above. The amount paid or payable by
an indemnified party as a result of the losses, claims, damages, liabilities or
expenses (or actions in respect thereof) referred to above shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating, defending, settling or compromising such
claim. Notwithstanding the provisions of this subsection (c), the Underwriter
shall not required to contribute any amount in excess of the amount by which the
total price at which the shares of the Stock underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages which
the Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission and no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act)
-18-
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
Notwithstanding anything in this Agreement to the contrary, (i) the liability of
any Selling Stockholder to the Underwriter Indemnified Parties pursuant to this
Section 6 or as a result of the breach of any representation, warranty, covenant
or agreement of such Selling Stockholder set forth in this Agreement shall be
limited to the proceeds received by such Selling Stockholder from the
Underwriter in the Offering of the Stock, net of underwriting discounts and
commissions, and net of any damages the Selling Stockholder has otherwise been
required to pay by reason of any untrue or alleged untrue statement in any
Preeffective Prospectus, the Registration Statement or the Prospectus, or by
reason of any omission or alleged omission therefrom and (ii) no Selling
Stockholder shall be required by this Section 6 to make any payment to any
Underwriter Indemnified Party until such time as such Underwriter Indemnified
Party has asserted a claim for such payment against the Company and such claim
cannot be satisfied by the Company in accordance with the provisions of this
Section 6.
7. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC. The
respective indemnities, covenants, agreements, representations, warranties and
other statements of the Company, the Selling Stockholders and the Underwriter,
as set forth in this Agreement or made by them respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Underwriter, the Selling Stockholders,
the Company or any of their officers or directors or any controlling persons,
and shall survive delivery of and payment for the Stock.
8. CONDITIONS OF UNDERWRITER'S OBLIGATIONS. The obligations of the
Underwriter hereunder shall be subject to the accuracy, in all material respects
at and (except as otherwise stated herein) as of the date hereof and at and as
of the Closing Dates (except that representations and warranties qualified by
materiality shall be true and correct in all respects), of the representations
and warranties made herein by the Company and the Selling Stockholders, and to
compliance in all respects at and as of the Closing Dates by the Company and the
Selling Stockholders with their covenants and agreements herein contained, and
to the following additional conditions:
The Registration Statement, if not heretofore effective, shall have become
effective and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or the Underwriter, shall be threatened by the
Commission, and any request for additional information on the part of the
Commission (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been complied with to the reasonable satisfaction of the
Underwriter. Any filings of the Prospectus, or any supplement thereto, required
pursuant to Rule 424(b) or Rule 434 of the Rules and Regulations, shall have
been made in the manner and within the time period required by Rule 424(b) and
Rule 434 of the Rules and Regulations, as the case may be.
Neither the Registration Statement nor the Prospectus, or any amendment or
supplement thereto, shall contain an untrue statement of fact which in the
reasonable opinion of counsel to the
-19-
Underwriter is material or omits to state a fact which in the reasonable opinion
of the Underwriter is material, required to be stated therein or necessary to
make the statements therein not misleading.
At the time of execution of this Agreement, the Underwriter shall have received
from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, independent certified public accountants, a letter,
dated the date hereof, in form and substance satisfactory to the Underwriter.
The Underwriter shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, independent
certified public accountants, a letter, dated the Closing Dates, to the effect
that such accountants reaffirm, as of the Closing Dates, and as though made on
the Closing Dates, the statements made in the letter furnished by such
accountants pursuant to paragraph (c) of this Section 8.
The Underwriter shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇ & Bockius LLP, counsel for
the Company, an opinion, dated the Closing Dates, to the effect set forth in
Exhibit I hereto.
The Underwriter shall have received from ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP,
counsel for the Underwriter, their opinion or opinions dated the Closing Dates
with respect to the incorporation of the Company, the validity of the Stock, the
Registration Statement and the Prospectus and such other related matters as
Underwriter may reasonably request, and the Company and the Selling Stockholders
shall have furnished to such counsel such documents as they may reasonably
request for the purpose of enabling them to pass upon such matters.
The Underwriter shall have received a certificate, dated the Closing Dates, of
the Company signed on its behalf by the president and the chief financial
officer of the Company in which such officers shall state to the effect that:
(i) No stop order suspending the effectiveness of the
Registration Statement has been issued, and, to the knowledge of the
signers, no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act;
(ii) As of the date of such certificate, the Prospectuses, as
amended or supplemented through such date, does not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(iii) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, and except as
set forth or contemplated in the Prospectus, neither the Company nor any of
its subsidiaries has incurred any material liabilities or obligations,
direct or contingent not in the ordinary course of business, nor entered
into any material transactions not in the ordinary course of business and
there has not been any material adverse change in the condition (financial
or otherwise), properties, business affairs, management, business
prospects or results of operations of the Company and its subsidiaries
considered as a whole, or any change in the capital stock (other than
pursuant to the exercise of outstanding stock options or warrants or
conversion of
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preferred stock) of the Company and its subsidiaries which is material to
the Company and its subsidiaries considered as a whole;
(iv) The representations and warranties of the Company in this
Agreement are true and correct in all material respects (except that
representations and warranties qualified by materiality shall be true and
correct in all respects) at and as of the Closing Dates, and the Company
has complied in all material respects with all the agreements and performed
or satisfied all the conditions on its part to be performed or satisfied at
or prior to the Closing Dates.
The Underwriter shall have received a certificate or certificates, dated the
First Closing Date, of each Selling Stockholder to the effect that as of the
First Closing Date such Selling Stockholder's representations and warranties in
this Agreement are true and correct in all material respects as if made on and
as of such Closing Date (except that representations and warranties qualified by
materiality shall be true and correct in all respects), and that he has
performed in all material respects all his obligations and satisfied all the
conditions on such Selling Stockholder's part to be performed or satisfied at or
prior to such Closing Date.
Each officer, director and employee of the Company has furnished to you, on or
prior to the date of this agreement, a letter or letters (the "Lock-up Letters")
in substantially the form attached as Exhibit B hereto.
The Nasdaq National Market shall have approved the Stock for inclusion, subject
only to official notice of issuance.
All opinions, certificates, letters and other documents will be in compliance
with the provisions hereunder only if they are satisfactory in form and
substance to the Underwriter in his reasonable judgment. The Company will
furnish to the Underwriter conformed copies of such opinions, certificates,
letters and other documents as the Underwriter shall reasonably request. If any
of the conditions hereinabove provided for in this Section shall not have been
satisfied when and as required by this Agreement unless such failure to satisfy
results from any default or omission on the part of the Underwriter, this
Agreement may be terminated by the Underwriter by notifying the Company of such
termination in writing or by telegram at or prior to the First Closing Date, but
the Underwriter shall be entitled to waive any of such conditions.
9. EFFECTIVE DATE. This Agreement shall become effective
immediately.
10. TERMINATION. This Agreement may be terminated by the Underwriter
by notice to the Company and the Selling Stockholders, (i) if at or prior to the
First Closing Date trading in securities on any of the New York Stock Exchange
or Nasdaq National Market, shall have been suspended or minimum or maximum
prices shall have been established on any such exchange or market, or a banking
moratorium shall have been declared by New York State or United States
authorities; (ii) trading of any securities of the Company shall have been
suspended on any exchange or on the Nasdaq National Market; (iii) if following
the date of this Agreement and prior to the First Closing Date there shall have
been (A) an outbreak or escalation of hostilities between the United
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States and any foreign power or of any other insurrection or armed conflict
involving the United States or (B) any material adverse change in financial
markets or any calamity or crisis which, in the reasonable judgment of the
Underwriter, make it impractical or inadvisable to offer or sell the Stock on
the terms contemplated by the Prospectus; (iv) if there shall have been any
development or prospective development involving particularly the business or
properties or securities of the Company or any of its subsidiaries or the
transactions contemplated by this Agreement, which is material and adverse and
in the reasonable judgment of the Underwriter, makes it impracticable or
inadvisable to offer or deliver the Stock on the terms contemplated by the
Prospectus; or (v) pursuant to Section 8.
11. REIMBURSEMENT OF UNDERWRITER. Notwithstanding any other
provisions hereof, if this Agreement shall be terminated by the Underwriter
under Section 8 or Section 10 (other than a termination due to any failure,
refusal or inability by the Company or any Selling Stockholder to perform any
covenant or satisfy any condition of this Agreement on their part to be
performed or satisfied which is due to the default or omission of the
Underwriter or any Selling Stockholder), the Company will bear and pay the
expenses specified in Section 5 hereof and, in addition to its obligations
pursuant to Section 6 hereof, the Company will reimburse the reasonable out-of-
pocket expenses of the Underwriter (including reasonable fees and disbursements
of counsel for the Underwriter) incurred in connection with this Agreement and
the proposed purchase of the Stock, and promptly upon demand the Company will
pay such amounts to you; provided, that the Company shall not in be liable to
any of the Underwriter for damages on account of loss of anticipated profits
from the sale by them of the Stock.
12. NOTICES. All communications hereunder shall be in writing and,
(i) if sent to the Underwriter shall be mailed, delivered or telegraphed and
confirmed to you, at ▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇
▇. ▇▇▇▇▇▇▇, Principal, with copies to BT Alex. ▇▇▇▇▇ Incorporated, ▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel and ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, Esquire, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, (ii) if sent to the Company or any
Selling Stockholder, shall be mailed, delivered or telegraphed and confirmed c/o
CDnow, Inc., ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, General Counsel.
13. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Underwriter, the Company and the Selling Stockholders and their
respective successors and legal representatives. Nothing expressed or mentioned
in this Agreement is intended or shall be construed to give any person other
than the persons mentioned in the preceding sentence any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person; except that the representations, warranties,
covenants, agreements and indemnities of the Company and the Selling
Stockholders contained in this Agreement shall also be for the benefit of the
person or persons, if any, who control the Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, and the
indemnities of the Underwriter shall also be for the benefit of each director of
the Company, each of its officers who has signed the Registration
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Statement and the person or persons, if any, who control the Company or any
Selling Stockholders within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act.
14. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland without giving
effect to the choice of law principles thereof.
15. AUTHORITY OF THE ATTORNEYS-IN-FACT. Any action taken under this
Agreement by any of the Attorneys-in-fact will be binding on the Selling
Stockholders.
16. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of
any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) thereto as are necessary to make it
valid and enforceable.
17. GENERAL. This Agreement constitutes the entire agreement of the
parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company, the Selling Stockholders and the
Underwriter.
The Company, the Selling Stockholders and the Underwriter acknowledge
and agree that the only information furnished or to be furnished by the
Underwriter to the Company for inclusion in any Prospectus or the Registration
Statement consists of the information set forth in the last paragraph on the
front cover page (insofar as such information relates to the Underwriter),
legends required by Item 502(d) of Regulation S-K under the Exchange Act and the
information under the caption "Underwriting" in the Prospectus.
The reimbursement, indemnification and contribution agreements
contained in this Agreement and the representations, warranties and covenants in
this Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of the
Underwriter or controlling person thereof, or by or on behalf of the Company or
its directors or officers and (c) delivery of and payment for the Stock under
this Agreement.
18. COUNTERPARTS. This Agreement may be signed in two (2) 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.
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Any person executing and delivering this Agreement as Attorney-in-fact
for the Selling Stockholders represents by so doing that he has been duly
appointed as Attorney-in-fact by such Selling Stockholder pursuant to a validly
existing and binding Power of Attorney which authorizes such Attorney-in-fact to
take such action.
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter and your acceptance shall constitute a binding agreement
between us.
Very truly yours,
CDNOW, INC.
By:______________________________
SELLING STOCKHOLDERS LISTED
IN SCHEDULE A
By:___________________________
Attorney-in-fact
By:__________________________________
Attorney-in-fact
Acting on his own behalf and on
behalf of the Selling Stockholders
listed in Schedule A.
Accepted and delivered
as of the date first above
written.
By: BT ALEX. ▇▇▇▇▇ INCORPORATED
By:_________________________
Title:
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SCHEDULE A
Number of shares
of Option Stock
Seller to be sold
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
TOTAL
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